UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-KSB
Annual Report Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
For the fiscal year ended December 31, 1997 Commission file number 0-23512
BIOCORAL, INC.
(Name of small business issuer as specified in its charter)
Delaware 33-0601504
(State or other jurisdiction of (I.R.S. Employer I.D. No.)
incorporation or organization)
3, villa de l'Industrie, Saint-Ouen
FRANCE N/A
(Address of Principal Executive Offices) (Zip Code)
011-3314-010-2252
(Registrant's telephone number)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Title of each class
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Common Stock. $.001 Par Value
Indicate by check mark whether the issuer (1) filed all reports required
to be filed by Section 13 or 15(d) of the Securities 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 |X| No |_|
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-B is not contained herein, and no disclosure will be
contained, to the best of issuer'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. Yes |X| No |_|
Issuer's revenues from continuing operations for its most recent fiscal
year were $610,701.
The aggregate market value of the voting stock held by non-affiliates of
the Issuer, as of December 31, 1997, was approximately $27,753,000.
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The Issuer had 7,697,215 shares of common stock outstanding as of December
31, 1997.
Documents Incorporated by Reference - See Exhibit Index
PART I
Item 1. Description of Business
Background
BioCoral, Inc., a Delaware corporation (the "Company") is an international
biomaterials company that, through its subsidiaries, develops, manufactures and
markets bone graft and growth material for orthopedic, oral and maxillofacial
applications to a number of countries outside the United States. The Company's
chief product, BioCoral, is derived from natural coral using proprietary
manufacturing processes. BioCoral has certain characteristics (chemical
composition, porosity, etc.) similar to human bone that facilitates its
replacement of bone and concomitant bone strengthening. Prior to 1995, the
Company derived substantially all its revenue from other unrelated businesses.
The Company has written off its investment in one such area, and has sold
certain real property owned by it which had been a prior focus of its business.
Through the end of 1997, the Company had not yet realized significant revenues
from the sale of its BioCoral products. Its products are not approved for sale
in the United States and there can be no assurance such approval will be
obtained. The failure to do so could have a material adverse effect upon the
Company's ultimate profitability.
The Company, formerly known as IMMO-Finance Corporation, was incorporated
on May 4, 1992 under the name Hermeneutics Corporation. The Company was
originally formed for the purpose of either merging with or acquiring an
operating company with operating history and assets. The Securities and Exchange
Commission has defined and designated these types of companies as "blind pools"
and "blank check" companies. From May 1992 through March 1994 the Company was a
blank check company with the primary purpose of seeking merger or acquisition
candidates. The Company ceased to be a blank check company on March 25, 1994
when it acquired all of the issued and outstanding shares of the capital stock
of Cabestan, Inc., a Pennsylvania corporation ("Cabestan"). Cabestan had owned
two commercial properties located in the Bensenville Industrial Park in the
Chicago area. Cabestan's commercial properties consisted of one building which
serves as a bulk warehouse/distribution center and a second building which
serves as office space and as a service center. The properties were sold to a
non-affiliated third party in 1997. See Item 2. - "Description of Properties".
The Company entered the biomaterials field on August 2, 1995, when it
acquired virtually all the outstanding shares of 3H Human Health Hightech Public
Company Limited, an Irish corporation ("3H"). The principal asset of 3H then
consisted of an option on an exclusive worldwide (except France) license to
distribute a bone substitute material manufactured from coral and marketed under
the name BioCoral. The license was granted by the owner of the patent rights to
BioCoral, Inoteb, S.A., a French corporation ("Inoteb") in which a 51.5% (now
66.95%)
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interest was subsequently acquired by the Company. The license granted by Inoteb
is for a period of 15 years plus two additional two year periods, and includes
the right to distribute certain other products developed by Inoteb. Potential
products include an osteoporosis treatment and a biological glue utilizing the
patient's own blood which eliminates the risks of transmission of viruses. None
of Inoteb's products are presently available in the United States and no FDA
approvals thereof have been obtained. The FDA approval process is long and
expensive and no assurance can be had of the ultimate granting thereof, or of
the Company's ultimate profitability.
The Company acquired the shares of 3H from Cornington International Inc.
and Halford Finance S.A., each a British Virgin Islands corporation and each a
client of Societe Financiere du Seujet, a financial services company owned by
Riccardo Mortara, the Company's former Chairman and a former director. 500,000
ordinary shares (out of 500,800 shares outstanding) and all 100,000 outstanding
preference shares, of 3H were acquired in exchange for (a) 800,000 shares of the
Company's common stock; and (b) the right to purchase 150,000 shares of the
Company's common stock for each $1,000,000 in net profit after taxes of 3H in
excess of $2,000,000, the aforementioned options to be prorated for each
fractional portion of each multiple of $1,000,000 net profit. In connection with
such Agreement the Company was granted an option to acquire Inoteb, which option
has been exercised in part. The Company also agreed, in connection with any
purchase of Inoteb, to invest all net profits after taxes from BioCoral for five
years (up to a maximum of $10,000,000) into Inoteb, and agreed to use its best
efforts to raise $15,000,000 for investment into Inoteb at the rate of
$5,000,000 per year by each of July 31, 1996, 1997 and 1998. The Company did not
raise such amount for Inoteb by July 31, 1997, and there can be no assurance
that it will be able to do so in the future.
The Company took further steps to solidify its position within the
biomaterials field by agreeing to acquire Inoteb. In October 1995, the Company
entered into an agreement (the "Inoteb Agreement") with 10 individuals, all
French nationals, pursuant to which the Company agreed to acquire from such
individuals an aggregate of 30,150 shares and 7497 convertible bonds
(collectively, the "Inoteb Securities") of Inoteb which, among other things,
owns certain patent rights to BioCoral's products. The shares and bonds of
Inoteb acquired represent 51.5% of the capital share of Inoteb and 86.67% of the
convertible bonds thereof. During the third quarter of 1996, the Company asked
for the conversion of all the Inoteb convertible bonds into shares of Inoteb and
the Company then owned 56% of the outstanding shares of Inoteb. The remaining
minority interest in Inoteb is owned by European financial institutions such as
Sofinnova S.A. and FCPR Soffinova Capital, both owned by Credit National of
Paris; SDR Bretagne, the official governmental development company for the
French region of Brittany; Jafco Saint-Honore I and II, owned by Compagnie
Financiere Ed. de Rothschild of Paris; Parquest Venture Partnership and Atlas
Venture Europe Fund B.V.
The consideration for the Inoteb Securities was initially to be an
aggregate of 1,035,292 shares of the Company's common stock. In addition, the
Inoteb Agreement provided for the
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Company to confirm that (a) the first $10,000,000 of 3H's net profits would be
utilized to subscribe for additional Inoteb capital for Inoteb to use for
research and development; and (b) it would use its best efforts to raise an
aggregate of $15,000,000 on or before July 31, 1998 to be utilized for
capitalizing Inoteb. 3H has not yet realized any significant revenues and the
Company has not raised any additional funds for Inoteb's capitalization.
The Agreement was closed in escrow with a French notary in late October
1995 owing to the implications of the Agreement for the Inoteb shareholders
under French law. The Company completed the acquisition of a 51.5% equity
interest in Inoteb on July 23, 1996 when the shares were released from escrow.
The number of shares given to the Inoteb shareholders was increased to reflect
the share dividend the Company had declared in December 1995.
In June 1997, Inoteb's board elected to conduct an "augmentation of
capital" under French law, similar to a rights offering in the US, in the
aggregate amount of FF 5,411,795. The Company was obligated to participate in
the augmentation of capital but did not have the cash to do so. The Company also
wished to obtain the benefits of owning in excess of 66 2/3 % of Inoteb which
would put it in a position of control thereof under French law. Therefore, the
Company arranged to borrow certain funds from Jean Darondel, now (but not then)
a director of the Company and Vida Nassiri Khoobdehi ("Vida"), sister of Nasser
Nassiri, the Company's Chairman. The two loans were formalized in an agreement,
dated November 1, 1997, pursuant to which the Company borrowed $260,000 (US)
from Vida Nassiri Khoobdehi and FF 971,905 from Jean Darondel. Each of the loans
was a demand loan with interest at 10% per annum and were secured by a pledge by
the Company of the Inoteb shares acquired by virtue of Vida (7557 shares) and
Jean Darondel (4741 shares) in the augmentation. The loan from Vida is
convertible at any time at Vida's option into 307,245 shares of the Company's
common stock. The loan from Jean Darondel is convertible at any time at Jean
Darondel's option into 192,755 shares of the Company's common stock. The
Agreement contains no provisions regarding Dr. Darondel's service as a director.
Through the date of this Report, no interest has been paid to either Dr.
Darondel or Vida.
Previously, on September 12, 1994, the Company had acquired a 51% interest
in the capital stock of Borgonuovo SIM S. A. (the "SIM"), an Italian corporation
with principal offices in Milan engaged in the brokerage and investment advisory
business. During the year ended December 31, 1995, this investment was written
off by the Company in its entirety. The Company also has another subsidiary,
IMMO Finance Distribution Limited, an Irish corporation ("IMMO Distribution"),
formed in April 1994. To date its only activity has been a passive investment in
PEMP, Inc., a Canadian mutual fund. During 1996, this investment was written off
by the Company in its entirety. See "Business - Discontinued Operations." Both
these investments had been approved by prior management of the Company.
The executive offices of the Company are located at 3, villa de
l'Industrie, Saint-Ouen, France consisting of approximately 3000 square feet of
office space.
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BioCoral
BioCoral is a natural biomaterial produced from natural coral. Certain
chemical, physical and structural characteristics of coral are very similar to
that of human bone tissue. BioCoral is derived from three particular species of
coral naturally present in abundance. BioCoral is primarily (more than 97%)
comprised of calcium carbonate. Porous and resorbable, BioCoral is prepared in
microgranules as well as in engineered shapes according to specific indication.
Due to its similarity to bone tissue, BioCoral is resorbed by the body as new
bone growth invades the BioCoral. The principal current alternative to BioCoral
is the utilization of autologous (from the patient's own body) bone grafts. The
use of autologous bone grafts requires the patient to undergo one or more
additional surgeries to harvest the bone graft material. This is not always
feasible due to the condition of the patient or other contraindications, and
must be shaped in a separate procedure to fit the graft area.
According to Inoteb, BioCoral has been used in over 130,000 patients,
principally in France and Italy. BioCoral was patented in France in 1979, in the
United States in 1982, and in Japan in 1989. Inoteb acquired the patent rights
to BioCoral from ANVAR/CNRS, the French National Center for Scientific Research,
a French governmental agency.
Clinical Applications
BioCoral has been used in various clinical applications. Current uses
include the following: (a) orthopedic surgery uses include spinal surgery,
tibial (shinbone) osteotomies, hip fractures, trephine (skull) hole replacement,
fracture repair and filling of bone cavities; (b) maxillocraniofacial surgery
and plastic surgery uses include reconstructive and cosmetic surgery; (c) oral
surgery uses include filling of bone defects due to loss of teeth or periodontal
disease.
BioCoral's crystalline structure is composed almost entirely of calcium
carbonate, with trace amounts of fluoride, strontium and magnesium. BioCoral is
highly porous, with one gram having a surface area greater than 1 square meter.
It is believed that this porosity is conducive to new bone growth and resorption
by the body. Because BioCoral is resorbed, it can be combined with
antimicrobials, anticancer agents or other pharmaceuticals for slow release into
bone tissue, resulting in an advantage over autologous bone grafts.
Osteoporosis
Osteoporosis is a progressive bone disorder in which bone density
decreases, combined with increased bone brittleness and porosity, which
primarily affects post-menopausal women. Current preventive treatment for
osteoporosis includes estrogen drugs. Phase II clinical trials in Europe have
demonstrated the efficacy of BioCoral for local osteoporosis treatment in
rebuilding bone, particularly in combination with osteodensimatic screening. The
Company intends to raise capital to fund Phase III clinical trials, which will
be a prerequisite to human use in the United States. There can be no assurance
that any such funds will be raised, and the failure to raise such
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funds could have a material adverse effect upon the Company.
Surgical Glue
Inoteb has developed an autologous fibrin adhesive glue with autologous
growth factors. This surgical glue is prepared using the patient's own blood, in
a closed system, eliminating immunological problems and the risk of blood-borne
disease transmission such as, for example, HIV. The surgical glue can be used
not only with BioCoral but also for the treatment of hemorrhage during surgery
and for wound healing in soft tissues. Inoteb is beginning clinical trials in
Europe of the surgical glue and expects to have the product ready for marketing
in Europe and elsewhere (but not the US) in late 1998. The Company anticipates
that the initial clinical applications of the autologous glue will be in
connection with facial and reconstructive plastic surgery. Pursuant to its
original license agreement with Inoteb, 3H had the exclusive right to distribute
the surgical glue outside France; by an extension of such agreement, dated
September 10, 1997, 3H acquired the commercial rights for France and Algeria as
well as an extension of the original license for two years. The world market
segment for the surgical glue is estimated by Inoteb to be in excess of $600
million. No assurance can be made that the Company will ever be able to
commercially exploit the surgical glue or, if commercially exploited, that it
will be successful.
On May 21, 1996, Inoteb entered into a requirements supply contract with
Intermedics Orthopedics of Denver, a subsidiary of Sulzer S.A. of Switzerland, a
major international medical products manufacturer. Pursuant to the agreement, 3H
agreed to supply all of such company's requirements of BioCoral products in
connection with Intermedics' proprietary bone growth factor. Intermedics' growth
factor, coupled with the Company's products, will be used in connection with
orthopedic surgical applications. Intermedics and BioCoral will move forward
promptly to begin clinical trials to obtain FDA approval of the products. No
assurance can be given as to the dollar value of this agreement, nor can there
be any assurance that it will be successful or lead to significant revenues.
Raw Materials and Manufacturing
The primary raw material used by the Company to manufacture BioCoral is
coral. The coral used in the Company's products is presently sourced from New
Caledonia, but is also found in abundance in wide areas of the Indian and
Pacific Oceans. The Company believes that its existing inventory of coral,
together with coral sources immediately available to it, are sufficient to meet
its present needs. To date, coral prices have been stable but no assurance can
be had that they will not rise. The Company is, however, unaware of any factors
which are likely to have a material adverse effect on the Company's ability to
obtain coral at a competitive price.
Manufacturing of BioCoral is done at Inoteb's facility in Saint Gonnery,
France. This facility, which covers approximately 350 square meters (3150 square
feet), has been ISO 9002 rated since August 1995 and recently passed an ISO
audit conducted by AFAQ, the French
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national quality assurance agency. On October 25, 1996, Inoteb was granted, in
addition to the ISO 9002 certification, European Norms 46002 certification for
the quality assurance system set up in the manufacturing process of BioCoral
and, on December 30, 1996, Inoteb was granted the EC certificate allowing sales
of BioCoral throughout the European Community. The Company believes this
facility is adequate to service the Company's present and immediately
anticipated needs.
Competition
BioCoral. The Company's BioCoral product competes with (i) natural bone
obtained from autograft procedures and allograft sources and with (ii) two other
synthetic bone products, one marketed in the United States by Interpore, Inc. a
publicly-held company with significantly greater resources and distribution
capabilities than the Company, and another that was approved by the FDA in May
1993. Autograft and allograft bone have been used for graft material for a much
longer period of time than BioCoral and similar materials, and in order to
increase its future sales of BioCoral, the Company will have to demonstrate to
the medical community the surgical and patient advantages, safety, efficacy,
cost effectiveness and clinical results of BioCoral.
The Company believes that BioCoral provides an attractive alternative to
autograft and allograft bone graft materials. In an autograft procedure, bone
material is first harvested from another part of the patient's skeleton and
then, in a second procedure, grafted to the site of the bone deficit. The
harvesting procedure increases operating time and expense, and can lead to
complications such as infection, excessive blood loss, chronic pain and
deformity. When an autograft is not feasible or desirable, allograft bone,
typically obtained from a cadaver, can be used. In order to maintain mechanical
and biological properties, some allograft bone is not sufficiently sterilized to
avoid all risks of disease transmission. Therefore, unlike BioCoral, which is a
sterile and biocompatible material, allograft bone carries the risks of implant
rejection and the transmission of infectious agents such as hepatitis and HIV.
The use of BioCoral entails none of these risks and provides clinical results
comparable to those of autograft material.
In May 1993, a second bone graft substitute was approved by the FDA. This
product consists of hydroxyapatite-calcium phosphate and bovine collagen, which
must be mixed with the patients' own bone marrow. The Company believes that this
three-part system is more difficult to use due to the mixing process and has
inferior mechanical qualities. It also requires refrigeration, has a shorter
shelf life and raises the risk of adverse reaction in patients allergic to
bovine collagen. This system is marketed by Zimmer, Inc., a subsidiary of
Bristol-Myers-Squibb, a competitor with significantly greater resources and
distribution capabilities than the Company.
The Company is not aware of the degree to which either Zimmer or
Interpore's products have penetrated the European or Asian markets, but their
significant market presence in the United States and their greater resources
pose a significant obstacle to the Company's ability to successfully market its
products in the United States should it ultimately obtain FDA approval of
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its products.
Dental Implant Market. The Company competes with many businesses in the
production and distribution of biomaterials for filling bone cavities before
rehabilitation of partially and totally edentulous patients. These businesses
compete primarily on the basis of product performance and price, as well as
customer loyalty and service.
Maxillofacial Market. BioCoral competes with autograft, allograft and
xenograft, as well as non-porous hydroxyapatite products for repair or
reconstruction of maxillofacial bone structures. In addition, this product
competes with silicone implants for maxillofacial applications. Companies
selling competitive products sometimes also sell dental implants, so bundling
these products is often a strategy. All of these businesses compete primarily on
the basis of product performance and price, as well as on customer loyalty and
service. Most of the Company's competitors have substantially greater resources,
larger market share and greater research and development capabilities than the
Company and may, therefore, be expected to compete aggressively and successfully
in the markets for the Company's dental implant products.
Management believes that the Company's products are superior to its
competitors' products. The Company has begun to make arrangements for the
commencement of clinical trials for certain of its products with a view toward
FDA approval thereof . In the interim, the Company will focus on increasing its
European and other sales of its products, streamlining Inoteb's operations,
entering into joint ventures with key strategic partners for distribution of its
products, research and development and the like. No assurance can be had that
any such arrangements will be reached or that they will be profitable.
Governmental Regulation
BioCoral has been approved for marketing in more than 15 countries in
Europe, Korea, South Africa, Canada and Australia. BioCoral has been approved
for reimbursement by the Tarif Interministeriel des Prestations Sanitaires, the
French national health services agency.
The Company's products are subject to significant government regulation in
the United States and other countries. To test clinically, and to produce and
mass market products for human diagnostic and therapeutic use in the United
States, the Company must comply with mandatory procedures and safety standards
established by the Food and Drug Administration ("FDA") and comparable state and
foreign regulatory agencies. Typically, such standards require that products be
approved by the government agency as safe and effective for their intended use
before being marketed for human applications. The approval process is expensive
and time-consuming, and no assurance can be given that any agency will grant
approval of the Company's products or that the length of time the approval
process will take will not be extensive. No clinical testing on humans may be
undertaken in the United States without first obtaining an Investigational
Device Exemption ("IDE") from the FDA.
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There are two principal methods by which FDA approval may be obtained to
market regulated products in the United States. One method is to seek FDA
approval through a premarket notification filing under Section 510(k) of the
Food, Drug and Cosmetics Act. Applicants under the 510(k) procedure must prove
that the device for which approval is sought is substantially equivalent to
devices on the market before the Medical Device Amendments of 1976 or devices
approved after the 510(k) procedure. The review period for a 510(k) application
is 90 days from the date of filing the application; if not rejected, within such
90 days, applications are deemed approved.
The alternative method is to obtain premarket approval ("PMA") from the
FDA. Under the PMA procedure, the applicant must obtain an IDE before beginning
the substantial clinical testing required to determine the safety, efficacy and
potential hazards of the products. The review period under the PMA procedure may
last for several years.
The FDA also imposes requirements on manufacturers and sellers of products
under its jurisdiction, such as labelling, manufacturing practices, record
keeping and reporting. There can be no assurance that appropriate approvals from
the FDA will be obtained for sales of any of the Company's products in the
United States. Such failure could have a materially adverse impact upon the
Company.
Discontinued Operations
Cabestan / Bensenville Real Estate Operations. On March 25, 1994 the
Company acquired all of the issued and outstanding capital stock of Cabestan.
