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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended May 31, 1997
OR
( ) TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE EXCHANGE ACT
Commission File Number : 0-27380
ECHOCATH, INC.
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(Exact Name of Small Business Issuer as specified in its charter)
NEW JERSEY 22-3273101
- ----------------------------------- -------------------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
P.O. Box 7224, Princeton, NJ 08543
- ------------------------------------ -------------------------------
(Address of Principal Executive Offices) (Zip Code)
Issuer's Telephone Number, Including Area Code. . . (609) 987-8400
- --------------------------------------------------------------------------------
Former Name, Former Address and Former Fiscal Year, If Changed Since Last Report
Check whether Issuer (1) has filed all reports required to be filed by Section
13 or 15 (d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
YES X NO
------ ------
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practical date:
CLASS OF COMMON EQUITY OUTSTANDING AT JULY 14, 1997
- ---------------------- ----------------------------
Class A Common Stock (No Par Value) 1,615,331
Class B Common Stock (No Par Value) 1,494,669
Transitional Small Business Disclosure Format (check one)
YES NO X
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PART 1: FINANCIAL INFORMATION
PART 2: OTHER INFORMATION
ECHOCATH, INC.
INDEX
Item 1: Financial Statements Page
----
Balance Sheets,
August 31, 1996 and May 31, 1997 (Unaudited) 3
Statements of Operations for the three months ended
May 31, 1996 (Unaudited), and May 31, 1997 (Unaudited) 4
Statements of Operations for the nine months ended
May 31, 1996 (Unaudited) and for the period from
February 14, 1990 (date of inception) to May 31, 1997 (Unaudited) 5
Statements of Cash Flows for the three months ended May 31, 1996
(Unaudited), and May 31, 1997 (Unaudited) and for the period from
February 14, 1990 (date of inception) to
May 31, 1997 (Unaudited) 6 & 7
Notes to Financial Statements and Exhibits 8 & 9
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operation 9, 10 & 11
Part II: Other Information 11
Signatures 12
2
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ECHOCATH, INC.
(FORMERLY ECHOCATH, LTD.)
(A Development Stage Enterprise)
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
August 31, 1996 May 31, 1997
--------------- ------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,387,691 $ 1,558,106
Trade receivable 6,125 --
Shareholder advance 101,899 --
Inventory 141,903 194,222
Prepaid expenses 150,288 77,349
------------ -----------
Total current assets 2,787,906 1,829,677
Furniture, equipment and leasehold improvements, net 254,604 324,035
Intangible assets, net 228,912 251,002
Other assets 29,862 29,686
----------- -----------
$ 3,301,284 $ 2,434,400
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 149,175 $ 66,782
Accrued expenses 352,286 315,238
Obligations under capital leases, current portion 23,015 26,978
----------- -----------
Total current liabilities 524,476 408,998
Obligations under capital leases 55,191 32,516
Note payable 540,000 540,000
Other liabilities 63,594 72,088
----------- -----------
Total liabilities 1,183,261 1,053,602
----------- -----------
Capital contribution subject to repayment 750,000 750,000
----------- -----------
Stockholders' equity:
Preferred stock, no par value, 5,000,000 shares authorized; 280,000 shares
of Series B Cumulative Convertible issued and outstanding, senior in
liquidation to Class A and Class B Common Stock,
(liquidation value $1,400,000) -- 1,374,989
Class A Common Stock, no par value, 18,500,000 shares
authorized; 1,615,331 issued and outstanding 6,211,661 6,197,388
Class B Common Stock, no par value, 1,500,000 shares
authorized; 1,494,669 shares issued and outstanding,
convertible into one share of Class A Common Stock 3,348,470 3,348,470
Deficit accumulated during the development stage (8,192,108) (10,290,049)
----------- -----------
Total stockholders' equity 1,368,023 630,798
----------- -----------
$ 3,301,284 $ 2,434,400
=========== ===========
</TABLE>
See accompanying notes to financial statements.
3
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ECHOCATH, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF OPERATIONS
THREE MONTHS ENDED MAY 31, 1996 AND
MAY 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1997
---- ----
<S> <C> <C>
REVENUE:
SBIR GRANT INCOME $ 38,449 $ --
PRODUCT SALES -- 142,430
COST OF SALES AND SBIR GRANT EXPENSE 80,468 34,326
--------- ---------
GROSS PROFIT (LOSS) (42,019) 108,104
OPERATING EXPENSES:
R&D 283,809 404,541
MARKETING AND G&A 373,539 433,169
--------- ---------
TOTAL OPERATING EXPENSES 657,348 837,710
--------- ---------
LOSS FROM OPERATIONS (699,367) (729,606)
NET INTEREST INCOME 16,600 800
--------- ---------
NET LOSS $ (682,767) $ (728,806)
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NET LOSS PER SHARE $ (.42) $ (.32)
SHARES AND COMMON SHARE EQUIVALENT 1,610,000 2,277,000
</TABLE>
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ECHOCATH, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF OPERATIONS
NINE MONTHS ENDED MAY 31, 1996 AND
MAY 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1997 FEBRUARY 14,
1990 (DATE OF
INCEPTION) TO
MAY 31, 1997
<S> <C> <C> <C>
REVENUE:
SBIR GRANT INCOME $ 38,449 $ -- $ 98,000
LICENSE FEES -- 150,000 425,000
PRODUCT SALES -- 155,010 242,882
------------ ------------ ------------
TOTAL REVENUE 38,449 305,010 765,882
COST OF SALES AND SBIR GRANT EXPENSE 80,468 38,629 292,926
------------ ------------ ------------
GROSS PROFIT (LOSS) (42,019) 266,381 472,956
OPERATING EXPENSES:
R&D 721,296 1,142,583 7,574,843
REPURCHASE OF TECHNOLOGY RIGHTS (SEE NOTE C)
575,000 -- 575,000
MARKETING AND G&A 933,691 1,238,599 5,733,960
------------ ------------ ------------
TOTAL OPERATING EXPENSES 2,229,987 2,381,182 13,883,803
LOSS FROM OPERATIONS (2,272,006) (2,114,801) (13,410,847)
NET INTEREST INCOME (EXPENSE) (16,090) 16,860 (82,470)
------------ ------------ ------------
NET LOSS $ (2,288,096) $ (2,097,941) $(13,493,317)
------------ ------------ ------------
NET LOSS PER SHARE $ (1.83) $ (.92)
SHARES AND COMMON SHARE EQUIVALENT 1,249,687 2,277,000
</TABLE>
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EchoCath, Inc.
