UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS UNDER SECTION 12(b) OR 12(g)
OF THE SECURITIES EXCHANGE ACT OF 1934
Medsearch Technologies, Inc.
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(Name of Small Business Issuer in its Charter)
Delaware 13-4070962
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(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
40 Wall Street, New York, New York 10005
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(Address of Principal Executive Offices) (Zip Code)
(212) 943-6000
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(Issuer's Telephone Number)
Securities to be registered pursuant to Section 12(b) of the Act:
None
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock, $.001 par value for per share
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(Title of Class)
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AVAILABLE INFORMATION
Subsequent to the date of this Registration Statement, Medsearch
Technologies, Inc. ("Medsearch" or the "Company") will be subject to the
information requirements of the Securities Exchange Act of 1934, as amended
("Exchange Act") and in accordance therewith will file reports and other
information with the Securities and Exchange Commission (the "Commission").
Reports and other information filed by the Company with the Commission can be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington D.C. 20549, and at
the Commission's New York Regional office at Seven World Trade Center, Suite
1300, New York, New York 10048. Copies of such material can also be obtained
from the Public Reference Section of the Commission, Washington, DC 20549 at
prescribed rates.
This Registration Statement, as well as all amendments thereto and
subsequent reports, have been and will be filed through the Electronic Data
Gathering, Analysis and Retrieval ("EDGAR") system. Documents filed through
EDGAR are publicly available through the Commission's Website at
http:/www.sec.gov.
The Company has filed with the Commission this Registration Statement
on Form 10-SB (together with all amendments and exhibits filed or to be filed in
connection herewith, the "Registration Statement") under the Exchange Act, with
respect to the Company's common stock, $.001 par value per share (the "Common
Stock"). Statements contained herein as to the contents of any document are
summaries of such documents and, in each instance, reference is hereby made to
the copy of such document filed as an exhibit to the Registration Statement, and
each such statement is qualified in all respects by such reference. All material
information relating to such exhibits are discussed in this Registration
Statement. The Registration Statement may be inspected and copied at the places
set forth above.
In addition to the foregoing, the Company will furnish to registered
holders of its Common Stock annual reports containing audited financial
statements, with an opinion expressed by the Company's independent auditors.
Such audited financial statements will be prepared in conformity with generally
accepted accounting principals ("GAAP"). The Company may furnish to registered
holders of its Common Stock unaudited financial statements on a quarterly basis,
such unaudited financial statements to be prepared in conformity with GAAP. The
Company will also furnish to registered holders all notices of stockholder's
meetings and other reports and communications of the Company.
The Company's principal executive offices are located at 40 Wall
Street, New York, NY 10005, and its telephone number is (212) 943-6000.
As of November 30, 1999 there were 6,534,582 shares of Common Stock
issued and outstanding held by 484 holders of record.
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PART I
ITEM 1. BUSINESS
FORWARD LOOKING STATEMENTS
Certain information contained in this Registration Statement are
forward-looking statements (within the meaning of Section 27A of the Securities
Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934,
as amended). Factors set forth that appear with the forward-looking statements
could cause the Company's actual results to differ materially from those
expressed in any forward-looking statements made by, or on behalf of, the
Company in this Registration Statement. Such potential risks and uncertainties
include, but are not limited to, the risk factors contained in the Registration
Statement including those relating to the Company's history of losses and early
stage of development. See "Risk Factors" below. The Company undertakes no
obligation to publicly release the results of any revisions to these
forward-looking statements which may be made to reflect events or circumstances
occurring after the date hereof or to reflect the occurrence of unanticipated
events. The safe harbor for forward looking statement does not apply to
statements made in connection with an initial public offering.
GENERAL/HISTORICAL INFORMATION
The Company was originally incorporated in 1986 under the laws of the
State of Nevada (under the name Best Resources, Inc. which later changed its
name to Diversified Concepts, Inc.). The Company was originally organized to
engage in investments and business development operations related to the sale of
lobster which was imported from Ecuador. Due to lack of sales, the Company
ceased selling lobster and began searching for a new business.
In June 1998, the Company consummated a 1-for-100 reverse stock split
resulting in a post-split capitalization of approximately 379,600 shares of
outstanding common stock. In June 1998, Mr. Jacob Meller, the Company's
President, purchased 214,600 of such outstanding shares from certain principal
stockholders (the former directors) of the Company. As a result of such
transaction, Mr. Meller owned approximately 57% of the outstanding stock, the
three principal shareholders owned approximately 35% (131,400 shares) and the
public shareholders owned the remaining 8% (33,600 shares). Simultaneously with
this transaction, a new board of directors was appointed consisting of Mr.
Meller and Ms. Frieda Goldstein.
The Company (the Diversified) changed its name to MedSearch, Inc. in
September 1998 to reflect its new direction as a medical device
research/development and distribution/marketing company. Medsearch Technologies,
Inc. was incorporated on April 12, 1999 pursuant to the laws of the State of
Delaware as the successor to Medsearch, Inc. It was organized to effectuate a
reincorporation of Medsearch, Inc. with and into Medsearch Technologies, Inc. on
August 11, 1999. The Company maintains its executive offices at 40 Wall Street,
New York, NY 10005 and its telephone number is (212) 943-6000.
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In October 1998, the Company acquired 70% of the outstanding stock of
Meduck Technologies, Ltd. ("Meduck") in consideration for the issuance of
700,000 shares of its Common Stock. Meduck is a medical device research and
development company based in Israel.
In October 1998, the Company acquired 100% of the outstanding stock of
Optimart Imports, Inc. ("Optimart") in consideration for the issuance of 500,000
shares of its Common Stock and $250,000. Optimart is a company that imports
optical products.
In June 1999, the Company acquired 100% of the outstanding stock of TNJ
Products, Inc. ("TNJ") in consideration for the issuance of 600,000 shares of
its Common Stock. TNJ is a medical product distribution company.
In June 1999, the Company sold Optimart to its original owners for the
return of 150,000 shares of the Company's Common Stock (to the treasury) and
$250,000 (payable in installments between June 1, 2000 and December 1, 2000).
Although Optimart generated profits, the Company based this decision on its
desire to focus solely on medical devices.
In July, 1999, the Company acquired an additional 27% of the
outstanding stock of Meduck, bringing the Company's interest in Meduck to 97%.
In August 1999, the Company acquired 100% of the outstanding stock of
M&W Medical Supply, LLC ("M&W") in consideration for the issuance of 50,000
shares of its Common Stock, 100,000 warrants with an exercise price of $2.00,
and 100,000 warrants with an exercise price of $3.00. M&W holds patents and
trademarks on an existing product called the SCOPESHIELD(TM).
THE COMPANY
MedSearch has three subsidiaries: Meduck, TNJ, and M&W.
MEDUCK: MedSearch acquired 70% of Meduck in October 1998. Based in
Israel, Meduck is a medical device research and development company specializing
in unique, non-invasive, high quality products. To date, the Company has
developed products in the field of anesthesia and urology. The Company is also
developing products in the fields of neurology and sleep medicine. In June 1999,
Meduck issued an additional 27% of its shares to Medsearch, bringing the
Company's interest in Meduck to 97%.
TNJ: MedSearch acquired 100% of TNJ in June 1999. TNJ is a
Chicago-based medical product distribution company with nationwide sales
representatives. TNJ offers rehabilitative breast cancer services and sells
breast cancer related products on the premises of the University to Chicago
Hospital and in central Chicago area. TNJ is licensed to distribute the Israeli
developed and manufactured "Lympha-Press" and "Ballancer" products.
M&W: MedSearch acquired 100% of M&W in August 1999. M&W holds patents
and trademarks on an existing product called the "SCOPESHIELD(TM)", a unique
disposable stethoscope cover which shields stethoscope from hazardous
microorganisms.
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MEDUCK
Meduck was acquired by MedSearch in October 1998. Meduck develops
unique, non-invasive medical devices geared toward different segments of the
medical device market. Meduck's products in development include products in the
fields of urology, anesthesia, neurology and sleep medicine. Meduck has no
products in the market and no sales. The products developed by Meduck are in
varied stages of development.
Meduck's staff includes highly qualified, experienced personnel with
degrees from internationally recognized universities. Meduck's research and
development is based on the collaboration of physicians and surgeons, leading
academic researchers in the field of biomedical engineering and engineers well
experienced in the medical device industry. Meduck plays a significant role in
the expected overall operations of the Company.
PRODUCTS
SYMDEX 1000' DEPTH OF ANESTHESIA MONITOR
In December 1998, MedSearch announced the development of a unique
(patent pending) product called the 'Symdex 1000' Depth of Anesthesia Monitor
("Symdex 1000"). The 'Symdex 1000' measures the depth of anesthesia via the
sympathetic nervous system (the neurological system of the body that reacts to
pain). The activity of the sympathetic nervous system is displayed on a screen
to alert the anesthesiologist as to whether or not the patient is asleep during
anesthesia.
Although patients may seem deeply asleep during surgery, this may not
be the case at all. At times, due to the muscle relaxants administered at the
beginning of the anesthetic process, the patient is awake and aware, but
physically paralyzed and incapable of moving to alert the anesthesiologist that
he is awake. If the patient is not deep enough asleep, he may accumulate
explicit and implicit memories which can trigger severe sleep disorders,
emotional stress of varying degree, and mental disorders.
While existing monitors measure brain waves (EEG) and muscle movements,
these measurements are, in the opinion of management, frequently inaccurate
because EEG requires the absence of outside influences such as electrical noise
caused by electrical incision tools, that are impossible to eliminate during
surgery. Because of the unreliability of existing monitors, anesthesiologists
sometimes administer extra medication. Over-administration of anesthetic
medication can prolong patient recovery rates and lengthen hospital stays. The
'Symdex 1000' utilizes temperature and other parameters to measure sympathetic
activity. This measurement of sympathetic activity provides the physician with a
more accurate measurement of patient awareness.
Medsearch's depth of anesthesia device incorporates advanced techniques
of evaluation. It evaluates on-line sympathetic activity and correlates the
information with existing parameters. Medsearch's patent pending algorithms
enable the physician to monitor 'old' and 'new' parameters from the
anesthesiologists perspective.
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The anesthesia monitor utilizes the measurement and analysis of
peripheral sympathetic activity. Sensors composed of existing temperature and
other components measure temperature, blood flow, heart rate and various other
parameters. These parameters are analyzed in real time by unique algorithms and
filters that determine sympathetic activity. According to the American Society
of Anesthesiologists, the parameters utilized by the Symdex 1000 are standard
practice during surgery.
The information is then transmitted via small, disposable sensors that
are attached to a finger on each of the patient's hands or to the patient's
earlobes. The information can be correlated with other signals such as EEG, ECG,
and others. The basic analyzed information is displayed on a monitor screen for
professional viewing.
The 'Symdex 1000' has 2 components - The Add-On Monitor and the
Multi-Parameter Monitor. The Add-On Monitor is the basic hardware and software
incorporated into a compact unit intended as an add-on to existing monitors in
the operating room. The Multi-Parameter Monitor is a complete system; it
includes a large monitor for viewing parameter correlations between the various
data types and the ability to record the data for future viewing and analysis.
The Company is in the process of preparing the documentation necessary
for its FDA filing. The Company intends to begin pre-marketing the "Symdex 1000"
in the last quarter of 2000.
COMPETITION - ANESTHESIA MONITORS
To date, anesthesiologists measure the depth of anesthesia utilizing a
few devices- none of which measure sympathetic activity. Though there is
constant research in this area, most efforts to develop a depth of anesthesia
monitor have failed. These efforts include the monitoring of brain waves, muscle
movement, and various physiological parameters which, in the opinion of
management, provide limited results. To management's knowledge, devices
currently on the market are based on different measurements including EEG, heart
rate, blood pressure and temperature, none of which, in management's belief, are
reliable as the measurement of sympathetic activity.
Current research is based around EEG (brain waves) and although there
is accumulated clinical data that sophisticated analysis of brain waves can, in
some cases, reliably monitor the depth of anesthesia, there are quite a few
limitations. The EEG is a good indicator of anesthetic depth only under certain
restricted conditions such as the absence of surgical stimulation, outside
influences such electrical and physiological noise. EEG monitoring involves the
precise placement of between 2 and 12 electrodes on the patient's scalp. The
existence of electrodes on the patients body can be an impediment to surgeons
who need easy access to the area.
THE MARKET FOR THE SYMDEX 1000
There has been tremendous growth in the last decade in the number of
surgical procedures performed annually. According to Time.com, over 20 million
surgical procedures are performed in the U.S. every year. This number does not
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include dentistry, abortion, family planning, birthing, pain-block and small
clinic-based procedures which account for a further 9 million annual surgical
procedures.
In the cost cutting climate of healthcare industries all over the world
there has been a natural transfer to outpatient (ambulatory) surgery. Reduced
reimbursement fees are forcing more and more hospitals to perform as many
surgical procedures as possible on an outpatient basis. In order to achieve
minimal patient recovery time, surgical procedures need to be brief. An
important factor in shortening the patient recovery period is minimizing the
amount of anesthesia a patient receives. This requires precise monitoring of the
patient in order to enable precise control of anesthetics delivery.
The trend of shortening post-surgery recovery periods applies not only
to outpatients but to inpatients as well. Patients are now quickly moved out of
expensive areas such as critical care units and into step-down units in an
effort to lower costs. There is also a definite trend towards placing patients
as quickly as possible into alternate site care for post-surgical recovery and
rehabilitation. The shifting markets and the rise in the number of surgeries
have led to an increase in sales of innovative surgical equipment, driving
revenues up sharply. The anesthesia monitoring market should continue to provide
stable and promising growth for manufacturers with innovative products designed
to meet the changing market needs.
NOCTURNAL PENILE TURNESCENCE AND RIGIDITY ("NPTR")
Over 20 million men in the United States experience complete erectile
dysfunction and over 10 million men experience partial erectile dysfunction.
Research has shown that approximately 25% of impotence cases are caused by
psychological factors while 75% of impotence cases are caused by physiological
factors. The majority of these men are 40 years of age or older. (New Insights
Into Erectile Dysfunction: A practical approach, Korenman SG am J Med 1998)
When the etiology of erectile failure is unclear, the NPTR test is
utilized to differentiate between organic (physiological) impotence and
psychogenic (psychological) impotence. The test is based on the assumption that
men with psychogenic impotence have normal erections during sleep, whereas men
with organic impotence have impaired erections during sleep. Another equally
important factor measured by the NPTR test is penile rigidity. While tumescence
indicates only penile circumference, rigidity is an equally important parameter,
indicating the patients ability to sustain an erection for a given period of
time.
In order for an NPTR test to be accurate the patient must be deeply
asleep, in a state known as REM. If the patient is not deeply asleep, the
results of the test are inaccurate and misleading, which can result in a
misdiagnosis. Since REM sleep is such a great parameter in achieving accurate
test results, Meduck has composed the sensor attachments from light material.
The sensors are easy to attach, comfortable, disposable, accurate and
inexpensive. Unlike other products which require 3 consecutive rights of testing
to gain results, the NPTR test requires only one night of usage. Additionally,
the NPTR test measures both tumescence and rigidity, recognizing that both
factors are important in the determination of erectile dysfunction.
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The Company is currently building a prototype of its NPTR monitor and
intends to begin sales of the product in the second quarter of 2000.
THE MARKET FOR THE NPTR TEST
As a result of the intense study of impotence a wide variety of new
effective treatments are now available for psychologically and physiologically
derived erectile dysfunction. Since the National Institutes of Health (NIH)
Consensus Conference on Impotence in 1992 addressed the inadequate level of
public and professional understanding of erectile dysfunction (ED), major
changes have taken place in the Urology field with respect to impotence. One of
the most significant and popular advances in the cure for impotence was the 1995
FDA approval of the use of prostaglandin E1 penile injections for the treatment
of impotence. More recently, in 1998, the Viagra oral pill became the fastest
selling drug in U.S. history.
The fact that the most applicable age group for impotence diagnosis and
treatment is over 40 has significant market size implications. Because of
western demographical changes, this is the fastest growing segment of the
population (Frost and Sullivan, Market Engineering, October 1998). Social
changes in the last two decades and the coming of age of the baby boomer
generation have cultivated a culture where men over 40 expect to live a high
quality life style in all aspects of life, including their sexual life style.
COMPETITION
The following is a summary of existing competitive products for NPTR
testing:
NTP STAMP TEST: a simple screening test, which uses adhesive paper stamps
similar to postage stamps. A strip of four stamps is snugly wrapped around the
penis with the overlying stamp wetted and sealed. The following morning the
stamp ring is examined for breaks along the perforations. This is repeated for a
three night period.
STRAIN-GAUGE: This device measures change in penile circumference. An elastic
loop is placed around the shaft of the penis. The loop contains a conductive
medium such as mercury. An increase in penile circumference causes a stretching
of the loop and a change in electrical signal. This is recorded on a portable
monitor.
SNAP-GAUGE: This measures penile rigidity, not circumference. Three plastic
elements are arranged parallel on a Velcro fastener, which is wrapped around the
penis. Each plastic film breaks at a predetermined rigidity of the penis.
TUMISENSORS: Penile circumference sensors, wires that operate similar to the
Strain-Gauge.
RIGISCAN: This device consists of two loops surrounding the penis, attached to a
small computer with memory capacity. The Rigiscan measures both penile
tumescence and rigidity on a continuous basis.
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Some of the shortcomings of the aforementioned tests include the fact
that diagnosis fails to indicate frequency and duration of any erections that
take place during sleep; diagnosis indicates either penile rigidity or
circumference but not both; when penile rigidity is diagnosed, the figure shown
indicates rigidity as compared with the average male as opposed to keeping the
number subjective to the individual being tested.
Unlike other products which require three consecutive nights of testing
in order to produce results, the MedSearch NPTR monitor requires only one night
of usage. Additionally, the NPTR monitor utilizes sensors which are disposable,
easy to put on, and comfortable to wear so as not to disrupt the ordinary
sleeping patterns of the patient. The NPTR monitor measurements both
circumference and rigidity and is relatively inexpensive because there is no
need for costly mechanical components.
PRODUCTS IN DEVELOPMENT PHASE
SLEEP MONITOR
The Sleep Monitor utilizes the same underlying technology as the
"Symdex 1000" and is intended for the diagnosis and monitoring of sleep
disorders including parameters such as EEG and heart rate. This monitor has a
basic clinical unit which provides a wide range of analysis as well as basic
real-time viewing of the information. The sleep monitor has five compact home
units which can record many hours worth of data, and are simple to use at home.
The patient can easily attach the sensors to his fingers and record a full
nights sleep in the comfort of his own home. Recorded data can later be analyzed
in the clinic.
According to a recent survey, one third of American adults (63 million
people) scored sleep levels known to be hazardous on a scientifically validated
sleep measurement. 6% scored in the severe levels category of sleepiness. Due to
the complexity of current healthcare systems, only 5% of the population is
properly diagnosed and treated for sleeping disorders. (National Sleep
Foundation Gallup Survey).
In order to diagnose a patient with existing monitors, he must spend at
least one night, usually more, in the clinic or hospital. Sensors of various
types are attached to his head and body by a specially trained nurse or
physician. Since hospitals and clinics are not comfortable sleep environments,
test results are frequently inaccurate. Sleep testing is an uncomfortable
procedure necessary not only for initial diagnosis but also for verification of
the selected treatment effectiveness.
Sleep medicine has been recognized by the American Medical Association
as a medical specialty. There are more than 3,000 physicians specializing in
sleep medicine and approximately 400 accredited sleep disorder centers in the
U.S. Diagnosed sleep disorders include Narcolespsy (an irresistible need to
sleep), Nocturnal Myoclanus (a condition associated with involuntary leg jerks
during sleep), Insomnia (inability to gain sufficient sleep), Sleep Apnea (a
breathing disorder characterized by brief interruptions of breathing during
sleep) and sleep walking.
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The response of the sympathetic nervous system is essential for the
accurate monitoring of a wide range of sleep conditions. The Sleep Monitor is
the only device which can monitor not only EEG and heart rate, but sympathetic
activity as well.
None of the existing monitors or software systems are actually direct
competitors of the Sleep Monitor since their sensors are too complex for use in
the home-care environment and do not measure sympathetic activity directly.
There are no sleep monitors intended for home use that can be easily worn by the
patient during a normal night's sleep in their own home. Existing systems are
complex monitors which are used for monitoring in sleep laboratories.
The simplicity of the sensor attachments and the compact size and
mobility of the Sleep Monitor home unit enables the patient to be monitored at
home. It is the home care environment which holds the most potential for this
monitor.
Management believes that the full U. S. marketing potential is
estimated at 3,500 sleep monitoring systems and 35 million sensor sets annually.
This figure is based on the number of specializing physicians and sleep disorder
centers and an average number of 1000 patients per clinic/physician. The
world-wide potential market is conservatively estimated to be twice as large.
NEUROLOGICAL MONITORING
The neurological monitoring market is primarily undeveloped in terms of
existing equipment. One procedure that would greatly benefit from the
Neurological Monitor is a sympathectomy. A sympathectomy is a surgical procedure
in which the sympathetic activity of the upper limbs is disabled. The surgeon
electrically scorches the ganglia of the sympathetic nervous system which
controls the upper limbs. Sympathectomy's are commonly performed on individuals
with palmar hyperhidrosis (excess perspiration of the palms).
A surgeon utilizing the Neurological Monitor could detect instantly if
the procedure was done satisfactorily simply by monitoring the patient's hands
for sympathetic activity. If there is a need for further scorching of the
ganglia, it can be done immediately. Currently, the success of a sympathectomy
procedure can only be evaluated after patient recovery. The Neurological Monitor
measures sympathetic activity and is intended for neurological research, patient
monitoring, and the diagnosis of neurological disorders.
