-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VlMO7zbyFRSQIsyPQ5WAXwoM30TCezStIsTp2csf9kqTY5dUb/ACN3CpVP+VvazI SKXd9m6JPv3XQaxC/2rp6w== 0001026700-03-000017.txt : 20030404 0001026700-03-000017.hdr.sgml : 20030404 20030404103552 ACCESSION NUMBER: 0001026700-03-000017 CONFORMED SUBMISSION TYPE: 20-F/A PUBLIC DOCUMENT COUNT: 14 CONFORMED PERIOD OF REPORT: 20030404 FILED AS OF DATE: 20030404 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MYCOBIOTECH LTD CENTRAL INDEX KEY: 0001203457 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMMERCIAL PHYSICAL & BIOLOGICAL RESEARCH [8731] FILING VALUES: FORM TYPE: 20-F/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-50083 FILM NUMBER: 03639548 BUSINESS ADDRESS: STREET 1: 12 SCIENCE PARK DR #04-01 STREET 2: THE MENDEL SINGAPORE CITY: SCIENCE PARK 1 SINGAPORE STATE: U0 ZIP: 118225 20-F/A 1 fm20fa2_4303.txt As filed with the Securities and Exchange Commission on November 12, 2002 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 20-F Amendment No. 2 (Mark one) [x ] Registration statement pursuant to Section 12(b) or 12(g) of the Securities Exchange Act of 1934 or [ ] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended __________________ or [ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from _________ to _________ Commission file number 0-50083 MYCOBIOTECH LTD. ----------------------------------------------------- (Exact Name of Registrant as Specified in Its Charter) Singapore ----------------------------------------------- (Jurisdiction of Incorporation or Organization) 12 Science Park Drive, #04-01 The Mendel, Singapore Science Park 1, Singapore 118225 -------------------------------------------------------------------- (Address of Principal Executive Offices) Please send copies of all communications to: Hank Vanderkam, Esq. Vanderkam & Associates 1301 Travis, Suite 1200 Houston, Texas 77002 (713) 547-8900 Securities registered or to be registered pursuant to Section 12(b) of the Act: Title of Each Class Name of Each Exchange On Which Registered None None Securities registered or to be registered pursuant to Section 12(g) of the Act: Common Stock Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None As of October 20, 2002, the Registrant had outstanding 25,593,548 ordinary shares. Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirement for the past 90 days. Yes No X --- --- Indicate by check mark which financial statement item the registrant has elected to follow. Item 17 Item 18 X --- --- (APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS.) Indicate by check mark whether registrant has filed all documents and reports required to be filed by Section 12, 13, or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes No X --- ---- PART I Item 1. Identity of Directors, Senior Management and Advisers. A. Directors and Senior Management. Directors. The Board of Directors is entrusted with responsibility for the overall management of MycoBiotech Ltd (the "Company"). Information regarding the Directors is listed below: Name Address Position --------- --------------- ------------- Dr Kok Kheng Tan 5B Bright Hill Drive, Singapore 579596 Chairman of the Board and Chief Executive Officer Prof Chin Tiong Tan 52 Kingsmead Road, Singapore 267996 Director Victor Ang 1 Siglap Road #04-14, Singapore 448906 Director Dr.Alfred Wee Tiong Loh 85 Namly Place, Singapore 267237 Director David Soo Theng Lua 442A Dunearn Road, Singapore 289616 Director Jin Soon Tan 41 Jalan Sembilang, Singapore 576884 Director
Senior Management The day-to-day operations of the Company are entrusted to the Chief Execuitve Officer and an experienced and qualified team of Executive Officers responsible for the different functions of the Group. The particulars of the Executive Officers are set out below: Name Address Position -------- ----------- ----------- John Edward Smith 17 Queensberry Avenue, Bearsden, Chief Scientific Officer Glasgow G61 3LR, Scotland, UK Eugene Lim 35 Jasmine Road, Singapore 576594 Group Company Secretary and Chief Financial Officer Yevindra Sepala Ilangakoon 17, Bicknor Close, Canterbury, Kent Chief Operating CT2 7UB, England Officer-Europe Richard Poh Pheng Chia 30 Cedar Avenue General Manager B Marketing Singapore 349708 (Nutraceuticals And Functional Foods) Ronald Han Kiang Ang 77 Nim Road, #02-03 Nim Gardens, General Manager B Marketing Singapore 807586 (Mushrooms) Franklin Leong Tian Chong 118 Serangoon North Ave 1 #03-229, Group Accounts Manager Singapore 550118 Rajive Goonewardena 19 Seletar West Farmway 5 Singapore 798057 Senior Manager - Production & Technical Support Thye Aun Yong 62 Kasai Road, Singapore 808309 Senior Manager B Mushroom Production
Scientific Advisory Board. The Company has established a Scientific Advisory Board comprising scientists and clinicians with academic and commercial experience in mycology and biotechnology especially in the area of drug discovery, development and clinical use. The board reviews and evaluates the Company=s research and development programs, advises on scientific and clinical strategy, monitors scientific progress and helps identify and assess new project areas. The members of our Scientific Advisory Board are: 2 Prof. John Edward Smith DSc, FRSE (Chairman) Dr. Raymond Chang, MD, FACP Dr. Jong Shung-Chang, DSc Professor Gloria Lim, DSc Dr. David Moore, DSc, FLS Professor Solomon P Wasser, DSc B. Advisers. Vanderkam & Associates, 1301 Travis St. Ste. 1200, Houston, TX 77002 act as U.S. counsel for the Company. C. Auditors. The audits as of December 31, 2001 and 2000 and related statements for December 31, 2001, 2002 and 1999 and conversion to US GAAP were performed by Thomas Leger & Co., 1235 N. Loop W., Ste. 907, Houston, TX 77088. They are members of the American Institute of Certified Public Accountants. Item 2. Offer Statistics and Expected Timetable. No Disclosure Necessary. Item 3. Key Information. A. Selected Financial Data B Singapore dollars have been converted into U.S. dollars for operations at the rate following rates of exchange: 2001- 1.7917; 2000-1.7239; 1999-1.6929; 1998-1.6490; and 1997-1.6490. All years have been audited. The information for years ended December 31, 1997 and 1998 were audited using international accounting standards and not U.S.G.A.A.P. The information for years ended December 31, 1999, 2000, 2001 and the interim periods have been prepared in accordance with U.S.G.A.A.P. B. Years Ended December 31, 2001 2000 1999 1998 1997 ---- ---- ---- ---- ---- US `000 US `000 US `000 US `000 US `000 Average Exchange Rate of Singapore 1.7917 1.7239 1.6929 1.6490 1.6490 Dollars STATEMENT OF OPERATIONS Net Sales 3,456 3,707 1,256 2,567 3,653 Cost of Sales (3,312) (2,478) (684) (1,215) (2,214) ------- ------- ----- ------- ------- Gross Profit 144 1,229 572 1,352 1,439 Operating Expenses (3,211) (2,992) (1,137) (2,117) (1,554) ------- ------- ------- ------- ------- Loss from Operations (3,067) (1,763) (565) (765) (115) Other income / (expenses) (732) (37) (72) 532 87 ------ ---- ---- --- ---- Net loss before taxes (3,799) (1,800) (637) (233) (28) Taxation 0 44 31 - - Net loss after tax (3,799) (1,844) (668) (233) (28) Comprehensive income (loss) 102 65 (62) - - ---- -- ----- - - Comprehensive loss (3,697) (1,779) (730) (233) (28) ======= ======= ===== ===== ==== Loss per common share (0.23) (0.14) (.07) (.02) - ====== ====== ===== ===== ==== Basic Weighted average shares outstanding 15,768,929 13,035,298 10,706,728 10,000,000 10,000,000 ========== ========== ========== ========== ========== Exchange Rate of Singapore Dollars - US `000 US `000 US `000 US `000 US `000 as of the Balance Sheet Date 1.8445 1.7331 1.6655 1.6490 1.6490
3 BALANCE SHEET DATA: Working Capital (deficit) (374) (141) (80) (1,642) (926) Total assets 2,515 3,714 1,618 474 1,887 Long term debts 211 2,098 2,157 1,024 1,569 Shareholders' deficit (49) (734) (1,781) (2,656) (2,422) The exchange rate between the U.S. dollar and the Singapore dollar for each of the past six months is as follows: High Low High Low ------ ----- ------ ------ September, 2002 1.78065 1.74545 June, 2002 1.79270 1.76374 August, 2002 1.77226 1.74723 May, 2002 1.80695 1.78706 July, 2002 1.77096 1.73029 April, 2002 1.84673 1.80481 B. Capitalization and Indebtedness. The following table sets forth the debt and capitalization of the Company as of September 30, 2002 . The data set forth below should be read in conjunction with the other financial information included elsewhere in this Registration Statement. See "Consolidated Financial Statements" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." US$ - Exchange Rate of Singapore Dollars as of Balance Sheet Data 1.7760 Common Stock .54 par 14,865,787 Paid in Capital 3,002,782 Retained Earnings Deficit (17,099,285) Accumulated Other Comprehensive Income 132,124 Unsecured convertible bonds 33,785 Grant 39,847 Long-term lease obligation 8,984 Liabilities & shareholders' deficit 2,480,021 C. Reasons for the Offer and Use of Proceeds. No Disclosure Necessary. D. Risk Factors. The Company is subject to a number of risks and uncertainties. If any of the following considerations and uncertainties develop into actual events, our business, financial condition or results of operations could be materially adversely affected. 4 SOUTHEAST ASIA RISKS The Weak Economies of Southeast Asia Have Been a Significant Factor In The Decline of Our Sales and May Impact Future Sales The economies of Southeast Asia remain weak as a result of the currency crisis of 1999 which led to a recession in the region. In addition, with a soft US economy, and the US technology meltdown, international exports, the economic engine of the region have been significantly affected, further depressing the regions economy. Because Southeast Asia, and Singapore in particular is the major markets for our products, the weak economy has impacted our sales as the Company's products are more a discretionary item then a food staple. The weak economy of the region is a significant factor in the decline in our sales, and until the "economy" of the region recovers, will impact future sales and either increase our loss or decrease our profitability. POLITICAL RISKS Although the political environment in Singapore is stable, there is significant political instability in the region. Since the fall of the government of Indonesia, the Indonesian political situation has been completely unstable. Malaysia, although reasonably stable, faces various internal challenges. In addition, the rise of Muslim extremist has further complicated the political landscape as both Malaysia and Indonesia are Muslim countries. Because Singapore is surrounded by Muslim countries, both of whom are battling Muslim extremist, and because of the unstable political situation in Indonesia, there is no guaranty that this instability will not spill over into Singapore, our principal market. Should this instability spread to Singapore, it would have a significant negative impact on our sales. Furthermore, since Indonesia and Malaysia supply the majority of our mushrooms a disruption of this supply could also significantly decrease our sales. Any decline in sales will increase our loss or decrease our profitability. Financial Risks We incurred accelerating net operating losses of $729,834, $1,778,838 and $3,697,585 for FY 1999, FY 2000 and FY 2001, respectively. In addition, we have a loss of $2,095,434 for the first nine months of 2002. Because of these losses our audit opinions have been qualified on a going concern basis. Furthermore, our revenue for the year ended December 31, 2001 declined by 6.8% from our revenues for the year ended December 31, 2000, although our revenues for the first nine months of 2002 totalled $ 2,651,861, a slight increase from the $2,627,344 the first nine months of 2001. In addition, our gross profit margins declined from 33.16% for the year ended December 31, 2000 to 4.18% for the year ended December 31, 2001 and to 8.98% for the nine months ended September 30, 2002. Unless these trends are reversed, we will be unable to continue as an operating business. WE WILL REQUIRE FINANCING Because we have been unprofitable, and we are uncertain when, if ever we will generate earnings and cash flow and we are dependent upon the proceeds of future equity offerings or other financing to implement our business plan and to finance our working capital requirements. Monthly direct operating expenses average $268,000 and monthly indirect operating expenses average $239,000 a month. While we have recently completed a rights issue to shareholders, we will need to seek additional financing of at least $5,000,000. Upon completion of this registration we anticipate an offering either in Singapore or in the U.S. of our shares, as the company has insufficient liquidity to operate for the next six months. To the extent that we incur indebtedness or issue debt securities instead of a share offering, we will be subject to risks associated with incurring such indebtedness, including the risks that interest rates may fluctuate and that our cash flow may be insufficient to pay principal and interest on any such indebtedness. In addition because of our financial conditon, we are uncertain if financing will be available to us on commercially reasonable terms, or at all. If we are unable to obtain financing, our ability to continue operations could be adversely affected. We also may be precluded from the equity market. If we are unable to raise additional funds, we will be unable to continue business operations or pay our current liabilities. 5 Business Risks WE FACE STRONG COMPETITION IN THE SALES OF OUR PRODUCTS The primary market for our products is Singapore where we have approximately 32% of the mushroom market but only a very small percent of the health food supplement market. Our mushrooms face stiff competition from the importation of Chinese grown mushrooms where the production costs are lower and from a panorama of health food supplements. Because of this competition, prices have been falling and our profit margins declining contributing to our overall loss. Our other market is the United Kingdom where we have less than a one-percent market share. Our competitors in Singapore are Kahsim, Be Fresh, Chan Kok Hong and MP Project who import fresh shitake mushrooms, principally from China. Our competitors in the United Kingdom are Liversey Brothers, TecFoods, Fruit of the Forest, and Smithy Mushrooms who import fresh shitake mushrooms from France, Holland and China. WE FACE RISKS RELATED TO DISTRIBUTING AND SELLING FRESH MUSHROOMS Fresh mushrooms are perishable products which require special low-temperature handling equipment for storage and transportation. Mishandling of our fresh mushrooms can lead to spoilage and a loss of income . In a typical year, this loss amounts to approximately 5% of the mushroom cost. Furthermore, our business is executed on a credit basis. Hence the receipt of payments will depend on the creditworthiness and financial standing of our customers. While we keep our credit polices tight, we still incur losses of approximately 1% of the credit extended. Any increase in either of these costs will increase our net operating losses or decrease our earnings. WE FACE RISKS IN OPENING OVERSEAS MARKETS In the past, our operations have largely been confined to Singapore. As part of our business strategy, assuming the availability of capital, we intend to expand our business into other countries particularly Malaysia, England and Canada. However, in each of these countries we face still competition from entities which have been in these markets and are familiar with the neuances of each country whereas we have no prior history in such markets. This could significantly effect our ability to grow in such markets or to be profitable in such markets. WE ARE DEPENDENT ON THE PERFORMANCE OF OUR ASSOCIATED COMPANIES An associated company is a non-subsidiary in which our ownership is 50% or less but in whose financial and operating policy decisions we exercises significant influence. We enter into such arrangements because the other shareholder/investors provide the initial investment, working capital, and on site management while we contribute the technical knowhow and training. If we are unable to find partners for associated operations, we will not have the capital for expansion, or to continue to fund certain of our operations, and possibly even continue our business operations. WE ARE SUBJECT TO VARIOUS GOVERNMENTAL REGULATIONS Although there are currently no governmental regulations affecting fresh food in our markets, there is no assurance such will not be enacated. To the extent our products are marketed as health foods or supplements, we are subject to various regulations which control any claims or benefits made on such products. While these regulations do not impose an economic risk, should more strenuous regulations be adoped in the future which would apply to our products, such could have an adverse economic impact by increasing our costs. OUR NEW PRODUCTS MAY NOT GAIN WIDESPREAD ACCEPTANCE We have developed a range of mushroom-based health foods and health food supplements for which there are no established markets. Many of our products are still under development and there can be no assurance that such products will be successfully developed or commercialized on a timely basis, or at all. Even if commercialized, there is no guarantee that such products will gain acceptance by consumers. The successful launch of our new products is dependent upon our ability to educate and create awareness of the potential benefits of such products among consumers and also the ability of our health products to suit the demands and needs of consumers. Our inability to achieve a significant level of market acceptance will negatively impact our future profitability and financial position. AVAILABILITY OF THE MAIN RAW MATERIAL WILL AFFECT OUR PRODUCTION AND PROFITABILITY Wood sawdust is the main raw material in our production of mushrooms under an artificial environment and constitutes 45% of our total material costs. Presently, we are not dependent on any single distributor for our supply of wood sawdust and our ability to switch to alternative suppliers allows us to take advantage of favorable pricing. Nevertheless, any shortage in the supply of wood sawdust will have a negative impact on our production output and consequently our profitability. 6 WE ARE RELIANT ON DISTRIBUTORS We distribute some of our non-fresh food products through third-party distributors. Our agreements with these third-party distributors contains no minimum purchase requirements. Furthermore, these distributors were given exclusive marketing for a period of five years in a given geographic area Because these agreements are new, they have no proven track record with the company and we are reliant on their best efforts in selling our products. Because of the exclusivity and because of the newness of these arrangements, we are unable to predict the level of their sales success, if any. Therefore, there can be no assurance that we will be able to successfully maintain marketing, distribution or sales capabilities for these products. In addition we are launching a new line of MycoMed mushroom based health supplements through multi-level marketing. Our agreements with qualified distributors specifies only a low minimum purchase requirement. There is no guarantee that these distributors will actively sell the products or will continue to sell the products in either the medium or long term. This would negatively impact future sales and profits. ONLY ONE OF OUR DISTRIBUTORS IS GENERATING ANY MATERIAL REVENUES Although we have executed five distribution agreements only one is producing any material revenue. The agreement between Everbloom Mushroom Ptd Ltd. and Ben Choon Marketing Pte Ltd produced approximately 77% of our total sales for the year ended December 31, 2001. Under this agreement, we are obligated to reimburse Ben Choon Marketing Pte Ltd. all costs incurred in marketing and distribution of the products, plus 20% of the net profit. These expenses totaled approximately $505,000 and $567,000 for the year ended December 31, 2001 and 2000 respectively. Without the marketing by Ben Choon Marketing Pte. Ltd. we would loose approximately three quarters of our total sales and be unable to continue as a going concern. OUR MAJOR DISTRIBUTOR IS CONTROLLED BY A RELATED PARTY Our major distributor, Ben Choon Marketing Pte. Ltd. is controlled by Chin Hian Tan who owns 91% of the issued and outstanding shares. Chin Hian Tan is a director of Everbloom Mushroom Pte. Ltd. our subsidiary, and the brother of Dr. Kok Kheng Tan, our Chairman of the Board and Chief Executive Officer. Under the terms of this Distribution Agreement, we are required to reimburse Ben Choon Marketing Pte. Ltd. for all costs incurred in marketing and distributing of our products, plus 20% of the net profit. Because of this relationship, there is no assurance that the best prices are being received for our products, that all marketing and distribution prices are at the most favorable rate, or that 20% of the profit from sales under this agreement is a reasonable commission. If the prices received are not fair market value, or the costs incurred are not reasonable, profits will be diverted from the Company to the related party. WE ARE RELIANT ON CONTRACT MANUFACTURERS. Our Linzir range of products such as Lingzhi-shiitake capsules and extracts must be approved by the Singapore Ministry of Health (MOH) before they can be sold in Singapore. We have appointed Beacon Chemicals Pte Ltd, a Ministry Of Health approved manufacturing company, to produce these products. We are dependent on this third-party production facility to ensure that the contents of these products meet the requirements of the Ministry Of Health, while maintaining product quality and acceptable manufacturing costs. Should this manufacturing relationship terminate or should any supplier not be able to satisfy our quality requirements, our supply for these goods will be affected, thus depriving us of a potential source of revenue and earnings. IMPORTANCE OF DEFENDING OUR PROPIETARY TECHNOLOGY We regard our proprietary rights on the findings of our R&D activities and patents on mushroom cultivation technology such as the Everbloom Process as being critical to our success. However, there is no assurance that patents issued to us will not be invalidated or circumvented in the future or that the rights created there under will continue to provide a competitive advantage. Should we not be able to protect our proprietary rights sufficiently, our source of revenue will be adversely affected. 7 We rely heavily on a combination of patents, copyrights, trademarks, non-disclosure agreements and licenses to protect our expertise. We also rely on confidentiality agreements with our employees and strive to limit access to the distribution of proprietary information. Despite these precautions, there is a possibility that unauthorized third parties may adopt, copy or modify certain of our research results, methodology and technology. In particular, we have granted exclusive rights to our joint venture partners and other third parties to access certain of our research results and technology. We generally enter into confidentiality agreements with these parties to reduce the access of such information to outside parties. However, there is no assurance that, after taking the appropriate steps to prevent such leakage of proprietary information, our competitors and other unauthorized third parties will not gain access to such information. Furthermore, the laws of some countries do not adequately protect our intellectual properties. In the event that patents expire, or in countries where patents have not been granted, we are also exposed to the risk of competitors attempting to duplicate our expertise. From time to time, third parties may assert exclusive patent, copyright, trademark and other intellectual property rights to technologies that are used by us. Litigation may be necessary to defend against alleged infringement of the rights of others or to determine the scope and validity of the proprietary rights of others. Future litigation may also be necessary to enforce and protect our traded secrets and other intellectual property rights owned by us. Any such litigation could be costly and may divert the management"s attention, either of which could have a material adverse effect on our business, financial conditions and results of operations. Adverse determinations in such litigation could result in the loss of our proprietary rights and/or prevent us from manufacturing or selling our products or services, which could adversely disrupt the conduct of our business. IT MAY BE DIFFICULT TO SERVE US WITH LEGAL PROCESS OR ENFORCE JUDGMENTS AGAINST US OR OUR MANAGEMENT. We are a Singapore holding company, and all or a substantial portion of our assets are located in Southeast Asia. In addition, all but one of our directors and officers are non-residents of the United States, and all or substantial portions of the assets of such individuals are located outside the United States. As a result, it may not be possible to effect service of process within the United States upon such persons. Moreover, there is doubt as to whether the courts of Singapore, Malaysia or Indonesia would enforce: - - judgements of United States courts against us, our directors or our officers based on the civil liability provisions of the securities laws of the United States or any state; or - - in original actions brought in Singapore, Malaysia or Indonesia, for liabilities against us or non-residents based upon the securities laws of the United States or any state. In addition, it may be difficult for investors to enforce in the United States judgements obtained in United States courts based on the civil liability provisions of the United States federal securities laws against us or any of our non United States executive officer. Therefore, investors may have limited ability to redress any losses caused from a violation of United States Security Rules. SOME INFORMATION ABOUT US MAY BE UNAVAILABLE BECAUSE WE ARE NOT SUBJECT TO CERTAIN REPORTING REQUIREMENTS UNDER THE FOREIGN PRIVATE ISSUER RULES. We are a foreign private issuer within the meaning of the rules under the Securities and Exchange Act of 1934, as amended.("Exchange Act"). As such, we are not subject to certain provisions applicable to United States public companies, including: - - the rules under the Exchange Act requiring the filing with the Securities & Exchange Commission of quarterly reports on Form 10-Q or current reports on Form 8-K; - - the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act; and - - the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and establishing insider liability for profits realized from any "short-swing' trading transaction. Because of these exemptions, investors are not provided the same information which is generally available concerning public companies organized in the United States and therefore, may not be able to make as informed investment as decisions as that for the purchase of securities of a United States Public Company. 8 Item 4. Information on the Company. A. History and Development of the Company. MycoBiotech Ltd is a group of companies involved in producing mushroom related health foods and health food supplements, mushroom based food products, including fresh mushrooms, biopharmaceutical products and technology-based cultivation processes. Approximately ninety percent (90%) of our revenues are derived from the growing and marketing of fresh mushrooms. The Company was incorporated under the Singapore Companies Act in Singapore on May 22, 1980 as a private company limited by shares under the name of Tan Mushroom Laboratories (Pte) Ltd. The name was subsequently changed to Everbloom Mushroom (Pte) Ltd in 1981, to Everbloom Biotechnology (Pte) Ltd in 1984 and to MycoBiotech Pte Ltd in November 1999. We changed the name again to MycoBiotech Limited on September 28, 2000 and became a public limited company. Our registered office address is 12 Science Park Drive #04-01, The Mendel Singapore Science Park 1, Singapore. In 1985, we incorporated another company, Everbloom Mushroom Pte Ltd ("Everbloom Mushroom"), to undertake mushroom cultivation while Everbloom Biotechnology focused on the R&D of the mushroom cultivation process as well as the medicinal properties of Shiitake mushroom. In 1988 we incorporated a new subsidiary, Everbloom International Technology Pte. Ltd., to handle the worldwide licensing of our patented mushroom cultivation technology, the Everbloom Process. Everbloom Biotechnology was the holding company of Everbloom International Technology Pte. Ltd., and Everbloom Mushroom Pte Ltd. In 1989 Everbloom Health Food Pte Ltd. was formed to conduct research and development of health food products and health food supplements. Building on our experience in the cultivation of Shiitake mushroom under artificial conditions, we started to expand overseas in 1998. In December 1998, we incorporated two companies in the U.K, MycoTechnology Ltd UK and Mycoceuticals Ltd - UK, with the intention of growing and selling of exotic mushrooms and the manufacture and trading of mushroom-based nutraceuticals and functional foods respectively in the U.K and Europe. In July 1999 MycoPharma was incorporated with the primary purpose of undertaking research and development of biopharmaceuticals and nutraceuticals products and the clinical trials of these products. In August 2000 we incorporated Everbloom Mushroom (Kent) Ltd to operate the mushroom facility in Kent, England. In September 2000, we invested into MedMyco Ltd, an Israeli Biotechnology company involved in the development and manufacturing of drugs and dietary supplements from edible and medicinal mushrooms. In June 2001, we entered a 50:50 joint venture with 936450 Ontario Ltd and Horus Capital Ltd for the right to use our Mushroom Technology in North America. Everbloom Biotechnology (Canada) Ltd, is a holding company for companies set up to grow and sell exotic mushroom in North America, as well as sell health foods and health food supplements. In 2002, the company acquired the intellectual property relating to the isolation and characterization of fungal growth hormones called Fungiflex and Fungiflex2 from Dr David Moore and Dr Lily Novak Frazer, two fungal developmental biologists from the University of Manchester, UK. The acquisition strengthens our knowledge-based of biopharmaceuticals and will assist in our research into and development of new fungicides. 9 The following chart illustrates our current organizational structure. MycoBiotech Ltd. Singapore 100% 100% 100% 100% 50% Everbloom Everbloom International Biotechnology Technology Pte Ltd (Candada) Ltd. (Singapore) MycoPharma Everbloom Everbloom Pte Ltd Mushroom Pte Health Food Pte (Singapore) Ltd. Ltd. (Singapore) (Singapore) 100% 30% Mycoceuticals Ltd. Ever-Bloom UK Nutraceuticals (M) Sdn Bhd (United Kingdom) (Malaysia) 25% 100% Medmyco MycoTechnology Ltd. Ltd. UK (Isreal) (United Kingdom) 50% 100% 30% PT Everbloom FFM- Randhoetatah Mushroom (Kent) Everbloom Cemerlang Ltd. Mushroom (Indonesia) (United Kingdom) (Malaysia) 10 B. Business Overview General The Company was founded by Dr. Kok Kheng Tan to commercialize his research on technology-based production of Shiitake and other exotic mushrooms. This technology-based process uses a combination of specially formulated growing substance, principally a woodchip mixture and controlled environmental conditions. Business and Growth Strategy Our principal business is the cultivation and marketing of fresh mushrooms. This accounts for nearly 90% of our total sales. Our secondary business is the promotion and sale of health foods and health supplements. We believe that there is a long-term global trend towards preventive medicine as opposed to curative medicine. Therefore there should be a growing market in the health food and health supplement sector. The relaxation of certain labelling laws, particularly in the United States, allowing for certain health claims to be labelled on health supplements should further drive growth in the sector. Mushrooms have a long history of use in traditional Eastern (Chinese and Japanese) medicine, We will promote the potential benefits of mushroom-based health foods and health food supplements to an increasingly health conscious global population. The health supplement market alone was worth US$92billion in 2000. Expansion of our business globally through joint ventures and acquisitions To increase our customer base and expand our market, we have entered joint ventures or acquired companies that are synergistic to our mushroom related businesses in Asia. These are our English and Canadian ventures, although the Canadian businesses are not yet operational. We also hope to shift the production of mushrooms to low-cost regions in order to capitalise on the lower cost of raw material, labour and power. We will distribute mushrooms and mushroom-based products through our overseas subsidiaries or associated companies which are located in Canada, Malaysia, England, and Indonesia. Each of these companies will be responsible for the management of its profitability, geographical areas of distribution and network of distribution agents. MycoTechnology Ltd, UK is responsible for the distribution of mushrooms and Mycoceuticals Ltd, UK for health foods and health supplement in Europe. Everbloom Canada will be responsible for the Canadian and the North America markets for all products. In Malaysia the distribution of all products is undertaken by our associate company, Everbloom Nutraceuticals Malaysia. We intend to engage distributors with proven track records in the respective geographical areas to gain access to supermarkets, health specialty shops and pharmacies. Our Indonesia subsidiary, PT Randhoetatah Cemerlang will leverage on Indonesia's low cost structure to grow mushrooms and manufacture certain of our Company's products. HEALTH FOODS AND HEALTH SUPPLEMENTS. Overview There are three regional markets targeted by the Company for mushroom-related health food and supplements in the year 2003; these are Singapore, Malaysia, and United Kingdom. Subsquent targeted markets will include North America, Europe, Australia, Korea, Japan, Thailand and Philippines. Current Products Health Supplements Presently we market three health supplements- Linzir capsules, Linzir Elixir extracts and Essence Of Shiitake. . Linzir capsules contain concentrated extracts of Lingzhi and Shiitake mushrooms. Both Lingzhi and Shiitake mushrooms contain substances which have been found to enhance the bodies well being and provide certain health benefits. Linzir Elixir is a liquid extract of the Lingzhi and Shiitake mushrooms blended with honey. It is targeted to consumers who prefer liquid to capsules. It essentially contains all the health benefits found in the Linzir capsules. 11 Essence of Shiitake is a concentrated liquid extract of Shiitake mushrooms hygienically packed, sterilised and sealed in a 2.5 oz glass bottle. It contains all the nutritional benefits of Shiitake mushrooms and has additional health benefits. Health Foods Our health foods may be summarised into six categories; 1. Mushroom Crunchies which are snacks made of vacuum fried mushrooms in 50gm canisters or packs and are available in four flavours. 2. Shiitake Superior Soups which are soups containing abalone, scallops and Shiitake mushrooms. Eight varieties have been formulated and commercialised for sale; 3. Shiitake Herbal Soups which contain Shiitake mushrooms and traditional Chinese herbs doubled-boiled with chicken. Six varieties are commercially available; 4. Shiitake Mushroom Sauces are pour-over sauces which combine Shiitake mushrooms with various other oriental and western sauces. Eight varieties are available commercially; 5. Oriental Gourmet and Exotic Mushroom Soups which contain Shiitake mushrooms and other mushrooms with local flavours and ingredients. Eighteen varieties are available commercially. 6. Mushroom Pickles are mushrooms preserved as pickles that are available in three varieties. Sales and Marketing We promote our health foods and health supplements by participating in trade fairs such as Vitafood International in Geneva, Natural Food Expo in England and the Natural Food Expo in the United States. We intend to raise our profile and increase the market exposure of our products by participating in additional trade shows and exhibitions as well as through publication of research findings and advertisements in selected journals and magazines in the field of science and biotechnology. We hope to place advertisements through the print media and broadcast media as well as stage special events and publicity programs and through our website, www.mycobiotech.com and www.mushroom-shop.com. Although we have executed five distribution agreements, only one is producing any material revenue. That is the agency agreement between Everbloom Mushroom PTE LTD ("EM") with BAN CHOON MARKETING PTE LTD (BAN CHOON). BAN CHOON is controlled by Chin Hian Tan, the brother of Dr. Tan, our president and is a director of Everbloom Mushroom Pte Ltd., our subsidiary. This agency agreement provides for BAN CHOON to be the exclusive distributor of certain products in the Singapore area. The agreement also provides for BAN CHOON to be paid for all costs incurred in the marketing and distribution of the products plus 20% of the net profit. During 2001, sales through BAN CHOON totaled approximately $2,654,000 or approximately 77% of our total sales. Expenses paid by BAN CHOON were approximately $505,000. Net income provided to the Company was approximately $67,700. During 2000, sales through BAN CHOON totaled approximately $2,352,600 or approximately 72% of total sales. Expenses paid by BAN CHOON were approximately $567,000. Net income provided to the Company was approximately $83,000. Governmental Regulations There are no governmental regulations which govern the importing or exporting of fresh mushrooms in Singapore or in England where our products are sold. In the sale of health supplements, there are currently no regulations other than labeling. These regulations require a listing of the products ingredients and weight, and limit the labeling of health benefits which can be claimed and require a listing of the name of the producer or manufacturer of the product. From time to time, proposals have been introduced to either regulate the claimed benefits of health supplements, or to have them registered as drugs (which would subject the products to all of the drug testing rules and approvals). However to date no such proposal has ever been enacted in any of the jurisdictions in which our products are marketed. 12 Future Products The following new products are scheduled to be launched within the next twelve months. Lingzhi-Shiitake mushroom with Honey-Emulsion for kids. This is an extension product of the Linzir capsules but will be targeted to children. Gano-X B. In capsule form, this is a pure Lingzhi mushroom extract product. It will be promoted as a health supplement that aids in lowering high blood pressure, fighting diabetes, and slowing the aging process. Odorex B. In capsules form, this is an extract from the champignon mushroom. This product will be as a health supplement to eliminate body odour, bad breath and faecal smell. Product Pipeline Our biopharmaceutical products have been developed from research undertaken both by us and by third parties on various types of medicinal mushrooms and are the first products of their kind in the world. (a) MycoGlucan. This product has just been launched and is produced in capsule form and contains ingredients from five different mushrooms - Shiitake, Lingzhi, Yunzhi, Monkey Head and Maitake Mushrooms. These ingredients have been shown to enhance the immune system, stimulate appetite, and increase production of antibodies. Preclinical trials of Mycoglucan is being conducted in the laboratories of the Department of Microbiology at the University of Singapore. (b) MycoDiab. MycoDiab is produced in sterile conditions from the Yellow Brain mushroom. The main bioactive component in this product is the polysaccharide glucuronoxylomannan. MycoDiab will be marketed as a prevention for diabetes and also as a supplement to stimulate the immune system. Preclinical trials of this product have started in Israel, at the laboratory of Harlan Biotech. (c) Mycovastatin. Mycovastatin is produced from the Oyster mushroom. The product has been shown in preclinical trials to lower cholesterol in mice. The acquisition of the intellectual property relating to the isolation and characterisation of Fungal growth hormones called FungiFlex1 and FungiFlex2 will enable the Company to further research into and develop new fungicides for the world market. Mushrooms Overview We are a producer of cultivated mushrooms using our patented technology called the Everbloom Process. The growing of mushrooms using traditional methods normally takes ten to twelve (12) months before harvest under natural climatic conditions. Unfortunately, the natural production method makes it difficult to control the supply year round. The process of shortening the growing period using a sawdust supplemented substrate under environmentally controlled conditions was successfully developed by Dr Tan in 1979 at the then University of Singapore under a research grant from the International Foundation for Science, Stockholm. This discovery was commercialized in 1980 by Everbloom Biotechnology (Pte) Ltd. The Everbloom cultivation process has been patented and proven to be thirteen times more productive than the cultivation of mushrooms under natural climate condition. Our goal is to develop the Everbloom brand and a reputation for reliability and consistency in quality. Our business model is to license growers with the Everbloom process and grow mushrooms using our strains and stringent cultivation standards. This model releases our capital for other purposes while maintaining our control of the mushroom quality. Products Our primary product is the Shiitake mushroom. However, we also grow other mushrooms such as Nameko, Monkey Head and Pink and Yellow Oyster mushrooms. The sale of fresh mushrooms provides nearly ninety percent of our revenue. 13 Sales & Marketing We target our fresh mushrooms to middle and upper income groups. We will concentrate our marketing efforts on providing more exposure of the benefits of mushrooms through cooking demonstrations, tasting sessions and the distribution of recipes at grocery chains. Our marketing message will focus on the health-enhancing qualities of mushrooms. Sales efforts will be focused on locating distributors with proven track records. And, the Company will source and develop relationships with distributors who have access to national grocery chains. 14 Patents / Licenses / Contracts / Processes We have developed and patented our sawdust-based mushroom cultivation process. We regard our copyrights, trade marks, trade secrets and other intellectual property as important to our success. We rely on a combination of patent, trademark laws and contractual restrictions to protect our proprietary rights in products and services. The following is the table of our patents: A."Mushroom Cultivation" ------ ---------------- ------------------ -------------- -------------- --------------- ----------------- Publn/ Grant Date Country Proprietor Application Application Grant No. No. Date ------ ---------------- ------------------ -------------- -------------- --------------- ----------------- 1. US MycoBiotech(1) 536260 29/9/1983 4542608 24/9/1985 ------ ---------------- ------------------ -------------- -------------- --------------- ----------------- 2. Sri Lanka MycoBiotech(2) 9769 8/6/1987 9769 24/7/87 ------ ---------------- ------------------ -------------- -------------- --------------- -----------------
B."Cultivation on Rubber Wood" - -------- ------------ ---------------------------- -------------- -------------- ---------------- ----------- Publn/ Grant Country Proprietor Application Application No. Grant Date No. Date - -------- ------------ ---------------------------- -------------- -------------- ---------------- ----------- 1. US MycoBiotech(1) 057335 2/6/1987 4833821 30/5/1989 - -------- ------------ ---------------------------- -------------- -------------- ---------------- ----------- 2. UK MycoBiotech(2) 8923604.6 2/6/1987 2223922 5/12/1990 - -------- ------------ ---------------------------- -------------- -------------- ---------------- ----------- 3. Singapore MycoBiotech(2) 9391282.2 1/12/1993 9391282.2 22/4/1994 - -------- ------------ ---------------------------- -------------- -------------- ---------------- ----------- 4. Malaysia MycoBiotech(2) PI9002102 2/6/1987 MY-104548A 30/4/1994 - -------- ------------ ---------------------------- -------------- -------------- ---------------- -----------
C."Cultivation with Thermal Shock" - -------- -------------- ---------------------------- -------------- --------------- ------------ ------------ Publn/ Country Proprietor Application Application Grant Grant Date No. Date No. - -------- -------------- ---------------------------- -------------- --------------- ------------ ------------ 1. Singapore MycoBiotech(2) 9391281-4 1/12/1993 9391281-4 17/5/1994 - -------- -------------- ---------------------------- -------------- --------------- ------------ ------------ 2. US MycoBiotech(1) 277823 30/11/1988 4987698 29/1/1991 - -------- -------------- ---------------------------- -------------- --------------- ------------ ------------ 3. Philippines MycoBiotech(2) 35335 2/6/1987 28576 7/11/1994 - -------- -------------- ---------------------------- -------------- --------------- ------------ ------------ 4. Canada MycoBiotech(2) 538736 3/6/1987 1288371 3/9/1991 - -------- -------------- ---------------------------- -------------- --------------- ------------ ------------ 5. Australia MycoBiotech(2) 73748/87 2/6/1987 604707 24/4/1991 - -------- -------------- ---------------------------- -------------- --------------- ------------ ------------ 6. UK MycoBiotech(2) 8712904.5 2/6/1987 2191074 12/12/1990 - -------- -------------- ---------------------------- -------------- --------------- ------------ ------------ 7. New Zealand MycoBiotech(2) 220531 2/6/1987 220531 10/7/1990 - -------- -------------- ---------------------------- -------------- --------------- ------------ ------------ 8. Belgium MycoBiotech(1) 87304869.8 2/6/1987 0248636 30/9/1992 - -------- -------------- ---------------------------- -------------- --------------- ------------ ------------ 9. France MycoBiotech(1) 87304869.8 2/6/1987 0248636 30/9/1992 - -------- -------------- ---------------------------- -------------- --------------- ------------ ------------ 10. Germany MycoBiotech(1) 87304869.8 2/6/1987 0248636 30/9/1992 - -------- -------------- ---------------------------- -------------- --------------- ------------ ------------
15 11. Italy MycoBiotech(1) 87304869.8 2/6/1987 0248636 30/9/1992 - -------- -------------- ---------------------------- -------------- --------------- ------------ ------------ 12. Netherlands MycoBiotech(1) 87304869.8 2/6/1987 0248636 30/9/1992 - -------- -------------- ---------------------------- -------------- --------------- ------------ ------------ 13. Spain MycoBiotech(1) 87304869.8 2/6/1987 0248636 30/9/1992 - -------- -------------- ---------------------------- -------------- --------------- ------------ ------------ 14. Switzerland MycoBiotech(1) 87304869.8 2/6/1987 0248636 30/9/1992 - -------- -------------- ---------------------------- -------------- --------------- ------------ ------------ 15. Malaysia MycoBiotech(2) PI8700754 2/6/1987 MY-101739A 17/1/1992 - -------- -------------- ---------------------------- -------------- --------------- ------------ ------------
D."Making Mushroom Spawn" Publn/ Country Proprietor Application Application Grant Grant Date No. Date No. ------- ----------------- ------------------------- --------------- -------------- ------------- -------------------- 1. Australia Tan Kok Kheng and 19609/83 27/9/1983 564248 20/1/1988 MycoBiotech(1) ------- ----------------- ------------------------- --------------- -------------- ------------- -------------------- 2. New Zealand Tan Kok Kheng and 205746 26/9/1983 205746 26/9/1983 MycoBiotech(1) ------- ----------------- ------------------------- --------------- -------------- ------------- -------------------- 3. Belgium MycoBiotech(1) 83305709.4 26/9/1983 0107911 20/12/1989 ------- ----------------- ------------------------- --------------- -------------- ------------- -------------------- 4. France MycoBiotech(1) 83305709.4 26/9/1983 0107911 20/12/1989 ------- ----------------- ------------------------- --------------- -------------- ------------- -------------------- 5. Germany MycoBiotech(1) 83305709.4 26/9/1983 0107911 20/12/1989 ------- ----------------- ------------------------- --------------- -------------- ------------- -------------------- 6. Netherlands MycoBiotech(1) 83305709.4 26/9/1983 0107911 20/12/1989 ------- ----------------- ------------------------- --------------- -------------- ------------- -------------------- 7. UK MycoBiotech(1) 83305709.4 26/9/1983 0107911 20/12/1989 ------- ----------------- ------------------------- --------------- -------------- ------------- -------------------- 8. Canada Tan Kok Kheng & 83305709.4 28/9/1983 1207690 15/7/1986 MycoBiotech(1) ------- ----------------- ------------------------- --------------- -------------- ------------- -------------------- 9. Singapore MycoBiotech(1) 9190118.1 20/2/1991 9190118.1 12/3/1991 ------- ----------------- ------------------------- --------------- -------------- ------------- -------------------- 10. Malaysia MycoBiotech(2) PI8701544 3/9/1987 MY-101013A 29/6/1991 ------- ----------------- ------------------------- --------------- -------------- ------------- --------------------
