<PAGE> 1
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
---------------------- ---------------------
Commission file number 0-30256
ADVANCED PLANT PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
Delaware 59-2762023
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
43 West 33rd Street
New York, New York 10001
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 695-3334
<TABLE>
<CAPTION>
Title of Class Exchange on Which Registered
-------------- ----------------------------
<S> <C> <C>
Securities registered pursuant N/A
to Section 12(b) of the Act:
Securities registered pursuant Common Stock Over-the-counter bulletin board
to Section 12(g) of the Act: $.007 Par Value
</TABLE>
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
----- ------
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-B ss.228.405 of this chapter is not contained herein,
and will not be contained, to the best of Registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-KSB or any amendment to this Form 10-KSB
-----
----------------------------------
The number of shares outstanding of the Registrant's common stock is
108,499,506 (as of March 23, 2000). The aggregate market value of the voting
stock held by nonaffiliates of the Registrant was approximately $ 37,741,277
(as of March 24, 2000, based upon a closing price of the Company's Common Stock
on the over-the-counter bulletin board on such date of $0.45.
DOCUMENTS INCORPORATED BY REFERENCE
None.
===============================================================================
<PAGE> 2
ADVANCED PLANT PHARMACEUTICALS, INC.
INDEX TO ANNUAL REPORT ON FORM 10-KSB
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
ITEMS IN FORM 10-KSB
-------------------- Page
Facing page ----
<S> <C>
Part I
- ------
Item 1. Business........................................................... 3
Item 2. Properties......................................................... 6
Item 3. Legal Proceedings.................................................. 6
Item 4. Submission of Matters to Vote of Security Holders.................. None
Part II
- -------
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters................................................ 7
Item 6. Management's Discussion and Analysis
or Plan of Operations.............................................. 8
Item 7. Financial Statements............................................... 9
Item 8. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure............................. N/A
Part III
- --------
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance With Section 16(a) of the Exchange Act................. 10
Item 10. Executive Compensation............................................. 11
Item 11. Security Ownership of Certain Beneficial Owners
and Management..................................................... 14
Item 12. Certain Relationships and Related Transactions..................... 15
Item 13. Exhibits, and Reports on Form 8-K.................................. 17
Signatures............................................................................... 19
</TABLE>
<PAGE> 3
PART I.
ITEM 1. BUSINESS
DESCRIPTION OF BUSINESS.
Business development. Our company was incorporated in the State of
Delaware in1986, under the name Ventra Management, Inc. ("Ventra"). On July 20,
1994, we amended Ventra's Certificate of Incorporation to change our name to
Advanced Plant Pharmaceuticals, Inc.
Business of the Company; principal products and services. We are a
development stage company that utilizes whole plants to develop all natural
dietary supplements. We have what we believe is a unique thirteen step process
(the "Process") utilizing whole plants for the production of dietary
supplements. We believe that our Process will (i) preserve, in the dietary
supplements produced with such Process, virtually the whole of the natural
ingredients found in the plant and (ii) will result in all of the dietary
supplements produced with such Process using the same plants in the same
proportions, having near identical ingredient formulations. We believe that the
current technology used by other producers of dietary supplements extracts
natural ingredients and nutrients from a plant through an extraction process
using alcohol which, we believe, changes the chemical formation of the plant
and destroys many of the natural ingredients the plant has to offer. Our
Process however, utilizes the whole plant without the use of alcohol and allows
the use of nearly the whole of the natural ingredients available from the
plant.
We have applied our Process to manufacture garlic in the form of a
dietary supplement. According to Paavo Airola, P.H.D., author of The Miracle of
Garlic, Garlic is believed to have preventive and/or therapeutic benefits in the
treatment of high blood pressure, atherosclerosis, tuberculosis, arthritis and
cancer. We hope to expand our product line, using the Process, to produce
dietary supplements from herbs such as St. John's Wort, Kava Kava, Ginko Biloba
and Echinacea. While we hope to apply for a patent on our Process, we, as of
the date of this report, do not have the necessary funds to make or prosecute
any patent application.
We have also developed two dietary supplements, Lo-Chol and
Perthon/Abavca (the latter hereafter referred to as "ACA"), which are comprised
of several specific botanical components. The labels for our products contain
statutory disclaimers in accordance with the requirements of the Federal Food,
Drug and Cosmetic Act, as amended by the Dietary Supplement Health and
Education Act of 1994, stating that the products have not been evaluated by the
Food and Drug Administration ("FDA") and that the products are not intended to
diagnose, treat, cure, or prevent diseases, and the label does not contain a
claim that the product will diagnose, mitigate, treat, cure, or prevent a
specific disease or class of disease.
<PAGE> 4
We believe that our patented, all natural, dietary supplement, Lo-Chol,
comprised of six specific botanical components, is a cholesterol lowering agent.
Our belief with respect to the cholesterol lowering qualities of Lo-Chol is
based on a study of four hundred people performed in Australia by several
physicians hired by the Company to do such study in 1990. Such study indicated
that when used in the context of good dietary practices, Lo-Chol not only
lowers total cholesterol and triglycerides, but also increases HDL (High
Density Lipoprotein which is health associated cholesterol) and balances the
proportion of HDL to LDL (Low Density Lipoprotein which is disease associated
cholesterol). Because we believe that Lo-Chol, as a dietary supplement, does
not need to be approved by the FDA, such studies performed with Lo-Chol were
not performed in accordance with FDA standards and therefore we cannot give any
assurance that this dietary supplement would receive FDA approval as an
effective treatment for high cholesterol. Furthermore, pursuant to the federal
statute referred to above, the label used for the Lo-Chol package cannot make a
claim that Lo-Chol lowers cholesterol or triglycerides.
We have also developed an all natural dietary supplement called ACA
which we believe is an immune system enhancer. We believe that ACA has the
ability to improve the quality of life of patients suffering from HIV-AIDS;
specifically, to reverse glandular swelling, promote weight gain, improve
response to skin hypersensitivity tests and increase the circulating
concentration of helper T cells (CD4-positive cells). Our belief with respect to
the therapeutic qualities of ACA is based on a limited study of fifteen patients
suffering from HIV-AIDS in Australia performed by several physicians that we
hired to do such study between 1989 and 1993. Such study of the effectiveness of
ACA was not performed in accordance with FDA standards and therefore we cannot
give any assurance that this dietary supplement would receive FDA approval as an
effective treatment for HIV-AIDS. Although we believe that ACA, as a dietary
supplement, does not need to be approved by the FDA, ACA has received from the
FDA the status of an investigational new drug ("IND") which permits us to
proceed with Phase I/II clinical trials. Furthermore, pursuant to the federal
statute referred to above, the label used for the ACA package cannot make a
claim that ACA is an effective treatment for HIV-AIDS.
We have also purchased the exclusive rights and interests to various
natural and herbal allergy and sinus formulations, which were developed by Dr.
Leonard Bielory, Director of Allergy and Immunology and Director of the Asthma
and Allergy Research Center at UMDNJ-New Jersey Medical School. We hope to
research such formulations so that when developed as herbal dietary
supplements, they may have a positive effect on bronchodilation, pulmonary
functions and antagonism of asthma mediators such as histamines. We believe
that our formulations will improve the symptoms seen in patients with allergic
rhinitis such as runny and watery noses, sneezing and itching. Dr. Bielory is
one of the two members of our Board of Directors and the owner of 630,000
shares of our common stock. In addition, in consideration of his selling us the
allergy and sinus formulations, we have agreed to grant to Dr. Bielory options
to purchase 18,000,000 shares of our common stock at an exercise price of one
thousandths of one cent per share, but only after our shareholders approve an
increase in the number of shares of our common stock we
<PAGE> 5
are authorized to issue. In addition we are obligated to pay to Dr. Bielory a
royalty of $.01 for each bottle of his allergy and nasal formulations we sell
and issue him up to 5,000,000 additional shares of our common stock for each
$20,000,000 of revenues we receive from the sale of such allergy and sinus
formulations.
Distribution of products. We intend to market and sell our dietary
supplements to customers in domestic and foreign markets. In June 1999, we
entered in to an exclusive distribution agreement with Ambar Pharmacies and
Health, Inc. ("Ambar") for the sale of our products in Israel. Such
distribution agreement is for a period of two years and requires Ambar to
purchase a minimum of $88,290 of the Company's products in the first two years.
On July 1, 1999, we entered into an exclusive distribution agreement with
Manayer Najd Trading & Medical Supplies Co. ("MNM") for the distribution of our
products in Saudi Arabia and with Manayer Egypt Trading & Medical Supplies Co.
("MEM") for the distribution of our products in Egypt. Each agreement is for a
period of five years from the date that MNM and/or MEM receives a registration
certificate from their respective countries. MNM has begun the application
process for such certificate in Saudi Arabia, but has not yet received
approval. MEM has begun the application process for such certificate in Egypt,
but has not yet received approval. Such distribution agreements commit MNM and
MEM to purchase products from us for not less than an aggregate of $4,681,140
in such five year period. The Lo-Chol and ACA capsules to be sold by such
distributors will be manufactured for us by third party manufacturers. In
November 1999, we entered into a six month agreement with Gold River Pharm,
Ltd. ("Gold River") in which we gave Gold River exclusive rights to distribute
our products in Hong Kong and in January, 2000 we entered into an agreement
with Santex S.A., a French corporation, in which Santex agreed to, on a best
efforts basis, introduce us to distributors in Europe and in Asia. We have has
also made minimal sales of our products over our Internet site at
http://www.Advanced Plant Pharm.com. We can give no assurance that profitable
operations can be attained through the commercial sale of our products. As of
March 27, 2000, we have not received any revenues as a result of any of those
agreements.
We maintain an Internet site at http://www.Advanced Plant Pharm.com for
access to information about us and for purchase of our products on-line. Our
products are also available for purchase on other web sites. Our sales to date
have been insignificant.
Sources of material. We use a raw material supplier located in
Brooklyn, New York, as our main supplier and source for the specific plants and
other ingredients used for manufacturing our dietary supplements. We believe
that there are many other suppliers from which we can purchase the plants and
other ingredients we need.
Patents and trademarks. We have a patent for our herbal composition,
Lo-Chol, patent No. 5,707,631, that was issued by the U.S. Patent Office to us
on January 13, 1998. Lo-Chol is patented as an all-natural, fully standardized,
dietary supplement comprised of 6
<PAGE> 6
specific botanical components to act synergistically to help maintain healthy
cholesterol levels.
Government regulations. In accordance with the Federal Food, Drug and
Cosmetic Act, as amended by the Dietary Supplement Health and Education Act of
1994 ("FD&C Act"), we believe that we meet specific requirements in labeling
our products. Specifically, the statute requires that dietary supplements be
labeled as such, that the dietary support claim be submitted to the FDA within
thirty days after its first use, that the labeling bear a
statutorily-prescribed disclaimer stating that the claim has not been evaluated
by the FDA and that the product is not intended to diagnose, treat, cure, or
prevent diseases, and that the labeling does not contain a claim that the
product will diagnose, mitigate, treat, cure, or prevent a specific disease or
class of disease.
Number of employees. We currently employ four full-time persons and we
employ one part time consultant. We believe that our relations with our
employees are satisfactory. None of our employees are represented by a union.
c) REPORTS TO SECURITY HOLDERS:
The Company is not currently subject to the reporting requirements of
Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended.
Since the effectiveness of our Form 10-SB, we have filed and will continue to
file annual and quarterly reports with the Securities and Exchange Commission
("SEC"). The public may read and copy any materials filed by us with the SEC at
the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C.
20549. The public may obtain information on the operation of the SEC's Public
Reference Room by calling the SEC at 1-800--SEC-0330. We are an electronic
filer and the SEC maintains an Internet site that contains reports, proxy and
information statements, and other information regarding issuers that file
electronically with the SEC, which may be viewed at http://www.sec.gov.
ITEM 2. PROPERTIES
We lease office space at 43 West 33rd Street, New York, New York 10001,
all of which we currently use as our principal executive offices. Our lease for
such premises expires on October 30, 2000. We pay base rent of $1,995 per
month.
ITEM 3. LEGAL PROCEEDINGS
There are presently no material pending legal proceedings to which we
are a party or to which any of our property is subject and, to the best of the
our knowledge, no such actions against us are contemplated or threatened.
<PAGE> 7
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
a. Market Information.
Our common stock is listed on the over-the-counter bulletin board
("OTCBB"), under the symbol "APPI". The following table sets forth the high and
low bid prices of our common stock for each of the following quarters:
<TABLE>
<CAPTION>
HIGH LOW
-------- -------
FISCAL YEAR ENDED DECEMBER 31, 1998
- -----------------------------------
<S> <C> <C>
First quarter............................................ $0.15 $0.0625
Second quarter........................................... $0.125 $0.0625
Third quarter............................................ $0.07 $0.03
Fourth quarter........................................... $0.0625 $0.02
FISCAL YEAR ENDED DECEMBER 31, 1999
- -----------------------------------
First quarter............................................ 0.125 0.025
Second quarter........................................... $.10 $.025
Third quarter............................................ $0.09 $.0625
Fourth quarter........................................... $.25 $.0625
</TABLE>
Such over-the-counter market quotations reflect interdealer prices,
without retail mark-up, mark-down or commission, and may not represent actual
transactions.
b. Holders
As of March 23, 2000, there were 338 record holders of our common
stock. To the best of our knowledge, such figure does not take into account
those stockholders whose certificates are held in the name of broker-dealers or
other nominees. We believe that there are more beneficial owners of our common
stock, most of whose shares are held in street name.