The neurological monitoring market is largely undeveloped in terms of
existing monitors. The MedSearch Neurological Monitor will, in management's
belief, be the first monitor of its kind.
TNJ
TNJ was acquired by MedSearch in June 1999. TNJ is a Chicago-based
medical product distribution company and a rehabilitative medical services
provider with 2 locations in Chicago, Illinois, including a new location on the
premises of the University of Chicago Hospital. The Company intends to utilize
TNJ as a distribution channel for all products currently in development. TNJ's
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product distribution line includes compression equipment for sports injuries,
specialized prosthesis for postmastectomy, and lymphedema home treatments. TNJ
offers rehabilitative services on both its premises, assisting clients with
breast cancer treatment and sports injury rehabilitation. TNJ plays a
significant role in the expected overall operations of the Company.
PRODUCTS
LYMPHA PRESS
The Lympha Press is a unique item manufactured by Mego-Afek, an
Israeli-based medical device manufacturer. A product designed to alleviate the
discomfort of Lymphedema, the Lympha Press reduces inflammation of body parts
and the aesthetic appearance of deformity. Lymphedema is a fairly common
condition, effecting roughly 1% of the U.S. population. Although Lymphedema is a
chronic and progressive condition, it can be brought under control via
consistently keeping the effected body part free from swelling.
In addition to its use for patients with Lymphedema, the Lympha Press
is renowned for its therapeutic treatment of acute inflammation, joint
effusions, and chronic overuse injuries.
BALLANCER
The Ballancer is a therapeutic electric machine invented, developed,
and manufactured by Mego Afek, an Israeli-based medical product manufacturer.
The creation of the Ballancer is the result of comprehensive research in the
fields of sports medicine, plastic surgery, and physiotherapy. Regular use of
the Ballancer will assist in the prevention and treatment of varicose veins, the
reduction of swelling, and the removal of excess fluids.
POSTMASTECTOMY PRODUCTS
TNJ's postmastectomy product line includes non-weighted breast forms,
silicone prosthesis, and customized mastectomy bras. TNJ has in-house
experienced personnel customizing products from raw materials.
M&W
M&W is a New Jersey based medical product developer acquired by
Medsearch in August 1999. M&W holds patents on an existing product called the
"SCOPESHIELD(TM)", a unique stethoscope cover which shields stethoscopes from
hazardous microorganisms. The Company believes that the SCOPESHIELD(TM) product
will become standard infection control procedure similar to the use of latex
gloves and thermometer covers. M&W and its SCOPESHIELD(TM) product play a
significant role in the expected overall operations of the Company.
Although stethoscopes come into direct contact with patients frequently
throughout the day, disinfection of stethoscopes between usage has not become an
established practice.
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According to the AMA, stethoscopes are often contaminated with staphylococci and
are vectors of infection transmission. Their study showed that 89% of all
stethoscopes cultured grew staphylococcus species of bacteria and 19% included
the more pathogenic Staphylococcus aures bacteria.
The SCOPESHIELD(TM) comes in two unique dispensers; one designed for
desk use, one designed for pocket use. The SCOPESHIELD(TM) stickers glide on
easily and are disposable, limiting cross-infection between patients. Both the
SCOPESHIELD(TM) dispensers and the SCOPESHIELD(TM) stickers can be utilized as
promotional items for pharmaceutical companies.
The Company knows of no similar or competitive products on the market.
MARKETING AND SALES
MedSearch is looking to distribute its products via its wholly owned
subsidiary, TNJ Products, Inc., and is also considering the formation of
strategic partnerships for the marketing of each product. The Company is also
considering direct marketing either through its subsidiaries or through an
independent sales team.
GOVERNMENT REGULATION; FDA REGULATION
Israel is an acknowledged site for clinical trials by the FDA. Prior to
distributing products in the U.S., it is necessary to obtain FDA approval.
MedSearch hopes to clear some of its products through FDA 510(k) premarket
notification, an expeditious approval process for new products.
RESEARCH AND DEVELOPMENT
The company currently conducts all research and development for its
product line in Israel. Estimated annual expenditures with respect to research
and development is $1 million. Currently all research and development takes
place at Meduck's offices in Tel Aviv, Israel.
INTELLECTUAL PROPERTY
The Company's ability to compete successfully and achieve future
revenue growth will depend, in part, on its ability to protect its proprietary
technology and operate without infringing the rights of others. The Company has
a policy of seeking patents, when appropriate, on inventions resulting from its
ongoing research and development and manufacturing activities.
Medsearch has applied for a patent (No. 09/157,503) with the United
States Patent and Trademark Office with respect to the "Symdex 1000." M&W holds
four patents (No. 5,424,495 issued on June 13, 1995, No. 5,528,004 issued on
June 18, 1996 and No. 5,686,706 issued on November 11, 1997 and No. 5,949,032
issued on September 7, 1999. The patents relate to the invention titled
"Dispensable, Disposable Cover for Stethoscopes." The Company also received a
Notice of Allowance (No. 75/369,028) for its trademark Scopeshield(TM). Once the
Company has submitted a final design plan for the SCOPESHIELD(TM), the Notice of
Allowance is expected to be changed into a finalized trademark. The Company has
also applied for a patent with respect to its NPTR monitor. There can be no
assurance that the Company's applications will be granted or, if granted, that
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it will not be challenged or circumvented by competitors. The Company intends to
broaden its patent protection in other countries for its existing patents and
file for additional patent protection relating to products it is currently
developing.
Notwithstanding the Company's active pursuit of patent and/or trademark
protection, the Company believes that the success of its medical devices depends
more on its specification, design, uniqueness and employee expertise than on
patent protection. The Company generally enters into confidentiality and
non-disclosure agreements with its employees and limits access to its
proprietary technology. The Company may in the future be notified that it is
infringing certain patent and/or other intellectual property rights of others.
Although there are no such pending lawsuits against the Company or unresolved
notices that the Company is infringing intellectual property rights of others,
there can be no assurance that litigation or infringement claims will not occur
in the future.
EMPLOYEES
As of September 30, 1999, the Company had a total of 16 employees
including the employees of its subsidiaries. The Company has 6 employees in
engineering, research, and development, 2 employees in design, 2 employees in
quality assurance, and 6 employees in administration. In addition, TNJ has 9
sales representatives. The Company believes its future performance will depend
in large part on its ability to attract and retain highly skilled employees.
None of the Company's employees is represented by a labor union and the Company
has not experienced any work stoppages. The Company considers its employee
relations to be good.
RISK FACTORS
IN ADDITION TO OTHER INFORMATION IN THIS REGISTRATION STATEMENT ON FORM
10-SB, THE FOLLOWING IMPORTANT FACTORS SHOULD BE CAREFULLY CONSIDERED IN
EVALUATING THE COMPANY AND ITS BUSINESS BECAUSE SUCH FACTORS CURRENTLY HAVE A
SIGNIFICANT IMPACT ON THE COMPANY'S BUSINESS, PROSPECTS, FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
RECENT HISTORY OF LOSSES. The Company incurred net losses of $87,704
and $139,100 for the years ended December 31, 1997 and 1998, respectively. The
Company expects that losses will increase and continue until such time, if ever,
as the Company can market its products. In addition, the Company had an
accumulated deficit of $1,884,225 at December 31, 1998.
EARLY STAGE OF DEVELOPMENT. The Company has generated limited revenues
to date. While the Company is able to finance certain of its current operations
from revenues, it requires additional financing to increase its research and
development activities to acquire additional technologies and to develop new
products. The Company's operations are subject to all of the risks inherent in
the commercialization of new products. The likelihood of the success of the
Company must be considered in light of the problems, expenses, difficulties,
complications and delays frequently encountered when developing new products.
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<PAGE>
POSSIBLE NEED FOR ADDITIONAL FINANCING. There can be no assurance that
the Company will not require additional financing in the near future There can
be no assurance that any additional financing will be available to the Company
on acceptable terms, or at all. If adequate funds are not available, the Company
may be required to delay, scale back, or eliminate its research and development
or obtain funds through arrangement with partners or others that may require the
Company to relinquish rights to certain of its technologies or potential
products or other assets. Accordingly, the inability to obtain such financing
could have a material adverse effect on the Company's business, financial
condition and results of operations.
DEPENDENCE UPON KEY EMPLOYEES AND CONSULTANTS; RECRUITMENT OF
ADDITIONAL PERSONNEL. The Company is dependent upon the efforts of and abilities
of Jacob Meller, its Chairman of the Board of Directors, and President, and
Frieda Goldstein, its Vice President, Secretary and Treasurer, and on other
members of its scientific and management staff of its subsidiaries. To date, the
Company has been able to attract and retain the personnel necessary for its
operations. However, there can be no assurance that the Company will be able to
do so in the future. If the Company is unable to attract and retain personnel
with necessary skills when needed, its business and expansion plans could be
adversely effected.
LIMITED SALES AND MARKETING EXPERIENCE. The Company intends to market
and sell its products in the United States and certain foreign countries, if and
when regulatory approval is obtained, through a direct sales force and
distributors. Establishing significant marketing and sales capability will
require significant resources. There can be no assurance that the Company will
be able to recruit and retain skilled sales management, direct salespersons or
distributors, or that the Company's sales effort will be successful. To the
extent that the Company enters into distribution arrangements for the sale of
its products, the Company will be dependent on the efforts of third parties.
There can be no assurance that such efforts will be successful.
ENVIRONMENTAL AND OTHER GOVERNMENT REGULATIONS. A portion of the
Company's future products may be regulated by the United States Food and Drug
Administration (the "FDA"). Such regulations extend to manufacturing practices,
the conduct of clinical investigations, pre-market approval, record keeping and
clearance from the FDA for commercial marketing of its primary products. In
addition, other products that the Company might develop may also be subject to
FDA regulation. There can be no assurance that the Company will be able to
obtain FDA clearance for commercial marketing of its products. Even if FDA
clearance is received, government regulation may have an adverse impact on the
timing and cost of new product introductions, may interfere with the marketing
of existing products and may require the recall of products from customer
locations.
PRODUCT RECALLS AND LIABILITY. Products such as those being developed
by the Company may be subject to recall for unforeseen reasons. In addition,
certain projected applications of the Company's products entail the risk of
product liability claims. The Company performs extensive testing of its products
at each stage of their design to minimize the risk of recall or product
liability claims. A recall or product liability claim could adversely affect the
Company's operation and reputation. The Company does not maintain any insurance
related to recalls or product liability and, accordingly, a product recall of
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<PAGE>
the Company's principle products or successful product liability claims against
the Company would have an adverse effect on the Company.
COMPETITION AND TECHNOLOGICAL CHANGES. The Company's success depends
upon establishing and maintaining a competitive position in research,
development and commercialization of products and technologies in its areas of
focus. The medical device industry is competitive and requires substantial
capital. The Company competes with, and will compete with, numerous
international, national and regional companies, many of which have significantly
larger operations and greater financial, marketing, human and other resources
than the Company. Accordingly, such competitors may have substantial competitive
advantages over the Company, including the ability to negotiate favorable supply
and distribution agreements and the ability to negotiate more favorable terms
with the developers of technology, including universities. In addition, the
Company plans to develop additional products and acquire additional technologies
in order to expand the Company's product and technology portfolio. No assurance
can be given that the Company will successfully compete in any market in which
it conducts or may conduct operations or that developments by such competitors
will not render the Company's current or future products or technologies
uncompetitive or obsolete.
LIMITED PRIOR PUBLIC MARKET; POTENTIAL LIMITED TRADING MARKET; POSSIBLE
VOLATILITY OF STOCK PRICE. There has only been a limited public market for the
securities and there can be no assurance that an active trading market in the
Company's securities will be maintained. In addition, the stock market in recent
years has experienced extreme price and volume fluctuations that have
particularly affected the market prices of many smaller companies. The trading
price of the common stock is expected to be subject to significant fluctuations
in response to variations in quarterly operating results, changes in analysts'
earnings estimates, announcements of technological innovations by the Company or
its competitors, general conditions in the medical device industry and other
factors. These fluctuation, as well as general economic and market conditions,
may have a material or adverse effect on the market price of the Company's
common stock.
PENNY STOCK REGULATIONS MAY IMPOSE CERTAIN RESTRICTIONS ON
MARKETABILITY OF SECURITIES. The Securities and Exchange Commission (the
"Commission") has adopted regulations which generally define a "penny stock" to
be any equity security that has a market price (as defined) of less than $5.00
per share or an exercise price of less than $5.00 per share, subject to certain
exceptions. As a result, the Company's Common Stock is subject to rules that
impose additional sales practice requirements on broker-dealers who sell such
securities to persons other than established customers and accredited investors
(generally those with assets in excess of $1,000,000 or annual income exceeding
$200,000, or $300,000 together with their spouse). For transactions covered by
these rules, the broker-dealer must make a special suitability determination for
the purchase of such securities and have received the purchaser's written
consent to the transaction prior to the purchase. Additionally, for any
transaction involving a penny stock, unless exempt, the rules require the
delivery, prior to the transaction, of a risk disclosure document mandated by
the Commission relating to the penny stock market. The broker-dealer must also
disclose the commission payable to both the broker-dealer and the registered
representative, current quotations for the securities and, if the broker-dealer
is the sole market maker, the broker-dealer must disclose this fact and the
broker-dealer's presumed control over the market. Finally, monthly statements
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<PAGE>
must be sent disclosing recent price information for the penny stock held in the
account and information on the limited market in penny stocks. Consequently, the
"penny stock" rules may restrict the ability of broker-dealers to sell the
Company's securities and may affect the ability of purchasers in this Offering
to sell the Company's securities in the secondary market and the price at which
such purchasers can sell any such securities.
PROPRIETARY TECHNOLOGY; RISK OF THIRD PARTY CLAIMS OF INFRINGEMENT. The
Company's ability to compete successfully and achieve future revenue growth will
depend, in part, on its ability to protect its proprietary technology and
operate without infringing upon the rights of others. Although there are no
pending lawsuits against the Company regarding its technology or notices that
the Company is infringing upon intellectual property rights of others, there can
be no assurance that litigation or infringement claims will not occur in the
future. Such litigation or claims could result in substantial costs, and
diversion of resources and could have a material adverse effect on the Company's
business, financial condition, and results of operations. The Company generally
enters into confidentiality and non-disclosure agreements with its employees and
limits access to and distribution of its proprietary information. However, there
can be no assurance that such measures will provide adequate protection for the
Company's trade secrets or other proprietary information, or that the Company's
trade secrets or proprietary technology will not otherwise become known or be
independently developed by competitors. The failure of the Company to protect
its proprietary technology could have a material adverse effect on its business,
financial condition and results of operations.
NO DIVIDENDS. The Company has not paid any dividends on its Common
Stock since its inception and does not intend to pay dividends on its Common
Stock in the foreseeable future. Any earnings which the Company may realize in
the foreseeable future will be retained to finance the growth of the Company.
ANTI-TAKEOVER PROVISIONS. Pursuant to the Company's Certificate of
Incorporation, the Board of Directors may issue up to 2,000,000 shares of
Preferred Stock in the future with such preferences, limitations and relative
rights as the Board may determine without stockholder approval. The rights of
the holders of Common Stock will be subject to, and may be adversely affected
by, the rights of the holders of any Preferred Stock that may be issued in the
future. The issuance of Preferred Stock, while providing flexibility in
connection with possible acquisitions and other corporate purposes, could have
the effect of delaying or preventing a change in control of the Company without
further action by the stockholders. The Company has no present plans to issue
any shares of Preferred Stock. In addition, following this Offering the Company
will become subject to the anti-takeover provisions of Section 203 of the
Delaware General Corporation Law, which will prohibit the Company from engaging
in a "business combination" with an "interested stockholder" for a period of
three years after the date of the transaction in which the persons became an
interested stockholder, unless the business combination is approved in a
prescribed manner. The application of Section 203 also could have the effect of
delaying or preventing a change of control of the Company.
ADDITIONAL AUTHORIZED SHARES OF COMMON STOCK AND PREFERRED STOCK
AVAILABLE FOR ISSUANCE MAY ADVERSELY AFFECT THE MARKET. The Company is
authorized to issue 50,000,000 shares of its Common Stock, $.001 par value.
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<PAGE>
Currently there are 6,534,582 shares of Common Stock issued and outstanding.
However, the total number of shares of Common Stock issued and outstanding does
not include the exercise of up to 4,080,000 warrants to purchase up to 4,080,000
shares of Common Stock at an exercise price of $1.25 per share, 411,400 shares
of Common Stock issuable upon exercise of warrants at $1.00 per share, 481,400
shares of Common Stock issuable upon exercise of the warrants at $2.00 per share
and 100,000 shares of Common Stock issuable upon exercise of the warrants at
$3.00 per share. After reserving a total of 5,072,800 shares of Common Stock for
issuance upon the exercise of all options and warrants, the Company will have at
least 38,392,618 shares of authorized but unissued Common Stock available for
issuance without further shareholder approval. As a result, any issuance of
additional shares of Common Stock may cause current shareholders of the Company
to suffer significant dilution which may adversely affect the market.
In addition to the above-referenced shares of Common Stock which may be
issued without shareholder approval, the Company has 2,000,000 shares of
authorized preferred stock, the terms of which may be fixed by the Board of
Directors. The Company presently has no issued and outstanding shares of
preferred stock and while it has no present plans to issue any shares of
preferred stock, the Board of Directors has the authority, without shareholder
approval, to create and issue one or more series of such preferred stock and to
determine the voting, dividend and other rights of holders of such preferred
stock. The issuance of any of such series of preferred stock could have an
adverse effect on the holders of Common Stock.
SHARES ELIGIBLE FOR FUTURE SALE MAY ADVERSELY AFFECT THE MARKET. The
Company has 6,534,582 shares of its Common Stock issued and outstanding,
2,407,020 of which are "restricted securities". Rule 144 provides, in essence,
that a person holding "restricted securities" for a period of one year may sell
only an amount every three months equal to the greater of (a) one percent of the
Company's issued and outstanding shares, or (b) the average weekly volume of
sales during the four calendar weeks preceding the sale. The amount of
"restricted securities" which a person who is not an affiliate of the Company
may sell is not so limited, since non-affiliates may sell without volume
limitation their shares held for two years if there is adequate current public
information available concerning the Company. In such an event, "restricted
securities" would be eligible for sale to the public at an earlier date. The
sale in the public market of such shares of Common Stock may adversely affect
prevailing market prices of the Common Stock.
EFFECT OF OUTSTANDING OPTIONS AND WARRANTS. Currently, there are
outstanding stock options and warrants to purchase an aggregate of 4,080,000
shares of Common Stock at an exercise price of $1.25 per Share, an additional
411,400 shares of Common Stock at an exercise price of $1.00 per share, an
additional 481,400 shares of Common Stock at an exercise price of $2.00 per
share and an additional 100,000 shares of Common Stock at an exercise price of
$3.00 per share. None of such options or warrants are available for public
resale and such shares would be subject to Rule 144 of the Act upon issuance
thereof. The exercise of such outstanding options and warrants will dilute the
percentage ownership of the Company's stockholders, and any sales in the public
market of shares of Common Stock underlying such securities may adversely affect
prevailing market prices for the Common Stock. Moreover, the terms upon which
the Company will be able to obtain additional equity capital may be adversely
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<PAGE>
affected since the holders of such outstanding securities can be expected to
exercise their respective rights therein at a time when the Company would, in
all likelihood, be able to obtain any needed capital on terms more favorable to
the Company than those provided in such securities. A substantial number of
outstanding warrants contain provisions for cashless exercise.
LIMITATION ON DIRECTOR LIABILITY. As permitted by Delaware law, the
Company's Certificate of Incorporation limits the liability of directors to the
Company or its stockholders for monetary damages for breach of a director's
fiduciary duty except for liability in certain instances. As a result of the
Company's charter provision and Delaware law, stockholders may have limited
rights to recover against directors for breach of fiduciary duty.
FORWARD-LOOKING INFORMATION MAY PROVE INACCURATE. This Registration
Statement contains forward-looking statements and information that are based on
management's beliefs as well as assumptions made by, and information currently
available to, management. When used in this Registration Statement (including
Exhibits), words such as "anticipate," "believe," "estimate," "expect," and,
depending on the context, "will" and similar expressions, are intended to
identify forward-looking statements. Such statements reflect the Company's
current views with respect to future events and are subject to certain risks,
uncertainties and assumptions, including the specific risk factors described
above. Should one or more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual results may vary materially from
those anticipated, believed, estimated or expected. The Company does not intend
to update these forward-looking statements and information.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
MedSearch Technologies, Inc. is a research, development and
distribution company specializing in unique, diagnostic, non-invasive medical
devices. The Company's current patented, patent-pending and/or trademarked
products include (1) the "SCOPESHILED(TM)", a disposable, anti-microbial
stethoscope cover which shields stethoscope from hazardous microorganisms, (2)
the "Symdex 1000," a monitor which measures the depth of anesthesia via the
sympathetic nervous system through disposable sensors connected to the finger,
and (3) the "NPTR test," a diagnostic product utilized to differentiate between
physical and psychological impotence. The Company conducts research and
development through its subsidiaries Meduck Technologies, Ltd. and M&W Medical
Supply, LLC and conducts its marketing through its subsidiary, TNJ Products,
Inc. The Company also distributes products designed to reduce swelling in
certain body parts and products designed for postmastectomy patients.
The Company has approximately 90 unresolved Medicare claims in which
the Company provided patients with the physician-prescribed Lympha Press
product. Medicare claims that the patient's health condition did not warrant
receipt of the Lympha Press product. Based on medical documentation including
actual prescriptions, the Company believes the aforementioned to be unfounded.
