U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
Annual Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the fiscal year ended December 31, 1995, 1996 and 1997
Commission File No. 1-12178
InnoVet, Inc.
----------------------------------------------
(Name of small business issuer in its charter)
Florida 59-2699441
- ------------------------------ -------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
of incorporation or organization)
P. O. Box 145, Winter Park, Florida 32789
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number None
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Securities registered under Section 12(b) of the Exchange Act: None
----
Securities registered under Section 12(g) of
the Exchange Act: None
-----------------
(Title of Class)
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15 (d) of the Exchange Act of 1934 during
the past 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.
Yes No X
----- -----
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B is not contained in this form, and no
disclosure will be contained, to the best of registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ X ]
The issuer had no revenues for its most recent fiscal year ended
December 31, 1997.
As of July 15, 1998, the aggregate market value of the voting stock
held by non-affiliates of the issuer was zero.
As of July 15, 1998, the issuer had outstanding 18,656,881 shares
of its common stock.
Transitional Small Business Disclosure Format Yes No X
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<PAGE>
PART I
Item 1. Description of Business.
(a) Business Development.
The Company was incorporated under the laws of the State of
Florida on February 3, 1986. The Company is in the specialty
animal healthcare technology business, however its operations have
been limited in the past three years because of insufficient funds.
It had no revenues in 1997 and in 1996 and 1995 all of its revenues
were derived from the sale of its cleaning product that removes pet
stains and odors from carpeting. Its license rights to this product
were terminated in the 1997 fiscal year. The Company owns United
States patent rights to a biological product using the trade name
IVET-629 that is designed to accelerate recovery of horses with
respiratory ailments. In August 1995, the Company granted a
worldwide exclusive license to develop and market the technology to
SSG, Inc., a private Mississippi corporation. See THE COMPANY'S
BUSINESS - IVET-629. The Company has a sublicense right to develop
and market certain monoclonal antibodies to be used in a gender
selection technology for livestock. The Company discontinued its
research activity on this technology in March 1996 because of lack
of funds.
The Company granted Oakes, Fitzwilliams & Co. Limited a
security interest in its IVET-629 patent rights and assigned its
rights and interest in the gender selection technology sublicense
to Oakes Fitzwilliams in March 1997 as part of the consideration
for a loan. The loan is in the amount of $65,000 and was made
mainly to provide the Company with money for legal and accounting
fees to bring the Company in compliance with the reporting
requirements of the Securities Exchange Act of 1934 ("Exchange
Act"). See CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
(b) The Company's Business.
Search for Merger or Acquisition Partner
----------------------------------------
In the 1997 fiscal year the Company's sole activity was to
find a company to merge with or that will acquire it. So far its
efforts have not been successful. The Company believes that its
public shell can be made attractive if it is able to meet its
reporting requirements under the Exchange Act and maintain its OTC
Bulletin Board listing with the National Association of Securities
Dealers, Inc. It obtained a loan of $65,000 in March 1997 for this
purpose, as well as to provide it with money to conduct due
diligence on a potential merger or acquisition partner. The Company
does not know whether it will be able to find a suitable partner.
If it cannot, the Company may have to liquidate its assets and
dissolve. See MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - LIQUIDITY AND CAPITAL
RESOURCES.
IVET-629
---------
IVET-629 is a biological product used for treating target
animals for specified illnesses. The mode of operation of the
product has not been completely elucidated. The process of using
IVET-629 for treating target animals for specified illnesses is the
subject of an issued United States patent that the Company owns.
The Company's patent rights were assigned to Oakes, Fitzwilliams,
its second largest shareholder, in March 1997 as part of the
collateral to secure a loan. See CERTAIN RELATIONSHIP AND RELATED
TRANSACTIONS.
The Company acquired its rights to IVET-629 from BioQuest,
Inc., an affiliate of DRA & Associates, Inc. ("DRA"). Under the
terms of the acquisition agreement, the Company has royalty-free
rights to the technology, including sublicensing rights. The
Company acquired the assets and liabilities of DRA's business in
May 1992. In May 1994, the Company sold DRA, with the exception of
the IVET-629 intellectual property, to a principal of DRA.
On August 16, 1995, the Company licensed its development and
marketing rights to IVET-629 to SSG. Pursuant to the terms of the
licensing agreement, SSG assumed responsibility for product
development, obtaining regulatory approvals and marketing. The
Company granted SSG a worldwide exclusive license, with the right
to sublicense the technology covered by the patent and any related
patents which are issued, and to make use of and sell the products
derived from the patents. SSG paid the Company $3,000 for the
license and agreed to pay it a royalty of 6 percent of net sales of
products sold by it or any of its sublicensees. There is a minimum
royalty payment of $10,000 in 1998. No payments have been made to
the Company under the licensing agreement. The Company has the
option, if the minimum royalty payment is not paid in 1998, to
convert the exclusive license to non-exclusive or terminate the
agreement. The agreement terminates on June 15, 2010. After that
date, and subject to SSG's payment to the Company of all fees and
royalties, SSG shall have a perpetual, fully paid, non-exclusive
license.
Gender Selection Technology
---------------------------
The Company was developing a semen cell separation technology
for gender selection of livestock by livestock farmers. The
technology, if developed, would allow dairy farmers, for example,
to reproduce female offspring from their highest producing animal
(to increase milk yield).
In 1994, the Company's original collaborator in developing the
gender selection technology, Applied Immune Sciences, Inc. ("AIS"),
decided to limit its participation in the development of the
technology. Under a modification to the Company's initial
development agreement with AIS, the Company was granted a
sublicense by AIS that gives it exclusive worldwide rights to
certain monoclonal antibodies to be used to develop the gender
selection technology. Should the utilization of any of these
antibodies result in a commercial product, the Company will pay AIS
a 1% royalty on net product sales. Should the utilization of any of
these antibodies, or should a spermicidal effect on sperm cells be
patented and commercialized, the royalty will be 2% of net product
sales.
The Company is now responsible for all funding related to
development of the technology. The Company retained a key research
scientist, formerly utilized by AIS, to continue development of the
technology and established laboratory facilities in California to
continue its development efforts. Experiments were performed using
the monoclonal antibody on cattle embryos. Research was
discontinued in March 1996 because of insufficient funds. The
results of the experiments were mixed and the Company is
reevaluating this program in light of the results achieved and the
Company's current financial condition.
Competition
------------
Competition in the pharmaceutical and biological industries in
general is based on such factors as product performance, safety,
patient compliance, ease of use, price, acceptance by
veterinarians, marketing, distribution and adaptability to various
types of application. In addition, technological competition may be
based on the development of alternative products and approaches
aimed at the treatment or prevention of the same diseases as the
Company's products.
The Company is not aware of any other commercially viable
product or process which can produce separation of bovine male or
female sperm at a satisfactory increase in success rate over
natural selection. Research activities using flow cytometry,
electrical current and other methods have been unable to produce a
cost-effective and commercially acceptable product or process that
achieves a satisfactory minimum probability of selection of gender,
sperm viability for insemination or processing speed.
Product Liability
-----------------
The Company currently does not have any product liability
insurance because it is not conducting any business and cannot
afford to pay the insurance premium.
Government Regulation
---------------------
The Company's IVET-629 product is regulated in the United
States by the United States Department of Agriculture by specific
illness claims in the host animal. If a product is approved in the
United States, and is guaranteed to be safe in the environment, it
will generally be accepted for import to other countries. Human
applications of IVET-629 would be regulated by the Food and Drug
Administration and comparable agencies in other countries.
The Company knows of no regulations which govern the use of
its gender selection technology in the livestock industry.
Procedures for seeking and obtaining governmental approval for
products can involve the expenditure of substantial time and
resources, and there can be no assurance that any such approval
will be granted on a timely basis, if at all. Product approvals can
also be withdrawn if compliance with regulatory guidelines is not
maintained or if problems occur following product introduction to
the market.
Patent Protection
-----------------
The Company's proprietary process for treating target animals
for specified illnesses with the IVET-629 product is the subject of
an issued United States patent. The Company has filed two foreign
applications for patents claiming various additional aspects of
this technology.
There can be no assurance that the Company's patents will
afford the Company comercially significant protection of its
proprietary technology or have commercial application. The
Company's patents have not been tested in courts and litigation may
be necessary to determine the validity and scope of its proprietary
rights. Moreover, the patent laws of foreign countries may differ
from those of the United States and the degree of protection
afforded by foreign patents may therefore be different.
