<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for use of the Commission only (as permitted by Rule
14a-b(e)(2)
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Harrier, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[X] 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:
$.001 par value common stock of Harrier, Inc.
----------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
128,790,000 shares (pre-split)
----------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:(1)
$.013 per share (pre-split), representing the average of the bid and
asked price on Jan. 30, 1998
----------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------------------
5) Total fee paid:
$4,121.28
----------------------------------------------------------------------
[ ] 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:
-----------------------------------------------
2) Form, Schedule or Registration Statement No.:
-----------------------------------------------
3) Filing Party:
-----------------------------------------------
4) Dated Filed:
-----------------------------------------------
- --------------
(1) Set forth the amount on which the filing fee is calculated and state how
it was determined.
<PAGE>
PRELIMINARY COPIES
HARRIER, INC.
2200 PACIFIC COAST HIGHWAY, SUITE 301
HERMOSA BEACH, CALIFORNIA 90254
(310) 376-7721
-------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MARCH 12, 1998
-------------
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 March 12,
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").
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
($595,167 as of December 31, 1997); 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 45
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,
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 January 14,
1998, as the record date for determination of stockholders entitled to notice
of, and to vote at, the Annual Meeting. Only
<PAGE>
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 at
any time before it has been voted at the Annual Meeting.
By Order of the Board of Directors,
Candace Beaver
SECRETARY
February ___, 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
-------------
ANNUAL MEETING OF STOCKHOLDERS OF
HARRIER, INC. TO BE HELD ON MARCH 12, 1998
-------------
PROXY STATEMENT
This Proxy Statement is being furnished to 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 March 12, 1998, and any postponements
or adjournments thereof (the "Annual Meeting"). 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 45 basis; and
(iv) the election of a board of five directors nominated by the COPE
shareholders. A copy of the Reorganization Agreement is attached to this Proxy
Statement as Appendix A. 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 VOTE FOR THE
REORGANIZATION PROPOSAL, FOR THE GLYCOSYN PROPOSAL THE AMENDMENT PROPOSAL AND
FOR THE COPE DIRECTOR NOMINEES.
-------------
This Proxy Statement is dated and was first mailed to the Company's
stockholders on or about February __, 1998.
<PAGE>
TABLE OF CONTENTS
PROXY STATEMENT
-------------
SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA . . . . . . . . . . . 5
GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SHARES OUTSTANDING AND VOTING RIGHTS . . . . . . . . . . . . . . . . . 7
SPECIAL CONSIDERATIONS RELATING TO THE REORGANIZATION . . . . . . . . . 8
PROPOSAL NO. 1: REORGANIZATION PROPOSAL . . . . . . . . . . . . . . . . 10
PROPOSAL NO. 2: GLYCOSYN PROPOSAL . . . . . . . . . . . . . . . . . . . 13
PROPOSAL NO. 3: AMENDMENT PROPOSAL . . . . . . . . . . . . . . . . . . 16
PROPOSAL NO. 4: COPE DIRECTOR PROPOSAL . . . . . . . . . . . . . . . . 18
PROPOSAL NO. 5: COPE INDEPENDENT AUDITOR PROPOSAL . . . . . . . . . . . 18
PROPOSAL NO. 6: HARRIER DIRECTOR PROPOSAL . . . . . . . . . . . . . . 19
OTHER MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
DESCRIPTION OF SECURITIES . . . . . . . . . . . . . . . . . . . . . . . 19
BUSINESS OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . 20
MANAGEMENT OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . 21
HARRIER MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS. . . 23
PRINCIPAL STOCKHOLDERS OF THE COMPANY . . . . . . . . . . . . . . . . . 23
BUSINESS OF COPE . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
COPE MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION . . . . . . . . . . . . 33
MANAGEMENT OF THE COMPANY FOLLOWING THE REORGANIZATION . . . . . . . . 36
CERTAIN INFORMATION CONCERNING CAPITAL STOCK OF
THE COMPANY AND COPE . . . . . . . . . . . . . . . . . . . . . . . . 37
ANNUAL REPORT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
STOCKHOLDER PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . . . 38
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE . . . . . . . . . . . . 38
INDEX TO FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . 39
APPENDICES
- ----------
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. This summary does not purport to be a complete
statement of all the material features of the Reorganization Agreement and
related matters and 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 and in the information and documents incorporated by
reference herein. Capitalized terms used but not defined in this summary have
the meanings ascribed to them elsewhere in this Proxy Statement.
THE MATTERS TO BE CONSIDERED AT THE ANNUAL MEETING ARE OF GREAT IMPORTANCE
TO THE STOCKHOLDERS OF THE COMPANY BECAUSE, IF THE REORGANIZATION AGREEMENT IS
APPROVED AND ADOPTED AND THE PROPOSED REORGANIZATION IS CONSUMMATED, THE
STOCKHOLDERS' EQUITY INVESTMENT IN THE COMPANY WILL BECOME AN EQUITY INVESTMENT
IN COPE. ACCORDINGLY, STOCKHOLDERS ARE URGED TO READ AND CAREFULLY CONSIDER THE
INFORMATION SUMMARIZED BELOW AND PRESENTED ELSEWHERE IN THIS PROXY STATEMENT.
Date, Time and Place of the Annual
Meeting........................... March 12, 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
($595,167 as of December 31, 1997), 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
"Special Consideration 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
-1-
<PAGE>
Stock on a one for 45 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, 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 January 14, 1998
(the "Record Date") are entitled to
notice of and to vote at the Annual
Meeting. On the Record Date there were
15,517,923 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 January 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
5.6% 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 344,843 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
3,206,843 shares of Harrier Common Stock
outstanding. See "Proposal No. 1:
Reorganization Proposal - The
Reorganization Agreement"
and "-Conditions to the Reorganization."
-2-
<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 95% 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. The
company'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. The
company 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.
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) so that no gain or loss
will be recognized by the Company's
stockholders as a result of the
Reorganization. See "Proposal No. 1:
Reorganization Proposal -- Federal
Income Tax Consequences of
Reorganization."
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
-3-
<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."
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 January 30,
1998 was $.13 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 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>
Three Months Ended
Year Ended June 30, September 30, 1997
--------------------------- ------------------
1996 1997
------------- ------------
<S> <C> <C> <C>
HARRIER HISTORICAL
Revenue................... $ 66,687 $ 48,069 $ --
Net loss.................. (1,325,556) (686,236) (102,900)
Total assets.............. 748,987 325,482 207,360
Stockholders' equity
(deficit)............... (371,104) (961,790) (1,045,191)
<CAPTION>
Nine Months Ended
Year Ended December 31, September 30, 1997
--------------------------- ------------------
1995 1996
------------- ------------
<S> <C> <C> <C>
COPE HISTORICAL
Revenue.................. $ 11,020,356 $ 12,515,123 $ 12,591,365
Net income............... 88,202 315,823 185,929
Total assets............. 3,352,233 3,970,289 7,212,045
Stockholders' equity..... 858,277 1,005,028 1,809,843
<CAPTION>
Three Months Ended
Year Ended June 30, 1997 September 30, 1997
--------------------------- ------------------
<S> <C> <C>
PRO FORMA COMBINED
HARRIER AND COPE
Revenue.................. $ 15,227,998 $ 4,746,691
Net income............... 160,710 38,941
Total assets............. (1) 7,414,504
Stockholders' equity..... (1) 1,809,841
</TABLE>
- ---------------
(1) Not provided.
-5-
<PAGE>
GENERAL INFORMATION
This Proxy Statement and the accompanying notice and form of proxy are
being sent to stockholders of the Company on or about February __, 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
March 12, 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 ($595,167 as of December 31,
1997); 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 45 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 January 14, 1998
-6-
<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 15,517,923 issued and outstanding
shares of Harrier Common stock entitled to vote at the Annual Meeting and
approximately 382 holders of record of Harrier Common Stock.
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.
-7-
<PAGE>
SPECIAL CONSIDERATIONS RELATING TO THE REORGANIZATION
PRIOR TO VOTING ON THE REORGANIZATION PROPOSAL, STOCKHOLDERS OF THE COMPANY
SHOULD CAREFULLY EXAMINE THIS ENTIRE PROXY STATEMENT 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. ACCORDINGLY, THE COMPANY'S
STOCKHOLDERS ARE URGED TO READ AND CAREFULLY CONSIDER THE FOLLOWING INVESTMENT
CONSIDERATIONS.
INTEREST OF MANAGEMENT
Certain officers and Directors of the Company and their associates may be
deemed to have an interest in the consummation of the Reorganization. As of
December 31, 1997, the Company was indebted to NCIF in the amount of $595,167.
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.
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.
COPE 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."
CONTROL BY FORMER COPE SHAREHOLDERS
Following the Reorganization, the current management of Harrier will be
replaced and the former management of COPE will continue essentially unchanged
as the management of the Company. 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.
The former shareholders of COPE will own approximately 89.2% of the
outstanding shares of Harrier Common Stock after consummation of the
Reorganization. Accordingly, the former shareholders of COPE will continue to
have the right to elect a majority of the Board of Directors and to control the
affairs of the Company and to approve or disapprove any matter submitted to a
vote of the stockholders.
-8-
<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, 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.
FEDERAL INCOME TAX CONSEQUENCES
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.
However, no ruling from the Internal Revenue Service has been requested that the
Reorganization will so qualify.