The Company had previously billed and received payment for approximately 500 of
the same units from Medicare under the same regulations. The Company cannot
revoke the product from the patients as the device was deemed medically
necessary by the treating physicians. To date, the Company has paid for the
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distributed products from its own resources. The Company hopes to settle the
dispute in the near future. The Company is confident that the Department of
Appeals will find in its favor.
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998 AS COMPARED TO DECEMBER 31, 1997
The Company had net sales of $804,000 for the year ended December 31,
1998 as compared to $456,000 for the year ended December 31, 1997. The increase
is attributable to sale of $415,000 of optical products verses a $67,000 (15%)
sales decline at the TNJ Products unit.
Cost of sales increased during the year ended December 31, 1998 to
$521,000 from $164,000 for the year ended December 31, 1997. The increase
corresponds to the Company's increase in sales of optical products.
Operating expenses decreased to $537,000 from $730,000 for the year
ended December 31, 1998 as compared to 1997, a decrease of $193,000 (26%). The
net decrease is attributable to an accounts receivable write down of $471,000,
offset by decreased operating expenses due to decreased sales.
The Company had a net loss for the year ended December 31, 1998 of
$239,000 as compared to a net loss of $480,000 for the year ended December 31,
1997, a decrease of $241,000. Of the decrease loss, $471,000 is attributable to
the aforementioned accounts receivable write down offset by additional expenses
from starting new operations.
YEAR ENDED DECEMBER 31, 1997 AS COMPARED TO DECEMBER 31, 1996
The Company had net sales of $456,000 for the year ended December 31,
1997 compared to $1,200,000 for the year ended December 31, 1996. The decrease
is attributable to a decline in sales by TNJ Products.
Cost of sales decreased during the year ended December 31, 1997 to
$164,000 from $445,000 for the year ended December 31, 1996. The decrease
corresponds to TNJ Product's decrease in sales for the comparative period.
Operating expenses decreased to $730,000 from $930,000 for the year
ended December 31, 1997 compared to 1996, a decrease of $200,000 (22%). A
decrease of $120,000 is attributable to the Company ceasing operations of its
fish business. While expenses should have been lower due to reduced sales, TNJ
Products, Inc. wrote down accounts receivable by $471,000.
The Company had a net loss for the year ended December 31, 1997 of
$480,000 as compared to a net loss of $157,000 for the year ended December 31,
1996, an increase of $323,000 (206%). The increase is attributable to the
aforementioned accounts receivable write down of sales at TNJ Products.
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LIQUIDITY AND CAPITAL RESOURCES
DECEMBER 31, 1998 TO DECEMBER 31, 1997
At December 31, 1998, the Company had cash of $498,000 as compared to
cash of $29,000 at December 31, 1997. In August 1998, the Company completed a
unit sale whereby it received net proceeds of approximately $1,000,000. The
financing consisted of 4,000,000 units, each unit comprised of one share of
common stock and one warrant to purchase an additional one share of the
Company's common stock. The Company used $250,000 of the proceeds as part of the
purchase price of Optimart Imports. Optimart is a company that imports optical
products. The balance of the proceeds have been used to pay some offering costs,
to purchase fixed assets for $85,000 and $165,000 for working capital.
At December 31, 1997 the Company had cash of $29,000 as compared to
cash of $42,000 at December 31, 1996. During 1997 the Company was basically
dormant and used cash of $13,000 to maintain its existence.
Management believes the unit sale would give the Company sufficient
working capital to fund its operations and expansion plans for at least calendar
year 1999, although there can be no assurance of the Company's future
profitability.
NINE MONTHS ENDED SEPTEMBER 30, 1999 AS COMPARED TO SEPTEMBER 30, 1998
For the nine months ended September 30, 1999 the Company had sales of
$1,100,000, cost sales of $857,000 and a gross profit of $243,000. Of these
amounts, $872,000 of sales, $812,000 of cost of sales and gross profit of
$60,000 were due to optical product sales by Optimart which was sold in June of
1999. The remaining sales of $228,000 (21%) cost of sales of $45,000 (5%) and
gross profit of $182,000 (75%) are from TNJ Products, Inc.
Operating expenses for the nine months ended September 30, 1999 of
$1,055,000 include $121,000 (11%) of compensation expenses to officers and
directors paid in restricted common stock of the Company; $171,000 (16%)
research and development expenses from Meduck; $98,000 (9%) amortization of
patents and licenses, $90,000 (8%) of bad debt expense. Optimart had directly
allocable expense of $55,000 (5%) and the balance of $520,000 (49%) is for the
general and administrative expenses of the Company.
As a result of the above items, the Company had a net loss of $812,000
for the nine months ended September 30, 1999, as compared to a net loss of
$112,000 for the nine months ended September 30, 1998, when the Company had
limited operations other than TNJ Products, Inc.
LIQUIDITY AND CAPITAL RESOURCES
The Company operates three subsidiaries: TNJ, Meduck and M&W. TNJ's
operations involve medical product distribution. The assets employed by the
Company to support the operations are primarily working capital to finance
accounts receivable which are generated by product sales which are reimbursed by
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Medicare and private insurance. While accounts receivable collections
approximate 120 days, purchases are paid COD. Thus, the liquidity of the Company
is significantly affected by the volume of billings generated by TNJ which
fluctuates month to month.
Meduck's operations are usually research and development of medical
products. The Company hopes to begin sales in 2000. Meduck has also redesigned
the stethoscope-shield sold by M&W. The Company expects products sales to start
in the first quarter of 2000.
The capital requirements of the Company arise in three major areas.
These are (1) the need for additional capital to increase product sales through
additional marketing expense and to support additional inventories and accounts
receivable; (2) the need for capital to increase administrative capabilities,
including hiring a chief financial officer and acquire additional management
information systems and (3) the need for additional capital for research and
development of current and new products.
As described hereinabove, management believes the Company has
sufficient liquidity to meet its projected expenditures on a short-term basis.
Absent additional funding, the Company will have limited liquidity on a
long-term basis. Moreover, many demands on liquidity, such as technological or
regulatory problems, could cause the Company's liquidity to be inadequate. At
present, the Company does not have any additional sources of liquidity,
including bank lines of credit. Long-term working capital needs are expected to
be met through sales of the Scopeshield(TM), Symdex 1000, NPTR Test, and other
new products. There can be no assurances that any such products will be
successfully marketed or commercially viable.
YEAR 2000
Many computer systems and software products currently employed by
businesses and individuals worldwide will not function properly as the year 2000
approaches unless changes are incorporated to a once common programming standard
which refers to date sensitive fields using only two digits. Therefore, for
example, by entering a date which is in the year 2000, a program might
inadvertently read it as the year 1900, causing inaccurate data or system
failures. The Company currently employs software programs which are readily
available in the marketplace, known as "canned" software applications. The
Company has examined the costs to upgrade its systems with systems which are
year 2000 compliant, and determined that the cost to do so is immaterial in
relation to the Company's operations. The Company believes that its computer
hardware currently meets compliance standards. However, the proliferation of sub
$1,000 personal computers on the market today would make an upgrade, if
necessary, also immaterial.
ITEM 3. DESCRIPTION OF PROPERTIES
The Company rents (from an unaffiliated party), on a month to month
basis, approximately 1900 square feet at 40 Wall Street, New York, NY 10005,
which serves as the Company's executive offices. The monthly rental is $4,500.
The Company's subsidiary, Meduck Technologies, obtains rent free premises in Tel
Aviv, Israel, from Meduck's president. TNJ leases space at 5011 North Lincoln
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Avenue, Chicago, IL 60625 pursuant 5-year lease which expires on February 1,
2001. The annual rental is $13,200.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth information, as of November 30, 1999
with respect to the beneficial ownership of the outstanding shares of the
Company's Common Stock (6,534,582 as of such date) by (i) any holder known to
the Company owning more than five percent (5%) of the outstanding shares; (ii)
the Company's officers and directors; and (iii) the directors and officers of
the Company as a group:
<TABLE>
<CAPTION>
Number of Shares of
Name of Beneficial Owner* Common Stock (1) Percentage (%) of Ownership
- - - ------------------------- ---------------- ---------------------------
<S> <C> <C>
Jacob Meller(2) 714,600 10.58%
Frieda Goldstein(3) 50,000 .76%
Jeanette Tracy 10,000 .15%
Isaac Wurzburger(4) ---- ----
Clarke Holdings, Ltd. 700,000 10.80%
Bahnahafstrasse 52
Ch - 8001
Zurich, Switzerland
RMC Limited 600,000 9.25%
Box 187, Victory House
Prospect Hill
Douglas, Isle of Man
1M9 91QF, British Isles
All Officers and Directors as a group 774,600 11.49%
(4 persons)(5)
</TABLE>
* Unless otherwise indicated, the address of all persons listed in this
section is c/o MedSearch Technologies, Inc., 40 Wall Street, New York, NY
10005.
(1) Beneficially ownership as reported in the table above has been determined
in accordance with Instruction (4) to Item 403 of Regulation S-B of the
Securities Exchange Act.
(2) Mr. Meller is the record holder of 214,600 of such shares. Includes
500,000 warrants (250,000 of which are exercisable at $1.00 and 250,000 of
which are exercisable at $2.00).
(3) Includes 30,000 warrants exercisable at $1.25 per share.
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(4) Medical Innovations, LLC owns 50,000 shares of Common Stock and 200,000
warrants (100,000 of which are exerciseable at $2.00 and 100,000 of which
are exercisable at $3.00). Medical Innovations, LLC is an entity which is
50% owned by Dr. Wurzburger's wife, Dr. Wurzburger disclaims beneficial
ownership of such securities.
(5) Includes 500,000 warrants held by Mr. Meller and 30,000 warrants held Ms.
Goldstein. See Notes 2 and 3.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The names and ages of the directors and executive officers of the
Company are set forth below. All Directors are elected annually by the
stockholders to serve until the next annual meeting of the stockholders and
until their successors are duly elected and qualified. Officers are elected
annually by the Board of Directors to service at the pleasure of the Board.
Name Age Position(s) With the Company
- - - ---- --- ----------------------------
Jacob Meller 53 Chairman of the Board and President
Jeanette Tracy, PhD. 42 Director
Frieda Goldstein 26 Vice President, Treasurer, Secretary
and Director
Isaac Wurzburger, M.D. 44 Medical Advisor and Proposed Director
BACKGROUND OF EXECUTIVE OFFICERS AND DIRECTORS
JACOB MELLER, has been the Chairman of the Board and President of the Company
since June 1998. Mr. Meller is an entrepreneur in the medical device industry.
After studying accounting at Bar Ilan University in Israel, he served as Chief
Financial Officer from 1973 to 1984 at Asher Foistfonger, Ltd. ("AFL"), an
Israeli public company. Following his position at AFL, Mr. Meller spent fifteen
years dealing in Israeli medical technology including seven years marketing and
distributing Israeli-manufactured medical devices in Europe. Mr. Meller was one
of the founders of TNJ, one of the Company's wholly-owned subsidiaries, and
served as its Chairman from March 1995 to June 1996. Mr. Meller is a full-time
officer of the Company.
DR. JEANETTE TRACY, has been a director of the Company since January 1999. Ms.
Tracy is a member of the Board of Directors of MedSearch, Inc. In addition to
her work with MedSearch, Inc., Dr. Tracy heads the AWARE (Awareness With
Anesthesia Research and Education) Organization, helping patients deal with
traumatic stress derived from awareness during anesthesia. Her expertise on the
issue of awareness during anesthesia has made Dr. Tracy a key figure in the
anesthesiology community and in the media. Dr. Tracy has been interviewed by
CNN, Inside Edition, Dateline, Extra, Oprah, Leeza, FOX News, ABC, KNBC, NBC,
and CBS National News. She has also been interviewed by Time Magazine, Redbook
Magazine, People Magazine, Allure Magazine, and US News and World Report. Dr.
Tracy has been awarded the "Public Interest in Anesthesia Award" for the year
2000 by the Council for Public Interest and Anesthesia and the American
Association of Nurse Anesthetists. Ms. Tracy has a masters in Metaphysics from
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the University of Metaphysics, a Ph.D. in Pastoral Psychology from the
International Metaphysics Ministry. Dr. Tracy divides her time between her
private practice and her position as Director of the Company.
FRIEDA GOLDSTEIN, has been the Vice President, Secretary, and Treasurer of the
Company since June 1998. Over the past five years, Ms. Goldstein has been an
executive assistant to the vice president at Inter-Governmental Philatelic
Corporation and Abner, Herrman and Brock Investment Management. In addition to
her current position with MedSearch. Ms. Goldstein is an MBA candidate at Pace
University's Lubin School of Business. Ms. Goldstein received her B.A. in
Sociology from Brooklyn College in 1996. Ms. Goldstein is a full-time officer of
the company.
DR. ISAAC WURZBURGER, is Board Certified by the American Association of Family
Physicians. Dr. Wurzburger is an Assistant Attending Physician at Columbia
Presbyterian Hospital and has been appointed to the facilities of Columbia
University Medical School and New York Medical College. Dr. Wurzburger is the
inventor of the SCOPESHIELD(TM) and other medical devices. Dr. Wurzburger
received his M.D. at the University of Chicago Medical School in Chicago,
Illinois. Dr. Wurzburger has agreed to join the Board upon the Company obtaining
officers/directors insurance coverage. The Company plans to procure
officers/directors insurance by January, 2000.
SUBSIDIARY MANAGEMENT
MEDUCK
SHLOMO NEVO- President and CEO
Mr. Nevo is a highly recognized industrial engineer with over 22 years
experience in the industrial field. Responsible for the long term direction of
Meduck and overseeing the day-to-day operations, Mr. Nevo supervises all product
development. Mr. Nevo has participated in product development for numerous
Global companies such as Pfizer, Inc. Prior to working at Meduck, Mr. Nevo
worked as a project manager for NCA, Ltd., an Israeli manufacturer of metal
aircraft parts. Mr. Nevo is a part -time employee of Meduck.
VERED CAPLAN- Vice President
Prior to joining Meduck in 1998, Ms. Caplan was the Project Manager at Aran
Technologies, Israel's largest engineering subcontracting company. Ms. Caplan is
in the final stages of completing her masters degree in biomedical engineering
and is an assistant to Dr. Barnea. Ms. Caplan received an MBA in marketing and
business development from Tel Aviv University and mechanical engineering from
Technion Institute at Haifa University. Ms. Caplan is a full-time employee of
Meduck.
22
<PAGE>
OFER BARNEA, PH.D- Chief Scientist and Inventor
In addition to his position at Meduck, Dr. Barnea is an inventor, lecturer and
researcher of the biomedical engineering faculty at Tel Aviv University. Dr.
Barnea received his Ph.D at Drexel University in Philadelphia, Pennsylvania. Dr.
Barnea is also a renowned consultant for global marketing companies engaged in
R&D. Dr. Barnea allocates the majority of his time to his work with Meduck.
RON FLAISHON, MD- Consulting Anesthesiologist
In addition to his position as Director of Ambulatory Anesthesiology at Sourasky
Medical Center, and as a Clinical Instructor at the Sackler School of Medicine,
Dr. Flaishon is conducting clinical trials for the 'Symdex 1000'. Dr. Flaishon
is also coordinating the US clinical trials for the 'Symdex 1000'. Dr. Flaishon
received his M.D. in anesthesiology at the Technion Institute in 1983, and
completed a clinical research fellowship in 1995 on the depth and adequacy of
anesthesia at Emory University School of Medicine in Atlanta, Georgia. Dr.
Flaishon is the physician in charge of the clinical trials for the Symdex 1000.
Dr. Flaishon is not an employee of Meduck.
TNJ
TSIONA BITTON- President and CEO
Responsible for the long term direction of TNJ and overseeing the day-to-day
operations of TNJ, Ms. Bitton has over 19 years experience in breast cancer
treatment and sports injury rehabilitation and the medical device distribution
field. Ms. Bitton is a certified orthotist (B.O.C.) and a certified compression
therapist. Ms. Bitton has been with TNJ since inception in 1995 and personally
trained all of TNJ's independent marketing team. Ms. Bitton is a member of the
"Why Me Breast Cancer Organization". Ms. Bitton received an Associate Degree in
Human Physiology from Technion Institute at Haifa University. Ms. Bitton is a
full-time employee of TNJ.
NANU BODHANWALA- Chief Financial Officer
Responsible for medical billing and accounts receivable, Mr. Bodhanwala is the
senior accountant at TNJ. Mr. Bodhanwala also assumes general office duties and
helps Ms. Bitton oversee the needs of TNJ's nationwide sales representatives.
Mr. Bodhanwala received his BA in Accounting from the BJVM University, Vallbh
Vidhya Najar, India. Mr. Bodhanwala is a full-time employee of the Company.
ITEM 6. EXECUTIVE COMPENSATION
The only executive officer of the Company that received a salary during
1998 was Ms. Goldstein, the Company's Vice President, who received $36,000
during 1998. Her current salary is $36,000. In 1999, Ms. Goldstein received
20,000 restricted shares of Common Stock.
23
<PAGE>
EMPLOYMENT AGREEMENTS
The Company has no employment agreements with any of its executive
officers.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
To the best of management's knowledge there were no material
transactions, or series of similar transactions, or any currently proposed
transactions, or series of similar transactions, to which the Company was or is
to be a party, in which the amount involved exceeds $60,000, and in which any
director or executive officer, or any security holder who is known by the
Company to own of record or beneficially more than 5% of any class of the
Company's common stock, or any member of the immediate family of any of the
foregoing persons, has an interest.
Jacob Meller, the Company's President, served as Chairman of the Board
of TNJ from March 1995 to June 1996. At the time of the Company's acquisition of
TNJ, Mr. Meller did not own any of the TNJ capital stock.
Pursuant to the acquisition of M&W in August 1999, the Company entered
into a Royalty and Consulting Agreement ("Royalty Agreement") with Medical
Innovations, LLC ("Innovations"), an entity in which the wife of Dr. Wurzburger,
a proposed Director of the Company, has a 50% interest. Pursuant to the Royalty
Agreement, the Company has the right of first refusal on future technology
developed by Innovations, subject to certain conditions. The Royalty Agreement
provides that Innovations will be entitled to future royalties on all products
developed by the Company from Innovations (including existing M&W products) on a
sliding scale beginning at 10% and reduced to 3% after the Company has in excess
of $10,000,000 in adjusted gross revenue from such products. If the Company does
not achieve sales of $1,000,000 during each 12-month period (commencing August
2000) or if the Company fails to manufacture and sell products (within 1 year
from the time a product is ready for commercial sale), the Company may lose the
rights to such products (including existing M&W products). To secure the
Company's obligation under the Royalty Agreement, the Company granted a security
interest in and to the patents of M&W.
The Company intends to indemnify its officers and directors to the full
extent permitted by Delaware law. Under Delaware law, a corporation may
indemnify its agents for expenses and amounts paid in third party actions and,
upon court approval in derivative actions, if the agents acted in good faith and
with reasonable care. A majority vote of the Board of Directors, approval of the
stockholder or court approval is required to effectuate indemnification.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended, may be permitted to officers, directors or persons
controlling the Company, the Company has been advised that, in the opinion of
the Securities and Exchange Commission, such indemnification is against public
policy as expressed in such Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Company of expenses incurred or paid by an officer, director or
controlling person of the Company in the successful defense of any action, suit
or proceeding) is asserted by such officer, director or controlling person in
connection with the securities being registered, the Company will, unless in the
24
<PAGE>
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in such Act and will
be governed by the final adjudication of such issue.
Transactions between the Company and its officers, directors, employees
and affiliates will be on terms no less favorable to the Company than can be
obtained from unaffiliated parties. Any such transactions will be subject to the
approval of a majority of the disinterested members of the Board of Directors.
ITEM 8. DESCRIPTION OF SECURITIES
GENERAL
The Company is authorized to issue up to 50,000,000 shares of Common
Stock, $.001 par value per share, of which 6,534,582 shares were issued and
outstanding as of November 30, 1999. The Company's Certificate of Incorporation
authorizes 2,000,000 shares of "blank check" preferred stock, none of which are
outstanding.
COMMON STOCK
Subject to the rights of holders of preferred stock, if any, holders of
shares of Common Stock of the Company are entitled to share equally on a per
share basis in such dividends as may be declared by the Board of Directors out
of funds legally available therefor. There are presently no plans to pay
dividends with respect to the shares of Common Stock. Upon liquidation,
dissolution or winding up of the Company, after payment of creditors and the
holders of any senior securities of the Company, including preferred stock, if
any, the assets of the Company will be divided pro rata on a per share basis
among the holders of the shares of Common Stock. The Common Stock is not subject
to any liability for further assessments. There are no conversion or redemption
privileges nor any sinking fund provisions with respect to the Common Stock and
the Common Stock is not subject to call. The holders of Common Stock do not have
any pre-emptive or other subscription rights.
Holders of shares of Common Stock are entitled to cast one vote for
each share held at all stockholders' meetings for all purposes, including the
election of directors. The Common Stock does not have cumulative voting rights.
All of the issued and outstanding shares of Common Stock are fully
paid, validly issued and non-assessable.
PREFERRED STOCK
None of the 2,000,000 "blank check" preferred shares are currently
outstanding. The Board of Directors of the Company have the authority, without
further action by the holders of the outstanding Common Stock, to issue shares
of preferred stock from time to time in one or more classes or series, to fix
the number of shares constituting any class or series and the stated value
thereof, if different from the par value, and to fix the terms of any such
series or class, including dividend rights, dividend rates, conversion or
25
<PAGE>
exchange rights, voting rights, rights and terms of redemption (including
sinking fund provisions), the redemption price and the liquidation preference of
such class or series.