(A Development Stage Enterprise)
Statements of Cash Flows
Nine Months ended May 31, 1996,
May 31, 1997 and the period from
February 14, 1990 (date of inception)
to May 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
1996 1997 February 14, 1990
(date of inception) to
May 31, 1997
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (2,288,096) $ (2,097,941) $(13,493,318)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 53,833 89,994 350,617
Loss on write-off of intangible assets -- -- 2,000
Change in operating assets & liabilities:
(Increase) decrease in accounts receivable (31,116) 7,500 (1,625)
(Increase) decrease in inventory 26,246 (52,319) (155,585)
(Increase) decrease in prepaid expenses (33,938) 71,565 (75,724)
(Increase) decrease in other assets (10,081) (8,343) (29,686)
(Increase) decrease in deferred offering costs 328,236 -- --
Increase (decrease) in accounts payable (159,213) (1,435) 105,746
Increase (decrease) in accrued expenses and
due to (from) related parties (609,142) (49,008) 244,432
------------ ------------ ------------
Net cash used in operating activities (2,723,271) (1,941,971) (12,903,143)
------------ ------------ ------------
Cash flows from investing activities:
Purchase of furniture, equipment and
leasehold improvements (163,758) (144,074) (520,626)
Purchase of intangible assets 8,432 (37,442) (293,298)
------------ ------------ ------------
Net cash used in investing activities (155,326) (181,516) (813,924)
------------ ------------ ------------
Cash flows from financing activities:
Proceeds from partner borrowings -- -- 840,000
Principal payments on partner
borrowings -- -- (840,000)
Proceeds from borrowings of notes
payable -- -- 1,925,000
Principal payments on borrowings of
notes payable (370,000) -- (1,385,000)
Advance to shareholder (101,899) -- (101,899)
Repayment from shareholder -- 101,899 101,899
Additions to capital lease obligations 50,000 -- 50,000
Principal payments on capital lease
obligations (9,310) (18,713) (81,140)
Capital contribution for repurchase
of technology rights 75,000 -- 75,000
Proceeds from obligation to issue
common stock -- -- 1,725,368
Net proceeds from issuance of capital
stock -- -- 2,826,268
Capital increase from settlement of
prior obligations 17,200 -- 17,200
Proceeds from partner capital
contributions -- -- 2,700,100
Net proceeds from initial public
offering and over-allotment option 6,217,542 (14,273) 6,197,388
Net proceeds from issuance of
preferred stock -- 1,374,989 1,374,989
------------ ------------ ------------
Net cash provided by financing activities 5,878,533 1,293,902 15,275,173
------------ ------------ ------------
Net increase (decrease) in cash 2,999,936 (829,585) 1,558,106
Cash, beginning of period 14,186 2,387,691 --
------------ ------------ ------------
Cash, end of period $ 3,014,122 $ 1,558,106 $ 1,558,106
------------ ------------ ------------
Supplemental disclosure of cash flow
information:
(continued)
</TABLE>
6
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<TABLE>
<S> <C> <C> <C>
Cash paid during the year for:
Interest $ 16,090 $ 46,646 $267,885
-------- -------- --------
Supplemental disclosure of noncash transactions:
Equipment transferred from partner $ -- $ -- $ 48,604
-------- -------- --------
Inventory transferred from partner $ -- $ -- $ 38,635
-------- -------- --------
Capital lease obligation transferred from partner $ -- $ -- $ 25,506
-------- -------- --------
Equipment acquired under capital lease $ 50,000 $ -- $115,128
-------- -------- --------
</TABLE>
7
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ECHOCATH, INC. (A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONDENSED FINANCIAL STATEMENTS
NOTE A: GENERAL AND BUSINESS
The summary financial statements included herein have been prepared, without
audit, pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations, although EchoCath, Inc. (the "Company") management believes that
the disclosures are adequate to make the information presented not misleading.
It is suggested that these summary financial statements be read in conjunction
with the financial statements and the notes thereto included in the Company's
Form 10-KSB for the fiscal year ending August 31, 1996.
In the opinion of Management, all adjustments (consisting solely of normal
recurring adjustments) necessary to present fairly the financial position,
results of operation and cash flows at May 31, 1996 and May 31, 1997 have been
made.
NOTE B:
In January 1996, the Company completed its initial public offering consisting of
1,400,000 units. Each unit consists of one share of Class A Common Stock, one
Class A Redeemable Warrant, and one Class B Redeemable Warrant. The proceeds
from the offering before expenses were $7,000,000.
In February 1996, the over-allotment option to purchase 210,000 units was
exercised by the underwriter and this resulted in additional proceeds of
$1,050,000 before expenses.
NOTE C:
In January 1996, the Company entered into an agreement to repurchase, for
$575,000, certain technology rights. Of such amount, $500,000 was paid from
proceeds of the initial public offering and $75,000 was reflected as a capital
contribution. The Company recognized a $575,000 charge to operations relating to
this agreement to repurchase.
NOTE D:
Inventories are summarized as follows:
May 31, 1997
------------
Raw Materials $ 162,616
Finished Goods 31,606
---------
$ 194,222
---------
NOTE E:
On July 7, 1995, the Company entered into an agreement to amend its previously
existing agreement with Alliance Partners (Alliance). In accordance with the new
agreement, the partners of Alliance and certain other entities and individuals
became entitled to receive a 35% equity interest in the Company in exchange for
Alliance's repayment of the Company's $750,000 of outstanding borrowings under
the Company's bank demand note payable, which was paid in full in August 1995.
The payment of such indebtedness is to be treated as a capital contribution;
however, if a portion of the Class B warrants to be issued in connection with
the initial public offering are subsequently exercised providing the Company
with $23,040,000 in proceeds, then $750,000 of such proceeds will be repaid to
Alliance. Accordingly, the $750,000 received from Alliance is reflected as
"Capital contribution subject to repayment" in the accompanying balance sheet.
The Company is engaged in discussions with certain shareholders for the purpose
of assuming the outstanding $750,000 obligation from the Company to Alliance
in exchange for warrants to purchase shares of Class A Common Stock. If the
Company enters into an agreement with any shareholders, it is anticipated that
the Company will be permitted to reflect the $750,000 as permanent capital in
its future financial statements. There can be no assurance that any agreement
will be entered into.
NOTE F:
The Company entered into an agreement dated December 30, 1996 with Medtronic,
Inc. for the licensing of EchoMark'r' and ColorMark'r' proprietary technologies
for certain medical procedures. Under the agreement the Company may receive a
series of payments totaling $950,000 after the completion of certain milestones.
When commercially available the Company will receive royalties under the terms
of the agreement.