THE BOARD OF DIRECTORS OF HARRIER HAS APPROVED THE REORGANIZATION PROPOSAL,
THE GLYCOSYN PROPOSAL, THE AMENDMENT PROPOSAL, THE COPE DIRECTOR PROPOSAL AND
THE COPE INDEPENDENT AUDITOR PROPOSAL BY UNANIMOUS VOTE OF ALL DIRECTORS AND
RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE APPROVAL AND ADOPTION OF THE
REORGANIZATION PROPOSAL, THE GLYCOSYN PROPOSAL, THE AMENDMENT PROPOSAL, THE COPE
DIRECTOR PROPOSAL AND THE COPE INDEPENDENT AUDITOR PROPOSAL. PROXIES SOLICITED
BY THE BOARD OF DIRECTORS OF HARRIER WILL BE VOTED TO APPROVE THE REORGANIZATION
PROPOSAL, THE GLYCOSYN PROPOSAL, THE AMENDMENT PROPOSAL, THE COPE DIRECTOR
PROPOSAL AND THE COPE INDEPENDENT AUDITOR PROPOSAL UNLESS STOCKHOLDERS SPECIFY
IN THEIR PROXIES A CONTRARY CHOICE.
-9-
<PAGE>
PROPOSAL NO. 1: REORGANIZATION PROPOSAL
GENERAL
The Company, COPE and the COPE 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 3,202,398 shares of Harrier
Common Stock outstanding, approximately 89.2% 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 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. 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. 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 REORGANIZATION AGREEMENT
On October 30, 1997, the Company entered into a Securities Purchase
Agreement and Plan of Reorganization ("Reorganization Agreement") with COPE and
the COPE Shareholders. 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 45 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
89.2% 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 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 Company's stockholders shall have
adopted and approved the Reorganization Agreement, the Glycosyn
Recapitalization, the Amendment Proposal and the COPE Director Proposal; (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 foregoing does not purport to be a complete statement of the terms of
the Reorganization
-10-
<PAGE>
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 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; (ii) 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 45 reverse split; (iii)
the Company's sale of 2,850,000 shares of Glycosyn Common Stock to NCIF; (iv)
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; (v) the
absence of any material adverse change in the condition, financial or otherwise,
of the Company or COPE; (vi) the absence of material misrepresentations or
breaches of covenants; and (vii) 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 Shareholders and the Company; (ii) by the Company
in the event of the material breach by COPE or the COPE Shareholders of any
provision of the Reorganization Agreement; or (iii) by the COPE or the COPE
Shareholders in the event of the material breach by the Company of any provision
of the Reorganization Agreement.
INTEREST OF MANAGEMENT
Certain officers and Directors of the Company and their associates may be
deemed to 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 December 31, 1997, the Company was indebted to NCIF in the amount of
$595,167. 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 December 31, 1997, directors and officers of the
Company and their affiliates beneficially owned an aggregate of 853,582 shares
of Harrier Common Stock, representing approximately 5.6% 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.
-11-
<PAGE>
FEDERAL INCOME TAX CONSEQUENCES OF REORGANIZATION
The following discussion summarizes the material federal income tax
consequences of the Reorganization 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, therefore, to consult with their own tax advisors with regard to the
potential tax consequences of the Reorganization in light of their individual
circumstances.
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 (the
"Code") and thus, no gain or loss will be recognized by the holders of Harrier
Common Stock or the COPE Shareholders as a result of the Reorganization.
However, no ruling from the Internal Revenue Service that the Reorganization
will so qualify has been requested and it is not a condition to the
Reorganization that an opinion of counsel be received to the effect that the
Reorganization will so qualify.
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 5.6% of the
outstanding Harrier Common Stock have indicated they intend to vote in favor of
the Reorganization Proposal.
-12-
<PAGE>
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.
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 $595,167 by Harrier, 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 ($595,167 as of December 31, 1997). NCIF is an investment fund in which
Harrier's Chairman of the Board, Jurg Kehrli, and President, Kevin DeVito, are
retained as managers.
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
-13-
<PAGE>
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, was
engaged by the Company in August 1997 to advise the Board of Directors of the
Company as to the fairness, from a financial point of view, of the proposed
Glycosyn Recapitalization. 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 arriving at its fairness determination and preparing its
opinions, BVPG performed certain quantitative financial analysis, including a
comparative financial and operating analysis of Glycosyn. In its written
opinion, BVPG states that it has concluded that a reasonable estimate of the
total fair market value of all of the issued and outstanding shares of Common
Stock of Glycosyn as of December 31, 1997 was $930,423. BVPG stated that this
value is determined by the income value method (a.k.a. the discounted cash flow
method), such method having been determined by BVPG to be the most applicable
method of valuing Glycosyn. In rendering its opinions, BVPG 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.
INTEREST OF 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 REORGANIZATION
The Company believes that the sale of the Glycosyn Common Stock to NCIF and
the transfer of its assets to Glycosyn and the assumption of all liabilities by
Glycosyn will not result in a material tax consequence to either the Company or
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.
-14-
<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 5.6% of the outstanding Harrier Common Stock have
indicated they intend to vote in favor of the Glycosyn Recapitalization
Proposal.
-15-
<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 45 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 45 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 344,843 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 45 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 45 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
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
-16-
<PAGE>
circumstances.
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" 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 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 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 5.6% of the outstanding
Harrier Common Stock have indicated that they intend to vote in favor of the
Amendment Proposal.
-17-
<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 5.6% 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 & 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 & Glassman. Representatives
of Raimondo, Pettit & Glassman 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 5.6% of the outstanding
Harrier Common Stock have indicated they intend to vote in favor of the COPE
Independent Auditor Proposal.
-18-
<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 January 30, 1998, 15,517,923 shares of Harrier Common Stock were issued
and outstanding and held of record by approximately 382 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.
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
3,206,843 shares of New Common Stock issued and outstanding, exclusive of any
options to purchase shares.
-19-
<PAGE>
TRANSFER AGENT
The Transfer Agent for the Harrier Common Stock is Interwest Transfer
Company, Salt Lake City, Utah.
-20-
<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 SINCE
- ---- --- -------- -----
<S> <C> <C> <C>
Jurg Kehrli 55 Chairman/Director February, 1987
William P. Cordeiro 53 Director June, 1994
Kevin DeVito 37 President/Director July, 1992
Candace Beaver 36 Secretary and June, 1991
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, Chairman, was formerly the President and a principal
shareholder of Kehrli Rontgen A.G. from which the Company originally acquired
the rights to a substantial number of its products. Mr. Kehrli is the son of
the founder of Kehrli Rontgen, A.G., a manufacturer of X-ray equipment which
he managed for 22 years prior to his affiliation with the Company. Mr. Kehrli
is currently an independent financial and management consultant for
European-based companies.
Dr. Cordeiro, Director, 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. He is an associate
professor in the Management Department of California State University's
School of Business and Economics in Los Angeles, co-founder of Bartik,
Cordeiro and Associates, Inc. and was previously Vice Chairman of the Veta
Grande Companies, Inc. and Planning Manager for ARCO.
Mr. DeVito, President and Director, is a former financial consultant,
having previously been employed in this function with Cigna Financial
Services, Inc. He graduated from the University of California, Los Angeles.
Mr. DeVito joined the Company in 1990 as marketing manager and was promoted
to President in July 1992. Mr. DeVito's initial project for the Company was
the attainment of the
-21-
<PAGE>
Company's initial medical-use approvals for the Bioptron Lamp.
Candace Beaver, Secretary and Chief Financial Officer, was formerly the
Controller of Addison Design Consultants, Inc., an international design and
corporate identity firm. She is a graduate of the University of California,
Berkeley. Mrs. Beaver has worked in both the public and private accounting
profession for the past 11 years.
Those required to make filings under Section 16(a) have done so to the
best of the Company's knowledge.
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 December 31, 1997, the Company was indebted to NCIF in the amount
of $595,167. In connection with the Glycosyn Recapitalization, the Company
proposes to issue 2,850,000 shares of Glycosyn Common Stock to NCIF in
consideration of NCIF's cancellation of all of the indebtedness. The
consummation of Harrier's sale of 2,850,000 shares of Glycosyn Common Stock
to NCIF is subject to the approval of the Company's shareholders and
Harrier's receipt of an opinion from an independent business appraiser that
the terms of the transaction are fair to the Company's shareholders.
EXECUTIVE COMPENSATION
The Summary Compensation Table below includes, for each of the fiscal
years ended June 30, 1997, 1996, and 1995 individual compensation for
services to the Company and its subsidiaries of the Chief Executive Officer
(the "Named Officer").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term Compensation
Annual Compensation Awards Payouts
----------------------------- ----------------------- ----------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Other
Name Annual Restricted All Other
and Compen- Stock LTIP Compen-
Principal sation Award(s) Options/ Payouts sation
Position Year Salary($) 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.
-22-
<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, and the Company Quarterly Report on Form
10-QSB for the quarter ended September 30, 1997 for disclosure concerning
Management's Discussion and Analysis or Plan of Operations of the Company,
such information being incorporated by this reference into this Proxy
Statement.
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.
-23-
<PAGE>
BUSINESS OF COPE
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, 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. The
company 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 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. The Company 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. The company
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 the company's operations in Austria
are carried out by its wholly-owned subsidiary, COPE Handelsges.m.b.h. All
references in this section to COPE or "the company" include COPE AG, a Swiss
corporation and its subsidiaries. The company's executive offices are
located at Grundstrasse 14, 6343 Rotkreuz, Switzerland. The company'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
-24-
<PAGE>
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.
The Company believes that the factors noted above will greatly increase the
number of sites worldwide requiring advanced storage solutions. According to
Strategic Research Corp., a storage management industry consultant, the
number of centralized storage sites worldwide requiring more than 200
gigabytes of backup is projected to grow from approximately 116,000 sites in
1996 to 660,000 sites by the year 2000. The company believes that it is in a
strong position to capitalize on the opportunities created by this projected
growth.
-25-
<PAGE>
PRODUCTS AND SERVICES
The company'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, the company also provides its
clients consulting, training and systems servicing. In 1996, approximately
$500,000 (or 4%) of COPE's $12,500,000 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. The company 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.
