UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-SB/A
(AMENDMENT NO. 2)
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:
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None
Securities to be registered pursuant to Section 12(g) of the Act:
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Common Stock, $.001 Par Value for Per Share
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(Title of Class)
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AVAILABLE INFORMATION
You should read this entire Registration Statement carefully including
information set forth in the section entitled "Risk Factors" beginning on page
12.
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 March 31, 2000 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, a medical device research/development and
distribution/marketing company, is in its early stage of development and has a
history of losses. The Company incurred net losses of $241,121 and $1,003,923
for the years ended December 31, 1998 and 1999, respectively. The Company has
generated limited revenues to date and requires additional financing to
increase its research and development activities and to develop new products.
See "Risk Factors" below.
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
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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.
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 that holds various patents for medical
devices. There were no other assets or operations acquired by Medsearch in the
transaction.
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 had
distribution rights to sell optical products. There were no other assets or
operations acquired in the transaction..
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 June, 1999, Meduck issued an additional 27% of its outstanding stock
to the Company (by converting $237,000 of loans to Meduck for such stock),
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 a
notice of allowance for a trademark 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 (by converting
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$237,000 of loans to Meduck for such stock), 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.
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.
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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.
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.
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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
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)
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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.
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.
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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.
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).
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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.
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
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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
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.
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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. 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.
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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
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 March 31, 2000, 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.
11
<PAGE>
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 $241,121
and $1,003,923 for the years ended December 31, 1998 and 1999, 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 $2,990,239 at December 31, 1999.
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.
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
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<PAGE>
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
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
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<PAGE>
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
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.
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<PAGE>
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. As
of March 31, 2000 there were 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 130,000 shares of Common Stock issuable upon
exercise of the warrants at $3.00 per share. After reserving a total of
5,102,800 shares of Common Stock for issuance upon the exercise of all options
and warrants, the Company will have at least 38,362,618 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
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<PAGE>
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. As of March 31, 2000, there
were 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 130,000 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 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.
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<PAGE>
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
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, 1999 as Compared to December 31, 1998
The Company had net sales of $1,110,000 for the year ended December 31,
1999 as compared to $405,000 for the year ended December 31, 1998. The increase
of $705,000 (74%) is attributable to optical product sales of $872,000 versus
$405,000, a change of $467,000, plus the TNJ acquisition added sales of $223,000
and the Company had consulting fees of $15,000.
Cost of sales increased during the year ended December 31, 1999 to
$859,000 from $371,000 for the year ended December 31, 1998. The increase of
$488,000 (132%) $442,000 relates to the Company's increase in sales of optical
products and $46,000 relates to medical product sales by TNJ.
Operating expenses increased to $1,270,000 from $311,000 for the year
ended December 31, 1999 as compared to 1998, an increase of $959,000 (300%). The
net increase is attributable to increased operations in the United States and
Israel. Meduck had $203,000 of research and development expenses vs none in
1998, the Company expensed $183,000 in stock compensation to officers and
directors and $45,000 in goodwill vs none in 1998, the Company expensed $132,000
of contributed rent and compensation vs $63,000 in 1998 and the balance of
$459,000 is due to the Company operating for a full year vs six months in 1998.
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<PAGE>
The Company had a net loss for the year ended December 31, 1999 of
$1,004,000 as compared to a net loss of $241,000 for the year ended December 31,
1998, an increase of $763,000 (317%). The increased loss of $763,000 is
attributable to the aforementioned detailed expenses and full year operations.
Year Ended December 31, 1998 as Compared to December 31, 1997
The Company had net sales of $405,000 for the year ended December 31,
1998 as compared to $-0- for the year ended December 31, 1997. The increase is
attributable to sales of optical products verses the Company being dormant in
1997.
Cost of sales increased during the year ended December 31, 1998 to
$371,000 from $-0- for the year ended December 31, 1997. The increase
corresponds to the Company's increase in sales of optical products.
Operating expenses increased to $311,000 from $45,000 for the year
ended December 31, 1998 compared to December 31, 1997, an increase of $302,000
(86%). The increase of $266,000 is attributable to the start of operations.
The Company had a net loss for the year ended December 31, 1998 of
$277,000 as compared to a net loss of $88,000 for the year ended December 31,
1997, an increase of $189,000 (68%). The increase is attributable to the
aforementioned increased operations.
