<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the period ended March 31, 2000
OR
[ ] Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the transition period
from to
-------------- --------------
Commission file number 0-26323
ADVANCED BIOTHERAPY CONCEPTS, INC.
(Exact name or registrant as specified in its charter)
Nevada 95-4066865
(State of jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
6355 Topanga Canyon Boulevard
Suite 510
Woodland Hills, California 91367
(Address of principal executive offices, including zip code)
(818) 883-3956
(Registrant's telephone number, including area code)
Indicate by mark whether the Registrant (1) has filed all reports required to be
filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
[X] YES [ ] NO
As of March 31, 2000, the Registrant had 39,398,265 shares of common stock,
$0.001 par value, outstanding.
---------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
ITEM PAGE
PART I.
1. Financial Statements
a. Accountant's Review Report
b. Balance Sheets -- March 31, 2000 (unaudited) and December 31, 1999
c. Statement of Operations -- Three Months Ended March 31, 2000, March
31, 1999 and from Inception through March 31, 2000
d. Statement of Cash Flows -- Three Months Ended March 31, 2000, March
31, 1999 and from Inception through March 31, 2000
e. Notes to Financial Statements
2. Management's discussion and Analysis of Financial Condition and Results
of Operations
PART II.
2. Changes In Securities
6. Exhibits and Reports on Form 8-K
<PAGE>
PART I
ITEM 1. FINANCIAL STATEMENTS
ACCOUNTANT'S REVIEW REPORT
The Board of Directors
Advanced Biotherapy Concepts, Inc.
Woodland Hills, CA 91367
We have reviewed the accompanying balance sheet of Advanced Biotheraphy
Concepts, Inc. (a Development Stage Enterprise), as of March 31, 2000, and the
related statements of operations, stockholders' equity, and cash flows for the
three-month period ended March 31, 2000. All information included in these
financial statements is the representation of the management of Advanced
Biotherapy Concepts, Inc.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit in accordance with
generally accepted auditing standards, the objective of which is the expression
of an opinion regarding the financial statements taken as a whole. Accordingly,
we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial statements in order for them to be in
conformity with generally accepted accounting principles.
The financial statements for the year ended December 31, 1999 were audited by us
and we expressed an unqualified opinion on it in our report dated April 5, 2000.
We have not performed any auditing procedures since that date.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company has suffered recurring losses from operations,
has generated little revenue in the past years, and has a working capital
deficit of $63,481 at March 31, 2000. These conditions raise substantial doubt
about the Company's ability to continue as a going concern. Management's plans
regarding this issue are also discussed in Note 2, and include additional
capitalization of the Company, as well as an attempt to decrease expenses. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
Williams & Webster, P.S.
CERTIFIED PUBLIC ACCOUNTANTS
Spokane, Washington
May 9, 2000
<PAGE>
ADVANCED BIOTHERAPY CONCEPTS, INC.
(A DEVELOPMENT STAGE ENTERPISE)
BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
March 31, December 31,
2000 1999
(Unaudited)
------------ ------------
<S> <C> <C>
CURRENT ASSETS
Cash $ 4,937 $ 34,958
------------ ------------
TOTAL CURRENT ASSETS 4,937 34,958
------------ ------------
PROPERTY AND EQUIPMENT, net of depreciation - -
------------ ------------
OTHER ASSETS
Notes receivable-related party 246,619 -
Interest receivable 3,504 -
Patents and patents pending, net of accumulated amortization 111,503 113,319
------------ ------------
TOTAL OTHER ASSETS 361,626 113,319
------------ ------------
TOTAL ASSETS $ 366,563 $ 148,277
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable $ 68,418 $ 93,934
Loan payable to related party - 257,076
------------ ------------
TOTAL CURRENT LIABILITIES 68,418 351,010
LONG-TERM LIABILITIES
Notes payable, related parties 127,631 213,381
------------ ------------
TOTAL LIABILITIES 196,049 564,391
------------ ------------
COMMITMENTS AND CONTINGENCIES - -
------------ ------------
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, par value $0.001 per share; 50,000,000 shares authorized;
39,398,265 and 30,198,265 shares issued and outstanding 39,398 30,198
Subscriptions receivable - (32,500)
Stock options 210,738 210,738
Stock warrants 168,665 -
Additional paid-in capital 3,223,545 2,770,305
Deficit accumulated during the development stage (3,471,832) (3,394,855)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) 170,514 (416,114)
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ 366,563 $ 148,277
============ ============
See accompanying notes and accountant's review report.
</TABLE>
<PAGE>
ADVANCED BIOTHERAPY CONCEPTS, INC.
(A DEVELOPMENT STAGE ENTERPISE)
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
From Inception
December 2,
Quarter Ended 1985
------------------------------ Through
March 31, 2000 March 31, 1999 March 31, 2000
----------------
(Unaudited) (Unaudited) (Unaudited)
------------- --------------- ----------------
<S> <C> <C> <C>
REVENUES $ - $ - $ 89,947
------------- --------------- ----------------
OPERATING EXPENSES
Research and development 648 4,279 2,105,694
Professional fees 189,338 12,518 1,311,089
Depreciation and amortization 2,627 1,500 410,409
Salaries and benefits - - 751,501
Contract services 10,000 - 10,000
Shareholder relations and
transfer fees 1,725 3,000 129,871
Rent 450 - 111,504
General and administrative 3,210 412 566,203
------------- --------------- ----------------
207,998 21,709 5,396,271
------------- --------------- ----------------
Loss from operations (207,998) (21,709) (5,306,324)
Other income (expense)
Miscellaneous income - - 22,000
Internal gain on sale of
securities 129,445 - 129,445
Interest income 3,566 36 4,662
Interest expense (1,990) - (369,052)
------------- --------------- ----------------
131,021 36 (212,945)
------------- --------------- ----------------
Loss before extraordinary item (76,977) (21,673) (5,519,269)
Extraordinary item, forgiveness
of debt - - 2,047,437
------------- --------------- ----------------
NET LOSS $ (76,977) $ (21,673) $ (3,471,832)
============= =============== ================
BASIC AND DILUTED NET LOSS
PER COMMON STOCK SHARE
OUTSTANDING $ nil $ nil $ (0.16)
============= =============== ================
WEIGHTED AVERAGE NUMBER OF
BASIC AND DILUTED COMMON
STOCK SHARES OUTSTANDING 38,286,177 27,874,775 21,248,977
============= =============== ================
See accompanying notes and accountant's review report.
</TABLE>
<PAGE>
ADVANCED BIOTHERAPY CONCEPTS, INC.
(A DEVELOPMENT STAGE ENTERPISE)
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
Deficit
Accumulated
Common Stock Additional During
--------------------- Paid-in Stock Stock Stock Development
Shares Amount Capital Subscriptions Warrants Options Stage
---------- ---------- ------------ ------------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1997 26,836,075 $ 26,836 $ 2,522,459 $ - $ - $ -5) $ (4,278,835)
Common stock issued 305,000 305 30,195 - - - -
Net loss for the year ended
December 31, 1998 - - - - - - (259,912)
---------- ---------- ------------ ------------- ------------- ---------- -------------
Balance, December 31, 1998 27,141,075 27,141 2,552,654 - - - (4,538,747)
Common stock issued at
approximately $0.05 per
share 3,158,000 3,158 151,993 - - - -
Cancellation of escrowed
shares (850,000) (850) 850 - - - -
Common stock issued for
services at approximately
$0.05 per share 99,190 99 4,860 - - - -
Contribution of capital by
shareholders in form of
foregone interest and rent - - 28,098 - - - -
Stock subscriptions issued 650,000 650 31,850 (32,500) - - -
Stock options issued in
exchange for forgiveness
of accrued wages - - - - - 210,738 -
Net income for the year ended
December 31, 1999 - - - - - - 1,143,892
---------- ---------- ------------ ------------- ------------- ---------- -------------
Balance, December 31, 1999 30,198,265 30,198 2,770,305 (32,500) - 210,738 (3,394,855)
Contribution of capital by
shareholders in form of
foregone interest and rent - - 2,440 - - - -
Stock subscriptions paid - - - 32,500 - - -
Stock bonus plan issued in
exchange for loan payable
and notes receivable 9,200,000 9,200 450,800 - - - -
Stock warrants issued in
exchange for services - - - - 168,665
Net income for the three
month period ended
March 31, 2000 - - - - - - (76,977)
---------- ---------- ------------ ------------- ------------- ---------- -------------
Balance, March 31, 2000
(Unaudited) 39,398,265 $ 39,398 $ 3,223,545 $ - $ 168,665 $ 210,738 $ (3,471,832)
========== ========== ============ ============= ============= ========== =============
See accompanying notes and accountant's review report.
</TABLE>
Required information regarding stock issuances prior to January 1, 1999 can be
found in Note 8.
<PAGE>
ADVANCED BIOTHERAPY CONCEPTS, INC.