The Company acquired the stock of Cabestan for a cash purchase price of
approximately $5,544,000. The Company financed the acquisition through a
combination of obtaining a $1,050,000 short term loan and through capital raised
in a Regulation S offering to non-US investors, which offering had its initial
closing on March 23, 1994 with respect to 630,000 shares of Common Stock with
net proceeds to the Company of $4,536,000. The short term loan bore interest at
the rate of 5% per annum and was repaid in full by the Company prior to its
September 30, 1994 due date out of the proceeds from the Company's Regulation S
Offering. The Company raised an aggregate of $7,022,160 in net proceeds to the
Company in its Regulation S Offering concluded in December 1994.
Concurrently with the Company's acquisition of the stock of Cabestan,
Cabestan acquired the following assets from Bensenville Industrial Park, L.P.
("BIP") for the following considerations: (i) Building #3 in the Bensenville
Industrial Park located adjacent to Chicago's O'Hare Airport ("Building #3") for
a purchase price of $3,631,210 in cash and the assumption of an outstanding
mortgage obligation on this property of $1,876,878; (ii) a 100% beneficial
ownership interest in Building #12 in the Bensenville Industrial Park ("Building
#12") for a purchase price of $1,642,790 in cash and the assumption of an
outstanding mortgage obligation on this property of $2,999,120 and (iii) a 9.3%
limited partnership interest in Bensenville Associates Limited, an Illinois
limited partnership ("BAL") (the "Limited Partnership Interest"),
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for a purchase price of $270,000. Riccardo Mortara, then a director and the
Chief Executive Officer of the Company, was, at such time, an affiliate of BIP.
Building #3 is used as a bulk warehouse/distribution center and Building #12 is
used for office space and as a service center. BAL, the former owner of the
entire Bensenville Industrial Park consisting of 14 buildings in the
Chicago/O'Hare Airport area (the "Bensenville Industrial Park"), of which
Building #3 and Building #12 were a part, is currently the owner of
approximately 12.5 acres of undeveloped land in the Bensenville Industrial Park.
Building #3 and Building #12 are collectively referred to herein as the
"Bensenville Properties." The Bensenville Properties were sold in February 1997.
See Item 2 "Description of Property".
The opportunity to acquire Cabestan was presented to the Company by
Dremer Holding, Ltd. ("Dremer"), through its President, Riccardo Mortara, who,
at the time, was also the Company's Chief Executive Officer and a director. Mr.
Mortara is the sole officer, director and shareholder of Dremer. Also as part of
the acquisition of Cabestan, Dremer received 1,000 shares of the Series A
Preferred Stock of the Company. The Series A Preferred Stock entitled Dremer to
elect 60% of the members of the Board of Directors of the Company and
effectively afforded Mr. Mortara, after the acquisition of Cabestan, with
effective control of the Company. By January 1997, all such Series A Preferred
Stock was converted, together with a cash infusion into the Company of
$1,000,000 , into 1,000,000 shares of the Company's common stock.
The SIM. On May 31, 1994 the Company entered into a non-binding letter of
intent (the "Letter of Intent") to acquire a 51% ownership interest in
Borgonuovo SIM S.p.A. (the "SIM"), an Italian company with principal offices
located in Milan engaged in the brokerage and asset management business. A SIM
is the Italian equivalent of a U.S. securities brokerage and investment advisory
firm. The purchase price for the 51% interest in the SIM was approximately
$2,000,000 (US). Although the Letter of Intent contemplated the purchase of the
full 51% interest in the SIM at one time at the Closing (as defined below), the
Company acquired an aggregate of 14% of the issued and outstanding capital stock
of the SIM, in increments, between the execution of the Letter of Intent and the
execution of a definitive purchase agreement, for a pro-rata portion of the
approximately $2,000,000 (US) purchase price for the full 51% interest. On
September 12, 1994, there was a simultaneous execution and closing (the
"Closing") of a Stock Purchase Agreement, by and among the Company, Kialu
S.r.l., an Italian company (the "SIM Stockholder") and Alessandro Bassetti
("Bassetti") , an individual residing in Milan (the "Stock Purchase Agreement")
with respect to the acquisition by the Company of the additional 37% interest in
the SIM for the balance of the $2,000,000 U.S. purchase price, so that on
September 12, 1994 the Company became the owner of a 51% interest in the SIM.
The Stock Purchase Agreement granted to the SIM Stockholder the right to put the
remaining 49% interest in the SIM (which includes the shares owned by Mr.
Bassetti's uncle) to the Company from and after the three year anniversary date
of the Closing. The put option entitles the SIM Stockholder to put the 49% of
the stock of the SIM to the Company at a purchase price of 49% of the net book
value of the SIM at the time of the exercise of the put option. Owing to
disagreements with management of the SIM and the SIM's poor performance, this
investment was written off in its entirety during 1995.
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Investment in PEMP - In September 1994 the Company, through IMMO
Distribution, made a passive investment of approximately $600,000 in PEMP
Investment Advisers, Inc. ("PEMP"), a company with offices in Montreal which
offers financial and tax planning services to private individuals and entities.
For its initial investment in PEMP, IMMO Distribution acquired a PEMP "network"
consisting of a randomly chosen group of PEMP clients, and was entitled to
receive a percentage of the annual financial management and other fees paid to
PEMP by the clients included in IMMO Distribution's "network." The investment in
PEMP's network was converted by IMMO Distribution into a loan in December 1994
with a variable rate of interest. This loan was converted into 800,000 shares of
the preferred stock of PEMP in June 17, 1995, which preferred shares are
entitled to an annual cumulative fixed dividend at the rate of 10% per annum.
Although Mr. Mortara had prior business dealings with PEMP, neither Mr. Mortara,
nor any officer or director of the Company, is an affiliate of PEMP. During
1996, certain parties affiliated with PEMP had agreed to redeem all such shares
for the amount of $600,000, which has not been accomplished as of the date of
this Report, nor has any interest been paid. Accordingly, effective August 1,
1996, the Company wrote down this investment in its entirety. Management is
presently evaluating its options on how to proceed with PEMP.
Financings
The Regulation S Offering
The Company conducted an offering of its Common Stock outside of the
United States pursuant to Regulation S promulgated under the Securities Act of
1933 from March 1994 through December 1994 (the "Regulation S Offering"). In its
Regulation S Offering, the Company sought to raise up to $40,000,000 through the
sale of up to 5,000,000 shares of its Common Stock at a price of $8.00 per
share. An aggregate of 975,300 shares of Common Stock were sold in the
Regulation S Offering raising aggregate net proceeds for the Company of
$7,022,160.
The shares offered in the Regulation S Offering were offered primarily
through Societe Financiere Privee, S.A., a financial services company located
in, and organized under the laws of, Switzerland. Mr. Mortara, the Company's
former Chief Executive Officer and a non-U.S. citizen, requested SFP to offer
the shares in the Regulation S Offering to certain of its customers. In
addition, Mr. Mortara offered the shares in the Regulation S Offering on behalf
of the Company directly to persons and entities which are among his personal and
business acquaintances. The Company paid a commission on all shares sold in the
Regulation S Offering by non-affiliates of the Company of 10% or $0.80 per share
sold in the offering. The shares which were offered through Mr. Mortara or his
affiliates were sold at a price of $7.20 per share and no commissions were paid
to Mr. Mortara or his affiliates with respect to such offers or sales. Most of
the sales in the Regulation S Offering were made to Societe Financiere Privee,
S.A., which purchased such shares as the nominee holder for approximately 166
persons and entities. Mr. Mortara is not an affiliate of Societe Financiere
Privee, S.A., but does have a pre-existing long-term business relationship with
such entity.
11
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The Regulation D Offering
The Company conducted an offering of units of its debt and equity
securities in accordance with Regulation D promulgated under the Securities Act
of 1933 from June 1994 through January 31, 1995 (the "Regulation D Offering")
primarily to raise funds needed by the Company to acquire the SIM. In the
Regulation D Offering, the Company sought to raise up to $2,500,000 by the sale
of up to 50 Units (the "Units") at a price of $50,000 per Unit, each Unit
consisting of one $50,000 six month note bearing interest at a rate of 12% per
annum (the "Reg D Notes") and 1,250 shares of the Common Stock of the Company,
$.001 par value per share (the "Common Stock"). The Company sold an aggregate of
39.5 Units in the Regulation D Offering, with an aggregate of $1,975,000 in
proceeds for the Company raised in such offering in consideration for the
issuance of $1,975,000 in face amount of the Reg D Notes and 49,375 shares of
Common Stock. Baraban Capital Corporation ("BCC"), an investment banking firm
and former affiliate of the Company, guaranteed payment of principal and
interest on the Reg D Notes. Baraban Securities Incorporated, a broker-dealer
and former affiliate of the Company ("BSI") acted as the broker-dealer with
respect to the offering of the Units. In consideration for such activities BSI
received a sales commission of 10% on the Units sold and a nonaccountable
expense allowance equal to 3% on the Units sold. BSI also received 500 shares of
Common Stock of the Company for each Unit sold in the Regulation D Offering, or
an aggregate of 19,750 shares of Common Stock.
An aggregate of $1,775,000 in principal amount and $53,250 of accrued but
unpaid interest became due and payable on the Reg D Notes on April 4, 1995, and
the Company was unable to pay such amounts, and accordingly, defaulted in the
repayment of the Reg D Notes. Societe Financiere du Seujet, an affiliate of
Riccardo Mortara, the Chief Executive Officer and a director of the Company,
agreed to deliver to the holders of the Reg D Notes which had become due and
payable, in exchange for the surrender and cancellation of such Reg D Notes,
one-half of the principal amount due on such Reg D Notes, all of the accrued and
unpaid interest on such Reg D Notes through April 4, 1995 and a new promissory
note for one-half of the original principal amount on such Reg D Notes ("New
Notes"). During the period from April 4, 1995 through June 30, 1996, an
additional 60% of the principal amount and all accrued interest through June 30,
1996 was paid on the New Notes. In May 1997, following the sale of the
Bensenville Properties, the Company paid off the full principal balance of and
all accrued interest through June 30, 1997 on the New Notes to all but one
noteholder who could not be located.
Employees
The Company currently has no employees other than its officers and
directors who devote as much time as they believe necessary to carry out the
affairs of the Company. Inoteb currently has 12 employees, all of whom are full
time.
12
<PAGE>
Item 2. Description of Property.
On October 15, 1996, Cabestan entered into an agreement with Brooklyn
Roads, Ltd., an Ontario corporation ("Buyer") based in Toronto pursuant to which
Buyer agreed to acquire the fee interest in the Bensenville Properties for an
aggregate consideration of $6,800,000. The consideration for the property was to
be payable in part by the assumption of an existing first mortgage loan
("Mortgage") on the property in the approximate amount of $4,750,000, and the
balance in cash at closing. There was no prior relationship between the Company
and Buyer. The agreement was amended on January 30, 1997 (the "Amendment") to
provide for a reduction in the purchase price to $6,675,000 and to add certain
minimum rent guarantees. In February 1997, Buyer's rights under the agreement,
as amended, were assigned to Carbrook LLC, a Minnesota limited liability company
("Carbrook").
The transaction closed on February 18, 1997. The total consideration for
the sale was $6,675,000. The purchase price was funded partly in cash and partly
by assumption of the Mortgage whose balance at the time was $4,747,982. Of the
cash proceeds of the sale (approximately $1,515,000) an aggregate of $442,423
were escrowed with the title insurance company pending issuance of three letters
of credit, two (in the aggregate amount of $430,000) to secure certain rent
guarantee obligations set forth in the Amendment and one which replaces a letter
of credit previously issued to secure one of the leases on the Bensenville
Properties. Not included in the sale was Cabestan's 9.3% special limited
partnership interest in BAL. BAL, the former owner of the Bensenville Industrial
Park, is now the owner of three parcels of undeveloped land including a 5-acre
tract called Bensenville #16 and two additional parcels of 4.9 and 2.76 acres.
During 1997, an aggregate of $59,905 was paid by the Company to Carbrook in
connection with rent guarantees.
The Bensenville Properties sold to Carbrook comprise an aggregate of
158,791 square feet of office and warehouse space on 10.33 acres, and are part
of the 14 building Bensenville Industrial Park located in Bensenville, Illinois
near Chicago's O'Hare Airport. The industrial park contains an aggregate of
1,967,698 square feet of rentable space on 125 acres and was developed by
Trammel Crow Company. In December 1993, 12 of the 14 buildings in the
Bensenville Industrial Park were sold by BAL to a single purchaser, and the
remaining two buildings, the Bensenville Properties, were distributed to BIP as
a partnership distribution in lieu of cash. BIP ultimately transferred such
buildings to Cabestan.
Item 3. Legal Proceedings.
On July 25, 1997, the United States Securities and Exchange
Commission ("Commission") filed a complaint in the United States District Court
for the District of Columbia against the Company alleging that the Company had
failed to file its Annual Report on Form 10- KSB for the year ended December 31,
1996, two Quarterly Reports on Form 10-QSB for the
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fiscal quarters ended September 30, 1996 and March 31, 1997, and five
Notifications of Late Filing with respect to its delinquent reports. The
Commission sought to compel the Company to file its delinquent periodic reports
and to enjoin the Company from any further violations of Section 13(a) of the
Exchange Act and Rules 12b-25, 13a-1 and 13a-13 thereunder. Simultaneously with
the filing of the Commission's complaint, the Company consented to the entry of
a Final Judgment granting the relief sought by the Commission and admitted that
it had not filed the periodic reports as described above. All delinquent reports
were filed by the Company by August 15, 1997 and the Company has been current in
its filings since that time.
There are no other material litigations pending against the Company at
this time.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
PART II
Item 5. Market for Common Equity and Related Stockholder Matters.
At December 31, 1997 there were 7,697,215 shares of the Company's Common
Stock issued and outstanding. A significant portion of the outstanding shares of
the Company are subject to resale restrictions and, unless registered under the
Securities Act of 1933 (the "Act"), or exempted under another provision of the
Act, will be ineligible for sale in the public market. Sales of substantial
amounts of the Common Stock of the Company which are presently restricted in the
public market could adversely affect prevailing market prices.
The following table sets forth information regarding the high and low bid
and asked price for the Company's common stock as reported on the Electronic
Bulletin Board. Such prices no not necessarily reflect actual transactions and
do not include retail mark-up, mark-down or commissions. The prices set forth
below are per share.
- -------------------------------------------
Quarter High Ask Low Bid
- -------------------------------------------
March 31, 1997 6 1/4 3 7/8
- -------------------------------------------
June 30, 1997 5 3/8 3 3/4
- -------------------------------------------
September 30, 4 5/8 2 7/8
1997
- -------------------------------------------
14
<PAGE>
- -------------------------------------------
December 31,
1997 4 1/2 1 7/8
- -------------------------------------------
Holders
As of December 31, 1997 there were approximately 90 holders of record of
the shares of the Company's common stock.
Dividends
The Company has paid no cash dividends on its equity securities to date
and does not anticipate the payment of cash dividends on its equity securities
in the near future. The Company paid a dividend of one share of its common stock
for each three shares owned on December 18, 1995 and paid, in December 1996,
another stock dividend of one share for each three shares owned as of November
6, 1996.
Item 6. Management's Discussion and Analysis of Business and Results of
Operations
This Management's Discussion and Analysis of Financial Condition and
Results of Operations, as well as several other parts of this Annual Report on
Form 10-KSB, contain forward- looking statements and information that involve
significant risks and uncertainties. The Company's actual results could differ
materially from those anticipated by such forward-looking statements and
information. Factors that may cause such differences may not be foreseeable by
the Company at this time. This Management's Discussion and Analysis of Financial
Condition and Results of Operations should be read in conjunction with the
Company's consolidated financial statements and notes thereto included elsewhere
herein.
Results of Operations
Total revenues from continuing operations for the year ended December 31,
1997 ("FY 1997") were $610,701 as opposed to $325,071 for the year ended
December 31, 1996 ("FY 1996"). This increase was due principally to the
inclusion of a full year of Inoteb's operations, as opposed to half a year in FY
1996. The net loss for FY 1997 widened to $3,378,564 from $1,660,697 in FY 1996.
This was due primarily to a reserve against loss on impairment of intangible
assets ($1,478,778) and to a significant increase in amortization expense (from
$115,051 in FY 1996 to $682,500 in FY 1997) of which approximately $483,000 was
accelerated as a result of the resignation of Mr. Mortara. Operating expenses
were relatively stable on a comparative basis.
Financial Condition, Liquidity and Capital Resources
The Company's liquidity was better in FY 1997 as opposed to FY 1996. The
Company's
15
<PAGE>
cash position increased from $9142 at December 31, 1996 to $506,930 at December
31, 1997, primarily as a result of the receipt of proceeds from the sale of its
Bensenville facility from which it realized net cash proceeds of approximately
$1,515,000.The Company's liquidity was also helped by the infusion of an
additional $1,000,000 into the Company (through January 1997) in connection with
the conversion of its Series A Preferred Stock. Management believes that it has
sufficient resources to fund the Company's operations through December 31, 1998.
The Company has, however, significant cash needs on an ongoing basis
during the short and medium term, resulting primarily from the Company's
ordinary operating expenses and for its obligation to raise funds for research
and development. The Company is actively seeking a significant investor/joint
venture partner to infuse significant additional capital into the Company and is
presently in negotiations with certain investors to fill that role. No assurance
can be had that any such agreement will be entered into or, if entered into,
that it will be sufficient to fund all the Company's capital requirements.
Current Plans of the Company
The Company intends to focus on the marketing and development of its
BioCoral and related products. To obtain approval for the sale of such products
in the United States will require a significant expenditure of capital over a
long period of time. The Company anticipates realizing some revenues from the
sale of BioCoral and related products in 1998 although they are not expected to
be sufficient to maintain the Company's operations. As mentioned above, the
Company is also actively seeking a significant investor/joint venturer to assist
in the funding of its operations.
In their report on the Company's financial statements included herein, the
Company's auditors have raised substantial doubts about the Company's ability to
continue as a going concern. See "Financial Statements".
Special Note Regarding Forward-Looking Statements
Statements contained in various portions of this Annual Report on Form 10-K
(including, without limitation, this Item 6 and Item 1) regarding, among other
things, the dates upon which the Company anticipates commencing clinical trials
for certain of its products or receiving certain revenues or proceeds constitute
forward-looking statements under the Federal securities laws. Such statements
are subject to certain risks and uncertainties that could cause the actual
timing of such revenues, clinical trials or other events to differ materially
from those projected. With respect to such dates, the Company's management has
made certain assumptions regarding, among other things, timeliness in payment by
the parties with which it deals, the successful and timely completion of
pre-clinical tests, obtaining certain approvals of the clinical trials from the
FDA, the availability of adequate clinical supplies, the absence of delays in
patient enrollment and the availability of adequate capital resources necessary
to complete the clinical trials. The Company's ability to commence clinical
trials on the dates anticipated is subject to certain risks and the Company's
ability to recognize revenue is subject to both ordinary and extraordinary
business risks. Undue reliance should not be placed on the dates on which the
Company anticipates recognizing revenues or commencing clinical trials. These
estimates are based upon the current expectations of Company's management, which
may change in the future due to a
16
<PAGE>
large number of potential events, including unanticipated future developments.
Item 7. Financial Statements.
Attached.
Item 8. Changes In and Disagreement with Accountants on Accounting and Financial
Disclosure :
None.
PART III
Item 9. Directors. Executive Officers, Promoters and Control Persons; Compliance
With Section 16 (a) of the Exchange Act
The following is certain information with respect to directors, executive
officers and key employees of the Company as of March 31, 1998:
Nasser Nassiri, Age 35, Chairman of the Board, President and a Director
Ramine Almassi, Age 33, Secretary, Treasurer and a Director
Jean Darondel, Age 55, Director
Each of such persons was elected or appointed for a one-year term to serve
and hold office until their respective successors are elected or appointed.
Nasser Nassiri is the Chief Executive Officer, Chairman of the Board and a
director of the Company. Mr. Nassiri is a Paris-based financier active in Europe
and the Middle East. Since 1990, he has been a private investor and financial
advisor to several European financial and portfolio institutions, as well as
family investment companies and pharmaceutical businesses in the Middle East. In
addition, he is and has been a director of several Canadian mineral and mining
production companies, and serves as Chairman of Automated Financial Systems,
Inc., a publicly-held US company. From 1990 until 1994, Mr. Nassiri was a
director of Contact World Paris, a privately-held international electronics
company and, from 1983 to 1987, Mr. Nassiri was a director of Prak Management, a
privately-held Middle East - based oil and gas holding company.
