<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. 1)
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for use of the Commission only (as permitted by Rule
14a-b(e)(2)
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Harrier, Inc.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:(1)
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[X] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Dated Filed:
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(1) Set forth the amount on which the filing fee is calculated and state how
it was determined.
<PAGE>
HARRIER, INC.
2200 PACIFIC COAST HIGHWAY, SUITE 301
HERMOSA BEACH, CALIFORNIA 90254
(310) 376-7721
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD SEPTEMBER 11, 1998
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To the Stockholders of Harrier, Inc.:
An annual meeting (the "Annual Meeting") of the stockholders of Harrier,
Inc. (the "Company") will be held at 10:00 a.m., Pacific Time, on September 11,
1998, at 2200 Pacific Coast Highway, Suite 301, Hermosa Beach, California 90254
to consider and vote on the following matters:
1. The approval and adoption of the Stock Purchase Agreement and Plan
of Reorganization ("Reorganization Agreement") by and among the Company,
COPE AG, a Swiss corporation ("COPE"), and the shareholders of COPE ("COPE
Shareholders") whereby the COPE Shareholders will become the controlling
stockholders of the Company and COPE will become a wholly-owned subsidiary of
the Company (the "Reorganization Proposal"). After giving effect to the
Reorganization, the shareholders of COPE will own approximately 91.4% of the
issued and outstanding shares of the Company's Common Stock and the current
shareholders of the Company will own approximately 8.6% of the issued and
outstanding shares of the Company's Common Stock.
2. If the Reorganization Proposal is approved, the approval and adoption
of the Common Stock Purchase Agreement ("Glycosyn Agreement") between the
Company, Glycosyn Pharmaceuticals, Inc., a Delaware corporation ("Glycosyn"),
and the New Capital Investment Fund, a Cayman Islands investment fund ("NCIF"),
whereby (i) NCIF will purchase from the Company 2,850,000 shares of the $.001
par value common stock ("Glycosyn Common Stock") of Glycosyn in consideration of
NCIF's cancellation of all of the indebtedness owed to it by the Company
($610,167 as of March 31, 1998); and (ii) Glycosyn will acquire all of the
assets and assume all of the liabilities of the Company (the "Glycosyn
Proposal").
3. If the Reorganization Proposal and Glycosyn Proposal are approved, the
approval and adoption of an Amendment to the Certificate of Incorporation of the
Company to: (i) change the name of the Company to "COPE, Inc."; and (ii) reverse
split the outstanding shares of Common Stock of the Company on a one for 58
basis (the "Amendment Proposal").
4. If the Reorganization Proposal, the Glycosyn Proposal and Amendment
Proposal are approved, to elect the five directors specified by COPE in the
Reorganization Agreement to hold office commencing upon the closing of the
Reorganization Agreement and to expire on the next annual meeting of
stockholders or until their successors are duly elected and qualified (the "COPE
Director Proposal").
5. If the foregoing proposals are approved, to elect ATAG Ernst &
Young AG, a member of Ernst & Young International, as the Company's
independent auditors for the fiscal year ending December 31, 1998 ("COPE
Independent Auditor Proposal").
6. If either of the Reorganization Proposal, Glycosyn Proposal or
Amendment Proposal is not approved, to elect as directors Jurg Kehrli, Kevin
DeVito and William Cordeiro to hold office until the next annual meeting of
stockholders or until their successors are duly elected and qualified (the
"Harrier Director Proposal").
7. To transact such other business as may properly come before the Annual
Meeting or at any and all adjournments thereof.
The Board of Directors has fixed 5:00 p.m. Pacific Time, on July 13,
1998, as the record date for determination of stockholders entitled to notice
of, and to vote at, the Annual Meeting. Only stockholders of record at that
time are entitled to notice of, and to vote at, such Annual Meeting.
Whether or not you plan to attend the Annual Meeting, please complete,
date and sign your proxy and return it promptly in the enclosed envelope.
Your proxy may be revoked in the manner described in the accompanying Proxy
Statement/Prospectus at any time before it has been voted at the Annual
Meeting.
By Order of the Board of Directors,
Candace Beaver
SECRETARY
August 20, 1998
Hermosa Beach, California
YOUR VOTE IS IMPORTANT. PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY
CARD AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE, WHETHER OR NOT YOU PLAN TO
ATTEND THE ANNUAL MEETING.
<PAGE>
HARRIER, INC.
2200 PACIFIC COAST HIGHWAY, SUITE 301
HERMOSA BEACH, CALIFORNIA 90254
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ANNUAL MEETING OF STOCKHOLDERS OF
HARRIER, INC. TO BE HELD ON SEPTEMBER 11, 1998
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PROXY STATEMENT/PROSPECTUS
This Proxy Statement/Prospectus is being furnished to: (i) the holders
of the Common Stock, $.001 par value ("Harrier Common Stock"), of Harrier,
Inc., a Delaware corporation (the "Company" or "Harrier"), in connection with
the solicitation of proxies by the Board of Directors of the Company for use
at an Annual Meeting of Stockholders of the Company to be held on September 11,
1998, and any postponements or adjournments thereof (the "Annual Meeting");
and (ii) the Minority Shareholders of COPE AG, a Swiss corporation ("COPE"),
in connection with the Company's solicitation of the COPE Minority
Shareholders' exchange of their capital shares of COPE for shares of Harrier
Common Stock as part of the Reorganization (as described below). As used
herein, the term "COPE Minority Shareholders" refers to all shareholders of
COPE other than its two principal shareholders, Adrian Knapp and Stephan
Isenschmid. After giving effect to the Reorganization, the shareholders of
COPE will own approximately 91.4% of the issued and outstanding shares of the
Harrier Common Stock and the current shareholders of the Company will own
approximately 8.6% of the issued and outstanding shares of the Harrier Common
Stock.
The Annual Meeting is being held for the purpose of voting on
the five proposals identified in the Notice of Annual Meeting and described
in this Proxy Statement. The Reorganization Proposal (Proposal No. 1), the
Glycosyn Proposal (Proposal No. 2), the Amendment Proposal (Proposal No. 3)
and the COPE Director Proposal (Proposal No. 4) are not independent. The
Reorganization Agreement cannot be effected unless the Glycosyn Proposal, the
Amendment Proposal and the COPE Director Proposal are also approved. If the
Reorganization Proposal is rejected, the Glycosyn Proposal, the Amendment
Proposal and the COPE Director Proposal will not be voted on. If the
Reorganization Proposal, the Glycosyn Proposal, the Amendment Proposal and
the COPE Director Proposal are approved and the transactions under the
Reorganization Agreement ("Reorganization") are consummated, the Company will
continue with the management of COPE described in "Management of the Company
Following the Reorganization" herein. If either the Reorganization Proposal,
the Glycosyn Proposal, the Amendment Proposal or the COPE Director Proposal
is rejected, the Company will continue its current operations with the
directors elected pursuant to the Harrier Director Proposal ("Proposal No.
6") and its current officers.
The Reorganization Agreement contemplates the following: (i) stockholder
approval of the Reorganization pursuant to which COPE will become a
wholly-owned subsidiary of the Company; (ii) stockholder approval of (a) the
Company's sale of 2,850,000 shares of Glycosyn Common Stock to NCIF and (b)
Glycosyn's acquisition of all of the assets and assumption of all of the
liabilities of the Company; (iii) an amendment to the Company's Certificate
of Incorporation to effect: (a) a change in the name of the Company to "COPE,
Inc.;" and (b) a reverse split the outstanding shares of Common Stock on a
one for 58 basis; and (iv) the election of a board of five directors
nominated by the COPE shareholders. In connection with the Reorganization, the
Company shall issue 2,862,000 shares of Harrier Common Stock to the COPE
shareholders in exchange for all of the issued and outstanding shares of
COPE. A copy of the Reorganization Agreement is attached to this Proxy
Statement as Appendix A.
<PAGE>
THE HARRIER COMMON STOCK BEING OFFERED TO THE COPE MINORITY SHAREHOLDERS
HEREBY IS SPECULATIVE AND INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" COMMENCING ON PAGE 9.
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NEITHER THIS TRANSACTION NOR THE HARRIER COMMON STOCK ISSUABLE TO THE COPE
MINORITY SHAREHOLDERS HAS BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY SWISS OR STATE REGULATORY AUTHORITY NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY SWISS OR STATE REGULATORY
AUTHORITY PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY
STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The Board of Directors of the Company has determined that the
Reorganization is fair and in the best interests of the Company and its
stockholders and unanimously recommends that the stockholders of the Company
vote for the Reorganization Proposal, for the Glycosyn Proposal the Amendment
Proposal and for the COPE director nominees. Certain members of the Board of
Directors of the Company have conflicts of interest in making this
recommendation. See "Risk Factors Relating to the Reorganization," "Proposal
No. 1: Reorganization Proposal - Conflicts of Interest of Company
Management," and "Proposal No. 2: Glycosyn Proposal -Conflicts of Interest of
Company Management."
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THE DATE OF THIS PROXY STATEMENT/PROSPECTUS IS AUGUST 20, 1998.
<PAGE>
TABLE OF CONTENTS
PROXY STATEMENT/PROSPECTUS
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SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA . . . . . . . . . . . 5
AVAILABLE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . 6
THE OFFERING TO THE COPE MINORITY SHAREHOLDERS . . . . . . . . . . . . 6
GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SHARES OUTSTANDING AND VOTING RIGHTS . . . . . . . . . . . . . . . . . 8
RISK FACTORS RELATING TO THE REORGANIZATION . . . . . . . . . . . . . . 9
PROPOSAL NO. 1: REORGANIZATION PROPOSAL . . . . . . . . . . . . . . . . 11
PROPOSAL NO. 2: GLYCOSYN PROPOSAL . . . . . . . . . . . . . . . . . . . 14
PROPOSAL NO. 3: AMENDMENT PROPOSAL . . . . . . . . . . . . . . . . . . 17
PROPOSAL NO. 4: COPE DIRECTOR PROPOSAL . . . . . . . . . . . . . . . . 19
PROPOSAL NO. 5: COPE INDEPENDENT AUDITOR PROPOSAL . . . . . . . . . . . 19
PROPOSAL NO. 6: HARRIER DIRECTOR PROPOSAL . . . . . . . . . . . . . . 20
OTHER MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
DESCRIPTION OF SECURITIES . . . . . . . . . . . . . . . . . . . . . . . 20
BUSINESS OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . 21
MANAGEMENT OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . 22
HARRIER MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS. . . 24
PRINCIPAL STOCKHOLDERS OF THE COMPANY . . . . . . . . . . . . . . . . . 24
BUSINESS OF COPE . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
COPE MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION . . . . . . . . . . . . 32
MANAGEMENT OF THE COMPANY FOLLOWING THE REORGANIZATION . . . . . . . . 35
CERTAIN INFORMATION CONCERNING CAPITAL STOCK OF
THE COMPANY AND COPE . . . . . . . . . . . . . . . . . . . . . . . . 36
ANNUAL REPORT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
STOCKHOLDER PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . . . 37
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE . . . . . . . . . . . . 37
INDEX TO FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . 38
APPENDICES
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Reorganization Agreement . . . . . . . . . . . . . . . . . . . Appendix A
Amendment to Certificate of Incorporation . . . . . . . . . . . Appendix B
(i)
<PAGE>
SUMMARY
The following is a brief summary of certain information contained
elsewhere in this Proxy Statement/Prospectus, including (i) a summary of all
of the material terms of the Reorganization Agreement and the proposals
submitted for the approval of the Company's shareholders; and (ii) the
Company's offering of shares of Harrier Common Stock to the COPE Minority
Shareholders. The summary should be read in conjunction with, and is
qualified in its entirety by reference to, the more detailed information
appearing elsewhere in this Proxy Statement/Prospectus, and in the
information and documents incorporated by reference herein, which provide
important additional disclosure of the material terms and provisions of the
matter set forth below. Capitalized terms used but not defined in this
summary have the meanings ascribed to them elsewhere in this Proxy
Statement/Prospectus.
THE MATTERS TO BE CONSIDERED BY THE SHAREHOLDERS OF THE COMPANY AT THE
ANNUAL MEETING AND BY THE COPE MINORITY SHAREHOLDERS IN CONNECTION WITH THE
OFFERING BY THE COMPANY ARE OF GREAT IMPORTANCE TO THE STOCKHOLDERS OF THE
COMPANY AND THE COPE MINORITY SHAREHOLDERS. ACCORDINGLY, STOCKHOLDERS OF THE
COMPANY AND THE COPE MINORITY SHAREHOLDERS ARE URGED TO READ AND CAREFULLY
CONSIDER THE INFORMATION SUMMARIZED BELOW AND PRESENTED ELSEWHERE IN THIS
PROXY STATEMENT/PROSPECTUS.
Date, Time and Place of the Annual
Meeting........................... September 11, 1998, at 10:00 a.m.,
Pacific Time, at 2200 Pacific Coast
Highway, Suite 301, Hermosa Beach,
California. See "Introduction."
Reorganization Proposal............ To consider and vote upon a proposal to
approve the reorganization of the
Company pursuant to the Reorganization
Agreement, a copy of which is attached
hereto as Appendix A, providing for the
issuance of 2,862,000 shares (post-
split) of the Company's Common Stock to
the former shareholders of COPE (the
"COPE Shareholders"). The COPE
Shareholders will control the Company
after the Reorganization. See "Proposal
No 1: Reorganization Proposal" and
"Proposal No. 4: COPE Director
Proposal."
Glycosyn Proposal In the event the Reorganization Proposal
is approved, to consider and vote upon a
proposal to approve and adopt the Common
Stock Purchase Agreement ("Glycosyn
Agreement") between the Company,
Glycosyn Pharmaceuticals, Inc., a
Delaware corporation ("Glycosyn"), and
the New Capital Investment Fund, a
Cayman Islands investment fund ("NCIF"),
whereby (i) NCIF will purchase from the
Company 2,850,000 shares of the $.001
par value common stock ("Glycosyn Common
Stock") of Glycosyn in consideration of
NCIF's cancellation of all of the
indebtedness owed to it by the Company
($610,167 as of March 31, 1998), and
(ii) Glycosyn will acquire all of the
assets and assume all of the liabilities
of the Company. Pursuant to the
Reorganization Agreement, the Company is
required to divest itself of its
controlling interest in Glycosyn and
otherwise substantially divest itself of
all of its assets and liabilities as a
condition to the consummation of the
Reorganization. Certain members of
management of the Company have a
significant interest in NCIF. See
"Risk Factors Relating to the
Reorganization - Interests of Company
Management," "Management of the Company
- Certain Transactions." See also
"Proposal No. 2 "Glycosyn Proposal."
Amendment Proposal................. In the event the Reorganization Proposal
and the Glycosyn Proposal are approved,
to consider and vote upon a proposal to
amend the Certificate of Incorporation
of the Company to: (i) change its name
to "COPE, Inc.;" and (ii) to reverse
split the outstanding shares of Common
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<PAGE>
Stock on a one for 58 basis. See
"Proposal No. 3: "Amendment Proposal."
COPE Director Proposal In the event the Reorganization
Proposal, the Glycosyn Proposal and the
Amendment Proposal are approved, to
elect the nominees of COPE as directors
to hold office until the next meeting of
stockholders or until their successors
are duly elected and qualify, which
terms will commence on the closing of
the Reorganization Agreement. See
"Proposal No. 4: Election of COPE
Directors."
COPE Independent Auditor Proposal.. In the event that the foregoing
proposals are approved, to elect ATAG
Ernst & Young AG, COPE's current
auditors, as the Company's independent
auditors for the fiscal year ending
December 31, 1998.
Election of Harrier Directors
Proposal.......................... In the event that either the
Reorganization Proposal, the Glycosyn
Proposal, Amendment Proposal or the COPE
Director Proposals is not approved, to
elect as directors Jurg Kehrli, Kevin
DeVito and William Cordeiro to hold
office until the next annual meeting of
stockholders or until their successors
are duly elected and qualified. See
"Proposal No. 6: Election of Harrier
Directors."
Stockholders Entitled to Vote...... Only stockholders of record at 5:00
p.m., Pacific Time on July 13, 1998
(the "Record Date") are entitled to
notice of and to vote at the Annual
Meeting. On the Record Date there were
15,697,923 issued and outstanding shares
of Common Stock, $.001 par value of the
Company ("Harrier Common Stock").
Vote Required...................... Under Delaware General Corporate Law,
the approval and adoption of the
Reorganization Agreement is not
required; however, the Reorganization
Agreement requires, as a condition to
the closing thereof, the approval
thereof by the affirmative vote of a
quorum of the Harrier Common Stock
present at the meeting. See
"Reorganization Proposal-Conditions to
the Reorganization." All current
Harrier directors and officers have
indicated that they intend to vote their
shares of Harrier Common Stock to
approve the Reorganization.
Interest of Harrier Management..... As of June 30, 1998, directors and
officers of the Company and their
affiliates beneficially owned an
aggregate of 853,582 shares of Harrier
Common Stock, representing approximately
5.4% of the outstanding shares of
Harrier Common Stock. See "Principal
Stockholders of the Company." See
"Proposal No. 1: Reorganization
Proposal - The Reorganization Agreement;
Conditions of the Reorganization."
Terms of the Reorganization........ After the reverse split and just prior
to the closing of the Reorganization
Agreement, there will be slightly in
excess of 270,654 shares of Harrier
Common Stock outstanding. On closing of
the Reorganization, the COPE
Shareholders, will receive a total of
2,862,000 shares of Harrier Common Stock
in exchange for 100% of the outstanding
shares of capital stock of COPE. At
that time, there will be approximately
3,132,654 shares of Harrier Common Stock
outstanding. See "Proposal No. 1:
Reorganization Proposal - The
Reorganization Agreement"
and "-Conditions to the Reorganization."
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<PAGE>
The Company and COPE............... The Company has been engaged in the
discovery, development and sale of
selected products and technologies in
the health, fitness and medical markets.
Most recently the Company has been
engaged in the distribution of the
Bioptron-Registered Trademark- Lamp
("Lamp"), a pain relief medical device,
and through its 94% owned subsidiary,
Glycosyn, the development and testing of
certain new synthetic drugs using the
Company's proprietary GLYCOSYLATION
processes. The Company discontinued the
distribution of the Bioptron Lamp in
June 1997. See "Business of the
Company."
COPE is a Swiss-based provider of data
storage and information management
consulting services and solutions. COPE
provides information management
consulting, services and solutions to a
variety of companies in the financial,
insurance, pharmaceutical and
telecommunication industries located in
Switzerland, Germany and Austria.
COPE's principal operations consist
of the design, implementation and
management of information systems that
provide data storage, data security and
data warehousing solutions. COPE
generally provides its information
systems on a turn-key basis and
purchases for resale the hardware and
software components made part of its
information systems solutions.
COPE is a value-added reseller of
hardware and software products offered
by the leading vendors in the data
storage industry, including ADIC, AMPEX,
ATL, Data General, DG CLARiiON BU, HP,
IBM, Legato, NSM, Oracle, Overland,
Platinum, Qualix, Storage Tek, SUN, and
VERITAS. COPE was founded in 1991 and
is headquartered in Rotkreuz,
Switzerland. (See "Business of COPE.")
Reorganization Proposal:
Recommendation of Board of
Directors.......................... The Board of Directors of the Company
has duly approved the Reorganization
Agreement and recommends a vote in favor
of the Reorganization Proposal in the
belief that the Reorganization is in the
best interests of the Company and its
Stockholders. Before giving this
approval, the Board of Directors
reviewed a number of factors, including
the financial condition of the Company,
the business and prospects of COPE and
the terms of the Reorganization
Agreement. Certain members of the Board
of Directors of the Company have
conflicts of interest in making this
recommendation. See "Risk Factors
Relating to the Reorganization,"
"Proposal No. 1: Reorganization Proposal
- Conflicts of Interest of Company
Management," and "Proposal No. 2:
Glycosyn Proposal - Conflicts of
Interest of Company Management."
Federal Income Tax Consequences of the
Reorganization..................... For federal income tax purposes, it is
intended that the Reorganization will
constitute a tax-free reorganization
under Internal Revenue Code Section
368(a)(1)(B)for the Company's
Stockholders so that no gain or loss
will be recognized by the Company's
stockholders as a result of the
Reorganization. The Company will not
experience any gain or loss as a result
of the Reorganization. However, as of
March 31, 1998 the Company has a pro
forma net operating loss carryforward
("NOL") for Federal income tax
purposes of approximately
$11,900,000. As a result of the
Reorganization, the Company believes
that it may lose as much as 95% of
the NOL for Federal income tax
purposes. The COPE shareholders will
not experience gain or loss as a
result of the Reorganization.
However, the COPE shareholders and
the Company stockholders are urged to
consult with their own tax advisors
with regard to the potential tax
consequences of the Reorganization in
light of their individual
circumstances. See "Proposal No. 1:
Reorganization Proposal -- Federal
Income Tax Consequences of
Reorganization." For the Federal
income tax consequences of the
Glycosyn Proposal and the proposed
reverse split, see "Proposal No. 2:
Glycosyn Proposal -Federal Income Tax
Consequences of the Glycosyn
Recapitalization" and "Proposal No.
3: Amendment Proposal - Federal
Income Tax Consequences of the
Reverse Split."
Accounting Treatment............... The Company intends to account for the
Reorganization as a reverse acquisition.
Conditions to the Reorganization;
Termination....................... Notwithstanding approval of the
Reorganization Proposal by the Company's
stockholders by the requisite vote,
consummation of the Reorganization is
subject to a
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<PAGE>
number of conditions which, if not
fulfilled or waived, permit
termination of the Reorganization
Agreement. These conditions include,
but are not limited to: the
consummation of the Company's sale of
2,850,000 shares of Glycosyn Common
Stock to NCIF; the Company's
divestiture of its assets (other than
a minority interest in Glycosyn) and
its liabilities; the approval of the
Amendment; the release of the Company
by its creditors and their consent to
the assumption of the Company's
liabilities by Glycosyn; the election
of COPE designees as directors of the
Company; and the fulfillment of
certain other covenants and conditions
by the parties. The Reorganization
may also be abandoned by mutual
consent, and in certain other
circumstances. See "Proposal No. 1:
Reorganization Proposal -- Conditions
to the Reorganization."
Dissenters Rights................. Neither the Company's Bylaws nor
the Delaware General Corporate Law
provide dissenters rights to the
holders of Harrier Common Stock who
do not vote in favor of the
Reorganization Proposal or any of
the other proposals for
consideration at the Annual
Meeting.
The Offering to
the COPE Shareholders................ Pursuant to this Proxy
Statement/Prospectus, the Company is
offering shares of Harrier Common
Stock to each COPE Minority Shareholder.
Pursuant to the terms and
conditions of the Reorganization
Agreement, a total of 2,862,000
shares ("Harrier Shares") of Harrier
Common Stock will be issued to the
COPE shareholders. The principal
shareholders of COPE, Adrian Knapp
and Stephan Isenschmid, have executed
the Reorganization Agreement and
agreed to exchange their shares of
COPE capital stock on the same terms
being offered by the Company to the
COPE Minority Shareholders. The
number of shares of Harrier Common
Stock to be offered to each COPE
shareholder will be based on the
shareholder's pro rata share of the
outstanding shares of COPE and will
be determined by multiplying the
total number of Harrier Shares (i.e.,
2,862,000 shares (post-split) of
Harrier Common Stock) by a fraction,
the numerator of which is the total
number of COPE Shares owned by the
individual COPE shareholder at the
Closing and the denominator of which
is the total number of COPE Shares
issued and outstanding at the
Closing. Based on 1,060 shares of
COPE capital stock issued and
outstanding as of the close of the
Reorganization, the Company offers
hereby 2,700 shares of Harrier Common
Stock for each share of COPE capital
stock. The exchange of the capital
shares of COPE for the shares of
Harrier Common Stock will not be
decided by the vote of the COPE
Minority Shareholders as a group,
instead each COPE Minority
Shareholder will individually elect
to exchange their COPE capital shares
for their pro rata portion of the
Harrier Shares.
Regulatory Requirements........... There are no material regulatory
requirements that must be complied
with in connection with the
consummation of the transactions
associated with the Reorganization.
Closing............................ If the Reorganization Proposal is
approved at the Annual Meeting, and all
other conditions to the Reorganization
have been met or waived, the closing
("Closing") of the Reorganization will
be effected as soon as practicable
following the filing of the Amendment
with the Secretary of the State of
Delaware. If the Reorganization
Proposal, the Glycosyn Proposal and the
Amendment Proposal are each approved at
the Annual Meeting, and all other
conditions to the Reorganization have
been met or waived, the parties expect
the Closing of the Reorganization to be
effected shortly thereafter. If all
conditions are not met or waived, there
could be a delay in the Closing or the
Reorganization Agreement could be
terminated.
Expenses........................... The party incurring costs and expenses
in connection with the Reorganization
shall pay them.
Market Price Data.................. COPE Common Stock is not publicly
traded. Harrier Common Stock is quoted
on the OTC Bulletin Board. The last
reported sale transaction on July 22,
1998 was $.16 per share of Harrier
Common Stock. On December 1, 1997, the
last full trading day immediately
preceding the public announcement of the
Reorganization Proposal, the last
reported sale transaction for the
Harrier Common Stock was $0.10 per
share.
Pro Forma Financial Data........... See the table on the next page and
"Financial Statements."
New Symbol......................... Harrier Common Stock will continue to
be listed for trading on the OTC
Bulletin Board, and will be quoted
under the symbol "COPE", from and after
the closing of the Reorganization.
-4-
<PAGE>
SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA
The following tables set forth for the periods indicated (i) certain
historical information with respect to the Company and COPE and (ii) certain
information on an unaudited pro forma combined basis for the Company giving
effect to the consummation of the transactions contemplated by the
Reorganization Proposal, the Glycosyn Proposal and the Amendment Proposal. Such
information is based on the historical financial statements of COPE and the
Company and the unaudited pro forma condensed consolidated financial statements
and the related notes thereto included elsewhere herein. This financial data
should be read in conjunction with the Financial Statements and with
Management's Discussion and Analysis of Financial Condition or Plan of
Operations for the Company and COPE included elsewhere herein.
<TABLE>
<CAPTION>
Nine Months Ended
Year Ended June 30, March 31, 1998
--------------------------- ------------------
1996 1997 (Unaudited)
------------- ------------
<S> <C> <C> <C>
HARRIER HISTORICAL
Revenue................... $ 66,687 $ 48,069 $ -
Net loss.................. (1,325,556) (686,236) (370,683)
Total assets.............. 748,987 325,482 364,940
Stockholders'
deficit................ (371,104) (961,790) (1,152,973)
<CAPTION>
Year Ended December 31,
--------------------------------------------- Three Months Ended
1995 1996 1997 March 31, 1998
------------- ------------ --------------- ------------------
(Unaudited)
<S> <C> <C> <C> <C>
COPE HISTORICAL
Revenue.................. $ 11,020,356 $ 12,515,123 $ 17,916,171 $ 4,640,835
Net income............... 88,202 315,823 632,897 101,765
Total assets............. 3,352,233 3,970,289 7,191,912 5,806,910
Stockholders' equity..... 858,277 1,005,028 2,260,925 2,269,387
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended
Year Ended December 31, 1997 March 31, 1998
-------------------------------- ------------------
(Unaudited) (Unaudited)
<S> <C> <C>
PRO FORMA COMBINED
HARRIER AND COPE
Revenue.................. $ 17,916,171 $ 4,640,835
Net income............... 342,536 46,229
Total assets............. 7,274,745 5,864,572
Stockholders' equity..... 2,266,879 2,243,361
</TABLE>
COMPARATIVE
PER SHARE DATA
<TABLE>
<CAPTION>
Pro Forma Equivalent
COPE Harrier Combined COPE Pro Forma
Historical Historical and Harrier Harrier
---------------------------------------------------
<S> <C> <C> <C> <C>
BOOK VALUE PER SHARE:
March 31, 1998 $2,140.93 ($0.07) $0.72 $ 0.07
December 31, 1997 $2,132.95 ($0.07) $0.73 $ 0.07
BASIC AND DILUTIVE INCOME
(LOSS) PER SHARE FROM CONTINUING
OPERATIONS:
For the three months ended March 31, 1998(1) $96.00 ($0.31) $0.01 $ 0.00
For the year ended December 31, 1997(1) $623.54 ($0.02) $0.11 $ 0.01
CASH DIVIDENDS PER SHARE:
For the three months ended March 31, 1998(1) $0.00 $0.00 $0.00 $ 0.00
For the year ended December 31, 1997(1) $0.00 $0.00 $0.00 $ 0.00
SHARES OUTSTANDING
at March 31,1998 1,060 15,698,780 3,132,654 270,654
at December 31, 1997 1,060 15,298,780 3,125,772 233,542
</TABLE>
- ---------------------------
1. The historical information presented for Harrier, Inc. at March 31, 1998
and December 31, 1997 is presented on a rolling nine and twelve month basis
as Harrier's fiscal year end is June 30.
-5-
<PAGE>
AVAILABLE INFORMATION
The Company has filed a Registration Statement on Form S-4
("Registration Statement") under the Securities Act of 1933, as amended
("1933 Act"), with the Securities and Exchange Commission ("Commission").
This Proxy Statement/Prospectus, constituting a part of the Registration
Statement, serves both as a proxy statement to be delivered to the
shareholders of the Company and a Prospectus under the 1933 Act for the
offering by the Company pursuant to the terms of the Reorganization Agreement
of the Harrier Common Stock to the COPE Minority Shareholders in connection
with the Reorganization. As permitted by the rules and regulations of the
Commission, this Proxy Statement/Prospectus omits certain information,
exhibits and undertakings contained in the Registration Statement. Such
additional information is publicly available through the Commission's World
Wide Web site (http://www.sec.gov) or may be inspected at the principal
office of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, and
copies of or any part thereof can be obtained from such office after payment
of fees prescribed by the Commission.
Incorporated by reference into this Proxy Statement/Prospectus is the
Company's Annual Report on Form 10-KSB/A for the fiscal year ended December
31, 1997, copies of which are available upon request and will be delivered to
each of the Company's Stockholders as of the record date and to each COPE
Minority Shareholder. Requests for the annual report shall be made to Kevin
DeVito, President of the Company, 2200 Pacific Coast Highway, Suite 301,
Hermosa Beach, California 90254. In order to ensure timely delivery of such
reports, any request should be made by September 4, 1998.
THE OFFERING TO THE COPE MINORITY SHAREHOLDERS
General
Pursuant to this Proxy Statement/Prospectus, the Company is offering
shares of Harrier Common Stock to each COPE Minority Shareholder. Pursuant
to the terms and conditions of the Reorganization Agreement, a total of
2,862,000 shares ("Harrier Shares") of Harrier Common Stock will be issued to
the COPE shareholders. The principal shareholders of COPE, Adrian Knapp and
Stephan Isenschmid, have each executed the Reorganization Agreement and
thereby agreed to exchange their shares of COPE capital stock for shares of
Harrier Common Stock on the same terms now being offered by the Company to
the COPE Minority Shareholders. As of the date of this Proxy
Statement/Prospectus, Messrs. Knapp and Isenschmid each own 480 shares of
COPE capital stock, representing a total of 960 of the 1,060 issued and
outstanding shares of COPE capital stock. The 100 capital shares not held by
Messrs. Knapp and Isenschmid are held by the COPE Minority Shareholders,
including 60 capital shares issued by COPE in a private placement in the
third quarter of 1997 for the gross proceeds of approximately US$700,000 and
40 capital shares issued by COPE prior to 1995 in connection with its
acquisition of certain business assets.
The number of shares of Harrier Common Stock to be offered to each COPE
shareholder will be based on the shareholder's pro rata share of the
outstanding shares of COPE and will be determined by multiplying the total
number of Harrier Shares (i.e., 2,862,000 shares (post-split) of Harrier
Common Stock) by a fraction, the numerator of which is the total number of
COPE Shares owned by the individual COPE shareholder at the Closing and the
denominator of which is the total number of COPE Shares issued and
outstanding at the Closing. Based on 1,060 shares of COPE capital stock
issued and outstanding as of the date of the close of the Reorganization, the
Company hereby offers 2,700 shares (post-split) of Harrier Common Stock for
each one share of COPE capital stock held by the COPE Minority Shareholders.
The exchange of the capital shares of COPE for the shares of Harrier Common
Stock will not be decided by the vote of the COPE Minority Shareholders as a
group, instead each COPE Minority Shareholder will individually elect to
exchange their COPE capital shares for their pro rata portion of the Harrier
Shares.
The offering to the COPE Minority Shareholders and the Company's
obligation to issue any of the Harrier Shares to the COPE Minority
Shareholders is conditioned on the agreement by the COPE Minority
Shareholders to exchange all of their shares of COPE capital stock for the
Harrier Shares and the close of the Reorganization Agreement pursuant to the
terms of the Reorganization Agreement. In order to accept the Company's
offer of 2,700 shares (post-split) of Harrier Common Stock for each share of
COPE capital stock, each COPE Minority Shareholder must tender his or her
shares of COPE capital stock to the Company on or before the close of the
Reorganization. If all of the shares of COPE capital stock are tendered by
the COPE Minority Shareholders and the Reorganization is consummated pursuant
the terms of the Reorganization Agreement, then the Company shall accept all
tenders from the COPE Minority Shareholders and issue to the COPE Minority
Shareholders certificates for shares of Harrier Common Stock.
In the event that one or more COPE Minority Shareholders refuse the
Company's exchange offer, neither the Company, COPE nor the accepting COPE
Shareholders are obligated to consummate the Reorganization. However, in the
event one or more of the COPE Minority Shareholders refuse the exchange
offer, the Company, COPE and the accepting COPE Shareholders could decide to
waive the condition of unanimous approval and proceed to consummate the
Reorganization. In such an event, any COPE Minority Shareholder who refuses
the exchange offer would remain a minority shareholder of COPE.
Material Differences Between the COPE Shares and the Harrier Shares
The COPE Shares represent equity interests in a Swiss stock corporation and
the Harrier Shares represent equity interests in a Delaware corporation. Both
Swiss and Delaware corporate law provide the principal terms and conditions of
the rights, preferences and privileges of the securities of the corporations
organized thereunder. Swiss corporate law and Delaware corporate law are
similar in most material respects in the area of shareholder rights, however
Swiss corporate law does provide, or allow Swiss corporations to grant, certain
significant rights that are not allowed to shareholders of Delaware
corporations. Unless restricted by the corporation's charter documents, Swiss
corporate law provides the owners of capital shares in Swiss corporations with
limited preemptive rights to participate in new issuances of securities by the
corporation, whereas Delaware law does not allow preemptive rights unless the
charter documents specifically provide for it. Under Swiss law new issuances of
stock by Swiss stock corporations are generally subject to shareholder approval,
whereas new stock issuances by Delaware corporations require only the approval
of the board of directors. Under Swiss corporate law, dividends by Swiss
corporations require shareholder approval whereas dividends by Delaware
corporations require only the approval of the board of directors. See
"Description of Securities" for a summary for the material terms of the Harrier
Shares.
Tax Consequences
The following discussion summarizes the material Federal income tax
consequences of the Reorganization under Swiss and German law to the COPE
Shareholders and is based on the written opinion obtained by COPE from ATAG
Ernst & Young AG (which opinion has been filed as an exhibit to the
Registration Statement of which this Proxy Statement/Prospectus is made part
of). This summary is based upon existing law which is subject to change by
legislation, administrative action and judicial decision. The opinion from
ATAG Ernst & Young AG and the following summary of that opinion does not
purport to be a complete statement of all Swiss or German Federal tax
considerations that may apply to a particular shareholder and does not
address any state, local, or foreign tax consequences, except for matters of
US withholding tax. COPE Shareholders are urged, therefore, to consult with
their own tax advisors with regard to the potential tax consequences of the
Reorganization in light of their individual circumstances.
COPE has received an opinion from ATAG Ernst & Young AG substantially to
the effect that, based upon the terms of the Reorganization Agreement and
certain related factual representations, no gain or loss will be recognized
in connection with the exchange of COPE Shares for the shares of Harrier
Common Stock by COPE Shareholders who are Swiss or German taxpayers. ATAG
Ernst & Young AG also opined that the basis of the shares of Harrier Common
Stock received by the COPE Shareholders will be the same as the basis of the
COPE shares surrendered in exchange therefor. ATAG Ernst & Young AG also
opined that dividends distributed by the Company to its shareholders who are
Swiss or German taxpayers will be subject to a U.S withholding tax of (i) 5%
of the gross amount of the dividends if the beneficial owner is a company
which holds directly at least 10% of the voting stock of the Company, and
(ii) 15% of the gross amount of the dividends in all other cases.
Risk Factors
The Reorganization presents certain risks and other investment
considerations. The COPE Minority Shareholders are encouraged to read and
carefully consider the disclosure set forth at the section, "Risk Factors
Relating to the Reorganization," beginning on page 9.
-6-
<PAGE>
GENERAL INFORMATION CONCERNING ANNUAL MEETING
This Proxy Statement/Prospectus and the accompanying notice and form of
proxy are being sent to stockholders of the Company on or about August 20,
1998 in connection with the solicitation by the Board of Directors of Harrier
of proxies to be used at the Annual Meeting of stockholders of the Company to
be held on September 11, 1998 at 10:00 a.m., Pacific Time, and at any and all
adjournments thereof. The Annual Meeting will be held at 2200 Pacific Coast
Highway, Suite 301, Hermosa Beach, California.
The Annual Meeting is to be held for the purpose of allowing the
stockholders of the Company to consider and vote on various proposals, including
the Reorganization Proposal, the Glycosyn Proposal, the Amendment Proposal and
the COPE Director Proposal; however, the four proposals are not independent and
in the event that either the Reorganization Proposal, the Glycosyn Proposal, the
Amendment Proposal or the COPE Director Proposal is not approved, none of them
shall be consummated. The Reorganization Proposal provides for the acquisition
of 100% of the outstanding shares of capital stock of COPE so that upon closing
of the Reorganization Agreement COPE will become a wholly-owned subsidiary of
the Company. The Glycosyn Proposal provides for (i) the Company's sale of
2,850,000 shares of Glycosyn Common Stock to New Capital Investment Fund, a
Cayman Islands investment fund ("NCIF") in consideration of NCIF's cancellation
of all of the indebtedness owed it by the Company ($610,167 as of March 31,
1998); and (ii) Glycosyn's acquisition of all of the assets subject to the
liabilities of the Company. The Amendment Proposal provides for an amendment to
the Company's Certificate of Incorporation to effect: (a) a change in the name
of the Company to "COPE, Inc."; and (b) a reverse split of the Harrier Common
Stock on a one for 58 basis. The COPE Director Proposal provides for the
election of five directors nominated by the COPE shareholders to hold office
until the next meeting of stockholders or until their successors are duly
elected and qualified. If either the Reorganization Proposal, the Glycosyn
Proposal, the Amendment Proposal or the COPE Director Proposal is not approved,
none of them shall be consummated and the stockholders will vote on the Harrier
Director Proposal, which provides for the election of three directors nominated
by present management of the Company to hold office until the next meeting of
stockholders or until their successors are duly elected and qualified.
The Company is not aware of any matters to come before the Annual Meeting
other than as stated herein. However, if any other matters properly come before
the Annual Meeting, the persons named on the enclosed form of proxy will vote
the proxy in accordance with their best judgment on such matters.
PERSONS MAKING THE SOLICITATION
The proxy is being solicited on behalf of the Board of Directors of the
Company. In addition to solicitation of proxies by mail, proxies may be
solicited in person or by telephone or telegram by directors and officers of the
Company who will not receive additional compensation for such services. The
Company will also request brokerage firms and other custodians, nominees, and
fiduciaries to forward soliciting materials to the beneficial owners of stock
held of record by them. The Company will reimburse such brokers, custodians,
nominees and fiduciaries for the reasonable out-of-pocket expenses incurred by
them. The expense of all such solicitations, including mailing, will be borne
by the Company.
TERMS OF THE PROXY
The enclosed Proxy indicates the matters to be acted upon at the Annual
Meeting and provides boxes to be marked to indicate the manner in which the
stockholder's shares are to be voted with respect to each such matter. By
appropriately marking the boxes, a stockholder may specify, with respect to each
matter, whether the proxy holders shall vote for or against or shall be without
authority to vote the shares represented by the Proxy. The Proxy also confers
upon the holders thereof discretionary voting authority with respect to such
other business as may properly come before the Annual Meeting.
If the Proxy is executed properly and is received by the proxy holders
prior to the Annual Meeting, the shares represented by the Proxy will be voted.
Where a stockholder specifies a choice with respect to any matter to be acted
upon, the shares will be voted in accordance with such specification. Any Proxy
which is executed in such a manner as not to withhold authority to vote for the
approval of a particular proposal shall be deemed to confer such authority. A
Proxy may be revoked at any time prior to its exercise by giving written notice
of the revocation thereof to Candace Beaver, Secretary, Harrier, Inc., 2200
Pacific Coast Highway, Suite 301, Hermosa Beach, California 90254, by attending
the meeting and electing to vote in person, or by a duly executed proxy bearing
a later date.
VOTING SECURITIES
The securities entitled to vote at the Annual Meeting consist of all of the
issued and outstanding shares of the Company's common stock, $.001 par value per
share. The close of business on July 13, 1998
-7-
<PAGE>
has been fixed by the Board of Directors of the Company as the record date.
Only stockholders of record as of the record date may vote at the Annual
Meeting. As of the record date, there were 15,697,923 issued and outstanding
shares of Harrier Common stock entitled to vote at the Annual Meeting and
approximately 380 holders of record of Harrier Common Stock.
COMPANY SHARES OUTSTANDING AND VOTING RIGHTS
The only authorized class of capital stock of the Company outstanding
and entitled to vote at the Annual Meeting is Harrier Common Stock. Each
outstanding share of Harrier Common Stock is entitled to one (1) vote on each
matter submitted to the Annual Meeting. The presence at the Annual Meeting
of the holders of an amount of shares of Harrier Common Stock and proxies
representing the right to vote shares of Harrier Common Stock in excess of
one-half of the number of shares outstanding as of the Record Date will
constitute a quorum for transacting business.
