As filed with the Securities and Exchange Commission on March __, 2000
Registration No.
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================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2
Registration Statement
Under The
Securities Act of 1933
MOLECULAR DIAGNOSTICS & THERAPEUTICS, INC.
(Name of Small Business Issuer in its Charter)
Colorado
---------------------------------
(State or Other Jurisdiction
of Incorporation or Organization)
2835
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(Primary Standard Industrial
Classification Code Number)
84-1191749
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(I.R.S. Employer
Identification No.)
1880 Industrial Circle, Suite B-3
Longmont, Colorado 80501
(303) 485-8500
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(Address and Telephone Number of Principal Executive Offices)
1880 Industrial Circle, Suite B-3
Longmont, Colorado 80501
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(Address and Principal Place of Business or
Intended Principal Place of Business)
Malcolm H. Benedict
2595 Canyon Blvd.,
Suite 160
Boulder, CO 80302
(303) 485-8500
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(Name, Address and Telephone Number of Agent for Service)
Copy to:
Arnold R. Kaplan
Reinhart, Boerner, Van Deuren, Norris & Rieselbach, P.C.
1775 Sherman Street, Suite 2100
Denver, Colorado 80203
(303) 831-0909
Approximate Date of Proposed Sale to the Public:
As soon as practicable after this Registration Statement becomes effective.
<PAGE>
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please 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 this Form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, check the following box. [ ]
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<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
=====================================================================================================================
Proposed Maximum Proposed Maximum Amount of
Title Each Class of Securities Amount To Be Offering Aggregate Registration
To Be Registered Registered Price per share(1) Offering Price Fee
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par value 1,000,000 $10.00 $10,000,000 $2780
- ----------------------------------------------------------------------------------------------------------------------
Representative's Warrants to purchase 66,667 $.0001 $ 6.67 --
Common Stock
- ----------------------------------------------------------------------------------------------------------------------
Common Stock, $.01 par value, 66,667 $10.00 $ 666,670 $ 185
issuable upon Exercise of
Representative's Warrants(1)
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Total.................................................$2965
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</TABLE>
(1) Estimated solely for purposes of calculating the registration fee.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
MOLECULAR DIAGNOSTICS & THERAPEUTICS, INC.
CROSS-REFERENCE SHEET
(Between Items of Form SB-2 and Prospectus)
<TABLE>
<CAPTION>
Form SB--2 Item No. and Caption Prospectus Captions
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<S> <C> <C>
1. Front of Registration Front Cover Page; Plan of Distribution.
Statement and Outside Front
Cover of Prospectus.
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2. Inside Front and Outside Back Inside Front Cover Page;
Cover Pages of Prospectus. Available Information; Back Cover Page.
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3. Summary Information and Risk Prospectus Summary; The Company;
Factors. Risk Factors.
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4. Use of Proceeds. Use of Proceeds.
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5. Determination of Offering Price. Plan of Distribution.
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6. Dilution. Dilution.
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7. Selling Security Holders. Not Applicable.
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8. Plan of Distribution. Front Cover Page; Plan of Distribution.
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9. Legal Proceedings. Business.
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10. Directors, Executive Management; Principal Stockholders.
Officers, Promoters and
Control Persons.
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11. Security Ownership of Certain Beneficial Principal Stockholders.
Owners and Management.
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12. Description of Securities. Description of Capital Stock.
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13. Interest of Named Experts and Counsel. Experts.
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14. Disclosure of Commission Position on Indemnification.
Indemnification for Securities Act
Liabilities.
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15. Organization Within Last Five Not Applicable.
Years.
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16. Description of Business. Business.
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17. Management's Discussion and Analysis or Plan of Plan of Operation.
Operation.
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18. Description of Property. Business.
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19. Certain Relationships and Related Transactions. Certain Transactions.
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20. Market for Common Equity and Related Stockholder Front Cover Page; Capitalization; Dividends; Description
Matters. of Securities; Principal Shareholders.
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21. Executive Compensation. Management.
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22. Financial Statements. Selected Financial Data; Financial Statements.
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23. Changes in and Disagreements With Accountants Not Applicable.
on Accounting and Financial Disclosure.
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</TABLE>
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
1,000,000 Shares
Molecular Diagnostics & Therapeutics, Inc.
Common Stock
1,000,000
This offering includes a minimum escrowed number of shares (200,000)
equal to $2,000,000 and a maximum number of shares (1,000,000) equal to
$10,000,000. The minimum must be reached by ______, 200_, which period may be
extended for an additional 180 days at the option of the Company, or funds will
be returned without interest.
Prior to this offering, there has been no public market for the common
stock. The Company is applying for listing on The NASDAQ Small Cap Market.
Please see "Risk Factors" beginning on page 6 to read about certain
factors you should consider before buying shares of any common stock.
-------------------
Neither the Securities and Exchange Commission nor any other regulatory
body has approved or disapproved of these securities or passed upon the accuracy
or adequacy of this prospectus. Any representation to the contrary is a criminal
offense.
--------------------
<TABLE>
<CAPTION>
Total Total
Per Share Minimum Maximum
--------- ---------- -----------
<S> <C> <C> <C>
Public offering price $10.00 $2,000,000 $10,000,000
Underwriting discount $ .80 $ 160,000 $ 800,000
Proceeds, before expenses, to the Company $ 9.20 $1,840,000 $ 9,200,000
--------- ---------- -----------
</TABLE>
THREE ARROWS CAPITAL CORP. TRAVIS MORGAN SECURITIES, INC.
Prospectus dated March ___, 2000
<PAGE>
Page 2, inside front cover, a graphical representation of the
Company's objectives and vision.
[photo]
M.D.T.I. Proposed Manufacturing & PET Facility
[photo] [photo]
TR-30 Cyclotron Computerized Robotics
[photo]
G.E. PET Camera (one of the many available)
<PAGE>
PROSPECTUS SUMMARY
You should read the following summary, together with the more detailed
information concerning the Company, including the Company's financial statements
and notes to those financial statements, that appear elsewhere in this
prospectus. Because of the technical nature of the Company's proposed business,
we have included a Glossary of scientific and technical terms used in this
prospectus beginning on page 38.
Our Business
We plan to manufacture, market and distribute a range of
radiopharmaceuticals and radiochemicals to the nuclear medicine industry, an
endeavor that represents the merger of medicine and biology. We will employ new
machines and techniques in a proprietary approach that gives superior quality
products while sharply lowering costs. Radiopharmaceuticals and radiochemicals
are used as radioisotopes for identifying and labeling radioactive elements in
medical diagnostics, biological research and commercial applications. According
to the Institute of Medicine, while the production methods of
radiopharmaceuticals are antiquated, the nuclear medicine industry is growing
substantially, with an estimated $7 to $10 billion dollars spent annually in the
United States alone, thirteen percent (13%) of which represents radioisotopes.
We will employ an Internet site for our marketing applications and to serve as
one of the portals for all levels of users. We believe our production and
distribution approach establishes a new standard for the industry.
Our Approach
Nuclear medicine is the field that administers radioactive drugs
(radioactive tracers and pharmaceuticals) to patients for the diagnosis of
diseases such as heart disease and cancer. When these radiopharmaceuticals are
given to a patient, they are taken up within the body according to their
physical and chemical properties. These individual radiopharmaceuticals are
chosen based on their attraction for particular body organs or other sites of
clinical concern. Radiopharmaceuticals are different from standard
pharmaceuticals since they are not intended to change the body's normal
biological functions. Radioisotopes behave chemically and pharmacologically in a
manner similar to their non-radioactive counterparts. Due to complacency within
the industry, higher quality, cost-effective, diagnostic drug products have not
been produced for the past fifteen to twenty years. We intend to acquire several
unique and powerful new cyclotrons that will provide us with the capability to
make less expensive and purer isotopes than the competition. We will combine our
manufacturing approach with a computerized robotic system that:
o Reduces manufacturing labor costs;
o Enables a 24-hour production and quality control cycle;
o Reduces staff exposure to radiation;
o Eliminates expensive, repetitive errors;
o Guarantees consistent quality with every batch of radiopharmaceuticals;
and
o Permits local delivery with lower inventory wastage.
Our system replaces lower amperage, single beam instruments using
manual procedures that have produced poorer quality and higher cost . We believe
that:
o Our technology and process will change the production methods for
radiopharmaceuticals;
o We have sharply superior technology compared to existing manufacturers;
o We can manufacture with high gross margins;
o Our products will improve the quality of healthcare.
We are prepared to file the necessary applications required for
licensing and regulatory approval from the Colorado Department of Public Health
and Environment--State Laboratory and Radiation Services Division for the
handling of radioactive materials and with the Food and Drug Administration
("FDA") for the operation of a nuclear medicine laboratory and for the
production of iodine radiochemical products. Under an agreement between the
State of Colorado and Nuclear Regulatory Commission ("NRC"), approval of our
application by the State of Colorado will provide us with all necessary approval
by the NRC. We have contracted for the acquisition of several of the most
powerful isotope production cyclotrons of their kind. Our initial eight
radiopharmaceuticals provide the highest market opportunity for us. See
"Business - Business Strategy."
3
<PAGE>
Business Strategy
Our success will be dependent, in large part, upon our ability to
identify and adequately penetrate the market for our radiochemical and
radiopharmaceutical products. We plan to acquire a TR-30 million electron volt,
1.2 milli amperes negative ion technology cyclotron, designed by our CEO and
manufactured by EBCO Technologies, Inc. which, together with our automated
robotic system for the manufacture of our products, will provide us with the
most powerful isotope production cyclotron of their kind. This instrument is
capable of providing higher beam current and multiple (5) beam lines. Increasing
the beam current focuses higher energy that produces higher purity radionuclides
with greater commercial yields. Multiple beam lines increase the number of
radionuclides produced at a given time. We believe that no other company has
this technology.
We will also produce technetium-99m generators. The technetium-99m
generator was introduced in the late 1960's to provide the benefits of on-site
production of the radioactive nuclide technetium-99m. This type of generator
consists of a long-life radionuclide which, when processed in the generator,
produces the radiopharmaceutical technetium-99m; technetium-99m is used in
certain diagnostic procedures.
The radionuclide producing equipment, coupled with computerized
robotics, provide a fully automated and integrated system for the manufacture of
radionuclides. Computerized robotic manufacturing provides numerous advantages
to the system for the production of radionuclides by generating higher purity,
higher yield, and cost-effective radiopharmaceuticals. Our system replaces
instruments using manual procedures for the production of radiopharmaceuticals.
These antiquated instruments, coupled with outdated procedures, produce poor and
inconsistent quality, low yield, and higher cost radiopharmaceuticals.
Recent Developments
We are currently negotiating for interim loan financing in an amount up
to $1,000,000 million dollars, which will be used to open and equip our
temporary facility and obtain the raw materials necessary to begin manufacturing
and marketing of sodium iodide 123. We have also obtained a commitment from
D.V.I. Financial Services, Inc. to finance the acquisition of our first
cyclotron from EBCO Technologies, Inc., in the amount of $10 million, upon our
having a net worth of at least $2.5 millions dollars and fulfilling other
conditions contained in the commitment. This equipment financing will be in the
form of an equipment lease.
Our Offices
Our principal executive offices are located at 1880 Industrial Circle,
Suite B-3, Longmont, CO 80501, and our telephone number is (303) 485-8500; fax
(303) 485-7099. The address of our corporate website is
www.moleculardiagnostics.com. Information contained on our website does not
constitute part of this prospectus. We expect to lease our temporary facility
and construct our permanent facility for our manufacturing operations in
Longmont, Colorado; however, we have not identified a specific site for our
temporary facility at this time. With respect to our permanent facility, we have
entered into a contract to purchase approximately 5.5 acres of land (with an
option for an additional 5 acres) in Weld County, Colorado, upon which we plan
to construct our permanent facility. That contract is subject to the fulfillment
of several conditions, and we cannot guarantee at this time that the purchase
will be completed. See "BUSINESS - Our Facilities."
We are a development stage company that was organized under the laws of
the State of Colorado on February 19, 1992.
4
<PAGE>
The Offering
Shares offered by the Company.................... 1,000,000
Shares to be outstanding after this
offering, if all shares are purchased........ 9,654,515
Use of Proceeds............................... Deposit on building;
Purchase of equipment for our
plant; Working capital and
general corporate purposes.
See "USE OF PROCEEDS."
SUMMARY FINANCIAL INFORMATION
The following summary financial and other data for each of the years
ended March 31, 1999 and 1998 have been derived from our audited financial
statements included elsewhere in this prospectus. The summary financial and
other data for each of the nine months ended December 31, 1999 and December 31,
1998 are derived from our unaudited financial statements which, in our opinion,
consist of normal recurring adjustments necessary for a fair presentation of
this information, have been prepared on the same basis as the audited financial
statements, and include all adjustments necessary to a fair presentation of this
information. We have not commenced operations at this time and have had no sales
as of this date. You should read "Plan of Operations" and our financial
statements and notes included elsewhere in this prospectus for a further
explanation of the financial data summarized here.
<TABLE>
<CAPTION>
Year Ended March 31, Nine Months Ended December 31,
-------------------- ------------------------------
1998 1999 1998 1999
---- ---- ---- ----
Statement of Operations Data: (unaudited) (unaudited)
- ----------------------------
<S> <C> <C> <C> <C>
Revenues $ 0 $ 0 $ 0 $ 0
Gross profit (loss) -0- -0- -0- -0-
Income (loss) from operations (277,085) (751,817) (382,066) (508,777)
Net income (loss) - historical
Historical net income (loss) (0.04) (0.10) (0.05) (0.06)
Weighted average common shares
Outstanding(1) 6,763,943 7,608,692 7,518,516 8,346,570
</TABLE>
(1) After giving effect to a 3 for 2 reverse stock split completed in November,
1999
Balance Sheet Data: At March 31, 1999 At December 31, 1999
- ------------------ ----------------- --------------------
(unaudited)
-----------
Working capital (3,045) $ 26,652
Total assets 40,431 69,154
Total liabilities 9,940 17,742
Shareholders' equity 30,491 51,412
RISK FACTORS
An investment in the shares of common stock offered this prospectus
involves a high degree of risk. In addition to the other information contained
in this prospectus, including the financial statements, notes thereto and the
Glossary (beginning on page 38), the following risk factors should be considered
carefully by prospective investors, who should be in a position to risk the loss
of their entire investment.
No operating history makes evaluating our business difficult;
Development Stage Company.
Although we were incorporated in 1992, we are in the development stage
and have not sold any radiochemical or radiopharmaceutical products. As a
result, we have no operating history upon which you may evaluate our business
and prospects. Our prospects must be considered in light of risks, expenses,
delays, problems and difficulties frequently encountered by development stage
companies. We have not filed any application for licensing and have not received
any regulatory approval for our products or our operations. Until such time, if
ever, as we file necessary applications and receive necessary regulatory
approvals, we will not be able to commence operations.
5
<PAGE>
We may be unable to meet our future capital requirements.
Based on our current operating plan, we anticipate that the net
proceeds of this offering and cash provided by operations will allow us to meet
our cash requirements for at least 12 months. However, we may require additional
funding sooner than anticipated. In addition, unplanned acquisition and
development opportunities may arise, which could require us to raise additional
capital. If we raise additional capital through the sale of equity, including
preferred stock and/or convertible debt securities, the percentage ownership of
our then existing shareholders will be diluted. We cannot be certain that
additional financing will be available when we may need it. If adequate funds
are not available on acceptable terms, we may be unable to obtain necessary
federal and state licenses and regulatory approvals, fund our expansion, develop
or enhance our products, or respond to competitive pressures. This limitation
could have a material adverse effect on our business, financial condition and
results of operations.
Our current financial position is precarious and our auditors have a
"going-concern" issue.
Since December 31, 1999, our working capital position has continued to
deteriorate. At December 31, 1999, we had an accumulated deficit of $2,485,312.
We had a net loss for the nine months ended December 31, 1999 of $508,777. These
losses have resulted in significant liquidity problems for us. Our independent
auditors issued their report, dated June 22, 1999, for the year ended March 31,
1999, which indicates that our losses and liquidity problems have raised
substantial doubt about our ability to continue as a going concern. See
"Financial Statements for the Years Ended March 31, 1999 and 1998.
Best efforts offering and limited state registrations means the funds
sought in this offering may not be achieved
This offering of the Company's common stock is conducted on a "best
efforts" basis by Three Arrows Capital Corp. and Travis Morgan Securities, Inc.
We are required to sell a minimum of 200,000 shares within a six month time
period (which period may be extended for an additional 180 days, at the option
of the Company) to break escrow, and no funds will be released to the Company
until such time as this sale has been made. No underwriter, placement agent, or
other person has contracted with the Company to purchase or sell all or any of
the shares. There is no assurance that we will be capable of selling all or any
of the shares. If less than all of the shares offered are sold, we will not be
able to rapidly realize the plans set forth in the Business section of this
prospectus and will rely instead on our internal growth and/or bank or other
financing for our expansion. Additionally, this offering will be qualified in a
limited number of states, which means that not all potential buyers of the
shares will be able to do so without separate registration or an exemption from
registration.
If we lose our key personnel or are unable to recruit additional
personnel, our business may suffer
We are dependent on the efforts of our senior management and scientific
staff, including Malcolm Benedict, Dr. Donald Ludwig, and others. Currently, Mr.
Benedict and Dr. Ludwig are the only members of our management who have any
experience or expertise in radiochemical and radiopharmaceutical business. The
loss of either of these individuals could have a material adverse effect upon
us. We intend to apply for key man life insurance policies on the lives of Mr.
Benedict and Dr. Ludwig. The coverage under these policies may be inadequate to
compensate us for the loss of any of these individuals. Our future success will
depend in large part upon our ability to attract and retain skilled scientific,
management, operational and marketing personnel, as to which we can offer no
assurance.
We may experience limited resources for raw materials
Enriched stable isotopes, which are used as targets, are bombarded with
protons to produce radioisotopes. The principal United States source for
enriched stable isotopes is the Oak Ridge National Laboratory in Oak Ridge,
Tennessee, which relies on government funding for continuing production.
Although these isotopes are currently also available from Germany, Russia,
Israel, Canada, South Africa, China and other foreign sources, there can be no
assurance that there will continue to be an adequate supply of enriched stable
isotopes. This lack of supply could materially adversely impact our ability to
manufacture radiochemicals and radiopharmaceuticals, which in turn, would have a
material adverse effect upon us. Although the energy level and beam intensity of
our system are expected to be sufficient to produce most radiochemicals and
radiopharmaceuticals from unenriched stable isotopes, which are in abundant
supply, the production process will require various proprietary chemical
separation techniques, and we cannot assure that these techniques will be
successful.
6
<PAGE>
We have intellectual property and license applications
We currently do not own any patents, though we intend on filing patent
applications for some of our modifications and improvements, and to protect
others as trade secrets. We cannot assure, however, that patents on such
modifications and improvements will be issued or, if issued, that such patents
or modifications and improvements protected as trade secrets will provide
meaningful protection. We intend to proceed with or without patent protection,
since we believe that the disclosure requirements of federal patent laws provide
competitors with easy access to the secrets of rapid changing technology. Third
parties may have filed applications for, or may have been issued patents and may
obtain additional patents and proprietary rights related to, products or
processes competitive with or similar to ours. We may not be aware of all
patents potentially adverse to our interests that may have been issued to
others, and we cannot assure that such patents do not exist or have not been
filed or may not be filed or issued. If patents have been or are issued to
others containing conflicting claims and such claims are ultimately determined
to be valid, we may be required to obtain licenses or to develop or obtain
alternate technology. We cannot assure that such licenses, if required, would be
available on commercially acceptable terms, if at all, or that we would be able
to develop or obtain alternate technology, which would have a material adverse
effect on us. We cannot assure that the validity of any of the patents licensed
to, or that may in the future be owned by, us would be upheld if challenged by
others in litigation, or that our technologies, even if covered by our patents,
would not infringe patents owned by others. We could incur substantial costs in
defending suits brought against us or any of our licensors for infringement, in
suits by us against others for infringement, or in suits contesting the validity
of a patent. Any such proceedings may be lengthy. In any suit contesting the
validity of a patent, the patent being contested would be entitled to a
presumption of validity and the contesting party would be required to
demonstrate invalidity of the patent by clear and convincing evidence. If the
outcome of any litigation were to be adverse to our interests, our business
would be materially adversely affected. In certain instances, we may choose not
to seek patent protection and may rely on trade secrets and other confidential
know-how to protect our innovations. There can be no assurance that protectable
trade secrets or know-how will be established or, if established, that they will
remain protected or that others will not independently and lawfully develop
similar or superior innovations. We require all employees to sign non-disclosure
agreements with us. All directors and consultants, other than members of the
Company's medical and scientific advisory board, will execute agreements
containing confidentiality provisions. We cannot assure, however, that any
confidentiality agreements will be complied with or will be enforceable.
Government regulation can prove expensive and difficult to comply with
The manufacture and sale of radiochemicals and radiopharmaceuticals is
subject to extensive federal and state regulation. Prior to commencing
operations, approval of our temporary and permanent production facilities must
be obtained from various state and federal agencies. In addition, the U.S.
Department of Transportation ("DOT") regulates the quantity and method of
shipment of radioactive materials, and sets specifications with respect to the
class of shipping containers used. Our facilities will be subject to continual
inspection for compliance with the federal current good manufacturing practice
regulations, which require that we manufacture radiochemicals and
radiopharmaceuticals and maintain manufacturing, testing and quality control
records in a prescribed manner.
We also will be subject to regulation by the United States
Environmental Protection Agency ("EPA"), various natural resource commissions
and the United States Occupational Safety and Health Administration ("OSHA")
with respect to the radioactive content of water and air discharges and the
handling and disposal of radioactive waste. The failure to obtain, or delay in
obtaining, any such approvals, or the failure to comply with any such
regulations would have a material adverse effect on us. Our production of
radiochemicals and radiopharmaceuticals will involve the controlled use of
hazardous materials, chemicals and various radioactive substances. Although our
compliance with safety procedures for handling, storing and disposing of
materials prescribed by state and federal regulations is a prerequisite to
commencing the manufacture and sale of radiochemicals and radiopharmaceuticals,
the accidental contamination or injury from these materials will be a continuing
risk. The FDA regulates the clinical testing, manufacturing, labeling and
distribution of medical devices in the United States. Any radiochemicals and
radiopharmaceuticals developed under arrangements between us and medical
institutions and universities will require the prior approval of the FDA, which
has established mandatory procedures and standards for the clinical testing,
manufacture and marketing of therapeutic and diagnostic products. This could be
a protracted and costly process.
7
<PAGE>
We may have to divert the use of funds from this offering to other purposes
Although we intend to apply net proceeds from the sale of the common
stock in the manner described under "Use of Proceeds," we have broad discretion
within such proposed uses as to the precise allocation of the net proceeds, the
timing of expenditures and all other aspects of the use thereof.
Our technology may become obsolete
Competition is intense within the nuclear medicine industry; however,
we believe there currently is no producer within the United States of
radiochemicals and radiopharmaceuticals with the purity and quantity that we
expect to produce for commercial sale to the nuclear medicine industry.
Currently, radiochemicals and radiopharmaceuticals produced by cyclotron
accelerators are manufactured in the United States principally by E.I. duPont
and Company, Merck & Co., Inc., Mallinckrodt Inc., International Isotopes, Inc.,
Amersham Pharmacia Biotech Ltd. and Theragenics Corporation (the "Radiochemical
and Radiopharmaceutical Producing Companies") primarily, we believe, for their
own radiochemical and radiopharmaceutical products. We believe that hospitals,
medical institutions and universities also produce certain short-lived
radiochemicals and radiopharmaceuticals utilizing small cyclotron accelerators,
principally for their own needs. The Radiochemical and Radiopharmaceutical
Producing Companies have substantially greater capital and other resources than
we do. The U.S. government also produces radioisotopes, primarily for research
purposes, in three national laboratories, Brookhaven National Laboratory, Los
Alamos National Laboratory and Oak Ridge National Laboratory. Outside the United
States, MDS/Nordion, Inc., a Canadian firm, and Mallinckrodt, N.V. at Petten, a
Netherlands firm, which also have substantially greater capital and other
resources than the Company, are major producers of cyclotron-produced and
reactor-produced radioisotopes. MDS/Nordion, Inc. currently supplies a
significant portion of the radioisotopes used in the diagnostic nuclear medicine
industry in the United States, and we cannot assure that we will be able to
compete successfully with that firm. We cannot assure that we will be able to
compete successfully against any competitor or potential competitor.
Some local residents may complain about a nuclear facility within their
neighborhood
Some residents of local areas may voice concerns about the potential
environmental hazards associated with the construction of our facility and our
operations. We believe that construction of the facility and our proposed plan
of operation will not be adversely affected by the residents' expressions of
concern, although we can give no assurance about that.
We may be subject to conflicts of interest
Members of management of the Company may in the future serve as
officers, directors, controlling shareholders and/or in other positions of
management and/or control with other corporations or other business entities.
Some of our executive officers and/or directors may divide their time and
efforts between the Company and their other employment and/or business
obligations. Because of these potential future associations , there may be
potential conflicts of interest in their acting as executive officers and/or
directors of the Company.
8
<PAGE>
Furthermore, to further assist in the development of our technologies,
we have established a group of technical advisors comprised of individuals with
technical and scientific credentials who are expected to advise us on technical
and scientific issues. There can be no assurance that we will be successful in
maintaining such a group. We anticipate that the technical advisors will review
the technical progress of our products, engineering and research and
development. We may obtain technical advisors individually on a consulting basis
to perform work specifically for and at our direction. We do not intend to
retain individuals to serve as technical advisors whose primary employers, or
other third parties with whom such individuals have consulting arrangements, are
in competition with us; however, our technical advisors will likely be employed
on a full-time basis by academic or research institutions. Accordingly, our
technical advisors will be able to devote only a portion of their time to our
business and research activities and may have potential conflicts of interest.
We have huge power requirements and are dependent upon a steady
source of electricity
The operation of the cyclotron will be dependent upon receiving 300
kilowatts of electric power 24 hours per day, seven days per week, and any power
interruption could materially affect our operations. We have elected to receive
power from United Power, located in Brighton, Colorado, although there are other
power sources readily available through the regional system. We also expect to
have a backup generator system.
Health care reimbursement changes and health care reform could endanger
our revenues
We anticipate that we will sell our radiochemicals and
radiopharmaceuticals to hospitals and clinics that provide health care services
to their patients. Such institutions and patients typically bill, or seek
reimbursement from, various third party payors, such as Medicare, Medicaid,
other government programs and private insurance carriers, for the charges
associated with the health care services provided. Similarly, we anticipate that
a large percentage of our revenues from our PET diagnostic imaging center will
come from third-party party payors. We believe that our ability to sell
radiochemicals and radiopharmaceuticals, and our ability to operate our PET
diagnostic imaging center at levels sufficient to be profitable, will be
directly related to the coverage and reimbursement policies of third party
payors. If government and third party payors do not provide adequate coverage
and reimbursement levels, the market acceptance of our products and services
would be materially adversely affected. Health care reform proposals have been
introduced in Congress and in various state legislatures. It is currently
uncertain whether any health care reform legislation will be enacted at the
federal level, or what actions governmental and private payors may take in
response to the suggested reforms. Such reforms, if enacted, may affect the
availability of third-party reimbursement for PET diagnostic imaging services
and radiochemical and radiopharmaceutical products as well as the price levels
at which we will be able to sell such services and products. We cannot predict
when any proposed reforms will be implemented, if ever, or the effect of any
implemented reforms on our business. Any implemented reforms are likely,
however, to have an adverse effect upon us.
We have product liability for which we may not be able to secure
adequate insurance
The use of radiochemicals and radiopharmaceuticals in clinical trials
may expose us to potential product liability risks that are inherent in the
testing, manufacture, marketing and sale of human diagnostic and therapeutic
products. In addition, the failure to effect timely delivery of radiochemicals
and radiopharmaceuticals may cause a delay in a scheduled test or procedure or
result in the functional loss of radioactivity of the radiochemicals and
radiopharmaceuticals, thereby exposing us to potential liability. We currently
have no product liability insurance.
We intend to obtain product liability insurance prior to commencing
production of any radiochemicals and radiopharmaceuticals, but we cannot assure
that we will be able to obtain or maintain insurance on acceptable terms, or
that any insurance obtained will provide adequate coverage. Claims or losses in
excess of any liability insurance coverage ultimately obtained by us could have
a material adverse effect on us.
Investors in this offering will realize immediate and substantial
dilution and pay considerably more than early investors
Purchasers of the common stock in this offering will experience
immediate and substantial dilution in the net tangible book value of the shares
of common stock purchased by them in this offering of $9.04 per share or 90% per
share, assuming all shares offered by us are purchased. The current
shareholders, including our officers and directors, acquired their shares of
common stock for nominal consideration or for consideration substantially less
than the assumed initial public offering price. As a result, new investors will
bear substantially all of the risks inherent in an investment in us.
9
<PAGE>
The price for the shares has been determined arbitrarily and without
regard to book value or a measurement of present value. In addition, there is no
public market for the common stock at the present time.
The initial public offering price of the common stock will be
determined arbitrarily by discussions between the Selling Agent and us. Factors
considered in such negotiations, in addition to prevailing market conditions,
will include the history and prospects for the industry in which we compete, an
assessment of our management, our prospects, our capital structure and certain
other factors as we deem relevant. Therefore, the initial public offering price
per share of the common stock will not necessarily bear any relationship to
established valuation criteria and, accordingly, may not be indicative of prices
that may prevail at any time or from time to time in the public market. Prior to
this offering, there has been no public market for the common stock, and we
cannot assure that an active trading market will develop after this offering or,
if developed, that the market will be sustained.
Payment of dividends is unlikely
We have never paid cash dividends on our common stock, and do not
expect to pay cash dividends in the foreseeable future.
A large number of shares may come on the market at a later time and
substantially depress the market price
Sales of common stock in the public market after this offering could
materially and adversely affect the market price of the common stock and might
make it more difficult for us to sell equity securities or equity related
securities in the future at a time and price that we deem appropriate. Upon the
completion of this offering, assuming all shares offered hereby are purchased,
we will have 9,654,515 shares of common stock outstanding. Of these shares, the
1,000,000 shares of common stock sold in this offering will be freely tradable
(unless held by our affiliates) without restriction. The remaining 8,654,515
shares currently outstanding are restricted securities within the meaning of the
Securities Act of 1933, as amended (the "Securities Act"). The holders of
4,661,489 shares, constituting directors, executive officers, and certain
principal shareholders, have agreed for a period of 12 months after the date of
this prospectus not to sell, directly or indirectly, any shares owned by them
without the prior written consent of us and the Selling Agent.
We and the Selling Agent jointly may, at any time without notice,
release all or any portion of the shares subject to such lock-up agreements.
Prior to the expiration of the 12-month lock-up period, 4,661,489 shares and,
upon expiration of the twelve month lockup period, all of the shares of common
stock held by existing shareholders will be eligible for immediate public resale
under Rule 144, subject to the volume limitations and other requirements of Rule
144.
We may not be able to keep up with rapid technological change
Our market is characterized by rapid technological advancement and
change and frequent new product announcements. Significant technological changes
could render our existing technology obsolete. Accordingly, our business will
require substantial research and development efforts and expenditures, and our
future success will depend on our ability to enhance proposed products, reduce
product costs and develop and introduce new products to keep pace with
technological development in response to evolving customer requirements. Our
failure to anticipate or respond adequately to technological development could
result in the loss of anticipated future revenues and impair our
competitiveness. If we are unable to successfully respond to these developments
or do not respond in a cost-effective way, our business, financial condition and
results of operations will be materially adversely affected. To be successful,
we must adapt to our rapidly changing market by continually improving the
responsiveness, services and features of our products and by developing the
features necessary to meet customer needs. Our success will depend, in part, on
our ability to adapt to rapidly changing technologies to enhance existing
services and to develop the services and technologies that address the needs of
our customers.
10
<PAGE>
FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements based on our
current expectations, assumptions, estimates and projections about our systems
and our industry. These forward-looking statements involve risks and
uncertainties. Our actual results could differ materially from those anticipated
in these forward-looking statements as a result of certain factors, as more
fully described in the "Risk Factors" section and elsewhere in this prospectus.
We undertake no obligation to update publicly any forward-looking statements for
any reason, even if new information becomes available or other events occur in
the future.
USE OF PROCEEDS
The net proceeds to us from the sale of a minimum of 200,000 shares of
common stock and a maximum of 1,000,000 shares of common stock offered by us are
estimated to be, after deducting underwriting commissions, used approximately as
follows:
Minimum
<TABLE>
<CAPTION>
Approximate Percentage
Approximate Dollar Amount of Net Proceeds
------------------------- ----------------------
<S> <C> <C>
Sales, marketing and customer service $ 225,000 12%
Test and installation of equipment 125,000 7%
Expansion of production facilities 825,000 45%
Development for Proprietary Equipment 365,000 20%
Working capital and general purposes 300,000 16%
Total $ 1,840,000 100%
</TABLE>
Maximum
<TABLE>
<CAPTION>
Approximate Percentage
Approximate Dollar Amount of Net Proceeds
------------------------- ----------------------
<S> <C> <C>
Sales, marketing and customer service $ 400,000 4%
Test and installation of equipment 400,000 4%
Expansion of production facilities 6,000,000 65%
Development for Proprietary Equipment 1,600,000 17%
Working capital and general purposes 800,000 9%
Total $ 9,200,000 100%
</TABLE>
The minimum amount will allow us to obtain the necessary licensing for
and open our temporary facility and begin production of Iodine-123
radiochemical, which should allow us to become a profitable operating company
and fund our operations for approximately 12 months. If less than the maximum
amount is raised, we will determine the proper allocation of the amount raised
to be used toward the acquisition and construction of our permanent facility,
equipping the same and commencing production of additional products, as
described in this prospectus, within the following ranges.
Sales, marketing and customer support. Represents anticipated costs
associated with marketing our systems to targeted markets (from $56,250 to
$100,000) and advertisers, including salaries for from two to four employees
that market our systems (from $112,500 to $200,000) and travel expenses with
respect to marketing (from $56,250 to $100,000).
Test and installation of equipment. Represents anticipated costs
associated with the development of our cyclotron (from $31,250 to $100,000),
robotic equipment (from $62,500 to $200,000) and PET Camera (from $31,250 to
$100,000).
11
<PAGE>
Expansion of production facilities. Represents costs associated with
expanding our in-house capabilities, including proprietary equipment (from
$103,125 to $750,000), formulation equipment (from $103,125 to $750,000) and
radiation monitoring (from $125,000 to $900,000). Costs include additional
design (from $50,000 to $150,000), simulation (from $25,000 to $60,000), test
equipment (from $40,000 to $160,000) and the purchase of additional prototypes
(from $189,000 to $1,900,000). Includes salaries for from four to 20 production
employees (from $189,750 to $1,380,000).
Development for Proprietary Equipment. Represents costs associated with
protecting employees and the public from radiation exposure, including hiring
from one to five additional employees (from $54,750 to $240,000), design,
construction and testing of proprietary equipment (from $54,750 to $240,000), as
well as installation of radioactive monitoring systems (from $182,500 to
$800,000).
Working capital and general corporate purposes. Working capital may be
used, among other things, to pay offering expenses, salaries of our employees,
rent, trade payables, professional fees and other operating expenses. Please see
"MANAGEMENT."
The allocation of the net proceeds from this offering set forth above
represents our best estimate based upon all shares offered by us being purchased
and our currently proposed plans, as well as assumptions relating to our
operations and certain assumptions regarding general economic conditions. If any
of these factors change, we may find it necessary or advisable to reallocate
some of the proceeds within the above-described categories or to use portions
for other purposes.
We anticipate that the net proceeds of this offering, even on a minimum
basis, together with our projected revenues from our operations from our
temporary facility, will be sufficient to fund our operations and capital
requirements for at least 12 months following this offering. We cannot assure,
however, that such funds will not be expended earlier due to unanticipated
changes in economic conditions or other circumstances that we cannot foresee. If
our plans change or our assumptions change or prove to be inaccurate, we could
be required to seek additional financing sooner than currently anticipated. We
also expect that, when the opportunity arises, we may acquire or invest in
complementary businesses, products or technologies. We have no present
understandings, commitments or agreements with respect to any material
acquisition or investment.
Pending the use of proceeds in the manner mentioned above, the net
proceeds of this offering will be invested principally in short-term,
interest-bearing investment grade securities.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our common stock.
We do not intend to declare or pay any dividends on our common stock in the
foreseeable future. We currently intend to retain future earnings, if any, to
finance the expansion of our business.
DILUTION
Purchasers of the common stock offered hereby will experience an
immediate and substantial dilution in the net tangible book value of their
common stock from the offering price. Our net tangible book value as of December
31, 1999 was $51,412 or $.006 per share of common stock. Net tangible book value
per share represents the amount of our tangible net worth divided by the total
number of shares of common stock outstanding as of December 31, 1999. After
giving effect to the sale of 1,000,000 shares of common stock by us in the
offering and the application of the net proceeds therefrom (assuming the maximum
offering is subscribed and after deduction of underwriting discounts and
commissions and estimated offering expenses payable), our pro forma net tangible
book value as of December 31, 1999 would have been $9,251,412 or $.958 per share
of common stock. This represents an immediate increase in net tangible book
value of $.952 per share to existing shareholders and an immediate dilution of
$9.042 per share to purchasers of shares in this offering. The following table
illustrates the per share dilution:
12
<PAGE>
Offering price: $10.00
Net tangible book value per common share before the offering $ .006
Per share increase attributable to new investors $ .952
Pro forma net tangible book value per share after the offering $ .958
Dilution in net tangible book value per share to new investors $9.042
The offering price of the shares has been determined based on an
estimate by us of our earnings potential over the next five years and other
factors. See "RISK FACTORS" and "PLAN OF DISTRIBUTION." Management makes no
representations that we will generate such earnings, and there can be no
assurance as to when we will generate revenues and earnings, if ever. The
offering price is arbitrary and does not reflect our asset value, net worth,
present earnings, cash flow or any other established criteria of value. The
offering price of the shares may or may not be an indication of their present
value or the value of our Company or their future value or our future value.
CAPITALIZATION
The following table sets forth our capitalization as of December 31,
1999 and as adjusted to give effect to the sale of 1,000,000 shares (assuming
the maximum number of shares offered hereby are sold) and the application of the
estimated net proceeds therefrom, assuming an offering price at $10.00 per share
for the common stock. No stock splits, stock dividends, or other forms of
recapitalization are planned at this time. See "Use of Proceeds."
