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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB/A
AMENDMENT NO. 1
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended May 31, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
Commission file number 0-5099
LIFE SCIENCES, INC.
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(Name of small business issuer in its charter)
DELAWARE 59-0995081
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2900 - 72nd STREET NORTH
ST. PETERSBURG, FLORIDA 33710
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number (727) 345-9371
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Securities registered under Section 12(b) of the Exchange Act: NONE
Securities registered under Section 12(g) of the Exchange Act:
COMMON STOCK, $.10 PAR VALUE ("Common Stock")
--------------------------------------------------------------
(Title of class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes [ ] No [X]
Check if disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of the Form 10-KSB
or any amendment to the Form 10-KSB [ ].
Registrant's revenues for its fiscal year ended May 31, 1999 were
approximately $1,084,000.
The aggregate market value of the Common Stock held by non-affiliates
on April 26, 2000, based on the closing sale price of the Common stock on that
day ($2.00) on the OTC bulletin board, was $2,866,910.
As of May 31, 1999 and as of April 26, 2000 there were 4,196,670 shares
of Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
NONE
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
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AMENDMENT TO APPLICATION OR REPORT
FILED PURSUANT TO SECTION 12, 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
LIFE SCIENCES, INC.
FORM 10-KSB/A
AMENDMENT NO. 1
The undersigned registrant, Life Sciences, Inc., a Delaware corporation
(the "Company", "LSI" or "Registrant"), hereby amends the following items,
financial statements, exhibits and other portions of its Annual Report on Form
10-KSB for the fiscal year ended May 31, 1999 as set forth in the attached
pages:
Item 1. Description of Business
Item 2. Description of Property
Item 5. Market for Common Equity and Related Stockholder Matters
Item 6. Management's Discussion and Analysis or Plan of Operation
Item 7. Financial Statements
Item 9. Directors, Executive Officers, Promoters and Control
Persons; Compliance With Section 16(a) of the Exchange Act
Item 10. Executive Compensation
Item 11. Security Ownership of Certain Beneficial Owners and Management
Item 12. Certain Relationships and Related Transactions
Item 13. Exhibits and Reports on Form 8-K
(a) Exhibits Required by Item 601 of Regulation S-B
Exhibit Index
Financial Data Schedule
and repeats the following items without amendment from its Annual Report on Form
10-KSB for the fiscal year ended May 31, 1999 as originally filed on August 30,
1999:
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
Item 8. Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure
Item 13. Exhibits and Reports on Form 8-K
(b) Reports on Form 8-K
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THIS ANNUAL REPORT ON FORM 10-KSB/A CONTAINS FORWARD-LOOKING STATEMENTS WITHIN
THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. SUCH
STATEMENTS ARE SUBJECT TO RISKS, UNCERTAINTIES AND OTHER FACTORS THAT COULD
CAUSE ACTUAL EVENTS AND RESULTS TO DIFFER MATERIALLY FROM THOSE EXPRESSED OR
IMPLIED BY THOSE FORWARD-LOOKING STATEMENTS. SEE "ITEM 1. BUSINESS - FORWARD
LOOKING STATEMENTS".
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
BUSINESS DEVELOPMENT
Life Sciences, Inc., a Delaware corporation (the "Company", "LSI" or
"Registrant"), was incorporated in 1963 to produce and sell
specific-pathogen-free, or "SPF", laboratory animals for biomedical research,
particularly in the area of cancer. Since 1990 the Company has primarily focused
its activities on the production and sale of molecular biology enzymes employed
in the synthesis and other manipulations of DNA and other nucleic acids.
In 1997 the Company ceased production of SPF laboratory animals, and in
1998 shut down a joint venture then engaged in the incineration of biomedical
waste. In 1999 the Company sold an outlying parcel of land to an unaffiliated
neighboring business and, in a separate transaction in May 1999, sold all of its
remaining real estate and entered into a lease for the laboratory and office
facilities it historically occupied. The latter sale transaction satisfied the
$859,075 principal amount of a mortgage on the property and extinguished the
additional mortgage indebtedness secured by the property. The Company also
eliminated in 1999 an additional $568,829 of principal amount of indebtedness
through its conversion into 1,399,927 shares of the Company's Common Stock. In
the mortgage satisfaction transaction and the conversion of debt to equity
transactions, interest and other amounts aggregating approximately $1,100,000
were forgiven and extinguished. The mortgage satisfaction transaction, the lease
transaction, the conversion of debt to equity transactions, and the forgiveness
of indebtedness transactions, were each effected with parties affiliated with
LSI in a restructuring of the Company.
While revenues during the most recent three fiscal year period
beginning June 1, 1996 went from approximately $660,000 to approximately
$1,084,000, the Company did not have a material operating profit during that
time. Those revenue and additional loans from affiliated parties allowed LSI to
continue in business and to carry out only those activities absolutely essential
to its survival. While the number of Registrant's employees during this time
period remained relatively constant, the mix of employees changed to accommodate
the shift in the emphasis of the Company's business from SPF laboratory animals
to molecular biology enzymes.
BUSINESS OF REGISTRANT
LSI is a biotechnology company engaged primarily in the production and
sale of enzymes used in the synthesis and manipulation of DNA and other nucleic
acids. The Company specializes in enzyme products employed by scientists to make
genetic (DNA) sequences, which sequences are utilized in basic research and the
genetic modification of plants, animals and other organisms. Genetically
modified organisms provide the basis for production of unique, genetically
engineered drugs, the optimization of certain industrial processes to include
food production, and many other applications.
For more than 15 years LSI has produced and sold enzymes recovered from
retroviruses, a family of viruses that includes HIV, the causative agent of
AIDS. Specifically the Company propagates large quantities of avian
myeloblastosis virus ("AMV") from which it harvests the enzymes AMV reverse
transcriptase and integrase. Reverse transcriptase causes the synthesis of cDNA
from an RNA template,
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while integrase catalyzes the cutting of genetic material and is believed to aid
the splicing of retrovirus genes or other foreign DNA into the host's
chromosome.
In the just ended fiscal year, the Company expanded its production
capability to include the two enzymes of bacterial origin that in combination
with AMV reverse transcriptase are required to carry out nucleic acid
amplification using nucleic acid sequence based amplification ("NASBA"), a
proprietary method for rapid test-tube synthesis of billions of copies of
specific fragments of RNA or DNA. NASBA technology, now owned by Organon
Teknika, a business unit of Akzo Nobel (the Netherlands based chemical and
pharmaceutical giant), and licensed to other diagnostic manufacturers, is
primarily employed in products for assessment of human health to identify the
presence and concentration of viral (virus load) and bacterial pathogens in the
body fluids of patients with diseases such as hepatitis or HIV infection.
In addition to the sale of enzymes produced in its own facilities, the
Company also sells enzymes produced by others, as well as products that arise
from the combination of enzymes with other substrates into kits used to carry
out certain specific molecular biology reactions. These products include:
AMV RT CDNA SYNTHESIS KIT - a product designed to maximize the test
tube synthesis of full-length cDNA to provided an optimal template for
polymerase chain reaction (PCR) based amplification and other
experimental techniques; and
NASBA RESEARCH KIT - a product utilized for nucleic acid amplification
that is uniquely suited for the amplification of RNA.
Individuals and organizations engaged in basic genetic research and the
development of genetically engineered products are currently the Company's
primary customers for its enzyme products.
Registrant currently derives most of its revenue from the sale of AMV
reverse transcriptase and T7 RNA polymerase. When used in combination with the
enzyme RNase-H, these products in proprietary combinations are used to cause the
directed amplification, or copying, of specific segments of RNA or DNA. This
method, along with LSI's enzymes, are employed by the Company and certain of its
customers in the identification of pathogens involved in various human diseases
and their presence as contaminants in water and other materials that may be
ingested by humans.
The Company sells its molecular biology enzyme products directly to end
users who carry out nucleic acid related research and product development at
universities and diagnostic and pharmaceutical manufacturers, primarily in the
United States and Europe. Direct mail and internet-based communication are
employed in these efforts. The Company also utilizes independent distributors in
Europe and Asia for distribution of its products in those regions of the World.
In addition, the Company sells a significant portion of its enzyme production to
other manufacturers or resellers who either use the product as a component in
kits of their own manufacture, or resell the enzymes in combination with other
substrates to end users. The Company employs four professional scientists and
eight technicians in its enzyme operations.
Since December 1998, over 40% of the Company's revenues have arisen
from the sale of a special formulation of all of LSI's internally produced
enzyme products to a single clinical diagnostic manufacturer. A supply agreement
currently being negotiated with this manufacturer, Organon Teknika, is expected
to provide that the Company will, until August 2002, supply the enzymes at a
rate about equal to the approximately $400,000 of sales of this product to this
customer during the six months ended July 31, 1999. During the year ended May
31, 1999, the Company was also dependent on a single Asian independent
distributor for an additional 15% of the Company's enzyme revenues for the year.
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The Company has begun development of products for rapid detection of
biological contaminants in environment related locations (drinking water and
air), as well as in food and certain samples used to identify the causative
agent of certain human diseases. All of the Company's planned environmental and
clinical diagnostic products for detection of viral or bacterial pathogens are
based on Organon Teknika's NASBA technology. The Company has licensed the NASBA
technology from Organon Teknika for certain specific applications and expects to
reach agreement with other unaffiliated parties to expand the scope of LSI's
NASBA related activities. The NASBA method employs all of the Company's
internally produced enzyme products in conjunction with other substrates to
cause rapid replication (amplification) of specific segments of nucleic acids.
Confirmation of the presence of large numbers of a single segment of RNA or DNA
after the amplification reaction is the basis for determination of the identity
of contaminating viruses or bacteria.
In 1997, Registrant entered into the first of two agreements with
Innovative Biotechnologies, Inc. ("Innovative"), a Niagara Falls, New York
company, to provided technical and financial support in the development of a
NASBA based test for the waterborne pathogen, Cryptosporidium parvum. This
development effort was successfully completed in the Fall of 1999, and in the
Spring of 2000 the Company expects to begin supplying to Innovative all of the
molecular biology components of the C. parvum test as well as distribution of
the complete test in certain areas of the world. The Company expects to
independently develop additional NASBA based tests for waterborne pathogens.
The Company executed in June 1999 a letter of intent with 1144668
Ontario Ltd., ("NumberCo"), a Mississauga, Ontario company, that is expected to
enable LSI to produce and sell NASBA based test kits for detection of food borne
pathogens. NumberCo, a successor to Cangene Corp., the original owner of the
NASBA technology, retained a license to utilize NASBA for detection of food
borne pathogens in 1995 when the NASBA related patents and related technology
were conveyed to Organon Teknika. The joint venture of the Company and NumberCo
contemplated by this executed letter of intent is expected to begin operations
in the Summer of 2000 and projects introduction of its first product, a NASBA
based test for Listeria monocytogenes, to the research market in late 2000. The
Company expects to produce and sell additional food borne pathogens tests
developed by the planned joint venture with NumberCo.
In addition to its enzyme related activities, the Company has continued
its development of a light based analyzer and related sensors for real-time
detection of certain chemicals in the air and in aqueous solutions. This work,
begun more than five years ago with US Department of Energy funding in
conjunction with Lockheed Martin Corp., was slowed in recent years by limited
working capital. However, the Company's activity in this area led to the
February 2000 execution of a letter of intent with Life Sciences, Corp. ("LSC"),
an unaffiliated, Gaithersburg, Maryland company, and Accident Prevention Plus,
LLC ("APP"), a Hauppauge, New York company, to form a joint venture that would
operate state-wide alcohol interlock services initially in the states of Florida
and Georgia. This letter of intent further contemplates the development and sale
of a novel motor vehicle safety related device that combines a breath alcohol
detector based motor vehicle ignition interlock with a motor vehicle data
logger. The proposal anticipates a to-be-completed definitive agreement that,
among other things, is expected to obligate LSC to make available to the
proposed joint venture a breath alcohol analyzer based ignition interlock, as to
which LSC holds an exclusive license for distribution in North America, and a
license to proprietary software that it has developed and currently uses to
support state-wide alcohol interlock programs in 13 states. The contemplated
definitive agreement is similarly expected to obligate APP to grant a license to
the joint venture to utilize APP's proprietary software and related hardware
design for a motor vehicle data logger. The letter of intent provides for equal
holdings in the proposed venture by each of APP, LSC and the Company.
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The formation of the proposed joint venture anticipates rapidly
expanding mandated usage of alcohol interlock devices nationwide, as individual
states enact legislation and administrative policies to satisfy certain
requirements related to monitoring of motor vehicle operators with multiple DUI
convictions. Such monitoring or impoundment of vehicles is mandated in
provisions of the U.S. Transportation Equity Act for the 21st Century (TEA 21)
that take effect in October 2000. The potential for successful, rapid extension
of alcohol interlock programs into a large number of states with relatively
modest requirements for capital is enhanced by the combination of the interlock
devices and data logger.
In addition to applications of the proposed integrated instrument
related to monitoring the breath alcohol level of a motor vehicle operator prior
to starting the vehicle, and from time to time during the course of the
vehicle's operation, the data logger component of the device would monitor and
magnetically store a record of salient parameters associated with the vehicle
performance. Information related to vehicle speed, acceleration and deceleration
rates, engine speed, etc. for over 600 hours of vehicle operation may be stored
on a credit card like device, or communicated in real time to other locations
via modem.
The participants in the proposed joint venture expect to extend the
range of applications of the integrated data logger / interlock to embrace
monitoring of vehicle operator behavior, including sensors and alarms to detect
and warn of drowsiness.
COMPETITION
The Company competes with independent laboratories, laboratory product
distributors, clinical diagnostic producers, and non-profit organizations, many
of which are larger and have greater resources than the Company.
The enzyme segment of the molecular biology industry in which the
Company primarily markets its products is highly fragmented, but includes
several companies with substantially greater financial resources, product
development capabilities and management depth than LSI. Registrant believes its
direct competition in its existing business arises primarily from its
competitors' sale of genetically engineered variants of its major product, AMV
reverse transcriptase, which are sometimes sold at a lower price than the
Company's natural-origin product.
With respect to its planned environmental and clinical diagnostic
products, the Company will encounter entrenched competition from products that
incorporate the more widely accepted polymerase chain reaction (PCR) method for
amplification of segments of DNA. Vigorous competition is also anticipated in
connection with the proposed joint venture concerning interlock and data logger
devices.
SOURCE AND AVAILABILITY OF MATERIALS
The principal supplies used in the Company's business consist of
domestic livestock, laboratory plastic ware, glassware, chemicals and animal
feed. Except as described below, these supplies are available from numerous
suppliers, and the Company has experienced no difficulty in purchasing adequate
supplies for its operations. Biological specimens (day old birds) utilized in
the production of the virus substrate from which AMV reverse transcriptase is
derived, are of a specific type and are not widely available. To insulate itself
from disruptions in supply of these birds, LSI has initiated an internal
hatchery operation that enables the Company to sustain its supplies of birds
through the purchase of fertilized eggs from any of 10 hatcheries throughout the
United States. In addition, the Company maintains substantial inventories of the
virus substrate, a portion of which is stored at an off-site, contingent
production facility.
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PATENTS, TRADEMARKS AND LICENSES
The Company holds a series of nonexclusive licenses that enable it to
employ a proprietary technology, nucleic acid sequence based amplification
(NASBA), in the production and sale of products for identification of pathogenic
organisms, including biological warfare agents in water, food and air. The NASBA
license regime also permits the Company to produce and sell, in China and Taiwan
only, products for identification of certain viral and bacterial pathogens that
cause a variety of human diseases.
The Company holds a separate nonexclusive license to produce and sell
products incorporating a proprietary liposome-based technology for rapid, low
cost electrochemical or colorimetric detection and analysis of the outcome of
the nucleic acid amplification events engendered in the NASBA reaction.
The Company also holds a license to produce and sell a renewable
chemical reagent sensor, the FlowProbe, for real time detection of inorganic and
organic chemical contaminants in water and other aqueous solutions.
In addition to the foregoing, LSI also holds a concession from the
University of Florida Research Foundation that will permit the Company to
operate a contingent production facility at the Sid Martin Biotechnology Center,
an affiliate of the University of Florida, for emergency production of LSI's
enzyme products using pre-positioned substrates. The availability of a
contingent production facility is expected to be a necessary condition of a
multi-year agreement being negotiated by the Company to supply enzymes for use
in certain clinical diagnostic kits produced by others.
ENVIRONMENTAL MATTERS
The Company believes it is in compliance with all relevant federal,
state and local environmental regulations, and does not expect to incur
significant costs in the foreseeable future to maintain compliance with such
regulations.
EMPLOYEES
At May 31, 1999, the Company employed 21 people, including ten
professional employees.
RESEARCH AND DEVELOPMENT
Product development expenses were $89,284 in 1998 and $118,298 in 1999.
Of these amounts, the majority was applied to the expansion of the Company's
family of enzyme products and the creation of novel formulations of the enzymes
used in the NASBA reaction in order to satisfy the revised requirements of a
major customer. The same enzyme formulations will be used in the NASBA based
diagnostic products that will be produced by the Company. The remaining amounts
were applied in both years to the development of a real time analyzer and
related sensors for real-time detection of chemical contaminants in water and
air.
FORWARD LOOKING STATEMENTS
Some of the statements in this report are "forward-looking statements"
and are made pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. Readers are cautioned that these forward-looking
statements reflect numerous assumptions, known and unknown risks, uncertainties
and other factors that may affect the business and prospects of LSI and cause
the actual results, performance or achievements of the Company to differ
materially from those expressed or implied by the forward-looking statements.
These factors include longer product development lead times, delays in product
roll
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outs, failure to obtain anticipated contracts with third parties or orders from
customers, or less favorable contracts with third parties or lower than expected
volumes from customers, higher material and labor costs, unfavorable patent or
other technology decisions, the availability of adequate sources of working
capital and cash flow, and economic, competitive, technological, governmental
and other factors. In addition, from time to time the Company may make other
forward-looking statements in future filings (including exhibits) with the
Securities and Exchange Commission (the "Commission"), in reports of the Company
to its stockholders, and in other communications made by or with the approval of
the Company.
ITEM 2. DESCRIPTION OF PROPERTY.
The Company leases a facility of approximately 24,000 square feet at
2900 - 72nd Street North, St. Petersburg, Florida 33710 under the terms of a
five-year lease expiring in 2004. Minimum annual rental under the lease is
$90,000. Until May 1999 the Company owned this property. At that time,
Registrant sold the property to an affiliated entity in satisfaction of the
mortgage indebtedness held by the affiliate on the property. See notes 9 and 10
to Registrant's audited financial statements referred to in Item 7 of this
Amendment No. 1 to Annual Report on Form 10-KSB.
Registrant's executive and other offices, and its laboratories are
located within these facilities, the majority of which was constructed in 1969
and the balance in 1962. Management believes these facilities are adequate to
meet the needs of the Company's through the end of the lease term.
ITEM 3. LEGAL PROCEEDINGS.
Registrant is a defendant in an action captioned Imaging Science
Technologies, Inc. v. Life Sciences, Inc., Pinellas County, Florida Circuit
Court Case No. 98-6412-CI-19, which was served on the Company in October 1998.
The complaint seeks unspecified damages based on allegations the Company failed
to hold allegedly confidential information relating to immunobiosensors and
related technology in confidence, failed to return such information to the
plaintiff, and disclosed or used such information for its own purposes. The
Company has denied the material allegations of the complaint. Management of the
Company believes plaintiff's claims are without merit and are immaterial to the
business, operations and prospects of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted during Registrant's fiscal quarter ended May
31, 1999 to a vote of its stockholders.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
MARKET FOR COMMON STOCK
The Common Stock of the Company is inactively traded in low volumes in
the over-the-counter (bulletin board) market under the symbol "LFSCE". The high
and low reported bid prices of the Common Stock for the periods indicated are
set forth in the following table:
<TABLE>
<CAPTION>
HIGH LOW
BID PRICES BID PRICES
---------- ----------
<S> <C> <C>
YEAR ENDED MAY 31, 1998:
First Quarter $0.218 $0.156
Second Quarter $0.218 $0.100
Third Quarter $0.187 $0.100
Fourth Quarter $0.187 $0.080
</TABLE>
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<TABLE>
<S> <C> <C>
YEAR ENDED MAY 31, 1999:
First Quarter $1.187 $0.100
Second Quarter $0.875 $0.312
Third Quarter $0.312 $0.200
Fourth Quarter $0.562 $0.220
YEAR ENDED MAY 31, 2000:
First Quarter $0.300 $0.250
Second Quarter $1.125 $0.250
Third Quarter $0.937 $0.125
Fourth Quarter $0.300 $0.125
(through April 26, 2000) $1.500 $2.000
</TABLE>
The sale price of the Common Stock was reported as $.25 per share on
August 19, 1999 (the last date prior to the date of the original date of this
report where a sale of Common Stock was reported on the OTC bulletin board) and
$2.00 on April 26, 2000 (the last date prior to the date of this amended report
where a sale of Common Stock was reported on the OTC bulletin board). On April
26, 2000, the closing bid and ask prices for the Common Stock were reported as
$1.50 and $2.00 per share, respectively. The preceding quotations were reported
through market makers or other inter-dealer quotation medium. Those quotations
reflect inter-dealer prices, without retail mark-ups, mark-downs or commissions,
and may not reflect actual transactions.
HOLDERS
At August 19, 1999 and at April 26, 2000 there were approximately 1,200
holders of record of the Common Stock.
DIVIDENDS
No cash dividends were paid at any time during the Company's two most
recent fiscal years, and the Company does not anticipate or contemplate paying
cash dividends in the foreseeable future. In addition, dividends generally may
only be paid under the laws of the State of Delaware, the place of the Company's
incorporation, out of a corporation's "surplus" (generally the difference
between (i) the total assets of the corporation and (ii) the sum of its total
liabilities, plus the aggregate par value of its outstanding stock), or its net
profits for the fiscal year in which the dividend is declared and/or the
preceding fiscal year. These provisions would be expected to prevent the Company
from paying a dividend at this time.
RECENT SALES OF UNREGISTERED SECURITIES
The only securities sold by Registrant during the preceding three years
without registration under the Securities Act of 1933, as amended (the
"Securities Act"), were the 1,399,927 shares of Common Stock sold by the Company
in April and May 1999 in two private transactions effected directly by
Registrant with accredited investors and without the payment of any commission.
The Company entered into these transactions with Simon Srybnik, its Chairman and
CEO, a member of Simon Srybnik's family, and business entities wholly owned by
Mr. Srybnik and members of his family.
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Louis D. Srybnik, the brother of Simon Srybnik, agreed in April 1999 to
accept 57,142 shares of Common Stock at $0.4375 per share in payment and
discharge of the $25,000.00 principal amount of a debt due to him. The debt
arose through Louis D. Srybnik's earlier loan to the Company. Interest and other
charges in the amount of approximately $4,300.00 were forgiven or deemed not to
have accrued in the transaction.
In May 1999 Simon Srybnik and business entities wholly owned by him and
his two brothers, Louis D. and Julius B. Srybnik, agreed to accept an aggregate
of 1,342,785 shares of Common Stock at $0.405 per share in payment and discharge
of the $543,829.39 principal amount of indebtedness represented by various loans
made by them to Registrant over the prior years. Interest and other charges of
approximately $216,770.00 were forgiven or deemed not to have accrued in the
transaction.
Each of the investors in these two transactions represented to
Registrant that they were accredited investors within the meaning of Regulation
D, as adopted by the Commission under the Securities Act, by virtue of directly
(in the case of the individual investors) or indirectly through their owners (in
the case of the entity investors) meeting the income and/or net worth portions
of the definition of accredited investor within that regulation. The investors
also each made various representations to the Company regarding their investment
intent and sophistication, their knowledge of and access to information
regarding the business and affairs of the Company, and similar matters typical
in such private placement transactions. On the basis of all of the relevant
facts and circumstances, Registrant relied on the provisions of Rule 506 of
Regulation D and/or Section 4(2) of the Securities Act in effecting the
transactions without registration under that act.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
Introductory Note
Some of the statements in the following discussion and analysis, and
elsewhere in this Annual Report are "forward-looking statements" and are made
pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. Readers are cautioned that these forward-looking statements
reflect numerous assumptions, known and unknown risks, uncertainties and other
factors that may affect the business and prospects of LSI and cause the actual
results, performance or achievements of the Company to differ materially from
those expressed or implied by the forward-looking statements. These factors
include longer product development lead times, delays in product roll outs,
failure to obtain anticipated contracts with third parties or orders from
customers, or less favorable contracts with third parties or lower than expected
volumes from customers, higher material and labor costs, unfavorable patent or
other technology decisions, the availability of adequate sources of working
capital and cash flow, and economic, competitive, technological, governmental
and other factors. In addition, from time to time the Company may make other
forward-looking statements in future filings (including exhibits) with the
Securities and Exchange Commission, in reports of the Company to its
stockholders, and in other communications made by or with the approval of the
Company.
Due to the Company's history of operating losses and continued reliance
on loans and advances from related parties, the Company's independent certified
public accountants have qualified their report dated September 8, 1999 on the
Company's financial statements as to a going concern uncertainty. The following
commentary within management's discussion and analysis addresses the Company's
plans with regard to these matters and subsequent events that have a direct
bearing on these matters.
While revenues from the sale of molecular biology enzymes during fiscal
1999 of $1.08 million were essentially unchanged from the prior year, a
significant shift in the mix of particular enzyme products occurred. The change
reflects the commencement of sales to Organon Teknika, the Netherlands based
manufacturer of clinical diagnostics products, of a novel combination of enzymes
utilized in a proprietary nucleic acid amplification reaction. Until fiscal year
1999, Organon Teknika had purchased only AMV RT from LSI and procured the
remainder of the enzymes required for the NASBA amplification technology from
other vendors. A supply agreement currently being negotiated with Organon
Teknika is expected to commit it to purchase the combination of three enzymes
from LSI until
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January 2002. The Company currently projects sales of the NASBA enzymes of
slightly less than $1 million for the fiscal year ending May 31, 2000.
Although the Company's sales to Organon Teknika increased during the
1999 fiscal year, sales to Pacific Rim customers were adversely impacted during
the first half of the fiscal year by generally downward economic trends in Japan
and other countries in the region. Sales to this region rebounded during the
final quarter of the 1999 fiscal year and the Company expects this restored
level to be sustained through fiscal year 2000.
The cost of sales of enzyme products increased less than $5,000 between
fiscal 1998 and 1999.
Expenses related to the operating and administrative elements of the
Company's operations increased more than 50% to slightly more than $600,000
between the periods. Significant increases in wages and a portion of the added
amounts for professional expense reflect the costs associated with the sale of
real estate and the recapitalization of the Company through an exchange of debt
held by related parties for equity. Additional expense related to preparations
for an audit of the Company's financial statements for the first time since the
fiscal year ended May 31, 1994. Together these costs exceeded $100,000.
Additional increases in this expense category reflect the Company's increased
attention, manifested in increased travel and communications expense, to its
European and Asian customers who together accounted for more than 65% of fiscal
year 1999 revenue.
In addition to the costs identified above, additional increases in the
Company's operating and administrative expense arose from a new initiative to
acquire a license to the NASBA technology from Organon Teknika. The Company also
acquired other licenses for complementing proprietary concepts to render the
substrates used in the NASBA reaction thermo stable and to enable rapid
detection of the nucleic acid sequences generated during the NASBA reaction.
When integrated, these innovations are expected to form the technology platform
to support the launch of a family of robust, low-cost, nucleic acid
amplification based tests for detection of pathogens in drinking water, in fresh
and prepared foods, and in applications related to biological weapons defense.
Further because of the relatively low-cost characteristics of the NASBA
diagnostic tests designed by the Company, a second NASBA license was acquired
from Organon Teknika to enable the Company to produce and sell NASBA based
diagnostic tests for HIV, Hepatitis and other sexually transmitted diseases in
China and Taiwan. The Company believes that a market for these tests exceeding
200 million procedures per year exists in China and adjacent regions. Because
management believes it is essential that a China based joint venture company be
created and separately capitalized in order to achieve the market potential for
NASBA based human diagnostics in this region, the Company incurred significant
related travel, communication and legal expense in connection with the license
negotiations and presentations to potential joint venture partners in the United
States, Japan, China and Taiwan.
The Company's steps to acquire licenses for NASBA technology and
complementing technologies reflect management's belief that the Company has put
in place the requisite staff and installed the appropriate manufacturing
controls to enable it to supply enzymes to any entity that produces NASBA based
diagnostic kits. The identical resources are expected to be employed to develop
NASBA based diagnostic products for clinical and environmental applications for
LSI's own account. The Company is committed to expansion of its resources to
develop NASBA tests through affiliations and collaborations with business
partners and academic based scientists. Activities in this sphere are expected
to constitute the Company's focus for growth in the intermediate term.
In addition to the NASBA enzyme mix currently being supplied to Organon
and other NASBA licensees, the Company will begin to produce a dried NASBA
enzyme mix during the fourth quarter of
11
<PAGE> 12
fiscal year 2000. Dried enzymes and other components in NASBA based diagnostic
kits permit the products to be transported and stored in locations where
next-day delivery of frozen products and storage at deep-freeze temperatures may
not be possible. Additionally, the shelf life of new products is extended by the
use of dried test kit components. LSI licensed the enzyme drying technology from
Organon Teknika, and management believes the implementation of the enzyme drying
technology will enhance its currently advantaged position for NASBA enzyme sales
when compared to its competitors.
The technology used to produce the dried NASBA enzyme mix is equally
effective in protecting any of the nucleic acid modifying enzymes used in
molecular biology research. The availability of dried enzymes for shipment and
short-term storage at ambient temperature is expected to enhance the Company's
ability to market it entire offering of enzyme products to North American end
users, as well as to distributors world wide, particularly those targeting their
sales to the Pacific Rim and Eastern Europe. The availability of dried enzymes
precludes the need for transport of enzyme products using dry ice as a
refrigerant.
With respect to specific NASBA based environmental diagnostic products,
the Company expects to begin the sale of a NASBA based test for the waterborne
pathogen Cryptosporidium parvum in Autumn 2000 under an agreement with
Innovative Biotechnologies International. While the test kit will be produced by
Innovative, LSI expects to supply all of the molecular biology components of the
test kit, including enzymes, primers and other substrates, while Innovative will
provide the sample collection and sample preparation components together with a
proprietary system and related instrumentation to support analysis of the test
results.
The Company has executed a letter of intent with 1144668 Ontario Ltd
("NumberCo") to form a joint venture to develop and sell NASBA based test for
detection of food borne pathogens. NumberCo holds a license to employ the NASBA
technology in detection of food-borne pathogens that has its origins in the
invention of the NASBA amplification technology and its subsequent sale to
Organon Teknika. In addition to the license for use of the NASBA technology,
NumberCo owns a completed NASBA based test for detection of Listeria
monocytogenes, a food borne pathogen that was implicated in the FDA mandated
destruction of more than 30 million pounds of prepared foods within the past 12
months. The Company expects to manufacture and sell NumberCo's test for Listeria
monocytogenes.
To support the planned test for Listeria and other environmental and
clinical diagnostic targets that the Company expects to develop and market, the
Company has acquired via a license from Innovative the identical detection and
analysis technology used with Innovative's test for C. parvum. This detection
system represents a significant advance in the technologies for assessment of
the outcome of nucleic acid amplification and related events. While nearly every
competing method or instrument relies on the examination of emissions of light
from fluorescent or luminescent events, the LSI NASBA tests will rely on the
measurement of low level electrical signals from an electrochemical reaction, or
the detection of changes in color that are machine readable or readily
detectable to the unaided eye. In either version of the technology, the
detection instrument is expected to be market priced at approximately $1,000,
compared to 10 to 50 times that amount for instruments generally used to support
competing nucleic acid detection and analysis technologies. Further, because of
the sensitivity and relative simplicity of the electrochemical detection system,
the time required to carry out the analysis phases of a nucleic acid
amplification reaction can be reduced to approximately 5 minutes compared to the
1 to 2 hours required for some competing methods.
In December 1999, the Company executed a letter of understanding with
the Centers for Disease Control ("CDC"), an agency of the U.S. government, that
obligates CDC to negotiate solely with LSI on a cooperative research and
development agreement to develop a NASBA based test for detection of
Norwalk-like viruses ("NLV"). This group of food borne pathogens is estimated to
cause approximately
12
<PAGE> 13
23 million cases of food related illness annually in the U.S. The contemplated
agreement is expected to provide for the transfer to the Company of certain U.S.
Government owned intellectual property (patents, patent applications and trade
secrets) related to NLV in exchange for the Company's direct and in-kind funding
to the CDC for development of the test. The Company's effort with the CDC is
focused on the development of tests to support the CDC programs in active and
passive surveillance for food borne pathogens. Because tests used in this manner
are not employed in the diagnosis of human disease, but rather in the
identification of the locus for episodic outbreaks of NLV infections, the
Company believes that it will be able to begin marketing the NLV test without
approvals by the U.S. Food and Drug Administration or other regulatory agencies.
Since the contemplated test for NLV will have applications beyond public health
related surveillance, including clinical diagnosis, the Company expects to enter
into one or more OEM sale arrangements with a major clinical diagnostics
supplier and to jointly seek appropriate regulatory approvals and certifications
after the start of initial sales of the test product. Work on NLV test related
development effort is scheduled to begin in Spring 2000.
The Company has executed a letter of intent to form a joint venture to
pursue in equal ownership with Life Sciences Corp. (an unrelated entity) and
Accident Prevention Plus the development, operation and/or marketing of alcohol
interlock services and a combination breath alcohol detector based motor vehicle
ignition interlock with a motor vehicle data logger. Certain license rights and
proprietary technologies would be utilized by the proposed joint venture to
participate in an anticipated expansion in federally-mandated usage of alcohol
interlock devices nationwide, as well as expected combinations of the interlock
devices and data logger to perform a variety of functions, including monitoring,
magnetically storing and/or simultaneously transmitting to other locations
records of vehicle performance (e.g., vehicle speed, acceleration and
deceleration rates, engine speed) and monitoring of operator behavior (e.g.,
signs of drowsiness) and related warning alarms.
The expansion of the Company's product offering to include NASBA based
tests for environmental pathogens, together with the introduction of dried
enzyme preparations and a renewed focus on end-user customers, will require
increases in staff and financial resources allocated to marketing. Additional
staff also will be required to produce increased amounts of molecular biology
enzymes. Management believes that these activities can be readily supported from
projected improvements in the Company's cash flows.