Note:- (1) The patent is registered in the name of Everbloom Mushroom, the former name of the Company. (2) The patent is registered in the name of Everbloom Biotechnology, the former name of the Company. Patents are granted for an average period of 15 to 20 years from the application date, if periodically renewed during the life of the patents. The Everbloom Process We are a producer of cultivated mushrooms with our proprietary biotechnology, the Everbloom Process and an integrated producer of edible mushrooms and mushroom-based products. The Everbloom Process is used in all the mushroom farms operated by our licensees. We grow primarily Shiitake mushrooms. However, we also grow other mushrooms such as Nameko, Monkey Head and Pink and Yellow Oyster mushrooms, though in much smaller quantities. 16 Our sawdust logs are logistically easier to handle than those involving bed logs the traditional product. Sawdust logs are short vertical logs approximately seven to eight inches high and weigh anywhere from two to seven pounds as opposed to bed logs which are approximately four feet long and weigh more than twenty-six pounds. Bed logs cultivation must be done outdoors, thereby restricting the farm to areas where the climate is conducive to cultivation. Sawdust logs can be placed on shelves in growing houses, permitting environmental control growing area, a reduced labor cost and better utilisation of real estate. Finally, sawdust logs reduce the time to incubation and first fruiting (harvest) to months instead of years. Generally, the entire yield from the sawdust log can be obtained within a year. Patents are granted for an average period of 15 to 20 years from the application date. Dr. Tan is named as a joint or the sole owner of a patent at the point of application due to the patent laws of certain countries. Dr. Tan has assigned all of his rights in the patents to Everbloom Biotechnology, and steps have been taken to record the Company as the sole owner. Four patents relating to fermentor culture of mushroom species for cholesterol lowering and for antidiabetes have been granted in the USA. We have also filed patents for this technology in Europe, Canada, Japan and Israel. Our patents cover the following four technologies: 1. A process for producing, methods and compositions of cholesterol lowering agents from higher Basidiomycetes mushrooms. 2. A process for higher Basidiomycetes Mushrooms grown (as biomass) in submerged culture. 3. A process for producing, methods and compositions of glucuronoxylomannan as a health food supplement from the Basidiomycetes of Mushrooms. 4. A process for higher Basidiomycetes Mushrooms grown (as one cell biomass) in a submerged culture. Trade Marks We own a number of trade marks worldwide, for marks comprising and including the words "EVERBLOOM", "LINZIR" (in the English and Chinese languages), "MYCOMED", "MYCOVITE", "MYCOGLUCAN" and "ELIXIR". These marks cover a variety of health foods, supplements and alternative medical products. Our trade marks are registered and pending registration in Singapore, Malaysia, Brunei, Indonesia, Japan, Korea, the Philippines, Taiwan and Thailand. The "LINZIR" trade marks were originally owned by Winthrop Products Inc., (except in Japan), where it is owned by Sterling Winthrop Inc. Winthrop Products was purchased by SmithKline Beecham Plc and the "LINZIR" trade marks were sold by SmithKline Beecham to Everbloom Biotechnology in 1998. Winthrop Products and SmithKline Beecham Plc are still registered as the owners of the "LINZIR" marks outside of Singapore. Proprietary Information Aside from patented technology, we also own certain proprietary information and know-how concerning techniques and methods relating to the patented inventions. Where proprietary information is held by Dr.Tan, such information has already been assigned by Dr.Tan to our Company. License Agreements A license agreement dated December 8, 1997 entered into between Everbloom International Technology Pte Ltd and Everbloom Mushroom (UK) Ltd; A license agreement dated May 30, 1998 entered into between Everbloom Biotechnology (Pte) Ltd and Everbloom International Technology Pte Ltd; A license agreement dated June 1, 1998 entered into between Everbloom Biotechnology (Pte) Ltd and Everbloom Health Food Pte Ltd; 17 A license agreement dated December 9, 1998 entered into between Everbloom International Technology Pte Ltd and Everbloom Mushroom (UK) Ltd; A license agreement dated December 9, 1998 entered into between Everbloom Health Food Pte Ltd and Mycoceuticals Ltd; A license agreement dated January 21, 2000 entered into between Everbloom Health Food Pte Ltd and Ever-Bloom, Nutraceuticals (M) Sdn Bhd; A license agreement dated February 23, 2000 entered into between Everbloom International Technology Pte Ltd and Gulf Mushrooms Products Company (S.A.O.G.); and A licence agreement dated June 4, 2001 entered into between MycoBiotech Ltd and Everbloom Biotechnology (Canada) Ltd. Each of these license agreements are with subsidiaries or associated companies and require that we contribute our technology and train personnel. However, none of these licenses are currently producing revenues to us, but even if they did, our obligations are minimal. Although not a license agreement, there is an exclusive rights agreement with a third party whereby a subsidiary of the Company is required to purchase approximately $500,000 of product from such third party. 18 Item 5. Operating and Financial Review and Prospects. A. Operating Results. Selected Financial Data Nine Months Years Ended December 31, Ended Average Exchange Rate of Singapore Dollars 1.7960 1.7917 1.7239 1.6929 September 30, 2002 2001 2000 1999 ---- ------ ------ ------- US `000 US `000 US `000 US `000 STATEMENT OF OPERATIONS Net Sales $2,652 3,456 3,707 1,256 Cost of Sales 2,414 (3,312) (2,478) (684) -------- -------- -------- -------- Gross Profit 238 144 1,229 572 Operating Expenses (2,150) (3,211) (2,992) (1,137) -------- -------- -------- -------- Loss from Operations (1,912) (3,067) (1,763) (565) Other Income/(Expenses) (210) 732 (37) (72) -------- -------- -------- -------- Net Loss Before Taxes (2,122) (3,799) (1,800) (637) Taxation 0 0 44 31 -------- -------- -------- -------- Net Loss after Tax (2,122) (3,799) (1,844) (668) ======== ======== ======== ======== Comprehensive income 27 102 65 62 Comprehensive loss (2,095) (3,697) (1,779) (730) ======== ======== ======== ======== Loss per common share ($0.09) $(0.23) $(0.14) (.07) ======== ======== ======== ======== Average Weighted Number of Shares Outstanding 22,083,645 15,768,929 13,035,298 10,706,728 ========== ========== ========== ==========
Exchange Rate of Singapore Dollars as of the US `000 US `000 US `000 ------- ------- ------- Balance Sheet Date 1.7760 1.8445 1.7331 BALANCE SHEET DATA Working Capital (Deficit) 414 (374) (141) Total Assets 2,840 2,515 3,714 Long Term Debts 83 211 2,098 Shareholders' Equity (Deficit) 901 (49) (734)
The following discussion and analysis should be read in conjunction with our financial statements and notes to the financial statements appearing elsewhere. The amounts reflected in the following discussion are in United States Dollars. The functional currency of our operations in the Singapore Dollar. Management's Discussion and Analysis and Results of Operations Year Ended December 31, 2001 Compared With Year-Ended December 31, 2000. Sales of Mushroom Products. Sales of mushroom products for the year ended December 31, 2001 decreased by $251,043 or 6.8% to $3,455,930 from $3,706,973 for the year ended December 31, 2000. This decrease in sales resulted from a general slow down in the retail sector of the Singapore economy. Prices remained fairly constant through out the period with approximately a 1% average decrease in prices with the balances of the decreases in sales being in sales volume. Cost of Sales. Cost of sales for the year ended December 31, 2001 increased by $833,580 or 33.65% to $3,311,617 from $2,477,767 for the year ended December 31, 2000. This increase resulted from higher unit labor costs, newly designed packaging materials and additional freight cost. Gross Profit, as a percentage of sales decreased to 4.17% for the year ended December 31, 2001 from 33.15% for the year ended December 31, 2000 due to increased competition, a weak economy, a change in the product mix and higher costs of production. 19 Operating Expenses. Operating expenses for the year ended December 31, 2001 increased by $218,685 or 7.3% to $3,211,047 from $2,992,362 for the year ended December 31, 2000. The increase in operating expenses resulted from an increase in professional fees of $74,415, an increase in rent expenses of $196,749 principally from a full year of rental expense on the English facility compared to only several months in 2000 and an increase in other expenses, principally legal fees and marketing expenses from the new English operation of $490,353 which were partially offset by decreases in depreciation and amortization of $30,547, a decrease in the write off of bad debts of $168,735 an absence of a write-off for an aborted public offering ($143,000) and a decrease in personnel expense of $200,500. The decrease in personnel expenses resulted from the absent of bonus payments in the current year and from the company staffing up for an expansion which was delayed because a planned registration and fund raising in Singapore which did not materialize and therefore these additional staff persons were either terminated or resigned and not replaced which produced a reduction in payroll expense of $122,550. The remainder of the decrease in payroll expense was decreases in bonuses of $78,000. The reduction in personnel will not have any impact on future operations. As a result of the foregoing, the net loss from operations for the year ended December 31, 2001 increased by $1,303,578 or 73.93% to $3,066,734 from $1,763,156 for the year ended December 31, 2000. Other Income (loss). Other income (loss) consists principally of interest, changes in equity investments, impairments of investments and miscellaneous items. Other losses for the year ended December 31, 2001 increased by $695,524 or 1887.6% to 732,567 from $37,043 for the year ended December 31, 2000. This increase resulted from an increase of $4,343 in interest expense, an increase of equity investment loss from the Indonesian operation to $563,274 from $10,726 in 2000 and a $183,804 impairment of investments compared to zero in 2000 which were partially offset by an increase in other income of $55,897 principally that of other farm revenue. The impairment loss resulted from a write off of our investment in Medmyco Ltd, our Isreal operation. Written off was our investment of approximately $40,000 and the funds which were subsequently advanced. These subsequent advances were initially classified as a receivable and later reclassified to the investment account. Because the operations no longer has commercial viability, it was impaired. Income Taxes. There was no provision for income taxes for the year ended December 31, 2001. For the year ended December 31, 2000, there was a provision for income taxes of $43,878 even though the Company had an operating loss. Income tax expense was recorded in 2000 because of profit generated from the sale of a technology license by a British Subsidiary. Other Comprehensive Income. Other comprehensive income increased by $36,477 or 55.91% for the year ended December 31, 2001 to $101,716 from $65,239 for the year ended December 31, 2000. This increase resulted principally from an exchange of bonds for equity at a different exchange rate than when sold, and a writeoff of investments at a different exchange rate than at the date of investment. As a result of the foregoing, the comprehensive loss for the year ended December 31, 2001 increased by $1,918,747 or 108% to a loss of $3,697,585 from a loss of $1,778,838 for the year ended December 31, 2000. Liquidity and Capital Resources As of December 31, 2001, the Company had unrestricted cash of $47,108 and a deficiency in working capital of $374,097. This compares with unrestricted cash of $74,755 and a deficiency in working capital of $141,101 as of December 31, 2000. The Company has three credit facilities covering bank overdrafts and letters of credit. The credit facilities provide for bank overdraft protection of approximately $500,000 and for irrevocable letters of credit for approximately $400,000. The credit facilities are generally secured by cash, inventory, corporate guarantees, key-man insurance and personal guarantees of one of the Company's directors. The credit facilities are payable on demand. Interest rates range from one percent to one and one-half percent over the bank prime rates. Interest rates ranged from 6% to 7% at December 31, 2001. Other nominal charges may also apply. Cash flows used in operating activities increased by $564,757 to $2,380,556 for the year ended December 31, 2001 from $1,815,799 for the year ended December 31, 2000. This increase is attributable to increases in the net operating loss deferred offering costs and other expenses which were partially offset by reduced by increases in non-cash expenses and changes in the current accounts. 20 Cash used in investing activities decreased by $1,210,727 to $161,471 for the year ended December 31, 2001 from $1,372,198 for the year ended December 31, 2000. This decrease resulted from a reduction in deposits and the absence of investment expenditures and fixed current expenditures in the current year as well as a slight decrease in the amount of restricted cash. Cash flows from financing activities decreased by $519,243 to $2,522,743 for the year ended December 31, 2001 from $3,041,986 for the year ended December 31, 2000. This decrease was the result of decreased bank overdrafts, a smaller decrease in short-term borrowings and fewer sales of common stock which was partially offset by increased funds from letters of credit, a grant and a small increase in long term leases. Because the company continues to generate losses from its operations, it is able to sustain itself only from the sale of its shares and from borrowings. However, in the future, there is no guaranty that the Company will continue to be able to sell its shares or borrow additional funds, without which we will have insufficient cash to find our operations for the next twelve months. Year Ended December 31, 2000 Compared With Year-Ended December 31, 1999. Sales of Mushroom Products. Sales of mushroom products for the year ended December 31, 2000 increased by $2,450,529 or 195% to $3,706,973 from $1,256,444 for the year ended December 31, 1999. This increase in sales resulted from the addition of a distributor to market the Company's products in 2000. Cost of Sales. Cost of sales for the year ended December 31, 2000 increased by $1,793,341 or 262.02% to $2,477,767 from $684,426 for the year ended December 31, 1999. This increase resulted from an increase in sales increased competition and higher production costs. Gross Profit, as a percentage of sales decreased to 33.15% for the year ended December 31, 2000 from 45.52% for the year ended December 31, 1999. The lower gross profit was due to a change in the sales mix to lower margin goods, higher production costs and increased competition. Operating Expenses. Operating expenses for the year ended December 31, 2000 increased by $1,855,370 or 163.2% to $2,992,362 from $1,136,992 for the year ended December 31, 1999. The increase in operating expenses resulted from increases in depreciation and amortization of $44,241, an increase in bad debt allowances of $165,029 an increase in professional fees of $150,210,( principally from an aborted attempt to list the Company's shares in Singapore), an increase in rent expenses of $174,677 (principally from moving to new corporate headquarters) and an increase in other expenses (principally advertising and promotion, distribution, and marketing expenses) of $484,415 and an increase in personnel expense of $836,798, (principally in bonuses) The increase in allowance for bad debts resulted from the economic turn down in the region which caused one of our customers to fail and us to write off our trade receivable from them. As a result of the foregoing, the net loss from operations for the year ended December 31, 2000 increased by $1,198,182 or 212.1% to $1,763,156 from $564,974 for the year ended December 31, 1999. Other Income (loss). Other income (loss) consists principally of interest, changes in equity investments, impairments of investments and miscellaneous items. Other losses for the year ended December 31, 2000 decreased by $34,619 or 48.3% to $37,043 from $71,662 for the year ended December 31, 1999. This decrease resulted from an increase of $2,032 in interest expense, an increase of equity investment loss of $10,726 from zero in 1999 which was partially offsetted by an increase in other income of $47,377 principally rental income and management fee. Income Taxes. The provision for income taxes for the year ended December 31, 2000 was $43,878 an increase of $15,893 or 50.5% from the year ended December 31, 1999. Even though the Company had an operating loss in both years, income tax expense was recorded in each year because of minimal profit on a separate company basis where one of the subsidiaries reported taxable income. Other Comprehensive Income. Other comprehensive income increased by $126,953 for the year ended December 31, 2000 to $65,239 from a loss of $61,714 for the year ended December 31, 1999. This resulted from a positive increase in the exchange rate from which the Company benefited in the redemption and exchange of certain bonds. As a result of the foregoing, the comprehensive loss for the year ended December 31, 2000 increased by $1,049,004 or 143.7% to a loss of $1,778,838 from a loss of $727,834 for the year ended December 31, 1999. 21 Liquidity and Capital Resources As of December 31, 2000, the Company had unrestricted cash of $74,755 and a deficit in working capital of $141,101. This compares with cash of $192,275 an a deficit of working capital of $80,000 as of December 31, 1999. The Company has three credit facilities covering bank over drafts and letters of credit. The credit facilities provide for bank overdraft protection of approximately $500,000 and for irrevocable letters of credit of approximately $400,000. The credit facilities are generally secured by cash, inventory, corporate guarantees, key-man insurance and personal guarantees of one of the Company's directors. At December 31, 2000, the Company had $173,100 of restricted deposits with the banks as collateral. The credit facilities are payable on demand with interest rates ranging from one-percent to one and one-half percent over the bank prime rates. Other nominal charges may apply. Total interest expenses on these loans totaled $8,888 for the year ended December 31, 2000. There was no interest for the year ended December 31, 1999. Cash flows used in operating activities was virtually identical with the prior year increasing by $1,581 to $1,815,799 for the year ended December 31, 2000 from $1,814,218 for the year ended December 31, 1999. The increase in the net operating loss of 1,175,957 was offset almost in its entirety by increases in non-cash items and changes in the current accounts. Cash used in investing activities increased by $898,333 to $1,375,198 for the years ended December 31, 2000 from $473,865 for the year ended December 31, 1999. This increase resulted from increased deposits, increased investments, a slight increase in the purchase of fixed assets and an increase in restricted cash which was partially offset by a decrease in the purchase of intangibles. Cash flows from financing activities increased by $444,479 to $3,041,986 for the year ended December 31, 2000 from $ 2,597,507 for the year ended December 31, 1999. This increase resulted from increased bank overdraft, reduced short-term debt repayments and an increase in the proceeds from the sale of common stock which was partially offset by a decrease in funds from letter of credit and long-term leases. Although the Company's cash position improved slightly during the year-ended December 31, 2000, the Company continues to generate substantial net operating losses. The Company is only able to continue operations by borrowing funds or selling shares, without which we would have insufficient cash to fund our operations for the next twelve months. Nine Months Ended September 30, 2002 Compared With the Nine Months Ended September 30, 2001. Sales of Mushroom Products. Sales of mushroom products for the nine months ended September 30, 2002 increased by $24,517 or .9% to $2,651,861 from $2,627,344 for the corresponding period of the prior year. This increase in sales resulted from sales contributed by the British Subsidiary of $248,494 which was offset by a decrease in the sale of health foods and health food supplements due to weak demand. For the nine months ended September 30, 2002, 94.73% of our revenues were from the sale of fresh mushrooms and 85.4% of our total sales were through Ban Choon, a related party. During the first nine months of 2002, we sold $116,072 in health foods and health food supplements. We had no revenues from biopharmaceuticals. Cost of Sales. Cost of sales for the nine months ended September 30, 2002 increased by $577,393 or 31.4% to $2,413,679 from $1,836,286 for corresponding period of the prior year. This increase resulted from an increase in direct purchases, freight charges and increased production expenses. Gross profit, as a percentage of sales decreased to 8.98 % for the nine months ended September 30, 2002 from 30.10% for the corresponding period of the prior year. Operating Expenses. Operating expenses for the nine months ended September 30, 2002 decreased by $4,756 or .2% to $2,150,771 from $2,155,527 for the corresponding period of the prior year. The decrease in operating expenses resulted from a decrease in rental expense of $103,384 from the shuttering of the retail outlets which was partially offset by an increase in personnel expense of $7,696, depreciation and amortization of $791 and other expenses of $90,141 principally because of an increase in allowance for doubtful accounts. This increase resulted from the write off of the receivable from our associated company in Indonesia. As a result of the foregoing, the net loss from operations for the nine months ended September 30, 2002 increased by $548,120 or 40.17 % to a loss of $1,912,589 from a loss of $1,364,469 for the corresponding period of the prior year. 22 Other Income (loss). Other income (loss) consists principally of interest, changes in equity investments, impairments of investments and miscellaneous items. Other income for the nine months ended September 30, 2002 decreased by $243,380 or 53.7% to a loss of $209,727 from a loss of $453,107 for the corresponding period of the prior year. This decrease resulted from a decrease of $254,907 in equity investment losses and a decrease of $51,074 in interest expenses from reduced borrowings which was partially offset by a decrease in other income of $62,601. Income Taxes. There was no provision for income taxes for the nine months ended September 30, 2002 and the corresponding period of the prior year. Other Comprehensive Income. Other comprehensive income decreased by $82,178 or 75.4% for the nine months ended September 30, 2002 to $26,882 from $109,060 for the corresponding period of the prior year. This decrease resulted from less foreign currency gains in the current year compared to the foreign currency gain in the prior year. As a result of the foregoing, the comprehensive loss for the nine months ended September 30, 2002 increased by $386,918 or 22.64% to a loss of $2,095,434 from a loss of $1,708,516 for the corresponding period of the prior year. Traditionally, inflation has had a limited impact on the Company, and management does not believe that it will have a material impact in the near future. Liquidity and Capital Resources As of September 30, 2002, the Company had unrestricted cash of $231,314 and working capital of $414,583. This compares with unrestricted cash of $47,108 and a deficiency in working capital of $374,097 as of December 31, 2001. The Company has three credit facilities covering bank overdrafts and letters of credit. The credit facilities provide for bank overdraft protection of approximately $500,000 and for irrevocable letters of credit for approximately $400,000. The credit facilities are generally secured by cash, inventory, corporate guarantees, key-man insurances and personal guarantees of one of the Company's directors. The credit facilities are payable on demand. Interest rates range from one percent to one and one-half percent over the banks prime rates. Interest rates ranged from 6% to 7% at December 31, 2001. Other nominal charges may also apply. Cash flows used in operating activities increased by $855,414 to $2,502,455 for the nine months ended September 30, 2002 from $1,647,041 for the corresponding period of the prior year. This increase resulted from an increased net operating loss and changes in the current accounts. Cash used in investing activities decreased by $55,081 to $97,828 for the nine months ended September 30, 2002 from $152,909 for the corresponding period of the prior year. This increase resulted from a reduction in deposits and investments on net sales of assets and an increase in restricted cash. Cash flows from financing activities increased by $1,072,460 to $2,757,607 for the nine months ended September 30, 2002 from $1,685,147 provided by financing activities for the corresponding period of the prior year. This increase resulted from a sale of $2,960,724 of common stock and additional stock subscription of $319,689 which was partially offset by repayments of bank borrowings and payments on long-term leases. Because the Company has continued to generate losses from operations, it has been able to sustain itself only from the sale of its shares. However, there is no guaranty that in the future it will be able to continue to sell its shares, without which the Company will have insufficient cash to fund its operations for the next twelve months. 23 Item 6. Directors, Senior Management and Employees. The Executive Officers of the Company as of October 20, 2002 are as follows: Name Age Position - ------- ------- ---------------- Dr Kok Kheng Tan 55 Chairman of the Board, Director & Chief Executive Officer John Edward Smith 71 Chief Scientific Officer Eugene Lim 53 Chief Financial Officer & Secretary Yevindra Sepala Ilangakoon 48 Chief Operating Officer - Europe Richard Poh Pheng Chia 55 General Manager - Marketing Ronald Han Kiang Ang 62 General Manager - Marketing Franklin Leong Tian Chong 45 Group Accounts Manager Rajive Goonewardena 58 Production Manager Thye Aun Yong 67 Production Manager Victor Ang 56 Director Dr Alfred Wee Tiong Loh 56 Director David Soo Theng Lua 55 Director Chin Tiong Tan 54 Director Jin Soon Tan 67 Director Information on the business and working experience of our Directors are set out below: - Dr Kok Kheng Tan Dr Tan is the founder and Chief Executive Officer of Mycobiotech and its subsidiaries. He was educated at the University of Singapore where he obtained his B.Sc (First Class Honours) in Botany and at the University of Manchester where he obtained a Ph.D. in Mycology. He has carried out research in the field of biochemistry specializing in physiology and biochemistry of fungal development and in the cultivation of mushroom. Dr Tan had written many papers for international journals and other publications. He was a member of the Singapore Society for Microbiology, having served as its Vice President and President during the period from 1978 to 1980. He was formerly a lecturer in Biochemistry at the National University of Singapore from 1976 to 1995. Dr Tan was a director of Singapore Bus Services (1978) Ltd (now known as DelGro Corp), a company listed on the Stock Exchange of Singapore. He is currently director of CityCab Pte Ltd and various privately held companies. He is also a council member of the Singapore Confederation of Industries ("SCI") (formerly known as Singapore Manufacturers' Association) and serves as the Chairman of the Food & Beverage Industry Group. Dr Tan also sits on the committee of many public organizations. Among such committee include the Food Advisory Committee of Trade Development Board, Ministry of Environment and Productivity and Standards Board, the Council of National Healthy Lifestyle Committee, and the Ministry of Health's Nutrition Labeling Committee. Victor Ang Mr Ang is an independent Director of the Company. He is presently the Chairman and CEO of Chesapeake Technologies in Singapore and the Vice Chairman of IPP Financial Services Holding Ltd. He also sits on the board of a number of companies in the internet, multimedia, and financial services industries. He graduated from Nottingham University, England as a Shell Scholar with first-class honours in Chemical Engineering in 1968. He was previously with Shell Singapore, IBM (U.K) and Gulf Oil Europe. He was also General Manager of International Computers Ltd in the UAE (1979 to 1983), Managing Director of Hewlett-Packard, Asia Pacific (1983 to 1993), Managing Director of ERP (1993 to 1995), Managing Director of AT & T Global Information Solution (1995 to 1997), President and CEO of ST Computer Systems and Services Ltd (1997 to 2001). Dr. Alfred Wee Tiong Loh Dr. Loh is an independent Director of the Company. Dr Loh is the founding partner and Senior Clinical Director of the Raffles Medical Group, a medical practice listed on the main board of the Singapore Exchange (SGX). He is also a clinical tutor in Family Medicine in the National University of Singapore's Faculty of Medicine, and a clinical examiner of the School of Postgraduate Medical Studies for the Master of Medicine (Family Medicine) Examinations. Dr. Loh is the Chief Executive Officer ( CEO ) of the World Organisation of Family Doctors (WONCA) which has over 150,000 Family Physicians / General Practitioners in over 85 countries worldwide as its members. As CEO he oversees the running of the Wonca Secretariat in Singapore and the various programmes of the organization globally. He is a Fellow of the College of Family Physicians in Singapore and was its President from 1991 - 1996 .. He was recently elected to the Fellowship of Royal College of General Practioners, UK. Dr Loh also sits on various committees (including National Ethics Committee, Breast Cancer Working Committee, Medicine Advisory Committee) of the Ministry of Health, Singapore, and the Singapore Medical Association. Dr Loh is also involved in his family owned food trading business which is involved in the import and export of frozen products and grocery items to Western Malaysia, Brunei, Myanmar and Vietnam. Dr. Loh received his medical training in Singapore and graduated with the Degree of Bachelor of Medicine, Bachelor of Surgery ( MBBS ) from the University of Singapore in 1973. He also holds an MBA from the University of Hull ( UK ) 24 David Soo Theng Lua Mr Lua is an independent Director of the Company. Presently he is the chairman of ACPS Investmentt Pte Ltd. Previously he was the Acting Chief Operating Officer of Autron Ltd, a company listed on the Singapore Exchange, Director Institutional Sales, of Ong & Co Private Limited, a securities house which is a member of the Singapore Exchange. Mr Lua has had extensive experience in the areas of finance and general management having worked in diversified industries including engineering, manufacturing, - construction, publishing and printing industries. He had, in the past, held various senior management positions and directorships in publicly listed companies in Singapore and Malaysia. He was formerly Deputy Group Managing Director of Avimo Ltd, the Chief Excutive Officer of Lysaght Corrugated Pipes Pte Ltd, an Executive Director of United Engineers Bhd and the Financial Controller of Times Publishing Bhd, among other positions. Mr Lua is a qualified accountant and holds a Degree in Bachelor of Accountancy (Honours) from the University of Singapore (now known as the National University of Singapore) -, Mr Lua is also a Fellow of the Chartered Institute of Management Accountants (UK) and is a member of the Institute of Certified Public Accountants of Singapore. Prof Chin Tiong Tan Prof Tan is an independent Director of the Company. He is the Provost and professor of the Singapore Management University. He was educated in University of Singapore where he graduated with a B.B.A. (Hons) and in the US where he graduated with a Ph.D. in 1977 from Pennsylvania State University. He was Assistant Professor at the University of the Pacific (USA), from 1976 to 1978 and joined the National University of Singapore ("NUS") in 1978. He has held various positions at NUS and was Professor at the Faculty of Business Administration, and Director of the NUS Office for Continuing Education. Prof Tan was the former President of the Marketing Institute of Singapore. In addition, Prof Tan provides consultation and advisory services to many companies around the world. He currently sits on the board of several listed companies including Superior Metals Ltd, Hersing Corp and HMI Ltd. Jin Soon Tan Mr Tan is an independent Director of the MycoBiotech. He is presently the Executive Director of Singapore Article Number Council. Previously, he served 31 years with Sime Darby Singapore Ltd in various capacities. He served as a Director, International Trading (1989-1991), Business Development Director (1985-1989), Regional Director, Microcomputer Sime Darby Systems (1984-1985), Sales Director, Consumer Division (1982-1984) and as Director and General Manager of Sime Darby Edible Products (1974-1982). He sits on many international and government organization such as the Electronic Data Interchange ("EDI") and Food Standards Committee. Mr. Tan was a member of the Executive Committee of the Singapore Manufacturer's Association from 1991-1994. Mr. Tan was also a member of the Governing Council of Singapore Institute of Management from 1984 to 1989., and a member of the Court, University of Singapore (1972-1980). Mr. Tan graduated from the University of Malaya (Singapore) with a Bachelor of Arts (B.A) and is a member of the Chartered Institute of Marketing, UK, and the Singapore Institute of Management. Senior Management The day-to-day operations of the Company are entrusted to an experienced and qualified team of Executive Officers responsible for the different functions of the Group. Information on the business and working experience of our Executive Officers is given below: Dr Kok Kheng Tan Dr Tan is the founder and Chief Executive Officer of Mycobiotech and its subsidiaries. He was educated at the University of Singapore where he obtained his B.Sc (First Class Honours) in Botany and at the University of Manchester where he obtained a Ph.D. in Mycology. He has carried out research in the field of biochemistry specialising in physiology and biochemistry of fungal development and in the cultivation of mushroom. Dr Tan had written many papers for international journals and other publications. He was a member of the Singapore Society for Microbiology, having served as its Vice President and President during the period from 1978 to 1980. He was formerly a lecturer in Biochemistry at the National University of Singapore from 1976 to 1995. 25 Dr Tan was a director of Singapore Bus Services (1978) Ltd (now known as DelGro Corp), a company listed on the Stock Exchange of Singapore. He is currently director of CityCab Pte Ltd and various privately held companies. He is also a council member of the Singapore Confederation of Industries ("SCI") (formerly known as Singapore Manufacturers' Association) and serves as the Chairman of the Food & Beverage Industry Group. Dr Tan also sits on the committee of many public organisations. Among such committee include the Food Advisory Committee of Trade Development Board, Ministry of Environment and Productivity and Standards Board, the Council of National Healthy Lifestyle Committee, and the Ministry of Health's Nutrition Labeling Committee. Prof John Edward Smith Prof Smith is the Group's Chief Scientific Officer responsible for the research and development of the medical properties of exotic mushrooms. He is a eminent fungal biotechnologist and an Emeritus Professor of Applied Microbiology at the University of Strathclyde, UK. He is a fellow of the Royal Society of Edinburgh and the Institute of Biology U.K. He was a professor of Applied Microbiology at the University of Strathclyde, Head of Department of Applied Microbiology from 1979-1985. He was also a member of Senate and Court of the University. Prof Smith also sits in various food and biotechnology committees in UK and Europe. Among these committees are the Advisory Committee on Novel Foods and Processes, International Scientific Panel of the Danish Research and Development Programme for Food Science and Technology. In addition, he has also served at various times on the councils of Society of General Microbiology and British Mycological Society, UK. He has authored and co-authored more than 180 scientific papers and some 20 books on fungi and fungal biotechnology including a very successful University textbook "Biotechnology" published by Cambridge University Press , and is on the editorial board of several major microbiological and biotechnology journals including International Journal of Medicinal Mushrooms. Eugene Lim Eugene is the Group Company Secretary and Chief Financial Officer. He is responsible for the Corporate finance and secretarial function including investor relations, finance and administration for all the companies in the Group. Mr. Lim is also responsible for the Group's corporate planning, human resource, legal and information technology and public relations activities. Mr Lim joined the Group in August 1998 as the General Manager (Finance & Administration) and is a qualified Chartered Accountant and is a Fellow of the Chartered Institute of Management Accountants (UK), the Institute of Company Accountants (UK), the Institute of Financial Accountants (UK) and the Institute of Commerce (UK). Mr Lim has over 28 years experience in financial management, administration, company secretarialship and general management. He has worked in various multinational companies and in various industries including the electronics, manufacturing, piling and civil engineering, music recording and retailing, car rental and travel industries. Mr Lim also holds various positions in community organisations. He is a member of Kampong Chai Chee Citizen Consultative Committee, and a council member of the South-East Community Development Council. He is also the Vice-President of the Chartered Institute of Management Accountants (Singapore Branch). Yevindra Sepala Ilangakoon Yevindra is the Chief Operating officer for Europe. He joined the Group in January 2000 and is responsible for the group companies in the U.K and Europe. He has 20 years of management experience of which 9 years was with Keels Agro Products Ltd ("KeelsAgro") which was producing Shiitake Mushrooms. During that time, the Company won the Presidential Export Award on 3 consecutive years and was placed 3rd in the National Productivity Awards. He was the Executive Director of Keels Agro for 4 years and thereafter the Managing director of Keels Agro for three years before joining Delmege Forsyth & Co. Ltd, marketing and distribution company as Deputy Managing Director where he worked for 3 years. Mr Yevindra graduated in Microbiology from the Manchester Metropolitan University in U.K. He also holds a postgraduate diploma in Business & Financial Administration from the Institute of Chartered Accountants Business School (Sri Lanka), a post graduate diploma in Marketing and a Master of Business Administration from the University of Jayawardenapura, Sri Lanka. Richard Poh Pheng Chia Richard is the General Manager (Marketing - Health Foods & Health Supplements). He joined the Group in November 1999. His responsibilities include the Mushroom Shop and for the strategic marketing of all health food products. Richard Chia has more than 15 years hands-on management experience in retail banking , wholesale banking, relationship management, developing new business and divisions and setting-up of joint venture companies in the food and beverages and property industries. He was the General Manager of First Ohio Food Systems Pte Ltd running the Ponderosa Chain of restaurants for 4 years and the Centre Director for KTL Properties Pte Ltd running Clarke Quay for one year. Richard Chia holds a Master in Business Administration from the University of Hull. 26 Ronald Han Kiang Ang Ronald is the General Manager (Marketing - Mushrooms) of the Company. Mr Ang joined the Group in February 1992 and is responsible for the marketing and sales of mushrooms and other fresh produces. Mr Ang has more then thirty years of experience in food business and has been involved in many areas of food business including buying, selling, marketing, warehousing, retailing and distribution. He had worked with the Primary Production Department, Fitzpatrick's Food Supplies Pte Ltd, Ben Foods (S) Pte Ltd and Jardine Matheson (S) Ltd. He was responsible in setting up the 7-Eleven chain of convenience stores when he was with Jardine. Prior to joining the Group, he was the Operations Manager of New Mart chain of fresh produces. Franklin Leong Tian Chong Franklin is the Group Accounts Manager and is responsible for the accounts and financial functions of the Group. He joined the Company in January 2001. Franklin has more than 22 years of financial management experience. Prior to joining the Group, he was Regional Financial Controller for Hotel Equatorial International Ltd and worked in Asia Pacific Hotel Management Ltd, Hind Hotels International Ltd, Hotel Grand Central Ltd, Tung Mung Texile Pte Ltd and The English Pub Company Pte Ltd. Franklin has a Diploma in Accounting. Rajive Goonewardena Rajive is the Group's Senior Manager for production and technical support. He joined the Group in June 1996 and is responsible for the development of the mushroom growing technology. Rajive has more than twelve years of experience in mushroom growing. Prior to joining the Group he was the Production Manager of the shiitake farm of John Keells Holdings Ltd and before that the Farm Manager of the Belwood Farm. Rajive is a graduate of the National Institute of Business Management in Sri Lanka. Thye Aun Yong Yong is the Group's Senior Manager - mushroom production and joined the Group in July 2000. Mr Yong is responsible for running the Singapore Mushroom Farm and for R & D of mushroom production with the view of introducing new edible and medicinal mushrooms to the market. He is a graduate of Nanyang University with a B.Sc(Botany) degree and holds a Master of Science in Botany from the University of Auckland (New Zealand). Mr Yong worked in the Sembawang Field Experimental Station of the Primary Production Department for 25 years, and had been involved in mushroom and vegetable crop research since 1970. He was the Head of Mushroom Research (1985-1994), Head of Vegetable Agrotechnology Section (1989-1994), and Head of Vegetable and food Crop Section (1995). Mr Yong has also published 14 books on mushrooms and other agricultural topics. Term for Officers and Directors All directors are elected for a term of one-year. All officers serve at the discretion of the Board of Directors. Committee Membership Mr David Lua is the Chairman of the Audit Committee. The other members are Dr Alfred Loh and Victor Ang. Dr Alfred Loh is the Chairman of the Compensation Committee. The other members are Prof Chin Tiong Tan, Victor Ang and Dr. Kok Kheng Tan. Mr David Lua is the Chairman of the Nominating Committee. The other members are Dr Kok Kheng Tan and Dr Alfred Loh. Executive Compensation. The following table sets forth information concerning cash and non-cash compensation paid or accrued for services in all capacities to the Company during the year-ended December 31, 2001 of each person who served as the Company's Chief Executive Officer during calendar year 2001. No other executive officers total annual salary and bonus exceeded $100,000 during the calendar year ended December 31, 2001 or for any of the two previous years. Long-Term Name and Principal Annual Compensation Compensation ------------------- Other Stock Plans Position Year Salary Bonus Auto Allowance (No. of Shares) ----------- ---- ------ ----- -------------- --------------- Dr Kok Kheng Tan, CEO 2001 97,587 8,132 18,188 125,000 2000 103,860 8,655 19,812 125,000 1999 91,397 6,578 15,873 125,000
27 Stock Option Grants Bonuses are determined at the discretion of the Board of Directors, but within the prescribed limits of the employment contract. At an Extraordinary General Meeting on July 6, 2000, the Company changed the name of its previous option plan from the MycoBiotech Executive Share Option Scheme 1997 to the MycoBiotech Share Option Scheme for Directors and Employees and the terms of the Scheme was extended to cover all employees including independent Directors. The total number of share options to be issued by the Company pursuant to the Plan will not exceed 20% of the issued ordinary share capital of the Company. Under the terms of the Plan, each share option entitles the Directors and the employees of the MycoBiotech Group to subscribe for one new ordinary share of S $1 each in the Company. The options are granted in consideration of S $1 each for all the shares in respect of which the option is granted. The option may be exercised at any time after the date of grant but no later than five years from the date the share option was granted. The shares under option may be exercised in full or in 1,000 shares or a multiple thereof on the payment of the exercise price. Options granted are cancelled when the option holder ceases to be a full-time employee of the Company or any corporation in the MycoBiotech Group subject to certain exceptions at the discretion of the Company. The following table sets forth information concerning the grant of stock options made during 2001 to each officer and director: Percent of Total Options Granted to Options Employees in Fiscal Price Per Expiration Options Name Granted Year Share Date Outstanding ---- ------- ---- --------- ----------- ------------- Dr Kok Kheng Tan 125,000 15.15% 0.92 12-31-06 925,000 Eugene Lim 100,000 12.12% 0.92 12-31-06 510,000 Dr. Alfred Wee Tiong Loh 100,000 12.12% 0.92 12-31-06 250,000 David Soo Theng Lua 100,000 12.12% 0.92 12-31-06 320,000 Prof Chin Tiong Tan 100,000 12.12% 0.92 12-31-06 300,000 Jin Soon Tan 100,000 12.12% 0.92 12-31-06 200,000