<PAGE> 8
c. Dividends
We have never paid cash dividends or made distributions on our common
stock, and we do not anticipate that we will pay cash dividends or make
distributions on our common stock in the foreseeable future.
We have sustained significant recurring operating losses and will not have
available retained earnings to pay out any dividends in the near future.
d. Recent Sale of Unregistered Securities
During the first two quarters of our 1999 fiscal year we issued shares
of our common stock for cash or services rendered to us and we granted options
to purchase our common stock for services rendered to us, absent registration
under the Securities Act of 1933, as amended, pursuant to exemptions provided by
Regulation D and pursuant to Section 4(2) of the Securities Act for
transactions by an issuer not involving a public offering. See Item 4 entitled
"Recent Sale of Unregistered Securities" in our Form 10SB dated July 23, 1999
which is filed with the SEC.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR
PLAN OF OPERATIONS
Plan of Operation.
(i) We believe that currently we have enough cash on hand to enable us to
operate until September 1, 2000. We have had minimal sales of our products and
have primarily financed our operations, research and development with the
proceeds of the sale of our common stock (See section entitled - "Recent Sales
of Unregistered Securities"). Should we aggressively expand manufacturing and
the distribution of our products, we may need additional funding for such
purposes. We may be materially adversely affected if we are unable to secure
sufficient funds to finance our manufacturing and distribution activities.
(ii) We intend to use our Process to expand our product line to include
herbal dietary supplements such as St. John's Wort, Kava Kava, Ginko Biloba and
Echinacea. We estimate that the initial production and preliminary marketing of
these four herbal products to potential domestic and international distributors
and wholesalers will cost approximately $60,000.
(iii) We do not expect to purchase or sell any manufacturing facilities
or significant equipment over the next twelve months.
(iv) We do not foresee any significant changes in the number of
employees we will employ over the next twelve months.
<PAGE> 9
ITEM 7. FINANCIAL STATEMENTS
Reference is made to the Financial Statements referred to in the
accompanying Index, setting forth the financial statements of Advanced Plant
Pharmaceuticals, Inc., together with the report of Michael C. Finkelstein & Co.
dated March 15, 2000.
<PAGE> 10
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS
OF THE REGISTRANT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth, as of the date of this filing, the
name, age and position of each of our executive officers and directors and the
terms of office of each executive officer and director.
<TABLE>
<CAPTION>
Name Age Position
------- ------- ------------
<S> <C> <C>
David Lieberman 37 President and Director
Dr. Leonard Bielory 45 Chairman and Scientific Director
Barry Clare 41 Chief Operating Officer
</TABLE>
David Lieberman, has served as our President since July 1, 1996 and is
a member of our Board of Directors since June 1996. Since 1991, he has worked
in the offices of the Chief Rabbi of Bnai Brak, Israel. He also serves as a
consultant for Osem Industries, Inc., an international food conglomerate
located in Israel.
Barry Clare has served as our Chief Operating officer since April 1998.
Mr. Clare served as the President of American Breaktime Industries, Inc., a
private company engaged in the vending and food service business in the New
York Metropolitan area for eight years until 1994. From 1994 to 1996, Mr. Clare
served as Vice President and as a Director of International Investment Banking
Corp., a privately held corporation, and from 1996 to 1998 served as Vice
President and as a Director for Venture Capital Stage, Inc. and Intermediaries,
Inc., two privately held companies that specialize in bridge funding and
mergers and acquisitions.
Leonard Bielory, M.D. has served as our Chairman since March 15, 2000.
Dr. Bielory is presently the Director of the Division of Allergy, Immunology
and Rheumatology and is the Director of the Division of Asthma and Allergy at
the New Jersey Medical School where he is also an Associate Professor of
Medicine, Pediatrics and Ophthalmology. Dr. Bielory serves as the Chairman of
the Board and President of the University Physician Associates - the New Jersey
Medical School Faculty Practice. Dr. Bielory currently serves as a consultant
on allergy and immunology to Newark Beth Israel Hospital, Newark, NJ, and to
Saint Barnabas Medical Center, Livingston, NJ.
<PAGE> 11
All directors hold office until the next annual meeting of shareholders
and the election and qualification of their successors. Our directors receive
no cash compensation for serving on the Board of Directors other than
reimbursement of reasonable expenses incurred in attending meetings.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
To the best of our knowledge, David Lieberman and Barry Clare,
individuals who are executive officers, directors and/or beneficial owners of
more than 10% of our common Stock, during the fiscal year ended December 31,
1999, have each untimely filed one report on Form 3. Such filings were required
because we became a reporting company.
ITEM 10. EXECUTIVE COMPENSATION
The following table sets forth certain summary information concerning
the compensation paid or accrued to our chief executive officer for each of the
last three fiscal years. We have not paid compensation to any other executive
officer or employee in excess of $100,000 on an annual basis.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL
COMPENSATION STOCK AWARDS
---------------- ----------------
RESTRICTED
STOCK
NAME AND SALARY AWARDS OPTIONS
PRINCIPAL POSITION YEAR ($) ($) (#)
---- --- --- ---
<S> <C> <C> <C> <C>
1999 135,000 (1) -- 750,000 (4)
DAVID LIEBERMAN 1998 135,000 (2) 50,000 (2) 0
CHIEF EXECUTIVE OFFICER,............. 1997 135,000 (3) -- 0
</TABLE>
(1) In 1999 we paid David Lieberman $19,000 and issued to him 17 million
shares of our common stock valued at $170,000. $135,000 of the
$170,000 was payment for his 1999 annual salary and the remaining
$35,000 together with the $19,000 was payment against accrued salary
payable to him from 1996.
(2) In lieu of salary owed pursuant to his employment agreement, David
Lieberman received 800,000 shares of our common stock valued at $.0625
per share. Such issuance of common stock was in addition to the $85,000
accrued (but not yet paid) salary.
(3) Of the $135,000 owed to Mr. David Lieberman, $55,000 was paid to him,
and the remainder of $80,000 accrued but not yet paid.
(4) Options to purchase 750,000 shares of common stock were granted to Mr.
Lieberman in June, 1999, pursuant to this employment agreement.
<PAGE> 12
The following table sets forth certain information regarding the
granting of options to our executive officers during the year ended December 31,
1999.
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
- ------------------------------------------------------------------------------------------------
Individual Grants
-----------------
---------------------------------------------------------------------------------------
(a) (b) (c) (d) (e)
Number of % of Total
Securities Options/SARs
Underlying Granted to Exercise
Options/SAR Employees in or Base Price Expiration
Name Granted (#) Fiscal Year (1) ($/Share) Date
---- ----------- --------------- --------- ----
<S> <C> <C> <C> <C>
David Lieberman 750,000 33.3% $.01 6/10/04
Barry Clare 750,000 33.3% $.02 6/10/04
</TABLE>
The following table sets forth certain information regarding options
exercised and exercisable during the fiscal year ended December 31, 1999 and
the value of the options held as of December 31, 1999 by the Executive
Officers.
<PAGE> 13
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUE
The following table sets forth certain information regarding options
exercisable during 1999 and the value of the options held as of December 31,
1999 by the Named Officers. None of the Named Officers exercised any options in
1999 nor did the Named Officers hold any options which were not exercisable at
December 31, 1999.
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED OPTIONS VALUE OF UNEXERCISED IN-THE-MONEY
AT OPTIONS
NAME FISCAL YEAR END AT FISCAL YEAR END (1)
- ---- --------------- ----------------------
<S> <C> <C>
David Lieberman 750,000 $86,250
Barry Clare 750,000 $78,750
</TABLE>
- ------------------
(1) The difference between (x) the product of the unexercised options and
the closing price of our common stock on December 31, 1999, as listed on
the OTC Bulletin Board, less (y) the product of the unexercised options
and the exercise price of such options.
Employment Agreements.
On June 10, 1999, we renewed an employment agreement to provide for the
continued employment of Mr. David Lieberman as the Company's president. The
employment agreement provides for employment on a full-time basis and contains
a provision that Mr. David Lieberman will not compete or engage in a business
competitive with our current or anticipated business until the expiration of
his agreement in June 2002. Pursuant to the agreement, we will pay Mr. David
Lieberman a base salary of $135,000 per annum and we have granted him a five
year option to purchase 750,000 shares of our common stock at an exercise price
of $.01 per share. During 1999, we issued Mr. Lieberman 17 million shares of
our common stock as partial payment against accrued salary payable to him.
On June 10, 1999, we entered into an employment agreement with Mr.
Barry Clare to serve as our Chief Operating Officer. Pursuant to the terms of
this agreement, we will pay Mr. Clare a base salary of $75,000 per annum and we
have granted him a five-year option to purchase 750,000 shares of our common
stock at an exercise price of $.02 per share.
On March 15,2000 we entered into an employment agreement with Dr.
Leonard Bielory to serve as our scientific director. Pursuant to the terms of
this agreement, we will pay to Dr. Bielory, on a monthly basis, the $126,000
that we owe to him for accrued consulting fees. This agreement is for a period
of two years and we will pay Dr. Bielory monthly compensation ranging from $500
to $2,500 per month depending upon our net profits. We have also granted Dr.
Bielory a five-year option to purchase 750,000
<PAGE> 14
shares of our common stock at an exercise price of $.4375 and upon signing of
his employment agreement we agreed to issue 225,000 restricted shares of our
common stock to him.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information, to the best of our
knowledge, as of March 23, 2000, with respect to each person known by us to own
beneficially more than five percent (5%) of our common stock, and the name and
shareholdings of each director, executive officer and all directors and
executive officers as a group.
<TABLE>
<CAPTION> Percent of Class
Title Of Name And Address Amount And Nature
Class Of Beneficial Owner Beneficial Owner (1) Of (1)
- --------- ----------------------- ------------------- ---------
<S> <C> <C> <C>
Common David Lieberman 24,000,000 (2) 18.1%
Stock 37 Harotem Street
Ashdod, Israel 77572
Common Barry Clare 750,000 (3) *
Stock 27 Curtis Place
Lynbrook, NY 11563
Common Dr. Leonard Bielory 1,380,000 (4) 1.25%
Stock 400 Mountain Avenue
Springfield, NY 07081
Common Officers and Directors 26,130,000 (2)(3)(4) 19.4%
Stock as a group (3 persons)
</TABLE>
* Represents less than 1% of our shares of common stock
outstanding.
(1) The number of Shares of Common Stock beneficially owned
by each person or entity is determined under the rules
promulgated by the Securities and Exchange Commission
(the "Commission"). Under such rules, beneficial
ownership includes any shares as to which the person or
entity has sole or shared voting power or investment
power. The percentage of the company's outstanding shares
is calculated by including among the shares owned by such
person any shares which such person or entity has the
right to acquire within 60 days after March 23, 2000. The
inclusion herein of any shares deemed beneficially owned
does not constitute an admission of beneficial ownership
of such shares.
(2) Does not include 1,950,000 shares which Mr. Lieberman has
the right to acquire upon exercise of stock options. On
February 17, 2000, Mr. Lieberman voluntarily agreed not to
exercise any of such options until that time that the
stockholders of the Company agree to increase the number
of shares of common stock that the Company is authorized
to issue.
<PAGE> 15
(3) Includes 750,000 shares which Mr. Clare has the right to
acquire upon exercise of stock options.
(4) Includes 750,000 shares which Dr. Bielory has the right
to acquire upon exercise of stock options.
On July 16, 1999, we entered into a Technology Purchase Agreement with
Mr. C.J. Lieberman whereby we acquired exclusive rights and interests to a
thirteen step process which utilizes virtually the whole of the nutrients found
in plants to manufacture herbal dietary supplements.
On February 28, 2000, we entered into an Asset Purchase Agreement with
Dr. Leonard Bielory whereby we acquired the exclusive rights and interests to
various allergy and sinus formulations. (See Section entitled "Certain
Relationships and Related Transactions").
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Except as set forth below, during the past two fiscal years, we have
had no transactions with any officer, director, or any shareholder owning
greater than five percent (5%) of our issued and outstanding shares, nor any
member of the above referenced individual's immediate family.
We had entered into a three year consulting agreement with Mr. C.J.
Lieberman, David Lieberman's brother, to provide consulting services to us with
regard to the acquisition of new pharmaceutical products and in the areas of
developing, manufacturing and marketing pharmaceutical products. On June 10,
1999, we entered into a new consulting agreement with C.J. Lieberman that
superseded his previous agreement which was scheduled to expire on December 31,
1999, for his continued consulting services. Pursuant to such agreement, we
agreed to pay C.J. Lieberman a consulting fee of $9,000 per month and have
granted him a five year option to purchase 750,000 shares of our Common Stock,
at an exercise price of $.02 per share. As of December 31, 1999, we were
indebted to Mr. C.J. Lieberman for $188,527 for consulting fees accrued but not
paid.
On July 16, 1999, we entered into a Technology Purchase Agreement with
Mr. C.J. Lieberman whereby we acquired exclusive rights and interests to a
thirteen step process which utilizes virtually the whole of the nutrients found
in plants to manufacture herbal dietary supplements. The purchase price for the
process, 18,000,000 shares of our common stock, is conditioned on our
stockholders voting in favor of increasing the number of shares we are
authorized to issue to 250,000,000 shares. In addition, we agree to pay to Mr.