(A DEVELOPMENT STAGE ENTERPISE)
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
From Inception
Quarter Ended March December 2,1985
31, through
----------------------- March 31,
2000 1999 2000
(Unaudited) (Unaudited) (Unaudited)
----------- ---------- ----------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (76,977) $ (21,673) $(3,471,832)
Adjustments to reconcile
net loss to cash used in
operating activities:
Depreciation and
amortization 2,627 1,500 410,409
Extraordinary gain - - (1,684,068)
Investment income (129,445) - (129,445)
Expenses paid through issuance
of common stock - - 231,340
Expenses paid through issuance
of common stock warrants 168,665 - 168,665
Expenses paid through
contribution of additional
paid in capital 2,440 - 30,538
Organization costs - - (9,220)
Decrease (increase) in:
Interest receivable (3,504) - (3,504)
Increase (decrease) in:
Accounts payable (25,516) (8,216) 68,418
Accounts payable, related parties (129,444) - 127,632
Salaries payable - - 1,682,984
Accrued interest - - 9,962
----------- ---------- ----------------
Net cash used in operating activities (191,154) (28,389) (2,568,121)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets - - (36,973)
Internal gain on sale of securities 129,445 - 129,445
Acquisition of patents (812) - (179,049)
----------- ---------- ----------------
Net cash provided (used) in investing
activities 128,633 - (86,577)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of
common stock - 73,120 2,413,754
Proceeds from stock
subscriptions 32,500 - 32,500
Proceeds from notes payable - - 288,508
Payments on notes payable - - (75,127)
----------- ---------- ----------------
Net cash provided by
financing activities 32,500 73,120 2,659,635
------------ ---------- ---------------
Net increase (decrease) in cash (30,021) 44,731 4,937
Cash, beginning 34,958 1,182 -
----------- ---------- ---------------
Cash, ending $ 4,937 $ 45,913 $ 4,937
=========== ========== ===============
Supplemental disclosures:
Interest paid $ - $ - $ 339,927
=========== ========== ================
Income taxes paid $ - $ - $ -
=========== ========== ================
4
NON-CASH FINANCING AND INVESTING
ACTIVITIES:
Professional fees and expenses $ - $ - $ 368,967
Common stock subscribed $ - $ - $ 32,500
Common stock issued in exchange
for a loan payable
and notes receivable $ 460,000 $ - $ 460,000
Warrants issued for services $ 168,665 $ - $ 168,665
</TABLE>
See accompanying notes and accountant's review report.
<PAGE>
ADVANCED BIOTHERAPY CONCEPTS, INC.
(A DEVELOPMENT STAGE ENTERPISE)
NOTES TO FINANCIAL STATEMENTS
March 31, 2000 and December 31, 1999
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
Advanced Biotherapy Concepts, Inc. (hereinafter "the Company"), was incorporated
December 2, 1985 under the laws of the State of Nevada. The Company is involved
in the research and development of the treatment of autoimmune diseases in
humans. The Company is currently conducting research in Maryland.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of Advanced Biotherapy Concepts,
Inc. is presented to assist in understanding the Company's financial statements.
The financial statements and notes are representations of the Company's
management which is responsible for their integrity and objectivity. These
accounting policies conform to generally accepted accounting principles and have
been consistently applied in the preparation of the financial statements.
DEVELOPMENT STAGE ACTIVITIES
The Company has been in the development stage since its formation in 1985 and
has not realized any significant revenues from its planned operations. It is
primarily engaged in the research and development of the treatment of autoimmune
diseases in humans.
GOING CONCERN
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern.
As shown in the accompanying financial statements, the Company incurred a net
loss of $76,977 for the first quarter of 2000. At March 31, 2000, current
liabilities exceed current assets by $63,481 and the Company has an accumulated
deficit during the development stage at March 31, 2000 of $3,471,832. The future
of the Company is dependent upon its ability to obtain financing, and upon
future profitable operations from the commercial success of its medical research
and development of products to combat diseases of the human immune system and
products for treatment of viral and bacterial diseases of animals. Management
has established plans designed to increase the capitalization of the Company and
is actively seeking additional capital that will provide funds needed to
increase liquidity, fund the research and development and therefore the internal
growth of the Company, in order to fully implement its business plans. For the
twelve-month period subsequent to December 31, 1999, the Company anticipates
that its minimum cash requirements to continue as a going concern will be less
than $250,000. The anticipated source of funds will be provided from the
issuance for cash of additional common stock of the Company. In addition,
management is actively seeking a collaborative relationship with either a
pharmaceutical or biotechnology company. If successful, cash requirements may be
met through royalty or licensing fees. The financial statements do not include
any adjustments relating to the recoverability and classification of recorded
assets, or the amounts and classification of liabilities that might be necessary
in the event the Company cannot continue in existence.
ACCOUNTING METHOD
The Company's financial statements are prepared using the accrual method of
accounting.
<PAGE>
ADVANCED BIOTHERAPY CONCEPTS, INC.
(A DEVELOPMENT STAGE ENTERPISE)
NOTES TO FINANCIAL STATEMENTS
March 31, 2000 and December 31, 1999
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CASH AND CASH EQUIVALENTS
For purposes of the Statement of Cash Flows, the Company considers all
short-term debt securities purchased with a maturity of three months or less to
be cash equivalents.
PROVISION FOR TAXES
At March 31, 2000, the Company had net operating loss carryforwards of
approximately $3,400,000 which may be offset against future taxable income. No
tax benefit has been reported in the financial statements, as the Company
believes there is a 50% or greater chance that the net operating loss
carryforwards will expire unused. Accordingly, the potential tax benefits of the
net operating loss carryforwards are offset by a valuation allowance of the same
amount.
USE OF ESTIMATES
The process of preparing financial statements in conformity with generally
accepted accounting principles requires the use of estimates and assumptions
regarding certain types of assets, liabilities, revenues, and expenses. Such
estimates primarily relate to unsettled transactions and events as of the date
of the financial statements. Accordingly, upon settlement, actual results may
differ from estimated amounts.
IMPAIRED ASSET POLICY
In March 1995, the Financial Accounting Standards Board issued a statement
titled "Accounting for Impairment of Long-lived Assets." In complying with this
standard, the Company reviews its long-lived assets quarterly to determine if
any events or changes in circumstances have transpired which indicate that the
carrying value of its assets may not be recoverable. The Company determines
impairment by comparing the undiscounted future cash flows estimated to be
generated by its assets to their respective carrying amounts. The Company does
not believe any adjustments are needed to the carrying value of its assets at
March 31, 2000 and December 31, 1999.
RECLASSIFICATIONS
Certain amounts from prior periods have been reclassified to conform with the
current period presentation. This reclassification has resulted in no changes to
the Company's accumulated deficit or net losses presented.
INTERIM FINANCIAL STATEMENTS
The interim financial statements as of and for the three months ended March 31,
2000, included herein have been prepared for the Company, without audit. They
reflect all adjustments, which are, in the opinion of management, necessary to
present fairly the results of operations for these periods. All such adjustments
are normal recurring adjustments. The results of operations for the periods
presented are not necessarily indicative of the results to be expected for the
full fiscal year.
<PAGE>
ADVANCED BIOTHERAPY CONCEPTS, INC.
(A DEVELOPMENT STAGE ENTERPISE)
NOTES TO FINANCIAL STATEMENTS
March 31, 2000 and December 31, 1999
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
DERIVATIVE INSTRUMENTS
In June 1998 the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This new standard establishes accounting
and reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. It requires
that an entity recognize all derivatives as either assets or liabilities in the
balance sheet and measure those instruments at fair value.
At March 31, 2000, the Company has not engaged in any transactions that would be
considered derivative instruments or hedging activities.
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is provided using the
straight-line method over the estimated useful lives of the assets. The
following is a summary of property, equipment and accumulated depreciation at
March 31, 2000 and December 31, 1999.
Accumulated
Cost Depreciation
----------- --------------
Lab equipment $ 27,582 $ 27,582
Office equipment 4,839 4,839
Furniture and fixtures 1,302 1,302
----------- --------------
$ 33,723 $ 33,723
=========== ==============
There was no depreciation expense for the period ended March 31, 2000 and the
year ended December 31, 1999.
NOTE 4 - INTANGIBLE ASSETS
PATENTS AND PATENTS PENDING
Costs relating to the development and approval of patents, other than research
and development costs, which are expensed, are capitalized and amortized using
the straight-line method over seventeen years.
Accumulated
Cost amortization Net amount
---------- ------------- ----------
Balance, at December 31, 1998 $ 132,311 $ (55,784) $ 76,527
1999 Activity 45,925 (9,133) 36,792
---------- ------------- ----------
Balance, December 31, 1999 178,236 (64,917) 113,319
2000 Activity 811 (2,627) (1,816)
---------- ------------- ----------
Balance, March 31, 2000 $ 179,047 $ (67,544) $ 111,503
========== ============= ==========
<PAGE>
ADVANCED BIOTHERAPY CONCEPTS, INC.
(A DEVELOPMENT STAGE ENTERPISE)
NOTES TO FINANCIAL STATEMENTS
March 31, 2000 and December 31, 1999
NOTE 5 - RELATED PARTY TRANSACTIONS
The Company's chairman and principal shareholder has advanced funds to pay a
significant portion of the Company's expenses since 1989. At December 31, 1999,
the cumulative amounts owed to the chairman for expenses amount to $257,076.
Even though the chairman is not charging interest to the Company, interest was
calculated at the applicable federal rate of 5.59% at December 31, 1999. This
interest was recorded as interest expense and contributed capital in the
accompanying financial statements. During 2000, the Company paid part of this
note and the balance was used to offset a bonus stock sale to the chairman. At
December 31, 1998 the amounts owing to the Company's chairman for accrued salary
was $1,146,000. During 1999 an additional salary was accrued in the amount of
$100,000. At December 31, 1999, in accordance with an agreement with other
employee/shareholders of the Company, the chairman received options to purchase
623,000 shares of common stock at $0.10 per share. The value of these options,
in the amount of $155,750, was used to reduce the accrued salary of the
chairman. See Note 9. In 1999, the chairman forgave the balance of accrued
salary of $1,090,250 along with accrued interest of $9,962. This is recorded in
the financial statements as a component of extraordinary income.