With respect to product development, the Company is presently seeking a
capital commitment in the range of $6 to $10 million to support the proposed
China joint venture's plan to complete clinical trials in China on a low-cost
virus-load test for HIV before the end of calendar year 2000. Management
believes successful completion of this initial clinical trial will be sufficient
to attract the additional capital required to expand the range of NASBA based
human diagnostic products to be approved by the cognizant regulatory agencies
and offered for sale in China. These additional funds also will be employed to
develop the requisite distribution relations to foster sales of the products
throughout the Chinese subcontinent.
The Company faces similar challenges with respect to funding the
development of additional diagnostic products for detection of food and water
borne pathogens and biowarfare agents. Management believes development funds
from governmental and private agencies with interests in public health and
alliances with strategic corporate partners will complement the Company's
internally funded development efforts.
The Company was restructured during fiscal 1999. The Company sold a
parcel of its land to an unrelated party and, in a separate transaction with the
entity holding a mortgage on all the Company's real estate and owned by the
Company's President and Chairman and members of his family, sold its remaining
land together with its office and laboratory facilities. The first transaction
resulted in a gain of approximately $195,000 while
13
<PAGE> 14
the latter, when combined with related forgiveness of accrued interest and of a
related note payable, resulted in an increase in paid-in capital of slightly
more than $1.1 million. In another group of transactions, the Company's Chairman
and President, his brother and related entities agreed to convert existing loans
in the principal amount of $568,829 made by them to the Company into shares of
Common Stock of the Company at the fair market values on the dates of
conversion.
Liquidity and Capital Resources
During the five years ended May 31, 1999, the Company had operating
losses aggregating $1,695,739, and during those years relied on loans and
advances from related entities to fund its operations. The elimination of
interest for the past two fiscal years, further loans and advances from the
same related entities during that period, and cash from the sale of vacant land
at the end of fiscal 1999 have been the primary sources of working capital to
sustain the Company's operations.
Net cash used in operating activities in fiscal 1999 was $260,919
compared to $72,421 in fiscal 1998. Net cash in fiscal 1999 was used primarily
to fund the fiscal 1999 operating loss. After taking into account the increase
of $230,382 in accrued interest payable, the net cash in fiscal 1998 was used
mainly to fund the net loss and an almost $200,000 fourth quarter increase in
accounts receivable.
While the Company's cash needs will increase in fiscal 2000, management
expects that an increase in revenues, improvements in gross margin for certain
of its enzyme products and the elimination of interest expense will assure
sufficient working capital for all of the Company's expanded operations expected
to be internally funded.
In late calendar 1999, the Company experienced resurgence in enzymes
sales from its Pacific Rim distributors, and at the beginning of fiscal year
2000 a substantial increase in enzyme orders from its most significant customer,
Organon Teknika. Revenues of slightly more than $1.1 million through the end of
the third quarter of fiscal 2000 indicate that total revenues for fiscal year
2000 will exceed 1999 revenues of $1,084,181.
The Company is pursuing negotiations with respect to a proposed supply
agreement with an expected term of more than two years with respect to supplying
Organon Teknika with the group of enzymes for its nucleic acid amplification
based clinical diagnostic kits. Because LSI would be the sole source supplier of
NASBA enzymes to Organon Teknika, this proposed supply agreement is expected to
be complemented by two additional agreements with Organon Teknika which would be
intended to assure the continuity of Organon Teknika's supply of the NASBA
enzymes. A proposed facilities management agreement and a proposed license
agreement would provide, in essence, that in the event LSI were to be unable to
deliver the NASBA enzymes to Organon Teknika at a scheduled time, Organon
Teknika would, via the provisions of these proposed agreements, advance the
Company approximately $200,000 in cash through a one-time, forward purchase of
substrates used in the production of the AMV reverse transcriptase component of
the NASBA enzyme mix. Under the provisions of these proposed supplemental
agreements, Organon Teknika would also be entitled to directly supervise the
production of the NASBA enzymes in LSI's facilities until LSI were to restore
its capability to make timely delivery of the enzymes. The amounts advanced to
LSI by Organon Teknika would be credited on a prorata basis (with respect to
quantity of enzyme delivered to Organon Teknika in each consignment) against
future deliveries by the Company of the NASBA enzymes to Organon Teknika.
ITEM 7. FINANCIAL STATEMENTS.
Registrant incorporates herein by this reference the accountants'
report, the financial statements and
14
<PAGE> 15
the related notes appearing in the exhibit attached hereto as Exhibit 99.1. Each
of the items incorporated herein by reference is listed as part of the
description of Exhibit 99.1 in Item 13(a) of this report by reference to the
page where it appears or begins in Exhibit 99.1.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(A) OF THE EXCHANGE ACT.
DIRECTORS, EXECUTIVE OFFICERS AND NOMINEES
Each of the directors and executive officers of the Company as of May
31, 1999 is shown in the following table, as are all persons presently
nominated to become a director or an executive officer of the Company. The
following table also sets forth certain additional information regarding those
persons, including their respective beneficial ownership of Common Stock, and
the beneficial Common Stock ownership of all directors and executive officers
of LSI as a group. Beneficial ownership of Common Stock is set forth as of May
31, 1999 and as of April 26, 2000.
<TABLE>
<CAPTION>
NAME
AND AGE POSITION(S) WITH BENEFICIAL
OR LSI AND PERIOD CURRENT COMMON PERCENT
IDENTITY PRINCIPAL OCCUPATION SERVED AS TERM STOCK OF
OF GROUP DURING LAST 5 YEARS DIRECTOR EXPIRES OWNERSHIP CLASS
- ------------- ------------------- --------- ------- ------------- ----------
<S> <C> <C> <C> <C> <C>
Simon Srybnik Director, Chairman, Chief Executive Officer, 1963 2000 2,369,323 (1) 56.46% (1)
83 President and Treasurer; nominee for re-election until Annual
as a director; a New York based industrialist 2000 Meeting
active in a number of closely held
businesses, including Kerns Manufacturing
Corp. and S&S Machinery Corp., whose
activities include precision manufacturing
and merchandising of industrial equipment
Steven Victor Director(2); for more than the past five 1993(2) 2000(2) -0- -0-
M.D. years, a dermatologist with his own until Annual
49 practice in New York, New York 2000 Meeting
Alex A. Burns Vice President and Secretary; nominee for N/A N/A 350,100 (3) 7.70% (3)
59 election as a director; employed by the Company
since 1984, and its General Manager for more than
the past five years
Norman J. Nominee for election as a director; for more than N/A N/A -0- -0-
Marcus the past five years, a psychiatrist and Chief of
M.D. Pain Service and Director of New York Pain
59 Treatment Program, Lenox Hill Hospital
(1983-1998) and Clinical Associate Professor
in Anesthesiology and Psychiatry, NYU School
of Medicine (1999-present)
All directors, executive 2,719,423 (4) 59.81% (4)
officers and nominees
as a group (4 persons)
</TABLE>
15
<PAGE> 16
(1) See notes (2) and (5) to the table presented as part of Item 11 of this
Amendment No. 1 to Annual Report on Form 10-KSB, which note is incorporated
herein by this reference.
(2) Dr. Victor resigned as a director on April 20, 2000.
(3) Includes 350,000 shares of Common Stock subject to presently exercisable
stock options held by Mr. Burns, which shares are considered to be
outstanding for purposes of calculating the percentage shown for him and at
note 3 to this table.
(4) See the other notes to this table.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act and applicable regulations require
all officers, directors and persons who beneficially own more than 10% of the
Common Stock (collectively, the "Reporting Persons") to file initial reports of
ownership and reports of changes in ownership with the Securities and Exchange
Commission, and to furnish copies to the Company. Specific due dates for these
reports have been established by statute and the Commission. LSI is required to
report herein specified information regarding failures to file such reports on a
timely basis during the most recent fiscal year or prior fiscal years. Based on
its review of available records, the Company believes that all Section 16(a)
filing requirements applicable to the Reporting Persons have been complied with
during LSI's past nine fiscal years, except as shown in the following table.
Name of Reporting
Person and Position(s) No. of No. of
with LSI Late Reports Transactions
- ---------------------- ------------ ------------
Alex A. Burns; executive officer and 5 3
nominee for election as a director
Kerns Manufacturing Corp.; more than 4 2
10% beneficial owner
Charles M. Kleim; officer 4 2
Julius B. Srybnik; more than 10% 8 7
beneficial owner
Louis D. Srybnik; more than 10% 16 11
beneficial owner
Simon Srybnik; executive officer, 14 12
director and nominee for re-election
as a director, and more than 10%
beneficial owner
Sutton Investing Corp.; more than 2 1
10% beneficial
Steven Victor; former director(1) 2 1
- ---------------
(1) No reports filed. Resigned as a director April 20, 2000.
ITEM 10. EXECUTIVE COMPENSATION.
SUMMARY COMPENSATION TABLE. The following table sets forth certain
information with respect to
16
<PAGE> 17
compensation awarded, earned or paid during the three fiscal years ended May 31,
1999 to Simon Srybnik and Alex A. Burns, the Company's only two executive
officers, for their service in all capacities to LSI and its subsidiary.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Compensation
Annual Compensation Awards
----------------------------- -------------
Other Securities
Fiscal Annual Underlying All Other
Name and Principal Positions Year Salary Compensation Options Compensation
- ---------------------------- ------ -------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C>
Simon Srybnik, Chairman of the 1999 -0- -0- -0- -0- (1)
Board, Chief Executive Officer and 1998 -0- -0- -0- -0-
President 1997 -0- -0- -0- -0-
Alex A. Burns 1999 $35,000 -0- (2) 350,000 (3) -0-
Vice President and General Manager 1998 $35,000 -0- -0- -0-
1997 $35,000 -0- -0- -0-
</TABLE>
(1) Expenses in connection with Mr. Srybnik's performance of his duties for LSI
are either paid directly by the Company or reimbursed to him.
(2) The Company makes a leased automobile available for use by Mr. Burns. The
dollar value of any personal use of the automobile is excluded from the
table because the amount thereof, if any, is less than 10% of his annual
salary.
(3) Represents two options granted to Mr. Burns in 1999. See the text and table
following the caption "Option Grants in Last Fiscal Year" below.
OPTIONS GRANTS IN LAST FISCAL YEAR. The follow table sets forth certain
information with respect to the grant of stock options during fiscal 1999 to
Alex A. Burns. Mr. Burns is the only individual named in the summary
compensation table that received any stock option grants during 1999. These
options were granted with an option exercise price of not less than 100% of the
fair market value of the underlying Common Stock on the date of the grant.
<TABLE>
<CAPTION>
Individual Grants
-----------------------------------------------------------------------------------
Percentage
of Total Options
Number of Securities Granted to Employees
Underlying Options in Exercise or Base Expiration
Name Granted Fiscal Year Price /Share Date
---- -------------------- -------------------- ---------------- ----------
<S> <C> <C> <C> <C>
Alex A. Burns 350,000(1) 72.92% $0.405 05/26/09
</TABLE>
(1) Represents two options, one of which for 150,000 shares was granted under
the Company's 1990 Employee Stock Option Plan. The other option was granted
as a "non-statutory" stock option outside of the terms of that plan.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION
VALUES. The following table sets forth certain information with respect to all
options held by Alex A. Burns at May 31, 1999. Mr.
17
<PAGE> 18
Simon Srybnik, the only other executive officer of the Company, does not hold
any options granted by LSI.
<TABLE>
<CAPTION>
Number of Securities Value of
Underlying Unexercised
Unexercised Options In-the-Money
at FY-End Options at FY-End
Shares Acquired Exercisable/ Exercisable/
Name on Exercise Value Realized Unexercisable Unexercisable
---- --------------- -------------- -------------------- -----------------
<S> <C> <C> <C> <C>
Alex A. Burns - - - (1) - - - (1) 350,000 (2)/ N/A(3)/
- 0 - N/A
</TABLE>
(1) Mr. Burns did not exercise any options during fiscal 1999.
(2) Options covering these shares were granted to Mr. Burns in fiscal 1999.
(3) No amount is shown because the option exercise price of $0.405 with respect
to these options exceeds the reported quotation price of $0.25 per share in
the over-the-counter market at fiscal 1999 year-end.
COMPENSATION OF DIRECTORS. Directors are not compensated for their
service on the Board of Directors. Expenses for attendance at meetings of the
Board are either paid directly by the Company or reimbursed to directors.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
No person or any "group" [as that term is used in section 13(d)(3) of
the Exchange Act] is known to the Company to own beneficially more than 5% of
the outstanding Common Stock as of May 31, 1999 or as of April 26, 2000, except
as described in the following table. Beneficial ownership of Common Stock is
shown as of May 31, 1999 and as of April 26, 2000.
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE PERCENT OF
OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP CLASS
------------------- ----------------------- --------------
<S> <C> <C>
Alex A. Burns 350,100 (1) 7.70% (1)
2900 - 72nd Street North
St. Petersburg, Florida 33710
Julius B. Srybnik 1,950,738 (2) (3) 46.48% (2) (3)
140 - 53rd Street
Brooklyn, New York 11232
Louis D. Srybnik 2,011,230 (2) (4) 47.92% (2) (4)
140 - 53rd Street
Brooklyn, New York 11232
Simon Srybnik 2,369,323 (2) (5) 56.46% (2) (5)
140 - 53rd Street
Brooklyn, New York 11232
Kerns Manufacturing Corp. 656,909 (6) 15.65% (6)
3714 - 29th Street
Long Island City, New York 11101
Sutton Investing Corp. 774,453 (7) 18.45% (7)
140 - 53rd Street
Brooklyn, New York 11232
</TABLE>
18
<PAGE> 19
(1) See note (3) to the table presented as part of Item 9 of this Amendment
No. 1 to Annual Report on Form 10-KSB, which note is incorporated herein by
this reference.
(2) Includes an aggregate of 1,784,088 shares beneficially owned, directly or
indirectly, by seven corporations (including the two named in the table
text) directly or indirectly owned by Julius B., Louis D. and Simon Srybnik,
each of whom directly or indirectly owns one-third of the outstanding stock
of each of the entities and shares in the voting and/or investment power
with respect to the LSI Common Stock owned by such entities. Accordingly,
these same 1,784,088 shares are shown in the table as beneficially owned by
each of Julius B., Louis D. and Simon Srybnik.
(3) Includes direct ownership of 166,650 shares, of which 150 shares are held as
custodian for his son Jed Srybnik.
(4) Includes direct ownership of 227,142 shares.
(5) Includes direct ownership of 585,235 shares.
(6) Includes 612,465 shares owned directly and an additional 44,444 shares owned
by a wholly owned subsidiary, Apex Organization, Inc. All of these shares
are also shown in the table as beneficially owned by each of Julius B.,
Louis D. and Simon Srybnik. See note (2) to this table.
(7) These shares are also shown in the table as beneficially owned by each of
Julius B., Louis D. and Simon Srybnik. See note (2) to this table.
Information with respect to the beneficial ownership of Common Stock by
directors, nominees to become directors, and executive officers of Registrant is
set forth in the table presented as part of Item 9 of this Amendment No. 1 to
Annual Report on Form 10-KSB. That information is incorporated herein by this
reference.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
During a period of more than five years preceding June 1, 1998, which
date was the beginning of the Company's 1999 fiscal year, various business
entities owned directly or indirectly in equal shares by Simon Srybnik and his
two brothers, Louis D. and Julius B. Srybnik, and Simon Srybnik and Louis D.
Srybnik individually, provided various loans in amounts that were required, when
combined with the limited revenues of LSI during the period, to allow LSI to
continue in business and to carry out only those activities absolutely essential
to its survival. Simon Srybnik is a director of the Company, a nominee for
re-election as a director of the Company, and is the Company's Chairman, Chief
Executive Officer and President. He and his two brother may be considered to be
the "parents" of LSI within the meaning of the Exchange Act by virtue of their
direct and indirect beneficial ownership of LSI Common Stock. See the tabular
information and related notes set forth in Item 11 of this Amendment No. 1 to
Annual Report on Form 10-KSB.
While there may have been some upward and downward fluctuations in the
total amounts due to these affiliated parties during the period, from May 31,
1993 to May 31, 1998 the aggregate amount of the indebtedness to these related
parties, including interest and other charges, increased from approximately
$707,000 to approximately $2,425,000. The rates of interest on these loans
during this period was typically between 10.5% and 11.5%, and was 10.5% during
fiscal 1998. No interest accrued on this debt subsequent to May 31, 1998. During
fiscal 1998, the aggregate amount of this related party indebtedness increased
by approximately $186,648 to reach the total of approximately $2,425,000 at May
31, 1998. In the fiscal year ended May 31, 1999, the principal of this
indebtedness increased by $103,165 (net). All of this indebtedness was
eliminated through restructuring transactions between the Company and these
related parties in fiscal 1999.
19
<PAGE> 20
Approximately $905,000 of the total of this indebtedness was eliminated
through the conversion in April and May 1999 of a total of $568,829 of principal
into 1,399,927 shares of the Company's Common Stock and the forgiveness by the
creditors of the balance. Louis D. Srybnik agreed in April 1999 to accept 57,142
shares of Common Stock at $0.4375 per share in payment and discharge of the
$25,000.00 principal amount of a debt due to him in connection with his earlier
loan to the Company. In May 1999 Simon Srybnik and certain of the business
entities controlled by him and his two brothers (Kerns Manufacturing Corp.,
Industrial Renting Corp., Continental Salvage Corp., Sutton Investing Corp., S&S
Machinery Corp., and Apex Organization, Inc.) agreed to accept an aggregate of
1,342,785 shares of Common Stock at $0.405 per share in payment and discharge of
the $543,829.39 aggregate principal amount of indebtedness represented by
various separate loans made by them to LSI over the prior years. Interest and
other charges due on these debts were forgiven in these stock issuance
transactions. The prices at which the shares were issued in these transactions
were each equal to the approximate mean between the last available reported bid
and ask prices of the Common Stock in the over-the-counter market prior to the
respective dates of the transactions. Kerns Manufacturing Corp. was a more than
10% beneficial owner of the Common Stock prior to the May 1999 transaction and
increased its ownership through it, and Sutton Investing Corp. became a more
than 10% beneficial owner of the Common Stock through that transaction.
Also in May 1999, the Company sold an outlying parcel of its land to an
unaffiliated neighboring business for $200,000 cash. In a separate transaction
on the same day with a related business entity, the Company sold all of its
remaining real estate and entered into a lease for the laboratory and office
facilities it historically owned and occupied. The latter sale transaction
satisfied $859,075 of the principal amount of a mortgage on the property and,
via forgiveness of interest and other amounts, extinguished an additional
approximately $764,000 of real estate related indebtedness. The Company's
aggregate historical cost from the 1960's of all of the land and building
improvements was less than $500,000. The aggregate of the sales prices in these
two real estate sale transactions was slightly greater than an appraisal secured
about a year earlier of the entire property. The mortgage satisfaction real
estate transaction and the lease transaction were effected with 186-194 Imlay
Street Realty Corp. ("Imlay Street Realty"), one of the business entities
equally owned by Simon, Louis D. and Julius B. Srybnik.
Imlay Street Realty leases the laboratory and office facilities of the
Company to the Company under a five year lease expiring in 2004. The lease of
the approximately 24,000 facility in St. Petersburg, Florida provides for an
annual rental for the initial two years of $90,000. The rent is subject to
adjustment each two years thereafter to reflect current market rental rates, but
not less than the initial rate.
As described in the text following the caption "Option Grants in Last
Fiscal Year" under Item 10 of this Amendment No. 1 to Annual Report on Form
10-KSB, the Company granted Alex A. Burns, an executive officer of LSI, a
nominee for election as a director of the Company and the beneficial owner of
more than 5% of the Common Stock, options covering 350,000 shares of Common
Stock in fiscal 1999. As indicated in that text, these options were granted with
an option exercise price of not less than 100% of the fair market value of the
underlying Common Stock on the date of the grants.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS REQUIRED BY ITEM 601 OF REGULATION S-B.
20
<PAGE> 21
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
- ---------- ----------------------
<S> <C>
3 Certificate of Incorporation and Bylaws of Registrant,
incorporated herein by this reference to the amended
Registration Statement filed with the Securities and Exchange
Commission on or about January 29, 1968
- --------------------------------------------------------------------------------
10.1 1988 Employee Stock Option Plan of Life Sciences, Inc.
- --------------------------------------------------------------------------------
10.2 1990 Employee Stock Option Plan of Life Sciences, Inc.
- --------------------------------------------------------------------------------
10.3 License Agreement dated July 9, 1998 between Organon Teknika
B.V and Registrant
10.4 License Agreement dated March 31,1999 between Organon Teknika
B.V and Registrant
10.5 Addendum dated September 28, 1999 to License Agreement
between Organon Teknika B.V and Registrant
- --------------------------------------------------------------------------------
10.6 April 9, 1999 agreement between LSI and Louis D. Srybnik
for issuance to him of 57,142 shares of LSI Common Stock in
liquidation of indebtedness due to him
- --------------------------------------------------------------------------------
10.7 Contract for Purchase and Sale of Real Estate, May 8, 1999,
between LSI and Cavaform, Inc.
- --------------------------------------------------------------------------------
10.8 Contract for Purchase and Sale of Real Estate, dated May
21, 1999, between Registrant and 186 - 194 Imlay Street
Realty Corp.
- --------------------------------------------------------------------------------
10.9 Driveway Easement Agreement, dated May 27, 1999, between LSI
and Cavaform, Inc.
- --------------------------------------------------------------------------------
10.10 May 27, 1999 agreement among LSI and Simon Srybnik, Kerns
Manufacturing Corp., Industrial Renting Corp., Continental
Salvage Corp., Sutton Investing Corp., S&S Machinery Corp.
and Apex Organization, Inc. for issuance to them of an
aggregate of 1,342,785 shares of LSI Common Stock in
liquidation of separate indebtedness due to them
- --------------------------------------------------------------------------------
10.11 June 15, 1999 letter of intent between LSI and 1144668
Ontario Ltd.
- --------------------------------------------------------------------------------
10.12 Sublicense Agreement dated July 29, 1999 between Registrant
and Innovative Biotechnologies International, Inc.
- --------------------------------------------------------------------------------
10.13 Letter of understanding dated November 21, 1999 between LSI
and the Viral Gastroenteritis Section of the Centers for
Disease Control and Prevention
- --------------------------------------------------------------------------------
10.14 Letter of intent dated February 9, 2000 among Registrant,
Accident Prevention Plus, Inc. and Life Sciences Corporation
- --------------------------------------------------------------------------------
27.1 Financial Data Schedule at and for year ended May 31, 1999
- --------------------------------------------------------------------------------
99.1 Financial Statements Required to be Filed by Item 7 of Report
</TABLE>
<TABLE>
<CAPTION>
Page Number
in Exhibit 99.1
---------------
<S> <C>
Report of Independent Certified Public Accountants 1
Consolidated Balance Sheets as of
May 31, 1999 and 1998 2
Consolidated Statements of Operations for
the years ended May 31, 1999 and 1998 3
Consolidated Statement of Stockholders'
Equity (Deficit) for the years ended
May 31, 1999 and 1998 4
Consolidated Statements of Cash Flows
for the years ended May 31, 1999 and 1998 5
Notes to Consolidated Financial Statements 6
</TABLE>
21
<PAGE> 22
(B) REPORTS ON FORM 8-K.
Registrant did not file any reports on Form 8-K during the last quarter
of the period covered by this report on Form 10-KSB.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, Registrant
has caused this Amendment No. 1 to its Annual Report on Form 10-KSB for the
fiscal year ended May 31, 1999 to be signed on its behalf by the undersigned,
thereunto duly authorized.
LIFE SCIENCES, INC.
Date: April 28, 2000 By: /s/ SIMON SRYBNIK
-------------------------------
Simon Srybnik, Chairman
and Chief Executive Officer
In accordance with the Exchange Act, this Amendment No. 1 to the Annual
Report on Form 10-KSB of Life Sciences, Inc. for the fiscal year ended May 31,
1999 has been signed below by the following persons on behalf of Registrant, and
in the capacities and on the dates indicated.
<TABLE>
<S> <C> <C>
/s/ SIMON SRYBNIK Director, Chairman, CEO, April 28, 2000
- --------------------------- and President
Simon Srybnik (Principal Executive Officer)
/s/ CHARLES M. KLEIM Controller April 28, 2000
- ---------------------------
Charles M. Kleim
</TABLE>
22
<PAGE> 23
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
- ----------- ----------------------
<S> <C>
3 Certificate of Incorporation and Bylaws of Registrant,
incorporated herein by this reference to the amended
Registration Statement filed with the Securities and Exchange
Commission on or about January 29, 1968
- --------------------------------------------------------------------------------
10.1 1988 Employee Stock Option Plan of Life Sciences, Inc.
- --------------------------------------------------------------------------------
10.2 1990 Employee Stock Option Plan of Life Sciences, Inc.
- --------------------------------------------------------------------------------
10.3 License Agreement dated July 9, 1998 between Organon Teknika
B.V and Registrant
10.4 License Agreement dated March 31,1999 between Organon Teknika
B.V and Registrant
10.5 Addendum dated September 28, 1999 to License Agreement
between Organon Teknika B.V and Registrant
- --------------------------------------------------------------------------------
10.6 April 9, 1999 agreement between LSI and Louis D. Srybnik
for issuance to him of 57,142 shares of LSI Common Stock in
liquidation of indebtedness due to him
- --------------------------------------------------------------------------------
10.7 Contract for Purchase and Sale of Real Estate, May 8, 1999,
between LSI and Cavaform, Inc.
- --------------------------------------------------------------------------------
10.8 Contract for Purchase and Sale of Real Estate, dated May
21, 1999, between Registrant and 186 - 194 Imlay Street
Realty Corp.
- --------------------------------------------------------------------------------
10.9 Driveway Easement Agreement, dated May 27, 1999, between LSI
and Cavaform, Inc.
- --------------------------------------------------------------------------------
10.10 May 27, 1999 agreement among LSI and Simon Srybnik, Kerns
Manufacturing Corp., Industrial Renting Corp., Continental
Salvage Corp., Sutton Investing Corp., S&S Machinery Corp.
and Apex Organization, Inc. for issuance to them of an
aggregate of 1,342,785 shares of LSI Common Stock in
liquidation of separate indebtedness due to them
- --------------------------------------------------------------------------------
10.11 June 15, 1999 letter of intent between LSI and 1144668
Ontario Ltd.
- --------------------------------------------------------------------------------
10.12 Sublicense Agreement dated July 29, 1999 between Registrant
and Innovative Biotechnologies International, Inc.
- --------------------------------------------------------------------------------
10.13 Letter of understanding dated November 21, 1999 between LSI
and the Viral Gastroenteritis Section of the Centers for
Disease Control and Prevention
- --------------------------------------------------------------------------------
10.14 Letter of intent dated February 9, 2000 among Registrant,
Accident Prevention Plus, Inc. and Life Sciences Corporation
- --------------------------------------------------------------------------------
27.1 Financial Data Schedule at and for year ended May 31, 1999
- --------------------------------------------------------------------------------
99.1 Financial Statements Required to be Filed by Item 7 of Report
</TABLE>
<TABLE>
<CAPTION>
Page Number
in Exhibit 99.1
---------------
<S> <C>
Report of Independent Certified Public Accountants 1
Consolidated Balance Sheets as of
May 31, 1999 and 1998 2
Consolidated Statements of Operations for
the years ended May 31, 1999 and 1998 3
Consolidated Statement of Stockholders'
Equity (Deficit) for the years ended
May 31, 1999 and 1998 4
Consolidated Statements of Cash Flows
for the years ended May 31, 1999 and 1998 5
Notes to Consolidated Financial Statements 6
</TABLE>
23
<PAGE> 1
Exhibit 10.1
1988 EMPLOYEE STOCK OPTION PLAN
OF
LIFE SCIENCES, INC.
1. THE PLAN. This 1988 Employee Stock Option Plan (the "Plan")
is intended to encourage ownership of stock of Life Sciences, Inc. (the
"Corporation") by specified employees of the Corporation and its subsidiaries
and to provide additional incentive for them to promote the success of the
business of the Corporation.
2. STOCK SUBJECT TO THE PLAN. Subject to the provisions of
Paragraph 14 hereof, the total number of shares of the common stock, par value
$.10 per share, of the Corporation (the "Stock") which may be issued pursuant
to incentive stock options and non-incentive stock options granted under the
Plan (the "Options") shall not exceed 250,000. Such shares of Stock may be, in
whole or in part, either authorized and unissued shares or treasury shares, as
the Board of Directors of the Corporation (the "Board") shall from time to time
determine. If an Option shall expire or terminate for any reason without having
been exercised in full, the unpurchased shares covered thereby shall (unless
the Plan shall have been terminated) again be available for Options under the
Plan.
3. ADMINISTRATION OF THE PLAN. The Plan shall be administered by
the Board which shall have plenary authority, in its discretion, to determine
the employees of the Corporation and its subsidiaries to whom Options shall be
granted (individually, an "Optionee," and collectively, the "Optionees"), the
number of shares to be subject to each Option and the terms of each Option. The
Board shall also have plenary authority, subject to the express provisions of
the Plan, to interpret the Plan, to prescribe, amend and rescind any rules and
regulations relating to the Plan and to take such other action in connection
with the Plan as it deems necessary or advisable. The interpretation and
construction by the Board of any provisions of the Plan or of any Option
granted thereunder shall be final, and no member of the Board shall be liable
for any action or determination made in good faith with respect to the Plan or
any Option granted thereunder.
4. EMPLOYEES ELIGIBLE FOR OPTIONS. All employees of the
Corporation or its subsidiaries shall be eligible for Options. In making the
determination as to employees to whom Options shall be granted and as to the
number of shares to be covered by such Options, the Board shall take into
account the duties of the respective employees, their present and potential
contributions to the success of the Corporation, and such other factors as it
shall deem relevant in connection with accomplishing the purposes of the Plan.
5. TERM OF PLAN. The Plan shall terminate on, and no Options
shall be granted after, October 1, 1998, provided that the Board may at any
time terminate the Plan prior thereto.
<PAGE> 2
6. MAXIMUM OPTION GRANT. The aggregate fair market value
(determined as of the time the Option is granted) of the Stock of the
Corporation, with respect to which incentive stock options are exercisable for
the first time by an employee during any calendar year (under this Plan or any
other plan of the Corporation or the parent or any subsidiary of the
Corporation), shall not exceed $100,000.
7. OPTION PRICE. Each Option shall state the option price, which
shall be not less than 100% of the fair market value of the Stock on the date
of the granting of the Option. The fair market value of shares of Stock shall
be determined by the Board and shall be the mean between the bid and ask prices
of the Stock in the over-the-counter market on the date of the granting of the
Option. Notwithstanding any other provision contained in this Plan, an Option
granted to an employee who, on the date of grant, owns stock possessing more
than 10% of the total combined voting power of all classes of stock of either
the Corporation or any parent or subsidiary, shall be granted at an option
price of 110% of fair market value on the date of grant and shall be
exercisable only during the five-year period immediately following the date of
grant. In calculating stock ownership of any person, the attribution rules of
Code ss. 425(d) will apply. Furthermore, in calculating stock ownership, any
stock that the employee may purchase under outstanding options will not be
considered.
8. TERM OF OPTIONS. The term of each Option shall be for a
maximum of ten years from the date of granting thereof, but may be for a lesser
period or be subject to earlier termination as hereinafter provided.
9. EXERCISE OF OPTIONS. Any Option may be exercised from time to
time as to any part or all of the Stock to which the Optionee shall then be
entitled, provided, however, that an Option may not be exercised (a) as to less
than 100 shares at any one time (or for the remaining shares then purchasable
under the Option, if less that 100 shares), and (b) unless the Optionee shall
have been in the continuous employ of the Corporation or its subsidiaries from
the date of the granting of the Option to the date of its exercise, except as
provided in Paragraphs 12 and 13. The purchase price of the Stock issuable upon
exercise of an Option shall be paid in full at the time of exercise thereof (I)
in cash, or (ii) by the transfer to the Corporation of shares of its Stock with
a fair market value (as determined by the Board) equal to the purchase price of
the Stock issuable upon exercise of such Option. The holder of an Option shall
not have any rights as a stockholder with respect to the Stock issuable upon
exercise of an Option until certificates for such Stock shall have been
delivered to him after the exercise of the Option.
10. NON-TRANSFERABILITY OF OPTIONS. An Option shall not be
transferable otherwise than by will, or by the laws of descent and
distribution, and is exercisable during the lifetime of the Optionee only by
the Optionee.
11. FORM OF OPTION. Each Option granted pursuant to the Plan
shall be evidenced by an agreement (an "Option Agreement"), in such form as the
Board shall from time to time approve. The Option Agreement shall comply in all
respects with the terms and conditions of the Plan, and may contain such
additional provisions, including,
<PAGE> 3
without limitation, restrictions upon the exercise of the Option, as the Board
shall deem appropriate.
12. TERMINATION OF EMPLOYMENT. In the event that the employment
of an Optionee shall be terminated (otherwise than by reason of death), such
Option shall be exercisable (to the extent that the Optionee shall have been
entitled to do so at the termination of his employment) at any time before the
expiration of a period of time not exceeding three months after such
termination, but not more than ten years after the date on which such Option
shall have been granted. Nothing in the Plan or in the Option Agreement shall
confer upon any Optionee any right to be continued in the employ of the
Corporation or its subsidiaries, or to interfere in any way with the right of
the Corporation or any such subsidiary to terminate or otherwise modify the
terms of Optionee's duties or position shall not affect such Optionee's Option
so long as such Optionee is still an employee of the Corporation or its
subsidiaries.
13. DEATH OF EMPLOYEE. In the event of the death of an Optionee,
any unexercised Option shall be exercisable (to the extent that the Optionee
shall have been entitled to do so at the time of his death) at any time before
the expiration of a period not exceeding three months after his death but not
more that ten years after the date on which such Option shall have been
granted, and only by such person or persons to whom such deceased Optionee's
right shall pass under such Optionee's will or by the laws of descent and
distribution.
14. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. In the event of
changes in the outstanding Stock of the Corporation by reason of stock
dividends, split-ups, capitalization, mergers, consolidations, combinations or
exchanges of shares, reorganizations or liquidations, the number and class of
shares available under the Plan and the maximum number of shares as to which
Options may be granted to an employee shall be correspondingly adjusted.
15. SHAREHOLDER APPROVAL. This Plan is subject to, and no Options
shall be exercisable hereunder until after, the approval of the Plan by a
majority of the outstanding Stock of the Corporation within twelve months after
the date of the adoption of the Plan by the Board.