<TABLE>
<CAPTION>
Amount Outstanding As of December 31, 1999
----------------------------------------------
Prior to Offering After Offering
----------------- --------------
<S> <C> <C>
Accounts Payable: $ 17,742 $ 17,742
Total Liabilities $ 17,742 $ 17,742
Shareholder's (deficit) Equity:
Preferred Stock, 5,000,000 authorized
No par value, 0 shares issued and
Outstanding on December 31, 1999 -0- -0-
Common stock, 45,000,000 authorized
No par value, 8,654,515 shares issued
and outstanding, on December 31, 1999. $2,683,279 $11,883,279
(after giving effect to stock split)
Total shareholders' equity $ 51,412 $ 9,251,412
</TABLE>
The following table sets forth a comparison as of December 31, 1999 of
the number of shares of common stock acquired by current shareholders from us,
the total consideration paid for such shares of common stock and the average
price per share paid by such current shareholders and to be paid by the
prospective purchasers of the shares (based upon an offering price of $10.00).
<TABLE>
<CAPTION>
Shares Purchased Consideration
--------------------- -------------------------- Average Cash Price
Number Percent Amount Percent Per Share
--------- ------- ----------- ------- ------------------
<S> <C> <C> <C> <C> <C>
Existing shareholders* 8,654,515 89.6 $ 2,683,279 21.2 $ .31
New investors 1,000,000 10.4 $10,000,000 78.8 $10.00
--------- ------ ---------- -----
Total 9,654,515 100.0 $12,683,279 100.0 $ 1.31
</TABLE>
- -----------------------------
* - reflect 3 for 2 reverse split
13
<PAGE>
SELECTED FINANCIAL DATA
The selected statements of operations data for the years ended March
31, 1998 and March 31, 1999 and for the nine- month periods ended December 31,
1998 and December 31, 1999 and the selected balance sheet data as of March 31,
1999 and December 31, 1999 have been derived from the audited and unaudited
financial statements included elsewhere in this prospectus. Results for the nine
months ended December 31, 1999 are not necessarily indicative of those for the
full fiscal year. The data presented below should be read in conjunction with
"Plan of Operation" and the financial statements and accompanying notes thereto
appearing elsewhere in the prospectus.
<TABLE>
<CAPTION>
Nine Months Ended
Year Ended March 31, December 31,
---------------------- ----------------------
1998 1999 1998 1999
---- ---- ---- ----
Statement of Operations Data: (unaudited) (unaudited)
<S> <C> <C> <C> <C>
Revenues $ 0 $ 0 $ 0 $ 0
Cost or revenues 0 0 0 0
Gross profit 0 0 0 0
Operating costs and expenses:
Selling, general and administrative 209,376 594,660 366,266 422,725
Research and development 67,600 157,157 15,800 86,052
Total operating costs and expenses 276,976 751,817 382,066 508,777
Income (loss) from operations (276,976) (751,817) (382,066) (508,777)
Interest income (expense), net (109) -0- -0- -0-
Net income (loss) - historical (277,085) (751,817) (382,066) (508,777)
Historical net income per share -
Weighted average common shares outstanding(1) 6,763,943 7,608,692 7,518,516 8,346,570
- basic (0.04) (0.10) (0.05) (0.06)
- diluted (0.04) (0.10) (0.05) (0.06)
</TABLE>
(1) After giving effect to a 3 for 2 reverse stock split completed in
November, 1999
The adjusted balance sheet data as of December 31, 1999 reflects the
sale of 1,000,000 shares of common stock offered hereby after deducting the
underwriting commission and other offering expenses.
<TABLE>
<CAPTION>
As of March 31, 1999 December 31, 1999
-------------------- ----------------
Balance Sheet Data: (unaudited)
<S> <C> <C>
Cash and cash equivalents $ 4,883 $44,394
Working capital $(3,045) $26,652
Total assets $40,431 $69,154
Total liabilities $ 9,940 $17,742
Total stockholders' equity $30,491 $51,412
</TABLE>
PLAN OF OPERATION
The following Plan of Operation of the Company should be read in
conjunction with the Company's financial statements and notes thereto and the
other financial information included elsewhere in this prospectus. In addition
to historical information, this plan of operation and other parts of this
prospectus contain forward-looking information that involves risks and
uncertainties. The Company's actual results could differ materially from those
anticipated by such forward-looking information as a result of certain factors
including, but not limited to, those set forth under "Risk Factors" and
elsewhere in this prospectus.
14
<PAGE>
The Company is a development stage company which intends to become a
leading domestic producer of radiochemicals and radiopharmaceuticals for retail
and commercial sale to the nuclear medicine industry. Since its inception, the
Company's operations have been limited to developing the concept for our
cyclotron and related automatic robotic system, designing facilities for its
operations, identifying land, preparing license applications and raising
capital.
As was discussed in the Use of Proceeds section, if we sell only the
minimum number of shares offered, the net proceeds will enable us to open our
temporary facility and to begin manufacturing Iodine 123. We intend to finance
the acquisition of the cyclotron, the production facility and the majority of
the robotic and manufacturing equipment. We expect to pay interest on the
construction loans and advances to the cyclotron manufacturer during the course
of construction. The following plan of operation is based upon our selling the
maximum number of shares being offered. If we sell less than the maximum, we
will determine the proper allocation of the proceeds received in excess of the
minimum net proceeds.
During the first quarter following funding, we will hire five additional
people, including a radio-chemist, a controller (CPA) and three clerical people.
We will begin filing the applications for the various licenses that will be
required. We will acquire the land for the permanent facility, including our
manufacturing facility, corporate offices and PET diagnostic imaging center. We
will also lease a temporary facility and begin constructing the robotic
processes that will be employed with the cyclotron production processes. Ebco
Technologies, Inc. will begin constructing the cyclotron and orders for related
equipment will be placed. Construction will commence upon the permit approval
process acceptance. Cash expended will be as follows:
General and administrative expenses $ 405,000
Acquisition of property and equipment $ 1,246,000
-----------------
First quarter expenditures $ 1,651,000
=================
During the second quarter following funding, construction will proceed
on the permanent facility. The manufacture of the cyclotron will also proceed.
Work on various applications will still be in process. Our computer system,
phone system and laboratory equipment will be ordered. Additional robotic
equipment will be purchased. We will begin the implementation of our marketing
department, including the hire of two additional personnel. Cash expended during
this quarter will be as follows:
General and administrative expenses $ 433,000
Acquisition of property and equipment $ 620,000
-----------------
Second quarter expenditures $ 1,053,000
=================
During the third quarter following funding, we will hire four new
personnel to be used in human resources, accounting and clerical positions.
Construction of the permanent facility and the cyclotron will continue. We also
anticipate that our temporary facility will be licensed and will commence
operations. Work will also progress on the various applications. Final payments
will be made on the phone system, and computer system. Furniture and fixtures
for the permanent facility will be ordered. We will begin the development of
other production systems for additional products and begin the coordination of
the radiation monitoring system and its installation. Cash will be expended
during this quarter as follows:
General and administrative expenses $ 500,000
Acquisition of property and equipment $ 1,350,000
----------------
Third quarter expenditures $ 1,850,000
================
15
<PAGE>
In the fourth quarter following funding, the permanent facility will be
completed. The cyclotron and related production equipment will be installed. The
permanent facility will be occupied. The full level of general and
administration expenses of $323,000 per month will be reached in the twelfth
month. Ten technical personnel, including the cyclotron crew, will be hired.
Additional production equipment will be purchased. Cash outlays during this
quarter will be as follows:
General and administrative expenses $ 860,000
Acquisition of property and equipment $ 900,000
Financing and lease payments $ 815,000
----------------
Fourth quarter expenditures $ 2,575,000
================
Production and sales are expected to begin during the thirteenth month
from our permanent facility; we anticipate sales of sodium iodide-123 from our
temporary facility beginning in the third quarter following funding; however, we
have not estimated a sales figure for these purposes. Throughout the
twelve-month period, excess funds will be invested in money market instruments.
Estimated interest income of $320,000 is expected.
Proceeds of offering $ 9,200,000
Interest income $ 320,000
---------------
Funds available $ 9,520,000
Cash expended during first twelve months $ 7,129,000
---------------
Balance available for further working
capital $ 2,391,000
===============
The Company's program for the balance of 2000 and the first half of
2001 is to complete construction of its manufacturing facility. We will begin
development of our sodium iodine-123 radiochemical manufacturing and
distribution program. We will also pursue formal relationships with various
distributors, universities and medical institutions. Our PET diagnostic imaging
center, which consists of our second product, fluorine-18 FDG, will be a service
to the medical community of the local and surrounding regions. This will be
accomplished by offering the local medical communities with the access to the
latest PET diagnostic imaging procedures, without the high costs associated with
the development with a PET diagnostic center. Following the completion of
construction, the Company intends to move its principal executive offices to our
permanent facility and to use that facility to assemble proprietary equipment
and finalize the installation and testing of the cyclotron components (targets).
The Company has allocated a portion of the net proceeds from this
offering for the development of proprietary equipment (See "Use of Proceeds")
and also the purchase of wholesale quantities of radioisotopes. The Company also
intends, prior to completion of the manufacturing facility, to enter into
preliminary contracts with distributors, universities and medical institutions
throughout the United States, and to pursue formal commitments with foreign
sources, such as sources in Europe, Russia and Israel, for the acquisition of
enriched stable isotopes necessary for the production of radiochemicals and
radiopharmaceuticals; however, there can be no assurance of obtaining these
isotopes.
We have recently commenced a $25.0 million capital expansion undertaking
that includes $10.0 million in equity offered hereby, $10.0 million in debt for
the purchase of our first cyclotron and $5.0 million for the construction of new
production and administrative facilities. Although no assurances can be given,
we expect that the new cyclotron and facilities will become operational before
the middle of 2001. We intend to apply a portion of the net proceeds of this
offering toward the purchase of equipment to be installed in calendar year 2000
and use the remainder for working capital and other corporate purposes as
appropriate. See "Use of Proceeds."
During the course of our development activities from February 2, 1992
through December 31, 1999, we have sustained operating losses, and have an
inadequate cash supply. From February 19, 1992 (inception) through December 31,
1999, we raised working capital through offerings of our no par value preferred
stock, which was expected to permit us to continue operations.
16
<PAGE>
We continue to be in the development stage and have commenced
operations. To date, our efforts have been focused upon organizational
activities, development of a business plan, obtaining funding from successful
offerings of Classes "A" through "I" shares of preferred stock (all of which
shares have been converted to common stock) and preparing the radioactive
materials and establishment license applications and Investigational New
Drug/New Drug Applications for certain proposed radiopharmaceutical products,
for filing with the Colorado Department of Public Health and Environment--State
Laboratory and Radiation Services Division and the FDA. In addition to preparing
these applications, Mr. Malcolm H. Benedict, our CEO, has developed a
technetium-99m generator system, which he believes to be technologically
feasible and patentable, for the purpose of automating the radiochemical and
radiopharmaceutical manufacturing process using robotics technology.
We intend to file a patent application with the U.S. Patent and
Trademark Office pertaining to the unique automation features of this process;
however, we cannot assure that such proposed patent application will be
successfully filed or approved, or result in the issuance of letters patent to
us. (See "Risk Factors - We have intellectual property and license
applications.")
Despite the above-described activities and the Company having raised
gross proceeds totaling $3,021,685 from a series of preferred stock offerings,
we are not yet in a position to commence our proposed business activities in the
manufacture, marketing and distribution of radiochemical and radiopharmaceutical
products. Since inception, we have received no revenue from operations and, for
the period from inception through December 31,1999, we realized an accumulated
net loss from operations aggregating $2,485,312. As of December 31, 1999, our
assets totaled $69,154; our liabilities are $17,742; and our total stockholders'
equity was $51,412. Of our total expenses of $2,485,312 as of December 31, 1999,
$645,585 thereof consisted of the rights to certain applications (including the
radioactive materials license and establishment license applications and
IND/NDA's for sodium iodide I-123 capsules and solutions, and fluorine-18 FDG),
designs, processes, procedures, technology and specifications (including the
technology and specifications for the technetium-99m generator system designed
by Mr. Benedict), which are intangible assets, accounted for in accordance with
SFAS No. 2. SFAS No. 2 requires that all research and development costs, except
those done for others under contract or certain government-related entities, are
charged to expense.
We had working capital in the amount of $26,652 as of December 31,
1999. Our working capital is presently minimal or negative and there can be no
assurance that our financial condition will improve. After this offering which,
if completed, will yield the Company net proceeds of a maximum of approximately
$9,200,000, the Company is nevertheless expected to continue to have minimal
working capital or a working capital deficit as a result of the continuing net
loss anticipated from operations until such time, if ever, as we are successful
in obtaining the requisite licensing and regulatory approvals and sufficient
additional capital to obtain the facilities, inventory and equipment and employ
the requisite personnel required in order to commence operations. To fully
implement the Company's current business plan, we need to obtain additional debt
capital to acquire the facilities and the cyclotron. We expect to continue in
operation, without an infusion of capital, after the expiration of twelve months
from the closing of this offering. In order to obtain additional equity
financing, management may be required to dilute the interest of existing
shareholders or forego a substantial interest in its revenues, if any. We cannot
assure that any such operating capital required by us in order to fully
implement our business plan will be available to the Company in the foreseeable
future, if ever. (See "Risk Factors - We may be unable to meet our future
capital requirements.")
BUSINESS
General
We plan to manufacture, market and distribute a range of
radiopharmaceuticals and radiochemicals to the nuclear medicine industry, an
endeavor that represents the merger of medicine and biology. We will employ new
machines and techniques in a proprietary approach that gives superior quality
products while sharply lowering costs. Radiopharmaceuticals and radiochemicals
are used as radioisotopes for identifying and labeling radioactive elements in
medical diagnostics, biological research and commercial applications. According
to the Institute of Medicine, while the production methods of
radiopharmaceuticals are antiquated, the nuclear medicine industry is growing
substantially with an estimated $7 to $10 billion dollars spent annually in the
United States alone, thirteen percent (13%) of which represents radioisotopes.
We will employ an Internet site for our marketing applications and to serve as
one of the portals for all levels of users. We believe our production and
distribution approach will permit establishing a new standard for the industry.
17
<PAGE>
Our Approach
Nuclear medicine is the field that administers radioactive drugs
(radioactive tracers and pharmaceuticals) to patients for the diagnosis of
diseases such as heart disease and cancer. When these radiopharmaceuticals are
given to a patient, they are taken up within the body according to their
physical and chemical properties. These individual radiopharmaceuticals are
chosen based on their attraction for particular body organs or other sites of
clinical concern. Radiopharmaceuticals are different from standard
pharmaceuticals since they are not intended to change the body's normal
biological functions. Radioisotopes behave chemically and pharmacologically in a
manner similar to their non-radioactive counterparts. Due to complacency within
the industry, higher quality, cost-effective, diagnostic drug products have not
been produced for the past fifteen to twenty years. We intend to acquire several
unique and powerful new cyclotrons that will provide us with the capability to
make less expensive and purer isotopes than the competition. We will combine our
manufacturing approach with a computerized robotic system that:
o Reduces manufacturing labor costs;
o Enables a 24-hour production and quality control cycle;
o Reduces staff exposure to radiation;
o Eliminates expensive repetitive errors;
o Guarantees consistent quality with every batch of radiochemicals and
radiopharmaceuticals; and;
o Permits local delivery with lower inventory and wastage.
Our system will replace older lower amperage, single beam instruments
using manual procedures that have produced poorer quality and higher cost than
our proposed system. We believe that:
o Our technology and process will change the production methods for
radiopharmaceuticals;
o We have sharply superior technology compared to existing
manufacturers;
o We can manufacture with high gross margins;
o Our products will improve the quality of healthcare.
We are prepared to file the necessary applications required for
licensing and/or regulatory approval from the Colorado Department of Public
Health and Environment--State laboratory and Radiation Services Division, for
the handling of radioactive materials and with the (FDA) for the operation of a
nuclear medicine laboratory and for the production of iodine radiopharmaceutical
products. Under an agreement between the State of Colorado and the NRC, approval
of our application by the State will provide us with all necessary approval by
the NRC.
Business Strategy
The acquisition of our TR-30 million electron volt, 1.2 milli amperes
negative ion technology cyclotrons designed by our CEO and manufactured by EBCO
Technologies, Inc., will provide us with the most powerful isotope production
cyclotron of its kind. This instrument is capable of providing higher beam
current and multiple (5) beam lines. Increasing the beam current focuses higher
energy that then produces higher purity radionuclides with greater commercial
yields. Multiple beam lines increase the number of radionuclides produced at a
given time. We believe that no other company has this technology.
Construction and licensing of our facility and installation of our
first cyclotron will enable us to begin producing, subject to regulatory
approval, our first two radiochemical and radiopharmaceutical products, sodium
iodide 123 solutions and capsules and fluorine 18 FDG. At the same time we will
acquire and install a PET camera and establish our diagnostic imaging center to
serve the Rocky Mountain region. We will also produce technetium-99m generators.
The technetium-99m generator was introduced in the late 1960's to provide the
benefits of on-site production of the radioactive nuclide technetium-99m. This
type of generator consists of a long-life parent radionuclide which, when
processed in the generator, produces the radiopharmaceutical technetium-99m;
technetium-99m is used in certain diagnostic procedures.
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The radionuclide producing equipment, coupled with computerized
robotics, provide a fully automated and integrated system for the manufacture of
radionuclides. Computerized robotic manufacturing provides numerous advantages
to the system for the production of radionuclides by generating higher purity,
higher yield, and cost-effective radiopharmaceuticals. Our system replaces
instruments using manual procedures for the production of radiopharmaceuticals.
These antiquated instruments, coupled with outdated procedures, produce poor and
inconsistent quality, low yield, and higher cost radiopharmaceuticals.
We will manufacture the listed eight of the 34 radiochemicals and
radiopharmaceuticals (listed below) in our NRC application. New drugs in
research pipelines promise to accelerate applications even more, and we expect
to be in a leadership position to supply increased demand.
o Sodium Iodide-123 solution for thyroid studies
o Fluorine-18 FDG (Fluor-Deoxy-Glucose) used to test metabolic function
for PET (Positron Emission Tomography)
o Carbon-11 used to detect brain tumors
o Nitrogen-13 used for cardiac blood flow studies
o Oxygen-15 used in studying blood flow
o Palladium-103 primarily used as a therapeutic for treating prostate
cancer
o Gallium-67 used as therapeutic for skin cancer
o Technetium-99m (Sodium Pertechnetate) solution for diagnostic
procedures
We will employ an in-house direct mail and telephone strategy. We will
market and drop-ship directly to diagnostic centers and university hospitals. We
also have incorporated an aggressive approach to use of the internet in concert
with traditional forms of communication in our industry.
Market Analysis
Overview
While radioisotopes and enriched stable isotopes are essential in
medicine, isotopes also find wide parallel uses in research in chemistry,
physics and geosciences with additional needs existing in the commercial sector.
The U.S. Department of Energy (DOE) and its predecessors, the Atomic Energy
Commission and the Energy Research and Development Agency, have supported the
development and application of isotopes in a technology transfer. One of every
three hospitalized patients in the United States undergoes a nuclear medicine
procedure. More than 36,000 diagnostic medical procedures that employ
radioactive isotopes are performed daily in the United States and close to 100
million laboratory tests that use radioactive isotopes are performed each year.
Radionuclides are also used to deliver radiation therapy to a growing number of
patients each year (approximately 180,000 in 1998). (Source: National Academy
Press, Division of Health Sciences Policy).
Current Industry Status
The industry is governed by dated new drug applications (NDA's) and
Drug Master Files (DMFs) which, in order to change, would require the following:
*Designing new technologies for manufacturing;
*Developing new chemistries within some of these drugs;
*Developing new processing and operational procedures.
*Developing prototypes for each area;
*Streamlining distribution centers (nuclear pharmacies); and
*Revising DMFs to reflect all new technologies and operational
procedures.
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In order for industry to make the above changes, they must continue to
operate their old manufacturing facility according to their existing NDA's until
a supplemental application for each new drug product is submitted and approved.
This could significantly increase the products' cost since the estimated cost
for an NDA (Supplemental Application) can exceed $1 million per drug
application. The effect of these changes are delays in availability for 9 months
for minor changes and 4 years for major changes, provided a completely new NDA
is not demanded by the FDA. For these reasons, not many companies would attempt
a supplemental application. A change in the Current Good Manufacturing Practices
(cGMP's) requires intensive capitalization to deliver quality diagnostic
medicine.
The Nuclear Medicine Market
Nuclear medicine today in the United States is a multi-billion dollar
industry. One of every three hospitalized patients in the United States
undergoes a nuclear medicine procedure. Since 1994, the nuclear medicine
industry exceeded the growth rates of the general medical community. The market
has been estimated to have grown to $7 to $10 billion (Isotopes for Medicine and
the Life Sciences, National Academy Press; 1995). There are in excess of
110,000,000 target organ procedures that will be performed annually using
nuclear medicine throughout the United States (Isotopes for Medicine and the
Life Sciences). This is an increase from an estimated 2,500,000 in 1992. This
growth is due to new methods of diagnostic procedures in nuclear medicine, one
of which is Positron Emission Tomography (PET). The increase in the average age
of the general population ensures that nuclear medicine will continue to play an
expanded role in medical diagnosis.
The radiopharmaceuticals of tomorrow depend on the investigation of
radioactive tracers and therapeutic nuclides of today. The vast potential of
molecular nuclear medicine may not be realized with current limitations in the
supply of research radionuclides. Currently, only 1,250 out of 8,000 hospitals
use radionuclides, but we believe with lower cost, higher quality and effective
distribution, the potential market is much greater.
Within the industry, three major markets co-exist: the commercial
market, the medical market and the research market. Our product lines will cross
over into each of these special markets. The demand for different product lines,
however, will vary in each market. The commercial market consists of those
companies producing sealed sources or who produce commercial technetium-99m
generators distributed directly or indirectly to the medical market. We estimate
that the size of the total nuclear medicine and radiochemical market is
approximately $4 billion annually. The research market is widespread and diverse
throughout the United States. It includes universities as well as private
research facilities. The government research activities are also included in
this segment. Its size has been estimated at $555 million annually.
The medical market is the largest of these broad segments. It includes
all the nuclear medicine facilities in hospitals and clinics throughout the
country. These facilities provide both diagnostic and treatment programs. Over
8,000 physicians practice nuclear medicine in the U.S. The radiopharmaceutical
wholesale market accelerated rapidly due to the introduction of Thallium-201 and
the general growth of nuclear procedures. Thallium-201 sales increased because
of increased utilization of cardiac ECT studies and gated SPECT (Single-Photon
Emission Computed Tomography) of myocardial perfusion images (The Nuclear
Medicine Market in the U.S., Frost & Sullivan). Iodine-123 sales also increased
dramatically to $14.7 million due to the increase in the renal studies being
done and sales of other products, such as, indium oxide for blood cell labeling
(according to the Society of Nuclear Medicine).
As we try to estimate the future, it appears that most of the increase
will be in new product areas. The largest potential will be derived from the
introduction of a new, improved technetium-99m generator and cold kits,
particularly for cardiac and brain imaging and most recently breast imaging.
Thus, coupled with increased use of PET scans using Fluorine -18 FDG in new
product applications, this additional volume should result in an increased
market for radiopharmaceuticals. Within each market segment, the customer base
is varied. Physicians and hospitals comprise the principal customer base in the
medical division. Universities, research scientists and government facilities
constitute the base in the research division, with commercial manufacturers and
distributors in the commercial division. In each section the customer base and
the direct purchasers of our products have been identified. Specific marketing
and sales programs have been developed to serve every customer base within each
section.
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We estimate the current market of products and categories as follows:
===========================================================================
Wholesale market (radiochemicals) $ 950,400,000
- ---------------------------------------------------------------------------
Research market $ 1,607,555,000
- ---------------------------------------------------------------------------
Retail market $ 8,553,600,000
- ---------------------------------------------------------------------------
Therapy $ 110,000,000
===========================================================================
Sales and Distribution
We will capitalize on the expertise of Malcolm Benedict and Donald
Ludwig Ph.D., for the distribution of our products. Mr. Benedict and Dr. Ludwig
have many contacts throughout the nuclear medicine community. We expect to use
an established distribution program, plus an in-house direct mail and telephone
campaign. We will market and drop-ship directly to physicians, universities,
diagnostic centers, nuclear pharmacies and hospitals. Mr. Benedict has also
taken the required steps to ship product. The Company shipping requirements will
be in compliance with all the regulatory agencies.
Technology, Production and Products
Overview
Developments in therapeutic and diagnostic drugs have historically come
from the need to improve treatment regimens and provide more accurate diagnoses.
Specifically, improvements in radiopharmaceutical diagnostic drugs are required
to provide a clearer picture of the affected organ system to prevent
misdiagnosis. Diagnostic procedures that can provide more accurate diagnosis,
significantly reduce costs to the entire health care system: the patient, the
hospital, third party payors and the employer.
Technology
Our technology focuses on an integrated system that can produce high
quality, cost effective radionuclides. Our technology includes two instruments
for the production of radionuclides concomitant (radionuclidic and radiochemical
quality control) with computerized robotics for manufacturing the radionuclides.
Cyclotron. A cyclotron is an instrument used by physicists to
accelerate elementary particles to energies effective in causing chemical,
atomic, sub-atomic and nuclear reactions to occur. Historically, the cyclotron
was a large, heavy and expensive piece of equipment. Newer systems such as the
TR-30 H- system are medium weight, efficient, automated and cost effective.
Cyclotrons accelerate charged particles in a circular pathway through
accelerating gaps. The internal parts of the cyclotron that accomplish this
process are in the shape of the letter "D" and are referred to as Dees. A
charged particle, such as the proton, is accelerated from one dee to the next
dee by the means of a Voltage Gradient placed across the face of the dees. As
the proton passes from one dee to the next dee, its velocity or momentum
increases. At a certain specific energy the protons, which form the beam, are
directed from the cyclotron to the target producing radioactive products of
interest. All radiopharmaceutical substances produced by these methods are
produced at specified energy levels in order to maximize production and minimize
impurities that reduce the product's safety and efficacy. The cyclotron
accomplishes the same function by directing the particle beam through a series
of accelerating nodes that are arranged in a spiral.
The production process for cyclotron produced radionuclides is similar
to that associated with certain aspects of nuclear reactors in that special
stable isotope targets have to be prepared. Targets are bombarded by the
cyclotron using charged particles, which are appropriate for the particular
nuclear reaction. This is followed by a chemical separation process to prepare
the desired form of the radionuclide. However, there is a tremendous shortage of
cyclotron produced radionuclides for domestic use. The Journal of Nuclear
Medicine, Vol. 34, Number 6, June 1993 stated, "that the Department of Energy
(DOE) indicates that the department recognizes that this is a very serious issue
and the department is making every effort that it can". We believe that this
problem still exists.
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We believe that the cyclotron will be the primary production unit for
the next 10 to 25 years. Linear accelerators are machines for the future as
nuclear medicine expands. We believe the cyclotron, however, will not outgrow
its usefulness for producing nuclides at a low cost. Linear accelerators are in
the experimental state and have not been proven for commercial production. The
linear accelerator and cyclotron are both based on the technology of
accelerating charged particles to very high velocities, and therefore high
energies. The particle beam is then directed into "targets" consisting of stable
atoms. The high energies of the particles cause the non-radioactive target
material to become radioactive through nuclear changes. Cyclotrons have the
advantage of smaller size and may operate in a much smaller space, thus being
more advantageous to nuclear medicine industry applications. We believe that
cyclotrons also are less expensive to operate than linear accelerators and
therefore are more ideal for small to large volume operations. Cyclotrons are
being used in industrial applications as well as other various uses such as
cancer therapy, explosive and incendiary detection, nondestructive materials
testing and mineral content determination and analysis. These areas are also
very profitable and are continuing to expand.
The acquisition of several TR-30 million electron volt, 1.2 milli
amperes negative ion technology cyclotrons from EBCO Technologies, Inc. will
provide the Company with the most powerful isotope production cyclotron of its
kind. This instrument is capable of providing higher beam current and multiple
(5) beam lines. Increasing the beam current produces higher energy targets that
generate higher purity radionuclides with greater production yields. Multiple
beam lines increase the number of radionuclides produced at a given time. No
other Company has this technology available to them at this time.
Technetium-99m Generator. The use of technetium-99m generators is
advantageous because the product shows the function of major body organs.
Technetium-99m is used because it provides good resolution and efficiency with
the nuclear medicine camera. The producers of these generators replace the
customer's product on a weekly and bi-weekly basis. The capacity of the
generator is selected so that it provides sufficient output for one to two
weeks. The larger users, such as the nuclear pharmacies, may order one or more
generators per week. E.I. du Pont deNemours and Company, Amersham Pharmacia
Biotech Ltd. and Mallinckrodt Inc. now produce generators for the United States
market. These companies produce generators in the 1 to 15 Curie range. The
Company's generators will be in the 100 to 1,600 Curie range. This is
substantially higher in quality and quantity than anything available in the
market.
Our strategy will be to challenge this market by introducing a
permanent, proprietary rechargeable generator invented by our founder, Malcolm
H. Benedict. The Company believes such a generator will offer a purer and more
cost-effective product. These generators will also provide handling advantages
(such as reducing radiation exposure) over the industry's existing disposable
units. The new technetium-99m generators will be placed in nuclear pharmacies or
clinics in major metropolitan areas throughout the country. The role of these
entities will be to supply the product to hospitals and clinics, thus
eliminating the need for such facilities to own and operate their own
generators. The Company believes the instant availability of massive quantities
of a purer technetium-99m, through a local distribution network will offer an
advantage to the physicians and this will also represent a substantial cost
savings to the hospital and the patient. The greater availability of the drug
can also be expected to increase the use of radiopharmaceuticals, which will
increase our market share and sales volume.
Development and Manufacturing of Radioactive Elements
Radioisotopes are produced either in a nuclear reactor or Particle
Accelerator (one of two kinds of cyclotron). After target elements are bombarded
by a particle beam from a cyclotron or linear accelerator, the resultant
radioisotopes are processed into radiochemicals in specially designed
facilities. These radiochemicals are then processed into radiopharmaceuticals
for distribution and use in nuclear medicine laboratories and clinics.
Radiopharmaceuticals are used in extremely small quantities to make the
drugs safe and effective for human use. The radiopharmaceuticals on the market
today are safe in that they reduce radiation exposure to the patient; however,
we believe that they could be greatly improved. Radiopharmaceuticals are
prepared in various forms, such as capsule, sterile solutions and single or
multiple dose vials for injection into the body. Most of the available
radiopharmaceuticals are used in the form provided by the manufacturer.
Technetium-99m can be utilized in combination with various other compounds or it
can be used in its more basic form, as technetium-99m, for brain and thyroid
scanning.
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In order to develop radiopharmaceuticals, it is necessary:
* to establish a chemical analog of a body substance, which can be
represented by a specific radiopharmaceutical, that will demonstrate
dynamic function of an organ or gland.
* to determine the amount of time it takes to reach the organ or target
of interest in the body and to determine the effect on surrounding body
regions which might blur and confuse the evidence of the diagnosis. The
objective is to maximize the scan and make sure it does not compromise
the other qualities sought.
* for the radioactive material to have the minimum or lowest possible
physical useful life consistent with the practicality of the time
required for shipment. Generally, the shorter the half-life of the
radiopharmaceutical, the safer the drug is to administer to the
patient. Therefore, more diagnostic information can be recorded from
the patient in a shorter time period. The shorter useful life of the
radiopharmaceutical diminishes radiation exposure to the patient by
reducing the time that the body is exposed to the radioactive form of
the material. The object is to minimize the radiation dose to the
patient while getting a moving picture of the organ of interest.
In addition, radiopharmaceuticals used in conjunction with
complementary procedures can assist in the diagnosis and tracking of a disease.
For example, the combination of two radiopharmaceuticals, "technetium-99m" and
"xenon 133" can be used to study lung perfusion. Lung perfusion demonstrates the
flow of blood through the lungs whereby the xenon 133 gas inhalation
demonstrates the viability of the air passages in the lung. This provides a very
accurate assessment of the function of the patient's lungs.
We plan to manufacture the following radiochemical and
radiopharmaceutical products in the first year of operation:
Sodium Iodine-123. Iodine is an essential element in the normal diet
and is extracted by the thyroid gland and converted into thyroxin and other
thyroid hormones. Sodium Iodine-123 has been used by physicians in order to
discriminate between the many types of thyroid dysfunction and disease. Sodium
Iodine-123 radiopharmaceutical has ideal chemical properties for studies of the
thyroid. Furthermore, many drugs and metabolically active compounds can be
labeled by the inclusion of sodium iodine-123 without loss of biochemical
activity. For example, sodium iodine-123 labeled amphetamines are used to
determine the regional cerebral blood flow in patients who have suffered, for
example, a stroke. The New York State research foundation was responsible for
the research and origin of Sodium Iodine-123 HIPDM. Our founder, Malcolm
Benedict, was responsible for the development and commercialization of Sodium
Iodine-123 HIPDM into a finished radiopharmaceutical. This product is also used
for strokes, Alzheimer's disease, epilepsy and brain imaging. Due to its low
toxicity, it is equally well tolerated by adults and children.
PET Products. These products, which are listed below, are produced
entirely by cyclotrons and must be processed as radiochemicals, formulated into
radiopharmaceuticals and administered to patients within a very short time.
These products have been generally produced in a research hospital environment
and are now used on site on a commercial basis.
o Fluorine-18 (FDG) has a useful life of 110 minutes and is a
radiochemical that can be incorporated into organic chemicals and
used as a radiopharmaceutical. It is also used to produce other
products for specific purposes that can be used for examination of
many different organs.
o Carbon-11 has a 20-minute useful life and can be incorporated in
many organic compounds to replace non-radioactive Carbon-12.
Sometimes, physicians prefer to use Carbon-11 Methionine in the
detection of disease with brain tumors that cannot be detected
with Fluorine-18 (FDG).
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o Nitrogen-13 has a 10-minute useful life and can be incorporated
into numerous organic compounds. An application of this type of
study is to attach a radiopharmaceutical and physical process
continuously going on, in living organisms and cells. Nitrogen-13
is often used for cardiac blood flow studies.
o Oxygen-15 has a 2-minute useful life and is used in studying blood
flow of the brain and the heart by labeling ordinary water.
The PET camera produces images from the emitting of the
radiopharmaceutical administered to the patient. PET is the most accurate test
to reveal coronary artery disease or rule out its presence. The PET images can
show inadequate blood flow to the heart during stress, which goes undetected by
other non-invasive cardiac tests. We believe that at this time PET is considered
to be one of the best diagnostic methods to determine the viability of heart
tissue for blood flow studies. PET imaging can be used on the following cancers:
lung, colorectal, breast, adrenal and brain. PET can be used to determine the
location of tumor cells. Because tumor cells are more metabolically active than
normal cells, a PET scan easily detects them. PET scans can also determine
whether a tumor is benign or malignant, whether cancer treatment, such as
chemotherapy, has been effective. Clinical indications for imaging in neurology
include the evaluation of primary central nervous system tumors, epilepsy and
dementia.
We plan to manufacture the following radiopharmaceutical products in
the second year of operation:
Gallium-67. This product tends to concentrate in tumors and abscesses.
The primary use of this radiopharmaceutical is the detection of cancer. It has
application in many specific tumors (lymphoma, melanoma, carcinoma, lung, and
hematoma) and a wide variety of tumors common in pediatric patients. Gallium-67
also is known to concentrate in sites of local or systemic inflammation and is
therefore valuable as a screening tool for infections of non-specific origin,
for which there are no other diagnostic or localizing techniques.
Technetium-99m. Technetium-99m is a common radiopharmaceutical used for
showing the function of major body organs and other tissues (brain, lung, legs,
bone, liver, and kidney). Technetium-99m, alone, or combined with other agents,
is used to determine brain blood flow (brain scan image), lung scans before and
after surgery, thrombosis in the peripheral vascular system, bone diseases and
tumors in various organs. Technetium-99m is delivered in bulk and requires a
specialist in nuclear medicine to be on duty in each of the medical facilities
or nuclear pharmacies.
Palladium-103. Palladium-103 is a form of small radioactive pellets
which are implanted in a patient's prostate under ultrasound guidance to destroy
a tumor. These small radioactive sources ("commonly called "seeds") are
permanently implanted, via needles, into the prostate gland, and are clinically
excellent therapy for the treatment of early-stage prostate cancer.
Intellectual Property
We do not have any issued patents or patents pending. We anticipate
filing patents for many of our robotic manufacturing procedures, radiochemical
targets and technetium-99m generator.
History
We are dependent upon the extensive expertise of Malcolm H. Benedict,
our founder, Chairman, President and Chief Executive Officer. In 1972, Mr.
Benedict founded Benedict Nuclear Pharmaceuticals, Inc., ("BNPI"). BNPI began
producing radiopharmaceuticals under the control of the Nuclear Regulatory
Commission (NRC) and the State of Colorado Health Department, acting in place of
the Federal Food and Drug Administration, and later consented to make filings
under FDA procedures. Mr. Benedict has devoted his principal efforts and
resources to meeting the regulatory requirements necessary to manufacture
radioactive drugs. In August 1981, the FDA granted BNPI an Investigational New
Drug ("IND") permit to manufacture and conduct clinical trials on Iodine-123
capsules and solution (Iodine-123). After reporting the findings on the safety
and effectiveness of these drugs, BNPI submitted a New Drug Application (NDA)
for Iodine-123 capsules and solution (Iodine-123). BNPI's NDA was awarded in May
1982. The application was completed in nine months from the initial acceptance
until final approval. Canada's Radiation Safety Bureau issued BNPI an NDA for
its Iodine-123 capsules and solution within three months of filing the necessary
documentation. Similarly, an IND/NDA was filed for Thallium-201. Mr. Benedict
left BNPI in 1991, and subsequently that firm was merged with several other
companies prior to its acquisition by Syncor, Inc.
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Competition
We believe that six major corporations currently dominate the
radiochemical and radiopharmaceutical industry; however, brand name competition
is not a significant factor in marketing diagnostic drug products; the
improvement of the quality and purity of diagnostic drug products will be a more
significant factor. The six major manufacturers that we have identified are Du
Pont, Mallinckrodt Chemical Corporation, Nycomed-Amersham International,
MDS-Nordion, International Isotopes and Theragenics. Our cyclotrons, which are
being manufactured by EBCO, Inc., will run at 1.2 milli amps (1,200 micro amps)
or higher, which we believe far exceeds the cyclotron capacity of our
competitors.
Fundamental Weaknesses of the Industry.
There are inherent weaknesses within this industry. These companies
began manufacturing radiopharmaceuticals from the products developed for
university-generated research. As a result, they were not committed to the
development of quality products at a low cost. Their entire business was based
on their ability to obtain FDA approvals on these drug products as they were
developed. For the most part, they operate today from the NDA's and Drug Master
Files that were developed 15-20 years ago.