C.J. Lieberman a royalty payment of $.01 per bottle with respect to each
product manufactured with the Process, one percent of our suggested retail
price of each product manufactured
<PAGE> 16
with the Process and ten percent of our net profits from the sale of products
manufactured with the Process (net profits to be determined by our independent
public accountants using generally accepted accounting principles). In the
event that we enter into an agreement with a third party for the sale of
products manufactured with the Process, which agreement unconditionally
provides for payment to us of not less than $20,000,000, we shall issue to Mr.
C.J. Lieberman up to twenty five million shares of our common stock at the rate
of five million shares for each $20,000,000 required to be paid to us pursuant
to such agreement.
On February 28, 2000, we entered into an Asset Purchase Agreement with
Dr. Leonard Bielory whereby we acquired the exclusive rights and interest to
allergy and sinus formulations. As consideration we will grant Dr. Bielory
options to purchase 18,000,000 shares of our common stock at an aggregate
exercise price of $180.00, that is, an exercise price of one thousandths of one
percent per share. Dr. Bielory's option is conditioned on our stockholders
voting to increase the number of shares we are authorized to issue to
250,000,000 shares. In addition, we have agreed to pay Dr. Bielory a royalty
payment of $.01 per bottle for each bottle using such formulations we acquired
from Dr. Bielory, one percent of our suggested retail price of each bottle
using such formulations and ten percent of our net profits from the sale of
products manufactured with the Assets (net profits to be determined by our
independent public accountants using generally accepted accounting principles).
In the event that we enter into an agreement with a third party for the sale of
products manufactured using such formulations, which agreement unconditionally
provides for payment to us of not less than $20,000,000, we shall issue to Dr.
Bielory up to twenty five million shares of our common stock at the rate of
five million shares for each $20,000,000 required to be paid to us pursuant to
such agreement.
<PAGE> 17
FORWARD LOOKING INFORMATION
MAY PROVE INACCURATE
This Annual Report on Form 10-K contains certain forward-looking
statements and information relating to the Company that are based on the
beliefs of management, as well as assumptions made by and information currently
available to us. When used in this document, the words "anticipate," "believe,"
"estimate," and "expect" and similar expressions, as they relate to us, are
intended to identify forward-looking statements. Such statements reflect our
current views with respect to future events and are subject to certain risks,
uncertainties and assumptions, including those described in this annual report
on Form 10-K. Should one or more of these risks or uncertainties materialize,
or should underlying assumptions prove incorrect, actual results may vary
materially from those described herein as anticipated, believed, estimated or
expected. We do not intend to update these forward-looking statements.
Item 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits and Index Required
<TABLE>
<CAPTION>
Exhibit Number
- --------------
<S> <C>
3.1.1 Articles of Incorporation of the Company, as amended (1)
3.2 By-Laws of the Company (1)
10.1 Employment Agreement by and between the Company and David Lieberman
(1)
10.2 Stock Option Agreement by and between the Company and David Lieberman
(1)
10.3 Employment Agreement by and between the Company and Barry Clare (1)
10.4 Stock Option Agreement by and between the Company and Barry Clare (1)
10.5 Employment Agreement by and between the Company and Dr. Bielory (*)
10.6 Distribution Agreement between the Company and Ambar Pharmacies and
Health, Inc. (*)
10.7 Distribution Agreement between the Company and Manayer Najd Trading &
Medical Supplies Co. (1)
</TABLE>
<PAGE> 18
<TABLE>
<S> <C>
10.8 Distribution Agreement between the Company and Manayer Egypt Trading &
Medical Supplies Co. (1)
10.9 Technology Purchase Agreement between the Company and C.J.
Lieberman (1)
10.10 Asset Purchase Agreement between the Company and Dr. Bielory (*)
27 Financial Data Schedule (*)
</TABLE>
- --------------
* Filed herewith.
(1) Filed as an Exhibit to the Company's Form 10-SB, dated July 23, 1999,
and incorporated herein by reference.
(b) REPORTS ON FORM 8-K.
The Company filed no Current Reports on Form 8-K during the fourth quarter of
fiscal year ended December 31, 1999.
<PAGE> 19
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
Dated: March 29, 2000 Advanced Plant Pharmaceuticals, Inc.
By:/s/ David Lieberman
-------------------
David Lieberman
President
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
Registrant and in the capacities and on the dates indicated.
Signature Title Date
/s/David Lieberman President and Chief March 29, 2000
- ------------------ Executive Officer
David Lieberman (Principal Executive
Officer)
/s/Leonard Bielory Chairman and Director March 29, 2000
- -------------------
Leonard Bielory
/s/Barry Clare Chief Operating March 29, 2000
- ------------------ Officer
Barry Clare
/s/David Lieberman (Principal Financial and March 29, 2000
- ------------------ Accounting Officer)
David Lieberman
<PAGE> 20
Table of Contents
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditor's Report F-2
Consolidated Balance Sheets F-3
Consolidated Statements of Operations F-4
Consolidated Statements of Cash Flows F-5
Consolidated Statements of Stockholders' Equity F-6
Notes to the Financial Statements F-7 - F-14
</TABLE>
<PAGE> 21
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
of Advanced Plant Pharmaceuticals, Inc.
We have audited the accompanying balance sheet of Advanced Plant
Pharmaceuticals, Inc. (the "Company") as of December 31, 1999, and the related
statements of operations, shareholders' equity and cash flows for each of the
two years in the period then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatements. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all respects, the financial position of Advanced Plant Pharmaceuticals, Inc. as
of December 31, 1999, and the results of their operations and their cash flows
for each of the two years then ended, in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 8 to the
financial statements, the Company has suffered recurring losses from operations
and has negative working capital that raises substantial doubt about the ability
to continue as a going concern. Management's plans in regard to these matters
are also described in Note 8. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
Michael C. Finkelstein, CPA
Morganville, New Jersey
March 15, 2000
F-2
<PAGE> 22
ADVANCED PLANT PHARMACEUTICALS, INC
BALANCE SHEET
AS OF DECEMBER 31, 1999
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Current assets:
Cash and cash equivalents $ 12,726
--------------
Total current assets 12,726
Other assets 9,228
--------------
$ 21,954
==============
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C>
Current Liabilities:
Accounts Payable $ 90,085
Accrued expenses payable 846,097
Loans payable 159,056
Due to distributor 103,500
--------------
Total current liabilities 1,198,738
--------------
Shareholders' Equity:
Common stock, $.0007 par value, 120,000,000
shares authorized and 108,499,506 shares issued 75,950
Capital in excess of par value 3,975,889
Accumulated deficit (5,183,443)
Treasury shares at cost (180)
Stock subscriptions receivable (45,000)
--------------
Total shareholders' equity (1,176,784)
--------------
$ 21,954
==============
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE> 23
ADVANCED PLANT PHARMACEUTICALS, INC.
STATEMENT OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
Net Sales $ 7,695 $ 157
Cost of goods sold 25,770 834
------------ ------------
Gross profit (18,075) (677)
------------ ------------
Operating expenses:
Research and development 31,222 24,428
General and administrative 804,033 521,456
------------ ------------
Total operating expenses 835,255 545,884
------------ ------------
Operating loss (853,330) (546,561)
Other expense (income) 2,440 75,000
------------ ------------
Loss before provision for income taxes (855,770) (621,561)
Provision for income taxes - -
------------ ------------
Net loss $ (855,770) $ (621,561)
============ ============
Loss per common share $ (0.01) $ (0.01)
============ ============
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE> 24
ADVANCED PLANT PHARMACEUTICALS, INC.
STATEMENT OF CASH FLOWS
FOR YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
-------------- --------------
Cash Flows from Operating Activites:
<S> <C> <C>
Net Loss from operations $ (855,770) $ (621,561)
Adjustments to reconcile net loss from
operations to net cash used by operating
activities:
Amortization expense 635 635
Compensation expense attributed to stock options 97,500 -
Services paid with common stock 365,799 214,716
Decrease in prepaid expenses 12,153 8,694
Decrease in accounts payable (64,203) (4,170)
Increase(decrease) in accrued expenses 38,942 165,219
Change in certain other assets and liabilities - (4,148)
-------------- --------------
Net cash used by operations (404,944) (240,615)
-------------- --------------
-------------- --------------
Cash Flows from Investing Activities: - -
-------------- --------------
Cash Flows from Financing Activities:
Proceeds from short-term loans payable 150,019 21,130
Payments on short-term loans payable (2,547) (5,099)
Net proceeds from issuance of common stock 266,000 148,448
Stock subscriptions collected - 77,650
-------------- --------------
Net cash provided by financing activities 413,472 242,129
-------------- --------------
Net increase in Cash and cash equivalents 8,528 1,514
Cash and cash equivalents at beginning of period 4,198 2,684
-------------- --------------
Cash and cash equivalents at end of period $ 12,726 $ 4,198
============== ==============
Supplemental Cash Flow Information:
Cash Paid During the Period for:
Interest - -
============== ==============
Income Taxes - -
============== ==============
Information about Noncash Activities:
Common stock issued to satisfy loans payable $ 51,600 $ 32,500
============== ==============
Common stock issued for services $ 365,799 $ 214,716
============== ==============
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE> 25
ADVANCED PLANT PHARMACEUTICALS, INC.
STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
Common Stock Capital Stock
Number of in excess of Accumulated Treasury Subscriptions
Shares Par Value Par Value Deficit Stock Receivable Total
-------------------------- ------------- ------------- ----------------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1997 43,935,918 30,755 2,868,855 (3,706,112) (180) (146,984) (953,666)
Issuance of common stock 10,849,639 7,595 388,069 395,664
Collected stock subscriptions 77,650 77,650
Cancelled stock subscriptions (138,882) (97) (69,237) 69,334 -
Net loss for period (621,561) (621,561)
-------------------------- ------------- ------------- ----------------------- -------------
Balance at December 31, 1998 54,646,675 38,253 3,187,687 (4,327,673) (180) - (1,101,913)
Issuance of common stock 53,852,831 37,697 690,702 (45,000) 683,399
Stock options granted below market 97,500 97,500
Net loss for period (855,770) (855,770)
-------------------------- ------------- ------------- ----------------------- -------------
Balance at December 31, 1999 108,499,506 75,950 3,975,889 (5,183,443) (180) (45,000) (1,176,784)
========================== ============= ============= ======================= =============
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE> 26
ADVANCED PLANT PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations:
Advanced Plant Pharmaceuticals, Inc. ("the Company" or "APPI") focuses on
the research and development of plant based dietary supplements. The Company
owns the rights to a process, which utilizes whole plants to manufacture all
natural dietary supplements. The Company intends to use this process to
manufacture products that it hopes to distribute worldwide through various
sales distribution contracts.
The Company expects, in the near term, to finance these efforts through the
sale of its common stock until such time as operations achieve a positive
cash flow. There is no guarantee that the Company will accomplish this goal.
See Note 8, "Financial Results and Liquidity."
Cash Equivalents:
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three months or
less to be cash equivalents.
Other Assets:
Other assets consist of patents and a security deposit.
Patents are amortized on a straight-line method over their economic lives
and are reviewed for impairment whenever the facts and circumstances
indicate that the carrying amount may not be recoverable.
Research & Development Costs:
Research and development costs are expensed as incurred.
Income Taxes:
APPI has incurred significant losses from operations. The Company has
elected not to record any tax benefits relating to potential net operating
loss carryforwards due to the uncertainty of realizing those benefits.
The Company intends to follow Statement of Financial Accounting Standards
No. 109 (SFAS 109), "Accounting for Income Taxes" when either operations
achieve profitability or the realization of net operating loss benefits can
more readily be measured, whichever comes first.
F-7
<PAGE> 27
ADVANCED PLANT PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
There were 5,500,000 and 1,900,000 common stock options outstanding as of
December 31, 1999 and 1998 respectively. As a result of the losses reported
in the periods presented these options, if exercised, would be antidilutive.
Accordingly, only Basic EPS is presented in these financial statements. The
weighted-average number of shares used in the computation of per share data
was 92,577,304 in 1999 and 47,986,030 in 1998.
Stock-Based Compensation:
APPI has satisfied various loans, trade payables, employee back-wages and
other liabilities through the issue of its common stock. The Company
accounts for such stock-based compensation using the fair-value method as
prescribed by SFAS No. 123, "Accounting for Stock-Based Compensation." The
Company has also issued stock options to key employees. As permissible under
SFAS No. 123, the Company accounts for stock options using the intrinsic
value method as prescribed under Accounting Principles Board Opinion No. 25
("APB No. 25"). All disclosures required by SFAS No. 123 are presented in
Note 4 "Stock Options."
Use of Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions. These estimates and assumptions affect the reported amounts of
assets and liabilities, the disclosure of contingent liabilities and the
reported amounts of revenues and expenses. Actual results could differ from
these estimates.
NOTE 2 RELATED-PARTIES TRANSACTIONS
On July 16, 1999, the Company entered into a Technology Purchase Agreement
with C.J. Lieberman (brother of the current President) whereby the Company
acquired exclusive rights and interests to a thirteen-step process, which
utilizes virtually the whole of the nutrients found in plants to manufacture
herbal dietary supplements. The purchase price for the process, 18,000,000
shares of the Company's common stock, is conditioned on the occurrence that
the stockholders of the Company vote in favor of increasing the number of
shares it is authorized to issue to 250,000,000 shares.