The company 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. The company sells data storage software under various
reselling arrangements with several software companies where COPE functions
as an operating and other software system vendor. COPE works in various
selling partnerships for the following products:
<TABLE>
<CAPTION>
COMPANY PRODUCT BUSINESS RELATIONSHIP
- -------------------------------------- -------------------------------- ---------------------
<S> <C> <C>
ADIC Tape Libraries Value Added Reseller
ATL Products Tape Libraries Value Added Reseller
Data General - CLARiiON Business Unit CLARiiON Disk Arrays Value Added Reseller
IBM High End Servers Value Added Reseller
Legato Systems Back-up and archiving Software Value Added Reseller
NSM CD Jukeboxes Value Added Reseller
Oracle Data Base and OWH Value Added Reseller
OVERLAND DATA Tape Libraries Value Added Reseller
Qualix Failure and Data Replication Value Added Reseller
Software
STORAGE TEK Tape Libraries Value Added Reseller
</TABLE>
-26-
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
SUN Microsystems High End Servers Value Added Reseller
VERITAS Software Data Management, Failure, Backup Value Added Reseller
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
The company 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. The company 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. The Company 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. The company 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 the company.
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
-27-
<PAGE>
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. The company'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, the company 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 the
Company's employees are represented by a labor union. The Company 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. The company
leases this space pursuant to a one year lease expiring in March 1998, at the
rate of SFr12,000 per month. The company 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
<TABLE>
<CAPTION>
<S> <C>
Application Recovery: The component of Disaster Recovery which
deals specifically with restoration of
business systems software and data after
the processing platform has been
restored or replaced.
Automated Tape Library: A storage system designed for large
amounts of data. Features an automated
"robot" that retrieves tapes within
seconds or minutes.
</TABLE>
-28-
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Back-up Strategies (Recovery
Strategies): Alternative operating method (i.e.,
platform, location, etc.) for facilities
and system operations in the event of a
disaster.
Business Interruption Costs: The costs or lost revenue associated
with an interruption in normal business
operations.
Cache: A portion of memory that collects and
holds data until a processing or storage
module processes it.
Critical Functions: Business activities or information which
could not be interrupted or be
unavailable for several business days
without significantly jeopardizing
operation of the organization.
Critical Records: Records or documents which, if damaged
or destroyed, would cause considerable
inconvenience and/or require replacement
or re-creation at considerable expense.
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.
Direct Access Storage Device (DASD): A storage device in which access time is
effectively independent of data
location. DASD refers to a magnetic disk
in a mainframe environment.
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.
Encryption: The transformation of data into a form
unreadable by anyone without a secret
decryption key. Its purpose is to ensure
privacy by keeping the information
hidden from anyone for whom it is not
intended.
Enterprise Data Management (EDM): EDM software provides back-up and
restoration
</TABLE>
-29-
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
capabilities across multiple,
heterogeneous computing environments.
Failover: The shift of operations from an online
system to an alternate or redundant
system after a failure.
Failover Clustering: A method where two or more machines are
connected by a high-bandwidth I/O bus.
If the primary server fails, a second
machine stands in to recover files,
data, and applications.
Fault Tolerance: A type of back-up in which a system can
remain operational, sometimes in a
degraded mode, even though one or more
elements of the system have failed.
Fault tolerance is obtained through the
use of redundant components or modules.
File Mirroring: A method of network backup that gives
users direct access to files and file
histories. Copies of files are stored on
a network-attached disk volume. If the
file or storage server is offline, files
are still accessible. File-mirroring
systems have a disk-drive cache that
mirrors changed files and moves them to
a redundant copy. The file mirror is
then captured on tape.
File Server: The central repository of shared files
and applications in a computer network
(LAN).
Firewall: A system or combination of systems that
enforce a boundary between two or more
networks. A network-level firewall, or
packet filter, examines the traffic at
the network protocol packet level. An
application-level firewall examines
traffic at the application level (i.e.,
FTP, email and TelNet). An application-
level firewall also often re-addresses
outgoing traffic so it appears to have
originated from the firewall rather than
from the internal host.
Hierarchical Storage Management: The process of automatically storing
data on the lowest-cost devices that can
support the performance required by the
applications. To users, data storage
never reaches its maximum. File access,
regardless of location in the storage
hierarchy, is completely transparent.
Hot Swap: Where defective equipment, such as a
drive or power supply, is exchanged
without having to shut down the
equipment or system.
</TABLE>
-30-
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Local Data Warehouse: A data warehouse in an operating unit
which has been fed from that unit's own
transaction systems. Its data will not
have been mapped onto the main
enterprise data warehouse, so there will
be no access from outside the unit. The
data is usually transferred to a staging
warehouse where it can be mapped onto
the enterprise data model and then
incorporated into the enterprise data
warehouse. The alternative is to
transfer the transactional data straight
to the enterprise warehouse and make it
available locally in a data mart.
Mean Time Between Failure: The average amount of time before any
component in a system will fail.
Nearline Storage: The position in the storage hierarchy
between primary, or online, storage and
offline storage. Nearline storage is
accessible in seconds to minutes through
the use of automated media handling.
Network Architecture: The basic layout of a computer and its
attached systems, such as terminals and
the paths between them.
Parity Bit: Checking the accuracy of data, parity is
used in some RAID systems to recover
data in the event one drive in an array
fails.
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.
Response Time: The time it takes for the software to
execute a command issued by the user.
This is critical when working with
warehouse data using interactive
analysis, as the software needs to keep
up with the user's chain of thought. It
should be less than five seconds and
preferably under one second. Enormous
time and effort is being invested by
hardware and software vendors to find
innovative technology which will further
reduce response times.
Server Mirroring: The process of maintaining redundant
file systems on each of two servers. The
alternate server may be local or remote.
When the primary server is off-line, the
alternate takes over, providing
continuous access to data and network
services.
</TABLE>
-31-
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Terabyte: One thousand gigabytes. Large data
warehouses now in operation can be more
than one terabyte in size.
</TABLE>
-32-
<PAGE>
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 and interim unaudited 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 "Special Considerations 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. COPE's cost of sales, on the other hand, are denominated almost
exclusively 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 expenses,
specifically 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 costs of its client contracts for the
purpose of mitigating 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.
-33-
<PAGE>
RESULTS OF OPERATIONS
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.
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 AND ADMINISTRATIVE 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%).
FOREIGN EXCHANGE TRANSLATION
COPE's gain from foreign exchange translation decreased by $23,713 from
$37,416 in fiscal 1995 to $13,703 in fiscal 1996 primarily as a result of the
further weakening of the Swiss Franc against the U.S. dollar.
NINE MONTHS ENDED SEPTEMBER 30, 1997
COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 1996
COPE had net sales of $12,591,365 for first nine months of fiscal 1997
compared to $8,177,584 for the prior year period as a result of further market
share increase. During the same period, cost of sales as a percentage of
revenue increased from 69.6% to 72.9% as result of strengthening US Dollars
compared to the Swiss Franc. The company incurred less consultancy expenses in
the first nine months of fiscal 1997 ($128,765) compared to the prior year
period ($356,450) due to postponed major contracts. The company had a total of
$63,766 net interest expenses compared to $54,709 for the 1996 year period as a
result of higher credit facilities used.
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 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
-34-
<PAGE>
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 September 30, 1997, COPE had working capital of approximately
$1,276,682, 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
large part, to the acceptance and payment by large customers for several
information systems in the first two quarters and the company's net profit
($185,929) for the first three quarters of the 1997 fiscal year.
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 the Federal Republic of
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 the
FRG. 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.
-35-
<PAGE>
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 February 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, since
1991. Stalder & Murer acts as general counsel to COPE.
-36-
<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>
March 31, 1996 $0.218 $0.218
June 30, 1996 $0.220 $0.220
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
</TABLE>
On January 30, 1998, the bid and ask prices as quoted on the OTC Bulletin
Board for the Company's Common Stock were $.13 and $.1875 respectively.
On January 30, 1998, there were approximately 382 holders of record of the
15,317,923 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.
-37-
<PAGE>
ANNUAL REPORT
Company's annual report to stockholders for the fiscal year ended June 30,
1997 was mailed to stockholders on or about February __, 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 June 1, 1998.
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 (excluding the financial statements and schedules
included therein which have been superseded by the financial
statements and schedules included herein);
Also incorporated by reference herein are all reports filed by the Company
under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934
after the date of this Proxy Statement and prior to the date of the Annual
Meeting.
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 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.
-38-
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
HARRIER, INC.
Independent Auditors' Report . . . . . . . . . . . . . . . . . . 40
Consolidated Balance Sheet as of June 30, 1997 . . . . . . . . . 41
Consolidated Statements of Operations for the Years Ended
June 30, 1997 and 1996 . . . . . . . . . . . . . . . . . . . . 42
Consolidated Statements of Changes in Stockholders' Equity
(Deficit) for the Years Ended June 30, 1997 and 1996 . . . . . 43
Consolidated Statements of Cash Flows for the Years Ended
June 30, 1997 and 1996 . . . . . . . . . . . . . . . . . . . . 44
Notes to Consolidated Financial Statements . . . . . . . . . . . 47
Unaudited Consolidated Balance Sheet as of September 30, 1997 . 64
Unaudited Consolidated Statements of Operations for the Three
Months Ended September 30, 1997 and 1996 . . . . . . . . . . . 65
Unaudited Consolidated Statements of Cash Flows for the Three
Months Ended September 30, 1997 and 1996 . . . . . . . . . . . 66
Notes to Unaudited Financial Statements . . . . . . . . . . . . 67
COPE AG
Independent Auditors' Report . . . . . . . . . . . . . . . . . . 68
Consolidated Balance Sheet as of December 31, 1996 . . . . . . . 69
Consolidated Statements of Operations for the Years Ended
December 31, 1996 and 1995 . . . . . . . . . . . . . . . . . . 70
Consolidated Statements of Shareholders' Equity for the
Years Ended December 31, 1996 and 1995 . . . . . . . . . . . . 71
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1996 and 1995 . . . . . . . . . . . . . . . . . . 72
Notes to Audited Consolidated Financial Statements . . . . . . . 73
Unaudited Condensed Consolidated Balance
Sheet as of September 30, 1997 . . . . . . . . . . . . . . . .82
Unaudited Condensed Consolidated Statements of Operations for
the Nine Months Ended September 30, 1997 and 1996. . . . . . . 83
Unaudited Condensed Consolidated Statements of Cash Flows for
the Nine Months Ended September 30, 1997 and 1996. . . . . . . 84
Notes to Unaudited Condensed Consolidated Financial Statements . 85
PRO FORMA COMBINED FINANCIAL INFORMATION
Unaudited Pro Forma Condensed Consolidated Balance Sheet as of
September 30, 1997 . . . . . . . . . . . . . . . . . . . . . . 88
Unaudited Pro Forma Condensed Consolidated Statement of
Operations for the Three Months Ended September 30, 1997 . . . 89
Unaudited Pro Forma Condensed Consolidated Statement of
Operations for the Year Ended June 30, 1997. . . . . . . . . . 90
Notes to Unaudited Pro Forma Condensed
Consolidated Financial Statements . . . . . . . . . . . . . . . 92
</TABLE>
39
<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
40
<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.