Until we enter this market, they have no incentive to change because
they can pass the cost of the radiopharmaceuticals down to the patient. We
intend to restructure the industry for the next generation on quality, cost and
distribution upgrades.
Currently, radioisotopes produced by a cyclotron accelerator are
manufactured in the United States principally by the radioisotope producing
companies, primarily, we believe, for their own radiopharmaceutical products. We
believe that hospitals, medical institutions and universities also produce
certain short-lived radioisotopes utilizing small cyclotron accelerators,
principally for their own radiopharmaceutical needs. The radioisotope producing
companies have substantially greater capital and other resources than we do, and
there can be no assurance that they may not elect to produce radioisotopes for
commercial sale. The U.S. government also produces radioisotopes, primarily for
research purposes, in three national laboratories, Brookhaven National
Laboratory, Los Alamos National Laboratory and the Oak Ridge, Tennessee National
Laboratory, and has announced that it plans to modify the nuclear reactor at
Sandia National Laboratory in Albuquerque, New Mexico to produce certain
radioisotopes. In addition, there can be no assurance that a third party will
not contract with the U.S. government to acquire radioisotopes for commercial
sale. Outside the United States, MDS Nordion, Inc., a Canadian firm, and
Mallinckrodt, N.V. at Petten, a Netherlands firm, both of which have
substantially greater capital and other resources than we do, are major
producers of cyclotron-produced and accelerator-produced radioisotopes. MDS
Nordion, Inc. currently supplies a significant portion of the radioisotopes used
in the diagnostic nuclear medicine industry in the United States, and there can
be no assurance that we will be able to compete successfully with this firm.
Government Regulation
Regulation of Production and Radioactive Waste. The manufacture of
radiochemicals and radiopharmaceuticals is subject to extensive federal and
state regulation. Prior to commencing operations, we must obtain approval of our
facility from the various agencies which administer these regulations, and prior
to transporting medical use radiochemicals and radiopharmaceuticals across state
lines, we must obtain approval from the FDA. In addition, the DOT regulates the
quantity and method of shipment of radioactive materials, and sets
specifications with respect to the class of shipping containers used. Our
facilities will be subject to continual inspection for compliance with state and
federal regulations, which require that we manufacture radiochemicals and
maintain manufacturing, testing and quality control records in a prescribed
manner. See "Risk Factors--Government Regulation." Since our facility will have
to be approved by the State of Colorado Department of Public Health - State
Laboratory and Radiation Services Division, which approves facilities under
agreement with the NRC, we believe it will not be subject to regulation by the
NRC or the Department of Energy. FDA regulations provide that a
radiopharmaceutical production facility may not be used for any purpose other
than the production of radiochemicals and radiopharmaceuticals.
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We will be required to file a Drug Master File with the FDA for each
radiopharmaceutical which we propose to produce. These radiochemicals and/or
radiopharmaceuticals can then be used by other radiopharmaceutical companies for
manufacturing their own proprietary radiopharmaceuticals. These products will be
covered by NDA's filed by the respective radiopharmaceutical companies, which
companies will make reference to our applicable DMF.
The production and processing of radioisotopes generate a certain
amount of low-level, solid radioactive waste. Pursuant to the Low Level
Radioactive Waste Policy Act of 1980, states are required to assure the safe
disposal of mildly radioactive materials. The handling, retention and disposal
of radioactive waste is regulated by various other agencies, which enforce
federal regulations promulgated by the Environmental Protection Agency ("EPA")
and their own regulations. We believe that radioactive waste that we produce
will fall into the category of low-level radioactive waste. Most of this waste
will be in the form of used laboratory expendables, such as latex gloves and
absorbent paper used to protect laboratory counter tops from direct exposure to
spilled materials, which waste will be compacted and disposed of through the
usual commercial channels used by universities, medical institutions and
industrial users of radioactive materials. Between scheduled waste pick-ups,
compacted materials containing longer-lived radioisotopes temporarily will be
retained on-site in a specially designed, low-level waste reduction facility,
which facility will reduce the amount of radioactive waste that must be removed
to a permanent radioactive waste disposal facility. The production of
radioisotopes at our facility will include the chemical separation of
radioisotopes. This may lead to the production of some mixed hazardous waste,
consisting of a mixture of low-level radioactive materials, water, organic
solvents and inorganic salts. We will hold such materials on-site for a period
of time until the radioisotopes decay to stable isotopes, at which time the
materials can be moved off-site for disposal by commercial waste handlers.
Liquid waste resulting from the processing of accelerator-produced controlled
products or from the washing down of hot cells or other decontamination
procedures will be contained in storage tanks at our facility. It is anticipated
that the capacity of the storage tanks will be sufficient to permit the holding
of radioactive wastes until decay to negligible levels has taken place. In
compliance with applicable state laws, we will maintain a radiation safety
committee, comprised of Malcolm Benedict and Dr. Donald A. Ludwig. Our radiation
safety officer will be appointed to oversee our radiation safety procedures. The
radiation protection officer will control and monitor our compliance with state
and federal regulations, and will conduct radiation audits to comply with
applicable regulatory requirements.
Although we intend to comply with all applicable regulations regarding
the manufacture and sale of radiochemicals and radiopharmaceuticals, such
regulations are subject to change and depend on administrative interpretations.
We cannot assure that future changes in regulations or interpretations made by
the FDA or other regulatory bodies, with possible retroactive effect, will not
have a material adverse effect on us. We also will be subject to numerous
federal, state and local laws relating to such matters as safe working
conditions, manufacturing practices, fire hazard control and disposal of
hazardous or potentially hazardous substances. We cannot assure that we will not
incur significant costs in complying with such laws and regulations or that such
laws or regulations will not have a material adverse effect upon us.
Medical imaging centers must comply with regulations, promulgated in
most states by an agency of the state government under authority delegated by
the NRC, governing the possession and use of radiopharmaceuticals for diagnostic
medical procedures. In order to secure approval, a medical imaging center must
submit an acceptable site plan for its camera, employ adequate radiation safety
and quality procedures, and provide a nuclear medicine physician or other
qualified physician who meets certain training and experience standards. Many
states have "certificate of need" regulations that require a hospital purchaser
or user of expensive diagnostic equipment, such as medical imaging cameras, to
obtain regulatory approval prior to purchasing the equipment. A primary purpose
of those regulations is to contain health care costs by restricting the number
of similar units in a particular locality. We cannot assure that such
requirements or the delays that may be occasioned thereby will not limit our
ability to market and sell our products.
26
<PAGE>
Other Regulations. If we enter into agreements with suppliers to
acquire various controlled-items, neutron-produced research and therapeutic
radiochemicals or accelerator-produced radiochemicals for our distribution, we
will be subject to various regulations regarding the handling of radioactive
materials. Compliance with such regulations will be the responsibility of the
contracting supplier. Any radiopharmaceuticals developed under arrangements
between us and medical institutions and universities, including preclinical
animal studies, the filing of an IND application, human clinical trials and the
approval of a NDA, will require prior approval of the FDA, which has established
mandatory procedures and standards for the clinical testing, manufacture and
marketing of therapeutic and diagnostic products. Obtaining approval from the
FDA could be a time consuming and costly process.
We also will be subject to regulation by the EPA, OSHA and other agencies
with respect to the radioactive content of water and air discharges and the
handling and disposal of radioactive waste. We intend to comply with all such
laws and regulations and believe our facilities and operations will not create
any hazards to nearby residents, employees or visitors. See "Risk
Factors--Government Regulation".
Regulatory Approvals. We are prepared to file the necessary
applications required for licensing and/or regulatory approval from the Colorado
Department of Public Health and Environment - (State Laboratory and Radiation
Services Division) for the handling of radioactive materials and the FDA for the
operation of a nuclear medicine laboratory and for the production of iodine
radiochemical products. We believe these licenses will be granted when the
building and equipment are completed in our temporary and permanent facilities
and final inspection has taken place. We do not anticipate any obstacles in our
ability to obtain the required licenses.
Product Liability and Insurance.
The use of our radioisotopes in radiopharmaceuticals and in clinical
trials may expose us to potential product liability, which is inherent in the
testing, manufacture, marketing and sale of human diagnostic and therapeutic
products. In addition, the failure to effect timely delivery of radioisotopes
may cause a delay in a scheduled test or procedure or result in the functional
loss of radioactivity of the radioisotope, thereby exposing us to potential
liability. We currently have no product liability insurance. We intend to obtain
product liability insurance prior to commencing production of any radioisotopes
and prior to the manufacture and sale of any products, but there can be no
assurance we will be able to obtain or maintain such insurance on acceptable
terms or that any insurance obtained will provide adequate coverage. Claims or
losses in excess of any liability insurance coverage ultimately obtained by us
could have a material adverse effect on us. See "Risk Factors--Product Liability
Exposure and Insurance."
Our Facilities
We currently lease office space at 1880 Industrial Circles, Suite B-3
in Longmont, Colorado and additional space in Boulder, Colorado. The office
space in Boulder, Colorado is subleased to an unrelated entity. Upon completion
of this offering, we anticipate temporarily leasing additional space in Longmont
to begin production and sale of sodium iodide-123. We will also purchase land
for and begin construction of our permanent facility. We have entered in to a
contract to purchase approximately 5.5 acres of land (with an option to purchase
an additional 5 acres) in Weld County, Colorado, approximately 6.7 miles east of
Longmont, Colorado and approximately 2.3 miles west of Interstate 25, Colorado's
major north-south throughway. We have deposited 102,000 shares of common stock
in an escrow account for that purchase and we anticipate, pending the
fulfillment of all conditions to the purchase, closing on the purchase in July,
2000; however, we cannot assure that we will be able to close on the purchase.
We will obtain insurance on our facilities for fire, theft and general
liability coverage during the period of any occupied or leased facility. The
dollar value of the property coverage shall not be less than eighty (80%) of the
replacement cost of the facility and equipment, unless otherwise covered in an
equal amount.
27
<PAGE>
Employees
The Company currently has four full-time employees, consisting of three
executive officers and one administrative person. Once the permanent facility is
constructed, we intend to hire additional technical personnel to operate and
monitor the cyclotron and robotic manufacturing equipment and medical personnel
to operate the PET diagnostic imaging center. The Company believes its
relationship with its employees to be good. None of the employees is represented
by a union and there have been no work stoppages to date.
Legal Proceedings
There are no legal proceedings to which the Company is a party.
MANAGEMENT
Directors and Executive Officers
Board of Directors and Executive Officers
The following are our directors and executive officers:
Name Age Position
- ---- --- --------
Malcolm H. Benedict 62 President, CEO and Chairman of the Board
Donald A. Ludwig, Ph.D. 52 Director and Executive Vice President
Janet L. Davis 44 Director and Secretary
Vernon L. Morris, CPA 55 Chief Financial Officer
David D. Mc Nurlin 38 Vice President, Corporate Development
Malcolm H. Benedict has served as the President, Chief Executive
Officer and Chairman of the Board of Directors of the Company since the
inception of Molecular Diagnostics and Therapeutics, Inc., (formally Nu-Tec.,
L.T.D.), on February 19, 1992. From 1979 to 1991, Mr. Benedict served as the
President, Chief Executive Officer and Chairman of the Board of Directors of
Golden Pharmaceuticals, Inc., Golden, Colorado ("Golden Pharmaceuticals",
formerly known as "North American Chemical Corporation," and "Benedict Nuclear
Pharmaceuticals, Inc."), a publicly held corporation that was engaged in the
manufacturing and distribution of radiopharmaceuticals, subsequently selling its
product line to Syncor Pharmaceuticals, Inc. During the approximate 19 years
since Mr. Benedict's founding of Golden Pharmaceuticals in 1972, Golden
Pharmaceuticals developed into a national drug company and received FDA approval
for the commercialization of two radiopharmaceutical products. Mr. Benedict has
extensive experience in nuclear medicine during the past 35 years. Mr. Benedict
is an active member of five well-known professional organizations, as well as
the Society of Nuclear Medicine.
Donald A. Ludwig has served as Executive Vice President and a director
of the Company since 1998. He is a sales, marketing and management executive
with more than twenty-five years experience in high technology, nuclear medical
and radiopharmaceutical production instrumentation. He has a PhD in medical
physics. He has managed technology groups in the advanced diagnostic imaging,
radiation therapy and PET industry. He has consulted with many of the leading
companies in this industry and his advice is frequently sought by overseas
healthcare organizations. For the past several years, he has been the principal
consultant at Physics For Medicine, an independent physics service provider to
the nuclear science community. He is an expert in the use of Particle
Accelerators for the manufacturing of radiochemicals and radiopharmaceuticals
and the distribution process.
Janet L. Davis has served as the Secretary since 1996 and has served as
an interim Director of the Company since December 1999. She was appointed to
serve as an interim Director of the Company upon the resignation of J.D. Kish.
She is currently employed as a paralegal by Reinhart, Boerner, Van Deuren,
Norris & Rieselbach, P.C. Ms. Davis successfully completed an American Bar
Association-approved program in paralegal studies and a Bachelor of Science
degree in education from Louisiana State University.
28
<PAGE>
Vernon L. Morris. Mr. Morris was appointed the Chief Financial Officer
of the Company in January 2000. He is a Certified Public Accountant and has had
his own accounting practice in Boulder, Colorado for the past twelve years. Mr.
Morris received his degree in Physics from Colorado State University and his CPA
certificate in Colorado in 1972. Mr. Morris was employed with Brock Cordle and
Associates as chief audit partner and securities audit partner. Mr Morris will
be responsible for all financial operations and controls, including budgeting,
financing, financial reports and taxes. Mr. Morris is a member of the American
Institute of Certified Public Accountants.
David D. Mc Nurlin has served as the Vice President of Corporate
Development for the Company since January 1, 1998. His responsibilities include
project management, cost analysis and cost breakdown, budget forecasting and
facility development. Mr. Mc Nurlin is currently in pursuit of his BSBA in
Business Administration. Mr. Mc Nurlin has over 12 years project management
experience and over 8 years experience in computer information systems.
All directors currently hold office until the next annual meeting of
shareholders and until their successors are duly elected and qualified. Our
executive officers serve at the discretion of the Board of Directors and until
their successors are duly elected and qualified.
Medical and Scientific Advisory Board
Michael J. Lawson, M.D. (Board Certified Nuclear Medicine & Internal
Medicine) is the Director of the Good Samaritan PET Center, Phoenix, Arizona.
Dr. Lawson has an extensive background in the field of nuclear medicine over the
past thirty years. He is a founding Member of the American Society of Nuclear
Cardiology. Dr. Lawson is an active member of more than six medical
organizations as well as having extensive publications. He is a graduate of the
University of Utah School of Medicine. Dr. Lawson has joined the Company as the
Advisor and Director of the PET Center.
Steven M. Larson, M.D. (Board Certified Nuclear Medicine & Internal
Medicine) is the Chief of Nuclear Medicine at Memorial Sloan Kettering Cancer
Institute, New York, New York. Dr. Larson, a graduate of the Washington School
of Medicine, has had an extensive background in the field of nuclear medicine
and internal medicine over the past thirty years. Dr. Larson is an active member
of several medical organizations as well as having extensive publications. Dr.
Larson has joined the Company as a medical advisor in diagnostic and therapeutic
medicine.
Karl Erdman, Ph.D. has worked as Chief Scientist on PET Medical
Cyclotron, Research Cyclotron, and Commercial Radioisotope Cyclotron Projects at
EBCO Technologies, Inc. since 1987. Dr. Erdman received his Ph.D. in Physics
from the University of British Columbia. Prior to joining Ebco, he worked as
Associate Director of TRIUMF, Canada's National Meson Facility located in
Vancouver, BC, and was involved as part of the team who built TRIUMF in 1972. He
is an internationally recognized expert in negative ion cyclotrons,
radio-frequency systems in Cyclotron Accelerators, charged particle beam line
design and operation, and cyclotron applications. Dr Erdman taught at the
Physics Department at the University of British Columbia. He has had many
accepted international articles published on physics. He has joined the Company
as a scientific advisor in cyclotron operations and controls.
Richard R. Johnson, Ph.D. has worked as Program Manager on PET Medical
Cyclotron, Research Cyclotron, and Commercial Radioisotope Cyclotron Projects at
EBCO Technologies since 1996. Dr. Johnson received his Ph.D. in Physics from the
University of British Columbia. Prior to joining Ebco, he worked as Division
Head of TRIUMF, Canada's National Meson Facility located in Vancouver, BC, and
was involved as part of Administration, Technical and Applied Programs
responsible for medical applications. He has joined the Company as a scientific
advisor in cyclotron operations and manufacturing procedures.
Hermann Schweickert, Ph.D. is the head of the Cyclotron Laboratory at
the National Laboratory of Germany. Dr. Schweickert received his Ph.D. in
Physics from University of Heidelberg, Germany. He was responsible for the
design, construction and operation of two accelerators at the laboratory. He is
the head of the accelerator development group. He is a member the Institute of
Nuclear Physics and The Institute of Neutron Physics and Reactor Technology. Dr.
Schweickert is an expert for the International Atomic Energy Agency throughout
the world in the field of radioisotope production for medical applications. He
has published extensively in international physics journals. He has joined the
Company as a scientific advisor in cyclotron operations and targets.
29
<PAGE>
Volker Bechtold, Ph.D. is the Deputy Director of the Cyclotron
Laboratory at the National Laboratory of Germany. Dr. Bechtold received his
Ph.D. in Physics of the University of Karlsrule, Germany. Previously, he was the
scientist responsible for the design, construction and operation of the 42 MeV
Cyclotron. He has worked as Director of Isotope Production and in the research
center of the National Laboratory developing many of the radiopharmaceuticals
for medical applications in Europe. Dr. Bechtold is an expert for the
International Atomic Agency (IAEA) throughout the world in the field of
radioisotope production for medical applications. He has published extensively
in international physics journals. He has joined the Company as a scientific
advisor in cyclotron operations, targets, (gas and solid), manufacturing and
production of radiochemicals and radiopharmaceuticals.
Robert L. Mundis, Certified Health Physicist is the radiation
protection officer for the Company. His responsibilities will include, but not
be limited to, the following: enforce compliance with all safety rules as
contained in radioactive materials license and as promulgated by the federal,
state and local governments; to inspect the Company according to the provisions
of the radioactive license on a quarterly basis and issue reports. He has worked
as a Certified Health Physicist at the Los Alamos National Laboratory since
1991. Mr. Mundis received his BA in Mathematics from the University of Niagara.
He is a Technical Staff Member in the TA-53 Accelerator Health Physics Section
of the HS-1 Health Physics Operations Group at the Laboratory.
Ronald J. Callahan Ph.D. is the Nuclear Pharmacist at the Division of
Nuclear Medicine, Massachusetts General Hospital (Harvard Medical School). He
received his Ph.D. at the Massachusetts College of Pharmacy. He is an expert in
the field of pharmaceuticals and radiopharmaceuticals and on the Advisory Panel
of the United States Pharmacopeia & National Formulary. He has served on the
Board of Trustees of the Society of Nuclear Medicine. Dr. Callahan is a member
of numerous societies, of which one is the Radiopharmaceutical Science Council
of the Society of Nuclear Medicine.
The members of the Medical and Scientific Advisory Board are expected
to advise us on technical and scientific issues. We anticipate that the board of
advisors will review the technical progress of the Company's products,
engineering and research and development, and will be compensated at a rate per
meeting to be determined by our Board of Directors, plus reasonable travel
expenses in connection with such meetings. The advisors will make
recommendations to us regarding product capability and specifications,
engineering designs and research and development objectives, and our future
technical development. We do not intend to retain individuals to serve as
advisors whose primary employers, or other third parties with whom such
individuals have consulting arrangements, are in competition with us. Advisors
may be retained individually by us on a consulting basis to perform work
specifically for and at our direction. The members of the Medical and Scientific
Advisory Board have each received 5,000 shares of common stock for their
participation on this board.
Summary Compensation Table
The following table sets forth the compensation paid or accrued, for
the fiscal years ended March 31, 1999, 1998 and 1997 for our President and
Executive Vice President. Other than our President, we have no officer whose
salary and bonus were in excess of $100,000. There is no executive officer,
other than those listed on the following table, who was awarded, earned or paid
more than $100,000 for the fiscal year ended March 31, 1999, 1998 and 1997. The
Company does not have any option or other grants outstanding.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
Bonus
Fiscal Year Salary Research and Cyclotron License
Name and Principal Position Ended Development and Design
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Malcolm H. Benedict, President 1999 $125,000 $120,000 $37,157
1998 $ 86,667 $ 67,600 -0-
1997 $ 50,000 $ 75,000 13,000
- ---------------------------------------------------------------------------------------------------------
</TABLE>
30
<PAGE>
Employment Agreements
We have entered into a Second Amended Employment Agreement with Mr.
Benedict. The Employment Agreement is for a term of three years, commencing
January 1, 1999 and provides that Mr. Benedict shall serve as Chief Executive
Officer of the Company. Mr. Benedict agrees to devote his full working time,
attention and energy to the business of the Company. Pursuant to the agreement,
Mr. Benedict is entitled to a base salary of $125,000 per year, plus additional
compensation for new additions or changes to an original license application in
an amount not less than $40,000 per license application. The employment
agreement also provides that the employee is entitled to additional incentive
compensation as determined by the board of directors, from time to time, for the
performance of duties not customarily performed by a President and Chief
Executive Officer of a radiopharmaceutical company. In the Employment Agreement,
Mr. Benedict agrees to waive any compensation owed to him and which was not paid
for calendar years prior to 1999; provided, however, the board of directors may
consider such waiver in determining any additional incentive compensation. Mr.
Benedict will be entitled to six weeks' vacation per year, locally recognized
holidays and other benefits pursuant to plans approved by the Company offered to
all employees. The employment agreement may be terminated by Mr. Benedict upon
60 days' notice or by the Company for cause. Furthermore, the Employment
Agreement will be terminated upon Mr. Benedict's death and may be terminated
upon his disability, provided he shall, in either case, be entitled to receive
his salary for six months following such termination. The employment agreement
also contains confidentiality provisions prohibiting Mr. Benedict from
disclosing trade secrets and other proprietary information.
We have entered into an Employment Agreement with Dr. Ludwig. The
Employment Agreement is for a term of five years, commencing April 1, 1998 and
provides that Dr. Ludwig shall serve as Executive Vice President of the Company.
Dr. Ludwig agrees to devote his full working time, attention and energy to the
business of the Company. Pursuant to the agreement, Dr.Ludwig is entitled to a
base salary of $100,000 per year, plus additional compensation for new additions
or changes to an original license application in an amount not less than $40,000
per license application. The employment agreement also provides that Dr.Ludwig
is entitled to additional incentive compensation as determined by the board of
directors, from time to time, for the performance of duties not customarily
performed by an Executive Vice President of a radiopharmaceutical company. In
the Employment Agreement, Dr. Ludwig stipulates that, during the first two years
of the agreement, the Company may not be able to pay the full amount of the
agreed salary and agrees to accept a lesser amount without the expectation of
being paid the balance during any future year. The board of directors may
consider such waiver in determining any additional incentive compensation. Dr.
Ludwig will be entitled to six weeks' vacation per year, locally recognized
holidays and other benefits pursuant to plans approved by the Company offered to
all employees. The employment agreement may be terminated by Dr. Ludwig upon 60
days' notice or by the Company for cause. Furthermore, the Employment Agreement
will be terminated upon Dr. Ludwig's death and may be terminated upon his
disability, provided he shall, in either case, be entitled to receive his salary
for six months following such termination. The employment agreement also
contains confidentiality provisions prohibiting Dr. Ludwig from disclosing trade
secrets and other proprietary information. For the period from April 11, 1998 to
December 31, 1999, Dr. Ludwig worked on a part-time basis and was paid
approximately half of the salary stated in the employment agreement.
Stock Option Plan
At the current time, we do not have a stock option plan that has been
approved by the shareholders.
Committees of the Board of Directors
We have not established any committees of the board of directors at
this time. We anticipate establishing committees for audit and executive
compensation during the second quarter of 2000, each of which are expected to be
headed by an outside director.
31
<PAGE>
Director Compensation
We reimburse directors for reasonable travel expenses incurred in
connection with their activities on behalf of the Company, but we do not pay
directors any fees for board participation.
In March 1999 we issued 66,667 shares (100,000 pre-split) of the
Company's common stock to Dr. Ludwig as a bonus for his services as director of
the Company. The shares were valued at the time of issuance at $1.125 per share
($.75 per share - pre-split).
Indemnification of Directors and Officers
Our Bylaws eliminate the liability of an officer or director, or former
officer or director, of the Company for expenses actually and necessarily
incurred in connection with the defense of any action, suit or proceeding in
which they are made parties, except in relation to matters as to which they are
adjudged to be liable for negligence or misconduct in the performance of their
duties. Our Articles of Incorporation provide that the board of directors may
indemnify each officer, director, employee or agent of the Company against
expenses, judgments, fines and amounts paid in settlement actually and
reasonably incurred in connection with an action, suit or proceeding if the
director, officer, employee or agent acted in good faith and in a manner he
reasonably believed to be in the best interest of the Company and, with respect
to any criminal action or proceeding, he had no reasonable cause to believe his
action was unlawful. If any director, officer or controlling person in
connection with the securities being registered asserts a claim for
indemnification related to such liabilities, other than the payment by us of
expenses incurred or paid by our director, officer or controlling person in the
successful defense of any action, suit or proceeding, we will, unless in the
opinion of our counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by us is against public policy as expressed in the Securities
Act of 1933, as amended, and we will be governed by the final adjudication of
such issue.
PRINCIPAL SHAREHOLDERS
The following table sets forth information with respect to the
beneficial ownership of shares of common stock held by:
o each person or entity who is known by us to beneficially own five
percent or more of the common stock;
o each director and executive officer of the Company; and
o all directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>
Percentage of Shares
Beneficially Owned (3)
Name of Beneficial Owner (1) Number of Shares(2) Before Offering After Offering
- ---------------------------- ------------------- --------------- --------------
<S> <C> <C> <C>
Malcolm H. Benedict 3,119,000 36.00% 32.00%
Donald A. Ludwig 66,667 0.80% 0.70%
Janet L. Davis 6,667 0.08% 0.07%
Vernon L. Morris 75,000 0.90% 0.80%
David D. Mc Nurlin 59,489 0.70% 0.60%
All Directors and Executive
Officers as a group (five) persons 3,326,823 38.48% 33.54%
Jacqueline Rae Quinn (4) 821,333 9.50% 8.50%
First Trust Corporation (5) 513,333 5.90% 5.30%
Total of all Principal Shareholders 4,661,489 53.88% 47.34%
</TABLE>
(1) Unless otherwise indicated, the address for each named individual or group
is in care of the Company at 1880 Industrial Circle, Suite B-3, Longmont,
CO 80501.
(2) Reflects 3 for 2 reverse stock split.
(3) Unless otherwise indicated, we believe that all persons named in the table
have sole voting and investment power with respect to all shares of common
stock beneficially owned by them. None of the persons listed owns any
options or other rights to acquire additional shares of the Company's
common stock.
(4) Jacqueline Rae Quinn is the beneficial owner of these shares, which were
acquired by James C. Quinn while he served as a director of the Company.
Mr. Quinn resigned as a director of the Company, effective July 7, 1999.
(5) These shares beneficially owned by Arthur W. Young, a former director of
the company.
32
<PAGE>
CERTAIN TRANSACTIONS
Related party transactions
During the years ended March 31, 1999 and 1998, and for the period from
February 19, 1992 (inception) through March 31, 1999, the Company paid officers
$157,157, $67,600, and $559,533 (unaudited) respectively, for compensation that
is included in the accompanying financial statements as research and development
costs.
During the nine months ended December 31, 1999, the Company paid
officers $23,500 (unaudited) for compensation that was charged to research and
development costs. Additional expenses of $62,552 (unaudited) resulted in
research and development costs totalling $86,052 (unaudited) for the 9 months
ended December 31, 1999.
During the year ended March 31, 1999, the Company issued 103,500 shares
of no par value common stock to employees for compensation valued by management
at the fair value of the common stock, or $.75 per share. These shares are
"restricted securities" and may be sold only in compliance with Rule 144 of the
Securities Act.
We believe that these transactions were fair and reasonable to us and
were on terms no less favorable than could have been obtained from unaffiliated
third parties. Any such future transactions will be on terms no less favorable
to us than could be obtained from unaffiliated parties.
ARTICLES AND BYLAWS
Our Articles of Incorporation and Bylaws contain certain provisions
regarding the rights and privileges of shareholders, some of which may have the
effect of discouraging certain types of transactions that involve an actual or
threatened change of control, diminishing the opportunities for a shareholder to
participate in tender offers, including tender offers at a price above the then
current market value of the common stock or over a shareholder's cost basis in
the common stock, and inhibiting fluctuations in the market price of the common
stock that could result from takeover attempts. Such provisions could work to
the detriment of shareholders in the event that management has any interests
over and above those of the shareholders. These provisions of the Articles and
Bylaws are summarized below. Reference is made to the full text of the Articles
and Bylaws. The following summary is qualified in its entirety by such
reference.
Size of Board and Election of Directors. The Articles provide that the
number of Directors shall be fixed from time to time as provided in the Bylaws.
The Bylaws currently provide at least three persons to serve on the Board. The
Articles further provide that the Board may enact, alter, amend and repeal the
Bylaws by action taken in accordance with such Bylaws, not inconsistent with the
Articles or applicable law, including dividing the Board of Directors into three
classes. At the current time all directors are elected at each annual meeting of
shareholders.
DESCRIPTION OF SECURITIES
General
We are authorized to issue 45,000,000 shares of common stock, without
par value and 5,000,000 shares of preferred stock, without par value. As of the
date of this prospectus, we have outstanding 8,654,515 shares of common stock
owned by approximately 327 holders of record. In November, 1999, the Company's
shareholders approved a three for two reverse stock split of the common stock.
There are no shares of preferred stock currently outstanding.
33
<PAGE>
Common Stock
The holders of common stock are entitled to one vote for each share
held of record in the election of directors and in all other matters to be voted
on by the shareholders. There is no cumulative voting with respect to the
election of directors. As a result, the holders of more than 50% of the shares
voting for the election of directors can elect all of the directors. Holders of
common stock are entitled:
o To receive any dividends as may be declared by the Board of Directors
from funds legally available for such purpose; and
o In the liquidation, dissolution, or winding up of the Company, to share
ratably in all assets remaining after payment of liabilities and after
provision has been made for each class of stock, if any, having preference
over the common stock. All of the outstanding shares of common stock are,
and the shares of common stock offered hereby will be, upon issuance and
sale, validly issued, fully paid, and nonassessable. Holders of common
stock have no preemptive right to subscribe for or purchase additional
shares of any class of our capital stock.
Preferred Stock
The Board of Directors has the authority, within the limitations and
restrictions stated in the Articles of Incorporation, to provide for the
issuance of shares of preferred stock, in one or more series, and to fix the
rights, preferences, privileges and restrictions, thereof, including dividend
rights, conversion rights, voting rights, terms of redemption, liquidation
preferences and the number of shares constituting any series or the designation
of such series. The issuance of preferred stock could have the effect of
decreasing the market price of the common stock and could adversely affect the
voting and other rights of the holders of common stock.
Transfer Agent and Registrar
We intend to act as our own Transfer Agent and Registrar for the common
stock initially and later to arrange for a stock transfer and trust company to
take this responsibility.
LIMITATIONS OF DIRECTORS' LIABILITY AND INDEMNIFICATION
OF DIRECTORS AND OFFICERS
Our Bylaws provide that our directors will not be personally liable for
expenses actually and necessarily incurred by them in connection with the
defense of any action, suit or proceeding in which they, or any of them, are
made parties except in instances in which they are adjudged to be liable for
negligence or misconduct. Such limitations are designed to protect the directors
at the possible disadvantage of shareholders; however, management believes such
protection is necessary to induce talented individuals to serve on the board.
We have included provisions in our Articles of Incorporation providing
for indemnification of our directors, officers, employees and agents by us,
including the advancement of expenses incurred by a director, officer, employees
and agents in any suit in which any of these people are involved. We believe
that such actions will assist us in attracting and retaining qualified
individuals to serve as directors, officers, employees, or agents. Prospective
investors should be aware, however, that the costs associated with indemnifying
a director, officer, employees and agents could be significant and, if not
covered by insurance, could adversely affect our results of operations.
Furthermore, in situations where we have advanced litigation expenses to a
director, officer, employees and agents and the director, officer, employees and
agents is required to repay the expenses because it is ultimately determined
that he is not entitled to indemnification, the director, officer, employees or
agents may not have sufficient cash or assets to repay the expenses advanced.
34
<PAGE>
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to our directors, officers and controlling persons pursuant
to the foregoing provisions or otherwise, we have been advised that in the
opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Securities Act and therefore
unenforceable. If a claim for indemnification against such liabilities (other
than the payment by the Company of expenses incurred or paid by one of our
directors, officers or controlling persons 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, we will 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.
LIMITATIONS ON TRANSFER OF SHARES
There is currently no public market for our common stock, and there is
little likelihood that an active trading market will develop in the near future
as a result of this offering. The Registration Statement, of which this
prospectus is a part, is intended to be qualified with the Securities and
Exchange Commission pursuant to Form SB-2 under the Securities Act, and as such,
the shares will become freely traded under the federal securities laws. The
shares, however, will have been registered in only a limited number of states
and may not be sold or otherwise transferred to persons who are residents of any
state in which the shares have not been registered unless they are subsequently
registered or there exists an exemption from the applicable state's registration
requirements with respect to such sale or transfer.
QUALIFIED SMALL BUSINESS ISSUER CAPITAL GAINS TAX EXCLUSION
In 1993, IRS Section 1202 was enacted to provide a 50-percent exclusion
of any gain from the sale of "qualified small business stock." For the shares to
qualify for the exclusion, several tests must be met. For instance, the shares
must be purchased directly from the Company, not in a later trading market, and
the shares must be held for at least five years. In addition, a "qualified small
business" must not have more than $50 million in assets at all times before the
issuance of the stock and immediately thereafter.
Further, at least 80 percent of the assets must be used in the "active
conduct of one or more qualified trades or businesses" throughout the holding
period. There are also limitations on the persons who may use the exclusion.
Prospective investors should consult their own tax advisers as to the
availability of the exclusion.
SHARES ELIGIBLE FOR FUTURE SALE
Upon consummation of this offering, we will have up to 9,654,515 shares
of common stock outstanding, of which the 1,000,000 being offered hereby will be
freely tradable without restriction or further registration under the Securities
Act, except for any shares purchased by an "affiliate", which will be subject to
the resale limitations of Rule 144 promulgated under the Securities Act.
All of the remaining 8,654,515 shares of common stock currently
outstanding are "restricted securities" or owned by "affiliates", as those terms
are defined in Rule 144, and may not be sold publicly unless they are registered
under the Securities Act or are sold pursuant to Rule 144 or another exemption
from registration. The 8,654,515 restricted shares will be eligible for sale
without registration under Rule 144, 365 days following the completion date of
this prospectus.
Lockup Agreement
All executive officers and directors and certain principal shareholders
(representing over 48% of the 9,654,515 outstanding shares of common stock) have
agreed for a period of 12 months following the qualification date of this
prospectus, without the underwriter's prior written consent, not to, sell or
otherwise dispose of any shares of common stock in any public market transaction
including pursuant to Rule 144.
35
<PAGE>
Rule 144
In general, under Rule 144 as currently in effect, subject to the
satisfaction of certain other conditions, a person, including an affiliate of us
or persons whose shares are aggregated with an affiliate who has owned
restricted shares of common stock beneficially for at least one year, is
entitled to sell, within any three-month period, a number of shares that does
not exceed the greater of:
o 1% of the then outstanding shares of the issuer's common stock; or
o the average weekly trading volume during the four calendar weeks preceding
such sale, provided that certain public information about the issuer, as
required by Rule 144, is then available and the seller complies with
certain other requirements.
Rule 144(k)
A person who is not an affiliate, has not been an affiliate within
three months prior to sale, and has beneficially owned the restricted shares for
at least two years, is entitled to sell such shares under Rule 144(k) without
regard to any of the limitations described above.
Minimal Prior Market
Prior to this offering, there has been no market for the common stock,
and we cannot predict the effect, if any, that market sales of shares of common
stock, or the availability of such shares for sale, will have on the market
prices of the common stock prevailing from time to time. Nevertheless, the
possibility that substantial amounts of common stock may be sold in the public
market may adversely affect prevailing market prices for the common stock and
could impair our ability to raise capital through the sale of our equity
securities.
PLAN OF DISTRIBUTION
We are offering to sell 200,000 shares (minimum) and up to 1,000,000
shares (maximum) of common stock at an offering price of $10.00 per share on a
best-efforts basis. We have agreed to pay to a broker-dealer, Three Arrows
Capital Corporation, 10101 Grosvenor Place #2016, Rockville, MD 20852 (301) 897
3889 (the "Selling Agent") a sales commission of 8 percent, or $.80 per share.
In addition, we have agreed to issue warrants to the broker-dealer to purchase
shares at the offering price, within the four years following the completion of
the offering, at the rate of one warrant for each fifteen shares sold, and paid
a fee of $10,000 for due diligence and consultation. Warrants to be received by
the Selling Agent are restricted from sale, transfer, assignment or
hypothecation for a period of two years from the effective date of the offering
except to officers or partners (not directors) of the Selling Agent and members
of the selling group and/or their officers or partners. Three Arrows Capital
Corp. is a registered broker-dealer with the NASD and is registered with the
states of New York, Maryland, Virginia and numerous other jurisdictions. We have
also agreed to indemnify the Selling Agent for any material misstatement in its
filing. We have no plans, proposals, arrangements, or understandings with the
Selling Agent, other than the warrant shares of the Company's common stock, with
regard to future transactions. No other material relationships exist between the
Selling Agent and us or our management.
None of our officers, employees, or directors will be paid a commission
in connection with the sale of any shares, nor will any officer, employee or
director undertake the sale of the shares. Sale of the shares will only be
undertaken by the Selling Agent. None of the principal shareholders nor our
management nor the Selling Agent will buy shares in the offering. The shares
will be offered by the Selling Agent on our behalf primarily through direct
solicitations, media coverage, and posting of announcements.
We reserve the right to reject any subscription in its entirety or to
allocate shares among prospective investors. If any subscription is rejected,
funds received by us for such subscription will be returned with interest and
without deduction. The Company will enter into an escrow agreement with Norwest
Bank, Colorado, NA(the "Escrow Agent") pursuant to which the Escrow Agent will
hold all funds deposited with it by the Selling Agent until the minimum of
$2,000,000 has been received. If the minimum has not been reached by ________,
200_, which period may be extended for an additional 180 days at the option of
the Company, funds will be returned to the subscribers without interest.
Subscribers will be required to make certain representations and warranties in
the subscription agreement that should be carefully read before signing.
