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FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q SB/A
[X] QUARTERLY REPORT PER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE PERIOD ENDED JUNE 30, 1999.
OR
[_] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from
__________________to_________________.
Commission File Number 0-9860
BIOSEARCH MEDICAL PRODUCTS, INC.
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(Exact name of registrant as specified in its charter)
NEW JERSEY 22-2090421
- ------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
35 INDUSTRIAL PARKWAY, SOMERVILLE, NEW JERSEY 08876-1276
- --------------------------------------------- -------------
(Address of principal executive offices) (Zip Code + 4)
Registrant's telephone number, including area code: (908) 722-5000
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
[X] YES [_] No
Indicate the number of shares outstanding of each of the issuers classes of
Common Stock, as of the close of the period covered by this report.
OUTSTANDING AT
CLASS JUNE 30, 1999
--------------- ---------------
Common Stock,
without par value 2,202,878
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<PAGE>
BIOSEARCH MEDICAL PRODUCTS, INC.
INDEX TO FORM 10-Q SB
JUNE 30, 1999
PAGE NO.
--------
PART I - FINANCIAL INFORMATION
Condensed Balance Sheet at June 30, 1999 (unaudited)
and December 31, 1998. 3 - 4
Condensed Statements of Operations (unaudited)
for the three month periods and six month periods ended
June 30, 1999 and June 30, 1998. 5
Condensed Statements of Cash Flows (unaudited)
for the six month periods ended
June 30, 1999 and June 30, 1998. 6
Notes to (unaudited) Condensed
Financial Statements. 7
Management's Discussion and Analysis of the Financial
Condition and the Results of Operations. 8 - 9
PART II - OTHER INFORMATION
Signatures. 10
2
<PAGE>
PART I
ITEM I - FINANCIAL STATEMENTS
BIOSEARCH MEDICAL PRODUCTS, INC.
CONDENSED BALANCE SHEETS
ASSETS
JUNE 30 DECEMBER 31
1999 1998(1)
UNAUDITED
CURRENT ASSETS:
Cash and cash equivalents $ 63,977 $ 105,768
Trade receivables 281,315 78,751
Inventories (note 2) 378,956 297,613
Other assets 210,478 256,127
---------- ----------
TOTAL CURRENT ASSETS 934,726 738,259
PROPERTY, PLANT AND EQUIPMENT, (NET) 82,978 152,887
OTHER ASSETS 4,122 5,862
---------- ----------
TOTAL ASSETS $1,021,826 $ 896,998
========== ==========
(1) - Derived from audited financial statements.
(continued)
3
<PAGE>
BIOSEARCH MEDICAL PRODUCTS, INC.
CONDENSED BALANCE SHEETS
(CONTINUED)
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
JUNE 30 DECEMBER 31
1999 1998(1)
UNAUDITED
CURRENT LIABILITIES:
<S> <C> <C>
Customer deposit $ 38,087 $ 380,000
Accounts payable 320,869 253,498
Accrued liabilities 84,866 174,330
------------ ------------
TOTAL CURRENT LIABILITIES 443,822 807,828
LONG-TERM DEBT (NOTE 3) -- --
------------ ------------
TOTAL LIABILITIES 443,822 807,828
------------ ------------
SHAREHOLDERS' EQUITY:
Common stock, no par value; 5,000,000
shares authorized; issued 2,202,878
at June 30, 1999, and at December 31, 1998 11,129,954 11,129,954
Accumulated deficit (10,520,711) (11,009,545)
Treasury stock, at cost; 7,920 shares
at June 30, 1999 and at December 31, 1998 (31,239) (31,239)
------------ ------------
TOTAL SHAREHOLDERS' EQUITY 578,004 89,170
------------ ------------
$ 1,021,826 $ 896,998
============ ============
</TABLE>
(1) - Derived from audited financial statements.
See accompanying notes to
unaudited condensed financial statements.
4
<PAGE>
BIOSEARCH MEDICAL PRODUCTS, INC.