16. AMENDMENT OF THE PLAN. The Board shall have complete power
and authority to modify or amend the Plan (including the form of Option
Agreement) from time to time in such respects as it shall deem appropriate,
provided, however, that the Board shall not, without the approval of a majority
of the outstanding Stock of the Corporation entitled to vote at a meeting of
the stockholders, (I) increase the maximum number of shares which in the
aggregate are subject to Options under the Plan except as set forth in
Paragraph 14, (ii) extend the period during which Options may be granted or
exercised, or (iii) reduce the Option price below 100% of the fair market value
of the Stock issuable upon exercise of Options at the time of the granting
thereof, other than to change the manner of determining the fair market value
thereof. No termination or amendment of the Plan shall, without consent of the
individual Optionee, adversely affect the right of such Optionee under an
Option theretofore granted to him or under such Optionee's Option Agreement.
<PAGE> 1
Exhibit 10.2
1990 EMPLOYEE STOCK OPTION PLAN
OF
LIFE SCIENCES, INC.
1. THE PLAN: This 1990 Employee Stock Option Plan (the "Plan")
is intended to encourage ownership of stock of Life Sciences Inc. (the
"Corporation") by specified employees of the Corporation and its subsidiaries
and to provide additional incentive for them to promote the success of the
business of the Corporation.
2. STOCK SUBJECT TO THE PLAN: Subject to the provisions of
Paragraph 14, the total number of shares of the Common Stock, par value $.10
per share, of the Corporation (the "Stock") that may be issued pursuant to
incentive stock options [within the meaning of the Internal Revenue Code of
1986, as amended, (the "Code")], and non-incentive stock options granted under
the Plan (the "Options") shall not exceed 500,000. The Stock may be, in whole
or in part, either authorized and unissued shares or treasury shares as the
Board of Directors of the Corporation (the "Board") shall from time to time
determine. If an Option shall expire or terminate for any reason without having
been exercised in full, the unpurchased shares covered thereby shall (unless
the Plan shall have been terminated) again be available for Options under the
Plan.
3. ADMINISTRATION OF THE PLAN: The Plan shall be administered by
the Board which shall have plenary authority, in its discretion, to determine
the employees of the Corporation and its subsidiaries to whom Options shall be
granted (individually, an "Optionee," and collectively, the "Optionees"), the
number of shares of Stock to be subject to each Option, and the terms of each
Option, including whether it is intended to be an incentive stock option, a
non-incentive stock option, or both. The Board shall also have plenary
authority, subject to the express provisions of the Plan, to interpret the
Plan, to prescribe, amend and rescind any rules and regulations relating to the
Plan, and to take such other action in connection with the Plan as it deems
necessary or advisable. The interpretation and construction by the Board of any
provisions of the Plan or of any Option granted thereunder shall be final, and
no member of the Board shall be liable for any action or determination made in
good faith with respect to the Plan or any Option granted thereunder.
4. EMPLOYEES ELIGIBLE FOR OPTIONS: All employees of the
Corporation or its subsidiaries shall be eligible for Options. In making the
determination as to employees to whom Options shall be granted and as to the
number of shares of Stock to by covered by such Options, the Board shall take
into account the duties of the respective employees, their present and
potential contributions to the success of the Corporation, and such other
factors as it shall deem relevant in connection with accomplishing the purposes
of the Plan.
5. TERM OF PLAN: The Plan shall terminate on, and no Options
shall be granted after, December 12, 2000 provided, however, the Board may at
any time terminate the Plan prior thereto, subject to the last sentences of
Paragraph 16.
6. MAXIMUM OPTION GRANT: The aggregate fair market value
(determined as of the time of the Option granted) of Stock with respect to
which incentive stock options are exercisable for the first time by an Optionee
during any calendar year (under this Plan or any other plan of the Corporation
or the parent or any subsidiary of the Corporation) shall not exceed $100,000.
7. OPTION PRICE: Each Option shall state the option price, which
shall be not less than 100% of the fair market value of the Stock on the date
of the granting of the Option. The fair market value of the Stock shall be
determined by the Board and shall be the mean between the bid and ask prices of
the Stock in the over-the-counter market on the date of the granting of the
Option. Notwithstanding any other provision contained in this Plan, an Option
granted to an employee who, on the date of grant owns voting securities
possessing more than 10% of the total combined voting power of all classes of
shares of either the Corporation or any parent or subsidiary, shall be granted
at an option price of not less than 110% of fair market value on the date of
grant, and shall be exercisable only during the five-year period immediately
following the date of grant. In calculating ownership of shares of any person,
the attribution rules of Code, Section 425(d), will apply. Furthermore, in
calculating share ownership, any shares the Optionee may purchase under
outstanding options will not be considered.
Page 1 of 3
<PAGE> 2
8. TERM OF OPTIONS: The term of each Option shall be for a
maximum of ten years from the date of granting thereof, but may be for a lesser
period or be subject to earlier termination as hereinafter provided.
9. EXERCISE OF OPTIONS: Any Option may be exercised from time to
time as to any part or all of the Stock to which the Optionee shall then be
entitled; provided, however, an Option may not be exercised (a) as to less than
100 shares at any one time (or for the remaining shares then purchasable under
the Option if less than 100 shares), (b) unless the Optionee shall have been in
the continuous employ of the Corporation or its subsidiaries from the date of
the granting of the Option to the date of its exercise, except as provided in
Paragraphs 12 and 13, and (c) an incentive stock option may not be exercised
while any previously granted incentive stock option is outstanding. The
purchase price of the Stock issuable upon exercise of an Option shall be paid
in full at the time of exercise thereof (i) in cash, or (ii) by the transfer to
the Corporation of shares of Stock with a fair market value (as determined by
the Board) equal to the purchase price of the Stock issuable upon exercise of
such Option. The holder of an Option shall not have any rights as a stockholder
with respect to the Stock issuable upon exercise of an Option until
certificates for such Stock shall have been registered in the name of the
Optionee after the exercise of the Option.
10. NON-TRANSFERABILITY OF OPTIONS: An Option shall not be
transferable otherwise than by will or the laws of descent and distribution,
and is exercisable during the lifetime of the Optionee only by the Optionee.
11. FORM OF OPTION: Each Option granted pursuant to the Plan
shall be evidenced by an agreement (an "Option Agreement") in such form as the
Board shall from time to time approve. The Option Agreement shall comply in all
respects with all the terms and conditions of the Plan and the requirements of
the Code, and may contain such additional provisions, including, without
limitation, restrictions upon the exercise of the Option, as the Board shall
deem advisable.
12. TERMINATION OF EMPLOYMENT: In the event the employment of an
Optionee shall be terminated (otherwise than by reason of death), any Option
held by such Optionee shall be exercisable (to the extent the Optionee shall
have been entitled to do so at the termination of his employment) at any time
prior to the expiration of three months after such termination, but not more
than ten years after the date on which such Option shall have been granted.
Nothing in the Plan or in the Option Agreement shall confer upon any Optionee
any right to be continued in the employ of the Corporation or its subsidiaries
or interfere in any way with the right of the Corporation or any such
subsidiary to terminate or otherwise modify the terms of an Optionee's
employment; provided, however, a change in an Optionee's duties or position
shall not affect such Optionee's Option so long as such Optionee is still an
employee of the Corporation or its subsidiaries.
13. DEATH OF EMPLOYEE: In the event of the death of an Optionee,
any unexercised portion of his Option shall be exercisable (to the extent the
Optionee shall have been entitled to do so at the time of his death) at any
time before the expiration of three months after his death, but not more than
ten years after the date on which such Option shall have been granted, and only
by such person or persons to whom such deceased Optionee's rights shall pass
under such Optionee's will or by the laws of descent and distribution.
14. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION: In the event of
changes in the outstanding Stock by reason of any stock dividends, split-ups,
capitalizations, mergers, consolidations, combinations or exchanges of shares,
reorganizations or liquidations, the number and class of shares available under
the Plan and the maximum number of shares as to which Options may be granted to
Optionees under outstanding Option Agreements shall be correspondingly
adjusted.
15. SHAREHOLDER APPROVAL: This Plan is subject to, and no Options
shall be exercisable hereunder until after, the approval by a majority of the
outstanding Stock of the Corporation within twelve months after the date of the
adoption of the Plan by the Board.
Page 2 of 3
<PAGE> 3
16. AMENDMENT OF THE PLAN: The Board shall have complete power
and authority to modify or amend the Plan (including the form of Option
Agreement) form time to time in such respects as it shall deem appropriate;
provided, however, the Board shall not, without the approval of a majority of
the outstanding Stock entitled to vote at a meeting of the stockholders, (i)
increase the maximum number of shares of Stock which in the aggregate are
subject to Options under the Plan except as set forth in Paragraph 14, (ii)
extend the period during which Options may be granted or exercised, or (iii)
reduce the Option price below 100% of the fair market value of the Stock
issuable upon exercise of Options at the time of the granting thereof, other
than to change the manner of determining the fair market value thereof. No
termination or amendment of the Plan shall, without the consent of the
individual Optionee, adversely affect the rights of such Optionee under an
Option theretofore granted to him or under such Optionee's Option Agreement.
Page 3 of 3
<PAGE> 1
Exhibit 10.3
LICENSE AGREEMENT
This License Agreement is entered into this 9th day of July 1998, by and between
ORGANON TEKNIKA B.V. (hereinafter referred to as "Teknika"), a corporation of
the Netherlands having its principal place of business at Boseind 15, 5281 RM
Boxtel, the Netherlands,
And
LIFE SCIENCES, INC., (hereinafter referred to as "LICENSEE"), a corporation of
the U.S.A., having its registered offices at 2900 72nd Street North, St.
Petersburg, Florida 33710, U.S.A.
WHEREAS, Teknika is the equitable owner of all the right, title and interest in
and to certain Patent Rights (as Hereinafter defined) owned by its ultimate
holding company Akzo Nobel N.V. (a corporation organized under the laws of the
Netherlands) including, but not limited to, the exclusive right to grant
licenses under such Patent Rights, and Teknika further is the beneficial owner
of, and has the right to grant licenses under, Accusphere Technology as defined
hereinafter,
WHEREAS, LICEENSEE desires to obtain a license from Teknika under the Patent
Rights and the Accusphere Technology, for the purposes stated herein below.
NOW THEREFORE, the parties agree as follows:
1. Definitions
1.1 The term "NASBA" means isothermal transcription based enzymatic nucleic
acid amplification procedure, method or system.
1.2 The term "NASBA" Technology" means a technology employing NASBA
principal, including, but not limited to, the information contained in
the patents and/or the claims of the patents and/or patent applications
included in the Patent Rights.
1.3 The term "Accusphere Technology" means a proprietary processing method
which conveys thermal protective characteristics to enzymes and other
biologically active molecules when stored at temperatures above 00C and
as set out in more detail in Annex A.
1.4 The term "Licensed Products" shall mean any in vitro diagnostic test,
assay, method or kit, the development, manufacture, use, or sale of
which make use of the NASBA Technology and/or are covered by one or
more claims of the Patent Rights and/or which make use of the
Accusphere Technology and includes services for providing test results
or other services which utilize such product(s)
<PAGE> 2
1.5 The term "Net Sales" means the gross amount actually charged by
LICENSEE, on sales, or other dispositions for value, of Licensed
Products, less value added taxes, and less a lump sum to cover all
usual deductions such as discounts, sales, use and similar taxes
allowances or credits for returned products actually allowed and taken,
custom duties, transportation, shipping and handling charges, etc.
which shall be 5% of the invoice amount for the Licensed Products.
Sales or other transfers of Licensed Products to Affiliated Companies
or between Affiliated Companies and resold to third parties, shall not
constitute Net Sales of Licensed Products until the Licensed Products
are sold to parties who are not Affiliated Companies.
1.6 The term "Research Market" shall mean customers utilizing Licensed
Products for non-commercial, research purposes only. For the avoidance
of doubt, such customers shall not resell the Licensed Products,
neither commercialize results obtained with the Licensed Products, nor
shall reimbursement under a health care plan be applicable on the
Licensed Products so sold.
1.7 The term "Water Testing Market" shall mean the market for testing water
which is destined to be used as drinking water and/or for aquaculture,
for the presence of pathogenic waterborne organisms.
1.8 The term "Air Testing Market" shall mean the market for testing the
environment for the presence of airborne pathogens.
1.9 The term "Territory" shall mean all countries of the world.
1.10 The term "Affiliated Company" means any company which, by means of
ownership of 50% or more of shares or at least 50% interest in income
or otherwise, directly or indirectly controls, is controlled by or is
under common control with either party.
2. Licensing of Patent Rights and Proprietary Technology
Teknika hereby grants to LICENSEE a non-transferable, non-exclusive
license, without the right to sublicense, to use the NASBA Technology
and/or the Accusphere Technology and the Patent Rights for the sole
purpose of manufacturing, using, selling and/or having sold by
resellers Licensed Products under its own label in the Research Market,
Water Testing Market and the Air Testing Market in the Territory for
the life of this Agreement. Commencing with the execution and delivery
of this Agreement, Teknika shall use its best efforts to transfer to
LICENSEE any relevant know-how, including, but not limited to, the
Accusphere Technology, in order that LICENSEE may successfully utilize
the technology licensed to it under this Agreement.
<PAGE> 3
3. Royalties, Records and Accounting
3.1 In consideration of the rights granted under Article 2, LICENSEE shall
pay Teknika according to the terms set out in Annex C of this Agreement
a non-refundable, non deductible payment of USD $105,000,- which
payment shall not act as prepaid royalties creditable toward any
running royalties due under this Paragraph as and when such royalties
are due and payable.
3.2 Furthermore LICENSEE shall pay Teknika as from the effective day
hereof, a running royalty of 10% of the Net Sales to end-users of
Licensed Products utilizing NASBA Technology but not Accusphere
Technology and #% of the Net Sales of Licensed Products utilizing
Accusphere Technology but not NASBA Technology and 13% of Licensed
Products utilizing both Accusphere Technology and NASBA Technology. The
LICENSEE shall pay Teknika a running royalty of 13% of the Net Sales to
resellers of Licensed Products utilizing NASBA Technology but not
Accusphere Technology and 5% of the Net Sales of Licensed Products
utilizing Accusphere Technology but not NASBA Technology and 18% of
Licensed Products utilizing both Accusphere Technology and NASBA
Technology.
3.3 LICENSEE agrees to keep or cause to be kept accurate records and books
of account in accordance with good accounting practice, showing the
information required to permit calculation of Net Sales and the
royalties under this Article. These books and records shall be
preserved for at least six (6) years from the date of the royalty
payments to which they pertain.
3.4 On or before the 45th day of each calendar quarter during the term
hereof, LICENSEE shall prepare and send to Teknika royalty reports for
the previous quarter. Said reports shall indicate total sales and Net
Sales per country under this Agreement for the previous calendar
quarter, per Licensed Product, and shall show the amount of royalty due
with sufficient information to enable confirmation by Teknika, and
LICENSEE shall include payment of the amount of royalties shown to be
due with such report.
3.5 Periodically (i.e. each calendar quarter), LICENSEE shall provide to
Teknika customer lists, which shall only be used for enabling Teknika
to closely follow-up and keep track of which customers are being served
by LICENSEE.
3.6 Upon ten (10) days written notice and not more than once per calendar
year, LICENSEE agrees to permit one or more Certified Public
Accountant(s) appointed by Teknika (except one to whom LICENSEE has a
reasonable objection), to enter upon the premises of LICENSEE during
all usual business hours of LICENSEE at any time following the 60th day
of any calendar quarter in order to inspect files and records
pertaining to Net Sales and royalties under this Agreement, and to make
on LICENSEE's premises and retain copies of any and all parts of the
records and accounts kept by LICENSEE pursuant to this
<PAGE> 4
Article, including invoices which are relevant to any report required
to be rendered by LICENSEE. Said copies shall be provided to the
Certified Public Accountant(s) at no expense to Teknika. Said Certified
Public Accountant(s) shall keep all information received from LICENSEE
confidential; however, it will provide Teknika with the Net Sales, per
country, for each type of Licensed Product, specifying the sales and
the application of the appropriate royalty rate so that royalties due
Teknika May be calculated. The information obtained by the Certified
Public Accountant(s) shall be retained for a period of seven (7) year.
In the event any audit results in a change upward in an annual royalty
payment of as much as five percent (5%) for any annual period, LICENSEE
shall pay the costs of such audit for such annual period, otherwise
such audit shall be a Teknika's expenses.
3.7 Payment of all royalties hereunder shall be made at Teknika's option in
Dutch Guilders or Euro at the mean rate of exchange existing on ;the
last day of the quarter to which the payment applies as published in
the Wall Street Journal (European Edition).
4. Duration
4.1 This Agreement shall become effective as of August 1, 1998, and shall
remain in effect until the last to expire of the Patent Rights;
provided, however, that LICENSEE's rights to use the Accusphere
Technology shall continue for an additional 25 years, subject to the
payment of the related royalty for this technology.
4.2 In the event either party breaches this Agreement, in addition to all
other rights and remedies which either party may have, the party not in
default may terminate this Agreement by written notice. Such
termination shall become effective on the date set forth in the notice
of termination, but in no event shall it be earlier than sixty (60)
days from the date of mailing thereof and shall have no effect if the
breach has been cured within the said period of notice.
4.3 The termination of this Agreement shall not relieve LICENSEE from its
obligation to pay Teknika all royalties that shall have accrued up to
the effective date of termination.
5. Assignment
Teknika shall have the right to assign this Agreement to, or delegate
its obligations hereunder to be performed by any successor of
Affiliated Company of Teknika, provided that Teknika warrants that the
terms and conditions for LICENSEE remain unchanged. This Agreement is
not assignable by LICENSEE without the prior written consent of
Teknika.
<PAGE> 5
6. Entirety Clause
As of the date hereof, this Agreement supersedes all previous oral and
written agreements between the parties, and constitutes the only and
entire understanding to exist between the parties with respect to the
subject matter of this Agreement, and no amendment shall be implied or
proven form or evidence by negotiations between the parties heretofore
or hereinafter conducted or agreements of the parties heretofore or
hereafter executed, unless in writing and signed by the parties hereto.
7. Warranty
7.1 Teknika represents and warrants to LICENSEE that it has the full right
and power to grant the license to LICENSEE as set forth in this
Agreement.
7.2 Except as specifically set forth in paragraph 7.1 herein, Teknika makes
no representations or warranties, either express or implied, arising by
law or otherwise, including, but not limited to, implied warranties of
merchantability or fitness for a particular purpose. In no event will
Teknika have any obligation or liability arising from tort, or for loss
of revenue or profit, or for incidental or consequential damages.
In particular, with no limitation, nothing in this Agreement will be
construed as:
(i) A warranty or representation that anything made, used,
sold or otherwise disposed of under the license granted in this
Agreement is or will be free from infringement of patents of third
parties;
(ii) Conferring the right to use in advertising, publicity,
or otherwise any trademark, trade name, or any contraction,
abbreviation, simulation, or adaptation thereof, of Teknika; or
(iii) Conferring by implication, estoppel, or otherwise any
license or rights under any patents of Teknika other than the Patent
Rights, regardless of whether the patents are dominant or subordinate
to Patent Rights.
7.3 In the event LICENSEE becomes aware of infringement of the Patent
Rights or the Accusphere Technology by a third party, it will
immediately notify ;Teknika thereof. Teknika intends to use such
reasonable efforts, as it in its sole discretion determine, to pursue
infringers and enforce its rights under the Patent Rights. LICENSEE, at
Teknika's request, shall render all reasonable assistance and
cooperation in that regard. Any recoveries resulting from such action
by Teknika shall be Teknika's property.
8. Applicable Law; Severability
8.1 This Agreement shall be deemed to have been made in and shall be
construed in accordance with the laws of the Kingdom of the Netherland,
for all matters other than scope and
<PAGE> 6
validity of the Patent Rights, as to which the laws of the particular
country where the Patent Rights are in dispute shall supply.
8.2 Any dispute, controversy or claim arising under, out of or relating to
this contract and any subsequent amendments of this contract,
including, without limitation, its formation, validity, binding effect,
interpretation, performance, breach or termination, as well as
non-contractual claims, shall be submitted to mediation in accordance
with the WIPO Mediation Rules. The place of mediation shall be Geneva,
Switzerland. The language to be used in the mediation shall be English.
If, and to the extent that, any such dispute, controversy or claim has
not been settled pursuant to the mediation without 60 days of the
commencement of the mediation, it shall, upon the filing of a Request
for Arbitration by either party, be referred to and finally determined
by arbitration in accordance with the WIPO Arbitration Rules.
Alternatively, if, before the expiration of the said period of 60 days,
either party fails to participate or to continue to participate in the
mediation, the dispute, controversy or claim shall, upon the filing of
a Request for Arbitration by the other party, be referred to and
finally determined by arbitration in accordance with the WIPO
Arbitration Rules. The arbital tribunal shall consist of a sole
arbitrator. The place of arbitration shall be Geneva, Switzerland. The
language to be used in the arbital proceedings shall be English. The
arbitration shall be in lieu of any other remedy and the award shall be
final, binding and enforceable by any court having jurisdiction for
that purpose.
9. Miscellaneous Provisions
9.1 All notices which shall or may be given hereunder shall be in writing
in English and shall be prepaid registered mail addressed to the
recipient at the addresses herein stated, or at such other address as a
party may from time to time designate:
Organon Teknika B.V.
Boseind 15
5281 RM Boxtel
The Netherlands
Attn: President
and
Life Sciences, Inc.
2900 72nd Street North
St. Petersburg
Florida 33710
W.S.A.
Attn: President
<PAGE> 7
9.2 Payment of lumpsum fees and royalties, due under this Agreement, are to
be made to Organon Teknika B.B., Boxtel. the Netherlands, to its
account with ABN Amro Bank, Nijmegen, the Netherlands, account no.
45.30.40.152
9.3 Confidentiality
Each party to this Agreement agrees that any information
obtained by it from the other party pursuant to this Agreement shall be
kept in the strictest confidence and shall only be used for the proper
performance of this Agreement, except that this obligation shall not
apply to:
(a) information which is in or becomes part of the public
domain otherwise than by breach of this Agreement; or
(b) information which the recipient can show was in its
possession at the date of signing of this Agreement; or
(c) information which was received by the recipient or its
affiliated companies without the benefit of any disclosure by the
disclosing party; or
(d) is ;independently developed by the recipient or its
affiliated companies without the benefit of any disclosure by the
disclosing party; or
(e) is required to be disclosed by court order or other
process of law. The foregoing obligation shall cease five (5) years
after termination or expiration of this Agreement.
As agreed at Boxtel, As agreed at St. Petersburg,
ORGANON TEKNIKA B.V. LIFE SCIENCES, INC.
/s/ J. Dopper /s/ Alex A. Burns
- ------------------------ ----------------------------
R. Salsmans Alex Burns
p.o. J. Dopper Vice President
Executive Vice President
/s/ A.J.F Stap
- ------------------------
A.J.F. Stap
Executive Vice President
Strategic Affairs
<PAGE> 1
Exhibit 10.4
LICENSE AGREEMENT
This License Agreement is entered into this March 31, 1999, by and between
ORGANON TEKNIKA B.V. (hereinafter referred to as "Teknika"), acorporation of the
Netherlands, having its principal place of business at Boseind 15, 5281 RM
Boxtel, The Netherlands
and
LIFE SCIENCES INC., (hereinafter referred to as "LICENSEE"), a corporation of
the U.S.A., having its registered offices at 2900 72nd Street North, St.
Petersburg, Florida 33710, U.S.A..
WHEREAS, Teknika is the equitable owner of all the right, title and interest in
and to certain Patent Rights (as hereinafter defined) owned by its ultimate
holding company Akzo Nobel N.V. (a corporation organized under the laws of the
Netherlands) including, but not limited to, the exclusive right to grant
licenses under such Patent Rights.
WHEREAS, LICENSEE desires to obtain a license from Teknika under the Patent
Rights for the purposes stated herein below.
NOW THEREFORE, the parties agree as follows:
1. Definitions
1.1 The term "NASBA" means isothermal transcription based enzymatic nucleic
acid amplification procedure, method or system.
1.2 The term "NASBA Technology" means a technology employing the NASBA
principle, including, but not limited to, the information contained in
the patents and/ or the claims of the patents and/or patent
applications included in the Patent Rights.
1.3 The term "Boom Technology" means a technology employing the Boom
principle, including, but not limited to, the information contained in
the patents and/ or the claims of the patents and/or patent
applications included in the Patent Rights.
1.4 The term "Licensed Products" shall mean any in vitro diagnostic test,
assay, method or kit, the development, manufacture, use or sale of
which make use of the NASBA Technology, the Boom Technology and / or
the NASBA and Boom Technology and are covered by one or more claims of
the Patent rights.
<PAGE> 2
1.5 The term "Patent Rights" shall mean the patents and patent applications
described in the attached ANNEX A and B hereto and any patents
subsequently granted as well as any substitutions, divisions,
continuations, continuations in part, renewals, reissues, confirmations
or registrations, foreign counterparts and extensions of the foregoing.
1.6 The term "Net Sales" means the gross amount actually charged by
LICENSEE, on sales, or other dispositions for value, of Licensed
Products, less value added taxes and less a lump sum to cover all usual
deductions such as discounts, sales, use and similar taxes, allowances
or credits for returned products actually allowed and taken, custom
duties, transportation, shipping and handling charges, etc. which shall
be 5% of the invoice amount for the Licensed Products. Sales or other
transfers of Licensed Products to Affiliated Companies or between
Affiliated Companies and resold to third parties, shall not constitute
Net Sales of Licensed Products until the Licensed Products are sold to
parties who are not Affiliated Companies.
1.7 The term "Field of Use" shall mean clinical diagnostic tests for
detection of pathogens for HIV, Hepatitis and other sexually
transmitted diseases in human subjects.
1.8 The term "Territory" shall mean the Peoples Republic of China and other
territories under the administrative control of Central Chinese
Governmental Authorities, together with the Republic of China {Taiwan}.
With the mutual consent of the parties to this agreement the geographic
limits of the "Territory" may from time to time be extended to
accommodate the sale of the same tests as sold in the "Territory" in
other areas as well as the sale of specific additional NASBA based
tests to be sold in named geographic locales other than the
"Territory". The parties shall agree on the terms and conditions for
such possible extension in good faith negotiations.
1.9 The term "Affiliated Company" means any company which, by means of
ownership of 50% or more of shares or at least 50% interest in income
or otherwise, directly or indirectly controls, is controlled by or is
under common control with either party.
2. Licensing of Patent Rights and Proprietary Technology
2.10 Teknika hereby grants to LICENSEE a non-transferable, non-exclusive
license, without the right to sublicense, to use the NASBA Technology
and / or the Boom Technology and / or the Patent Rights for the sole
purpose of manufacturing, using, selling and/or having sold by
independent resellers Licensed Products under its own label or the
label of an Affiliated Company in the Clinical Diagnostic Testing in
the Field of Use in the Territory for the life of this Agreement.
Commencing with the execution
<PAGE> 3
and delivery of this Agreement, Teknika shall use its reasonable
efforts to transfer to LICENSEE any relevant know-how, including, but
not limited to, the NASBA and Boom Technologies in order that LICENSEE
may successfully utilize the technology contemplated to be licensed to
it under this Agreement.
3. Royalties, Records and Accounting
3.1 In consideration of the rights granted under Article 2, LICENSEE shall
pay Teknika according to the schedule set out in Annex C of this
Agreement a non-refundable, non deductible payment of USD 300,000 {US
Dollars three hundred thousand}, which payment shall not act as prepaid
royalties creditable toward any running royalties due under this
Paragraph as and when such royalties are due and payable.
3.2 Furthermore LICENSEE shall pay Teknika as from the Effective Date
hereof, a running royalty of 8% of the Net Sales to end-users of
Licensed Products utilizing NASBA Technology. The LICENSEE shall pay
Teknika a running royalty of 10% of the Net Sales to resellers for
utilizing NASBA Technology. The LICENSEE shall pay Teknika a running
royalty of 3% of the Net Sales for Licensed Products utilizing Boom
Technology whether such sales are to end-users or to independent
resellers. Royalties due on sales of Licensed Products made during the
periods prior to the LICENSEE achieving annual sales of USD 5 million
of the Licensed Products may be offset by license fees payable to the
LICENSEE by Teknika for Teknika's access to trade secrets or other
intellectual property developed by the LICENSEE and its affiliates. The
election to license such trade secrets or intellectual property is to
be made at Teknika's sole discretion. The LICENSEE's anticipated
integrated NASBA cassette shall be excluded from the technologies made
available to Teknika via this construction.
3.3 LICENSEE agrees to keep or cause to be kept accurate records and books
of account in accordance with good accounting practice, showing the
information required to permit calculation of Net Sales and the
royalties under this Article. These books and records shall be
preserved for at least six {6} years from the date of the royalty
payments to which they pertain.
3.4 On or before the 45th day of each calendar quarter during the term
hereof LICENSEE shall prepare and send to Teknika royalty reports for
the previous quarter. Said reports shall indicate total sales and Net
Sales per country under this Agreement for the previous calendar
quarter, per Licensed Product, and shall show the amount of royalty due
with sufficient information to enable confirmation by Teknika, and
LICENSEE shall include payment of the amount of royalties shown to be
due with such report.
<PAGE> 4
3.5 Periodically {i.e., each calendar quarter}, LICENSEE shall provide to
Teknika customer lists, enabling Teknika to closely follow-up and keep
track of which customers are being served by LICENSEE.
3.6 Upon ten (10) days written notice and not more than once per calendar
year, LICENSEE agrees to permit one or more Certified Public Account
{s} appointed by Teknika {except one to whom LICENSEE has a reasonable
objection}, to enter upon the premises of LICENSEE during all usual
business hours of LICENSEE at any time following the 60th day of any
calendar quarter in order to inspect files and records pertaining to
Net Sales and royalties under this Agreement, and to make on LICENSEE's
premises and retain copies of any and all parts of the records and
accounts kept by LICENSEE pursuant to this Article, including invoices
which are relevant to any reports required to be rendered by LICENSEE.
3.7 Said copies shall be provided to the Certified Public Accountant {s} at
no expense to Teknika. Said Certified Public Accountant {s} shall keep
all information received from LICENSEE confidential; however, it will
provide Teknika with the Net Sales, per country, for each type of
Licensed Product, specifying the sales and the application of the
appropriate royalty rate so that royalties due Teknika may be
calculated. The information obtained by the Certified Public Accountant
{s} shall be retained for a period of seven {7} years.
In the event any audit results in a change upward in any royalty
payment of as much as five percent {5%} for any annual period, LICENSEE
shall pay the costs of such audit for such annual period, otherwise
such audit shall be at Teknika's expenses.
3.7 Payment of all royalties hereunder shall be made at Teknika's option in
Dutch Guilders or Euro at the mean rate of exchange existing on the
last day of the quarter to which the payment applies as published in
the Wall Street Journal {European Edition}.
4. Duration
4.1 This Agreement shall become effective as of June 1, 1999, {Effective
Date} and shall remain in effect until the last to expire of the Patent
Rights.
4.2 In the event either party breaches this Agreement, in addition to all
other rights and remedies which either party may have, the party not in
default may terminate this Agreement by written notice. Such
termination shall become effective on the date set forth in the notice
of termination, but in no event shall it be earlier than sixty (60)
days from the date of mailing
<PAGE> 5
thereof and shall have no effect if the breach has been cured within
the said period of notice.
4.3 The termination of this Agreement shall not relieve LICENSEE from its
obligation to pay Teknika all royalties that shall have accrued up to
the effective date of termination.
5. Assignment
Teknika shall have the right to assign this Agreement to, or delegate
its obligations hereunder to be performed by any successor or
Affiliated Company of Teknika, provided that Teknika warrants that the
terms and conditions for LICENSEE remain unchanged. This Agreement is
not assignable by LICENSEE without the prior written consent of
Teknika.
6. Entirety Clause
As of the date hereof, this Agreement supersedes all previous oral and
written agreements between the parties, and constitutes the only and
entire understanding to exist between the parties with respect to the
subject matter of this Agreement, and no amendment shall be implied or
proven from or evidenced by negotiations between the parties heretofore
or hereinafter conducted or agreements of the parties heretofore or
hereafter executed, unless in writing and signed by the parties hereto.
7. Warranty
7.1 Teknika represents and warrants to LICENSEE that it has the full right
and power to grant the license to LICENSEE as set forth in this
Agreement.
7.2 Except as specifically set forth in Paragraph 7.1 herein, Teknika makes
no representations or warranties, either express or implied, arising by
law or otherwise, including, but not limited to, implied warranties of
merchantability or fitness for a particular purpose. In no event will
Teknika have any obligation or liability arising from tort, or for loss
of revenue or profit, or for incidental or consequential damages.
In particular, with no limitation nothing in this Agreement will be
construed as:
<PAGE> 6
(i) A warranty or representation that anything made, used,
sold or otherwise disposed of under the license granted in this
Agreement is or will be free from infringement of patents of third
parties;
(ii) Conferring the right to use in advertising, publicity,
or otherwise any trademark, trade name, or any contraction,
abbreviation, simulation, or adaptation thereof, of Teknika; or
(iii) Conferring by implication, estoppel, or otherwise any
license or rights under any patents of Teknika other than the Patent
Rights, regardless of whether the patents are dominant or subordinate
to Patent Rights.
7.3 In the event LICENSEE becomes aware of infringement of the Licensed
Patents by a third party, it will immediately notify Teknika thereof.
Teknika intends to use such reasonable efforts, as it in its sole
discretion determines, to pursue infringers and enforce its rights
under the Licensed Patents. LICENSEE, at Teknika's request, shall
render all reasonable assistance and cooperation in that regard. Any
recoveries resulting from such action by Teknika shall be Teknika's
property.
8. Applicable Law: Severability
8.1 This agreement shall be deemed to have been made in and shall be
construed in accordance with the laws of the Kingdom of the
Netherlands, for all matters other than scope and validity of the
Patent Rights, as to which the laws of the particular country where the
Patent Rights are in dispute shall apply.
8.2 Any dispute, controversy or claim arising under, out of or relating to
this contract and any subsequent amendments of this Contract,
including, without limitation, its formation, validity, binding effect,
interpretation, performance, breach or termination, as well as
non-contractual claims, shall be submitted to mediation in accordance
with the WIPO Mediation Rules. The language to be used in the mediation
shall be English.
<PAGE> 7
If, and to the extent that, any such dispute, controversy or claim has
not been settled pursuant to the mediation within 60 days of the
commencement of the mediation, it shall, upon the filing of a Request
for Arbitration by either party, be referred to and finally determined
by arbitration in accordance with the WIPO Arbitration Rules.
