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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM 8-K
CURRENT REPORT,
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (Date of Earliest Event Reported): February 23, 1998 (February 4,
1998)
NU-TECH BIO-MED, INC.
(Exact Name of Registrant as Specified in Charter)
DELAWARE 0-11772 25-1411971
- ---------------------------- ----------------------- -------------------
(State or Other Jurisdiction (Commission File Number) (I.R.S. Employer
of Incorporation) Identification No.)
476 MAIN STREET - SUITE 3-DFL
WAKEFIELD, RHODE ISLAND 02879
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (401) 789-9995
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Index to Current Report on Form 8-K
of Nu-Tech Bio-Med, Inc.
February 23, 1998
<TABLE>
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Item Page
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<S> <C> <C>
Item 5. Other Events 3
Item 7. Financial Statements and Exhibits 3
Signatures 4
</TABLE>
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Item 5. Other Events.
On February 4, 1998, a complaint was filed against Nu-Tech Bio-Med,
Inc. (the "Company") and others in an action in the United States District Court
for the Southern District of New York captioned Gorra Holding and Barras
Investment v. Nu-Tech Bio-Med, Inc., J. Marvin Feigenbaum and Robert B. Fagenson
(Docket No. 98 Civ. 764 (JMP)). The complaint alleges that the Company and the
other defendants violated Section 10(b) and Section 20 of the Securities
Exchange Act of 1934 (the "Exchange Act") and Rule 10b-5 promulgated thereunder.
The complaint also alleges common law fraud, conversion and breach of contract.
These claims against the Company are purportedly based on allegations that the
Company participated in a scheme to deprive its Series A Convertible Preferred
Shareholders of their conversion and registration rights. The complaint seeks
compensatory damages of at least $1.25 million and punitive damages of at least
$3 million or, in the alternative, an order for the Company to allow the
plaintiffs to exercise certain conversion and registration rights, and seeks
reasonable costs and attorneys' fees.
The Company believes that the claims are without merit, and that it has
good defenses which it will assert at the appropriate time. The action is
currently in its preliminary stages.
In a Current Report on Form 8-K, dated May 29, 1997, the Company
reported a complaint against the Company captioned Mordechai Gurary v. Isaac
Winehouse, Isaac Winehouse d/b/a Wall & Broad Equities and Nu-Tech Bio-Med, Inc.
(Docket No. 97 Civ. 3803 (LBS)) in the United States District Court for the
Southern District of New York. On February 9, 1998, the court dismissed with
prejudice the federal claims of violations of Section 10(b) of the Exchange Act
for failure to state a claim and dismissed the state claims of violations of
Section 349 of the General Business Law of the State of New York.
Item 7. Financial Statements and Exhibits.
Exhibit No. Document
99 Summons and Complaint in the action "Gorra Holding and Barras
Investment v. Nu-Tech Bio-Med, Inc., J. Marvin Feigenbaum and
Robert B. Fagenson." Case No. 98 Civ. 764 (JMP) in the United
States District Court, Southern District of New York
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report on Form 8-K to be signed on its
behalf by the undersigned hereunto duly authorized.
NU-TECH BIO-MED, INC.
By: / s/ J. MARVIN FEIGENBAUM
-----------------------------------------
Name: J. Marvin Feigenbaum
Title: Chairman of the Board,
President, Chief Executive
and Chief Financial Officer
Date: February 23, 1998
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EXHIBIT INDEX
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Exhibit No. Document
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99 Summons and Complaint in the action "Gorra Holding and Barras
Investment v. Nu-Tech Bio-Med, Inc., J. Marvin Feigenbaum and
Robert B. Fagenson." Case No. 98 Civ. 764 (JMP) in the United
States District Court, Southern District of New York
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EXHIBIT 99
Summons and Complaint in the action "Gorra Holding and Barras Investment v.
Nu-Tech Bio-Med, Inc., J. Marvin Feigenbaum and Robert B. Fagenson." Case No. 98
Civ. 764 (JMP) in the United States District Court, Southern District of New
York
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UNITED STATES DISTRICT COURT
DISTRICT OF
- --------------------------------------X
GORRA HOLDING and BARRAS :
INVESTMENT,
: SUMMONS IN A CIVIL ACTION
Plaintiffs, -------------------------
:
-against- CASE NUMBER 98 CIV 764
:
NU-TECH BIO-MED, INC.,
J. MARVIN FAIGENBAUM, and :
ROBERT B. FAGENSON,
:
Defendants.
