SECURITIES AND EXCHANGE
COMMISSION
WASHINGTON, D.C.
20549
SCHEDULE 14A
INFORMATION
Proxy Statement Pursuant
to
Section 14(a) of
the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant |X|
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Filed by a Party other than the
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Check the appropriate box:
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to Rule 14a-12
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NuWay
Medical, Inc.
(Name of Registrant as Specified
In
Its Charter)
(Name of Person(s) Filing Proxy
Statement, if other than the Registrant)
Payment
of Filing Fee (Check the appropriate box):
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No fee required.
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and
0-11.
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pursuant to Exchange Act Rule 0-11 (set forth the amount on which
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filing fee is calculated and state how it was determined):
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Fee paid previously with preliminary materials.
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Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its
filing.
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Amount Previously Paid:
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NOTICE
OF SPECIAL MEETING OF STOCKHOLDERS
TO
BE HELD ON MARCH 15, 2007
To
Our
Stockholders:
You
are
cordially invited to attend the Special Meeting of Stockholders (the
“Meeting”) of NuWay Medical, Inc., a Delaware corporation (the “Company”), which
will be held at Residence Inn by Marriott, 2855 Main Street, Irvine, California
92614, at 10:00 a.m. local time on March 15, 2007, for the purposes of
considering and voting upon the following matters:
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1.
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A
proposal to approve the acquisition of the assets of IOWC Technologies
Inc. (“IOWC”), and the issuance of shares of our common stock to
IOWC;
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2.
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A
proposal to approve an amendment to our certificate of incorporation
to
change our name from NuWay Medical, Inc. to BioLargo, Inc. in connection
with completion of the transactions with IOWC;
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3.
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A
proposal to authorize the Board to effect a reverse stock split of
our
common stock at a specific ratio to be determined by the Board within
a
range from 1-for-10 to 1-for-100;
and
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4.
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A
proposal to increase the authorized capital stock of the Company
from
100,000,000 shares of common stock to 200,000,000 shares of common
stock
and from 25,000,000 shares of preferred stock to 50,000,000 shares
of
preferred stock, and make certain technical corrections to provisions
in
our certificate of incorporation regarding our blank check preferred
stock.
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These
matters are described more fully in the proxy statement accompanying this
notice.
Our
stockholders will also act upon such other business as may properly come
before
the meeting or any adjournment or postponement thereof. The Board is not
aware
of any other business to be presented to a vote of the stockholders at the
Meeting.
The
Board
has fixed the close of business on January 29, 2007 as the record date (the
“Record Date”) for determining those stockholders who will be entitled to notice
of and to vote at the Meeting. The stock transfer books will remain open
between
the Record Date and the date of the Meeting.
Representation
of at least a majority in voting interest of our common stock either in person
or by proxy is required to constitute a quorum for purposes of voting on
each
proposal to be voted on at the Meeting. Accordingly, it is important that
your shares be represented at the Meeting. WHETHER OR NOT YOU PLAN TO ATTEND
THE
MEETING, PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN
IT IN
THE ENCLOSED ENVELOPE. Your proxy may be revoked at any time prior to the
time
it is voted at the Meeting.
Please
read the accompanying proxy material carefully. Your vote is important and
we
appreciate your cooperation in considering and acting on the matters
presented.
By
Order
of the Board of Directors,
Dennis
Calvert
President
and Chief Executive Officer
February
13, 2007
Irvine,
California
Table
of Contents
To
PROXY
STATEMENT
FOR
SPECIAL
MEETING OF STOCKHOLDERS
Of
NUWAY
MEDICAL, INC.
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Page
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Voting
Rights and Solicitation
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1
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General
Note About References to Shares of Our Stock
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2
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Proposal
One: Approval of Acquisition of the Assets of IOWC Technologies,
Inc. and
Issuance of Common Stock to IOWC and Kenneth Code
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3
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Summary
of Terms of the Transactions |
3
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Background
of the BioLargo Transactions
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5
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IOWC
Financial Information |
26
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Pro
Forma Financial
Information |
41
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Selected
Financial
Data and Pro Forma Selected Financial Data and Information |
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Proposal
Two: Proposal to Change the Company’s Name
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49
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Proposal
Three: Proposal to Authorize Our Board of Director to Effectuate
a Reverse
Stock Split in an Amount to be Determined by the Board between
1-for-10
and 1-for-100
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50
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Proposal
Four: Proposal to Increase Ou Authorized Capital from 100,000,000
to
200,000,000 Shares of Common Stock and from 25,000,000 to 50,000,000
Shares of Preferred Stock and to Make Certain Technical Corrections
to
Provisions Regarding our Blank Check Preferred Stock
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54
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Stockholder
Proposals
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57
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Annual
Report on Form 10-KSB
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57
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Other
Matters
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57
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Appendix
A: Amended and Restated Certificate of Incorporation of Nuway
Medical
Inc.
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A-1
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PROXY
STATEMENT
FOR
SPECIAL
MEETING OF STOCKHOLDERS
OF
NUWAY MEDICAL, INC.
To
Be Held on March 15,
2007
This
proxy statement is furnished in connection with the solicitation by our Board
of
Directors (the “Board”) of proxies to be voted at a Special Meeting of
Stockholders (the “Meeting”), which will be held at 10:00 a.m. local time on
March 15, 2007 at Residence Inn by Marriott, 2855 Main Street, Irvine,
California 92614, or at any adjournments or postponements thereof, for the
purposes set forth in the accompanying Notice of Special Meeting of Stockholders
(the “Notice”). This proxy statement and the proxy card are first being
delivered or mailed to stockholders on or about February 13, 2007. Our Annual
Report for the year ended December 31, 2005, as amended, on Form 10-KSB/A (the
“10-KSB”) and the Quarterly Report for the nine months
ended September 30, 2006, as amended, on Form 10-QSB/A (the “10-QSB”) are being
mailed to stockholders concurrently with this proxy statement. Neither the
10-KSB nor the 10-QSB is to be regarded as proxy soliciting material or as
a
communication by means of which any solicitation of proxies is to be made except
to the extent that portions thereof are specifically incorporated by reference
herein. See the information under “Annual Report on Form 10-KSB” below which
details the portions of the 10-KSB and 10-QSB incorporated by reference herein.
The Company’s executive offices are located at 2603 Main Street, Suite 1155,
Irvine, California 92614 and its telephone number at that location is (949)
235-8062.
VOTING
RIGHTS AND SOLICITATION
The
close of business on January 29, 2007 was the record date (the “Record
Date”) for stockholders entitled to notice of and to vote at the Meeting. As of
the Record Date, we had 78,393,480 shares of common stock, par value $0.00067
per share, and no shares of preferred stock, par value $0.00067 per share,
issued and outstanding. All of the shares of our common stock outstanding on
the
Record Date, and only those shares, are entitled to vote on each of the
proposals to be voted upon at the Meeting. Holders of common stock of record
entitled to vote at the Meeting will have one vote for each share of common
stock so held with regard to each matter to be voted upon.
All
votes
will be tabulated by the inspector of elections appointed for the Meeting,
who
will separately tabulate affirmative and negative votes, abstentions and broker
non-votes.
The
holders of a majority in voting interest of the common stock outstanding and
entitled to vote at the Meeting shall constitute a quorum for the transaction
of
business at the Meeting. The voting interest of shares of the common stock
represented in person or by proxy will be counted for purposes of determining
whether a quorum is present at the Meeting. Shares which abstain from voting
as
to a particular matter will be treated as shares that are present and entitled
to vote for purposes of determining the voting interest present and entitled
to
vote with respect to any particular matter, but will not be counted as votes
cast on such matter. If a broker or nominee holding stock in “street name”
indicates on a proxy that it does not have discretionary authority to vote
as to
a particular matter, those shares will not be considered as present and entitled
to vote with respect to such matter and will not be counted as a vote cast
on
such matter.
In
voting with regard to Proposal One (issuance of common stock as part of the
transactions with IOWC, which transactions are described in Proposal One
and elsewhere in this proxy statement (the “Transactions”)),
stockholders
may vote in favor of each such proposal or against each such proposal or may
abstain from voting. The vote required to approve Proposal One is governed
by Delaware law, and the minimum vote required to approve each such proposal
is
a majority of the total votes cast on such proposal, provided a quorum is
present. As a result, in accordance with Delaware law, abstentions and broker
non-votes will not be counted and will have no effect on the outcome of the
vote
on this proposal.
In
voting
with regard to Proposal Two (authorizing the name change), Proposal Three
(authorizing reverse stock split) and Proposal Four (increase in authorized
capital stock and certain technical amendments to our blank check preferred),
stockholders may vote in favor of each such proposal or against each such
proposal or may abstain from voting. The vote required to approve Proposals
Two, Three and Four is governed by Delaware law, and the minimum vote
required is majority of the outstanding shares of the Company entitled to
vote
at the Meeting, provided a quorum is present. As a result, in accordance
with
Delaware law, abstentions and broker non-votes will have the effect of a
vote
“Against” each such proposal.
Shares
of our common stock represented by proxies in the accompanying form which
are
properly executed and returned to us will be voted at the Meeting in accordance
with the stockholders’ instructions contained therein. In the absence of
contrary instructions, shares represented by such proxies will be voted FOR
each
of Proposal One, Proposal Two, Proposal Three and Proposal Four. Management
does not know of any matters to be presented at the Meeting other than those
set
forth in this proxy statement and in the Notice accompanying this proxy
statement. If other matters should properly come before the Meeting, the
proxyholders will vote on such matters in accordance with their best
judgment.
Any
stockholder has the right to revoke his, her or its proxy at any time before
it
is voted at the Meeting by giving written notice to our Secretary and by
executing and delivering to the Secretary a duly executed proxy card bearing
a
later date, or by appearing at the Meeting and voting in
person.
The
entire cost of soliciting proxies will be borne by the Company. Proxies will
be
solicited principally through the use of the mails, but, if deemed desirable,
may be solicited personally or by telephone, or special letter by our officers
and regular employees for no additional compensation. Arrangements may be made
with brokerage houses and other custodians, nominees and fiduciaries to send
proxies and proxy material to the beneficial owners of our common stock, and
such persons may be reimbursed for their expenses.
GENERAL
NOTE ABOUT REFERENCES TO SHARES OF OUR STOCK:
Unless
expressly stated otherwise, all references in this proxy statement to numbers
of
shares of our common or preferred stock are to such amount prior to a proposed
reverse stock split which is being presented to the stockholders as Proposal
Three.
PROPOSAL
ONE
APPROVAL
OF ACQUISITION OF THE ASSETS OF IOWC TECHNOLOGIES INC. AND
ISSUANCE
OF COMMON STOCK TO IOWC AND KENNETH CODE
General
The
Company has been operating as a public shell company since June 2003 and, as
of
the date of this proxy statement, has no continuing business operations. The
Company’s Annual Report on Form 10-KSB, as amended, which was mailed to the
stockholders at the same time as this proxy statement, contains a discussion
of
the Company’s past business activities and stockholders are urged to read
carefully Part I, Item 1, “Description of Business” and the financial
information described under the caption “Annual
Report on
Form 10-KSB” below, which is incorporated by reference herein.
As
previously disclosed in the Company’s public filings with the SEC, the Company
has been seeking to acquire a business with ongoing operations. In furtherance
of that strategy, the Company conducted a search for suitable candidates and
in
July 2005 identified certain technologies for use in products designed for
distribution in the food, medical, disaster relief and biohazardous material
transportation industries as a potential acquisition candidate, which
technologies and
the
anticipated consequences to the Company if the Transactions are not consummated
are
described in more detail below.
Because
Mr. Code is interested in the outcome of Proposal One, Mr. Code will not vote
any stock he beneficially owns on this Proposal One at the Meeting.
SUMMARY
OF TERMS OF THE TRANSACTIONS
The
following is a summary only of certain terms of the Transactions. This summary
is qualified in its entirety by the more detailed discussion of the Transactions
contained in this proxy statement, including the sections referred to in this
summary.
Transactions
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We
will acquire substantially all of the assets, consisting primarily
of
technology, license and distribution agreements, of IOWC (collectively,
the “IOWC Assets”). See “The Proposal and Reasons for Stockholder Vote”,
“BioLargo Technology and BioLargo Products”, “Background of the
Transactions”, “Reasons for the Transactions” and “Risk Factors”
below.
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Consideration
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In
connection with the closing of the Transactions, we will issue 553,475,300
shares (the “IOWC Stock”) of our common stock to IOWC. See “The Proposal
and Reasons for Stockholder Vote” and “Pro Forma Capitalization and
Significant Dilution to Existing Stockholders”
below.
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Previous
Agreements
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In
connection with the Transactions, we have previously entered into
a
Marketing and Licensing Agreement, which is summarized under “Marketing
and Licensing Agreement” below; a Consulting Agreement, which is
summarized under “Consulting Agreement” below; and a Research and
Development Agreement, which is summarized under “Research and Development
Agreement” below.
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Additional
Agreements
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In
connection with the closing of the Transactions, we will enter into
(i) a
definitive asset purchase agreement, summarized under “Other Agreements -
Asset Purchase Agreement” below; and (ii) an employment agreement with Mr.
Code, summarized under “Other Agreements - Code Employment
Agreement”.
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Conditions
to Closing
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Among
the conditions to closing are approval by our stockholders of (i)
approval
of the issuance of the IOWC Stock to IOWC, discussed in more detail
under “The Proposal and Reasons for Stockholder Vote” and “Pro Forma
Capitalization and Significant Dilution to Existing Stockholders” below;
(ii) the change of our corporate name, discussed in more detail under
“Proposal Two” below; (iii) a reverse split of our common stock,,
discussed in more detail under “Proposal Three” below; and (iv) an
increase in our authorized capital stock, discussed in more detail
under
“Proposal Four” below.
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Change
of Control
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Upon
the closing of the Transactions, IOWC and Mr. Code will own approximately
61.0% of our issued and outstanding common stock. See “Pro Forma
Capitalization and Significant Dilution to Existing Stockholders”
below.
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Stockholder
Approvals
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Our
stockholders are being asked to approve the issuance of the IOWC
Stock, as discussed under “Proposal One”. However, our stockholders are
not being asked to approve the issuance of 15,515,913 shares of our
common
stock already issued to Mr. Code (the “Code Stock”) in connection with the
Consulting Agreement. See “Consulting Agreement” below.
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Consequences
of
Non-Approval
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If
each of Proposals One, Two, Three and Four is not approved by our
stockholders, the Transactions will not be consummated. In such event,
among other things, (i) the Marketing and Licensing Agreement, Research
and Development Agreement and Consulting Agreement will terminate;
(ii)
Mr. Code will return the Code Stock to us; and (iii) all rights granted
to
us by BioLargo will revert to BioLargo. See “Consequences If Stockholders
Do Not Approve Transactions” below.
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The
Proposal and Reasons for Stockholder Vote
The
Company is requesting stockholders to approve the acquisition of substantially
all of the assets of IOWC (whose principal offices are located at Unit 4, 1780
Glastonbury Blvd NW, Edmonton, AB, Canada T5T 6P9, telephone (780) 482-2753)
and
the issuance and sale of 553,475,300 shares of the Company’s common stock to
IOWC, as part of a series of transactions (the “Transactions”) intended to
transfer to the Company certain technology and rights (“the BioLargo
Technology”) relating to a process whereby disinfecting chemistry is
incorporated into absorbent materials, liquids, powders, tablets or other
delivery methods that can be then incorporated into products in several
industries. If the Transactions are not consummated, the Company will remain
a
public shell with no continuing business operations. The Transactions
and
the
anticipated consequences to the Company if the Transaction are not consummated
are
described more fully below.
Nasdaq
Marketplace Rule 4350 requires stockholder approval in connection with the
issuance of or potential issuance which will result in a change of control
of
the issuer. The Company believes that the issuances related to the Transactions
constitute a change in control of the Company, and as such it is appropriate
for
the Company to seek the approval of its stockholders prior to issuing its
shares. While the Company’s common stock is not quoted on the Nasdaq National
Market and the Company is not subject to Nasdaq Marketplace Rules, the Company
believes that it is in the best interest of the Company and its stockholders
for
the stockholders of the Company to be given the opportunity to vote on the
issuance of shares of common stock of the Company in connection with the
Transactions. Moreover, the Company believes that if the Company were to apply
for listing on a significant market such as Nasdaq, the fact that the Company
complied with such rules would be deemed a positive factor in its application.
It is important to note, however, that the Company has no current plans to
apply
for listing on Nasdaq or any other trading market and there is no assurance
that, even if the Company were to do so, that the Company’s stock would be
accepted for trading on any such market.
Proposals
Required for Approval of Proposal One
In
Proposal One, the Company is requesting the stockholders to approve the issuance
of 553,475,300 shares of the Company’s common stock. In order for the Company to
issue this number of shares, the stockholders must also approve Proposal Three,
which requests the stockholders to grant
the
Board authority to amend and restate our Certificate of Incorporation to effect
a reverse stock split of our common stock in an amount to be determined by
the
Board, but between a 1-for-10 and a 1-for-100
reverse split. For example, effecting a reverse split of the Company’s common
stock at a minimum of 1-for-10, the actual issuance requested by this
Proposal One would be one-tenth the stated amount, or a maximum of
55,347,530 shares. This number of shares is within the limits of the number
of
shares authorized by the Company’s Certificate of Incorporation.
Background
of the BioLargo Transactions
At
the
beginning of 2004, we had no continuing business operations. We operated
as a
public shell and management was actively seeking merger and acquisition
candidates with ongoing operations. We had nominal cash on hand.
Over
the
course of several years prior to 2004, we had entered various businesses
through
the acquisition of either entities with operating businesses or technology
that
could be developed and marketed. However, as a result of various factors,
primarily inadequate capital and the inability to raise financing successfully,
we could not successfully exploit these acquisitions and integrate them in
a way
to produce profitable operations. By the end of 2003, management elected
to
dispose, through sales or other means, of these acquisitions.
We
also
continued to deal with the effects of certain matters that arose (i) under
prior
management and (ii) from our business dealings with a former consultant and
principal stockholder of the Company, Mark Roy Anderson, from mid-2002 to
early-2003. The Company’s prior association with Mr. Anderson had led to a
number of regulatory and legal inquiries and investigations into the company
and
its then- management, including an informal inquiry by the SEC. We cooperated
with this investigation and a related investigation by the Federal Bureau
of
Investigation into Mr. Anderson’s business dealings. The SEC inquiry was
terminated in April 2005.
In
February 2004, Mr. Code, the inventor of the patented BioLargo Technology
and
the president and sole shareholder of IOWC, was introduced to Dennis Calvert,
who by that time was the Company’s president, by a mutual acquaintance. Mr. Code
was seeking to build a management team, secure capital resources to further
conduct additional research and development on the BioLargo Technology, commence
product development and begin commercializing the BioLargo Technology.
In
March
2004, we began preliminary negotiations with Mr. Code which focused on
distribution and selling strategy which contemplated the use of Premium Medical
Group (“PMG”) as a selling and marketing agent for the absorbent pads,
incorporating the BioLargo Technology. PMG had entered into an agreement
with us
in January 2004, to merge with the Company. Our early discussions with Mr.
Code
contemplated an arrangement whereby if the Company were able to generate
meaningful sales and or arranged new development capital to be provided for
the
further development of the BioLargo Technology, then the Company could acquire
the BioLargo technology over time, or outright at an agreed upon purchase
price.
We actively pursued investment capital to support this plan, including the
expansion and involvement of PMG.
Around
this time, our stock was trading at approximately $0.01 per share with
46,322,736 shares outstanding, or a total market capitalization of approximately
$464,000. At that time, we had no continuing operations, no tangible assets
and
were also lacking in working capital. In addition, we had outstanding
liabilities of approximately $3,000,000.
Mr.
Code,
on behalf of IOWC, informed our management that the BioLargo Technology
required
working capital to further its research and development and commercialization,
and that given our lack of capital resources at the time, we would have
to find
a way to create sufficient opportunities to develop and commercialize the
BioLargo Technology. Mr. Code made it clear in each conversation he had
with our
management during this time frame that working capital was his first priority
to
further the development of the BioLargo Technology. Moreover, Mr. Code’s initial
position was that if he was ever going to consider selling the BioLargo
Technology, he would require adequate cash be paid to IOWC for his controlling
ownership, in addition to insuring that appropriate working capital would
be
available to exploit the potential commercial opportunities for the BioLargo
Technology.
