As filed with the Securities and Exchange Commission on September 18, 2000
Registration No. 333-______
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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MEDITECH PHARMACEUTICALS, INC.
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(Name of small business issuer in its charter)
NEVADA 2834 95-3819300
---------------------- --------------------------- ----------------
(State or Jurisdiction (Primary (I.R.S. Employer
of Incorporation Standard Industrial Idenficiation
or Organization) Classification Code Number) Number)
10105 E. Via Linda #103, PMB 382
Phoenix, Arizona 85258
(480) 614-2874
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(Address and telephone number of principal executive offices
and principal place of business)
Gerald N. Kern
Chairman and Chief Executive Officer
Meditech Pharmaceuticals, Inc.
10105 E. Via Linda #103, PMB 382,
Phoenix, Arizona 85258
(480) 614-2874
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(Name, address and telephone number of agent for service)
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Copies to:
Mark Ziebell, Esq.
Jeffers, Shaff & Falk, LLP
18881 Von Karman Avenue, Suite 1400
Irvine, California 92612
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Approximate date of proposed sale to the public: From time to time after
the effective date of this registration statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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<PAGE>
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
-------------------------- -------------------- -------------------------- ---------------------- ------------------
Title of Each Class of Amount to be Proposed Maximum Offering Proposed Maximum Amount of
Securities to be Registered Price Per Security (1) Aggregate Offering Registration Fee
Registered Price
-------------------------- -------------------- -------------------------- ---------------------- ------------------
<S> <C> <C> <C> <C>
Common Stock, $.00001 49,316,000 (2) $0.253 $12,452,290 $3,287.40
par value
-------------------------- -------------------- -------------------------- ---------------------- ------------------
Common Stock, $.00001 27,800,000 (3) $0.253 $7,033,400 $1,856.82
par value
-------------------------- -------------------- -------------------------- ---------------------- ------------------
Total 77,116,000 $0.253 $19,485,690 $5,144.22
-------------------------- -------------------- -------------------------- ---------------------- ------------------
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee in
accordance with Rule 457(c) under the Securities Act of 1933, as amended
(the "Act"), based on the average of the closing bid and asked prices for
our Common Stock (the "Common Stock") as reported on the OTC Electronic
Bulletin Board on September 14, 2000.
(2) Includes up to an aggregate of 40,000,000 shares of our Common Stock
issuable as Put Shares to Swartz Private Equity, LLC pursuant to the
Investment Agreement. See "Investment Agreement". Also includes 9,316,000
outstanding shares of our Common Stock held by other selling shareholders.
(3) Includes (i) 7,000,000 shares of our Common Stock issuable upon exercise of
the commitment warrant issued to Swartz, (ii) up to 4,000,000 shares of our
Common Stock issuable upon exercise of purchase warrants that we may issue
to Swartz pursuant to the Investment Agreement, and (iii) 16,800,000 shares
of our Common Stock issuable upon exercise of options and warrants issued
or committed to be issued to other selling shareholders.
(4) This Registration Statement also covers any additional shares of our Common
Stock that may become issuable by virtue of the anti-dilution provisions of
the warrants. No additional registration fee is included for these shares.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
The information in this prospectus is not complete and may be changed. We
may not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and we are not soliciting offers to buy these
securities in any state where the offer or sale is not permitted.
Subject to Completion, Dated September 18, 2000
PROSPECTUS
Meditech Pharmaceuticals, Inc.
The Resale of 77,116,000 Shares of Common Stock
This prospectus covers the resale by the selling shareholders of up to
77,116,000 shares of our Common Stock in the over-the-counter market at the
prevailing market price or in negotiated transactions.
o 9,316,000 shares which are presently outstanding and held by selling
shareholders,
o Up to 40,000,000 shares are issuable to Swartz Private Equity, LLC, as
put shares,
o Up to 7,000,000 shares are issuable upon the exercise of commitment
warrants issued to Swartz,
o Up to 4,000,000 shares are issuable upon the exercise of purchase
warrants issuable to Swartz in connection with the exercise of puts to
Swartz, and
o 16,800,000 shares are issuable upon the exercise of options and
warrants issued or committed to be issued to other selling
shareholders.
We will receive no proceeds from the sale of the shares by the selling
shareholders. However, we have received proceeds from the sale of shares
currently outstanding and may receive proceeds from the sale of shares to Swartz
and, if exercised, will receive proceeds from the sale of shares issuable upon
the exercise of warrants by Swartz and certain other selling shareholders.
Our common stock is quoted on the over-the counter electronic bulletin
board under the symbol "MDCH.OB". On September 14, 2000, the average of the bid
and asked prices of our common stock was $0.253 per share.
----------------
THIS INVESTMENT INVOLVES A HIGH DEGREE OF RISK.
PLEASE REFER TO RISK FACTORS BEGINNING ON PAGE 7
The Securities and Exchange Commission (SEC) and state securities
regulators have not approved these securities or determined if this prospectus
is truthful or complete. Any representation to the contrary is a criminal
offense. This prospectus is not an offer to sell these securities and it is not
soliciting an offer to buy these securities in any state where the offer or sale
is not permitted.
<PAGE>
Please read this prospectus carefully. It describes our company, finances and
products. Federal and state securities laws require that we include in this
prospectus all the important information that you will need to make an
investment decision.
You should rely only on the information contained in this prospectus to make
your investment decision. We have not authorized anyone to provide you with
information that is different from what is contained in this prospectus.
<PAGE>
The following table of contents has been designed to help you find important
information contained in this prospectus. We have included subheadings to aid
you in searching for particular information you might want to return to. We
encourage you to read the entire prospectus.
TABLE OF CONTENTS
PROSPECTUS SUMMARY.............................................................1
About our Company...........................................................1
About our revenues..........................................................1
About our Investment Agreement..............................................1
Additional Shares We Are Registering........................................1
THE OFFERING...................................................................2
RISK FACTORS...................................................................3
Factors that may affect operating results and financial condition...........3
We incurred significant losses in previous years............................3
We will need additional capital.............................................3
We have received a going concern opinion....................................3
We have had no revenues from sales of product since inception...............3
Our inability to provide scientific proof for product
claims will adversely affect our sales....................................4
FDA and other government regulation will restrict
our ability to sell product...............................................4
If MTCH-24(TM)and Viraplex(R)do not gain widespread
market acceptance, our anticipated sales and results
of operations will suffer. 4
We may be unable to meet demand for our new products........................4
Unanticipated problems associated with product
development could delay or hinder introduction of new products............5
We may be unable to successfully expand our operations......................5
The large number of shares eligible for immediate and
future sales may depress the price of our stock.5
We may be unable to prevent others from developing similar products.........5
The price of our stock may continue to be volatile..........................5
We may incur significant costs resulting from
product liability claims..................................................6
Inability to retain current management could damage our operations..........6
We have limited personnel resources.........................................6
Our executive officers get substantial benefit from our company.............6
Our products will face competition from companies
with greater resources....................................................6
We have limited marketing resources.........................................6
We have no foreign operations outside of a joint
venture relationship in Vancouver, B.C....................................7
The company has paid no dividends since inception and
has no current plans to pay any dividends.................................7
The exercise price of options and warrants may
adversely affect our stock price and your percentage of ownership........ 7
Our common stock is subject to penny stock regulation.......................8
The public markets for the company's common stock are limited...............8
Forward-looking statements..................................................8
USE OF PROCEEDS...............................................................10
SELLING STOCKHOLDERS..........................................................11
Investment Agreement.......................................................12
PLAN OF DISTRIBUTION..........................................................14
MANAGEMENT....................................................................15
Directors and Executive Officers...........................................15
Executive Compensation.....................................................16
Employment Agreements......................................................17
i
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BUSINESS......................................................................18
Our Products...............................................................18
Agricultural Products......................................................19
Marketing Plan.............................................................20
Competition................................................................20
Patents....................................................................20
VIRAPLEX (R)(R)...............................................................21
Government Regulation......................................................21
Employees..................................................................21
Litigation.................................................................21
Properties.................................................................21
MANAGEMENT'S DISCUSSION AND ANALYSIS OF.......................................22
Overview...................................................................22
Results of Operations......................................................22
Sources of Revenues and Revenue Recognition................................22
Revenue and expenses for 2000 and 1999.....................................22
Liquidity and Capital Resources............................................23
Year 2000 Compliance.......................................................24
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.................................24
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................................25
MARKET INFORMATION............................................................25
DIVIDEND POLICY...............................................................26
PRINCIPAL STOCKHOLDERS........................................................27
DESCRIPTION OF SECURITIES.....................................................28
Common Stock...............................................................28
Preferred Stock............................................................29
Dividends..................................................................29
Stock Options..............................................................29
Warrants...................................................................29
INDEMNIFICATION OF OFFICERS, DIRECTORS AND OTHERS.............................29
TRANSFER AGENT................................................................30
LEGAL MATTERS.................................................................30
EXPERTS.......................................................................30
ADDITIONAL INFORMATION........................................................30
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS...................................F-1
ii
<PAGE>
PROSPECTUS SUMMARY
This summary highlights information found in greater detail elsewhere in
this prospectus. In addition to this summary, we urge you to read the entire
prospectus carefully, including the risks of investing in our common stock
discussed under "Risk Factors," before you decide to buy our stock.
About our Company
Meditech Pharmaceuticals, Inc. ("Meditech") is a drug development company,
founded May 4, 1982 and incorporated in Nevada on March 21, 1983, which is
focused in the areas of research, development, and marketing in the biomedical
industry, with an emphasis on anti-infective drugs. We have completed various
stages of planning and developing products containing our proprietary drugs
Viraplex(R) and MTCH-24(TM).
Our development activities since inception (May 4, 1982) have included
efforts to secure financing, create a management and business structure, and
develop and test Viraplex(R) and MTCH-24(TM). MTCH-24(TM) has demonstrated
positive preliminary test results against acne, citrus canker, herpes, and other
viral and fungal problems. Viraplex(R) has tested against orofacial and genital
herpes.
About our revenues
To date we have not generated any revenue from the sale of products.
Recently, however, we received aggregate payments of $125,000 from Immune
Network Research, Inc. (representing a $25,000 payment for an irrevocable option
and a $100,000 payment in anticipation of a definitive license agreement), a
Canadian company with whom we are negotiating a license agreement to develop and
market our patented products outside of the United States. We anticipate that
future revenues will be derived from similar licensing arrangements and product
sales once our products are ready for commercialization.
About our Investment Agreement
We have entered into an investment agreement with Swartz Private Equity,
LLC to sell up to $30 million of our common stock to Swartz. The dollar amount
of each sale is limited by our common stock's trading volume, and a minimum
period of time must elapse between each sale. Each sale will be to Swartz. In
turn, Swartz will either hold our stock in their own portfolio, sell our stock
in the open market, or place our stock through negotiated transactions with
other investors. This prospectus covers the resale of our stock by Swartz either
in the open market or to other investors. Our Investment Agreement with Swartz
is included as an exhibit to this registration statement.
Additional Shares We Are Registering
We are also registering for resale 9,316,000 shares of our common stock
which we previously sold in various exempt private offerings and 16,800,000
shares of our common stock issuable upon exercise of options and warrants which
are currently outstanding or committed to be issued in the near future..
1
<PAGE>
THE OFFERING
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Common stock outstanding 136,713,432(1)
prior to this offering
Common stock being offered for 77,116,000(2)
resale to the public
Common stock outstanding after this offering 176,713,432(3)
Price per share to the public Market price at time of resale
Total proceeds raised by offering None, however we have received
proceeds from the sale of
shares that are presently
outstanding; we may receive up
to $30 million from Swartz
under the investment
agreement; and we may receive
additional amounts from the
sale of shares to Swartz
and others upon the exercise
of outstanding options and
warrants and warrants that may
be issued to Swartz pursuant
to the Investment Agreement.
Use of proceeds from the sale of the We plan to use the proceeds
shares to Swartz for working capital and
general corporate purposes
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(1) Does not include 7,000,000 shares underlying warrants issued to Swartz in
connection with the Investment Agreement nor any shares underlying warrants
which we may issue to Swartz in the future pursuant to the Investment
Agreement. Also does not include 16,800,000 shares underlying options and
warrants currently outstanding and held by the remaining selling
shareholders.
(2) Includes (i) 9,316,000 shares that are presently outstanding, (ii) up to
40,000,000 shares that may be issued to Swartz pursuant to the Investment
Agreement, (ii) 7,000,000 shares underlying warrants issued to Swartz in
connection with the Investment Agreement, (iv) up to 4,000,000 shares
underlying warrants that we may issued to Swartz in the future pursuant to
the Investment Agreement, and (v) 16,800,000 shares underlying outstanding
options and warrants held by the remaining selling shareholders.
(3) Includes up to 40,000,000 shares that may be issued to Swartz pursuant to
the Investment Agreement.
2
<PAGE>
RISK FACTORS
The common shares being offered for resale by the selling shareholders are
highly speculative in nature, involve a high degree of risk and should be
purchased only by persons who can afford to lose their entire investment in the
common shares. Before purchasing any of the common shares, you should carefully
consider the following factors relating to our business and prospects.
Factors that may affect operating results and financial condition.
Our future operating results and financial condition depend on a number of
factors that we must successfully manage in order to achieve favorable future
operating results. The following potential risks and uncertainties, together
with those mentioned elsewhere in this prospectus, could affect our future
operating results, financial condition, and the market price of our common
stock.
We incurred significant losses in previous years.
We began operations in May 1982 and have a limited operating history upon
which potential investors may evaluate our performance. We reported significant
losses for the last three years. In addition, our future operations may not be
profitable. The likelihood of our success must be considered relative to the
problems, difficulties, complications, and delays frequently encountered in
connection with the development and operation of a new business, and the
significant change in strategy toward increased licensing for over-the-counter
products. To date, we have generated an accumulated deficit of more than $15.5
million.
We will need additional capital.
We will need the proceeds of this proposed offering to carry out our
proposed operations. This offering might not provide enough funds to ensure the
success of our research and business development efforts. Since our research and
development efforts could face unexpected issues, we may face unexpected
expenses.
We have received a going concern opinion.
We have received a report from our independent certified public accountants
that includes an explanatory paragraph describing the uncertainty as to whether
we will be able to continue as a going concern. These consolidated financial
statements contemplate our ability to continue as a going concern and do not
include any adjustments that might result from this uncertainty.
We have had no revenues from sales of product since inception.
To date we have not generated any significant revenues from the sale of our
products. We are currently working with one strategic partner, Immune Network
Research Ltd. to move our products to regulatory and commercial acceptance.
Additionally, we hope to release our initial products through licensing
arrangements with larger retail product companies. As a result, we are dependent
on the financial resources and marketing capabilities of third parties. We
cannot make any assurances that we will be able to successfully bring our
products to market.
3
<PAGE>
Our inability to provide scientific proof for product claims will adversely
affect our sales.
The marketing of Viraplex(R) and MTCH-24(TM) involves claims that such
products act as antiviral and antibacterial agents, are effective against
retroviruses including herpes, Epstein-Barr virus, cytomegalovirus, and citrus
canker, among others. Under FDA and FTC rules, we are required to obtain
scientific data to support any health claims we make concerning our products. As
we have completed Phase one and Phase two clinical testing for the FDA on both
products (and are approved to enter into clinical trials), we have obtained such
scientific data for all of our products. There is no assurance that the
scientific data we have obtained in support of such claims will be deemed
acceptable to the FDA or FTC, should either agency request any such data in the
future. If the FDA or the FTC requests any supporting information, and we are
unable to provide support that is acceptable to the FDA or the FTC, either
agency could force us to stop making the claims in question or restrict us from
selling the affected products.
FDA and other government regulation will restrict our ability to sell product.
We are subject to various federal, state and local laws affecting our
business. Our Viraplex(R) and MTCH-24(TM) compounds are subject to regulation by
the FDA, including regulations with respect to labeling of products, approval of
ingredients in products, claims made regarding the products, and disclosure of
product ingredients. If we do not comply with these regulations, the FDA could
prevent us from bring our products to market or force us to stop selling the
affected products or incur substantial costs in adopting measures to maintain
compliance with these regulations.
Our advertising claims regarding our products are subject to the
jurisdiction of the FTC as well as the FDA. In both cases we are required to
obtain scientific data to support any advertising or labeling health claims we
make concerning our products, although no pre-clearance or filing is required to
be made with either agency. If we are unable to provide the required support for
such claims, the FTC may stop us from making such claims or require us to stop
selling the related product.
If MTCH-24(TM) and Viraplex(R) do not gain widespread market acceptance, our
anticipated sales and results of operations will suffer.
Through our alliance with Immune Network Research, Ltd., we are conducting
testing for approval of our MTCH-24(TM) (which is intended to be commercially
marketed as Zorex) and Viraplex(R) products. Although preliminary studies have
indicated that MTCH-24(TM) and Viraplex(R) are effective against a range of
retroviruses including herpes, citrus canker, cytomegalovirus, and other viral
and bacterial agents, there is no guarantee that the product will achieve
widespread acceptance by the market. If any unanticipated problem arises
concerning the efficacy of MTCH-24(TM) or Viraplex(R), or the products fail to
achieve widespread market acceptance for any reason, our prospects for our
future operating results will be adversely affected.
We may be unable to meet demand for our new products.
To the extent MTCH-24(TM) or Viraplex(R), or any other new product we
introduce, achieves widespread market acceptance and generates significant
demand, we may be unable to produce and deliver sufficient quantities of the
product to meet our customers' demands on a timely basis. If so, we could lose
opportunities to sell larger quantities of the product and damage relationships
with distributors whose orders could not be timely filled.
4
<PAGE>
Unanticipated problems associated with product development could delay or hinder
introduction of new products.
We may experience unanticipated difficulties in developing new products
that could delay or prevent the introduction of those products. We may be
dependent in the near future upon the MTCH-24(TM) and Viraplex(R) products that
are currently being developed, and upon a licensing strategy that is still
untested. If we are unable to develop new products on a timely basis, our
business, operating results, and financial condition could be materially
adversely affected.
We may be unable to successfully expand our operations.
We intend to continue expanding our manufacturing and marketing operations.