The Company is the owner of a United States trademark
registration for the trade name IVET-629. The Company intends to
rely on unpatented trade secrets and proprietary know-how in
continuing technological information to maintain and develop its
commercial position. It has entered into confidentiality agreements
with former employees, consultants and SSG. These agreements may
not provide sufficient protection for the Company's trade secrets
or proprietary know-how in the event of any unauthorized use or
disclosure of such know-how. In addition, there can be no assurance
that others will not obtain access or independently develop these
trade secrets or know-how.
Employees
-----------
The Company does not have any employees.
Item 2. Description of Property.
The Company does not own or rent any property, other than
fully depreciated property.
Item 3. Legal Proceedings.
The Company is not a party to any pending legal proceeding.
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote of security holders during
theyears ended December 31, 1995, December 31, 1996 and December
31, 1997.
PART II
Item 5. Market for Common Equity and Related Stockholder Matters.
(a) Market Information.
The Company's common stock traded on the Emerging Company
Marketplace of the American Stock Exchange from July 15, 1993 to
July 11, 1995. Since July 11, 1995, the common stock has traded on
the NASD's OTC Bulletin Board. During the past two fiscal years and
through the first quarter of fiscal 1998, trading in the common
stock has been limited. The closing bid price during this period
has ranged from zero to one cent. It would not be meaningful to
present a quarter by quarter breakdown of the high and low bid
price during the above period.
The closing bid price for the common stock on July 15, 1998
was zero.
(b) Holders.
As of July 15, 1998, there were approximately 672 holders of
record of the Company's common stock.
(c) Dividends.
The Company has not paid dividends and does not anticipate
that it will pay dividends in the foreseeable future. The Company
is not under any contractual restriction concerning its present or
future ability to pay dividends.
(d) Recent Sales of Unregistered Securities.
In the past three years, the Company issued a total of 360,000
restricted shares of common stock to Dr. Jesse W. Houdeshell, the
Company's former Chief Executive Officer and President. The shares
were issued to Dr. Houdeshell as a result of his exercise of
360,000 options on January 3, 1995 at an exercise price of $.001
per share. The total proceeds to the Company as the result of the
exercise of the options was $360. The options had been previously
granted to Dr. Houdeshell pursuant to the Company's Officers,
Directors And Key Employees' Stock Option Plans.
The Company believes that the above securities transaction is
exempt from registration under the Securities Act of 1933 (the
"Act") pursuant to Section 4(2) of such Act, as a transaction by an
issuer not involving any public offering for, among other reasons,
the following: (i) no general solicitation or advertising was used;
(ii) the transaction was isolated; and (iii) Dr. Houdeshell had
access to information about the Company that an available
registration would provide.
Item 6. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
(a) Results of Operations.
Sales volume of $345,368 in 1995 and $261,713 in 1996 resulted
from the sale of the pet stain and odor eliminator product. The
difference in volume reflects the timing of orders from the sole
purchaser of the product. The last order for the product was
shipped in the fall of 1996. Gross margin on sales of the product
was constant at 42% in both periods.
Other income of $125,592 in 1995 represents the difference
between the compensation accrued for a former executive and the
final settlement amount paid.
Gain on sale of marketable securities of $99,979 in 1995 as
well as the foregin currency transaction gain of $5,873, resulted
from the sale of certain securities received as consideration for
the sale of the Cambridge Veterinary Sciences subsidiary.
Compensation of officers and employees ceased in August of
1995 when all full time employees of the Company were terminated.
Consulting fees in 1995 and 1997 were for payments to Roland
M. Hendrickson, the Company's Chairman, for services other than as
a director.
Research and development of $43,456 was primarily for the
development of the Company's gender selection technology. The
research was discontinued due to lack of funds.
In August of 1995 the Company terminated both employees,
discontinued its office lease and phone numbers. As a result, 1996
and 1997 expenses represent administrative expenses to continue the
active shell of the Company only.
Interest expense in 1995 was paid to a bank for a loan secured
by the securities received in the Cambridge Veterinary Sciences
transaction. The principal amount was paid in full with the
proceeds from the sale of the securities. The interest expense in
1997 resulted from a loan granted by a significant shareholder. See
LIQUIDITY AND CAPITAL RESOURCES.
(b) Liquidity and Capital Resources.
During 1995 and 1996 the Company was able to continue as a
result of revenues from the sale of the pet stain and odor
eliminator product. When orders for the product ceased in the fall
of 1996, the Company used remaining cash to pay obligations. In the
spring of 1997, a shareholder loaned the Company $65,000 in order
to complete audits from prior periods and bring securities filings
into compliance. See CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS.
The Company currently has no sources of revenue and minimal
cash.It is possible that the shell may be used by an active entity
seekingpublic company status; however, it is uncertain if or when
such an event will occur. If such an event does not occur within a
short period of time, the Company may liquidate.
Item 7. Financial Statements.
Financial statements are listed under Item 13 of this Annual
Report and begin on page F-1.
Item 8. Changes In and Disagreements With Accountants on
Accounting and Financial Disclosure.
Not applicable.
PART III
Item 9. Directors and Executive Officers; Compliance with
Section 16(a) of the Exchange Act.
(a) Directors and Executive Officers.
Information about the directors and executive officers of the
Company is set forth below.
Director Date Director's
Name Age Positions Since Term Expires
- --------------------- --- --------- --------- ----------------
Roland M. Hendrickson 75 Chairman 1992 1995(Agreed to
of the continue to serve
Board until next Annual
Shareholders
Meeting)
Scott P. Cielewich 47 Executive 1993 1996(Agreed to
Vice continue to serve
President and until next Annual
Chief Financial Shareholders
Officer Meeting)
All directors hold office for three years. They continue to
hold office until the annual meeting of shareholders of the Company
that occurs after the third anniversary of their election and until
their successors have been elected and qualified. Officers are
elected or appointed by the Board of Directors and hold office
until their successors have been elected or appointed and
qualified.
Roland M. Hendrickson has been Chairman of the Company since
October 1993. He was Vice Chairman from April to October 1993.
Since October 1996 he has been Vice President, Montgomery Group,
Inc. (formerly known as Montgomery Associates, Inc.), a management
consulting firm. He was President of the company from April 1988 to
October 1996. From 1962 to 1988 he was President, Agricultural
Division, Pfizer, Inc. He was also a corporate vice president of
Pfizer from 1973 to 1988. He received a B.S. degree in agricultural
education from the University of Minnesota.
Scott P. Cielewich has been Executive Vice President since
1993 and Chief Financial Officer since April 1989. Since August
1995, he has devoted time to the Company as needed but has been
employed full time elsewhere. From August 1995 to December 1995 he
was Regional Vice President of Operations of the South Florida
Region of MedPartners, Inc. In 1996 he was self-employed as a
physician's practice management consultant. Since January 1997 he
has been employed as Vice President of Operations for the Eastern
United States of Physicians Resource Group, Inc. From December 1991
to June 1993, he was Managing Partner, Treasure Coast Sports
Medicine, Ltd., a provider of physical therapy services. Mr.
Cielewich's other work experience includes eight years as a staff
accountant and, later, audit manager for Price Waterhouse & Co.,
Buffalo, New York. Mr. Cielewich is a Certified Public Accountant
and is a member of the Florida Institute and New York State Society
of Certified Public Accountants. Mr. Cielewich has a B.B.A. degree
with a major in accounting from St. Bonaventure University.
(b) Compliance with Section 16(a) of the Exchange Act.
Based solely upon a review of Forms 3 and 4 and amendments
thereto furnished to the Company pursuant to Rule 16a-3(e) under
the Exchange Act during its last three fiscal years and Form 5 and
amendments thereto furnished to it in the last three fiscal years
and any written representation from reporting persons, as defined
in the Exchange Act, the Company is not aware of late reports, or
any transactions not reported timely, or any failure to file any
reports required by Section 16(a) of the Exchange Act during its
most recent fiscal year.
Item 10. Executive Compensation.
(a) Summary Compensation Table.
Not applicable.
(b) Options/SAR Grants Table.
Not applicable.
(c) Aggregated Option/SAR Exercises and Fiscal Year-End
Option/SAR Value Table.
Not applicable.
(d) Long-Term Incentive Plan Awards Table.
Not applicable.
(e) Compensation of Directors.
Not applicable.
Item 11. Security Ownership of Certain Beneficial Owners and
Management.
(a) Security Ownership of Certain Beneficial Owners.