In
April
2004, and in furtherance of the prior discussions, we entered into
confidentiality and non-circumvention agreements with IOWC so that we could
begin the process of due diligence and technical training prior to embarking
on
a selling strategy or potential acquisition of the BioLargo Technology. Our
management, particularly Dennis Calvert, focused on learning substantially
more
about the BioLargo Technology, developing a business plan, embarking on market
research, commencing market testing and studying the potential commercial
markets and applications for the BioLargo Technology as well as potential
funding sources to further its development, and these efforts continued for
the
next several months. Additionally, Mr. Code focused on training Mr. Calvert
about the science of the BioLargo Technology, manufacturing processes and
potential commercial markets for the BioLargo Technology. Mr. Calvert continued
a methodical process of validating the technical claims of IOWC about the
BioLargo Technology as well as training the sales staff at PMG, while our
management team continued to search for capital to support the growth plans
of
PMG.
In
July
2004, we were advised by PMG that they were unwilling to pay for a required
financial audit of PMG, which was required to consummate the transaction
between
our two companies. We had also exhausted our contacts with possible financing
sources for PMG’s expansion and none was successful. Our only source of capital
at that time was from Mr. Calvert’s personal funds.
In
October 2004, we terminated and rescinded the acquisition agreement with
PMG.
However, because IOWC maintained a high level of interest in working with
our
management, Mr. Code expressed a willingness to continue working with us
on the
BioLargo Technology, but also made it clear that capital was required to
fully
exploit the BioLargo Technology.
Also
in
October 2004, a new licensing group named BioLargo LLC, which is unaffiliated
with IOWC, executed a license agreement with IOWC to commercialize certain
aspects of the BioLargo Technology. The benefits of this license agreements
were
later transferred to us by IOWC, pursuant to an agreement that we entered
into
with IOWC as of December 31, 2005 (the “M&L Agreement”); see discussion
below. We terminated this license agreement in October 2006, due to non-payment
and other breaches by BioLargo LLC.
By
December 2004, as a result of our research and market testing of the BioLargo
Technology, our Board of Directors agreed with management that it was in
our
best interest to focus exclusively on the BioLargo Technology for commercial
exploitation.
In
January 2005, with the assistance of the Company, IOWC entered into a Master
Distributorship Agreement with Food Industry Technologies, Inc., for all
food
applications of the BioLargo Technology.
In
early
2005, we engaged the services of Evans & Evans, Inc. (“Evans & Evans”),
an independent business assessment firm, to look at the BioLargo Technology.
Evans & Evans is a Canadian corporate finance advisory and valuation firm
with offices across Canada and also in the United States. Evans & Evans
offers a range of independent and advocate services including valuation
and
fairness opinions, business planning and research, mergers and acquisitions
advice, business due diligence, market and competitive research and capital
formation assistance.
Our
management was introduced to Evans & Evans by a third-party referral.
Management interviewed principals of Evans & Evans to gain an understanding
of their qualifications. We also reviewed publicly available qualifications
and
accomplishments of Evans & Evans. Based on those efforts, management
concluded that Evans & Evans was qualified to perform the analysis
requested. Given the limited scope of the work and the price quoted by
Evans
& Evans, we did not interview any other consultants. Other
than the amount we paid for Evans and Evans’ services, there is no material
relationship, and there has not been any material relationship for at
least the
past two years, between Evans & Evans, its partners, employees or
associates, and either IOWC or us, and no such relationship is contemplated.
We
did
not seek a formal appraisal or fairness opinion of the value of the BioLargo
Technology given our limited resources and the disparities between our
then-current stock value and the assumed range of values of the BioLargo
Technology, even
the
lower end of which significantly exceeded the then-current value of 51%
of our
common stock.
Evans
& Evans issued a report dated March 22, 2005 (the “Report”). The Report
included an estimated value of the BioLargo Technology using a discounted
cash
flow approach. The Report included an estimated potential price of the
100% of
the intellectual property owned by IOWC based on a number of assumptions.
The
Report did not stipulate the fair market value of the IOWC Assets and/or
IOWC
itself. Evans & Evans did not opine on the fairness of the consideration we
agreed to pay IOWC and we did not ask Evans & Evans to opine on the fairness
of the consideration. We determined the amount and type of the consideration
to
pay IOWC for the BioLargo Technology as a result of negotiations between
Mr.
Code and our management.
In
connection with the preparation of the Report, Evans & Evans relied upon
financial and other information, data, advice, opinions and representations
obtained by Evans & Evans from public sources or provided to Evans &
Evans by IOWC or otherwise pursuant to the engagement of Evans & Evans. The
Report is conditional upon the facts or representations which were relied
upon
by Evans & Evans. Subject to the exercise of their professional judgment and
except as expressly described in the Report, Evans & Evans did not attempt
to verify independently the accuracy or completeness of any such information,
data, advice, opinions or representations.
In
preparing the Report, Evans & Evans made adjustments to certain assumptions
provided by management to reflect its own professional judgment regarding
future
events. The Evans & Evans Report has been prepared on the basis of
securities markets as well as economic and general business and financial
conditions prevailing as at January 31, 2005 and on the condition and
prospects,
financial or otherwise, of IOWC as reflected in the information and documents
reviewed by Evans & Evans and as represented by executive officers and
operating management of IOWC. In conducting its analysis, Evans & Evans made
numerous assumptions regarding the impact of general economic and industry
conditions on the future financial results of the holder of the IOWC
Assets.
We
paid
Evans & Evans $10,700 for its services in preparing the Report.
The
following is a summary of the material terms of the final version of
the Evans
& Evans Report dated March 22, 2005. This summary is not intended to be
complete and is qualified in its entirety by the full text of the Report.
In
the
Report, price refers to the most likely price that an arm’s length party might
likely buy the IOWC Assets, assuming it is vended into a company that
is listed
and funded on an organized, regulated and liquid U.S. stock market. It
is also
based on all of the information and assumptions outlined in the Report.
The
reader should realize this includes reference to all of the terms and
conditions
and the assumptions set out in the Report.
Most
importantly, price as defined in the Report, approximates “market potential”, it
does not equal fair market value. Price, as defined in the Report, refers
to the
implied potential price of the IOWC Assets. Such analysis is based principally
on a review of the future revenues and/or net income and/or cash flows
to be
garnered from the IOWC Assets. In doing this, one is examining the future
expected cash flows of the IOWC Assets given certain IOWC claimed milestones
and
assumptions. Such calculated price is based on many factors (i.e. external
factors, market conditions, projected organizational performance,
etc.).
In
preparing the Report, Evans & Evans relied on information provided by the
management of IOWC and the Company, as well as publicly available documents
and
information on the IOWC Assets, IOWC and the Company.
Documents
and sources of information utilized or revised by Evans & Evans included:
interviews with key members of IOWC’s management team; a review of IOWC’s and
the Company’s business plans, marketing materials and product information; a
review of IOWC’s website; a review of resumes of employees, consultants or
directors of IOWC and the Company; a review of the certificate of incorporation
and the articles of incorporation for IOWC; a review of funding proposals;
a
review of material agreements, a review of patent applications; interviews
with
competitors and industry participants; a review of market data from various
independent industry sources; and, a review of financial and stock market
trading data on comparable public companies.
Evans
& Evans was not provided with formal income statements and balance sheets
for IOWC. Had such information been available, pricing approaches and
conclusions may have differed and differed materially.
Evans
& Evans made the following assumptions in completing the Report as at
January 31, 2005 (the “Pricing Date”): (1) key management of IOWC and the
Scientific Advisory Board continue to be associated with the Company
for at
least the next 36 months following the transaction with IOWC; (2) there
are no
claims or liabilities associated with the IOWC Assets; (3) IOWC successfully
achieves the milestones outlined in its current strategic business plan,
including raising sufficient working capital, so that all of the projected
financial and business requirements and results associated with IOWC’s
intellectual property are achieved. Should IOWC’s intellectual property not be
successful in the above and in generating the revenues outlined in the
Report,
the price of the IOWC Assets would differ materially; (4) IOWC has satisfactory
title to all of the tangible and intangible assets described in the Report
and
there are no liens or encumbrances on such assets nor have any assets
been
pledged in any way; and (5) IOWC has complied with all government taxation
and
regulatory practices as well as all aspects of its contractual agreements
that
would have an effect on the Report, and there are no other material agreements
entered into by IOWC relating to IOWC’s intellectual property that are not
disclosed in the Report.
In
determining the price of an asset and/or a business, there is no single
or
specific mathematical formula. The particular approach and the factors
to
consider will vary in each case. Pricing approaches are primarily income-based.
Income-based approaches are appropriate where an asset and/or enterprise’s
future earnings are likely to support a price in excess of the price
of the
existing net assets. Commonly used income-based approaches are comparable
transactions/companies as well as a discounted cash flow
analysis.
With
respect to IOWC’s intellectual property, Evans & Evans believed it was most
appropriate to utilize one income-based approach in arriving at the price
of
IOWC’s intellectual property at the Pricing Date. Given the historical and,
more
importantly, the business model forecasted by IOWC management (i.e.,
significant
orders expected in the short-term) and the long-term nature of IOWC’s planned
business model, it is the view of Evans & Evans that the most appropriate
primary method in determining the range of price of the IOWC Assets at
the
Pricing Date involved an income-based approach, namely a discounted cash
flow
approach (“DCF Approach”).
The
DCF
Approach was deemed most appropriate given the types of revenues projected
going
forward, the agreements in place as at the Pricing Date and that it estimates
the possible range of cash flows to be received by investors in IOWC’s
intellectual property. Numerous other approaches were examined but not
considered appropriate as indications of price (i.e., comparable companies,
comparable transactions, relief from royalty, super profits, etc.) as
either
insufficient or inadequate information was available regarding each of
these
approaches.
The
DCF
Approach is a widely accepted pricing analysis methodology because this
approach
considers the price of the IOWC Assets given rise to the discretionary
cash flow
that may well be available to the Company going forward from commercializing
the
IOWC Assets.
In
undertaking the DCF Approach, Evans & Evans utilized projections of
operating results the Company, on an assumed post-acquisition of the
IOWC Assets
basis, as the starting point for calculating the DCF. Those internally-generated
projections were based a series of assumptions, which may or may not
come to
pass and which could significantly affect the values contained in such
projections, about a number of factors, including hypothetical licensing
and
royalty revenue from the sale of products in the absorbent healthcare
and
transportation industries and assumed market share in those industries
over a
10-year acquisition period. It should be noted that the Company’s projections
were not projections of the assumed or hypothetical value of the BioLargo
Technology itself but of hypothetical results of operations. Finally,
the nature
of all projections is imprecise and no assurance can be given that any
of the
projected values, whatever they purport to measure, can be achieved.
Evans
& Evans did not consider any possible equity holdings that the Company
may
obtain through its partnership agreements with third parties in the future.
While such additional increases in price may very well occur in the future,
inclusion of them in the price of the IOWC Assets as at the Pricing Date
was
considered too speculative. Evans & Evans did extrapolate the four-year
projections of IOWC out one year (to the fifth year) and then used these
projections (for the years ended December 31) with a series of additional
financial modifications to reflect the price related to IOWC’s intellectual
property. Evans & Evans also subtracted certain costs and expenses related
to the corporate operations of the Company versus being related to the
IOWC
Assets.
In
undertaking the DCF Approach, the authors of the Report adjusted for
a
$3,500,000 equity injection required to fund the operations in year one
and
beyond. A review of IOWC’s assumptions and overall projections resulted in Evans
& Evans selecting discount rates in the range of 25% to 30% to account
for a
blend of financial risk as well as equity invested. Evans & Evans also
adjusted downwards the residual multiplier (from 3.33 to 2.5) in order
to
properly reflect the business and financial risk associated with achieving
the
projected after-tax level of cash flows from years 1-5. Evans & Evans
considered the various due diligence and qualitative factors outlined
in the
Report in determining the appropriate discount rates to use in the DCF
Approach.
Based
upon and subject to the assumptions, limitation, adjustments and analyses
set
forth in the Report, Evans & Evans is of the view that the price of IOWC’s
intellectual property was in the range of $22.0 million as of the Pricing
Date.
The
Report will be made available for inspection and copying at our principal
executive offices during regular business hours by any interested stockholder
or
representative of a stockholder who has been so designated in writing.
A copy of
the Report will also be furnished by us to any interested stockholder
or
representative who has been so designated in writing upon written request
and at
the expense of the requesting stockholder. Any such request should be
directed
to Corporate Secretary, NuWay Medical, Inc., 2603 Main Street, Irvine,
California 92614 (telephone (949) 235-8062).
In
April
2005, the Company and IOWC continued their discussions on the basic terms
of how
to structure the acquisition of the BioLargo Technology by the Company. The
two
companies also continued to formulate a plan for the commercialization of
the
BioLargo Technology. In June 2005, we engaged an outside consultant to assist
us
in developing a strategic business plan, including assisting us in identifying
key revenue targets and strategies for licensure of the BioLargo Technology.
By
June
2005, after our months-long marketing inquiries and in consultation with
outside
consultants and potential licensing partners as well as leaders in industries
which could apply the BioLargo Technology, our management gained additional
comfort that, if adequate capital resources could be made available, the
BioLargo Technology was commercially viable and the size of the potential
markets for products incorporating the BioLargo Technology were sufficiently
large to warrant its continued pursuit by us. There were no other active
acquisition possibilities known to our mangement at that time and the business
proposition with IOWC therefore had the opportunity to create the greatest
possibility of enhanced shareholder value over time.
Meaningful
negotiations took place in June and July 2005, leading to the signing of
a
letter of intent between us and IOWC. The negotiations over the amount
consideration to be paid to IOWC were greatly influenced by IOWC’s requirements,
which had been clear from the inception of the relationship in March 2004,
as to
what IOWC required before it would be willing to relinquish control over
the
BioLargo Technology. Mr. Code had made it clear in his earlier conversations
with our management that working capital was his first priority to further
the
development of the BioLargo Technology, and that if IOWC was ever going
to
consider relinquishing control, it would require that cash be paid to IOWC
for a
controlling ownership, in addition to insuring that appropriate working
capital
was available to exploit the commercial opportunities for the BioLargo
Technology. However, during the 15 months of the relationship between Mr.
Code
and Mr. Calvert on behalf of the Company, during the March 2004 through
mid-2005
period, our management was able to demonstrate sufficiently to IOWC that
it had
the skills and commitment that IOWC sought to exploit the commercial opportunity
available to the BioLargo Technology, and that management was committed
to
creating value for its shareholders, despite having limited capital resources.
As
a
result of the foregoing, negotiations regarding the amount of consideration
to
be paid by us for the BioLargo Technology shifted to reflect a recognition
that
while our capital resources were still insufficient to fully exploit the
BioLargo Technology, the parties still wished to complete the transaction
with
each other and another mutually acceptable method of consideration had
to be
found. Mr. Code suggested that if IOWC were to receive a majority of our
common
stock, then he would have the ability to exert a larger measure of control
over
us to ensure that we took the necessary additional actions to seek capital
and
invest it in the further development and commercialization of the BioLargo
Technology, and, additionally, he would be rewarded for deferring cash
at
closing and waiting until a later date for the monetization of his years
of
efforts in developing the BioLargo Technology in the form of enhanced
shareholder value through stock ownership.
For
its
part, our management had not only come to believe that the commercialization
of
the BioLargo Technology was viable, but also knew that it had no other
active
prospects for acquisition or merger. Accordingly, our management agreed
that
IOWC would receive a majority of our common stock. Because Mr. Code was
not
willing to let IOWC be diluted below 51%, the parties reviewed calculations
of
the Company’s outstanding shares on a fully-converted basis, based on the
convertible securities then issued and outstanding and agreed that this
percentage of our common stock would be issued to IOWC in consideration
of the
IOWC Technology.
Given
the
low market valuation of our common stock, our mangements concluded that
the
opportunity to enhance future shareholder value was greater than the
consideration to be paid to IOWC for a controlling interest in the Company.
The
highest closing price of our common stock for the quarter ending June 30,
2005
was $0.02 with approximately 52,000,000 shares outstanding of June 30,
2005, or
a total maximum market capitalization of approximately $1,040,000. At this
time,
our current liabilities were approximately $4,300,000. We had cash on hand
at
the end of June 2005 of approximately $181,000 and no other tangible assets.
Our
management concluded that the value of the BioLargo Technology significantly
exceeded the then-current value of 51% of our outstanding common stock
on a
fully-converted basis.
On
July
25, 2005, we executed a letter of intent with IOWC, pursuant to which we
agreed
to acquire BioLargo Technology and two license and/or distributor agreements
pursuant to which IOWC had licensed the BioLargo Technology for use in products
designed for distribution in the food, medical and biohazardous material
transportation industries. For more detailed information about the terms
of the
letter of intent, please see the information set forth under the caption
“Letter
of Intent” under this Proposal One below.
Between
mid-2005 and December 2005, our management continued to study and implement
initial marketing and commercial licensing opportunities associated with
the
BioLargo Technology. The Company had no ongoing operations, no tangible
assets
and cash on hand of approximately $283,000. Current Liabilities were just
over
$5,000,000. Because of the slower-then-anticipated pace of completing the
Transactions and raising sufficient capital to more aggressively develop
and
commercialize the BioLargo Technology, Mr. Code requested, and our management
agreed, to adjust the previous calculations of stock to be paid to IOWC
to
reflect certain possible additional issuances of common stock or securities
convertible into common stock in the future, such as additional capital
raises
to fund operations, possible conversion of accrued and unpaid compensation
to
executives of the Company for stock, conversion of accrued and unpaid interest
on debt and issuances of employee stock options.
Our
management carefully calculated the potential dilution effects of a number
of
anticipated future issuances to generate a calculation of anticipated but
not
realized dilutive transactions as of the projected closing date of the
Transactions, but dilutive transactions that the parties believed would
be, or
were likely to be, realized by the Company in the future. The total number
of
shares of our issued and outstanding common stock, on a fully-converted
basis,
was then adjusted to account for such further possible issuances, so that
after
all such issuances IOWC would still have approximately 51% of the total
number
of shares of our common stock. Because the parties acknowledged that such
calculations were estimates and not precise, the parties agreed to increase
the
number of shares to be issued to IOWC from approximately 51% to approximately
61%, to allow for dilution of the IOWC position back down to 51% as these
other
issuances and conversions occurred. Based on the then current outstanding
number
of shares of our common stock, this calculation came out to 568,991,213
shares.
This was the final agreed upon number of shares to be issued to IOWC that
was
included in the M&L Agreement discussed in the next paragraph.
Because
of the Company’s small size and continued limited resources, our ability to fund
IOWC’s ongoing research and development and pre-marketing activities proceeded
at a slower pace than was originally anticipated. Therefore, pending our
ability
to consummate the acquisition of the BioLargo Technology, in December 2005,
we
executed the M&L Agreement with IOWC and Mr. Code. Pursuant to the
M&L Agreement, we, through our wholly-owned subsidiary BioLargo Life
Technologies, Inc. ("BLTI") acquired certain rights to develop, market, sell
and
distribute products that were developed, and are in development, by IOWC.
For
more detailed information about the terms of the M&L Agreement, please see
the information set forth under the caption “Marketing and Licensing Agreement”
under this Proposal One below.
In
April
2006, we engaged
Robert Stewart, Ph.D., to serve as the Company’s regulatory specialist for U.S.
Environmental Protection Agency (“EPA”) and U.S. Food and Drug Administration
(“FDA”) required activities. During this period, we also focused
on establishing relationships with key agents who work on a commission basis
to
assist us in marketing to large corporations and other organizations. In
May
2006, we hired a consultant to assist us on our marketing and sales efforts.
Because
of the continuing slower pace of consummating the BioLargo Transactions,
in part
the result of our continuing limited capital resources, and in consideration
of
certain of Mr. Code’s personal reasons, pending the consummation of the BioLargo
Transactions, we entered into a Consulting Agreement (the "Consulting
Agreement") with Mr. Code in June, 2006, effective January 1, 2006. The
Consulting Agreement was initially due to expire on January 1, 2007, in
anticipation of the consummation of the BioLargo Transaction by such date,
and
the term has been extended to March 31, 2007. Upon the consummation of the
BioLargo Transactions, we intend to enter into a long-term employment agreement
with Mr. Code. For more detailed information about the terms of the Consulting
Agreement, please see the information set forth under the caption “Consulting
Agreement” under this Proposal One, below. For more detailed information about
the anticipated terms of the employment agreement, please see the information
set forth under the caption “Other Agreements - Asset Purchase Agreement -
Code Employment Agreement” under this Proposal One, below.
Similarly,
pending the consummation of the BioLargo Transactions, in August 2006, we
and
BLTI entered into a Research and Development Agreement with IOWC and Mr.