In addition, the Company agrees to pay to C.J. Lieberman a royalty payment
of $.01 per bottle with respect to each product manufactured with the
process, 1% (one percent) of the Company's suggested retail price of each
product manufactured with the process and 10% (ten percent) of the Company's
net profits from the sale of products manufactured with the process. In the
event that the Company enters into an agreement with a third party for the
sale of products manufactured with the process, which agreement
unconditionally provides for payment to the Company of not less than
$20,000,000 upon receipt by the Company of such $20,000,000 from such third
party, the Company shall issue to C.J. Lieberman five million shares for
each $20,000,000 paid to the Company, not to exceed twenty five million
shares.
F-8
<PAGE> 28
ADVANCED PLANT PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 2 RELATED-PARTIES TRANSACTIONS
(Continued)
During 1999, the Company issued 6.2 million shares of its common stock to
C.J. Lieberman. As partial payment against an accrued salary payable of
$311,597 which had been outstanding since his resignation as President in
1996. The stock was valued at $62,000.
Upon his resignation as President in 1996, the Company retained C.J.
Lieberman as a consultant. His consultant's agreement, which was for the
period July 30, 1996 to December 31, 1999, includes annual compensation of
$114,000, reimbursement of all direct expenses incurred while providing
services to the Company and options for the purchase of 600,000 shares of
the Company's common stock. On June 10, 1999, the Company entered into a new
consulting agreement with C.J. Lieberman that superseded his previous
agreement. The new agreement provides for monthly consulting fees of $9,000
and a five-year option to purchase 750,000 shares of the Company's common
stock at an exercise price of $.02 per share. The employment contract period
is through June 10, 2002.
Due to the absence of revenues, cash flow has been unpredictable and often
non-existent. As a result, C.J Lieberman frequently lent the Company funds
or directly paid expenses on behalf of the Company. These transactions were
accounted for in a loan account. When funds were available, Mr. Lieberman
would take advances against this loan account.
As of December 31, 1999 the loan account had a balance payable to Mr.
Lieberman of $5,619 as compared to a receivable balance due from Mr.
Lieberman of $12,153 at December 31, 1998. These balances are included in
"Loans Payable" and "Prepaid expenses and other current assets" at December
31, 1999 and 1998 respectively. The Company also has outstanding balances
due C.J. Lieberman of $438,128 and of $412,000 at December 31, 1999 and 1998
respectively. These balances represent unpaid salary during his term as
President as well as unpaid consulting fees and are included in "Accrued
expenses payable."
During 1999, the Company also issued the current President, David Lieberman,
17 million shares of its common stock as partial payment against accrued
salary payable to him. The shares were valued at $170,000. The Company owed
the President unpaid salary of $178,500 at December 31, 1999 and $232,500 at
December 31, 1998. These balances are included in "Accrued expenses
payable".
David Lieberman, has also lent the Company funds, or paid expenses on behalf
of the Company. The balance owed to David Lieberman relating to these
transactions was $4,783 at December 31, 1999 and 1998 and is included in
"Loans payable" on the balance sheet.
NOTE 3 CAPITAL STOCK
The Company is authorized to issue 120 million shares of it common stock,
par value $.0007 per share. The holders of common stock are entitled to one
vote for each share held on all matters to be voted on by stockholders.
F-9
<PAGE> 29
ADVANCED PLANT PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 3 CAPITAL STOCK
(Continued)
The Company is also authorized to issue 5 million shares of preferred stock,
par value $.0007 per share. There is currently no preferred stock
outstanding and the company has no current plans to issue preferred stock.
During 1999, the Company issued 32,034,650 shares of its common stock to
satisfy various liabilities of the Company as follows:
<TABLE>
<CAPTION>
# of Shares Fair Value Description
----------- ---------- -----------
<S> <C> <C>
6,200,000 $ 62,000 Partial payment of accrued salary payable
to CJ Lieberman from prior years for his
past service as President.
17,000,000 $ 170,000 Partial payment of accrued salary payable
to David Lieberman.
960,000 $ 9,600 Payment of 1st quarter wages to two
employees.
2,254,650 $ 49,198 Payment of expenses relating to
consulting and legal services.
4,120,000 $ 51,600 Payment for various loans.
1,500,000 $ 75,000 Payment of an out-of-court settlement for
a claim against the company (see further
discussion below).
</TABLE>
During April 1999, the Company issued 21,818,181 shares of its common stock
to three private investors for $300,000. After deducting commissions and
escrow fees of $34,000, the net cash proceeds from this private placement
were $266,000.
During June 1999, the Company entered into an out-of-court settlement for a
$75,000 claim against the Company. The claim represented lost profits
incurred by an investor due to an unusual delay by the company in issuing
common stock purchased by that investor. This settlement was reserved for
during 1998 and is included in "Other expense" and "Accrued expenses
payable" in the 1998 financial statements.
NOTE 4 STOCK OPTIONS
In accordance with various employment and consulting contracts the Company
has in prior years issued stock options to its President, its two employees
and a key consultant.
F-10
<PAGE> 30
ADVANCED PLANT PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 4 STOCK OPTIONS
(Continued)
On June 10, 1999 the Company entered into new employment agreements with the
President and two employees and a new consulting contract with a key
consultant. Pursuant to these agreements, the Company granted each of these
individuals options to purchase 750,000 shares of the Company's common
stock. These options, which expire on June 10, 2004, have a weighted average
exercise price of approximately $.02, which was below the then current
market price for the stock. The Company recorded compensation expense of
$97,500 in 1999 to recognize the intrinsic value of these options as defined
in APB No. 25.
During June 1999, the Company agreed to cancel a prior stock option
agreement, that granted 400,000 options to an employee in 1997, and replace
it with a new option agreement. Pursuant to the new option agreement, the
Company replaced the 400,000 cancelled options with 1,000,000 options to
purchase common stock at $.05 per share. The new options expire on June 30,
2002. There was no compensation costs attributed to these options since the
exercise price equaled the market price as of the grant date.
The weighted average fair value of all options granted in 1999 was $.05 per
option share. The fair value of options granted in 1999 was estimated using
the Black-Scholes option pricing model with the following assumptions:
risk-free interest rate of 5.61%, expected option life of 4.4 years,
expected dividend yield of zero and expected volatility of 160.86%.
Had compensation expense been recognized using the fair value method
prescribed in SFAS No. 123, the Company's net loss would have increased by
$52,599 in 1999 and $25,265 in 1998. The effect on net loss per share would
have been negligible in both years.
The following table summarizes stock option activity for 1999 and 1998:
<TABLE>
<CAPTION>
Weighted Weighted
average average
exercise Options exercise
Options price exercisable price
------- ----- ----------- -----
<S> <C> <C> <C> <C>
Balance at December 31, 1997 1,900,000 $.09 1,300,000 $.11
Granted - - - -
Exercised - - - -
Cancelled - - - -
--------- --------- --------- ---------
Balance at December 31, 1998 1,900,000 $.09 1,800,000 $.09
Granted 4,000,000 .03 - -
Exercised - - - -
Cancelled (400,000) .25 - -
--------- --------- --------- ---------
Balance at December 31, 1999 5,500,000 $ .03 5,500,000 $ .03
========= ========= ========= =========
</TABLE>
F-11
<PAGE> 31
ADVANCED PLANT PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 4 STOCK OPTIONS
(Continued)
As of December 31, 1999, there were 5,500,000 common stock options
outstanding with a weighted-average remaining life of 3.9 years and a
weighted average exercise price of $.03 per share.
NOTE 5 COMMITMENTS AND CONTINGENCIES
The Company has employment agreements with three employees and a consulting
contract with a key consultant to the Company. At December 31, 1999, the
Company was committed under these agreements to wages and salaries of
approximately $285,000 annually through 2001 and approximately $127,000 in
2002. The contracts also include grants for five-year stock options to
purchase 2,250,000 shares of common stock at a weighted average exercise
price of $.017 per share. See Note 2 "Related Parties Transactions" for
discussion of commitments under a consulting contract with a key consultant.
The Company leases its office space at 43 West 33rd Street, New York, NY.
The current lease term expires on October 30, 2000. The minimum rental
commitment remaining under this lease was $19,950 at December 31, 1999.
NOTE 6 LOANS PAYABLE
Loans Payable consists of unsecured, non-interest bearing short-term loans
typically of less than three months duration. The loan agreements provide
the Company with the option of repaying the loans with either cash or
restricted shares of the Company's common stock.
NOTE 7 DUE TO DISTRIBUTOR
In 1995, the Company entered into a distribution agreement with a foreign
distributor in anticipation of bringing a product to market. The agreement
required an advance payment for product by the distributor. The Company was
unable to produce the anticipated product and in 1997 entered into a
settlement agreement with the distributor calling for eighteen monthly
installment payments of $5,750 and 60,000 shares of the Company's common
stock to be issued to the distributor. As of December 31, 1999, the Company
has neither issued the common stock nor made any of the installment payments
as required by the settlement agreement. The Company has elected not to
accrue any liability for the 60,000 shares of common stock, which had a fair
market value of approximately $7,500 at December 31 1999.
NOTE 8 FINANCIAL RESULTS AND LIQUIDITY
Since its inception, the Company has had significant operating losses and
working capital deficits. The Company's continued existence has been
dependant on cash proceeds received from the sale of its common stock and
the willingness of vendors to accept stock in lieu of cash payments for
their services. Employees have also accepted deferrals of wage payments.
F-12
<PAGE> 32
ADVANCED PLANT PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 8 FINANCIAL RESULTS AND LIQUIDITY
(Continued)
The Company hopes to reverse this trend by generating cash inflows through
the sale of new products that they have developed. To accomplish this
objective, the Company will require working capital to satisfy current
operating expenses, and to produce inventory, during the interim period
preceding such time as the revenue cycle begins generating cash.
To market and generate sales of its new products, the Company entered into
several new distribution agreements during 1999. Following is a discussion
of the potential minimum sales that may result from these agreements:
In June 1999, the Company entered into an exclusive two-year distribution
agreement with Ambar Pharmacies and Health, Inc. ("Ambar") for the sale of
the Company's products in Israel. Such distribution agreement requires Ambar
to purchase a minimum of $88,290 during the two year period. Under the
agreement, the Company is committed to reimburse Ambar for advertising
expenditures in an amount not to exceed 5% of Ambar's gross purchases.
In July 1999, the Company entered into exclusive distribution agreements
with Manayer Najd Trading & Medical Supplies Co. ("MNM") and with Manayer
Egypt Trading & Medical Supplies Co. ("MEM") for distribution of the
Company's products in Saudi Arabia and Egypt respectively. Both agreements
are contingent on the distributors receiving product registration
certificates from their respective countries and are for periods of five
years commencing upon receipt of the registration certificates. The
potential aggregate minimum purchases required under these agreements is
$4,681,140. As of March 15, 2000 the product registration certificates have
not been approved by the various countries.
The success of these distribution agreements, and their effect on the
Company's cash flow, is uncertain. There is no guarantee that the cash
generated from new product sales will occur prior to the depletion of
existing cash balances, or that the generated cash receipts will be
sufficient to fund operating costs which can be expected to increase as the
Company "ramps up" for manufacturing and distribution activities. There also
is no assurance that the Company will continue to be able to finance
operations through the sale of its common stock, the exchange of stock for
services or from the proceeds of unsecured loans with private lenders.
NOTE 9 SUBSEQUENT EVENTS
On January 4, 2000 the Company entered into a one-year agreement with Santex
S.A., a French corporation, in which Santex agreed to, on a best efforts
basis, introduce the Company to distributors in Europe and Asia. As
compensation for their efforts, Santex is to receive a percentage of all
payments received by the Company from distributors introduced to the Company
by Santex as follows; 10% of all payments received on the distributors first
order, 8% of all payments received on subsequent orders for the 2-year
period following the first order and 1% of all payments received thereafter.
F-13
<PAGE> 33
ADVANCED PLANT PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 9 SUBSEQUENT EVENTS
(Continued)
On February 17, 2000 the Company retained the services of First Madison
Securities, Inc. ("FMS"). FMS will act as consultant and non-exclusive
financial advisor and investment banker to the Company in connection with
strategic planning, securities transactions, valuations, mergers &
acquisitions, alternative financing structures and capital formation. FMS
will also act as placement agent for the Company.
As compensation for these services, the Company will issue FMS 6,000,000
restricted shares of its common stock as follows; 1,700,000 shares upon
signing the agreement, 1,700,000 shares within three months of signing the
agreement and 2,600,000 shares within six months of signing the agreement.
The restricted shares shall be registered with the Securities and Exchange
Commission to become free trading shares as soon as possible with FMS
bearing all registration costs. The Company will also pay FMS a placement
fee for any transactions consummated, directly or indirectly, through FMS
during the term of the agreement or within two years thereafter. The
placement fee will consist of a payment equal to 10% of the gross proceeds
raised from the sale of applicable securities, reimbursement of
non-accountable expenses equal to 3% of the gross proceeds from the sale of
any applicable securities plus warrants to purchase common stock equal to
10% of the applicable shares sold. Additionally, the Company will reimburse
FMS for all reasonable out-of-pocket expenses incurred in the performance of
this agreement, up to a maximum of $25,000.