Holders of a majority of the outstanding shares of Harrier Common Stock
entitled to vote must be present in person or represented by proxy to constitute
a quorum at the Annual Meeting. The affirmative vote of the holders of a quorum
of the outstanding shares of Harrier Common Stock present or represented at the
meeting is required for approval of the Reorganization Proposal. See Proposal
"No. 1: The Reorganization Proposal - Conditions to the Reorganization." The
affirmative vote of the holders of a majority of the shares of Harrier Common
Stock present or represented at the Annual Meeting is required to elect each of
the nominees for director. Cumulative voting is not permitted in the election
of directors.
The Board of Directors of the Company has designated Candace Beaver and
Tycanne Ryan, and each of them, as proxies to vote shares of Harrier Common
Stock solicited on its behalf. If the enclosed form of proxy is executed and
returned, it may nonetheless be revoked at any time prior to the vote at the
Annual Meeting by written notice to Candace Beaver, Secretary, 2200 Pacific
Coast Highway, Suite 301, Hermosa Beach, California 90254, by attending the
meeting and electing to vote in person, or by proper delivery of a duly executed
proxy bearing a later date. The persons named in the enclosed proxy will vote
as directed with respect to each proposal, or in the absence of any direction,
in favor of approval and adoption of the Reorganization Proposal, the Glycosyn
Proposal, the Amendment Proposal, the COPE Director Proposal and the COPE
Independent Auditor Proposal, or, in the event any one of the foregoing is
rejected, the Harrier Director Proposal.
-8-
<PAGE>
RISK FACTORS RELATING TO THE REORGANIZATION
THE STOCKHOLDERS OF THE COMPANY AND THE COPE MINORITY SHAREHOLDERS
SHOULD CAREFULLY EXAMINE THIS ENTIRE PROXY STATEMENT/PROSPECTUS AND THE
APPENDICES HERETO. IF THE REORGANIZATION AGREEMENT IS APPROVED AND ADOPTED
AND THE REORGANIZATION IS CONSUMMATED, THE COMPANY'S STOCKHOLDERS' EQUITY
INVESTMENT IN THE COMPANY WILL BECOME AN EQUITY INVESTMENT IN COPE.
LIKEWISE, THE COPE MINORITY SHAREHOLDERS WILL BE EXCHANGING THEIR COPE SHARES
FOR SHARES OF HARRIER COMMON STOCK. ACCORDINGLY, THE COMPANY'S STOCKHOLDERS
AND THE COPE MINORITY SHAREHOLDERS ARE URGED TO READ AND CAREFULLY CONSIDER
THE FOLLOWING INVESTMENT CONSIDERATIONS.
CONFLICTS OF INTEREST OF COMPANY MANAGEMENT
Certain officers and Directors of the Company and their associates have
an interest in the consummation of the Reorganization. As of March 31,
1998, the Company was indebted to NCIF in the amount of $610,167. NCIF is a
Cayman Islands investment fund managed by two of the Company's Directors, Mr.
Jurg Kehrli and Mr. Kevin DeVito. In connection with the Glycosyn
Recapitalization, the Company proposes to issue 2,850,000 shares of Glycosyn
Common Stock to NCIF in consideration of NCIF's cancellation of all of the
indebtedness owed to it by the Company. The consummation of Harrier's sale
of 2,850,000 shares of Glycosyn Common Stock to NCIF is subject to the
approval of the Company's shareholders and Harrier's receipt of an opinion
from an independent business appraiser that the terms of the transaction are
fair to the Company's shareholders. However, due to the interests of Messrs.
Kehrli and DeVito in both NCIF and the Company, the sale of the Glycosyn
Common Stock in consideration of the cancellation of indebtedness cannot be
considered to be an arms length transaction.
FAILURE TO CONSUMMATE THE REORGANIZATION
In the event that the Company is unable to consummate the Reorganization
with COPE, the Company will have to either locate a new reorganization
candidate or pursue the development of the business of its subsidiary,
Glycosyn. In either event, the Company's future will be jeopardized by the
lack of working capital and revenue producing operations and the Company will
require significant additional capital in order to maintain its present level
of research and development currently being undertaken by Glycosyn. The
Company had a working capital deficit of ($1,363,637) and no revenues for the
nine months ended March 31, 1998. In addition, the report from the Company's
independent accountants accompanying the Company's audited financial
statements as of and for the fiscal year ended June 30, 1997 expresses doubt
as to the Company's ability to continue as a going concern.
RELIANCE ON COPE PERSONNEL
Since its inception, COPE has been under the management of its Stephan
Isenschmid, President, and Adrian Knapp, Chairman. Messrs. Isenschmid and Knapp
are responsible for the overall direction of COPE. The success of COPE is
dependent to a significant degree upon the efforts of Messrs. Isenschmid and
Knapp and the loss or unavailability of either of them could have a material
adverse affect upon COPE's operations. COPE has obtained key-man insurance in
the amount of Sfr500,000 upon each of the lives of Mr. Isenschmid and Mr. Knapp,
however, there can be no assurance that such policies will adequately protect
COPE against the loss of either officer.
RISKS ASSOCIATED WITH THE BUSINESS OF COPE
OPERATIONAL RISKS. COPE's business is subject to significant
operational risks, including, without limitation, intense competition, rapid
and continuous developments and changes in prevailing technologies and
standards in the data storage industry, the availability of additional
capital as required and general economic conditions. There can be no
assurance that COPE will be able to successfully compete in the future. See
"Business of COPE."
DEPENDENCE ON THIRD PARTIES. An important part of the data storage and
information management consulting services and solutions provided by COPE are
the hardware and software products which it resells to its customers. In most
cases COPE acts as a wholesale distributor of those products pursuant to
nonexclusive contracts which are cancelable at the will of the vendor. While
COPE believes it has excellent relations with each of its vendors, there can be
no assurance that a vendor in the future will restrict or deny COPE the ability
to purchase its hardware or software products at the wholesale price. The
inability of COPE to purchase products from an important vendor at the wholesale
price could have a materially adverse impact on COPE's business. See "Business
of COPE."
FURTHER GROWTH. A significant amount of COPE's future growth is expected
to come from European markets outside of Switzerland. Although COPE has
substantial experience in marketing and providing its services and solutions in
Austria and Germany, the continued expansion of COPE outside of Switzerland will
present certain management and logistical issues on a level that COPE has
previously not encountered. COPE's inability to successfully administer its
growth outside of the Swiss market could have a materially adverse impact on
COPE's future profitability. See "Business of COPE."
CONTROL BY FORMER COPE SHAREHOLDERS; NO PRIOR PUBLIC COMPANY EXPERIENCE
Following the Reorganization, the current management of the Company will
be replaced and the former management of COPE will continue essentially
unchanged as the management of the Company and the headquarters and
operations of the Company will be relocated to Rotkreuz, Switzerland, the
present home of COPE. There can be no assurance that COPE's management will
be an effective management team, or that it will successfully carry out the
expansion strategy or the business plan of COPE. In addition, no member of
the COPE management team has any prior experience in managing a public
company that trades in the US securities markets.
The former shareholders of COPE will own approximately 91.4% of the
outstanding shares of Harrier Common Stock after consummation of the
Reorganization. Accordingly, the former shareholders of COPE will have the
power to elect all of the Board of Directors, to control the affairs of the
Company and to approve or disapprove any matter submitted to a vote of the
stockholders.
RELOCATION OF COMPANY HEADQUARTERS AND OPERATIONS
Prior to the Reorganization, the Company's headquarters were located in
Hermosa Beach, California and virtually all of the Company's historical
operations had been conducted in the United States. Upon the close of the
Reorganization, the Company's headquarters shall be relocated to Rotkreuz,
Switzerland and virtually all of the Company's operations shall take place in
Western Europe.
-9-
<PAGE>
FORWARD LOOKING STATEMENTS
The following discussion contains certain forward-looking statements
that are based on the Company's and COPE's beliefs as well as assumptions
made by and information currently available to the Company and COPE. When
used below and elsewhere in this in this Proxy Statement/Prospectus, the
words "believe," "expect," "anticipate," "estimate" and similar expressions
are intended to identify forward-looking statements. Such statements are
subject to certain risks, uncertainties and assumptions, including (i) the
intense competition in COPE's industry; (ii) future developments and changes
in prevailing technologies and standards in the data storage industry; (iii)
availability of additional capital as required; and (iv) general economic
conditions. Should one or more of these risks or uncertainties materialize,
or should underlying assumptions prove incorrect, actual results may vary
materially from those anticipated, estimated, or projected. The Company and
COPE caution shareholders of the Company and the COPE Minority Shareholders
not to place undue reliance on any such forward-looking statements, all of
which speak only as of the date made.
FEDERAL INCOME TAX CONSEQUENCES TO COMPANY SHAREHOLDERS
It is anticipated that the Reorganization will qualify as a reorganization
described in Section 368(a)(1)(B) of the Internal Revenue Code of 1986, such
that the Company's stockholders should not recognize any gain or loss.
However, no ruling from the Internal Revenue Service ("IRS") has been
requested that the Reorganization will so qualify. See "Proposal No. 1:
Reorganization Proposal - Federal Income Tax Consequences."
ADDITIONAL RISKS FOR CONSIDERATION BY COPE SHAREHOLDERS
NO ACTIVE TRADING MARKET. The Harrier Common Stock is traded on the OTC
Bulletin Board under the symbol "HARE." On July 22, 1998, the last reported
sale price of the Harrier Common Stock on the OTC Bulletin Board was $.16 per
share. However, the Company considers its Common Stock to be "thinly traded"
and any last reported sale prices may not be a true market-based valuation of
the Harrier Common Stock. Prior to the Reorganization, there has been a
limited public market for the Harrier Common Stock and there can be no
assurance that an active market will develop or be sustained. The Company
believes factors such as announcements of results of operations and
developments concerning the Company's competitors may cause the market price
of the Harrier Common Stock to fluctuate, perhaps substantially. In addition,
in recent years the stock market in general, and the shares of emerging
public companies in particular, have experienced extreme price fluctuations.
These broad market and industry fluctuations may adversely affect the market
price of the Harrier Common Stock subsequent to the Reorganization.
LIMITED MARKET FOR THE COMPANY'S COMMON SHARES; "PENNY STOCK" REGULATIONS.
To the extent that the price of the Harrier Common Stock trades below $5.00
per share, the Company's shares may be subject to certain "penny stock" rules
promulgated by the Securities and Exchange Commission (the "Rules"), which
impose additional sales practice requirements on broker/dealers who sell penny
stock to persons other than established customers and accredited investors
(generally institutions with assets in excess of $5,000,000 or individuals with
net worth in excess of $1,000,000). For transactions covered by the Rules, the
broker/dealer must make a special suitability determination for the purchaser
and receive the purchaser's written consent to the transaction prior to the
sale. Furthermore, the Rules generally require, among other things, that
brokers, engaged in secondary trading of penny stocks provide customers with
written disclosure documents, monthly statements of the market value of penny
stocks, disclosure of the bid and asked prices and disclosure of the
compensation to the broker/dealer and disclosure of the sales person working for
the broker/dealer. These rules and regulations may affect the ability of
broker/dealers to sell the Company's securities, thereby limiting the liquidity
of the Company's securities.
DILUTION. Prior to the Reorganization Agreement, the shareholders of COPE
effectively own 100% of the ownership interest in COPE and its subsidiaries.
Pursuant to the Reorganization, the COPE shareholders will be transfer 100% of
the equity interests of COPE for approximately 91.4% of the equity interests of
the Company. Without giving effect to any value to the Harrier Common Stock
represented by the Company's post-Reorganization interest in Glycosyn (which
will represent the Company's only post-Reorganization asset other than its
ownership interest in COPE), the COPE shareholders will experience an immediate
8.6% dilution in their equity ownership of COPE as a result of the
Reorganization.
TAX CONSEQUENCES TO COPE SHAREHOLDERS. Pursuant to the Reorganization,
each COPE shareholder will exchange their capital shares of COPE for shares
of Harrier Common Stock. COPE has received an opinion from ATAG Ernst &
Young AG substantially to the effect that, based upon the terms of the
Reorganization Agreement and certain related factual representations, no gain
or loss will be recognized under Swiss or German Federal income tax law in
connection with the exchange of COPE Shares for the shares of Harrier Common
Stock. Dividends distributed by the Company to its shareholders who are
Swiss or German taxpayers will be subject to a U.S withholding tax. See "The
Offering to the COPE Minority Shareholders - Tax Consequences." COPE
shareholders are urged to consult with their own tax advisors with regard to
the potential tax consequences of the Reorganization in light of their
individual circumstances.
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PROPOSAL NO. 1: REORGANIZATION PROPOSAL
GENERAL
The Company, COPE and Adrian Knapp and Stephan Isenschmid, the founders
and majority shareholders of COPE (the "COPE Majority Shareholders"), have
entered into the Reorganization Agreement which sets forth the terms and
conditions upon which the Reorganization is to be effected and certain
representations, warranties and covenants relating to the Reorganization.
The Reorganization Agreement provides that at the closing of the
Reorganization (the "Closing") in exchange for all of the outstanding capital
shares of COPE, the Company shall issue 2,862,000 shares (post-split) of
Harrier Common Stock. Immediately upon completion of the Reorganization, the
Company will have approximately 3,132,654 shares of Harrier Common Stock
outstanding, approximately 91.4% of which will be held by the former COPE
Shareholders.
At the Closing, COPE shall become a wholly-owned subsidiary of the Company.
All references to the Reorganization and the terms and conditions thereof in
this Proxy Statement/Prospectus are qualified by reference to the
Reorganization Agreement set forth as Appendix A hereto, which is
incorporated herein by reference.
PRINCIPAL REASONS FOR REORGANIZATION
The Company has historically been engaged in the discovery, development
and sale of selected products and technologies in the health, fitness and
medical markets. Since 1996, the Company's strategic focus has been to find
a merger candidate. The Company has considered a merger to be a priority due
to the absence of significant sales of the Company's Bioptron lamp ("Lamp")
and the Company's continuing inability to obtain the additional capital
necessary to fund its pharmaceutical research and development operations.
Management of the Company believe that in the absence of significant
additional capital, its reorganization with an operating business was its
only viable alternative. During the fiscal years ended June 30, 1996 and
1997, the Company had revenues of $66,687 and $48,069 from the sale of the
Bioptron Lamps. In 1997, the Company and Naturade, Inc. ("Naturade"), its
joint venture marketing partner, mutually agreed to terminate all operations
relating to the Bioptron Lamp. Since then, the Company has received no sales
or revenue from any source, other than $20,000 in grant income to its
Glycosyn subsidiary. The Company's and Naturade's decision was based on
their inability to generate significant sales of the Bioptron Lamps and the
scheduled termination of the Company's marketing rights to the Bioptron Lamp.
Since approximately June 1996, the Company has sought to identify a company
or business opportunity which could be acquired by the Company in exchange for
shares of Harrier Common Stock. During the last 18 months, management of the
Company reviewed a number of business plans and negotiated with a number of
acquisition candidates before entering into the Reorganization Agreement with
COPE. Management believes that COPE is superior to all other acquisition
candidates reviewed by the Company for several reasons, including the
capabilities of COPE's management, COPE's level of operations and profitability,
the prospects for growth in the data storage industry generally and COPE's
competitive position within that industry and the amount of dilution to be
experienced by the shareholders of the Company.
The Company's negotiations with COPE commenced in the fourth quarter of
1996. At that time, Adrian Knapp, Chairman of the Board of COPE, initiated
contact with New Capital AG ("NCA"), a Zurich based management and financial
consulting firm. Mr. Jurg Kehrli and Mr. Kevin DeVito, both of whom are
directors of the Company, are principals of NCA. Mr. Knapp initiated contact
with NCA for purposes of obtaining advice and assistance regarding COPE's
interest in going public in the United States. The negotiations and discussions
between NCA and COPE were carried out primarily by Mr. DeVito on behalf of NCA,
and later the Company, and Mr. Knapp on behalf of COPE. In the fourth quarter
of 1996, COPE retained NCA to conduct certain financial analysis and consulting
concerning going public in the United States.
In the course of the analysis, NCA discussed with COPE various manners of
effectively taking COPE public in the United States securities markets,
including a direct initial public offering by COPE and COPE's reorganization
with a publicly-traded U.S. corporation. The management of COPE came to an
early decision that they would like to take COPE public in the United States by
way of a reorganization with a publicly-traded U.S. corporation. Prior to
contacting NCA, COPE had discussed a U.S. initial public offering with certain
U.S. underwriters, during which COPE was made aware that the class of
underwriters that it would prefer to represent it in an initial public offering
had minimum public offering requirements of approximately $10 million, whereas
COPE did not have a need at that time for such an amount of money. At the same
time, however, COPE wished to achieve public status in order to obtain future
access to the U.S. capital markets and provide stock based compensation to its
key employees. For these reasons, COPE chose to pursue a reorganization with a
U.S. public corporation.
In the course of their discussions, NCA and COPE discussed various U.S.
public corporations and the relative advantages and disadvantages. These
discussions focused primarily on shell corporations which were not listed on
any exchange and had no assets or operations versus corporations with the
securities listed on the OTC Bulletin Board or a more senior exchange.
During these discussions, COPE was made aware of Harrier as a possible
reorganization candidate. By February 1997, COPE came to a preliminary
decision that it would like to go public in the United States through a
reorganization with Harrier, subject to Harrier's divestiture of all of its
assets, liabilities and operations. At that time, Messrs. Kehrli and DeVito
of NCA informed COPE that due to their conflict of interest between NCA and
Harrier, it would be best for COPE to terminate its relationship with NCA.
Accordingly, in February 1997, COPE terminated its consulting contract with
NCA including all obligations on the part of COPE to further compensate NCA
or any principals of NCA in connection with activities relating to the
reorganization of COPE and Harrier. Prior to that time COPE had paid NCA
approximately $20,000 for financial analysis and consulting services rendered.
On March 2, 1997, the Company and COPE entered into a non-binding Letter of
Intent for the Reorganization. The Letter of Intent was on substantially the
same terms as the Reorganization Agreement, with the exception that the Letter
of Intent originally provided that Harrier was required to divest itself of all
assets, liabilities and operations, including the entire ownership of its
Glycosyn subsidiary. Over the next several months, the Company and COPE, along
with their respective professional representatives, conducted due diligence
inquiries of the other party and drafted and negotiated the Reorganization
Agreement. In the course of those discussions and negotiations, the Company
informed COPE that it was unable to find a buyer for its Glycosyn subsidiary on
any reasonable terms. Management of the Company asked COPE to consider
completing the Reorganization with Glycosyn remaining as an operating subsidiary
of the Company. COPE informed the Company that it would only close the
Reorganization with COPE as a subsidiary as long as the Company's percentage
ownership of Glycosyn was reduced to an amount that would not require the
consolidation of Glycosyn's financial condition or results of operations with
that of the post-Reorganization Company. To this end, the Company pursued the
sale of Glycosyn Common Stock to NCIF in cancellation of the indebtedness owed
by the Company to that fund.
Management's decision to reorganize with COPE was based on the fact that
COPE's financial condition, results of operations and prospects were far
superior to any other acquisition candidate. In terms of the amount of
dilution to be experienced by the shareholders of the Company, most of the
acquisition candidates reviewed by the Company expressed their desire to
receive 85% to 90% of the issued and outstanding shares of Common Stock after
giving effect to a possible reorganization. The Company has agreed that the
COPE shareholders will receive 91.4% of the issued and outstanding shares of
Common Stock after giving effect to the Reorganization. Although this
represents a higher amount of dilution to the Company's shareholders than
other acquisition candidates reviewed by the Company, management of the
Company believes that the market value of the equity to be retained by the
Company's present shareholders after giving effect to the Reorganization will
be significantly higher than the market value of the equity that would have
been retained by the Company's present shareholders after giving effect to
reorganizations with the other acquisition candidates. Management's belief
is based on its perception that COPE's financial condition, results of
operations and prospects supported a significantly higher valuation for COPE
itself over all other acquisition candidates.
Initially, the Company and COPE agreed that the COPE Shareholders would
receive approximately 89.7% of the outstanding Harrier Common Stock after
giving effect to the Reorganization. In July 1998, COPE demanded that it
acquire a slightly higher percentage interest. COPE's demand was based on
its claim of higher than expected time and costs involved in the
Reorganization and its reevaluation of the benefits of the Reorganization
relative to alternative methods of going public and raising capital. The
Company had initially proposed, as part of the Reorganization, to reverse
split the outstanding shares of Harrier Common Stock on a 48 for one basis,
which would have resulted in 3,180,040 shares of Harrier Common Stock
outstanding after giving effect to the Reorganization of which the COPE
Shareholders would have owned 89.7% as a group and the current shareholders
of the Company would have owned 10.3% as a group. In response to COPE's
demand for a slightly higher percentage interest, in July 1998 the Company
agreed with COPE that the Company would reverse split its outstanding shares
of Harrier Common Stock on a one for 58 basis. After giving effect to the
one for 58 reverse split and the consummation of the Reorganization, the
Company will have 3,132,654 shares of Harrier Common Stock outstanding of
which the COPE Shareholders will own 91.4% as a group and the current
shareholders of the Company will own 8.6% as a group.
Management agreed to COPE's demand for a slightly higher percentage
interest based on its belief that the Reorganization, assuming a one for 58
reverse split, still represented the best alternative for the shareholders of
the Company. Although COPE had originally agreed to consummate the
Reorganization based on the Company's one for 48 reverse split and the COPE
Shareholders' acquisition of 89.7% of the issued and outstanding shares of
Harrier Common Stock, the date set forth in the Reorganization Agreement by
which the Reorganization was required to close had passed and counsel to the
Company advised management that COPE might not be contractually bound to
close the Reorganization based on the terms of a one for 48 reverse split.
Based on the last sale price for the Harrier Common Stock of $.16 per
shares as of July 22, 1998, and after giving effect to the one for 58 reverse
split, the 2,862,000 shares of Harrier Common Stock issuable to the COPE
shareholders will have an assumed market value of $26,559,360. However, the
Company considers the Harrier Common Stock to be "thinly traded" and any last
reported sale prices may not be a true market-based valuation of the Harrier
Common Stock. The number of shares of Harrier Common Stock to be issued to
the COPE Shareholders was determined by the parties agreement that the COPE
Shareholders would own 91.4% of the Company after giving effort to the
Reorganization.
THE REORGANIZATION AGREEMENT
On October 30, 1997, the Company entered into a Securities Purchase
Agreement and Plan of Reorganization ("Reorganization Agreement") with COPE,
as amended on July 24, 1998. The principal shareholders of COPE, Adrian
Knapp and Stephan Isenschmid ("majority Shareholders"), have also each
executed the Reorganization Agreement and thereby agreed to exchange their
shares of COPE capital stock for shares of Harrier Common Stock on the same
terms now being offered by the Company to the COPE Minority Shareholders. As
of the date of this Proxy Statement/Prospectus, Messrs. Knapp and Isenschmid
each own 480 shares of COPE capital stock, representing a total of 960 of the
1,060 issued and outstanding shares of COPE capital stock.
The Reorganization Agreement provides that immediately prior to the
Closing of the Reorganization, the Company shall effect the Glycosyn
Recapitalization and file an amendment (the "Amendment") to the Company's
Certificate of Incorporation to: (i) change the name of the Company to COPE
Inc.; and (ii) reverse split the outstanding shares of Common Stock of the
Company on a one for 58 basis. At the Closing, and subject to the
satisfaction of the foregoing, the Company will issue 2,862,000 shares
(post-split) of the Company's $.001 par value common stock ("Harrier Common
Stock"), representing 91.4% of the issued and outstanding shares of Harrier
Common Stock after giving effect to the Closing, in exchange for the COPE
shareholders' transfer of all of the issued and outstanding capital shares of
COPE to the Company. The Reorganization Agreement initially provided that
the Company would effect a one for 48 reverse split as a condition to the
Reorganization. In July 1998, the Reorganization Agreement was amended to
require the Company to conduct a one for 58 reverse split, for the reasons
described further above. The Reorganization Agreement also requires that the
five designees of the COPE Shareholders, Adrian Knapp, Stephan Isenschmid,
Peter Koch, Markus Stalder and Kevin DeVito, be elected directors of the
Company. See "Proposal No. 4: Election of COPE Directors
The Closing shall occur when: (i) the COPE Minority Shareholders shall
have tendered their COPE capital shares in exchange for shares of Harrier
Common Stock; (ii) the Company's stockholders shall have
adopted and approved the Reorganization Agreement, the Glycosyn
Recapitalization, the Amendment Proposal and the COPE Director Proposal; (iii)
the Amendment shall have been filed with the Secretary of State of Delaware; and
(iv) all conditions to closing of the Reorganization Agreement shall have been
met and all closing documents shall have been delivered. The Reorganization
Agreement contains typical representations and warranties of the parties for
transactions of this type.
The foregoing does not purport to be a complete statement of the terms of
the Reorganization
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Agreement. Stockholders are encouraged to read the entire Reorganization
Agreement, a copy of which is appended hereto as Appendix A.
CONDITIONS TO THE REORGANIZATION
The Reorganization Agreement sets forth certain representations and
warranties by each of the parties and the terms, covenants and conditions to
be complied with and performed by each of them on or before the Closing.
Consummation of the Reorganization is conditioned upon satisfaction or waiver
of conditions precedent set forth in the Reorganization Agreement, including,
among other things: (i) the tender to the Company of all COPE capital shares
held by the COPE Minority Shareholders; (ii) the approval of the Reorganization
Agreement, the Glycosyn Recapitalization, the Amendment Proposal and the COPE
Director Proposal by the affirmative vote of a quorum of the Harrier Common
Stock; (iii) the filing of the Amendment with the Delaware Secretary of State
for purposes of changing the name of the Company to COPE, Inc. and effecting
the one for 58 reverse split; (iv) the Company's sale of 2,850,000 shares of
Glycosyn Common Stock to NCIF; (v) the Company's transfer of all assets and
liabilities to Glycosyn and the release of the Company by its creditors with
respect to all of its liabilities; (vi) the absence of any material adverse
change in the condition, financial or otherwise, of the Company or COPE;
(vii) the absence of material misrepresentations or breaches of covenants;
and (viii) the absence of any temporary restraining order, preliminary or
permanent injunction, or other order preventing consummation of the
Reorganization or any transaction contemplated by the Reorganization
Agreement.
The Reorganization Agreement may be terminated and the Reorganization
abandoned (whether before or after approval by the Company stockholders): (i)
by the mutual consent of the COPE Majority Shareholders and the Company; (ii)
by the Company in the event of the material breach by COPE or the COPE
Majority Shareholders of any provision of the Reorganization Agreement; or
(iii) by the COPE or the COPE Majority Shareholders in the event of the
material breach by the Company of any provision of the Reorganization
Agreement. Subsequent to the approval of the Reorganization Agreement by the
shareholders of the Company, either party may waive any of the conditions to
its obligations to close the transactions under the Reorganization Agreement.
In the event of any material changes or amendments to the Reorganization
Agreement or the terms of the Reorganization itself, whether before or after
shareholder approval of the Reorganization Agreement, the Company will
resolicit proxies pursuant to an appropriately revised Proxy Statement.
CONFLICTS OF INTEREST OF COMPANY MANAGEMENT
Certain officers and Directors of the Company and their associates have
an interest in the consummation of the Reorganization, as follows:
NCIF LOAN. During the year ended June 30, 1996 the Company entered into a
$500,000 loan agreement with New Capital Investment Fund ("NCIF"), a Cayman
Islands investment fund managed by two of the Company's Directors, Mr. Jurg
Kehrli and Mr. Kevin DeVito. The loan bears interest on the unpaid principal
amount at the rate of twelve percent (12%) per annum, with interest payable
monthly. The principal outstanding under the loan is due and payable on June 4,
1998. Loan obligations can be paid with securities of either the Company or its
Glycosyn subsidiary.
As of March 31, 1998, the Company was indebted to NCIF in the amount of
$610,167. In connection with the Glycosyn Recapitalization, the Company
proposes to sell 2,850,000 shares of Glycosyn Common Stock to NCIF in
consideration of NCIF's cancellation of all of the indebtedness. The
consummation of Harrier's sale of 2,850,000 shares of Glycosyn Common Stock to
NCIF is subject to the approval of the Company's shareholders and Harrier's
receipt of an opinion from an independent business appraiser that the terms of
the transaction are fair to the Company's shareholders.
STOCK OWNERSHIP. As of June 30, 1998, directors and officers of the
Company and their affiliates beneficially owned an aggregate of 853,582 shares
of Harrier Common Stock, representing approximately 5.4% of the outstanding
shares of Harrier Common Stock. See "Principal Stockholders of the Company."
ACCOUNTING TREATMENT
The Reorganization will be treated as a reverse acquisition with COPE being
the accounting acquiror.
EXPENSES
Pursuant to the Reorganization Agreement, the parties have agreed that the
party incurring costs and expenses in connection with the Reorganization shall
pay them.
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FEDERAL INCOME TAX CONSEQUENCES OF REORGANIZATION
The following discussion summarizes the material Federal income tax
consequences of the Reorganization to the Company and its stockholders but
does not purport to be a complete statement of all Federal tax considerations
that may apply to a particular shareholder and does not address any state,
local, or foreign tax consequences. This summary is based upon existing law
which is subject to change by legislation, administrative action and judicial
decision. Stockholders are urged, however, to consult with their own tax
advisors with regard to the potential tax consequences of the Reorganization in
light of their individual circumstances.
The Company has received an opinion from Raiskin & Revitz (which opinion
has been filed as an exhibit to the Registration Statement of which this
Proxy Statement/Prospectus is made part of) substantially to the effect that,
based upon the terms of the Reorganization Agreement and certain related
factual representations, that the Reorganization will qualify as a
reorganization described in Sections 368(a)(1)(B) and 368(a)(1)(E) of the
Internal Revenue Code of 1986 (the "Code") and thus, no gain or loss will be
recognized by the Company or the holders of Harrier Common Stock as a result
of the Reorganization. In their opinion, Raiskin & Revitz note that the net
operating loss of the Company will be reduced for Federal income tax purposes
as a result of the Reorganization pursuant to Section 382 of the Code.
Raiskin & Revitz state in their opinion that the extent of the reduction of
the net operating loss will depend on certain facts existing as of the date
of the close of the Reorganization, consequently they are not able to opine
on the amount or extent of the reduction. As of March 31, 1998, the
Company's pro forma net operating loss for Federal income tax purposes was
approximately $11,900,000. The Company believes that the net operating loss
as of March 31, 1998 may be reduced for Federal income tax purposes by as
much as 95%.
DISSENTERS' RIGHTS
Neither the Company's Bylaws nor the Delaware General Corporation Law
provide dissenters rights to the holders of Harrier Common Stock who do not vote
in favor of the Reorganization Proposal.
VOTE REQUIRED
Under Delaware law, to approve the Reorganization, the vote of outstanding
shares of Harrier Common Stock is not technically required. However, the
approval of the stockholders of the Company of the Reorganization is required by
the Reorganization Agreement. Thus, the approval of a majority of the shares
present or represented at the Annual Meeting will be required for approval of
the Reorganization. The officers and directors of the Company and their
affiliates owning beneficially an aggregate of approximately 5.4% of the
outstanding Harrier Common Stock have indicated they intend to vote in favor of
the Reorganization Proposal.
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PROPOSAL NO. 2: GLYCOSYN PROPOSAL
GENERAL
Glycosyn is approximately a 94% owned subsidiary of the Company and was
formed to further develop and finance technologies currently owned or licensed
by the Company in a field of carbohydrate chemistry called glycosylation, which
the Company believes to have broad applications in the fields of medical
therapeutics. Patents have been filed and issued for several pharmaceutical
compounds created through the Company's glycosylation process. Furthermore,
newer technologies are in the "discovery" stage, meaning chemical activity has
been characterized and further development is underway to support additional
patent applications. Since its inception in 1996, Glycosyn has generated
$100,000 of revenue, all of which was received under one government grant.
The Glycosyn Recapitalization is part of a broader recapitalization of the
Company in connection with the COPE Reorganization. COPE conditioned its
agreement to reorganize with the Company upon the Company's substantial
divestiture of all assets, liabilities and operations. Initially, COPE insisted
on the Company's sale or transfer of its entire interest in Glycosyn. Company
management considered and pursued alternative means of satisfying COPE's
demands, including the analysis of a spin-off of the Company's approximately 94%
equity interest in Glycosyn and sale of its approximately 94% interest in
Glycosyn. After consideration of the available alternatives and in the absence
of any equitable offers to purchase Glycosyn, the Company has structured the
following series of transactions (referred to herein as the "Glycosyn
Recapitalization") for purposes of satisfying COPE's demands:
- Concurrent with the close of the COPE Reorganization, Harrier
will transfer all of its assets and liabilities to Glycosyn. In connection
therewith, the principal creditors of Harrier, except NCIF which is presently
owed $610,167 by Harrier as of March 31, 1998, will agree to release Harrier
of any further liability for their claims.
- Concurrent with the close of the COPE Reorganization, Harrier will
sell to NCIF 2,850,000 shares of its 5,000,000 Glycosyn Common Stock shares in
consideration of NCIF's agreement to cancel all of the indebtedness owed by
Harrier ($610,167 as of March 31, 1998). NCIF is an investment fund in which
Harrier's Chairman of the Board, Jurg Kehrli, and President, Kevin DeVito, are
retained as managers. The close of the COPE Reorganization is a condition to
the Company's sale of Glycosyn Common Stock to NCIF and in the event the COPE
Reorganization does not close for any reason the Company will not sell the
Glycosyn Common Stock to NCIF.
The Company's decision to sell 2,850,000 shares of Glycosyn Common Stock to
NCIF is the result of (i) the Company's desire to retain ownership of Glycosyn
in the absence of an acceptable purchase offer and (ii) COPE's demand that
Harrier substantially divest all of its assets and liabilities. Upon the sale
of the 2,850,000 shares of Glycosyn Common stock, Harrier's interest in Glycosyn
will be reduced to approximately 40% and, as a result, the financial condition
and results of operations of Glycosyn will not be consolidated with the
Company's subsequent to the close of the COPE Reorganization. The Company's
reduction of its ownership interest in Glycosyn to a level which terminated the
Company's requirement to consolidate Glycosyn's financial statements has
satisfied COPE's demand for the substantial divestiture of all its assets and,
at the same time, allows the Company to retain a significant ownership interest
in the subsidiary.
In furtherance of its obligation under the Reorganization Agreement to
effect the Glycosyn Recapitalization, the Company intends to enter into an
agreement ("Glycosyn Agreement") with NCIF and Glycosyn pursuant to which,
immediately prior to the Closing: (i) the Company will sell 2,850,000 shares of
Glycosyn Common Stock to NCIF in exchange for NCIF's cancellation of all
indebtedness owed by the Company; and (ii) the Company will transfer to Glycosyn
all of its assets, consisting primarily of equipment and furniture, subject to
Glycosyn's assumption of all of the Company's liabilities as of the Closing.
The Glycosyn Agreement sets forth certain representations and warranties by
each of the parties and the terms, covenants and conditions to be complied with
and performed by each of them on or before the close of the transactions
thereunder. Consummation of the transactions under the Glycosyn Agreement are
conditioned upon satisfaction or waiver of conditions precedent set forth in the
Reorganization
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Agreement, including, among other things: (i) the approval of the
Reorganization Agreement and the Glycosyn Recapitalization by the
stockholders of the Company; (ii) the Company's receipt of a fairness opinion
from an independent business appraiser that the terms of the Company's sale
of the 2,850,000 shares of Glycosyn Common Stock are fair to the shareholders
of the Company; (iii) the absence of material misrepresentations or breaches
of covenants; and (iv) the absence of any temporary restraining order,
preliminary or permanent injunction, or other order preventing consummation
of the Reorganization or any transaction contemplated by the Reorganization
Agreement or the Glycosyn Agreement.
FAIRNESS OPINION
Business Valuation & Planning Group ("BVPG"), of Orange, California, has
been engaged by the Company to advise the Board of Directors of the Company
as to the fairness, from a financial point of view, of the proposed Glycosyn
Recapitalization. Prior to its engagement of BVPG, the Company and NCIF had
agreed in principle on the terms of the Glycosyn Recapitalization and BVPG
was asked to render an opinion on those terms. In January 1998, BVPG
rendered an opinion to the Company's Board of Directors that, as of the date
of such opinion, the Company's sale of 2,850,000 shares of its Glycosyn
Common Stock in exchange for NCIF's cancellation of all of the indebtedness
owed to it by the Company ($595,167 as of December 31, 1997) is fair to
stockholders of the Company from a financial point of view. In rendering its
opinion, BVPG determined that a reasonable estimate of the total fair market
value of Glycosyn as of December 31, 1997 was $930,423. This value was
determined by the income value method (aka the discounted cash flow method),
which was deemed by BVPG to be the most applicable method of valuing Glycosyn.
In authorizing and approving the terms of the Glycosyn Recapitalization,
specifically the Company's sale of 2,850,000 shares of its Glycosyn Common Stock
in exchange for NCIF's cancellation of all of the indebtedness owed to it by
the Company ($595,167 as of December 31, 1997), the Board of Directors of the
Company took note that the estimated fair market value per share of Glycosyn
(based on 5,262,100 shares outstanding and an estimated fair market value of
$930,423) as of December 31, 1997 was approximately $.18 per share, whereas
NCIF's effective purchase price for the 2,850,000 shares of Glycosyn Common
Stock (based on NCIF's cancellation of $595,167 of indebtedness as of
December 31, 1997 for 2,850,000 shares of Glycosyn Common Stock) would be
$.209 per share. As of March 31, 1998, the indebtedness owed by the Company
to NCIF had increased to $610,167, through the accrual of interest on the
principal amount, effectively increasing NCIF's purchase price for the
Glycosyn Common Stock (based on NCIF's cancellation of $610,167 of
indebtedness for 2,850,000 shares of Glycosyn Common Stock) to $.214 per
share as of March 31, 1998.
In its opinion, BVPG stated that the basic principle behind the valuation
of a closely-held private company, such as Glycosyn, is to analyze the earning
power of the Company and its ability to convert earning power into relevant
value. BVPG measured earning power using the rates of return expected of the
financial markets for various types of investment alternatives, with
consideration given to history, expected growth rates and risk in comparison to
similar companies, as well as other techniques to determine fair market value.
BVPG stated that regardless of the valuation method utilized, in the case of a
closely-held private enterprise, the subject's fair market value is influenced
by the relative illiquidity of the interests representing ownership of the
enterprise. Not only is there no assurance that a buyer will be found at any
price, but in addition liquidating a position in a privately-held company can be
more costly and time consuming than liquidating securities ownership in a
publicly-traded enterprise. For these reasons, BVPG stated that a discount
relative to the value of a similar but publicly-traded security should be
applied to the value of privately-held company to reflect the limited
marketability. In estimating the fair market value of Glycosyn, BVPG applied a
discount for the lack of marketability of 32% from the estimated fair market
value, which BVPG supported by reference to several recent studies which
analyzed the discount for lack of marketability from the fair market value of
privately-held companies.
In valuing Glycosyn, BVPG considered three methods of valuation -- the
income value method (aka discounted cash flow method), the book value method and
the market value method. As more fully described below, BVPG eliminated the
valuations determined by the market value and book value methods and relied upon
the income value method as being the most reliable indicator of Glycosyn's
estimated fair market value.
INCOME VALUE METHOD. One of the methods employed by BVPG was the income
value method (aka discounted cash flow method). BVPG stated that the income
value method is used for the purpose of determining the present value of
anticipated future cash flow. Under the income value method, BVPG relied
upon Glycosyn's internally projected cash flow statements for fiscal years
1998, 1999 and 2000, which reflected cash flow from operations of $61,025 in
fiscal 1998, $618,524 in fiscal 1999 and $1,261,649 in fiscal 2000 (for
aggregate cash flow from operations of $1,941,198 for the three fiscal years
ending 2000). BVPG then applied a discount rate of 51.73% to arrive at a
present valuation of $670,066 for Glycosyn's three year cash flow. The
discount rate consisted of a base rate of 6.73%, representing the discount
associated with risk free securities as reflected by the interest rate on
30-year Treasury Bills as of the opinion date, and a risk premium of 45%,
representing the discount associated with systematic and unsystematic risk
based on a proprietary mathematical model developed by BVPG. Added to that
present value dollar amount was the residual value (which represented the
value of Glycosyn's business at the end of the three-year forecast) of
$698,203. Residual value was determined by projecting cash flow for the year
2000 (estimated to be $1,261,649) and capitalizing that amount using the
reciprocal of the discount rate of 51.73%. The sum of the cumulative present
value of cash flows and the present value of the residual value was
discounted for lack of marketability at 32% to arrive at an estimated fair
market value using the income value method of $930,423.
THE MARKET VALUE METHOD. BVPG also employed the market value method of
determining the estimated fair market value for Glycosyn. BVPG located two
private company sales, Royce Laboratories and Envirogen, Inc., which had
recently been sold in arm's-length transactions. Relying upon the publicly
disclosed transaction value and utilizing a multiple of net sales for
purposes of comparative value analysis, BVPG estimated that Royce
Laboratories had been sold at 3.97 times its most recent annual net sales and
Envirogen had been sold at a value of a multiple of 1.51 its most recent
annual net sales. Assuming for purposes of its opinion that Glycosyn had
annual net sales of $275,000, which was derived from Glycosyn's 1998
projected statement of operations, BVPG arrived at market valuations of
Glycosyn of $1,092,217 (determined by base annual sales of $275,000 by Royce
Laboratory's multiple of 3.97) at $415,094 (represented by the base annual
salary of $275,000 multiplied by the Envirogen multiple of 1.51). The
estimated fair market value per share of Glycosyn under the market value
method (based on 5,262,100 shares outstanding and an estimated fair market
value of $1,092,217) as of December 31, 1997 was approximately $.208 per
share, whereas NCIF's effective purchase price for the 2,850,000 shares of
Glycosyn Common Stock (based on NCIF's cancellation of $595,167 of
indebtedness as of December 31, 1997 for 2,850,000 shares of Glycosyn Common
Stock) would be $.209 per share. As of March 31, 1998, the indebtedness owed
by the Company to NCIF had increased to $610,167, effectively increasing
NCIF's purchase price for the Glycosyn Common Stock to $.214 per share as of
March 31, 1998. BVPG found that the estimated fair market value of Glycosyn
based on the Royce Laboratory's multiple roughly approximated the estimated
fair market value of Glycosyn resulting from the income value method, however
BVPG determined not to rely on the market value method for purposes of
estimating determining the fair market value of Glycosyn based on its
conclusion that the two subject companies, Royce Laboratories and Envirogen,
were too dissimilar in nature to Glycosyn.
