As filed with the Securities and Exchange Commission on March 14,2003.
Registration No. 333-102526.
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
BIOPHAN TECHNOLOGIES, INC.
(Name of small business issuer in its charter)
Nevada 8700 82-0507874
(State or other jurisdiction (Primary Standard Industrial (IRS Employer
of incorporation or Classification Identification
organization) Code Number) Number)
150 Lucius Gordon Drive, Suite 215
West Henrietta, New York 14586
(585) 214-2441
(Address and telephone number of registrant's principal executive offices)
Michael L. Weiner
Chief Executive Officer
150 Lucius Gordon Drive, Suite 215
West Henrietta, New York 14586
Ph. (585) 214-2441
Fax:(585) 427-2433
(Name, address and telephone number of agent for service)
Copy of all communications to:
Alan S. Lockwood, Esq.
Boylan, Brown, Code, Vigdor & Wilson, LLP
2400 Chase Square
Rochester, New York 14604
Ph. (585) 232-5300
Fax: (585) 232-3528
Approximate date of commencement of proposed sale to the public: As soon
as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act,
check the following box: [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462 (b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box: [ ]
CALCULATION OF REGISTRATION FEE
Title of Each Amount to Be Proposed Maximum Proposed Maximum Amount of
Class of Registered Offering Price Aggregate Registration
Securities to Per Share (1) Offering Price Fee
Be Registered (1)
-------------------------------------------------------------------------------------
Common Stock Up to $.655 $4,061,000 $373
6,200,000
Common Stock Up to $.655 $ 203,050 $ 18
Issuable upon 310,000
Exercise of
Carolina
Financial
Warrants(2)
Common Stock 5,541,100 $.655 $3,629,421 $334
Common Stock 2,770,550 $.655 $1,814,710 $167
Issuable upon
Exercise of
Warrants(2)
Common Stock 258,006 $.655 $ 168,994 $ 16
Issued as
Commission
Common Stock 121,572 $.655 $ 79,630 $ 7
Issuable upon
Exercise of CFS
Warrants(2)
Common Stock 1,180,000 $.655 $ 772,900 $ 71
Issuable upon
Exercise of
Warrants of
Biomed(2)
Common Stock 3,000,000 $.655 $1,965,000 $181
Issuable upon
Exercise of
Warrants of
SBI(2)
(1) Estimated solely for purposes of calculating the registration fee in
accordance with Rule 457(c) under the Securities Act of 1933, as amended
(the "Act"), based on the average of the closing bid and asked prices for the
Registrant's Common Stock (the "Common Stock") as reported on the Nasdaq OTC
Bulletin Board on January 8, 2003.
(2) The number of shares of Common Stock specified above is the number which
may be acquired upon exercise of certain of the Company's warrants described
in the Prospectus forming a part of this Registration Statement (the
"Warrants"). This Registration Statement covers, pursuant to Rule 416, in
addition, such indeterminable number of shares of Common Stock as may be
issued on exercise of the Warrants by reason of adjustments in the number of
shares of Common Stock issuable pursuant to antidilution provisions contained
in the Warrants. Since such additional Common Stock will, if issued, be
issued for no additional consideration, no registration fee is required.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
registration statement shall thereafter become effective in accordance
with Section 8(a) of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Securities and Exchange
Commission, acting pursuant to said Section 8(a), may determine.
2
Subject to completion dated March 14, 2003
PROSPECTUS
BIOPHAN TECHNOLOGIES, INC.
19,381,228 SHARES OF COMMON STOCK
There are hereby offered up to 19,381,228 shares of the common stock, of
Biophan Technologies, Inc. All of these shares are being offered by selling
shareholders. Biophan will not receive any of the proceeds from the sale of
shares by the selling shareholders.
This prospectus relates primarily to the resale by Spectrum Advisors, Ltd., of
up to 6,200,000 shares of our common stock that may be issued through a
common stock purchase agreement between us and Spectrum, as further described
in this prospectus.
Spectrum is an "underwriter" within the meaning of the Securities Act of 1933
in connection with its sales.
This prospectus also relates to the resale of the following shares:
* up to 310,000 shares of our common stock underlying up to 310,000
warrants to be issued to Carolina Financial Services, LLC for services
rendered in relation to the common stock purchase agreement
* 5,541,100 shares of common stock, and 2,770,550 shares of common stock
underlying warrants, issued to certain purchasers in a private placement
of our securities, pursuant to which the purchasers were granted the
right to have their common stock registered in a subsequent
registration statement, together with 258,006 shares issued as
commissions to a finder in connection with that offering;
* 121,572 common shares underlying warrants granted to principals of CFS
for financial advisory and investment banking services;
* 1,180,000 shares issuable upon exercise of warrants issued to Biomed
Solutions, LLC; and
* 3,000,000 shares issuable upon exercise of warrants issued to SBI USA,
LLC
Our common stock trades on the over-the-counter market under the symbol
"BIPH." The last reported sales price for our common stock on March 12, 2003
was $.44 per share.
The Securities Offered Hereby Involve A High Degree Of Risk.
Investing In Our Common Stock Involves Risks Which Are Described Under "Risk
Factors" Beginning On Page 3.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospects is accurate or complete. It is illegal for anyone to tell
you otherwise.
The date of this prospectus is March 14, 2003.
3
TABLE OF CONTENTS
PART I Page
Prospectus Summary 5
Summary Historical Financial Information 6
Risk Factors 7
Use of Proceeds 14
Nature of Trading Market 14
Dividend Policy 14
Capitalization. 15
Plan of Operation 15
Business 17
Legal Proceedings 32
Management 32
Executive Compensation 37
Security Ownership of Certain Beneficial Owners and Management 39
Certain Transactions 41
Description of Securities 43
Shares Eligible for Resale 45
Restated Common Stock Purchase Agreement 46
Selling Stockholders 48
Plan of Distribution 53
Legal Matters 55
Experts 55
Where you can find Additional Information 55
Financial Statements F-1
4
PART II
Information not required in prospectus 57
Signatures 64
You should rely only on the information contained in this prospectus. We have
not, and the underwriters have not, authorized anyone to provide you with
different information. If anyone provides you with different information, you
should not rely on it. We are not, and the underwriters are not, making an
offer to sell these securities in any jurisdiction where the offer or sale is
not permitted. You should assume that the information contained in this
prospectus is accurate only as of the date on the front cover of this
prospectus. Our business, financial condition, results of operations and
prospects may have changed since that date.
PROSPECTUS SUMMARY
This summary is not complete and does not contain all of the information that
you should consider before investing in our common stock. You should read the
entire prospectus carefully, including the more detailed information regarding
our company, the risks of purchasing our common stock discussed under "risk
factors," and our financial statements and the accompanying notes.
Biophan Technologies, Inc.
Biophan Technologies, Inc. is an early-stage research and development company
focusing on technology that will enable certain medical procedures and
biomedical devices, including cardiac pacemakers, to become safe and
compatible with magnetic resonance imagining (MRI) diagnostics. We believe we
are developing patented and patentable technologies that will allow devices to
be operated safely and effectively while being used in the presence of MRI.
Our research efforts are focusing on demonstrating the feasibility of our
coating and filtering solutions which we intend to license to medical device
manufacturers. We began our current line of business on December 1, 2000; to
date we have had no revenues from operations.
Common Stock Purchase Agreement Relating To Equity Line
Effective November 22, 2002, we entered into a restated common stock purchase
agreement with Spectrum Advisors, Ltd. for the potential future issuance and
sale of up to $3,000,000 of our common stock. This agreement restated and
superseded a common stock purchase agreement entered into with Bonanza Capital
Masterfund, Ltd. as of June 6, 2002, on essentially the same terms and
conditions. Pursuant to the common stock purchase agreement we, at our sole
discretion and from time to time over a period of 24 months, may draw down on
this facility, sometimes termed an equity line, and Spectrum is obligated to
purchase shares of our common stock. The purchase price of the common stock
purchased as to any draw down will be equal to 80% of the average daily volume
weighted average price of our common stock for the five trading days preceding
the applicable date. The minimum draw down which Spectrum is obligated to
honor for any trading day is $12,500. Under certain circumstances, we may
increase Spectrum's obligation under the equity line to $10,000,000. We are
currently registering only 6,200,000 shares for sale under the equity line; at
$.45, the closing price of our common stock on March 7, 2003, we would only be
able to draw down up to $2,232,000 on the equity line of credit. We
anticipate that we will register additional shares in the future to enable us
to take full advantage of the equity line.
5
The Offering
Securities offered by selling
shareholders........................ Up to 19,381,228 shares of common stock,
representing:
* up to 6,200,000 shares issuable
pursuant to the equity line
* up to 310,000 shares issuable upon
exercise of warrants to be issued in
connection with the equity line
* 8,311,650 shares issued to investors
in our recent private placement or upon
exercise of warrants issued in connection
with that offering, plus 258,006 shares
issued to a finder in connection with
that offering;
*121,572 shares issuable upon exercise
of warrants issued to our financial
advisors;
* 1,180,000 shares issuable upon
exercise of warrants issued to Biomed
Solutions, LLC;
* 3,000,000 shares issuable upon exercise
of warrants issued to SBI USA, LLC.
Use of Proceeds..................... We will not receive any proceeds of the
sale of shares by selling shareholders.
We will receive proceeds of the equity
line to the extent that we exercise our
rights to do so. Those proceeds, if any,
will be used to repay loans, to undertake
research, to defray offering costs, and
for working capital. See Plan of
Operations.
Risk Factors........................ An investment in our common stock
involves a high degree of risk and could
result in a loss of your entire
investment.
OTC symbol.......................... BIPH
Executive Offices
Our executive offices are located at 150 Lucius Gordon Drive, Suite 215,
West Henrietta, New York 14586. Our telephone number is (585) 214-2441 and
our website is: www.biophan.com.
SUMMARY HISTORICAL FINANCIAL INFORMATION
The following table presents summarized financial information as of November
30, 2002 and the nine months then ended, and as of February 28, 2002 and 2001
and the years then ended. The information is extracted from the consolidated
financial statements presented elsewhere in this prospectus and should be read
in conjunction therewith.
6
Nine months ended Year ended Year ended
Operating Data: November 30,2002 February 28,2002 February 28,2001
----------------------------------------------------------------------------
Revenue -0- -0- -0-
Salaries and related $ 493,589 $ 461,629 $ 59,861
General & 398,930 475,520 16,059
administrative
expenses
Total expenses 2,313,726 3,705,917 729,130
Net (loss) (2,313,726) (3,705,917) (729,130)
Net loss per share (0.08) (0.14) (0.08)
Weighted average 30,359,831 27,000,962 9,166,887
shares outstanding
----------------------------------------------------------------------------
Balance Sheet Data: November 30,2002 February 28,2002 February 28,2001
Current assets $ 175,300 $ 672,823 $ 172,092
Total assets 377,875 866,638 343,752
Current liabilities 775,140 645,389 280,992
Long-term
liabilities 500,000 -0- 438,000
Stockholders' equity
(deficiency) (897,265) 221,249 (375,240)
Working capital (599,840) 27,434 (108,900)
----------------------------------------------------------------------------
RISK FACTORS
Please consider the following risk factors together with the other
information presented in this prospectus including the financial statements
and the notes thereto before investing in our common stock. The trading price
of our common stock could decline due to any of the following risks, and you
might lose all or part of your investment.
We Have Only Limited Operating History That Makes it Difficult To Evaluate
Our Business and Prospects.
We are a development stage company. We face all the inherent risks which
exist in any new business venture. We have a very limited history of
operations, limited assets and no earnings from operations to date. We are
in the initial stages of developing our technologies, and our success will
depend on our ability to design, develop and market our intellectual property
and resulting products. Due to our limited operating history, you may not
have adequate information with which to make an informed investment decision.
We Have Generated No Revenues and If We Are Unable to Generate Sufficient
Revenues in the Future, We May Not Be Able to Continue Our Business.
7
We are still in our formative and development stage. As an investor, you
should be aware of the difficulties, delays and expenses normally encountered
by an enterprise in its development stage, many of which are beyond our
control, including unanticipated research and developmental expenses,
employment costs, and administrative expenses. We cannot assure our
investors that our proposed business plans as described in this prospectus
will materialize or prove successful, or that we will ever be able to operate
profitably. If we cannot operate profitably, you could lose your entire
investment. As a result of the start-up nature of our business, initially we
expect to sustain substantial operating expenses without generating
significant revenues.
We Have a History of Losses and a Large Accumulated Deficit and We Expect
Future Losses That May Cause Our Stock Price to Decline.
For the nine months ended November 30, 2003 and fiscal years ended
February 28, 2002 and 2001, we incurred net losses of $2,313,726, $3,705,917
and $729,130, respectively. We expect to lose more money as we spend
additional capital to develop and market our technologies and establish our
infrastructure and organization to support anticipated operations. We cannot
be certain whether we will ever earn a significant amount of revenues or
profit, or, if we do, that we will be able to continue earning such revenues
or profit. Also, the current economic weakness may limit our ability to
develop and ultimately market our technologies. Any of these factors could
cause our stock price to decline and result in you losing a portion or all of
your investment.
Our Inability To Attract Or Retain Key Personnel Could Adversely Affect Our
Business And Negatively Affect Your Investment.
We depend on the continued employment of our senior management team for
our future success. If one or more members of our senior management team
leave our company, our business, financial condition and operating results
could be materially and adversely affected. We also depend on our ability to
attract additional qualified employees, researchers and consultants. We will
need to hire additional, highly skilled researchers, marketing and sales
people as our business grows. The competition for such skilled personnel is
intense. If we are unable to hire such personnel, we may be unable to achieve
our business objectives. The resulting adverse effect on our business could
lead to a decline in our stock price and a loss of a portion or all of your
investment.
Our Research and Development Efforts May Not Result in Commercially Viable
Products Which Could Result in a Decline of Our Stock Price and a Loss of
Your Investment.
Our technologies are in the development stage. Further research and
development efforts will be required to develop these technologies to the
point where they can be incorporated into commercially viable or salable
products. We have set forth in this prospectus our proposed research and
development program as it is currently conceived. We cannot assure you,
however, that this program will be accomplished in the order or in the time
frame set forth. We reserve the right to modify the research and development
program. We may not succeed in developing commercially viable products from
our technologies. If not, our ability to generate revenues from our
technologies will be severely limited. This would result in the loss of all
or part of your investment.
We May Not Have Opportunities To Enter Into Strategic Partnerships for the
Commercialization of our Technologies Which Could Have a Severe Negative
Impact on Our Ability to Market Our Products.
We intend to enter into strategic partnerships or other relationships
with established biomedical, pharmaceutical and bio-pharmaceutical companies
to obtain the necessary regulatory approvals and to undertake the
manufacturing and marketing efforts required to commercialize our products.
However, we do not have commitments at this time from any potential partners.
If we are unable to enter into any new partnerships, then we may be unable to
commence the commercialization of our products.
8
We May Not Be Able To Develop A Market For Our Technology Which Will Most
Likely Cause Our Stock Price to Decline.
The demand and price for our technology and related products will be
based upon the existence of markets for the technology and products and the
markets for products of others, which may utilize our technology. The extent
to which we may gain a share of our intended markets will depend, in part,
upon the cost effectiveness and performance of our technology and products
when compared to alternative technologies, which may be conventional or
heretofore unknown. If the technology or products of other companies provide
more cost-effective alternatives or otherwise outperform our technology or
products, the demand for our technology or products maybe adversely affected.
Our success will be dependent upon market acceptance of our technology and
related products. Failure of our technology to achieve and maintain
meaningful levels of market acceptance would materially and adversely affect
our business, financial condition, results of operations and market
penetration. This would likely cause our stock price to decline.
If We Are Unable To Compete Successfully Against Our Competitors, Our
Business, Financial Condition And Operating Results Will Be Adversely
Affected.
There may be other companies that provide the same or similar technology
as we are developing. Most of our potential competitors will have more
financial resources and experience, which enable them to better withstand the
impact of certain industry risks. In addition, the major manufacturers of
pacemakers and other implantable devices may have internal development
programs that eliminate their need to license our technology. If we are
unable to compete successfully with other in our market, our business will
most likely fail resulting in a decline in our stock price and a loss of your
investment.
We May Not Be Able To Obtain Necessary Government Approval To Market Our
Technology Which Will Most Likely Cause Our Stock Price to Decline and Our
Business to Fail.
Our marketing partners must obtain the approval of the U.S. Food
and Drug Administration in order to market our MRI-safe technology. If
these approvals are not obtained, or are significantly delayed, our ability
to generate revenues may be adversely affected and our development and
marketing efforts inhibited. This would most likely cause our stock price to
decline and result in the loss of all or part of your investment.
We May Not Be Able To Protect Our Proprietary Rights and We May Infringe the
Proprietary Rights of Others. Our Inability to Protect Our Rights Could
Impair Our Business and Cause us to Incur Substantial Expense to Enforce our
Rights.
Proprietary rights are critically important to us. While we have several
patents under exclusive license, and we intend to aggressively pursue patent
protection for our technologies, we cannot assure you that any additional
patents will be issued. Although we will seek to defend our patents and to
protect our other proprietary rights, our actions may be inadequate to protect
our patents and other proprietary rights from infringement by others, or to
prevent others from claiming infringement of their patents and other
proprietary rights.
Policing unauthorized use of our technology is difficult and some foreign
laws do not provide the same level of protection as U.S. laws. Litigation
may be necessary in the future to enforce our intellectual property rights,
to protect our trade secrets or patents that we may obtain, or to determine
the validity and scope of the proprietary rights of others. Such litigation
could result in substantial costs and diversion of resources and have a
material adverse effect on our future operating results.
9
Because Two Of Our Directors Are Equity Owners And Managers Of Biomed
Solutions, LLC, A Creditor And Shareholder Of Biophan, There May Be Conflicts
Of Interest.
Michael L. Weiner, our President, CEO and director, is the Manager and
equity member of Biomed. Mr. Weiner, and Ross Kenzie, also a director of
Biophan, make up the Biomed Board of Members. Biomed and its members own a
significant amount of our outstanding common stock and we owe Biomed $500,000
plus interest for the transfer to us of its MRI-compatible pacemaker patents
pending. We have also executed a line of credit with Biomed pursuant to which
we owe Biomed $300,000 plus accrued interest as of the date hereof. We have
issued to Biomed 1,180,000 warrants for the purchase of our common stock. Mr.
Weiner is also the Manager and 42.3% equity member of Technology Innovations,
LLC, which is a 57% equity member of Biomed. Further, Mr. Weiner is on the
board of Nanoset, LLC, an entity owned in part by Biomed and with which we
have negotiated a technology license agreement and are exploring acquiring
additional rights to Nanoset's technology.
Because of their relationships with these other entities, Messrs. Weiner
and Kenzie may have conflicts of interest with respect to certain matters
affecting us. All potential conflicts may not be resolved in a manner that is
favorable to us. We believe it is impossible to predict the precise
circumstances under which future potential conflicts may arise and therefore
intend to address potential conflicts on a case-by-case basis. Under Nevada
law, directors have a fiduciary duty to act in good faith and with a view to
the interests of the corporation.
If We Fail To Pay The Purchase Price For Our Technology, That Technology Will
Revert To Biomed, Which Will Significantly And Negatively Impact Our Business
And Your Investment.
Under the Transfer Agreement with Biomed in connection with our
acquisition of the MRI intellectual property rights, Biomed maintains a
security interest in the underlying patents until the amount of $500,000, plus
interest at 8% per annum, is paid to Biomed. Biomed has the right to take
back these intellectual property rights if we do not satisfy the liability
which is payable in 12 equal installments commencing June 1, 1004. In the
event we are unable to satisfy this condition, and we lose our rights to the
technology, we will suffer significant harm to our business and financial
condition which would most likely cause the price of our stock to decline.
The So Called "Penny Stock Rule" Could Make It Cumbersome For Brokers And
Dealers To Trade in Our Common Stock, Making the Market For Our Common Stock
Less Liquid Which Could Cause The Price Of Our Stock To Decline.
Trading of our common stock on the OTC Bulletin Board may be subject to
certain provisions of the Securities Exchange Act of 1934, commonly referred
to as the "penny stock" rule. A penny stock is generally defined to be any
equity security that has a market price less than $5.00 per share, subject
to certain exceptions. If our stock is deemed to be a penny stock, trading
in our stock will be subject to additional sales practice requirements on
broker-dealers. These may require a broker dealer to:
* make a special suitability determination for purchasers of our shares;
* receive the purchaser's written consent to the transaction prior to
the purchase; and
* deliver to a prospective purchaser of our stock, prior to the first
transaction, a risk disclosure document relating to the penny stock
market.
10
Consequently, penny stock rules may restrict the ability of broker-
dealers to trade and/or maintain a market in our common stock. Also,
prospective investors may not want to get involved with the additional
administrative requirements, which may have a material adverse effect on the
trading of our shares.
Risks Related To The Equity Line
The Equity Line May Not Generate Sufficient Funds For Our Needs. Additional
Required Capital May Not Be Available At Attractive Terms Which Would Have A
Material Negative Effect On Our Operating Results And Our Stock Price.
The funds that we raise by drawing upon the equity line may not be
sufficient to carry out all of the plans described in this prospectus or to
achieve financial success. We do not have commitments for additional
financing. To secure additional financing, we may have to borrow money or
sell more securities, which may reduce the value of the securities to be
issued as a result of this offering. We may be unable to secure additional
financing on favorable terms.
Selling additional stock, either privately or publicly, could dilute the
equity interests of our stockholders. If we borrow more money, we will have
to pay interest and may also have to agree to restrictions that limit our
operating flexibility. If we are unable to obtain adequate financing, we may
have to curtail business operations which would have a material negative
effect on operating results and most likely result in a lower stock price.
The Common Stock Purchase Agreement Limits The Number Of Shares Of Common
Stock Spectrum Is Permitted To Hold At Any One Time To 9.9%, Which May
Further Limit Our Ability To Draw Down Amounts That We Request.
The common stock purchase agreement provides that we may not sell shares
of our common stock pursuant to our draw down right under such agreement if
sale would cause Spectrum to beneficially own more than 9.9% of our issued
and outstanding common stock at any one time. Accordingly, we may have to
significantly curtail the scope of our operations and alter our business plan
if, at the time of one or more draw downs, this 9.9% restriction results in
our inability to draw down some or all of the amounts requested in any draw
down notice. Of course, any resale of our common stock by Spectrum would
reduce their beneficial ownership, reducing the effect of the 9.9% provision
on our ability to exercise draw downs.
We Do Not Have A Sufficient Number Of Authorized But Unissued And Unreserved
Shares To Permit Us To Take Full Advantage Of The Spectrum Equity Line Of
Credit At Current Market Prices. If We Are Unable To Obtain Approval For An
Increase In Our Authorized Shares, We Will Have To Curtail Our Development
Efforts, And We May Be Unable To Achieve Our Business Plan.
Under the Spectrum equity line of credit, we are permitted to draw up to
$3,000,000 and, under certain circumstances, to increase this commitment up
to $10,000,000. To draw down $3,000,000 at our current market price would
require us to issue 8,333,333 shares to Spectrum and 416,667 warrants to CFS.
We currently have available for issuance only 6,628,365 common shares, so we
are registering 6,200,000 shares for issuance to Spectrum and 310,000 for
issuance to CFS upon exercise of its warrants. At our current market price,
this will only allow us to draw down $2,232,000. If our market price
declines, we will be able to draw down even less.
Unless the market price of our common stock substantially increases, we
must obtain approval from our shareholders to increase our authorized shares,
and then file and have declared effective a new registration statement, in
order to take full advantage of the equity line of credit. If we are unable
to do so, we may have to curtail our technology development efforts, and our
business and the price of our stock may be adversely affected.
11
Our Common Stock Purchase Agreement With Spectrum And The Issuance Of Shares
To Spectrum Thereunder May Cause Significant Dilution To Our Stockholders And
May Have An Adverse Impact On The Market Price Of Our Common Stock.
The resale by Spectrum of our common stock that it purchases from us will
increase the number of our publicly traded shares, which could depress the
market price of our common stock. Moreover, as all the shares we sell to
Spectrum will be available for immediate resale, the mere prospect of our
sales to it could depress the market price for our common stock. If we were
to require Spectrum to purchase our common stock at a time when our stock
price is low, our existing common stockholders will experience substantial
dilution. The issuance of shares to Spectrum will therefore dilute the equity
interest of existing stockholders and could have an adverse effect on the
market price of our common stock.
The perceived risk of dilution may cause our stockholders to sell their
shares, which would contribute to a decline in the price of our common stock.
Moreover, the perceived risk of dilution and the resulting downward pressure
on our stock price could encourage investors to engage in short sales of our
common stock. By increasing the number of shares offered for sale, material
amounts of short selling could further contribute to progressive price
declines in our common stock.
Our Common Stock Has Experienced In The Past, And Is Expected To Experience
In The Future, Significant Price And Volume Volatility, Which Substantially
Increases The Risk That You May Not Be Able to Sell Your Shares at or above
the Price That You Pay for the Shares.
Because of the limited trading market for our common stock, and because
of the possible price volatility, you may not be able to sell your shares of
common stock when you desire to do so. During 2002, and through February 2003
our common stock was sold and purchased at prices that ranged from a high of
$6.45 to a low of $0.18 per share. The inability to sell your shares in a
rapidly declining market may substantially increase your risk of loss because
of such illiquidity and because the price for our common stock may suffer
greater declines because of its price volatility.