At December 31, 1999, the Company owed its secretary/treasurer $13,381 for
expenses paid in previous years and recorded in notes payable. During 2000, this
note was used as partial payment for a bonus stock purchase by the
secretary/treasurer. At December 31, 1998 the Company also owed $184,000 in
unpaid salary recorded as salary payable. During 1999, additional salary in the
amount of $45,000 was accrued for this employee. At December 31, 1999, in
accordance with an agreement with other employee/shareholders of the Company,
the secretary/treasurer received options to purchase 114,500 shares of common
stock at $0.10 per share. The value of these options, in the amount of $28,625,
was used to reduce the accrued salary of this employee/shareholder. See Note 9.
In 1999, the secretary/treasurer forgave the balance of accrued salary in the
amount of $200,375. This is recorded in the financial statements as a component
of extraordinary income.
At December 31, 1998 the CEO of the Company was owed $171,360 in accrued salary.
During 1999, a portion of this liability was paid. Also during 1999, additional
salary in the amount of $75,000 was accrued. At December 31, 1999, in accordance
with an agreement with other employee/shareholders of the Company, the CEO
received options to purchase 105,453 shares of common stock at $0.10 per share.
The value of these options in the amount of $26,363 was used to reduce the
accrued salary of the CEO. See Note 9. In 1999, the CEO forgave the balance of
accrued salary in the amount of $181,622. This is recorded in the financial
statements as a component of extraordinary income.
Notes payable to related parties consist of loans payable to the chairman and
principal shareholder and to another officer. During 2000, $85,750 of the notes
was used to offset a bonus stock sale. The remaining notes have no specific due
date, are currently uncollateralized, and are non-interest bearing, however,
interest was calculated at the applicable federal rate in place at March 31,
2000 in the amount of 6.27%. This interest was recorded as interest expense and
contributed capital in the accompanying financial statements.
During 2000 and 1999, the Company received the use of approximately 3,500 square
feet of commercial building space on a rent-free basis from a firm owned by one
of the Company's directors. The utilization of the facility in this manner is
mutually beneficial to the Company and the owner of this otherwise empty
facility. No formal agreement ____ memorializes this month-to-month arrangement.
The value of the use of the facility is approximately $150 per month, and is
recorded in the financial statements as rent expense and contributed capital.
<PAGE>
ADVANCED BIOTHERAPY CONCEPTS, INC.
(A DEVELOPMENT STAGE ENTERPISE)
NOTES TO FINANCIAL STATEMENTS
March 31, 2000 and December 31, 1999
NOTE 6 - INTERNAL GAIN ON SALE OF SECURITIES
During the quarter ending March 31, 2000, an officer of the Company sold stock
at a gain shortly after purchasing stock through a stock bonus plan. In
compliance with the Securities and Exchange Rule 16b, the stockholder remitted
the gain to the Company. The gain amounted to $129,445 and is reflected in the
income statement as internal gain on sale of securities.
Subsequent to the date of these financial statements, another officer remitted
similar gains to the Company in the amount of $28,075.
NOTE 7 - YEAR 2000 ISSUES
Like other companies, Advanced Biotherapy Concepts, Inc. could be adversely
affected if the computer systems it, or its suppliers or customers, uses do not
properly process and calculate date-related information and data from the period
surrounding and including January 1, 2000. This is commonly known as the "Year
2000" issue. Additionally, this issue could impact non-computer systems and
devices such as production equipment, elevators, etc. The costs related to Year
2000 compliance are expensed as incurred. At this time, there have been no known
effects to the Company in regards to the Year 2000 issue.
NOTE 8 - COMMON STOCK AND ADDITIONAL PAID-IN CAPITAL
Information regarding the number of shares issued and consideration received is
as follows:
Common stock
--------------------------------
Additional
Amount per Paid-in
share Shares Amount Capital
------------------------------------------------
Common stock issued for cash:
1985 $ .50 100,000 $ 100 $ 49,900
1986 1.00 639,500 640 678,861
1987 1.00 850,500 850 759,650
1988 1.00 25,000 25 24,975
1993 .25 2,402,000 2,402 475,900
1995 .05 1,000,000 1,000 49,000
1996 .05 520,000 520 25,480
1997 .05 490,000 490 24,010
1997 .10 1,310,500 1,311 129,739
1997 .01 325,000 325 2,925
1998 .10 305,000 305 30,195
1999 .05 3,158,000 3,158 151,993
---------------------------------------
11,125,500 11,126 2,402,628
---------------------------------------
Common stock issued for patents
assigned:
1984 .01 550,000 5,500 0
1985, adjustment to reflect
change in number and par value
of shares outstanding 2,750,000 (2,200) 2,200
---------------------------------------
3,300,000 3,300 2,200
---------------------------------------
<PAGE>
ADVANCED BIOTHERAPY CONCEPTS, INC.
(A DEVELOPMENT STAGE ENTERPISE)
NOTES TO FINANCIAL STATEMENTS
March 31, 2000 and December 31, 1999
NOTE 8 - COMMON STOCK AND ADDITIONAL PAID-IN CAPITAL (CONTINUED)
Common stock
---------------------------------
Additional
Amount per Paid-in
share Shares Amount Capital
-------------------------------------------------
Common stock issued
for acquisitions:
1985 $ .01 13,333,500 $ 13,334 $ (41,112)
--------------------------------------
Common stock issued
for note receivable:
1986 1.00 10,000 10 9,990
2000 .05 4,932,380 4,932 241,687
--------------------------------------
4,942,380 4,942 251,677
--------------------------------------
Contribution of additional
paid in capital:
1999 - - - 28,098
2000 - - - 2,440
--------------------------------------
- - 30,538
--------------------------------------
Stock subscriptions:
1999 .05 650,000 650 31,850
--------------------------------------
Cancellation of escrowed shares:
1999 .001 (850,000) (850) 850
--------------------------------------
Common stock issued for services (1):
1988 .50 25,000 25 12,475
1989 .20 20,000 20 3,980
1989 1.10 5,000 5 5,495
1990 .50 3,500 4 1,746
1990 .62 14,750 14 9,131
1990 .66 10,875 11 7,166
1990 .80 8,250 8 6,592
1991 .31 7,000 7 2,163
1991 .34 100,000 100 33,900
1991 1.00 2,500 3 2,497
1991 .85 50,000 50 42,450
1992 .625 2,000 2 1,248
1992 .75 60,500 60 45,315
1993 .25 120,000 120 29,880
1996 .03 234,000 234 6,786
1996 .05 26,000 26 1,274
1996 .12 48,500 48 5,772
1997 .05 155,500 155 7,619
1999 .05 99,190 99 4,860
--------------------------------------
992,565 991 230,349
--------------------------------------
<PAGE>
ADVANCED BIOTHERAPY CONCEPTS, INC.
(A DEVELOPMENT STAGE ENTERPISE)
NOTES TO FINANCIAL STATEMENTS
March 31, 2000 and December 31, 1999
NOTE 8 - COMMON STOCK AND ADDITIONAL PAID-IN CAPITAL (CONTINUED)
Common stock
--------------------------------
Additional
Amount per Paid-in
share Shares Amount Capital
------------------------------------------------
Common stock issued to
replace unrecorded certificates:
1988 $ .001 $ 1,200 $ 1 $ (1)
1992 .001 500 1 (1)
---------------------------------------
1,700 2 (2)
---------------------------------------
Common stock issued for
forgiveness of accounts
payable (1):
1990 .50 25,000 25 12,475
1996 .05 150,000 150 7,350
--------------------------------------
175,000 175 19,825
--------------------------------------
Common stock issued in
payment of notes payable (1):
2000 .05 1,714,995 1,715 84,035
-------------------------------------
Common stock issued in
payment of loans payable (1):
2000 .05 2,552,625 2,553 125,078
--------------------------------------
Common stock issued
for commissions (1):
1993 .001 1,260,000 1,260 -
--------------------------------------
Stock options issued
1993 - for debt repayment (1) .25 200,000 200 49,800
1991 - for services (1) 35,825
--------------------------------------
Total 39,398,265 $ 39,398 $ 3,223,545
======================================
(1)Per share amounts determined by information deemed most reliable based on
circumstances of each case: trading price at time of issuance or value of
services received.
STOCK BONUS PLAN
On January 11, 2000, the Company issued 9,200,000 shares of common stock to
certain key officers and directors under a stock bonus plan, subject to various
restrictions. The plan's purpose is to keep personnel of experience and ability
in the employ of the Company and to compensate them for their contributions to
the growth of the Company, thereby inducing them to continue to make such
contributions in the future. Such stock bonuses were issued at the weighted
average price at which the Company has been selling shares of stock out of
authorized but yet unissued common stock to third parties during the six months
immediately preceding the issuance of the bonus shares, or $0.05.
<PAGE>
ADVANCED BIOTHERAPY CONCEPTS, INC.
(A DEVELOPMENT STAGE ENTERPISE)
NOTES TO FINANCIAL STATEMENTS
March 31, 2000 and December 31, 1999
NOTE 9 - STOCK OPTIONS AND ISSUANCE COMMITMENTS
On February 25, 1991, the Corporation granted non-statutory options to purchase
stock to members of its board of directors, officers, and outside consultants.
These remaining options offer a total of 860,000 shares at a price of $.20 per
share with an exercise period of February 25, 1991, to February 25, 2001.
Additional options were issued effective February 1, 1993, for a total of
250,000 shares at a price of $.01 per share, with an exercise period of February
1, 1993, to February 1, 2003. During 1995, options for 50,000 shares were
granted at $.20 per share which expire in 2005. Also in 1995, options for
350,000 shares were granted at $.01 per share expiring in 2005. During 1996,
options for 525,000 shares were granted at $.10 per share. The shares purchased
will be restricted and, therefore, may not be transferred without registration
under applicable Federal and State securities laws.