BOOK VALUE METHOD. BVPG also considered the book value method for
purposes of determining the estimated fair market value of Glycosyn.
However, BVPG concluded that the book value of a company rarely bears a
relationship to its market value and that whereas book value is a useful
accounting concept, it has only limited applicability in the valuation
process. Nonetheless, BVPG relied upon the pro forma balance sheet of
Glycosyn to arrive at an estimated fair market value based on the book value
method of $838,871, which consisted of Glycosyn's pro forma book value based
on certain pro forma adjustments. The estimated fair market value per share
of Glycosyn under the book value method (based on 5,262,100 shares
outstanding and an estimated fair market value of $838,871) as of December
31, 1997 was approximately $.159 per share, whereas NCIF's effective purchase
price for the 2,850,000 shares of Glycosyn Common Stock (based on NCIF's
cancellation of $595,167 of indebtedness as of December 31, 1997 for
2,850,000 shares of Glycosyn Common Stock) would be $.209 per share. As of
March 31, 1998, the indebtedness owed by the Company to NCIF had increased to
$610,167, effectively increasing NCIF's purchase price for the Glycosyn
Common Stock to $.214 per share as of March 31, 1998.
In arriving at its fairness determination and preparing its opinions,
BVPG performed certain quantitative financial analysis, including a
comparative financial and operating analysis of Glycosyn. BVPG also reviewed
a variety of financial and other records of Glycosyn. However, in connection
with its review, BVPG did not independently verify any of such information
and relied on such information to be complete and accurate in all material
respects.
In rendering its fairness opinion, BVPG made certain assumptions concerning
Glycosyn and its internal and external environment. These assumptions are:
1. That Glycosyn will have the necessary resources and commitments to
develop its business.
2. That Glycosyn will be an on-going concern, and as such have a value in
excess of the book value of its assets, and meet its internal
financial projections.
3. The stated fair market value is only valid for the date of the
valuation and for the purpose specified.
4. That all information and documents provided by the Company and
Glycosyn to BVPG are truthful, accurate and complete.
BVPG stated in its fairness opinion that the fair market value fairly
represents the amount the Company can expect to receive at the time of sale for
its interest in Glycosyn. BVPG's opinion is based on the analysis of the
financial statements, sales forecasts; market, industry and competitive
analysis; and knowledge of the Glycosyn as provided by management.
BVPG stated that the fair market value represents the amount the Company
would net from a sale before taxes, commissions, and other selling costs. This
value may be increased by offering terms which allow the prospective buyer to
reduce the amount of the initial cash investment. However, BVPG stated that the
exact amount the Company might receive for the stock or assets of Glycosyn is
dependent on the terms of the sale, tax provisions existing at the time of
sale, financial performance and conditions at the time of sale, as well as
other factors that impact value.
BVPG is located in Orange, California and for the past 14 years has been
engaged in the business of providing business valuations of privately held
businesses. The Company selected BVPG based on the level of its experience
in valuing privately owned businesses and the terms of the engagement
proposed by BVPG, including its fees. The Company paid BVPG $5,000 for its
valuation services.
CONFLICTS OF INTEREST OF COMPANY MANAGEMENT
NCIF is a Cayman Islands investment fund managed by two of the Company's
Directors, Mr. Jurg Kehrli and Mr. Kevin DeVito. See Proposal No.1: COPE
Reorganization - Interest of Management.
EXPENSES
The Company will pay all of the expense to be incurred by the Company or
Glycosyn in connection with Glycosyn Recapitalization. All expense of NCIF
will be paid by NCIF.
FEDERAL INCOME TAX CONSEQUENCES OF GLYCOSYN RECAPITALIZATION
The Company has received an opinion from Raiskin & Revitz (which opinion
has been filed as an exhibit to the Registration Statement of which this
Proxy Statement/Prospectus is made part of) substantially to the effect that,
based upon the terms of the Glycosyn Proposal and certain related factual
representations, the Company's sale of the Glycosyn Common Stock to NCIF and
the Company's transfer of its assets to Glycosyn and Glycosyn's assumption of
the Company's liabilities will result in the Company's recognition of gain or
loss on the transaction. While Raiskin & Revitz was unable to opine on the
exact amount of gain and related tax liability, the Company believes that the
available net operating loss of the Company for Federal income tax purposes
will offset any gain for Federal income tax purposes realized on the sale of
the Glycosyn Common Stock to NCIF and the Company's transfer of its assets to
Glycosyn.
DISSENTERS' RIGHTS
Neither the Company's Bylaws nor the Delaware General Corporation Law
provide dissenters rights to the holders of Harrier Common Stock who do not vote
in favor of the Glycosyn Recapitalization Proposal.
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<PAGE>
VOTE REQUIRED
Under Delaware law, to approve the Glycosyn Recapitalization, the vote of
outstanding shares of Harrier Common Stock is not technically required.
However, the approval of the stockholders of the Company of the Glycosyn
Recapitalization is required by the Reorganization Agreement. Thus, the
approval of a majority of the shares present or represented at the Annual
Meeting will be required for approval of the Glycosyn Recapitalization. The
officers and directors of the Company and their affiliates owning beneficially
an aggregate of approximately 5.4% of the outstanding Harrier Common Stock have
indicated they intend to vote in favor of the Glycosyn Recapitalization
Proposal.
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<PAGE>
PROPOSAL NO. 3: AMENDMENT PROPOSAL
GENERAL
The Board of Directors of the Company believes that the best interests
of the Company and its stockholders will be served by approving the
Amendment. The Amendment will: (i) change the name of the Company to "COPE,
Inc.;" and (ii) effect a reverse split of the outstanding shares of Harrier
Common Stock on a one for 58 basis. Stockholders are urged to read carefully
the following sections of this Proxy Statement, including the Amendment,
Appendix B hereto, before voting on this proposal.
NAME CHANGE
As a condition to the Reorganization, the stockholders of the Company
will be approving a change in the name of the Company to COPE, Inc. In the
event the Reorganization Agreement is not approved, the Amendment Proposal
will be withdrawn. The purpose of the name change is to enable third parties
to more easily identify the Company after the Reorganization is effected.
REASONS FOR THE REVERSE SPLIT
Pursuant to the reverse split, each 58 shares of presently issued and
outstanding Harrier Common Stock would be converted and exchanged into one
share of post-split common stock ("New Common Stock"). Authorization for the
reverse split includes the authorization for the rounding-up of all
fractional shares resulting from the reverse split. Thus, there will be
slightly over 270,654 shares issued and outstanding prior to the time the
Reorganization is effected. The proposed reverse stock split will not affect
materially any stockholder's proportionate equity interest in the Company
other than a slight adjustment which may occur due to the rounding-up of
fractionalized interests resulting from the reverse split.
The purpose of the reverse split is to accomplish the financial terms
agreed upon with COPE and the COPE Shareholders in the Reorganization
Agreement as it relates to equity ownership interest in the Company. The
management of COPE has negotiated for the one for 58 reverse split based on
their desire to reach a stock price of at least $4.00 per share in order to
qualify the New Common Stock for a listing on the NASDAQ Small Cap Stock
Market. There can be no assurance, however, that the New Common Stock will
trade at a price near or above $4.00 per share or that the Company will be
able to list its New Common Stock on the NASDAQ Small Cap Stock Market.
The reverse split will not affect the stockholders' equity of the
Company as reflected on the financial statements of the Company, except to
change the number of issued and outstanding shares of New Common Stock.
EXCHANGE OF CERTIFICATES
No scrip or fractional share certificates of New Common Stock will be
issued in connection with the proposed reverse stock split. Shareholders of
record holding a number of shares not evenly divisible by 58 who would
otherwise receive a fractional share of New Common Stock will receive one
share of New Common Stock in lieu of each fractional share resulting from the
proposed reverse stock split. The shareholders of the Company are not being
asked to exchange the certificates for their existing shares of Common Stock
for certificates for shares of New Common Stock, however, they are entitled
to do so if they wish.
FEDERAL INCOME TAX CONSEQUENCES OF THE REVERSE SPLIT
The federal income tax consequences of the proposed reverse stock split
will be as set forth below. The following information is based upon existing
law which is subject to change by legislation, administrative action and
judicial decision and is necessarily general. Therefore, stockholders are
advised to consult with their own tax advisor for more detailed information
relating to their individual tax
-17-
<PAGE>
circumstances.
The Company has received an opinion from Raiskin & Revitz (which opinion
has been filed as an exhibit to the Registration Statement of which this
Proxy Statement/Prospectus is made part of) substantially to the effect that,
based upon the terms of the proposed reverse stock split and certain related
factual representations:
1. The proposed reverse stock split will be a tax-free
recapitalization for the Company and its stockholders to the extent that
shares of Harrier Common Stock are "exchanged" solely for shares of New
Common Stock.
2. The receipt of New Common Stock due to the issuance of a whole
share of New Common Stock in lieu of any fractional shares resulting from the
proposed reverse stock split should constitute a nontaxable stock dividend.
3. The shares of New Common Stock in the hands of stockholder will
have an aggregate basis for computing gain or loss for federal income tax
purposes equal to the aggregate basis of shares of Harrier Common Stock held
by that shareholder immediately prior to the proposed reverse stock split.
4. A stockholder's holding period for shares of New Common Stock for
Federal income tax purposes will include the holding period of shares of
Harrier Common Stock exchanged therefor, provided that the shares of Harrier
Common Stock were capital assets in the hands of the stockholder.
VOTE REQUIRED
In accordance with Delaware law, the affirmative vote of the holders of
at least a majority of the outstanding shares of Harrier Common Stock present
or represented at the Annual Meeting will be required for approval of the
Amendment. The officers and directors of the Company and their affiliates
owning beneficially an aggregate of approximately 5.4% of the outstanding
Harrier Common Stock have indicated that they intend to vote in favor of the
Amendment Proposal.
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<PAGE>
PROPOSAL NO. 4: COPE DIRECTOR PROPOSAL
GENERAL
In the event that the Reorganization Proposal, the Glycosyn Proposal and
the Amendment Proposal are all approved, five directors nominated by the COPE
Shareholders are to be elected at the Annual Meeting to hold office until the
next annual meeting of stockholders or until their successors have been duly
elected and qualified. The five nominees for director are Adrian Knapp,
Stephan Isenschmid, Peter Koch, Markus Stalder and Kevin DeVito. See
"Management of the Company following the Reorganization" below for
information with respect to the age, current positions and background of each
of these nominees.
The Company's Certificate of Incorporation and Bylaws give the Board of
Directors ("Board") the authority to determine the size of the Board. The
Board currently consists of three directors. The Company's governing charter
documents provide that each director of the Company holds office until the
next annual meeting of stockholders or until his successor is duly elected
and qualified.
Subject to the approval of the Reorganization Agreement by the
stockholders, the Board has authorized an increase in the number of directors
to five and has authorized the nomination of Adrian Knapp, Stephan
Isenschmid, Peter Koch, Markus Stalder and Kevin DeVito to serve as
directors, commencing upon the Closing of the Reorganization Agreement, until
the next annual meeting of stockholders or until his successor is duly
elected and qualified.
VOTE REQUIRED
The affirmative vote of holders of a majority of the Harrier Common
Stock present or represented at the Annual Meeting will be required to elect
each of the nominees for director. Cumulative voting is not permitted in the
election of directors. The officers and directors of the Company and their
affiliates owning beneficially an aggregate of approximately 5.4% of the
outstanding Harrier Common Stock have indicated that they intend to vote in
favor of the COPE Director Proposal. Subject to the approval of the
Reorganization Agreement by the stockholders, management recommends the
election of all nominees for director listed in Proposal No.4.
PROPOSAL NO. 5: COPE INDEPENDENT AUDITOR PROPOSAL
The Company's independent auditors for the fiscal years ended June 30,
1997 and 1996 were Raimondo Pettit Group (formerly Raimondo, Pettit &
Glassman). Based on an expectation of the stockholders' approval of the
Reorganization Proposal, the Board of Directors of the Company has approved a
change in the Company's fiscal year end to December 31 and has nominated Atag
Ernst & Young, a member of Ernst & Young International, COPE's current
independent auditors, as the Company's independent auditors for the fiscal
year ending December 31, 1997. In the event the Reorganization Proposal is
not approved, the Company would not expect to retain Atag Ernst & Young and,
instead, Raimondo Pettit Group. Representatives of Raimondo Pettit Group
are expected to be present at the meeting and will be available to
make a statement and respond to appropriate questions. Representatives of
Atag Ernst & Young are not expected to be present at the meeting.
VOTE REQUIRED
Under Delaware law, to approve the COPE Independent Auditor Proposal,
the vote of outstanding shares of Harrier Common Stock is not technically
required. The officers and directors of the Company and their affiliates
owning beneficially an aggregate of approximately 5.4% of the outstanding
Harrier Common Stock have indicated they intend to vote in favor of the COPE
Independent Auditor Proposal.
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<PAGE>
PROPOSAL NO. 6: HARRIER DIRECTOR PROPOSAL
GENERAL
In the event that either the Reorganization Proposal, the Glycosyn
Proposal, the Amendment Proposal or the COPE Director Proposals is not
approved, three directors nominated by the Board of Directors of the Company
are to be elected at the Annual Meeting to hold office until the next annual
meeting of stockholders or until their successors have been duly elected and
qualified. The three nominees for director are Jurg Kehrli, Kevin DeVito and
William Cordeiro. See "Management of the Company" for information with
respect to the age, current positions and background of each of these
nominees.
VOTE REQUIRED
The vote of the holders of a majority of the Harrier Common Stock
present or represented at the Annual Meeting will be required to elect each
of the nominees for director. Cumulative voting is not permitted in the
election of directors. In the event that either the Reorganization Proposal,
the Glycosyn Proposal, the Amendment Proposal or the COPE Director Proposals
is not approved, management recommends the election of all nominees for
director listed in Proposal No. 6.
OTHER MATTERS
Except for the matters referred to in the accompanying Notice of Annual
Meeting, management does not intend to present any matter for action at the
Annual Meeting and knows of no matter to be presented at the Annual Meeting
that is a proper subject for action by the stockholders.
DESCRIPTION OF SECURITIES
CURRENT
The authorized capital stock of the Company consists of 30,000,000
shares of Common Stock, $.001 par value ("Harrier Common Stock"), of which,
as of June 30, 1998, 15,697,923 shares of Harrier Common Stock were issued and
outstanding and held of record by approximately 380 persons. Each holder of
shares of Harrier Common Stock is entitled to one vote for each share held on
all matters to be voted upon by the stockholders generally. The shares do
not have cumulative voting rights, which means that the holders of more than
50% of the shares of Harrier Common Stock voting for the election of
directors can elect all the directors, and that in such an event the holders
of the remaining shares would not be able to elect a single director.
The approval of proposals submitted to stockholders at a meeting
requires the favorable vote of a majority of the shares voting, except in the
case of certain fundamental matters (such as certain amendments to the
Certificate of Incorporation, and certain mergers and reorganizations), in
which cases Delaware law and the Company's Bylaws require the favorable vote
of at least a majority of all outstanding shares. Stockholders are entitled
to receive such dividends as may be declared from time to time by the Board
of Directors out of funds legally available therefor, and in the event of
liquidation, dissolution or winding up of the Company to share ratably in all
assets remaining after payment of liabilities. The holders of shares of
Harrier Common Stock have no preemptive, conversion or subscription rights.
The Company's Certificate of Incorporation provides that the directors of
the Company shall be protected from personal liability to the fullest extent
permitted by law. In addition, the Company's Bylaws provide that the Company
may indemnify directors, officers, employees or agents to the fullest extent
permitted by law and the Company has provided such indemnification to its
directors, Jurg Kehrli, Kevin DeVito and William Cordeiro, pursuant to written
indemnity agreements. Insofar as indemnification for liabilities arising under
the 1933 Act may be permitted to directors, officers and controlling persons of
the Company pursuant to the foregoing provisions, or otherwise, the Company has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in such laws and is,
therefore, unenforceable.
AFTER THE REORGANIZATION
If the Reorganization Proposal is approved and the Reorganization is
consummated, the authorized capital stock of the Company will consist of
30,000,000 shares of New Common Stock and there will be slightly in excess of
3,132,654 shares of New Common Stock issued and outstanding, exclusive of any
options to purchase shares.
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<PAGE>
TRANSFER AGENT
The Transfer Agent for the Harrier Common Stock is Interwest Transfer
Company, Salt Lake City, Utah.
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<PAGE>
BUSINESS OF THE COMPANY
GENERAL
Harrier, Inc., a Delaware corporation ("Harrier" or "the Company"), has
historically been engaged in the discovery, development and sale of selected
products and technologies in the health, fitness and medical markets. Since
1996, the Company's strategic focus has been to find a merger candidate. The
Company has considered a merger to be a priority due to the absence of
significant sales of the Company's Bioptron lamps and the Company's
continuing inability to obtain the additional capital necessary to fund its
pharmaceutical research and development operations.
Unless the context otherwise requires, the term "Company" refers to
Harrier, Inc., a Delaware corporation, and its majority owned subsidiary,
Glycosyn Pharmaceuticals, Inc., a Delaware corporation, and its equity
interest in DermaRay International, LLC, a California limited liability
company.
See Part 1, Item 1 of the Company's 1997 Annual Report, a copy of which
accompanies this Proxy Statement, for a description of the business of the
Company, such information being incorporated by this reference into this
Proxy Statement.
MANAGEMENT OF THE COMPANY
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS COMPLIANCE WITH
SECTION 16(a)
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Jurg Kehrli 55 Chairman/Director
William P. Cordeiro 53 Director
Kevin DeVito 37 President/Director
Candace Beaver 36 Secretary and
Chief Financial Officer
</TABLE>
All Directors and Executive Officers of the Company, are elected or
appointed, respectively, to serve for a one year term and hold their office
until their successors are elected or appointed and qualified.
The following is a brief resume of each Director and Executive Officer
of the Company:
Mr. Kehrli has served as Chairman of the Board of the Company since
1987. Since 1996, Mr. Kehrli has also served as a principal of New Capital
A.G., a Zurich based financial and management consulting firm for
European-based companies.
Dr. Cordeiro has served as a director of the Company since June 1994.
Since 1990, Dr. Cordeiro has served as Professor in the Management Department of
California State University's School of Business and Economics in Los
Angeles. Dr. Cordeiro holds a B. S. in Biology from the University of San
Francisco, an MBA in Finance from the University of Southern California, and
a Ph.D. in Executive Management from the Peter Drucker Graduate Management
Center, the Claremont Graduate School. Dr. Cordeiro is also a director of
Virtual Telecom, Inc.
Mr. DeVito has served as President and Director of the Company since
July 1992. Since 1996, Mr. DeVito has served as a principal of New Capital
A.G., a Zurich based financial and management consulting firm for
European-based companies.
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<PAGE>
Candace Beaver has served as Secretary and Chief Financial Officer
of the Company since June 1991.
No person was subject to Section 16 of the Securities Exchange Act of 1934
with respect to the Company and failed to file a report required by Section
16(a) during the most recent fiscal year, however each of the Company's
directors delinquently filed their Annual Beneficial Ownership Statement on Form
5 for the year ended June 30, 1997.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the year ended June 30, 1996 the Company entered into a $500,000
loan agreement with New Capital Investment Fund ("NCIF"), an entity
affiliated with the President and the Chairman of the Board. The loan bears
interest of 12%. The loan was extended for one (1) year and is now due on
June 4, 1998. Loan obligations can be paid with securities of either the
Company or its Glycosyn subsidiary. Common shares of Glycosyn have been paid
to NCIF at a value of $1.00 per Glycosyn share. NCIF has agreed to extend
the term of the note if the Company does not have funds to pay the loan back
or if the value of common stock payments is overly dilutive to the Company.
(See Note 8 to the financial statements included herein.). NCIF is currently
advised on certain transactions by two of the Company's Directors, Mr. Kehrli
and Mr. DeVito. Both Mr. Kehrli and Mr. DeVito abstained from voting on the
approval of the loan by the Company's board.
As of March 31, 1998, the Company was indebted to NCIF in the amount
of $610,167. In connection with the Glycosyn Recapitalization, the Company
proposes to issue 2,850,000 shares of Glycosyn Common Stock to NCIF in
consideration of NCIF's cancellation of all of the indebtedness. The
consummation of Harrier's sale of 2,850,000 shares of Glycosyn Common Stock
to NCIF is subject to the approval of the Company's shareholders and
Harrier's receipt of an opinion from an independent business appraiser that
the terms of the transaction are fair to the Company's shareholders.
Notwithstanding the fairness opinion, Glycosyn has in the past sold shares of
Common Stock at prices of up to $1.00 per share, which is significantly more
than the price of $0.21 per share being paid by NCIF. Management attributes
the difference in sale price to the fact that Glycosyn's value has declined
over the last few years as Glycosyn's lack of capital has allowed the
competition in the area of glycosylation to catch up to and, in some cases,
exceed Glycosyn's technology.
On January 23, 1998, New Capital AG loaned Glycosyn $60,000 in
consideration of Glycosyn's delivery of an unsecured promissory note in the
original principal amount of $60,000. The note bears interest at the rate of
twelve percent (12%) per annum and all interest and principal is due and payable
on January 22, 1999. New Capital AG is a Zurich based financial and management
consulting firm. The Company's Chairman of the Board and President, Jurg Kehrli
and Kevin DeVito, respectively, are the principals of New Capital AG.
EXECUTIVE COMPENSATION
The Summary Compensation Table below includes, for each of the fiscal
years ended June 30, 1997, 1996, and 1995 individual compensation for
services to the Company and its subsidiaries of the Chief Executive Officer
(the "Named Officer").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term Compensation
Annual Compensation Awards Payouts
----------------------------- ----------------------- ----------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Other
Name Annual Restricted All Other
and Compen- Stock LTIP Compen-
Principal sation Award(s) Options/ Payouts sation
Position Year Salary($) Bonus ($) ($) ($) SARs(#) ($) ($)
- -------- ---- --------- -------- ------ -------- -------- ---------- -------
Kevin DeVito 1997 64,147 (1) -0- -0- -0- -0-
President 1996 94,994 (2) -0- -0- -0- -0-
1995 116,233 -0- -0- -0- -0-
</TABLE>
(1)Include $3,600 per year for car allowance and $1,680 per year for
executive insurance.
(2)Includes $900 per year for car allowance and $1,680 per year for executive
insurance.
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<PAGE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
No options were granted in fiscal year 1997.
DIRECTOR COMPENSATION
Dr. Cordeiro is paid a Director's fee of $500 per month. No other Director
compensation was paid during fiscal year 1997.
HARRIER MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
See Part II, Item 6 of the Company's 1997 Annual Report, a copy of which
accompanies this Proxy Statement/Prospectus, for disclosure concerning
Management's Discussion and Analysis or Plan of Operations of the Company,
for its fiscal years ended June 30, 1997 and 1996. such information being
incorporated by this reference into this Proxy Statement/Prospectus.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1998
During the nine months ended March 31, 1998, the Company had no revenue from
operations as a result of its discontinuation of sales and marketing of the
Bioptron lamps. Operating expenses incurred during the three and nine months
ended March 31, 1998 totaled $82,933 and $343,092, respectively, and relate
primarily to the proposed Reorganization. (See ITEM 2).
LIQUIDITY AND CAPITAL RESOURCES
For the purpose of preserving the Company as a going concern, the Company has
entered into the Reorganization Agreement. In connection with the proposed
Reorganization, the Company will transfer all of its assets and liabilities
to Glycosyn. In connection therewith, the principal creditors of the Company
except New Capital Investment Fund ("NCIF"), which is presently owed
approximately $610,167 by the Company, will agree to release the Company of
any further liability for their claims. At the same time, the Company will
sell to NCIF 2,850,000 shares of its Glycosyn Common Stock in consideration
of NCIF's agreement to cancel the $610,000 of indebtedness owed by Harrier.
In event the Company fails to consummate the Reorganization and the Glycosyn
recapitalization, the Company will require substantial additional capital in
order to continue its present level of operations, of which there can be no
assurance. The report of the Company's independent accountants for the
Company's 1997 fiscal year includes an explanatory paragraph with respect to
substantial doubt existing about the Company's ability to continue as a going
concern in the absence of additional capital.
PRINCIPAL STOCKHOLDERS OF THE COMPANY
See Part III, Item 11 of the Company's 1997 Annual Report, a copy of which
accompanies this Proxy Statement, for a description of the security ownership
of the Company, such information being incorporated by this reference into
this Proxy Statement.
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BUSINESS OF COPE
GENERAL
COPE is a Swiss-based provider of data storage and information
management consulting services and solutions. COPE's principal operations
consist of the design, implementation and management of information systems
that provide data storage, data security and data warehousing solutions.
COPE offers its clients a staff of 20 consultants and engineers trained to
analyze each client's specific needs and then design and implement an
information system that integrates the hardware and software products that
best meet the identified objective. COPE generally provides its information
systems on a turn-key basis and purchases for resale the hardware and
software components made part of its information systems solutions. COPE is a
value added reseller of hardware and software products offered by the major
vendors in the data storage industry, including ADIC, AMPEX, ATL, DATA
GENERAL, DG- CLARiiON BU, HP, IBM, LEGATO, NSM, ORACLE, OVERLAND, PLATINUM,
QUALIX, STORAGE TEK, SUN, and VERITAS. COPE provides information management
consulting, services and solutions to a variety of companies in the
financial, insurance, pharmaceutical and telecommunication industries located
in Switzerland, Germany and Austria.
COPE was founded in 1991 and is headquartered in Rotkreuz, Switzerland.
COPE commenced operations in 1991 as a provider of consulting services and data
storage systems to the Swiss market. Typical customers at that time were PC
retailers, specifically those selling IBM PS/2 products. In the European
market at that time, computer manufacturers were not directing significant
corporate resources into data storage. This opportunity allowed COPE to
immediately enter the market with a competitive mix of quality products
suitable for customized internal and external data storage applications. In
early 1993, COPE began to study the RAID (redundant array of inexpensive
disk-drives) sector, designing corresponding solutions for their clients. In
the Fall of 1993, the first family of RAID systems was introduced by COPE to
the Swiss market. Some of these systems are still in use today. In 1994,
COPE signed a distribution contract with Data General for the distribution of
Open CLARiiON systems. COPE led all other distributors throughout Europe from
1994 through 1996.
In 1994, COPE began to market its services and systems in Austria. In
1995, COPE commenced offering consulting services and systems in the area of
data storage. In late 1995, COPE expanded its operations to the Federal
Republic of Germany. In 1997, COPE commenced offering services and systems
in the area of data warehousing. COPE seeks to become the leading provider
of data storage services and solutions throughout Central Europe. COPE
continues to expand its expertise in data storage throughout all disciplines.
Certain terms used below are defined in the Section "Glossary." COPE's
operations in the Federal Republic of Germany are conducted by its
wholly-owned subsidiary, COPE GmbH, and its operations in Austria are carried
out by its wholly-owned subsidiary, COPE Handelsges.m.b.h. All references in
this section to COPE include COPE AG, a Swiss corporation and its
subsidiaries. COPE's executive offices are located at Grundstrasse 14, 6343
Rotkreuz, Switzerland. COPE's telephone number (from the U.S.) is
011-41-41-798-33-33.
INDUSTRY OVERVIEW
The data storage business involves data availability (to minimize the
impact of system failures on business-critical applications), data protection
(to eliminate the loss of essential data), data warehousing (to provide
day-to-day decision support and business intelligence for business
executives), and disaster recovery (saving data in the event of a disaster).
Set forth below is a general description of the foregoing data storage
applications:
DATA AVAILABILITY. Continuous, uninterrupted access to data gives an
advantage over most companies. Visionary leadership will approach the
problem of potential data loss preventatively by
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eliminating the possibility through preplanning. A by-product of using
COPE's service as a guide, is the development of an efficient system for
managing information. A company with a poor data access plan, or no plan at
all, is vulnerable to being overtaken by the competition when problems arise.
Also, a bad system is an overworked system. And an overworked system means
expensive maintenance or replacement and valuable loss of time. In every
sense, the cost of doing things right is much less than the cost of ignoring
the problem.
DATA PROTECTION. Data storage implies continual updating and
incorporation of changes. As a company grows, so does the mass of data being
processed. Backing-up data becomes more time-consuming and expensive.
Without a good back-up and restoration plan in place, more time may be spent
on data retrieval because of slow system response and the frequent breakdowns
that occur with increased demand. COPE can help streamline the process by
identifying hardware and software combinations that make sense for a company.
DATA WAREHOUSING. Proper data warehousing allows information to be
retrieved in order to make successful decisions. With a corporate-wide plan
in place, information from internal and external data sources is gathered,
consolidated, edited, prepared, and released to executive staff for review,
analysis, and other uses. In order to be cost-effective, data warehousing
systems must provide quick access, but also be simple to manage. And, the
manner in which data is presented should highlight changes and trends in
business and facilitate in-depth analysis on-line.
DISASTER RECOVERY. Even easy access and frequent back-up cannot offset
a really devastating event, or "super crash." Floods, fires, earthquakes,
and other natural disasters can destroy records and hardware. To make things
worse, management can be held responsible for the failure to institute
disaster contingency plans, leading to a loss of data. A disaster recovery
plan is perhaps the most important part of a data storage system.
Current data storage solutions provide secure, high capacity data
repositories based primarily on three technologies -- magnetic disk, optical
disk and magnetic tape. Magnetic tape remains the most cost effective
storage medium, and is used most often for backup and archival functions. The
development of automated tape libraries, which address the historically high
degree of costly human intervention involved in using tape storage, is
helping to drive the expanded use of magnetic tape. Automated tape libraries
also provide improved throughput, increased data capacity and unattended
operation through the use of multiple drives and cartridges. In addition,
business managers are increasingly perceiving data to be critical at a
company-wide level as opposed to only being important at the individual
workstation level. As a result, central management of data has been
increasing.
The data storage industry has experienced rapid growth in recent years in
response to the significant increase in the amount of electronically stored
data. COPE believes that this growth will continue due to (i) the
introduction of increasingly powerful computing platforms, (ii) the spreading
use of computers for tasks that previously were performed manually, (iii) the
increasing number, size, bandwidth and complexity of computer networks,
particularly client/server networks, (iv) the rapid growth of data-intensive
applications and (v) the growth of intranet and Internet based computing. In
addition, emerging data intensive applications, such as still image, motion
video, check imaging and other multimedia applications and character
recognition uses, are accelerating the demand for data storage solutions.
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PRODUCTS AND SERVICES
COPE's principal operations consist of the design, implementation and
management of information systems that provide data storage, data security
and data warehousing operations on a turn-key basis. In addition to
providing turn-key data storage systems, COPE also provides its clients
consulting, training and systems servicing. In 1997, approximately
$1,310,996 (or 7.3%) of COPE's $17,916,171 in revenue represented consulting
fees unrelated to sales of storage data systems, however the company intends to
increase its marketing efforts in the area of consulting services and expects
that consulting revenues will in the future increase as a percentage of
overall revenue.
SYSTEM DESIGN AND IMPLEMENTATION. COPE provides information systems on
a turn-key basis and purchases for resale the hardware and software
components made part of its information systems. As of the date of this
Proxy Statement, COPE employs a staff of 20 consultants and engineers trained
to analyze each client's specific data storage needs and then design and
implement an information system that integrates the hardware and software
products that best meet the identified objective. COPE is a value added
reseller of hardware and software products offered by the leading vendors in
the data storage industry, including ADIC, AMPEX, ATL, DATA GENERAL, DG
CLARiiON BU, HP, IBM, LEGATO, NSM, ORACLE, OVERLAND, PLATINUM, QUALIX,
STORAGE TEK, SUN, and VERITAS. Because COPE represents several hardware and
software vendors, they can provide an objective and independent analysis of a
client's needs, whether they involve the integration of existing equipment or
the establishment of a completely new enterprise storage system. COPE has
provided data storage systems to a variety of companies in the financial,
insurance, pharmaceutical and telecommunication industries located in
Switzerland, Germany and Austria.
COPE is a value added reseller of a number of hardware and software
products to its customers, including tape libraries, data storage disk
arrays, high-end servers, other storage equipment and numerous other
peripheral products related to the installation and utilization of data
storage technology. COPE sells data storage software under various
reselling arrangements with several software companies where COPE functions
as an operating and other software system vendor. The following table sets
forth the vendors with which COPE works in various selling partnerships, the
vendor's products resold by COPE and the amount of COPE's revenue from the
sale of hardware and software products during fiscal 1997 represented by each
vendor:
<TABLE>
<CAPTION>
COMPANY PRODUCT BUSINESS RELATIONSHIP % OF PRODUCT REVENUE
- -------------------------------------- -------------------------------- --------------------- --------------------
<S> <C> <C> <C>
ADIC Tape Libraries Value Added Reseller 14%
ATL Products Tape Libraries Value Added Reseller 4%
Data General - CLARiiON Business Unit CLARiiON Disk Arrays Value Added Reseller 18%
IBM High End Servers Value Added Reseller 18%
Legato Systems Back-up and archiving Software Value Added Reseller 12%
NSM CD Jukeboxes Value Added Reseller 7%
Oracle Data Base and OWH Value Added Reseller 2%
OVERLAND DATA Tape Libraries Value Added Reseller 4%
Qualix Failure and Data Replication Value Added Reseller 1%
Software
STORAGE TEK Tape Libraries Value Added Reseller 11%
</TABLE>
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<TABLE>
<S> <C> <C>
SUN Microsystems High End Servers Value Added Reseller 1%
VERITAS Software Data Management, Failure, Backup Value Added Reseller 5%
and Activity Software
</TABLE>
COPE generally contracts to deliver information systems, including all
hardware and software, on a turn-key basis pursuant to fixed price contracts.
Consistent with industry practice, COPE generally is not able to obtain
significant up-front or progress payments on its contracts providing for the
design, implementation and sale of information systems. Accordingly, COPE is
required to finance its clients contracts, including the purchase of the
hardware and software components of the information systems. COPE's
principal sources of working capital are cash from operations and an
operating line of credit from Credit Suisse in the maximum amount of
SFr2,000,000. COPE has been successful to date in securing extensions on its
line with Credit Suisse for purposes of financing certain client contracts as
needed, however there can be no assurance that COPE will continue to do so in
the future.
CONSULTING. COPE's consulting and education division offers professional
services such as analyses, conceptual solutions, target-performance comparisons,
quantity structures, feasibility studies, capital budgeting and ROI
calculations, as well as project management and user training. In addition to
training and education, the COPE service division implements and maintains data
management plans recommended by the consulting division. COPE service engineers
are certified by strategic partners such as IBM, SUN and Microsoft. The service
department contracts directly with the end-user to maintain systems and manage
the plan, be it data recovery, warehousing, security or availability.
SALES AND MARKETING
COPE markets its high volume information management consulting, services
and solutions primarily through its field sales organization complemented by
other sales channels, including systems integrators, OEMs, VARs and
international distributors.
As of December 31, 1997, COPE's field sales force consisted of 12
personnel, including seven sales representatives and five sales engineers
that provide technical assistance for systems sales. COPE currently has five
sales offices, most of which are staffed with both sales and technical
pre-sales personnel. COPE uses a consultative sales approach for selling to
major accounts. This model entails the collaboration of technical and sales
personnel, typically in a one-to-one ratio, to formulate proposals that
address the specific requirements of the customer. COPE focuses its initial
sales efforts on senior MIS department personnel, and works closely with
system and network administrators for evaluation and deployment.
COMPETITION
The information management market is intensely competitive, highly
fragmented and characterized by rapidly changing technology and
evolving standards. Competitors vary in size and in the scope and breadth of
the products and services offered. COPE's major competitors are vendors of
information management software and hardware products, including Hewlett
Packard, EMC, Unisys, Digital Equipment Corp. and Tandem Computer
Corporation. COPE also experiences significant competition from other
independent consulting and engineering firms.
Many of the COPE's current and potential competitors, particularly
information management hardware and software vendors, have significantly
greater financial, technical, marketing and other resources than COPE.
As a result, they may be able to respond more quickly to new or emerging
technologies and changes in customer requirements, or, in the case of
vendors, to devote greater resources to the development, promotion, sale and
support of their products than the company. COPE also expects that
competition will increase as a result of future software industry
consolidations, which have occurred in the information management market in
the past. In addition, current and potential competitors have
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established or may establish cooperative relationships among themselves or
with third parties. Accordingly, it is possible that new competitors or
alliances among competitors may emerge and rapidly acquire significant
market share. There can be no assurance that COPE will be able to compete
successfully against current or future competitors or that competitive
pressures faced by the company will not materially adversely affect its
business, operating results or financial condition.
In addition to competition for client contracts, COPE also competes for
qualified technical engineers. COPE's future success depends in significant
part upon the continued service of its key technical personnel and its
continuing ability to attract and retain highly qualified technical engineers
and consultants. Competition for such personnel is intense, and there can be
no assurance that COPE can retain its key technical and managerial employees
or that it can attract, assimilate or retain other highly qualified technical
personnel in the future.
LITIGATION
There are no legal proceedings to which COPE or any of its officers or
directors is party or to which the property of the company is subject.
EMPLOYEES
As of December 31, 1997, COPE had a total of 51 employees. Of the
total, 20 were in consulting and engineering, 21 were in sales and marketing,
and 10 in finance, administration and operations. None of COPE's employees
are represented by a labor union. COPE has not experienced any work
stoppages and considers its relations with its employees to be good.
PROPERTIES
COPE's executive offices are located in Rotkreuz, Switzerland and
consist of approximately 6,300 square feet of leased space. COPE leases this
space pursuant to a one year lease expiring in March 1998, at the rate of
SFr12,000 per month. COPE also maintains the following sales office:
<TABLE>
<CAPTION>
Location Size Monthly Rental Rate
- -------- ---- -------------------
<S> <C> <C>
Munich, Germany 1,800 sq. ft. $1,700
Frankfurt, Germany 1,800 sq. ft. $2,400
Gera, Germany 1,800 sq. ft. $1,900
Dresden, Germany 1,500 sq. ft. $2,200
Vienna, Austria 2,000 sq. ft. $2,000
</TABLE>
GLOSSARY
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<TABLE>
<CAPTION>
<S> <C>
Cache: A portion of memory that collects and
holds data until a processing or storage
module processes it.
Data Warehouse: A separate database dedicated to
decision support. Data is transferred
from transaction processing systems and
integrated. It is arranged by customer,
not by date or transaction. It is
accessed to provide management
information through report writers,
query tools, data access and retrieval
tools OLAP servers and enterprise
information systems. It is a software
architecture not a product.
Disaster: Any event that creates an inability on
an organization's part to provide
critical business functions for some
predetermined period of time. SIMILAR
TERMS: Business Interruption; Outage;
Catastrophe.
Disaster Recovery Software: An application program developed to
assist an organization in writing a
comprehensive disaster recovery plan.
Disk Array: A group of storage devices that provides
higher data-transfer rates, higher data
availability, or both.
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
Redundant Array of Inexpensive Disks
(RAID): A technique for grouping drives to
improve performance and data
availability. RAID devices with multiple
disks appear as one disk to the OS. If
one disk fails, others can still operate
because a separate disk provides parity
information that can supply the missing
data.
</TABLE>
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COPE MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION
This "Management's Discussion and Analysis of Financial Condition and
Results of Operations" (i) should be read in conjunction with COPE's annual
audited (1997, 1996 and 1995) consolidated financial statements, the notes
thereto and the other financial data included elsewhere in this Proxy
Statement and (ii) includes forward-looking statements which involve risks
and uncertainties. COPE's actual results may differ materially from the
results predicted by such forward-looking statements due to various factors,
including but not limited to those which are discussed below and elsewhere in
this Proxy Statement, including "Risk Factors Relating to the Reorganization
- -COPE Risks."
OVERVIEW
GENERAL. COPE is a Swiss-based provider of data storage and information
management consulting services and solutions. The Company's principal
operations consist of the design and implementation of information systems in
the areas of data storage, data security and data warehousing. The company was
founded in 1991 and is headquartered in Rotkreuz, Switzerland. COPE presently
conducts business throughout Switzerland, Germany and Austria.
COPE regularly enters into certain financial commitments payable in Swiss
Francs, the unit of currency of Switzerland. All Swiss Franc based amounts are
designated by the symbol SFr. As of December 31, 1997, the Swiss Franc-Dollar
exchange rate was 1.45 Swiss Franc to 1 U.S. Dollar.
CURRENCY EXCHANGE RATES. Although COPE reports its results in US
dollars, virtually all of its sales are denominated in other currencies,
including, primarily, Swiss francs and, to a lesser extent, Deutsche marks
and the Austrian schillings. A significant amount of COPE's cost of sales
(i.e., hardware and software purchases) on the other hand, are denominated in
US dollars. Consequently, the Company's cost of doing business is directly
affected by any changes in the exchange rate between the US dollar, on the
one hand, and the Swiss franc and, to a lesser extent, the Deutsche mark and
Austrian schilling, on the other hand. The financial position and results of
operations of COPE and the company's foreign subsidiaries are measured using
local currency as the functional currency. Assets and liabilities of COPE
and its subsidiaries are translated at the exchange rate in effect at each
year-end. Income statement accounts are translated at the average rate of
exchange prevailing during the year. Translation adjustments arising from
differences in exchange rates from period to period are included in the
cumulative translation adjustment account in stockholders' equity.
In recent years, particularly in the 1996-1997 period, the US dollar has
generally strengthened against the Swiss franc. This has had the effect of
reducing sales denominated in Swiss francs when translated to US dollars as
compared to prior periods. Furthermore, because most of the Company's cost
of sales are denominated in US dollars the strengthening of the US dollar
also has had an adverse effect on COPE's operating profits.
COPE typically enters into forward exchange contracts covering fifty
percent (50%) of its hardware and software purchases for its client contracts
in order to mitigate the adverse effects of currency exchange fluctuations.
However, these actions generally provide only a partial mitigation of the
adverse effects of changes in currency rates and there can be no assurance
that changes in currency rates in the future will not have a material adverse
affect on COPE's business, financial condition and results of operations.