- -------------------------------------X
TO:
NU-TECH BIO-MED, INC. J. MARVIN FAIGENBAUM ROBERT B. FAGENSON
476 Main Street 476 Main Street 19 Rector Street
Suite 3-DFL Suite 3-DFL New York, NY 10006
Wakefield, RI 02879 Wakefield, RI 02879
YOU ARE HEREBY SUMMONED and required to serve upon
PLAINTIFF'S ATTORNEY
PERETZ BRONSTEIN, ESQ.
60 East 42nd Street, Suite 4600
New York, NY 10165
an answer to the complaint in this action which is herewith served upon you,
within 20 days after service of this summons upon you, exclusive of the day of
service. If you fail to answer, judgment will be taken against you by default
for the relief demanded in the complaint.
JAMES M. PARKINSON FEB 04, 1998
- ------------------ ------------
CLERK DATE
/s/
- ------------------
BY DEPUTY CLERK
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PERETZ BRONSTEIN, ESQ. (PB 8628)
60 East 42nd Street, Suite 4600
New York, New York 10165
(212) 697-6484
Attorneys for Plaintiffs
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
- ----------------------------------------------X
GORRA HOLDING and BARRAS : 98 CV 764
INVESTMENT,
: COMPLAINT
Plaintiffs, ---------
:
-against- JURY TRIAL
: DEMANDED
NU-TECH BIO-MED, INC., --------
J. MARVIN FAIGENBAUM, and :
ROBERT B. FAGENSON,
:
Defendants.
- ----------------------------------------------X
Plaintiffs Gorra Holding and Barras Investment, through their
undersigned counsel, for their complaint against Nu-Tech Bio-Med, Inc. ("NTBM"),
J. Marvin Faigenbaum and Robert B. Fagenson, hereby allege as follows:
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SUMMARY
Plaintiffs sue for securities fraud, common law fraud, conversion
of breach of contract arising out of defendants' wrongful scheme to extract $14
million from a group of investors (including $1 million from plaintiffs)
(collectively, the "Investors") and refusal to deliver the marketable securities
promised in exchange. The Investors purchased 14,000 Class A Preferred Shares of
defendant NTBM (the "Preferred Shares") at the price of $1,000 each (the
"Offering"), which by their terms are convertible to NTBM common stock (the
"Conversion Shares"). The Offering was a private sale of unregistered,
restricted securities pursuant to SEC Regulation D. The Company promised to
register the Conversion Shares with the SEC so as to allow them to trade freely.
In order to avoid a market glut of NTBM's shares and the decrease in stock price
that would likely result, from the time of the Investors' investment, NTBM has
utilized very artifice and device at its disposal to thwart the conversion of
the Preferred Shares and registration of the Conversion Shares. The results has
been to lock the Investors into their NTBM position and prevent them from
recovering their principal and promised minimum 33% market premium.
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The pattern of NTBM's intentional interference with the Investors'
exercise of their conversion and registration rights (the "Scheme"), which has
been ongoing since the time of the Offering, gives rise to plaintiffs' federal
securities and common law claims. Plaintiffs are entitled to compensatory
damages in excess of $1.25 million, plus punitive damages. In the alternative,
plaintiffs seek an order that defendants immediately take the necessary steps to
allow plaintiffs to exercise their contractual conversion and registration
rights.
PARTIES
(i) Gorra Holding and Barras Investment are both Panama
Corporations with their principal places of business in Zurich, Switzerland.
Each purchased 500 Preferred Shares at $1,000 each. Gorra Holding converted 100
of its Preferred Shares, leaving it with 400 Preferred Shares.
(ii) NTBM is a Delaware Corporation authorized to do business in
New York. Its principal place of business is in Wakefield, Rhode Island. It is a
biomedical company that produces agents for the testing of the effectiveness of
cancer treatment drugs. Until December 1997 its principal place of business was
in New York, New York. Its shares trade on the NASDAQ exchange.
(iii) Marvin Faigenbaum ("Faigenbaum") is the President, Chief
Executive Officer and Chairman of NTBM. Robert B. Fagenson ("Fagenson") is a
director of NTBM and a highly sophisticated investment banker. Faigenbaum and
Fagenson have been the primary actors on the
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Company's behalf in carrying out the Scheme. Each of these individuals are NTBM
shareholders (Faigenbaum approximately 10%; Fagenson under 1%), giving them a
personal incentive to protect the price of NTBM's stock. In addition, as
managers of NTBM, they have an interest in supporting the stock price to
facilitate NTBM's ability to raise capital in the public markets.