41
<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 290,442 587,410
Salaries and related expenses 357,049 418,445
Research and development - 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.
42
<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.
43
<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 (7,102) 62,908
Accounts payable and accrued expenses (7,102) 62,908
Net cash used in operating activities (494,893) (791,156)
</TABLE>
44
<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.
45
<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.
46
<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 equity securities and a 50% interest in an unconsolidated
joint venture.
The equity securities are classified as available-for-sale and are stated at
their fair market value based on quoted market prices.
The Company has no majority control over the joint venture's operations or
management; accordingly, the investment in joint venture is accounted for under
the equity method. The Company's share of the income or loss of the joint
venture is recognized as an increase or decrease, respectively, in the Company's
investment. Profits and losses on transactions with the joint venture are
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.
47
<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.
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.
48
<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.
49
<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.
50
<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.
51
<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 amount
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.
52
<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>
53
<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.
54
<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>
55
<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>
56
<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
57
<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.
58
<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
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>
59
<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.
60
<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 45 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 89.2% 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
March 12, 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
61
<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.
62
<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 49 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.
63
<PAGE>
HARRIER, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
SEPTEMBER 30,
1997
--------------
<S> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 17,437
Amount receivable from related party 115,478
Grant contribution receivable 0
Other current assets 15,083
--------------
Total Current Assets 147,998
--------------
PROPERTY AND EQUIPMENT, NET 28,506
--------------
Intangible assets 30,856
Total Assets $ 207,360
--------------
--------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 579,286
Convertible note payable to related party 579,833
Deferred grant revenue 0
Dividend payable to Glycosyn preferred stockholders 4,450
--------------
Total Current Liabilities 1,163,551
--------------
Minority Interests 89,000
STOCKHOLDERS' EQUITY:
Common Stock 14,099
Additional paid-in capital 15,343,110
Accumulated deficit (16,364,689)
Cumulative translation adjustment (37,711)
--------------
Total Stockholders' Equity (1,045,191)
Total liabilities and stockholders' equity $ 207,360
--------------
--------------
</TABLE>
64
<PAGE>
HARRIER, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
SEPTEMBER 30,
--------------------------
1997 1996
---------- ------------
<S> <C> <C>
SALES $ 0 $ 7,338
COST OF SALES 0 6,837
---------- ------------
GROSS PROFIT 0 501
---------- ------------
EXPENSES:
General and administrative 43,668 38,496
Amortization and depreciation 3,060 2,474
Salaries and related expenses 60,128 108,164
Research and development 0 5,000
---------- ------------
Total Expenses 106,856 154,134
LOSS FROM OPERATIONS (106,856) (153,633)
---------- ------------
OTHER INCOME (EXPENSE):
Grant income 20,000 0
Interest income/(expense) (15,244) (12,694)
---------- ------------
Total Other Income (Expense) 4,756 (12,694)
Income (loss) from continuing operations
before provision for income taxes (102,100) (166,327)
Provision for income taxes (800) (300)
---------- ------------
Net income (loss) (102,900) (166,627)
---------- ------------
Net income (loss) per common share $ (0.01) $ (0.01)
---------- ------------
---------- ------------
</TABLE>
65
<PAGE>
HARRIER, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
SEPTEMBER 30,
---------------------------
1997 1996
------------ ------------
<S> <C> <C>
Cash Flows from (used for) Operating Activities:
Net Loss $ (102,900) $ (166,627)
------------ ------------
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH
USED BY OPERATING ACTIVITIES:
Depreciation and amortization 3,060 2,474
Accrued interest 15,333 0
CHANGES IN ASSETS AND LIABILITIES:
Related party receivable 45,000 (4,844)
Accounts receivable 0 23,879
Receivable from joint venture 0 34,679
Assets held for sale 0 17,500
Inventory 0 37,734
Other current assets 9,262 7,810
Accounts payable and accrued expenses (30,056) 104,314
------------ ------------
Total Adjustments 42,599 223,546
Cash used by Operating Activities $ (60,301) $ 56,919
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payment for property and equipment 0 (6,016)
Increase in patent costs 0 (1,289)
------------ ------------
Cash used by Investing Activities $ 0 $ (7,305)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of stock
Net Cash Flows Provided by Financing
Activities $ 19,501 $ 150,595
------------ ------------
Effect of Exchange Rate Changes on Cash $ 0 $ (28)
------------ ------------
Net Increase in Cash and Cash Equivalents (40,800) 200,181
Cash and Cash Equivalents at Beginning of Period 58,237 494,068
------------ ------------
Cash and Cash Equivalents at End of Period $ 17,437 $ 694,249
------------ ------------
------------ ------------
</TABLE>
` 66
<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 Registrant
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 September 30, 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 Registrant's June 30, 1997 audited
financial statements. The results of operations for the three months ended
September 30, 1997 are not necessarily indicative of the operating results for
the full year.
NOTE 2 - 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 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.
NOTE 3 - LETTER OF INTENT
On March 2, 1997, the Company entered into a non-binding letter of intent to
acquire a Swiss based corporation engaged in the business of computer data
storage ("Acquisition Candidate"). Under the terms of the letter of intent, the
Company would acquire all of the capital stock the Acquisition Candidate and the
present shareholders of the Acquisition Candidate will acquire approximately
88.5% of the issued and outstanding common stock of the Company. The Company's
acquisition of the Acquisition Candidate is subject to further due diligence on
the part of both parties, a definitive agreement between the parties and the
approval of the transaction by the Company's directors and shareholders. There
can be no assurance that the Company will consummate the proposed transaction or
that the terms of any transaction will not materially vary from the foregoing
terms.
NOTE 4 - ISSUANCE OF COMMON STOCK
During the quarter ended September 30, 1997 the Company issued approximately
130,000 shares of Harrier, Inc. common stock as payment in lieu of cash in the
settlement of a lawsuit.
NOTE 5 - SUBSEQUENT EVENTS
Subsequent to September 30, 1997 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.