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RESULTS OF OPERATIONS
Results of Operations
Fiscal 1997 Compared to Fiscal 1996
NET SALES
During the 12 months ended December 31, 1997, COPE had net sales of
$17,916,171, which amounts to an increase of 43% over the net sales of
$12,513,123 during the prior year period as a result of further market share
increase. Sales of solutions increased 40% during the year reaching
$16,605,175 as compared to $11,834,701. This increase is primarily due to a
significant increase in market share in Germany and Austria. Net sales in
these markets grew by approximately 83% in 1997 as compared to growth of
approximately 40% in 1996. Sales of services increased 92% during the year
reaching $1,810,996 as compared to $680,422 in 1996. This increase is due to
increased demand for consulting services as a result of greater market share.
COPE's management believes that similar patterns of growth will continue,
particularly in the German market for 1998.
COST OF SALES
During fiscal year 1997, cost of sales was $12,817,738 compared to
$8,829,711 for the prior year, 71.3% and 70.6% of the total revenues,
respectively, which amounts to an increase of 44%. Cost of sales consists
exclusively of COPE's cost for the hardware acquired for resale as part of its
information systems solutions.
GROSS PROFIT
The Company's gross profit margin for fiscal 1997 was 28.5% compared to
29.4% for the prior year. COPE's strategy for the future is the deemphasis of
lower margin stock (such as the distribution of hardware and software without
associated consulting work) and the emphasis of higher margin work (such as the
sale of stand-alone consulting work). The slight decrease in gross margin is
due in part to an increase in hardware costs. A portion of the increase in
hardware costs is due to a stronger U.S. dollar during this year as compared to
the Swiss franc as almost all of the purchases of hardware are U.S. dollar
denominated. As consulting services becomes a greater percentage of the sales
mix, margins are expected to increase. Gross margins in Switzerland and Austria
increased in 1997 over those of 1996. However, Germany has not seen this same
trend as consulting services have not reached the same levels obtained in the
other countries.
SELLING, GENERAL, ADMINISTRATIVE AND CONSULTING EXPENSES
COPE's selling, general, administrative and consulting expenses as a
percentage of net sales was substantially unchanged between fiscal 1997 (24.2%)
and fiscal 1996 (23.5%).
FISCAL 1996 COMPARED TO FISCAL 1995.
NET SALES
During the 12 months ended December 31, 1996, COPE had net sales of
$12,513,123, which amounts to an increase of 13% over the net sales of
$11,020,356 during the prior year. The increase is attributable to an
increase in market share, particularly in Switzerland and Germany.
Consulting services revenue increased approximately 30% over the prior year
($680,422 in 1996 compared to $520,145 in 1995).
COST OF SALES
During fiscal year 1996, cost of sales was $8,831,006 compared to
$8,154,271 for the prior year. Cost of sales consists exclusively of COPE's
cost for the hardware and software acquired for resale as part of its
information systems.
GROSS PROFIT
The company's gross profit margin for fiscal 1996 was 29.4% compared to 26%
for the prior year. COPE's strategy for the future is the deemphasis of lower
margin work (such as the distribution of hardware and software without
associated consulting work) and the emphasis of higher margin work (such as the
sale of stand-alone consulting work). The increase in the gross profit margin
for 1996 was the result of increased consulting services during 1996 and the
decrease in sales of hardware and software.
SELLING, GENERAL, ADMINISTRATIVE AND CONSULTING EXPENSES
COPE's selling, general, administrative and consulting expenses as a
percentage of net sales was substantially unchanged between fiscal 1996 (23.5%)
and fiscal 1995 (23.2%).
EQUITY TRANSACTIONS
During the quarter ended September 30, 1997, COPE issued 60 shares at
a nominal value of SFr100 each. The shares were sold to 29 European investors.
The proceeds of the sale of the shares were used as additional working capital.
The nominal value of the shares issued totaling $4,112 was posted to the share
capital account whereas the remainder of the proceeds amounting to $690,199 was
recorded as additional paid in capital. After this increase the share capital
of COPE consists of 1,060 issued and outstanding shares, with a nominal
value of SFr100 (368.5) each. Each ordinary share is entitled to one vote. No
stock options or convertible securities existed at December 31, 1997 and 1996.
Dividends may only be declared and paid from the accumulated retained
earnings (after deductions of certain legally required reserve allocations)
shown in COPE's annual Swiss statutory unconsolidated financial
statements presented in Swiss Francs ("SFr"). Any dividends to be declared will
be payable in Swiss francs. Such amounts differ from the related earnings as a
result of the adjustments made to present the Consolidated Financial Statements
in accordance with U.S. GAAP. As of December 31, 1997, COPE's Swiss
statutory unconsolidated financial statements reflected SFr558,532 ($382,818) of
retained earnings available for distribution.
Three Months Ended March 31, 1998
Compared to Three Months Ended March 31, 1997
COPE had net sales of $4,640,835 for the first three months of fiscal
1998 compared to $3,093,942 for the prior year period as a result of further
market share increase. COPE had sales services of $495,348 for the first
three months of fiscal year 1998 compared to $219,458 for the prior year
period. COPE's sales services as a percentage of net sales increased from
7.1% to 10.7%. During the same period, cost of sales as a percentage of
revenue decreased from 72.7% to 68.3% as a result of the increase of sales
services to total net sales. COPE's gross profit margin for the period
was 31.7% compared to 27.3% for the prior year period. Interest expense
totalled $13,058 in the first quarter compared to $21,037 for the 1997 year
period as a result of lower credit facilities used. COPE had net income of
$101,765 compared to $12,133 for the prior year period.
LIQUIDITY AND FINANCIAL CONDITION
COPE's historical working capital requirements include the financing of
all costs involved in the design, implementation and sale of information
systems. COPE generally contracts to deliver information systems, including
all hardware and software, on a turn-key basis pursuant to fixed price
contracts. Consistent with industry practice, COPE generally is not able to
obtain significant up-front or progress payments on its contracts providing
for the design, implementation and sale of information systems. Accordingly,
COPE is generally required to finance its clients' contracts, including the
purchase of the hardware and software components of the information systems.
COPE's principal sources of working capital are cash from operations and an
operating line of credit from Credit Suisse in the maximum amount of
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SFr2,000,000. COPE has been successful to date in securing extensions on its
line with Credit Suisse for purposes of financing certain client contracts as
needed, however there can be no assurance that COPE will continue to do so in
the future.
As of December 31, 1997, COPE had working capital of approximately
$1,071,807, compared to a working capital position of $676,779 as of December
31, 1996. The increase in working capital over the prior year end was due, in
part, to a significant customer advance received on a contract in progress at
year end. Accounts receivable increased by approximately 64% at December 31,
1997 from that of the prior year due to an overall increase in sales for the
year, particularly, in the fourth quarter and a general trend of slower
collections than in the prior year. Additionally, inventories increased by
approximately 41% at December 31, 1997 over that of the prior year. The
increase is attributable to the increase in the volume of business and
represents hardware and software products received which are undergoing
testing and configuration for contracts in progress.
As of March 31, 1998, COPE had working capital of approximately $773,162,
compared to a working capital position of $1,071,807 as of December 31, 1997.
The decrease in working capital over the prior year end was due primarily to
a reduction in receivables caused by lower sales volume in the first
quarter of 1998 when compared to the fourth quarter of 1997 and increased
collections of outstanding balances.
While COPE believes that its available working capital, including
presently available credit lines, is adequate for its current working capital
requirements, the company believes that it will require significant
additional working capital in order to finance continued growth. In 1995,
COPE began to offer consulting services and information systems in
Germany and its plan of operations for the next three years are based on the
company's continued development of the market for information systems in
Germany. Upon the close of the Reorganization, the Company intends to seek
additional debt or equity capital through additional bank lines of credit or
the sale of shares of the equity securities of the Company. At the present
time, there are no firm commitments or agreements on the part of any party at
this time to provide any additional debt or equity capital to the Company and
there can be no assurance that the Company will be able to obtain additional
capital. The Company's inability to obtain additional debt or equity capital
on a timely basis will, in all likelihood, materially adversely affect the
future growth of the operations and revenues of COPE.
YEAR 2000 ISSUE
COPE has developed a plan to modify its information technology to
recognize the Year 2000 and has begun converting its critical data
processing systems. COPE is mainly using internal resources to address this
issue, and believes that these resources will be sufficient to to mitigate
any potentially significant problems. Related expenses are charged to income
as incurred.
FORWARD LOOKING STATEMENTS
The foregoing discussion contains certain forward-looking statements
that are based on COPE's beliefs as well as assumptions made by and
information currently available to COPE. When used herein and elsewhere in
this in this Proxy Statement, the words "believe," "expect," "anticipate,"
"estimate" and similar expressions are intended to identify forward-looking
statements. Such statements are subject to certain risks, uncertainties and
assumptions, including (i) the intense competition in COPE's industry; (ii)
future developments and changes in prevailing technologies and standards in
the data storage industry; (iii) availability of additional capital as
required; and (iv) general economic conditions. Should one or more of these
risks or uncertainties materialize, or should underlying assumptions prove
incorrect, actual results may vary materially from those anticipated,
estimated, or projected. The Company and COPE caution shareholders of the
Company and potential investors not to place undue reliance on any such
forward-looking statements, all of which speak only as of the date made.
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MANAGEMENT OF THE COMPANY FOLLOWING THE REORGANIZATION
DIRECTORS AND EXECUTIVE OFFICERS OF COPE
All of the existing officers of COPE will become officers of the Company
following the Reorganization. Pursuant to Proposal No. 4, it is also expected
that all of the directors of the Company immediately following the consummation
of the Reorganization will be those persons designated by the COPE Shareholders.
The following table sets forth the directors and executive officers of COPE
after the Reorganization. Their prior positions with COPE or Harrier are
discussed below:
Upon the Closing of the Reorganization, the directors and executive
officers of COPE will be:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Adrian Knapp 35 Chairman of the Board and Executive Vice
President
Stephan Isenschmid 37 President, Chief Executive Officer and
Director
Markus Bernhard 33 Chief Financial Officer
Peter Koch 72 Director
Markus Stalder 45 Director
Kevin DeVito 37 Director
</TABLE>
IDENTIFICATION OF CERTAIN SIGNIFICANT EMPLOYEES
Other than those officers set forth above, no other persons are expected to
make significant contributions to the business of COPE.
FAMILY RELATIONSHIPS
There are no family relationships between any of the above-mentioned
officers or directors.
BUSINESS EXPERIENCE
Biographical information with respect to these individuals follows:
ADRIAN KNAPP, co-founded COPE in 1991 and has served as Chairman of the
Board since inception.
STEPHAN ISENSCHMID, co-founded COPE in 1991 and has served as President,
Chief Executive Officer and a director since inception.
MARKUS BERNHARD has served as Chief Financial Officer of COPE since
September 1997. From 1991 to September 1997, Mr. Bernhard was employed as a
public accountant at Revisuisse Price Waterhouse.
PETER KOCH has served as General Manager of acp GmbH, a German-based
distributor of computer products and peripherals since 1991.
MARKUS STALDER has been a partner in the law firm, Stalder & Murer,
located in Sihlbrugg, Switzerland, since 1991. Stalder & Murer has acted as
general counsel to COPE since 1991.
-35-
<PAGE>
KEVIN DEVITO has served as President and a director of Harrier, Inc. since
June 1992. From 1990 to June 1992, Mr. DeVito served as the marketing manager
for the Company.
NEW NASDAQ SYMBOL
After the Reorganization, shares of the Company's common stock will be
traded on NASDAQ under the symbol "COPE."
CERTAIN INFORMATION CONCERNING CAPITAL STOCK OF
THE COMPANY AND COPE
MARKET PRICE OF HARRIER COMMON STOCK
The Company's common stock currently is traded on the OTC Bulletin Board
under the symbol "HARE".
The following table sets forth, for the respective periods indicated, the
high and low bid prices for the common stock of the Company. The quotations
presented reflect inter-dealer prices, without retail markup, markdown, or
commissions, and may not necessarily represent actual transactions in the common
stock of the Company.
<TABLE>
<CAPTION>
Quarter Ended High Bid Low Bid
------------- -------- -------
<S> <C> <C>
September 30, 1996 $0.188 $0.125
December 31, 1996 $0.062 $0.062
March 31, 1997 $0.160 $0.130
June 30, 1997 $0.065 $0.065
September 30, 1997 $0.15 $0.06
December 31, 1997 $0.15 $0.07
March 31, 1998 $0.24 $0.06
June 30 $0.20 $0.105
</TABLE>
On July 22, 1998, the bid and ask prices as quoted on the OTC Bulletin
Board for the Company's Common Stock were $.16 and $.18, respectively.
On June 30, 1998, there were approximately 380 holders of record of the
15,697,923 shares of the Company's Common Stock issued and outstanding.
Since its inception, no dividends have been paid on the Company's common
stock, and the Company does not presently have retained earnings to permit the
payment of a dividend. Although there are no restrictions on the declaration or
payment of dividends set forth in the Articles of Incorporation of the Company
or any other agreement with stockholders, the Company expects future earnings
will be utilized for the development of its business. Therefore, the Company
does not anticipate paying dividends on its common stock in the foreseeable
future.
COPE COMMON STOCK
There has never been a public market for shares of COPE Common Stock.
DIVIDENDS - COPE
COPE has not paid any dividends on COPE Common Stock since inception.
-36-
<PAGE>
ANNUAL REPORT
Company's annual report to stockholders for the fiscal year ended June 30,
1997 was mailed to stockholders on or about August 20, 1998.
STOCKHOLDER PROPOSALS
Any stockholder proposal intended to be presented at the next Annual
Meeting of Stockholders and included in the Company's proxy statement must be
received by the Company's Secretary not later than July 6, 1999.
EXPERTS
The consolidated financial statements of Harrier, Inc. as of June 30,
1997 and for each of the two years ended June 30, 1997, have been included
herein in reliance upon the report of Raimondo Pettit Group (formerly known
as Raimondo Pettit & Glassman), independent certified public accountant, upon
the authority of the firm as experts in accounting and auditing. Such report
includes an explanatory paragraph relating to substantial doubt existing
about Harrier's ability to continue as a going concern and appears elsewhere
herein.
The financial statements of COPE AG as of December 31, 1997 and 1996 and
for each of the years in the three year period ended December 31, 1997
included in the Proxy Statement of Harrier, Inc., which is referred to and
made part of this Prospectus and Registration Statement, have been audited by
ATAG Ernst & Young AG, independent auditors, as set forth in their report
appearing elsewhere herein, and are included in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.
LEGAL MATTERS
Certain legal matters in connection with the Harrier Common Stock
offered hereby are being passed upon by Oppenheimer Wolff & Donnelly LLP,
Newport Beach, California, counsel for the Company. Raiskin & Revitz has
provided the Company with an opinion, summarized elsewhere herein, on certain
tax consequences under US Federal income tax law to the Company and its
shareholders. ATAG Ernst & Young AG has provided COPE with an opinion,
summarized elsewhere herein, on certain tax consequences under Swiss and
German Federal income tax laws to the COPE and its shareholders.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, or portions of documents, are incorporated herein
by reference:
The Company's Annual Report on Form 10-KSB for the year ended
June 30, 1997; and
The Company's amended Annual Report on Form 10-KSB/A for the year
ended June 30, 1997.
Concurrent with its delivery of this Proxy Statement/Prospectus, the
Company deliver to each holder of Harrier Common Stock and each COPE
Minority Shareholder its Annual Report on Form 10-KSB for the year ended June
30, 1997, as ammended.
Any statement contained in the information or a document incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Proxy Statement/Prospectus to the extent that any statement contained
herein or in any other subsequently filed document which also is or is deemed
to be incorporated by reference herein modifies or supersedes such statement.
Any such statement so modified or superseded shall not be deemed, except as
so modified or superseded, to constitute a part of this Proxy
Statement/Prospectus.
-37-
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
HARRIER, INC.
Independent Auditors' Report . . . . . . . . . . . . . . . . . . F-1
Consolidated Balance Sheet as of June 30, 1997 . . . . . . . . . F-2
Consolidated Statements of Operations for the Years Ended
June 30, 1997 and 1996 . . . . . . . . . . . . . . . . . . . . F-3
Consolidated Statements of Changes in Stockholders' Equity
(Deficit) for the Years Ended June 30, 1997 and 1996 . . . . . F-4
Consolidated Statements of Cash Flows for the Years Ended
June 30, 1997 and 1996 . . . . . . . . . . . . . . . . . . . . F-5
Notes to Consolidated Financial Statements . . . . . . . . . . . F-7
Unaudited Consolidated Balance Sheet as of March 31, 1998. . . . F-25
Unaudited Consolidated Statements of Operations for the Nine
Months Ended March 31, 1998 and 1997 . . . . . . . . . . . . . F-26
Unaudited Consolidated Statements of Cash Flows for the Nine
Months Ended March 31, 1998 and 1997 . . . . . . . . . . . . . F-27
Notes to Unaudited Consolidated Financial Statements . . . . . . F-28
COPE AG
Independent Auditors' Report . . . . . . . . . . . . . . . . . . F-31
Consolidated Balance Sheets as of December 31, 1997 and 1996 . . F-32
Consolidated Statements of Operations for the Years Ended
December 31, 1997, 1996 and 1995 . . . . . . . . . . . . . . . F-34
Consolidated Statements of Shareholders' Equity for the
Years Ended December 31, 1997, 1996 and 1995 . . . . . . . . . F-35
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1997, 1996 and 1995 . . . . . . . . . . . . . . . F-36
Notes to Audited Consolidated Financial Statements . . . . . . . F-37
Unaudited Consolidated Balance Sheet as of March 31, 1998. . . . F-49
Unaudited Consolidated Statements of Operations for the Three
Months ended March 31, 1998 and 1997 . . . . . . . . . . . . . F-51
Unaudited Consolidated Statements of Cash Flows for the Three
Months ended March 31, 1998 and 1997 . . . . . . . . . . . . . F-52
Notes to Unaudited Consolidated Financial Statements . . . . . . F-53
PRO FORMA COMBINED FINANCIAL INFORMATION
Unaudited Pro Forma Condensed Consolidated Balance Sheet as of
December 31, 1997. . . . . . . . . . . . . . . . . . . . . . . F-55
Unaudited Pro Forma Condensed Consolidated Statement of
Operations for the Year Ended December 31, 1997. . . . . . . . F-56
Unaudited Pro Forma Condensed Consolidated Statement of
Operations for the Three Months ended March 31, 1998 . . . . . F-57
Notes to Unaudited Pro Forma Condensed
Consolidated Financial Statements. . . . . . . . . . . . . . . F-58
</TABLE>
-38-
<PAGE>
RAIMONDO, PETTIT & GLASSMAN
A PARTNERSHIP INCLUDING PROFESSIONAL CORPORATIONS
CERTIFIED PUBLIC ACCOUNTANTS
UNION BANK TOWER, SUITE 1250
21515 HAWTHORNE BOULEVARD Telephone (910) 540-5990
TORRANCE, CALIFORNIA 90503 Fax (310) 543-3066
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Harrier, Inc.
Hermosa Beach, California
We have audited the accompanying consolidated balance sheet of Harrier, Inc. as
of June 30, 1997, and the related statement of operations, changes in
stockholders' equity (deficit), and cash flows for the two years in the period
then ended. The financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Harrier, Inc. as of June 30, 1997 and the consolidated results of their
operations and their cash flows for the two years in the period then ended, in
conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1 to
the consolidated financial statements, the Company has suffered recurring losses
from operations and has negative working capital and a stockholders' deficit.
The Company's continued existence depends primarily on its ability to complete a
merger with an operational entity or to raise additional debt or equity
financing to develop and market its biochemical technologies. These matters
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 1. The consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
RAIMONDO, PETTIT & GLASSMAN
Torrance, California
August 29, 1997, except for the last
sentence of the penultimate paragraph
of Note 4 and Note 16, as to which
the date is October 31, 1997
F-1
<PAGE>
<TABLE>
<CAPTION>
HARRIER, INC.
CONSOLIDATED BALANCE SHEET
JUNE 30, 1997
- -----------------------------------------------------------------------------
<S> <C>
ASSETS
Cash and cash equivalents $ 58,237
Amounts receivable from related parties 160,478
Grant contribution receivable 20,000
Other current assets 24,344
- -----------------------------------------------------------------------------
Total current assets 263,059
- -----------------------------------------------------------------------------
Property and equipment, net 30,636
Intangible assets, net 31,787
- -----------------------------------------------------------------------------
TOTAL ASSETS $ 325,482
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' DEFICIT
LIABILITIES
Accounts payable and accrued expenses $ 609,322
Convertible note payable to related party 564,500
Deferred grant revenue 20,000
Dividend payable to Glycosyn preferred stockholders 4,450
- -----------------------------------------------------------------------------
Total current liabilities 1,198,272
- -----------------------------------------------------------------------------
MINORITY INTERESTS 89,000
COMMITMENTS AND CONTINGENCY (NOTES 10, 11, 13 AND 14)
- -----------------------------------------------------------------------------
STOCKHOLDERS' DEFICIT
Preferred stock, $.001 par value - authorized,
5,000,000 shares; issued and outstanding,
0 shares -
Common stock, $.001 par value - authorized,
30,000,000 shares; issued and outstanding,
13,968,394 shares 13,968
Additional paid-in capital 15,323,740
Accumulated deficit (16,261,789)
Cumulative translation adjustment (37,709)
- -----------------------------------------------------------------------------
Total stockholders' deficit (961,790)
- -----------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 325,482
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-2
<PAGE>
HARRIER, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
FOR THE YEARS ENDED JUNE 30, 1997 1996
- -------------------------------------------------------------------------------
<S> <C> <C>
SALES $ 48,069 $ 66,687
COST OF SALES 50,383 123,724
- -------------------------------------------------------------------------------
GROSS PROFIT (LOSS) (2,314) (57,037)
- -------------------------------------------------------------------------------
EXPENSES
Selling, general and administrative 274,142 587,410
Salaries and related expenses 311,249 418,445
Research and development 62,100 176,773
Amortization and depreciation 40,489 23,895
- -------------------------------------------------------------------------------
TOTAL EXPENSES 687,980 1,206,523
- -------------------------------------------------------------------------------
LOSS FROM OPERATIONS (690,294) (1,263,560)
- -------------------------------------------------------------------------------
OTHER INCOME (EXPENSE)
National Cancer Institute grant 80,000 -
Interest income (expense), net (57,638) 5,905
Write off of intangible assets - (134,923)
Loss on sale of marketable securities (15,716) -
Miscellaneous income 6,600 78,500
Amortization and equity in loss of
joint venture - (50,108)
Loss on sale of investment in joint
venture (7,448) -
Unrealized loss on investment - (8,775)
- -------------------------------------------------------------------------------
TOTAL OTHER INCOME (EXPENSE) 5,798 (109,401)
- -------------------------------------------------------------------------------
LOSS BEFORE PROVISION FOR INCOME TAXES (684,496) (1,372,961)
PROVISION FOR (BENEFIT FROM) INCOME TAXES 1,740 (47,405)
- -------------------------------------------------------------------------------
NET LOSS $ (686,236) $ (1,325,556)
- -------------------------------------------------------------------------------
NET LOSS PER COMMON SHARE $ (.06) $ (0.11)
- -------------------------------------------------------------------------------
AVERAGE COMMON SHARES OUTSTANDING 12,468,780 11,783,861
- -------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-3
<PAGE>
HARRIER, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
- -------------------------------------------------------------------------------
FOR THE YEARS ENDED JUNE 30, 1997 AND 1996
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Total
Additional Cumulative Stockholders
Common Stock Paid-in Accumulated Translation Equity
Capital Deficit Adjustment (Deficit)
Shares Amount
<S> <C> <C> <C> <C> <C> <C>
Balances, July 1, 1995 11,684,266 $11,684 $15,013,577 $(14,245,547) $(37,652) $742,062
Issuance of common stock
net of $15,750 in
offering costs 284,128 284 212,163 212,447
Net loss for the year
ended June 30, 1996 (1,325,556) (1,325,556)
Translation adjustment as
of June 30, 1996 (57) (57)
Balances, July 1, 1996 11,968,394 11,968 15,225,740 (15,571,103) (37,709) (371,104)
Issuance of common stock 2,000,000 2,000 98,000 100,000
Dividend payable to Glycosyn
preferred stockholders (4,450) (4,450)
Net loss for the year
ended June 30, 1997 (686,236) (686,236)
Translation adjustment as
of June 30, 1997 - -
Balances, June 30, 1997 13,968,394 $13,968 $15,323,740 $(16,261,789) $(37,709) $(961,790)
----------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-4
<PAGE>
HARRIER, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEARS ENDED JUNE 30, 1997 1996
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(686,236) $(1,325,556)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 40,489 23,895
Provision for uncollectible amounts - (16,014)
Write-down of inventory - 74,767
Write-off of uncollectible amounts - 61,811
Miscellaneous income recognized
upon sale of inventory - (66,000)
Amortization and equity in loss
of joint venture - 50,108
Loss on sale of investment in joint venture 7,448 -
Unrealized loss on investment - 8,775
Loss on sale of marketable securities 15,716 -
Write-off of intangible assets - 134,979
Services received and loan fees
in exchange for stock - 55,100
Accrued interest 60,833 3,667
Increase (decrease) resulting
from changes in:
Accounts receivable, trade - (3,541)
Amount receivable from sale of assets - 17,000
Receivables from joint research and
development agreement - 34,680
Receivables from related parties 45,070 29,539
Inventory 40,411 61,446
Other current assets (11,522) 1,280
Accounts payable and accrued expenses (7,102) 62,908
Net cash used in operating activities (494,893) (791,156)
</TABLE>
F-5
<PAGE>
HARRIER, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEARS ENDED JUNE 30, 1997 1996
<S> <C> <C>
CASH FLOWS USED IN INVESTING ACTIVITIES:
Purchase of property and equipment $ (54,849) (7,841)
Proceeds from sale of marketable securities 46,159 -
Intangible assets expenditure - (5,339)
Collection on note receivable for sale of
equity in joint venture and inventory 20,000 -
Collection of receivable from related party 5,798 -
Net cash provided by (used in) investing
activities 17,108 (13,180)
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:
Issuance of common stock 100,000 157,290
Issuance of preferred stock of subsidiary 89,000 -
Borrowings from related party - 500,000
Net cash provided by financing activities 189,000 657,290
Net decrease in cash (288,785) (147,046)
Cash and cash equivalents, beginning of year 347,022 494,068
Cash and cash equivalents, end of year $ 58,237 $ 347,022
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the year for:
Interest $ - $ -
Taxes 1,740 1,711
Non-cash investing and financing activities:
Stock issued for services and loan fees $ - $ 55,100
Note receivable in consideration for sale of
equity in joint venture and inventory $ 175,000 $ -
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-6
<PAGE>
1. ORGANIZATION AND DESCRIPTION OF BUSINESS
Harrier, Inc. was organized under the laws of the State of Utah on October 8,
1985 and later was reincorporated in the State of Delaware. The Company is
engaged in research, development and marketing of a number of products which are
at various stages of development. Until June 30, 1997, the Company was selling
the Bioptron Lamp (cosmetic and medical uses) in the Western Hemisphere.
Glycosyn Pharmaceuticals, Inc. ("Glycosyn") is organized as a majority-owned
subsidiary under the laws of the State of Delaware. Glycosyn holds all of the
Company's biomedical technologies rights and obligations. The biomedical
technologies are currently in the pre-clinical development phase. In December
1996, Glycosyn was awarded a $100,000 grant from the National Cancer Institute
to cover certain research costs.
The accompanying consolidated financial statements include the accounts of
Harrier, Inc., its wholly-owned subsidiary, Harrier GmbH, a German corporation,
and Glycosyn (collectively, the "Company"). All significant intercompany
transactions and balances have been eliminated.
The Company has incurred losses from inception of $16,261,789 including $686,236
during the year ended June 30, 1997 and with the sale of its investment in Derma
Ray (see Note 3) has no on-going revenue generating operations. As disclosed in
Note 3, in September 1992 the Company disposed of its European operations that
had accounted, to that date, for a significant part of its business. The
Company continues to concentrate on developing its biochemical technologies and
is in the process of seeking a merger partner (see Note 16 - Subsequent Event -
COPE Reorganization). However, there can be no assurance that the Company will
successfully acquire or merge with an operational entity, or develop its
biochemical technologies.
These factors, among others, raise substantial doubt about the Company's ability
to continue as a going concern. Financing for activities to date has previously
come from the sale of Company assets, sale of the Company's stock and short-term
borrowings. To continue the development of its biochemical technologies beyond
the pre-clinical testing phase, the Company will require substantially more
capital than it currently has. There can be no assurance as to the Company's
ability to fully develop and license its biochemical technologies and other
products. The consolidated financial statements do not include any adjustments
that might result from the outcome of the above-mentioned uncertainties.
F-7
<PAGE>
HARRIER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
MANAGEMENT'S ESTIMATES
The preparation of financial statements, in conformity with generally accepted
accounting principles, requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
INVENTORY
Inventory, consisting of finished goods, is recorded at the lower of cost or
market, with cost being determined using the first-in, first-out ("FIFO")
method. All inventory was sold at June 30, 1997 (see Note 3).
PROPERTY AND EQUIPMENT
Property and equipment, including significant improvements thereto, are stated
at cost and are depreciated using the straight-line method over an estimated
useful life of 5 years. Maintenance and repairs are charged to expense as
incurred.
INVESTMENTS
Investments represent up to their disposition (see note 6) equity securities
and a 50% interest in an unconsolidated joint venture.
The equity securities were classified as available-for-sale and stated at
their fair market value based on quoted market prices.
The Company had no majority control over the joint venture's operations or
management; accordingly, the investment in joint venture was accounted for
under the equity method. The Company's share of the income or loss of the
joint venture was recognized as an increase or decrease, respectively, in the
Company's investment. Profits and losses on transactions with the joint
venture were eliminated to the extent of the Company's ownership interest.
The Company assesses whether there has been a permanent impairment in the value
of its investments by considering factors such as quoted market prices,
estimated joint venture revenues and prospects and other economic factors.
F-8
<PAGE>
HARRIER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
2. SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
INTANGIBLE ASSETS
Intangible assets include patents, product rights and technology costs. All
patent, product rights and technology costs are capitalized and amortized over
ten years using the straight-line method. The Company assesses whether there
has been a permanent impairment in the value of intangible assets by considering
factors such as expected future product revenues, anticipated product demand and
prospects and other economic factors.
INCOME TAXES
The Company accounts for income taxes in accordance with the provisions of
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes," which requires the recognition of deferred tax liabilities and assets
for the expected future tax consequences of events that have been included in
the financial statements or tax returns. Under this method, deferred tax
liabilities and assets are determined based on the difference between the
financial statement and the tax basis of assets and liabilities using enacted
rates in effect for the year in which the differences are expected to reverse.
Valuation allowances are established when necessary to reduce deferred tax
assets to the amount expected to be realized.
FOREIGN CURRENCY TRANSLATION
Financial statements of foreign operations where the local currency is the
functional currency are translated using exchange rates in effect at
period-end for assets and liabilities and average exchange rates during the
period for results of operations. Related translation adjustments are
reported as a separate component of stockholders' equity. The Company has
determined that the local currency of its international subsidiary is the
functional currency. Gains and losses from foreign currency transactions are
generally included in operations. All references to foreign currencies in
the following notes to the financial statements have been translated using
June 30 year-end exchange rates, except where otherwise noted. There were no
foreign currency transaction gains or losses included in the statements of
operations for the year ended June 30, 1997 and 1996.
LOSS PER COMMON SHARE
The computation of loss per common share is based on the weighted average number
of shares of common stock outstanding during the periods presented. Common
stock equivalents have not been included in the loss per common share because
their effect would be anti-dilutive.
F-9
<PAGE>
HARRIER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CASH AND CASH EQUIVALENTS
The Company considers short-term investments which have maturities of three
months or less at the date of acquisitions to be cash equivalents. From time
to time, the Company's cash on deposit with banks exceeds the $100,000
federally-insured limit.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of financial instruments included in current assets and
liabilities approximates fair value because of the short maturity of these
items.
CONCENTRATION OF CREDIT RISK
For the years ended June 30, 1997 and 1996, the Company earned approximately
100% and 32%, respectively, of its operating revenues from one customer.
ISSUANCE OF STOCK FOR SERVICES
Shares of the Company's common stock issued for services are recorded in
accordance with Accounting Principles Board Opinion No. 16, "Business
Combinations" and Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" ("SFAS 123"), at the fair market value
of the stock issued or the fair market value of the services provided, whichever
value is the more clearly evident.
STOCK COMPENSATION PLAN
SFAS 123 encourages, but does not require, companies to record compensation cost
for stock-based employee compensation plans at fair value. The Company elected
to account for stock-based compensation using the intrinsic value method
prescribed in Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees," and related interpretations. Accordingly, compensation
cost for stock options is measured as the excess, if any, of the quoted market
price of the Company's stock at the date of the grant over the amount an
employee must pay to acquire the stock.
F-10
<PAGE>
HARRIER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RECENT ACCOUNTING DEVELOPMENT
In February, 1997, the FASB adopted Statement No. 128, "Earnings Per Share."
This new standard requires dual presentation of basic and diluted earnings per
share ("EPS") on the face of the statement of income and requires reconciliation
of the numerators and the denominators of the basic and diluted EPS
calculations. This statement will be effective for the second quarter of the
Company's 1998 fiscal year. The Company has not yet quantified what effect, if
any, the adoption of SFAS 128 will have on its earnings per share of common
stock.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income."
This statement establishes standards for reporting and display of comprehensive
income and its components (revenues, expenses, gains and losses) in an entity's
financial statements. This statement requires an entity to classify items of
other comprehensive income by their nature in a financial statement and display
the accumulated balance of other comprehensive income separately from retained
earnings and additional paid-in-capital in the equity section of a statement of
financial position. This pronouncement is effective for fiscal years beginning
after December 15, 1997 and the Company expects to adopt the provision of this
statement in fiscal year 1998. Management does not expect this statement to
significantly impact the Company's financial statements.
In June 1997, the FASB issued SFAS No. 131, "Disclosures About Segments of an
Enterprise and Related Information." This statement requires public enterprises
to report financial and descriptive information about its reportable operating
segments and establishes standards for related disclosures about product and
services, geographic areas, and major customers. This pronouncement is
effective for fiscal years beginning after December 15, 1997 and the Company
expects to adopt the provisions of this statement in fiscal year 1998.
Management does not expect this statement to significantly impact the Company's
financial statements.
3. SALE OF ASSETS
SALE OF BIOPTRON A.G.
Bioptron A.G. ("Bioptron") was the Company's former subsidiary which developed,
manufactured and marketed the Bioptron Lamps. In September 1992, the Company
sold Bioptron's assets and its share capital to an unaffiliated entity. The
aggregate consideration was of approximately $3,000,000 plus a 4% royalty on
future Bioptron Lamp sales. The Company retained exclusive rights to market and
distribute the Bioptron Lamps in the Western Hemisphere (the "Territory") and is
marketing and selling Bioptron Lamps directly and through distributors in the
Territory.
3. SALE OF ASSETS (CONTINUED)
On June 30, 1994, the Company amended the Bioptron sales agreement and received
5,000 B1 lamps and twenty B2 lamps as payment in full, in lieu of future
Bioptron royalty payments. Accordingly, the Company recorded $60,000, which was
net of a $290,000 allowance, as inventory at June 30, 1994 related to this
transaction. Based on sales activity during fiscal year 1996, a $66,000
reduction of such allowance was recognized as miscellaneous income in 1996. The
allowance was reversed in connection with the sale of inventory to Derma Ray.
F-11
<PAGE>
HARRIER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
SALE OF BIOPTRON LAMP INVENTORY AND REDEMPTION OF DERMA RAY'S INTEREST
During the year ended June 30, 1995, the Company acquired a 50% interest in
Derma Ray International Limited Liability Corporation ("Derma Ray"). Derma Ray
was formed to market, distribute and sell various health and cosmetic products,
including the Company's Bioptron Lamps.
On June 30, 1997, the Company sold its Bioptron Lamp inventory to Derma Ray and
agreed to the redemption of its entire membership in consideration for $175,000
(see Note 4).
4. AMOUNTS RECEIVABLE FROM RELATED PARTIES
The following is a summary of amounts receivable from related parties as of June
30, 1997:
<TABLE>
<CAPTION>
<S> <C>
Receivable from Derma Ray $ 155,000
Employee receivable 5,478
------------
$ 160,478
------------
</TABLE>
On June 30, 1997, the Company sold its entire inventory and its interest in
Derma Ray in consideration for $40,000 in cash (of which $20,000 was paid before
year end) and a note receivable of $135,000. The note is non-interest bearing
and is due no later than June 30, 1998, provided that Derma Ray shall apply all
of the gross proceeds of the sale of the Bioptron Lamps towards the
reimbursement of the note and use its best efforts to repay the note principal
as soon as possible. As of October 31, 1997, $75,000 had been repaid on the
note.
The employee receivable amount was applied after year-end against compensation
due to the employee.
F-12
<PAGE>
HARRIER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
5. PROPERTY AND EQUIPMENT
The following is a summary of property and equipment at cost, less accumulated
depreciation as of June 30, 1997:
<TABLE>
<CAPTION>
<S> <C>
Equipment $ 66,062
Furniture and fixtures 17,645
Leasehold improvements 32,585
-----------
$ 116,292
Accumulated depreciation 85,656
-----------
$ 30,636
-----------
</TABLE>
Total depreciation expense for the years ended June 30, 1997 and 1996 was
$36,766 and $4,396, respectively.
6. INVESTMENTS
During fiscal 1997, the Company sold $61,875 in marketable securities for
$46,159, recognizing a $15,716 loss included in the consolidated statement of
operations.
During the year ended June 30, 1996, the Company recorded a $8,775 valuation
allowance to reduce its investment in equity securities to its estimated net
realizable value based on quoted market prices. Since management believed that
the decline in market price is permanent, the Company recorded the change in
valuation allowance in the 1996 consolidated statement of operations.
During the year ended June 30, 1995, the Company acquired a 50% interest in
Derma Ray for a $200,000 initial capital contribution. The excess of the
Company's contribution over its equity in the joint venture's net assets
amounted to $50,000 and is amortized over five years. During the years ended
June 30, 1997 and 1996, Derma Ray incurred gains (losses) of $16,803 and
($68,550), of which $8,402 and ($34,275) were allocated to the Company and
recorded in the 1997 and 1996 consolidated statements of operations. As
disclosed in Note 3, the Company sold the Bioptron lamps and its membership
interest to Derma Ray and recorded a net loss of $7,448. The last $5,000
payment under the note will be deemed to have redeemed the Company's entire
membership interest.
F-13
<PAGE>
HARRIER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
6. INVESTMENTS (CONTINUED)
Condensed financial information (unaudited) relating to Derma Ray is as follows:
<TABLE>
<CAPTION>
CONDENSED BALANCE SHEET JUNE 30, 1997
----------------------- -------------
<S> <C>
ASSETS
Cash $ 36,578
Inventories and other current assets 213,704
Investment in Naturade, Inc.'s common stock 150,000
------------
$ 400,282
------------
LIABILITIES AND EQUITY
Payable to Harrier, Inc. $ 155,000
Equity 245,282
------------
$ 400,282
------------
</TABLE>
<TABLE>
<CAPTION>
CONDENSED INCOME STATEMENT
--------------------------
Year Ended June 30
-------------------------
1997 1996
<S> <C> <C>
Sales $ 163,520 $ 1,814
------------ ----------
Gross Profit $ 44,933 $ (1,211)
------------ ----------
Expenses $ 28,130 $ 67,339
------------ ----------
Net Gain (Loss) $ 16,803 $ (68,550)
------------ ----------
</TABLE>
F-14
<PAGE>
HARRIER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
7. INTANGIBLE ASSETS
The following is a summary of intangible assets, net as of June 30, 1997:
<TABLE>
<CAPTION>
<S> <C>
Patents and patent applications $ 37,219
Accumulated amortization 5,432
-----------
$ 31,787
-----------
-----------
</TABLE>
The Company has filed individual and continuation-in-part patents on its
modified glycosylation compounds and related chemical processes since January
1990. In September, 1992, the Company filed new patent applications covering
significant additions to its glycosylation process. These patents, which have
subsequently been issued, are co-owned by the Company and the University of
Michigan because they involve technologies developed pursuant to research
agreements entered into with the University. Compensation to the University for
future revenues generated from technology related to the co-owned patents has
not been determined at this time.
Total amortization charged to operations was $3,723 and $19,499 for the years
ended June 30, 1997 and 1996, respectively.
During fiscal year 1996, the Company abandoned and wrote off all intangibles
relating to a product under development designated as the "Calorimeter." The
net write off of $134,923 is included in the fiscal 1996 Consolidated Statement
of Operations.
8. CONVERTIBLE NOTE PAYABLE TO RELATED PARTY
On June 9, 1996, the Company entered into a $500,000 loan agreement with an
entity affiliated with the President and the Chairman of the Board. The loan
bears interest at 12% and is due on June 4, 1998. At the Company's option, the
loan's principal and interest can be repaid using the Company's stock (or its
subsidiary's stock, if publicly traded), valued at 75% of the average price 90
days preceding the repayment date. In consideration for entering into the
agreement Glycosyn issued 52,100 shares, with a value representative of 1% of
loan fees.
F-15
<PAGE>
HARRIER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
9. MINORITY INTEREST
At June 30, 1997, the Company owns approximately 94% of Glycosyn. During the
year ended 1997, Glycosyn sold 44,500 shares of its Series A preferred stock for
$89,000 to a related party. The stock has a liquidation preference of $2 per
share ($89,000), is convertible into shares of Glycosyn common stock and
entitles the holder to a dividend of 12% of the liquidation preference, payable
quarterly in common stock of Glycosyn. The preferred stock has been presented
in the accompanying financial statements as minority interest.
10. COMMON STOCK AND STOCK OPTION PLAN
During the year ended June 30, 1997, the Company issued 2,000,000 shares of
common stock (total value $100,000) and 2,000,000 common stock purchase warrants
(see Note 11) to existing share-holders and related parties.
During the year ended June 30, 1996, the Company issued 284,128 shares for a
total of $212,447 ($157,290 in cash), net of approximately $15,750 in stock
offering costs, and including 290,000 common stock purchase warrants (see Note
11).