36
<PAGE>
Prior to this offering, there has been no public market for the common
stock. Consequently, the initial public offering price per share of the common
stock will be determined arbitrarily by negotiation between the Company and the
Selling Agent and does not necessarily bear any relationship to the Company's
asset value, net worth or other established criteria of value. The factors
considered in such negotiations, in addition to prevailing market conditions,
include the history and prospects of the industry in which the Company competes,
and assessment of the Company's management, the prospects, of the Company, its
capital structure, the market for initial public offerings and certain other
factors as are deemed relevant.
Once the minimum has been reached, within five days of its receipt of
a subscription agreement from the Selling Agent confirming that an accompanying
check for the purchase price of shares has been received, we will send by first
class mail a written confirmation to notify the subscriber of the extent, if
any, to which subscription has been accepted by us. We reserve the right to
reject orders for the purchase of shares in whole or in part. Not more than
thirty days following the mailing of its written confirmation a subscriber's
common stock certificate will be mailed by first class mail.
LEGAL MATTERS
Certain legal matters with respect to the validity of the common stock
offered hereby will be passed upon for us by Reinhart, Boerner, Van Deuren,
Norris & Rieselbach, P.C.
EXPERTS
The financial statements as of and for the years ended March 31, 1999
and 1998 have been audited by the firm of Cordovano and Harvey, P.C.,
independent auditors, as indicated in their report with respect thereto, and are
included herein in reliance upon such report given upon the authority of such
firm as experts in accounting and auditing.
ADDITIONAL INFORMATION
We have filed a registration statement on Form SB-2 under the
Securities and Exchange Commission in Washington, D.C. with respect to the
securities offered hereby. This prospectus, which constitutes a part of the
registration statement, does not contain all of the information set forth in the
registration statement and the exhibits and schedules thereto. For further
information with respect to us and the securities offered hereby, reference is
made to the registration statement and the exhibits and schedules thereto filed
as a part thereof. Statements contained in this prospectus as to the contents of
any contract or other document filed as an exhibit to the registration
statement, each such statement being qualified in all respects by such
reference. The registration statement, including all amendments, exhibits and
schedules thereto, may be inspected without charge at the office of the
Securities and Exchange Commission at Judiciary Plaza, 450 Fifth Street, NW,
Washington, D.C. 20549 or by calling 1/800/SEC-0330. Copies of such material may
also be obtained at prescribed rates from the Public Reference Section of the
Commission at 450 Fifth Street, NW, Washington, D.C. 20549. In addition, the
Securities and Exchange Commission maintains a web site that contains reports,
proxy and information statements and other information regarding issues that
file electronically with the Commission. The address of the site is
http://www.sec.gov.
As a result of this offering, we will become subject to the information
and reporting requirements of the SEC and will be required to file periodic
reports, proxy statements and other information with the SEC. We intend to
furnish to our stockholders annual reports containing audited financial
statements and we may also issue quarterly reports containing unaudited interim
financial information for the first three quarters of each fiscal year.
37
<PAGE>
Glossary
Particle Accelerator A machine that accelerates charged
proton particles to an energy level suitable
for causing stable isotopes to be transformed
into radioisotopes.
Cold Kit The pharmaceutical element to which a
radiochemical is attached prior to injection
into the patient. These can be diagnostic or
therapeutic in function.
Curie Unit used in measuring radioactivity.
Cyclotron Machine used to produce radioactive isotopes.
A particle accelerator used to produce
radionuclides. It is essentially an FM
broadcast transmitter, under vacuum, inside
an electromagnet.
DMF Drug Master File. A compilation of
information relating to the proposed
product to determine the identity, purity,
strength and manufacturing documentation used
for the product and also contains analytical
methods for documentation and compliance with
established specifications. The DMF does not
contain any clinical information, but becomes a
part of the NDA.
Dynamic Organ Function Monitoring and measurement of organ function.
Enzymatic An enzyme is a complex protein produced by
living cells, capable of acting independently
as a catalyst.
FDA Federal Food and Drug Administration.
Branch of the Federal government
that oversees the manufacturing and sales of
ethical drugs.
Gallium-67 applications This nuclide in its chemical form,
gallium citrate, tends to concentrate in
abscesses and tumors. The clinical application
is the detection of cancer, determination of
activity level and prognosis for the patient.
Also, a good infection-screening isotope.
Gamma Camera Equipment that enables a physician to
follow externally the course of
radiopharmaceutical given to a patient. It
utilizes gamma rays.
Gamma Ray Electromagnetic radiation, similar to X-ray,
detectable by a gamma camera.
Geo-Sciences Sciences of the earth.
Generator A process that produces technetium-99m from the
raw material Molybdenum-99.
Imaging Technique in which either a gamma camera or
ultrasound is used to produce
IND Investigational New Drug. When granted, an IND
permits the manufacturer to produce a drug for
investigation purposes.
Isotope Nuclides with the same number of protons, but
different numbers of neutrons.
38
<PAGE>
Metabolic Function The sum of all physical and chemical changes
that take place within an organ.
NDA New Drug Application. Manufacturer submits
application to the FDA when manufacturer has
developed clinical data and good-manufacturing
practices showing the product offers the
claimed efficacy and safety for medical use.
When accepted, NDA authorizes the manufacture
and sale.
Nuclide Individual atom described by specific number of
neutrons and protons.
Positron Emission
Tomography(PET) A non-invasive, diagnostic imaging technique
for measuring the metabolic activity of cells
in the human body.
Radioisotope Naturally occurring or artificially created
radioactive isotope of a chemical element.
Radioisotopes are used in medical therapy and
biological research.
Radiopharmaceutical Radioactive drug used for
diagnostic or therapeutic procedures.
Radiochemical Radioactive compound.
Target A stable isotope that when bombarded with
charged particles from an accelerator results
in a neutron deficient radiochemical.
Technetium-99m The process of separating technetium-99m from
Molybdenum 99; the result is a
radiopharmeceutical drug product.
Voltage Gradient Differential between high and low energies
(used to accelerate sub-atomic particles as in
a cyclotron.)
Xenon-133 A radioactive gas used as a radiopharmaceutical
39
<PAGE>
Item 22. Financial Statements
INDEX TO FINANCIAL STATEMENTS
Page
Independent auditors' report.................................................F-2
Balance sheets, March 31, 1999 and December 31, 1999 (unaudited).............F-3
Statements of operations, for the years ended March 31, 1999 and 1998,
February 19, 1992 (inception) through March 31, 1999 (unaudited), for
the nine months ended December 31, 1999 and 1998 (unaudited), and
from February 19, 1992 (inception) through December 31, 1999 (unaudited)..F-4
Statement of shareholders' equity, from February 19, 1992 (inception)
through December 31, 1999 (unaudited).....................................F-5
Statements of cash flows, for the years ended March 31, 1999 and 1998,
February 19, 1992 (inception) through March 31, 1999 (unaudited), for
the nine months ended December 31, 1999 and 1998 (unaudited), and
from February 19, 1992 (inception) through December 31, 1999 (unaudited)..F-9
Summary of significant accounting policies..................................F-10
Notes to financial statements...............................................F-14
F-1
<PAGE>
INDEPENDENT AUDITORS REPORT
To the Board of Directors and Shareholders
Molecular Diagnostics and Therapeutics, Inc.
(Formerly Nu-Tec., L.T.D.)
We have audited the accompanying balance sheet of Molecular Diagnostics and
Therapeutics, Inc. (formerly Nu-Tec., L.T.D.) (a development stage company) as
of March 31, 1999 and the related statements of operations, shareholders'
equity, and cash flows for the years ended March 31, 1999 and 1998. 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Molecular Diagnostics and
Therapeutics, Inc. as of March 31, 1999, and the results of its operations and
its cash flows for the years ended March 31, 1999 and 1998 in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in the Summary of Significant
Accounting Policies, the Company has no revenues and has experienced significant
operating losses during the periods from February 19, 1992 (inception) through
March 31, 1999, which raises a substantial doubt about its ability to continue
as a going concern. Management's plans in regard to these matters are also
described in the Summary of Significant Accounting Policies. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
Cordovano and Harvey, P.C.
Denver, Colorado
June 22, 1999
F-2
<PAGE>
MOLECULAR DIAGNOSTICS AND THERAPEUTICS, INC.
(Formerly Nu-Tec., L.T.D.)
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1999 1999
--------- ------------
(Unaudited)
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash..........................................................................................$.4,883 $.44,394
Prepaid expenses.............................................................................. 2,012 -
------- -------
TOTAL CURRENT ASSETS 6,895 44,394
FURNITURE AND EQUIPMENT, less accumulated depreciation
totaling $64,066 and $77,031 (unaudited), respectively (Note C)............................... 29,186 20,410
DEPOSITS........................................................................................... 4,350 4,350
------- -------
$40,431 $69,154
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable............................................................................. $.9,940 $.17,742
TOTAL CURRENT LIABILITIES
COMMITMENTS (Note G).............................................................................. - -
SHAREHOLDERS' EQUITY (Note E)
Preferred stock, no par value, 5,000,000 shares authorized;
22,875 and -0- (unaudited) shares issued and outstanding,
respectively.............................................................................. 128,039 -
Common stock, no par value, 45,000,000 shares authorized;
8,008,206 (post-split) and 8,654,515 (post-split) (unaudited)
shares issued and outstanding, respectively...............................................1,965,392 2,683,279
Deferred offering costs...................................................................... (86,405) (146,555)
Deficit accumulated during the development stage............................................(1,976,535) (2,485,312)
------- -------
TOTAL SHAREHOLDERS' EQUITY 30,491 51,412
------- -------
$40,431 $69,154
======= =======
</TABLE>
See accompanying summary of significant accounting policies and notes to
financial statements.
F-3
<PAGE>
MOLECULAR DIAGNOSTICS AND THERAPEUTICS, INC
(Formerly Nu-Tec., L.T.D.)
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
February 19, February 19,
1992 1992
Years Ended (Inception) Nine Months Ended (Inception)
March 31, Through December 31, Through
-------------------------- March 31, -------------------------- December 31,
1999 1998 1999 1999 1998 1999
----------- ----------- ----------- ----------- ----------- -----------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C> <C>
COSTS AND EXPENSES
Salaries and payroll taxes ........ $ 174,915 $ 97,745 $ 432,382 $ 177,874 $ 203,571 $ 610,256
Stock-based compensation
(Notes B&E):
Employee compensation .......... 77,625 -- 77,625 40,450 -- 118,075
Professional fees .............. 143,700 -- 143,700 16,850 -- 160,550
Directors' fees ................ -- -- - 26,250 -- 26,250
Research and development
costs (Note B) ..... 157,157 67,600 559,533 86,052 15,800 645,585
Web site, graphics and
computer services .... 43,425 -- 43,425 28,012 40,825 71,437
Rent .............................. 37,413 23,348 132,340 33,402 30,363 165,742
Professional fees ................. 44,796 25,670 101,208 18,347 38,742 119,555
Office ............................ 12,600 6,489 42,473 9,674 9,317 52,147
Postage ........................... 5,402 8,128 19,477 4,470 3,317 23,947
Telephone ......................... 7,832 5,979 40,002 14,525 4,507 54,527
Contract labor .................... 12,213 13,800 233,712 28,242 6,389 261,954
Repairs and maintenance ........... 340 2,286 9,184 1,135 -- 10,319
Depreciation ...................... 17,857 10,192 63,973 12,965 7,896 76,938
Other ............................. 16,542 15,739 77,264 10,529 21,339 87,793
----------- ----------- ----------- ----------- ----------- -----------
OPERATING LOSS ............ (751,817) (276,976) (1,976,298) (508,777) (382,066) (2,485,075)
INTEREST EXPENSE ....................... -- (109) (237) -- -- (237)
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
LOSS BEFORE INCOME TAXES .. (751,817) (277,085) (1,976,535) (508,777) (382,066) (2,485,312)
INCOME TAX BENEFIT
(EXPENSE) (Note D)
Current ........................... 324,429 119,924 777,269 211,271 141,880 988,540
Deferred .......................... (324,429) (119,924) (777,269) (211,271) (141,880) (988,540)
----------- ----------- ----------- ----------- ----------- -----------
NET LOSS ............. $ (751,817) $ (277,085) $(1,976,535) $ (508,777) $ (382,066) $(2,485,312)
=========== =========== =========== =========== =========== ===========
Basic loss per common share ............ $ (0.10) $ (0.04) $ (0.06) $ (0.05)
=========== =========== =========== ===========
Basic weighted average common
shares outstanding ................ 7,608,692 6,763,943 8,346,570 7,518,516
=========== =========== =========== ===========
Diluted loss per common share .......... $ (0.10) $ (0.04) $ (0.06) $ (0.05)
=========== =========== =========== ===========
Diluted weighted average common shares
shares outstanding ................. 7,608,692 6,763,943 8,346,570 7,518,516
=========== =========== =========== ===========
</TABLE>
See accompanying summary of significant accounting policies and
notes to financial statements.
F-4
<PAGE>
MOLECULAR DIAGNOSTICS AND THERAPEUTICS, INC
(Formerly Nu-Tec , L T D )
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF SHAREHOLDERS' EQUITY
February 19, 1992 (inception) through December 31, 1999 (unaudited)
<TABLE>
<CAPTION>
Deficit
Accumulated
Preferred Stock Common Stock Deferred During the Total
----------------------- ------------------------- Offering Development Shareholders
Shares Amount Shares Amount Costs Stage Equity
---------- ---------- ---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, February 19, 1992
(inception) ................ -- $ -- -- $ -- $ -- $ -- $ --
Sale of common stock, $0.0001
per share (Note B) ........ -- -- 5,250,000 578 -- -- 578
Issuance of convertible
preferred shares in
exchange for intellectual
property rights at
$0 0001 per share ........... 100,000 10 -- -- -- -- 10
Sale of common stock, $0 015
per share (Note E) ........ -- -- 400,000 6,000 -- -- 6,000
Shares issued for services,
valued at cost, $0 015
per share (Note E) ......... -- -- 120,000 1,800 -- -- 1,800
Conversion of convertible
preferred stock to
common stock at a rate
of 1 to 4 .................. (100,000) (10) 400,000 10 -- -- --
--------- --------- ---------- --------- -------- --------- --------
BALANCE, MARCH 31, 1992
(unaudited) ......... -- -- 6,170,000 8,388 -- -- 8,388
--------- --------- ---------- --------- -------- --------- --------
Sale of Class B convertible
preferred shares,
pursuant to a private
placement memorandum,
net of offering costs
totaling $50,289,
$5.00 per share ............ 29,000 94,711 -- -- -- -- 94,711
Net loss for the year ended
March 31, 1993 ............. -- -- -- -- (95,678) (95,678)
--------- --------- ---------- --------- -------- --------- --------
BALANCE, MARCH 31, 1993
(unaudited) .......... 29,000 94,711 6,170,000 8,388 -- (95,678) 7,421
--------- --------- ---------- --------- -------- --------- --------
Shares issued for services,
valued at cost,
$0.001 per share (Note B) .. -- -- 905,000 905 -- -- 905
Sale of Class B convertible
preferred shares,
pursuant to a private
placement memorandum,
net of offering costs
totaling $4,195,
$5.00 per share ............ 2,700 9,305 -- -- -- -- 9,305
Conversion of Class B
convertible preferred
stock to common stock
at a rate of 1 to 12,
respectively ............... (31,700) (104,016) 380,400 104,016 -- -- --
Shares issued for prizes,
$0.4166 per share .......... -- -- 8,500 3,540 -- -- 3,540
Sale of common stock,
$0.22 per share ............ -- -- 50,000 11,000 -- -- 11,000
Shares issued for services,
valued at cost $0.22
per share (Note E) ........... -- -- 200,000 44,000 -- -- 44,000
Net loss for the year ended
March 31, 1994 ................ -- -- -- -- -- (90,504) (90,504)
--------- --------- ---------- --------- -------- --------- --------
BALANCE, MARCH 31, 1994
(unaudited) ........... -- -- 7,713,900 171,849 -- (186,182) (14,333)
--------- --------- ---------- --------- -------- --------- --------
Sale of common stock,
$0.625 per share ........... -- -- 2,500 1,565 -- -- 1,565
Shares issued for prizes,
$0.4166 per share .......... -- -- 1,000 417 -- -- 417
</TABLE>
See accompanying summary of significant accounting
policies and notes to financial statements
F-5
<PAGE>
MOLECULAR DIAGNOSTICS AND THERAPEUTICS, INC
(Formerly Nu-Tec , L T D )
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF SHAREHOLDERS' EQUITY
February 19, 1992 (inception) through December 31, 1999 (unaudited)
<TABLE>
<CAPTION>
Deficit
Accumulated
Preferred Stock Common Stock Deferred During the Total
----------------------- ------------------------- Offering Development Shareholders
Shares Amount Shares Amount Costs Stage Equity
---------- ---------- ---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Sale of Class A convertible
preferred shares,
pursuant to a private
placement memorandum,
net of offering costs
totaling $28,990,
$5 00 per share .......... 25,000 96,010 -- -- -- -- 96,010
Conversion of Class A
convertible preferred
stock to common stock at
a rate of 1 to 8,
respectively ............. (25,000) (96,010) 200,000 96,010 -- -- --
Sale of Class C convertible
preferred shares,
pursuant to a private
placement memorandum,
$5 00 per share .......... 6,000 30,000 -- -- -- -- 30,000
Net loss for the year ended
March 31, 1995 ........... -- -- -- -- -- (119,509) (119,509)
--------- --------- ---------- --------- -------- --------- --------
BALANCE, MARCH 31, 1995
(unaudited) .......... 6,000 30,000 7,917,400 269,841 -- (305,691) (5,850)
--------- --------- ---------- --------- -------- --------- --------
Sale of common stock,
$0 625 per share ......... -- -- 5,000 3,132 -- -- 3,132
Sale of Class C convertible
preferred shares,
pursuant to a private
placement memorandum,
net of offering costs
totaling $69,810,
$5 00 per share .......... 93,570 339,774 -- -- -- -- 339,774
Conversion of Class C
convertible
preferred stock to
common stock at a rate of
1 to 16, respectively .... (99,570) (369,774) 1,593,120 369,774 -- -- --
Sale of Class D convertible
preferred shares,
pursuant to a private
placement memorandum,
$5 00 per share .......... 18,100 108,600 -- -- -- -- 108,600
Conversion of Class D
convertible
preferred stock to
common stock at a rate of
1 to 12, respectively .... (11,600) (69,600) 139,200 69,600 -- -- --
Net loss for the year ended
March 31, 1996 ........... -- -- -- -- -- (430,541) (430,541)
--------- --------- ---------- --------- -------- --------- --------
BALANCE, MARCH 31, 1996
(unaudited) ......... 6,500 39,000 9,654,720 712,347 -- (736,232) 15,115
--------- --------- ---------- --------- -------- --------- --------
Sale of Class D convertible
preferred shares,
pursuant to a private
placement memorandum,
net of offering costs
totaling $100,571,
$5 00 per share .......... 22,400 90,841 -- -- -- -- 90,841
Conversion of Class D
convertible
preferred stock to
common stock at a rate of
1 to 12, respectively .... (28,900) (129,841) 346,800 129,841 -- -- --
Sale of Class E convertible
preferred shares,
pursuant to a private
placement memorandum,
$6 00 per share .......... 12,835 77,010 -- -- -- -- 77,010
Conversion of Class E
convertible
preferred stock to
common stock at a rate of
1 to 12, respectively .... (12,835) (77,010) 154,020 77,010 -- -- --
</TABLE>
See accompanying summary of significant accounting
policies and notes to financial statements
F-6
<PAGE>
MOLECULAR DIAGNOSTICS AND THERAPEUTICS, INC
(Formerly Nu-Tec , L T D )
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF SHAREHOLDERS' EQUITY
February 19, 1992 (inception) through December 31, 1999 (unaudited)
<TABLE>
<CAPTION>
Deficit
Accumulated
Preferred Stock Common Stock Deferred During the Total
----------------------- ------------------------- Offering Development Shareholders
Shares Amount Shares Amount Costs Stage Equity
---------- ---------- ---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Shares issued for services,
valued at cost,
$0 50 per share (Note E) .... -- -- 13,133 6,566 -- -- 6,566
Sale of common stock,
$0 50 per share ............. -- -- 4,832 2,416 -- -- 2,416
Net loss for the year ended
March 31, 1997 .............. -- -- -- -- -- (211,401) (211,401)
---------- ---------- ---------- ---------- ---------- ---------- -----------
BALANCE, MARCH 31, 1997 ... -- -- 10,173,505 928,180 -- (947,633) (19,453)
---------- ---------- ---------- ---------- ---------- ---------- -----------
Sale of Class F convertible
preferred shares,
pursuant to a private
placement memorandum,
$6 00 per share ............. 20,500 123,000 -- -- -- -- 123,000
Conversion of Class F
convertible preferred
stock to common stock at
a rate of 1 to 12,
respectively ................ (10,500) (63,000) 126,000 63,000 -- -- --
Sale of common stock, $0.50
per share ................... -- -- 500 250 -- -- 250
Repurchase of common stock,
subsequently cancelled ...... -- -- (8,000) (5,873) -- -- (5,873)
Sale of Class G convertible
preferred shares,
pursuant to a private
placement memorandum,
net of offering costs
totaling $49,125,
$6 00 per share ............. 67,351 354,981 -- -- -- -- 354,981
Net loss for the year ended
March 31, 1998 .............. -- -- -- -- -- (277,085) (277,085)
---------- ---------- ---------- ---------- ---------- ---------- -----------
BALANCE, MARCH 31, 1998 ... 77,351 414,981 10,292,005 985,557 -- (1,224,718) 175,820
---------- ---------- ---------- ---------- ---------- ---------- -----------
Sale of Class G convertible
preferred shares,
pursuant to a private
placement memorandum,
$6 00 per share ............ 1,000 6,000 -- -- -- -- 6,000
Conversion of Class F
convertible preferred
stock to common stock
at a rate of 1 to 12,
respectively .............. (10,000) (60,000) 120,000 60,000 -- -- --
Conversion of Class G
convertible preferred
stock to common stock
at a rate of 1 to 12,
respectively ................ (68,351) (360,981) 820,212 360,981 -- -- --
Sale of Class H convertible
preferred shares,
pursuant to a private
placement memorandum,
net of offering costs
totaling $26,215,
$6.00 per share ............... 60,499 336,779 -- -- -- -- 336,779
Shares issued for prizes,
$0.75 per share ............... -- -- 1,000 750 -- -- 750
Shares issued for stock-based
compensation, valued at cost
of stock offering , $.75 per
share (Note E) ................ . -- -- 295,100 221,325 -- -- 221,325
</TABLE>
See accompanying summary of significant accounting
policies and notes to financial statements
F-7
<PAGE>
MOLECULAR DIAGNOSTICS AND THERAPEUTICS, INC
(Formerly Nu-Tec , L T D )
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF SHAREHOLDERS' EQUITY
February 19, 1992 (inception) through December 31, 1999 (unaudited)
<TABLE>
<CAPTION>
Deficit
Accumulated
Preferred Stock Common Stock Deferred During the Total
----------------------- ------------------------- Offering Development Shareholders
Shares Amount Shares Amount Costs Stage Equity
---------- ---------- ---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Conversion of Class H
convertible preferred
stock to common stock
at a rate of 1 to 8,
respectively................ (60,499) (336,779) 483,992 336,779 - - -
Sale of Class I convertible
preferred shares,
pursuant to a private
placement memorandum,
net of offering costs
totaling $9,211,
$6.00 per share.............. 22,875 128,039 - - - - 128,039
Offering costs related to
proposed initial
public offering (Note E).... - - - - (86,405) - (86,405)
Net loss for the year ended
March 31, 1999.............. - - - - - (751,817) (751,817)
---------- ---------- ---------- ---------- ---------- ---------- -----------
BALANCE, MARCH 31, 1999 22,875 128,039 12,012,309 1,965,392 (86,405) (1,976,535) 30,491
---------- ---------- ---------- ---------- ---------- ---------- -----------
Shares issued for stock-based
compensation, valued at
cost of stock offering,
$.75 per share (Note E)
(unaudited)................ - - 111,400 83,550 - - 83,550
Sale of Class I convertible
preferred shares,
pursuant to a private
placement memorandum,
$6.00 per share (unaudited) 34,458 206,748 - - - - 206,748
Conversion of Class I
convertible preferred
stock to common stock
at a rate of 1 to 8,
respectively (unaudited) (57,333) (334,787) 458,664 334,787 - - -
Sale of common shares to
existing shareholders,
$.75 per share (unaudited) - - 399,400 299,550 - - 299,550
3 for 2 reverse split of
common stock (unaudited)
(Note E)................... - - (4,327,258) - - - -
Offering costs related to
proposed initial public
offering (unaudited)
(Note E).................... - - - - (60,150) - (60,150)
Net loss for the nine
months ended
December 31, 1999
(unaudited)................. - - - - - (508,777) (508,777)
---------- ---------- ---------- ---------- ---------- ---------- -----------
BALANCE, DECEMBER 31, 1999
(unaudited)............. - $ - 8,654,515 $2,683,279 $ (146,555) $ (2,485,312) $ 51,412
========== ========== ========== ========== ========== ========== ===========
</TABLE>
See accompanying summary of significant accounting policies
and notes to financial statements
F-8
<PAGE>
MOLECULAR DIAGNOSTICS AND THERAPEUTICS, INC.
(Formerly Nu-Tec., L.T.D.)
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
February 19, February 19,
1992 1992
For The Years Ended (Inception) Nine Months Ended (Inception)
March 31, Through December 31, Through
----------------------- March 31, ------------------------ December 31,
1999 1998 1999 1999 1998 1999
---------- ----------- ----------- ----------- ----------- ------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net loss...................................... $ (751,817) $ (277,085) $(1,976,535) $ (508,777) $ (382,066) $(2,485,312)
Transactions not requiring cash:
Depreciation............................... 17,857 10,192 63,973 12,965 7,896 76,938
Stock-based compensation (Note E).......... 221,325 - 221,325 83,550 221,325 304,875
Common stock issued for services........... - - 52,366 - - 52,366
Common stock issued for prizes............. 750 - 4,707 - 750 4,707
Changes in current assets and current
liabilities:
Receivables and other current assets....... (3,805) 4,812 (6,362) 2,012 - (4,350)
Accounts payable and accrued expenses...... (15,597) 25,537 9,940 7,802 (23,282) 17,742
---------- --------- ----------- ---------- ---------- -----------
NET CASH (USED IN)
OPERATING ACTIVITIES (531,287) (236,544) (1,630,586) (402,448) (175,377) (2,033,034)
---------- --------- ----------- ---------- ---------- -----------
INVESTING ACTIVITIES
Payments for furniture and equipment.......... (13,978) (24,449) (93,252) (4,189) (12,625) (97,441)
---------- --------- ----------- ---------- ---------- -----------
NET CASH (USED IN)
INVESTING ACTIVITIES (13,978) (24,449) (93,252) (4,189) (12,625) (97,441)
FINANCING ACTIVITIES
Proceeds from the issuance of preferred and
common stock............................... 506,244 461,350 2,159,405 506,298 75,544 2,665,703
Payments for the repurchase of common stock - (5,873) (5,873) - - (5,873)
Payments for offering costs................... (121,831) (49,125) (424,811) (60,150) - (484,961)
---------- --------- ----------- ---------- ---------- -----------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 384,413 406,352 1,728,721 446,148 75,544 2,174,869
---------- --------- ----------- ---------- ---------- -----------
NET CHANGE IN CASH (160,852) 145,359 4,883 39,511 (112,459) 44,394
Cash at beginning of year..................... 165,735 20,376 - 4,883 165,735 -
---------- --------- ----------- ---------- ---------- -----------
CASH AT END OF YEAR $ 4,883 $ 165,735 $ 4,883 $ 44,394 $ 53,276 $ 44,394
========== ========= =========== ========== ========== ===========
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION:
Cash paid for interest........................ $ - $ 109 $ 237 $ - $ - $ 237
========== ========= =========== ========== ========== ===========
Cash paid for income taxes.................... $ - $ - $ - $ - $ - $ -
========== ========= =========== ========== ========== ===========
</TABLE>
See accompanying summary of significant accounting policies
and notes to financial statements
F-9
<PAGE>
MOLECULAR DIAGNOSTICS AND THERAPEUTICS, INC.
(Formerly Nu-Tec., L.T.D.)
(A DEVELOPMENT STAGE COMPANY)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Development stage company
Molecular Diagnostics and Therapeutics, Inc. (the "Company") is in the
development stage in accordance with Statement of Financial Accounting Standard
(SFAS) No. 7.
Use of estimates
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities, and
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Cash equivalents
For the purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with an original maturity of three
months or less to be cash equivalents.
Furniture, equipment and depreciation
Furniture and equipment are recorded at cost. When capital assets are retired or
otherwise disposed of, the related cost and accumulated depreciation are removed
from the respective accounts and the net difference, less any amount realized,
is reflected in the statement of operations.
Depreciation is calculated on the straight-line method over the useful lives of
the related assets.
Research and development costs
Costs to obtain certain intangible assets are accounted for in accordance with
SFAS No. 2, "Accounting for Research and Development Costs". Research and
development costs consist of the direct labor and expenses incurred in preparing
new drug applications and applying for Cyclotron and Radioactive Materials
Licenses. SFAS No. 2 requires that all research and development costs, except
those done for others under contract or certain government-related entities, be
charged to expense.
Income taxes
Income taxes are provided for the tax effects of transactions reported in the
financial statements and consist of taxes currently due plus deferred taxes
related primarily to differences between the recorded book basis and the tax
basis of assets and liabilities for financial and income tax reporting. The
deferred tax assets and liabilities represent the future tax return consequences
of those differences, which will either be taxable or deductible when the assets
and liabilities are recovered or settled. Deferred taxes are also recognized for
operating losses that are available to offset future taxable income and tax
credits that are available to offset future federal income taxes.
F-10
<PAGE>
MOLECULAR DIAGNOSTICS AND THERAPEUTICS, INC.
(Formerly Nu-Tec., L.T.D.)
(A DEVELOPMENT STAGE COMPANY)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Web-site development costs
Web-site development costs are expensed when incurred.
Deferred offering costs
The Company incurred costs related to the offerings of its preferred stock and
common stock during the periods presented. All costs associated with the
Company's private stock offerings were deducted from proceeds received from
those offerings. Costs associated with the Company's planned public stock
offering will also be deducted from the gross proceeds at its conclusion.
However, should the offering not be successful, the deferred costs associated
with the public offering will be expensed at that time.
Earnings/(loss) per share
Effective December 31, 1997, Statement of Financial Accounting Standards No. 128
"Earnings Per Share" requires a dual presentation of earnings per share - basic
and diluted. Basic earnings per share has been computed on the weighted average
of common shares outstanding. Diluted earnings per share reflects the increase
in weighted average common shares outstanding that would result from the assumed
exercise of outstanding stock options and conversion of outstanding preferred
shares. For the years ended March 31, 1999 and 1998, 1,547,797 and 1,354,696
shares, respectively, were excluded from the diluted earnings per share
calculation, as these shares were anti-dilutive. Had these shares been included
in the calculation, diluted weighted average shares outstanding would have
increased to 12,960,835 and 11,500,611 for the years ended March 31, 1999 and
1998, respectively.
Fair value of financial instruments
The Company has determined, based on available market information and
appropriate valuation methodologies, that the fair value of its financial
instruments approximates carrying value. The carrying amounts of cash,
receivables, payables and other current liabilities approximate fair value due
to the short-term maturity of the instruments.
Stock-based compensation
During the period from February 19, 1992 (inception) through March 31, 1999, the
Company used shares of its no par value common stock to pay for various services
and for use as prizes. The Company also used shares of common stock to
compensate certain employees. During the same period, the Company granted stock
options to members of management. The Company accounted for these stock-based
compensation arrangements in a consistent manner, for all periods presented. For
shares of common stock issued to employees, consultants, and for prizes, the
Company valued the transaction at the historical fair value of the common stock
issued. The fair value of the common stock was adjusted to the most recent
historical price at which the Company offered its common stock for sale to
unrelated third party investors.
F-11
<PAGE>
MOLECULAR DIAGNOSTICS AND THERAPEUTICS, INC.
(Formerly Nu-Tec., L.T.D.)
(A DEVELOPMENT STAGE COMPANY)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Stock-based compensation, continued
The Company applied the "intrinsic value method" as prescribed by Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" in
determining compensation expense when accounting for stock option awards. The
intrinsic value method computes stock option expense at the excess of the strike
price of the option over the market price of the underlying share of common
stock, on the grant date.
SFAS No. 123, "Accounting for Stock-Based Compensation" was issued in October
1995 and was effective for fiscal years beginning after December 15, 1995. This
accounting standard encourages the use of the "fair value based method" in
accounting for compensation expense associated with stock option awards and
similar plans but permitted the continued use of the intrinsic value method. The
Company adopted SFAS No. 123 effective April 1, 1996; however, the Company has
elected to continue to determine the value of stock-based compensation
arrangements under the provisions of APB 25. No pro forma disclosures have been
included in the accompanying notes to the financial statements as there was no
pro forma effect to the Company's operations or earnings per share.
Recently issued accounting pronouncements
The Company has adopted the following new accounting pronouncements for the year
ended March 31, 1999. SFAS No. 130, "Reporting Comprehensive Income," requires
the reporting and display of total comprehensive income and its components in a
full set of general-purpose financial statements. SFAS No. 131, "Disclosures
about Segments of an Enterprise and Related Information," is based on the
"management" approach for reporting segments. The management approach designates
the internal organization that is used by management for making operating
decisions and assessing performance as the source of the Company's reportable
segments. SFAS No. 131 also requires disclosure about the Company's products,
the geographic areas in which it earns revenue and holds long-lived assets, and
its major customers. SFAS No. 132, "Employers' Disclosures about Pensions and
Other Post-retirement Benefits," which requires additional disclosures about
pension and other post-retirement benefit plans, but does not change the
measurement or recognition of those plans. SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities," requires an entity to recognize
all derivatives on a balance sheet, measured at fair value. Statement of
Position ("SOP") 98-1, "Accounting for Costs of Computer Software Developed for
Internal Use," requires that entities capitalize certain internal-use software
costs once certain criteria are met. SOP 98-5, "Reporting on the Costs of
Start-Up Activities," provides among other things, guidance on the reporting of
start-up costs and organization costs. It requires costs of start-up activities
and organization costs to be expensed as incurred. There was no effect on the
financial statements presented from the adoption of the new pronouncements. The
Company will continue to review new accounting pronouncements over time to
determine if any additional disclosures are necessary based on evolving
circumstances.
F-12
<PAGE>
MOLECULAR DIAGNOSTICS AND THERAPEUTICS, INC.
(Formerly Nu-Tec., L.T.D.)
(A DEVELOPMENT STAGE COMPANY)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Reclassifications
Certain reclassifications have been made to the presentation of the prior years'
financial statements to correspond to the current year. Total equity and net
loss are unchanged due to these reclassifications.
Basis of presentation
The accompanying financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. As shown in the accompanying
financial statements, the Company is a development stage company with no revenue
as of March 31, 1999 and has incurred a loss of 2,485,312 (unaudited) for the
period from February 19, 1992 (inception) through March 31, 1999. This factor,
among others, may indicate that the Company will be unable to continue as a
going concern.
The financial statements do not include any adjustments relating to the
recoverability and classification of liabilities that might be necessary should
the Company be unable to continue as a going concern. The Company's continuation
as a going concern is dependent upon its ability to generate sufficient cash
flow to meet its obligations on a timely basis and ultimately to attain
profitability. The Company plans on raising $10 million through an initial
public offering that will be registered with the Securities and Exchange
Commission on Form SB-2 to fund the building, cyclotron and proposed operations.
The costs of implementing the business plan in excess of the initial public
offering proceeds are expected to be financed with debt. The Company is largely
dependent upon the proceeds anticipated to be received from the proposed initial
public offering and debt financings to carry out its proposed operations. The
Company's ability to continue as a going concern is dependent upon successful
completion of the offering and financings and ultimately, upon obtaining
government approval for its licenses and achieving profitable operations. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
Unaudited financial information
The statements of operations, shareholders' equity and cash flows for the period
from February 19, 1992 (inception) through March 31, 1997 and for the nine
months ended December 31, 1999 and 1998, have been prepared by the Company
without audit. In the opinion of management, the accompanying unaudited
financial information contains all adjustments (consisting only of normal
recurring adjustments) necessary for the fair presentation of the Company's
results of operations and its cash flows for the period from February 19, 1992
(inception) through March 31, 1997 and for the nine months ended December 31,
1999 and 1998.
Name change
On November 9, 1999, the Company changed its name from Nu-Tec., L.T.D. to
Molecular Diagnostics and Therapeutics, Inc.
F-13
<PAGE>
MOLECULAR DIAGNOSTICS AND THERAPEUTICS, INC.
(Formerly Nu-Tec., L.T.D.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOTE A: BACKGROUND
The Company was incorporated under the laws of Colorado on February 19, 1992.
The principal activities since inception have included efforts towards the
preparation of four new drug applications, a radioactive materials license, a
cyclotron license, and the sale and issuance of shares of its preferred and
common stocks. Upon receipt of regulatory approval, the Company intends to
develop, manufacture and distribute radiochemical and radiopharmaceutical drug
products. Due to the nature of the products and the presence of radioactive
substances, the Company will be subject to regulation by a number of federal and
state agencies, including the Food and Drug Administration. Following is a
summary of the Company's new drug applications and licenses as well as its
current status:
Description Status
---------------------- ----------------------------------------
New Drug Applications:
----------------------
Iodine-123......................Application preparation in progress
Technetium-99m..................Initial Stage of application preparation
in progress
Flourine-18 (FDG)...............Application preparation in progress
Palladium-103...................Initial stage of application preparation
in progress
Licenses:
---------
Radioactive Materials Licens....Application preparation in progress
Cyclotron Operating License.....Application preparation in progress
NOTE B: RELATED PARTY TRANSACTIONS
During the years ended March 31, 1999 and 1998, and for the period from February
19, 1992 (inception) through March 31, 1999, the Company paid officers $157,157,
$67,600, and $559,533 (unaudited), respectively, for compensation that is
included in the accompanying financial statements as research and development
costs.
During the nine months ended December 31, 1999, the Company paid
officers $23,500 (unaudited) for compensation that was charged to research and
development costs. Additional expenses of $62,552 (unaudited) resulted in
research and development costs totalling $86,052 (unaudited) for the nine months
ended December 31, 1999.
During the year ended March 31, 1999, the Company issued 103,500 shares of no
par value common stock to employees for compensation valued by the Board of
Directors at the fair value of the common stock, or $.75 per share (see Note E).
The Board of Directors considered contemporaneous equity transactions and other
analysis to determine the fair value of the common stock. These shares are
"restricted securities" and may be sold only in compliance with Rule 144 of the
Securities Act of 1933, as amended (the "Act").
