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DRAFT--3/22/96
FOR DISCUSSION PURPOSES ONLY
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
/X/ Annual report under Section 13 or 15(d) of the Securities Exchange Act of
1934 [FEE REQUIRED]
For the fiscal year ended DECEMBER 31, 1995
/ / Transition report under Section 13 or 15(d) of the Securities Exchange Act
of 1934 [NO FEE REQUIRED] For the transition period from to
Commission file number 0-11772
NU-TECH BIO-MED, INC.
(Name of small business issuer as specified in its charter)
Delaware 25-1411971
(State of Incorporation) (I.R.S. Employer Identification No.)
55 Access Road, Warwick, Rhode Island 02886
(Address of Principal Executive Offices) (Zip Code)
Issuer's telephone number, including area code: (401) 732-6520
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which Registered
------------------- -----------------------------------------
Common Stock, $.01 par value Boston Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.01 per share
(Title of Class)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
----- -----
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. /X/
Issuer's revenues for its most recent fiscal year: $322,778
--------
The aggregate market value of the voting stock held by non-affiliates
of the registrant as of March 15, 1996 computed by reference to the average of
the high bid and low asked prices of such stock as reported by Nasdaq on such
date was approximately $22,155,000.
The number of shares of Common Stock outstanding as of March 15, 1996:
1,742,155
Documents Incorporated by Reference - None
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PART I
ITEM 1. BUSINESS
Organization
Nu-Tech Bio-Med, Inc. (hereinafter sometimes referred to as
"Registrant", "Nu-Tech" or the "Company") was originally organized under the
laws of the State of Delaware in September 1981 under the name "Applied DNA
Systems, Inc.". On November 16, 1994, the Company changed its name to its
present name. The Company's wholly owned operating subsidiary, Analytical
Biosystems Corp. ("ABC") was organized under the laws of the State of Delaware
in August, 1985. Unless the context otherwise requires, all references to the
Company include ABC. The Company maintains its principal executive and
administrative offices, and clinical laboratory and research facilities at 55
Access Road, Warwick, Rhode Island 02886, and its telephone number is (401)
732-6520, fax number (401) 738-9160. The Company also maintains additional
executive offices at 500 Fifth Avenue, New York, New York 10036, telephone
number (212) 391-2424, fax number (212) 391-2864.
Principal Business of the Company
The Company, through its wholly owned subsidiary, Analytical Biosystems
Corporation ("ABC"), is a clinical oncology laboratory service and research
company which currently performs and furnishes a patented in vitro
chemosensitivity assay known as the Fluorescent Cytoprint Assay ("FCA") which
aids oncologists in selecting those chemotherapeutic drugs most likely to be
effective in treating a cancer patient's solid mass tumor.
The FCA, which was developed by M. Boris Rotman, Ph.D., Professor of
Medical Science at Brown University, Providence, Rhode Island, is a patented
laboratory procedure that measures the effectiveness of specific chemotherapy
drugs in destroying cancer cells retrieved from solid mass tumors removed from
individual patients. The FCA tests cancer tissue taken from the individual's
tumor against many of the chemotherapeutic agents likely to be used for that
tumor type. Information provided by the test helps rule out ineffective drugs
and assists the oncologists in determining appropriate chemotherapy.
The Company's potential customers are surgeons, oncologists,
pathologists, cancer patients, hospitals, health maintenance organizations
("HMOs"), community cancer centers, and third party insurance companies.
See hereafter "Business - The Clinical Oncology Laboratory
Services of the Company."
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GENERAL BUSINESS DEVELOPMENTS
WITHIN MOST RECENT FISCAL YEAR
Completion of Private Placements
On April 27, 1995, the Company, in a private transaction effected with
eight investors, sold an aggregate of 120,000 shares of Common Stock and an
aggregate of 45,714 Common Stock Purchase Warrants (the "Warrants") for an
aggregate of $722,285.70. The Warrants are exercisable at $7.00 per share
through July 31, 2001, and the Warrantholders were accorded certain piggyback
registration rights. The proceeds received by the Company as a result of the
aforesaid transaction were used for additional working capital purposes.
On July 14, 1995, the Company, in a private transaction effected with
seven investors, sold an aggregate of 93,335 shares of Common Stock and an
aggregate of 35,408 Common Stock Purchase Warrants (the "Warrants") for an
aggregate of $561,780.40. The Warrants are exercisable at $7.00 per share
through July 31, 2001, and the Warrantholders were accorded certain piggyback
registration rights. The proceeds received by the Company as a result of the
aforesaid transaction were to make available to the Company additional working
capital.
Imaging Systems Agreement
On April 20, 1995, ABC entered into an Agreement with Loats Associates,
Inc. ("Loats") pursuant to which Loats was engaged for the purpose of
evaluating, redesigning, configuring, assembling and installing a new and
improved version of the image system currently utilized by ABC in connection
with the quantitative evaluation of assays performed utilizing the Company's
patented Fluorescent Cytoprint Assay ("FCA"). Loats was engaged by ABC to
perform and complete the project on a work-for-hire basis. The project was
completed in December, 1995. See "Business - ABC Image System"
Clinical Trials Agreement
On August 14, 1995, ABC entered into an agreement (the "Clinical Trials
Agreement") with a research institution (the "Institution") and certain
individuals (the "Principal Investigators").
The Clinical Trials Agreement relates to the conduct and performance of
certain proprietary research and development activities to be performed and/or
coordinated on a work for hire basis on behalf of ABC by the Institution. The
protocol for which the clinical trials are to be conducted is entitled "A
Randomized Trial Comparing Empiric Therapy Versus Chemotherapy Directed by In
Vitro Sensitivity Testing in Patients with Carcinoma of Unknown Primary Site".
The conduct of the clinical trials is under the exclusive direction and control
of the Institution and the
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Principal Investigators, who will coordinate the protocol with participating
physicians, manage the project, collect and correlate data and provide ABC with
a final report of the study in form and content generally accepted by medical
and scientific publications and journals. The Principal Investigators are to
direct the study in accordance with applicable Institution policies and are in
accordance with generally accepted standards of good clinical practice, and all
applicable local, state and federal laws and regulations governing the
performance of clinical investigations.
The total approximate cost to ABC is not to exceed $568,000. ABC may
terminate the Clinical Trials Agreement with the Institution at any time, in
which case it is responsible for a payment to the Institution on the basis of
the number of patients evaluated through the date of termination. The clinical
trials being conducted are non-mandatory and are part of the Company's objective
of obtaining correlated data with respect to evaluated patients with respect to
whom treatment has been determined with the aid of the FCA. The cost of the
funding of such clinical trials was an anticipated use of proceeds received from
the Company's December 20, 1994 public offering. The clinical trials commenced
in October, 1995.