During the year ended June 30, 1990, the Company adopted an incentive stock
option and award plan. A total of 1,500,000 shares of common stock may be
issued under the plan and have been reserved by the Board of Directors for that
purpose. Options may be granted to Directors, Officers, employees and other
individuals at terms and exercise prices to be determined by the Board of
Directors. The following is a summary of all common stock options outstanding:
<TABLE>
<CAPTION>
JUNE 30, 1997 JUNE 30, 1996
--------------------------- -----------------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
SHARES EXERCISE PRICE SHARES EXERCISE PRICE
<S> <C> <C> <C> <C>
Outstanding, beginning of year 813,996 2.72 1,052,998 3.19
Granted - - - -
Canceled-expired (363,996) 5.46 (239,002) 4.78
Exercised - - - -
-------- --------
Outstanding, end of year 450,000 .50 813,996 2.72
-------- --------
-------- --------
Exercisable, end of year 450,000 .50 813,996 2.72
-------- --------
-------- --------
</TABLE>
F-16
<PAGE>
HARRIER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
10. COMMON STOCK AND STOCK OPTION PLAN (CONTINUED)
In 1997 and 1996, there were no options granted by the Company. Each option
allows the holder to purchase one share of common stock at the exercise price at
any time after the vesting date, which has been immediate, and before the
expiration date.
Options outstanding at June 30, 1997 are summarized as follows:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
NUMBER REMAINING NUMBER OF SHARES
EXERCISE PRICE OUTSTANDING CONTRACTUAL LIFE EXERCISABLE
-------------- ----------- ----------------- ----------------
<S> <C> <C> <C>
$ .50 450,000 11 Months 450,000
</TABLE>
F-17
<PAGE>
HARRIER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
11. WARRANTS
Convertibility rights, weighted average exercise price and remaining contractual
life attached to the common stock purchase warrants issued in connection with
public and private stock offerings are as follows:
<TABLE>
<CAPTION>
1994 1995 1996 1997
SERIES C AND D WARRANTS WARRANTS WARRANTS WARRANTS
--------------- ------------------- ------------------- ------------------ -----------------
SHARES WAEP* SHARES WAEP SHARES WAEP SHARES WAEP SHARES WAEP
------- ------ --------- -------- --------- ------ -------- ------ -------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Outstanding 426,480 $ .85 352,250 $ 1.08 1,964,367 $ .70 290,000 $ .44 - -
beginning of
the year
Issued - - - - - - - - - -
Cancelled- (426,480) .85 (352,250) 1.08 (1,964,367) .70 - - - -
expired
Exercised - - - - - - - - - -
Outstanding & 0 - 0 - 0 - 290,000 .44 2,000,000 .13
exercisable -
end of year
Weighted average 7 mos. 33 mos
remaining
contractual life
Range of exercise - - - - - - $ .22 - .70 $ .13 -
price
</TABLE>
*Weighted average exercise price
F-18
<PAGE>
HARRIER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
12. INCOME TAXES
The components of the provision for income taxes (tax benefit) are as
follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED JUNE 30,
----------------------------
1997 1996
-------- --------
<S> <C> <C>
Current:
State $ 1,740 $ 800
Foreign - (48,205)
-------- --------
1,740 (47,405)
Deferred - -
-------- --------
$ 1,740 $(47,405)
-------- --------
-------- --------
</TABLE>
The reconciliation of the effective tax rates and U.S. statutory tax rates
are as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED JUNE 30,
-----------------------------
1997 1996
--------- --------
<S> <C> <C>
Tax benefit at statutory rate (34%) (34%)
Foreign tax - (3%)
Change in valuation allowance 34% 34%
----- ---
0% 3%
</TABLE>
At June 30, 1997, the Company has net operating loss carryforwards, for
income tax reporting purposes, of approximately $11,783,000 and $3,180,000
available to offset future federal and California taxable income,
respectively. The federal carryforwards expire in 2009 and the California
carryforwards expire in 1998. The utilization of net operating loss
carryforwards may be limited under the provisions of Internal Revenue Code
Section 382.
At June 30, 1997, the Company had available tax credit carryforwards
comprised of federal and state research and experimentation credits of
$57,467 and $8,007, respectively. The California federal and state
research and experimentation credit carryforwards expire in 2009 and 1998,
respectively.
At June 30, 1997, the Company had approximately $3.9 million in capital
loss carryforwards which are available until 1998 to offset capital gains
for federal and California state tax purposes. Since it is not
determinable at this time whether such credits will ever be realizable,
they are not considered as deferred tax assets.
F-19
<PAGE>
HARRIER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
12. INCOME TAXES (CONTINUED)
The components of the net deferred tax asset and (liability) are as
follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED JUNE 30,
----------------------------
1997 1996
---------- ----------
<S> <C> <C>
State taxes $ 354 $ 340
Royalty income 0 51,202
Net operating loss carryforward 4,383,141 4,059,141
Patents 1,738 (118)
Credits 65,474 67,140
Other 28,270 33,601
---------- ----------
Subtotal 4,478,977 4,211,306
Valuation allowance (4,478,977) (4,211,306)
Total $ - $ -
---------- ----------
---------- ----------
</TABLE>
13. COMMITMENTS
OPERATING LEASES
The Company leases office space under operating leases that expire
throughout fiscal year 1999. Total rent expense amounted to $46,390 and
$41,597 for the years ended June 30, 1997 and 1996, respectively.
Minimum future rental payments under the noncancelable operating leases
are as follows as of June 30:
<TABLE>
<CAPTION>
<S> <C>
1998 $29,310
1999 3,760
-------
$33,070
-------
-------
</TABLE>
F-20
<PAGE>
HARRIER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
14. CONTINGENCY - JOINT RESEARCH AND DEVELOPMENT AGREEMENT
On May 1, 1993, the Company completed a drug development agreement with
American Diagnostica, Inc. ("ADI"), a private company located in Greenwich,
Connecticut. Pursuant to the agreement, ADI was required to develop and test
synthetic drugs using the Company's proprietary glycosylation processes. ADI
has committed to pay the Company $5,000 per month over 100 months and expend
at least $800,000 for research and development.
In June 1995, ADI informed the Company that it was unable to fund any further
obligations pursuant to the research and development portion of the drug
development agreement. The Company then terminated the related agreement
for, among other things, anticipatory repudiation. On August 24, 1995, ADI
filed a civil action for money damages alleging wrongful termination,
substantial compliance under the agreement, and that the Company was indebted
to the plaintiff for damages in an unspecified amount, plus punitive damages,
attorney fees and interest. In December, 1995, Harrier moved the court for
an order compelling the plaintiff to submit the dispute to arbitration. In
September, 1996, the court granted the Company's motion, staying all
proceedings pending the conclusion of mandatory arbitration in California, as
the parties provided in the research and development agreement. As of the
date of the financial statements, no arbitration proceeding has been
commenced by either party. Management believes that it has meritorious
defenses to all of ADI's claims and that the claims are substantially without
merit. Under current circumstances, no determination can be made as to the
ultimate outcome of the litigation or as to the necessity for any provision
in the accompanying consolidated financial statements for any liability that
may result from an unfavorable outcome.
15. NATIONAL CANCER INSTITUTE GRANT
In December 1996, Glycosyn was awarded a $100,000 grant to finance research
on its medical technologies. $80,000 was received and expensed before year
end, whereas the remaining $20,000 was received and expensed after year end.
F-21
<PAGE>
HARRIER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
16. SUBSEQUENT EVENTS
STOCK ISSUANCE
Subsequent to year end the Company issued 1,200,000 shares at $.10 per
share (total value $120,000) and common stock purchase warrants allowing
the holders to purchase 900,000 shares of the Company's common stock at
$.13 a share through September, 2000.
COPE REORGANIZATION
On October 30, 1997, the Company entered into a Securities Purchase Agreement
and Plan of Reorganization ("Reorganization Agreement") with COPE AG
("COPE"), a Swiss stock corporate engaged in the business of providing high
volume information management consulting, services and solutions to Swiss,
German and Austrian companies. Pursuant to the Reorganization Agreement, the
shareholders of COPE will become the controlling stockholders of the Company
and COPE will become a wholly-owned subsidiary of the Company (referred to
herein as the "COPE Reorganization"). In connection with the proposed COPE
Reorganization, the Company has terminated its Bioptron operations and
entered into an agreement with a related party, New Capital Investment Fund
("NCIF"), to sell 2,850,000 shares of the $.001 par value common stock
("Glycosyn Common Stock") of its subsidiary, Glycosyn, to NCIF in exchange
for NCIF's cancellation of $590,000 of indebtedness owed by the Company
(referred to herein as the "Glycosyn Recapitalization"). See "Glycosyn
Recapitalization" below.
The Reorganization Agreement provides that immediately prior to the closing
("Closing") of the COPE Reorganization, the Company shall effect the Glycosyn
Recapitalization and file an amendment (the "Amendment") to the Company's
Certificate of Incorporation to: (i) change the name of the Company to COPE
Inc.; and (ii) reverse split the outstanding shares of Common Stock of the
Company on a one for 48 basis. At the Closing, and subject to the
satisfaction of the foregoing, the Company will issue 2,862,000 shares
(post-split) of the Company's $.001 par value common stock ("Harrier Common
Stock"), representing 89.7% of the issued and outstanding shares of Harrier
Common Stock after giving effect to the Closing, in exchange for the COPE
shareholders' transfer of all of the issued and outstanding capital shares of
COPE to the Company. The Closing shall occur when: (i) the Company's
stockholders shall have adopted and approved the Reorganization Agreement and
the Glycosyn Recapitalization; (ii) the Amendment shall have been filed with
the Secretary of State of Delaware; and (iii) all conditions to closing of
the Reorganization Agreement shall have been met and all closing documents
shall have been delivered. The Reorganization Agreement contains typical
representations and warranties of the parties for transactions of this type.
The consummation of the COPE Reorganization and the Glycosyn Recapitalization
are subject to the approval of the stockholders of the Company. An annual
meeting of the stockholders of the Company has been tentatively scheduled for
January 1998, at which the COPE Reorganization and the Glycosyn
Recapitalization will be submitted for shareholder approval.
Additional information concerning COPE, the COPE Reorganization and the
Glycosyn Recapitalization will be included in a Proxy Statement to be filed
with the Securities and Exchange Commission and distributed to shareholders
of the Company.
GLYCOSYN RECAPITALIZATION
The Glycosyn Recapitalization is part of a broader recapitalization of the
Company in connection with the COPE Reorganization. The Company has
structured the following series of transactions (referred to herein as the
"Glycosyn Recapitalization"):
Concurrent with the close of the COPE Reorganization, Harrier will
transfer all of its assets and liabilities to Glycosyn. In connection
therewith, the principal creditors of Harrier, except NCIF which is
presently owed $590,000 by Harrier, will be requested to agree to
release Harrier of any further liability for their claims.
Concurrent with the close of the COPE Reorganization, Harrier will sell
to NCIF 2,850,000 shares of its
F-22
<PAGE>
HARRIER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
5,000,000 Glycosyn Common Stock shares in consideration of NCIF's
agreement to cancel the $590,000 of indebtedness owed by Harrier. NCIF
is an investment fund in which Harrier's Chairman of the Board, Jurg
Kehrli, and President, Kevin DeVito, are retained as managers.
Upon the sale of the 2,850,000 shares of Glycosyn Common stock, Harrier's
interest in Glycosyn will be reduced to approximately 40% and, as a result, the
financial condition and results of operations of Glycosyn will not be
consolidated with the Company's subsequent to the close of the COPE
Reorganization.
The consummation of the Glycosyn Recapitalization is subject to the approval of
the stockholders of the Company and the receipt of an opinion of the fairness of
the terms of Harrier's sale of 2,850,000 shares of Glycosyn Common Stock. An
annual meeting of the stockholders of the Company has tentatively been scheduled
for (March 12, 1998) at which the Glycosyn Recapitalization will be submitted
for shareholder approval.
F-23
<PAGE>
HARRIER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
16. SUBSEQUENT EVENTS (CONTINUED)
NEW CONCEPT THERAPEUTICS INVESTMENT ACQUISITION
Glycosyn acquired a minority interest in New Concept Therapeutics, Inc., a North
Carolina corporation ("NCT"), pursuant to an agreement ("NCT Agreement") dated
October 30, 1997. NCT was formed on July 1, 1997 for the purpose of
manufacturing and distributing boron-containing pharmaceutical products for the
treatment of cancer. NCT's products are used in connection with boron neutron
capture therapy, an experimental cancer treatment currently under clinical
trials in the United States and Europe. NCT is a start-up business with nominal
assets and results of operations as of October 30, 1997.
Pursuant to the NCT Agreement, Glycosyn has agreed to purchase 23 shares of
the common stock of NCT, representing approximately 19% of the issued and
outstanding common shares of NCT, in consideration of Glycosyn's delivery of
an unsecured promissory note in the original principal amount of $250,000.
The Note bears interest at the rate of 10% per annum. Glycosyn is required
to pay a minimum of $50,000 of the principal amount under the Note on or
before December 31, 1997, with the payment of the remaining $200,000 balance,
and all accrued interest thereon on or before April 30, 1998. Glycosyn has
also agreed to use its best efforts to prepay the principal amount under the
Note as soon as practicable. As of October 31, 1997, Glycosyn has advanced
$43,000 to NCT under the Note. As additional consideration for its receipt
of the Note, NCT and its principal shareholders have granted Glycosyn an
option ("NCT Option") to purchase all 123 of the issued and outstanding
shares of NCT at an exercise price of $7,500 per share for a two year period.
The NCT Option is exercisable by Glycosyn subject to its payment of the
entire principal amount of the Note. The NCT Option provides that Glycosyn
may pay for the underlying NCT common shares by Glycosyn's delivery of
1,225,000 shares of Glycosyn common stock (at a rate of $0.30 per Glycosyn
share).
The Company's intention with regard to NCT is to assist it in the development
and marketing of its boron-containing pharmaceutical products and, in the event
of the commercial success of NCT's products, acquire all of the issued and
outstanding common shares of NCT.
F-24
<PAGE>
HARRIER, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
March 31,
1998
------------
<S> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 8,905
Amount receivable from related party 50,000
Grant contribution receivable 0
Other current assets 6,370
------------
Total Current Assets 65,275
------------
PROPERTY AND EQUIPMENT, net 20,670
------------
Intangible assets 28,995
Investment in New Concept Therapeutics 250,000
------------
Total Assets $ 364,940
------------
------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 596,616
Convertible note payable to related party 671,347
Note payable to New Concept Therapeutics 156,500
Deferred grant revenue 0
Dividend payable to Glycosyn preferred stockholders 4,450
------------
Total Current Liabilities 1,428,913
------------
Minority Interests 89,000
STOCKHOLDERS' EQUITY:
Common Stock 15,698
Additional paid-in capital 15,501,510
Accumulated deficit (16,632,470)
Cumulative translation adjustment (37,711)
------------
Total Stockholders' Equity (1,152,973)
------------
Total liabilities and
stockholders' equity $ 364,940
------------
------------
</TABLE>
F-25
<PAGE>
HARRIER, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Nine Months Ended
December 31,
--------------------------
1998 1997
----------- ----------
<S> <C> <C>
SALES $ 0 $ 46,581
COST OF SALES 0 49,047
----------- ----------
GROSS PROFIT 0 (2,466)
----------- ----------
EXPENSES:
General and administrative 162,779 126,003
Amortization and depreciation 12,757 10,054
Salaries and related expenses 167,556 294,318
Research and development 0 5,000
----------- ----------
Total expenses 343,092 435,375
----------- ----------
LOSS FROM OPERATIONS (343,092) (437,841)
----------- ----------
OTHER INCOME (EXPENSE):
Grant income 20,000 40,000
Loss on investment 0 (15,716)
Interest income/(expense) (46,791) (42,615)
----------- ----------
Total Other Income (Expense) (26,791) (18,331)
----------- ----------
Income (loss) from continuing operations before
provision for income taxes (369,883) (456,172)
Provision for income taxes (800) (1,100)
----------- ----------
Net loss (370,683) (457,272)
----------- ----------
Basic and diluted loss per share $ (0.02) $ (0.04)
----------- ----------
</TABLE>
The accompanying notes are an integral part
of these unaudited condensed consolidated financial statements.
F-26
<PAGE>
HARRIER, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
MARCH 31,
----------------------------------
1998 1997
---- ----
<S> <C> <C>
Cash Flows from (used for) Operating Activities:
Net Loss $(370,683) $(457,272)
----------- -----------
Adjustments to reconcile net income to net cash
used by operating activities:
Depreciation and Amortization 12,757 10,054
Accrued interest 46,851 45,666
Changes in assets and liabilities:
Related party receivable 110,478 18,500
Inventory 0 48,601
Other current assets 17,974 3,549
Accounts payable and accrued expenses (12,707) (57,144)
----------- -----------
Total Adjustments 175,353 69,226
----------- -----------
Cash Used by Operating Activities $(195,330) $(388,046)
----------- -----------
Cash Flows from Investing Activities:
Payment for property and equipment 0 (62,885)
Increase in investment (250,000) 0
Decrease in investment 0 61,875
----------- -----------
Cash used by Investing Activities $(250,000) $ (1,010)
----------- -----------
Cash Flows from Financing Activities:
Note payable to New Concept Therapeutics 156,500 0
Note payable to New Capital AG 60,000 0
Issuance of stock 179,500 89,000
----------- -----------
Net Cash Flows Provided by
Financing Activities $ 396,000 89,000
----------- -----------
Effect of Exchange Rate Changes on Cash $ (2) $ (28)
----------- -----------
Net Increase in Cash and Cash Equivalents (49,332) (300,084)
Cash and Cash Equivalents at Beginning of Period 58,237 347,022
----------- -----------
Cash and Cash Equivalents at End of Period $ 8,905 $ 46,938
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral part
of these unaudited condensed consolidated financial statements
F-27
<PAGE>
HARRIER, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
UNAUDITED
NOTE 1 - CONDENSED FINANCIAL STATEMENTS
The accompanying financial statements have been prepared by the Company
without audit. In the opinion of management, all adjustments (which include only
normal recurring adjustments) necessary to present fairly the financial
position, results of operations and cash flows at December 31, 1997, and for all
periods presented have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. It is suggested that these unaudited condensed
consolidated financial statements be read in conjunction with the financial
statements and notes thereto included in the Company's June 30, 1997 audited
financial statements. The results of operations for the nine months ended
December 31, 1997 are not necessarily indicative of the operating results for
the full year.
NOTE 2 - NOTES PAYABLE TO RELATED PARTIES
On June 9, 1996, the Company entered into a $500,000 loan agreement with an
entity affiliated with the President and the Chairman of the Board. The loan
bears interest of 12% and is due on June 4, 1998. At the Company's option, the
loan's principal and interest can be repaid using the Company's stock (or its
subsidiary's stock, if publicly traded), valued at 75% of the average price 90
days preceding the repayment date. In consideration for entering into the
agreement, Glycosyn Pharmaceuticals, Inc. issued 52,100 shares valued to
represent 1% in loan fees.
On January 23, 1998, New Capital AG loaned Glycosyn $60,000 in consideration
of Glycosyn's delivery of an unsecured promissory note in the original
principal amount of $60,000. The note bears interest at the rate of twelve
percent (12%) per annum and all interest and principal is due and payable on
January 22, 1999. New Capital AG is a Zurich based financial and management
consulting firm. The Company's Chairman of the Board and President, Jurg
Kehrli and Kevin DeVito, respectively, are the principals of New Capital AG.
NOTE 3 - SECURITIES PURCHASE AGREEMENT AND PLAN OF REORGANIZATION
On October 30, 1997, the Company entered into a Securities Purchase Agreement
and Plan of Reorganization ("Reorganization Agreement") with COPE AG ("COPE"), a
Swiss sock corporation engaged in the business of providing high volume
information management consulting services and solutions to Swiss, German and
Austrian industries. Pursuant to the Reorganization Agreement, the SHAREHOLDERS
of COPE will become the controlling stockholders of the Company and COPE will
become a wholly-owned subsidiary of the Company. (See ITEM 2)
NOTE 4 - ISSUANCE OF COMMON STOCK
F-28
<PAGE>
During the nine months ended March 31, 1998 the Company issued approximately
130,000 shares of Harrier, Inc. common stock as payment in lieu of cash in the
settlement of a lawsuit.
In addition, the Company issued 1,200,000 shares of Harrier, Inc. common stock
at $0.10 per shares and 900,000 common stock warrants. The shares were sold
pursuant to Regulation S under the Securities Act of 1933 to seven European
investors. There was no underwriter involved in the transaction. The proceeds
from the sale of the shares will be used for working capital and administrative
and professional fees associated with a prospective merger.
F-29
<PAGE>
In January 1998 the Company issued 400,000 shares of Harrier, Inc common stock
at $0.10 per share. The shares were sold pursuant to Regulation S under the
Securities Act of 1933. There was no underwriter involved in the transaction.
The proceeds from the sale of the shares will be used for working capital and
administrative and professional fees associated with a prospective merger.
F-30
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Shareholders and Board of Directors of
COPE AG
Rotkreuz, Switzerland
We have audited the accompanying consolidated balance sheets of Cope AG and
subsidiaries as of December 31, 1996 and 1997 and the related consolidated
statements of income, shareholders' equity and cash flows for each of the three
years in the period ended December 31, 1997. 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 auditing standards generally accepted
in the United States of America. 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 financial statements referred to above present fairly, in
all material respects, the consolidated financial position of COPE AG and
subsidiaries at December 31, 1996 and 1997, and the consolidated results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1997, in conformity with accounting principles generally
accepted in the United States of America.
ATAG ERNST & YOUNG AG
Kevin McCabe Edgar Christen
Chartered Accountant Swiss Certified Accountant
Zug, Switzerland
March 23, 1998
F-31
<PAGE>
COPE AG
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1997 AND 1996
(AMOUNTS IN US DOLLARS)
<TABLE>
<CAPTION>
ASSETS 1997 1996
---------- ---------
<S> <C> <C> <C>
CURRENT ASSETS
Cash 678,936 262,047
Trade accounts receivable Note 3 3,622,485 2,226,227
Inventories 1,383,191 981,941
Other current assets Note 4 318,182 171,647
---------- ----------
TOTAL CURRENT ASSETS 6,002,794 3,641,862
---------- ----------
Property and equipment, net Note 5 570,475 267,627
Loans receivable Note 6 394,406 0
Goodwill, net of amortization of 0 9,736
USD 1,757 and USD 1,217, respectively
Intangible assets 125,631 51,064
Deferred income taxes Note 12 98,606 0
---------- ----------
1,189,118 328,427
---------- ----------
TOTAL ASSETS 7,191,912 3,970,289
---------- ----------
---------- ----------
</TABLE>
See notes to the consolidated financial statements
F-32
<PAGE>
COPE AG
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1997 AND 1996
(AMOUNTS IN US DOLLARS)
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY 1997 1996
---------- ---------
<S> <C> <C> <C>
CURRENT LIABILITIES
Short-term borrowings Note 7 661,982 172,066
Trade accounts payable 2,779,683 2,116,029
Amounts due to related parties Note 13 97,984 190,048
Customer advances 704,915 0
Other payables Note 9 130,658 175,651
Accrued other liabilities Note 10 506,416 219,378
Current income taxes 49,349 36,989
Deferred income taxes Note 12 0 54,922
--------- ---------
TOTAL CURRENT LIABILITIES 4,930,987 2,965,083
--------- ---------
Commitments and contingent liabilities Note 15
Minority interests 0 178
--------- ---------
SHAREHOLDERS' EQUITY
Share capital: Note 11 80,448 76,336
Common stocks, SFR 100 (USD 75.89) par value:
Autorized shares - 1,060 (1996: 1,000) , issued
and outstanding shares - 1,060 (1996: 1,000)
Legal reserves 44,330 44,330
Additional paid in capital 690,199 0
Cumulative translation adjustment (145,731) (74,420)
Retained earnings 1,591,679 958,782
--------- ---------
TOTAL SHAREHOLDERS' EQUITY 2,260,925 1,005,028
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 7,191,912 3,970,289
--------- ---------
--------- ---------
</TABLE>
See notes to the consolidated financial statements
F-33
<PAGE>
COPE AG
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS DECEMBER 31, 1997, 1996 AND 1995
(AMOUNTS IN US DOLLARS)
<TABLE>
<CAPTION>
1997 1996 1995
----------- ---------- ----------
<S> <C> <C> <C>
REVENUES
Sales solution 16,605,175 11,834,701 10,500,211
Sales services 1,310,996 680,422 520,145
---------- ---------- ----------
17,916,171 12,515,123 11,020,356
---------- ---------- ----------
OPERATING EXPENSES
Cost of sales 12,817,738 8,829,711 8,126,940
Selling, general and administrative expenses 4,205,093 2,394,693 1,870,905
Consultancy expenses 131,723 540,347 688,236
Depreciation and amortization 220,363 262,155 195,320
Impairment of intangible assets 0 77,990 0
---------- ---------- ----------
17,374,917 12,104,896 10,881,401
---------- ---------- ----------
OPERATING INCOME 541,254 410,227 138,955
OTHER INCOME (EXPENSE):
Interest expense (76,197) (63,940) (64,341)
Interest income 704 2,791 12,071
Other expense (270) (3,069) (5,908)
Foreign exchange gain 38,716 12,408 10,085
---------- ---------- ----------
(37,047) (51,810) (48,093)
---------- ---------- ----------
INCOME BEFORE INCOME TAX AND MINORITY INTERESTS 504,207 358,417 90,862
Minority interests 0 (696) 6,918
Current income tax expense (benefit) 34,076 42,775 (16,725)
Deferred income tax (benefit) expense (162,766) 515 7,147
---------- ---------- ----------
(128,690) 42,594 (2,660)
NET INCOME 632,897 315,823 88,202
---------- ---------- ----------
---------- ---------- ----------
BASIC AND DILUTED EARNINGS PER SHARE 623.54 315.82 88.20
WEIGHTED AVERAGE NUMBER OF SHARES 1,015 1,000 1,000
</TABLE>
See notes to the consolidated financial statements
F-34
<PAGE>
COPE AG
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
DECEMBER 31, 1997, 1996 AND 1995
(AMOUNTS IN US DOLLARS)
<TABLE>
<CAPTION>
ADDITIONAL CUMULATIVE TOTAL
NUMBER SHARE LEGAL PAID IN RETAINED TRANSLATION SHAREHOLDERS'
OF SHARES CAPITAL RESERVES CAPITAL EARNINGS ADJUSTMENT EQUITY
---------- --------- -------- ---------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1995 1,000 76,336 763 0 598,324 4,503 679,926
Exchange rate changes for the year 90,149 90,149
Net income 88,202 88,202
-------- -------- ------- ------- -------- -------- ---------
Balance at December 31, 1995 1,000 76,336 763 0 686,526 94,652 858,277
Contributions to legal reserves 43,567 (43,567) 0
Exchange rate changes for the year (169,072) (169,072)
Net income 315,823 315,823
-------- -------- ------- ------- -------- -------- ---------
Balance at December 31, 1996 1,000 76,336 44,330 0 958,782 (74,420) 1,005,028
Issuance of share capital 60 4,112 690,199 694,311
Exchange rate changes for the year (71,311) (71,311)
Net income 632,897 632,897
-------- -------- ------- ------- -------- -------- ---------
Balance at December 31, 1997 1,060 80,448 44,330 690,199 1,591,679 (145,731) 2,260,925
-------- -------- ------- ------- -------- -------- ---------
-------- -------- ------- ------- -------- -------- ---------
</TABLE>
See notes to the consolidated financial statements
F-35
<PAGE>
COPE AG
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(AMOUNTS IN US DOLLARS)
<TABLE>
<CAPTION>
1997 1996 1995
--------- ---------- ---------
<S> <C> <C> <C>
CASH FLOW PROVIDED BY OPERATING ACTIVITIES
Net income 632,897 315,823 88,202
ADJUSTMENT TO RECONCILE NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES
Depreciation and amortization 220,363 262,155 195,320
Deferred income taxes (162,766) 515 (7,147)
Gains/Losses on disposal of fixed assets 0 2,697 0
Minority interest share in negative equity absorbed by parent 0 (696) (6,918)
Inventory reserves (13,883) 13,883 0
EFFECTS OF CHANGES IN ASSETS AND LIABILITIES
Accounts receivable (1,530,889) (872,870) 49,683
Inventories (474,609) (190,722) (107,290)
Other current assets (226,326) (73,195) (19,820)
Accounts payable 736,413 1,269,952 (180,836)
Customer advances 704,915 0 0
Accruals 404,820 (68,910) 194,152
---------- ---------- ----------
Total adjustments to net income (341,962) 342,809 117,144
---------- ---------- ----------
NET CASH FLOW PROVIDED BY OPERATING ACTIVITIES 290,935 658,632 205,346
CASH FLOW USED IN INVESTING ACTIVITIES
Purchase of property and equipment (585,881) (229,210) (273,412)
Loans receivable (394,406) 0 0
Movements of intangible asssets (80,138) (6,998) (136,425)
Proceeds from sale of property and equipment 4,653 9,778 10,871
Change in cash resulting from disposal of investment 0 (3,865) 0
---------- ---------- ----------
NET CASH FLOW USED IN INVESTING ACTIVITIES (1,055,772) (230,295) (398,966)
CASH FLOW (USED IN) PROVIDED BY FINANCING ACTIVITIES
Capital stock issued (share capital & additional paid in capital) 694,312 0 0
Increase/Decrease of short term borrowings 502,770 (293,085) (320,401)
---------- ---------- ----------
NET CASH FLOW (USED IN) PROVIDED BY FINANCING ACTIVITIES 1,197,082 (293,085) (320,401)
Effect of exchange rate changes on cash (15,356) (34,477) 65,478
NET DECREASE/INCREASE OF CASH AND CASH EQUIVALENTS 416,889 100,775 (448,543)
Cash and cash equivalents at beginning of the period 262,047 161,272 609,815
---------- ---------- ----------
Cash and cash equivalents at end of the period 678,936 262,047 161,272
---------- ---------- ----------
---------- ---------- ----------
SUPPLEMENTAL CASH FLOW DISCLOSURE
Interest paid 76,197 63,940 64,341
Income taxes paid 22,643 13,525 7,122
</TABLE>
F-36
<PAGE>
COPE AG
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997, 1996 AND 1995
NOTE 1- BASIS OF PRESENTATION
The accompanying consolidated financial statements present the consolidated
operations COPE AG and its majority owned subsidiaries (collectively hereinafter
referred to as "COPE" or the "Company").
The accompanying consolidated financial statements have been prepared in
accordance with United States generally accepted accounting principles ("U.S.
GAAP"). In accordance with Swiss law, the Company is required to prepare its
financial statements in accordance with the Swiss Code of Obligations ("Swiss
GAAP"). Swiss GAAP varies in certain respects from U.S. GAAP. Accordingly, the
Company has recorded certain adjustments in order to present the accompanying
financial statements in accordance with U.S. GAAP. Certain amounts from prior
years have been reclassified to conform to the current year presentation.
NATURE OF OPERATIONS
COPE provides comprehensive management solutions relating to information storage
and retrieval subsystems including consulting, project implementation and
hardware installation. The Company services its customers through its main
office located in Rotkreuz, Switzerland, and its subsidiary company offices
located in Taufkirchen, Germany and Vienna, Austria.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of COPE
AG and its majority owned subsidiaries. All intercompany accounts and
transactions have been eliminated in consolidation.
SIGNIFICANT ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the periods. Actual results
could differ from these estimates.
REVENUE RECOGNITION
Consulting revenue is recognized at the time of delivery of the service.
Revenue from the sale of hardware and related software is recognized at the time
of acceptance by the customer, generally after installation at a customer's
site. Revenue from certain customer-installable products is recognized at the
time of shipment. Costs associated with post-installation warranty obligations
are estimated and accrued at the time of revenue recognition.
End users of equipment sold by the Company generally contract with the Company
for equipment service and software support, which includes normal maintenance
and repair or replacement of product components. Revenue from these service and
support contracts is recognized ratably over the term of the contract and the
cost associated with these activities is expensed as incurred.
CUSTOMER ADVANCES
Customer advances include advance payments on contracts in progress at year end.
These amounts will be recognized as income after acceptance by the customers.
INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined using
the weighted average cost method. Inventories consist of finished products held
for resale.
F-37
<PAGE>
COPE AG
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
DECEMBER 31, 1997, 1996 AND 1995
PROPERTY AND EQUIPMENT
Property and equipment are carried at cost and are generally depreciated using
the straight-line method over the estimated useful lives of the assets. The
useful lives utilized for this purpose are:
Machinery and equipment......................................3 - 5 years
Leasehold improvements....................10 years or shorter lease term
GOODWILL
Goodwill represents the cost in excess of net assets acquired on business
acquisitions and is amortized on a straight-line basis over 10 years. The
Company periodically evaluates the realizability of the carrying value of
goodwill by assessing current and future trading performance and cash flows. At
December 31, 1997, the Company disposed of one subsidiary. Goodwill of USD 1,757
has been written off.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company reviews long-lived assets and certain identifiable intangibles to be
held and used or disposed of for impairment whenever events or changes in
circumstances indicate that the carrying value of an asset may not be
recoverable. Where the undiscounted cash flows is less than the carrying amount
of the asset, the asset is written down to its net realizable value measured on
the basis of discounted expected cash flows.
INTANGIBLE ASSETS
Intangible assets are carried at cost and are generally depreciated using the
straight-line method over the estimated useful lives of the assets. The useful
lives utilized for this purpose are:
License ........................................ 3 - 5 years
Startup cost for business operations ................5 years
FOREIGN CURRENCIES The financial statements of the Company's foreign
operations are measured in the currency in which that entity primarily
conducts its business (the functional currency). The functional currency of
all the Company's foreign operations is the applicable local currency. When
translating foreign functional currency and the parent Company financial
statements into U.S. Dollars ("USD"), year-end exchange rates are applied to
asset and liability accounts, while average annual rates are applied to
income statement accounts. Adjustments resulting from this process are
recorded in a separate component of shareholders' equity.
Foreign currency transaction gains and losses resulting from the settlement of
amounts receivable or payable denominated in a currency other than the
functional currency are credited or charged to income.
A certain amount of the Company's purchases are settled in U.S. Dollars and the
Company enters into forward exchange contracts for the purchase of U.S. Dollars.
Since there are no firm purchase commitments, such exchange contracts do not
qualify as a hedge under FAS 52 and, accordingly, the gains or losses are
included in income in the period in which the exchange rates change.
INCOME TAXES
The Company accounts for certain income and expense items differently for
financial reporting purposes than for tax purposes. Provisions for deferred
taxes are made in recognition of such temporary differences, following the
requirements of Financial Accounting Standards Board No. 109 "Accounting for
Income Taxes".
F-38
<PAGE>
COPE AG
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -(CONTINUED)
DECEMBER 31, 1997, 1996 AND 1995
EARNINGS PER SHARE
In 1997, the Financial Accounting Standards Board issued Statement No. 128,
"Earnings Per Share". Statement 128 replaced the calculation of primary and
fully diluted earnings per share with basic and diluted earnings per share.
Unlike primary earnings per share, basic earnings per share excludes any
dilutive effects of options, warrants and convertible securities. Diluted
earnings per share is very similar to the previously reported fully diluted
earnings per share. The adoption of this statement did not impact the Company.
Basic and diluted earnings per share are calculated by dividing net income by
the weighted average shares outstanding as the Company had no outstanding
preferred shares or stock options plans as of December 31, 1997, 1996 and 1995.
Weighted average shares used in the calculations are 1,015 shares for 1997,
1,000 shares for 1996 and 1995.
NOTE 3 - TRADE ACCOUNTS RECEIVABLE
<TABLE>
<CAPTION>
Trade accounts receivable consist of the following:
Years ended December 31,
------------------------------
1997 1996
----------- -----------
(USD)
<S> <C> <C>
Trade accounts receivable 3,622,485 2,264,746
Allowance for doubtful accounts 0 (38,519)
----------- -----------
Total trade accounts receivable, net 3,622,485 2,226,227
----------- -----------
----------- -----------
<CAPTION>
A summary of activity in the allowance for doubtful accounts is as follows:
Years ended December 31,
------------------------------
1997 1996
----------- -----------
(USD)
<S> <C> <C>
Balance at beginning of year (38,519) (42,109)
Provisions 0 (2,115)
Accounts written off 0 5,705
Reverse the allowance for doubtful accounts 38,519 0
----------- -----------
Balance at end of year 0 (38,519)
----------- -----------
----------- -----------
</TABLE>
In the year 1996 the Company has written off USD 5,705 (1997: USD 0) for
doubtful accounts. Therefore the Company does not consider an allowance for
doubtful accounts to be necessary for it's business operations.
F-39
<PAGE>
COPE AG
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -(CONTINUED)
DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
NOTE 4 - OTHER CURRENT ASSETS
Other current assets consist of the following:
Years ended December 31,
------------------------------
1997 1996
----------- ---------
(USD)
<S> <C> <C>
Deferred costs 138,821 0
Prepaid expenses 87,505 85,237
Deposits (maturity more than 3 months) 20,893 10,155
Other 70,963 76,255
----------- ---------
Total other receivables 318,182 171,647
----------- ---------
----------- ---------
<CAPTION>
NOTE 5 - PROPERTY AND EQUIPMENT
Property, plant and equipment consist of the following:
Years ended December 31,
------------------------------
1997 1996
----------- ---------
(USD)
<S> <C> <C>
Leasehold improvements 35,347 35,347
Machinery and equipment 1,138,946 715,735
Accumulated depreciation (603,818) (483,455)
----------- ---------
Total property and equipment, net 570,475 267,627
----------- ---------
----------- ---------
</TABLE>
NOTE 6 - LOANS
Loans receivable bear interest at market rates ranging from 5 % to 7.5 %. The
Company will receive repayment of approximately USD 348,000 of loans receivable
through royalty payment streams. Approximately USD 39,000 of the balance is due
from a related party. See note 13 for further discussion.
NOTE 7 - SHORT-TERM BORROWINGS
As of December 31, 1997, the Company has established short-term overdraft
facilities under which the Company and its subsidiaries could borrow up to USD
1,370,800. Amounts drawn down on the facilities are due on demand and
collateralized by account receivable balances and by life insurance policies on
the major shareholders, Mr. A. Knapp and Mr. S. Isenschmid, for USD 342,700
each. Amounts outstanding at December 31, 1997 total USD 661,982. As of
December 31, 1997, the Company had available approximately USD 709,000 under
these facilities. The weighted average interest rate on amounts outstanding 1997
was 7.0 %. Interest paid for the years ending December 31, 1997, 1996 and 1995,
amounted to USD 76,197, USD 63,940 and USD 64,341, respectively.
F-40
<PAGE>
COPE AG
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -(CONTINUED)
DECEMBER 31, 1997, 1996 AND 1995
NOTE 8 - PENSION PLANS
Substantially all of the Company's employees are covered by government pension
plans administered by the respective countries' governmental authorities. The
employees' contributions are based on a percentage of gross salary. The Company
generally contributes an amount equal to that contributed by the employees. The
Company provides no additional pension or post-retirement benefits. The cost of
these plans charged to operations for the years ended December 31, 1997, 1996
and 1995 was USD 26,904, USD 29,180 and USD 13,258 respectively.
<TABLE>
<CAPTION>
NOTE 9 - OTHER PAYABLES
Other payables consist of the following:
Years ended December 31,
-------------------------------
1997 1996
----------- -----------
(USD)
<S> <C> <C>
Social security 24,091 57,378
Value Added Taxes 87,691 0
Other 18,876 118,273
----------- -----------
130,658 175,651
----------- -----------
----------- -----------
<CAPTION>
NOTE 10 - ACCRUED OTHER LIABILITIES
Accrued other liabilities consist of the following:
Years ended December 31,
-------------------------------
1997 1996
----------- -----------
(USD)
<S> <C> <C>
Warranty reserve 18,849 96,296
Accrual for unbilled supplies 194,213 0
Legal, professional and other fees 67,190 48,148
Personnel and social security expenses 139,945 68,519
Other 86,219 6,415
----------- -----------
506,416 219,378
----------- -----------
----------- -----------
</TABLE>
Product warranty is provided by the original equipment manufacturer. The Company
only warrants the services provided. Therefore, the warranty reserve is adjusted
to the expected amount of warranty cost based on the ISO (9001) Management
reviews.
NOTE 11 - SHAREHOLDERS' EQUITY
During the quarter ended September 30, 1997 the Company issued 60 shares at a
nominal value of SFR 100 each. The shares were sold to 29 investors. The
proceeds of the sale of the shares was used as additional working capital. The
nominal value of the shares issued totaling USD 4,112 was recorded as share
capital and the remainder of the proceeds amounting to USD 690,199 was recorded
as additional paid in capital. After this increase the share capital of the
Company consists of 1,060 issued and outstanding shares, with a nominal value of
SFR 100 (USD 75.89) each. Each ordinary share is entitled to one vote. No stock
options or convertible securities existed during 1997, 1996 and 1995.
F-41
<PAGE>
COPE AG
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -(CONTINUED)
DECEMBER 31, 1997, 1996 AND 1995
NOTE 11 - SHAREHOLDERS' EQUITY (CONTINUED)
Dividends may only be declared and paid from the accumulated retained earnings
(after deduction of certain legally required reserve allocations) shown in the
Company's annual Swiss statutory unconsolidated financial statements presented
in Swiss Francs ("SFR"). Any dividends to be declared will be payable in Swiss
Francs. Such amounts differ from the retained earnings as a result of the
adjustments made to present the Consolidated Financial Statements in accordance
with U.S. GAAP. As of December 31, 1997, the Company's Swiss statutory
unconsolidated financial statements reflected SFR 558,532 (USD 382,818) of
retained earnings available for distribution.