Stock Option Exercised and Year-End Option Values Shares Acquired Name on Exercise (#) Exercise Price ------- ------------------ ----------------- Dr Kok Kheng Tan 200,000 0.54 Dr. Alfred Wee Tiong Loh 50,000 0.54 Jin Soon Tan 100,000 0.54 All of the shares exercised were from previous option grants at $0.54. 28 Employment Contracts On January 31, 2000, the Company entered into an employment contract with Dr Kok Kheng Tan. The contract is effective from January 1, 2000 (the "Effective Date"). The principal terms of the service contracts are as follows: (i) employment will be for a period of five (5) years from the Effective Date or such later date as may be agreed in writing between the Company and the executive. The contract may be terminated by either party giving the other party not less than six months' notice in writing in salary in lieu of notice; (ii) he will be entitled to a monthly salary of $8,333; (iii) he shall, in respect of each financial year, be entitled to a bonus of an amount equivalent to not less than 1 months' salary and not more than 6 months' salary at the discretion of the Board. (iv) he shall, in respect of each financial year, be eligible to participate in the performance incentive bonus for management staff and to be remunerated in such quantum as the Board of Directors shall determine. (v) in addition, he shall be provided with and entitled to the sole use of a motor car. The Company shall reimburse the executive up to $2,778 per month for the up-keep and maintenance of such motor car, inclusive of gasoline, parking fees and all fees, charges and duties relating to road usage (including but not limited to Electronic Road Pricing charges imposed by the Land Transport Authority or other regulatory body in Singapore); (vi) the rate of the executive's salary shall be reviewed in January of each year and shall be adjusted by such amount as may be determined by the Board. C. Board Practices. Audit Committee Recognising the importance of corporate governance and the need to offer the highest standards of accountability to shareholders, the Audit Committee intends to adhere closely to the principles outlined in the Best Practices Guide issued by the Singapore Exchange and to meet periodically to perform the following functions:- (a) review the audit plans of the Company's external auditors; (b) review the external auditors' evaluation of the system of internal controls; (c) review the external auditors' reports; (d) review the co-operation given by the Company's officers to the external auditors; (e) review the financial statements of the Company and the Group before their submission to the board of Directors; (f) nominate external auditors for re-appointment; and (g) review interested party transactions. Apart from the duties listed above, the Audit Committee will hire and review the findings of internal investigations into matters where there is any suspected fraud or irregularity, or failure of internal controls or infringements of any Singapore law, rule or regulation which has or is likely to have a material impact on the Group's operating results and/or financial position. Compensation Committee The Compensation Committee of the Board of Directors establishes the general compensation policies of the Company with respect to stock options and the compensation plans and specific compensation levels for executives of the Company. The Compensation Committee consists of a majority of non-employee Directors who are not eligible to participate in any of the compensation plans or programs it administers, other than the options these individuals receive under the guidelines established for the granting of stock options to Board and Committee members. The primary consideration of the Compensation Committee in determining overall executive compensation is to motivate, reward and retain the best management team to achieve the company's objective and thus compensation is based upon a combination of overall financial performance of the company, the meeting of long term objectives and each individuals' experience and past performance, while considering salaries of other executives in similar companies. 29 The executive compensation system consists of three major components: base salary, annual incentive - consisting of participation in a cash bonus program, and long term incentive compensation-consisting of stock option grants. Nominating Committee The Nominating Committee is charged with recommending persons to stand for election for the Board of Directors. It is the responsibility of the Committee to investigate potential nominees and to seek the best candidate possible. D. Facilities and Employees. We do not experience any significant seasonal fluctuations in the number of employees. Relationship between management and staff are good and there have not been any industrial disputes in the Company or its subsidiaries. The Company currently employs fifty-threein Singapore and eighteen people in England. We have experienced no difficulty in hiring or retaining personnel. With the exception of our operation in England, which is new, most of our personnel are long time employees. The Company has mushroom growing facilities in Singapore and England and Malaysia. The production of certain health supplements are subcontracted to Beacon Chemicals Pte Ltd. Health foods, such as soups and sauces are produced in the Food Process Technology Centre of the Productivity Standards Board (PSB) in Singapore. Description of Property Our principal executive offices are located at 12 Science Park Drive #04-01, The Mendel, Singapore Science Park, 1 Singapore 118225. We lease approximately 4,659 square feet of office space at this location at a months rental rate of approximately $5,855. We also have a mushroom growing facility in Singapore of approximately 65,340 square feet and rents for approximately $440 per month. In Kent, England we lease a farm with growing facilities. This facility comprises thirteen (13) acres and rents for approximately $11,667 per month. Item 7. Major Shareholders and Related Party Transactions. A. Major Shareholders. The following table sets out, as of October 20, 2002, the beneficial ownership of shares of the Company's common stock by each shareholder of the company who is known by the Company to be a beneficial owner of more than 5% of the Company's common stock and all officers and directors of the company. The company has only one class of stock and all shareholders have equal per share voting rights. Amount of Beneficial Changes in Prior Name Ownership Percent Three Years --------- --------------------- --------------- ----------------- Dr. Koh Kheng Tan 5,373,389(1) 21.00% 630,811 Professor Chin Tiong Tan 211,891 .83% 211,890 Dr. Alfred Wee Tiong Loh 191,011 .75% 191,010 Jin Soon Tan 120,000 .47 120,000 David Soo Theng Lua 63,001 .24 63,000
30 Victor Ang 5,000 - 5,000 Eugene Lim 153,239 .60 153,238 Dr. Poon Liat Ang (2) 2,216,990 8.73 1,915,049 All officers and directors as a group (7 persons) 8,334,521 32.62 1. Include shares held by Dr. Irene Hwee Kwee Chua, his wife and Everbloom Investment Pte Ltd. And Everbloom Holdings Pte Ltd, entities controlled by the Tan family. 2. Include shares held by Dr. Eu Li Wu, his wife. B. Related Party Transactions. Save as disclosed below, none of our Directors, substantial shareholders of the Company and the Executive Officers has any interest in any material transactions undertaken by the Group in the past three financial years. (a) Sale and Purchase of Goods Since 1983, Everbloom Mushroom, a subsidiary of the Company, has been buying various types of mushrooms from Ban Choon Marketing Pte Ltd. Since 1998, Everbloom Mushroom also sells Shiitake mushrooms to Ban Choon. Mr Chin Hian Tan who holds 91.0 per cent. of the issued and paid up capital of Ban Choon Marketing Pte Ltd. Mr Tan is an outside Director of Everbloom Mushroom and a brother of Dr Kok Kheng Tan. The agency agreement provides for BAN CHOON to be the exclusive distributor of certain products in the Singapore area. The agreement also provides for BAN CHOON to be paid for all the costs incurred in the marketing and distribution of the products plus 20% of the net profit. EM owes BAN CHOON approximately $141,500 net of a commission owed to EM from BAN CHOON from prior years at December 31, 2001. During 2001, sales through BAN CHOON totalled approximately $2,645,000 or approximately 77% of total sales. Expenses paid by BAN CHOON were approximately $505,000. Net income provided to the Company was approximately $67,700. During 2000, sales through BAN CHOON totalled approximately $2,352,600 or approximately 72% of total sales. Expenses paid by BAN CHOON were approximately $567,000. Net income provided to the Company was approximately $83,000. The remaining amounts owed to related parties, approximately $137,000 as of December 31, 2001, is owed to Everbloom Holding Ltd. and Everbloom Investments Ltd. for advances to the Company. These entities are owned and controlled by the Tan Family. C. Interests of Experts and Counsel. None Item 8. Financial Information. A. Consolidated Statements and other Financial Information The consolidated financial statements are filed in this Report as Item 18. B. Significant Changes Not applicable 31 Item 9. The Offer and Listing. A. Offer and Listing Details Because our shares are neither listed nor publicly trade, this provision is not applicable. B. Plan of Distribution Not applicable. However, when shares are registered, they will be issued as American Depository Receipts (ADR's) An ADR is a receipt for the shares of a foreign based corporation held in the vault of a U.S. bank, in this case the Bank of New York, entitling the shareholder to all dividends and capital gains; instead of buying shares of foreign based companies in overseas markets, Americans can buy shares in the U.S. in the form of an ADR. C. Market Because our shares are not yet registered in the United States, there is no current market for the shares nor are they listed on any exchange. D. Selling Shareholders Not applicable E. Dilution Not applicable F. Expenses of the Issuer Not applicable. Item 10. Additional Information. A. Share Capital. The Company is authorized to issue 50,000,000 shares of common stock at a par value of $1.00 (Singapore) (US$0.54). All shares are a single class. As of October 31, 2002, 25,593,548 shares of the Company's common stock had been issued and were outstanding. In addition 2,692,570 options for the purchase of shares were outstanding as of October 31, 2002. All of the outstanding shares have been fully paid and are non-assessable. As of December 31, 2001, the Company had 21,109,542 shares issued and outstanding. During the current year, options have been exercised for 304,930 shares and 4,324,006shares have been sold for cash. B. Memorandum and Articles of Association. Corporate Powers. We have been registered under the Company's act in the Republic of Singapore since May 22,1980. Our Memorandum of Association states that the object for which we are established are in essence to engage in any business which is not prohibited by law, enforced in the Republic of Singapore. Share Capital. The share capital of the Company is $50,000,000 Singapore Dollars (US$27,000,000) divided into 50,000,000 shares of common stock having a par value of $1.00 Singapore (US$0.54). All shares have the same rights with regards to dividends or distributions upon liquidation. The Company has the power to increase or reduce its capital to divide its shares into several classes and to attach to any class preferencial, differed, special rights, privileges or conditions. At present all shares have the same or equal rights and are entitled to one vote per share. The directors of the Company may convene meetings of the shareholders upon 14 days written notice. The general meeting shall be held at least once a year and special meetings may be held at any time. Measures should be passed by a majority of the shares entitled to vote. Restrictions on Rights to Own Securities. There are no limitations on the right to own securities of the Company. Change in Control Provisions. There are no provisions of our Memorandum of Association and Articles of Association that would have an effect of delaying, deferring or preventing a change in our control and that would operate only with respect to a merger, acquistion or corporate restructuring involving us. Disclosure of Share Ownership. There are no provisions governing the ownership threshold above which shareholder ownership must be disclosed. Applicable Law. Under the laws of most jurisdictions in the U.S., majority and controlling shareholders generally have certain "fiduciary" responsibilities to the minority shareholders. Shareholder action must be taken in good faith and actions by controlling shareholders which are obviously unreasonable may be declared null and void. Singapore law protecting the interest of minority shareholders may not be as protective in all circumstances as the law protecting minority shareholders in the US jurisdictions. 32 While Singapore law does permit a shareholder of a Singapore company to sue its directors derivatively, that is, in the name of and for the benefit of our company and to sue a company and its directors for his benefit and for the benefit of others similarly situated, the circumstances in which any such action may be brought, and the procedures and defenses that may be available in respect of any such action, may result in the rights of shareholders of a Singapore company being more limited than those of shareholders of a company organized in the U.S. Our directors have the power to take certain actions without shareholder approval, including an amendment of our Memorandum of Association or Articles of Association or an increase or reduction in our authorized capital, which would require shareholder approval under the laws of most U.S. jurisdictions. In addtion, the directors of a Singapore corporation, subject in certain cases to court approval but without shareholder approval, may, among other things, implement a reorganization, certain mergers or consolidations, the sale, transfer, exchange or disposition of any assets, property, part of the business, or securities of the corporation, or any combination, if they determine it is in the best interest of the corporation, its creditors, or its shareholders. Our ability to amend our Memorandum of Association and Articles of Association without shareholder approval could have the effect of delaying, deterring or preventing a change in our control without any further action by the shareholders, including a tender offer to purchase our common stock at a premium over then current market prices. As in most US jurisdictions, the board of directors of a Singapore corporation is charged with the management of the affairs of the corporation. In most US jurisdictions, directors owe a fiduciary duty to the corporation and its shareholders, including a duty of care, under which directors must properly apprise themselves of all reasonably available information, and a duty of loyalty, under which they must protect the interests of the corporation and refrain from conduct that injures the corporation or its shareholders or that deprives the corporation or its shareholders of any profit or advantage. Many US jurisdictions have enacted various statutory provisions which permit the monetary liability of directors to be eliminated or limited. Under Singapore law, liability of a corporate director to the corporation is primarily limited to cases of willful malfeasance in the performance of his duties or to cases where the director has not acted honestly and in good faith and with a view to the best interests of the corporation. However, under our Articles of Association, we are authorized to indemnify any director or officer who is made or threatened to be made a party to a legal or administrative proceeding by virtue of being one of our directors or officers, provided such person acted honestly and in good faith and with a view to our best interests and, in the case of a criminal proceeding, such person had no reasonable cause to believe that his conduct was unlawful. Our Articles of Association also enables us to indemnify any director or officer who is successful in such a proceeding against expense and judgements; fines and amounts paid in settlement and reasonably incurred in connection with the proceeding. The above description of certain differences between Singapore and US corporate laws is only a summary and does not purport to be complete or to address every applicable aspect of such laws. However, we believe that all material differences are disclosed above. Changes in Capital. Requirements to effect changes in capital are not more stringent than is required by law. C. Material Contracts. We generally have two types of contracts; marketing and distribution agreements which are described under Item 4, "Sale and Marketing" and license agreements which are listed under Item 4, "License Agreements". The company generates revenues from only one Sales and Marketing Agreement, that with BanChoon Marketing Ptd. Ltd. a related party. The company does not generate revenue from any of its current license agreements. Generally each license agreement provides for the license to provide the capital, the management and payment of a fee in exchange for our providing the mushroom growing technology and training. The license generally are for a specific geographic area, but are not limited by a fixed term. The Ban Choon agreement requires the Company to reimburse Ban Choon for all costs incurred in marketing and distributing our products, plus 20% of the net profit. The Company is also responsible for all credit risks. The Company has three credit facilities covering bank overdrafts and letters of credit. The credit facilities provide for bank overdraft protection of approximately $500,000 and for irrevocable letters of credit for approximately $400,000. The credit facilities are generally secured by cash, inventory, corporate guarantees, key-man insurance and personal guarantees of one of the Company's directors. 33 The credit facilities are payable on demand. Interest rates range from one percent to one and one-half percent over the banks prime rates. Interest rates ranged from 6% to 7% at December 31, 2001. Other nominal charges may also apply. The Company has three lease agreements for property in Singapore, two for the form and one for its officer facilities. The form leases are for three years beginning on January 1, 2001 and January 1, 2003 respectively and call for annual rent of $9,708 (Singapore$) and $13,850 (Singapore $), respectively. The lease for the officer facilities is for a period of three years beginning on December 1, 1999 and calls for an annual rent of $128,801 (Singapore $). This lease has been extended for a period of one year. D. Exchange Controls. There are no material Singapore laws that impose foreign exchange controls on us or that effect our payment of dividends, interest or other payments to non resident holders of our capital stock. Singapore law and our Memorandum of Association and Articles of Association impose no limitations on the right of non-resident of foreign owners to hold or vote our common stock. E. Taxation. The following is a summary of anticipated material U.S. federal income and Singapore tax consequences of an investment in our common stock. The summary does not deal with all possible tax consequences relating to an investment in our common stock and does not purport to deal with the tax consequences applicable to all categories of investors, some of which, such as dealers in securities, insurance companies and tax-exempt entities, may be subject to special rules. In particular, the discussion does not address the tax consequences under state, local and other non-U.S. and non-Singapore tax laws. Accordingly, each prospective investor should consult its own tax advisor regarding the particular tax consequences to it of any investment in the common stock. The discussion below is based upon laws and relevant interpretations in effect as of the date of this annual report, all of which are subject to change. United States Federal Income Taxation The following discussion addresses only the material U.S. federal income tax consequences to a U.S. person, defined as a U.S. citizen or resident, a U.S. corporation, or an estate or trust subject to U.S. federal income tax on all of its income regardless of source, making an investment in the common stock. For taxable years beginning after December 31, 1996, a trust will be a U.S. person only if: - - a court within the U.S. is able to exercise primary supervision over its administration; and - - one or more U.S. persons have the authority to control all of its substantial decisions. In addition, the following discussion does not address the tax consequences to a person who holds or will hold, directly or indirectly, 10% or more of our common stock, which we refer to as a "10% Shareholder". Non-U.S. persons and 10% Shareholders are advised to consult their own tax advisors regarding the tax considerations incident to an investment in our common stock. There are no withholding taxes on dividends paid by a Singapore Company to a non-Singapore resident. Therefore, a U.S. taxpayer would include in his/her/its taxable income the full amount of the dividend paid and pay the tax without offset or credit. There is no foreign tax credit as there was no withholding at source. Gain or loss on the sale or exchange of our common stock will be treated as capital gain or loss if our common stock is held as a capital asset by the U.S. investor. Such capital gain or loss will be long-term capital gain or loss if the U.S. investor has held our common stock for more than one year at the time of the sale of exchange. There is no Singapore tax to a non-Singapore resident on the sale or exchange of common stock. F. Dividends and Paying Agents. Not applicable 34 G. Statement by Experts. Not applicable H. Documents On Display. The documents concerning our company which are referred to in this Report may be inspected at our principal executive offices at 12 Science Park Drive #04-01, The Mendel, Singapore, Science Park 1, Singapore 118225. I. Subsidiary Information. Not applicable. Item 11. Quantitative and Qualitative Disclosures About Market Risk. Net fair value of financial assets and liabilities The net fair value of all financial assets and liabilities approximates their carrying value which are disclosed in the balance sheets and notes to the financial statements. Interest rate exposures The Company's exposure to interest rate risk, which is the risk that a financial instrument's value will fluctuate as a result of changes in market interest rates. The secured bank overdraft and letters of credit are subject to floating interest rates at prime plus 1% to 1.5% the secured letters of credit receipts facility is subject to a floating interest rate of prime plus 1.5%. However, based on borrowing levels at December 31, 2001, interest rate fluxutions are immaterial. Credit risk The Company's maximum exposure to credit risk at balance sheet date in relation to each class of recognized financial assets is the carrying amount, net of any provisions for doubtful debts, of those assets as indicated in the balance sheets and notes to the financial statements. Foreign currency risk The Company incurs foreign currency risk on sales and purchases that are denominated in a currency other than Singapore dollars. The currencies giving rise to this risk are primarily US dollars and Sterling Pounds. The Company does not hedge its foreign currency risk. Item 12. Description of Securities Other than Equity Securities. Not applicable. Part II Item 13. Defaults, Dividend Arrearages and Delinquencies. Not applicable. Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds. Not applicable. Part III Item 17. Financial Statements. Not applicable. 35 Item 18. Financial Statements. MYCOBIOTECH, LTD AND SUBSIDIARIES INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Pages December 31, 2001 Report of Independent Auditors F-2 Consolidated Balance Sheets as of December 31, 2001 and 2000 F-3-4 Consolidated Statements of Loss for the years ended December 31, 2001, 2000 and 1999 F-5 Consolidated Statements of Changes in Shareholders' Equity for the years ended December 31, 2001, 2000 and 1999 F-6 Consolidated Statements of Cash Flows for the years ended December 31, 2001, 2000 and 1999 F-7-8 Notes to Financial Statements F-9-22 September 30, 2002 (Unaudited) Consolidated Balance Sheet as of September 30, 2002 F-23-24 Consolidated Statements of Income for the Nine months ended September 30, 2002 and 2001 F-25 Consolidated Statements of changes in Shareholders' Equity for the Nine months ended September 30, 2002 F-26 Consolidated Statements of Cash Flows for the Nine months ended September 30, 2002 F-27-28 Notes to Financial Statements F-29 Schedule II - MycoBiotech, Ltd. and Subsidiaries Valuation and Qualifying Accounts Provision for Doubtful Accounts
Item 19. Exhibits. 3.1* Articles and Memorandum of Association of MycoBiotech Ltd. 10.1* Service Contract with Dr. Koh Kheng Tan 10.2* MycoBiotech Share Option Scheme for Directors & Employees 10.3 A license agreement dated December 8, 1997 entered into between Everbloom International Technology Pte Ltd and Everbloom Mushroom (UK) Ltd; 10.4* A license agreement dated May 30, 1998 entered into between Everbloom Biotechnology (Pte) Ltd and Everbloom International Technology Pte Ltd; 10.5* A license agreement dated June 1, 1998 entered into between Everbloom Biotechnology (Pte) Ltd and Everbloom Health Food Pte Ltd; 10.6 A license agreement dated December 9, 1998 entered into between Everbloom International Technology Pte Ltd and Everbloom Mushroom (UK) Ltd; 10.7* A license agreement dated December 9, 1998 entered into between Everbloom Health Food Pte Ltd and Mycoceuticals Ltd; 10.8* A license agreement dated February 23, 2000 entered into between Everbloom International Technology Pte Ltd and Gulf Mushrooms Products Company (S.A.O.G.); and 10.9* A license agreement dated June 4, 2001 entered into between MycoBiotech Ltd and Everbloom Biotechnology (Canada) Ltd. 10.10* A license agreement dated January 21, 2000 entered into between Everbloom Health Food Pte Ltd and Ever-Bloom, Nutraceuticals (M) Sdn Bhd; 10.11* Marketing & Distribution Agreement - Everbloom Health Food P/L & Ever-Bloom Nutraceuticals (M) Sdn Bhd 36 10.12* Marketing & Distribution Agreement - Everbloom Health Food P/L & Latin Asia Inc. 10.13* Distributorship Agreement - Everbloom Health Food P/L & Diethlem Singapore P/L 10.14* Distributorship Agreement - MycoBitech Ltd. and A. Clouet, Pty Ltd. 10.15* Distributorship Agreement - Everbloom Health Food P/L & Everbloom Biotechnology (Canada) Ltd. 10.16* Agency Agreement Everbloom Mushroom Pte Ltd. and BanChoon Marketing Pte Ltd. 10.17 Sale & Purchase Agreement - Everbloom International Technology P/L & P.T. Bank Paribas - BBD Indonesia 10.18* Assignment Agreement - Everbloom International Technology P/L & P.T Bank Paribas - BBD Inidonesia 10.19* Sale & Purchase Agreement - Everbloom International Technology P/L & P.T Rabobank Duta Indonesia 10.20* Assignment Agreement - Everbloom International Technology P/L & P.T Rabobank Duta Indonesia 10.21* Investor Relations Agreement - MycoBiotech Ltd. & Stoneside Development Limited 10.22* License Agreement between Everbloom Biotechnology (Canada) Ltd. and Everbloom - Ridge Mushroom Joint Venture date February 1, 2001 10.23* License Agreement between MycoBiotechnology Ltd. and Culture Technik Brabant dated December 8, 2000 10.24* Sale and Purchase Agreement between Everbloom International Technology Pte. Ltd. and P.T. Int: Mekar Sejati dated August 21, 2000 10.25 Letter from Beacons Pharmaceutical confirming that they act as contract manufacture for Linzir Capsules and Mycoglucan Capsules 10.26 Banking Agreement with United Overseas Bank 10.27 Banking Agreement with Keppel Tatlee Bank 10.28 Tenancy Agreement dated June 20, 2001 between Everbloom Mushroom Pte Ltd and the Government of Singapore 10.29 Tenancy Agreement dated November 27, 2002 between Everbloom Mushroom Pte Ltd and the Government of Singapore 10.30 Commercial Lease dated July 18, 2001 between Everbloom International Technology Pte Ltd. and Templar Investment Ltd. 10.31 Banking Agreement with Southern Bank Berhad 23.1 Consent of Certified Public Accountants * Denotes previously filed. 37 SIGNATURES MYCOBIOTECH LTD. By: /s/ Dr. Kok Kheng Tan ------------------------------------------- Dr. Kok Kheng Tan, Chief Executive Officer Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated. Signatures Title Date ------------ ------- ------- /s/ Dr Kok Kheng Tan Chairman of the Board and April 3, 2003 - ------------------------- Chief Executive Officer Dr Kok Kheng Tan /s/ Victor Ang Director April 3, 2003 - ------------------------- Victor Ang /s/ Dr Alfred Wee Tiong Loh Director April 3, 2003 - -------------------------- Dr Alfred Wee Tiong Loh /s/ David Soo Theng Lua Director April 3, 2003 - -------------------------- David Soo Theng Lua /s/ Professor Chin Tiong Tan Director April 3, 2003 - -------------------------- Professor Chin Tiong Tan /s/ Jin Soon Tan Director April 3, 2003 - -------------------------- Jin Soon Tan /s/ Eugene Lim Chief Financial Officer and April 3, 2003 - -------------------------- Secretary Eugene Lim MYCOBIOTECH, LTD AND SUBSIDIARIES INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Pages December 31, 2001 Report of Independent Auditors F-2 Consolidated Balance Sheets as of December 31, 2001 and 2000 F-3-4 Consolidated Statements of Loss for the years ended December 31, 2001, 2000 and 1999 F-5 Consolidated Statements of Changes in Shareholders' Equity for the years ended December 31, 2001, 2000 and 1999 F-6 Consolidated Statements of Cash Flows for the years ended December 31, 2001, 2000 and 1999 F-7-8 Notes to Financial Statements F-9-22 September 30, 2002 (Unaudited) Consolidated Balance Sheet as of September 30, 2002 F-23-24 Consolidated Statements of Income for the nine months ended September 30, 2002 and 2001 F-25 Consolidated Statements of Income for the three months ended September 30, 2002 and 2001 F-26 Consolidated Statements of Cash Flows for the nine months ended September 30, 2002 and 2001 F-27-28 Notes to Financial Statements F-29
Independent Auditor's Report To the Board of Directors, MYCOBIOTECH, LTD Singapore We have audited the accompanying consolidated balance sheet of MYCOBIOTECH, LTD and subsidiaries as of December 31, 2001 and 2000 and the related consolidated statements of operations, shareholders' equity, and cash flows for the years then ended December 31, 2001, 2000 and 1999. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, such financial statements referred to in the first paragraph present fairly, in all material respects, the financial position of MYCOBIOTECH, LTD and subsidiaries, as of December 31, 2001 and 2000 and the results of its operations and its cash flows for the years ended December 31, 2001, 2000 and 1999, in conformity with generally accepted accounting principles accepted in the United States of America. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company has suffered recurring losses from operations and has a net working capital deficiency, which raises substantial doubt about its ability to continue as a going concern. Management's plans regarding those matters are described in Note 3. The financial statements do not include any adjustments that might result from the outcome of these uncertainties. THOMAS LEGER & CO., L.L.P. Houston, Texas October 7, 2002 MYCOBIOTECH, LTD AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNITED STATES DOLLARS) ASSETS December 31, 2001 2000 ---- ---- CURRENT ASSETS Cash and cash equivalents $ 47,108 $ 74,755 Cash and bank balances - restricted 328,958 173,100 Trade receivables net of provision of $23,162 and $0 at December 31, 2001 and 2000 497,646 1,022,394 Stock subscription receivable 319,689 - Inventory 605,683 664,176 Prepaid expenses and deposits 68,366 270,546 Deferred offering expense 71,775 - Other 39,778 3,428 ------------ ------------ TOTAL CURRENT ASSETS 1,979,003 2,208,399 PROPERTY, PLANT AND EQUIPMENT 300,668 477,496 INVESTMENTS 38,368 807,122 INTANGIBLE 108,430 138,480 DEPOSIT TO SUPPLIER 88,255 82,642 ------------- ------------ TOTAL ASSETS $ 2,514,724 $ 3,714,139 ============= ============ F-3 MYCOBIOTECH, LTD AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNITED STATES DOLLARS) LIABILITIES AND SHAREHOLDERS' DEFICIT December 31, 2001 2000 ---- ---- CURRENT LIABILITIES Bank overdraft secured $ 352,110 $ 322,931 Short-term debt unsecured interest free 108,430 115,400 Open letters of credit 159,569 29,428 Trade payables 647,228 746,438 Other payables and accrued expenses 775,507 549,653 Income tax payable 31,700 127,964 Related parties 278,556 457,686 ----------- ------------ TOTAL CURRENT LIABILITIES 2,353,100 2,349,500 ----------- ------------ LONG-TERM LIABILITIES Unsecured convertible bonds 119,274 1,996,423 Grant 38,366 - Long-term lease obligations 53,356 102,198 ----------- ------------ TOTAL LONG-TERM LIABILITIES 210,996 2,098,621 SHAREHOLDERS' EQUITY Common stock , S $1.00 par value, 25,000,000 authorized; 21,109,542 and 14,002,000 issued and outstanding at December 31, 2001 and 2000 12,307,813 8,417,452 Paid-in capital 2,514,543 2,271,649 Retained deficit (14,976,969) (11,177,668) Treasury stock - (248,940) Accumulated other comprehensive income 105,241 3,525 ------------- ------------ Total Shareholders' Deficit (49,372) (733,982) ------------- ------------ Total Liabilities and Shareholders' Deficit $ 2,514,724 $ 3,714,139 ============= ============ F-4 MYCOBIOTECH, LTD AND SUBSIDIARIES CONSOLIDATED LOSS STATEMENTS AND COMPREHENSIVE LOSS (UNITED STATES DOLLARS) December 31, 2001 2000 1999 ---- ---- ---- SALE OF MUSHROOM PRODUCTS $ 3,455,930 $ 3,706,973 $ 1,256,444 COST OF SALES 3,311,617 2,477,767 684,426 ---------- ----------- --------- GROSS PROFIT 144,313 1,229,206 572,018 DEPRECIATION AND AMORTIZATION 118,965 149,512 105,271 GENERAL AND ADMINISTRATIVE EXPENSES Bad debt 122,970 291,705 126,676 Personnel expense 1,138,961 1,482,511 645,713 Professional fees 258,084 183,669 33,459 Rent expense 407,757 211,008 36,331 Other 1,164,310 673,957 189,542 ---------- ----------- --------- LOSS FROM OPERATIONS (3,066,734) (1,763,156) (564,974) OTHER INCOME (LOSS) Interest expense (145,174) (140,831) (138,799) Equity investment loss (574,000) (10,726) - Impairment of investments (183,804) - - Other 170,411 114,514 67,137 ----------- ------------ --------- LOSS BEFORE TAXATION (3,799,301) (1,800,199) (636,636) PROVISION FOR INCOME TAXES - (43,878) (31,484) ----------- ------------ ---------- NET LOSS (3,799,301) (1,844,077) (668,120) ----------- ------------ ---------- OTHER COMPREHENSIVE INCOME Foreign currency translation 101,716 65,239 (61,714) ----------- ------------ ---------- COMPREHENSIVE LOSS $ (3,697,585) $(1,778,838) $(729,834) =========== ============ ========== BASIC AND DILUTED LOSS PER SHARE $ (0.23) $ (0.14) $ (0.07) =========== ============ ========== BASIC WEIGHTED AVERAGE SHARES 15,768,929 13,035,298 10,706,728 =========== ============ =========== F-5 MYCOBIOTECH, LTD AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' DEFICIT YEARS ENDED DECEMBER 31, 2001 AND 2000 (UNITED STATES DOLLARS) Accumulative other Tolal Common Common Paid-in Retained comprehensive Treasury Shareholder's Shares Stock capital deficit income stock deficit -------- ------- --------- --------- --------------- --------- -------------- Balance December 31, 1998 10,000,001 $ 6,064,208 $ 22,741 $ (8,665,471) $ - $ - $(2,578,522) Issue shares for cash 2,205,999 1,303,089 224,470 - - - 1,527,559 Foreign currency translation - - - - (61,714) - (61,714) Net loss December 31, 1999 - - - (668,120) - - (668,120) ------------ ----------- --------- ---------- ---------- ------- ---------- Balance December 31, 1999 12,206,000 7,367,297 247,211 (9,333,591) (61,714) - (1,780,797) ----------- ---------- -------- ----------- -------- ------- ---------- Issue shares for cash 1,350,000 783,902 2,024,438 - - - 2,808,340 Issue shares for investment 416,000 248,940 - - - (248,940) - Exchange shares for bonds 30,000 17,310 - - - - 17,310 Foreign currency translation - - - - 65,239 - 65,239 Net loss December 31, 2000 - - - (1,844,077) - - (1,844,077) Adjustment - 3 - - - 3 ----------- ---------- -------- ----------- -------- ------- ---------- Balance December 31, 2000 14,002,000 8,417,452 2,271,649 (11,177,668) 3,525 (248,940) (733,982) =========== ---------- ---------- ------------ ------ --------- --------- Issue shares for cash 3,749,246 2,071,933 211,252 - - - 2,283,185 Issue shares for services 12,239 6,715 6,715 - - - 13,430 Issue shares for investment - PTRC64,000 11,060 - - - 248,940 260,000 Issue shares for investment in Medmyco 22,057 12,101 24,927 37,028 Exchange shares for bonds 3,260,000 1,788,555 - - - - 1,788,555 Foreign currency translation - - - - 101,716 - 101,716 Net loss December 31, 2001 - - - (3,799,301) - - (3,799,301) Adjustment - (3) - - - - (3) ----------- ----------- ---------- ------------ --------- ------- ---------- Balance December 31, 2001 21,109,542 $ 12,307,813 $2,514,543 $(14,976,969) $ 105,241 $ - $ (49,372) =========== =========== ========== ============ ========= ======= ==========
F-6 MYCOBIOTECH, LTD AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNITED STATES DOLLARS) Year Ended December 31, 2001 2000 1999 ---- ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (3,799,301) $ (1,844,077) $ (668,120) ------------- ------------- ----------- ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH USED BY OPERATING ACTIVITIES: Depreciation and amortization 118,965 149,512 105,271 Issuance of stock for expenses 13,430 - - Impairment of investment 183,804 - - Equity investment loss 574,000 10,726 - (INCREASE) DECREASE IN ASSETS: Trade receivables 524,748 (629,057) (179,485) Inventory 58,493 (273,612) (146,748) Prepaid expenses and deposits 202,180 (162,308) - Deferred offering expenses (71,775) - - Other (36,350) 12,516 (124,182) INCREASE (DECREASE) IN LIABILITIES: Trade payables (99,210) 263,838 (495,044) Other payables and accrued expenses 225,854 220,898 (351,895) Related parties (179,130) 442,675 15,011 Income tax payable (96,264) (6,910) 30,974 -------- ------- ------- Net cash used by operating activities (2,380,556) (1,815,799) (1,814,218) ----------- ----------- -----------
F-7 MYCOBIOTECH, LTD AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNITED STATES DOLLARS) Year Ended December 31, 2001 2000 1999 ---- ---- ---- CASH FLOWS FROM INVESTING ACTIVITIES Deposit to supplier (5,613) (82,642) - Investment - (805,786) (1,336) Intangible - - (168,118) Purchase of fixed assets - (310,670) (304,411) Increase in restricted cash (155,858) (173,100) - --------- --------- -- Cash provided for investing activities (161,471) (1,372,198) (473,865) --------- ----------- --------- CASH FLOWS FROM FINANCING ACTIVITIES Bank overdraft - net 29,179 228,186 34,683 Short-term unsecured (6,970) (70,903) (937,744) Letters of credit - net 130,141 29,428 180,126 Grant 38,366 - - Long-term leases 48,842 46,935 55,264 Bonds - - 1,737,619 Sale of common stock 2,283,185 2,808,340 1,527,559 ---------- ---------- ---------- 2,522,743 3,041,986 2,597,507 ---------- ---------- ---------- NET INCREASE (DECREASE) IN CASH AND BANK BALANCES (19,284) (146,011) 247,710 Effects of exchange rate changes (8,363) (33,223) (61,714) Cash and bank balances, at beginning of period 74,755 253,989 6,279 ------- -------- ------ Cash and bank balances, at end of period $ 47,108 $ 74,755 $ 192,275 ========= ========= ========== SUPPLEMENTARY CASH FLOWS DISCLOSURES 1. Interst paid $ 145,172 $ 140,831 $ 107,099 ========= ========= ========== 2. Taxes paid $ 91,144 $ 45,043 $ - ========= ========= ==========
3. Stock subscription receivables totaling $319,689 were collected and deposited into the Company's accounts in January, 2002. 4. Effective December 31, 2001 approximately $1,788,555 of unsecured convertible bonds were exchanged for 3,240,000 shares of S $1 par value common stock. 5. Treasury stock (416,000 shares) for $248,940 and additional issue of 64,000 shares valued at $11,060 totaling 480,000 shares for $260,000 (combined value at par) were issued for the Company's investment in PT Randhoetatah Camerlangin July, 2001. See Note 7. 6. 22,057 shares of stock were issued at a value of $37,028 for the company's investment in Medmyco, Ltd. 7. 12,239 shares of stock were issued at a value of $13,430 for services. 8. Shares were issued in 2000 for approximately $248,940 and the transaction was rescinded during 2000. The shares were held in treasury until July, 2001. 9. Approximately $17,310 of unsecured convertible bonds were exchanged for 30,000 shares of S $1 par value common stock during 2000. F-8 MYCOBIOTECH, LTD AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001 1. ORGANIZATION AND PRINCIPAL ACTIVITIES MycoBiotech Ltd. ("Company") is a public limited company domiciled and incorporated in Singapore in 1980. The current principal activity of the Company is the sale of fresh mushroom and related mushroom products. The Company also licenses mushroom cultivation technology and know-how on production of nutraceuticals and functional foods. The Company has no reportable income from the sales of licenses and technology during the three year period ended December 31, 2001. The Company's management has identified only one reportable segment. 2. BASIS OF PRESENTATION The consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States of America ("US GAAP"). This basis of accounting differs from that used in the statutory financial statements of subsidiaries which are prepared in accordance with the accounting principles generally accepted in Singapore. The following material adjustments were made to present the consolidated financial statements to conform with US GAAP: (Rounded to nearest $1,000) December 31, ------------------------------------- Increase (decrease) 2001 2000 1999 ----- -------- ------ Trade receivable (220,000) (450,000) - Inventory (413,000) - - Fixed Assets - (222,000) (269,000) Intangibles - (1,117,000) (998,000) Goodwill - (480,000) (531,000) Investments (1,050,000) (1,200,000) - Paid-in capital (1,116,000) (967,000) - Retained deficit (1,843,000) (1,569,000) (1,798,000) Sales - (450,000) (591,000) Inventory write-off 413,000 - - Other expense - (133,000) (591,000) Amortization - (142,000) (139,000) Research and development - (271,000) - F-9 MYCOBIOTECH, LTD AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001 Consolidated Companies Domicile Ownership ------------------------- ----------- ---------- Everbloom Health Food Pte Ltd Singapore 100% Everbloom International Technology Pte Ltd Singapore 100% Everbloom Mushroom (Kent) Ltd United Kingdom 100% Everbloom Mushroom Pte Ltd Singapore 100% Mycoceuticals Ltd United Kingdom 100% MycoPharma Pte Ltd Singapore 100% MycoTechnology Ltd United Kingdom 100% Associated company is defined as a Company, not being a subsidiary, in which the ownership is 50% or less and in whose financial and operating policy decisions, the Company exercises significant influence. Associated companies are accounted for under the equity method whereby the Company's share of profits and losses of these companies are included in the consolidated profit and loss account and the Company's investment account adjusted accordingly. Losses, of an associated company, in excess of the Company's investment are not recorded unless there is a legal obligation to commit additional funds (See Note 7 Investments for further discussion). Intercompany profits and losses are eliminated until realized by the Company as if the Company were consolidated. The Company reviews its investments periodically and an impairment loss, if any, is recorded. Associated Companies Domicile Ownership --------------------------- --------- ---------- Everbloom Biotechnology (Canada) Ltd. Canada 50% Ever-Bloom Nutraceuticals Sdn Bhd Malaysia 30% Medmyco. Ltd. Isreal 25% PT Randhoetatah Cemerlang Indonesia 50% 3. GOING CONCERN The Company has repeatedly suffered recurring losses from operations. The Company has been successful in the past raising working capital through the sale of stock and corporate borrowings. The Company raised approximately $2,050,000 in August and September of 2002 to fund operations for the remainder of the year and to implement the Company's business plan. Management believes sufficient funding will be available to meet operating needs and for the Company's business plan. 4. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES Basis of consolidation The consolidated financial statements of the Company include the Company and its subsidiaries. All material intercompany balances have been eliminated. F-10 MYCOBIOTECH, LTD AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001 Economic and political risks The company faces a number of risks and challenges since its primary operations are in Singapore, Malaysia, Indonesia, and the United Kingdom. The financial statements have been prepared assuming the Company will continue as a going concern. Cash and cash equivalents The Company considers cash and cash equivalents to include cash on hand and demand deposits with banks with maturity dates of three months or less. Cash restricted The Company has restricted cash as a function of collateral for its bank debt. Inventory Inventories are stated at lower of cost or market on the first-in, first-out basis, and includes finished goods, raw materials, packaging material and product merchandise. Finished goods include costs of raw materials, packaging and labor used in production. The Company reviews its inventory quarterly to identify slow-moving, obsolete or otherwise impaired inventory. The Company's estimates for inventory write-downs are based on the best estimates of product sales prices and customer demand patterns, and/or its plans to transition its products. Property, plant and equipment Property, plant and equipment are carried at cost. The cost of repairs and maintenance is expensed as incurred; major replacements and improvements are capitalized. When assets are retired or disposed of, the cost and accumulated depreciation are removed from the accounts, and any resulting gains or losses are included in income in the year of disposition. In accordance with Statement of Financial Accounting Standards, (SFAS) No. 144, "Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of ", the Company examines the possibility of decreases in the value of fixed assets when events or changes in circumstances reflect the fact that their recorded value may not be recoverable. The Company does not believe the adoption of SFAS 144 will have a material effect on the Company's financial statements. Depreciation is calculated on a straight-line basis over the estimated useful life of the assets. The percentages applied are: Leasehold improvements 10% Machines and equipment 20%-33% Vehicles 20% Office equipment 20% Intangible Intangibles, such as brand names, are amortized over their estimated useful life in accordance with SFAS 142, "Goodwill and Other Intangible Assets." The adoption of SFAS 142 did not effect the useful life or the amortization of intangibles. F-11 MYCOBIOTECH, LTD AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001 Income taxes Taxes are calculated in accordance with taxation principles currently effective in the individual company's domicile. Deferred income taxes are determined under the liability method as required by Statement of Financial Accounting Standard No. 109 "Accounting for Income Taxes". Foreign currency translation Conversion of currency from a Singapore dollar ("S $") into a United States dollar ("US$") has been made at the respective applicable rates of exchange. Assets and liabilities denominated in foreign currencies are converted into US$ at the applicable rate of exchange at the balance sheet date. Income and expense amounts are converted at the average rate of exchange. Conversion of currency from S $ into US $ has been made at the rate of exchange on December 31, 2001 and 2000: at US$1.00: S $1.8445: and US$1.00: S $1.7331, respectively. No representation is made that the S $ amounts could have been, or could be, converted into US$ at that rate. Income and expense items were converted at the average rates for the year. Use of estimates The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results when ultimately realized could differ from those estimates. Employee benefits Share Option Scheme - The Company has in place the MycoBiotech Share Option Scheme for granting of share options to Directors and full-time employees of the Company to subscribe for ordinary shares in the Company. The total number of share options to be issued by the Company pursuant to the scheme shall not exceed 20% of the issued ordinary share capital of the Company. The Company accounts for stock-based employee compensation arrangements in accordance with the provisions of Accounting Principles Board Opinion (APB) No. 25, "Accounting for Stock Issued to Employees", and complies with the disclosure provisions of SFAS No.123, "Accounting for Stock-Based Compensation". The Company accounts for stock-based compensation using the intrinsic value method, whereby, compensation cost is recognized when the exercise price at the date of grant is less than fair market value of the Company's common stock. Under the plan, the option exercise price for stock options may not be less than the fair market value of the Company's common stock at the date of grant as determined by the Board of Directors. No compensation cost has been recorded in the accompanying financial statements. Options expire no later than five years from the date of grant. See Note 15 for further information. F-12 MYCOBIOTECH, LTD AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001 It is intended that this scheme will lapse when the Company's shares are listed on the Singapore Exchange or any other exchange and another scheme would be introduced to comply with the requirements of that exchange. Mandatory contributions - Mandatory contributions are made by the Company and its subsidiaries to the respective Government's Central Provident Fund schemes at the statutory rates in force during the period, based on gross salary payments. The cost of these payments is charged to the statement of income in the same period as the related salary cost. Revenue recognition Revenue is recognized FOB the customer. All exports require an irrevocable letter of credit. The letter of credit is realized by the Company upon presenting the relevant shipping documents to the bank and then the revenue is recognized. The Company has no significant sales returns or allowances. The sale of a license is recognized when cash consideration is received. There were no sales to third parties for the three year period ended December 31, 2001. All related company sales of licenses have been eliminated. Accounts Receivable Trade receivables are carried at original invoice amount less an estimate made for doubtful receivables resulting from the inability of customers to make required payments. The amount of the reserve is based on historical experience and an analysis of the accounts receivable outstanding. If the financial condition of the customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required which would result in an additional expense in the period such determination was made. Trade receivables are written off when deemed uncollectible. Recoveries of trade receivables previously written off are recorded when received. There have been no material recoveries. Research and development Research and development expenditures are charged to expense as incurred. There were no significant research and development expenses incurred. Loss per share The company follows the statement of Financial Accounting Standards No. 128 ("SFAS 128"), "Earnings Per Share". Under SFAS 128, basic loss per share is computed by dividing loss available to common shareholders by the weighted-average number of common share assumed to be outstanding during the period of computation. Recent pronouncements In July 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities. SFAS 146 addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force ("EITF") Issue No. 94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain costs Incurred in a Restructuring). F-13 MYCOBIOTECH, LTD AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001 SFAS 146 requires recognition of a liability for a cost associated with an exit or disposal activity when the liability is incurred, as opposed to when the entity commits to an exit plan under EITF No. 94-3. SFAS 146 is to be applied prospectively to exit or disposal activities initiated after December 31, 2002. The Company does not believe that the adoption of SFAS 146 will have a material effect on the Company's financial position, results of operations, or cash flows. 