67
<PAGE>
INDEPENDENT AUDITORS' REPORT
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, 1995 and 1996 and the related consolidated
statements of income, shareholders' equity and cash flows for the years then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with 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 as of December 31, 1995 and 1996, and the consolidated results of
their operations and their cash flows for the years then ended, 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
August 22, 1997
68
<PAGE>
COPE AG
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
DECEMBER 31,
1996 1995
----------- ----------
(USD)
<S> <C> <C>
ASSETS
Current Assets
Cash $ 262,047 $ 161,272
Trade accounts receivables Note 3 2,226,227 1,708,300
Other receivables 171,647 103,643
Inventories Note 4 981,941 959,839
----------- ----------
TOTAL CURRENT ASSETS $3,641,862 $2,933,054
----------- ----------
Fixed assets
Property and equipment Note 5 267,627 281,797
Goodwill, net of amortization of USD
1,217 and USD 5,726, respectively 9,736 51,541
Intangible assets 51,064 85,841
----------- ----------
Total fixed assets 328,427 419,179
----------- ----------
TOTAL ASSETS $3,970,289 $3,352,213
----------- ----------
----------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Short-term borrowings Note 6 $ 172,066 $ 503,441
Trade accounts payable 2,116,029 1,055,903
Amounts due from related parties Note 12 190,048 253,653
Other payables Note 8 173,651 264,921
Accrued other liabilities Note 9 219,378 304,182
Current income taxes 36,989 19,329
Deferred income taxes Note 11 54,922 73,300
----------- ----------
Total current liabilities 2,965,083 2,474,729
----------- ----------
Commitments and contingent
liabilities Note 14 0 0
Minority interests 178 19.227
Shareholders' equity Note 10
Share capital
Common stocks, CHF 100 (USD 76) 76.336 76.336
par value Authorized shares -
1,000 shares, issued and
outstanding shares - 1,000 shares
in 1996 and 1995
Legal reserves 44,330 763
Cumulative translation adjustment (74,420) 94,652
Retained earnings 958,782 686,526
Total shareholders' equity 1,005,028 858,277
----------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY 3,970,289 3,352,233
----------- ----------
----------- ----------
</TABLE>
See notes to the Consolidated financial statements
69
<PAGE>
COPE AG
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
DECEMBER 31,
1996 1995
----------- ----------
(USD)
<S> <C> <C>
REVENUES
Net sales 12,515,123 11,020,356
OPERATING EXPENSES
Cost of sales 8,831,006 8,154,271
Selling, general and administrative expenses 2,394,693 1,870,905
Consultancy expenses 540,347 688,236
Depreciation and amortization 262,155 195,320
Impairment of intangible assets 77,990 0
----------- ----------
12,106,191 10,908,732
----------- ----------
OPERATING INCOME 408,932 111,624
OTHER INCOME (EXPENSE)
Interest expense (63,940) (64,341)
Interest income 2,791 12,071
Other expense (3,069) (5,908)
Foreign exchange gain 13,703 37,416
----------- ----------
(50,515) (20,762)
----------- ----------
INCOME BEFORE INCOME TAX AND MINORITY INTEREST 358,417 90,862
Minority interests 696 6,918
Current income taxes (42,775) (16,725)
Deferred income taxes (515) 7,147
----------- ----------
(42,594) (2,660)
NET INCOME 315,823 88,202
----------- ----------
----------- ----------
EARNINGS PER SHARE 315.82 88.20
</TABLE>
See notes to the consolidated financial statements
70
<PAGE>
COPE AG
CONSOLIDATED STATEMENTS SHAREHOLDERS' EQUITY
AS OF DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
SHARE LEGAL RETAINED CUMULATIVE TOTAL
CAPITAL RESERVES EARNINGS TRANSLATION SHAREHOLDERS'
ADJUSTMENT EQUITY
--------- ---------- ---------- ------------ --------------
USD USD USD USD USD
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1995 76,336 763 598,324 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 76,336 763 686,526 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 76,336 44,330 958,782 (74,420) 1,005,028
--------- ---------- ---------- ------------ --------------
--------- ---------- ---------- ------------ --------------
</TABLE>
See notes to the consolidated financial statements
71
<PAGE>
COPE AG
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1997 1996
---------- ---------
(USD)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income 315,823 (88,202)
Adjustments to reconcile net income to
net cash used in operating activities:
Depreciation and amortization 262,155 195,320
Deferred income taxes 515 (7,147)
Gains/losses on disposal of fixed assets 2,697 0
Minority interest (696) (6,918)
Inventory write downs upon sale of inventory 13,883 0
Effects of changes in assets and liabilities:
Accounts receivable (872,870) 49,683
Inventories (190,722) (107,290)
Prepaid expenses (73,195) (19,820)
Accounts payable 1,269,952 (180,836)
Accruals (68,910) 194,152
---------- ----------
Total adjustments to net income 342,809 117,144
---------- ----------
NET CASH FLOW PROVIDED BY OPERATING ACTIVITIES 658,632 205,346
CASH FLOW USED IN INVESTING ACTIVITIES
Purchase of property and equipment (229,210) (273,412)
Purchase of intangible assets (6,998) (136,425)
Proceeds from sale of property and equipment 9,778 10,871
Change in cash resulting from disposal of
subsidiaries (3,865) 0
---------- ---------
NET CASH FLOW USED IN INVESTING ACTIVITIES (230,295) (398,966)
CASH FLOW USED IN FINANCING ACTIVITIES
Decrease of short term borrowings (293,085) (320,401)
---------- ---------
NET CASH FLOW USED IN FINANCING ACTIVITIES (293,085) (320,401)
Effect of exchange rate changes on cash (34,477) 65,478
NET INCREASE OF CASH AND CASH EQUIVALENTS 100,775 (448,543)
Cash and cash equivalents at beginning of the year 161,272 609,815
---------- ---------
CASH AND CASH EQUIVALENTS AT END OF THE YEAR 262,047 161,272
---------- ---------
---------- ---------
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Interest paid 63,940 64,341
Income taxes paid 13,525 7,122
</TABLE>
See notes to the consolidated financial statements
72
<PAGE>
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.
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 Chicago, USA, 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 as earned and the cost associated with these activities
is expensed as incurred.
INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined using
the first-in, first-out (FIFO) method.
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:
<TABLE>
<CAPTION>
<S> <C>
Machinery and equipment 3 - 5 years
Leasehold improvements 10 years or shorter lease term
</TABLE>
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, 1996, the Company disposed of two subsidiaries. The related
unamortized goodwill has been included in the cost of the
73
<PAGE>
asset sold.
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. During 1996, in an
attempt to expand its operations in Germany, the Company purchased the
customer list from a German company which wished to cease operational
activity in the business sector in which the Company is active. The
acquisition cost amounting to USD 77,990 was originally recorded as an
intangible asset. In the period to December 31, 1996, the sales expected to
be realized from the customer base taken over did not materialize. Based on
expected cash flows, the carrying amount will not be recovered and the
related assets have been written down to their net realizable value.
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".
EARNINGS PER ORDINARY SHARE
Earnings per ordinary share is calculated by dividing net income by the average
ordinary shares outstanding. The Company had no outstanding preferred shares or
stock option plans as of December 31, 1996 and 1995.
NOTE 3 - TRADE ACCOUNTS RECEIVABLE
Trade accounts receivable consist of the following:
<TABLE>
<CAPTION>
Years ended December 31,
------------------------
1996 1995
----------- ----------
(USD)
<S> <C> <C>
Trade accounts receivable 2,264,746 1,750,409
Allowance for doubtful accounts (38,519) (42,109)
----------- ----------
Total trade accounts receivable, net 2,226,227 1,708,300
----------- ----------
----------- ----------
</TABLE>
74
<PAGE>
A summary of activity in the allowance for doubtful accounts is as follows:
<TABLE>
<CAPTION>
Years ended December 31,
------------------------
1996 1995
----------- ----------
(USD)
<S> <C> <C>
Balance at beginning of year (42,109) (42,241)
Provisions (2,115) 132
Accounts written off 5,705 0
----------- ----------
Balance at end of year (38,519) (42,109)
----------- ----------
----------- ----------
</TABLE>
NOTE 4 - INVENTORIES
Inventories consist of finished products held for resale.
NOTE 5 - PROPERTY AND EQUIPMENT
Property, plant and equipment consist of the following:
<TABLE>
<CAPTION>
Years ended December 31,
------------------------
1996 1995
----------- ----------
(USD)
<S> <C> <C>
Leasehold improvements 35,347 36,401
Machinery and equipment 715,735 609,322
Accumulated depreciation (483,455) (363,926)
----------- ----------
Total property and equipment, net 267,627 281,797
----------- ----------
----------- ----------
</TABLE>
NOTE 6 - SHORT-TERM BORROWINGS
As of December 31, 1996, the Company has established short-term overdraft
facilities under which the Company and its subsidiaries could borrow up to USD
778,000. 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 370,370
each. Amounts outstanding at December 31, 1996 total USD 172,066. As of December
31, 1996, the Company had available approximately USD 606,000 under these
facilities. The weighted average interest rate on amounts outstanding at
December 31, 1996 was 7.4%. Interest paid for the years ending December 31, 1996
and 1995, amounted to USD 63,940 and USD 64,341 respectively.
NOTE 7 - 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, 1996 and 1995
was USD 29,180 and USD 13,258 respectively.
75
<PAGE>
NOTE 8 - OTHER PAYABLES
Other payables consist of the following:
<TABLE>
<CAPTION>
Years ended December 31,
------------------------
1996 1995
-------- -------
(USD)
<S> <C> <C>
Social security 57,378 0
Consulting fees 0 193,853
Other 118,273 71,068
------- -------
175,651 264,921
------- -------
------- -------
</TABLE>
NOTE 9 - ACCRUED OTHER LIABILITIES
Accrued other liabilities consist of the following:
<TABLE>
<CAPTION>
Years ended December 31,
------------------------
1996 1995
-------- -------
(USD)
<S> <C> <C>
Warranty 96,296 103,449
Legal, professional and other fees 48,148 84,400
Personnel and social security expenses 68,519 93,103
Other 6,415 23,230
------- -------
219,378 304,182
------- -------
------- -------
</TABLE>
NOTE 10 - SHAREHOLDERS' EQUITY
The share capital of the Company consists of 1,000 issued and outstanding
shares, with a nominal value of CHF 100 (USD 74) each. Each ordinary share is
entitled to one vote. No stock options or convertible securities exist at
December 31, 1996 and 1995.
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 ("CHF"). 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, 1996, the Company's Swiss statutory
unconsolidated financial statements reflected CHF 374,260 (USD 277,230) of
retained earnings available for distribution.
NOTE 11 - INCOME TAXES
Pretax income (loss) for the years ended December 31, 1996 and 1995 was taxed in
the following jurisdictions:
<TABLE>
<CAPTION>
Years ended December 31,
------------------------
1996 1995
-------- -------
(USD)
<S> <C> <C>
Switzerland 401,093 43,766
Foreign (42,676) 47,096
------- ------
358,417 90,862
------- ------
------- ------
</TABLE>
76
<PAGE>
Components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
Years ended December 31,
------------------------
1996 1995
-------- -------
(USD)
<S> <C> <C>
Current:
Switzerland 36,453 19,098
Foreign 6,322 (2,373)
------- ------
Total current 42,775 16,725
------- ------
Deferred:
Switzerland 515 (7,147)
Foreign 0 0
------- ------
Total deferred 515 (7,147)
------- ------
43,290 9,578
------- ------
------- ------
</TABLE>
The company has net deferred tax liabilities as of December 31, 1996 and
1995 as follows:
<TABLE>
<CAPTION>
Years ended December 31,
------------------------
1996 1995
-------- --------
(USD)
<S> <C> <C>
Deferred tax assets:
Net operating losses 131,110 77,398
Valuation allowance 0 0
------- -------
131,110 77,398
------- -------
Deferred tax liabilities:
Inventories 102,270 123,770
Trade accounts receivable 12,800 9,000
Deductible provisions eliminated
on consolidation 67,486 0
Other 3,476 17,928
------- -------
186,032 150,698
------- -------
Net deferred tax liabilities (54,922) (73,300)
------- -------
------- -------
</TABLE>
77
<PAGE>
Under Swiss corporate tax law, taxes on income are composed of State and
Federal taxes. The Company's composite corporate tax rates was 18% for each
of the years ended December 31, 1996 and 1995. A reconciliation of income
taxes determined using the statutory rate to actual income taxes provided
is as follows:
<TABLE>
<CAPTION>
Years ended December 31,
------------------------
1996 1995
-------- --------
(USD)
<S> <C> <C>
Income tax expense at statutory rates 64,515 16,355
Varying foreign tax rates (35,226) 59,972
Utilization of foreign NOLs (55,292)
Permanent differences:
Goodwill 6,997 (8,869)
Other 7,004 (2,588)
------- -------
43,290 9,578
------- -------
------- -------
</TABLE>
At December 31, 1996 and 1995, the Company had German and Austrian net loss
carryforwards for tax purposes of approximately USD 320,740 and USD 184,483
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.