Code,
pursuant to which IOWC and Mr. Code will provide research and development
services and expertise in the field of disposable absorbent products to the
Company and BLTI. That agreement, as amended (the “R&D Agreement”), was
initially due to expire on December 31, 2007 in anticipation of the consummation
of the BioLargo Transaction by such date, and the term has been extended
to
March 31, 2007. For more detailed information about the terms of the R&D
Agreement, please see the information set forth under the caption “Research and
Development Agreement” under this Proposal One, below.
In
September 2006, Mr. Code, as inventor, and BLTI, as assignee, filed two more
patent applications with the US Patent and Trademark Office. A third patent
application was filed on October 11, 2006 by and for the same parties. For
more
detailed information regarding these most recent patent applications, please
see
the information set forth under the caption “BioLargo Technology and BioLargo
Products” under this Proposal One, below.
In
February through April, 2006, we began discussions with five major research
universities to further our research for specific applications. In September
2006, we hired UCLA to research applications of the BioLargo technology for
beach and soil remediation. An initial report regarding this research was
presented in October 2006 at the National Beaches Conference sponsored by
the
EPA. These various discussions are ongoing and focus on engaging those
universities to perform research on the BioLargo Technology for soil and
sand
remediation, animal studies, Department of Defense applications, and embedded
anti-microbial applications in textiles.
Throughout
2006, we have engaged in various efforts to continue testing, developing
and
pre-marketing products incorporating the BioLargo Technology. For example,
in
January 2006, we contracted with a third party manufacturer to produce samples
for presentation purposes of absorbent pads. We also engaged a particle,
formulations, blending and specialty manufacturing company to work with us
in
product development and sample fabrication. In June 2006, we hired a third-party
laboratory to perform a series of independent test and issue their reports
to
assist us in validating the BioLargo Technology to a Good Lab Practices
Standard.
Throughout
2006, we also have been actively involved in initial marketing activities
of the
BioLargo Technology. For example, in February 2006, we presented the BioLargo
Technology to a number major corporations for potential licensing discussions.
Following an April 2006 international conference of industry for infection
control in Prague, Czech Republic, attended by Mr. Code, we pursued with
Mr.
Code presentations to one of the largest companies in the embedded
anti-microbial industry. In June 2006, we began
discussions with a number of large healthcare companies about incorporating
the
BioLargo Technology in their products. The potential areas of focus include
wound dressings, drapes, wipes, bandages, diapers disinfecting and sterilization
solutions, among other possible uses in their various products.
In
June
2006, we participated in a conference for all government agencies throughout
California and have since discussed the BioLargo technology for possible
governmental use in sewage spills, water quality, rainwater runoff contamination
problems and beach clean-up efforts. Also in June 2006, we participated in
a
national military defense conference sponsored by the National Defense Industry
Association for all military services, including Homeland Security, and have
since discussed the BioLargo Technology for possible application in the areas
of
military hospitals, pandemic prevention, agricultural protection, hazardous
waste, food protection, decontamination of porous and non-porous materials,
disaster relief and national world class laboratory access. Subsequently,
we
have presented the BioLargo technology with other governmental officials
and
agencies. In September we also attended a national Agro Terrorism Conference
sponsored by the Federal Bureau of Investigation and the Joint Terrorism
Task
Force.
Meetings
with numerous potential licensees or purchasers or other users of products
incorporating the BioLargo Technology in a wide range of applications, have
continued. However, it is essential to note that we do not yet have any
agreements in place with any of these potential licensees, purchasers or
other
users, or any other potential licensees, purchasers or other users, regarding
any products incorporating the BioLargo Technology, and no assurance can
be
given if any such efforts will prove successful.
BioLargo
Technology and BioLargo Products
Mr.
Code
and IOWC have developed and own the BioLargo Technology, consisting of certain
intellectual property including two U.S. Patents (Patent Numbers 6146725 and
6328929), relating to a process whereby disinfecting chemistry is incorporated
into absorbent materials, liquids, powders, tablets or other delivery methods,
that can be then incorporated into products in multiple industries. Three patent
applications have recently been filed with the US Patent and Trademark Office
relating to this technology listing Code as inventor and BLTI as assignee
pursuant to the Research and Development Agreement discussed below. The first
application relates to the remediation and improvement of land mass that has
been contaminated with microbes such as bacteria, viruses, rickittsiae and
fungi. The technology relates to the treatment of ground such as soil and sand
with chemicals acting as antimicrobial agents. The second application relates
to
the field of antimicrobial protection, particularly antimicrobial activity
in
close proximity to the bodies of patients, and more particularly in removable
materials placed into contact with the bodies of patients. The third application
relates to the field of antimicrobial protection, particularly antimicrobial
activity in close proximity to environments that need to be protected from
or
cleansed of microbial or chemical material that might be of concern. These
include closed and open environments.
If
the
Transactions are completed, the Company intends to use the BioLargo Technology
to develop certain products for use in distribution in the food, medical,
disaster relief and biohazardous material transportation industries. For the
purposes of this proxy statement the term “BioLargo Products” means any product
designed, manufactured, conceived or contemplated, either at the present time,
or in the future, based on the BioLargo Technology or any derivation
thereof.
It
is
expected that the BioLargo Technology will enable the Company to offer a
portable product that comparably addresses four precautions—containment,
isolation, neutralization and disposal—against
disease
transmission as established by the Center for Disease Control. The BioLargo
Technology has been reviewed and validated in several third party studies.
The
Company believes that the BioLargo Technology and derivative products may be
applied in approximately 30 products in several vertical markets.
The
Company believes that the primary initial markets for its products are likely
to
be:
|
·
|
Packaging
for Blood and Bio-hazardous Material
Transport
|
|
·
|
Meat
and Poultry Packing
|
|
·
|
Disaster
Relief Efforts, Soil and Sand Remediation, and Water
Treatment
|
The
Company plans to pursue its primary revenues from licensing its BioLargo
Technology. It has multiple products available for immediate distribution,
namely absorbent pads and materials to be used for clean up of or as a
precautionary measure from spills of liquids, including hazardous materials.
The
Company is actively developing additional products for distribution by working
with manufacturers, other technology developers and potential customers.
The
BioLargo Technology places inorganic compounds (similar in composition and
dosage to what is used in everyday common vitamins) into absorbent products
like
bed pads, blood pads, diapers, surgical drapes, transportation packages for
protective liners, wound dressings, bandages and
other
delivery methods.
Management
believes that the BioLargo Technology offers the following
features:
|
·
|
Increased
Holding Power -
The technology can increase the holding power of absorbent material
up to
6 times, depending on product
configuration.
|
|
·
|
Price-The
actual cost of raw materials and installation of the BioLargo Technology
chemistry is less than $0.10 per metric ton.
|
|
·
|
Generally
Regarded As Safe (GRAS) - The
chemistry used is understood by the Food and Drug Administration
and
scientific community as non-toxic, and safe, in the dosages used
as well
as the methodology of its delivery.
|
|
·
|
Disinfection
- The
chemical composition of the technology installed into products, deploys
an
additive germ killing strategy, that includes a flashing of Iodine,
(the
so-called “Gold Standard” by which all disinfecting strategies are
compared) a lowering of PH levels-creating an acidic environment,
oxidation, and flocculation, a binding reaction to lock in the
microbes.
|
|
·
|
Isolation
- The
chemistry reacts when insulted by a liquid, and is absorbed by the
super
absorbent material in the pad, and is effectively ‘bound’ into the
product, thereby isolating it from any
escape.
|
|
·
|
Bio-Degradable
-
The chemistry accelerates
decomposition.
|
|
·
|
Containment
- The
chemistry when added to a super absorbent materials acts to contains
microbial particles, so they cannot
escape.
|
|
·
|
Inorganic
Solution
-
The use of Iodine is strategic to the Company’s products in that it is the
most effective disinfecting solution, covering a broad range of materials
upon which it is effective, and as an Inorganic Solution, organic
microbes
are unable to develop resistance to its killing
power.
|
|
·
|
Disposal
- It
renders products safe to handle.
|
Letter
of Intent
In
July
2005, the Company entered into a letter of intent (“LOI”) with IOWC. The LOI set
out the terms for the acquisition of certain assets of IOWC consisting of
certain intellectual property, including two United States patent and two
license and/or distributor agreements pursuant to which IOWC had licensed
certain of its technologies for use in products designed for distribution in
the
food, medical and biohazardous material transportation industries. In connection
with the transactions contemplated by the LOI, the Company agreed to issue
up to
51% of its common stock to IOWC. The LOI provided that the transactions
contemplated by the LOI would be completed pursuant to the terms of an asset
purchase agreement as well as a research and development agreement. In addition,
the LOI required certain stockholders approvals as a condition to the closing
of
the transactions contemplated by the LOI including approval of the issuance
of
the shares of the Company’s common stock to IOWC, a reverse stock split and an
increase in the authorized capital stock of the Company.
As
the
parties worked toward preparing the documentation called for by LOI and as
the
Company began to prepare the proxy materials needed for its stockholders
meeting, it became increasingly clear to the parties that the length of time
and
the costs involved in preparing documentation for a stockholders meeting would
likely jeopardize the chances that the transactions contemplated by the LOI
could be completed in a manner benefiting both parties. Accordingly, in late
2005 the parties began to explore alternative strategies that would enable
them
to begin to realize the benefits of the transactions contemplated by the LOI
while at the same time allow the Company to call a meeting of its stockholders
for the purpose of approving the issuance of its shares.
Marketing
and Licensing Agreement
In
furtherance of the proposed transactions with IOWC, on December 31, 2005,
the
Company entered into the M&L Agreement with IOWC and Mr. Code.
Pursuant
to the M&L Agreement the Company, through BLTI, acquired certain rights to
develop, market, sell and distribute products that were developed, and are
in
development, by BioLargo
relating
to the BioLargo Technology and BioLargo Products.
Licenses
Granted to BLTI
Pursuant
to the terms of the M&L Agreement, IOWC granted to BLTI. a license, with
respect to the BioLargo Technology and the BioLargo Products to further develop
the technology, to further develop existing and new products based on that
technology, and to produce, market, sell and distribute any such products,
through its own means, or by contract or assignment to third parties or
otherwise, including without limitation:
|
·
|
Technology
Development Rights. Exclusive
worldwide right to expand and improve upon the existing BioLargo
Technology, to conduct research and development activities based
on the
BioLargo Technology, and to contract with third parties for such
research
and development activities; and any improvements on the BioLargo
Technology, or any new technology resulting such efforts of BLTI,
shall be
owned solely by BLTI.
|
|
·
|
Product
Development Rights.
Exclusive worldwide right to expand and improve upon the existing
BioLargo
Products, to conduct research and development activities to create
new
products for market, and to contract with third parties for such
research
and development activities. Any new products created by BLTI resulting
from these efforts shall be owned solely by
BLTI.
|
|
·
|
Marketing
Rights.
Exclusive right to market, advertise, and promote the BioLargo Technology
and the BioLargo Products in any market and in any manner it deems
commercially reasonable.
|
|
·
|
Manufacturing
Rights.
A
transferable, worldwide exclusive right to manufacture, or have
manufactured, BioLargo Products.
|
|
·
|
Selling
Rights.
A
transferable, worldwide exclusive right to sell BioLargo Technologies
and
BioLargo Products.
|
|
·
|
Distribution
Rights.
A
transferable, worldwide exclusive right to inventory and distribute
BioLargo Products.
|
|
·
|
Licensing
Rights.
A
transferable, worldwide exclusive right to license BioLargo Technologies
and BioLargo Products to third
parties.
|
Assigned
Agreements
Pursuant
to the terms of the M&L Agreement, IOWC and Mr. Code also assigned to BLTI
its rights and obligations with respect to the following Agreements
(collectively, the “Assigned Agreements”):
|
·
|
Agreement
dated October 15, 2004 by and between Kenneth R. Code, IOWC, BioLargo
Technologies, Inc., or IOWC’s assigns and Craig Sundheimer and Lloyd M.
Jarvis (the “Sundheimer/Jarvis Agreement”).
|
|
·
|
Agreement
dated January 15, 2005 by and between Kenneth R. Code, IOWC and Food
Industry Technologies, Inc.
|
|
·
|
Letter
of Intent dated November 15,
2004 by and between Kenneth R. Code and IOWC and GTS Research, Inc.
|
Pursuant
to the terms of the M&L Agreement the Company is to receive any and all
royalties, payments, license fees, and other consideration generated by the
Assigned Agreements as of January 1, 2006. As part of the assignment, IOWC
agreed to transfer the 20% interest it acquired in “BioLargo, LLC” pursuant to
the Sundheimer/Jarvis Agreement. In October 2006, the Company terminated the
Sundheimer/Jarvis Agreement, for cause. Subsequently, the Company and IOWC
agreed that IOWC’s 20% interest in BioLargo, LLC would not be transferred by
IOWC to BLTI, but that BLTI would have the option to acquire such 20% interest
for nominal consideration for seven years (the “Option Agreement”).
Consulting
Agreement
On
June
20, 2006, the Company entered into the Consulting Agreement with Mr. Code.
Pursuant to the Consulting Agreement, the Company has engaged the services
of
Mr. Code, effective January 1, 2006, to advise the Company in research and
development and technical support, and to provide other services and assistance
to the Company in matters relating to the Company’s business.
The
Consulting Agreement contains provisions requiring Mr. Code to devote
substantially all of his business time to the Company; prohibiting Mr. Code
from
directly or indirectly engaging in any business activity that would be
competitive with the business of the Company or its affiliates, including
its
wholly-owned subsidiary BioLargo Life Technologies, Inc.; providing that
during
the term of the Consulting Agreement and for one year post-termination, Mr.
Code
will not solicit the Company’s employees or customers; and other standard
provisions typical for a consulting agreement. The Consulting Agreement also
provides that the Company shall retain the exclusive right to use or distribute
all creations which may be created during the term of the Consulting Agreement.
The Consulting Agreement, as amended on December 20, 2006, terminates on
March
31, 2007, unless terminated earlier as provided therein. During the term
of the
Consulting Agreement, Mr. Code shall be paid $15,400 per month, prorated
for
partial months, and shall be entitled to reimbursement for authorized business
expenses incurred in the performance of his duties.
It
is
anticipated that the Consulting Agreement will be replaced with an employment
agreement between the Company and Mr. Code, pursuant to which Mr. Code will
be
employed as BLTI’s Chief Technology Officer. See “Other Agreements - Asset
Purchase Agreement - Code Employment Agreement” below.
Research
and Development Agreement
On
August
11, 2006, the Company and BLTI entered into the R&D Agreement, which
agreement amended was amended on August 14, 2006, with IOWC and Mr. Code.
Pursuant to the R&D Agreement, IOWC and Mr. Code will provide its research
and development services and expertise in the field of disposable absorbent
products to the Company and BLTI.
The
R&D Agreement provides that the Company and BLTI will own, and the Company
and BLTI will have the exclusive right to commercially exploit, the intellectual
property developed, created, generated, contributed to or reduced to practice
pursuant to the R&D Agreement. In addition, IOWC and Mr. Code have agreed
that during the term of the R&D Agreement and for one year after termination
they will not compete with, and will not provide services to any person or
entity which competes with, any aspect of BLTI’s business.
The
R&D Agreement,
as
amended on December 20, 2006,
terminates on March 31, 2007, unless terminated earlier as provided therein.
During the term of the R&D Agreement, but only after mutually acceptable
research facilities are established for the performance of IOWC’s services (as
of this date, no acceptable research facilities have been established), IOWC
shall be paid (i) a fee of $5,500 per month for each month during which no
services are being performed pursuant to the R&D Agreement to offset for
laboratory and/or office and IOWC employee expenses and (ii) such additional
amounts as the parties may agree in connection with specific research projects
conducted pursuant to the R&D Agreement.
As
further consideration to Mr. Code to enter into the R&D Agreement, on August
14, 2006 the Company issued to Code 15,515,913 shares of its Common Stock
(the
“Code Stock”), or approximately 19.9% of the Company’s issued and outstanding
common stock immediately following the issuance of the Code Stock.
The
Company’s stockholders are not
being
asked to approve the issuance of the Code Stock by the Company. However,
because Mr. Code is interested in the outcome of this Proposal One, as the
principal stockholder of IOWC, neither the Code Stock nor any other stock
of the
Company which Mr. Code beneficially owns will vote on Proposal One at the
Meeting.
Mr.
Code
and IOWC have agreed to protect, maintain and keep confidential any proprietary
or confidential information of the Company and BLTI and have executed a
non-disclosure and confidentiality agreement in favor of the
Company.
Other
Agreements
The
M&L Agreement also provides that the parties will enter into certain
additional agreements in furtherance of the LOI, including (i) an asset purchase
agreement (“Asset Purchase Agreement”) whereby the Company will acquire the two
U.S. patents held by IOWC and certain other assets of IOWC; and (ii) an
employment agreement with Mr. Code (the “Code Employment Agreement”).
The
following are summaries only of the likely provisions of the Asset Purchase
Agreement to be entered into by the Company, BLTI, IOWC and Mr. Code, and the
Code Employment Agreement to be entered into between BLTI and Mr. Code. The
Company has approved the consummation of the transaction on the terms and
subject to the conditions so summarized, but the other parties to the agreements
have not, as of the date of this proxy statement, and other than the number
of
shares to be issued to IOWC, approved these terms and conditions in their
entirety. Thus these summaries are neither complete nor necessarily a summary
of
the final terms between and among the parties with respect to the subject matter
thereof, which may be still subject to negotiation.
Asset
Purchase Agreement
Sale
of Assets.
Pursuant
to the terms of the Asset Purchase Agreement, Mr. Code and IOWC will sell,
transfer and assign all of their rights, title and interests to two US patents
and related intellectual property, as well as the records related to the patents
and intellectual property.
In
addition to the Code Stock issued in August 2006 and as further and full payment
for IOWC’s obligations set forth in the M&L Agreement, pursuant to the Asset
Purchase Agreement, the Company will deliver to IOWC the following number of
shares of common stock comprising, in the aggregate, the IOWC Stock upon
the approval of the issuance of the IOWC Stock by the Company’s stockholders,
which amounts shall be based upon the total outstanding common stock after
the
issuances of this stock consideration, as well as the conversion into common
stock of the Company’s existing debt:
|
·
|
Licensing
Rights. As
full payment for the license granted to BLTI, and without taking
into
account the effects of a reverse split of the Company’s common stock as
described in Proposal Three, the Company will deliver to IOWC 411,558,557
shares of the Company’s common stock.
|
|
·
|
Assigned
Agreements. As
full payment for the assignment of the Assigned Agreements, and without
taking into account the effects of a reverse split of the Company’s common
stock as described in Proposal Three, the Company will deliver to
IOWC an
additional 127,725,069 shares of the Company’s common stock.
|
|
·
|
Asset
Purchase Agreement. As
full payment for the transfer of any intellectual property under
the terms
of the Asset Purchase Agreement, and without taking into account
the
effects of a reverse split of the Company’s common stock as described in
Proposal Three, the Company will deliver to IOWC an additional 14,191,674
shares of the Company’s common stock.
|
|
·
|
Total
Consideration. The
total common stock to be issued to IOWC for all components of the
Transactions, without taking into account the effects of a reverse
split
of the Company’s common stock as described in Proposal Three, shall equal
553,475,300 shares of the Company’s common stock. Separately, Mr. Code has
already been issued 15,515,913 shares of the Company’s common stock in
connection with the R&D Agreement.
|
The
Company’s stockholders are being asked to approve the issuance of 553,475,300
shares of the Company’s common stock, which comprises the IOWC Stock, at the
Meeting. The number of shares to be issued to IOWC has been calculated prior
to
giving effect to the reverse split on which stockholders are being asked
to
vote. See Proposal Three below. A
reverse
split must be effectuated prior to the issuance to IOWC because the Company’s
Certificate of Incorporation only allows the issuance of 100,000,000 shares
of
its common stock (or 200,000,000 if Proposal Four is approved). The
Company’s stockholders are not
being
asked to approve the issuance of the 15,515,913 shares of the Company’s common
stock previously issued to Mr. Code, which comprise the Code Stock.
Representations
and Warranties.
As part
of the Asset Purchase Agreement, Mr. Code and IWOC, jointly and severally,
will
make certain representations and warranties to BLTI with respect to, among
other
things:
|
· |
title
to the assets being sold;
|
|
· |
sufficiency
of the assets for the future conduct of business by
BLTI;
|
|
· |
intellectual
property matters;
|
|
· |
litigation
and proceedings
|
|
· |
compliance
with laws; and
|
The
Asset
Purchase Agreement also contains additional representations and warranties
of
Mr. Code and/or IOWC, and of BLTI, standard for asset purchase transactions.
The
representations and warranties of the parties contained in the Asset Purchase
Agreement will survive for four years after the closing at which time they
will
expire.