The price of our common stock that will prevail in the market after this
offering may be higher or lower than the price you pay. Certain factors,
some of which are beyond our control, that may cause our share price to
fluctuate significantly include, but are not limited to, the following:
* variations in our quarterly operating results;
* our ability to complete the research and development of our
technologies;
* the development of a market in general for our products;
* changes in market valuations of similar companies;
* announcement by us or our competitors of significant contracts,
acquisitions, strategic partnerships, joint ventures or capital
commitments;
* loss of a major customer or failure to complete significant
transactions;
* additions or departures of key personnel; and
12
* fluctuations in stock market price and volume.
Additionally, in recent years the stock market in general, and the OTC-BB
and technology stocks in particular, have experienced extreme price and
volume fluctuations. In some cases, these fluctuations are unrelated or
disproportionate to the operating performance of the underlying company.
These market and industry factors may materially and adversely affect our
stock price, regardless of our operating performance.
In the past, class action litigation often has been brought against
companies following periods of volatility in the market price of those
companies' common stock. If we become involved in this type of litigation in
the future, it could result in substantial costs and diversion of management
attention and resources, which could have a further negative effect on your
investment in our stock.
Because Spectrum Is A Resident Of A Foreign Country, It May Be Difficult Or
Impossible To Obtain Or Enforce Judgments Against Spectrum.
Spectrum is a Nevis corporation with offices in London, England, and a
substantial portion of its assets are located outside of the United States.
As a result, it may be difficult or impossible to effect service of process
on Spectrum within the United States. It may also be difficult or impossible
to enforce judgments entered against Spectrum in courts in the United States
based on civil liability provisions of the securities laws of the United
States. In addition, judgments obtained in the United States, especially
those awarding punitive damages, may not be enforceable in foreign countries.
Special Note Regarding Forward-Looking Statements
This prospectus contains forward-looking statements that involve risks and
uncertainties. These include statements about our expectations, plans,
objectives, assumptions or future events. In some cases, you can identify
forward-looking statements by terminology such as "anticipate," "estimate,"
"plans," "potential," "projects," "continuing," "ongoing," "expects,"
"management believes," "we believe," "we intend" and similar expressions.
These statements involve estimates, assumptions and uncertainties that could
cause actual results to differ materially from those expressed for the
reasons described in this prospectus. You should not place undue reliance on
these forward-looking statements.
You should be aware that our actual results could differ materially from
those contained in the forward-looking statements due to a number of factors:
* continued development of our technology
* dependence on key personnel
* competitive factors
* the operation of our business
* general economic conditions
The forward-looking statements speak only as of the date on which they are
made, and, except to the extent required by federal securities laws, we
undertake no obligation to update any forward-looking statement to reflect
events or circumstances after the date on which the statement is made or to
reflect the occurrence of unanticipated events. In addition, we cannot assess
the impact of each factor on our business or the extent to which any factor,
or combination of factors, may cause actual results to differ materially from
those contained in any forward-looking statements.
13
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of shares by any selling
shareholder. Because we are not obligated to, and may decide not to, exercise
any draw downs under the equity line of credit agreement, we may not receive
any proceeds under the equity line of credit agreement. Further, no warrant
holder is compelled to exercise their warrants, so we may not receive any
proceeds from warrant exercise.
The estimated expenses to be incurred by us in connection with this offering
include:
* $5,000 for printing and engraving expenses;
* $50,000 for legal and accounting fees and expenses; and
* $1,535 for SEC registration fees.
We will pay all of these expenses; the selling shareholders will pay only
dealers' commissions; if any, on the sale of their shares.
NATURE OF TRADING MARKET
Our common stock is listed on the OTC Bulletin Board under the symbol BIPH.
The stock was not actively traded until October 2001 and the following table
sets forth, for the fiscal quarters indicated, the high and low bid prices.
These quotations reflect inter-dealer prices, without mark-up, mark-down or
commission, and may not represent actual transactions.
Quarter Ended High Low
November 30, 2001 $6.50 $5.50
February 28, 2002 $7.25 $2.37
May 31, 2002 $2.65 $ .75
August 31, 2002 $1.13 $ .30
November 30, 2002 $ .38 $ .18
We currently have outstanding 37,634,693 shares held by approximately 400
shareholders.
DIVIDEND POLICY
We have never paid cash dividends and have no plans to do so in the
foreseeable future. Our future dividend policy will be determined by our
Board of Directors and will depend upon a number of factors, including our
financial condition and performance, our cash needs and expansion plans,
income tax consequences, and the restrictions that applicable laws and our
credit arrangements then impose.
14
CAPITALIZATION
The following table sets forth our capitalization as of November 30, 2002.
You should read this information in conjunction with our financial statements
and the accompanying notes, and the other financial information appearing
elsewhere in this prospectus. All data in the following table is unaudited.
Long-term debt: $ 500,000
==========
Stockholders'equity(deficiency):
Common stock,$.005 par value
Authorized,60,000,000 shares
Issued and outstanding:
32,987,759 shares $ 164,939
Additional paid-in capital 5,786,427
Accumulated deficit (6,848,631)
----------
$ (897,265)
==========
PLAN OF OPERATION
We are currently in the development stage of operations and expect to be
in that mode for the foreseeable future. Our primary mission is to develop
and commercially exploit technologies for enabling cardiac pacemakers and
other life sustaining medical devices to be safe and compatible with magnetic
resonance imaging (MRI) and other equipment that generates powerful magnetic
and radio frequency signals.
From sales of our common stock to Spectrum Advisors, Ltd, we estimate
that proceeds of $2,232,000 will be sufficient to satisfy our cash
requirements over the ensuing twelve months. Our estimate of the use of
proceeds from the offering is as follows:
Research and product development $ 970,000
Administrative expenses 508,000
Repay related party loans plus interest 475,000
Offering costs 279,000
----------
$2,232,000
==========
We intend to pursue our research and product development activities,
concentrating the major portion of our available resources on the shielding
and filtering technologies for achieving MRI safe solutions. Our plan of
operation comprehends that we will identify commercialization partners that
would provide development payments to advance our products to market. We
estimate that our research and development plan will require approximately
$970,000 of our funds over the next twelve months, dedicated to the following
activities:
MRI Shielding for Active Medical Devices $ 344,000
MRI Shielding for Passive Medical Devices 238,000
Photonic Technology for Intraluminal MR Imaging 388,000
----------
$ 970,000
==========
The MRI Shielding project entails the development of technology that may
be applied to active medical devices such as pacemakers, drug pumps and others,
and to passive medical devices such as biopsy needles, guidewires and others,
to allow patients to undergo MRI diagnostics. The Intraluminal project
involves the use of our photonic technology to develop microcoil products that
improve the image quality and reduce the scan time of MRI diagnostic
procedures. The projects will be conducted in orderly phases, first
demonstrating technical feasibility, then completing detailed product designs,
verifying and validating the designs. A commercialization partner will be
able to intersect at any stage of development of a project.
15
The related party loans include a $350,000 line of credit agreement with
Biomed Solutions, LLC, which is a shareholder of Biophan and of which Michael
L. Weiner, our CEO, is a manager and part owner. Currently, $300,000 is
outstanding under this agreement. The loan bears interest at 8% per annum and
is due and payable in 10 equal consecutive monthly installments commencing
upon the effectiveness of this registration statement. Related party loans
also include a loan of $143,570 from H. DeWorth Williams, a less than 5%
stockholder. This loan also bears interest at 8% per annum and is due on
December 31, 2003.
Our current strategic plan does not indicate a need for material capital
expenditures in the conduct of research and development activities, nor does
the plan contemplate any significant change in the number of employees. We
currently employ ten full-time individuals.
New Accounting Standards
In June 2001, the Financial Accounting Standards Board (FASB) issued
Statement No. 143 "Accounting for Asset Retirement Obligations" (SFAS 143).
SFAS 143 addresses financial accounting and reporting for obligations
associated with the retirement of tangible long-lived assets and the
associated asset retirement costs. It applies to legal obligations associated
with the retirement of long-lived assets that result from the acquisition,
construction, development and/or the normal operation of a long-lived asset,
except for certain obligations of lessees. SFAS 143 is effective for
financial statements issued for fiscal years beginning after June 15, 2002.
We currently are reviewing SFAS 143 and intend to implement it, if applicable,
as of March 1, 2003.
In August 2001, the FASB issued Statement No. 144 "Accounting for the
Impairment or Disposal of Long-Lived Assets" (SFAS 144). SFAS 144 supersedes
FASB Statement No. 121 "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed Of" (SFAS 121); however it retains the
fundamental provisions of that statement related to the recognition and
measurement of the impairment of long-lived assets to be "held and used". In
addition, SFAS 144 provides more guidance on estimating cash flows when
performing a recoverability test, requires that a long-lived asset (group) to
be disposed of other than by sale (e.g., abandoned) be classified as "held and
used" until it is disposed of, and establishes more restrictive criteria to
classify an asset (group) as "held for sale". SFAS 144 is effective for
fiscal years beginning After December 15, 2001. The adoption of SFAS 144 did
not have a material impact on our consolidated financial condition or results
of operations.
In April 2002, the FASB issued Statement No. 145 "Rescission of FASB
Statements No. 4, 44 and 62, Amendment of FASB Statement No. 13, and Technical
Corrections" (SFAS 145). SFAS 145 will require gains and losses on
extinguishments of debt to be classified as income or loss from continuing
operations rather than as extraordinary items as previously required under
Statement of Financial Accounting Standards No. 4 (SFAS 4). Extraordinary
treatment will be required for certain extinguishments as provided in APB
Opinion No. 30. SFAS 145 also amends Statement of Financial Accounting
Standards No. 13 and requires that certain modifications to capital leases be
treated in the same manner as sale-leaseback transactions. SFAS 145 is
effective for financial statements issued after May 15, 2002, and with respect
to the impact of the reporting requirements of changes made to SFAS 4 for
fiscal years beginning after May 15, 2002. The adoption of the applicable
provisions of SFAS 145 did not have an effect on our financial statements.
16
In June 2002, the FASB issued Statement No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities" (SFAS 146). SFAS 146 nullifies
Emerging Issues Task Force Issue No. 94-3 "Liability Recognition for Certain
Employee Termination Benefits and Other Costs to Exit an Activity (including
Certain Costs Incurred in Restructuring)". SFAS 146 applies to costs
associated with an exit activity that does not involve an entity newly
acquired in a business combination or with a disposal activity covered by SFAS
144. SFAS 146 is effective for exit or disposal activities that are initiated
after December 31, 2002, with earlier application encouraged. We will
implement SFAS 146 as of March 1, 2003.
BUSINESS
Company History
We incorporated in the State of Idaho on August 1, 1968 under the name
Idaho Copper and Gold, Inc. On February 9, 1999 we amended our Articles of
Incorporation to change our name from Idaho Copper and Gold, Inc. to Idaho
Technical, Inc. On January 12, 2000 we formed a corporation in Nevada with
the intent to move our domicile to Nevada. On January 24, 2000 we implemented
the change of domicile to Nevada by filing Articles of Merger between the
Idaho and Nevada Corporations. On December 1, 2000 we amended our Articles
of Incorporation to change our name from Idaho Technical, Inc. to GreatBio
Technologies, Inc. and on July 19, 2001 we amended our Articles of
Incorporation to change our name from GreatBio Technologies, Inc. to Biophan
Technologies, Inc.
On December 1, 2000, we acquired LTR Antisense Technology, Inc., a New
York corporation, from Biomed Solutions, LLC (formerly Biophan, LLC), a New
York limited liability company, in a share for share exchange. As a result of
the exchange, LTR became a wholly owned subsidiary. The exchange was
consummated pursuant to and in accordance with an Exchange Agreement, dated
December 1, 2000 and amended as of June 8, 2001, by and among our company,
LTR and Biomed. LTR owns several patents for proprietary HIV antisense gene
therapy technology.
At the time the acquisition of LTR Antisense, the board of directors of
the company consisted of Dale F. Miller (also President), David A. Miller
(Vice President/Secretary/Treasurer) and Jeanne B. Miller. There were
outstanding 4,047,330 shares, of which Ed Cowle owned 851,000 shares, David A.
Miller owned 90,500 shares, H. DeWorth Williams owned 1,398,200 shares, and
Dale F. Miller owned 91,500 shares. The terms of the transaction were
established by arms-length negotiation between Cowle, Williams and Dale Miller
on behalf of the company, and Michael Weiner on behalf of Biomed, and approved
by the Board of Directors of the company and the Board of Members of Biomed.
In connection with the transaction, 250,000 shares were issued to Walter Keay,
an individual who acted as a finder for the company in connection with the
transaction.
Following the acquisition, the shareholders of the company before the
transaction owned collectively 15.83% of the company.
In connection with the exchange, we:
* issued an aggregate of 10,759,101 shares of common stock to Biomed in
exchange for all the issued shares of LTR and
* issued an aggregate of 10,759,101 shares of common
stock to a group of investors for $175,000.
17
Also on December 1, 2000, we acquired intellectual property rights,
including a pending patent to the MRI-compatible pacemaker technology from
Biomed, for future consideration of $500,000. The assignment was consummated
pursuant to, and in accordance with, the Transfer Agreement, dated December 1,
2000 and amended as of June 7, 2001 by and between us and Biomed. The due date
of this payment has been extended to be payable in twelve monthly installments
commencing on June 1, 2004. The obligation bears interest at 8% per annum
from February 28, 2002.
Both the Exchange Agreement and the Assignment and Security Agreement
contain provisions for the reversion of the technology to Biomed if
a) we become bankrupt or otherwise seek protection from creditors; or
b) in the case of the MRI-compatible technology, we fail to pay the
consideration therefor when due.
In 2002, we decided to discontinue research and development of the HIV
antisense technology. While the technology holds promise and has issued
patents, we feel our most promising opportunity is in the MRI safe solutions
we have developed and we intend to focus our research and development
activities on that technology. We may sell the HIV antisense patents if an
appropriate buyer can be identified. The CRADA with the National Institutes
of Health and the University of Rochester was discontinued in 2002.
Company Business
Our core business is providing technology that will enable both
implantable and non-implanted (interventionally used) medical devices to be
used safely and effectively in conjunction with MRI diagnosis, and will enable
surgical procedures to be performed under MRI guidance.
Background Terms, Facts, and Assumptions:
* MRI is widely considered to be the premiere non-invasive imaging
method due to the following capabilities:
* Superb soft tissue contrast
* No ionizing radiation or toxic contrast agents
* Images are not obstructed by bone
* Multi-plane images can be obtained without repositioning the patient
* The ability to use MRI to guide surgical procedures.
Due to these advantages, we believe the use of MRI will continue to
increase. As the technology continues to evolve, MRI systems using stronger
static magnetic and RF will become increasingly common. These advances may
create greater risks to more patients and institutions that use MRI, exposing
pacemaker patients to MRI creates risks and liabilities that are likely to
endure for some time. We believe that a solution that can be shown to
substantially reduce these risks would be readily accepted by the market.
Such a solution may provide our licensees with the opportunity to increase
their market share by claiming safer devices, as well as reduce potential
liabilities. Biophan's MRI-safe technology platforms could make this possible
in a way that requires no changes to existing product designs, and
requires very minor modifications to existing product manufacturing processes.
Due to these advantages, we believe that the technologies will be attractive
to commercial partners.
18
FDA regulations and manufacturer labeling for pacemaker devices include
strict contraindications against use in an MRI environment(See Achenbach S, et
al Am Heart J 1997;134:467-473; ECRI, Health Devices Alert, May 27,1988, pp.1;
Shellock FG, Reference Manual for Magnetic Resonance Safety: 2002 edition,
Amirsys, Inc., Salt Lake City, 2001; Zaremba L. FDA guidance for MR system
safety and patient exposures: current status and future considerations /
Magnetic resonance procedures: health effects and safety. CRC Press, Boca
Raton Fl, pp.183-196, 2001). Contraindication means that a particular action
or procedure, in this case, use in an MRI environment, is inadvisable. This
pacemaker contraindication is based on evidence that induced electrical
currents in the pacemaker lead can falsely pace the heart rapidly, can damage
the device itself, and can create localized heating that causes tissue damage
that may degrade the effectiveness of the pacing system. Independent
description of these problems can be found in the following references:
1. Experimental studies showing that pacemaker electrodes could heat up
to 100 C (increase of 63.1 C) within 90 seconds of MRI scanning.
S. Achenbach, et.al. "Effects of MRI on Cardiac Pacemakers and Electrodes,
American Heart Journal, 1997, 134, 467-473.
2. Professional opinion that "In practice, it is not possible to design a
device for use in an MR environment, incorporating long metallic parts such as
guide wires, mechanical cables, or electrical leads, and be completely sure of
safety." Conclusions from experimental studies showing 74 C (and higher)
temperature increases in guide wires after 30 seconds of MR scanning
M. Konings, et.al. MEDICA MUNDI, 45/1, March 2001, page 35
3. Experimental data indicating a maximum temperature of almost 90 C and
myocardial necrosis (that) could be demonstrated in histological studies.
F. Duru, et.al. Pacing in MRI environment: Clinical and technical
considerations on compatibility. Eur Heart J, 2001, 22: 113-124.
Given the number of pacemaker patients worldwide (approximately 3
million (See Barbaro, V.; Bartolini, P., and Bernarducci, R. (Biomedical
Engineering Laboratory, Istituto Superiore di Sanita, Rome, Italy. ingbio:net.
iss.it). A portable unit for remote monitoring of pacemaker patients. Journal
of Telemedicine & Telecare. 1997; 3(2)), and the percentage of pacemaker
wearers who are denied MRI as a result of the contraindication, as high as
17%, a very conservative estimate of the number of patients denied access to
MRI is 300,000, and may be higher (See "Interference in Implanted Cardiac
Devices, Part II" by Sergio L. Pinski and Richard G. Trohman, October 2002,
PACE, Vol. 25, No. 10. Specifically, the authors state "In a survey of
1,567 Japanese pacemaker patients, 17% stated that they presented conditions
for which MRI would have been recommended if the device (pacemaker) had not
been present." The source of this statement may be found in a study entitled,
"Concerns about sources of electromagnetic interference in patients with
pacemakers", authors Y. Sakakibara and T. Mitsui, Jpn Heart J 1999;
40:737-743.),.
Other medical devices also contraindicated for use with MRI could be made
safe with Biophan's technologies. (See "The Reference Manual for Magnetic
Resonance Safety, by Dr. Frank G. Shellock, 2002 edition, Amirsys Inc., ISBN
1-931-884-00-5.)
An MRI procedure may be crucial to diagnosing colon cancer, a brain tumor,
or a host of other serious, life threatening problems. The existence of a
medical device that is not MRI safe and compatible requires physicians and
patients to make a very difficult decision to either forego the MRI, or risk
serious injury and potential death from undergoing MRI with a pacemaker,
neurostimulator, or other implantable device installed. See the following
19
references for information relating to patient deaths:
1. FDA Medical Device Report (MDR) records of pacemaker patient deaths
during or shortly after an MR exam. FDA Medical Device Records (MDRs)
# 351516, 748838, 175218, and 1259381:
2. Pacemaker patient who died 15 minutes after MRI scan of the brain.
"Fiber Optics "Fiber Optics May Allow Pacemaker Users To Undergo MRIs Without
Health Threat." The Wall Street Journal, Feb 22, 2002. D. Pennell, M.D.
Imperial College, London.
3. Pacemaker patient who suffered severe brain damage and death following
an MRI exam. Loss prevention case of the month. "Not my responsibility!"
Journal of the Tennessee Medical Association. 1988;81(8): 523, J. K. Avery,
M.D. St. Thomas Hospital, Nashville, TN.
Technology
A brief description of the terms used to describe our technologies may be
helpful and is present below.
* The term 'MRI safe' refers to a situation in which MRI testing will
cause no harm to the patient or to any implantable or interventional
device within them.
* The term 'MRI compatible' refers to a situation in which image
interference is minor, and the resulting MRI image is useful in
diagnosing the patient's state of health.
* The term 'active' refers to an implantable device or surgical
implement that uses optical, electrical, and/or other energy to sense
or transmit information, and/or modify or treat diseased tissue.
Examples include pacemakers and related devices, catheter imaging
devices, and drug pumps, all of which may be affected during MRI.
* The term 'passive' refers to an implantable device or surgical
implement that does not transmit information but serves to move, secure
or modify tissue or another device, and does so via its mechanical
action or presence only.
* Carbon Composite materials consist of ultra-fine whiskers of carbon
dispersed in a plastic material. The resulting material has the
ability to absorb and/or reflect electromagnetic energy at frequencies
that relate to the size of the whiskers. This material can be extruded
and molded to make components.
* Nanomagnetic materials consist of ultra-fine particles of magnetic
material (such as iron) embedded in a ceramic material. These
particles are so small that they behave differently than they would in
a continuous layer or solid. The choice of magnetic and ceramic
materials, particle sizes, and layer thickness permit 'tuning' the
nanomagnetic layer to reflect and/or absorb specific frequencies of
energy. They are also so thin that they can flex without breaking and
are extremely tough.
* Filtering technology that essentially blocks unwanted induced currents
at both ends of a catheter or other device.
20
* Photonic technology that uses miniature diode lasers and photocells at
each end of a catheter or pacemaker lead or surgical device to
transmit energy and information without any electrical conductors.
Diode lasers are semiconductor devices that can be as small as the size
of a grain of salt that convert an electrical pulse to light at a
single frequency or color. Photocells reverse this process and can
also be very small. By integrating these elements carefully at each
end of an optical fiber, we can send power and information without the
use of wires. This technology has been made very reliable and cost
effective by development in support of the telecommunications industry.
* A further application of photonics is in intraluminal imaging. This is
a very exciting extension of MRI imaging where the MRI receiver coil
that is traditionally outside the body, is reduced to a very small size
(microcoil) so that it can be placed inside (intra) a body cavity or
blood vessel (lumen). This can provide significant improvements in
resolution. We believe the performance and safety of these microcoils
can be greatly improved by using our photonic technology to replace the
wires currently being used by researchers to connect them to the
external MRI system.
Research and Product Development Activities
We are developing technology that enables patients with implanted
biomedical devices to safely undergo MRI. We remain committed to the
development of MRI-safe solutions for pacemakers and other biomedical devices.
Specifically, we have been developing an MRI safe temporary pacemaker and
recently conducted animal tests demonstrating this temporary pacemaker can
safely pace an animal's heart. The details of this testing are discussed
below. The current design of the temporary pacemaker utilizes a photonic, or
fiber-optic based catheter which could be inserted into a patient prior to an
MRI procedure to ensure that if their implanted device fails or malfunctions,
the temporary device will keep their heart safely paced. Based on our testing
and research we believe the technical and clinical feasibility of a photonic
approach has already been demonstrated.
Initially we planned to develop the photonic temporary pacemaker
ourselves, through clinical trials, FDA approval, and into commercial use.
However, at this point in time we do not intend to take the device through FDA
approval on our own. Instead we are offering the temporary pacemaker, along
with our other MRI safe solutions, to prospective licensees for licensing and
further development. To date we have received licensing interest for the
pacing solution, and for utilization in developing a fiber-optic catheter for
an imaging application using MRI scans, called "intraluminal imaging" however,
we have not yet entered any licensing or development contracts for the
technology.
Our current research efforts are focused on demonstrating the feasibility
of our coating and filtering solutions which we intend to license to medical
device manufacturers. Initial tests of these solutions have been promising and
have generated industry interest. The results of these tests are discussed
below. Until these tests were recently completed it was not clear if these
solutions could solve the MRI safety issues of pacemakers and other devices.
With the initial results we have achieved, it appears that these solutions can
significantly reduce the heating and other problems that have caused the MRI
contraindications. Our discussions with major manufacturers of pacemakers and
other devices has indicated a strong preference for coating/filtering
solutions versus photonic solutions for several reasons including battery life
and ease of engineering redesign. To date we have received licensing interest
in our technology from pacemaker, guide wire and neurological device companies
but we have not yet entered into any licenses for the technology.
21
We have completed two evaluations of the fiber-optic based temporary
pacemaker. Tests conducted in an active MRI environment conducted in a
'phantom' (a plastic box with gel material that mimics the body) proved
operability of the device and lack of heating. An animal study demonstrates
that the device can effectively pace the heart. The MRI phantom tests were
conducted by a leading MRI safety expert, Dr. Frank Shellock, at
HealthSouth/Kerlan-Jobe MRI Center, Los Angeles, Calif. The animal study was
conducted by a noted vascular surgeon, Dr. Robert Rubin, at Downstate Medical
Center, State University of New York.
The fiber-optic lead has been tested in an MRI machine and does not heat
up as do existing catheters that contain metal wires. We are exploring the
use of this technology with third parties, under license, for use in deep
brain stimulation applications, such as treating movement related disorders
like Parkinson's disease and epilepsy. We have also received OEM licensing
interest from several companies wishing to use the fiber-optic lead to power
intraluminal coils. We are anticipating one or more R&D contracts to help
finance the development of this product that is based upon Biophan's photonic
technology platform.
We have licensed, on an exclusive basis, issued patents for shielding and
electromagnetic interference (EMI) filtering technologies that include the use
of carbon composite and nanomagnetic particle technologies.
We have obtained a license from Johns Hopkins University for an issued
patent for an MRI-safe electrocardiogram and pacemaker lead. The license is
exclusive to us for implantable devices and also covers other market segments.
This technology provides a low-pass radio frequency ("RF") filter at the
electrode tip in the heart that permits conduction of pacemaker signals but
blocks high-frequency MRI electromagnetic signals that cause problems in
implanted devices.
We have also filed patents for reducing the energy output of an MRI
machine in order to minimize the energy that causes lead heating. The
combination of shielding, filtering, and MRI output reduction could possibly
result in solving the MRI heating problem in both active medical devices (e.g.
pacemakers, defibrillators), and passive medical devices (e.g. catheters,
guide wires).