<TABLE>
<CAPTION>
NOTE 12 - INCOME TAXES
Pretax income (loss) for the years ended December 31, 1997, 1996 and 1995
was taxed in the following jurisdictions:
Years ended December 31,
-----------------------------------------
1997 1996 1995
---------- ----------- -----------
(USD)
<S> <C> <C> <C>
Switzerland 994,782 401,093 43,766
Foreign (490,575) (42,676) 47,096
---------- ----------- -----------
504,207 358,417 90,862
---------- ----------- -----------
---------- ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
Components of the provision for income taxes are as follows:
Years ended December 31,
-----------------------------------------
1997 1996 1995
---------- ----------- -----------
(USD)
<S> <C> <C> <C>
Current:
Switzerland 34,688 36,453 19,098
Foreign (612) 6,322 (2,373)
---------- ----------- -----------
Total current 34,076 42,775 16,725
---------- ----------- -----------
Deferred:
Switzerland 39,074 515 (7,147)
Foreign (201,840) 0 0
---------- ----------- -----------
Total deferred (162,766) 515 (7,147)
---------- ----------- -----------
(128,690) 43,290 9,578
---------- ----------- -----------
---------- ----------- -----------
</TABLE>
F-42
<PAGE>
COPE AG
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -(CONTINUED)
DECEMBER 31, 1997, 1996 AND 1995
NOTE 12 - INCOME TAXES (CONTINUED)
<TABLE>
<CAPTION>
The Company has net deferred tax assets (tax liabilities) as of December 31, 1997 and 1996 as follows:
Years ended December 31,
------------------------
1997 1996
----------- ---------
(USD)
<S> <C> <C>
Deferred tax assets:
Net operating losses 309,652 131,110
Valuation allowance 0 0
----------- ---------
309,652 131,110
----------- ---------
Deferred tax liabilities:
Inventories 94,629 102,270
Trade accounts receivable 22,207 12,800
Deductible provisions eliminated on consolidation 65,150 67,486
Warranty accrual 18,814 0
Other 10,246 3,476
----------- ---------
211,046 186,032
----------- ---------
Net deferred tax assets /liabilities 98,606 (54,922)
----------- ---------
----------- ---------
</TABLE>
Management believes it is more likely than not that all deferred tax assets are
realizable.
Under Swiss corporate tax law, taxes on income are composed of State and Federal
taxes. The Company's composite corporate tax rates were 18% or 8.5% (Basic
change in Swiss tax law in 1998) for the year ended December 31, 1997. For the
years 1996 and 1995 the corporate tax rate was 18%. A reconciliation of income
taxes determined using the statutory rate to actual income taxes provided is as
follows:
<TABLE>
<CAPTION>
Years ended December 31,
----------------------------------------
1997 1996 1995
--------- --------- ----------
(USD)
<S> <C> <C> <C>
Income tax expense at statutory rates 25,670 64,515 16,355
Varying foreign tax rates (157,280) (35,226) 59,972
Utilization of foreign NOLs 0 0 (55,292)
Permanent differences:
Goodwill 0 6,997 (8,869)
Other 2,920 7,004 (2,588)
--------- --------- ----------
(128,690) 43,290 9,578
--------- --------- ----------
--------- --------- ----------
</TABLE>
At December 31, 1997, the Company had German and Austrian net loss carryforwards
for tax purposes of approximately USD 710,279 respectively. Under applicable
German tax law, the net operating losses can be carried forward for an
indefinite period of time. A current change in the Austrian tax law permits tax
losses arising since 1991 to be carried forward for an indefinite period of time
and can be offset against income arising in fiscal years 1998 and thereafter.
F-43
<PAGE>
COPE AG
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -(CONTINUED)
DECEMBER 31, 1997, 1996 AND 1995
NOTE 13 - RELATED PARTY TRANSACTIONS
Mr. Knapp, Chairman, has been an employee of the Company since July 1, 1997. For
the six months from July to December 1997 he earned a salary of USD 53,461. In
the past his services were charged to the Company by Adrian Knapp Consulting, a
sole proprietorship owned by Mr. Knapp. For the year ended December 31, 1996,
consultancy expenses include USD 168,067 in respect of services rendered by Mr.
Knapp. Mr. Knapp is also a major shareholder holding approximately 45.3% of the
issued share capital.
Mr. Isenschmid, Chief Executive Officer, has been an employee of the Company
since July 1, 1997. For the six months from July to December 1997 he earned a
salary of USD 53,461. In the past his services were charged to the Company by
STI Marketing- und Organisationsberatung, a sole proprietorship owned by Mr.
Isenschmid. For the year ended December 31, 1996 consultancy expenses include
USD 166,589 in respect of services rendered by Mr. Isenschmid. Mr. Isenschmid is
also a major shareholder holding approximately 45.3% of the issued share
capital.
Mr. Schallhorn, the General Manager of COPE GmbH, Germany, is a salaried
employee of COPE GmbH. Mr. Schallhorn, is also the sole proprietor of UPM
Unternehmensberatung und Vertrieb ("UPM"). In terms of an agreement dated March
6, 1995, between COPE GmbH and UPM, UPM invoices COPE GmbH in respect of
marketing and distribution consulting services rendered by Mr. Schallhorn. The
amount to be charged by UPM is dependent upon the achievement of certain
performance targets. For the years ended December 31, 1997, 1996 and 1995,
consultancy expenses include USD 88,894 and USD 70,888 ,respectively, for
consulting services rendered by Mr. Schallhorn. As of December 31, 1997 a loan
amount of USD 38,954 was owed by Mr. Schallhorn. This loan bears interest at 7.5
% and is reported under loans as described in note 6.
At December 1, 1997, the Company disposed of its investment in Xpert Inc.,
located in Chicago, Illinois, to Messrs. Knapp and Isenschmid jointly. Xpert
Inc. had no significant operations or balance sheet accounts in 1997 or 1996.
Messrs. Knapp and Isenschmid acquired Xpert Inc. by taking over the amount owed
to the Company of USD 30,432 (SFR 44,400) . No cash was received in respect of
disposal. Payables due to the main shareholders were reduced by SFR 44,400.
As at December 31, 1997 and 1996, the financial statements included the
following liabilities due to related parties:
<TABLE>
<CAPTION>
Years ended December 31,
------------------------
1997 1996
---------- ----------
(USD)
<S> <C> <C>
A. Knapp 118,874 148,635
S. Isenschmid (20,890) 41,413
---------- ----------
97,984 190,048
---------- ----------
---------- ----------
</TABLE>
F-44
<PAGE>
COPE AG
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -(CONTINUED)
DECEMBER 31, 1997, 1996 AND 1995
NOTE 14 - LEASES
The Company has operating leases primarily for office space and equipment which
expire at various dates through the year 2000 with, in some instances, renewal
privileges. Certain leases provide for escalation of the rentals based on the
increase in the consumer price index and base mortgage rates. Operating lease
costs are charged to income as incurred.
The minimum annual rental commitments under long-term non-cancelable operating
leases as of December 31, 1997, were as follows:
<TABLE>
<CAPTION>
1997
--------
(USD)
<S> <C>
1998 88,947
1999 71,894
2000 9,011
--------
Total future minimum lease payments 169,852
--------
--------
</TABLE>
Total rent expense for operating leases was approximately USD 120,484, USD
133,333 and USD 86,440 for the years ended December 31, 1997, 1996 and 1995,
respectively.
NOTE 15 - COMMITMENTS AND CONTINGENT LIABILITIES
Management is not aware of any matters that could give rise to any liability to
the Company that would have a material adverse effect on the Company's business,
financial condition or results of operations.
F-45
<PAGE>
COPE AG
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -(CONTINUED)
AS OF DECEMBER 31, 1997, 1996 AND 1995
NOTE 16 - OPERATIONS BY GEOGRAPHICAL AREA
The Company operates in one business segment which consists of the provision of
comprehensive management solutions relating to information storage and retrieval
subsystems including consulting, project implementation and hardware
installation.
Information concerning the Company's geographic locations is summarized as
follows:
<TABLE>
<CAPTION>
Years ended December 31,
-----------------------------------------
1997 1996 1995
----------- ----------- ----------
(USD)
<S> <C> <C> <C>
NET SALES
Switzerland
Unaffiliated 11,850,517 10,187,333 9,652,337
Intercompany 182,757 448,179 207,874
----------- ----------- ----------
12,033,274 10,635,512 9,860,211
Foreign 6,733,917 3,673,308 2,614,842
----------- ----------- ----------
Total 18,767,191 14,308,820 12,475,053
Eliminations (851,020) (1,793,697) (1,454,697)
----------- ----------- ----------
Total consolidated 17,916,171 12,515,123 11,020,356
----------- ----------- ----------
----------- ----------- ----------
OPERATING INCOME (LOSS)
Switzerland 1,067,896 538,978 194,207
Foreign (487,926) (130,046) (82,583)
----------- ----------- ----------
Total consolidated 579,970 408,932 111,624
----------- ----------- ----------
----------- ----------- ----------
IDENTIFIABLE ASSETS
Switzerland 4,664,271 3,027,571 2,588,947
Foreign 2,527,641 942,718 763,286
----------- ----------- ----------
Total consolidated 7,191,912 3,970,289 3,352,233
----------- ----------- ----------
----------- ----------- ----------
</TABLE>
Intercompany sales between Switzerland and other geographic areas are generally
at purchase cost.
F-46
<PAGE>
COPE AG
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -(CONTINUED)
AS OF DECEMBER 31, 1997, 1996 AND 1995
NOTE 17 - FINANCIAL INSTRUMENTS
FAIR VALUE
The carrying value of financial instruments such as cash, accounts receivable,
accounts payable approximate their fair value due to the short-term maturities
of these instruments.
CONCENTRATION OF RISKS
Financial instruments that potentially subject the Company to concentrations of
credit risk consist primarily of cash and accounts receivable. The Company's
cash is principally denominated in Swiss Francs and is maintained principally
with one financial institution in Switzerland. The Company provides credit in
its normal course of business to a wide variety of customers and, generally,
requires no collateral from its customers. The allowance for non-collection of
accounts receivable is based upon management's expectations of collectibility .
In the year ended December 31, 1997, sales to the five biggest customers of the
Company amounted to 29% of consolidated net sales (1996: 29 %). In both years
sales to one of these five customers exceeded 10 %. The Company performs ongoing
credit evaluations of its customers.
The Company enters into forward exchange contracts to hedge significant USD
purchase transactions. As of December 31, 1997, 1996 and 1995, the Company had
approximately SFR 2,470,200 (USD 1,750,000), SFR 310,675 (USD 250,000) and SFR
1,143,100 (USD 1,000,000), respectively, of outstanding foreign exchange
contracts in which U.S. Dollars were purchased. At December 31, 1997, seven
contracts were open which had settlement dates from January to June 1998. At
December 31, 1996, one contract was open which had a March 1997 settlement date.
The fair values of foreign exchange forward contracts as obtained from the
trading department of the Company's bank as per December 31, 1997, 1996 and 1995
were SFR 2,549,945, SFR 334,625 and SFR 1,132,025, respectively
NOTE 18 - REORGANIZATION AGREEMENT
On October 30, 1997, the Company entered into a Securities Purchase Agreement
and Plan of Reorganization (Reorganization Agreement) with Harrier, Inc., a
Delaware corporation (referred to as Harrier). Harrier has historically been
engaged in the discovery, development and sale of selected products and
technologies in the health, fitness and medical markets. Pursuant to the
Reorganization Agreement, the shareholders of COPE will become the controlling
stockholders of Harrier and COPE will become a wholly-owned subsidiary of
Harrier. In connection with the proposed reorganization with Harrier, Harrier
will divest of its controlling interest in its subsidiary containing all of
Harrier's assets, liabilities and operations. The Reorganization Agreement
provides that immediately prior to the closing of the transaction with the
Company, Harrier shall change the name of Harrier to COPE Inc. and effect a one
for 48 reverse split of the outstanding shares of common stock of Harrier. Then
Harrier will issue 2,862,000 shares on a post-split basis of Harrier's $.001 par
common stock, representing 89.7 % of the then issued and outstanding shares of
Harrier common stock giving effect to the closing. All events and transactions
are subject to approval by the stockholders of Harrier at an annual meeting of
the stockholders.
F-47
<PAGE>
COPE AG
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -(CONTINUED)
AS OF DECEMBER 31, 1997, 1996 AND 1995
NOTE 19 - SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31 YEAR
---------- --------- ------------ ----------- ---------
(USD) (USD) (USD) (USD) (USD)
<S> <C> <C> <C> <C> <C>
1997
- --------
Revenue 3,093,942 4,750,732 4,746,691 5,324,806 17,916,171
Gross profit 843,312 1,419,509 1,152,346 1,683,266 5,098,433
Net income 12,133 90,686 124,789 405,289 632,897
Earnings per share 12.13 90.69 124.79 382.35 623.54
1996
- --------
Revenue 2,308,829 2,822,970 3,045,785 4,337,539 12,575,123
Gross profit 658,341 907,381 916,450 1,203,240 3,685,412
Net income (133,376) 64,282 124,371 260,546 315,823
Earnings per share (13.38) 64.28 124.37 260.55 315.82
</TABLE>
F-48
<PAGE>
COPE AG
CONDENSED CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN US DOLLARS)
(UNAUDITED)
<TABLE>
<CAPTION>
March 31,
ASSETS 1998
<S> <C>
Current assets
Cash 461,525
Trade accounts receivable 2,261,576
Inventories 1,205,008
Other current assets 382,576
Total current assets 4,310,685
Property and equipment, net 625,002
Loans receivable 636,052
Goodwill 0
Intangible assets 58,908
Deferred income taxes 176,263
1,496,225
TOTAL ASSETS 5,806,910
</TABLE>
See notes to condensed consolidated financial statements
F-49
<PAGE>
COPE AG
CONDENSED CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN US DOLLARS)
(UNAUDITED)
<TABLE>
<CAPTION>
LIABILITIES AND March 31,
SHAREHOLDERS' EQUITY 1998
<S> <C>
Current Liabilities
Short-term borrowings 491,698
Trade accounts payable 2,209,701
Amounts due from related parties 41,961
Customer advances 146,853
Other payables 154,165
Accrued other liabilities 447,327
Current income taxes 45,818
Total current liabilities 3,537,523
Commitments and contingent liabilities
Minority interests 0
Shareholders' equity
Share capital 80,448
Common stocks, SFr. 100 (USD 75.89)
par value:
Authorized shares 1,060. Issued and
outstanding shares 1,060
Legal reserves 44,330
Additional paid in capital 690,199
Cumulative translation adjustment (239,034)
Retained earnings 1,693,444
Total shareholders' equity 2,269,387
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY 5,806,910
</TABLE>
See notes to condensed consolidated financial statements
F-50
<PAGE>
COPE AG
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE QUARTERS ENDED MARCH 31, 1998 AND 1997
(AMOUNTS IN US DOLLARS)
(UNAUDITED)
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Revenues
Sales solution 4,145,487 2,874,484
Sales services 495,348 219,458
4,640,835 3,093,942
Operating expenses
Cost of sales 3,167,524 2,250,630
Selling, general and administrativee 1,213,242 851,262
Consultancy expenses 66,502 28,518
Depreciation and amortization 53,052 25,769
Impairment of intangible assets 63,004 0
4,563,324 3,156,179
Operating income 77,511 (62,237)
Other income (expense):
Interest expense (13,058) (21,037)
Interest income 0 17,362
Other income 1,145 24,495
Foreign exchange loss (1,285) (1,648)
(13,198) 19,172
Income before income tax 64,313 (43,065)
Minority interests 0 5,381
Current income taxes (47,297) (1,957)
Deferred income taxes 84,749 51,774
37,452 55,198
Net income 101,765 12,133
Basic and diluted earnings per share 96.00 12.13
Weighted average number of shares 1,060 1,000
</TABLE>
See notes to condensed consolidated financial statements
F-51
<PAGE>
COPE AG
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE QUARTERS ENDED MARCH 31, 1998 AND 1997
(AMOUNTS IN US DOLLARS)
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Cash flow provided by operating activities
Net income 101,765 12,133
Adjustment to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 53,052 25,769
Impairment of intangible assets 63,004 0
Deferred income taxes (84,749) (51,774)
Effects of changes in assets and liabilities
Accounts receivable 1,236,466 211,355
Inventories 119,639 (489,052)
Other current assets (81,264) (71,609)
Accounts payable (459,174) (243,624)
Customer advances (543,317) 0
Accruals (60,394) (146,461)
Total adjustments to net income 243,263 (765,396)
Net cash flow provided by
(used in) operating activities 345,028 (753,263)
Cash flow used in investing activities
Purchase of property and equipment (171,716) (53,744)
Loans receivable (267,785) 0
Movements of intangible asssets 0 (7,030)
Net cash flow used in investing activities (439,501) (60,774)
Cash flow (used in) provided
by financing activities
Increase/Decrease of short term borrowings (145,010) 808,805
Net cash flow (used in)
provided by financing activities (145,010) 808,805
Effect of exchange rate changes on cash 22,072 (16,329)
Net decrease of cash and cash equivalents (217,411) (21,561)
Cash and cash equivalents at beginning
of the period 678,936 262,047
Cash and cash equivalents at end of the period 461,525 240,486
Supplemental cash flow disclosure
Interest paid 12,485 19,483
Income taxes paid 1,141 8,455
</TABLE>
See notes to condensed consolidated financial statements
F-52
<PAGE>
COPE AG
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS AS OF MARCH 31, 1998
(UNAUDITED)
NOTE 1 - CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The accompanying financial statements have been prepared by COPE AG without
audit. In the opinion of management, all adjustments (which include only normal
recurring adjustments) necessary to present fairly the financial position,
results of operations and cash flows at March 31, 1998, and for all periods
presented have been made. In accordance with Swiss law, the Company is required
to prepare its financial statements in accordance with the Swiss Code of
Obligations ("Swiss GAAP"). Swiss GAAP varies in certain respects from U.S.
GAAP. Accordingly, certain adjustments have been recorded in order to present
the accompanying financial statements in accordance with U.S. GAAP.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. It is suggested that these unaudited condensed
consolidated financial statements be read in conjunction with the financial
statements and notes thereto included in COPE AG's December 31, 1997 audited
financial statements. The results of operations for the three months ended March
31, 1998 are not necessarily indicative of the operating results for the full
year.
NOTE 2 - CREDIT FACILITIES
During 1997, the Company extended its credit facilities from SFr1,000,000 to
SFr2,000,000 ($1,316,000) to partially finance the higher business volume. The
net credit (defied as short-term borrowings of net cash) as of March 31, 1998
was $30,173 compared to $724,098 as of March 31, 1997. At December 31, 1997,
this same measure resulted in net cash of $16,954.
NOTE 3 - IMPAIRMENT OF INTANGIBLE ASSETS
In the first quarter of fiscal 1998, COPE reported an impairment loss of
$63,004 related to the write-down of an exclusive option for the rights to
purchase, develop and market a new technique for the automatic storage of
data.
The results of an on-site pilot project carried out during the first quarter
of fiscal 1998 proved unsatisfactory. As a result, management has reduced
the carrying value of the asset to the estimated fair market value, being the
estimated amount recoverable upon sale to a third party.
NOTE 4 - SUBSEQUENT EVENTS
On October 30, 1997 the Company entered into a Securities Purchase Agreement
and Plan of Reorganization (Reorganization Agreement) with Harrier, Inc., a
Delaware corporation (referred to as Harrier). Harrier has historically been
engaged in the discovery, development an sale of selected products and
technologies in the health, fitness and medical markets. Pursuant to the
Reorganization Agreement, the shareholders of COPE will become the
controlling stockholders of Harrier and COPE will become a wholly-owned
subsidiary of Harrier. In connection with the proposed reorganization with
Harrier, Harrier will divest of its controlling interest in its subsidiary
containing all of Harrier's assets, liabilities and operations. The
Reorganization Agreement provides that immediately prior to the closing of
the transaction with the Company, Harrier shall change the name of Harrier to
COPE Inc. In July 1998, the Company and Harrier agreed to adjust the original
terms for the reverse split of the outstanding common stock of Harrier from
one for 48 to one for 58. All events and transactions are subject to approval
by the stockholders of Harrier at an annual meeting of the stockholders.
F-53
<PAGE>
HARRIER, INC. AND COPE A.G.
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF MARCH 31, 1998, AND FOR THE THREE MONTHS THEN
ENDED AND FOR THE YEAR ENDED DECEMBER 31, 1997
(Unaudited)
To Reflect the Disposition of a
Majority Interest in Glycosyn and the
Reverse Acquisition of Cope A.G.
----------------------
The following pro forma condensed consolidated balance sheet (unaudited) as
of March 31, 1998, and the pro forma condensed consolidated statements of
operations (unaudited), for the three months ended March 31, 1998 and for the
year ended December 31, 1997, give effect to the reverse acquisition of all
the outstanding shares of Cope A.G. ("Cope") and related recapitalization of
Glycosyn, by Harrier, Inc. ("Harrier" or "the Company") which transactions
are expected to be completed during the Second quarter of 1998 and accounted
for under the purchase method. The pro forma consolidated information is
based on the historical financial statements of Cope and Harrier, with Cope
as the Accounting Acquiror, and includes assumptions and adjustments set
forth in the accompanying notes to the pro forma condensed consolidated
financial statements. The pro forma unaudited consolidated balance sheet and
the pro forma unaudited condensed consolidated statements of operations
present the financial position of Cope and Harrier and its results of
operations as if Cope had acquired Harrier as of March 31, 1998 and January
1, 1997, respectively.
The pro forma condensed consolidated balance sheets (unaudited) as of March
31, 1998 and the pro forma condensed statements of operations (unaudited) for
the three months ended March 31, 1998 and for the year ended December 31,
1997 may not be indicative of the results that actually would have occurred
if the acquisition had been in effect on the dates indicated or which may be
obtained in the future. These pro forma consolidated financial statements
(unaudited) should be read in connection with the Harrier audited financial
statements and notes for the year ended June 30, 1997 and the unaudited
financial statements for the nine and three month periods ended March 31,
1998 included in Harrier's Annual Report on Form 10K-SB and quarterly report
on Form 10Q-SB, respectively, and the Cope consolidated financial statements
and notes thereto contained elsewhere herein.
F-54
<PAGE>
HARRIER, INC. AND COPE A.G.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1998
(UNAUDITED)
-------------
<TABLE>
<CAPTION>
COPE AG HARRIER, INC. PROFORMA ADJUSTMENTS PRO FORMA
GLYCOSYN CONSOLIDATED
RECAPITALIZAT COPE REVERSE TOTALS
ION MERGER
------------------------- ------------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Cash 461,525 8905 (3,378)(1) 467,052
A/R - Trade 2,261,576 2,261,576
Other receivable 0
A/R - Related Parties 50,000 50,000
Inventory 1,205,008 1,205,008
Other Current Assets 382,576 6,370 (6,293)(1) 382,653
0
---------- ---------- ------------ ----------- ----------
Total Current Assets 4,310,685 65,275 (9,671) 0 4,366,289
Property and Equipment, net 625,002 20,670 (18,612)(1) 627,060
Investments, Glycosyn 0 (1) 0
Loans 636,052 636,052
Intangible assets, net 58,908 28,995 (28,995)(1) 58,908
Investment in NCT 250,000 (250,000)(1) 0
Deferred income tax asset 176,263 176,263
---------- ---------- ------------ ----------- ----------
Total Assets 5,806,910 364,940 (307,278) 0 5,864,572
---------- ---------- ------------ ----------- ----------
---------- ---------- ------------ ----------- ----------
Short term borrowings 491,698 491,698
A/P & Accrued Expenses 2,209,701 596,616 (512,928)(1) 2,293,389
Notes Payable & other amounts due to related parties 41,961 671,347 (671,347)(1) 41,961
Note payable to NCT 156,500 (156,500)(1) 0
Customer advances 146,853 146,853
Other payables 154,165 154,165
Other accrued liabilities 447,327 447,327
Current income tax payable 45,818 45,818
Dividend payable 4,450 (4,450)(1) 0
Deferred credit 0
---------- ---------- ------------ ----------- ----------
Total Liabilities 3,537,523 1,428,913 (1,345,225) 0 3,621,211
---------- ---------- ------------ ----------- ----------
---------- ---------- ------------ ----------- ----------
Minority Interest 89,000 (89,000)(1) 0
---------- ---------- ------------ ----------- ----------
Common stock 80,448 15,698 (92,935)(3) 3,211
Legal reserves 44,330 (44,330)(3) 0
Additional Paid In Capital 690,199 15,501,510 (15,501,510)(3) 814,977
44,330 (3)
80,448 (3)
Retained Earnings (Accumulated Deficit) 1,693,444 (16,632,470) 1,126,947 (1) 15,501,510 (3) 1,664,207
(37,711)(1) (8,474)(3)
Cumulative Transition Adj. (239,034) (37,711) 37,711 (1) (239,034)
---------- ---------- ------------ ----------- ----------
Stockholders' Equity (Deficit) 2,269,387 (1,152,973) 1,126,947 0 2,243,361
---------- ---------- ------------ ----------- ----------
Total Liabilities & S/E (Deficit) 5,806,910 364,940 (307,278) 0 5,864,572
---------- ---------- ------------ ----------- ----------
---------- ---------- ------------ ----------- ----------
</TABLE>
F-55
<PAGE>
HARRIER, INC. AND COPE A.G.
PROFORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
COPE AG HARRIER, INC. PROFORMA ADJUSTMENTS PRO FORMA
CONSOLIDATED
GLYCOSYN TOTALS
RECAPITOLIZAT COPE REVERSE
ION MERGER
----------------------------- ------------- --------------- ------------
<S> <C> <C> <C> <C> <C>
Sales 17,916,171 35,401 (2) (35,401) (4) 17,916,171
Cost of Sales 12,817,738 38,709 (38,709) (4) 12,817,738
----------------------------- ------------- --------------- ------------
Gross Profit 5,098,433 (3,308) 0 3,308 5,098,433
----------------------------- ------------- --------------- ------------
Expenses:
Selling, General & Administrative 4,205,093 319,461 (79,933) (2) (92,200) (4) 4,352,421
Selanters, consulting & Related Expenses 131,723 202,369 (64,712) (2) 269,380
Research & Development 0 77,100 (77,100) 0
Depreciation & Amortization 220,363 43,557 (40,563) (2) 223,357
----------------------------- ------------- --------------- ------------
Total Expenses 4,557,179 642,487 (262,308) (92,200) 4,845,158
----------------------------- ------------- --------------- ------------
Gain (Loss) from Operations 541,254 (645,795) 262,308 95,508 253,275
Other Income (Expense):
Grant Income 0 100,000 (100,000) (2) 0
Interest expense, net (75,493) (60,314) 60,000 (2) (75,807)
Miscellaneous Income (270) 6,600 0 6,330
Equity in Loss of Joint Venture (7,448) 0 (7,448)
Foreign exchange gain or loss 38,716 0 0 38,716
----------------------------- ------------- --------------- ------------
Total Other Income (Expense) (37,047) 38,838 (40,000) 0 (38,209)
----------------------------- ------------- --------------- ------------
Profit (Loss) Before Income Taxes 504,207 (606,957) 222,308 95,508 215,066
Provision (benefit) for Income Taxes (128,690) 1,440 (220) (5) (127,470)
----------------------------- ------------- --------------- ------------
Net Profit (Loss) 632,897 (608,397) 222,528 95,508 342,536
----------------------------- ------------- --------------- ------------
Weighted average number of shares: Basic 1,015 233,542 2,862,000 (6) 3,095,542
(1,015)(6)
Diluted 1,015 233,542 2,900,333 (6) 3,133,875
(1,015)(6)
0
------------ ------------
Earnings/Loss per share: Basic 623.54 ($2.61) (626.26)(6) $0.11
------------ ------------
Diluted 623.54 ($2.61) (626.26)(6) $0.11
------------ ------------
</TABLE>
F-56
<PAGE>
HARRIER, INC. AND COPE A.G.
PROFORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
COPE AG HARRIER, INC. PROFORMA ADJUSTMENTS PRO FORMA
CONSOLIDATED
GLYCOSYN COPE TOTALS
RECAPTALIZ REVERSE
ATION MERGER
------------------------ ---------- --------- ------------
<S> <C> <C> <C> <C> <C>
Sales 4,640,835 0 0 (4) 4,640,835
Cost of Sales 3,167,524 0 0 (4) 3,167,524
--------- --------- --------- --------- ---------
Gross Profit 1,473,311 0 0 0 1,473,311
--------- --------- --------- --------- ---------
Expenses:
Selling, General & Administrative 1,213,242 33,338 (2,698)(2) (5,945)(4) 1,237,937
Salaries, consulting & Related Ex 66,502 46,137 (16,461)(2) 96,178
Research & Development 0 0 0 0
Depreciation & Amortization 116,056 3,458 (2,293)(2) 117,221
--------- --------- --------- --------- ---------
Total Expenses 1,395,800 82,933 (21,452) (5,945) 1,451,336
--------- --------- --------- --------- ---------
Gain (Loss) from Operations 77,511 (82,933) 21,452 5,945 21,975
Other Income/(Expense):
Grant Income 0 0 (2) 0
Interest expense, net (13,058) (16,180) (2) 16,180 (13,058)
Miscellaneous Income 1,145 0 0 1,145
Equity in Loss of Joint Venture 0 0 0
Foreign exchange gain or loss (1,285) 0 0 (1,285)
--------- --------- --------- --------- ---------
Total Other Income/(Expense) (13,198) (16,180) 0 16,180 (13,198)
--------- --------- --------- --------- ---------
Profit (Loss) Before Income Taxes 64,313 (99,113) 21,452 22,125 8,777
Provision (benefit) for Income Taxes (37,452) 0 (5) (37,452)
--------- --------- --------- --------- ---------
Net Profit (Loss) 101,765 (99,113) 21,452 22,125 46,229
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Weighted average number of shares: Basic 1060 268,370 2,862,000 (6) 3,130,370
(1,060)(6)
Diluted 1060 268,370 2,924,759 (6) 3,193,129
(1,060)(6)
--------- --------- ---------
Earnings/Loss per share: Basic $96.00 ($0.37) (95.62) $0.01
--------- --------- ---------
Diluted $96.00 ($0.37) (95.62) $0.01
--------- --------- ---------
</TABLE>
F-57
<PAGE>
HARRIER, INC. AND COPE A.G.
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF MARCH 31, 1998, AND FOR THE THREE MONTHS THEN
ENDED AND FOR THE YEAR ENDED DECEMBER 31, 1997
(Unaudited)
-------------
1. BASIS OF PRESENTATION
The pro forma condensed consolidated balance sheet (unaudited) as of March
31, 1998 and the pro forma condensed consolidated statements of operations
(unaudited) for the three months ended March 31, 1998 and for the year ended
December 31, 1997 reflect the change in year end of Harrier, Inc. to December
31 and the following transactions:
COPE REORGANIZATION
On October 30, 1997, the Company entered into a Securities Purchase Agreement
and Plan of Reorganization ("Reorganization Agreement") with COPE AG
("COPE"), a Swiss stock corporation, as amended on July 24, 1998. Pursuant
to the Reorganization Agreement, the shareholders of COPE will become the
controlling stockholders of the Company and COPE will become a wholly-owned
subsidiary of the Company (referred to herein as the "COPE Reorganization).
In connection with the proposed COPE Reorganization, Harrier has terminated
its Bioptron operations and entered into an agreement with a related party,
New Capital Investment Fund ("NCIF"), to sell 2,850,000 shares of the $.001
par value common stock ("Glycosyn Common Stock") of its subsidiary, Glycosyn,
to NCIF in exchange for NCIF's cancellation of approximately $610,167 of
indebtedness owned by the Company (referred to herein as the Glycosyn
Recapitalization"). See "Glycosyn Recapitalization" below.
The Reorganization Agreement provides that immediately prior to the closing
("Closing") of the COPE Reorganization, the Company shall effect the Glycosyn
Recapitalization and file an amendment (the "Amendment") to the Company's
Certificate of Incorporation to: (i) change the name of the Company to COPE
Inc., and (ii) reverse split the outstanding shares of Common Stock of the
Company on a one for 58 basis. At the Closing, and subject to the
satisfaction of the foregoing, the Company will issue 2,862,000 shares
(post-split) of the Company's $.001 par value common stock ("Harrier Common
Stock"), representing approximately 91.4% of the issued and outstanding
shares of Harrier Common Stock after giving effect to the Closing, in
exchange for the COPE shareholders' transfer of all of the issued and
outstanding capital shares of COPE to the Company. The Closing shall occur
when (i) the Company's stockholders shall have adopted and approved the
Reorganization Agreement and the Glycosyn Recapitalization; (ii) the
Amendment shall have been filed with the Secretary of State of Delaware; and
(iii) all conditions to closing of the Reorganization Agreement shall have
been met and all closing documents shall have been delivered.
F-58
<PAGE>
HARRIER, INC. AND COPE A.G.
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF MARCH 31, 1998, AND FOR THE THREE MONTHS THEN
ENDED AND FOR THE YEAR ENDED DECEMBER 31, 1997
(Unaudited)
-------------
1. BASIS OF PRESENTATION (CONTINUED)
COPE REORGANIZATION (CONTINUED)
The consummation of the COPE Reorganization and the Glycosyn Recapitalization
the subject to approval by the stockholders of the Company. An annual meeting
of the stockholders of the Company has been tentatively scheduled, at which
the COPE Reorganization and the Glycosyn Recapitalization will be submitted
for shareholder approval.
GLYCOSYN RECAPITALIZATION
The Glycosyn Recapitalization is part of a broader recapitalization of the
Company in connection with the COPE Reorganization. The Company has structured
the following series of transactions (referred to herein as the "Glycosyn
Recapitalization"):
- Concurrent with the close of the COPE Reorganization, Harrier will
transfer all of its assets and liabilities to Glycosyn. In connection
therewith, the principal creditors of harrier, except NCIF which is
presently owed approximately $610,167 by Harrier, will be requested to
agree to release Harrier of any further liability for their claims.
- Concurrent with the close of the COPE Reorganization, Harrier will
sell to NCIF 2,850,000 shares of 5,000,000 Glycosyn Common Stock
shares in consideration of NCIF agreement to cancel the $610,167 of
indebtedness owed by Harrier. NCIF is an investment fund in which
Harrier's Chairman of the Board, Jurg Kehrli, and President, Kevin De
Vito, are retained as managers.
Upon the sale of the 2,850,000 shares of Glycosyn Common stock, Harrier's
interest in Glycosyn will be reduced to approximately 40% and, as a result, the
financial condition and results of operations of Glycosyn will not be
consolidated with Harrier, Inc.'s subsequent to the close of the COPE
Reorganization.
The consummation of the Glycosyn Recapitalization is subject to approval by the
stockholders of the Company and the receipt of an opinion of the fairness of the
terms of Harrier's sale of 2,850,000 shares of Glycosyn Common Stock.
F-59
<PAGE>
HARRIER, INC. AND COPE A.G.
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF MARCH 31, 1998, AND FOR THE THREE MONTHS THEN
ENDED AND FOR THE YEAR ENDED DECEMBER 31, 1997
(Unaudited)
1. BASIS OF PRESENTATION (CONTINUED)
These pro forma condensed consolidated financial statements (unaudited)
represent the consolidated financial position and operations of Harrier and
Cope as if the transactions described above had occurred March 31, 1998 and
January 1, 1997, respectively.
2. DESCRIPTION OF PRO FORMA ADJUSTMENTS
(1) GLYCOSYN RECAPITALIZATION
This adjustments reflects the assignment of $512,928 in payables to
Glycosyn and the deconsolidation of Glycosyn after the sale of 55% of the
Company's 95% interest Glycosyn's common stock. The $671,347 in debt to
related parties will be canceled in consideration for the sale of the
majority interest in the amount $610,167 and $61,180 due by Glyclosyn to
New Capital AG will be deconsolidated upon recapitalization. Because of
Glycosyn's negative equity, the Company's basis is nihil and Harrier will
record a gain on assignment and disposition of majority interest of
$1,126,947.
(2) RECOGNITION OF GLYCOSYN'S RECAPITALIZATION IN THE STATEMENT OF
OPERATIONS
This adjustment reflects the decrease in costs associated with the sale of
Harrier's majority interest in Glycosyn, as if the sale had occurred on
January 1, 1997. The adjustment also reflects the reversal of interest
expense that would not have been incurred had the sale and related debt
cancellation occurred on January 1, 1997. Since the Company's basis in
Glycosyn would have been nihil, there is no equity in losses of Glycosyn
for the period presented.
F-60
<PAGE>
HARRIER, INC. AND COPE A.G.
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF MARCH 31, 1998, AND FOOR THE THRE MONTHS THEN
ENDED AND FOR THE YEAR ENDED DECEMBER 31, 1997
(Unaudited)
2. DESCRIPTION OF PRO FORMA ADJUSTMENTS (CONTINUED)
(3) REVERSE MERGER OF COPE A.G.
Since the owners of Cope A.G. will remain 91.4% owners of the combined
entity after the acquisition, Cope was deemed the accounting acquiror and
the acquisition will be accounted for as a reverse merger under the
purchase method. Accordingly, from an accounting standpoint, Cope's equity
is carried forward as the equity of the combined entity. There will be no
step up in Harrier's accounting bases and, as a result, Cope is assumed to
have acquried Harrier at Harrier's book value of ($26,026) (after Glycosyns
recapitalization). This adjustment reflects the elimination of Harrier's
equity and accumulated deficit. Minority interests in Harrier are
immaterial and have not been reflected for purposes of this pro forma
adjustment.
(4) NON-RECURRING REVENUES AND EXPENSES
Because the disposition of Harrier's bioptron lamp operations, which
occurred in June 1997, was a prerequisite for the Cope merger to occur,
revenues and expenses relating to the Bioptron lamp operations have been
removed from the December 31, 1997 statement of operations in this pro
forma adjustment.
In addition, approximately $5,945 and $92,200 in outside legal and
consulting expenses incurred during the three months ended March 31,
1998 and for the year ended December 31, 1997 are directly related
to the acquisition and reorganization transactions described above.
These expenses will not be recurring and they were reversed on a pro
forma basis.
(5) INCOME TAXES
The income tax effect of the above transactions is insignificant to the
pro forma statements of operations presented.
(6) PRO FORMA EARNINGS PER SHARE (EPS)
Weighted number of shares reflects the one for fifty-eight share reverse
split to be effected as part of the Cope merger transaction.
The 2,862,000 shares of adjustment to basic EPS reflects the issuance of
stock in connection with the Cope reverse merger. The 2,924,759 and
2,900,333 shares adjustments to diluted EPS includes the 2,862,000 shares
previously described and 62,759 and 38,333 other common stock equivalents
assumed to be dilutive for the three months ended March 31, 1998 and the
year ended December 31, 1997, respectively (see below). The 1,060 and
1,015 shares adjustments are to reconcile the final number of shares
outstanding.
The EPS has been presented in accordance with statements of Financial
Accounting Standard (SFAS) 128, and reflects basic and diluted earnings per
share. For diluted EPS, the weighted average number of shares has been
adjusted to include all common stock equivalents (for purposes of the pro
forma information, all options and warrants are assumed to have an exercise
price lower than the fair market value of the stock). Such common stock
equivalents are excluded when the inclusion would be antidilutive.
F-61
<PAGE>
APPENDIX A
AMENDED AND RESTATED
SECURITIES PURCHASE AGREEMENT
AND PLAN OF REORGANIZATION
THIS AMENDED AND RESTATED SECURITIES PURCHASE AGREEMENT AND PLAN OF
REORGANIZATION ("Agreement") is entered into on July 24, 1998 by and among
HARRIER, INC., a Delaware corporation ("Harrier"), COPE AG, a Swiss
corporation ("COPE"), and STEPHAN ISENSCHMID ("Isenschmid") and ADRIAN KNAPP
("Knapp") as majority stockholders of COPE (the "Majority Stockholders").
R E C I T A L S
A. Harrier, COPE and the COPE Majority Shareholders have previously
entered into that certain Securities Purchase Agreement and Plan of
Reorganization dated October 30, 1997 ("First Agreement"), and the parties
now wish to amend and restate the First Agreement by way of this Agreement.
B. Harrier has authorized capital stock consisting of 30,000,000 shares
of common stock, $.001 par value ("Harrier Common Stock"), and 5,000,000
shares of preferred stock, $.001 par value ("Harrier Preferred Stock").
Harrier has issued and outstanding 15,697,923 shares of Harrier Common Stock
and no shares of Harrier Preferred Stock.
C. Glycosyn Pharmaceuticals, Inc. ("Glycosyn") is a Delaware
corporation with authorized capital stock consisting of 10,000,000 shares of
common stock, $.001 par value ("Glycosyn Common Stock"), and 5,000,000 shares
of preferred stock, $.001 par value ("Glycosyn Preferred Stock"). Glycosyn
has issued and outstanding 5,262,100 shares of Glycosyn Common Stock, of
which Harrier owns 5,000,000 shares, and 250,000 shares of Glycosyn Preferred
Stock designated as Series A Preferred Stock.
D. COPE has share capital of SFr106,000 consisting of 1,060 shares (the
"COPE Shares") of SFr100 par value capital stock ("COPE Capital Stock").
E. Prior to the Closing (as defined in Section 1.4), Harrier shall
effect a 1 for 58 reverse split ("Reverse Split") of the issued and
outstanding shares of Harrier Common Stock.
F. Prior to Closing, each stockholder of COPE other than the Majority
Stockholders shall execute a subscription agreement substantially in the form
of Exhibit B hereto (the "Subscription Agreement") (each such other
stockholder a "Subscriber" and all of the Subscribers together with the
Majority Stockholders, the "Selling Stockholders").
G. The Selling Stockholders wish to sell the COPE Shares and Harrier
wishes to acquire the COPE Shares, at the Closing, in exchange for the
transfer to the Selling Stockholders of an aggregate of 2,862,000 shares
(post-split) of Harrier Common Stock ("Harrier Shares"), subject to the terms
and upon the conditions hereinafter set forth.
A G R E E M E N T
It is agreed as follows:
1. SECURITIES PURCHASE AND REORGANIZATION.
1.1 AGREEMENT TO EXCHANGE SECURITIES. Subject to the terms and
upon the conditions set forth herein, and in the case of the Subscribers,
pursuant to the Subscription Agreement, each Selling Stockholder agrees to
sell, assign, transfer and deliver to Harrier, and Harrier agrees to purchase
from each Selling Stockholder, at the Closing, the COPE Shares owned by the
respective Selling Stockholder as set forth on the List of Selling
Stockholders, in exchange for the transfer, at the Closing, by Harrier to
each Selling Stockholder of a pro rata share of Harrier Shares. A Selling
Stockholder's pro rata share of Harrier Shares shall be determined by
multiplying the total number of Harrier Shares (I.E., 2,862,000 shares
(post-split) of Harrier Common Stock) by a fraction, the numerator of which
is the total number of COPE Shares owned by the Selling Stockholder at the
Closing and the denominator of which is the total number of COPE Shares
issued and outstanding at the Closing.