Ramine Almassi has been a director of the Company since 1997 and also
serves as its Secretary and Treasurer. Mr. Almassi is a Paris-based certified
public accountant and was Chief Financial Accountant at Bertrand SA (Heineken
France) for three years. Currently, Mr. Almassi serves as Financial Director of
Shiva, Ltd., a Middle East art company, and Belles Feuilles Ltd., a publishing
and advertising group. He also serves as a director and officer of Automated
Financial Systems, Inc., a publicly-held US company.
17
<PAGE>
Jean Darondel has been a director of the Company since January 1998. Dr.
Darondel was a co-founder of Inoteb and was its President Director General for
several years. Dr. Darondel is known for his research in the field of veterinary
medicine and business development in the medical/pharmaceutical fields. Dr.
Darondel is focusing his efforts on expanding the commercialization of BioCoral
products in Europe.
BioCoral also has a Scientific Advisory Board to aid it in the strategic
development of its products. Its members include Dr. Jean Louis Patat, Dr. Jean
Darondel, Dr. Alberto Jussman and Dr. Rosy Eloy. Dr. Patat, a former President
Director General of Inoteb, is a member of the European Society of Biomaterials
and La Societe de Medicine de Paris. Dr. Patat has been involved with the
development of BioCoral since 1979 focusing on its osteoporosis applications
since 1991. Dr. Alberto Jussman is a specialist in post-menopausal medicine and
the prevention of osteoporosis and is a consultant to the Laboratoires pour la
Pharmacie et les Devices Medical and teaches at the CHU Bichat - Claude Bernard
in Paris. Dr. Rosy Eloy, former Vice President of the Administrative Council of
INSERM, is Director of Biomatech, a French company that tests and evaluates
biomaterials and pharmaceutical products.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than ten
percent of the Company's Common Stock to file with the Securities Exchange
Commission initial reports of stock ownership and reports of changes in stock
ownership. Due to administrative oversight, Mr. Nassiri was late in reporting,
during one month, certain changes in beneficial ownership which occurred in
1997. Also due to administrative oversight, Mr. Darondel was late in reporting
his initial statement of beneficial ownership.
Item 10. Executive Compensation
Directors do not receive compensation for their duties as directors.
On September 1, 1997, the Company entered into a Consulting Agreement with
Nasser Nassiri, its Chairman, pursuant to which Mr. Nassiri serves as Chairman
of the Company. The Agreement, which is for a three year term, provides for base
compensation of $150,000 per annum, reimbursement of certain expenses and for a
payment of two years' compensation thereunder in the event of a change in
control of the Company. Due to the Company's financial condition, through the
date of this Report, Mr. Nassiri has taken no cash compensation pursuant to his
Consulting Agreement and has only sought reimbursement of his expenses.
The Board has agreed to grant each director reimbursement up to $75,000
per annum for expenses actually incurred by them in connection with their
service as such. During 1997, the Company reimbursed Mr. Nassiri an aggregate of
approximately $38,000 for expenses incurred. In addition, there is no
prohibition on advances being made by the Company to its officers and
18
<PAGE>
directors although no such advances have been made to date. Management is not
currently aware of any circumstances under which it would institute a policy of
prohibiting advances from being made to its officers and directors. The
stockholders of the Company will not have the opportunity to vote on or approve
such compensation. There is no maximum dollar amount of compensation that may be
paid to management.
On June 11, 1996, the Company granted to each of Riccardo Mortara and
Nasser Nassiri, options for each of them to purchase up to 125,000 (currently
166,667) shares of the Company's common stock at an exercise price of $7.75 (now
$5.81) per share. The options are exercisable at any time during the five year
period following their grant.
On December 31, 1996, the Company granted to each of Riccardo Mortara and
Nasser Nassiri, options for each of them to purchase up to 325,000 shares of the
Company's common stock at an exercise price of $3.75 per share. The
consideration for the grant of such options was their continued service as
directors of the Company. The options are exercisable at any time during the
five year period following their grant. The option exercise price was below the
market price of the shares of the Company's common stock on the date of grant.
On October 21, 1997, the Company granted to each of Nasser Nassiri and
Ramine Almassi, options for each of them to purchase up to 350,000 shares of the
Company's common stock at an exercise price of $2.375 per share. The
consideration for the grant of such options was nominal. The options are
exercisable at any time during the five year period following their grant. The
option exercise price was the market price of the shares of the Company's common
stock on the date of grant.
On February 3, 1998, the Company granted to Jean Darondel an option to
purchase up to 200,000 shares of the Company's common stock at an exercise price
of $ 3.25 per share. The consideration for the grant of such options was
nominal. The option is exercisable at any time during the five year period
following its grant. The option exercise price was the market price of the
shares of the Company's common stock on the date of grant.
Item 11. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth information, as of January 31, 1998,
relating to the beneficial ownership of the Company's Common Stock by those
persons beneficially holding more than 5% of the Company's Common Stock, by the
Company's directors and executive officers, and by all of the Company's
directors and executive officers as a group. Unless otherwise indicated, the
address for each person listed below is in care of the Company.
- --------------------------------------------------------------------------------
Name and Address Amount and Nature of Percent of Class
Beneficial Ownership
- --------------------------------------------------------------------------------
19
<PAGE>
- --------------------------------------------------------------------------------
Jean Darondel 225,000(1) 2.8
- --------------------------------------------------------------------------------
Ramine Almassi 350,000(2) 4.3
- --------------------------------------------------------------------------------
Nasser Nassiri 883,772(3) 10.3
- --------------------------------------------------------------------------------
All Officers/Directors as a
Group (3 persons) 1,458,772 16.0
- --------------------------------------------------------------------------------
(1) Includes 225,000 immediately exercisable options.
(2) Includes 350,000 immediately exercisable options.
(3) Includes 841,667 immediately exercisable options.
Item 12. Certain Relationships And Related Transactions.
During 1997 and 1998, the Company granted stock purchase options to each
of Riccardo Mortara, the Company's former Chairman, Nasser Nassiri, its current
Chairman, and each of Ramine Almassi and Jean Darondel, current directors of the
Company. In addition, the Company entered into a Consulting Agreements with Mr.
Nassiri. See Item 10 - "Executive Compensation".
The Company acquired 3H from two entities which are clients of Societe
Financiere du Seujet, the financial services company of which Riccardo Mortara,
former Chairman and director of the Company, is the owner. Mr. Mortara did not
receive any compensation in connection with such acquisition, and Mr. Mortara
disclaims any beneficial ownership of either of such entities or of any of the
Company's securities owned by such entities. See Item 1 - "Description of
Business - Background".
A company owned and controlled by Riccardo Mortara received 1,000 shares
of the Series A Preferred Stock of the Company for services rendered by it to
the Company. The services rendered included the negotiation and structuring of
the acquisition of the Bensenville Properties by Cabestan, and the negotiation
and structuring of the acquisition by the Company of Cabestan. At various times
through January 1997, all such shares of Series A Preferred Stock were converted
into shares of common stock. See "Business- Discontinued Operations".
In 1997, the Company borrowed certain funds from the sister of its
Chairman and from an individual who is now, but was not then, a director of the
Company. See Item 1. "Description of Business - Background".
There are no arrangements, agreements or understandings between
non-management shareholders and the Company's management under which
non-management shareholders may directly or indirectly participate in or
influence the management of the Company's affairs. There
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<PAGE>
are no arrangements, agreements or understandings pursuant to which
non-management shareholders have agreed to exercise their voting rights to
continue to elect the current directors to the Company's Board of Directors.
PART IV
Item 13. Exhibits
(a) See Index to Exhibits. The Exhibits therein listed and attached hereto
and the Exhibits therein incorporated by reference are filed as part of this
report.
(b) Reports on Form 8-K. -- None.
21
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Company has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
BIOCORAL, INC.
Date: 4/15/98 By: s/ Nasser Nassiri
---------------------------------------
Nasser Nassiri , Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the Company
and in the capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
s/ Nasser Nassiri
- ----------------------------
Nasser Nassiri Chairman of the Board 4/15/98
and a director
s/ Ramine Almassi
- ----------------------------
Ramine Almassi Treasurer, Secretary and 4/15/98
a director
s/ Jean Darondel Director 4/15/98
- ----------------------------
Jean Darondel
22
<PAGE>
Exhibit Index
Certificate of Incorporation
3.1 Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to
Company's Form 10-SB Registration Statement filed with the Commission on
February 25, 1994, as amended ("Registration Statement")
3.2 By-laws (incorporated by reference to Exhibit 3.2 to the Registration
Statement)
3.3 Amendment to Certificate of Incorporation (incorporated by reference to
Amendment No. 1 to the Registration Statement filed with the Commission on
April 18, 1994 ("Amendment No. 1")
3.4 Amendment to Certificate of Incorporation, (incorporated by reference to
Exhibit 10.21 to the Company's Annual Report on Form 10-KSB filed December
27, 1996 ("1996 10-KSB")
Material Contracts
10.1 1992 Stock Option Plan (incorporated by reference to Exhibit 10.1 to the
Registration Statement)
10.2 Stock Option Agreement with Jehu Hand (incorporated by reference to
Exhibit 10.2 to the Registration Statement)
10.3 Stock Option Agreement with Eric Anderson (incorporated by reference to
Exhibit 10.3 to the Registration Statement)
10.4 Stock Purchase Agreement, dated March 21, 1994, by and among Registrant,
Cabestan, Inc., Jehu Hand and Eric Anderson (incorporated by reference to
Exhibit 10.4 to Amendment No. 1)
10.5 Assignment and Assumption of Transfer Agreement, dated March 25, 1994
(incorporated by reference to Exhibit 10.5 to Amendment No. 1)
10.6 Transfer Agreement, dated December 1993 (incorporated by reference to
Exhibit 10.6 to Amendment No. 1)
10.7 Assignment and Assumption of Limited Partnership Interest, dated March 25,
1994 (incorporated by reference to Exhibit 10.7 to Amendment No. 1)
10.8 Agreement of Sale and Purchase, dated March 25, 1994 (incorporated by
reference to Exhibit 10.8 to Amendment No. 1)
<PAGE>
10.9 Extension Agreement, dated March 1994, by and among Bensenville
AssociatesLimited, L.P. and Cabestan, Inc. (incorporated by reference to
Exhibit 10.9 to Amendment No. 1)
10.10 Agreement, dated December 30, 1993 between Bensenville Industrial Park,
L.P. and Bensenville Associates Limited, L.P. (incorporated by reference
to Exhibit 10.10 to Amendment No. 1)
10.11 Credit Agreement between Societe Financiere Privee SA and the Company,
dated March 22, 1994 (incorporated by reference to Exhibit 10.11 to
Amendment No. 1) 10.12 Letter of Intent, dated May 31, 1994 between the
Company and Borgonuovo SIM, S.p.A. (incorporated by reference to Exhibit
10.12 to Amendment No. 2 to the Company's Registration Statement filed
with the Commission on July 15,1994 ("Amendment No. 2")
10.13 Mortgage Loan Commitment between the Principal Financial Group and
Cabestan, Inc., dated June 20, 1994, (incorporated by reference to Exhibit
10.13 to Amendment No. 3)
10.14 Stock Purchase Agreement, dated September 12, 1994, by and between
IMMO-Finance Corporation, Kialu S.r.L. and Alessandro Bassetti,
(incorporated by reference to Exhibit 10.14 to Amendment No. 3 to the
Company's Registration statement, as filed with the Commission on
September 2, 1994 ("Amendment No. 3"))
10.15 Shareholders' Agreement, dated September 12, 1994, by and among Kialu
S.r.L., IMMO-Finance Corporation and Alessandro Bassetti (incorporated by
reference to Exhibit 10.15 to Amendment No. 3)
10.16 Property Management and Leasing Agreement, dated as of October 6, 1994
between Trammell Crow M.W., Inc. and Cabestan, Inc. (incorporated by
reference to Exhibit 10.16 to Company's 10-KSB Annual Report filed April
18, 1995)
10.17 Acquisition Agreement between IMMO-Finance Corporation and Halford Finance
S.A. and Cornington International, Inc., dated August 2, 1995
(incorporated by reference to Exhibit 10.17 to Company's 1996-10-KSB)
10.18 Distribution Agreement between Inoteb and 3H Human Health Company, Ltd.,
dated May 13, 1995 (English and French versions) (incorporated by
reference to Exhibit 10.18 to Company's 1996-10-KSB)
10.19 Contract de Fournitures between Inoteb and 3H Human Health Hightech PLC,
dated October 11, 1995 (incorporated by reference to Exhibit 10.19 to
Company's 1996- 10-KSB)
10.20 Convention between IMMO-Finance Corporation and various French
shareholders and note holders, dated October 6 and 18, 1995 (incorporated
by reference to Exhibit 10.20 to Company's 1996-10-KSB)
<PAGE>
10.21 INTENTIONALLY OMITTED
10.22 Supply Agreement between Inoteb, S.A., 3H Human Health Hightech PLC and
Intermedics Orthopedics/Denver, Inc., dated May 23,1996 (incorporated by
reference to Exhibit 10.22 to Company's 1996-10-KSB)
10.23 Stock Option Agreement between Biocoral and Riccardo Mortara, dated June
10, 1996 (incorporated by reference to Exhibit 10.23 to Company's
1996-10-KSB)
10.24 Stock Option Agreement between Biocoral, Halford Finance, S.A. and
Cornington International, Inc., dated September 13, 1996 (incorporated by
reference to Exhibit 10.24 to Company's 1996-10-KSB)
10.25 Purchase Agreement between Cabestan, Inc. and Brooklyn Roads Limited,
dated October 9, 1996 (incorporated by reference to Exhibit 10.25 to
Company's 1996-10-KSB)
10.26 Letter Agreement between Biocoral and UI USA, Inc., dated November 26,
1996 (incorporated by reference to Exhibit 10.26 to Company's 1996-10-KSB)
10.27 Stock Option Agreement between Biocoral and each of Nasser Nassiri and
Riccardo Mortara, dated December 31, 1996 (incorporated by reference to
Exhibit 10.27 to Company's 1996-10-KSB)
10.28 Stock Option Agreement, dated October 21, 1997, by and between Biocoral
and Nasser Nassiri*
10.29 Stock Option Agreement, dated October 21, 1997, by and between Biocoral
and Ramine Almassi*
10.30 Consulting Agreement, dated September 1, 1997, by and between Biocoral and
Nasser Nassiri*
10.31 Stock Option Agreement, dated October 1, 1997, by and between Biocoral and
Jean Darondel*
10.32 Agreement, dated November 1, 1997, by and between Biocoral, Vida Nassiri
Khoobdehi and Jean Darondel*
10.33 Stock Option Agreement, dated October 1, 1997, by and between Biocoral and
Jean-Louis Patat*
10.34 Stock Option Agreement, dated October 1, 1997, by and beween Biocoral and
Alberto Jussman*
<PAGE>
10.35 Stock Option Agreement, dated October 21, 1997 by and between Biocoral and
Rosy Eloy*
10.36 Stock Option Agreement, dated February 3, 1998, by and between Biocoral
and Jean Darondel*
*Filed herewith
11 List of Biocoral subsidiaries
27 Financial Data Schedule
<PAGE>
BIOCORAL, INC. AND SUBSIDIARIES
I N D E X
PAGE
----
REPORTS OF INDEPENDENT PUBLIC ACCOUNTANTS F-2/3
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996 F-4
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1997 AND 1996 F-5
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
YEARS ENDED DECEMBER 31, 1997 AND 1996 F-6
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997 AND 1996 F-7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F-8/21
* * *
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and
Stockholders
BioCoral, Inc.
We have audited the accompanying consolidated balance sheets of BIOCORAL, INC.
(a Delaware corporation) AND SUBSIDIARIES as of December 31, 1997 and 1996, and
the related consolidated statements of operations, stockholders' equity
(deficiency) 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 did not
audit the financial statements of Inoteb SA, a 66.95%-owned subsidiary as of
December 31, 1997, which statements reflect total assets of approximately
$930,000 and $1,080,000 as of December 31, 1997 and 1996, respectively, and
losses from continuing operations of approximately $432,000 and $772,000 for the
year ended December 31, 1997 and the period from July 1, 1996 (date of
acquisition) through December 31, 1996, respectively. Those statements were
audited by other auditors whose report (which contains an explanatory paragraph
with respect to Inoteb, SA's ability to continue as a going concern) has been
furnished to us, and our opinion, insofar as it relates to the amounts included
for Inoteb SA, is based solely on the report of the other auditors.
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, based on our audits and the report of the other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of BioCoral, Inc. and Subsidiaries as
of December 31, 1997 and 1996, and their results of operations and cash flows
for the years then ended, in conformity with generally accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1 to
the financial statements, the Company and Inoteb SA, its principal operating
subsidiary, have incurred significant recurring losses and, as a result, the
Company had a working capital deficiency and an accumulated deficit at December
31, 1997. These conditions raise substantial doubt about the Company's ability
to continue as a going concern. Management's plans regarding those matters also
are described in Note 1. The consolidated financial statements do not include
any adjustments relating to the recoverability and classification of reported
asset amounts or the amounts and classification of liabilities that might
result from the outcome of this uncertainty.
J.H. COHN LLP
Englewood Cliffs, New Jersey
March 27, 1998
F-2
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and
Stockholders
Inoteb SA
We have audited the consolidated balance sheets of INOTEB SA (a French
corporation) AND SUBSIDIARY as of December 31, 1997 and 1996, and the related
consolidated statements of operations, stockholders' deficiency and cash flows
for the year ended December 31, 1997 and the period from July 1, 1996 (the
effective date of the Company's acquisition by Biocoral, Inc.) to December 31,
1996. These financial statements, which are not presented separately herein, 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
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Inoteb SA and
Subsidiary as of December 31, 1997 and 1996, and their results of operations and
cash flows for the year ended December 31, 1997 and the period from July 1, 1996
to December 31, 1996, in conformity with generally accounting principles in the
United States.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 2 to
the financial statements (which are not presented separately herein), the
Company has incurred significant recurring losses and, as a result, it had a
working capital deficiency and an accumulated deficit at December 31, 1997.
Those conditions raise substantial doubt about the Company's ability to continue
as a going concern. Management's plans regarding those matters also are
described in Note 2. The consolidated financial statements do not include any
adjustments relating to the recoverability and classification of reported asset
amounts or the amounts and classification of liabilities that might result from
the outcome of this uncertainty.
CONSULTAUDIT S.A.