On February 28, 2000 the Company entered into an Asset Purchase Agreement
with Dr. Leonard Bielory whereby the company acquired the exclusive rights
and interest to allergy and sinus formulations ("Assets"). As consideration
for such formulations, Dr. Bielory shall receive options to purchase
18,000,000 shares of the company's common stock at an aggregate exercise
price of $180. This purchase is contingent on the occurrence that the
Company's stockholders vote in favor of increasing the number of shares the
Company is authorized to issue to 250,000,000. Additionally, the Company
agrees to pay Dr. Bielory a royalty payment of $.01 per bottle with respect
to each product manufactured with these Assets, 1% (one percent) of the
suggested retail price of each product sold that was manufactured with the
Assets and 10% (ten percent) of the company's net profits before taxes from
such sales (net profits to be determined by the Company's regularly retained
independent public accountants using generally accepted accounting
principles).
In the event that the Company enters into an agreement with a third party
for the sale of products manufactured with these Assets, which agreement
unconditionally provides for payments to the Company of not less than
$20,000,000, whether in lump sum or over a period of four years, from such
third party, the Company shall issue to Dr. Bielory 5 million shares for
each $20,000,000 required to be paid to the Company, not to exceed twenty
five million shares.
On March 15, 2000 the company entered into a two-year employment agreement
with Dr. Leonard Bielory whereby Dr. Bielory will serve as the Company's
Scientific Director and its Chairman of the Board of Directors. Under the
terms of the agreement, the Company is required to pay Dr. Bielory wages of
$500 per month for the first twelve months and up to $2,500 per month
thereafter, contingent on the Company achieving specified net profit levels.
Commencing on March 15, 2000 and each January 1 thereafter, Dr. Bielory is
to receive options to purchase 750,000 shares of the Company's common stock
as additional compensation under this agreement. Dr. Bielory is also to
receive 225,000 restricted shares of the Company's common stock as a signing
bonus.
F-14
<PAGE> 34
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to the use on Form 10-KSB of our report on the financial
statements for Advanced Plant Pharmaceuticals, Inc. dated March 15, 2000 on our
examinations for the years ended December 31, 1998 and 1999. We also consent to
the reference to our firm under the caption "Experts" with respect to the
financial statements.
MICHAEL C. FINKELSTEIN
Morganville, New Jersey
Certified Public Accountant
March 27, 2000
<PAGE> 35
<TABLE>
<CAPTION>
Exhibit Number
- --------------
<S> <C>
3.1.1 Articles of Incorporation of the Company, as amended (1)
3.2 By-Laws of the Company (1)
10.1 Employment Agreement by and between the Company and David Lieberman (1)
10.2 Stock Option Agreement by and between the Company and David Lieberman
(1)
10.3 Employment Agreement by and between the Company and Barry Clare (1)
10.4 Stock Option Agreement by and between the Company and Barry Clare (1)
10.5 Employment Agreement by and between the Company and Dr. Bielory (*)
10.6 Distribution Agreement between the Company and Ambar Pharmacies and
Health, Inc. ( *)
10.7 Distribution Agreement between the Company and Manayer Najd Trading &
Medical Supplies Co. (1)
10.8 Distribution Agreement between the Company and Manayer Egypt Trading &
Medical Supplies Co. (1)
10.9 Technology Purchase Agreement between the Company and C.J. Lieberman(1)
10.10 Asset Purchase Agreement between the Company and Dr. Bielory (*)
27 Financial Data Schedule (*)
</TABLE>
- --------------
* Filed herewith.
(1) Filed as an Exhibit to the Company's Form 10-SB, dated July 23, 1999,
and incorporated herein by reference.
<PAGE> 1
EXHIBIT 10.5
THIS EMPLOYMENT AGREEMENT (the "Agreement") made as of the 15th day of March,
2000, is made, by and between ADVANCED PLANT PHARMACEUTICALS, INC., with an
address at 43 West 33rd Street, New York, NY 10001 ("APPI" or the "Company") and
DR. LEONARD BIELORY, with an address at 400 Mountain Avenue, Springfield, New
Jersey 07081 ( "Bielory" or the "Scientific Director").
W I T N E S S E T H
WHEREAS, APPI is a nutriceutical company engaged in the development and
distribution of all natural, plant-derived dietary supplements; and
WHEREAS, the Company is desirous of retaining the services of Bielory in
the position of Scientific Director for purposes of providing scientific
overview and oversight all of the Company's products; and
WHEREAS, the Company is desirous of electing Bielory to serve as its
Chairman of the Board of Directors, subject to the approval of its current
Board; and
WHEREAS, this Agreement shall supersede all previous consulting or
employment agreements between the Company and Bielory, except that the amount of
$126,000 accrued to January 31, 2000 from previous consulting agreements with
Dr. Bielory shall not be canceled by this Agreement and shall still be owed to
Dr. Bielory by the Company. The sum of $20,000 will be paid to Dr. Bielory upon
execution of this Agreement. The balance of $106,000 will be paid to Dr. Bielory
in monthly installments of $800, to be paid on the first day of each calendar
month beginning April 1, 2000.
NOW, THEREFORE, in consideration of the mutual covenants contained herein and
further good and valuable consideration, the undersigned parties hereby agree as
follows:
1. Employment With APPI
APPI hereby retains the services of Bielory to serve as the Company's
Scientific Director (duties and responsibilities to be defined hereafter)
and Bielory hereby agrees to serve the Company in such capacity.
2. Duties and Responsibilities
Bielory, in his position as Scientific Director shall perform the
following services for the Company including, but not limited to:
2.1 Bielory will assist APPI in developing and creating a market for
the Company's existing products such as ACA and Lo-Chol and such
other plant based nutriceutical product or other herbal or
therapeutic supplements as may hereinafter be developed or
purchased by the Company during the term of this Agreement.
2.2 Bielory will assist the Company in developing and creating a
market for the assets purchased from Dr. Bielory by the Company
(the "Assets") on February 28, 2000. Bielory will use his best
efforts to introduce the Company to distributors and purchasers of
such Assets.
2.3 Bielory will assist the Company in assembling a credible
scientific advisory board for the purpose of maximizing the
Company's business mission and financial earning potential. The
Company acknowledges and agrees that Bielory is employed and
engaged in other medical, academic and related activities and that
the performance of his duties hereunder
1
<PAGE> 2
will be significantly less than full time and that the rendering
of Scientific Director's services will be periodic and upon such
occasions and dates as Scientific Director may choose in his
discretion to accomplish the duties outline herein.
2.4 The Company shall provide Bielory with coverage under the
Company's product liability insurance with minimum coverage of
$1,000,000. The Company shall provide Bielory with proof of
insurance coverage in form satisfactory to Bielory, and such
coverage shall provide that the policy of insurance shall not be
canceled without thirty (30) days, prior written notice to
Bielory.
2.5 The Company shall provide Bielory, with regard to his capacity as
Chairman of the Board of Directors, with Officer's and Director's
insurance in amounts satisfactory to him and his counsel. APPI
shall provide Bielory with proof of Officer's and Director's
insurance coverage in form satisfactory to him and such coverage
shall provide that the policy of insurance shall not be canceled
without thirty (30) days prior written notice to Bielory.
3. Term
The term of this Agreement shall be for two (2) years beginning on the
date hereof, March 15, 2000 and ending on March 15, 2002.
4. Compensation
4.1 For the services described in Section 2 of this Agreement, the
Company will pay to Bielory Five Hundred Dollars ($500) per month
commencing March 15, 2000, and shall pay such amount monthly
continuing thereafter for a period of twelve (12) months from the
date hereof.
4.2 If and when the Company earns net profits equal to or in excess of
$50,000 per month, then Bielory's monthly compensation shall be
increased to an aggregate of $1,000 per month for the then
remaining Term of this Agreement. The amount of the Company's "net
profits" shall be determined by the Company's then independent
public accountants regularly retained using generally accepted
accounting principles.
4.3 If and when the Company earns net profits equal to or in excess of
$100,000 per month, then Bielory's monthly compensation shall be
increased to an aggregate of $2,500 per month for the then
remaining Term of this Agreement.
4.4 If and when the Company earns net profits equal to or in excess of
$150,000 per month, then Bielory's monthly compensation shall be
reevaluated and subsequently determined by the board of directors
of the Company.
4.5 The provisions regarding compensation in this Section 4(a) are in
addition to those compensatory arrangements under the Asset
Purchase Agreement between Dr. Bielory and the Company dated
February 28, 2000.
4.6 Commencing March 1, 2000, and effective each January 1 thereafter,
for so long as this Agreement is in effect, Bielory will receive
an option to purchase 750,000 shares of the Company's common
stock, par value $.0007 (the "Options"). Such Options shall be
exercisable at any time by Bielory whether or not the parties are
in a contractual relationship with each other at the time of the
exercise of such Options. The exercise price for the 2000 option
shall be the listed closing bid price of the Common Stock as of
March 15, 2000 and the exercise price of subsequent annual option
grants shall be the listed closing price of the first market day
of January of each year as quoted on the
2
<PAGE> 3
Over-The-Counter Bulletin Board or that exchange on which the
Company's Common Stock is then quoted.
4.7 Upon acceptance by the undersigned of the terms of this Agreement,
Bielory shall be granted 225,000 restricted shares of the
Company's Common Stock, par value $.0007. Such stock shall be
issued pursuant to Section 4(2) of the Securities Act of 1933, as
amended. Such stock given to Bielory shall be valued at the
closing bid price of the Company's common stock as quoted on the
Over-The-Counter market as of the date hereof. Bielory shall
acknowledge in writing to the Company that such restricted shares
are being acquired for investment purposes only and not with a
view towards public distribution or resale. Bielory further
acknowledges that such stock given to him shall be restricted and
bear the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THESE SHARES HAVE BEEN
ACQUIRED FOR INVESTMENT PURPOSES ONLY AND NOT WITH A VIEW TOWARD DISTRIBUTION OR
RESALE. THESE SHARES MAY NOT BE MORTGAGED, PLEDGED, HYPOTHECATED OR OTHERWISE
TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SHARES UNDER
THE ACT, OR AN OPINION OF COUNSEL FOR THE CORPORATION THAT REGISTRATION IS NOT
REQUIRED UNDER THIS ACT OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
Bielory shall be given piggyback registration rights. if the
Company, at any time, proposes to register any of its securities for sale for
its own account or for the account of any other person (other than a
registration relating to the sale of securities to employees or consultants of
the Company pursuant to a stock option, stock purchase or similar plan) the
Company shall give written notice to Bielory thirty days prior to filing such
registration statement.
4.8 Bielory shall be compensated additional shares of restricted stock
for various publication, speaking engagements and presentations. Specifically,
Bielory shall receive not less than 25,000 shares of the Company's stock, such
number of shares and price to be determined by the Company's Board of Directors,
for each article that is written by Bielory and published in a medical journal
or publication that is academic in nature or for speaking engagement or
presentations that are for academic purposes. Additionally, Bielory shall
receive not less than 5,000 shares of the Company's stock, such number of shares
and price to be determined by the Company's Board of Directors, for each article
that is written by Bielory and published that is of a marketing nature to
promote the Company's products and/or for speaking engagements or presentations
that will help market the Company's products.
4.9 In the event payment for the above compensation is received by
Bielory after the tenth (10th) day of the month, or after ten (10) days from
receipt of an invoice from Bielory, whichever is applicable, or any check fails
of collection, APPI agrees to pay Bielory a service charge of five percent (5%)
for each payment that is paid late. In the event any payment is made more than
thirty days after its due date, Bielory shall be entitled to eighteen percent
(18%) interest on each past due payment until the date paid.
5. Termination
Bielory shall be permitted to terminate this Agreement at will, upon
giving the Company ninety (90) days prior written notice, provided,
however, that any compensation, options or shares given to Bielory by
that time shall be deemed to have been earned pro rata to the date of
termination of this Agreement. The Company shall be permitted to
terminate the Agreement upon ninety (90) days prior written notice to
Bielory.
3
<PAGE> 4
6. Representation and Warranties by the Company
The Company warrants and represents that
6.1 It is a Corporation in existence and good standing under the laws
of the State of its incorporation, Delaware.
6.2 The Company will take such steps as are necessary, including but
not limited to, the payment of all premiums required to maintain
the insurance coverage for the benefit of Bielory referenced in
Section 2(c) and (d) above.
6.3 The Company has the authority to enter into this Agreement.
6.4 The Company has not filed any Petition in Bankruptcy, nor has a
Petition in Bankruptcy or insolvency been filed in connection with
the Company as of the date of execution of this Agreement nor is
same contemplated by the Company.
6.5 This Agreement has been approved by the Board of Directors of the
Company and a resolution to that effect has been cast by such
Board and executed by the President of the Company.
6.6 The Company has not entered into any agreements with any
physicians or other persons of similar qualifications to provide
services similar to those to be provided by Bielory under this
Agreement, and will not do so for the duration of this Agreement
except with the prior written consent of Bielory, which may be
withheld for any reason.
6.7 The Company will not utilize the name and/or likeness of Bielory
without his prior written consent, which may be withheld for any
reason in the discretion of Bielory; however, Bielory hereby
agrees to have his name, title, age and a brief description of his
background incorporated in reports and forms to be submitted to
the Securities and Exchange Commission ("SEC") so that the Company
may comply with federal securities regulations. Bielory also
agrees to allow his name to be incorporated in press releases by
the Company after approval of such releases by Bielory.