8
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NOTE G:
LICENSE AGREEMENT
The Company entered into an agreement dated February 27, 1997 for an exclusive
license agreement with EP MedSystems, Inc. (EP MedSystems). The agreement
provides that certain products can be incorporated into the EP MedSystems'
diagnostic catheter line. The Company may receive development milestone payments
totaling $700,000. The milestones include the testing of a limited series of
patients, system capability demonstration, and the sale of a limited quantity of
product. When commercially available the Company will receive royalties under
the terms of the agreement. The agreement provides that any royalty payment can
be reduced, but not to an amount below zero, by an amount equal to the amount of
any dividends under the Company's Series B Cumulative Preferred Stock which are
accrued but not paid as of that date.
PREFERRED STOCK SUBSCRIPTION AGREEMENT
The Company entered into a subscription agreement dated February 27, 1997 with
EP MedSystems. EP MedSystems purchased 280,000 shares of the Company's Series B
Cumulative Convertible Preferred Stock for $1,400,000. The agreement provides
for an annual dividend of $.27 per share. The Company can redeem the Preferred
Stock if certain performance goals of the Class A Common Stock are achieved. The
Series B Preferred Stock is convertible into Class A Common Stock. The
conversion of Series B Cumulative Convertible Preferred Stock to Class A Common
Stock will be at the conversion rate of 1 share of Class A Common Stock for each
1.2 shares of Series B Cumulative Preferred Stock through 1999. Thereafter, the
conversion rate shall be 1 share of Class A Common Stock issuable for each 1.3
shares of Series B Cumulative Convertible Preferred Stock.
NOTE H:
EARNINGS PER SHARE
Earnings per share are based on the weighted average number of common shares
outstanding during the respective periods. The Company's common stock
equivalents (preferred stock, warrants and stock options) outstanding have not
been included, as the computation would not be diluted.
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
GENERAL
EchoCath, Inc. develops, manufactures and markets medical devises which enhance
and expand the use of ultrasound technology for medical applications and
procedures.
Certain statements in this quarterly Report under the caption "Management's
Discussion and Analysis of Financial Condition and Results of Operation"
constitute "forward-looking statements" within the meaning of Private Securities
Litigation Reform Act of 1995, including, without limitation, statements
regarding future cash requirements. Such forward-looking statements involve
known and unknown risks, uncertainties and other factors which may cause the
actual results, performance, or achievements of the Company, or industry
results, to be materially different from any future results, performance, or
achievements expressed or implied by such forward-looking statements. Such
factors include, among others, the following: delays in product development;
problems or delays with clinical trials; failure to receive or delays in
receiving regulatory approval; lack of enforceability of patents and proprietary
rights; lack of reimbursement; general economic and business conditions;
industry capacity; industry trends; demographic changes; competition; material
costs and availability; the loss of any significant customers; changes in
business strategy or development plans; quality of management; availability,
terms and deployment of capital; business abilities and judgment of personnel;
availability of qualified personnel; changes in, or the failure to comply with,
government regulations; and other factors referenced in this Report.
9
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RESULTS OF OPERATIONS
Nine Months Ended May 31, 1997 and 1996
REVENUE:
The Company had revenues of $305,010 and $38,449 for the nine months ended May
31, 1997 and 1996, respectively. Product sales represented 50.9% of the revenue,
and license fees represented 49.1% of revenue for the nine months ended May 31,
1997. A Small Business Innovation Research (SBIR) Grant of $38,449 represented
100% of the revenue for the nine months ended May 31, 1997. Cost of sales
represented 12.7% of the total revenue as of May 31, 1997. Cost of sales as of
May 31, 1996 consisted primarily of SBIR Grant expenses of $38,449 and
additional charges to cost of sales of $38,881 pertaining to the write off of
inventory. This combination of changes resulted in a cost of sales of 210% of
revenue for the nine months ended May 31, 1996.
RESEARCH AND DEVELOPMENT:
Research and Development (R&D) expenses increased 58.4% during the nine months
ended May 31, 1997, compared to the previous period, because of expenses
associated with Food and Drug Administration compliance reviews, new hires,
additional material purchases, increased rent as a result of an extended lease
agreement for the building that the Company occupies and the cost of a joint
research project with a hospital. R & D expenses for 1996 were net of the
repurchase of certain technology rights for $575,000 that is set out in a
separate line in the Statement of Operations when making the comparisons.
SELLING, GENERAL AND ADMINISTRATIVE:
Selling, General and Administrative (S, G, & A) expenses increased 32.7% during
the nine months ended May 31, 1997, compared to the previous period, because of
salary and related cost resulting from new employees, amendments to employment
agreements with senior management and the allocation of more management expense
to administration. Other factors of less significance were increases in
insurance expenses, a new building lease agreement, an increase in consultant
expenses, and costs associated with the Company's first meeting of shareholders
since its initial public offering.
RESULTS OF OPERATIONS
Three Months Ended May 31, 1997 and 1996
REVENUE:
The Company had revenue of $142,430 for the three months ended May 31, 1997 and
$38,449 for the three months ended May 31, 1996. Product sales accounted for
100% of the revenue for the 1997 period and a SBIR Grant represented 100% of
revenue for the 1996 period. Cost of sales represented 24.1% of the total
revenue for May 31, 1997. Cost of sales as of May 31, 1996 consisted primarily
of SBIR Grant expenses of $38,449 and additional charges to cost of sales of
$38,881 pertaining to the write off of inventory. This combination of changes
resulted in a cost of sales of 210% of revenue for the three months ended May
31, 1996.
RESEARCH AND DEVELOPMENT:
R & D expenses increased 42.6 % during the three months ended May 31, 1997
because of expenses associated with the Food and Drug Administration compliance
reviews, new hires, additional material purchases, and increased rent as a
result of an extended lease agreement for the building that the Company
occupies.
SELLING, GENERAL AND ADMINISTRATIVE:
S, G & A expenses increased 16.0% during the three months ended May 31, 1997
because of salary and related cost resulting from new employees, revisions to
employment contracts with senior management and allocation of more management
expense to administration. Other factors of less significance were a new
building lease agreement, and an increase in legal costs.
LIQUIDITY AND CAPITAL RESOURCES
The Company anticipates that its current cash, together with revenues expected
to be derived from sales of certain of its products and license fees, should be
sufficient to fund research, development, testing, regulatory
10
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requirements, operating and other capital needs through the next twelve months.
The Company may need substantial additional financing in order to continue
development of and commercialize certain of its proposed products and other
potential products after June 1998. The Company has no binding commitments from
any third parties to provide funds to the Company.
RECENTLY ISSUED ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128 (SFAS 128), "Earnings Per Share". SFAS
128 establishes standards for computing and presenting earnings per share. In
accordance with the effective date of SFAS 128, the Company will adopt SFAS 128
as of February 28, 1998. This statement is not expected to have a material
impact on the Company's financial statements.
PART II: OTHER INFORMATION
Item 5: Other Information
International Distribution Agreement
The Company entered into an agreement dated June 10, 1997 with Medison Co. Ltd.
