PROSPECTUS
SUMMARY
Our
Business
We are
dedicated to improving people’s health through the detection and eradication of
nanobacterium sanguineum
(nanobacteria). Our research is establishing the pathogenic role of Nanobacteria
in calcification, particularly in coronary artery heart disease and vascular
disease. We have identified two biomarkers of nanobacterial infection, labelled
NB2™ ELISA assays, to detect nanobacterial antigen ad IgG antibody. We are also
leveraging our proprietary knowledge and intellectual property to develop
therapies to treat nanobacterial infection. We currently market a patented
therapeutic nanobacteria regimen that we developed.
Our
intellectual property covers methods for the detection, growth and treatment of
Nanobacteria and is being leveraged to develop novel companion diagnostic and
therapeutic products to detect and treat nanobacterial infections. We are also
exploring commercialization opportunities in the bio-industrial and bio-medical
markets.
About
Nanobacteria - Nanobacteria are extremely small cell-walled micro organisms. We
believe that they are the smallest self-replicating organism ever detected.
Nanobacteria were first discovered in 1988 by a Finnish researcher, and Nanobac
co-Founder Olavi Kajander, M.D., Ph.D. Dr. Neva Ciftcioglu joined his team in
1991 and their corroborated work with nanobacteria has put them at the forefront
of research into this medically important pathogen. Their research was the first
to establish that blood-borne Nanobacteria forms slow-growing calcified colonies
in arteries and organs, much as coral reefs are formed.
There are
medical researchers that contend that nanobacteria not alive and they are
artifacts, contaminants or crystalline growths. We believe research shows that
nanobacteria have many characteristics of life and further research is required.
We are
also working on the following portfolio of diagnostic and therapeutic products
focused on Nanobacteria and diseases of pathological calcification.
1.
Diagnostics - We have developed two diagnostic assays to identify the presence
of Nanobacteria in blood. One test measures levels of Nanobacterial antigen
(NANO-CAPTURE - Nanobacterial Antigen Assay) and the other test measures whether
a patient has been exposed to Nanobacteria (NANO-SERO - Nanobacteria Antibody
Assay). Our goal is to develop diagnostic assays that will be globally
distributed for a variety of diseases associated with nanobacterial infection
and pathologic calcification. Our diagnostic tests will facilitate further
research into the cause and effect of Nanobacteria and will allow researchers
the ability to measure changes in levels of Nanobacteria in their test
patients.
2.
Therapeutics - We are in the process of implementing a clinical strategy to
develop novel therapies against nanobacterial infections. Currently, we offer a
combination of supplements that are designed to help break down the
hydroxylapatite shell that encapsulates Nanobacteria, which may make the
pathogen more susceptible to antimicrobial therapy. Preliminary results
demonstrate that our combination of supplements, along with the antibiotic
Tetracycline HCL, may reduce coronary calcium scores. However, further studies
are required and the preliminary results may be incorrect. To date, no drugs
have demonstrated the ability to significantly decrease coronary calcium scores.
3. Other
Applications - Nanobacteria may also be contaminating biologics, like vaccines
and bio-medical devices, like implantable hip replacement parts. We are
exploring commercial opportunities to detect and eradicate nanobacterial
infection or contamination in the following additional markets:
| · |
Bio-Medical-
Vaccines and Blood Products |
| · |
Bio-Industrial-
Implantable Durable Medical Devices and Medical Exam
Equipment |
Prospectus
Summary (continued)
Disease
Markets - Nanobacteria may be implicated in a variety of human diseases
associated with pathological calcification including coronary artery disease,
kidney stones, polycystic kidney disease, prostatitis and cancers with calcium.
Treatment costs associated with these diseases represent over $350 billion of
total healthcare spending. Most significant amongst this list is cardiovascular
disease. Cardiovascular disease represents 27% of all physician visits and 26%
of all physician scripts in the United States. Coronary artery disease (CAD) is
the most common form of heart disease. CAD begins as coronary artery
calcification that leads to atherosclerosis before developing into
CAD.
Our
principal executive offices are located at 2727 W. Martin Luther King Blvd.,
Suite 850, Tampa, Florida 33607. We were incorporated under the laws of the
state of Florida. Our telephone number is (813) 264-2241.
Number
of Shares Being Offered
This
prospectus covers the resale by the selling stockholders named in this
prospectus of up to 26,472,843 shares of our common stock issued to selling
stockholders, and up to 32,625,000 shares of common stock which may be issued to
the selling stockholders upon the exercise of outstanding common share purchase
warrants issued in connection with private placement. The selling stockholders
may sell the shares of common stock in the public market or through privately
negotiated transactions or otherwise. The selling stockholders may sell these
shares of common stock through ordinary brokerage transactions, directly to
market makers or through any other means described in the section entitled "Plan
of Distribution".
Number
of Shares Outstanding
There
were 187,340,093 shares of our common stock issued and outstanding as at May 4,
2005.
Use
of Proceeds
We will
not receive any of the proceeds from the sale of the shares of common stock
being offered for sale by the selling stockholder. We will, however, incur all
costs associated with this registration statement and prospectus.
Prospectus
Summary (continued)
Summary
of Financial Data
The
following selected consolidated financial data has been derived from our
consolidated financial statements. The information below should be read in
conjuncture with “Management’s Discussion and Analysis of Financial Condition
and Results of Operations” and our Consolidated Financial Statements and related
notes. The following information is presented as of and for the period from
February 22, 2002 (date of inception) through December 31, 2002 and as of and
for the years ended December 31, 2003 and 2004.
| |
|
Years
ended December 31, |
|
| |
|
2004
|
|
2003
|
|
2002 |
|
| |
|
|
|
|
|
|
|
Consolidated
Balance Sheet Data: |
|
|
|
|
|
|
|
|
Working
Capital |
|
|
($1,189,310 |
) |
|
($6,763,635 |
) |
|
($340,922 |
) |
|
Total
assets |
|
$ |
9,684,307 |
|
$ |
6,044,090 |
|
$ |
5,223 |
|
|
Total
liabilities |
|
$ |
3,573,463 |
|
$ |
6,850,246 |
|
$ |
346,145 |
|
|
Shareholders'
equity (deficit) |
|
$ |
6,110,844 |
|
|
($806,156 |
) |
|
($340,922 |
) |
|
Shares
outstanding at period end |
|
|
187,240,093
|
|
|
99,968,840
|
|
|
19,982,965
|
|
| |
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
Consolidated
Statement of Operation Data: |
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
$ |
358,361 |
|
$ |
482,815 |
|
$ |
0 |
|
|
Gross
profit |
|
$ |
257,891 |
|
$ |
149,693 |
|
$ |
0 |
|
|
Operating
loss |
|
|
($7,600,383 |
) |
|
($2,700,211 |
) |
|
($43,621 |
) |
|
Loss
from continuing operations |
|
|
($7,817,510 |
) |
|
($2,761,133 |
) |
|
($43,621 |
) |
|
Net
loss |
|
|
($7,874,778 |
) |
|
($3,699,491 |
) |
|
($1,475,299 |
) |
|
Diluted
earnings per share |
|
|
($0.05 |
) |
|
($0.05 |
) |
|
($0.11 |
) |
|
Cash
dividends |
|
$ |
0 |
|
$ |
0 |
|
$ |
0 |
|
|
Cash
dividends per share |
|
$ |
0.00 |
|
$ |
0.00 |
|
$ |
0.00 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Weighted
average common shares |
|
|
152,903,084
|
|
|
67,489,524
|
|
|
13,941,197
|
|
| (1) |
Consolidated
Balance Sheet and Consolidated Statement of Operation data for the years
ended December 31, 2004 and 2003 give effect to our acquisition of
NanobacLabs Pharmaceuticals, Inc. in June 2003 and Nanobac OY in November
2003. |
| |
(2)
|
Consolidated
Statement of Operation data for the years ended December 31, 2004, 2003
and 2002 give effect for the October 2003 decision to dispose of the
HealthCentrics business Unit. Accordingly, HealthCentrics’ operations for
2002 and 2003 have been removed from continuing operations.
|
RISK
FACTORS
An
investment in our common stock involves a number of very significant risks. You
should carefully consider the following risks and uncertainties in addition to
other information in this prospectus in evaluating our company and our business
before purchasing shares of common stock. Our business, operating results and
financial condition could be seriously harmed due to any of the following risks.
The risks described below are not the only ones facing our company. Additional
risks not presently known to us may also impair our business operations. You
could lose all or part of your investment due to any of these
risks.
We
require additional financing in order to continue in business as a going
concern, the availability of which is uncertain. We may be forced by business
and economic conditions to accept financing terms which will require us to issue
our securities at a discount, which could result in further dilution to our
existing stockholders.
As
discussed under the heading, "Management's Discussion and Analysis - Liquidity
and Capital Resources," we require additional financing to fund our operations.
There can be no assurance that additional financing will be available to us when
needed or, if available, that it can be obtained on commercially reasonable
terms. In addition, any additional equity financing may involve substantial
dilution to our stockholders. If we fail to raise sufficient financing to meet
our immediate cash needs, we will be forced to scale down or perhaps even cease
the operation of our business, which may result in the loss of some or all of
your investment in our common stock.
In
addition, in seeking debt or equity private placement financing, we may be
forced by business and economic conditions to accept terms which will require us
to issue our securities at a discount from the prevailing market price or face
amount, which could result in further dilution to our existing
stockholders.
Liquidity
and Working Capital Risks; Need for Additional Capital to Finance Growth and
Capital Requirements
Throughout
2004 and 2003, affiliates of our Chief Executive Officer have provided our
capital needs through loans and capital contributions. While these affiliates
continue to provide for the majority of our cash requirements, they are under no
obligation to continue such financing and/or strategic guidance. In the event
these affiliates should discontinue their support, we may have difficulty in
continuing our operations. In such an event, shareholders could lose their
investment in its entirety. Historically, these affiliates have provided capital
to us on a demand debt basis after which they may convert debt into shares of
our common stock. If, in the future we require additional capital, these
affiliates may contribute some or all of our requirements. We anticipate that as
a part of any such loan, these affiliates would have rights to convert into
additional shares of our common stock. In such an event and to the degree of
which we require these affiliates’ support, shareholders may experience
dilution. At present, we do not maintain key man insurance for our CEO.
In
addition to the financial support we may receive from affiliates of our CEO, we
may continue to seek to raise capital from public or private equity or debt
sources to provide working capital to meet our general and administrative costs
until net revenues make the business self-sustaining. We cannot guarantee that
we will be able to raise any such capital on terms acceptable to us or at all.
Such financing may be upon terms that are dilutive or potentially dilutive to
our stockholders. If alternative sources of financing are required, but are
insufficient or unavailable, we will be required to modify our growth and
operating plans in accordance with the extent of available funding.
Risk
Factors (continued)
Potential
Incorrect Conclusions on the Detection and Eradication of
Nanobacteria
Most of
our future revenue is based on our ability to detect and eradicate Nanobacteria.
If it is ultimately proved that our diagnostic methodologies and treatment
regimens as covered by our patents are ineffective or based upon incorrect
scientific conclusions, our existing patents and product lines may lose most or
all of their value. Further, if we are unsuccessful in leveraging our diagnostic
and therapeutic products to detect and treat nanobacterial diseases, we may not
generate sufficient revenue to offset our expenses.
Acceptance
of Products in the Marketplace is Uncertain.
Our
future financial performance will depend, at least in part, upon the
introduction and customer acceptance of our proposed treatments and products.
Our treatments and products may not achieve market acceptance, and such adverse
marketing results could materially harm the Company.
Limited
Operating History Anticipated Losses; Uncertainty of Future
Results
We have a
limited operating history upon which an evaluation of our Company and our
prospects can be based. Our prospects must be evaluated with a view to the risks
encountered by companies in early stages of development, particularly in light
of the uncertainties relating to the new and evolving biolife science research
which we intend to develop and market, and the acceptance of our business model.
We will be incurring costs to: (i) perform research studies to prove the
effectiveness of our pharmaceutical products, (ii) further develop and market
our products; (iii) establish distribution relationships; and (iv) build an
organization. To the extent that such expenses are not subsequently followed by
commensurate revenues, our business, results of operations and financial
condition will be materially adversely affected. We, therefore, cannot insure
that we will be able to immediately generate sufficient revenues. We expect
negative cash flow from operations to continue for at least the next 12 months
as we continue to develop and market our business. If cash generated by
operations is insufficient to satisfy our liquidity, we may be required to sell
additional equity or debt securities. The sale of additional equity or
convertible debt securities would result in additional dilution to our
stockholders. Our initial operations may not be profitable, since time will be
required to build our business to the point that our revenues will be sufficient
to cover our total operating costs and expenses. Our reaching a sufficient level
of sales revenues will depend upon a large number of factors, including
availability of sufficient working capital, the number of customers we are able
to attract and the costs of continuing development of our product
line.
Federal
Food and Drug Administration
Some or
all of our products may be governed by rules and regulations established by the
United States Food and Drug Administration (“FDA”). Changes in FDA regulations
and the enforcement thereof may affect our biolife science business.
Furthermore, we may not be successful in filing and obtaining approval of our
510K or PMA filings with the FDA for our Nano-Capture Antigen and Nano-Sero IgG
ELISA assays.
Data
Obtained Through Clinical Trials.
Data
obtained from pre-clinical studies and clinical trials do not necessarily
predict results that will be obtained from later pre-clinical studies and
clinical trials. Moreover, pre-clinical and clinical data is susceptible to
varying interpretations, which could delay, limit or prevent regulatory
approval. A number of companies in the pharmaceutical industry have suffered
significant setbacks in advanced clinical trials, even after experiencing
promising results in earlier trials. The failure to adequately demonstrate the
safety and/or effectiveness of an intended product under development could delay
or prevent regulatory clearance of the potential drug or treatment, resulting in
delays to commercialization, and could materially harm the
business.
Risk
Factors (continued)
Competitors
in the Pharmaceutical Industry May Develop Competing
Technologies
Drug
companies and/or other health care companies may seek to develop and market
technologies which may compete with our Company’s technology. While we believe
that our technology regarding the prescription treatment of nanobacterial
infections caused by nanobacterium sanguineum is unique, other competitors may
develop similar or different treatments which may become more accepted by the
marketplace.
Regulations
may Inhibit our Ability to Sell Nanobac Supplements
Codex is
a joint body comprising government representatives
and non-governmental organizations, jointly managed by the United
Nation's (U.N.) Food and Agriculture Organization (FAO) and the World
Health Organization (WHO) of the U.N. The Codex Committee on Nutrition and Foods
for Special Dietary Uses (CCNFSDU) has been attempting to develop international
guidelines for vitamins and minerals since 1991. In November 2004, these
guidelines were finalized and a vote to ratify will take place in July,
2005.
There is
a school of thought within the dietary supplement community that
buying vitamins and other dietary supplements will be severely limited by
this CODEX. Passage of the above guidelines may inhibit our ability to sell
Nanobac Supplement outside of the United States. We do not believe that the
passage will impact United State revenue as the U.S. draft position states that
"The United States supports consumer choice and access to dietary supplements
that are safe and are labelled in a truthful and non-misleading manner."
Further, the CODEX Draft notes that the Codex Guidelines for Vitamin and Mineral
Supplements will not adversely affect the availability of safe and truthfully
labelled supplement products in the U.S. marketplace or to U.S. consumers. If
our interpretation is not correct passage of the international guidelines may
inhibit the sales of Nanobac Supplement inside and outside of the United States
Risk
of Third Party Lawsuits.
We are
exposed to potential product liability risks that are inherent in the testing,
manufacturing and marketing of pharmaceutical products. We cannot assure
potential investors that such claims will not be asserted against the Company. A
successful liability claim or series of claims brought against us could have a
material adverse effect on our financial condition. In addition, we may be sued
by third parties who claim that our products and treatments infringe upon the
intellectual property rights of others or that we have misappropriated trade
secrets of others. This risk is exacerbated by the fact that the validity and
breadth of claims covered in medical technology patents and the breadth and
scope of trade secret protection involve complex legal and factual questions for
which important legal principles are unresolved. Any litigation or claims
against us, whether or not valid, could result in substantial costs, could place
a significant strain on our financial resources, and could harm our
reputation.
Government
Regulation
Healthcare
in general and the pharmaceuticals industry in particular are highly regulated
markets, subject to both federal and a multitude of state regulations and
guidelines. The majority of our business is still in clinical research
applications and is governed by the medical community. There can be no assurance
that changes to state or federal laws will not materially restrict our ability
to sell our products or develop new product lines.
Intellectual
Property Rights
We have a
family of patents encompassing the detection and eradication of nanobacteria.
There are risks inherent in any intellectual property rights in that they may be
challenged as being invalid or not original. Additionally, other parties may
abuse such intellectual rights, causing the Company to defend its rights.
Risk
Factors (continued)
Dependency
upon Key Technical and Scientific Personnel Who May Terminate Employment at Any
Time.
Our
success will depend to a significant degree upon the continued services of key
technical and scientific personnel, including but not limited to E. Olavi
Kajander, MD, PhD. In addition, our success may depend on our ability to attract
and retain other highly skilled personnel. Competition for qualified personnel
is intense, and the process of hiring and integrating such qualified personnel
is often lengthy. We may be unable to recruit personnel on a timely basis, if at
all. All of the Company’s management and other employees may voluntarily
terminate their employment with us at any time. The loss of the services of key
personnel, or the inability to attract and retain additional qualified
personnel, could result in delays to development, loss of sales, and/or
diversion of management resources that could have a material adverse affect on
the Company.
Competition
The
markets in which we compete include successful and well-capitalized competitors
that vary in size and scope. Principal competitors include Pfizer, Merck and
other pharmaceutical companies having unique treatments for cardiovascular
disease. All of these competitors are more established, benefit from greater
name recognition and have substantially greater resources than us. Moreover, we
could face additional competition as other established and emerging companies
enter the market and new products and technologies are introduced. Increased
competition could result in price reductions, fewer customer subscriptions,
reduced gross margins and loss of market share, any of which could materially
adversely affect our business, financial condition and operating results. In
addition, current and potential competitors may make strategic acquisitions or
establish cooperative relationships among themselves or with third-parties,
thereby increasing the ability of their products to address the needs of our
prospective consumers. While we believe we can differentiate our product from
these current and future competitors, focusing on the products' functionality,
flexibility, adaptability and features, there can be no assurance that we will
be able to compete successfully against current and future competitors. The
failure to effectively compete would have a material adverse effect upon our
business, financial condition and operating results.
Lack
of Independent Directors
We cannot
guarantee our Board of Directors will have a majority of independent directors
in the future. In the absence of a majority of independent directors, our
executive officers, who are also principal stockholders and directors, could
establish policies and enter into transactions without independent review and
approval thereof. This could present the potential for a conflict of interest
between the Company’s stockholders and the controlling officers and/or
directors.
Limitation
of Liability and Indemnification of Officers and Directors
Our
officers and directors are required to exercise good faith and high integrity in
our management affairs. Our Articles of Incorporation and By Laws provide,
however, that our officers and directors shall have no liability to our
shareholders for losses sustained or liabilities incurred which arise from any
transaction in their respective managerial capacities unless they violated their
duty of loyalty, did not act in good faith, engaged in intentional misconduct or
knowingly violated the law, approved an improper dividend or stock repurchase,
or derived an improper benefit from the transaction. Our Articles and By-Laws
also provide for the indemnification by us of the officers and directors against
any losses or liabilities they may incur as a result of the manner in which they
operate our business or conduct the internal affairs, provided that in
connection with these activities they act in good faith and in a manner they
reasonably believe to be in, or not opposed to, the best interests of the
Company, and their conduct does not constitute gross negligence, misconduct or
breach of fiduciary obligations.
Continued
Control by Current Officers and Directors
The
present officers and directors control approximately 50% of the outstanding
shares of Common Stock, and are in a position to elect all of our Directors and
otherwise control the Company, including, without limitation, authorizing the
sale of equity or debt securities of the Company, the appointment of officers,
and the determination of officer's salaries. Shareholders have no cumulative
voting rights.
Please
read this prospectus carefully. You should rely only on the information
contained in this prospectus. We have not authorized anyone to provide you with
different information. You should not assume that the information provided by
the prospectus is accurate as of any date other than the date on the front of
this prospectus.
FORWARD-LOOKING
STATEMENTS
This
prospectus contains forward-looking statements, which relate to future events or
our future financial performance. In some cases, you can identify
forward-looking statements by terminology such as "may", "will", "should",
"expects", "plans", "anticipates", "believes", "estimates", "predicts",
"potential" or "continue" or the negative of these terms or other comparable
terminology. These statements are only predictions and involve known and unknown
risks, uncertainties and other factors, including the risks in the section
entitled "Risk Factors" on pages 8 to 11, that may cause our or our industry's
actual results, levels of activity, performance or achievements to be materially
different from any future results, levels of activity, performance or
achievements expressed or implied by these forward-looking
statements.
While
these forward-looking statements, and any assumptions upon which they are based,
are made in good faith and reflect our current judgment regarding the direction
of our business, actual results will almost always vary, sometimes materially,
from any estimates, predictions, projections, assumptions or other future
performance suggested herein. Except as required by applicable law, including
the securities laws of the United States, we do not intend to update any of the
forward-looking statements to conform these statements to actual results The
safe harbour for forward-looking statements provided in the Private Securities
Litigation Reform Act of 1995 does not apply to the offering made in this
prospectus.
SECURITIES
AND EXCHANGE COMMISSION'S PUBLIC REFERENCE
Any
member of the public may read and copy any materials filed by us with the
Securities and Exchange Commission at the SEC's Public Reference Room at 450
Fifth Street, N.W., Washington, D.C. 20549. Information on the operation of the
Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. The
SEC maintains an Internet web site (http://www.sec.gov) that contains reports,
proxy and information statements, and other information regarding issuers that
file electronically with the SEC.
THE
OFFERING
This
prospectus covers the resale by the selling stockholders named in this
prospectus by the selling stockholders named in this prospectus of:
- up to
26,472,843 shares of common stock including common stock issuable to the selling
stockholders pursuant to subscription agreements; and
- up to
32,625,000 shares of common stock issuable to selling stockholders assuming the
exercise of outstanding common share purchase warrants.
USE
OF PROCEEDS
The
shares of common stock offered hereby are being registered for the account of
the selling stockholders named in this prospectus. As a result, all proceeds
from the sales of the common stock will go to the selling stockholders and we
will not receive any proceeds from the resale of the common stock by the selling
stockholders. We will, however, incur all costs associated with this
registration statement and prospectus.
SELLING
SHAREHOLDERS
This
prospectus relates to the offer and sale by the following selling stockholders
of the indicated number of shares, all of which are issuable pursuant to
warrants and subscription agreements held by these selling stockholders. The
number of shares set forth in the table for the selling stockholders represents
an estimate of the number of shares of common stock to be offered by the selling
stockholders. The actual number of shares of common stock issuable pursuant to
the subscription agreements is based on the future market price of the common
stock. The actual number of shares of common stock offered in this prospectus,
and included in the registration statement of which this prospectus is a part,
includes such additional number of shares of common stock as may be issued or
issuable pursuant to the subscription agreements and exercise of the related
warrants by reason of any stock split, stock dividend or similar transaction
involving the common stock, in accordance with Rule 416 under the Securities Act
of 1933.