CONDENSED STATEMENTS OF OPERATIONS
UNAUDITED
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
-------------------------- -------------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues, net $ 498,074 $ 381,065 $ 716,475 $ 985,182
Cost of goods sold 341,707 320,969 555,914 751,071
----------- ----------- ----------- -----------
Gross profit 156,367 60,096 160,561 234,111
Selling, general and
administrative costs 218,380 224,041 413,609 426,059
----------- ----------- ----------- -----------
Operating loss (62,013) (163,945) (253,048) (191,949)
Other income/(expense):
Interest expense -- (1,542) -- (22,427)
Other, net 150,455 -- 150,622 1,886
Gain on sale of fixed assets and
technology -- -- 591,259 --
----------- ----------- ----------- -----------
150,455 (1,542) 741,881 (20,541)
----------- ----------- ----------- -----------
Pre-tax net income/(loss) 88,442 (165,487) 488,833 (212,490)
Federal income taxes
NET INCOME/(LOSS) $ 88,442 $ (165,487) $ 488,833 $ (212,490)
=========== =========== =========== ===========
NET INCOME/(LOSS) PER COMMON SHARE $ .04 $ (.08) $ .22 $ (.10)
=========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES 2,202,878 2,202,878 2,202,878 2,202,878
=========== =========== =========== ===========
</TABLE>
See accompanying notes to
unaudited condensed financial statements
5
<PAGE>
BIOSEARCH MEDICAL PRODUCTS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
UNAUDITED
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30
-----------------
1999 1998
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 488,833 $(212,490)
Adjustments to reconcile net income to net
cash used in operating activities:
Depreciation and amortization 16,284 38,891
Gain on sale of fixed assets and technology (591,259) --
--------- ---------
Sub total (574,975) 38,891
--------- ---------
CHANGES IN ASSETS AND LIABILITIES:
(Increase)/decrease in accts receivable (202,564) 136,129
(Increase/decrease in inventory (81,342) 23,915
Decr/(incr) in other current assets 45.649 3,582
Increase in other assets 1,740 1,064
Increase)/(decrease) in accts payable 67,371 (3,510)
Increase/(decrease) in other liabilities (89,464)
Increase/(decrease) in customer deposits (141,913) 15,241
--------- ---------
Sub total (400,523) 176,421
--------- ---------
Total adjustments (975,498) 215,312
--------- ---------
Net cash (used)/provided by operating activities (486,665) 2,822
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (5,126) (3,488)
Proceeds from sale of fixed assets and technology 450,000 --
Net cash(used)/provided by investing activities 444,874 (3,488)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term borrowings -- --
--------- ---------
Net cash used in financing activities -- --
--------- ---------
Net decrease in cash & cash equivalents (41,791) (666)
Cash & cash equivalents at beginning of period 105,768 14,486
--------- ---------
Cash & cash equivalents at end of period $ 63,977 $ 13,820
========= =========
</TABLE>
See accompanying notes to
unaudited condensed financial statements
6
<PAGE>
BIOSEARCH MEDICAL PRODUCTS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
UNAUDITED
1. BASIS OF PRESENTATION
The accounting policies followed by the Company are set forth in Note 1 of
Notes to Condensed Financial Statements in the 1998 Annual Report on Form
10-KSB.
In the opinion of the management of the Company, the accompanying condensed
financial statements contain only normal and recurring adjustments necessary for
the fair presentation of the Company's financial position as of June 30, 1999
and the results of operations for the three month periods and six month periods
ended June 30, 1999 and June 30, 1998 and the statement of cash flows for the
six month periods ended June 30, 1999 and June 30, 1998.
The results of operations for the three month periods and six month periods
ended June 30, 1999 are not necessarily indicative of the results to be expected
for a succeeding quarter or for the full year.
2. INVENTORIES
JUNE 30, 1999 DECEMBER 31, 1998
UNAUDITED
Finished Goods $121,266 $ 96,263
Work In Process 79,581 61,915
Raw Materials 178,109 139,435
-------- --------
$378,956 $297,613
======== ========
3. OTHER INCOME
In February 1999 the Company reached an agreement with C.R.Bard where
they purchased the worldwide exclusive rights to the coating technology for
intermittent urinary catheters and related coating machine for $650,000. The
machine had a net book value of $58,741 creating a gain on the sale of $591,259.