(Medison) of Seoul, Korea for the distribution of ColorMark'r' Systems
throughout the Far East. Medison has agreed to order a certain minimum number of
ColorMark'r' Systems within the next twelve months.
Item 6: Exhibits and Reports on Form 8-K
A) Exhibits
10.22 International Distribution Agreement dated June 10, 1997 between
the Company and Medison Co. Ltd.*
27) Financial Data Schedule
B) There were no reports on Form 8-K filed during the quarter ended May 31,
1997.
* The Company has requested confidential treatment of certain
provisions contained in Exhibit 10. The copy filed as an exhibit
omits the information subject to the confidentiality request.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant caused this Report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Date: July 21, 1997
EchoCath, Inc.
--------------------
(Registrant)
By: /s/ Frank DeBernardis
---------------------
Frank DeBernardis
President, Chief Executive Officer,
Principal Financial and Accounting
Officer
12
STATEMENT OF DIFFERENCES
------------------------
The registered trademark symbol shall be expressed as .....'r'
<PAGE>
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INTERNATIONAL DISTRIBUTION AGREEMENT
AGREEMENT, made as of this 1st day of April, 1997, by and between ECHOCATH,
INC., a corporation formed under the laws of the State of New Jersey, U.S.A.,
having its principal place of business at 4326 U. S. Route One, Monmouth
Junction, New Jersey 08852 (hereinafter referred to as "ECHOCATH"), and MEDISON
CO. LTD, having its principal place of business at 22-5, Chungmuro 5-ga,
Chung-gu, Seoul, 100-015 Korea (hereinafter referred to as "DISTRIBUTOR").
W I T N E S S E T H
WHEREAS, the parties desire to enter into an Agreement relating to the
distribution by Distributor of certain products manufactured or sold by
EchoCath; and
WHEREAS, Distributor agrees to distribute EchoCath's products subject to the
terms and conditions of this Agreement;
NOW, THEREFORE, in consideration of the premises and mutual covenants herein
contained, the parties hereto agree as follows:
1. DEFINITIONS: For the purpose of this Agreement, the following
definitions shall apply:
1.1 "TERRITORY" shall mean the geographic territory as specified in
Schedule A attached hereto, which schedule is hereby made a part of this
Agreement.
1.2 "PRODUCT" OR "PRODUCTS" shall mean those products of EchoCath and
its affiliates as specifically listed on Schedule A attached hereto. EchoCath
may, in its sole discretion, from time to time and at any time upon
30 days notice to Distributor add or delete any of its products to the
list of Products included on Schedule A upon written notice to Distributor;
provided, however, that EchoCath shall honor any order for a Product being
deleted which is accepted by EchoCath before the effective date of the deletion.
1.3 "QUALITY ASSURANCE STANDARDS" shall mean such government and
industry requirements for assuring quality of the Products and such other
reasonable requirements as may be appropriate in the industry and applicable to
products of the same type as the Products.
1.4 "APPROPRIATE REGULATORY AUTHORITIES" shall mean all governmental and
other regulatory agencies, authorities and commissions which are responsible for
(i) approving Products before they can be sold commercially within the Territory
or (ii) otherwise regulating the manufacturing, packaging, labelling, marketing,
advertising, storage, records and reports, and distribution of Products within
the Territory. Specifically included within this definition, but without in any
way limiting its generality, shall be the United Stated Food and Drug
Administration.
2. APPOINTMENT
2.1 APPOINTMENT. EchoCath hereby grants to Distributor during the term
of this Agreement the exclusive right to promote, sell and distribute the
Products within the Territory. It is understood that Distributor is an
independent contractor and that Distributor has the right to sell the Products
at any price or prices it may choose. Distributor may appoint one or more
sub-distributors, but such sub-distributors must adhere to the provisions of
this agreement. Notwithstanding the foregoing, Distributor may not sell Products
for use in the field of electrophysiology and/or for use in cardiac ablation or
pacemaker lead implantation or removal or procedures related thereto.
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DISTRIBUTION AGREEMENT
2.2 Distributor shall not make any warranties, representations, promises
or covenants on behalf of or for EchoCath to anyone, except such as may be
expressly approved in writing by EchoCath. Unless otherwise agreed in writing by
EchoCath, Distributor shall not during the term of this Agreement function as or
accept an appointment as a promoter, distributor or sales representative of any
third-party with respect to the sale or lease of any competitive products, or
their components or ancillary products (except in-so-far as Distributor's
ultrasound consoles may be deemed to be ancillary products are concerned), other
than the Products hereunder, or promote and/or sell and/or distribute the
Products for sale to anyone or in any place other than to the customers within
the Territory. For purposes of this Section 2.2, the term "Distributor" shall
also be meant to include any and all persons (whether such person be an
individual, a partner or a corporation) who control, are principal owners of, or
are otherwise acting as principals of the Distributor appointed herein.
2.3 DISTRIBUTOR'S OBLIGATIONS - SALES AND MARKETING. During the term of
this Agreement, Distributor shall undertake in good faith and shall use its best
efforts to promote, sell and distribute the Products within the Territory.
Furthermore, Distributor shall:
(a) Take all reasonable and necessary action to satisfy the
demand for the Products throughout the Territory and attempt to increase the
demand for such Products by, among other things, servicing all Customer accounts
with reasonable frequency and soliciting new buyers within the Customer market.
(b) Maintain adequate sales and warehouse facilities and employ a
sufficient number of personnel with experience reasonably satisfactory to
EchoCath to adequately promote the sale of Products.
(c) Maintain a sufficient inventory of Products, demonstration
units and support material to reasonably fulfill the requirements of its
Customers located in the Territory.
(d) Maintain adequate records concerning the sale of the Products
as required by Appropriate Regulatory Authorities including, without limitation,
complete and accurate records concerning the sale of the Products by product
numbers and by lot numbers.
(e) Submit to EchoCath (i) quarterly reports of quarterly sales
tracking data in units of product sales and quarterly sales data by hospital or
other appropriate facility and (ii) other reports at such times and in such
manner as EchoCath and Distributor mutually agree.
(f) Use only advertising literature provided or approved by
EchoCath (Distributor may translate such literature into the native language(s)
of the Territory) and develop a promotional program that takes into account the
local culture in each particular region within the Territory.
(g) Comply with any and all standard operating procedures
("SOPs") established by EchoCath as they relate to quality control, medical and
technical complaints, packaging, labelling, trademark usage and regulatory
procedures to the extent that EchoCath has furnished copies of such SOPs to
Distributor. In the event that local variations to the SOPs are needed due to
different market conditions, Distributor shall notify EchoCath in advance of any
such variation, which notice shall specify the actual variation(s) needed and
the justifications for such variance. In no event may any variation which
affects a Product's safety, efficacy or approved use in the United States be
submitted to any Appropriate Regulatory Authority or otherwise implemented
without EchoCath's prior written approval.