The
Shareholder identified under “OY Acquisition” is currently employed by the
Company, but is not a Named Executive Officer of the Company. None of the other
selling stockholders have held any position or office within our company, nor
have they had any other material relationship with us in the past three years,
other than in connection with transactions pursuant to which the selling
stockholders acquired convertible notes and warrants. We have been notified by
the selling stockholders that they are not broker-dealers or affiliates of
broker-dealers and that they believe they are not required to be
broker-dealers.
The
following table also sets forth the name of each person who is offering the
resale of shares of common stock by this prospectus, the number of shares of
common stock beneficially owned by each person, the number of shares of common
stock that may be sold in this offering and the number of shares of common stock
each person will own after the offering, assuming they sell all of the shares
offered.
Selling
Shareholders (continued)
| |
|
|
|
Shares
Beneficially Owned |
|
|
|
Shares
Beneficially Owned |
|
| |
|
Prior
to the Offering |
|
|
After
the Offering |
| |
|
|
|
|
|
|
|
Total
Shares |
|
|
|
|
|
| Name |
|
|
|
Number
(1) |
|
Percent
(2) |
|
Registered
(1) (3) |
|
Number |
|
Percent
(2) |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subscription
Agreements |
|
|
|
|
|
|
|
|
|
|
|
The
Nutmeg Group, LLC (4) |
|
|
|
|
|
32,500,000
|
|
|
14.6 |
% |
|
32,500,000
|
|
|
0
|
|
|
0.0 |
% |
3366
Commercial |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Northbrook,
IL 60062 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jaytern
Associates, Inc. (5) |
|
|
|
|
|
6,250,000
|
|
|
3.1 |
% |
|
6,250,000
|
|
|
0
|
|
|
0.0 |
% |
29
Beach Road |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Monmouth
Beach, NJ 07750 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NITE
Capital (6) |
|
|
|
|
|
10,000,000
|
|
|
4.9 |
% |
|
10,000,000
|
|
|
0
|
|
|
0.0 |
% |
100
East Cook Avenue, Suite 201 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Libertyville,
IL 60048 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hartsfield
Capital Securities, Inc. (7) |
|
|
|
|
|
3,250,000
|
|
|
1.6 |
% |
|
3,250,000
|
|
|
0
|
|
|
0.0 |
% |
3775
Mansell Road |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alparetta,
GA 30022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal
|
|
|
|
|
|
52,000,000
|
|
|
21.8 |
%
|
|
52,000,000
|
|
|
0
|
|
|
0.0 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion
of Current Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benedict
Maniscalco |
|
|
|
|
|
1,566,925
|
|
|
0.8 |
% |
|
951,925
|
|
|
615,000
|
|
|
0.3 |
% |
4730
N. Habana Avenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Suite
201 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tampa,
FL 33614 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MacFarlane
Ferguson & McMullen |
|
|
|
|
|
222,460
|
|
|
0.1 |
% |
|
222,460
|
|
|
0
|
|
|
0.0 |
% |
400
North Tampa Street |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Suite
2300 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tampa,
FL 33602 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal |
|
|
|
|
|
1,789,385
|
|
|
0.9 |
% |
|
1,174,385
|
|
|
615,000
|
|
|
0.3 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OY
Acquisition |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
E.
Olavi Kajander (8) |
|
|
|
|
|
6,523,458
|
|
|
3.3 |
% |
|
5,923,458
|
|
|
600,000
|
|
|
0.3 |
% |
2727
W Martin Luther King Blvd |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Suite
850 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tampa,
Florida 33607 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal |
|
|
|
|
|
6,523,458
|
|
|
3.3 |
% |
|
5,923,458
|
|
|
600,000
|
|
|
0.3 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
60,312,843
|
|
|
24.7 |
% |
|
59,097,843
|
|
|
1,215,000
|
|
|
0.6 |
% |
Selling
Shareholders (continued)
The
number and percentage of shares beneficially owned is determined in accordance
with Rule 13d-3 of the Securities Exchange Act of 1934, and the information
is not necessarily indicative of beneficial ownership for any other purpose.
Under such rule, beneficial ownership includes any shares as to which the
selling stockholder has sole or shared voting power or investment power and also
any shares, which the selling stockholder has the right to acquire within 60
days. The actual number of shares of common stock issuable pursuant to the
subscription agreements are subject to adjustment depending on the future market
price of the common stock, and could be materially less or more than the number
estimated in the table.
| (1) |
Represents
common stock that potentially may be issued: (a) pursuant to subscription
agreements; and (b) upon the exercise of common share purchase warrants
issued to the named selling stockholders pursuant to subscription
agreements. The subscription agreements contains a contractual restriction
on beneficial share ownership. It provides that the holder may not receive
shares, or exercise the warrant, to the extent that such shares, would
result in the holder, together with its affiliates, beneficially owning in
excess of 4.99% of our then issued and outstanding shares of common stock.
For the purposes of this table, any contractual restriction on the number
of securities the selling stockholders may own at any point in time has
been disregarded. |
| (2) |
Includes
189,006,760 shares of common stock issued and outstanding as of May 4,
2005 (including 1,666,667 shares in the process of being issued) and
32,625,000 Warrants outstanding related to the selling
shareholders. |
| (3) |
Assumes
that all securities registered will be
sold. |
| (4) |
Includes
10,833,333 shares of common stock underlying a subscription amount of
$650,000 and 8,125,000 shares underlying warrants exercisable at 120% of
the Fixed Price per share and 8,125,000 shares underlying warrants
exercisable at 150% of the Fixed Price per share.
|
| (5) |
Includes
2,083,333 shares of common stock underlying a subscription amount of
$125,000 and 1,562,500 shares underlying warrants exercisable at 120% of
the Fixed Price per share and 1,562,500 shares underlying warrants
exercisable at 150% of the Fixed Price per share.
|
| (6) |
Includes
3,333,333 shares of common stock underlying a subscription amount of
$200,000 and 2,500,000 shares underlying warrants exercisable at 120% of
the Fixed Price per share and 2,500,000 shares underlying warrants
exercisable at 150% of the Fixed Price per share.
|
| (7) |
Includes
3,250,000 shares underlying warrants at approximately $.15 per
share. |
| (8) |
Includes
5,000,000 shares of common stock underlying warrants exercisable at $.005
per share. |
CIRCUMSTANCES
UNDER WHICH THE SELLING STOCKHOLDERS ACQUIRED SECURITIES
Subscription
Agreements
From
August through February 2005, we entered into subscription agreements, with the
selling stockholders, for a private placement of shares of common stock and
warrants for an aggregate purchase price of $2,950,000 ($1,000,000 of which is
from an affiliate of the Company). As of date, we received an aggregate of
$1,475,000 from the selling stockholders (including $500,000 from an affiliate
of the Company) and the balance will be paid within five days of the
effectiveness of this prospectus. The purchasers are irrevocably bound to
purchase our securities.
Shares
of Common Stock
The
shares of common stock are priced at the lesser of
(a)
$0.12, or
(b)
fifty-two percent (52%) of the average closing bid price for the common stock on
the five trading days immediately prior to the date on which the registration
statement is declared effective.
(the
lesser of (a) and (b) are referred to as the "Fixed Price").
Warrants
The
selling stockholders will be issued warrants exercisable into such number of
shares of common stock equal to 100% of the subscription amount paid by the
selling stockholders, divided by the Fixed Price. The warrants expire on
December 31, 2008. Fifty percent (50%) of such warrants are exercisable into
shares of common stock at a price per share equal to 110% of the lesser of (a)
$0.12; or (b) fifty-two percent (52%) of the average closing bid price for our
common stock for the five trading days immediately prior to the filing with the
Securities and Exchange Commission of the Registration Statement]. The remaining
fifty percent (50%) of the warrants are exercisable into shares of common stock
at price per share equal to 150% of the lesser of (a) $0.12; or (b) fifty-two
percent (52%) of the average closing bid price for Common Stock on the five
trading days immediately prior to the filing with the Securities and Exchange
Commission of the Registration Statement].
Conversion
of Current Liabilities
During
October and December 2004, we entered into agreements with two creditors for the
conversion of approximately $170,000 of current liabilities into 1,174,385
shares of common stock. The current liabilities were the result of professional
services provided to us.
OY
Acquisition
In
January, March and August, we executed agreements to issue 5,923,458 shares of
our common stock and 5,000,000 warrants exercisable into shares of our common
stock in exchange for the remaining 35% of Nanobac OY and the settlement of past
services provided by the minority stockholders of Nanobac OY. At the conclusion
of these transactions, we owned 100% of Nanobac OY.
PLAN
OF DISTRIBUTION
The
selling stockholders and any of their respective pledgees, donees, assignees and
other successors-in-interest may, from time to time, sell any or all of their
shares of common stock on any stock exchange, market or trading facility on
which the shares are traded or in private transactions. These sales may be at
fixed or negotiated prices. The selling stockholders may use any one or more of
the following methods when selling shares:
| · |
ordinary
brokerage transactions and transactions in which the broker-dealer
solicits the purchaser; |
| · |
block
trades in which the broker-dealer will attempt to sell the shares as agent
but may position and resell a portion of the block as principal to
facilitate the transaction; |
| · |
purchases
by a broker-dealer as principal and resale by the broker-dealer for its
account; |
| · |
an
exchange distribution in accordance with the rules of the applicable
exchange; |
| · |
privately-negotiated
transactions; |
| · |
short
sales that are not violations of the laws and regulations of any state or
the United States; |
| · |
broker-dealers
may agree with the selling stockholders to sell a specified number of such
shares at a stipulated price per share; |
| · |
through
the writing of options on the shares; |
| · |
a
combination of any such methods of sale; and
|
| · |
any
other method permitted pursuant to applicable law.
|
The
selling stockholders may also sell shares under Rule 144 under the Securities
Act, if available, rather than under this prospectus. The selling stockholders
shall have the sole and absolute discretion not to accept any purchase offer or
make any sale of shares if they deem the purchase price to be unsatisfactory at
any particular time.
The
selling stockholders may also engage in short sales against the box, puts and
calls and other transactions in our securities or derivatives of our securities
and may sell or deliver shares in connection with these trades.
The
selling stockholders or their respective pledgees, donees, transferees or other
successors in interest, may also sell the shares directly to market makers
acting as principals and/or broker-dealers acting as agents for themselves or
their customers. Such broker-dealers may receive compensation in the form of
discounts, concessions or commissions from the selling stockholders and/or the
purchasers of shares for whom such broker-dealers may act as agents or to whom
they sell as principal or both, which compensation as to a particular
broker-dealer might be in excess of customary commissions. Market makers and
block purchasers purchasing the shares will do so for their own account and at
their own risk. It is possible that a selling stockholder will attempt to sell
shares of common stock in block transactions to market makers or other
purchasers at a price per share which may be below the then market price. The
selling stockholders cannot assure that all or any of the shares offered in this
prospectus will be issued to, or sold by, the selling stockholders. The selling
stockholders and any brokers, dealers or agents, upon effecting the sale of any
of the shares offered in this prospectus, may be deemed to be "underwriters" as
that term is defined under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, or the rules and regulations under
such acts. In such event, any commissions received by such broker-dealers or
agents and any profit on the resale of the shares purchased by them may be
deemed to be underwriting commissions or discounts under the Securities Act.
We are
required to pay all fees and expenses incident to the registration of the
shares, including fees and disbursements of counsel to the selling stockholders,
but excluding brokerage commissions or underwriter discounts.
The
selling stockholders, alternatively, may sell all or any part of the shares
offered in this prospectus through an underwriter. No selling stockholder has
entered into any agreement with a prospective underwriter and there is no
assurance that any such agreement will be entered into.
Plan
of Distribution (continued)
The
selling stockholders may pledge their shares to their brokers under the margin
provisions of customer agreements. If a selling stockholder defaults on a margin
loan, the broker may, from time to time, offer and sell the pledged shares. The
selling stockholders and any other persons participating in the sale or
distribution of the shares will be subject to applicable provisions of the
Securities Exchange Act of 1934, as amended, and the rules and regulations under
such act, including, without limitation, Regulation M. These provisions may
restrict certain activities of, and limit the timing of purchases and sales of
any of the shares by, the selling stockholders or any other such person. In the
event that the selling stockholders are deemed affiliated purchasers or
distribution participants within the meaning of Regulation M, then the selling
stockholders will not be permitted to engage in short sales of common stock.
Furthermore, under Regulation M, persons engaged in a distribution of securities
are prohibited from simultaneously engaging in market making and certain other
activities with respect to such securities for a specified period of time prior
to the commencement of such distributions, subject to specified exceptions or
exemptions. In regards to short sells, the selling stockholder can only cover
its short position with the securities they receive from us upon conversion. In
addition, if such short sale is deemed to be a stabilizing activity, then the
selling stockholder will not be permitted to engage in a short sale of our
common stock. All of these limitations may affect the marketability of the
shares.
LEGAL
PROCEEDINGS
Except as
described below, we know of no material, active or pending legal proceedings
against us, nor are we involved as a plaintiff in any material proceedings or
pending litigation. There are no proceedings in which any of our directors,
officers or affiliates, or any registered or beneficial shareholders are an
adverse party or has a material interest adverse to us.
On
September 24, 2004 a civil action was filed in United States District Court -
Southern District of California by World Health Products, LLC (“World Health”)
broadly alleging that the Company, together with a customer of the Company
(“Customer”), has infringed on its Patent Number 5,602,180 related to the sale
of suppositories included in the Company’s supplement product. World Health
alleged additional complaints against the Customer to which the Company is not
liable. During February 2005, World Health dropped the Company from their
lawsuit as there tests of the Company’s suppositories determined that World
Health’s patents were not being infringed upon.
DIRECTORS,
EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
|
Name |
Position
Held with the Company |
Age |
Date
First
Elected
or Appointed |
|
John
Stanton |
Chief
Executive and Financial Officer, and Chairman |
56 |
November
2000 |
|
Alex
Edwards |
Director |
40 |
March
2003 and January 2004 |
|
Dr.
Jan Egberts |
Director |
45 |
January
2004 |
|
Dr.
Stephen Rechtschaffen |
Director |
55 |
January
2004 |
Business
Experience
The
following is a brief account of the education and business experience during at
least the past five years of each director, executive officer and key employee,
indicating the principal occupation during that period, and the name and
principal business of the organization in which such occupation and employment
were carried out.
John
Stanton - Chairman Chief Executive Officer and Chief Financial
Officer
- From
March 2001 through January 2004, Mr. Stanton served as our Chief Executive
Officer (“CEO”). Mr. Stanton reassumed the role of CEO on July 23, 2004. From
March, 2001 through the present, Mr. Stanton has served as our Chairman of the
Board of Directors and Chief Financial Officer. From 1987 through the present,
Mr. Stanton served as the President and CEO of Florida Engineered Construction
Products, Corporation. Mr. Stanton has served as Chairman of the Board of
Directors of publicly-traded EarthFirst Technologies, Inc. from May 15, 2000
through the present. Mr. Stanton also serves on the Board of Directors of
publicly traded Medical Technology Systems, Inc., Powercerv Corp., Cybercare,
Inc. and White Knight SST, Inc. Since the early 1990's, Mr. Stanton has been,
and continues to be, involved in turn-around management for financially
distressed companies, providing both management guidance and financing. In 1981,
Mr. Stanton assumed the role of Chief Financial Officer for Florida Engineered
Construction Products, Corporation, a privately held manufacturer of residential
and commercial construction products, located in Tampa, Florida. Mr. Stanton
worked as an auditor with the international professional services firm that is
now known as Ernst & Young, LLP from 1973 through 1981. Mr. Stanton, a
Vietnam veteran of the United States Army, graduated from the University of
South Florida with a Bachelors Degree in Marketing and Accounting in 1972, and
with an MBA in 1973. Mr. Stanton earned the designation of Certified Public
Accountant in 1974 and was a Sells Award winner in the CPA examination. Mr.
Stanton is a lifetime resident of Tampa, Florida.
Directors,
Executive Officers, Promoters and Control Persons
(continued)
Alex
Edwards - Director -
Beginning January 2004, Mr. Edwards served as our CEO. He relinquished the CEO
role to Mr. Stanton in July 2004. From March 2003 through January 2004, Mr.
Edwards served as our Executive Vice President and Chief Operating Officer. Mr.
Edwards was also a Director from March 2003 through May 2003. He rejoined the
Board of Directors in January 2004 and continues to serve on the Board of
Directors through the present. From May 2002 through present, Mr. Edwards is a
managing partner of 360 Partners as well as president and CEO of 360 Energy.
From January 1997 to May 2002, Edwards was an executive with SRI/Surgical
Express. He served in roles that ranged from vice-president/general manager to
spending his last year with the company as president. From February 1993 through
December 1996, he worked in sales and marketing with Dianon Systems, Inc. His
positions included sales and sales management roles as well as field and
corporate marketing. Mr. Edwards also served as an officer in the United States
Navy with duty assignments ranging from shipboard divisional leadership to
executive assistant for the Naval Surface Group Commander in Norfolk, Virginia.
Mr. Edwards is a 1987 graduate of the United States Naval Academy.
In August
2003 Mr. Edwards settled a civil enforcement action brought against him by the
Securities and Exchange Commission in U.S. District Court in Tampa, Florida. The
complaint alleged that Mr. Edwards, while serving as president of SRI/Surgical
Express, Inc. (SRI), a publicly traded Florida hospital supply company, caused
SRI to enter into two transactions that resulted in SRI overstating its Fiscal
2001 third quarter revenue. Without admitting or denying the allegations in the
complaint, Mr. Edwards consented to the entry of a Final Judgment permanently
enjoining him from future violations of (or aiding and abetting violations of)
Sections 10(b), 13(b)(5), and 13(b)(2)(A) and (B) of the Securities Exchange Act
of 1934 and Exchange Act Rule 13b2-1. The Final Judgment also imposed a $50,000
civil penalty.
Dr.
Jan Egberts - Director - Dr.
Egberts joined the Board of Directors on February 2, 2004. From February 2001 to
January 2004 Dr Egberts served as Chairman of Molnlycke Healthcare, Inc. in
Newtown, PA. In addition, he served concurrently as President of the BARRIER
division from February 2001 through April 2002 and from April 2002 to January
2004 as Senior Vice President and Global Marketing Director of Molnlycke Health
Care in Goteborg Sweden. Prior to Molnlycke, Dr. Egberts served as Vice
President, Business and Market Development World Wide for Johnson & Johnson,
New Brunswick, NJ from November, 1996 to February, 2001. At Johnson &
Johnson, he served as a member of the Global Management Board of the Johnson
& Johnson Medical franchise where he was responsible for
licensing/acquisitions, equity investment and patent management. Prior to
Johnson & Johnson, Dr. Egberts held various positions with Merck & Co.
including Senior Director Marketing, Osteoporosis Business Group in West Point,
PA from February, 1994 to November, 1996; Partner in Egberts & Company, in
Amsterdam from September, 1993 to February, 1994 and various roles including
lastly Engagement Manager with McKinsey & Company in New York, Dusseldorf,
London and Amsterdam from September, 1989 to September, 1993. Finally, Dr
Egberts was the Project Manager with Cancer Biotechnology Research and
Development Organon / Bionetics Research, Inc. from September, 1995 to August,
1997.
Dr.
Egberts received his medical degree from Erasmus University Medical School,
Rotterdam, the Netherlands in 1985. He pursued the final two years of his
Medical School at Harvard Medical School in Boston and served a Medical
Subinternship at John Hopkins Medical School in Baltimore. He received his MBA
from Stanford Graduate School of Business in 1989.
Dr.
Stephan Rechtschaffen -
Director
- Dr.
Rechtschaffen joined the Board of Directors on February 2, 2004. He co-founded
Omega Institute in 1977 and is the present CEO and Chairman of the Board. He was
the developer and director of Foxhollow Wellness Spa in Lenox, MA from September
1987 through June 1989, and director of the Rhinebeck Health Center in
Rhinebeck, NY, from November 1983 through March1989. Dr. Rechtschaffen is the
author of: TimeShifting;
Creating More Time to Enjoy Your Life, 1996,
published in the United States by Doubleday, and in England, Europe, Japan and
Australia by Random House. He is co-author of Vitality
and Wellness, 1999,
published by Dell. Dr. Rechtschaffen received his medical degree in 1973 from
New York Medical College in New York City. His residency was at Harkness
Community Hospital in San Francisco.
Family
Relationships
There are
no family relationships between any of our company's directors or executive
officers.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table sets forth, as of May 4, 2005, certain information with respect
to the beneficial ownership of our common stock by each stockholder known by us
to be the beneficial owner of more than 5% of our common stock and by each of
our current directors and executive officers. Each person has sole voting and
investment power with respect to the shares of common stock, except as otherwise
indicated. Beneficial ownership consists of a direct interest in the shares of
common stock, except as otherwise indicated.
|
Name
and Address of Beneficial Owner |
Amount
and Nature of |
Percentage |
|
Beneficial
Ownership |
of
Class(1) |
|
Gary
S. Mezo (3) |
24,560,000 |
12.99% |
|
11407
Minaret Drive |
|
Tampa,
FL 33626 |
|
John
D. Stanton (4) (5) (6) |
89,082,658 |
47.13% |
|
Alexander
Edwards III (5) (6) |
9,166,667 |
4.85% |
|
Jan
Egberts |
0 |
0.00% |
|
Stephan
Rechtschaffen |
0 |
0.00% |
|
Directors
and Executive Officers as a Group (Four persons) |
98,249,325 |
51.98% |
| (1) |
Beneficial
ownership
is determined in accordance with the rules of the Securities and Exchange
Commission and generally includes voting or investment power with respect
to securities. For purposes of calculating the percentage beneficially
owned, the number of shares deemed outstanding includes (i) 187,340,093
shares outstanding as May 4, 2005, and (ii) 1,666,667 shares underlying a
subscription agreement. Unless otherwise provided, the street address of
each beneficial owner is c/o Nanobac Pharmaceuticals, Incorporated, 2727
W. Dr. Martin Luther King Blvd., Suite 850, Tampa, Florida
33607. |
| (2) |
Nanobac
has relied upon information reported by the respective shareholder to the
SEC pursuant to Section 13(d) or 13(g) of the Securities Exchange Act of
1934, as amended, as of April 12, 2005. |
| (3) |
Includes
9,760,000 shares held by Mr. Mezo’s spouse, Nancy Schriewer, and 160,000
shares held by Nancy Schriewer’s father as to which he disclaims
beneficial ownership. |
| (4) |
Includes
74,442,658 shares held by the corporate entities of Escape Velocity of
Tampa Bay, Inc., White Knight SST, Inc., Stone Enclosure, Inc., Wade Inc.
of Tampa Bay and Denouement Strategies, Inc. in which Mr. Stanton owns a
controlling ownership. |
| (5) |
Includes
14,640,000 shares that an affiliate of Mr. Stanton has an option to
purchase from Mr. Mezo. |
Changes
in Control
We are
unaware of any contract or other arrangement the operation of which may at a
subsequent date result in a change of control of Nanobac.