Alternatively, if, before the expiration of the said period of 60 days,
either party fails to participate or to continue to participate in the
mediation, the dispute, controversy or claim shall, upon the filing of
a Request for Arbitration by the other party, be referred to and
finally determined by arbitration in accordance with the WIPO
Arbitration Rules. The arbitral tribunal shall consist of a sole
arbitrator. The place of arbitration shall be Geneva, Switzerland. The
language to be used in the arbitral proceedings shall be English. The
arbitration shall be in lieu of any other remedy and the award shall be
final, binding and enforceable by any court having jurisdiction for
that purpose.
9. Miscellaneous Provisions
9.1 All notices which shall or may be given hereunder shall be in writing
in English and shall be prepaid registered mail addressed to the
recipient at the addresses herein stated, or at such other address as a
party may from time to time designate:
Organon Teknika B.V.
Boseind 15
5281 RM Boxtel
The Netherlands
Attn: President
and
Life Sciences Inc.
2900 72nd Street North
St. Petersburg,
Florida 33710, U.S.A.
Attn: President
9.2 Payment of Lump sum fees and royalties, due under this agreement, are
to be made to Organon Teknika B. V., Boxtel, The Netherlands, to its
account with ABN Amro Bank, Amsterdam, the Netherlands, account no.
45.30.40.152.
<PAGE> 8
9.3 Confidentiality
Each party to this Agreement agrees that any information obtained by it
from the other party pursuant to this Agreement shall be kept in the
strictest confidence and shall only be used for the proper performance
of this Agreement, except that this obligation shall not apply to:
a) information which is in or becomes part of the public
domain otherwise than by breach of this Agreement; or
b) information which the recipient can show was in its
possession at the date of signing of this Agreement; or
c) information which was received by the recipient on a
non-confidential basis from a third party having the legal right to
transmit the same; or
d) is independently developed by the recipient or its
Affiliated Companies without the benefit of any disclosure by the
disclosing party; or
e) is required to be disclosed by court order or other process
of law.
The foregoing obligation shall cease five (5) years after termination or
expiration of this Agreement.
As agreed at Boxtel As agreed at St. Petersburg
ORGANON TEKNIKA B.V. LIFE SCIENCES, INC.
/s/ J. Dopper /s/ Alex Burns
- ------------------------ ---------------------------
R. Salsmans Alex Burns
p.o. J. Dopper Vice President
Executive Vice President
/s/ A.J.F. Stap
- ------------------------
A.J.F. Stap
Executive
Vice President
Strategic Affairs
<PAGE> 1
Exhibit 10.5
ADDENDUM
TO
LICENSE AGREEMENT
This Addendum is entered into this 28th day of September 1999, by and between
ORGANON TEKNIKA B.V. (hereinafter referred to as "Teknika") , a private company
with limited liability having its principal place of business at Boseind 15,
5281 RM Boxtel, the Netherlands,
and
LIFE SCIENCES INC. , (hereinafter referred to as "Licensee" ) , a corporation
having its registered offices at 2900 7th Street North, St. Petersburg, Florida
33710, U.S.A.,
WHEREAS, Teknika and Licensee entered into a licence agreement on 9 July 1998
whereby Licensee was granted a non exclusive license to use the NASBA
Technology, Accusphere Technology and Patent rights as defined and further
described therein (the 'Original Agreement') ;
WHEREAS, Teknika has undertaken under the Original Agreement to transfer any
relevant know how in respect of the Accusphere Technology to Licensee in order
that Licensee may successfully utilise the technology;
WHEREAS, Licensee has expressed a need to be provided with a design plan of a
drip dispenser (hereinafter the "Design Plan") , as attached as ANNEX A, for
the use of the Accusphere Technology, Teknika is willing to provide the Design
Plan and has provided the Design Plan and Teknika now wishes to formalise the
terms and conditions, subject to which the Design Plan has been transferred to
the Licensee, in this Addendum to the Original Agreement;
NOW THEREFORE, THE PARTIES AGREE AS FOLLOWS:
ARTICLE 1 - DEFINITIONS
Product means the drip dispenser as further described in the attached ANNEX A
to be developed by Licensee using the Design Plan. Agreement means this
Addendum and the original Agreement. Unless specifically defined in the text of
this Addendum, all other terms will have the meaning as defined in the Original
Agreement.
ARTICLE 2 - DEVELOPMENT
2.1 Teknika has disclosed and delivered to Licensee the Design Plan as
needed by Licensee in the development of the Product.
page 1
<PAGE> 2
The parties acknowledge, for the avoidance of doubt, that no transfer
of right to intellectual property embodied in the Design Plan will be
effected or has been effected by such transfer of Design Plan.
2.2 Licensee shall assume and diligently pursue at its own expense all
activities reasonably necessary to develop and manufacture the
Product.
2.3 Where Licensee makes improvements to the Product or discovers or
develops a new application of the know how in respect of the
Accusphere Technology or the Product during the term of this
Agreement, Licensee will grant a royalty free, non exclusive license
to Teknika for the manufacture, development and use of these
improvements.
2.4 Licensee warrants that any third party instructed to manufacture the
Product for Licensee will be bound by the terms and conditions of the
Original Agreement and this Addendum, including but not limited to the
obligation of confidentiality in respect of any confidential
information of Teknika, and Licensee hereby agrees to compensate
Teknika for any damages incurred by Teknika as a result of a breach of
the terms and conditions of the Original Agreement and/or this
Addendum by such third party.
ARTICLE 3 - DURATION AND TERMINATION
3.1 This Addendum shall become effective as of the date of signing hereof.
The term of this Addendum shall coincide with the term of the Original
Agreement.
3.2 Upon termination Licensee shall cease to use the Design Plan and shall
return all data, information, records, reports etc. in respect of the
Design Plan, including the Product, and transfer all rights accruing
to Licensee as a consequence of this Agreement promptly to Teknika
upon its request.
ARTICLE 4 - LIABILITY
4.1 Licensee hereby undertakes to indemnify, defend and hold Teknika
harmless against any claims, demands, damages and expenses (including
reasonable attorney's fees) in connection with any loss, damage,
injury or death suffered by Licensee, its Affiliates, employees or any
third party and either directly or indirectly arising or resulting or
alleged to arise or result from the development, manufacture or use of
the Product by or on behalf of' Licensee.
4.2 The provisions of Paragraph 4.1 above shall apply with the provision
that:
(a) Teknika promptly notifies Licensee in writing after Teknika
receives notice of any claim;
page 2
<PAGE> 3
(b) Licensee shall have the right to sole control of the defence,
trial, and any related settlement negotiations; and
(c) Teknika reasonably co operates with Licensee in the defence
of any such claim.
ARTICLE 5 - WHOLE AGREEMENT
This Addendum and the Original Agreement together form the entire agreement
between the parties hereto relating to the subject matter of this Agreement.
Unless otherwise provided for in this Addendum, all terms and conditions of the
Original Agreement continue to apply. Where any of the terms of conditions of
this Addendum and the Original Agreement conflict, the terms and conditions of
this Addendum shall prevail. This Agreement may be modified in writing only.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement through
their duly authorized officers in duplicate on the day, month and year first
written above. behalf of
For and on behalf of For and on behalf of
Organon TEKNIKA B.V. LIFE SCIENCES INC.
/s/ R. Salsmans /s/ Alex A. Burns
-------------------------------- --------------------------------
Name: Dr. R. Salsmans Name: Alex Burns
-------------------------------- --------------------------------
Title: President Title: Vice President
------------------------------- -------------------------------
/s/ A. J. F. Stap
--------------------------------
Name: A. J. F. Stap
--------------------------------
Title: Executive Vice President
-------------------------------
page 3
<PAGE> 1
Exhibit 10.6
LOUIS D. SRYBNIK
April 9, 1999
LIFE SCIENCES, INC.
Attn.: Alex A. Burns
2900 72nd Street North
St. Petersburg, Florida 33710
Re: Investment Representations and Agreements - Life Sciences,
Inc.
Gentlemen:
This letter sets forth my representations, warranties and
acknowledgements to Life Sciences, Inc., a Delaware corporation ("LSI", "you" or
the "Company"), and my related covenants and agreements with you, all in
connection with the offer to purchase from you shares of common stock, $.10 par
value per share, of LSI (the "Common Stock"), at $.4375 per share(1) as the
means of liquidating your indebtedness to me.
As of the close of business yesterday, April 8, 1999, you were indebted
to me in the aggregate amount of $29,342.13, consisting of $25,000.00 in
principal (the "Principal") and $4,342.13 in interest and other charges
(collectively, the "Other Charges"), all of which is due to me in connection
with one or more loans of money to you as reflected in your books and records.
During my current visit to Florida, you and I have agreed, and upon acceptance
of this letter (this "Investment Representation Letter" or this "Letter") by you
we hereby evidence our agreement, that the Principal shall be paid and
discharged by the sale and issuance by you, in a private offering to me, of
shares of Common Stock at $.4375 per share, and that the Other Charges shall be
forgiven and extinguished upon the date of your acceptance of this Letter
without any further act or deed by either of us. This would result in the sale
and issuance to me of a total of 57,142 whole shares (rounded down in
calculation) of Common Stock (the "Shares") as of the date this Letter. I hereby
subscribe for and agree to purchase the Shares.
It is in this context that I provide you with this Letter as an
inducement to your sale of the Shares to me, and I intend and realize that the
Company and its agents and representatives will rely on my representations,
warranties, acknowledgements, covenants and agreements set forth in this Letter
in connection with the sale to me of the Shares. I understand that reliance will
also be placed on the accuracy and completeness hereof in complying with the
obligations of applicable securities laws, and that failure to comply with those
obligations may have significant legal consequences.
(1) Representations, Etc. Therefore, for good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
preceding three paragraphs are incorporated herein by this reference, and I
represent, warrant, acknowledge, covenant and agree as follows:
(a) My business address is 140 - 53rd Street, Brooklyn,
New York 11232, and my social security number is ###-##-####. Insofar as I am
aware, no commission or other remuneration is payable as a result of my proposed
purchase of the Shares, and no general solicitation or advertisement occurred in
connection therewith.
(b) I am an "accredited investor" within the meaning of
Regulation D under the
- --------
(1) This amount is equal to the last reported high, low and closing prices of
the Common Stock in the over-the-counter market on March 26, 1999, the
closest available date for such information prior to the date hereof.
<PAGE> 2
Life Sciences, Inc. Investment Representation Letter
April 9, 1999 Page 2
- --------------------------------------------------------------------------------
Securities Act of 1933, as amended ("Securities Act"), and the Florida
Securities and Investor Protection Act ("Florida Act") because my current
individual net worth exceeds $1,000,000, and/or I had individual income(2) in
excess of $200,000 in each of the two most recent years and have a reasonable
expectation of reaching the same income level in the current year. I also have
such knowledge and experience in financial and business matters that I am
capable of evaluating the merits and risks of my acquisition of the Shares and
of my investment in LSI. I understand there is no guaranty or assurance that you
ever will be profitable, and that your operating history includes a history of
losses. Accordingly, I am aware of the speculative nature of my proposed
investment and of the significant risks involved, and I represent and warrant
that I can bear the economic risk of such investment. I understand that an
investment in LSI is not suitable for any person who does not so understand such
risks. My investments in and commitments to all non-liquid investments,
including my proposed purchase of the Shares, are reasonable in relation to my
net worth, and I have adequate means of providing for my current needs and
possible contingencies without disposing of my proposed investment in the
Shares. All information I have provided to you concerning my financial position
and knowledge of financial and business matters is correct and complete as of
the date hereof.
(c) I have received and reviewed prior to my
determination to purchase the Shares and prior to the execution and delivery of
this Investment Representation Letter, all of the material information
concerning LSI, the Common Stock, the Shares and other matters that I considered
to be necessary or appropriate in connection with my investment decision.
(d) Among the documents I have had full and fair access
to prior to the execution and delivery of this Letter are all material contracts
to which LSI is a party or by which you are bound or benefitted, your historical
financial statements and related financial information as requested by me, and
the minute book of LSI containing the records of the actions of your Board of
Directors and stockholders.
(e) The Shares are to be acquired by me, in my name only,
for my own account, and no other person has any direct or indirect beneficial
ownership interest or other interest therein. The Shares are to be acquired by
me solely for investment purposes and not with a view to resale or distribution,
and I have no contract, undertaking, agreement or arrangement for any sale,
distribution or other transfer of any interest in any of the Shares, and no
present plans to enter into any such arrangement.
(f) I understand that the offer and sale of the Shares
has not been registered with or reviewed by the Securities and Exchange
Commission under the Securities Act, with or by any agency under the Florida
Act, or with or by any other state securities law administrator on the grounds,
among others, that the issuance and sale thereof is exempt from those
registration requirements on the grounds, among others, of not involving any
public offering and/or that the Shares in the context of this transaction are a
"covered security" as that phrase is defined in Section 18(a) of the Securities
Act and, accordingly, a "federal covered security" as that phrase is defined and
used in the Florida Act. I further understand that your, and your agents' and
representatives', reliance on such exemptions are, in material part, based on my
representations, warranties, acknowledgements, covenants and agreements set
forth herein. I also understand that no federal or state securities law
administrator has reviewed or approved any disclosure or other associated
material concerning the Shares, LSI, the Common Stock or any related matter, and
I acknowledge that my decision to acquire the Shares is of my own volition and
has not been recommended by you or by any federal or state securities law
administrator.
- --------
(2) A measure of a person's income for this purpose is the amount of his
individual adjusted gross income (as reported on a federal income tax
return) increased by: (i) any deduction for a portion of long term capital
gains [Internal Revenue Code ("Code") Section 1202]; (ii) any deduction for
depletion (Section 611 et. seq. of the Code); (iii) any exclusion for
interest on tax-exempt municipal obligations (Section 103 of the Code); and
(iv) any losses of a partnership allocated to the individual limited
partner (as reported on Schedule E of Form 1040).
<PAGE> 3
Life Sciences, Inc. Investment Representation Letter
April 9, 1999 Page 3
- --------------------------------------------------------------------------------
(g) I have been represented by such legal, tax,
accounting, financial and other advisors selected and retained by me as I have
found necessary to consult concerning my proposed purchase of the Shares and my
proposed investment. I have sufficient knowledge and experience in business and
financial matters that I am capable of evaluating all facets of the merits and
risks thereof [or I have used and relied upon in connection with my decision to
purchase the Shares, my own independent purchaser representative (insert
identity of purchaser representative or insert "N/A": N/A )
who does have such knowledge and experience and, therefore, the terms "I" and
"me" in this paragraph (g) shall include (as appropriate in the context) such
identified representative], and I investigated all facets of the merits and
risks of such proposed purchase prior to deciding to purchase the Shares. I
acknowledge that I have had full and fair access to all information concerning
LSI, the Shares (and also to other information considered by me to be necessary
or appropriate as a prudent and knowledgeable investor to enable me to make an
informed investment decision concerning the acquisition of the Shares), and that
I was previously informed that all documents, records and books pertaining to
such proposed investment were at all relevant times available for inspection and
review by me. I have determined the information necessary or appropriate for my
review of the merits and risks of my proposed investment, and I shall not seek
to hold you, or any of your agents or representatives, liable for matters
included in or omitted from my investigation based on such determination. I
acknowledge that I have had the opportunity to ask questions of, and have
received satisfactory answers from, you and your officers and directors
concerning LSI, the Shares and related matters. I also acknowledge that I have
had an opportunity to obtain additional information necessary to verify the
accuracy of such information and to evaluate the merits and risks of my proposed
investment. In my determination to acquire the Shares, no person made any
representation or warranty, expressed or implied, to me in any way relating
thereto except as expressly set forth or referenced herein, I have not relied on
any oral representation or warranty, and I did not rely on any offering
literature other than the documents and information made available to me as
provided herein.
(h) I understand that the Shares are not readily
transferable, and that there is only a limited over-the-counter market for the
Common Stock, no assurance is given by anyone that an active and substantial
public market will develop, or if developed that it will be sustained, I may not
be able to readily liquidate my proposed investment in the Shares in any event,
and I must bear the economic risk of an investment therein indefinitely. I also
understand there are substantial restrictions on the sale and transfer of the
Shares I am purchasing, and that subsequent sale or other transfer where
permitted will require registration thereof with applicable federal and state
securities law administrators and/or an opinion of my counsel acceptable to LSI
that any such transfer is exempt from such securities law requirements. I
further understand that legends, including a legend substantially as set forth
in Section (2) below, will be on the certificate issued to represent the Shares.
I agree not to offer, sell, pledge or otherwise transfer any of the Shares or
any interest therein absent compliance with applicable federal and state
securities laws and the referenced legend conditions. I understand that neither
the Company nor any other person has any obligation to register any Common Stock
or to provide me an opinion for the foregoing purposes.
(i) No representation or warranty by me herein contains
any untrue statement of a material fact or omits to state a material fact
necessary to make the statements contained herein not misleading, and the
representations, warranties, acknowledgements, covenants and agreements set
forth herein shall survive the payment, issuance and delivery, of the Shares.
(j) I acknowledge that I understand the meaning and legal
consequences of the representations, warranties, acknowledgements, covenants and
agreements contained herein, and I agree to indemnify and hold LSI and its
agents and representatives harmless from and against any and all loss,
<PAGE> 4
Life Sciences, Inc. Investment Representation Letter
April 9, 1999 Page 4
- --------------------------------------------------------------------------------
damage, liability or expense, including costs and reasonable attorneys' and
paralegal fees, to which any of them may be put or which they may incur by
reason of, or in connection with, any misrepresentation by me, any breach by me
of any representation or warranty, or any failure by me to fulfill any covenant
or agreement herein. The representations, warranties, acknowledgements,
covenants and agreements set forth in this Letter are intended to benefit each
of the persons described in the preceding sentence.
(2) Legends. The Shares shall be subject to any legend condition
necessary to assist in complying with applicable federal and state securities
laws, including such legends as may be appropriate under Regulation D as adopted
by the Securities and Exchange Commission under the Securities Act and the
legend set forth below. In any event, the certificate representing the Shares
shall have endorsed on it a legend reading substantially as follows:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AND MAY NOT BE OFFERED FOR SALE,
SOLD, HYPOTHECATED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THAT ACT OR AN OPINION OF
COUNSEL SATISFACTORY TO THE ISSUER THAT SUCH REGISTRATION IS NOT
REQUIRED.
(3) Interpretation. Any descriptive headings of or in sections and
paragraphs of this Letter are inserted for convenience only and are not a part
of this Letter. No provision in this Investment Representation Letter shall be
construed against any party as the drafter. As used herein, the singular
includes the plural, the plural includes the singular and words in one gender
include the others; the terms "herein", "hereof", "hereunder" and similar
references refer to the whole of this Investment Representation Letter; and
"include", "including" and similar terms are not words of limitation. Whenever
possible, each provision of this Letter shall be interpreted in such manner as
to be effective and valid under applicable law, but if any provision shall be
prohibited or invalid under applicable law, such provision shall be ineffective
to the extent of such prohibition or invalidity only, without invalidating the
remainder of such provision or of the remaining provisions of this Letter.
(4) Miscellaneous. This Investment Representation Letter: (i)
contains the complete statement of all arrangements between LSI and me with
respect to its subject matter, and supersedes all previous agreements, promises,
arrangements and understandings, written or oral, relating to its subject
matter; (ii) cannot be assigned by either party without the other's prior
written consent, and cannot be modified, amended or waived except by an
instrument in writing signed by the parties necessary to the enforcement
thereof; (iii) shall be binding upon and shall inure to the benefit of our
respective successors, permitted assigns, heirs and legal representatives; (iv)
may be executed in any number of counterparts, each of which shall be deemed an
original instrument, but all such counterparts together shall constitute but one
agreement; and (v) shall be governed by, and construed and enforced in
accordance with, the laws of the State of Florida; provided, however, to the
extent Florida law is preempted by federal law, federal law shall apply. LSI and
I each hereby consent to the personal jurisdiction of the state and federal
courts located within the territorial limits of the United States District Court
for the Middle District of Florida, Tampa Division, agree that venue for any
litigation (or mediation or arbitration in connection therewith) related in any
way to this Letter shall only be in Pinellas County, Florida, or, if
appropriate, the United States District Court for the Middle District of
Florida, Tampa Division, and waive any objection to such exclusive jurisdiction
and venue. If either of us retains the services of counsel to enforce any
provision of this Letter, or because of litigation (or mediation or arbitration
in connection therewith) involving this Letter, the prevailing party shall be
entitled to recover, in addition to any other relief or remedy obtained, all
costs, expenses, and attorneys' and paralegal fees paid or incurred by it,
including costs, expenses and such fees at trial and any appeal,
<PAGE> 5
Life Sciences, Inc. Investment Representation Letter
April 9, 1999 Page 5
- --------------------------------------------------------------------------------
whether in a court, administrative, arbitration or mediation proceeding.
Please sign and return the second copy of this Investment Representation Letter
to me if you find it satisfactory to acknowledge, evidence and confirm your
agreement with all of the foregoing.
Very truly yours,
/s/ Louis D. Srybnik
- -------------------------
Louis D. Srybnik
Confirmed, Accepted and Agreed:
LIFE SCIENCES, INC.
By: /s/ Alex A. Burns
---------------------------
Alex A. Burns, Vice President
April 9, 1999
<PAGE> 1
Exhibit 10.7
REAL ESTATE PURCHASE AND SALE AGREEMENT
This REAL ESTATE PURCHASE AND SALE AGREEMENT ("Contract") is made, executed and
delivered on May 8 , 1999, by LIFE SCIENCES, INC., a Delaware corporation
("Seller"), of 2900 - 72nd Street North, St. Petersburg, Florida 33710 [FEI
No.: 59-0995081, Phone: (727) 345-9371, Facsimile: (727) 347-2957], and
CAVAFORM, INC., a Florida corporation ("Buyer"), of 2700 - 72nd Street North,
St. Petersburg, Florida 33710 [FEI No.: 59-1818157, Phone: (727) 384-3676,
Facsimile: (727) 384-0523], and for good and valuable consideration, the
receipt and sufficiency of which are hereby mutually acknowledged, Seller and
Buyer agree as follows:
(1) PROPERTY PURCHASE AND SALE: Pursuant to the terms and conditions of this
Contract, Seller shall sell and Buyer shall buy the following described real
property in Pinellas County, Florida (the "Property"): that portion of Lot 6,
Block 1, Tyrone Planned Industrial District Second Replat and Addition
(recorded in Plat Book 57, Page 17, Public Records of Pinellas County, Florida)
lying southerly of a line drawn (a) perpendicular to the easterly line of such
Lot 6 and (b) 20' south of the most southerly portion of the concrete steps on
the south side of the building located on such Lot 6; provided, however, that
the exact legal description shall be as provided by the survey referred to in
paragraph (b) of the Standards For Real Estate Transactions attached hereto as
Exhibit "A" and incorporated herein by this reference (the "Standards") and
reasonably approved by Seller and Buyer. No personal property is included in
the transaction provided for in this Contract (the "Transaction"). Buyer may
not assign this Contract.
(2) PURCHASE PRICE; PAYMENT: The Transaction is a cash transaction, with no
contingency for financing. The purchase price for the Property is $200,000.00.
Of this amount, Buyer shall deposit the sum of $10,000.00 (the "Deposit") with
SUNCOAST TITLE COMPANY OF FLORIDA, INC. ("Escrow Agent"), Attn.: Linda R.
O'Dell, Manager, 7241 - 49th Street North, Pinellas Park, Florida 33781 [Phone:
(727) 546-8935, Facsimile: (727) 544-7406] upon Buyer's execution of this
Contract, and the balance in the amount of $190,000.00, subject to adjustments
and prorations and plus Buyer's closing costs, shall be provided to Escrow
Agent in the form of a locally drawn cashier's or official bank check not later
than the closing.
(3) EFFECTIVE DATE; FACSIMILES; NOTICE: The effective date of this Contract
(the "Effective Date") shall be the date first set forth above. A facsimile
copy of this Contract and/or of any notice, demand or other communication
hereunder, and any signatures hereon or thereon via facsimile, shall be
considered for all purposes as an original. All notices, demands or other
communications hereunder shall be in writing, and may be given to Seller, Buyer
and to Escrow Agent, at their respective addresses/numbers set forth herein, by
hand delivery, by U.S. certified mail, postage prepaid with return receipt
requested, or by telephonically confirmed facsimile transmission. Notice shall
be considered given upon the earlier of actual receipt or, if mailed as
provided herein, 3 days after mailing.
(4) TITLE EVIDENCE; CLOSING: At least 5 days before the closing date, Seller
shall deliver to Buyer or Buyer's attorney a title insurance commitment (with
legible copies of instruments listed as exceptions attached thereto) in
accordance with paragraph (a) of the Standards and, after closing, an owner's
policy of title insurance, the cost of such commitment and insurance to be paid
1/2 by Seller and 1/2 by Buyer at the closing. Insurance against adverse
matters pursuant to Section 627.7841, F.S., as amended, shall be applicable.
The Transaction shall be closed and the closing documents delivered on May 14,
1999, unless modified by other provisions of this Contract, at the offices of
the Escrow Agent, commencing at 10:00 a.m. and continuing thereafter until
completed. Seller warrants that there are no parties in occupancy other than
Seller. Seller shall deliver occupancy of the Property to Buyer at the time of
closing.
(5) RESTRICTIONS; EASEMENTS; LIMITATIONS: Buyer shall take title subject to:
comprehensive land use plans, zoning, restrictions, prohibitions and other
requirements imposed by governmental authority; restrictions and matters
appearing on the plat or otherwise common to the subdivision; outstanding oil,
gas and mineral rights of record without right of entry; public utility
easements of record; taxes for the year of closing and subsequent years;
provided, that there exists at closing no violation of the foregoing. Seller
shall convey title to the Property by statutory warranty deed, subject only to
matters contained in this section and those otherwise accepted by Buyer. As
part of the closing of the Transaction, Seller and Buyer shall execute and
deliver for recordation an easement agreement (as attached hereto as Exhibit
"B" and incorporated herein by this reference) to provide a driveway easement
from 72nd Street North across the most southerly portion of the property
retained by Seller and the most northerly portion of the Property to be
acquired by Buyer (the "Driveway Easement"). The exact legal description of the
area of the Driveway Easement (the "Easement Area") shall be provided by the
surveyor referred to in paragraph (b) of the Standards and reasonably approved
by Seller and Buyer.
(6) INSPECTION: Buyer and its agents shall have the right for the 5 days
following the Effective Date (the "Inspection Period") to enter on the
Property, upon reasonable prior written notice to Seller, for the purposes of
performing such inspections, tests and studies as Buyer may desire in order to
satisfy itself as to all aspects (other than title) of the condition and
suitability of the Property for Buyer. Buyer shall timely pay all costs of such
inspections, tests and studies and, in the event the closing is not consummated
as set forth herein, shall immediately restore, at Buyer's expense, any damage
to the Property caused by reason of any such entry. Buyer shall indemnify and
hold Seller harmless from any and all loss, damage, cost and expense, including
reasonable attorneys' fees, that Seller may sustain or incur by reason of
Buyer's or its agents' actions under this section.
(7) CANCELLATION; AS IS: If Buyer determines, in its sole discretion, during
the Inspection Period that the Property is not suitable for Buyer, Buyer may
cancel this Contract by written notice of such election given to Seller not
later than 48 hours after the expiration of the Inspection Period. In this
event, the Deposit shall be immediately returned to Buyer, and Buyer and Seller
shall be released of all further obligations hereunder, except as have
previously accrued. If Buyer does not exercise this right of cancellation and
the closing occurs, Buyer takes the Property AS IS, subject to the express
warranties of Seller herein and in the deed to Buyer of the Property.
(8) DISCLOSURES; OTHER WARRANTIES; AGREEMENTS:
(a) RADON GAS: Radon is a naturally occurring radioactive gas that, when it
has accumulated in a building in sufficient quantities, may present health
risks to persons who are exposed to it over time. Levels of radon that exceed
federal and state guidelines have been found in buildings in Florida.
Additional information regarding radon and radon testing may be obtained from
your county health department.
(b) Seller warrants that there are no facts known to Seller materially
affecting the value of the Property which are not readily observable by Buyer
or which have not been disclosed to Buyer, and that Seller has not received any
notice with respect to the Property from any governmental organization as to a
currently uncorrected violation of any kind.
(c) Seller and Buyer warrant to each other that there is no broker or other
person entitled to any commission by reason of the sale of the Property under
this Contract. Seller shall indemnify and hold Buyer harmless from any and all
loss, damage, cost and expense, including reasonable attorneys' fees, that
Buyer may sustain or incur by reason of any real estate commission or fee
claimed to be due by, through or under Seller. Buyer shall indemnify and hold
Seller harmless from any and all loss, damage, cost and expense, including
reasonable attorneys' fees, that Seller may sustain or incur by reason of any
real estate commission or fee claimed to be due by, through and under Buyer.
(d) Seller is a United States person, and shall execute and deliver to
Buyer and to Escrow agent as part of the closing such affidavits as may be
appropriate to establish that the withholding requirements of Section 1445 of
the Internal Revenue Code of 1986 ("IRC") relating to withholding on
dispositions of real property interests by foreign persons are not applicable
to the Transaction. Buyer and Seller shall each provide Escrow Agent with such
information as may be required for Escrow Agent to complete the appropriate
Form 1099 and report the Transaction under Section 6045(e) of the IRC.
IN WITNESS WHEREOF, Seller and Buyer have executed and delivered this
Contract on the date first set forth above.
LIFE SCIENCES, INC. (Seller) CAVAFORM, INC. (Buyer)
by: /s/ Alex A. Burns by: /s/ David Massie
---------------------------------- ----------------------------------
Alex A. Burns David Massie
The undersigned agrees to act as Escrow Agent under this Contract and
acknowledges receipt of the Deposit of $10,000.00, subject to collection:
SUNCOAST TITLE COMPANY OF FLORIDA, INC. (Escrow Agent)
by: /s/ Linda R. O'Dell
----------------------------------
Linda R. O'Dell, Manager
<PAGE> 2
STANDARDS FOR REAL ESTATE TRANSACTIONS
(a) EVIDENCE OF TITLE: A title insurance commitment issued by a Florida
licensed title insurer agreeing to issue to Buyer, upon recording of the deed
to Buyer, an owner's policy of title insurance in the amount of the purchase
price, insuring Buyer's title to the Property, subject only to liens,
encumbrances, exceptions or qualification provided in this Contract and those
to be discharged by Seller at or before closing. Seller shall convey marketable
title subject only to liens, encumbrances, exceptions or qualifications
provided in this Contract. Marketable title shall be determined according to
applicable title standards adopted by authority of The Florida Bar and in
accordance with law. Buyer shall have 5 days from the date of receiving
evidence of title to examine it. If title is found defective, Buyer shall
within such 5 days notify Seller in writing specifying any defects. If defects
render title unmarketable, Seller will have 30 days from receipt of written
notice to remove the defects, failing which Buyer shall, within 5 days after
expiration of the 30 day period, deliver written notice to Seller either: (1)
extending the time for a reasonable period not to exceed 60 additional days
within which Seller shall use diligent effort to remove the defects; or (2)
requesting a refund of the Deposit, which shall immediately be returned to
Buyer. If Buyer fails to so notify Seller, Buyer shall be deemed to have
accepted the title as it then is. Seller shall, if title is found unmarketable,
use diligent effort to correct any defects within the time provided therefor.
If Seller is unable to timely correct the defects, Buyer shall either waive the
defects, or receive a refund of the Deposit, thereby releasing Buyer and Seller
form all further obligations under this Contract. If evidence of title is
delivered to Buyer less than 5 days prior to closing, Buyer may extend the
closing date so that Buyer shall have up to 5 days from the date of receipt of
evidence of title to examine the same in accordance with this paragraph (a).
(b) SURVEY: Seller, within time allowed to deliver evidence of title and to
examine same, shall have the Property surveyed and certified by a registered
Florida surveyor. If the survey discloses encroachments on the Property, other
than from real property currently owned or occupied by Buyer, or that any
improvements located thereon encroach on setback lines, easements, lands of
others or violate any restrictions, contract covenants or applicable
governmental regulation, the same shall constitute a title defect. Seller shall
also cause such surveyor to prepare the legal descriptions and related drawing
of the Easement Area for the Driveway Easement referenced in Section 5 of this
Contract. The cost of the survey of the Property and of the Easement Area shall
be paid 1/2 by Buyer and 1/2 by Seller as part of the closing of the
Transaction.
(c) LIENS: Seller shall furnish to Buyer at time of closing an affidavit
attesting to the absence, unless otherwise provided for herein, of any
financing statement, claims of lien or potential lienors arising or resulting
from work or materials ordered at the instance or behest of Seller and further
attesting that there has not been at the instance or behest of Seller any
improvements or repairs to the Property for 90 days immediately preceding the
date of closing. If the Property has been improved or repaired within that time
at the instance or behest of Seller, Seller shall deliver releases or waivers
of construction liens executed by all general contractors, subcontractors,
suppliers, and materialmen in addition to Seller's lien affidavit setting forth
the names of all such persons, further affirming that all charges for such
improvements or repairs ordered at the instance or behest of Seller which could
serve as a basis for a construction lien or a claim for damages have been paid
or will be paid at the closing of this Contract. The foregoing requirements of
Seller shall not apply to the extent any such person, work or materials were
retained or ordered by, or are the obligation of, Buyer.
(d) TIME: Time is of the essence of this Contract. In computing time periods of
less than 6 days, Saturdays, Sundays and state or national legal holidays shall
be excluded. Any time periods provided for herein which shall end on a
Saturday, Sunday or a legal holiday shall extend to 5:00 p.m. of the next
business day.
(e) CLOSING DOCUMENTS: Seller shall furnish the deed, Seller's lien affidavit,
Seller's possession affidavit and corrective instruments attributable to acts
or omissions of Seller. Buyer shall furnish those items reasonably requested by
Escrow Agent.
(f) EXPENSES: Recording of corrective instruments shall be paid by Seller.
Documentary stamps on the deed and recording the deed shall be paid 1/2 by
Buyer and 1/2 by Seller. Charges for the following related title services,
namely title or abstract charge, title examination, and settlement and closing
fee, shall also be paid 1/2 by Buyer and 1/2 by Seller.
(g) PRORATIONS; CREDITS: Taxes, assessments and other expenses of the Property
shall be prorated through the day before closing. Cash at closing shall be
increased or decreased as may be required by prorations to be made through the
day prior to closing, or occupancy, if occupancy occurs before closing. Taxes
shall be prorated based on the current year's tax with due allowance made for
maximum allowable discount, homestead and other exemptions. If closing occurs
at a date when the current year's millage is not fixed and current year's
assessment is available, taxes will be prorated based on such assessment and
prior year's millage. If current year's assessment is not available, then taxes
will be prorated on prior year's tax. A tax proration based on an estimate
shall, at request of either party, be readjusted upon receipt of tax bill on
condition that a statement to that effect is signed at closing.