<PAGE>
<PAGE>
DISTRIBUTION AGREEMENT
2.4 DISTRIBUTOR'S OBLIGATIONS - LEGAL AND REGULATORY MATTERS.
Distributor, at its sole cost and expense (except as otherwise expressly
provided below), with sole responsibility in its capacity as Exclusive
distributor and in full compliance with all applicable laws and regulations,
including but not limited to those of all Appropriate Regulatory Authorities,
shall:
(a) Be responsible for identifying all regulatory requirements,
obtaining and maintaining in the name of EchoCath, all necessary approvals,
authorizations, registrations and/or licenses for the market, sale and
distribution of the Products; any and all such activities shall be coordinated
with EchoCath in order to avoid duplication of effort and unnecessary expense.
EchoCath shall provide Distributor with the information and materials for
submission to the Appropriate Regulatory Authorities as requested by such
Appropriate Regulatory Authorities. In making such submissions Distributor (i)
shall not make any statement or representation of any kind which is untruthful
or otherwise deceptive (ii) shall inform EchoCath of all material requested by
the Appropriate Regulatory Authorities (iii) shall submit only materials which
have been provided or approved by EchoCath for such purpose and/or which have
been prepared by Distributor using information accurately derived from such
materials (iv) shall not, without EchoCath's prior written permission, alter in
any way any material which EchoCath provides to Distributor for submission.
(b) Pay for all costs related to any clinical trial required by
any Appropriate Regulatory Authority with respect to a Product in order to
obtain its approval, registration or license. The parties shall endeavor to
discuss any protocols for clinical trials prior to any submission of such
protocols to any Appropriate Regulatory Authority.
(c) Store Products under their respective labelled conditions
using appropriate facilities and equipment which comply with current good
manufacturing procedures and practices.
(d) Distribute Products, and their respective labelling as
received from EchoCath without any modifications, unless such modifications are
required by Appropriate Regulatory Authorities (in which case Distributor shall
advise EchoCath before such modification is made) or are mutually agreed upon
prior to distribution. Distributor shall also provide appropriate language
translations for product literature and labels to facilitate the distribution of
Products within each country of the Territory.
(e) Exercise required vigilance with respect to any and all
charges, complaints and claims concerning the Products which are in the nature
of a legal claim or otherwise reportable to the Appropriate Regulatory
Authorities; immediately forward to EchoCath information concerning such
matters; cooperate with EchoCath in investigating such matters; maintain
adequate records so as to permit a recall of any Product or Product lot; and
cooperate with EchoCath in effecting a recall should one be deemed necessary by
EchoCath.
(f) Submit to EchoCath all written trademark, labelling, and
instructional materials, and other promotional items subject to regulatory
control to be used in connection with any Products.
(g) Advise EchoCath fully with respect to all safety,
environmental, and other standards, specifications, and other requirements
imposed by Appropriate Regulatory Authorities or otherwise by law, regulation or
order in the Territory and applicable to the Products and advise EchoCath of all
instructions, warnings and labels applicable to the Products that are necessary
or desirable under laws, regulations or practices in the Territory.
<PAGE>
<PAGE>
DISTRIBUTION AGREEMENT
2.5 ECHOCATH'S OBLIGATIONS - LEGAL AND REGULATORY MATTERS. EchoCath, at
its sole cost and expense shall:
(a) Supply all Products packaged and labelled (in the English
language unless otherwise agreed) in compliance with requirements in the country
of destination, provided Distributor has advised EchoCath of any particular
requirements.
(b) Promptly investigate all Product complaints received from
Distributor and advise Distributor, in writing of the results of any such
complaint investigation.
(c) Promptly advise Distributor if the recall of any Product or
any lot of any Product becomes necessary and assist Distributor in notifying all
customers and effecting the recall.
(d) Provide Distributor with advance notification of any material
changes or modifications of any Product which may affect the Product's
regulatory registration or approved indications.
2.6 RIGHT OF FIRST REFUSAL. In the event EchoCath shall finalize an
agreement wherein a third party is to be appointed as an exclusive distributor
of the Products in any one or more countries outside of the Territory, then and
in that event, Distributor shall have the right of first refusal to accept such
appointment on the exact same terms and conditions, including any and all sales
performance requirements, that EchoCath shall have offered to the third party.
EchoCath shall provide Distributor with written notice of such pending
appointment and Distributor shall have five business days to accept the
appointment. Failure to respond within that time period shall be deemed a
rejection by Distributor of the appointment. It is expressly acknowledged that
this provision shall not survive any merger or acquisition of EchoCath and in
the event of such a transaction, neither EchoCath, the acquiring company or the
surviving company shall be bound by the terms of this paragraph.
3. SUPPLY OF PRODUCT AND PACKAGING.
3.1 EchoCath shall sell to Distributor and Distributor shall purchase
from EchoCath all of its requirements of the Products according to the terms
hereof.
3.2 The "General Terms and Conditions" set forth in Schedule C attached
hereto shall apply with respect to all Products sold pursuant to this Agreement
and are hereby incorporated as part of this Agreement.
4. ANNUAL BUSINESS PLAN
4.1 The representatives of the Distributor and EchoCath will meet at
least once per calendar year to discuss sales forecasts, budgets, customer
issues, demographics, and other items as they arise.
5. PERFORMANCE REQUIREMENTS
5.1 During each twelve-month period of this Agreement, Distributor
agrees to purchase a sufficient quantity of Products to meet the performance
requirements set forth on Schedule B of this Agreement; such performance
requirements may be modified by mutual written agreement of EchoCath and
Distributor. Any failure by Distributor to make purchases at or above the
performance requirements set forth on Schedule B attached hereto shall be deemed
a material breach hereof and this Agreement may be terminated immediately by
EchoCath. The parties agree to meet prior to the end of the twelve month period
to negotiate performance requirements for the subsequent twelve month period
based upon the previous year's actual sales performance.
<PAGE>
<PAGE>
DISTRIBUTION AGREEMENT
6. TERM OF AGREEMENT
6.1 This Agreement shall become effective upon the date first above
written (the "Effective Date") and shall expire on the first anniversary of the
Effective Date unless sooner terminated in accordance with the terms and
conditions hereof. After such initial period the parties may agree to renew this
Agreement for additional periods; provided that (i) the parties shall have
mutually agreed in advance as to the performance goals and other terms
applicable to such renewal term and (ii) any such renewal shall be in writing
and signed by both parties.