We conduct our R&D and prototype development through sub-contract
arrangements with third parties. Greatbatch Enterprises Corporation, a company
in Clarence, New York founded and managed by Wilson Greatbatch, has developed
the fiber-optic prototype temporary pacemaker for us under contract, and has
assigned the related patent applications to Biophan. Biophan's agreement with
Greatbatch Enterprises has expired and the parties plan to work on a time and
materials basis going forward. Any future prototype work on the photonic
catheter will be conducted with FDA approved manufacturers. Biophan has
entered into R&D agreements with Alfred University to develop nanomagnetic
shield technology, and with the University of Buffalo for carbon composite
polymers. These arrangements are discussed in more detail below.
Biophan has entered into a development agreement with the UB Business
Alliance. The objective of this collaboration is to develop the means to
shield implanted medical devices, such as a catheter, from the harmful effects
of magnetic resonance imaging. The technology being developed by this
collaboration consists of small carbon materials manufactured in a flexible
22
polymer support such as silicone rubber. Major activities include development
of optimally performing mixtures of carbon and polymer materials, the
application of these optimal formulations to medical devices, and the testing
of these devices in a magnetic resonance imaging system. Under the terms of
the agreement, the Company will contribute $23,375 toward the project costs
estimated to be $42,994.
Biophan has also entered into agreements with Alfred University. The
objective of this collaboration is to develop the means to shield implanted
medical devices, such as pacemaker leads, from the harmful effects of magnetic
resonance imaging (MRI). The technology being developed by this collaboration
consists of nano-magnetic materials and the processes used to apply these
materials as uniform, thin-film coatings. Major activities include the
development of optimal nano-magnetic coating formulations, delivery of three
coated pacemaker leads, the delivery of three coated guidewires suitable for
testing, processes for applying these formulations to medical devices,
and the testing of these devices in a magnetic resonance imaging system.
This collaboration also provides Biophan with access to expensive, thin-film
coating equipment considered essential to the development of effective nano-
magnetic MRI shielding materials. Biophan has paid Alfred University $118,000
for these services.
While the objectives of the two collaborations are similar (i.e. the
development and evaluation of MRI shielding materials), it should be
understood that each collaboration is developing a different technology.
The success of these collaborations would provide Biophan with multiple
solutions to the MRI safety problem. Biophan considers this to be very
important, since the MRI shielding requirements differ by product type, and
having multiple solutions would enable the company to apply its technologies
to a broader range of products. Specific product technology development
activities along with timelines and estimated costs, can be found in the
section "Products and Markets" below in this document.
Patents and Intellectual Property
We have been aggressive in filing patent applications on these
technologies. Due to the importance of our patent portfolio it may be
helpful to provide more detail regarding the patent process:
* Once a patent is filed, the Patent Office examines it over a period that
may range from a year to two or more. Office action is a challenge to
the content or scope of the patent. Once negotiation over the office
action is complete the Patent office may allow the patent, essentially
informing the inventor(s) that they may pay fees and the patent will
then issue, or become a formal patent.
* As previously discussed, we have exclusive licenses, in medical device
applications, to three issued patents; one each in the areas of carbon
composite shielding, nanomagnetic shielding, and RF filtering.
* We have filed (42) US patent applications covering various aspects of
photonic and other technologies providing improvements in MRI safety
and compatibility, as well as other aspects of implantable device
performance. Approximately 60% of these have been published by the
USPTO, and we anticipate initial Office Actions in the near future.
* The inventor of the nanomagnetic shield technology has applied for an
additional (9) US patent applications covering further improvements
extensions to that technology; these will also be licensed exclusively
to Biophan for medical markets.
23
* Additional patent filings in nanomagnetic materials, and in MRI
microcoil designs, are in process or contemplated.
The issued patents have remaining lifetimes, as follows:
* Nanomagnetic shield; 19 years
* Carbon composite shield; 12 years
* RF filter; 7 years
Lifetimes for the 42 patent applications which issue will be the
greater of:
* 17 years from the date of issue, or
* 20 years from the date of filing
* The patent strategy being pursued by us is based on both broad coverage
at the system level and focused coverage at the component level.
* This strategy is being applied to active medical devices such as cardiac
assist devices (pacemakers and defibrillators), intraluminal imaging
coils, patient monitoring instrumentation, neurostimulators, drug pumps,
endoscopes; and to passive medical devices such as biopsy needles,
guidewires, and to other medical devices that need to be made safe and
effective in an MRI environment.
Products and Markets
We are addressing three basic areas of technology and product
development that apply across several market segments:
* MRI shielding for active medical devices.
* MRI shielding for passive medical devices, such as guidewires and
biopsy needles, enabling surgery be done under MRI guidance.
* Photonic and shielding solutions for MRI imaging
Following are brief descriptions of the planned development activities,
each with a set of milestones with timeline and estimated Biophan cost. Some
of these activities will be done with a partner; these numbers reflect only
Biophan's expenses.
MRI shielding for active medical devices
We have licensed, developed, and patented technology in both carbon
composite shielding and nanomagnetic shielding. This approach has the
potential to provide a more cost-effective path to MRI safety and
compatibility than the photonic approach. Results of direct testing in an
MRI device to date have been quite promising, and further work is under way
to refine the designs of materials and coating methods. This MRI shielding
technology may be applied to active medical devices such as pacemakers and
related devices, drug pumps, and the like. We are currently having
discussions, under confidentiality agreements, with manufacturers of primary
device components such as pacemaker leads, as well as manufacturers of
complete systems, concerning their use of this technology.
24
Milestones / Activities - MRI Shielding for Active Devices:
MILESTONE/ACTIVITY TIME PERIOD REQUIRED
FUNDING
(000s)
-------------------------------------------------------------------------------
1. Demonstrate Technical Feasibility March to June 2003 $147
a. Demonstrate the ability to minimize or
eliminate the unacceptable device
heating and electrical problems caused
by MRI
b. Demonstrate the ability to meet
secondary product performance
requirements (e.g. biocompatibility,
flexibility, etc)
c. Demonstrate that the technology can be
manufactured at acceptable costs and
quality
d. Continue to file related patent
applications
2. Identify a commercialization March to June 2003 $ 33
partner(s)
3. Complete a Detailed Product Design July to December $130
2003
a. Further optimize the technology's
performance and manufacturability
b. Develop detailed Product Design and
Manufacturing Process Specifications
4. Complete Design Verification October 2003 to $170
March 2004
a. Demonstrate that a product
manufactured to the Product Design
Specifications will satisfy the
Product Performance Requirements
b. Develop documentation required to
initiate clinical testing
5. Complete Design Validation April 2004 to $150
December 2004
a. Demonstrate that a product
manufactured to the Product Design
Specifications is clinically effective
and safe when used as intended
b. Develop documentation required for
regulatory body approval to distribute
and sell the product
-------------------------
TOTAL $630
=========================
Biophan intends to identify a
commercialization partner(s) to help
focus and financially support
activities (3), (4), and (5).
25
MRI shielding for passive medical devices
The same MRI shielding technology may be applied to a wide variety of
passive devices that are used in implantable medical devices and in surgery,
such as biopsy needles, guidewires, endoscopes, etc. We believe that our MRI
shielding will eliminate the problems of patient risks and image degradation
for passive devices and surgical implements which incorporate the technology.
We are currently having discussions with a variety of manufacturers of passive
devices, and involving them in test procedures we are conducting.
Milestones / Activities - MRI Shielding for Passive Devices
MILESTONE/ACTIVITY TIME PERIOD REQUIRED
FUNDING
(000s)
-------------------------------------------------------------------------------
1. Demonstrate Technical Feasibility March to June 2003 $ 90
a. Demonstrate the ability to minimize or
eliminate the unacceptable device
heating and electrical problems caused
by MRI
b. Demonstrate the ability to meet
secondary product performance
requirements (e.g. biocompatibility,
flexibility, etc)
c. Demonstrate that the technology can be
manufactured at acceptable costs and
quality
d. Continue to file related patent
applications
2. Identify a commercialization March to June 2003 $ 33
partner(s)
3. Complete a Detailed Product Design July to December $ 95
2003
a. Further optimize the technology's
performance and manufacturability
b. Develop detailed Product Design and
Manufacturing Process Specifications
4. Complete Design Verification October 2003 to $170
March 2004
a. Demonstrate that a product
manufactured to the Product Design
Specifications will satisfy the
Product Performance Requirements
b. Develop documentation required to
initiate clinical testing
26
5. Complete Design Validation April 2004 to $150
December 2004
a. Demonstrate that a product
manufactured to the Product Design
Specifications is clinically effective
and safe when used as intended
b. Develop documentation required for
regulatory body approval to distribute
and sell the product
-------------------------
TOTAL $538
=========================
Once again, Biophan intends to
identify a commercialization
partner(s) to help focus and
financially support activities (3),
(4), and (5).
Photonic technology applied to a temporary pacemaker
We have subcontracted the development and testing of a photonic temporary
pacemaker device to Greatbatch Enterprises. This phase of the development
work has been completed. The photonic temporary pacemaker is intended as a
backup for patients who need MRI diagnosis but who already have an implanted
pacemaker or implantable cardioverter defibrillator (ICD). This device
consists of:
* An external handheld controller that is MRI safe.
* A fiber optic lead that is biocompatible and physically similar to
typical electrical pacemaker leads. This lead is temporarily inserted
through a puncture and run through blood vessels to the heart.
* The photonic electrodes at the end of the lead reconvert light to
electrical signals that pace the heart in the same manner as
traditional pacemakers.
* The controller is designed to be reusable, and the lead/electrode are
single use. The temporary pacemaker is available if the implanted
device encounters any type of malfunction during or after the MRI
procedure.
As previously noted, while the technical and clinical feasibility of a
photonic approach to cardiac pacing has already been demonstrated, the
results of recent Biophan R&D activities in shielding and filtering
technologies has enabled a change in direction of product development. A
coated temporary pacing lead is anticipated to be considerably less expensive
than a photonically powered temporary pacing device. Thus the photonically
based temporary pacing program has been put on hold pending interest from a
corporate partner. It should, however, be noted that additional attributes of
photonic technology relating to information bandwidth are applicable to the
emerging market of internally-placed micro-sized MRI receiver coils
(intraluminal MRI microcoils). The project is described in the next section
of this document.
27
The initial prototype of an externally powered pacemaker being developed
by us was recently tested in an MRI system. The test used a "phantom" or
plastic and liquid model of a human torso to permit tests for displacement due
to the magnetic field, and for heating due to the RF energy. The results of
this test, conducted by Dr. Frank Shellock, concluded that "the lead of the
Photonic Temporary Pacemaker will not present an additional hazard or risk to
a patient undergoing an MRI procedure using an MR system operating with a
static magnetic field of 1.5 Tesla or less. As such the lead of the Photonic
Temporary Pacemaker that underwent evaluation should be considered "MR safe"
according to the specific conditions used for testing." Shellock, F. G.
"Magnetic Resonance Safety Testing of a Fiber-Optic Lead Used for the Photonic
Temporary Pacemaker."
Photonic technology for intraluminal MR imaging
Our patent coverage includes the use of photonics in medical devices
unrelated to implants or to cardiac pacing. One example is in a relatively
new branch of MRI referred to as intraluminal MRI. Image quality and
resolution are directly related to proximity of the MRI receiver coil to
tissue being diagnosed. Traditional full-body receiver coils are large enough
for the patient and support device to pass through. Smaller coils placed on
the patient, near the area of interest, can provide improved images.
Intraluminal (within a body opening or vessel) and intraparenchymal (within
tissue e.g. brain) MRI microcoils provide performance advantages that include
improved image quality, reduced scan time, and the ability to utilize lower
strength MRI coils. However, current MRI microcoil techniques are limited by
problems similar to those that exist for pacemakers. A photonic coil interface
and use of optical fiber transmission eliminate these problems, provide for
other optical tissue measurements, and provide the ability to handle huge
amounts of data easily. One very exciting opportunity is in the area of
'vulnerable plaque'. It is believed that up to 85% of heart attacks and
strokes may be caused by rapid formation of clots at places in the artery
walls that are missed by other diagnostic methods. A feature article from
Scientific American, May 2002; vol.286; no.5 by Peter Libby, entitled
"Atherosclerosis: The New View", describes in detail the new thinking
regarding the genesis of the vast majority of heart attacks and strokes. We
are currently seeking a licensee interested in developing and marketing the
photonic MRI and microcoil markets. The following cost projections are only
to be expended in the event of a licensee willing to fund a portion of these
phases and agree to take the product to market.
Milestones / Activities - Photonic Technology for Intraluminal MR Imaging
MILESTONE/ACTIVITY TIME PERIOD REQUIRED
FUNDING
(000s)
1. Demonstrate Technical Feasibility April to June 2003 $ 50
a. Demonstrate the ability to minimize or
eliminate the unacceptable device
heating and electrical problems caused
by MRI
b. Demonstrate the ability to meet
secondary product performance
requirements (e.g. biocompatibility,
flexibility, etc)
c. Demonstrate that the technology can be
manufactured at acceptable costs and
quality
28
d. Continue to file related patent
applications
2. Identify a commercialization April to September $250
partner(s) 2003
3. Complete a Detailed Product Design October 2003 to $410
June 2004
a. Further optimize the technology's
performance and manufacturability
b. Develop detailed Product Design and
Manufacturing Process Specifications
4. Complete Design Verification July 2004 to $160
September 2004
a. Demonstrate that a product
manufactured to the Product Design
Specifications will satisfy the
Product Performance Requirements
b. Develop documentation required to
initiate clinical testing
5. Complete Design Validation October 2004 to $500
September 2005
a. Demonstrate that a product
manufactured to the Product Design
Specifications is clinically effective
and safe when used as intended
b. Develop documentation required for
regulatory body approval to distribute
and sell the product
-------------------------
TOTAL $1,370
=========================
Once again, Biophan intends to
identify a commercialization
partner(s) to help focus and
financially support activities (3),
(4), and (5).
The research and development expenses incurred by us were $113,144 for
the fiscal year ended February 28, 2001, $949,124 for the fiscal year ended
February 28, 2002, and $837,123 for the nine months ended November 30, 2002.
Markets
The global market for medical devices that could benefit from technology
that will enable those devices to operate safely and effectively in an MRI
environment was approximately $5 billion in the year 2002 and is growing by
15% annually. (See Wedbush Morgan Securities' Equity Research Report 13 Mar.
2002 on NYSE-GB.
29
Competition
There are a number of major companies engaged in the development of
medical devices some of which may be investigating MRI safe options. However,
to the best of our knowledge none of these companies, nor other companies that
serve as their suppliers, have successfully developed technology enabling
implantable medical devices to be operated in the presence of MRI equipment.
We believe that in order to commercialize our technologies we will have to
enter into a development or licensing agreement with one or more of the
companies engaged in the development of medical devices.
Currently,the major providers of active medical devices contraindicated
for MRI include the following companies:
Medtronic Incorporated is a leading manufacturer of cardiac rhythm
management, cardiovascular and other medical devices. The company
has a dominant position in cardiac pacemakers, is the leading
manufacturer of implantable cardiac defibrillators, and is a major
player in most other device markets in which it competes.
Guidant Corporation is also a leading manufacturer of cardiac rhythm
management devices such as cardiac pacemakers, implantable cardiac
defibrillators, interventional cardiology devices (including coronary
stents), and other cardiac and vascular surgery devices and instruments.
St. Jude Medical, Inc. is a global developer, manufacturer, and
distributor of medical device products for cardiac rhythm management,
cardiology and vascular access. Other products include mechanical and
tissue heart valves and vascular closure devices.
Boston Scientific Corporation is the world's largest medical device
company dedicated to less-invasive therapies. The Company's products and
technologies are designed to improve surgical procedures and improve
patient response, and involve a range of interventional tools and
procedures.
Johnson & Johnson is the world's largest healthcare company; in addition
to OTC and home healthcare products, they provide a wide variety of
pharmaceutical, diagnostic, and surgical products.
We do not consider the above companies to be direct competitors, although
they may possibly be developing MRI safe solutions for their own product
lines. Rather they may have interest in adopting one or more of our
technologies into their products. Various first and second tier suppliers to
these companies may be directly affected by either the photonic or shielding
technologies we plan to commercialize, and since to the best of our knowledge
none of them have satisfactory solutions to MRI issues, they are potential
additional or alternative prospects for commercializing our technology.
Manufacturing and Component Strategy
We are developing technology for MRI safety which will be licensed to
leading biomedical device manufacturers. We do not plan to manufacture any
product or component on our own. We may provide critical components and
coating devices sourced from third parties and resold to our customers.
Regulatory Approval
We believe that our technology will be incorporated into various medical
devices by major manufacturers and that these manufacturers will be
responsible for obtaining FDA and other regulatory approvals required for
clinical studies and marketing of their products. The time and cost of these
activities can be substantial, especially for Class III implantable products,
and could delay the introduction to the marketplace of products utilizing our
technology.
30
Currently, the FDA, specifically The Center for Drug Evaluation and
Research (CDER), is responsible for the approval to market products resulting
from the technology currently being developed by Biophan. Approval to market
may take the form of a New Drug Application (NDA). An NDA is sought by a
company prior to the commencement of clinical testing in humans. Before
approving an NDA, the FDA will seek substantial documentation demonstrating
that the product candidate technology is safe and effective. Once the NDA
has been approved, clinical trials are conducted in three sequential phases
which may overlap. Phase I clinical trials are performed in healthy human
subjects to establish initial data about the safety and efficacy of the
product. In Phase II clinical trials, in addition to accumulating safety and
efficacy data, the product is evaluated in a limited number of patients with
the targeted disease condition. Phase III clinical trials typically involve
continued testing for safety and efficacy, as well as other criteria, in
expanded, large-scale, multi-center studies of patients with the targeted
disease condition.
Licenses
We have entered into licenses for issued, allowed and pending patents.
These licenses require annual minimum royalties up to $10,000 each, some of
which escalate in future years, and provide for ongoing royalties of 4-5% of
product sales. Each license is for the life of the patent(s) and each is
exclusive for the medical market or segments thereof, and permit sub-
licensing:
* a license from Johns Hopkins University for an issued patent for an
MRI safe electrocardiogram and pacemaker lead. This agreement provides
for an initial licensing fee of $10,000 and a running royalty of 4% on
product sales.
* a license agreement for additional shielding technologies from Nanoset,
LLC. This license agreement provides for a one time licensing fee of
$10,000 and an additional payment of $5,000 upon the issuance of the
patent application(s). Additional technology rights are being explored
under an expanded licensing arrangement.
* a license from Deborah D. L. Chung for an issued patent entitled Metal
Filament for Electromagnetic Shielding. This agreement provides for an
initial licensing fee of $10,000 and a running royalty of 5% on product
sales.
Employees
As of November 30, 2002, we had ten full-time employees.
Description of Property
Our headquarters are located at 150 Lucius Gordon Drive, Suite 215, West
Henrietta, NY 14586, in 4,000 square feet of office space leased from an
unrelated party. Current rentals are $4,475 per month and the lease expires
in September 2004. The coordination of our research and development projects
and the administration of our two wholly owned subsidiary companies, currently
inactive, are directed from this location.
31
LEGAL PROCEEDINGS
We are not a party to any material legal proceedings and there are no
material legal proceedings pending with respect to our property. We are not
aware of any legal proceedings contemplated by any governmental authorities
involving either us or our property. None of our directors, officers or
affiliates is an adverse party in any legal proceedings involving us or our
subsidiaries, or has an interest in any proceeding which is adverse to us or
our subsidiaries.
MANAGEMENT
The officers and directors of Biophan are as follows:
Name Age Title
Guenter H. Jaensch 64 Chairman of the Board
Michael L. Weiner 55 Director, Chief Executive Officer, President
Robert J. Wood 63 Vice-President, Treasurer, Chief Financial
Officer
David A. Miller 48 Secretary
Stuart G. MacDonald 54 Vice-President-Research and Development
Jeffrey L. Helfer 50 Vice-President-Engineering
Robert S. Bramson 64 Director
Steven Katz 54 Director
Ross B. Kenzie 71 Director
The above listed officers and directors will serve until the next annual
meeting of the shareholders or until their death, resignation, retirement,
removal, or disqualification, or until their successors have been duly
elected and qualified. Vacancies in the existing Board of Directors may be
filled by majority vote of the remaining Directors. Officers serve at the
will of the Board of Directors.
Guenter H. Jaensch, Ph.D is the former Chairman and CEO of Siemens Pacesetter,
Inc., a manufacturer of pacemakers. During his more than twenty-five years at
Siemens, Dr. Jaensch held various senior executive positions prior to running
Siemens Pacesetter, including President of Siemens Communications Systems,
Inc. from from August 1983 to March 1985, Chairman and President of Siemens
Corporate Research and Support, Inc., from from April 1982 to September 1991
and Chairman and CEO of Siemens Pacesetter, Inc. and Head of the Cardiac
Systems Division of Siemens AG Medical Engineering Group from from October
1991 to September 1994. Dr. Jaensch holds a Masters Degree in Business
Administration and a Ph.D. in Business and Finance from the University of
Frankfurt and taught business and statistics at the University prior to
joining Siemens in 1969. In 1994, he joined St. Jude Medical as Chairman and
CEO of Pacesetter, Inc., a St. Jude Medical Company, and retired in 1995 to
manage his personal investments. Since December 1997 he has been a director
of MRV Communications, a publicly traded company which is a leading company
in the fiber optic technology business. Dr. Jaensch has been a director of
Biophan since March 2002.
Michael L. Weiner began his career at Xerox Corporation in 1975, where he
served in a variety of capacities in sales and marketing, including manager of
software market expansion and manager of sales compensation planning. In 1985,
after a ten year career at Xerox, Mr. Weiner founded Microlytics, a Xerox spin-
off company which developed technology from the Xerox Palo Alto Research
Center into a suite of products with licenses to many companies. In January
1995, Weiner co-founded and became CEO of Manning & Napier Information
Services, a Rochester-based company providing patent analytics, prior art
searches, and other services. He held this position until January of 1999. In
February 1999 he formed Technology Innovations, LLC, to develop and expand
certain intellectual property assets. In August, 2000, Technology Innovations,
LLC created a subsidiary, Biomed Solutions, LLC, to pursue certain biomedical
and nanotechnology opportunities. Mr. Weiner serves on the Boards of Biomed
Solutions, LLC, Technology Innovations, LLC, Speech Compression Technologies,
LP (an R&D partnership commenced in 1989 to pursue compression technologies),
Nanoset, LLC, and Nanocomp, LLC. Mr. Weiner holds six issued patents invented
prior to the formation of Biophan and owned by other companies. Mr. Weiner has
been CEO and a director of Biophan since December 2000. The six issued
patents developed by Mr. Weiner are held by Technology Innovations. These
patents do not involve technology that is or will compete with Biophan.
32
Robert J. Wood is a Certified Public Accountant with extensive experience
in public accounting and business consulting. He began his career at Price
Waterhouse & Co. in 1962 after graduating from St. John Fisher College with a
B.B.A. in Accounting. From 1973 to 2000, he was consecutively owner/partner
of Metzger, Wood & Sokolski, CPAs (through December 1985), Mengel, Metzger,
Barr & Co., LLP (through December 1990), and Wood & Company, CPAs, P.C.
(through November 2000), all in Rochester, New York. In December 2000, his
practice was acquired by a regional CPA firm, Eldredge, Fox and Porretti, LLP
and he was engaged in business consulting until joining Biophan as full-time
Chief Financial Officer in August 2001. He is a member of the New York State
Society of Certified Public Accountants.
David A. Miller was self employed from January 1998 until June 2001.
Since June 2001 he has been employed by Biophan. From January 1998 through
June 2000 Mr. Miller managed a retail outlet for his family's antique, gold
and jewelry business. Additionally, from January 1998 until June 2001 he
operated a business providing office support services. Mr. Miller has been an
SEC Edgar system filing agent since November 1999. Mr. Miller has been
associated with the Company since 1996. He has held the office of Corporate
Secretary since January 30, 1999. During the period from April 22, 1998 until
December 1, 2000 the Company was inactive. Mr. Miller provided office space
for the Company and performed duties associated with maintaining the Company's
corporate existence. His duties included preparing and filing documents with
applicable governmental agencies, maintaining stock records, stockholder
relations, keeping minutes of Board of Directors and stockholder meetings and
electronically filing periodic and special reports with the SEC. Since
December 1, 2000 Mr. Miller has served the Company in a similar manner
consistent with the requirements of the office of Corporate Secretary. He
served on the Board of Directors from April 22, 1998 until February 1, 2001
and held the offices of Vice-President and Treasurer from April 22, 1998
until December 1, 2000.
Stuart G. MacDonald is experienced in research and development with a
broad engineering and science background, emphasizing a systems approach to
developingcomplex technology. From January 1995 through December 2000, Mr.
MacDonald was employed at Ortho-Clinical Diagnostics, a Johnson & Johnson
company, in Rochester, New York, holding the position of Director-Engineering
from 1996 to mid-1997 and Vice-president, Clinical Lab Instrumentation R & D
from mid-1997 through December 2000. He was responsible for overall
management of the R&D group, including personnel, administration and financial
performance. He worked at Eastman Kodak Company from 1971 to 1994, rising to
the position of Assistant Director, Clinical Diagnostic Research Labs. Mr.
MacDonald has a B.S. in Mechanical Engineering and Masters of Engineering
degree from Cornell University. He is also licensed as a professional
engineer by the State of New York. Mr. MacDonald was employed by Biophan as
Vice-President-Research and Development in January 2001.