Conditions
to Closing.
The
Asset Purchase Agreement provides certain conditions to the obligations of
the
parties, which must either be satisfied or waived before the closing can occur.
The
Transactions are subject to approval by IOWC's board of directors and
stockholders, approval by the Company's Board and approval by the Company's
stockholders at the Meeting of the following matters:
|
·
|
an
amendment to the Company's Certificate of Incorporation increasing
the
number of authorized shares of its common
stock;
|
|
·
|
the
issuance of the number of shares of common stock to IOWC required
pursuant
to the Transactions;
|
|
·
|
authorization
for the Board to reverse split of the Company's common stock, in
a ratio
it deems appropriate; and
|
|
·
|
the
election of Mr. Code to the Company’s
Board.
|
The
consummation of the Transactions with IOWC is subject to various other
conditions, in addition to those described hereinabove, such as contractual
conditions customary for transactions of this nature. The Company currently
expects to consummate the transactions in the first quarter of 2007, assuming
the Company’s stockholders approve Proposals One, Two, Three and Four and
all other conditions to the consummation of the Transactions with IOWC are
satisfied.
Indemnification.
Under
the Asset Purchase Agreement, IOWC and Mr. Code will, jointly and severally,
indemnify BLTI and each of its officers, directors, employees, agents and
affiliates, and each of their successors and assigns from and against any and
all costs, losses, claims, liabilities, fines, penalties, consequential damages
(other than lost profits), and expenses (including interest which may be imposed
in connection therewith and court costs and reasonable fees and disbursements
of
counsel) incurred in connection with, arising out of, resulting from or incident
to:
|
· |
liabilities
or claims arising out of the assets or the business of IOWC before
the
closing;
|
|
· |
liabilities
or claims after the closing relating to IOWC or Mr.
Code;
|
|
· |
breach
of the representations or warranties made by IOWC or Mr.
Code;
|
|
· |
default
in any agreements made by IOWC or Mr.
Code;
|
|
·
|
taxes
of any kind arise out of or result from the transactions contemplated
by
the Asset Purchase Agreement; and
|
|
· |
liabilities
or claims relating to employee
matters.
|
BLTI
will
indemnify IOWC and Mr. Code and their officers, directors, employees, agents
and
affiliates, and each of their successors and assigns from and against any and
all costs, losses, claims, liabilities, fines, penalties, consequential damages
(other than lost profits), and expenses (including interest which may be imposed
in connection therewith and court costs and reasonable fees and disbursements
of
counsel) incurred in connection with, arising out of, resulting from or incident
to:
|
·
|
breach
of the representations and warranties made by BLTI;
and
|
|
·
|
default
in any agreement made by BLTI.
|
The
Asset
Purchase Agreement provides the mechanism by which the parties must notify
each
other of any claims, the methods for resolution of such and requires the parties
to arbitrate any unresolved claims.
Termination.
The
Asset Purchase Agreement provides that the parties by mutual agreement may
terminate the Asset Purchase Agreement. In addition, either party may
unilaterally terminate the Asset Purchase Agreement if that party determines
that the conditions to closing of the other party will not be satisfied or
if
the other party has breached a representation or warranty and fails to cure
such
breach within five days after receiving notice of such breach.
The
Asset
Purchase Agreement also allows BLTI to terminate the Asset Purchase Agreement
if:
|
·
|
it
is not satisfied, in its sole discretion, with the results of its
due
diligence investigations; and
|
|
·
|
it
has not obtained on terms and conditions satisfactory to it, in its
sole
discretion, all of the financing it needs to consummate the transactions
contemplated by the Asset Purchase Agreement and fund the working
capital
requirements of BLTI after the
closing.
|
Miscellaneous.
The
Asset Purchase Agreement also contains customary provisions relating to
governing law, assignment of rights and obligations, attorneys’ fees, force
majeure and other matters standard for asset purchase transactions.
Code
Employment Agreement
The
Code
Employment Agreement is anticipated to provide that Mr. Code will be appointed
Chief Technology Officer of BLTI, and receive (i) base compensation of $184,000
annually (with an automatic 10% annual increase) and (ii) a bonus equal to
equal
to 3% of the licensing revenues received by BLTI, plus (iii) such other amounts
that the Board of Directors of BLTI may determine from time to time. In
addition, Mr. Code will be eligible to participate in incentive plans, stock
option plans, and similar arrangements as determined by the Board of Directors
of BLTI. Mr. Code is also eligible to receive heath insurance premium payments
for himself and his family, a car allowance of $800 per month, paid vacation
of
four weeks per year plus an additional two weeks per year for each full year
of
service during the term of the agreement up to a maximum of ten weeks per year,
and disability insurance. Mr. Code will also be entitled to participate in
any
other plans and arrangements, which provide for sick leave, vacation, or
personal days, provided to or for the officers of BLTI from time to time. The
employment agreement will have a term of five years, unless earlier terminated
in accordance with its terms.
The
Code
Employment Agreement is also anticipated to provide that Mr. Code’s employment
may be terminated by BLTI due to disability, for cause or without cause. Mr.
Code’s employment may be terminated if he is unable to return to his duties
within 30 days after notice of termination is given to him. During the
disability period, Mr. Code is eligible to receive his salary and benefits.
If
Mr. Code’s employment is terminated for cause he will be eligible to receive his
accrued base compensation and vacation compensation through the date of
termination. If Mr. Code’s employment is terminated without cause, then he will
be eligible to receive the greater of (i) one year’s compensation plus an
additional one half year for each year of service since the effective date
of
the employment agreement or (ii) one year’s compensation plus an additional one
half year for each year remaining in the term of the agreement.
The
Code
Employment Agreement requires Mr. Code to keep certain information confidential,
not to solicit customers or employees of BLTI or interfere with any business
relationship of BLTI.
Mr.
Code
will also be nominated for election to the Board of the Company and appointed
to
the board of directors of BLTI.
Reasons
for the Transactions
The
Board
has determined that the terms of the issuance of common stock to IOWC and Mr.
Code in connection with the Transactions are fair, and in the best interests
of,
the Company and its stockholders. The Board consulted with management, as well
as its legal counsel and financial advisors, in reaching its decision to approve
the Transactions. The Board considered a number of factors in its deliberations,
including the following:
|
· |
Viability
of the BioLargo Technology
|
|
· |
Commercial
viability when deployed in a licensing
strategy
|
|
· |
Potential
future revenue
|
|
· |
Existing
license agreements already executed
|
|
· |
Availability
of third party validations of the Technology
claims
|
|
· |
Prospects
for future technology developments
|
|
· |
Potential
target licensing partnerships
|
|
· |
Commitment
by Mr. Code to serve as CTO
|
|
· |
Prospects
for customer acceptance of the
products
|
|
· |
Diversity
of industry applications
|
|
· |
Potential
for contribution to public health and disaster
relief
|
|
· |
Worldwide
market opportunity
|
The
Board
also considered potential negative factors relating to the Transactions,
including the following:
|
· |
The
significant dilution of existing stockholders resulting from issuances
to
IOWC and Mr.
Code;
|
|
· |
the
risk that the benefits sought to be achieved by the Transactions
would not
be realized;
|
|
· |
the
risk that the Transactions may not be completed in a timely manner,
if at
all;
|
|
· |
the
other risks and uncertainties discussed above under “Risk Factors” in the
10-KSB.
|
The
foregoing discussion of information and factors considered and given weight
by
the Board is not intended to be exhaustive. In view of the variety of factors
considered in connection with its evaluation of the Transactions, the Board
did
not find it practicable to, and did not, quantify or otherwise assign relative
weights to the specific factors considered in reaching its determinations and
recommendations.
Management
of the Company after the Transactions
It
is
expected that Mr. Calvert will remain as President and CEO of the Company under
a newly executed long-term employment agreement.
The
Board
has agreed to appoint Mr. Code as BLTI’s Chief Technology Officer pursuant to a
long-term employment agreement and has agreed to appoint Mr. Code to the Board
effective upon closing of the Transactions. In addition, the Company is in
the
process of negotiating employment and/or consulting agreements with third
parties, including an interim CFO, marketing and corporate development
professionals. There is no assurance however that the Company will be able
to
attract and retain any such employees.
Consequences
if Stockholders Do Not Approve Transactions
Please
see the information regarding Proposals One, Two, Three and Four contained
in this proxy statement, each of which addresses conditions to the consummation
of the Transactions. If the stockholders do not approve each of Proposals One,
Two, Three and Four, the Transactions with IOWC will not be consummated. In
such event, the M&L Agreement, the R&D Agreement and
the
Option Agreement will terminate. The Consulting Agreement, as amended, expires
on March 31, 2007. Pursuant to the R&A Agreement, Mr. Code must return the
Code Stock to the Company upon termination of the R&D
Agreement. Additionally, upon termination of the M&L Agreement, all
rights granted by BioLargo to the Company (or its subsidiary BLTI) shall revert
to BioLargo. Additionally, pursuant to the LOI, amounts advanced by
the Company to BioLargo would be converted into stock of IOWC at $1.00
per share. The parties are currently negotiating the classification of sums
expended by the Company pursuant to the Agreements, and whether such sums would
constitute an "advance" pursuant to letter of the intent. As of December 31,
2006, the Company believes these sums are in excess of $750,000. If the
Transactions are not consummated, the Company will remain a public shell with
no
continuing business operations and the restoration of the parties to the
conditions that existed prior to the commencement of the Transactions may be
time consuming and costly and may involve disputes among the parties, including
disputes as to the calculation of the equity interest in IOWC to be
received by the Company.
Pro-Forma
Capitalization and Significant Dilution to Existing
Stockholders
Stockholders
are cautioned that the certain matters presented to them at the Meeting,
if
approved, will cause substantial and significant dilution to their stockholdings
in the Company. These matters include principally Proposal One. However,
if
Proposal Four is approved by the stockholders (increase in authorized capital
stock), then the Company intends to (i) mandatorily convert certain convertible
notes into shares of common stock, (ii) issue common stock to several
individuals with respect to whom the Company has accrued and unpaid obligations
for a variety of services and (iii) issue common stock in connection with
a new
employment agreement with Mr. Calvert.
The
table
below sets forth the Company’s capitalization as it is currently and what it
would be if all matters presented to the stockholders at the Meeting are
approved. This
table DOES NOT take into account the effect of a reverse split of the common
stock as set forth in Proposal Three:
Stockholder
or Group
|
|
Capitalization
Prior to
Meeting
|
|
Pro
Forma Capitalization
Assuming
Approval of All
Proposals
(7)
|
|
|
|
Shares
|
|
%
|
|
Shares
|
|
%
|
|
Existing
Stockholders (1)
|
|
|
45,813,737
|
|
|
58.5
|
%
|
|
46,161,844
|
|
|
5.0
|
%
|
Kenneth
Code and IOWC
|
|
|
15,515,913
|
|
|
19.8
|
%
|
|
568,991,213(2
|
)
|
|
61.0
|
%
|
Officers
(other than Mr. Calvert), Current and Former Non-employee
Directors
|
|
|
12,256,979
|
|
|
15.6
|
%
|
|
25,623,646(3
|
)
|
|
2.7
|
%
|
Dennis
Calvert
|
|
|
4,782,107
|
|
|
6.1
|
%
|
|
95,652,107(4
|
)
|
|
10.3
|
%
|
Convertible
Noteholders (5)
|
|
|
—
|
|
|
|
|
|
158,892,545
|
|
|
17.0
|
%
|
Deferred
Payments to Consultants (6)
|
|
|
|
|
|
|
|
|
37,074,167
|
|
|
4.0
|
%
|
TOTAL
|
|
|
78,368,736
|
|
|
100.0
|
%
|
|
932,395,522
|
|
|
100.0
|
%
|
|
(1)
|
Excludes
shares held by Messrs. Calvert, Code, other Officers, IOWC, and Current
and Former Non-employee Directors.
|
|
(2)
|
Includes
553,475,300 shares of common stock to be issued to IOWC in connection
with
the Transactions.
|
|
(3)
|
Includes
an aggregate 13,366,667 shares of common stock to be issued to officers
(other than Mr. Calvert), and former and current non-employee directors
in
connection with the conversion of an aggregate $166,667 of accrued
and
unpaid salary or director fees through December 31,
2006.
|
|
(4)
|
Includes
(i) 33,779,600 shares of common stock to be issued to Mr. Calvert
in
connection with the conversion of $334,221 of accrued and unpaid
salary
through December 31, 2006; and (ii) 57,090,400 shares of common stock
to
be issued to Mr. Calvert in connection with the initial grant under
a new
employment agreement to be entered into between the Company and Mr.
Calvert.
|
|
(5)
|
Consists
of an aggregate 158,892,545 shares of common stock to be issued to
various
holders of convertible notes with respect to which the Company has
the
right to cause mandatory
conversion.
|
|
(6)
|
Consists
of an aggregate of 37,074,167 shares of common stock to be issued
to
various consultants whom the Company either has the right to pay
in shares
or believes will accept payment in shares, for services previously
rendered to the Company, in the accrued and unpaid aggregate amount
of
$607,160.
|
|
(7)
|
Although
this table assumes the approval of all proposals, the total shares
listed
do not take into account the effect of the approval of Proposal Three,
which authorizes the board to effect a reverse-split of the Company’s
common stock by a minimum ratio of 10-for-1. If a 10-for-1 ratio
reverse-split were approved by the Board, the total issued and outstanding
stock would equal 93,239,552
shares.
|
In
addition, the Company will need to raise additional funds in the form of equity,
which will likely cause further dilution in the percentage ownership of its
stockholders. There is no assurance that the Company will be able to raise
additional capital on commercially reasonable terms or at all.
Risks
Relating to the Transactions
In
addition to the significant dilution that will occur to our existing
stockholders and other risks that are set out in the 10-KSB, the Transactions
involve other significant risks including technology risks. The technology
that
the Company is acquiring from IOWC is at an early stage of development. There
is
a risk that our technologies will not be commercially feasible or, even if
our
technologies are commercially feasible, they may not be commercially accepted.
In addition, potential products will require extensive research, development
and
testing before they can be commercialized. These potential products, if any,
also may involve lengthy regulatory reviews and require regulatory approval
before they can be sold. There is no assurance, however, that any of our
potential products will prove to be safe and effective, meet regulatory
standards or continue to meet such standards if already approved. There is
also
a risk that we may not be able to produce any of our potential products in
commercial quantities at acceptable costs, or market them successfully. Failure
to achieve commercial feasibility, demonstrate safety, achieve clinical
efficacy, obtain regulatory approval or, together with partners, successfully
market products will negatively impact our revenues and results of operations.
As a company in the development stage and with an unproven business strategy,
IOWC’s limited history of operations makes evaluation of the BioLargo Technology
as a business difficult.
IOWC
has
limited operating history, and since its incorporation in 2000 has been, and
continues to be, involved in development of products using the BioLargo
Technology, establishing manufacturing, and marketing of these products to
consumers and industry partners. Once we complete the transactions with IOWC,
we
may not attain profitable operations and our management may not succeed in
realizing our business objectives.
The
commercial viability of the BioLargo Technology is unproven and we may not
be
able to attract customers.
Only
a
limited number of customers have purchased products using the BioLargo
Technology in the medical
pad and bio-hazardous material transport packaging
application to date and no consumer has purchased products using the BioLargo
Technology in the wound
dressings, food or other potential product applications
identified
by the Company.
Accordingly, the commercial viability of products using the BioLargo Technology
is not known at this time. If commercial opportunities are not realized from
the
sale of products using the BioLargo Technology, our ability to generate revenue
would be adversely affected and our business model would have to be abandoned.
We
expect to incur future losses and may not be able to achieve profitability.
Although
we expect to generate revenue eventually from sales of products using the
BioLargo Technology, we anticipate net losses and negative cash flow to continue
for the foreseeable future until such time as our products are brought to
market, and for a period of time thereafter. We intend to significantly expand
our research and development efforts. Consequently, we will need to generate
significant additional revenue or seek additional funding to fund our
operations. This has put a proportionate corresponding demand on capital. Our
ability to achieve profitability is entirely dependent upon our research and
development efforts to deliver a viable product and the Company’s ability to
successfully bring it to market. Although our management is optimistic that
we
will succeed with marketing products using the BioLargo Technology, we cannot
be
certain as to timing or whether we will generate sufficient revenue to be able
to operate profitably. If we cannot achieve or sustain profitability, we may
not
be able to fund our expected cash needs or continue our operations.
If
we are not able to devote adequate resources to product development and
commercialization, we may not be able to develop our
products.
Certain
of the BioLargo Technology products are still under various stages of
development. Because we have limited resources to devote to product development
and commercialization, any delay in the development of one product or
reallocation of resources to product development efforts that prove unsuccessful
may delay or jeopardize the development of other product candidates. Although
our management believes that, once the Transactions close, it can finance
product development through private placements and other capital sources, if
we
do not develop new products and bring them to market, our ability to generate
revenues will be adversely affected.
Some
of the products using the BioLargo Technology will require regulatory
approval.
The
products in which the BioLargo Technology may be used and incorporated have
both
regulated and non-regulated applications. The regulatory approvals for certain
applications may be difficult, impossible, time consuming and or expensive
to
obtain. While the management believes such approvals are available for the
applications contemplated, until those approvals from the U.S. Food and Drug
Administration or the U.S. Environmental Protection Agency or other regulatory
bodies, if required, at the federal and state levels, as may be required are
obtained, then the Company may not be able to generate commercial revenues.
Certain
specific regulated applications and its use therein require highly technical
analysis, additional third party validation and will require regulatory
approvals from organizations like the FDA.
If
our products and services do not gain market acceptance, it is unlikely that
we
will become profitable.
The
market for products that that are used to transport bio-hazardous material
and
serve as an absorbent pad or clean up device, and for food
applications is
evolving and we have many successful competitors. Multiple manufacturers,
including Johnson & Johnson, Sealed Air, and Kendall Tyco, have historically
used various technologies, including protective boxes, styrofoam boxes, gel
packs, absorbent materials, bed pads, drapes, and clean up pads, to package
for transport blood products, and to sanitize, deodorize, and clean up, as
well
as protect workers and patients in healthcare and other applicable environments.
At this time, the BioLargo Technology is unproven in its commercial use, and
the
use of the BioLargo Technology by others is limited. The commercial success
of
products using the BioLargo Technology will depend upon the adoption of the
BioLargo Technology by bio-hazardous material transporters, bio-hazardous
material storage and testing companies, healthcare workers, hospitals, nursing
homes, infectious disease experts and consumers as an approach to reduce the
risk of disease transfer and disease containment and related bio-hazardous
materials handling. Market acceptance may depend on many factors, including:
|
·
|
the
willingness and ability of consumers and industry partners to adopt
new
technologies;
|
|
·
|
the
willingness of governments to mandate reduction of the rates of incidence
of disease transfer, reduction of risk of spills and leaks associated
with
bio-hazardous materials and as a general safety measure, as well
as
regulatory approvals (FDA) in certain applications where the
technology may be used;
|
|
·
|
our
ability to convince potential industry partners and consumers that
the
BioLargo Technology is an attractive alternative to other technologies
for
reduction of disease transfer and as a protective and safety device
against bio-hazardous materials;
|
|
·
|
our
ability to manufacture products and provide services in sufficient
quantities with acceptable quality and at an acceptable cost;
and
|
|
·
|
our
ability to place and service sufficient quantities of our
products.
|
If
products using the BioLargo Technology do not achieve a significant level of
market acceptance, demand for our products will not develop as expected and
it
is unlikely that we will become profitable.
Any
revenues that we may earn in the future are unpredictable, and our operating
results are likely to fluctuate from quarter to
quarter.
We
believe that our future operating results will fluctuate due to a variety of
factors, including:
|
·
|
delays
in product development;
|
|
·
|
market
acceptance of our new products;
|
|
·
|
changes
in the demand for, and pricing, of our
products;
|
|
·
|
competition
and pricing pressure from competitive
products;
|
|
·
|
manufacturing
delays; and
|
|
·
|
expenses
related to, and the results of, proceedings relating to our intellectual
property.
|
A
large
portion of our expenses, including expenses for our facilities, equipment and
personnel, is relatively fixed and not subject to significant reduction. In
addition, we expect our operating expenses will continue to increase
significantly in 2007 and 2008, as we begin our research and development,
production and marketing activities. Although we expect to generate revenues
from sales of our products in the future, revenues may decline or not grow
as
anticipated and our operating results could be substantially harmed for a
particular fiscal period. Moreover, our operating results in some quarters
may
not meet the expectations of stock market analysts and investors. In that case,
our stock price most likely would decline.
We
may face costly intellectual property disputes.