Paris, France
February 27, 1998
F-3
<PAGE>
BIOCORAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
ASSETS 1997 1996
----------- -----------
<S> <C> <C>
Current assets:
Cash $ 506,930 $ 9,142
Accounts receivable, net of allowance for
doubtful accounts of $245,900 and $261,300 104,600 153,700
Inventories 177,500 251,100
Net assets of discontinued operations 430,000 1,971,007
Other current assets 95,000 202,500
----------- -----------
Total current assets 1,314,030 2,587,449
Property and equipment, net of accumulated
depreciation of $149,500 and $98,100 109,053 226,936
License fees, net of accumulated amortization
of $160,956 1,324,794
Goodwill, net of accumulated amortization of
$16,000 153,984
Other assets 188,682 192,412
----------- -----------
Totals $ 1,611,765 $ 4,485,575
=========== ===========
LIABILITIES AND
STOCKHOLDERS' EQUITY (DEFICIENCY)
Current liabilities:
Current portion of long-term debt $ 352,825 $ 255,100
Notes payable:
Related parties 428,811
Other 25,000 517,500
Accounts payable and accrued liabilities 591,302 893,970
----------- -----------
Total current liabilities 1,397,938 1,666,570
Long-term debt, net of current portion 447,875 786,500
----------- -----------
Total liabilities 1,845,813 2,453,070
----------- -----------
Commitments and contingencies
Stockholders' equity (deficiency):
Preferred stock, par value $.001 per share;
1,000,000 shares authorized; 300 shares
issued and outstanding in 1996
Common stock, par value $.001 per share;
20,000,000 shares authorized; 7,697,215
and 7,242,722 shares issued and
outstanding 7,697 7,243
Additional paid-in capital 12,509,248 12,080,191
Accumulated deficit (12,295,993) (8,917,429)
Unearned compensation (455,000) (1,137,500)
----------- -----------
Total stockholders' equity (deficiency) (234,048) 2,032,505
----------- -----------
Totals $ 1,611,765 $ 4,485,575
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
F-4
<PAGE>
BIOCORAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Revenues:
Sales $ 526,900 $ 250,300
Other income 83,801 74,771
----------- -----------
Totals 610,701 325,071
----------- -----------
Operating expenses:
Cost of sales 172,400 142,300
Research and development, net of subsidies 234,400 297,600
Interest 49,888 114,101
Depreciation of property and equipment 51,400 98,100
Amortization of other assets 115,051
Amortization of unearned compensation 682,500
Consulting and professional fees 489,238 294,708
Other operating expenses 642,603 454,339
----------- -----------
Totals 2,322,429 1,516,199
----------- -----------
Loss before other expenses (credits) (1,711,728) (1,191,128)
Other expenses (credits):
Loss on disposal of investment in non-
marketable securities (600,000)
Write-off of intangible assets (1,478,778)
Minority interest in loss of subsidiary 117,225
----------- -----------
Loss from continuing operations (3,190,506) (1,673,903)
----------- -----------
Discontinued real estate operations:
Income from operations 213,206
Loss on disposal (188,058) (200,000)
----------- -----------
Income (loss) from discontinued operations (188,058) 13,206
----------- -----------
Net loss $(3,378,564) $(1,660,697)
=========== ===========
Loss per common share:
Loss from continuing operations -- basic $ (.42) $ (.29)
Loss from discontinued operations -- basic (.02)
----------- -----------
Net loss per common share -- basic $ (.44) $ (.29)
=========== ===========
Weighted average common shares outstanding 7,630,282 5,679,046
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
F-5
<PAGE>
BIOCORAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
Preferred Stock Common Stock
--------------- ----------------
Number Number Additional Total
of of Paid-In Accumulated Unearned Stockholders'
Shares Amount Shares Amount Capital Deficit Compensation Equity
------ ------ ------ ------ ------- ------- ------------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1,
1996 1,000 $ 1 5,913,316 $5,913 $ 9,394,020 $(7,256,732) $2,143,202
Proceeds from sale
of common stock 266,667 267 619,733 620,000
Cancellation of pre-
ferred stock in con-
nection with sale of
common stock (700) (1) 933,333 933 699,068 700,000
Cancellation of common
stock in connection
with terminated ac-
quisition (1,711,110) (1,711) 1,711
Common stock issued
to acquire 56% of
Inoteb SA 1,840,516 1,841 228,159 230,000
Issuance of compensa-
tory stock options 1,137,500 $(1,137,500)
Net loss (1,660,697) (1,660,697)
------ ---- --------- ------ ----------- ------------ ----------- ----------
Balance, December 31,
1996 300 -- 7,242,722 7,243 12,080,191 (8,917,429) (1,137,500) 2,032,505
Cancellation of pre-
ferred stock in con-
nection with sale of
common stock (300) -- 400,000 400 299,600 300,000
Issuances of common
stock for consulting
services 54,493 54 129,457 129,511
Amortization of un-
earned compensation 682,500 682,500
Net loss (3,378,564) (3,378,564)
------ ---- --------- ------ ----------- ------------ ----------- ----------
Balance, December 31,
1997 $ -- 7,697,215 $7,697 $12,509,248 $(12,295,993) $ (455,000) $ (234,048)
====== ==== ========= ====== =========== ============ =========== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
F-6
<PAGE>
BIOCORAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Operating activities:
Net loss $(3,378,564) $(1,660,697)
Adjustments to reconcile net loss to
net cash used in operating activities:
Loss on impairment of intangible assets 1,478,778
Depreciation of property and equipment 51,400 98,100
Loss on disposal of property and equipment 83,541
Effect of governmental subsidies on
research and development expenses (120,000)
Write-off of nonmarketable securities 600,000
Amortization of other assets 115,051
Amortization of unearned compensation 682,500
Minority interest in loss of subsidiary (117,225)
Common stock issued for consulting services 129,511
(Income) loss from discontinued operations 188,058 (13,206)
Changes in operating assets and liabilities:
Accounts receivable 49,100 160,600
Inventories 73,600 66,600
Other current assets 107,500 247,027
Other assets 3,730 630
Accounts payable and accrued lia-
bilities (302,668) (1,235,192)
----------- -----------
Net cash used in operating activi-
ties (953,514) (1,738,312)
----------- -----------
Investing activities:
Net cash acquired in purchase of Inoteb SA 259,000
Capital expenditures (17,058) (99,936)
Advances from related party (85,491)
Net proceeds from disposal of real estate
operations 1,085,000
Net cash provided by investing ----------- -----------
activities 1,067,942 73,573
----------- -----------
Financing activities:
Principal payments on short-term obligations (224,551)
Proceeds from long-term obligations 69,000
Principal payments on long-term obligations (189,900) (75,200)
Proceeds from notes payable to related
parties 428,811
Proceeds from sales of common stock 300,000 1,320,000
----------- -----------
Net cash provided by financing
activities 383,360 1,244,800
----------- -----------
Net increase (decrease) in cash 497,788 (419,939)
Cash, beginning of year 9,142 429,081
----------- -----------
Cash, end of year $ 506,930 $ 9,142
=========== ===========
Supplemental disclosure of cash flow data:
Interest paid $ 88,996 $ 111,493
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
F-7
<PAGE>
BIOCORAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Business and summary of accounting policies:
Business:
BioCoral, Inc. ("BioCoral") was incorporated under the laws of the
State of Delaware on May 4, 1992 and originally organized as a
"blind pool" or "blank check" company for the purpose of either
merging with or acquiring an operating company. BioCoral was a
"development stage company" for accounting purposes until March 25,
1994 when it acquired all of the issued and outstanding stock of
Cabestan, Inc. ("Cabestan"), which concurrently acquired commercial
real estate properties from a commonly-controlled related party. As
further explained below and in Note 2, Cabestan entered into an
agreement to sell its real estate properties in October 1996 and
consummated the sale in February 1997. Accordingly, the results of
the real estate operations have been shown separately as
discontinued operations in the accompanying consolidated statements
of operations. The net assets of the discontinued real estate
operations have also been reclassified and shown separately in the
accompanying consolidated balance sheets.
During 1995, BioCoral acquired 3H Human Health Hightech Public
Limited Company ("3H"), an Irish corporation, for the purpose of
commencing and developing commercial biomaterials operations. 3H's
only significant activity prior to being acquired by BioCoral was
the acquisition of an option for the purchase of a license from
Inoteb SA ("Inoteb"), a French corporation, that would give 3H the
exclusive right to distribute, anywhere outside of France, the
medical products developed and manufactured by Inoteb. During 1995,
BioCoral also exercised its option for the purchase of the license
from Inoteb (see Note 2), and it acquired an option to purchase a
controlling interest in Inoteb. During July 1996, BioCoral exercised
its option for the purchase of the controlling interest in Inoteb
(see Note 2).
BioCoral, Inoteb, 3H, Cabestan and BioCoral's other subsidiaries
are referred to collectively herein as the "Company."
As of December 31, 1997, substantially all of the Company's
continuing operations were biomaterials operations conducted through
Inoteb, which was 66.95%-owned as of that date. Such operations
consist primarily of developing, manufacturing and marketing bone
substitute materials made from coral and other orthopedic, oral and
maxillofacial products, including products marketed under the trade
name of BioCoral. The Company has not received the regulatory
approvals needed to market its products in the United States.
Obtaining such approvals could take a long time and involve
substantial expenditures. The Company had generated limited amounts
of revenues from its biomaterials operations through December 31,
1997 and, as a result, it wrote off the costs as of that date of
goodwill and licensing fees that it had incurred and capitalized in
the development of its biomaterials operations.
F-8
<PAGE>
BIOCORAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Business and summary of accounting policies (continued):
Business (concluded):
During 1994, BioCoral filed a registration statement under the
Securities Exchange Act of 1934 (the "Exchange Act") and, as a
result, it became required to file periodic reports with the United
States Securities and Exchange Commission.
Basis of presentation:
The accompanying consolidated financial statements have been
prepared based on the assumption that the Company will continue as
a going concern. However, the Company has generated limited amounts
of revenues from its biomaterials operations and has incurred
significant recurring losses from its continuing and discontinued
operations, including net losses of $3,378,564 and $1,660,697 in
1997 and 1996, respectively. As a result, the Company had a working
capital deficiency of $83,908 and an accumulated deficit of
$12,295,993 at December 31, 1997. Inoteb, the Company's principal
operating subsidiary, also had a working capital deficiency and an
accumulated deficit. These conditions, among others, raise
substantial doubts about the ability of the Company to continue as
a going concern.
Management believes that the Company's commercial success and
ability to ultimately generate profitable biomaterials operations
and continue as a going concern will depend to a significant extent
on the Company's ability to obtain from regulatory authorities,
such as the Food and Drug Administration, the approvals that will be
necessary to enable it to sell its products in the United States and
certain other countries. Management expects that the approval
process is likely to be very costly and time consuming, and that the
Company will need substantial additional amounts of working capital
to fund operations while it further develops its technology and
obtains the regulatory approvals.
Management believes that the Company will need a minimum of
approximately $700,000 to finance its operations through at least
January 1, 1999. Management plans to obtain such resources through
loans from, or sales of capital stock to, related and/or unrelated
parties. Management believes that if the Company cannot obtain such
resources from other parties, the Company's chairman of the board of
directors and chief executive officer is committed to and will
provide the funds through loans or the purchase of the Company's
capital stock. Management will also seek such funds from joint
venture or other strategic partners. However, management cannot
provide any assurances that the Company will be successful in
obtaining such financing and regulatory approvals, or that even if
it does obtain such financing and regulatory approvals it will be
able to generate profitable operations on a sustained basis. The
accompanying consolidated financial statements do not include any
adjustments that might be necessary should the Company be unable to
continue as a going concern.
F-9
<PAGE>
BIOCORAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Business and summary of accounting policies (continued):
Principles of consolidation:
The consolidated financial statements include the accounts of
BioCoral and its majority-owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated in
consolidation.
Use of estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect certain reported amounts and
disclosures. Accordingly, actual results could differ from those
estimates.
Cash:
At December 31, 1997 and 1996, substantially all of the Company's
cash was held in foreign banks.
Inventories:
Inventories are stated at the lower of cost, determined on the
first-in, first-out ("FIFO") method, or market.
Impairment of long-lived assets:
The Company has adopted the provisions of Statement of Financial
Accounting Standards No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of ("SFAS
121"). Under SFAS 121, impairment losses on long-lived assets, such
as property and equipment, licenses and goodwill, are recognized
when events or changes in circumstances indicate that the
undiscounted cash flows estimated to be generated by such assets
are less than their carrying value and, accordingly, all or a
portion of such carrying value may not be recoverable. Impairment
losses are then measured by comparing the fair value of assets to
their carrying amounts.
Property and equipment:
Property and equipment used in the Company's medical products
manufacturing operations are recorded at cost. Depreciation is
computed using the straight-line method over the estimated useful
lives of the assets (15 years for properties and three to ten years
for equipment).
License fees:
Prior to being written-off upon recognition of their impairment,
license fees were recorded at cost and were being amortized using
the straight-line method over 15 years.
F-10
<PAGE>
BIOCORAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Business and summary of accounting policies (continued):
Goodwill:
Prior to being written-off upon recognition of its impairment,
goodwill, which represented the excess of the costs of acquiring the
medical products manufacturing business over the fair value of the
net assets at the date of acquisition, was being amortized using the
straight-line method over an estimated useful life of five years.
Advertising:
The Company expenses the cost of advertising and promotions as
incurred. Advertising costs charged to operations were not material
in 1997 and 1996.
Research and development:
Costs and expenses related to research and product development are
expensed as incurred.
Income taxes:
The Company accounts for income taxes pursuant to the asset and
liability method which requires deferred tax assets and liabilities
to be computed annually for temporary differences between the
financial statement and tax bases of assets and liabilities that
will result in taxable or deductible amounts in the future based on
enacted tax laws and rates applicable to the periods in which the
temporary differences are expected to affect taxable income.
Valuation allowances are established when necessary to reduce
deferred tax assets to the amount expected to be realized. The
income tax provision or credit is the tax payable or refundable for
the period plus or minus the change during the period in deferred
tax assets and liabilities.
Stock split:
In November 1996, the Board of Directors of the Company declared a
four for three stock split on the Company's common stock which was
effected in the form of a stock dividend and was paid on December
16, 1996. All common share and per share amounts have been
retroactively restated to reflect the effect of the four for three
stock split.
Income (loss) per common share:
Effective December 31, 1997, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 128, Earnings per
Share ("SFAS 128"), which replaces the presentation of "primary"
and "fully-diluted" income (loss) per common share required under
previously promulgated accounting standards with the presentation of
"basic" and "diluted" income (loss) per common share.
F-11
<PAGE>
BIOCORAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Business and summary of accounting policies (concluded):
Income (loss) per common share (concluded):
Basic net income (loss) per common share is calculated by dividing
net income or loss for each period by the weighted average number
of common shares outstanding during the period. The calculation of
diluted net income (loss) per common share is similar to that of
basic net income (loss) per common share, except that the
denominator is increased to include the number of additional common
shares that would have been outstanding if all potentially dilutive
common shares, principally those issuable upon the exercise of
stock options, were issued during the period.
Since the Company had losses in 1997 and 1996, the assumed effects
of the exercise of outstanding stock options were anti-dilutive and,
accordingly, diluted per share amounts have not been presented in
the accompanying consolidated statements of operations. In addition,
the basic per share amounts presented in the accompanying
consolidated statements of operations which were computed in
accordance with SFAS 128 do not differ from those computed under
previously promulgated accounting standards.
Other recent accounting pronouncements:
In June 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 130, Reporting
Comprehensive Income ("SFAS 130"), and Statement of Financial
Accounting Standards No. 131, Disclosures about Segments of an
Enterprise and related Information ("SFAS 131"), which could require
the Company to make additional disclosures in its financial
statements no later than for the year ending December 31, 1998. SFAS
130 defines comprehensive income, which includes items in addition
to those reported in the statement of operations, and requires
disclosures about its components. Management believes that the
adoption of SFAS 130 will not have a material impact on the
Company's disclosures. SFAS 131 requires disclosures for each
segment of a business and the determination of segments based on its
internal management structure. Management is in the process of
evaluating whether SFAS 131 will require the Company to make any
additional disclosures.
Reclassifications:
Certain accounts in the 1996 consolidated financial statements have
been reclassified to conform with 1997 presentations.
F-12
<PAGE>
BIOCORAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2 - Acquisitions and dispositions:
Acquisition of 3H and the licensing agreement:
During 1995, the Company issued 1,422,223 shares of common stock to
acquire all of the outstanding common shares of 3H. Since neither
the shares issued by the Company nor the rights acquired by 3H had
an objectively determinable value at the date of the exchange, the
Company valued the shares issued and the rights initially acquired
on the basis of the par value of the shares issued of $1,422.
During 1995, the Company exercised its option and purchased a
15-year license from Inoteb for the exclusive right to distribute
the medical products developed and manufactured by Inoteb anywhere
outside of France. The Company initially capitalized the cost of the
license which was $1,485,751. Based on the Company's recurring
losses and the uncertainties related to its ability to generate
profits in the future from the Inoteb technology, the licensing fees
were deemed to be impaired and the remaining carrying value of
$1,324,794 was written off in 1997.
Acquisition of the majority interest in Inoteb:
During July 1996, the Company issued 1,840,516 shares of common
stock to acquire effectively 56% of Inoteb's common stock. The
acquisition was accounted for as a purchase and, accordingly, the
results of operations of Inoteb have been included in the
consolidated totals from July 1, 1996, the effective date of the
acquisition.
The Company valued the shares issued to acquire Inoteb at $230,000
or $.125 per share. Total acquisition costs were allocated to the
assets acquired and liabilities assumed based on their estimated
fair values on the date of acquisition, with the excess of the cost
over such fair values allocated to goodwill, as shown below:
Cash $ 259,000
Accounts receivable 314,300
Inventories 317,700
Other current assets 448,142
Property and equipment 225,100
Goodwill 169,984
Other assets 23,500
Accounts payable and accrued expenses (293,701)
Long-term debt (1,116,800)
Minority interest (117,225)
----------
Cost of acquisition $ 230,000
==========
F-13
<PAGE>
BIOCORAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2 - Acquisitions and dispositions (continued):
Acquisition of the majority interest in Inoteb (concluded):
The following unaudited pro forma information shows the results of
continuing operations for the year ended December 31, 1996 as though
Inoteb had been acquired at the beginning of 1996:
Revenues $ 700,471
Loss from continuing operations (2,172,028)
Loss per common share - basic (.32)
Weighted average common shares
outstanding - basic 6,863,659
In addition to combining the historical results of operations of the
Company and Inoteb, the pro forma results include adjustments to
reflect depreciation and amortization based on the fair values of
assets acquired and the minority interest in the net loss (subject
to the limitation explained below).
Based on the Company's recurring losses and the uncertainties
related to its ability to generate profits in the future from the
Inoteb technology, the goodwill associated with the acquisition of
Inoteb was deemed to be impaired and the remaining carrying value of
$153,984 was written off in 1997.
The Company initially recorded approximately $117,000 as the
minority interest in connection with its purchase of the 56%
interest in Inoteb in July 1996. The minority interest in Inoteb's
net loss during the period from July 1, 1996, the effective date of
acquisition, through December 31, 1996 exceeded the minority
interest initially recorded by approximately $222,000 and,
accordingly, that amount was included in the Company's net loss for
1996.
During 1997, the Company increased its ownership percentage in
Inoteb to 66.95% by purchasing additional shares of common stock
directly from Inoteb for the Company through an intercompany
transfer of approximately $678,000. As a result, an additional
$226,000 of capital was allocated to the minority interest. The
minority interest in Inoteb's net loss in 1997 exceeded the
additional minority interest recorded in 1997 by approximately
$173,000 and, accordingly, that amount was included in the Company's
net loss for 1997.
As a result, income earned by Inoteb subsequent to December 31,
1997, if any, will be allocated entirely to the Company until such
time as the Company recovers excess losses of approximately $395,000
that were not charged to the minority interest.
F-14
<PAGE>
BIOCORAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2 - Acquisitions and dispositions (concluded):
Sale of real estate operations:
On March 25, 1994, Cabestan commenced real estate operations when it
purchased land, two buildings and a 9.3% interest in a limited
partnership that owns undeveloped land from Bensenville Industrial
Park, L.P ("BIPLP") for total consideration of approximately
$9,860,000. Riccardo Mortara is an executive officer and the sole
director of BIPA, Inc., the general partner of BIPLP. Mr. Mortara is
a principal stockholder of the Company. He was also the chairman of
the Board of Directors and chief executive officer of the Company at
the time the real estate was acquired (he resigned from those
positions effective August 18, 1997). Accordingly, the Company and
BIPLP were commonly-controlled entities when the Company acquired
the real estate from BIPLP.
The acquisition was accounted for as a purchase. Since the Company
and BIPLP were commonly-controlled entities, the Company initially
recorded the properties at BIPLP's approximate historical cost of
$8,300,000 and accounted for the remainder of the purchase price as
a distribution to a related party through a direct charge to
stockholders' equity.
In October 1996, the Company decided to discontinue its real estate
operations and entered into an agreement to sell the commercial real
estate owned by Cabestan for total consideration of approximately
$6,800,000 before costs directly related to the sale. The sale was
consummated on February 18, 1997. The purchaser paid approximately
$4,748,000 by assuming a mortgage note on the properties and paid
$1,945,000 in cash, of which $430,000 was deposited in escrow to
secure certain minimum rent guarantees made to the purchaser and
approximately $1,515,000 was remitted to the Company.
Pursuant to SFAS 121 and the terms of the sales agreement, the
carrying value of the properties was written-down by approximately
$1,625,000 in September 1995 to net realizable value based on the
sales price, and other assets were written down by $200,000 in 1996.
As a result, the aggregate consideration received approximated the
remaining carrying value of the properties when the sale was
consummated and no additional gain or loss from the sale was
recognized in 1997.
The net assets of the Company's discontinued real estate operations
as of December 31, 1997 and 1996 are set forth in Note 12.