The following table sets forth the name and address of each
beneficial owner of more than five percent of the Company's voting
stock known to the Company, the number of shares known to be
beneficially owned as of July 15, 1998, and the percent of the
total shares outstanding so owned. Each person named in the table
has sole investment and voting power regarding the shares set forth
opposite his name, except as otherwise noted. All beneficial
ownership is direct or of shares held for the stockholder in street
name, except as otherwise indicated.
Amount and
Nature of Percent
Title of Name and Address Beneficial of Class
Class Beneficial Owner Ownership Outstanding
- -------- ---------------------- ---------- -----------
Common Stock Jesse W. Houdeshe ll1,046,247(1) 5.55%(1)
$.001 Par 7721 Wexford Way
Value Port St. Lucie, FL 34986
Ivory & Sime 2,433,334(2) 12.17%(2)
Capital, PLC
One Charlotte Square
Edinburgh, EH2 4D2 England
Oakes, Fitzwilliams & 1,435,333(3) 7.22(3)
Co. Limited
Bryon House
7-9 St. James's Street
London, SW1A1EE England
- -------------------
(1) Includes currently exercisable options to purchase 180,013
shares.
(2) Includes currently exercisable warrants to purchase 1,333,334
shares.
(3) Includes currently exercisable warrants to purchase 1,027,333
shares.
(b) Security Ownership of Management.
The following table shows the beneficial ownership of the
Company's common stock as of July 15, 1998, by each director and
by all directors as a group.
Amount and
Nature of Percent
Positions Beneficial of Class
Name Held Ownership (1) Outstanding
- --------------------- --------- ------------- -----------
Roland M. Hendrickson Chairman 112,500(2) 0.60%(2)
Scott P. Cielewich Executive Vice 645,166(3) 3.35%(3)
President, Chief
Financial Officer
and Director
Directors as a Group, 757,666 12.32%(4)
(2 persons)
- ---------------------
(1) All shares are beneficially owned, and sole voting and
investment power is held, by the persons named except as
otherwise noted.
(2) Includes currently exercisable options to purchase 75,000
shares.
(3) Includes currently exercisable options to purchase 342,500
shares and currently exercisable warrants to purchase 266,666
shares.
(4) Includes currently exercisable options to purchase 417,500
shares and currently exercisable warrants to purchase 266,666
shares.
Item 12. Certain Relationships and Related Transactions.
On December 18, 1995, the Company entered into an agreement to
terminate a prior termination agreement ("Agreement to Terminate")
with Dr. Jesse W. Houdeshell, its former Chief Executive Officer
and President. Dr. Houdeshell is also the owner of approximately
5.55% of the Company's outstanding common stock. The original
termination agreement was entered into on February 24, 1994. This
agreement terminated Dr. Houdeshell's employment agreement with the
Company except for the provisions related to arbitration and
confidentiality of information. The agreement, among other things,
provided that the Company would pay Dr. Houdeshell $60,000 a year
for five years as a consulting fee. Additional payments were
contingent on certain benchmark events occurring which were related
to the Company's technologies and the sale of a subsidiary or the
merger or acquisition of the Company with any independently owned
company. None of these events occurred. Under the terms of the
Agreement to Terminate, the agreement entered into February 24,
1994 was terminated. The Company paid Dr. Houdeshell $5,000. In
addition, the Company assigned to Dr. Houdeshell a termination
agreement related to the payment of $100,000 to the Company by
AgMed, Inc. and Meade Quality, Inc.; a promissory note made by
BioQuest, Inc. payable to the Company in the amount of $30,000; a
promissory note in the amount of $75,000 made by BioLab,Inc. with
the Company as payee; and 40,000 shares of restricted common stock
of Protein Delivery, Inc. owned by the Company. For purposes of the
Agreement to Terminate, the restricted stock had a value of
$20,000; the other items assigned had a value of zero. The
Agreement to Terminate includes a covenant not to compete which
expires on March 31, 1999, as well as the arbitration and
confidentiality provisions which were part of the termination
agreement. Dr. Houdeshell is prohibited from disclosing
confidential information about the Company through March 31, 1999.
Oakes, Fitzwilliams and Co. Limited, an investment banking
firm based in England and the beneficial owner of 7.22% of the
Company's outstanding common stock, loaned the Company $65,000 on
March 17, 1997 under the terms of a secured promissory note and
security agreement. The note was due and payable on or before
September 30, 1997 with interest at the London InterBank Offered
Rate ("Libor") plus 4% as of March 17, 1997. Although the principal
and interest on the loan has not been repaid, Oakes, Fitzwilliams
has not demanded repayment. The Company has the option to repay the
principal and interest by issuing shares of its common stock to
Oakes, Fitzwilliams pursuant to Regulation S under the Securities
Act at a price of $.0025 per share. The security agreement gives
Oakes, Fitzwilliams a security interest in the Company's patent
covering the IVET-629 technology and two foreign patent
applications related to the technology. The security agreement
required the Company to assign its licensing rights in the gender
selection technology under its agreement with Applied Immune
Sciences, Inc. The Company also assigned to Oakes, Fitzwilliams the
licensing rights to its pet stains and odor remover product,
however that license agreement has since terminated. Under the
terms of an arrangement agent agreement, Oakes, Fitzwilliams was
entitled to receive a $5,000 arrangement fee for the loan, as well
as $10,000 for expenses. Additionally, Oakes, Fitzwilliams will
receive a "breakup fee" of $25,000 if it introduces the Company to
an acquisition or merger candidate and the Company enters into an
agreement with the candidate but elects not to proceed. The
arrangements fee, out-of-pocket expenses and any "breakup fee" can,
at the option of the Company, be paid in shares of its commons
stock issued pursuant to Regulation S under the Securities Act at
a price of $.0025 per share.
PART IV
Item 13. Financial Statements, Exhibits and Reports on Form 8-K.
(a) Financial Statements.
The following financial statements are filed as part of this
Annual Report.
Financial Statements Page
- ------------------------------------------------ ----
(1) Report of Grant Thornton F1
(2) Balance Sheets F2
(3) Statements of Operations F3
(4) Statement of Stockholders' Equity F4
(5) Statements of Cash Flows F5
(6) Notes to Financial Statements F6 to F12
(b) Exhibits.
The Company hereby incorporates by reference the following
documents:
Exhibit
Number Description of Exhibit
- ------- -------------------------------------------------
3.1 Articles of Incorporation
3.2 Amendment to Articles of Incorporation
3.3 Bylaws
4.1 Form of Certificate for Shares of Common Stock
4.2 Form of Warrant included in the Units
4.7 InnoVet, Inc. Officers, Directors and Key Employees Stock
Option Plan (1988)
4.8 InnoVet, Inc. Consultants and Independent Contractors'
Non-Qualified Stock Option Plan
4.9 InnoVet, Inc. Officers, Directors and Key Employees' Non-
Qualified Stock Option Plan (1989)
4.12 Form of Placement Agent Warrant dated March 26, 1993
10.8 InnoVet, Inc. Employee Stock Option Plan (1987)
10.9 InnoVet, Inc. Non-Qualified Stock Option Plan (1987)
Exhibits 3.1 through 3.3, 4.1, 4.2, 10.8 and 10.9 were filed
as part of Form S-18 Registration Statement of InnoVet, Inc. and
Pre-Effective Amendments thereto, declared effective on March 9,
1988, Registration No. 33-19593-A.
Exhibits 4.7 and 4.8 were filed as part of Post-Effective
Amendment No. 2 to Form S-18 Registration Statement of InnoVet,
Inc., declared effective on May 15, 1989.
Exhibit 4.9 was filed as part of InnoVet, Inc.'s Form 10-K for
the fiscal year ended December 31, 1989, Commission File No. 1-
12178.
Exhibit 4.12 was filed on April 1, 1993, as part of InnoVet,
Inc.'s Form 10-KSB for the year ended December 31, 1992, Commission
File No. 1-12178.
The following exhibits are filed herewith:
Exhibit
Number Description of Exhibit
- -------- --------------------------------------------------------
10.49 Agreement to Terminate Termination, Release and
Consulting Agreement with Jesse W. Houdeshell dated
December 18, 1995.
10.50 Secured Promissory Note for $65,000 dated March 17, 1997,
Oakes,Fitzwilliams & Co., Limited., Payee.
10.51 Security Agreement Between InnoVet, Inc. and Oakes,
Fitzwilliams dated March 17, 1997.
10.52 Arrangement Agent Agreement Between InnoVet, Inc. and
Oakes, Fitzwilliams dated March 17, 1997.
(c) Reports on Form 8-K.
No reports on Form 8-K were filed during the last quarter of
the period covered by this Form 10-KSB.