Stock options granted to a director of the Company for 325,000 shares at a price
of $.01 were exercised in 1997. On December 31, 1999, three officers of the
Company received 842,953 stock options in partial payment of accrued salaries.
In accordance with Statement or Financial Accounting Standard No. 123, the fair
value of the options was estimated using the Black Scholes Option Price
Calculation. The following assumptions were made to value the stock options:
strike price at $0.10, risk free interest rate at 5%, expected life at 5 years,
and expected volatility at 30%. At December 31, 1999, the Company recorded
$210,738 ($0.25 per options) to reduce accrued wages for the value of these
options based upon these Black Scholes assumptions. These stock options are
exercisable immediately, and expire on December 31, 2005. See Note 5. No options
were exercised or cancelled in the three-month period ended March 31, 2000, or
the year ending December 31, 1999.
Grant date Expiration date Number of shares Exercise price
--------------------------------------------------------------------------
02/25/91 02/25/01 650,000 $.20
11/30/95 11/30/05 350,000 .01
12/01/95 12/01/05 50,000 .20
02/01/93 02/01/03 150,000 .01
02/25/91 02/25/01 125,000 .20
02/25/91 02/25/01 85,000 .20
02/01/93 02/01/03 100,000 .01
11/20/96 12/01/05 525,000 .10
12/31/99 12/31/05 842,953 .10
------------
Total 2,877,953
============
Options exercisable at March 31, 2000 and December 31, 1999 are 2,877,953.
NOTE 10 - INCOME (LOSS) PER SHARE
Basic earnings (loss) per share is computed by dividing the net income (loss) by
the weighted average number of shares outstanding during the period. The
weighted average number of shares is calculated by taking the number of shares
outstanding and weighting them by the amount of time that they were outstanding.
Diluted earnings (loss) per share is computed by dividing the net income (loss)
by the weighted average number of diluted shares outstanding during the period.
Diluted net loss per share is the same as basic net loss per share as inclusion
of the common stock equivalents would be antidilutive.
<PAGE>
ADVANCED BIOTHERAPY CONCEPTS, INC.
(A DEVELOPMENT STAGE ENTERPISE)
NOTES TO FINANCIAL STATEMENTS
March 31, 2000 and December 31, 1999
NOTE 11 - NON-CASH COMMITMENT
On January 19, 2000, the Company engaged Cappello Capital Corp. of Santa Monica,
California, to serve as the Company's investment banking firm and strategic
advisor. Pursuant to the Company's agreement with Cappello Capital Corp.
("Agreement"), the Company agreed to issue to Cappello Capital Corp. or its
designees, as partial compensation for its services, warrants to purchase up to
4,685,135 shares of Company Common Stock with an exercise price of $0.15 per
share. The warrants are exercisable for ten years. A cash-less exercise may be
used for all warrant transactions. No fees are payable to Cappello Capital Corp.
in connection with the exercise of the warrants. The warrants will contain full,
unconditional piggy-back registration rights without any holdback obligations.
Should Cappello Capital Corp. elect to cancel its Agreement with the Company
within the first twelve months following the date thereof, then the Company
would be entitled to cancel a pro rata share of the warrants based upon the
number of days remaining in the one year period from the date of Cappello
Capital Corp.'s notice of cancellation.
<PAGE>
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
EXCEPT FOR THE HISTORICAL INFORMATION CONTAINED HEREIN, THE FOLLOWING DISCUSSION
CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVES RISKS AND UNCERTAINTIES,
INCLUDING STATEMENTS REGARDING THE PERIOD OF TIME WHICH THE COMPANY'S EXISTING
CAPITAL RESOURCES FROM VARIOUS RESOURCES WILL BE ADEQUATE TO SATISFY ITS CAPITAL
REQUIREMENTS. THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE
DISCUSSED HEREIN. FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES
INCLUDE BUT ARE NOT LIMITED TO, THOSE DISCUSSED IN THIS SECTION, AS WELL AS IN
THE SECTIONS ENTITLED BUSINESS, TECHNICAL BACKGROUND, RISK FACTORS, DESCRIPTION
OF PROPERTIES, LEGAL PROCEEDINGS, SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS, MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER'S MATTERS
OF THE COMPANY'S ANNUAL REPORT (FORM 10-KSB/A) FOR THE FISCAL YEAR ENDING
DECEMBER 31, 1999.
Results of Operations
Liquidity and Capital Resources.
As of March 31, 2000, the Company has issued and outstanding 39,398,265
shares of its Common Stock to officers, directors and others. The Company is a
development stage company and has no material assets. The Company had $4,937 in
cash as of March 31, 2000.
Three Months Ended March 31, 2000 and 1999.
For the three months ended March 31, 2000, the Company realized a net loss
from operations of $76,977 compared to a net loss from operations of $21,673 for
the three months ended ending March 31, 1999. The Company increased professional
fees over 1999 in the amount of $176,820 principally related to the valuation of
warrants issued to the Company's investment banking firm and financial advisor,
Cappello Capital Corp. During the quarter ending March 31, 2000, an officer of
the Company sold stock at a gain shortly after purchasing stock through a stock
bonus plan. In compliance with the Securities and Exchange Rule 16b, the
stockholder remitted the gain to the Company. The gain amounted to $129,445 and
is reflected in the income statement as internal gain on sale of securities. The
Company realized The Company did not realize any operating revenues through
March 31, 2000.
<PAGE>
PART II
Item 2.
(c) On April 18, 2000, the Company sold in a private placement to
accredited investors certain convertible demand notes ("Notes") in the aggregate
principal amount of $75,000. The Company did not pay any underwriting discounts
or commissions in connection with such private placement. The Notes are payable
upon 15 days' written demand. The Notes are convertible into shares of Company
Common Stock at the rate of one share of Common Stock for each fifty cents
($0.50) of the amount of principal and/or accrued interest so converted. The
foregoing conversion price is subject to adjustment for stock splits, stock
dividends or similar distributions in respect of the Common Stock occurring
after the date of such Notes. The Notes were sold to Alexander L. Cappello,
a director of the Company, and other principals and affiliates of Cappello
Capital Corp., the Company's financial advisor.
The form of warrant to be issued by the Company to Cappello Capital Corp.
or its designees has been negotiated with Cappello Capital Corp., the Company's
financial advisor, which warrant had been previously disclosed in the Company's
Form 10-KSB/A. The form of warrant will include, in addition to piggyback
registration rights, certain demand registration rights.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibit (10) Common Stock Warrant
Exhibit (27) Financial Data Schedule
Dated: May 12, 2000 ADVANCED BIOTHERAPY CONCEPTS,
INC.
By: /s/ Edmond Buccellato
Edmond Buccellato, President
By: /s/ Jeanne Kelly
Jeanne Kelly, Secretary/Treasurer
<PAGE>
EXHIBIT 10
THIS COMMON STOCK PURCHASE WARRANT (THE "WARRANT") AND ANY SHARES ACQUIRED UPON
THE EXERCISE OF THE WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY APPLICABLE SECURITIES LAW OF ANY JURISDICTION. NEITHER
THE WARRANT NOR ANY OF SUCH SHARES MAY BE SOLD OR TRANSFERRED IN THE ABSENCE OF
SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SUCH ACT OR SUCH APPLICABLE
SECURITIES LAWS. NEITHER THE WARRANT NOR ANY OF SUCH SHARES MAY BE TRANSFERRED
EXCEPT UPON THE CONDITIONS SPECIFIED IN THE WARRANT, AND NO TRANSFER OF THE
WARRANT OR ANY OF SUCH SHARES SHALL BE VALID OR EFFECTIVE UNLESS AND UNTIL SUCH
CONDITIONS SHALL HAVE BEEN COMPLIED WITH.
FORM OF COMMON STOCK PURCHASE WARRANT
For Cappello Capital Corp. or its designees
To Subscribe for and Purchase Shares
of Common Stock of
ADVANCED BIOTHERAPY CONCEPTS, INC.
EXPIRES AT 5:00 P.M. PACIFIC TIME, ON JANUARY 18, 2010
DATE OF WARRANT: JANUARY 19, 2000
This certifies that___________________________________________ the registered
holder hereof, or assigns (the "Warrantholder") is entitled to purchase from
Advanced Biotherapy Concepts, Inc., a Nevada corporation (the "Company"), at any
time before the expiration time and date shown above (the "Expiration Time")
[not to exceed 4,685,135] shares of the common stock of the Company ("Common
Stock") at the purchase price per share of Fifteen Cents ($0.15) (the "Warrant
Price").
The number and class of shares purchasable upon exercise of the warrant
represented hereby (the "Warrant") shall be subject to adjustment from time to
time as set forth below.
SECTION 1. TRANSFERABILITY AND FORM OF WARRANT.
1.1 REGISTRATION. This Warrant shall be numbered and shall be
registered on the books of the Company.
1.2 TRANSFER. This Warrant shall be transferable on the books of the
Company only upon delivery thereof duly endorsed by the Warrantholder or duly
authorized attorney or representative, accompanied by proper evidence of
succession, assignment or authority to transfer. Upon any registration of
transfer, the Company shall execute and deliver a new Warrant to the person
entitled thereto. This Warrant may be divided or combined, upon request to the
1
<PAGE>
Company by the Warrantholder, into a certificate or certificates representing
the right to purchase the same aggregate number of shares.