Expansion will place substantial strains on our management and our operational,
accounting, and information systems. Successful management of growth will
require us to improve our financial controls, operating procedures, and
management information systems, and to train, motivate, and manage our
employees.
In addition, to the extent that actual demand for our products in the
future is less than anticipated, we may incur higher than necessary costs in
preparing for an anticipated growth in sales that does not materialize or
materializes more slowly than expected. Failure to manage growth effectively
could have a material adverse effect on the results of our operations and our
ability to execute our business strategy.
The large number of shares eligible for immediate and future sales may depress
the price of our stock
Sales of substantial amounts of common stock in the open market or the
availability of a large number of additional shares for sale could adversely
affect the market price for the common stock. Substantially all of our
outstanding shares of common stock, as well as the shares underlying vested but
as yet unexercised warrants and options, have either been registered for public
sale or may be sold under Rule 144 promulgated under the Securities Act.
Therefore, all of these shares may be immediately sold by the holders. A
substantial increase in the volume of trading in our stock may depress the price
of our common stock.
We may be unable to prevent others from developing similar products.
We have received trademark and patent protection for our products from the
United States, Canada and Italy. There can be no assurance that we will be able
to successfully defend any trademarks, trade names or patents against claims
from or use by competitors or that future trademark, trade name or patent
applications will be approved by the United States Patent and Trademark Office
or any similar foreign agency.
We consider some of our product formulations and processes to be
proprietary in nature and rely upon a combination of non-disclosure agreements,
other contractual restrictions and trade secrecy laws to protect such
proprietary information. There can be no assurance that these steps will be
adequate to prevent misappropriation of our proprietary information or that our
competitors will not independently develop chewing gum formulations and
processes that are substantially equivalent or superior to our own.
The price of our stock may continue to be volatile.
The market price of our common stock has been highly volatile and may
continue to be volatile in the future. Factors such as our operating results or
public announcements may cause the market price of our stock to decline quickly.
Market prices for securities of many small capitalization companies have
experienced wide fluctuations in response to variations in quarterly operating
results, general economic indicators and other factors beyond our control.
5
<PAGE>
We may incur significant costs resulting from product liability claims.
We are subject to significant liability should use or consumption of our
products cause injury, illness or death. We do not have insurance coverage for
these risks at this time. When, and if, we acquire insurance, there can still be
no assurance that our insurance coverage will be adequate to protect us against
product liability claims or that insurance coverage will continue to be
available on reasonable terms.
Inability to retain current management could damage our operations.
Our operations are dependent upon our ability to hire and retain qualified
management personnel and upon the continued services of our executive officers,
including Gerald N. Kern and Steven I. Kern. The loss of the services of any of
our executive officers, whether as a result of death, disability, or otherwise,
would have a material adverse effect upon our business.
We have limited personnel resources.
Currently we have only three employees. Other employees with necessary
skills have discussed joining the company upon re-financing, if and when
completed, but may not actually do so. If they do not, we will need to recruit
and retain professional and technical staff to ensure that we have the range of
skills necessary to operate and maintain our business.
Our executive officers get substantial benefit from our company.
Gerald N. Kern, our Company's Chairman and Chief Executive Officer, and
Steven I. Kern, our Company's Chief Operating Officer and Chief Financial
Officer, have the right to receive $150,000 and $120,000 annually, respectively,
along with insurance benefits and certain contemplated bonuses. Cynthia Kern,
the Company's President and Corporate Secretary, also benefits from certain
contemplated bonuses. All current employees are related.
Our products will face competition from companies with greater resources.
We will face heavy competition in the field of antimicrobial agents. Our
products, if finally approved by applicable governmental agencies for marketing,
will have to compete with similar products from well-known and established
companies. Many of our competitors have vastly greater financial resources,
larger research and development staffs, and more powerful marketing groups than
our Company.
We have limited marketing resources.
We are planning to drive our marketing efforts through licensing agreements
with other companies who will provide for the final sale of products to
consumers. We may not be successful in entering into licensing and/or
distribution agreements, and any new licensees may not successfully market our
products.
6
<PAGE>
We have no foreign operations outside of a joint venture relationship in
Vancouver, B.C.
In addition to the United States, we are conducting research in Canada. If,
in the future, we intend to market products in foreign countries, these foreign
operations face the risks of doing business in foreign countries, including
unstable politics and economies, foreign governments' regulations, and changes
in currency values. In addition, we may operate in some foreign countries which
enforce exchange controls which would limit our ability to take capital or
earnings out of the country.
The company has paid no dividends since inception and has no current plans to
pay any dividends.
We have not paid dividends on our Common Stock since the Company was
founded. Even if our operations later produce revenues or profitability, we do
not anticipate that dividends will be paid. We intend to apply future profits,
if any, toward the further development of our business.
The exercise of our put rights may lower the market price of our common stock
and substantially dilute the interests of other holders of our common stock.
As we exercise our put rights, we will be required to issue shares of our
common stock to Swartz at a price below the prevailing market price of our
common stock.
The shares issuable to the selling shareholder upon exercise of our put rights
will be issued at a price equal to the lesser of (i) the market price for our
common stock minus $.075 or (ii) 91% of the market price for our common stock.
Accordingly, the shares issuable to the selling shareholder upon exercise of our
put rights will be issued at a rate that will be below the market price of our
common stock.
The sale of material amounts of our common stock could reduce the price of
our common stock and encourage short sales.
As we sell shares of our common stock to Swartz pursuant to our put rights and
if, and to the extent that Swartz sells the common stock, our common stock price
may decrease due to the additional shares in the market. As the price of our
common stock decreases, and if we decide to exercise our right to put shares to
Swartz, we will be required to issue more shares of our common stock upon
exercise of our put rights for any given dollar amount invested by Swartz,
subject to a designated minimum put price specified by us and a minimum
designated number of shares to be purchased. This may encourage short sales,
which could place further downward pressure on the price of our common stock.
The exercise of our put rights may substantially dilute the interests of
other holders.
The shares of our common stock issuable upon exercise of our put rights will be
available for sale immediately upon issuance. Accordingly, subject to (i) any
designated minimum put price we may specify, (ii) any minimum number of shares
which we choose to put and (iii) any volume limitations, as further described
under "Selling Shareholders," the exercise of our put rights may result in
substantial dilution to the interests of the other holders of our common stock
and the price of our common stock may decrease which would entitle the selling
shareholder to receive a greater number of shares of our common stock upon
exercise of our put rights.
The exercise price of options and warrants may adversely affect our stock price
and your percentage of ownership.
If all of the warrants that may be issued to Swartz under the Investment
Agreement are issued, there will be outstanding options and warrants to purchase
27,800,000 shares of our common stock, assuming that we issue a total of
11,000,000 warrants to Swartz under the Investment Agreement (including the
7,000,000 warrants already issued). The number of warrants that may be issued to
7
<PAGE>
Swartz under the Investment Agreement will fluctuate depending on the price at
which we put shares to Swartz, which in turn will depend on the market price of
our common stock at the time of puts. In the future, we may grant more warrants
or options under stock option plans or otherwise. The exercise of stock options
and warrants that are presently outstanding or may be issued in the future will
dilute the percentage ownership of our other shareholders.
Our common stock is subject to penny stock regulation.
Our common stock is considered penny stock and is, therefore, subject to
the Securities Enforcement Remedies and Penny Stock Reform Act of 1990. Penny
stock, as defined by the Penny Stock Reform Act, is any equity security not
traded on an exchange or quoted on Nasdaq that has a market price of less than
$5.00 per share. This classification requires additional disclosure in
connection with any trades, including the delivery to purchasers, prior to any
penny stock transaction, of a disclosure schedule explaining the penny stock
market and the associated risks. The regulations applicable to penny stocks
could severely limit the market liquidity of our common stock and could limit
your ability to sell your securities in the secondary market.
The public markets for the company's common stock are limited.
Our Common Stock is traded in the Over-The-Counter Bulletin Board. The OTC
Bulletin Board is not an exchange and, because trading of securities on the OTC
Bulletin Board is often more sporadic than the trading of securities listed on
an exchange or Nasdaq, you may have difficulty reselling any of the shares that
you purchase from the selling shareholders.
We may experience difficulties in the introduction of new products that could
result in our having to incur significant unexpected expenses or delay the
launch of new products.
Our compounds and products are in various stages of development. These
development stage products and compounds may not be completed in time to allow
production or marketing due to the inherent risks of new product and
pharmaceutical development, limitations on financing, competition, loss of key
personnel and other factors. Although we may license some of our compounds and
products at their current stage of development, there can be no assurance that
we will be able to do so. Unanticipated clinical or regulatory obstacles can
arise at any time and result in lengthy and costly delays or in a determination
that further development is not feasible.
The development of our products and compounds has taken longer than
anticipated and could be additionally delayed. Therefore, there can be no
assurance of timely completion and introduction of improved products on a
cost-effective basis, or that such products, if introduced, will achieve market
acceptance such that, in combination with existing products, they will sustain
us or allow us to achieve profitable operations.
Forward-looking statements.
This prospectus includes "forward-looking" statements within the meaning of
Section 27A of the Securities Act of 1933, Section 21E of the Securities
Exchange Act of 1934, and the Private Securities Litigation Reform Act of 1995,
and we desire to take advantage of the "safe harbor" provisions in those laws.
Therefore, we are including this statement for the express purpose of availing
ourselves of the protections of these safe harbor provisions with respect to all
of the forward-looking statements we make. The forward-looking statements in
this prospectus reflect our current views with respect to possible future events
and financial performance. These forward-looking statements are subject to
certain risks and uncertainties, including specifically the absence of
significant revenues, financial resources, a history of losses, no assurance
that technology cannot be completed or that its completion will not be delayed,
8
<PAGE>
significant competition, the uncertainty of patent and proprietary rights,
uncertainty as to royalty payments and indemnification risks, trading risks of
low-priced stocks and those other risks and uncertainties discussed herein that
could cause our actual results to differ materially from our historical results
or those we anticipate. In this prospectus, the words "anticipates," "believes,"
"expects," "intends," "future" and similar expressions identify certain
forward-looking statements. You are cautioned to consider the specific risk
factors described in "Risk Factors" and elsewhere in this prospectus and not to
place undue reliance on the forward-looking statements contained in this
prospectus, which speak only as of the date of this prospectus. We undertake no
obligation to publicly revise these forward-looking statements to reflect the
effect of events or circumstances that may arise after the date of this
prospectus. All written and oral forward-looking statements made subsequent to
the date of this prospectus and attributable to us or persons acting on our
behalf are expressly qualified in their entirety by this section.
9
<PAGE>
USE OF PROCEEDS
We will not receive any proceeds from the resale of our common stock
pursuant to this offering. We may, however, receive proceeds from the sale of
our common stock to Swartz pursuant to the Investment Agreement, and, if
exercised, we will receive proceeds from Swartz upon Swartz's exercise of
warrants issued, or which may be issued, pursuant to the Investment Agreement.
We will also receive proceeds from the exercise of options and warrants by other
selling shareholders. We expect to use any proceeds that we receive from Swartz
and other selling shareholders for working capital and general corporate
purposes, including the completion of product development, clinical testing, the
testing of further product applications and potential product compounds and
marketing and promotion of MTCH-24(TM) and Viraplex(R). We will have significant
discretion in the use of any proceeds received from Swartz and we have not
determined the allocation of any proceeds that we may receive. Pending the use
of any proceeds as discussed above, we intend to invest these funds in short
term, interest-bearing, investment-grade obligations.
10
<PAGE>
SELLING STOCKHOLDERS
The following table sets forth certain information as of the date of this
prospectus, with respect to Swartz and the other selling stockholders for whom
we are registering shares for resale to the public. Swartz and the other selling
stockholders propose selling all of their shares, in which case each would
beneficially own no shares after the offering. Except as set forth below, none
of the selling shareholders currently is an affiliate of ours, and none of them
has had a material relationship with us during the past three years. None of the
selling shareholders are or were affiliated with registered broker-dealers. An
asterisk indicates if their common stock ownership is less than one percent.
<TABLE>
<CAPTION>
Maximum Amount and
Shares No. of Shares Percentage
Beneficially to be Sold of Common Stock
Name of Owned Prior to Pursuant to this after the offering (1)
Stockholder Offering Prospectus Number %
---------------------------- ------------- ------------ ----------------------
<S> <C> <C> <C> <C>
Swartz Private Equity, LLC.. 51,000,000 51,000,000(2) 0 *
Immune Networks, Ltd........ 10,000,000 10,000,000 0 *
Gerald N. Kern.............. 33,266,794(3) 7,010,000 26,256,794 14.9%
Cynthia S. Kern............. 3,000,000(4) 3,000,000 0 *
Harry Hall.................. 800,000(5) 800,000 0 *
Lester Goldstein............ 1,050,000(6) 1,050,000 0 *
Frederick W. Croft.......... 550,000(7) 550,000 0 *
Gregg Martins............... 806,000(8) 806,000 0 *
Steven I. Kern.............. 2,500,000(9) 2,500,000 0 *
Ira Victor.................. 50,000(10) 50,000 0 *
Mark Politi................. 50,000(11) 50,000 0 *
Alan Weiss.................. 100,000(12) 100,000 0 *
Murdie Antonio.............. 200,000(13) 200,000 0 *
Total....................... 103,372,794(14) 77,116,000 26,256,794 14.9%
</TABLE>
----------
* Represents less than one percent.
(1) Assumes that all of the offered shares will be resold by the selling
shareholders and none will be held by the selling shareholders for their
own accounts.
(2) Represents up to 40,000,000 shares of our common stock that we may sell to
Swartz pursuant to the Investment agreement and up to 11,000,000 shares of
our common stock which may be issued to Swartz upon Swartz's exercise of
warrants issued or issuable in connection with the Investment Agreement. It
is expected that Swartz will not own beneficially more than 9.9% of our
outstanding common stock at any time.
(3) Includes 1,500,000 shares of common stock issuable upon exercise of
outstanding stock options. Includes 26,256,794 shares of common stock owned
by Petro-Med, Inc. Mr. Kern is the Chairman of the Board and Chief
Executive Officer of Petro-Med, Inc. and may be deemed the beneficial owner
of such shares. Does not include an aggregate of 2,250,000 shares of common
stock held by Mr. Kern's spouse and adult children. Mr. Kern disclaims
beneficial ownership of the shares held by such persons. Mr. Kern is the
Company's Chairman of the Board, President and Chief Executive Officer and
is a member of the Company's Board of Directors.
(4) Includes 1,000,000 shares of common stock issuable upon exercise of
outstanding stock options. Does not include an aggregate of 7,260,000
shares of common stock held by Ms. Kern's spouse and adult children. Ms.
Kern disclaims beneficial ownership of the shares held by such persons. Ms.
Kern is the Company's President and Corporate Secretary and is a member of
the Company's Board of Directors.
(5) Includes 450,000 shares of common stock issuable upon exercise of
outstanding stock purchase warrants. Mr. Hall is a member of the Company's
Board of Directors.
(6) Includes 450,000 shares of common stock issuable upon exercise of
outstanding stock purchase warrants. Mr. Goldstein is a member of the
Company's Board of Directors.
(7) Includes 300,000 shares of common stock issuable upon exercise of
outstanding stock purchase warrants.
11
<PAGE>
(8) Includes 200,000 shares of common stock issuable upon exercise of
outstanding stock purchase warrants.
(9) Includes 2,500,000 shares of common stock issuable upon exercise of
outstanding stock options. Mr. Kern is the Company's Chief Operating
Officer and Chief Financial Officer.
(10) Includes 50,000 shares of common stock issuable upon exercise of
outstanding stock purchase warrants.
(11) Includes 50,000 shares of common stock issuable upon exercise of
outstanding stock purchase warrants.
(12) Includes 100,000 shares of common stock issuable upon exercise of
outstanding stock purchase warrants.
(13) Includes 200,000 shares of common stock issuable upon exercise of
outstanding stock purchase warrants.
Investment Agreement
On June 30, 2000, we entered into an investment agreement with Swartz
Private Equity, LLC. The investment agreement entitles us to issue and sell our
common stock to Swartz for up to an aggregate of $30 million from time to time
during a three-year period beginning on the date that this registration
statement is declared effective. This is also referred to as a put right.
Put Rights. In order to invoke a put right, we must have an effective
registration statement on file with the SEC registering the resale of the common
shares which may be issued as a consequence of the invocation of that put right.
Additionally, we must give at least ten but not more than twenty business days
advance notice to Swartz of the date on which we intend to exercise a particular
put right and we must indicate the number of shares of common stock we intend to
sell to Swartz. At our option, we may also designate a maximum dollar amount of
common stock (not to exceed $2 million) which we will sell to Swartz during the
put and/or a minimum purchase price per common share at which Swartz may
purchase shares during the put. The number of shares of common stock sold to
Swartz in a put may not exceed the lesser of (i) 1.5million shares (ii) 15% of
the aggregate daily reported trading volume of our common shares, excluding
certain block trades of our common stock, during the 20 business days after the
date of our put notice, excluding any trading days in which the common stock
trades below a minimum price, if any, that we specify in our put notice; (iii)
15% of the aggregate daily reported trading volume of our common shares during
the 20 business days before the put date, excluding certain block trades; or
(iv) a number of shares that, when added to the number of shares acquired by
Swartz under the investment agreement during the 31 days preceding the put date,
would exceed 9.99% of our total number of shares of common stock outstanding (as
calculated under Section 13(d) of the Securities Exchange Act of 1934).
For each common share, Swartz will pay us the lesser of:
- the market price for such put, minus $.075 or
- ninety-one percent (91%) of the market price for the put.
Market price is defined as the lowest closing bid price for our common
stock during the pricing period which is the twenty business day period
following the date notice of the put was provided to Swartz. However, the market
price may not be less than the designated minimum per share price, if any, that
we indicated in our notice.
Warrants. Within five business days after the end of each pricing period,
we are required to issue and deliver to Swartz a warrant to purchase a number of
shares of common stock equal to 10% of the common shares issued to Swartz in the
applicable put. Each warrant will be exercisable at a price which will initially
equal 110% of the market price for the applicable put. The warrants will have
semi-annual reset provisions. Each warrant will be immediately exercisable and
have a term beginning on the date of issuance and ending five years thereafter.