SIGNATURES
In accordance with Section 13 or 15 (d) of the Exchange Act,
the registrant has caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
INNOVET, INC.
By: /S/ Scott P. Cielewich
--------------------------
Scott P. Cielewich,
Executive Vice President
and Chief Financial Officer
(Acting Principal Executive
Officer)
Date: July 24, 1998.
In accordance with the Exchange Act, this report has been
signed below by the following persons on behalf of the registrant
and in the capacities and on the dates indicated.
Signature Title Date
- ----------------------- ------------------------- ------------
/S/ Scott P. Cielewich Executive Vice President, July 24, 1998
- ----------------------- Chief Financial Officer and
Scott P. Cielewich Director (Principal Financial
and (Accounting Officer)
/S/ Roland M. Hendrickson Chairman of the Board of July 24, 1998
- ------------------------- Directors
Roland M. Hendrickson
<PAGE>
FINANCIAL STATEMENTS AND REPORT
OF INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS
INNOVET, INC.
December 31, 1997, 1996 and 1995
<PAGE>
REPORT OF INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS
Board of Directors
InnoVet, Inc.
We have audited the accompanying balance sheets of InnoVet, Inc. as
of December 31, 1997, 1996 and 1995, and the related statements of
operations, stockholders' equity and cash flows for the years then
ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion
on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of
InnoVet, Inc. as of December 31, 1997, 1996 and 1995, and the
results of their operations and their cash flows for the years then
ended in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming
the Company will continue as a going concern. As discussed in Note
B to the financial statements, the Company previously has generated
significant losses from operations and has a large accumulated
deficit. This raises substantial doubt about the entity's ability
to continue as a going concern. The financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.
Fort Lauderdale, Florida
April 8, 1998
<PAGE>
InnoVet, Inc.
BALANCE SHEETS
December 31,
ASSETS
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Current assets
Cash and cash
equivalents $ 44,500 $ 77,159 $ 28,770
Prepaid expenses and other
current assets - 747 -
----------- ----------- -----------
Total current assets 44,500 77,906
28,770
Property, plant and equipment,
at cost less accumulated
depreciation - 646
2,163
Other assets - 85
24,571
----------- -----------
- ------------
Total assets $ 44,500 $ 78,637 $
55,504
=========== ===========
============
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities
Accounts payable $ 40,670 $ 2,670 $ 30,279
Loans from stockholder 65,000 - -
Accrued interest 4,974 - -
Total current ----------- ----------- -----------
liabilities 110,644 2,670 30,279
Stockholders' equity
Common stock, $.001 par value,
100,000,000 shares authorized;
18,656,881 shares issued at
December 31, 1997, 1996 and
1995 18,657 18,657 18,657
Capital in excess of
par value 18,856,654 18,856,654 18,856,654
Capital representing
stock grants 5,514,990 5,514,990 5,514,990
----------- ------------ ------------
Accumulated deficit (24,456,445) (24,314,334) (24,365,076)
(66,144) 75,967 25,225
------------ ------------ ------------
Total liabilities and
stockholders' equity $ 44,500 $ 78,637 $ 55,504
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
InnoVet, Inc.
STATEMENTS OF OPERATIONS
Years ended December 31,
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- -----------
<S> <C> <C> <C>
Revenues
Sales $ - $261,713 $345,368
Other income - 214 125,592
Interest income, net - 23 3,058
Foreign currency transaction gain - - 5,873
Gain on sale of marketable
securities - - 99,979
---------- ---------- ---------
- 261,950 579,870
Costs and expenses
Cost of sales - 151,800 200,115
Compensation
Officers and employees - - 137,633
Consulting 20,000 - 19,438
Research and development - - 43,456
Selling, general and
administrative 116,591 57,891 371,068
Depreciation expense 546 1,517 1,517
Interest expense 4,974 - 40,625
---------- -------- ---------
(142,111) 211,208 813,852
---------- -------- ---------
Income (loss) from
continuing operations
before income taxes (142,111) 50,742 (233,982)
Provision for income taxes - - -
---------- --------- ----------
Net income (loss) $ (142,111) $ 50,742 $(233,982)
=========== ========= =========
Net loss per share $ (.01) $ - $ (.01)
========== ========= =========
Weighted average shares 18,656,881 18,656,881 18,656,714
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
InnoVet, Inc.
STATEMENT OF STOCKHOLDERS'EQUITY
For the three years ended December 31, 1997
<TABLE>
<CAPTION>
Total
Capital in Capital Stock-
Common Stock Excess of Representing Accumulated holders'
Shares Amount Par Value Stock Grants Deficit Equity
---------- -------- ---------- ---------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
Balance,
January 1,
1995 18,294,881 $18,295 $18,854,156 $5,514,990 $(24,131,094) $256,347
Capital representing
exercise
of stock
options
(Note F) 360,000 360 - - - 360
Capital
representing
stock issued
in exchange
for services
(Note G) 2,000 2 2,498 - - 2,500
Net loss - - - - (233,982) (233,982)
-------- ------- --------- --------- ---------- ---------
Balance,
December 31,
1995 18,656,881 18,657 18,856,654 5,514,990 (24,365,076) 25,225
Net income - - - - 50,742 50,742
---------- ------ ---------- ---------- ----------- ---------
Balance,
December 31,
1996 18,656,881 18,657 18,856,654 5,514,990 (24,314,334) 75,967
Net loss - - - - (142,111) (142,111)
---------- ------ ---------- --------- ------------ ---------
Balance,
December 31,
1997 18,656,881 $18,657 $18,856,654 $5,514,990 $(24,456,445) $(66,144)
========== ======= =========== ========== ============= =========
</TABLE>
The accompanying notes are an integral part of this statement.
<PAGE>
InnoVet, Inc.
STATEMENTS OF CASH FLOWS
Years ended December 31,
<TABLE>
<CAPTION>
1997 1996 1995
Cash flows from operating activities: ---------- --------- ---------
<S> <C> <C> <C>
Net income (loss) $(142,111) $50,742 $(233,982)
Adjustments to reconcile net loss to
net cash used in operating activities:
Stock issued for services - - 2,500
Amortization expense - 3,521 3,521
Depreciation expense 546 1,517 1,517
Foreign currency transaction gain - - (5,873)
(Gain)loss on sale of equipment (400) - 9,809
Write-off of patents - 20,965 -
Changes in operating assets and liabilities of:
Decrease in accounts receivable - - 1,029
Decrease in investments - - 839,583
Decrease in other receivables - - 215,768
Decrease (increase) in prepaid expenses 747 (747) 11,217
Decrease in other assets 85 - 52,590
Increase (decrease) in accounts payable 38,000 (27,609) (105,238)
Increase (decrease) in accrued expenses 4,974 - (334,414)
(Decrease) in short-term borrowings - - (704,961)
Net cash (used for) provided by -------- ------- ----------
operating activities (98,159) 48,389 (246,934)
Cash flows from investing activities:
Sale of property, plant and equipment 500 - 24,872
Sale of investments - - 80,000
-------- ------ ---------
Net cash provided by investing
activities 500 - 104,872
Cash flows from financing activities:
Loans from stockholder 65,000 - -
Proceeds from exercise of stock options - - 360
-------- ------- --------
Net cash provided by financing
activities 65,000 - 360
(Decrease) increase in cash and
cash equivalents (32,659) 48,389 (141,702)
Cash and cash equivalents,
beginning of year 77,159 28,770 170,472
-------- ------- ---------
Cash and cash equivalents,
end of year $ 44,500 $77,159 $ 28,770
======== ======= =========
Supplemental disclosures of cash flow information
Cash paid during the year:
Interest $ - $ - $ 41,577
======== ======= =========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
InnoVet, Inc.
NOTES TO FINANCIAL STATEMENTS
December 31, 1997, 1996 and 1995
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
InnoVet was in the specialty animal health care technology
business. The Company's business consisted of a cleaning product
which removes pet stains and odors from carpeting.
Foreign Currency Translation
- ----------------------------
The Company received assets and incurred liabilities and expenses
in a foreign currency related to the sale of its UK subsidiary.
Income statement transactions were translated at the average
exchange rates prevailing during the year. Adjustments resulting
from this translation process are expensed and included in net
earnings for the period.
Depreciation
- ------------
Property and equipment are stated at cost. Depreciation is
calculated over the estimated useful life, from five to seven
years, of related assets using accelerated methods.