Our
ability to compete effectively will depend in part on our ability to develop
and
maintain proprietary aspects of our technology and either to operate without
infringing the proprietary rights of others or to obtain rights to technology
owned by third parties. Pending patent applications relating to the BioLargo
Technology may not result in the issuance of any patents or any issued patents
that will offer protection against competitors with similar technology. Patents
we receive may be challenged, invalidated or circumvented in the future or
the
rights created by those patents may not provide a competitive advantage. We
also
rely on trade secrets, technical know-how and continuing invention to develop
and maintain our competitive position. Others may independently develop
substantially equivalent proprietary information and techniques or otherwise
gain access to our trade secrets.
There
are potential claims from prior business affiliates of
IOWC.
Given
the
history of the development of the BioLargo Technology, and Mr. Code’s assignment
of the two patents registered with the United States Patent and Trademark Office
to a third party company pursuant to an agreement that Mr. Code believes was
breached and terminated, there could be claims or rights of ownership to the
BioLargo Technology asserted by third parties. In the event of a legal dispute,
a lengthy and costly legal defense would be required to defend against any
such
claims, and notwithstanding the Company’s position in these potential disputes,
the Company cannot predict the outcome of such litigation. Loss of our ownership
of the BioLargo Technology would have a serious adverse affect on our business
and plan of operations. Any financial settlement of claims, including royalties
we might have to pay to third parties, could have a serious adverse affect
on
our results of operations in future periods.
IOWC
Financial Information
REPORT
OF INDEPENDENT AUDITOR
To
the
Board of Directors and Stockholders
IOWC
Technologies Inc.
I
have
audited the balance sheets of IOWC Technologies Inc. (the "Company")
as of
December 31, 2005 and 2004 and the related statements of operations,
stockholders' deficit and cash flows for the years then ended. These
financial
statements are the responsibility of the Company's management. My responsibility
is to express an opinion on these consolidated financial statements based
on my
audits.
I
conducted my audits in accordance with generally accepted auditing standards
of
the United States of America. Those standards require that I plan and
perform
the audit to obtain reasonable assurance about whether the financial
statements
are free of material misstatements. An audit includes examining, on a
test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. I believe that my audits provide a
reasonable
basis for my opinion.
In
my
opinion, the financial statements referred to above present fairly, in
all
material respects, the financial position of IOWC Technologies Inc. as
of
December 31, 2005 and 2004 and the results of their operations and their
cash
flows for the years then ended, in conformity with accounting principles
generally accepted in the United States of America.
The
accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note 1 to the consolidated
financial statements, the Company has limited liquid resources, recurring
losses, and is seeking to implement its business plan, which requires
the
Company to be acquired or develop a business. These matters raise
substantial doubt about its ability to continue as a going concern. Management's
plans in regard to these matters are also discussed in Note 1.
The financial statements do not include any adjustment that might result
from the outcome of this uncertainty.
/s/
JEFFREY S. GILBERT
Los
Angeles, California
October
19, 2006
See
accompanying notes to financial statements
IOWC
TECHNOLOGIES INC.
BALANCE
SHEET
As
of
September 30, 2006 (unaudited),
and
as
of December 31, 2005 and 2004
ASSETS
|
|
|
|
September
30,
2006
|
|
December
31,
2005
|
|
December
31,
2004
|
|
|
|
(unaudited)
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
Cash
|
|
$
|
40,558
|
|
$
|
-
|
|
$
|
5,397
|
|
Total
Current Assets
|
|
|
40,558
|
|
|
-
|
|
|
5,397
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
ASSETS
|
|
$
|
40,558
|
|
$
|
-
|
|
$
|
5,397
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
Accounts
Payable and Accrued Expenses
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Total
Current Liabilities
|
|
|
-
|
|
|
- |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’
EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock, No Par Value, 120 shares issued and outstanding
|
|
|
1
|
|
|
1
|
|
|
1
|
|
Additional
Paid in Capital
|
|
|
715,814
|
|
|
566,430
|
|
|
410,510
|
|
Accumulated
Deficit
|
|
|
(675,257
|
)
|
|
(566,431
|
)
|
|
(405,114
|
)
|
Total
Stockholders’ Equity
|
|
|
40,558
|
|
|
-
|
|
|
5,397
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
|
$
|
40,558
|
|
$
|
-
|
|
$
|
5,397
|
|
See
accompanying notes to financial statements
IOWC
TECHNOLOGIES INC.
STATEMENT
OF OPERATIONS
For
the
Years Ended December 31, 2005 and 2004
For
the
Nine Months Ended September 30, 2006 and 2005 (unaudited)
|
|
September
30,
2006
|
|
September
30,
2005
|
|
December
31,
2005
|
|
December
31,
2004
|
|
Revenue
|
|
(Unaudited)
|
|
(Unaudited)
|
|
|
|
|
|
License
Revenue
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs
and Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling,
General and Administrative
|
|
|
(108,826
|
)
|
|
(76,184
|
)
|
|
(161,317
|
)
|
|
(193,575
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from operations
|
|
|
(108,826
|
)
|
|
(76,184
|
)
|
|
(161,317
|
)
|
|
(193,575
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
Before Income Taxes
|
|
|
(108,826
|
)
|
|
(76,184
|
)
|
|
(161,317
|
)
|
|
(193,575
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision
for Income Taxes
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss
|
|
$
|
(108,826
|
)
|
$
|
(76,184
|
)
|
$
|
(161,317
|
)
|
$
|
(193,575
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See
accompanying notes to financial statements
IOWC
TECHNOLOGIES INC.
STATEMENT
OF CASH FLOWS
For
the
Years Ended December 31, 2005 and 2004
For
the
Nine Months Ended September 30, 2006, and 2005 (unaudited)
|
|
September
30,
2006
|
|
September
30,
2005
|
|
December
31,
2005
|
|
December
31,
2004
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES
|
|
(Unaudited)
|
|
(Unaudited)
|
|
|
|
|
|
Net
Income (Loss)
|
|
$
|
(108,826
|
)
|
$
|
(76,184
|
)
|
$
|
(161,317
|
)
|
$
|
(193,575
|
)
|
Adjustments
to Reconcile Net Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Cash Used In Operating Activities
|
|
|
(108,826
|
)
|
|
(76,184
|
)
|
|
(161,317
|
)
|
|
(193,575
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
No
cash used in of from investing activities
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contributions
|
|
|
149,384
|
|
|
70,787
|
|
|
155,920
|
|
|
198,972
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Cash Provided by (Used in) Continuing Operations
|
|
|
40,558
|
|
|
(5,397
|
)
|
|
(5,397
|
)
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH
AND CASH EQUIVALENTS - BEGINNING
|
|
|
-
|
|
|
5,397
|
|
|
5,397
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH
AND CASH EQUIVALENTS - ENDING
|
|
$
|
40,558
|
|
$
|
-
|
|
$
|
-
|
|
$
|
5,397
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See
accompanying notes to financial statements
IOWC
TECHNOLOGIES INC.
STATEMENTS
OF CHANGES IN STOCKHOLDER’S DEFICIENCY
For
the
Year Ended December 31, 2005
For
the
Nine Months Ended September 30, 2006 (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Number
of
|
|
No
Par
|
|
Additional
Paid
|
|
Accumulated
|
|
|
|
Shares
|
|
Value
|
|
In
Capital
|
|
Deficit
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE
AT December 31, 2003
|
|
|
120
|
|
$
|
1
|
|
$
|
211,538
|
|
$
|
(211,539
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contributions
|
|
|
|
|
|
|
|
|
198,972
|
|
|
-
|
|
Net
Loss for the year ended December 31, 2004
|
|
|
|
|
|
|
|
|
|
|
|
(193,575
|
)
|
BALANCE
AT December 31, 2004
|
|
|
120
|
|
|
1
|
|
|
410,510
|
|
|
(405,114
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contributions
|
|
|
|
|
|
|
|
|
155,920
|
|
|
-
|
|
Net
Loss for the year ended December 31, 2005
|
|
|
|
|
|
|
|
|
|
|
|
(161,317
|
)
|
BALANCE
AT December 31, 2004
|
|
|
120
|
|
|
1
|
|
|
566,430
|
|
|
(566,431
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contributions
|
|
|
|
|
|
|
|
|
149,384
|
|
|
-
|
|
Net
Loss for the nine months ended September 30, 2006
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
(108,826
|
)
|
BALANCE
AT September 30, 2006 (unaudited)
|
|
|
120
|
|
$
|
1
|
|
$
|
715,814
|
|
$
|
675,257
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See
accompanying notes to financial statements
IOWC
TECHNOLOGIES INC.
Notes
to
the Financial Statements
Note
1. Organization and Business
Organization
IOWC
Technologies Inc., (the “Company”), was formed December 2000 in Edmonton,
Alberta, under the Business Corporations Act of Canada. Kenneth R.
Code (“Code”)
is its sole owner and sole Director. See also Note 4.
Business
Code
is
listed as the inventor of two patents on file with the United States
Patent and
Trademark office: (i) number 6,146,725, entitled “Absorbent Composition”; and
(ii) number 6,328,929, entitled “Method of Delivering Disinfectant in an
Absorbent Substrate”. These patented technologies incorporate anti-infective
agents into fabric-type absorbent webs to make products that neutralize
bio-hazardous materials, are biodegradable, and may be disposed of
in the normal
waste stream, for use in products designed for distribution in the
food, medical
and biohazardous material transportation industries. As of December
31, 2005,
Code had transferred all of his right, title and interest in the two
patents to
the Company.
The
Company’s sole business objective is to develop relationships to license this
technology for third party use.
The
financial statements have been prepared on a going concern basis, which
contemplates the realization of assets and the settlement of liabilities
and
commitments in the normal course of our business. The Company had a
net loss of
$108,826 and $76,184 for the nine-month periods ended September 30,
2006 and
2005, respectively. The Company had a net loss of $193,575 and $161,317
for the
twelve months ended December 31, 2004 and 2005, respectively.
As
of
September 2006, the Company has limited liquidity and capital resources.
These
factors raise substantial doubt about its ability to continue as a
going
concern. Ultimately, the Company’s ability to continue as a going concern is
dependent upon its ability to attract new sources of capital, establish
relationships to enter into marketing and license agreements, and achieve
a
reasonable threshold of operating efficiencies and achieve profitable
operations.
Note
2. Summary of Significant Accounting Policies
a)
Principles
of Consolidation.
There
are
no subsidiaries.
IOWC
TECHNOLOGIES INC.
Notes
to
the Financial Statements
b)
Property
and Equipment.
Maintenance
and repairs are charged to expense as incurred. There were no capital
expenditures.
c)
Use
of
Estimates.
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management
to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at the
date of
the financial statements, and revenues and expenses during the period reported.
Actual results could differ from those estimates. Estimates are used when
accounting for stock-based transactions, uncollectible accounts receivable,
asset depreciation and amortization, and taxes, among others.
d) Revenue
Recognition.
The
Company generated $ -0- revenue in 2004 and 2005. The Company generated
$ -0-
revenue for the nine months ended September 30, 2006.
e)
Common
Stock.
All
common stock of the Company is owned by Code, also its sole Director and
President.
Note
3. Pending Sale of Assets
On
July
25, 2005, the Company executed a letter of intent (“LOI”) with NuWay Medical
Inc. (“NuWay”), pursuant to which NuWay will acquire certain of the Company’s
assets (the “Purchased Assets”), consisting of certain intellectual property,
including two United States patents (collectively, the “BioLargo Technology”).
The BioLargo Technology relates
to a process whereby disinfecting chemistry is incorporated into absorbent
materials, liquids, powders, tablets or other delivery methods, that can
be then
incorporated into products in multiple industries.
For the purposes of these Notes, the term “BioLargo Products” means any product
designed, manufactured, conceived or contemplated, either at the present
time,
or in the future, based on the BioLargo Technology or any derivation
thereof.
As
the
parties worked toward preparing the documentation called for by LOI and
as the
NuWay began to prepare the proxy materials needed for its stockholders
meeting
(required to approve the issuance of stock to the Company),
it
became increasingly clear to the parties that the length of time and the
costs
involved in preparing documentation for a stockholders meeting would likely
jeopardize the chances that the transactions contemplated by the LOI could
be
completed in a manner benefiting both parties. Accordingly, in late 2005
the
parties began to explore alternative strategies that would enable them
to begin
to realize the benefits of the transactions contemplated by the LOI while
at the
same time allow NuWay to call
a
meeting of its stockholders for the purpose of approving the issuance of
its
shares.
IOWC
TECHNOLOGIES INC.
Notes
to
the Financial Statements
In
furtherance of the proposed transactions with NuWay, on December 31, 2005,
the
Company and Code executed a Marketing and Licensing Agreement (“M&L
Agreement”) with NuWay (through NuWay’s subsidiary BioLargo Life Technologies,
Inc., “BLTI”). Pursuant to the M&L Agreement BLTI acquired certain rights
(“Rights”) from the Company and Code to develop, market, sell and distribute
products that were developed, and are in development, relating to the BioLargo
Technology and BioLargo Products.
Pursuant
to the terms of the M&L Agreement,
the
Company granted to BLTI a license, with respect to the BioLargo Technology
and
the BioLargo Products, to further develop the technology, to further develop
existing and new products based
on that
technology, and to produce, market, sell and distribute any such products,
through its own means, or by contract or assignment to third parties or
otherwise, including without limitation:
· |
Technology
Development Rights. Exclusive
worldwide right to expand and improve upon the existing BioLargo
Technology, to conduct research and development activities based
on the
BioLargo Technology, and to contract with third parties for such
research
and development activities; and any improvements on the BioLargo
Technology, or any new technology resulting from such efforts
of BLTI,
shall be owned solely by BLTI.
|
· |
Product
Development Rights.
Exclusive worldwide right to expand and improve upon the existing
BioLargo
Products, to conduct research and development activities to create
new
products for market, and to contract with third parties for such
research
and development activities. Any new products created by BLTI
resulting
from these efforts shall be owned solely by
BLTI.
|
· |
Marketing
Rights.
Exclusive right to market, advertise, and promote the BioLargo
Technology
and the BioLargo Products in any market and in any manner it
deems
commercially reasonable.
|
· |
Manufacturing
Rights.
A
transferable, worldwide exclusive right to manufacture, or have
manufactured, BioLargo Products.
|
· |
Selling
Rights.
A
transferable, worldwide exclusive right to sell BioLargo Technologies
and
BioLargo Products.
|
· |
Distribution
Rights.
A
transferable, worldwide exclusive right to inventory and distribute
BioLargo Products.
|
· |
Licensing
Rights.
A
transferable, worldwide exclusive right to license BioLargo Technologies
and BioLargo Products to third
parties.
|
IOWC
TECHNOLOGIES INC.
Notes
to
the Financial Statements
Pursuant
to the terms of the M&L Agreement, the
Company also assigned to BLTI its rights and obligations with respect to
the
following
Agreements (collectively, the “Assigned Agreements”):
· |
Agreement
dated October 15, 2004 by and between Kenneth R. Code, the Company,
BioLargo Technologies, Inc., or IOWC’s assigns and Craig Sundheimer and
Lloyd M. Jarvis.
|
· |
Agreement
dated January 15, 2005 by and between Kenneth R. Code and the
Company and
Food Technologies, Inc.
|
· |
Letter
of Intent dated November 2004 by and between Kenneth R. Code
and the
Company and GTS Research, Inc.
|
Pursuant
to the terms of the M&L Agreement, the Company transferred its right to
receive any and all royalties, payments, license fees, and other consideration
generated by the Assigned Agreements as of January 1, 2006. As part of
the
assignment, the Company agreed to transfer its 20% interest in BioLargo,
LLC to
BLTI. In October 2006, NuWay terminated the license agreement with BioLargo,
LLC, for cause. Subsequently, the Company
and NuWay agreed that the 20% interest in BioLargo, LLC would not be transferred
by the Company to BLTI but BLTI would have the option to acquired such
20%
interest for nominal consideration for seven years.
Research
and Development Agreement
On
August
11,
2006,
the Company and Code entered into a Research and Development Agreement,
which
agreement was amended on August 14, 2006 (collectively, the “R&D
Agreement”), with NuWay and BLTI. Pursuant
to the R&D Agreement, the Company and Code will provide its research and
development services and expertise in the field of disposable absorbent
products
to NuWay and
BLTI.
The
R&D Agreement provides that the NuWay and BLTI will own, and NuWay and BLTI
will have the exclusive right to commercially
exploit,
the intellectual
property developed, created, generated, contributed to or reduced to practice
pursuant
to the
R&D Agreement. In addition, the Company and Code have agreed that during
the
term of the R&D Agreement and for one year after termination they will not
compete with, and will not provide services to any person or entity which
competes with, any aspect of BLTI’s business.
The
R&D Agreement terminates on December 31, 2006, unless terminated earlier
as
provided therein. During the term of the R&D Agreement, but only after
mutually acceptable research facilities are established for the performance
of
the Company’s services (which facilities have not been established as of
September 30, 2006), the Company shall be paid (i) a fee of $5,500 per
month for
each month during which no services are being performed pursuant to the
R&D Agreement to offset for laboratory and/or office and employee expenses
and (ii) such additional amounts as the parties may agree in connection
with
specific research projects conducted pursuant to the R&D
Agreement.
IOWC
TECHNOLOGIES INC.
Notes
to
the Financial Statements
As
further consideration to Code to enter into the R&D Agreement, on August 14,
2006 NuWay issued to Code 15,515,913 shares of its Common Stock (the “Code
Stock”), or approximately 19.9% of its issued and outstanding common stock
immediately following the issuance of the Code Stock.
The
M&L Agreement also provides that the parties will enter into certain
additional agreements in furtherance of the LOI, including
(i) an
asset purchase agreement (“Asset Purchase Agreement”) whereby the Company will
acquire the two U.S. patents held by the Company and certain other assets
of the
Company; and (ii) an employment agreement with Mr. Code (the “Code Employment
Agreement”).
NuWay
is
requesting its stockholders
to
approve the above described transactions and the issuance and sale of
553,475,300 shares of its common stock to the Company.
Note
4. Related Party Transactions
Sale
of Technology
In
September 2000, Code agreed to sell all right, title and interest to the
Technology to a third party company. This agreement included several conditions
of performance and in 2001 Code gave written notification claiming that
the
purchaser had breached the purchase agreement, based on its failure to
provide
an operating line of credit required by the asset purchase agreement and
agreements governing the entity. Code formally repudiated the contract.
This
notification was not acknowledged and no further communication has been
made
between companies.
The
Company believes that its ownership in this technology and related patents
are
unencumbered.
Unreimbursed
Business Expenses
In
2004
and 2005, and continuing into 2006, Code paid operating expenses on the
Company’s behalf. These contributions totaled $198,972 and $155,920 for 2004 and
2005, respectively. For the nine months ended September 30, 2006 the expenses
totaled $149,384. All contributions were recorded as additional paid in
capital.
Note
5. Commitments and Contingencies
The
Company is not presently a party to any litigation.
IOWC
TECHNOLOGIES INC.
Notes
to
the Financial Statements
Note
6. Subsequent Events.
In
October 2004, the Company entered into an agreement to license the technology
to
a third party company (“BioLargo LLC”) with no prior relation to the Company.
(This agreement was assigned to BLTI; see Note 3.) As partial consideration,
the
Company received a 20% ownership interest in BioLargo LLC. Pursuant to
this
agreement BioLargo LLC was granted exclusive rights to market and develop
the
technology for specific markets, and nonexclusive rights to market the
technology in other markets. BioLargo LLC failed to meet sales performance
requirements and failed to make required advance royalty payments, and
is
therefore in breach of the agreement. Per the terms of the Agreement, the
breach
has terminated the exclusivity provisions, and gives the Company the right
to
terminate all of BioLargo LLC’s rights in the agreement. The Company assigned
its rights in this agreement to NuWay in the M&L Agreement, and NuWay
exercised its right to terminate this agreement in October 2006.
Plan
of Operations After Consummation of the Transactions
Overview
Assuming
the approval of all the proposals being presented at the Meeting and the
consummation of the Transactions with IOWC, we intend to focus our efforts
primarily on the further research and development, and commercialization
of
products incorporating the BioLargo Technology for at least the next 12 months.
If the Transactions with IOWC are consummated, we intend to commercially
utilize
the BioLargo Technology to develop certain products for use in various
industries.
The
BioLargo Technology will enable us to offer a portable product that comparably
addresses four precautions -- containment, isolation, neutralization and
disposal -- against disease transmission as established by the Center for
Disease Control. We believe that the BioLargo Technology and derivative products
may be applied in products in several vertical markets.