7. Representation and Warranties by Bielory
Bielory represents and warrants that:
7.1 He is free to serve as the Company's Scientific Director and that
such position will not in any way conflict with other medical or
academic duties which Bielory now has or may have during the Term
of this Agreement.
7.2 Bielory is a practicing physician and in addition, acts as
consultant and advisor to other firms in the medical and health
care industries, including but not limited to, pharmaceutical
firms, Medical services firms, UMDNJ - New Jersey Medical School,
Starx Asthma and Allergy Centers and others health care providers.
It is not Bielory's intention to provide services exclusively for
APPI in the field of Allergy and Immunology (AIDS) and related
disorders.
8. Confidential Information
All data and information supplied by the undersigned parties to each
other shall be treated by each party as confidential information unless
it falls within the exceptions enumerated below. Bielory shall not
disclose any confidential information supplied to Bielory by APPI to any
third party not affiliated with APPI by common ownership and then only to
affiliates under similar conditions
4
<PAGE> 5
of confidentiality, nor shall the Company disclose any confidential
information supplied to the Company by Bielory, unless each party obtains
the other's prior written consent or unless such information falls within
the following exceptions:
8.1 Except to the extent it can be established by competent proof that
such confidential information was known by the disclosing party
prior to receiving confidential information from the other
undersigned party.
8.2 Except to the extent that such confidential information is or
becomes publicly known through no fault or omission attributable
to Bielory or the Company; or except to the extent that such
confidential information is rightfully given to the disclosing
party from proper independent sources.
8.3 Except to the extent that confidential information is derived
independently of any disclosure from the undersigned parties.
8.4 Obligations of confidentiality shall continue for a period of
three (3) years after the termination of this Agreement.
8.5 All documents, data, know-how, formulas and samples provided to
Bielory by APPI and end-products of the same are and will at all
times remain the property of APPI and shall be returned to APPI
when no longer needed for experimental purposes or evaluation or
upon termination of this Agreement, whichever occurs first.
9. PUBLICATIONS:
Bielory agrees that he will not publish or co-author any paper relating
to his work with APPI without the prior written approval of APPI, which
approval will not be unreasonably withheld or delayed. Bielory further
agrees that publications of material arising from this Agreement may be
made by APPI, but that use of Bielory's name in connection with such
publication will require Bielory's prior written approval, which approval
will not be unreasonably withheld or delayed.
10. NOTICES
Any notice, demand or communication required, permitted or desired to be
given hereunder, shall be deemed effectively given when personally
delivered or mailed by prepaid certified mail, return receipt requested,
or by overnight commercial carrier, addressed as follows:
To: Mr. David Lieberman
Advanced Plant Pharmaceuticals, Inc.
43 West 33rd Street
New York, New York
With A Copy To:
Seth Farbman, Esq.
Feder Kaszovitz Isaacson Weber Skala & Bass LLP
750 Lexington Avenue
New York, NY 10022
To: Dr. Leonard Bielory
Scientific Director
400 Mountain Avenue
5
<PAGE> 6
Springfield, NJ 07081
With a Copy To:
Abraham Borenstein, Esq.
Bloom Borenstein, P.C.
155 Morris Avenue
Springfield, NJ 07081
Facsimile (973) 379-4620
or to such other address, and to the attention of such other person(s) or
officer(s) as either party may designate by written notice.
11. INDEMNIFICATION
Bielory hereby agrees to hold APPI harmless and indemnify it against any
and all costs, claims and damages for injuries or otherwise resulting
from the negligence of Bielory in fulfilling Bielory's obligations
pursuant to this agreement.
12. WAIVER OF BREACH
The waiver of any breach of any term or condition of this Agreement shall
not be deemed to constitute a waiver of any other term or condition of
this Agreement.
13. SEVERABILITY
If any term or provision of this Agreement or the application thereof to
any person or circumstance shall to any extent be invalid or
unenforceable, the remainder of this Agreement or the applicability of
such term or provision to persons or circumstances other than those as to
which it is held invalid or unenforceable shall not be affected thereby,
and each term and provision of this Agreement shall be valid and
enforceable to the fullest extent permitted by law.
14. GOVERNING LAW
This Agreement shall be governed by and construed and enforced in,
accordance with the laws of the State of New Jersey. All actions
hereunder shall be brought in the state or federal courts of the State of
New Jersey.
15. ENTIRE AGREEMENT
This Agreement contains the entire Agreement of the parties with respect
to its subject matter and no waiver, modification or change of any of its
provisions shall be valid unless in writing and signed by the parties
against whom such claimed waiver, modification or change is sought to be
enforced (unless otherwise provided herein) .
ADVANCED PLANT PHARMACEUTICALS, INC.
Dated:March 15, 2000 By:/s/ David Lieberman
-------------- -----------------------------------
David Lieberman, President
6
<PAGE> 7
SCIENTIFIC DIRECTOR
Dated:March 15, 2000 By:/s/ Dr. Leonard Bielory
-------------- --------------------------------
Dr. Leonard Bielory
7
<PAGE> 1
EXHIBIT 10.6
DISTRIBUTION AGREEMENT
THIS DISTRIBUTION AGREEMENT ("Agreement") is made and entered into
this 28th day of the month of June, 1999 by and between Advanced Plant
Pharmaceuticals, Inc. ("APPI") a Delaware corporation, having a principal
office at, 75 Maiden Lane, New York, New York 10038, and Ambar Pharmacies
and Health, Inc., an Israeli corporation, having its principal offices at
30 Aba Hilel Street, Ramat-Gan, Israel, 52532 ("Ambar").
WITNESSETH
WHEREAS, APPI manufactures and produces certain pharmaceutical "Products"
(as listed in Exhibit A attached hereto and as may be amended from time to time)
and would like Ambar to distribute such Products in Israel (hereinafter referred
to as the "Territory") and Ambar is willing to become a distributor of such
Products, all on the terms hereinafter set forth;
NOW, THEREFORE, in consideration of the above premises and the mutual
covenants and agreements herein contained, the parties hereto agree as follows:
1. TERM. This Agreement will remain in effect from the date hereof
until December 31, 2000, unless terminated sooner as hereinafter provided.
2. APPOINTMENT. APPI hereby appoints Ambar during the Term of this
Agreement, and Ambar hereby accepts such appointment, as APPI's exclusive
distributor of the Products in the Territory.
3. SALE AND PURCHASE OF PRODUCTS.
a. From the date hereof through December 31, 1999 ( the
"Initial Purchase Period"), APPI will sell to Ambar, and Ambar will purchase
from APPI the following:
not less than 2,000 units of Lo-Chol 60/1000 ("Lo-Chol 60") at a purchase
price of $5.23 per unit and 1,000 units of ACA 70/1000 ("ACA") at a purchase
price of $17.83 for an aggregate purchase price of $28,290 (the "Initial Period
Minimum Purchase Price").
b. The Initial Period Minimum Purchase Price is to be paid,
in U.S dollars, as follows: ten percent (10%) of the Initial Period Minimum
Purchase Price, $2,829 is to be wired to APPI's designated bank account or shall
be paid by Ambar using its business credit card within twenty (20) business days
of the signing of this Agreement. The remaining ninety percent (90%) of the
Initial Period Minimum Purchase Price is to be wired to APPI's designated bank
account at the time Ambar places an order for the Products or Ambar may, at the
time Ambar places an order for the Products, provide evidence of approval of
payment using its business credit card or a letter of credit acceptable to APPI
such that payment will be made to APPI no later than sixty (60) days from when
APPI makes the Products available to Ambar for pick-up. (For example, after
Ambar pays 10% of the Initial Period Minimum
<PAGE> 2
Purchase Price, $2,829, then a subsequent order by Ambar for $5,000 worth of
Products would only require Ambar to pay the remaining 90% percent of the
purchase price, $4,500.)
c. From January 1, 2000 through December 31, 2000 (the
"Second Purchase Period"), APPI will sell to Ambar, and Ambar will purchase from
APPI, Lo-Chol 60 at a purchase price of $5.23 per unit and/or ACA at a purchase
price of $17.83 per unit, which the total cost of such Products shall not be
less than an aggregate purchase price of $60,000 (the "Second Period Minimum
Purchase Price").
d. The Second Period Minimum Purchase Price is to be paid,
in US dollars, as follows: ten percent (10%) of the Second Period Minimum
Purchase Price, $6,000, is to be wired to APPI's designated bank account or
shall be paid by Ambar using a letter of credit acceptable to APPI or its
business credit card on January 15, 2000. The remaining ninety percent (90%) of
the Second Period Minimum Purchase Price is to be wired to APPI's designated
bank account at the time Ambar places an order for the Products or Ambar may, at
the time Ambar places an order for the Products, provide evidence of approval of
payment using its business credit card or a letter of credit acceptable to APPI
such that payment will be made to APPI no later than sixty (60) days from when
APPI makes the Products available to Ambar for pick-up.
e. Payments for Products ordered by Ambar, other than the
minimum purchases as outlined in subsections (b) and (d) of this Section, is to
be wired to APPI's designated bank account at the time Ambar places an order for
the Products or Ambar may, at the time Ambar places an order for the Products,
provide evidence of approval of payment using its business credit card or a
letter of credit acceptable to APPI such that payment will be made to APPI no
later than sixty (60) days from when APPI makes the Products available to Ambar
for pick-up.
f. APPI, at its expense, will make available the Products
ordered by Ambar, within thirty (30) days after Ambar requests such Products.
APPI will make the Products available by giving notice to Ambar, in accordance
with Section 15 of this Agreement, that such ordered units are available for
pick up by Ambar at APPI's principal office located at 75 Maiden Lane, New York,
NY 10038. After such notice is given to Ambar and such ordered Products are made
available at APPI's principal office, title to and all risk of loss of and
damage to the Products will pass to Ambar.
4. EXCLUSIVITY; SALES BY DISTRIBUTOR.
a. While this Agreement is in effect, APPI hereby grants to Ambar
the exclusive rights to sell the Products in the agreed Territory . While this
Agreement remains in effect, APPI will not, directly or indirectly, sell the
Products within the Territory and will not permit anyone else, either directly
or indirectly, to sell or otherwise exploit the Products within the Territory.
b. Ambar may sell the Products in such manner and on such terms as
approved by APPI. Ambar will comply with all applicable laws, rules and
regulations in selling and in otherwise dealing with the Products.
c. Should APPI, in its sole discretion, decide to market and sell
the Products in any or all of
1
<PAGE> 3
the "Extended Territories" (defined below), APPI acknowledges that it shall
provide Ambar with a right of first refusal to act as an exclusive distributor
for the Products in those areas subject to agreed upon terms by both parties.
The Extended Territories shall include any one or all of the following areas:
Turkey, Jordan, Holland and Denmark. APPI agrees that upon a decision by its
Board of Directors to market and sell the Products in the Extended Territories,
APPI will provide Notice to Ambar (as provided in Section 15 of this Agreement)
of such decision, upon which Ambar shall have fifteen business days to exercise
its right of first refusal by notifying the Company.
d. Neither Ambar, nor its officers, employees or agents will be
deemed to be the agents, employees, partners, co-venturers or representatives,
legal or otherwise, of APPI for any purpose whatsoever.
5. ADVERTISING. On the last day of the Initial Purchase Period, December
31, 1999, APPI will provide a rebate to Ambar in the amount of five percent of
the gross purchase price of the products ordered by Ambar during such period, so
long as such rebate is understood by Ambar to be used solely for marketing and
advertising of the Products in the agreed upon Territory. Evidence that such
rebate was used by Ambar solely for marketing and advertising of the Products in
the agreed upon Territory shall be provided to APPI and if such evidence is not
provided, Ambar agrees to return said rebate to APPI.
APPI acknowledges that during the Term of this Agreement Ambar may
suggest and recommend to APPI marketing and promotional strategies to help Ambar
sell the Products in the stated Territory. APPI, after review and approval of
such marketing and promotional strategies and at APPI's sole discretion, will
match, dollar for dollar in U.S. currency, those funds which Ambar is willing to
contribute towards such marketing and promotional strategies with the
understanding and acknowledgment by Ambar that APPI will not contribute in
excess of ten thousand dollars ($10,000) throughout the Term of this Agreement.
Should APPI review and approve such marketing expenses, APPI will notify Ambar
of such approval, Ambar will notify APPI regarding the dollar amount that Ambar
expects to contribute, APPI within fifteen business days will then match such
stated amount by sending a check or wire transfer to Ambar, and Ambar will then
provide to APPI evidence that such funds were expended on the agreed upon
marketing and promotional items.
6. CONFIDENTIALITY. Ambar hereby acknowledges and agrees that as per the
Confidentiality Agreement signed between Ambar and APPI, dated April 8, 1999 (a
copy of which is annexed hereto), all Confidential Information is and shall
remain the exclusive property of APPI.
7. RIGHT TO RENEW. The Term of this Agreement may be renewed by written
agreement of APPI and Ambar. Nothing contained herein shall be deemed to create
any express or implied obligation on the part of either party to renew or extend
this Agreement; however, the undersigned parties agree, in six months from the
date hereof, to evaluate the success of this Agreement and may negotiate, in
good faith, a potential five year extension of this Agreement with terms to be
agreed upon. Each party in its sole discretion shall have the right to
determine, for any reason whatsoever, not to renew, continue or extend this
Agreement.