WARRANTS
In connection with the Company's private offering in July 1998, the
Company issued 4,000,000 warrants to purchase Common Stock exercisable at $1.00
per share and expiring on August 1, 2001. In December 1998, the Company and the
holders of such warrants exchanged such warrants for an equal amount of new
warrants. Each new warrant entitles the registered holder to purchase one share
of the Company's Common Stock at an exercise price of $1.25 per share until
December 31, 2002. The warrants are exercisable commencing January 1, 2001. No
fractional shares of Common Stock will be issued in connection with the exercise
of warrants. Upon exercise, the Company will pay the holder the value of any
such fractional shares in cash, based upon the market value of the Common Stock
at such time. Such warrants contain provisions for cashless exercise.
In August, 1998, the Company issued 500,000 warrants to Jacob Meller,
the Company's President. 250,000 of such warrants are exercisable at $1.00 per
share with the remaining warrants exercisable at $2.00 per share. The $1.00
warrants expire on October 1, 2000, while the $2.00 warrants expire on October
1, 2001.
In June 1998, the Company issued to its former President, 262,800
warrants. 131,400 of such warrants are exercisable at $1.00 per share with the
remaining 131,400 warrants exercisable at $2.00 per share. The $1.00 warrants
expire June 16, 2000, while the $2.00 warrants expire on June 16, 2001.
In October, 1998, the Company issued 30,000 warrants to Frieda
Goldstein, the Company's Secretary, each exercisable at $1.00 per share, and
expiring on August 1, 2000. In January 1999, the Company and Ms. Goldstein
exchanged such warrants for an equal amount of warrants at an exercise price of
$1.25 per share, expiring on December 31, 2002.
Such warrants contain provisions for cashless exercise.
In August, 1998, the Company issued 30,000 warrants to a law firm, each
exercisable at $1.00 per share. Such warrants expire on August 19, 2000.
In January 1999, the Company issued 50,000 warrants to a law firm,
exercisable at $1.25 per share and expiring on December 31, 2002. Such warrants
contains provisions for cashless exercise.
In connection with the acquisition of M&W, the Company issued 200,000
warrants to Medical Innovations, LLC, an entity in which the wife of Dr.
Wurzburger, a proposed Director of the Company, has a 50% interest. All of such
warrants expire in August 2002. 100,000 of such warrants are exercisable at
$2.00 per share and 100,000 of such warrants are exercisable at $3.00 per share.
26
<PAGE>
In the event a holder of warrants fails to exercise the warrants prior
to their expiration, the warrants will expire and the holder thereof will have
no further rights with respect to the warrants.
A holder of warrants will not have any rights, privileges or
liabilities as a shareholder of the Company prior to exercise of the warrants.
The Company is required to keep available a sufficient number of authorized
shares of Common Stock to permit exercise of the warrants.
The exercise price of the warrants and the number of shares issuable
upon exercise of the warrants will be subject to adjustment to protect against
dilution in the event of stock dividends, stock splits, combinations,
subdivisions and reclassifications. No assurance can be given that the market
price of the Company's Common Stock will exceed the exercise price of the
warrants at any time during the exercise period.
DELAWARE ANTI-TAKEOVER LAW PROVISIONS
As a Delaware corporation, the Company is subject to Section 203 of the
General Corporation Law. In general, Section 203 prevents an "interested
stockholder" (defined generally as a person owing 15% or more of a Delaware
corporation's outstanding voting stock) from engaging in a "business
combination" (as defined) with such Delaware corporation for three years
following the date such person became an interested stockholder unless (i)
before such person became an interested stockholder, the board of directors of
the corporation approved the transaction in which the interested stockholder
became an interested stockholder or approved the business combination, (ii) upon
consummation of the transaction that resulted in the interested stockholder's
becoming an interested stockholder, the interested stockholder owned at least
85% of the voting stock of the corporation outstanding at the time the
transaction commenced (excluding stock held by the directors who are also
officers of the corporation and by certain employee stock plans), or (iii)
following the transaction in which such person became an interested stockholder,
the business combination is approved by the board of directors of the
corporation and authorized at a meeting of stockholders by the affirmative vote
of the holders of two-thirds of the outstanding voting stock of the corporation
not owned by the interested stockholder. Under section 203, the restrictions
described above also do not apply to certain business combinations proposed by
an interested stockholder following the public announcement or notification of
one of certain extraordinary transactions involving the corporation and a person
who had not been an interested stockholder during the previous three years or
who became an interested stockholder with the approval of the corporation's
board of directors and if such business combination is approved by a majority of
the board members who were directors prior to any person's becoming an
interested stockholder. The provisions of Section 203 requiring a super-majority
vote to approve certain corporate transactions could have the effect of
discouraging, delaying or preventing hostile takeovers, including those that
might result in the payment of a premium over market price or changes in control
or management of the Company.
LIMITATION ON LIABILITY OF DIRECTORS
The Company's Certificate of Incorporation provides that a director of
the Company will not be personally liable to the Company or its stockholders for
monetary damages for breach of the fiduciary duty of care as a director,
27
<PAGE>
including breaches which constitute gross negligence. By its terms and in
accordance with the Delaware General Corporation Law, however, this provision
does not eliminate or limit the liability of a director of the Company (i) for
breach of the director's duty of loyalty to the Company or its stockholders,
(ii) for acts or omissions not in good faith or which involve international
misconduct or a knowing violation of law, (iii) under Section 174 of the
Delaware General Corporation Law, (relating to unlawful payments or dividends or
unlawful stock repurchases or redemptions), (iv) for any improper benefit or (v)
for breaches of a director's responsibilities under the Federal Securities laws.
SHARES ELIGIBLE FOR FUTURE RESALE
As of November 30, 1999, the Company had an aggregate of 6,534,582
shares of its Common Stock issued and outstanding, 2,407,020 all of which are
"restricted securities," which may be sold only in compliance with Rule 144
under the Securities Act of 1933, as amended. Rule 144 provides, in essence,
that a person holding restricted securities for a period of one year after
payment therefor may sell, in brokers' transactions or to market makers, an
amount not exceeding 1% of the outstanding class of securities being sold, or
the average weekly reported volume of trading of the class of securities being
sold over a four-week period, whichever is greater, during any three-month
period. (Persons who are not affiliates of the Company and who had held their
restricted securities for at least two years are not subject to the volume or
transaction limitations.) The sale of a significant number of these shares in
the public market may adversely affect prevailing market prices of the Company's
securities following this Offering.
TRANSFER AGENT & REGISTRAR
The transfer agent and registrar for the Company's Common Stock is
Atlas Stock Transfer, 5899 South State, Murray, Utah 84107.
28
<PAGE>
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY
AND OTHER SHAREHOLDER MATTERS
The Company's shares of Common Stock have quoted since December 20,
1993 on the OTC Bulletin Board (originally under the symbol "BSTR"). From
September 11, 1996 through September 2, 1998, the Common Stock traded under the
symbol "DVCC". Since September 2, 1998, the Common Stock has been trading under
the symbol "MDSX". However, the Company is not aware of any established trading
market for its Common Stock nor is there any record of significant trading in
the Company's Common Stock.
The following table sets forth the range of high and low bid quotations
for the Common Stock, since October 1998, as reported by the OTC Bulletin Board.
The quotes represent inter-dealer prices without adjustment or mark-ups,
mark-downs or commissions and may not necessarily represent actual transactions.
The trading volume of the Company's securities fluctuates and may be extremely
limited (or non-existent) during certain periods. As a result, the liquidity of
an investment in the Company's securities may be adversely affected.
COMMON STOCK
---------------
HIGH LOW
---- ---
1998
- - - ----
Quarter ended*
December 31, 1998 $1-1/2 $ 1/2
1999
- - - ----
Quarter ended
March 31, 1999 $3-1/2 $1-7/16
Quarter ended
June 30, 1999 $3-3/8 $2-1/4
Quarter ended
September 30, 1999 $4-1/4 $2-3/4
* Limited trading on the OTC Bulletin Board commenced in October 1998.
On November 30, 1999, the final quoted price as reported by the OTC
Bulletin Board was 3-1/2 for each share of Common Stock. As of November 30,
1999, there were 6,534,582 shares of Common Stock outstanding, held of record by
approximately 484 record holders.
29
<PAGE>
DIVIDEND POLICY
It is the policy of the Board of Directors to retain earnings for use
in the maintenance and expansion of the Company's business. the Company has not
declared any cash dividends to the shareholders of its capital stock and does
not intend to declare such dividends in the foreseeable future.
ITEM 2. LEGAL PROCEEDINGS
The Company is not a party to any material litigation or governmental
proceedings that, management believes, would result in judgments or fines that
would have a material adverse effect on the Company.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
None.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
In July 1998 the Company sold 4,000,000 shares of Common Stock to eight
(8) accredited investors for an aggregate purchase price of $1,000,000. The
sales were made in reliance upon Rule 504 of Regulation D under the Act. No
commissions were paid.
In connection with the Company's acquisition of shares of Meduck
Technologies, Ltd. (the Company's majority-owned subsidiary) in October 1998,
the Company issued 700,000 shares of Common Stock to Clark Holdings, Ltd. The
sale was made in reliance upon Section 4(2) of the Act. No commissions were
paid.
In connection with the Company's acquisition of shares Optimart
Imports, Inc. (formerly a wholly-owned subsidiary of the Company) in October
1998, the Company issued 500,000 shares of Common Stock to Dorrex International,
Ltd. The sale was made in reliance upon Section 4(2) of the Act. No commissions
were paid.
In connection with the Company's acquisition of shares of TNJ Products,
Inc. (a wholly-owned subsidiary of the Company) in June 1999, the Company issued
600,000 shares of Common Stock to RMC Limited. The sale was made in reliance
upon Section 4(2) of the Act. No commissions were paid.
In connection with the Company's acquisition of M&W Medical Supplies,
LLC (a wholly-owned subsidiary of the Company) in August 1999, the Company
issued 50,000 shares of Common Stock to Medical Innovations, LLC, an entity in
which the wife of Dr. Wurzburger, a proposed Director of the Company, has a 50%
interest. The sale was made in reliance on Section 4(2) of the Act. No
commissions were paid.
30
<PAGE>
In June 1999, the Company issued 10,000 shares of Common Stock to
Jeanette Tracy, a Director of the Company. The sale was made in reliance on
Section 4(2) of the Act. No commissions were paid.
In June 1999, the Company issued 20,000 shares of Common Stock to
Frieda Goldstein, a Director of the Company. The sale was made in reliance on
Section 4(2) of the Act. No commissions were paid.
In June 1999, the Company issued 125,000 shares of Common Stock to
Tsiona Bitton, a Director of TNJ, the Company's wholly-owned subsidiary. The
sale was made in reliance on Section 4(2) of the Act. No commissions were paid.
In July 1999, the Company issued 300,000 shares of Common Stock to
Omnistar Enterprises, Ltd., an entity owned by certain officers of Meduck, a
subsidiary of the Company. The sale was made in reliance on Section 4(2) of the
Act. No commissions were paid.
In May 1998, the Company issued 150,000 shares of Common Stock to each
of Richard Fiorenze and Thomas Trobiano, former officers and directors of the
Company, in exchange of the forgiveness of $232,012 of debt owed by the Company
to such persons.
In April 1997, the Company issued 3,000 shares of Common Stock to a
former employee of the Company, for $3,000 of services rendered. The sale was
made in reliance on Section 4(2) of the Act. No commissions were paid.
In August 1997, the Company issued 300 shares of Common Stock to An-Con
Genetics, Inc. in connection with the Company's investment in such entity. The
sale was made in reliance on Section 4(2) of the Act. No commissions were paid.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law (the "GCL")
empowers a corporation to indemnify its directors and officers and to purchase
insurance with respect to liability arising out of the performance of their
duties as directors and officers. The GCL provides further that the
indemnification permitted thereunder shall not be deemed exclusive of any other
rights to which the directors and officers may be entitled under the
corporation's by-laws, any agreement, vote of stockholders or otherwise.
Article Ninth of the Company's Certificate of Incorporation eliminates
the personal liability of directors to the fullest extent permitted by Section
102 of the GCL. Article Tenth provides for indemnification of all persons whom
it shall have the power to indemnify pursuant to Section 145 of the GCL.
The effect of the foregoing is to require the Company to the extent
permitted by law to indemnify the officers and directors of the Company for any
claim arising against such persons in their official capacities if such person
acted in good faith and in a manner that he reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect to any
31
<PAGE>
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers or persons controlling
the Company pursuant to the foregoing provisions, the Company has been informed
that in the opinion of the SEC, such indemnification is against public policy as
expressed in the Securities Act and is therefore unenforceable.
The Company does not currently have any liability insurance coverage
for its officers and directors.
PART III
ITEM 1. INDEX TO EXHIBITS
2.1 Certificate of Incorporation of the Company
2.2 Certificate of Merger (Delaware)
2.3 Articles of Merger (Nevada)
2.4 Agreement and Plan of Merger
2.5 By-Laws of the Company
3.1 Specimen Certificate for shares of Common Stock
3.2 Form of Private Placement Warrant
10.1 Consent of Kempisty & Company, Independent Certified Public
Accountants.
27 Financial Data Schedule
32
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
the registrant caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
MEDSEARCH TECHNOLOGIES, INC.
By: /s/ JACOB MELLER
------------------------------------
Name: Jacob Meller
Title: President
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
<TABLE>
<CAPTION>
Signature Title Date
- - - --------- ----- ----
<S> <C> <C>
/s/ JACOB MELLER
- - - ------------------------------ President and Director December 1, 1999
Jacob Meller
/s/ FRIEDA GOLDSTEIN
- - - ----------------------------- Vice President, Treasurer, December 1, 1999
Frieda Goldstein Secretary and Director
/s/ JEANETTE TRACY
- - - -----------------------------
Jeanette Tracy Director December 1, 1999
</TABLE>
33
<PAGE>
MEDSEARCH TECHNOLOGIES, INC.
(FORMERLY MEDSEARCH, INC.)
INDEX
PAGE
INDEPENDENT AUDITORS' REPORT F2
CONSOLIDATED BALANCE SHEETS F3
CONSOLIDATED STATEMENTS OF OPERATIONS F4
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY F5-6
CONSOLIDATED STATEMENTS OF CASH FLOWS F7-8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F9-18
<PAGE>
KEMPISTY & COMPANY
CERTIFIED PUBLIC ACCOUNTANTS, P.C.
- - - --------------------------------------------------------------------------------
15 MAIDEN LANE - SUITE 1003 - NEW YORK, NY 10038 - TEL (212) 406-7272 - FAX
(212) 513-1930
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Medsearch Technologies, Inc.
We have audited the consolidated balance sheet of Medsearch Technologies, Inc.
as of December 31, 1998, and the related consolidated statements of operations,
stockholders' equity and cash flows for the years ended December 31, 1998 and
December 31, 1997. 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 audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Medsearch Technologies, Inc. as
of December 31, 1998, and the results of its operations and its cash flows for
the years ended December 31, 1998 and December 31, 1997 in conformity with
generally accepted accounting principles.
Kempisty & Company
Certified Public Accountants PC
New York, New York
March 19, 1999
F2
<PAGE>
<TABLE>
<CAPTION>
MEDSEARCH TECHNOLOGIES, INC.
(FORMERLY MEDSEARCH, INC.)
CONSOLIDATED BALANCE SHEETS
September 30, December 31,
1999 1998
------------- ------------
(unaudited)
ASSETS
<S> <C> <C>
Current Assets
Cash and equivalents $ 63,192 $ 521,557
Accounts receivable-net (Note 10) 55,632 252,905
Note receivable (Note 7) 22,039 --
Officer loan receivable -- 15,000
Inventory 8,575 --
Deferred expenses 247,936
Other receivable 38,204 --
Prepaid expenses 892 1,042
----------- -----------
Total Current Assets 436,470 790,504
Fixed assets-net (Note 3) 113,528 127,573
Note receivable (Note 7) 144,078 --
Other assets
Licenses-net -- 352,942
Patents-net 538,214 169,167
Deferred expenses 427,754 --
----------- -----------
Total Other Assets 965,968 522,109
----------- -----------
TOTAL ASSETS $ 1,660,044 $ 1,440,186
=========== ===========
LIABILITIES & STOCKHOLDERS' EQUITY
Liabilities
Accounts payable & accrued expenses $ 59,798 $ 119,833
Bank loan payable 4,223 --
Current portion of note payable 3,273 3,273
----------- -----------
Total Current Liabilities 67,294 123,106
Note payable 36,226 39,199
Commitments & contingencies (Note 11)
Stockholders' Equity (Note 7)
Common stock, 50,000,000 shares authorized at $.001
par value; issued and outstanding 6,534,582 at September
30, 1999, 6,179,582 at December 31, 1998 6,534 6,179
Preferred stock 2,000,000 shares authorized at $.001 par
value; issued and outstanding none -- --
Capital in excess of par value 4,398,727 3,308,210
Deficit (2,848,737) (2,036,508)
----------- -----------
Total Stockholders' Equity 1,556,524 1,277,881
----------- -----------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 1,660,044 $ 1,440,186
=========== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
F3
<PAGE>
<TABLE>
<CAPTION>
MEDSEARCH TECHNOLOGIES, INC.
(FORMERLY MEDSEARCH, INC.)
CONSOLIDATED STATEMENTS OF OPERATIONS
For the nine months For the Year Ended
ended September 30, December 31,
1999 1998 1998 1997
----------- ----------- ----------- -----------
(unaudited)
<S> <C> <C> <C> <C>
Sales revenues $ 1,100,184 $ 241,756 $ 803,626 $ 456,128
Cost of sales 857,534 92,881 520,569 163,676
----------- ----------- ----------- -----------
Gross profit 242,650 148,875 283,057 292,452
Stock compensation (Note 7) 120,560 -- -- --
Research and development 170,505 -- 21,279 --
General & administrative expenses 763,814 285,736 536,633 730,012
----------- ----------- ----------- -----------
1,054,879 285,736 557,912 730,012
Loss from operations (812,229) (136,861) (274,855) (437,560)
Other income & expenses
Interest income -- 1,685 12,699 775
Other income -- 10,000 10,000 --
Interest expense -- -- -- (33,357)
Gain (loss) on investment -- 13,572 13,572 (10,166)
----------- ----------- ----------- -----------
Income (loss) before taxes (812,229) (111,604) (238,584) (480,308)
Provision for income taxes -- -- -- --
----------- ----------- ----------- -----------
Net income (loss) $ (812,229) (111,604) (238,584) (480,308)
=========== =========== =========== ===========
Proforma adjustments (Note 13)
Officers compensation 90,000 -- 90,000 --
Rent expense 9,000 -- 9,000 --
----------- ----------- ----------- -----------
Proforma net income (loss) 99,000 0 99,000 0
$ (911,229) (111,604) (337,584) (480,308)
=========== =========== =========== ===========
Basic and diluted income (loss) per share (0.13) (0.15) (0.08) (0.71)
=========== =========== =========== ===========
Proforma basic and diluted
income (loss) per share (0.15) (0.15) (0.12) (0.71)
=========== =========== =========== ===========
Basic and diluted average shares outstanding 6,276,709 757,483 2,833,281 677,814
=========== =========== =========== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
F4
<PAGE>
<TABLE>
<CAPTION>
MEDSEARCH TECHNOLOGIES, INC.
(FORMERLY MEDSEARCH, INC.)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' (DEFICIT)
YEARS ENDED DECEMBER 31, 1998
AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 (UNAUDITED)
Common Stock Preferred Stock Capital in
-------------------------- ------------------------- Excess of
Shares Amount Shares Amount Par Value Deficit Total
----------- ----------- ----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance January 1, 1997
as previously reported 76,339 $ 76 -- $ -- $ 1,429,104 $(1,657,491) $ (228,311)
Adjustment in connection
with TNJ acquisition 600,000 600 -- -- 87,667 339,875 428,142
----------- ----------- ----------- ----------- ----------- ----------- -------------
Balance January 1, 1997
as restated 676,339 676 -- -- 1,516,771 (1,317,616) 199,831
Capital contribution in TNJ -- -- -- -- 222,607 -- 222,607
Shares issued for services
at $.001 per share 3,000 3 -- -- 2,999 -- 3,002
Shares issued for services
at $.001 per share 300 -- -- -- 300 -- 300
Loss for year ended
December 31, 1997 -- -- -- -- -- (480,308) (480,308)
----------- ----------- ----------- ----------- ----------- ----------- -------------
Balance December 31, 1997 679,639 679 0 0 1,742,677 (1,797,924) (54,568)
Fractional share adjustment
due to reverse stock split (57) -- -- -- -- -- 0
Shares issued to officers for
debt repayment 300,000 300 -- -- 231,712 -- 232,012
Forgiveness of loan interest
by officers -- -- -- -- 39,021 -- 39,021
Sales of units 4,000,000 4,000 -- -- 996,000 -- 1,000,000
Shares issued for acquisition
of Meduck 700,000 700 -- -- 174,300 -- 175,000
Shares issued for acquisition
of Optimart 500,000 500 -- -- 124,500 -- 125,000
Loss for year ended
December 31, 1998 -- -- -- -- -- (238,584) (238,584)
----------- ----------- ----------- ----------- ----------- ----------- -------------
Balance December 31, 1998 6,179,582 6,179 0 0 3,308,210 (2,036,508) 1,277,881
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
F5
<PAGE>
<TABLE>
<CAPTION>
MEDSEARCH TECHNOLOGIES, INC.