Liquidity and Capital Resources
December 31, 1999 to December 31, 1998
At December 31, 1999, the Company had cash of $368,000 as compared to
cash of $498,000 at December 31, 1998 a decrease of $130,000 (26%). The decrease
results from the Company using $593,000 in its operations of which $203,000 was
used for research and development. The Company was able to generate cash by
issuing demand notes for $400,000 and collecting $65,000 of notes and loans
receivable.
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.
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Medsearch believes that its cash on hand together with additional
borrowings and/or equity sales will be sufficient to fund its capital
expenditures and working capital requirements for at least the next 12 months.
Medsearch may require additional capital in the future for new business
activities related to its current and planned businesses, or in the event it
decides to make additional acquisitions or enter into joint ventures and
strategic alliances. Sources of additional capital may include cash flow from
operations, public or private equity and debt financings, bank debt and vendor
financings. However, we cannot assure you that Medsearch will be successful in
producing sufficient cash flow or raising debt or equity capital to meet its
strategic business objectives or that such funds, if available, will be
available on a timely basis and on terms that are acceptable to Medsearch. If
Medsearch is unable to obtain such capital, it may have to delay or curtail
business operations. In addition, Medsearch may increase the number of
consulting projects it takes on, which in turn may accelerate Medsearch's need
for additional capital.
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
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 March 31, 2000 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%
David Filer (4) 30,000 .45%
Isaac Wurzburger(5) ---- ----
Clarke Holdings, Ltd. 700,000 10.80%
Bahnahafstrasse 52
Ch - 8001
Zurich, Switzerland
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Number of Shares of
Name of Beneficial Owner* Common Stock (1) Percentage (%) of Ownership
- - ------------------------- ---------------- ---------------------------
<S> <C> <C>
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 804,600 11.34%
(4 persons) (6)
</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.
(4) Includes 30,000 warrants exercisable at $3.00 per share.
(5) 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.
(6) Includes 500,000 warrants held by Mr. Meller and 30,000 warrants held by
each of David Filer and 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.
<TABLE>
<CAPTION>
Name Age Position(s) With the Company
- - ---- --- ----------------------------
<S> <C> <C>
Jacob Meller 53 Chairman of the Board and President
David Filer, Ph.D 52 Director
Frieda Goldstein 26 Vice President, Treasurer, Secretary and Director
Isaac Wurzburger, M.D. 44 Medical Advisor and Proposed Director
</TABLE>
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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. DAVID FILER, has been a Director of the Company since February 2000. Dr.
Filer is a biotechnology analyst and investment consultant to biotech and
pharmaceutical companies engaged in research and development. Dr. Filer received
his masters in Microbiology and Biochemistry and his Ph.D. in Microbiology from
Tel Aviv University and was the Senior Molecular Biologist at the Millhauser
Laboratories of NYU Medical Center for 10 years. Dr. Filer divides his time
between his private practice and his 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 June, 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
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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.
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.
22
<PAGE>
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
1999 was Ms. Goldstein, the Company's Vice President, who received $36,000
during 1999. Her current salary is $36,000. In June 1999, Ms. Goldstein received
20,000 restricted shares of Common Stock. In June 1999, the Company also issued
10,000 shares of Common Stock to Dr. Tracy, a former director of the Company and
an additional 125,000 shares of Common Stock to Tsiona Bitton, a director of TNJ
(a wholly-owned subsidiary of the Company). In addition, the Company issued
300,000 shares of Common Stock to a company owned by Messrs. Barnea and Nevo,
officers of Meduck (a majority owned subsidiary of the Company). See "Financial
Statements - Note 8."
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
23
<PAGE>
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
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 March 31, 2000. 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,
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<PAGE>
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
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.
25
<PAGE>
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.
In February 2000, the Company issued 30,000 warrants to Dr. David
Filer, a Director, each exercisable at $3.00 per share and expiring on February
1, 2003. Such warrants contain provisions for cashless exercise.
The business purpose of the above issuances of warrants (other than in
connection with the private placement and acquisition of M&W) were to allow
these persons (officers and professionals) to share in the growth of the
Company, which management believes to be in the best interest of the Company.