Patents
- --------
The Company's proprietary process for treating target animals for
specified illnesses was its IVET-629 product, which was the subject
of an issued United States patent. Legal costs to obtain the
patent on this technology were capitalized as incurred. Costs
associated with certain clinical trials to obtain USDA approval
were expensed as incurred as research and development. The Company
was amortizing the patent over 10 years. Amortization expense
related to this patent was $3,521 in 1996 and 1995. At the end of
1996, the carrying value of the patent was deemed to have been
impaired and the unamortized amount of $20,965 was written-off and
is included in selling, general and administrative expenses.
Research and Development Expenses
- ---------------------------------
All research and development costs were charged to expense as
incurred. During 1995, the Company paid $43,456 for further
research and development.
Net Income (Loss) Per Share
- ---------------------------
Net income (loss) per common share has been computed based on the
weighted average number of shares outstanding during each period
presented. The effect of stock options and warrants as common
stock equivalents have not been included in the computation as they
are antidilutive.
Cash and Cash Equivalents
- -------------------------
Cash and cash equivalents include repurchase agreements all with
maturities of three months or less when purchased.
Significant Customer
- --------------------
During 1996 and 1995, 100%, of the Company's total sales were made
to a significant customer for the pet stain and odor eliminator
product.
Use of Estimates
- ----------------
The preparation of financial statements, in conformity with
generally accepted accounting principles, requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and the disclosure of contingent assets and
liabilities at the date of the financial statements, and the
reported amounts of revenue and expenses during the reporting
period. Accordingly, actual results could differ from those
estimates.
NOTE B - GOING CONCERN
The accompanying financial statements have been prepared in
conformity with generally accepted accounting principles, which
contemplate continuation of the Company as a going concern.
However, the Company had sustained substantial losses from
operations in recent years and has a significant accumulated
deficit. Also, the Company has sold off substantially all of its
operating businesses and in 1997, the Company's sole activity was
to find a company to merge with or that will acquire it. The
Company believes that its public shell can be made attractive if it
is able to meet its reporting requirements under the Exchange Act
and maintain its OTC Bulletin Board listing with the National
Association of Securities Dealers, Inc.
<PAGE>
NOTE C - PROPERTY, PLANT AND EQUIPMENT
Property, plant, and equipment consist of the following:
<TABLE>
<CAPTION>
December 31,
----------------------------------------
<S> <C> <C> <C>
1997 1996 1995
--------- --------- ---------
Furniture and fixtures $ 12,364 $ 12,464 $ 12,464
--------- --------- ---------
Less accumulated depreciation
and amortization 12,364 11,818 10,301
--------- --------- ---------
$ - $ 646 $ 2,163
========= ========= =========
</TABLE>
NOTE D - LOANS FROM STOCKHOLDER
In March 1997, the Company borrowed $65,000 under the terms of a
secured promissory note and security agreement. The note was due
and payable on or before September 30, 1997 with interest at the
London InterBank Offered Rate ("Libor") plus 4% as of March 17,
1997. Although the principal and interest on the loan has not been
repaid, repayment has not been demanded. The Company has the
option to repay the principal and interest by issuing shares of its
common stock to the stockholder pursuant to Regulation S under the
Securities Act at a price of $.0025 per share. The security
agreement grants a security interest in the Company"s patent
covering the IVET-629 technology and two foreign patent
applications related to the technology. In addition, the Company
was required to assign its licensing rights in the gender selection
technology and its licensing rights to its pet stains and odor
remover product. Under the terms of an arrangement agent
agreement, the stockholder was entitled to receive a $5,000
arrangement fee for the loan, as well as $10,000 for expenses,
these amounts are included in accounts payable at December 31,
1997. Additionally, the stockholder will receive a "breakup fee"
of $25,000 if it introduces the Company to an acquisition or merger
candidate and the Company enters into an agreement with the
candidate but elects not to proceed. The arrangements fee, out-of-
pocket expenses and any breakup fee can, at the option of the
Company, be paid in shares of its common stock issued pursuant to
Regulation S under the Securities Act at a price of $.0025 per
share.
NOTE E - INCOME TAXES
No tax benefit has been provided for the 1997 and 1995 losses as
there is no carryback benefit available.
At December 31, 1997, the Company had approximately $11,800,000
available in unused net operating loss carryforwards for income tax
purposes which, if not otherwise used, will expire in years 2002
through 2012. All of these net operating loss carryforward can be
utilized without limitation. The future tax benefit associated
with these items is approximately $4,400,000 for which a 100%
valuation allowance has been provided, as the realization of these
benefits is not assured.
NOTE F - STOCK OPTION PLANS
The Company has three stock option plans: the ("1988 Plan"), the
("1989 Plan") and a Consultants and Independent Contractors Non-
Qualified Stock Option Plan (CIC Plan). The exercise price of all
options granted by the Company equals or exceeds the market price
at the date of grant. No compensation expense has been recognized.
The Company accounts for stock options under the intrinsic value
method specified by Accounting Principles Board Opinion No. 25
"Accounting for Stock Issued to Employees." As required by
Statement of Financial Accounting Standards (SFAS) No. 23
"Accounting for Stock Based Compensation," the following table
presents pro forma net income and income per share data.
Had compensation cost for the 1989 Plan options issued to employees
been determined based on the fair value of the options at the grant
dates consistent with the method of SFAS 123, the Company's net
earnings (loss) and earnings (loss) per share would have been
changed to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1997 1996 1995
Net income(loss) ----------- --------- ------------
<S> <C> <C> <C>
As reported $ (142,111) $ 742 $ (233,982)
Pro forma $ (142,111) $ 50,742 $ (246,432)
Income (loss) per share
As reported $ (.01) $ - $ (.01)
Pro forma $ (.01) $ - $ (.01)
</TABLE>
The fair value of each option grant is estimated on the date of
grant using the binomial option-pricing model with the following
weighted-average assumptions used for grants in 1995: dividend
yield of 0.0 percent for all years; expected volatility of 412
percent; risk-free interest rate of 7.75 percent; and expected
holding period of 10 years.
The following information applies to options outstanding at
December 31, 1997.
<TABLE>
<CAPTION>
Options Outstanding and Exercisable
----------------------------------------------
Weighted -
Weighted- Average
Range of Average Remaining
Exercise Prices Shares Exercise Price Contractual Life
- --------------- ----------- -------------- ----------------
<S> <C> <C> <C>
$.001 268,093 $ .001 4.62 years
$.37 - $1.00 250,000 .560 6.18 years
$1.125 665,000 1.125 6.18 years
$1.25 - $1.75 849,175 1.517 4.98 years
$1.80 - $2.19 116,000 2.145 4.95 years
---------
2,148,268
=========
</TABLE>
The 1988 Plan
- -------------
The 1988 Plan covers 1,000,000 shares of common stock and may be
exercised at a price set above or below the fair market value of
the common stock on the date of the grant, as determined by the
Board of Directors. Options expire ten years from the date of
grant. The Plan terminates on the date on which options to be
granted have expired or have been exercised in full.
The 1989 Plan
- -------------
The 1989 Plan is identical to the 1988 Plan except for limiting the
maximum number of shares which all directors, officers, and key
employees may receive to 800,000, 150,000, and 50,000,
respectively. The number of shares increased by 1,000,000 per
Board of Directors' Action in 1991, in 1993 and in 1994. It also
provides that the purchase price for the shares granted shall be
not less than par value or more than the price per share of the
last transaction of the date prior to the day on which the options
are granted. No compensation was charged to operations in 1996 and
1995 in accordance with APB No. 25.
Consultants and Independent Contractors (CIC) Plan
- --------------------------------------------------
The Company has reserved 250,000 shares at an exercise price of
$.001 per share of common stock under a Consultants and Independent
Contractors Non-Qualified Stock Option Plan, which was adopted
during 1989.
Other Options Granted
- ---------------------
The Company has also granted options to purchase shares of common
stock as consideration primarily to investors in private
transactions or in exchange for services rendered to the Company.
No compensation was charged to operations in 1997, 1996 or 1995.