12
<PAGE>
Limitations And Conditions Precedent To Our Put Rights. Swartz is not
required to acquire and pay for any common shares with respect to any particular
put for which:
- we have announced or implemented a stock split or combination of our
common stock;
- we have paid a common stock dividend;
- we have made a distribution of our common stock or of all or any
portion of our assets between the put notice date and the date the
particular put closes; or
- we have consummated a major transaction (including a transaction,
which constitutes a change of control) between the advance put notice
date and the date the particular put closes.
Short Sales. Swartz and its affiliates are prohibited from engaging in
short sales of our common stock unless they have received a put notice and the
amount of shares involved in a short sale does not exceed the number of shares
specified in the put notice.
Cancellation of Puts. We must cancel a particular put between the date of
the advance put notice and the last day of the pricing period if:
- we discover an undisclosed material fact relevant to Swartz's
investment decision;
- the registration statement registering resales of the common shares
becomes ineffective; or
- our common stock is delisted from the then primary exchange.
If a put is canceled, it will continue to be effective, but the pricing period
for the put will terminate on the date notice of cancellation of the put is
given to Swartz. Because the pricing period will be shortened, the number of
shares Swartz will be required to purchase in the canceled put may be smaller
than it would have been had the put not been canceled.
Shareholder Approval. We may issue more than 20% of our outstanding shares.
If we become listed on the NASDAQ Small Cap Market or NASDAQ National Market,
then we must get shareholder approval to issue more than 20% of our outstanding
shares. Since we are currently a bulletin board company, we do not need
shareholder approval.
Termination of Investment Agreement. We may also terminate our right to
initiate further puts or terminate the investment agreement by providing Swartz
with notice of such intention to terminate; however, any such termination will
not affect any other rights or obligations we have concerning the investment
agreement or any related agreement.
Restrictive Covenants. During the term of the investment agreement and for
a period of one-year thereafter, we are prohibited from engaging in certain
transactions. These include the issuance of any debt or equity securities in a
private transaction which are convertible or exercisable into shares of common
stock at a price based on the trading price of the common stock at any time
after the initial issuance of such securities or with a fixed conversion or
exercise price subject to adjustment. We are also prohibited from entering into
any private equity line type agreements similar to the investment agreement
without obtaining Swartz's prior written approval.
Right of First Refusal. Swartz has a right of first refusal to purchase any
equity securities offered by us in any private transaction which closes on or
prior to one year after the termination of the investment agreement.
13
<PAGE>
Swartz's Right of Indemnification. We are obligated to indemnify Swartz
(including their stockholders, officers, directors, employees and agents) from
all liability and losses resulting from any misrepresentations or breaches we
made in connection with the investment agreement, our registration rights
agreement, other related agreements, or the registration statement.
PLAN OF DISTRIBUTION
Each selling shareholder is free to offer and sell his or her common shares
at such times, in such manner and at such prices as he or she may determine. The
types of transactions in which the common shares are sold may include
transactions in the over-the-counter market (including block transactions),
negotiated transactions, the settlement of short sales of common shares, or a
combination of such methods of sale. The sales will be at market prices
prevailing at the time of sale or at negotiated prices. Such transactions may or
may not involve brokers or dealers. The selling shareholders have advised us
that they have not entered into any agreements, understandings or arrangements
with any underwriters or broker-dealers regarding the sale of their securities.
The selling shareholders do not have an underwriter or coordinating broker
acting in connection with the proposed sale of the common shares.
The selling shareholders may effect such transactions by selling common
stock directly to purchasers or to or through broker-dealers, which may act as
agents or principals. Such broker-dealers may receive compensation in the form
of discounts, concessions, or commissions from the selling shareholders. They
may also receive compensation from the purchasers of common shares for whom such
broker-dealers may act as agents or to whom they sell as principal, or both
(which compensation as to a particular broker-dealer might be in excess of
customary commissions).
Swartz Private Equity, LLC is, and each remaining selling shareholder and
any broker-dealer that acts in connection with the sale of common shares may be
deemed to be, an "underwriter" within the meaning of Section 2(11) of the
Securities Act. Any commissions received by such broker-dealers and any profit
on the resale of the common shares sold by them while acting as principals might
be deemed to be underwriting discounts or commissions.
Because Swartz is, and each remaining selling shareholder may be deemed to
be, an "underwriter" within the meaning of Section 2(11) of the Securities Act,
the selling shareholders will be subject to prospectus delivery requirements.
We have informed the selling shareholders that the anti-manipulation rules
of the SEC, including Regulation M promulgated under the Securities and Exchange
Act, may apply to their sales in the market and has provided the selling
shareholders with a copy of such rules and regulations.
Selling shareholders also may resell all or a portion of the common shares
in open market transactions in reliance upon Rule 144 under the Securities and
Exchange Act, provided they meet the criteria and conform to the requirements of
such Rule.
Swartz and the other selling stockholders will pay all commissions,
transfer taxes and other expenses associated with their sales. The shares
offered hereby are being registered pursuant to our contractual obligations, and
we have agreed to pay the expenses of the preparation of this prospectus. We
have also agreed to indemnify Swartz against certain liabilities, including,
without limitation, liabilities arising under the Securities Act.
14
<PAGE>
MANAGEMENT
Directors and Executive Officers
The following persons are our current directors, executive officers and
significant employees:
Name Age Position
---- --- --------
Gerald N. Kern 62 Chairman of the Board,
Chief Executive Officer, and Director
Steven I. Kern 33 Chief Operating Officer and
Chief Financial Officer
Cynthia Kern 50 President; Corporate Secretary;
and Director
Harry Hall 65 Director
Lester Goldstein, P.hD 57 Director
Each Director is elected to hold office until the next annual meeting of
stockholders and until his or her successor is duly elected and qualified. All
officers serve at the discretion of the Board of Directors.
Gerald N. Kern
Chairman of the Board and Chief Executive Officer; Director
Mr. Gerald N. Kern has been Chairman of the Board and Chief Executive
Officer of Meditech Pharmaceuticals, Inc. since July 1982 and has been a
director since July 1982. Mr. Kern served as the Company's President from July
1982 until June 1995. Mr. Kern has also served as Chairman of the Board,
President and Chief Executive Officer of GumTech International, Inc., a chewing
gum company, from August 1996 to February 1998. Mr. Kern also served as
President of AURA Interactive, an electronics company, from August 1994 to
August 1996. From July 1982 to present, Mr. Kern has served as President and
Chief Executive Officer and a director of Petro-Med, Inc., a shareholder in our
Company.
Steven I. Kern
Chief Operating Officer and Chief Financial Officer
Mr. Steven I Kern has served as the Chief Financial Officer of Meditech
Pharmaceuticals, Inc. since February 2000. Prior to joining the Company, Mr.
Kern was the Vice President of Marketing for Financial Management Advisors, Inc.
from February 1999 to January 2000. From July 1996 to January 1999, Mr. Kern
served as a Vice President for Merrill Lynch in its Private Client Group. Mr.
Kern was also a Vice President for Smith Barney from October 1993 to July 1996.
He graduated from the University of California, Los Angeles in 1994 with a B.A.
in English.
Cynthia S. Kern
President and Corporate Secretary; Director
Mrs. Kern has served as the President of Meditech Pharmaceuticals, Inc.,
since June 1995 and as its Corporate Secretary since July 1982. Mrs. Kern has
been a director of the Company since July 1982. Prior to joining the Company,
Mrs. Kern served as President and Treasurer of FSL Cosmetics, Ltd.. Mrs. Kern
earned a B.A. Degree in English from the University of California at Los
Angeles.
15
<PAGE>
Lester F. Goldstein, Ph.D.
Director
Dr. Goldstein has been a member of the Board of Directors of Meditech
Pharmaceuticals, Inc., since July 1982. Dr. Goldstein currently serves as the
President and Chief Operating Officer of Island Mist, a manufacturer of portable
missing systems, positions he has held since January 2000. From April 1998 to
January 2000, Dr. Goldstein was Vice President of Coast Energy, a manufacturer
of energy saving devices. From August 1996 to February 1998, Dr. Goldstein
served as Executive Vice President of Gumtech International, Inc., a chewing gum
manufacturer, where he was responsible for operations. Prior that position, Dr.
Goldstein served as Vice President of AURA Systems, an electronics company, from
July 1992 to August 1996, where he was in charge of operations. Dr. Goldstein
obtained a B.A. Degree from Hofstra University in Physics and Mathematics and
M.S. and Ph.D. degrees in Physics from the Polytechnic University of New York.
Harry Hall
Director
Mr. Hall has been a member of the Board of Directors of Meditech
Pharmaceuticals, Inc. since 1984. Mr. Hall has had over 30 years of corporate
management experience. Mr. Hall is currently a principal at Hall & Associates, a
sales and marketing consulting firm, a position he has held since 1986. Prior to
1986, Mr. Hall had extensive experience in the apparel industry. Mr. Hall is a
graduate of Auburn University where he received a B.S. in Business
Administration and he has completed the Effective Executive Program at Wharton
University. Mr. Hall has also served as the President of the Consumer Affairs
Committee of the American Apparel Manufacturers Association.
Executive Compensation
The following table sets forth information concerning the compensation of
our chief executive officer and each of the other two most highly compensated
executive officers for services rendered in all capacities to Meditech
Pharmaceuticals, Inc., for each of the fiscal years ended May 31, 1998, 1999 and
2000. Due to our financial condition, all executive officers have agreed to
defer receipt of their compensation during each of the last three fiscal years.
All of the individuals named in the table will hereinafter be referred to as the
"Named Executive Officers".
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
------------------------------------- ------------------------------------- ----------------------------------------
Annual Compensation Long-Term Compensation Award
------------------------------------- ------------------------------------- ----------------------------------------
Restricted Securities
Fiscal Stock Underlying
Name and Principal Position Year Salary Bonus Grants Options
------------------------------------- ----------- -------------- ---------- ------------------- --------------------
<S> <C> <C> <C> <C>
Jerry N. Kern 2000 $ 54,000 $ 0 None 4,500,000 shares
Chairman of the Board and 1999 $ 108,000 $ 0 None None
Chief Executive Officer 1998 $ 108,000 $ 0 None None
------------------------------------- ----------- -------------- ---------- ------------------- --------------------
Steven I. Kern 2000 $ 0 $ 0 None 2,500,000
Chief Operating Officer and 1999 $ 0 $ 0 None None
Chief Financial Officer 1998 $ 0 $ 0 None None
------------------------------------- ----------- -------------- ---------- ------------------- --------------------
Cynthia Kern 2000 $ 22,500 $ 0 None 3,000,000
President and Corporate 1999 $ 45,000 $ 0 None None
Secretary 1998 $ 45,000 $ 0 None None
------------------------------------- ----------- -------------- ---------- ------------------- --------------------
16
</TABLE>
<PAGE>
We do not currently maintain any employee benefit plans for our employees.
Employee benefits, including medical, dental and life insurance benefits and a
401(k) retirement savings plan, may be considered when management deems it
necessary to attract and maintain additional key employees.
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information on option and warrant grants in
the fiscal year ended May 31, 2000 to the Named Executive Officers.
<TABLE>
<CAPTION>
Percent
Total Options
Number of Securities Granted to Exercise Grant
Grant Underlying All Employees in Price Expiration Date
Named Officer Date Options Granted Fiscal Year ($/Share) Date Value
------------------------- ---------- ------------------------ -------------------- -------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Gerald N. Kern 6/1/99 3,000,000 33.3% $0.01 5/31/06 $30,000
2/1/00 1,500,000 16.7% $0.21 5/1/07 $45,000
------------------------- ---------- ------------------------ -------------------- -------------- ------------- --------------
Steven I. Kern 2/1/00 2,500,000 16.7% $0.05 5/1/07 $75,000
------------------------- ---------- ------------------------ -------------------- -------------- ------------- --------------
Cynthia Kern 6/1/99 2,000,000 22.2% $0.01 5/31/06 $20,000
2/1/00 1,000,000 11.1% $0.21 5/1/07 $30,000
------------------------- ---------- ------------------------ -------------------- -------------- ------------- --------------
OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table provides information on option exercises in the fiscal
year ended May 31, 2000, by the Named Executive Officers and the value of
unexercised options held by the Named Executive Officers as of May 31, 2000.
------------------------- ---------------- ----------- ---------------------------------- ------------------------------------
Number of
securities underlying Value of unexercised
unexercised options in-the-money options at
Shares at May 31, 2000 May 31, 2000
acauired on Value --------------- ------------
Name Exercise realized Exercisable Unexercisable Exercisable Unexercisable
----------------------- ---------------- ----------- -------------- ------------------- ---------------- -------------------
Gerald N. Kern 3,000,000 $810,000 1,500,000 None $477,150 --
------------------------- ---------------- ----------- -------------- ------------------- ---------------- -------------------
Steven I. Kern None -- 2,500,000 None $695,250 --
------------------------- ---------------- ----------- -------------- ------------------- ---------------- -------------------
Cynthia Kern 2,000,000 $580,000 1,000,000 None $318,100 --
------------------------- ---------------- ----------- -------------- ------------------- ---------------- -------------------
</TABLE>
Employment Agreements
We entered into an employment agreement with Gerald N. Kern dated as of
February 3, 2000 and approved by our directors on April 20, 2000, providing for
his employment as Chief Executive Officer effective February 3, 2000 contingent
upon completion of the Swartz offering discussed in this prospectus. The
agreement is for a three year term and provides for a base salary of $150,000
per annum for the first year with an increase at least equal to the consumer
price index over each succeeding year. He is also eligible for bonuses at the
discretion of the Board of Directors. Certain other expenses (car allowance,
travel, expense account) will also be paid to him on a monthly basis. The base
salary may be increased at the discretion of the board of directors. The
agreement provides for a bonus to be granted periodically by the Board of
Directors. We may terminate Mr. Kern's employment with or without cause, but
termination without cause (other than disability or death) would result in a
lump sum severance payment including the unearned salary for the remainder of
the contract plus any prorated earned bonuses. Also, upon a change of control,
as defined in the agreement, Mr. Kern may elect to terminate employment and
obtain a lump sum severance payment equal to the base salary for the remaining
months of the agreement plus any prorated earned bonuses. In the event that the
Swartz financing is completed, we will grant Mr. Kern an option to purchase
15,950,000 common shares which will vest over the course of his employment
agreement.
17
<PAGE>
We entered into an employment agreement with Steven I. Kern dated as of
February 3, 2000 and approved by our directors on February 3, 2000, with Mr.
Kern providing for his employment as Chief Operating Officer and Financial
Officer of the Company contingent upon completion of the Swartz offering
discussed in this prospectus. The agreement is for a three year term providing
for a base salary of $120,000 per annum for the first year and not less than
$120,000 per annum during the second and third years of the agreement. The base
salary may be increased at the discretion of the board of directors. The
agreement provides for payment of certain other expenses (car, expense account,
travel), and eligibility for executive bonuses at the discretion of the Board of
Directors. In the event that the Swartz financing is completed, we will grant
Mr. Kern an option to purchase 13,950,000 shares which will vest over the period
of his employment contract. We may terminate Mr. Kern's employment with or
without cause, but termination without cause (other than disability or death)
would result in a lump sum severance payment equal to the remainder of the base
salary due under the agreement (but without the obligation to grant any further
options). If within twelve months of a change in control, as defined in the
agreement, Mr. Kern's employment is terminated for other than cause or if Mr.
Kern refuses to accept or voluntarily resigns from a position other than a
qualified position, as that term is defined in the agreement, then he will
receive a lump sum severance payment equal to twelve months of his then current
salary.
BUSINESS
Meditech Pharmaceuticals, Inc. began its business in May 1982, and were
incorporated in Nevada on March 21, 1983. In 1983, the Company completed its
initial public offering under a registration statement on Form S-1 under the
Securities Act of 1933. This offering raised gross proceeds of $3,960,000 and
net proceeds of approximately $2,500,000 upon the sale of 12,000,000 units at
$.30 per unit. We are currently incorporated in the State of Nevada and are in
good standing.
Our Products
We have developed two patented compounds: MTCH-24(TM) and Viraplex(R). Both
of these compounds show positive test results for treatment of a variety of
enveloped viruses.
MTCH-24(TM)
Herpes I and II are enveloped viruses. How MTCH-24(TM) acts against
enveloped viruses is not fully understood, but, based on laboratory tests
conducted for the Company, it is thought to be potentially effective against
several enveloped viruses. MTCH-24(TM) has been tested and has produced positive
results in vitro in laboratory tests against a range of other enveloped viruses
such as influenza, Epstein-Barr virus, respiratory syncytial virus ("RSV"),
pseudorabies, rhino tracheitis, cytomegalovirus, as well as rotavirus, a
non-enveloped virus.
EBV is a herpes virus that causes infectious mononucleosis and may be a
cause of Burkitt's lymphoma, a disease found mostly in Africa and New Guinea,
and less frequently, in the United States. EBV causes widespread early childhood
disease in developing countries, and is also associated with nasopharyngeal
carcinoma, a malignant tumor of the nose, usually affecting young adults.
CMV is a virus, the effects of which vary substantially, depending upon the
age and immune status of the infected person. Infection of an infant can result
in a fatal disease involving the nervous system, liver, and other body sites.
Infection acquired later in life may cause a syndrome clinically
indistinguishable from mononucleosis. Generalized CMV infection, which can be
fatal, may also occur in patients whose immune systems have been compromised.
Rotavirus is believed to be the causative agent in over 50% of all cases of
acute diarrhea in children requiring hospitalization. It can be highly
contagious and sometimes fatal. Rotavirus is also a major cause of
gastroenteritis in swine and lambs, with a mortality rate of 30% to 50%.
18
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Initial therapeutic uses of MTCH-24(TM) will include the topical treatment
of HSV-1 and Acne. Future dosage forms and uses covered by patents include
creams, lotions, mouthwashes, cleansers, surface disinfectants, impregnated
facial tissues, douches and inhalants, as well as systemic forms. Meditech has
developed an over-the-counter product containing MTCH-24(TM) for treating the
symptoms of herpes simplex virus infections of the lips, mouth, and face (cold
sores). Initially, the active ingredients shown in the product will be drugs,
other than MTCH-24(TM), that previously have been recognized by the FDA as safe
and effective for the intended uses, as specified in FDA monographs or proposed
monographs. No further claims will be made for the product other than those
specified in these regulations. MTCH-24(TM) will be used in these products as a
surfactant or non-active ingredient. Under these conditions, the Company hopes
its OTC product will fall within the scope of the FDA regulations and would be
able to be brought to market in the United States without further FDA approval.