With respect to M&W, the issuances were fully negotiated between the parties and
was part of the total purchase price. All of such warrants were issued with
exercise prices equal to the fair market value as of the date of grant. With
respect to the July 1998 private placement, the business purpose to exchange the
warrants were twofold. First, the exercise price was increased which was
beneficial to the Company. Second, the Company desired to have such warrants not
immediately exercisable. It therefore amended the warrants to have an exercise
period from January 1, 2001 to December 31, 2002. The Company intended to
alleviate any significant immediate dilution and fluctuation in the market price
of the Common Stock due to the increase in the public float.
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.
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<PAGE>
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,
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.
27
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SHARES ELIGIBLE FOR FUTURE RESALE
As of March 31, 2000, 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.
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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 are currently quoted on the Pink
Sheets. From December 1993 through January 2000, the Common Stock was quoted 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
or Pink Sheets, as applicable. 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
Quarter ended
December 30, 1999 $3.50 $1.875
* Limited trading on the OTC Bulletin Board commenced in October 1998.
29
<PAGE>
On March 29, 2000, the final quoted price as reported by the Pink
Sheets was $2.50 for each share of Common Stock. As of March 31, 2000, there
were 6,534,582 shares of Common Stock outstanding, held of record by
approximately 484 record holders.
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 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 December 1997, the Company issued 300 shares of Common Stock to a
former employee of the Company, for $300 of services rendered. 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. The sale was made in reliance on Section 4(2) of the Act. No
commissions were paid.
In each of the three preceeding paragraphs, the issuances were made to
individuals who were intimately familiar with all aspects of the Company's
business and financial condition.
In July 1998 the Company sold 4,000,000 shares of Common Stock to eight
(8) 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 in that the offering did
not exceed $1,000,000, and complied with the general requirements of Regulation
D. The investors were given all information requested from the Company prior to
the closing of such offering and were accredited investors. No commissions were
paid.
30
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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 valued at $175,000 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 valued at $125,000 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 valued at $1,050,000 to RMC Limited. The sale was
made in reliance upon Section 4(2) of the Act. No commissions were paid.
In each of the three previous paragraphs, the investors were given all
information requested from the Company, were given adequate time with officers
and directors of the Company and were accredited investors.
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. The sale was made in reliance on Section 4(2) of the Act.
In June 1999, the Company issued 10,000 shares of Common Stock to
Jeanette Tracy, a former Director of the Company, for services as a director. No
cash value was received, and the Company assigned a non-cash equity value of
$1.75 per share. 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, for services as a director. No cash
value was received, and the Company assigned a non-cash equity value of $1.75
per share. 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, for
services as a Director of TNJ. No cash value was received, and the Company
assigned a non-cash equity value of $1.75 per share. 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 for services performed and to be performed over a 3
year period. The sale was made in reliance on Section 4(2) of the Act. No
commissions were paid.
31
<PAGE>
In February 2000, the Company issued 30,000 warrants to Dr. David
Filer, a Director of the Company, for services to be performed as a director.
The sale was made in reliance on Section 4(2) of the Act.
In each of the six preceding paragraphs, the issuances were made to
individuals who were intimately familiar with all aspects of the Company's
business and financial condition.
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. No cash value was received, and the Company assigned a non-cash equity
value of $2.50 per share to the Common Stock, $.50 per warrant on the warrants
to purchase 100,00 shares at $2.00 per share expiring August 18, 2000 and also
per warrant on the warrants to purchase 100,000 shares at $3.00 per share
expiring August 18, 2000. The sale was made in reliance on Section 4(2) of the
Act. No commissions were paid. The investor was given all information about the
Company, was intimately familiar with the Company's operations and financial
condition and is an accredited investor.
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
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.
32
<PAGE>
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
- - -------------------------
* Previously Filed
33
<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.
Signature Title Date
- - --------- ----- ----
/s/ JACOB MELLER President and Director April 3, 2000
- - ----------------------------
Jacob Meller
/s/ FRIEDA GOLDSTEIN Vice President, Treasurer, April 3, 2000
- - --------------------------- Secretary and Director
Frieda Goldstein
/s/ DAVID FILER Director April 3, 2000
- - ----------------------------
David Filer
34
<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 F9-20
<PAGE>
MEDSEARCH, INC.