5. INVENTORIES Inventories are summarized as follows: December 31, -------------------------------- 2001 2000 ---------- ----------- Raw Matrials $ 396,075 $ 347,469 Finished products 209,608 316,707 ---------- ----------- $ 605,683 $ 664,176 ========== =========== Certain inventory is pledged as collateral for loans. 6. PROPERTY, PLANT AND EQUIPMENT December 31, -------------------------------- 2001 2000 --------- --------- Leasehold improvements $ 996,678 $ 996,678 Machinery and equipment 1,315,914 1,516,165 Other 131,824 188,438 ------------ ----------- Less accumulated depreciation $ 300,668 $ 477,496 ============ =========== 7. INVESTMENTS The Company acquired a 50% equity interest in PT Randhoetatah Cemerlang ("PTRC"), in Indonesia, during July, 2001. The Company's original investment was represented by the issuance of 480,000 shares of common stock recorded at approximately $260,000 or par value. The Company made non-refundable payments to banks during 2000 and 2001 totaling $232,000 which the Company recorded as a receivable and subsequently reclassified as additional investment. The Company also made additional advances of $55,000. These amounts totaled $574,000. F-14 MYCOBIOTECH, LTD AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001 The Company entered into agreements with two banks during August 2000 to acquire outstanding loans, penalties and interest payable aggregating approximately $10,000,000 for approximately $1,500,000 payable in 90 days. The Company does not have any legal obligation to perform and its potential loss is limited to the cash paid. The Company renegotiated the agreements in February and July, 2002, and the Company continues to renegotiate the agreements. The Company paid an additional amount of $20,000 in July, 2002. These payments are non-refundable pursuant to the agreements. There can be no assurance the Company will be able to complete the transactions with the banks. The Company has no legal obligation to complete the transactions with the banks. The Company does not have sufficient working capital to complete the transaction under the current terms. The Company's investment of $574,000 was expensed during 2001 as Equity investment loss. The PTRC unaudited net loss for 2001 is approximately $2,500,000. The Company's portion would have been $1,250,000. The company did not record its prorata share of the loss since it has no legal obligation to advance any additional sums of money to either PTRC or to the banks. 8. INTANGIBLE The Company acquired the brand name Linzir and currently markets certain products under this name. The Company paid approximately $240,000 and is amortizing the cost over a ten-year period. December 31, -------------------------------- 2001 2000 ------ ------- Linzir Brand Name $216,860 $ 230,800 Accumulated Amortization (108,430) (92,320) --------- ---------- $108,430 $ 138,480 ========= ========== 9. DEFERRED EXPENSES Deferred expenses are expenses incurred in the Company's public offering. The amount will be written off in the period the public offering becomes effective or is abandoned. 10. RELATED PARTY TRANSACTIONS Everbloom Mushroom PTE LTD ("EM") has an exclusive agency agreement dated January 2000 with BAN CHOON MARKETING PTE LTD (BAN CHOON). BAN CHOON is controlled by Chin Hian Tan, a shareholder of the Company and a director of Everbloom Mushroom Pte Ltd. The agency agreement provides for BAN CHOON to be the exclusive distributor of certain products in the Singapore area. The agreement also provides for BAN CHOON to be paid for all the costs incurred in the marketing and distribution of the products plus 20% of the net profit. EM owes BAN CHOON approximately $141,500 net of a commission owed to EM from BAN CHOON from prior years at December 31, 2001. F-15 MYCOBIOTECH, LTD AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001 During 2001, sales through BAN CHOON totaled approximately $2,645,000 or approximately 77% of total sales. Expenses paid by BAN CHOON were approximately $505,000. Net income provided to the Company was approximately $67,700. During 2000, sales through BAN CHOON totaled approximately $2,352,600 or approximately 72% of total sales. Expenses paid by BAN CHOON were approximately $567,000. Net income provided to the Company was approximately $83,000. The remaining amounts owed to related parties, approximately $137,000 as of December 31, 2001, is owed to Everbloom Holding Ltd. and Everbloom Investments Ltd. for advances to the Company. These entities are owned and controlled by the Tan Family. 11. UNSECURED CONVERTIBLE BONDS During 2001, unsecured convertible bonds of $1,788,555 were converted into ordinary shares of S $1 each in the capital of the Company. Each bond has an option to subscribe for one ordinary share of S $1 in the Company's common stock at an exercise price of S $1 exercisable at any time within five years from the date of issue or the date the Company receives in-principle approval from The Singapore Exchange Limited for a proposed listing of the shares of the Company, whichever is earlier. The shares under option may be exercised in blocks of 10,000 shares or an integral multiple thereof. The option expires at the end of five years from the date of issue of the bond. On maturity of the bonds, being five years from the date of issue, the face amount of the bonds and all unpaid interest accrued shall be repaid by the Company in full. The bonds bear interest at 5-6% per annum. Interest expense for the bonds for 2001, 2000 and 1999 was $108,000, $121,000, and $109,000, respectively. 12. GRANT Included in non-current liabilities is a grant received of $38,366 approved and funded by Singapore-Israel Industrial Research and Development Foundation ("SIIRDF") to a subsidiary company, Mycopharma Pte Ltd in respect of a project for the development and cultivation of medicinal mushrooms culture for nutraceuticals and biopharmaceuticals. This project is being undertaken by its associated company, MedMyco Ltd, in Israel. Under the terms of the agreement dated March 26, 2001 between SIIRDF, MedMyco Ltd and Mycopharma Pte Ltd (where Medmyco Ltd and Mycopharma Pte Ltd are collectively know as the "participants") SIIRDF agrees to fund the project by providing a grant of 50% of the actual expenses incurred for each qualifying item up to 50% of the qualifying cost for such qualifying items. The aggregate amount of the grant shall not exceed US$358,738 or 22% of the total "cost to project", i.e. US$1,161,825 and US$496,650 under the approved project budget of MedMyco Ltd and Mycopharma Pte Ltd respectively, whichever is lower. F-16 MYCOBIOTECH, LTD AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001 SIIRDF has the right to revoke the award of the grant and/or terminate the agreement at any time if there are any adverse material changes in the implementation of the project. It is agreed between parties under the agreement that participants shall, jointly or severally, repay SIIRDF such grants obtained based on gross sales derived from the sale, leasing or other marketing or commercial exploitation of such innovation, including service or maintenance contract, commencing with the first such commercial transaction and on the repayment schedules as stipulated in the agreement, free of interest. 13. BANK DEBT The Company has three credit facilities covering bank overdrafts and letters of credit. The credit facilities provide for bank overdraft protection of approximately $500,000 and for irrevocable letters of credit for approximately $400,000. The credit facilities are generally secured by cash, inventory, corporate guarantees, key-man insurance and personal guarantees of one of the Company's directors. The Company has restricted deposits with the banks as collateral totaling $328,958 and $173,100 at December 31, 2001 and 2000, respectively. The credit facilities are payable on demand. Interest rates range from one percent to one and one-half percent over the banks prime rates. Interest rates ranged from 6% to 7% at December 31, 2001. Other nominal charges may also apply. Interest expense to the banks was $20,822 and $8,888 for December 31, 2001 and 2000, respectively. No interest was paid to banks under these agreements in 1999. 14. FINANCE LEASE CREDITORS Obligations under finance lease contract are as follow: 2001 2000 ------ ------ Minimum lease installments payable within one financial year $ 46,290 $ 54,450 after one financial year but within five financial years 51,615 115,217 --------- --------- 97,905 169,667 Finance charges allocated to future periods (13,605) (18,492) --------- --------- Present value of finance lease liabilities $ 84,300 $151,175 ========= ========= Due within 12 months $ 30,944 $ 48,978 ========= ========= Due after 12 months $ 53,356 $102,197 ========= ========= MYCOBIOTECH, LTD AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001 15. THE MYCOBIOTECH SHARE OPTION SCHEME FOR DIRECTORS AND EMPLOYEES ("SCHEME") The Company adopted a share option scheme in 1997 and amended the plan in 2000 to cover all employees and Directors. Share options are offered for a period of thirty days to the directors and employees. The directors and employees have to pay the Company one S $ (approximately $.54) upon acceptance of the offer. The date of acceptance is considered the grant date for purposes of evaluating compensation to be recognized by the Company. The Company takes into consideration recent sales for cash to third parties in valuing the stock option. The option may be exercised at any time after the date of grant but no later than five years from the date the share option was granted. The shares under option may be exercised in full or in 1,000 shares or a multiple thereof on the payment of the exercise price. Options granted are cancelled when the option holder ceases to be a full-time employee of the Company or any corporation in the MycoBiotech Group subject to certain exceptions at the discretion of the Company. It is intended that this scheme will lapse when the Company's shares are listed on an Exchange and another scheme would be introduced to comply with the requirements of the Exchange. F-18 MYCOBIOTECH, LTD AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001 A summary of the status of the company's share options as of December 31, 2001, 2000, and 1999 and the changes during the years ended on those dates are presented below:Weighted-average fair value of options granted in 2001 S $ 0.22 Weighted Average Shares Exercise Price Per Share -------- -------------------------- Outstanding and excercisable at January 1, 1999 170,000 S$1.00 Granted 240,000 S$1.00 Exercised - - Forfeited (10,000) - Expired - - ----------- ---------- Outstanding and excercisable at December 31, 1999 400,000 S$1.00 Granted 1,070,000 S$1.00 Exercised - - Forfeited (63,500) - Expired - - ----------- ----------- Outstanding and exercisable at December 31, 2000 1,406,500 S$1.00 Granted 2,191,000 S$1.44 Exercised (510,000) S$1.00 Forfeited - Expired - ----------- ------------ Outstanding and exercisable at December 31, 2001 3,087,500 S$1.31 Weighted-average fair value of options granted in 2001 S $ 0.22 Weighted-average fair value of options granted in 2000 S $ 0.17 Weighted-average fair value of options granted in 1999 S $ 0.16 F-19 MYCOBIOTECH, LTD AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001 The following table summarizes information about the stock options outstanding at December 31, 2001: Options outstanding and exercisable -------------------------------------------------------- Weighted Average Remaining Excercise Prices Options Contractual Life ------------------ --------- ------------------- S$1.00 1,702,500 3.5 years S$1.70 1,385,000 5 years ----------- ------------ 3,087,500 4.2 years =========== ============ Under SFAS 123, the fair value of each option was estimated on the date of grant using the Black-Scholes option pricing model. The Company's stock options have characteristics significantly different from those of traded options. The following assumptions were used for the grants in the years ended December 31, 2001, 2000 and 1999: risk-free interest rates between 3.16% to 3.96%; dividend rates of zero; expected lives of 5 years. In determining the "minimum value," SFAS 123 does not require the volatility of the Company's common stock underlying the options to be calculated or considered because the Company is not publicly traded as of December 31, 2001. No expense was recognized in 2001, 2000, and 1999 related to the options. Had the compensation cost for stock options granted to employees been determined under SFAS 123, net loss and basic and diluted net loss per share for the years ended December 31, 2001, 2000 and 1999 would have changed as indicated in the following pro forma amounts: 2001 2000 1999 ------ ------ ------ Net Loss As reported $(3,799,301) $(1,844,077) $(688,120) Proforma $(4,069,377) $(1,948,984) $(690,274) Basic and diluted net loss per share As reported $ (0.23) $ (0.14) $ (0.07) Proforma $ (0.25) $ (0.15) $ (0.07) 16. TAXATION Taxes are calculated in accordance with regulations in which the Company and its subsidiaries are located. Taxes are calculated on a separate entity basis since consolidation is not allowed. F-20 MYCOBIOTECH, LTD AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2001 The provisions for income taxes for the years ended December 31 are summarized as follows: 2001 2000 1999 ------- -------- ------- Current $ - $ 43,878 $ 31,484 Deferred - - - -------- -------- -------- $ - $ 43,878 $ 31,484 ======== ======== ======== Deferred income taxes are provided for the temporary differences between financial reporting and tax basis of the Company's assets and liabilities. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. 2001 2000 -------- -------- Deferred tax assets: Net operating losses $ 2,941,000 $ 574,859 Capital allowances 3,141 - Valuation allowance (2,944,141) (574,859) ------------ ----------- Deferred tax liabilities - - ------------ ----------- $ - $ - ============ =========== The net operating losses and capital allowances do not expire under current regulations. A reconciliation of income tax computed at the nominal statutory corporate tax rate to the provision for income taxes at December 31 is as follows: 2001 2000 1999 ------ ------ ------- Income taxes at nominal rate $(949,825) $(461,019) $(167,030) Permanent and valuation differences 949,825 504,897 198,514 ---------- --------- ---------- $ - $ 43,878 $ 31,484 ========== ========= ========== 17. COMMITMENTS At December 31, 2001, there were the following commitments: Exclusive rights commitments In accordance with the terms of an agreement dated August 21, 2000, a subsidiary company is required to purchase approximately $500,000 of a product from a third party supplier over the next 2 years in return for the exclusive rights for the supply of mushrooms produced by the supplier. F-21 Bank loans commitments Under the terms of the agreements with the banks as disclosed in Note 7, the Company is required to make further payments of $1,236,000 to effect the assignment of these loans. Operating lease commitments At December 31, 2001, there were future minimum lease payments under a non-cancelable operating lease in subsequent accounting period as follows: Amount ----------- 2002 $ 219,000 2003 146,000 2004 141,000 2005 141,000 2006 70,000 The disclosed commitments are based on existing rental rates. The lease agreements provide for periodic revision of such rates in the future. 18. FINANCIAL INSTRUMENTS Net fair value of financial assets and liabilities The net fair value of all financial assets and liabilities approximates their carrying value. The Company does not hedge its risk. The aggregate net fair values and carrying amounts of financial assets and financial liabilities are disclosed in the balance sheets and in the notes to the financial statements. 19. SUBSEQUENT EVENTS STOCK RIGHTS ISSUE The Company issued 3,649,776 shares of S $1.00 par for approximately $2,050,000 in August and September of 2002 as per a rights issue to shareholders. INVESTOR RELATIONS AGREEMENT The Company is planning to go public on the capital market in the United States of America through this issuance of American Depository Receipts ("ADR") to be arranged by the Bank of New York. The Company entered into an Investor Relations Agreement ("Agreement") on August 6, 2002 with Stoneside Development Limited of the United States of America. The Agreement provides for investor relations and stock promotion for a twelve-month period. The Agreement provides for payment of $92,000 over the twelve-month period. F-22 MYCOBIOTECH, LTD AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED) (UNITED STATES DOLLARS) ASSETS September 30, December 31, 2002 2001 ---- ---- CURRENT ASSETS Cash and cash equivalents $ 231,314 $ 47,108 Cash and bank balances - restricted 306,661 328,958 Trade receivables 480,814 497,646 Stock subscription receivable - 319,689 Inventory: Raw material 40,633 264,956 Finished goods 302,867 200,386 Packing materials 152,909 140,341 Prepaid expenses and deposits 80,890 68,366 Deferred offering expense 270,576 71,775 Other 43,916 39,778 ----------- ---------- TOTAL CURRENT ASSETS 1,910,580 1,979,003 PROPERTY, PLANT AND EQUIPMENT 341,636 300,668 INVESTMENTS 39,849 38,368 INTANGIBLE 95,892 108,430 DEPOSIT TO SUPPLIER 92,064 88,255 ----------- ----------- TOTAL ASSETS $ 2,480,021 $2,514,724 =========== =========== F-23 MYCOBIOTECH, LTD AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED) (UNITED STATES DOLLARS) LIABILITIES AND SHAREHOLDERS' DEFICIT September 30, December 31, 2002 2001 ---- ---- CURRENT LIABILITIES Bank overdraft secured $ - 352,110 Short-term debt unsecured interest free 140,193 108,430 Open letters of credit - 159,569 Trade payables 686,536 647,228 Other payables and accrued expenses 565,571 775,507 Income tax payable 4,355 31,700 Related parties 99,342 278,556 ----------- ----------- TOTAL CURRENT LIABILITIES 1,495,997 2,353,100 ----------- ----------- LONG-TERM LIABILITIES Unsecured convertible bonds 33,785 119,274 Grant 39,847 38,366 Long-term lease obligations 8,984 53,356 ----------- ----------- TOTAL LONG-TERM LIABILITIES 82,616 210,996 SHAREHOLDERS' EQUITY Common stock , S $1.00 par value, 50,000,000 authorized; 25,593,548 and 21,109,542 issued and outstanding at September 30, 2002 and December 31, 2001 14,865,787 12,307,813 Paid-in capital 3,002,782 2,514,543 Retained deficit (17,099,285) (14,976,969) Accumulated other comprehensive income 132,124 105,241 ----------- ------------ Total Shareholders' Equity (Deficit) 901,408 (49,372) ----------- ------------ Total Liabilities and Shareholders' Deficit $2,480,021 $ 2,514,724 =========== ============ F-24 MYCOBIOTECH, LTD AND SUBSIDIARIES CONSOLIDATED LOSS STATEMENTS AND COMPREHENSIVE LOSS (UNAUDITED) (UNITED STATES DOLLARS) Nine months ended September 30, 2002 2001 ---- ---- SALE OF MUSHROOM PRODUCTS $ 2,651,861 $ 2,627,344 COST OF SALES 2,413,679 1,836,286 ---------- ---------- GROSS PROFIT 238,182 791,058 DEPRECIATION AND AMORTIZATION 86,405 85,614 GENERAL AND ADMINISTRATIVE EXPENSES Personnel expense 882,366 874,670 Rent expense 219,806 323,190 Other 962,194 872,053 ----------- ---------- LOSS FROM OPERATIONS (1,912,589) (1,364,469) OTHER INCOME (LOSS) Interest expense (57,877) (108,951) Equity investment loss (177,076) (431,983) Other 25,226 87,827 ----------- ---------- LOSS BEFORE TAXATION (2,122,316) (1,817,576) PROVISION FOR INCOME TAXES - - ----------- ---------- NET LOSS (2,122,316) (1,817,576) ----------- ----------- OTHER COMPREHENSIVE INCOME (LOSS) Foreign currency translation 26,882 109,060 ----------- ----------- COMPREHENSIVE LOSS $ (2,095,434) $ (1,708,516) ============= ============ BASIC AND DILUTED LOSS PER SHARE $ (0.09) $ (0.11) ============= ============ BASIC WEIGHTED AVERAGE SHARES 22,083,645 15,178,661 ============= ============ F-25 MYCOBIOTECH, LTD AND SUBSIDIARIES CONSOLIDATED LOSS STATEMENTS AND COMPREHENSIVE LOSS (UNAUDITED) (UNITED STATES DOLLARS) Three months ended September 30, 2002 2001 ---- ---- SALE OF MUSHROOM PRODUCTS $ 817,319 $ 880,970 COST OF SALES 811,428 428,507 -------- -------- GROSS PROFIT 5,891 452,463 DEPRECIATION AND AMORTIZATION 26,404 21,108 GENERAL AND ADMINISTRATIVE EXPENSES Personnel expense 329,542 221,594 Rent expense 66,862 83,757 Other 319,891 529,218 -------- -------- LOSS FROM OPERATIONS (736,808) (403,214) OTHER INCOME (LOSS) Interest expense (30,992) (34,382) Equity investment gain/loss (90,105) (431,983) Other 21,431 38,942 -------- --------- LOSS BEFORE TAXATION (836,474) (830,637) PROVISION FOR INCOME TAXES - - -------- --------- NET LOSS (836,474) (830,637) --------- --------- OTHER COMPREHENSIVE INCOME Foreign currency translation (6,281) (114,778) --------- --------- COMPREHENSIVE LOSS $ (842,755) $ (945,415) ========== ========== BASIC AND DILUTED LOSS PER SHARE $ (0.04) $ (0.06) ========== ========== BASIC WEIGHTED AVERAGE SHARES 23,582,224 16,621,005 ========== =========== F-26 MYCOBIOTECH, LTD AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (UNITED STATES DOLLARS) Nine months ended September 30, 2002 2001 ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (2,122,316) $ (1,817,576) ------------- ------------- ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH USED BY OPERATING ACTIVITIES: Depreciation and amortization 86,405 85,614 (INCREASE) DECREASE IN ASSETS: Trade receivables 16,832 360,423 Inventory 109,274 (334,007) Prepaid expenses and deposits (12,524) 194,014 Deferred offering expenses (198,801) (21,779) Other (4,138) (46,874) INCREASE (DECREASE) IN LIABILITIES: Trade payables 39,308 (103,037) Other payables and accrued expenses (209,936) 142,000 Related parties (179,214) (47,252) Income tax payable (27,345) (58,567) -------- -------- Net cash used by operating activities (2,502,455) (1,647,041) ----------- ----------- F-27 MYCOBIOTECH, LTD AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (UNITED STATES DOLLARS) Nine months ended September 30, 2002 2001 ---- ---- CASH FLOWS FROM INVESTING ACTIVITIES Deposit to supplier (3,809) (9,861) Investment (1,481) 3,727 (Purchase) disposition of fixed assets (114,835) 19,588 Increase in restricted cash 22,297 (166,363) --------- --------- Cash provided for investing activities (97,828) (152,909) --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES Bank overdraft - net (352,110) 23,641 Short-term unsecured 31,763 (2,246) Letters of credit - net (159,569) 75,084 Grant 1,482 - Long-term leases (44,372) (69,366) Sale of common stock 2,960,724 1,658,034 Stock subscription receivable 319,689 - ----------- ---------- Cash provided for (used by) financing activities 2,757,607 1,685,147 ----------- ---------- NET INCREASE (DECREASE) IN CASH AND BANK BALANCES 157,324 (114,803) Effects of exchange rate changes 26,882 109,060 Cash and bank balances, at beginning of period 47,108 74,755 ----------- ---------- Cash and bank balances, at end of period $ 231,314 $ 69,012 =========== ========== F-28 MYCBIOTECH LTD AND SUBSIDIARIES FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002 NOTE 1. - BASIS OF PRESENTATION The accompanying unaudited financial statements of MycoBiotech, LTD and subsidiaries have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10Q and Item 8 of Form 20-F. They do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, considered necessary for a fair presentation, have been included in the accompanying unaudited financial statements. Operating results for the periods presented are not necessarily indicative of the results that may be expected for the full year. These financial statements should be read in conjunction with the financial statements and footnotes, which are included as part of financial statements for the year ended December 31, 2001. F-29 SCHEDULE II MYCOBIOTECH, LTD AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS PROVISION FOR DOUBTFUL ACCOUNTS Balance at Balance at Beginning of Charged to end of Period Expense Deductions Period --------------- ------------- ------------- ------------- $ - $ 126,676 (1) $ - $ - 12/31/99 - 291,705 (1) - - 12/31/00 - 23,162 (2) - 23,162 12/31/01 99,808 (1) 23,162 - 7,07(2) 16,088 9/30/02 108,889 (3) (1) Direct write-off used for those years and for some accounts receivable in year 2001. There were no accounts receivable which required a reserve for doubtful accounts at December 31, 1999 and 2000. (2) Provision for December 31, 2001. (3) Direct write-off of funds advanced during third quarter to an associated company. Associated company does not have the ability to repay the advance. EX-10 3 ex106_4403.txt DATED THIS 8th DAY OF December 1997 BETWEEN EVERBLOOM INTERNATIONAL TECHNOLOGY PTE LTD AND EVERBLOOM MUSHROOM (UK) LIMITED LICENCE AGREEMENT Contact person: Dr Tan Kok Kheng Managing Director Tel: 4821070 Fax: 4821657 THIS AGREEMENT is made on the 8th day of December 1997 BETWEEN EVERBLOOM INTERNATIONAL TECHNOLOGY PTE LTD, a company incorporated in the Republic of Singapore and having its registered office at 9 Seletar West Farmway 5, Singapore 798057 (hereinafter referred to as "Everbloom") of the one part AND EVERBLOOM MUSHROOM (UK) LIMITED of United Kingdom, formerly PM 172 LIMITED, whose registered office is at 12 St Catherine Stree, Cupar, Fife, Scotland, UK (hereinafter referred to as "EM UK") of the other part; WHEREAS (A) Everbloom has the Know-how/Technology to cultivate Shiitake Mushroom using the Process as set out in USA Patent Nos. 4987698, 4542608 and 4833821, European Patent Nos. 0107911 and 0248636 and British Patents Nos. 0107911, 2191074 and 2223922 and the Materials to produce Logs and Spawn. (B) EM (UK) is desirous of cultivating Shiitake Mushroom and producing Logs and Spawn. (C) Everbloom hereby agrees to grant to EM (UK) the right to cultivate Shiitake Mushroom and to produce Logs and Spawn in United Kingdom and to supply the technical know-how and data and to provide the necessary assistance upon the terms and conditions hereinafter appearing. IT IS HEREBY AGREED as follows: 1. DEFINITIONS 1.1 Whenever used in this Agreement the following terms shall be deemed to have the following meanings unless the context otherwise requires:- "Business" shall mean the cultivation of Shiitake Mushroom and production of Logs and Spawn by EM (UK). "Chemical Mix" shall mean the nutrients developed by Everbloom for the cultivation of Shiitake Mushrooms and production of Logs and Spawn. "Documentation" shall mean the written Technical Information and Improvements pertaining to Product and the plant, machinery and raw materials required for production thereof and shall include designs, drawings, manuals, brochures, pamphlets, slides, photographs, audio and video tapes, advertisement materials and promotional aids. "Effective Date" shall mean the date on which this Agreement comes into operation. "Everbloom's shall mean a suitably qualified consultant to be Consultant" made available by Everbloom for the purpose of providing the services referred in Clause 4 hereof. "Improvements" shall mean future improvements relating to Technical Information and Documentation. "Know-how/ shall mean all information and data including Technology" formulae designs specifications techniques procedures plans discoveries and inventions (whether patented or not) as used at any time by Everbloom in growing, marketing and selling Shiitake Mushroom at their facilities in Singapore and by any other licensees wherever legally possible, which pertain to the use and exploitation of the Process or the cultivation or marketing and sale of Shiitake Mushroom by means of the Process, together with any further information or data pertaining thereto as may be available with Everbloom. "Logs" shall mean raw materials comprising preformulated materials such as chopped wood and/or sawdust and Chemical Mix mixed with water in a ratio of approximately ______ grams of dry substrate to ______ grams of water produced according to Everbloom's Know-how/Technology. "Materials" shall mean Logs, Spawn and Chemical Mix. "Parties" shall mean Everbloom and EM (UK). "Process" shall mean the process to produce fungi of the species Lentinus edodes by the means described in USA Patent Nos. 4987698, 4542608 and 4833821, and European Patent Nos. 0107911 and 0248636 and British Patent Nos 0107911, 2191074 and 2223922, copies of which are available upon receipt. "Product" shall mean Logs, Spawns and Shiitake Mushrooms. "Plant" shall mean a facility in United Kingdom designed and approved by Everbloom and to produce ___________ metric tons of fresh Shiitake Mushrooms per annum, using the Technical Information, Documentation and Improvements provided by Everbloom hereunder. The land and investment for the Plant will be committed by EM (UK). "Shiitake Mushroom" shall mean the fungi of the species Lentinus edodes cultivated according to the Process or any part thereof. "Spawn" shall mean the spawn of the species Lentinus edodes produced according to Everbloom's Know-how/Technology. "Technical Information" shall mean the information, know-how, data, formulae, specifications, techniques, designs, procedures, plans, discoveries and inventions (whether patented or not) available with Everbloom and relating to the following, in so far as the same has been commercially tested and used and found to be successful, including (but not limited to):- (a) design, engineering, fabrication, erection and installation of plant, machinery and equipment required for the production of Product and sources of supply thereof; (b) production processes and methods, operating conditions, pollution and quality control and testing and product development in respect of Product; and (c) chemical mixes and all other materials and ingredients to be used in the production of the Product including instructions on the required quantities and characteristics thereof and their treatment in the production of Product as well as sources of supply thereof. 1.2 In this Agreement, unless the context of subject matter otherwise requires:- (a) The singular includes the plural and vice versa. Words importing any gender include the other gender. Words importing persons include corporations and incorporated bodies of persons and vice versa; (b) References to clauses and schedules are references to Clauses and Schedules to this Agreement; (c) References to agreements and deeds include all renewals, extensions and amendments thereof; and (d) The headings to the clauses herein are for convenience of reference only and do not form part of this Agreement or affect the interpretation hereof. 2. SCOPE OF LICENCE In consideration of EM (UK)'s agreement to pay the amounts specified herein, Everbloom hereby grants to EM (UK) the right to use the Know-how/Technology in the production of Logs and Spawn and the cultivation of Shiitake Mushroom in United Kingdom. 3. FINANCE & ACCOUNTING 3.1 It is the responsibility of EM (UK) to operate and maintain proper accounting procedures in accordance with generally accepted accounting principles. 3.2 EM (UK) shall keep at its registered office true and accurate records, accounts books and data ("Business Records") which shall accurately reflect all particulars relating to the Business and shall submit to Everbloom such information and reports concerning the Business in such form as may be specified by Everbloom. 3.3 EM (UK) shall submit quarterly statements of sales to Everbloom and Royalties payable within 15 days after the end of each quarter. 3.4 EM (UK) shall submit financial reports relating to the Business on a half-yearly basis. 3.5 EM (UK) shall submit annual audited accounts of the Business within 90 days after the year end. 3.6 EM (UK) shall preserve and keep all Business Records for a period as required by local tax laws. 3.7 Everbloom reserves the right to appoint a firm of independent accountants to review the records of the Business pertaining to the calculation of Royalties payable. 4. TECHNICAL INFORMATION ETC, TO BE PROVIDED BY EVERBLOOM 4.1 Everbloom shall furnish to EM (UK) all Technical Information, Documentation and Improvements and render all assistance necessary to enable EM (UK) to successfully establish the Plant and to produce and cultivate the Product. 4.2 Without prejudice to the generality of the foregoing, Everbloom shall, from time to time, provide to EM (UK), complete and uptodate Technical Information, Documentation and Improvements:- (a) to enable EM (UK) to design, engineer, erect, install and commission the Plant and all machinery and equipment therein and to successfully produce, develop and sell the Product; (b) to enable EM (UK) to procure suitable machinery, equipment and spares at reasonable prices and to fabricate and manufacture the same indigenously in United Kingdom; (c) with regard to import substitution in respect of Plant, machinery, equipment and ingredients for the Product; (d) with regard to operational safety and maintenance procedures of the Plant and quality control, testing and product development in respect of Product and ingredients, packaging etc as required by the markets from time to time; (e) to enable EM (UK) to procure in the international markets, alternative raw materials, consumables and other imputs necessary for production of Product at reasonable prices; (f) with regard to measures to ensure the the project will not cause any pollution problems or environmental hazards and that the effluents will meet statutory requirements, and (g) with regard to the conversion into useful byproducts, of spent materials including logs after harvesting of mushrooms. 4.3 All Documentation to be furnished by Everbloom hereunder shall be in English and in the metric system. 4.4 Everbloom shall furnish the Technical Information and Documentation as aforesaid within thirty (30) days of the Effective Date. 5. TRAINING OF EM (UK) PERSONNEL 5.1 During the tenure of this Agreement, Everbloom shall train EM (UK) personnel at the Plant as well as at other suitable factories for the proper use and exploitation of Technical Information, Documentation and Improvements furnished hereunder and for development of new products and articles. For the purpose, Everbloom shall deploy, as and when necessary, sufficiently knowledgeable and experienced consultants. 5.2 Any such consultants deployed by Everbloom shall, during their stay in United Kingdom, observe all rules and regulations that apply to EM (UK) employees. Likewise, any EM (UK) personnel being trained outside United Kingdom by Everbloom shall observe all rules and regulations that apply to Everbloom's employees in those countries respectively. 5.3 The EM (UK) personnel to be trained, the Everbloom consultants to be deployed and the periods of such training and deputation etc, shall be as agreed by the parties from time to time. 5.4 EM (UK) will meet the actual expenses of the Everbloom consultants deployed in United Kingdom, in respect of their travel, board and lodging; but no daily or other fees or remuneration will be paid to them. 6. MANAGEMENT OF PLANT 6.1 During the tenure of this Agreement, Everbloom shall deploy its personnel in such numbers as are necessary to supervise, oversee and manage the operation of the Plant. 6.2 All costs and expenses incurred or accrued to the personnel shall be borne and paid by EM (UK). The costs and expenses shall include, but is not limited to, remuneration, salary, board, lodging, travel, transportation and other reasonable amenities. 7. PAYMENTS 7.1 In consideration of the rights and licence granted, and duties and obligations undertaken by Everbloom herein, EM (UK) shall pay Everbloom a technology fee of (pound)100,000.00 upon the signing of this Agreement net of all taxes (including but not limited to withholding taxes), dues, charges and expenses, which shall be for EM (UK)'s sole account. 7.2 As consideration for the continual transfer of the Know-how/Technology, EM (UK) shall pay Everbloom a royalty of 10% on profit before tax. 7.3 Such royalties due under Clause 7.2 above shall be due immediately after the end of the quarter and payable within 30 days from that date without the need for a demand from Everbloom. Any late payment shall attract interest calculated at the rate of 1.5% per month from the due date. 7.4 Time will run from the date on which the production of sawdust and logs commences. 7.5 Any improvements to the Know-how/Technology shall be passed on to EM (UK) without any further requirement of payments of fees or royalties. 7.6 The payments to be made by EM (UK) to Everbloom hereunder is also subject to the required approvals of the Government of United Kingdom and to such modifications as may be made by them. 8. MARKETING OF PRODUCTS Everbloom agrees to use their best endeavours to assist EM (UK) to market the Products for sale internationally. Such sales shall be under the brand "Everbloom". 9. WARRANTY 9.1 Everbloom warrants that the Technical Information, Documentation and Improvements furnished by it hereunder shall be of the latest and best type and quality and which in the experience, studies and tests of Everbloom have proved to be sufficient and technically and economically efficient and practical for the production of the Product and for establishment of a Plant of the specified capacity. Based on current specifications, production should be not less than 150 grams of fresh mushrooms from 1 kilogram of sawdust log. 9.2 Everbloom further warrants that all rights in the Technical Information, Documentation and Improvements furnished hereunder are proprietory and belong to Everbloom and that the use and exploitation thereof by EM (UK) and/or its sub licensees pursuant hereto will not infringe or violate any rights of any third parties. 9.3 Everbloom hereby indemnifies and shall keep indemnified EM (UK) and its sub licensees from and against all liabilities, expenses, losses, costs and damages that may be incurred by them on account of the infringement of the rights of any third party rights arising from the use and exploitation of the Technical Information, Documentation and Improvements and the production and cultivation of the Product. 10. SUPPLY OF RAW MATERIALS AND COMMERCIAL SERVICES 10.1 In the event that EM (UK) requires any raw materials for the production and cultivation of the Product and makes a written request for the same, Everbloom shall supply the same for such prices and on such other terms as may mutually be agreed upon. 10.2 Everbloom will assist EM (UK) in the sourcing/supply of machinery and consumables required to set up and operate the Plant,as and when called upon to do so by EM (UK). 10.3 The raw materials shall include the Chemical Mix, which shall be supplied by Everbloom at the price of S$4.00 per kilogram FOB Singapore 11. CONFIDENTIALITY Each Party hereto undertakes to keep secret all information of a confidential or secret nature supplied by one Party to the other pursuant to this Agreement and agrees not to disclose any of such information to the public or to any third party without the express prior consent in writing of the supplying Party and each Party in receipt of such information is to ensure that it discloses such information only to responsible employees and consultants whose duties are in furtherance of the objectives of this Agreement and which cannot be fulfilled without use by such Party of the information and where it is relevant to those duties and who are under binding obligations to keep secret such of the information as is necessarily disclosed to them. 12. ASSIGNMENT 12.1 This Agreement shall enure to the benefit of the successors and assigns of Everbloom. 12.2 EM (UK) shall not be entitled at any time to assign, transfer or encumber this Agreement or any part thereof or the benefit thereof or control thereof or any benefit hereunder except with the previous written consent of Everbloom such consent not to be unreasonably withheld. 13. DEFAULT AND TERMINATION 13.1 In the event that EM (UK) shall become insolvent or make an assignment for the benefit of creditors or be placed under judicial management or if other proceedings for the appointment of a receiver of EM (UK) or other custodian for EM (UK)`s business or assets if filed and is consented to by EM (UK) and is not dismissed within thirty (30) days or a receiver or other custodian is appointed or if proceedings for composition with creditors under any state or federal law shall be instituted by or against EM (UK) or if the real or personal property of EM (UK) shall be sold after levy thereupon by any sheriff, receiver, then upon the occurance of any said events, EM (UK) shall be deemed to be in default under this Agreement and all rights granted to EM (UK) hereunder shall thereupon terminate without any need for notice to EM (UK) and this Agreement shall thereupon be terminated. 13.2 Without prejudice to the generality of the foregoing EM (UK) shall be in default under this Agreement:- (a) if EM (UK) fails to submit when due financial reports which Everbloom is entitled to under this Agreement. (b) if EM (UK) fails to comply substantially with any of the requirements imposed upon it by the Agreement. 13.3 EM (UK) shall have the right to terminate this Agreement if Everbloom shall be in default of any of the following conditions:- (a) in the event that Everbloom is liquidated, dissolved or becomes insolvent or bankrupt or is placed under judicial management or the control to receivers or trustees. (b) if Everbloom is unable to conduct the business contemplated by this Agreement. In such event, the formulae for the Chemical Mix, which is held by Haridass Ho & Partners of 24 Raffles Place, #18-01/03 Clifford Centre, Singapore 048621, shall be made available to EM (UK) on written demand. In addition, should the Government of United Kingdom so require, the formula for the Chemical Mix shall be sent by Haridass Ho & Partners to EM (UK)'s nominated patent agents/attorneys upon receipt of a written request together with documentary proof of the Government's requirement. 14. RIGHTS AND OBLIGATIONS OF PARTIES ON TERMINATION OR EXPIRATION Upon the termination or expiration of this Agreement all rights granted herein by Everbloom to EM (UK) shall revert to Everbloom. 15. RELATIONSHIP OF PARTIES AND INDEMNIFICATION 15.1 It is hereby declared that EM (UK) is an independent contractor and not an agent, legal representative, joint venturer, partner, employee or servant of Everbloom and is not empowered to act on Everbloom's behalf in any manner. EM (UK) agrees that Everbloom is not in any way a fiduciary of EM (UK). 15.2 EM (UK) shall indemnify Everbloom, its officers, directors, employees, agents affiliates, successors and assigns, against: (a) any and all claims, damages or liabilities based upon, arising out of, or in any way related to any negligence or act or omission by EM (UK) or any its agents, contractors, servants, employees or licensees, and any obligation of EM (UK) incurred pursuant to any provision of this Agreement. (b) any or all fees (including attorney's fees), costs and other expenses incurred by or on behalf of Everbloom in the investigation, defence or prosecution of any and all claims. 16. NOTICES 16.1 All notices or other communication to Everbloom contemplated by the terms of this Agreement shall be in writing and sent by registered mail, return receipt requested, addressed to Everbloom at 9 Seletar West Farmway 5, Singapore 798057 (or such other address as Everbloom shall designate in writing) or by facsimile or to such address confirmed by registered mail. 16.2 All notices to EM (UK) required by the terms of this Agreement shall be in writing and sent by registered mail, addressed to EVERBLOOM MUSHROOM (UK) LIMITED at 12 St Catherine Street, Cupar, Fife, Scotland, United Kingdom or such other address as EM (UK) shall designate in writing, or by facsimile or to such address confirmed by registered mail. 16.3 If by registered mail, any notice shall be deemed to have been given when received. 17. TERMS 17.1 This Agreement embodies all the terms and conditions agreed upon between the Parties hereto and supercedes and cancels in all respects all previous agreements and undertakings between the Parties hereto with respect to the subject matter hereunder whether such be written or oral. 17.2 Nothing in this Agreement shall constitute a partnership between the Parties nor constitute one Party the agent of the other Party and vice versa. 18. NO WAIVER No omission or delay on the part of any party in exercising its rights under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise by any Party of any such right preclude the further or other exercise thereof or the exercise of any other right which it may have. 19. SEVERANCE In the event that any provision of this Agreement shall be void or unenforceable by reason of any provision of applicable law it shall be deleted and the remaining provisions hereof shall continue as amended so as to give effect to the spirit of this Agreement so far as possible. 20. COSTS AND EXPENSES Unless otherwise expressly stated herein all costs and expenses incurred by either Party in the performance of this Agreement shall be borne by the Party incurring the same. 21. AMENDMENTS The conditions contained in this Agreement may be varied, altered, amended or deleted and fresh conditions embodied from time to time by mutual consent in writing and duly signed and executed by the Parties hereto and such writing would then be deemed for all purposes to be part and parcel of this Agreement and to be read and interpreted so and neither Party would contest the validity thereof. 22. GOVERNMENTAL APPROVALS 22.1 The Parties hereto undertake to obtain from the respective Governments all approvals and authorisations necessary or required for the implementation of the provisions of this Agreement. 22.1 Should approval and or authorisation from the respective Governments be subsequently withdrawn for any reason whatsoever, this agreement shall automatically be terminated unless otherwise agreed between the Parties. 