1.3 FORM OF WARRANT. This Warrant shall be executed on behalf of the
Company by its President, Vice President or other authorized officer, and shall
be dated as of the date of signature thereof by the Company either upon initial
issuance or upon division, exchange, substitution or transfer. A Warrant bearing
the signature of an individual who was at any time the proper officer of the
Company shall bind the Company, notwithstanding that such individual shall have
ceased to hold such office prior to the delivery of such Warrant. The form of
election to exercise any Warrant and the form of assignment of any Warrant shall
be substantially as attached hereto.
SECTION 2. PAYMENT OF TAXES.
The Company will pay all documentary stamp taxes, if any, attributable
to the initial issuance of shares to the Warrantholder; provided, however, that
the Company shall not be required to pay any tax or taxes which may be payable
in respect to any secondary transfer of the Warrant or the shares.
SECTION 3. MUTILATED OR MISSING WARRANTS.
In case this Warrant shall be mutilated, lost, stolen or destroyed, the
Company shall, at the request of the Warrantholder, issue and deliver in
exchange and substitution for and upon cancellation of the mutilated Warrant, or
in lieu of and in substitution for the lost, stolen or destroyed Warrant, a new
Warrant of like tenor, but only upon receipt of evidence satisfactory to the
Company of such loss, theft or destruction of such Warrant. The applicant shall
also comply with such other reasonable regulations and pay such other reasonable
administrative charges as the Company may prescribe.
SECTION 4. RESERVATION OF SHARES.
There has been reserved, and the Company shall at all times keep
reserved so long as this Warrant remains outstanding, out of its authorized
shares of capital stock, such number and class of shares as shall be subject to
purchase under this Warrant. Such reserved shares shall be used solely for
issuances upon exercise of the Warrant. Shares of any class issued upon exercise
of this Warrant shall have all the rights and privileges of other shares of the
same class, whenever issued, subject to the adjustment provisions set forth
below.
SECTION 5. EXERCISE OF WARRANT.
5.1 EXERCISE BY CASH PAYMENT. The Warrantholder shall have the right
at anytime and from time to time to exercise this Warrant in full or in part by
surrender of this Warrant to the Company accompanied by payment to the Company
in cash or by certified or cashier's check or by wire transfer of funds of the
aggregate Warrant Price for the number of shares in respect of which this
Warrant is then exercised.
2
<PAGE>
5.2 CASHLESS EXERCISE. This Warrant may be exercised in full or in
part by surrender of this Warrant to the Company accompanied by written notice
substantially in the form attached hereto of the Warrantholder's election to
effect cashless exercise ("Cashless Exercise"). Upon Cashless Exercise, the
Warrantholder shall be entitled to receive, in respect of each share for which
this Warrant is then exercised, that number of shares of Common Stock (or such
other class of shares as may then be issuable upon exercise hereof) which,
valued at Current Market Value, have a value equal to the Current Market Value
of each of the shares as to which this Warrant is then being exercised less the
Warrant Price payable for each such share. For purposes of this Section 5.2,
Current Market Value of Common Stock shall mean (i) if the Common Stock is
traded in the over-the-counter market or on the National Association of
Securities Dealers, Inc. Automated Quotation System ("NASDAQ"), the per share
closing sale price of the Common Stock on the trading day immediately preceding
the date of delivery of such notice of Cashless Exercise as reported by NASDAQ
or an equivalent generally accepted reporting service, or (ii) if the Common
Stock is traded on a national securities exchange, the per share closing price
of the Common Stock on the principal stock exchange on which it is listed on the
trading day immediately preceding the date of delivery of such notice of
Cashless Exercise or (iii) if the Common Stock is not so listed or traded, the
fair market value of the Common Stock as determined in good faith by the board
of directors of the Company. The term "closing sale price" shall mean the last
sale price on the day in question as reported by NASDAQ or an equivalent
generally accepted reporting service or (as the case may be) as reported by the
principal stock exchange in which the Common Stock is listed, or if not so
reported, as reasonably determined in good faith by the board of directors of
the Company.
5.3 DELIVERY OF CERTIFICATES. Upon exercise of this Warrant, the
Company shall issue and cause to be delivered with all reasonable dispatch to or
upon the written order of the Warrantholder and in such name or names as the
Warrantholder may designate, a certificate or certificates for the number of
full shares issuable upon such exercise together with cash, as provided in
Section 7 hereof, in respect of any fractional shares. The Company shall effect
such issuance immediately and shall transmit the certificates by messenger or
overnight delivery service to reach the address designated by the Warrantholder
within two business days after receipt of the Warrant Price or, in the case of a
cashless exercise, after receipt of the Warrant Such certificate or certificates
shall be deemed to have been issued to any person so designated to be named
therein shall be deemed to have become a Warrantholder of record of such shares
as of the date of surrender of the Warrant and payment of the Warrant Price, as
aforesaid, notwithstanding that the certificates representing such shares shall
not actually have been delivered or that the stock transfer books of the Company
shall then be closed In the event of partial exercise a new Warrant evidencing
the remaining portion of this Warrant will be issued by the Company.
SECTION 6. ADJUSTMENT OF WARRANT PRICE AND NUMBER OF SHARES.
6.1 ADJUSTMENTS. The number and kind of securities purchasable upon
the exercise of the Warrant and the Warrant Price shall be subject to adjustment
from time to time upon the happening of certain events, as follows:
3
<PAGE>
(a) If the shares purchasable upon exercise of the Warrant are
subdivided, combined or reclassified, or if other shares of the kind so
purchasable are issued in respect thereof as a dividend thereon (excluding
dividends required by the charter provisions governing such shares), the number
and class of shares purchasable upon exercise of the Warrant immediately prior
thereto shall be adjusted so that the Warrantholder shall be entitled to receive
the kind and number of shares or other securities of the Company which it would
have owned or would have been entitled to receive, after the happening of any of
the events described above, had the Warrant been exercised immediately prior to
the happening of such event or any record date with respect thereto. Any
adjustments made pursuant to this paragraph (a) shall become effective
immediately after the effective date of such event retroactive to the record
date, for such event.
(b) If the shares purchasable upon exercise of the Warrant become
entitled to receive a distribution of evidences of indebtedness or assets
(excluding dividends required by the charter provisions governing such shares)
or rights, options, warrants or convertible securities containing the right to
subscribe for or purchase securities or assets of the Company, then, in each
case, the number of shares thereafter purchasable upon the exercise of the
Warrant shall be determined by multiplying the number of shares theretofore
purchasable upon exercise of the Warrant by a fraction, of which the numerator
shall be the then Current Market Value on the date of such distribution, and of
which the denominator shall be such Current Market Value on such date minus the
then fair value of the portion of the assets or evidence of indebtedness so
distributed or of such subscription rights, options or warrants applicable to
one share. Such adjustment shall be made whenever any such distribution is made
and shall become effective on the date of distribution retroactive to the record
date for the determination of shareholders entitled to receive such
distribution. Current Market Value shall have the meaning set forth in Section
7.
(c) No adjustment in the number of shares purchasable hereunder
shall be required unless such adjustment would require an increase or decrease
of at least one percent (1%) in the number of shares then purchasable upon the
exercise of a Warrant; PROVIDED, HOWEVER, that any adjustments which by reason
of this paragraph (c) are not required to be made immediately shall be carried
forward and taken into account in any subsequent adjustment.
(d) Whenever the Warrant Price or the number or class of shares
purchasable upon the exercise of a Warrant is adjusted as herein provided, a
corresponding adjustment in the number of shares so purchasable or the Warrant
Price, as the case may be, shall be made so that the aggregate Warrant Price
payable upon full exercise of the Warrant shall remain the same. If such
adjustment results in more than one class of security being purchasable upon
exercise of the Warrant, the adjusted Warrant Price shall be allocated to such
securities on the basis of their respective fair market values.
(e) Whenever the number or class of shares purchasable upon the
exercise of a Warrant or the Warrant Price is adjusted as herein provided, the
Company shall cause to be promptly mailed to the Warrantholder by first class
mail, postage prepaid, notice of such adjustment or adjustments setting forth
the number and class of shares purchasable upon the exercise of the Warrant and
the Warrant Price after such adjustment, together with a brief
4
<PAGE>
statement of the facts requiring such adjustment and the computation of such
adjustment, the Company shall cause independent public accountants selected by
the Company to verify and, if necessary, correct such computation.
(f) The term "Common Stock" shall include (i) the class of stock
designated as the Common Stock of the Company at the issue of this Warrant or
(ii) any other class of stock resulting from successive changes or
reclassifications of such Common Stock. In the event that at any time, as a
result of an adjustment made pursuant to this Section, the Warrantholder shall
become entitled to purchase any securities of the Company other than shares of
Common Stock, thereafter the number of such other securities so purchasable upon
exercise of the Warrant and the Warrant Price of such securities shall be
subject to adjustment from time to time in a manner and on terms nearly
equivalent as practicable to the provisions contained in this Section.
6.2 NO ADJUSTMENT FOR DIVIDENDS. Except as provided in Subsection
6.1, no adjustment in respect of any dividends shall be made during the term of
the Warrant or upon the exercise of the Warrant.
6.3 PRESERVATION OF PURCHASE RIGHTS UPON RECLASSIFICATION,
CONSOLIDATION, ETC. In case of any reclassification of the securities of the
Company or any consolidation of the Company with or merger of the Company into
another corporation or in case of any sale or conveyance to another corporation
of the property, assets or business of the Company as an entirety or
substantially as an entirety, the Company or such successor or purchasing
corporation, as the case may be, shall provide by agreement that the
Warrantholder shall have the right thereafter upon payment of the Warrant Price
in effect immediately prior to such action to purchase upon exercise of the
Warrant the kind and amount of shares and other securities and property which
he/she would have owned or have been entitled to receive after the happening of
such reclassification, consolidation, merger, sale or conveyance had the Warrant
been exercised immediately prior to such action. Such agreement shall provide
for adjustments, which shall be as nearly equivalent as may be practicable to
the adjustment provided for in this Section. The provisions of this subsection
shall similarly apply to successive reclassification, consolidation, mergers,
sales or conveyances.