The Company received $450,000 cash and applied a $200,000 deposit.
On June 7, 1999 entered into an agreement with Applied Medical Resources
in which they were granted a perpetual, non exclusive, worldwide license for
using the Company's Licensed Technology for the sum of $150,000. The entire
amount was booked as other income.
4. COMMITMENTS AND CONTINGENCIES
There are no claims or actions against the Company which will materially
effect its financial statements.
7
<PAGE>
BIOSEARCH MEDICAL PRODUCTS, INC.
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Revenues were $498,074 for the three months ended June 30, 1999, up
$117,009 or 30.7% compared to revenues of $381,065 for the prior year three
month period. The revenues for the six months ended June 30, 1999 were down
$268,707 or 27.3% compared to last year's $985,182.The primary reason for the
reduction in revenues versus last year is due to the loss of the SIMS business
which amounted to approximately $600,000 during 1998, offset by increases in
revenues generated from our OEM sales to Wilson-Cook during 1999 which amounted
to approximately $226,000 and the Company's new OEM arrangement with C.R.Bard in
the United Kingdom which amounted to $142,000 in 1999.
Gross profit for the second quarter 1999 was $156,367 up $96,271 from
last years gross profit of $60,096. Six month figures show gross profit being
down $73,550 or 31.4% from $234,111 in 1998 to $160,561 in 1999. The reaseon for
the increase in gross profit in the second quarter is due primarily to the
product mix which generated higher gross margins than the mix in the prior
period. The gross margins are expected to continue for the balance of 1999.The
decrease in year to date gross profit for the year 1999 versus 1998 is due
primarily to the loss in revenues as explained previously, offset by the cost
containment procedures implemented in 1997 and continued in 1999
Operating loss for the second quarter 1999 was $62,013 or 12.5% of
sales. This represents a reduction in the loss of $101,932 or 62.2% compared to
the 1998 loss of $163,945 or 43% of sales. Year to date 1999 the operating loss
is $253,048 or 35.3% of sales against a loss of $191,949 or 19.5% of sales for
1998. The net operating losses between 1999 and 1998 reflect a concious effort
to maintain cost controls implemented in 1997, however certain revenue levels
need to be attained to make the Company profitable.
Net income for the second quarter 1999 was $88,442, which was $253,929
higher than the $165,487 loss during 1998. Year to date 1999 net income is
$488,833, over $701,323 higher than last year's loss of $212,490. The major
reason for the change in net income is because of the C.R.Bard deal signed in
February 1999 in which the Company recognized a gain on the sale of the machine
and technology of $591,259 and the agreement signed in June 1999 with Applied
Medical Resources in which the Company booked $150,000 to other income(see
Footnote No. 3).
8
<PAGE>
BIOSEARCH MEDICAL PRODUCTS, INC.
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The Company's operating activities used $286,665 during the first six
months of 1999 and investing activities provided $244,874 cash for the same
period. Overall cash flow decreased by $41,791 for the six months ended June 30,
1999
For the six month period ended June 30, 1999 the Company used $286,665
from operating activities. This is due primarily to increases in accounts
receivable of $202,564; inventory of $81,342; a decrease in other liabilities of
$89,464; customer deposits of $141,913 and the gain on the sale of a fixed asset
of $591,259, offset by a decrease in other current assets of $45,649; increase
in accounts payableof $67,371 and net income for the six months of $488,833.
Investing activities generated $444,874, primarily proceeds from the sale of a
fixed asset of $450,000 offset by capital expenditures of $5,126 during the
first six months. Net income was positive due to two separate agreements signed
during 1999. The C.R.Bard agreement amounted to $650,000 for the worldwide
exclusive rights to the coating technology for intermittent urinary catheters
and its related coating machine. The second agreement entered into was with
Applied Medical Resources in which the Company granted perpetual worldwide, non
exclusive license to use the Company's License Technology for the sum of
$150,000. Efforts are underway to collect receivables in a more timely fashion
and consult with its vendors to extend payables terms thereby increasing the
Company's cashflow. The Company continues to manufacture and ship intermittent
catheters to C.R.Bard, United Kingdom, against their original prepaid purchase
order of $180,000.