During the year ended March 31, 1994, the Company issued 905,000 (unaudited)
shares of its no par value common stock to an officer valued by the Board of
Directors at the fair value of the common stock, or $.001 per share. The Board
of Directors considered contemporaneous equity transactions and other analysis
to determine the fair value of the common stock. These shares are "restricted
securities" and may be sold only in compliance with Rule 144 of the Act.
F-14
<PAGE>
MOLECULAR DIAGNOSTICS AND THERAPEUTICS, INC.
(Formerly Nu-Tec., L.T.D.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOTE B: RELATED PARTY TRANSACTIONS, CONTINUED
During the period ended March 31, 1992, the Company issued 5,250,000 (unaudited)
shares of no par value common stock to an officer valued by the Board of
Directors at the fair value of the common stock, or $.0001 per share. The Board
of Directors considered contemporaneous equity transactions and other analysis
to determine the fair value of the common stock. These shares are "restricted
securities" and may be sold only in compliance with Rule 144 of the Act.
NOTE C: FURNITURE AND EQUIPMENT
Furniture and equipment consisted of the following:
March 31, December 31,
1999 1999
------------------ ------------------
(Unaudited)
Furniture........................... $.19,444 $ 19,444
Office and computer equipment....... 63,774 67,963
Computer software................... 10,034 10,034
------------------ ------------------
93,252 97,441
Less: accumulated depreciation...... (64,066) (77,031)
------------------ ------------------
$ 29,186 $ 20,410
================== ==================
NOTE D: INCOME TAXES
A reconciliation of the U.S. statutory federal income tax rate to the effective
rate is as follows:
<TABLE>
<CAPTION>
March 31,
--------------------------- December 31,
1999 1998 1998
----------- ---------- ------------
(Unaudited)
<S> <C> <C> <C>
U.S. federal statutory graduated rate....... 34.00% 33.61% 34.00%
State income tax rate,
net of federal benefit................... 3.14% 3.20% 3.14%
Offering costs.............................. 6.01% 6.47% 4.39%
Net operating loss for which no tax
benefit is currently available........... .-43.15% -43.28% -41.53%
------- ------- -------
0.00% 0.00% 0.00%
======= ======= =======
</TABLE>
At March 31, 1999, deferred taxes consisted of a net tax asset of $777,269 due
to operating loss carryforwards of $1,976,535, which was fully allowed for in
the valuation allowance of $777,269. The valuation allowance offsets the net
deferred tax asset for which there is no assurance of recovery. The change in
the valuation allowance for the years ended March 31, 1999 and 1998 was $324,429
and $119,924, respectively. Net operating loss carryforwards will expire through
2019.
F-15
<PAGE>
MOLECULAR DIAGNOSTICS AND THERAPEUTICS, INC.
(Formerly Nu-Tec., L.T.D.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOTE D: INCOME TAXES, CONTINUED
At December 31, 1999, deferred taxes consisted of a net tax asset totaling
$988,540 (unaudited) due to net operating loss carryforwards of $2,485,312
(unaudited). The valuation allowance offsets the net deferred tax asset for
which there is no assurance of recovery. The change in the valuation allowance
for the nine months ended December 31, 1999 was $211,271 (unaudited), which
increased the valuation allowance to $988,540 (unaudited).
The valuation allowance will be evaluated at the end of each year, considering
positive and negative evidence about whether the asset will be realized. At that
time, the allowance will either be increased or reduced; reduction could result
in the complete elimination of the allowance if positive evidence indicates that
the value of the deferred tax asset is no longer impaired and the allowance is
no longer required.
NOTE E: SHAREHOLDERS' EQUITY AND STOCK-BASED COMPENSATION
The Company has established one class of common stock and has authorized
preferred shares to be designated by class as determined by the Board of
Directors.
The common shares each have voting rights, with no par value or preference
rights. The preferred shares have voting rights equal to the number of shares of
converted common stock and no par value.
On February 1, 1999, the Company commenced a private offering of 58,333 shares
of its Class I Convertible Preferred Stock at $6.00 per share pursuant to an
exemption under Rule 504 of Regulation D under the Securities Act of 1933, as
amended. Each preferred share is convertible by the Company on or before July
28, 1999, into eight common shares for no additional consideration and is
entitled to a preference of $6.00 per share upon liquidation of the Company.
Each issued and outstanding preferred share is entitled to eight votes based
upon the conversion ratio of eight common shares issuable upon the conversion of
each preferred share. As of March 31, 1999, there were 22,875 shares of
Convertible Preferred Stock outstanding that were convertible to 183,000 shares
of common stock. During the nine months ended December 31, 1999, the Company
sold 34,458 (unaudited) shares of convertible preferred stock in connection with
its Class "I" offering. The 34,458 (unaudited) shares were in addition to the
22,875 shares sold prior to March 31, 1999. On July 27, 1999, all 57,333
(unaudited) preferred shares were converted to 458,664 (unaudited) shares of
common stock.
During the year ended March 31, 1999, the Company incurred $121,831 in offering
costs related to its private placement offerings and proposed initial public
offering. $26,215 and $9,211 in offering costs were offset against the Company's
proceeds raised through its Class "H" and Class "I" offerings, respectively. The
remaining $86,405 was paid toward the Company's proposed public offering and is
included in the accompanying financial statements as deferred offering costs.
During the nine months ended December 31, 1999, the Company incurred an
additional $60,150 (unaudited) in offering costs related to its proposed initial
public offering.
The Company proposed to conduct a public offering to offer for sale 1,000,000
shares of its no par value common stock at $10.00 per share. The Company plans
to commence the offering during 2000.
F-16
<PAGE>
MOLECULAR DIAGNOSTICS AND THERAPEUTICS, INC.
(Formerly Nu-Tec., L.T.D.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOTE E: SHAREHOLDERS' EQUITY AND STOCK-BASED COMPENSATION, CONTINUED
During the year ended March 31, 1999, the Company issued 41,600 shares for
services rendered. 27,900 shares were issued for professional fees related to
the preparation of Company's business plan; 10,000 shares were issued for legal
fees in connection with the Company's offering; and 3,700 shares were issued to
consultants for other professional services. These shares were valued by the
Board of Directors at the fair value of common stock, or $.75 per share. The
Board of Directors considered contemporaneous equity transactions and other
analysis to determine the fair value of the common stock. Stock-based
compensation expense of $31,200 was recognized in the accompanying financial
statements for the year ended March 31, 1999.
During the year ended March 31, 1999, the Company issued 253,500 shares of its
no par value common stock as compensation to officers, employees and
consultants. These shares were valued by the Board of Directors at the fair
value of common stock, or $.75 per share. Stock-based compensation expense of
$190,125 was recognized in the accompanying financial statements for the year
ended March 31, 1999.
During the year ended March 31, 1997, the Company issued 13,133 shares to a
consultant for services rendered. These shares were valued by the Board of
Directors at the fair value of common stock, or $.50 per share.
During the year ended March 31, 1994, the Company issued 200,000 (unaudited)
shares to a consultant for services rendered. These shares were valued by the
Board of Directors at the fair value of common stock, or $.22 per share.
During the year ended March 31, 1992, the Company issued 120,000 (unaudited)
shares of no par value common stock to consultants for services rendered. These
shares were valued by the Board of Directors at the fair value of common stock,
or $.015 per share. These shares are "restricted securities" and may be sold
only in compliance with Rule 144 of the Act.
During the period ended March 31, 1992, the Company issued 400,000 (unaudited)
shares of its common stock to an investor for $6,000 (unaudited), or $.015 per
share. These shares are "restricted securities" and may be sold only in
compliance with Rule 144 of the Act.
On September 30, 1999, the Board of Directors approved a 3 for 2 reverse split
of the Company's no par value common stock. The shareholders ratified the
reverse stock split on November 1, 1999.
During the nine months ended December 31, 1999, the Company sold 399,400
(unaudited) shares of its no par value common stock to certain shareholders of
record for proceeds of $299,550 ($.75 per share) (unaudited).
F-17
<PAGE>
MOLECULAR DIAGNOSTICS AND THERAPEUTICS, INC.
(Formerly Nu-Tec., L.T.D.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOTE E: SHAREHOLDERS' EQUITY AND STOCK-BASED COMPENSATION, CONTINUED
During the nine months ended December 31, 1999, the Company issued 57,467
(unaudited) shares of common stock for services rendered. 35,000 (unaudited) of
the shares were issued to directors in lieu of fees and the remaining 22,467
(unaudited) shares were issued to consultants for other professional services.
These shares were valued by the Board of Directors at the price of the shares of
common stock sold in a stock offering ongoing at the time of issuance, or $.75
per share (unaudited). As a result, stock-based compensation expense of $43,100
(unaudited) was recognized in the accompanying financial statements for the nine
months ended December 31, 1999.
During the nine months ended December 31, 1999, the Company issued 53,933
(unaudited) shares of its no par value common stock as compensation. These
shares were valued by the Board of Directors at the fair value of common stock,
or $.75 per share (unaudited). As a result, stock-based compensation expense of
$40,450 (unaudited) was recognized in the accompanying financial statements for
the nine months ended December 31, 1999.
NOTE F: STOCK OPTION AGREEMENTS
On December 29, 1995, the Board of Directors adopted a Stock Option Plan, which
reserved 5,000,000 shares of the Company's common stock. On January 23, 1996,
the Company granted non-compensatory stock options for 1,122,183 shares of its
common stock to its president and other individuals. The options, which are
vested and exercisable as of the grant date, allow the optionees to purchase
475,000; 275,000; 172,183; 100,000; and 100,000 shares of common stock at $.35
per share. The Company's common stock is not traded in the public market and the
exercise price of $.35 per share on the grant date approximated management's
estimate of the fair value of the Company's common stock. The options expire on
January 23, 2001. As of March 31, 1999, no options had been exercised.
On September 30, 1999, the Board of Directors approved the termination of all
outstanding stock options.
NOTE G: COMMITMENTS
Office leases
The Company entered into an operating lease for office space located in Boulder,
Colorado on January 27, 1997. The lease commenced February 1, 1997 and expires
January 31, 2002. On October 22, 1998, the Company entered into a second
operating lease for office space located in Longmont, Colorado.
On October 14, 1999, the Company signed a tenant to a sublease agreement for the
office space located in Boulder, Colorado. The sublease commences on November 1,
1999 and ends on January 31, 2002.
F-18
<PAGE>
MOLECULAR DIAGNOSTICS AND THERAPEUTICS, INC.
(Formerly Nu-Tec., L.T.D.)
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOTE G: COMMITMENTS, CONTINUED
Future minimum lease payments under both office leases and receipts under the
sublease agreement for the years ended March 31 are as follows:
Minimum Sublease Net
Rental Rental Rental
Payments Income Payments
----------------- ------------------ -----------------
March 31, (Unaudited) (Unaudited) (Unaudited)
- ---------
2000............ $ 43,173 $ 7,561 $ 35,612
2001............ 44,021 18,797 25,224
2002............ 32,802 16,253 16,549
--------- ------- --------
$ 119,996 $42,611 $ 77,385
========= ======= ========
NOTE H: SUBSEQUENT EVENTS
During January and February 2000, the Company sold 172,796 (unaudited) shares of
its no par value common stock to certain shareholders of record for proceeds
totaling $194,399 ($1.125 per share) (unaudited).
On March 8, 2000, the Company entered into a contract to purchase land. The
Company agreed to issue 102,000 (unaudited) shares of its no par value common
stock as earnest money towards the total purchase price of $1,198,730
(unaudited). The balance of the purchase price is due on the closing date, which
is scheduled for July 17, 2000. The Company's obligation to purchase the land is
subject to receiving approval from Weld County, Colorado for the Company's site
plan and building plans on or before June 22, 2000.
F-19
<PAGE>
PART II
Information Not Required in Prospectus
Item 24. Indemnification of Directors and Officers.
The Registrant's Amended and Restated Articles of Incorporation provide
that the Board of Directors of the Registrant may indemnify any person who was
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Registrant), by
reason of the fact that he is or was a director, officer, employee or agent of
the Registrant or is or was serving at the request of the Registrant as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorney fees),
judgements, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in the best interests
of the Registrant and, with respect to any criminal action or proceeding, had no
reasonable cause to be believe his conduct was unlawful. The Board of Directors
may also indemnify any such person made a party to such actions and suits, by or
in the right of the Registrant to procure a judgement in its favor, against
expenses (including attorney fees) actually in connection with the defense or
settlement of such action or suit if he so acted, but no indemnification shall
be made in respect of any claim, issue, or matter as to which such person has
been adjudged to be liable for negligence or misconduct in the performance of
his duty to the registrant unless and only to the extent that the court
determines, in view of all of the circumstances of the case, such person is
fairly and reasonably entitled to such indemnification.
The Registrant's Bylaws provide that the Registrant shall indemnify any
and all of its directors or officers, or former directors or officers, or any
person who may have served at the Registrant's request as a director or officer
of another corporation in which the Registrant owns capital stock or of which it
is a creditor, against expenses actually and necessarily incurred by them in
connection with the defense of any action, suit or proceeding in which they, or
any of them, are made parties, or a party, by reason of being or having been
directors or officers or a director or officer of the Registrant, or of such
other corporation, except in relation to matters as to which any such director
or officer or former director or person shall be adjudged in such action, suit
or proceeding to be liable for negligence or misconduct in the performance of
duty.
The Colorado Business Corporation Act provides that a corporation may
indemnify a person made a party to a proceeding because the person is or was a
director against liability incurred in the proceeding if (a) the person
conducted himself or herself in good faith, (b) the person reasonably believed
(1) in the case of conduct in an official capacity with the corporation, that
his or her conduct was in the corporation's best interests; and (2) in all other
cases, that his or her conduct was at least not opposed to the corporation's
best interests and (c) in the case of any criminal proceeding, the person had no
reasonable cause to believe his or her conduct was unlawful. Such
indemnification is permitted in connection with a proceeding by or in the right
of the corporation only to the extent of reasonable expenses incurred in
connection with the proceeding. A corporation may not indemnify a director (a)
in connection with a proceeding by or in the right of the corporation in which
the director was adjudged liable to the corporation; or (b) in connection with
any other proceeding charging that the director derived an improper personal
benefit, whether or not involving action in an official capacity, in which
proceeding the director was adjudged liable on the basis that he or she derived
an improper personal benefit.
<PAGE>
The Colorado Business Corporation Act further provides that a
corporation, unless limited by its articles of incorporation, shall indemnify a
person who was wholly successful, on the merits or otherwise, in the defense of
any proceeding to which the person was a party because the person is or was a
director, against reasonable expenses incurred by him or her in connection with
the proceeding.
The Registrant has applied for directors' and officers' liability
insurance with an aggregate policy limit of $1,000,000.
Item 25. Other Expenses of Issuance and Distribution.
The estimated expenses of this Offering, all of which will be paid by
Registrant, are as follows:
SEC Registration Fee $ 2,965
National Association of Securities Dealers, Inc. Fee 1,500
Nasdaq Listing Fee 6,000
Accounting Fees and Expenses _______
Registrant's Legal Fees and Expenses _______
Blue Sky Expenses and Counsel Fees _______
Printing and Engraving Fees 3,500
Transfer Agent and Registrar's Fees and Expenses 1,000
Miscellaneous Expenses _______
-------
Total $______
<PAGE>
Item 26. Recent Sales of Unregistered Securities.
From January 1996 through June 1996, the Registrant sold an aggregate
of 40,500 shares of its Class D Preferred Stock in a private placement to 27
investors for an aggregate consideration of $202,500 ($5.00 per share). The
offering was conducted in accordance with Rule 504 of Regulation D by means of a
confidential offering memorandum. Each share of Preferred stock was converted,
pursuant to its terms, into twelve shares of the Registrant's common stock in
June, 1996 at the option of the Registrant for no additional consideration.
From July 1996 through January 1997, the Registrant sold an aggregate
of 12,835 shares of its Class E Preferred Stock in a private placement to 15
investors for an aggregate consideration of $77,010 ($6.00 per share). The
offering was conducted in accordance with Rule 504 of Regulation D by means of a
confidential offering memorandum. Each share of Preferred stock was converted,
pursuant to its terms, into twelve shares of the Registrant's common stock in
January, 1997 at the option of the Registrant for no additional consideration.
From February 1997, through August, 1997 the Registrant sold an
aggregate of 20,500 shares of its Class F Preferred Stock in a private placement
to 11 investors for an aggregate consideration of $123,000 ($6.00 per share).
The offering was conducted in accordance with Rule 504 of Regulation D by means
of a confidential offering memorandum. Each share of Preferred stock was
converted, pursuant to its terms, into twelve shares of the Registrant's common
stock in August, 1997 at the option of the Registrant for no additional
consideration.
From August, 1997 through March, 1998 the Registrant sold an aggregate
of 68,351 shares of its Class G Preferred Stock in a private placement to 40
investors for an aggregate consideration of $410,106 ($6.00 per share). The
offering was conducted in accordance with Rule 504 of Regulation D by means of a
confidential offering memorandum. Each share of Preferred stock was converted,
pursuant to its terms, into twelve shares of the Registrant's common stock in
March, 1998 at the option of the Registrant for no additional consideration.
In January, 1998 the Registrant issued 13,133 shares of its common
stock to an individual as a consulting fee for the review of the offering
documents. The shares were valued at the time of issuance at $.50 per share.
Such individual was provided with access to all material information regarding
an investment in the Registrant and was given the opportunity to ask questions
of and receive answers from the executive officers of the Registrant.
Accordingly, this issuance was exempt from registration under the Securities Act
pursuant to Section 4(2) thereunder.
<PAGE>
From June 1998, through December 1998, the Registrant sold an aggregate
of 60,499 shares of its Class H Preferred Stock in a private placement to 39
investors for an aggregate consideration of $362,994 ($6.00 per share). The
offering was conducted in accordance with Rule 504 of Regulation D by means of a
confidential offering memorandum. Each share of Preferred stock was converted,
pursuant to its terms, into eight shares of the Registrant's common stock in
December, 1998 at the option of the Registrant for no additional consideration.
In August, 1998 the Registrant issued 600 shares of its common stock to
a shareholder as a consulting fee for the review of marketing documents. The
shares were valued at the time of issuance at $.75 per share. Such individual
was provided with access to all material information regarding an investment in
the Registrant and was given the opportunity to ask questions of and receive
answers from the executive officers of the Registrant. Accordingly, this
issuance was exempt from registration under the Securities Act pursuant to
Section 4(2) thereunder.
In January, 1999 the Registrant issued 10,000 shares of its common
stock to an individual as compensation for the review and preparation of
offering documents. The shares were valued at the time of issuance at $.75 per
share. Such individual was provided with access to all material information
regarding an investment in the Registrant and was given the opportunity to ask
questions of and receive answers from the executive officers of the Registrant.
Accordingly, this issuance was exempt from registration under the Securities Act
pursuant to Section 4(2) thereunder.
From February 1999 through July, 1999 the Registrant sold an aggregate
of 57,333 shares of its Class I Preferred Stock in a private placement to 29
investors for an aggregate consideration of $343,998 ($6.00 per share). The
offering was conducted in accordance with Rule 504 of Regulation D by means of a
confidential offering memorandum. Each share of Preferred stock was converted,
pursuant to its terms, into eight shares of the Registrant's common stock in
July, 1999 at the option of the Registrant for no additional consideration.
In February, 1999 the Registrant issued 91,600 shares of its common
stock to an entity for services provided to the Registrant. The shares were
valued at the time of issuance at $.75 per share. A representative of such
entity was provided with access to all material information regarding an
investment in the Registrant and was given the opportunity to ask questions of
and receive answers from the executive officers of the Registrant. Accordingly,
this issuance was exempt from registration under the Securities Act pursuant to
Section 4(2) thereunder.
<PAGE>
In March, 1999 the Registrant issued 1,000 shares of its common stock
to an individual as a consulting fee for the review of financial documents. The
shares were valued at the time of issuance at $.75 per share. Such individual
was provided with access to all material information regarding an investment in
the Registrant and was given the opportunity to ask questions of and receive
answers from the executive officers of the Registrant. Accordingly, this
issuance was exempt from registration under the Securities Act pursuant to
Section 4(2) thereunder.
In March, 1999 the Registrant issued 3,500 shares of its common stock
to an employee of the Registrant as a bonus. The shares were valued at the time
of issuance at $.75 per share. Such employee was provided with access to all
material information regarding an investment in the Registrant and was given the
opportunity to ask questions of and receive answers from the executive officers
of the Registrant. Accordingly, this issuance was exempt from registration under
the Securities Act pursuant to Section 4(2) thereunder.
In March, 1999 the Registrant issued 100,000 shares of its common stock
to a director of the Registrant for his services to the Registrant as director.
The shares were valued at the time of issuance at $.75 per share. The director
had access to all material information regarding an investment in the
Registrant. Accordingly, this issuance was exempt from registration under the
Securities Act pursuant to Section 4(2) thereunder.
In March, 1999 the Registrant issued 86,300 shares of its common stock
to an officer of the Registrant for accrued services to the Registrant as an
officer. The shares were valued at the time of issuance at $.75 per share. The
officer had access to all material information regarding an investment in the
Registrant. Accordingly, this issuance was exempt from registration under the
Securities Act pursuant to Section 4(2) thereunder.
In March, 1999 the Registrant issued 1,600 shares of its common stock
to an individual as a consulting fee for reviewing documents in connection with
the G preferred offering. The shares were valued at the time of issuance at $.75
per share. Such individual was provided with access to all material information
regarding an investment in the Registrant and was given the opportunity to ask
questions of and receive answers from the executive officers of the Registrant.
Accordingly, this issuance was exempt from registration under the Securities Act
pursuant to Section 4(2) thereunder.
In April, 1999 the Registrant issued an aggregate of 35,000 shares of
its common stock to seven individuals (5,000 shares each) for their agreement to
serve on the Registrant's Scientific Advisory Board. The shares were valued at
the time of issuance at $.75 per share. Each of the individuals was provided
with access to all material information regarding an investment in the
Registrant and was given the opportunity to ask questions of and receive answers
from the executive officers of the Registrant. Accordingly, these issuances were
exempt from registration under the Securities Act pursuant to Section 4(2)
thereunder.
<PAGE>
In May, 1999 the Registrant issued 6,667 shares of its common stock to
an individual for services provided to the Registrant. The shares were valued at
the time of issuance at $.75 per share. Such individual was provided with access
to all material information regarding an investment in the Registrant and was
given the opportunity to ask questions of and receive answers from the executive
officers of the Registrant. Accordingly, this issuance was exempt from
registration under the Securities Act pursuant to Section 4(2) thereunder.
In July, 1999 the Registrant issued 800 shares of its common stock to
an individual as a consulting fee for reviewing documents in connection with H
preferred offering. The shares were valued at the time of issuance at $.75 per
share. Such individual was provided with access to all material information
regarding an investment in the Registrant and was given the opportunity to ask
questions of and receive answers from the executive officers of the Registrant.
Accordingly, this issuance was exempt from registration under the Securities Act
pursuant to Section 4(2) thereunder.
In July, 1999 the Registrant issued 10,000 shares of its common stock
to the Registrant's corporate secretary for her services as secretary. The
shares were valued at the time of issuance at $.75 per share. She had access to
all material information regarding an investment in the Registrant. Accordingly,
this issuance was exempt from registration under the Securities Act pursuant to
Section 4(2) thereunder.
In July, 1999 the Registrant issued 33,933 shares of its common stock
to an officer of the Registrant as employment compensation. The shares were
valued at the time of issuance at $.75 per share. The individual had access to
all material information regarding an investment in the Registrant. Accordingly,
the issuance was exempt from registration under the Securities Act pursuant to
Section 4(2) thereunder.
In July, 1999 the Registrant issued 5,000 shares of its common stock to
an individual as a consulting fee for investor relations services. The shares
were valued at the time of issuance at $.75 per share. The individual was
provided with access to all material information regarding an investment in the
Registrant and was given the opportunity to ask questions of and receive answers
from the executive officers of the Registrant. Accordingly, the issuance was
exempt from registration under the Securities Act pursuant to Section 4(2)
thereunder.
<PAGE>
In August, 1999 the Registrant sold an aggregate of 379,100 shares of
its common stock in a private placement to 14 investors for an aggregate
consideration of $284,325 ($.75 per share). Each of the purchasers was an
existing shareholder of the Registrant and an accredited investor, as defined in
Regulation D ("Regulation D") promulgated under the Securities Act of 1933, as
amended (the "Securities Act"), who was provided with access to all material
information regarding an investment in the Registrant and who was given the
opportunity to ask questions of and receive answers from the executive officers
of the Registrant. Accordingly, these issuances were exempt from registration
under the Securities Act pursuant to Section 4(2) thereunder.
In September, 1999 the Registrant issued 20,000 shares of its common
stock to an officer of the Registrant as employment compensation. The shares
were valued at the time of issuance at $.75 per share. Such officer had access
to all material information regarding an investment in the Registrant.
Accordingly, this issuance was exempt from registration under the Securities Act
pursuant to Section 4(2) thereunder.
On November 1, 1999 the Registrant's shareholders approved a three for
two reverse stock split. Prior to the split, the Registrant had 12,981,773
common shares outstanding and, following the split, there were 8,654,515 common
shares outstanding.
During January and February, 2000 the Registrant sold an aggregate of
172,796 shares of its common stock in a private placement to seven investors for
an aggregate consideration of $194,399 ($1.125 per share). Each of the
purchasers was an existing shareholder of the Registrant and an accredited
investor, as defined in Regulation D ("Regulation D") promulgated under the
Securities Act of 1933, as amended (the "Securities Act"), who was provided with
access to all material information regarding an investment in the Registrant and
who was given the opportunity to ask questions of and receive answers from the
executive officers of the Registrant. Accordingly, these issuances were exempt
from registration under the Securities Act pursuant to Section 4(2) thereunder.
On March 8, 2000, the Registrant entered into a contract to purchase
land and, as part thereof, agreed to issue 102,000 shares of its common stock as
earnest money towards the total purchase price of $1,189,515 (unaudited). The
stock is being held by the seller's real estate agent pending the closing of the
sale. The purchaser is an accredited investor, as defined in Regulation D
("Regulation D") promulgated under the Securities Act of 1933, as amended (the
"Securities Act") and was provided with access to all material information
regarding an investment in the Registrant and was given the opportunity to ask
questions of and receive answers from the executive officers of the Registrant.
Accordingly, these issuances were exempt from registration under the Securities
Act pursuant to Section 4(2) thereunder
<PAGE>
During March, 2000 the Registrant sold an aggregate of 76,330 shares of
its common stock in a private placement to nine investors for an aggregate
consideration of $85,874 ($1.125 per share). Each of the purchasers was an
existing shareholder of the Registrant and an accredited investor, as defined in
Regulation D ("Regulation D") promulgated under the Securities Act of 1933, as
amended (the "Securities Act"), who was provided with access to all material
information regarding an investment in the Registrant and who was given the
opportunity to ask questions of and receive answers from the executive officers
of the Registrant. Accordingly, these issuances were exempt from registration
under the Securities Act pursuant to Section 4(2) thereunder.
All stock certificates issued in connection with the foregoing
transactions were legended to reflect their restricted status.
Item 27. Exhibits
(a) Exhibits:
1. Underwriting and Selling Agreement, dated August 4, 1999 between the
Registrant and Three Arrows Capital Corp., including Letter Agreement,
dated August 3, 1999, between the Registrant and Three Arrows Capital
Corp.
1.1 Escrow Agreement, dated March __, 2000, by and among the Registrant,
the Underwriter and Norwest Bank Colorado, N.A. (to be filed by
amendment)
3.1 Copy of Registrant's Amended and Restated Articles of Incorporation.
3.1.1 Copy of Registrant's Articles of Amendment to the Articles of
Incorporation, as filed with the Colorado Secretary of State
on October 30, 1992.
3.1.2 Copy of Registrant's Articles of Amendment to the Articles of
Incorporation, as filed with the Colorado Secretary of State
on November 9, 1999.
3.2 Copy of Registrant's Bylaws.
4.1 Specimen Common Stock Certificate.
4.2 Form of Representative's Warrant Agreement between Registrant and
Three Arrows Capital Corporation. (to be filed by amendment)
5.1 Opinion by Reinhart, Boerner, Van Deuren, Norris & Rieselbach, P.C.,
as to legality of the shares of Common Stock offered by the Company.
(to be filed by amendment)
10.1 Copy of Second Amendment to Employment Agreement, effective as of
January 1, 1999 between Registrant and Malcolm H. Benedict.
10.2 Copy of Employment Agreement, effective as of April 1, 1998 between
Registrant and Donald A. Ludwig, Ph.D.
10.3 Letter of Proposal, dated September 30, 1999, from DVI Financial
Services, Inc. to the Registrant.
10.4 Pre-Contract Agreement, dated March 11, 1998 between the Registrant
and Ebco Technologies
10.5 Contract to Buy and Sell Real Estate, dated March 8, 2000, between the
Registrant and Horizon Investments, LLC
10.6 Agreement to Amend/Extend Contract, dated March 15,2000, between the
Registrant and Horizon Investments, LLC
23.1 Consent of Cordovano and Harvey, P.C
23.2 Consent of Reinhart, Boerner, Van Deuren, Norris & Rieselbach, P.C.,
(included in Exhibit 5.1).
27.1 Financial Data Schedule as of December 31, 1999.
<PAGE>
Item 28. Undertakings.
The undersigned Registrant hereby undertakes:
(1) To file during any period in which offers or sales are
being made pursuant to Rule 415 under the Securities Act a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act;
(ii) To reflect in the prospectus any facts or events
which, individually or in the aggregate, represent a
fundamental change in the information in the registration
statement. Notwithstanding the foregoing, any increase or
decrease in the total dollar value 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 Securities
and Exchange Commission (the "Commission") pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price
represent no more than a 20% 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 additional or changed material
information on the plan of distribution.
(2) For determining liability under the Securities Act, to
treat each post-effective amendment as a new registration statement of
the securities offered, and the offering of the securities at that time
to be the initial bona fide offering.
<PAGE>
(3) To file a post-effective amendment to remove from
registration any of the securities that remain unsold at the end of the
offering.
Registrant hereby undertakes to provide to the Underwriters at the
closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended (the "Act") may be permitted to directors,
officers and controlling persons of Registrant pursuant to the provisions of its
Amended and Restated Articles of Incorporation, as amended, its Bylaws, the
Colorado Business Corporation Act or otherwise, 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 Registrant for expenses incurred or paid by a director,
officer or controlling person of 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, 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.
The undersigned Registrant hereby undertakes:
(1) For purposes of determining any liability under the
Securities Act, to treat 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
Registrant under Rule 424(b)(1), or (4), or 497(h) under the Securities
Act as part of this registration statement as of the time the
Commission declared it effective.
(2) For determining any liability under the Securities Act, to
treat each post-effective amendment that contains a form of prospectus
as a new registration statement for the securities offered in the
registration statement, and that offering of the securities at that
time as the initial bona fide offering of those securities.
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933,
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this Registration
Statement or amendment thereto to be signed on its behalf by the undersigned, in
the City of Longmont, State of Colorado, on the 27th day of March, 2000.
MOLECULAR DIAGNOSTICS & THERAPEUTICS, INC.
By: /s/ Malcolm H. Benedict
---------------------------------
Malcolm H. Benedict, Chairman of the Board,
Chief Executive Officer, President and
Treasurer
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement or amendment thereto has been signed by the following
persons in the capacities and on the dates stated.
Signature Title Date
--------- ------- ----
/s/Malcolm H. Benedict Chairman of the Board, March 27, 2000
- ----------------------- Chief Executive Officer,
Malcolm H. Benedict President, Treasurer and Director
/s/Donald A. Ludwig Executive Vice President March 27, 2000
- ----------------------- and Director
Donald A. Ludwig
/s/Janet L. Davis Secretary and Director March 27, 2000
- -----------------------
Janet L. Davis
Exhibit 1
UNDERWRITING & SELLING AGREEMENT
In regard to the offerings being made by Nu-Tec, L.T.D. (NT), or
successors, in a stock offering under the Securities Act of 1933 or an
exemption, private placement, merger or acquisition, NT agrees to pay to the
Three Arrows Capital Corp. (TAC):
1. A commission of 8.00% of the gross proceeds of the offering, contingent
upon achieving the minimum specified in the offering. Warrants on shares
at the offering price at the rate of one warrant per fifteen shares sold,
effective at the minimum; are also granted. The term of the warrants to
run from the date of this Agreement and for four years from the end of the
offering period, not to exceed five years from the initial offering date,
and cannot be sold, transferred, assigned or hypothecated for at least one
year from the effective date of the offering. One demand registration
right is granted not to exceed five years from the effective date.
2. A due diligence fee of $4,000 and consulting fee of $5,950 plus mutually
agreed expenses including fees of any state where Three Arrows Capital
Corp. must register for the NT offering. If the offering is terminated,
TAC will be reimbursed only for the actual, accountable, out-of-pocket
expenses.
3. Hold Three Arrows Capital Corp. and its agents harmless from, and
indemnify their agents for, any and all costs of investigation of claims,
costs, expenses, attorney fees or other liabilities or disbursements
arising out of any administrative investigation or proceeding or any
litigation, commenced or threatened, relating to this underwriting which
stem from any misstatements or incorrect information from NT principals,
employees, directors or agents, including without limitation, the
implementation of this Agreement, the distribution of stock or funds, the
investment of funds, the interpretation of this Agreement or similar
matters. The Underwriter will not be indemnified for any claims, costs,
expenses or other liability arising from its bad faith or negligence or
that of its employees, officers, directors or agents.
4. All subscription checks will be mailed to TAC for prompt deposit to the
Escrow Account, at the escrow agent, no later than noon of the next
business day. Such funds will be handled in accordance with the Escrow
Agreement filed as an exhibit to the offering document TAC will fully
comply with the provisions of Rules 2730, 2740, 2750 and 2420 of the NASD
Conduct Rules.
For NT For TAC
/s/ Malcolm H. Benedict /s/ Ronald Peterson
- ----------------- ---------------------
(Signature) (Signature)
Malcolm H. Benendict, NUTEC, L.T.D. President Ronald Peterson, President
- ----------------- --------------------------
(Name & title) (Name & title)
August 4, 1999 August 4, 1999
- ------------------ ----------------------
(Date) (Date)
<PAGE>
Three Arrows Capital Corp.
August 3, 1999
Member NASD SIPC
Mr. Malcolm H. Benedict, CEO
Nu-Tec, L.T.D.
1880 Industrial Circle, Suite B3
Longmont, CO 80501
Dear Mr. Benedict:
This letter is in addition to an Underwriting and Selling Agreement which is
forwarded to you as of this day, and constitutes and agreement for Three Arrows
Capital Corp. to write the registration statements for a filing under the
Securities Act of 1933, as amended, or exemption thereto. Further, this
agreement reflects our responsibility for the communiques that will be made with
the state and federal regulatory agencies (as necessary) to allow Nu-Tec, L.T.D.
(or successor), to file a registration statement or to otherwise solicit and
raise funds in a public offering. In addition to the registration statement, we
will jointly develop and execute a marketing plan.
We will provide complete documentation and a rewritten business plan in a form
generally acceptable to the SEC and state security commissions. The latter will
reflect: "Description of the Business, Means of Production/Stage of Product
Development, Description of the Industry/Competition, Marketing Strategy/Major
Customers, Number and Type of Employees, Description of Properties Owned or to
be Acquired, Dependence on Intellectual Property, Corporate History, Regulation,
Strategy to Achieve Profitability, Impact of Delayed or Failed Milestones, and
Litigation." The entire document will include: "Table of Contents, Offering
Summary, Explanatory Notes, Jurisdictional Notice, Risk Factors, Business and
Properties, Plan of Distribution, Use of Proceeds, Capitalization, Management
and Directors, Compensation of Executive Officers, Principal Shareholders,
Common Stock, Accounting, Financial Statements, Certain Article and Bylaw
Provisions, Plan of Placement of the Common Stock, Subscription Agreement, and
Exhibits." In the event of a merger or acquisition in which the Company is not
the surviving entity, TAC shall be entitled to receive 5% of the gross value
received by the shareholders of the Company, as a group, as a result to such
acquisition.
This registration offering document will commence upon receipt of $5,950 for
completion of the work above, and an executed Underwriting and Selling Agreement
with $4,000 for due diligence. Both checks should be made out to Three Arrows
Capital Corp. The above assumes input form you and your advisors and the
provision of documentation as requested. This agreement as well as the
Underwriting and Selling Agreement both relate to founders and company shares.
Experience with such offerings suggests that especially close cooperation is
required by the CFO or CPA, acting for the firm. The nature of the success of
all securities offerings is now and has always been indeterminate. In the case
of smaller stock offerings such as Regulation S and SB the history of such
offerings suggests that less than half have been successful to even include
breaking escrow. This undertaking assumes that the company knows the difficulty
associated with obtaining any and all types of financing in today's marketplace.
The placement effort by Three Arrows Capital Corp. is always conducted on a
best-efforts basis and no promises or guarantees of such stock being sold are
given or implied.
Very truly yours,
THREE ARROWS CAPITAL CORP.
/s/ RonaldPeterson
-----------------------
Ronald Peterson
President
Agreed: /s/ Malcolm H. Benedict
- -------------------------------
Dated: 8/6/99 CEO
- -------------------------------
-------------------------------------------------------------------------
www.threearrowscapital.com [email protected] 888-286-1911
[SEAL]
STATE OF COLORADO
DEPARTMENT OF
STATE
CERTIFICATE
I, NATALIE MEYER, Secretary of State of the State of Colorado
hereby certify that the prerequisites for the issuance of this certificate have
been fulfilled in compliance with law and are found to conform to law.
Accordingly, the undersigned, by virtue of the authority vested in me by
law, hereby issues A RESTATED CERTIFICATE OF INCORPORATION WITH AMENDMENTS TO
(NU-TEC, L.T.D.).
Dated: MARCH 27, 1992
/s/ Natalie Meyer
--------------------------
Secretary of State
<PAGE>
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
(NU-TEC, L.T.D.)
(NU-TEC, L.T.D.) a Colorado corporation ("Corporation") pursuant to
Section 7-2-112 of the Colorado Corporation Code, hereby adopts following as a
complete revision and restatement of its original Articles of Incorporation as
previously filed with the Secretary of State of the State of Colorado on
February 19, 1992. The following Restated Articles of Incorporation correctly
set forth the provisions of the Articles of Incorporation of the Corporation, as
amended; they have been adopted by the Board of Directors of the Corporation, no
shares having been issued; and they supersede the original Articles of
Incorporation of the Corporation and all amendments thereto.
Pursuant to the foregoing, the undersigned, as a director of the
Corporation, does hereby amend and restate the Articles of Incorporation of this
Corporation, as follows:
FIRST: The name of the Corporation is (NU-TEC, L.T.D)
SECOND: The Corporation shall have perpetual existence.