(FORMERLY MEDSEARCH, INC.)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' (DEFICIT)
YEARS ENDED DECEMBER 31, 1998
AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 (UNAUDITED)
(CONTINUED)
Common Stock Preferred Stock Capital in
-------------------------- ------------------------- Excess of
Shares Amount Shares Amount Par Value Deficit Total
----------- ----------- ----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Shares from sale of Optimart
received and retired (150,000) (150) -- -- -- -- (150)
Additional capital from sale
of Optimart -- -- -- -- 109,772 -- 109,772
Restricted stock issued to
officers and directors in lieu
of cash compensation 155,000 155 -- -- 271,095 -- 271,250
Shares issued for
compensation 300,000 300 -- -- 524,700 -- 525,000
Shares and warrants
issued for acquisition of
M & W Medical Supplies, L.L.C 50,000 50 -- -- 184,950 -- 185,000
Loss for the nine months
ended September 30, 1999 -- -- -- -- -- (812,229) (812,229)
----------- ----------- ----------- ----------- ----------- ----------- ------------
Balance September 30, 1999 6,534,582 $ 6,534 0 $ 0 $ 4,398,727 $(2,848,737) $ 1,556,524
=========== =========== =========== =========== =========== =========== ============
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
F6
<PAGE>
<TABLE>
<CAPTION>
MEDSEARCH TECHNOLOGIES, INC.
(FORMERLY MEDSEARCH, INC.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the nine months For the Year Ended
ended September 30, December 31,
-------------------------- --------------------------
1999 1998 1998 1997
----------- ----------- ----------- -----------
(unaudited)
<S> <C> <C> <C> <C>
Operating Activities
Net income or (loss) $ (812,229) $ (111,604) $ (238,584) $ (480,308)
Adjustments to reconcile net income or (loss)
to net cash provided by operating activities:
Depreciation & amortization 109,935 -- 36,158 6,070
Bad debt 89,274 (36,536) (26,399) 501,595
Stock issued for compensation 120,560 -- -- 3,300
Changes in operating assets:
(Increase) decrease in accounts receivable 107,999 (48,795) (22,599) 13,695
(Increase) decrease in inventory (8,575) -- -- --
(Increase) decrease in current assets (70,401) -- 5,126 8,499
Increase (decrease) in interest payable -- (42,167) (42,167) 33,357
Increase (decrease) in payables (60,035) 87,851 187,064 (77,578)
----------- ----------- ----------- -----------
Net cash (used)provided by operating activities (523,472) (151,251) (101,401) 8,630
Investing Activities
Purchase of fixed assets (1,143) (53,599) (127,738) --
Loans made to officers -- -- (15,000) (29,133)
Repayment of officer loans 15,000 14,476 29,133 --
Acquisition of Optimart - cash portion -- -- (250,000) --
Sale of investment -- 33,375 -- --
----------- ----------- ----------- -----------
Net cash provided(used) by investing activities 13,857 (5,748) (363,605) (29,133)
Financing Activities
Increase (decrease) in bank loans 74,149 -- (8,372) 8,372
Payment of bank loan and note (72,899) (36,224) (34,495) --
Proceeds from note receivable payment 50,000 -- -- --
Proceeds from sale of stock -- 1,000,000 1,000,000 --
----------- ----------- ----------- -----------
Net cash provided by financing activities 51,250 963,776 957,133 8,372
----------- ----------- ----------- -----------
Increase (decrease) in cash (458,365) 806,777 492,127 (12,131)
Cash at beginning of period 521,557 29,430 29,430 41,561
----------- ----------- ----------- -----------
Cash at end of period $ 63,192 $ 836,207 $ 521,557 $ 29,430
=========== =========== =========== ===========
Supplemental Disclosures of Cash Flow Information:
Cash paid during year for:
Interest $ 8,540 $ -- $ 915 $ --
=========== =========== =========== ===========
Income taxes $ -- $ -- $ -- $ --
=========== =========== =========== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
F7
<PAGE>
<TABLE>
<CAPTION>
MEDSEARCH TECHNOLOGIES, INC.
(FORMERLY MEDSEARCH, INC.)
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
For the nine months For the Year Ended
ended September 30, December 31,
1999 1998 1998 1997
-------- -------- -------- --------
(unaudited)
Supplemental Disclosures of Cash Flow Information
- - - -------------------------------------------------
Non-cash investing and financing activities:
<S> <C> <C> <C> <C>
Issuance of common stock for
cancellation of indebtedness $ -- $300,000 $300,000 $ --
Officers forgiveness of loan interest $ -- $ 39,021 $ 39,021 $ --
Issuance of common stock for
Meduck acquisition $ -- $ -- $700,000 $ --
Issuance of common stock for
Optimart acquisition, net of cash paid $ -- $ -- $125,000 $ --
Receipt of common stock and notes for
Optimart divestiture and accounts receivable $478,617 $ -- $ -- $ --
Issuance of common stock and warrants for
M & W Medical acquisition $185,000 $ -- $ -- $ --
Issuance of common stock for compensation $796,250 $ -- $ -- $ 3,302
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
F8
<PAGE>
MEDSEARCH TECHNOLOGIES, INC.
(FORMERLY MEDSEARCH, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS AND DISCLOSURES AT AND FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1998 AND 1999 ARE UNAUDITED)
Note 1- ORGANIZATION & OPERATIONS
Medsearch, Inc., a Nevada corporation, was organized on June 13,
1986 and changed its name to Medsearch, Inc. on June 16, 1998.
The Company and its subsidiaries are engaged in the development,
manufacturing and marketing of medical products.
Nine Months Ended September 30, 1999
------------------------------------
On April 12, 1999 Medsearch Technologies, Inc. was incorporated in
Delaware to effectuate a reincorporation of Medsearch, Inc.-Nevada
with and into the Company. All shares of outstanding common stock
were exchanged on a one for one basis for shares of the $0.001 par
value common stock of the new Delaware corporation. There was no
change in the number of shares authorized.
Note 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Principles of Consolidation
---------------------------
The consolidated financial statements include the accounts of Meduck
Technologies, LTD. ("Meduck") a 70% owned subsidiary as of December
31, 1998 and September 30, 1999, Optimart Imports, Inc.
("Optimart"), a 100% owned subsidiary for the period of ownership
October, 1998 through its sale in June, 1999 and TNJ Products, Inc.
acquired in June, 1999. All significant intercompany accounts and
transactions have been eliminated. Subsidiary losses in excess of
the unrelated investors' interest are charged against the Company's
interest.
Nine Months Ended September 30, 1999
------------------------------------
During June, 1999 the Company converted $237,000 of loans
to Meduck for an additional 27% interest, bringing its
total ownership percentage to 97%.
b. Foreign Currency Translation
----------------------------
The Company has determined that the local currency of its
Israeli subsidiary, Meduck, is the functional currency. In
accordance with Statement of Financial Accounting Standard
No. 52, "Foreign Currency Translation" ("SFAS No. 52") the
assets and liabilities denominated in foreign currency are
translated into U.S. dollars at the current rate of
exchange existing at period-end and revenues and expenses
are translated at average monthly exchange rates. Related
translation adjustments are reported as a separate
component of stockholders' equity, whereas, gains or losses
resulting from foreign currency transactions are included
in results of operations.
F9
<PAGE>
MEDSEARCH TECHNOLOGIES, INC.
(FORMERLY MEDSEARCH, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS AND DISCLOSURES AT AND FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1998 AND 1999 ARE UNAUDITED)
Note 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
c. Cash and Cash Equivalents
-------------------------
For purposes of the statement of cash flows, the Company considers
all highly liquid investments with a maturity of three months or
less at acquisition to be cash equivalents.
d. Property and Equipment
----------------------
Property and equipment are accounted for at cost and are depreciated
over their estimated useful lives on a straight-line basis.
e. Research and Development Costs
------------------------------
Research and development costs are charged to operations as
incurred. Machinery, equipment and other capital expenditures which
have alternative future use beyond specific research and development
activities are capitalized and depreciated over their estimated
useful lives.
f. Income Taxes
------------
The Company previously adopted Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes", (SFAS No.109")
which requires the asset and liability method of accounting for
income taxes. Enacted statutory tax rates are applied to temporary
differences arising from the differences in financial statement
carrying amounts and the tax basis of existing assets and
liabilities. Due to the uncertainty of the realization of income tax
benefits, (Note 4), the adoption of SFAS 109 had no effect on the
financial statements of the Company.
g. Use of Estimates
----------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires the Company's 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 could differ from those estimates.
F10
<PAGE>
MEDSEARCH TECHNOLOGIES, INC.
(FORMERLY MEDSEARCH, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS AND DISCLOSURES AT AND FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1998 AND 1999 ARE UNAUDITED)
Note 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
h. Concentration of Credit Risk
----------------------------
Financial instruments which potentially subject the Company to
significant concentrations of credit risk consist principally of
cash investments at commercial banks and receivables from officers
and directors of the Company. Cash and cash equivalents are
temporarily invested in interest bearing accounts in financial
institutions, and such investments may be in excess of the FDIC
insurance limit. Receivables from an officer of the Company (Note 9)
are unsecured and represent a concentration of credit risk due to
the common employment and financial dependency of this individual on
the Company.
i. Patents and Licenses
--------------------
Patents are being amortized on a straight line basis over 10 years.
Licenses are being amortized over the life of the license or 34
months.
j. Reverse Stock Split
-------------------
The Company's Board of Directors effected a 1 for 100 reverse stock
split of its common stock $.001 par value on May 16, 1998. All share
and per share amounts in the accompanying financial statements have
been retroactively adjusted to reflect this stock split.
k. Interim Reporting
-----------------
The accompanying financial information as of September 30, 1999 and
for the nine months ended September 30, 1998 and 1999 is unaudited
and, in the opinion of management, all adjustments, consisting only
of normal recurring adjustments considered necessary for a fair
presentation, have been included. Operating results for any interim
period are not necessarily indicative of the results for any other
interim period or for an entire year.
l. Comprehensive Income
--------------------
Effective January 1, 1998 the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income"
("SFAS No. 130"). SFAS No. 130 requires an entity to report
comprehensive income and its components and increases financial
reporting disclosures. This standard has no impact on the Company's
financial position, cash flows or results of operations since the
Company's comprehensive income is the same as its reported net
income for 1998 and the nine months ended September 30, 1999.
F11
<PAGE>
MEDSEARCH TECHNOLOGIES, INC.
(FORMERLY MEDSEARCH, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS AND DISCLOSURES AT AND FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1998 AND 1999 ARE UNAUDITED)
Note 3- FURNITURE AND EQUIPMENT
<TABLE>
<CAPTION>
Furniture and equipment consists of the following: September 30, December 31,
1999 1998
-------------- -------------
<S> <C> <C>
Office furniture and equipment $ 74,362 $ 74,362
Vehicle 42,472 42,472
Telephone equipment 11,366 11,366
Computers 14,477 13,334
-------------- -------------
142,677 141,534
Less: Accumulated depreciation (29,149) (13,961)
-------------- -------------
$ 113,528 $ 127,573
============== =============
</TABLE>
Note 4- INCOME TAXES
The Company recognized a loss for the years ended December 31, 1998
and 1997. The amount of available additional net operating loss
carry forwards are approximately $13,000 for 1997, $157,000 for
1996, $142,000 for 1995 and $398,000 for 1994. The net operating
loss carry forwards, if not utilized, will expire in the years 2001
through 2017.
The Financial Accounting Standards Board issued SFAS #109,
Accounting for Income Taxes, which is effective for calendar years
beginning after December 31, 1992. The Company has adopted SFAS #109
for the years ended December 31, 1996 and December 31, 1995. In
accordance with SFAS #109, at December 31, 1996 and 1995 the Company
recognized deferred tax assets of approximately $584,000 and
$580,000, respectively, arising from the net operating loss
carry-forwards available to reduce future taxable income. These
assets were reduced by valuations allowances of $584,000 and
$580,000, respectively.
Note 5- LOAN PAYABLE
<TABLE>
<CAPTION>
Long term debt consists of the following: September 30, December 31,
1999 1998
-------------- -------------
<S> <C> <C>
Installment loan $ 39,499 $ 42,472
Less current portion 3,273 3,273
-------------- -------------
$ 36,226 $ 39,199
============== =============
</TABLE>
The installment loan payable from a finance company is secured by an
automobile and is payable in monthly installments of $622, which
include principal and interest through March, 2001, at which time a
final balloon payment of $32,943 is due. The interest rate on the
loan is 8.5%.
F12
<PAGE>
MEDSEARCH TECHNOLOGIES, INC.
(FORMERLY MEDSEARCH, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS AND DISCLOSURES AT AND FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1998 AND 1999 ARE UNAUDITED)
Note 6- FAIR VALUE OF FINANCIAL INSTRUMENTS
The following estimated fair value amounts have been determined
using available market information and appropriate valuation
methodologies. However, considerable judgment is necessarily
required in interpreting market data to develop the estimates of
fair value.
Accordingly, the estimates presented herein are not necessarily
indicative of the amounts that the Company could realize in a
current market exchange. The use of different market assumptions
and/or estimation methodologies may have a material effect on the
estimated fair value amounts.
December 31, 1998
Carrying Amount Fair Value
--------------- ----------
Assets:
Cash and cash equivalents $ 521,557 $ 521,557
Accounts receivable 252,905 252,905
Officer loan receivable 15,000 15,000
The carrying amounts of cash and cash equivalents are a reasonable
estimate of their fair value.
Note 7- STOCKHOLDERS' EQUITY
On May 14, 1998 the Company issued 300,000 shares of $0.001 common
stock to two officers in repayment of loans to the Company totalling
approximately $195,000.
On May 16, 1998 the Company declared a one for one hundred reverse
stock split of its $.001 par value common stock. The par value of
the common stock was not changed.
On August 1, 1998 the Company sold four million (4,000,000) units,
each unit consisting of one share of common stock $.001 par value
and one warrant to purchase one share of $.001 par value common
stock at $1.00, expiring August 1, 2001 at $.25 per unit for total
gross proceeds of $1,000,000. On December 24, 1998 the Board of
Directors cancelled the above warrants and issued new warrants
exercisable at $1.25, which expire on December 31, 2002.
F13
<PAGE>
MEDSEARCH TECHNOLOGIES, INC.
(FORMERLY MEDSEARCH, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS AND DISCLOSURES AT AND FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1998 AND 1999 ARE UNAUDITED)
Note 7- STOCKHOLDERS' EQUITY (Continued)
MEDUCK TECHNOLOGIES, LTD. AQUISITION
On October 1, 1998 the Company issued 700,000 shares of $.001 par
value common stock valued at $.25 per share or $175,000 for a
seventy percent (70%) interest in Meduck, a company engaged in the
development and manufacturing of medical products.
OPTIMART IMPORTS, INC. ACQUISITION
On October 9, 1998 the Company issued 500,000 shares of $.001 par
value common stock valued at $.25 per share or $125,000 plus
$250,000 for one hundred percent (100%) of Optimart. Optimart is a
company that imports optical products under a three year rights
agreement effective August 2, 1998. The cost of the Optimart
acquisition of $375,000 will be amortized over the remaining life of
the agreement or thirty four (34) months.
TNJ ACQUISITION
In June, 1999 the Company issued 600,000 shares of $0.001 par value
common stock for 100% of the outstanding shares of TNJ Products,
Inc. common stock, a medical product distributor and a
rehabilitative medical service provider. The acquisition was
accounted for as a pooling of interests. The accompanying financial
statements for 1998 are based on the assumption that the companies
were combined for the full year, and financial statements of prior
years have been restated to give effect to the combination.
Summarized results of operations of the separate companies for the
period from January 1, 1999 through June 30, 1999, the date of
acquisition, are as follows:
<TABLE>
<CAPTION>
Medsearch TNJ
------------- -------------
<S> <C> <C>
Net sales $ 871,714 $ 142,675
============== =============
Net income $ (253,719) $ (215,257)
============= =============
The summarized assets and liabilities of the separate
companies on June 30, 1999, the date of acquisition, were
as follows:
Medsearch TNJ
------------- -------------
<S> <C> <C>
Cash and cash equivalents $ 284,280 $ 14,223
Other current assets 130,252 81,542
Other assets 513,557 --
Property and equipment 68,954 48,787
------------- -------------
$ 997,043 $ 144,552
Current liabilities (80,728) (25,752)
Long-term debt -- (37,226)
------------- -------------
$ 916,315 $ 81,574
============= =============
</TABLE>
F14
<PAGE>
MEDSEARCH TECHNOLOGIES, INC.
(FORMERLY MEDSEARCH, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS AND DISCLOSURES AT AND FOR THE SIX
MONTHS ENDED SEPTEMBER 30, 1998 AND 1999 ARE
UNAUDITED)
Note 7- STOCKHOLDERS' EQUITY (Continued)
The following is a reconciliation of the amounts of net sales and
net income previously reported for 1998 and 1997 with restated
amounts:
Net sales and other revenue: 1998 1997
------------ ------------
As previously reported $ 405,180 $ --
TNJ 398,446 456,128
------------ ------------
As restated $ 803,626 $ 456,128
============ ============
Net income (loss): 1998 1997
------------ ------------
As previously reported $ (178,121) $ (87,704)
TNJ (60,463) (392,604)
------------ ------------
As restated $ (238,584) $ (480,308)
============ ============
OPTIMART DIVESTITURE
In June 1999, the Company sold Optimart back to its original
investors for $418,597. This amount was paid by returning 150,000
shares of the Company's common stock valued at $1.75 per share or
$262,500, and a $216,117 non-interest bearing note, payable in three
installments between June 1, 2000 and December 1, 2000. $60,020 of
the note was for the accounts receivable outstanding at the date of
sale. The note is secured by 100,000 shares of the Company's stock
owned by the buyer.
The following represents the sales, cost of sales and gross profit
related to Optimart for the periods presented (in thousands):
Six months Year ended
ended June 30, December 31,
1999 1998
-------------- ------------
Sales $ 872 $ 405
Cost of sales 812 371
---------- ---------
Gross Profit $ 60 $ 34
========== =========
M & W ACQUISITION
On August 18, 1999 the Company acquired 100% of the outstanding
membership interests of M & W Medical Supplies, L.L.C. ("M & W"), a
medical products company, for 50,000 shares of the Company's common
stock, warrants to purchase 100,000 shares of the Company's common
stock at $2.00 per share expiring August 18, 2002 and warrants to
purchase 100,000 shares of the Company's common stock at $3.00 per
share expiring August 18, 2002.
F15
<PAGE>
MEDSEARCH TECHNOLOGIES, INC.
(FORMERLY MEDSEARCH, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS AND DISCLOSURES AT AND FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1998 AND 1999 ARE UNAUDITED)
Note 7- STOCKHOLDERS' EQUITY (Continued)
STOCK ISSUED FOR COMPENSATION
During June, 1999 the Company issued 155,000 restricted shares of
its common stock, valued at $271,250, to two officers and a director
for services rendered and to be rendered. For the nine months ended
September 30, 1999 $76,810 was charged to expense.
On July 7, 1999 the Company issued 300,000 restricted shares of the
Company's common stock valued at $525,000 to Omnistar Enterprises,
Ltd, a company owned by an officer of the Company's subsidiary as
additional compensation for services to be performed over the next
three years. For the nine months ended September 30, 1999 $43,750
was charged to expense.
COMMON STOCK WARRANTS
During 1998, warrants ranging from $1.00 to $2.00 per share to
purchase 822,800 shares of common stock were granted at exercise
prices which were above the current quoted market price of the stock
on the date issued. Warrants to purchase 4,822,800 shares of common
stock were exercisable at December 31, 1998 and warrants to purchase
5,072,800 shares of common stock were exercisable at September 30,
1999. The per share exercise prices of these warrants are as
follows:
December 31, 1998
-----------------
Exercise Year of
Shares Price Expiration
------------ -------- ----------
441,400 1.00 2000
4,000,000 1.25 2002
381,400 2.00 2001
------------
Total 4,822,800
============
September 30, 1999
------------------
Exercise Year of
Shares Price Expiration
------------ -------- ----------
411,400 1.00 2000
4,080,000 1.25 2002
481,400 2.00 2001
100,000 3.00 2002
------------
Total 5,072,800
============
F16
<PAGE>
MEDSEARCH TECHNOLOGIES, INC.
(FORMERLY MEDSEARCH, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS AND DISCLOSURES AT AND FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1998 AND 1999 ARE UNAUDITED)
Note 7- STOCKHOLDERS' EQUITY (Continued)
<TABLE>
<CAPTION>
The following is a summary of warrant transactions:
Nine months ended Year ended
September 30, 1999 December 31, 1998
------------------ --------------------
<S> <C> <C>
Outstanding at beginning of period 4,822,800 --
Granted during the twelve month period 50,000 822,800
Issued as part of unit sale -- 4,000,000
Warrants cancelled and exchanged (30,000) (4,000,000)
New warrants issued 230,000 4,000,000
Exercised during the twelve month period -- --
------------------ --------------------
Outstanding and eligible for exercise 5,072,800 4,822,800
================== ====================
</TABLE>
During 1999 the Company issued to its attorneys, 50,000 warrants to
purchase common stock, exercisable at $1.25 per share which expire
December 31, 2000.
Note 8- GENERAL AND ADMINISTRATIVE EXPENSES
The president has waived his salary for the first year. However, the
Company has issued to the President 250,000 warrants to purchase
common stock, exercisable at $1.00 and expiring December 31, 2000,
and 250,000 warrants to purchase common stock exercisable at $2.00
which expire on December 31, 2002.
Note 9- RELATED PARTY TRANSACTIONS
On May 14, 1998 the Company issued 300,000 shares of common stock
$.001 par value in payment of approximately $195,000 of loans due to
officers of the Company.
Additionally, the officers of the Company forgave approximately
$40,000 in accrued interest on the loans.
During 1998 the Company loaned $15,000 to one of its officers. The
loan was repaid in February, 1999.
<TABLE>
<CAPTION>
Note 10- ACCOUNTS RECEIVABLE
September 30, 1999 December 31, 1998
------------------- --------------------
<S> <C> <C>
Accounts receivable $ 475,632 $ 583,631
Allowance for doubtful accounts (420,000) (330,726)
------------------- --------------------
Accounts receivable-net $ 55,632 $ 252,905
=================== ====================
</TABLE>
The Company has fully reserved for its Medicare accounts receivable,
which are in dispute.