23. APPLICABLE LAW/JURISDICTION 23.1 This Agreement shall in all respects be governed by and construed in accordance with the laws of the Republic of Singapore and the Parties agree to submit to the non-exclusive jurisdiction of the courts of the Republic of Singapore. IN WITNESS WHEREOF the parties have duly executed this Agreement as of the date and year written above. SIGNED by Dr Tan Kok Kheng ) for and on behalf of EVERBLOOM ) INTERNATIONAL TECHNOLOGY ) PTE LTD in the presence of :- ) SIGNED by Prof John E Smith ) for and on behalf of EVERBLOOM ) MUSHROOM (UK) LTD ) in the presence of :- ) EX-10 4 ex1017_4403.txt SALES AND PURCHASE AGREEMENT This Sale and Purchase Agreement ("Agreement") is made on 21 August 2000 between: 1. PT BANK PARIBAS-BBD Indonesia, a limited liability company established under the laws of the Rpublic of Indonesia, having domicile at Jakarta, Menara Mulia suite 1211, Jalan Gatot Subroto Kavling 9-11, in this matter represented by Mr Patrice Maveyraud, in his capacity as President Director ("Seller"); and 2. Everbloom International Technology Pte Ltd, a company established under the laws of Singapore, with its registered office at 12 Science Park Drive #04-01, The Mendel Singapore Science Park 1, Singapore 118225 ("Purchaser"). (The Seller and the Purchaser hereinafter referred to collectively as the "Parties"). WHEREAS: A. Pursuant to Credit Agreement: Promissory Note Purchase Agreement and Acknowledge of Indebtness number 42 dated 25 August 1992 made before Notary Anita Christiana, Sarjana Hukum, in Jakarta (further such agreement, together with any amendment, addendum, extension, renewal or confirmation which made thereto, shall be referred to as the "Credit Agreement") between the Seller as the Bank and PT Randhoetatah Cemerlang as the Borrower, the Bank provided the Borrower with the following facility: * A Medium Term Loan in the principal amount of US$1,900,000.00 (United States Dollars: One million and nine hundred thousand). B. The total outstanding under the Facility (calculated up to 31 July 2000) is as follows: Principal : US$ 1,900,000.00 Overdue Interest : US$ 1,469,172.85 C. The Seller intends to sell to the Purchaser, and the Purchaser intends to purchase from the Seller all rights, titles, and interests in the Credit Agreement ("Rights") on the terms and conditions set out in this Agreement and in an assignment ("Assignment Agreement") to be made between the Seller and the Purchaser on or about the date of this Agreement. NOW THEREFORE, the parties agree as follows: 1. The Purchaser hereby agrees to purchase from the Seller, and the Seller hereby agrees to sell to the Purchaser, the Rights. The transfer of the Rights to the Purchaser shall be effected in accordance with the terms of the assignment Agreement. 2. The Seller and the Purchaser agree that notwithstanding anything to the contrary in this Agreement and the Assignment Agreement, the transfer of the Rights to the Purchaser shall not be effective until full payment by the Purchaser of the purchase price in the manner contemplated by paragraphs 2 and 3 of this Agreement and the delivery of all Transaction Documents (as defined in the Assignment Agreement). 3. In the event the Purchaser fails to fulfil the payment in such manner, this Agreement and the Assignment Agreement shall automatically be null and void, and all payments which has been made under this Agreement shall not refundable and shall be calculated as payment of (principal) under the Credit Agreement 4. In the even the Purchaser fails to fulfil the payment under this Agreement and the Seller fails to deliver the Transaction Documents (as defined in the Assignment Agreement), this Agreement and the Assignment shall be null and void, and all payment which has been made under this Agreement shall be refundable in full within 7 days of notice of demand form the Purchaser. The Parties agrees that the purchase price for the sale and purchase of the rights is US$437,000.00 (United Sates Dollars four hundred and thirty seven thousand) which shall be paid by the Purchaser as follows: Payment Date Amount - -------------------------- ---------------------------------- ---------------- Up front Payable on the signing of the US$ 43,700.00 agreement - -------------------------- ---------------------------------- ---------------- - -------------------------- ---------------------------------- ---------------- Final Payment 90 days after the signing of the US$ 393,300.00 agreement, i.e. 20 November 2000. - -------------------------- ---------------------------------- ---------------- 5. All payments of purchase price as referred to in Clause 3 above shall be paid by the Purchaser to the Seller on each payment due as referred to in Clause 3 in immediately available funds without any set off, counterclaim or withholding of any nature of the following account: Account Number : 001-006905, CHIP UID 313535 Bank : Chase Manhattam Bank, New York, USA Beneficiary : PT. BANK PARIBAS-BBD Indonesia Quoting reference : Payment of purchase price related to PT Randhoetatah Cemerlang 6. The Seller and the Purchase shall keep in confidence all information concerning the other party, including but not limited to information in connection with the Transaction Documents and all other information obtained by it during the negotiation and carrying into effect of this Agreement and, except with the prior written consent of the other party, shall not disclose any of that information to any person other than: (a) as required by law or statue including reporting requirements to Bank Indonesia or tax authority or by the order of a court having jurisdiction over the party; (b) to employees of the party or a related corporation in order to facilities the transaction; (c) to an independent adviser of the party to the extent required for the adviser properly to advise the party. (d) to a financial institute in connection with the application by the party for financial accommodation relating to this Agreement; (e) to an auditor of the party in order to make financial statement, balance sheet and any other financial report of the party; and (f) to any companies within the group of Paribas by the Seller. And upon receiving such information each party shall use its best endeavors to ensure the confidentiality provision under this clause. 7. This Agreement shall be governed and constructed by in accordance with the laws of the Republic of Indonesia. 8. For the implementation of this Agreement and all its consequences, the Parties hereby select non-exclusive jurisdiction of the District Court of South Jakarta. 9. This Agreement may be executed in any counterparts and all of those counterparts taken together constitute one and the same agreement IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed as of the date first mention above. PT. BANK PARIBAS-BBD Indonesia Everbloom International Technology Pte Ltd Name : Mr Patrice Maveyraud Name : Dr Tan Kok Kheng Title : President Director Title : Managing Director Name : Eugene Lim Title : Company Secretary EX-10 5 ex1022_4403.txt DATED THIS __________ DAY OF ________________________ 2001 BETWEEN EVERBLOOM BIOTECHNOLOGY (CANADA) LTD AND EVERBLOOM - RIDGE MUSHROOM JOINT VENTURE LICENCE AGREEMENT THIS AGREEMENT made as of the day of , 2001 BETWEEN EVERBLOOM BIOTECHNOLOGY (CANADA) LTD, a corporation valid and existing under the laws of Province of Ontario and having its head office at 347 Bay Street, Suite 1002, Toronto, Ontario M5H 2R7 (hereinafter referred to as the "Licensor") AND EVERBLOOM - RIDGE MUSHROOM JOINT VENTURE, a corporation valid and existing under the laws of Canada and having its registered office at 200 Park Royal, West Vancouver, British Colombia (hereinafter referred to as the "Licensee"). WHEREAS the Licensor has the exclusive North America rights to certain Proprietary Marks (as hereinafter defined) and the Know-how/Technology (as hereinafter defined); AND WHEREAS the Licensee is desirous of obtaining, and the Licensor is desirous of granting to the Licensee, the right to use the Proprietary Marks and the right to sublicense Know-how/Technology for the manufacturing, production, marketing and/or sale of the Products (as hereinafter defined) in the Territory (as hereinafter defined), upon the terms and subject to the conditions as hereinafter set out; NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the respective covenants and agreements of the parties contained herein, the sum of one dollar paid by each party hereto to each of the other parties hereto and other good and valuable consideration (the receipt and sufficiency of which is hereby acknowledge by each of the parties hereto) it is agreed as follows: ARTICLES ONE DEFINITIONS 1.1 Whenever used in this Agreement the following terms shall be deemed to have the following meanings unless the context otherwise requires: "Business" shall mean the cultivation of Shiitake Mushroom including the production of Logs and Spawn as well as other exotic and medicinal mushrooms. "Confidential Information" shall mean all information (whether written or verbal) in and relating to the Documentation, Know-how/Technology and all other information furnished by the Licensor to the Licensee relating to the business and trade secrets of the Licensor, but shall exclude the following information: (i) information which is or becomes available to the public through no fault of the party receiving such information; and (ii) information which is subsequently received by any party from any third party. "Documentation" shall mean all drawings, specification, manuals and any other applicable media and documentation relating to the Know-how/Technology or its usage thereof including all materials useful for design (for example, logic manuals, flow charts and principles of operation) and machine-readable text or graphic files subject to display or printout, all advertising, promotional, commercial and publicity pamphlets, brochures, leaflets and other materials whatsoever relating to the Products. "Improvements" shall mean future improvements relating to Know-how/Technology and Technical Information and Documentation. "Know-how/Technology" shall mean all information and data including formulae Technology design specifications, techniques procedures, plans, discoveries and inventions (whether patented or not) as used at any time by the Licensor in growing, marketing and selling Shiitake Mushrooms including the production of Logs and Spawn as well as other exotic and medicinal mushrooms at their facilities in Singapore and by any other licensees wherever legally possible, which pertain to the use and exploitation of the Process or the cultivation or marketing and sale of Shiitake Mushrooms and other exotic mushrooms by means of the Process, together with any further information or data pertaining thereto as may be available with the Licensor. "Logs" shall mean raw materials comprising pre-formulated materials such as chopped wood and/or sawdust and Nutrient Mix mixed with water in the proper ration according to the Licensor's Know-how/Technology. "Materials" shall mean Logs, Spawn and Nutrient Mix. "Nutrient Mix" shall mean the nutrients developed by the Licensor for the cultivation of Shiitake Mushrooms and production of Logs and Spawn as well as other exotic and medicinal mushrooms. "Other Exotic Mushrooms" shall mean other species of mushroom cultivated according to the Process or any part thereof. "Parties" shall mean the Licensor and Licensee. "Plant" shall mean a facility in British Coloumbia designed and approved by the Licensor to produce fresh Shiitake Mushrooms or other exotic mushrooms, using the Technical Information, Documentation and Improvements provided by the Licensor hereunder. The land and investment for the Plant will be committed by the Licensee. "Process" shall mean the process to produce fungi of the species Shiitake and other exotic mushrooms by the means described in USA Patent Nos. 4987698, 4542608 and 4833821 and Canada Patent Nos. 1207690 and 1288371. "Proprietary Marks" shall mean the trade marks, trade names, logos, designs, symbols, emblems, insignia, fascia, slogans and other identifying marks whether or not registered or capable of registration now or at any time hereafter adopted by the Licensor for use in connection with any Product and/or the Know-how/Technology. "Shiitake Mushrooms" shall mean the fungi of the species Shiitake cultivated according to the Process or any part thereof. "Spawn" shall mean the spawn of the species Shiitake produced according to the Licensor's Know-how/Technology. "Technical Information" shall mean the information, know-how, data, formulae, specifications, techniques, designs, procedures, plans, discoveries and inventions (whether patented or not) available with the Licensor and relating to the following, in so far as the same has been commercially tested and used and found to be successful, including (but not limited to): (i) design, engineering, fabrication, erection and installation of plant, machinery and equipment required for the production of Product and sources of supply thereof; (ii) production processes and methods, operating conditions, pollution and quality control and testing and product development in respect of Product; and (iii) nutrient mixes and all other materials and ingredients to be used in the production of the Product including instructions on the required quantities and characteristics thereof and their treatment in the production of Product as well as sources of supply thereof. ARTICLE TWO GRANT OF LICENSE 2.1 Provision of Documentation. The Licensor hereby grants to the Licensee, and the Licensee hereby accepts a license to use, and the right to sublicense the Proprietary Marks, Know-how/Technology and Documentation as well as all Improvements thereon for the cultivation, manufacturing, production, marketing and/or sale of the Products (the "Rights"). 2.2 Territory. The Rights granted to the Licensee pursuant to this Agreement shall extend to British Colombia (hereinafter called the "Territory"). 2.3 Cultivation, Marketing and Distribution. The Licensor acknowledges and agrees that the Licensee shall be using the Proprietary Marks, Know-how/Technology, Documentation and the Process to cultivate, market and distribute Shiitake Mushrooms and other exotic, edible and medicinal mushrooms throughout the Territory. 2.4 Sub-license. The Licensor hereby grants to the Licensee the right to sub-license in the Territory any and all of the rights granted to the Licensee as set out in this Agreement to sub-licensees at the sole discretion of the Licensee, such sub-license agreements and the parties therein to be fully disclosed and communicated to the Licensor. ARTICLE THREE CONSIDERATION 3.1 License Fees. In consideration of the rights and license granted, and the duties and obligations of the Licensor as set out herein, the Licensee shall pay to the Licensor a technology fee of C$500,000 (Five Hundred Thousand Canadian Dollars) net of all taxes (including but not limited to withholding taxes), dues, charges and expenses, said fee to be satisfied by the issue of C$500,000 (Five Hundred Thousand Canadian Dollars) worth of stock. 3.2 Sub-license Fees. In further consideration of the right granted by the Licensor to the Licensee as set out in Section 2.4 of this Agreement, the Licensee agrees to pay the Licensor an amount equal to 25% of all monies and all other considerations paid to and received by the Licensee from its sub-licensee(s) for the sub-license(s). ARTICLE FOUR REPRESENTATIONS AND WARRANTIES OF THE LICENSOR 4.1 The Licensor represents and warrants to the Licensee that the Licensor has the exclusive North American license to the Proprietary Marks, Know-how/Technology, Documentation and Process including without limiting the generality of the foregoing all rights in and to the patents, trademarks and other intellectual property as set out in this Agreement and that the Licensor has the sole and exclusive right to authorize the use of such patents, trademarks and other intellectual property by the Licensee in accordance with the provisions of this Agreement. ARTICLE FIVE COVENANTS OF THE LICENSOR AND THE LICENSEE 5.1 The Licensee covenants and agrees to do the following throughout the term of this Agreement: (i) to operate and maintain proper accounting procedures in accordance with generally accepted accounting principles; (ii) to keep at its registered office true and accurate records, accounts, books and data ("Business Records") which shall accurately reflect all particulars relating to the Business and shall submit to the Licensor such information and reports concerning the Business in such form as may be specified by the Licensor; (iii) to submit quarterly Statement of Sales and Royalties Payable within 60 days after the end of each quarter; (iv) to submit financial reports relating to the Business on a half-yearly basis, not later than 60 days after the mid-year and year-end dates; (v) to submit annual audited accounts of the Business within 180 days after the year end; (vi) to preserve and keep all Business Records for a period as required by local tax laws; The Licensee shall further ensure that each and every covenant referred to above will also be obtained from any and all sub-licensees and same shall be forwarded to the Licensor. 5.2 The Licensor covenants and agrees to do the following throughout the term of this Agreement: (i) to furnish to the Licensee and its sub-licensees all" Know-how/Technology, Technical Information, Documentation and Improvements and render all assistance necessary to enable the Licensee and its sub-licensees to successfully establish the Plant and to produce and cultivate the Product; (ii) without limiting the generality of the foregoing, the Licensor shall, from time to time, provide to the Licensee and its sub-licensees, complete and up-to-date Know-how/Technology, Technical Information, Documentation and Improvements as it becomes available; (iii) to enable the Licensee and its sub-licensees to design, engineer, erect, install and commission the Plant and all machinery and equipment therein and to successfully produce, develop and sell the Product; (iv) to enable the Licensee and its sub-licensees to procure suitable machinery, equipment and spares at reasonable prices and to fabricate and manufacture the same indigenously in The Territory; (v) to enable the Licensor and its sub-licensees to procure in the international markets, alternative raw materials, consumables and other inputs necessary for production of Product at reasonable prices. All Technical Information and Documentation referred to above shall be furnished in English and shall be delivered to the Licensee within thirty (30) days of the Effective Date. ARTICLE SIX TRAINING OF THE LICENSEE'S PERSONNEL 6.1 During the tenure of this Agreement, the Licensor shall train the Licensee's personnel at the Plant as well as at other suitable factories for the proper use and exploitation of Technical Information, Documentation and Improvements furnished hereunder and for development of new products and articles. For this purpose, the Licensor shall deploy, for a duration of not more than one month at anyone time, as and when necessary, sufficiently knowledgeable and experienced consultants to the Plant. 6.2 Any such consultants deployed by the Licensor shall, during their stay in the Territory, observe all rules and regulations that apply to Licensee's employees. 6.3 The personnel to be trained, the consultants to be deployed and the periods of such training, shall be as agreed by the parties from time to time. 6.4 All expenses incurred in connection with the training of the Licensee's personnel at the Plant and elsewhere shall be borne by the Licensee unless otherwise mutually agreed to by the parties. 6.5 The Licensee shall pay the Licensor a consultant's fee to be negotiated on an individual basis and shall meet the actual expense of the Licensor consultants deployed in the Territory, in respect of their travel, board and lodging; but no daily or other fees or remuneration will be paid to them. ARTICLE SEVEN MANAGEMENT OF PLANT 7.1 During the tenure of this Agreement and on mutual agreement, the Licensor shall deploy its personnel in such numbers, not exceeding three (3) at anyone time, as are necessary to supervise, oversee and manage the operation of the Plant. as agreed by the Parties from time to time. 7.2 All costs and expenses incurred or accrued to the personnel shall be borne and paid by the Licensee. The costs and expenses shall include, but not limited to, remuneration, salary, board, lodging, travel, transportation and other reasonable amenities. 7.3 In addition to the deployment of the Licensor's technical personnel to assist in the operation of the Plant as may be agreed from time to time, the Licensor shall arrange for a senior consultant to visit the Plant to review production and technical issues with the Licensee's management once a year and such traveling, accommodation, meals and out-of-pocket expenses shall be borne by the Licensee. ARTICLE EIGHT ROYALTIES AND PAYMENTS 8.1 As consideration for the continual transfer of the Know-how/Technology, the Licensee shall pay the Licensor a royalty equivalent to 5% of the ex-farm value of Shiitake Mushrooms and other exotic mushrooms produced utilizing the Know-how/Technology in the Territory by the Licensee or sub-licensee(s). Should product produced utilizing the Know-how/Technology in the Territory by the Licensee or sub-licensee(s) be sold between the Licensee and sub-licensee(s), the value to be used for royalty determination shall be the greater. 8.2 Such royalties due under Clause 8.1 above shall be due immediately after the end of the quarter and payable within 60 days from that date without the need for a demand from the Licensor. Any late payment shall attract interest calculated at the rate of 1.0% per month from the due date. 8.3 Time will run from the date on which domestic production of sawdust and logs commences on a commercial basis. 8.4 Any improvements to the Know-how/Technology shall be passed on to the Licensee and its sub- licensees without any further requirement of payments of fees or royalties. ARTICLE NINE MARKETING OF PRODUCTS 9.1 The Licensor agrees to use their best endeavors to assist the Licensee to market the Products. Such sales shall be under the brand "EVERBLOOM" or such other names as shall be mutually agreed to by the parties. 9.2 As consideration thereof, the Licensee agrees to pay to the Licensor a commission of 10% on the sales attributed solely or partially to the Licensor. 9.3 Except with the written consent of the Licensor, the Licensee and its sub-licensees shall not export its products to territories where the Licensor already has a presence directly or indirectly. ARTICLE TEN SUPPLY OF RAW MATERIALS AND COMMERCIAL SERVICES 10.1 In the event that the Licensee requires any raw materials for the production and cultivation of the Product and makes a written request for the same, the Licensor shall supply the same at such prices and on such other terms as may mutually be agreed upon. 10.2 The Licensor will assist the Licensee in the sourcing/supply of machinery and consumables required to set up and operate the Plant, as and when called upon to do so by the Licensee. 10.3 The raw materials shall include the Nutrient Mix, which shall be supplied by the Licensor at a price to be agreed. ARTICLE ELEVEN TERM OF AGREEMENT 11.1 Term of Agreement. This Agreement shall come into effect on its date of execution and shall continue in full force and effect for an indefinite period of time, unless terminated earlier in accordance with the terms set out below. 11.2 Termination of Agreement. The Licensor shall be entitled to terminate this Agreement where: (i) the Licensee breaches any of its covenants and obligations in this Agreement including without limiting the generality of the foregoing; (ii) if the Licensee fails to submit when due the Statement of Sales and Royalties Payable and financial reports which the Licensor is entitled to under this Agreement; (iii) if the Licensee fails to make payment of amounts due under this Agreement within 60 days when they fall due; and (iv) in the event that the Licensee is liquidated, dissolved or becomes insolvent or bankrupt or is placed under judicial management or the control to receivers or trustees. then the Licensor shall have the right to terminate this Agreement after giving the Licensee written notice setting out such default and sixty (60) days to rectify the default. If after sixty (60) days have elapsed, the Licensee has failed to cure said default, this Agreement shall be terminated forthwith and the Licensee shall not be entitled to reimbursement of any fees paid by the Licensee at the date of termination. 11.3 Injunction. The Licensor shall be entitled to an injunction to restrain the Licensee from engaging in any activities which constitute a breach of any of the provisions of this Agreement without limiting any other legal or equitable remedies available to the Licensor. 11.4 The Licensee's Right Terminate. In the event that the Licensor shall breach any of its covenants and obligations in this Agreement or in the event that the Licensor is liquidated, dissolved or becomes insolvent or bankrupt or is placed under judicial management or the control to receivers or trustees, the Licensee shall have the right to terminate this Agreement after giving the Licensor written notice setting out such default and thirty (30) days to rectify the default If after thirty days have elapsed, the Licensor has failed to cure said default, this Agreement shall be terminated forthwith. 11.5 Termination Not to Relieve Obligations of Parties. Any termination pursuant to this Agreement shall not relieve any party of any obligation or liability accrued hereunder prior to such termination or rescind or give rise to any right to rescind anything done by any party hereunder prior to the time such termination becomes effective and such termination shall not affect in any manner any rights of any party arising under this Agreement prior to such termination. ARTICLE TWELVE GOVERNMENTAL APPROV ALS 12.1 The Parties hereto undertake to obtain from the respective Governments all approvals and authorizations necessary or required for the implementation of the provisions of this Agreement. 12.2 Should approval or authorization from the respective Governments be subsequently withdrawn for any reason whatsoever, this Agreement shall automatically be terminated unless otherwise agreed between the Parties. ARTICLE THIRTEEN CONFIDENTIALITY 13.1 Each party hereto undertakes to keep secret all information of a confidential or secret nature supplied by one party to the other pursuant to this Agreement and agrees not to disclose any of such information to the public or to any third party during the term of this Agreement and following the expiration thereof without the express prior consent in writing of the supplying party and each party in receipt of such information is to ensure that it discloses such information only to responsible employees and consultants whose duties are in furtherance of the objectives of this Agreement and which cannot be fulfilled without use by such Party of the information and where it is relevant to those duties and who are under binding obligations to keep secret such of the information as is necessarily disclosed to them. ARTICLE FOURTEEN RELATIONSHIP OF PARTIES AND INDEMNIFICATION 14.1 It is hereby declared that the Licensee is an independent contractor and not an agent, legal representative, joint venturer, partner, employee or servant of the Licensor and is not empowered to act on the Licensor's behalf in any manner. The Licensee agrees that the Licensor is not in any way a fiduciary of the Licensee. 14.2 The Licensee shall indemnify the Licensor, its officers, directors, employees, agents, affiliates, successors and assigns against: (i) any and all claims, damages, or liabilities based upon, arising out of, or in any way related to any negligence or act or omission by the Licensee or any of its agents, contractors, servants, employees or licensees, and any obligation of the Licensee incurred pursuant to any provision of this Agreement; (ii) any or all fees (including reasonable attorney's fees), costs and other expenses incurred by or on behalf of the Licensor in the investigation, defence or prosecution of any and all claims. ARTICLE FIFTEEN GENERAL CONTRACT PROVISIONS 15.1 Notices. All notices or other communication to the Licensor required by the terms of this Agreement shall be in writing and sent by registered mail, return receipt request, addressed to Everbloom Biotechnology (Canada) Ltd. at 347 Bay Street, Suite 1002, Toronto, Ontario M5H 2R7, or such other address as the Licensee shall designate in writing, or by facsimile or to such address confirmed by registered mail. All notices or other communication to The Licensee contemplated by the terms of this Agreement shall be in writing and sent by registered mail, return receipt request, addressed to , or such other address as the Licensee shall designate in writing or by facsimile or to such address confirmed by registered mail. If by registered mail, any notice shall be deemed to have been given when received, or if by facsimile, when the appropriate confirmation is received. 15.2 Assignment. The Licensee and its sub-licensees shall not be entitled at any time to assign this Agreement or any part hereof except with the previous written consent of the Licensor such consent not to be unreasonably withheld. 15.3 Time of the Essence. Time shall be of the essence of this Agreement and of every part hereof and no extension or variation of this Agreement shall operate as a waiver of this provision. 15.4 Entire Agreement. This Agreement constitutes the entire Agreement between the Parties with respect to all of the matters herein and its execution has not been induced by, nor do any of the parties rely upon or regard as material, any representations or writings whatever not incorporated herein and made a part hereof and may not be amended or modified in any respect except by written instrument signed by the parties hereto. Any schedules referred to herein are incorporated herein by reference and form part of the Agreement. 15.5 Additional Considerations. The parties shall sign such further and other documents, cause such meetings to be held, resolutions passed and by-laws enacted, exercise their vote and influence, do and perform and cause to be done and performed such further and other acts and things as may be necessary or desirable in order to give full effect to this agreement and every part thereof 15.6 Enurement. This Agreement shall enure to the benefit of and be binding upon the parties and their respective successors and assigns. 15.7 Waiver. No omission or delay on the part of any party in exercising its rights under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise by any party of any such right preclude the further or other exercise thereof or the exercise of any other right which it may have. Failure of either party to require performance by the other party of any provision hereof shall in no way affect the full right to require such performance at anytime thereafter. Nor shall the waiver by either party of a breach of any provision hereof be taken or held to be a waiver of any succeeding breach of such provision or as a waiver of the provision itself 15.8 Severability. If any Article, Section or any portion of any Section of this Agreement is determined to be unenforceable or invalid for any reason whatsoever that unenforceability or invalidity shall not affect the enforceability or validity of the remaining portions of this Agreement and such unenforceable or invalid Article, Section or portion thereof shall be severed from the remainder of this Agreement. 15.9 Headings for Convenience Only. The division of this Agreement into articles and sections is for convenience of reference only and shall not affect the interpretation or construction of this Agreement. 15.10 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the Republic of Singapore and the Parties agree to submit to the non-exclusive jurisdiction of the courts of the Republic of Singapore. 15.11 Gender. In this Agreement, words importing the singular number shall include the plural and vice versa, and words importing the use of any gender shall include the masculine, feminine and neuter genders and the word "person" shall include an individual, a trust, a partnership, a body corporate, an association or other incorporated or unincorporated organization or entity. 15.12 Calculation of Time. When calculating the period of time within which or following which any act is to be done or step taken pursuant to this Agreement, the date which is the reference date in calculating such period shall be excluded. If the last day of such period is not a Business Day, then the time period in question shall end on the first business day following such non-business day. 15.13 Counterparts. This Agreement may be executed in several counterparts, each of which so executed shall be deemed to be an original and such counterparts together shall be but one and the same instrument. IN WITNESS WHEREOF the parties have duly executed this Agreement as of the date and year written above. SIGNED by Dr Tan Kok Kheng ) for and on behalf of EVERBLOOM BIOTECHNOLOGY ) CANADA) LTD in the presence of: ) SIGNED by ) for and on behalf of EVERBLOOM - RIDGE ) MUSHROOM JOINT VENTURE in the presence of: ) EX-10 6 ex1023_4403.txt LICENCE AGREEMENT THIS AGREEMENT made as of the day of , 2000. ------- --------------------- BETWEEN: MYCOTECHNOLOGY LTD, a limited company incorporated under the Companies Act under number 176935 and having their Registered Office at 12, St. Catherine Street, Cupar, Scotland, United Kingdom (hereinafter referred to as the "Licensor") OF THE FIRST PART, CULTUUR TECHNIEK BRABANT, a corporation valid and existing under the laws of Netherlands and having its registered office at Vensteeg 1b 5411, AR Zeeland, Netherlands (hereinafter referred to as the "Licensee") OF THE SECOND PART. WHEREAS the Licensor has the exclusive European rights to certain Proprietary Marks (as hereinafter defined) and the Know-how/Technology (as hereinafter defined); AND WHEREAS the Licensee is desirous of obtaining, and the Licensor is desirous of granting to the Licensee, the sole and exclusive right to use the Proprietary Marks and the Know-how/Technology for the manufacturing, production, marketing and/or sale of the Products (as hereinafter defined) in the Netherlands (as hereinafter defined), upon the terms and subject to the conditions as hereinafter set out; NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the respective covenants and agreements of the parties contained herein, the sum of one pound sterling paid by each party hereto to each of the other parties hereto and other good and valuable consideration (the receipt and sufficiency of which is hereby acknowledged by each of the parties hereto) it is agreed as follows: ARTICLE ONE DEFINITIONS 1.1 Whenever used in this Agreement the following terms shall be deemed to have the following meanings unless the context otherwise requires:- "Business" shall mean the cultivation of Shiitake Mushrooms including the production of Logs and Spawn as well as other exotic and medicinal mushrooms and mushroom by-products. "Confidential Information" shall mean information (whether written or verbal) in and relating to the Documentation, Know-how/Technology and all other information furnished by the Licensor to the Licensee relating to the business and trade secrets of the Licensor, but shall exclude the following information:- (a)information which is or becomes available to the public through no fault of the party receiving such information; and (b)information which is subsequently received by any party from any third party. "Documentation" shall mean all drawings, specifications, manuals and any other applicable media and documentation relating to the Know-how/Technology or its usage thereof including all materials useful for design (for example, logic manuals, flow charts and principles of operation) and machine-readable text or graphic files subject to display or printout, and all advertising, promotional, commercial and publicity pamphlets, brochures, leaflets and other materials whatsoever relating to the Products. "Improvements" shall mean all future improvements relating to Know-how/Technology and Technical Information and Documentation. "Know-how/Technology" shall mean information and date including formulae Technology design specifications, techniques, procedures, plans, discoveries and inventions (whether patented or not) as used at any time by the Licensor in growing, marketing and selling Shiitake Mushrooms including the production of Logs and Spawn as well as other exotic and medicinal mushrooms and mushroom by-products at their facilities in Singapore and by any other licensees wherever legally possible, which pertain to the use and exploitation of the Process or the cultivation or marketing and sale of Shiitake Mushrooms and other exotic mushrooms by means of the Process, together with any further information or date pertaining thereto as may be available with the Licensor. "Logs" shall mean raw materials comprising pre-formulated materials such as chopped wood and/or sawdust and Nutrient Mix mixed with water in the proper ration according to the Licensor's Know-how/Technology. "Materials" shall mean Logs, Spawn and Nutrient Mix. "Nutrient Mix" shall mean the nutrients developed by the Licensor for the cultivation of Shiitake Mushrooms and production of Logs and Spawn as well as other exotic and medicinal mushrooms and mushroom by-products. "Parties" shall mean the Licensor and the Licensee. "Plant" shall mean a facility in the Territory designed and approved by the Licensor to produce fresh Shiitake Mushrooms or other exotic mushrooms, using the Technical Information, Documentation and Improvements provided by the Licensor hereunder. The land and investment for the Plant will be committed by the Licensee. "Process" shall mean the process to produce fungi of the species Shiitake and other exotic mushrooms by the means described in the European Patent Nos. 0107911/0248636 "Proprietary Marks" shall mean the trade marks, trade names, logos, designs, symbols, emblems, insignia, fascia, slogans and other identifying marks whether or not registered or capable of registration now or at any time hereafter adopted by the Licensor for use in connection with any Product and/or the Know-how/Technology. "Shiitake Mushrooms" shall mean the fungi of the species shiitake cultivated according to the Process or any part thereof. "Other Exotic Mushrooms" shall mean any other species of exotic mushrooms cultivated according to the Process or any part thereof. "Spawn" shall mean the spawn of the species Shiitake and of the exotic mushrooms produced according to the Licensor's Know-how/Technology. "Technical Information" shall mean the information, know-how, data, formulae, specifications, techniques, designs, procedures, plans, discoveries and inventions (whether patented or not) available with the Licensor and relating to the following, in so far as the same has been commercially tested and used and found to be successful, including (but not limited to): (a) design, engineering, fabrication, erection and installation of plant, machinery and equipment required for the production of Product and sources of supply thereof; (b) production processes and methods, operating conditions, pollution and quality control and testing and product development in respect of Product; and (c) Nutrient Mixes and all other materials and ingredients to be used in the production of the Product including instructions on the required quantities and the characteristics thereof and their treatment in the production of Product as well as sources of supply thereof. ARTICLE TWO GRANT OF LICENCE 2.1 Provision of Documentation. The Licensor hereby grants to the Licensee, and the Licensee hereby accepts a sole, perpetual and exclusive license to use, and the right to sublicense the Proprietary Marks, Know-how/Technology and Documentation as well as all Improvements thereon for the cultivation, manufacturing, production, marketing and/or sale of the Products (the "Rights"). 2.2 Territory. The Rights granted to the Licensee pursuant to this Agreement shall extend to the Netherlands (hereinafter called the "Territory"). 2.3 Cultivation, Marketing and Distribution. The Licensor acknowledges and agrees that the Licensee shall be using the Proprietary Marks, Know-how/Technology, Documentation and the Process to cultivate, market and distribute Shiitake Mushrooms and other exotic, edible and medicinal mushrooms throughout the Territory. ARTICLE THREE CONSIDERATION 3.1 License Fees. In consideration of the rights and license granted, and the duties and obligations of the Licensor as set out herein, the Licensee shall pay to the Licensor a technology fee of (pound)300,000 (three hundred thousand pounds sterling) net of all taxes (including but not limited to withholding taxes), dues, charges and expenses. ARTICLE FOUR REPRESENTATIONS AND WARRANTIES OF THE LICENSOR 4.1 The Licensor represents and warrants to the Licensee that the Licensor has the exclusive European license to the Proprietary Marks, Know-how/Technology, Documentation and Process including without limiting the generality of the foregoing all rights in and to the patents, trademarks and other intellectual property as set out in this Agreement and that the Licensor has the sole and exclusive right to authorize the use of such patents, trademarks and other intellectual property by the Licensee in accordance with the provisions of this Agreement. ARTICLE FIVE COVENANTS OF THE LICENSOR AND THE LICENSEE 5.1 The Licensee covenants and agrees to do the following throughout the term of this Agreement: (i) to operate and maintain proper accounting procedures in accordance with generally accepted accounting principles. (ii) to keep at its registered office true and accurate records, accounts, books and data ("Business Records") which shall accurately reflect all particulars relating to the Business and shall submit to the Licensor such information and reports concerning the Business in such form as may be specified by the Licensor. (iii) to submit financial reports relating to the Business on a half-yearly basis, not later than 60 days after the mid-year and year-end dates. (iv) to submit annual audited accounts of the Business within 180 days after the year-end. (v) to preserve and keep all Business Records for a period as required by local tax laws. The Licensee shall further ensure that each and every covenant referred to above will also be obtained from any and all sub-licensees and same shall be forwarded to the Licensor. 5.2 The Licensor covenants and agrees to do the following throughout the term of this Agreement: (i) to furnish to the Licensee and its sub-licensees all Know-how/Technology, Technical Information, Documentation and Improvements and render all assistance necessary to enable the Licensee and its sub-licensees to successfully establish the Plant and to produce and cultivate the Product. (ii) without limiting the generality of the foregoing, the Licensor shall, from time to time, provide to the Licensee and its sub-licensees, complete and up-to-date Know-how/Technology, Technical Information, Documentation and Improvements as it becomes available. (a) to enable the Licensee and its sub-licensees to design, engineer, erect, install and commission the Plant and all machinery and equipment therein and to successfully produce, develop and sell the Product. (b) to enable the Licensee and its sub-licensees to procure suitable machinery, equipment and spares at reasonable prices and to fabricate and manufacture the same indigenously in The Territory. (c) to enable the Licensor and its sub-licensees to procure in the international markets, alternative raw materials, consumables and other inputs necessary for the production of Product at reasonable prices. All Technical Information and Documentation referred to above shall be furnished in English and shall be delivered to the Licensee within thirty (30) days of the Effective Date. ARTICLE SIX TRAINING OF THE LICENSEE'S PERSONNEL 6.1 During the tenure of this Agreement, the Licensor shall train the Licensee's personnel at the Plant as well as at other suitable factories for the proper use and exploitation of Technical Information, Documentation and Improvements furnished hereunder and for development of new products and articles. For this purpose, the Licensor shall deploy, for a duration of not more than one month at any one time, as and when necessary, sufficiently knowledgeable and experienced consultants to the Plant. 6.2 Any such consultants deployed by the Licensor shall, during their stay in the Territory, observe all rules and regulations that apply to Licensee's employees. 6.3 The personnel to be trained, the consultants to be deployed and the periods of such training, shall be as agreed by the parties from time to time. 6.4 All expenses incurred in connection with the training of the Licensee's personnel at the Plant and elsewhere shall be borne by the Licensee unless otherwise mutually agreed to by the parties. 6.5 The Licensee shall pay the Licensor a consultant's fee to be negotiated on an individual basis and shall meet the actual expense of the Licensor consultants deployed in the Territory, in respect of their travel, board and lodging; but no daily or other fees or remuneration will be paid to them. ARTICLE SEVEN MANAGEMENT OF PLANT 7.1 During the tenure of this Agreement and on mutual agreement, the Licensor shall deploy its personnel in such numbers, not exceeding three (3) at any one time, as are necessary to supervise, oversee and manage the operation of the Plant, as agreed by the Parties from time to time. 7.2 All costs and expenses incurred or accrued to the personnel shall be borne and paid by the Licensee. The costs and expenses shall include, but not limited to, remuneration, salary, board, lodging, travel, transportation and other reasonable amenities. 7.3 In addition to the deployment of the Licensor's technical personnel to assist in the operation of the Plant as may be agreed from time to time, the Licensor shall arrange for a senior consultant to visit the Plant to review production and technical issues with the Licensee's management once a year and such traveling, accommodation, meals and out-of-pocket expenses shall be borne by the Licensee. ARTICLE EIGHT MARKETING OF PRODUCTS 8.1 The Licensor agrees to use their best endeavors to assist the Licensee to market the Products. Such sales shall be under the brand "EVERBLOOM" or such other names as shall be mutually agreed to by the parties. 8.2 As consideration thereof, the Licensee agrees to pay to the Licensor a commission of 10% on the sales attributed solely or partially to the Licensor. 8.3 Except with the written consent of the Licensor, the Licensee and its sub-licensees shall not export its products to territories where the Licensor already has a presence directly or indirectly. ARTICLE NINE SUPPLY OF RAW MATERIALS AND COMMERCIAL SERVICES 9.1 In the event that the Licensee requires any raw materials for the production and cultivation of the Product and makes a written request for the same, the Licensor shall supply the same at such prices and on such other terms as may mutually be agreed upon. 9.2 The Licensor will assist the Licensee in the sourcing/supply of machinery and consumables required to set up and operate the Plant, as and when called upon to do so by the Licensee. 9.3 The raw materials shall include the Nutrient Mix, which shall be supplied by the Licensor at a price to be agreed. ARTICLE TEN TERM OF AGREEMENT 10.1 Term of Agreement. This Agreement shall come into effect on its date of execution and shall continue in full force and effect for an indefinite period of time, unless terminated earlier in accordance with the terms set out below. 10.2 Termination of Agreement. The Licensor shall be entitled to terminate this Agreement where: (a) the Licensee breaches any of its covenants and obligations in this Agreement including without limiting the generality of the foregoing: (i) if the Licensee fails to submit when due the Statement of Sales and Royalties Payable and financial reports which the Licensor is entitled to under this Agreement; (ii)if the Licensee fails to make payment of amounts due under this Agreement within 60 days when they fall due; and (iii)in the event that the Licensee is liquidated, dissolved or becomes insolvent or bankrupt or is placed under judicial management or the control to receivers or trustees then the Licensor shall have the right to terminate this Agreement after giving the Licensee written notice setting out such default and sixty (60) days to rectify the default. If after sixty (60) days have elapsed, the Licensee has failed to cure said default, this Agreement shall be terminated forthwith and the Licensee shall not be entitled to reimbursement of any fees paid by the Licensee at the date of termination. 10.3 Injunction. The Licensor shall be entitled to an injunction to restrain the Licensee from engaging in any activities which constitute a breach of any of the provisions of this Agreement without limiting any other legal or equitable remedies available to the Licensor. 10.4 The Licensee's Right to Terminate. In the event that the Licensor shall breach any of its covenants and obligations in this Agreement or in the event that the Licensor is liquidated, dissolved or becomes insolvent or bankrupt or is placed under judicial management or the control to receivers or trustees, the Licensee shall have the right to terminate this Agreement after giving the Licensor written notice setting out such default and thirty (30) days to rectify the default. If after thirty days have elapsed, the Licensor has failed to cure said default, this Agreement shall be terminated forthwith. 