Pending Acquisitions; Letters of Intent
On December 6, 1995, the Company entered into a Letter of Intent with
Infotechnology, Inc. ("Infotech"), Advanced Corporate Services, Inc.
("Advanced"), Questech Capital, Corp. ("Questech") and American Cytogenetics,
Inc. ("ACI") pursuant to which the Company, subject to the completion of a
formal agreement, will acquire from Infotech, Advanced and Questech all of the
Common and Preferred Shares owned by each of them in ACI representing
approximately 53.9% of all of ACI's issued and outstanding shares of Common
Stock and approximately 59.9% of all of ACI's issued and outstanding shares of
Preferred Stock. In addition, the Company will acquire, directly from ACI, an
additional number of shares of Common Stock which, when added to the shares to
be acquired from Infotech, Advanced and Questech, will total approximately 80%
of all of ACI's issued and outstanding shares of Common Stock. Infotech,
Questech and Advanced are sometimes collectively referred to herein as the
"Control Shareholders", the Common Shares to be acquired from the Control
Shareholders are sometimes referred to herein as the "Control Common Shares",
the shares of Preferred Stock to be acquired from the Control Shareholders are
sometimes referred to herein as the "Control Preferred Shares", and the Common
Shares to be acquired directly from ACI are sometimes referred to herein as the
"Direct Purchase Shares". The anticipated purchase price to be paid to the
Control Shareholders is an aggregate of $784,200, of which $237,825 is to be
paid in cash to Infotech, $59,529 is to be paid in cash to Advanced, and
$486,204 is to be paid to Questech by the delivery of 51,179 restricted shares
of the Company. In addition, the Company is to deliver to Questech a 5-Year
Warrant to purchase 15,000 shares of
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the Company Common Stock at an exercise price equal to the average of the high
offer and low bid price for the Company's Common Stock for the 30 days
immediately succeeding the date of the Letter of Intent. The final number of
shares to be delivered to Questech shall be based on 68% of the average bid and
asked price for the Company's Common Stock for the 30 days following the date of
the Letter of Intent. The number of shares of Common Stock to be purchased
directly by the Company from ACI at the closing will be for an aggregate
purchase price of $300,000. The transaction was originally anticipated to be
completed on or before January 31, 1996, but is now contemplated to be completed
in the second quarter of 1996 and is subject to, among other things, the
approval of the transaction by the respective Boards of each of the entities,
the execution of a mutually acceptable definitive agreement, and the attainment
of all necessary approvals relating thereto.
ACI owns and operates a licensed clinical laboratory located in North
Hollywood, California and is engaged in the business of providing
disease-specific laboratory testing services principally in the areas of
cervical cancer and certain sexually transmitted diseases. The principal
laboratory test conducted by ACI is the test commonly known as the "pap smear".
It is believed that ACI processes in excess of 400,000 pap tests per year and is
one of the largest laboratories of its type in the country.
With the completion of the transaction, the Company will be the largest
shareholder of ACI and ACI will be a majority owned subsidiary of the Company.
The Clinical Oncology Laboratory Services of the Company
The Company is a clinical oncology laboratory service and research
company which principally performs a patented in vitro chemosensitivity assay
known as the FCA. The FCA, which was developed by M. Boris Rotman, Ph.D.,
Professor of Medical Science at Brown University, Providence, Rhode Island,
measures the effectiveness of specific chemotherapy drugs in destroying cancer
cells retrieved from solid mass tumors removed from individual patients. The FCA
tests cancer tissue taken from the individual's tumor against many of the
chemotherapeutic agents likely to be used for that tumor type. Information
provided by the test helps rule out ineffective drugs and assists the
oncologists in determining the most appropriate chemotherapy.
The Company also offers an ATP Cell Viability Assay ("ATPCVA") which is
a bioluminescent assay utilized for the determination of inhibition of metabolic
activity in cancer cells. It is the Company's intention to use the
non-proprietary ATP-CVA in conjunction with the Company's FCA for the purpose of
expanding the number of chemotherapeutic drugs which the Company can offer for
in vitro response testing. The Company's FCA will be principally used for the
assay of those chemotherapeutic drugs which have the effect of bursting or
killing cancer cells. With respect to other
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chemotherapeutic drugs which work in a different fashion, the ATPCVA will detect
the inhibition of metabolic activity. One of the latter drugs to work in this
fashion is taxol, which has been approved by the Food & Drug Administration for
the use in the treatment of breast, lung and ovarian cancer and will be assayed
by the Company utilizing the ATP-CVA assay. In addition, the Company has added
to the chemotherapeutic drugs which it is capable to assay, navelbine, which is
currently used in the treatment of nonsmall cell lung cancer and whose effect is
to burst or kill the cancer cells. This drug is being assayed by the Company
utilizing the FCA.
BACKGROUND
Chemotherapy is a broad term used to describe the use of cytotoxic
drugs in the treatment of cancer. In treating cancer patients with solid mass
tumors, medical oncologists can currently choose from approximately 50
anticancer agents approved by the United States Food and Drug Administration.
Generally, medical oncologists administer chemotherapy drugs without knowing
whether the individual cancer patient's tumor is sensitive to the drugs being
utilized. This is primarily due to the fact that cancer is an individual
disease, with each patient having a unique combination of age, sex, health,
tumor characteristics and chemosensitivity. When the use of chemotherapy is
indicated for a cancer patient, a choice is made by the treating physician based
in part on historical data and published protocols indicating the chemotherapy
drugs most likely to be effective for specific solid mass tumor types without
prior testing of the drug selected on a patient's tumor. However, current forms
of chemotherapy are only statistically effective (as measured by reduction of
tumor size or relative extension of life expectancy) to the patient on an
average of 40% of the time. Chemosensitivity testing of a patient's tumor prior
to the initiation of chemotherapy has therefore been a longstanding goal of many
research scientists.
The Company's FCA is a laboratory testing procedure which, using a
patented technique and proprietary information, tests cancer tissue taken from
an individual's tumor against many of the chemotherapeutic agents likely to be
used for that tumor type (in varying combinations and concentrations). The FCA
provides information to help the doctor rule out ineffective drugs, and
identifies for the doctor those drugs that appear to be most effective, thereby
giving the patient a better chance of success with the appropriate chemotherapy.
Further, a reliable, predictable assay for chemotherapy can reduce the
occurrence of induced resistance of a patient's cancer to chemotherapeutic
drugs. Extensive clinical data has indicated that if a patient receives the
"wrong" drug initially, the chances of responding to the "right" drug are
significantly reduced.