NOTE 12 - RELATED PARTY TRANSACTIONS
Mr. Knapp, Managing Director, Finance and Administration, is not an employee of
the Company. His services are charged to the Company by Adrian Knapp Consulting,
a sole proprietorship owned by Mr. Knapp. No agreement exists between the
Company and Adrian Knapp Consulting for the provision of Mr. Knapp's services to
the Company. For the years ended December 31, 1996 and 1995, consultancy
expenses include USD 168,067 and USD 169,707 respectively in respect of services
rendered by Mr. Knapp. Mr. Knapp is also a major shareholder holding 49% of the
issued share capital.
Mr. Isenschmid, Managing Director, Marketing and Product development, is not an
employee of the Company. His services are charged to the Company by STI
Marketing- und Organisationsberatung, a sole proprietorship owned by Mr.
Isenschmid. No agreement exists between the Company and STI Marketing- und
Organisationsberatung for the provision of Mr. Isenschmid 's services to the
Company. For the years ended December 31, 1996 and 1995, consultancy expenses
include USD 166,589 and USD 173,559 respectively in respect of services rendered
by Mr. Isenschmid. Mr. Isenschmid is also a major shareholder holding 49% 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, 1996 and 1995, consultancy
expenses include USD 70,888 and USD 103,480 respectively in respect of
consulting services rendered by Mr. Schallhorn. At December 31, 1996, The
Company disposed of its investments in Eins Ahh AG and Freex AG to Messrs. Knapp
and Isenschmid jointly. Neither of these companies had significant operations or
balance sheet accounts in 1996 or 1995. Messrs. Knapp and Isenschmid acquired
the companies for a total consideration of USD 96,296 (CHF 130,000), being the
net equity value of these investments at December 31, 1996. No cash was
received in respect of the disposals. Payables due to the main shareholders were
reduced by CHF 130,000
78
<PAGE>
As at December 31, 1996 and 1995, the financial statements included the
following liabilities due to related parties:
<TABLE>
<CAPTION>
Years ended December 31,
------------------------
1996 1995
-------- --------
(USD)
<S> <C> <C>
A. Knapp 148,635 192,628
S. Isenschmid 41,413 49,260
UPM 0 11,765
------- -------
190,048 253,653
------- -------
------- -------
</TABLE>
NOTE 13 - LEASES
The Company has operating leases primarily for office space and equipment which
expire at various dates through 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, 1996, were as follows:
<TABLE>
<CAPTION>
1996
-------
(USD)
<S> <C>
1997 113,956
1998 79,456
1999 23,087
2000 1,636
2001 0
Thereafter 0
-------
Total future minimum lease payments 218,135
-------
-------
</TABLE>
Total rent expense for operating leases was approximately USD 133,333 and USD
86,440 for the years ended December 31, 1996 and 1995, respectively.
NOTE 14 - 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.
79
<PAGE>
NOTE 15 - 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,
--------------------------
1996 1995
---------- ----------
(USD)
<S> <C> <C>
NET SALES
Switzerland
Unaffiliated 10,187,333 9,652,337
Intercompany 448,179 207,874
---------- ----------
10,635,512 9,860,211
---------- ----------
Austria 1,345,420 867,594
Foreign 2,327,888 1,747,248
---------- ----------
Total 14,308,820 12,475,053
Eliminations (1,793,697) (1,454,697)
---------- ----------
Total 12,515,123 11,020,356
---------- ----------
---------- ----------
OPERATING INCOME (LOSS)
Switzerland 538,978 194,207
Austria (56,823) 91,664
Foreign (73,223) (174,247)
---------- ----------
Total 408,932 111,624
---------- ----------
---------- ----------
IDENTIFIABLE
Switzerland 3,027,571 2,588,947
Austria 508,483 311,939
Foreign 434,235 451,347
---------- ----------
Total 3,970,289 3,352,233
---------- ----------
---------- ----------
</TABLE>
Intercompany sales between USA and Switzerland are at purchase cost plus a
mark-up. Intercompany sales between Switzerland and other geographic areas
are generally at purchase cost.
NOTE 16 - 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 years ended December 31, 1996 and 1995, sales to one customer in
Switzerland
80
<PAGE>
amounted to 15% and 12% respectively of consolidated net sales. The
Company performs ongoing credit evaluations of its customers and maintains
allowances for potential credit risks.
The Company enters into forward exchange contracts to hedge significant
intercompany purchase transactions. As of December 31, 1996 and 1995, the
Company had approximately CHF 310,675 (USD 250,000) and CHF 1,143,100 (USD
1,000,000), respectively, of outstanding foreign exchange contracts in which
U.S. Dollars were purchased. At December 31, 1995, four contracts were open the
last of which was settled in December 1996. 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, 1996 and 1995 were CHF 334,625 and CHF
1,132,025 respectively.
81
<PAGE>
COPE AG
CONDENSED CONSOLIDATED BALANCE SHEETS AS OF
SEPTEMBER 30, 1997 AND 1996
(Unaudited)
<TABLE>
<CAPTION>
ASSETS 1997 1996
--------- ---------
(USD) (USD)
<S> <C> <C>
CURRENT ASSETS
Cash 812,442 152,034
Trade accounts receivable, net 3,259,791 1,545,555
Other receivables 867,102 156,445
Inventories, net 1,739,549 1,231,211
--------- ---------
TOTAL CURRENT ASSETS 6,678,884 3,085,245
--------- ---------
FIXED ASSETS
Property and equipment, net 444,480 245,487
Goodwill 15,882 10,246
Intangible assets 72,799 54,233
--------- ---------
533,161 309,966
--------- ---------
TOTAL ASSETS 7,212,045 3,395,211
--------- ---------
--------- ---------
LIABILITIES AND SHAREHOLDER'S EQUITY
CURRENT LIABILITIES
Short-term borrowings 1,166,396 872,808
Trade accounts payable 3,194,626 1,245,015
Amounts due from related parties 149,557 178,432
Other payables 578,897 146,897
Accrued other liabilities 314,563 211,548
Current income tax accrual 45,283 22,458
Deferred income tax accrual (47,120) 24,158
--------- ---------
TOTAL CURRENT LIABILITIES 5,402,202 2,701,316
--------- ---------
Commitments and contingent liabilities 0 0
Minority interests 0 145
--------- ---------
SHAREHOLDER'S EQUITY
Share capital 80,453 76,336
Common stocks, CHF 100 (USD 76) par value:
Authorized shares - 1,060 shares issued
and outstanding shares - 1,060
Legal reserves 44,330 44,330
Additional paid in capital 690,909 0
Cumulative translation adjustment (150,560) (69,875)
Retained earnings 1,144,711 642,959
--------- ---------
TOTAL SHAREHOLDER'S EQUITY 1,809,843 693,750
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY 7,212,045 3,395,211
--------- ---------
--------- ---------
</TABLE>
See notes to condensed consolidated financial statements
<PAGE>
COPE AG
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE NINE MONTH PERIOD ENDED
(Unaudited)
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30,
1997 1996
------------- -------------
(USD) (USD)
<S> <C> <C>
REVENUES
Net sales 12,591,365 8,177,584
OPERATING EXPENSES
Cost of sales 9,176,198 5,695,414
Selling, general and administrative expenses 2,971,478 1,748,552
Consultancy expenses 128,765 356,450
Depreciation and amortization 147,406 187,356
Impairment of intangible assets 0 42,333
------------- -------------
12,423,847 8,030,105
------------- -------------
------------- -------------
OPERATING INCOME 167,518 147,479
OTHER INCOME (EXPENSE)
Interest expense (81,331) (56,557)
Interest income 17,565 1,868
Other expense 0 (21,106)
Other income 15,325 0
Foreign exchange gain (loss) (6,097) 9,923
------------- -------------
(54,536) (65,872)
------------- -------------
INCOME BEFORE INCOME TAX 112,982 81,607
Minority interests 0 34
Current income taxes (30,780) (25,620)
Deferred income taxes 103,727 (744)
------------- -------------
72,947 (26,330)
NET INCOME 185,929 55,277
------------- -------------
------------- -------------
EARNINGS PER SHARE 175.40 55.28
</TABLE>
See notes to condensed consolidated financial statements
<PAGE>
COPE AG
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTH PERIOD ENDED
(Unaudited)
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30,
1997 1996
------------- -------------
(USD) (USD)
<S> <C> <C>
CASH FLOW PROVIDED BY OPERATING ACTIVITIES
Net income 185,929 55,277
Adjustment to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 147,406 187,356
Deferred income taxes (102,042) (49,142)
Effects of changes in assets and liabilities
Accounts receivable (1,696,972) 102,377
Inventories (757,608) (271,372)
Prepaid expenses (32,057) 7,566
Accounts payable 1,441,353 (94,849)
Accruals 103,479 (282,750)
------------- -------------
Total adjustments to net income (896,441) (400,814)
NET CASH FLOW PROVIDED BY OPERATING ACTIVITIES (710,512) (345,537)
CASH FLOW USED IN INVESTING ACTIVITIES
Purchase of property and equipment (406,666) (46,221)
Movements of intangible assets (27,880) 31,608
------------- -------------
NET CASH FLOW USED IN INVESTING ACTIVITIES (434,546) (14,613)
CASH FLOW USED IN FINANCING ACTIVITIES
Capital stock issued (share capital & additional paid
in 695,026 0
Increase/Decrease of short term borrowings 994,330 369,367
------------- -------------
NET CASH FLOW USED IN FINANCING ACTIVITIES 1,689,356 369,367
Effect of exchange rate changes on cash 6,097 (18,455)
NET DECREASE/INCREASE OF CASH AND CASH EQUIVALENTS 550,395 (9,238)
Cash and cash equivalents at beginning of the period 262,047 161,272
------------- -------------
CASH AND CASH EQUIVALENTS AT END OF THE PERIOD 812,442 152,034
------------- -------------
------------- -------------
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Interest paid (79,101) (52,457)
Income taxes paid (15,180) (12,015)
</TABLE>
See notes to condensed consolidated financial statements
<PAGE>
COPE AG
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 1997
(unaudited)
Note 1 - Condensed consolidated financial statements
The accompanying condensed consolidated financial statements present the
consolidated operations of COPE AG and its wholly-owned subsidiaries
(collectively hereinafter referred to as COPE or the Company) and 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 petition, results of operations and cash flows
at September 30, 1997, 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 Obligation ("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, 1996 audited financial statements. The results of operations
for the nine months ended September 30, 1997 are not necessarily indicative
of the operating results for the full year.