Option activity regarding the Company's stock option plans, is as
follows:
<TABLE>
<CAPTION>
Other
1988 1989 CIC Options
Plan Plan Plan Granted Total
------- -------- ------ ------- ---------
<S> <C> <C> <C> <C> <C>
Shares under option:
Outstanding at
January 1, 1995 153,000 2,333,468 3,500 387,850 2,877,818
Granted - 352,000 - - 352,000
Exercised 153,000 438,700 - - 591,700
Canceled - - - 40,000 40,000
------- --------- ----- ------- ---------
Outstanding at
December 31, 1995 - 2,246,768 3,500 347,850 2,598,118
Granted - 105,000 - - 105,000
Exercised - 207,000 - - 207,000
Canceled - - - 347,850 347,850
------- --------- ----- ------- ---------
Outstanding at
December 31, 1996 - 2,144,768 3,500 - 2,148,268
Granted - - - - -
Exercised - - - - -
Cancelled - - - - -
------- --------- ----- ------- ---------
Outstanding at
December 31, 1997 - 2,144,768 3,500 - 2,148,268
======= ========= ===== ======= =========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
December 31,
-------------------------------------------
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Weighted average exercise price $ 1.13 $ 1.13 $ 1.00
Option price per share $.001-$2.19 $ .001-$2.19 $.001-$2.19
Options exercisable 2,148,268 2,148,268 2,598,118
Price of options exercised .001 .001 -
</TABLE>
The weighted average fair value of options granted amounted to $-0-
in 1997 and 1996 and $12,450 in 1995.
NOTE G - STOCKHOLDERS'EQUITY
Capital Representing Services Rendered
- --------------------------------------
During 1995, the Company granted 2,000 shares with a market value
of $2,500 in exchange for services.
Summary of Warrants
- -------------------
As of December 31, 1997 outstanding warrants were as follows:
<TABLE>
<CAPTION>
Exercisable Exercise Expiration
Shares Price Date
----------- -------- ----------
<S> <C> <C> <C>
Services Performed 5,333,332 $ 0.1875 6/28/99
Placement Agents 232,911 3.00 3/26/98
506,667 0.1875 6/28/99
---------
6,072,910
=========
</TABLE>
During 1995, 136,000 warrants expired ranging in a price of $2.0625
to $3.375.
During 1996, 993,234 warrants expired ranging in a price of $1.875
to $2.00.
During 1997, 150,000 warrants expired ranging in a price of $2.00
to $3.50.
EXHIBIT 10.49
(Agreement to Terminate Termination, Release and Consulting
Agreement with Jesse W. Houdeshell dated December 18, 1995)
<PAGE>
AGREEMENT TO TERMINATE
TERMINATION, RELEASE AND CONSULTING AGREEMENT
This Agreement To Terminate Termination, Release And
Consulting Agreement (the "Agreement") is made this 18th day of
December , 1995, by and between InnoVet, Inc., a Florida
corporation, (the "Company"), 14266 U. S. Highway 1, Suite 206,
Juno Beach, Florida 33408 and Dr. Jesse W. Houdeshell ("JWH"),
residing at 7721 Wexford Way, Port St. Lucie, Florida 34986.
RECITALS
WHEREAS, the Company and JWH entered into a Termination,
Release And Consulting Agreement dated February 23, 1994, related
to JWH's employment as an officer and position as a director of the
Company; and
WHEREAS, the Company and JWH are interested in terminating the
Termination, Release and Consulting Agreement provided adequate
consideration is given to JWH and the parties are protected from
claims and liabilities against each other.
NOW, THEREFORE, in consideration of the foregoing and other
good and valuable consideration the parties, intending to be
legally bound, agree as follows:
1. Termination of Prior Agreement.
The Termination, Release And Consulting Agreement dated
February 24, 1994 between the Company and JWH is hereby terminated.
2. Consideration to JWH.
The Company shall pay JWH the sum of $5,000 as soon as
possible but not later than 60 days from the date of this
Agreement.
The Company shall assign to JWH the following:
a. A termination agreement related to the payment of
$100,000 to the Company by Agmen, Inc. and Meat Quality, Inc. A
copy of the assignment and termination agreement is attached as
Exhibit A and incorporated by reference. The recognized value of
the termination agreement for purposes of this Agreement is $0.00.
b. A promissory note in which Bio Quest, Inc. is the
obligor and the Company is the payee with a stated value of
$30,000. A copy of the promissory note with enclosures is attached
as Exhibit B and incorporated by reference. The recognized value
of the promissory note for purposes of this Agreement is $0.00.
c. A promissory note in the amount of $75,000 in which
the obligor is Biolab, Inc. and the Company is the payee. A copy
of the promissory note with enclosures is attached as Exhibit C
with enclosures and incorporated by reference. For purposes of this
Agreement the promissory note has a value of $0.00.
d. Forty thousand (40,000) shares of restricted common
stock of Protein Delivery, Inc. owned by the Company. A copy of
the stock certificate and blank stock power transferring the stock
to JWH is attached as Exhibit D and incorporated by reference. For
purposes of this Agreement the restricted common stock has a value
of $20,000.
3. Covenant Not To Compete. JWH hereby agrees that
from the date of this Agreement and through March 31, 1999, he will
not engage in any business that competes with the Company with
respect to technologies or products owned or being developed,
licensed or sold by the Company on the date of this Agreement,
including without limitation IVET-629 and the sex selector
technology (the method of separating female-producing sperm cells
from male-producing sperm cells, in semen by way of monoclonal
antibodies). JWH acknowledges that the foregoing covenant not to
compete is reasonable and necessary for the protection of the
Company and is agreed to as an inducement to the Company and as
part of the consideration under this Agreement. JWH shall not be
in any respect whatsoever personally involved in any such
operations which would be competitive with the products or
technologies owned by the Company, under development, licensed or
sold on the date of this Agreement.
Ten days before accepting any employment or consulting
arrangement with any animal health business which would be
competitive with the products or technologies owned by the Company,
under development, licensed or sold on the date of this Agreement,
JWH shall notify the Company in writing, and provide a written job
description of the contemplated services to be rendered and to
whom. Ten days after receipt, if the Company believes that the
contemplated services to be rendered by JWH materially breach the
covenant not to compete clause, it shall notify JWH in writing and
address with specificity the basis for its position. JWH shall
than have ten days within which to respond in writing that he
either (i) will reject the subject employment opportunity or (ii)
will litigate the matter pursuant to paragraph 10 below as to the
issue of whether or not the contemplated employment would violate
the terms of paragraph 3 of this Agreement. In the event that JWH
elects to litigate, JWH shall not accept employment any earlier
than thirty days from the date a complaint is filed, provided,
however, that this provision is not intended to be a waiver of any
rights by the Company.
4. No Revival of Rights; Continuing Effectiveness of Section
XIV of Employment Agreement.
It is the intent of the parties that this Agreement shall not
have the effect of reviving any rights which JWH had in the
Employment Agreement dated December 31, 1991. However, Section XIV
of the Employment Agreement prohibiting disclosure of confidential
information through March 31, 1999 remains in effect. This
provision is incorporated by reference and is made a part of this
Agreement.
5. Release of InnoVet, Inc. by JWH.
On behalf of himself, his heirs, executors, personal
representatives, administrators, successors and assigns and any
person he represents, JWH for good and sufficient consideration,
the receipt of which is hereby acknowledged, hereby releases and
forever discharges the Company, its present and former agents,
parent corporations, predecessors, successors, attorneys,
accountants, subsidiaries, affiliates, officers, directors,
shareholders and assigns from any and all claims and causes of
action of any nature or description, which have been or could have
been asserted, whether such claims or causes of action are known or
unknown, suspected or unsuspected, now exist, hereafter exist or
heretofore existed in favor of JWH, arising out of JWH's employment
with the Company, a document entitled "Employment Agreement",
bearing the date December 31, 1991, a document entitled
"Termination, Release And Consulting Agreement", bearing the date
February 23, 1994, and any other dealings between JWH and the
Company, except any actions or omissions of the Company or JWH
occurring after the date of this release, including any breach of
this Agreement and any party's right to enforce this Agreement.
6. Release of JWH by InnoVet, Inc.
On behalf of itself, its officers, directors and agents, for
good and sufficient consideration, the receipt of which is hereby
acknowledged, the Company, hereby releases and forever discharges
JWH, his heirs, executors, personal representatives,
administrators, successors and assigns and any person he represents
from any and all claims and causes of action of any nature or
description, which have been or could have been asserted, whether
such claims or causes of action are known or unknown, suspected or
unsuspected, now exist, hereafter exist or heretofore existed in
favor of the Company, arising out of JWH's employment with the
Company, a document entitled "Employment Agreement", bearing the
date December 31, 1991, a document entitled "Termination, Release
And Consulting Agreement", bearing the date February 23, 1994, and
any other dealings between the Company and JWH, except any actions
or omissions of the Company or JWH occurring after the date of this
release, including any breach of this Agreement and any party's
right to enforce this Agreement.