A further salutary benefit of enhancing the ability to initially select
a chemotherapeutic regimen having maximum efficacy
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is health care cost containment. The cost of treating a cancer patient with
chemotherapy is substantial. Further costs are added to the health care system
when initial chemotherapy is ineffective. These additional costs include
second-line chemotherapy, radiation therapy, laboratory and radiology studies,
hospitalization and supportive care. These factors, among others, have
highlighted the need to measure the clinical utility of therapies relative to
their costs. The National Cancer Institute has estimated overall costs for
cancer at $104 billion for 1990 (the most recent published data available). The
Company believes that the use of the FCA as a tool in selecting an effective
course of chemotherapeutic treatment could result in a significant benefit to
third-party payors (such as insurance companies and health maintenance
organizations) in their efforts to contain health care costs.
THE DEVELOPMENT OF THE COMPANY'S FCA
Since the 1950's, scientists and researchers have attempted to culture
tumor cells in vitro (outside of the body) and to test their response to various
chemotherapeutic agents. A number of clonogenic and non-clonogenic assays using
single cells derived from tumors were proposed to predict chemosensitivity in
cancer patients. In a clonogenic assay only stem cells (cells that can form
clones) are utilized. In a non-clonogenic assay all the different types of the
cells of the tumor are utilized. Although single cell based assays are generally
effective in determining whether a tumor will be resistant to a particular
chemotherapy (i.e. negative predictive), they cannot predict whether a
chemotherapy could be successful in treating the tumor (i.e. positive
predictive). M. Boris Rotman, Ph.D., Professor of Medical Science at Brown
University, Providence, Rhode Island, developed a micro-organ culture system
which is a patented portion of the Company's FCA. The FCA, based on technology
that has little in common with single-cell assays, maintains tumor fragments
(microorgans) in miniaturized organ cultures while they are tested for
responsiveness to therapeutic agents. This method permits assessment of tumor
cultures in a manner more closely approximating the in vivo (in the body) state.
Dr. Rotman, in developing the FCA, arrived at a method of preserving the
architectural integrity of the tumor as well as intercellular contacts so that a
representative sample of the entire tumor cell population can be tested. As a
result, unlike other assays currently being marketed which are only utilized to
predict a patient's resistance to particular drugs, the FCA is able to enhance
the ability of the physician to assess whether a drug will be successful in
treating the tumor.
The Company believes that its FCA represents an advance over single
cell assays. Single cell assays produce cultures of individual, single cells
taken from a tumor, which do not resemble the original tissue taken from the
patient. Another of the advantages of the FCA is the higher evaluability rate
(i.e., the ability to perform the assay on a specimen) as compared to other
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assays. The FCA, by utilizing clusters of cells which are able to be cultured in
vitro, can achieve an evaluability rate in excess of 90% of tumors tested. The
Company believes the FCA evaluability rate significantly exceeds the rate for
other non-clonogenic and clonogenic assays.
Unlike single cell assays, which measure the ability of the
chemotherapeutic agent to inhibit rapid cell division -- growth that may not be
duplicated in vivo (in the body) -- the FCA measures the actual ability of a
drug to destroy cancerous tissue. In addition, clonogenic assays typically take
several weeks to produce results -- an obvious problem when time is critical for
the patient. The FCA circumvents these shortcomings and allows results to be
determined within 10 days.
THE FCA TECHNOLOGY
The Company's FCA is founded upon two essential concepts: (1) the use
of fluorochromasia, a process which permits visual assessment of the effect of
chemotherapy on cancer cells without destroying the clusters of cells; and (2)
the isolation of microorgans of tumor tissue, which retain the three-dimensional
architecture of cancer cells as they exist in the patient.
The process of fluorochromasia was initially described in 1966 in a
scientific paper co-authored by Dr. M. Boris Rotman and Dr. Benjamin W.
Papermaster, who found that a chemical, fluorescein acetate, passes through the
membranes of living cells. Once inside the cell, enzymes cleave the fluorescein
acetate and release free fluorescein. The free fluorescein is retained in the
living cell for up to two hours. When illuminated under blue light, living
cells, which retain the free fluorescein, are visible, while dead cells, which
do not retain the dye, are not. This technique allows for the visual assessment
of cell death. Fluorochromasia, therefore, can be used to determine when living
cells have been killed by a chemotherapeutic agent.
In order to utilize fluorochromasia, however, it was necessary for Dr.
Rotman to devise a method that would produce samples of cancerous tissue
suitable for laboratory testing. The second phenomena he observed was that by
shaking small pieces of human tumor, in the presence of a mild enzyme solution,
clusters of malignant cells could be separated from non-cancerous connective
tissue. Many of the natural adhesions between the tumor cells are not disrupted
by this procedure. As a result, greater than 90% of the tumors survived and
could be tested.
This patented laboratory method for micro-organ preparation results in
clusters of 50 to 500 cells composed almost entirely of viable tumor cells,
preserving the structure and function of the original tumor. The samples of
tumor, called "micro-organs," when maintained in special cultures, will maintain
themselves while preserving the actual three dimensional architecture of the
tumor.
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The high assay evaluability rate and the clinical correlation are due primarily
to the fact that the tumor architecture is retained through the process.
The FCA technology is applicable to all solid mass tumors. Solid mass
tumors comprise between 80 and 90 percent of all new cancer cases. The remainder
are hematological malignancies such as leukemia that do not form solid masses.
Since 1986, the Company has performed over 4,176 assays from over 250
different hospitals and physicians. The Company has correlated data, both
retrospective and prospective, from 365 case studies collected from institutions
such as Roswell Park Memorial Institute, Hoag Cancer Center, and Memorial
Sloan-Kettering Cancer Center, as well as data from other physicians using the
assay to treat their patients. To date, the overall experience of the Company is
that the FCA has been 92% accurate in predicting resistance and 76% accurate in
predicting sensitivity (whether a drug will be effective in destroying cancer
cells). See "Business - Market Information" for further information regarding
future prospective clinical trials.
The following table details the types of tumors assayed by the Company
from 1986 through December 31, 1995:
<TABLE>
<S> <C>
Gynecological 818
Breast 680
Gastroenterological 595
Pulmonary 372
Head and Neck 315
Sarcoma (all types) 267
Neurological 205
Melanoma 178
Genitourinary Tract 157
Lymphoma 148
Unknown Primary 151
Miscellaneous Other 290
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Total 4,176
=====
</TABLE>
THE ASSAY PROCEDURE
Freshly excised tumor specimens are transported to the Company's
laboratory in a cold culture medium (below 10 (degree)C) and processed within 48
hours of surgery. The patient's doctor advises the Company which
chemotherapeutic agents to test. A 500-mg biopsy specimen is sufficient to test
10 drugs at different levels of concentration. Partial digestion of minced
viable tumor tissue in a mild enzyme solution liberates micro-organs consisting
of viable malignant cells. The fluorescein monoacetate easily penetrates the
lipid bi-layer of the cell membrane. Once within the cell, the fluorescent
monoacetate transforms to fluorescein which, if the cell membrane is intact and
the cell is viable, accumulates for a
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short time within the cell rendering it strongly fluorescent when viewed in a
light source that excites fluorescein. On the other hand, a dead or dying cell's
membrane is "leaky" and permeable to fluorescein, which therefore does not
accumulate. Since accumulated fluorescein does diffuse slowly (in about two
hours) out of viable cells and brief exposure to fluorescein is not cytostatic
or cytotoxic, cell viability testing can be repeated several times during the
course of the assay in the same culture.