(h) SPECIAL ASSESSMENT LIENS: Certified, confirmed and ratified special
assessment liens as of date of closing (not as of Effective Date) are to be
paid by Seller. Pending liens as of date of closing shall be assumed by Buyer.
If the improvement has been substantially completed as of Effective Date, any
pending lien shall be considered certified, confirmed or ratified and Seller
shall, at closing, be charged an amount equal to the last estimate or
assessment for the improvement by the public body.
(i) RISK OF LOSS: If the Property is damaged by any casualty before closing and
cost of restoration does not exceed $2,500.00, cost of restoration shall be an
obligation of Seller and closing shall proceed pursuant to the terms of this
Contract with restoration costs escrowed at closing. If the cost of restoration
exceeds such amount and Seller does not elect to pay the additional cost, Buyer
shall have the option of either taking the Property as is, together with either
such amount or any insurance proceeds payable by virtue of such loss or damage,
or of canceling this Contract and receiving return of the Deposit.
(j) ESCROW: Escrow Agent is authorized and agrees by acceptance of the Deposit
to deposit them promptly, hold same in escrow and, subject to clearance,
disburse them in accordance with terms and conditions of this Contract. Failure
of funds to clear shall not excuse Buyer's performance. If in doubt as to
Escrow Agent's duties or liabilities under this Contract, Escrow Agent may, at
Escrow Agent's option, continue to hold the subject matter of the escrow until
the parties hereto agree to its disbursement or until a judgment of a court of
competent jurisdiction shall determine the rights of the parties, or Escrow
Agent may deposit the same with the clerk of the circuit court having
jurisdiction of the dispute. Upon notifying all parties concerned of such
action, all liability on the part of Escrow Agent shall terminate, except to
the extent of accounting for any items previously delivered out of escrow. Any
suit between Buyer and Seller wherein Escrow Agent is made a party because of
acting as Escrow Agent hereunder, or in any suit wherein Escrow Agent
interpleads the subject matter of the escrow, Escrow Agent shall recover
reasonable attorneys' fees and costs incurred, with these amounts to be paid
out of the escrowed funds or equivalent and charged and awarded as court costs
in favor of the prevailing party. Escrow Agent shall not be liable to any party
or person for misdelivery to Buyer or Seller of items subject to the escrow,
unless such misdelivery is due to willful breach of the provisions of this
Contract or gross negligence of Escrow Agent.
(k) ATTORNEYS' FEES; COSTS: In any litigation, including breach, enforcement or
interpretation, arising out of this Contract, the prevailing party in such
litigation shall be entitled to recover from the non-prevailing party
reasonable attorneys' fees and costs.
(l) FAILURE OF PERFORMANCE: If Buyer fails to perform this Contract within the
time specified, the Deposit paid by Buyer may be recovered and retained by and
for the account of Seller as agreed upon liquidated damages, consideration for
the execution of this Contract and in full settlement of any claims; whereupon,
Buyer and Seller shall be relieved of all further obligations under this
Contract; or Seller, at Seller's option, may proceed in equity to enforce
Seller's rights under this Contract. If, for any reason other than failure of
Seller to make Seller's title marketable after diligent effort, Seller fails,
neglects or refuses to perform this Contract, Buyer may seek specific
performance or elect to receive the return of the Deposit without thereby
waiving any action for damages resulting from Seller's breach.
(m) CONTRACT NOT RECORDABLE; PERSONS BOUND: Neither this Contract nor any
notice of it shall be recorded in any public records. This Contract shall bind
and inure to the benefit of the parties and their successors in interest.
Whenever the context permits, the singular shall include the plural, and one
gender shall include all.
(n) HEADINGS; OTHER AGREEMENTS: The headings of the section and paragraphs of
this Contract are inserted for convenience only and are not a part of this
Contract. This Contract shall not be construed against any party as the
drafter. No prior or present agreement or warranty shall be binding on Buyer or
Seller, unless included in this Contract. No modification to or change in this
Contract shall be valid or binding upon the parties unless in writing and
executed by the party or parties intended to be bound by it.
EXHIBIT "A"
<PAGE> 1
Exhibit 10.8
CONTRACT FOR PURCHASE AND SALE OF REAL ESTATE
This CONTRACT FOR PURCHASE AND SALE OF REAL ESTATE (together with any attached
riders, exhibits and addenda, this "Contract") is made, executed and delivered
as of May 21 , 1999, by LIFE SCIENCES, INC., a Delaware corporation ("Seller"),
of 2900 - 72nd Street North, St. Petersburg, Florida 33710 [FEI No.:
59-0995081, Phone: (727) 345-9371, Facsimile: (727) 347-2957], and 186 - 194
IMLAY STREET REALTY CORP., a New York corporation ("Buyer"), of 140 - 53rd
Street, Brooklyn, New York 11232 [FEI No.: 11-2061896, Phone: (718) 492-7400,
Facsimile: (718) 492-9608], and for good and valuable consideration, the
receipt and sufficiency of which are hereby mutually acknowledged, Seller and
Buyer agree as follows:
(1) PROPERTY PURCHASE AND SALE: Pursuant to the terms and conditions of this
Contract, Seller shall sell and Buyer shall buy the following described real
property in Pinellas County, Florida (the "Property"): Lot 5, Block 1, Tyrone
Planned Industrial District Second Replat and Addition, as recorded in Plat
Book 57, Page 17, Public Records of Pinellas County, Florida, and that portion
of Lot 6, Block 1, Tyrone Planned Industrial District Second Replat and
Addition, as recorded in Plat Book 57, Page 17, Public Records of Pinellas
County, Florida, lying northerly of a line drawn south of the most southerly
portion of the concrete steps on the south side of the building located on such
Lot 6 and parallel with the southerly line of such Lot 6; provided, however,
the exact legal description shall be as provided by the survey referred to in
paragraph (b) of the Standards For Real Estate Transactions attached hereto as
Exhibit "A" and incorporated herein by this reference (the "Standards") and
reasonably approved by Seller and Buyer. No personal property is included in
the transaction provided for in this Contract (the "Transaction").
(2) PURCHASE PRICE; PAYMENT: The purchase price for the Property is
$859,075.00. This amount shall be paid by Buyer's execution, acknowledgement
and delivery to SUNCOAST TITLE COMPANY OF FLORIDA, INC. ("Escrow Agent")
[Attn.: Linda R. O'Dell, Manager, 7241 - 49th Street North, Pinellas Park,
Florida 33781, Phone: (727) 546-8935, Facsimile: (727) 544-7406] of a full
satisfaction of the mortgage Buyer holds on the Property and other property
(the "Satisfaction"). As a matter of agreement between Buyer and Seller with
which Escrow Agent need not be concerned, Seller will be paying additional
consideration to Buyer outside of the Transaction to discharge the difference
between amounts secured by the mortgage and the purchase price of the Property.
Escrow Agent need not confirm the payment and receipt of such other
consideration as a condition to the closing of the Transaction. Buyer shall
deposit the Satisfaction and Buyer's closing costs (in the form of a locally
drawn cashier's or official bank check) with Escrow Agent not later than the
closing.
(3) EFFECTIVE DATE; FACSIMILES; NOTICE: The effective date of this Contract
shall be the date first set forth above (the "Effective Date"). A facsimile
copy of this Contract and/or of any notice, demand or other communication
hereunder, and any signatures hereon or thereon via facsimile, shall be
considered for all purposes as an original. All notices, demands or other
communications hereunder shall be in writing, and may be given to Seller, Buyer
and to Escrow Agent, at their respective addresses/numbers set forth herein, by
hand delivery, by U.S. certified mail, postage prepaid with return receipt
requested, or by telephonically confirmed facsimile transmission. Notice shall
be considered given upon the earlier of actual receipt or, if mailed as
provided herein, 3 days after mailing.
(4) TITLE EVIDENCE; CLOSING: At least 2 days before the closing date, Seller
shall, at Buyer's expense, deliver to Buyer or Buyer's attorney a title
insurance commitment (with legible copies of instruments listed as exceptions
attached thereto) in accordance with paragraph (a) of the Standards and, after
closing, an owner's policy of title insurance. Insurance against adverse
matters pursuant to Section 627.7841, F.S., as amended, shall be applicable.
The Transaction shall be closed and the closing documents delivered on May 27,
1999, unless modified by other provisions of this Contract, at the offices of
the Escrow Agent, commencing at 10:00 a.m. and continuing thereafter until
completed. Seller warrants that there are no parties in occupancy other than
Seller. Seller shall remain in occupancy of the Property after the time of
closing under a lease of the property from Buyer to Seller. A memorandum of
such lease will not be recorded as part of the closing of the Transaction, and
Escrow Agent need not confirm the execution and delivery thereof as a condition
to the closing.
(5) RESTRICTIONS; EASEMENTS; LIMITATIONS: Buyer shall take title subject to:
comprehensive land use plans, zoning, restrictions, prohibitions and other
requirements imposed by governmental authority; restrictions and matters
appearing on the plat or otherwise common to the subdivision; outstanding oil,
gas and mineral rights of record without right of entry; public utility
easements of record; taxes for the year of closing and subsequent years;
provided, that there exists at closing no violation of the foregoing. Buyer
shall also take title subject to that certain Driveway Easement Agreement, a
copy of which as executed and delivered by Seller and Cavaform, Inc. and to be
recorded as part of the transaction documented in Escrow Agent's File No.
99-119 has been provided to Buyer. Seller shall convey title to the Property by
statutory warranty deed, subject only to matters contained in this section and
those otherwise accepted by Buyer.
(6) INSPECTION: Buyer and its agents shall have the right for the 2 days
following the Effective Date (the "Inspection Period") to enter on the
Property, upon reasonable prior written notice to Seller, for the purposes of
performing such inspections, tests and studies as Buyer may desire in order to
satisfy itself as to all aspects (other than title) of the condition and
suitability of the Property for Buyer. Buyer shall timely pay all costs of such
inspections, tests and studies and, in the event the closing is not consummated
as set forth herein, shall immediately restore, at Buyer's expense, any damage
to the Property caused by reason of any such entry. Buyer shall indemnify and
hold Seller harmless from any and all loss, damage, cost and expense, including
reasonable attorneys' fees, that Seller may sustain or incur by reason of
Buyer's or its agents' actions under this section.
(7) CANCELLATION; AS IS: If Buyer determines, in its sole discretion, during
the Inspection Period that the Property is not suitable for Buyer, Buyer may
cancel this Contract by written notice of such election given to Seller not
later than 24 hours after the expiration of the Inspection Period. In this
event, Buyer shall pay title and escrow charges incurred, and Buyer and Seller
shall be released of all further obligations hereunder, except as have
previously accrued. If Buyer does not exercise this right of cancellation and
the closing occurs, Buyer takes the Property AS IS, subject to the express
warranties of Seller herein and in the deed to Buyer of the Property.
(8) DISCLOSURES; OTHER WARRANTIES; AGREEMENTS:
(a) RADON GAS: Radon is a naturally occurring radioactive gas that, when it
has accumulated in a building in sufficient quantities, may present health
risks to persons who are exposed to it over time. Levels of radon that exceed
federal and state guidelines have been found in buildings in Florida.
Additional information regarding radon and radon testing may be obtained from
your county health department.
(b) Seller warrants that there are no facts known to Seller materially
affecting the value of the Property which are not readily observable by Buyer
or which have not been disclosed to Buyer, and that Seller has not received any
notice with respect to the Property from any governmental organization as to a
currently uncorrected violation of any kind.
(c) Seller and Buyer warrant to each other that there is no broker or other
person entitled to any commission by reason of the sale of the Property under
this Contract. Seller and Buyer shall indemnify and hold each other harmless
from any and all loss, damage, cost and expense, including reasonable
attorneys' fees, that the party to be indemnified may sustain or incur by
reason of any real estate commission or fee claimed to be due by, through or
under the other party.
(d) Seller is a United States person, and shall execute and deliver to
Buyer and to Escrow Agent as part of the closing such affidavits as may be
appropriate to establish that the withholding requirements of Section 1445 of
the Internal Revenue Code of 1986 ("IRC") relating to withholding on
dispositions of real property interests by foreign persons are not applicable
to the Transaction. Buyer and Seller shall each provide Escrow Agent with such
information as may be required for Escrow Agent to complete the appropriate
Form 1099 and to report the Transaction under Section 6045(e) of the IRC.
IN WITNESS WHEREOF, Seller and Buyer have executed and delivered this
Contract for Purchase and Sale of Real Estate as of the date first set forth
above.
LIFE SCIENCES, INC. (Seller) 186-194 IMLAY STREET REALTY CORP. (Buyer)
by: /s/ Alex A. Burns by: /s/ Simon Srybnik
----------------------------- --------------------------------------
Alex A. Burns Simon Srybnik
The undersigned agrees to act as Escrow Agent under this Contract for Purchase
and Sale of Real Estate:
SUNCOAST TITLE COMPANY OF FLORIDA, INC. (Escrow Agent)
by: /s/ Linda R. O'Dell
- -------------------------------------
Linda R. O'Dell, Manager
<PAGE> 2
STANDARDS FOR REAL ESTATE TRANSACTIONS
(a) EVIDENCE OF TITLE: A title insurance commitment issued by a Florida
licensed title insurer agreeing to issue to Buyer, upon recording of the deed
to Buyer, an owner's policy of title insurance in the amount of the purchase
price, insuring Buyer's title to the Property, subject only to liens,
encumbrances, exceptions or qualifications provided in this Contract and those
to be discharged by Seller at or before closing. Seller shall convey marketable
title subject only to liens, encumbrances, exceptions or qualifications
provided in this Contract. Marketable title shall be determined according to
applicable title standards adopted by authority of The Florida Bar and in
accordance with law. Buyer shall have 2 days from the date of receiving
evidence of title to examine it. If title is found defective, Buyer shall
within such 2 days notify Seller in writing specifying any defects. If defects
render title unmarketable, Seller will have 30 days from receipt of written
notice to remove the defects, failing which Buyer shall, within 5 days after
expiration of the 30 day period, deliver written notice to Seller either: (1)
extending the time for a reasonable period not to exceed 60 additional days
within which Seller shall use diligent effort to remove the defects; or (2)
Buyer shall pay title and escrow charges incurred and the Transaction shall be
terminated. If Buyer fails to so notify Seller, Buyer shall be deemed to have
accepted the title as it then is. Seller shall, if title is found unmarketable,
use diligent effort to correct any defects within the time provided therefor.
If Seller is unable to timely correct the defects, Buyer shall either waive the
defects, or shall pay title and escrow charges incurred, thereby releasing
Buyer and Seller from all further obligations under this Contract. If evidence
of title is delivered to Buyer less than 2 days prior to closing, Buyer may
extend the closing date so that Buyer shall have up to 2 days from the date of
receipt of evidence of title to examine the same in accordance with this
paragraph (a).
(b) SURVEY: Seller, at Buyer's expense, within time allowed to deliver evidence
of title and to examine same, shall have the Property surveyed and certified by
a registered Florida surveyor. If the survey discloses encroachments on the
Property, or that any improvements located thereon encroach on setback lines,
easements, lands of others or violate any restrictions, contract covenants or
applicable governmental regulation, the same shall constitute a title defect.
(c) LIENS: Seller shall furnish to Buyer at time of closing an affidavit
attesting to the absence, unless otherwise provided for herein, of any
financing statement, claims of lien or potential lienors arising or resulting
from work or materials ordered at the instance or behest of Seller and further
attesting that there has not been at the instance or behest of Seller any
improvements or repairs to the Property for 90 days immediately preceding the
date of closing. If the Property has been improved or repaired within that time
at the instance or behest of Seller, Seller shall deliver releases or waivers
of construction liens executed by all general contractors, subcontractors,
suppliers, and materialmen in addition to Seller's lien affidavit setting forth
the names of all such persons, further affirming that all charges for such
improvements or repairs ordered at the instance or behest of Seller which could
serve as a basis for a construction lien or a claim for damages have been paid
or will be paid at the closing of this Contract. The foregoing requirements of
Seller shall not apply to the extent any such person, work or materials were
retained or ordered by, or are the obligation of, Buyer.
(d) TIME: Time is of the essence of this Contract. In computing time periods of
less than 6 days, Saturdays, Sundays and state or national legal holidays shall
be excluded. Any time periods provided for herein which shall end on a
Saturday, Sunday or a legal holiday shall extend to 5:00 p.m. of the next
business day.
(e) CLOSING DOCUMENTS: Seller shall furnish the deed, Seller's
lien affidavit, Seller's possession affidavit and corrective instruments
attributable to acts or omissions of Seller. Buyer shall furnish the
Satisfaction and those other items reasonably requested by Escrow Agent.
(f) EXPENSES: Recording of corrective instruments other than the Satisfaction
shall be paid by Seller. Documentary stamps on the deed and recording the deed
and the Satisfaction shall be paid by Buyer. Charges for the following related
title services, namely title or abstract charge, title examination, and
settlement and closing fee, shall be paid by Buyer as the party responsible for
paying for the title evidence in accordance with Section 4 of this Contract.
(g) PRORATIONS; CREDITS: Taxes, assessments and other expenses of the Property
shall be prorated through the day before closing. Cash at closing shall be
increased or decreased as may be required by prorations to be made through the
day prior to closing, or occupancy, if occupancy occurs before closing. Taxes
shall be prorated based on the current year's tax with due allowance made for
maximum allowable discount, homestead and other exemptions. If closing occurs
at a date when the current year's millage is not fixed and current year's
assessment is available, taxes will be prorated based on such assessment and
prior year's millage. If current year's assessment is not available, then taxes
will be prorated on prior year's tax. A tax proration based on an estimate
shall, at request of either party, be readjusted upon receipt of tax bill on
condition that a statement to that effect is signed at closing.
<PAGE> 3
(h) SPECIAL ASSESSMENT LIENS: Certified, confirmed and ratified special
assessment liens as of date of closing (not as of Effective Date) are to be
paid by Seller. Pending liens as of date of closing shall be assumed by Buyer.
If the improvement has been substantially completed as of Effective Date, any
pending lien shall be considered certified, confirmed or ratified and Seller
shall, at closing, be charged an amount equal to the last estimate or
assessment for the improvement by the public body.
(i) RISK OF LOSS: If the Property is damaged by any casualty before closing and
cost of restoration does not exceed $2,500.00, cost of restoration shall be an
obligation of Seller outside of the Transaction and closing shall proceed
pursuant to the terms of this Contract. If the cost of restoration exceeds such
amount and Seller does not elect to pay the additional cost, Buyer shall have
the option of either taking the Property as is, together with either such
amount or any insurance proceeds payable by virtue of such loss or damage, or
of canceling this Contract and paying title and escrow charges incurred.
(j) ESCROW: Escrow Agent is authorized and agrees by execution hereof to hold
the documents and funds deposited in escrow under this Contract and, subject to
clearance as to funds, to disburse them in accordance with terms and conditions
of this Contract. If in doubt as to Escrow Agent's duties or liabilities under
this Contract, Escrow Agent may, at Escrow Agent's option, continue to hold the
subject matter of the escrow until the parties hereto agree to its disbursement
or until a judgment of a court of competent jurisdiction shall determine the
rights of the parties, or Escrow Agent may deposit the same with the clerk of
the circuit court having jurisdiction of the dispute. Upon notifying all
parties concerned of such action, all liability on the part of Escrow Agent
shall terminate, except to the extent of accounting for any items previously
delivered out of escrow. Any suit between Buyer and Seller wherein Escrow Agent
is made a party because of acting as Escrow Agent hereunder, or in any suit
wherein Escrow Agent interpleads the subject matter of the escrow, Escrow Agent
shall recover reasonable attorneys' fees and costs incurred, with these amounts
to be paid out of the escrowed funds or equivalent and charged and awarded as
court costs in favor of the prevailing party. Escrow Agent shall not be liable
to any party or person for misdelivery to Buyer or Seller of items subject to
the escrow, unless such misdelivery is due to willful breach of the provisions
of this Contract or gross negligence of Escrow Agent.
(k) ATTORNEYS' FEES; COSTS: In any litigation, including for breach,
enforcement or interpretation, arising out of this Contract, the prevailing
party in such litigation shall be entitled to recover from the non-prevailing
party reasonable attorneys' fees and costs.
(l) FAILURE OF PERFORMANCE: If Buyer fails to perform this Contract within the
time specified, Seller, at Seller's option, may proceed in equity to enforce
Seller's rights under this Contract. If, for any reason other than failure of
Seller to make Seller's title marketable after diligent effort, Seller fails,
neglects or refuses to perform this Contract, Buyer may seek specific
performance or elect to pay title and escrow charges incurred without thereby
waiving any action for damages resulting from Seller's breach.
(m) CONTRACT NOT RECORDABLE; PERSONS BOUND: Neither this Contract nor any
notice of it shall be recorded in any public records. This Contract shall bind
and inure to the benefit of the parties and their successors in interest.
Whenever the context permits, the singular shall include the plural, and one
gender shall include all.
(n) HEADINGS; OTHER AGREEMENTS: The headings of the section and paragraphs of
this Contract are inserted for convenience only and are not a part of this
Contract. This Contract shall not be construed against any party as the
drafter. No prior or present agreement or warranty shall be binding on Buyer or
Seller, unless included or referred to in this Contract. No modification to or
change in this Contract shall be valid or binding upon the parties unless in
writing and executed by the party or parties intended to be bound by it.
EXHIBIT "A"
<PAGE> 1
Exhibit 10.9
PREPARED BY AND WHEN RECORDED RETURN TO:
RONALD L. STEPHENSON, ESQUIRE
POST OFFICE BOX 2861
ST. PETERSBURG, FLORIDA 33731-2861
DRIVEWAY EASEMENT AGREEMENT
This DRIVEWAY EASEMENT AGREEMENT ("Agreement") is made and entered into on
May 27, 1999 by and between LIFE SCIENCES, INC., a Delaware corporation ("LSI"),
and CAVAFORM, INC., a Florida corporation ("Cavaform").
RECITALS:
(a) LSI is the owner of the real property situate, lying and being in
Pinellas County, Florida and described on the attached Exhibit A, which is
incorporated herein by this reference ("Exhibit A), as PARCEL ONE. This property
and each part thereof is sometimes referred in this Agreement as the "LSI
Property".
(b) On or about the date hereof, Cavaform became the owner, through
acquisition from LSI, of the real property situate, lying and being in Pinellas
County, Florida and described on Exhibit A as PARCEL TWO. This property and each
part thereof is sometimes referred to in this Agreement as the "Cavaform
Property".
(c) By this Agreement, the parties desire to establish and to regulate a
driveway easement from 72nd Street North, St. Petersburg, Florida for ingress
and egress to and from the LSI Property and the Cavaform Property (sometimes
collectively referred to herein as the "Benefited Property"), such driveway
easement (the "Driveway Easement") to be over the southerly portion of the LSI
Property and the northerly portion of the Cavaform Property. Such southerly and
northerly portions of property are more particularly described as the real
property situate, lying and being in Pinellas County, Florida and described on
Exhibit A as PARCEL THREE (the "LSI Easement Parcel") and PARCEL FOUR (the
"Cavaform Easement Parcel"). The LSI Easement Parcel and the Cavaform Easement
Parcel are sometimes collectively referred to in this Agreement as the "Easement
Area". The Easement Area is more particularly described as the real property
situate, lying and being in Pinellas County, Florida and described on Exhibit A
as PARCEL FIVE.
NOW, THEREFORE, in consideration of the foregoing and the covenants
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by LSI and Cavaform, the parties
agree as follows:
1. RECITALS. The foregoing recitals are true and correct, and are incorporated
herein by this reference.
2. GRANTS OF EASEMENTS. On the terms and conditions herein contained, LSI hereby
grants to Cavaform, and to the successors in title to the Cavaform Property, for
the use and benefit of the Cavaform Property, a perpetual, non-exclusive
easement for ingress and egress to the Cavaform Property, on, over and across
the LSI Easement Parcel. On the terms and conditions herein contained, Cavaform
hereby grants to LSI, and to the successors in title to the LSI Property, for
the use and benefit of the LSI Property, a perpetual, non-exclusive easement for
ingress and egress to the LSI Property, on, over and across the Cavaform
Easement Parcel.
3. USE. Without limiting the other provisions of this Agreement, the Driveway
Easement may be used for the intended purpose of providing ingress and egress to
and from the Benefited Property by the respective employees, agents, tenants,
subtenants, licensees, mortgagees in possession, customers and business invitees
of the owners of the Benefited Property. Neither of the parties shall do
anything that will impair the use of the Driveway Easement for its intended
purpose; provided, however, that limited impairment of use resulting from
construction, repair and maintenance of improvements to the Driveway Easement is
not a breach of this provision. Parking or standing of vehicles in the Driveway
Easement is not permitted, except as requisite in and about the construction,
repair and maintenance of improvements to the Driveway Easement.
4. COVENANTS RUNNING WITH THE LAND. The terms, covenants and conditions set
forth in this Agreement shall run with the real property described herein (i.e.,
the Benefited Property and the Easement Area) and shall benefit and bind the
parties, and any successor owner of all or any portion of the real property
described in this Agreement. Subsequent owners of all or any portion of the
Benefited Property shall have the full benefit and right of enjoyment of the
easements and other rights herein granted. The rights, benefits and obligations
of this Agreement shall be transferred and conveyed upon transfer or conveyance
of any portion of real property benefited or burdened by the easements herein
granted without the need of any reference to this Agreement.
<PAGE> 2
5. NO PUBLIC DEDICATION. Nothing contained in this Agreement shall be deemed to
be a gift or dedication of any portion of any real property described herein to
the general public or for any public use or purpose.
6. CONSTRUCTION, REPAIR AND MAINTENANCE. At its sole cost and expense, Cavaform
shall construct, or shall cause to be constructed, improvements, including
asphalt paving and concrete curbing, within the Easement Area suitable to the
use thereof as the Driveway Easement, and thereafter shall maintain the same, or
cause it to be maintained, in good repair and in a safe, well-lighted, clean and
orderly condition, and shall provide suitable insurance with respect to the
same. Notwithstanding the foregoing, from and after such time as the owner of
the LSI Easement Parcel makes more than an incidental use of the Driveway
Easement, such owner shall be responsible for reimbursing the party performing
the maintenance on, and providing the insurance with respect to, the Driveway
Easement for one-half of the reasonable cost of such maintenance and insurance
applicable to the Driveway Easement for periods of time after the commencement
of more than such an incidental use. Each party shall be solely responsible for
the property taxes and assessments on that portion of the Easement Area owned by
the party.
7. DAMAGE. If any owner of any of the Benefited Property, or such owner's
employees, agents, tenants, subtenants, licensees, mortgagees in possession,
customers or business invitees, cause any damage (such owner is referred to as
the "Applicable Owner") to the Driveway Easement, the Applicable Owner shall
immediately begin the repair of such damage at its sole cost and expense and
diligently complete such repairs as soon as reasonably possible, but in no event
later than 30 days after such property is damaged.
8. FAILURE TO MAINTAIN AND REPAIR. If any person responsible for construction,
repair or maintenance under the provisions of this Agreement fails to perform
its obligations hereunder (the "Defaulting Owner"), then after notice to the
Defaulting Owner by another owner of property affected by this Agreement (the
"Non-Defaulting Owner"), and provided that the Defaulting Owner does not
commence its construction, repair or maintenance obligations within five days
after receiving the notice and diligently complete the performance of such
maintenance and repair obligations as soon as reasonably possible, but in no
event more than 30 days after the delivery of such notice, the Non-Defaulting
Owner shall have the right, but not the obligation, to perform any of the
obligations of the Defaulting Owner. In the event of an emergency, the
Non-Defaulting Owner may immediately perform the obligations of the Defaulting
Owner. All reasonable costs and expenses incurred by the Non-Defaulting Owner in
connection with the Defaulting Owner's failure to perform, together with
interest at the highest lawful rate per annum from the date of the expenditure
of such funds (the "Remediation Costs") shall be due from the Defaulting Owner
to the Non-Defaulting Owner upon receipt of a bill therefor. The Remediation
Costs shall be the obligation of the Defaulting Owner, and the Non-Defaulting
Owner shall have a lien against the property owned by the Defaulting Owner and
subject to this Agreement ("Defaulting Owner's Property") to secure the
Remediation Costs. The priority of such lien shall be the date a claim of lien,
stating the amount of Remediation Costs and specifying that the lien is against
the Defaulting Owner's Property, is mailed to the Defaulting Owner and recorded
in the public records of Pinellas County, Florida. Such lien may be foreclosed
in the same manner as a real estate mortgage.
9. INTERPRETATION. In the event any provision of this Agreement is determined to
be invalid, illegal, void or unenforceable, in whole or in part, such
determination shall not be construed to invalidate the remaining provisions of
this Agreement which shall remain in full force and effect. Descriptive headings
of or in sections and any exhibits are inserted for convenience only and are not
a part of this Agreement. Any time period provided for herein which shall end
on, and any date provided for herein which is on, a Saturday, Sunday or legal
holiday in the United States shall extend to 5:00 p.m. of the next business day.
Unless otherwise qualified, references in this Agreement to "Section" or
"section" are to provisions of this Agreement and a reference thereto includes
any subparts, and the use of the terms "party" or "parties" are references to
Cavaform and/or LSI, and their respective successors as contemplated by Sections
2 and 4, as required or permitted by the context. As used herein, the singular
includes the plural, the plural includes the singular and words in one gender
include the others; the terms "herein", "hereof", "hereunder" and similar
references refer to the whole of this Agreement; and "include", "including" and
similar terms are not words of limitation. This Agreement shall not be construed
against any party as the drafter, and may not be waived, amended or modified in
any respect except by further agreement in writing duly executed by all parties
that own the real property that is affected by such waiver, amendment or
modification.
10. GENERAL. This Agreement: (i) shall become effective on the date it is first
recorded in the public records of Pinellas County, Florida; (ii) contains the
entire statement of all arrangements, representations, warranties, promises,
covenants, understandings and agreements, written or oral, between LSI and
Cavaform with respect to its subject matter, and supersedes all previous
arrangements, representations, warranties, promises, covenants, understandings
and agreements, written or oral, relating to its subject matter; and (iii) shall
be governed by, and construed and enforced in accordance with, the internal laws
of the State of Florida without reference to its laws relating to the conflict
of laws; provided, however, to the extent Florida law is preempted by federal
law, federal law shall apply. With respect to the Driveway Easement, each of the
parties shall comply with all applicable laws, rules, regulations and
requirements of public authorities, and shall indemnify, defend and hold
harmless each owner of real property underlying the Easement Area against all
claims, demands, loss, damage, liabilities,
PAGE 2
<PAGE> 3
suits, actions and judgments (including costs and reasonable attorneys' and
paralegals' fees) arising or resulting out of, or related to, the other party's
use (including use by such party's employees, agents, tenants, subtenants,
licensees, mortgagees in possession, customers or business invitees) of the
portion of the Driveway Easement that is upon such owner's real property. In the
event of litigation involving this Agreement, each party irrevocably consents to
the exclusive personal jurisdiction over that party of the courts (both federal
and state) located within the territorial limits of the United States District
Court for the Middle District of Florida, Tampa Division, in the State of
Florida and to venue therein for all purposes, and the prevailing party shall be
entitled to recover as part of the judgment its costs of suit, including
reasonable attorneys' and paralegals' fees, at trial and on appeal. The defense
to an action for the specific enforcement of this Agreement that the remedy of
damages alone may be adequate is waived by each of the parties.
11. NOTICE. Any notice given to any party under this Agreement shall be valid
only if in writing and shall be deemed to be duly given only if delivered
personally or sent by courier service, by overnight delivery service, or by
registered or certified mail, postage prepaid, addressed to the respective
addresses of the parties set forth under their signatures below. Either party
may by notice to the other change its address for notice. Notice shall be
effectively given upon the earlier of actual receipt or three days after
forwarding. In the event notice is mailed as provided in this section and is
returned to the sender for any reason, that notice shall be deemed to have been
received by the party to whom it was addressed on the date the notice was
initially placed in the U. S. Postal Service by the sender.
IN WITNESS WHEREOF, LSI and Cavaform have caused this Driveway Easement
Agreement to be executed, acknowledged and delivered in their respective names
by duly authorized officers on the date first written above.
<TABLE>
<S> <C>
LIFE SCIENCES, INC.
WITNESSES:
/s/ Behnam Movaseghi By: /s/ Alex A. Burns
- --------------------------------- -----------------------------------------------
(Authorized Officer)
Behnam Movaseghi Alex A. Burns
- --------------------------------- ---------------------------------------------------
NAME LEGIBLY PRINTED, TYPEWRITTEN OR STAMPED
NAME LEGIBLY PRINTED, (Address of Such Person and of Life Sciences, Inc.)
TYPEWRITTEN OR STAMPED 2900 - 72ND STREET NORTH
ST. PETERSBURG, FLORIDA 33710
/s/ Ronald L. Stephenson
- ---------------------------------
Ronald L. Stephenson
- ---------------------------------
NAME LEGIBLY PRINTED, TYPEWRITTEN
OR STAMPED
CAVAFORM, INC.
/s/ Behnam Movaseghi By: /s/ Robert C. Massie
- --------------------------------- -----------------------------------------------
(Authorized Officer)
/s/ Behnam Movaseghi Sect./Tr. R. C. Massie
- --------------------------------- ---------------------------------------------------
NAME LEGIBLY PRINTED, NAME LEGIBLY PRINTED, TYPEWRITTEN OR STAMPED
TYPEWRITTEN OR STAMPED (Address of Such Person and of Cavaform, Inc.)
2700 - 72ND STREET NORTH
/s/ Ronald L. Stephenson ST. PETERSBURG, FLORIDA 33710
- ---------------------------------
Ronald L. Stephenson
- ---------------------------------
NAME LEGIBLY PRINTED, TYPEWRITTEN
OR STAMPED
</TABLE>
PAGE 3
<PAGE> 4
STATE OF FLORIDA )
COUNTY OF PINELLAS )
The foregoing instrument was acknowledged before me this 27th day of May
1999, by Alex A. Burns, the Vice President of LIFE SCIENCES, INC., a Delaware
corporation, on behalf of the corporation. He is personally known to me, or he
has produced (insert type of identification produced) Driver's License as
identification.