7. Confidentiality.
The parties hereby represent, warrant and agree that they
will keep confidential all settlement discussions and agreements
entered into between them, including all terms and amounts
discussed and paid under this Agreement, and the facts and
circumstances of any dispute that may have existed between them;
and further agree not to discuss such matters to anyone in any
manner unless such disclosure is pursuant to valid legal process,
an unsolicited request of a regulatory agency with a legal right to
demand such information or as otherwise required by law.
8. No Assignment.
JWH has not assigned or transferred, or attempted to have
assigned or transferred to any person or entity, his rights under
this Agreement. JWH possesses actual lawful authority and
competency to execute this Agreement. He agrees to indemnify,
defend and hold the Company harmless from and against any and all
claims arising out of any such assignment or transfer or attempted
assignment or transfer, or any portion thereof or interest therein.
9. Binding Effect.
This Agreement shall be binding upon the Company and JWH and
their respective heirs, administrators, legal representatives,
executors, predecessors, successors and assigns.
10. Resolution of Disputes.
Any dispute, claim or controversy arising out of or related to
this Agreement or the breach thereof shall be governed by Florida
law and resolved by litigation in Palm Beach County, Florida before
a judge. The parties hereby waive their right to a trial by jury.
The prevailing party in any such litigation shall be entitled to
reasonable attorneys fees and costs.
11. Complete Understanding.
This Agreement constitutes the complete understanding of the
parties and may not be altered, modified, amended or rescinded
except in writing and signed by the parties hereto.
This Agreement has been executed by the parties hereto on the
date shown in the first paragraph.
Jesse W. Houdeshell InnoVet, Inc.
/S/ Jesse W. Houdeshell /S/ Scott P. Cielewich
- ---------------------------- --------------------------------
Scott P. Cielewich, Executive
Vice President and Chief
Financial Officer
EXHIBIT 10.50
(Secured Promissory Note for $65,000 dated March 17, 1997,
Oakes, Fitzwilliams & Co., Limited, Payee)
<PAGE>
SECURED PROMISSORY NOTE
$65,000 Juno Beach, Florida
March 17, 1997
On or before September 30, 1997, for value received, InnoVet,
Inc., a Florida corporation, the maker, with its business address
at 14255 U. S. Hwy. 1, Suite 206, Juno Beach, Florida 33408,
promises to pay to Oakes, Fitzwilliams & Co. Limited, the payee,
with its business address at Byron House, 7-9 St. James's Street,
London SW1A 1EE the principal sum of Sixty Five Thousand Dollars
($65,000.00), with interest to be six months Libor plus four
percent (4%) as of March 17, 1997.
1. Incorporation of Terms of Security Agreement.
This note is secured by a continuing security in the
collateral described in a security agreement, dated March 17, 1997,
executed by the maker in favor of the payee. The terms of that
security agreement are hereby incorporated by reference herein. On
default under the security agreement or under this Note, the Payee
may exercise any of the remedies granted by the security agreement
or given to a secured party under section 9 of the Florida Uniform
Commercial Code.
2. Acceleration of Maturity.
If the Maker should at any time fail in business or become
insolvent, or commit an act of bankruptcy, or if any writ of
execution, garnishment, attachment or other legal process is issued
against any deposit account or other property it owns, or if any
assessment for taxes against it, other than taxes on real property,
is made by the federal or state government, or any department
thereof, or if it fails to notify the Payee of any material change
in its financial condition, all of the Maker's obligations shall,
at the option of the Payee, become due and payable immediately
without demand or notice.
3. Option to Repay in Stock.
The Maker, at its option, may repay the principal and interest
on the loan by issuing shares of its common stock to the Payee
pursuant to Regulation S under the Securities Act of 1933 at a
price of $.0025 per share.
4. Use of Proceeds.
The proceeds paid to the Maker shall be used to pay legal and
accounting fees in connection with the preparation and filing of
reports required by state and federal regulatory agencies, the
NASDAQ Stock Market, Inc. and to conduct due diligence on a merger
candidate for the Maker.
5. Modification of Terms.
The Payee may, with or without notice, to the Maker, cause
additional parties to be added hereto, or release any party hereto,
or revise, extend or renew the Note, or extend the time for making
any payment provided for herein, or accept payment of principal and
interest in advance without affecting its liability; except that if
it pays all principal and interest due on the Note in advance, it
will not incur a prepayment penalty.
6. Waiver of Rights by Maker.
The Maker hereby waives (1) presentment, demand, protest and
notice of non-payment; (2) the right, if any, to the benefit of,
or to direct the application of, any security hypothecated to the
Payee until all of its indebtedness, however arising, shall have
been paid; and (3) the right to require the Payee to proceed
against any party to this Note or to pursue any other remedy in its
power.
5. Governing Law; Venue; Non-Jury Trial.
This Note shall be governed and construed in accordance with
the laws of the state of Florida. Venue for any litigation arising
out of or related to this agreement or the breach thereof shall be
in Palm Beach County, Florida and be tried before a judge. The
Maker hereby expressly waives its right to a jury trial.
6. Attorney's Fees and Costs.
In the event of commencement of suit to enforce payment of
this Note, the prevailing party in any such litigation shall be
entitled to reasonable attorney's fees and costs, as the court may
judge reasonable.
INNOVET, INC.
By: /S/ Scott P. Cielewich
-------------------------------
Scott P. Cielewich, Executive
Vice President and Chief
Financial Officer
EXHIBIT 10.51
(Security Agreement Between InnoVet, Inc. and
Oakes, Fitzwilliams dated March 17, 1997)
<PAGE>
SECURITY AGREEMENT
Agreement made March 17, 1997, between InnoVet, Inc., with its
business address of 14255 U. S. Hwy. 1, Suite 206, City of Juno
Beach, State of Florida, County of Palm Beach, State of Florida,
herein referred to as "Pledgor", and Oakes, Fitzwilliams & Co.
Limited, Byron House, of 7-9 St. James's Street, London SW1A 1EE,
England, herein referred to as "Pledgee".
SECTION ONE
GRANT OF SECURITY INTEREST
Pledgor, for valuable consideration, receipt of which is
acknowledged, hereby grants to Pledgee, the first lien on and
security interest in all:
a. Patents, patent applications, patent disclosures and all
related continuations in part, divisionals, reissues, re-
examinations, utilities, model certificates of invention and
design, patents, patent applications, registrations and
applications for registration, as shown in Exhibit A attached
hereto and incorporated by reference;
b. An assignment of its rights under the agreement between
InnoVet, Inc. and Quest Chemical Corporation dated October 23,
1989, the letter agreement dated October 5, 1989 and all amendments
to the October 23, 1989 agreement, as described in Exhibit B
attached hereto and incorporated by reference; and
c. An assignment of its rights under the agreement between
InnoVet, Inc. and Applied Immune Sciences, Inc., dated September 3,
1993, as amended on January 4, 1994 and July 12, 1994 relating to
monoclonal antibodies useful for the differentiation by sex of
sperm cells, as shown in Exhibit C attached hereto and incorporated
by reference.
SECTION TWO
OBLIGATION SECURED
The security interest granted hereby secures payment of the
note and all liabilities and agreements of the Pledgor to the
Pledgee whether now existing or hereafter arising, under and
pursuant to the note. The Pledgor shall hold the collateral.
SECTION THREE
REPRESENTATIONS AND WARRANTIES
Pledgor hereby represents and warrants that it owns the assets
described in Section One and such assets are not subject to any
lien, pledge, charge, encumbrance, security interest, or a right or
auction on the part of any third person to purchase or acquire such
shares or any part thereof.
SECTION FOUR
PLEDGEES' RIGHTS
Pledgee shall have, with respect to the shares, the rights and
obligations of a secured party under Article 9, Florida Uniform
Commercial Code.
SECTION FIVE
WAIVER
Pledgor waives demand, notice, protest, and all demands and
notices of any action taken by Pledgee under this agreement or in
connection with any of the collateral, except as otherwise required
by this security agreement, and Pledgor consents to any indulgence
granted by Pledgee to others, and to any substitution for, exchange
of, addition to, or release of the collateral, in whole or in part,
or release of any party liable on the collateral. Pledgor releases
Pledgee from any and all claims for depreciation, loss, or damage
caused by any act or omission (except willful misconduct) on the
part of Pledgee, its agents and employees, including, without
limitation, failure to exercise, or delay in exercising, any right,
privilege, or option, to present for payment, to protest, to sue
on, to collect or realize on any of the collateral or any moneys
due or to become due thereon.