The micro-organs are immobilized in collagen-impregnated cellulose and
placed on the culture plate. The pattern ("cytoprint") of fluorescent
micro-organs is recorded by computer imaging. After a 24-hour incubation,
anti-cancer drugs are added to the culture, which is then incubated for an
additional 48 hours. The culture medium is then replaced by a drug-free medium;
after a further 96 hours of incubation, tumor kill (by inference) is assessed by
repeating the fluorescent cytoprint procedure. Accordingly, results are
generally available from seven-ten days after receipt of the tumor specimen.
Drug induced cytotoxicity in these micro-organs is assessed by
comparing computer processed images of fluorescent cytoprints taken before and
after drug treatment. The disappearance of fluorescent micro-organs from the
cytoprint of the drug-treated culture, as compared to the cytoprint of the
initial culture, is used to assess drug toxicity. Thus, each culture acts as its
own baseline.
The following are the chemotherapy drugs presently available for
testing:
Actinomycin D Doxorubicin Mitoxantrone
Bleomycin Etoposide (VP 16) Navelbine
Carboplatin 5-Fluorouracil Streptozocin
Carmustine FUDR ThioTEPA
Cisplatin Lomustine Taxol
Cyclophosphamide(Analog) Melphalan Vinblastine
Mitomycin C Vincristine
While there are approximately 50 anti-cancer agents for solid tumors,
the above drugs constitute the predominate agents currently utilized in
chemotherapy treatment for solid mass tumors.
IMAGE PROCESSING AND MANAGEMENT FOR THE FCA
As reported above under the heading "Recent Developments", the Company
entered into an agreement with Loats Associates who was engaged for the purpose
of evaluating, redesigning, configuring, assembling and installing a new and
improved version of the imaging system currently utilized by ABC in connection
with the quantitative evaluation of assays performed utilizing the FCA. The
project was completed by Loats Associates in December, 1995. The Company's goal,
which was accomplished by Loats Associates, was to implement an automated system
which would provide stable,
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reproducible evaluation of FCA fluorescent cytoprint images and generate hard
copy reports of chemosensitivity results for transmission to physicians. The
improved version of the imaging system also allows the transference of data to
and from front office functions such as order entry, receiving and billing, and
provides the Company with the capability for data-basing patient outcome
results. The system's enhanced software applications provide the Company with
the capability to:
(i) identify and warn the technicians of possible
outcome failures;
(ii) normalize quantitive measures;
(iii) record fluorescence changes in micro-organ images
during the assay procedure and to correct such changes; and
(iv) assess the percent cell kill as a measure of
chemosensitivity.
The new system consists of a video image acquisition system, a robotic
specimen plate delivery mechanism and software to analyze and evaluate the video
images of the FCA micro-organ cultures, calculate chemosensitivity results,
control the specimen plate delivery robot and track and database data related to
the entire FCA procedure. The proprietary software allows the Company to verify
and document proper and repeatable operation of video image acquisition
equipment according to required laboratory protocols relating to the
verification of accuracy, linearity and repeatability. Management believes that
the upgraded imaging, which allows for computerized quantification of the
Company's FCA, has eliminated human judgment from the interpretation of the
assay results. This substantially improves the validity of the FCA procedure and
streamlines the process.
PATENTS
Integral to the Company's business is its FCA. The United States Patent
Office has granted ABC three patents covering the FCA, the methodology of the
cell culturing and related apparatus. The Company has also been granted European
patents covering this technology in the designated states of France, Germany,
Italy and the United Kingdom. In Canada, one patent has been granted on the
"Methods for Separating" in the FCA. ABC also has been granted two patents, one
for "Cytotoxicity Assays in Cell Culturing Devices" and one for "Cell Culturing
Methods and Apparatus" in Japan. A Japanese patent application for "Methods of
Separating" is still pending. The following summarizes the status of the
Company's granted patents and pending patent applications:
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PATENT 1. CYTOTOXICITY ASSAYS IN CELL CULTURING DEVICES
U.S. Patent No. 4,559,299 Issued: December 17, 1985
Expires: December 17, 2002
European Patent No. 0138833 Granted: November 6, 1991
Expires: January 12, 2004
Japanese Patent Application
No. 59-500699 Granted: August 9, 1994
Expires: January 12, 2004
This patent is the core FCA patent and covers the sensitivity of tumor
explants (i.e. tumor specimens that have been removed from the body and placed
in an artificial medium for growth) to chemotherapeutic drugs and the use of
fluorescent molecules to determine the survival of cells in the presence of the
drugs.
PATENT 2. CELL CULTURING METHODS AND APPARATUS
U.S. Patent No. 4,734,372 Issued: March 29, 1988
Expires: March 29, 2005
European Patent No. 0171896 Granted: November 27, 1991
Expires: June 21, 2005
Japanese Patent Application
No. 60-134451 Granted: March 29, 1994
Expires: June 21, 2005
This patent discloses further devices and methods for the FCA, as well
as an improved protocol for conducting cytotoxicity assays with fluorochromatic
detection techniques.
PATENT 3. METHODS FOR SEPARATING MALIGNANT CELLS
FROM CLINICAL SPECIMENS
U.S. Patent No. 4,937,187 Issued: June 26, 1990
Expires: June 26, 2007
Canadian Patent No. 1,293,216 Issued: December 17, 1991
Expires: December 17, 2008
European Patent No. 0277837 Granted: August 4, 1993
Expires: February 5, 2008
Japanese Patent Application
No. 63-021434 Pending
This patent covers methods for preparing tumor biopsies for
chemosensitivity assays by mechanically and enzymatically dissociating the
tissues into micro-organs and removing nonaggregated cells (particularly blood
cells) from the preparation.
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The Company's success will depend in part on its ability to defend its
patents, maintain trade secrets and operate without infringing upon the
proprietary rights of others, both in the United States and in foreign
countries. In addition, there can be no assurance that any patents issued to the
Company will not be challenged, invalidated or circumvented, or that the rights
granted thereunder will afford the Company protection from competitive products
or processes. In addition, there can be no assurance that the Company will have
the financial or other resources necessary to enforce or defend a patent
infringement or proprietary rights violation action. The Company is not aware of
any objection or challenge to its patents or of any asserted claim of patent
infringement.