F-15
<PAGE>
BIOCORAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 3 - Income taxes:
As of December 31, 1997, the Company had net operating loss
carryforwards of approximately $6,203,000 available to reduce future
Federal taxable income which, if not used, will expire at various
dates through 2012. Due to changes in the ownership of the Company,
the utilization of these loss carryforwards may be subject to
substantial annual limitations.
Deferred tax assets of approximately $2,109,000 and $1,634,000
attributable to the potential benefits from such net operating loss
carryforwards as of December 31, 1997 and 1996, respectively, were
offset by equivalent valuation allowances due to the uncertainties
related to the extent and timing of the Company's future taxable
income. There were no other material temporary differences as of
these dates.
Note 4 - Property and equipment:
Property and equipment used in the Company's medical products
operations consisted of the following:
1997 1996
-------- --------
Land $ 10,000 $ 11,400
Buildings and improvements 163,610 150,400
Equipment and furnishings 84,943 163,236
-------- --------
258,553 325,036
Less accumulated depreciation 149,500 98,100
-------- --------
Totals $109,053 $226,936
======== ========
Note 5 - Investment in nonmarketable securities:
In September 1994, IMMO Limited invested $600,000 in PEMP, Inc.
("PEMP"). The investment was in the form of a loan at December 31,
1994. It was converted into nonmarketable preferred shares during
1995 which are entitled to an annual cumulative 10% dividend. PEMP
is a Canadian financial advisory firm and an affiliate of PEMP
Investment Advisors, Inc., a beneficial owner of shares of the
Company's common stock.
In August 1996, based on PEMP's inability to make the dividend
payments, management of the Company deemed the investment in PEMP to
be worthless, and it was written off in 1996.
F-16
<PAGE>
BIOCORAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 6 - Short-term notes payable:
At December 31, 1997, the Company had outstanding notes payable to
related parties with a principal balance of $428,811 that are due on
demand and bear interest at 10%. The notes are secured by 12,298
shares of Inoteb's common stock. The noteholders have the option to
convert the notes at any time into a total of 500,000 shares of
common stock of the Company (which is equivalent to a conversion
rate of $.8576 per share). Interest on such borrowings totaled
approximately $11,000 in 1997.
The Company sold six month, 12% notes (the "Regulation D notes") in
the principal amount of $1,975,000 in 1994 and 1995 through an
offering that was exempt pursuant to Regulation D of the Securities
Act. As of April 4, 1995, the Company was in default with respect to
the payment of Regulation D notes with a principal balance of
$1,775,000 and accrued but unpaid interest of $53,250 and,
accordingly, such notes became due and payable. In August 1995, the
Company paid 80% of the principal balance and was able to negotiate
an extension of the due date. During 1997, the Company used a
portion of the proceeds from the sale of its commercial real estate
(see Note 2) to make principal payments on the notes totaling
$492,500 (including $208,062 which was directly offset against
outstanding notes and, accordingly, not reflected in the
accompanying 1997 consolidated statement of cash flows). As a
result, the outstanding principal balance of the Regulation D notes
was $25,000 at December 31, 1997. Management anticipates that the
Company will repay the remaining balance as soon as it can locate
the remaining noteholder.
Note 7 - Long-term debt:
Long-term debt at December 31, 1997 and 1996 consisted of the
following:
1997 1996
-------- ----------
Term loans payable monthly in
varying installments, including
interest at rates ranging from
6.95% to 9.5%, through December
2001 (A) $397,600 $ 524,600
Noninterest bearing advances in-
itially scheduled to be paid
in monthly installments through
2002 (B) 403,100 517,000
-------- ----------
800,700 1,041,600
Less current portion 352,825 255,100
-------- ----------
Long-term debt $447,875 $ 786,500
======== ==========
F-17
<PAGE>
BIOCORAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 7 - Long-term debt (concluded):
(A) The loans were secured by equipment with a net carrying value
of approximately $109,053 at December 31, 1997.
(B) The advances were made to Inoteb by an agency of the French
government that finances or subsidizes certain research and
development projects. If the research does not result in a
commercially feasible product and certain other conditions are
met, Inoteb will not have to pay some or all of the advances.
During 1997, the Company reduced advances payable and research
and development expenses by $120,000 as a result of subsidies
obtained from the governmental agency.
Principal payment requirements on long-term obligations in each of
the five years subsequent to December 31, 1997 are as follows:
Year Ending
December 31, Amount
------------ ------
1998 $352,825
1999 134,925
2000 111,925
2001 100,925
2002 100,100
Management of the Company believes that the term loans and the
noninterest bearing advances had carrying values that approximated
their fair values as of December 31, 1997 because the interest rates
and other relevant terms of such financial instruments were the
equivalent of those that the Company could have obtained for new
loans as of that date.
Note 8 - Common stock issued or issuable to Consultants and advisors:
On October 21, 1997, the Company issued 54,493 shares of common
stock for consulting services with a fair market value of $129,511
or $2.38 per share which was charged to operating expenses in 1997
(including $100,000 for the fair market value of 42,105 shares
issued to the Company's chief executive officer). These were noncash
transactions that are not reflected in the accompanying 1997
consolidated statement of cash flows.
On October 1, 1997, the Company formed a Scientific Advisory Board
("SAB") with four members who will advise the Company on scientific
and medical developments relating to its products. Although the
Company is not contractually obligated to compensate the members of
the SAB, management intends to issue shares of the Company's common
stock with a fair value of $39,000 to them on April 1, 1998 and
October 1, 1998 to compensate them for their services. Accordingly,
the Company accrued a liability of $19,500 for such compensation as
of December 31, 1997, which would have required the issuance of
approximately 5,400 shares as payment based on the fair market value
of the Company's common shares as of December 31, 1997.
Note 9 - Stock option plan:
On May 4, 1992, the Company adopted a stock option plan (the "Plan")
pursuant to which options to purchase an aggregate of up to
2,000,000 shares of common stock may be issued.
-- On June 10, 1996, the Company granted options for the purchase
of 333,334 shares of common stock exercisable at $5.81 per
share, the fair market value of the shares on the date of
grant.
F-18
<PAGE>
BIOCORAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 9 - Stock option plan (continued):
-- On December 31, 1996, the Company granted options for the
purchase of 650,000 shares of common stock exercisable at
$3.75 per share (including options for the purchase of 325,000
shares granted to Mr. Mortara).
-- On October 21, 1997, the Company granted its chief executive
officer and its new chief financial officer options to
purchase a total of 700,000 shares of common stock exercisable
at $2.375 per share, the fair market value of the shares on
the date of grant.
-- In 1997, the Company granted the members of the SAB options to
purchase a total of 75,000 shares of common stock exercisable
at $2.875 per share, the fair market value of the shares on
the date of grant.
These options are exercisable for a five year period from the date
of issuance. At December 31, 1997, there were no other outstanding
options and options to purchase 241,666 shares were available for
grant. Accordingly, the weighted average exercise price of the
options outstanding and exercisable at December 31, 1997 and 1996
was $3.56 and $4.45 per share, respectively. The weighted average
fair value of the options granted in 1997 and 1996 was $2.42 and
$5.61 per share, respectively.
The fair value of the common stock underlying the 650,000 options
issued on December 31, 1996 exceeded the exercise price. Therefore,
the Company charged $1,137,500 to unearned compensation and
additional paid-in capital upon the issuance of these options on
December 31, 1996 based on the number of shares subject to option
and the difference between the estimated fair value of an underlying
share and the per share exercise price. Unearned compensation is
being amortized on a straight-line basis over periods of up to five
years. The unamortized portion of unearned compensation is presented
separately in and deducted from stockholders' equity in the
Company's consolidated balance sheets. General and administrative
expenses for 1997 include amortization of $682,500, of which
approximately $483,000 was accelerated as a result of the
resignation of Mr. Mortara.
The Company has elected to make pro forma disclosures, as required
by Statement of Financial Accounting Standards No. 123, Accounting
for Stock-Based Compensation ("SFAS 123"), of net income or loss as
if a fair value based method of accounting for stock options had
been applied if such pro forma amounts differ materially from the
historical amounts. Therefore, the Company will account for stock
options in accordance with the provisions of Accounting Principles
Board Opinion No. 25, Accounting for Stock Issued to Employees, and
recognize compensation costs as a result of the issuance of stock
options based on the excess, if any, of the fair value of the
underlying stock at the date of grant (or at an appropriate
subsequent measurement date) over the amount the employee must pay
to acquire the stock.
F-19
<PAGE>
BIOCORAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 9 - Stock option plan (concluded):
The compensation cost, pro forma loss and loss per common share from
continuing operations and net loss and net loss per common share for
1997 and 1996 determined using a fair value based method of
accounting for the stock options granted in 1997 and 1996, as
required by SFAS 123, would not differ materially from the
corresponding historical amounts.
Note 10- Preferred stock:
At January 1, 1996, there were 1,000 shares of nonconvertible,
Series A preferred stock outstanding, all of which were owned by a
company controlled by Mr. Mortara. During 1996, a total of 700
shares of preferred stock outstanding were canceled and 933,333
shares of common stock were sold to the holder for $700,000. During
January 1997, the remaining 300 shares of preferred stock
outstanding were canceled and 400,000 shares of common stock were
sold to the holder for $300,000.
Note 11- Terminated acquisition:
The Company had issued 1,955,556 common shares in 1995 in connection
with a proposed acquisition of a new subsidiary. The acquisition
proposal was terminated and 1,711,110 of the shares were canceled as
of December 31, 1996. The Company has ordered its transfer agent not
to transfer any of the remaining shares.
Note 12- Discontinued operations:
The assets and liabilities of the Company's discontinued real estate
operations as of December 31, 1997 and 1996 consisted of the
following:
1997 1996
-------- ----------
Cash $ 200,000
Cash held in escrow $430,000
Property and equipment, net of
accumulated depreciation 6,654,000
Mortgage note payable (4,767,000)
Other liabilities (115,993)
-------- ----------
Net assets $430,000 $1,971,007
======== ==========
Income (loss) from discontinued real estate operations reflects
charges for interest of $38,764 and $338,075 for 1997 and 1996,
respectively. Depreciation was discontinued when the property and
equipment was written down to net realizable value in 1995 and there
was no charge for depreciation expense in 1997 and 1996.
F-20
<PAGE>
BIOCORAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 13- Segment and geographic information:
The Company operates principally in one industry segment which
includes the development, manufacture and sale of biomedical
materials used in medical products. The Company conducts operations
outside of the United States, principally in France and Ireland.
Information about the Company's operations in different geographic
locations for 1997 and 1996 is shown below:
United
States France Ireland Consolidated
------ ------ ------- ------------
1997
Net sales $ 526,900 $ 526,900
Loss from
continuing
operations $(1,400,005) (432,400) $(1,358,101) (3,190,506)
Identifiable
assets 676,801 929,653 5,311 1,611,765
1996
Net sales 250,300 250,300
Loss from
continuing
operations (255,321) (771,700) (646,882) (1,673,903)
Identifiable
assets 2,067,341 1,079,984 1,338,250 4,485,575
Note 14- Subsequent event:
On February 3, 1998, the Company granted options to purchase 200,000
shares of common stock pursuant to the plan exercisable at $3.25 per
share, the fair market value of the shares on the date of the grant
(see Note 9).
* * *
F-21
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Company has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
BIOCORAL, INC.
Date: 4/15/98 By: s/ Nasser Nassiri
---------------------------------------
Nasser Nassiri , Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the Company
and in the capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
s/ Nasser Nassiri
- ----------------------------
Nasser Nassiri Chairman of the Board 4/15/98
and a director
s/ Ramine Almassi
- ----------------------------
Ramine Almassi Treasurer, Secretary and 4/15/98
a director
s/ Jean Darondel Director 4/15/98
- ----------------------------
Jean Darondel
22
STOCK OPTION AGREEMENT
AGREEMENT, dated as of October 21, 1997, between BioCoral, Inc., a
Delaware corporation with its principal place of business c/o Stein Riso Haspel
& Jacobs, 805 Third Avenue, New York, NY 10022 (the "Company") and Nasser
Nassiri, residing at 161 Rue Jules Guesde, Levallois-Perret, FRANCE (the
"Optionee").
W I T N E S S E T H:
WHEREAS, on October 21, 1997, the Board of Directors of the Company
resolved to grant an option (the "Option") to the Optionee for the purchase of
up to 350,000 shares of the Company's common stock, par value $.001 per share
(the "Common Stock") at a strike price of $2.375 (US) per share on the terms and
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the parties hereto agree as follows:
1. Grant of Option. Subject to all the terms and conditions hereof, the
Company hereby grants to Optionee the right to purchase all or any part of an
aggregate of 350,000 shares of Common Stock of the Company (the "Option Shares")
at an exercise price of $2.375 per share, on the terms and conditions set forth
in this Agreement.
2. Exercisability of Option. The Option Shares subject to the Option shall
become purchasable beginning at any time and from time to time beginning on the
date hereof and for a period of 60 months thereafter, and after the expiration
date (the "Expiration Date"), this option and all rights hereunder shall expire
and any Option Shares not purchased on or before the Expiration Date may not
thereafter be purchased hereunder. In the event Optionee fails to exercise the
option on or prior to the Expiration Date, then the Option as to all Option
Shares not exercised shall expire and Optionee shall have no rights with respect
to such remainder of the Option or the Option Shares.
3. Consideration for Grant of Option. The consideration for grant of the
Option is $10,
<PAGE>
the receipt of which is hereby acknowledged, and Optionee's past services.
4. Method of Exercise of Option; Payment of Option Purchase Price. This
Option shall be exercisable at any time and from time to time, prior to the
Expiration Date, by written notice (the "Notice") to the Company at its
principal office, presently located c/o Stein Riso Haspel & Jacobs LLP, 805
Third Avenue, New York, NY 10022. The Notice shall state the Optionee's election
to exercise this Option and the number of Option Shares in respect of which it
is being exercised, and shall be accompanied by a check in the amount of the
Exercise Price. Upon payment of the full purchase price of the Option Shares by
Optionee, the Company shall deliver a certificate or certificates representing
those shares. A certificate or certificates for the shares as to which this
Option shall have been so exercised shall be registered in the name of the
Optionee and shall be delivered to Optionee at the address of Optionee specified
in the Notice or at such other address as Optionee shall set forth in its
Notice.
5. Non-Assignability of Option. This Option may be exercised only by the
Optionee and shall not be sold, transferred, assigned, pledged, hypothecated or
otherwise disposed of in any way (whether by operation of law or
otherwise)without the Company's prior written consent except that Optionee may,
solely in connection with a transfer of all or substantially all of his assets
to an entity or entities controlled by Optionee("Affiliate"), sell, transfer or
assign all its interest in this Agreement to such Affiliate but only after
giving the Company at least thirty days notice in writing of the proposed sale,
transfer or assignment. Any buyer, transferee, or assignee of this Option shall
be bound by and subject to each and every provision of this Agreement and shall
not sell, transfer, assign, pledge, hypothecate or otherwise dispose of the
Option in any way (whether by operation of law or otherwise).
6. Adjustments to Preserve Option Benefits.
2
<PAGE>
If the outstanding shares of the Company's Common Stock are
exchanged for a different number or kind of shares or securities of the Company
through stock splits, reverse stock splits, stock dividends, recapitalization or
other changes in the stock of the Company, an appropriate and proportionate
adjustment shall be made in the number and kind of shares issued upon any
subsequent exercise of this Option without any change in the aggregate purchase
price to be paid for such shares. For any and all such purposes, but only for
such purposes, Optionee shall be considered to be a shareholder of record of the
Company as of the date of this Option Agreement. Nothing in this Agreement shall
preclude the Corporation from issuing additional shares of Common Stock to any
third party.
7. Limitation of Optionee's Rights. Except as otherwise provided in
Section 6 above, Optionee shall not have any of the rights or privileges of a
shareholder of the Company in respect of any Option Shares issuable upon
exercise of this Option unless and until those shares have been paid for in full
and upon such payment in full Optionee shall be deemed to be the record holder.
8. Purchase for Investment. The Optionee represents and agrees that if the
Optionee exercises this Option in whole or in part then those Option Shares so
acquired will be acquired for the purpose of investment and not with a view to
their resale or distribution and upon each exercise of this Option, the Optionee
will furnish to the Company a written statement to that effect, satisfactory in
form and substance to the Company and its counsel. Optionee understands and
acknowledges that the shares to be acquired pursuant to this Option will be
restricted securities as such term is defined under the Securities Act of 1933,
as amended, (the "Act") and accordingly will bear a legend indicating such
restrictions.
9. Representations and Warranties of Optionee. As a condition to receipt
of the Option and for other good and valuable consideration, receipt of which is
hereby acknowledge, the Optionee
3
<PAGE>
represents and warrants to the Company as follows:
(i) Optionee acknowledges that the Company is a development
stage company with no significant operating history and that there are
significant risks associated with the Company's business. Accordingly, the value
of the Option and the Option Shares will be based upon the Company's development
of its business which is subject to significant risks; and
(ii) Optionee understands that the Option and the Option
Shares (upon exercise of the option) are being offered and sold under an
exemption from registration provided by Section 4(2) of the Act and the
regulations promulgated thereunder, as well as applicable State law exemptions,
and warrants and represents that the Option and the Option Shares are being or
will be (in the case of the Option Shares) acquired by the undersigned solely
for the undersigned's own account, for investment purposes only, and are not
being purchased with the intent or view to resell the Option or the Option
Shares or for the resale, distribution, subdivision or fractionalization
thereof. Consequently, the undersigned must bear the economic risk of the
investment for an indefinite period of time because the Option and the Option
Shares cannot be resold or otherwise transferred unless subsequently registered
under the act and qualified under applicable State law or an opinion of
qualified counsel that indicates an exemption from registration and/or
qualification is available.
10. Notices. Any notice to be given under the terms of this Option shall
be in writing and addressed to the Company at the Company's then-present
addressor to Optionee at the address provided herein, or at such other address
as either party may hereafter designate in writing to the other. Any notice or
other communication given hereunder shall have been deemed duly given when
enclosed in a properly sealed envelope addressed as aforesaid, registered or
certified, and deposited postage prepaid in a post office or branch post office
or, in person, when so delivered, or by Federal Express or similar courier
providing evidence of receipt.
4
<PAGE>
11. Representations of Company. The Company represents: (i) the execution,
delivery and performance of this Agreement has been duly authorized by the Board
of Directors of the Company; (ii) the consummation of the transaction
contemplated by this Agreement will not violate any provision of the Company's
Certificate of Incorporation or Bylaws; and (iii) no consent of any third party
including, without limitation, federal or state regulatory agencies is required
for execution and performance of this Agreement by the Company.
12. Governing Law. This Agreement shall be deemed to be made under and
shall be construed in accordance with the laws of the State of Delaware and
applicable Federal law without regard to conflict of law principles.
13. Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their legal successors and permitted
assigns.
14. Entire Understanding. This Agreement constitutes the entire
understanding of the parties and shall not be amended except by written
agreement between the parties.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the day and year first above written.
BIOCORAL, INC.
By: /s/ Nasser Nassiri
--------------------------
Nasser Nassiri, Chairman
/s/ Nasser Nassiri
------------------------------
Nasser Nassiri, Optionee
5
STOCK OPTION AGREEMENT
AGREEMENT, dated as of October 21, 1997, between BioCoral, Inc., a
Delaware corporation with its principal place of business c/o Stein Riso Haspel
& Jacobs, 805 Third Avenue, New York, NY 10022 (the "Company") and Ramine
Almassi, with his office at 3 villa de l'Industrie, Saint-Ouen, FRANCE (the
"Optionee").
W I T N E S S E T H:
WHEREAS, on October 21, 1997, the Board of Directors of the Company
resolved to grant an option (the "Option") to the Optionee for the purchase of
up to 350,000 shares of the Company's common stock, par value $.001 per share
(the "Common Stock") at a strike price of $2.375 (US) per share on the terms and
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the parties hereto agree as follows:
1. Grant of Option. Subject to all the terms and conditions hereof, the
Company hereby grants to Optionee the right to purchase all or any part of an
aggregate of 350,000 shares of Common Stock of the Company (the "Option Shares")
at an exercise price of $2.375 per share, on the terms and conditions set forth
in this Agreement.
2. Exercisability of Option. The Option Shares subject to the Option shall
become purchasable beginning at any time and from time to time beginning on the
date hereof and for a period of 60 months thereafter, and after the expiration
date (the "Expiration Date"), this option and all rights hereunder shall expire
and any Option Shares not purchased on or before the Expiration Date may not
thereafter be purchased hereunder. In the event Optionee fails to exercise the
option on or prior to the Expiration Date, then the Option as to all Option
Shares not exercised shall expire and Optionee shall have no rights with respect
to such remainder of the Option or the Option Shares.