F17
<PAGE>
MEDSEARCH TECHNOLOGIES, INC.
(FORMERLY MEDSEARCH, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS AND DISCLOSURES AT AND FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1998 AND 1999 ARE UNAUDITED)
Note 11- COMMITTMENTS AND CONTINGENCIES
The Company leases office space from an unaffiliated party on a
month to month basis. Rental expense for 1998 was $9,311. Rental
expense for the nine months ended September 30, 1999 was $34,791.
TNJ leases office space and equipment under noncancellable leases
expiring through February 1, 2001. The minimum future annual
operating lease commitments for leases with noncancellable terms in
excess of one year are as follows:
YEAR ENDING DECEMBER 31, AMOUNT
------------------------ ---------------
1999 $ 14,471
2000 14,725
2001 3,725
2002 254
---------------
Total $ 33,175
===============
Rent expense for TNJ was $13,200 for 1998, and $10,662 for the nine
months ended September 30, 1999.
Note 12- EARNINGS PER SHARE
During 1998 the Company adopted SFAS No. 128, "Earnings Per Share",
which requires the reporting of both basic and diluted earnings per
share. Net income per share-basic is computed by dividing income
available to common shareholders by the weighted average number of
common shares outstanding for the period. Shares isssuable under
stock warrants are excluded from computations as their effect is
antidilutive.
Note 13- PROFORMA NET INCOME (LOSS)
The proforma net income (loss) reflects additional normal operating
expenses for officers compensation and rent that were waived by an
officer of the Company for the periods shown, but will be incurred
in the future.
Note 14- ACQUISITIONS
The assets acquired in the acquisitions of M & W, Meduck and
Optimart are as follows:
M & W Optimart Meduck
----------- ----------- ----------
License agreement $ -- $ 375,000 $ --
Patents 185,000 -- 412,103
----------- ----------- ----------
Total purchase price $ 185,000 $ 375,000 $ 412,103
=========== =========== ==========
F18
CERTIFICATE OF INCORPORATION
OF
MEDSEARCH TECHNOLOGIES, INC.
The undersigned, a natural person, for the purpose of
organizing a corporation for conducting the business and promoting the purposes
hereinafter stated, under the provisions and subject to the requirements of the
laws of the State of Delaware (particularly Chapter 1, Title 8 of the Delaware
Code and the acts amendatory thereof and supplemental thereto, and known,
identified, and referred to as the "General Corporation Law of the State of
Delaware"), hereby certifies that:
FIRST: The name of the corporation (hereinafter called the
"Corporation") is MEDSEARCH TECHNOLOGIES, INC.
SECOND: The address, including street, number, city, and
county, of the registered office of the corporation in the State of Delaware is
Corporation Service Company, 1013 Centre Road, in the City of Wilmington, County
of New Castle; and the name of the registered agent of the corporation in the
State of Delaware at such address is Corporation Service Company.
THIRD: The purpose of the Corporation is to engage in any
lawful act or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware.
FOURTH:
(a) The total number of shares of capital stock which the
Corporation shall have authority to issue is 52,000,000, 50,000,000 of which are
common shares, par value $.001 per share, each entitled to one vote per share,
and 2,000,000 of which are preferred shares, par value $.001 per share.
The shares of Preferred Stock may be issued from time to time in one or
more series, in any manner permitted by law, as determined from time to time by
the Board of Directors, and stated in the resolution or resolutions providing
for the issuance of such shares adopted by the Board of Directors pursuant to
authority hereby vested in it. Without limiting the generality of the foregoing,
shares in such series shall have such voting powers, full or limited, or no
voting powers, and shall have such designations, preferences and relative,
participating, optional, or other special rights, and qualifications,
limitations, or restrictions thereof, permitted by law, as shall be stated in
the resolution or resolutions providing for the issuance of such shares adopted
by the Board of Directors pursuant to authority hereby vested in it. The number
of shares of any such series so set forth in such resolution or resolutions may
be increased (but not above the total number of authorized shares of Preferred
Stock) or decreased (but not below the number of shares thereof then
outstanding) by further resolution or resolutions adopted by the Board of
Directors pursuant to authority hereby vested in it.
<PAGE>
No holder of any of the shares of the stock of the
Corporation, whether now or hereafter authorized and issued, shall be entitled
as of right to purchase or subscribe for any unissued stock of any class, or any
additional shares of any class to be issued by reason of any issuances of
capital stock of the Corporation or any increase of the authorized capital stock
of any class of the Corporation, or bonds, certificates of indebtedness,
debentures, or other securities convertible into stock of any class of the
Corporation, or carrying any right to purchase stock of any class of the
Corporation, but any such unissued stock or any such additional authorized issue
of any stock or of other securities convertible into stock, or carrying any
right to purchase stock, may be issued and disposed of pursuant to resolution of
the Board of Directors to such persons, firms, corporations, or associations,
and upon such terms, as may be deemed advisable by the Board of Directors in the
exercise of its discretion.
FIFTH: The name and the mailing address of the incorporator
are as follows:
NAME MAILING ADDRESS
Stuart Neuhauser Berlack, Israels & Liberman LLP
120 West 45th Street
New York, New York 10036
SIXTH: The corporation is to have perpetual existence.
SEVENTH: Whenever a compromise or arrangement is proposed
between this Corporation and its creditors or any class of them and/or between
this Corporation and its stockholders or any class of them, any court of
equitable jurisdiction within the State of Delaware may, on the application in a
summary way of this Corporation or of any creditor or stockholder thereof or on
the application of any receiver or receivers appointed for this Corporation
under ss.291 of Title 8 of the Delaware Code or on the application of trustees
in dissolution or of any receiver or receivers appointed for this Corporation
under ss.279 of Title 8 of the Delaware Code order a meeting of the creditors or
class of creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, to be summoned in such manner as the said court
directs. If a majority in number representing three fourths in value of the
creditors or class of creditors, and/or of the stockholders or class of
stockholders of this Corporation, as the case may be, agree to any compromise or
arrangement and to any reorganization of this Corporation as a consequence of
such compromise or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the said application
has been made, be binding on all the creditors or class of creditors, and/or on
all the stockholders or class of stockholders, of this Corporation, as the case
may be, and also on this Corporation.
<PAGE>
EIGHTH: For the management of the business and for the conduct
of the affairs of the Corporation, and in further definition, limitation, and
regulation of the powers of the Corporation and of its directors and of its
stockholders or any class thereof, as the case may be, it is further provided:
1. The management of the business and the conduct of the
affairs of the Corporation shall be vested in its Board of Directors. The number
of directors which shall constitute the whole Board of Directors shall be fixed
by, or in the manner provided in, the Bylaws, but shall always equal or exceed
two (2) members. The phrase "whole Board" and the phrase "total number of
directors" shall be deemed to have the same meaning, to wit, the total number of
directors which the corporation would have if there were no vacancies. No
election of directors need be by written ballot.
2. After the original or other Bylaws of the Corporation have
been adopted, amended, or repealed, as the case may be, in accordance with the
provisions of ss.109 of the General Corporation Law of the State of Delaware,
and, after the Corporation has received any payment for any of its stock, the
power to adopt, amend, or repeal the Bylaws of the Corporation may be exercised
by the Board of Directors of the Corporation; provided, however, that any
provision for the classification of directors of the Corporation for staggered
terms pursuant to the provisions of subsection (d) of ss.141 of the General
Corporation Law of the State of Delaware shall be set forth in an initial Bylaw
or in a Bylaw adopted by the stockholders entitled to vote of the Corporation
unless provisions for such classification shall be set forth in this certificate
of incorporation.
3. Whenever the Corporation shall be authorized to issue only
one class of stock, each outstanding share shall entitle the holder thereof to
notice of, and the right to vote at, any meeting of stockholders. Whenever the
Corporation shall be authorized to issue more than one class of stock, no
outstanding share of any class of stock which is denied voting power under the
provisions of the certificate of incorporation shall entitle the holder thereof
to the right to vote at any meeting of stockholders except as the provisions of
paragraph (2) of subsection (b) of ss.242 of the General Corporation Law of the
State of Delaware shall otherwise require; provided, that no share of any such
class which is otherwise denied voting power shall entitle the holder thereof to
vote upon the increase or decrease in the number of authorized shares of said
class.
NINTH: The personal liability of the directors of the
Corporation is hereby eliminated to the fullest extent permitted by the
provisions of paragraph (7) of subsection (b) of ss.102 of the General
Corporation Law of the State of Delaware, as the same may be amended and
supplemented.
TENTH: The Corporation shall, to the fullest extent permitted
by the provisions of ss.145 of the General Corporation Law of the State of
Delaware, as the same may be amended and supplemented, indemnify any and all
persons whom it shall have power to indemnify under said section from and
against any and all of the expenses, liabilities, or other matters referred to
in or covered by said section which may be incurred by or asserted against such
persons by reason of any action taken or entitled to be taken on behalf of the
Corporation and in furtherance of its interests, and the indemnification
provided for herein shall continue as to a person who has ceased to be a
director, officer, employee, or agent and shall inure to the benefit of the
heirs, executors, and administrators of such a person.
<PAGE>
ELEVENTH: From time to time any of the provisions of this
certificate of incorporation may be amended, altered, or repealed, and other
provisions authorized by the laws of the State of Delaware at the time in force
may be added or inserted in the manner and at the time prescribed by said laws,
and all rights at any time conferred upon the stockholders of the corporation by
this certificate of incorporation are granted subject to the provisions of this
Article ELEVENTH.
Signed on April 13, 1999.
/s/ STUART NEUHAUSER
--------------------
Stuart Neuhauser
Incorporator
CERTIFICATE OF MERGER
OF
MEDSEARCH, INC.
(A NEVADA CORPORATION)
AND
MEDSEARCH TECHNOLOGIES, INC.
(A DELAWARE CORPORATION)
It is hereby certified that:
1. The constituent business corporations participating in the merger
herein certified are :
(i) MedSearch, Inc., which is incorporated under the laws of the
State of Nevada ("MedSearch NV"); and
(ii) MedSearch Technologies, Inc., which is incorporated under the
laws of the State of Delaware ("MedSearch DEL").
2. An Agreement and Plan of Merger has been approved, adopted,
certified, executed and acknowledged by each of the aforesaid constituent
corporations in accordance with the provisions of subsection (c) of Section 252
of the General Corporation Law of the State of Delaware, to wit, by MedSearch NV
in accordance with the State of its incorporation and by MedSearch DEL in the
same manner as is provided in Section 251 of the General Corporation Law of the
State of Delaware.
3. The name of the surviving corporation in the merger herein certified
is MedSearch DEL, which will continue its existence as said surviving
corporation under its present name upon the effective date of said merger
pursuant to the provisions of the General Corporation Law of the State of
Delaware.
4. The Certificate of Incorporation of MedSearch DEL, as now in force
and effect, shall continue to be the Certificate of Incorporation of said
surviving corporation until amended and changed pursuant to the provisions of
the General Corporation Law of the State of Delaware.
5. The executed Agreement and Plan of Merger between the aforesaid
constituent corporations is on file at the principal place of business of the
aforesaid surviving corporation, the address of which is as follows:
40 Wall Street
New York, NY 10005
<PAGE>
6. A copy of the aforesaid Agreement and Plan of Merger will be
furnished by the aforesaid surviving corporation, on request, and without cost,
to any stockholder of each of the aforesaid constituent corporations.
7. The authorized capital stock of MedSearch NV consists of 50,000,000
shares, $.001 par value per share.
Dated: August 9, 1999
MEDSEARCH, INC.
(NEVADA)
By: /s/ JACOB MELLER
----------------
Name: Jacob Meller
Title: President
Dated: August 9, 1999
MEDSEARCH TECHNOLOGIES, INC.
(DELAWARE)
By: /s/ JACOB MELLER
----------------
Name: Jacob Meller
Title: President
2
ARTICLES OF MERGER
OF
MEDSEARCH, INC.
(a Nevada Corporation)
WITH AND INTO
MEDSEARCH TECHNOLOGIES, INC.
(a Delaware Corporation)
To the Secretary of State
State of Nevada
Pursuant to the provisions of Chapter 92A, Nevada Revised Statutes, the
foreign corporation and the domestic corporation herein named do hereby adopt
the following Articles of Merger.
1. An Agreement and Plan of Merger ("Merger Agreement") for merging
MedSearch, Inc. a business corporation organized and existing under the laws of
the State of Nevada ("MedSearch NV"), with and into MedSearch Technologies,
Inc., a business corporation organized and existing under the laws of the State
of Delaware ("MedSearch DEL"), with MedSearch DEL as the surviving entity in the
merger, has been adopted by the Board of Directors of MedSearch NV and by the
Board of Directors of MedSearch DEL.
2. The Merger Agreement was approved by the written consent of a
majority of the stockholders of MedSearch NV pursuant to the provisions of
Chapter 92A and Chapter 78, Nevada Revised Statutes. The consenting stockholders
represent 97% of the issued and outstanding shares of common stock, $.001 par
value per share, of MedSearch NV, entitled to vote on the Merger Agreement.
3. The merger of MedSearch NV with and into MedSearch DEL is permitted
by the laws of the jurisdiction of organization of MedSearch DEL and has been
authorized in compliance with said laws by which MedSearch DEL is governed.
4. MedSearch DEL does not have any stockholders. Accordingly, the
Merger Agreement was approved by the Board of Directors of MedSearch DEL and
certified by the secretary of MedSearch DEL pursuant to the laws of its
jurisdiction of incorporation.
5. No amendments to the Certificate of Incorporation of MedSearch DEL,
the surviving entity in the merger, are effected by the merger provided for
herein.
<PAGE>
6. The specified address of MedSearch DEL where copies of process may
be sent by the Secretary of State of Nevada, served pursuant to the provisions
of Section 78.461, Nevada Revised Statutes, in a proceeding to enforce any
obligation or the rights of dissenting stockholders of MedSearch NV, unless
MedSearch DEL has designated in writing to the Secretary of State of Nevada a
different address for that purpose, is:
40 Wall Street
New York, NY 10005
7. The executed Merger Agreement is on file in the offices of MedSearch
DEL located at the address set forth in paragraph 6 hereof. A copy of the Merger
Agreement will be furnished by MedSearch DEL, on request, and without cost, to
any stockholder of each of the constituent corporations.
8. The merger herein provided for shall become effective in the State
of Nevada upon the filing of these Articles of Merger.
Dated: August 9, 1999
MEDSEARCH, INC.
(Nevada)
/s/ JACOB MELLER
-------------------------------
Jacob Meller, President
/s/ FRIEDA GOLDSTEIN
-------------------------------
Frieda Goldstein, Secretary
MEDSEARCH TECHNOLOGIES, INC.
(Delaware)
/s/ JACOB MELLER
-------------------------------
Jacob Meller, President
/s/ FRIEDA GOLDSTEIN
-------------------------------
Frieda Goldstein, Secretary
<PAGE>
STATE OF NEW YORK )
)ss.:
COUNTY OF NEW YORK )
On August 9, 1999, personally appeared before me, a Notary Public in
and for the State and County aforesaid, Jacob Meller, President of MedSearch,
Inc., a Nevada corporation, personally known to me to be the person whose name
is subscribed to the above instrument in the said capacity, who acknowledged
that he executed the said instrument.
---------------------------------
Notary Public
STATE OF NEW YORK )
)ss.:
COUNTY OF NEW YORK )
On August 9, 1999, personally appeared before me, a Notary Public in
and for the State and County aforesaid, Jacob Meller, President of MedSearch
Technologies, Inc., a Delaware corporation, personally known to me to be the
person whose name is subscribed to the above instrument in the said capacity,
who acknowledged that he executed the said instrument.
---------------------------------
Notary Public
AGREEMENT AND PLAN OF MERGER entered into as of the 9th day of August
1999 by and between MedSearch, Inc., a business corporation organized under the
laws of the State of Nevada, having offices located at 40 Wall Street, New York,
NY 10005 ("MedSearch NV"), and MedSearch Technologies, Inc., a business
corporation organized under the laws of the State of Delaware, having offices
located at 40 Wall Street, New York, New York 10005 ("MedSearch DEL").
1. MedSearch NV and MedSearch DEL shall pursuant to the provisions of
the Nevada General Corporation Law ("NVGCL") and the provisions of the Delaware
General Corporation Law ("DGCL"), be merged with and into a single corporation,
to wit, MedSearch DEL, which shall be the surviving corporation upon the
effective date of the merger and which is sometimes hereinafter referred to as
the "surviving corporation", and which shall continue to exist as said surviving
corporation under its present name pursuant to the provisions of the DGCL. The
separate existence of MedSearch NV, which is sometimes hereinafter referred to
as the "terminating corporation", shall cease upon the effective date of the
merger in accordance with the provisions of the NVGCL.
2. The certificate of incorporation of the surviving corporation upon
the effective date of the merger in the State of Delaware shall be the
certificate of incorporation of said surviving corporation; and said certificate
of incorporation shall continue in full force and effect until amended and
changed in the manner prescribed by the provisions of the DGCL.
3. The by-laws of the surviving corporation upon the effective date of
the merger in the State of Delaware will be the by-laws of said surviving
corporation and will continue in full force and effect until changed, altered,
or amended as therein provided and in the manner prescribed by the provisions of
the DGCL.
4. The directors and officers in office of the surviving corporation
upon the effective date of the merger in the State of Delaware shall be the
members of the first Board of Directors and the first officers of the surviving
corporation, all of whom shall hold their directorships and offices until the
election and qualification of their respective successors or until their tenure
is otherwise terminated in accordance with the by-laws of the surviving
corporation.
5. The number of outstanding shares of the terminating corporation is
6,484,582, all of which are of one class and are common shares and all of which
are entitled to vote. There are no outstanding shares of the surviving
corporation.
Each issued share of the terminating corporation shall, upon the
effective date of the merger, be converted into one (1) share of the surviving
corporation. The issued shares of the surviving corporation shall not be
converted in any manner, but each said share which is issued as of the effective
date of the merger shall continue to represent one issued share of the surviving
corporation.
<PAGE>
6. This Agreement and Plan of Merger shall be approved by the Board of
Directors of each of the surviving corporation and terminating corporation and
shall be approved by the shareholders of the terminating corporation in the
manner prescribed by the NVGCL, and the merger of the terminating corporation
with and into the surviving corporation shall be authorized in the manner
prescribed by the DGCL.
7. In the event that this Agreement and Plan of Merger shall have been
approved by the shareholders entitled to vote of the terminating corporation in
the manner prescribed by the NVGCL, and in the event that the merger of the
terminating corporation with and into the surviving corporation shall have been
duly authorized in compliance with the DGCL, the terminating corporation and the
surviving corporation hereby stipulate that they will cause to be executed and
filed and/or recorded any document or documents prescribed by the laws of the
State of Nevada and of the State of Delaware, and that they will cause to be
performed all necessary acts therein and elsewhere to effectuate the merger.
8. The Board of Directors and the proper officers of the terminating
corporation and of the surviving corporation, respectively, are hereby
authorized, empowered and directed to do any and all things, and to make,
execute, deliver, file, and/or record any and all instruments, papers, and
documents which shall be or become necessary, proper, or convenient to carry out
or put into effect any of the provisions of this Agreement and Plan of Merger or
of the merger herein provided for.
9. The effective date in the State of Nevada and in the State of
Delaware of the merger herein provided for shall be the date of filing of the
Certificates of Merger.
IN WITNESS WHEREOF, each of the constituent corporations are
executing this Agreement and Plan of Merger as of the first date written above.
MEDSEARCH, INC.
(NEVADA)
By: /s/ JACOB MELLER
----------------
Name: Jacob Meller
Title: President
MEDSEARCH TECHNOLOGIES, INC.
(DELAWARE)
By: /s/ JACOB MELLER
----------------
Name: Jacob Meller
Title: President
2
BY-LAWS
OF
MEDSEARCH TECHNOLOGIES, INC.
(A DELAWARE CORPORATION)
ARTICLE I
STOCKHOLDERS
1. CERTIFICATES REPRESENTING STOCK. Certificates representing
stock in the corporation shall be signed by, or in the name of, the corporation
by the Chairman or Vice-Chairman of the Board of Directors, if any, or by the
President or a Vice-President and by the Treasurer or an Assistant Treasurer or
the Secretary or an Assistant Secretary of the corporation. Any or all the
signatures on any such certificate may be a facsimile. In case any officer,
transfer agent, or registrar who has signed or whose facsimile signature has
been placed upon a certificate shall have ceased to be such officer, transfer
agent, or registrar before such certificate is issued, it may be issued by the
corporation with the same effect as if he were such officer, transfer agent, or
registrar at the date of issue.
Whenever the corporation shall be authorized to issue more
than one class of stock or more than one series of any class of stock, and
whenever the corporation shall issue any shares of its stock as partly paid
stock, the certificates representing shares of any such class or series or of
any such partly paid stock shall set forth thereon or registration of transfer
of any shares of stock of any class or series shall be noted conspicuously
representing such shares.
The corporation may issue a new certificate of stock or
uncertificated shares in place of any certificate theretofore issued by it,
alleged to have been lost, stolen, or destroyed, and the Board of Directors may
require the owner of the lost, stolen, or destroyed certificate, or his legal
representative, to give the corporation a bond sufficient to indemnify the
corporation against any claim that may be made against it on account of the
alleged loss, theft, or destruction of any such certificate or the issuance of
any such new certificate or uncertificated shares.