6.2 This Agreement may be terminated by either party: (a) at any time
during the initial term or any subsequent renewal hereof, upon written notice to
the other party by reason of any default or breach of this Agreement; provided
that, the defaulting party shall have received prior written notice of the
specific default or breach and has failed to cure the default within thirty (30)
days after a notice sent by the aggrieved party to the defaulting party (except
that if such breach is not curable such termination shall be effective on the
date of such notice), or (b) immediately with or without the giving of notice,
if the other party shall file a petition in bankruptcy, or shall be adjudicated
a bankrupt, or shall take advantage of the insolvency laws of any state or
country, or shall make an assignment for the benefit of creditors, or shall be
voluntarily or involuntarily dissolved, or shall have a receiver, trustee or
other court officer appointed for its property.
6.3 Upon the termination of this Agreement, the Distributor shall
immediately remove all displays, signs and decals and cease to represent itself
as an authorized Distributor of EchoCath Products and shall otherwise desist
from all conduct or representation which might lead the public to believe that
Distributor is so authorized. Thereafter Distributor immediately shall
discontinue all display of EchoCath's trademarks.
6.4 Upon termination of this Agreement, Distributor shall promptly upon
request by EchoCath (i) take any and all action necessary and appropriate and
(ii) cooperate with EchoCath, in order to effect the orderly transfer to
EchoCath (or to any legally permissible EchoCath designee) of any and all of the
approvals, authorizations, registrations and/or licenses from Appropriate
Regulatory Authorities in the Territory in order to permit continued marketing,
sale and distribution of the Products by EchoCath (or by such EchoCath
designee).
6.5 Any termination of this Agreement shall not be an exclusive remedy,
but shall be in addition to any legal or equitable remedies available. Neither
the termination nor non-renewal of this Agreement shall release Distributor from
the obligation to pay any sum that may be owing to EchoCath (whether then or
thereafter due) or operate to discharge any liability that had been incurred by
Distributor prior to any such termination. Except as qualified by the preceding
sentence, neither party shall, by reason of the termination or non-renewal of
this Agreement be liable to the other for any damages (whether direct,
consequential, incidental, or other including, without limitation, expenditures,
loss of profit or projected profits of any kind whatsoever), sustained by reason
of any such termination.
7. NOTICES
Any notice required or permitted to be given hereunder shall be in
writing, shall be effective when actually delivered and shall be either (i)
delivered personally by hand, (ii) sent by registered or certified mail, or
(iii) sent by an internationally recognized and qualified delivery service
(e.g., Federal Express or DHL). All such notices shall be sent postage prepaid
to the addresses of each party set forth at the beginning of this Agreement or
to such other address or addresses as shall be designated in writing.
8. MISCELLANEOUS
<PAGE>
<PAGE>
DISTRIBUTION AGREEMENT
8.1 GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with the laws of the State of New Jersey (U.S.A.). The provisions of
the Uniform Commercial Code as adopted by the State of New Jersey (U.S.A.) and
not the Convention on Contracts for the International Sale of Goods shall apply.
For purposes of this Agreement, Distributor agrees to accept personal
jurisdiction in the State of New Jersey (U.S.A.). Furthermore, Distributor (i)
agrees that exclusive venue for any and all litigation concerning this Agreement
shall be in the State of New Jersey (U.S.A.), (ii) waives any claim of lack of
jurisdiction, and (iii) agrees that any judgment rendered in EchoCath's favor
against Distributor may be enforced in the country where Distributor's offices
and/or Distributor's assets are located.
8.2 LOCAL LAW. The Distributor shall notify EchoCath of the existence
and content of any mandatory provision of law in the Territory or any other
applicable law that conflicts with any provision of this Agreement at the time
of its execution or thereafter. Any failure by Distributor to comply with the
provisions of this Section 8.2 shall constitute a material breach by Distributor
which shall entitle EchoCath to terminate this Agreement effective immediately
upon notice to the Distributor.
8.3 ENTIRE AGREEMENT. This Agreement sets forth the entire understanding
between the parties with respect to the matters dealt with herein and
specifically supersedes any and all purchase or other agreements previously
entered into by the parties covering the sale of the Products. Neither party has
made nor relied upon any warranties or representations not specifically set
forth in this Agreement. No modification of any of the provisions contained
herein may be made except in writing, in each instance signed by and on behalf
of the party against which enforcement is being sought. In the event of any
conflict between this English version of this Agreement and any translation
(whether signed or unsigned by the parties) of this English version, this
English version shall prevail.
8.4 WAIVER. Any waiver or excuse of non-performance or non-compliance
with the terms of this Agreement granted by one party in favor of the other
party for any given occasion shall not be effective and shall not be construed
as a total waiver or excuse of non-performance or non-compliance for any
subsequent occasions.
8.5 BENEFIT AND ASSIGNMENT. Neither party shall, without the consent of
the other, assign or transfer this Agreement or any rights or obligations
hereunder, except that, upon notice to Distributor, EchoCath (or its authorized
assignee) may assign or transfer this Agreement to a successor organization in
the event of merger, consolidation or transfer or sale of all or substantially
all of its assets and in the case of any such assignment or transfer, this
Agreement shall be binding upon and inure to the benefit of such successor
organization, and such party shall remain fully liable hereon.
8.6 SEVERABILITY. The invalidity or enforceability of any term,
provision, clause, or any portion thereof of this Agreement shall in no way
impair or affect the validity or enforcement of any other provision of this
Agreement, which remains in full force and effect.
8.7 RELATIONSHIP BETWEEN THE PARTIES. The relationship between Buyer and
Seller is that of vendee and vendor. Neither party, nor its agents and
employees, shall under any circumstances be deemed agents or representatives of
the other and neither shall have authority to act for and/or bind the other in
any way, whether express or implied, or represent that it is in any way
responsible for acts of the other. This Agreement does not establish a joint
venture, agency nor partnership between the parties, nor does it create an
employer/employee relationship.
8.8 SCHEDULES. The Schedules and Addenda (if any) attached hereto are
hereby made a part of this Agreement as if fully included herein.
<PAGE>
<PAGE>
DISTRIBUTION AGREEMENT
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
WITNESS: ECHOCATH, INC.
[SIGNATURE]
BY: Frank DeBernardis
-----------------------------------
TITLE: President June 10,1997
--------------------------------
WITNESS: DISTRIBUTOR:
[SIGNATURE]
BY: [SIGNATURE]
-----------------------------------
TITLE: CTO/Vice President June 10, 1997
---------------------------------
<PAGE>
<PAGE>
DISTRIBUTION AGREEMENT
SCHEDULE A
SCHEDULE OF TERRITORY, PRODUCTS, PRICING AND CUSTOMERS
1. The term "Territory" shall include the following geographic areas:
South Korea
Japan
Taiwan
The Peoples Republic of China
Thailand
The Philippines
Malaysia
Myanmar
Cambodia
Vietnam
Laos
Indonesia
Mongolia
Distributor expressly agrees that it shall be bound by and shall comply with any
rules or regulations promulgated by the United States barring or regulatory
trade with any country within the Territory. Nothing herein is intended to imply
that EchoCath has determined that sales of the Products are legally permissible
to any country in the Territory.