Extensive legal research will be conducted by outside FDA and FTC counsel prior
to the release for sale of any of the Company's product.
Viraplex(R)
Studies by the National Cancer Institute have been conducted since 1987 to
screen 60,000 drugs against cancer related organisms. One of the final drugs
remaining in the testing sample as potentially effective against some cancers is
Viraplex(TM). The testing to determine actual effectiveness has still not been
completed.
One of the problems in moving this project forward was the inherent
insolubility of Viraplex(R). In 1997 and 1998, the drug was reformulated into a
fully soluble form, which now makes it possible to deliver the maximum
therapeutic dose to the intended site of delivery. Part of the proceeds of this
offering may be used to continue the cancer trials via the production of the
more soluble form of the drug.
Meditech and its associates are testing Viraplex(R), as well as
MTCH-24(TM), and are, pending satisfactory test results, planning to develop
additional products containing these drugs. Viraplex(R), which is intended to be
administered orally in capsule form as a prescription treatment for orofacial
and genital herpes simplex virus infections, started Phase III clinical trials
for safety and effectiveness in humans. (Trials were suspended pending
refinancing) The Company received permission from the FDA in 1987 to initiate a
320-patient Phase III study, consisting of 160 patients with genital herpes and
160 patients with orofacial herpes. More than 50% of this testing has been
completed.
Agricultural Products
Plant diseases due to fungi, bacteria and viruses cause a loss of crops
worldwide. Aspergillus flavus is one of the fungi that cause spoilage of stored
grain, corn, and other foodstuffs. In addition, fungi pose a major health hazard
by producing mycotoxins, chemical substances that are extremely toxic and/or
carcinogenic to humans and animals. In particular, aflatoxin produced by
Aspergillus flavus is among the most deadly substances known to man. MTCH-24
(TM) has been shown to be effective in inhibiting and preventing the growth of
Aspergillus on wheat and corn.
Organisms of the bacteria genus Xanthomonas cause citrus canker, a plant
disease that causes loss of oranges, other citrus fruit trees, and some
vegetables. MTCH-24(TM) has been shown to inhibit this organism at
concentrations non-toxic to humans. Currently tests are ongoing with Biosciences
Laboratories in Montana against this organism and two others.
The Company has engaged in limited testing and development in this area and
is seeking to interest potential licensees and/or joint venture partners to
provide assistance in testing, obtaining the necessary approvals for, and
marketing one or more of the Agricultural Products. At this point, the Company
has not decided which of the Agricultural Products it will seek to develop
commercially or the order of such development. This will depend in large part on
the identity of the licensees and/or joint venture partners and the wishes and
interests of such parties.
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Marketing Plan
We will attempt to produce and market products through licensing
arrangements with larger pharmaceutical and consumer product companies. In
addition, we intend to bring out an MTCH-24(TM)-based Cold Sore product in the
United States. The target customers for our products are intended to be drug
chains, drug wholesalers, mass marketers and food chains, as well as, direct
sales via the Internet. We intend to employ independent sales representative
organizations, if available to us.
We hope to use an independent advertising group. Media would be aimed at
the appropriate segments of the population, as well as publications targeting
the self-medicating segment. Much of the advertising is intended to be print. A
professional outside agency, specializing in drug naming has been assigned the
task of developing a name that is designed for maximum consumer impact and long
consumer attention span. Concurrently, the Company has worked with a drug naming
consulting firm to develop the name to be used commercially for MTCH-24(TM). The
name selected is Zorex(TM). An intent to use has been filed with the PTO.
Competition
There is at least one FDA-approved product currently available, by
prescription, for the treatment of herpes infections. Burroughs-Wellcome Co.
sells it under the name Zovirax(R) (Acyclovir). FDA approval of Zovirax is
limited to selected cases of genital and mucocutaneous herpes and also to
specific usage. Other companies are testing vaccines intended to prevent
infection by herpes viruses. Treatment of persons presently afflicted with
recurrent herpes infections is the primary focus of the products being developed
by the Company.
Many pharmaceutical companies and other researchers have announced their
intention to introduce, or are believed to be in the process of developing a
variety of products that may perform some or all of the functions of proposed
Viraplex(R) and MTCH-24(TM) products. Competing products are already available
for many of the functions of proposed MTCH-24(TM) products.
Patents
Our performance and ability to compete depend to a significant degree on
our proprietary knowledge. We rely or intend to rely on a combination of patent
and trade secret laws, non-disclosure agreements and other contractual
provisions to establish, maintain and protect our proprietary rights.
MTCH-24(TM)
1. United States Patent #4,717,735 (Antibacterial Methods and Agent),
issued January 1, 1988 (6 claims)
2. United States Patent #4,719,235 (Methods and Compositions for Treating
Viral Infections), issued January 12, 1988 (37 claims)
3. United States Patent #4,752,617 (Antibacterial Methods and Agent),
issued June 21, 1988 (6 claims)
4. Canadian Patent #1,242,147 (Method for Treating Viral Infection),
issued September 20, 1988 (6 claims)
5. Canadian Patent #1,256,032 (Method and Composition for Treating Viral
Infections), issued July 20, 1989 (16 claims)
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6. United States Patent #4,885,310 (Antifungal Methods and Agent), issued
December 205, 1989 (26 claims)
VIRAPLEX (R)(R)
1. Italian Patent #1,196,739 (Herpes Simplex Treatment), issued November
25, 1988 (6 claims)
2. United States Patent #4,810,707 (Herpes Simplex Treatment), issued
March 7, 1989 (5 claims)
3. Canadian Patent #1,261,269 (Herpes Simplex Treatment), issued
September 26, 1989 (14 claims)
Government Regulation
Pharmaceutical products are subject to extensive regulation in the United
States and most foreign countries. In the United States, ethical pharmaceutical
products cannot be marketed or sold before they have passed the three-stage
process required by the Food and Drug Administration. Providing adequate test
data, completing filings and obtaining final regulatory approval is usually a
multi-year process.
Once ethical pharmaceutical products are approved for sale, many of them
are purchased through health plans which are subject to state and Federal
regulations including the Health Maintenance Act of 1973, the Knox-Keene Act in
California, and numerous other regulations which bar some forms of treatment and
some pharmaceutical products as being "experimental" or "not medically
necessary".
Similar regulations and regulatory oversight are in place in most
countries. This ongoing regulatory oversight can also result in products being
withdrawn from the market after they have been approved for sale in instances
where new test data creates additional regulatory concerns.
Employees
We currently have three employees. We currently contract with outside
partners to perform the testing and registration of our patented products. As we
move toward completion of testing and introduction of products to the market, we
plan to substantially increase the number of employees in administrative and
marketing roles.
Litigation
We are not a party to any material legal proceedings nor aware of any
pending litigation against our Company. As our products complete registration
and are introduced to the marketplace, we anticipate that the risk of litigation
against our Company may increase.
Properties
We currently operate out of space owned by Gerald Kern, our Chairman and
CEO that is provided to the Company without charge. This space will not be
adequate for operations as we move forward. We anticipate acquiring a small
office in Los Angeles within the next twelve months.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion of our financial condition and
operations in conjunction with the consolidated financial statements and the
related notes included elsewhere in this prospectus. This discussion contains
forward-looking statements that involve risks and uncertainties. Our actual
results may differ materially from those anticipated in these forward-looking
statements as a result of many factors, including but not limited to, those
described under "Risk Factors" and elsewhere in this prospectus.
Overview
We are a drug development company, founded in 1982, focused in the areas of
research, development, and marketing in the biomedical industry, with an
emphasis on anti-infective drugs. The Company has completed various stages of
planning and developing products containing its proprietary drugs Viraplex (R)
and MTCH-24(TM).
Our development activities since inception (May 4, 1982) have included
efforts to secure financing, create a management and business structure, and
develop and test Viraplex (R) and MTCH-24(TM) for release as both OTC and
ethical products. These activities have produced very little in operating
revenues.
Since we became a public company, our operations have related primarily to
securing our patents, initiating and continuing clinical tests, recruiting
personnel and raising capital. Through May 31, 2000, we have derived our
revenues from the sale of a license option to Immune Network Research, Inc. to
develop and market our patented products. Both companies are currently
negotiating the terms of the license
Results of Operations
Our revenues have grown to $25,000 in 2000 after no revenues in 1999. The
consolidated May 31, 2000 financial statements included a net loss of $623,200,
of which $309,000, or approximately 49%, was due to interest accruals. The
consolidated May 31, 1999 financial statements included a net loss of $767,400,
of which $283,000, or approximately 40%, was due to interest accruals and salary
accruals.
Sources of Revenues and Revenue Recognition
Revenues consist entirely of fees from a licensing agreement with Immune
Network Research, Ltd. ("IMM") of Vancouver, British Columbia, for the
development and marketing of several applications of MTCH-24(TM) and Viraplex
(R). The Company received $25,000 for the license agreement and $100,000 for
deferred revenues through May 31, 2000.
We recognize revenues from license in the year it was granted. The initial
license has a one-year life, eliminating the need to amortize option revenue
over multiple years.
Revenue and expenses for 2000 and 1999
Our expenses include research and development and general and
administrative. Research and development consists of laboratory expenses,
consulting expenses, test expenses, clinical and research salaries, and other
costs associated with the development of products not yet being marketed.
General and administrative expenses include the salaries and benefits costs of
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management and other non-manufacturing employees, sales and marketing expenses,
rent, accounting, legal and operational costs. Personnel compensation and
facilities costs represent a high percentage of our operating expenses and are
relatively fixed in advance of each quarter.
Revenues. Revenues were $0 in 1999 and grew to $25,000 in 2000. The increase in
revenues was entirely due to the Immune Networks license.
Research and Development Costs. Direct research and development cost in 2000
were $1,200, up from $0 in 1999.
General and Administrative Expenses. Direct salaries and costs were $484,400 in
1999 and dropped to $338,000 in 2000, a decrease of approximately 30%. The
decrease in direct costs for 2000 compared to 1999 was primarily due to the
officers waiving compensation after November 1999. In the future, we expect
direct costs to increase in absolute dollar terms but to decrease as a
percentage of revenues due to OTC products reaching the market and the sale of
additional product licenses.
Gerald Kern, our Chairman and Chief Executive Officer, funded selling,
general and administrative expenses privately during 1999 and 2000. Accordingly,
they aren't included in the historic figures. In the future, we expect selling,
general and administrative expenses to increase in absolute dollars but to
decrease as a percentage of revenues due to improved economies of scale and
higher overall revenues.
Liquidity and Capital Resources
Since inception, we have funded our operations and investments in property
and equipment through cash from equity financings and cash from licensing fees.
Our cash and cash equivalents were $0 at May 31, 1999 and $114,800 at May
31, 2000. Cash was not augmented by net proceeds from financing activities in
either year.
On June 30, 2000, we entered into an investment agreement with Swartz
Private Equity, LLC. The investment agreement entitles us to issue and sell our
common stock to Swartz for up to an aggregate of $30 million from time to time
during a three-year period beginning on the date that this registration
statement is declared effective. This is also referred to as a put right. The
trading volume limits the dollar amount of each sale and a minimum period of
time must occur between sales. In order to sell shares to Swartz, there must be
an effective registration statement on file with the SEC covering the resale of
the shares by Swartz and we must meet certain other conditions. The agreement is
for a three-year period ending June 30, 2003.
We have incurred recurring operating losses and positive cash flows from
operating activities and have negative working capital. We believe that our
available equity financing arrangement with Swartz will be sufficient to meet
our working capital and capital expenditure requirements for at least the next
two years. However, there can be no assurance that we will receive financing
from Swartz, that we will not require additional financing within this time
frame or that such additional financing, if needed, will be available on terms
acceptable to us, if at all.
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Year 2000 Compliance
The Year 2000 problem is the result of certain computer programs being
written using two digits, rather than four digits, to define the applicable
year. Any computer programs that have time-sensitive software may recognize a
date using "00" as the year 1900 rather than the year 2000, or not recognize the
date at all. If not corrected, this could result in system failures or
miscalculations that could result in service or other interruptions. To date, we
have not experienced any significant Year 2000 problems.
Testing and compliance monitoring as part of our Year 2000 program will
continue through-out 2000 to ensure proper leap year operations and that system
changes and additions are Year 2000 compliant.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
As discussed in our Form 8-k filed with the Commission on September 8,
2000, on September 6, 2000, the our Board of Directors approved the engagement
of Singer Lewak Greenbaum & Goldstein LLP, as our independent certified public
accountants, to audit our financial statements for the fiscal year ending May
31, 2001. Singer Lewak Greenbaum & Goldstein, LLP, was also engaged to audit our
financial statements for the fiscal year ended May 31, 2000, and each of the two
years in the period then ended, for inclusion in this registration statement.
The engagement of Singer Lewak Greenbaum & Goldstein LLP, follows the
replacement of Roy A. Cohen, C.P.A., who had been engaged to audit our financial
statements for the fiscal years ended May 31, 1985 through 2000. The audit
reports provided by Roy A. Cohen, C.P.A. for the prior two fiscal years did not
contain an adverse opinion or disclaimer of opinion; however, the audit reports
for such periods did contain a going concern qualification.
There were no past or present disagreements between us and Roy A. Cohen,
C.P.A., on any matter of accounting principles or practices, financial statement
disclosure or auditing, scope or procedure. There were no "reportable events"
(as such term is defined in Item 304 of Regulation S-K) that occurred within our
two most recent fiscal years nor any subsequent interim period preceding the
replacement of Roy A. Cohen, C.P.A.
During our two most recent fiscal years and any subsequent interim period
prior to the engagement of Singer, Lewak, Greenbaum & Goldstein LLP, neither we
nor anyone on our behalf consulted with Singer, Lewak, Greenbaum & Goldstein
LLP, regarding either (i) the application of accounting principles to a
specified transaction, either completed or proposed, or the type of audit
opinion that might be rendered on our financial statements or (ii) any matter
that was either the subject of a "disagreement" or a "reportable event."
Our financial statements for the fiscal year ended May 31, 2000, and each
of the two years in the period then ended, which are included in this
registration statement have been restated from those previously filed by us with
our Form 10-K filed with the Commission on August 21, 2000. We intend to amend
that filing to included the restated financial statements.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There were no transactions, or series of transactions, during the fiscal
years 2000 or 1999, nor are there any currently proposed transactions, or series
of transactions, to which we are a party, in which the amount exceeds $60,000,
and in which to our knowledge any director, executive officer, nominee, five
percent or greater shareholder, or any member of the immediate family of any of
the foregoing persons, has or will have any direct or indirect material interest
other than as described below.
Since our inception, we have received advances from Petro-Med, Inc., an
affiliate, to fund our working capital requirements. All though we did not
receive any advances during the fiscal years 2000 or 1999, we did accrue
interest each year of $309,000 and $283,000, for the years ended May 31, 2000
and 1999, respectively, on the balance of outstanding advances. Interest is
accrued at the rate of 9% per annum.
Pursuant to our option agreement dated February 3, 2000 with Immune Network
Research, Inc. ("IMM"), and the proposed worldwide (excluding the United States)
license agreement between our Company and IMM which we are currently
negotiating, we have agreed to grant an option to IMM to purchase 10,000,000
restricted shares of our common stock upon signing of the definitive license
agreement. The option, and underlying shares of common stock, will be issued to
IMM in consideration for analytic and development work to be performed by IMM to
develop new applications and new patent claims for our products. If the option
were exercised currently, the 10,000,000 shares of common stock would represent
approximately 7% of our total issued and outstanding shares.
We have also agreed to grant to IMM certain registration and information
rights with respect to the option (and to shares purchased upon exercise of the
option) issued to IMM. Subject to certain limitations, we are obligated to use
our best efforts to effect a registration of the shares to be purchased by IMM
upon exercise of the option upon two written request of IMM. We are also
obligated to include the shares, subject to certain limitations, in any
underwriting and in any other registration statement filed by us. The 10,000,000
shares are being registered pursuant to the registration statement of which this
prospectus is a part.
As previously discussed, we issued a warrant to Swartz Private Equity, LLC
to purchase 7,000,000 shares of our common stock as a condition to entering into
the investment agreement dated June 30, 2000.
MARKET INFORMATION
Our common stock is traded in the over-the-counter market and is quoted on
the Nasdaq Over-The-Counter Bulletin Board system under the symbol "MDCH.OB".
Prices reported represent prices between dealers, do not include markups,
markdowns or commissions and do not necessarily represent actual transactions.
The market for our shares has been sporadic and at times very limited.
The following table sets forth the high and low bid quotations for the
common stock for the fiscal years ended May 31, 2000 and 1999.
HIGH LOW
---- ---
Fiscal Year Ended May 31, 2000
First Quarter $0.02 $0.01
Second Quarter 0.08 0.01
Third Quarter 0.97 0.31
Fourth Quarter 0.44 0.27
Fiscal Year Ended May 31, 1999
First Quarter $0.03 $0.02
Second Quarter 0.02 0.02
Third Quarter 0.03 0.02
Fourth Quarter 0.04 0.01
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Our common stock is considered a penny stock and is, therefore, subject to
the Securities Enforcement Remedies and Penny Stock Reform Act of 1990. Penny
stock, as defined by the Act, is any equity security not traded on an exchange
or quoted on Nasdaq that has a market price of less than $5.00 per share. This
classification requires additional disclosure in connection with any trades
involving a stock defined as a penny stock (subject to certain exceptions),
including delivery, prior to any penny stock transaction, of a disclosure
schedule explaining the penny stock market and the associated risks.
Broker-dealers who recommend such low-priced securities to persons other than
established customers and accredited investors must satisfy special sales
requirements, including a requirement that they make an individualized written
suitability determination for the purchase and receive the purchaser's written
consent prior to the transaction.
On September 15, 2000, the closing bid price of our common stock was $0.265
and there were approximately 3000 shareholders of record, excluding stock held
in street name.