10.5 Termination Not to Relieve Obligations of Parties. Any termination pursuant to this Agreement shall not relieve any party of any obligation or liability accrued hereunder prior to such termination or rescind or give rise to any right to rescind anything done by any party hereunder prior to the time such termination becomes effective and such termination shall not affect in any manner any rights of any party arising under this Agreement prior to such termination. ARTICLE ELEVEN GOVERMENTAL APPROVALS 11.1 The Parties hereto undertake to obtain from the respective Governments all approvals and authorizations necessary or required for the implementation of the provisions of this Agreement. 11.2 Should approval or authorization from the respective Governments be subsequently withdrawn for any reason whatsoever, this Agreement shall automatically be terminated unless otherwise agreed between the Parties. ARTICLE TWELVE CONDIFENTIALITY 12.1 Each Party hereto undertakes to keep secret all information of a confidential or secret nature supplied by one Party to the other pursuant to this Agreement and agrees not to disclose any of such information to the public or to any third party during the term of this Agreement and following the expiration thereof without the express prior consent in writing of the supplying Party and each Party in receipt of such information is to ensure that it discloses such information only to responsible employees and consultants whose duties are in furtherance of the objectives of this Agreement and which cannot be fulfilled without use by such Party of the information and where it is relevant to those duties and who are under binding obligations to keep secret such of the information as is necessarily disclosed to them. ARTICLE THIRTEEN RELATIONSHIP OF PARTIES AND INDEMNIFICATION 13.1 It is hereby declared that the Licensee is an independent contractor and not an agent, legal representative, joint venturer, partner, employee or servant of the Licensor and is not empowered to act on the Licensor's behalf in any manner. The Licensee agrees that the Licensor is not in any way fiduciary of the Licensee. 13.2 The Licensee shall indemnify the Licensor, its officers, directors, employees, agents, affiliates, successors and assigns against: (1) any and all claims, damages, or liabilities based upon, arising out of, or in any way related to any negligence or act or omission by the Licensee or any of its agents, contractors, servants, employees or licensees, and any obligation of the Licensee incurred pursuant to any provision of this Agreement. (2) any or all fees (including reasonable attorney's fees), costs and other expenses incurred by or on behalf of the Licensor in the investigation, defence or prosecution of any and all claims. ARTICLE FOURTEEN GENERAL CONTRACT PROVISIONS 14.1 Notices. All notices or other communication to the Licensee required by the terms of this Agreement shall be in writing and sent by registered mail, return receipt request, addressed to Cultuur Techniek Brabant at Vensteeg 1b 5411, AR Zeeland, Netherlands, or such other address as the Licensee shall designate in writing, or by facsimile or to such address confirmed by registered mail. All notices or other communication to The Licensor contemplated by the terms of this Agreement shall be in writing and sent by registered mail, return receipt request, addressed to Mycotechnology Ltd at 12, St. Catherine Street, Cupar, Scotland, United Kingdom, or such other address as the Licensor shall designate in writing, or by facsimile or to such address confirmed by registered mail. If by registered mail, any notice shall be deemed to have been given when received, or if by facsimile, when the appropriate confirmation is received. 14.2 Assignment. The Licensee and its sub-licensees shall not be entitled at any time to assign this Agreement of any part hereof except with the previous written consent of the Licensor such consent not to be unreasonably withheld. 14.3 Time of the Essence. Time shall be of the essence of this Agreement and of every part hereof and no extension or variation of this Agreement shall operate as a waiver of this provision. 14.4 Entire Agreement. This Agreement constitutes the entire Agreement between the Parties with respect to all of the matters herein and its execution has not been induced by, nor do any of the parties rely upon or regard as material, any representations or writings whatever not incorporated herein and made a part hereof and may not be amended or modified in any respect except by written instrument signed by the parties hereto. Any schedules referred to herein are incorporated herein by reference and form part of the Agreement. 14.5 Additional Considerations. The parties shall sign such further and other documents, cause such meetings to be held, resolutions passed and by-laws enacted, exercise their vote and influence, do and perform and cause to be done and performed such further and other acts and things as may be necessary or desirable in order to give full effect to this agreement and every part thereof. 14.6 Enurement. This Agreement shall ensure to the benefit of and be binding upon the parties and their respective successors and assigns. 14.7 Waiver. No omission or delay on the part of any Party in exercising its rights under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise by any Party of any such right preclude the further or other exercise thereof or the exercise of any other right which it may have. Failure of either Party to require performance by the other party of any provision hereof shall in no way affect the full right to require such performance at anytime thereafter. Nor shall the waiver by either party of a breach of any provision hereof be taken or held to be a waiver of any succeeding breach of such provision or as a waiver of the provision itself. 14.8 Severability. If any Article, Section or any portion of any Section of this Agreement is determined to be unenforceable or invalid for any reason whatsoever that enforceability or invalidity shall not affect the enforceability or validity of the remaining portions of this Agreement and such enforceable or invalid Article, Section or portion thereof shall be severed from the remainder of this Agreement. 14.9 Headings for Convenience Only. The division of this Agreement into articles and sections is for convenience of reference only and shall not affect the interpretation or construction of this Agreement. 14.10 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the Republic of Singapore and the Parties agree to submit to the non-exclusive jurisdiction of the courts of the Republic of Singapore. 14.11 Gender. In this Agreement, words importing the singular number shall include the plural and vice versa, and words importing the use of any gender shall include the masculine, feminine and neuter genders and the word "person" shall include an individual, a trust, a partnership, a body corporate, an association or other incorporate or unincorporated organization or entity. 14.12 Calculation of Time. When calculating the period of time within which or following which any act is to be done or step taken pursuant to this Agreement, the date which is the reference date in calculating such period shall be excluded. If the last day of such period is not a Business Day, then the time period in question shall end on the first business day following such non-business day. 14.13 Counterparts. This Agreement may be executed in several counterparts, each of which so executed shall be deemed to be an original and such counterparts together shall be but one and the same instrument. IN WITNESS WHEREOF the parties have duly executed this Agreement as of the date and year written above. MYCOTECHNOLOGY LTD CULTUUR TECHNIEK BRABANT Per: c/s Per: c/s ----------------------------- -------------------------------- Authorized Signing Officer Authorized Signing Officer Witness Witness EX-10 7 ex1024_4403.txt DATED THIS ________ DAY OF ____________________ 2000 BETWEEN EVERBLOOM INTERNATIONAL TECHNOLOGY PTE LTD AND P.T. INTI MEKAR SEJATI SALE AND PURCHASE AGREEMENT THIS AGREEMENT for the Sale and Purchase of Shiitake Mushrooms is made on the ______day of _____________ 2000. BETWEEN (1) EVERBLOOM INTERNATIONAL TECHNOLOGY PTE LTD, a company incorporated in Singapore and having its registered office at 12 Science Park Drive, #04-01 The Mendel, Singapore Science Park 1, Singapore 118225 ("Everbloom"); and (2) P.T. INTO MEKAR SEJATI, a company incorporated in Indonesia and having its registered office at Jln Pasar Pagi, No. 16 Jakarta, Indonesia ("PTIMS"). WHEREAS (A) Everbloom is the licensor, and PTIMS is the licensee in Indonesia, of certain mushroom technology developed and owned by Everbloom and PTIMS operates a Mushroom Farm at Pacet, Java. (B) Everbloom is desirous of assisting in the upgrading of the facilities at the mushroom farm of PTIMS to its maximum capacity. (C) PTIMS is desirous of selling to Everbloom exclusively all the mushrooms not sold locally. NOW IT IS HEREBY AGREED as follows: 1. DURATION OF AGREEMENT This Agreement shall commence on 1st September 2000 and will be for a period 3 years and may be renewed subsequently every 3 years by mutual agreement. 2. LOG PRODUCTION PTIMS shall undertake with immediate effect to produce logs to fill up 4 growing houses per month and will do its utmost to keep the operational costs to the minimum without compromising the standards required to achieve high yield and good quality mushrooms. 3. SELLING PRICE The selling price for the mushrooms are as per Schedule A and will be subjected for review every 12 months by mutual agreement. 4. ADVANCE PAYMENT (a) Everbloom will advance S$30,000 per month to PTIMS for the purchase of mushrooms at the beginning of each month to assist in the log production as per Schedule B. Detailed accounts of the operational costs are to be faxed to Everbloom at the end of each month. (b) Another S$10,000 can be advanced per month to assist in the additional repairs and upgrading required as per Schedule C. Any such expenditure required must be approved in advance by Everbloom before any such advance is given. (c) All advances will bear interest at the rate of 7.5% per annum and all advances plus interest will be used to offset against the sale of mushrooms by PTIMS to Everbloom. (d) PTIMS will undertake to prudently expend the advances either for operational costs or repairs and will not utilise such advances other than for such stated purposes. 5. MUSHROOM YIELD PTIMS will produce the minimum yield as per the attached Schedule D so that it can ay least achieve the repayment volume forecasted and that a new forecast for the next 12 months is to be submitted to Everbloom at the beginning of every month. If necessary the volume between local and Everbloom will be decided by mutual agreement form time to time. 6. EXCLUSIVE OVERSEAS SALES PTIMS will sell all the mushrooms not sold locally exclusively to Everbloom and will refer all overseas clients and contacts to Everbloom for Everbloom to deal with them with immediate effect. 7. RIGHT OF FIRST REFUSAL PTIMS hereby undertake to offer the right of first refusal to Everbloom in the event that PTIMS intends to sell the mushroom farm or the Company either in whole or in part to any third party. This right notwithstanding Everbloom may make a proposal to purchase or invest at any time which is to be negotiated and agreed upon by mutual agreement. In the event that such a sale or investment tales place the balance amount of advances given plus interest can be used as part of the purchase or investment consideration. 8. BREACH OR FAILURE In the event of any breach of agreement or failure to perform by PTIMS, Everbloom reserves the rights to withhold any further advances until such breach or failure is rectified. In the event that such breach or failure is not rectified within 30 days Everbloom reserves the right to terminate this agreement with immediate effect while reserving all its rights under this agreement and that PTIMS shall be required to refund immediately all advances and interest and be liable for any related costs or liabilities arising thereof. 9. AMENDMENTS No amendment of this Agreement shall be effective for any purpose whatsoever if not agreed upon in writing by mutual agreement. 10. ROYALTIES Everbloom agrees to withhold the collection of royalties from PTIMS until such time as all the advances and interest have been offsettted against the sale of mushrooms. Such offsetting in future will however be on a staggered basis by mutual agreement. PTIMS will nevertheless report the sale each month for royalty calculation and will provide immediately data of prior years as well for an accurate calculation of royalties for prior years. 11. GOVERNING LAW This Agreement is governed by and shall be construed in accordance with the laws of Singapore. Each party hereto submits to the jurisdiction of the Singapore Courts but this agreement may be enforced in any court of competent jurisdiction. IN WITNESS whereof this Agreement has been entered into the day and year first above written. Signed By ) For and On Behalf Of ) EVERBLOOM INTERNATIONALTECHNOLOGY ) PTE LTD ) in the presence of :- ) Signed By ) For and On Behalf Of ) P.T. INTI MEKAR SEJATI ) in the presence of :- ) SCHEDULE A Selling Prices of Shiitake Mushrooms Between PTIMS and Everbloom (combined basis) For Shipment Ex Jakarta (FOB Prices) Up to 5 tons per month - For Medium/ Large S$4.20 per kg - For Small/ Baby Small S$3.20 per kg Up to 10 tons per month - For Medium/ Large S$3.99 per kg (5% discount) - For Small/ Baby Small S$3.04 per kg Up to 15 tons per month - For Medium/ Large S$3.78 per kg (10% discount) - For Small/ Baby Small S$2.88 per kg More than 15 tons per month - For Medium/ Large S$3.57 per kg (15% discount) - For Small/ Baby Small S$2.72 per kg For shipment to Surabaya (CaF Prices) Up to 5 tons per months - For Medium/ Large S$3.75 per kg - For Small/ Baby Small S$3.50 per kg Up to 10 tons per month - For Medium/ Large S$3.56 per kg (5% discount) - For Small/ Baby Small S$3.32 per kg Up to 15 tons per month - For Medium/ Large S$3.38 per kg (10% discount) - For Small/ Baby Small S$3.15 per kg More than 15 tons per month - For Medium/ Large S$3.18 per kg (15% discount) - For Small/ Baby Small S$2.98 per kg Note: In the event that the discounted volume is achieved sometime during the month then PTIMS will issue credit notes for those invoices previously issued. EX-10 8 ex1025_4403.txt BEACONS PHARMACEUTICALS Date: 12 March 2003 To Whom It May Concern Dear Sir/Madam, RE: LINZIR CAPSULE and MYCOGLUCAN CAPSULE We are pleased to confirm that the above products are contract manufactured by our company (formally known as Beacons Chemicals Pte Ltd) for Everbloom Health Food Pte Ltd. Thank you, Yours faithfully, Ko Kim Kee (Production Pharmacist) BEACONS PHARMACEUTICALS PTE LD 21 China Bee Avenue Singapore 619942 Tel: 65 62652338 Fax: 65 62615723 EX-10 9 ex1026_4403.txt UNITED OVERSEAS BANK PRIVATE & CONFIDENTIAL United Overseas Bank Limited, Head Office 80 Raffles Place, UOB Plaza, Singapore 048624 Tel: (65) 533 9898 Fax: (65) 5342334 www.uobgroup.com EVERBLOOM INTERNATIONAL TECHNOLOGY PTE LTD 12 Science Park Drive #04-01 The Mendel Singapore Science Park 1 Singapore 118225 Registered Our Ref Date Tel No. WRC/RL/TW/jam 13 September, 2001 539 3118 (UOB Upper Bt Timah) Dear Sirs SUBJECT : BANKING FACILITIES We are pleased to offer you the following banking facilities subject to the terms and conditions stated herein and subject also to the Standard Terms and Conditions Governing Banking Facilities annexed to this letter ("the Standard Terms"). In the event of any inconsistency between the terms and conditions herein and the Standard Terms, the terms and conditions herein shall prevail :- 1. LINE OF CREDIT S$300,000-00 Singapore Dollars Three Hundred Thousand Only. Within Line S$300,000-00 for establishing irrevocable sight documentary Letter of Credit covering your imports to Singapore (S$300,000-00) for issuing Trust Receipt under our Letter of Credit for tenor of up to 180 days (including IBC bills) with interest at 1.5% over our Bank's prime rate (currently 3.5% per annum) prevailing from time to time with monthly rests. This is to be operated within the above Letter of Credit line. 2. SECURITIES The Line of Credit and all monies owing by you from time to time shall be secured by a fresh Joint & Several Guarantee for S$300,000-00 to be singed by Tan Kok Kheng and Lim Eugene. 3. NEGATIVE PLEDGE You shall not sell, transfer or create in favour of any third party any change, mortgage, pledge or lien in respect of any of the company's assets or factors any of your account receivables without our prior written consent. 4. VARIATION OF INTEREST RATES We may vary from time to time at our absolute discretion, the rates of interest payable, on any of the facilities herein and also on any amount(s) not paid on due dates of overdrawn in excess of the approved limit. 5. BANKING TRANSACTION You will undertake to channel/ conduct/ through us an amount of banking facilities (including foreign exchange) commensurate with the credit line granted. 6. LETTER OF GUARANTEE We enclosed our Guarantee Form in duplicate to be signed by the guarantor(s) and duly witnessed by your company's Auditors or Solicitors and to be returned to us as soon as possible. 7. BOARD OF DIRECTORS' RESOLUTION You shall furnish to our Bank a certified copy of your board of Directors' Resolution authorising the acceptance of the above Line of Credit. Notwithstanding the above terms and conditions, you would appreciate that the availability of the above Line of Credit subject to our usual periodic review and any subsequent change will be at our discretion. If the terms and conditions of this offer are acceptable to you, please sign and return the duplicate of this letter together with your Board of Directors' Resolution accepting the Line of Credit within the next 14 days from the day herein. We are pleased to be of service to you. Yours faithfully For UNITED OVERSEAS BANK LIMTIED Commercial Credit Tracy Wu Ronald Lim Account Relationship Manager Senior Vice President ******************************************************************************** TO : UNITED OIVERSEAS BANK LIMITED We hereby accept your above offer Line of Credit and acknowledge receipt of a copy of The Standard Terms and Conditions Governing Banking Facilitates. We also enclose an extract of our Board of Directors' Resolution accepting the Letter of Credit. ................................................................................. EVERBLOOM INTERNATIONAL TECHNOLOGY PTE LTD Date (Company's Stamp and authorised Signatures(s)) STANDARD TERMS AND CONDITIONS GOVERNING BANKING FACILITES Granted by: United Overseas Bank Limited To: Everbloom International Technology Pte Ltd ------------------------------------------ Under Facility Letter dated 13 September 2001 (ref WRC/RL/TW/jam) ----------------- ----------------- A. GENERAL TERMS AND CONDITIONS 1. IMPLEMENTATION The facilities can be drawndown only on completion of legal documentation and fulfillment of such conditions precedent as the bank may require. The Bank has the right to implement a part only of the facilities and/ or change the terms of its use time to time. Where the purchase of property is financed, no part of the faculties shall be disbursed until you have paid the difference between the facility amount and the purchase price and stamp fees on the transfer. 2. INTEREST All interest charged (including additional interest) shall be calculated based on a 365 day year and the actual number of days elapsed with such periodic rests as the Bank may specify. Interest is payable both before and after judgment and interest rates may be varied by the Bank from time to time in its absolute discretion. The minimum interest charge for an account in overdraft is $3.00 per month, or any other amount set at the sole discretion of the Bank. 3. COSTS AND EXPENSES All costs and expenses, legal or otherwise, connected with the provision protection and realization of securities, and the processing implementation and recovery of money owing under the facilities shall be payable by you on demand, on a full indemnity basis, together with interest from the date the costs and expenses are incurred to the date of full payment of such rate as the Bank may prescribe. 4. ADDITIONAL INTEREST 4.1 Interest of 2% per annum in addition to the prescribe rate for the facility stated in the Facility Letter will be charged on all overdue trust receipt, instalments of principal and interest on the loan, fees, commissions and all other charges not paid when due. 4.2 For overdraft not paid on demand and utilization in excess of the approved limit, interest will be charged at 2% per annum in addition to the overdraft rate stated in the Facility Letter or 4% over prime, whichever rate is higher. 5. RIGHT OF DEBT Without prejudice to any rights that the Bank may have, the bank shall have the right (without being obliged to) at any time without prior notice to debit your current account and/ or to debit the balance of the overdraft facility (if any) with all accrued interest, unpaid loan instalments of principal and interest, overdue trust receipt, term bills, outstandings in respect of performance guarantees, indemnities, bonds, fees, commissions, charges, the costs and expenses stated in paragraph 3 and all other monies due on the credit line provided no such debiting shall be deemed to be a payment of the amount due (except to the extent of any amount in credit in your current account) or a wavier of any event of default under this Agreement or any other agreement relating to the credit line. If such debiting causes your account to be overdrawn, interest shall be payable accordingly. 6. FINANCIAL STATEMENTS AND INFORMATION Your company shall supply to the Bank on request all statements, information, materials and explanation relating to your business and financial position including, where appropriate, annual audited Financial Statements and Dir4ectors'/ auditors' Report which shall be provided no later than 6 months after the close of each financial year of your account. 7. REORGANISATION/ CHANGES IN MEMORANDUM & ARTICLES OF ASSOCIATION Your company shall not, without the bank's prior written consent (which will not be unreasonably withheld), undertake or permit any reorganization, amalgamation, reconstruction, take-over, substantial change of shareholders or any other schemes of compromise or arrangement affecting your present constitution or amend or alter any of the provisions in your Memorandum & Articles of Association relating to your borrowing powers and principal business activities. 8. WAIVER WITHOUT PREJUDICE The Bank may neglect or forbear to enforce any of the terms in this Agreement or waive on such conditions as it deems fit any breach by you of the same without prejudice to its right at any time afterwards to act strictly in accordance with the originally agreed terms in respect of the existing or subsequent breach. 9. RIGHT OF SET OFF The Bank shall be entitled (but shall not obliged) at any time and without notice to you to combine, consolidate or merge all or any of your accounts and liabilities with and t the Bank whether singly or jointly with any person and may transfer or set off any sums in credit in such accounts in or towards satisfaction of any of your liabilities whether actual or contingent, primary or collateral. If any of the accounts in credit is expressed in quantities of gold, silver or other precious metals or is on a currency other than the currency of the liabilities, the Bank may convert them to cash in the currency of the liabilities at the Bank's own rate for their purchase or exchange then prevailing. 10. EVENTS OF DEFAULT On the occurrence of any of the following events of default (i) the Bank shall ceases to be under any further commitment to you and all outstandings under the entire credit line ("the Outstandings") shall become due and payable immediately; (ii) the bank shall, in addition to the rights to set out herein, be entitled (as equitable charges) to attach the Outstandings to any property of yours (whether real or personal) and to lodge a caveat against any real property that may now or hereafter be registered in your name whether singly or jointly; and (iii) you shall provide cash cover for all contingent liabilities and for all notes and bills accepted endorsed or discounted and all bonds guarantees indemnities documentary or other credit cards or any instruments whatsoever form time to time entered into by the Bank for your accounts or at your request:- (a) If you breach any terms of this Agreement including failure to pay any amount due under this Agreement on the due date or on demand, (b) If you are unable to pay your debts when they become due or commit an act of bankruptcy or insolvency; EX-10 10 ex1027_4403.txt Keppel TatLee Bank PRIVATE & CONFIDENTIAL Keppel TatLeeBank Limited 10 Hoe Chiang Road 27 November 2000 Keppel Towers Singapore 089315 Tel: 2228228 Everbloom Mushroom Pte Ltd Fax:2252256 12 Science Park Drive #04-01 The Mendel Singapore Science Park 1 Singapore 118225 Attn: Dr Tan Kok Kheng Dear Sir RE: CREDIT FACILITIES We are pleased to extend to you the following Line of Credit of S$1,000,000 (Singapore Dollars One Million Only) subject to our Standards Terms and Conditions Governing Banking Facilities ("Standard Terms") and subject to the following terms and conditions :- 1. CREDIT FACILTIES/ LIMITS 1.1 Overdraft ("OD") - S$600,000 1.2 Letter of Credit ("LC")/ Trust Receipts ("TR")/ Trade Advance ("TA")/ Shipping Guarantee ("SG") - S$300,000 1.3 Bankers Guarantee ("BG") - S$ 20,000 1.4 Foreign Exchange Line ("FX") - S$ 80,000 2. PURPOSE OF CREDIT FACILITIES OD - For working capital LC - For establishing irrevocable Letters of Credit at sight or usance for a Tenor of up to 60 days to facilities the purpose of materials used in the normal course of business. TR/TA - For Trust Receipt / Trade Advance financing under our LC, your collection bills (D/A and D/P) and supplier's invoices for a tenor of up to 60 days inclusive of any usance period. SG - For issuing Shipping Guarantees under our LCs and collection bills (D/A & D/P) pending the receipt of shipping documents. BG - For the issuance of performance bonds to parties as security deposit in respect to underlying contracts or to fulfil certain statutory requirements that are normally required in the normal course of your business. FX - For spot and forward contracts up to 6 months. 3. PRICING 3.1 OD - For the first S$300,000, interest shall be at the Bank's prime lending rate ("PLR") calculated on daily balance with monthly rest. Thereafter, interest shall be at 1.50% per annum over the Bank's PLR calculated on daily balance with monthly rest. 3.2 LC - Commission of 1/8% per month subject to a minimum of 1/4 % flat. 3.3 TR - TR financing in Singapore Dollars shall be at 1.5% per annum over the Bank's prevailing PLR calculated on daily balance with monthly rest. 3.4 TA - TA financing in Singapore Dollars shall be at 1.5% per annum over the Bank's prevailing PLR calculated on daily balance with monthly rest. 3.5 BG - Commission of 1% flat subject to minimum of S$50/- for tenors of up to a years or minimum of $100/- for tenors of more than a year. 3.6 FX - Treasury Quote. 4. SECURITY/ SUPPORT: 4.1 Charge over cash and Security Agreement for fixed deposits amounting to not less than S$300,000 maintained with the Bank. 4.2 Open Debenture incorporating a fixed and floating charge over all your undertaking, property and assets, both present and future to be executed in favour of the Bank. 4.3 Corporate guarantee for all monies owing to be executed in favour of the Bank by MycoBiotech Pte Ltd, duly witnessed by a solicitor, the company secretary or the Bank's officer. 4.4 Assignment of keyman insurance to be taken up by Everbloom Mushroom Pte Ltd on the life of Dr Tan Kok Kheng for a sum of S$700,000. 4.5 Joint and Several Personal Continuing Guarantee and Indemnity for all monies owing to be executed by M/S Tan Chin Hian, Lim Eugene and Tan Kok Kheng. 5. CONVENANTS 5.1 Negative Pledge. Save for charges, assignments or encumbrances which are currently subsisting which have been previously disclosed to the Bank in writing, no further charges, assignments or encumbrance whatsoever are to be created over any of your present or further assets as long as any facilities are outstanding from you to the Bank, except with the Bank's prior written consent which shall not be unreasonably withheld. 5.2 Shareholders funds shall not be less than S$200,000,000 during the tenor of the credit facilities. 6. AVAILABLITY OF THE FACILTIES The credit facilities will be available for your use upon completion of all legal matters and documentation and upon receipt of all relevant documents duly signed, including but not limited to the following: - 6.1 copy of your Certified of Incorporation and Memorandum and Articles of Association certified as a true copy by a Director or the Company Secretary: - 6.2 copy of your Board of directors' Resolutions certified as a true copy by a Director or the Company Secretary duly authorizing: - (i) the acceptance of the credit facilities upon the terms and conditions enumerated herein; (ii)the appointment of an authorized signatory or signatories to executed on your behalf all legal documents, security documents, notices and any other documents connected with the credit facilities; and (iii)the affixing of the company seal in accordance with your Memorandum and Articles of Association to all documents as may be required by the Bank; 6.3 the security documents duly executed and stamped; 6.4 Forms 33 & 34, if applicable in respect of the relevant security documents duly executed and lodged with the Registry of companies, Singapore; 6.5 any other documents as may be requested by the Bank from time to time. 7 OTHER TERMS AND CONDIDTIONS 7.1 To the extent that the same are not inconsistent with the express term hereof, the bank's Standard Terms then in force and as may be amended, supplemented or replaced from time to time (copy enclosed) are deemed to be incorporated in this offer. 7.2 The credit facilities are subject to our Bank's periodic review and the Bank reserves the right of determination or modification of the terms and conditions as its absolute discretion. 7.3 The Bank may at its absolute discretion with or without notice to you and without prejudice to the Bank's other rights of set-off, debit any or all of the outstanding payments to your current account irrespective of whether your account is in credit or otherwise. 7.4 A copy of your company's audited final accounts is to be forwarded to the Bank annually or whenever required to do so by the Bank. 7.5 There shall be no substantial change in your ownership or shareholding during the tenor of the credit facilities without our Bank `s written consent; such consent not to be unreasonably withheld. 7.6 The terms and conditions governing the credit facilties shall be subject to any prevailing rules and regulations of the Monetary authority of Singapore ("MAS") and any other competent authority which may from time to time have jurisdiction over the matters contemplated in this letter. In particular, the credit facilities are subject to your undertaking to and agreeing with the Bank not to use the Singapore dollars outside Singapore and not to transfer, lend or otherwise make available directly or indirectly, either in whole or in part, any Singapore Dollar Credit obtained under the credit facilities to any person, associate, branch, subsidy or affiliate (as the context may require) who are not residents of Singapore or, in the case of companies, which are majority-owned, jointly-owned or otherwise controlled by non-resident of Singapore. The Bank reserves the right to request you form time to time, to furnish it with documentary evidence (in form and substance acceptable to the Bank) showing your compliance with the above terms and conditions. Further, we shall not be obliged to advance moneys under the credit facilties if such advance would or in our view is likely to result in a breach of such rules and regulations. 7.7 You hereby warrant that all equipment and systems (including computers and software) utilized by you and persons material to your business, which process, generate or utilise date (including date data) or are reliant on any data for proper operation, do not suffer from any inability, defect which would prevent such equipment and systems form properly processing, generating or business by virtue of such inability or defect and undertake to ensure that your business will not be affected by such inability or defect. 7.8 The Foreign Exchange facility is subject to the foreign exchange availability which is determined solely by the Bank. The Bank reserves the right to deliver funds only upon receipt of funds by us. 8. LEGAL EXPENSES 8.1 All legal expenses, stamp fees and disbursements in connection with the above credit facilities will be borne by you including not limited to fees incurred in respect of bankruptcy, winding-up judicial management, property, cause book, writ seizure and sale and all related searches as may be required by the Bank. 8.2 If upon acceptance of this offer, the mortgaged property and/ or other securities provided is found to be unacceptable to the Bank for mortgage purposes for any reason whatsoever, or if you subsequently decided not to proceed with the loan, you are required to pay the abortive costs incurred. 9. GOODS & SERVICES AND OTHER TAXES Any goods and service tax or other levies now or hereafter imposed by law (including but not limited to the Goods and Services Tax Act Cap. 117A) or required to be paid in respect of any monies payable to or receivable by the Bank or any expenses incurred by the Bank shall (except to the extent prohibited by law) be borne and paid by you and the Bank shall be entitled to debit the same from your account(s). We trust that the above terms and conditions are acceptable to you. Please confirm your acceptance by signing and returning to us the duplicate copy of this letter together with a certified copy of your Board Resolution accepting the credit facilities duly signed by 7 December 2000; after which date this letter of offer shall lapse. We are pleased to be of service and look forward to hearing from you in due course. Yours faithfully For KEPPEL TATLEE BANK LIMITED GILBERT KOH JACK TAN Deputy Manager Senior Manager Corporate Business Division Corporate business Division ================================================================================ To: KEPPEL TATLEE BANK LIMITED We confirm acceptance of the above offer of Line of Credit and we enclose an extract of our Board of Directors' Resolution accepting the above offer. We irrevocably and unconditionally consent to the Bank and its officers disclosing to any guarantor(s), co-debtor(s), co-mortgagor(s), joint account holder(s) or to any subsidiary, branch, agency, correspondent or representative office of the Bank, or its holding company or subsidiary of its holding company, or to any authority or to any potential assignees, transferees or to any other person proposing to enter into contractual arrangements with the Bank in relation to the credit facilities, such information about us and our subsidiaries, including but not limited to the monies and other relevant particular information relating to our accounts with the Bank. For Everbloom Mushroom Pte Ltd Dr Tan Kok Kheng Eugene Lim Authorised Signatory (ies) & Company Stamp Date: 22 November 2000 EX-10 11 ex1028_4403.txt TENANCY AGREEMENT LAND OFFICE THE STATE LAND RULES, 1993 THIS AGREEMENT is made on 20th day of June Two Thousand and One (2001) BETWEEN the GOVERNMENT OF THE REPUBLIC OF SINGAPORE c/o the Land Office, 5 Shenton Way, #24-01 Temasek Tower, Singapore 068811 (hereinafter referred to as "the Landlord") of the one part and:- Everbloom Mushroom Pte Ltd 9 Seletar West Farmway 5 Singapore 798057 (hereinafter referred to as "the Tenant" which expression shall where the context so admits include the Tenant's heirs, executors and administrators) of the other part. WHEREBY IT IS AGREED as follows:- Clause 1 - Grant of Rights 1.1 The Landlord hereby lets and the Tenant hereby takes as Tenant ALL THAT land situated at 19 Seletar West Farmway 5, Singapore (798057), State Land lot 1407 MK 20 in the Republic of Singapore more particularly shown edged red on the plan annexed hereto and comprising an approximate site area of 6,070 square metres (hereinafter referred to as the "said premises") TO HOLD the same unto the Tenant in accordance with the terms and conditions herein contained and subject to the provisions of the State Land Rules 1993 for a term of 3 YEAR(S) from the 1st day of January 2001 at a monthly rent of $809/- (Dollars Eight Hundred and Nine only) (subject to 3% GST or its prevailing rate therefore) (hereinafter referred to as "the Rent"), such Rent to be paid in advance without demand on or before the first day of every calendar month at the Land Office in Singapore. Clause 2 - Terminate & Renewal of Tenancy 2.1 The tenancy may be terminated by either party on 90 days' notice in writing to the other party. Such termination shall be without prejudice to the rights and remedies of the Landlord against the Tenant in respect of any antecedent breach of this Agreement by the Tenant. Clause 3 - Security Deposit 3.1 The Tenant shall deposit with the Landlord a sum of $9,708 equal to one year rent or lodge a Banker's Guarantee for one year rent upon signing of this Agreement as a security deposit for the due performance of the terms and conditions of this Agreement, such cash deposit to be refunded to the Tenant without interest or such guarantee to be discharged or released as the case may be, at the termination of the tenancy subject to forfeiture for breach of any of the conditions or stipulations herein contained. 3.2 The Landlord shall be entitled at any time to deduct from the said deposit such reasonable sum or sums as shall be sufficient to remedy any breach by the Tenant of the said conditions or stipulations herein contained but Provided Always that if the said deposit is insufficient to remedy the breach of the Tenant the Landlord shall be entitled to claim from the Tenant such sum or sums deemed necessary by the Landlord for remedying the Tenant's breach of any of the said conditions or stipulations. Clause 4 - Interest 4.1 Penalties on late payment If the Tenant fails or neglect to pay any rent, service and conservancy charges and any other charges due, to pay an interest at the rate 9% per annum of the outstanding debt calculated from the date such rent falls due (whether formally demanded or not) for payment to the date of actual payment without prejudice to any right of action or remedy for any antecedent breach of covenant by the Tenant. Clause 5 - Tenant's Covenants The Tenant hereby covenants with the Landlord to abide by the following:- 5.1 Operation of Business 5.1.1 To pay the said rental on a monthly basis as mentioned in the manner aforesaid. 5.1.2 To pay the said rental on a monthly basis through the Inter-Bank Giro (IBG) Scheme as mentioned in the manner aforesaid. 5.1.3 To reimburse the Landlord the amount of any goods and services tax chargeable under the Goods and Services Tax Act (Chapter 117A) for the grant of the tenancy under this Agreement. 5.1.4 To use the said premises only as a Mushroom & Bean sprout farm and not to use the said premises for any other purpose without the prior written consent of the Landlord. 5.1.5 To obtain prior approval from the landlord for any intensified land use (e.g placement of containers, erection of shelter etc.) of said premises. 5.1.6 Subject to Clause 5.1.5 additional rent will be chargeable for the intensification of land use of the said premises. The amount chargeable is dependent on the extent of the intensification. 5.1.7 To obtain and take out in its own name and maintain at its own expense any appropriate license for the use of the said premises from the relevant authorities for the purpose stated in Clause 5.1.4 herein. 5.1.8 To pay all charges for the connection and supply of water, electricity, gas and any water-borne sewerage systems or other miscellaneous charges by the relevant competent authority which are payable in respect of the said premises. 5.1.9 To comply fully with all laws and regulations of the Republic of Singapore and with all reasonable requirements of any Government department or any local authority constituted under any written law for the time being in force. 5.1.10 To produce the Agreement on demand, to the Landlord or any officer authorised by the Landlord. 5.1.11 Subject to Clauses 7.3 & 7.4, to commence and complete the proposed renovations, repairs, alterations, additions, structural changes to the said premises as shall be necessary to adapt them for the Land for the use stated in Clause 5.1.4 herein accordance with the plans approved by the relevant authorities. 5.1.12 To notify the Landlord of any change of shareholders or partners or change of company name or of any form construction whatsoever of the tenants. 5.1.13 To comply with all and additional requirements which the Landlord may stipulate during the Term relating to the prior use of the subject premises. Clause 6 - Prohibitions 6.1 Not to do or permit to be done upon the said premises anything which in the opinion of the Landlord may be a nuisance or annoyance to or in any way interfere with the quiet and comfort of the occupants of adjoining buildings or any other adjoining occupiers or the neighbourhood and shall not use the same for any illegal or immoral purposes. 6.2 Not to assign, transfer, sublet, license or part with the actual or legal possession or the use of the said premises or any part thereof except by Agreement in writing with the Landlord. 6.3 No permanent building or temporary structures shall be constructed/used or permitted to be constructed/used on the said premises except with the prior written approval of the Landlord and the relevant authorities. 6.4 Not to undertake any addition or alteration works without the prior written approval of the Landlord and the relevant authorities. In the event that the Landlord consents to such addition or alteration works, the Tenant shall engage competent professionals to submit plans, drawings and calculations to the relevant authorities for approval before proceeding with any addition or alteration works. 6.5 Not to keep or permit to be kept on the said premises or any part thereof any materials of a dangerous or explosive nature of the keeping of which may contravene any local laws or regulations or by-laws. 6.6 Not to keep any wild animal or any reptile or bird in or upon the said premises of any part thereof or in the surrounding area of the said premises. 6.7 Not to permit or use the said premises for any form of gaming, gambling, unlawful meeting or unlawful activity. 6.8 Not to erect, put up, display, affix, paint or otherwise exhibit any signboard, sign lights, embellishments, announcement, placard, poster, advertisement, name, name plates, notices, banners, flags, flagstaff, canvas, awnings, coverings or any other thing whatsoever upon any part of the said land or on the exterior of the said property or on the windows and doors thereof or the interior face of any shop front or window of the said property or in or about any part of the building except such as shall be approved in writing by the Landlord. 6.9 No installation/ erections of any signboard/ advertisement/ skysign to the premises is permitted prior to obtaining written permission from the Building Control Division in addition to the Landlord's approval. Clause 7 - Maintenance, Repair and Cleanliness 7.1 At the Tenant's expense, to keep the interior and exterior of the said premises, including the roof, drains, sanitary and water apparatus and the Landlord's fixtures and fittings therein and the doors and windows thereto in good and tenantable repair and condition throughout the said term provided that the Tenant shall take all reasonable measures and precautions to ensure that any damage, defect or dilapidation which has been or at any time shall be occasioned by fair wear and tear shall not give rise or cause or contribute to any substantial injury to the said premises. 7.2 To obtain written permission from the relevant authorities prior to felling any trees within the development boundary of the Land and to comply with all their requirements. 7.3 To remove any partitioning, renovations, alterations, additions or structural changes or improvements or other words (herein-under known as "Works") made to the said premises if so required by the Landlord and in such case to restore the said premises in all respects to tenantable state in default of which the Landlord may proceed to carry out such work and all costs and expenses incurred shall be recoverable from the Tenant forthwith. 7.4 No compensation shall be given to the Tenant upon termination of the tenancy agreement notwithstanding any improvements made by the Tenant during the tenancy. Clause 8 - Laundry Covenants 8.1 The Landlord hereby covenants with the Tenant as follows:- Tenant's Quiet Enjoyment of the Said Premises Subject to Clause 2.1 hereto, upon the Tenant paying the rent and observing and performing his covenants and obligations under this Agreement, the Tenant shall peaceably hold and enjoy the possession of the said premises during the said term without any disturbance by the Landlord or any person rightfully claiming under or in trust for the Landlord. Clause 9 - PROVIDED ALAWAYS and it is expressly agreed as follows 9.1 Renovation works 9.1.1 All renovations, repairs, alterations, structural changes carried out to the said premises pursuant to this agreement shall remain the property of the Landlord. 9.2 Non-Compliance 9.2.1 Notwithstanding Clause 1 of this Agreement if the rent herein reserved or any party thereof shall remain unpaid for fourteen (14) days after becoming due (whether formally demanded or not) or if any of the conditions or stipulations herein contained on the Tenant's part to be performed or observed shall not be so performed or observed or if the Tenant or any other person in whom for the time being the tenancy shall be vested shall become bankrupt or enter into any composition with the Tenant's creditors or suffer any distress or execution to be levied on the Tenant's goods or if the Tenant being a company shall go into liquidation whether voluntary (save for the purpose of amalgamation or reconstruction) or compulsory then and in any such cases it shall be lawful for the Landlord at any time thereafter to re-enter upon the said premises or any part thereof in the name of the whole and thereupon the tenancy hereby created shall absolutely determine but without prejudice to any right of action accrued to the Landlord in respect of any antecedent breach of this Agreement by the Tenant. 9.3 Fitness for Occupation 9.3.1 In case the said premises or any part thereof shall at any time during the continuance of this Agreement be destroyed or damaged by fire, lighting, riot, explosion or any other inevitable cause beyond the Tenant's control so as to be unfit for occupation and use then and in every such case the rent hereby reserved or a just and fair proportion thereof as the Landlord may determine according to the nature and extent of the damage sustained shall be suspended and ceased to be payable in respect of any period while the said premises continue to be unfit for occupation and use by reason of such damage. 9.3.2 In case the said premises be destroyed or damaged as stated in the previous sub-clause the Landlord, if he so thinks fit shall be at liberty by notice in writing to determine the tenancy hereby created and upon such notice being given the tenancy hereby created shall absolutely cease and determine but without prejudice to any accrued right of action of the Landlord in respect of any antecedent breach of this Agreement by the Tenant. 9.4 Notice of Re-letting To permit the Landlord or his duly authorized agents during the 90 days immediately preceding the determination of this Agreement to affix and retain without interference upon the said premises a notice for re-letting the same and during the said 90 days to permit all persons with the written authority of the Landlord or his duly authorized agents at reasonable times upon prior appointment made to view the said premises. 9.5 Notices 9.5.1 Any notice served under or otherwise in connection with this Agreement shall be sufficiently served on the Tenant if forwarded or sent to the Tenant at the said premises by registered post and shall be sufficiently served on the Landlord if delivered to the Collector of Land Revenue personally or sent to the Collector of Land Revenue at the Land office by registered post. A notice sent by registered post shall be deemed to be given at the time when in due courses of post it would be delivered at the address to which it is sent. 9.6 Indemnification 9.6.1 The Tenant shall indemnify and keep the Government indemnified against all claims, costs, proceedings or actions whatsoever arising out of or in connection with any damage to property or injury to life arising from the tenancy hereby created. 