3. Consideration for Grant of Option. The consideration for grant of the
Option is $10,
1
<PAGE>
the receipt of which is hereby acknowledged, and Optionee's past services.
4. Method of Exercise of Option; Payment of Option Purchase Price. This
Option shall be exercisable at any time and from time to time, prior to the
Expiration Date, by written notice (the "Notice") to the Company at its
principal office, presently located c/o Stein Riso Haspel & Jacobs LLP, 805
Third Avenue, New York, NY 10022. The Notice shall state the Optionee's election
to exercise this Option and the number of Option Shares in respect of which it
is being exercised, and shall be accompanied by a check in the amount of the
Exercise Price. Upon payment of the full purchase price of the Option Shares by
Optionee, the Company shall deliver a certificate or certificates representing
those shares. A certificate or certificates for the shares as to which this
Option shall have been so exercised shall be registered in the name of the
Optionee and shall be delivered to Optionee at the address of Optionee specified
in the Notice or at such other address as Optionee shall set forth in its
Notice.
5. Non-Assignability of Option. This Option may be exercised only by the
Optionee and shall not be sold, transferred, assigned, pledged, hypothecated or
otherwise disposed of in any way (whether by operation of law or otherwise)
without the Company's prior written consent except that Optionee may, solely in
connection with a transfer of all or substantially all of his assets to an
entity or entities controlled by Optionee ("Affiliate"), sell, transfer or
assign all its interest in this Agreement to such Affiliate but only after
giving the Company at least thirty days notice in writing of the proposed sale,
transfer or assignment. Any buyer, transferee, or assignee of this Option shall
be bound by and subject to each and every provision of this Agreement and shall
not sell, transfer, assign, pledge, hypothecate or otherwise dispose of the
Option in any way (whether by operation of law or otherwise).
6. Adjustments to Preserve Option Benefits.
2
<PAGE>
If the outstanding shares of the Company's Common Stock are
exchanged for a different number or kind of shares or securities of the Company
through stock splits, reverse stock splits, stock dividends, recapitalization or
other changes in the stock of the Company, an appropriate and proportionate
adjustment shall be made in the number and kind of shares issued upon any
subsequent exercise of this Option without any change in the aggregate purchase
price to be paid for such shares. For any and all such purposes, but only for
such purposes, Optionee shall be considered to be a shareholder of record of the
Company as of the date of this Option Agreement. Nothing in this Agreement shall
preclude the Corporation from issuing additional shares of Common Stock to any
third party.
7. Limitation of Optionee's Rights. Except as otherwise provided in
Section 6 above, Optionee shall not have any of the rights or privileges of a
shareholder of the Company in respect of any Option Shares issuable upon
exercise of this Option unless and until those shares have been paid for in full
and upon such payment in full Optionee shall be deemed to be the record holder.
8. Purchase for Investment. The Optionee represents and agrees that if the
Optionee exercises this Option in whole or in part then those Option Shares so
acquired will be acquired for the purpose of investment and not with a view to
their resale or distribution and upon each exercise of this Option, the Optionee
will furnish to the Company a written statement to that effect, satisfactory in
form and substance to the Company and its counsel. Optionee understands and
acknowledges that the shares to be acquired pursuant to this Option will be
restricted securities as such term is defined under the Securities Act of 1933,
as amended, (the "Act") and accordingly will bear a legend indicating such
restrictions.
9. Representations and Warranties of Optionee. As a condition to receipt
of the Option and for other good and valuable consideration, receipt of which is
hereby acknowledge, the Optionee
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<PAGE>
represents and warrants to the Company as follows:
(i) Optionee acknowledges that the Company is a development
stage company with no significant operating history and that there are
significant risks associated with the Company's business. Accordingly, the value
of the Option and the Option Shares will be based upon the Company's development
of its business which is subject to significant risks; and
(ii) Optionee understands that the Option and the Option
Shares (upon exercise of the option) are being offered and sold under an
exemption from registration provided by Section 4(2) of the Act and the
regulations promulgated thereunder, as well as applicable State law exemptions,
and warrants and represents that the Option and the Option Shares are being or
will be (in the case of the Option Shares) acquired by the undersigned solely
for the undersigned's own account, for investment purposes only, and are not
being purchased with the intent or view to resell the Option or the Option
Shares or for the resale, distribution, subdivision or fractionalization
thereof. Consequently, the undersigned must bear the economic risk of the
investment for an indefinite period of time because the Option and the Option
Shares cannot be resold or otherwise transferred unless subsequently registered
under the act and qualified under applicable State law or an opinion of
qualified counsel that indicates an exemption from registration and/or
qualification is available.
10. Notices. Any notice to be given under the terms of this Option shall
be in writing and addressed to the Company at the Company's then-present
addressor to Optionee at the address provided herein, or at such other address
as either party may hereafter designate in writing to the other. Any notice or
other communication given hereunder shall have been deemed duly given when
enclosed in a properly sealed envelope addressed as aforesaid, registered or
certified, and deposited postage prepaid in a post office or branch post office
or, in person, when so delivered, or by Federal Express or similar courier
providing evidence of receipt.
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<PAGE>
11. Representations of Company. The Company represents: (i) the execution,
delivery and performance of this Agreement has been duly authorized by the Board
of Directors of the Company; (ii) the consummation of the transaction
contemplated by this Agreement will not violate any provision of the Company's
Certificate of Incorporation or Bylaws; and (iii) no consent of any third party
including, without limitation, federal or state regulatory agencies is required
for execution and performance of this Agreement by the Company.
12. Governing Law. This Agreement shall be deemed to be made under and
shall be construed in accordance with the laws of the State of Delaware and
applicable Federal law without regard to conflict of law principles.
13. Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their legal successors and permitted
assigns.
14. Entire Understanding. This Agreement constitutes the entire
understanding of the parties and shall not be amended except by written
agreement between the parties.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the day and year first above written.
BIOCORAL, INC.
By: /s/ Nasser Nassiri
---------------------------
Nasser Nassiri, Chairman
/s/ Ramine Almassi
-------------------------------
Ramine Almassi, Optionee
5
CONSULTING AGREEMENT
AGREEMENT, made as of this 1st day of September, 1997, by and
between BIOCORAL, INC., a Delaware corporation having its principal place of
business c/o Stein Riso Haspel & Jacobs LLP, 805 Third Avenue, New York, NY
10022 ("Company") and Nasser Nassiri, residing at 161 rue Jules Guesde,
Levallois - Perret FRANCE ("Executive").
W I T N E S S E T H:
WHEREAS, Executive possesses significant experience in international
business and financial affairs; and
WHEREAS, Company desires to engage the services of Executive and to
appoint Executive as its President and Chairman, and Executive desires to accept
such engagement upon the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the foregoing and on the mutual
agreements and covenants hereinafter contained, the parties hereto agree as
follows:
1. Engagement. Company agrees to engage Executive as a consultant and
independent contractor to Company, to serve as its Chairman and President, and
Executive agrees to accept such engagement, all upon the terms and conditions
hereinafter set forth.
2. Term of Engagement. The term of engagement of Executive under this
Agreement shall be for a period of three (3) years commencing on the date
hereof.
3. Duties. Executive shall, during the term of his engagement, devote his
such amount of his business time and attention and shall apply his skill and
knowledge to the business of Company as shall be necessary to discharge his
obligations as Chairman and President. All such services shall
<PAGE>
be rendered outside the United States. Executive further agrees to perform such
other duties and render such other services consistent with his position as may
from time to time be reasonably required by the Board of Directors of Company.
Furthermore, Executive shall, during the term his engagement, keep all such
records of his work for Company as Company directs and in the manner as Company
directs, all such records and data so recorded to be the sole and absolute
property of Company, and will, at Company's request, and in any event, at the
termination of engagement (regardless of the reason therefor) surrender to
Company any and all memoranda, books, papers, notebooks, reports, customer lists
and activity reports, and any and all other data and information and any and all
copies or abstracts thereof whether made by Executive, Company or by third
parties that Executive has concerning Company's business or Company's
"Intangible Property" (as defined herein).
4. Compensation.
(a) As compensation for his services hereunder, Company shall pay to
Executive during the term of this Agreement, and Executive agrees to accept as
compensation for the services to be rendered by him, annual base compensation in
the amount of $150,000 payable in monthly installments. Executive shall also be
entitled to reimbursement of all his out-of-pocket expenses relating to the
affairs of Company against presentation of vouchers therefor.
(b) In the event that, at any time during the term hereof, Company
shall attempt to terminate this Agreement, or in the event that at any time
during the term hereof, there shall occur a "Change in Control" of Company,
then, in either event, lump sum compensation in an amount of $300,000 shall
become immediately due and payable to Executive. For purposes of this Agreement,
the term "Change in Control" shall mean any one of the following: (i) the
transfer of 25% or more of the outstanding voting shares of the Company; (ii)
the purchase of all or substantially all of the Company's assets (whether in a
single transaction or in a series of transactions); (iii) the merger or
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<PAGE>
consolidation of the Company with any other entity the result of which is that
the other entity or its equityholders owns 25% or more of the Company's
outstanding equity; or (iv) a change in more than 40% of the seats of the Board
of Directors of the Company.
5. Restrictive Covenant.
(a) During the term of this Agreement and for a period of six (6)
months thereafter, Executive shall not, directly or indirectly, engage or
participate in, or be in any manner connection with, any other business which is
similar to or competes with any business operations or activities of Company or
act as a director, officer, partner, consultant, or Executive for or make any
financial investment in any other firm, corporation or other such enterprise
anywhere in the United States, without the expressed written approval of
Company. Nothing contained herein, however, shall restrict Executive from making
any investments in any business or enterprise whose securities are listed on a
national securities exchange or actively traded in the over-the-counter market,
which business or enterprise is or might be, directly or indirectly, in
competition with the business operations of the Company; provided, however, that
such investment does not give Executive the right to control or influence the
policy decisions of such business.
(b) During the term of this Agreement and at all times thereafter,
Executive will not divulge, furnish or make accessible to anyone (other than in
the regular course of business of Company or at the request of Company) any
knowledge or information with respect to confidential or secret methods, data,
ideas, creations, plans, materials and processes (including improvements and
enhancements thereof) of Company including, without limitation, any customer or
client lists, telephone leads, prospect lists, advertising and sales promotion
materials, forms or literature and manufacturing processes (collectively,
"Intangible Property").
(c) Executive agrees that any Intangible Property that he may
conceive, make,
3
<PAGE>
invent, develop or suggest during the term of this Agreement (whether
individually or jointly with any other person or persons), relating in any way
to the business or activities of Company shall be the sole, exclusive and
absolute property of Company. Executive will immediately disclose any Intangible
Property to Company, except where the same is lawfully protected from disclosure
as the trade secret of a third party or by any other lawful bar to such
disclosure. Executive further agrees that without further remuneration (except
out-of-pocket expenses) and whether or not Executive is still engaged by
Company, he will, at Company's request, execute and deliver any documents and
give reasonable assistance which may be essential or desirable to secure to,
assign, and vest in Company the sole and exclusive right, title and interest in
and to such Intangible Property including, in those instances where Company
determines in its sole discretion, to apply for letters patent of the United
States of America and/or foreign countries, patent applications, copyright
applications, assignments, affidavits, priority claims and other documents now
or hereafter essential or desirable in the opinion of Company in obtaining,
maintaining and/or defending such patents, copyrights or other proprietary
rights and in securing to and vesting in Company the sole and exclusive right,
title and interest in and to such rights.
(d) Executive agrees that during the term of this Agreement, or any
renewals or extensions hereof and for a period of six (6) months thereafter, he
will not:
(i) Directly or indirectly solicit, raid, entice or induce any
employee of Company to be engaged by any other person, firm or corporation; or
(ii) Directly or indirectly approach any such employee for
such purposes; or
(iii) Authorize or knowingly approve the taking of such
actions by other
4
<PAGE>
persons on behalf of any such person, firm or corporation or assist any such
person, firm or corporation in taking such action.
(e) Executive agrees that during the term of this Agreement he will
not enter into on behalf of Company or cause Company to enter into, directly or
indirectly, any transaction with any business organization in which he or any
member of his immediate family may be interested as a partner, trustee,
director, officer, Executive, shareholder, other equity holder, lender of money
or guarantor, unless the material facts as to his interest and as to the
transaction are disclosed or are known to Company.
(f) Executive acknowledges that the services to be rendered by him
hereunder are of a special, unique and extraordinary character and that it would
be difficult if not impossible to replace such services, and further that
irreparable injury would be sustained by Company in the event of a violation by
Executive of any of the provisions of this Agreement, and by reason thereof,
Executive consents and agrees that if he violates any of the provisions of this
Agreement, Company shall be entitled to an injunction to be issued by any court
of competent jurisdiction restraining him from committing or continuing any
violation of this Agreement, in addition to all other remedies available to
Company under this Agreement or otherwise. The existence of any claim or cause
of action of the Executive against Company, whether predicated on this Agreement
or otherwise shall not constitute a defense to the enforcement by the Company of
these restrictions.
(g) In the event of a judicial determination of the unreasonableness
of these covenants with regard to time, geographical limitations or prohibited
activities, it is agreed by the parties that their intention is that this
Agreement should be considered to be effective within judicially determined
reasonable limits, time and prohibited activities.
5
<PAGE>
8. Termination.
(a) Company shall have the right to terminate this Agreement if
Executive shall commit any material act of malfeasance, disloyalty or breach of
trust against Company. Company's sole right under such circumstances shall be to
prohibit Executive from utilizing Company facilities, and shall be without
prejudice to Company's obligations to pay Executive compensation pursuant to
subparagraph 4 (c).
(b) In the event Company elects to terminate this Agreement as set
forth above, Company shall provide notice of termination to Executive in
accordance with the notice provisions of paragraph 10 hereof and this Agreement
shall terminate without further act ten (10) days after the giving of such
notice. Such termination shall not abrogate or annul any provisions of this
Agreement which are intended to survive said termination including, without
limitation, the provisions of subparagraph 4 (c) hereof.
6. Representation and Warranty of Executive. Executive represents and
warrants that he is not a party to any agreement, contract or understanding,
whether written or oral and whether of employment or otherwise, which would in
any way restrict or prohibit him from undertaking or performing in accordance
with the terms and conditions of this Agreement.
7. Complete Understanding. This Agreement constitutes the complete
understanding of the parties hereto and may not be altered, modified, amended or
rescinded except in a writing signed by the parties hereto.
8. Titles. The titles set forth in this Agreement are for convenience of
reference only and shall not be considered as part of this Agreement in any
respect nor shall they in any way affect the substance of any provision
contained in this Agreement.
6
<PAGE>
9. Severability. If any covenant or other provision of this Agreement is
finally judicially determined to be invalid, unlawful or incapable of being
enforced by reason of any rule of law or public policy, all other conditions and
provisions of this Agreement which can be given effect without the invalid,
unlawful or unenforceable provision shall, nevertheless, remain in full force
and effect, and no covenant or provision shall be deemed dependent upon any
other covenant or provision unless so expressed herein.
10. Notices. All notices which are required or which may be given under
the provisions of this Agreement shall be conclusively deemed to have been given
if delivered personally or sent by certified mail, return receipt requested,
with postage prepaid, to each of the parties hereto at the respective addresses
set forth above, or to such other address or addresses as either party may
hereinafter designate in writing as his or its address for this purpose in the
manner herein provided for giving notices. The date of giving of such notice
shall be conclusively deemed to be the date of receipt, if delivered personally,
or the date of postmark, if mailed.
11. Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the heirs, executors, administrators, and personal
representatives of Executive and the successors and permitted assigns of
Company.
12. Prior Agreements. Any and all prior agreements or memoranda of
understanding with respect to any matters herein contained, whether written or
oral, are herewith canceled and shall be of no further force or effect.
13. Construction. Whenever the sense of this Agreement so requires, the
masculine gender shall be deemed to include the feminine and/or neuter gender,
and the plural, the singular and vice versa.
7
<PAGE>
14. Governing Law. This Agreement, its performance and the rights,
obligations and remedies of the parties hereto, shall be construed and governed
by the laws of the State of New York without regard to its principles of
conflict of laws.
IN WITNESS WHEREOF, the parties hereto have set their hands as of
the day and year first above written.
BIOCORAL, INC.
By: /s/ Nasser Nassiri
--------------------------
Nasser Nassiri, Chairman
/s/ Nasser Nassiri
------------------------------
Nasser Nassiri, Executive
8
STOCK OPTION AGREEMENT
AGREEMENT, dated as of October 1, 1997, by and between BioCoral,
Inc., a Delaware corporation with its principal place of business at 3, villa de
l'Industrie, Saint-Ouen, FRANCE (the "Company") and Jean Darondel, residing at
Les Marronniers, 14340 Cambremer, FRANCE (the "Optionee").
W I T N E S S E T H:
WHEREAS, on October 1, 1997, the Board of Directors of the Company
resolved to grant an option (the "Option") to the Optionee for the purchase of
up to 25,000 shares of the Company's common stock, par value $.001 per share
(the "Common Stock") at a strike price of $2.875 (US) per share on the terms and
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the parties hereto agree as follows:
1. Grant of Option. Subject to all the terms and conditions hereof, the
Company hereby grants to Optionee the right to purchase all or any part of an
aggregate of 25,000 shares of Common Stock of the Company (the "Option Shares")
at an exercise price of $2.875 per share, on the terms and conditions set forth
in this Agreement.
2. Exercisability of Option. The Option Shares subject to the Option shall
become purchasable beginning at any time and from time to time beginning on the
date hereof and for a period of 60 months thereafter, and after the expiration
date (the "Expiration Date"), this option and all rights hereunder shall expire
and any Option Shares not purchased on or before the Expiration Date may not
thereafter be purchased hereunder. In the event Optionee fails to exercise the
option on or prior to the Expiration Date, then the Option as to all Option
Shares not exercised shall expire and Optionee shall have no rights with respect
to such remainder of the Option or the Option Shares.
3. Consideration for Grant of Option. The consideration for grant of the
Option is $10,
<PAGE>
the receipt of which is hereby acknowledged, and Optionee's past services.
4. Method of Exercise of Option; Payment of Option Purchase Price. This
Option shall be exercisable at any time and from time to time, prior to the
Expiration Date, by written notice (the "Notice") to the Company at its office,
presently located at 3, villa de l'Industrie, 93400 Saint-Ouen, FRANCE. The
Notice shall state the Optionee's election to exercise this Option and the
number of Option Shares in respect of which it is being exercised, and shall be
accompanied by a check in the amount of the Exercise Price. Upon payment of the
full purchase price of the Option Shares by Optionee, the Company shall deliver
a certificate or certificates representing those shares. A certificate or
certificates for the shares as to which this Option shall have been so exercised
shall be registered in the name of the Optionee and shall be delivered to
Optionee at the address of Optionee specified in the Notice or at such other
address as Optionee shall set forth in its Notice.
5. Non-Assignability of Option. This Option may be exercised only by the
Optionee and shall not be sold, transferred, assigned, pledged, hypothecated or
otherwise disposed of in any way (whether by operation of law or
otherwise)without the Company's prior written consent except that Optionee may,
solely in connection with a transfer of all or substantially all of his assets
to an entity or entities controlled by Optionee ("Affiliate"), sell, transfer or
assign all its interest in this Agreement to such Affiliate but only after
giving the Company at least thirty days notice in writing of the proposed sale,
transfer or assignment. Any buyer, transferee, or assignee of this Option shall
be bound by and subject to each and every provision of this Agreement and shall
not sell, transfer, assign, pledge, hypothecate or otherwise dispose of the
Option in any way (whether by operation of law or otherwise).
6. Adjustments to Preserve Option Benefits.
If the outstanding shares of the Company's Common Stock are exchanged for
a
2
<PAGE>
different number or kind of shares or securities of the Company through stock
splits, reverse stock splits, stock dividends, recapitalization or other changes
in the stock of the Company, an appropriate and proportionate adjustment shall
be made in the number and kind of shares issued upon any subsequent exercise of
this Option without any change in the aggregate purchase price to be paid for
such shares. For any and all such purposes, but only for such purposes, Optionee
shall be considered to be a shareholder of record of the Company as of the date
of this Option Agreement. Nothing in this Agreement shall preclude the
Corporation from issuing additional shares of Common Stock to any third party.