THIRD: The nature of the business of the Corporation and the objects
and purposes and business thereof proposed to be transacted,
promoted or carried on are as follows:
Section 1. Specific Purposes. To operate as a manufacturer/distributor
of products and services related to nuclear medicine; to operate and
maintain radioisotope laboratory for the purpose of providing shared
services to nuclear medicine laboratories and industrial applications;
and
Section 2. General Purposes. To carry on any business, including the
transaction of all lawful business for which corporations may be
organized pursuant to the Colorado Corporation Code, to have and
exercise all powers, privileges and immunities now or hereafter
conferred upon or permitted to corporations by the laws of the State of
Colorado, and to do any and all things herein set forth to the same
extent as natural persons could do insofar as permitted by the laws of
the State of Colorado.
<PAGE>
It is the intention that the purposes, objects and powers specified by
the foregoing clause shall not, except as otherwise expressed, be limited or
restricted by reference to or inference from the terms of any other clause in
these Articles of Incorporation, but each purpose, object or power stated in the
foregoing clause shall be regarded as an independent purpose, object or power.
ARTICLE IV. Section 1. Authorized Capital. The total number of shares
of all classes which the Corporation shall have authority to issue is 50,000,000
of which 5,000,000 shall be Preferred Shares, no par value per share, and
45,000,000 shall be Common Shares, no par value per share, and the designations,
preferences, limitations and relative rights of the shares of each class are as
follows:
Section 2. Preferred Shares. The Corporation may divide and issue the
Preferred Shares in series. Preferred Shares of each series when issued shall be
designated to distinguish them from the shares of all other series. The Board of
Directors is hereby expressly vested with authority to divide the class of
Preferred Shares into series and to fix and determine the relative rights and
preferences of the shares of any such series so established to the full extent
permitted by these Articles of Incorporation and the Colorado Corporation Code
in respect to the following:
A. The number of shares to constitute such series, and the
distinctive designations thereof;
B. The rate and preference of dividends, if any, the time of
payment of dividends, whether dividends are cumulative and the date
from which any dividend shall accrue;
C. Whether shares may be redeemed and, if so, the redemption
price and the terms and conditions of redemption;
D. The amount payable upon shares in event of involuntary
liquidation;
E. The amount payable upon shares in event of voluntary
liquidation;
F. Sinking fund or other provisions, if any, for the
redemption or purchase of shares;
G. The terms and conditions on which shares may be converted,
if the shares of any series are issued with the privilege of
conversion;
2
<PAGE>
H. Voting powers, if any; and
I. Any other relative rights and preferences of shares of such
series, including, without limitation, any restriction on an increase
in the number of shares of any series theretofore authorized and any
limitation or restriction of rights or powers to which shares of any
future series shall be subject.
Section 3. Common Shares.
A. The rights of holders of Common Shares to receive dividends
or share in the distribution of assets in the event of liquidation,
dissolution or winding up of the affairs of the Corporation shall be
subject to the preferences, limitations and relative rights of the
Preferred Shares fixed in the resolution or resolutions which may be
adopted from time to time by the Board of Directors of the Corporation
providing for the issuance of one or more series of the Preferred
Shares.
B. The holders of the Common Shares shall be entitled to one
vote for each Common Share held by them of record at the time for
determining the holders thereof entitled to vote. With respect to any
matter for which the Colorado Corporation Code provides that two-thirds
affirmative vote of the shareholders is necessary to carry, the
affirmative vote of a simple majority of the Common Shares entitled to
vote thereon and present in person or by proxy shall be sufficient to
carry any proposal or motion put to the shareholder for their approval.
C. The Common Shares of the Corporation shall be issued for
such consideration as shall be fixed from time to time by the Board of
Directors. In the absence of fraud, the judgment of the directors as to
the value of any property or services received in full or partial
payment for Common Shares shall be conclusive. When Common Shares are
issued upon payment of the consideration fixed by the Board of
Directors, such Common Shares shall be taken to be fully paid and
nonassessable.
D. Dividends in cash, property or Common Shares of the
Corporation may be paid, as and when declared by the Board of
Directors, out of funds of the Corporation to the extent and in the
manner permitted by law.
FIFTH: The business and affairs of the Corporation shall be managed by
the Board of Directors. The number of directors constituting the Board of
Directors shall be fixed in the manner provided in the By-laws of the
3
<PAGE>
Corporation, subject to the limitation that the initial Board of Directors of
the Corporation shall consist of three persons, whose names and addresses are,
as follows:
Malcolm H. Benedict 7226 Crawford Gulch
Golden, CO 80403
James Craig Quinn 5907 Secrest Drive
Arvada, CO 80003
Robert Lanari 10000 East Yale, #6
Denver, CO 80231
Such persons shall serve as directors of the Corporation until the
first annual meeting of shareholders or until their successors shall have been
elected and qualified.
In accordance with the By-laws of the Corporation, the Board of
Directors may be divided into three classes, each class to be as nearly equal in
number as possible, the term of office of directors of the first class to expire
at the first annual meeting of shareholders after their election, that of the
second class to expire at the second annual meeting after their election, and
that of the third class to expire at the third annual meeting after their
election. At each annual meeting following such classification and division of
the members of the Board of Directors, a number of directors equal to the number
of directorships in the class whose term expires at the time of such meeting
shall be elected to hold office until the third succeeding annual meeting of
shareholders of the Corporation.
SIXTH: Cumulative voting shall not be allowed in the election of
directors.
SEVENTH: Shareholders shall not have a preemptive right to subscribe
for, purchase or acquire additional unissued or treasury shares of the
Corporation or securities convertible into shares or carrying share purchase
warrants or privileges as the same may be issued from time to time by the
Corporation.
EIGHTH: The address of the Corporation's initial registered office is
7226 Crawford Gulch, Golden, Colorado 80403, and the name of the initial
registered agent at such address is Malcolm H. Benedict.
NINTH: The names and addresses of the Incorporators are, as follows:
Malcolm H. Benedict 7226 Crawford Gulch
Golden, CO 80403
4
<PAGE>
James Craig Quinn 5907 Secrest Drive
Arvada, CO 80003
Robert Lanari 10000 East Yale, #6
Denver, CO 80231
TENTH: The Board of Directors shall have the power to enact, alter,
amend and repeal such By-laws not inconsistent with the laws of the State of
Colorado and these Articles of Incorporation as it may deem best for the
management of the Corporation.
ELEVENTH: The following paragraphs are inserted for the management of
the business and for the conduct of the affairs of the Corporation and the same
are in furtherance of and not in limitation or exclusion of the powers conferred
by law:
1. Contracts with Directors and Officers.
(a) No contract or other transaction between the Corporation
and one or more of its directors or any other corporation, firm,
association or entity in which one or more of the directors of the
Corporation are directors or officers or are financially interested,
shall be either void or voidable solely because such directors are
present at the meeting of the Board of Directors or a committee thereof
which authorizes or approves such contract or transaction or solely
because their votes are counted for such purpose if:
(i) The fact of such relationship or interest is
disclosed or known to the Board of Directors or committee which
authorizes, approves or ratifies the contract or transaction by a vote
or consent sufficient for that purpose without counting the votes or
consents of the interested directors; or
(ii) The fact of such relationship or interest is
disclosed or known to the shareholders entitled to vote and they
authorize, approve or ratify such contract or transaction by vote or
written consent; or
(iii) The contract or transaction is fair or
reasonable to the Corporation.
(b) Common or interested directors may be counted in
determining the presence of a quorum at a meeting of the Board of
Directors or a committee thereof which authorizes, approves or ratifies
such contract or transaction.
2. Miscellaneous Activities. The Corporation shall have the following
miscellaneous powers:
5
<PAGE>
(a) To acquire by purchase, exchange or lease; and to hold, own, use,
assign, lease, sell, convey or mortgage, either alone or in conjunction with
others, the rights, property and business of any person, entity, partnership,
association or corporation heretofore or hereafter engaged in any business, the
purposes of which are similar to the purposes set forth in Article THIRD above.
(b) To enter into any lawful formation for sharing profits, union of
interest, reciprocal association, or cooperative association with any
corporation, association, partnership, individual, or other legal entity, for
the carrying on of any business, the purposes of which are similar to the
purposes set forth in Article THIRD above, and to enter into any general or
limited partnership, the purposes of which are similar to such purposes.
(c) To enter into, for the benefit of its employees, one or more of the
following: (i) a pension plan, (ii) a profit sharing plan, (iii) a stock bonus
plan, (iv) a thrift and savings plan, (v) a restricted stock option plan, or
(vi) other retirement, health and accident, insurance, welfare or incentive
compensation plan.
3. Indemnification of Officers Directors and Others.
The Board of Directors of the Corporation shall have the power to:
(a) Indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of the Corporation), by reason of the fact that he is or was
a director, officer, employee or agent of the Corporation or is or was serving
at the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorney's fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in the best interests of the Corporation and, with
respect to any criminal action or proceedings, had no reasonable cause to
believe his conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement or conviction or upon a plea of nolo
contendere or its equivalent shall not of itself create a presumption that the
person did not act in good faith and in a manner which he reasonably believed to
be in the best interests of the Corporation and, with respect to any criminal
action or proceeding, had reasonable cause to believe that his conduct was
unlawful.
6
<PAGE>
(b) Indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action or suit by or in the
right of the Corporation to procure a judgment in its favor by reason of the
fact that he is or was a director, officer, employee or agent of the Corporation
or is or was serving at the request of the Corporation as a director, officer,
employee or agent of the Corporation, partnership, joint venture, trust or other
enterprise against expenses (including attorney's fees) actually and reasonably
incurred by him in connection with the defense or settlement of such action or
suit if he acted in good faith and in a manner he reasonably believed to be in
the best interests of the Corporation; but no indemnification shall be made in
respect of any claim, issue or matter as to which such person has been adjudged
to be liable for negligence or misconduct in the performance of his duty to the
Corporation unless and only to the extent that the court in which such action or
suit was brought determines upon application that, despite the adjudication of
liability, but in view of all circumstances of the case, such person is fairly
and reasonably entitled to indemnification for such expenses which such court
deems proper.
(c) Indemnify a director, officer, employee or agent of the Corporation
to the extent that such person has been successful on the merits in defense of
any action, suit or proceeding referred to in subparagraph (a) or (b) of this
Paragraph 2 or in defense of any claim, issue, or matter therein, against
expenses (including attorney's fees) actually and reasonably incurred by him in
connection therewith.
(d) Authorize indemnification under subparagraph (a) or (b) of this
Paragraph 2 (unless ordered by a court) in the specific case upon a
determination that indemnification of the director, officer, employee or agent
is proper in the circumstances because he has met the applicable standard of
conduct set forth in said subparagraph (a) or (b). Such determination shall be
made by the Board of Directors by a majority vote of a quorum consisting of
directors who were not parties to such action, suit or proceeding, or, if such a
quorum is not obtainable or even if obtainable a quorum of disinterested
directors so directs, by independent legal counsel in a written opinion, or by
the shareholders.
(e) Authorize payment of expenses (including attorney's fees) incurred
in defending a civil or criminal action, suit or proceeding in advance of the
final disposition of such action, suit or proceeding as authorized in
subparagraph (d) of this Paragraph 2 upon receipt of an undertaking by or on
behalf of the director, officer, employee or agent to repay such amount unless
it is ultimately determined that he is entitled to be indemnified by the
Corporation as authorized in this Paragraph 2.
(f) Purchase and maintain insurance on behalf of any person who is or
was a director, officer, employee or agent of the Corporation or who is or was
7
<PAGE>
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against him and incurred by him in any
such capacity or arising out of his status as such, whether or not the
Corporation would have the power to indemnify him against such liability under
the provisions of this Paragraph 2.
The indemnification provided by this Paragraph 2 shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
these Articles of Incorporation, and the By-laws, agreement, vote of
shareholders or disinterested directors or otherwise, and any procedure provided
for by any of the foregoing, both as to action in his official capacity and as
to action in another capacity while holding such office, and shall continue as
to a person who has ceased to be a director, officer, employee or agent and
shall inure to the benefit of heirs, executors and administrators of such a
person.
4. Corporate Opportunity.
The officers, directors and other members of management of this
Corporation shall be subject to the doctrine of "corporate opportunities" only
insofar as it applies to business opportunities in which this Corporation has
expressed an interest as determined from time to time by this Corporation's
Board of Directors as evidenced by resolutions appearing in the Corporation's
minutes. Once such areas of interest are delineated, all such business
opportunities within such areas of interest which come to the attention of the
officers, directors, and other members of management of this Corporation shall
be disclosed promptly to this Corporation and made available to it. The Board of
Directors may reject any business opportunity presented to it and thereafter any
officer, director or other member of management may avail himself of such
opportunity. Until such time as this Corporation, through its Board of
Directors, has designated an area of interest, the officers, directors and other
members of management of this Corporation shall be free to engage in such areas
of interest on their own and this doctrine shall not limit the right of any
officer, director or other member of management of this Corporation to continue
a business existing prior to the time that such area of interest is designated
by the Corporation. This provision shall not be construed to release any
employee of this Corporation (other than an officer, director or member of
management) from any duties which he may have to this Corporation.
8
<PAGE>
WITNESS WHEREOF, the undersigned has signed and acknowledged these
Amended and Restated Articles of Incorporation of Nu-Tec, L.T.D., this 25th day
of March, 1992.
/s/ Malcolm H. Benedict
-----------------------------
Malcolm H. Benedict, Director
STATE OF COLORADO )
) ss.
COUNTY OF ARAPAHOE )
Before me, a notary public, the 25th day of March, 1992, personally
appeared Malcolm H. Benedict, known to me personally to be the same person whose
name is subscribed to and who executed the foregoing Amended and Restated
Articles of Incorporation, and for himself acknowledged that he signed, sealed
and delivered said instrument in writing as his free and voluntary act and deed
for the uses and purposes therein set forth.
WITNESS MY HAND AND OFFICIAL SEAL.
My commission expires: 12/16/94
/s/ Renee C. Lampshire
--------------------------
Notary Public
9
[SEAL]
STATE OF COLORADO
DEPARTMENT OF
STATE
CERTIFICATE
I, NATALIE MEYER, Secretary of State of the State of Colorado hereby
certify that the prerequisites for the issuance of this certificate have been
fulfilled in compliance with law and are found to conform to law.
Accordingly, the undersigned, by virtue of the authority vested in me
by law, hereby issues A CERTIFICATE OF AMENDMENT TO NU-TEC., L.T.D.
Dated: OCTOBER 30, 1992
/s/Natalie Meyer
------------------
SECRETARY OF STATE
<PAGE>
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION OF
NU-TEC., L.T.D.
----------------
Pursuant to the Colorado Corporation Code, the undersigned adopts the
following Articles of Amendment to its Articles of Incorporation, the same
having been duly adopted by unanimous consent of the Board of Directors
effective August 17, 1992 and, at a special meeting of shareholders called for
such purpose on August 31, 1992, approved by affirmative vote of the holders of
97.9% of the shares of the Corporation entitled to vote thereon:
FIRST: Article IV of the Articles of Incorporation is hereby amended in its
entirety to read as follows:
ARTICLE IV
Stock and Voting Rights
The total number of shares of all classes which the Corporation shall
have authority to issue is 50,000,000 of which 5,000,000 shall be Preferred
Shares, no par value per share, and 45,000,000 shall be Common Shares, no par
value per share, and the designations, preferences, limitations and relative
rights of the shares of each class are as follows:
A. Preferred Shares. The Corporation may divide and issue the Preferred
Shares in series. Preferred Shares of each series when issued shall be
designated to distinguish them from the shares of all other series. The Board of
Directors is hereby expressly vested with authority to divide the class of
Preferred Shares into series and to fix and determine the relative rights and
preferences of the shares of any such series so established to the full extent
permitted by these Articles of Incorporation and the Colorado Corporation Code
in respect to the following:
1) The number of shares to constitute such series, and the
distinctive designations thereof;
2) The rate and preference of dividends, if any, the time of
payment of dividends, whether dividends are cumulative and the
date from which any dividend shall accrue;
3) Whether shares may be redeemed and, if so, the redemption
price and the terms and conditions of redemption. Preferred
Shares redeemed, purchased or otherwise acquired by the
Corporation and cancelled shall thereupon be restored to the
series;
4) The amount payable upon shares in event of involuntary
liquidation;
5) The amount payable upon shares in event of voluntary
liquidation;
6) Sinking fund or other provisions, if any, for the redemption
or purchase of shares;
7) The terms and conditions on which shares may be converted, if
the shares of any series are issued with the privilege of
conversion;
8) Voting powers, if any; and
<PAGE>
9) Any other relative rights and preferences of shares of such
series, including, without limitation, any restriction on an
increase in the number of shares of any series theretofore
authorized and any limitation or restriction of rights or
powers to which shares of any future series shall be subject.
B. Common Shares.
1) The rights of holders of Common Shares to receive dividends or share
in the distribution of assets in the event of liquidation, dissolution
or winding up of the affairs of the Corporation shall be subject to the
preferences, limitations and relative rights of the Preferred Shares
fixed in the resolution or resolutions which may be adopted from time
to time by the Board of Directors of the Corporation providing for the
issuance of one or more series of the Preferred Shares.
2) The holders of the Common Shares shall be entitled to one vote for
each Common Share held by them of record at the time for determining
the holders thereof entitled to vote.
C. Cumulative Voting. Cumulative voting shall not be allowed in the
election of directors of the Corporation and every shareholder entitled to vote
at such election shall have the right to vote the number of shares owned by him
for as many persons as there are directors to be elected, and for whose election
he has a right to vote.
D. Denial of Preemptive Rights. No shareholder of the Corporation shall
by reasons of his holding shares of any class or series have any preemptive or
preferential rights to purchase or subscribe to any shares of any class or
series of the Corporation now or hereafter to be authorized, or any notes,
debentures, bonds or other securities convertible into or carrying options or
warrants to purchase shares of any class or series now or hereafter to be
authorized, whether or not the issuance of any such shares or notes, debentures,
bonds or other securities would adversely effect the dividend or voting rights
of such shareholder, other than such rights, if any, as the Board of Directors,
in its discretion from time to time, may grant, and at such price as the Board
of Directors, in its discretion, may fix; and the Board of Directors, if
otherwise authorized by the provisions of these Articles of Incorporation may
issue shares of any class or series of the Corporation or any notes, debentures,
bonds or other securities convertible into or carrying options or warrants to
purchase shares of any class or series, without offering any such shares of any
class or series either in whole or in part to the existing shareholders of any
class or series.
E. Majority Vote. When, with respect to any action to be taken by the
shareholders (If the Corporation, the Colorado Corporation Code requires the
vote or concurrence of the holders of greater than a majority of the outstanding
shares, or of any class or series entitled to vote thereon, any and every such
action shall be taken, notwithstanding the requirements of the Colorado
Corporation Code, by the affirmative vote or concurrent of the holders of a
majority of outstanding shares, or of any class or series entitled to vote
thereon.
SECOND: Article V, paragraph B., of the Articles of Incorporation is hereby
amended to read in its entirety as follows:
E. A majority of the Board of Directors of the Corporation and the
affirmative vote of not less than a majority of the Common Shares at a meeting
at which a quorum is present, shall have the power to amend, alter, change or
repeal any provision of these Articles of Incorporation.
THIRD: With the exception of the foregoing changes, all other provisions of the
Articles of Incorporation of the Corporation shall remain the same.
2
<PAGE>
FOURTH: No changes were effected with regard to any exchange, reclassification
or cancellation of issued shares, and no change was effected with regard to the
stated capital or amount of stated capital.
NU-TEC., L.T.D.
By: /s/ Malcoln H. Benedict
------------------------------
Malcolm H. Benedict, President
and /s/ James C. Quinn
------------------------------
James C. Quinn, Secretary
STATE OF COLORADO)
) ss.
COUNTY OF )
I, Robert Simpson, a Notary Public in and for said county, in the state
aforesaid, do hereby certify that Malcolm H. Benedict and James C. Quinn, whose
names are subscribed to the foregoing Articles of Amendment, personally appeared
before me this day, and being by me first duly sworn, declared that they are the
persons who signed the foregoing document as President and Secretary, and that
the statements therein contained are true.
WITNESS MY HAND AND OFFICIAL SEAL.
My Commission expires: 1/4/94
/s/ Robert Simpson
----------------------------
Notary Public
3
MUST BE TYPED For office use only
FILING FEE: $25.00 1991210603 C
MUST SUBMIT TWO COPES $40.00
SECRETARY OF STATE
11-09-1999 10:21:17
Please include a typed
self-addressed envelope
Mail to: Secretary of State
Corporations Section
1560 Broadway, Suite 200
Denver, CO 80202
(303) 894-2251
Fax (303) 894-2242
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
Pursuant to the provisions of the Colorado Business Corporation Act, the
undersigned corporation adopts the following Articles of Amendment to its
Articles of Incorporation:
FIRST: The name of the corporation Is Nu-Tec.. L.T.D.
SECONOD: The following amendment to the Articles of Incorporation was adopted on
November 1, 1999 as prescribed by the Colorado Business Corporation Act, and in
the manner marked with an X below:
No shares have been issued or Directors Elected-Action by Incorporators
- -----
No shares have been issued but Directors Elected-Action by Directors
- -----
Such amendment was adopted by the board of directors where shares have
- -----
been issued and shareholder action was not required.
x Such amendment was adopted by a vote of the shareholders. The number of
- -----
shares voted for the amendment was sufficient for approval.
THIRD: If changing corporate name, the new name of the corporation is Molecular
Diagnostics & Therapeutics. Inc.
FOURTH: The manner, if not set forth in such amendment, in which any exchange,
reclassification, or cancellation of issued shares provided for in the amendment
shall be effected, is as follows:
If these amendments are to have a delayed effective date, please list that date:
(Not to exceed ninety (90) days from the date of filing)
Signature: /s/ Malcolm H. Benedict
-----------------------
Title: President & C.E.O.
------------------
BY-LAWS
OF
NU-TEC, L.T.D.
ARTICLE I
Offices
1 Business Offices, The principal office of the corporation shall be at
7226 Crawford Gulch, Golden, Colorado. The corporation may also have one or more
offices at such other place or places within or without the State of Colorado as
the Board of Directors may from time to time determine or as the business of the
corporation may require.
2. Registered Office. The registered office of the corporation shall be
as set forth in the Articles of Incorporation, unless changed as provided by the
Colorado Corporation Code.
ARTICLE II
Shareholder's Meetings
1. Annual Meetings, The annual meetings of shareholders for the election
of directors to succeed those whose terms expire and for the transaction of such
other business as may come before the meeting shall be held in each year on the
second Friday in January.
2. Special Meetings. Special meetings of shareholders for any purpose
or purposes, unless otherwise prescribed by statute or by the Articles of
Incorporation, may be called at any time by the President or by the Board of
Directors and shall be called by the President or Secretary upon the request
(which shall state the purpose or purposes therefor) of the holders of not less
than two-tenth (2/10) of the outstanding shares of the corporation entitled to
vote at the meeting.
3. Place of Meeting. Meetings of shareholders shall be held at the
principal office of the corporation or at such other place or places, within or
without of the State of Colorado, as may be from time to time determined by the
Board of Directors.
4. Notice of Meetings. Notice of each meeting of shareholders, whether
annual or special, shall be given not less than ten (ten) nor more than fifty
(50) days prior thereto to each shareholder of record entitled to vote thereat
by delivering written of printed notice thereof to such shareholder personally
or by mailing the same to his address as it appears on the stock transfer books
of the corporation; provided, however, that if the authorized shares of the
<PAGE>
corporation are proposed to be increased, at least thirty (30) days' notice in
like manner shall be given. The notice of all meetings shall state the place,
day and hour thereof. The notice of a special meeting shall, in addition, state
the purposes thereof.
5. Fixing Record Date. The Board of Directors shall fix in advance a
date, not less than fifty (50), days preceding the date of any meeting of
shareholders, or the day or the day for payment of any dividend, or the date for
the allotment of rights or the date when any change or conversion or exchange of
authorized shares shall go into effect, or a date fixed as the final date for
obtaining such consent, as a record date for the determination of the
shareholders entitled to notice of, and to vote at, any such meeting and any
adjournment thereof, or entitled to receive any such dividend, or to any such
allotment of rights, or to exercise the rights in respect of any such change,
conversion or exchange of capital stock, or to give such consent, and in such
case only such shareholders as shall be shareholders of record on the date so
fixed shall be entitled to notice of , and to vote at, such meeting and any
adjournment thereof, or to receive payment of such dividend, or to receive such
allotment of rights, or to exercise such rights, or to give such consent, as the
case maybe, notwithstanding any transfer of any shares on the books, of the
corporation after any such record date fixed as aforesaid.
6. Voting List. At lean ten (10) days before every meeting of
shareholders, a complete list of shareholders entitled to vote thereat or any
adjournment thereof, arranged in alphabetical order, showing the address of each
shareholder and the number of shares held by each, shall be prepared by the
officer or agent of the corporation who has charge of the stock transfer books
of the corporation. Such list shall be open at the principal office of the
corporation to the inspection of any shareholder during usual business hours for
a period of at least ten (10) days prior to such meeting, and such list shall be
produced and kept at the time and place of the meeting during the whole time
thereof and subject to the inspection of any shareholder who may be present.
PAGE 2
<PAGE>
7. Organization. The President or Vice President shall call meetings of
shareholders to order and act as Chairman of such meetings. In the absence of
said officers, any shareholder entitled to vote thereat, or any proxy of any
such shareholder, may call the meeting to order and a Chairman shall be elected.
In the absence of the Secretary and Assistant Secretary of the corporation, and
person appointed by the Chairman shall act as Secretary of such meetings.
8. Quorum. The holders of a majority of the shares issued and
outstanding and entitled to vote thereat shall when present in person and
represented by proxy be requisite to and shall constitute a quorum at all
meetings of shareholders for the transaction of business except as otherwise
provided by statute, by the Articles of Incorporation, or by these By-laws. In
the absence of a quorum at any such meeting, a majority of the shareholders
present in person or represented by proxy and entitled to vote thereat may
adjourn the meeting from time to time without further notice until a quorum
shall be present or represented.
9. Voting. At every meeting of shareholders each shareholder having the
right to vote shall be entitled to vote in person or by proxy executed in
writing by such shareholder or by his duly authorized attorney in fact;
provided, however, that no such proxy shall be valid after eleven (ii) months
from the date of its execution, unless such proxy expressly provided for a
longer period.
When a quorum is present at any meeting, the vote of the holders of a
majority of the shares having voting power present in person or represented by
proxy shall decide any question brought before such meeting, unless the question
is one upon which express provision of a statute, or the Articles of
Incorporation, or these By-Laws, a different vote is required, in which case
such express provision shall govern and control the decision of such question.
ARTICLE III
Board of Directors
1. Election and Tenure. The business and affairs of the corporation
shall be managed by a Board of Directors who shall be elected at the annual
meetings of shareholders by majority vote, and each Director shall be elected to
serve until the next succeeding annual meeting and until his successor shall be
elected and shall qualify.
PAGE 3
<PAGE>
2. Number and Qualification. The Board of Directors shall consist of at
least three (3) members. Directors need not be shareholders or residents of the
State of Colorado.
3. Organization Meeting. After each annual election of Directors, the
Board of Directors shall meet for the purpose of organization, selection of a
Chairman of the Board, the election of officers and the transaction of any other
business.
4. Regular Meetings. Regular meetings of the Board of Directors shall
be held at such time or time as may be determined by the Board of Directors and
specified in the notice of such meeting.
5. Special Meetings. Special meetings of the Board of Directors may be
called by the Chairman of the Board on three (3) days' notice to each Director,
either personally, by mail, by telegram or by telephone, and shall be called by
the Chairman of the Board or Secretary in like manner and on like notice on the
written request of any two directors. The purpose of a special meeting of the
Board of Directors need to be stated in the notice thereof.
6. Place of Meetings. Any meeting of the Board of Directors may be held
at such place or places either within or without the State of Colorado as shall
from time to time be determined by the Board of Directors or fixed by the
Chairman of the Board and designated in the notice of the meeting.
7. Quorum. A majority of the number of Directors fixed by Paragraph Two
(2) of this Article III shall constitute a quorum at all meetings of the Board
of Directors, and the act of a majority of the Directors present at a meeting at
which a quorum is present shall be the act of the Board of Directors. In the
absence of a quorum at any such meeting, a majority of the Directors present may
adjourn the meeting from time to time without further notice until a quorum
shall be present
8. Vacancies. Any vacancy occurring in the Board of Directors may be
filled by the affirmative vote of a majority of the remaining Directors though
less than a quorum of the Board of Directors. A Director elected to fill a
vacancy shall be elected for the unexpired term of his predecessor in office. My
directorship to be filled by reason of an increase in the number of Directors
shall be filled by the affirmative vote of a majority of the Directors then in
office or by an election at an annual meeting or at a special meeting of
shareholders called from that purpose.
PAGE 4
<PAGE>
A Director chosen to fill a position resulting from an increase in the
number of Directors shall hold office until the next annual meeting of
shareholders and until his successor shall be elected and shall qualify.
9. Compensation of Directors. Directors who are not employees of the
corporation may be paid such annual compensation as may from time to time be
fixed by resolution of the Board of Directors. All Directors may be allowed a
fixed sum and expenses incurred for attendance at each regular of special
meeting of the Board of Directors as may be from time to time fixed by
resolution of the Board of Directors. Nothing herein contained shall be
construed to preclude any Director from serving the corporation in any other
capacity and receiving compensation therefore.
ARTICLE IV
Notice and Action Without Meeting
1. Notice. Whenever, under the provisions of a statute or the Articles
of Incorporation, or of these By-Laws, notice is required to be given to any
Director or shareholder, it shall not be construed to mean personal notice, but
such notice may be given in writing, by mail, postage prepaid, and addressed to
such Director or shareholder at such address as appears on the books of the
corporation, and such notice shall be deemed to be given at the time when the
same shall be thus mailed.
2. Waiver of Notice. Whenever any notice whatsoever is required to be given
under the provisions of a statute, or of the Articles of Incorporation, or by
these By-Laws, a waiver thereof in writing, signed by the person or persons
entitled to said notice, whether before, at, or after the time stated therein,
or the appearance of such person or persons at such meeting, or in the case of a
shareholders' meeting by proxy, shall be deemed equivalent thereto.
3. Action Without a Meeting. Any action required, or which may be taken
at a meeting of the Directors, shareholders, or members of any executive
committee of the corporation, may be taken without a meeting if a consent in
writing, setting forth the action so taken shall be signed by all of the
Directors, shareholders, or members of the executive committee, as the case may
be, who are entitled to vote with respect to the subject matter thereof.
PAGE 5
<PAGE>
ARTICLE V
Officers
1. Election and Tenure. The Board Of Directors annually shall elect a
President, Vice President, a Secretary, and a Treasurer. Any two or more offices
may be held by the same person, except the offices of President and Secretary.
Each officer so elected or appointed shall continue in office until his
successors shall be elected or appointed and shall qualify, or until
resignation, removal, death, or other disqualifications.
2. Resignation, Removal and Vacancies. Any officer may resign at any
time by giving written notice thereof to the Board of Directors or to the
Chairman of the Board. Such resignation shall take effect on the date specified
therein and no acceptance of the same shall be necessary to render the same
effective.
Any officer may at any time be removed by the affirmative vote of
two-thirds (2/3) of the number of Directors specified in Paragraph Two (2) of
Article III of these By-Laws, or by an executive committee thereunto duly
authorized.
If any office becomes vacant for any reason, the vacancy may be filled
by the Board of Directors. An officer appointed to fill a vacancy shall be
appointed for the unexpired term of his or her predecessor in office.
3. President. The President shall be the chief executive officer of the
corporation. He, shall preside at all meetings of the shareholders and shall
have general and active management of the business of the corporation. He shall
see that all orders and resolutions of the Board of Directors are carried into
effect and in general shall perform all duties as may from time to time be
assigned to him by the Board of Directors.
4. Vice President. The Vice President shall perform such duties and
possess such powers as from time to time may be assigned to him by the Board of
Directors, or by the President. In the absence or inability of the President,
the Vice President shall perform the duties of the President
5. Secretary. The Secretary shall give, or cause to be given, notice of
all meetings of shareholders and of the Board of Directors, and shall attend all
such meetings and keep a record of their proceedings. The Secretary shall be the
custodian of the Seal of the corporation; shall have power to affix the same to
all documents, the execution of which on behalf of the corporation is authorized
by these By-Laws, or by the action of the Board of Directors, and in
PAGE 6
<PAGE>
general, shall perform all duties incident to the office of the Secretary, and
such other duties as from time to time may be assigned to the Secretary by the
Board of Directors or the President
6. Treasurer. The Treasurer shall give a bond for the faithful
discharge of his duties if, and in such sum and with sureties as the Board of
Directors shall require. The Treasurer shall have charge and custody of and be
responsible for all funds and securities of the corporation and deposit all such
funds in the name of the corporation in such banks or other depositories as
shall be selected by the Board of Directors. The Treasurer shall collect and
receive and give receipts for all money or securities belonging to the
corporation. In general the Treasurer shall perform all the duties incident to
the office of Treasurer and such other duties as from time to time may be
assigned to the Treasurer by the Board of Directors or by the President
7. Salaries. Officers of the corporation shall be entitled to such
salaries, emoluments, compensation or reimbursement as shall be fixed or allowed
by the Board of Directors.
ARTICLE VI
Indemnification
1. Indemnification. The corporation shall indemnify any and all of its
Directors or officers, or former Directors or officers, or any person who may
have served at its request as a Director or officer of another corporation in
which it owns shares of capital stock or of which it is a creditor, against
expenses actually and necessarily incurred by them in connection with the
defense of any action, suitor proceeding in which they, or any of them, are made
parties, or a party, by reason of being or having been Directors of officers or
a Director or officer of the corporation, or of such other corporation, except
in relation to matters as to which any such Director or officer or former
Director or person shall be adjudged in such action, suit or proceeding to be
liable for negligence or misconduct in the performance of duty. Such
indemnification shall not be deemed exclusive of any other rights to which those
indemnified may be entitled, under any By-Laws, agreement vote of shareholders,
or otherwise.
ARTICLE VII
Execution of Instruments
1. Execution of Instruments. The President and Secretary shall have the
power to execute on behalf and in the name of the corporation any deed,
contract, bond, debenture, note or other obligations or evidences of
PAGE 7
<PAGE>
indebtedness, or proxy, or other instrument requiring the signature of an
officer of the corporation, except where the signing and execution thereof shall
be expressly delegated by the Board of Directors to some other officer or agent
of the corporation. Unless so authorized, no officer, agent, or employee shall
have any power or authority to bind the corporation in any way, to pledge its
credit or to render it liable pecuniarily for any purposes or in any amount
2. Checks and Endorsements. All checks and drafts upon the funds to the
credit of the corporation in any of its depositories shall be signed by such of
its officers or agents as shall from time to time be determined by resolution of
the Board of Directors which may provide for the use of facsimile signatures
under specified conditions, and all notes, bill receivable, trade acceptances,
drafts, and other evidences of indebtedness payable to the corporation, be
endorsed by such officers or agents of the corporation or in such manner as
shall from time to time be determined by resolution of the Board of Directors.
ARTICLE Vlll
Shares of Stock
1. Certificates of Stock. The certificates of shares of the corporation
shall be in such form not inconsistent with the Colorado Corporation Code and
the Articles of Incorporation as shall be approved by the Board of Directors,
and shall be numbered and shall be entered in the books of the corporation as
they are issued. They shall exhibit the holder's name and number of shares; such
other matters as shall be required by law, and shall be signed by the President,
or a Vice President, and the Secretary, and shall be sealed with the seal of the
corporation, or a facsimile thereof.
In case any officer who has signed a certificate ceased to hold such
office prior to the issuance of delivery of the certificate, such certificate
may nevertheless be issued and delivered by the corporation as though the
officer who signed such certificate, or whose facsimile signature shall have
been used thereon, had not ceased to be such officer of the corporation.
2. Lost and Destroyed Certificates. In case any certificate of stock of
the corporation shall be alleged to have been destroyed or lost, the corporation
shall not be required to issue a new certificate in lieu thereof, expect upon
receipt of evidence satisfactory to the Board of Directors of the destruction or
loss of such certificate, and, if so required by the Board of Directors, upon
receipt also of a bond in such sum as the Board of Directors may direct, not
PAGE 9
<PAGE>
exceeding double the value of such stock, and, if so required, with surety or
sureties satisfactory to the Board of Directors, to indemnify the corporation
against any claim that may be made against it on account of the alleged
destruction or loss of such certificate.
3. Transfer of Stock. Transfers of the shares of the stock of the
corporation shall be made only on the books of the corporation by the registered
holder thereof, or by his attorney thereunto authorized by power of attorney
duly executed and filed with the Secretary, and upon the surrender of the
certificate or certificates for such shares. The corporation, under the Articles
of Incorporation, has the right to impose restrictions upon the transfer of any
shares of the stock of the corporation, or any interest therein, from time to
time issued, and any transfer or transfers of any of the shares of the stock of
the corporation, or any interest therein, shall be made in accordance with and
subject to any such restrictions from time to time so imposed.
ARTICLE IX
Corporate Seal
1. Corporate Seal. The corporate seal shall be in such form as shall be
approved by resolution of the Board of Directors. Said seal may be used by
causing it or a facsimile thereof to be impressed or affixed or reproduced or
otherwise. The impression of the seal may be made and attested by the Secretary
for the authentication of contracts or other papers requiring the seal.
ARTICLE X
Fiscal Year
1. Fiscal Year. The fiscal year of the corporation shall be such year
as shall be adopted by the Board of Directors.
ARTICLE XI
Corporate Books and Records
1. Corporate Books. Except as otherwise required by statute, the books
and records of the corporation may be kept within or without the State of
Colorado at such place or places as may be from time to time designated by the
Board of Directors.
PAGE 9
<PAGE>
ARTICLE XII
Emergency By-Laws and Amendments
1. Emergency By-Laws. Board of Directors may adopt emergency By-Laws,
which shall, notwithstanding any different provisions elsewhere, be operative
during any emergency resulting from an attack on the United States, or any
nuclear or atomic disaster, and which may make any provisions that may be
practical and necessary for the circumstances of the emergency.
2. Amendments. All By-Laws of the corporation shall be subject to
alteration, amendment, or repeal, and new By-Laws may be added by the
affirmative vote of a majority of a quorum of the members of the Board of
Directors at any regular or special meeting.
END OF BY-LAWS.