/s/ Linda R. O'Dell
--------------------------------------------
SIGNATURE
(SEAL)
Linda R. O'Dell
--------------------------------------------
NAME LEGIBLY PRINTED, TYPEWRITTEN OR STAMPED
My Commission Expires:
STATE OF FLORIDA )
COUNTY OF PINELLAS )
The foregoing instrument was acknowledged before me this 27th day of May
1999, by Robert C. Massie, the Sect./Tr. of CAVAFORM, INC., a Florida
corporation, on behalf of the corporation. He is personally known to me, or he
has produced (insert type of identification produced) Driver's License as
identification.
/s/ Linda R. O'Dell
--------------------------------------------
(SEAL)
Linda R. O'Dell
--------------------------------------------
NAME LEGIBLY PRINTED, TYPEWRITTEN OR STAMPED
My Commission Expires:
PAGE 4
<PAGE> 1
Exhibit 10.10
SIMON SRYBNIK AND VARIOUS
ENTITIES
May 27, 1999
LIFE SCIENCES, INC.
Attn.: Alex A. Burns
2900 72nd Street North
St. Petersburg, Florida 33710
Re: Investment Representations and Agreements - Life Sciences, Inc.
Gentlemen:
This letter sets forth the individual representations, warranties and
acknowledgements of the individual and of each of the entities listed in the
table below (collectively referred to hereinafter as "we", "us", "our" and
similar terms) to Life Sciences, Inc., a Delaware corporation ("LSI", "you" or
the "Company"), and our related individual covenants and agreements with you,
all in connection with the offer to purchase from you shares of common stock,
$.10 par value per share, of LSI (the "Common Stock"), at $.405 per share(1) as
the means of liquidating your individual indebtedness to each of us.
As of the close of business yesterday, May 26, 19992, you were
indebted to us as set forth in the following table, all of which amounts are
due by you in connection with one or more separate loans of money by us to the
Company as reflected in your books and records.
<TABLE>
<CAPTION>
Interest and
Other Charges
Principal (collectively, the
Creditor Name Total Amount ("Principal") "Other Charges")(2)
------------- ------------ ------------- -------------------
<S> <C> <C> <C>
Kerns Mfgering Corp. $184,530.57 $107,071.31 $ 77,459.26
Industrial Renting Corp. 30,731.17 20,000.00 10,731.17
Continental Salvage Corp. 30,364.74 20,000.00 10,364.74
Simon Srybnik 35,427.95 15,000.00 20,427.95
Sutton Investing Corp. 380,566.56 313,653.63 66,912.93
S&S Machinery Corp. 76,045.81 50,104.45 25,941.36
Apex Organization, Inc. 23,022.39 18,000.00 5,022.39
----------- ----------- -----------
TOTALS $760,689.19 $543,829.39 $216,859.80
</TABLE>
During his current visit to Florida, Simon Srybnik has, for himself,
individually, and as an authorized officer of each of the entities named in the
foregoing table (the "Entities") reached agreement with you, and upon
acceptance by you of this letter (this "Investment Representation Letter" or
this "Letter") it shall evidence the agreement between you and us, that the
individual amounts of Principal shall be paid and discharged by the sale and
issuance by you, in a private offering to us, of shares of Common Stock at
$.405
- ---------------
(1) This amount is the approximate mean between the last available reported
bid and ask prices of the Common Stock in the over-the-counter market
prior to the date hereof.
(2) Interest included in the table is calculated through May 31, 1999, the
five additional days being immaterial under the circumstances. It is
understood that late payment charges were never booked by the Company;
only interest amounts were booked by the Company.
<PAGE> 2
Life Sciences, Inc. Investment Representation Letter
May 27, 1999 Page 2
===============================================================================
per share, and that the Other Charges shall be forgiven and extinguished upon
the date of your acceptance of this Letter without any further act or deed by
you or any of us. This would result as of the date of this Letter in the sale
and issuance to us of an aggregate of 1,342,785 whole shares (rounded down in
calculation) of Common Stock (the "Shares"), which individual amounts of Shares
we individually hereby subscribe for and agree to purchase:
Issuee-Creditor Name EIN/SS No. Number of Shares
-------------------- ---------- ----------------
Kerns Manufacturing Corp. 11-1613018 264,373
37-14 29th Street
Long Island City, NY 11101
Industrial Renting Corp. 11-1742522 49,382
132-54th Street
Brooklyn, NY 11220
Continental Salvage Corp. 11-2044758 49,382
Simon Srybnik ###-##-#### 37,037
Sutton Investing Corp. 11-1996040 774,453
S&S Machinery Corp. 13-2533665 123,714
Apex Organization, Inc. 11-2399253 44,444
-------
TOTAL SHARES 1,342,785
It is in this context that we provide you with this Letter as an
inducement to your sale of the Shares to us, and each of us intend and realize
that the Company and its agents and representatives will rely on our individual
representations, warranties, acknowledgements, covenants and agreements set
forth in this Letter in connection with the sale to us of the Shares. We each
understand that reliance will also be placed on the accuracy and completeness
hereof in complying with the obligations of applicable securities laws, and
that failure to comply with those obligations may have significant legal
consequences.
(1) Representations, Etc. Therefore, for good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
each of the preceding portions of this Letter is incorporated herein by this
reference, and we each for ourselves individually (severally, and not jointly
and severally) represent, warrant, acknowledge, covenant and agree as follows:
(a) Except as otherwise set forth in the immediately preceding
table, the business address for each of us is 140 - 53rd Street, Brooklyn, New
York 11232. Our respective employer identification numbers or social security
number are as set forth in that same table. Insofar as we are individually
aware, no commission or other remuneration is payable as a result of our
respective proposed purchases of the Shares, and no general solicitation or
advertisement occurred in connection therewith.
(b) We are each an "accredited investor" within the meaning of
Regulation D under the Securities Act of 1933, as amended ("Securities Act"),
and the Florida Securities and Investor Protection Act ("Florida Act") because,
(i) in the case of Simon Srybnik, his current individual net worth exceeds
$1,000,000 and/or he had individual income(3) in excess of $200,000 in each of
the two most recent years and has a reasonable expectation of reaching the same
income level in the current year, and (ii) in the case of each of the Entities,
each of the three stockholders of each of the Entities (i.e., Simon Srybnik,
Louis D. Srybnik and Julius B. Srybnik), each of whom owns one-third of the
outstanding stock of each of the Entities, is an accredited investor by virtue
of having a current individual net worth in excess of $1,000,000
- ---------------
3 A measure of a person's income for this purpose is the amount of his
individual adjusted gross income (as reported on a federal income tax
return) increased by: (i) any deduction for a portion of long term capital
gains [Internal Revenue Code ("Code") Section 1202]; (ii) any deduction for
depletion (Section 611 et. seq. of the Code); (iii) any exclusion for
interest on tax-exempt municipal obligations (Section 103 of the Code); and
(iv) any losses of a partnership allocated to the individual limited partner
(as reported on Schedule E of Form 1040).
<PAGE> 3
Life Sciences, Inc. Investment Representation Letter
May 27, 1999 Page 3
===============================================================================
and/or because he had individual income(4) in excess of $200,000 in each of the
two most recent years and has a reasonable expectation of reaching the same
income level in the current year. We each also have such knowledge and
experience in financial and business matters that we are capable of evaluating
the merits and risks of our respective acquisitions of the Shares and of our
investments in LSI. We understand there is no guaranty or assurance that you
ever will be profitable, and that your operating history includes a history of
losses. Accordingly, we are aware of the speculative nature of our proposed
investments and of the significant risks involved, and we represent and warrant
that we can individually bear the economic risk of such investments. We
understand that an investment in LSI is not suitable for any person who does
not so understand such risks. Our respective investments in and commitments to
all non-liquid investments, including our individual proposed purchases of the
Shares, are reasonable in relation to our respective net worths, and we each
have adequate means of providing for our respective current needs and possible
contingencies without disposing of our respective proposed investments in the
Shares. All information we have provided to you concerning our respective
financial positions and knowledge of financial and business matters is correct
and complete as of the date hereof.
(c) We have received and reviewed prior to our individual
determinations to purchase the Shares and prior to the execution and delivery
of this Investment Representation Letter, all of the material information
concerning LSI, the Common Stock, the Shares and other matters that we
considered to be necessary or appropriate in connection with our respective
investment decisions.
(d) Among the documents we have had full and fair access to prior
to the execution and delivery of this Letter are all material contracts to
which LSI is a party or by which you are bound or benefitted, your historical
financial statements and related financial information as requested by one or
more of us, and the minute book of LSI containing the records of the actions of
your Board of Directors and stockholders.
(e) The Shares are to be acquired by us individually, in our own
respective names only, for our own respective accounts, and no other person has
any direct or indirect beneficial ownership interest or other interest therein,
other than the stockholders of the Entities in their capacities as such. The
Shares are to be individually acquired by us solely for investment purposes and
not with a view to resale or distribution, and none of us has any contract,
undertaking, agreement or arrangement for any sale, distribution or other
transfer of any interest in any of the Shares, and no present plans to enter
into any such arrangement.
(f) We each understand that the offer and sale of the Shares has
not been registered with or reviewed by the Securities and Exchange Commission
under the Securities Act, with or by any agency under the Florida Act, or with
or by any other state securities law administrator on the grounds, among
others, that the issuance and sale thereof is exempt from those registration
requirements on the grounds, among others, of not involving any public offering
and/or that the Shares in the context of these transactions are a "covered
security" as that phrase is defined in Section 18(a) of the Securities Act and,
accordingly, a "federal covered security" as that phrase is defined and used in
the Florida Act. We each further understand that your, and your agents' and
representatives', reliance on such exemptions are, in material part, based on
our representations, warranties, acknowledgements, covenants and agreements set
forth herein. We also each understand that no federal or state securities law
administrator has reviewed or approved any disclosure or other associated
material concerning the Shares, LSI, the Common Stock or any related matter,
and we each acknowledge that our respective decisions to acquire the Shares is
of our own
- ----------------
4 See explanation in footnote 3.
<PAGE> 4
Life Sciences, Inc. Investment Representation Letter
May 27, 1999 Page 4
===============================================================================
volition and has not been recommended by you or by any federal or state
securities law administrator.
(g) We have been represented by such legal, tax, accounting,
financial and other advisors selected and retained by us as we have
individually found necessary to consult concerning our respective proposed
purchases of the Shares and our respective proposed investments. We have
sufficient knowledge and experience in business and financial matters that we
are individually capable of evaluating all facets of the merits and risks
thereof [or one or more of us have used and relied upon in connection with our
respective decisions to purchase the Shares, our own independent purchaser
representative [insert identity of purchaser representative(s) or insert "N/A":
N/A ]
-----------------------------------
who does have such knowledge and experience and, therefore, the terms - "we"
and "us" in this paragraph (g) shall include (as appropriate in the context)
such identified representative(s) for those of us, if any, who have used such a
representative], and we each investigated all facets of the merits and risks of
such proposed purchases prior to deciding to purchase the Shares. We each
acknowledge that we have had full and fair access to all information concerning
LSI, the Shares (and also to other information considered by us individually to
be necessary or appropriate as a prudent and knowledgeable investor to enable
us individually to make an informed investment decision concerning the
acquisition of the Shares), and that we were previously informed that all
documents, records and books pertaining to such proposed investments were at
all relevant times available for inspection and review by us. We have each
determined the information necessary or appropriate for our respective reviews
of the merits and risks of our proposed investments, and we shall not seek to
hold you, or any of your agents or representatives, liable for matters included
in or omitted from our respective investigations based on such determinations.
We acknowledge that we have had the opportunity to ask questions of, and have
received satisfactory answers from, you and your officers and directors
concerning LSI, the Shares and related matters. We also acknowledge that we
have each had an opportunity to obtain additional information necessary to
verify the accuracy of such information and to evaluate the merits and risks of
our proposed investments. In our respective determinations to acquire the
Shares, no person made any representation or warranty, expressed or implied, to
any of us in any way relating thereto except as expressly set forth or
referenced herein, we have not relied on any oral representation or warranty,
and we did not rely on any offering literature other than the documents and
information made available to us individually as provided herein.
(h) We each understand that the Shares are not readily
transferable, and that there is only a limited over-the-counter market for the
Common Stock, no assurance is given by anyone that an active and substantial
public market will develop, or if developed that it will be sustained, we may
not be able to readily liquidate our proposed investments in the Shares in any
event, and we must bear the economic risk of an investment therein
indefinitely. We also understand there are substantial restrictions on the sale
and transfer of the Shares we are purchasing, and that subsequent sale or other
transfer where permitted will require registration thereof with applicable
federal and state securities law administrators and/or an opinion of our
counsel acceptable to LSI that any such transfer is exempt from such securities
law requirements. We each further understand that legends, including a legend
substantially as set forth in Section (2) below, will be on the certificates
issued to each of us to represent our individual portions of the Shares. We
each agree not to offer, sell, pledge or otherwise transfer any of the Shares
or any interest therein absent compliance with applicable federal and state
securities laws and the referenced legend conditions. We each understand that
neither the Company nor any other person has any obligation to register any
Common Stock or to provide any of us an opinion for the foregoing purposes.
(i) No representation or warranty by any of us herein contains any
untrue statement of a material fact or omits to state a material fact necessary
to make the statements contained herein not misleading, and the
representations, warranties, acknowledgements, covenants and agreements set
forth herein shall survive the payment, issuance and delivery, of the Shares.
<PAGE> 5
Life Sciences, Inc. Investment Representation Letter
May 27, 1999 Page 5
===============================================================================
(j) We each acknowledge that we understand the meaning and legal
consequences of our individual representations, warranties, acknowledgements,
covenants and agreements contained herein, and we each agree to indemnify and
hold LSI and its agents and representatives harmless from and against any and
all loss, damage, liability or expense, including costs and reasonable
attorneys' and paralegal fees, to which any of them may be put or which they
may incur by reason of, or in connection with, any misrepresentation by us
individually, any breach by us individually of any representation or warranty,
or any failure by us individually to fulfill any of our individual covenants or
agreements herein. The representations, warranties, acknowledgements, covenants
and agreements set forth in this Letter are intended to benefit each of the
persons described in the preceding sentence.
(2) Legends. The Shares shall be subject to any legend condition
necessary to assist in complying with applicable federal and state securities
laws, including such legends as may be appropriate under Regulation D as
adopted by the Securities and Exchange Commission under the Securities Act and
the legend set forth below. In any event, each of the certificates representing
the Shares shall have endorsed on it a legend reading substantially as follows:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AND MAY NOT BE
OFFERED FOR SALE, SOLD, HYPOTHECATED OR OTHERWISE TRANSFERRED
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THAT ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER
THAT SUCH REGISTRATION IS NOT REQUIRED.
(3) Interpretation. Any descriptive headings of or in sections and
paragraphs of this Letter are inserted for convenience only and are not a part
of this Letter. No provision in this Investment Representation Letter shall be
construed against any party as the drafter. As used herein, the singular
includes the plural, the plural includes the singular and words in one gender
include the others; the terms "herein", "hereof", "hereunder" and similar
references refer to the whole of this Investment Representation Letter; and
"include", "including" and similar terms are not words of limitation. Whenever
possible, each provision of this Letter shall be interpreted in such manner as
to be effective and valid under applicable law, but if any provision shall be
prohibited or invalid under applicable law, such provision shall be ineffective
to the extent of such prohibition or invalidity only, without invalidating the
remainder of such provision or of the remaining provisions of this Letter.
(4) Miscellaneous. This Investment Representation Letter: (i) contains
the complete statement of all arrangements between LSI and each of us with
respect to its subject matter, and supersedes all previous agreements,
promises, arrangements and understandings, written or oral, relating to its
subject matter; (ii) cannot be assigned by you without our prior written
consent, cannot be assigned by any of us without your prior written consent,
and cannot be modified, amended or waived except by an instrument in writing
signed by the parties necessary to the enforcement thereof; (iii) shall be
binding upon and shall inure to the benefit of your and our respective
successors, permitted assigns, heirs and legal representatives; (iv) may be
executed in any number of counterparts, each of which shall be deemed an
original instrument, but all such counterparts together shall constitute but
one agreement; and (v) shall be governed by, and construed and enforced in
accordance with, the laws of the State of Florida; provided, however, to the
extent Florida law is preempted by federal law, federal law shall apply. LSI
and we each hereby consent to the personal jurisdiction of the state and
federal courts located within the territorial limits of the United States
District Court for the Middle District of Florida, Tampa Division, agree that
venue for any litigation (or mediation or arbitration in connection therewith)
related in any way to this Letter shall only be in Pinellas County, Florida,
<PAGE> 6
Life Sciences, Inc. Investment Representation Letter
May 27, 1999 Page 6
===============================================================================
or, if appropriate, the United States District Court for the Middle District of
Florida, Tampa Division, and waive any objection to such exclusive jurisdiction
and venue. If either you or any of us retains the services of counsel to
enforce any provision of this Letter, or because of litigation (or mediation or
arbitration in connection therewith) involving this Letter, the prevailing
party shall be entitled to recover, in addition to any other relief or remedy
obtained, all costs, expenses, and attorneys' and paralegal fees paid or
incurred by it, including costs, expenses and such fees at trial and any
appeal, whether in a court, administrative, arbitration or mediation
proceeding.
Please sign and return the second copy of this Investment Representation Letter
to Simon Srybnik if you find it satisfactory to acknowledge, evidence and
confirm your agreement with all of the foregoing.
Very truly yours,
/s/ Simon Srybnik
- -----------------------------------
Simon Srybnik, for himself
and as an authorized officer
of each of the Entities
Confirmed, Accepted and Agreed:
LIFE SCIENCES, INC.
By: /s/ Alex A. Burns
---------------------------------
Alex A. Burns, Vice President
May 27, 1999
<PAGE> 1
Exhibit 10.11
June 15, 1999
Mr. Anthony S. Johnston
Lawrence T. Malek, Ph.D.
11144668 Ontario Ltd.
3403 American Drive
Suites 1-2
Mississauga, Ontario
Canada L4V 1T4
Dear Tony and Larry:
Over the past year we have discussed a variety of proposals that would enable us
jointly to bring to market NASBA based products for detection of food home
pathogens. That the concept has retained its viability despite the many
distractions that we at Life Sciences have experienced during the interim
encourages me that our objectives are valid and with a modicum of good fortune
some measure of success in the food testing marketplace should be readily
achievable.
In our most recent discussions, I advised you that LSI had completed its
negotiations to license the electrochemical detection technology that has been
patented by Cornell University. Further, we have continued our discussions with
Princeton Separations to develop a NASBA compatible electrochemiluminescent
technology that would provide the basis for an absorbance based, qualitative
assessment of the amplicons yielded in a successful NASBA reaction. These steps,
together with LSl's continuing effort to develop a solid state cassette to carry
out NASBA reactions using immobilized enzymes and primers, are expected to fuel
our opportunity for successful early on financing to support the development and
marketing of food testing products. The factors set out above are significant
elements in the follow on proposals for joint activities between our
organizations.
In our most recent series of discussions on various aspects of proposed
collaborations, we agreed in principle that LSI and 1144668 Ontario Ltd.
(Numberco) would, subject to definitive documentation, enter into agreements
that would eventually lead to LSl's acquisition of 1144668 Ontario Ltd. in
exchange for the common stock of Life Sciences. As a path to this objective, LSI
and Numberco would initially form a joint venture to be equally owned by LSI and
Numberco to develop and market NASBA based tests for food home pathogens. With
the exception of contributing to the joint venture the technology necessary to
enable the joint venture to produce and sell a NASBA test for Listeria
monocytogenes, which is now an asset of Numberco, and Numberco's representation
on the governing body of the joint venture, the role of Numberco or the staff of
Genescape in the joint venture would be limited to that of advisory,
specifically with respect to advice regarding scientific operation of the
venture. LSI would bear all the legal, administrative and related costs to
establish, house and staff the venture's operations, and LSI would provide the
lead effort to attract grant and contract support from public and private U.S.
and international agencies with interest in food safety.
<PAGE> 2
1144668 Ontario Ltd. June 15, 1999 page 2
Our discussions with respect to funding of the development of individual test
products also provided that either of LSI or Numberco may pursue investments
from others or make direct investment in the joint venture or alternatively in
individual test products. In such cases additional equity in the joint venture,
or a royalty interest in a specific test product, would be awarded. With respect
to the already developed test for Listeria monocytogenes, if the test is at or
near the market-ready state and may be introduced without substantial added
development expense to be borne by LSI, Numberco would receive a royalty equal
to 15% of the net sales of the L. monocytogenes test kit.
With respect to the existing and any altered capital structure of Numberco, in
exchange for 50,000 shares of LSI common stock, the principals of Numberco would
grant LSI an option to purchase their holdings in Numberco for an additional
200,000 shares of the common stock of LSI. LSI's option would be exercisable
within 3 years of the date of the joint venture agreement at any time that the
market value of LSI common stock is sustained at or above $6.00 per share for 30
consecutive days, the market value being computed as one-half the sum of the
closing bid and asked prices of the LSI common stock. LSI's option to purchase
would also be alternatively exercised through LSI's payment to you of $1.2
million.
LSI's acquisition of an option to purchase Numberco recognizes that Cangene
Corporation owns a separate option to purchase a 25% interest in Numberco. This
option expires in September, 2000. With respect to the Cangene option, Numberco
and LSI are agreed that in the event Cangene elects to exercise its option, the
proceeds will flow to the current shareholders of Numberco, and LSI's option to
purchase Numberco becomes exercisable for the same consideration without regard
to the market value of the LSI common stock. Further, with respect to the LSI
option, prior to its exercise of same, the principals of Numberco may recover
for their own use such assets of Numberco as you elect, except for the NASBA
license for detection of food borne pathogens.
I trust that this communication accurately summarizes our discussions on this
matter to date and may serve as a basis for the development of definitive joint
venture and acquisition agreements. The agreement in principle represented by
this letter in intent is subject to the completion of our discussions, the
preparation, execution and delivery of definitive agreements, and the initiation
and completion of steps necessary to achieve compliance with applicable
securities laws. Please know that we at Life Sciences look forward to an
aggressive effort to fulfill the objectives described herein.
Sincerely,
LIFE SCIENCES, INC.
/s/ Alex A. Burns
- -------------------
Alex A. Burns
Vice President
Confirmed:
1144668 ONTARIO, LTD
/s/ Lawrence Malek
--------------------------------------------
Lawrence Malek, President
/s/ Anthony S. Johnston
--------------------------------------------
Anthony S. Johnston, Chief Executive Officer
June 15, 1999
-------------
Date
<PAGE> 1
Exhibit 10.12
SUBLICENSE AGREEMENT
THIS SUBLICENSE AGREEMENT made and entered into as of July 29, 1999
("Effective Date") between INNOVATIVE BIOTECHNOLOGIES INTERNATIONAL, INC., a
Delaware corporation having offices at 335 Lang Boulevard, Grand Island, New
York 14072 ("INNOVATIVE") and LIFE SCIENCES, INC., a Delaware corporation with
offices at 2900 72nd Street North, St. Petersburg, FL 33710 ("LSI").
WHEREAS, INNOVATIVE is the holder of an exclusive worldwide license
from the Cornell Research Foundation, Inc. ("Foundation") under certain United
States patents and applications which are listed in attached Exhibits A and B,
respectively;
WHEREAS, the work leading to the inventions disclosed and claimed in
Exhibits A and B were supported in part by an agency of the U.S. Government,
Foundation is obligated to comply with the U.S. Office of Management & Budget's
Circular No. A-124 and 37 CFR Part 401;
WHEREAS, LSI wants to secure a non-exclusive sublicense under said
patents and patent applications under the terms and conditions herein; and
WHEREAS, INNOVATIVE is willing to grant a non-exclusive sublicense to
LSI under said patents and patent applications under the terms and conditions
herein;
NOW, THEREFORE, in consideration of the covenants and obligations
hereinafter set forth, the parties hereto hereby agree as follows:
ARTICLE 1 - DEFINITIONS
The following definitions will apply throughout this Agreement:
1.1 "Field of Use" shall mean the detection of target nucleic
acids only to the extent such nucleic acids are first amplified by Nucleic Acid
Sequence Based Amplification (NASBA Technology) as described in attached
Exhibit C.
1.2 "INNOVATIVE Technology" shall mean all inventions, designs,
know-how, and technologies developed or licensed by INNOVATIVE, whether
patented or unpatented, including without limitation inventions, designs,
know-how, and technologies relating to liposomes and their use in migration
strip assays, with or without the use of interdigitated electrode arrays.
1.3 "Licensed Application" shall mean the U.S. patent
applications listed at Exhibit A, and any continuation, continuation-in-part,
or divisional applications thereof, as well as any foreign counterparts
thereof.
1.4 "Licensed Patent" shall mean the U.S. patents listed at
Appendix B, any U.S. patents issuing from a Licensed Application, all reissues
and reexamination certificates thereof, as well as any foreign counterparts
thereof.
<PAGE> 2
1.5 "Licensed Products" shall mean products or uses claimed or
embodied in a Licensed Application or Licensed Patent or products or uses
utilizing the INNOVATIVE Technology.
1.6 "Licensed Year" shall mean each twelve (12) month period
beginning on the Effective Date of this Agreement and, thereafter, on the
anniversary date thereof.
1.7 "LSI Technology" shall mean all inventions, designs,
know-how, and technologies developed or licensed by LSI, whether patented or
unpatented.
1.8 "Net Sales Revenues" shall mean the gross amount of revenue
collected by LSI, its subsidiaries, contractors or sales agents from its
customers for the sale or use of Licensed Products starting on the Effective
Date of this Agreement, less: (1) trade and/or quantity discounts; (2) returns
and allowances; (3) retroactive price reductions; and (4) royalties paid to
others.
1.9 "Term" shall mean the period of time from the Effective Date
until the expiration date of the last to expire of the Licensed Patents. In the
event there are no Licensed Patents, the term of this Agreement shall be eight
(8) years from the Effective Date.
ARTICLE 2 - GRANT
2.1 Subject only to the rights of and obligations to the U.S.
Government as set forth in U.S. Office of Management & Budget Circular A-124 or
37 CFR Part 401, INNOVATIVE hereby grants to the LSI for the Term, under the
terms and conditions set forth below, a non-exclusive worldwide sublicense to
make, have made, use, sell, offer to sell, or distribute Licensed Products in
the Field of Use.
2.2 The sublicense granted to LSI in Section 2.1 includes the
right to have the Licensed Products in the Field of Use made by third parties
under contract, provided such contract manufacturing is subject to and
conditioned upon appropriate supervision and quality assurance and control by
LSI. The contract manufacturer shall be bound in writing to respect all rights
of INNOVATIVE set forth in this Agreement and to supply all Licensed Products
it produces exclusively to LSI.
2.3 LSI shall not sublicense its rights and obligations under
this Agreement unless such sublicense is approved in writing by both the
Foundation and INNOVATIVE.
2.4 The rights granted to LSI pursuant to Sections 2.1, 2.2, and
2.3 do not include any right for LSI to sell to any other entity, including
Organon Teknica B.V., a Boxtel Netherlands company, a product line that will
combine NASBA Technology with INNOVATIVE Technology. ARTICLE 3-TECHNICAL
SUPPORT TO LSI
3.1 Provided that LSI is meeting its obligations under this
Agreement, INNOVATIVE shall provide LSI with technical support regarding the
INNOVATIVE Technology. Such technical support shall be in the form of phone and
email consultation or onsite visits, as described in Sections 3.2 and 3.3.
3.2 Technical support in the form of phone and email consultation
shall be provided by INNOVATIVE to LSI free of charge in an amount not to
exceed ten (10) hours per month.
<PAGE> 3
Any technical support requested by LSI in excess of ten (10) hours per month
shall be charged to LSI at a rate of $ 175 per hour. Such amounts shall be
invoiced by INNOVATIVE to LSI on a monthly basis and shall be payable by LSI
within thirty (30) days of invoicing.
3.3 Technical support in the form of onsite visits shall be
provided by INNOVATIVE to LSI for a period of eighteen (18) months from the
Effective Date. During this period, LSI shall be entitled to no more than four
(4) onsite visits, of duration not longer than three (3) consecutive days,
exclusive of travel time, by INNOVATIVE personnel or its consultants.
Alternatively, LSI may visit INNOVATIVE or one of its consultants, at its
expense for one or more of these onsite visits. LSI shall be fully responsible
for all travel, car rental, food and lodging, and all other reasonable travel
expenses incurred by INNOVATIVE personnel or its consultants in connection with
such onsite visits, provided they are approved in advance by LSI. LSI shall
reimburse INNOVATIVE within ten (10) days of incurring such costs.
ARTICLE 4 - REPRESENTATIONS AND WARRANTIES
4.1 Mutual Representations. The parties each represent and
warrant:
4.1.1 Such party is duly organized and validly existing
under the laws of the state of its incorporation and has full corporate power
and authority to enter into this Agreement and carry out the provisions hereof.
4.1.2 Such party is duly authorized to execute and deliver
this Agreement and to perform its obligations hereunder.
4.1.3 This Agreement is a legal and valid obligation
binding upon it and enforceable in accordance with its terms. The execution,
delivery, and performance of this Agreement by such party does not conflict
with any agreement, instrument, or understanding, oral or written, to which it
is a party or by which it may be bound, nor violate any law or regulation of
any court, governmental body or administrative or other agency having
jurisdiction over it.
4.2 Representations by INNOVATIVE
4.2.1 INNOVATIVE represents that, subject only to the
rights of and obligations to the U.S. Government as set forth in U.S. Office of
Management Budget Circular A-124 or 37 CFR, INNOVATIVE has the right to grant
the above sublicense.
4.2.2 INNOVATIVE, to the best of its knowledge, represents
that Foundation is the sole owner of the Licensed Applications and Licensed
Patents, subject to the exclusive license to INNOVATIVE and the rights of the
U.S. Government as set forth in U.S. Office of Management Budget Circular A-124
or 37 CFR.
4.2.3 INNOVATIVE MAKES NO WARRANTY OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE OR ANY OTHER WARRANTY, EXPRESS OR IMPLIED.
INNOVATIVE MAKES NO WARRANTY THAT USE OF THE INNOVATIVE TECHNOLOGY WILL NOT
INFRINGE ON PATENT RIGHTS OR OTHER PROPRIETARY RIGHTS OWNED BY OTHERS.
<PAGE> 4
4.2.4 INNOVATIVE MAKES NO REPRESENTATIONS REGARDING THE
SCOPE OF THE LICENSED PATENTS AND THE LICENSED APPLICATIONS.
4.3 Representations by LSI
4.3.1 LSI represents that it has certain worldwide rights
together with other geographically limited rights to make, have made, use,
sell, offer to sell, or distribute products utilizing NASBA Technology.
4.3.2 Except as to INNOVATIVE, LSI represents and warrants
that no individual or entity has asserted to LSI that LSI would be infringing
any foreign or domestic patent or would be misappropriating or improperly using
or disclosing any trade secret, confidential information, or know-how (and LSI
is unaware of any basis for such claim) which relates in any manner to the
subject matter of this Agreement.
ARTICLE 5 - LICENSING FEES
5.1 In consideration of the non-exclusive worldwide sublicense
granted hereunder, LSI agrees to pay INNOVATIVE a sublicensing fee of
$150,000 payable as follows:
5.1.1 A non-refundable payment of $ 25,000 upon execution
of this Agreement;
5.1.2 An additional non-refundable payment of $ 25,000 on
the six (6) month anniversary of the Effective Date of this Agreement;
5.1.3 An additional non-refundable payment of $100,000 on
the eighteen (18) months anniversary of the Effective Date of this Agreement or
upon the first sale of Licensed Product in the Field of Use, whichever shall
occur first.
ARTICLE 6 - ROYALTY PAYMENTS
6.1 LSI shall pay to INNOVATIVE a running earned royalty of ten
(10) percent of Net Sales Revenue for sales or uses in all regions of the
world, except that a reduced royalty rate of four (4) percent of Net Sales
Revenue shall apply to sales or uses in the following countries:
6.1.1 People's Republic of China.
6.1.2 Taiwan.
6.1.3 Nations of sub-Sahara Africa (See Exhibit D)
6.2 Minimum Royalty Payments.
<PAGE> 5
6.2.1 In order to maintain its non-exclusive rights,
pursuant to this Agreement, LSI shall pay INNOVATIVE a Minimum Royalty on an
annual basis, according to the following schedule:
Licensed Year Minimum Royalty
- ------------- ---------------
Licensed Year 1 - 1.5 $ 0
Licensed Year 1.5 - 2.0 $ 10,000 (for 6 month period)
Licensed Year 3 $ 50,000
Licensed Year 4 $ 75,000
Licensed Year 5 $ 135,000
Licensed Year 6 $ 200,000
Licensed Year 7 and thereafter $ 250,000
6.2.2 Minimum Royalty payments, pursuant to Section 6.2.1,
shall be made in quarterly installments in advance of each calendar quarter for
the Licensed Year in which they are due. Such Minimum Royalty payments are not
refundable nor applicable to succeeding Licensed Years.
ARTICLE 7 - ACCOUNTING AND PAYMENT SCHEDULE
7.1 Royalties, pursuant to Section 6.1, shall be paid by LSI to
INNOVATIVE on a quarterly basis for each Licensed Year within sixty (60) days
following the end of that quarter, to the extent such royalties exceed the
Minimum Royalty payments for that quarter of the Licensed Year made in advance
under Section 6.2.
7.2 Within sixty (60) days following the end of each quarter of
the Licensed Year, LSI shall deliver to INNOVATIVE a report ("Royalty Report")
in writing setting forth sales of Licensed Products (including a negative
report, if appropriate). LSI shall keep accurate records, certified by it,
showing the information by which LSI arrived at a royalty determination and
will permit a person appointed by INNOVATIVE or Foundation to make such
inspection of said records as may be necessary to verify Royalty Reports made
by LSI.
7.3 In making the royalty payments pursuant to Section 7.1,
conversion from foreign currencies, if any, shall be based upon the conversion
rate on the last day of the month in which the Net Sales Revenues were
collected.
7.4 Royalty payments which are delayed beyond the sixty (60) days
after the end of the quarter in which they become due, pursuant to Section 7.1,
shall be subject to a ten percent (10%) per annum charge for the first thirty
(30) days and an eighteen percent (18%) per annum thereafter.
SECTION 8 - LSI DUTY OF DILIGENCE
8.1 LSI shall exercise due diligence to effect the introduction
of Licensed Products into the commercial market as soon as practical. LSI
agrees to develop and exploit Licensed
<PAGE> 6
Products with diligence by manufacture and/or sale of Licensed Products for the
duration of the term of this Agreement. In any event, within thirty six (36)
months from the Effective Date, LSI shall have commenced sales of Licensed
Products and have achieved Net Sales Revenues of at least one and one-half
million dollars (U.S.).