33
Jeffrey L. Helfer's background includes 28 years in new product and
technology development, systems management, new business development, and
regulatory affairs, having served in a number of positions at Eastman Kodak
Company for 19 years until November 1994 and from December 1994 to September
2001 at Ortho-Clinical Diagnostics (OCD) in Rochester, New York, a Johnson &
Johnson company. Most recently, he was program director within OCD's Product
Development and Program Management Center of Excellence, where he was
responsible for systems management of OCD's next-generation clinical chemistry
platform. He also held positions as Program Director and Director of
Regulatory Affairs from April 2000 to September 2001, Director of Engineering
from January 1997 to March 2000, Director of New Business Development from
February 1995 to December 1996, and headed up multiple international and
corporate initiatives to improve product performance and business processes.
He holds a B.S. from Rochester Institute of Technology and an M.S. from the
University of Rochester, both in Mechanical Engineering. Mr. Helfer is a
Johnson & Johnson certified Design for Six Sigma Black Belt and a New York
State Professional Engineer. Mr. Helfer was employed by Biophan as Vice-
President-Engineering in October 2001.
Robert S. Bramson is an engineer and patent attorney and since 1996 has
been a partner in Bramson & Pressman, a law firm that focuses on patent and
technology licensing matters. Since 1996 he has also been President of VAI
Management Corp., a consulting firm that specializes in patent and technology
licensing. He is former head of the Computer and Technology law group of
Schnader, Harrison, Segal & Lewis (where he worked from 1968 to 1989); former
Vice President and General Patent and Technology Counsel for Unisys (from 1989
to 1990); founder and former CEO of InterDigital Patents Corporation, a patent
licensing company (from 1992 to 1995); former Licensing Counsel for Abbott
Laboratories (from 1963 to 1966); and has been Adjunct Professor of Patent
Law, Computer Law and (presently) Licensing Law at Temple Law School, Rutgers
Law School and Villanova Law School at different times (from 1980 to date).
Mr. Bramson has been a director of Biophan since July 2001.
Steven Katz is President of Steven Katz & Associates, Inc., a technology-
based management consulting firm specializing in strategic planning, corporate
development, new product planning, technology licensing, and structuring and
securing various forms of financing since 1982. From January 2000 until
October 2001, Mr. Katz was President and Chief Operating Officer of Senesco
Technologies, Inc., a public company engaged in the development of proprietary
genes with application to agro-biotechnology. From 1983 to 1984 he was the co-
founder and Executive Vice President of S.K.Y. Polymers, Inc., a biomaterials
company. Prior to S.K.Y. Polymers, Inc., Mr. Katz was Vice President and
General Manager of a non-banking division of Citicorp. From 1976 to 1980 he
held various senior management positions at National Patent Development
Corporation, including President of three subsidiaries. Prior positions were
with Revlon, Inc. (1975) and Price Waterhouse & Co. (1969 to 1974). Mr. Katz
received a Bachelor of Business Administration degree in Accounting from the
City College of New York in 1969. He is presently a member of the Board of
Directors of USA Technologies, Inc., a publicly held corporation, and several
other private companies. Mr. Katz has been a director of Biophan since July
2001.
Ross B. Kenzie is a former Chairman and Chief Executive Officer of
Goldome Bank, from which he retired in June 1989. He was previously Executive
Vice President of Merrill Lynch & Co., in the New York worldwide
headquarters, and is a former member of the Merrill Lynch & Co. Board of
Directors. He is a former Director of the Federal Home Loan Bank of New York
(from 1984 to 1988) and served on the boards of the National Council of
Savings Institutions (from 1982 to 1986), the Federal Reserve Bank of New
York, Buffalo Branch (from 1985 to 1987), and the Savings Banks Association of
New York State (from 1984 to 1987). Mr. Kenzie was a Director of Millard
Fillmore Hospitals (from 1982 to 1995)and is currently Past Chairman
Emeritus. He served on the Board of the Kaleida Health, Education and
Research Foundation (from 1998 to 2000) and is currently on its Investment
Committee. He was a Director of the Health Systems Agency of Western New York
(from 1988 to 1991), and was a member of the Western New York Commission on
Health Care Reform (from 1987 to 1990). Mr. Kenzie was a member of the
College Council of the State University College at Buffalo (from 1981 to 1998)
and served as Chairman. He was a Director of the College's Foundation and a
member of its Finance Committee (from 1984 to 1998) and is currently on its
Investment Committee. He served on the Council of the Burchfield-Penney Art
Center (from 1990 to 2001) and the Albright Knox Art Gallery (from 1983 to
1985). He is also a member of the Board, and the Chairman of the Investment
Committee of the State University at Buffalo Foundation. Mr. Kenzie currently
serves on the boards of several companies including the publicly held Rand
Capital Corporation and many entrepreneurial ventures that are privately held,
including the Boards of Members of Biomed Solutions LLC and Technology
Innovations, LLC. Mr. Kenzie has been a director of Biophan since December
2000.
34
Committees
The Board of Directors has an Audit Committee consisting of Mssrs. Bramson,
Katz and Kenzie and a Compensation Committee consisting of Mssrs. Bramson,
Katz and Kenzie. The Audit Committee makes recommendations concerning the
engagement of independent public accountants, reviews with the independent
accountants the results of the audit engagement, approves professional
services provided by the accountants including the scope of non-audit
services, if any, and reviews the adequacy of our internal accounting
controls. The Compensation Committee makes recommendations to the Board
regarding executive and employee compensation and benefits.
Compensation of the Board of Directors
Non-management directors are paid an annual cash fee of $3,500 and a per-
meeting fee of $1,000. In addition, non-management directors receive options
under our Stock Option Plan described below. All directors are reimbursed
reasonable expenses incurred in attending Board meetings. The Company
maintains directors and officers liability insurance.
Conflicts of Interest:
Messrs. MacDonald, Helfer and Wood each spends a portion of his time on
the business affairs of Biomed for which Biomed reimburses Biophan a
percentage of their salary and benefits. Our Board of Directors periodically
reviews this arrangement on a regular basis. Currently, Biomed reimburses
Biophan for approximately 20% of the time of MacDonald, Helfer and Wood. The
Board of Directors does not believe that any conflicts of interest arise as a
result of this policy, but it monitors the relationship on an ongoing basis.
Michael Weiner devotes essentially his full business time to our company.
His employment agreement with Biophan requires a majority of his time,
allowing him to attend to certain administrative duties of Technology
Innovations, its subsidiary, Biomed Solutions, and Speech Compression
Technologies, LP, an R&D partnership holding certain assets. Mr. Weiner is a
member and the manager of Biomed and of Technology Innovations. Ross Kenzie,
one of the Biophan directors, is on the Board of Members of Technology
Innovations and Biomed. Biomed is in the business of identifying and
acquiring technologies in the biomedical field for exploitation; it is a
creditor of our company pursuant to the Line of Credit Note; and it has the
right to reacquire the MRI-compatible technology which it sold to us if
payments are not made when due. Due to these opposing roles, conflicts of
interest could arise as to the enforcement of Biomed's rights under the Line
of Credit Note, the determination of which entity will acquire a particular
technology and the enforcement of its rights to the MRI-compatible technology
under the Transfer Agreement.
35
Biomed is an investor in Nanoset, and Mr. Weiner serves on the board of
Nanoset. Subsequent to the formation of Nanotech and Mr. Weiner's joining
their board, Mr. Weiner learned that the nanomagnetic particle technology
held by Nanoset might be applicable to the MRI safety goals of Biophan, and
Mr. Weiner brought this technology to Biophan, securing certain exclusive
licenses.
Biomed has agreed that all intellectual property developed by the
employees of Biomed that is in the area of MRI Safe and/or Image Compatible
Technology (the "MRI Technology") and HIV Antisense shall be assigned to
Biophan. Per this agreement, MRI Technology means the technology necessary
to enable medical devices resistant to radio frequency and static and gradient
electromagnetic fields produced by magnetic resonance imaging machines. HIV
Antisense is a method of treating HIV.
Our independent directors will make all determinations and decisions
relating to the issue involving Biomed described above, without the vote of
either Mr. Weiner or Mr. Kenzie. In addition, the Board will act to ensure
that Mr. Weiner and Mr. Kenzie discharge their obligations to Biophan in
accordance with their fiduciary duties to Biophan.
Limitation on Liability of Directors
Under Nevada Revised Statutes Section 78.138, a director or officer is
generally not individually liable to the corporation or its shareholders for
any damages as a result of any act or failure to act in his capacity as a
director or officer, unless it is proven that:
* his act or failure to act constituted a breach of his fiduciary duties
as a director or officer; and
* his breach of those duties involved intentional misconduct, fraud or a
knowing violation of law.
This provision is intended to afford directors protection against and to limit
their potential liability for monetary damages resulting from suits alleging a
breach of the duty of care by a director. As a consequence of this provision,
stockholders of Biophan will be unable to recover monetary damages against
directors for action taken by them that may constitute negligence or gross
negligence in performance of their duties unless such conduct falls within one
of the foregoing exceptions. The provision, however, does not alter the
applicable standards governing a director's fiduciary duty and does not
eliminate or limit the right of Biophan or any stockholder to obtain an
injunction or any other type of non-monetary relief in the event of a breach
of fiduciary duty.
As permitted by Nevada law, Biophan's By-Laws include a provision which
provides for indemnification of a director or officer by the Company against
expenses, judgments, fines and amounts paid in settlement of claims against
the director or officer arising from the fact that he was an officer or
director, provided that the director or officer acted in good faith and in a
manner he or she believed to be in or not opposed to the best interests of the
Company.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons pursuant to
the foregoing provisions, or otherwise, the Company 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.
36
Scientific Advisory Board
From time to time, we call upon the advice of members of our Scientific
Advisory Board who currently serve without fixed cash compensation but are
each entitled to receive 8,333 options upon completion of each year of
membership. The members of our Board are:
Bradford C. Berk, M.D., Ph.D.- Since 1998, Dr. Berk has been Director, Center
of Cardiovascular Research; Paul N. Yu Professor and Chief of Cardiology;
Charles A. Dewey Professor and Chairman of Medicine, University of Rochester
Medical Center. Dr. Berk has clinical expertise in adult cardiology and
scientific expertise in cardiovascular medicine, particularly vascular
biology.
Herbert A. Hauptman, Ph.D.- In 1970, Dr. Hauptman joined the crystallographic
group of the Hauptman-Woodward Medical Research Institute (formerly the
Medical Foundation of Buffalo) of which he became Research Director in 1972.
He currently serves as President of the Hauptman-Woodward Medical Research
Institute as well as Research Professor in the Department of Biophysical
Sciences and Adjunct Professor in the Department of Computer Science at the
University of Buffalo. He was awarded the 1985 Nobel Prize in Chemistry and
elected to the National Academy of Sciences in 1988.
Kevin Parker, M.S., Ph.D.- Dean Parker is a Professor of Electrical and
Computer Engineering, Radiology, and Bioengineering at the University of
Rochester. In 1998, Dr. Parker was named Dean of the School of Engineering
and Applied Sciences.
Henry M. Spotnitz, M.D.- Since 1994, Dr. Spotnitz has been Vice-Chairman,
Research and Information Systems Department of Surgery at Columbia
Presbyterian Medical Center.
Jianhui Zhong, Ph.D.- Professor Zhong joined the University of Rochester in
1997 and is currently an Associate Professor of Radiology, Physics, and
Biomedical Engineering, and Director of the MRI Research Group at
the University Medical Center.
Special Consultant to the Scientific Advisory Board
Ray Kurzweil, B.S.- Founder, Chairman, and CEO of Kurzweil Technologies, Inc.,
a technology development company, since 1995. President Clinton awarded Mr.
Kurzweil the National Medal of Technology in 1999, for his invention of the
Kurzweil Reading Machine for the Blind. Mr. Kurzweil was inducted into the
National Inventor's Hall of Fame in 2002, and received the Lemelson-MIT Prize
in 2001. Mr. Kurzweil also developed Kurzweil Voice Recognition System, and
Kurzweil Music Synthesizer.
EXECUTIVE COMPENSATION
The following table summarizes the annual compensation paid to our Chief
Executive Officer during the three years ended February 28, 2002:
Name
and Year Salary Securities
principal underlying
position options/SARs
(a) (b) (c) (g)
------------------------------------------------------------
Michael L. Weiner, 2/29/00 $ -0- -0-
CEO
Michael L. Weiner, 2/28/01 $ -0- 250,000
CEO
Michael L. Weiner, 2/28/02 $150,600 -0-
CEO
37
Columnar information required by Item 402(a)(2) has been omitted for
categories where there has been no compensation awarded to, earned by, or paid
to, the named Executive required to be reported in the table during fiscal
2000, 2001 and 2002.
Stock Options
As of June 22, 2001, the Board of Directors adopted the Biophan
Technologies, Inc. 2001 Stock Option Plan. The Option Plan provides for the
grant of incentive and non-qualified stock options to selected employees, the
grant of non-qualified options to selected consultants and to directors and
advisory board members. The Option Plan is administered by the Compensation
Committee of the Board of Directors and authorizes the grant of options for
2,500,000 shares. The Compensation Committee determines the individual
employees and consultants who participate under the Plan, the terms and
conditions of options, the option price, the vesting schedule of options and
other terms and conditions of the options granted pursuant thereto. Non-
employee directors participate pursuant to the formula set forth in the
Option Plan. Each Director receives an initial grant of 30,000 options,
vesting equally on the first, second and third anniversaries of grant and
annual grants of 10,000 options thereafter. As of November 30, 2002, we had
commitments to issue options to purchase 2,439,997 shares of Common Stock
under the Option Plan. No options were granted to named executives during the
last fiscal year.
The following table summarizes information concerning stock options granted
to our Chief Executive Officer during the last completed fiscal year ended
February 28, 2002:
Number of
securities Value of
underlying unexercised in-
Shares unexercised the-money
acquired Value options/SARS at options/SARs at
Name on realized FY-end (#) FY-end ($)
exercise ($) Exercisable/Unexer- Exercisable/Unexer-
(#) cisable cisable
(a) (b) (c) (d) (e)
-----------------------------------------------------------------------------
Michael L. None $-0- 250,000/None $-0-/$-0-
Weiner, CEO
Employment Agreements
We have Employment Agreements with all our executive officers.
Mr. Weiner's Agreement provides, among other things, for an annual salary not
less than $175,000, a rate of pay that commenced within the fiscal year ended
February 28, 2002. He may be terminated by us for cause, without cause with
ninety days' written notice, upon his death or disability or upon a change in
control of the Corporation. In the event of involuntary termination,
disability or change in control, we will pay (i) the unpaid amount of the base
salary earned through the date of termination (ii) any bonus compensation
earned but not yet paid; and (iii) a severance payment equal to one (1) year
of his then current salary. In addition, the Executive will be immediately
vested in any options, warrants, retirement plan or agreements then in effect.
38
In the event of termination for cause, all unexercised warrants and
options, whether or not vested, shall be canceled and he will not be eligible
for severance payments.
In the event of voluntary termination, all unvested warrants and options
shall be canceled and he shall have three (3) months from the date of
termination to exercise his rights with respect to any unexercised but vested
options. He will not be eligible for severance payments.
As used in the Employment Agreement, "change in control" means the
occurrence of any one of the following events:
(1) on the date of the merger or consolidation of Biophan with
another entity where the members of the Board, immediately prior
to the merger or consolidation, would not immediately after the
merger or consolidation, constitute a majority of the Board of
Directors of the entity issuing cash or securities in the merger or
consolidation, or (2) on the date of the sale or other disposition of
all or substantially all of the assets of Biophan.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The table below lists the beneficial ownership of our common stock by
each person known by us to be the beneficial owner of more than 5% of such
securities, as well as the shares of Biophan beneficially owned by each
director and officer and by all directors and officers as a group.
Title of Class: Common
Shares
Name and Address of Beneficially
Beneficial Owner Owned(1)(2) Percent of Class
---------------------- ------------ ----------------
*Guenter H. Jaensch(3)
964 Allamanda Drive
Delray Beach, FL 33483 733,334 1.93%
*Michael L. Weiner (4)
693 Summit Drive
Webster, NY 14580 9,052,272 23.16%
Edward F. Cowle
99 Park Avenue
Suite 2230
New York, NY 10016 2,898,600 7.70%
Geoffrey Williams
56 West 400 Street
Suite 200
Salt Lake City, UT 84101 2,389,701 6.35%
Wilson Greatbatch (5)
5935 Davison Road
Akron, NY 14001 5,831,210 15.35%
*Robert S. Bramson (6)
1100 East Hector Street
Suite 410
Consohocken, PA 19428 20,000 .05%
39
*Ross B. Kenzie (7)
Cyclorama Bldg. Suite 100
369 Franklin Street
Buffalo, NY 14202 20,000 .05%
*Steven Katz (8)
20 Rebel Run Drive
East Brunswick 70,000 .19%
Robert J. Wood (9)
12 Peachtree Lane
Pittsford, NY 14534 146,667 .39%
Stuart G. MacDonald (10)
4663 East Lake Road
Pultneyville, NY 14538 163,334 .43%
Jeffrey H. Helfer (11)
1153 Hidden Valley Trail
Webster, NY 14580 203,334 .54%
David A. Miller
4004 Sunnyside Road
Sandpoint, ID 83864 100,500 .27%
SBI USA, LLC (12)
2361 Campus Drive
Suite 210
Irvine, CA 92612 3,000,000 7.38%
All Officers and Directors as a 10,509,441 26.36%
group (9 persons)
* Member of the Board of Directors
(1) Except as may be set forth below, the persons named in the table have
sole voting and investment power with respect to all shares shown as
beneficially owned by them.
(2) Applicable percentage of ownership is based on 37,634,693 shares
outstanding as of January 6, 2003, together with applicable options
for such shareholder. Beneficial ownership is determined in
accordance with the rules of the SEC and includes voting and
investment power with respect to shares. Shares subject to options
or warrants currently exercisable or exercisable within 60 days after
January 6, 2003 are deemed outstanding for purposes of computing the
percentage ownership of the person holding such options or warrants,
but are not deemed outstanding for computing the percentage of any
other shareholder.
(3) Includes 433,334 shares issuable upon exercise of options and
warrants granted to Dr. Jaensch which shares he has the right to
acquire within 60 days.
(4) Michael L. Weiner is a member and the manager of Technology
Innovations, LLC, (Innovations) which is the majority owner of Biomed
Solutions, LLC . Mr. Weiner is also the Manager of Biomed. Mr.
Weiner's calculation includes 662,857 shares owned beneficially and
of record by Biomed and 300,644 shares owned beneficially and of
record by Innovations. Includes 1,180,000 shares issuable to Biomed
upon exercise of warrants issued to Biomed, 2,068,966 shares issuable
to Biomed upon conversion of $300,000 outstanding as of February 28,
2003 on the line of credit, and 3,448,276 shares issuable to Biomed
upon conversion of the $500,000 transfer agreement payment. It also
includes 283,334 shares issuable upon exercise of options granted to
Mr. Weiner, which shares Mr. Weiner has the right to acquire within
60 days.
40
(5) Includes 5,379,550 shares owned of record and beneficially by
Greatbatch Gen-Aid, Ltd., an entity owned by Wilson Greatbatch, and
109,993 shares owned by E. & W.G. Foundation,a private foundation of
which Mr. Greatbatch is co-trustee. Also includes 191,667 shares
issuable upon exercise of options granted to Mr. Greatbatch, which
shares Mr. Greatbatch has the right to acquire within 60 days, and
includes 150,000 warrants issued in connection with the Transfer
Agreement with Biomed.
(6) Includes 20,000 shares issuable upon exercise of options granted to
Mr. Bramson, which shares he has the right to acquire within 60
days.
(7) Includes 20,000 shares issuable upon exercise of options granted to
Mr. Kenzie, which shares he has the right to acquire within 60 days.
Does not include shares owned beneficially or of record by Biomed or
by TI,LLC. Mr. Kenzie is the Manager and an equity member of Biophan
Ventures, LLC, which is the 43% equity member in Biomed; he is also
the Manager of Patent Ventures LLC, which is the Class A Member of
Innovations. Mr. Kenzie and Mr. Weiner comprise the Board of Members
of Biomed; Mr. Kenzie serves on the Board of Members of Innovations.
(8) Includes 20,000 shares issuable upon exercise of options granted to
Mr. Katz, which shares he has the right to acquire within 60 days.
(9) Includes 86,667 shares issuable upon exercise of options and warrants
granted to Mr. Wood, which shares he has the right to acquire within
60 days.
(10) Includes 103,334 shares issuable upon exercise of options and
warrants granted to Mr. MacDonald, which shares he has the right to
acquire within 60 days.
(11) Includes 103,334 shares issuable upon exercise of options and
warrants granted to Mr. Helfer, which shares he has the right to
acquire within 60 days.
(12) Includes 3,000,000 shares issuable upon exercise of warrants granted
to SBI , which shares it has the right to acquire within 60 days.
CERTAIN TRANSACTIONS
(1) Michael L. Weiner, President and Chief Executive Officer of Biophan,
is the Manager and a 42.7% equity member of Technology Innovations,
LLC. Innovations is the 57% equity member of Biomed Solutions, LLC
(formerly Biophan, LLC). Mr. Weiner is also the Manager of Biomed.
He and Ross Kenzie make up the Board of Members of Biomed. Biomed is
the record owner of 662,857 shares of common stock of Biophan;
Innovations is the record owner of 300,644 shares of common stock of
Biophan. As Manager of Innovations and Biomed, Mr. Weiner has
control over these entities. Mr. Weiner is also on the board of
Nanoset, LLC, an entity owned in part by Biomed Solutions, and with
which the we have entered into a technology license agreement.
41
(2) On December 1, 2000, Biomed received 10,759,101 shares of Biophan's
common stock in exchange for its shares of LTR Antisense Technology,
Inc. Most of those shares have been distributed to the members of
Biomed and their members.
(3) Also on December 1, 2000, Biomed transferred its MRI-compatible
pacemaker patent pending and related technology to Biophan for a
future payment of $500,000. This payment bears interest at 8% per
annum from February 28, 2002, and has been extended several times, to
June 1, 2004. After June 1, 2004, principal and interest are payable
in 12 equal monthly installments. After November 30, 2002, this
entire obligation is convertible into common shares of Biophan at a
conversion price equal to the lowest of (i) the closing bid price on
June 4, 2002; (ii) the closing bid price on the date of exercise; or
(iii) the lowest per share purchase price paid by any third party
between June 4, 2002 and the exercise date.
(4) On June 4, 2002, we executed a line of credit agreement with Biomed
providing for borrowings up to $250,000. On August 19, 2002, the
line was increased $100,000 and the expiration date thereof for that
portion of the line was set at August 19, 2003. The payment date of
amounts borrowed under the original Line was extended to December 1,
2002. On November 7, 2002, the maturity date of the Line was
extended until such time as the financing contemplated by the common
stock purchase agreement commences; thereafter, it is payable over
time as Biophan receives proceeds from the equity line.
(5) Biomed also holds a total of 1,180,000 warrants to purchase shares of
Biophan common stock. On March 1, 2001, it received options to
purchase 200,000 shares at an exercise price of $1.00, in
consideration of management effort and expense incurred on behalf of
Biophan. On June 4, 2002, it received 100,000 warrants at an exercise
price of $1.00 in consideration of the extension of the due date for
the Transfer Agreement payment, and 75,000 warrants with an exercise
price of $1.00 for the grant of the line of credit. (Wilson
Greatbatch also received 150,000 warrants in consideration of the
extension of the due date of the Transfer Agreement. On August 19,
2002, Biomed received 30,000 warrants in consideration of the
increase in the line of credit commitment, and 275,000 warrants
for additional extensions of the payment terms of the Transfer
Agreement payment. On that date, the exercise price for all
680,000 warrants then outstanding to Biomed was set at the lowest of
(i) the closing bid price on June 4, 2002; (ii) the closing bid price
on the date of exercise; or (iii) the lowest per share purchase price
paid by any third party between June 4, 2002 and the exercise
date. On November 7, 2002, Biomed was granted warrants to purchase an
additional 500,000 shares at an exercise price of $.50 per share, in
consideration of the final extension of the Transfer Agreement
payment approved that day. The number of warrants will be reduced by
16,667 for each month prior to June 1, 2005 that the Transfer
Agreement obligation is paid in full. Each extension of the Transfer
Agreement payment enabled the Company to retain the MRI-compatible
technology that it acquired under the Transfer Agreement. In each
forgoing case, the Board of directors determined, without the vote of
Mr. Weiner, that the consideration received by the company was fair
and adequate consideration for the warrants issued.
42
(6) During the years ended February 28, 2002 and 2001, Biomed and
Innovations paid expenses on behalf of Biophan aggregating $253,014
and $170,136 respectively. These advances did not bear interest and
were subsequently repaid.
(7) On January 1, 2001, Wilson Greatbatch was granted 250,000 options
for his consulting services to us, and 8,333 options as former
Chairman of the Scientific Advisory Board. As a consultant Mr.
Greatbatch assisted Biophan in its development of its photonic
pacemaker by providing design and engineering services. The board of
directors determined that the value of the consulting services was
fair and adequate consideration for the options issued; Biophan
recorded compensation expense of $9,200 with respect to those
options. Through his ownership of Greatbatch Gen-Aid, Ltd. and his
co-trusteeship of a private foundation, E.& W.G. Foundation, he is
the beneficial owner of 5,489,543 common shares of Biophan. He is
also entitled to receive 60% of the consideration payable to Biomed
($500,000) for transfer of the MRI-compatible pacemaker technology to
Biophan; on June 4, 2002, he received 150,000 warrants with an
exercise price of $1.00 in consideration of the extension of the
payment due under the Transfer Agreement. Greatbatch Gen-Aid holds
a 3.5% membership interest (11 Units) in Innovations.
