IN THE UNITED STATES BANKRUPTCY COURT
FOR THE SOUTHERN DISTRICT OF FLORIDA
FT. LAUDERDALE DIVISION
Chapter 7
AMERICAN SCIENTIFIC RESOURCES,
IN CORPORA TED,
Case No. 12-14640-JKO
Debtor.
DECLARATION OF HOWARD TAYLOR IN
SUPPORT OF DEBTOR'S MOTION FOR ENTRY OF
AN ORDER CONVERTING BANKRUPTCY CASE TO
A CASE UNDER CHAPTER 11 OF THE BANKRUPTCY CODE
I, Howard Taylor, declare pursuant to section 1746 of title 28 of the United States Code,
that the foregoing is true to the best of my knowledge, information and belief.
I. BACKGROUND ,
1. I am the sole director of American Scientific Resources, Inc. ('"American
Scientific" or the '"Debtor"). I have personal knowledge of its business operations, customers,
suppliers, sales force, creditors and shareholders. I was appointed to American Scientific's board
of directors (the "Board") on December 29th 2011.
2. American Scientific is a Nevada corporation with corporate offices in
Florida. American Scientific is publicly traded on the OTC Market under the ticker symbol
ASFX. Until recently American Scientific was fully reporting with the Securities & Exchange
Commission.
3. Prior to the transaction described below, American Scientific's main
business was comprised of the design, ownership, manufacture and sales of proprietary medical
devices. Theses products are primarily:
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Case 12-14640-JKO Doc 71 Filed 11/21/12 Page 18 of 23
• A non-contact thermometer device that provides an accurate patient
temperature reading without the need to contact in any way the
subject, therefore providing a touchless, non invasive and hygienic
method of temperature taking. The device is sold in two primary
formats; a retail version under American Scientific brand of Veratemp
and as private label for major retailers in the United States and
overseas. A professional use version called the Veratemp + sold to
physicians offices, care facilities, clinics, etc. The devices are FDA
and CE approved.
• The Disintegrator Plus, an electrical device that destroys at the point of
use syringe needles, thereby rendering the remaining syringe barrel
harmless to the self administering patient, healthcare workers, waste
processors and the community at large. The device is both FDA and
CE approved and is EPA certified for the stated purpose.
4. As of February, 2012, Robert Faber acted as American Scientific's Chief
Executive Officer and Chairman of the Board and Jason Roth acted as a Director.
5. Beginning in approximately December, 2011, Robert Faber and Jason
Roth and other insiders of American Scientific (the 'Brooklands Parties") were instrumental in
the creation and execution of a plan to transfer American Scientific's assets to a newly formed
private corporation that they now control with others, Brooklands, Inc. ("Brooklands")1
•
6. On February 23,2012, Mr. Faber, in his capacity as Company Chief
Executive Officer, executed an agreement (the "Asset Sale Agreement") with Brooklands- his
company - to transfer most of American Scientific's assets to Brooklands. 2 In exchange,
Brooklands agreed to (a) pay American Scientific $50,000; (b) assume certain debts of American
Scientific owed to Brooklands insiders and Messrs. Roth, Faber's family and friends totaling
Brooklands' current shareholders are, upon information and belief, Robert Faber and Jason Roth, Gross
Capital Partners, LP (Irv Gross), John Madril, Ron Yellin, William Spier, Ikona Global Partners, Rajo Capital
Management, David Kleinhandler, Jonathan Spier, Acqua Wellington Opportunity LP, Amos Alter, Harris Sterling,
Susan Levy, Paul Cohen.
Brooklands' current officers include, upon information and belief, Robert Faber and Jason Roth.
2 Most of American Scientific's assets not transferred to Brooklands in the February 23, 2012 transaction
were subsequently converted by Brooklands and/or its insiders (see L Supra).
Case 12-14640-JKO Doc 71 Filed 11/21/12 Page 19 of 23
almost $1.8 million3
; (c) hire Messrs. Roth, Faber and certain other American Scientific insiders;
and (d) gave an unsecured obligation to pay American Scientific five percent of its net profits
over five years as a royalty.
7. Upon information and belief, American Scientific never received any
royalty payments from Brooklands and almost all of the $50,000 initial payment was transferred
directly to Messrs. Roth and Faber, and Brooklands' counsel.
8. After the transaction, American Scientific was left with debts in excess of
Three Million Dollars ($3,000,000.00) (not including debts claimed to be held by the parties
associated with Brooklands and the Transaction) and few assets.