(A Development Stage Company)
INDEX
PAGE
INDEPENDENT AUDITORS' REPORT 2
BALANCE SHEETS 3
STATEMENTS OF OPERATIONS 4
STATEMENTS OF STOCKHOLDERS' EQUITY 5-7
STATEMENTS OF CASH FLOWS 8
NOTES TO FINANCIAL STATEMENTS 9-14
F1
<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, 1999 and 1998, and the related consolidated statements of
operations, stockholders' equity and cash flows for the years ended December 31,
1999 and December 31, 1998. 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, 1999 and 1998, and the results of its operations and its cash
flows for the years ended December 31, 1999 and December 31, 1998 in conformity
with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 14 conditions
exist which raise substantial doubt about the Company's ability to continue as a
going concern unless it is able to generate sufficient cash flows to meet its
obligations and sustain its operations. Management's plan regarding these
matters is also described in Note 14. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
Kempisty & Company
Certified Public Accountants PC
New York, New York
March 20, 2000
F2
<PAGE>
MEDSEARCH TECHNOLOGIES, INC.
(FORMERLY MEDSEARCH, INC.)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, December 31,
1999 1998
------------ ------------
ASSETS
<S> <C> <C>
Current Assets
Cash and equivalents $ 367,840 $ 498,176
Accounts receivable-net (Note 11) 156,271 36,295
Note receivable (Note 8) 22,039 --
Officer loan receivable -- 15,000
Inventory 8,575 --
Other receivable 6,133 --
Prepaid expenses 1,090 --
---------- ----------
Total Current Assets 561,948 549,471
Fixed assets-net (Note 3) 110,955 76,824
Note receivable (Note 8) 144,078 --
Other assets
Licenses-net -- 352,942
Patents-net 331,958 169,167
Goodwill-net (Note 8) 864,459 --
----------- ----------
Total Other Assets 1,196,417 522,109
----------- ----------
TOTAL ASSETS $ 2,013,398 $ 1,148,404
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Accounts payable and accrued expenses $ 102,803 $ 68,205
Demand notes payable (Note 5) 400,000 --
Current portion of note payable (Note 6) 4,366 --
----------- ----------
Total Current Liabilities 507,169 68,205
Note payable (Note 6) 34,095 --
Commitments and contingencies (Note 12) -- --
Minority interest -- --
Stockholders' Equity (Note 8)
Common stock, 50,000,000 shares authorized at $.001
par value; issued and outstanding 6,534,582 at December
31, 1999, 5,579,582 at December 31, 1998 6,534 5,579
Preferred stock 2,000,000 shares authorized at $.001 par
value; issued and outstanding none -- --
Capital in excess of par value 5,070,503 3,060,936
Deficit (2,990,239) (1,986,316)
Currency translation adjustment (953) --
Unearned compensation (613,711) --
----------- ----------
Total Stockholders' Equity 1,472,134 1,080,199
----------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,013,398 $1,148,404
=========== ==========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
F3
<PAGE>
MEDSEARCH TECHNOLOGIES, INC.
(FORMERLY MEDSEARCH, INC.)