JURISDICTION
(iv) Jurisdiction over this matter is 28 USC Section 1332
(diversity) in that the amount in controversy is in excess of $50,000 and the
action is between citizens of a foreign state and residents of the United
States. In addition, the Court has jurisdiction over this matter pursuant to 15
USC Section 78aa (Section 27 of the Exchange Act) and principles of pendent
jurisdiction.
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FACTS
The Investor's Purchase of 14,000 Preferred Shares
The Investors purchased aggregate of 14,000 Preferred Shares for
$14 million in November 1996. Pursuant to the Certificate of Designation filed
with the Delaware Secretary of State, the Preferred Shares were to be
convertible into NTBM common stock at the lower of $17.50 per share or a 25%
discount to the average trading price of NTBM's shares at the time of
conversion. NTBM's stock price was between $10 and $15 per share until March
1997, but dropped thereafter, falling below $1 per share by July 1997. The lower
the price went, the more share the Investors would receive upon conversion.
Pursuant to a Registration Rights Agreement between NTBM and the
Investors, NTBM was required, upon the written demand of a majority of the
Investors, to file with the SEC a Registration Statement relating to the
Conversion Shares so that such shares could be sold by the Investors on NASDAQ.
Unless registered with the SEC, the Investors would be unable to exit their
investment and would be forced to hold their NTBM stock whether or not
prevailing market conditions made it wise to do so.
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The Voluntary Filing and Abrupt Withdrawal of the December 1996 Registration
Statement
Even before the Investors demanded the Conversion Shares be
registered, NTBM voluntarily filed a Registration Statement relating to the
Conversion Shares (the "December 1996 Registration Statement"), thereby waiving
the demand requirement. Upon information and belief, the reason the Company
filed the December Registration Statement voluntarily was so that it could
rescind it voluntarily (according to its reading of the Registration Rights
Agreement) before the Investors had the opportunity to sell any Conversion
Shares.
Indeed, on the very day the December 1996 Registration Statement
was to become effective, February 5, 1997, the company withdrew it. The
Company's only explanation was that it was entitled to do so being that no
written registration demand had been delivered to Company. Upon information and
belief, the Company withdrew the December Registration Statement to prevent the
Investors from obtaining and selling Conversion Shares, which likely would have
had a depressive effect upon the price of NTBM's stock. Ironically, another
registration statement filed on the same day as the December 1996 Registration
Statement, which allowed the investment bankers who had received shares as part
of their commissions in connection with the Offering, was not withdrawn and
became effective on February 5, 1997.
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The Filing of the July Registration Statement,
Followed by the Shortage of Conversion Shares
(i) Following the withdrawal of the December 1996 Registration
Statement, the Company did everything it could to delay the registering of the
Conversion Shares. In a meeting following the rescission of the December 1996
Registration Statement, Faigenbaum and Fagenson assured Investors that the
Conversion Shares would be registered shortly. Excuse after excuse followed.
First, NTBM took the position that submission of the registration statement had
to wait until after approval of a pending corporate acquisition, scheduled to
take place in April 1997. Thereafter, the Company decided it needed various
investor questionnaires completed by the Investors as a pre-condition to
registration. No such requirement had ever been discussed. Collecting the
completed forms from numerous Investors, worldwide, delayed the process further.
(ii) Defendants at the same time took an extremely aggressive
reading of the Certificate of Designation, which provided that no Investor could
own more than 4.9% of the Company as a result of conversion. Defendants insisted
upon calculating the percentage ownership of each Investor following conversion
as a percentage of the common shares outstanding prior to conversion, rather
than as a fraction of the total shares outstanding following conversion,
including the Conversion Shares themselves. The Company's reading of the formula
resulted in limiting the number of Preferred Shares each Investor could convert.
(iii) NTBM finally did file another registration statement on July
23, 1997 (following the receipt of a demand to on behalf of the Investors). Yet,
exactly one week later, on August 1,
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1997, NTBM "realized" that it had not authorized sufficient numbers of shares to
allow for the conversion of all of the Preferred Shares. The price of NTBM's
stock had been dropping since March 1997. The Company obviously was aware that
additional Conversion Shares would be required as a result. Yet, the Company
seems intentionally to have waited until it ran out of Conversion Shares (after
the delay in filing the second registration statement) to take steps to
authorize additional shares.
The Authorization of Additional Shares, Followed
by the Suspension of the Registration Statement
(iv) Shareholder approval necessary to authorize the issuance of 50
million shares was finally obtained in late-October 1997. However, in
early-October the Company had announced that it needed to "update" the July
Registration Statement to include financial information relating to NTBM's
acquisition of another medical testing company. The Company suspended all sales
of the Conversion Shares pursuant to the July Registration Statement pending the
submission of the additional information. The additional information was filed
on December 18, 1997, but sales remain suspended.