8. PATENTS AND TRADEMARKS. Ambar acknowledges and agrees that APPI is the
sole and exclusive owner of all right, title and interest in and to the products
Lo-Chol and ACA and that Ambar will not claim or assert any rights or interests
in the trademarks or patents of such names and/or Products. Nothing contained in
this Agreement shall operate as or be construed as an assignment, grant or other
transfer of
2
<PAGE> 4
any kind of any of APPI's right, title, or interest in or to any of the
trademarks or patent rights of Lo-Chol and ACA.
9. INDEMNITY. Ambar agrees to indemnify and hold harmless APPI and its
Affiliates and any director, officer, stockholder, employee or agent of any of
them from and against any and all claims, losses, liabilities, damages, costs,
and expenses (including, but not limited to, attorneys', expert witness and
accounting fees and expenses) which may be sustained and arise out of Ambar's
activities, or those of its employees or agents, including without limitation,
any misrepresentations or misleading statements in respect of the Products or
any violation by Ambar of any of the provisions of this Agreement.
10. EXPENSES. All expenses and costs incurred by Ambar in the performance
of its obligations under this Agreement shall be the sole responsibility of
Ambar and shall not be advanced or reimbursed by APPI other than those outlined
in Section 5 of this Agreement.
11. ASSIGNABILITY. Ambar may not assign, transfer or delegate this
Agreement or any of its rights or obligations under this Agreement without the
prior written consent of APPI, and any attempted assignment, transfer or
delegation without such consent shall be deemed null and void and of no effect.
12. TERMINATION. This agreement may be terminated by either party in case
of a breach of any of the material terms of this agreement by giving ninety (90)
days prior written notice to the other party. If this Agreement is terminated by
Ambar, Ambar acknowledges to fulfill payment to APPI for both of the minimum
purchase requirements as outlined in Section 3 above. If Ambar fails to meet the
stated minimum purchase requirements or fails to make timely payments in
accordance with this Agreement then APPI shall treat such action as a material
default and may terminate this Agreement and/ or seek liquidated damages from
Ambar.
13. GOVERNING LAW. The validity, interpretation and performance of this
Agreement and any dispute connected herewith shall be governed and construed in
accordance with the laws of the Sate of New York without reference to its
conflict of law principles.
14. ENTIRE AGREEMENT. This Agreement, constitutes the entire agreement
between APPI and Ambar. This Agreement supersedes any prior or existing
contracts and arrangements by and between APPI and Ambar for the distribution of
the Products in the Territory.
15. NOTICE. Any notice required hereunder shall be made in writing by
hand-delivery, telefax, telex, courier, registered air mail, electronic mail, or
by any other means of delivery which enables the sending party to verily receipt
thereof Such notice shall be deemed given (a) at the actual time of receipt in
the case of hand-delivery or transmission by telefax, (b) Upon receipt of tile
addressee's answer back on the sender's machine in case of transmission by
telex, and (c) three (3) business days after sending in case of notice by
courier, cable or registered air mail. Any notices shall be sent to the
following addresses:
If to APPI: If to Ambar:
Advanced Pharmaceuticals, Inc. Ambar Pharmacies & Health, Inc.
Attention: Sam Berkowitz Ambar Abraham
3
<PAGE> 5
75 Maiden Lane 30 Aba Hilel Street
New York, NY 10038 Ramat-Gan, Israel 53532
Either party may change the address to which notices are to he sent to it by
giving notice of such change of address to the other party in the manner herein
provided for giving notice.
16. COUNTERPARTS. This Agreement may he executed in any number of
separate counterparts, each of which shall be deemed to be original but which
together shall constitute one in the same instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of
the day and year first above written by their respective authorized officials.
AMBAR PHARMACIES AND HEALTH, INC. ADVANCED PLANT
PHARMACEUTICALS, INC.
BY /s/ Ambar Abraham By /s/ David Lieberman
----------------------- ------------------------------
Name: Ambar Abraham Name: David Lieberman
Title: Title: President
EXHIBIT A
4
<PAGE> 6
-Lo-Chol 60/1000
-ACA 70/1000
<PAGE> 1
EXHIBIT 10.10
ASSET PURCHASE AGREEMENT dated as of February 28 , 2000,
by and between ADVANCED PLANT PHARMACEUTICALS, INC., a Delaware corporation (the
"Purchaser") having its principal office at 43 West 33rd Street, New York, NY
10001, and Dr. Leonard Bielory ("Seller"), who resides at 400 Mountain Avenue,
Springfield, NJ 07081.
WITNESSETH
WHEREAS, the Purchaser is engaged in the business of developing, testing
and selling plant based nutritional supplements (the "Business"), and is
desirous of purchasing certain assets which pertains to the Business of the
Purchaser;
WHEREAS, the Seller has developed Allergy and Sinus formulations using
various herbal components (the "Asset").
WHEREAS, Seller represents that he is the sole owner of all rights and
interests to the Asset;
WHEREAS, the Purchaser is desirous of purchasing such Asset from Seller
so that Purchaser has the exclusive rights to manufacture, distribute and sell
the Asset in any country worldwide where it is approved for sale by the
respective governmental drug and other regulatory agencies;
WHEREAS, Seller is willing to sell, transfer and assign all of his right,
title and interest in and to such Asset to the Purchaser in accordance with the
terms and provisions set forth below;
NOW, THEREFORE, in consideration of the foregoing premises, and the
representations, warranties, covenants and agreements contained herein, and for
other good and valuable consideration, the receipt and adequacy of which is
hereby acknowledged, the undersigned parties hereby agree as follows:
1. PURCHASE AND SALE OF ASSET.
1.1 Subject to the provisions of this Agreement, the Seller hereby sells,
conveys, transfers, assigns and delivers to the Purchaser, by appropriate
instruments in the forms annexed hereto, and Purchaser purchases and accepts,
for the consideration hereinafter defined, the Asset as described in Schedule A
(as attached hereto), specifically including, but without limitation, allergy
nasal lavage solutions and sinus solutions.
<PAGE> 2
1.2 Purchase Price
The purchase price that Purchaser shall pay to Seller for the
purchase of the Asset shall be the following:
(A) Five year options to purchase an aggregate of 18,000,000 shares of the
Purchaser's common stock, par value $.0007 (the "Purchase Price" the "Shares" or
the "Options") at an exercise price of $180.00 for all 18,000,000 shares. Seller
hereby acknowledges and understands that such Options to purchase 18,000,000
Shares and any additional Shares issuable pursuant to paragraph 1.2(D) below,
shall be issued by the Purchaser to Seller conditioned on the occurrence of the
following event:
that the stockholders of the Purchaser (the "Stockholders") vote in favor
of increasing the number of shares that the Purchaser is authorized to
issue from 120,000,000 to a number equivalent to or greater than
250,000,000 shares. The Purchaser hereby agrees to use its best efforts
to put forward a proposal to its Stockholders to increase the number of
shares it is authorized to issue from 120,000,000 to 250,000,000 in its
upcoming 1999 Annual Meeting. Seller acknowledges and understands that
the Purchaser cannot give any assurances that its Stockholders will vote
in favor of such proposal. If such increase in the shares that the
Purchaser is authorized to issue is approved by the majority of the
Stockholders, the Purchaser shall issue the Options representing the
Purchase Price to the Seller within fifteen business days from the time
that the Certificate of Amendment to the Purchaser's Certificate of
Incorporation is effective. If such increase in shares is not approved on
or before September 1, 2000, at the request of the Seller, this Agreement
will be void and all schedule A assets will be returned to Seller; and
The options to be issued to Dr. Bielory shall be delivered as follows:
(I) an Option to purchase 12,000,000 Shares of the Company's Common Stock
at an exercise price of $120.00 for all 12,000,000 shares shall be
delivered to Dr. Bielory upon APPI's receipt of the formula from Dr.
Bielory and (II) an Option to purchase 6,000,000 shares of the Company's
Common Stock at an exercise price of $60.00 for all 6,000,000 shares
shall be delivered to Dr. Bielory upon APPI commencing to market any
product formulated, in whole or in part, by Dr. Bielory.
(B) Purchaser shall pay to the Seller in U.S. Dollars a royalty payment of $.01
(one cent) per bottle with respect to the Asset and an additional one percent
(1%) of the Company's suggested retail price of each product sold of the Asset.
Such payments shall be made to the Seller within thirty (30) days after the end
of each calendar quarter for products manufactured and sold of the Asset made
during such Calendar Quarter; and
(C) Purchaser shall pay to the Seller ten percent (10%) of the Purchaser's net
profits before taxes that Purchaser retains from sale of the products of the
Asset. The amount of the
<PAGE> 3
Purchaser's "net profits" from such sales shall be determined by the Company's
then independent public accountants regularly retained using generally accepted
accounting principles; and
(D) In the event that the Purchaser enters into any agreement or series of
agreements with any third party or subsidiary or division thereof, for sale of
products of the Asset, which agreement unconditionally provides for payment to
the Purchaser which will result in net proceeds of not less than $20,000,000,
whether in a lump sum, or over a period of four years, or any combination
thereof, from such third party, the Purchaser shall issue to the Seller
5,000,000 Restricted Shares for each twenty million dollars ($20,000,000)
required to be paid to the Purchaser under the terms of such agreement or
agreements. Provided, however, that the maximum number of Shares the Purchaser
shall be required to issue to the Seller pursuant to the provisions of this
clause shall be twenty five million (25,000,000) Shares.
(1.3) The certificates evidencing the Shares to be paid by the
Purchaser to Seller as outlined in this Section 1.2(A)(B)(C)(D), which
constitutes the equity portion of the outlined Purchase Price, shall be endorsed
with the following restrictive legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THESE SHARES HAVE BEEN
ACQUIRED FOR INVESTMENT PURPOSES ONLY AND NOT WITH A VIEW TOWARD DISTRIBUTION OR
RESALE. THESE SHARES MAY NOT BE MORTGAGED, PLEDGED, HYPOTHECATED OR OTHERWISE
TRANSFERRED ABSENT REGISTRATION OF SUCH SHARES UNDER THE ACT, OR AN OPINION OF
COUNSEL FOR THE CORPORATION THAT REGISTRATION IS NOT REQUIRED UNDER THIS ACT OR
AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
(1.4) Purchaser agrees that at no time prior June 1, 2000, will
the Purchaser's Board of Directors propose an increase in the number of Shares
the Purchaser is authorized to issue in excess of 250,000,000 shares and in no
event shall any stock split, or reverse stock split be proposed or implemented
without Seller's written consent, which may be withheld for any reason.
2. Representations and Warranties of Seller.
Seller hereby makes the following representations and warranties to Purchaser in
order to induce the Purchaser to enter in to this Agreement:
(a) Authority. The Seller has full power and authority to execute,
deliver and perform this Agreement and to carry out the transactions
contemplated thereby and hereby.
(b) Governmental Filings. To Seller's knowledge, Seller is not
required to submit
<PAGE> 4
any notice, report or other filing to any governmental or regulatory agency, nor
is any notice or report required to be obtained by the Purchaser in connection
with the execution or delivery of this Agreement, or the consummation of the
transactions contemplated thereby and hereby.
(c) Title and Related Matters. The Seller, who asserts that he has
created the Asset, has good and marketable title to the Asset free and clear of
all liens, pledges, charges and encumbrances, liabilities or any other adverse
claims of every kind or character, and Purchaser shall acquire good and valid
title to the Asset, free and clear of all liens, pledges, charges security
interests, restrictions, licenses, encumbrances, liabilities or any other
adverse claim of any kind or character.
(d) Infringement. To the best of the Seller's knowledge, no persons
other than the Purchaser has heretofore utilized the Asset. To the best of the
Seller's knowledge, the Asset will not infringe or violate any valid patent,
trademark, trade name or copyright of others and the Seller has not received any
notice, claim or protest respecting any such violation or infringement.
(e) Broker. No agent, broker or other person acting pursuant to
authority of Seller is entitled to any commission or finder's fee in connection
with the transactions contemplated by this Agreement.
(f) Accuracy of Information. No representation, statement or
information made or furnished by Seller to Purchaser or by Purchaser to Seller,
in this Agreement, and the schedules hereto and the documents set forth contain,
or shall contain, any untrue statement of fact or omits or shall omit any fact
necessary to make the information contained in such representation, or
information not misleading, and, there are no obligations, contingent or
otherwise, of the Seller or Purchaser that are not shown on any such schedule.
(g) Claims. No claim has been asserted by any person other than Seller
and purchaser with regard to the Asset or the rights to the use thereof.
(h) Use. The Seller will not, without the Purchaser's written consent,
hereafter use the Asset or permit any persons other than Purchaser and
the Purchaser's designees and assigns, to use the Asset, except for Seller's
private use of such Assets or the distribution of such Assets to Dr. Bielory's
patients.
(i) Governmental Approvals. The Seller has taken or will take all
necessary actions to provide that in the developing, testing and manufacturing
of the Asset , the Seller is and shall continue to be in compliance in all
material respects with all United States and foreign, state, county, local or
other governmental statutes and ordinances, and with all rules and regulations
of all United States and foreign, state, county, local and other governmental
agencies and bodies, applicable to him, and to the Asset, except that to date,
Seller has not applied for approvals or licenses of any agency.