PAGE 10
<TABLE>
<CAPTION>
<S> <C>
===================================================================================================================
= =
= =
= [NUMBER] [MDTI LOGO] [SHARES] =
= =
= =
= MOLECULAR DIAGNOSTICS & THERAPEUTICS, INC. =
= INCORPORATED UNDER THE LAWS OF THE STATE OF COLORADO =
= The Corporation is authorized to issue 45,000,000 Common Shares - No Par Value =
= And 5,000,000 Preferred Shares - No Par Value =
= =
= =
= =
= THIS CERTIFIES THAT =
= =
= Is The Owner of =
= =
= FULLY PAID AND NON-ASSESSABLE SHARES OF NO PAR VALUE COMMON STOCK OF =
= =
= MOLECULAR DIAGNOSTICS & THERAPEUTICS, INC. =
= =
= transferable only on the books of the Corporation by the holder hereof in person or by duly =
= authorized Attorney upon surrender of this Certificate properly endorsed. =
= =
= In Witness Whereof, the said Corporation has caused this Certificate to be signed by its duly authorized =
= officers and to be sealed with the Seal of the Corporation. =
= =
= Dated: =
= =
= /s/Janet Davis [MDTI CORPORATE SEAL] /s/Malcolm H. Benedict =
= Janet Davis, Secretary Malcolm H. Benedict, President =
= =
= =
===================================================================================================================
</TABLE>
THIS SECOND AMENDMENT TO THE EMPLOYMENT AGREEMENT (hereinafter referred
to as the "Agreement") is entered into this 30th day of September, 1999, and
effective as of January 1, 1999, by and between Nu-Tec., L.T.D. (hereinafter
referred to as the "Employer'), a Colorado corporation with its executive
offices located at 1880 Industrial Circle, Suite #B-3, Longmont, Colorado 80501,
and Malcolm Benedict (hereinafter referred to as the "Employee"). This Agreement
amends and supersedes that certain Amended Employment Agreement between the
parties dated effective as of January 1, 1996, and terminating on December 31,
2001.
WITNESSETH:
WHEREAS:
1. The Employer is engaged in the business of developing, manufacturing
and distributing radiochemical and radiopharmaceutical products.
2. The Employee has certain expertise in the above-described business.
3. The Employer desires to employ the Employee and the Employee desires
to be employed by the Employer upon the terms and conditions hereinafter set
forth.
NOW, THEREFORE, in consideration of the mutual promises and agreements
hereinafter set forth, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Employment. The Employer hereby employs, engages and hires the
Employee as the Chief Executive Officer of the Employer and the Employee hereby
accepts and agree~ to such employment, hiring and engagement and to the orders,
advice and direction of the Employer. The Employee, in his capacity as the Chief
Executive Officer of the Employer, shall manage and direct the overall programs
and activities of the Employer in the day-to-day operations of the business of
the Employer. In addition, the Employee shall have and perform such other duties
as are customarily performed by one holding such position in other businesses or
enterprises that are the same as or similar to that engaged in by the Employer,
and shall have and perform such unrelated duties and services as may be assigned
to him from time to time by the Board of Directors of the Employer. The Employee
agrees to abide by the Company policies and procedures established from time to
time by the Employer. The exact nature of the duties of the Employee shall be
more fully outlined and defined in a formal job description between the Employer
and the Employee, copies of which, as amended from time to time, shall be
attached hereto and incorporated herein by this reference. The Employee shall
accept from the Employer, as full compensation for his services, including,
without limitation, any services rendered by him as an officer or director of
the Employer or of any parent, subsidiary or affiliate of the Employer, the
compensation in the form of salary and shares of common stock, no par value per
share (hereinafter referred to as the" Common Stock"), of the Employer as
provided in Section 4 below.
<PAGE>
2. Best Efforts of Employee. The Employee agrees that he will at all
times faithfully, industriously and to the best of his ability, experience and
talents perform to the reasonable satisfaction of the Employer all of the duties
that may be required of and from him pursuant to the express and implicit terms
of this Agreement. Such duties shall be rendered at 1880 Industrial Circle,
Suite #B-3, Longmont, Colorado 80501, and at such place or places and during
such hours as the Employer shall in good faith require or as the interest,
needs, business or opportunity of the Employer shall require.
3. Term of Employment. The term of this Agreement shall be a period of
three (3) years, commencing January 1, 1999, and terminating December 31, 2001,
subject, however, to prior termination as hereinafter provided.
4. Compensation of Employee. The Company shall pay or furnish the
Employee, and the Employee shall accept from the Company, as full compensation
for the Employee's services, including, without limitation, any services
rendered by him as an officer or director of the Employer or of any parent,
subsidiary or affiliate of the Employer, the following compensation:
a. A gross salary of $125,000 per annum, payable in equal monthly
installments once or twice per month on the first day of each month during the
term of this Agreement. New additions or changes to an original license
application not in the original application, further incentive compensation in
the minimum amount not less than $40,000 per license application will apply.
b. In the event that Employer receives major funding from
investment sources, the Board of Directors may, in its sole discretion,
determine to pay additional incentive compensation to Employee for the
performance of services not customarily performed by the President or Chief
Executive Officer of a radiopharmaceutical company, in such amounts and forms as
shall be established by it. The nature, extent, complexity and other factors in
connection with such services shall be presented to and evaluated by the Board
of Directors of the Employer at a Special Meeting of the Board of Directors
called for that purpose.
5. Prior Non-Payment or Underpayment of Compensation. Employer is a
start-up company and has, from time to time prior to the execution of this
Agreement been unable to pay Employee all compensation due to Employee under the
previous Agreements. Employee hereby waives his right to any and all
compensation due to Employee under the previous Agreements (whether such
compensation was due under the original form of this Agreement, or under the
First Amended form) for calendar years prior to 1999, but unpaid during such
period. Employee and Employer mutually acknowledge that any amounts of
compensation waived by Employee under this paragraph may be considered by the
Board of Directors of Employee in establishing any additional incentive
compensation paid to Employee under paragraph 4.b. above.
6. Termination.
a. This Agreement may be terminated by the Employee upon sixty
(60) days' prior written notice to the Employer. If the Employee shall so
terminate this Agreement, the Employee shall be entitled to be paid only through
the date of such termination.
2
<PAGE>
b. (1) The Employer, by a majority vote of the Board of Directors,
may terminate this Agreement at any time for cause, as defined below, without
notice to the Employee and with pay only through the date of such termination.
(2) Sufficient cause for termination by the Employer shall be
a determination made in good faith and based upon reasonable grounds that the
Employee: (a) has failed to properly perform his material duties hereunder, or
has been substantially absent from employment for material amounts of time; (b)
has engaged in habitual drunkenness or abusive drugs rendering the Employee
unable to carry our his duties in a responsible manner; (c) has committed an act
with the intent to defraud or hinder the Employer; or (d) has been negligent in
the performance of the duties owed by the Employee to the Employer,
(3) As soon as may be practicable after the termination of
the Employee by the Employer for cause, the Board of Directors of the Employer
shall make an investigation of, and allow the Employee an opportunity to discuss
with the Board of Directors, the relevant facts with respect thereto. If the
Board of Directors of the Employer shall determine that the Employee has been
terminated without cause, the Employee shall be reinstated in the position which
he held prior to the termination and shall receive any compensation accrued or
payable during the period of his termination. In such event, any accrued
benefits shall be payable to the Employee as if the Employee had not been
terminated.
(4) Any conduct of the Employee which shall constitute cause
for termination under the terms of subsection b. (2) of this Section 6 and any
breach or evasion of any of the terms of this Agreement by either party hereto
will result in immediate and irreparable injury to the injured party and will
authorize recourse to injunction and/or specific performance as well as to all
other legal or equitable remedies to which such injured panty may be entitled
hereunder.
c. If the Employee shall die during the term of this Agreement,
this Agreement and the Employee's employment hereunder shall terminate
immediately upon the Employee's death, provided that the Employee shall be
entitled to his salary hereunder to the last day of the sixth month following
the month in which such death occurs.
d. (1) Notwithstanding anything in this Agreement to the contrary,
the Employer is hereby given the option to terminate this Agreement and the
Employee's employment hereunder in the event that the Employee, during the term
hereof, shall become permanently disabled as defined in subsection d.(2) of this
Section 6 below. Such option may be exercised by the Employer at any time after
the Employee becomes permanently disabled by giving written notice of
termination to the Employee. This Agreement and the Employee's employment shall
terminate one hundred eighty (180) days after such notice, provided that the
Employee shall be entitled to the compensation as provided in Section 4. hereof
to the last day of the month in which such termination occurs.
(2)For purposes of this Agreement, the Employee shall be deemed to have
become permanently disabled if, because of ill health, physical or mental
disability or for other causes beyond his control, he shall have been unable or
unwilling or shall duties hereunder on seventy-five per cent (75%) of the days
during a period of four (4)consecutive months, irrespective of whether or not
such days are consecutive.
3
<PAGE>
7. Extent of Service: Self-Dealing. The Employee shall devote his full,
normal working time, attention and energy to the business of the Employer and,
as assigned by the Board of Directors of the Employer, to the business of
corporations affiliated with the Employer, and shall not during the term of this
Agreement be engaged in any other business activity which conflicts with the
Employee's obligations under this Agreement. The foregoing shall not be
construed as preventing the Employee from making investments in businesses or
enterprises provided such investments do not require any services on the part of
the Employee in the management, operation or affairs of such businesses or
enterprises.
The Employee shall cooperate with, assist and furnish information upon
request to the President or the Board of Directors of the Employer or of the
directors or affiliates of the Employer and the auditors and legal counsel for
the Employer or its affiliates. The provisions of this Section 6 shall survive
termination of this Agreement with respect to matters arising during the period
of employment of the Employee by the Employer.
8. Disclosures of Information. The Employee recognizes and acknowledges
that he has and will have access to certain confidential information of the
Employer and its affiliates, such as data accumulation and analysis of
technology, specifications, intellectual property, applications for
radiochemical and radiopharmaceutical products, lists of clients or customers,
know-how and other proprietary information, that are valuable, special and
unique assets and property of the Employer and such affiliates. The Employee
will not, after the term of his employment, disclose, without the prior written
consent or authorization of the Employer, any of such information to any firm,
person, corporation, association, enterprise or other entity. In the event a
third party seeks to compel disclosure of confidential information by the
Employee by judicial or administrative process, the Employee shall promptly
notify the Employer of such occurrence and furnish to the Employer a copy of the
demand, summons, subpoena or other process served upon the Employee to compel
such disclosure, and will permit the Employer to assume, at the Employer's
expense but with the Employee's cooperation, defense of the disclosure demand.
Upon termination of the Employee's employment by the Employer, the
Employee shall neither take or retain any proprietary papers, customer lists,
manuals, files or other documents or copies thereof belonging to the Employer or
any of its affiliates.
The provisions of this Section 8, shall survive the termination of
this Agreement. In the event of a breach or threatened breach by the Employee of
the provisions of this Section 8, the Employer shall be entitled to an
injunction restraining the Employee from disclosing, in whole or in part, such
confidential information. Nothing herein shall be construed as prohibiting the
Employer from pursuing any other remedies available to the Employer for such
breach or threatened breach, including the recovery of damages from the
Employees.
4
<PAGE>
9. Vacation. The Employee shall be entitled to a vacation of six (6)
weeks per year, plus customary local holidays, during the term of this
Agreement. The Employee shall be entitled to receive all compensation payable
hereunder in full during the period of any vacation.
10. Other Benefits. The Employee shall be entitled to all other
benefits contained in the approved Company benefit plan(s) offered to all
employees, subject to the provisions of such plan(s). This plan includes
holidays, sick leave and other benefits.
11. Notices. Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing and delivered or sent by registered
or certified mail to his last known address, in the case of the Employee, or to
the principal executives offices of the Company, in the case of the Employer.
12. Waiver of Breach. Any waiver by the Employer of a breach of any
provision of this Agreement by the Employee shall not operate or be construed as
a waiver of any subsequent breach by the Employee.
13. Assignment. The rights and obligations of the Employer under this
Agreement shall inure to the benefit of and shall be binding upon the successors
and assigns of the Employer.
14. Applicable Law. It is the intention of the parties hereto that this
Agreement and the performance hereunder and all suits and special proceedings
here under be construed in accordance with and pursuant to the laws of the State
of Colorado and that in any action, special proceeding or other proceeding that
may be brought arising out Of, in connection with or by reason of this
Agreement, the laws of the State of Colorado shall be applicable and shall
govern to the exclusion of the law of any other forum, without regard to the
jurisdiction in which any action or special proceeding may be instituted.
15. Severability. All agreements and covenants contained herein are
severable, and in the event any of them, with the exception of those contained
in Sections ~ and 4 hereof, shall be held to be invalid by any competent court,
this Agreement shall be interpreted as if such invalid agreements or covenants
were not contained herein.
16. Entire Agreement. This Agreement constitutes and embodies the
entire understanding and agreement of the parties and supersedes and replaces
all prior understandings, agreements and negotiations between the parties,
provided that nothing herein shall be deemed to restrict or limit the common law
duties of the Employee to the Employer.
17. Waiver and Modification. Any waiver, alteration or modification of
any of the provisions of this Agreement shall be valid only if made in writing
and signed by the parties hereto. Each party hereto, from time to time, may
waive any of his or its rights hereunder without effecting a waiver with respect
to any subsequent occurrences or transactions hereof
5
<PAGE>
18. Captions and Paragraph Heading. Captions and paragraph headings
used herein are for convenience only, are not a part hereof and shall not be
used in construing this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement to be
effective as of the day and year first above written
EMPLOYEE:
/s/ Malcolm H. Benedict
--------------------
Malcolm H Benedict
EMPLOYER
NU-TEC, L.T.D.
Attest:
/s/ Janet L. Davis, Secretary By: /s/Malcolm H. Benedict
- ----------------------------- ----------------------
Janet L. Davis, Secretary Malcolm H. Benedict
6
EMPLOYMENT AGREEMENT
This Employment Agreement (hereinafter referred to as the "Agreement") is
entered into this 1st day of April, 1998, and effective as of April 1, 1998, by
and between Nu-Tec., L.T.D. (hereinafter referred to as the "Employer'), a
Colorado corporation with its executive offices located at 1880 Industrial
Circle, Suite #B-3, Longmont, Colorado 80501, and Donald A. Ludwig (hereinafter
referred to as the "Employee").
WITNESSETH:
WHEREAS:
1. The Employer is engaged in the business of developing, manufacturing and
distributing radiochemical and
radiopharmaceutical products.
2. The Employee has certain expertise in the above-described business.
3. The Employer desires to employ the Employee and the Employee desires to
be employed by the Employer upon the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual promises and agreements
hereinafter set forth, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Employment. The Employer hereby employs, engages and hires the Employee
as the Executive Vice President of the Employer and the Employee hereby accepts
and agrees to such employment, hiring and engagement and to the orders, advice
and direction of the Employer. In addition, the Employee shall have and perform
such other duties as are customarily performed by one holding such position in
other businesses or enterprises that are the same as or similar to that engaged
in by the Employer, and shall have and perform such unrelated duties and
services as may be assigned to him from time to time by the Board of Directors
and/or the President of the Employer. The Employee agrees to abide by the
Company policies and procedures established from time to time by the Employer.
The exact nature of the duties of the Employee shall be more fully outlined and
defined in a formal job description between the Employer and the Employee,
copies of which, as amended from time to time, shall be attached hereto and
incorporated herein by this reference. The Employee shall accept from the
Employer, as full compensation for his services, including, without limitation,
any services rendered by him as an officer or director of the Employer or of any
parent, subsidiary or affiliate of the Employer, the compensation in the form of
salary and shares of common stock, no par value per share (hereinafter referred
to as the" Common Stock"), of the Employer as provided in Section 4 below.
2. Best Efforts of Employee. The Employee agrees that he will at all times
faithfully, industriously and to the best of his ability, experience and talents
perform to the reasonable satisfaction of the Employer all of the duties that
may be required of and from him pursuant to the express arid implicit terms of
this Agreement.
<PAGE>
Such duties shall be rendered at 1880 Industrial Circle, Suite #8-3,
Longmont, Colorado 80501, and at such place or places and during such hours as
the Employer shall in good faith require or as the interest, needs, business or
opportunity of the Employer shall require.
3. Term of Employment. The term of this Agreement shall be a period of five
(5) years, commencing April 1, 1998, and terminating December 31, 2003, subject,
however, to prior termination as hereinafter provided.
4. Compensation of Employee. The Company shall pay or furnish the Employee,
and the Employee shall accept from the Company, as full compensation for the
Employee's services, including, without limitation, any services rendered by him
as an officer or director of the Employer or of any parent, subsidiary or
affiliate of the Employer, the following compensation:
a. A gross salary of $100,000 per annum, payable in equal monthly
installments once or twice per month on the first day of each' month during the
term of this Agreement. Employee stipulates that during the first two (2) years
of this Agreement, that Employer may not be able to pay the full amount of the
agreed salary and Employee is willing to accept a lesser amount without
expectation of being paid the balance of the salary during any future year.
Notwithstanding the foregoing, Employee and Employer mutually acknowledge that
any amounts of compensation waived by Employee under in establishing any
additional incentive compensation paid to Employee under paragraph 4.b below.
New additions or changes to an original license application not in the original
application, further incentive compensation in the minimum amount not less than
$40,000 per license application will apply.
b. In the event that Employer receives major funding from investment
sources, the Board of Directors may, in its sol~ discretion, determine to pay
additional incentive compensation to Employee for the performance of services
not customarily performed by the Executive Vice President of a
radiopharmaceutical company, in such amounts and forms as shall be established
by it. The nature, extent, complexity and other factors in connection with such
services shall be presented to and evaluated by the Board of Directors of the
Employer at a Special Meeting of the Board of Directors called for that purpose.
5. Termination.
a. This Agreement may be terminated by the Employee upon sixty (60)
days' prior written notice to the Employer. If the Employee shall so terminate
this Agreement, the Employee shall be entitled to be paid only through the date
of such termination.
b. (1) The Employer, by a majority vote of the Board of Directors, may
terminate this Agreement at any time for cause, as defined below, without notice
to the Employee and with pay only through the date of such termination.
<PAGE>
(2) Sufficient cause for termination by the Employer shall be a
determination made in good faith and based upon reasonable grounds that the
Employee: (a) has failed to properly perform his material duties hereunder, or
has been substantially absent from employment for material amounts of time; (b)
has engaged in habitual drunkenness or abusive drugs rendering the Employee
unable to carry our his duties in a responsible manner; (c) has committed an act
with the intent to defraud or hinder the Employer; or (d) has been negligent in
the performance of the duties owed by the Employee to the Employer,
(3) As soon as may be practicable after the termination of the
Employee by the Employer for cause, the Board of Directors of the Employer shall
make an Investigation of, and allow the Employee an opportunity to discuss with
the Board of Directors, the relevant facts with respect thereto. If the Board of
Directors of the Employer shall determine that the Employee has been terminated
without cause, the Employee shall be reinstated in the position which he held
prior to the termination and shall receive any compensation accrued or payable
during the period of his termination. In such event, any accrued benefits shall
be payable to the Employee as if the Employee had not been terminated.
(4) Any conduct of the Employee which shall constitute cause for
termination under the terms of subsection b. (2) of this Section 6 and any
breach or evasion of any of the terms of this Agreement by either party hereto
will result in immediate and irreparable injury to the injured party and will
authorize recourse to injunction and/or specific performance as well as to all
other legal or equitable remedies to which such injured party may be entitled
hereunder.
c. If the Employee shall die during the term of this Agreement, this
Agreement and the Employee's employment hereunder shall terminate immediately
upon the Employee's death, provided that the Employee shall be entitled to his
salary hereunder to the last day of the sixth month following the month in which
such death occurs.
d. (1) Notwithstanding anything in this Agreement to the contrary,
the Employer is hereby given the option to terminate this
Agreement and the Employee's employment hereunder in the
event that the Employee, during the term hereof, shall
become permanently disabled as defined in subsection d.(2)
of this Section 6 below. Such option may be exercised by the
Employer at any time after the Employee becomes permanently
disabled by giving written notice of termination to the
Employee. This Agreement and the Employee's employment shall
terminate one hundred eighty (180) days after such notice,
provided that the Employee shall be entitled to the
compensation as provided in Section 4. hereof to the last
day of the month in which such termination occurs.
(2) For purposes of this Agreement, the Employee shall be deemed
to have become permanently disabled if, because of ill
health, physical or mental disability or for other causes
beyond his control, he shall have been unable or unwilling
or shall duties hereunder on seventy-five per cent (75%) of
the days during a period of four (4) consecutive months,
irrespective of whether or not such days are consecutive.
<PAGE>
6. Extent of Service: Self-Dealing. The Employee shall devote his full,
normal working time, attention and energy to the business of the Employer and,
as assigned by the Board of Directors of the Employer, to the business of
corporations affiliated with the Employer, and shall not during the term of this
Agreement be engaged in any other business activity which conflicts with the
Employee's obligations under this Agreement. The foregoing shall not be
construed as preventing the Employee from making investments in businesses or
enterprises provided such investments do not require any services on the part of
the Employee in the management, operation or affairs of such businesses or
enterprises.
The Employee shall cooperate with, assist and furnish information upon
request to the President or the Board of Directors of the Employer or of the
directors or affiliates of the Employer and the auditors and legal counsel for
the Employer or its affiliates. The provisions of this Section 6 shall survive
termination of this Agreement with respect to matters arising during the period
of employment of the Employee by the Employer.
7. Disclosures of Information. The Employee recognizes and acknowledges
that he has and will have access to certain confidential information of the
Employer and its affiliates, such as data accumulation and analysis of
technology, specifications, intellectual property, applications for
radiochemical and radiopharmaceutical products, lists of clients or customers,
know-how and other proprietary information, that are valuable, special and
unique assets and property of the Employer and such affiliates. The Employee
will not, after the term of his employment, disclose, without the prior written
consent or authorization of the Employer, any of such information to any firm,
person, corporation, association, enterprise or other entity. In the event a
third party seeks to compel disclosure of confidential information by the
Employee by judicial or administrative process, the Employee shall promptly
notify the Employer of such occurrence and furnish to the Employer a copy of the
demand, summons, subpoena or other process served upon the Employee to compel
such disclosure, and will permit the Employer to assume, at the Employer's
expense but with the Employee's cooperation, defense of the disclosure demand.
Upon termination of the Employee's employment by the Employer, the Employee
shall neither take or retain any proprietary papers, customer lists, manuals,
files or other documents or copies thereof belonging to the Employer or any of
its affiliates.
The provisions of this Section 8, shall survive the termination of this
Agreement. In the event of a breach or threatened breach by the Employee of the
provisions of this Section 8, the Employer shall be entitled to an injunction
restraining the Employee from disclosing, in whole or in part, such confidential
information. Nothing herein shall be construed as prohibiting the Employer from
pursuing any other remedies available to the Employer for such breach or
threatened breach, including the recovery of damages from the Employees.
8. Vacation. The Employees shall be entitled to a vacation of six (6) weeks
per year, plus customary local holidays, during the term of this Agreement. The
Employee shall be entitled to receive all compensation payable hereunder in full
during the period of any vacation.
<PAGE>
9. Other Benefits. The Employee shall be entitled to all other benefits
contained in the approved Company benefit plan(s) offered to all employees,
subject to the provisions of such plan(s). This plan includes holidays, sick
leave and other benefits.
10. Notices. Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing and delivered or sent by registered
or certified mail to his last known address, in the case of the Employee, or to
the principal executives offices of the Company, in the case of the Employer.
11. Waiver of Breach. Any waiver by the Employer of a breach of any
provision of this Agreement by the Employee shall not operate or be construed as
a waiver of any subsequent breach by the Employee.
12. Assignment. The rights and obligations of the Employer under this
Agreement shall inure to the benefit of and shall be binding upon the successors
and assigns of the Employer.
13. Applicable Law. It is the intention of the parties hereto that this
Agreement and the performance hereunder and all suits and special proceedings
here under be construed in accordance with and pursuant to the laws of the State
of Colorado and that in any action, special proceeding or other proceeding that
may be brought arising out of, in connection with or by reason of this
Agreement, the laws of the State of Colorado shall be applicable and shall
govern to the exclusion of the law of any other forum, without regard to the
jurisdiction in which any action or special proceeding may be instituted.
14. Severability. All agreements and covenants contained herein are
severable, and in the event any of them, with the exception of those contained
iii Sections I and 4 hereof, shall be held to be invalid by any competent court,
this Agreement shall be interpreted as if such invalid agreements or covenants
were not contained herein.
15. Entire Agreement. This Agreement constitutes and embodies the entire
understanding and agreement of the parties and supersedes and replaces all prior
understandings, agreements and negotiations between the parties, provided that
nothing herein shall be deemed to restrict or limit the common law duties of the
Employee to the Employer.
16. Waiver and Modification. Any waiver, alteration or modification of any
of the provisions of this Agreement shall be valid only if made in writing and
signed by the parties hereto. Each party hereto, from time to time, may waive
any of his or its rights hereunder without effecting a waiver with respect to
any subsequent occurrences or transactions hereof
17. Captions and Paragraph Headings. Captions and paragraph headings used
herein are for convenience only, are not a part hereof and shall not be used in
construing this Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement to be
effective as of the day and year first above written.
EMPLOYEE
/s/ Donald A. Ludwig
-----------------------
Donald A Ludwig
EMPLOYER:
NU-TEC., L.T.D.
Attest: /s/ Janet Davis
- ------------------------- By: /s/ Malcolm H. Benedict
Janet Davis, Secretary -----------------------
Malcolm H. Benedict
DVI Financial Services Inc.
(DVI/NYSE)
1400 PRESTON ROAD, SUITE 370
PLANO, TEXAS 75093
TELEPHONE: (972) 769-0012
FACSIMILE: (972) 769-8063
September 30, 1999
Mr. Malcolm H. Benedict
President - C.E.O.
Nu-Tec, L.T.D.
2595 Canyon Blvd. Suite 160
Boulder, CO 80302
Dear Malcolm:
It is my pleasure to outline the following proposal for your review. It is based
on the following conditions to be met by Nu-Tec and it is the intention of DVI
Financial Services, Inc. to proceed with final approval based on the following
criteria:
1. Nu-Tec, L.T.D. to have a net worth equal to, at least
twenty-five percent (25%) of transaction amount.
2. Nu-Tec, L.T.D. to have sufficient working capital to cover
operations and lease payment for 12 to 18 months for start up.
3. Commitment fee of 1% of transaction to be deposited with DVI.
This is referenced in the Commitment Payment section of this
proposal.
4. Completion of business plan to include information on which
assumptions are based in the proforma, location of facility
with lease or purchase cost and updated management team with
background and resumes.
SECURED PARTY: DVI Financial Services, its affiliates or assigns.
LESSEE: Nu-Tec, L.T.D.
EQUIPMENT: Cyclone 30 Cyclotron System with all necessary equipment.
EQUIPMENT COST: $10,000,000.00
LEASE TERM: 60 months (5 years)
PAYMENTS: Equal consecutive monthly payments each in advance at
$217,424.23 each
ADVANCED
PAYMENTS: First monthly payment.
LEASE COMMENCEMENT:
The above quotations are based on a 33
month average of U.S. Treasury rates as
published by the Federal Reserve which at
this time are 5.65%. For each increase or
decrease of .25% in those Treasury rates
the payments will be adjusted to reflect a
corresponding change until the lease
documents are accepted by Nu-Tec, L.T.D.
Upon acceptance by Nu-Tec, L.T.D., the
Payments would be fixed for the duration of
the lease term and based on the then
prevailing treasury rates.
<PAGE>
LESSOR AGREEMENT
AT MATURITY OF
LEASE TERM: At the completion of tile lease term, provided all payments
have been made, and the lease is not in default, Nu-Tec,
L.T.D. may purchase equipment for the then purchase option of
$1.00.
INTERIM PAYMENT: The Lessee shall pay daily payments, equivalent to 1\3Oth of
the monthly payments, for the period from and inclusive of the
date of Lessee's execution of the Certificate of Acceptance
the day preceding the Lease commencement Date.
INTEREST ON
PROGRESS
PAYMENTS: Interest on outstanding progress payments will be at the rate
of Prime plus 375 basis points (3.75%).
TAXES: The Lessee shall pay all fees, assessments, sales, property
and other taxes imposed.
MAINTENANCE: Lessee will keep and maintain the equipment in good operating
order, repair and condition.
INSURANCE: Lessee will provide all inclusive insurance.
APPROVAL OF
TRANSACTION: The proposed lease is subject to the approval of the Secured
Party's Executive Committee and no deleterious change in
Lessee's financial condition prior to the Equipment Delivery
and Acceptance Date.
REPRESENTATIONS
AND FINANCIAL
STATEMENTS: Lessee has furnish Secured Party with financial statements for
the last three (3) fiscal years and its latest interim
statements, plus other pertinent information, along with bank
and trade references, pro forma, etc.
LEGAL, SEARCH AND
FILING FEES: Lessee will reimburse Secured Party for expenses incurred for
searches and filing fees. Secured Party anticipates using its
standard documentation and if the transaction is approved by
Secured Party, Lessee agrees to a $250.00 non refundable
documentation fee to cover administrative expenses of
processing this transaction. Although the Secured Party does
not anticipate any additional expenses, if this transaction
necessitates extensive use of Secured Party's in house
counsel, the obtaining of appraisals or other extraordinary
expenses, such costs shall be borne by Lessee.
COMMITMENT
PAYMENT: Upon acceptance of this proposal, Lessee shall pay to Secured
Party an advance payment equal to $ (1 %) of tile total
anticipated equipment cost ($100,000.00). This advance payment
will be credited to the Lessee's advance payments on a prorata
basis as funds are taken down.
<PAGE>
If this lease proposal is not approved by the Secured Party'
as proposed or in an acceptable manner to Lessee as indicated
on the original or signed amended proposal, the advance
payments win be promptly and fully refunded to Lessee.
If this Lease is approved, but takedown does not occur by the
Equipment Delivery and Acceptance Date through no fault of the
Secured Party, this Commitment fee will be considered earned
by Secured Party.
EXPIRATION OF
PROPOSAL: This proposal expires November 30, 1999, if not accepted by
Lessee.
I sincerely appreciate the opportunity to submit this proposal for your
review and approval.
Sincerely,
/s/ Joe Rush
- -------------------
Joe Rush
Regional Manager
ACCEPTED AND APPROVED
Nu-Tec, L.T.D
by: /s/ Malcolm H. Benedict
-----------------------
title: President & C.E.O.
--------------------
date: 9/30/99
---------------------
11 March 1998
Pre-Contract Agreement
----------------------
Nu-Tec., L.T.D. of Boulder Colorado and Ebco Technologies of Richmond Canada
intend to enter into a contract for the supply of TR30 cyclotron Systems to
Nu-Tec in the calendar year 1998.
The purpose of this Pre-Contract Agreement is to assure that timely information
about concepts and designs are transferred and that appropriate materials can be
ordered in a timely fashion.
Nu-Tec., L.T.D. and Ebco agree to work together on a sole and exclusive basis
for the supply of 30 MeV cyclotrons, beam lines and related equipment for the
proposed Nu-Tec cyclotron radioisotope production facility
Nu-Tec., L.T.D. and Ebco agree to share conceptual designs for the proposed
Nu-Tec Cyclotron Radioisotope Production Facility.
Nu-Tec., L.T.D. intends to purchase the magnet steel and main magnet coils at
its earliest convenience prior to a full contract to ensure an rapid delivery of
the TR3O cyclotron. In return, Ebco Technologies shall share facility design
information at an agreed to charge out rate that will form part of the
consulting services of the contract for the TR30. The complete contract will be
negotiated and signed before full manufacture of the system components begin.
The recipients of information shared under this precontract agreement
acknowledge and agree that such information is of a confidential nature
proprietary to both parties and shall not be used, disclosed and/or duplicated
except in accordance with the express written authorization of both parties to
this agreement
Signed:
/s/ RR Johnson /s/ Malcolm H. Benedict
- ----------------------------- ---------------------------
RR Johnson, Programme Manager Malcolm Benedict, President
Ebco Technologies Nu-Tec, L.T.D.
CONTRACT TO BUY AND SELL REAL ESTATE
(COMMERCIAL)
1. AGREEMENT. Buyer agrees to buy and the undersigned Seller agrees to sell the
Property defined below on the terms and conditions set forth in this contract.
2. DEFINED TERMS.
a. Buyer. Buyer, M.D.T.I. Molecular Diagnostics & Therapeutics, Inc. will
take title to the real property described below as [ ] Joint Tenants [ ] Joint
Tenants [ ] Tenants In Common [X] Other
b. Property. The Property is the following legally described real estate:
Lots 2 And 3, Block 4; and Lots 2 and 3, Block 5; totaling 4.76 acres m/l plus
an additional parcel of land 80 ft. x 405 ft (32,400 sq. ft.) for a total of 5.5
acres m/l in the County of in the Vista Commercial Center, Weld County,
Colorado, commonly known as No.(to be determined) Longmont Colorado 80504 Street
Adress:---- City----State ---- Zip---- together with the interests, easements,
rights, benefits, improvements and attached fixtures appurtenant thereto, all
interest of Seller in vacated streets and alleys adjacent thereto, except as
herein excluded.
c. Dates and Deadlines.
Item No. Reference Event Date or Deadline
- --------------------------------------------------------------------------------
1 ss.5a Loan Application Deadline n/a
2 ss.5b Loan Commitment Deadline n/a
3 ss.5c Buyer's Credit Information Deadline n/a
4 ss.5c Disapproval of Buyer's Credit Deadline n/a
5 ss.5d Existing Loan Documents Deadline n/a
6 ss.5d Objection to Existing on a Deadline n/a
7 ss.5d Approval of Loan Transfer Deadline n/a
8 ss.6a Appraisal Deadline June 15, 2000
9 ss.7a Title Dealing June 15, 2000
10 ss.7a Survey Deadline June 15, 2000
11 ss.7b Document Request Deadline June 20, 2000
12 ss.8a Title Objection Deadline June 20, 2000
13 ss.8b Off Record Matters Deadline June 15, 2000
14 ss.8b Off Record Matters objection Deadline June 20, 2000
15 ss.10 Seller's Property Disclosure Deadline June 15, 2000
16 ss.10a Inspection Objection Deadline June 22, 2000
17 ss.10b Resolution Deadline June 30, 2000
18 ss.11 Closing Date July 17, 2000
19 ss.16 Possession Date delivery of deed
20 ss.16 Possession Time hour of closing
21 ss.28 Acceptance Deadline Date March 17, 2000
22 ss.28 Acceptance Deadline Time 12:00 noon
d. Attachments. The following exhibits, attachments and addenda are a part
of this contract: Common Interest Community Addendum.
e. Applicability of Terms. A check or similar mark in a box means that such
provision is applicable. The abbreviation "N/A" means not applicable.
3. INCLUSIONS AND EXCLUSIONS.
a. The Purchase Price includes the following items (inclusions);
(1) Fixtures. If attached to the Property on the date of this
contract, lighting, heating, plumbing, ventilating, and air conditioning
fixtures, inside telephone wiring and connecting blocks/jacks, plants, mirrors,
floor coverings, intercom systems, sprinkler systems and controls, and n/a.
(2) Other Inclusions. If on the Property whether attached or not on
the date of this contract; storm windows, storm doors, window and porch shades,
awnings, blinds, screens, window coverings, curtain rods, drapery rods, storage
sheds, and all keys. Check box if included: [ ] Smoke/Fire Detectors, [ ]
Security Systems(s); and n/a.
(3) Trade Fixtures. With respect to trade fixtures, Seller and buyer
agree as follows: n/a
b. Instruments of Transfer. The Inclusions are to be conveyed at Closing
free and clear of all taxes, liens and encumbrances, except as provided inss.12.
Conveyance shall be by bill of sale or other applicable legal instrument(s).
c. Exclusions. The following attached fixtures are excluded from this sale:
n/a
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<PAGE>
4. PURCHASE PRICE AND TERMS. The Purchase price set forth below shall be payable
in U.S. Dollars by Buyer as follows: Price is calculated @ $5.00 per sq. ft. for
239,746 square feet of land.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Item No. Reference Item Amount Amount
1 ss.4 Purchase Price $1,198,730.00
2 ss.4a Earnest Money $*114,750.00 see Add. Prov.g
3 ss.4b New Loan
4 ss.4c Assumption Balance
5 ss.4d Seller or Private Financing
6 ss.4e Cash at Closing 1,083,980.00
7 TOTAL $1,198,730.00 $1,198,730.00
</TABLE>
a. Earnest Money. The Earnest Money set forth in this Section, in the form
of 102,000 shares of stock in part payment of the Purchase Price and shall be
payable to and held by Dyer Realty, Inc. in its trust account, on behalf of both
Seller and Buyer. The parties authorize delivery of the Earnest Money deposit to
the Closing Company, if any, at or before Closing. *M.D.T.I. corporate stock to
be issued in name of Seller.
b. New Loan. Buyer shall obtain a new loan set forth in this Section and as
follows: [ ] Conventional [ ] Other n/a. This loan will be secured by a n/a
(1st, 2nd, etc.) deed of trust.
The loan total loan amount not in excess of $___ shall be amortized over a
period of n/a years at approximately $n/a per month including principal and
interest not to exceed n/a% per annum, plus, if required by Buyer's lender a
monthly deposit of 1/12 of the estimated annual real estate taxes and property
insurance premium. If the loan is an adjustable interest rate or graduated
payment loan, the monthly payments and interest rate initially shall not exceed
the figures set forth above.
Loan discount points, if any, shall be paid to lender at Closing and shall
not exceed one % of the total loan amount. Notwithstanding the loan's interest
rate, the first one loan discount points shall be paid by Buyer and the
balance, if any, shall be paid by Buyer.
Buyer shall timely pay Buyer's loan costs and a loan origination fee not to
exceed one % of loan amount.
c. Assumption. (Omitted as inapplicable.)
d. Seller or Private Financing. (Omitted as inapplicable.)
e. Cash at Closing. All amounts paid by Buyer at Closing including Cash at
Closing, plus Buyer's closing cost, shall be in funds which comply with all
applicable Colorado laws, which include cash, electronic transfer funds,
certified check, savings and loan teller's check and cashier's check (Good
Funds).
5. FINANCING CONDITIONS AND OBLICATIONS.
a. Loan Applications. If Buyer is to pay all or part of the Purchase Price
obtaining an new loan, or if an existing loan is not to be released at Closing,
Buyer, if required by such lender, shall make written application by Loan
Application Deadline (Sec.2c). Buyer shall cooperate with Seller and lender to
obtain loan approval, diligently and timely pursue same in good faith, execute
all documents and furnish all information and documents required by lender, and,
subject to Sec.4, timely pay the cost of obtaining such loan or lender consent.