9.7 Waiver 9.7.1 Failure by the Landlord to enforce at any time any of the provisions of this Agreement shall not be construed as a waiver of any continuing breach of any provision or any other provision of this Agreement or as a waiver of any right under this Agreement. 9.8 Legal Costs & Expenses To Be Borne By Tenant 9.8.1 The legal expenses of the preparation, completion and stamping of the original Agreement shall be borne by the Tenant and paid forthwith. 9.9 Dispute 9.9.1 This Agreement shall be governed by and construed in accordance with the laws of the Republic of Singapore and the parties hereto agree to submit to the jurisdiction of the Courts of Singapore in respect of any dispute arising hereunder. Clause 10 - Clause Headings 10.1 Clause headings are for reference and convenience of the parties only and do not define, limit or change the meaning, interpretation and scope of any of the clauses. Clause 11 - Applicable Law 11.1 This Agreement shall be deemed to be made in Singapore and shall be subject to, governed by and interpreted in accordance with the Laws of the Republic of Singapore for every purpose. Clause 12 - Mediation 12.1 Notwithstanding anything in this Agreement, in the event of any dispute, claims, question or disagreement arising out of or relating to this Agreement, or the breach thereof no Party shall proceed to litigation or any other form of dispute resolution UNLESS the Parties have made reasonable efforts to resolve the same through the same mediation in accordance with the mediation rules of the Singapore Mediation Centre. 12.2 A Party who received a notice for mediation from the other Party shall consent and participate in the mediation process in accordance with Sub-clause 12.1. 12.3 Failure to comply with Sub-clause 12.1 and 12.2 shall be deemed to be a breach of agreement. As witness the hands of the parties hereto the day and year first above written. SIGNED by the Tenant: Name : Dr K K Tan Company Stamp NRIC : 0339763G In the presence of: Name : Eugene Lim NRIC : 0165829H SIGNED by the Collector of Land Revenue: Damian Chuah Collector of Land Revenue for and on behalf of the Government of the Republic of Singapore In the presence of Dy Collector Land Revenue: Dy Collector of Land Revenue Singapore EX-10 12 ex1029_4403.txt TENANCY AGREEMENT LAND OFFICE THE STATE LAND RULES, 1993 THIS AGREEMENT is made on 27th day of November Two Thousand and Two (2002) BETWEEN the GOVERNMENT OF THE REPUBLIC OF SINGAPORE c/o the Land Office, 5 Shenton Way, #24-01 Temasek Tower, Singapore 068811 (hereinafter referred to as "the Landlord") of the one part and:- M/s Everbloom Mushroom Pte Ltd 9 Seletar West Farmway 5 Singapore 798057 (hereinafter referred to as "the Tenant" which expression shall where the context so admits include the Tenant's heirs, executors and administrators) of the other part. WHEREBY IT IS AGREED as follows:- Clause 1 - Grant of Rights 1.1 The Landlord hereby lets and the Tenant hereby takes as Tenant ALL THAT land situated at No 9 Seletar West Farmway 5, State Land lot 1410 Mukim 20 in the Republic of Singapore more particularly shown edged red on the plan annexed hereto and comprising an approximate site area of 9,835.60 square metres (hereinafter referred to as the "said premises") TO HOLD the same unto the Tenant in accordance with the terms and conditions herein contained and subject to the provisions of the State Land Rules 1993 for a term of 3 YEAR(S) from the 1st day of January 2003 at a yearly rent of $13,,850.00 (Dollars Thirteen Thousand Eight Hundred and fifty Only) (subject to 5% GST or its prevailing rate therefore) (hereinafter referred to as "the Rent"), such Rent to be paid in advance without demand on or before the first day of every calendar month at the Singapore Land Authority in Singaopore. Clause 2 - Terminate & Renewal of Tenancy 2.1 The tenancy may be terminated by either party on 90 days' notice in writing to the other party. Such termination shall be without prejudice to the rights and remedies of the Landlord against the Tenant in respect of any antecedent breach of this Agreement by the Tenant. Clause 3 - Security Deposit 3.1 The Tenant shall deposit with the Landlord a sum of $13,850.00 equal to one year rent or lodge a Banker's Guarantee for one year rent upon signing of this Agreement as a security deposit for the due performance of the terms and conditions of this Agreement, such cash deposit to be refunded to the Tenant without interest or such guarantee to be discharged or released as the case may be, at the termination of the tenancy subject to forfeiture for breach of any of the conditions or stipulations herein contained. 3.2 The Landlord shall be entitled at any time to deduct from the said deposit such reasonable sum or sums as shall be sufficient to remedy any breach by the Tenant of the said conditions or stipulations herein contained but Provided Always that if the said deposit is insufficient to remedy the breach of the Tenant the Landlord shall be entitled to claim from the Tenant such sum or sums deemed necessary by the Landlord for remedying the Tenant's breach of any of the said conditions or stipulations. Clause 4 - Interest 4.1 Penalties on late payment If the Tenant fails or neglect to pay any rent, service and conservancy charges and any other charges due, to pay an interest at the rate 9% per annum of the outstanding debt calculated from the date such rent falls due (whether formally demanded or not) for payment to the date of actual payment without prejudice to any right of action or remedy for any antecedent breach of covenant by the Tenant. Clause 5 - Tenant's Covenants The Tenant hereby covenants with the Landlord to abide by the following:- 5.1 Operation of Business 5.1.1 To pay the said rental on a yearly basis as mentioned in the manner aforesaid. 5.1.2 To pay the said rental on a yearly basis through the Inter-Bank Giro (IBG) Scheme as mentioned in the manner aforesaid. 5.1.3 To reimburse the Landlord the amount of any goods and services tax chargeable under the Goods and Services Tax Act (Chapter 117A) for the grant of the tenancy under this Agreement. 5.1.4 To use the said premises only as a MUSHROOM FARMING and not to use the said premises for any other purpose without the prior written consent of the Landlord. 5.1.5 To obtain prior approval from the landlord for any intensified land use (e.g placement of containers, erection of shelter etc.) of said premises. 5.1.6 Subject to Clause 5.1.5 additional rent will be chargeable for the intensification of land use of the said premises. The amount chargeable is dependent on the extent of the intensification. 5.1.7 To obtain and take out in its own name and maintain at its own expense any appropriate license for the use of the said premises from the relevant authorities for the purpose stated in Clause 5.1.4 herein. 5.1.8 To pay all charges for the connection and supply of water, electricity, gas and any water-borne sewerage systems or other miscellaneous charges by the relevant competent authority which are payable in respect of the said premises. 5.1.9 To comply fully with all laws and regulations of the Republic of Singapore and with all reasonable requirements of any Government department or any local authority constituted under any written law for the time being in force. 5.1.10 To produce the Agreement on demand, to the Landlord or any officer authorised by the Landlord. 5.1.11 Subject to Clause (7.4), to commence and complete the proposed renovations, repairs, alterations, additions, structural changes to the said premises as shall be necessary to adapt them for the Land for the use stated in Clause 5.1.4 herein accordance with the plans approved by the relevant authorities. 5.1.12 To notify the Landlord of any change of shareholders or partners or change of company name or of any form construction whatsoever of the tenants. 5.1.13 To comply with all and additional requirements which the Landlord may stipulate during the Term relating to the prior use of the subject premises. Clause 6 - Prohibitions 6.1 Not to do or permit to be done upon the said premises anything which in the opinion of the Landlord may be a nuisance or annoyance to or in any way interfere with the quiet and comfort of the occupants of adjoining buildings or any other adjoining occupiers or the neighbourhood and shall not use the same for any illegal or immoral purposes. 6.2 Not to assign, transfer, sublet, license or part with the actual or legal possession or the use of the said premises or any part thereof except by Agreement in writing with the Landlord. 6.3 No permanent building or temporary structures shall be constructed/used or permitted to be constructed/used on the said premises except with the prior written approval of the Landlord and the relevant authorities. 6.4 Not to undertake any addition or alteration works without the prior written approval of the Landlord and the relevant authorities. In the event that the Landlord consents to such addition or alteration works, the Tenant shall engage competent professionals to submit plans, drawings and calculations to the relevant authorities for approval before proceeding with any addition or alteration works. 6.5 Not to keep or permit to be kept on the said premises or any part thereof any materials of a dangerous or explosive nature of the keeping of which may contravene any local laws or regulations or by-laws. 6.6 Not to keep any wild animal or any reptile or bird in or upon the said premises of any part thereof or in the surrounding area of the said premises. 6.7 Not to permit or use the said premises for any form of gaming, gambling, unlawful meeting or unlawful activity. 6.8 Not to erect, put up, display, affix, paint or otherwise exhibit any signboard, sign lights, embellishments, announcement, placard, poster, advertisement, name, name plates, notices, banners, flags, flagstaff, canvas, awnings, coverings or any other thing whatsoever upon any part of the said land or on the exterior of the said property or on the windows and doors thereof or the interior face of any shop front or window of the said property or in or about any part of the building except such as shall be approved in writing by the Landlord. 6.9 No installation/ erections of any signboard/ advertisement/ skysign to the premises is permitted prior to obtaining written permission from the Building Control Division in addition to the Landlord's approval. Clause 7 - Maintenance, Repair and Cleanliness 7.1 At the Tenant's expense, to keep the interior and exterior of the said premises, including the roof, drains, sanitary and water apparatus and the Landlord's fixtures and fittings therein and the doors and windows thereto in good and tenantable repair and condition throughout the said term provided that the Tenant shall take all reasonable measures and precautions to ensure that any damage, defect or dilapidation which has been or at any time shall be occasioned by fair wear and tear shall not give rise or cause or contribute to any substantial injury to the said premises. 7.2 To obtain written permission from the relevant authorities prior to felling any trees within the development boundary of the Land and to comply with all their requirements. 7.3 To remove any partitioning, renovations, alterations, additions or structural changes or improvements or other words (herein-under known as "Works") made to the said premises if so required by the Landlord and in such case to restore the said premises in all respects to tenantable state in default of which the Landlord may proceed to carry out such work and all costs and expenses incurred shall be recoverable from the Tenant forthwith. 7.4 No compensation shall be given to the Tenant upon termination of the tenancy agreement notwithstanding any improvements made by the Tenant during the tenancy. Clause 8 - Laundry Covenants 8.1 The Landlord hereby covenants with the Tenant as follows:- Tenant's Quiet Enjoyment of the Said Premises Subject to Clause 2.1 hereto, upon the Tenant paying the rent and observing and performing his covenants and obligations under this Agreement, the Tenant shall peaceably hold and enjoy the possession of the said premises during the said term without any disturbance by the Landlord or any person rightfully claiming under or in trust for the Landlord. Clause 9 - PROVIDED ALAWAYS and it is expressly agreed as follows 9.1 Renovation works 9.1.1 All renovations, repairs, alterations, structural changes carried out to the said premises pursuant to this agreement shall remain the property of the Landlord. 9.2 Non-Compliance 9.2.1 Notwithstanding Clause 1 of this Agreement if the rent herein reserved or any party thereof shall remain unpaid for fourteen (14) days after becoming due (whether formally demanded or not) or if any of the conditions or stipulations herein contained on the Tenant's part to be performed or observed shall not be so performed or observed or if the Tenant or any other person in whom for the time being the tenancy shall be vested shall become bankrupt or enter into any composition with the Tenant's creditors or suffer any distress or execution to be levied on the Tenant's goods or if the Tenant being a company shall go into liquidation whether voluntary (save for the purpose of amalgamation or reconstruction) or compulsory then and in any such cases it shall be lawful for the Landlord at any time thereafter to re-enter upon the said premises or any part thereof in the name of the whole and thereupon the tenancy hereby created shall absolutely determine but without prejudice to any right of action accrued to the Landlord in respect of any antecedent breach of this Agreement by the Tenant. 9.3 Fitness for Occupation 9.3.1 In case the said premises or any part thereof shall at any time during the continuance of this Agreement be destroyed or damaged by fire, lighting, riot, explosion or any other inevitable cause beyond the Tenant's control so as to be unfit for occupation and use then and in every such case the rent hereby reserved or a just and fair proportion thereof as the Landlord may determine according to the nature and extent of the damage sustained shall be suspended and ceased to be payable in respect of any period while the said premises continue to be unfit for occupation and use by reason of such damage. 9.3.2 In case the said premises be destroyed or damaged as stated in the previous sub-clause the Landlord, if he so thinks fit shall be at liberty by notice in writing to determine the tenancy hereby created and upon such notice being given the tenancy hereby created shall absolutely cease and determine but without prejudice to any accrued right of action of the Landlord in respect of any antecedent breach of this Agreement by the Tenant. 9.4 Notice of Re-letting To permit the Landlord or his duly authorized agents during the 90 days immediately preceding the determination of this Agreement to affix and retain without interference upon the said premises a notice for re-letting the same and during the said 90 days to permit all persons with the written authority of the Landlord or his duly authorized agents at reasonable times upon prior appointment made to view the said premises. 9.5 Notices 9.5.1 Any notice served under or otherwise in connection with this Agreement shall be sufficiently served on the Tenant if forwarded or sent to the Tenant at the said premises by registered post and shall be sufficiently served on the Landlord if delivered to the Collector of Land Revenue personally or sent to the Collector of Land Revenue at the Land office by registered post. A notice sent by registered post shall be deemed to be given at the time when in due courses of post it would be delivered at the address to which it is sent. 9.6 Indemnification 9.6.1 The Tenant shall indemnify and keep the Government indemnified against all claims, costs, proceedings or actions whatsoever arising out of or in connection with any damage to property or injury to life arising from the tenancy hereby created. 9.7 Waiver 9.7.1 Failure by the Landlord to enforce at any time any of the provisions of this Agreement shall not be construed as a waiver of any continuing breach of any provision or any other provision of this Agreement or as a waiver of any right under this Agreement. 9.8 Legal Costs & Expenses To Be Borne By Tenant 9.8.1 The legal expenses of the preparation, completion and stamping of the original Agreement shall be borne by the Tenant and paid forthwith. 9.9 Dispute 9.9.1 This Agreement shall be governed by and construed in accordance with the laws of the Republic of Singapore and the parties hereto agree to submit to the jurisdiction of the Courts of Singapore in respect of any dispute arising hereunder. Clause 10 - Clause Headings 10.1 Clause headings are for reference and convenience of the parties only and do not define, limit or change the meaning, interpretation and scope of any of the clauses. Clause 11 - Applicable Law 11.1 This Agreement shall be deemed to be made in Singapore and shall be subject to, governed by and interpreted in accordance with the Laws of the Republic of Singapore for every purpose. Clause 12 - Mediation 12.1 Notwithstanding anything in this Agreement, in the event of any dispute, claims, question or disagreement arising out of or relating to this Agreement, or the breach thereof no Party shall proceed to litigation or any other form of dispute resolution UNLESS the Parties have made reasonable efforts to resolve the same through the same mediation in accordance with the mediation rules of the Singapore Mediation Centre. 12.2 A Party who received a notice for mediation from the other Party shall consent and participate in the mediation process in accordance with Sub-clause 12.1. 12.3 Failure to comply with Sub-clause 12.1 and 12.2 shall be deemed to be a breach of agreement. Clause 13 - Contracts (Rights of Third Parties) Act Not Applicable 13.1 This Agreement does not create any right under the Contracts (Rights of Third Parties) Act, which is enforceable by any person who is not a party to it As witness the hands of the parties hereto the day and year first above written. SIGNED by the Tenant: Name : Eugene Lim Company Stamp NRIC : S0165829H In the presence of: Name : Chong Leong Tian NRIC :S1259200J SIGNED by the Collector of Land Revenue: Hoon Sung Long Collector of Land Revenue for and on behalf of the Government of the Republic of Singapore In the presence of Dy Collector Land Revenue: Yap Kin Ong Dy Collector of Land Revenue Singapore EX-10 13 ex1030_4403.txt COMMERCIAL LEASE OF WHOLE Date : 18 July 2001 Parties : 1. "The Landlord" TEMPLAR INVESTMENTS LIMITED whoser registered office is at Saffrey Square, suite 205, Bank Lane, PO Box N-8188 Nassau, Bahamas. 2. "The Tenants" EVERBLOOM INTERNATIONAL TECHNOLOGY Pte LIMITED whose registered office is at 12 Science Park Drive, 04-01 The Mendel, Science Park, Singapore 118225 and whose address for service within the UK is c/o Thomas Eggar Church Adams, Sussex house, North Street, Horsham, West Sussex, RH12 1BJ. 3. "The Surety" MYCOBIOTECH Pte LIMITED whose registered office is at 12 Science Park Drive, 04-01 The Mendel, Science Park, Singapore 118225 and whose address for service within the UK is c/o Thomas Eggar Church Adams, Sussex house, North Street, Horsham, West Sussex, RH12 1BJ. OPERATIVE PROVISIONS: 1 Interpretation 1.1 Definitions In this Lease the following words and expressions shall where the context so admits be deemed to have the following meanings: 1.1.1 "conducting Media" means drains sewers conduits flues gutted gullies channels ducts shafts watercourses pipes cables optic fibres data or impulse transmission wires mains and services or any of them and all ancillary equipment serving the Demised Premises 1.1.2 "the Demised Premises" means the property described in Schedule 1 and refers to each and every part of the Demised Premises 1.1.3 "the Encumbrances" means the exceptions and reservations referred to in the Property Register of title number K747701 so far as they affect and relate to the Demised Premises 1.1.4 "Insured Risks" means risks from time to time covered by the policy or policies of insurance effected by the Landlord pursuant to the covenant in clause 5.2 against loss or damage by fire lightning explosion aircraft (including articles dropped from the aircraft) terrorism riot civil commotion malicious persons earthquake storm tempest flood bursting and overflowing of water pipes tanks and other apparatus and impact by road, vehicles and such other risks as the Landlord from time to time in its absolute discretion may think fit to insure against 1.1.5 "Interest" means interest at the rate of 4% over the base rate of National Westminster Bank plc for the time being and from time to time prevailing (as well after as before judgment) or such other comparable rate as the Landlord may reasonably designate if the base rate shall cease to be published 1.1.6 "the landlord" includes all persons entitled to the reversion immediately expectant upon the determination of the Term created by this Lease 1.1.7 "this Lease" includes any instruments supplemental or collateral to it 1.1.8 "Outgoings" means all general rates water charges and all existing and future rates taxes charges assessments impositions and outgoings whatsoever (whether parliamentary municipal parochial or otherwise) which are now or may at any time in the future be payable charged or assessed on property or the owner or occupier of property 1.1.9 "Rent" means the annual rent of ONE HUNDRED THOUSAND POUNDS ((pound)100,000). 1.1.10 "Rent" means the Rent together with all additional rents and any other sums payable under this Lease including without limitation the Insurance Rent 1.1.11 "Insurance Rent" means the sums payable by the Tenant pursuant to clause 3.3 1.1.12 "the Rent Commencement Date" means the date hereof 1.1.13 "the Tenant" includes the Tenant's successors in title and assigns in whom this Lease shall for the time being be vested 1.1.14 "the term" means five years commencing on and including the 1st July 2001 (together with any statutory extension continuing or holding over at the end of the contractual term) 1.1.15 "Unsecured Underletting" means an Underletting of the Demised Premises in relation to which the underlessor and the underlessee have agreed to exclude the provisions of Section 24 to 28 of Part II of the Landlord and Tenant Act 1954 and their agreemnt6 to do so has been duly authorized beforehand by the court 1.2 Interpretation of restriction on the Tenant In any case where the Tenant is placed under a restriction by reason of the covenants and conditions contained in this Lease the restriction shall be deemed to include the obligation on the Tenant not to permit or allow the infringement of the restriction by any person claiming rights to use enjoy or visit the Demised Premises through under or in trust for the Tenant 1.3 Clauses and clause headings 1.3.1 The clause and paragraph headings in this Lease are for ease of reference only and shall not be taken into account in the construction or interpretation of any covenant condition or provision to which they refer 1.3.2 References in this Lease to a clause Schedule or paragraph are references where the context so admits to a clause Schedule paragraph of a Schedule in this Lease and reference in a Schedule to a paragraph are unless the context otherwise requires) references to a paragraph Schedule 1.4 Singular and plural meanings Words in this Lease importing the singular meaning shall where the context so admits include the plural meaning and vice versa 1.5 Statutes and statutory instruments Reference in this Lease to any statue or statutory instruments shall include and refer to any statue or statutory instrument amending consolidating or replacing them respectively from time to time and for the time being in force save that in clause 3.13 any reference to the Town and Country Planning (Use Classes) Order 1987 is a reference to that Order as originally made without any amendment and additionally in the case of the Value Added Tax Act 1994 shall include any directions and regulations adopted by the Council of the European Communities which relates to Value Added Tax 1.6 Gender Words in this Lease of the neuter gender shall include both the masculine and feminine genders and vice versa and words denoting natural persons shall include corporations and firms and all such words shall be construed interchangeably in that manner 1.7 Joint and several obligations Where the Tenant or Surety to this Lease is/are or shall be two or more persons the expression `the Tenant' or the `Surety' shall include the plural number and obligations in this Lease expressed or implied to be made with the Tenant or the Surety or by the Tenant or the Surety shall be deemed to be made with or by such persons jointly and severally 2 The demise In consideration of the Rents and the covenants reserved by and contained in this Lease: 2.1 the Landlord at the request of the Surety DEMISES to the Tenant the Demised Premises TOGETHER WITH the rights set out in Schedule 2 EXCEPTING AND RESERVING to the Landlord the rights set out in Schedule 3 for the Term SUBJECT TO the Encumbrances and 2.2 the Tenant PAYING during the Term FIRSTLY the Rent (including the Reviewed Rent as determined by the provisions for revision contained in Clause 6) by equal quarterly payments in advance on the usual quarter days in every year the first (or proportional part) of such payments in respect of the period commencing on the Rent Commencement Date and ending on the quarter day next following to be made on the grant of this lease and SECONDLY the Insurance Rent and THIRDLY the Rents (excluding the Rent and the Insurance Rent) in such manner as provided for in this Lease 3. Tenant's Covenant The Tenant covenants with Landlord as follows: 3.1 To pay Rents 3.1.1 To pay the Rents reserved by this Lease without any deduction or set off whatsoever whether legal or equitable by means of a standing order or direct debit to the Landlord's bankers at the times and in the manner specified in relation to each of them. 3.1.2 If the whole or any part of the Rents and other monies due under this Lease shall remain unpaid fourteen days after they shall have become due (in the case of Rent whether formally demanded or not) or if the Landlord shall refuse to accept the tender of Rents because of a breach of covenant on the part of the Tenant then to pay interest on such Rent (or part of the Rents) and other monies as from the date they became due until they are paid to (and accepted by) the Landlord and the aggregate amount for the time being so payable shall at the option of the Landlord be recoverable by action or as rent in arrear 3.2 To pay Outgoings 3.2.1 To pay and discharge all Outgoings in respect of the Dmeised Premises or any part thereof (other than taxes imposed on the Landlord in respect of the Rent or in respect of a disposal or dealing with the Landlord's reversionary interest in the Demised Premises) 3.2.2 To pay to the Landlord on demand the amount of any rates or surcharge payable by the Landlord after the expiration or sooner determination of the Term through the Landlord's inability to claim void rate relief or any similar relief or exemption for the maximum period (commencing with the date of termination of the Term) which would have been allowed had the Demised Premises been occupied up to the date of the termination of the Term 3.2.3 Not to agree any valuation of the demised Premises for rating purposes or agree any alteration in the rating list in respect thereof without the prior consent in writing of the landlord such consent not to be unreasonably withheld or delayed 3.2.4 Not to make any proposal to alter the rating list so far as the list relates to the Demised Premises or lodge an appeal in respect thereof without the prior written consent of the Landlord such consent not to be unreasonably withheld or delayed 3.2.5 Forthwith upon receipt to provide the Landlord with a copy of any notice of an alteration or proposed alteration in the rating list which will or may affect the Demised Premises 3.2.6 To pay for all gas electricity water telecommunication and other services consumed on the Demised Premised and all charges for meters and all standing charges 3.3 To pay Insurance premises 3.3.1 To pay to the landlord the insurance premiums incurred with respect to the Insured Risks as to which the following provisions shall apply: 3.3.1.1 the insurance premium shall include all monies expended or required to be expended by the Landlord in effecting and/or maintaining cover fir the demised Premises against the Insured Risks (including the cost of statutory inspections and periodic valuations for insurance purposes) 3.3.1.2 the Tenant's liability shall include the whole of any increase in the insurance premiums or expense of renewal payable by reason of any act omission or default if the Tenant or any person deriving possession occupation or enjoyment of the Demised Premises through the Tenant or any person in or upon the Demised Premises with the authority of the Tenant whether express or implied and also the whole of any increase in the insurance premiums for the Demised Premises attributable to the character of the Tenant or to the particular use if the Demised Premises made by the Tenant and those deriving title under the Tenant or to the condition of the Demised Premises 3.3.1.3 the cover may take due account of the effects of inflation and escalation of costs and fees 3.3.1.4 the insurance premium shall be payable by the Tenant to the landlord on demand. 3.3.2 To pay the Landlord on demand a fair and proper proportion (to be conclusively determined by the Landlord or the Landlord's surveyors) of the expense of cleaning lighting repairing renewing decorating maintaining and rebuilding any party walls fences roadways pavements entrance way stairs and passages accessways and service areas which are or may be used or enjoyed by an occupied of the Demised Premises in common with any other person or persons 3.4 Repair 3.4.1 From time to time and at all times and substantially to repair renew replace rebuild and clean the Demised Premised and to keep the Demised Premised in good and substantial state of repair and condition throughout the Term (fair wear and tear excepted in respect of the equipment plant and machinery referred to in Schedule 1) and from time to time and at all times well and substantially to keep any part of the Demised Premises which is built on property cultivated laid out and landscaped in a neat and tidy manner throughout the Term 3.4.2 The obligations in clauses 3.4.1 shall extend to all improvements and additional to the Demised Premises and all Landlord's fixture fittings and appurtenances of whatsoever nature affixed or fastened to the Demised Premised 3.4.3 The obligations in clause 3.4.1 do not extend to damage by insured Risks unless and to the extent that the policies of insurance in respect of Insured Risks effected by the Landlord are vitiated or the policy monies are withheld by reason of any act or omission of the Tenant its employees or agents 3.5 Reinstatement after damage if the Demised Premises shall be destroyed or damaged by any of the Insured Risks and if the Term shall not have determined under clause 4.4 if so required to join with the Landlord in making application for any planning or other permission necessary for the rebuilding or reinstating the Demised premises provided that this clause shall not render the tenant liable for fees payable in respect of such an application 3.6 Decoration 3.6.1 In the year 2006 and in the last three months of the Term (howsoever determined) to decorate the inside of any building comprised in the Demised Premised with two coats of good quality paint and to strip and re-paper such decoration in the last three months of the Term to be executed in such colours patterns and materials as the Landlord may reasonably require 3.6.2 In the year 2006 and also in the last three months of the Term (howsoever determined) to be exterior of any building comprised in the Demised Premises with three coasts of good quality paint or other suitable materials of good material in a proper and workmanlike manner 3.7 Fire Fighting 3.7.1 To keep the Demised Premises supplied and equipped with all fire fighting and extinguishing appliances form time to time: (a) required by law or (b) required by the insurers of the Demised Premises or recommended by them or (c) reasonably required by the Landlord 3.7.2 To ensure that such appliances are kept available for inspection and properly maintained and not to obstruct the access to or means of working such appliances or the means of escape from Demised Premises in case of fire 3.7.3 To take expeditiously all requisite steps to obtain any necessary fire certificate 3.8 Landlord's right of inspection and right of repair 3.8.1 To permit the Landlord its workmen or agents and any authorized person at all reasonable times to enter into inspect and view the Demised Premises and examine their condition and also to take a schedule of fixtures in the Demised Premises 3.8.2 If any breach of covenant defects disrepair removal of fixtures or unauthorized alternations or additions shall be found upon such inspection for which the Tenant is liable then upon by the Landlord to the Tenant to commence and thereafter diligently proceed to execute all repairs works replacements or removal required to the reasonable satisfaction of the Landlord or its surveyor or agent 3.8.3 If the Tenant shall not within a reasonable time comply with a notice given pursuant to this clause 3.8 then forthwith to permit the Landlord its workmen or agents with or without plant and other machinery to enter into the Demised Premises and execute such repairs works replacements or removals. 3.8.4 To pay to the Landlord on demand all costs and expenses so incurred with Interest form the date of expenditure until the date they are paid by the Tenant to the Landlord (such costs and expenses and Interest to be recoverable as if they were Rent in arrears) 3.9 Yield up in repair at the end of the Term At the expiration or earlier determination of the Tem or at such later time as the Landlord recovers possession of the Demised Premises from Tenant 3.9.1 to quality yield up the Demised Premises (together with all additions and improvements to the Demised Premised and all fixtures which during the Term may be fixed or fastened to or upon the Demised Premises other than the Tenant's fixtures removable by the Tenant) decorated repaired cleaned and kept fully in accordance with the Tenant's covenants contained in this Lease 3.9.2 if so required buy the Landlord to remove from the Demised Premises all the Tenant's belongings that is to say trade fixtures and fittings and all notices boards and sign bearing the name of or otherwise relating to the Tenant (including in this context any persons deriving title to the Demised Premises under the Tenant) or its business and all partitions fixtures and fittings not installed at the date hereof and any alterations carried out to the Demised Premises during the Term 3.9.3 to make to the satisfaction of the Landlord all damage to the Demised Premises resulting for in the removal of the Tenant's belonging form the Demised Premises and by reinstatement of the Demised Premises pursuant to any covenant with the Landlord 3.9.4 to reimburse to the Landlord all expenditure reasonably incurred by the Landlord after the termination of the Term in repairing painting and decorating the Demised Premises so as to put them into the condition required by the foregoing Tenant's covenant and to pay to the Landlord a sum equivalent to the loss of rent suffered by the Landlord during the period form such termination until the date upon which all such works have been completed 3.10 Landlord's right of entry for repairs etc. 3.10.1 To permit the Landlord its workmen or agents and all others employed by the landlord or by the other occupiers of any adjourning or neighbours property together with plant and machinery at reasonable times after giving to the Tenant previous notice (except in an emergency where no notice shall be required) to enter upon the Demised Premises and where necessary to erect scaffolding on the Demised Premises: 3.10.1.1 to construct alter maintain build or rebuild any adjourning or neighbouring remises or property of the Landlord or person so entering or 3.10.1.2 to construct alter maintain repair or fix anything or additional thing serving such property and running through under or on the Demised Premises or 3.10.1.3 to comply with an obligation to any third party having legal rights over the Demised Premises or 3.10.1.4 in exercise of a right or to comply with an obligation of repair maintenance or renewal under this Lease or 3.10.1.5 in connection with the construction development or redevelopment of any adjourning or neighbouring land or premises including the right to build on or onto in prolongation of any boundary walls of the Demised Premises without payment of compensation for any nuisance annoyance inconvenience or damage caused to the Tenant subject to the Landlord (or other person so entering) exercising such right in a reasonable manner and making good any damage caused to the Demised Premises 3.11 Alterations 3.11.1 Not without the consent of the Landlord which shall not be unreasonably withheld or delayed to erect or permit or suffer to be erected any other building structure pipe wire mast or post upon the Demised Premises nor to make or permit to suffer to be made any alteration therein or addition thereto nor to commit or permit or suffer any waste spoil or destruction in or upon the Demised Premises nor to cut injuries or remove or suffer to be cut injured or removed any of the roofs walls (whether outside or inside) floors joist timbers wires pipes drains appurtenances or fixtures of the building or Demised Premises 3.11.2 At the expiration or earlier determination of the Term (unless otherwise required by the Landlord) to reinstate the Demised Premises to the same condition as they were in at the grant of this Lease such reinstatement to be carried out under the supervision an to the reasonable satisfaction of the Landlord or the Landlord's surveyor or agent 3.11.3 To procure that any alternations or additions to the Demised Premises permitted by the Landlord under clauses 3.11.1 shall be carried out only by a contractor approved by the Landlord (such approval not to be unreasonably withheld) and in accordance with the Construction (Design and Management) Regulations 1994 ("the CDM Registrations") 3.12 Alienation of part absolutely prohibited not to charge or assign or underlet or otherwise share or part with possession of part only of the Demised Premises save for the existing Farm Business Tenancy Agreement dated 29th March 2000 in favour of Robert Montgomery Limited 3.13 Parting with possession and occupation Not to part with or share possession or occupation of or declare any trust in respect of the Demised Premises or any thereof PROVIDED THAT occupation of the Demised Premises or any part thereof as a licensee only by any company which is a member of the same group (as that expression is defined in section 42 of the Landlord and Tenant Act 1954) as the Tenant shall not be a breach of this covenant PROVIDED FURTHER that: 3.13.1 no legal estate or other right of tenancy shall be created 3.13.2 the Tenant shall forthwith give the Landlord notice in writing of the identify of such company the relationship to the Tenant the area occupied the date of occupation and date of vacation 3.13.3 the Tenant shall procure that the said company shall vacate the Demised premised forthwith upon whichever is the earlier of the date of expiration or sooner determination of the Term and the date on which same group and 3.13.4 if the rent is paid by any such company it shall be deemed to have been paid by and on behalf of the Tenant 3.14 Assignment Permitted Not to assign the whole or any part of the Demised Premises save that the Tenant may with the written consent of the Landlord obtained not more than three months previously (which consent shall not unreasonably withheld or delayed): 3.14.1 assign the whole of the Demised Premises provided that it will be reasonable for the Landlord to impose any or all of the following conditions (which are specified for the purpose of section 19(1A) of the Landlord and Tenant Act 1927) on giving any licence for an assignment by the Tenant as a condition precedent to the granting of such consent and any such licence shall be treated as being subject to each of the following conditions: 3.14.2 a requirement that the assigning Tenant execute as a deed and deliver to the Landlord prior to the assignment in question and before giving occupation of the whole or any part of the Demised Premises an Authorised Guarantee Agreement (as defined in and for the purpose of section 16 of the Landlord and Tenant (Covenant) Act 1995) (`AGA') in a form reasonably required by the Landlord. 3.14.3 if the landlord reasonably requires a requirement that on or more third party guarantors reasonably acceptable to the Landlord are provided who prior to the assignment in question and before giving occupation of the whole or any part of the Demised Premises enter into direct covenants with the Landlord (and if more than one then jointly and severally) in the terms set out in the Fourth Schedule 3.14.4 if the Landlord reasonably so requires a requirement that the proposed assignee prior to the assignment in question and before being given occupation of the whole or any part of the Demised Premises enter into such rent deposit arrangement and/or provide such additional security for performance by the proposed assignee of its obligations under this Lease as the Landlord may reasonably require 3.14.5 that any guarantor of the Tenant's obligations under this Lease shall have guaranteed to the Landlord that the Tenant will comply with the term and conditions of an AGA entered into by the Tenant on the terms and in a form which the Landlord reasonably requires 3.14.6 a requirement that prior to the assignment in question and before giving occupation of any part of the premises to be assigned the assignee covenants to the Landlord to pay the rent for the time being and from time to time reserved by this Lease and to observe and perform the covenants and conditions contained in this Lease on the part of the Tenant for the period until the assignee is released from its covenants implied in this Lease and upon the next assignment to enter into AGA as specified above provided that no assignment of whole of the Demised Premises shall be permitted whatsoever to a proposed assignee which is a person or company connection with the Tenant within the meaning of section 839 of the Income and Corporation Taxes Act 1988 3.15 Charging permitted Not to charge the whole of the Demised Premises without the consent of the Landlord 3.16 Underletting permitted 3.16.1Not to underlet the whole or any part of the Demised Premises except provided that if (a) the whole of the Demised Premises are to be underlet and (b) the rent to be reserved by the underlease shall not be less than the Rents for the time being payable by the Tenant under this Lease and shall be the best obtainable without taking a fine or premium and shall not be commuted or payable more than one quarter in advance (c) the Tenant shall comply with clause 3.16.2, 3.16.3, 3.16.4 and 3.16.5 the Tenant may underlet the whole of the Demised Premises with the prior consent of the landlord which consent shall not be reasonably withheld or delayed 3.16.2 To incorporate in every permitted underlease: (a) such provisions as are necessary to ensure that the terms are consistent with and are no less onerous than the terms contained in this Lease (b) a covenant that the undertenant shall not underlet the whole or any part of the premises thereby demised (c) a covenant that the undertenant shall not assign or charge part only of the premises thereby demised (d) a covenant that the undertenant shall not assign or charge the whole of the premises thereby demised without the consent of both the landlord and the Tenant under this lease and any superior landlord if required (e) a covenant that the undertenant shall not part with or share possession or occupation of or declare a trust in respect of the premises thereby demised save by way of an assignment or charge pursuant to the provisions hereinafter before referred to (f) a covenant by the undertenant (which the Tenant hereby covenants to enforce) prohibiting the undertenant form causing or suffering any act or thing upon or in relation to the premises underlet inconsistent with or in breach of the provisions of this Lease and (g) a condition for re-entry in the form referred to in clause 4.1 hereof 3.16.3 Upon any permitted underlease to procure that the undertenant shall give a direct covenant in a deed in favour of the landlord to observe and perform the covenants and conditions on the part of the Tenant contained in this lease (save as to payment of rent) insofar as the same relate top the premises underlet and (if the landlord reasonably requires) to procure that such guarantor or guarantors as may be acceptable to the Landlord guarantee such covenant in such terms as the landlord may form time to time require 3.16.4 Without prejudice to the provisions hereinbefore contained the Tenant shall obtain the approval of the Landlord's solicitors to the principal terms of any underlease (and if required) the form of underlease finally agreed with the proposed undertenant before granting the same (such approval not to be unreasonably withheld or delayed) 3.16.5 In connection with any underlease the Tenant shall: (a) not consent to or participate in any variation or addition to any such underlease (or any of the terms thereof) without the prior consent of the Landlord (such consent not to be unreasonably withheld or delayed) (b) enforce all the covenant and obligations of the underlessee thereunder and not expressly or by implication waive any breach of the same (c) not grant any under unless it contains an exclusion of section 24-28 of the landlord and Tenant Act 1954 pursuant to a court obtained prior to the grant such exclusion court application and order to be first approved in writing by the landlord 3.16.6 Within one month after written request by the Landlord to notify the Landlord in writing (a) whether the Tenant occupies the Demised Premises wholly or in part (b) whether the Tenant has granted an underlease of the whole of the Demised Premises and if so the landlord of the rent reserved by any underlease and the full name and address of any underlessee and (c) whether there are any other occupiers of the Demised Premises save as specified above and if so the full terms on which they occupy 3.17 Registration Within one moth after any assignment underlease assignment if underlease mortgage charge transfer disposition or devolution of the Demised Premises or any part thereof or any devolution in the estate of the Tenant therein or if the Lease and every surrender of any derivative mediate or immediate estate in the Demised Premises or any devolution of such estate in the Demised Premises or any devolution of such estate to give notice thereof in duplicate to the Landlord's solicitors and to produce to them the original or a certified copy of the instrument or instruments (including any relevant probate letters of administration or assent) and also to deliver to the same solicitors for retention by the Landlord a copy therefore and to pay to the same solicitors a reasonable fee (but not less than (pound)20) for the registration of such transaction 3.18 User Not to use the Demised Premises otherwise than for the cultivation and distribution of mushrooms and associated products ("the Permitted Use") 3.19 Restrictions affecting use of the Demised Premises 3.19.1 Not to erect install or use in or upon the Demised Premises any engine furnace machinery or apparatus which causes noise fumes or vibration and which can be heard smelled or felt in nearby premises or outside the Demised Premises or which may cause damage or overload the services serving the Demised Premises 3.19.2 Not to store in or upon the Demised Premises any petrol or other specially inflammable dangerous offensive explosive or combustible substance material or liquid 3.19.3 Not to use the Demised Premises for any noxious nosy or offensive trade or business nor for any illegal or immoral act or purpose 3.19.4 Not to hold any sales by auction on the Demised Premises 3.19.5 Not to hold in or on the Demise Premises any exhibition public meeting or public entertainment 3.19.6 Not to permit any vocal or instrument music in the Demised Premises so that it can be heard in nearby premises or outside the Demised Premises 3.19.7 Not to do