9. Some of the assets left with American Scientific, include approximately
$146,000 worth of inventory. Though this inventory remains on American Scientific's books
and records\ upon information and belief, at some point post-petition, this inventory was
transferred to Brooklands for no consideration (the "Converted Inventory").
10. Based on my knowledge of the facts and legal analysis conveyed to me by
my attorneys, I believe American Scientific holds many causes of action relating to the
Transaction, including:
a. Claims for breaches of the fiduciary duties of loyalty against
American Scientific's former officers and directors who either directly or
indirectly benefitted from the Transaction such benefiting parties being
The debts assumed by Brooklands include Deborah A. Roth Trust ($1,087,000.00); Gross Capital Partners,
LP ($ 49,709.52); John Madril ($41,653.33); Ron Yellin ($49,709.52); William Spier ($74,514.27); Ikona Global
Partners ($72,763.47); Rajo Capital Management ($26,500.00); David Kleinhandler ($99,263.47); Jonathan Spier
($49,631.74) and Acqua Wellington Opportunity LP ($235,000.00).
4 See the Chapter 7 Trustee's October 29, 2012 Individual Estate Property Record and Report (Docket No.
61).
Case 12-14640-JKO Doc 71 Filed 11/21/12 Page 20 of 23
Robert Faber, Jason Roth, Paul Cohen, Austin Kazinetz (being former
officers and directors) and Daniel Levy;
b. Claims for fraud or breaches of the fiduciary duties of loyalty
against American Scientific's former officers and directors who sold their
Company debentures to investors shortly before the bankruptcy filing;
c. Claims for breaches of the fiduciary duties of care against
American Scientific's former officers and directors who either
orchestrated or were complicit in the Transaction;
d. Claims of actual fraudulent conveyance against Brooklands and
those parties who received benefits from the Transaction based on the
parties intent to delay, hinder or defraud American Scientific's creditors;
e. Claims of constructive fraudulent conveyance against Brooklands
and those parties who received benefits from the Transaction based on the
lack of adequate consideration received by American Scientific for the
assets conveyed;
f. Claims of conversion against Brooklands and those parties who
received the Converted Inventory;
g. Claims of preferential transfers and/or fraudulent conveyance
against those creditors of American Scientific whose debts were assumed
by Brooklands in the Transaction and subsequently paid;
h. Claims of preferential transfers against those creditors whose
unsecured claims were converted into secured claims by the filing of
A
Case 12-14640-JKO Doc 71 Filed 11/21/12 Page 21 of 23
UCC-1 Financing Statements during the ninety days prior to American
Scientific's bankruptcy filing;
1. Claims of equitable subordination against those creditors of
American Scientific who benefited from the Transaction; and
J. Claims against certain insiders of American Scientific and
Brooklands for violating Securities Statutes in their failure to exercise
their fiduciary responsibilities and directly benefiting from sales of certain
securities and debt instruments of American Scientific.
11. As of February 27,2012, all directors of American Scientific other than
myself had resigned5
•
II. THE BANKRUPTCY FILING
12. On February 27, 2012, the instant bankruptcy case was filed as an
involuntary petition under chapter 7 of the United States Bankruptcy Code.
13. Rather than contest the involuntary bankruptcy filing, Jason Roth, Robert
Faber, Paul Cohen, and Austin Kazinetz tendered their respective resignations as directors,
officers, and/or employees of the Debtor.
14. The Debtor's liquidation is being overseen by the chapter 7 Trustee
appointed in this case Marc P. Barmat, Esq.
III. CONVERSION AND REORGANIZATION
15. After searching for debtor-in-possession financing (a difficult task when
the debtor was not in possession), I have located and negotiated with an entity comprised of
unsecured creditors of the Debtor to provide post-conversion debtor-in-possession financing
American Scientific's bylaws only require one Director.
Case 12-14640-JKO Doc 71 Filed 11/21/12 Page 22 of 23
("DIP Financing"). This financing will not only allow the Debtor to commence rigorous
litigation as outlined above, but it will allow the Debtor to reorganize.
16. Upon conversion of the case to a case under chapter 11 of the Bankruptcy
Code, the Debtor will seek approval of the DIP financing.
17. [color=red]Based on my knowledge of the Debtor, its business operations, customers,
suppliers, creditors and shareholders, I believe that upon reorganization the Debtor will be able
to recommence its business operations, and provide a significant recovery to its creditors and
shareholders.[/color]
18. I have spoken with the creditors holding most of the Debtor's unsecured
claims; the majority support converting this case to a case under chapter 11 of the Bankruptcy
code (except, of course, those creditors related to the Transaction).
The foregoing statements are true and correct to the best of my knowledge, information
and belief.
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Dated: November_, 2012
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