The Company also relies on certain proprietary trade secrets and
know-how, which are not patentable, and on certain ancillary technologies which
are not patentable or proprietary and are therefore available to the Company's
competitors. Although the Company has taken steps to protect its unpatented
trade secrets and know-how, in part through the use of confidentiality
agreements with substantially all of its employees, there can be no assurance
that these agreements will not be breached, that the Company would have adequate
remedies for any breach, or that the Company's trade secrets will not otherwise
become known or be independently developed or discovered by competitors.
The ability of the Company to obtain patents and similar rights and the
nature, extent and enforceability of the intellectual property rights that may
be obtained as a result of the Company's research efforts involve complex legal
and factual concerns. Discoveries made or developed by the Company may not
qualify for patents or, if qualified, may be subject to challenge or to
protracted proceedings. In addition, other public or private concerns, including
universities, may hold or have filed patent applications and may have been
issued patents on inventions, or otherwise possess proprietary rights to
technology which may be necessary to commercially implement the Company's
technology. With respect to future developments, the Company may be required to
license other patents or proprietary rights, and the cost and availability of
such licenses, are presently unknown. While the Company has not conducted an
infringement study with respect to any of its patents or proprietary technology,
the Company is not aware of the need to obtain a license from any other party in
order to practice its existing technology. There can be no assurances that
others may not independently develop similar technology or otherwise obtain
access to the Company's know-how.
GOVERNMENT REGULATION; LICENSES
ABC and its principal product, the FCA, is subject to regulation by a
division of the U.S. Department of Health and Human Services, Health Care
Finance Administration ("HCFA") under the Clinical Laboratories Improvement Act
of 1988 ("CLIA"). These
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regulations mandate that all clinical laboratories be certified to perform
testing on human specimens and provide specific conditions for certification.
These regulations also contain guidelines for the qualification,
responsibilities, training, working conditions and oversight of clinical
laboratory employees. In addition, specific standards are imposed for each type
of test which is performed in a laboratory. CLIA and the regulations promulgated
thereunder are enforced through continuous quality inspections of test methods,
equipment, instrumentation, materials and supplies on a biennial and "spot"
basis; the most recent of which occurred on December 21, 1994. Any change in
CLIA or these regulations or in the interpretation thereof could have a
materially adverse effect on the Company's business, prospects, financial
condition or results of operations. To its knowledge, the Company is in
compliance with the currently applicable regulations of HCFA. At the present
time, the U.S. Food and Drug Administration ("FDA") does not regulate the FCA.
ABC holds a clinical laboratory license from the State of Rhode Island
and a federal laboratory registration certificate to permit the interstate
shipment of tumors and billing. The Company also holds a wastewater discharge
permit from the Warwick, Rhode Island Sewer Authority.
PROFESSIONAL AND PRODUCT LIABILITY
As a clinical laboratory performing assay services, the Company may be
subject to professional and/or product claims. While no claims or actions have
been asserted against or instituted to date arising out of the performance by
the Company of any assay, any such actions in the future may subject the Company
to liability for damages and significant costs associated with the defense of
such action or claim. The Company presently maintains professional liability
insurance in the amount of $1,000,000 as well as product liability insurance in
the amount of $1,000,000. There can be no assurance, however, that this coverage
will be adequate to protect the Company against future claims or that insurance
will be available to the Company in the future on acceptable terms, if at all,
or that a liability or other claim would not materially and adversely affect the
business, prospects, financial condition or results of operations of the
Company. The Company intends, however, if feasible, to increase the amount of
such insurance coverage to such greater amount as management, in its discretion,
may determine having due regard to the cost of such insurance coverage.
MARKET INFORMATION
The Company's potential customers are surgeons, oncologists,
pathologists, cancer patients, hospitals, health maintenance organizations
("HMOs"), community cancer centers, and third party insurance companies. The
Company had attempted only limited marketing of the FCA. The commercial success
of the Company is
14
<PAGE> 15
materially dependent upon the ability of the Company to educate the medical
community generally, and oncologists, surgeons, hospitals and HMOs in
particular, of the benefits and applications of the Company's assay, and to
distinguish the Company's technology from existing technology in the field and
assays marketed by others. The process of educating the physician regarding the
use and benefits of a new technology such as the FCA is, in the Company's
opinion, difficult. The success of such education and marketing efforts will be
materially dependent upon the ability of the Company to attract and assemble a
national medical service sales force through which the Company's assay will be
marketed. No assurance can be given that the Company will be able to
successfully recruit experienced sales personnel or successfully implement its
proposed sales and marketing programs. As part of the Company's research and
development and to enhance the ability of the Company to proceed with its
intended sales and marketing of the FCA and related clinical laboratory
services, the Company has developed protocols to conduct new randomized
prospective clinical trials. While the clinical trials which the Company is in
the initial stages of conducting are not required as a condition to use or
market the FCA, the Company believes that the results will have a material
effect upon the acceptance of the Company's assay and the ultimate success of
the Company's business, in that such results would, if they demonstrate the
efficacy of the FCA, be an added sales and marketing tool.
In the United States, there are over 16,000 physicians who treat cancer
patients. This group of physicians are broken down into the following
categories: approximately 5,100 medical oncologists and 1,300 surgical
oncologists who treat most general cancers; 300 gynecologic oncologists who
treat advanced cases of cervical and endometrial cancer and most ovarian
cancers; and 9,500 urologists who treat prostate, bladder and testicular
malignancies. This does not include the over 20,000 general surgeons who treat
cancer patients by removing tumors in surgery. (Sources: American Medical
Association and the Society of Surgical Oncology).
Currently, there are approximately 5,300 community hospitals (exclusive
of federal, respiratory, psychiatric or long-term care institutions). Of this
number, approximately 1,300 hospitals have cancer programs approved by the
American College of Surgeons. These hospitals are one of the focuses of the
Company's clinical services business. The Company's services are provided to
oncologists, surgeons and hospital pathologists who submit their patients' tumor
specimen to the Company for testing.
According to statistical information published by the American Cancer
Society, over 1.1 million new cancer patients will be diagnosed each year. Of
these 1.1 million cancer patients, approximately 80% (880,000) will have solid
tumors. A portion of those patients (estimated by the Company based upon
published literature to be approximately 25%) will be treated with chemotherapy,
and are therefore candidates for the FCA. In
15
<PAGE> 16
addition, over 2.2 million patients previously diagnosed with solid tumor
cancers whose first line chemotherapy treatment has been ineffective or who have
experienced a relapse are also candidates for the FCA.