DESCRIPTION
OF COMMON STOCK
Our
authorized capital stock consists of 250,000,000 shares of common stock no par
value, and 1,000,000 shares of preferred stock with no par value. As of May 4,
2005, there were 208,798,425 shares of our common stock issued and outstanding,
including shares underlying a subscription. Each stockholder is entitled to one
vote for each share of common stock held on all matters submitted to a vote of
stockholders, including the election of directors.
Each
stockholder is entitled to receive the dividends as may be declared by our board
of directors out of funds legally available for dividends and, in the event of
liquidation, to share pro rata in any distribution of our assets after payment
of liabilities. Our board of directors is not obligated to declare a dividend.
Any future dividends will be subject to the discretion of our board of directors
and will depend upon, among other things, future earnings, the operating and
financial condition of Nanobac, its capital requirements, general business
conditions and other pertinent factors. It is not anticipated that dividends
will be paid in the foreseeable future.
Stockholders
do not have pre-emptive rights to subscribe for additional shares of common
stock if issued by us. There are no conversion, redemption, sinking fund or
similar provisions regarding the common stock.
Shares of
our common stock are subject to rules adopted by the Securities and Exchange
Commission that regulate broker-dealer practices in connection with transactions
in "penny stocks". "Penny stock" is defined to be any equity security that has a
market price (as defined) less than $5.00 per share or an exercise price of less
than $5.00 per share, subject to certain exceptions. For the foreseeable future,
our common stock will most likely continue to be covered by the penny stock
rules, which impose additional sales practice requirements on broker-dealers who
sell to persons other than established customers and "accredited investors." The
term "accredited investor" refers generally to institutions with assets in
excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or
annual income exceeding $200,000 or $300,000 jointly with their spouse.
The penny
stock rules require a broker-dealer, prior to a transaction in a penny stock not
otherwise exempt from the rules, to deliver a standardized risk disclosure
document in a form prepared by the Securities and Exchange Commission which
provides information about penny stocks and the nature and level of risks in the
penny stock market. The broker-dealer also must provide the customer with
current bid and offer quotations for the penny stock, the compensation of the
broker-dealer and its salesperson in the transaction and monthly account
statements showing the market value of each penny stock held in the customer's
account. The bid and offer quotations, and the broker-dealer and salesperson
compensation information, must be given to the customer orally or in writing
prior to effecting the transaction and must be given to the customer in writing
before or with the customer's confirmation. In addition, the penny stock rules
require that prior to a transaction in a penny stock not otherwise exempt from
these rules; the broker-dealer must make a special written determination that
the penny stock is a suitable investment for the purchaser and receive the
purchaser's written agreement to the transaction. These disclosure requirements
may have the effect of reducing the level of trading activity in the secondary
market for the stock that is subject to these penny stock rules. Consequently,
these penny stock rules may affect the ability of broker-dealers to trade our
securities.
LEGAL
MATTERS
The
validity of the shares of common stock offered by the selling stockholders was
passed upon by the law firm of Sichenzia Ross Friedman Ference LLP.
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
There
have been no disagreements with any of our accountants on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure. On January 30, 2004, we appointed Aidman, Piser &
Company, P.A. as the independent accounting firm engaged as the principal
accounting firm to audit our financial statements for the year ended December
31, 2003. The decision to change the principal accounting firm was approved by
our Board of Directors on January 30, 2004. For further information relating to
our change in certifying accountants, please refer to our Current Report on Form
8-K dated January 30, 2004 on file with the Commission.
INTEREST
OF NAMED EXPERTS AND COUNSEL
No expert
or counsel named in this prospectus as having prepared or certified any part of
this prospectus or having given an opinion upon the validity of the securities
being registered or upon other legal matters in connection with the registration
or offering of the common stock was employed on a contingency basis or had, or
is to receive, in connection with the offering, a substantial interest, directly
or indirectly, in the registrant or any of its parents or subsidiaries. Nor was
any such person connected with the registrant or any of its parents,
subsidiaries as a promoter, managing or principal underwriter, voting trustee,
director, officer or employee.
EXPERTS
Our
consolidated financial statements as of and for the years ended December 31,
2004 and 2003, filed with this prospectus and registration statement have been
audited by Aidman, Piser & Company, P.A. independent accountants, as set
forth in their report accompanying the consolidated financial statements. The
financial statements referred to above are included herein in reliance upon such
reports given upon the authority of the firm as experts in accounting and
auditing.
DISCLOSURE
OF SEC POSITION OF
INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
Our
Articles of Incorporation, as amended, provide to the fullest extent permitted
by Florida law, a director or officer of Nanobac shall not be personally liable
to Nanobac or its shareholders for damages for breach of such director's or
officer's fiduciary duty. The effect of this provision of our Certificate of
Incorporation, as amended, is to eliminate the rights of Nanobac and its
shareholders (through shareholders' derivative suits on behalf of Nanobac) to
recover damages against a director or officer for breach of the fiduciary duty
of care as a director or officer (including breaches resulting from negligent or
grossly negligent behaviour), except under certain situations defined by
statute. Nanobac believes that the indemnification provisions in its Certificate
of Incorporation, as amended, are necessary to attract and retain qualified
persons as directors and officers.
Insofar
as indemnification for liabilities arising under the Securities Act might be
permitted to directors, officers or persons controlling our company under the
provisions described above, we have been informed that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act and is therefore unenforceable.
DESCRIPTION
OF BUSINESS
We are a
research-based bio-lifescience company. Our research is focused on investigating
the role of Nanobacterium sanguineum, (“Nanobacteria”) in human diseases.
Researchers at Nanobac have discovered a novel nano-sized particle that we
believe is responsible for a majority of diseases associated with soft tissue
calcification or plaque. Nanobacteria are extremely tiny, mineral forming units
composed of calcium and phosphate, two primary components of bones and teeth.
Because of the mineralizing properties of Nanobacteria, they have also been
called calcifying nano-particles. Calcifying nano-particles have been identified
at the center (nidis) of numerous diseased tissues and floating in blood vessels
and in the urinary tract.
While
calcification is a normal process for building healthy bones and teeth,
calcification also plays a role in other conditions related to diseases, such as
strokes and heart attacks. We believe that blood-borne nanobacteria forms
slow-growing calcified colonies in arteries and organs, much as coral reefs are
formed. Calcification of blood vessels typically involves the heart’s coronary
arteries in atherosclerosis. It also occurs in arteries more generally
throughout the body in arteriosclerosis, or hardening of the arteries. Kidney
stones are calcifications within the urinary tracts. In addition, pathologic or
soft tissue calcifications are observed in many other diseases such as,
prostatitis (a painful inflammation of the prostate gland), and Polycystic
Kidney Disease (growths of cysts in the kidneys). Research has shown the
presence of Nanobacteria in the parts of the body affected by these diseases. We
believe that Nanobacteria may play a key role in the pathogenesis of these and
other diseases.
We
believe that our research will lead to a better understanding of Nanobacteria
and its role in disease. This in turn will enable us to develop better
diagnostic tests to detect the presence of Nanobacteria and therapies to treat
Nanobacterial infection.
Our
objective is to gain a better understanding of the role Nanobacteria plays in
diseases associated with soft tissue calcification (or the build up of calcified
deposits within the body), and to develop new methods to detect and treat
diseases associated with nanobacterial infection. At the same time, we intend to
expand the sales of our Dietary Supplements and In Vitro Diagnostic products.
Our business is comprised of three areas:
| · |
Bio-Medical
Research – Pharmaceutical Drug
Discovery |
We
believe these three areas will fuel each other. The development of new and more
effective methods to diagnose nanobacterial infection and diseases involving
pathologic calcification should increase the demand for our dietary supplements
and for new drugs that we may bring to the market alone or in partnership.
Likewise, as more effective therapies come to market, diagnostic test ordering
tends to increase.
While
there is still a long way to go in the study of Nanobacteria, we are pleased
with the results we have achieved thus far and we are optimistic about the
prospects for the future development of diagnostic tests and treatments for
diseases caused by - or associated with - nanobacterial infection.
Dietary
Supplement Products
Through
our research, we have developed a combination of dietary supplements called
“Nanobac Supplements” that are part of a patented therapeutic regimen.
Preliminary
studies have shown that the Nanobac Supplements in combination with the
antibiotic Tetracycline may decrease soft tissue calcification. One component of
the Nanobac Supplements is a calcium disodium ethylene diamine tetraacetic acid
(“EDTA”) rectal suppository. EDTA is a synthetic amino acid that acts as a
chelator (binding molecules such as metals and minerals and holding them tightly
so that they can be removed from a system). EDTA chelation removes heavy metals
and minerals from the blood, and is approved by the U.S. Food and Drug
Administration (“the FDA”) for use in treating lead poisoning and toxicity from
other heavy metals. Studies have shown that EDTA may help break up calcium
deposits allowing the calcium to be removed from the body.
Description
of Business (continued)
The
Company also markets a dietary supplement that is combined with the EDTA
suppository. The Nanobac Oral Supplement is a proprietary blend of essential
amino acids, enzymes, antioxidants and natural anti-inflammatory
components.
| - |
Enzymes
are proteins produced by living organisms and functioning as biochemical
catalysts in living organisms. Enzymes can speed up reactions in the body
and this may help injured tissue repair
faster. |
| - |
An
antioxidant is a chemical compound or substance that inhibits oxidation.
The Nanobac Oral Supplement includes several major antioxidants.
Increasing evidence suggests that using antioxidants can prevent LDL
cholesterol lipoprotein oxidation and its resulting damage to arterial
tissue. |
We intend
to maximize the sales of our existing Nanobac Supplements by establishing
revenue generating collaborations with medical providers and expanding our
channels of distribution through partnerships with complementary technology
companies.
A recent
preliminary study of prostatitis patients provided evidence that patients using
the Nanobac Supplements, combined with the antibiotic Tetracycline, over a three
month period showed significant improvement in their symptoms of chronic
prostatitis / chronic pelvic pain syndrome. We are encouraged by the findings of
this and other studies and are actively marketing the Nanobac Supplements while
continuing our research into the cause of soft tissue calcification and effect
of Nanobacteria on diseases. Based upon our findings, we anticipate developing
more effective countermeasures to treat diseases in which Nanobacteria may play
a role.
Diagnostics
We have
developed two diagnostic assays to identify the presence of Nanobacteria in
blood. One test measures levels of Nanobacterial antigen (NANO-CAPTURE -
Nanobacterial Antigen Assay) and the other test measures whether a patient has
been exposed to Nanobacteria (NANO-SERO - Nanobacteria Antibody Assay).
An
antigen is generally defined as a substance that, when introduced into the body,
stimulates the production of an antibody. An antibody is generally defined as
any of various proteins in the blood that are generated in reaction to foreign
proteins or polysaccharides, neutralize them, and thus produce immunity against
certain microorganisms or their toxins.
In
October 2004 we announced the signing of a Manufacturing Agreement with
Medicorp, Inc., for the production of NANO-CAPTURE and NANO-SERO Assays. Nanobac
is transferring production of both assays from our Nanobac OY research
laboratory in Kuopio, Finland to Medicorp in preparation for expanded
distribution and potential FDA clinical trials. Medicorp is Canada's largest,
independent ISO 9001-certified manufacturer and distributor of immunodiagnostic
and microbiology products.
The
NANO-CAPTURE and NANO-SERO test kits will be sold through a distributor network.
We have signed a distribution agreement with Oxoid Ltd. (“Oxoid”) for
territories in Europe, Brazil and Australia. Oxoid is one of the world's leading
manufacturers and distributors of microbiological culture media and other
diagnostic products. With corporate headquarters in Basingstoke, Hampshire,
Oxoid Ltd is supported by a network of wholly owned sales and distribution
companies in Europe, North and South America and Australia. We have also
recently received notification of CE Mark status, which is necessary for
distribution of our kits in Europe.
Our goal
is to develop diagnostic assays that will be globally distributed for a variety
of diseases associated with nanobacterial infection and pathologic
calcification. Our diagnostic tests will facilitate further research into the
cause and effect of Nanobacteria and will allow researchers the ability to
measure changes in levels of Nanobacteria in their test patients.
Description
of Business (continued)
Research
Nanobacterial
research is ongoing around the world. Our lead scientists Olavi Kajander and
Neva Ciftcioglu, have formed multidisciplinary alliances with top researchers
including: Hojatollah Vali, McGill University, Canada; Mayo Clinic, Rochester,
Minnesota; University of South Florida; Iowa State University; D. Shoskes,
Cleveland Clinic; Garcia-Cuerpo, Spain; China Ghangsha group; Sommer,
Univ. of Ulm; Pretorius, South-Africa; G. Epstein/J.T. Salonen; Tom
& Marcia Hjelle, Univ. of Illinois; Y. Av-Gay, University of British
Columbia; and R. Berger, Miami Heart Institute, Miami FL. We intend to serve as
the nexus for research scientists and become the premier leader in nanobacterial
research and distribution of knowledge. We generally retain the rights for the
commercialization of intellectual property that result from these collaborative
studies.
To date,
these collaborations have resulted in the publishing of over 80 articles,
numerous abstracts and book chapters. Example publications since 1998 include
articles in Science, Nature and Nature Medicine, Proceedings of the National
Academy of Sciences, Lancet, New Scientist, Molecular Medicine, PDA Journal,
Kidney International, Circulation, Journal of Pathophysiology, and American
Society for Microbiology.
In 2004,
we entered into a Space Act Agreement with NASA’s Johnson Space Center (“JSC”),
Houston Texas, to collaborate on the research of nanobacterium sanguineum and
its nature and role in pathological calcification, including the detection and
treatment of the pathogen. Since Astronauts may be more prone to an increased
rate of pathological calcification while in a zero gravity environment, the
collaboration will support NASA’s need to better understand the effects of
long-term space travel on humans. In addition, Nanobac’s work provides a model
for studying mineralized organic matters that could aid NASA in the search for
extraterrestrial life.
Nanobac
co-founder and Director of Science, Neva Ciftcioglu, Ph.D. will remain at NASA
JSC as Staff Scientist and principal researcher. Under the agreement, NASA will
provide workspace at JSC for Nanobac’s personnel located at JSC. The agreement
further provides Nanobac the opportunity to work together with a
multidisciplinary team of NASA researchers while having access to basic
laboratory services for nanobacteria science, including electron microscopy,
molecular biology and geology-mineralogy research facilities. Projects ranging
from searching for nanobacteria biosignatures in earth fossils and in Mars
meteorites to diagnosing and treating nanobacteria infection are anticipated.
Nanobac will provide JSC with equipment and specialty supplies for nanobacteria
research and apply its pioneering diagnostic and treatment experience in the
field.
We own
the rights for the commercialization of intellectual property that results from
our collaborative research at NASA JSC. However, the U.S. Federal Government
retains the right to use this intellectual property for U.S. Government purposes
without compensation to us.
Description
of Business (continued)
The
Role of Nanobacteria in Calcification Associated
Diseases
Cardiovascular
Diseases
The most
serious and widespread of the diseases caused by calcified plaque are
atherosclerosis (hardening of the arteries) and coronary heart disease. Coronary
heart disease is caused by a narrowing of the coronary arteries that feed the
heart, which may be caused by the build-up of Nanobacteria.
Many
cardiovascular researchers have shown that atherosclerosis might be the
life-long result of our bodies’ various healing mechanisms and inflammatory
responses to infection. Researchers have sought to isolate an infectious agent
that is present in our tissues that could stimulate the development of
atherosclerotic plaques. Until recently, no single infection, viral or
bacterial, had been implicated.
The
Company believes that Nanobacteria might play a key role in the development of
atherosclerosis and consequently focused its early efforts on investigating the
relationship between Nanobacteria and atherosclerosis.
Three
recently published studies conducted by prominent medical researchers have
collectively shown that Nanobacteria might be the previously unidentified agent
involved in the development of atherosclerotic heart disease. A group of
researchers at the Mayo Clinic, led by Virginia Miller, PhD showed that
Nanobacteria are present in calcified atherosclerotic coronary arteries and
heart valves.
Cardiovascular
researcher Benedict Maniscalco, MD published a study that showed that patients
with severe coronary artery disease tested positive for nanobacterial antigen.
The study also indicated that a majority of cardiac patients that received the
Nanobac Supplements had a decrease in their coronary artery calcium scores.
Angina was decreased or ablated in 16 of 19 patients. Lipid (fats and fat like
materials) profiles also improved in most patients. Dr. Maniscalco’s study
concluded that the coronary artery calcium scores of most coronary artery
disease patients decreased during the period they used the Nanobac Supplements
inferring regression of calcified coronary artery plaque volume. The patients
tolerated the therapy well and their angina and lipid profiles improved.
Also, at
a recent American Heart Association scientific session, one of the world’s most
prominent heart disease researchers, Stephen E. Epstein, MD, Director of the
Cardiovascular Research Institute at Washington Hospital Medical Center in
Washington D.C., reported that 94% of people with calcified coronary arteries
have nanobacterial infection as measured by the Company’s Nanobacterial Antibody
Assay, and that antibody results correlated with coronary calcification scoring.
Therefore, the Nanobacterial Antibody Assay may be a predictor of patients with
high levels of calcium in their coronary arteries. These patients are at the
highest risk for a heart attack. Thus, the Nanobacterial Antibody Assay could be
used as a biomarker that may predict which patients are at greatest risk for a
heart attack.
The
collective weight of the three studies suggests that nanobacteria infection may
be the previously unknown infectious agent associated with atherosclerotic
plaque. The physical presence of Nanobacteria in the diseased artherosclerotic
tissues and the correlation with heart disease calcification levels suggests
that long-term nanobacterial infection is involved in the development of the
calcification in atherosclerotic heart disease.
Nanobac
is continuing its research of the relationship between nanobacterial infection
and heart disease and has expanded its research to include other diseases
involving pathological calcification.
Description
of Business (continued)
Urological
Diseases
Kidney
stones are one of the most common disorders of the urinary tract. A kidney stone
is a solid piece of material that forms in the kidney out of substances in the
urine. A problem stone can block the flow of urine and cause great
pain.
Prostatitis
is a painful inflammation of the prostate gland. Symptoms may include pain while
urinating or ejaculating, chills or fever, perineal, testicular, bladder or low
back pain.
Polycystic
kidney disease (“PKD”) is a genetic disorder characterized by the growth of
numerous cysts in the kidneys. PKD cysts can slowly replace much of the mass of
the kidneys, reducing kidney function and leading to kidney failure.
Researchers
have shown a relationship between Nanobacteria and urological diseases such as
kidney stones, prostatitis, and PKD. Until these studies, no single infection,
viral or bacterial, had been identified that could have caused the progression
of these diseases.
Nanobac
has focused on investigating the relationship between Nanobacteria and these
urological diseases.
Kidney
Stones: Several
studies conducted by prominent medical researchers have collectively shown
Nanobacteria as a probable cause of kidney stone formation. Depending upon the
patient population, researchers have found that 62% to 97% of kidney stones have
Nanobacteria. The presence of Nanobacteria is independent of the type of kidney
stone.
It is
believed that Nanobacteria create the calcific deposits that are physically
present in the kidney stones and therefore may be the cause of kidney stone
formation.
The
Company has been working with scientists at NASA to research the effects of
Nanobacteria in the formation of kidney stones during space flights. Neva
Ciftcioglu, the Company’s Director of Science, and a team of NASA scientists
used multiple techniques to determine that Nanobacteria infection multiplies
faster in space flight simulated conditions than on Earth. This determination is
especially important to NASA as it indicates that astronauts on future long-term
missions to the moon and Mars are at an increased risk for developing kidney
stones.
The
Company is continuing its collaboration with NASA. The observation that
Nanobacteria grow faster in conditions simulating the microgravity conditions of
space also allows researchers to grow cultures faster. A problem facing
researchers in studying Nanobacteria had been in developing a sufficient amount
of material. Nanobacterial particles double about once every three days compared
to typical bacteria which doubles about every 20 minutes.
Prostatitis: A
recent observational study of prostatitis patients, led by Daniel A. Shoskes,
M.D., of Cleveland Clinic Florida, demonstrated a significant improvement in the
symptoms of chronic prostatitis / chronic pelvic pain syndrome for those
patients who took Nanobac Supplements for a period of three months. The treated
group of fifteen patients had prostatic stones and longstanding Chronic Pelvic
Pain Syndrome (“CPPS”) symptoms that were not responsive to prior conventional
therapies. Two of the patients in the test group who had been on complete
medical disability have returned to work.
Polycystic
Kidney Disease (“PKD”): Studies
have shown that 100% of kidney cyst fluids and urine were positive for
Nanobacteria. Nanobac plans to initiate research trials that will evaluate the
link between Nanobacteria and PKD.
Description
of Business (continued)
Other
Opportunities
Nanobacteria
may also be contaminating biologics, like vaccines and bio-medical devices, like
implantable hip replacement parts. We are exploring commercial opportunities to
detect and eradicate nanobacterial infection or contamination in the following
additional markets:
| · |
Bio-Medical-
Vaccines and Blood Products |
| · |
Bio-Industrial-
Implantable Durable Medical Devices and Medical Exam
Equipment |
Nanobacterium
Sanguineum Background and Description
Nanobacterium
sanguineum (nanobacteria) was discovered in 1988 by Finnish researcher Olavi
Kajander, M.D., PhD. Dr. Kajander was carrying out mammalian cell research when
a routine mammalian cell culture experiment, using commercially available fetal
bovine serum as the growth media, just wasn't getting off the ground. The cells
weren't thriving and dividing like they should; the cells were sickly and died
off before any study could be done. Strange vacuoles were forming up in many of
the cells, and these cells subsequently died. Dr. Kajander, like all basic cell
researchers, had encountered this problem before; sometimes their cell cultures
worked, and sometimes they didn't. Dr. Kajander researched this further and
after several weeks of culture, turbidity developed in one of the flasks. We
believe this represented the first isolation of Nanobacterium sanguineum.
In 1991
Dr. Kajander was joined by microbiologist Neva Ciftcioglu, Ph.D. at the
University of Kuopio, Finland. Their research established that the blood-borne
nanobacteria forms slow-growing calcified colonies in arteries and organs, much
as coral reefs are formed. Nanobacteria have been found in human and animal
blood, urine and saliva. The name "nanobacteria" was introduced and patented by
Dr. Olavi Kajander as the name for very small mineral-associated bacteria-like
particles.
Competition
The
market for providing physicians and managed care organizations with nanobacteria
related disease management and services is just emerging, and we believe are
currently the only company providing a comprehensive approach to managing
nanobacterial diseases.
The
general market for academic researchers and clinical laboratories with In Vitro
diagnostic test kits is highly competitive and includes diagnostic companies
such as, Roche, Abbott, Bayer, Johnson & Johnson, and Dade
Behring.
The
general market for specialized clinical laboratory services for detection,
diagnosis, prognosis and monitoring is highly competitive and dominated by Quest
and Labcorp. Their competitive strength lies in their service capabilities and
their ability to provide local couriers for specimen pickup and broad-based
contracting ability with managed care organizations.
The
general market for pharmaceuticals and dietary supplements is also highly
competitive and includes Fortune 500 pharmaceutical companies as well as small
to medium sized pharmaceutical and dietary supplement companies.