in or upon the Demised Premises anything which may be or become or cause a nuisance annoyance disturbance inconvenience injury or damage to the Landlord or to the owners tenants and occupiers of adjoining or neighbouring properties 3.19.9 Not to do anything whereby any policy of insurance on including or in any way relating to the Demised Premises taken out by the Landlord may become void or voidable or whereby the premium thereon may be increased and to comply with all the requirements of the insurers a to fire and security precautions relating to the Demised Premises 3.19.10 Not to use the Demised Premises as a betting shop or betting office 3.19.11 Not to use the Demised Premises for the sale of wines spirits beers or any intoxicating liquor for consumption either on or off the Demised Premises 3.19.12 Not to permit the drains to be obstructed by oil grease or other deleterious matter but to keep the Demised Premises and the drains serving the Demised Premises thoroughly cleaned as often as may be necessary 3.19.13 Not to give any bill of sale or other preferential security on the stock-in-trade or personal chattels of the Tenant for the time being be on or about the Demised Premises 3.20 Keyholders The Tenant must ensure that at all times the landlord and the local police force have written notice of the name home address and home telephone number of at least two keyholders of the Demised Premises 3.21 Notices of a competent authority Within seven days of the receipt by the Tenant of any notice order requisition direction or plan given made or issued to or by a competent authority affecting the Demised Premises or the occupation or user thereof to supply a copy thereof to the Landlord and to make or join in making objections or representations against or in respect thereof as the Landlord may reasonably require 3.22 Compliance with statutes etc. 3.22.1 To comply in all respects with the provisions of all statutes and instruments pursuant to them for the time being in force and requirements of any competent authority relating to the Demised Premises or anything done in or upon them by the Tenant and to indemnity the landlord against all actions proceedings claims or requirements or any default in compliance with them 3.22.2 In particular but without prejudice to the generally of clause 3.25.1: 3.22.2.1 to execute all works and do all things on or in respect of the Demised Premises which are required under the offices Shops and Railway Premises Act 1963 3.22.2.2 to comply with all requirements under any present or future Act of Parliament order byelaw or regulation as to the use or occupation of or otherwise concerning the Demised Premises 3.22.2.3 to execute with all due diligence (commencing within two months or sooner if necessary and then proceeding continuously) all works to the Demised Premises for which the Tenant is liable in accordance with this clause 3.25 and of which the Landlord has given to the Tenant and 3.22.2.4 if the Tenant shall not comply with clause 3.25.2.3 to forthwith permit the Landlord to enter the Demised Premises to carry out such works and to pay to the Landlord on demand the expense of so doing (including surveyor's other professional advisors' fees) together with interest form the date of expenditure until payment by the Tenant to the Landlord (such monies to be recoverable as if they were Rents in arrears) 3.22.3 The Tenant must immediately give notice to the Landlord of any defect in the Demised Premises that might give rise to an obligation on the landlord to do or refrain form doing anything in order to comply with the provisions of this Lease or the duty of care imposed on the Landlord whether pursuant to the Defective Premises Act 1972 or otherwise and must at all times display and maintain any notices the Landlord may time to time require him to display at the Demised Premises 3.22.4 The Tenant must comply with the provisions of the CDM Regulations being the only client (*as defined by the provisions of the CDM Regulations) and fulfil in relation to all and any works all the obligations of the clients as set out in or reasonably to be inferred for the CDM Regulations and make a declaration to that effect to the Health and Safety Executive in accordance with the Approved code of Practice published from time to time by the Health and Safety Executive in relation to the CDM Regulations. The provisions of clause 3.14.12 are to have effect in any circumstances to which these obligations apply 3.22.5 At the end of the Term the Tenant must forthwith deliver to the Landlord any and all health and safety files relating to the Demised Premises in accordance with the CDM Regulations 3.23 Planning Permissions 3.23.1 Not to make any application under the Town and country Planning Acts to any local planning authority for permission to develop (including change of use of ) the Demised Premises without the prior written consent of the Landlord which shall not be unreasonably withheld or delayed 3.23.2 To indemnity the Landlord against any development charges other charges and expenses payable in respect of such applications and to reimburse to the Landlord the costs it may properly incur in connection with such consent 3.23.3 To pay to the Landlord on demand any sum or sums which may become payable in consequence of the use of the Demised Premises reverting to that existing prior to such application being made 3.23.4 Forthwith to give to the Landlord full particulars in writing of htegrant of planning permission 3.23.5 Not to implement any planning permission if the Landlord shall make reasonable objection to any of the conditions subject to which it has been granted 3.24 Compliance with Town and country Planning requirements 3.24.1 To perform and observe all the provision and requirements of all statutes and regulations relating to the Town and Country planning Acts in relation to the Demised Premises and to obtain any development or other consent which may be requisite by reason of the development of or on the Demised Premises by the Tenant 3.24.2 To indemnity the landlord from and against any loss or expense suffered by the Landlord by reason of the Tenant's failure to obtain any necessary development or other consents as aforesaid 3.24.3 To give full particulars to the Landlord of any notice or proposal for a notice or order or proposal for an order made given or issued to the Tenant or by virtue of any status or regulation relating to the Town and Country Planning Acts or otherwise within seven days of the receipt of any such notice by the Tenant and if so required by the Landlord to produce such notice or proposal for a notice or order to the Landlord 3.24.4 Forthwith to take all reasonable and necessary steps to comply with any such notice or order 3.24.5 Another request and cost of the Landlord to make or join with the landlord in making such objections or representations against or in respect of any proposals for such a notice or order as the Landlord may deem expedient 3.25 Claims made by third parties To indemnity the Landlord against any claims proceedings or demands and the costs and expenses so incurred which may be brought against the Landlord by any employees workpeople agents or visitors of the Tenant in respect of any accident loss or damage whatsoever to person or property howsoever caused or occurring in or upon the Demised Premises 3.26 Cost of applications notices and recovery of arrears 3.26.1 The Tenant must pay to the Landlord on demand on a full indemnity basis all proper and reasonable costs fees charges disbursements and expenses including but without prejudice to the generality of the above those payable to counsel solicitors surveyors and bailiffs properly incurred by the Landlord in relation to or incidental to: 3.26.1.1 every application made by the Tenant for a consent or licence required by the provisions of this Lease whether it is granted refused or offered subject to any qualification or condition or the application is withdrawn 3.26.1.2 the contemplation preparation and service of a notice under section 146 of the Law of Property Act 1925 or by reason or contemplation of proceedings under sections 146 or 147 of that Act even if forfeiture is avoided otherwise than by relief granted by the court. 3.26.1.3 the recovery or attempted recovery of arrears of Rent or other sums due under this Lease and 3.26.1.4 any steps taken in contemplation of or in connection with the preparation and service of a schedule of dilapidations during or after the end of the term. 3.26.1.5 prior to the Landlord being require to consider any application for licence or consent required pursuant to the terms of this Lease the Tenant must procure that its solicitors provide an unqualified undertaking to the Landlord's solicitors to pay the Landlord's reasonable and proper costs on a full indemnity basis whether or not such application proceed top completion 3.27 Obstruction of windows or lights 3.27.1 Not to permit any easement to be made or acquired into against or upon the Demised Premises 3.27.2 Where any encroachment or easement shall be made or attempted to be made or acquired forthwith to give notice of the circumstances to the Landlord and at the request of the Landlord to adopt such course as may be reasonably required or deemed proper by the landlord for preventing any such encroachment or the acquisition of any such easement 3.28 Value Added Tax 3.28.1 To pay and indemnity the Landlord against any value added tax (or any of a similar nature that may be substituted for it or levied in addition to it) lawfully imposed upon and added to any rent fee charge cost or other payment or expenses in respect of goods and services supplied by or on behalf of the Landlord in connection with this Lease 3.28.2 To indemnity the Landlord to the extent that input (value added) tax for which the Landlord may be able to third parties in respect of goods and services to the Landlord in connection with this Lease is not recoverable by the Landlord by credit against output (value added) tax or repayment to the Landlord by the Commissioners of Customs and Excise 3.29 Notices "to let" and "for sale" To allow the Landlord its surveyor or agents to enter on the Demised Premises at any time: 3.29.1 within six months next before the expiration or earlier determination of the Term to fix upon any suitable and conspicuous part of the Demised Premises a notice board for re-letting the Demised Premises 3.29.2 to fix on any suitable and conspicuous part of the Demised Premises a notice board for sale of the Landlord's interest in the Demised Premises 3.29.3 not to remove or obscure any such notice board and 3.29.4 to permit all persons authorised by the Landlord or its agents to view the Demised Premises at reasonable hours without interruption in connection with any such letting or sale 3.30 Expenses in respect of party walls and structures To pay a fair proportion (to be conclusively determined by the Landlord's Surveyor) of the expenses incurred in respect of any repairing rebuilding and cleansing any party walls fences sewers drains channels sanitary apparatus pipes wires passageways stairways entrance ways roads pavements and other things the use of which is common to the Demised Premises and to other property including the fire escape 3.31 Indemnities 3.31.1 To indemnity the Landlord against all costs and expense including professional fees reasonably and property incurred by the Landlord in connection with all and every loss and damage whatsoever incurred or sustained by the Landlord as a consequence of every breach of the covenants by the Tenant set out herein or implied PROVIDED that such indemnity shall extent to and cover all costs and expenses incurred by the landlord in connection with any steps which the landlord may take to remedy any such breath and be without prejudice to any rights or remedies of the Landlord in respect of any such breach 3.31.2 Without prejudice to the generally of the foregoing to indemnity the Landlord against any tax or imposition which becomes payable by the Landlord in respect of the Demised Premises or any part thereof by reason of any act or omission of the Tenant and against any additional tax or imposition which either during or after the termination of the Term becomes payable by the Landlord in respect of the Demised Premises or any part thereof or any other property whatsoever (whether as a result of the loss of exemption from tax or the loss of eligibility for reduced rates of a tax or as a result of the grossing-up of tax or otherwise howsoever) which but for such act or omission would not have been payable by the Landlord 3.31.3 To indemnity the Landlord against all actions claims liabilities costs and expenses alleged or demanded by the owners or occupiers of any adjourning or neighbouring property or other parties arising through the use or occupation of the Demised Premises the existence of any article in or about the Demised Premises or the execution or omission of any works upon the Demised Premises except insofar as the same may be due solely to the landlord's own act or default or the act or default of the Landlord's employees or agents 3.32 Encumbrances To observe and perform the obligations and liabilities comprising the Encumbrances and to indemnity and keep indemnified the landlord against any liability whatsoever arising out of breach non-observance or non-performance of such obligations and liabilities 3.33 Surety In the event that any person firm or body corporate which has or shall have guaranteed the Tenant's obligations contained in this ?Lease shall die or in an event shall occur in relation to such person firm or body corporate of the type referred to in clause 4.1.3 then to give immediate notice thereof to the Landlord and if so required by the Landlord at the expense of the Tenant within 20 working days thereafter to procure that some other guarantor or guarantors acceptable to the Landlord execute a guarantee in respect of the Tenant's obligations contained in this Lease in the form referred in the fourth Schedule or on such other terms as the landlord may reasonably require 4 Provisos The parties agree to the following provisos: 4.1 Proviso for re-entry 4.1.1 If 4.1.1.1.1 any or any part of the Rents reserved by the Lease shall be unpaid for 21 days after any of the days when they become due for payment (whether or not they shall have been lawfully demanded) or 4.1.1.2 the Tenant shall at any time fail or neglect to perform or observe any of the covenants conditions or agreements contained in this Lease to be performed or observed by the Tenant or shall allow any distress or execution to be levied on the Tenant's goods or 4.1.1.3 an event of insolvency shall occur in relation to the Tenant or any one of the Tenants or any guarantor of the Tenant or any one of the Tenants then and in any such case it shall be lawful for the Landlord or any person or persons duly authorised by the Landlord for that purpose to re-enter the Demised Premises or any part of them in the name of the whole and peaceably to repossess and enjoy the Demised Premises as if this Lease had not been made 4.1.2 Re-entry in exercise of the rights contained in clause 4.1.1 shall be without prejudice to any right of action or remedy of the Landlord in respect of any antecedent breach of any of the covenants by the Tenant contained in the Lease 4.1.3 The expression "an event of insolvency" in clause 4.1.1.3 includes (in relation to a company or other corporation which is the Tenant or one of the Tenants or a guarantor) the company ceasing to exist the inability of the company to pay its debts entry into compulsory or voluntary liquidation (except for the purpose of amalgamation or reconstruction by a solvent company) the passing of a resolution for a creditors winding up the making of a proposal to the company and its creditors for a composition in satisfaction of its debts or a scheme of arrangement of its affairs, the application to the court for an administration order and the appointment of a receiver or an administrative receiver and (in relation to an individual who is the Tenant or a guarantor) inability to pay or having no reasonable prospect of being able to pay his debts, the presentation of a bankruptcy petition the making of a proposal to his creditors for a composition in satisfaction of his debts or a scheme of arrangement of his affairs the application to the application to the court for an interim order and the appointment of a receiver or interim receiver and in relation to the various events of insolvency they shall wherever appropriate be interpreted in accordance and conjunction with the relevant provisions of the Insolvency Act 1986 4.2 Payment of Rent not waiver No demand for a receipt or acceptance of any part of the Rent or any payment on account thereof shall operate as a waiver by the Landlord of any right which the Landlord may have to forfeit this Lease by reason of any breach of covenant by the Tenant and the Tenant shall not in any proceedings for forfeiture be entitled to rely on any such demand receipt or acceptance as aforesaid as a defence PROVIDED that this proviso shall have effect in relation only to a demand receipt or acceptance made during such period as may in all the circumstances be reasonable for enabling the Landlord to conduct any negotiations with the Tenant for remedying the breach commencing upon the Landlord becoming aware of such breach 4.3 Rent abatement in case of damage by Insured Risks 4.3.1 If the whole or any part of the Demised premises shall at any time be destroyed or damaged by any of the Insured Risks so as to render the Demised Premises unfit for occupation and use and the policy or policies of insurance shall not have been vitiated or payment of the policy monies withheld in whole or in part in consequence of some act or default of the Tenant his employees or agents then the Rents reserved by this Lease or a fair proportion of them according to the nature and extent of the damage sustained shall cease and be suspended until the Demised Premises shall be rendered fit for occupation and use again 4.3.2 Any dispute as to the amount or extent of such cesser of Rent shall be referred to the award of a single arbitrator if the Landlord and the Tenant can agree upon one and otherwise to an arbitrator appointed at the request of either of them by the President for the time being of the Royal Institution of Chartered Surveyors and in either case in accordance with the provisions of the Arbitration Act 1996 4.4 Determination if destruction If during the Term the Demised Premises or the Building shall be destroyed or so damaged by any of the Insured Risks as to be substantially unfit for occupation and use 4.4.1 the Landlord may by not less than three months notice expiring at any time determine the Term and upon the expiry of such notice the Term shall determine without prejudice to any remedy of the Landlord in respect of any of the Tenant's covenants 4.4.2 if the Term is determined under clause 4.4.1 the Landlord shall be entitled to retain the insurance monies received by the Landlord 4.5 No warranty as to use Nothing herein shall be deemed to constitute any warranty by the Landlord that the Demised premises or any part thereof are under the Planning Acts authorised for use for any specific purpose 4.6 Power for Landlord to deal with adjoining property The Landlord may deal as it may think fit with other property or buildings belonging to the Landlord adjoining or nearby and to erect or suffer to e erected on such property any buildings whatsoever or to rebuild reconstruct alter or otherwise maintain any such property whether or not such building rebuilding reconstruction alteration or maintenance shall affect or diminish the light or air which may now or at any time be enjoyed by the Tenant in respect of the Demised Premises 4.7 Arbitration of disputes between the Tenant and other If any dispute or disagreement shall at any time arise between the Tenant and the tenants and occupiers of any adjoining or contiguous property or premises belonging to the Landlord relating to the Conducting Media serving the Demised Premises or any adjoining or contiguous premises or any easements or privileges whatsoever affecting or relating to the Demised Premises or any adjoining or contiguous property or premises or any other thing the use of which is shared by the Demised Premises and such adjoining or contiguous property or premises the dispute or disagreement shall from time to time be settled and determined by the Landlord to which determination the Tenant shall from time to time submit 4.8 Exemption from liability in respect of services 4.8.1 The Landlord shall not be liable to the Tenant for any loss damage or inconvenience which may be caused by reason of: 4.8.1.1 temporary interruption of services during periods of inspection maintenance repair and renewal 4.8.1.2 the breakdown failure stoppage leaking bursting or defect of any hot or cold water sanitary ventilation extraction plant and machinery or of soil gas water or electricity or other plan and machinery or of the Conducting Media in the Demised Premises or neighbouring or adjoining property or premises 4.9 Accidents The Landlord shall not be responsible to the Tenant or the Tenant's licensees employees or visitors nor to any other person for any accident happening injury damage destruction or financial or consequential loss whether to person property or goods sustained or suffered in the Demised Premises 4.10 Compensation for disturbance Except to the extent that any statutory provision prohibits the Tenant's right to compensation being reduced or excluded by agreement the Tenant nor any assignee or undertenant shall not be entitled on quitting the Demised Premises to claim from the Landlord any compensation under the Landlord and Tenant Act 1954 4.11 Application It is acknowledged and agreed that the Landlord shall be allowed a period of not less than thirty days for the purpose of considering any application made by the Tenant for consent pursuant to clauses 3.12 to 3.16 (inclusive) hereof such period to be calculated from the date of receipt by the Landlord of the last of the information and references reasonably requested by it in relation to the transaction which is the subject of the application 4.12 Removal of property after determination of Term 4.12.1 If at such time as the Tenant has vacated the Demised Premises after the determination of this Lease any property of the Tenant shall remain in or on the Demised Premises and the Tenant shall fail to remove the same within 14 days after being requested by the Landlord so to do by a notice to that effect then the Landlord may as the agent of the Tenant sell such property and shall then hold the proceeds of sale after deducting the costs and expenses of removal storage and sale incurred by it to the order of the Tenant 4.12.2 The Tenant shall indemnify the Landlord against any liability incurred by or to any third party whose property shall have been sold by the Landlord in the bona fide mistake belief (which shall be presumed unless the contrary be proved) that such property belonged to the Tenant and was liable to be dealt with as such pursuant to this clause 4.13 Notices consents and approvals 4.13.1 Any notice served under or in connection with this Lease shall be in writing and be properly served if compliance is made with the provisions of section 196 of the Law of Property Act 1925 (as amended by the Recorded Delivery Service Act 1962) 4.13.2 If the receiving party consists of more than one person a notice to one of them is notice to all 4.13.3 Any consent or approval under this Lease shall be required to be obtained before the act or event to which it applies is carried out or done and shall be effective only when the consent or approval is given in writing by Deed in such form as the Landlord shall require 4.14 Landlords Mortgagees 4.14.1 The powers rights matters and discretions granted and reserved to the Landlord under this Lease shall be construed as including (where appropriate) the exercise of such right matter and discretion or any mortgagee of the Landlord their servants agents or workmen and all others authorised by them 4.14.2 If the Tenant shall do or propose to do any matter or thing for which the consent of any mortgagee of the Landlord shall be required the Tenant shall bear and indemnify the Landlord against the cost of obtaining such consent together with all incidental surveyors' professional or other fees and disbursement 4.14.3 The Landlord shall be entitled to withhold the Landlord's consent in any matter where any consent of any mortgagee of the Landlord is required and the Landlord having used all reasonable endeavours to do so (provided that the Landlord shall not be required to instigate any proceedings in any court) is unable to obtain it 4.15 Exclude third party rights etc Act Nothing in this Lease confers any rights on any person pursuant to the Contracts (Rights of Third Parties) Act 1999 4.16 Rights of Pre-emption 4.16.1 If at any time after 30th June 2002 and at any time when the Lease is vested in Tenant (here meaning only Everbloom International Pte Limited or MycoBiotech Pte Limited or any subsidiary of that company) the Landlord shall desire to dispose of its freehold interest in the Demised Premises it shall first serve written notice upon the Tenant of such intention stating the price and other material terms agreed in relation to any proposed sale ("the Landlord's Notice") 4.16.2 In the event that the Tenant wished to acquire the freehold reversion in the Demised premises upon the same terms as the agreed sale and in particular at the same price it shall within 20 working days of receipt of the Landlord's Notice serve written notice upon the Landlord of its desire ("the Tenant's Notice") 4.16.3 Upon receipt of the Tenant's Notice the Landlord shall sign and return to the Tenant a duplicate copy of the Notice 4.16.4 Upon the Tenant's Notice being returned by the Landlord duly signed the Landlord thereby agrees to sell and the Tenant thereby agrees to purchase the Property upon the terms set out in the Landlord's Notice but in any event not at a price below (pound)800,000 and otherwise in accordance with Schedule 5 hereof 5 Landlord's covenants The Landlord covenants with the Tenant (but not so as to bind the Landlord after it has parted with the reversion) as follows: 5.1 Quiet enjoyment That the Tenant paying the Rents and performing the Tenant's covenants reserved by and contained in this Lease the Tenant may lawfully and peaceably enjoy the Demised Premises throughout the Term without any lawful suit eviction or interruption by the Landlord or by any person lawfully claiming through under or in trust for the Landlord 5.2 Insurance 5.2.1 To insure the Demised Premises and keep the same insured (subject to such terms exclusions excesses and limitations as may be imposed by the insurers against 5.2.1.1 loss or damage by the Insured Risks (in the case of terrorism only in as far as insurance cover is available at commercially prudent rates of premium) in such amount as the Landlord shall from time to time deem sufficient to cover the full amount of the costs (including reasonable provision for escalation of such costs between the date of destruction of damage and the date of rebuilding or reinstating the Demised Premises) of completely rebuilding or reinstating the Demised Premises 5.2.1.2 professional fees in such amount as the Landlord from time to time deems appropriate the cost of site clearance (including demolition and debris removal in respect of the Demised Premises) and three years' rent of the Demised Premises at the rate for the time being payable or prospectively payable 5.2.1.3 (to the extent to which the same is not covered by clause 5.2.1.1) sudden and unforeseen damage to the lifts and other engineering plant in the Demised Premises 5.2.1.4 Property Owners Liability for an Indemnity Limited which the Landlord deems appropriate from time to time and to effect such insurance with the insurers or underwriters of repute and to produce to the Tenant when requested details of such insurances and confirmation of payment of the current premiums 5.2.2 Whenever the whole or any part of the Demised Premises shall in consequence of the occurrence of any of the Insured Risks be destroyed or damaged so as to render the whole or part of the Demised Premises unfit for occupation or use then with all the due diligence to apply the monies received for that purpose by virtue of the policy of insurance (or to require the monies to be laid out) towards the rebuilding repairing and reinstating the Demised Premises with all convenient speed 5.2.3 The Landlord's obligation under this clause 5.2 shall cease if and to the extent that the insurance shall be vitiated or the policy monies withheld by any act or default of the Tenant 6 Rent review 6.1 The review date The Rent payable under his Lease shall be reviewed on the 1 July 2006 (referred to in this clause 6 as "the Relevant Review Date") and as from the Relevant Review Date the Reviewed Rent (agreed or determined in accordance with the following provisions of this clause) shall become payable in all respects as if it were the Rent reserved by this Lease 6.2 Upward only rent review The Reviewed Rent shall be the greater of: 6.2.1 the Rent payable under this Lease immediately preceding the Relevant Review Date and 6.2.2 the market rent of the Demised Premises at the Relevant Review Date 6.3 The market rent The expression "the Market Rent" shall for the purpose of this Lease mean the yearly rental value of the Demised Premises having regard to rental values as between a willing landlord and a willing tenant for property at the Relevant Review date without a premium for a term of four years from the Relevant Review Date and subject to the provisions to the same effect as those contained in this Lease (other than the amount of Rent but including these provisions for rent review) but upon the assumption (if not the fact) that at the Relevant Review Date: 6.3.1 the Demised Premises are available to be let with vacant possession (but such assumption shall not give rise to any discount or abatement of the market rent to allow for any concessionary rent or rent-free period which a willing landlord would grant to a willing tenant upon such a letting) 6.3.2 the Demised Premises are fit fitted out and ready for immediate occupation and use 6.3.3 no work has been carried out to the Demised Premises by the Tenant (or any predecessor-in-title of the Tenant) which has diminished the market rent 6.3.4 in case the Demised Premises have been destroyed or damaged or have become inaccessible they have been fully reinstated (or rendered accessible) 6.3.5 the Demised Premises are in a state of full repair and the covenants on behalf of the Landlord and the Tenant have been fully observed and performed 6.3.6 there is not in operation any statute order or instrument regulation or direction which has the effect of regulating or restricting the amount of Rent of the Demised Premises which might otherwise be payable and 6.3.7 the Demised Premises may be lawfully used for the Permitted Use (and there shall be disregarded any actual restriction or qualification which may be imposed on such use by the terms of the user covenant in clause 3 or otherwise) and that no capital is required to be expended upon the Demised Premises to enable them to be so used 6.3.8 that all Value Added Tax or other imposition or levy of a like nature payable by the Tenant under the provision of this lease is recoverable by the Tenant in full or would be recoverable by any/every prospective willing tenant 6.4 Matters to be disregarded In agreeing or determining the market rent the effect upon it of the following matters shall be disregarded: 6.4.1 the occupation of the Demised Premises by the Tenant (or any predecessor-in-title of the Tenant) 6.4.2 any goodwill attached to the Demised Premises by reason of the carrying out at the Demised Premises of the business of the Tenant (or predecessors-in-title of the Tenant to that business) 6.4.3 any improvements to the Demised Premises made by the Tenant with the consent of the Landlord other than those made in pursuance of an obligation to the Landlord 6.4.4 any equipment plant or machinery in or on the Demised Premises whether set out in the attached inventory or otherwise 6.5 Procedure for determination of market rent 6.5.1 The Landlord and the Tenant shall endeavour to agree the Market Rent at any time not being earlier than twelve months before the Relevant Review Date but if they shall not have agreed the Market Rent three months before the Relevant Review Date the amount of the Market Rent shall be determined by a surveyor who shall act as an expert and not an arbitrator to be agreed between the parties of if there is no such agreement then to be nominated by the President for the time being of The Royal Institution of Chartered Surveyors on the application of either the Landlord or the Tenant provided that the surveyor shall on being appointed invite the Landlord and the Tenant to submit to him within such time limit (not being less than 21 days) as he shall consider appropriate such representations as to the Market Rent with such supporting evidence as the same may respectively wish and the costs of the referral to the surveyor shall be decided by him and his decision shall be final and binding on the parties hereto 6.5.2 The reference to and award of the arbitrator shall be in accordance with the Arbitration Act 1996 6.5.3 The arbitrator to be nominated shall be a chartered surveyor having experience of leasehold valuation of property being put to the same or similar use as the Demised Premises and of property in the same region in which the Demised Premises are situated 6.6 Time limits Time shall not be of the essence in agreeing or determining the Reviewed Rent or of appointing an arbitrator 6.7 Rental adjustments If the Market Rent shall not have been agreed or determined in accordance with the provisions of this clause before the Relevant Review Date then until the Market Rent shall have been so agreed or determined the Tenant shall continue to pay on account rent at the rate of Rent payable immediately before the Relevant Review Date and when the Market Rent shall have been agreed or determined the Tenant shall forthwith pay to the Landlord all arrears of the Reviewed Rent which shall have accrued with Interest upon the arrears in respect of the period commencing on the Relevant Review Date and ending with the payment of the arrears by the Tenant to the Landlord 1 6.8 Memorandum of rent review The parties shall cause a memorandum of the Reviewed Rent duly signed by the Landlord and the Tenant to be endorsed on or securely annexed to this Lease and the counterpart of this Lease 7 Surety covenant 7.1 Guarantee The Surety covenants with the Landlord to perform and observe all the covenants obligations and stipulations set out in the Fourth Schedule 7.2 No waiver of liability The Surety shall not be released from liability under these provisions by reason of any forbearance the granting of time or any other indulgence on the part of the Landlord including (but without prejudice to the generality of the foregoing) any granting or extension of time under or varying the procedure set out in clause 6.5 7.3 Surety to accept new lease upon disclaimer If a liquidator or trustee in bankruptcy of the Tenant shall disclaim this Lease the Surety will (if the Landlord shall by notice within three months after such disclaimer so require) take from the Landlord a lease of the Demised Premises for a term commensurate with the residue of the Term which would have remained had there been no disclaimer at the same Rents and subject to the same covenants and conditions as are reserved by and contained in this Lease (with the exception of this clause) such lease to take effect from the date of the disclaimer and in such case the Surety shall pay the costs of such new lease and execute and deliver to the Landlord a counterpart of the new lease 8 Distress Without prejudice to its other rights at law in the event of any rent or other monies due under this Lease being in arrears for fourteen days whether demanded or not the Landlord shall be entitled to enter on the Demised Premises or any part thereof and to distrain and to apply the proceeds thereof in or towards the payment of the said rents or other monies 2 9 VAT Any rent or other sum payable by the Tenant hereunder is exclusive of Value Added Tax or other tax that is or may be payable thereon IN WITNESS whereof the parties hereto have executed this Lease as a deed the day and year first above written SCHEDULE 1 The Demised Premises ALL THAT piece of land as shown edged red on the plan attached hereto together with the buildings erected thereon and any equipment plant or machinery in or on the Demised Premises set out in the attached inventory SCHEUDLE 2 Rights Granted The right for the Tenant (in common with other persons entitled to the like right) to free and uninterrupted passage and running of water and soil gas electricity telecommunications and all other services to and from the Demised Premises in through and along the Conducting Media now laid or which may during a period of eighty (80) years from the commencement of the Term be laid in on over or under the Demised Premises or any part thereof SCHEDULE 3 Exceptions and Reservations 1 The right to free and uninterrupted passage and running of water and soil gas electricity telecommunications and all other services to and from the Demised Premises in through and along the Conducting Media now laid or which may during a period of eighty (80) years from the commencement of the Term be laid in on over or under the Demised Premises or any part thereof 3 2 The right to support shelter and protection for the Landlord's adjoining or neighbouring property from the Demised Premises as is enjoyed at the date hereof 3 The right for the Landlord its agents and workmen and all others authorised at all reasonable times upon reasonable prior notice (except in the case of emergency) to enter the Demised Premises for the purpose of carrying out its obligations hereunder the Landlord making good all damage caused by such entry or any works consequent thereon 4 Full right and liberty to build rebuild alter or raise the height of any building on any adjoining or neighbouring property of the Landlord in such manner as the Landlord thinks fit even if doing so diminishes obstructs affects or interferes with the amenity of or the access to the Demised Premises of passage of light and air to the Demised Premises 5 The right to build on to connect with or otherwise take into use any wall or fence bounding the Demised Premises and any Conducting Media comprising in or serving the Demised Premises without payment of any consideration or compensation to the Tenant subject to the Landlord making good at its own expense any damage thereby caused to the Demised Premises SCHEDULE 4 Surety's Covenants 1 The Surety hereby covenants with the Landlord as a primary obligation that 1.1 the Tenant will at all times during the Term pay the Rent on the days and in manner aforesaid and will duly perform and observe all the Tenant's covenants contained in the Lease and that in case of default the Surety will pay and make good to the Landlord on demand all loss damages costs and expenses thereby arising or incurred by the Landlord 1.2 the Surety will enter into any further lease granted by the Landlord to the Tenant whether pursuant to the Landlord and Tenant Act 1954 or otherwise to guarantee the obligations of the Tenant under such lease such guarantee to be in terms identical (mutatis mutandis) to the terms of this guarantee or in such other terms as may be required by the Landlord 4 1.3 in the event that the Lease shall be forfeited or a liquidator or trustee in bankruptcy shall disclaim or surrender this Lease the Surety shall if the Landlord so requires by notice in writing given to the Surety within three months after such event take a new lease of the Demised Premises for the residue of the Term unexpired at the date of such event and at the Rents then payable and subject to the terms of this Lease in every respect and to execute and deliver to the Landlord a counterpart thereof and to pay to the Landlord the costs thereof 1.4 in the event that the Landlord shall not require the Surety to take up a lease in accordance with the provisions of paragraph 1.3 hereof then the Surety shall pay to the Landlord a capital sum in the amount of the Rent that would have otherwise been payable under this Lease for the period of three months from the date of disclaimer surrender or forfeiture 2 PROVIDED ALWAYS THAT IT IS HEREBY AGREED THAT 2.1 The Surety shall not be released or discharged in any way from its obligations under this Lease by 2.1.1 any neglect or forbearance of the Landlord in endeavouring to obtain payment of the Rent when the same become payable or to enforce performance or observance of the Tenant's covenant herein and any time which may be given by the Landlord to the Tenant 2.1.2 any variation of the terms of this Lease 2.1.3 the transfer of the Landlord's reversionary interest immediately expectant on the determination of the Term 2.1.4 any refusal by the Landlord to accept rent tendered by or on behalf of the Tenant at a time when the Landlord was entitled to re-enter the Demised Premises 2.1.5 any legal limitation and/or incapacity of Tenant and/or any change in the constitution or powers of the Tenant the Surety or the Landlord 2.1.6 any liquidation administration or bankruptcy of the Tenant or the Surety and 5 2.2 The Surety shall not be entitled to participate in or be subrogated to any security held by the Landlord in respect of the Tenant's obligations or otherwise to stand in the place of the Landlord in respect of any such security 2.3 The Surety hereby waives any right to require the Landlord to pursue against the Tenant any rights which may be available to the Landlord before proceeding against the Surety SCHEDULE 5 Provisions for the acquisition of the Freehold interest in the Demised Premises 1 The National Conditions of Sale (20th Edition) shall apply so far as they are not inconsistent with or varied by any expressed terms of this Agreement and completion will take place 20 working days after IPO has been obtained when vacant possession of the Property shall be given the Tenant subject to and with the benefit to any rights restrictions obligations and other matters relating to the Tenant's then existing occupation pursuant to this Lease and rights obligations and restrictions created by the Tenant 2 The Landlord shall sell with Full Title Guarantee 3 Title to the Property is registered at H M Land Registry and will be deduced in accordance with Section 110 of the Land Registration Act 1925 4 Each party should be responsible for its own costs in relation to the acquisition and disposal of the Property 5 The Transfer of the Property shall be to the Tenant or such other corporate entity at the Tenant's direction provided that the Transferee shall be a member of the same group (as that expression is defined in Section 42 of the Landlord and Tenant Act 1954) as the Tenant EXECUTED as a Deed and ) DELIVERED by TEMPLAR ) INVESTMENTS LIMITED acting ) by its duly authorised officer:- ) .................................... Director ..................................... Director/Secretary EX-10 14 ex1031_4403.txt Singapore Branch 39 Robinson Road, # 01-02, Robinson Point, Singapore 068911 Tel: 532-1318 Fax: 535-5366 Telex: RS 24191 OUR Ref: SCS.CYW.ylg.Everbloom -------------------- ------ ---- ---- - Everbloom Health Food Pte Ltd 12 Science Park Drive #04-01 The Mendel Singapore Science Park 1 Singapore 118225 Attn: Mr. Tan Kok Kheng Managing Director Dear Sirs: BANKING FACILITIES We are pleased to advise that Southern Bank Berhad ("the bank") has approved the following facilities for your Company's use, subject to the terms and conditions stated herein: 1. Facilities a) S$350,000/- - For overdraft in current account, payable on Demand. b) S$150,000/- - for issuance of irrevocable Letters of Credit covering the import of raw materials and/or any other goods acceptable to the Bank into Singapore and/or for Trust Receipts up to 90 days' tenor and/or Transport Documents Guarantee covering the release of the merchandise imported under the above Letters of Credit. ------------- Total: S $500,000/- = = = = = = = SOUTHERN BANK BERHAD Everbloom Health Food Pte Ltd Singapore 2. Interest Rates Overdraft - 1.25% per annum above the Bank's Prime rate Trust Receipts - 1.00% per annum above the Bank's Prime rate or such other rate(s) as we may determine from time to time. Interest for Overdraft shall be calculated on a daily basis with monthly rests and will be debited to your account and payable on a monthly basis. Interest for Trust Receipts shall be calculated on a daily basis 3. Purpose of Banking Facilities The Banking Facilities are extended for your working capital requirements. 4. Securities The above facilities together with all monies and liabilities which may be owing to Southern Bank Berhad from time to time shall be secured by the followings: - a) a pledge of Fixed Deposit(s) and/or Foreign Currency Deposit(s) totaling at least S$300,000/- (or its equivalent in foreign currency) to us with interest to be capitalized; and b) a Deed of Guarantee to be signed by Messrs. Lim Eugene and Tan Kok Kheng jointly and severally in their personal capacity. 5. You are required to provide your company's management accounts to us on a quarterly basis. 6. Your account is to be conducted actively within the approved limit. 7. Bills and Trust Receipts are to be settled promptly. 8. For Trade Finance Facilities, the Bank may at its absolute discretion, allow third party Letter of Credit to be issued on behalf of your related companies, subject to satisfactory completion of the Bank's standard documentation. 9. All legal costs (both part and party between solicitor and client), withholding taxes and Goods & Services taxes or other fee charges and out-of-pocket expenses incurred in connection with the Banking Facilities shall be borne by you. Such expenses shall also be payable even if the said Facilities are aborted. 10. You shall covenant not to create or permit to exist any lien on any assets of the Company without first obtaining the consent of the Bank in writing. 11. You shall pay to the Bank a cancellation fee of 0.25% flat (payable on cancellation) on any part/amount of the Banking Facilities cancelled by you or which is deemed by the Bank to have been cancelled. 12. Without prejudice to our rights, the Bank may at any time at its absolute discretion (and without assigning any reason therefor) without prior notice to you, suspend, vary or cancel the Banking Facilities whereupon the Banking Facilities shall be suspended / varied / terminated with immediate effect thereon. 13. Your Company shall submit to us its audited Balance Sheet and Profit and Loss Statement every year and within six(6) months from your last financial year-end. 14. The Bank is at liberty to divulge, disclose, reveal and forward information relating to your banking accounts to our Head Office or branch offices at their requests, at any time without prior notice to or consent from you and without being liable to you in any manner whatsoever. 15. The Banking Facilities shall be available to you only on completion of the security documentation and/or with our consent to utilize the facilities. 16. We reserve the right to review the Banking Facilities from time to time at our absolute discretion. 17. Attached hereto is a copy of our Standard Terms and Conditions Governing Banking and Credit Facilities, which shall form an integral part of this letter and is incorporated by reference herein. If the terms and conditions are acceptable to you, please indicate your acceptance by signing and returning the duplicate copy of this letter to us, within the validity period of this offer which is fourteen (14) days from date hereof, together with: A) a certified true copy of your Directors' Resolution accepting the same under all the above terms and conditions contained herein; b) the enclosed Deed of Guarantee and Charge of Fixed Deposit (First Party) duly executed; and c) photocopies of the guarantors' identity cards. Yours faithfully for SOUTHERN BANK BERHAD - ----------------------- ---------------------------- Soon Chee Siong Chua Yeow Wan Manager Account Manager Risk Management Dept. Credit & Marketing Dept. EX-23 15 ex231_4403.txt Exhibit 23.1 Consent As independent certified public accountants, we hereby consent to the incorporation in the Registration Statement on Form 20-F of our report relating to the financial statements of MycoBiotech Ltd. and Subsidiaries and to all references to this firm included in such Form 20-F. As of December 31, 2001 and 2000 and the related Statements for December 31, 2001, 2000 and 1999. /s/ Thomas Leger & Co. LLP ------------------------ Thomas Leger & Co. LLP April 2, 2003 Houston, TX -----END PRIVACY-ENHANCED MESSAGE-----