We
believe that the primary initial markets for our products are likely to
be:
|
· |
packaging
for blood and bio-hazardous material
transport
|
|
· |
meat
and poultry packing
|
|
· |
disaster
relief efforts, soil and sand remediation, and water
treatment
|
We
plan
to pursue our primary revenues from licensing the BioLargo Technology, rather
than becoming a manufacturer of products incorporating the BioLargo Technology.
We currently have multiple products available for immediate distribution,
namely
absorbent pads and materials to be used for clean-up of or as a precautionary
measure from spills of liquids, including hazardous materials. We will also
continue to actively develop additional products for distribution by working
with manufacturers, other technology developers and potential customers.
However, while we have been engaged in extensive negotiations with numerous
potential licensees and other users of the products incorporating the BioLargo
Technology, there are no such agreements in place to date and therefore we
cannot forecast when we will first generate revenues. Nonetheless, we currently
believe that we will begin generating licensing revenue during
2007.
Sales
and Marketing
Over
at
least the next 12 months, we intend to devote a significant part of our
resources to sales and marketing of the BioLargo Technology. However, we
are not
able to estimate at present the number of people we may hire, and the estimated
costs associated with such hires, for this effort. This is a continuation
of the
initial efforts we have undertaken during 2006. While specific efforts will
vary
based on market conditions and opportunities that present themselves from
time
to time, the following discussion of recent efforts is indicative of the
types
of efforts we expect to undertake after consummation of the
Transactions.
In
April
2006, we engaged Robert Stewart, Ph.D., to serve as the Company’s regulatory
specialist for EPA and FDA required activities. During this period, we also
focused on establishing relationships with key agents who work on a commission
basis to assist us in marketing to large corporations and other organizations.
In May 2006, we hired a consultant to assist us on our marketing and sales
efforts.
From
February through April, 2006, we began discussions with five major research
universities to further our research for specific applications. In September
2006, we hired UCLA to research applications of the BioLargo technology for
beach and soil remediation. An initial report regarding this research was
presented in October 2006 at the National Beaches Conference sponsored by
the
EPA. These various discussions are ongoing and focus on engaging those
universities to perform research on the BioLargo Technology for soil and
sand
remediation, animal studies, Department of Defense applications, and embedded
anti-microbial applications in textiles.
Throughout
2006, we engaged in various efforts to continue testing, developing and
pre-marketing products incorporating the BioLargo Technology. For example,
in
January 2006, we contracted with a third party manufacturer to produce samples
for presentation purposes of absorbent pads. We also engaged a particle,
formulations, blending and specialty manufacturing company to work with us
in
product development and sample fabrication. In June 2006, we hired a third-party
laboratory to perform a series of independent test and issue their reports
to
assist us in validating the BioLargo Technology to a Good Lab Practices
Standard.
Throughout
2006, we also were actively involved in initial marketing activities for
the
BioLargo Technology. For example, in February 2006, we presented the BioLargo
Technology to a number major corporations for potential licensing discussions.
Following an April 2006 international conference of industry for infection
control in Prague, Czech Republic, attended by Mr. Code, we pursued with
Mr.
Code presentations to one of the largest companies in the embedded
anti-microbial industry. In June 2006, we began discussions with a number
of
large healthcare companies about incorporating the BioLargo Technology in
their
products. The potential areas of focus include wound dressings, drapes, wipes,
bandages, diapers disinfecting and sterilization solutions, among other possible
uses in their various products.
In
June
2006, we participated in a conference for all government agencies throughout
California and have since discussed the BioLargo technology for possible
governmental use in sewage spills, water quality, rainwater runoff contamination
problems and beach clean-up efforts. Also in June 2006, we participated in
a
national military defense conference sponsored by the National Defense Industry
Association for all military services, including Homeland Security, and have
since discussed the BioLargo Technology for possible application in the areas
of
military hospitals, pandemic prevention, agricultural protection, hazardous
waste, food protection, decontamination of porous and non-porous materials,
disaster relief and national world class laboratory access. Subsequently,
we
have presented the BioLargo technology with other governmental officials
and
agencies. In September we also attended a national Agro Terrorism Conference
sponsored by the Federal Bureau of Investigation and the Joint Terrorism
Task
Force.
Meetings
with numerous potential licensees or purchasers or other users of products
incorporating the BioLargo Technology in a wide range of applications, have
continued. However, it is essential to note that we do not yet have any
agreements in place with any of these potential licensees, purchasers or
other
users, or any other potential licensees, purchasers or other users, regarding
any products incorporating the BioLargo Technology, and no assurance can
be
given if any such efforts will prove successful.
Research
and Development
We
currently anticipate that research and development costs we incur over the
next
12 months could range significantly, between $300,000 and $1,000,000. This
money
is likely to be spent primarily on further research and development of the
BioLargo Technology, continued testing of the efficacy of the BioLargo
Technology in certain applications and the development of additional production
methods for use of the BioLargo Technology in certain applications.
Additionally,
we currently anticipate that additional patent applications will be filed
during
the next 12 months with the United States Patent and Trademark Office, although
we are uncertain of the cost of such patent filings, which will depend upon
the
number of such applications prepared and filed. This is a continuation of
recent
such activities. For example, in September 2006, Mr. Code, as inventor, and
BLTI, as assignee, filed two patent applications with the US Patent and
Trademark Office. A third patent application was filed on October 11, 2006
by and for the same parties.
Selling,
General and Administrative Expenses
Selling,
general and administrative expenses were $1,077,000 for the nine-month period
ended September 30, 2006. Even though the allocation of specific categories
of
expenditures are likely to change during the next 12 months compared to
historical allocations of such expenditures, we currently anticipate that
this
annualized rate of expenditure is likely to increase during
the next 12 months. The primary components of such increase are likely
to include research and development, salary for additional sales and
marketing personnel that will be hired as our business activities expand,
additional operational and/or administrative staff, the costs of compliance
with
the Sarbanes-Oxley Act of 2002 including internal controls functions, and
increased professional fees associated with increased business activities.
Liquidity
and Capital Resources
General
We
have
been, and immediately after the consummation of the Transactions with IOWC
we
will be, limited in terms of our capital resources. Our cash position is,
and
immediately after the consummation of the Transactions will be, insufficient
to
meet our continuing anticipated expenses or fund anticipated operating expenses
after the consummation of the Transactions with IOWC. Accordingly, we will
be
required to raise additional capital to sustain operations and implement
our
post-acquisition business plan.
As
of
September 30, 2006, we had limited liquid and capital resources, raising
a
substantial doubt about our ability to continue as a going concern. Ultimately,
our ability to continue as a going concern is dependent upon its ability
to
attract new sources of capital, attain a reasonable threshold of operating
efficiencies and achieve profitable operations by commercializing products
incorporating the BioLargo Technology. The pro forma financial statements
presented herein do not include any adjustments that might be necessary if
we
are unable to continue as a going concern.
We
have
approximately $2,398,070 aggregate principal amount of our promissory notes
that
mature at various times during 2007. We do not presently have funds sufficient
to repay these obligations as they mature. We have the right to require
$1,978,070 aggregate principal amount of the notes into shares of our common
stock. The remaining $420,000 principal amount of these notes permit, but
do not
require, the holder thereof to convert the notes into shares of our common
stock, even assuming the approval of the increase in our capital stock pursuant
to the proposed amendment to our certificate of incorporation, the holder
of
such note may not elect to convert its note into shares of common stock.
In the
event that we have not raised further capital prior to the maturity date
of such
remaining $420,000 principal amount of such convertible notes which do not
have
a mandatory conversion feature and, absent any new agreement between the
Company
and the holder of this note, we would be in default of that note. In addition,
if our stockholders have not formally approved an increase in the number
of our
authorized common shares, or unless we are able to refinance or renegotiate
the
terms of the notes, we would also be in default of the $1,978,070 principal
amount of notes which do have a mandatory conversion feature. No financing
is in
place at present, and it is unknown if any financing will be in place in
the
future, which would permit us to repay these notes in full as they mature.
We
have obtained the consent of all of our noteholders to extend the maturity
date
of those convertible notes until after we have held the Meeting, to approve,
among other things, an increase in our authorized capital stock and thereby
permit the conversion of such notes into shares of our common stock.
In
order
to meet the foregoing operating expenses and financial obligations, we have
been
forced to use cash on hand to fund our operations. We have also been conducting
a private offering of our convertible notes to a limited number of accredited
investors to provide additional working capital. Depending upon the success
of
this ongoing offering, the details of which are reported in the reports that
we
file periodically with the SEC, such proceeds could provide additional capital
for the next several months at most.
We
are
actively pursuing numerous alternatives for our current and longer-term
financial requirements, including additional raises of capital from investors
in
the form of convertible debt or equity. Negotiations are underway with various
sources of such capital. However, some of these financing alternatives will
likely not be made available, if they are made available at all, until and
unless our stockholders approve the proposals being presented to them at
the
Meeting. Accordingly, there is no assurance that we will be able to raise
any
additional capital. It is unlikely that we will be able to qualify for bank
debt
until such time as our operations are considerably more advanced and we are
able
to demonstrate the financial strength to provide confidence for a lender,
which
we do not currently believe is likely to occur for at least the next 12
months.
Pro
Forma Financial Information
INDEX
TO
PRO FORMA FINANCIAL STATEMENTS
Consolidating Balance Sheet as of December
31, 2005 |
|
38
|
|
|
|
Consolidating Statement of Operations
for the
year ended
December 31, 2005 |
|
39
|
|
|
|
Consolidating Balance Sheet as of September
30, 2006 |
|
40
|
|
|
|
Consolidating Statement of Operations
for the
nine-month period ended
September 30, 2006 |
|
41
|
|
|
|
Notes to Consolidating Financial
Statements |
|
42
|
PRO
FORMA UNAUDITED CONSOLIDATING
FINANCIAL STATEMENTS OF NUWAY MEDICAL,
INC.
AND IOWC TECHNOLOGIES INC.
The
following pro forma unaudited consolidating financial statements of the “Company
and IOWC are presented here to provide information on the financial history
of
the combined entities, although the Company is not acquiring IOWC. The Company
however is acquiring IOWCs significant asset (its developed technology) through
licensing agreement so the Company will have the right licensed to exploit
this
technology. The licensing agreement the Company has entered into represents
a
significant transaction that if successful will represent the future major
operating activity of the Company.
The
Company will issue 59.3% of its common stock to obtain the licensing agreement
with the entity, which will have no valuation on the Company's financial
statements and has issued an additional 15,515,913 shares of its common stock
issued to the individual controlling IOWC to induce him to enter into an
employment agreement with the Company. This issuance has been reflected as
a
charge to income based on the valuation of the shares issued to him.
These
unaudited proforma consolidating financial statements should be read in
conjunction with the historical financial statements of the Company and of
IOWC
and the accompanying disclosures contained in this proxy statement or which
are
incorporated by reference herein. These proform financial statements are
provided for informational purposes only and do not purport to represent
what
the Company’s financial position or results of operations would actually have
been had the transactions with IOWC been consummated on the dates of such
statements or to project results of operations or financial position for
any
future period.
NUWAY
MEDICAL, INC AND SUBSIDIARY
IOWC
TECHNOLOGIES INC.
PRO
FORMA UNAUDITED CONSOLIDATING BALANCE SHEET
AS
OF DECEMBER 31, 2005
|
|
NuWay
Medical, Inc. and Subsidiary
|
|
IOWC
Technologies Inc.
|
|
Adjustments
|
|
Pro
Forma
|
|
CURRENT
ASSETS
|
|
|
|
|
|
|
|
|
|
Cash
and Cash Equivalents
|
|
$
|
283,462
|
|
$
|
-
|
|
|
|
|
$
|
283,462
|
|
Total
Current Assets
|
|
|
283,462
|
|
|
-
|
|
|
|
|
|
283,462
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
ASSETS
|
|
$
|
283,462
|
|
|
-
|
|
|
|
|
$
|
283,462
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ DEFICIENCY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
Payable and Accrued Expenses
|
|
$
|
2,312,663
|
|
$
|
-
|
|
|
|
|
$
|
2,312,663
|
|
Notes
Pa yable
|
|
|
2,740,570
|
|
|
-
|
|
|
|
|
|
2,740,570
|
|
Debentures
Payable, Net
|
|
|
21,151
|
|
|
-
|
|
|
|
|
|
21,151
|
|
Total
Current Liabilities
|
|
|
5,074,384
|
|
|
-
|
|
|
|
|
|
5,074,384
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS'
DEFICIENCY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible
Preferred Series A, $.00067 Par Value, 25,000,000 Shares Authorized,
559,322 Shares Issued and Outstanding at December 31, 2005
|
|
|
375
|
|
|
-
|
|
|
|
|
|
375
|
|
Common
Stock, $.00067 Par Value, 100,000,000 Shares Authorized, 62,333,501
Shares
Issued At December 31, 2005 (196,947,700 shares issued after close
of IOWC
transaction)
|
|
|
41,056
|
|
|
1
|
|
|
86,391
|
|
|
127,448
|
|
Additional
Paid-In Capital
|
|
|
23,396,834
|
|
|
566,430
|
|
|
(652,822
|
)
|
|
23,310,442
|
|
Accumulated
Deficit
|
|
|
(28,229,187
|
)
|
|
(566,431
|
)
|
|
566,431
|
|
|
(28,229,187
|
)
|
Total
Stockholders’ Deficiency
|
|
|
(4,790,922
|
)
|
|
-
|
|
|
-
|
|
|
(4,790,922
|
)
|
TOTAL
LIABILITIES AND STOCKHOLDERS’ DEFICIENCY
|
|
$
|
283,462
|
|
|
-
|
|
$
|
-
|
|
$
|
283,462
|
|
NUWAY
MEDICAL, INC AND SUBSIDIARY
IOWC
TECHNOLOGIES INC.
PRO
FORMA UNAUDITED CONSOLIDATING STATEMENTS OF OPERATIONS
FOR
THE YEAR ENDED DECEMBER 31, 2005
|
|
NuWay
Medical, Inc. and Subsidiary
|
|
IOWC
Technologies Inc.
|
|
Adjustments
|
|
Pro
Forma
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
-
|
|
|
-
|
|
|
|
|
|
-
|
|
Total
Revenues
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs
and Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling,
General and Administrative
|
|
$
|
944,807
|
|
$
|
161,317
|
|
|
-
|
|
$
|
1,106,124
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Costs and Expenses
|
|
|
944,807
|
|
|
161,137
|
|
|
-
|
|
|
1,106,124
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from operations
|
|
|
(944,807
|
)
|
|
(161,137
|
)
|
|
-
|
|
|
(1,106,124
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
Income and Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
Expense
|
|
|
242,494
|
|
|
-
|
|
|
-
|
|
|
242,494
|
|
Net
Other Expenses
|
|
|
(242,494
|
)
|
|
-
|
|
|
-
|
|
|
(242,494
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss
|
|
$
|
(1,187,301
|
)
|
$
|
(161,317
|
)
|
|
-
|
|
$
|
(1,348,618
|
)
|
NUWAY
MEDICAL, INC AND SUBSIDIARY
IOWC
TECHNOLOGIES INC.
PRO
FORMA UNAUDITED CONSOLIDATING BALANCE SHEET
AS
OF SEPTEMBER 30, 2006
|
|
NuWay
Medical, Inc. and Subsidiary
|
|
IOWC
Technologies Inc.
|
|
Adjustments
|
|
Pro
Forma
|
|
CURRENT
ASSETS
|
|
|
|
|
|
|
|
|
|
Cash
and Cash Equivalents
|
|
$
|
98,497
|
|
$
|
40,558
|
|
|
-
|
|
$
|
139,055
|
|
Prepaid
Expenses
|
|
|
21,500
|
|
|
|
|
|
-
|
|
|
21,500
|
|
Total
Current Assets
|
|
|
119,747
|
|
|
40,558
|
|
|
-
|
|
|
160,555
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
ASSETS
|
|
$
|
119,747
|
|
$
|
40,558
|
|
|
-
|
|
$
|
160,555
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ DEFICIENCY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
Payable and Accrued Expenses
|
|
$
|
2,544,629
|
|
$
|
-
|
|
|
-
|
|
$
|
2,544,629
|
|
Notes
Pa yable
|
|
|
3,298,070
|
|
|
-
|
|
|
-
|
|
|
3,298,070
|
|
Debentures
Payable, Net
|
|
|
21,151
|
|
|
-
|
|
|
-
|
|
|
21,151
|
|
Total
Current Liabilities
|
|
|
5,863,850
|
|
|
-
|
|
|
-
|
|
|
5,863,850
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS'
DEFICIENCY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible
Preferred Series A, $.00067 Par Value, 25,000,000 Shares Authorized,
399,322 Shares Issued and Outstanding at September 30, 2006
|
|
|
268
|
|
|
-
|
|
|
-
|
|
|
268
|
|
Common
Stock, $.00067 Par Value, 100,000,000 Shares Authorized, 77,994,158
Shares
Issued At September 30, 2006 (191,631,323 shares issued and outstanding
after close of IOWC transaction)
|
|
|
52,256
|
|
|
1
|
|
|
76,136
|
|
|
128,393
|
|
Additional
Paid-In Capital
|
|
|
23,618,480
|
|
|
715,814
|
|
|
(751,393
|
)
|
|
23,582,901
|
|
Accumulated
Deficit
|
|
|
(29,415,107
|
)
|
|
(675,257
|
)
|
|
675,257
|
|
|
(29,415,107
|
)
|
Total
Stockholders’ Deficiency
|
|
|
(5,744,103
|
)
|
|
40,558
|
|
|
-
|
|
|
(5,703,545
|
)
|
TOTAL
LIABILITIES AND STOCKHOLDERS’ DEFICIENCY
|
|
$
|
119,747
|
|
$
|
40,558
|
|
|
-
|
|
$
|
160,305
|
|
NUWAY
MEDICAL, INC AND SUBSIDIARY
IOWC
TECHNOLOGIES INC.
PRO
FORMA UNAUDITED CONSOLIDATING STATEMENTS OF OPERATIONS
FOR
THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2006
|
|
NuWay
Medical, Inc. and Subsidiary
|
|
IOWC
Technologies Inc.
|
|
Adjustments
|
|
Pro
Forma
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Total
Revenues
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs
and Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research
and Development
|
|
$
|
108,298
|
|
$
|
-
|
|
|
-
|
|
$
|
108,298
|
|
Selling,
General and Administrative
|
|
|
1,077,468
|
|
|
76,184
|
|
|
-
|
|
|
1,153,682
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Costs and Expenses
|
|
|
1,185,766
|
|
|
76,184
|
|
|
-
|
|
|
1,261,950
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from operations
|
|
|
(1,185,766
|
)
|
|
(76,184
|
)
|
|
-
|
|
|
(1,261,950
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
Income and Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
Expense
|
|
|
(282,474
|
)
|
|
-
|
|
|
-
|
|
|
(282,274
|
)
|
Reduction
to Note Payable and related accrued interest
|
|
|
282,320
|
|
|
-
|
|
|
-
|
|
|
282,320
|
|
Net
Other Income (and Expense)
|
|
|
(154
|
)
|
|
-
|
|
|
-
|
|
|
(154
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss
|
|
$
|
(1,185,920
|
)
|
$
|
(76,184
|
)
|
|
-
|
|
$
|
(1,262,104
|
)
|
NUWAY
MEDICAL, INC AND IOWC TECHNOLOGIES INC.
Notes
to Pro Forma Unaudited Consolidating
Financial
Statements
Note
1. Business and
Organization
Outlook
Both
entities (NuWay and IOWC) had no continuing business operations as of December
31, 2005 and September 30, 2006. The Company (NuWay) operated as a shell company
during the twelve-month period ended December 31, 2005, and operations primarily
consisted of the Company seeking funding, maintaining the corporate entity,
complying with the reporting and other requirements of the Securities Exchange
Commission (the “SEC”),
engaging in
ongoing research and development for the BioLargo Technology (as defined below),
engaging in initial marketing activities for the BioLargo Technology and
planning for the consummation of certain proposed transactions (the “Transactions”),
as described
below. See discussion of the Transactions with IOWC Technologies, Inc. (“IOWC”),
below.
The
Company will need working capital resources to
maintain the Company's status and to fund other anticipated costs and expenses
during the year ending December 31, 2006 and beyond. The Company's ability
to
continue as a going concern is dependent on the Company's ability to raise
capital. If the Company is able to acquire IOWC's assets, it will need
additional capital until and unless that prospective operation is able to
generate positive working capital sufficient to fund the Company's cash flow
requirements from operations.