2. The term "Product(s)" shall mean the Color Mark System consisting of the
following, and their corresponding prices.
(Information omitted and filed separately with the Commission under
rule 24B-2)
SCHEDULE B
(Information omitted and filed separately with the Commission under
rule 24B-2)
<PAGE>
<PAGE>
SCHEDULE C - GENERAL TERMS AND CONDITIONS - CONTINUED
SCHEDULE C
GENERAL TERMS AND CONDITIONS
C1. PRICE AND PAYMENT
C1.1 PRODUCT PRICES. Subject to the requirements of Section C1.2 below,
the price per unit of any Product shall be the respective price as stated on the
Schedule A, attached hereto and made a part hereof.. All prices shall be F.O.B.
Monmouth Junction, New Jersey. Distributor shall bear all costs and expenses
including but not limited to any taxes, levies, duties or fees of any kind,
nature or description whatsoever, incident or applicable to the shipment of any
Products sold to Distributor; any and all such costs and expenses paid by
EchoCath shall be separately billed to the Distributor in accordance with
EchoCath's standard shipping policies.
(C1.2 Information omitted and filed separately with the Commission under
rule 24B-2)
C1.3 INVOICES. All invoices submitted by EchoCath to Distributor shall
be payable by Distributor in United States by means of one or more letters of
credit for the benefit of EchoCath, in form and substance acceptable to
EchoCath, to provide payment for Product. If payment is not received within the
prescribed period, then (i) EchoCath may notify Distributor of such failure and
(ii) interest shall accrue on any unpaid balance from the date of the invoice at
the rate of 1.5% per month (18% per annum), but, in no event at a rate greater
than the maximum rate permitted by applicable law. All payments are payable in
U.S. dollars only unless EchoCath shall otherwise agree to in writing prior to
Distributor tendering payment.
<PAGE>
<PAGE>
SCHEDULE C - GENERAL TERMS AND CONDITIONS - CONTINUED
C2. PURCHASE ORDERS; DELIVERY OF PRODUCT
C2.1 All orders for Products shall be made on Distributor's purchase
order forms. Each purchase order or any acknowledgment thereof, whether printed,
stamped, typed or written shall be governed by the terms of this Agreement and
none of the provisions of such Distributor purchase orders or acknowledgments
shall be applicable, except those specifying the quantity of Products ordered,
or general delivery date and shipping instructions and other general
non-contractual invoice information.
C2.2 In order to plan manufacturing capacity and to order raw materials
from vendors, EchoCath required and Distributor shall provide on the first day
of each month the following: a) a six month rolling forecast for purchases of
the Products for each month during that period; and b) a three month firm
purchase order for the number of units to be purchased of the products during
that period. EchoCath shall be required to deliver the number of units in the
firm three month purchase order, provided the number of units does not exceed
33% above the units anticipated by the six month forecast for the corresponding
period. Orders which exceed such amount shall be addressed on a best efforts
basis by EchoCath. In no event, however, is EchoCath required to divert orders
from its other customers in order to meet such coverage in Distributor's firm
purchase order. Distributor's firm purchase order shall also not be for an
amount of units equal to or less than 50% of the amount anticipated for the
corresponding period by the six month forecast. In the event Distributor's firm
purchase order shall not meet such minimum requirements, Distributor upon
EchoCath's request, shall reimburse EchoCath for the cost of raw materials
(including transportation charges) purchased in anticipation of meeting 100% of
the amount anticipated for that period by the six month forecast.
C3. REJECTION
C3.1 If Distributor reasonably determines that a Product does not
conform to EchoCath's product specifications or is otherwise defective,
Distributor may reject such Product, but such rejection must be made by written
notice mailed within thirty (30) days after discovery of such non-conformance or
defect. Failure to notify EchoCath shall constitute acceptance.
C3.2 EchoCath shall have the right to either replace any properly
rejected Product or otherwise cure the non-conformance within forty-five (45)
days after the date of such written notice. If the non-conformance cannot be
remedied within such 45-day period of time, Distributor's exclusive remedy shall
be a refund of the purchase price paid by Distributor for the non-conforming
Product, such reimbursement to be initially by credit to Distributor's account
and then in cash if no charges arise within ninety (90) days to which such
credit may be applied. Distributor shall return the non-conforming goods to
EchoCath at EchoCath's request and expense.
C3.3 The term "non-conformance" as used in this Article shall not be
meant to include the fact that the Products have become outdated after receipt
by Distributor.
C4. TRADEMARKS; OWNERSHIP OF DATA; CONFIDENTIALITY
C4.1 Distributor shall acquire no rights under this Agreement in any
product, patent, trademark or trade names of EchoCath, EchoCath's parent
company, or their affiliates, except as is, in EchoCath's sole discretion,
consistent with Distributor's right to offer for sale and sell the Products
under the terms of this Agreement. Distributor admits and acknowledges that
EchoCath is the sole and complete owner of such names and marks. Without
limiting the generality of the foregoing, Distributor shall not register, or
attempt to register,
<PAGE>
<PAGE>
SCHEDULE C - GENERAL TERMS AND CONDITIONS - CONTINUED
any trademark, trade name, service mark or logo now or hereafter owned, licensed
or used by EchoCath (collectively "Trademarks") in any country except where such
registration is made at the request of, in the name of, and for the benefit of,
EchoCath as owner of the Trademarks and is in furtherance of the purposes of
this Agreement. In no event shall Distributor cause or permit itself to be
registered as the exclusive licensee of the Trademarks.
C4.2 Distributor will promptly notify EchoCath of any infringement or
threatened infringement of any patents, trademarks or trade names under which
EchoCath's products are sold of which Distributor becomes aware, and will at
EchoCath's request, assist EchoCath in preventing or eliminating such
infringement.
C4.3 Distributor shall not disclose to any person or entity, or permit
to be disclosed by any of its employees, officers, directors or agents, any
confidential information of EchoCath except for disclosures authorized in
writing by appropriate officers of EchoCath. For purposes of this Agreement,
"confidential information" shall include such information as know-how relating
to the Products, product development data, customer lists, marketing business
information and trade secrets, which are acquired by Distributor from EchoCath
during the term of this Agreement. This restriction on disclosure shall not
apply if such information is ascertainable from public or published information
from trade sources. This provision shall survive termination of this Agreement.
