WEB NEWS Pump and Dump Watch
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Deal Flow
As reported in our Current Report on Form 8-K filed with the Commission on February 19, 2013, on or about February 12, 2013, we issued shares of our common stock to certain holders of our Series D Convertible Preferred Stock pursuant to Notices of Conversion dated February 5, 2013. On July 16, 2013, we entered into Stock Exchange Agreements with three of those shareholders to re-exchange some of their shares of common stock for shares of our Series D Convertible Preferred Stock. Specifically, M&K Family Limited Partnership exchanged 15,750,000 shares of our common stock for 630,000 shares of our Series D Convertible Preferred Stock, Northstar Consumer Products, LLC exchanged 2,500,000 shares of our common stock for 100,000 shares of our Series D Convertible Preferred Stock, and Rivercoach Partners, LP exchanged 6,250,000 shares of our common stock for 250,000 shares of our Series D Preferred Stock. M&K Family Limited Partnership, Northstar Consumer Products, LLC, and Rivercoach Partners, LP, are all entities related and/or controlled by our executive officers and/or directors.
As a result of the cancellation of 24,500,000 shares of our common stock pursuant to the Stock Exchange Agreements, as of July 30, 2013, we had 21,037,268 shares of common stock issued and outstanding.
Reverse Merger Activity
Item 1.01 Entry into a Material Definitive Agreement.
On May 6, 2013, we closed the acquisition of HemCon Medical Technologies Inc., an Oregon corporation (“HemCon”), pursuant to the terms of an Agreement for Purchase and Sale of Stock entered into by and between us and HemCon (the “Agreement”). The Agreement was entered into as part of HemCon’s Fifth Amended Plan of Reorganization in its bankruptcy proceeding (United States Bankruptcy Court, District of Oregon, Case No. 12-32652-elp11) and was approved by the Court as part of HemCon’s approved Plan of Reorganization. Under the Agreement, we purchased 100 shares of HemCon’s common stock, representing 100% of HemCon’s then-outstanding voting securities, in exchange for $3,075,000 (the “Purchase Price”). The Purchase Price was paid to the Court and the Trustee of the bankruptcy proceeding to be distributed to HemCon’s creditors in accordance with the Plan of Reorganization.
HemCon, founded in 2001, is a diversified life sciences company that develops, manufactures and markets innovative wound care/infection control medical devices. These products target the emergency medical, surgical, dental, military and over‐the‐counter (OTC), markets in the US and globally. HemCon’s advanced wound care and infection control products are designed to quickly stop moderate to severe hemorrhaging in OTC, surgery, trauma, battlefield injuries, and surgical wounds. The company’s wound care products are presently either chitosan-based or oxidized cellulose. Chitosan has long been recognized as a robust hemostat and provides natural antibacterial properties. Historically chitosan has been difficult to reliably incorporate into manufactured wound care products. HemCon has overcome these historical limitations and has been granted patents for its proprietary lyophilized and gauze-based manufacturing processes that allow for consistent and reliable commercial grade wound care and infection control products. HemCon’s original medical device product, the HemCon Bandage, was developed in partnership with the U.S. Army. Between 2003 and 2008, the bandage was the standard issue hemorrhage control bandage for all U.S. Army soldiers and is credited with saving hundreds of lives on the battlefield. Under the Reorganization Plan, HemCon kept its wound care/infection control medical devices business and all assets related thereto. The other segment of its operations, called the “LyP Product" which related to HemCon’s proprietary lyophilized human plasma and universal lyophilized plasma technology were spun out into a newly formed corporation and are not part of our acquisition of HemCon.
In connection with our acquisition of HemCon, we entered into employment agreements with Mr. Barry Starkman to serve as our Senior Vice President of Operations and the President and Chief Executive Officer of HemCon, and with Simon McCarthy to serve as Chief Scientist Officer of HemCon. Under our employment agreement with Mr. Starkman his employment has an initial term from May 6, 2013 until April 30, 2015 and will automatically renew for two-year terms unless terminated by the parties in accordance with the agreement. Mr. Starkman’s base salary is $250,000 per year with the possibility of up to 15% to 30% in incentive compensation based on meeting performance criteria to be established by us and HemCon. Under the employment agreement with Mr. McCarthy his employment has an initial term from May 6, 2013 until April 30, 2015 and will automatically renew for two-year terms unless terminated by the parties in accordance with the agreement. Mr. McCarthy’s base salary is $150,000 per year with the possibility of up to 15% in incentive compensation based on meeting performance criteria to be established by us and HemCon.
Deal Flow
Item 1.01
Entry into a Material Definitive Agreement.
On June 25, 2012, we entered into a License and Asset Purchase Option Agreement (the “Agreement”) with NorthStar Consumer Products, LLC, a Connecticut limited liability company (“NCP”), under which TriStar Consumer Products, Inc., our wholly-owned subsidiary, acquired the exclusive license to develop, market and sell, NCP’s Beaute de Maman product line, which is a line of skincare and other products specifically targeted for pregnant women. In addition, we acquired the exclusive license rights to develop, market and sell NCP’s formula being developed for itch suppression, which would be sold as an over-the-counter product, if successful. These licenses are for a period of up to one year, subject to earlier termination upon specified events. During the term of the license, the assets and business being licensed will be run by management of NCP pursuant to a consulting agreement. As a result of these license rights we are now responsible for developing, marketing and selling the “Beaute de Maman” products, as well as NCP’s anti-itch formula, including all expenses, contractual arrangements, etc., related to product development, manufacturing, marketing, selling, bottling and packaging, and shipping. We will also receive all revenue derived from sales of the products, other than the amounts owed to Dr. Michelle Brown, from whom NCP purchased the “Beaute de Maman” business and assets. Under the arrangement with Dr. Brown she is entitled to approximately seven percent (7%) of net revenue for all products sold under the Beaute de Maman brand name and derived from formulas transferred under the agreement with NCP for a 20 year period ending December 31, 2031. In exchange for these license rights we agreed to issue NCP 225,000 shares of our Series D Convertible Preferred Stock. This transaction closed on June 26, 2012.