<PAGE>
1.2 INSTRUMENTS OF TRANSFER.
(a) COPE SHARES. The Selling Stockholders shall deliver to
Harrier at the Closing evidence of the COPE Shares with such endorsements,
assignments and other instruments of transfer, in form satisfactory to
Harrier and its counsel, in order to effectively vest in Harrier all of the
Selling Stockholders' right, title and interest in and to the COPE Shares.
From time to time after the Closing, and without further consideration, the
Selling Stockholders will execute and deliver such other instruments of
transfer and take such other actions as Harrier may reasonably request in
order to more effectively transfer to Harrier the securities intended to be
transferred hereunder.
(b) HARRIER SHARES. Harrier shall deliver to the Selling
Stockholders at the Closing original certificates evidencing Harrier Shares,
in form and substance satisfactory to COPE and its counsel, in order to
effectively vest in the Selling Stockholders all right, title and interest in
and to the Harrier Shares. From time to time after the Closing, and without
further consideration, Harrier will execute and deliver such other
instruments and take such other actions as the Selling Stockholders may
reasonably request in order to more effectively issue to them Harrier Shares.
1.3 APPROVAL OF HARRIER STOCKHOLDERS. Harrier will duly call and
will promptly hold a meeting of its stockholders for the purpose of approving
its acquisition of the COPE Shares on the terms and conditions set forth in
this Agreement and in connection therewith will comply fully with the
applicable provisions of the Bylaws of Harrier and the Delaware General
Corporation Law relating to the calling and holding of a meeting of
stockholders for such purpose. In connection with the foregoing, and except
as expressly limited by Section 3.9, Harrier will comply fully with the
requirements of the Securities Exchange Act of 1934 Act, as amended
("Exchange Act"), and the rules and regulations thereunder with respect to
the solicitation of proxies for use at such meeting.
1.4 CLOSING. The closing ("Closing") of the exchange of the COPE
Shares and Harrier Shares shall take place at Holiday Inn Crowne Plaza, 300
North Harbor Drive, Redondo Beach, California, at 10:00 a.m., local time, on
August 21, 1998, or at such other time and place as may be mutually agreed
to in writing by the Selling Stockholders and Harrier ("Closing Date").
2. REPRESENTATIONS AND WARRANTIES OF THE SELLING STOCKHOLDERS. Each
Majority Stockholder severally represents, warrants and covenants to and with
Harrier as follows:
2.1 POWER AND AUTHORITY. The Majority Stockholder has all
requisite individual power and authority to enter into and to carry out all
of the terms of this Agreement and all other documents executed and delivered
in connection herewith. All individual action on the part of the Majority
Stockholder necessary for the authorization, execution, delivery and
performance of this Agreement by the Majority Stockholder has been taken and
no further authorization on the part of the Majority Stockholder is required
to consummate the transactions provided for in this Agreement. When executed
and delivered by the Majority Stockholder, this Agreement shall constitute
the valid and legally binding obligation of the Majority Stockholder
enforceable in accordance with its terms, subject to the qualification and
limitation that the procedural and remedial rights of the other parties to
this Agreement may be limited or rendered unenforceable by (i) bankruptcy,
insolvency, reorganization, moratorium or other similar laws, (ii) legal or
equitable principles now or hereafter in effect relating to or affecting the
enforcement of rights or remedies generally, or (iii) the availability of
equitable remedies.
2.2 OWNERSHIP OF AND TITLE TO SECURITIES. The List of Majority
Stockholders set forth on Exhibit A hereto (the "Stockholder List")
accurately sets forth the name, residence address and number of shares of
COPE Capital Stock owned by the Majority Stockholder. The Majority
Stockholder represents that, except for the COPE Shares or as disclosed on
the COPE Disclosure Schedule attached as Schedule 1 hereto ("COPE Disclosure
Schedule"), there are no warrants, options, subscriptions, calls, or other
similar rights of any kind for the issuance or purchase of any securities of
COPE held by the Majority Stockholder. The Majority Stockholder represents
that the Majority Stockholder has and will transfer to Harrier good and
marketable title to the COPE Shares which it owns as set forth on the
Stockholder List, free and clear of all pledges, security interests,
mortgages, liens, claims, charges, restrictions or encumbrances, except for
restrictions under applicable U.S. federal or state securities laws.
<PAGE>
2.3 INVESTMENT AND RELATED REPRESENTATIONS.
(a) HARRIER SHARES AS REGULATION S OR "RESTRICTED"
SECURITIES. The Majority Stockholder is aware that neither the Harrier Shares
nor the offer or sale thereof to the Majority Stockholder has been registered
under the U.S. Securities Act of 1933, as amended ("Securities Act"), or
under any foreign or state securities law. The Majority Stockholder further
understands that no registration statement has been filed with the Securities
and Exchange Commission ("SEC"), nor with any other U.S. or foreign
regulatory authority and that, as a result, any benefit which might normally
accrue to an investor such as the Majority Stockholder by an impartial review
of such a registration statement by the SEC or other regulatory commission
will not be forthcoming. The Majority Stockholder acknowledges that the
Harrier Shares are being offered alternatively pursuant to Regulation S under
the Securities Act and certain exemptions from Section 5 of the Securities
Act. The Majority Stockholder acknowledges that, except as otherwise
disclosed on the COPE Disclosure Schedule, it is not a "U.S. person" as
defined by Rule 902(o) under the Securities Act, a copy of which has been
provided to each Majority Stockholder, and that it is not acquiring the
Harrier Shares for the account or benefit of any "U.S. person." The Majority
Stockholder understands that to the extent Regulation S does not apply to
Harrier's issuance of Harrier Shares to the Majority Stockholder, the Harrier
Shares will be characterized as "restricted" securities under U.S. federal
securities laws inasmuch as they are being acquired in a transaction not
involving a public offering and that under such laws and applicable
regulations such securities may be resold without registration under the
Securities Act only in certain limited circumstances. The Majority
Stockholder represents that the Majority Stockholder is familiar in general
with Rule 144 under the Securities Act (which provides generally for a one
year holding period and limitations on the amount of "restricted" securities
that can be sold in compliance with the rule upon completion of the holding
period), and understands the resale limitations imposed thereby and by the
Securities Act. The Majority Stockholder agrees that the Majority
Stockholder will not sell all or any portion of Harrier Shares except in
accordance with Regulation S, pursuant to registration under the Securities
Act or pursuant to an available exemption from registration under the
Securities Act. The Majority Stockholder understands that each certificate
for Harrier Shares issued to the Majority Stockholder or to any subsequent
transferee shall be stamped or otherwise imprinted with an appropriate legend
summarizing the restrictions described in this Section 2.4(a) and that
Harrier shall refuse to transfer the Harrier Shares except in accordance with
such restrictions, such legend to be substantially as follows:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND SUCH
SECURITY MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED
EXCEPT (1) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT; (2) IN AN OFFSHORE TRANSACTION IN ACCORDANCE
WITH RULE 903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT,
OR (3) PURSUANT TO AN EXEMPTION FROM REGISTRATION, IN EACH CASE AS
CONFIRMED IN AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY AND
IN EACH CASE IN ACCORDANCE WITH ANY OTHER APPLICABLE LAW.
(b) INVESTMENT REPRESENTATION. This Agreement is made with
the Majority Stockholder in reliance upon the Majority Stockholder's
representation to the other parties to this Agreement, which by the Majority
Stockholder's execution of this Agreement the Majority Stockholder hereby
confirms, that the Harrier Shares to be received by the Majority Stockholder
are being acquired pursuant to this Agreement for investment and not with a
view to the public resale or distribution thereof unless in accordance with
Regulation S, pursuant to an effective registration statement or exemption
under the Securities Act.
(c) NO PUBLIC SOLICITATION. The Majority Stockholder is
acquiring the Harrier Shares after private negotiation and has not been
attracted to the acquisition of the Harrier Shares by any press release,
advertising or publication.
(d) ACCESS TO INFORMATION. The Majority Stockholder believes
it has received all of the information it considers necessary or appropriate
for deciding whether to acquire the Harrier Shares, including, but not
limited to the copies of the Harrier SEC Reports (as defined in Section 4.4).
The Majority Stockholder further represents that it has had an opportunity
to ask questions of, and to receive answers from, Harrier regarding Harrier,
its business and prospects, and the Harrier Shares.
<PAGE>
(e) INVESTOR SOPHISTICATION AND ABILITY TO BEAR RISK OF LOSS.
The Majority Stockholder, if a corporation or a partnership, has not been
organized for the purpose of acquiring the Harrier Shares. The Majority
Stockholder acknowledges that it is able to protect its interests in
connection with the acquisition of the Harrier Shares and can bear the
economic risk of investment in such securities without producing a material
adverse change in the Majority Stockholder's financial condition. The
Majority Stockholder otherwise has such knowledge and experience in financial
or business matters that the Majority Stockholder is capable of evaluating
the merits and risks of the investment in the Harrier Shares.
3. REPRESENTATIONS AND WARRANTIES OF COPE, ISENSCHMID AND KNAPP.
COPE, Isenschmid and Knapp each severally represents, warrants and covenants
to and with Harrier as follows:
3.1 CORPORATE ORGANIZATION, ETC. COPE is a Swiss corporation duly
organized, validly existing and in good standing under the laws of
Switzerland and is duly qualified to do business and is in good standing as a
foreign corporation under the laws of each jurisdiction in which the
character or location of the assets owned or leased by it require
qualification, except where the failure to so qualify would not materially
adversely affect the business or condition, financial or otherwise, of COPE.
COPE has delivered or prior to the Closing Date will deliver to Harrier
complete and correct copies of its bylaws and other organizational documents,
as amended, certified by the Chairman of COPE to be complete and correct.
COPE owns all of the issued and outstanding securities of COPE GmbH, Ltd., a
German corporation, COPE Handelsgmbh, an Austrian limited liability company,
and Xpert, Inc., a Florida corporation. Other than COPE GmbH, COPE
Handelsgmbh and Xpert, Inc. (the "COPE Subsidiaries"), COPE has no
subsidiaries or equity ownership in any other entities. No warrants,
options, subscriptions, calls, commitments, or other rights or agreements of
any kind for the purchase, issuance or sale of the capital shares of COPE
GmbH, COPE Handelsgmbh or Xpert, Inc. are outstanding or otherwise exist.
3.2 CAPITALIZATION. The authorized, issued and outstanding
capitalization of COPE is as recited in the second recital to this Agreement.
All issued and outstanding shares of COPE Capital Stock have been duly
authorized and validly issued and are fully paid and non-assessable and none
of such issued and outstanding shares of COPE Capital Stock have been issued
in violation of the preemptive rights of any past or present stockholders.
No warrants, options, subscriptions, calls, commitments or other rights or
agreements of any kind issued, granted or entered into by COPE for the
purchase, issuance or sale of, or security exchangeable for or convertible
into, any authorized shares of COPE Capital Stock are outstanding or
otherwise exists and no authorized unissued shares of COPE Capital Stock are
reserved for any purpose. The Majority Stockholders are the only holders of
COPE Capital Stock and the Stockholder List accurately sets forth the names
and residence addresses and number of COPE Shares owned by the Majority
Stockholders.
3.3 CORPORATE POWER AND AUTHORITY. COPE and each of the COPE
Subsidiaries has all requisite corporate power and authority to own or lease
all of its properties and assets, to operate its properties and assets and to
carry on its businesses as now conducted. COPE has all requisite corporate
power and authority to enter into and to carry out all of the terms of this
Agreement. All corporate action on the part of COPE and its stockholders
necessary for the authorization, execution, delivery and performance of this
Agreement by COPE has been taken and no further corporate authorization on
the part of COPE is required to consummate the transactions provided for in
this Agreement. Neither the execution, delivery nor performance of this
Agreement by COPE or the Majority Stockholders shall violate or result in a
breach of any provisions of the Bylaws or other organizational documents, as
amended, of COPE. Neither the execution, delivery nor performance of this
Agreement by the Majority Stockholders shall constitute a default or result
in a breach of or accelerate the performance required under any mortgage,
deed of trust, lien, lease, restriction or other contract or agreement to
which COPE or any of its properties or assets are bound or affected, or
violate any order, writ, injunction, decree, judgment or other restriction of
any court, administrative agency or governmental body.
3.4 FINANCIAL STATEMENTS. COPE has furnished to Harrier its
consolidated balance sheet as of the end of its fiscal year ended December
31, 1996 and its consolidated statements of earnings, stockholders' equity
and cash flows for the fiscal years ended December 31, 1996 and 1995,
together with appropriate notes to such consolidated financial statements.
Prior to the Closing, COPE shall deliver to Harrier the aforementioned
financial statements, accompanied by reports thereon containing opinions
without comment or qualification, except as therein noted, by its independent
certified public accountants. COPE has also furnished to Harrier its
consolidated balance sheet as of June 30, 1997 and its consolidated
statements of earnings and cash flows for the six months ended on such date,
together with appropriate notes to such consolidated financial statements.
<PAGE>
All of the foregoing consolidated financial statements (collectively,
the "COPE Financial Statements"), including in each case the related notes,
have been prepared in conformity with United States generally accepted
accounting principles consistently applied and are correct and complete in
all material respects and such consolidated financial statements fairly
present the financial position of COPE and the COPE Subsidiaries as of the
dates of such balance sheets and the results of operations for the respective
periods indicated.
3.5 ABSENCE OF UNDISCLOSED LIABILITIES. COPE and the COPE
Subsidiaries have no material liabilities, fixed or contingent, other than
(i) liabilities fully reflected in the COPE Financial Statements, or (ii)
liabilities incurred since June 30, 1997 in the ordinary course of business
or as contemplated or permitted by this Agreement or referred to in the COPE
Disclosure Schedule, all of which in the aggregate, taking into consideration
all other changes in the financial condition of COPE and the COPE
Subsidiaries in the ordinary course of business, have had no material adverse
affect on the financial position or results of operations of COPE and the
COPE Subsidiaries, taken as a whole, or on the conduct of its businesses.
3.6 ABSENCE OF ADVERSE CHANGES. Except as disclosed in the COPE
Disclosure Schedule or the COPE Financial Statements, since June 30, 1997,
there has not been (i) any material adverse change in the assets or
liabilities or in the condition, financial or otherwise, or business,
properties, earnings or net worth of COPE and the COPE Subsidiaries, taken as
a whole, or (ii) any damage or destruction in the nature of a casualty loss,
whether covered by insurance or not, materially and adversely affecting any
property or business of COPE or the COPE Subsidiaries which is material to
the consolidated financial condition, operation or business of COPE and the
COPE Subsidiaries, taken as a whole.
3.7 CONTRACTS AND AGREEMENTS. Set forth in the COPE Disclosure
Schedule is a list of all contracts and agreements (including loan
agreements), other than contracts for goods or services in the ordinary
course of business, to which COPE or any COPE Subsidiary is a party or by
which it is bound, involving more than $50,000. Except as set forth in the
COPE Disclosure Schedule, none of the contracts and agreements will expire or
be terminated or be subject to any modification of terms or conditions upon
the consummation of the transactions contemplated by this Agreement. Except
as set forth in the COPE Disclosure Schedule, neither COPE nor any COPE
Subsidiary is in default in any material respect under the terms of any such
contract or agreement nor in default in the payment of any principal of or
interest on any indebtedness for borrowed money nor has any event occurred
which, with the passage of time or giving of notice, would constitute such a
default by COPE or any COPE Subsidiary and no other party to any such
contract or agreement is in default in any material respect thereunder nor
has any such event occurred with respect to such party.
3.8 NO VIOLATION OR LITIGATION. Except as set forth in the COPE
Disclosure Schedule, neither COPE nor any COPE Subsidiary is in material
violation of any law or order, writ, injunction or decree of any court or
other governmental department, commission, board, bureau, agency or
instrumentality, and there are no material lawsuits, proceedings, claims or
governmental investigations pending or, to the knowledge of any executive
officer of COPE, threatened against COPE, any COPE Subsidiary or against the
properties or business of any of them, nor is there any reasonable basis
known to COPE for any such action and there is no action, suit, proceeding or
investigation pending, threatened or, to the knowledge of COPE, contemplated
which questions the legality, validity or propriety of the transactions
contemplated by this Agreement.
3.9 ACCURACY OF PROXY STATEMENT. Harrier's notice of special
meeting and proxy statement ("Proxy Statement"), including any amendments or
supplement thereto, will, when the Proxy Statement is mailed to the
stockholders of Harrier as contemplated by Section 1.3 hereof, contain the
information with respect to COPE and the Selling Stockholders required by the
Exchange Act and the rules and regulations thereunder. The Proxy Statement
will not, at the time of mailing, at the time of the meeting of stockholders
of Harrier or at the Closing, include any untrue statement of a material fact
or omit to state a material fact with respect to COPE or the Selling
Stockholders required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The Selling Stockholders make no representations as to
statements or omissions regarding information solely relating to Harrier, it
being the agreement of the parties that responsibility for such statements or
omissions rests solely with Harrier.
3.10 EMPLOYEE OR CONSULTING AGREEMENTS. The COPE Disclosure
Schedule lists all plans, contracts, and arrangements, oral, implied or
written, included but not limited to union contracts, employment agreements,
consulting agreements, employee manuals, incentive payment plans and employee
benefit plans,
<PAGE>
whereunder COPE or any COPE Subsidiary has any obligations (other than
obligations to make current wage or salary payments terminable on notice of
90 days or less) to its officers or employees or other persons or their
beneficiaries or whereunder any of such person owes money to COPE or any COPE
Subsidiary, except to the extent any such obligation is set forth in the COPE
financial statements.
3.11 INSURANCE. COPE and the COPE Subsidiaries each maintain
policies of fire and casualty, liability and other forms of insurance in such
amounts and against such risks and losses as are reasonable for its
businesses and properties, and will keep such insurance in full force and
effect through the Closing. A list and brief description (including
effective and termination dates) of all policies of insurance, including
insurance providing benefits for employees, owned or held by COPE or the COPE
Subsidiaries on the date hereof and of all material performance bonds
maintained by COPE on the date hereof are set forth in the COPE Disclosure
Schedule. Neither COPE nor any of the COPE Subsidiaries are subject to any
liabilities as a self-insurer of its business and property which could have a
material adverse impact on its business, properties or prospects, taken as a
whole, except as disclosed in the COPE Disclosure Schedules.
3.12 TRADEMARKS AND PATENTS. COPE and the COPE Subsidiaries have
no material trademarks, trade names, copyrights, inventions, patents or
applications therefor which are owned, used, registered in the name of or
licensed to COPE or any COPE Subsidiary, except for those listed in the COPE
Disclosure Schedule. Except as disclosed in the COPE Disclosure Schedule, no
proceedings have been instituted or are pending or threatened or contemplated
which challenge the validity of the ownership by COPE or any COPE Subsidiary
of any such trademark, trade name, copyright, invention or patent. Except as
disclosed in the COPE Disclosure Schedule, neither COPE nor any COPE
Subsidiary has licensed anyone to use any such trademark or any technical
know how or other proprietary rights of COPE or any COPE Subsidiary.
3.13 NO GOVERNMENTAL OR OTHER PROCEEDING OR LITIGATION. No order
of any court or administrative agency is in effect which restrains or
prohibits COPE or the Selling Stockholders from consummating the transactions
contemplated hereby, and no suit, action, investigation, inquiry or
proceeding by any governmental body or other person or legal or
administrative proceeding has been instituted or threatened which questions
the validity or legality of COPE's or the Selling Stockholders' consummation
of the transactions contemplated hereby.
3.14 APPROVALS AND CONSENTS. There are no permits, consents,
mandates or approvals of public authorities, either U.S. or Swiss, federal,
state or local, or of any third party necessary for COPE's or the Selling
Stockholders' consummation of the transactions contemplated hereby.
3.15 BROKERAGE. No broker or finder has acted directly or
indirectly for the Selling Stockholders in connection with this Agreement or
the transactions contemplated hereby, and no broker or finder is entitled to
any brokerage or finder's fee or other commission in respect thereof based in
any way on agreements, arrangements or understandings made by or on behalf of
the Selling Stockholders.
3.16 PERMITS AND OTHER OPERATING RIGHTS. Except as disclosed in
the COPE Disclosure Schedule, COPE and the COPE Subsidiaries currently
possess all permits, licenses, certificates and other authorizations from
third parties, including, without limitation, foreign and domestic
governmental authorities, necessary or required by applicable provisions of
law and judicial decisions, and by the property and contract rights of third
parties, for it to own or lease its properties and assets and to operate its
business in the manner in which it is intended.
3.17 EMPLOYEE RETIREMENT PLANS. Neither COPE nor any COPE
Subsidiary has an employee pension, retirement or benefit plan.
3.18 PERSONAL PROPERTY, INVENTORIES AND TITLE TO PROPERTY. All
personal property owned, leased or used by COPE and the COPE Subsidiaries is
reflected in the COPE Financial Statements, and is in good operating and
working condition and fit for operation in the usual course of business,
ordinary wear and tear excepted. Except as set forth in the COPE Disclosure
Schedule, COPE and the COPE Subsidiaries have good and marketable title to
all of their assets, and a good and valid leasehold interest in all property
leased by the corporation, free and clear of all liens.
3.19 ENVIRONMENTAL MATTERS. There has been no manufacture,
refining, storage, disposal or treatment of Hazardous Substances (as
hereinafter defined) by COPE or any COPE Subsidiary at any real property
currently or in the past owned, operated, used, leased or contracted for by
COPE or any COPE Subsidiary, or
<PAGE>
otherwise in violation of any Environmental Laws (as hereinafter defined) or
which would require remedial action under any Environmental Law. During the
past three years neither COPE nor any COPE Subsidiary has received (a) notice
of any such violation with respect to any Hazardous Substance at or by any of
such real property, (b) notice from any governmental agency that COPE or any
COPE Subsidiary, or any present or former owner, lessee or operator of such
real property, is a potentially responsible party for cleanup liability with
respect to the emission, discharge or release of any Hazardous Substance or
for any other matter arising under the Environmental Laws or in any
litigation, administrative proceeding, finding, order, citation, notice,
investigation or complaint under any Environmental Law, or (c) notice of
violation, citation, complaint, request for information, order, directive,
compliance schedule, notice of claim, proceeding or litigation from any party
concerning COPE's or any COPE Subsidiaries' compliance with any Environmental
Law. As used herein "Environmental Laws" means the Resource Conservation
Recovery Act, the Comprehensive Environmental Responsibility Compensation and
Liability Act, the Superfund Amendments and Reauthorization Act, the Toxic
Substances Control Act, the Hazardous Materials Transportation Act, the Clean
Air Act, the Clean Water Act, and other similar foreign, federal, state and
local laws, as amended, together with all regulations issued or promulgated
thereunder, relating to pollution, the protection of the environment or the
health and safety of workers or the general public. As used herein
"Hazardous Substance" means any hazardous substance, hazardous or toxic
waste, hazardous material, pollutant or contaminant, as those or similar
terms are used in the Environmental Laws, including, without limitation,
asbestos and asbestos-related products, chlorofluorocarbons, oils or
petroleum derived compounds, polychlorinated biphenyl, pesticides and radon.
3.20 TAX MATTERS. COPE and each COPE Subsidiary has timely filed
all tax returns and all information returns and reports required to be filed
by or with respect to it under the laws of its jurisdiction for all periods
ending on or prior to the date hereof and will timely file all such returns
and reports required to be filed from the date hereof through the Closing
Date. COPE and the COPE Subsidiaries have paid all taxes which have become
due or payable, and will pay on or prior to the Closing Date all taxes which
have become due or payable on or prior to the Closing Date.
3.21 TRANSACTIONS WITH AFFILIATES. Except as set forth in the
notes to the COPE Financial Statements or the COPE Disclosure Schedule,
neither COPE nor any COPE Subsidiary has purchased, acquired or leased any
property or services from, or sold, transferred or leased any property or
services to, or loaned or advanced any money to, or borrowed any money from,
or guaranteed or otherwise become liable for any indebtedness or other
obligations of, or acquired any capital stock, obligations or securities of,
or made any management, consulting or similar fee arrangement with any
officer, director, employee or stockholder of COPE or any COPE Subsidiary
(nor any spouse, child or affiliate thereof), nor is COPE or any COPE
Subsidiary a party to any agreement oral or written with respect to any of
the foregoing.
3.22 OTHER INFORMATION. None of the written information,
documents or memoranda furnished or to be furnished by COPE or the Majority
Stockholders to Harrier or any of their representatives is false or
misleading in any material respect or omits to state a material fact required
to be stated therein or necessary in order to make any of the statements
therein, in the light of the circumstances under which they were made, not
misleading.
4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF HARRIER. Harrier
represents, warrants and covenants to and with COPE and the Selling
Stockholders as follows:
4.1 CORPORATE ORGANIZATION, ETC. Harrier and Glycosyn are
corporations duly organized, validly existing and in good standing under the
laws of the State of Delaware, and are duly qualified to do business and are
in good standing as foreign corporations under the laws of each jurisdiction
in which the character or location of the assets owned or leased by each of
them require qualification, except where the failure to so qualify would not
materially adversely affect the business or condition, financial or
otherwise, of Harrier on a consolidated basis. Harrier and Glycosyn have
delivered or prior to the Closing Date will deliver to COPE complete and
correct copies of their certificates of incorporation, as amended, and
bylaws, as amended, certified by their respective secretaries to be complete
and correct. As of the date of this Agreement, Harrier is the owner of
5,000,000 shares of the Glycosyn Common Stock and a membership interest in
DermaRay LLC, a California limited liability company ("DermaRay"). Other
than Glycosyn and DermaRay, Harrier has no other subsidiaries or equity
ownership in any other entity.
4.2 CAPITALIZATION. The authorized, issued, outstanding and
reserved capital stock of Harrier and Glycosyn is as recited in the recitals
to this Agreement. All issued and outstanding shares of capital stock of
<PAGE>
Harrier and Glycosyn have been duly authorized and validly issued and are
fully paid and non-assessable and none of such issued and outstanding shares
have been issued in violation of the preemptive rights of any past or present
stockholder. Except as set forth in the recitals or the Harrier Disclosure
Schedule attached hereto as Schedule 2 ("Harrier Disclosure Schedule"), no
warrants, options, subscriptions, calls, commitments or other rights or
agreements of any kind issued, granted or entered into by Harrier or Glycosyn
for the purchase, issuance or sale of, or security exchangeable for or
convertible into, any shares of such authorized capital stock is outstanding
or otherwise exists and no authorized unissued shares of Harrier or Glycosyn
are reserved for any purpose.
4.3 CORPORATE POWER AND AUTHORITY. Harrier and Glycosyn have all
requisite corporate power and authority to own or lease all of their
respective properties and assets, to operate their respective properties and
assets and to carry on their respective businesses as now conducted. Harrier
has all requisite corporate power and authority to enter into and to carry
out all of the terms of this Agreement. The execution, delivery and
performance of this Agreement has been or prior to the Closing will be duly
authorized and approved by vote of Harrier board of directors without
dissent. All corporate action on the part of Harrier, its officers,
directors and stockholders necessary for the authorization, execution,
delivery and performance of this Agreement by Harrier will have been taken
prior to the Closing and no further corporate authorization on the part of
Harrier will be required to consummate the transactions provided for in this
Agreement. Harrier has furnished or on or before the Closing Date will
furnish COPE with certified copies of all corporate resolutions or consents
relating to the execution, delivery and performance of this Agreement. When
executed and delivered by Harrier, this Agreement shall constitute the valid
and legally binding obligation of Harrier enforceable in accordance with its
terms subject to the qualification and limitation that COPE and the Selling
Stockholders' procedural and remedial rights may be limited or rendered
unenforceable by (i) bankruptcy, insolvency, reorganization, moratorium or
other similar laws, (ii) equitable principles now or hereafter in effect
relating to or affecting the enforcement of rights or remedies generally, or
(iii) the availability of equitable remedies. Neither the execution,
delivery nor performance of this Agreement by Harrier shall violate or result
in a breach of any provisions of Harrier's certificate of incorporation or
bylaws. Except where such violation or breach would not adversely affect the
performance by Harrier of its obligations hereunder and would not have a
material adverse affect on the business or condition, financial or otherwise,
of Harrier on a consolidated basis, neither the execution, delivery nor
performance of this Agreement by Harrier shall constitute a default or result
in a breach of or accelerate the performance required under any mortgage,
deed of trust, lien, lease, restriction or other contract or agreement to
which Harrier or Glycosyn or any of their properties or assets are bound or
affected, or violate any order, writ, injunction, decree, judgment or other
restriction of any court, administrative agency or governmental body.
4.4 FINANCIAL STATEMENTS; SEC REPORTS. Harrier has furnished to
the Selling Stockholders its consolidated balance sheet as of the end of its
fiscal year ended June 30, 1997 and its consolidated statements of earnings,
stockholders' equity and cash flows for the fiscal years ended June 30, 1997
and 1996. Prior to the Closing, Harrier shall deliver to COPE the
aforementioned financial statements, together with appropriate notes to such
consolidated financial statements, accompanied by reports thereon containing
opinions without comment or qualification, except as therein noted, by its
independent certified public accountants.
All of the foregoing consolidated financial statements (collectively,
the "Harrier Financial Statements"), including in each case the related
notes, have been prepared in conformity with generally accepted accounting
principles consistently applied and are correct and complete in all material
respects and such consolidated financial statements fairly present the
financial position of Harrier and the Glycosyn as of the dates of such
balance sheets and the results of operations for the respective periods
indicated.
Harrier has also furnished to the Selling Stockholders its Annual Report
on Form 10-KSB for the fiscal year ended June 30, 1996, and all quarterly
reports on Form 10-QSB and current reports on Form 8-K which it has filed
with the SEC since June 30, 1996. Prior to the Closing, Harrier shall
deliver to the Selling Stockholders its Annual Report on Form 10-KSB for the
fiscal year ended June 30, 1997. The above reports of Harrier to the SEC are
sometimes collectively referred to hereinafter as the "Harrier SEC Reports."
The Harrier SEC Reports contain all of the information required by the
Exchange Act and the rules and regulations thereunder and do not contain any
untrue statements of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
4.5 ABSENCE OF UNDISCLOSED LIABILITIES. Harrier and Glycosyn have
no material liabilities, fixed or contingent, other than (i) liabilities
fully reflected in the Harrier Financial Statements, or (ii) liabilities
incurred since June 30, 1997 in the ordinary course of business or as
contemplated or permitted by this Agreement or
<PAGE>
referred to in the Harrier Disclosure Schedule, all of which in the
aggregate, taking into consideration all other changes in the financial
condition of Harrier and Glycosyn in the ordinary course of business, have
had no material adverse effect on the financial position or results of
operations of Harrier and Glycosyn, taken as a whole, or on the conduct of
its businesses.
4.6 ABSENCE OF ADVERSE CHANGES. Except as disclosed in the
Harrier Disclosure Schedule or Harrier Financial Statements, since June 30,
1997, there has not been any material adverse change in the assets or
liabilities or in the condition, financial or otherwise, or business,
properties, earnings or net worth of Harrier and Glycosyn, taken as a whole,
or (ii) any damage or destruction in the nature of a casualty loss, whether
covered by insurance or not, materially and adversely affecting any property
or business of Harrier or Glycosyn which is material to the consolidated
financial condition, operation or business of Harrier and Glycosyn, taken as
a whole.
4.7 CONTRACTS AND AGREEMENTS. Set forth in the Harrier Disclosure
Schedule is a list of all contracts and agreements (including loan
agreements) to which Harrier or Glycosyn is a party or by which it is bound,
involving more than $5,000. Except as set forth in the Harrier Disclosure
Schedule, none of the contracts and agreements will expire or be terminated
or be subject to any modification of terms or conditions upon the
consummation of the transactions contemplated by this Agreement. Except as
set forth in the Harrier Disclosure Schedule, neither Harrier nor Glycosyn is
in default in any material respect under the terms of any such contract or
agreement nor in default in the payment of any principal of or interest on
any indebtedness for borrowed money nor has any event occurred which, with
the passage of time or giving of notice, would constitute such a default by
Harrier or Glycosyn and no other party to any such contract or agreement is
in default in any material respect thereunder nor has any such event occurred
with respect to such party.
4.8 NO VIOLATION OR LITIGATION. Except as set forth in the
Harrier Disclosure Schedule, neither Harrier nor Glycosyn is in violation of
any law or order, writ, injunction or decree of any court or other
governmental department, commission, board, bureau, agency or
instrumentality, and there are no lawsuits, proceedings, claims or
governmental investigations pending or, to the knowledge of any executive
officer of Harrier, threatened against Harrier, Glycosyn or against the
properties or business of any of them, nor is there any reasonable basis
known to Harrier for any such action and there is no action, suit, proceeding
or investigation pending, threatened or, to the knowledge of Harrier,
contemplated which questions the legality, validity or propriety of the
transactions contemplated by this Agreement.
4.9 ACCURACY OF PROXY STATEMENT. Harrier's notice of special
meeting and proxy statement ("Proxy Statement"), including any amendments or
supplement thereto, will, when the Proxy Statement is mailed to the
stockholders of Harrier as contemplated by Section 1.3 hereof, contain the
information with respect to Harrier and Glycosyn required by the Exchange Act
and the rules and regulations thereunder. The Proxy Statement will not, at
the time of mailing, at the time of the meeting of stockholders of Harrier or
at the Closing, include any untrue statement of a material fact or omit to
state a material fact with respect to Harrier or Glycosyn required to be
stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading. Harrier
makes no representations as to statements or omissions regarding information
solely relating to COPE or the Selling Stockholders, it being the agreement
of the parties that responsibility for such statements or omissions rests
solely with the Selling Stockholders.
4.10 EMPLOYEE OR CONSULTING AGREEMENTS. The Harrier Disclosure
Schedule lists all plans, contracts, and arrangements, oral, implied or
written, included but not limited to union contracts, employment agreements,
consulting agreements, employee manuals, incentive payment plans and employee
benefit plans, whereunder Harrier or Glycosyn has any obligation (other than
obligations to make current wage or salary payments terminable on notice of
30 days or less) to its officers or employees or other persons or their
beneficiaries or whereunder any of such persons owe money to Harrier or
Glycosyn.
4.11 INSURANCE. Harrier and Glycosyn each maintain policies of
fire and casualty, liability and other forms of insurance in such amounts and
against such risks and losses as are reasonable for its businesses and
properties, and will keep such insurance in full force and effect through the
Closing. A list and brief description (including policy numbers,
deductibles, potential loss adjustments under retrospective policies,
carriers and effective and termination dates) of all policies of insurance,
including insurance providing benefits for employees, owned or held by
Harrier or Glycosyn on the date hereof and of all material performance bonds
maintained by Harrier on the date hereof are set forth in the Harrier
Disclosure Schedule. Neither Harrier nor Glycosyn is subject to any
liabilities as a self-insurer of its business and property which could have a
material adverse impact on its
<PAGE>
business, properties or prospects, taken as a whole, except as disclosed in
the Harrier Disclosure Schedules.
4.12 TRADEMARKS AND PATENTS. Harrier and the Harrier Subsidiaries
have no material trademarks, trade names, copyrights, inventions, patents or
applications therefor which are owned, used, registered in the name of
licensed to Harrier or Glycosyn, except for those listed in the Harrier
Disclosure Schedule. Except as disclosed in the Harrier Disclosure Schedule,
no proceedings have been instituted or are pending or threatened or
contemplated which challenge the validity of the ownership by Harrier or
Glycosyn of any such trademark, trade name, copyright, invention or patent.
Except as disclosed in the Harrier Disclosure Schedule, neither Harrier nor
Glycosyn has licensed anyone to use any such trademark or any technical know
how or other proprietary rights of Harrier or Glycosyn.
4.13 PERMITS AND OTHER OPERATING RIGHTS. Except as disclosed in
the Harrier Disclosure Schedule, Harrier and Glycosyn currently possess all
permits, licenses, certificates and other authorizations from third parties,
including, without limitation, foreign and domestic governmental authorities,
necessary or required by applicable provisions of law and judicial decisions,
and by the property and contract rights of third parties, for it to own or
lease its properties and assets and to operate its business in the manner in
which it is intended.
4.14 NO GOVERNMENTAL OR OTHER PROCEEDING OR LITIGATION. No order
of any court or administrative agency is in effect which restrains or
prohibits Harrier or Glycosyn from consummating the transactions contemplated
hereby, and no suit, action, investigation, inquiry or proceeding by any
governmental body or other person or legal or administrative proceeding has
been instituted or threatened which questions the validity or legality of
Harrier's or Glycosyn's consummation of the transactions contemplated hereby.
4.15 APPROVALS AND CONSENTS. Except as contemplated by Sections
1.3 and 5.6, there are no permits, consents, mandates or approvals of public
authorities, either U.S. or Swiss, federal, state or local, or of any third
party necessary for Harrier's consummation of the transactions contemplated
hereby.
4.16 BROKERAGE. No broker or finder has acted directly or
indirectly for Harrier in connection with this Agreement or the transactions
contemplated hereby, and no broker or finder is entitled to any brokerage or
finder's fee or other commission in respect thereof based in any way on
agreements, arrangements or understandings made by or on behalf of Harrier.
4.17 EMPLOYEE RETIREMENT INCOME SECURITY ACT. Neither Harrier nor
Glycosyn has an "employee pension benefit plan," as such term is defined in
Section 3 of the Employee Retirement Income Security Act of 1974. Neither
Harrier nor Glycosyn, nor any ERISA Affiliate of either of them, has ever
sponsored, maintained, or contributed to, or been required to sponsor,
maintain or contribute to, any single or multiemployer plan as defined in
Section 4001 of the Employee Retirement Security Act of 1974, as amended
("ERISA"). For purposes of the foregoing, "ERISA Affiliate" shall mean any
person (as defined in Section 3(9) of ERISA), which together with Harrier, or
Glycosyn would be deemed to be a single employer plan (i) within the meaning
of Section 414(b), (c), (m) or (o) of the Internal Revenue Code of 1986, as
amended, or (ii) as a result of Harrier or Glycosyn being or having been a
general partner of such person.
4.18 PERSONAL PROPERTY, INVENTORIES AND TITLE TO PROPERTY. All
personal property owned, leased or used by Harrier and Glycosyn is reflected
in the Harrier Financial Statements, and is in good operating and working
condition and fit for operation in the usual course of business, ordinary
wear and tear excepted. Except as set forth in the Harrier Disclosure
Schedule, Harrier and Glycosyn have good and marketable title to all of its
assets, and a good and valid leasehold interest in all property leased by the
corporation, free and clear of all liens.
4.19 ENVIRONMENTAL MATTERS. There has been no manufacture,
refining, storage, disposal or treatment of Hazardous Substances (as
hereinafter defined) by Harrier or Glycosyn at any real property currently or
in the past owned, operated, used, leased or contracted for by Harrier or
Glycosyn, or otherwise in violation of any Environmental Laws (as hereinafter
defined) or which would require remedial action under any Environmental Law.
During the past three years neither Harrier nor Glycosyn has received (a)
notice of any such violation with respect to any Hazardous Substance at or by
any of such real property, (b) notice from any governmental agency that
Harrier, or any present or former owner, lessee or operator of such real
property, is a potentially responsible party for cleanup liability with
respect to the emission, discharge or release of any Hazardous Substance or
for any other matter arising under the Environmental Laws or in any
litigation, administrative proceeding, finding, order, citation, notice,
investigation or complaint under any Environmental Law, or (c) notice of
violation, citation,
<PAGE>
complaint, request for information, order, directive, compliance schedule,
notice of claim, proceeding or litigation from any party concerning the
corporation's compliance with any Environmental Law. As used herein
"Environmental Laws" means the Resource Conservation Recovery Act, the
Comprehensive Environmental Responsibility Compensation and Liability Act,
the Superfund Amendments and Reauthorization Act, the Toxic Substances
Control Act, the Hazardous Materials Transportation Act, the Clean Air Act,
the Clean Water Act, and other similar federal, state and local laws, as
amended, together with all regulations issued or promulgated thereunder,
relating to pollution, the protection of the environment or the health and
safety of workers or the general public. As used herein "Hazardous
Substance" means any hazardous substance, hazardous or toxic waste, hazardous
material, pollutant or contaminant, as those or similar terms are used in the
Environmental Laws, including, without limitation, asbestos and
asbestos-related products, chlorofluorocarbons, oils or petroleum derived
compounds, polychlorinated biphenyl, pesticides and radon.
4.20 TAX MATTERS. Harrier and Glycosyn have timely filed all
federal, state and local tax returns and all information returns and reports
required to be filed by or with respect to it under the laws of the United
States or any state or other jurisdiction for all periods ending on or prior
to the date hereof and will timely file all such returns and reports required
to be filed from the date hereof through the Closing Date. All federal,
state, county, local, and foreign income, profits, franchise, sales, use,
occupational, property, excise, payroll, withholding and other taxes
(including interest and penalties) (collectively, "Taxes") required to have
been paid or accrued by Harrier or Glycosyn have been fully paid or are
adequately provided for on Harrier's consolidated balance sheet and any Taxes
required to be paid or accrued prior to the Closing Date will be fully paid
or adequately provided for on the books of Harrier or Glycosyn as the case
may be. To the knowledge of Harrier, no issues have been raised (and are
currently pending) by the Internal Revenue Service or any other taxing
authority concerning the liability of Harrier, Glycosyn or DermaRay for
Taxes, and no waivers of statutes of limitations have been given or requested
with respect to Harrier, Glycosyn or DermaRay. There is no tax lien of any
kind outstanding against the assets, property, or business of Harrier,
Glycosyn or, to the knowledge of Harrier, DermaRay. All deficiencies
asserted or assessments (including interest and penalties) made as a result
of any examination by the Internal Revenue Service or by appropriate state or
departmental tax authorities of the federal, state or local income tax, sales
tax or franchise tax returns of or with respect to Harrier, Glycosyn or, to
the knowledge of Harrier, DermaRay have been fully paid or are adequately
provided for on Harrier's consolidated balance sheet and no proposed (but
unassessed) additional taxes, interest or penalties have been asserted.