6.4 STATEMENT ON WARRANT CERTIFICATES. Irrespective of any adjustment
in the Warrant Price or the number of securities purchasable upon the exercise
of the Warrant, the Warrant certificate or certificates theretofore or
thereafter issued may continue to express the same price and number of
securities as are stated in the similar Warrant certificates initially issued.
SECTION 7. FRACTIONAL INTERESTS; CURRENT MARKET VALUE; CLOSING BID PRICE.
The Company shall not be required to issue fractional shares on the
exercise of the Warrant. If any fraction of a share would, except for the
provisions of this Section, be issuable on the exercise of the Warrant (or
specified portion thereof), the Company shall pay an amount in cash equal to the
then Current Market Value multiplied by such fraction. The term "Current Market
Value" of the Common Stock shall mean (i) if the Common Stock is traded in the
over-the-counter market or on the National Association of Securities Dealers,
Inc., Automated Quotation System ("NASDAQ"), the average per share closing sale
price of the Common Stock
5
<PAGE>
on the twenty (20) consecutive trading days immediately preceding the date in
question, as reported by NASDAQ or an equivalent generally accepted reporting
service, or (ii) if the Common Stock is traded on a national securities
exchange, the average for the twenty (20) consecutive trading days immediately
preceding the date in question of the daily per share closing prices of the
Common Stock on the principal stock exchange on which it is listed, or (iii) if
the Common Stock is not so listed or traded, the fair market value of the Common
Stock as determined in good faith by the board of directors of the Company. The
term "closing sale price" shall mean the last sale price on the day in question
as reported by NASDAQ or an equivalent generally accepted reporting services or
(as the case may be) as reported by the principal stock exchange in which the
Common Stock is listed, or if not so reported, as reasonably determined in good
faith by the board of directors of the Company.
SECTION 8. NO RIGHTS AS SHAREHOLDER; NOTICES TO WARRANTHOLDER.
Nothing contained herein shall be construed as conferring upon the
Warrantholder any rights whatsoever as a shareholder of the Company, including
the right to vote, to receive dividends, to consent or to receive notices as a
shareholder in respect to any meeting of shareholders for the election of
directors of the Company or any other matter. If, however, at any time prior to
the expiration of the Warrant and prior to the exercise, any of the following
events shall occur;
(a) any action which would require an adjustment pursuant to
Section 6.1 or 6.3; or
(b) a dissolution, liquidation or winding up of the Company
(other than in connection with a consolidation, merger or sale of its property,
assets and business, as an entirety) shall be proposed;
then in any one or more of said events, the Company shall give notice in writing
of such event to the Warrantholder at least fifteen (15) days prior to the date
fixed as a record date or the date of closing the transfer books or other
applicable date or the date of closing the transfer books, as the case may be.
Any notice to the Warrantholder shall be given at the address of the
Warrantholder appearing on the books of the Company, and if the Warrantholder
has specified a telecopier address, by facsimile transmission to such address.
SECTION 9. REGISTRATION AND INDEMNIFICATION.
The Company and each Holder covenant and agree that:
9.1 REQUEST FOR REGISTRATION.
(a) REGISTRABLE SECURITIES. If the Company shall receive at any
time beginning January 19, 2001, a written request from the Holders of at least
fifty percent (50%) of the Registrable Securities then outstanding (the
"Initiating Holders") that the Company file a
6
<PAGE>
registration statement under the Securities Act covering the registration of at
least such number of the Registrable Securities then outstanding as would yield
an aggregate offering price of at least Four Million Dollars ($4,000,000) before
underwriting discounts and commissions, then the Company shall, within thirty
(30) days of the receipt thereof, give written notice of such request to all
Holders and shall, subject to the limitations of Section 9.1(b), use
commercially reasonable efforts to effect as soon as practicable, the
registration under the Securities Act of all Registrable Securities which the
Holders request to be registered by the Company in accordance with Section
9.1(b).
(b) NOTICE OF UNDERWRITING. If the Initiating Holders intend to
distribute the Registrable Securities covered by their request by means of an
underwriting, they shall so advise the Company as a part of their request made
pursuant to this Section 9.1 and the Company shall include such information in
the written notice referred to in Section 9.1(a). The underwriter will be
selected by a majority in interest of the Initiating Holders and shall be
reasonably acceptable to the Company. In such event, the right of any Holder to
include his Registrable Securities in such registration shall be conditioned
upon such Holder's participation in such underwriting and the inclusion of such
Holder's Registrable Securities in the underwriting (unless otherwise mutually
agreed by a majority in interest of the Initiating Holders and such Holder) to
the extent provided herein. All Holders proposing to distribute their securities
through such underwriting shall (together with the Company as provided in
Section 9.7(e)) enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting. Notwithstanding any
other provision of this Section 9.1, if the underwriter advises the Company in
writing that marketing factors require a limitation of the number of shares to
be underwritten, then the Company shall so advise all Holders of Registrable
Securities which would otherwise be underwritten pursuant hereto, and the number
of shares of Registrable Securities that may be included in the underwriting
shall be allocated among all Holders thereof, including the Initiating Holders,
in proportion (as nearly as practicable) to the amount of Registrable Securities
of the Company owned by each Holder. Any Registrable Securities excluded or
withdrawn from such underwriting shall be withdrawn from the registration.
(c) POSTPONEMENT OF REGISTRATION. Notwithstanding the foregoing,
if the Company shall furnish to Holders requesting a registration statement
pursuant to this Section 9.1, a certificate signed by the President of the
Company stating that in the good faith judgment of the Board of Directors of the
Company, it would be detrimental to the Company and its shareholders for such
registration statement to be filed and it is therefore necessary to defer the
filing of such registration statement, the Company shall have the right to defer
such filing for a period of not more than one hundred eighty (180) days after
receipt of the request of the Initiating Holders; PROVIDED, HOWEVER, that the
Company may not utilize this right more than once in any twelve-month period,
whether pursuant to this Section 9.1(c) or otherwise.
(d) NO REGISTRATION OBLIGATION. Notwithstanding anything to the
contrary herein, the Company shall not be obligated to effect, or to take any
action to effect, any registration pursuant to this Section 9.1:
(i) After the Company has effected two (2) registrations
pursuant to this Section 9.1 and such registrations have been declared or
ordered effective;
7
<PAGE>
(ii) During the period starting with the date sixty (60)
days prior to the Company's good faith estimate of the date of filing of, and
ending on a date one hundred eighty (180) days after the effective date of, a
registration subject to Section 9.2 hereof; provided that the Company is
actively employing in good faith all reasonable efforts to cause such
registration statement to become effective;
(iii) If within thirty (30) days of receipt of a written
request from Initiating Holders pursuant to Section 9.1(a), the Company gives
notice to the Holders of the Company's intention to make a public offering
within ninety (90) days.
(e) EXCEPTIONS. Notwithstanding the foregoing, a registration
will not count as one of the two required registrations under Section 9.1(d)(i)
unless: (a) the Initiating Holders were able to sell a minimum of fifty-percent
(50%) of the shares sought to be so registered in such registration; and (b) the
Company did not include shares to be sold by it in such registration.
9.2 PIGGYBACK REGISTRATION.
(a) INCLUSION OF REGISTRABLE SECURITIES. At any time after the
date hereof and prior to the date which is the third anniversary of the
Expiration Date, subject to the remainder of this Section 9.2, in the event that
the Company decides to Register any shares of Common Stock on a form that would
be suitable for a Registration of both shares of Common Stock offered by the
Company and Registrable Securities held by the Warrantholder, the Company shall
on each such occasion: (i) promptly give each Warrantholder written notice
thereof; and (ii) include in such Registration (and any related registration,
and in any underwriting involved therein), the Registrable Securities specified
in a written request executed and delivered to the Company by the Holders of at
least twenty percent (20%) of the then aggregate outstanding Warrants and
Warrant Shares, within twenty (20) days after receipt of such written notice
from the Company.
(b) NOTICE OF UNDERWRITING IN PIGGYBACK REGISTRATION. If the
Registration of which the Company gives notice involves an underwriting, the
Company shall so advise each Warrantholder in such notice. In such case, the
right of any Warrantholder to Registration shall be conditioned upon the
occurrence of such underwriting and the inclusion of such Warrantholder's
Registrable Securities in such underwriting to the extent provided in this
Section 9.2. All Warrantholders proposing to distribute their Warrant Shares
through such underwriting shall (together with the Company) enter into an
underwriting agreement with the underwriter's representative for such offering
in form and substance reasonably satisfactory to the underwriter's
representative. The Warrantholders shall have no right to participate in the
selection of the underwriters for an offering pursuant to this Section 9.2.
(c) WITHDRAWAL IN REGISTRATION. If any Warrantholder disapproves
of the terms of any such underwriting, such Warrantholder may elect to withdraw
therefrom by written notice to the Company and the underwriter delivered at
least seven (7) days prior to the effective date of the registration statement.
Any Registrable Securities or other securities excluded or withdrawn from such
underwriting shall be withdrawn from such Registration. The Company shall have
the right to postpone or withdraw a Registration proposed to be effected
pursuant to this Section 9.2 at any time without any obligation to any
Warrantholder.