(8) On March 1, 2002, Dr. Guenter H. Jaensch was granted options to
purchase 250,000 shares and on 7/16/02 was granted an additional
100,000 options, for his consulting services to us. As a consultant,
Dr. Jaensch assisted the company in developing its strategic plan,
attended trade shows, and arranged and met with potential customers
and strategic partners. The board of directors determined that the
value of the consulting services was fair and adequate consideration
for the options issued; Biophan valued the options at $36,900 and
$592,500, respectively, and is recording compensation expense with
respect to those values.
DESCRIPTION OF SECURITIES
The following summary is a description of the common stock of Biophan and
Biophan's Certificate of Incorporation and Bylaws.
General
Biophan's authorized capital consists of 60,000,000 shares of common
stock, par value $.005 per share.
Common Stock
As of January 6, 2003, Biophan had outstanding 37,634,693 shares of common
stock. Each share of common stock is entitled to one vote at all meetings of
shareholders. Shareholders are not permitted to cumulate votes in the
election of directors. All shares of common stock are equal to each other
with respect to liquidation rights and dividend rights. There are no
preemptive rights to purchase any additional shares of common stock. In the
event of liquidation, dissolution or winding up Biophan, holders of the
common stock will be entitled to receive, on a pro rata basis, all assets of
Biophan remaining after satisfaction of all liabilities and preferences of
outstanding preferred stock, if any. Neither the certificate of
incorporation nor the by-laws of Biophan contain any provisions which limit
or restrict the ability to take over the Company.
43
Options and Warrants
We have outstanding options to purchase an aggregate of 2,489,995 shares
of common stock pursuant to our 2001 Stock Option Plan, to directors,
officers, key employees and consultants, of which 1,496,666 were exercisable.
No options have been exercised to date. The following chart sets out the
material terms of the options:
Optionholders Number of Exercise Expiration Dates
Options Granted Price
-------------------------------------------------------------------------
Non-management 530,000 $.10 - $.50 3/19/06 - 7/16/12
directors
Employees 1,275,000 $.43 - $.50 1/1/11 - 7/16/12
Consultants 560,000 $.50 - $1.00 1/1/11 - 12/4/11
Scientific Advisory 124,995 $.50 2/1/07
Board
------------
TOTAL 2,489,995
============
We also have outstanding warrants to purchase an additional 7,729,706 shares
of our common stock. The following chart sets out the material terms of the
warrants:
Warrantholders Number of Exercise Expiration
Warrants Price Dates
----------------------------------------------------------------
Bridge Lenders 246,627 $1.00 6/15/04
Biomed 1,180,000 $ .50 11/7/07
Solutions,LLC
Wilson Greatbatch 150,000 $1.00 6/4/04
SBI USA, LLC 2,000,000 $1.00 6/30/03
SBI USA, LLC 1,000,000 $1.50 9/30/03
CFG Capital ,LLC 121,572 $.16-$.41 11/11/05 - 7/30/07
Westbay 1,385,275 $ .25 3/27/04 - 7/9/05
Shareholders
Westbay 1,385,275 $ .50 3/27/04 - 7/9/05
Shareholders
Boylan, Brown, et 161,290 $ .31 1/7/08
al
Others 99,667 $1.00 7/30/07
------------
TOTAL 7,729,706
============
44
CERTAIN STATUTORY PROVISIONS OF THE NEVADA REVISED STATUTES
Sections 78.411 through 78.444 of the Nevada Revised Statutes provides,
in general, that a stockholder acquiring more than 10% of the outstanding
voting shares of a publicly-held Nevada corporation subject to the statutes
(an "Interested Stockholder") may not engage in certain "Combinations" with
the corporation for a period of three years subsequent to the date on which
the stockholder became an Interested Stockholder.
Section 78.416 defines the term "Combination" to encompass a wide variety
of transactions with or caused by an Interested Stockholder in which the
Interested Stockholder receives or could receive a benefit on other than a pro
rata basis with other stockholders, including mergers, certain asset sales,
certain issuances of additional shares to the Interested Stockholder or
transactions in which the Interested Stockholder receives certain other
benefits.
These provisions could have the effect of delaying, deferring or
preventing a change of control of the Company. The Company's stockholders,,
by adopting an amendment to the Certificate of Incorporation or Bylaws of the
Company, may elect not to be governed by these provisions. Neither the
Certificate of Incorporation nor the Bylaws of the Company currently excludes
the Company from these restrictions.
The Nevada Revised Statutes permit a corporation to indemnify its
directors and officers against expenses, judgments, fines and amounts paid in
settlement in cases brought against the officer or director in his capacity
as such, provided the director or officer acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
corporation. The exceptions include a breach of the director's duty of
loyalty, acts or omissions not in good faith or which involve intentional
misconduct or knowing a violation of law, and improper personal benefit. The
Company's By-Laws contain a provision implementing this statute.
Transfer Agent
Biophan's transfer agent for the common stock is Continental Stock Transfer &
Trust Company, 17 Battery Place, New York, NY 10004-1123.
SHARES ELIGIBLE FOR RESALE
Future sales of substantial amounts of common stock in the public market
could adversely affect market prices prevailing from time to time. Under the
terms of this offering, the shares of common stock offered, or the common
shares underlying the warrants, may be resold without restrictions or further
registration under the Securities Act of 1933, except that any shares
purchased by our "affiliates," as that term is defined under the Securities
Act, may generally only be sold in compliance with Rule 144 under the Act.
Certain shares of outstanding common stock were issued and sold by
Biophan in private transactions in reliance upon exemptions from registration
under the Act. Such shares may be sold only pursuant to an effective
registration statement filed by Biophan or an applicable exemption, including
the exemption contained in Rule 144 promulgated under the Act.
In general, under Rule 144 as currently in effect, a shareholder,
including an affiliate of Biophan may sell shares of common stock after at
least one year has elapsed since such shares were acquired from Biophan or an
affiliate of Biophan. The number of shares of common stock which may be sold
within any three-month period is limited to the greater of: (i) one percent
of the then outstanding common stock or (ii) the average weekly trading
volume in the common stock during the four calendar weeks preceding the date
on which notice of such sale was filed under Rule 144. Certain other
requirements of Rule 144 concerning availability of public information,
manner of sale and notice of sale must also be satisfied. In addition, a
shareholder who is not an affiliate of Biophan and who has not been an
affiliate of Biophan for 90 days prior to the sale and who has beneficially
owned shares acquired from Biophan or an affiliate of Biophan for over two
years may resell the shares of common stock without compliance with the
foregoing requirements under Rule 144.
45
RESTATED COMMON STOCK PURCHASE AGREEMENT
Effective November 22, 2002, we entered into a restated common stock purchase
agreement with Spectrum Advisors, Ltd., for the future issuance and purchase
of shares of our common stock. This agreement restates and supersedes the
common stock purchase agreement entered into June 6, 2002 with Bonanza
Capital, upon essentially the same terms and conditions. This common stock
purchase agreement establishes what is sometimes termed an equity line of
credit or an equity draw down facility.
After taking into account shares currently reserved for issuance under all
outstanding convertible securities, we have 6,628,365 authorized common shares
available for issuance. We are registering 6,200,000 of these shares for
possible issuance and sale by Spectrum under the common stock purchase
agreement, and an additional 310,000 common shares which will underlie
warrants issuable to Carolina Financial if all 6,200,000 shares are issued
under the common stock purchase agreement.
Draw Downs
In general, the draw down facility operates as follows. At our sole
discretion and from time to time over the course of 24 months, we may make
unlimited draw down requests, pursuant to which the investor, Spectrum, is
obligated to purchase up to an aggregate of $3.0 million of our common stock.
Spectrum's minimum commitment for each draw request is $37,500. The maximum
amount we can actually draw for each request is limited to 30% of the volume
weighted average price of our common stock multiplied by the average daily
trading volume multiplied by the number of trading days in the applicable
draw down period. We are under no obligation to request a draw down during
any period or, in the absence of such a request, to issue any shares to
Spectrum. If, on any day during the draw down period, the average volume
weighted price of our common stock drops below the minimum threshold price of
$.18, then that day will be excluded from the relevant settlement and the
aggregate amount of our draw down request will be reduced accordingly.
The draw down period will be 3 consecutive trading days. After each 3-
trading-day settlement period, the final draw down amount for that settlement
period is determined. We are entitled to receive funds on the 5th, 8th, 11th,
14th, 17th, 20th and 23rd trading day of each month. The final draw down
amount will be reduced by 1/3rd for each trading day during the draw down
period that the volume weighted average stock price falls below the threshold
price. We then use the formulas in the common stock purchase agreement to
determine the number of shares that we will issue to Spectrum in return for
the final draw down amount. The aggregate total of all draw downs under the
equity draw down facility cannot exceed $3.0 million. However, the Company at
its option may increase Spectrum's commitment up to 50% of the Company's
market capitalization at the time of exercise of the option, not to exceed
$10.0 million. Using its current market capitalization, and subject to the
limits on daily draw-down amount, the Company could increase Spectrum's
commitment to approximately $6,000,000.
46
The per share price that Spectrum pays for our common stock for each draw
down includes a 20% discount to the average daily market price of our common
stock for each day during the draw down period, weighted by trading volume
during each such trading day. The price per share that Spectrum ultimately
pays is determined by dividing the final draw down amount by the number of
shares that we issue to Spectrum.
Finally, the common stock purchase agreement does not permit us to draw funds
if the issuance of shares of common stock to Spectrum pursuant to the draw
down would cause Spectrum to beneficially own more than 9.9% of our issued and
outstanding common stock at the time of issuance. In such cases, we will not
be permitted to issue the shares otherwise issuable pursuant to the draw down
and Spectrum will not be obligated to purchase those shares. Of course, any
of Spectrum's resales of shares would reduce the number of shares it
beneficially owns, and would enable us to issue additional shares to Spectrum
subject once again to the 9.9% limitation.
The Draw Down Procedure And The Stock Purchases
We may request a draw down by faxing to Spectrum a draw down notice, stating
the amount of the draw down that we wish to exercise and calculating the
number of shares to be issued thereunder.
Amount Of The Draw Downs
No draw down can be less than $37,500. The amount may be increased to 30% of
the weighted average price of our common stock for the 3 days in the draw
down period, ending on the day prior to the date of our request, multiplied
by the average daily trading volume for the 3 days in the draw down period
ending on the day prior to the date of our request, multiplied by the number
of trading days in the draw down period. Additionally, if any of the
following events occur during the draw down period, the investment amount for
that draw down period will be reduced by 1/3 and the volume weighted average
price of any trading day on which the event occurred will have no effect on
the pricing of the shares purchased during that draw down period:
* the volume weighted average price is less than the minimum threshold
price of $.18; or
* trading in our common stock is suspended for more than three hours, in
the aggregate, on any trading day or if any trading day is shortened
because of a public holiday.
Number Of Shares Purchased During A Draw Down
The 3 trading days immediately preceding the draw down notice are used to
determine the number of shares that we will issue in return for the money
provided by Spectrum, which then allows us to calculate the price per share
that Spectrum will pay for our shares.
To determine the number of shares of common stock that we can issue in
connection with a draw down, calculate 1/3 of the draw down amount (i.e.,
$12,500). This amount will be referred to as the "per-day draw down amount."
Then, for each of the 3 trading days immediately preceding the date on which
we give notice of the draw down, divide the per-day draw down amount by 80%
of the volume weighted average daily trading price of our common stock for
that day. This 80% accounts for Spectrum's discount. The sum of these 3 daily
calculations produces the number of common shares that we will issue, unless,
as described above, the volume weighted average daily price for any given
trading day is below the threshold amount, or trading is suspended for any
given trading day, in which case that day is ignored in the calculation.
47
Sample Calculation Of Stock Purchases
The following is an example of the calculation of the number of shares we
would issue to Spectrum in connection with a draw down based on the assumed
daily prices set forth.
Day VWAP Minimum Commitment Number of Shares
1 .$.445 $12,500 28,090
2 .$.46 $12,500 27,174
3 .$.485 $12,500 25,773
Closing The Transaction
The delivery of the requisite number of shares and payment of the draw down
will take place through our attorneys, Boylan, Brown, Code, Vigdor & Wilson,
LLP, acting as escrow agent. The escrow agent pays the net proceeds to us,
after subtracting its escrow fee and Carolina's placement agent fees. We
would receive the amount of our draw down of $37,500 less a 10% cash fee paid
to Carolina of $3,750 less a $250 escrow fee, for net proceeds to us of
approximately $33,500.
We have paid $10,000 to cover the fees and expenses of purchaser's counsel,
and will pay an additional $15,000 on the first settlement date. Carolina
will receive warrants to purchase 5% of the shares sold to Spectrum (up to
310,000 shares of our common stock) at a price equal to 110% of the selling
price to Spectrum. Carolina is not obligated to purchase any of our shares
pursuant to the common stock purchase agreement.
Indemnification Of Spectrum
Spectrum is entitled to customary indemnification from us for any losses or
liabilities suffered by it based upon material misstatements or omissions
from the common stock purchase agreement, registration statement and the
prospectus, except as they relate to information supplied by Spectrum to us
for inclusion in the registration statement and prospectus.
SELLING STOCKHOLDERS
All of the securities being offered hereunder are being offered by the
selling shareholders. These holders fall into four categories:
* those who will obtain their shares pursuant to or in connection with
the stock purchase agreement;
* those who obtained their shares (or warrants with underlying common
shares) in a private placement of securities recently conducted by the
Company;
* SBI, who can obtain their shares upon exercise of warrants granted for
financial advisory services to Biophan; and
* Biomed Solutions, LLC, which can obtain its shares upon exercise of
warrants granted in consideration of loans to, or forebearance upon
amounts due from, Biophan.
The Restated Stock Purchase Agreement
48
The 6,200,000 common shares registered for resale by Spectrum under this
prospectus would constitute 14% of our issued and outstanding common shares
after such resale. We are registering the maximum number of authorized but
unissued and unreserved shares that we have available at this time for sale
under the stock purchase agreement. If we do not issue a draw down request,
we are under no obligation to issue any shares to Spectrum under the common
stock purchase agreement. Accordingly, the number of shares we are registering
for issuance under the common stock purchase agreement may be higher than the
number we actually issue under the common stock purchase agreement. However
at our current market price, this is not enough shares to draw down the full
$3,000,000 available under the stock purchase agreement. Unless our average
market price rises above $.60, we will need to have our shareholders authorize
more shares and file a new registration statement with the SEC, which
will need to become effective before we can request additional draw downs
under the common stock purchase agreement.
Spectrum
Spectrum is engaged in the business of investing in publicly traded equity
securities for its own account. Spectrum's principal offices are located at
38 Hertford Street, London, England. We understand that Spectrum's beneficial
owner is Pierce Loughran of London, England. Investment decisions for
Spectrum are made by its board of directors. Spectrum does not currently own
any of our securities as of the date of this prospectus. Other than Spectrum's
obligation to purchase common shares under the common stock purchase
agreement, it has no other commitments or arrangements to purchase or sell
any of our securities. There are no business relationships between Spectrum
and us other than as contemplated by the common stock purchase agreement.
Carolina Financial
Carolina has acted as placement agent in connection with the common stock
purchase agreement. Carolina introduced us to Spectrum and assisted us with
structuring the equity line of credit with Spectrum. Carolina's duties as
placement agent were undertaken on a reasonable best efforts basis only.
Carolina will receive warrants for 5% of the shares purchase by Spectrum, at
an exercise price of 110% of the selling price to Spectrum. It made no
commitment to purchase shares from us and did not ensure us of the successful
placement of any securities. Other than the shares underlying its warrants
which are registered for resale hereunder, Carolina does not own any of our
shares.
The four principals and beneficial owners of Carolina are William Prather,
Robert Cascella, Michael Niedswiecki, and Michael Mascia; they have also been
issued warrants to purchase a total of 121,572 warrants, consisting of 50,000
warrants at an exercise price of $.39 per share, 17,520 shares at an exercise
price of $.41 per share, and 54,052 shares at an exercise price of $.16 per
share. These warrants were granted for their efforts as placement agent in
other private placements undertaken by the Company and for financial advisory
services, and the underlying common shares have also been registered for
resale hereunder. None of these individuals held any position or office or
had any other material relationship with us or any of our affiliates within
the past three years. To our knowledge, after this offering, none of them
will own shares of our common stock.
Spectrum and Carolina or any of their affiliates have not held any positions
or offices or had material relationships with us or any of our affiliates
within the past three years other than as a result of the ownership of our
common stock. If, in the future, Spectrum's or Carolina's relationship with us
changes, we will amend or supplement this prospectus to update this
disclosure.
49
Westbay
Westbay Consulting, Inc., a Nevada corporation beneficially owned by Jason
Cope, acted as finder and consultant to the Company in connection with the
recently-completed private placement described below. For its services,
Westbay received 258,006 shares of common stock, which are registered for sale
hereunder. Except in its capacity as a finder and consultant, neither Westbay
or any principal of Westbay, has had any office or directorship, or any other
material relationship with the Company during the past three years. To the
best of our knowledge, following the completion of this offering, Westbay will
own less than 1% of the outstanding shares of the Company.
Biomed
Biomed Solutions, LLC is the New York limited liability company which
transferred the MRI technology and the shares of LTR Anti-sense Technology,
Inc. to us on December 1, 2000. The beneficial owners of Biomed included
Michael Weiner, Ross Kenzie and 50 investors. It is a shareholder of Biophan
and its Manager is Michael L. Weiner, who is the President and Chief Executive
Officer and a Director of Biophan. Biomed has received warrants to purchase a
total of 1,180,000 common shares, partially as consideration for making
available a line of credit to us and for forbearance of payments relating to
the MRI technology transfer. The Company is registering herewith the shares
underlying those warrants, for resale by Biomed. Following this offering,
Biomed will own 662,857 shares of the Company.
SBI
SBI USA, LLC is the U.S. investment banking arm of Softbank Investment Group
Japan. SBI received warrants in consideration of entering into a financial
advisory agreement with us on December 18, 2002. The advisory agreement
provides that, through December 31, 2003, SBI will advise us on financial
matters, including capital raising, acquisitions, and investor relations;
introduce us to broker-dealers, market makers and small institutional
investors; and prepare a corporate profile for use in investor relations.
Neither SBI nor any principal of SBI has had any office or directorship or any
other material relationship, other than its investment banking arrangement,
with the Company during the past three years. To the best of our knowledge,
following the completion of this offering SBI will own less than 1% of the
outstanding shares of the Company.
The Private Placement
From September 2002 through January 6, 2003, we raised gross proceeds of
$1,385,275 by selling 5,541,100 shares at a per share price of $.25 to 123
investors. Those investors also received warrants to purchase an additional
2,770,550 shares, half at an exercise price of $.25 per share and half at $.50
per share. These shareholders were granted registration rights, and their
shares (including the shares underlying the warrants)are registered for resale
hereunder. The names of these selling shareholders, and the number of shares
offered hereunder are set forth below. None of these shareholders held an
office or directorship or had any other material relationship with us during
the past 3 years, except that Guenter Jaensch, Jeffrey L. Helfer, Stuart
McDonald and Robert J. Wood are officers and/or directors of the Company and
own the number of shares set forth in Security Ownership of Certain Beneficial
Owners and Management. Except as to these named shareholders, to the best of
our knowledge, each of these shareholders will own less than 1% of our
outstanding shares following completion of this offering and the sale of the
shares registered hereunder.
50
SELLING SHAREHOLDERS
Securities Held
Before Offering Amount Offered
Position, Office Amount %
Name of or Material Common Warrant Common Warrant after Offering
Shareholder Relationship Shares Shares Shares Shares Complete
Spectrum None 0 0 6,200,000 0 0/0
Carolina Financial None 0 0 0 310,000 0/0
William Prather Financial Advisor 0 12,500 0 12,500 0/0
Robert Cascella Financial Advisor 0 36,358 0 36,358 0/0
Michael
Niedswiecki Financial Advisor 0 36,357 0 36,357 0/0
Michael Mascia Financial Advisor 0 36,357 0 36,357 0/0
Westbay
Consulting, Inc. Finder 258,006 0 258,006 0 0/0
Biomed Greater than
Solutions, LLC 10% Shareholder 662,857 1,180,000 0 1,180,000 662,857/1.5%
SBI USA, LLC Financial
Advisory Contract 0 3,000,000 0 3,000,000 0/0
Private
Placement
Shareholders
Bryan, Jennifer None 25,000 12,500 25,000 12,500 0/0
Buchholz, Rick None 50,000 25,000 50,000 25,000 0/0
Erhart, Joseph None 20,000 10,000 20,000 10,000 0/0
Kahle, Ronald, Jr. None 100,000 50,000 100,000 50,000 0/0
Kahle, Terry None 20,000 10,000 20,000 10,000 0/0
Knueve, Michael None 20,000 10,000 20,000 10,000 0/0
Knueve, Ronald None 20,000 10,000 20,000 10,000 0/0
Nienberg, Stephen None 40,000 20,000 40,000 20,000 0/0
Recker, Greg None 20,000 10,000 20,000 10,000 0/0
Unverferth, Brad None 285,000 142,500 285,000 142,500 0/0
Askins, Randall None 20,000 10,000 20,000 10,000 0/0
Averesch, Michael None 100,000 50,000 100,000 50,000 0/0
Erhart, Brian None 30,000 15,000 30,000 15,000 0/0
Gerding, William
and Debra None 40,000 20,000 40,000 20,000 0/0
Hortstman, Dennis None 40,000 20,000 40,000 20,000 0/0
Unverferth, Jason None 60,000 30,000 60,000 30,000 0/0
Unverferth, Mel
and Beverly None 40,000 20,000 40,000 20,000 0/0
Bilski, Dianna None 35,800 17,900 35,800 17,900 0/0
Cleary, Brian None 20,000 10,000 20,000 10,000 0/0
Fortman, Gary J. and
Deters, Jeffrey R. None 20,000 10,000 20,000 10,000 0/0
Fortman, Gary J. None 40,000 20,000 40,000 20,000 0/0
Hoellrich, Anthony J. None 20,000 10,000 20,000 10,000 0/0
Hoellrich, Daniel L. None 20,000 10,000 20,000 10,000 0/0
Hoellrich, Douglas D. None 20,000 10,000 20,000 10,000 0/0
Kahle, Terry L. None 18,000 9,000 18,000 9,000 0/0
Kahle, Scott L. None 20,000 10,000 20,000 10,000 0/0
Klass, Terry None 32,000 16,000 32,000 16,000 0/0
Krontz, Gerald E.