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Year Ended
December 31,
1999 1998
----------- -----------
Sales revenues $ 1,110,133 $ 405,180
Cost of sales 858,723 371,297
----------- -----------
Gross profit 251,410 33,883
Stock compensation (Note 7) 182,539 --
Research and development 203,337 21,279
General and administrative expenses 884,316 289,996
----------- -----------
1,270,192 311,275
Loss from operations (1,018,782) (277,392)
Other income and expenses
Interest income 8,090 12,699
Other income 13,255 10,000
Interest expense (6,486) --
Gain (loss) on investment -- 13,572
----------- -----------
Income (loss) before taxes (1,003,923) (241,121)
Provision for income taxes -- --
----------- -----------
Net income (loss) (1,003,923) (241,121)
=========== ===========
Basic and diluted income (loss) per share (0.17) (0.11)
=========== ===========
Basic and diluted average shares outstanding 6,051,431 2,236,294
=========== ===========
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, 1999 AND 1998
Capital Unearned
Common Stock Preferred Stock Excess of Translation Compen-
Shares Amount Shares Amount Par Value Deficit Adjustment Sation Total
--------- -------- ------ ------ ----------- ----------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance January 1, 1998
as previously reported 79,639 $ 79 -- $ -- $ 1,432,403 $(1,745,195) $ -- $ -- $ (312,713)
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
Rent and officers
compensation adjustment -- -- -- -- 63,000 -- -- -- 63,000
Loss for year ended
December 31, 1998 -- -- -- -- -- (241,121) -- -- (241,121)
--------- -------- ------ ------ ----------- ----------- ------- ------- ----------
Balance December 31, 1998 5,579,582 5,579 0 0 3,060,936 (1,986,316) 0 0 1,080,199
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, 1999 AND 1998
(CONTINUED)
Capital in Unearned
Common Stock Preferred Stock Excess of Translation Compen-
Shares Amount Shares Amount Par Value Deficit Adjustment Sation Total
---------- ----- ------ ------ ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Shares from sale of Optimart
received and retired (150,000) (150) -- -- (152,578) -- -- -- (152,728)
Shares issued for acquisition
of TNJ Products 600,000 600 -- -- 1,049,400 -- -- -- 1,050,000
Restricted stock issued to
officers and directors in lieu
of cash compensation 155,000 155 -- -- 271,095 -- -- (218,750) 52,500
Shares issued for
compensation 300,000 300 -- -- 524,700 -- -- (525,000) 0
Shares and warrants
issued for acquisition of
M & W Medical Supplies, L.L.C 50,000 50 -- -- 184,950 -- -- -- 185,000
Amortization of unearned
compensation -- -- -- -- -- -- -- 130,039 130,039
Rent and officers
compensation adjustment -- -- -- -- 132,000 -- -- -- 132,000
Translation adjustment -- -- -- -- -- -- (953) -- (953)
Loss for year ended
December 31, 1999 -- -- -- -- -- (1,003,923) -- -- (1,003,923)
---------- ----- ------ ------ ----------- ----------- ----------- ----------- -----------
Balance December 31, 1999 6,534,582 6,534 0 0 5,070,503 $(2,990,239) $ (953)$ (613,711)$ 1,472,134
========== ===== ====== ====== =========== =========== =========== =========== ===========
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
F-6
<PAGE>
MEDSEARCH TECHNOLOGIES, INC.
(FORMERLY MEDSEARCH, INC.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Year Ended
December 31,
1999 1998
----------- ------------
OPERATING ACTIVITIES
Net income or (loss) $(1,003,923) $ (241,121)
Adjustments to reconcile net income or (loss)
to net cash used by operating activities:
Depreciation and amortization 67,182 36,158
Rent and officer compensation adjustment 132,000 63,000
Gain from sale of investments -- (13,572)
Amortization of unearned compensation 182,539 --
Changes in operating assets and liabilities net of
effects of the purchase of TNJ Products:
(Increase) decrease in accounts receivable 10,049 (36,295)
(Increase) decrease in inventory -- --
(Increase) decrease in current assets 2,244 --
Increase (decrease) in payables 16,388 21,685
----------- ------------
Net cash (used) by operating activities (593,521) (170,145)
INVESTING ACTIVITIES
Purchase of fixed assets (6,730) (85,091)
Loans made to officers -- (15,000)
Repayment of officer loans 15,000 --
Acquisition of Optimart - cash portion -- (250,000)
Cash acquired in TNJ Products acquisition 14,223 --
Proceeds from sale of investment -- 46,947
----------- -----------
Net cash provided(used) by investing activities 22,493 (303,144)
FINANCING ACTIVITIES
Increase in notes payable 400,000 --
Payment of bank loan and note (9,308) (57,965)
Proceeds from note receivable payment 50,000 --
Proceeds from sale of stock -- 1,000,000
----------- -----------
Net cash provided by financing activities 440,692 942,035
----------- -----------
Increase (decrease) in cash (130,336) 468,746
Cash at beginning of period 498,176 29,430
----------- -----------
Cash at end of period $ 367,840 $ 498,176
=========== ===========
Supplemental Disclosures of Cash Flow Information:
Cash paid during year for:
Interest $ 6,486 $ 915
=========== ===========
Income taxes $ -- $ --
=========== ===========
SEE NOTES TO FINANCIAL STATEMENTS.
F7
<PAGE>
MEDSEARCH TECHNOLOGIES, INC.