Buyer agrees to satisfy the reasonable requirements of lender, and shall not
withdraw the loan or assumption application, nor intentionally cause any change
in circumstances which would prejudice lender's approval of the loan application
or funding of the loan.
b. Loan Commitment. If buyer is to pay all or part of the Purchase Price by
obtaining a new loan as specified in Sec.4b, this contract is conditional upon
Buyer obtaining a written loan commitment including, If required by lender, (1)
lender verification of employment, (2) lender approval of Buyer's
credit-worthiness, (3) lender verification that Buyer has sufficient funds to
close, and 94) specification of any remaining requirements for funding said
loan. This condition shall be deemed waived unless Seller receives from Buyer,
no later than Loan Commitment Deadline (Sec.2c), written notice of Buyer's
inability to obtain such loan commitment. If Buyer so notifies Seller, this
contract shall terminate. IF BUYER WAIVES THIS CONDITION BUT DOES NOT CLOSE,
BUYER SHALL BE IN DEFAULT.
c. Credit information. (Omitted as inapplicable.)
d. Existing Loan Review. (Omitted as inapplicable.)
6. APPRAISAL PROVISIONS.
a. Appraisal Condition. This subsection a. [x] Shall [ ] Shall Not apply.
Buyer shall have the sole option and election to terminate this contract if the
Purchase Price exceeds the Property's valuation determined by an appraiser
engaged by Buyer or Buyer's lender. The contract shall terminate by Buyer giving
Seller written notice of termination and either a copy of such appraisal or
written notice from lender which confirms the Property's valuation is less than
the Purchase Price, received on or before the Appraisal Deadline (Sec.2c). If
Seller does not receive such written notice of termination on or before the
Appraisal Deadline (Sec.2c). Buyer waives any right to terminate under this
subsection.
b. Cost of Appraisal. Cost of any appraisal to be obtained after the
date of this contract shall be timely paid By [x] Buyer [ ] Seller.
<PAGE>
7. EVIDENCE OF TITLE.
a. Evidence of Title; Survey. On or before Title Deadline (Sec.2c), Seller
shall cause to be furnished to Buyer, at Seller's expense, a current commitment
for owner's title insurance policy in an amount equal to the Purchase Price or
if this box is checked, [ ] An Abstract of title certified to a current date. If
a title insurance commitment is furnished, it [x] Shall [ ] Shall Not commit to
delete or insure over the standard exceptions which relate to
(1) parties in possession,
(2) unrecorded easements,
(3) survey matters,
(4) any unrecorded mechanics' liens,
(5) gap period (effective date of commitment to date deed is recorded), and
(6) unpaid taxes, assessments and unredeemed tax sales prior to the year of
Closing.
Any additional premium expense to obtain this additional coverage shall be paid
by [x] Buyer [ ] Seller. An amount not to exceed $_____ to be determined for the
cost of any improvement location certificate or survey shall be paid by [ ]
Buyer [x] Seller. If the cost exceeds this amount, Seller shall pay the excess
on or before Closing. The improvement location certificate or survey shall be
received by Buyer on or before Survey Deadline (Sec.2c). Seller shall cause the
title insurance policy to be delivered to Buyer as soon as practicable at or
after Closing.
b. Copies of Exceptions. On of before Title Deadline (Sec.2c), Seller, at
Seller's expense, shall furnish to Buyer, (1) a copy of any plats, declarations,
covenants, conditions and restrictions burdening the Property, and (2) if a
title insurance commitment is required to be furnished, and if this box is
checked [x] Copies of any Other Documents listed in the schedule of exceptions
(Exceptions). Even if the box is not checked, Seller shall have the obligation
to furnish these documents pursuant to this subsection of requested by Buyer any
time on or before the Document Requested Deadline (Sec.2c). This requirement
shall pertain only to documents as shown of record in the office of the clerk
and recorder(s). The abstract or title insurance commitment, together with any
copies or summaries of such documents furnished pursuant to this Section,
constitute the title documents (Title Documents).
8. TITLE.
a. Title Review. Buyer shall have the right to inspect the Title Documents.
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<PAGE>
Written notice by Buyer of unmerchantability of title or of any other
unsatisfactory title condition shown by the Title Documents shall be signed by
or on behalf of Buyer and given to Seller on or before Title Objection Deadline
(Sec.2c), or with five (5) calendar days after receipt by Buyer of any Title
Document(s) or endorsement(s) adding new Exception(s) to the title commitment
together with a copy of the Title Document adding new Exception(s) to title. If
Seller does not receive Buyer's notice by the date(s) specified above, Buyer
accepts the condition of title as disclosed by the Title Documents as
satisfactory.
b. Matters not Shown by the Public Records. Seller shall deliver to Buyer,
on or before Off-Record Matters Deadline (Sec.2c) true copies of all lease(s)
and survey(s) in Seller's possession pertaining to the Property and shall
disclose to Buyer all easements, liens or other title matters not shown by the
public records of which Seller has actual Knowledge. Buyer shall have the right
to inspect the Property to determine if any third party(ies) has any right in
the Property not shown by the public records (such as an unrecorded easement,
unrecorded lease, or boundary line discrepancy). Written notice of any
unsatisfactory condition(s) disclosed by Seller or revealed by such inspection
shall be signed by or on behalf Buyer and give to Seller on or before Off-Record
Matters Objection Deadline (Sec.2c). If Seller does not receive Buyer's notice
by said date, Buyer accepts title subject to such rights, if any, of third
parties of which Buyer has actual Knowledge.
c. Special Taxing Districts. SPECIAL TAXING DISTRICTS MAY BE SUBJECT TO
GENERAL OBLICATION INDEBTEDNESS THAT IS PAID BY REVENUES PRODUCED FROM ANNUAL
TAX LEVIES ON THE TAXABLE PROPERTY WITHIN SUCH DISTRICTS. PROPERTY OWNERS IN
SUCH DISTRICTS MAY BE PLACED AT RISK FOR INCREASED MILL LEVIES AND EXCESSIVE TAX
BURDENS TO SUPPORT THE SERVICING OF SUCH DEBT WHERE CIRCUMSTANCES ARISE
RESULTING IN THE INABILITY OF SUCH A DISTRICT TO DISCHARGE SUCH INDEBTEDNESS
WITHOUT SUCH AN INCREASE IN MILL LEVIES. BUYER SHOULD INVESTIGATE THE DEBT
FINANCING REQUIREMENTS OF THE AUTHORIZED GENERAL OBLIGATION INDEBTEDNESS OF SUCH
DISTRICT, EXISTING MILL LEVIES OF SUCH DISTRICT SERVICING SUCH INDEBTEDNESS, AND
THE POTENTIAL FOR AN INCREASE IN SUCH MILL LEVIES.
In the event the Property is located within a special taxing district and
Buyer desires to terminate this contract as a result, if written notice is
received by Seller on or before Off-Record Matters Objection Deadline (Sec.2c),
this contract shall then terminate. If Seller does not receive Buyer's notice by
such date, Buyer accepts the effect of the Property's inclusion in such special
taxing district(s) and waives the right to so terminate.
d. Right of Cure. If Seller receives notice of unmerchantability of
title or any other unsatisfactory title condition(s) or commitment terms as
provided in Sec.8a or b above, Seller shall use reasonable effort to correct
said items and bear any nominal expense to correct the same prior to Closing. If
such unsatisfactory title condition(s) are not corrected on or before Closing,
this contract shall then terminate; provided, however, Buyer may, by written
notice received by Seller, on or before Closing, waive objection to such items.
e. Title Advisory. The Title Documents affect the title, ownership and use
of the Property and should be reviewed carefully. Additionally, other matters
not reflected on the Title Documents may affect the title, ownership and use of
the Property, including without limitation boundary lines and encroachments,
area, zoning, unrecorded easements and claims of easements, leases and other
unrecorded agreements, and various laws and governmental regulation s concerning
land use, development and environmental matters. The surface estate may be owned
separately from the underlying mineral estate, and transfer of the surface
estate does not necessarily include transfer of the mineral rights. Third
parties may hold interests in oil, gas other minerals, geothermal energy or
water on or under the Property, which interests may give them rights to enter
and use the Property. Such matters may be excluded from the title insurance
policy. Buyer is advised to timely consult legal counsel with respect to all
such matters as there are strict time limits provided in this contract (e.g.,
Title Objection Deadline (Sec.2c)) and Off-Record Matters Objection Deadline
(Sec.2c).
9.LEAD BASED PAINT. Unless exempt, if the improvements on the Property include
one or more residential dwelling(s) for which a building permit was issued prior
to January 1, 1978, this contract shall be void unless a completed Lead-Based
Paint Disclosure (Sales) form is signed by Seller and the required real estate
licensee(s), which must occur prior to the parties signing this contract.
10. PROPERTY DISCLOSURE AND INSPECTION. On or before Seller's Property
Disclosure Deadline (Sec.2c), Seller agrees to provide Buyer with a written
disclosure of adverse matters regarding the Property completed by Seller to the
best of Seller's current actual knowledge.
a. Inspection Objection Deadline. Buyer shall have the right to have
inspection(s) of the physical condition of the Property and Inclusions, at
Buyer's expense. If the physical condition of the Property or Inclusions is
unsatisfactory in buyer's subjective discretion, Buyer shall on or before
Inspection Objection Deadline (Sec.2c):
(1) notify Seller in writing that this contract is terminated, or
(2) provide Seller with a written description of any unsatisfactory
physical condition which buyer requires Seller to correct (Notice to
Correct).
If written notice is not received by Seller on or before Inspection Objection
Deadline (Sec.2c), the physical condition of the Property and Inclusions shall
be deemed to be satisfactory to Buyer.
b. Resolution Deadline. If Notice to Correct is received by Seller and if
Buyer and Seller, have note agreed in writing to settlement thereof on or before
Resolution Deadline (Sec.2c), this contract shall terminate one calendar day
following the Resolution Deadline, unless before such termination Seller
receives Buyer's written withdrawal of the Notice to Correct.
<PAGE>
c. Damage; Liens; Indemnity. Buyer is responsible for payment for all
inspections, surveys, engineering reports or for any the work performed at
Buyer's request and shall pay for any damage which occurs to the Property and
Inclusions as a result of such activities. Buyer shall not permit claims or
liens of an kind against the Property for inspections, surveys, engineering
reports and for any other work performed on the Property at Buyer's request.
Buyer agrees to indemnify, protect and hold Seller harmless from and against any
liability, damage, cost or expense incurred by Seller in connection with any
such inspection, claim, or lien. This indemnity includes Seller's right to
recover all costs and expenses incurred by Seller to enforce this subsection,
including Seller's reasonable attorney fees. The provision of this subsection
shall survive the termination of this contract.
11. CLOSING. Delivery of deed(s) from Seller to buyer shall be at Closing
(Closing). Closing shall be on the date specified as the Closing Date (Sec.2c)
or by mutual agreement at an earlier date. The hour and place of Closing shall
be as designated by Dyer Realty, Inc. as mutually agreed by the parties.
12. TRANFER OF TITLE. Subject to tender or payment at Closing as required herein
and compliance by Buyer with the other terms and provisions hereof, Seller shall
execute and deliver a good and sufficient Genera Warranty Deed to Buyer, at
Closing, conveying the Property free and clear of all taxes except the general
taxes for the year of Closing. Except as provided herein, title shall be
conveyed free and clear of all liens, including any governmental liens for
special improvements installed as of the date of Buyer's signature heron,
whether assessed or not. Tittle shall be conveyed subject to:
a. those specific Exceptions described by reference to recorded documents
as reflected in the Title Documents accepted by Buyer in accordance with Sec.8a
[Title Review],
b. Distribution utility easements,
c. those specifically described rights of third parties not shown by the
public records of which buyer has actual knowledge and which were accepted by
Buyer in accordance with Sec.8b [Matters Not Shown by the Public Records], and
d. inclusion of the Property within any special taxing district, and
e. the benefits and burdens of any declaration and party wall agreements,
if any, and
f. other
13. PAYMENT OF ENCUMBRANCES. Any encumbrance required to be paid shall be paid
at or before Closing from the proceeds of this transaction or from any other
source.
14. CLOSING COSTS; DOCUMENTS AND SERVICES. Buyer and Seller shall pay, in Good
Funds, their respective Closing costs and all other items required to be paid at
Closing, except as otherwise provided herein. Buyer and Seller shall sign and
complete all customary or reasonably required documents at or before Closing.
Fees for real estate Closing services shall be paid at Closing by [x] One-Half
by Buyer and One-Half by Seller [ ] Buyer [ ] Seller [ ] Other.
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<PAGE>
The local transfer tax of _________% of the Purchase Price shall be paid at
Closing by [ ] Buyer [ ] Seller. Any sales and use tax that may accrue because
of this transaction shall be paid when due by [ ] Buyer [ ] Seller.
15.PRORATIONS. The following shall be prorated to Closing Date, except as
otherwise provided:
a. Taxes. Personal property taxes, if any, and general real estate taxes
for the year of Closing, based on [ ] The Taxes for the Calendar Year
Immediately Preceding Closing [x] the Most Recent Mill Levy and Most Recent
Assessment [ ] Other
b. Rents. Rents based on [ ] Rents Actually Received [ ] Accrued. Security
deposits held by Seller shall be credited to Buyer. Seller shall assign all
leases to Buyer and Buyer shall assume such lease.
c. Other Prorations. Water, sewer charges; and interest on continuing
loan(s), if any, and Association fees and any other assessments.
d. Final Settlement. Unless otherwise agreed in writing, these prorations
shall be final.
16.POSSESSION. Possession of the Property shall be delivered to Buyer on
Possession Date and Possession Time (Sec.2c), subject to the following lease(s)
or tenancy(s): none
If Seller, after Closing, fails to deliver possession as specified, Seller shall
be subject to eviction and shall be additionally liable to Buyer for payment of
$75.00 per day from the Possession Date (Sec.2c) until possession is delivered.
17. NOT ASSIGNABLE. This contract shall not be assignable by Buyer without
Seller's prior written consent. Except as so restricted, this contract shall
inure to the benefit of and be binding upon the heirs, personal representatives,
successors and assigns of the parties.
18. CONDITION OF, AND DAMAGE TO PROPERTY AND INCLUSIONS. Except as otherwise
provided in this contract, the Property, inclusion or both shall be delivered in
the condition existing as of the date of this contract, ordinary wear and tear
excepted.
a. Casualty; Insurance. In the event the Property or Inclusions shall be
damaged by fire or the casualty prior to Closing, in an amount of not more than
ten percent of the total Purchase Price, Seller shall be obligated to repair the
same before the Closing Date (Sec.2c). In the event such damage is not repaired
within said time or if the damages exceed such sum, this contract may be
terminated at the option of Buyer by delivering to Seller written notice of
termination. Should Buyer elect to carry out this contract despite such damage,
Buyer shall be entitled to a credit, at Closing, for all the insurance proceeds
resulting from such damage to the Property and Inclusions payable to Seller but
not the owner's association, if any, plus the amount of any deductible provided
for in such insurance policy, such credit not to exceed the total Purchase
Price.
b. Damage; Inclusions; Services. Should any Inclusion(s) or service(s)
(including systems and components of the Property, e.g. heating, plumbing, etc.)
fail or be damaged between the date of this contract and Closing or possession,
whichever shall be earlier, then Seller shall be liable for the repair or
replacement of such Inclusion(s) or service(s) with a unit of similar size, age
and quality, or an equivalent credit, but only to the extent that the
maintenance or replacement of such Inclusion(s) or service(s) or fixture(s) is
not the responsibility of the owner's association, if any, less any insurance
proceeds received by Buyer covering such repair or replacement.
c. Walk-Through: Verification of Condition. Buyer, upon reasonable notice,
shall have the right to walk through the Property prior to Closing to verify
that the physical condition of the Property and Inclusions complies with this
contract.
19. RECOMMENDATION OF LEGAL AND TAX COUNSEL. By signing this document, Buyer and
Seller acknowledge that the Selling Company or the Listing Company has advised
that this document has important legal consequences and has recommended the
examination of title and consultation with legal and tax or other counsel before
signing this contract.
20. TIME OF ESSENCE AND REMEDIES. Time is of the essence hereof. If any note or
check received as Earnest Money hereunder or any other payment due hereunder is
not paid, honored or tendered when due, or if any other obligation hereunder is
not performed or waived as herein provided, there shall be the following
remedies:
a. If Buyer Is in Default:
[ ] (1) Specific Performance. Seller may elect to treat this contract as
canceled, in which case all payments and things of value received hereunder
shall be forfeited and retained on behalf of Seller, and Seller may recover such
damages as may be proper, or Seller may elect to treat this contract as being in
full force and effect and Seller shall have the right to specific performance or
damages, or both.
[X] (2) Liquidated Damages. All payments and things of value received hereunder
shall be forfeited by Buyer and retained on behalf of Seller and both parties
shall thereafter be released from all obligations hereunder. It is agreed that
such payments and things of value are LIQUIDATED DAMAGES and (except as provided
in subsection c) are SELLER'S SOLE AND ONLY REMEDY for Buyer's failure to
perform the obligations of this contract. Seller expressly waives the remedies
of specific performance and additional damages,
b. If Seller Is In Default: Buyer may elect to treat this contract as
canceled, in which case all payments and things of value received hereunder
shall be returned and Buyer may recover such damages as may be proper, or Buyer
may elect to treat this contract as being in full force and effect and Buyer
shall have the right to specific performance or damages, or both.
c. Costs and Expenses. In the event of any arbitration or litigation
relating to this contract, the arbitrator or court shall award to the prevailing
party all reasonable costs and expenses, including attorney fees.
<PAGE>
21. MEDIATION. If a dispute arises relating to this contract, prior to or after
Closing, and is not resolved, the parties shall first proceed in good faith to
submit the matter to mediation. Mediation is a process in which the parties meet
with an impartial person who helps to resolve the dispute Informally and
confidentially. Mediators cannot impose binding decisions. The parties to the
dispute must agree before any settlement is binding. The parties will jointly
appoint an acceptable mediator and will share equally In the cost of such
mediation. The mediation, unless otherwise agreed, shall terminate in the event
the entire dispute Is not resolved 30 calendar days from the date written notice
requesting mediation is sent by one party to the other(s). This Section shall
not alter any date In this contract, unless otherwise agreed.
22. EARNEST MONEY DISPUTE. Notwithstanding any termination of this contract,
Buyer and Seller agree that, in the event of any controversy regarding the
Earnest Money and things of value held by broker or Closing Company (unless
mutual written instructions are received by the holder of the Earnest Money and
things of value), broker or Closing Company shall not be required to take any
action but may await any proceeding, or at broker's or Closing Company's option
and sole discretion, may Interplead all parties and deposit any moneys or things
of value into a court of competent jurisdiction and shall recover court costs
and reasonable attorney fees.
23. TERMINATION. In the event this contract is terminated, all payments and
things of value received hereunder shall be returned and the parties shall be
relieved of all obligations hereunder, subject toss.ss.10c, 21 and 22.
24. ADDITIONAL PROVISIONS. (The language of these additional provisions has not
been approved by the Colorado Real Estate Commission.)
a. Contract shall be subject to approval of Seller's Replat by Weld County
Planning and Weld County Commissioners.
b. Contract shall be subject to installation, by Seller, of utilities
including electrical, water, and sewer, and necessary requirements of roads by
Weld County.
c. Seller and Buyer agree that Buyer may purchase one or more water taps
from Horizon Investments LLC at the current price, at the time of purchase, as
determined by Left Hand Water District.
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<PAGE>
ADDITIONAL PROVISIONS (continued)
24. ADDITIONAL PROVISIONS (continued).
(The language of these additional provisions has not been approved by the
Colorado Real Estate Commission.)
Concerning the Property know as: Lots 2 and 3, Block 4 and Lots 2 and 3,
Block 5; plus an additional parcel totaling 5.5 acres m/l, Vista Commercial
Center, Weld County, Colo.
d. It is hereby mutually understood and agreed that no outside storage is
allowed, except that meeting the requirements for adequate screening, as
described in Paragraph 10.03 of the recorded Covenants for Vista Commercial
Center, and with written approval by the Architectural Control Committee. The
ACC of Vista Commercial Center will review plans for such use and render a
decision within seven days of submittal by Buyer. Buyer's obligation to purchase
the Property is conditioned on the ACC approving in writing, Buyer's building
plans, including the outside storage plans on or before June 15, 2000.
e. Contract is subject to all mylars of Replat being recorded in Weld
County.
f. Covenants of Vista Commercial Center, Phase I, shall be amended to
include Replat of property described, in this contract, on or before June 15,
2000.
g. Buyer's obligation to purchase the Property is subject to Buyer
receiving approval from Weld County for Buyer's Site Plan and building plans on
or before June 22, 2000. In the event Buyer has not received such approvals by
June 23, 2000, Buyer may elect to terminate this Contract by giving written
notice to Seller of the failure of the condition or in the alternative, Buyer
may elect to waive this condition. If Buyer fails to deliver written notice of
termination by June 23, 2000, this condition shall be deemed waived. Upon
receipt of approval by Weld County and the Architectural. Control Committee for
(i) Seller's replat of the Property, (ii) Buyer's Site Plan, and (iii) Buyer's
building plans, the amount of $20,000.00 in cash, or $20,000.00 of the MDTI
stock held as Earnest Money Deposit, at its then current market value, shall be
deemed to be non-refundable earnest money, except for Seller's default in
performing the Contract. In lieu of a portion the MDTI stock serving as the
non-refundable portion of the earnest money deposit, Seller shall have the
Option to elect to have buyer deposit the sum of $20,000.00 in cash or certified
funds with Dyer Realty, Inc. on or before July 10, 2000, and if such deposit is
made, such $20,000.00 deposit shall constitute the non-refundable earnest money
deposit. If Seller elects to have Buyer deposit the $20,000.00 cash, Seller will
notify Buyer in writing by no later than June 22, 2000.
h. Seller shall deliver to Buyer as soon as reasonably possible, but in no
event later than April 1, 2000, a copy of the survey and drawings of the
Property as proposed to be replatted, so that Buyer may use such information in
obtaining approval of its Site Plan and, building plans.
i. The survey required to be provided by Seller under Paragraph 7.a will
not be required to be an ALTA survey. ---------------
j. The purchase price shall be adjusted to reflect the actual square
footage of the Property as shown by the survey to be obtained by Seller,
multiplied by $5.00 per square foot.
M.D.T.I
/s/ Malcolm H. Benedict 03-08-00
- --------------------------------------------------
Buyer by Malcolm H. Benedict, Chairman Date Buyer
Date
<TABLE>
<CAPTION>
<S> <C>
HORIZON INVESTMENTS, LLC
/s/ N. Russell Stacey 03-08-00 /s/ Lyle E. Dehning 03-08-00
- ------------------------------------------------ --------------------------------------------------
Seller by N. Russell Stacey, Manager, Seller by Lyle E. Dehning, Manager Date
Date
================================================================================
CBS 2-9-99 Contract to Buy and Sell Real Estate (Commercial)
</TABLE>
<PAGE>
25. ENTIRE AGREEMENT; SUBSEQUENT MODIFICATION SURVIVAL. This contract
constitutes the entire contract between the parties relating to the subject
hereof, and any prior agreements pertaining thereto, whether oral or written,
have been merged and integrated into this contract. No subsequent modification
of any or the terms of this contract shall be valid, binding upon the parties,
or enforceable unless made in writing and signed by the parties. Any obligation
in this contract which, by its terms, is intended to be performed after
termination or Closing shall survive the same.
26. FACSIMILE. Signatures [X] May [ ] May Not be evidenced by facsimile.
Documents with original signatures shall be provided to the other party at
Closing, or earlier upon request of any party.
27. NOTICE. Except for the notice requesting mediation described in sec.21, any
notice to Buyer shall be effective when received by Buyer or by Selling Company
and any notice to Seller shall be effective when received by Seller or Listing
Company.
28. NOTICE OF ACCEPTANCE; COUNTERPARTS. This proposal shall expire unless
accepted in writing, by Buyer and Seller, as evidenced by their signatures
below, and the offering party receives notice of acceptance pursuant to sec.27
on or before Acceptance Deadline Date and Acceptance Deadline Time (sec.2c). If
accepted, this document shall become a contract between Seller and Buyer. A copy
of this document may be executed by each party, separately, and when each party
has executed a copy thereof, such copies taken together shall be deemed to be a
full and complete contract between the parties.
M.D.T.I.
/s/ Malcolm H. Benedict
- ---------------------------------------- ----------------------------
Buyer by Malcolm H. Benedict, Chairman Buyer
Date of Buyer's Signature: 03-08-00 Date of Buyer's Signature:
Buyer's Address: Buyer's Telephone No: 303 405-6500
1660 Industrial Circle Buyer's Fax No: 303 465-7099
Longmont, Colorado 80501
(NOTE: If this offer Is being countered or rejected, do not sign this document
Refer to sec.29)
HORIZON INVESTMENTS, LLC
/s/ N. Russell Stacey /s/ S. J. Weddel
- ---------------------------- -------------------------------
Seller by N. Russell Stacey, Manager Seller by S. J. Weddel, Manager
Date of Seller's Signature: 03-08-2000 Date of Seller's Signature: 03-08-2000
Seller's Address: 1635 Faith Place Seller's Telephone No: 303 776-5451
Longmont, Colorado 80501 Seller's Fax No:
29. COUNTER; REJECTION. This offer is [ ] Countered [ ] Rejected.
Initials only of party (Buyer or Seller) who countered or rejected offer
________ ___________
END OF CONTRACT
- --------------------------------------------------------------------------------
Note:Closing Instructions should be signed on or before Title Deadline.
- --------------------------------------------------------------------------------
BROKER ACKNOWLEDGMENTS. The undersigned Broker(s) acknowledges receipt of the
Earnest Money deposit specified in sec.4 and, while not a party to the contract,
agrees to cooperate upon request with any mediation conducted under sec.21.
Selling Company Brokerage Relationship. The Selling Company and its
licensees have been engaged in this transaction as [ ] Buyer Agent [ ] Seller
Agent/Subagent [ ] Dual Agent [X] Transactlon-Broker.
Listing Company Brokerage Relationship. The Listing Company and its
licensees have been engaged In this transaction as [ ] Seller Agent [ ] Dual
Agent [X] Transaction-Broker.
BROKERS' COMPENSATION DISCLOSURE
Selling Company's compensation or commission is to be paid by: [ ] Buyer [X]
Seller [ ] Listing Company [ ] Other
(To be completed by Listing Company) Listing Company's compensation or
commission is to be paid by [ ] Buyer [X] Seller [ ] Other:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
Selling Company: .. Dyer Realty, Inc. (Name of Company)
By: /s/ Marvin L. Dyer 03-[ ]-2000
Signature Marvin L. Dyer Date
Selling Company Address: 520 Main Street, Suite A Selling Company Telephone No: 303 772-3200
Longmont, Colorado 80501 Selling Company Fax No: 303 651-1320
Listing Company: Dyer Realty, Inc. (Name of Company)
By: /s/ Marvin L. Dyer 03-[ ]-2000
Signature Marvin L. Dyer Date
Listing Company Address: 520 Main Street, Suite A Listing Company Telephone No: 303 772-3200
Longmont, Colorado 80501 Listing Company Fax No: 303 651-1320
</TABLE>
================================================================================
CBS 2-9-99 Contract to Buy and Sell Real Estate (Commercial)
Buyer initials MHB Seller Initials NRS LED Page 5 of 5
<PAGE>
The printed portions of this form have been approved
By the Colorado Real Estate Commission. (CIC 32-9-99)
THIS FORM HAS IMPORTANT LEGAL CONSEQUENCES
AND THE PARTIES SHOULD CONSULT LEGAL AND TAX
OR OTHER COUNSEL BEFORE SIGNING.
COMMON INTEREST COMMUNITY ADDENDUM
TO CONTRACT TO BUY AND SELL REAL ESTATE
(COMMERCIAL or VACANT LAND - FARM - RANCH)
(This addendum should be used for the sale of Property involving ownership
of common elements, or where there is an obligation to pay common expenses
pursuant to a recorded Declaration)
AMENDMENT TO A CONTRACT TO BUY AND SELL REAL ESTATE
This Common Interest Community Addendum is made a part of the Contract to
Buy and Sell Real Estate for the purchase and sale of the Property known as Lots
2 and 3, Block 4 and Lots 2 and 3, Block 5, plus an additional 32,400 sq.ft.
parcel in Vista Commercial Center, which is dated March 8, 2000 between Buyer
and Seller ("Contract"). This Addendum shall control in the event of any
conflict with the Contract. The following provisions of the Contract are amended
by these additions:
Sec.3. INCLUSIONS AND EXCLUSIONS. The purchase price shall also include use
of the following parking facility(ies): n/a; and the following storage
facility(ies): n/a
Sec. 7c. COMMON INTEREST COMMUNITY GOVERNING DOCUMENTS.
(Check only one box)
[ ] (1) Not Applicable. This subsection c. shall not apply.
[X] (2) Conditional Of Buyer's Review. Seller shall cause to be furnished to
Buyer, at Seller's expense, on or before Title Deadline (Sec. 2c) a current
copy of the owner's association declarations, bylaws, rules and
regulations, party wall agreements (herein collectively "Governing
Documents"), most recent financial documents consisting of (a) annual
balance sheet, (b) annual income and expenditures statement, and (c) annual
budget (herein collectively "Financial Documents"), given to Seller on or
before Governing Documents Deadline, [which is the same as Title Objection
Deadline (Sec. 2c)], shall terminate this contract. If Seller does not
receive notice from Buyer within such time, Buyer accepts the terms of said
documents, and Buyer's right to terminate this contract pursuant to this
subsection is waived, notwithstanding the provisions of Sec. 8d.
[ ] (3) Not Conditional On Review. Buyer acknowledges that Seller has
delivered a copy of the Governing Documents and Financial Documents. Buyer
has reviewed them, agrees to accept the benefits, obligations and
restrictions which they impose upon the Property and its owners and waives
any right to terminate this contract due to such documents, notwithstanding
the provisions of Sec. 8d.
Sec. 8f. RIGHT OF FIRST REFUSAL. If the Governing Documents require written
approval of the sale contemplated by this contract or waiver of any option or
right of first refusal by the owner's association or any other owner in the
owners' association, Seller shall timely submit this contract and request
approval of the sale or waiver of any option or right of first refusal pursuant
to such provisions. If no such approval or waiver is obtained on or before June
15, 2000, this contract shall terminate. Buyer agrees to cooperate with Seller
in obtaining the approval and/or waiver if required by applicable Governing
Documents and shall make available such information as the owners' association
may reasonable require.
Sec. 14. CLOSING COSTS; DOCUMENTS AND SERVICES. Any fees incident to the
transfer from Seller to Buyer assessed on behalf of the owners' association
shall be paid by [ ]Buyer [X] Seller.
Sec. 15e. ASSOCIATION ASSESSMENTS. Current regular owners' association
assessments and association dues. Owners' association assessments paid in
advance shall be credited to Seller at Closing. Cash reserves held out of the
regular owners' association assessments for deferred maintenance by the owners'
association shall not be credited to Seller except as may be otherwise provided
by the Governing Documents. Any special assessment by the owners' association
for improvements that have been installed as of the date of Buyer's signature
heron shall be the obligation of Seller. Any other special assessment assessed
prior to Closing Date (Sec. 2c) by the owners' association shall be the
obligation of [X] Buyer [ ] Seller. Seller represents that the amount of the
regular owners' association assessment is currently payable at $ _______ tbd___
per ___ and that there are no unpaid regular or special assessments against the
Property except the current regular assessments and such assessments are subject
to change as provided in the Governing Documents. Seller agrees to promptly
request the owners' association to deliver to Buyer before Closing Date (Sec.
2c) a current statement of assessments against the Property. Any fees incident
to the issuance of such statement of assessments shall be paid by [ ] Buyer [X]
Seller.
M.D.T.I.
/s/ Malcolm Benedict
by Malcolm H. Benedict, Chairman
Buyer Buyer
Date of Buyer's signature: Date of Buyer's Signature:
Horizon Investments, LLC
/s/ N. Russell Stacey /s/ Lyle E. Dehning
by N. Russell Stacey, Manager by Lyle E. Dehning, Manager
Seller Seller
Date of Seller's signature: 03-08-2000 Date of Seller's signature: 03-08-2000
================================================================================
CIC 32-9-99 Common Interest Community Addendum to Contract Buy and Sell Real
Estate (Commercial - Vacant Land - Farm - Ranch) This form is product by:
Formulator for Windows 800-336-1027
<PAGE>
The printed portions of this form have been
approved by the Colorado Real Estate Commission.
(AE41-1-94)
THIS FORM HAS IMPORTANT LEGAL CONSEQUENCE SN THE PARTIES SHOULD CONSULT LEGAL
AND TAX OR OTHER COUNSEL BEFORE SIGNING.
AGREEMENT TO AMEND/EXTEND CONTRACT
March 15, 2000
RE: Contract dated March 8, 2000
Between M.D.T.I. (Buyer)
And Horizon Investments, LLC (Seller)
Relating to the sale and purchase of the following described real estate in the
County of Weld, Colorado.
Lots 2 and 3, Block 4; and Lots 2 and 3, Block 5; totaling 4.76 acres m/l plus
an additional parcel of land 80 ft x 405 ft (32,000 sq.ft.) for a total of 5.5
acres m/l in the Vista Commercial Center
Known as No. to be determined
Street Address
Longmont Colorado 80504 (Property).
City State Zip
Buyer and Seller hereby agree to amend the aforesaid contract as follows:
1. The date for closing and delivery of deed is changed to n/a
2. The date for furnishing commitment for title insurance policy or abstract
of title is changed to n/a
3. The date for delivering possession of Property is changed to n/a
4. The date for approval of new loan is changed to n/a
5. The date for lender's consent to loan assumption or transfer of Property is
changed to n/a
6. Other dates set forth in said contract shall be changed as follows: n/a
7. Additional amendments:
a. The Property to be purchased is amended as follows:
Lots 1 and 2, Block 5, Vista Commercial Center, Phase I; and
Lots 2 and 9, Block 5, Vista Commercial Center, Phase II and proposed plat,
for a total of 5.46 acres or 237,903 square feet of land, m/l.
SJW, NRS, MHB
b. The price is amended to read: $1,189,515.00, which is $5.00 per square
foot x 237,903 sq.ft.; the price may be adjusted prior to or at closing
upon verification of Survey.
8. Paragraphs 8 and 9 continued on the next page shall form a part of this
contract.
9. Copy of Phase II proposed plat is attached and made a part of this
Agreement.
SJW, NRS, MHB
All other terms and condition of said contract shall remain the same.
Horizon Investments, LLC
/s/ N. Russell Stacey /s/Lyle E. Dehning
by N. Russell Stacey, Manager by Lyle E. Dehning, Manager
Seller Seller
Date of Seller's Signature 3-15-2000 Date of Seller's Signature 3-15-2000
/s/Malcolm H. Benedict
by Malcolm H. Benedict, Chairman
Buyer
Date of Buyer's Signature March 3, 2000
No. AE41-1-94. AGREEMENT TO AMEND/EXTEND CONTRACT
This form produced by: Formulator for Windows 800-336-1027
<PAGE>
8. Option to Purchase
In consideration of the payment of $10.00, paid by Buyer to Seller, Seller
hereby grants to Buyer the right and option to purchase Lots 3 and 8, Block 5
and Lots 1, 2, and 3, Block 4, Vista Commercial Center (Phase II), (the "Option
Parcel") for a period beginning on the Closing date and extending until a date
one year thereafter (the "Option Period") under the following conditions:
A. Exercise of Option
Provided Buyer has closed on the purchase of the Property, Buyer may
exercise this option by giving written notice of such intent to Seller at any
time, with the closing to occur within 90 days.
B. Purchase Price
The purchase price shall be equal to $5.00 per square foot of the lands
within the Option Parcel, as established by a survey to be obtained by Seller.
Such purchase price shall be payable in cash or certified funds at closing.
Seller shall be responsible for the installation and costs of installing the
roads and utilities within the street rights of way.
C. Closing
Closing shall occur no later than 90 days after Buyer gives notice of
intent to exercise this option, at a time and place designated by Seller and
Buyer.
D. Title and Conveyance
At, or before, the closing after notice of Buyer's intent to exercise such
option, Seller shall furnish Buyer with a current commitment for title insurance
policy in an amount equal to the purchase price. Seller shall deliver the title
insurance policy with the standard exceptions deleted (provided Seller shall not
be required to provide an ALTA merchantable in Seller, and subject to no
encumbrance. Conveyance shall be by a good and sufficient general warranty deed,
at time of closing, conveying the property free and clear of all taxes except
taxes for the year of closing, and subject to easements and rights-of-way or
record prior to execution of this agreement, and any building and zoning
regulations. General taxes for the year of closing shall be prorated between
Seller and Buyer to the date of closing. Any encumbrance required to be paid may
be paid with proceeds from closing.
E. Failure of Option
In the event Buyer fails to exercise the option to purchase the property or
in the event the closing does not occur before the expiration of the Option
Period, then the option shall expire and all things of value paid to Seller
shall remain Seller's and Buyer shall not be entitled to claim any monies or
credit for monies previously paid to Seller.
F. Recording of Memorandum
At the closing of the purchase and sale of the Property, the parties agree
to execute a memorandum of this option agreement and record it in the records of
Weld County. Seller may record a notification that such rights have expired (as
to that portion sold by Seller to a third party purchaser).
M.D.T.I. Horizon Investments, LLC
By /s/ Malcolm Benedict by /s/N. Russell Stacey
Malcolm Benedict, Chairman N. Russell Stacey, Manager
President and CEO
By/s/ Lyle E. Dehning
Lyle E. Dehning, Manager
<PAGE>
[ Final Plat - Vista Commercial ]
Phase I
<PAGE>
[ Final Plat - Vista Commercial ]
Phase II
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Molecular Diagnostics &
Therapeutics, Inc. on form SB-2 of our report dated June 22, 1999, appearing in
the Prospectus, which is part of this Registration Statement, and of our report
dated June 22, 1999 relating to the financial statement schedules appearing
elsewhere in this Registration Statement.
We also consent to the reference to us under the headings "Selected Financial
Data" and "Experts" in such Prospectus.
/s/ Cordovano and Harvey, P.C.
- -------------------------------
Cordovano and Harvey, P.C.
Denver, Colorado
March 17, 2000
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<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> APR-01-1998
<PERIOD-END> MAR-31-1999
<CASH> 4,883
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 6,895
<PP&E> 93,252
<DEPRECIATION> (64,066)
<TOTAL-ASSETS> 40,431
<CURRENT-LIABILITIES> 9,940
<BONDS> 0
0
128,036
<COMMON> 1,965,392
<OTHER-SE> (2,062,940)
<TOTAL-LIABILITY-AND-EQUITY> 40,431
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 751,817
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (751,817)
<INCOME-TAX> 0
<INCOME-CONTINUING> (751,817)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (751,817)
<EPS-BASIC> (0.10)
<EPS-DILUTED> (0.10)
</TABLE>