Note
2. Transactions involving IOWC Technologies Inc.
See
the
information under the following captions under this “Proposal One:” (i)
“BioLargo Technology and BioLargo Products,” (ii) “Letter of Intent,” (iii)
“Marketing and Licensing Agreement,” (iv) “Consulting Agreement,” (v) “Research
and Development Agreement,” (vi) “Other Agreements,” (vii) “Asset Purchase
Agreement,” (viii) “Code Employment Agreement,” (ix) “Management of the Company
after the Transactions,” and (x) “Consequences if Stockholders Do Not Approve
Transactions.”
Note
3. Adjustment for Issuance of Common Stock
The
adjustment for the acquisition of the developed technology from IWOC is based
on
a calculation to determine the number of shares required to be issued for the
sellers to own 59.3% after issuance of the common stock of the Company based
on
the then historical shares of common stock outstanding at the respective balance
sheets dates. No impact is considered related to the proposed possible reverse
stock split nor the conversion of any shares that could be issued including
shares related to the conversion of certain notes payable and related accrued
interest.
SELECTED
FINANCIAL DATA AND PRO FORMA SELECTED FINANCIAL DATA AND
INFORMATION
The
selected historic consolidated statements of operations and balance sheet
data
for the years ended December 31, 2005, 2004, 2003, 2002 and 2001are derived
from
audited consolidated financial statements included in our various filed Form
10-KSBs. Our historical results are not necessarily indicative of the results
that may be achieved for any other period. The selected historic consolidated
statements of operations and balance sheet data for the periods ended September
30, 2006 and 2005 are derived from unaudited consolidated financial statements
included in our filed Form 10-QSBs. The selected Pro-Forma data are derived
from
the Pro-Forma Financial Statements included elsewhere in this Proxy. The
following historic data should be read in conjunction with
information contained under the caption “Management’s
Discussion and Analysis of Financial Condition and Results of Operations”
contained in this proxy statement or which are incorporated by reference
herein.
NuWay
Medical, Inc. and Subsidiary
(formerly NuWay Energy, Inc.; formerly Latin
American Casinos, Inc.)
|
|
Pro
forma
|
|
|
|
|
|
|
|
|
|
|
|
Periods
|
|
|
|
Nine
months ended
|
|
Year
|
|
Years
|
|
Nine
months ended
|
|
|
|
Sept
30, 2006
|
|
Dec
31, 2005
|
|
2005
|
|
2004
|
|
2003
|
|
2002
|
|
2001
|
|
Sept
30, 2006
|
|
Sept
30, 2005
|
|
Net
revenues from continuing operations
|
|
$
|
—
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
1,261,950
|
|
|
1,105,944
|
|
|
944,807
|
|
|
971,944
|
|
|
2,339,264
|
|
|
1,495,421
|
|
|
2,867,775
|
|
|
1,185,766
|
|
|
716401
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
(loss)
|
|
|
(1,261,950
|
)
|
|
(1,105,944
|
)
|
|
(944,807
|
)
|
|
(971,944
|
)
|
|
(2,339,264
|
)
|
|
(1,495,421
|
)
|
|
(2,864,175
|
)
|
|
(1,185,766
|
)
|
|
(716,401
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
income (expenses)
|
|
|
(154
|
)
|
|
(242,494
|
)
|
|
(242,494
|
)
|
|
(246,104
|
)
|
|
(344,832
|
)
|
|
6,741
|
|
|
121,935
|
|
|
(154
|
)
|
|
(171,344
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss)
from continuing operations
|
|
|
(1,262,104
|
)
|
|
(1,348,438
|
)
|
|
(1,187,301
|
)
|
|
(1,218,048
|
)
|
|
(2,684,096
|
)
|
|
(1,488,680
|
)
|
|
(2,742,240
|
)
|
|
(1,185,920
|
)
|
|
(887,745
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss)
from discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,938,113
|
)
|
|
(3,448,417
|
)
|
|
(3,910,193
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
(loss)
|
|
$
|
(1,262,104
|
)
|
$
|
(1,348,438
|
)
|
$
|
(1,187,301
|
)
|
$
|
(1,218,048
|
)
|
$
|
(7,622,209
|
)
|
$
|
(4,937,097
|
)
|
$
|
(6,652,433
|
)
|
$
|
(1,185,920
|
)
|
$
|
(887,745
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted
|
|
|
|
|
|
|
|
$
|
(0.02
|
)
|
$
|
(0.03
|
)
|
$
|
(0.08
|
)
|
$
|
(0.15
|
)
|
$
|
(0.35
|
)
|
$
|
(0.02
|
)
|
$
|
(0.01
|
)
|
Discontinued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.07
|
)
|
|
(0.35
|
)
|
|
(1.56
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss per share-basic and diluted
|
|
|
|
|
|
|
|
$
|
(0.02
|
)
|
$
|
(0.03
|
)
|
$
|
(0.15
|
)
|
$
|
(0.50
|
)
|
$
|
(1.91
|
)
|
$
|
(0.02
|
)
|
$
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
used in calculating net (loss) per common share-basic and
diluted
|
|
|
|
|
|
|
|
|
54,041,809
|
|
|
45,987,808
|
|
|
30,466,628
|
|
|
9,791,396
|
|
|
4,255,903
|
|
|
65,290,866
|
|
|
54,416,987
|
|
Shares
used in calculating net (loss) per common
share-discontinued
|
|
|
|
|
|
|
|
|
54,041,809
|
|
|
45,987,808
|
|
|
30,466,628
|
|
|
9,791,396
|
|
|
4,255,903
|
|
|
65,290,866
|
|
|
54,416,987
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro
forma net loss per share
|
|
$ |
(0.01
|
)
|
$ |
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
used in calculating pro forma net (loss) per common share
|
|
|
188,656,008
|
|
|
178,928,031
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Working
capital (deficiency)
|
|
$ |
(4,790,922
|
)
|
$ |
(4,790,922
|
)
|
$ |
(4,790,922
|
)
|
$ |
(3,707,521
|
)
|
$ |
(2,923,673
|
)
|
$ |
(2,401,058
|
)
|
$ |
(2,078,650
|
)
|
$
|
5,744,103
|
|
$
|
4,591,366
|
|
Total
assets
|
|
$
|
283,462
|
|
$
|
283,462
|
|
$
|
283,462
|
|
$
|
0
|
|
$
|
671
|
|
$
|
4,374,365
|
|
$
|
4,590,332
|
|
$
|
119,747
|
|
$
|
144,997
|
|
Total
debt
|
|
$
|
5,074,384
|
|
$
|
5,074,384
|
|
$
|
5,074,384
|
|
$
|
3,707,521
|
|
$
|
2,924,344
|
|
$
|
2,401,579
|
|
$
|
3,385,780
|
|
$
|
5,863,850
|
|
$
|
4,636,363
|
|
Stockholders'
equity (deficit)
|
|
$ |
(4,790,922
|
)
|
$ |
(4,790,922
|
)
|
$ |
(4,790,922
|
)
|
$ |
(3,707,521
|
)
|
$ |
(2,923,673
|
)
|
$
|
1,972,786
|
|
$
|
1,204,532
|
|
$ |
(5,744,103
|
)
|
$ |
(4,491,366
|
)
|
Common
stock outstanding at end of the period
|
|
|
191,631,323
|
|
|
196,947,700
|
|
|
63,333,501
|
|
|
51,981,236
|
|
|
36,341,586
|
|
|
17,092,827
|
|
|
5,033,883
|
|
|
77,994,158
|
|
|
51,981,236
|
|
Book
value per share-historic
|
|
|
|
|
|
|
|
$
|
(0.08
|
)
|
$
|
(0.07
|
)
|
$
|
(0.08
|
)
|
$
|
0.12
|
|
|
0.24
|
|
$
|
(0.07
|
)
|
$
|
(0.09
|
)
|
Book
value per share-proforma
|
|
$
|
(0.03
|
)
|
$
|
(0.02
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recommendation
of the Board
The
Board
unanimously recommends that stockholders vote FOR
the
issuance of shares of common stock.
PROPOSAL
TWO
PROPOSAL
TO CHANGE THE COMPANY’S NAME
General
In
connection with the proposed acquisition, our Board approved, subject to
stockholder approval, an amendment to the Company’s certificate of incorporation
to change its name from NuWay Medical, Inc. to “BioLargo,
Inc.”
The
text of the proposed amendment is set forth below. A form of the Amended
and
Restated Certificate of Amendment to the Certificate of Incorporation, which
reflects this proposed amendment as well as those described in
Proposal Three and Proposal Four below, is attached as Appendix A (the
“Amended and Restated Certificate”).
Description
of Amendment; Reasons for the Amendment
In
connection with the transactions contemplated with IOWC, the Board has
determined that it is in the best interests of the Company to change its
name so
that its name reflects the new business that is acquiring. In addition, it
is an
obligation of the Company to change its name in connection with the IOWC
transactions.
The
text
of the proposed amendment follows:
RESOLVED,
that the Certificate of Incorporation of the Corporation shall be amended
by
changing Article First thereof such that, as amended, said Article shall
be and
read as follows:
“The
name
of the corporation (which is hereinafter referred to as the “Corporation”) is
“BioLargo,
Inc.”
Right
to Abandon Name Change
Should
the Transactions with IOWC not be consummated for any reason, including its
abandonment by the Board or management of the Company, Proposal Two will
not be
implemented, even if it is approved by the stockholders.
Recommendation
of the Board
The
Board
unanimously recommends a vote FOR
the
proposed name change.
PROPOSAL
THREE
PROPOSAL
TO AUTHORIZE OUR BOARD
OF
DIRECTORS TO EFFECTUATE
A
REVERSE STOCK SPLIT
IN
AN AMOUNT TO BE DETERMINED BY
THE
BOARD BETWEEN 1-FOR-10 AND 1-FOR-100
General
As
of
November
2, 2006, 78,368,736 shares of our common stock were outstanding and
the
per share closing price of our common stock on that date was $0.016. In order
to
reduce the number of shares of common stock outstanding, the Board has
unanimously adopted a resolution seeking stockholder approval to grant the
Board
authority to amend and restate our Certificate of Incorporation to effect
a
reverse stock split of our common stock in an amount to be determined by
the
Board, but between a 1-for-10 and a 1-for-100
reverse split. Approval of this reverse stock split proposal would give the
Board authority to implement the reverse stock split at any time it determined
prior to March 31, 2007. In addition, approval of this reverse stock split
proposal would also give the Board authority to decline to implement a reverse
stock split prior to such date or at all.
If
our
stockholders approve the reverse stock split proposal and the Board decides
to
implement the reverse stock split, we will file the Amended and Restated
Certificate with the Secretary of State of the State of Delaware through
which a
to-be-determined number of shares of common stock issued and outstanding
will be
converted into one fully paid and non-assessable share of common stock, with
any
fractional shares that result from such reverse stock split to be rounded
up to
the nearest whole share of common stock. The reverse stock split, if
implemented, would not change the number of authorized shares of common stock
or
preferred stock or the par value of our common stock or preferred stock,
which
is why we are making a separate proposal to increase the number of authorized
shares of our common stock and preferred stock. See PROPOSAL FOUR.
Except
for any changes as a result of the treatment of fractional shares, each
stockholder will hold the same percentage of common stock outstanding after
the
reverse stock split as such stockholder did immediately prior to the
split.
Purpose
Over
the
past few years, the market price of our common stock has declined. In order
to
reduce the number of shares of our common stock outstanding and thereby attempt
to proportionally raise the per share price of our common stock, the Board
determined that a reverse stock split was desirable in order to: (i) encourage
greater investor interest in our common stock by making the stock price more
attractive to the many investors, particularly institutional investors, who
refrain from investing in lower priced stocks; and (ii) reduce trading fees
and
commissions incurred by stockholders, since these costs are based to a
significant extent on the number of shares traded.
The
Board
believes that the reverse stock split may help encourage greater interest in
our
common stock. The Board believes that the current market price of our common
stock may impair its acceptability to institutional investors, professional
investors and other members of the investing public. Many institutional and
other investors look upon stock trading at low prices as unduly speculative
in
nature and, as a matter of policy, avoid investing in such stocks. Various
brokerage house policies and practices also tend to discourage individual
brokers from dealing in low-priced stocks. Moreover, the analysts at many
brokerage firms do not monitor the trading activity or otherwise provide
research coverage of lower priced stocks. If effected, the reverse stock split
would reduce the number of outstanding shares of our common stock and increase
the trading price of our common stock. The Board believes that raising the
trading price of our common stock will increase the attractiveness of our common
stock to the investment community and possibly promote greater liquidity for
our
existing stockholders. Because broker commissions on low-priced stocks generally
represent a higher percentage of the stock price than commissions on higher
priced stocks, the current share price of our common stock, in the absence
of
the reverse stock split, may continue to result in individual stockholders
paying transaction costs (commissions, markups or markdowns) which are a higher
percentage of their total share value than would be the case if the share price
was substantially higher. For this reason, individual and institutional
investors may be unwilling to purchase our common stock at its current market
price.
If
the
stockholders approve the reverse stock split proposal, the reverse stock split
will be effected, if at all, only upon a determination by the Board that the
reverse stock split is in the best interests of the Company at that time. This
determination will be made by the Board to create the greatest marketability
of
our common stock based on prevailing market conditions at that time. No further
action on the part of stockholders will be required to either implement or
abandon the reverse stock split. If the Board does not implement a reverse
stock
split prior to March 31, 2007, the authority granted in this proposal to
implement a reverse stock split on these terms will terminate. The Board
reserves its right to elect not to proceed with the reverse stock split if
it
determines, in its sole discretion, that the split is no longer in the best
interests of the Company or our stockholders.
Risks
Associated With the Reverse Stock Split
There
can
be no assurance that the total market capitalization of our common stock after
the proposed reverse stock split will be equal to or greater than the total
market capitalization before the proposed reverse stock split or that the per
share market price of our common stock following the reverse stock split will
either exceed or remain higher than the current per share market price. There
can be no assurance that the market price per new share of our common stock
(the
“New Shares”) after the reverse stock split will rise or remain constant in
proportion to the reduction in the number of old shares of our common stock
(the
“Old Shares”) outstanding before the reverse stock split. For example, based on
the closing market price of our common stock on October 16, 2006 of $0.016
per
share, if the Board decided to implement a 1-for-25 reverse stock split, there
can be no assurance that the post-split market price of our common stock would
be $0.40 per share or greater. Accordingly, the total market capitalization
of
our common stock after the proposed reverse stock split may be lower than the
total market capitalization before the proposed reverse stock split and, in
the
future, the market price of our common stock following the reverse stock split
may not exceed or remain higher than the market price prior to the proposed
reverse stock split. In many cases, the total market capitalization of a company
following a reverse stock split is lower than the total market capitalization
before the reverse stock split. There can be no assurance that the reverse
stock
split will result in a per share price that will attract institutional investors
and brokers. While the Board believes that a higher stock price may help
generate investor interest, there can be no assurance that the reverse stock
split will result in a per share price that will attract institutional investors
and brokers.
A
decline
in the market price for our common stock after the reverse stock split may
result in a greater percentage decline than would occur in the absence of a
reverse stock split, and the liquidity of our common stock could be adversely
affected following a reverse stock split. The market price of our common stock
will also be based on our and other factors, some of which are unrelated to
the
number of shares outstanding. If the reverse stock split is affected and the
market price of our common stock declines, the percentage decline as an absolute
number and as a percentage of our overall market capitalization may be greater
than would occur in the absence of a reverse stock split. In many cases, both
the total market capitalization of a company and the market price of a share
of
such company’s common stock following a reverse stock split are lower than they
were before the reverse stock split. Furthermore, the liquidity of our common
stock could be adversely affected by the reduced number of shares that would
be
outstanding after the reverse stock split.
Principal
Effects Of The Reverse Stock Split
Corporate
Matters
If
approved and effectuated, the reverse stock split would have the following
effects:
|
·
|
A
to-be-determined number of Old Shares owned by a stockholder would
be
exchanged for one New Share;
|
|
·
|
The
number of shares of our common stock issued and outstanding will
be
proportionately reduced;
|
|
·
|
A
proportionate adjustments will be made to the per share exercise
price and
the number of shares issuable upon the exercise of all outstanding
options
and warrants entitling the holders thereof to purchase shares of
our
common stock, which will result in approximately the same aggregate
price
being required to be paid for such options or warrants upon exercise
of
such options or warrants immediately preceding the reverse stock
split;
and
|
|
·
|
the
number of shares reserved for issuance under our existing stock option
plans and employee stock purchase plans will be reduced
proportionately.
|
Fractional
Shares
No
scrip
or fractional certificates will be issued in connection with the reverse stock
split. Instead, any fractional share that results from the reverse stock split
will be rounded up to the next whole share of our common stock. If approved
and
affected, the reverse stock split will result in some stockholders owning “odd
lots” of less than 100 shares of our common stock. Brokerage commissions and
other costs of transactions in odd lots are generally somewhat higher than
the
costs of transactions in “round lots” of even multiples of 100
shares.
Authorized
Shares
Upon
the
effectiveness of the reverse stock split, the number of authorized shares of
common stock that are not issued or outstanding would increase due to the
reduction in the number of shares of our common stock issued and outstanding.
As
of November 2, 2006, we had 100,000,000 shares of common stock and
25,000,000 shares of preferred stock authorized. Of this amount, there were
78,368,736 shares of common stock and no shares of preferred stock issued and
outstanding on such date. Authorized but unissued shares will be available
for
issuance, and we may issue such shares in financings or otherwise. If we issue
additional shares, the ownership interest of holders of our common stock may
also be diluted. Also, the issued shares may have rights, preferences or
privileges senior to those of our common stock.
Accounting
Matters
The
reverse stock split will not affect the par value of our common stock. As a
result, as of the effective time of the reverse stock split, the stated capital
on our balance sheet attributable to our common stock will be reduced
proportionately, and the additional paid-in capital account will be credited
with the amount by which the stated capital is reduced. The per share net income
or loss and net book value of our common stock will be restated because there
will be fewer shares of our common stock outstanding.
Procedure
For Effecting Reverse Stock Split And Exchange Of Stock
Certificates
If
the
stockholders approve the proposal to authorize the Board to implement the
reverse stock split and the Board decides to implement the reverse stock split
on or prior to March 31, 2007, we will file the Amendment with the Secretary
of
State of the State of Delaware to amend our existing Certificate of
Incorporation. The reverse stock split will become effective at the time
specified in the Amendment, which is referred to below as the “effective time.”
Beginning at the effective time, each certificate representing Old Shares will
be deemed for all corporate purposes to evidence ownership of New Shares. The
text of the Amendments to affect the reverse stock split, if implemented by
the
Board, would be in substantially the form attached as Appendix A to this proxy
statements. In addition, the text of the form of Amendment attached to this
proxy statement is subject to modification to include such changes as may be
required by the Office of the Secretary of State of the State of Delaware and
as
the Board deems necessary and advisable to effect the reverse stock split,
including the insertion of the effective time determined by the
Board.
As
soon
as practicable after the effective time, stockholders will be notified that
the
reverse stock split has been affected. We expect that our transfer agent,
American Stock Transfer & Trust Company (“AST”), will act as exchange agent
for purposes of implementing the exchange of stock certificates. Stockholders
may, but are not required to, exchange their certificates evidencing the Old
Shares for certificates evidencing the New Shares. Current stock certificates
shall remain valid but are deemed to represent New Shares at the appropriate
reverse split proportion. In the event that Stockholders wish to submit their
certificates to AST for exchange, they will not be responsible for any transfer
fees. Any Old Shares submitted for transfer, whether pursuant to a sale, other
disposition or otherwise, will automatically be exchanged for New Shares,
subject to normal transfer agent fees. STOCKHOLDERS
SHOULD NOT DESTROY ANY STOCK CERTIFICATE(S) AND SHOULD NOT SUBMIT ANY
CERTIFICATE(S) UNLESS REQUESTED TO DO SO.
No
Dissenters’ Rights
Under
the
Delaware General Corporation Law, our stockholders are not entitled to
dissenters’ rights with respect to the reverse stock split, and the Company will
not independently provide stockholders with any such right.
Federal
Income Tax Consequences Of The Reverse Stock Split
The
following is a summary of certain material federal income tax consequences
of
the reverse stock split, does not purport to be a complete discussion of all
of
the possible federal income tax consequences of the reverse stock split and
is
included for general information only. Further, it does not address any state,
local or foreign income or other tax consequences. Also, it does not address
the
tax consequences to holders that are subject to special tax rules, such as
banks, insurance companies, regulated investment companies, personal holding
companies, foreign entities, nonresident alien individuals, broker-dealers
and
tax-exempt entities. The discussion is based on the provisions of the United
States federal income tax law as of the date hereof, which is subject to change
retroactively as well as prospectively. This summary also assumes that the
Old
Shares were, and the New Shares will be, held as a “capital asset,” as defined
in the Internal Revenue Code of 1986, as amended (i.e., generally, property
held
for investment). The tax treatment of a stockholder may vary depending upon
the
particular facts and circumstances of such stockholder. Each stockholder is
urged to consult with such stockholder’s own tax advisor with respect to the tax
consequences of the reverse stock split.