8.2 Within thirty (30) days after the end of each Licensed Year,
LSI shall provide an annual progress report to INNOVATIVE which describes the
progress that LSI is making toward product introduction.
8.3 LSI further agrees to maintain quality control over Licensed
Products and generally attend to proper, safe, fair, lawful, and reasonable
development and exploitation of the market for Licensed Products made and/or
sold by it.
ARTICLE 9 -INFRINGEMENT OF LICENSED PATENT RIGHTS BY THIRD PARTIES
9.1 In the event that any infringement of a Licensed Patent shall
come to the attention of INNOVATIVE or LSI, then that party shall duly inform
the other party, and INNOVATIVE shall inform Foundation. Foundation shall, in
its sole discretion, determine whether or not to prosecute a patent
infringement action. If Foundation elects not to prosecute a patent
infringement action, then INNOVATIVE may cause legal proceedings against the
alleged infringer at its own expense.
9.2 In any proceedings initiated by Foundation or INNOVATIVE,
Foundation or INNOVATIVE, as the case may be, shall be entitled to employ
counsel and control the course of litigation. LSI, at the expense of Foundation
or INNOVATIVE, shall cooperate with and assist Foundation or INNOVATIVE in any
proceedings initiated or defended by Foundation or INNOVATIVE.
ARTICLE 10 - DEFENSE OF THIRD PARTY INFRINGEMENT CLAIMS
10.1 In the event, INNOVATIVE or LSI becomes aware that LSI's
activities pursuant to Article 2 is the subject of a claim for patent
infringement, that party shall promptly notify the other and the parties shall
consider the claim and the most appropriate action to take. LSI shall have the
right to control the defense of any such suit brought against LSI and shall do
so at its own expense. The parties shall have the right to require each other's
reasonable cooperation in any such suit, upon written notice, and INNOVATIVE
shall have the obligation to participate and LSI shall bear the costs of its
participation. LSI shall have the right to enter into any settlement upon
INNOVATIVE's written consent, which consent shall not be unreasonably withheld.
10.2 In the event LSI's activities pursuant to Article 2 are
enjoined as a result of a patent infringement claim based solely on the
INNOVATIVE Technology, Licensed Patents, or Licensed Applications, the Minimum
Royalty payments under Section 6.2 shall be suspended for the duration of the
injunction. Should the Minimum Royalty payments be suspended due to an
injunction and the injunction is subsequently terminated, LSI shall resume
Minimum Royalty payments starting at the Licensed Year, pursuant to Section
6.2.1, at which the injunction was first imposed.
<PAGE> 7
ARTICLE 11 - INDEMNIFICATION AND HOLD HARMLESS OBLIGATIONS OF LSI
11.1 In no event shall INNOVATIVE be liable for any loss, claim,
damage, or liability, of any kind or nature, which may arise from or in
connection with the acts of LSI under this Agreement.
11.2 LSI agrees, at its sole expense, to indemnify or hold
harmless INNOVATIVE and Foundation, their trustees, officers, directors,
employees, agents, and consultants, including those at Cornell University,
against any and all claims, suits, losses, damages, costs, fees, and expenses
(including attorney fees and litigation costs), resulting from or arising out
of acts by LSI under this Agreement. LSI shall reimburse INNOVATIVE for all of
INNOVATIVE's expenses, including attorney fees and disbursements, arising out
of or relating to a claim by INNOVATIVE to enforce Article 11.
11.3 LSI will maintain general liability insurance in the amount
of at least $1,000,000 per occurrence with a deductible of not more than
$10,000 per occurrence with reasonable nationally recognized insurers for
property damage and destruction and injury to or death of individuals. LSI will
furnish INNOVATIVE upon request, and in any event on execution of this
Agreement and on each anniversary of the Effective Date of this Agreement,
written confirmation issued by the insurer or an independent insurance agent
confirming that insurance is maintained in accordance with the above
requirements.
ARTICLE 12 - ASSIGNMENT
12.1 The rights and obligations of LSI are not assignable except
either (1) to a successor in its business or (2) to an entity under common
ownership or control with LSI, provided such assignment is approved it writing
by both INNOVATIVE and Foundation, which authorization will not be unreasonably
withheld.
ARTICLE 13 - TERMINATION
13.1 This Agreement shall terminate at the end of the Term.
However, the provisions of Article 14, 15, and 16 shall survive.
13.2 INNOVATIVE and LSI may terminate this Agreement, in addition
to pursuing any remedies available under law or in equity, for noncompliance by
the other with any of the provisions herein by giving the noncomplying party
written notice of such noncompliance and the opportunity to cure the same. If
the non-complying party does not cure such noncompliance to the reasonable
satisfaction of the party issuing the notice of noncompliance (the "Notifying
Party") within sixty (60) days after giving the notice, the Notifying Party may
terminate this Agreement.
13.3 LSI may terminate this Agreement, without cause, by giving
INNOVATIVE written notice one-year notice prior to such termination.
ARTICLE 14 - ARBITRATION AND JURISDICTION
14.1 Resolution of all disputes over the meaning and
interpretation of this Agreement shall be attempted by conciliation and
mediation, and, if such conciliation and mediation is
<PAGE> 8
unsuccessful, then disputes shall be finally settled by an Arbitrator selected
by INNOVATIVE and LSI. If INNOVATIVE and LSI cannot agree on an Arbitrator,
then disputes shall be resolved by an Arbitration Panel comprising one
arbitrator appointed by INNOVATIVE, one arbitrator appointed by LSI, and a
Chairman of the Arbitration Panel appointed by the first two arbitrators. Any
such arbitration proceedings shall be adopted in accordance with generally
accepted arbitration rules; shall be held in the State of New York, unless
otherwise agreed by the parties; and judgment upon the arbitration award may be
entered in any court having jurisdiction.
14.2 In order to initiate procedures for dispute resolution by
conciliation, mediation, and arbitration, either party shall give written
notice to the other of its intention to resolve a dispute and, absent
satisfactory resolution, then to arbitrate. Such notice shall contain a
statement setting forth the nature of the dispute and the resolution sought.
If, within thirty (30) days of such notice, a resolution by conciliation
between the parties themselves or by mediation has not been achieved to the
satisfaction of both parties, and, if within sixty (60) days from said written
notice, an Arbitrator or Arbitration Panel has not been appointed with an
arbitration schedule satisfactory to both parties, then either party may
proceed with judicial remedies.
14.3 The parties reserve the right and power to proceed with
direct judicial remedies against the other without conciliation, mediation, or
arbitration for claims relating to breach of the royalty payment and sales
reporting provisions of this Agreement after giving written notice of such
breach to LSI followed by an opportunity period of thirty (30) days in which to
cure such breach. In collecting overdue royalty payments and securing
compliance with reporting obligations, INNOVATIVE may use all judicial remedies
available.
ARTICLE 15 - CONFIDENTIAL INFORMATION
15.1 In the course of carrying out their obligations under this
Agreement, the parties may need to disclose to one another Confidential
Information, including scientific information, business information, patent
information, and legal information. All Confidential Information shall be
provided in writing marked "CONFIDENTIAL" and, if initially disclosed verbally,
shall be confirmed in writing within thirty (30) days disclosure and marked
"CONFIDENTIAL." The obligation of confidentiality under this Agreement shall
continue for the Term. The parties shall preserve any and all Confidential
Information as confidential and shall not use any such Confidential Information
except as necessary to carry out their rights and obligations under this
Agreement. The party receiving Confidential Information shall have no liability
to the party disclosing Confidential Information with respect to the use or
disclosure to others not party to this Agreement, of Confidential Information
which the receiving party can establish to,
(a) have been known by receiving party prior to
communication by disclosing party to the receiving
party;
(b) have been a matter of public knowledge at the time
of such disclosure by the disclosing party;
(c) have become a matter of public knowledge, without
fault on the part of the receiving party, subsequent
to disclosure by the disclosing party to the
receiving party; or
<PAGE> 9
(d) have been disclosed to the receiving party from a
third party lawfully having possession of such
information without an obligation of confidentiality
to the disclosing party.
In the event that either party is required by a judicial or
administrative process to disclose Confidential Information, it shall promptly
notify the other party and allow that party a reasonable time to oppose such
process.
In no event shall the receiving party disclose any of the Confidential
Information until it provides notice and reasonable proof to the disclosing
party as required herein. 15.2 Upon termination of this Agreement, each party
will return, without retention of any copies, all Confidential Information
received from the other party.
ARTICLE 16 - OWNERSHIP OF INVENTIONS
16.1 INNOVATIVE shall have sole rights in all INNOVATIVE
Technology as a result of either or both INNOVATIVE's ownership of INNOVATIVE
Technology and/or Foundation's exclusive license to INNOVATIVE of the
INNOVATIVE Technology.
16.2 LSI shall have sole ownership of all LSI Technology.
16.3 In the event, LSI makes any inventions relating to INNOVATIVE
Technology or the use of INNOVATIVE Technology in accordance with Article 2 of
this Agreement, LSI shall grant INNOVATIVE a royalty-free, worldwide,
non-exclusive commercial license to make, have made, use, sell, offer to sell,
or distribute products utilizing such inventions.
ARTICLE 17 - MISCELLANEOUS
17.1 Invalidity or enforceability of any provision of this
Agreement in any particular respect shall not effect the validity and
enforceability of any of the other provisions of this Agreement or of the same
provision in any other respect.
17.2 This Agreement contains the entire understanding between and
among the parties hereto and supersedes any prior understandings and agreements
between or among them respecting the subject matter of this Agreement.
17.3 No amendment, modification, or supplement of any provision of
the Agreement will be valid or effective unless made in writing and signed by a
duly authorized officer of each party. The officers signing this Agreement
shall be "duly authorized officers" for all purposes of this Agreement, unless
notice is given to the contrary.
17.4 No provision of this Agreement shall be waived by any act,
omission, or knowledge of a party or its agents or employees except by an
instrument in writing expressly waiving such provision and signed by a duly
authorized officer of the waiving party.
<PAGE> 10
17.5 This Agreement and the rights of the parties hereto shall be
interpreted in accordance with the laws of the State of New York.
17.6 This Agreement may be executed in several counterparts, each
of which shall be deemed an original copy and all of which shall constitute one
agreement binding on all parties hereto notwithstanding that all parties shall
not have signed the same counterparts.
17.7 LSI agrees that it will not use the indicia or name
INNOVATIVE or any of INNOVATIVE's personnel in advertising, promotion, labeling
of Licensed Products or in fund raising without prior written approval of
INNOVATIVE.
17.8 LSI agrees that it will not use the indicia or names of
Foundation, Cornell University or of any of their personnel in advertising,
promotion, labeling of Licensed Products or in fund raising without prior
written approval of Foundation or Cornell University or any of their personnel.
17.9 Reports, notices, and other communications to INNOVATIVE
shall be addressed to:
President
INNOVATIVE Biotechnologies International, Inc.
335 Lang Boulevard
Grand Island, New York 14072
and notices and communications to LSI shall be addressable to:
Alex Burns
Life Sciences, Inc.
2900 72nd Street North, St.
Petersburg, FL 33710
IN WITNESS WHEREOF, the parties have caused this instrument to be executed in
duplicate as of the day and year first above written.
ATTEST: INNOVATIVE BIOTECHNOLOGIES
INTERNATIONAL , INC.
By: /s/ Richard A. Montagna
----------------------------------
Richard A. Montagna
Title: President
Date:
--------------------------------
ATTEST: LIFE SCIENCES, INC.
By: /s/ Alex A. Burns
----------------------------------
Alex A. Burns
Title: Vice President
-------------------------------
Date:
--------------------------------
<PAGE> 11
EXHIBIT A
U. S. PATENT APPLICATIONS
U.S. PATENT APPLICATION SERIAL NO. 09/027,324
"Liposome-Enhanced Immunoaggregation Assay & Test Device."
U.S. PATENT APPLICATION SERIAL NO. 09/034,086
"Liposome-Enhanced Immunoassay & Test Device."
U.S. PATENT APPLICATION SERIAL NO. 08/722,901
"Interdigitated Arrays for Liposome-Enhanced Immunoassay & Test Device."
U.S. PROVISIONAL PATENT APPLICATION NO. 60/086,190
"Liposome-Enhanced Nucleic Acid Detection Assay."
U.S. PROVISIONAL PATENT APPLICATION NO. 60/106,122
"Liposome-Based Analytical Test Device & Method."
<PAGE> 12
EXHIBIT B
ISSUED U.S. PATENTS
U.S. PATENT NO. 5,789,154
"Liposome-Enhanced Immunoassay & Test Device."
U.S. PATENT NO. 5,756,362
"Liposome-Enhanced Immunoaggregation Assay & Test Device."
U.S. PATENT NO. 5,753,519
"Liposome-Enhanced Immunoassay & Test Device."
<PAGE> 13
EXHIBIT C
DEFINITION OF NASBA TECHNOLOGY
The term "NASBA" refers to Nucleic Acid Sequence Based Amplification, an
isothermal, transcription-based enzymatic nucleic acid amplification procedure
that can be applied to both RNA and DNA targets. The reaction process for RNA
analytes is depicted in Figure 1. The process is initiated by the annealing of
an oligonucleotide primer (designated P1) to the RNA target present in the
nucleic acid extract obtained from the test sample. The 3' end of the P1 primer
is complementary to the target analyte; the 5' end encodes the T7 RNA polymerase
promoter. After annealing, the reverse transcriptase activity of AMV-RT is
engaged and a cDNA copy of the RNA target is produced. The RNA portion of the
resulting hybrid molecule is hydrolyzed through the action of RNase H. This
permits the second primer (P2; sense), which is complementary to an upstream
portion of the RNA target, to anneal to the cDNA strand. This permits the
DNA-dependent DNA polymerase activity of AMV-RT to be engaged, producing a
double stranded cDNA copy of the original RNA analyte with a functional T7 RNA
polymerase promoter at one end. This promoter is then recognized by the T7 RNA
polymerase, which produces a large amount of anti-sense, single stranded RNA
transcripts corresponding to the original RNA target. These anti-sense RNA
transcripts can then serve as templates for the amplification process, however
the primers anneal in the reverse order. The entire NASBA process is isothermal
and is generally conducted at 41oC. For the amplification of DNA, the process is
the same as described in Figure 1, except that an initial heat denaturing step
(e.g., 100oC, 5 minutes) is required before the addition of the enzymes to the
reaction mix.
Both INNOVATIVE and LSI understand and agree that a NASBA reaction may be
performed in one or more other manners similar to, but different from, that
depicted in Figure 1. Where LSI can demonstrate by documentary evidence that it
has obtained license rights from Organon Teknika to employ such other methods
for performance of NASBA, then INNOVATIVE and LSI hereby agree that such other
methods of performing NASBA shall be included in the definition of NASBA.
<PAGE> 14
EXHIBIT C (CONTINUED)
[GRAPHIC OF NASBA AMPLIFICATION REACTION]
<PAGE> 15
EXHIBIT D
NATIONS OF SUB-SAHARA AFRICA
Angola Mali
Botswana Mauritania
Burkina Faso Mozambique
Burundi Namibia
Cameroon Niger
Central Africa Nigeria
Chad Rwanda
Djibouti Senegal
Equatorial Guinea Sierra Leone
Eritrea South Africa
Ethiopia Sudan
Gambia Somalia
Ghana Tanzania
Ivory Coast Togo
Kenya Uganda
Lesotho Zaire
Liberia Zambia
Madagascar Zimbabwe
Malawi
<PAGE> 1
Exhibit 10.13
November 21, 1999
Stephan S. Monroe, Ph.D.
Viral Gastroenteritis Section
Division of Viral and Rickettsial Diseases
MailStop G04
Centers for Disease Control and Prevention
1600 Clifton Rd., NE
Atlanta, Georgia 30333
Dear Dr. Monroe,
This letter is to confirm the understanding between Life Sciences, Inc. and the
Gastroenteritis Section of the Centers for Disease Control with respect to the
impending initiation of work on a NASBA-based test for detection of Norwalk-like
viruses prior to the execution of a definitive cooperative research and
development agreement (CRADA) between the parties.
As we discussed in our meeting on November 17, 1999, completion of the work
within a timeframe consistent with the mission of the Centers can be achieved
only if there are no significant delays in the start-up and pursuit of the
effort. At the same time, the dollar value and missed business opportunity
implications of Life Sciences' in-kind contributions to the early stages of the
effort are of sufficient magnitude to warrant the assurances requested by LSI in
this communication. In addition, because LSI's work on this effort must begin in
earnest on November 29, 1999 to meet the timing discussed, the prompt execution
of this letter approaches the imperative.
Further with respect to our November 17 discussions, Life Sciences represented
that it will provide with respect to the CRADA, at no cost to the Centers, the
items set out below as its base contribution to the effort described above:
(i)* The financial wherewithal to support a post-doctoral
level scientist posted at the Centers, or at a location designated by
the Centers, to work on this effort for the initial 12 months of the
proposed CRADA. Funding at the same or adjusted level will be provided
for a second 12-month period if the program objectives of the initial
12 months are achieved. (This element of direct financial support,
including employee benefit related overhead, is not expected to exceed
$60,000 on an annual basis);
(ii) The transfer of a significant body of knowledge to CDC
based scientists in the performance of nucleic acid sequence based
amplification (NASBA); the design of primers necessary for
amplification of RNA and DNA templates using NASBA; and the detection
and analysis of the amplicons arising from these reactions using a
proprietary technology.
<PAGE> 2
Stephan S. Monroe, Ph.D. November 21, 1999 Page 2
(iii) A quantity of NASBA amplification and detection reagents
(enzyme, primers, probe-labeled liposomes, etc.) and supplies
sufficient to support this effort as ultimately defined in the scope of
work of the proposed CRADA for the full term of the agreement;
(iv) A quantity (not to exceed 20 ) of specially modified,
hand-held densitometers for low-cost, high-throughput qualitative and
semi-quantitative assessment of NASBA reactions using a lateral flow
cassette and a proprietary technology;
(v)* A quantity (not to exceed 3) of the LSI electrochemical
NASBA analyzers for low-cost, high-throughput quantitative assessment
of NASBA reactions using a proprietary technology;
(vi)* The use of an Organon Teknika automated nucleic acid
extractor apparatus for the full term of the CRADA;
(vii)* The use of an Organon Teknika electrochemiluminescece
detector for not less than the initial 6 months of the work effort;
and.
(viii)* The assembly and support of a LSI-
multiple-academic-center consortium to support the development of
technology and methods for recovery of Norwalk-like virus/RNA templates
in low copy number from non-patient related matrices to include water
and food.
* To be provided only upon execution of the definitive CRADA.
While the language of the draft agreement provided to us contemplates that, at
the successful completion of the work effort to be described in the CRADA,
certain U.S. government-owned intellectual property will be licensed to LSI for
a range of applications, excluding vaccine development and production, it is our
expectation that certain additional assurances can be provided by your Section
in order to secure LSI's contributions during the period prior to the execution
of a definitive CRADA. Specifically, the Gastroenteritis Section agrees by
execution of this letter that during the period prior to execution of the
definitive agreement, and provided Life Sciences faithfully provides those
elements of the resources described above that are designated as appropriate to
the work to be carried out during the pre-agreement period, the Gastroenteritis
Section will collaborate exclusively with Life Sciences on development of the
NASBA-based test for Norwalk-like viruses contemplated in our discussions.
It is our current plan to begin synthesis of the required primers and probes for
amplification of certain of the Norwalk-like viruses and detection of both the
Astro and Norwalk-like viruses during this coming Thanksgiving week. This
timetable is necessitated by the absolute requirement that work on production of
the labeled liposomes be carried out at Cornell University beginning on November
29 as an element of the transfer of a licensed technology. If this schedule is
not met, it is doubtful that the detection components will be available to us
<PAGE> 3
Roger I. Glass M.D., Ph.D. November 21, 1999 Page 3
before mid January 2000. I sincerely hope that timely execution of this letter
of intent will permit us to adhere to this plan.
Please sign where indicated below, and return to me via facsimile at
727-347-2957. Please call me at 727 345.9371 or 727 420.1795 if you have any
questions. I look forward to the continuation of the current pace of the
proposed activity.
Sincerely,
LIFE SCIENCES, INC.
/s/ Alex A. Burns
- -----------------------------
Alex A. Burns, Vice President
ACCEPTED AND AGREED:
Viral Gastroenteritis Section
Centers for Disease Control and Prevention
/s/ Stephan S. Monroe
------------------------------------------
Stephan S. Monroe
/i/ SSM
This letter is an accurate summary of outline of a CRADA discussed at a meeting
on 17 November 1999 between Mr. Alex Burns, Life Sciences, Inc., and Drs. Roger
Glass and Stephan Monroe, CDC
<PAGE> 1
Exhibit 10.14
LETTER OF INTENT
LIFE SCIENCES WITH ACCIDENT PREVENTION PLUS
AND LIFE SCIENCES CORPORATION
This shall serve to confirm the understanding of the parties with respect to a
proposed Joint Venture by and between Life Sciences, Inc. ("LSI"), Accident
Prevention Plus, Inc. ("APP") and Life Sciences Corporation ("LIFE").
WHEREAS, APP is the developer of an on-board vehicular data logger
("the Data Logger"); and
WHEREAS, LSI has a continuing business relationship with LIFE pursuant
to which LSI is negotiating to act inter alia as the Florida and Georgia
marketer of an alcohol breathalyzer based vehicle ignition interlock program
("Breathalyzer Interlock") distributed by LIFE; and
WHEREAS, the parties have conceived of the idea to integrate into a
single product (the "Integrated Product:") the Data Logger of APP, with LIFE's
Breathalyzer system and software for the Breathalyzer Interlock, to provide in
the commercial market a system able to monitor driving and motor vehicle
activity via the Data Logger when combined with other software programs; and
WHEREAS, LIFE desires to join in this joint venture; and
WHEREAS, LSI has committed to raising from outside sources the capital
necessary to fund the proposed Joint Venture
NOW, THEREFORE, the parties hereto express their intent to establish to
a joint venture to create, market and distribute nationally and in other
countries the "Integrated Product," and establish and operate a Breathalyzer
Interlock provider service, minimally in the states of Georgia and Florida:
1. The joint venture shall be established in a separate
Delaware corporation ("Newco"). Each of LSI, APP and Life shall own 33-1/3% of
the capital stock. Newco shall have a Board of Directors of seven (7) persons,
two (2) appointed by APP, two (2) appointed by LSI, two (2) appointed by LIFE
and one (1) independent appointed by consent of all of the shareholders. The
affirmative vote of five (5) directors shall be required for any corporate
action by Newco.
(a) LSI shall provide the capital or other resources
necessary for product research and development of the Integrated Product. APP
will contribute a license for the Data Logger with provisions for sublicenses by
Newco as well as sufficient product and parts to permit the research and
<PAGE> 2
development of the Integrated Product. It is estimated that the capital required
would be approximately Two Hundred and Fifty Thousand ($250,000) Dollars. The
maximum amount required of LSI for development of the Integrated Product shall
be Three Hundred and Fifty ($350,000) Dollars for the integrated product portion
of this venture.
(b) LSI shall provide additional funding to Newco for
approximately $600,000 to be used for to build, establish, operate, and provide
installations, calibration, monitoring, service, removals, and collateral needs
to an Ignition Interlock Program in the states of Georgia and Florida
(approximately evenly divided between the 2 state interlock programs).
i. This program will be owned by Newco, but
managed entirely by LIFE and its management, support staff, and contractors, and
LIFE shall be entitled to its costs of providing product, supplies and service,
and a reasonable ROI for its work. LIFE will provide the budgets needed for this
Georgia and Florida effort, and LSI will fund that budget as required for
implementation.
ii. LIFE will maintain the accounting for these
2 programs, and report to NEWCO's Board on the program development as required.
LIFE will conduct these programs on a reasonable budget, which will not
sacrifice quality of service, and will be intended to provide statewide coverage
for each program as soon as practicable. All costs of doing business in these 2
state programs will be the responsibility of Newco, funded by LSI, using Life's
management, programs, and expertise. Newco will fund the monthly startup
requirements of each state program.
iii. The programs shall be identified as LIFE
interlock programs, and/or Ignition Interlock Group of Georgia or Florida,
respectively (in the discretion of LIFE), and bear all the trademarks and
copyrights of a LIFE program (e.g., titles on reports to courts, probation and
administrators, IIG corporate logo, "authorized service center" logos, and
building signage), so that it can be identified as part of LIFE's national
interlock service program. LSI shall also provide the resources necessary to
combine certain computer software owned by LIFE in order to enable distributed
use of the complete In*CARS and administrative support software already
developed by LIFE. LIFE will continue to own its software programs. LIFE will
prepare and present its budget for start of the Georgia program within 120 days
of the funding requirements of LSI being met. If not funded so that the program
<PAGE> 3
can begin in Georgia by August 1, 2000, then LIFE may start the program through
other funding sources, and not be obligated to allow NEWCO to participate in the
ownership of the Georgia interlock program.
iv. LIFE will receive a royalty-free license to
utilize the modified integrated product computer software and any modifications
or maintenance required on that software from time to time.
v. Georgia and Florida will be the only
interlock states involved in this project, but LIFE will assist in marketing the
joint APP/LSI/LIFE breathalyzer/APP-product integrated project device
nationally, be responsible for supervising installation, calibration,
monitoring, training and maintenance of this project at its cost of providing
such services, on a budget and in a format agreed to by Newco.
vi. The Parties will use their best efforts to
extend the sale of the of integrated product worldwide, but failing any such
extension each party shall remain free to engage in international sales of its
own products.
(c) The parties shall work together to develop a more
precise description of the Integrated Product and of the intellectual property
being contribute to such Integrated Product by APP and LIFE. The parties will
also work together to identify and summarize technical constraints and other
elements of the research and development project for the Integrated product. If
either party becomes aware of any additional technology which would be useful or
appropriate for inclusion in the integrated product such party shall share the
information with the others.
(d) APP has advised LSI of its awareness of certain
technology related to the detection of drowsiness of motor vehicle operators
being developed at Carnegie Mellon University ("CMU"). APP shall use its best
efforts to gain access to the drowsiness technology for the joint venture from
CMU. Newco shall be solely responsible for any royalty payable with respect to
such drowsiness technology, and Newco shall be solely responsible for
negotiating any such royalty arrangement.
(e) LIFE shall provide Newco with the right to lease at
an agreed fee the "In Cars" program and any modifications that are required in
order to support the marketing of the Breathalyzer Interlock in the states of
Florida and Georgia. Modifications shall be part of the costs of providing the
program for which LIFE will be paid by NEWCO.
(f) The Parties contemplate that equity capital of
between
<PAGE> 4
$3 and $5 Million will be required for the full business activities of Newco.
Any sale of equity capital shall be for the account of Newco and shall equally
dilute the interests of LSI, APP and LIFE.
2. It shall be the responsibility of APP to budget and man the
integration project, under the supervision of Alex Burns and Jean Paul Daveau.
In the event LSI elects to have the integration project carried out by persons
other than APP, LSI shall make available to APP lending in an amount up to One
Hundred Thousand ($100,000) Dollars under terms to be negotiated and APP shall
allocate a sufficient portion of the time of JP Daveau to direct the integration
project during the course of the integration effort. Such loan shall be made
available at the commencement the integration project. As security for the
repayment of such $100,000 loan, APP shall pledge with LSI its shares in Newco.
LSI shall retain such shares until it is either repaid directly by APP or, if
not repaid directly, until it receives a disproportionate share of the proceeds
from Newco to the extend of such unpaid loan amount, or until such lending is
repaid in full. LSI shall have the option to convert the loan into APP common
stock at a price per share to be negotiated by the parties prior to the
execution of the formal agreement, provided for hereinafter.
If APP is engaged to carry out the integration project APP shall
receive a deposit of $50,000 against such work at the time it commences.
3. The estimated timetable for the completion of the integration
project is 8/1/00, provided however that if the work is proceeding the deadline
for completion of the integration project shall be extended up to June1, 2001,.
In the event the Integrated Product is not successfully developed on or prior to
the deadline prior, APP shall be released from the requirement to work
exclusively with Newco in the development of an integrated Data Logger /
Breathalyzer Interlock device, unless specifically extended by agreement of the
parties hereto. Likewise, if LSI has not funded the Georgia interlock program in
an agreed budget by August 1, 2000, LIFE shall be released from the requirement
to work exclusively with Newco in Georgia and may develop that program with
others. If LSI has not secured the funding for a Florida interlock program
within 90 days before the effective date of any future interlock legislation in
that State, then LIFE shall also be released from the requirement to work
exclusively with Newco in Florida and may develop that program with others.
4. (a) In the event the Integrated Product is successfully
developed, Newco shall have the exclusive license for the sale of the Integrated
Product and Newco shall purchase all Breathalyzer Interlock elements from Life,
and all Data Logger elements from APP.
(b) In the event Newco elects to contract/license
production of the Integrated Product to others and such product incorporates
intellectual property from APP to Newco, APP will additionally receive a royalty
equal to Five (5%) Percent of the selling price of the product.
<PAGE> 5
5. The parties acknowledge that with respect hereto, D. David
Cohen ("Cohen") has acted solely as counsel to LSI, not withstanding any
personal or professional relationship between Cohen and APP. APP further
acknowledges that it has consented to Cohen acting as counsel to LSI, and that
it has no objection thereto.
6. The formal agreement with respect to the matters set forth in
this Letter of Intent shall be executed on or before March 9, 2000. In the event
there is failure to execute a formal agreement, this Letter of Intent shall be
null and void, and of no legal consequence to either party hereto. The said
formal agreement shall be subject to the approval of the board of directors of
each party hereto.
February 9, 2000
Life Sciences, Inc.
By /s/ Alex A. Burns
- ------------------------------
Alex A. Burns
Accident Prevention Plus, Inc.
By /s/ Richard Goodhart
- ------------------------------
Richard Goodhart
Life Sciences Corporation
By /s/ Darrel Longest
- ------------------------------
Darrel Longest
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE INFORMATION IN THE FOLLOWING SCHEDULE HAS BEEN EXTRACTED FROM THE AUDITED
CONSOLIDATED FINANCIAL STATEMENTS OF REGISTRANT AS OF AND FOR THE PERIOD
INDICATED, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THOSE FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1999
<PERIOD-START> JUN-01-1998
<PERIOD-END> MAY-31-1999
<EXCHANGE-RATE> 1
<CASH> 81,955
<SECURITIES> 0
<RECEIVABLES> 262,268
<ALLOWANCES> 5,000
<INVENTORY> 151,189
<CURRENT-ASSETS> 495,412
<PP&E> 1,127,528
<DEPRECIATION> 976,939
<TOTAL-ASSETS> 791,704
<CURRENT-LIABILITIES> 514,393
<BONDS> 0
0
0
<COMMON> 419,667
<OTHER-SE> (177,444)
<TOTAL-LIABILITY-AND-EQUITY> 791,704
<SALES> 1,084,181
<TOTAL-REVENUES> 1,084,181
<CGS> 503,780
<TOTAL-COSTS> 503,780
<OTHER-EXPENSES> 763,775
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 17,282
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 17,282
<EPS-BASIC> .01
<EPS-DILUTED> .01
</TABLE>
<PAGE> 1
Exhibit 99.1
CONSOLIDATED FINANCIAL STATEMENTS
AND REPORT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
LIFE SCIENCES, INC. AND SUBSIDIARY
May 31, 1999 and 1998
<PAGE> 2
LIFE SCIENCES, INC. AND SUBSIDIARY
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
FILED WITH THE ANNUAL REPORT OF THE COMPANY ON FORM 10-KSB
FOR THE YEARS ENDED MAY 31, 1999 AND 1998
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Certified Public Accountants 1
Consolidated Balance Sheets as May 31, 1999 and 1998 2
Consolidated Statements of Operations for the years ended May 31, 1999 and 1998 3
Consolidated Statement of Stockholders' Equity (Deficit) for the years ended
May 31, 1999 and 1998 4
Consolidated Statements of Cash Flows for the years ended May 31, 1999 and 1998 5
Notes to Consolidated Financial Statements 6
</TABLE>
<PAGE> 3
Report of Independent Certified Public Accountants
--------------------------------------------------
Board of Directors of
Life Sciences, Inc.
We have audited the accompanying consolidated balance sheets of Life Sciences,
Inc. and Subsidiary as of May 31, 1999 and 1998, and the related consolidated
statements of operations, stockholders' equity, and cash flows for the years
then ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Life
Sciences, Inc. and Subsidiary as of May 31, 1999 and 1998, and the consolidated
results of their operations and their cash flows for the years then ended, in
conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As shown in the consolidated
financial statements, the Company had an accumulated deficit of $3,290,599 at
May 31, 1999. The Company has historically relied on loans and advances from
related entities to fund its operations. While the Company's history of
operating losses raises substantial doubt about the Company's ability to
continue as a going concern, management's plans in regard to this matter are
described in Note 3. The consolidated financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/ Grant Thornton LLP
Tampa, Florida
September 8, 1999
<PAGE> 4
LIFE SCIENCES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
May 31,
-----------------------------
1999 1998
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 81,955 $ 84,860
Accounts receivable, net 257,268 272,599
Inventories 151,189 133,734
Prepaid expenses 5,000 20,706
----------- -----------
Total current assets 495,412 511,899
Property, plant and equipment, net 150,589 262,875
Other assets 145,703 48,598
----------- -----------
Total assets $ 791,704 $ 823,372
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Notes and accrued interest payable, related parties $ -- $ 2,424,982
Notes payable 5,173 12,291
Accounts payable, trade 182,314 145,350
Accrued expenses 326,906 400,311
----------- -----------
Total current liabilities 514,393 2,982,934
Minority interest in consolidated subsidiary 35,088 41,044
Commitments and contingencies -- --
Stockholders' equity (deficit)
Common stock - $.10 par value, authorized 7,000,000 shares, 4,196,670
and 2,796,743 shares issued and outstanding in 1999 and 1998, respectively 419,667 279,674
Additional paid-in capital 3,113,155 827,601
Accumulated deficit (3,290,599) (3,307,881)
----------- -----------
Total stockholders' equity (deficit) 242,223 (2,200,606)
----------- -----------
Total liabilities and stockholders' equity (deficit) $ 791,704 $ 823,372
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
2
<PAGE> 5
LIFE SCIENCES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended May 31,
--------------------------------
1999 1998
----------- -----------
<S> <C> <C>
Net sales $ 1,084,181 $ 1,067,903
Costs and expenses
Cost of sales 503,780 499,229
Operating and administrative expenses 603,058 395,006
Research and development 118,298 89,284
Depreciation and amortization 42,419 47,387
----------- -----------
Total expenses 1,267,555 1,030,906
----------- -----------
Operating income (loss) (183,374) 36,997
Other income (expense):
Gain on sale of fixed assets 194,700 --
Interest expense -- (230,382)
Minority interest in net loss of consolidated subsidiary 5,956 10,642
----------- -----------
200,656 (219,740)
----------- -----------
Income (loss) before income taxes 17,282 (182,743)
Income tax provision (benefit) -- --
----------- -----------
Net income (loss) $ 17,282 $ (182,743)
=========== ===========
Net income (loss) per common share - basic and diluted $ .01 $ (.07)
=========== ===========
Weighted average shares of common stock outstanding:
basic 2,808,249 2,796,743
=========== ===========
diluted 2,812,512 2,796,743
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
3
<PAGE> 6
LIFE SCIENCES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
Shares of Additional
common paid-in Accumulated
stock Amount capital deficit Total
--------- -------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance at May 31, 1997 2,796,743 $279,674 $ 827,601 $(3,125,138) $(2,017,863)
Net loss -- -- -- (182,743) (182,743)
--------- -------- ----------- ----------- -----------
Balance at May 31, 1998 2,796,743 279,674 827,601 (3,307,881) (2,200,606)
Issuance of Common Stock
on conversion of related
party debt (Note 9) 1,399,927 139,993 428,835 -- 568,828
Forgiveness of a note
payable and accrued
interest on all notes
payable to related parties
(Note 9) -- -- 1,100,244 -- 1,100,244
Excess of debt over the net
book value of land and
buildings exchanged with
a related party (Note 9) -- -- 756,475 -- 756,475
Net income -- -- -- 17,282 17,282
--------- -------- ----------- ----------- -----------
Balance at May 31, 1999 4,196,670 $419,667 $ 3,113,155 $(3,290,599) $ 242,223
========= ======== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of this consolidated statement.