Nanobac
believes that it will be able to grow and defend the specialized nanobacteria
related disease market niche due to its expertise in the field, its disease
management approach, and its technology leadership.
Description
of Business (continued)
Government
Regulation
Clinical
Reference Laboratory
The
clinical reference laboratory operations are not regulated directly by the FDA.
Clinical reference laboratories in the United States are regulated under the
federal Clinical Laboratory Improvement Act (CLIA). Our reference laboratory is
located in Kuopio Finland and is regulated by European Union and Finland laws
and is not regulated by CLIA.
In
Vitro Diagnostics
The FDA
regulates in vitro diagnostic kits and reagents. We intend to begin clinical
studies to support an FDA filing for both the NANO-CAPTURE and NANO-SERO assays.
The timing of our clinical trials and FDA approval is dependent on future
funding. We recently received notification that our NANO-CAPTURE and NANO-SERO
assays meet the criteria for CE Mark in Europe.
Dietary
Supplements
FDA
regulates dietary supplements under a different set of regulations than those
covering "conventional" foods and drug products (prescription and
Over-the-Counter). Under the Dietary Supplement Health and Education Act of 1994
(DSHEA), the dietary supplement manufacturer is responsible for ensuring that a
dietary supplement is safe before it is marketed. FDA is responsible for taking
action against any unsafe dietary supplement product after it reaches the
market. Generally, manufacturers do not need to register with FDA nor get FDA
approval before producing or selling dietary supplements. Manufacturers must
make sure that product label information is truthful and not misleading.
FDA's
post-marketing responsibilities include monitoring safety, e.g. voluntary
dietary supplement adverse event reporting, and product information, such as
labelling, claims, package inserts, and accompanying literature. The Federal
Trade Commission regulates dietary supplement advertising.
Environmental
Matters
We have
not been impacted financially or operationally by environmental laws.
Geographic
We will
initially focus our dietary supplement business in North America. To date, over
95% of our revenue is from the United States. We also plan to develop our
markets in the European Union through the operations of our Finnish Subsidiary,
Nanobac OY.
Employees
We have
seven employees in our corporate headquarters in Tampa, Florida, one employee at
the NASA facility in Houston Texas and five employees in Finland.
MANAGEMENT'S
DISCUSSION AND ANALYSIS
During
calendar 2004, and for the foreseeable future, our primary focus is on the
research of the role Nanobacteria plays in human diseases in which pathologic
calcification deposits are found. Since the beginning of 2004, there have been
an increasing number of studies linking Nanobacteria to serious health problems,
including cardiovascular diseases, peripheral vascular diseases, prostatitis,
kidney stones, and Polycystic Kidney Disease. These studies have provided
additional evidence of a relationship between Nanobacteria and these diseases in
which pathological calcification is present. Our focus is in determining how
Nanobacteria works and what countermeasures can be developed to better treat
these diseases.
Recently
we signed a collaborative agreement with the Mayo Foundation for Medical
Education and Research to conduct research relating to the prevalence and
treatment of nanobacteria in specific disease populations. The parties will
evaluate the role of nanobacteria through four studies utilizing diagnostic test
kits developed by Nanobac.
We
continue with our collaborative efforts with scientists at NASA researching the
effects of Nanobacteria in the formation of kidney stones under conditions
simulating space flight. We also signed a collaborative agreement with Iowa
State University to work with the Department of Geological and Atmospheric
Sciences to explore novel methodologies for detecting calcified nano-particles
which may be related to nanobacteria.
While
there remains significant work ahead, we are encouraged by the progress being
made in the study of Nanobacteria and the increasing level of acceptance in the
medical community that there may be a relationship between the nano-particles we
call Nanobacteria and the progression of certain diseases involving pathologic
calcification. Our continuing research and development efforts, along with our
efforts in obtaining recognition by various regulatory agencies (e.g. the FDA
and similar agencies throughout the world), will require significant additional
amounts of financing over the next several years.
We are
attempting to protect the intellectual property rights to our discoveries
including our treatment therapies and our diagnostic methods by obtaining
patents. We currently have one issued patent and multiple patent applications
for treatment therapies including the combination of EDTA and tetracycline to
treat nanobacteria infections and the formula mix and treatment regimen for
Nanobac Supplements, We also have one issued patent and multiple patent
applications related to our diagnostic products We are attempting to further
protect our intellectual property rights by obtaining additional patents in
unique areas of research with respect to the role of Nanobacteria in pathologic
calcification. These efforts are ongoing and will require significant additional
infusions of financing to complete. It is also anticipated that additional
patents will be sought in the future as our research and development efforts
yield new discoveries.
We began
direct sales of our Nanobac Supplements in June 2004. Nanobac Supplements are
currently being marketed to the alternative medicine market and directly to the
customer over the Internet. We anticipate that the Nanobac Supplements are the
first generation of treatment therapies that we will develop and that the
portfolio of treatments will increase as a result of our continuing research
into the effect of Nanobacteria in numerous diseases.
During
calendar 2004, our two diagnostic tests have gained additional recognition for
their ability to identify Nanobacteria. We plan to initiate marketing our
diagnostic testing kits in Europe during the first half of 2005.
During
April 2004, we announced a name change from Nanobac Pharmaceuticals,
Incorporated to Nanobac Life Sciences, Inc. to become effective upon approval by
the shareholders.
Management
Discussion an Analysis (continued)
Results
of Operation
The
following table presents the percentage of period-over-period dollar change for
the line selected items in our Consolidated Statements of Operations for the
years ended December 31, 2004 and 2003. These comparisons of financial
results are not necessarily indicative of future results.
| |
|
|
|
| |
|
Year
ended December |
|
| |
|
2004 |
|
2003 |
|
%
Change |
|
|
Revenue |
|
$ |
358,361 |
|
$ |
482,815 |
|
|
-26 |
% |
|
Cost
of revenue |
|
|
100,470
|
|
|
333,122
|
|
|
-70 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
Gross
Profit |
|
|
257,891
|
|
|
149,693
|
|
|
72 |
% |
Gross
Profit percentage |
|
|
72 |
% |
|
31 |
% |
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
Selling,
general and administrative |
|
|
4,765,841
|
|
|
2,128,375
|
|
|
124 |
% |
|
Research
and development |
|
|
2,375,363
|
|
|
540,426
|
|
|
340 |
% |
|
Depreciation
and amortization |
|
|
717,070
|
|
|
181,103
|
|
|
296 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
Operating
loss |
|
|
(7,600,383 |
) |
|
(2,700,211 |
) |
|
181 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
Other
income (Expense) |
|
|
(217,127 |
) |
|
(60,922 |
) |
|
256 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from continuing operations |
|
|
(7,817,510 |
) |
|
(2,761,133 |
) |
|
183 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
Discontinued
Operations |
|
|
(57,268 |
) |
|
(938,358 |
) |
|
-94 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
Net
loss |
|
|
($7,874,778 |
) |
|
($3,699,491 |
) |
|
113 |
% |
Management
Discussion an Analysis (continued)
2004
Compared to 2003
Revenue
Revenue
for the years ended December 31, 2004 and 2003 is summarized as
follows:
| |
|
2004 |
|
2003 |
|
| |
|
|
|
|
|
|
Nanobac
Supplements |
|
$ |
230,321 |
|
$ |
0 |
|
|
License
revenue |
|
|
46,800
|
|
|
0
|
|
|
Nanobac
TX |
|
|
0
|
|
|
407,242
|
|
|
Diagnostic
Products |
|
|
81,240
|
|
|
75,573
|
|
| |
|
|
|
|
|
|
|
| |
|
$ |
358,361 |
|
$ |
482,815 |
|
During
December 2003, we voluntarily discontinued offering NanobacTX, which accounted
for 84% of our revenue for the year ended December 31, 2003. Accordingly, our
revenue for the first half of 2004 was significantly reduced from the level
experienced in the last half of 2003. During February 2004, we licensed a new
product to an affiliated third party. Effective June 2004, the above license
agreement was cancelled and we initiated sales of this product directly to
customers under the name of Nanobac Supplements. We are in the process of
accelerating our research and developing new products for better patient
acceptance.
Revenue
for the last quarter of 2004 averaged approximately $45,000 per month. Revenue
for the year ended December 31, 2003 represents seven months of sales subsequent
to our acquisition of LABS in June 2003.
Cost
of revenue
Cost of
revenue consists of direct materials, testing services (for diagnostic products)
and shipping. As a percentage of revenue, cost of revenue was 28% for the year
ended December 31, 2004 compared to 69% for the year ended December 31, 2003.
Cost of revenue for 2003 included $150,000 of fixed lab fees for our diagnostic
products. Without this fee, our cost of revenue would have been approximately
38% as a percentage of revenue. This fixed lab fee was eliminated in October
2003 and replaced with a variable cost structure, which significantly decreased
cost of revenue.
In
addition, the lower cost of revenue in 2004 was due in part to the 2004 license
revenue having no direct costs. During June 2004, this licensing agreement was
terminated and we initiated sales of Nanobac Supplements directly to customers,
which has resulted in higher revenue and cost of revenue.
Gross
Profit
Gross
profit as a percentage of revenue was 72%, for the year ended December 31, 2004
compared to 31% for the year ended December 31, 2003. The increase in gross
profit percentage is attributable to the 2004 license revenue having no costs
and the existence of $150,000 of fixed lab costs in 2003 which were not incurred
in 2004. We anticipate gross profit as a percentage of revenue to be between 65%
and 70% for 2005.
Management
Discussion an Analysis (continued)
2004
Compared to 2003 (continued)
Selling,
General and Administrative
Selling,
general and administrative (“SG&A”) expenses for the years ended December
31, 2004 and 2003 include a $2.6 million charge and a $750,000 charge,
respectively, for stock issued as part of the Plan of Reorganization as
confirmed by the Bankruptcy Court. SG&A expenses, excluding the above
charges, are summarized as follows:
| |
|
|
|
| |
|
Year
ended December |
|
| |
|
2004 |
|
2003 |
|
| |
|
|
|
|
|
|
SG&A
as reported |
|
$ |
4,765,841 |
|
$ |
2,128,375 |
|
|
Less
charges for stock issuances |
|
|
(2,562,750 |
) |
|
(750,000 |
) |
| |
|
|
|
|
|
|
|
|
SG&A
expenses net of charges for stock issuances |
|
$ |
2,203,091 |
|
$ |
1,378,375 |
|
For 2004,
64% of the remaining SG&A expenses are comprised of payroll, travel and
professional fees. Expenses to operate as a public company (primarily
professional fees and investor relations costs) comprise an additional 18% of
the remaining SG&A expense. Other significant SG&A expenses include
facility rental and insurance.
The
increase in SG&A for the year ended December 31, 2004 over December 31, 2003
(net of charges for stock issuances) is primarily attributable to the timing of
the acquisition of LABS in June 2003. Only seven months of SG&A for LABS is
included in the above SG&A expenses for 2003 compared to twelve months of
expenses in 2004.
SG&A
expenses for HealthCentrics are included in “Discontinued Operations”.
Research
and Development
For the
year ended December 31, 2004, approximately 65% of research and development
(“R&D“) expenses are for payroll and medical director fees and approximately
25% of R&D expenses are for research studies. Expenses for research studies
fluctuate from year to year as these expenses are dependent on specific
initiatives and funding sources. Remaining R&D expenses include patents, our
Finland lab and travel.
R&D
expenses for the year ended December 31, 2004 increased 340% compared to the
year ended December 31, 2003. The increase in R&D for the year ended
December 31, 2004 over December 31, 2003 is primarily attributable to the
acquisitions of LABS and OY. LABS was acquired in June 2003 and OY was acquired
in November 2003 and includes our laboratory in Koupio Finland. Accordingly,
only seven months of R&D for LABS and one and one-half months of R&D for
OY are included in the above expenses for the year ended December 31, 2003
compared to twelve months for 2004. This increase also reflects our emphasis on
R&D subsequent to the June 2003 acquisition of LABS. Specific increases
include increased payroll, initiation of research studies, expansion of our
patents and $500,000 of signing bonuses with the execution of employment
agreements for key scientific personnel.
R&D
expenses for HealthCentrics are included in “Discontinued Operations”. We intend
to continue to our R&D investment in the coming year.
Management
Discussion an Analysis (continued)
2004
Compared to 2003 (continued)
Depreciation
and amortization
Approximately
95% of depreciation and amortization are related to the amortization of
intangible assets acquired in the 2003 and 2004 acquisitions of LABS and OY.
Other
income (Expense)
Other
income for the years ended December 31, 2004 and 2003 is summarized as
follows:
| |
|
2004 |
|
2003 |
|
|
Interest
expense |
|
|
|
|
|
|
Stockholder
loan |
|
|
($237,957 |
) |
|
($23,703 |
) |
|
Other |
|
|
(10,096 |
) |
|
(19,231 |
) |
|
Foreign
currency exchange gain |
|
|
32,021
|
|
|
0
|
|
|
Other,
net |
|
|
(1,095 |
) |
|
(17,988 |
) |
| |
|
|
|
|
|
|
|
| |
|
|
($217,127 |
) |
|
($60,922 |
) |
Foreign
currency gain results from exchange rate changes between the U.S. dollar and the
Euro on intercompany advances between our U.S. subsidiary and our Finland
subsidiary.
Loss
from continuing operations
Loss from
continuing operations for the year ended December 31, 2004 was $7.8 million
compared to $2.8 million for the year ended December 31, 2003. Excluding
non-cash items for stock issuances and amortization and depreciation, the loss
from continuing operations for the years ended December 31, 2004 and 2003 were
as follows:
| |
|
2004 |
|
2003 |
|
Change |
|
|
Loss
from continuing operations |
|
|
($7,817,510 |
) |
|
($2,761,133 |
) |
|
($5,056,377 |
) |
|
Depreciation
and amortization |
|
|
717,070
|
|
|
181,103
|
|
|
535,967
|
|
|
Charges
for stock issuances |
|
|
2,562,750
|
|
|
750,000
|
|
|
1,812,750
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
Loss
from continuing operations |
|
|
|
|
|
|
|
|
|
|
|
excluding
non-cash items |
|
|
($4,537,690 |
) |
|
($1,830,030 |
) |
|
($2,707,660 |
) |
The loss
from continuing operations excluding the above non-cash items increased $2.7
million for the year ended December 31, 2004 compared to the year ended December
31, 2003. This increase reflects $1.8 million of additional R&D costs and an
additional five months of LABS SG&A expenses in 2004 compared to 2003.
We are
experiencing significant losses as we conduct research and development related
to nanobacteria and launch our products and services. We believe it will take
significant time before we will earn meaningful revenue to offset our expenses
and there is no assurance that we will be able to accomplish this goal. As a
result of the losses, we are dependent on affiliates of our CEO and other
investors to provide sufficient cash sources to fund our operations.
Management
Discussion an Analysis (continued)
2004
Compared to 2003 (continued)
Discontinued
Operations
During
October 2003, we decided to divest our HealthCentrics’ business unit to focus
exclusively on our nanobacteria business unit. We were unsuccessful in finding a
buyer in 2003 for this business unit. During March 2004, this business unit was
sold to an affiliate of our CEO for consideration of $250,000 plus assumption of
net liabilities of approximately $499,000. Our gain on disposal of approximately
$749,000 is accounted for as a capital contribution given the related party
nature of the arrangement.
As a
result of our decision to dispose of the HealthCentrics business unit, the
operations of HealthCentrics were retroactively removed from continuing
operations and disclosed as a single line item on the statements of operations.
The loss from discontinued operations for the years ended December 31, 2004 and
2003 is summarized as follows:
| |
|
2004 |
|
2003 |
|
| |
|
|
|
|
|
|
Revenue |
|
$ |
5,301 |
|
$ |
19,970 |
|
|
Cost
of revenue |
|
|
9,208
|
|
|
62,570
|
|
| |
|
|
|
|
|
|
|
|
Gross
profit (loss) |
|
|
(3,907 |
) |
|
(42,600 |
) |
| |
|
|
|
|
|
|
|
|
Selling,
general & administrative |
|
|
53,361
|
|
|
692,407
|
|
|
Research
and development |
|
|
-
|
|
|
203,351
|
|
| |
|
|
|
|
|
|
|
|
Net
loss |
|
|
($57,268 |
) |
|
($938,538 |
) |
Management
Discussion an Analysis (continued)
Liquidity
and Capital Resources
As of
December 31, 2004, we had total assets of $9.7 million of which only $115,000
were current assets. At December 31, 2004, we had total current liabilities of
$1.3 million and a working capital deficit of $1.2 million.
Since the
United States Bankruptcy Court confirmed a plan of reorganization that allowed
the Company to emerge from Chapter 11 during calendar 2002, the Company has
financed its activities primarily through loans made by entities affiliated with
our current Chief Executive Officer (referred to herein as “the Affiliated
Entities”). These loans were made as funding was needed and were extremely
advantageous to the Company in that the amounts were funded as the Company
needed financial infusions and allowed the Company to avoid the costs and
distractions of attempting to raise these amounts from unrelated parties. It is
unrealistic to believe that unrelated parties would have offered terms as
generous as those obtained from the Affiliated Entities, and it is also unlikely
that any financing could have been obtained under any terms without the
financing of the Affiliated Entities.
As
discussed in Item 5, from time to time the Affiliated Entities have agreed to
allow a portion of the loan balances to be converted into shares of the
Company’s common stock. On September 30, 2004, $7,500,000 of the loan balance
was converted into 29,999,964 shares of our common stock at a price of $.25 per
share. There is no obligation on the part of the Affiliated Entities to make
additional loans to the Company. The Affiliated Entities are also under no
obligation to convert any portion of the loan balances owed to it into
additional shares of the Company’s stock.
As is
also discussed in Item 5, since August of 2004, the Company has received $1.4
million (net of $125,000 of expenses) from three unaffiliated investors and one
affiliate for shares of the Company’s stock and an equal amount of warrants to
acquire additional shares of the Company’s stock. The exact number of shares to
be issued is dependent upon the average closing bid price of the Company’s stock
on the five trading days immediately prior to the date on which a registration
statement for these shares is declared effective. The purchase price of the
shares is equal to the lesser of (1) $.12 or (2) 52% of the average closing
price described above. An additional $1.5 million is to be received from these
investors within five days of registering the common shares and warrants. A
registration statement has not yet been filed for these shares. Successful
registration of the shares contemplated under the agreements discussed above
will provide significant amounts of needed capital into the Company. However, a
registration statement has not yet been filed with the Securities and Exchange
Commission (“SEC”) and there are no assurances that the SEC will declare a
registration statement effective.
Net cash
used in operations was $3.4 million for the year ended December 31, 2004. The
negative cash flow from operations reflects the $7.9 million net loss for the
year offset by the non-cash charge for common stock issuances of $2.6 million,
depreciation and amortization of $717,000, interest expense added to the
principal balance of the stockholder loan of $238,000, and an increase in
current liabilities of approximately $1.0 million.
Net cash
provided by investing activities was approximately $165,000 for the year ended
December 31, 2004, which reflects the receipt of $200,000 from a common stock
option exercise related to the acquisition of LABS offset by our purchase of
fixed assets of approximately $37,000.
Net cash
provided by financing activities was $3.2 million for the year ended December
31, 2004, which is attributable to stockholder loans of $2.1 million and $1.2
million from common stock Subscription Agreements as described in the preceding
paragraphs.
We are
dependent on raising additional funding necessary to implement our business plan
as outlined above. Should we not be successful in raising cash from the
Affiliated Entities and other investors, we are unlikely to continue as a going
concern.
Management
Discussion an Analysis (continued)
Recent
Accounting Pronouncements
In
November 2004, the FASB issued SFAS No. 151, “Inventory Costs.” The
statement amends Accounting Research Bulletin (“ARB”) No. 43, “Inventory
Pricing,” to clarify the accounting for abnormal amounts of idle facility
expense, freight, handling costs, and wasted material. ARB No. 43 previously
stated that these costs must be “so abnormal as to require treatment as
current-period charges.” SFAS No. 151 requires that those items be
recognized as current-period charges regardless of whether they meet the
criterion of “so abnormal.” In addition, this statement requires that allocation
of fixed production overhead to the costs of conversion be based on the normal
capacity of the production facilities. The statement is effective for inventory
costs incurred during fiscal years beginning after June 15, 2005, with
earlier application permitted for fiscal years beginning after the issue date of
the statement. The adoption of SFAS No. 151 is not expected to have any
significant impact on our current financial condition or results of operations.
In
December 2004, the FASB issued SFAS No. 153, “Exchanges of Nonmonetary
Assets – An Amendment of APB Opinion
No. 29.” APB Opinion No. 29, “Accounting for Nonmonetary
Transactions,” is based on the opinion that exchanges of nonmonetary assets
should be measured based on the fair value of the assets exchanged. SFAS
No. 153 amends Opinion No. 29 to eliminate the exception for
nonmonetary exchanges of similar productive assets and replaces it with a
general exception for exchanges of nonmonetary assets whose results are not
expected to significantly change the future cash flows of the entity. The
adoption of SFAS No. 153 is not expected to have any impact on our current
financial condition or results of operations.
Critical
Accounting Policies
Use of
estimates - The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosures of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
Forward
Looking Statements
This
report contains certain forward-looking statements that are based on current
expectations. In light of the important factors that can materially affect
results, including those set forth above and elsewhere in this report, the
inclusion of forward-looking information herein should not be regarded as a
representation by NNBP or any other person that the objectives or plans of NNBP
will be achieved. NNBP may encounter competitive, technological, financial and
business challenges making it more difficult than expected to continue to market
its products and services; competitive conditions within the industry may change
adversely; NNBP may be unable to retain existing key management personnel;
NNBP's forecasts may not accurately anticipate market demand; and there may be
other material adverse changes in NNBP's operations or business. Certain
important factors affecting the forward looking statements made herein include,
but are not limited to (i) accurately forecasting capital expenditures; (ii)
obtaining new sources of external financing; (iii) serving as the nexus for
research similar and (iv) conducting successful clinical trials supporting Dr.
Kajander’s theories that the human body does not recognize nanobacteria as
harmful, and accordingly, nanobacteria could be the cause of pathological
disease causing calcification found in multiple diseases. Assumptions relating
to budgeting, marketing, product development and other management decisions are
subjective in many respects and thus susceptible to interpretations and periodic
revisions based on actual experience and business developments, the impact of
which may cause NNBP to alter its capital expenditure or other budgets, which
may in turn affect NNBP's financial position and results of operations.
DESCRIPTION
OF PROPERTY
The
following table sets forth a description of our facilities:
|
Location |
|
|
|
Lease
Expiration |
|
Function |
| |
|
|
|
|
|
|
|
Tampa,
Florida |
|
7,700 |
|
June
2007 - |
|
Headquarters
for Nanobac |
| |
|
|
|
June
2010 |
|
operations
(approximately |
| |
|
|
|
|
|
50%
occupied) |
| |
|
|
|
|
|
|
|
Koupio,
Finland |
|
1,500 |
|
3
months notice |
|
Research
and laboratory |
| |
|
|
|
|
|
facility |
We expect
that our current facilities will be sufficient for the foreseeable future. To
the extent that we require additional space in the near future, we believe that
we will be able to secure additional leased facilities at commercially
reasonable rates.