8
<PAGE>
9.3 INDEMNIFICATION.
(a) COMPANY'S INDEMNIFICATION OF WARRANTHOLDERS. The Company
shall indemnify each Warrantholder, each of such Warrantholder's officers,
directors and partners, and each person controlling such Warrantholder, with
respect to which Registration, qualification or compliance of Registrable
Securities has been effected pursuant to Section 9.1 or 9.2 against all claims,
losses, damages or liabilities to which they may become subject under the
Securities Act or otherwise, to the extent-such claims, losses, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement (or alleged untrue statement) of any material fact contained in
any prospectus or other document (including any related registration statement)
incident to any such Registration, qualification or compliance, or arise out of
or are based on any omission (or alleged omission) to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, or any violation by the Company of any rule or regulation
promulgated under the Securities Act or the Securities Exchange Act of 1934, as
amended, or any state securities law applicable to the Company and relating to
statements made or required to be made by the Company in connection with any
such Registration, qualification or compliance and the Company shall indemnify
each such Warrantholder, the officers, directors and partners of each such
Warrantholder, and each person controlling such Warrantholder against any legal
and other expenses reasonably incurred by them in connection with investigating
or defending any such claim, loss, damage, liability or action; PROVIDED,
HOWEVER, that the Company shall not be liable in any such case to the extent
that any such claim, loss, damage, liability or expense arises out of or is
based upon any untrue statement or alleged untrue statement or omission or
alleged omission based upon, in reliance upon and in conformity with information
furnished in writing to the Company by such Warrantholder and stated to be
specifically for use in connection with the offering of securities of the
Company; PROVIDED, FURTHER, that the Company shall not be liable for amounts
paid in settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Company, which consent shall
not be unreasonably withheld. The obligations of the Company under this
paragraph shall survive the completion of the offering of Registrable Securities
under the registration statement.
(b) WARRANTHOLDER'S INDEMNIFICATION OF COMPANY. Each
Warrantholder shall, if Registrable Securities held by such Warrantholder are
included in the securities as to which such Registration, qualification or
compliance has been effected pursuant to Section 9.1 or 9.2 hereof, indemnify
the Company and each other Warrantholder, each of their respective officers,
directors and partners, legal counsel for the Company, and each person
controlling the Company and such other Warrantholder, against all claims,
losses, damages or liabilities to which they may become subject under the
Securities Act or otherwise, to the extent such claims, losses, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement (or alleged untrue statement) of any material fact contained in
any prospectus or other document (including any related registration statement)
incident to any such Registration, qualification or compliance or arise out of
or are based on any omission (or alleged omission) to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading (but only to the extent, that such untrue statement (or alleged
untrue statement) or omission (or alleged omission) is made in such Registration
statement, preliminary or final
9
<PAGE>
prospectus, amendment or supplement thereto, or other document based upon, in
reliance upon and in conformity with information furnished in writing to the
Company by such Warrantholder and stated to be specifically for use in
connection with the offering of securities of the Company), or any violation by
any Warrantholder of any rule or regulation promulgated under the Securities
Act, the Securities Exchange Act of 1934, as amended, or any state securities
law applicable to such Warrantholders and relating to statements made or
required to be made by or in reliance upon information supplied in writing by
such Warrantholder in connection with any such Registration, qualification or
compliance, and shall indemnify the Company and each other Warrantholder, each
of their respective directors, officers and partners, legal counsel for the
Company and each person controlling the Company and such other Warrantholders
against any legal and other expenses reasonably incurred by them in connection
with investigating or defending any such claim, loss, damage, liability or
action; PROVIDED that such Warrantholder shall not be liable for amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Warrantholder, which consent
shall not be unreasonably withheld; PROVIDED, HOWEVER, that the obligations of
each Warrantholder hereunder shall be limited to an amount equal to the net
proceeds received by such Warrantholder upon the sale of his Registrable
Securities. The obligation of each Warrantholder under this paragraph shall
survive the completion of the offering of Registrable Securities under the
registration statement.
(c) INDEMNIFICATION PROCEDURE. Promptly after an indemnified
party receives notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against an indemnifying
party, notify the indemnifying party in writing of the commencement thereof and
generally summarize such action. The indemnifying party shall have the right to
participate in and to assume the defense of such claim.
9.4 MARKET STANDOFF. Each Warrantholder hereby agrees that, if so
requested by the Company and the underwriter's representative, such
Warrantholder shall not sell or otherwise transfer any Registrable Securities or
other securities of the Company, other than Warrant Shares registered pursuant
to Section 9.1 or 9.2 hereof, during the one hundred eighty (180) day period
following the effective date of a registration statement of the Company filed
under the Securities Act.
9.5 SURVIVAL OF REGISTRATION RIGHTS. The rights of the Warrantholders
pursuant to Section 9.1 and 9.2 hereof shall survive for three (3) years after
the Expiration Date as long as any Registrable Securities remain outstanding.
9.6 AVAILABILITY OF RULE 144. Notwithstanding anything contained
herein to the contrary, the rights of each Warrantholder under Section 9.1 and
9.2 hereof shall cease with respect to any Registrable Securities at any time
that the Warrantholders may lawfully sell all Registrable Securities without
Registration under the Securities Act pursuant to Rule 144 promulgated
thereunder or otherwise. The Company represents that, as of the date of issuance
of the Warrants, it has filed all reports required to be filed by it under
Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended.
10
<PAGE>
9.7 OBLIGATIONS OF THE COMPANY. Whenever required under this Section
9.1 or 9.2 to effect the registration of any Registrable Securities, the Company
shall, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its best efforts to cause such
registration statement to become effective, and, upon the request of the Holders
of a majority of the Registrable Securities registered thereunder, keep such
registration statement effective for up to one hundred twenty (120) days. The
Company shall not be required to file, cause to become effective or maintain the
effectiveness of any registration statement that contemplates a distribution of
securities on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act.
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement for up to one hundred twenty
(120) days.
(c) Furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the disposition of Registrable
Securities, as applicable, owned by them.
(d) Use its reasonable best efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holders, PROVIDED that the Company shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a general consent
to service of process in any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter into
and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering. Subject to
Section 9.1(b), each Holder participating in such underwriting shall also enter
into and perform its obligations under such an agreement.
(f) Notify each Holder of Registrable Securities, covered by
such registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing, such obligation to continue for one hundred twenty (120) days.
(g) Cause all such Registrable Securities registered pursuant to
such registration statement to be listed on each securities exchange on which
similar securities issued by the Company are then listed.
11
<PAGE>
(h) Provide a transfer agent and registrar for all Registrable
Securities registered pursuant to such registration statement and a CUSIP number
for all such Registrable Securities, in each case not later than the effective
date of such registration.
9.8 FURNISH INFORMATION. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Section 9 with
respect to the Registrable Securities of any selling Holder that such Holder
shall furnish to the Company such information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of such securities
as shall be required to effect the registration of such Holder's Registrable
Securities. The Company shall have no obligation with respect to any
registration requested pursuant to Section 9.1 of this Agreement if, as a result
of the application of the preceding sentence, the number of shares or the
anticipated aggregate offering price of the Registrable Securities to be
included in the registration does not equal or exceed the number of shares or
the anticipated aggregate offering price required to originally trigger the
Company's obligation to initiate such registration as specified in Section
9.1(a).
9.9 EXPENSES OF REGISTRATION.
(a) DEMAND REGISTRATION. All Registration Expenses, other than
Selling Expenses, incurred in connection with registrations, filings or
qualifications pursuant to Section 9.1 shall be borne by the Company; PROVIDED,
HOWEVER , that the Company shall not be required to pay for any expenses of any
registration proceeding begun pursuant to Section 9.1 if the registration
request is subsequently withdrawn at the request of the Initiating Holders (in
which case all participating Holders shall bear such expenses), unless the
Holders of a majority of the Registrable Securities agree to forfeit their right
to one demand registration pursuant to Section 9.1. All Selling Expenses shall
be borne by the Warrantholders of the Registrable Securities Registered pro rata
on the basis of the number of Registrable Securities Registered.
(b) COMPANY REGISTRATION. All Registration Expenses, other than
Selling Expenses, incurred in connection with registrations, filings or
qualifications pursuant to Section 9.2, shall be borne by the Company. All
Selling Expenses shall be borne by the Warrantholders of the Registrable
Securities Registered pro rata on the basis of the number of Registrable
Securities Registered.
9.10 DELAY OF REGISTRATION. No Holder shall have any right to obtain
or seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Section 9.
9.11 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the
Company to register Registrable Securities pursuant to this Section 9 may be
assigned (but only with all related obligations) by a Holder to a transferee or
assignee of at least twenty-five percent (25%) (or if the Warrant has already
been converted, to purchasers of at least twenty-five percent (25%) of Common
Stock) of such Holder's Warrants as of the date of this Agreement (as
appropriately adjusted for anti-dilution and any subsequent stock splits, stock
dividends, recapitalizations and the like), PROVIDED (i) the Company is, within
ten (10) days after such transfer, furnished with written notice of the name and
address of such transferee or assignee and the securities with
12
<PAGE>
respect to which such registration rights are being assigned; (ii) such
transferee agrees in writing to be subject to all restrictions set forth in this
Warrant and PROVIDED, FURTHER, that such assignment shall be effective only if
immediately following such transfer the further disposition of such securities
by the transferee or assignee is restricted under the Securities Act. For the
purposes of determining the number of shares of Registrable Securities held by a
transferee or assignee, the holdings of transferees and assignees of a
partnership who are partners or retired partners of such partnership (including
spouses and ancestors, lineal descendants and siblings of such partners or
spouses who acquire Registrable Securities by gift, will or intestate
succession) shall be aggregated together and with the partnership.
SECTION 10. PRE-EMPTIVE RIGHTS.