Management believes that the Company's financial condition at June 30,
1999 represents an uncertain base to conduct current operations. The Company's
ability to continue as a going concern is dependent upon its success at
generating cash flow or obtaining additional financing to meet its capital needs
and curtailing the ongoing losses by generating profitable revenue levels. The
financial statements do not include any adjustments that might result from the
outcome of these uncertainties.
The Company continues to focus all its efforts on building its OEM
business and its coating business through its technology. The Company received
its ISO 9000 certification and is awaiting CE mark certification. The Company
feels this will open the European market to its products and allow additional
relationships with other large medical companies' who have not received their
certification and wish to sell their products in Europe.
There is no assurance that the Company's revenue levels in 1999 will
attain the volumes needed to maintain operations.
9
<PAGE>
PART II - OTHER INFORMATION
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BIOSEARCH MEDICAL PRODUCTS, INC.
Dated: October 25, 1999 /s/ Manfred F. Dyck
-----------------------------------
Manfred F. Dyck
President and Principal
Executive Officer and Director
Dated: October 25, 1999 /s/ Robert C. Keller
-----------------------------------
Robert C. Keller
Treasurer
Chief Financial and Accounting Officer
10
<PAGE>
INDEX TO EXHIBITS
10.(aaaaa) License agreement between Applied Medical Resources and the
Company, dated June 7, 1999, in which Applied Medical was
granted perpertual, non exclusive, worldwide rights to use the
Company's Licensed Technology on specified products.
11
LICENSE AGREEMENT
This is an agreement (the "AGREEMENT") dated and effective as of the
date of last signature below (the "Effective DATE"), by and between the
following parties:
a) Biosearch Medical Products, Inc., a corporation having its principal
office at 35 Industrial Parkway, Somerville, New Jersey 08876
("LICENSOR"); and
b) Applied Medical Resources, Inc., a corporation having its principal
office at 26051 Merit Circle, Building 104, Laguna Hills, California
92653 ("APPLIED").
ARTICLE 1- BACKGROUND
1.1 Licensor is the owner of certain formulations and know-how for the
production of the following specific lubricious and primer coatings for use
in the Licensed Product Markets (the "LICENSED TECHNOLOGY"):
(i) BMPI 48TS designed for coating Pellethane
(ii) BMPI 49TS designed for coating C-Flex
(iii) BMPI 51TS (TS43 + S4) designed for coating Polyester
(iv) BMPI 40TS Clear Stainless Steel Guidewire primer
(v) BMPI 63TS Blue Stainless Steel Guidewire primer
(vi) S4 hydrophilic coating
1.2 Applied desires to obtain a license from the Licensor to use the Licensed
Technology.
1.3 Licensor is willing to grant to Applied a license to use the Licensed
Technology upon the terms and conditions set forth below.
Therefore, in consideration of the mutual promises contained in this
Agreement, the parties agree as follows:
ARTICLE 2- DEFINITIONS
The following terms, when used with initial capital letters, shall have the
meanings set forth below.
2.1 "LICENSED PRODUCT MARKETS" are the worldwide markets for: (i)
vascular/cardiovascular products; (ii) endourology products (including
non-balloon Foley-type catheters); and (iii) general surgery products.
Licensed Product Markets specifically do not include the worldwide markets
for: (i) urological drainage (Foley-type) catheters with balloons; (ii)
indwelling vascular/cardiovascular stents and grafts; (iii) OEM coating
services on devices or products not manufactured by Applied; and (iv)
intermittent urinary drainage catheters.
2.2 "FINAL TRANSFER DATE" is September 30, 1999.
<PAGE>
2.3 "LOAN AGREEMENT" is the agreement executed by Applied and Licensor on May
13, 1999 that is attached hereto as Exhibit A.