<PAGE> 5
(j) Investment Representations.
(i) The Seller will acquire the Shares for the Seller's own
account, for investment purposes only, and not with a view to the sale or other
distribution thereof, in whole or in part, in violation of the Act, the General
Rules and Regulations ("Rules and Regulations") of the Securities and Exchange
Commission ("Commission") promulgated thereunder, or any other applicable
securities laws.
(ii) The Seller is familiar with and has received documentation
concerning the business and financial condition of the Purchaser and Seller has
had the opportunity to obtain answers to any questions concerning the
Purchaser's business, financial and other affairs. The Seller fully understands
that any payment hereunder in Shares is conditional upon approval by the
Stockholders of an increase in the number of shares the Purchaser is authorized
to issue. Moreover Seller understands that such Shares given to him as the
Purchase Price are also subject to the conditions set forth in Section 1.2
above, present an exceptional risk, and the Shares may decline in value such
that Seller may lose the entire current value of the Shares.
(iii) The Seller has been advised that the Shares have not been
registered under the Securities Act and that the Shares issued and delivered in
reliance on an exemption from the registration requirements of the Securities
Act, Section 4(2) thereof as a transaction by an issuer not involving a public
offering. The Seller has also been advised that it may not make any disposition
of the Shares unless (a) the Shares are registered under the Securities Act, or
(b) the sale, transfer or other disposition is made in conformity with the
provisions of Rule 144 of the Rules and Regulations, or (c) prior thereto (1)
notice of the proposed disposition is given to the Purchaser with a detailed
statement of the circumstances surrounding the proposed disposition and (2) the
Purchaser shall have received the opinion of counsel for the Purchaser at the
expense of Seller to the effect (x) that the proposed disposition will not be in
contravention of any of the provisions of the Securities Act or of the Rules and
Regulations thereunder, or (y) that appropriate action necessary for compliance
with the Securities Act and the Rules and Regulations thereunder has been taken.
(iv) The Seller understands that the Purchaser is under no
obligation to register the Shares under the Securities Act, or to take any other
action in order to make compliance with an exemption from the registration
provisions of the Securities Act in connection with any sale of the Shares by
the Seller.
(v) The Seller has been advised that the Shares constitute
"restricted securities," as that term is defined in Rule 144 of the Rules and
Regulations.
(vi) The Seller understands that there will be placed upon the
certificates representing the Shares, and upon any certificates issued in
substitution therefor, an appropriate stop transfer legend regarding the
restrictions on the transfer of the Shares under the Securities Act.
<PAGE> 6
(k) Absence of Litigation. Seller is not aware and has not received
notice of any threatened, pending or commenced litigation, arbitration or
administrative hearing or investigation, or other action seeking to prevent, or
having a potential detrimental effect upon Purchaser in connection with the
Asset or the consummation of the transactions contemplated by this Agreement.
(l) Insolvency Proceedings. No insolvency proceedings, including
bankruptcy, receivership, reorganization, composition or arrangement with
creditors, are pending or threatened against Seller.
(m) Schedule Being True and Correct. The schedules and exhibits to this
Agreement are true and correct in all respects.
(n) Conflicts. The execution, delivery and performance of this
Agreement, shall not conflict with or result in the breach or violation of
either parties' contracts, agreements, commitments, licenses, permits,
authorizations or concession to which they are a party or by which they are
bound, or any statute, rule, regulation, ordinance, code, order, judgment, writ,
injunction, decree or award of any court or administrative governmental body, or
constitute an event which with notice, lapse of time, or both, would result in
any such breach, or violation and which would have a material adverse effect on
each other.
3. Representations and Warranties of Purchaser.
Purchaser makes the following representations and warranties as of the date
hereof:
(a) Organization and Good Standing. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware.
(b) Authority. Except of Stockholder authorization to increase the
number of shares of its common stock, the Purchaser has (a) full power and has
taken all corporate action necessary to execute, deliver and perform this
Agreement, as amended and partially restated and to carry out the transaction
contemplated hereby and (b) has full power to execute, deliver and perform the
obligations of Purchaser under this Agreement and has been duly and effectively
authorized by Purchaser's Board of Directors and no further corporate authority
therefor or approval thereof is required by law.
(c) Conflicts. The execution, delivery and performance of this
Agreement shall not conflict with or result in the breach or violation of any of
the Purchaser's contracts, agreements, commitments, licenses, permits,
authorizations or concession to which it is a party or by which it is bound, or
any statute, rule, regulation, ordinance, code, order, judgment, writ,
injunction, decree or award of any court or administrative governmental body, or
constitute an event which with notice, lapse of time, or both, would result in
any such breach, or violation and which would have a material adverse effect on
the Purchaser.
<PAGE> 7
(d) Brokers. No agent, broker or other person acting pursuant to
authority of Purchaser is entitled to any commission or finder's fee in
connection with the transactions contemplated hereby.
(e) Governmental Filings. Except for filing with the Commission
required by Federal Securities laws, Purchaser is not required to submit any
notice, report or other filing to any governmental or regulatory agency, nor is
any notice of any report required to be obtained by Purchaser in connection with
the execution or delivery of this Agreement or the consummation of the
transactions contemplated hereby.
(f) Absence of Litigation. Purchaser is not aware and has not
received notice of any threatened, pending or commenced litigation, arbitration
or administrative hearing or investigation, or other action seeking to prevent,
or having a potential detrimental effect upon the undersigned parties in
connection with the Asset or the consummation of the transactions contemplated
by this Agreement.
(g) Insolvency Proceedings. No insolvency proceedings, including
bankruptcy, receivership, reorganization, composition or arrangement with
creditors, are pending or threatened against Purchaser.
4. Indemnification Rights. To the best of Seller's knowledge, Seller
represents and warrants that the components of the products in Schedule A have
various anti-allergy and anti-inflammatory effects as reported in Seller's peer
review manuscript "Journal of Asthma" (February 1999). Seller does not warrant
or represent whether or not such products will require any licenses or approvals
from any state or federal agency. Purchaser expressly indemnifies and holds
Seller harmless from any and all lawsuits, proceedings, arbitrations, or other
actions arising out of, or in connection with, the manufacture, sale,
advertisement, distribution or any other use of the Assets following execution
of this Agreement and for six (6) years after its expiration or termination.
Purchaser warrants that it carries, and will continue to carry, for as long as
it has obligations under this Agreement, in excess of $1,000,000 of Product
Liability insurance which will cover Seller and the Assets. Purchaser agrees to
provide Seller 30 days notice of cancellation and of renewals of such insurance
coverage.
5.1 Survival of Representations, Warranties and Covenants. All
representations and warranties contained herein or appended hereto shall be
valid and enforceable and shall survive the consummation of the transaction
contemplated hereby, irrespective of any investigation made by or on behalf of
either party for a period of five (5) years following the date of this
Agreement. All covenants and other agreements contained herein shall be valid
and
<PAGE> 8
enforceable for a period of six (6) years following the date hereof.
5.2 Notices. All notices which are permitted or required under this Agreement
shall be in writing and delivered personally or by certified mail, postage
prepaid, addressed as follows, or to such other person or address as may be
designated by written notice by one party to the other parties:
If to Purchaser: Advanced Plant Pharmaceuticals, Inc.
Attention: Samuel Berkowitz
43 West 33rd St.
New York, New York 10001
With a copy to: Feder, Kaszovitz, Isaacson, Weber, Skala & Bass LLP
Attention: Seth A. Farbman, Esq.
750 Lexington Avenue
New York, New York 10022
If to Seller: Dr. Leonard Bielory
400 Mountain Avenue
Springfield, NJ 07081
With a copy to: Abraham Borenstein, Esq.
Bloom Borenstein, P.C.
155 Morris Avenue
Springfield, NJ 07081
Facsimile: (973) 379-4620
Notices shall be deemed delivered when delivered personally or when
mailed by prepaid certified or registered mail with return receipt requested, or
air courier which provides for evidence of delivery.
The addresses set forth above shall be conclusive for all purposes unless
and until written notice, in the manner for notice provided in this section 6.2,
of a change of address shall be sent to the parties herein.
5.3 Severability. Any provision of this Agreement which is invalid or
unenforceable shall be ineffective to the extent of such invalidity or
unenforceability, without affecting in any way the remaining provision hereof.
5.4 Schedules. It is acknowledged and agreed that all exhibits and schedules
are an integral part hereof and are incorporated, in total, by reference fully
as a part of this Agreement.
5.5 Amendment. This Agreement may not be modified, amended or terminated
except by written agreement subscribed by both parties hereto.
<PAGE> 9
5.6 Waiver. No waiver of any breach or default hereunder shall be considered
valid unless in writing and signed by the party giving such waiver, and no such
waiver shall be deemed a waiver of any subsequent breach or default of the same
or similar nature.
5.7 Headings. The paragraph headings contained herein are for the purpose of
convenience only and are not intended to define or limit the contents of said
paragraphs.
5.8 Counterparts. This Agreement may be executed in one or more counterparts,
all of which taken together shall be deemed one original.
5.9 Governing Law. This Agreement will be deemed to have been made and
delivered in the State of New Jersey and its validity, interpretation, and
construction, as well as the remedies for its enforcement or breach are to be
applied pursuant to, and in accordance with, the laws of the State of New Jersey
for contracts made and to be performed in that State.
5.10 Jurisdiction and Venue. The Purchaser and Seller each hereby (i) agrees
that any legal suit, action or proceeding arising out of or relating to this
Agreement prior to its amendment and as amended and partially restated shall be
instituted exclusively in New Jersey State Superior Court, or in the United
States District Court of New Jersey, (ii) waives any objection to the venue of
any such suit, action or proceeding and the right to assert that such forum is
not a convenient forum, and (iii) irrevocably consents to the jurisdiction of
the New Jersey State Superior Court and the United States District Court of New
Jersey in any such suit, action or proceeding, and the Purchaser and Seller each
further agrees to accept and acknowledge service or any and all process which
may be served in any such suit, action or proceeding in New Jersey State
Superior Court or in the United States District Court of New Jersey and agrees
that service of process upon it mailed by certified mail to its address shall be
deemed in every respect effective service of process upon it in any suit, action
or proceeding.
IN WITNESS WHEREOF, this Agreement has been duly executed as of the date
first written above.
ADVANCED PLANT PHARMACEUTICALS, INC.
(Purchaser)
By:
/s/ David Lieberman
--------------------------
David Lieberman, President
ACCEPTED AND AGREED:
(Seller)
By:
<PAGE> 10
/s/ Leonard Bielory
- ----------------------------
Dr. Leonard Bielory
<PAGE> 11
SCHEDULE B
BILL OF SALE
KNOW ALL MEN BY THESE PRESENTS:
The undersigned, Dr. Leonard Bielory ("Seller"), in consideration of certain
payments and other good and valuable consideration paid to Seller by ADVANCED
PLANT PHARMACEUTICALS, INC. ("Assignee"), the receipt and sufficiency of which
is hereby acknowledged, pursuant to the terms of that certain Asset Purchase
Agreement, dated as of February 28, 2000 ("Technology Purchase Agreement"), by
and between Seller and Assignee, the closing of the transaction contemplated
thereby held on the date hereof, hereby assigns, grants, conveys, sells,
transfers and delivers to Assignee all of his respective rights, title and
interest in and to the Asset (as such term is defined in the Asset Purchase
Agreement and as identified and described more particularly on Schedule A
thereto), including, without limitation:
(i) all rights owned, held or enjoyed by the Seller relating to or
connected with the research, development of the Asset by the Seller in the
United States and worldwide. Such rights shall include, but not be limited to,
the complete underlying dossier and supporting documentation, studies and tests,
formulations, extraction methodologies and technical processes; (ii) copies of
all books and records of the Seller relating to studies, trade secrets,
technical information, development of the Asset; (iii) any and all other
property rights of the Seller, of any kind, character and description, whether
tangible or intangible, which are appurtenant to the ownership of, including but
not limited to all information and records acquired for, used in, or in any way
related to the developing, testing and manufacturing of by the Seller.
To have and to hold the same unto Assignee and its assigns forever.
The Asset Purchase Agreement and all of the terms, conditions, representations,
warranties and covenants therein and the schedules and exhibits thereto, are
incorporated into this General Assignment by reference as if same were set forth
herein.
Any provision of this assignment which may be unenforceable or invalid under any
law shall be ineffective to the extent of such unenforceability or invalidity
without affecting the enforceability or validity of any other provision hereof.
<PAGE> 12
IN WITNESS WHEREOF, Seller has caused this to be duly executed on this
28th day of February, 2000
/s/ Leonard Bielory
--------------------
Dr. Leonard Bielory
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 12,726
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 12,726
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 21,954
<CURRENT-LIABILITIES> 1,198,738
<BONDS> 0
0
0
<COMMON> 4,006,659
<OTHER-SE> (5,183,443)
<TOTAL-LIABILITY-AND-EQUITY> (1,176,784)
<SALES> 7,695
<TOTAL-REVENUES> 7,695
<CGS> 25,770
<TOTAL-COSTS> 25,770
<OTHER-EXPENSES> 837,695
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (855,770)
<INCOME-TAX> 0
<INCOME-CONTINUING> (855,770)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (855,770)
<EPS-BASIC> (.01)
<EPS-DILUTED> (.01)
</TABLE>