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
Loans
from Entity Affiliate with the Company’s Chief Executive
Officer
Since
emerging from bankruptcy in November 2002, Nanobac has financed its activities
primarily from advances from affiliates of the Company’s CEO (“CEO Affiliates”).
As a result of the above advances, the amount due to CEO Affiliates at September
30, 2004 was $7.5 million. On September 30, 2004, this loan was converted into
29,999,964 shares of Nanobac’s common stock.
From
October 1, 2004 through May 4, 2005, an additional $1.9 million has been
advanced to Nanobac to fund current operations. During December 2004, $500,000
of this loan was converted into a subscription agreement as described below. The
remaining balance of approximately $1.4 million remains payable at May 4, 2005.
All loan
amounts contemplated above are net of any periodic cash repayments.
Subscription
Agreement
During
December 2004, the Company entered into a Subscription Agreement with an entity
affiliated with the Chief Executive Officer. Under the terms of the Subscription
Agreement, the entity converted a $500,000 loan to equity. The Company is to
receive additional cash of $500,000 within five days of registering the common
shares and warrants issued as a result of the Subscription Agreements. The
number of common shares to be issued is equal to the amount received divided by
the lesser of $.12 or 52% of the average closing bid price of the Company’s
common stock on the five trading days immediately prior to the date on which the
registration statement is declared effective (“Fixed Price”). In addition, the
Subscription Agreement provided for the issuance of warrants equal to the number
of common shares issued. Fifty percent (50%) of the warrants are exercisable at
110% of the Fixed Price and the remaining 50% of the warrants are exercisable at
150% of the Fixed Price. Unexercised warrants will expire December 31, 2008.
License
Agreement
During
February 2004, the Company entered into a licensing agreement with Pegasus
Worldwide, Inc. (“Pegasus”) to market one of the Company's over the counter
products. The Company’s Chief Executive Officer is a director of Pegasus. Under
the terms of the license agreement, the Company was due $75 for each unit of
product sold. For the year ended December 31, 2004, the Company recognized
revenue of $46,800. Effective June 1, 2004, this license agreement was cancelled
and the Company is selling this product directly to customers.
MARKET
FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Our
common stock is traded under the symbol "NNBP".
From
October 12, 1994 through August 18, 1997, the Company's Common Shares were
traded in the NASDAQ SmallCap Market under the symbol "NATD". Beginning August
18, 1997 the Company's Common Shares were traded on the Over The Counter
Bulletin Board. Effective March 27, 2000, the trade symbol was changed to
"AMER". Effective July 21, 2003, the trade symbol was changed to "NNBP". From
March 2001 through November 2004, our Common Shares have traded through the Over
The Counter Pink Sheets. From November 2004 to present, our Common Shares have
been traded on the Over The Counter Bulletin Board (“OTCBB”). The following
table sets forth the high and low bid prices for Common Shares as reported by
NASDAQ, OTC Pink Sheets, and OTCBB for the periods indicated. Quotations on
NASDAQ, OTC Pink Sheets and OTCBB reflect inter-dealer prices, without retail
mark-up, mark-down or commission and may not represent actual transactions.
| |
|
High |
|
Low |
|
2003 |
|
|
|
|
|
|
First
Quarter |
|
$ |
1.70 |
|
$ |
0.50 |
|
|
Second
Quarter |
|
$ |
0.69 |
|
$ |
0.24 |
|
|
Third
Quarter |
|
$ |
1.34 |
|
$ |
0.62 |
|
|
Fourth
Quarter |
|
$ |
1.05 |
|
$ |
0.49 |
|
| |
|
|
|
|
|
|
|
|
2004 |
|
|
|
|
|
|
|
|
First
Quarter |
|
$ |
0.90 |
|
$ |
0.41 |
|
|
Second
Quarter |
|
$ |
0.71 |
|
$ |
0.22 |
|
|
Third
Quarter |
|
$ |
0.30 |
|
$ |
0.16 |
|
|
Fourth
Quarter |
|
$ |
0.30 |
|
$ |
0.14 |
|
| |
|
|
|
|
|
|
|
|
2005 |
|
|
|
|
|
|
|
|
First
Quarter |
|
$ |
0.16 |
|
$ |
0.11 |
|
|
Second
Quarter * |
|
$ |
0.12 |
|
$ |
0.09 |
|
* As of
May 4, 2005
On May 4,
2005, the closing bid quote for the Common Shares was $0.10 per
share.
Our
common shares are issued in registered form. Continental Stock Transfer &
Trust Company, 17 Battery Place, New York, NY 10004 is the transfer agent for
our common shares. As of May 4, 2005, we had 187,340,093 shares of common stock
outstanding and approximately 252 stockholders.
DIVIDEND
POLICY
We have
not declared or paid any cash dividends since inception and we do not intend to
pay any cash dividends in the foreseeable future. Although there are no
restrictions that limit our ability to pay dividends on our common shares other
than as described below, we intend to retain future earnings for use in our
operations and the expansion of our business.
EXECUTIVE
COMPENSATION
Particulars
of compensation awarded to, earned by or paid to:
|
(a) |
our
company's chief executive officer (the "CEO"); |
| |
(b) |
each
of our company's four most highly compensated executive officers who were
serving as executive officers at the end of the most recently completed
fiscal year and whose total salary and bonus exceeds $100,000 per year;
and |
|
(c) |
any
additional individuals for whom disclosure would have been provided under
|
| |
(d)
|
but
for the fact that the individual was not serving as an executive officer
of our company at the end of the most recently completed fiscal
year |
the Named
Executive Officers are set out in the summary compensation table below.
| |
|
|
|
Annual
Compensation |
|
Other
Annual |
|
All
Other |
|
|
Name
and Principal Position |
|
Year |
|
Salary |
|
Bonus |
|
Compensation |
|
Compensation
(1) |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
John
D. Stanton (2) (3) |
|
|
2004 |
|
$ |
0 |
|
$ |
0 |
|
$ |
0 |
|
$ |
0 |
|
|
Chairman
of the Board; |
|
|
2003 |
|
$ |
0 |
|
$ |
0 |
|
$ |
745,000 |
|
$ |
0 |
|
|
Chief
Executive Officer and |
|
|
2002 |
|
$ |
0 |
|
$ |
0 |
|
$ |
0 |
|
$ |
0 |
|
|
Chief
Financial Officer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alex
Edwards (4) (5) |
|
|
2004 |
|
$ |
228,536 |
|
$ |
0 |
|
$ |
5,000 |
|
$ |
0 |
|
|
Chief
Executive Officer |
|
|
2003 |
|
$ |
76,920 |
|
$ |
0 |
|
$ |
0 |
|
$ |
0 |
|
| (1) |
In
accordance with SEC rules, other compensation in the form of perquisites
and other personal benefits is omitted, such perquisites and other
personal benefits constituted less than the lesser of $50,000 or 10% of
the total annual salary and bonus for the Named Executive Officer for such
year. |
| (2) |
Mr.
Stanton has served as the Chairman of the Board of Directors and Chief
Financial Officer since March 2001 and served as Chief Executive Officer
from March 2001 through January 2004 and July 2004 through present.
|
| (3) |
Other
Annual Compensation for 2003 is the value of 59,433,890 shares of the
Company’s common stock or common stock equivalents issued to affiliates of
Mr. Stanton in accordance with the American Enterprise.Com Corp.
Bankruptcy Plan. |
| (4) |
Mr.
Edwards commenced employment with Nanobac in March 2003 and was named
Chief Executive Officer in January 2004. He relinquished the Chief
Executive Officer role in July 2004. |
| (5) |
Other
Annual Compensation is the value of 500,000 shares of the Company’s common
stock issued to Mr. Edwards in accordance with the American Enterprise.Com
Corp. Bankruptcy Plan. |
COMPENSATION
OF DIRECTORS AND EXECUTIVE OFFICERS
Employment
and Compensation Agreement
John
Stanton - Mr.
Stanton does not have an employment or similar agreement with Nanobac. To date,
Mr. Stanton has received no salary or other compensation except for the receipt
of common and preferred shares in accordance with the Company’s bankruptcy plan.
Alexander
Edwards -
Effective
January 26, 2004, Mr. Edwards entered into a three year employment agreement
with Nanobac. The employment agreement expires on the third anniversary of the
effective date, and will renew automatically for additional one year periods
until either Nanobac or Mr. Edwards serves a 90 day notice of non-renewal. The
employment agreement may be terminated by Nanobac for good cause. Good cause is
defined as including: (a) theft, embezzlement or physical destruction with
regard to material property of Nanobac; (b) continued neglect by the employee in
fulfilling his duties as Chief Executive Officer as a result of habitual
alcoholism, drug addiction or unauthorized absenteeism; (c) appropriation of
business opportunities of Nanobac for the direct or personal gain; (d)
conviction or a plea of no contest for a felony or other criminal act for which
the possible penalties include a prison sentence of at least one year; (e) a
material breach of the restrictive covenants contained in the employment
agreement; or (f) default in a material respect of duties or willful and
malicious interference with Nanobac’s operations.
Under the
employment agreement, Mr. Edwards receives a base salary of at least $300,000
during the first year, $325,000 during the second year and $350,000 during the
third year of the employment agreement. The Board of Directors may increase, but
not decrease, base compensation above these amounts. The employment agreement
also provides for annual bonus compensation as annually approved by the Board of
Directors or Compensation Committee. Mr. Edwards is also eligible to receive
stock options exercisable at fair market value on the grant date, in such
amounts and subject to such vesting provisions as determined by the Board of
Directors or Compensation Committee. Mr. Edwards will receive all standard
benefits made available to other executive employees of Nanobac.
In the
event that Nanobac terminates Mr. Edwards's employment without good cause, Mr.
Edwards will receive a severance payment equal to 50% of base salary payable
under the remaining term of the employment agreement. If the termination without
good cause is within three years of a change of control of Nanobac, Mr. Edwards
will receive a severance payment equal to three times base salary payable under
the remaining term of the employment agreement plus an amount equal to any bonus
compensation paid in the previous year. The employment agreement contains a
non-competition covenant and non-solicitation covenants, in respect to customers
and employees of Nanobac, for a period of one year following termination of
employment.
On July
23, 2004, Alexander Edwards resigned as Chief Executive Officer and John Stanton
assumed the role of Chief Executive Officer. Mr. Edwards continues to serve as a
member of the Board of Directors. As a result of his resignation as Chief
Executive Officer, Mr. Edwards voluntarily terminated the above employment
agreement and his salary was adjusted to $23,660 per year for the performance of
limited services to Nanobac.
Directors'
Compensation
Nanobac's
directors, who are not also employees of Nanobac, receive no monetary
compensation. Each director is entitled to receive reimbursement of
out-of-pocket expenses for attending Board of Director or committee meetings.
Each independent Director is to receive 1,500,000 options to purchase of stock
of Nanobac. The issuance of these options is contingent upon the approval of a
stock option plan by Nanobac’s stockholders. If a stock option plan is not
approved, the Directors then receive 1,500,000 shares of Nanobac. During January
2005, 1,500,000 shares were issued to each of Jan Egberts and Stephan
Rechtschaffen as independent directors of Nanobac.
Compensation
of Directors and Executive Officers (continued)
Compensation
Committee Interlocks and Insider Participation
The
Company has not formed a Compensation Committee, accordingly, the Board of
Directors acts in the Compensation Committee’s capacity. The Board of Directors
is responsible for reviewing and recommending salaries, bonuses and other
compensation for Nanobac's executive officers.
Mr.
Edwards is currently on the Board of Directors and is an employee of the
Company. Mr. Stanton and Mr. Edwards serve on the Board of Directors and have
been awarded stock grants in connection with services performed when the Company
was in bankruptcy in 2001 and 2002.
Stock
Options
We
currently do not have a stock option plan.
FINANCIAL
STATEMENTS
Our
consolidated financial statements are prepared in conformity with generally
accepted accounting principles of the United States of America.
The
following financial statements pertaining to Nanobac are filed as part of this
prospectus:
| |
|
|
Report
of Aidman, Piser & Company, P.A., Independent Auditors |
F-1 |
| |
|
|
Consolidated
Balance Sheet as of December 31, 2004 |
F-2 |
| |
|
|
Consolidated
Statements of Operations for the years ended December 31, 2004 and
2003 |
F-3 |
| |
|
|
Consolidated
Statements of Changes in Stockholders' Equity for the years
|
|
|
ended
December 31, 2004 and 2003 |
F-4
|
| |
|
|
Consolidated
Statements of Cash Flows for the years ended December 31, 2004 and
2003 |
F-5 |
| |
|
| Notes to the Condensed
Consolidated Financial Statements |
F-6
- F-22 |
Independent
Auditors’ Report
Board of
Directors
Nanobac
Pharmaceuticals, Incorporated and Subsidiaries
Tampa,
Florida
We have
audited the accompanying consolidated balance sheet of Nanobac Pharmaceuticals,
Incorporated and Subsidiaries (F/K/A American Enterprise Corporation) (the
“Company”), as of December 31, 2004, and the related consolidated statements of
operations, stockholders’ deficit and cash flows for the two years then ended.
These financial statements are the responsibility of the Company’s management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We
conducted our audit in accordance with standards of the Public Accounting
Oversight Board (United States of America). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control over financial
reporting. Accordingly, we express no such opinion. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Nanobac
Pharmaceuticals, Incorporated and Subsidiaries, at December 31, 2004, and the
consolidated results of their operations and their cash flows for the two years
then ended in conformity with accounting principles generally accepted in the
United States of America.
The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. As discussed in Note 1 to the financial
statements, the Company has suffered recurring losses from operations, has
working capital and net capital deficiencies and is dependent upon continued
financing from stockholders and outside investors, all of which raise
substantial doubt about its ability to continue as a going concern. Management’s
plans in regard to these matters are also described in Note 1. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
/s/
Aidman, Piser & Company, P.A.
April 12,
2005
Tampa,
Florida
|
NANOBAC
PHARMACEUTICALS INCORPORATED AND SUBSIDIARIES |
|
CONSOLIDATED
BALANCE SHEET |
| |
|
|
|
| |
|
December
31, 2004 |
|
|
ASSETS |
|
|
|
|
CURRENT
ASSETS |
|
|
|
|
Cash |
|
$ |
17,908 |
|
|
Account
receivable |
|
|
3,395
|
|
|
Inventory |
|
|
70,571
|
|
|
Prepaid
expenses |
|
|
23,649
|
|
|
Total
current assets |
|
|
115,523
|
|
| |
|
|
|
|
|
FIXED
ASSETS, less
accumulated depreciation of
$84,143
|
|
|
124,995
|
|
| |
|
|
|
|
|
OTHER
ASSETS |
|
|
|
|
|
Security
deposits |
|
|
68,054
|
|
|
Intangible
assets, less accumulated amortization of
$832,701
|
|
|
5,760,342
|
|
|
Goodwill |
|
|
3,615,393
|
|
|
Total
other assets |
|
|
9,443,789
|
|
| |
|
|
|
|
|
TOTAL
ASSETS |
|
$ |
9,684,307 |
|
| |
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY |
|
|
|
|
|
CURRENT
LIABILITIES |
|
|
|
|
|
Accounts
payable |
|
$ |
645,491 |
|
|
Accrued
compensation |
|
|
50,611
|
|
|
Accrued
expenses |
|
|
335,861
|
|
|
Short-term
note payable |
|
|
62,379
|
|
|
Other
liabilities |
|
|
16,423
|
|
|
Stockholder
loans |
|
|
194,068
|
|
|
Total
current liabilities |
|
|
1,304,833
|
|
| |
|
|
|
|
|
LONG-TERM
LIABILITIES |
|
|
|
|
|
Accrued
compensation |
|
|
350,000
|
|
|
Stock
settlement liability |
|
|
1,918,630
|
|
|
Total
liabilities |
|
|
3,573,463
|
|
| |
|
|
|
|
|
COMMITMENTS
AND CONTINGENCY (Notes 9, 11 and 13) |
|
|
-
|
|
| |
|
|
|
|
|
STOCKHOLDERS'
EQUITY |
|
|
|
|
Common
stock, no par value, 250,000,000 shares authorized, 187,240,093
shares issued and outstanding |
|
|
16,296,550
|
|
Preferred
stock, no par value, 1,000,000 shares authorized, no shares issued
and outstanding |
|
|
-
|
|
|
Additional
paid-in capital |
|
|
3,539,328
|
|
|
Accumulated
deficit |
|
|
(13,049,568 |
) |
|
Accumulated
other comprehensive loss |
|
|
(675,466 |
) |
|
Total
stockholders' equity |
|
|
6,110,844
|
|
| |
|
|
|
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
$ |
9,684,307 |
|
The
accompanying notes are an integral part of these financial
statements
|
NANOBAC
PHARMACEUTICALS INCORPORATED AND SUBSIDIARIES |
|
CONSOLIDATED
STATEMENTS OF OPERATIONS |
| |
|
|
|
|
|
| |
|
Year |
|
Year |
|
| |
|
ended
|
|
ended
|
|
| |
|
December
31, 2004 |
|
December
31, 2003 |
|
| |
|
|
|
|
|
|
REVENUE |
|
$ |
358,361 |
|
$ |
482,815 |
|
| |
|
|
|
|
|
|
|
|
COST
OF REVENUE |
|
|
100,470
|
|
|
333,122
|
|
| |
|
|
|
|
|
|
|
|
GROSS
PROFIT |
|
|
257,891
|
|
|
149,693
|
|
| |
|
|
|
|
|
|
|
|
OPERATING
EXPENSES |
|
|
|
|
|
|
|
|
Sales,
general and administrative |
|
|
4,765,841
|
|
|
2,128,375
|
|
|
Research
and development |
|
|
2,375,363
|
|
|
540,426
|
|
|
Depreciation
and amortization |
|
|
717,070
|
|
|
181,103
|
|
|
Total
Operating Expenses |
|
|
7,858,274
|
|
|
2,849,904
|
|
| |
|
|
|
|
|
|
|
|
OPERATING
LOSS |
|
|
(7,600,383 |
) |
|
(2,700,211 |
) |
| |
|
|
|
|
|
|
|
|
OTHER
INCOME (EXPENSES) |
|
|
|
|
|
|
|
|
Interest
expense |
|
|
(248,053 |
) |
|
(42,934 |
) |
|
Foreign
currency exchange gain |
|
|
32,021
|
|
|
-
|
|
|
Other,
net |
|
|
(1,095 |
) |
|
(17,988 |
) |
| |
|
|
|
|
|
|
|
|
LOSS
FROM CONTINUING OPERATIONS |
|
|
|
|
|
|
|
|
BEFORE
INCOME TAXES |
|
|
(7,817,510 |
) |
|
(2,761,133 |
) |
| |
|
|
|
|
|
|
|
|
PROVISION
FOR INCOME TAXES |
|
|
-
|
|
|
-
|
|
| |
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
LOSS
FROM CONTINUING OPERATIONS |
|
|
(7,817,510 |
) |
|
(2,761,133 |
) |
| |
|
|
|
|
|
|
|
|
DISCONTINUED
OPERATIONS: |
|
|
|
|
|
|
|
|
Loss
from discontinued operations (no |
|
|
|
|
|
|
|
|
applicable
income taxes) |
|
|
(57,268 |
) |
|
(938,358 |
) |
| |
|
|
|
|
|
|
|
|
NET
LOSS |
|
$ |
(7,874,778 |
) |
$ |
(3,699,491 |
) |
| |
|
|
|
|
|
|
|
|
LOSS
PER COMMON SHARE (BASIC AND DILUTED): |
|
|
|
|
|
|
|
|
Continuing
operations |
|
$ |
(0.05 |
) |
$ |
(0.04 |
) |
|
Discontinued
operations |
|
|
0.00
|
|
|
(0.01 |
) |
| |
|
|
|
|
|
|
|
|
Net
loss |
|
$ |
(0.05 |
) |
$ |
(0.05 |
) |
| |
|
|
|
|
|
|
|
|
WEIGHTED
AVERAGE NUMBER OF |
|
|
|
|
|
|
|
|
COMMON
SHARES OUTSTANDING |
|
|
|
|
|
|
|
|
Basic
and Diluted |
|
|
152,903,084
|
|
|
67,489,524
|
|
The
accompanying notes are an integral part of these financial
statements
|
NANOBAC
PHARMACEUTICALS INCORPORATED AND SUBSIDIARIES |
|
CONSOLIDATED
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT) |
|
FOR
THE YEARS ENDED DECEMBER 31, 2003 AND 2004
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
| |
|
|
|
|
|
|
|
|
|
Additional |
|
Due
from |
|
|
|
Other |
|
Other |
|
|
|
| |
|
Common |
|
Stock |
|
Preferred |
|
Stock |
|
Paid-in |
|
Option |
|
Accumulated |
|
Comprehensive |
|
Comprehensive |
|
|
|
| |
|
Shares |
|
Value |
|
Shares |
|
Value |
|
Capital |
|
Exercise |
|
Deficit |
|
Loss |
|
Loss |
|
Total |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
31, 2002 Balance |
|
|
19,982,965
|
|
$ |
1,134,377 |
|
|
368,815
|
|
$ |
- |
|
$ |
- |
|
$ |
- |
|
|
($1,475,299 |
) |
$ |
- |
|
$ |
- |
|
|
($340,922 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of preferred stock to common
stock |
|
|
16,268,430
|
|
|
-
|
|
|
(368,815 |
) |
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock issued in connection with
bankruptcy |
|
|
23,335,445
|
|
|
399,516
|
|
|
794,569
|
|
|
350,484
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
750,000
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
issues for services |
|
|
50,000
|
|
|
30,175
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
30,175
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of liabilities to shares of common stock
|
|
|
3,644,000
|
|
|
728,800
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
728,800
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of common stock (see Notes 1 and
10) |
|
|
1,690,000
|
|
|
548,000
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
548,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued in acquisition of NanobacLabs
Pharmaceuticals, Inc. |
|
|
34,998,000
|
|
|
1,392,920
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(200,000 |
) |
|
-
|
|
|
-
|
|
|
-
|
|
|
1,192,920
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
loss: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss |
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(3,699,491 |
) |
|
(3,699,491 |
) |
|
-
|
|
|
(3,699,491 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation
adjustment |
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(15,638 |
) |
|
(15,638 |
) |
|
(15,638 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,715,129 |
) |
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2003 |
|
|
99,968,840
|
|
$ |
4,233,788 |
|
|
794,569
|
|
$ |
350,484 |
|
$ |
- |
|
$ |
(200,000 |
) |
$ |
(5,174,790 |
) |
|
|
|
$ |
(15,638 |
) |
$ |
(806,156 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of preferred stock to common
stock |
|
|
35,048,445
|
|
|
350,484
|
|
|
(794,569 |
) |
|
(350,484 |
) |
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
received from option exercise |
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
200,000
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
200,000
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock issued in connection with
bankruptcy |
|
|
4,500,000
|
|
|
2,562,750
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
2,562,750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued in acquisition of Nanobac
OY |
|
|
5,000,000
|
|
|
4,267,500
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
4,267,500
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital contribution associated with sale subsidiary to
affiliate |
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
749,327
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
749,327
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of liabilities to shares of common stock
|
|
|
32,097,808
|
|
|
4,882,028
|
|
|
-
|
|
|
-
|
|
|
2,887,501
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
7,769,529
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale
of common stock |
|
|
10,625,000
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(97,500 |
) |
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(97,500 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
loss: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss |
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(7,874,778 |
) |
|
(7,874,778 |
) |
|
-
|
|
|
(7,874,778 |
) |
Foreign currency translation
adjustment |
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(16,198 |
) |
|
(16,198 |
) |
|
(16,198 |
) |
|
Derivative
loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(643,630 |
) |
|
(643,630 |
) |
|
(643,630 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8,534,606 |
) |
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2004 |
|
|
187,240,093
|
|
$ |
16,296,550 |
|
|
-
|
|
$ |
- |
|
$ |
3,539,328 |
|
$ |
- |
|
$ |
(13,049,568 |
) |
|
|
|
$ |
(675,466 |
) |
$ |
6,110,844 |
|
The
accompanying notes are an integral part of these financial
statements
|
NANOBAC
PHARMACEUTICALS INCORPORATED AND SUBSIDIARIES |
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS |
| |
|
Year |
|
Year |
|
|
|
|
ended
|
|
ended
|
|
|
|
|
December
31, 2004 |
|
December
31, 2003 |
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
|
|
Net
Loss |
|
$ |
(7,874,778 |
) |
$ |
(3,699,491 |
) |
Adjustments
to reconcile net loss to cash flows from operating
activities: |
|
|
|
|
|
|
|
|
Depreciation
and amortization |
|
|
717,070
|
|
|
181,103
|
|
|
Loss
on disposition of assets |
|
|
-
|
|
|
7,659
|
|
|
Charges
from common stock issuances |
|
|
2,562,750
|
|
|
780,175
|
|
|
Minority
interest in net loss |
|
|
-
|
|
|
(3,545 |
) |
|
Interest
expense added to stockholder loan |
|
|
237,958
|
|
|
-
|
|
|
Net
(increase) decrease in assets: |
|
|
|
|
|
|
|
|
Accounts
receivable |
|
|
2,370
|
|
|
9,125
|
|
|
Inventory |
|
|
(54,360 |
) |
|
67,286
|
|
|
Other
assets |
|
|
(8,769 |
) |
|
78,383
|
|
|
Net
increase (decrease) in liabilities: |
|
|
|
|
|
|
|
|
Accounts
payable |
|
|
530,196
|
|
|
278,107
|
|
|
Accrued
compensation |
|
|
464,768
|
|
|
46,658
|
|
|
Accrued
expenses |
|
|
10,628
|
|
|
99,218
|
|
|
Deferred
revenue |
|
|
16,423
|
|
|
-
|
|
|
Total
adjustments |
|
|
4,479,034
|
|
|
1,544,169
|
|
|
Net
cash flows from operating activities |
|
|
(3,395,744 |
) |
|
(2,155,322 |
) |
| |
|
|
|
|
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES |
|
|
|
|
|
|
|
|
Acquisition
of fixed assets |
|
|
(36,765 |
) |
|
(18,157 |
) |
|
Security
deposits |
|
|
2,500
|
|
|
(2,932 |
) |
|
Acquisition
of subsidiary, net of cash received |
|
|
(901 |
) |
|
(81,022 |
) |
|
Cash
received from exercise of stock option in subsidiary |
|
|
200,000
|
|
|
300,000
|
|
|
Net
cash flows from investing activities |
|
|
164,834
|
|
|
197,889
|
|
| |
|
|
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
Advances
from line of credit, net |
|
|
-
|
|
|
(36,453 |
) |
Proceeds
from issuance of common stock and stock subscription agreements,
net of expenses |
|
|
1,177,500
|
|
|
548,000
|
|
|
Proceeds
from stockholder loans, net |
|
|
2,066,091
|
|
|
1,997,467
|
|
|
Payment
of notes payable, net |
|
|
(27,621 |
) |
|
(486,188 |
) |
|
Net
cash flows from financing activities |
|
|
3,215,970
|
|
|
2,022,826
|
|
| |
|
|
|
|
|
|
|
|
Effect
of exchange rate changes |
|
|
(16,907 |
) |
|
(15,638 |
) |
| |
|
|
|
|
|
|
|
|
Net
change in cash |
|
|
(31,847 |
) |
|
49,755
|
|
|
Cash
balance, beginning of period |
|
|
49,755
|
|
|
-
|
|
|
Cash
balance, end of period |
|
$ |
17,908 |
|
$ |
49,755 |
|
| |
|
|
|
|
|
|
|
|
Supplemental
disclosures of cash flow information: |
|
|
|
|
|
|
|
|
Cash
paid for interest expense |
|
$ |
10,095 |
|
$ |
42,934 |
|
| |
|
|
|
|
|
|
|
|
Supplemental
schedule of non-cash investing and financing
activities: |
|
|
|
|
|
|
|
|
Common
stock issued in acquisition |
|
$ |
4,267,500 |
|
$ |
1,392,920 |
|
|
Common
stock issued for the conversion of debt |
|
$ |
7,769,529 |
|
$ |
728,800 |
|
|
Stockholder
loan used for acquisition |
|
$ |
- |
|
$ |
4,071,342 |
|
|
Capital
contribution associated with sale of subsidiary to
affiliate |
|
|
|
|
|
|
|
|
Reduction
in stockholder loan |
|
$ |
250,000 |
|
$ |
- |
|
|
Assumption
of accounts payable and accrued expenses |
|
$ |
499,327 |
|
$ |
- |
|
The
accompanying notes are an integral part of these financial
statements
NANOBAC
PHARMACEUTICALS, INCORPORATED AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
YEARS
ENDED DECEMBER 31, 2004 AND 2003
1.