ARTICLE 3- LICENSE GRANT
3.1 Subject to the terms and conditions of this Agreement, as of the Effective
Date, Licensor hereby grants to Applied a perpetual, non-exclusive,
worldwide license to make, have made, use, sell, or otherwise dispose of
products incorporating the Licensed Technology in the Licensed Product
Markets.
3.2 Applied agrees to use the Licensed Technology only in connection with the
medical devices and products that Applied makes, uses and/or sells. Applied
shall not make the Licensed Technology available to any third party for a
period of ten (10) years from the Effective Date.
3.3 The foregoing sections 3.2 and 2.1 shall have no force or effect with
respect to any portion of the Licensed Technology that is or becomes public
through no fault of Applied.
ARTICLE 4 -TECHNOLOGY TRANSFER
4.1 Licensed Technology Transfer Licensor shall transfer the Licensed
Technology to Applied on the Effective Date. Transfer of the Licensed
Technology includes providing all of the formulations, specifications,
instructional materials, and training necessary and useful for Applied to
make commercial use of the Licensed Technology. The transfer of the
Licensed Technology shall not be deemed by Applied to be complete until
Applied has sufficient information and reasonable training to utilize the
Licensed Technology in commercial operation. Licensor shall undertake and
consummate all the research and other steps necessary to ensure that the
Licensed Technology is developed and transferred to Applied as soon as is
reasonably practicable and, in any event, no later than the Final Transfer
Date.
4.2 Extension of Final Transfer Date The Final Transfer Date may be extended
only by joint agreement of Licensor and Applied in writing.
4.3 Continuing Technical Support For a period of three (3) years from the
Effective Date, Licensor shall provide the technical and consulting support
that is reasonably necessary for Applied to make commercial use of the
Licensed Technology. Applied will reimburse Licensor for out-of-pocket
travel costs incurred in providing technical support to Applied under this
section 4.3, provided that Licensor obtains Applied's approval in advance
of incurring such costs.
ARTICLE 5- PAYMENTS
5.1 License Fee Payment As of the Effective Date, Licensor accepts receipt of
an initial license fee payment of Fifty Thousand Dollars ($50,000.00) (the
"INITIAL LICENSE FEE"). Prior to the date hereof, pursuant to the Loan
Agreement, Licensor received a loan of Fifty Thousand Dollars ($50,000.00)
from Applied on May 13, 1999 (the "LOAN"). As of the Effective Date, the
parties agree to set off the Initial License Fee and the Loan, such
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<PAGE>
that as of the date hereof the Initial License Fee shall be deemed paid by
Applied, and the Loan shall be deemed repaid by Licensor.
5.2 Licensed Technology Transfer and Support Fee In consideration of the
Licensed Technology transfer and technical support provided by Licensor to
Applied under Article 4 herein, Applied shall pay Licensor Seventy Five
Thousand Dollars ($75,000.00) on the Effective Date and Twenty Five
Thousand Dollars ($25,000.00) upon the completion of the transfer or on
September 30, 1999 whichever comes first.
ARTICLE 6- WARRANTIES AND REPRESENTATIONS
6.1 Licensor expressly warrants and represents that (a) it is empowered to
grant the license of the Licensed Technology granted; (b) this Agreement
and the full performance and enjoyment of the rights granted under this
Agreement will not breach the terms and conditions or any license,
contract, understanding or agreement, whether express, implied, written or
oral between the parties and any third party; (c) Licensor has the sole,
exclusive and unencumbered right to grant the license and rights granted
herein to Applied; and (d) the Licensed Technology does not infringe upon
or otherwise conflict with the intellectual property rights of any third
party.
6.2 Licensor shall indemnify and hold Applied harmless from all liabilities,
demands, damages, expenses and losses upon the breach of any of the
warranties and representations set forth in Article 6.1 above.