and Cherylanne None 20,000 10,000 20,000 10,000 0/0
Maag, Phillip D. None 40,000 20,000 40,000 20,000 0/0
Sarka, Robert J. None 50,000 25,000 50,000 25,000 0/0
Asad, Susan Sutherland None 14,000 7,000 14,000 7,000 0/0
Berger, Charles W., Jr.None 20,000 10,000 20,000 10,000 0/0
Brown, Meagan None 20,000 10,000 20,000 10,000 0/0
Brown, Grayling None 16,000 8,000 16,000 8,000 0/0
Bruskotter, Dennis None 20,000 10,000 20,000 10,000 0/0
51
Deters, Jeffrey None 40,000 20,000 40,000 20,000 0/0
Donnelly, Michael None 20,000 10,000 20,000 10,000 0/0
Fortman, Christopher & None
Fortman, Craig None 20,000 10,000 20,000 10,000 0/0
Fortman, Karl & Judy None 20,000 10,000 20,000 10,000 0/0
Gabor, Constance None 80,000 40,000 80,000 40,000 0/0
Gudewicz, Patrice None 10,000 5,000 10,000 5,000 0/0
Gudewicz, Richard None 20,000 10,000 20,000 10,000 0/0
Hohlbein, Michael None 50,000 25,000 50,000 25,000 0/0
Knueve, Ronald
& Bonnie None 10,000 5,000 10,000 5,000 0/0
Kreinbrink, John None 20,000 10,000 20,000 10,000 0/0
Otto, Jon & Karen None 20,000 10,000 20,000 10,000 0/0
Rosengarten, Kurt None 20,000 10,000 20,000 10,000 0/0
Schimmoeller, Craig &
Brenda None 100,000 50,000 100,000 50,000 0/0
Schroeder, Randal
& Pamela None 20,000 10,000 20,000 10,000 0/0
Scodellaro, James None 10,000 5,000 10,000 5,000 0/0
Siefker, Greg None 20,000 10,000 20,000 10,000 0/0
Steffey, Billie
& Rita None 10,000 5,000 10,000 5,000 0/0
Strauer, Robert None 10,000 5,000 10,000 5,000 0/0
Utrup, Kurt None 10,000 5,000 10,000 5,000 0/0
Vorst, Steven None 150,000 75,000 150,000 75,000 0/0
Warnecke, Rick None 100,000 50,000 100,000 50,000 0/0
Winkle, Roger None 40,000 20,000 40,000 20,000 0/0
Wittlinger, Mona None 6,000 3,000 6,000 3,000 0/0
Anstadt, George
& Nancy None 100,000 50,000 100,000 50,000 0/0
Averesch, Michael None 120,000 60,000 120,000 60,000 0/0
Bachmann, Roberta None 20,000 10,000 20,000 10,000 0/0
Barnes, Alvin None 40,000 20,000 40,000 20,000 0/0
Brashear, Robert None 17,000 8,500 17,000 8,500 0/0
Bowman, Donald None 10,000 5,000 10,000 5,000 0/0
Glendale Investments,
Ltd. None 120,000 60,000 120,000 60,000 0/0
Butler, Daniel & Sue None 20,000 10,000 20,000 10,000 0/0
Cleary, Michael None 10,000 5,000 10,000 5,000 0/0
Conditioning Concepts None 20,000 10,000 20,000 10,000 0/0
DeKalb, Daryl None 118,500 59,250 118,500 59,250 0/0
Dirty Dozen Investing None 45,000 22,500 45,000 22,500 0/0
Eisler, Craig None 16,000 8,000 16,000 8,000 0/0
Ellerbrock, Daniel
& Carol None 20,000 10,000 20,000 10,000 0/0
Estlack, Fred None 16,000 8,000 16,000 8,000 0/0
Fortman, Douglas None 30,000 15,000 30,000 15,000 0/0
Garman, Richard None 80,000 40,000 80,000 40,000 0/0
General Medina
Development None 11,400 5,700 11,400 5,700 0/0
Grenot, Michael None 50,400 25,200 50,400 25,200 0/0
Helfer, Vice President
Jeffrey L. 100,000 50,000 100,000 50,000 0/0
Jaensch, Guenter Chairman of the Board
& Terri 300,000 150,000 300,000 150,000 0/0
Jeary, Richard None 10,000 5,000 10,000 5,000 0/0
Kahle, Carl None 20,000 10,000 20,000 10,000 0/0
Kahle, Gary None 40,000 20,000 40,000 20,000 0/0
Kahle, Ronald None 50,000 25,000 50,000 25,000 0/0
Kahle, Timothy M. None 10,000 5,000 10,000 5,000 0/0
52
Kahle, Timothy R. None 20,000 10,000 20,000 10,000 0/0
Kenzie, Allan & Bette None 100,000 50,000 100,000 50,000 0/0
Knueve, Dan None 20,000 10,000 20,000 10,000 0/0
Knueve, Ed None 20,000 10,000 20,000 10,000 0/0
Knueve, Ronald
& Bonnie None 10,000 5,000 10,000 5,000 0/0
Lippco Capital LLC None 50,000 25,000 50,000 25,000 0/0
MacDonald, Vice President
Stuart 60,000 30,000 60,000 30,000 0/0
Mahley, Mary None 100,000 50,000 100,000 50,000 0/0
Mahley, Stephen None 100,000 50,000 100,000 50,000 0/0
Masters, Vernon None 40,000 20,000 40,000 20,000 0/0
Moore, Dennis None 12,000 6,000 12,000 6,000 0/0
Nelson, Laura M. None 20,000 10,000 20,000 10,000 0/0
Neu, Julie None 10,000 5,000 10,000 5,000 0/0
Newman, Reginald None 50,000 25,000 50,000 25,000 0/0
Nowak, Ronald None 16,000 8,000 16,000 8,000 0/0
Pierce, Frederick None 40,000 20,000 40,000 20,000 0/0
Sarka, Robert None 32,000 16,000 32,000 16,000 0/0
Sarka, Robert
& Karen None 50,000 25,000 50,000 25,000 0/0
Schimmoeller Family
Rev. Living Trust None 20,000 10,000 20,000 10,000 0/0
Siefker, Joseph
& Doris None 20,000 10,000 20,000 10,000 0/0
Siefker, Thomas None 20,000 10,000 20,000 10,000 0/0
Slawson, Kenneth None 51,000 25,500 51,000 25,500 0/0
Smith, Steven & Mary None 20,000 10,000 20,000 10,000 0/0
Terens, Frederick None 16,000 8,000 16,000 8,000 0/0
Unverferth, Jeffrey None 46,000 23,000 46,000 23,000 0/0
von der Embse, Barry None 60,000 30,000 60,000 30,000 0/0
Warnecke, Kevin
& Michelle None 20,000 10,000 20,000 10,000 0/0
Westbay Consulting, Financial Advisor
Inc. None 20,000 10,000 20,000 10,000 0/0
Western Harbor
Association None 40,000 20,000 40,000 20,000 0/0
Wittlinger, David None 664,000 332,000 664,000 332,000 0/0
Wittlinger, Donna None 12,000 6,000 12,000 6,000 0/0
Wittlinger, Mona None 26,000 13,000 26,000 13,000 0/0
Wittlinger, Viola None 80,000 40,000 80,000 40,000 0/0
Wittlinger, Walter None 40,000 20,000 40,000 20,000 0/0
Wood, Robert J. Vice President/CFO 60,000 30,000 60,000 30,000 0/0
PLAN OF DISTRIBUTION
General
Spectrum is offering the common shares for its account as statutory
underwriter, and not for our account. We will not receive any proceeds from
the sale of common shares by Spectrum. Spectrum may offer for sale up to
6,200,000 common shares which it may acquire pursuant to the terms of the
common stock purchase agreement. Spectrum is a statutory underwriter within
the meaning of the Securities Act of 1933 in connection with such sales of
common shares and will be acting as an underwriter in its resales of the
common shares under this prospectus. Spectrum has, prior to any sales, agreed
that its trading activities in our securities will comply with applicable
state and federal securities laws, rules and regulations and the rules and
regulations. We will pay the costs of registering the shares under this
prospectus, including legal fees.
53
To permit Spectrum to resell the common shares issued to it under the common
stock purchase agreement, we agreed to register those shares and to maintain
that registration. To that end, we have agreed with Spectrum that we will
prepare and file such amendments and supplements to the registration
statement and the prospectus as may be necessary in accordance with the
Securities Act of 1933 and the rules and regulations promulgated thereunder,
to keep it effective until the earliest of any of the following dates:
* the date after which all of the common shares held by Spectrum that are
covered by the registration statement have been sold by Spectrum
pursuant to such registration statement;
* the date after which all of the common shares held by Spectrum that are
covered by the registration statement may be sold, in the opinion of
our counsel, without restriction under the Securities Act of 1933; or
* the date after which all of the common shares held by Spectrum that are
covered by the registration statement may be sold pursuant to Rule
144(k) under the Securities Act of 1933, without limitation as to time,
manner of sale or volume.
Shares of common stock offered through this prospectus may be sold from time
to time by Spectrum or the other selling shareholders; or by pledgees,
donees, transferees or other successors in interest to such other selling
shareholders. We will supplement this prospectus to disclose the names of any
pledgees, donees, transferees, or other successors in interest to such
shareholders (other than Spectrum) that intend to offer common stock through
this prospectus.
Sales may be made on the OTC.BB or otherwise at prices and at terms then
prevailing or at prices related to the then current market price, or in
negotiated private transactions, or in a combination of these methods. Each
selling shareholder will act independently of us in making decisions with
respect to the form, timing, manner and size of each sale. We have been
informed by Spectrum and Carolina that there are no existing arrangements
between it and any other stockholder, broker, dealer, underwriter or agent
relating to the distribution of this prospectus. Spectrum is an underwriter
in connection with resales of its shares.
The common shares may be sold in one or more of the following manners:
* a block trade in which the broker or dealer so engaged will attempt to
sell the shares as agent, but may position and resell a portion of the
block as principal to facilitate the transaction;
* ordinary brokerage transactions and transactions in which the broker
solicits purchases; or
* privately negotiated transactions as permitted by Rule 15a-6 under the
Exchange Act of 1934.
In effecting sales hereunder, Spectrum or other selling shareholders may
arrange for other brokers or dealers to participate. Except as disclosed in a
supplement to this prospectus, no broker-dealer will be paid more than a
customary brokerage commission in connection with any sale of the common
shares by Spectrum. Brokers or dealers may receive commissions, discounts or
other concessions from the selling stockholders in amounts to be negotiated
immediately prior to the sale. The compensation to a particular broker-dealer
may be in excess of customary commissions. Profits on any resale of the
common shares as a principal by such broker-dealers and any commissions
received by such broker-dealers may be deemed to be underwriting discounts
and commissions under the Securities Act. Any broker-dealer participating in
such transactions as agent may receive commissions from the selling
shareholder, and, if they act as agent for the purchaser of such common
shares, from such purchaser.
54
In addition, any common shares covered by this prospectus which qualify for
sale pursuant to Rule 144 may be sold under Rule 144 rather than pursuant to
this prospectus.
However, since Spectrum is an underwriter, Rule 144 of the Securities Act of
1933 is not available to Spectrum to sell its shares.
We will not receive any of the proceeds from the sale of these common shares,
although we have paid the expenses of preparing this prospectus and the
related registration statement of which it is a part.
Spectrum is subject to the applicable provisions of the Exchange Act of 1934,
including without limitation, Rule 10b-5 and Regulation M thereunder. Under
applicable rules and regulations under the Exchange Act of 1934, any person
engaged in a distribution of the common shares may not simultaneously
purchase such securities for a period beginning when such person becomes a
distribution participant and ending upon such person's completion of
participation in a distribution. In addition, in connection with the
transactions in the common shares, Spectrum will be subject to applicable
provisions of the Exchange Act of 1934 and the rules and regulations under
that Act, including, without limitation, the rules set forth above. These
restrictions may affect the marketability of the common shares.
Each selling shareholder will pay all commissions and their own expenses, if
any, associated with the sale of the common shares, other than the expenses
associated with preparing this prospectus and the registration statement of
which it is a part.
Underwriting Compensation and Expenses
The underwriting compensation for Spectrum will depend on the amount of
financing that we are able to obtain under the common stock purchase
agreement, up to a maximum of approximately $ 600,000 if we are able to
obtain the entire $3,000,000 in financing. Spectrum will purchase shares
under the common stock purchase agreement at a price equal to 80% of the
volume weighted average daily price of our common stock on the OTC.BB, as
reported by Bloomberg Financial L.P. for each day in the pricing period with
respect to each draw down request.
In addition, we are obligated to pay Carolina, as compensation for its
services as placement agent, a cash fee equal to 10% of the gross proceeds
received from Spectrum under the common stock purchase agreement for draw
downs under the equity line. The placement agent compensation to Carolina
will depend on the amount of financing that we are able to obtain under the
common stock purchase agreement, up to a maximum of $300,000 if we are able
to obtain the entire $3,000,000 in financing. We also agreed to issue to
Carolina warrants to purchase up to 310,000 shares of our common stock at an
exercise price equal to 110% of the per share purchase price, as calculated
under the Stock Purchase Agreement, on the date of issuance. The warrant will
expire five years from the date of issuance.
LEGAL MATTERS
The validity of the common stock offered hereby will be passed upon for
Biophan by Boylan, Brown, Code, Vigdor & Wilson, LLP, Rochester, New York.
The firm has been granted options to purchase 40,000 shares of Biophan's
common stock at $.50 per share in connection with services rendered prior to
the commencement of this offering, and warrants to purchase an additional
161,290 shares at $.31 per share as partial consideration for its work in
connection with this offering.
55
EXPERTS
The financial statements of Biophan as of and for the years ended
February 28, 2002 and 2001, appearing in this prospectus have been audited by
Goldstein Golub Kessler LLP, Certified Public Accountants, as set forth in
their report thereon appearing elsewhere herein, and are included in reliance
upon such reports given upon the authority of such firm as experts in
accounting and auditing.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
Biophan files current, quarterly and annual reports with the SEC on forms 8-
KSB, 10QSB and 10KSB. Biophan has filed with the SEC a registration
statement on Form SB-2 (together with all amendments and exhibits thereto,
under the Securities Act, with respect to the shares being offered in this
offering. This prospectus does not contain all of the information set forth
in the registration statement, certain items of which are omitted in
accordance with the rules and regulations of the SEC. The omitted information
may be inspected and copied at the Public Reference Room maintained by the
SEC at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. You
can obtain information about operation of the Public Reference Room by
calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet site
that contains reports, proxy and information statements, and other
information regarding issuers that file electronically with the SEC at
http://www.sec.gov. Copies of such material can be obtained from the public
reference section of the SEC prescribed rates. Statements contained in this
prospectus as to the contents of any contract or other document field as an
exhibit to the registration statement are not necessarily complete and in
each instance reference is made to the copy of the document filed as an
exhibit to the registration statement, each statement made in this prospectus
relating to such documents being qualified in all respect by such reference.
For further information with respect to Biophan and the securities being
offered hereby, reference is hereby made to such registration statement,
including the exhibits thereto and the financial statements, notes, and
schedules filed as a part thereof.
56
FINANCIAL STATEMENTS
BIOPHAN TECHNOLOGIES, INC.
(FORMERLY GREATBIO TECHNOLOGIES, INC.)
AND SUBSIDIARIES
(a development stage company)
CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 28, 2002
BIOPHAN TECHNOLOGIES, INC. (FORMERLY GREATBIO
TECHNOLOGIES, INC.) AND SUBSIDIARIES
(a development stage company)
CONTENTS
February 28, 2002
-------------------------------------------------------------------------------
Independent Auditor's Report F-1
Consolidated Financial Statements:
Balance Sheet F-2
Statement of Operations F-3
Statement of Stockholders' Equity F-4-F-5
Statement of Cash Flows F-6
Notes to Consolidated Financial Statements F-7-F-14
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Biophan Technologies, Inc. (formerly GreatBio Technologies, Inc.)
We have audited the accompanying consolidated balance sheet of Biophan
Technologies, Inc. (formerly GreatBio Technologies, Inc.) and Subsidiaries
(a development stage company) as of February 28, 2002 and the related
consolidated statements of operations, stockholders' equity, and cash flows
for each of the two years in the period then ended, and for the period from
August 1, 1968 (date of inception) to February 28, 2002. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the 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. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Biophan
Technologies, Inc. (formerly GreatBio Technologies, Inc.) and Subsidiaries as
of February 28, 2002 and the results of their operations and their cash flows
for each of the two years in the period then ended and for the period from
August 1, 1968 (date of inception) to February 28, 2002 in conformity with
accounting principles generally accepted in the United States of America.
GOLDSTEIN GOLUB KESSLER LLP
New York, New York
April 5, 2002, except for Note 10,
as to which the date is June 7, 2002
Pg. F-1
BIOPHAN TECHNOLOGIES, INC. (FORMERLY GREATBIO
TECHNOLOGIES, INC.) AND SUBSIDIARIES
(a development stage company)
CONSOLIDATED BALANCE SHEET
------------------------------------------------------------------------------
February 28, 2002
------------------------------------------------------------------------------
ASSETS
Current assets:
Cash $ 12,199
Investments in marketable securities 568,805
Prepaid expenses and other current assets 91,819
------------------------------------------------------------------------------
Total current assets $ 672,823
Fixed assets - at cost, net 80,882
Other assets:
Intellectual property rights 110,000
Security deposit 2,933
Deferred tax asset, net of valuation allowance of $1,305,000 -
------------------------------------------------------------------------------
Total Assets $ 866,638
==============================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 129,040
Payable to related party 500,000
Due to related parties 16,349
------------------------------------------------------------------------------
Total current liabilities 645,389
------------------------------------------------------------------------------
Stockholders' equity:
Common stock - $.005 par value; authorized 60,000,000 shares,
issued and outstanding 29,549,439 shares 147,747
Additional paid-in capital 4,608,407
Deficit accumulated during the development stage (4,534,905)
------------------------------------------------------------------------------
Stockholders' equity 221,249
------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $ 866,638
==============================================================================
The accompanying notes and independent auditor's report should be
read in conjunction with the consolidated financial statements
Pg. F-2
BIOPHAN TECHNOLOGIES, INC. (FORMERLY GREATBIO
TECHNOLOGIES, INC.) AND SUBSIDIARIES
(a development stage company)
CONSOLIDATED STATEMENT OF OPERATIONS
----------------------------------------------------------------------------------------
Period from
August 1,
1968 (date of
Year ended Year ended inception) to
February 28, February 28, February 28,
2002 2001 2002
----------------------------------------------------------------------------------------
Operating expenses:
Salaries and related $ 461,629 $ 59,861 $ 521,490
Research and development 949,124 113,144 1,062,268
Professional fees 1,310,916 38,685 1,349,601
Write-down of intellectual property rights 490,000 490,000
General and administrative 475,520 16,059 502,080
----------------------------------------------------------------------------------------
Operating loss (3,197,189) (717,749) (3,925,439)
----------------------------------------------------------------------------------------
Other (income) expense:
Interest expense (540,543) (13,000) (553,543)
Interest income 26,061 1,619 27,680
Other income 42,035 42,035
Other expense (36,281) (36,281)
----------------------------------------------------------------------------------------
Total other expenses, net (508,728) (11,381) (520,109)
----------------------------------------------------------------------------------------
Loss from continuing operations (3,705,917) (729,130) (4,445,548)
Loss from discontinued operations (89,357)
----------------------------------------------------------------------------------------
Net loss $ (3,705,917) $ (729,130) $ (4,534,905)
========================================================================================
Loss per common share - basic and diluted $ (0.14) $ (0.08)
========================================================================================
Weighted-average shares outstanding 27,000,962 9,166,887
========================================================================================
The accompanying notes and independent auditor's report should be
read in conjunction with the consolidated financial statements
Pg. F-3
BIOPHAN TECHNOLOGIES, INC. (FORMERLY GREATBIO
TECHNOLOGIES, INC.) AND SUBSIDIARIES
(a development stage company)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
-------------------------------------------------------------------------------------------------
Period from August 1, 1968 (date of inception) to February 28, 2002
-------------------------------------------------------------------------------------------------
Deficit
Accumulated
Additional During the
Number Common Paid-in Development Stockholders'
of Shares Stock Capital Stage Equity
-------------------------------------------------------------------------------------------------
1969 - 14,130 shares issued for services
for $.05 per share 14,130 $ 70 $ 637 $ 707
1970 - 1,405,000 shares issued for mining
rights for $.05 per share 1,405,000 7,025 63,225 70,250
1970 - 55,500 shares issued for services
for $.05 per share 55,500 278 2,497 2,775
1973 - 10,000 shares issued for services
for $.05 per share
10,000 50 450 500
1976 - 500 shares issued for services
for $.05 per share
500 3 22 25
1978 - 12,000 shares issued for services
for $.05 per share
12,000 60 540 600
1980 - 225,000 shares issued for services
for $.05 per share
225,000 1,125 10,125 11,250
1984 - 20,000 shares issued for services
for $.05 per share
20,000 100 900 1,000
1986 - 10,000 shares issued for services
for $.05 per share
10,000 50 450 500
1990 - 10,000 shares issued for services
for $.05 per share 10,000 50 450 500
1993 - 25,000 shares issued for services
for $.05 per share
25,000 125 1,125 1,250
Net loss from inception through
February 28, 1998
$ (89,357) (89,357)
-------------------------------------------------------------------------------------------------
Balance at February 28, 1998
1,787,130 8,936 80,421 (89,357) -
1999 - 10,000 shares issued for services
for $.05 per share 10,000 50 450 $ 500
1999 - 1,000,000 shares issued for services
for $.005 per share 1,000,000 5,000 5,000
Net loss for the year ended
February 28, 1999 (5,500) (5,500)
-------------------------------------------------------------------------------------------------
Balance at February 28, 1999
2,797,130 13,986 80,871 (94,857) -
2000 - 1,000,200 shares issued
for services for $.005 per share
1,000,200 5,001 5,001
The accompanying notes and independent auditor's report should be
read in conjunction with the consolidated financial statements
Pg. F-4
BIOPHAN TECHNOLOGIES, INC. (FORMERLY GREATBIO
TECHNOLOGIES, INC.) AND SUBSIDIARIES
(a development stage company)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
-------------------------------------------------------------------------------------------------
Period from August 1, 1968 (date of inception) to February 28, 2002
-------------------------------------------------------------------------------------------------
Deficit
Accumulated
Additional During the
Number Common Paid-in Development Stockholders'
of Shares Stock Capital Stage Equity
-------------------------------------------------------------------------------------------------
Net loss for the year ended
February 29, 2000 (5,001) (5,001)
-------------------------------------------------------------------------------------------------
Balance at February 29, 2000 3,797,330 18,987 80,871 (99,858) -
2000 - 250,000 shares issued for services
for $.005 per share
250,000 1,250 1,250
2000 - Expenses paid by stockholder 2,640 2,640
2000 - 10,759,101 shares issued for
acquisition of Antisense Technology,
Inc. 10,759,101 53,795 121,205 175,000
2000 - 10,759,101 shares issued for cash
for $.005 per share 10,759,101 53,796 121,204 175,000
Net loss for the year ended
February 28, 2001 (729,130) (729,130)
-------------------------------------------------------------------------------------------------
Balance at February 28, 2001 25,565,532 127,828 325,920 (828,988) (375,240)
2001 - 2,399,750 shares issued for cash
for $1.00 per share 2,399,750 11,999 2,387,751 2,399,750
2001 - 468,823 shares issued for interest 468,823 2,344 466,479 468,823
2001 - Redemption of 200,000 shares (200,000) (1,000) (1,000)
2001 - 1,315,334 shares issued upon
conversion of bridge loans at $.75
per share 1,315,334 6,576 979,924 986,500
2001 - Offering costs associated with
share issuances for cash (254,467) (254,467)
2002 - Grant of stock options for services 702,800 702,800
Net loss for the year ended
February 28, 2002 (3,705,917)(3,705,917)
-------------------------------------------------------------------------------------------------
Balance at February 28, 2002 29,549,439 $ 147,747 $4,608,407 $(4,534,905) $ 221,249
=================================================================================================
The accompanying notes and independent auditor's report should be
read in conjunction with the consolidated financial statements
Pg. F-5
BIOPHAN TECHNOLOGIES, INC. (FORMERLY GREATBIO
TECHNOLOGIES, INC.) AND SUBSIDIARIES
(a development stage company)
CONSOLIDATED STATEMENT OF CASH FLOWS
-------------------------------------------------------------------------------------------------
Period from
August 1,
1968 (date of
Year ended Year ended inception) to
February 28, February 28, February 28,
2002 2001 2002
-------------------------------------------------------------------------------------------------
Cash flows from operating activities:
Net loss $(3,705,917) $ (729,130) $(4,534,905)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation 14,762 167 14,929
Realized and unrealized losses on marketable securities 38,143 38,143
Write-down of intellectual property rights 490,000 490,000
Amortization of discount on payable to related party 62,000 13,000 75,000
Issuance of common stock for services 1,250 101,108
Issuance of common stock for interest 468,823 468,823
Grant of stock options for services 702,800 702,800
Expenses paid by stockholder 2,640 2,640
Changes in operating assets and liabilities:
Increase in prepaid expenses and other current assets (91,819) (91,819)
Increase in security deposits (2,933) (2,933)
Increase in accounts payable and accrued expenses 18,184 97,525 115,709
Increase (decrease) in due to related parties (153,787) 126,640 (27,147)
-------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities (2,649,744) 2,092 (2,647,652)
-------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Purchases of fixed assets (90,811) (5,000) (95,811)
Sales of marketable securities 377,270 377,270
Purchases of marketable securities (984,218) (984,218)
-------------------------------------------------------------------------------------------------
Net cash used in investing activities (697,759) (5,000) (702,759)
-------------------------------------------------------------------------------------------------
Cash flow from financing activities:
Proceeds of bridge loans 986,500 986,500
Net proceeds from sales of capital stock 2,201,110 175,000 2,376,110
-------------------------------------------------------------------------------------------------
Net cash provided by financing activities 3,187,610 175,000 3,362,610
-------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents (159,893) 172,092 12,199
Cash and cash equivalents at beginning of period 172,092
-------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 12,199 $ 172,092 $ 12,199
=================================================================================================
Supplemental schedule of noncash investing and
financing activities:
Intellectual property acquired through issuance of common
stock and assumption of related party payable $ 175,000 $ 175,000
=================================================================================================
Acquisition of intellectual property rights $ 425,000 $ 425,000
=================================================================================================
Issuance of common stock upon conversion of bridge loans $ 986,500
=================================================================================================
The accompanying notes and independent auditor's report should be
read in conjunction with the consolidated financial statements
Pg. F-6
BIOPHAN TECHNOLOGIES, INC. (FORMERLY GREATBIO
TECHNOLOGIES, INC.) AND SUBSIDIARIES
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
February 28, 2002
-------------------------------------------------------------------------------
1. PRINCIPAL The consolidated financial statements include the accounts
BUSINESS of Biophan Technologies, Inc. ("Biophan") (formerly
ACTIVITY AND GreatBio Technologies, Inc.) and its wholly owned
SUMMARY OF subsidiaries, LTR Antisense Technology, Inc. ("Antisense")
SIGNIFICANT and MRIC Drug Delivery Systems, LLC ("MRIC") (collectively
ACCOUNTING referred to as the "Company"). All significant
POLICIES: intercompany accounts and transactions have been
eliminated in consolidation.
We are in the development stage and is expected to
remain so for at least the next 12 months. The Company was
formed in 1968 and obtained certain mining claims and
related rights, which were subsequently abandoned. As of
December 1, 2000, the principal business activity of the
Company is research and development of patent rights in two
areas: (1) MRI-compatible implantable cardiac pacemaker and
other implantable medical devices and (2) the use of
Antisense technology to block the HIV virus.
The Company has not generated any revenue throughout its
history. The Company's ability to continue in business is
dependent upon obtaining sufficient financing or attaining
future profitable operations.
On December 1, 2000, the Company amended its Articles of
Incorporation to change its name from Idaho Technical, Inc.
to GreatBio Technologies, Inc. and entered into an Exchange
Agreement with Biomed Solutions, LLC ("Biomed") (formerly
Biophan, LLC) and Antisense as more fully described below.
At the Annual Meeting on July 19, 2001, the shareholders
approved amending the Articles of Incorporation to change
the name of the Company to Biophan Technologies, Inc. The
change was effective as of that date.