Nature
of operations and summary of significant accounting
polices
Nature
of business
Nanobac
Pharmaceuticals, Incorporated and subsidiaries, ("Nanobac”, the "Company", or
"NNBP") trades under the symbol "NNBP."
NNBP’s
primary business is the study and development of therapeutic and diagnostic
technologies related to nanobacterium sanguineum (“Nanobacteria”). Nanobacteria
are believed to be small, slowly growing nano-particles that can be found in
human blood, kidney stones and arterial wall plaques.
Principles
of Consolidation
The
consolidated financial statements include the accounts of the Company and its
wholly-owned subsidiaries. All material intercompany transactions and balances
have been eliminated in consolidation. On June 4, 2003, the Company acquired a
majority interest in NanobacLabs Pharmaceuticals, Inc. and on November 11, 2003,
the Company acquired 65% of Nanobac OY (see Note 2, “Acquisitions”). In
accordance with Statement of Financial Accounting Standards (“SFAS”) No. 141,
“Business Combinations”, NNBP has included the results of operations of LABS
from June 4, 2003 and the results of operations of OY from November 11, 2003.
Where
losses applicable to the minority interest in a subsidiary exceed the minority
interest in the equity capital of the subsidiary, such excess and any further
losses applicable to the minority interest shall be charged against the majority
interest, as there is no obligation of the minority interest to make good such
losses.
Liquidity
and Management Plans
The
accompanying consolidated financial statements have been prepared assuming that
NNBP will continue as a going concern. The Company has incurred recurring losses
and has a working capital deficiency at December 31, 2004. The Company is
dependent on the continued financing from outside investors including additional
shareholder loans. All of these matters raise substantial doubt about the
ability of the Company to continue as a going concern. Management believes that
NNBP will need to raise additional capital in order to launch new clinical
trials, fund research and development for new treatment areas, and general
working capital requirements. Capital may be raised through further sales of
equity securities, which may result in dilution of the position of current
shareholders. At this time, there are no firm commitments to invest in NNBP. If
NNBP is unable to obtain such financing, the business might not attain
profitability.
There can
be no assurances that NNBP will be successful in obtaining debt or equity
financing in order to achieve its financial objectives and continue as a going
concern. The financial statements do not include any adjustments to the carrying
amount of assets and the amounts and classifications of liabilities that might
result from the outcome of this uncertainty.
Revenue
Recognition
Revenue
is recognized when the Company’s products are shipped and title has passed or
when diagnostic results are provided to the customer. Revenue is recorded net of
reserves for estimated discounts and incentives.
NANOBAC
PHARMACEUTICALS, INCORPORATED AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
YEARS
ENDED DECEMBER 31, 2004 AND 2003
1.
Nature of operations and summary of significant accounting polices
(continued)
Financial
instruments
The
carrying value of NNBP’s financial instruments, including cash, accounts
receivable, accounts payable, short-term note payable and stockholder loans
approximate their fair market values.
Inventory
Inventory
is stated at the lower of cost or market. Cost is determined in a manner which
approximates the first-in, first-out (FIFO) method. Inventory consists of raw
materials for currently marketed products and materials and processing costs for
antibodies and antigens used in our Finland laboratory. Inventory is shown net
of applicable reserves and allowances. Shipping costs are expensed as incurred
and are included in cost of revenue.
Fixed
Assets
Fixed
assets consist of furniture, fixtures, computers and lab equipment and are
recorded at cost. Fixed assets are depreciated using the straight-line method
over the estimated useful lives of three to seven years.
Intangible
assets and goodwill
Intangible
assets are recorded at cost, less accumulated amortization. Intangible assets
consist of acquired technology rights obtained in the acquisition of LABS and OY
(see Note 2). Amortization of intangible assets is provided over the following
estimated useful lives on a straight-line basis:
|
Patents |
12
years |
|
Product
rights |
5
years |
In
accordance with Statement of Financial Accounting Standards No. 142, “Goodwill
and Other Intangible Assets” (“SFAS No. 142”), and Statement of Financial
Accounting Standards, No. 144, “Accounting for the Impairment or Disposal of
Long-Lived Assets” (“SFAS No. 144”), the Company reviews its non-amortizable
long-lived assets, including intangible assets and goodwill for impairment
annually, or sooner whenever events or changes in circumstances indicate the
carrying amounts of such assets may not be recoverable. Other depreciable or
amortizable assets are reviewed when indications of impairment exist. Upon such
an occurrence, recoverability of these assets is determined as follows. For
long-lived assets that are held for use, the Company compares the forecasted
undiscounted net cash flows to the carrying amount. If it is determined that the
long-lived asset will be unable to recover its carrying amount, then it is
written down to fair value. For long-lived assets held for sale, assets are
written down to fair value. Fair value is determined based on discounted cash
flows, appraised values for management’s estimates, depending upon the nature or
the assets. Impairment within goodwill is tested using a two step method. The
first step is to compare the fair value of the reporting unit to its book value,
including goodwill. If the fair value of the unit is less than its book value,
the Company than determines the implied fair value of goodwill by deducting the
fair value of the reporting unit’s net assets from the fair value of the
reporting unit. If the book value of goodwill is greater than its implied fair
value, the Company writes down goodwill to its implied fair value. The Company’s
goodwill and intangible assets relate to the acquisition of NanobacLabs
Pharmaceuticals, Inc. and Nanobac OY. Goodwill
and intangible asset amortization is not deductible for income tax purposes.
NANOBAC
PHARMACEUTICALS, INCORPORATED AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
YEARS
ENDED DECEMBER 31, 2004 AND 2003
1.
Nature of operations and summary of significant accounting polices
(continued)
Use
of estimates
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Net
loss per share
Net loss
per share represents the net loss attributable to common stockholders divided by
the weighted average number of common shares outstanding during the period. The
effect of incremental shares from common stock equivalents is not included in
the calculation of net loss per share as the inclusion of such common stock
equivalents would be anti-dilutive. Accordingly, fully dilutive shares
outstanding equal basic shares outstanding as of December 31, 2004 and 2003
which is summarized as follows:
| |
|
Year
ended December 31, |
|
| |
|
2004 |
|
2003 |
|
|
Weighted
average common stock outstanding |
|
|
152,903,084 |
|
|
67,489,524 |
|
|
Warrants: |
|
|
|
|
|
|
|
|
Weighted
average shares under warrants at end of period |
|
|
7,469,406 |
|
|
- |
|
|
Treasury
stock which could be purchased |
|
|
(2,146,285 |
) |
|
- |
|
| |
|
|
|
|
|
|
|
|
Weighted
average common stock equivalents |
|
|
5,323,121 |
|
|
- |
|
|
Reduction
of common stock equivalents as inclusion would be
anti-dilutive |
|
|
(5,323,121 |
) |
|
- |
|
| |
|
|
|
|
|
|
|
|
Shares
used in diluted earnings per share calculation |
|
|
152,903,084 |
|
|
67,489,524 |
|
NANOBAC
PHARMACEUTICALS, INCORPORATED AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
YEARS
ENDED DECEMBER 31, 2004 AND 2003
1.
Nature of operations and summary of significant accounting polices
(continued)
Accumulated
Other Comprehensive Loss
Accumulated
other comprehensive loss consists of derivative loss from derivative financial
instruments and foreign currency translation adjustment related to our Finland
operations. Accumulated other comprehensive income has no applicable income tax.
Derivative
financial instruments
The
Company accounts for derivative financial instruments indexed to and potentially
settled in, its own stock in accordance with Emerging Issues Task Force 00-19,
which provides that if the number of shares deliverable in a transaction be
indeterminable, that said shares be presented as a liability in the balance
sheet. Further, the liability is to be measured at fair value until such
time as the obligation is settled. The shares issued in connection with
the 2004 Subscription Agreement transactions discussed in Note 10 are derivative
transactions and as such have been presented in the accompanying balance sheets
as liabilities and other comprehensive income (loss). The other
comprehensive income (loss) component represents the difference in the share
value as issued and the value of said shares at the balance
sheet date based on the trading value of the stock at December
31, 2004. At settlement, other comprehensive income (loss) will be charged
to retained earnings as a constructive dividend.
Research
and development expenses
Research
and development expenses are comprised of the following types of costs incurred
in performing R&D activities: salaries and benefits, occupancy costs of our
Finland laboratory, professional fees, clinical trial and related clinical
manufacturing costs. Research and development costs are expensed as incurred.
Income
taxes
NNBP
records its federal and state tax liability in accordance with Financial
Accounting Standards Board Statement No. 109 “Accounting for Income Taxes”. The
deferred taxes are recorded for temporary differences between the recognition of
income and expenses for tax and financial reporting purposes, using current tax
rates. Deferred assets and liabilities represent the future tax consequences of
those differences, which will either be taxable or deductible when the assets
and liabilities are recovered or settled.
NANOBAC
PHARMACEUTICALS, INCORPORATED AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
YEARS
ENDED DECEMBER 31, 2004 AND 2003
1.
Nature of operations and summary of significant accounting polices
(continued)
Recent
accounting pronouncements
In
November 2004, the FASB issued SFAS No. 151, “Inventory Costs.” The
statement amends Accounting Research Bulletin (“ARB”) No. 43, “Inventory
Pricing,” to clarify the accounting for abnormal amounts of idle facility
expense, freight, handling costs, and wasted material. ARB No. 43 previously
stated that these costs must be “so abnormal as to require treatment as
current-period charges.” SFAS No. 151 requires that those items be
recognized as current-period charges regardless of whether they meet the
criterion of “so abnormal.” In addition, this statement requires that allocation
of fixed production overhead to the costs of conversion be based on the normal
capacity of the production facilities. The statement is effective for inventory
costs incurred during fiscal years beginning after June 15, 2005, with
earlier application permitted for fiscal years beginning after the issue date of
the statement. The adoption of SFAS No. 151 is not expected to have any
significant impact on the Company’s current financial condition or results of
operations.
In
December 2004, the FASB issued SFAS No. 153, “Exchanges of Nonmonetary
Assets - An Amendment of APB Opinion No. 29.” APB Opinion No. 29,
“Accounting For Nonmonetary Transactions,” is based on the opinion that
exchanges of nonmonetary assets should be measured based on the fair value of
the assets exchanged. SFAS No. 153 amends Opinion No. 29 to eliminate
the exception for nonmonetary exchanges of similar productive assets and
replaces it with a general exception for exchanges of nonmonetary assets whose
results are not expected to significantly change the future cash flows of the
entity. The adoption of SFAS No. 153 is not expected to have any impact on
the Company’s current financial condition or results of operations.
In
December 2004, the FASB revised its SFAS No. 123 (“SFAS
No. 123R”), “Accounting for Stock Based Compensation.” The revision
establishes standards for the accounting of transactions in which an entity
exchanges its equity instruments for goods or services, particularly
transactions in which an entity obtains employee services in share-based payment
transactions. The revised statement requires a public entity to measure the cost
of employee services received in exchange for an award of equity instruments
based on the grant-date fair value of the award. That cost is to be recognized
over the period during which the employee is required to provide service in
exchange for the award. Changes in fair value during the requisite service
period are to be recognized as compensation cost over that period. In addition,
the revised statement amends SFAS No. 95, “Statement of Cash Flows,” to
require that excess tax benefits be reported as a financing cash flow rather
than as a reduction of taxes paid. The provisions of the revised statement are
effective for financial statements issued for the first interim or annual
reporting period beginning after June 15, 2005, with early adoption
encouraged. The Company is currently evaluating the impact that this statement
will have on its financial condition or results of operations.
Reclassifications
Certain
prior year amounts have been reclassified to conform to the current year
presentation.
NANOBAC
PHARMACEUTICALS, INCORPORATED AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
YEARS
ENDED DECEMBER 31, 2004 AND 2003
2.
Acquisitions
NanobacLabs
Pharmaceuticals, Inc.
On June
4, 2003, NNBP acquired approximately 74.4% of LABS in exchange for 24,400,000
restricted shares of NNBP. From June 5, 2003 through December 31, 2003, NNBP
acquired the remaining 25.6% of LABS from various stockholders in exchange for
6,598,000 restricted shares and additional consideration (in addition, see Note
10 for stock issued in connection with bridge funding for this acquisition).
The total
consideration for LABS was approximately $5.5 million, which included the
fair value of NNBP common stock issued, as well as direct transaction costs.
The
following table summarizes the estimated fair values of the assets acquired and
liabilities assumed as of the acquisition date:
|
Current
assets |
|
$ |
895,058 |
|
|
Investment
in OY |
|
|
693,778 |
|
|
Fixed
assets |
|
|
113,651 |
|
|
Identifiable
intangible assets |
|
|
1,350,000 |
|
|
Goodwill |
|
|
3,615,393 |
|
|
Other
assets |
|
|
62,500 |
|
|
Current
liabilities |
|
|
(768,280 |
) |
|
Note
payable |
|
|
(486,188 |
) |
| |
|
|
|
|
| |
|
$ |
5,475,912 |
|
Acquired
identifiable intangible assets consist of product rights for the treatment of
Nanobacteria. The
allocation of the purchase price was based, in part, on third-party valuations
of the fair values of identifiable intangible assets. Amortization
of this asset commenced as of the acquisition date.
NANOBAC
PHARMACEUTICALS, INCORPORATED AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
YEARS
ENDED DECEMBER 31, 2004 AND 2003
2.
Acquisitions (continued)
Nanobac
OY
Nanobac
OY is a Finnish company that performs similar research to that of the Company in
nanobacteria infection. On September 25, 2002, LABS entered into an agreement to
purchase 27% of Nanobac OY stock from three Finnish entities for 11,430 Euros. A
separate agreement also required LABS to acquire convertible promissory notes in
Nanobac OY in the amount of 686,000 Euros plus interest. On November 11, 2003,
NNBP completed the acquisition of Nanobac OY when the final payment was made and
the Company exercised the conversion option in the convertible promissory notes.
Upon the conclusion of this transaction, the Company owned 65% of OY.
During
January through March 2004, NNBP acquired the remaining 35% of Nanobac OY from
Dr. Kajander and Dr. Ciftcioglu (“OY Minority Shareholders”). The purchase price
was (a) 5 million shares of NNBP’s common stock, (b) 5 million warrants
convertible into NNBP’s common stock at $.005 per share and (c) cash
consideration of 15,000 Euros. Total consideration to the OY Minority
Stockholders is valued at $4.3 million.
The total
consideration to date for OY is $5.1 million, which included cash payments (made
before and after the acquisition of LABS), the fair value of NNBP common stock
issued, as well as direct transaction costs. The
following table summarizes the estimated fair values of the assets acquired and
liabilities assumed as of the acquisition date:
|
Current
assets |
|
$ |
37,534 |
|
|
Fixed
assets |
|
|
29,286
|
|
|
Identifiable
intangible assets |
|
|
5,243,048
|
|
|
Other
assets |
|
|
4,731
|
|
|
Current
liabilities |
|
|
(11,884 |
) |
|
Advances
from Nanobac |
|
|
(228,119 |
) |
| |
|
|
|
|
| |
|
$ |
5,074,596 |
|
Acquired
identifiable intangible assets consist of patents for the detection and
treatment of Nanobacteria. The
allocation of the purchase price was based, in part, on third-party valuations
of the fair values of identifiable intangible assets. Amortization
of this asset commenced as of the acquisition date.
In
addition, as part of the above agreement, the OY Minority Shareholders agreed to
employment agreements with NNBP. These agreements included $500,000 of signing
bonuses of which $150,000 was paid in 2004 and the remaining $350,000 (earned
upon certain triggering events that occurred in 2004) is payable two years from
the agreement dates (January and March 2006) and is included in long-term
liabilities.
NANOBAC
PHARMACEUTICALS, INCORPORATED AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
YEARS
ENDED DECEMBER 31, 2004 AND 2003
2.
Acquisitions (continued)
The
following unaudited table compares NNBP’s reported operating results to pro
forma information prepared on the basis that the above acquisitions had taken
place at January 1, 2003. In management’s opinion, the unaudited pro forma
combined results of operations are not indicative of the actual results that
would have occurred had the acquisitions been consummated at the beginning of
2003 or 2004 or of future operations of the combined companies under the
ownership and management of NNBP.
| |
|
Year
ended December 31, |
|
| |
|
2004 |
|
2003 |
|
|
As
Reported |
|
|
|
|
|
|
Revenue |
|
$ |
358,361 |
|
$ |
482,815 |
|
|
Net
loss |
|
$ |
(7,874,778 |
) |
$ |
(3,699,491 |
) |
|
Basic
loss per share |
|
$ |
(0.05 |
) |
$ |
(0.05 |
) |
|
Diluted
loss per share |
|
$ |
(0.05 |
) |
$ |
(0.05 |
) |
| |
|
|
|
|
|
|
|
|
Proforma |
|
|
|
|
|
|
|
|
Revenue |
|
$ |
358,361 |
|
$ |
1,183,210 |
|
|
Net
loss |
|
$ |
(7,911,923 |
) |
$ |
(5,518,739 |
) |
|
Basic
loss per share |
|
$ |
(0.05 |
) |
$ |
(0.06 |
) |
|
Diluted
loss per share |
|
$ |
(0.05 |
) |
$ |
(0.06 |
) |
3.