DIVIDEND POLICY
We have never declared cash dividends on our capital stock. We currently
intend to retain all available funds and any future earnings for use in the
operation and expansion of our business and do not anticipate paying any cash
dividends in the foreseeable future.
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PRINCIPAL STOCKHOLDERS
The following table sets forth, as of date of this prospectus, the stock
ownership of each officer and director of ours, of all officers and directors of
ours as a group, and of each person known by us to be a beneficial owner of 5%
or more of our common stock. Except as otherwise noted, each person listed below
is the sole beneficial owner of the shares and has sole investment and voting
power over such shares.
Name and Address Amount and Nature of Percentage of
of Beneficial Owner Beneficial Ownership Class
------------------- -------------------- -----
Petro-Med, Inc. 26,256,794 shares 19.2%
C/O Meditech
Gerald N. Kern 33,266,794 shares (1) 24.3%
10105 E. Via Linda,
No. 103
Scottsdale, AZ 85258
Steven I. Kern 2,500,000 shares (2) 1.8%
10105 E. Via Linda,
No. 103
Scottsdale, AZ 85258
Cynthia S. Kern 3,000,000 shares (3) 2.2%
10105 E. Via Linda,
No. 103
Scottsdale, AZ 85258
Lester Goldstein 1,050,000 shares (4) *
10105 E. Via Linda,
No. 103
Scottsdale, AZ 85258
Harry Hall 800,000 shares (5) *
10105 E. Via Linda,
No. 103
Scottsdale, AZ 85258
Immune Network Research, Inc. 10,000,000 shares(7) 7.3%
3650 Wesbrook Mall
Vancouver, Canada, BC V6S ZLZ
Swartz Private Equity, LLC 7,000,000 shares(8) 5.1%
200 Rosewell Summit
Suite 285
Roswell, Georgia 30076
All directors & officers 40,616,794 shares 29.7%
as a group (5 persons)
---------------
* Less than 1%.
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(1) Mr. Kern is the Chairman of the Board and Chief Executive Officer of
Petro-Med, Inc. and may be deemed the beneficial owner of the
26,256,794 shares owned by Petro-Med, Inc. Includes 1,500,000 shares
issuable upon exercise of outstanding stock options. Does not include
an aggregate of 2,250,000 shares of common stock held by Mr. Kern's
spouse and adult children. Mr. Kern disclaims beneficial ownership of
the shares held by such persons.
(2) Includes 2,500,000 shares issuable upon exercise of outstanding stock
options.
(3) Includes 1,000,000 shares issuable upon exercise of outstanding stock
options. Does not include an aggregate of 7,260,000 shares of common
stock held by Ms. Kern's spouse and adult children. Ms. Kern disclaims
beneficial ownership of the shares held by such persons.
(4) Includes 450,000 shares issuable upon exercise of outstanding stock
purchase warrants.
(5) Includes 450,000 shares issuable upon exercise of outstanding stock
purchase warrants.
(6) Includes 10,000,000 shares issuable upon exercise of the stock option
we will grant upon execution of our license agreement with Immune
Network Research, Inc.
(7) Includes 7,000,000 shares issuable upon exercise of the outstanding
warrant we issued to Swartz in connection with the Investment
Agreement.
Pursuant to the Investment Agreement, Swartz has the right to acquire up to
an additional 40,000,000 shares of our common stock under certain circumstances,
excluding certain warrants. It is expected that Swartz will not own beneficially
more than 9.9% of our outstanding common stock at any one time. Swartz will also
receive an amount of Purchase Warrants to purchase shares of our common stock
equal to 10% of the number of Put Shares purchased. See "Investment Agreement".
DESCRIPTION OF SECURITIES
The following summary description of our capital stock is a summary and is
qualified in its entirety by reference to our Articles of Incorporation, as
amended to date, and By-Laws and the terms and conditions of the Investment
Agreement. All material terms of these referenced documents are disclosed in
this document. Our authorized capital stock consists of 400,000,000 shares of
common stock, $.00001 par value per share, and 25,000,000 shares of preferred
stock, $.00001 par value per shares.
Common Stock
As of August 31, 2000, a total of 136,713,432 common shares were issued and
outstanding. The holders of common stock are entitled to one vote for each share
held. The affirmative vote of a majority of votes cast at a meeting which
commences with a lawful quorum is sufficient for approval of matters upon which
shareholders may or must vote, including the questions presented for approval or
ratification at the Annual Meeting. Common shares do not carry cumulative voting
rights, and holders of more than 50% of the common stock have the power to elect
all directors and, as a practical matter, to control the company. Holders of
common stock are not entitled to preemptive rights, and the common stock may
only be redeemed at our election.
After the satisfaction of requirements with respect to preferential
dividends, if any, holders of common stock are entitled to receive, pro rata,
dividends when and as declared by the board of directors out of funds legally
available therefor. Upon our liquidation, dissolution or winding-up, after
distribution in full of the preferential amount, if any, to be distributed to
holders of the preferred stock, holders of common stock are entitled to share
ratably in our assets legally available for distribution to our shareholders.
All outstanding shares of common stock are fully paid and non-assessable.
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Preferred Stock
We currently do not have any shares of preferred stock outstanding. Our
board of directors is authorized to issue up to 25,000,000 shares of preferred
stock, without any further action by the stockholders. The board of directors
may also divide any and all shares of preferred stock into series and fix and
determine the relative rights and preferences of the preferred stock, such as
the designation of series and the number of shares constituting such series,
dividend rights, redemption and sinking fund provisions, liquidation and
dissolution preferences, conversion or exchange rights and voting rights, if
any. Issuance of preferred stock by the board of directors will result in such
shares having dividend and/or liquidation preferences senior to the rights of
the holders of common stock and could dilute the voting rights of the holders of
common stock.
Dividends
We have not paid any cash dividends to date, and no cash dividends will be
declared or paid on the common shares in the foreseeable future. Payment of
dividends is solely at the discretion of our board of directors.
Stock Options
We do not currently have in place a formal employee stock option plan. From
time to time our Board of Directors has authorized the grant of stock options to
employees and other service providers. Such options do not qualify as "incentive
stock options" under Section 422 of the Internal Revenue Code of 1986, as
amended. As of August 31, 2000, the following options to purchase our common
stock were outstanding: (i) an option to purchase 2,500,000 shares of our common
stock at an exercise price of $0.05 per share, which will expire on May 1, 2007;
and (ii) options to purchase an aggregate of 2,500,000 shares of our common
stock at an exercise price of $0.21 per share, which will expire on May 1, 2007.
Warrants
As of August 31, 2000, the following warrants to purchase our common stock
were outstanding: (i) a warrant to purchase 7,000,000 shares of our common stock
at an exercise price of $0.33 per share, which will expire on May 20, 2005; (ii)
warrants to purchase an aggregate of 300,000 shares of our common stock at an
exercise price of $0.01 per share, which will expire on May 31, 2006; (iii)
warrants to purchase an aggregate of 50,000 shares of our common stock at an
exercise price of $0.05 per share, which will expire on May 1, 2007, and (iv)
warrants to purchase an aggregate of 1,600,000 shares of our common stock at an
exercise price of $0.21 per share, which will expire on May 1, 2007.
INDEMNIFICATION OF OFFICERS, DIRECTORS AND OTHERS
As permitted by applicable law, our By-Laws provide that we will indemnify
our officers, directors, employees, consultants and agents. This includes
indemnification against attorneys' fees and other expenses and liabilities they
incur to defend, settle or satisfy any civil or criminal action brought against
them arising out of their association with or activities on behalf of us.
However, they will not be indemnified if they are adjudged to have acted with
gross negligence, engaged in willful misconduct, knowingly violated the law,
breached their duty of loyalty or received improper personal benefit. We may
also bear the expenses of such litigation for any such persons upon their
promise to repay such sums if it is ultimately determined that they are not
entitled to indemnification. Such expenditures could be substantial and may not
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be recouped, even if we are so entitled. We have provided for indemnification
for liabilities arising under the Securities Act of 1933 as they may be
permitted to directors, officers or persons controlling us. The Securities and
Exchange Commission has informed us that such indemnification is against public
policy and may be unenforceable.
TRANSFER AGENT
American Securities Transfer & Trust, Inc., 12029 W. Alameda Parkway,
Lakewood, CO 80228, acts as our transfer agent and registrar for our common
stock. Their telephone number is (303) 984-1062.
LEGAL MATTERS
Jeffers, Shaff, & Falk, LLP, , Irvine, California 92612 has passed on the
validity of the common stock offered by us.
EXPERTS
Our financial statements as of May 31, 2000 and May 31, 1999, and for each
of the years in the two year period ended May 31, 2000, have been included in
this Prospectus and in the Registration Statement in reliance on the report,
which contains an explanatory paragraph relating to our ability to continue as a
going-concern as described in Note 2 to the financial statements, of Singer,
Lewack Greenbaum & Goldstein LLP, independent accountants, given on authority of
said firm as experts in auditing and accounting.
ADDITIONAL INFORMATION
We have filed with the Commission a registration statement on Form SB-2
under the Securities Act with respect to the common stock offered hereby. This
prospectus does not contain all of the information set forth in the rules and
regulations of the Commission. For further information with respect to Meditech
Pharmaceuticals, Inc. and this offering, we refer you to the registration
statement and exhibits filed as part of it. You may inspect the registration
statement, including the exhibits thereto, without charge at the Public
Reference Room of the Commission at 450 Fifth Street, N.W., Judiciary Plaza,
Washington, D.C. 20549 and at the regional offices of the Commission located at
7 World Trade Center, 13th Floor, New York, New York. You may obtain copies of
all or any portion of the registration statement from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Judiciary Plaza,
Washington, D.C. 20549, upon payment of the prescribed fees. You may obtain
information on the operation of the Public Reference Room by calling the
Commission at 1-800-SEC-0330. You may also access such material electronically
by means of the Commissions home page on the Internet at http://www.sec.gov.
Descriptions contained in this prospectus as to the contents of an contract or
other document filed as an exhibit to the registration statement are not
necessarily complete and each such description is qualified by reference to such
contract or document.
We mail a copy of our audited Annual Report on Form 10-KSB along with a
proxy statement to our shareholders prior to our annual meeting.
30
<PAGE>
MEDITECH PHARMACEUTICALS, INC. AND SUBSIDIARY
(DEVELOPMENT STAGE COMPANIES)
CONTENTS
May 31, 2000
--------------------------------------------------------------------------------
Page
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS F-2
FINANCIAL STATEMENTS
Consolidated Balance Sheet F-3 - F-4
Consolidated Statements of Operations F-5
Consolidated Statements of Stockholders' Deficit F-6 - F-11
Consolidated Statements of Cash Flows F-12 - F-13
Notes to Consolidated Financial Statements F-14 - F-30
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Stockholders
Meditech Pharmaceuticals, Inc.
We have audited the accompanying restated consolidated balance sheet of Meditech
Pharmaceuticals, Inc. and subsidiary (development stage companies) as of May 31,
2000, and the related restated consolidated statements of operations,
stockholders' deficit, and cash flows for each of the two years in the period
ended May 31, 2000, and for the period from May 4, 1982 (inception) to May 31,
2000. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our 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 financial position of Meditech
Pharmaceuticals, Inc. and subsidiary as of May 31, 2000, and the results of
their consolidated operations and their consolidated cash flows for each of the
two years in the period ended May 31, 2000, and for the period from May 4, 1982
(inception) to May 31, 2000 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. During the years ended May
31, 2000 and 1999, the Company incurred net losses of $623,200 and $767,400,
respectively. In addition, the Company's accumulated deficit was $15,524,700 as
of May 31, 2000. Recovery of the Company's assets is dependent upon future
events, the outcome of which is indeterminable. In addition, successful
completion of the Company's transition, ultimately, to the attainment of
profitable operations is dependent upon obtaining adequate financing to fulfill
its development activities and achieving a level of sales adequate to support
the Company's cost structure. These factors, among others, as discussed in Note
3 to the consolidated financial statements, raise substantial doubt about the
Company's ability to continue as a going concern. Management's plans in regard
to these matters are also described in Note 3. The consolidated financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
SINGER LEWAK GREENBAUM & GOLDSTEIN LLP
Los Angeles, California
September 8, 2000
F-2
<PAGE>
MEDITECH PHARMACEUTICALS, INC. AND SUBSIDIARY
(DEVELOPMENT STAGE COMPANIES)
CONSOLIDATED BALANCE SHEET
May 31, 2000
--------------------------------------------------------------------------------
ASSETS
(restated)
Current assets
Cash $114,800
Prepaid expenses 600
--------
Total current assets 115,400
Other assets 2,100
--------
Total assets $117,500
========
The accompanying notes are an integral part of
these financial statements.
F-3
<PAGE>
MEDITECH PHARMACEUTICALS, INC. AND SUBSIDIARY
(DEVELOPMENT STAGE COMPANIES)
CONSOLIDATED BALANCE SHEET
May 31, 2000
--------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' DEFICIT
(restated)
Current liabilities
Accounts payable and accrued expenses $ 1,502,500
Accrued compensation 2,787,100
Advances from affiliates 3,647,300
Loan payable 71,000
Deferred revenue 100,000
------------
Total current liabilities 8,107,900
------------
Minority interest in consolidated subsidiary 191,300
------------
Commitments and contingencies
Stockholders' deficit
Preferred stock, $0.001 par value
25,000,000 shares authorized
none issued and outstanding --
Common stock, $0.001 par value
400,000,000 shares authorized
136,713,432 shares issued and outstanding 136,700
Treasury stock, 8,000,000 shares at cost --
Subscriptions receivable (10,000)
Additional paid-in capital 7,216,300
Accumulated deficit (15,524,700)
------------
Total stockholders' deficit (8,181,700)
------------
Total liabilities and stockholders' deficit $ 117,500
============
The accompanying notes are an integral part of
these financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
MEDITECH PHARMACEUTICALS, INC. AND SUBSIDIARY
(DEVELOPMENT STAGE COMPANIES)
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended May 31, 2000 and 1999 and
for the Period from May 4, 1982 (Inception) to May 31, 2000
-------------------------------------------------------------------------------------------------------------
For the
Period from
May 4,
For the Year Ended 1982
May 31, (Inception)
------------------------------------- to May 31,
2000 1999 2000
------------- ------------- -------------
(restated) (restated) (restated)
<S> <C> <C> <C>
Revenue $ 25,000 $ -- $ 25,000
------------- ------------- -------------
Operating expenses
Research and development 1,200 -- 1,838,300
General and administrative 338,000 484,400 11,556,100
Aborted stock offering costs -- -- 325,400
------------- ------------- -------------
Total operating expenses 339,200 484,400 13,719,800
------------- ------------- -------------
Loss before other income (expense) (314,200) (484,400) (13,694,800)
------------- ------------- -------------
Other income (expense)
Interest expense (309,000) (283,000) (2,533,800)
Interest income -- -- 298,500
Other income, net -- -- 75,600
------------- ------------- -------------
Total other income (expense) (309,000) (283,000) (2,159,700)
------------- ------------- -------------
Loss before minority interest in losses
of subsidiary (623,200) (767,400) (15,854,500)
Minority interest in losses of subsidiary -- -- 329,800
------------- ------------- -------------
Net loss $ (623,200) $ (767,400) $ (15,524,700)
============= ============= =============
Basic and diluted loss per share $ (0.01) $ (0.01) $ (0.17)
============= ============= =============
Weighted-average shares outstanding 126,071,843 123,264,596 93,327,166
============= ============= =============
The accompanying notes are an integral part
of these financial statements.
F-5
<PAGE>
MEDITECH PHARMACEUTICALS, INC. AND SUBSIDIARY
(DEVELOPMENT STAGE COMPANIES)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
For the Period from May 4, 1982 (Inception) to May 31, 2000
------------------------------------------------------------------------------------------------------------------------------------
Deficit
Accumulated
Common Stock Treasury Stock Additional During the
------------------------- ----------------- Subscriptions Paid-In Development
Shares Amount Shares Amount Receivable Capital Stage Total
------ ------ ------ ------ ---------- ------- ------------ -----------
Initial capitalization 48,000,000 $ 48,000 $ $ $ 529,400 $ $ 577,400
Net loss
(1,022,600) (1,022,600)
----------- ----------- -------- -------- ----------- ----------- ----------- -----------
Balance May 31, 1983 48,000,000 48,000 -- -- -- 529,400 (1,022,600) (445,200)
Private placement
of stock 4,715,000 4,700 584,700 589,400
Initial public
offering 13,200,000 13,200 3,946,800 3,960,000
Offering costs (935,435) (935,435)
Cash on sale of
common stock
to officer 50,000 50 7,450 7,500
Compensation on
stock issued
to officer 50,000 50 20,500 20,550
Net loss
(1,338,400) (1,338,400)
----------- ----------- -------- -------- ----------- ----------- ----------- -----------
Balance May 31, 1984 66,015,000 66,000 -- -- -- 4,153,415 (2,361,000) 1,858,415
Net loss (1,794,100) (1,794,100)
----------- ----------- -------- -------- ----------- ----------- ----------- -----------
Balance May 31, 1985 66,015,000 66,000 -- -- -- 4,153,415 (4,155,100) 64,315
Issuance of stock for
subscriptions to
officer 8,000,000 8,000 (1,440,000) 1,440,000 8,000
Issuance of options for
services to consultants 160,200 160,200
Net loss (1,533,800) (1,533,800)
----------- ----------- -------- -------- ----------- ----------- ----------- -----------
The accompanying notes are an integral part
of these financial statements.