No
gain
or loss should be recognized by a stockholder upon such stockholder’s exchange
of Old Shares for New Shares pursuant to the reverse stock split. The aggregate
tax basis of the New Shares received in the reverse stock split (including
any
fraction of a New Share deemed to have been received) will be the same as the
stockholder’s aggregate tax basis in the Old Shares exchanged therefor. The
stockholder’s holding period for the New Shares will include the period during
which the stockholder held the Old Shares surrendered in the reverse stock
split.
Our
view
regarding the tax consequences of the reverse stock split is not binding on
the
Internal Revenue Service or the courts. ACCORDINGLY,
EACH STOCKHOLDER SHOULD CONSULT WITH HIS OR HER OWN TAX ADVISOR WITH RESPECT
TO
ALL OF THE POTENTIAL TAX CONSEQUENCES TO HIM OR HER OF THE REVERSE STOCK
SPLIT.
Condition
to Closing of the Transactions
The
approval of the reverse stock split one of several conditions to the closing
of
the Transactions with IOWC. Accordingly, if the stockholders do not approve
the
reverse stock split, the Transactions with IOWC will not be consummated.
However, subject to stockholder approval, the Board intends to complete the
reverse split even it the Transactions are not consummated, because the Board
believes that this will create a more manageable capital structure for the
Company and its future financing needs.
Recommendation
of the Board
The
Board
unanimously recommends a vote FOR
the
proposed authorization of our Board to affect a reverse-split of the Company’s
Common Stock in an amount to be determined by the Board between 1-for-10 and
1-for-100.
PROPOSAL
FOUR
PROPOSAL
TO INCREASE OUR
AUTHORIZED
CAPITAL FROM 100,000,000 TO 200,000,000 SHARES
OF
COMMON STOCK AND FROM 25,000,000 TO 50,000,000 SHARES
OF
PREFERRED STOCK
AND
TO MAKE CERTAIN TECHNICAL CORRECTIONS TO PROVISIONS REGARDING OUR
BLANK
CHECK PREFERRED STOCK
General
The
Board
has approved an amendment to our certificate of incorporation to increase the
authorized number of shares of common stock from 100,000,000 to 200,000,000,
and
the authorized number of shares of preferred stock from 25,000,000 to
50,000,000, after giving effect to the reverse stock split that the stockholders
are being asked to approve, and directed that this amendment be considered
by
the stockholders at the Meeting. A
form of
the Amended and Restated Certificate is attached as Appendix A. The
certificate of incorporation currently authorizes the Company to issue
100,000,000 shares of common stock, $0.00067 par value per share. It also
authorizes the Company to issue 25,000,000 shares of preferred stock, but the
proposed reverse stock split would not affect this authorization. As of November
2, 2006, there were 78,368,736 shares of common stock and no shares of
preferred stock issued and outstanding. Taking into account the shares issuable
in connection with the IOWC acquisition, the conversion of the outstanding
promissory notes and exercise of outstanding options and warrants, and the
conversion of promissory notes into common stock and exercise of warrants in
connection with the Company’s current private placement offering, the Company
does not have enough shares available to meet all of its share issuance
obligations. The number of authorized shares will not be reduced by any reverse
stock split discussed in Proposal Three above.
Reasons
for and Effects of the Proposal
The
Board
believes that it is desirable to increase the number of authorized shares of
common stock in order to (i) meet its current share issuance obligations and
(ii) ensure that there is a sufficient number available to provide the Company
with adequate flexibility to issue common stock for proper corporate purposes
that may be identified in the future. The
Company’s original Certificate of Incorporation provided for the Board's
authority to change the rights and preferences of unissued shares without
obtaining the approval of the Company’s shareholders, commonly referred to as
“blank check” stock. The Company believes that the right of the Board to so
designate or change such rights, preferences and privileges was intended to
apply only to unissued classes or series of preferred stock. However, this
provision of the Certificate of Incorporation .preceded the Company's having
authorized preferred stock, thus it is not completely clear that the Board’s
authority to issue such “blank check” stock is limited to authorized but
unissued shares of our preferred stock. The amendment to the Company’s
Certificate of Incorporation included in this Proposal Four includes a technical
correction that would remove the ambiguity and clarify that the “blank check”
provisions apply only to the Company’s authorized but unissued preferred
stock.
Existing
Share Issuance Obligations
The
Company is obligated to issue additional shares of its commons stock (as
calculated prior to giving effect to any reverse stock split described in
Proposal Three above), among other transactions, as follows:
|
·
|
158,892,545
shares of common stock issuable upon conversion of outstanding promissory
notes and debentures to investors;
|
|
·
|
58,571,714
shares of common stock issuable upon exercise of warrants issued
to the
holders of the Company’s outstanding notes and
debentures;
|
|
·
|
33,779,600
shares of common stock issuable upon conversion of the Company’s
indebtedness to the Company’s CEO, Dennis Calvert, for accrued but unpaid
compensation in the amount of
$334,221;
|
|
·
|
13,366,667
shares of common stock issuable to officers (other than Mr. Calvert)
and
former and current non-employee directors for accrued and unpaid
salary or
director fees, payable in stock;
|
|
·
|
37,074,167
shares of common stock issuable to various consultants for accrued
and
unpaid compensation for services rendered to the Company; and
|
|
·
|
553,475,300
shares of common stock issuable to IOWC as part of the Transactions,
assuming such issuance is approved by the stockholders at the
Meeting.
|
As
a
result of the foregoing obligations alone, without the increase in authorized
stock, the Company would not have a sufficient number of shares of stock,
depending upon whether or not the authorization for a reverse-split of the
Company’s common stock (Proposal Three) is approved and the ratio of such an
approved reverse split adopted by the Board.
In
addition, the Company is currently contemplating conducting a private offering
of convertible promissory notes which, if fully subscribed to, would require
the
Company to issue 36,363,636 shares of its common stock and warrants to purchase
36,363,636 shares of common stock upon the conversion of the notes and exercise
of the warrants. While there can be assurance that the Company will be able
to
complete the private offering because of the many risks involved in such an
offering and risks related to the Company’s business, the Company believes that
having enough shares authorized to meet its share issuance obligations will
likely be looked upon favorably by investors.
Future
Issuances
The
additional shares could be used, among other things, for stock dividends, for
acquisitions of other companies, for public or private financings to raise
additional capital and for stock-based employee benefit plans. There are
currently no commitments or agreements for the issuance of additional shares
of
common stock, other than with respect to shares issuable in the acquisition,
conversion of the notes and its equity incentive plans.
If
the
proposed amendment is adopted, the newly authorized shares would be unreserved
(other than the shares to be issued in connection with the acquisition, propose
private placement of notes and warrants, conversion of the notes and equity
incentive plans) and available for issuance by the Company without further
stockholder action, except as provided by Delaware law or the rules of any
stock
exchange or automated quotation system on which the Company’s common stock may
then be listed or quoted. All of the additional shares resulting from the
proposed increase in the Company’s authorized common stock would be of the same
class if and when they are issued, and holders would have the same rights and
privileges as holders of shares of common stock presently issued and
outstanding, including the same dividend, voting and liquidation rights.
The
holders of the Company’s common stock do not have preemptive rights to subscribe
to additional securities that may be issued by the Company, which means that
current stockholders do not have a prior right to purchase any additional shares
in connection with a new issuance of capital stock of the Company in order
to
maintain their proportionate ownership of the Company’s common stock.
Accordingly, if the Board of the Company elects to issue additional shares
of
common stock, such issuance could have a dilutive effect on the earnings per
share, voting power, and equity ownership of current stockholders. In addition,
each share of common stock is entitled to one vote in the election of directors
and other matters. The holders of the Company’s common stock are not entitled to
cumulative voting.
The
proposed increase in the authorized number of shares of common stock could
have
an anti-takeover effect. The availability for issuance of additional shares
of
common stock could discourage, or make more difficult, efforts to obtain control
of the Company because such shares could be issued to dilute the voting power
of
a person seeking control. For example, it may be possible for the Board to
delay
or impede a merger, tender offer, or proxy contest that it determines is not
in
the best interests of the Company and its stockholders by causing such
additional authorized shares to be issued to holders who might side with the
board in opposing such a takeover or change in control. By potentially
discouraging unsolicited takeover attempts, the proposed amendment may limit
the
opportunity for the Company’s stockholders to dispose of their shares at the
higher price generally available in takeover attempts or under a merger proposal
and may also have the effect of permitting the Company’s current management,
including the current Board, to retain its position and resist changes that
stockholders may wish to make if they are dissatisfied with the conduct of
the
Company’s business.
Condition
to Closing of the Transactions
The
approval of the increase in the authorized capital of the Company is one of
several conditions to the closing of the Transactions with IOWC. Accordingly,
if
the stockholders do not approve the increase in the authorized capital stock
and
that condition is not waived by IOWC, the Transactions with IOWC will not be
consummated. However, subject to stockholder approval, the Board intends to
complete the reverse split even if the Transactions with IOWC are not
consummated, because the Board believes that this will create a more manageable
capital structure for the Company and its future financing needs.
Dilutive
Effect of Increase in Authorized Capital Stock
By
itself, an increase in the Company’s authorized capital stock will not have any
dilutive effect on the Company’s stockholders. However, if this Proposal Four is
approved by the stockholders, the Company intends to (i) mandatorily convert
certain convertible notes into shares of common stock, (ii) issue common stock
to several individuals with respect to whom the Company has accrued and unpaid
obligations for a variety of services and (iii) issue common stock in connection
with a new employment agreement with Mr. Calvert. In addition, if
Proposal One is approved by the stockholders, the Company will issue the
IOWC Stock at the closing of the Transactions with IOWC. Therefore, an indirect
result of the approval of this Proposal Four will be significant dilution of
the
percentage of the Company owned by the existing stockholders. For more
information about this dilutive effect, including a table showing current and
pro forma capitalization of the Company, please see PROPOSAL ONE -
Pro-Forma
Capitalization and Significant Dilution to Existing Stockholders.
Recommendation
of the Board
The
Board
unanimously recommends a vote FOR
the
proposed increase in the authorized capital stock of the Company and the
technical corrections to provisions relating to the Company’s blank check
preferred stock.
STOCKHOLDER
PROPOSALS
From
time
to time stockholders present proposals that may be proper subjects for inclusion
in a proxy statement and for consideration at an annual meeting. Under the
rules
of the SEC, to be included in the proxy statement for our 2007 annual meeting
of
stockholders, proposals must be received by us no later than March
1, 2007.
ANNUAL
REPORT ON FORM 10-KSB
We
filed
with
the
SEC our original Annual Report for our year ended December 31, 2005
on Form 10-KSB on March 31, 2006, our amended Form 10-KSB (as amended,
the
“10-KSB”) on May 1, 2006, our Quarterly Report on Form 10-QSB for the quarterly
period ended September
30,
2006
on November 17, 2006 with the SEC, as amended by our Form 10-QSB/A filed
on
December 17, 2006 and our amended Form 10-QSB/A filed on January 29,
2007 (as amended, the “10-QSB”). A copy of the 10-KSB and
the 10-QSB have been mailed to all stockholders along with this proxy
statement. Stockholders may obtain additional copies of the original or
amended
10-KSB, the original or amended 10-QSB, and the exhibits to either of them,
without charge, by writing to our Corporate Secretary, at our principal
executive offices at 2603 Main Street, Suite 1155, Irvine, California
92614.
We
incorporate by this reference herein the Company’s Financial Statements and the
notes thereto, and the discussions under the captions “Description of
Business,” “Description of Properties,” “Legal
Proceedings,” “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” and
“Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure” contained in the 10-KSB and the
10-QSB.
OTHER
MATTERS
Management
does not know of any matters to be presented at the Meeting other than those
set
forth herein and in the Notice accompanying this proxy statement. If a
stockholder vote is necessary to transact any other business at the Meeting,
the
proxyholders intend to vote their proxies in accordance with their best judgment
related to such business.
It
is
important that your shares be represented at the Meeting, regardless of the
number of shares that you hold. YOU
ARE, THEREFORE, URGED TO EXECUTE PROMPTLY AND RETURN THE ACCOMPANYING PROXY
IN
THE ENVELOPE THAT HAS BEEN ENCLOSED FOR YOUR CONVENIENCE.
Stockholders who are present at the Meeting may revoke their proxies and vote
in
person or, if they prefer, may abstain from voting in person and allow their
proxies to be voted.
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By
Order of the Board of Directors,
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Dennis
Calvert
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Chairman
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Irvine,
California
February 13,
2007
AMENDED
AND RESTATED
CERTIFICATE
OF INCORPORATION
OF
NUWAY
MEDICAL INC.
NUWAY
MEDICAL INC. (the “Corporation”), a Delaware corporation, hereby certifies as
follows:
1. The
Corporation’s original certificate of incorporation was filed with the Secretary
of State of the State of Delaware on September 19, 1991. The Corporation
was
originally incorporated under the name of Repossession Auction,
Inc.
2. Pursuant
to Sections 242 and 228 of the General Corporation Law, the amendments
and
restatements herein set forth have been duly approved by the Board of
Directors
and stockholders of the Corporation.
3. Pursuant
to Section 245 of the General Corporation Law, this Amended and Restated
Certificate of Incorporation restates and integrates and further amends
the
provisions of the certificate of incorporation of the Corporation, as
amended to
date (as so amended, the “Certificate of Incorporation”).
4. The
text
of the Certificate of Incorporation is hereby amended and restated in
its
entirety as follows:
FIRST: The
name
of the corporation (which is hereinafter referred to as the “Corporation”) is
BioLargo, Inc.
SECOND:
The address of the Corporation’s registered office in the State of Delaware is
1209 Orange Street, Wilmington, Delaware, County of New Castle, and the
name of
its registered agent at such address is The Corporation Trust
Company.
THIRD:
The purpose of the Corporation is to engage in any lawful act or activity
for
which corporations may be organized under the General Corporation Law
of the
State of Delaware (the “General Corporation Law”).
The
purpose specified in the foregoing paragraph shall in nowise be limited
or
restricted by reference to, or inference from, the terms of any provision
in
this Amended and Restated Certificate of Incorporation.
The
Corporation shall possess and may exercise all powers and privileges
necessary
or convenient to effect the foregoing purpose, including the general
powers now
or hereafter conferred by the laws of the State of Delaware upon corporations
formed under the General Corporation Law.
FOURTH:
The total number of shares of capital stock which the Corporation is
authorized
to issue is 250,000,000 shares, all with a par value of $0.00067 per
share,
200,000,000 shares of which shall be common stock (the “Common Stock”) and
50,000,000 shares of which shall be preferred stock (the “Preferred Stock”)
The
Board
of Directors of the Corporation is authorized from time to time to provide
for
the issuance of the shares of the Preferred Stock in one or more series
and to
establish the number of shares to be included in each such series and
to fix the
designations, powers (including voting powers), preferences and rights
of the
shares of each such series and the qualifications, limitations or restrictions
thereof and to determine or alter the powers (including voting powers),
designations, preferences and relative, participating, optional or other
rights,
if any, and the qualifications, limitations or restrictions thereof,
if any,
granted to or imposed upon any wholly-unissued class and/or series of
Preferred
Stock in any resolution or resolutions of the Board of Directors originally
fixing the number of shares constituting any such wholly-unissued class
and/or
series, to increase or decrease (but not below the number of shares of
any such
class and/or series then outstanding) the number of shares of any such
class
and/or series, and to fix the number of shares of any such class and/or
series.
Effective
at 5:00 pm Eastern Standard Time on __________, 200- (the “Effective Time”),
pursuant to Section 242(a)(3) of the General Corporation Law, the issued
and
outstanding shares of the Corporation’s common stock shall be subject to a
reverse split, such that every ________ shares of the Corporation’s Common
Stock, par value $0.00067 per share, issued and outstanding immediately
prior to
the Effective Time, will be automatically be combined into one share
of Common
Stock, par value $0.00067 per share. Notwithstanding the immediately
preceding
sentence, no fractional shares of Common Stock shall be issued to the
holders of
record of Common Stock in connection with the foregoing combination of
shares of
Common Stock. In lieu thereof, any fractional share that results from
the
combination described in the two immediately preceding sentences will
be rounded
up to the next whole share of Common Stock.
Each
stock certificate that, immediately prior to the Effective Time, represented
shares of Common Stock shall, from and after the Effective Time, automatically
and without the necessity of presenting the same for exchange, represent
that
number of whole shares of Common Stock into which the shares of Common
Stock
represented by such certificate outstanding prior to the Effective Time
shall
have been combined; PROVIDED, HOWEVER, that each holder of record of
a
certificate that represented shares of Common Stock outstanding prior
to the
Effective Time shall receive, upon surrender of such certificate, a new
certificate representing the number of whole shares of Common Stock into
which
the shares of Common Stock represented by such certificate shall have
been
combined.
The
combination of Common Stock described in the preceding paragraphs shall
not
change the authorized number of shares of the Common Stock of the Corporation
or
the par value thereof
FIFTH:
The Corporation shall, to the full extent permitted by section 145 of
the
General Corporation Law of Delaware, as amended from time to time, indemnify
all
persons whom it may indemnify pursuant thereto.
A
director of the Corporation shall not be personally liable to the Corporation
or
its members for monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's duty of loyalty
to the
corporation or its members, (ii) for acts or omissions not in good faith
or
which involve intentional misconduct or a knowing violation of law, (iii)
under
section 174 of the General Corporation Law of Delaware, or (iv) for any
transaction from which the director derived an improper personal
benefit.
SIXTH:
The private property of the stockholders of the Corporation shall not
be subject
to the payment of corporate debts to any extent whatsoever.
SEVENTH:
The Board of Directors shall have the power without the assent or vote
of the
stockholders to make, alter, amend, change, add to, or repeal the by-laws
of the
corporation; PROVIDED, HOWEVER, that any by-law made by the Board of
Directors
may be altered, amended or repealed by the stockholders at any
time.
The
powers and authorize herein conferred upon the Board of Directors are
in
furtherance, and not in limitation, of those conferred by the laws of
the State
of Delaware. In addition to the powers and authorities herein or by statute
expressly conferred upon, it, the Board of Directors may exercise all
such
powers and do all such as acts and things as may be exercised or done
by the
corporation, subject, nevertheless, to the provisions of the laws of
the State
of Delaware, of this Amended and Restated Certificate of Incorporation
and to
the by-laws of the Corporation; PROVIDED, HOWEVER, that no by-law made
by the
stockholders shall invalidate any prior act by the directors which would
have
been valid if such by-law had not been made.
EIGHTH:
Whenever a compromise or arrangement is proposed between this Corporation
and
its creditors or any class of them and/or between this Corporation and
its
stockholders or any class of them, any court of equitable jurisdiction
within
the State of Delaware, on the application in a summary way of the Corporation
or
of any creditor or stockholder thereof or on the application of any receiver
or
receivers appointed for the Corporation under the provisions of section
291 of
Title 8 of the Delaware Code or on the application of trustees in dissolution
or
of any receiver or receivers appointed for this corporation under the
provisions
of section 279 of Title 8 of the Delaware Code order a meeting of the
creditors,
or class of creditors, and/or of the stockholders or class of stockholders
of
the Corporation, as the case may be, to be summoned in such manner as
the said
court directs. If a majority in number representing three-fourths in
value of
the creditors or class of creditors, and/or of the stockholders or class
of
stockholders of the Corporation, as the case may be agree to any compromise
or
arrangement and to any reorganization of the Corporation as consequence
of such
compromise or arrangement, the said compromise or arrangement and the
said
reorganization shall, if sanctioned by the court to which the said application
has been made, be binding on all the creditors or class of creditors,
and/or on
all the stockholders or class of creditors, and/or on all the stockholders
or
class of stockholders, of the Corporation, as the case may be, and also
on the
Corporation.
NINTH:
The Corporation reserves the right for amend, alter, change or appeal
any
provision contained in this Amended and Restated Certificate of Incorporation
and all rights conferred upon stockholders, directors and officers herein
are
granted subject to this reservation.
IN
WITNESS WHEREOF, the Corporation has caused this Amended and Restated
Certificate of Incorporation to be executed by ___________________________,
its
_________________________________, this ___ day of ___________, 200_
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NUWAY
MEDICAL INC.
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By:
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Name: |
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Title: |