2. UNCERTIFICATED SHARES. Subject to any conditions imposed by
the General Corporation Law, the Board of Directors of the corporation may
provide by resolution or resolutions that some or all of any or all classes or
series of the stock of the corporation shall be uncertificated shares. Within a
reasonable time after the issuance or transfer of any uncertificated shares, the
corporation shall send to the registered owner thereof any written notice
prescribed by the General Corporation Law.
3. FRACTIONAL SHARE INTERESTS. The corporation may, but shall
not be required to, issue fractions of a share. If the corporation does not
issue fractions of a share, it shall arrange for the disposition of fractional
interests by those entitled thereto, pay in cash the fair value of fractions of
a share as of the time when those entitled to receive such fractions are
determined, or issue scrip or warrants in registered form (either represented by
a certificate or uncertificated) or bearer form (represented by a certificate)
<PAGE>
which shall entitle the holder to receive a full share upon the surrender of
such scrip or warrants aggregating a full share. A certificate for a fractional
share or an uncertificated fractional share shall, but scrip or warrants shall
not unless otherwise provided therein, entitle the holder to exercise voting
rights, to receive dividends thereon, and to participate in any of the assets of
the corporation in the event of liquidation. The Board of Directors may cause
scrip or warrants to be issued subject to the conditions that they shall become
void if not exchanged for certificates representing the full shares or
uncertificated full shares before a specified date, or subject to the conditions
that the shares for which scrip or warrants are exchangeable may be sold by the
corporation and the proceeds thereof distributed to the holders of scrip or
warrants, or subject to any other conditions which the Board of Directors may
impose.
4. STOCK TRANSFERS. Upon compliance with provisions
restricting the transfer or registration of transfer of shares of stock, if any,
transfers or registration of transfers of shares of stock of the corporation
shall be made only on the stock ledger of the corporation by the registered
holder thereof, or by his attorney thereunto authorized by power of attorney
duly executed and filed with the Secretary of the corporation or with a transfer
agent or a registrar, if any, and, in the case of shares represented by
certificates, on surrender of the certificate or certificates for such shares of
stock properly endorsed and the payment of all taxes due thereon.
5. RECORD DATE FOR STOCKHOLDERS. In order that the corporation
may determine the stockholders entitled to notice of or to vote at any meeting
of stockholders or any adjournment thereof, the Board of Directors may fix a
record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the Board of Directors, and
which record date shall not be more than sixty nor less than ten days before the
date of such meeting. If no record date is fixed by the Board of Directors, the
record date for determining stockholders entitled to notice of or to vote at a
meeting of stockholders shall be at the close of business on the day next
preceding the day on which the meeting is held. A determination of stockholders
of record entitled to notice of or to vote at a meeting of stockholders shall
apply to any adjournment of the meeting; provided, however, that the Board of
Directors may fix a new record date for the adjourned meeting. In order that the
corporation may determine the stockholders entitled to consent to corporate
action in writing without a meeting, the Board of Directors may fix a record
date, which record date shall not precede the date upon which the resolution
fixing the record date is adopted by the Board of Directors, and which date
shall not be more than ten days after the date upon which the resolution fixing
the record date is adopted by the Board of Directors. If no record date has been
fixed by the Board of Directors, the record date for determining the
stockholders entitled to consent to corporate action in writing without a
meeting, when no prior action by the Board of Directors is required by the
General Corporation Law, shall be the first date on which a signed written
consent setting forth the action taken or proposed to be taken is delivered to
the corporation by delivery to its registered office in the State of Delaware,
its principal place of business, or an officer or agent of the corporation
having custody of the book in which proceedings of meeting of stockholders are
recorded. Delivery made to the corporation's registered office shall be by hand
or by certified or registered mail, return receipt requested. If no record date
has been fixed by the Board of Directors and prior action by the Board of
Directors is required by the General Corporation Law, the record date for
determining stockholders entitled to consent to corporate action in writing
without a meeting shall be at the close of business on the day on which the
Board of Directors adopts the resolution taking such prior action. In order that
-2-
<PAGE>
the corporation may determine the stockholders entitled to receive payment of
any dividend or other distribution or allotment of any rights or the
stockholders entitled to exercise any rights in respect of any change,
conversion, or exchange of stock, or for the purpose of any other lawful action,
the Board of Directors may fix a record date, which record date shall not
precede the date upon which the resolution fixing the record date is adopted,
and which record date shall be not more than sixty days prior to such action. If
no record date is fixed, the record date for determining stockholders for any
such purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto.
6. MEANING OF CERTAIN TERMS. As used herein in respect of the
right to notice of a meeting of stockholders or a waiver thereof or to
participate or vote thereat or to consent or dissent in writing in lieu of a
meeting, as the case may be, the term "share" or "shares" or "share of stock" or
"shares of stock" or "stockholder" or "stockholders" refers to an outstanding
share or shares of stock and to a holder or holders of record of outstanding
shares of stock when the corporation is authorized to issue only one class of
shares of stock and said reference is also intended to include any outstanding
share or shares of stock or any holder or holders of record of outstanding
shares of stock of any class upon which or upon whom the certificate of
incorporation confers such rights where there are two or more classes or series
of shares of stock or upon which or upon whom the General Corporation Law
confers such rights notwithstanding that the certificate of incorporation may
provide for more than one class or series of shares of stock, one or more of
which are limited or denied such rights thereunder; provided, however, that no
such right shall vest in the event of an increase or a decrease in the
authorized number of shares of stock of any class or series which is otherwise
denied voting rights under the provisions of the certificate of incorporation,
except as any provision of law may otherwise require.
7. STOCKHOLDER MEETINGS
- TIME. The annual meeting shall be held on the date and at
the time fixed, from time to time, by the directors, provided, that the first
annual meeting shall be held on a date within thirteen months after the
organization of the corporation, and each successive annual meeting shall be
held on a date within thirteen months after the date of the preceding annual
meeting. A special meeting shall be held on the date and at the time fixed by
the directors.
- PLACE. Annual meetings and special meetings shall be held
at such place, within or without the State of Delaware, as the directors may,
from time to time, fix. Whenever the directors shall fail to fix such place, the
meeting shall be held at the registered office of the corporation in the State
of Delaware.
- CALL. Annual meetings and special meetings may be called
by the directors or by any officer instructed by the directors to call the
meeting or by the holders of at least a majority of the outstanding Common
Stock.
-3-
<PAGE>
- NOTICE OR WAIVER OF NOTICE. Written notice of all meeting
shall be given, stating the place, date, and hour of the meeting and stating the
place within the city or other municipality or community at which the list of
stockholder of the corporation may be examined. The notice of an annual meeting
shall state that the meeting is called for the election of directors and for the
transaction of other business which may properly come before the meeting, and
shall (if any other action which could be taken at a special meeting is to be
taken at such annual meeting) state the purpose or purposes. The notice of a
special meeting shall in all instances state the purpose or purposes for which
the meeting is called. The notice of any meeting shall also include, or be
accompanied by, any additional statements, information, or documents prescribed
by the General Corporation Law. Except as otherwise provided by the General
Corporation Law, a copy of the notice of any meeting shall be given, personally
or by mail, not less than ten days nor more than sixty days before the date of
the meeting, unless the lapse of the prescribed period of time shall have been
waived, and directed to each stockholder at his record address or at such other
address which may have been furnished by request in writing to the Secretary of
the corporation. Notice by mail shall be deemed to be given when deposited, with
postage thereon prepaid, in the United States Mail. If a meeting is adjourned to
another time, not more than thirty days hence, and/or to another place, and if
an announcement of the adjourned time and/or place is made at the meeting, it
shall not be necessary to give notice of the adjourned meeting unless the
directors, after adjournment, fix a new record date for the adjourned meeting.
Notice need not be given to any stockholder who submits a written waiver of
notice signed by him before or after the time stated therein. Attendance of a
stockholder at a meeting of stockholder shall constitute a waiver of notice of
such meeting, except when the stockholder attends the meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the stockholders need be specified in any written waiver of notice.
- STOCKHOLDER LIST. The officer who has charge of the stock
ledger of the corporation shall prepare and make, at least ten days before every
meeting of stockholders, a complete list of the stockholders, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to the
meeting, either at a place within the city or other municipality or community
where the meeting is to be held, which place shall be specified in the notice of
the meeting, or if not so specified, at the place where the meeting is to be
held. The list shall also be produced and kept at the time and place of the
meeting during the whole time thereof, and may be inspected by any stockholder
who is present. The stock ledger shall be the only evidence as to who are the
stockholders entitled to examine the stock ledger, the list required by this
section or the books of the corporation, or to vote at any meeting of
stockholders.
- CONDUCT OF MEETING. Meetings of the stockholders shall be
presided over by one of the following officers in the order of seniority and if
present and acting - the Chairman of the Board, if any, the Vice-Chairman of the
Board, if any, the President, a Vice-President, or, if none of the foregoing is
in office and present and acting, by a chairman to be chosen by the
stockholders. The Secretary of the corporation, or in his absence, an Assistant
Secretary, shall act as secretary of every meeting, but if neither the Secretary
nor an Assistant Secretary is present the Chairman of the meeting shall appoint
a secretary of the meeting.
-4-
<PAGE>
- PROXY REPRESENTATION. Every stockholder may authorize
another person or persons to act for him by proxy in all matters in which a
stockholder is entitled to participate, whether by waiving notice of any
meeting, voting or participating at a meeting, or expressing consent or dissent
without a meeting. Every proxy must be signed by the stockholder or by his
attorney-in-fact. No proxy shall be voted or acted upon after three years from
its date unless such proxy provides for a longer period. A duly executed proxy
shall be irrevocable if it states that it is irrevocable and, if, and only as
long as, it is coupled with an interest sufficient in law to support an
irrevocable power. A proxy may be made irrevocable regardless of whether the
interest with which it is coupled is an interest in the stock itself or an
interest in the corporation generally.
- INSPECTORS. The directors, in advance of any meeting,
may, but need not, appoint one or more inspectors of election to act at the
meeting or any adjournment thereof. If an inspector or inspectors are not
appointed, the person presiding at the meeting may, but need not, appoint one or
more inspectors. In case any person who may be appointed as an inspector fails
to appear or act, the vacancy may be filled by appointment made by the directors
in advance of the meeting or at the meeting by the person presiding thereat.
Each inspector, if any, before entering upon the discharge of his duties, shall
take and sign an oath faithfully to execute the duties of inspectors at such
meeting with strict impartiality and according to the best of his ability. The
inspectors, if any, shall determine the number of shares of stock outstanding
and the voting power of each, the shares of stock represented at the meeting,
the existence of a quorum, the validity and effect of proxies, and shall receive
votes, ballots, or consents, hear and determine all challenges and questions
arising in connection with the right to vote, count and tabulate all votes,
ballots, or consents, determine the result, and do such acts as are proper to
conduct the election or vote with fairness to all stockholders. On request of
the person presiding at the meeting, the inspector or inspectors, if any, shall
make a report in writing of any challenge, question, or matter determined by him
or them and execute a certificate of any fact found by him or them. Except as
otherwise required by subsection (e) of Section 231 of the General Corporation
Law, the provisions of that Section shall not apply to the corporation.
- QUORUM. The holders of a majority of the outstanding
shares of stock shall constitute a quorum at a meeting of stockholders for the
transaction of any business. The stockholders present may adjourn the meeting
despite the absence of a quorum.
- VOTING. Each share of stock shall entitle the holder
thereof to one vote. Directors shall be elected by a plurality of the votes of
the shares present in person or represented by proxy at the meeting and entitled
to vote on the election of directors. Any other action shall be authorized by a
majority of the votes cast except where the General Corporation Law prescribes a
different percentage of votes and/or a different exercise of voting power, and
except as may be otherwise prescribed by the provisions of the certificate of
incorporation and these By-laws or by any shareholders or other agreement to
which the Corporation is a party. In the election of directors, and for any
other action, voting need not by ballot.
-5-
<PAGE>
8. STOCKHOLDER ACTION WITHOUT MEETINGS. Any action required
by the General Corporation Law to be taken at any annual or special meeting of
stockholders, or any action which may be taken at any annual or special meeting
of stockholders, may be taken without a meeting, without prior notice and
without a vote, if a consent in writing, setting forth the action so taken,
shall be signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and
voted. Prompt notice of there taking of the corporate action without a meeting
by less than unanimous written consent shall be given to those stockholders who
have not consented in writing. Action taken pursuant to this paragraph shall be
subject to the provisions of Section 228 of the General Corporation Law.
ARTICLE II
DIRECTORS
1. FUNCTION AND DEFINITION. The business and affairs of the
corporation shall be managed by or under the direction of the Board of Directors
of the corporation. The Board of Directors shall have the authority to fix the
compensation of the members thereof. The use of the phrase "whole board" herein
refers to the total number of directors which the corporation would have if
there were no vacancies.
2. QUALIFICATIONS AND NUMBERS. A director need not be a
stockholder or a resident of the State of Delaware. The initial Board of
Directors shall consist of 2 persons. Thereafter the number of directors
constituting the whole board shall be at least two. Subject to the foregoing
limitation and except for the first Board of Directors, such number may be fixed
from time to time by action of the stockholders or of the directors, or, if the
number is not fixed, the number shall be 2. The number of directors may be
increased or decreased by action of the stockholders or of the directors.
3. ELECTION AND TERM. The first Board of Directors, unless
the members thereof shall have been named in the certificate of incorporation,
shall be elected by the incorporator or incorporators and shall hold office
until the first annual meeting of stockholders and until their successors are
elected and qualified or until their earlier resignation or removal. Any
director may resign at any time upon written notice to the corporation.
Thereafter, directors who are elected at an annual meeting of stockholders, and
directors who are elected in the interim to fill vacancies and newly created
directorships, shall hold office until the next annual meeting of stockholders
and until their successors are elected and qualified or until their earlier
resignation or removal. Except as the General Corporation Law may otherwise
require, in the interim between annual meetings of stockholders or of special
meetings of stockholders called for the election of directors and/or for the
removal of one or more directors and for the filling of any vacancy in that
connection, newly created directorships and any vacancies in the Board of
Directors, including unfilled vacancies resulting from the removal of directors
for cause or without cause, may be filled by the vote of a majority of the
remaining directors then in office, although less than a quorum, or by the sole
remaining director.
-6-
<PAGE>
4. MEETINGS.
- TIME. Meetings shall be held at such time as the Board
shall fix, except that the first meeting of a newly elected Board shall be held
as soon after its election as the directors may conveniently assemble.
- PLACE. Meetings shall be held at such place within or
without the State of Delaware as shall be fixed by the Board.
- CALL. No call shall be required for regular meetings for
which time and place have been fixed. Special meetings may be called by or at
the direction of the Chairman of the board, if any, the Vice-Chairmen of the
Board, if any, or the President, or by or at the direction of a majority of the
directors in office.
- NOTICE OR ACTUAL OR CONSTRUCTIVE WAIVER. No notice shall
be required for regular meetings for which the time and place have been fixed.
Written, oral, or any other mode of notice of the time and place shall be given
for special meetings in sufficient time for the convenient assembly of the
directors thereat. Notice need not be given to any directors or to any member of
a committee of directors who submits a written waiver of notice signed by him
before or after the time stated herein. Attendance of any such person at a
meeting shall constitute a waiver of notice of such meeting, except when he
attends a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened. Neither the business to be transacted at, nor the purpose
of, any regular or special meeting of the directors need be specified in any
written waiver of notice.
- QUORUM AND ACTION. A majority of the whole Board shall
constitute a quorum except when a vacancy or vacancies prevents such majority,
whereupon a majority of the directors in office shall constitute a quorum,
provided, that such majority shall constitute at least one-third of the whole
Board. A majority of the directors present, whether or not a quorum is present,
may adjourn a meeting to another time and place. Except as herein otherwise
provided, and except as otherwise provided by the General Corporation Law, the
vote of the majority of directors present at a meeting at which a quorum is
present shall be the act of the Board. The quorum and voting provisions herein
stated shall not be construed as conflicting with any provisions of the General
Corporation Law and these Bylaws which govern a meeting of directors held to
fill vacancies and newly created directorships in the Board or action of
disinterested directors.
Any member or members of the Board of Directors or of any
committee designated by the Board, may participate in a meeting of the Board, or
any such committee, as the case may be, by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other.
-7-
<PAGE>
- CHAIRMAN OF THE MEETING. The Chairmen of the Board, if
any and if present and acting, shall preside at all meetings. Otherwise, the
Vice-Chairman of the Board, of any and if present and acting, or the President,
if present and acting, or any other director chosen by the Board, shall preside.
5. REMOVAL OF DIRECTORS. Except as may otherwise be provided
by the General Corporation Law, or any shareholders or other agreement to which
the Corporation is a party, any directors or the entire Board of Directors may
be removed, with or without cause, by the holders of a majority of the shares
then entitled to vote at an election of directors.
6. COMMITTEES. The Board of Directors may, by resolution
passed by a majority of the whole Board, designate one or more committees, each
committee to consist of one or more of the directors of the corporation. The
Board may designate one or more directors as alternate members of any committee,
who may replace any absent or disqualified member at any meeting of the
committee. In the absence or disqualification of any member of any such
committee or committees, the member or members thereof present at any meeting
and not disqualified from voting, whether or not he or they constitute a quorum,
may unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member. Any such
committee, to the extent provided in the resolution of the Board, shall have and
may exercise the powers and authority of the Board of Directors in the
management of the business and affairs of the corporation with the exception of
any authority of the Board of Directors in the management of the business and
affairs of the corporation with the exception of any authority the delegation of
which is prohibited by Section 141 of the General Corporation Law, and may
authorize the seal of the corporation to be affixed to all papers which may
require it.
7. WRITTEN ACTION. Any action required or permitted to be
taken at any meeting of the Board of Directors or any committee, as the case may
be, may be taken by the directors in lieu of any meeting, by the consent thereto
in writing, signed by all of the directors, and the writing, and the writing or
writings, are filed with the minutes of proceedings of the Board or committee.
ARTICLE III
OFFICERS
The officers of the corporation shall consist of a President,
a Secretary, a Treasurer, and, if deemed necessary, expedient, or desirable by
the Board of Directors, a Chairman of the Board, an Executive Vice President,
one or more other Vice-Presidents, one or more Assistant Secretaries, one or
more Assistant Treasurers, and such other officers with such titles as the
resolution of the Board of Directors choosing them shall designate. Except as
may otherwise be provided in the resolution of the Board of Directors choosing
him, no officer other than the Chairman or Vice Chairman of the Board if any,
need be a director. Any number of offices may be held by the same person, as the
directors may determine.
-8-
<PAGE>
ARTICLE IV
INDEMNIFICATION
The Corporation shall (a) indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact that he is or was a director,
officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit, (b) indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the Corporation), by reason of the fact that he is or was a director,
officer, employee or agent of the Corporation, or served at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with any such action, suit
or proceeding, in each case to the fullest extent permissible under subsections
(a) through (f) of Section 145 of General Corporation Law of the State of
Delaware or the indemnification provisions of any successor statute and (c)
advance reasonable and necessary expenses in connection with such actions or
suits, and not seek reimbursement of such expenses unless there is a specific
determination by a court having competent jurisdiction that the officer or
director is not entitled to such indemnification. The foregoing right of
indemnification shall in no way be exclusive of any other rights of
indemnification to which any such persons may be entitled, under any by-law,
agreement, vote of shareholders or disinterested directors or otherwise, and
shall inure to the benefit of such person and the heirs, executors and
administrators of such a person.
ARTICLE V
CORPORATE SEAL
The corporate seal shall be in such form as the Board of
Directors shall prescribe.
ARTICLE VI
FISCAL YEAR
The fiscal year of the corporation shall be fixed, and shall
be subject to change, by the Board of Directors.
CONTROL OVER BYLAWS
Subject to the provisions of the certificate of incorporation
and the provisions of the General Corporation Law, the power to amend, alter, or
repeal these Bylaws and to adopt new Bylaws may be exercised by the Board of
Directors or by the stockholders.
-9-
-------------------------- --------------------------
No.
-------------------------- --------------------------
MEDSEARCH TECHNOLOGIES, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
- - - --------------------------------------------------------------------------------
THIS
CERTIFIES
that
is the owner of
- - - --------------------------------------------------------------------------------
FULLY PAID AND NON-ASSESSABLE SHARES OF THE $.0001 PAR VALUE COMMON STOCK OF
MEDSEARCH TECHNOLOGIES, INC.
transferable only on the books of the corporation by the holder hereof in person
or by a duly authorized attorney upon surrender of this certificate properly
endorsed. This certificate and the shares represented hereby are issued and
shall be held subject to all of the provisions of the Certificate of
Incorporation and By-Laws of the Corporation and all amendments thereto, copies
of which are on file with the corporation, to all of which the holder of this
certificate, by acceptance hereof, assents.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be
signed by the signature of its duly authorized officers.
Dated:
By BY
- - - ------------------------- ------------------------------
Jacob Meller, President Frieda Goldstein, Secretary
<PAGE>
MEDSEARCH TECHNOLOGIES INC.
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common. UNIF GIFT MIN
TEN ENT - as tenants by the entireties ACT - ______ Custodian ______
JT TEN - as joint tenants with right of (Cust) (Minor)
survivorship and not as tenants under Uniform Gifts to Minor Act
in common
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, ____________________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFICATION NUMBER OF ASSIGNEE
- - - --------------------------------------
- - - --------------------------------------
- - - --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS,
INCLUDING POSTAL ZIP CODE, OF ASSIGNEE)
- - - --------------------------------------------------------------------------------
- - - --------------------------------------------------------------------------------
- - - ------------------------------------------------------------------------- Shares
of the common stock represented by the within Certificate and do hereby
irrevocably constitute and appoint
- - - ----------------------------------------------------------------------- Attorney
to transfer the said stock on the books of the within-named Corporation with
full power of substitution in the premises.