(FORMERLY MEDSEARCH, INC.)
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
For the Year Ended
December 31,
1999 1998
---------- ----------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Non-cash investing and financing activities:
Issuance of common stock for
cancellation of indebtedness $ -- $ 232,012
Officers forgiveness of loan interest $ -- $ 39,021
Issuance of common stock for
Meduck acquisition $ -- $ 175,000
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 for TNJ
Products Acquisition $1,050,000 $ --
Issuance of common stock and warrants for
M & W Medical acquisition $ 185,000 $ --
Issuance of common stock for compensation $ 796,250 $ --
SEE NOTES TO FINANCIAL STATEMENTS.
F8
<PAGE>
MEDSEARCH TECHNOLOGIES, INC.
(FORMERLY MEDSEARCH, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
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.
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. The financial statements for the
period prior to the reincorporation reflect the historical results of
operations for Medsearch, Inc.
Note 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Meduck
Technologies, LTD. ("Meduck") as of December 31, 1999 and 1998,
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.
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
DECEMBER 31, 1999
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
DECEMBER 31, 1999
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.
i. GOODWILL, PATENTS AND LICENSES
Goodwill represents the excess of acquisition costs over the fair value
of net assets of TNJ Products, Inc. acquired in June, 1999. Goodwill is
being amortized on a straight line basis over the estimated useful life
of ten years.
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. 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 1999
and 1998.
l. EARNINGS (LOSS) 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.
F11
<PAGE>
MEDSEARCH TECHNOLOGIES, INC.
(FORMERLY MEDSEARCH, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
Note 3- FURNITURE AND EQUIPMENT
Furniture and equipment consists of the following:
December 31, December 31,
1999 1998
------------ ------------
Office furniture and equipment $ 74,835 $ 60,391
Vehicle 43,423 --
Telephone equipment 11,366 11,366
Computers 20,992 13,334
--------- ---------
150,616 85,091
Less: Accumulated depreciation (39,661) (8,267)
--------- ---------
$ 110,955 $ 76,824
========= =========
Note 4- INCOME TAXES
The provision (benefit) for income taxes consisted of the following (in
thousands):
Year ended December 31,
1999 1998
------- --------
Current:
Federal tax expense $ (186) $ (86)
State tax expense (54) (25)
Deferred:
Federal tax expense 186 86
State tax expense 54 25
------- --------
$ -- $ --
======= ========
A reconciliation of differences between the statutory U.S. federal
income tax rate and the Company's effective tax rate follows:
Year ended December 31,
1999 1998
------- ------
Stautory federal income tax 34% 34%
State income tax-net of
federal benefit 5% 5%
Valuation allowance -39% -39%
------- ------
0% 0%
======= ======
F12
<PAGE>
MEDSEARCH TECHNOLOGIES, INC.
(FORMERLY MEDSEARCH, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
Note 4- INCOME TAXES (continued)
The components of deferred tax assets and liabilities were as follows
(in thousands):
December 31,
1999 1998
------ -----
Deferred tax assets:
Net operating loss carryforward $ 570 $ 330
------ -----
Total deferred tax assets 570 330
Valuation allowance (570) (330)
------ -----
Net deferred tax assets $ - $ -
====== =====
SFAS No, 109 requires a valuation allowance to be recorded when it is
more likely than not that some or all of the deferred tax assets will
not be realized. At December 31, 1998, a valuation allowance for the
full amount of the net deferred tax asset was recorded because of
continuing losses and uncertainties as to the amount of taxable income
that would be generated in future years.
The Company recognized losses for the years ended December 31, 1999
through 1994. The amount of available additional net operating loss
carry forwards are approximately $600,000 for 1999, $160,000 for 1998,
$87,000 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 2018.
Note 5- SHORT TERM BORROWINGS
During the fourth quarter of 1999 the Company borrowed $150,000 from
the President of the Company and $250,000 from Argos Associates an
unrelated investor. The loans are due on demand and bear interest at
the rate of one percent (1%) per month. The short term loan payable to
the president was repaid during February, 2000.
Short-term borrowings consisted of the following at December 31, 1999.
12% Demand note payable to the president of the Company $ 150,000
12% Demand note payable to Argos Associates 250,000
---------
$ 400,000
=========
At December 31, 1999 the carrying value of short-term
borrowings approximated fair values.