ARTICLE 7- ARBITRATION OF DISPUTES
Any controversy or claim arising out of or relating to this Agreement, or
the decision to enter into this Agreement, or the breach thereof, shall be
settled exclusively by arbitration in accordance with the provisions, then
obtaining, of the American Arbitration Association (AAA) before a panel of three
(3) arbitrators. The law of the State of New Jersey shall apply to the
arbitration proceedings. Judgment upon the award rendered by the arbitrators may
be entered in any court having jurisdiction thereof. In connection with any such
arbitration, the prevailing party shall be entitled to recover from the
nonprevailing party reasonable expenses including, without limitation,
reasonable attorneys' fees and reasonable accountants' fees. If the arbitrators
are unable to designate a prevailing party, they shall so state and the expenses
shall be split equally between the parties.
ARTICLE 8 - MISCELLANEOUS
8.1 Assignment Applied may assign this Agreement or any rights and obligations
contemplated herein to a company acquiring substantially all of the assets
of Applied, without the consent of Licensor, upon giving written notice
thereof to Licensor. Licensor may assign Applied's payment obligations set
forth herein to a third party, upon giving written notice thereof to
Applied. Any such assignment shall be subject to the terms of this
Agreement. In all other instances, neither Applied nor Licensor shall
assign this Agreement or any rights granted hereunder without the prior
written consent of the other
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<PAGE>
party. Subject to the foregoing, this Agreement shall bind and inure to the
benefit of the respective parties hereto and their successors and assigns.
8.2 Relationship of Parties The parties hereto are entering into this Agreement
as independent contractors, and nothing herein is intended or shall be
construed to create between the parties a relationship of principal and
agent, partners, joint venturers or employer and employee. Neither party
shall hold itself out to others or seek to bind or commit the other party
in any manner inconsistent with the foregoing provisions of this section
8.2.
8.3 Indemnification and Hold Harmless The parties hereto agree to indemnify and
hold harmless the other party for any negligent or willful act of one
party, or any agent or employee of that party, which results in the
assertion of a claim for damages against the other party. Such
indemnification shall not apply where the party seeking indemnification
contributed to or was responsible for the basis of the claim for damages.
8.4 Integration It is the mutual desire and intent of the parties to provide
certainty as to their future rights and remedies against each other by
defining the extent of their mutual undertakings as provided herein. The
parties have in this Agreement incorporated all representations,
warranties, covenants, commitments and understandings on which they have
relied in entering into this Agreement and, except as provided for herein,
neither party has made any covenant or other commitment to the other
concerning its future action. Accordingly, this Agreement constitutes the
entire agreement and understanding between the parties with respect to the
matters contained herein, and there are no prior oral or written promises,
representations, conditions, provisions or terms related thereto other than
those set forth in this Agreement. The parties may from time to time during
the term of this Agreement modify any of its provisions by mutual agreement
in writing.
This Agreement is signed on the dates set forth below by duly authorized
representatives of Applied and Licensor, respectively.
Applied Medical Resources, Inc. Biosearch Medical Products, Inc.
By: S/S By: S/S
Printed Name: Nabil Hilal Printed Name: Martin Dyck
Date: 06/04/99 Date: 06/07/99
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<PAGE>
EXHIBIT A
LOAN AGREEMENT
This Agreement is dated this 13 day of May, 1999, by and between Applied
Medical Resources Corporation, having a business address of 26051 Merit Circle,
Building 104, Laguna Hills, California 92653 (hereinafter "Applied Medical") and
Biosearch Medical Products, Inc., having a business address of 35 Industrial
Parkway, Somerville, New Jersey 08876-1276 (hereinafter "Biosearch").
WHEREAS, Biosearch is the owner of know-how and technology related to lubricious
coating of medical devices as more fully defined in Paragraph 2(d), (e) and (h)
(the "Technology"); and
WHEREAS, Applied Medical is planning to produce and market products
incorporating the Technology ('Product(s)"), and desires to retain Biosearch to
develop and/or transfer the coating process for said Products and to obtain a
non-exclusive license under Biosearch's Technology.
NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged and for the mutual promises, duties and
obligations herein contained, the parties hereto do hereby agree as follows :
1 Loan -- Applied Medical shall extend a loan ("Loan") to Biosearch in
the amount of Fifty Thousand Dollars ($50,000.00) following execution
hereof, but in no event later than five (5) days following execution.