Although the Company has collected a substantial amount of clinical
data which supports the efficacy of the FCA (see "Business -- The FCA
Technology"), in order to enhance the ability of the Company to maximize its
intended commercialization of the FCA, the Company believes that additional
non-mandatory prospective clinical trials should be performed. The trials will
address both issues of medical efficacy as well as cost-savings benefit. The
Company plans to incorporate further cost-effective studies into its current
clinical trials concerning medical efficacy. The Company cannot predict when the
results of these new trials will be available, nor can there be any assurance
that the results of such trials will provide data which further supports the
FCA.
The Company currently bills individual patients, hospitals and
insurance companies for assay services. To date, collections have been largely
dependent upon the eligibility of such charges for third party reimbursement.
Accordingly, the Company believes that its ability to successfully market the
FCA in large part will depend upon its ability to have the FCA approved for
reimbursement by third-party payors. Reimbursement approval will depend in part
upon acceptance of the FCA and its acceptance as a vehicle to ultimately contain
health care costs by eliminating ineffective chemotherapy. Reimbursement for
diagnostic tests is typically determined by reference to whether such tests are
generally accepted as standard medical practice by each third party payor, how
the charges for such tests compare to charges for established tests for similar
indications, and whether the charges are within the range of usual and customary
services. Such determinations are independently made by each third party payor.
Third party payors also consider whether a test will further the general
objective of health care cost containment and enhance the potential for the
reduction of treatment costs. To date, approximately 330 insurance companies
(including HMOs) have reimbursed for the test. Of this number, approximately 30
have routinely reimbursed for the FCA. The remainder have reimbursed on a
case-by-case review basis. In addition, the FCA is currently not eligible for
reimbursement by Medicare/Medicaid. Although the Company's FCA, as well as other
human tumor cell in vitro chemosensitivity assays, have been accepted for
reimbursement by Blue Cross/Blue Shield of the State of California, Blue Cross
of Tennessee, Blue Cross of Ohio and Blue Cross of Cleveland, the Company is not
aware of the acceptance for reimbursement of chemosensitivity assays by
individual Blue Cross/Blue Shield organizations in other states. There can be no
assurance that the Company will be able to obtain reimbursement approval on a
routine basis from enough additional third party payors so as to have a
significant impact on the marketing of the FCA. In the absence of third party
reimbursement, the Company will be dependent upon direct patient payment. Such
dependence may
16
<PAGE> 17
affect the amount and collectability of receivables. The Company anticipates
seeking routine reimbursement for its FCA from third party payors including
Medicare/Medicaid and independent Blue Cross/Blue Shield organizations. The
Company is unable to predict when and if such approval will be obtained.
The determination for eligibility of Medicare/Medicaid reimbursement
for the independent billing of the FCA (as well as any other medical procedure
or test) is made by HCFA. In April of 1991, the Company was informed by HCFA
that Medicare has not provided coverage for human tumor stem cell drug
sensitivity assays. The Company had been advised that this coverage decision had
been made by HCFA based upon advice received by HCFA prior to April 1991 from
the United States Public Health Service that human tumor drug sensitivity assays
were considered experimental. The Company, in October 1994, met with
representatives of HCFA and presented scientific data and information for use by
HCFA in support of the Company's request to reconsider or modify its previously
issued health coverage decision. No assurance may be given as to if or when HCFA
will act upon the information submitted to it, or whether any further data,
information or presentations will be required of the Company. The Company does
not believe that it is feasible for it to make any prediction as to the time
within which the entire process of review within HCFA may be completed.
HMOs and Preferred Provider Organizations (PPOs) are becoming strong
competitors to the larger traditional insurers and are viewed by the Company as
playing a central role in the Company's long term marketing plans. They are
perceived to be the growth segment of the service part of the health care
system. The HMOs and PPOs are having a significant effect on the health care
market, due to their ability to control costs. The FCA is viewed by the Company
as a valuable tool in assisting these health care organizations in containing
their cancer treatment costs by eliminating ineffective expensive chemotherapy.
To date, there is no agreement between the Company and any HMOs or PPOs.
SALES AND MARKETING
The Company is of the belief that its commercial success is materially
dependent upon its ability to educate the medical community generally, and
oncologists, surgeons, hospitals and HMOs in particular, of the benefits and
applications of the Company's assay, and to distinguish the Company's technology
from existing technology in the field and assays marketed by others. The process
of convincing a physician to use a new testing service is difficult and, in the
Company's view, requires a highly trained sales force to call on and educate the
physician regarding the use and benefits of the new technology. In addition,
management believes that physicians require actual experience with such new
tests before accepting and adopting them into their practice.
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<PAGE> 18
POTENTIAL IMPACT OF PENDING HEALTH CARE REFORM
Numerous proposals to amend the Medicaid/Medicare Systems are under
consideration in the United States Congress, including mandated basic health
care benefits, controls on health care spending, price controls, the creation of
large insurance purchasing groups and fundamental changes in the health care
delivery system. In addition, several states have passed and implemented, or are
considering, various health care reform proposals. Although the Company believes
its FCA to be cost-effective in overall chemotherapy treatment, changes in the
level of support by federal and state governments of health care services, the
methods by which such services may be delivered and the prices for such services
may all have a materially adverse impact on the Company's ability to achieve and
sustain a profit. Health care reform could also reduce the profitability of
certain medical institutions and, in turn, adversely impact the fees the Company
is able to charge for its laboratory services. The Company cannot predict which,
if any, health care reform plan might be adopted or, if adopted, the effect on
the Company's business.
COMPETITION
At the present time, there are several companies which commercially
market chemosensitivity assays. The Company believes that it is the only company
currently marketing a patented chemosensitivity assay in the United States. The
Company believes that it competes based upon its patented technology, the high
evaluability rate (i.e. the ability to successfully test the tumor) for most
types of human solid tumors, and the positive and negative predictive accuracy
of the Company's FCA assay. There can be no assurance that the Company's
competitors will not succeed in developing technologies and services that are
more accurate and effective than the Company's FCA or any other assay which may
be developed by the Company or that would render the Company's technology and
services obsolete or noncompetitive. In addition, in the event of the future
development and approval of chemotherapeutic drugs which are not capable of
being assayed by the FCA and such drugs become commonly used, such event may
materially affect the ability of the Company to market the FCA.
In addition, there are many public and private companies, including
several well-known pharmaceutical companies and specialized biotechnology
companies, universities and research centers, engaged in developing therapeutic
and diagnostic products for the treatment of cancer. Many of the Company's
competitors have substantially greater financial and technological resources
than the Company, and have significantly greater experience in sales and
marketing and research and development. Such companies may be more successful in
developing alternate methods to predict the effectiveness or non-effectiveness
of chemotherapeutic drugs on an individual cancer patient.
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<PAGE> 19
RESEARCH AND DEVELOPMENT
The research, development and patenting of the FCA has been completed.
The Company is currently pursuing its technical efforts mainly on non-mandatory
clinical studies. Additionally, the Company continues to refine its testing
process to prepare for full scale commercialization of the Company's laboratory
as well as to permit use of the FCA to test any new FDA approved drugs.