F13
<PAGE>
MEDSEARCH TECHNOLOGIES, INC.
(FORMERLY MEDSEARCH, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
Note 6- LOANS PAYABLE LONG TERM
Long term debt consists of the following loan acquired as part of the
TNJ Products, Inc. acquisition:
December 31,
1999
------------
Installment loan $ 38,461
Less current portion 4,336
---------
$ 34,125
=========
The installment loan payable to 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%.
As of December 31, 1999 the maturities for long term debt are as
follows:
2000 $ 4,336
2001 34,095
--------
$ 38,431
========
Note 7- 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, 1999
--------------------------
Carrying
Amount Fair Value
---------- ----------
Assets:
Cash and cash equivalents $ 367,840 $ 367,840
Accounts receivable 156,271 156,271
The carrying amounts of cash and cash
equivalents, and accounts receivable
are a reasonable estimate of their fair
values.
F14
<PAGE>
MEDSEARCH TECHNOLOGIES, INC.
(FORMERLY MEDSEARCH, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
Note 8- 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 $232,000.
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.
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 valued at $1.75 per share or $1,050,000 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 purchase.
The operations and financial position of TNJ Products, Inc. were
accounted for in the consolidated financial statements of the Company
beginning July, 1999. The excess purchase price over the estimated fair
value of the assets was approximately $910,000 and is being amortized
over 10 years using the straight-line method.
F15
<PAGE>
MEDSEARCH TECHNOLOGIES, INC.
(FORMERLY MEDSEARCH, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
Note 8- STOCKHOLDERS' EQUITY (Continued)
The following unaudited proforma summaries present the
consolidated results of operations of the Company as if the
business combination had occurred on January 1, 1999 and
January 1, 1998:
<TABLE>
<CAPTION>
Year ended Year ended
December 31, December 31,
1998 1997
------------- ------------
<S> <C> <C>
Revenue $ 1,100,184 $ 803,626
Net (loss) $ (812,229) $ (238,584)
Basic and diluted (loss) per share $ (0.13) $ (0.08)
=========== ==========
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:
Medsearch TNJ
----------- -----------
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
----------- -----------
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>
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.
F16
<PAGE>
MEDSEARCH TECHNOLOGIES, INC.
(FORMERLY MEDSEARCH, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
Note 8- STOCKHOLDERS' EQUITY (Continued)
The following represents the sales, cost of sales and gross profit
related to Optimart for the periods presented (in thousands):
Year ended Year ended
December 31, 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. The acquisition was accounted for as a
purchase.
STOCK ISSUED FOR COMPENSATION
During June, 1999 the Company issued 20,000 restricted common shares to
an officer and 10,000 restricted common shares to a director for
services rendered valued at $52,500. Additionaly, the Company issued
125,000 restricted common shares valued at $218,750, to an officer for
services to be rendered over the next three years. The unearned
compensation of $218,750 is being amortized over 36 months. For the
year ended December 31, 1999, $42,539 of unearned compensation 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. The additional compensation is being amortized over 36
months. For the year ended December 31, 1999, $87,500 was charged to
expense.
COMMON STOCK WARRANTS
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 and issued to a director 30,000 warrants to purchase
common stock, exercisable at $3.00 per share which expire February 28,
2003.
F17
<PAGE>
MEDSEARCH TECHNOLOGIES, INC.
(FORMERLY MEDSEARCH, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
Note 8- STOCKHOLDERS' EQUITY (Continued)
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
5,102,800 shares of common stock were exercisable at
December 31, 1999 and warrants to purchase 4,822,800 shares
of common stock were exercisable at December 31, 1998. 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
==========
December 31, 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
30,000 3.00 2003
---------
Total 5,102,800
=========
The following is a summary of warrant transactions:
Year ended December 31,
1999 1998
----------- ----------
Outstanding at beginning of period 4,822,800 --
Granted during the period 80,000 822,800
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 period -- --
----------- ----------
Outstanding and eligible for exercise 5,102,800 4,822,800
=========== ==========
F18
<PAGE>
MEDSEARCH TECHNOLOGIES, INC.
(FORMERLY MEDSEARCH, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
Note 9- 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.