4.21 TRANSACTIONS WITH AFFILIATES. Except as set forth in the
Harrier SEC Reports or the notes to the Harrier Financial Statements, neither
Harrier nor Glycosyn has purchased, acquired or leased any property or
services from, or sold, transferred or leased any property or services to, or
loaned or advanced any money to, or borrowed any money from, or guaranteed or
otherwise become liable for any indebtedness or other obligations of, or
acquired any capital stock, obligations or securities of, or made any
management, consulting or similar fee arrangement with any officer, director,
employee or stockholder of Harrier or Glycosyn (nor any spouse, child or
affiliate thereof), nor is Harrier or Glycosyn a party to any agreement oral
or written with respect to any of the foregoing.
4.22 OTHER INFORMATION. None of the written information,
documents or memoranda furnished or to be furnished by Harrier to COPE or the
Selling Stockholders or any of their representatives is false or misleading
in any material respect or omits to state a material fact required to be
stated therein or necessary in order to make any of the statements therein,
in the light of the circumstances under which they were made, not misleading.
5. CERTAIN ADDITIONAL UNDERSTANDINGS AND AGREEMENTS.
5.1 APPROVALS AND CONSENTS.
(a) IN GENERAL. The parties hereto shall each use all
reasonable best efforts to obtain, and shall not take any action which
jeopardizes obtaining, the necessary approvals and consents of other persons
and governmental authorities required to be obtained to consummate the
transactions contemplated by this Agreement.
(b) COPE AND SELLING STOCKHOLDERS COMPLIANCE WITH SECURITIES
LAWS. COPE and each Selling Stockholder shall take such actions as shall be
required in order to exempt the offer and sale of the COPE Shares to Harrier
from the registration and prospectus delivery requirements under the
Securities Act and to register or qualify or exempt from registration and
qualification requirements the offer and sale of the COPE Shares to Harrier
under applicable foreign and state securities laws.
<PAGE>
(c) HARRIER COMPLIANCE WITH SECURITIES LAWS. Harrier shall
cooperate with the Selling Stockholders in taking such actions as shall be
required in order to exempt the offer and sale of the Harrier Shares to the
Selling Stockholders from the registration and prospectus delivery
requirements under the Securities Act and to register or qualify or exempt
from registration and qualification requirements the offer and sale of the
Harrier Shares to the Selling Stockholders under applicable foreign and state
securities laws.
5.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
(a) COPE AND MAJORITY STOCKHOLDERS. The representations and
warranties of COPE and the Majority Stockholders made herein shall not be
affected by any information furnished to, or investigations made by Harrier
or any of its employees or representatives in connection with the subject
matter of this Agreement. The representations and warranties of the Majority
Stockholders shall survive the execution and delivery of this Agreement and
the consummation of the transactions contemplated thereby for a period of
four (4) years after the Closing Date. The representations and warranties of
COPE shall not survive the Closing.
(b) HARRIER. The representations and warranties of Harrier
made herein shall not be affected by any information furnished to, or
investigations made by, COPE or the Majority Stockholders, or any of their
employees or representatives, in connection with the subject matter of this
Agreement and shall survive the execution and delivery of this Agreement and
the consummation of the transactions contemplated thereby for period of four
(4) years after the Closing Date.
5.3 CONDUCT OF BUSINESS PRIOR TO THE CLOSING DATE. From the date
hereof until the Closing Date, COPE and the Majority Stockholders, on the one
hand, and Harrier, on the other, shall each act as follows, except as
otherwise expressly consented to by the other in writing, which consent shall
not be unreasonably withheld, except such actions taken to consummate the
transactions in accordance with this Agreement as contemplated thereby:
(a) NOTIFICATION. COPE and the Majority Stockholders and
Harrier shall each immediately notify the other of any material breaches of
the representations and warranties or any material nonfulfillment of the
covenants, agreements or obligations of it or of any developments which could
materially adversely affect the value of the COPE Shares or Harrier Shares.
Without limiting the foregoing, COPE and the Majority Stockholders and
Harrier shall each immediately notify the other of (1) any unexpected
emergency or other material change in the normal course of business or in the
operation of its properties, (2) the instigation of or any material
development in any litigation or regulatory proceedings, governmental
complaints, investigations or hearings (or communications indicating that the
same may be contemplated) in which COPE or Harrier is named as a party, and
(3) budgets, capital expenditures and material decisions involving its
material properties or assets. COPE and the Majority Stockholders and
Harrier shall each keep the other fully informed of such events and permit
its representatives access to all materials prepared in connection therewith.
(b) FORBEARANCE. From the effective date hereof to the
Closing Date, COPE and Harrier, or any of their subsidiaries, shall not,
without the prior written consent of the other, which consent shall not be
unreasonably withheld, except for such actions taken to consummate the
transactions in accordance with this Agreement as contemplated thereby: (1)
amend its articles of incorporation or bylaws; (2) issue any shares of
capital stock or securities convertible into any such securities or enter
into any agreement or commitment with respect to the issuance or purchase of
any such securities; (3) declare, pay or set aside for payment any dividend
or distribution in respect to any securities, or redeem, purchase or
otherwise acquire any securities any options, warrants or other rights to
purchase or subscribe to any securities; (4) make or contract for any capital
investment, capital expenditure, capital addition or capital improvement; (5)
negotiate with any person other than the other concerning any merger,
disposition of all or substantially all of its business, properties, or
assets, any tender offer, acquisition or other business combination, other
than the transactions provided for in this Agreement; (6) organize any new
subsidiary, acquire any capital stock or other debt or equity securities of
any corporation, enter into any partnership or joint venture or acquire any
equity or ownership interest in any business; or (7) take any action which
would cause or constitute a material breach, or would, if it had been taken
prior to the date hereof, have caused a material breach of the
representations and warranties of it set forth herein.
5.4 ACCESS. Each of the parties hereto may, prior to the Closing
Date, through its respective representatives, make such reasonable
investigation as is permitted by the laws of its respective jurisdiction of
<PAGE>
organization of the property, records and the financial condition of the
other parties hereto as it reasonably deems necessary or advisable to assure
itself of the accuracy of the representations and warranties of the other
parties hereto and compliance by the other parties hereto with all agreements
and conditions to be satisfied by them. Such investigation shall be done at
reasonable times and under reasonable circumstances. Each party shall each
keep confidential in the same manner in which it preserves its own
confidential information any information so obtained which is not otherwise
publicly available or ascertainable and to which it has been given access by
another party, subject to applicable reporting and disclosure requirements
under applicable foreign, federal and state laws, including without
limitation securities laws. Nothing in this Section 5.4 shall be deemed to
constitute a waiver by any party, or an agreement of any party to waive, with
respect to any document, any claim of attorney-client privilege or legal or
contractual privilege or requirement of confidentiality; provided, however,
that the party claiming such privilege or requirement shall identify to the
extent it is legally permitted the subject matter thereof to the party
seeking such document.
5.5 INDEMNIFICATION.
(a) INDEMNIFICATION BY HARRIER. Harrier agrees to indemnify,
defend and hold harmless the Selling Stockholders against and in respect of
any and all claims, demands, losses, costs, expenses, liabilities and
damages, including interest, penalties, and reasonable attorneys' fees, that
the Selling Stockholders shall incur or suffer which arise, result from or
relate to any material inaccuracy in or material breach or nonfulfillment of
any of the representations, warranties, covenants or agreements made by
Harrier in this Agreement, the schedules or exhibits hereto or in any other
Document furnished by Harrier under this Agreement.
(b) INDEMNIFICATION BY THE MAJORITY STOCKHOLDERS. Each
Majority Stockholder agrees to indemnify, defend and hold harmless Harrier
against and in respect of any and all claims, demands, losses, costs,
expenses, liabilities and damages, including interest, penalties, and
reasonable attorneys' fees, that Harrier shall incur or suffer which arise,
result from or relate to any material inaccuracy in or material breach of
nonfulfillment of any of the representations, warranties, covenants or
agreements made by COPE or the Majority Stockholder in this Agreement, the
schedules or exhibits hereto or in any other Document furnished by COPE or
the Majority Stockholder under this Agreement.
(c) PROCEDURES; RIGHTS TO SEPARATE COUNSEL. In the event any
party receives a complaint, claim or other notice of any loss, claim or
damage, liability or action, giving rise to a claim for indemnification under
this Section 5.5, the party claiming indemnification shall promptly notify
the indemnifying party of such complaint, notice, claim or action, and such
indemnifying party shall have the right to investigate and defend any such
loss, claim, damage, liability or action. The party claiming indemnification
shall have the right to employ separate counsel in any such action and to
participate in the defense thereof but the fees and expenses of such counsel
shall not be at the expense of the indemnifying party, unless the
indemnifying party fails to promptly defend, in which case the fees and
expenses of such separate counsel shall be borne by the indemnifying party.
In no event shall an indemnifying party be obligated to indemnify another
party for any settlement of any claim or action effected without the
indemnifying party's prior written consent.
6. CONDITIONS TO THE OBLIGATIONS OF COPE AND THE MAJORITY STOCKHOLDERS.
The obligations of COPE and the Majority Stockholders, hereunder are subject
to the fulfillment at or before the Closing, of the following conditions (any
of which may be waived in writing by COPE and the Majority Stockholders):
6.1 REPRESENTATIONS AND WARRANTIES, ETC. The representations and
warranties of Harrier contained herein shall have been true and correct in
all material respects when made and as of the Closing, except as affected by
actions taken after the date hereof with the prior written consent of the
Selling Stockholders.
6.2 PERFORMANCE OF COVENANTS. Harrier shall have performed and
complied in all material respects with all covenants, agreements, terms and
conditions and executed all documents required by this Agreement to be
performed, complied with, or executed by it prior to the Closing.
6.3 NO GOVERNMENTAL OR OTHER PROCEEDING OR LITIGATION. No order
of any court or administrative agency shall be in effect which restrains or
prohibits the transactions contemplated hereby, and no suit, action,
investigation, inquiry or proceeding by any governmental body or other person
or legal or administrative proceeding shall have been instituted or
threatened which questions the validity or legality of the transactions
contemplated
<PAGE>
hereby.
6.4 APPROVALS AND CONSENTS. All permits, consents or approvals of
applications to public authorities, federal, state or local, and all
approvals of any third persons, including without limitation all approvals or
consents under applicable federal or state securities laws, the granting of
which are necessary for the consummation of the transactions contemplated
hereby shall have been obtained.
6.5 HARRIER STOCKHOLDER APPROVAL. The holders of the outstanding
shares of the Harrier Common Stock shall have approved, in accordance with
Delaware General Corporation Law, (i) Harrier's issuance of Harrier Shares in
exchange for the COPE Shares, (ii) the Reverse Split; (iii) the Amendment to
Harrier's Certificate of Incorporation; (iv) the election of the COPE
nominees to Harrier's board of directors; and (v) Harrier's sale of Glycosyn
common shares in accordance with Section 6.15.
6.6 DELIVERY OF INSTRUMENTS OF TRANSFER. Harrier shall have
delivered to the Selling Stockholders or their representatives certificates
evidencing Harrier Shares.
6.7 CERTIFICATE. The President and Chief Financial Officer of
Harrier shall have delivered to the Selling Stockholders or their
representatives a certificate certifying as of the Closing Date the matters
set forth in Section 6.1 and 6.2.
6.8 DUE DILIGENCE. COPE's investigation of Harrier, Glycosyn and
NCT shall not have revealed any matters regarding the financial condition,
liabilities, operations or prospects of any of them which are not
satisfactory to COPE.
6.9 TAX CONSEQUENCES. COPE's analysis of the proposed ownership
structure of COPE following the Closing shall not have revealed any adverse
income tax consequences which are not acceptable to COPE in its reasonable
discretion.
6.10 RECAPITALIZATION AND CHARTER AMENDMENTS. Harrier will obtain
director and stockholder approval of: (a) this Agreement and the transactions
contemplated hereby; (b) the Reverse Split; (c) the change in the corporate
name of Harrier to "COPE, Inc." or such other mutually agreeable name as may
be available for use in the State of Delaware; (d) such amendments to the
bylaws and certificate of incorporation of Harrier as may be reasonably
requested by COPE; and (e) the election of a new board of directors of
Harrier, including Stephan Isenschmid, Adrian Knapp, Peter Koch, Markus
Stalder and Kevin DeVito, effective upon and subject to the Closing.
6.11 ASSIGNMENT AND ASSUMPTION. Harrier shall have assigned to
Glycosyn, and Glycosyn shall have assumed, all of Harrier's assets,
liquidated liabilities and indebtedness (including all threatened claims by
American Diagnostica Inc. ("ADI")) and contractual obligations pursuant to
the form of Assumption and Indemnification Agreement previously submitted to
the Selling Stockholders in connection herewith.
6.12 RELEASE FROM HARRIER CREDITORS. Harrier shall have received
from its creditors documentation unconditionally and irrevocably releasing
Harrier from any further liability, claim or demand. In addition, Harrier
shall have received from each party to an executory contract with Harrier
(including ADI), documentation consenting to the assumption by Glycosyn and
releasing Harrier of any further obligation thereunder.
6.13 SALE OF GLYCOSYN. Harrier shall obtain all necessary
director and stockholder approval of, and shall carry out and effect, (i) the
acquisition by Glycosyn of a nineteen percent (19%) ownership interest in New
Concept Therapeutics, Inc., a North Carolina corporation ("NCT"), plus an
option to acquire at least up to fifty-one percent (51%) of the ownership of
NCT; and (ii) the sale of 2,850,000 shares of the common stock of Glycosyn
presently owned by Harrier to New Capital Investment Fund ("NCIF") in
cancellation of all indebtedness presently owed Harrier to NCIF, in each case
pursuant to documentation reasonably acceptable to COPE.
6.14 LEGAL OPINION. COPE and the Selling Stockholders shall have
received from Bruck & Perry, A Professional Corporation, counsel for Harrier,
a favorable opinion dated the Closing Date in form and substance reasonably
satisfactory to COPE and the Selling Stockholders and their counsel, to the
effect that:
(i) Harrier and Glycosyn are corporations duly incorporated,
validly existing and in good
<PAGE>
standing under the laws of the State of Delaware and Harrier and Glycosyn
have full corporate power and corporate authority to own or lease its
properties and carry on its business as now conducted and is duly qualified
to do business and is in good standing in each jurisdiction where failure to
so qualify would have a material adverse effect on the corporation. Harrier
and Glycosyn have the corporate power and corporate authority to consummate
the transactions as provided herein;
(ii) the authorized capital stock of Harrier consists of
30,000,000 shares of Harrier Common Stock and 5,000,000 shares of Harrier
Preferred Stock, of which 15,697,923 shares of Harrier Common Stock and no
shares of Harrier Preferred Stock are issued and outstanding. To such
counsel's knowledge, no options, warrants, convertible securities, rights of
first refusal or other rights to obtain shares of the capital stock of
Harrier, whether on conversion of other securities or otherwise, have been
granted by Harrier, other than as set forth in the Harrier Disclosure
Schedule; no holder of shares of Harrier's Common Stock has any preemptive
rights with respect to any such shares or any securities convertible into
such shares from Harrier. All of the issued and outstanding shares of
Harrier's Common Stock on the Closing Date are validly issued, fully paid and
non-assessable; and there are no other corporations or other entities in
which Harrier owns, directly or indirectly, any equity interest, except
Glycosyn, DermaRay and NCT.
(iii) the Harrier Shares to be issued to the Selling
Stockholders at the Closing will be, when delivered to the Selling
Stockholders or their representatives, validly issued, fully paid and
non-assessable shares of Harrier's Common Stock free and clear of all
pledges, security interests, mortgages, liens, claims, charges, restrictions
or encumbrances, except for restrictions under applicable U.S. federal or
state securities laws, and, assuming the truth and accuracy of the Selling
Stockholders' representations and warranties set forth in Section 2 and the
Subscription Agreements, the Harrier Shares are exempt from the registration
requirements of the Securities Act; and
(iv) this Agreement and the transactions contemplated herein
have been duly approved by the Boards of Directors and by the stockholders of
Harrier and Glycosyn at meetings duly held in compliance with the Delaware
Law and in compliance with the Exchange Act and the applicable regulations
thereunder and this Agreement has been duly and validly executed and
delivered by Harrier; and the consummation of the transactions contemplated
herein in accordance with the terms of this Agreement is a valid and binding
obligation of Harrier, subject to the qualification and limitation that the
procedural and remedial rights of the other parties to this Agreement may be
limited or rendered unenforceable by (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws, (ii) legal or equitable
principles now or hereafter in effect relating to or affecting the
enforcement of rights or remedies generally, or (iii) the availability of
equitable remedies.
The opinions set forth above may be expressly made subject to the
qualifications and limitations that are contained in the Third-Party Legal
Opinion Report (including the legal opinion accord) of the Section of
Business Law, American Bar Association approved August 11, 1991 (the
"Accord"). In giving such opinions, such counsel may rely, in accordance
with the Accord, as to matters of fact, upon certificates of officers of
Harrier and governmental agencies and Harrier's transfer agent and registrar,
and as to matters of laws, upon opinions of other counsel satisfactory to
them, and shall deliver copies thereof to COPE and the Selling Stockholders
prior to the Closing Date. Such opinion may state that such counsel's
opinion is furnished, as counsel to Harrier, to COPE and the Selling
Stockholders and is solely for their benefit.
7. CONDITIONS TO THE OBLIGATIONS OF HARRIER. The obligations of
Harrier hereunder are subject to the fulfillment on or before the Closing, of
the following conditions (any of which may be waived in writing by Harrier):
7.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Selling Stockholders contained herein shall have been true
and correct in all material respects when made and shall be true and correct
in all material respects as of the Closing.
7.2 PERFORMANCE OF COVENANTS. The Majority Stockholders shall
have performed and complied in all material respects with all covenants,
agreements, terms and conditions and executed all documents required by this
Agreement to be performed, complied with or executed by them prior to or at
the Closing. Each stockholder other than the Selling Stockholders shall have
executed a Subscription Agreement.
7.3 INSTRUMENTS OF TRANSFER. The Selling Stockholders shall have
delivered to Harrier instruments
<PAGE>
of transfer for the COPE Shares in form and substance reasonably satisfactory
to Harrier and its counsel as shall be necessary to effectively transfer all
of the Selling Stockholders' right, title and interest in the COPE Shares to
Harrier.
7.4 NO GOVERNMENTAL OR OTHER PROCEEDING OR LITIGATION. No order
of any court or administrative agency shall be in effect which restrains or
prohibits the transactions contemplated hereby, and no suit, action,
investigation, inquiry or proceeding by any governmental body or other person
or legal or administrative proceeding shall have been instituted or
threatened which questions the validity or legality of the transactions
contemplated hereby.
7.5 APPROVALS AND CONSENTS. All permits, consents or approvals of
applications to public authorities, federal, state or local, and all
approvals of any third persons, including without limitation all approvals or
consents under applicable federal or state securities laws, the granting of
which are necessary for the consummation of the transactions contemplated
hereby shall have been obtained.
7.6 HARRIER STOCKHOLDER APPROVAL. The holders of the outstanding
shares of the Harrier Common Stock shall have approved, in accordance with
Delaware General Corporation Law, (i) Harrier's issuance of Harrier Shares in
exchange for the COPE Shares, (ii) the Reverse Split; (iii) the Amendment to
Harrier's Certificate of Incorporation; (iv) the election of the COPE
nominees to Harrier's board of directors; and (v) Harrier's sale of Glycosyn
common shares in accordance with Section 6.13.
7.7 RECAPITALIZATION AND CHARTER AMENDMENTS. Harrier will obtain
director and stockholder approval of: (a) this Agreement and the transactions
contemplated hereby; (b) the Reverse Split; (c) the change in the corporate
name of Harrier to "COPE, Inc." or such other mutually agreeable name as may
be available for use in the State of Delaware; (d) such amendments to the
bylaws and certificate of incorporation of Harrier as may be reasonably
requested by COPE; and (e) the election of a new board of directors of
Harrier, including Stephan Isenschmid, Adrian Knapp, Peter Koch, Markus
Stalder and Kevin DeVito, effective upon and subject to the Closing.
7.8 ASSIGNMENT AND ASSUMPTION. Harrier shall have assigned to
Glycosyn, and Glycosyn shall have assumed, all of Harrier's assets,
liquidated liabilities and indebtedness (including all threatened claims by
American Diagnostica Inc. ("ADI")) and contractual obligations pursuant to
the form of Assumption and Indemnification Agreement previously submitted to
the Selling Stockholders in connection herewith.
7.9 RELEASE FROM HARRIER CREDITORS. Harrier shall have received
from its creditors documentation unconditionally and irrevocably releasing
Harrier from any further liability, claim or demand. In addition, Harrier
shall have received from each party to an executory contract with Harrier
(including ADI), documentation consenting to the assumption by Glycosyn and
releasing Harrier of any further obligation thereunder.
7.10 SALE OF GLYCOSYN. Harrier shall obtain all necessary director
and stockholder approval of, and shall carry out and effect, (i) the
acquisition of a nineteen percent (19%) ownership interest in New Concept
Therapeutics, Inc., a North Carolina corporation ("NCT"), plus an option to
acquire at least up to fifty-one percent (51%) of the ownership of NCT; and
(ii) the sale of 2,850,000 shares of the common stock of Glycosyn presently
owned by Harrier to New Capital Investment Fund ("NCIF") in cancellation of
all indebtedness presently owed Harrier to NCIF.
7.11 LEGAL OPINION. Harrier shall have received from counsel for
COPE and the Selling Stockholders, a favorable opinion dated the Closing Date
in form and substance reasonably satisfactory to Harrier and its counsel, to
that effect that:
(i) COPE and each of the COPE Subsidiaries are corporations
duly incorporated, validly existing and in good standing under the laws of
the country of their organization, and COPE and each of the COPE Subsidiaries
have full corporate power and corporate authority to own or lease their
properties and carry on their business as now conducted and is duly qualified
to do business and is in good standing in each jurisdiction where failure to
so qualify would have a material adverse effect on the corporation. COPE and
the Selling Stockholders each have the corporate or individual power and
authority to consummate the transactions as provided herein;
<PAGE>
(ii) the authorized capital stock of COPE consists of SFr
106,000 shares of COPE Capital Stock, of which 1,060 shares are issued and
outstanding. To such counsel's knowledge, no options, warrants, convertible
securities, rights of first refusal or other rights to obtain shares of the
capital stock of COPE or any COPE Subsidiary, whether on conversion of other
securities or otherwise, have been granted by COPE or any COPE Subsidiary,
other than as set forth in the COPE Disclosure Schedules; no holder of shares
of COPE Capital Stock has any preemptive rights with respect to any such
shares or any securities convertible into such shares from COPE; all of the
issued and outstanding shares of COPE Capital Stock on the Closing Date are
validly issued, fully paid and non-assessable; and there are no other
corporations or other entities in which COPE owns, directly or indirectly,
any equity interest, except for COPE GmbH, Ltd., COPE Handelsgmbh and Xpert,
Inc.;
(iii) the COPE Shares to be transferred and assigned by the
Selling Stockholders to Harrier at the Closing will be, when delivered to
Harrier, validly issued, fully paid and non-assessable shares of COPE Common
Stock, and each Selling Stockholder has and will transfer to Harrier good and
marketable title to the COPE Shares which it owns as set forth on the
Stockholders List, free and clear of all pledges, security interests,
mortgages, liens, claims, charges, restrictions or encumbrances, except for
restrictions under applicable U.S. federal or state securities laws; and
(iv) this Agreement and the transactions contemplated herein
have been duly approved by the Selling Shareholders and managers and
directors and stockholders of COPE in compliance with the Swiss Law, and this
Agreement has been duly and validly executed and delivered by COPE and each
Selling Stockholder; and the consummation of the transactions contemplated
herein in accordance with the terms of this Agreement are the valid and
binding obligation of COPE and each Selling Stockholder, subject to the
qualification and limitation that the procedural and remedial rights of the
other parties to this Agreement may be limited or rendered unenforceable by
(i) bankruptcy, insolvency, reorganization, moratorium or other similar laws,
(ii) legal or equitable principles now or hereafter in effect relating to or
affecting the enforcement of rights or remedies generally, or (iii) the
availability of equitable remedies.
The opinions set forth above may be expressly made subject to the
qualifications and limitations that are contained in the Third-Party Legal
Opinion Report (including the legal opinion accord) of the Section of
Business Law, American Bar Association approved August 11, 1991 (the
"Accord"). In giving such opinions, such counsel may rely, in accordance
with the Accord, as to matters of fact, upon certificates of directors and
managers of COPE and governmental agencies, and as to matters of laws, upon
opinions of other counsel satisfactory to them, and shall deliver copies
thereof to Harrier prior to the Closing Date. Such opinion may state that
such counsel's opinion is furnished, as counsel to COPE and the Selling
Stockholders, to Harrier and is solely for the benefit of Harrier.
8. MISCELLANEOUS.
8.1 CUMULATIVE REMEDIES. Any Person having any rights under any
provision of this Agreement will be entitled to enforce such rights
specifically, to recover damages by reason of any breach of any provision of
this Agreement, and to exercise all other rights granted by law, which rights
may be exercised cumulative and not alternatively.
8.2 SUCCESSORS AND ASSIGNS. The rights and obligations of the
parties under this Agreement shall not be assignable without the written
consent of COPE and Harrier and any such purported assignment without their
written consent shall be void ab initio. Except as otherwise expressly
provided herein, all covenants and agreements contained in this Agreement by
or on behalf of any of the parties hereto will bind and inure to the benefit
of the respective successors and assigns of the parties hereto whether so
expressed or not.
8.3 SEVERABILITY. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement is held to be
prohibited by or invalid under applicable law, such provision will be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of this Agreement or the other documents.
8.4 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, any one of which need not contain the signatures of more than
one party, but all such counterparts when taken together will constitute one
and the same agreement.
<PAGE>
8.5 NOTICES. Any approvals, consents or notices required or
permitted to be sent or given shall be delivered in writing personally or
mailed, certified mail, return receipt requested, to the following addresses
and shall be deemed to have been received within five days after such mailing:
If to COPE: COPE AG
Grundstrasse 14
CH-6343 Rotkreuz
Switzerland
Attn: Adrian Knapp, Chairman
With a copy to: Dechert, Price & Rhoads
30 Rockefeller Plaza
New York, New York 10112
Attn: Fredric J. Klink, Esq.
If to the Majority Stockholders: The Majority Stockholders
Address set forth on Exhibit A
with a copy to: Dechert, Price & Rhoads
30 Rockefeller Plaza
New York, New York 10112
Attn: Fredric Klink, Esq.
If to Harrier: Harrier, Inc.
2200 Pacific Coast Highway, Suite 301
Hermosa Beach, California 90254
Attn: Kevin DeVito, President
with a copy to: Oppenheimer Wolff & Donnelly LLP
500 Newport Center Drive, Suite 700
Newport Beach, California 92660
Attn: Daniel K. Donahue, Esq.
8.6 GOVERNING LAW; ARBITRATION. The validity, meaning and effect
of this Agreement shall be determined in accordance with the laws of the
State of California, U.S.A. applicable to contracts made and to be performed
in that state, without regard to its conflicts of laws rules; provided
however that the Federal Arbitration Act of the United States shall govern
issues as to arbitrability. If a dispute arises in connection with or
relating to this Agreement and the parties are unable to resolve it within
forty-five (45) days through direct negotiations, the dispute shall be
referred to final and binding arbitration to be held in Los Angeles,
California, U.S.A. in accordance with the rules of the American Arbitration
Association for International Arbitration (as they may be amended from time
to time). The award of the arbitrator(s) shall be final and binding upon the
parties hereto and may be enforced by any court of competent jurisdiction
pursuant to the Convention on the Recognition and Enforcement of Foreign
Arbitral Awards, by which all parties agree to be bound.
8.7 SCHEDULES AND EXHIBITS. All schedules and exhibits are an
integral part of this Agreement.
8.8 LITIGATION COSTS. If any legal action or any arbitration or
other proceeding is brought for the enforcement of this Agreement, or because
of an alleged dispute, breach, default, or misrepresentation in connection
with any of the provisions thereof, the successful or prevailing party or
parties shall be entitled to recover reasonable attorneys' fees and other
costs incurred in that action or proceeding, in addition to any other relief
to which it or they may be entitled.
8.9 ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement and understanding of the parties with respect to the subject matter
thereof, and supersedes all prior and contemporaneous agreements and
understandings.
<PAGE>
IN WITNESS WHEREOF, each of the parties to this Agreement has executed
Or caused this Agreement to be executed as of the date first above written.
"HARRIER"
Harrier, Inc.
a Delaware corporation
By: /S/ KEVIN DEVITO
------------------------------------------
Kevin DeVito, President
"COPE"
COPE AG,
a Swiss corporation
By: /S/ ADRIAN KNAPP
------------------------------------------
Adrian Knapp, Chairman
"MAJORITY SHAREHOLDERS"
/S/ STEPHAN ISENSCHMID
------------------------------------------
Stephan Isenschmid
/S/ ADRIAN KNAPP
------------------------------------------
Adrian Knapp
<PAGE>
EXHIBIT A
LIST OF Selling StockholderS
<TABLE>
<CAPTION>
Number of Shares
of COPE Capital
Name and Address of Stock Owned by
Selling Stockholder Selling Stockholder
- --------------------------------------- ---------------------
<S> <C>
Stephan Isenschmid 480
Buchenweg 5
CH-6034 Inwil
SWITZERLAND
Adrian Knapp 480
Oberseeburg 45
6006 Luzern
SWITZERLAND
Ketts & Co. 20
4th Floor, 50 Hans Crescent
Knightsbridge, London
SW1 0NB, U.K.
Dr. Rudolf Fueter 10
Pilatusstrasse 141
6003 Luzern
SWITZERLAND
Gabriele Koch 10
Strahlerweg 123
76227 Karlsruhe
GERMANY
Bernd Rombach 10
Strahlerweg 16
76227 Karlsruhe
GERMANY
Maria Fischer 5
Bireggstr. 16
6003 Luzern
SWITZERLAND
Marco Scharer 5
Schoenbuehlstrand 19
6005 Luzern
SWITZERLAND
Verena Tritscheller 5
c/o Credit Suisse PB, Pde32
6002 Luzern
SWITZERLAND
Markus Vogel 4
Bergstrasse 21
6052 Hergiswil
SWITZERLAND
Hedwig Maters 3
c/o Alex Kolb
Alte Landstr. 124
8801 Thalwil
SWITZERLAND
<PAGE>
Number of Shares
of COPE Capital
Name and Address of Stock Owned by
Selling Stockholder Selling Stockholder
- --------------------------------------- ---------------------
<S> <C>
Paul Wasescha 3
Stegenhalde 11
6048 Horw
SWITZERLAND
Finn Cederstroem 2
c/o Prime Invest
Usserhus 4
6023 Rothenburg
SWITZERLAND
Franz Knapp 2
Gartenheimstr. 5
6006 Luzern
SWITZERLAND
Peter Naf 2
c/o Prime Invest
Usserhus 4
6023 Rothenberg
Markus Zemp 2
Hofmatt
6142 Gettnau
SWITZERLAND
Hans Bitzi 1
c/o Credit Suisse PB, Pde32
6002 Luzern
SWITZERLAND
Reto Levy 1
St. Wendelin 8
6343 Holhausem
SWITZERLAND
Stefan Christen 1
Renggstrasse 29
6052 Hergiswil
SWITZERLAND
Klaus Eberle 1
Wieslocherstr. 4
69234 Dielheim
GERMANY
Hans Gerig 1
Zeughausgasse 20
6300 Zug
SWITZERLAND
August Harmeling 1
c/o Prime Invest
Usserhus 4
6023 Rothenburg
SWITZERLAND
Rene Heini 1
<PAGE>
Number of Shares
of COPE Capital
Name and Address of Stock Owned by
Selling Stockholder Selling Stockholder
- --------------------------------------- ---------------------
<S> <C>
c/o Prime Invest
usserhus 4
6023 Rothenburg
SWITZERLAND
Karl-Ludwig Heldmann 1
c/o Credit Suisses PB, Pde32
6002 Luzern
SWITZERLAND
Bernadette Meier 1
Postfach 47
6032 Emmen
SWITZERLAND
Peter Muff 1
Schoenruetirain 5
6045 Meggen
SWITZERLAND
Alexander Schar 1
c/o Prime Invest
Usserhus 4
6023 Rothenburg
SWITZERLAND
Josy Schar 1
c/o Prime Invest
Usserhus 4
6023 Rothenburg
SWITZERLAND
Thomas Schar 1
c/o Prime Invest
Usserhus 4
6023 Rothenburg
SWITZERLAND
Ralph Schmid 1
Rueggisingerstrasse 141
6032 Emmen
SWITZERLAND
Eugen Stocker 1
Talstrasse 8
6403 Kuessnacht
SWITZERLAND
Translex AG 1
Sihlbruggstr. 105
6340 Baar
SWITZERLAND
Esther Vogel-Felber 1
Bergstrasse 21
6052 Hergiswil
SWITZERLAND
</TABLE>
<PAGE>
SCHEDULE 1
COPE DISCLOSURE SCHEDULE
------------------------
Section 2.2. Options, Warrants, Subscription Calls
-------------------------------------
None.
Section 2.3. Selling Stockholders Who Are U.S. Persons
----------------------------------------
None
Section 3.5 Undisclosed Liabilities
None
Section 3.6 Material Adverse Changes
None
Section 3.7 Contracts and Agreements involving more than $50,000
Customers:
Ringier AG Zofingen
Liechtensteinische Landesbank
Vendors:
IBM Zurich
ADIC Paris
Others:
CS Credit Suisse Lucern, Sfr. 1 Million Credit Contract
dated 9/3/96 BAWAG Wien, ATS 1 Million Credit Contract
renewed 9/9/97 Office Lease Rotkreuz, New Contract dated
9/9/97, $110,000 Take over Office Interior Rotkreuz,
Contract dated 9/9/97, $150,000.
Section 3.8 Court Orders, Proceedings
None
Section 3.10 Employment Agreements
Consulting Agreements:
Section 3.11 Insurance Policy
Life Insurance Stephan Isenschmid 5/95 Termination Date $350,000
Adrian Knapp 5/96 Termination Date $350,000
Wolfgang Schallhorn 2/97 Termination Date $150,000
Liability Insurance Effective date 6/97, Termination date 6/2002 $3,500,000
Transport Insurance Effective date 2/97, Termination date 2/2002 $650,000
Fire/
<PAGE>
Water Insurance Effective date 1/95, Termination date 1/2000 $650,000
Section 3.12 Trademarks and Patents
Trademark COPE, Organization Mondial de la Propriete Intellectuelle
International Registry No. 658047, covering Germany, Austria, Benelux, France,
Italy, Scandinavia
Section 3.16 Permits or Operating Rights not Obtained
None.
<PAGE>
SCHEDULE 2
HARRIER DISCLOSURE SCHEDULE
SECTION 4.2
Set forth below are the outstanding warrants and options to purchase
Harrier Common Stock responsive to Section 4.2:
<TABLE>
<CAPTION>
Number of Underlying
Name of Holder Shares Exercise Price
(Pre-Split) (Pre-Split) Expiration Date
- ----------------------- -------------------- -------------- -----------------
<S> <C> <C> <C>
O. Walter 30,000 $0.50 January 10, 1998
H. Maissen 50,000 $0.70 November 20, 1997
R. Stussi 100,000 $0.30 March 19, 1998
Hochstrasser 100,000 $0.30 March 19, 1998
Guignet 10,000 $0.22 March 10, 1998
DeVito 150,000 $0.50 May 22, 1998
Hollister 75,000 $0.50 May 22, 1998
Kehrli 75,000 $0.50 May 22, 1998
Beaver 75,000 $0.50 May 22, 1998
Bartik, Cordeiro & Assoc. 75,000 $0.50 May 22, 1998
Hans Maissen 1,000,000 $0.13 April 1, 2000
Daniel Huber 700,000 $0.13 April 23, 2000
Cornelia Cuniberti 100,000 $0.13 April 23, 1999
Annabella Schalchli A.S. 100,000 $0.13 April 23, 2000
Neil Gibbons 100,000 $0.13 April 23, 2000
Daniel Huber 200,000 $0.13 September 2, 2000
Neil Gibbons 500,000 $0.13 September 2, 1999
</TABLE>
SECTION 4.7
Set forth below are the contracts and agreements of Harrier and Glycosyn
responsive to Section 4.7:
Research and Development Agreement dated May 1, 1993 between American
Diagnostica, Inc. and Harrier, Inc.
DermaRay International, L.L.C. Limited Liability Company Agreement dated
November 29, 1994 between Harrier, Inc. and Naturade, Inc.
Asset Transfer Agreement and Plan of Liquidation and Dissolution dated
June 30, 1997 by and among Harrier, Inc., Naturade, Inc. and DermaRay
International, L.L.C.
Technology Transfer Agreement dated January 31, 1996 between Harrier, Inc.
and Glycosyn Pharmaceuticals, Inc.
Letter Agreement dated September 30, 1997 between Glycosyn Pharmaceuticals,
Inc., New Concept Therapeutics, Inc., Gerald Head and David Spielvogel.
<PAGE>
APPENDIX B
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
HARRIER, INC.
Harrier, Inc., a corporation duly organized and existing under the General
Corporation Law of the State of Delaware (the "Corporation"), does hereby
certify that:
I. The amendment to the Corporation's Certificate of Incorporation set
forth below was duly adopted in accordance with the provisions of Section 242
and has been consented to in writing by the directors pursuant to a Unanimous
Written Consent of the Directors effective as January 5, 1998 and by the
stockholders of the Corporation at an annual meeting held on August __, 1998, in
accordance with Section 228 of the General Corporation Law of the State of
Delaware.
II. ARTICLE I of the Corporation's Certificate of Incorporation is amended
to read in its entirety as follows:
"ARTICLE I
Name of Corporation
The name of this corporation is COPE, Inc."
IN WITNESS WHEREOF, the undersigned hereby duly executes this Certificate
of Amendment hereby declaring and certifying under penalty of perjury that this
is the act and deed of the Corporation and the facts herein stated are true,
this __ day of August 1998.
HARRIER, INC.
By:
---------------------------------------
Kevin DeVito, Chief Executive Officer
<PAGE>
HARRIER, INC.
2200 Pacific Coast Highway, Suite 301
Hermosa Beach, California 90254
(310) 376-7721
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of Harrier, Inc. (the "Company") hereby
constitutes and appoints Candace Beaver and Tycanne Ryan, each with power of
substitution, as attorneys and proxies, to appear, attend and vote all of the
shares of the common stock of the Company standing in the name of the
undersigned at the Annual Meeting of Stockholders of the Company to be held
at the offices of the Company, 2200 Pacific Coast Highway, Suite 301, Hermosa
Beach, California 90254 on September 11, 1998, at 10:00 a.m., local time, and
at any adjournment or adjournments thereof, upon the following:
1. To approve and adopt the Stock Purchase Agreement and Plan of
Reorganization ("Reorganization Agreement") by and among the Company, COPE AG,
a Swiss corporation ("COPE"), and the shareholders of COPE ("COPE Shareholders")
(the "Reorganization Proposal").
/ / FOR / / AGAINST / / ABSTAIN
2. If the Reorganization Proposal is approved, to approve and adopt the
Agreement ("Glycosyn Agreement") between the Company, Glycosyn Pharmaceuticals,
Inc., a Delaware corporation ("Glycosyn"), and the New Capital Investment Fund,
a Cayman Islands investment fund ("NCIF") (the "Glycosyn Proposal").
/ / FOR / / AGAINST / / ABSTAIN
3. If the Reorganization Proposal and Glycosyn Proposal are approved, to
approve and adopt the Amendment to the Certificate of Incorporation of the
Company to: (i) change the name of the Company to "COPE, Inc."; and (ii) reverse
split the outstanding shares of Common Stock of the Company on a one for 58
basis (the "Amendment Proposal").
/ / FOR / / AGAINST / / ABSTAIN
4. If the Reorganization Proposal, Glycosyn Proposal and Amendment
Proposal are approved, to elect five directors as follows: Adrian Knapp,
Stephen Isenschmid, Peter Koch, Markus Stalder and Kevin DeVito (the "COPE
Director Proposal").
/ / FOR all nominees listed above / / WITHHOLD AUTHORITY to vote for
all nominees listed below
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below.)
- --------------------------------------------------------------------------------
5. To elect Atag Ernst & Young as the Company's independent auditors for
the fiscal year ending December 31, 1998.
/ / FOR / / AGAINST / / ABSTAIN
6. If either of the Reorganization Proposal, Glycosyn Proposal or
Amendment Proposal is not approved, to elect as directors Jurg Kehrli, Kevin
DeVito and William Cordeiro (the "Harrier Director Proposal").
/ / FOR all nominees listed above / / WITHHOLD AUTHORITY to vote for
all nominees listed below
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below.)
- --------------------------------------------------------------------------------
7. To vote with discretionary authority on such other business as may
properly come before the meeting.
/ / FOR / / AGAINST / / ABSTAIN
The Reorganization Proposal (Proposal No. 1), the Glycosyn Proposal
(Proposal No. 2), the Amendment Proposal (Proposal No. 3) and the COPE
Director Proposal (Proposal No. 4) are not independent. The Reorganization
Agreement cannot be effected unless the Glycosyn Proposal, the Amendment
Proposal and the COPE Director Proposal are also approved. If the
Reorganization Proposal is rejected, the Glycosyn Proposal, the Amendment
Proposal and the COPE Director Proposal will not be voted on. If the
Reorganization Proposal, the Glycosyn Proposal, the Amendment Proposal and
the COPE Director Proposal are approved and the transactions under the
Reorganization Agreement ("Reorganization") are consummated, the Company will
continue with the management of COPE. If either the Reorganization Proposal,
the Glycosyn Proposal, the Amendment Proposal or the COPE Director Proposal
is rejected, the Company will continue its current operations with the
directors elected pursuant to the Harrier Director Proposal ("Proposal No.
6") and its current officers.
<PAGE>
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED BY THE
UNDERSIGNED. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE
PROPOSALS INDICATED AND IN ACCORDANCE WITH THE DISCRETION OF THE PROXY HOLDERS
ON ANY OTHER BUSINESS.
Dated: ___________, 1998 -----------------------------------
Signature
-----------------------------------
Signature (if jointly held)
-----------------------------------
Print Name
Please mark, date and sign your name EXACTLY
AS IT APPEARS ON THE ENVELOPE and return this
Proxy as promptly as possible in the
postage-paid envelope provided.
PLEASE CHECK IF YOU ARE PLANNING TO ATTEND THE MEETING / /