F-6
<PAGE>
MEDITECH PHARMACEUTICALS, INC. AND SUBSIDIARY
(DEVELOPMENT STAGE COMPANIES)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
For the Period from April 1, 1997 (Inception) to December 31, 1999
------------------------------------------------------------------------------------------------------------------------------------
Deficit
Accumulated
Common Stock Treasury Stock Additional During the
------------------------- ----------------- Subscriptions Paid-In Development
Shares Amount Shares Amount Receivable Capital Stage Total
------ ------ ------ ------ ---------- ------- ------------ -----------
Balance May 31, 1986 74,015,000 $ 74,000 -- $ -- $(1,440,000) $ 5,753,615 $(5,688,900) $(1,301,285)
Conversion of advances
from affiliates 10,000,000 10,000 549,900 559,900
Rescission of common
stock issued to
officer and held in
treasury 8,000,000 1,440,000 (1,440,000)
Issuance of shares
for services rendered 310,000 300 77,900 78,200
Issuance of Viral
Research Technologies,
Inc. common
stock for services 296,700 296,700
Issuance of Viral
Research Technologies,
Inc. options
for services 190,400 190,400
Issuance of options
for services 42,200 42,200
Net loss -- -- -- -- -- -- (1,706,300) (1,706,300)
----------- --------- ----------- --------- ----------- ----------- ----------- -----------
Balance, May 31, 1987 84,325,000 84,300 8,000,000 -- -- 5,470,715 (7,395,200) (1,840,185)
Issuance of shares to
consultants for services 1,540,000 1,500 125,800 127,300
Stock options exercised 366,000 400 9,500 9,900
The accompanying notes are an integral part
of these financial statements.
F-7
<PAGE>
MEDITECH PHARMACEUTICALS, INC. AND SUBSIDIARY
(DEVELOPMENT STAGE COMPANIES)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
For the Period from April 1, 1997 (Inception) to December 31, 1999
------------------------------------------------------------------------------------------------------------------------------------
Deficit
Accumulated
Common Stock Treasury Stock Additional During the
------------------------- ----------------- Subscriptions Paid-In Development
Shares Amount Shares Amount Receivable Capital Stage Total
------ ------ ------ ------ ---------- ------- ------------ --------
Stock options issued to
employees and consultants $ -- $ -- $ $ 13,800 $ -- $ 13,800
Issuance of common stock
of subsidiary 290,000 290,000
Net loss (880,200) (880,200)
----------- ----------- ----------- ----------- ---- ---------- --------- ----------
Balance, May 31, 1988 86,231,000 86,200 8,000,000 -- -- 5,909,815 (8,275,400) (2,279,385)
Common stock issued
to officer 8,000,000 8,000 72,000 80,000
Stock options issued
to employees and
consultants 15,600 15,600
Sale of common stock 2,756,832 2,800 131,600 134,400
Net loss -- -- -- -- -- -- (641,400) (641,400)
----------- ----------- ----------- ----------- ---- ---------- ---------- ----------
Balance, May 31, 1989 96,987,832 97,000 8,000,000 -- -- 6,129,015 (8,916,800) (2,690,785)
Sale of common stock 100,000 100 3,200 3,300
Stock options issued
to employees 7,300 7,300 7,300
Net loss -- -- -- -- -- -- (522,000) (522,000)
----------- ----------- ----------- ----------- ---- ---------- --------- ----------
Balance, May 31, 1990 97,087,832 97,100 8,000,000 -- -- 6,139,515 (9,438,800) (3,202,185)
Stock issued for services 2,750,000 2,800 38,300 41,100
Net loss -- -- -- -- -- -- (479,100) (479,100)
----------- ----------- ----------- ----------- ---- ---------- --------- ----------
The accompanying notes are an integral part
of these financial statements.
F-8
<PAGE>
MEDITECH PHARMACEUTICALS, INC. AND SUBSIDIARY
(DEVELOPMENT STAGE COMPANIES)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
For the Period from April 1, 1997 (Inception) to December 31, 1999
------------------------------------------------------------------------------------------------------------------------------------
Deficit
Accumulated
Common Stock Treasury Stock Additional During the
------------------------- ----------------- Subscriptions Paid-In Development
Shares Amount Shares Amount Receivable Capital Stage Total
------ ------ ------ ------ ---------- ------- ------------ --------
Balance, May 31, 1991 99,837,832 $ 99,900 8,000,000 $ $ -- $ 6,177,815 $(9,917,900) $ (3,640,185)
Sale of common stock 2,000,000 2,000 29,400 31,400
Net loss -- -- -- -- -- -- (483,100) (483,100)
------------ ---------- ---------- --------- --------- ------------ ------------ ------------
Balance, May 31, 1992 101,837,832 101,900 8,000,000 -- -- 6,207,215 (10,401,000) (4,091,885)
Net loss -- -- -- -- -- -- (449,400) (449,400)
------------ ---------- ---------- --------- --------- ------------ ------------ ------------
Balance, May 31, 1993 101,837,832 101,900 8,000,000 -- -- 6,207,215 (10,850,400) (4,541,285)
Stock issued for
services 7,385,300 7,400 208,400 215,800
Net loss -- -- -- -- -- -- (753,900) (753,900)
------------ ---------- ---------- --------- --------- ------------ ------------ ------------
Balance, May 31, 1994
(restated) 109,223,132 109,300 8,000,000 -- -- 6,415,615 (11,604,300) (5,709,385)
Committed stock for
services 13,600 13,600
Net loss -- -- -- -- -- -- (515,600) (515,600)
------------ ---------- ---------- --------- --------- ------------ ------------ ------------
Balance, May 31, 1995
(restated) 109,223,132 109,300 8,000,000 -- -- 6,429,215 (12,119,900) (5,675,385)
Net loss -- -- -- -- -- -- (501,600) (501,600)
------------ ---------- ---------- --------- --------- ------------ ------------ ------------
Balance, May 31, 1996
(restated) 109,223,132 109,300 8,000,000 -- -- 6,429,215 (12,621,500) (6,082,985)
The accompanying notes are an integral part
of these financial statements.
F-9
<PAGE>
MEDITECH PHARMACEUTICALS, INC. AND SUBSIDIARY
(DEVELOPMENT STAGE COMPANIES)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
For the Period from April 1, 1997 (Inception) to December 31, 1999
------------------------------------------------------------------------------------------------------------------------------------
Deficit
Accumulated
Common Stock Treasury Stock Additional During the
------------------------- ----------------- Subscriptions Paid-In Development
Shares Amount Shares Amount Receivable Capital Stage Total
------ ------ ------ ------ ---------- ------- ------------ --------
Stock issued for
services 15,340,300 $ 15,300 $ $ 412,000 $ $ 427,300
Net loss -- -- -- -- -- -- (957,400) (957,400)
------------ ---------- ---------- --------- --------- ------------ ------------ ------------
Balance, May 31, 1997
(restated) 124,563,432 124,600 8,000,000 -- -- 6,841,215 (13,578,900) (6,613,085)
Net loss -- -- -- -- -- -- (555,200) (555,200)
------------ ---------- ---------- --------- --------- ------------ ------------ ------------
Balance, May 31, 1998
(restated) 124,563,432 124,600 8,000,000 -- -- 6,841,215 (14,134,100) (7,168,285)
Stock issued to
employees 3,500,000 3,500 120,000 123,500
Stock issued to
vendors for
services 1,300,000 1,300 51,700 53,000
Net loss -- -- -- -- -- -- (767,400) (767,400)
------------ ---------- ----------- --------- -------- ------------ ------------ -----------
Balance, May 31, 1999
(restated) 129,363,432 129,400 8,000,000 -- -- 7,012,915 (14,901,500) (7,759,185)
Stock issued to
employees
as compensation 450,000 400 10,850 11,250
Stock issued to
vendors for
services 1,400,000 1,400 73,600 75,000
Exercise of options
for accrued
compensation 5,000,000 5,000 45,000 50,000
The accompanying notes are an integral part
of these financial statements.
F-10
<PAGE>
MEDITECH PHARMACEUTICALS, INC. AND SUBSIDIARY
(DEVELOPMENT STAGE COMPANIES)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
For the Period from April 1, 1997 (Inception) to December 31, 1999
------------------------------------------------------------------------------------------------------------------------------------
Deficit
Accumulated
Common Stock Treasury Stock Additional During the
------------------------- ----------------- Subscriptions Paid-In Development
Shares Amount Shares Amount Receivable Capital Stage Total
------ ------ ------ ------ ---------- ------- ------------ --------
Exercise of options
for subscriptions
receivable 500,000 $ 500 $ (10,000) $ 9,500 $ $ --
Stock options
issued to
consultants 29,000 29,000
Stock options
issued to
employees 35,435 35,435
Net loss -- -- -- -- -- -- (623,200) (623,200)
------------ ---------- ---------- --------- --------- ------------ ------------ ------------
Balance, May 31, 2000
(restated) 136,713,432 $ 136,700 8,000,000 $ -- $ (10,000) $ 7,216,300 $(15,524,700) $ (8,181,700)
============ ========== ========== ========= ========= ============ ============ ============
The accompanying notes are an integral part
of these financial statements.
F-11
<PAGE>
MEDITECH PHARMACEUTICALS, INC. AND SUBSIDIARY
(DEVELOPMENT STAGE COMPANIES)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended May 31, 2000 and 1999 and
for the Period from May 4, 1982 (Inception) to May 31, 2000
-------------------------------------------------------------------------------------------------------------------------
For the
Period from
May 4,
For the Year Ended 1982
May 31, (Inception)
---------------------------------- to May 31,
2000 1999 2000
------------- ------------ -------------
(restated) (restated) (restated)
Cash flows from operating activities
Net loss $ (623,200) $ (767,400) $(15,524,700)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities
Depreciation and amortization -- -- 135,600
Warrants and options issued to employees and
vendors 86,200 -- 775,100
Minority interest in losses of subsidiary -- -- (329,800)
Stock issued to employees and vendors 114,500 176,500 1,267,300
Accrued interest on advances from affiliates 309,000 283,000 2,533,800
Increase in
Prepaid expenses -- -- (600)
Other assets (2,100) -- (2,100)
Increase in
Accounts payable and accrued expenses 53,700 51,000 1,502,500
Accrued compensation 70,100 240,800 2,787,100
Deferred revenue 100,000 -- 100,000
------------ ------------ ------------
Net cash provided by (used in) operating activities 108,200 (16,100) (6,755,800)
------------ ------------ ------------
Cash flows from investing activities
Purchase of furniture and equipment -- -- (135,600)
------------ ------------ ------------
Net cash used in investing activities -- -- (135,600)
------------ ------------ ------------
Cash flows from financing activities
Proceeds from advances from affiliates, net 6,600 16,100 2,250,800
Proceeds from loan payable -- -- 71,000
Proceeds from sale of stock, net -- -- 4,684,400
------------ ------------ ------------
Net cash provided by financing activities 6,600 16,100 7,006,200
------------ ------------ ------------
The accompanying notes are an integral part
of these financial statements.
F-12
<PAGE>
MEDITECH PHARMACEUTICALS, INC. AND SUBSIDIARY
(DEVELOPMENT STAGE COMPANIES)
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
For the Years Ended May 31,2000 and 1999 and
a for the Period from May 4, 1982 (Inception) to May 31, 2000
----------------------------------------------------------------------------------------------------------------------------
For the
Period from
May 4,
For the Year Ended 1982
May 31, (Inception)
---------------------------------- to May 31,
2000 1999 2000
------------- ------------ ---------
(restated) (restated) (restated)
Net increase in cash $ 114,800 $ -- $114,800
Cash, beginning of period -- -- --
------------- ------------- --------
Cash, end of period $ 114,800 $ -- $114,800
============= ============= ========
Supplemental disclosures of cash flow information
Interest paid $ -- $ -- $ --
============= ============= ========
Income taxes paid $ -- $ -- $ --
============= ============= ========
The accompanying notes are an integral part
of these financial statements.
F-13
</TABLE>
<PAGE>
MEDITECH PHARMACEUTICALS, INC. AND SUBSIDIARY
(DEVELOPMENT STAGE COMPANIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 31, 2000
--------------------------------------------------------------------------------
NOTE 1 - DESCRIPTION OF BUSINESS
Meditech Pharmaceuticals, Inc. ("Meditech") is a drug development company,
which is focused in the areas of research, development, and marketing in
the biomedical industry, with an emphasis on anti-infective drugs. Meditech
was incorporated in Nevada on March 21, 1983 and completed its initial
public offering in August 1983. Since then, it has been engaged in research
and development activities associated with bringing its products to market.
NOTE 2 - RESTATEMENTS
Shares Issued and Outstanding Restatement
-----------------------------------------
The Company has restated its prior period financial statements for certain
adjustments related to accounting for shares issued during the years ended
May 31, 1994 through May 31, 2000. The Company had recorded certain stock
grants to consultants that were not transacted during the years ended May
31, 1995 and 1994. In addition, the Company incorrectly recorded the
acquisition of 8,000,000 shares of common stock into treasury as a
retirement of those shares. The resulting misstatements affect shares
outstanding in those periods as follows:
Common
Shares Common
Outstanding, Shares
Year Ending as Previously Outstanding,
May 31, Reported as Corrected
-------------- --------------- ------------
(in 000s) (in 000s)
1994 102,593 109,223
1995 103,681 109,223
1996 103,681 109,223
1997 119,016 124,563
1998 119,016 124,563
1999 123,816 129,363
2000 131,166 136,713
F-14
<PAGE>
MEDITECH PHARMACEUTICALS, INC. AND SUBSIDIARY
(DEVELOPMENT STAGE COMPANIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 31, 2000
--------------------------------------------------------------------------------
NOTE 2 - RESTATEMENTS (Continued)
Stock and Options Issued to Employees and Consultants
-----------------------------------------------------
During the years ended May 31, 2000 and 1999, the Company incorrectly
recorded the fair market value of its shares and stock options issued to
employees and consultants. These changes have been corrected to reflect the
appropriate values. Total adjustments and their relative impact on the
Company's net loss are as follows:
Adjustment
for Corrected
Values
Net Loss, Attributed to
Year Ending as Previously Stock-Based Net Loss,
May 31, Reported Compensation as Corrected
------- -------- ------------ ------------
1999 $ (1,002,300) $ 379,100 $ (623,200)
2000 $ (721,500) $ (45,900) $ (767,400)
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
---------------------------
The consolidated financial statements include the accounts of Meditech and
its 37% owned and controlled subsidiary Viral Research Technologies, Inc.
("Viral") (collectively, the "Company"). All significant intercompany
transactions and balances have been eliminated in consolidation.
Basis of Presentation
---------------------
The accompanying consolidated financial statements have been prepared in
conformity with generally accepted accounting principles, which contemplate
continuation of the Company as a going concern. The Company incurred net
losses of $623,200 and $767,400 during the years ended May 31, 2000 and
1999, respectively. In addition, the Company had an accumulated deficit of
$15,524,700 as of May 31, 2000. Management recognizes that the Company must
generate additional resources and the eventual achievement of sustained
profitable operations. Management's plans include obtaining additional
capital through equity financing and the extension of existing debt. The
consolidated financial statements do not include any adjustments that might
be necessary if the Company is unable to continue as a going concern.
F-15
<PAGE>
MEDITECH PHARMACEUTICALS, INC. AND SUBSIDIARY
(DEVELOPMENT STAGE COMPANIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 31, 2000
--------------------------------------------------------------------------------
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Development Stage Enterprise
----------------------------
The Company is a development stage company as defined in Statement of
Financial Accounting Standards ("SFAS") No. 7, "Accounting and Reporting by
Development Stage Enterprises." The Company is devoting substantially all
of its present efforts to establish a new business, and its planned
principal operations have not yet commenced. All losses accumulated since
inception have been considered as part of the Company's development stage
activities.
Estimates
---------
In preparing financial statements in conformity with generally accepted
accounting principles, management makes 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 and Cash Equivalents
-------------------------
For purposes of the statements of cash flows, the Company considers all
highly liquid investments purchased with original maturity of three months
or less to be cash equivalents.
Offering Costs
--------------
Offering costs arose from warrants issued to the underwriter currently
involved with offerings of the Company's securities. Such costs are offset
against the proceeds of such offerings upon their successful completion and
are charged to operations in the event the offering is not successful.
Revenue
-------
Revenue represents license fees that are recognized when earned over the
period of the applicable license agreement.
Impairment of Long-Lived Assets
-------------------------------
The Company reviews its long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may
not be recoverable. Recoverability of assets to be held and used is
measured by a comparison of the carrying amount of the assets to future net
cash flows expected to be generated by the assets. If the assets are
considered to be impaired, the impairment to be recognized is measured by
the amount by which the carrying amount exceeds the fair value of the
assets. To date, no impairment has occurred.
F-16
<PAGE>
MEDITECH PHARMACEUTICALS, INC. AND SUBSIDIARY
(DEVELOPMENT STAGE COMPANIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 31, 2000
--------------------------------------------------------------------------------
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Income Taxes
------------
The Company utilizes SFAS No. 109, "Accounting for Income Taxes," which
requires the recognition of deferred tax assets and liabilities for the
expected future tax consequences of events that have been included in the
financial statements or tax returns. Under this method, deferred income
taxes are recognized for the tax consequences in future years of
differences between the tax bases of assets and liabilities and their
financial reporting amounts at each period end based on enacted tax laws
and statutory tax rates applicable to the periods in which the differences
are expected to affect taxable income. Valuation allowances are
established, when necessary, to reduce deferred tax assets to the amount
expected to be realized.
Fair Value of Financial Instruments
-----------------------------------
The Company measures its financial assets and liabilities in accordance
with generally accepted accounting principles. For certain of the Company's
financial instruments, including cash, accounts payable and accrued
expenses, and accrued compensation, the carrying amounts approximate fair
value due to their short maturities.
Concentrations of Credit Risk
-----------------------------
The financial instrument which potentially subjects the Company to
concentrations of credit risk is cash. The Company places its cash with
high quality financial institutions, and at times it may exceed the Federal
Deposit Insurance Corporation $100,000 insurance limit. As of May 31, 2000,
uninsured portions of cash amounted to $15,000.
Loss per Share
--------------
The Company utilizes SFAS No. 128, "Earnings per Share." Basic loss per
share is computed by dividing loss available to common stockholders by the
weighted-average number of common shares outstanding. Diluted loss per
share is computed similar to basic loss per share except that the
denominator is increased to include the number of additional common shares
that would have been outstanding if the potential common shares had been
issued and if the additional common shares were dilutive. For the years
ended May 31, 2000 and 1999, the Company incurred net losses; therefore,
basic and diluted loss per share are the same.
Reclassifications
-----------------
Certain reclassifications have been made to the May 31, 1999 financial
statements to conform with the May 31, 2000 presentation.