Note 2 - Issuance of share capital
During the quarter ended September 30, 1997 the Company issued 60 shares at a
nominal value of CHF 100 each. The shares were sold to 29 investors. The
proceeds of the sale of the shares is used as additional working capital. The
nominal value of the share issued totaling USD 4,117 was posted to the share
capital accounts whereas the remainder of the proceeds amounting to USD
690,909 was recorded as additional paid in capital.
Note 3 - Minority interests
With the aim of gaining full control over its subsidiaries, the Company has
acquired the remaining shares in COPE GmbH, Taufkirchen, Germany from the
minority shareholders. The consideration paid to the minority shareholders
was equal to the nominal value.
Note 4 - Credit facilities
During 1997, the Company could extend its bank credit line from CHF 1 million
to CHF 2 million (USD 1,379 million), thereby securing the financial needs as
a result of the higher business volume.
Note 5 - Consulting expenses
In mid 1997, Adrian Knapp, Chairman, Stephan Isenschmid, President and Chief
Executive Officer of COPE AG and Wolfgang Schallhorn, General Manager of COPE
Germany, ceased serving the Company through their sole proprietorship
companies but entered into regular employment contracts with the Company. As
a consequence, in the income statement for the nine months ended September
30, 1997, their compensations are no longer shown as consultancy expenses but
are reported as payroll expenses in the caption Selling, general and
administrative expenses.
Note 6 - 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 and sale of selected products and
technologies in the health, fitness and medical markets. Pursuant to the
Reorganization Agreement, the shareholders of COPE
<PAGE>
Note 6 - Subsequent events (continued)
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 45 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 89.4% 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 to be held in March 1998.
<PAGE>
HARRIER, INC. AND COPE A.G.
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 1997, FOR THE THREE MONTH PERIOD ENDED
SEPTEMBER 30, 1997 AND FOR THE YEAR ENDED JUNE 30, 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 September 30, 1997, and the pro forma condensed consolidated statements
of operations (unaudited), for the three month period ended September 30,
1997, and the year ended June 30, 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 first quarter of
calendar 1998 and accounted for under the purchase method. The pro forma
consolidated information is based on the historical financial statements of
Harrier and includes assumptions and adjustments set forth in the
accompanying notes to the pro forma condensed consolidated financial
statements. The pro forma unaudited condensed consolidated balance sheet and
the pro forma unaudited condensed consolidated statements of operations
present the financial position of Harrier and its results of operations as if
Harrier had acquired COPE as of September 30, 1997 and July 1, 1996,
respectively.
The pro forma condensed consolidated balance sheet (unaudited) as of
September 30, 1997 and the pro forma condensed consolidated statements of
operations (unaudited) for the three month period ended September 30, 1997
and the year ended June 30, 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
condensed consolidated financial statements (unaudited) should be read in
conjunction with the Harrier audited financial statements and notes for the
year ended June 30, 1997 and the unaudited condensed consolidated financial
statements for the three month period ended September 30, 1997 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.
<PAGE>
HARRIER, INC. AND COPE A.G.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1997
(UNAUDITED)
_______________
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS PRO FORMA
------------------------------- ------------
HARRIER, INC. COPE A.G. GLYCOSYN COPE CONSOLIDATED
RECAP & REVERSE TOTALS
NCT ACQ. MERGER
------------- ------------ ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents $ 17,437 $ 812,442 $ - $ - $ 829,879
A/R - Trade - 3,259,791 - - 3,259,791
Other receivable - 867,102 - - 867,102
A/R - Related parties 115,478 - - - 115,478
Inventory - 1,739,549 - - 1,739,549
Other current assets 15,083 - - - 15,083
Deferred income tax asset - 47,120 - 3,342 (3) 50,462
------------- ------------ ------------- ------------- -------------
Total Current Assets 147,998 6,726,004 - 3,342 6,877,344
------------- ------------ ------------- ------------- -------------
PROPERTY AND EQUIPMENT, NET 28,506 444,480 (24,506)(1) - 448,480
INVESTMENTS, GLYCOSYN - - 0 (1) - 0
GOODWILL - 15,881 - - 15,881
INTANGIBLE ASSETS, NET 30,856 72,799 (30,856)(1) - 72,799
------------- ------------ ------------- ------------- -------------
Total Assets 207,360 7,259,164 (55,362) 3,342 7,414,504
------------- ------------ ------------- ------------- -------------
------------- ------------ ------------- ------------- -------------
LIABILITIES
Short term borrowings - 1,166,396 - - 1,166,396
A/P & accrued expenses 579,268 3,194,626 (512,928)(1) - 3,260,966
Notes payable & other
amounts due to related parties 579,833 149,557 (579,833)(1) - 149,557
Other payables - 578,898 - - 578,898
Other accrued liabilities - 314,563 - - 314,563
Current income tax payable - 45,283 - - 45,283
Dividend payable 4,450 - (4,450)(1) - 0
------------- ------------ ------------- ------------- -------------
Total Liabilities 1,163,551 5,449,323 (1,097,211) - 5,515,663
MINORITY INTEREST 89,000 - (89,000)(1) - 0
------------- ------------ ------------- ------------- -------------
COMMON STOCK 14,099 80,453 - (91,377)(3) 3,175
LEGAL RESERVES - 44,330 - (44,330)(3) 0
ADDITIONAL PAID-IN CAPITAL 15,343,110 690,909 - (15,343,110)(3) 812,517
44,330 (3)
77,278 (3)
Retained earnings/
Accumulated deficit (16,364,689) 1,144,711 1,041,849 (1) 15,360,551 (3) 1,144,711
(37,711)(1)
Cumulative translation
adjustment (37,711) (150,562) 37,711 (1) (150,562) (301,124)
------------- ------------ ------------- ------------- -------------
STOCKHOLDERS' EQUITY/(DEFICIT) (1,045,191) 1,809,841 1,041,849 3,342 1,809,841
------------- ------------ ------------- ------------- -------------
Total Liabilities & S/E 207,360 7,259,164 (55,362) 3,342 7,414,504
------------- ------------ ------------- ------------- -------------
------------- ------------ ------------- ------------- -------------
Shares outstanding post split 313,306 2,862,000 (5)
26,667 (5) 3,201,973
------------- ------------ ------------- ------------- -------------
------------- ------------ ------------- ------------- -------------
SEE ACCOMPANYING NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE>
<PAGE>
HARRIER, INC. AND COPE A.G.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997
(UNAUDITED)
_______________
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS PRO FORMA
------------------------------ ------------
HARRIER, COPE A.G. GLYCOSYN COPE CONSOLIDATED
INC. RECAP & REVERSE TOTALS
NCT ACQ. MERGER
---------- ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
SALES $ - $ 4,746,691 $ - $ - $ 4,746,691
Cost of sales - 3,594,345 - - 3,594,345
---------- ------------ ----------- ----------- ------------
GROSS PROFIT 0 1,152,346 - 1,152,346
---------- ------------ ----------- ----------- ------------
OPERATING EXPENSES:
Selling, general & administrative 43,668 953,552 (6,872)(2) (25,000)(4) 965,341
Salaries, consulting & related exp. 60,128 79,525 (29,316)(2) - 110,337
Depreciation and amortization 3,060 50,616 (2,293)(2) - 51,383
---------- ------------ ----------- ----------- ------------
Total Expenses 106,856 1,083,693 (38,488) (25,000) 1,127,061
---------- ------------ ----------- ----------- ------------
---------- ------------ ----------- ----------- ------------
Gain (Loss) from Operations (106,856) 68,653 38,488 25,000 285
---------- ------------ ----------- ----------- ------------
OTHER INCOME/(EXPENSE):
Grant Income 20,000 0 (20,000)(2) - 0
Interest expense, net (15,244) (31,984) 15,244(2) - (31,984)
Miscellaneous income - 3,333 - - 3,333
Minority interest - (2,635) - - (2,635)
---------- ------------ ----------- ----------- ------------
Total Other Income (Expense) 4,756 (31,286) (4,756) 0 (31,286)
---------- ------------ ----------- ----------- ------------
---------- ------------ ----------- ----------- ------------
Loss Before Income Taxes (102,100) 37,367 33,732 25,000 (6,001)
Provision for Income Taxes
(Benefit) 800 (45,742) - - (44,942)
---------- ------------ ----------- ----------- ------------
Net Profit (Loss) (102,900) 83,109 33,732 25,000 38,941
---------- ------------ ----------- ----------- ------------
---------- ------------ ----------- ----------- ------------
Weighted average number of shares 313,306(5) - - 2,862,000(5) 3,262,862
60,889(5)
26,667(5)
Earnings (Loss) Per Share ($0.33) - - - $0.01
---------- ------------ ----------- ----------- ------------
SEE ACCOMPANYING NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE>
<PAGE>
HARRIER, INC. AND COPE A.G.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 1997
(UNAUDITED)
_______________
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS PRO FORMA
--------------------- ------------
GLYCOSYN COPE
HARRIER, RECAP & REVERSE CONSOLIDATED
INC. COPE A.G. NCT ACQ. MERGER TOTALS
--------- ----------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
SALES $ 48,069 $15,227,998 $ - $ (48,069)(4) $15,227,998
Cost of sales 50,383 10,846,783 - (50,383)(4) 10,846,783
--------- ----------- --------- ---------- -----------
Gross Profit (2,314) 4,381,215 0 2,314 4,381,215
--------- ----------- --------- ---------- -----------
EXPENSES:
Selling, general & administrative 290,442 3,247,534 (80,378)(2) (95,000)(4) 3,362,598
Salaries, consulting & related exp 357,049 328,427 (166,628)(2) - 518,848
Depreciation and amortization 40,489 227,868 (37,255)(2) - 231,102
--------- ----------- --------- ---------- -----------