7. Limitation of Optionee's Rights. Except as otherwise provided in
Section 6 above, Optionee shall not have any of the rights or privileges of a
shareholder of the Company in respect of any Option Shares issuable upon
exercise of this Option unless and until those shares have been paid for in full
and upon such payment in full Optionee shall be deemed to be the record holder.
8. Purchase for Investment. The Optionee represents and agrees that if the
Optionee exercises this Option in whole or in part then those Option Shares so
acquired will be acquired for the purpose of investment and not with a view to
their resale or distribution and upon each exercise of this Option, the Optionee
will furnish to the Company a written statement to that effect, satisfactory in
form and substance to the Company and its counsel. Optionee understands and
acknowledges that the shares to be acquired pursuant to this Option will be
"restricted securities" as such term is defined under the Securities Act of
1933, as amended (the "Act") and accordingly will bear a legend indicating such
restrictions.
9. Representations and Warranties of Optionee. As a condition to receipt
of the Option and for other good and valuable consideration, receipt of which is
hereby acknowledge, the Optionee represents and warrants to the Company as
follows:
3
<PAGE>
(i) Optionee acknowledges that the Company is a development
stage company with no significant operating history and that there are
significant risks associated with the Company's business. Accordingly, the value
of the Option and the Option Shares will be based upon the Company's development
of its business which is subject to significant risks; and
(ii) Optionee understands that the Option and the Option
Shares (issuable upon exercise of the Option) are being offered and sold under
an exemption from registration provided by Section 4 of the Act and the
regulations promulgated thereunder, as well as applicable State law exemptions,
and warrants and represents that the Option and the Option Shares are being or
will be (in the case of the Option Shares) acquired by the undersigned solely
for the undersigned's own account, for investment purposes only, and are not
being purchased with the intent or view to resell the Option or the Option
Shares or for the resale, distribution, subdivision or fractionalization
thereof. Consequently, the undersigned must bear the economic risk of the
investment for an indefinite period of time because the Option and the Option
Shares cannot be resold or otherwise transferred unless subsequently registered
under the act and qualified under applicable State law or an opinion of
qualified counsel that indicates an exemption from registration and/or
qualification is available.
10. Notices. Any notice to be given under the terms of this Option shall
be in writing and addressed to the Company at the Company's then-present address
or to Optionee at the address provided herein, or at such other address as
either party may hereafter designate in writing to the other. Any notice or
other communication given hereunder shall have been deemed duly given when
enclosed in a properly sealed envelope addressed as aforesaid, registered or
certified, and deposited postage prepaid in a post office or branch post office
or, in person, when so delivered, or by Federal Express or similar overnight
courier providing evidence of receipt.
4
<PAGE>
11. Representations of Company. The Company represents: (I) the execution,
delivery and performance of this Agreement has been duly authorized by the Board
of Directors of the Company; (ii) the consummation of the transactions
contemplated by this Agreement will not violate any provision of the Company's
Certificate of Incorporation or Bylaws; and (iii) no consent of any third party
including, without limitation, federal or state regulatory agencies is required
for execution and performance of this Agreement by the Company.
12. Governing Law. This Agreement shall be deemed to be made under and
shall be construed in accordance with the laws of the State of Delaware and
applicable Federal law without regard to conflict of law principles.
13. Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their legal successors and permitted
assigns.
14. Entire Understanding. This Agreement constitutes the entire
understanding of the parties and shall not be amended except by written
agreement between the parties.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the day and year first above written.
BIOCORAL, INC.
By: /s/ Nasser Nassiri
-------------------------
Nasser Nassiri, Chairman
/s/ Jean Darondel
-----------------------------
Jean Darondel, Optionee
5
AGREEMENT
AGREEMENT, made this 1st day of November, 1997, by and among BioCoral,
Inc., a Delaware corporation ("BioCoral") with its principal place of business
c/o Stein Riso Haspel & Jacobs LLP, 805 Third Avenue, New York, NY 10022 U.S.A.;
Vida Nassiri Khoobdehi ("Vida"), residing at Abu Dhabi, U.A.E.; and Jean
Darondel ("Jean"), residing at Les Marroniers, 14340 Cambremer, FRANCE.
WITNESSETH:
WHEREAS, BioCoral has been, since 1996, a shareholder of Inoteb S.A., a
French societe anonyme ("Inoteb") owning, as of August 31, 1997, approximately
57% of Inoteb's outstanding share capital; and
WHEREAS, Jean was an original shareholder of Inoteb who exchanged his
Inoteb shares for BioCoral shares in 1995; and
WHEREAS, in June 1997, Inoteb's board decided to do an "augmentation of
capital" ("Augmentation") for Inoteb, similar to a "rights offering" in the US,
in the aggregate amount of FF 5,411,795; and
WHEREAS, the Augmentation, by decision of the Inoteb board, was open only
to existing shareholders of Inoteb as of such date; and
WHEREAS, by letter dated June 12, 1997, BioCoral engaged itself to
participate in the Augmentation up to FF 4,000,000 in order to guarantee the
continuation of Inoteb through the end of 1997 to Inoteb's French auditors,
which was necessary for Inoteb to continue its ordinary business operations; and
WHEREAS, in order to permit BioCoral to take advantage of the Augmentation
to improve its position in Inoteb, Vida loaned BioCoral (the "Vida Loan") the
sum of $260,000 (US)
<PAGE>
on September 20, 1997, then equivalent to FF 1,549,236 (the day rate at Credit
du Nord, BioCoral's bank), in order for BioCoral to subscribe for an aggregate
of 7,557 shares of Inoteb (the "Vida Shares"); and
WHEREAS, on October 24, 1997, Jean also loaned BioCoral (the "Jean Loan")
the sum of FF 971,905, to enable BioCoral to subscribe for an aggregate of 4,741
Inoteb shares (the "Jean Shares"); and
WHEREAS, as a result of the two aforementioned subscriptions, BioCoral has
become a major shareholder of Inoteb owning approximately 66.96% of Inoteb's
shares and Vida and Jean desire to formalize their respective relationships with
BioCoral regarding the Vida Loan and the Jean Loan, all as more fully set forth
herein;
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Vida Loan. The Vida Loan shall be a demand loan with simple interest at
the rate of 10% per annum, denominated in US dollars. Since the Vida Shares were
purchased by BioCoral and are registered in its name, BioCoral hereby pledges
the Vida Shares as security for the repayment of the Vida Loan. Further,
BioCoral agrees to escrow such Vida Shares, with all voting rights appurtenant
thereto, with Stein Riso Haspel & Jacobs LLP, counsel to BioCoral, pending
repayment of or conversion of the Vida Loan. At Vida's option, the Vida Loan may
be converted at any time into 307,245 shares of BioCoral common stock, to be
registered in the name of Vida or her designee, all costs and expenses of such
exchange to be borne by BioCoral. Such conversion, which shall be by simple
notice to BioCoral, shall be cause for the immediate release of the Vida Shares
from escrow.
2. Jean Loan. The Jean Loan shall be a demand loan with simple interest at
the rate of 10% per annum, denominated in US dollars. Since the Jean Shares were
purchased by BioCoral
<PAGE>
and are registered in its name, BioCoral hereby pledges the Jean Shares as
security for the repayment of the Jean Loan. Further, BioCoral agrees to escrow
such Jean Shares, with all voting rights appurtenant thereto, with Stein Riso
Haspel & Jacobs LLP, counsel to BioCoral, pending repayment of or conversion of
the Jean Loan. At Jean's option, the Jean Loan may be converted at any time into
192,755 shares of BioCoral common stock, to be registered in the name of Jean or
his designee, all costs and expenses of such exchange to be borne by BioCoral.
Such conversion, which shall be by simple notice to BioCoral, shall be cause for
the immediate release of the Jean Shares from escrow.
3. Notices. All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly made when delivered personally or
when mailed, first class, postage prepaid, by registered or certified mail,
return receipt requested, addressed to the parties at their respective addresses
first above mentioned or to such other address as any party shall hereafter
designate to the other parties in conformity with the foregoing.
4. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
5. Complete Agreement. This Agreement contains the entire understanding
among the parties hereto with respect to the transactions contemplated hereby
and supersedes all prior agreements and understandings with respect to such
subject matter.
6. Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors, permitted
assigns, heirs, executors, administrators and personal representatives. This
Agreement may not be assigned by any party hereto without the prior written
consent of other parties hereto and any such attempted
<PAGE>
assignment shall be void and of no force and effect, except that Vida may
designate an assignee of her right to receive her shares under Section 1 above
without the consent of any other party hereto.
7. Amendment; Waiver. This Agreement may be amended, modified, superseded
or canceled, and any of the terms, covenants, representations, warranties or
conditions hereof may be waived, only by a written instrument executed by the
parties hereto or, in the case of a waiver, by the party waiving compliance. No
waiver by any party of any condition, or of the breach of any provision, term,
covenant, representation or warranty contained in this Agreement, in any one or
more instances, shall be deemed to be or construed as a further or continuing
waiver of any such condition or of the breach of any other provision, term,
covenant, representation or warranty of this Agreement.
8. Severability and Applicable Law. Each provision hereof is intended to
be severable and the invalidity or illegality of any portion of this Agreement
shall not affect the validity or legality of the remainder hereof. This
Agreement shall be deemed to be made under and shall be construed and enforced
in accordance with the laws of the State of New York without regard to its
principles of conflict of laws.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
BIOCORAL, INC.
/s/ Vida Nassiri Khoobdehi
- -----------------------------
Vida Nassiri Khoobdehi
By: /s/ Nasser Nassiri
-----------------------------
Nasser Nassiri, President
/s/ Jean Darondel
- -----------------------------
Jean Darondel By: /s/ Ramine Almassi
-----------------------------
Ramine Almassi, Director
STOCK OPTION AGREEMENT
AGREEMENT, dated as of October 1, 1997, by and between BioCoral,
Inc., a Delaware corporation with its principal place of business at 3, villa de
l'Industrie, Saint-Ouen, FRANCE (the "Company") and Jean Louis Patat, with his
office c/o the Company (the "Optionee").
W I T N E S S E T H:
WHEREAS, on October 1, 1997, the Board of Directors of the Company
resolved to grant an option (the "Option") to the Optionee for the purchase of
up to 25,000 shares of the Company's common stock, par value $.001 per share
(the "Common Stock") at a strike price of $2.875 (US) per share on the terms and
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the parties hereto agree as follows:
1. Grant of Option. Subject to all the terms and conditions hereof, the
Company hereby grants to Optionee the right to purchase all or any part of an
aggregate of 25,000 shares of Common Stock of the Company (the "Option Shares")
at an exercise price of $2.875 per share, on the terms and conditions set forth
in this Agreement.
2. Exercisability of Option. The Option Shares subject to the Option shall
become purchasable beginning at any time and from time to time beginning on the
date hereof and for a period of 60 months thereafter, and after the expiration
date (the "Expiration Date"), this option and all rights hereunder shall expire
and any Option Shares not purchased on or before the Expiration Date may not
thereafter be purchased hereunder. In the event Optionee fails to exercise the
option on or prior to the Expiration Date, then the Option as to all Option
Shares not exercised shall expire and Optionee shall have no rights with respect
to such remainder of the Option or the Option Shares.
3. Consideration for Grant of Option. The consideration for grant of the
Option is $10, the receipt of which is hereby acknowledged, and Optionee's past
services.
<PAGE>
4. Method of Exercise of Option; Payment of Option Purchase Price. This
Option shall be exercisable at any time and from time to time, prior to the
Expiration Date, by written notice (the "Notice") to the Company at its office,
presently located at 3, villa de l'Industrie, 93400 Saint-Ouen, FRANCE. The
Notice shall state the Optionee's election to exercise this Option and the
number of Option Shares in respect of which it is being exercised, and shall be
accompanied by a check in the amount of the Exercise Price. Upon payment of the
full purchase price of the Option Shares by Optionee, the Company shall deliver
a certificate or certificates representing those shares. A certificate or
certificates for the shares as to which this Option shall have been so exercised
shall be registered in the name of the Optionee and shall be delivered to
Optionee at the address of Optionee specified in the Notice or at such other
address as Optionee shall set forth in its Notice.
5. Non-Assignability of Option. This Option may be exercised only by the
Optionee and shall not be sold, transferred, assigned, pledged, hypothecated or
otherwise disposed of in any way (whether by operation of law or
otherwise)without the Company's prior written consent except that Optionee may,
solely in connection with a transfer of all or substantially all of his assets
to an entity or entities controlled by Optionee ("Affiliate"), sell, transfer or
assign all its interest in this Agreement to such Affiliate but only after
giving the Company at least thirty days notice in writing of the proposed sale,
transfer or assignment. Any buyer, transferee, or assignee of this Option shall
be bound by and subject to each and every provision of this Agreement and shall
not sell, transfer, assign, pledge, hypothecate or otherwise dispose of the
Option in any way (whether by operation of law or otherwise).
6. Adjustments to Preserve Option Benefits.
If the outstanding shares of the Company's Common Stock are
exchanged for a different number or kind of shares or securities of the Company
through stock splits, reverse stock
2
<PAGE>
splits, stock dividends, recapitalization or other changes in the stock of the
Company, an appropriate and proportionate adjustment shall be made in the number
and kind of shares issued upon any subsequent exercise of this Option without
any change in the aggregate purchase price to be paid for such shares. For any
and all such purposes, but only for such purposes, Optionee shall be considered
to be a shareholder of record of the Company as of the date of this Option
Agreement. Nothing in this Agreement shall preclude the Corporation from issuing
additional shares of Common Stock to any third party.
7. Limitation of Optionee's Rights. Except as otherwise provided in
Section 6 above, Optionee shall not have any of the rights or privileges of a
shareholder of the Company in respect of any Option Shares issuable upon
exercise of this Option unless and until those shares have been paid for in full
and upon such payment in full Optionee shall be deemed to be the record holder.
8. Purchase for Investment. The Optionee represents and agrees that if the
Optionee exercises this Option in whole or in part then those Option Shares so
acquired will be acquired for the purpose of investment and not with a view to
their resale or distribution and upon each exercise of this Option, the Optionee
will furnish to the Company a written statement to that effect, satisfactory in
form and substance to the Company and its counsel. Optionee understands and
acknowledges that the shares to be acquired pursuant to this Option will be
"restricted securities" as such term is defined under the Securities Act of
1933, as amended (the "Act") and accordingly will bear a legend indicating such
restrictions.
9. Representations and Warranties of Optionee. As a condition to receipt
of the Option and for other good and valuable consideration, receipt of which is
hereby acknowledge, the Optionee represents and warrants to the Company as
follows:
(i) Optionee acknowledges that the Company is a development
stage
3
<PAGE>
company with no significant operating history and that there are significant
risks associated with the Company's business. Accordingly, the value of the
Option and the Option Shares will be based upon the Company's development of its
business which is subject to significant risks; and
(ii) Optionee understands that the Option and the Option
Shares (issuable upon exercise of the Option) are being offered and sold under
an exemption from registration provided by Section 4 of the Act and the
regulations promulgated thereunder, as well as applicable State law exemptions,
and warrants and represents that the Option and the Option Shares are being or
will be (in the case of the Option Shares) acquired by the undersigned solely
for the undersigned's own account, for investment purposes only, and are not
being purchased with the intent or view to resell the Option or the Option
Shares or for the resale, distribution, subdivision or fractionalization
thereof. Consequently, the undersigned must bear the economic risk of the
investment for an indefinite period of time because the Option and the Option
Shares cannot be resold or otherwise transferred unless subsequently registered
under the act and qualified under applicable State law or an opinion of
qualified counsel that indicates an exemption from registration and/or
qualification is available.
10. Notices. Any notice to be given under the terms of this Option shall
be in writing and addressed to the Company at the Company's then-present address
or to Optionee at the address provided herein, or at such other address as
either party may hereafter designate in writing to the other. Any notice or
other communication given hereunder shall have been deemed duly given when
enclosed in a properly sealed envelope addressed as aforesaid, registered or
certified, and deposited postage prepaid in a post office or branch post office
or, in person, when so delivered, or by Federal Express or similar overnight
courier providing evidence of receipt.
11. Representations of Company. The Company represents: (I) the execution,
delivery
4
<PAGE>
and performance of this Agreement has been duly authorized by the Board of
Directors of the Company; (ii) the consummation of the transactions contemplated
by this Agreement will not violate any provision of the Company's Certificate of
Incorporation or Bylaws; and (iii) no consent of any third party including,
without limitation, federal or state regulatory agencies is required for
execution and performance of this Agreement by the Company.
12. Governing Law. This Agreement shall be deemed to be made under and
shall be construed in accordance with the laws of the State of Delaware and
applicable Federal law without regard to conflict of law principles.
13. Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their legal successors and permitted
assigns.
14. Entire Understanding. This Agreement constitutes the entire
understanding of the parties and shall not be amended except by written
agreement between the parties.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the day and year first above written.
BIOCORAL, INC.
By: /s/ Nasser Nassiri
-------------------------------
Nasser Nassiri, Chairman
/s/ Jean-Louis Patat
-----------------------------------
Jean-Louis Patat, Optionee
5
STOCK OPTION AGREEMENT
AGREEMENT, dated as of October 1, 1997, by and between BioCoral,
Inc., a Delaware corporation with its principal place of business at 3, villa de
l'Industrie, Saint-Ouen, FRANCE (the "Company") and Alberto Jussman, with his
office c/o the Company (the "Optionee").
W I T N E S S E T H:
WHEREAS, on October 1, 1997, the Board of Directors of the Company
resolved to grant an option (the "Option") to the Optionee for the purchase of
up to 15,000 shares of the Company's common stock, par value $.001 per share
(the "Common Stock") at a strike price of $2.875 (US) per share on the terms and
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the parties hereto agree as follows:
1. Grant of Option. Subject to all the terms and conditions hereof, the
Company hereby grants to Optionee the right to purchase all or any part of an
aggregate of 15,000 shares of Common Stock of the Company (the "Option Shares")
at an exercise price of $2.875 per share, on the terms and conditions set forth
in this Agreement.
2. Exercisability of Option. The Option Shares subject to the Option shall
become purchasable beginning at any time and from time to time beginning on the
date hereof and for a period of 60 months thereafter, and after the expiration
date (the "Expiration Date"), this option and all rights hereunder shall expire
and any Option Shares not purchased on or before the Expiration Date may not
thereafter be purchased hereunder. In the event Optionee fails to exercise the
option on or prior to the Expiration Date, then the Option as to all Option
Shares not exercised shall expire and Optionee shall have no rights with respect
to such remainder of the Option or the Option Shares.
3. Consideration for Grant of Option. The consideration for grant of the
Option is $10, the receipt of which is hereby acknowledged, and Optionee's past
services.
<PAGE>
4. Method of Exercise of Option; Payment of Option Purchase Price. This
Option shall be exercisable at any time and from time to time, prior to the
Expiration Date, by written notice (the "Notice") to the Company at its office,
presently located at 3, villa de l'Industrie, 93400 Saint-Ouen, FRANCE. The
Notice shall state the Optionee's election to exercise this Option and the
number of Option Shares in respect of which it is being exercised, and shall be
accompanied by a check in the amount of the Exercise Price. Upon payment of the
full purchase price of the Option Shares by Optionee, the Company shall deliver
a certificate or certificates representing those shares. A certificate or
certificates for the shares as to which this Option shall have been so exercised
shall be registered in the name of the Optionee and shall be delivered to
Optionee at the address of Optionee specified in the Notice or at such other
address as Optionee shall set forth in its Notice.
5. Non-Assignability of Option. This Option may be exercised only by the
Optionee and shall not be sold, transferred, assigned, pledged, hypothecated or
otherwise disposed of in any way (whether by operation of law or
otherwise)without the Company's prior written consent except that Optionee may,
solely in connection with a transfer of all or substantially all of his assets
to an entity or entities controlled by Optionee ("Affiliate"), sell, transfer or
assign all its interest in this Agreement to such Affiliate but only after
giving the Company at least thirty days notice in writing of the proposed sale,
transfer or assignment. Any buyer, transferee, or assignee of this Option shall
be bound by and subject to each and every provision of this Agreement and shall
not sell, transfer, assign, pledge, hypothecate or otherwise dispose of the
Option in any way (whether by operation of law or otherwise).