Additionally, under the Agreement, we, through our wholly-owned subsidiary, have the option to purchase all the assets related to the “Beaute de Maman” products, as well as NCP’s anti-itch formula. In order to exercise this option we must: (i) we must be a fully reporting company under the Securities Exchange Act of 1934, as amended (the “’34 Act”), and be current in our reporting obligations under the ’34 Act; (ii) we must have written employment agreements in place with John Linderman and James Barickman; (iii) we must be in a position to support the marketing and other operational needs of the “Beaute de Maman” business, and to otherwise meet our financial obligations as they become due; (iv) we must have fully assumed the obligations with respect to a sale of the Beaute de Maman business; and (v) we shall not have any litigation or inquiry, investigation or proceeding (whether preliminary, formal or informal) by any governmental unit, agency or regulatory body (or SRO), or by any current or former stockholder or creditor, that is pending or overtly threatened against us or our subsidiary, including without limitation, no litigation, inquiry, investigation or proceeding with respect to our securities issuances and/or ’34 Act filings, or seeking to delist or remove us from the OTC Markets (Pink Sheets).
Our option is exclusive and remains open for a period (the “Option Period”) of the shorter of (i) six (6) months after the above five conditions are satisfied, or (ii) the remaining Term of the License. Upon expiration of the Option Period, the option automatically and irrevocably expires and is of no further force and effect. If we validly exercise the option to purchase the business and assets, we will issue NCP 750,000 shares of our Series D Convertible Preferred Stock as consideration for such purchase.
Additionally, under the Agreement, in connection with our license rights and to ensure we can fulfill any immediate orders timely, we purchased all existing finished product of the Beaute de Maman product line currently owned by NCP. In exchange for the inventory we agreed to issue NCP 25,000 shares of our Series D Convertible Preferred Stock.
On June 29, 2012, we entered into a Stock Purchase Agreement with Rockland Group, LLC, an entity owned and controlled by Harry Pond, one of our officers and directors (the “Stock Purchase Agreement”). Under the Stock Purchase Agreement, Rockland Group agreed to purchase 1,540,000 shares of our Series D Convertible Preferred Stock in exchange for $308,000. To date, Rockland Group has paid $141,000 of this amount and plans to pay the remaining balance on or before July 20, 2012.
Item 3.02
Unregistered Sales of Equity Securities
Under the Agreement we agreed to issue 250,000 shares of our Series D Convertible Preferred Stock to NCP. Those shares were issued on or about June 29, 2012. All the shares were issued with a restrictive legend in accordance with Rule 144. We relied upon Section 4(2) of the Securities Act of 1933, as amended for the above issuance.
Under the Stock Purchase Agreement, we agreed to issue 1,540,000 shares of Series D Convertible Preferred Stock to Rockland Group, LLC, an entity owned and controlled by Harry Pond, one of our officers and directors. The shares were issued on or about June 29, 2012. All the shares were issued with a restrictive legend in accordance with Rule 144. We relied upon Section 4(2) of the Securities Act of 1933, as amended for the above issuance.
Investor Alert
On June 1, 2011, the People’s Court of Guandong Jiangmen Pengjiang District held a hearing relating to our landlord’s claim for unpaid rent for our factory plus penalty interest and other claims. The landlord has made a claim for payment of overdue rent in the amount of RMB 1,236,000, penalty interest in the amount of RMB 1,067,930 and a claim for potential loss of income in the amount of RMB 618,000, for a total amount claimed of RMB 2,921,930 (approximately $451,379). At the hearing, we were informed that the court intends to issue a judgment on June 14, 2011.
If a settlement with the landlord with respect to this matter is not reached by then, we expect that our factory assets will be seized and the process of selling them by auction to satisfy the claim will begin on June 14, 2011. We anticipate the enforcement date will be effective 7 to 10 days from June 14, 2011. We understand that the court will randomly select a valuation company and an auction company to assist it in this process and that this auction proceeding will last two to three months. Once the assets are sold, the court will decide on the distribution of the proceeds from the auction proceeding.
Acquisition Activity
On May 31, 2011, we entered into a
cancellation agreement with Well Talent Technology Limited pursuant to which we cancelled our agreement dated July 9, 2010 with Well Talent Technology for the sale and purchase of the shares and shareholders’ loans of our two subsidiaries, Roots Biopark Limited and Biopack (Intellectual Property) Limited. In the cancellation agreement, each of Well Talent Technology and our company agreed to release the other from any claims under the cancelled agreement.
Deal Flow
On July 9, 2010, Biopack Environmental Limited (“Biopack”), a wholly-owned subsidiary of Starmetro Group Limited, which is our wholly-owned subsidiary, entered into a share purchase agreement with Well Talent Technology Limited (“Well Talent”), a company incorporated in the British Virgin Islands, whereby Well Talent will purchase:
Al of the issued and outstanding shares of Roots Biopark Limited (“RBL”), which wholly owns Jiangmen Roots Biopack Ltd., and Roots Biopack (Intellectual Property) Limited (“RBIPL”); The shareholder’s loan in the amount of HK$26,017,413.91 (approximately US$3,348,444) advanced by Biopack to RBL and the shareholder’s loan of HK$193,442.56 (approximately US$24,896) advanced by Biopack to RBIPL.
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