Such Loan amount shall be applicable toward a research and license
agreement, ("License Agreement") the parties intend to negotiate in
good faith based on the terms defined in Paragraph 2 herein. Biosearch
agrees to repay Applied Medical the full Loan amount by July 15, 1999
if the parties do not finalize the License Agreement by June 15, 1999.
2. License Agreement -- Applied Medical and Biosearch shall negotiate in
good faith a License Agreement based on the following general terms:
(a) License Biosearch shall grant Applied Medical a non-exclusive,
worldwide royalty free license to make, use or sell Products
incorporating the Technology in the markets defined in paragraph
2(b) below
(b) Markets -- Subject the exclusions defined in paragraph 2(c),
Applied Medical shall have the right to make, use or sell medical
devices and products incorporating the Technology in
vascular/cardiovascular, endourology (including non-balloon Foley
type catheters) and general surgery markets.
(c) Exclusions -- Excluded from the definition of the Markets defined
in paragraph 2(b) above are the following:
(i) Urological drainage (Foley) catheters with balloons.
(ii) Indwelling vascular/cardiovascular stents and grafts.
(iii) OEM coating services on products not manufactured by
Applied Medical
(iv) intermittent urinary drainage catheters.
-5-
<PAGE>
d) Research and/or Technology Transfer - Biosearch shall transfer to
Applied Medical and/or as needed, conduct research and develop
surface preparation and coating processes, as defined in
paragraph 2(h), in accordance with a mutually agreed upon
schedule. Technology transfer shall include all documentation and
qualification of all steps necessary and useful for Applied
Medical to make and apply the surface preparation and coating
material to the Products.
(e) Consulting and Technical Support - Biosearch shall provide
consulting and technical support to Applied Medical to apply the
S4 coating on Products and assist in resolving technical problems
as may be reasonably requested by Applied Medical during the Term
of the License Agreement.
(f) License Fee - Applied Medical shall pay Biosearch a one-time
license fee of Fifty Thousand Dollars ($50,000.00) on the
effective date of the License Agreement. The Loan amount defined
in Paragraph 1 above will be applied towards the License Fee
(i.e. extinguished).
(g) Research and/or Technology Transfer Cost - Applied Medical shall
pay Biosearch Seventy Five Thousand Dollars ($75,000.00) upon
signing the Agreement and Twenty Five Thousand Dollars
($25,000.00) upon the completion of the transfer or on September
30, 1999 whichever comes first.
(h) Coating Processes -- Biosearch shall develop and/or transfer to
Applied Medical the following processes for the coating of
Applied Medical's Products:
(i) BMPI 4S TS for Pellethane dilators and sheaths.
(ii) BMPI 49 TS for C-Flex coaxing
(iii) TS 51 (TS43 + S4) for Polyester mesh stents
(iv) SS Primer for Guidewires
(v) S4 for all Products
(i) Term - Three Years.
(j) OEM Exclusion -- Applied Medical agrees that for at least ten
(10) years from the effective date of the License Agreement, to
only use the Technology for its own application and Products and
to not make the Technology available to a third party.
3. Hold Harmless and Indemnification The parties hereto agree to indemnify and
hold harmless the other for any negligent or willful act of one party, or
any agent or employee of a party, which results in the assertion of a claim
for damages against the other party. Such indemnification shall not apply
in the circumstances in which the party claiming indemnification from the
other contributed to or was responsible for the basis for the claim for
damages.
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<PAGE>
4. Both parties are independent contractors under this Agreement. Nothing
contained in this Agreement is intended nor is to be construed as to
constitute Applied Medical or Biosearch as partners, agents, or joint
ventures. Neither party hereto will have any express or implied right or
authority to assume or create any obligations on behalf of or in the name
of the other party or to bind the other party to any contract, agreement or
undertaking with any third party.
IN WITNESS WHEREOF, the parties hereto hereby execute this Agreement on the
dates set forth below, by the signature of their duly authorized
representatives.
Applied Medical Resources Corporation Biosearch Medical Products, Inc.
S/S S/S
Nabil Hilal, Sr. VP. Martin C. Dyck, President
Date: 05/13/99 Date: 05/13/9
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