Since October 1, 1998, the owner of the Company's Israeli office, who
is also an officer of the Company is contributing the fair market
rental of the space or $1,000 per month to the Company. Additionally,
the president of the Company is contributing his salary of $10,000 per
month to the Company since his appointment in June of 1998. For 1999
and 1998 the Company recorded $132,000 and $63,000 of contributed
officers compensation and rent expense.
Note 10- RELATED PARTY TRANSACTIONS
On May 14, 1998 the Company issued 300,000 shares of common stock $.001
par value in payment of approximately $230,000 of loans and $39,000 in
accrued interest due to former officers of the Company.
During December 1998 the Company loaned $15,000 to one of its officers.
The loan was repaid in February, 1999.
In December 1999 the president of the Company lent the Company $150,000
payable on demand with interest at one percent (1%) per month. The loan
was repaid in February 2000.
Note 11- ACCOUNTS RECEIVABLE
December 31, December 31,
1999 1998
------------ ------------
Accounts receivable $ 518,328 $ 36,295
Allowance for doubtful accounts (362,057) --
---------- ---------
Accounts receivable-net $ 156,271 $ 36,295
========== =========
The Company has fully reserved for its Medicare accounts
receivable, which are in dispute.
F19
<PAGE>
MEDSEARCH TECHNOLOGIES, INC.
(FORMERLY MEDSEARCH, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
Note 12- COMMITTMENTS AND CONTINGENCIES
The Company leases office space from an unaffiliated party on a month
to month basis. TNJ leases office space and equipment under
noncancellable leases expiring through February 1, 2001. Rental expense
for 1998 was $9,311. Rental expense for the year ended December 31,
1999 was $61,868. 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
------------------------ --------
2000 $ 14,725
2001 3,725
2002 254
--------
Total $ 18,704
========
Note 13- ACQUISITIONS
The assets acquired in the acquisitions of M & W, Meduck and Optimart
on the dates they were acquired are as follows:
M & W Optimart Meduck
-------- ---------- ---------
License agreement $ -- $ 375,000 $ --
Patents and Notice of
Allowance for TM 185,000 -- 175,000
---------- ---------- ----------
Total purchase price $ 185,000 $ 375,000 $ 175,000
========== ========== ==========
Note 14- GOING CONCERN MATTERS
The accompanying financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. As shown
in the financial statements for the years ended December 31, 1999 and
1998, the Company incurred losses of $1,003,923 and $241,121,
respectively. These factors among others may indicate that the Company
will be unable to continue as a going concern for a reasonable period
of time.
The financial statements do not include any adjustments relating to the
recoverability and classification of liabilities that might be
necessary should the Company be unable to continue as a going concern.
The Company's continuation as a going concern is dependent upon its
ability to generate sufficient cash flow to meet its obligations on a
timely basis and to obtain additional financing or refinancing as may
be required to ultimately attain profitability. The Company is also
actively pursuing additional equity financing through stock sales and
when necessary management has lent the Company money for working
capital.
F20
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
We consent to the use in this Registration Statement on Form 10-SB/A of our
report included herein dated March 20, 2000, relating to the consolidated
financial statements of Medsearch Technologies, Inc. and subsidiaries.
Kempisty & Company
Certified Public Accountants PC
New York, NY
March 30, 2000
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001093759
<NAME> MEDSEARCH TECHNOLOGIES, INC.
<MULTIPLIER> 1
<CURRENCY> USD
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<EXCHANGE-RATE> 1
<CASH> 367,840
<SECURITIES> 0
<RECEIVABLES> 518,328
<ALLOWANCES> 362,057
<INVENTORY> 8,575
<CURRENT-ASSETS> 561,948
<PP&E> 150,616
<DEPRECIATION> 39,661
<TOTAL-ASSETS> 2,013,398
<CURRENT-LIABILITIES> 507,169
<BONDS> 0
0
0
<COMMON> 6,534
<OTHER-SE> 1,465,600
<TOTAL-LIABILITY-AND-EQUITY> 2,013,398
<SALES> 1,110,133
<TOTAL-REVENUES> 1,110,133
<CGS> 858,723
<TOTAL-COSTS> 1,270,192
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,003,923)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,003,923)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,003,923)
<EPS-BASIC> (.17)
[EPS-BASIC] (.17)
</TABLE>