6. Adjustments to Preserve Option Benefits.
If the outstanding shares of the Company's Common Stock are
exchanged for a different number or kind of shares or securities of the Company
through stock splits, reverse stock
2
<PAGE>
splits, stock dividends, recapitalization or other changes in the stock of the
Company, an appropriate and proportionate adjustment shall be made in the number
and kind of shares issued upon any subsequent exercise of this Option without
any change in the aggregate purchase price to be paid for such shares. For any
and all such purposes, but only for such purposes, Optionee shall be considered
to be a shareholder of record of the Company as of the date of this Option
Agreement. Nothing in this Agreement shall preclude the Corporation from issuing
additional shares of Common Stock to any third party.
7. Limitation of Optionee's Rights. Except as otherwise provided in
Section 6 above, Optionee shall not have any of the rights or privileges of a
shareholder of the Company in respect of any Option Shares issuable upon
exercise of this Option unless and until those shares have been paid for in full
and upon such payment in full Optionee shall be deemed to be the record holder.
8. Purchase for Investment. The Optionee represents and agrees that if the
Optionee exercises this Option in whole or in part then those Option Shares so
acquired will be acquired for the purpose of investment and not with a view to
their resale or distribution and upon each exercise of this Option, the Optionee
will furnish to the Company a written statement to that effect, satisfactory in
form and substance to the Company and its counsel. Optionee understands and
acknowledges that the shares to be acquired pursuant to this Option will be
"restricted securities" as such term is defined under the Securities Act of
1933, as amended (the "Act") and accordingly will bear a legend indicating such
restrictions.
9. Representations and Warranties of Optionee. As a condition to receipt
of the Option and for other good and valuable consideration, receipt of which is
hereby acknowledge, the Optionee represents and warrants to the Company as
follows:
(i) Optionee acknowledges that the Company is a development
stage
3
<PAGE>
company with no significant operating history and that there are significant
risks associated with the Company's business. Accordingly, the value of the
Option and the Option Shares will be based upon the Company's development of its
business which is subject to significant risks; and
(ii) Optionee understands that the Option and the Option
Shares (issuable upon exercise of the Option) are being offered and sold under
an exemption from registration provided by Section 4 of the Act and the
regulations promulgated thereunder, as well as applicable State law exemptions,
and warrants and represents that the Option and the Option Shares are being or
will be (in the case of the Option Shares) acquired by the undersigned solely
for the undersigned's own account, for investment purposes only, and are not
being purchased with the intent or view to resell the Option or the Option
Shares or for the resale, distribution, subdivision or fractionalization
thereof. Consequently, the undersigned must bear the economic risk of the
investment for an indefinite period of time because the Option and the Option
Shares cannot be resold or otherwise transferred unless subsequently registered
under the act and qualified under applicable State law or an opinion of
qualified counsel that indicates an exemption from registration and/or
qualification is available.
10. Notices. Any notice to be given under the terms of this Option shall
be in writing and addressed to the Company at the Company's then-present address
or to Optionee at the address provided herein, or at such other address as
either party may hereafter designate in writing to the other. Any notice or
other communication given hereunder shall have been deemed duly given when
enclosed in a properly sealed envelope addressed as aforesaid, registered or
certified, and deposited postage prepaid in a post office or branch post office
or, in person, when so delivered, or by Federal Express or similar overnight
courier providing evidence of receipt.
11. Representations of Company. The Company represents: (I) the execution,
delivery
4
<PAGE>
and performance of this Agreement has been duly authorized by the Board of
Directors of the Company; (ii) the consummation of the transactions contemplated
by this Agreement will not violate any provision of the Company's Certificate of
Incorporation or Bylaws; and (iii) no consent of any third party including,
without limitation, federal or state regulatory agencies is required for
execution and performance of this Agreement by the Company.
12. Governing Law. This Agreement shall be deemed to be made under and
shall be construed in accordance with the laws of the State of Delaware and
applicable Federal law without regard to conflict of law principles.
13. Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their legal successors and permitted
assigns.
14. Entire Understanding. This Agreement constitutes the entire
understanding of the parties and shall not be amended except by written
agreement between the parties.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the day and year first above written.
BIOCORAL, INC.
By: /s/ Nasser Nassiri
------------------------------
Nasser Nassiri, Chairman
/s/ Alberto Jussman
----------------------------------
Alberto Jussman, Optionee
5
STOCK OPTION AGREEMENT
AGREEMENT, dated as of October 1, 1997, by and between BioCoral,
Inc., a Delaware corporation with its principal place of business at 3, villa de
l'Industrie, Saint-Ouen, FRANCE (the "Company") and Rosy Eloy, with her office
c/o the Company (the "Optionee").
W I T N E S S E T H:
WHEREAS, on October 1, 1997, the Board of Directors of the Company
resolved to grant an option (the "Option") to the Optionee for the purchase of
up to 10,000 shares of the Company's common stock, par value $.001 per share
(the "Common Stock") at a strike price of $2.875 (US) per share on the terms and
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the parties hereto agree as follows:
1. Grant of Option. Subject to all the terms and conditions hereof, the
Company hereby grants to Optionee the right to purchase all or any part of an
aggregate of 10,000 shares of Common Stock of the Company (the "Option Shares")
at an exercise price of $2.875 per share, on the terms and conditions set forth
in this Agreement.
2. Exercisability of Option. The Option Shares subject to the Option shall
become purchasable beginning at any time and from time to time beginning on the
date hereof and for a period of 60 months thereafter, and after the expiration
date (the "Expiration Date"), this option and all rights hereunder shall expire
and any Option Shares not purchased on or before the Expiration Date may not
thereafter be purchased hereunder. In the event Optionee fails to exercise the
option on or prior to the Expiration Date, then the Option as to all Option
Shares not exercised shall expire and Optionee shall have no rights with respect
to such remainder of the Option or the Option Shares.
3. Consideration for Grant of Option. The consideration for grant of the
Option is $10, the receipt of which is hereby acknowledged, and Optionee's past
services.
<PAGE>
4. Method of Exercise of Option; Payment of Option Purchase Price. This
Option shall be exercisable at any time and from time to time, prior to the
Expiration Date, by written notice (the "Notice") to the Company at its office,
presently located at 3, villa de l'Industrie, 93400 Saint-Ouen, FRANCE. The
Notice shall state the Optionee's election to exercise this Option and the
number of Option Shares in respect of which it is being exercised, and shall be
accompanied by a check in the amount of the Exercise Price. Upon payment of the
full purchase price of the Option Shares by Optionee, the Company shall deliver
a certificate or certificates representing those shares. A certificate or
certificates for the shares as to which this Option shall have been so exercised
shall be registered in the name of the Optionee and shall be delivered to
Optionee at the address of Optionee specified in the Notice or at such other
address as Optionee shall set forth in its Notice.
5. Non-Assignability of Option. This Option may be exercised only by the
Optionee and shall not be sold, transferred, assigned, pledged, hypothecated or
otherwise disposed of in any way (whether by operation of law or
otherwise)without the Company's prior written consent except that Optionee may,
solely in connection with a transfer of all or substantially all of his assets
to an entity or entities controlled by Optionee ("Affiliate"), sell, transfer or
assign all its interest in this Agreement to such Affiliate but only after
giving the Company at least thirty days notice in writing of the proposed sale,
transfer or assignment. Any buyer, transferee, or assignee of this Option shall
be bound by and subject to each and every provision of this Agreement and shall
not sell, transfer, assign, pledge, hypothecate or otherwise dispose of the
Option in any way (whether by operation of law or otherwise).
6. Adjustments to Preserve Option Benefits.
If the outstanding shares of the Company's Common Stock are
exchanged for a different number or kind of shares or securities of the Company
through stock splits, reverse stock
2
<PAGE>
splits, stock dividends, recapitalization or other changes in the stock of the
Company, an appropriate and proportionate adjustment shall be made in the number
and kind of shares issued upon any subsequent exercise of this Option without
any change in the aggregate purchase price to be paid for such shares. For any
and all such purposes, but only for such purposes, Optionee shall be considered
to be a shareholder of record of the Company as of the date of this Option
Agreement. Nothing in this Agreement shall preclude the Corporation from issuing
additional shares of Common Stock to any third party.
7. Limitation of Optionee's Rights. Except as otherwise provided in
Section 6 above, Optionee shall not have any of the rights or privileges of a
shareholder of the Company in respect of any Option Shares issuable upon
exercise of this Option unless and until those shares have been paid for in full
and upon such payment in full Optionee shall be deemed to be the record holder.
8. Purchase for Investment. The Optionee represents and agrees that if the
Optionee exercises this Option in whole or in part then those Option Shares so
acquired will be acquired for the purpose of investment and not with a view to
their resale or distribution and upon each exercise of this Option, the Optionee
will furnish to the Company a written statement to that effect, satisfactory in
form and substance to the Company and its counsel. Optionee understands and
acknowledges that the shares to be acquired pursuant to this Option will be
"restricted securities" as such term is defined under the Securities Act of
1933, as amended (the "Act") and accordingly will bear a legend indicating such
restrictions.
9. Representations and Warranties of Optionee. As a condition to receipt
of the Option and for other good and valuable consideration, receipt of which is
hereby acknowledge, the Optionee represents and warrants to the Company as
follows:
(i) Optionee acknowledges that the Company is a development
stage
3
<PAGE>
company with no significant operating history and that there are significant
risks associated with the Company's business. Accordingly, the value of the
Option and the Option Shares will be based upon the Company's development of its
business which is subject to significant risks; and
(ii) Optionee understands that the Option and the Option
Shares (issuable upon exercise of the Option) are being offered and sold under
an exemption from registration provided by Section 4 of the Act and the
regulations promulgated thereunder, as well as applicable State law exemptions,
and warrants and represents that the Option and the Option Shares are being or
will be (in the case of the Option Shares) acquired by the undersigned solely
for the undersigned's own account, for investment purposes only, and are not
being purchased with the intent or view to resell the Option or the Option
Shares or for the resale, distribution, subdivision or fractionalization
thereof. Consequently, the undersigned must bear the economic risk of the
investment for an indefinite period of time because the Option and the Option
Shares cannot be resold or otherwise transferred unless subsequently registered
under the act and qualified under applicable State law or an opinion of
qualified counsel that indicates an exemption from registration and/or
qualification is available.
10. Notices. Any notice to be given under the terms of this Option shall
be in writing and addressed to the Company at the Company's then-present address
or to Optionee at the address provided herein, or at such other address as
either party may hereafter designate in writing to the other. Any notice or
other communication given hereunder shall have been deemed duly given when
enclosed in a properly sealed envelope addressed as aforesaid, registered or
certified, and deposited postage prepaid in a post office or branch post office
or, in person, when so delivered, or by Federal Express or similar overnight
courier providing evidence of receipt.
11. Representations of Company. The Company represents: (I) the execution,
delivery
4
<PAGE>
and performance of this Agreement has been duly authorized by the Board of
Directors of the Company; (ii) the consummation of the transactions contemplated
by this Agreement will not violate any provision of the Company's Certificate of
Incorporation or Bylaws; and (iii) no consent of any third party including,
without limitation, federal or state regulatory agencies is required for
execution and performance of this Agreement by the Company.
12. Governing Law. This Agreement shall be deemed to be made under and
shall be construed in accordance with the laws of the State of Delaware and
applicable Federal law without regard to conflict of law principles.
13. Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their legal successors and permitted
assigns.
14. Entire Understanding; Masculine / Feminine. This Agreement constitutes
the entire understanding of the parties and shall not be amended except by
written agreement between the parties. As used herein, the masculine form shall
include the feminine and vice-versa as the context shall require.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the day and year first above written.
BIOCORAL, INC.
By: /s/ Nasser Nassiri
-------------------------------
Nasser Nassiri, Chairman
/s/ Rosy Eloy
-----------------------------------
Rosy Eloy, Optionee
5
STOCK OPTION AGREEMENT
AGREEMENT, dated as of February 3, 1998, by and between BioCoral,
Inc., a Delaware corporation with its principal place of business at 3, villa de
l'Industrie, Saint-Ouen, FRANCE (the "Company") and Jean Darondel, with his
office c/o the Company (the "Optionee").
W I T N E S S E T H:
WHEREAS, on February 3, 1998, the Board of Directors of the Company
resolved to grant an option (the "Option") to the Optionee for the purchase of
up to 200,000 shares of the Company's common stock, par value $.001 per share
(the "Common Stock") at a strike price of $3.25 (US) per share on the terms and
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the parties hereto agree as follows:
1. Grant of Option. Subject to all the terms and conditions hereof, the
Company hereby grants to Optionee the right to purchase all or any part of an
aggregate of 200,000 shares of Common Stock of the Company (the "Option Shares")
at an exercise price of $3.25 per share, on the terms and conditions set forth
in this Agreement.
2. Exercisability of Option. The Option Shares subject to the Option shall
become purchasable beginning at any time and from time to time beginning on the
date hereof and for a period of 60 months thereafter, and after the expiration
date (the "Expiration Date"), this option and all rights hereunder shall expire
and any Option Shares not purchased on or before the Expiration Date may not
thereafter be purchased hereunder. In the event Optionee fails to exercise the
option on or prior to the Expiration Date, then the Option as to all Option
Shares not exercised shall expire and Optionee shall have no rights with respect
to such remainder of the Option or the Option Shares.
3. Consideration for Grant of Option. The consideration for grant of the
Option is $10, the receipt of which is hereby acknowledged.
<PAGE>
4. Method of Exercise of Option; Payment of Option Purchase Price. This
Option shall be exercisable at any time and from time to time, prior to the
Expiration Date, by written notice (the "Notice") to the Company at its office,
presently located at 3, villa de l'Industrie, 93400 Saint-Ouen, FRANCE. The
Notice shall state the Optionee's election to exercise this Option and the
number of Option Shares in respect of which it is being exercised, and shall be
accompanied by a check in the amount of the Exercise Price. Upon payment of the
full purchase price of the Option Shares by Optionee, the Company shall deliver
a certificate or certificates representing those shares. A certificate or
certificates for the shares as to which this Option shall have been so exercised
shall be registered in the name of the Optionee and shall be delivered to
Optionee at the address of Optionee specified in the Notice or at such other
address as Optionee shall set forth in its Notice.
5. Non-Assignability of Option. This Option may be exercised only by the
Optionee and shall not be sold, transferred, assigned, pledged, hypothecated or
otherwise disposed of in any way (whether by operation of law or
otherwise)without the Company's prior written consent except that Optionee may,
solely in connection with a transfer of all or substantially all of his assets
to an entity or entities controlled by Optionee ("Affiliate"), sell, transfer or
assign all its interest in this Agreement to such Affiliate but only after
giving the Company at least thirty days notice in writing of the proposed sale,
transfer or assignment. Any buyer, transferee, or assignee of this Option shall
be bound by and subject to each and every provision of this Agreement and shall
not sell, transfer, assign, pledge, hypothecate or otherwise dispose of the
Option in any way (whether by operation of law or otherwise).
6. Adjustments to Preserve Option Benefits.
If the outstanding shares of the Company's Common Stock are
exchanged for a different number or kind of shares or securities of the Company
through stock splits, reverse stock
2
<PAGE>
splits, stock dividends, recapitalization or other changes in the stock of the
Company, an appropriate and proportionate adjustment shall be made in the number
and kind of shares issued upon any subsequent exercise of this Option without
any change in the aggregate purchase price to be paid for such shares. For any
and all such purposes, but only for such purposes, Optionee shall be considered
to be a shareholder of record of the Company as of the date of this Option
Agreement. Nothing in this Agreement shall preclude the Corporation from issuing
additional shares of Common Stock to any third party.
7. Limitation of Optionee's Rights. Except as otherwise provided in
Section 6 above, Optionee shall not have any of the rights or privileges of a
shareholder of the Company in respect of any Option Shares issuable upon
exercise of this Option unless and until those shares have been paid for in full
and upon such payment in full Optionee shall be deemed to be the record holder.
8. Purchase for Investment. The Optionee represents and agrees that if the
Optionee exercises this Option in whole or in part then those Option Shares so
acquired will be acquired for the purpose of investment and not with a view to
their resale or distribution and upon each exercise of this Option, the Optionee
will furnish to the Company a written statement to that effect, satisfactory in
form and substance to the Company and its counsel. Optionee understands and
acknowledges that the shares to be acquired pursuant to this Option will be
"restricted securities" as such term is defined under the Securities Act of
1933, as amended (the "Act") and accordingly will bear a legend indicating such
restrictions.
9. Representations and Warranties of Optionee. As a condition to receipt
of the Option and for other good and valuable consideration, receipt of which is
hereby acknowledge, the Optionee represents and warrants to the Company as
follows:
(i) Optionee acknowledges that the Company is a development
stage
3
<PAGE>
company with no significant operating history and that there are significant
risks associated with the Company's business. Accordingly, the value of the
Option and the Option Shares will be based upon the Company's development of its
business which is subject to significant risks; and
(ii) Optionee understands that the Option and the Option
Shares (issuable upon exercise of the Option) are being offered and sold under
an exemption from registration provided by Section 4 of the Act and the
regulations promulgated thereunder, as well as applicable State law exemptions,
and warrants and represents that the Option and the Option Shares are being or
will be (in the case of the Option Shares) acquired by the undersigned solely
for the undersigned's own account, for investment purposes only, and are not
being purchased with the intent or view to resell the Option or the Option
Shares or for the resale, distribution, subdivision or fractionalization
thereof. Consequently, the undersigned must bear the economic risk of the
investment for an indefinite period of time because the Option and the Option
Shares cannot be resold or otherwise transferred unless subsequently registered
under the act and qualified under applicable State law or an opinion of
qualified counsel that indicates an exemption from registration and/or
qualification is available.
10. Notices. Any notice to be given under the terms of this Option shall
be in writing and addressed to the Company at the Company's then-present address
or to Optionee at the address provided herein, or at such other address as
either party may hereafter designate in writing to the other. Any notice or
other communication given hereunder shall have been deemed duly given when
enclosed in a properly sealed envelope addressed as aforesaid, registered or
certified, and deposited postage prepaid in a post office or branch post office
or, in person, when so delivered, or by Federal Express or similar overnight
courier providing evidence of receipt.
11. Representations of Company. The Company represents: (I) the execution,
delivery
4
<PAGE>
and performance of this Agreement has been duly authorized by the Board of
Directors of the Company; (ii) the consummation of the transactions contemplated
by this Agreement will not violate any provision of the Company's Certificate of
Incorporation or Bylaws; and (iii) no consent of any third party including,
without limitation, federal or state regulatory agencies is required for
execution and performance of this Agreement by the Company.
12. Governing Law. This Agreement shall be deemed to be made under and
shall be construed in accordance with the laws of the State of Delaware and
applicable Federal law without regard to conflict of law principles.
13. Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their legal successors and permitted
assigns.
14. Entire Understanding; Masculine / Feminine. This Agreement constitutes
the entire understanding of the parties and shall not be amended except by
written agreement between the parties. As used herein, the masculine form shall
include the feminine and vice-versa as the context shall require.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the day and year first above written.
BIOCORAL, INC.
By: /s/ Nasser Nassiri
-----------------------------
Nasser Nassiri, Chairman
/s/ Jean Darondel
---------------------------------
Jean Darondel, Optionee
5
Exhibit 21
LIST OF SUBSIDIARIES
1. Inoteb S.A.
2. 3H Human Health Hightech, Plc
3. Cabestan, Inc.
4. IMMO-Distribution Ltd.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BIOCORAL
INC. AND SUBSIDIARIES AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 506,930
<SECURITIES> 0
<RECEIVABLES> 350,500
<ALLOWANCES> 245,900
<INVENTORY> 177,500
<CURRENT-ASSETS> 1,314,030
<PP&E> 258,553
<DEPRECIATION> 149,500
<TOTAL-ASSETS> 1,611,765
<CURRENT-LIABILITIES> 1,397,938
<BONDS> 1,254,511
0
0
<COMMON> 7,697
<OTHER-SE> (241,745)
<TOTAL-LIABILITY-AND-EQUITY> 1,611,765
<SALES> 526,900
<TOTAL-REVENUES> 610,701
<CGS> 172,400
<TOTAL-COSTS> 172,400
<OTHER-EXPENSES> 3,598,919
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 49,888
<INCOME-PRETAX> (3,190,506)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,190,506)
<DISCONTINUED> (188,058)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,378,564)
<EPS-PRIMARY> (.44)
<EPS-DILUTED> 0
</TABLE>