In accordance with the terms of the Exchange Agreement (the
"Agreement") dated December 1, 2000, the Company acquired
from Biomed all of the issued and outstanding common stock
of its wholly owned subsidiary, Antisense, in exchange for
10,759,101 shares of authorized but previously unissued
common stock, par value $.005. The operations of Antisense
are included since the date of acquisition. Had Antisense
been acquired as of March 1, 2000, there would have been no
effect on the Company's operations. Antisense's only
assets at December 1, 2000 were the HIV patents.
Also on December 1, 2000, the Company acquired certain
intellectual property rights relating to the magnetic
resonance imaging ("MRI") technology from Biomed for the
future consideration of $500,000. The transfer was
consummated pursuant to and in accordance with the Transfer
Agreement (as amended), dated December 1, 2000, between the
Company and Biomed.
For purposes of the statement of cash flows, the Company
considers all highly liquid instruments with an original
maturity of three months or less to be cash equivalents.
The Company maintains cash in bank deposit accounts which,
at times, exceed federally insured limits. The Company has
not experienced any losses on these accounts.
Marketable securities that are bought and held principally
for the purpose of selling them in the near term are
classified as trading securities. Trading securities are
recorded at fair value, with the change in fair value
during the period included in operations.
Depreciation of fixed assets is provided by the straight-
line method over the estimated useful lives of the related
assets. Amortization of acquired intellectual property
rights is provided by the straight-line method over 17
years. Costs for internally developed intellectual
property rights with indeterminate lives are expensed as
incurred.
At each balance sheet date, the Company evaluates the
period of amortization of intangible assets. The factors
used in evaluating the period of amortization include: (i)
current operating results, (ii) projected future operating
results, and (iii) any other material factors that affect
continuity of the business.
Basic loss per common share is computed by dividing net
loss by the weighted-average number of shares of common
stock outstanding during the period. Diluted earnings per
share gives effect to dilutive options, warrants and other
potential common stock outstanding during the period.
Potential common stock has not been included in the
computation of diluted loss per share, as the effect would
be antidilutive.
Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases. Deferred
tax assets and liabilities are measured using enacted rates
expected to apply when the differences are expected to be
realized. A valuation allowance is recognized if it is
anticipated that some or all of the deferred tax asset may
not be realized.
The preparation of financial statements in conformity with
generally accepted accounting principles requires the use
of estimates by management. Actual results could differ
from these estimates.
In July 2001, the Financial Accounting Standards Board
("FASB") issued Statement of Financial Accounting Standards
("SFAS") No. 142, "Goodwill and Other Intangible Assets"
("SFAS No. 142").
SFAS No. 142 addresses how intangible assets that are
acquired individually or with a group of other assets
should be accounted for in financial statements upon their
acquisition. This statement requires goodwill to be
periodically reviewed for impairment rather than amortized.
SFAS No. 142 supersedes Accounting Principles Board ("APB")
Opinion No. 17, "Intangible Assets".
In August 2001, the FASB issued SFAS No. 144, "Accounting
for the Impairment or Disposal of Long-Lived Assets" ("SFAS
No. 144"). This Statement addresses financial accounting
and reporting for the impairment or disposal of long-lived
assets. This Statement supersedes SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of", and amends the
accounting and reporting provisions of APB Opinion No. 30,
"Reporting the Results of Operations Reporting the Effect
of Disposal of a Segment of a Business, and Extraordinary,
Unusual and Infrequently Occurring Events and
Transactions", for the disposal of a segment of a business.
The provisions of SFAS Nos. 142 and 144 will be effective
for fiscal years beginning after December 15, 2001. The
Company is currently evaluating the implications of
adoption of SFAS Nos. 142 and 144 and anticipates adopting
the provisions for its fiscal year beginning March 1, 2002.
The impact of these standards on the Company's financial
statements has not yet been determined.
Management does not believe that these recently issued, but
not yet effective, accounting standards if currently
adopted would have a material effect on the accompanying
consolidated financial statements.
2. INVESTMENTS IN Investments in trading securities are summarized as follows
MARKETABLE at February 28, 2002:
SECURITIES:
Gross
Unrealized Fair
Cost Loss Value
-----------------------------------------------------------
Corporate debt securities $605,086 $ 36,281 $ 568,805
============================================================
Unrealized holding losses on trading securities amounted
to $36,281 for the year ended February 28, 2002.
3. FIXED ASSETS: Fixed assets, at cost, consist of the following:
Depreciation/
Amortization
Period
-----------------------------------------------------------
Furniture & Equipment $33,949 5-7 years
Computers 7,703 5 years
Internet Web site 54,159 7 years
-----------------------------------------------------------
95,811
Less accumulated depreciation (14,929)
-----------------------------------------------------------
$80,882
===========================================================
Depreciation expense for the years ended February 28, 2002
and 2001 amounted to $14,762 and $167, respectively.
Depreciation expense for the period from August 1, 1968
(Date of Inception) to February 28, 2002 was $14,929.
4. INTELLECTUAL Intellectual property rights were acquired on December 1,
PROPERTY 2000 and encompass two areas: (1) The utilization of new
RIGHTS: proprietary technology to prevent implantable cardiac
pacemakers and other critical and life-sustaining medical
devices from being affected by MRI and other equipment
using magnetic fields, radio waves and similar forms of
electromagnetic interference ("EMI"), and (2) the use of
proprietary Antisense gene therapy technology to inhibit
the spread of human immunodeficiency virus (HIV-1)
infection in conjunction with the use of lentiviral
vectors.
In accordance with Statement of Financial Accounting
Standards ("SFAS") No. 121, Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of, at February 28, 2001, the Company recognized
a loss of $490,000 through a write-down of the intellectual
property rights to their fair market value, in accordance
with an independent, third-party valuation. As discussed
in Note 1, the Company has not yet recorded revenue and
the continuation of business is dependent on the Company's
ability to obtain sufficient financing or attain future
profitable operations.
5. STOCKHOLDERS' During the months of July, August, October and December
EQUITY: 2001 and January 2002, the Company issued 2,399,750 shares
of common stock for cash of $1.00 per share, in connection
with a private placement of up to 3,000,000 shares of
common stock. The Company incurred offering costs of
$254,467 in conjunction with this private placement.
During December 2001, the Company issued 1,315,334 shares
of common stock at $.75 per share, in connection with a
conversion of bridge loans for which the Company received
cash proceeds of $986,500. Additionally, the Company
issued 468,823 shares of common stock valued at $1.00 per
share, for interest in connection with these bridge loan
agreements.
During September 2001, the Company redeemed 200,000 shares
of common stock, initially issued in connection with an
issuance of 250,000 shares of common stock for services.
6. COMMITMENTS: The Company is obligated under an operating lease for
office space expiring September 30, 2004. The Company may
terminate the lease after September 30, 2002 upon ninety
days prior written notice to the landlord. The aggregate
minimum future payments under this lease are payable as
follows:
Year ending February 28,
2003 $ 36,867
2004 46,783
2005 25,083
-----------------------------------------------------------
$108,733
===========================================================
Rent expense charged to operations under this operating
lease aggregated $14,667 and $ -0- for the years ended
February 28, 2002 and 2001, respectively. Rent expense
charged to operations for the period from August 1, 1968
(Date of Inception) to February 28,2002 was $14,667.
7. RELATED-PARTY Under the Transfer Agreement dated December 1, 2000, the
TRANSACTIONS: Company incurred a liability of $500,000 (including
interest of $75,000) to Biomed in connection with the
acquisition of the MRI intellectual property rights
described in Note 4. Biomed maintains a security interest
in the underlying patents until the liability is satisfied.
The intellectual property rights will revert to Biomed if
the Company does not satisfy the liability by December 1,
2002. The stated liability bears interest at an imputed
rate of 12.48%, and the balance payable at February 28,
2002 is $500,000.
At February 28, 2002, the carrying value of the Company's
obligation approximated its estimated fair value based
upon current borrowing rates for similar issues.
Biomed and another related party paid expenses on behalf
of the Company aggregating $253,014 and $170,136 during the
years ended February 28, 2002 and 2001, respectively. The
amounts due to the related parties do not bear interest,
and the Company expects to repay these liabilities during
the next 12 months.
8. STOCK-BASED The Company has a stock option plan (the "Plan") which
COMPENSATION provides for the granting of nonqualified or incentive
PLAN: stock options ("ISO") to officers, key employees, non-
employee directors and consultants. The Plan authorizes
the granting of options to acquire up to 2,500,000 common
shares. ISO grants under the Plan are exercisable at the
market value of the Company's stock on the date of such
grant. Nonqualified option grants under the Plan are
exercisable at amounts determined by the board of
directors. All options under the Plan are exercisable at
times as determined by the board of directors, not to
exceed 10 years from the date of grant. Additionally, the
Plan provides for the granting of restricted stock to
officers and key employees.
The following table summarizes activity in stock options:
Year Ended February 28, 2002
-----------------------------------------------------------
Weighted-
average
Exercise
Options Price
-----------------------------------------------------------
Outstanding at beginning
of year - -
Granted 1,779,997 $ .51
Forfeited - -
Exercised - -
-----------------------------------------------------------
Outstanding at end of year 1,779,997 $ .51
===========================================================
The following table summarizes information about stock
options outstanding and exercisable at February 28, 2002:
Average Weighted-
Remaining average
Range of Number Number Contractual Exercise
Exercise Price Outstanding Exercisable Life Price
---------------------------------------------------------------
$.50 1,779,997 675,000 9 years $.50
===============================================================
The Company has elected to apply APB Opinion No. 25 and
related interpretations in accounting for its stock
options and has adopted the disclosure-only provisions of
SFAS No. 123. Had the Company elected to recognize
compensation cost based on the fair value of the options
granted at the grant date as prescribed by SFAS No. 123,
the Company's net loss and loss per common share would
have been as follows:
February 28, 2002
-----------------------------------------------------------
Net loss - as reported $(3,705,917)
===========================================================
Net loss - pro forma (3,714,917)
===========================================================
Basic and diluted loss per common
share - as reported $ (.14)
===========================================================
Basic and diluted loss per common
share - pro forma $ (.14)
===========================================================
The fair value for these options was estimated at the
date of grant using the Black-Scholes option pricing model
with the following weighted-average assumptions for the
year ended February 28, 2002: risk-free interest rates of
4.27% to 4.87%; no dividend yield; volatility factors of
the expected market price of the Company's common stock of
90%, and a weighted-average expected life of the options
of 9 years.
At February 28, 2002, 720,003 shares of common stock were
reserved for future issuance of stock options.
9. INCOME TAXES: As of February 28, 2002, the Company had net operating loss
carryforwards of approximately $3,348,000 for federal
income tax purposes, which expire through 2022.
The reconciliation of income tax computed at the U.S.
federal statutory tax rates to income tax expense is as
follows:
Year Ended February 28, 2002 2001
-----------------------------------------------------------
Tax benefit at U.S. statutory rates 34 % 34 %
Increase in valuation allowance (34)% (34)%
-----------------------------------------------------------
-0-% -0-%
===========================================================
Deferred tax asset is comprised of the following:
February 28, 2002
-----------------------------------------------------------
Net operating loss carryforwards $1,138,000
Write-down of intellectual property rights 167,000
-----------------------------------------------------------
Total deferred tax asset 1,305,000
Valuation allowance (1,305,000)
-----------------------------------------------------------
Net deferred tax asset $ -0-
==========================================================
10. SUBSEQUENT During June 2002, the Company entered into a Stock Purchase
EVENT Agreement(the "Agreement") whereby the Company agreed to
sell up to $2,400,000 of the Company's common stock. The
minimum monthly sale of common stock under the Agreement
shall be $250,000. The Company has agreed to file with the
Securities and Exchange Commission ("SEC") a Registration
Statement covering the shares issuable under this agreement.
The Company can begin selling shares to the purchaser 20
days after the SEC declares the above-mentioned Registration
Statement effective.
BIOPHAN TECHNOLOGIES, INC.
(FORMERLY GREATBIO TECHNOLOGIES, INC.)
AND SUBSIDIARIES
(a development stage company)
CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 2002
BIOPHAN TECHNOLOGIES, INC. (FORMERLY GREATBIO
TECHNOLOGIES, INC.) AND SUBSIDIARIES
(A Development Stage Company)
CONTENTS
November 30, 2002
-------------------------------------------------------------------------------
Independent Accountant's Report F-1
Consolidated Financial Statements:
Balance Sheet F-2
Statement of Operations F-3
Statement of Stockholders' Deficiency F-4
Statement of Cash Flows F-5
Notes to Consolidated Financial Statements F-6 - F-7
INDEPENDENT ACCOUNTANT'S REPORT
--------------------------------
To the Board of Directors
Biophan Technologies, Inc.
We have reviewed the accompanying condensed consolidated balance sheet of
Biophan Technologies, Inc. and Subsidiaries as of November 30, 2002, and
the related condensed consolidated statements of operations for the nine-month
and three-month periods ended November 30, 2002 and 2001, the consolidated
statement of stockholders' deficiency for the nine-month period ended November
30, 2002, the consolidated statements of cash flows for the nine-month periods
ended November 30, 2002 and 2001 and the amounts included in the cumulative
column in the condensed consolidated statements of operations and cash flows
for the period from March 1, 2002 to November 30, 2002. These financial
statements are the responsibility of the Company's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which
is the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that
should be made to the accompanying condensed consolidated financial statements
for them to be in conformity with accounting principles generally accepted in
the United States of America.
We have previously audited, in accordance with auditing standards generally
accepted in the United States of America, the consolidated balance sheet as of
February 28, 2002, and the related consolidated statements of operations,
stockholders' equity, and cash flows for the year then ended and for the
period from August 1, 1968 (date of inception) to February 28, 2002(not
presented herein). In our report dated April 5, 2002, except for Note 10, as
to which the date was June 7, 2002, we expressed an unqualified opinion on
those consolidated financial statements. In our opinion, the information set
forth in the accompanying condensed consolidated balance sheet as of February
28, 2002, is fairly stated, in all material respects, in relation to the
consolidated balance sheet from which it has been derived.
/s/GOLDSTEIN GOLUB KESSLER LLP
New York, New York
January 3, 2003
Pg. F-1
BIOPHAN TECHNOLOGIES, INC.
AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
November 30, 2002
(Unaudited) February 28, 2002
-------------------------------------------
ASSETS
Current Assets:
Cash and equivalents $ 28,053 $ 12,199
Marketable securities, at market value - 568,805
Due from related parties 16,779
Prepaid expenses 130,468 91,819
-------------------------------------------
Total Current Assets 175,300 672,823
Fixed Assets, at cost, net 69,642 80,882
Other Assets:
Intellectual property rights 110,000 110,000
Security deposit 2,933 2,933
Deferred private equity placement costs 20,000 -
Deferred tax asset, net of valuation allowance of
$1,718,000 and $1,305,000 respectively - -
-------------------------------------------
132,933 112,933
-------------------------------------------
$ 377,875 $ 866,638
===========================================
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Current Liabilities:
Accounts payable and accrued expenses $ 326,780 $ 129,040
Loan payable to stockholder 143,570
Payable to related party 300,000 500,000
Due to related parties 4,790 16,349
-------------------------------------------
Total Current Liabilities 775,140 645,389
Long-term payable to related party 500,000
Stockholders' Equity (Deficiency):
Common stock, $.005 par value
Authorized, 60,000,000 shares
Issued and outstanding, 32,987,759 and 29,549,439
shares respectively 164,939 147,747
Additional paid-in capital 5,786,427 4,608,407
Deficit accumulated during the development stage (6,848,631) (4,534,905)
-------------------------------------------
(897,265) 221,249
-------------------------------------------
$ 377,875 $ 866,638
===========================================
See Accountant's Review Report and Notes to Consolidated Financial Statements.
Pg. F-2
BIOPHAN TECHNOLOGIES AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIENCY
Nine Months Ended November 30, 2002
(Unaudited)
Deficit
Accumulated
Additional During the Stockholders'
Number of Common Paid-in Development Equity
Shares Stock Capital Stage (Deficiency)
-----------------------------------------------------------------
Balance at February 28, 2002 29,549,439 $ 147,747 $ 4,608,407 $(4,534,905) $ 221,249
Shares issued for cash for $.34 per share 993,886 4,969 337,461 342,430
Shares issued for cash for $.15 per share 1,192,874 5,964 167,002 172,966
Shares issued for cash for $.25 per share 1,128,000 5,640 276,360 282,000
Shares issued as commissions on offerings 123,560 619 (40,803) (40,184)
Grant of stock options for services 138,000 138,000
Intrinsic value of beneficial conversion
feature of note payable 300,000 300,000
Net loss for the nine months ended
November 30, 2002 (2,313,726) (2,313,726)
----------------------------------------------------------------
Balance at November 30, 2002 32,987,759 $ 164,939 $ 5,786,427 $(6,848,631) $ (897,265)
================================================================
See Accountant's Review Report and Notes to Consolidated Financial Statements
Pg. F-3
BIOPHAN TECHNOLOGIES, INC.
AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Period from August
Three Months Ended Nine Months Ended 1, 1968 (date of
November 30, November 30, inception) to
2002 2001 2002 2001 November 30, 2002
------------------------------------------------------------------------
Operating expenses:
Salaries and related $ 146,462 $ 149,392 $ 493,589 $ 264,299 $ 1,015,079
Research and development 195,842 284,035 837,123 570,790 1,899,391
Professional fees 104,784 243,357 374,804 415,994 1,724,405
Write-down of intellectual property
rights - - - - 490,000
General and administrative 111,321 194,063 398,930 283,155 901,010
------------------------------------------------------------------------
Operating loss (558,409) (870,847) (2,104,446) (1,534,238) (6,029,885)
Other income(expense):
Interest income 177 11,088 16,878 16,758 44,558
Interest expense (162,862) (292,499) (334,422) (524,117) (887,965)
Other income 47,345 47,109 137,069 47,109 179,104
Other expense (41,020) (28,805) (51,493) (65,086)
------------------------------------------------------------------------
(115,340) (275,322) (209,280) (511,743) (729,389)
------------------------------------------------------------------------
Loss from continuing operations (673,749) (1,146,169) (2,313,726) (2,045,981) (6,759,274)
Loss from discontinued operations - - - - (89,357)
------------------------------------------------------------------------
Net loss $ (673,749) $(1,146,169) $(2,313,726) $(2,045,981) $(6,848,631)
========================================================================
Loss per common share -basic
and diluted $ ( 0.02) $ (0.04) $ (0.08) $ (0.08)
=======================================================
Weighted average shares outstanding 31,902,380 27,270,895 30,359,831 26,228,246
=======================================================
See Accountant's Review Report and Notes to Consolidated Financial Statements.
Pg. F-4
BIOPHAN TECHNOLOGIES, INC.
AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Period from August
Nine Months Ended 1, 1968 (date of
November 30, inception) to
2002 2001 November 30, 2002
---------------------------------------------------
Cash flows - operating activities:
Net loss $ (2,313,726) $ (2,045,981) $ (6,848,631)
Adjustments to reconcile net loss to net cash
used for operating activities:
Depreciation 19,191 3,800 34,120
Unrealized loss on marketable securities - 51,493 38,143
Amortization of interest on convertible note payable 300,000 - 300,000
Losses on marketable securities 28,805 - 28,805
Write-down of intellectual property rights - - 490,000
Amortization of discount on payable to
related party - 46,500 75,000
Issuance of common stock for services - - 101,108
Issuance of common stock for interest - 469,759 468,823
Grant of stock options for services 138,000 - 840,800
Expenses paid by stockholder - - 2,640
Changes in operating assets and liabilities:
Increase in due from related parties (16,779) - (16,779)
Increase in prepaid expenses (38,649) (86,625) (130,468)
Increase in security deposits (2,933)
Increase in accounts payable and
accrued expenses 197,740 840 313,449
Decrease in due to related parties (11,559) (189,362) (38,706)
---------------------------------------------------
(1,696,977) (1,749,576) (4,344,629)
---------------------------------------------------
Cash flows - investing activities:
Purchases of fixed assets (7,951) (31,448) (103,762)
Deferred equity placement costs (20,000) - (20,000)
Cost of web site development - (41,259)
Security deposit - (2,933)
Sales of marketable securities 540,000 - 917,270
Purchases of marketable securities - (984,217) (984,218)
---------------------------------------------------
512,049 (1,059,857) (190,710)
---------------------------------------------------
Cash flows - financing activities:
Proceeds of bridge loans - 986,500 986,500
Loan from stockholder 143,570 - 143,570
Line of credit borrowing from related party 300,000 - 300,000
Net proceeds from sales of capital stock 757,212 1,783,675 3,133,322
---------------------------------------------------
1,200,782 2,770,175 4,563,392
---------------------------------------------------
Net increase(decrease) in cash and cash equivalents 15,854 (39,258) 28,053
Cash and cash equivalents, beginning 12,199 172,092 -
---------------------------------------------------
Cash and cash equivalents, ending $ 28,053 $ 132,834 $ 28,053
===================================================
Supplemental schedule of noncash investing and
financing activities:
Intellectual property acquired through issuance of
capital stock and assumption of related party payable $ - $ - $ 175,000
===================================================
Acquisition of intellectual property $ - $ - $ 425,000
===================================================
Issuance of common stock upon conversion of
bridge loans $ - $ - $ 986,500
==================================================
See Accountant's Review Report and Notes to Consolidated Financial Statements.
Pg. F-5
BIOPHAN TECHNOLOGIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 2002
INTERIM FINANCIAL STATEMENTS:
The consolidated financial statements as of November 30, 2002 and for the
three and nine months ended November 30, 2002 and 2001 are unaudited.
However, in the opinion of management of the Company, these financial
statements reflect all adjustments, consisting solely of normal recurring
adjustments, necessary to present fairly the financial position and results of
operations for such interim periods. The results of operations for the
interim periods presented are not necessarily indicative of the results to be
obtained for a full year.
BASIS OF CONSOLIDATION
The consolidated financial statements include the accounts of Biophan
Technologies, Inc. ("Biophan") (formerly GreatBio Technologies, Inc.) and its
wholly owned subsidiaries, LTR Antisense Technology, Inc. ("Antisense") and
MRIC Drug Delivery Systems, LLC ("MRIC") (collectively referred to as the
"Company"). All significant intercompany accounts and transactions have been
eliminated in consolidation.
ORGANIZATIONAL HISTORY
The Company was incorporated under the laws of the State of Idaho on August 1,
1968. On January 12, 2000, the Company changed its domicile to Nevada by
merging into a Nevada corporation, and on July 19, 2001, changed its name to
Biophan Technologies, Inc. The Company's stock currently trades over-the-
counter under the symbol BIPH. Our corporate headquarters are located at 150
Lucius Gordon Drive, Suite 215, West Henrietta, New York 14586; Tel. (585)
214-2441; website: www.biophan.com.
On December 1, 2000, the Company acquired LTR Antisense Technology, Inc., a
New York corporation ("LTR"), from Biomed Solutions, LLC (formerly Biophan,
LLC), a New York limited liability company ("Biomed"), in a share for share
exchange. As a result of the exchange, LTR became a wholly owned subsidiary of
the Company. The exchange was consummated pursuant to and in accordance with
an Exchange Agreement, originally dated December 1, 2000 and subsequently
amended, by and among the Company, LTR and Biomed. LTR owns multiple patents
for proprietary HIV antisense gene therapy technology.
In connection with the exchange, the Company (i) issued an aggregate of
10,759,101 shares of common stock to Biomed in exchange for all the issued
shares of LTR and (ii) issued an aggregate of 10,759,101 shares of common
stock to a group of investors for $175,000. Also on December 1, 2000, the
Company acquired intellectual property rights, including a pending patent to
the MRI-compatible pacemaker technology from Biomed (the "Assignment"), for
future consideration of $500,000 ("MRI technology purchase liability payable")
The Assignment was consummated pursuant to, and in accordance with, an
Assignment and Security Agreement, originally dated December 1, 2000 and
subsequently amended, by and between the Company and Biomed.
Pg. F-6
PRINCIPAL BUSINESS ACTIVITIES
The Company is developing technologies that make biomedical devices safe for
use in an MRI (Magnetic Resonance Imaging) machine. Many biomedical devices
are prohibited for use in an MRI machine, including pacemakers, cardioverter-
defibrillators, neurostimulators, bladder control devices, insulin pumps with
wire connected sensors, pain control devices, interluminal imaging coils,
interventional catheters and guide wires, endoscopes, and others.
The Company is in the development stage and is expected to remain so for at
least the next twelve months.
PREPAID EXPENSES:
Prepaid expenses at November 30, 2002 consists of the following:
Prepaid consulting fees $ 80,999
Prepaid insurance 31,444
Prepaid supplies 18,125
--------
$130,468
========
LOAN AGREEMENTS:
In June 2002, the Company signed a Loan Agreement with a shareholder
providing for borrowings of up to $400,000 with interest payable at 8% per
annum. Principal and accrued interest become due and payable on December 31,
2003. At November 30, 2002, $143,570 had been borrowed under this Agreement.
In June 2002, the Company executed a line-of-credit agreement (the "Line")
with Biomed that provided for borrowings up to $250,000. Interest accrues at
8% per annum. Upon execution of the Line, Biomed received warrants to
purchase 325,000 shares of restricted common stock at $1.00 per share. The
warrants were valued at approximately $234,000 which was recorded as a
discount against the Convertible Promissory Note (the "Note") supporting the
Line. At issuance, the Note was convertible into shares of the Company's
common stock, at a price below the market value of such stock. The intrinsic
value of the beneficial conversion feature of the Note was recorded as an
additional discount, such that the full $250,000 issued was discounted, with
a corresponding increase to additional paid-in capital.