F-17
<PAGE>
MEDITECH PHARMACEUTICALS, INC. AND SUBSIDIARY
(DEVELOPMENT STAGE COMPANIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 31, 2000
--------------------------------------------------------------------------------
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Comprehensive Income
--------------------
For the year ended May 31, 2000, the Company adopted SFAS No. 130,
"Reporting Comprehensive Income." This statement establishes standards for
reporting comprehensive income and its components in a financial statement.
Comprehensive income as defined includes all changes in equity (net assets)
during a period from non-owner sources. Examples of items to be included in
comprehensive income, which are excluded from net income, include foreign
currency translation adjustments and unrealized gains and losses on
available-for-sale securities. Comprehensive income is not presented in the
Company's financials statements since the Company did not have any of the
items of comprehensive income in any period presented.
Recently Issued Accounting Pronouncements
-----------------------------------------
In June 1999, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 136, "Transfer of Assets to a Not-for-Profit Organization or Charitable
Trust that Raises or Holds Contributions for Others." This statement is not
applicable to the Company.
In June 1999, the FASB issued SFAS No. 137, "Accounting for Derivative
Instruments and Hedging Activities." The Company does not expect adoption
of SFAS No. 137 to have a material impact, if any, on its financial
position or results of operations.
In June 2000, the FASB issued SFAS No. 138, "Accounting for Certain
Instruments and Certain Hedging Activities." This statement is not
applicable to the Company.
In June 2000, the FASB issued SFAS No. 139, "Rescission of FASB Statement
No. 53 and Amendments to Statements No. 63, 89, and 121." This statement is
not applicable to the Company.
NOTE 4 - MINORITY INTEREST IN CONSOLIDATED SUBSIDIARY
On January 22, 1987, the Company and a 50% investor formed VRT, Inc.
("VRT"), a Nevada corporation, for the purposes of developing a marketing
strategy for its products. On January 26, 1987, the Company granted certain
exclusive rights to VRT to market and distribute the Company's products.
The agreement expired on November 30, 1996.
On April 30, 1987, pursuant to a merger agreement, VRT was combined with
Viral, a Nevada corporation and an inactive public shell, which became the
surviving corporation. In the transaction, Viral issued 15,000,000 shares
to the Company and its investor for all outstanding shares of VRT. After
the merger, the Company owned 37% of Viral. Viral has been consolidated as
it is effectively controlled by the Company.
F-18
<PAGE>
MEDITECH PHARMACEUTICALS, INC. AND SUBSIDIARY
(DEVELOPMENT STAGE COMPANIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 31, 2000
--------------------------------------------------------------------------------
NOTE 4 - MINORITY INTEREST IN CONSOLIDATED SUBSIDIARY (Continued)
At May 31, 2000, the assets and liabilities of Viral were as follows:
Assets
Due from Meditech $ 400,000
-------------
Total assets $ 400,000
=============
Liabilities
Accounts payable $ 5,000
Due to Meditech 129,000
-------------
Total liabilities 134,000
Equity 266,000
-------------
Total liabilities and equity $ 400,000
=============
Amounts recorded in the minority interest on the accompanying balance sheet
represent the pro-rata portion of Viral's equity attributable to minority
stockholders.
NOTE 5 - COMMITMENTS AND CONTINGENCIES
Leases
------
Currently, the Company uses its operating facilities, which are provided by
its Chief Executive Officer, without a lease and without payment. There is
no guarantee the officer will be willing to provide these facilities in the
future.
Employment Agreements
---------------------
The Company entered into an employment agreement dated as of February 3,
2000 with its Chief Executive Officer, contingent upon completion of the
offering discussed in Note 7. The agreement is for a three-year term and
provides for a base salary of $150,000 per annum for the first year with an
increase at least equal to the consumer price index over each succeeding
year. The agreement provides for a severance payment including the unearned
salary for the remainder of the contract plus any prorated earned bonuses
in the event of termination without cause or upon change of control.
Additionally, the agreement grants options to purchase 15,950,000 shares of
common stock exercisable at various prices and vesting over the course of
his employment agreement.
F-19
<PAGE>
MEDITECH PHARMACEUTICALS, INC. AND SUBSIDIARY
(DEVELOPMENT STAGE COMPANIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 31, 2000
--------------------------------------------------------------------------------
NOTE 5 - COMMITMENTS AND CONTINGENCIES (Continued)
Employment Agreements (Continued)
---------------------
The Company entered into an employment agreement dated as of February 3,
2000 with its Chief Financial Officer, contingent upon completion of the
offering discussed in Note 7. The agreement is for a three-year term
providing for a base salary of $120,000 per annum for the first year and
not less than $120,000 per annum during the second and third years of the
agreement. In addition, the officer will be granted a total of 13,950,000
warrants exercisable at various prices and vesting over the course of the
agreement. The agreement provides for a severance payment including the
remainder of the base salary due under the agreement if the officer is
discharged without cause or if the officer is terminated within 12 months
of a change of control of the Company. The severance payment will be equal
to 12 months of the current salary.
Litigation
----------
The Company may become involved in various legal proceedings and claims
which arise in the ordinary course of its business. Management does not
believe that these matters will have a material adverse effect on the
Company's consolidated position or results of operations.
License Agreement
-----------------
On February 3, 2000, the Company received $25,000 from Immune Network
Research, Ltd. ("INR"), a Canadian pharmaceutical development company under
a letter of intent. The payment was made for a one-year irrevocable option
granting the right to negotiate for an exclusive license for pharmaceutical
applications worldwide outside of the United States. The Company then
received an additional $100,000 from INR in anticipation of a definitive
agreement. Under the terms of the letter, if an agreement is reached, the
Company will issue an option to INR for up to 10,000,000 shares of common
stock, under terms still in negotiation. In return, the Company will
receive royalties equal to 7% of net sales for all MTCH-24(TM) products
sold and 4% of net sales for all Viraplex(R) products sold by INR.
NOTE 6 - STOCKHOLDERS' DEFICIT
Preferred Stock
---------------
The Company is authorized to issue 25,000,000 shares of its $0.001 par
value preferred stock. The Company has not issued any preferred stock to
date.
Common Stock
------------
On June 30, 1983, the Company sold 4,715,000 shares of its common stock at
$0.125 per share in a private offering. Total gross proceeds received from
the private offering, net of $250,000 of cancelled stock subscriptions,
were $589,400.
F-20
<PAGE>
MEDITECH PHARMACEUTICALS, INC. AND SUBSIDIARY
(DEVELOPMENT STAGE COMPANIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 31, 2000
--------------------------------------------------------------------------------
NOTE 6 - STOCKHOLDERS' DEFICIT (Continued)
Common Stock (Continued)
------------
In July and August 1983, the Company sold 12,000,000 and 1,200,000 shares,
respectively, of its common stock at $0.30 per share in a public offering.
Total gross proceeds received from the offering were $3,960,000.
In December 1983, the Company sold 50,000 shares of common stock to an
officer at $0.15 per share for $7,500 and recorded $6,500 in compensation,
representing the difference between the price paid and the discounted
market value of the stock at the date of issuance.
In February 1984, the Company issued 50,000 shares of common stock to a
director for services. The Company recorded $14,000 in compensation,
representing the market value of the services at the date of issue.
On June 1, 1984, the Company issued 100,000 shares of common stock to its
former Chief Financial Officer for services rendered during the six-month
period ended May 31, 1984. Subsequently, this grant of shares was
rescinded, and an option to purchase common stock was issued.
In October 1985, the Company sold 8,000,000 shares of its common stock to
its Chief Executive Officer in exchange for the settlement of an $8,000
salary obligation and a note in the amount of $1,440,000 from the officer.
In December 1986, the note was cancelled and the 8,000,000 shares taken
into treasury. At that date, the officer received an option to purchase
8,000,000 shares of the Company's common stock for $0.01 per share. This
option was exercised in March 1989 for $80,000 in cash.
In June 1986, the Company converted advances of $559,900 from Petro-Med,
Inc. into 10,000,000 shares of common stock of the Company.
On April 7, 1987, the Company issued 210,000 shares of common stock to two
consultants for services rendered. The Company recorded $52,200 in
compensation, representing the discounted market value of the stock at the
date of issuance.
On April 16, 1987, the Company issued 100,000 shares of common stock to
three consultants for services rendered. The Company recorded $26,000 in
compensation, representing the discounted market value of the stock at the
date of issuance.
During the year ended May 31, 1987, Viral issued 350,000 shares of its
common stock to consultants for services valued at $296,700.
On June 11, 1987, the Company issued 100,000 shares of common stock to a
consultant for services rendered valued at $12,200.
F-21
<PAGE>
MEDITECH PHARMACEUTICALS, INC. AND SUBSIDIARY
(DEVELOPMENT STAGE COMPANIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 31, 2000
--------------------------------------------------------------------------------
NOTE 6 - STOCKHOLDERS' DEFICIT (Continued)
Common Stock (Continued)
------------
On October 2, 1987, the Company issued 665,000 shares of common stock to
two consultants for services rendered valued at $51,100.
On March 2, 1988, the Company issued 150,000 shares of common stock to a
consultant for services rendered valued at $13,900.
On March 17, 1988, the Company issued 25,000 shares of common stock to a
consultant for services rendered valued at $3,200.
On March 22, 1988, the Company issued 100,000 shares of common stock to a
consultant for services rendered valued at $13,000.
On May 25, 1988, the Company issued 500,000 shares of common stock to a
consultant for services rendered valued at $33,900.
During the year ended May 31, 1988, Viral sold shares of its common stock
for net proceeds of $290,000.
On March 27, 1989, the Company sold 250,000 shares of common stock for
$0.10 per share for gross proceeds of $25,000.
During the year ended May 31, 1989, the Company sold 2,506,832 shares of
common stock for net proceeds of $109,400.
During the year ended May 31, 1990, the Company sold 100,000 shares of its
common stock in a private transaction for net proceeds of $3,300.
During the year ended May 31, 1992, the Company sold 2,000,000 shares of
its common stock in a private transaction for net proceeds of $31,400.
On January 2, 1991, the Company issued 2,750,000 shares of common stock as
compensation for services valued at $41,000.
On July 12, 1993, the Company issued 5,700,000 shares of its common stock
to employees as compensation and for relief of certain accrued salaries.
The aggregate value of the compensation was $151,000, which included
forgiveness of $90,450 of accrued payroll.
On July 12, 1993, the Company issued 1,685,300 shares of common stock to
consultants for services valued at $64,800.
F-22
<PAGE>
MEDITECH PHARMACEUTICALS, INC. AND SUBSIDIARY
(DEVELOPMENT STAGE COMPANIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 31, 2000
--------------------------------------------------------------------------------
NOTE 6 - STOCKHOLDERS' DEFICIT (Continued)
Common Stock (Continued)
------------
During the year ended May 31, 1994, the Company committed certain stock to
a consultant for services. The services were performed through the year
ended May 31, 1997. The Company issued 2,180,300 shares of stock on July
11, 1996 and recognized consulting expense in the amount of $22,790 during
the year ended May 31, 1997. Consulting expense related to years prior to
May 31, 1997 was immaterial.
On July 11, 1996, the Company issued 9,800,000 shares of common stock to
employees for services and recognized $185,000 in compensation expense and
forgiveness of debts and payables due from the Company in the amount of
$89,254. Additionally, on that date, the Company issued 3,359,700 shares of
its common stock for services valued at $315,256.
On July 9, 1998, the Company issued 3,500,000 shares of common stock to
employees for a total of $123,500 in compensation for services.
On July 9, 1998, the Company issued 1,300,000 shares of common stock to
consultants for a total of $53,000 in compensation for services.
During the year ended May 31, 2000, the Company issued 450,000 shares of
common stock to employees for compensation. The shares were valued at
$11,250.
During the year ended May 31, 2000, the Company issued 1,400,000 shares of
common stock to vendors for services rendered. In connection with the
issuance, the company recorded $75,000 in consulting expense.
During the year ended May 31, 2000, holders of 5,000,000 employee options
exercised their options to purchase common stock for forgiveness of $50,000
of accrued compensation, which represented the exercise price of the
options.
During the year ended May 31, 2000, holders of 500,000 options exercised
their option to purchase common stock for a subscription receivable of
$10,000.
Stock Purchase Warrants and Options
-----------------------------------
On May 16, 2000, the Company issued warrants to purchase 7,000,000 shares
of common stock as a condition of entering into the investment agreement
described in Note 7. The warrants are exercisable immediately at $0.03 per
share and expire in 10 years. The warrants are valued at $2,380,000 and
represent offering costs. When the transaction closes, it will be reflected
as a reduction in the net proceeds from the offering, or, if the
transaction is aborted, will be charged to operations.
F-23
<PAGE>
MEDITECH PHARMACEUTICALS, INC. AND SUBSIDIARY
(DEVELOPMENT STAGE COMPANIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 31, 2000
--------------------------------------------------------------------------------
NOTE 6 - STOCKHOLDERS' DEFICIT (Continued)
Stock Purchase Warrants and Options (Continued)
-----------------------------------
During the year ended May 31, 1985, the Company issued options to purchase
480,000 shares of common stock at various exercise prices to employees and
consultants of the Company. The fair market value of the options were
immaterial. None of these options were exercised and all have expired.
On August 16, 1985, the Company issued options to purchase 1,600,000 shares
of its common stock at $0.023 per share to employees of the Company. These
options were issued at an exercise price that approximated market, and as
such, no compensation expense was recorded. All of these options have
expired.
On October 28, 1985, the Company issued options to purchase 8,000,000
shares of its common stock at $0.01 per share in connection with the
cancellation of a subscription receivable to its Chief Executive Officer.
Related to these options, the Company recognized compensation expense in
the amount of $104,000.
On February 27, 1986, the Company issued options to purchase 50,000 shares
of its common stock at the average of the bid/ask price on the date of
exercise to a consultant of the Company. Additionally, during the year
ended May 31, 1986, the Company issued options to purchase 462,000 shares
of its common stock to various consultants at exercise prices ranging from
$0.001 to $0.023 per share. The total consulting expense recognized in
connection with these options was $56,200. All of these options have
expired or been exercised.
During the year ended May 31, 1987, the Company issued options to purchase
1,675,000 shares of its common stock to employees of the Company. These
options were issued with an exercise price that approximated the fair
market value of the underlying common stock, and as such, no compensation
expense was recognized. All of these options have expired.
During the year ended May 31, 1987, the Company issued options to purchase
975,000 shares of its common stock to consultants of the Company at
exercise prices ranging from $0.01 to $0.08 per share. In connection with
these options, the Company recognized consulting expense of $42,200. All of
these options have expired.
During the year ended May 31, 1987, the Company's consolidated subsidiary
issued stock options to purchase 350,000 shares of Viral's common stock at
various exercise prices to consultants for services valued at $190,400. All
of these options have expired.
F-24
<PAGE>
MEDITECH PHARMACEUTICALS, INC. AND SUBSIDIARY
(DEVELOPMENT STAGE COMPANIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 31, 2000
--------------------------------------------------------------------------------
NOTE 6 - STOCKHOLDERS' DEFICIT (Continued)
Stock Purchase Warrants and Options (Continued)
-----------------------------------
During the year ended May 31, 1988, the Company issued options to purchase
550,000 shares of its common stock at exercise prices ranging from $0.05 to
$0.15 per share to consultants for services rendered. In connection with
these options, the Company recognized consulting expense in the amount of
$13,800. All of these options have expired.
During the year ended May 31, 1989, the Company issued options to purchase
450,000 shares of its common stock at exercise prices ranging from $0.01 to
$0.07 per share to consultants for services rendered. In connection with
these options, the Company recognized consulting expense in the amount of
$15,600. All of these options have expired.
During the year ended May 31, 1990, the Company issued options to purchase
100,000 shares of its common stock at an exercise price of $0.06 per share
to two consultants for services rendered. In connection with these options,
the Company recognized consulting expense in the amount of $7,300. All of
these options have expired.
On January 17, 2000, the Company issued options to purchase 5,000,000
shares of common stock to employees and stockholders of the Company. The
options are exercisable at $0.21 per share for 1,000,000 options and $0.05
per share for 4,000,000 options and expire on February 3, 2007. The Company
recognized $15,435 as compensation expense related to these options.
On February 1, 2000, the Company issued to employees of the Company options
to purchase 700,000 shares of common stock exercisable at $0.21 per share,
vesting immediately and expiring on May 1, 2007. No compensation was
recognized as the exercise price at the time of the grant approximated the
fair market value of the stock at the date of grant.
On February 1, 2000, the Company issued options to purchase 900,000 shares
of its common stock to consultants of the Company. The options were
exercisable at $0.21 per share and expire on May 31, 2006. Related to these
options, the Company recognized $27,000 in compensation expense, which
represents the fair market value of the options on the date of grant.
On February 1, 2000, the Company issued options to purchase 50,000 shares
of its common stock to a consultant of the Company. The options were
exercisable at $0.05 per share and expire on May 1, 2007. Related to these
options, the Company recognized consulting expense of $2,000.
F-25
<PAGE>
MEDITECH PHARMACEUTICALS, INC. AND SUBSIDIARY
(DEVELOPMENT STAGE COMPANIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 31, 2000
--------------------------------------------------------------------------------
NOTE 6 - STOCKHOLDERS' DEFICIT (Continued)
Stock Purchase Warrants and Options (Continued)
-----------------------------------
During the year ended May 31, 2000, the Company issued options to purchase
5,800,000 shares of common stock exercisable at $0.01 per share, vesting
immediately and expiring on May 31, 2006 to employees of the Company.
Related to these options, the Company recognized $20,000 of compensation
expense, which represents the intrinsic value of the options. As of May 31,
2000, options representing 300,000 shares of stock remained unexercised.
Employee Stock Option Transactions
----------------------------------
The Company has no formal stock option plan. The following summarizes all
transactions for the year ended May 31, 2000 involving the Company's common
stock purchase options issued to employees. (The Company did not have any
transactions during the year ended May 31, 1999):
Weighted-
Average
Number Exercise
of Options Price
------------- ------------
Outstanding, May 31, 1999 - $ -
Granted 11,500,000 $ 0.08
Exercised (5,500,000) $ 0.01
------------
Outstanding, May 31, 2000 6,000,000 $ 0.15
============
Exercisable, May 31, 2000 6,000,000 $ 0.15
============
The weighted-average remaining contractual life of the options outstanding
at May 31, 2000 is six years. The exercise prices for the options
outstanding at May 31, 2000 ranged from $0.01 to $0.21.