Dated:
-------------------
--------------------------------------------
NOTICE: The signature to the assignment must
correspond with the name as written upon the
face of the Certificate in every particular,
without alteration or enlargement or any
change whatever.
Signature(s) Guaranteed:
- - - -------------------------------------------------------
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE
GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND
LOAN ASSOCIATIONS AND CREDIT UNION WITH MEMBERSHIP IN
AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM),
PURSUANT TO S.E.C. RULE 17 Ad-15.
Warrant to Purchase
**-------**
------------------
Shares of Common Stock
NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF
THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND NEITHER
THIS WARRANT NOR SUCH SHARES MAY BE SOLD, ENCUMBERED OR OTHERWISE TRANSFERRED
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT OR AN
EXEMPTION FROM SUCH REGISTRATION REQUIREMENT, AND, IF AN EXEMPTION SHALL BE
APPLICABLE, THE HOLDER SHALL HAVE DELIVERED AN OPINION OF COUNSEL ACCEPTABLE TO
THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
VOID AFTER 5:00 P.M. NEW YORK CITY TIME ON THE LAST DAY OF THE EXERCISE PERIOD,
AS DEFINED IN THE WARRANT
SERIES A COMMON STOCK PURCHASE WARRANT
OF
MEDSEARCH, INC.
This is to certify that, FOR VALUE RECEIVED, or assigns ("Holder"), is
entitled to purchase, subject to the provisions of this Warrant, from MedSearch,
Inc., a Delaware corporation (the "Company"), at an exercise price per share of
one and 25/100 ($1.25), subject to adjustment as provided in this Warrant, Five
Hundred Thousand (500,000) shares of common stock, par value $.001 per share
("Common Stock"), of the Company at any time during the period (the "Exercise
Period"), as hereinafter defined. The Exercise Period shall mean the period
commencing January 1, 2001 and shall end at 5:00 P.M. New York City time, on
December 31, 2002; provided, however, that if such date is a day on which
banking institutions in the State of New York are authorized by law to close,
then on the next succeeding day which shall not be such a day. The number of
shares of Common Stock to be received upon the exercise of this Warrant and the
price to be paid for a share of Common Stock may also be adjusted from time to
time as hereinafter set forth. The shares of Common Stock deliverable upon such
exercise, and as adjusted from time to time, are hereinafter sometimes referred
to as "Warrant Shares," and the exercise price for the purchase of a share of
Common Stock pursuant to this Warrant in effect at any time and as adjusted from
time to time is hereinafter sometimes referred to as the "Exercise Price."
Reference in the Warrant to the "Series A Warrants" shall mean any or all of the
Series A Common Stock Purchase Warrants issued by the Company, regardless of
whether the Exercise Price of such Series A Warrants is the same as the Exercise
Price of this Warrant.
(a) EXERCISE OF WARRANT. This Warrant may be exercised in whole at any
time or in part from time to time during the Exercise Period by presentation and
surrender hereof to the Company at its principal office, or at the office of its
stock transfer agent, if any, with the Purchase Form annexed hereto duly
executed and accompanied by payment of the Exercise Price for the number of
shares of Common Stock specified in such form. If this Warrant should be
exercised in part only, the Company shall, upon surrender of this Warrant for
cancellation, execute and deliver a new Warrant evidencing the rights of the
<PAGE>
Holder hereof to purchase the balance of the shares of Common Stock purchasable
hereunder. Upon receipt by the Company of this Warrant at its office, or by the
stock transfer agent of the Company at its office, in proper form for exercise,
the Holder shall be deemed to be the holder of record of the shares of Common
Stock issuable upon such exercise, notwithstanding that the stock transfer books
of the Company shall then be closed or that certificates representing such
shares of Common Stock shall not then be actually delivered to the Holder.
At the option of Holder, this Warrant may be exercised, at any time or
from time to time, in the following "cashless exercise" transaction:
The Holder shall have the right to convert, in whole or in part, the
Warrants (the "Conversion Right") upon written notice of exercise from the
Holder to the Company that the Holder is exercising this Warrant in whole or in
part and as consideration of such exercise is authorizing the Company to
withhold from issuance a number of shares of Common Stock issuable upon exercise
of this Warrant, the Company shall deliver to the Holder (without payment by its
Holder of the aggregate Exercise Price) that number of shares of Common Stock
having an aggregate Fair Market Value equal to the quotient obtained by dividing
(x) the Spread Value by (y) the Fair Market Value of one share of Common Stock
immediately prior to the exercise of the Conversion Right.
Fair Market Value of a share of Warrant Stock as of a particular date
(the "Determination Date") shall mean:
(i) If the Warrant Stock is traded on an exchange or is quoted on the
Nasdaq National Market or the Nasdaq SmallCap Market ("Nasdaq"), then the
average of the closing or last sale price, respectively, reported for the five
trading days immediately preceding the Determination Date.
(ii) If the Warrant Stock is not traded on an exchange or on Nasdaq but
is traded in the over-the-counter market or other similar organization
(including the OTC Bulletin Board), then the average of the closing bid and ask
prices reported for the five trading days immediately preceding the
Determination Date.
(iii) If the Warrant Stock is not traded as provided above, then the
price determined in good faith by the Board of Directors of the Company,
provided that (A) the basis or bases of each such determination shall be set
forth in the corporate records of the Company pertaining to meetings and other
actions of such board, and (B) such records are available to the Holder for
inspection during normal business hours of the Company upon the giving of
reasonable prior notice.
(iv) If the Determination Date is the date of a liquidation,
dissolution or winding up, or any event deemed to be a liquidation, dissolution
or winding up pursuant to the Company's certificate of incorporation, then all
amounts to be payable per share to Holders of the securities then comprising
Warrant Stock pursuant to the charter in the event of such liquidation,
dissolution or winding up, plus all other amounts to be payable per share in
respect of the Warrant Stock in liquidation under the certificate of
incorporation, assuming for the purposes of this clause (iv) that all of the
shares of Warrant Stock then issuable upon exercise of all of the Warrants are
outstanding at the Determination Date.
The term "Spread Value" shall mean (i) the number of shares exercised
at a given time multiplied by the Fair Market Value of one share of Common
Stock, less (ii) aggregate applicable Exercise Price.
<PAGE>
(v) RESERVATION OF SHARES. The Company hereby agrees that at all times
there shall be reserved for issuance and/or delivery upon exercise of this
Warrant such number of shares of Common Stock as shall be required for issuance
and delivery upon exercise of this Warrant.
(vi) FRACTIONAL SHARES. No fractional shares or script representing
fractional shares shall be issued upon the exercise of this Warrant. Instead,
the Company will round to the nearest whole number.
(vii) EXCHANGE, TRANSFER, ASSIGNMENT OR LOSS OF WARRANT. This Warrant
is exchangeable, without expense, at the option of the Holder, upon presentation
and surrender hereof to the Company or at the office of its stock transfer
agent, if any, for other Warrants of different denominations entitling the
holder thereof to purchase in the aggregate the same number of shares of Common
Stock purchasable hereunder. Subject to the provisions of Paragraph (j) of this
Warrant, upon surrender of this Warrant to the Company or at the office of its
stock transfer agent, if any, with the Assignment Form annexed hereto duly
executed and funds sufficient to pay any transfer tax, the Company shall,
without charge, execute and deliver a new Warrant in the name of the assignee
named in such instrument of assignment and this Warrant shall promptly be
canceled. This Warrant may be divided or combined with other Warrants which
carry the same rights upon presentation hereof at the office of the Company or
at the office of its stock transfer agent, if any, together with a written
notice specifying the names and denominations in which new Warrants are to be
issued and signed by the Holder hereof. The term "Warrant" as used herein
includes any Warrants into which this Warrant may be divided or exchanged. Upon
receipt by the Company of evidence satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and (in the case of loss, theft or
destruction) of reasonably satisfactory indemnification, and upon surrender and
cancellation of this Warrant, if mutilated, the Company will execute and deliver
a new Warrant of like tenor. Any such new Warrant executed and delivered shall
constitute an additional contractual obligation on the part of the Company,
whether or not this Warrant so lost, stolen, destroyed, or mutilated shall be at
any time enforceable by anyone.
(viii) RIGHTS OF THE HOLDER. The Holder shall not, by virtue of this
Warrant, be entitled to any rights of a stockholder in the Company, either at
law or equity, and the rights of the Holder are limited to those expressed in
the Warrant and are not enforceable against the Company except to the extent set
forth herein.
(ix) ANTI-DILUTION PROVISIONS. The Exercise Price in effect at any time
and the number and kind of securities purchasable upon exercise of each Warrant
shall be subject to adjustment as follows:
(1) In case the Company shall (A) pay a dividend or make a
distribution on its shares of Common Stock in shares of Common Stock (B)
subdivide or reclassify its outstanding Common Stock into a greater number of
shares, or (C) combine or reclassify its outstanding Common Stock into a smaller
number of shares or otherwise effect a reverse split, the Exercise Price in
effect at the time of the record date for such dividend or distribution or of
the effective date of such subdivision, combination or reclassification shall be
proportionately adjusted so that the Holder of this Warrant exercised after such
date shall be entitled to receive the aggregate number and kind of shares which,
if this Warrant had been exercised immediately prior to such time, he would have
owned upon such exercise and been entitled to receive upon such dividend,
subdivision, combination or reclassification. Such adjustment shall be made
successively whenever any event listed in this Paragraph (f)(1) shall occur.
<PAGE>
(2) In case the Company shall issue rights or warrants to all
holders of its Common Stock entitling them to subscribe for or purchase shares
of Common Stock (or securities convertible into Common Stock) at a price (or
having a conversion price per share) less than the current market price of the
Common Stock (as defined in Paragraph (f)(5) of this Warrant) on the record date
mentioned below, the Exercise Price shall be adjusted so that the same shall
equal the price determined by multiplying the Exercise Price in effect
immediately prior to the date of such issuance by a fraction, of which the
numerator shall be the number of shares of Common Stock outstanding on the
record date mentioned below plus the number of additional shares of Common Stock
which the aggregate offering price of the total number of shares of Common Stock
so offered (or the aggregate conversion price of the convertible securities so
offered) would purchase at such current market price per share of the Common
Stock, and of which the denominator shall be the number of shares of Common
Stock outstanding on such record date plus the number of additional shares of
Common Stock offered for subscription or purchased (or into which the
convertible securities so offered are convertible). Such adjustment shall be
made successively whenever such rights or warrants are issued and shall become
effective immediately after the record date for the determination of
stockholders entitled to receive such rights or warrants; and to the extent that
shares of Common Stock or securities convertible into Common Stock are not
delivered after the expiration of such rights or warrants, the Exercise Price
shall be readjusted to the Exercise Price which would then be in effect had the
adjustments made upon the issuance of such rights or warrants been made upon the
basis of delivery of only the number of shares of Common Stock (or securities
convertible into Common Stock) actually delivered.
(3) In case the Company shall distribute to all holders of
Common Stock evidences of its indebtedness or assets (excluding cash dividends
or distributions paid out of current earnings and dividends or distributions
referred to in Paragraph (f)(1) of this Warrant or subscription rights or
warrants (excluding those referred to in Paragraph (f)(2) of this Warrant), then
in each such case the Exercise Price in effect thereafter shall be determined by
multiplying the Exercise Price in effect immediately prior thereto by a
fraction, of which the numerator shall be the total number of shares of Common
Stock outstanding multiplied by the current market price per share of Common
Stock (as defined in Paragraph (f)(5) of this Warrant), less the fair market
value (as determined by the Company's Board of Directors) of said assets or
evidences of indebtedness so distributed or of such rights or warrants, and of
which the denominator shall be the total number of shares of Common Stock
outstanding multiplied by such current market price per share of Common Stock.
Such adjustment shall be made successively whenever such a record date is fixed.
Such adjustment shall be made whenever any such distribution is made and shall
become effective immediately after the record date for the determination of
stockholders entitled to receive such distribution.
(4) Whenever the Exercise Price payable upon exercise of each
Warrant is adjusted pursuant to Paragraphs (f)(1), (2) or (3) of this Warrant,
the number of shares of Common Stock purchasable upon exercise of each Warrant
shall simultaneously be adjusted by multiplying the number of shares of Common
Stock issuable upon exercise of each Warrant in effect on the date thereof by
the Exercise Price in effect on the date thereof and dividing the product so
obtained by the Exercise Price, as adjusted. In no event shall the Exercise
Price per share be less than the par value per share, and, if any adjustment
made pursuant to Paragraph (f)(1), (2) or (3) would result in an exercise price
of less than the par value per share, then, in such event, the Exercise Price
per share shall be the par value per share.
<PAGE>
(5) For the purpose of any computation under Paragraphs (f)(2)
and (3) of this Warrant, the current market price per share of Common Stock at
any date shall be deemed to be the Fair Market Value (as defined above).
(6) No adjustment in the Exercise Price shall be required
unless such adjustment would require an increase or decrease of at least ten
cents ($0.10) in such price; provided, however, that any adjustments which by
reason of this Paragraph (f)(6) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All calculations
under this Paragraph (f) shall be made to the nearest cent or to the nearest
one-hundredth of a share, as the case may be. Anything in this Paragraph (f) to
the contrary notwithstanding, the Company shall be entitled, but shall not be
required, to make such changes in the Exercise Price, in addition to those
required by this Paragraph (f), as it in its discretion shall determine to be
advisable in order that any dividend or distribution in shares of Common Stock,
subdivision, reclassification or combination of Common Stock, issuance of
warrants to purchase Common Stock or distribution of evidences of indebtedness
or other assets (excluding cash dividends) referred to hereinabove in this
Paragraph (f) hereafter made by the Company to the holders of its Common Stock
shall not result in any tax to the holders of its Common Stock or securities
convertible into Common Stock.
(7) The Company may retain a firm of independent public
accountants of recognized standing selected by the Board of Directors (who may
be the regular accountants employed by the Company) to make any computation
required by this Paragraph (f), and a certificate signed by such firm shall be
conclusive evidence of the correctness of such adjustment.
(8) In the event that at any time, as a result of an
adjustment made pursuant to Paragraph (f)(1) of this Warrant, the Holder of any
Warrant thereafter shall become entitled to receive any shares of the Company,
other than Common Stock, thereafter the number of such other shares so
receivable upon exercise of any Warrant shall be subject to adjustment from time
to time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Common Stock contained in Paragraphs (f)(1) to
(6), inclusive, of this Warrant.
(9) Irrespective of any adjustments in the Exercise Price or
the number or kind of shares purchasable upon exercise of Warrants, Warrants
theretofore or thereafter issued may continue to express the same price and
number and kind of shares as are stated in this and similar Warrants initially
issued by the Company.
(g) OFFICER'S CERTIFICATE. Whenever the Exercise Price shall be
adjusted as required by the provisions of Paragraph (f) of this Warrant, the
Company shall forthwith file in the custody of its Secretary or an Assistant
Secretary at its principal office and with its stock transfer agent, if any, an
officer's certificate showing the adjusted Exercise Price and the adjusted
number of shares of Common Stock issuable upon exercise of each Warrant,
determined as herein provided, setting forth in reasonable detail the facts
requiring such adjustment, including a statement of the number of additional
shares of Common Stock, if any, and such other facts as shall be necessary to
show the reason for and the manner of computing such adjustment. Each such
officer's certificate shall be made available at all reasonable times for
inspection by the Holder or any holder of a Warrant executed and delivered
pursuant to Paragraph (a) and the Company shall, forthwith after each such
adjustment, mail, by certified mail, a copy of such certificate to the Holder or
any such holder at such holder's address set forth in the Company's Warrant
Register.
<PAGE>
(h) NOTICES TO WARRANT HOLDERS. So long as this Warrant shall be
outstanding, (1) if the Company shall pay any dividend or make any distribution
upon Common Stock (other than a regular cash dividend payable out of retained
earnings) or (2) if the Company shall offer to the holders of Common Stock for
subscription or purchase by them any share of any class or any other rights or
(3) if any capital reorganization of the Company, reclassification of the
capital stock of the Company, consolidation or merger of the Company with or
into another corporation, sale, lease or transfer of all or substantially all of
the property and assets of the Company to another corporation, or voluntary or
involuntary dissolution, liquidation or winding up of the Company shall be
effected, then in any such case, the Company shall cause to be mailed by
certified mail to the Holder, at least fifteen days prior to the date specified
in clauses (i) and (ii), as the case may be, of this Paragraph (h) a notice
containing a brief description of the proposed action and stating the date on
which (i) a record is to be taken for the purpose of such dividend, distribution
or rights, or (ii) such reclassification, reorganization, consolidation, merger,
conveyance, lease, dissolution, liquidation or winding up is to take place and
the date, if any is to be fixed, as of which the holders of Common Stock or
other securities shall receive cash or other property deliverable upon such
reclassification, reorganization, consolidation, merger, conveyance,
dissolution, liquidation or winding up.
(i) RECLASSIFICATION, REORGANIZATION OR MERGER. In case of any
reclassification, capital reorganization or other change of outstanding shares
of Common Stock of the Company, or in case of any consolidation or merger of the
Company with or into another corporation (other than a merger with a subsidiary
in which merger the Company is the continuing corporation and which does not
result in any reclassification, capital reorganization or other change of
outstanding shares of Common Stock of the class issuable upon exercise of this
Warrant) or in case of any sale, lease or conveyance to another corporation of
the property of the Company as an entirety, the Company shall, as a condition
precedent to such transaction, cause effective provisions to be made so that the
Holder shall have the right thereafter by exercising this Warrant, to purchase
the kind and amount of shares of stock and other securities and property
receivable upon such reclassification, capital reorganization and other change,
consolidation, merger, sale or conveyance by a holder of the number of shares of
Common Stock which might have been purchased upon exercise of this Warrant
immediately prior to such reclassification, change, consolidation, merger, sale
or conveyance. Any such provision shall include provision for adjustments which
shall be as nearly equivalent as may be practicable to the adjustments provided
for in this Warrant. The foregoing provisions of this Paragraph (i) shall
similarly apply to successive reclassifications, capital reorganizations and
changes of shares of Common Stock and to successive consolidations, mergers,
sales or conveyances. In the event that in connection with any such capital
reorganization or reclassification, consolidation, merger, sale or conveyance,
additional shares of Common Stock shall be issued in exchange, conversion,
substitution or payment, in whole in part, for a security of the Company other
than Common Stock, any such issue shall be treated as an issue of Common Stock
covered by the provisions of Paragraph (f) of this Warrant.
(j) TRANSFER TO COMPLY WITH THE SECURITIES ACT OF 1933. This Warrant or
the Warrant Shares or any other security issued or issuable upon exercise of
this Warrant may not be sold or otherwise disposed of except as follows:
(1) To a person who, in the opinion of counsel for the
Company, is a person to whom this Warrant or Warrant Shares may legally be
transferred without registration and without the delivery of a current
prospectus under the Act with respect thereto and then only against receipt of
an agreement of such person to comply with the provisions of this Paragraph (j)
<PAGE>
with respect to any resale or other disposition of such securities which
agreement shall be satisfactory in form and substance to the Company and its
counsel; or
(2) to any person upon delivery of a prospectus then meeting
the requirements of the Act relating to such securities and the offering thereof
for such sale or disposition.
Dated as of December 24, 1998
MEDSEARCH, INC.
By: /s/ JACOB MELLER
--------------------------------------
Jacob Meller
President
<PAGE>
PURCHASE FORM
Dated:__________, 19
The undersigned hereby irrevocably elects to exercise the within
Warrant to the extent of purchasing ____________ shares of Common Stock and
hereby makes payment of $________________ in payment of the actual exercise
price thereof.
=======================
INSTRUCTIONS FOR REGISTRATION OF STOCK
Name_______________________________________________________________________
(Please typewrite or print in block letters)
Signature__________________________________________________________________
Social Security or Employer Identification No._____________________________
ASSIGNMENT FORM
FOR VALUE RECEIVED,_______________________________________________
hereby sells, assigns and transfer unto
Name_______________________________________________________________________
(Please typewrite or print in block letters)
Address____________________________________________________________________
Social Security or Employer Identification No. ____________________________
The right to purchase Common Stock represented by this Warrant to the extent of
_______________ shares as to which such right is exercisable and does hereby
irrevocably constitute and appoint ____________ attorney to transfer the same on
the books of the Company with full power of substitution.
Dated: _______________________, 19
Signature _________________________________
Signature Guaranteed:
___________________________________________
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
We consent to the use in this Registration Statement on Form 10-SB of our report
included herein dated March 19, 1999, relating to the consolidated financial
statements of Medsearch Technologies, Inc. and subsidiaries.
Kempisty & Company
Certified Public Accountants PC
New York, New York
December 1, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001093759
<NAME> MEDSEARCH TECHNOLOGIES, INC.
<MULTIPLIER> 1
<CURRENCY> USD
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<EXCHANGE-RATE> 1
<CASH> 63,192
<SECURITIES> 0
<RECEIVABLES> 475,632
<ALLOWANCES> 420,000
<INVENTORY> 8,575
<CURRENT-ASSETS> 436,470
<PP&E> 142,677
<DEPRECIATION> 29,149
<TOTAL-ASSETS> 1,660,044
<CURRENT-LIABILITIES> 67,294
<BONDS> 0
0
0
<COMMON> 6,534
<OTHER-SE> 1,549,990
<TOTAL-LIABILITY-AND-EQUITY> 1,660,044
<SALES> 1,100,184
<TOTAL-REVENUES> 1,100,184
<CGS> 857,534
<TOTAL-COSTS> 1,054,879
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (812,229)
<INCOME-TAX> 0
<INCOME-CONTINUING> (812,229)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (812,229)
<EPS-BASIC> (.13)
<EPS-DILUTED> (.13)
</TABLE>