Research and development activities are conducted by the Company's
regular full-time employees as part of their principal employment functions. It
is impractical for the Company to attempt to quantify or separately segregate
the amount of time and overhead attributable to research and development
activities from all other activities; particularly since existing laboratory and
scientific activities associated with the FCA benefit the Company from a general
research and development point of view. For the year ended December 31, 1995 the
Company expended approximately $77,000 for specifically identifiable research
and development activities.
NEW PRODUCT DEVELOPMENT
In December of 1990, the Company commenced the development of the RMCE,
which utilizes technology protected by the Company's current patents. This
project is intended to evaluate the effectiveness of combined chemotherapy and
radiation treatment using the FCA technology in conjunction with irradiation of
the tumor specimen. The research project is based on the in vivo observation
that some cytotoxic drugs are potentiators (i.e. enhance effectiveness) of
radiation treatment. Dr. Rotman and Brown University completed, in May 1993, a
project funded by both RIPSAT and the Company, involving preliminary studies on
colon tumors. If the Company successfully concludes research and development on
the RMCE, the Company expects to add this process as an additional laboratory
service. The Company projects that commercialization of the RMCE will not be
ready for several years. Combination therapy using radiation and chemotherapy
together is a new and emerging method of cancer treatment.
The research and development of the RMCE project was carried out under
an agreement dated December 14, 1990 between the Company and RIPSAT under which
Brown University was designated as the research facility. RIPSAT has reimbursed
the Company approximately $320,000 for the project costs, representing 60% of
the project costs; the remaining 40% of the project costs were borne by the
Company through the contribution of assets or property. The funds advanced by
RIPSAT were principally paid by the Company to Brown University. The Company
remains indebted to Brown University in the amount of approximately $81,000 as
of March 15, 1996.
As part of its agreement with RIPSAT, the Company has agreed to
maintain its facilities in the State of Rhode Island. In the event that the
Company relocates outside of the State of Rhode
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<PAGE> 20
Island, the amount of advances by RIPSAT become due and payable in one year from
such relocation, together with interest at 2% above the prevailing prime rate of
interest. The Company does not have the present intention to relocate its
facilities outside of the State of Rhode Island. Under and pursuant to its
agreement with RIPSAT, Brown University was designated as the research facility,
and Dr. Rotman was the principal investigator. Brown University was to perform
the research program in connection with the RMCE project, for which it was to be
reimbursed for its costs, not to exceed $375,000. As of the date hereof, the
research on the RMCE project has not been completed. Although the term of Brown
University's engagement to perform research services expired on May 31, 1993 and
has not been further renewed, it is the intention of the Company to continue
such research at its own facility or through Brown University or other alternate
research facilities. The Company projects that the development of this
technology will be finished with the conclusion of clinical trials, but that
commercialization of the RMCE will not be ready for several years.
EMPLOYEES
As of March 1, 1996, the Company had 10 employees, of which 7 were
full-time employees, including its one executive officer, and 3 part time
employees. None of the Company's employees are represented by a labor union, and
the Company considers its relationship with its employees to be good.
ITEM 2. PROPERTIES
The Company maintains its offices and clinical laboratory in Warwick,
Rhode Island. This facility is comprised of approximately 4,064 square feet of
office and laboratory space. The present facilities are occupied under a lease
for a term of two years commencing November 1, 1994 and terminating October 31,
1996, renewable at the Company's option for three additional one year periods.
The base rent for this facility is $26,000 per annum. In addition to the base
rent, the Company pays, as additional rent, its proportionate share of increases
in real estate taxes on the premises, maintenance and utility charges.
While its present facilities are adequate for its present needs and are
sufficient to enable the Company to process approximately 900 assays per month,
the Company does not view such premises to be adequate for its anticipated
future needs in the event its planned marketing efforts are successful. In such
case, the Company will require additional laboratory and administrative
facilities. The Company believes that adequate facilities are readily available
in the greater Providence, Rhode Island area at competitive rentals. A
relocation of the Company's laboratory will require a re-licensing of the new
facility as a clinical laboratory under CLIA and by the State of Rhode Island.
The Company does not view the prospect of re-licensing a new facility as having
to result in a material adverse effect on the Company, though there
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<PAGE> 21
may be some temporary interruption in the processing of assays unless the
Company overlaps in relocating from one facility to another.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any pending material legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK]
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PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
A. Principal Market
On December 20, 1994, upon the Company's Registration Statement in
connection with the public offering of shares of its Common Stock being declared
effective by the Securities and Exchange Commission, the Common Stock of the
Company resumed trading on the SmallCap Market of The Nasdaq Stock Market under
the symbol "NTBM". For the period October 17, 1992 to December 20, 1994, the
Common Stock of the Company was traded on the OTC Bulletin Board under the
symbol "NTBM" (November 16, 1994 December 20, 1994), and under the symbol "ADNA"
(October 17, 1992 - November 16, 1994) while the Company was known by its
former name of Applied DNA Systems, Inc. Prior to October 17, 1992, the Common
Stock of the Company had been traded on the Nasdaq Stock Market.
On August 11, 1995, the Company's Common Stock was accepted for listing
on the Boston Stock Exchange under the symbol "NTB".
B. Market Information
The following is the range of actual high bid and low asked prices for
such Common Stock for the periods indicated. The high bid and low asked prices
commencing with the fourth quarter of 1994 reflect a one-for-thirty-five (1:35)
reverse split effected by the Company on November 16, 1994. Such prices have,
for all periods through the third quarter of 1994, been reported by the National
Quotation Bureau, and for all periods subsequent to the third quarter of 1994
have been reported by the Nasdaq SmallCap Market.
<TABLE>
<CAPTION>
Year High Bid Low Asked
---- -------- ---------
<S> <C> <C>
1994
1st Quarter .39 .28
2nd Quarter .26 .21
3rd Quarter .22 .21
4th Quarter 8.00 8 1/4
1995
1st Quarter 8 7/8 7 3/4
2nd Quarter 9 5/8 8 5/8
3rd Quarter 12 1/2 9 1/4
4th Quarter 14 7/8 12 1/2
</TABLE>
The above quotations, reported by Nasdaq and the National Quotation
Bureau, represent prices between dealers and do not include retail mark-up,
mark-down or commissions. Such quotations do not necessarily represent actual
transactions. For certain
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<PAGE> 23
periods indicated above, high bid and low asked prices were not
expressed in fractions.
C. Dividends
The Company has never paid a dividend, whether cash or property, on its
shares of Common Stock and has no present expectation of doing so in the
foreseeable future.