On August 19, 2002, the Line was increased by $100,000 and the expiration date
thereof was extended to August 19, 2003. The payment date of amounts borrowed
under the original Line was extended to December 1, 2002. In consideration
for the increase in the Line, Biomed received 30,000 additional warrants to
purchase shares of restricted common stock at a price dependent on the selling
price of the Company's stock, as defined. The exercise price of the warrants
issued to Biomed in exchange for the increase in the line of credit to
$350,000 and the extension of the payment date to December 1, 2002 is the
lowest of (i) the closing bid price on June 4, 2002; (ii) the closing bid
price on the date of exercise; or (iii) the lowest per share purchase price
paid by any third party between June 4, 2002 and the exercise date. The fair
value of the warrants - in accordance with guidance provided by Statement of
Financial Accounting Standards No. 123, Accounting for Stock-Based
Compensation - was estimated at the date of grant using the Black-Scholes
option pricing model with the following assumptions: risk-free interest rate
of 5.25; no dividend yield; volatility factor of the expected market price of
the company's common stock of 0.0%, and an expected life of 2.8 years. The
value attributed to the warrants was de minimis. As a result, these warrants
have been allocated no value. The Company has drawn an additional $50,000
under the Line, which was also fully discounted as a result of the beneficial
conversion feature, which was recorded as additional paid-in capital. At
November 30,2002, the Company has borrowed $300,000 in aggregate under the
Line.
Subsequent to November 30, 2002, in consideration for extending the maturity
date to June 1, 2004 and for prior extensions, the Company and Biomed agreed
to make the $500,000 MRI technology purchase liability payable to Biomed
convertible at Biomed's election into shares of the Company's common stock at
a price dependent on the selling price of the Company's stock, as defined.
Pg. F-7
CHANGES IN EQUITY:
In accordance with a Private Placement Memorandum dated July 2, 2001, the
Company offered to sell 3,000,000 shares of common stock, par value $.005 per
share, at $1.00 per share. Gross proceeds of $2,399,750 (net proceeds of
$2,188,332) were received.
In June 2001, the Company entered into bridge loan agreements providing gross
proceeds of $986,500. Loans of $400,000 from one lender provided for a
maturity date of December 15, 2001 and interest payable by issuance of 100,000
shares of stock on the due date. As additional consideration, the noteholder
received 100,000 shares of stock and warrants to purchase an additional
100,000 shares at $1.00 per share. The noteholder had the right to convert
the principal amounts into stock at $.75 per share at any time prior to
maturity. The Company also received proceeds from a series of bridge loans
aggregating $586,500 upon the same general terms as above except that interest
was payable by issuance of 73,324 shares of stock at the maturity date of
October 29, 2001 (extended to November 29, 2001). All bridge lenders
exercised their conversion options on November 29, 2001, at which time the
Company issued 1,315,334 shares of common stock to convert the loans to equity.
During June 2002, the Company entered into a Stock Purchase Agreement with an
institutional investor whereby the Company agreed to sell up to $2,400,000 of
the Company's common stock. In November 2002, the agreement was revised to
provide for sales of stock up to $3,000,000. The agreement requires the
Company to file with the Securities and Exchange Commission ("SEC") a
Registration Statement covering the shares issuable under this agreement. The
Company can begin selling shares to the purchaser immediately after the SEC
declares the above-mentioned Registration Statement effective. The Company is
in the process of filing for registration.
In July and August 2002, the Company entered into finder's agreements for the
sale of restricted common stock to foreign investors pursuant to the exemption
from registration provided in Regulation S of the 1933 Securities Act. The
Company issued a total of 2,186,760 shares of stock for aggregate net proceeds
of $503,412 under these agreements.
Effective August 22, 2002, the Company entered into a finder's agreement with
a domestic consulting firm providing for the sale of restricted shares of
common stock pursuant to Regulation D under the Securities Act. The finder
receives a cash fee of 10% plus stock. Through January 6, 2003, net cash
proceeds of $1,277,772 were received under this agreement.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers.
Under Nevada Revised Statutes Section 78.138, a director or officer is
generally not individually liable to the corporation or its shareholders for
any damages as a result of any act or failure to act in his capacity as a
director or officer, unless it is proven that:
* his act or failure to act constituted a breach of his fiduciary duties
as a director or officer; and
* his breach of those duties involved intentional misconduct, fraud or a
knowing violation of law.
This provision is intended to afford directors protection against and to limit
their potential liability for monetary damages resulting from suits alleging a
breach of the duty of care by a director. As a consequence of this provision,
stockholders of Biophan will be unable to recover monetary damages against
directors for action taken by them that may constitute negligence or gross
negligence in performance of their duties unless such conduct falls within one
of the foregoing exceptions. The provision, however, does not alter the
applicable standards governing a director's fiduciary duty and does not
eliminate or limit the right of Biophan or any stockholder to obtain an
injunction or any other type of non-monetary relief in the event of a breach
of fiduciary duty.
As permitted by Nevada law, Biophan's By-Laws include a provision which
provides for indemnification of a director or officer by the Company against
expenses, judgments, fines and amounts paid in settlement of claims against
the director or officer arising from the fact that he was an officer or
director, provided that the director or officer acted in good faith and in a
manner he or she believed to be in or not opposed to the best interests of
the Company.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons pursuant to
the foregoing provisions, or otherwise, the Company 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.
Item 25. Other Expenses of Issuance and Distribution.
SEC registration fee $ 1,534.90
Printing and engraving expenses $ 5,000.00
Legal and accounting fees and expenses $ 50,000.00
------------
TOTAL $ 56,534.90
============
All amounts in the above table are estimated except the SEC registration
fee. None of the expenses will be paid by selling shareholders.
57
Item 26. Recent Sales of Unregistered Securities.
The securities of Biophan that were issued or sold by the Company within
the past three years and were not registered with the SEC are described
below.
On December 1, 2000, we acquired LTR Antisense Technology, Inc., a New
York corporation, from Biomed Solutions, LLC (formerly Biophan, LLC), a New
York limited liability company in a share for share exchange. As a result
of the exchange, LTR became a wholly owned subsidiary. The exchange was
consummated pursuant to and in accordance with an Exchange Agreement, dated
December 1, 2000 and amended as of June 8, 2001, by and among Biophan, LTR
and Biomed. In connection with the exchange, we issued an aggregate of
10,759,101 shares of common stock to Biomed in exchange for all the issued
shares of LTR, and issued an aggregate of 10,759,101 shares of common stock
to an investor group consisting of all accredited investors for $175,000 in
cash and the undertaking to assist us in additional capital raising. The
value of the consideration received ($175,000) was established in arms-length
negotiation and approved by Biophan's board of directors. This transaction
was exempt from registration under section 4(2) of the Securities Act of
1933 because the shares were issued to a limited number of accredited
investors in a negotiated transaction, in which the issuer gave full
representations and warranties and the recipients of the securities did
extensive due diligence. The shares were all issued with restrictive
legends. We note that the bulk of the shares issued to Biomed were
subsequently distributed to its members. While we submit that this
distribution should not be integrated with the original issuance, as Biomed
had no present intention on December 1, 2000, to further distribute the
shares, we further submit that, if integrated, the transaction still
satisfies Section 4(2) as being to a limited number (50) of accredited
investors, who received shares bearing a restrictive legend.
Between January 1, 2001 and February 1, 2003, Biophan has issued options
to purchase a total of 2,489,995 options under its 2001 Stock Option Plan to
directors, officers, key employees and consultants. These include the
following:
* On January 1, 2001, Wilson Greatbatch was granted 250,000 options for
his consulting services to us, and 8,333 options as former Chairman of the
Scientific Advisory Board. The board of directors determined that the value
of the consulting services was fair and adequate consideration for the
options issued; Biophan recorded compensation expense of $9,200 with respect
to those options.
* On March 1, 2002, Dr. Guenter H. Jaensch was granted options to
purchase 250,000 shares and on 7/16/02 was granted an additional
100,000 options, for his consulting services to us. The board of
directors determined that the value of the consulting services was
fair and adequate consideration for the options issued; Biophan valued
the options at $36,900 and $592,500, respectively, and is recording
compensation expense with respect to those values.
* On January 1, 2001, Biophan issued to Boylan, Brown, Code, Vigdor &
Wilson, LLP options to purchase 40,000 shares of common stock at an
exercise price of $.50 per share, in consideration of the firm's
agreement to defer payment of legal fees incurred in the transaction
of the Exchange Agreement and Transfer Agreement dated December 1,
2000. Biophan recorded an expense of $1,600 with respect to the
issuance of these options.
The issuance of these options was exempt under Rule 701 of the Securities
Act.
58
In June 2001, we entered into bridge loan agreements providing gross
proceeds of $986,500. Loans of $400,000 from one lender provided for a
maturity date of December 15, 2001 and interest payable by issuance of
100,000 shares of stock on the due date. As additional consideration, the
noteholder received 100,000 shares of stock and warrants to purchase an
additional 100,000 shares at $1.00 per share. The noteholder had the right
to convert the principal amounts into stock at $.75 per share at any time
prior to maturity. We also received proceeds from a series of bridge loans
to 15 accredited investors aggregating $586,500 upon the same general terms
as above except that interest was payable by issuance of 73,324 shares of
stock at the maturity date of October 29, 2001 (extended to November 29,
2001). Warrants to purchase 146,627 at $1.00 per share were issued to these
lenders. All bridge lenders exercised their conversion options on November
29, 2001, at which time the Company issued 1,315,334 shares of common stock
to convert the loans to equity. This transaction was exempt from
registration under Regulation D, Rule 506 under the Securities Act of 1933.
Pursuant to a Private Placement Memorandum dated July 2, 2001, we offered
to sell 3,000,000 shares of common stock at $1.00 per share, solely to
accredited investors. The offering was concluded in January 2002. Gross
proceeds of $2,399,750 were received, less offering costs of $254,467. The
private offering was made pursuant to Regulation D, Rule 506 under the
Securities Act. In connection with this offering, we issued a total of
99,667 warrants at an exercise price of $1.00 per share, to three
individuals for their services in placing a portion of the offering.
Biomed has received a total of 1,180,000 warrants to purchase shares of
Biophan common stock as follows: On March 1, 2001, it received options to
purchase 200,000 shares at an exercise price of $1.00, in consideration of
management effort and expense incurred on behalf of Biophan. On June 4, 2002,
it received 100,000 warrants at an exercise price of $1.00 in consideration of
the extension of the due date for the Transfer Agreement payment (for which
Biophan recorded an expense of $72,000) and 75,000 warrants with an exercise
price of $1.00 for the grant of the line of credit (for which Biophan recorded
an expense of $54,000). On August 19, 2002, Biomed received 30,000 warrants
in consideration of the increase in the line of credit commitment, and 275,000
warrants for additional extensions of the payment terms of the Transfer
Agreement payment. On that date, the exercise price for all 680,000
warrants then outstanding to Biomed was set at the lowest of (i) the closing
bid price on June 4, 2002; (ii) the closing bid price on the date of exercise;
or (iii) the lowest per share purchase price paid by any third party between
June 4, 2002 and the exercise date. On November 7, 2002, Biomed received
warrants to purchase an additional 500,000 shares at an exercise price of $.50
per share, in consideration of the final extension of the Transfer Agreement
payment approved that day. The number of warrants will be reduced by 16,667
for each month prior to June 1, 2005 that the Transfer Agreement obligation
is paid in full. Each extension of the Transfer Agreement payment enabled the
Company to retain the MRI-compatible technology that it acquired under the
Transfer Agreement. In each forgoing case, the Board of directors determined,
without the vote of Mr. Weiner, that the consideration received by the
company was fair and adequate consideration for the warrants issued. These
warrant issuances were exempt from registration under Section 4(2) of the
Securities Act.
On June 4, 2002, Wilson Greatbatch received 150,000 warrants with an
exercise price of $1.00 in consideration of the extension of the payment due
under the Transfer Agreement(for which Biophan recorded an expense of
$108,000). This issuance was exempt from registration under Section 4(2) of
the Securities Act.
59
Also in July, 2002, we issued warrants to purchase a total of 50,000
shares at an exercise price of $1.00 per share to 4 individuals in
consideration of certain investment banking services. In November 2002, we
issued an additional 71,572 warrants to three of those 4 individuals in
consideration of services in the nature of finder in connection with a
portion of the Regulation S offering and other loans to the Company. We
relied on exemptions from Registration under Section 4(2) of the Securities
Act of 1933.
During August and September 2002, we issued issued a total of 2,186,760
shares of common stock for gross cash proceeds of $515,397, less commissions
and offering costs of $11,985. In connection with these transactions, we also
issued 99,388 shares of common stock as additional commission. These shares
were issued solely to nonaffiliated, non U.S. persons in offshore transactions
exempt from registration under the Securities Act of 1933 pursuant to
Regulation S.
From September 2002 through January 6, 2003, we raised $1,385,275 by
selling 5,541,100 shares at a per share price of $.25 to 123 accredited
investors. Those investors also received warrants to purchase an additional
2,770,550 shares, half at an exercise price of $.25 per share and half at
$.50 per share. In connection with this offering, we paid cash commissions
of $107,503 and issued 258,006 shares to broker-dealers in consideration
of their placement of shares. This offering was exempt from registration
under Regulation D, Rule 506 of the Securities Act of 1933, based upon the
following facts: the shares and warrants were sold only to accredited
investors with whom Biophan or Westbay, its finder, had a pre-existing
relationship; neither Biophan nor Westbay offered to sell the securities by
any form of general solicitation or general advertising; no Regulation D
offering took place within the six months prior to the commencement of the
offering; each purchaser represented that he had purchased the securities for
his own account, for investment; and the securities were issued with
restrictive legends.
On December 18, 2002, we issued warrants to purchase 2,000,000 shares at
$1.00 per share and 1,000,000 shares at $1.50 per share, to SBI USA, LLC as
consideration for the execution of an agreement to provide financial advisory
services. We relied on an exemption from registration under Section 4(2) of
the Securities Act.
On January 7, 2003, Biophan issued warrants to purchase 161,290 shares at
$.31 per share to Boylan, Brown, Code, Vigdor & Wilson LLP, in consideration
of the firm reducing its fees billed to Biophan for the preparation of this
registration statement by $25,000. The board of directors determined that
this was fair and adequate consideration; the company relied on an exemption
under Section 4(2) of the Securities Act for this issuance.
Item 27. Exhibits.
No.
*EX-2.1 Articles of Merger filed as Exhibit to Form 10-KSB for the
year ended February 29, 2000.
*EX-2.2 Articles of Dissolution filed as Exhibit to Form 10-KSB for
the year ended February 29, 2000.
*EX-2.3 Exchange Agreement, dated as of December 1, 2000, by and
among the Registrant, Biophan and LTR filed as part of
Form 8-K, filed December 15, 2000.
*EX-3.1 Certificate of Incorporation (Nevada) filed as Exhibit to
Form 10-KSB for the year ended February 29, 2000.
60
*EX-3.2 Bylaws (Nevada) Filed as exhibit to Form 10-KSB for the year
ended February 28, 2002.
*EX-3.3 Amendment to the Articles of Incorporation filed as part of
Form 8-K, filed December 15, 2000.
*EX-3.4 Amendment to Exchange Agreement filed as Exhibit to Form
10-KSB for the year ended February 28, 2001.
*EX-3.5 Certificate of Amendment to Articles of Incorporation filed
as exhibit to Form 8-K on August 27, 2001.
*EX-4.1 Stock Purchase Warrant between the Company and Biomed
Solutions, LLC dated June 4, 2002, filed as Exhibit to Form
10-QSB for the period ended May 31, 2002.
*EX-4.2 Stock Purchase Warrant between the Company and Bonanza
Capital Masterfund LTD, filed as Exhibit to Form 10-QSB for
the period ended May 31, 2002.
*EX-4.3 Restated Stock Purchase Warrant between the Company and Biomed
Solutions, LLC, dated January 8, 2003, filed as Exhibit to Form
10-QSB for the period ended November 30, 2002.
*EX-4.4 Stock Purchase Warrant between the Company and Biomed Solutions, LLC
dated November 11, 2002, filed as Exhibit to Form 10-QSB for the
period ended November 30, 2002.
*EX-4.5 Form of Stock Purchase Warrant issued to principals of Carolina
Financial Services, for a total of 121,572 shares, filed as Exhibit
to Form 10-QSB for the period ended November 30, 2002.
*EX-4.6 Form of Stock Purchase Warrant to be issued to Carolina Financial
services in connection with the Stock Purchase Agreement with
Spectrum Advisors, Ltd, filed as Exhibit to Form 10-QSB for the
period ended November 30, 2002.
*EX-4.7 Form of Stock Purchase Warrant issued to investors in private
placement of securities, for a total of 2,770,550 shares, filed as
Exhibit to Form 10-QSB for the period ended November 30, 2002.
*Ex-4.8 Stock Purchase Warrant issued to SBI USA, LLC , filed as Exhibit
to Form 10-QSB for the period ended November 30, 2002.
EX-5.1 Opinion of counsel
*EX-10.1 Assignment, dated as of December 1, 2000, by and between the
Registrant and Biophan filed as part of Form 8-K, filed
December 15, 2000.
*EX-10.2 Security Agreement, dated as of December 1, 2000, by and
between the Registrant and Biophan filed as part of Form
8-K, filed December 15, 2000.
*EX-10.3 Transfer Agreement filed as Exhibit to Form 10-KSB for the
year ended February 28, 2001.
*EX-10.4 Amendment to Transfer Agreement filed as Exhibit to Form
10-KSB for the year ended February 28, 2001.
61
*EX-10.5 Line of Credit Agreement between the Company and Biomed
Solutions, LLC dated June 4, 2002, filed as Exhibit to Form
10-QSB for the period ended May 31, 2002.
*EX-10.6 Convertible Promissory Note between the Company and Biomed
Solutions, LLC dated June 4, 2002, filed as Exhibit to Form
10-QSB for the period ended May 31, 2002.
*EX-10.7 Loan Agreement between the Company and H. Deworth Williams
dated June 18, 2002, filed as Exhibit to Form 10-QSB for
the period ended May 31, 2002.
*EX-10.8 Stock Purchase Agreement between the Company and Bonanza
Capital Masterfund LTD, filed as Exhibit to Form 10-QSB for
the period ended May 31, 2002.
*EX-10.9 Escrow Agreement between the Company, Bonanza Capital
Masterfund LTD and Boylan, Brown, Code, Vigdor & Wilson LLP,
filed as Exhibit to Form 10-QSB for the period ended May
31, 2002.
*EX-10.10 Registration Rights Agreement between the Company and
Bonanza Capital Masterfund LTD, filed as Exhibit to Form
10-QSB for the period ended May 31, 2002.
*EX-10.11 Executive Employment Agreement between the Company and
Michael L. Weiner dated December 1, 2000, filed as Exhibit
to Form 10-QSB for the period ended May 31, 2002.
*EX-10.12 Executive Employment Agreement between the Company and
Jeffrey L. Helfer dated June 6, 2002, filed as Exhibit to
Form 10-QSB for the period ended May 31, 2002.
*EX-10.13 Executive Employment Agreement between the Company and
Stuart G. MacDonald dated June 6, 2002, filed as Exhibit to
Form 10-QSB for the period ended May 31, 2002.
*EX-10.14 Executive Employment Agreement between the Company and
Robert J. Wood dated June 6, 2002, filed as Exhibit to Form
10-QSB for the period ended May 31, 2002.
*EX-10.15 Financial Accommodations Agreement between the Company and
Bellador (Labuan) Ltd dated July 1, 2002, filed as Exhibit
to Form 10-QSB for the period ended May 31, 2002.
*EX-10.16 Stock Purchase Agreement between the Company and Spectrum
Advisors, LTD., filed as Exhibit to Form 10-QSB for the period
ended November 30, 2002.
*EX-10.17 Escrow Agreement between the Company, Spectrum Advisors, Ltd.
and Boylan, Brown, Code, Vigdor & Wilson LLP., filed as Exhibit to
Form 10-QSB for the period ended November 30, 2002.
*EX-10.18 Registration Rights Agreement between the Company and
Spectrum Advisors, Ltd., filed as Exhibit to Form 10-QSB for the
period ended November 30, 2002.
EX-10.19 Lease Agreement between the Company and High Technology of
Rochester, Inc. dated October 8, 2001.
EX-10.20 Strategic Partnership Agreement between the Company and UB Business
Alliance dated December 10, 2001.
62
EX-10.21 License Agreement between the Company and Xingwu Wang and
Nanoset, LLC dated February 7, 2002.
EX-10.22 Patent License Agreement between the Company and Deborah D. L. Chung
dated April 5, 2002.
EX-10.23 License Agreement between the Company and Johns Hopkins University
dated April 24, 2002.
EX-10.24 Advisory Agreement between the Company and SBI USA, LLC dated
December 18, 2002.
60
EX-10.25 Development Agreement between the Company and Alfred University
dated February 21, 2002.
EX-10.26 Development Agreement between the Company and Alfred University
dated January 24, 2003.
EX-10.27 First Amendment to Restated Stock Purchase Agreement between the
Company and Spectrum Advisors, Ltd., dated March 10, 2003.
*EX-16.1 Letter on change of accountants filed as Exhibit to Form
10-KSB for the year ended February 28, 2001.
*EX-16.2 Appointment of independent public accountants filed as
exhibit to Form 8-K on May 7, 2001.
*EX-21 Subsidiaries filed as Exhibit to Form 10-KSB for the year
ended February 28, 2001.
*EX-22.1 Definitive Proxy Statement filed with the Securities and Exchange
Commission on January 10, 2000
*EX-22.2 Definitive Proxy Statement filed with the Securities and
Exchange Commission on June 3, 2001.
EX-23.1 Auditors' Consent - Goldstein, Golub, Kessler, LLP
*EX-23.2 Consent of Boylan, Brown, Code, Vigdor & Wilson, LLP is included in
its opinion filed as Exhibit 5.1.
EX-23.3 Accountant's Awareness Letter - Goldstein, Golub, Kessler, LLP
*EX-24.1 Power of Attorney (included on Signature Page of their Registration
Statement)
*EX-99.1 2001 Stock Option Plan filed as exhibit to Form 8-K on August
27, 2001.
* Exhibits so marked have heretofore been filed with the Securities and
Exchange Commission as part of the filing indicated and are
incorporated herein by reference.
Item 28. Undertakings.
The undersigned registrant hereby undertakes that it will:
(1) File, during any period in which it offers or sells securities, a post-
effective amendment to this Registration Statement to:
63
(i) Include any prospectus required by Section 10(a)(3) of the Securities Act
of 1933;
(ii) Reflect in the prospectus any facts or events arising after the effective
date of the Registration Statement which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement; and
(iii) Include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement;
Provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the registrant pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the registration
statement;
(2) For the purpose of determining any liability under the Securities Act of
1933, treat each such post-effective amendment as a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time 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 of
1933, as amended, 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 SEC such
indemnification is against public policy as expressed in the 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 defense 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 Act and will be governed by
the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purpose 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.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(3) For the purposes of determining any liability under the Securities
Act of 1933, each filing of the registrant's annual report pursuant to
section 13 or 15(d) of the Securities Exchange Act of 1034 that is
incorporated by reference in the registration statement shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
64
SIGNATURES
In accordance with the requirements of the Securities Act of 1933,
the Registrant certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form SB-2 and has
authorized this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the Town of West Henrietta,
State of New York on March 14, 2002.
BIOPHAN TECHNOLOGIES, INC.
By: /s/Michael L. Weiner
----------------------------------------
Michael L. Weiner,
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each director and officer whose signature
appears below constitutes and appoints Robert J. Wood as such person's true
and lawful attorney-in-fact and agent, will full powers of substitution and re-
substitution, for such person in name, place and stead, to sign in any and all
amendments (including post-effective amendments) to this Registration
Statement on Form SB-2, in any and all capacities, and to file the same, with
all exhibits thereto and all other documents in connection therewith, with
the Securities and Exchange Commission, granting unto such attorney-in-fact
and agent, and every act and thing requisite and necessary to be done, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that such attorney-in-fact and agent may lawfully
do or cause to be done by virtue hereof.
In accordance with the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on March 14, 2003.
Signature Title Date
--------------------- --------------------------- ---------------
/s/ Michael L. Weiner President, CEO and Director March 14, 2003
---------------------
Michael L. Weiner (Principal Executive Officer)
/s/ Robert J. Wood Vice President, Treasurer and CFO March 14, 2003
--------------------- (Principal Financial and Accounting
Robert J. Wood Officer)
/s/ David A. Miller Secretary March 14, 2003
---------------------
David A. Miller
By: /s/Robert J. Wood
---------------------
Robert J. Wood, as
Attorney-in-Fact
/s/ Guenter H. Jaensch Director March 14, 2003
---------------------
Guenter H. Jaensch
By: /s/Robert J. Wood
---------------------
Robert J. Wood, as
Attorney-in-Fact
/s/ Ross B. Kenzie Director March 14, 2003
---------------------
Ross B. Kenzie
By: /s/Robert J. Wood
---------------------
Robert J. Wood, as
Attorney-in-Fact
/s/ Steven Katz Director March 14, 2003
---------------------
Steven Katz
By: /s/Robert J. Wood
---------------------
Robert J. Wood, as
Attorney-in-Fact
/s/ Robert S. Bramson Director March 14, 2003
---------------------
Robert S. Bramson
By: /s/Robert J. Wood
---------------------
Robert J. Wood, as
Attorney-in-Fact
65