4
<PAGE> 7
LIFE SCIENCES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended May 31,
----------------------------
1999 1998
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 17,282 $(182,743)
Adjustments to reconcile net income (loss) to net cash used in operating
activities:
Depreciation and amortization 42,419 47,387
Gain on sale of land (194,700) --
Minority interest in net loss of consolidated subsidiary (5,956) (10,642)
Changes in assets and liabilities:
(Increase) decrease in accounts receivable 15,331 (226,954)
(Increase) in inventory (17,455) (26,697)
Decrease in prepaid expenses 15,706 35,085
(Increase) in other assets (97,105) (40,923)
Increase in accounts payable, trade 36,964 2,506
Increase in accrued interest expense on notes payable, related parties -- 230,382
Increase (decrease) in accrued expenses (73,405) 100,178
--------- ---------
Net cash used in operating activities (260,919) (72,421)
Cash flows from investing activities:
Purchase of property, plant and equipment (38,033) (15,208)
Proceeds from sale of land 200,000 --
--------- ---------
Net cash provided by (used in) investing activities 161,967 (15,208)
Cash flows from financing activities:
Proceeds from notes payable, related parties 227,000 186,648
Payments on notes payable, related parties (123,835) --
Payments on notes payable (7,118) (8,200)
Other -- (5,959)
--------- ---------
Net cash provided by financing activities 96,047 172,489
--------- ---------
Net increase (decrease) in cash (2,905) 84,860
Cash, beginning of period 84,860 --
--------- ---------
Cash, end of period $ 81,955 $ 84,860
========= =========
</TABLE>
Supplemental disclosure of non-cash investing and financing activities:
In 1999, certain notes payable to related parties were converted to
1,399,927 shares of common stock (see Note 9).
In 1999, the corporate office land and building was sold for $859,075.
A note payable, that was collateralized by the land and building, in
the same amount was held by the related party who purchased the
property and was used as consideration in the transaction (see Note 9).
The accompanying notes are an integral part of these consolidated statements.
5
<PAGE> 8
LIFE SCIENCES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 31, 1999 and 1998
NOTE 1 - DESCRIPTION OF ORGANIZATION AND BUSINESS
Life Sciences, Inc. (the Company) is a biotechnology company with its primary
operations in the production and sale of molecular biology enzymes used in the
test tube synthesis of DNA and its manipulation in a variety of genetic
engineering applications. The Company specializes in enzyme products employed by
scientists to make genetic (DNA) sequences, which are utilized in basic research
and the genetic modification of plants, animals and other organisms. The Company
sells its molecular biology enzyme products directly to end users who perform
nucleic acid related research and product development at universities and
diagnostic and pharmaceutical manufacturers, primarily in the United States,
Europe and Asia. Sales to customers based in Europe and Asia accounted for
approximately 65% of net sales during fiscal year 1999. The Company also
utilizes independent distributors in Europe and Asia to distribute its products
in these regions of the world. Through a 50 percent subsidiary, the Company,
until 1998, also engaged in the incineration of biomedical waste.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the significant accounting policies consistently applied in the
preparation of the accompanying consolidated financial statements follows:
Principles of Consolidation
The consolidated financial statements include the accounts of Life Sciences,
Inc. and a 50 percent owned subsidiary. Since Life Sciences, Inc. is deemed to
have the financial controlling interest in the subsidiary, it has been
consolidated in the accompanying financial statements. The minority interest
reflected in the statements of operations represents the net loss of the
consolidated subsidiary allocable to the remaining 50 percent interest held by
independent shareholders. All significant intercompany accounts and transactions
have been eliminated in consolidation.
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 and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements, as well as the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash Equivalents
The Company considers all highly liquid investments with an original maturity of
three months or less to be cash equivalents. There were no cash equivalents at
May 31, 1999 and 1998.
6
<PAGE> 9
LIFE SCIENCES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 31, 1999 and 1998
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Inventories
Inventories are stated at the lower of cost or market with cost determined on a
first-in, first-out (FIFO) method.
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation. Prior
to January 1, 1981, depreciation and amortization are provided using the
straight-line method over the estimated useful service lives of the related
assets. After this date, property and equipment are depreciated using
accelerated methods that are used for federal income tax reporting.
Impairment of Long-Lived Assets
The Company evaluates the recoverability of its long-lived assets (including
intangibles) in accordance with Statement of Financial Accounting Standards No.
121 ("SFAS No. 121"), Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of. SFAS No. 121 requires long-lived assets to
be reviewed for impairment whenever circumstances indicate that the carrying
amount of an asset may not be recoverable. An impairment is recognized to the
extent the sum of undiscounted estimated future cash flows expected to result
from the use of the asset is less than the carrying value. No impairment exists
for all periods presented.
Revenue Recognition
The Company recognizes revenue when product is shipped to its customers.
Research and Development Costs
Expenditures relating to the development of new products and processes, as well
as significant refinements to existing products, are expensed as incurred.
Research and development expenses charged to operations amounted to $118,298 and
$89,284 for the years ended May 31, 1999 and 1998. Included in these amounts
were primarily payroll and related costs incurred to expand the Company's enzyme
products for a major customer.
7
<PAGE> 10
LIFE SCIENCES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 31, 1999 and 1998
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Net Income (Loss) Per Common Share
Net income (loss) per common share, which represents both basic and diluted
earnings per share ("EPS"), is computed by dividing net income (loss) by the
weighted average common shares outstanding. The following table reconciles the
numerator and denominator of the basic and diluted EPS computation:
<TABLE>
<CAPTION>
Year Ended May 31,
------------------------------
1999 1998
---------- -----------
<S> <C> <C>
Numerator:
Net income (loss) $ 17,282 $ (182,743)
---------- -----------
Denominator:
Weighted average number of common shares used in
basic EPS 2,808,249 2,796,743
Dilutive stock options 4,263 --
---------- -----------
Weighted average number of common shares and
dilutive potential common shares used in diluted EPS 2,812,512 2,796,743
========== ===========
</TABLE>
For the year ended May 31, 1999, options to purchase 480,000 shares of Common
Stock were outstanding during the year but were not included in the computation
of diluted earnings per share because the exercise prices of the options were
greater than the average market price of the Common Stock and, therefore, the
effect would be anti-dilutive. Basic loss per share is the same as the diluted
loss per share for the year ended May 31, 1998, since the Company experienced a
net loss for the year.
Stock-Based Compensation
The Company presents only the disclosure provisions of Statement of Financial
Accounting Standards No. 123, Accounting for Stock Based Compensation, and
recognizes stock-based compensation using the intrinsic value method of
accounting prescribed by APB Opinion No. 25, Accounting for Stock Issued to
Employees (Note 11). Under this method, compensation is recognized at the date
of grant by the amount that the fair value of the underlying stock exceeds the
exercise price.
Financial Instruments
The carrying amount of the Company's financial instruments, which include cash,
accounts receivable, accounts payable, accrued expenses and debt, approximate
fair value due to the short-term maturity of those instruments. The Company
considers the fixed and variable rate debt instruments to be representative of
current market interest rates and, accordingly, the recorded amounts approximate
their present fair market value.
8
<PAGE> 11
LIFE SCIENCES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 31, 1999 and 1998
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Income Taxes
Deferred taxes are provided on the liability method whereby deferred tax assets
are recognized for deductible temporary differences, net operating losses and
tax credit carryforwards, and deferred tax liabilities are recognized for
taxable temporary differences. Temporary differences are the differences between
the reported amounts of assets and liabilities for financial reporting purposes
and their tax bases. Deferred tax assets are reduced by a valuation allowance
when, in the opinion of management, it is more likely than not that some portion
or all of the deferred tax assets will not be realized. Deferred tax assets and
liabilities are adjusted for the effect of changes in tax laws and rates on the
date of enactment.
Concentration of Credit Risk
The Company grants credit to customers who meet pre-established credit
requirements. The Company does not require collateral when trade credit is
granted to customers. Credit losses are provided for in the financial statements
and have been consistently within management's expectations. The allowance for
doubtful accounts related to accounts receivable at May 31, 1999 and 1998 was
approximately $5,000.
NOTE 3 - OPERATIONAL AND FUNDING MATTERS
The accompanying consolidated financial statements have been prepared in
conformity with generally accepted accounting principles, which contemplates
continuation of the Company as a going concern. Continuation of the Company as a
going concern contemplates the realization of assets, and settlement of
liabilities and commitments, in the normal course of business.
The Company had an accumulated deficit of $3,215,599 at May 31, 1999. The
Company has historically relied on loans and advances from related entities to
fund its operations. The financial statements do not include any adjustments
relating to the recoverability and classification of recorded asset amounts, or
amounts and classification of liabilities that might be necessary should the
Company be unable to continue in existence. The following commentary addresses
the Company's operations for the year ended May 31, 1999 and its plan to improve
future results.
Since 1994 the Company's aggregate loss of $1.7 million arose largely from the
Company's sustained effort to develop new products and services to offset
declines in revenues from the sale of its earlier anchor products, AMV reverse
transcriptase, and specific-pathogen-free (SPF) mice. In response to these
declining revenues, the Company ceased its sale of SPF mice in 1997 and, in a
further cost reduction effort in 1998, shut down a joint venture effort for
treatment of biomedical waste through thermal reduction.
9
<PAGE> 12
LIFE SCIENCES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 31, 1999 and 1998
NOTE 3 - OPERATIONAL AND FUNDING MATTERS - CONTINUED
The Company's development efforts during this period focused on technologies for
rapid detection of biological and chemical contaminants in food, water, and
other environmental samples. The Company also undertook work to expand its
offering of enzyme products and develop new formulations of the enzymes to
address the needs of particular customers.
While revenues from the sale of enzymes were essentially unchanged between 1998
and 1999, sales of a new formulation of AMV reverse transcriptase and other
enzymes introduced in 1999 offset a nearly $200,000 decline in sales of enzymes
to Pacific Rim distributors. The new formulation of enzymes was adopted by a
major clinical diagnostics manufacturer for use as substrate in a line of
proprietary products for nucleic acid sequence based amplification (NASBA) based
diagnosis of HIV and other human diseases. This new product has fostered a
revival in the enzyme sector of the Company's operations, with sales of NASBA
enzymes expected by management to increase from $420,000 in 1999 to nearly $1
million in 2000. Sales of the Company's standard enzyme products to Pacific Rim
distributors rebounded in the second half of 1999, and the Company expects this
sales level to be sustained.
In addition to the NASBA enzyme mix currently being supplied to diagnostic
manufacturers, the Company will begin to produce in fiscal 2000 a dried NASBA
enzyme mix using a licensed, proprietary technology. Dried enzymes and other
components in NASBA based diagnostic kits permit the products to be transported
and stored in locations where next-day delivery of frozen products using dry ice
as a refrigerant and storage at deep-freeze temperatures may not be possible.
Additionally the shelf life of new products is extended by the use of dried test
kit components.
Using the same drying technology, the Company plans to increase its product
offering to include dried preparations of any of the nucleic acid modifying
enzymes used in molecular biology research. The availability of dried enzymes
for shipment and short term storage at ambient temperature is expected to
enhance the Company's ability to market its entire offering of enzyme products
to North American end users as well as to distributors worldwide, particularly
those that target their sales to developing Pacific Rim countries and Eastern
Europe.
The diagnostic tests for which the Company supplies NASBA enzymes are based on a
proprietary technology for amplification of DNA and RNA. The technology offers a
powerful method for rapid identification of viral and bacterial pathogens
associated with human disease. Because of management's belief that NASBA
technology is an equally robust tool for detection of pathogens in food,
drinking water and other environmental locations to include bio-warfare agents,
the Company has acquired licenses from Organon Teknika and others to enable the
Company to produce and sell NASBA based tests for detection of environmental
pathogens worldwide and the development and sale of diagnostic tests for
identification of certain clinical pathogens in defined, geographically
restricted regions. The Company expects to launch its initial NASBA based tests
for environmental diagnosis during fiscal year 2000.
10
<PAGE> 13
LIFE SCIENCES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 31, 1999 and 1998
NOTE 3 - OPERATIONAL AND FUNDING MATTERS - CONTINUED
To support this effort, the Company additionally licensed a proprietary
technology to support the development of field portable devices for rapid
analysis of the results of NASBA reactions. The NASBA detection system now
employed by the Company reduces the cost of associated instrumentation by more
than 80% and increases sample throughput by more than five fold. The technical
and cost advantages of the Company detection system are expected to jump-start
the Company's sale of NASBA based products in the molecular biology community.
The favorable cost and throughput related characteristics of the Company's
NASBA detection system also have attracted substantial interest on the part of
public health authorities in the United States and China. In collaboration with
an agency of the United States government, the Company has begun work on a
NASBA based test for Norwalk-like virus, a food borne pathogen that causes an
estimated 23 million annual cases of illness in the United States. With the
encouragement of Chinese public health agencies, the Company has investigated
the potential use of the Company's NASBA diagnostic system to monitor the
virus-load of HIV patients and potentially screen extremely large numbers of
individuals for the presence of the pathogens that cause HIV, hepatitis, and
other sexually transmitted diseases. The Company is presently seeking a capital
commitment of $6-$10 million for a China based joint venture that would carry
out the Company's plan to complete clinical trails in China on a low-cost NASBA
based test for virus load in HIV patients during calendar year 2000. If the
capital commitment is not obtained, the Chinese initiative will not be further
pursued. If the commitment is obtained, management believes that successful
completion of this initial clinical trial will be sufficient to attract the
additional investment required to develop and distribute a full line of NASBA
based human diagnostic products for sexually transmitted diseases throughout
China.
The expansion of the Company's product offering to include NASBA based tests
for the research market, test kits for waterborne and food borne pathogens and
dried enzyme preparations, requires a renewed focus on the North American,
end-user market. Additional marketing resources must be added to the Company's
staff to achieve this objective. Further, additional production staff and
capital equipment would be required to support larger outputs of enzymes and to
produce dried enzyme preparations. Management believes that the additional
expenditures of approximately $300,000 that would be required to support these
activities should be provided from cash generated from the Company's
operations.
Management intends to continue to operate the Company in a conservative manner
and to limit any short-term expansion (exclusive of the contemplated China
based joint venture) to that which can be funded by cash flows from current
operations. While management believes the Company will be able to operate
without interruption, it intends to continue discussions with potential
business partners that can potentially enhance the Company's product and market
position. However, no assurances can be given that the Company will be able to
operate without interruption.
11
<PAGE> 14
LIFE SCIENCES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 31, 1999 and 1998
NOTE 4 - INVENTORIES
Inventories consisted of the following:
<TABLE>
<CAPTION>
May 31,
--------------------------
1999 1998
-------- --------
<S> <C> <C>
Virus $ 59,126 $ 45,006
Enzymes 92,063 70,669
Biologicals purchased for resale -- 18,059
-------- --------
Total $151,189 $133,734
======== ========
</TABLE>
NOTE 5 - PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
<TABLE>
<CAPTION>
May 31,
Life ---------------------------------
(Years) 1999 1998
------- ----------- -----------
<S> <C> <C> <C>
Land and improvements -- $ -- $ 27,739
Buildings and improvements 15-31.5 -- 670,406
Furniture and fixtures 5 - 10 137,445 134,445
Machinery and equipment 5 - 20 990,083 976,764
----------- -----------
1,127,528 1,809,354
Less - Accumulated depreciation and
amortization (976,939) (1,546,479)
----------- -----------
$ 150,589 $ 262,875
=========== ===========
</TABLE>
Depreciation and amortization expense was $42,419 and $47,387 for the years
ended May 31, 1999 and 1998, respectively.
NOTE 6 - OTHER ASSETS
Other assets consisted of the following:
<TABLE>
<CAPTION>
May 31,
--------------------------
1999 1998
-------- --------
<S> <C> <C>
Licensing fees $105,000 $ --
Equipment not placed in service 35,257 38,221
Other 5,446 10,377
-------- -------
$145,703 $48,598
======== =======
</TABLE>
12
<PAGE> 15
LIFE SCIENCES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 31, 1999 and 1998
NOTE 6 - OTHER ASSETS - CONTINUED
In July 1998, the Company entered into an agreement to license the use of the
NASBA technology and/or the Accusphere technology and related patent rights for
the sole purpose of manufacturing, using, selling and/or having sold by
resellers licensed products under its own label. The purchase price of the
license consists of a non-refundable fee of $105,000 upon signing of the
agreement. The cost of the licensing agreement acquired was recorded in other
assets by the Company and will be amortized over the period of its estimated
benefit period, which approximates 17 years. Under the terms of the agreement,
the Company is also required to pay royalties, as defined, to the licensor when
net sales to certain end users obtain predetermined levels.
NOTE 7 - ACCRUED EXPENSES
Accrued expenses consisted of the following:
<TABLE>
<CAPTION>
May 31,
--------------------------
1999 1998
-------- --------
<S> <C> <C>
Pension costs $202,687 $140,725
Compensation and related payroll costs 124,219 135,198
Property taxes and other -- 124,388
-------- --------
$326,906 $400,311
======== ========
</TABLE>
NOTE 8 - NOTES PAYABLE, RELATED PARTIES
Notes payable, related parties consisted of the following:
<TABLE>
<CAPTION>
May 31,
--------------------------
1999 1998
-------- --------
<S> <C> <C>
Note payable (includes accrued
interest of $764,437 for financial
reporting purposes) to a company
owned by the Company's President
and Chairman of the Board and
individuals related to the
Company's President and Chairman
of the Board, due on demand,
bearing interest at a rate of
10.5% and collateralized by a
mortgage on land and building
(original cost of land and
building $419,000) $ -- $1,739,594
</TABLE>
13
<PAGE> 16
LIFE SCIENCES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 31, 1999 and 1998
NOTE 8 - NOTES PAYABLE, RELATED PARTIES - CONTINUED
<TABLE>
<CAPTION>
May 31,
--------------------------
1999 1998
-------- --------
<S> <C> <C>
Unsecured note payable to the
President and Chairman of the
Board, due on demand, bearing
interest at a rate of 10.5%
(includes accrued interest of
$16,918 for financial reporting
purposes) -- 31,918
Unsecured notes payable to
companies owned by the Company's
President and Chairman of the
Board and individuals related to
the Company's President and
Chairman of the Board, due on
demand, bearing interest at a rate
of 10.5% (includes accrued
interest of $134,805 for financial
reporting purposes) -- 626,635
Unsecured note payable to a person
related to the Company's President
and Chairman of the Board, due on
demand, bearing interest at a rate
of 10.5% (includes accrued
interest of $1,835 for financial
reporting purposes) -- 26,835
-------- ----------
$ $2,424,982
======== ==========
</TABLE>
During fiscal year 1999, the unsecured notes payable described above were
converted into shares of Common Stock and the accrued interest was forgiven
(see Note 9).
In addition, in May 1999, the corporate office land and building was sold and
the note payable and accrued interest were released by the holder (Note 9).
NOTE 9 - STOCKHOLDERS' EQUITY (DEFICIT)
In 1999, the Company completed a major restructuring plan by eliminating debt
totaling $2,528,148 consisting of principal of $1,613,985 and accrued interest
of $914,163. This restructuring plan greatly enhanced its financial position at
May 31, 1999.
Notes payable (principal only) to related parties totaling $568,828 were
converted to equity by the issuance of 1,399,927 shares of the Company's common
stock. A note payable to a related party totaling $186,082 was forgiven. In
addition, the accrued interest associated with these notes payable totaling
$914,163 at May 31, 1998 was forgiven by the parties.
14
<PAGE> 17
LIFE SCIENCES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 31, 1999 and 1998
NOTE 9 - STOCKHOLDERS' EQUITY (DEFICIT) - CONTINUED
In addition, the Company sold its land and building in two distinct
transactions. The first involved an unrelated third party, which bought a
portion of the Company's vacant land for $200,000 in cash. The second
transaction involved a related party who bought the remaining land and the
buildings housing the corporate and manufacturing headquarters, which was
immediately leased back to the Company under a five-year term without any
current provisions for renewal. The note payable (the principal only) totaling
$859,075 collateralized by the property was held by the related party who
purchased the property and was used as consideration in the transaction. As a
result, the note payable, which approximated the estimated fair value of the
property immediately before the sale, was deemed fully satisfied by the
transaction. The accrued interest related to this note payable was forgiven.
The notes had resulted from the related parties funding the Company's
operations over a period of time exceeding four to five years. Prior to 1999,
the intent of all parties was that the debt would be repaid. The obligations
were represented by formal notes bearing market interest rates and containing
other provisions. With the elimination of the related party debt in 1999, all
parties agreed that interest would not accrue subsequent to May 31, 1998.
For financial statement reporting purposes, the restructuring (exclusive of the
sale of a portion of the vacant land to an unrelated third party) is presented
as capital transactions reflecting the substance of the transactions with
parties under varying percentage of common ownership. Accordingly, the
forgiveness of the accrued interest and note payable of $914,163 and $186,082,
respectively, are reflected as additional paid-in capital and not as income in
the statement of operations. The difference of $756,475 between the balance on
the note payable and the basis in the related property of approximately
$102,600, is also presented as an additional paid-in capital and not as a gain
on sale in the statement of operations.
Note 10 - COMMITMENTS AND CONTINGENCIES
Leases
The Company leases its corporate offices from an entity owned by the Company's
President and Chairman and individuals related to the Company's President and
Chairman (Note 9). The lease expires in the year 2004, without any current
provisions for renewal, and provides for annual commitments of $90,000, subject
to adjustment to reflect current market rates.
15
<PAGE> 18
LIFE SCIENCES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 31, 1999 and 1998
Note 10 - COMMITMENTS AND CONTINGENCIES - CONTINUED
Legal Proceedings
In October 1998, Imaging Science Technologies, Inc. filed an action in the
Pinellas County, Florida Circuit Court against the Company. The complaint seeks
unspecified damages based on allegations that the Company failed to return
confidential information to the Plaintiff and used such information for its own
purposes. The Company has denied the material allegations of the complaint. At
this time, management believes the Plaintiff's claims are without merit and the
ultimate resolution of this matter will not have a material effect on the
Company's financial position or results of operations.
Year 2000 Compliance
The Year 2000 issue relates to limitations in computer systems and applications
that may prevent proper recognition of the year 2000. The potential effect of
the Year 2000 issue on the Company and its vendors will not be fully
determinable until the Year 2000 and thereafter. If the Year 2000 modifications
are not properly completed either by the Company or entities with which the
Company conducts business, the Company's revenues and financial condition could
be adversely impacted.
The Company has identified its significant information technology systems that
could possibly be impacted by the Year 2000. The Company has been notified that
its accounting software packages and production system software are already
Year 2000 compliant.
The Year 2000 issue also provides for certification of Year 2000 compliance by
the Company's vendors. Such vendors provide biological resources used in the
production of enzymes. The Company could replace such vendors and related
products if it believes their state of Year 2000 readiness poses a risk to the
Company sufficient to warrant doing so. The Company does not anticipate any
difficulty in securing adequate replacements for such vendors or products.
Management does not anticipate significant disruptions in its operations as a
result of the turn of the century.
16
<PAGE> 19
LIFE SCIENCES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 31, 1999 and 1998
NOTE 11 - STOCK OPTIONS
The Board of Directors adopted a stock option plan under which incentive or
non-incentive stock options may be granted to directors, officers and key
employees. A total of 500,000 shares of Common Stock have been reserved for
issuance under the plan. The exercise price on options granted shall not be
less than the fair market value of the stock on the date of grant and will
expire no later than ten years from the date of grant. In the case of a
stockholder owning more than 10% of the outstanding stock of the Company, the
exercise price of an incentive option may not be less than 110% of the fair
market value of the stock on the date of grant, and such options will expire no
later than five years from the date of grant. Also, an aggregate fair market
value of the stock with respect to which incentive stock options are
exercisable for the first time by any individual in any calendar year may not
exceed $100,000. Options to purchase 270,000 shares of common stock were
outstanding under the terms of the 1990 plan and options to purchase 210,000
shares of common stock were granted in 1999 not within the terms of the 1990
plan. Additionally, at May 31, 1999, options to purchase 65,000 shares of
common stock were outstanding under stock option plans that have been
terminated.
The exercise price of each outstanding option equals the market price of the
Company's stock on the date of grant. Accordingly, no compensation cost has
been recognized for the plan. Had compensation cost for the plan been
determined based on the fair value of the options at the grant dates, the
Company's historical net loss and historical net loss per common share would
have been reduced to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
Year Ended May 31,
--------------------------
1999 1998
-------- --------
<S> <C> <C> <C>
Historical net income (loss) As reported $17,282 $(182,743)
Pro forma (83,518) (182,743)
Historical net income (loss) per
common share - basic As reported .01 (.07)
Pro forma (.03) (.07)
Historical net income (loss) per
common share - diluted As reported .01 (.07)
Pro forma (.03) (.07)
</TABLE>
The fair value of each option grant is estimated on the date of grant using
Binomial options-pricing model with the following weighted average assumptions
used for grants in 1999 and 1998, respectively: no dividend yield, expected
volatility of 50%, risk-free interest rate of 6.0% and expected lives of 5
years.
17
<PAGE> 20
LIFE SCIENCES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 31, 1999 and 1998
NOTE 11 - STOCK OPTIONS - CONTINUED
A summary of the status of the Company's stock options as of May 31, 1999 and
1998 and changes during the years ended on those dates are as follows:
<TABLE>
<CAPTION>
May 31, 1999 May 31, 1998
----------------------- ----------------------
Weighted- Weighted-
Average Average
Exercise Exercise
Price Price
--------- ---------
<S> <C> <C> <C> <C>
Outstanding at beginning
of year 65,000 .50 65,000 .50
Granted 480,000 .405 -- --
Canceled -- -- -- --
------- ------
Outstanding at end of year 545,000 .42 65,000 .50
------- ------
Options exercisable at end
of year 545,000 .42 -- --
======= ======
Weighted average fair
value per share of options
granted during the year .405 --
</TABLE>
The following table summarizes information about common stock options
outstanding at May 31, 1999:
<TABLE>
<CAPTION>
Options Outstanding
--------------------------------------------
Weighted
Number Average Weighted
Outstanding Remaining Average
At May 31, Contractual Exercise
Exercise Prices 1999 Life Price
--------------- ----------- ----------- --------
(in Years)
<S> <C> <C> <C>
.405 480,000 10 .405
.50 65,000 2 .50
</TABLE>
18
<PAGE> 21
LIFE SCIENCES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 31, 1999 and 1998
NOTE 12 - DEFINED PENSION PLAN
In 1999, the Company adopted Statement of Financial Accounting Standards No.
132 ("SFAS No. 132"), Employers Disclosures about Pensions and Other
Postretirement Benefits. SFAS No. 132 standardizes the disclosure requirements
for pensions and other postretirement benefits, requires additional information
on changes in the benefit obligations and fair values of plan assets, and
eliminates certain disclosures that are no longer considered useful. The
adoption of SFAS No. 132 had no impact on the Company's financial position or
results of operations.
The Company sponsors a noncontributory defined benefit pension plan that covers
substantially all full-time employees. The plan provides for benefits to be
paid to eligible employees at retirement, based upon years of service with the
Company and compensation rates near retirement. Contributions to the plan
reflect benefits attributed to employees' services to date, as well as services
expected to be earned in the future. The Company's general funding policy is to
contribute amounts deductible for federal income tax purposes. Plan assets
primarily consist of common and preferred stock, investment grade corporate
bonds, and U.S. government obligations. The Company has the right to modify,
amend or terminate the plan.
The following table provides a reconciliation of the changes in the benefit
obligations and the fair value of the plan assets for the years ended May 31,
1999 and 1998 and statements of the funded status as of May 31, 1999 and 1998.
<TABLE>
<CAPTION>
May 31,
-----------------------
1999 1998
--------- ---------
<S> <C> <C>
Components of net periodic benefit cost
Service cost $ 18,000 $ 20,000
Interest cost 17,000 17,000
Expected return on plan assets (8,000) (9,000)
--------- ---------
Net periodic benefit cost $ 27,000 $ 28,000
========= =========
</TABLE>
<TABLE>
<CAPTION>
May 31,
-----------------------
1999 1998
--------- ---------
<S> <C> <C>
Reconciliation of benefit obligation
Projected benefit obligation at beginning of year $ 226,000 $ 245,000
Service cost 18,000 20,000
Interest cost 17,000 17,000
Benefits paid (3,000) (32,000)
Net experience gain -- (24,000)
--------- ---------
Projected benefit obligation at end of year $ 258,000 $ 226,000
========= =========
</TABLE>
19
<PAGE> 22
LIFE SCIENCES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 31, 1999 and 1998
NOTE 12 - DEFINED PENSION PLAN - CONTINUED
<TABLE>
<CAPTION>
May 31,
-----------------------
1999 1998
--------- ---------
<S> <C> <C>
Reconciliation of fair value of plan assets
Fair value of plan assets at beginning of year $ 101,000 $ 132,000
Return on plan assets 5,000 1,000
Benefit payments (3,000) (32,000)
--------- ---------
Fair value of plan assets at end of year $ 103,000 $ 101,000
========= =========
Funded status
Funded status $(155,000) $(148,000)
Unrecognized (gain) loss (13,000) 8,000
Other (34,687) (725)
--------- ---------
Prepaid (accrued) benefit cost $(202,687) $(140,725)
========= =========
</TABLE>
At May 31, 1999 and 1998 the projected benefit obligation exceeds the fair
value of plan assets by approximately $150,000. As the accrued benefit cost
exceeds this amount in both years an additional minimum liability has not been
recognized.
The Company has not made a contribution to the Plan since April 1990. As a
result, the Plan is underfunded as defined by the rules and regulations of the
Internal Revenue Code. A minimum contribution of approximately $200,000 is
currently required to rectify this deficiency.
The assumptions used in the measurement of the Company's benefit obligations
are shown in the following table:
<TABLE>
<CAPTION>
May 31,
-----------------------
1999 1998
--------- ---------
<S> <C> <C>
Weighted-average assumptions
Discount rate 7.5% 7.5%
Expected return on plan assets 8.0% 8.0%
Rate of compensation increase 5.0% 5.0%
</TABLE>
20
<PAGE> 23
LIFE SCIENCES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 31, 1999 and 1998
NOTE 13 - INCOME TAXES
The components of the income tax provision (benefit) are as follows:
<TABLE>
<CAPTION>
Year Ended May 31,
-----------------------
1999 1998
--------- ---------
<S> <C> <C>
Current tax provision (benefit)
Deferred
Federal $ 20,000 $ --
State 3,000 --
Net operating loss carryforwards previously not
recognized as the amount was fully offset by a
valuation allowance (429,000) --
Reduction of deferred tax assets previously not
recognized as the amount was fully
offset by a valuation allowance (305,000) --
Change in valuation allowance 711,000 --
--------- ---------
$ -- $ --
========= =========
</TABLE>
Reconciliation of the amount of income taxes, as calculated by applying the
federal statutory income tax rate of 34% to the Company's pre-tax income (loss)
to that reported by the Company, is as follows:
<TABLE>
<CAPTION>
Year Ended May 31,
-----------------------
1999 1998
--------- ---------
<S> <C> <C>
Federal income taxes at statutory rates $ 5,900 $ (62,000)
State income taxes, net of federal benefit 600 (7,000)
Gain on forgiveness of note payable, related party
recognized for federal income tax purposes 70,000 --
Gain on sale of building recognized for federal income
tax purposes 285,000 --
Non-deductible interest 37,500 --
Non-recognition of current net operating loss
carryforwards -- 72,000
Recognition of prior operating losses (429,000) --
Change in valuation allowance 23,000 --
Other 7,000 (3,000)
--------- ---------
$ -- $ --
========= =========
</TABLE>
21
<PAGE> 24
LIFE SCIENCES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 31, 1999 and 1998
NOTE 13 - INCOME TAXES - CONTINUED
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the corresponding amounts used for income tax reporting purposes.
Significant components of the Company's deferred tax assets and liabilities are
as follows:
<TABLE>
<CAPTION>
May 31,
------------------------
1999 1998
--------- ----------
<S> <C> <C>
Deferred tax assets:
Allowance for doubtful accounts $ 2,000 $ 2,000
Net operating loss carryovers 523,000 951,000
Accrued interest, related party -- 306,000
--------- ----------
525,000 1,259,000
--------- ----------
Deferred tax liabilities:
Accrued pension contribution 76,000 53,000
Other (25,000) (25,000)
--------- ----------
51,000 28,000
--------- ----------
Less valuation allowance (576,000) (1,287,000)
--------- ----------
$ -- $ --
========= ==========
</TABLE>
At may 31, 1999, the Company has approximately $1,389,000 of net operating loss
carryforwards that expire between years 2003 through 2013.
NOTE 14 - SIGNIFICANT CUSTOMERS
Sales to three customers accounted for approximately 67% and 65% of net sales
for the years ended May 31, 1999 and 1998, respectively.
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