Total Expenses 687,980 3,803,829 (284,261) (95,000) 4,112,548
--------- ----------- --------- ---------- -----------
--------- ----------- --------- ---------- -----------
Gain (Loss) from Operations (690,294) 577,386 284,261 97,314 265,667
--------- ----------- --------- ---------- -----------
OTHER INCOME/(EXPENSE):
Grant Income 80,000 0 (80,000)(2) - 0
Interest income, net (57,638) (62,889) 57,638(2) - (62,889)
Write-off of intangible assets - 77,990 - - (77,990)
Miscellaneous income (loss) (16,564) 55,857 - - 39,293
--------- ----------- --------- ---------- -----------
Total Other Income (Expense) 5,798 (85,022) (22,362) - (101,586)
--------- ----------- --------- ---------- -----------
--------- ----------- --------- ---------- -----------
Gain (Loss) Before Income Taxes (684,496) 492,364 261,899 97,314 167,081
Provision for Income Taxes
(Benefit) 1,740 4,631 - - 6,371
--------- ----------- --------- ---------- -----------
Net Income (Loss) (686,236) 487,733 261,899 97,314 160,710
--------- ----------- --------- ---------- -----------
--------- ----------- --------- ---------- -----------
Weighted average number of shares 277,084(5) - - 2,862,000(5) 3,226,640
60,889(5)
20,667(5)
Earnings (Loss) Per Share ($2.48) - - - $0.05
--------- ----------- --------- ---------- -----------
</TABLE>
SEE ACCOMPANYING NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
HARRIER, INC. AND COPE A.G.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1997
(UNAUDITED)
_______________
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS PRO FORMA
--------------------- ------------
GLYCOSYN COPE
HARRIER, RECAP & REVERSE CONSOLIDATED
INC. COPE A.G. NCT ACQ. MERGER TOTALS
--------- ----------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
SALES $ 48,069 $15,227,998 $ - $ (48,069)(4) $15,227,998
Cost of sales 50,383 10,846,783 - (50,383)(4) 10,846,783
--------- ----------- --------- ---------- -----------
GROSS PROFIT (2,314) 4,381,215 0 2,314 4,381,215
--------- ----------- --------- ---------- -----------
EXPENSES:
Selling, general & administrative 290,442 3,247,534 (80,378)(2) (95,000)(4) 3,362,598
Salaries, consulting &
related exp. 357,049 328,427 (166,628)(2) - 518,848
Depreciation and amortization 40,489 227,868 (37,255)(2) - 231,102
--------- ----------- --------- ---------- -----------
Total Expenses 687,980 3,803,829 (284,261) (95,000) 4,112,548
--------- ----------- --------- ---------- -----------
--------- ----------- --------- ---------- -----------
Gain (Loss) from Operations (690,294) 577,386 284,261 97,314 268,667
--------- ----------- --------- ---------- -----------
OTHER INCOME/(EXPENSE):
Grant Income 80,000 0 (80,000)(2) - 0
Interest income, net (57,638) (62,889) 57,638 (2) - (62,889)
Write-off of intangible assets - (77,990) - - (77,990)
Miscellaneous income (loss) (16,564) 55,857 - - 39,293
--------- ----------- --------- ---------- -----------
Total Other Income (Expense) 5,798 (85,022) (22,362) - (101,586)
--------- ----------- --------- ---------- -----------
--------- ----------- --------- ---------- -----------
Gain (Loss) Before Income Taxes (684,496) 492,364 261,899 97,314 167,081
Provision for Income Taxes 1,740 4,631 - - 6,371
--------- ----------- --------- ---------- -----------
Net Income (Loss) (686,236) 487,733 261,899 97,314 160,710
--------- ----------- --------- ---------- -----------
--------- ----------- --------- ---------- -----------
Weighted average number of
shares 277,084(5) - - 2,862,000(5) 3,226,640
60,889(5)
20,667(5)
Earnings (Loss) Per Share ($2.48) - - - $0.05
--------- ----------- --------- ---------- -----------
</TABLE>
SEE ACCOMPANYING NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
HARRIER, INC. AND COPE A.G.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 1997, FOR THE THREE MONTH PERIOD ENDED
SEPTEMBER 30, 1997 AND FOR THE YEAR ENDED JUNE 30, 1997
(UNAUDITED)
_______________
1. BASIS OF PRESENTATION
The pro forma condensed consolidated balance sheet (unaudited) as of
September 30, 1997 and the pro forma condensed consolidated statements
of operations (unaudited) for the three month period ended September 30,
1997 and for the year ended June 30, 1997 reflect 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. 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 $580,000 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 45 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 89.2% 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 consummation of the COPE Reorganization and the Glycosyn
Recapitalization are subject to approval by the stockholders of the
Company. An annual meeting of the stockholders of the Company has been
tentatively scheduled for March 12, 1998, 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 $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 5,000,000 Glycosyn Common Stock shares
in consideration of NCIF's agreement to cancel all
<PAGE>
indebtedness owed by Harrier. As of December 31, 1997, the total amount
of such indebtedness was $595,107, however for purposes of these pro
forma financials the indebtedness is represented as $590,000. 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 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. An annual meeting of the stockholders of the Company has
tentatively been scheduled for March 12, 1998 at which time the Glycosyn
Recapitalization will be submitted for shareholder approval.
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.
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
September 30, 1997 and July 1, 1996, respectively.
2. DESCRIPTION OF PRO FORMA ADJUSTMENTS
(1) GLYCOSYN RECAPITALIZATION AND GLYCOSYN'S ACQUISITION OF A MINORITY
INTEREST IN NCT
This adjustment reflects the assignment of $512,928 in payables to
Glycosyn and the deconsolidations of Glycosyn after the sale of 55%
of the Company's 95% interest in Glycosyn's common stock. The
$579,833 in debt to related party will be canceled in consideration
for the sale of the majority interest. Because of Glycosyn's
negative equity, the Company's basis is nil and Harrier will record
a gain on assignment and disposition of majority interest of
$1,041,849. The acquisition by Glycosyn of a minority interest in
NCT has no impact on Harrier's financial statements after the sale
of its majority interest and, therefore, was not reflected herein.
(2) RECOGNITION OF GLYCOSYN'S RECAPITALIZATION AND NCT ACQUISITION IN THE
STATEMENTS 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 July 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 July 1, 1997.
Since the Company's basis in Glycosyn would have been nil, there is
no equity in losses of Glycosyn for the periods presented.
(3) REVERSE MERGER OF COPE A.G.
Since the owners of COPE A.G. will remain 90% 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, there will be no
excess of purchase price over fair market value of net assets
acquired.
<PAGE>
(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 in this pro forma adjustment.
In addition, because approximately $25,000 and $95,000 in legal,
consulting and administrative expenses were incurred during the
three months ended September 30, 1997 and the year ended June 30,
1997, as a result of the transactions described above, and these
expenses will not be recurring, they were reversed on a pro forma
basis.
(5) PRO FORMA EARNINGS PER SHARE
Weighted number of shares reflects the one for forty-five share
reverse split to be effected as part of the COPE merger transaction.
The 2,862,000 shares adjustment reflects the issuance of stock in
connection with the COPE reverse merger and the 26,667 shares
adjustment represents shares the Company had to issue subsequent to
September 30, 1997 in order to fund operating expenses during the
merger negotiations and implementation process.
When the combined entity's operations result in a pro forma net
profit, the weighted average number of shares has been adjusted to
include all 60,889 common stock equivalents (options and warrants).
Such common stock equivalents are excluded when the entity's
operations result in a loss.
<PAGE>
APPENDIX A
SECURITIES PURCHASE AGREEMENT
AND PLAN OF REORGANIZATION
THIS SECURITIES PURCHASE AGREEMENT AND PLAN OF REORGANIZATION
("Agreement") is entered into on October 30, 1997 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 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 15,317,923 shares of Harrier Common Stock
and no shares of Harrier Preferred Stock.
B. 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.
C. COPE has share capital of SFr106,000 consisting of 1,060 shares (the
"COPE Shares") of SFr100 par value capital stock ("COPE Capital Stock").
D. Prior to the Closing (as defined in Section 1.4), Harrier shall
effect a 1 for 45 reverse split ("Reverse Split") of the issued and
outstanding shares of Harrier Common Stock.
E. 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").
F. 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
January 30, 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 14,767,923 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: Bruck & Perry
A Professional Corporation
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 March __, 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 March 1998.
HARRIER, INC.
By:
---------------------------------------
Kevin DeVito, Chief Executive Officer
<PAGE>
HARRIER, INC. PRELIMINARY COPIES
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 March 12, 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").
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").
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 45
basis (the "Amendment Proposal").
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.
/ / 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.
/ / 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.
<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: February ___, 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 / /