F-26
<PAGE>
MEDITECH PHARMACEUTICALS, INC. AND SUBSIDIARY
(DEVELOPMENT STAGE COMPANIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 31, 2000
--------------------------------------------------------------------------------
NOTE 6 - STOCKHOLDERS' DEFICIT (Continued)
Employee Stock Option Transactions (Continued)
----------------------------------
The Company has adopted only the disclosure provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation." It applies Accounting Principles
Bulletin ("APB") Opinion No. 25, "Accounting for Stock Issued to
Employees," and related interpretations in accounting for its plans and
does not recognize compensation expense for its stock-based compensation
plans other than for restricted stock and options/warrants issued to
outside third parties. If the Company had elected to recognize compensation
expense based upon the fair value at the grant date for awards under these
plans consistent with the methodology prescribed by SFAS No. 123, the
Company's net loss and loss per share for the years ended May 31, 2000 and
1999 would be reduced to the pro forma amounts indicated below:
May 31,
-----------------------------------
2000 1999
--------------- ----------------
Net loss
As reported $ (623,200) $ (767,400)
Pro forma $ (799,200) $ (767,400)
Loss per common share
As reported $ (0.01) $ (0.01)
Pro forma $ (0.01) $ (0.01)
These pro forma amounts may not be representative of future disclosures
because they do not take into effect pro forma compensation expense related
to grants made before 1995. The fair value of these options was estimated
at the date of grant using the Black-Scholes option-pricing model with the
following weighted-average assumptions for the year ended May 31, 2000:
dividend yield of 0%; expected volatility of 90%; risk-free interest rate
of 5.8%; and expected life of five years. The weighted-average fair value
of options granted during the year ended May 31, 2000 was $0.02, and the
weighted-average exercise price was $0.08.
For options granted during the year ended May 31, 2000 where the exercise
price was greater than the stock price at the date of grant, the
weighted-average fair value of such options was $0.03, and the
weighted-average exercise price of such options was $0.21. For options
granted during the year ended May 31, 2000 where the exercise price was
less than the stock price at the date of grant, the weighted-average fair
value of such options was $0.16, and the weighted-average exercise price of
such options was $0.18. No options were issued during the year ended May
31, 2000 where the exercise price equaled the stock price at the date of
grant.
F-27
<PAGE>
MEDITECH PHARMACEUTICALS, INC. AND SUBSIDIARY
(DEVELOPMENT STAGE COMPANIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 31, 2000
--------------------------------------------------------------------------------
NOTE 6 - STOCKHOLDERS' DEFICIT (Continued)
Employee Stock Option Transactions (Continued)
----------------------------------
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting
restrictions and are fully transferable. In addition, option valuation
models require the input of highly subjective assumptions including the
expected stock price volatility. Because the Company's employee stock
options have characteristics significantly different from those of traded
options, and because changes in the subjective input assumptions can
materially affect the fair value estimate, in management's opinion, the
existing models do not necessarily provide a reliable single measure of the
fair value of its employee stock options.
NOTE 7 - INVESTMENT AGREEMENT
On June 30, 2000, the Company entered into an investment agreement with
Swartz Private Equity, LLC ("Swartz"). The investment agreement entitles
the Company to issue and sell common stock to Swartz in the form of put
rights for up to an aggregate of $30,000,000 from time to time during a
three-year period beginning on the date of an effective registration
statement.
Under the agreement, In order to invoke a put right, the Company must have
an effective registration statement on file with the Securities and
Exchange Commission and provide Swartz with at least 10 but not more than
20 business days advance notice of the date on which the Company intends to
exercise a put right and must indicate the number of shares of common stock
the Company intends to sell to Swartz. The Company may also designate a
maximum dollar amount of common stock (not to exceed $2,000,000), which the
Company will sell to Swartz during the put and/or a minimum purchase price
per common share at which Swartz may purchase shares during the put. The
number of shares of common stock sold to Swartz in a put may not exceed the
lesser of (i) 1,500,000 shares; (ii) 15% of the aggregate daily reported
trading volume of the Company's common shares, excluding certain block
trades, during the 20 business days after the date of a put notice, with
certain restrictions; (iii) 15% of the aggregate daily reported trading
volume of common shares during the 20 business days before the put date,
excluding certain block trades; or (iv) a number of shares that, when added
to the number of shares acquired by Swartz under the investment agreement
during the 31 days preceding the put date, would exceed 9.99% of the total
number of shares of common stock outstanding.
For each common share, Swartz will pay the Company the lesser of (i) the
market price for such put, minus $0.075 or (ii) 91% of the market price for
the put. This may be construed as a below-market issuance of securities and
could result in significant charges to the Company's earnings.
F-28
<PAGE>
MEDITECH PHARMACEUTICALS, INC. AND SUBSIDIARY
(DEVELOPMENT STAGE COMPANIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 31, 2000
--------------------------------------------------------------------------------
NOTE 7 - INVESTMENT AGREEMENT (Continued)
Additionally, within five business days after the end of each pricing
period, the Company is required to issue and deliver to Swartz a warrant to
purchase a number of shares of common stock equal to 10% of the common
shares issued to Swartz in the applicable put. Each warrant will be
exercisable at a price which will initially equal 110% of the market price
for the applicable put. The warrants will have semi-annual reset
provisions. Each warrant will be immediately exercisable and have a term
beginning on the date of issuance and ending five years thereafter.
Further, under the provisions of the agreement, during the term of the
investment agreement and for a period of one-year thereafter, the Company
is prohibited from engaging in certain financing transactions involving the
Company's equity securities.
NOTE 8 - INCOME TAXES
Significant components of the Company's deferred tax assets and liabilities
for income taxes consisted of the following:
Deferred tax assets
Reserve for finance charges $ 400,000
Accrued compensation 1,100,000
Interest on related party advances 1,010,000
Operating losses 1,629,000
Valuation allowance (4,139,000)
----------------
Net deferred tax asset $ -
================
The federal operating loss carryforwards at May 31, 2000 were approximately
$4,525,000.
NOTE 9 - RELATED PARTY TRANSACTIONS
Since inception, the Company has received advances from Petro-Med, Inc, an
affiliate, to fund its working capital requirements. At May 31, 2000 and
1999, the Company maintained short-term advances from affiliates of
$3,603,800 and $3,294,800, respectively. Accrued interest is attributed to
the outstanding balance as incurred. The advances bear interest at 9% per
annum on any outstanding balance. Interest expense on the advances was
$309,000 and $283,000 for the years ended May 31, 2000 and 1999,
respectively.
F-29
<PAGE>
MEDITECH PHARMACEUTICALS, INC. AND SUBSIDIARY
(DEVELOPMENT STAGE COMPANIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 31, 2000
--------------------------------------------------------------------------------
NOTE 9 - RELATED PARTY TRANSACTIONS (Continued)
At May 31, 2000, the Company maintained unsecured advances from
stockholders in the amount of $43,500. The advances are unsecured,
non-interest-bearing, and are payable on demand.
Due to cash shortages, the Company has accrued deferred salaries and
related taxes payable to certain officers who are stockholders and
directors of the Company. At May 31, 2000, the aggregate amount of accrued
compensation was $2,787,100.
The Company has entered into certain employment agreements with its
officers and stockholders (see Note 5).
The Company maintains its primary place of business in facilities owned by
the chief executive officer (see Note 5).
NOTE 10 - YEAR 2000 ISSUE
The Company has completed a comprehensive review of its computer systems to
identify the systems that could be affected by ongoing Year 2000 problems.
Upgrades to systems judged critical to business operations have been
successfully installed. To date, no significant costs have been incurred in
the Company's systems related to the Year 2000.
Based on the review of the computer systems, management believes all action
necessary to prevent significant additional problems has been taken. While
the Company has taken steps to communicate with outside suppliers, it
cannot guarantee that the suppliers have all taken the necessary steps to
prevent any service interruption that may affect the Company.
F-30
<PAGE>
======================================= ====================================
You should rely on the information
contained in this prospectus. We have
not authorized anyone to give you 77,116,000 Shares
information different than that
contained in this prospectus. We are
offering to sell shares of common stock MEDITECH
only in jurisdictions where offers and PHARMACEUTICALS, INC.
sales are permitted. The information
contained in this prospectus is current
only as of its date, regardless of the
time you receive this prospectus.
----------------
TABLE OF CONTENTS Common Stock
Page
Prospectus Summary................ 1
Risk Factors...................... 3
Use of Proceeds................... 10
Selling Shareholders.............. 11
Plan of Distribution.............. 14
Management........................ 15
Executive Compensation............ 16
Business.......................... 18
Management's Discussion and
Analysis......................... 22
Changes in and Disagreements
with Accountants on --------------------
Accounting and Financial
Disclosure....................... 24 PROSPECTUS
Certain Relationships and
Related Transactions............. 25
Market Information................ 25 --------------------
Dividend Policy................... 26
Principal Stockholders............ 27
Description of Securities......... 28
Indemnification of Officers
and Directors.................... 29
Legal Matters..................... 30
Experts........................... 30
Additional Information............ 30
Index to Financial Statements..... F-1
----------------
Until , 2000, all dealers that
effect transactions in the common stock,
whether or not participating in this September 18, 2000
offering, may be required to deliver a
prospectus. This is not in addition to
the dealers' obligation to deliver a
prospectus when acting as underwriters
and with respect to their unsold
allotments or subscriptions.
======================================== ====================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. Indemnification Of Officers And Directors.
Pursuant to the Company's By-Laws, the Company may indemnify its directors
and officers under certain circumstances against reasonable expenses (including
court costs and attorney's fees), judgments, penalties, fines, and amounts paid
in settlement actually and reasonably incurred in connection with any action,
suit or proceeding, whether civil, criminal, administrative or investigative, to
which any of them is a party by reason of his being a director, officer,
employee, or agent of the Company if it is determined that he acted in
accordance with the applicable standard of conduct set forth in such statutory
provisions. Thus, the indemnification provisions will protect officers and
directors from liability only if the officer or director meets the applicable
standard of conduct and the Company has the financial ability to honor the
indemnity.
ITEM 25. Other Expenses Of Issuance And Distribution.
Expenses payable in connection with the registration and distribution of
the securities being registered hereunder, all of which will be borne by the
Registrant, are as follows:
Registration Fee - Securities and Exchange Commission...... $ 5,144
Printing and Engraving..................................... 1,000*
Legal Fees and Expenses.................................... 10,000*
Accounting Fees............................................ 35,000*
Blue Sky Fees and Expenses................................. 1,000*
--------
Total.............................................. $ 52,144*
========
* Estimated
ITEM 26. Recent Sales Of Unregistered Securities.
1. On July 9, 1998, we issued an aggregate of 3,500,000 shares of our common
stock to two employees as compensation for services valued at $123,500. The
shares were issued at an agreed value of $0.035 per share.
2. On July 9, 1998, we issued an aggregate of 1,300,000 shares of our common
stock to six consultants as compensation for services valued at $53,000.
The shares were issued at an agreed value of $0.04 per share.
3. On June 6, 1999, we issued warrants to purchase an aggregate of 5,800,00
shares of our common stock to two employees and two consultants at an
exercise price of $0.01 per share.
4. On January 17, 2000, we issued an aggregate of 450,000 shares of our common
stock to three consultants as compensation for services valued at $11,250.
The shares were issued at an agreed value of $0.025 per share.
5. On January 17, 2000, we issued an aggregate of 400,000 shares of our common
stock to four service providers and consultants as compensation for
services valued at $10,000. The shares were issued at an agreed value of
$0.025 per share.
II-1
<PAGE>
6. On January 17, 2000, we issued an aggregate of 3,000,000 shares of our
common stock to two employees pursuant to the exercise of common stock
purchase warrants at an exercise price of $0.01 per shares.
7. On February 1, 2000, we granted options to purchase an aggregate of
5,000,000 shares of our common stock to three employees at an exercise
price of $0.05 per share (as to 2,500,000 shares) and $0.21 per share (as
to 2,500,000 shares).
8. On February 1, 2000, we issued warrants to seven consultants and service
providers to purchase an aggregate of 1,600,000 shares of our common stock
at an exercise price of $0.21 per share.
9. On February 1, 2000, we issued warrants to one consultant to purchase an
aggregate of 50,000 shares of our common stock at an exercise price of
$0.05 per share.
10. On February 3, 2000, we issued 1,000,000 shares of our common stock to one
consultant as compensation for services valued at $65,000. The shares were
issued at an agreed value of $0.065 per share.
11. On February 3, 2000, we issued and aggregate of 2,000,000 shares of our
common stock to two employees pursuant to the exercise of common stock
purchase warrants at an exercise price of $0.01 per shares.
12. On February 3, 2000, we issued and aggregate of 500,000 shares of our
common stock to two consultants pursuant to the exercise of common stock
purchase warrants at an exercise price of $0.01 per shares.
13. On May 16, 2000, we issued an option to Swartz to purchase 7,000,000 shares
of our common stock at an exercise price of $0.33 per share.
No underwriter was involved in any of the above issuances of securities.
All of the above securities were issued in reliance upon the exemptions set
forth in Section 4(2) of the Securities Act of 1933 on the basis that they were
issued under circumstances not involving a public offering.
ITEM 27. Exhibits.
The Exhibits to this Registration Statement are listed in the Exhibit Index
commencing at page EX-1 hereof.
ITEM 28. Undertakings.
The undersigned Registrant hereby undertakes the following:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after
the effective date of this Registration Statement (or the most
recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the
information in this Registration Statement; and
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in this registration, or
any material change to such information in the Registration
Statement.
II-2
<PAGE>
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment to
this Registration Statement any of the securities being registered which remain
unsold at the termination of this offering.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers or persons controlling the
Registrant pursuant to the General Corporation Law of Nevada, the Articles of
Incorporation, or otherwise, the Registrant has been advised that, in the
opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in such Act, and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or person controlling the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or person controlling the Registrant in connection with any
securities being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in such Act and will be governed by the final
adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all the
requirements for filing on Form SB-2 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Phoenix, State of Arizona, on the date below.
Dated: September 18, 2000 MEDITECH PHARMACEUTICALS, INC.
By: /s/ GERALD N. KERN
------------------------------------
Gerald N. Kern
Chief Executive Officer
II-4
<PAGE>
POWER OF ATTORNEY
We, the undersigned directors and officers of Meditech Pharmaceuticals,
Inc., do hereby constitute and appoint Gerald N. Kern, acting individually, our
true and lawful attorney and agent, to do any and all acts and things in our
name and behalf in our capacities as directors and officers, and to execute any
and all instruments for us an d in our names in the capacities indicated below,
which said attorney and agent may deem necessary or advisable to enable said
corporation to comply with the Securities Act of 1933, as amended, and any
rules, regulations and requirements of the Securities and Exchange Commission,
in connection with this Registration Statement, including specifically, but
without limitation, power and authority to sign for us or any of us in our names
and in the capacities indicated below, any and all amendments (including
post-effective amendments) hereof; and we do hereby ratify and confirm all that
the said attorney and agent shall do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
/S/ GERALD N. KERN Chairman, Chief Executive September 18, 2000
--------------------- Officer & Director
Gerald N. Kern
/S/ STEVEN I. KERN Chief Operating Officer & September 18, 2000
--------------------- Chief Financial Officer
Steven I. Kern
/S/CYNTHIA S. KERN President, Corporate Secretary September 18, 2000
-------------------- & Director
Cynthia S. Kern
/S/ LESTER GOLDSTEIN Director September 18, 2000
--------------------
Lester Goldstein
/S/HARRY HALL Director September 18, 2000
------------------
Harry Hall
II-5
<PAGE>
EXHIBIT INDEX
MEDITECH PHARMACEUTICALS, INC.
The following exhibits are included as part of this Registration
Statement, except those exhibits marked (1), which have previously been filed
with the Securities and Exchange Commission and are incorporated by reference to
another registration statement, report or document. References to the "Company"
in this Exhibit Index mean MEDITECH PHARMACEUTICALS, INC., a Nevada corporation.
Exhibit
No. Description
------- -----------
2.1 License Agreement With Immune Network Resources, Ltd. (1)
3.1 Original Articles of Incorporation of Meditech Pharmaceuticals, Inc.
(1)
3.2 Articles of Amendment of Meditech Pharmaceuticals, Inc., as filed with
the Nevada Secretary of State. (1)
3.3 Certificate of Incorporation of the Company, as filed with the
Nevada Secretary of State (1)
3.4 Bylaws of the Company (1)
3.3.2 Certificate of Amendment to the Certificate of Incorporation of the
Company, as filed with the Nevada Secretary of State on April 1983 (1)
3.4 Articles of Incorporation of Meditech Pharmaceuticals, Inc. (1)
4.1 Specimen common stock certificate (1)
4.2 Form of Stock Purchase Warrant dated July 1, 2000 (1)
4.3 Form of 6% Convertible Subordinated Promissory Note due September 30,
1998 aggregating $1,500,000 to six investors incorporated by reference
to Exhibit 4.3 to Form 10-QSB for fiscal quarter ended August 31, 1996
(1)
4.4 Registration Rights Agreement dated February 3, 2000 by and among the
Company and Immune Network Research, Inc. related to the registration
of the warrants in this offering (1)
4.5 Registration Rights Agreement dated May 16, 2000 by and among the
Company and Swartz Equity Partners, LLC related to the registration of
the warrants in this offering (1)
5.1* Legal opinion of Jeffers, Shaff & Falk, LLP, attorneys at law
10.1 Form of license agreement between the company and Immune Network
Research, Inc. (1)
EX-1
<PAGE>
10.2 Employment Agreement dated June 15, 2000 between the Company and
Gerald N. Kern (1)
10.10 Employment Agreement dated June 15, 2000 between the Company and
Steven I. Kern (1)
23.1 Consent of Independent Certified Public Accountants -
Singer, Lewack Greenbaum & Goldstein LLP
23.2* Consent of Jeffers, Shaff, & Falk, LLP
* To be filed by amendment.
EX-2