SECTION SIX
DEFAULT
Pledgor will be in default on the happening of any of the
following events or conditions:
a. Failure to make payment when due or failure to perform
any of the agreements or provisions contained or referred to, in
this security agreement, in any other agreement executed with
reference to this security agreement, or in any instrument
evidencing any of Pledgor's obligations to Pledgee.
b. Discovery of falsity in any material respect when made or
furnished of any warranty, representation, or statement contained
in this agreement or made or furnished to Pledgee by or on behalf
of Pledgor in connection with this agreement or to induce Pledgee
to extend credit to Pledgor.
c. Filing of suit in connection with any levy, seizure, or
attachment of or on the collateral.
d. At any time, in the opinion of Pledgee, the financial
condition of Pledgor becomes impaired or the collateral becomes
insufficient or unsafe.
e. Pledgor's dissolution, or other termination of existence,
merger or consolidation with another, insolvency, forfeiture of
right to do business, business failure, appointment of a receiver
of any part of its property; the calling of any meetings of or the
assignment for the benefit of creditors by Pledgor, or the
commencement of any proceedings under any bankruptcy or insolvency
laws by or against Pledgor or any guarantor or surety for Pledgor.
f. Default by any guarantor, surety, or indorser for Pledgor
with respect to any obligation or liability to Pledgee.
SECTION SEVEN
REMEDIES
a. On the occurrence of any event of default, and at any
time thereafter, Pledgee may, without notice to debtor, declare all
or any of the obligations secured by this agreement immediately due
and payable and will have, in addition to all other rights and
remedies, the rights and remedies of a secured party under Article
9 of the Florida Uniform Commercial Code, including but not limited
to the right to sell of otherwise dispose of any or all of the
collateral.
b. No act, delay, omission or course of dealing between
debtor and secured party will be a waiver of any of Pledgee's
rights or remedies under this security agreement, and no waiver,
change, modification or discharge in whole or in part of this
security agreement or of any obligation secured by this security
agreement will be effective unless in writing signed by Pledgee.
A waiver by Pledgee of any rights or remedies under the terms of
this security agreement or with respect to any obligation secured
by this agreement on any occasion will not be a bar to the exercise
of any right or remedy on any subsequent occasion. All rights and
remedies of Pledgees under this agreement are cumulative and may be
exercised singly or concurrently and the exercise of any one or
more of them will not be a waiver of any other.
SECTION EIGHT
TERMINATION
Upon payment in full of the secured promissory note, Pledgee
shall release its security interests.
SECTION NINE
RENEWALS OR EXTENSIONS
No renewal or extensions of the note, and no delay in the
enforcement or exercise of the rights granted the Pledgee under
this agreement shall constitute a waiver or affect the rights of
the Pledgee with respect to the shares of stock or any part
thereof.
SECTION TEN
NOTICES
All notices or other communications by either party to this
agreement must be in writing and either mailed by registered or
certified mail, postage prepaid, or hand delivered to the following
addresses during regular business hours:
Pledgor:
------------------------------
Pledgee:
------------------------------
SECTION ELEVEN
AMENDMENT OR MODIFICATION
This agreement may not be amended or modified except in
writing, duly executed and signed by the parties.
SECTION TWELVE
ADDITIONAL DOCUMENTS
Pledgor stipulates that it will execute and deliver to Pledgee
any and all additional documents which may be necessary to perfect
the security interest given to pledgee under this agreement.
SECTION THIRTEEN
BINDING EFFECT
This agreement shall be binding upon the parties hereto and
their representatives, heirs, successors, and assigns.
SECTION FOURTEEN
GOVERNING LAW; VENUE; ATTORNEYS FEES
This agreement shall be governed by Florida law. Venue for
any lawsuits arising out of or related to this agreement or the
breach thereof shall be Palm Beach County, Florida. The prevailing
party in any such lawsuit shall be entitled to reasonable attorneys
fees and costs.
IN WITNESS WHEREOF, Pledgor and Pledgee have executed this
agreement at Juno Beach, Florida, the day and year shown in the
first paragraph.
INNOVET, INC., Pledgor
By: /S/ Scott P. Cielewich
--------------------------------
Printed Name: Scott P. Cielewich
Title: EVP & CFO
OAKES, FITZWILLIAMS & CO. LIMITED,
Pledgee
By: /S/ James H. Gellert
-------------------------------
Printed Name: James H. Gellert
Title: As Agent-V.P. Oakes,
Fitzwilliams & Co., L.P.
EXHIBIT 10.52
(Arrangement Agent Agreement Between InnoVet, Inc.
and Oakes, Fitzwilliams dated March 17, 1997)
<PAGE>
ARRANGEMENT AGENT AGREEMENT
This Agreement is made as of this 17th day of March, 1997, by
and between InnoVet, Inc., a Florida corporation, 14255 U. S. Hwy.
1, Suite 206, Juno Beach, Florida 33408 (the "Company") and Oakes,
Fitzwilliams & Co. Limited, Byron House, 7-9 St. James's Street,
London, England, SW1A 1EE (the "Agent").
RECITALS
WHEREAS, the Agent is able to arrange a loan for the Company
of $65,000;
WHEREAS, the Agent has skill related to investment banking,
raising capital, mergers and acquisitions; and the Agent is in the
business of providing such services;
WHEREAS, the Company is interested in retaining the Agent to
assist it in those areas in which the Agent has skills; and
WHEREAS, the Agent is interested in performing such services
for the Company;
NOW, THEREFORE, in consideration of the foregoing and other
good and valuable consideration the parties, intending to be
legally bound, agree as follows:
1. Agent's Duties.
The Agent shall obtain a loan for the Company in the amount of
$65,000 to enable the Company to pay legal and accounting costs
connected with preparing and filing reports with state and federal
regulators, the NASDAQ, Inc. Stock Market and to conduct due
diligence of a company for the purpose of a merger. The Agent has
identified for the Company a merger candidate for it to consider.
2. Compensation and Expenses.
The Company shall pay the Agent at the closing on the loan of
$65,000 an arrangement fee of $5,000 plus an advance for fully
accountable out-of-pocket expenses in connection with the loan of
$10,000. Additionally, in the event the Agent introduces the
Company to an acquisition or merger candidate and the Company
enters into an acquisition or merger agreement with the candidate
but elects not to proceed, the Company will pay the acquisition
merger candidate a "break-up fee" of $25,000. The arrangement fee,
out-of-pocket expenses and any "break-up fee" that may be owed can,
at the option of the Company, be paid in shares of its common stock
issued pursuant to the exemption from securities registration under
Regulation S of the Securities Act of 1933 at a price of $.0025 per
share.
3. Confidentiality.
All data and information received by the Agent from the
Company in connection with the performance of its services shall be
treated as confidential and any materials that are provided to him
shall not be copied or divulged, directly or indirectly, to any
other person at any time except as may be necessary or desirable to
persons authorized by the Company. The Agent shall take all
necessary steps to prevent disclosure of any such information for
any such purposes other than as specified above. The Company
reserves the right to determine the nature and extent of disclosure
to the Agent.
4. Assignment.
The rights and obligations under this Agreement shall not be
assignable or transferrable by any party hereto without the prior
written approval of the other party. Such approval shall be at the
sole discretion of such other party and any assignment without such
written approval shall be void.
5. Complete Understanding.
This Agreement constitutes the complete understanding of the
parties and may not be altered, modified, amended or rescinded
except in writing and signed by the parties hereto.
6. Notices.
All notices which are required or which may be given under the
provisions of this Agreement shall be personally delivered, or sent
by certified or registered mail, return receipt requested to the
respective addresses set forth above, or to such other addresses
either party may subsequently designate in writing for the purpose
of receiving such notices.
7. Legal Fees and Costs; Venue; Governing Law.
In any litigation arising out of or relating to this Agreement
or the breach thereof, the prevailing party or parties shall be
entitled to recover reasonable attorneys fees and costs. Venue for
any such litigation shall be Palm Beach County, Florida. This
Agreement shall be governed by Florida law.
IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed as of the date shown above.
INNOVET, INC.
By: /S/ Scott P. Cielewich
-------------------------------
Scott P. Cielewich, Executive
Vice President and Chief
Financial Officer
OAKES, FITZWILLIAMS & CO. LIMITED
By: /S/ James H. Gellert
-------------------------------
Printed Name: James H. Gellert
Title: As Agent:VP of Oakes,
Fitzwilliam & Co.,L.P.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 44,500
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 44,500
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 44,500
<CURRENT-LIABILITIES> 110,644
<BONDS> 0
0
0
<COMMON> 18,656,881
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 44,500
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 142,111
<LOSS-PROVISION> 142,111
<INTEREST-EXPENSE> 4,974
<INCOME-PRETAX> 0
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</TABLE>