C5. REPRESENTATIONS AND WARRANTIES
C5.1 EchoCath represents and warrants that all Products shall be
manufactured in accordance with its specifications and appropriate Quality
Assurance Standards and shall meet all requirements set by the U.S. Food and
Drug Administration and comparable requirements of the European Community as
they become effective.
C5.2 The obligation of EchoCath under this warranty shall be strictly
and exclusively limited to repair, replacement or refund at the sole option of
EchoCath; EchoCath specifically disclaims liability for any damages (whether
direct or indirect, consequential, incidental or otherwise), including, without
limitation, expenditures, or loss of profits or projected profits.
C5.3 Distributor agrees and acknowledges that ALL OTHER WARRANTIES,
EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION, ANY WARRANTY OF
MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE, WITH RESPECT TO THE
PRODUCTS ARE EXPRESSLY EXCLUDED FROM THIS AGREEMENT OR ANY SALE PURSUANT HERETO.
Furthermore, the warranty stated herein shall not apply or be available to: (a)
any Product which, after shipment by EchoCath, is damaged, altered in any
respect, or subject to negligent treatment; (b) any consumer or user subsequent
to the initial purchaser from Distributor or Subdistributor; or (c) any Product
or under any circumstances more than two (2) years from the date the Product is
shipped to Distributor (except where a longer warranty period is specified in
writing by EchoCath with respect to a particular Product).
<PAGE>
<PAGE>
SCHEDULE C - GENERAL TERMS AND CONDITIONS - CONTINUED
C5.4 Distributor represents and warrants that it is not subject to any
conflicting obligations which might prevent it from, or interfere with, its
execution of this Agreement or its performance hereunder.
C6. INDEMNIFICATION
C6.1 Distributor shall indemnify and hold EchoCath harmless from,
against, for and in respect of any and all damages, losses, costs and expenses
(including, without limitation, reasonable attorneys' fees) arising out of any
suit, action or proceeding relating in any manner to Distributor's sale of
Products or performance of obligations hereunder, unless and to the extent that
such injury or damage is caused, directly or indirectly, by any contributing act
or omission, negligent or otherwise, of EchoCath, its directors, officers,
employees, servants or agents.
C7. EXEMPTIONS FROM PERFORMANCE REQUIREMENTS
No failure or delay in performance by either Distributor or EchoCath
shall give rise to any claims for damage if, and to the extent, such failure or
delay is caused by any one of more of the following: (a) Acts of God, fires or
flood; (b) Acts of public enemy; (c) Acts of governmental authority; (d)
Expropriation or confiscation of any plant, plant site or any of facilities
thereon; (e) Compliance with any law or regulation or the order of any court or
governmental authority; (f) Acts of war, rebellion, sabotage, riots, civil
disorders or explosions; (g) Strikes or labor disputes; (h) Unavoidable
casualties; (i) any delays in obtaining required regulatory approvals despite
diligent efforts by EchoCath or Distributor, as the case may be; or (ii) Any
other cause beyond EchoCath's and Distributor's reasonable control.
Notwithstanding the foregoing, neither party shall be excused by reason of the
above-described events from any obligation to pay money when due hereunder or
under any invoice.
C8. GOVERNMENTAL CONSENT TO EXPORTATION. This Agreement is made subject to any
restrictions concerning the export of products or technical information from the
United States which may be imposed upon or related to EchoCath or Distributor
from time to time by the Government of the United States. Furthermore,
Distributor agrees that it will not export, directly or indirectly, any
technical information acquired from EchoCath under this Agreement or any
products utilizing such technical information to any countries for which the
United States Government or any agency thereof at the time of export requires an
export license or other governmental approval, without first obtaining the
written consent to do so from the Department of Commerce or other agency of the
United States Government when required by applicable statute or regulation.
C9. IMPORT LICENSES, EXCHANGE CONTROLS, AND OTHER GOVERNMENTAL APPROVALS;
COMPLIANCE. The Distributor shall, at its expense, obtain any and all import
licenses and governmental approvals that may be necessary to permit the sale by
EchoCath and the purchase by the Distributor of Products hereunder, comply with
all registration requirements in the Territory, obtain such approvals from the
banking and other governmental authorities of the Territory as may be necessary
to effect payment of all amounts due hereunder to EchoCath, and comply with any
and all governmental laws, regulations, and orders that may be applicable to the
Distributor by reason of its execution of this Agreement including any
requirement to be registered as EchoCath's independent distributor with any
governmental authority, and including any and all laws, regulations, or orders
that govern or affect the ordering, export, shipment, import, sale (including
government procurement), delivery, or redelivery or Products in the Territory.
The Distributor shall furnish EchoCath with such documentation as EchoCath may
request to confirm the Distributor's compliance with this paragraph C9 and
agrees that it shall not engage in any course of conduct that, in EchoCath's
reasonable belief, would cause EchoCath to be in violation of the laws of any
jurisdiction.
<PAGE>
<PAGE>
SCHEDULE C - GENERAL TERMS AND CONDITIONS - CONTINUED
C10. QUESTIONABLE PAYMENTS. The Distributor certifies that neither it, nor any
of its directors, officers, employees, or agents is an official, agent, or
employee of any government of governmental agency or political party or a
candidate for any political office on the date of this Agreement. The
Distributor shall promptly notify EchoCath of the occurrence of any event that
would or may result in an exception to the foregoing representation. The
Distributor shall not, directly or indirectly, in the name of, on behalf of, or
for the benefit of EchoCath offer, promise or authorize to pay, or pay any
compensation, or give anything of value to, any official, agent, or employee of
any government or governmental agency, or to any political party or officer,
employee, or agent thereof. The Distributor shall require each of its directors,
officers, employees, and agents to comply with the provisions of this Section
C10. Any failure by Distributor to comply with the provisions of this Section
C10 shall constitute a material breach of this Agreement by Distributor which
shall entitle EchoCath to terminate this Agreement effective immediately on
notice to the Distributor.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-START> SEP-1-1996
<PERIOD-END> MAY-31-1997
<PERIOD-TYPE> 9-MOS
<CASH> 1,558,106
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 194,222
<CURRENT-ASSETS> 1,829,677
<PP&E> 634,276
<DEPRECIATION> 310,240
<TOTAL-ASSETS> 2,434,400
<CURRENT-LIABILITIES> 408,998
<BONDS> 0
<COMMON> 9,545,858
0
1,374,989
<OTHER-SE> 10,290,049
<TOTAL-LIABILITY-AND-EQUITY> 2,434,400
<SALES> 155,010
<TOTAL-REVENUES> 305,010
<CGS> 38,629
<TOTAL-COSTS> 38,629
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 46,746
<INCOME-PRETAX> (2,097,941)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,097,941)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,097,941)
<EPS-PRIMARY> (.92)
<EPS-DILUTED> (.92)
</TABLE>