Discontinued Operations
During
October 2003, NNBP decided to divest its HealthCentrics business unit to focus
exclusively on its nanobacteria business unit. NNBP was unsuccessful in finding
a non-affiliated buyer for this business unit. During March 2004, this business
unit was sold to an affiliate of the current CEO for consideration of $250,000
(a reduction in amounts otherwise owed to the affiliate). NNBP’s gain on
disposal was $749,326, which is accounted for as a capital contribution given
the related party nature of the arrangement. Summary operating results for the
discontinued operations for the years ended December 31, 2004 and 2003 are as
follows:
| |
|
2004 |
|
2003 |
|
|
Revenue |
|
$ |
5,301 |
|
$ |
19,970 |
|
| |
|
|
|
|
|
|
|
|
Loss
before income taxes |
|
|
($57,268 |
) |
|
($938,358 |
) |
|
Provision
for income taxes |
|
|
— |
|
|
— |
|
| |
|
|
|
|
|
|
|
|
Net
loss |
|
|
($57,268 |
) |
|
($938,358 |
) |
NANOBAC
PHARMACEUTICALS, INCORPORATED AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
YEARS
ENDED DECEMBER 31, 2004 AND 2003
4.
Fixed Assets
Fixed
assets at December 31, 2004 are summarized as follows:
| |
|
Dec
2004 |
|
|
Computer
equipment |
|
$ |
44,683 |
|
|
Computer
software |
|
|
17,982 |
|
|
Lab
equipment |
|
|
49,008 |
|
|
Office
equipment |
|
|
20,769 |
|
|
Furniture
and fixtures |
|
|
21,729 |
|
|
Leasehold
improvements |
|
|
54,967 |
|
| |
|
|
|
|
| |
|
|
209,138 |
|
|
Accumulated
Depreciation |
|
|
(84,143 |
) |
| |
|
|
|
|
| |
|
$ |
124,995 |
|
Depreciation
expense for the years ended December 31, 2004 and 2003 was $47,295 and $18,177,
respectively.
5.
Intangible Assets
Intangible
assets as of December 31, 2004 are summarized as follows:
| |
|
|
|
|
|
Product
rights |
|
$ |
1,350,000 |
|
|
Patents |
|
|
5,243,043 |
|
| |
|
|
|
|
|
|
|
|
6,593,043 |
|
|
Accumulated
amortization |
|
|
(832,701 |
) |
| |
|
|
|
|
| |
|
$ |
5,760,342 |
|
Amortization
expense for the years ended December 31, 2004 and 2003 was $669,775 and
$162,926, respectively. Expected future amortization is summarized as
follows:
Year
ending December 31, |
|
|
|
|
2005 |
|
$ |
706,920 |
|
|
2006 |
|
|
706,920 |
|
|
2007 |
|
|
706,920 |
|
|
2008 |
|
|
549,420 |
|
|
2009 |
|
|
436,920 |
|
|
Thereafter |
|
|
2,653,242 |
|
| |
|
|
|
|
| |
|
$ |
5,760,342 |
|
NANOBAC
PHARMACEUTICALS, INCORPORATED AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
YEARS
ENDED DECEMBER 31, 2004 AND 2003
6.
Accrued Expenses
Accrued
expenses as of December 31, 2004 are summarized as follows:
| |
|
|
|
|
|
Accrued
professional fees |
|
$ |
79,500 |
|
|
Royalty |
|
|
150,479 |
|
|
Employee
expense reports |
|
|
19,843 |
|
|
Payroll
taxes and benefits |
|
|
18,507 |
|
|
Other |
|
|
67,532 |
|
| |
|
|
|
|
| |
|
$ |
335,861 |
|
7.
Segment Information
With the
disposition of its HealthCentrics business unit (see Note 3), NNBP operates a
single business segment. Geographic information is summarized as
follows:
| |
|
Year
ended December 31, |
|
| |
|
2004 |
|
2003 |
|
|
Revenue |
|
|
|
|
|
|
United
States |
|
$ |
343,444 |
|
$ |
472,735 |
|
|
Finland |
|
|
14,917
|
|
|
10,080
|
|
| |
|
|
|
|
|
|
|
| |
|
$ |
358,361 |
|
$ |
482,815 |
|
|
Assets |
|
|
|
|
|
|
|
|
United
States |
|
$ |
3,281,026 |
|
|
|
|
|
Finland |
|
|
6,403,281
|
|
|
|
|
| |
|
|
|
|
|
|
|
| |
|
$ |
9,684,307 |
|
|
|
|
The
geographic classification of revenue was based upon the domicile of the entity
from which the revenues were earned. Approximately 98% of Finland assets relate
to patents recorded as a result of the acquisition of OY (see Note 2).
NANOBAC
PHARMACEUTICALS, INCORPORATED AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
YEARS
ENDED DECEMBER 31, 2004 AND 2003
8.
Income taxes
There was
no current or deferred provision or benefit for income taxes for the years ended
December 31, 2004 and 2003. The components of deferred tax asset as of December
31, 2004 and 2003 are as follows:
| |
|
|
|
|
|
| |
|
2004 |
|
2003 |
|
|
Deferred
tax asset: |
|
|
|
|
|
|
Net
operating loss carryforwards |
|
$ |
3,690,000 |
|
$ |
2,487,000 |
|
|
Valuation
allowance |
|
|
(3,690,000 |
) |
|
(2,487,000 |
) |
| |
|
|
|
|
|
|
|
|
Deferred
tax asset net of valuation allowance |
|
$ |
- |
|
$ |
- |
|
As of
December 31, 2004, the Company had approximately $9.1 million of net operating
loss carryovers which expire between 2016 and 2024.
The
following table accounts for the differences between the actual tax provision
and the amounts obtained by applying the statutory U.S. federal income tax rates
of 34% to the loss from continuing operations before income taxes and minority
interest:
| |
|
2004 |
|
2003 |
|
| |
|
|
|
|
|
|
Statutory
tax benefit |
|
$ |
2,756,000 |
|
$ |
967,000 |
|
|
State
taxes, net of federal benefit |
|
|
309,000
|
|
|
72,000
|
|
Nondeductible
expense for common stock issued for services |
|
|
(999,000 |
) |
|
(292,000 |
) |
|
Amortization
of intangible assets |
|
|
(261,000 |
) |
|
(57,000 |
) |
Nontaxable
income in connection with HealthCentrics'
disposition |
|
|
305,000
|
|
|
- |
|
|
Increase
in valuation allowance |
|
|
(2,116,000 |
) |
|
(715,000 |
) |
|
Other,
net |
|
|
6,000
|
|
|
25,000
|
|
| |
|
|
|
|
|
|
|
|
Provision
for taxes |
|
$ |
- |
|
$ |
- |
|
Changes
in the valuation allowance during the year ended December 31, 2004 were as
follows:
Valuation
allowance, beginning of year |
|
$ |
2,487,000 |
|
| |
|
|
|
|
Discontinued
operations |
|
|
(913,000 |
) |
Increase
from continuing operations |
|
|
2,116,000
|
|
| |
|
|
|
|
|
Valuation
allowance, end of year |
|
$ |
3,690,000 |
|
NANOBAC
PHARMACEUTICALS, INCORPORATED AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
YEARS
ENDED DECEMBER 31, 2004 AND 2003
9.
Related Party Transactions
Stockholder
Loan
An entity
controlled by the Chief Executive Officer (who is also the largest stockholder
of NNBP), had loaned NNBP approximately $8.2 million from June 2003 through
December 2004. This loan had interest at 5% and is due on demand. On September
30, 2004, $7.5 million of the above loan was converted into 29,999,964 shares of
the Company’s common stock. On December 13, 2004 an additional $500,000 of the
above loan was converted into 4,166,667 shares of the of the Company’s common
stock, which is included in the Stock Settlement Liability at December 31, 2004
(see Note 10). The remaining loan balance at December 31, 2004 was approximately
$194,000.
Interest
expense for the above loans for the years ended December 31, 2004 and 2003 was
approximately $238,000 and $23,000, respectively.
Short-Term
Notes Payable
Short-term
notes payable consist of unsecured advances from employees of the Company. These
notes bear interest at 5% and are due on demand.
Conversion
of Debt into Equity
During
August 2004, an employee and minority stockholder (less than 5% ownership of the
Company) converted an $111,000 liability due from the Company into 923,458
shares of the Company’s common stock.
License
Agreement
During
February 2004, NNBP entered into a licensing agreement with Pegasus Worldwide,
Inc. (“Pegasus”) to market one of NNBP's over the counter products. NNBP’s Chief
Executive Officer is a director of Pegasus. Under the terms of the license
agreement, NNBP was due $75 for each unit of product sold. For the year ended
December 31, 2004, NNBP recognized revenue of $46,800 under this license
agreement. Effective June 1, 2004, this license agreement was cancelled and NNBP
is selling this product directly to customers.
Royalty
Agreement
The
Company was a party to a royalty agreement with the former majority owner of
LABS who, along with his spouse, own approximately 24.4 million common shares of
NNBP. Under the terms of the royalty agreement, this stockholder would receive
an annual fee of $50,000 plus ten percent of gross sales from applicable
products. On March 16, 2004, the U.S. Patent Office printed Patent 6,706,290
“Methods for Eradication of Nanobacteria”. With the approval of this patent,
management believes that the above royalty agreement is not valid and no amounts
will ultimately be due under the above royalty agreement.
NANOBAC
PHARMACEUTICALS, INCORPORATED AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
YEARS
ENDED DECEMBER 31, 2004 AND 2003
10.
Stockholders' equity
Preferred
stock
The
holder(s) of preferred shares are entitled to receive non-cumulative dividends
not to exceed $.10 per share when and as declared by the Board of Directors. In
the event of any liquidation, dissolution or winding down of the company, either
voluntary or involuntary, the holder(s) of each preferred share shall be
entitled to be paid on an amount equal to $4.00 per share. In the event that the
Company authorizes the redemption of all or any preferred shares, the redemption
price shall be $4.30 per share. The preferred shares are convertible at any time
into common at the ratio of 44.11 common shares to one preferred share. Holders
of preferred shares have a right to cast eight votes per preferred share and the
right to elect 50% of the authorized members of the board of
directors.
Common
stock, preferred stock and warrant issuances
During
2004, creditors of the Company converted $7.8 million of liabilities into
32,097,808 shares of the Company’s common stock as follows:
|
Shareholder
loan (Note 9) |
|
|
29,999,964 |
|
$ |
7,499,990 |
|
|
Employee
(Note 9) |
|
|
923,458 |
|
|
110,815 |
|
|
Unaffiliated
vendors |
|
|
1,174385 |
|
|
158,724 |
|
| |
|
|
32,097,807 |
|
$ |
7,769,529 |
|
During
2004, the Company issued 5.0 million shares of its common stock and 5.0 million
warrants with an exercise price of $0.005 per share in connection with the
acquisition of the minority interest in OY (see Note 2). The value of these
stock and stock equivalent issuances was $4.3 million.
From
August 2004 through November 2004, the Company entered into Subscription
Agreements with two unaffiliated investors. Under the terms of the Subscription
Agreements, the Company received cash of $677,500 (net of $97,500 of expenses)
during the year ended December 31, 2004. The Company is to receive additional
cash of $775,000 within five days of registering the common shares and warrants
issued as a result of the Subscription Agreements. The number of common shares
to be issued is equal to the amount received divided by the lesser of $.12 or
52% of the average closing bid price of the Company’s common stock on the five
trading days immediately prior to the date on which the registration statement
is declared effective (“Fixed Price”). These amounts are classified as Stock
Settlement Liability at December 31, 2004. In addition, the Subscription
Agreements provide for the issuance of warrants equal to the number of common
shares issued. Fifty percent (50%) of the warrants are exercisable at 110% of
the Fixed Price and the remaining 50% of the warrants are exercisable at 150% of
the Fixed Price. Unexercised warrants will expire December 31, 2008. The Company
has agreed to use its best efforts to promptly register the common shares and
warrants.
During
December 2004, the Company entered into a Subscription Agreement with an
affiliate of the Company’s Chief Executive Officer. Under the terms of the
Subscription Agreement, the Company received cash of $500,000 during the year
ended December 31, 2004. The Company is to receive additional cash of $500,000
within five days of registering the common shares and warrants issued as a
result of the Subscription Agreement. All other terms of the Subscription
Agreement are substantially the same as the Subscription Agreements to the
unaffiliated investors described in the preceding paragraph. This amount is
classified as Stock Settlement Liability at December 31, 2004.
NANOBAC
PHARMACEUTICALS, INCORPORATED AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
YEARS
ENDED DECEMBER 31, 2004 AND 2003
10.
Stockholders' equity (continued)
As a
result of the above Subscription Agreements, at December 31, 2004, the Company
has issued 10,625,000 shares of common shares, which represents the minimum
number of shares to be issued under the Subscription Agreements in exchange for
cash received through December 31, 2004. If the price of the Company’s stock is
less than $0.23 per share when the Company’s registration statement is declared
effective, the Company will be required to issue additional shares under the
above Subscription Agreements equal to a price of 52% of the average closing bid
price of the Company’s common stock on the five trading days immediately prior
to the date on which the registration statement is declared effective. The
ultimate number of shares to be issued is indeterminate as the number of shares
is dependent on NNBP’s closing bid price when a registration statement is
declared effective. As a result, the $1,275,000 of cash received under the
Subscription Agreements through December 31, 2004 is included in long-term
liabilities.
At
December 31, 2004, the Company measured the value of the shares to be issued
under the Subscription Agreements through December 31, 2004 based on the
Company’s closing bid price at December 31, 2004 compared to the actual shares
issued. As a result of this measurement, an additional $643,630 long-term
liability was recorded as of December 31, 2004 with a charge to Other
Comprehensive Income.
From May
2001 through November 2002, the Company was subject to the jurisdiction of the
United States Bankruptcy Court (“the Bankruptcy Court”) under Chapter 11 of the
United States Bankruptcy Code. Throughout the bankruptcy proceedings, the
Company’s CEO and an affiliated entity funded the Company’s operations and
existence. As part of the plan of reorganization as approved by the Bankruptcy
Court, the Company was to issue 75 million shares of the Company’s stock to
affiliates of the CEO in satisfaction of this obligation. This transaction was
recorded at $750,000 or $.01 per share fair value at the date of the award
(based on the value at the measurement date) although shares were issued
periodically throughout 2003. Certain shares were issued as preferred shares (at
an equivalent value based on the conversion ratio of 44.11 per share). During
January 2004, the number of authorized shares was increased to 250,000,000, at
which time the previously issued preferred stock was converted to 35,048,445
shares of common stock.
During
January 2004, a remaining Bankruptcy obligation was satisfied when the Company
issued 4.5 million common shares to an entity that is an affiliate of the
Company’s CEO. The Company recognized an expense of $2.6 million in 2004 in
connection with this 4.5 million stock issuance which is the approximate fair
value of the stock on the issuance date.
During
2003, a total of 34,998,000 shares of the Company’s common stock were issued for
the acquisition of LABS (see Note 2) including 4.0 million common shares to an
affiliate of the Company’s Chief Executive Officer in connection with the
facilitation and bridge funding for this acquisition. The value of these share
issuances was approximately $1.4 million.
An
aggregate of 3,644,000 shares of stock were issued during 2003 in connection
with the conversion of $728,800 in related party debt to equity. Stock issued
for services in 2003 aggregated 50,000 shares valued at $30,175.
In
addition, the Company sold 1,690,000 shares of stock at prices ranging from $.20
to $.40 for aggregate proceeds of $548,000 and 368,815 shares of preferred stock
were converted to 16,268,430 shares of common stock.
NANOBAC
PHARMACEUTICALS, INCORPORATED AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
YEARS
ENDED DECEMBER 31, 2004 AND 2003
10.
Stockholders' equity (continued)
Warrants
As of
December 31, 2004, in connection with the OY acquisition, 5,000,000 warrants
were outstanding with an exercise price of $.005 per common share and an
expiration date of August 31, 2009 (see Note 2).
At the
finalization of the Subscription Agreements described above, approximately 23.4
million additional warrants will be issued with an estimated weighted average
exercise price of $.16 per common share and an expiration date of five years
from the date of issuance.
Stock
Option Plan
No stock
options were outstanding for the years ended December 31, 2004 and 2003.
11.
Commitments
The
Company leases administrative and laboratory facilities and office equipment
under cancelable and non-cancelable operating leases that expire through June
2010. The following table summarizes the minimum future rental commitments under
non-cancelable operating leases at December 31, 2004:
| Year ending December 31, |
|
|
|
|
|
2005 |
|
$ |
174,281 |
|
|
2006 |
|
|
178,408 |
|
|
2007 |
|
|
109,225 |
|
|
2008 |
|
|
58,163 |
|
|
2009 |
|
|
53,900 |
|
|
2010 |
|
|
27,234 |
|
| |
|
|
|
|
| |
|
$ |
601,211 |
|
Rent
expense on operating leases for the years ended December 31, 2004 and 2003 was
approximately $222,000 and $167,000, respectively.
NANOBAC
PHARMACEUTICALS, INCORPORATED AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
YEARS
ENDED DECEMBER 31, 2004 AND 2003
13.
Contingency
On
September 24, 2004 a civil action was filed in United States District Court -
Southern District of California by World Health Products, LLC (“World Health”)
broadly alleging that the Company, together with a customer of the Company
(“Customer”), has infringed on its Patent Number 5,602,180 related to the sale
of suppositories included in the Company’s supplement product. World Health
alleged additional complaints against the Customer to which the Company is not
liable. During February 2005, World Health dropped the Company from their
lawsuit as their tests of the Company’s suppositories determined that World
Health’s patents were not being infringed upon.
NANOBAC
PHARMACEUTICALS, INCORPORATED AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
YEARS
ENDED DECEMBER 31, 2004 AND 2003
15.
Quarterly Data
| |
|
Mar
31 |
|
Jun
30 |
|
Sep
30 |
|
Dec
31 |
|
2004
Quarter ended |
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$ |
32,385 |
|
$ |
73,564 |
|
$ |
118,141 |
|
$ |
134,271 |
|
|
Gross
profit |
|
$ |
25,196 |
|
$ |
42,072 |
|
$ |
76,037 |
|
$ |
114,586 |
|
Loss
from continuing operations |
|
|
($4,221,972 |
) |
|
($1,384,238 |
) |
|
($994,276 |
) |
|
($1,217,024 |
) |
|
Net
loss |
|
|
($4,279,240 |
) |
|
($1,384,238 |
) |
|
($994,276 |
) |
|
($1,217,024 |
) |
|
Loss
per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and Diluted |
|
|
($0.03 |
) |
|
($0.01 |
) |
|
($0.01 |
) |
|
($0.00 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2003
Quarter ended |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$ |
0 |
|
$ |
77,637 |
|
$ |
241,340 |
|
$ |
163,838 |
|
|
Gross
profit |
|
$ |
0 |
|
$ |
17,174 |
|
$ |
63,932 |
|
$ |
68,587 |
|
Loss
from continuing operations |
|
|
($935,446 |
) |
|
($166,229 |
) |
|
($679,241 |
) |
|
($980,217 |
) |
|
Net
loss |
|
|
($1,234,083 |
) |
|
($468,666 |
) |
|
($929,230 |
) |
|
($1,067,512 |
) |
|
Loss
per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and Diluted |
|
|
($0.03 |
) |
|
($0.01 |
) |
|
($0.01 |
) |
|
($0.01 |
) |
Reconciliation
of 2003 Quarterly Data to Forms 10-QSB as filed
| |
|
Mar
31 |
|
Jun
30 |
|
Sep
30 |
|
|
Revenue |
|
|
|
|
|
|
|
|
Revenue
as reported on Form 10Q |
|
$ |
5,812 |
|
$ |
84,049 |
|
$ |
244,616 |
|
|
Discontinued
operations |
|
|
(5,812 |
) |
|
(6,412 |
) |
|
(3,276 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
Revenue
per above |
|
$ |
0 |
|
$ |
77,637 |
|
$ |
241,340 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Gross
Profit |
|
|
|
|
|
|
|
|
|
|
|
Gross
profit as reported on Form 10Q |
|
|
($10,300 |
) |
$ |
3,034 |
|
$ |
38,503 |
|
|
Discontinued
operations |
|
|
10,300
|
|
|
14,140
|
|
|
25,429
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
Gross
profit per above |
|
$ |
0 |
|
$ |
17,174 |
|
$ |
63,932 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Net
loss |
|
|
|
|
|
|
|
|
|
|
|
Net
loss as reported on Form 10Q |
|
|
($595,222 |
) |
|
($449,924 |
) |
|
($913,780 |
) |
|
Amortization
of intangible assets |
|
|
-
|
|
|
(18,742 |
) |
|
(90,000 |
) |
|
Charge
or reversal thereof for stock issuances to affiliates of
officers |
|
|
(650,000 |
) |
|
|
|
|
74,550 |
|
|
Other |
|
|
11,139
|
|
|
- |
|
|
- |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Net
loss per above |
|
|
($1,234,083 |
) |
|
($468,666 |
) |
|
($929,230 |
) |
PART
II - INFORMATION NOT REQUIRED IN PROSPECTUS
| Item 24 |
INDEMNIFICATION OF DIRECTORS AND
OFFICERS |
Nanobac's
Articles of Incorporation, as amended, provide to the fullest extent permitted
by Florida law, a director or officer of Nanobac shall not be personally liable
to Nanobac or its shareholders for damages for breach of such director's or
officer's fiduciary duty. The effect of this provision of Nanobac's Articles of
Incorporation, as amended, is to eliminate the right of Nanobac and its
shareholders (through shareholders' derivative suits on behalf of Nanobac) to
recover damages against a director or officer for breach of the fiduciary duty
of care as a director or officer (including breaches resulting from negligent or
grossly negligent behavior), except under certain situations defined by statute.
Nanobac believes that the indemnification provisions in its Articles of
Incorporation, as amended, are necessary to attract and retain qualified persons
as directors and officers.
Insofar
as indemnification for liabilities arising under the Securities Act of 1933 (the
"Securities Act") may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defence of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such
issue.
The
following table sets forth the costs and expenses payable by us in connection
with the issuance and distribution of the securities being registered hereunder.
No expenses shall be borne by the selling stockholder. All of the amounts shown
are estimates, except for the SEC Registration Fees.
|
SEC
registration fees |
|
$ |
500.00 |
|
|
Accounting
fees and expenses |
|
$ |
10,000.00 |
|
|
Legal
fees and expenses |
|
$ |
30,000.00 |
|
|
Miscellaneous |
|
$ |
1,000.00 |
|
|
Total |
|
$ |
31,500.00 |
|
(1) We have
estimated these amounts
Item
26 RECENT
SALES OF UNREGISTERED SECURITIES
The
following table sets forth our sale of securities during the last three years
which securities were not registered under the Securities Act of 1933, as
amended. Except as described in paragraph 13, no underwriters were employed with
respect to the sale of any of the securities listed below.
1. On
December 6, 2002, we entered into a share for share exchange agreement to trade
all the outstanding common stock of HealthCentrics, Inc. for our common stock.
Shares issued in this exchange agreement are as follows:
|
Affiliates
of our CEO and Chairman |
|
|
11,251,249 |
|
|
25
accredited investors |
|
|
6,481,716 |
|
| |
|
|
|
|
| |
|
|
17,732,965 |
|
Each of
these former shareholders of HealthCentrics, Inc. received their shares in
reliance upon Section 4(2) of the Securities Act of 1933, because each of the
holders was knowledgeable, sophisticated and had access to comprehensive
information about us. At all relevant times we were a reporting company under
the Securities Exchange Act of 1934 and there was readily available adequate
current public information with respect to the Company. We placed legends on the
certificates stating that the securities were not registered under the
Securities Act and set forth the restrictions on their transferability and sale.