The pre-emptive rights set forth in this Section 10 shall be only for
the benefit of the Warrantholders who shall have exercised this Warrant and who
shall hold Warrant Shares on the date of the exercise of such pre-emptive
rights, and such pre-emptive rights shall not be exercisable by reason solely of
the ownership of this Warrant.
10.1 ISSUANCE OF SHARES. In the event that the Company shall determine
to issue any shares of Common Stock ("Shares"), or any options, warrants or
other rights to any Shares, except as provided in Section 10.3 below, such issue
shall be first offered to all Warrantholders of Warrant Shares in the same
proportions as the number of Warrant Shares (as distinguished from other Shares
held by such Warrantholder) then owned by each Warrantholder bears to the total
number of Shares then owned by all shareholders of the Company, at a price and
upon terms not less favorable than the price and terms at which such Shares or
options, warrants or other rights are proposed to be offered for sale to others,
PROVIDED that each such Warrantholder of Warrant Shares shall be entitled to
exercise such pre-emptive right only with respect to all of his pro rata share
of such Shares or options, warrants or other rights and not with respect to only
part thereof.
10.2 ELECTION OF RIGHTS. Any Warrantholder of Warrant Shares entitled
to any pre-emptive right pursuant to the provisions of Section 10.1 above must
signify his election to exercise such right in writing within fifteen (15) days
after the date notice is given to such Warrantholder by the Company with respect
to the proposed issue of such Shares or options, warrants or other rights to any
Shares. In the event that any Warrantholder fails to exercise timely his
pre-emptive right to purchase his pro rata share of such Shares or options,
warrants or other rights to any Shares so offered by the Company, the
pre-emptive right of such Warrantholder shall terminate with respect to that
particular issue of such Shares or options, warrants or other rights to any
Shares. In such event, for a period of ninety (90) days after the date of
termination of such pre-emptive rights, the Company may offer for sale and sell
the unpurchased remainder of such Shares or options, warrants or other rights to
any Shares generally to any other person, at a price and upon terms not more
favorable than the price and terms at which such Shares or options, warrants or
other rights to any Shares were offered to the Warrantholders pursuant to the
provisions of this paragraph. In the event that the Company fails to consummate
the sale of such Shares or options, warrants or other rights to any Shares
within such ninety-day period, either in whole or in part, the Company may not
offer for sale or sell the
13
<PAGE>
unpurchased remainder of such Shares or options, warrants or other rights to any
Shares without again complying with the provisions of this Section.
10.3 DETERMINATION OF SHARES. For purposes of this Section 10, the
term "Shares" shall mean all shares of Common Stock issued by the Company other
than shares of Common Stock issued or deemed to be issued:
(a) upon conversion of shares of preferred stock or upon
conversion of other convertible securities;
(b) to an employee, consultant officer or director pursuant to
stock option, stock grant, stock purchase or similar plans or arrangements
approved by the Board of Directors, including without limitation upon the
exercise of options outstanding as of the date of this Warrant;
(c) to an equipment lessor, bank, financial institution or
similar entity in a transaction approved by the Board of Directors, the
principal purpose of which is other than the raising of capital;
(d) as a dividend or other distribution in connection with which
an adjustment to the Warrant Shares is made pursuant to Section 6;
(e) shares issued as the result of stock splits or stock
dividends;
(f) in any public offering by the Company pursuant to an
effective registration statement under the Securities Act;
(g) in a merger or acquisition that is approved by the Board of
Directors; or
(h) pursuant to any transaction approved by the Board of
Directors primarily for the purpose of (a) a joint venture, technology licensing
or research and development activity, (b) distribution or manufacture of the
Company's products or services, or (c) any other transaction involving corporate
partners that is primarily for purposes other than raising capital through the
sale of equity securities.
SECTION 11. EXPIRATION OF WARRANTS.
If not theretofore exercised, this Warrant shall terminate at 5:00 p.m.
Pacific time on the Expiration Date.
SECTION 12. SUCCESSORS.
All the covenants and provisions of this Agreement by or for the
benefit of the Company or the Warrantholder shall bind and inure to the benefit
of their respective successors and assigns hereunder.
14
<PAGE>
SECTION 13. MERGER OR CONSOLIDATION OF THE COMPANY.
The Company will not merge or consolidate with or into any other
corporation or sell all or substantially all of its property to another
corporation, unless the provisions of Section 6.3 are complied with.
SECTION 14 DEFINITIONS.
(a) "EXPIRATION DATE" shall mean January 18, 2010.
(b) "REGISTER," "REGISTERED" and "REGISTRATION" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act of 1933, as amended, other than on Form S-4,
Form S-8 or any similar successor forms, and the declaration or ordering of the
effectiveness of such registration statement.
(c) "REGISTRABLE SECURITIES" shall mean Warrant Shares which
have not been Registered and sold in any Registered public offering or in a
transaction which is exempt from Registration if such sale permits the removal
of restrictive legends and if, after such sale, such Warrant Shares are freely
transferable without Registration.
(d) "REGISTRATION EXPENSES" shall mean all expenses incurred by
the Company in complying with Section 9 hereof, including, without limitation,
all federal and state registration, qualification and filing fees, printing and
related expenses, blue sky fees and expenses, National Association of Securities
Dealers, Inc. ("NASD") filing fees and stock exchange or NASD listing fees, fees
and disbursements of counsel to the Company and the underwriters, if any, and
the expense of any special audits or financial statement reviews incident to or
required by any such Registration, whether or not any registration statement
becomes effective.
(e) "SECURITIES ACT" shall mean the Securities Act of 1933, as
amended.
(f) "SELLING EXPENSES" shall mean all underwriting discounts and
selling commissions applicable to the sale of Registrable Securities pursuant to
Section 9 hereof, and all fees and expenses of legal counsel to the
Warrantholders and any other expenses incurred by Warrantholder in connection
with such sale.
(g) "WARRANT" and "THIS WARRANT" shall include and any and all
warrants issued upon division, exchange, substitution or transfer of the
Warrants evidenced hereby.
(h) "WARRANT SHARES" shall mean the shares of Common Stock
purchased or purchasable upon the exercise of this Warrant.
(i) "WARRANTHOLDER" or "HOLDER" shall include any transferee or
transferees of a Warrant.
15
<PAGE>
SECTION 15. APPLICABLE LAW.
This Agreement shall be deemed to be a contract made under the laws of the
State of Nevada and for all purposes shall be construed in accordance with the
laws of said State.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by a duly authorized officer of the Company as of January 19, 2000.
ADVANCED BIOTHERAPY CONCEPTS, INC.
By:
-------------------------------------------
Edmond Buccellato, Chief Executive Officer
16
<PAGE>
PURCHASE FORM
The undersigned hereby irrevocably elects to exercise the right
of purchase represented by the written Warrant in respect_____________________
Warrant Shares provided for therein, and requests that certificates be issued in
the name of:
- ---------------------------------------------------------------
(Please Print Name, Address and Taxpayer Identification Number)
- ---------------------------------------------------------------
and, if said number of shares shall not be all the shares purchasable hereunder,
that a new Warrant certificate for the balance of the shares purchasable under
the within Warrant be registered in the name of the undersigned Warrantholder of
his/her Assignee as below indicated and delivered to the address stated below.
The undersigned:
[ ] elects to pay the full Warrant Price in cash or by certified or
cashier's check or wire funds transfer
[ ] elects "cashless exercise" pursuant to Section 5.2 of the Warrant
Current Market Value: for purposes of Cashless Exercise is: $__________
Number of shares issuable on Cashless Exercise is: __________
Date:
------------------ -----------------------------------------------------
Signature of Warrantholder
The above signature must correspond with the name appearing upon the face of
this Warrant in every particular without alteration or enlargement or any change
whatever.
Name of Assignee, if any:
------------------------------------------
(Please Print)
---------------------------------------------------------------
(Please Print Name, Address and Taxpayer Identification Number)
---------------------------------------------------------------
SIGNATURE GUARANTEED: Signature guarantee is required if certificates are to be
registered in the name of any person other than the name
written upon the face of the Warrant. Signature must be
guaranteed by a commercial bank or trust company or a
member firm of the New York Stock Exchange.
<PAGE>
ASSIGNMENT
(To be signed only upon assignment of Warrant)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers into
- --------------------------------------------------------------------------------
(Name and Address of Assignee Must be Printed or Typewritten)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Taxpayer Identification Number of Assignee)
the written Warrant, hereby irrevocably constituting and appointing_____________
Attorney to transfer said Warrant on the books of the Company, with full power
of substitution in the premises.
Date:
------------------ -----------------------------------------------------
Signature of Registered Warrantholder
Signature Guaranteed: The above signature must correspond with the name
appearing upon the face of this Warrant in every
particular, without alteration or enlargement or any
change whatever, and must be guaranteed by a commercial
bank or trust company or a member firm of the New York
Stock Exchange.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Statement of Financial Condition at March 31, 2000 (Unaudited) and the Statement
of Income for the three months ended March 31, 2000 (Unaudited) and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> Dec-31-2000
<PERIOD-END> Mar-31-2000
<CASH> 4,937
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,937
<PP&E> 33,723
<DEPRECIATION> (33,723)
<TOTAL-ASSETS> 366,563
<CURRENT-LIABILITIES> 68,418
<BONDS> 0
0
0
<COMMON> 39,398
<OTHER-SE> 131,116
<TOTAL-LIABILITY-AND-EQUITY> 366,563
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 207,998
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,990
<INCOME-PRETAX> (76,977)
<INCOME-TAX> 0
<INCOME-CONTINUING> (76,977)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (76,977)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