(v) Moreover, in late November 1997, the Company notified the
Investors that even the newly authorized shares were depleted, so the Company
again lacked sufficient shares for conversion of all outstanding Preferred
Shares. No steps have been taken to date to authorize additional shares.
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(vi) The effect of the Company's maneuvers has been to prevent
conversion of the Preferred Shares into Conversion Shares, and the unrestricted
resale of the Conversion Shares. The Investors have effectively been locked into
their investment and denied the promised 33% premium. The Investors have no
adequate remedy at law.
CLAIM I -- Rule 10b-5; Section 20 (Exchange Act)
(vii) The foregoing allegations are hereby repeated and realleged.
(viii) Pursuant to Section 10(b) of the Securities Exchange Act of
1934 (15 USC Section 78j(b)) and Rule 10b-5 promulgated thereunder, it is
unlawful to utilize any instrumentality of interstate commerce to effect a
device, scheme or artifice to defraud purchasers of securities; to make any
misrepresentation or omission of material fact in connection with the purchase
or sale of a security; or to commit any act, practice or course of business
which operates as a fraud in connection with the purchase or sale of a security.
Pursuant to Section 20 of the Exchange Act (15 USC Section 78t) an individual
that controls the violator of Section 10(b) is liable for the primary violator's
wrong.
(ix) In this case NTBM and the other defendants failed to
disclose at the time of the Offering their premeditated intention to thwart the
Investors' conversion and registration rights. The steps taken by defendants
immediately following the Offering and continuing thereafter to interfere with
the Investors' conversion and registration rights were part of an artifice and
course of business to defraud the Investors. Defendants' actions are motivated
by a
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desire to protect the market for NTBM's shares and prevent even greater downward
movement in the price of its stock.
(x) The individual defendants actively participated in the
Scheme and are "control persons" of NTBM within the meaning of Section 20.
(xi) The Investors have been damaged at a minimum in an amount
equal to their investment, plus the 33% conversion premium. The defendants have
acted intentionally and wantonly, entitling the Investors to punitive damages,
in addition to compensatory damages.
CLAIM II -- Common Law Fraud
(xii) The foregoing allegations are hereby repeated and realleged.
(xiii) Defendants all participated in, but failed to disclose, the
Scheme. Plaintiffs relied upon the defendants' representations that the
conversion and registration rights associated with the Preferred Shares would be
honored.
(xiv) The Investors are entitled to compensatory and punitive
damages.
CLAIM III -- Conversion
(xv) The foregoing allegations are hereby repeated and realleged.
(xvi) The defendants have taken money from the Investors and
wrongfully blocked the Investors' recovery of their principal and the promised
premium.
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(xvii) Those Investors who have been unable to convert and sell
their Preferred Shares are locked into their NTBM position against.
(xviii) Plaintiffs have been damaged in an amount equal to their
remaining principal investment of $900,000, plus their lost premium.
(xix) Plaintiffs are entitled to the compensatory and punitive
damages.
CLAIMS IV -- Breach of Contract Against NTBM
(xx) The foregoing allegations are hereby repeated and realleged.
(xxi) The Certificate of Designation and Registration Rights
Agreement entitle the Investors to convert their Preferred Shares into
Conversion Shares and to require the Company to file a registration statement so
that the Conversion Shares can be sold freely on the market.
(xxii) Through the Scheme, NTBM has breached its obligations under
these agreements.
(xxiii) The Investors have been damaged in an amount equal to their
investments, plus the 33% conversion premium, plus an additional premium due to
the Company's breach of the Registration Rights Agreement. In addition, the
Investors are entitled to indemnification of their reasonable costs and
attorneys fees.
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WHEREFORE, plaintiffs demand judgment granting them;
(i) compensatory and punitive damages in an amount to be
determined at trial, but not less than $1.25 million in compensatory and $3
million in punitive damages;
(ii) in the alternative, an order that NTBM take the steps
necessary to allow plaintiffs to exercise their conversion and registration
rights, pursuant to the terms of the Certificate of Designation and Registration
Rights Agreement;
(iii) reasonable costs and attorney's fees; and
(iv) such further relief as the Court may deem just and proper.
Dated: February 4, 1998
-----------------------------------
PERETZ BRONSTEIN, ESQ. (PB 8628)
60 East 42nd Street, Suite 4600
New York, New York 10165
(212) 697-6484
Attorney for Plaintiffs