2. From
May 2001 through November 2002, we were in bankruptcy. Throughout the bankruptcy
proceedings, our Chairman, Secretary and CEO (collectively “NNBP Officers”)
funded our administrative costs and provided management to the Company in the
aggregate amount of $750,000 for services rendered during the bankruptcy. The
liability was to be settled through the issuance of up to 75 million shares of
the Company’s stock ($.01 per share fair value at the date of the award). Shares
were issued periodically throughout 2003. Certain shares were issued as
preferred shares (at an equivalent value based on the conversion ratio of 44.11
per share). Subsequent to December 31, 2003, the number of authorized shares was
increased to 250,000,000, at which time the previously issued preferred stock
was converted to 35,048,445 shares of Common stock. Total common shares issued
as a result of the above are as follows:
|
Affiliates
of our CEO and Chairman |
|
|
54,933,890 |
|
|
Alexander
Edwards III (Director) |
|
|
500,000
|
|
|
2 accredited
investors |
|
|
2,950,000
|
|
| |
|
|
|
|
| |
|
|
58,383,890
|
|
Each of
these NNBP Officers or affiliates received their shares in reliance upon Section
4(2) of the Securities Act of 1933, because each of the holders was
knowledgeable, sophisticated and had access to comprehensive information about
us. At all relevant times we were a reporting company under the Securities
Exchange Act of 1934 and there was readily available adequate current public
information with respect to the Company.
3. During
March 1998 and March 1999, 368,815 shares of preferred stock were convertible
into common shares at a rate of 1 share of preferred stock into 44.11 shares of
common stock. During January 2003, 100% of the preferred stock was converted
into common stock as follows:
|
Affiliates
of our CEO and Chairman |
|
|
11,651,555
|
|
|
34
accredited investors |
|
|
4,616,875
|
|
|
|
|
|
|
|
|
|
|
|
16,268,430
|
|
Each of
these NNBP Officers or affiliates received their shares in reliance upon Section
4(2) of the Securities Act of 1933, because each of the holders was
knowledgeable, sophisticated and had access to comprehensive information about
us. At all relevant times we were a reporting company under the Securities
Exchange Act of 1934 and there was readily available adequate current public
information with respect to the Company.
4. During
March 2003, April 2003 and July 2003, we issued 3,644,000 shares in exchange for
the cancellation of indebtedness. The indebtedness was the result of cash loans
to the Company. 444,000 shares were issued to Stone Enclosures, Inc. and
1,795,000 shares were issued to Wade, Inc. in exchange for the cancellation of
$447,800 of indebtedness ($.20 per share). Both of these entities are controlled
by our CEO and Chairman, John Stanton. The remaining 1,405,000 shares were
issued to Holmich Investment Corp. in exchange for the cancellation of $281,000
of indebtedness ($.20 per share). Each of these investors received their shares
in reliance upon Section 4(2) of the Securities Act of 1933, because each of the
holders was knowledgeable, sophisticated and had access to comprehensive
information about us. At all relevant times we were a reporting company under
the Securities Exchange Act of 1934 and there was readily available adequate
current public information with respect to the Company.
5. On
June 4, 2003 we entered into a share for share exchange agreement to exchange
74.4% of common stock of NanobacLabs Pharmaceuticals, Inc. (“LAABS”) for our
common stock. During June 2003 through December 2003, we acquired an additional
20.2% of LABS in exchange for our common stock. Shares issued in this exchange
agreement are as follows:
|
Gary
Mezo |
|
|
14,640,000
|
|
|
Nancy
M. Schriewer - Mezo |
|
|
9,760,000
|
|
|
18
accredited investors |
|
|
6,598,000
|
|
|
|
|
|
|
|
|
|
|
|
30,998,000
|
|
An
additional 4,000,000 shares were issued to Escape velocity of Tampa Bay, Inc. in
connection with the facilitation and bridge funding for the acquisition of LABS.
Each of
these former shareholders of LABS received their shares in reliance upon Section
4(2) of the Securities Act of 1933, because each of the holders was
knowledgeable, sophisticated and had access to comprehensive information about
us. At all relevant times we were a reporting company under the Securities
Exchange Act of 1934 and there was readily available adequate current public
information with respect to the Company. We placed legends on the certificates
stating that the securities were not registered under the Securities Act and set
forth the restrictions on their transferability and sale.
7. From
July 2003 through September 2003, we sold an aggregate of 1,690,000 shares of
our Common Stock to ten accredited private investors for $548,000. Each of
these investors received their shares in reliance upon Section 4(2) of the
Securities Act of 1933, because each of the holders was knowledgeable,
sophisticated and had access to comprehensive information about us. At all
relevant times we were a reporting company under the Securities Exchange Act of
1934 and there was readily available adequate current public information with
respect to the Company. We placed legends on the certificates stating that the
securities were not registered under the Securities Act and set forth the
restrictions on their transferability and sale.
8. During
November and December 2003 we issued 25,000 shares each to Eric Littman and
Hector Gomez in exchange for services rendered to the Company. Each of these
individuals received their shares in reliance upon Section 4(2) of the
Securities Act of 1933, because each of the holders was knowledgeable,
sophisticated and had access to comprehensive information about us. At all
relevant times we were a reporting company under the Securities Exchange Act of
1934 and there was readily available adequate current public information with
respect to the Company. We placed legends on the certificates stating that the
securities were not registered under the Securities Act and set forth the
restrictions on their transferability and sale.
9. During
January 2004 we issued 4,500,000 shares to Escape Velocity of Tampa Bay, Inc. in
exchange for services rendered to the Company during its bankruptcy. This entity
is controlled by our Chairman and CEO. This affiliate received its shares in
reliance upon Section 4(2) of the Securities Act of 1933, because the holder was
knowledgeable, sophisticated and had access to comprehensive information about
us. At all relevant times we were a reporting company under the Securities
Exchange Act of 1934 and there was readily available adequate current public
information with respect to the Company.
10.
During January 2004 and March 2004 (and amended in August 2004), we entered into
an employment agreements with E. Olavi Kajander and Neva Ciftcioglu which
included provisions to acquire their 35% ownership of Nanobac OY for 5,000,000
shares of our common stock and 5,000,000 warrants with an exercise price of
$.005 per share. Each of these employees received their shares in reliance upon
Section 4(2) of the Securities Act of 1933, because the holder was
knowledgeable, sophisticated and had access to comprehensive information about
us. At all relevant times we were a reporting company under the Securities
Exchange Act of 1934 and there was readily available adequate current public
information with respect to the Company.
11. From
August 2004 through November 2004, we entered into agreements with three
creditors to convert $269,538 of current liabilities due to them for
professional services into 2,097,843 shares of our common stock.
Each of
these creditors received their shares in reliance upon Section 4(2) of the
Securities Act of 1933, because each of the holders was knowledgeable,
sophisticated and had access to comprehensive information about us. At all
relevant times we were a reporting company under the Securities Exchange Act of
1934 and there was readily available adequate current public information with
respect to the Company. We placed legends on the certificates stating that the
securities were not registered under the Securities Act and set forth the
restrictions on their transferability and sale.
12. On
September 30, 2004, the stockholder loan of $7.5 million was converted into
29,999,964 share of our common stock at $0.25 per share. Shares were issued in
this conversion of debt into equity to affiliates of our CEO and Chairman.
Each of
these affiliates received their shares in reliance upon Section 4(2) of the
Securities Act of 1933, because each of the holders was knowledgeable,
sophisticated and had access to comprehensive information about us. At all
relevant times we were a reporting company under the Securities Exchange Act of
1934 and there was readily available adequate current public information with
respect to the Company. We placed legends on the certificates stating that the
securities were not registered under the Securities Act and set forth the
restrictions on their transferability and sale.
13. From
August through October 2004, we executed Subscription Agreements with various
investors. These investors paid us 50% of the subscription price at execution
and the remaining 50% is due within five days that a registration statement is
declared effective for the common shares that are being issued. In exchange for
the cash consideration, we are to issue these investors shares of our common
stock equal to the amount paid divided by the lesser of (a) $0.12 or (b)
fifty-two percent of the average closing bid price for our common stock on the
five days immediately prior to the date on which a registration statement is
declared effective (“The Fixed Price”). In addition, each of these investors
will receive an equivalent number of warrants. Assuming that The Fixed Price
will be $0.12 per share, the number of shares that will be issued under these
subscription agreements is as follows:
| |
|
Number |
|
|
|
|
|
| |
|
of
Shares |
|
Per
Share |
|
Proceeds |
|
Common
Stock: |
|
|
|
|
|
|
|
|
The
Nutmeg Group, LLC |
|
|
10,833,333
|
|
$ |
0.12 |
|
$ |
1,300,000 |
|
|
Jaytern
Associates, Inc. |
|
|
2,083,333
|
|
$ |
0.12 |
|
$ |
250,000 |
|
|
Alexander
Edwards |
|
|
8,333,333
|
|
$ |
0.12 |
|
$ |
1,000,000 |
|
|
NITE
Capital |
|
|
3,333,333
|
|
$ |
0.12 |
|
$ |
400,000 |
|
| |
|
|
|
|
|
|
|
|
|
|
| |
|
|
24,583,333
|
|
|
|
|
$ |
2,950,000 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number |
|
|
Exercise |
|
|
|
|
|
|
|
|
of
Warrants |
|
|
Price |
|
|
|
|
|
Warrants: |
|
|
|
|
|
|
|
|
|
|
|
The
Nutmeg Group, LLC |
|
|
5,416,667
|
|
$ |
0.132 |
|
|
|
|
|
The
Nutmeg Group, LLC |
|
|
5,416,667
|
|
$ |
0.180 |
|
|
|
|
|
Jaytern
Associates, Inc. |
|
|
1,041,667
|
|
$ |
0.132 |
|
|
|
|
|
Jaytern
Associates, Inc. |
|
|
1,041,667
|
|
$ |
0.180 |
|
|
|
|
|
Escape
velocity of Tampa Bay, Inc. (1) |
|
|
4,166,667
|
|
$ |
0.132 |
|
|
|
|
|
Escape
velocity of Tampa Bay, Inc. (1) |
|
|
4,166,667
|
|
$ |
0.180 |
|
|
|
|
|
NITE
Capital |
|
|
1,666,667
|
|
$ |
0.132 |
|
|
|
|
|
NITE
Capital |
|
|
1,666,667
|
|
$ |
0.180 |
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
| |
|
|
24,583,333
|
|
|
|
|
|
|
|
(1)
Affiliate of the Company.
Each of
these investors received their shares in reliance upon Section 4(2) of the
Securities Act of 1933, because each of the holders was knowledgeable,
sophisticated and had access to comprehensive information about us. At all
relevant times we were a reporting company under the Securities Exchange Act of
1934 and there was readily available adequate current public information with
respect to the Company.
Hartsfield
Capital Securities (Hartsfield) is due a 10% success fee for the Nutmeg
subscription. To date, Hartsfield has received $60,000 or 10% of the first
traunch of cash received from Nutmeg. An additional 10% will be payable to
Hartsfield when the remaining cash is received from Nutmeg. In addition,
Hartsfield is to receive warrants equal to 20% of the value of the Nutmeg
transaction based on 100% of the market price of our stock at the final closing
of the Nutmeg transaction. We estimate that the number of warrants to be issued
to Hartsfield will be approximately 3,250,000.
14.
During January 2005 we issued 100,000 shares of common stock to an employee as
consideration for services. This employee received his shares in reliance upon
Section 4(2) of the Securities Act of 1933, because the holder was
knowledgeable, sophisticated and had access to comprehensive information about
us. At all relevant times we were a reporting company under the Securities
Exchange Act of 1934 and there was readily available adequate current public
information with respect to the Company. We placed legends on the certificates
stating that the securities were not registered under the Securities Act and set
forth the restrictions on their transferability and sale.
Item
27 EXHIBIT
INDEX
|
Exhibit |
|
|
|
Number |
|
Description |
| |
|
|
|
3.1 |
|
Restated
Articles of Incorporation (Previously filed with the SEC as an exhibit to
the Registrant’s Annual Report on Form 10-KSB for the year ended December
31, 2003) |
| |
|
|
|
3.2 |
|
By-Laws
(Previously filed with the SEC as an exhibit to the Registrant’s Annual
Report on Form 10-KSB fore the year ended December 31,
2002) |
| |
|
|
|
10.1 |
|
First
Amended Plan of Reorganization of American Enterprise.com Corp.
(Previously filed with the SEC as an exhibit to the Registrant’s Current
Report on Form 8-K dated December 10, 2002, and incorporated herein
by reference) |
| |
|
|
|
10.2 |
|
Acquisition
Agreement dated December 6, 2002, between American Enterprise Corporation
and HealthCentrics, Inc. and its shareholders (Previously filed with the
SEC as an exhibit to the Registrant’s Current Report on Form 8-K
dated December 13, 2002, and incorporated herein by
reference) |
| |
|
|
|
10.4 |
|
Agreement
and Plan of Reorganization dated June 1, 2003 between Nanobac
Pharmaceuticals, Incorporated and NanobacLabs Pharmaceuticals, Inc.
(Previously filed with the SEC as an exhibit to the Registrant’s Annual
Report on Form 10-KSB for the year ended December 31, 2003 and
incorporated herein by reference) |
| |
|
|
|
10.5 |
|
Share
Purchase Agreement dated September 25, 2002 between NanobacLabs, L.L.C.
and selected shareholders of Nanobac OY (Previously filed with the SEC as
an exhibit to the Registrant’s Current Report on Form 8-K dated
November 26, 2003, and incorporated herein by
reference) |
| |
|
|
|
10.6
|
|
Convertible
Promissory Note Loans Purchase Agreement dated September 25, 2002 between
NanobacLabs, L.L.C. and selected shareholders of Nanobac OY (Previously
filed with the SEC as an exhibit to the Registrant’s Current Report on
Form 8-K dated November 26, 2003, and incorporated herein by
reference) |
| |
|
|
|
10.7
|
|
Closing
Agreement dated November 5, 2003 between NanobacLabs, L.L.C. and selected
shareholders of Nanobac OY (Previously filed with the SEC as an exhibit to
the Registrant’s Current Report on Form 8-K dated November 26, 2003,
and incorporated herein by reference) |
| |
|
|
|
10.9 |
|
Lease
Agreement dated April 17, 2002 between NanobacLabs, L.L.C. and MLK-Tampa
Associates, LLC regarding 5,593 square feet of office space located at
2727 W. Martin Luther King Blvd. - Suite 850, Tampa, Florida and First
Amendment to Lease dated September 1, 2002 between NanobacLabs, L.L.C. and
MLK-Tampa Associates, LLC regarding 2,121 square feet of office space
located at 2727 W. Martin Luther King Blvd. - Suite 101, Tampa, Florida
(Previously filed with the SEC as an exhibit to the Registrant’s Annual
Report on Form 10-KSB for the year ended December 31, 2004 and
incorporated herein by reference) |
| |
|
|
|
10.10 |
|
Loan
Agreement dated December 31, 2003 between Nanobac Pharmaceuticals,
Incorporated and Escape Velocity, Inc. (Previously filed with the SEC as
an exhibit to the Registrant’s Annual Report on Form 10-KSB for the year
ended December 31, 2003) |
| |
|
|
|
10.11 |
|
Employment
by and between Nanobac Pharmaceuticals, Incorporated and Alex H. Edwards
III dated January 26, 2004 (Previously filed with the SEC as an exhibit to
the Registrant’s Annual Report on Form 10-KSB for the year ended December
31, 2003) |
|
10.12 |
|
Sublease
Agreement dated May 18, 2004 between NanobacLabs, L.L.C. and Tampa Bay
Surgery Center Associates, Ltd regarding the sublease of 2,121 square feet
of office space located at 2727 W. Martin Luther King Blvd. - Suite 101,
Tampa, Florida (Previously filed with the SEC as an exhibit to the
Registrant’s Annual Report on Form 10-KSB for the year ended December 31,
2004 and incorporated herein by reference) |
| |
|
|
|
10.13 |
|
Share
Purchase Agreement dated March 30, 2004 between Nanobac Pharmaceuticals,
Incorporated and Escape Velocity of Tampa Bay, Incorporated for the sale
of HealthCentrics, Inc. (Previously filed with the SEC as an exhibit to
the Registrant’s Current Report on Form 8-K dated March 30, 2004, and
incorporated herein by reference) |
| |
|
|
|
10.14 |
|
Executive
Employment Agreement between Nanobac Pharmaceuticals, Incorporated, and E.
Olavi Kajander, MD, PhD, an individual dated January 15, 2004 (Previously
filed with the SEC as an exhibit to the Registrant’s Current Report on
Form 8-K dated March 31, 2004, and incorporated herein by
reference) |
| |
|
|
|
10.15 |
|
Executive
Employment Agreement between Nanobac Pharmaceuticals, Incorporated and
Neva Ciftcioglu, PhD, an individual dated March 31, 2004 (Previously filed
with the SEC as an exhibit to the Registrant’s Current Report on
Form 8-K dated March 31, 2004, and incorporated herein by
reference) |
| |
|
|
|
10.16 |
|
Nonreimbursable
Space Act Agreement between The National Aeronautics and Space
Administration Lyndon B. Johnson Space Center and Nanobac Pharmaceuticals,
Incorporated (Previously filed with the SEC as an exhibit to the
Registrant’s Current Report on Form 8-K dated March 31September 13,
2004 and incorporated herein by reference) |
| |
|
|
|
10.17 |
|
Debt
Cancellation Agreement dated August 30, 2004 between Nanobac
Pharmaceuticals, Incorporated and E. Olavi Kajander (Previously filed with
the SEC as an exhibit to the Registrant’s Annual Report on Form 10-KSB for
the year ended December 31, 2004 and incorporated herein by
reference) |
| |
|
|
|
10.18 |
|
Amendment
to Executive Employment Agreement dated August 30, 2004 between Nanobac
Pharmaceuticals, Incorporated and E. Olavi Kajander (Previously filed with
the SEC as an exhibit to the Registrant’s Annual Report on Form 10-KSB for
the year ended December 31, 2004 and incorporated herein by
reference) |
| |
|
|
|
10.19 |
|
Stock
Purchase Agreement dated August 30, 2004 between Nanobac Pharmaceuticals,
Incorporated and E. Olavi Kajander (Previously filed with the SEC as an
exhibit to the Registrant’s Annual Report on Form 10-KSB for the year
ended December 31, 2004 and incorporated herein by
reference) |
| |
|
|
|
10.20 |
|
Amendment
to Executive Employment Agreement dated September 10, 2004 between Nanobac
Pharmaceuticals, Incorporated and Neva Ciftcioglu (Previously filed with
the SEC as an exhibit to the Registrant’s Annual Report on Form 10-KSB for
the year ended December 31, 2004 and incorporated herein by
reference) |
| |
|
|
|
10.21 |
|
Subscription
Agreement, Registration Rights Agreement and Form of Warrant dated August
13, 2004 between Nanobac Pharmaceuticals, Incorporated and The Nutmeg
Group, LLC (serves as form of agreement for similar subscription
agreements) |
| |
|
|
|
10.22 |
|
Subscription
Agreement, Registration Rights Agreement and Form of Warrant dated
September 3, 2004 between Nanobac Pharmaceuticals, Incorporated and
Jaytern Associates, Inc. (Previously filed with the SEC as an exhibit to
the Registrant’s Annual Report on Form 10-KSB for the year ended December
31, 2004 and incorporated herein by
reference) |
|
10.23 |
|
Debt
Cancellation Agreement dated September 20, 2004 between Nanobac
Pharmaceutical, Incorporated and Escape Velocity, Inc. (Previously filed
with the SEC as an exhibit to the Registrant’s Annual Report on Form
10-KSB for the year ended December 31, 2004 and incorporated herein by
reference) |
| |
|
|
|
10.24 |
|
Debt
Cancellation Agreement dated October 18, 2004 between Nanobac
Pharmaceutical, Incorporated and Benedict Maniscalco (Previously filed
with the SEC as an exhibit to the Registrant’s Annual Report on Form
10-KSB for the year ended December 31, 2004 and incorporated herein by
reference) |
| |
|
|
|
10.25 |
|
Debt
Cancellation Agreement dated December 14, 2004 between Nanobac
Pharmaceutical, Incorporated and MacFarlane Ferguson & McMullen
(Previously filed with the SEC as an exhibit to the Registrant’s Annual
Report on Form 10-KSB for the year ended December 31, 2004 and
incorporated herein by reference) |
| |
|
|
|
16.1 |
|
Baumann,
Raymondo & Company, P.A. letter to the Securities and Exchange
Commission dated February 3, 2004 (Previously filed with the SEC as an
exhibit to the Registrant’s Current Report on Form 8-K dated January
30, 2004, and incorporated herein by reference) |
| |
|
|
|
23.1 |
|
Consent
of Aidman, Piser & Company, P.A. |
| |
|
|
|
31.1
|
|
Certification
to Section 302 of the Sarbanes-Oxley Act of 2002 - Chief Executive
Officer |
| |
|
|
|
31.2 |
|
Certification
to Section 302 of the Sarbanes-Oxley Act of 2002 - Chief Financial
Officer |
| |
|
|
|
32.1 |
|
Certification
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002 - Chief Executive
Officer |
| |
|
|
|
32.2 |
|
Certification
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002 - Chief Financial Officer
|
Item
28 UNDERTAKINGS
The
undersigned Company hereby undertakes that it will:
| (1) |
file,
during any period in which offers or sales are being made, a
post-effective amendment to this registration statement to include:
|
(a) any
prospectus required by Section 10(a)(3) of the Securities Act;
(b) reflect
in the prospectus any facts or events which, individually or together, represent
a fundamental change in the information in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the aggregate
offering price set forth in the "Calculation of Registration Fee" table in the
effective registration statement; and
(c) any
additional or changed material information with respect to the plan of
distribution not previously disclosed in the registration statement;
| (2) |
for
the purpose of determining any liability under the Securities Act, each of
the post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of
the securities at that time shall be deemed to be the initial bona fide
offering thereof; and |
| (3) |
remove
from registration by means of a post-effective amendment any of the
securities being registered which remain unsold at the termination of the
offering. |
Insofar
as indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers
and controlling persons of Nanobac pursuant to the foregoing provisions, or
otherwise, Nanobac has been advised that in the opinion of the Commission that
type of indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against said liabilities (other than the payment by Nanobac of
expenses incurred or paid by a director, officer or controlling person of
Nanobac in the successful defense of any action, suit or proceeding) is asserted
by the director, officer or controlling person in connection with the securities
being registered, Nanobac will, unless in the opinion of our counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of the issue.
For
purposes of determining any liability under the Securities Act, the information
omitted from the form of prospectus filed as part of this registration statement
in reliance upon Rule 430A and contained in a form of prospectus filed by the
registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act
shall be deemed to be part of this registration statement as of the time it was
declared effective.