D. Approximated Number of Equity Security Holders
The approximate number of record holders of the Company's Common Stock
as of March 15, 1996 was 1,087. Such number of record owners was determined from
the Company's shareholder records, and does not include beneficial owners of the
Company's Common Stock whose shares are held in the names of various security
holders, dealers and clearing agencies. The Company believes that the number of
beneficial owners of its Common Stock held by others as or in nominee names
exceeds 1,600 in number.
ITEM. 6 MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Year Ended December 31, 1995, Compared
with Year Ended December 31, 1994
Results of Operations
Total revenues for the twelve months ended December 31, 1995 were
$322,778 compared to $222,584 for the twelve months ended December 31, 1994. The
increase in total revenues is primarily due to the receipt by the Company of
approximately $159,000 of interest income during 1995, which interest income was
derived from the deposit of the proceeds of the Company's December 1994 public
offering as well as private sales of securities completed in April and July
1995.
Assay sales, net of billing adjustments, from the processing of ABC's
assay, the Fluorescent Cytoprint Assay, were $161,701 and $157,973 for the
twelve months ended December 31, 1995 and 1994, respectively. The amount of
billing adjustments relating to assay sales during the twelve months ended
December 31, 1995 and 1994 were approximately $22,156 and $76,932, respectively.
Other revenues for the twelve months ended December 31, 1995 were
$2,100 compared to $60,780 for the twelve months ended December 31, 1994. Other
revenues represent revenues from various pharmaceutical and drug development
organizations to test new chemotherapy compounds using the FCA. Payments
received are recorded as deferred income and are recognized as other revenue
according to the percent or work completed.
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General and administrative expenses for the twelve months ended
December 31, 1995 increased to $1,430,354 compared to $1,072,694 for the twelve
months ended December 31, 1994. The increase was principally due to an increase
in the Company's use of consultants which resulted in greater consultant fees
and expenses related to the Company's efforts to improve reimbursement for the
FCA.
Laboratory expenses for the twelve months ended December 31, 1995 and
1994 were $186,405 and $175,865, respectively. The increase is due to general
increases in the supplies, repairs and maintenance costs associated with the
operation of the laboratory.
Research and development expenses for the twelve months ended December
31, 1995 were $77,066. These expenses were incurred in connection with the
reconfiguration of ABC's image system and the implementation of a laboratory
procedure designed to complement the FCA.
Depreciation expenses at December 31, 1995 equalled $659,424 compared
to $291,728 at December 31, 1994. This increase was primarily due to the
incurrance of $535,093 related to the grant of 100,000 restricted shares granted
to J. Marvin Feigenbaum on June 8, 1995. See "Employment Agreements".
Interest expense for the twelve months ended December 31, 1995 and 1994
was $33,514 and $51,370, respectively. This decrease was due to the reduction of
principal outstanding for loans from the Small Business Loan Fund Corporation.
In addition, 7% Promissory Notes issued in the August 9, 1994 private placement
were repaid on December 28, 1994.
Rent expense for the twelve months ended December 31, 1995 was $24,972
as compared to $24,448 for the twelve months ended December 31, 1994.
Net loss per share of Common Stock for the twelve months ended December
31, 1995 decreased to $1.33 as compared to $2.15 for the twelve months ended
December 31, 1994. Weighted average shares were 1,570,498 and 647,501 for the
twelve months ended December 31, 1995 and 1994, respectively.
Liquidity and Capital Resources
The Company had approximately $2,538,000 in cash and cash equivalents
at December 31, 1995.
Total current assets decreased approximately $1,091,849 from December
31, 1994 due primarily to the utilization of cash during the period to support
operating activities and the payment and reduction of current liabilities.
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<PAGE> 25
Total current liabilities decreased approximately $40,966 from December
31, 1994 due primarily to a reduction in accrued expenses.
The Company believes that its current cash resources are adequate and
sufficient for the Company's anticipated needs through approximately August
1997. The Company may thereafter, if it has not achieved a positive cash flow,
require additional funds to sustain operations. No assurance may be given that
such additional capital, if required, will be available to the Company in the
future and, if not available, may have an adverse effect on the continued
operations of the Company.
At December 31, 1995, the Company had approximately $14.3 million in
tax net operating loss carryforwards and no tax benefits were recorded.
Approximately $3,100,000 of these losses relate to a subsidiary of the Company
and which losses are limited in usage. In addition, utilization of
approximately $9,900,000 of the net operating loss carryforwards may be subject
to limitations pursuant to Section 382 of the Tax Code.
Effects of Inflation
The Company does not view the effects of inflation to have a material
effect upon its business.
ITEM 7. FINANCIAL STATEMENTS
See Index to Financial Statements attached hereto.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not Applicable
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PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS
AND CONTROL PERSONS; COMPLIANCE WITH
SECTION 16(a) OF THE EXCHANGE ACT
The Directors and Executive Officers of the Company are as follows:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
J. Marvin Feigenbaum(1) 45 Chairman of the Board of
Directors, President,
Chief Executive and Chief
Financial Officer of the
Company; Chairman of the
Board of Directors, Chief
Executive, President and
Chief Financial Officer
of ABC.
Edmond E. Charrette, M.D.(1) 61 Director of the Company.
Leonard Green(1)(2) 69 Director of the Company.
David A. Sterling(2) 39 Secretary and Director of
the Company.
Chriss W. Street (2) 45 Director of the Company.
Robert B. Fagenson 46 Director of the Company.
Patricia A. Meitner, Ph.D. 54 Vice President of Science
and Laboratory Director
of ABC.
</TABLE>
- ---------------
(1) Member of the Audit Committee.
(2) Member of the Stock Option Committee.
The number of directors comprising the entire Board of Directors is
such number as determined in accordance with the ByLaws of the Company. The
Company's By-Laws provide for the number of directors to be not less than three
or more than eleven in number. The Company's Certificate of Incorporation
provides for a classified or "staggered" Board of Directors. The classified or
"staggered" Board of Directors is comprised of three classes of directors
elected for three (3) year terms. By reason of the classified Board of
Directors, one class of the Board comes up for re-election each year. Any
further amendment to the Company's Certificate of Incorporation affecting the
classified Board may
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only be adopted upon the affirmative vote of not less than 75% of the issued and
outstanding shares entitled to vote thereon.
At the Annual Meeting of Stockholders held on August 25, 1995, Mr.
Robert B. Fagenson was elected as a Class 1 Director to serve until the 1997
Annual Meeting of Stockholders; David A. Sterling was elected as a Class 2
Director to serve until the 1996 Annual Meeting of Stockholders; and Mr. Chriss
W. Street and Dr. Edmond E. Charrette were each elected as Class 3 Directors to
serve until the Company's 1998 Annual Meeting of Stockholders. Mr. Feigenbaum's
term as a director expires at the 1997 Annual Meeting and Mr. Green's term
expires at the 1996 Annual Meeting.
On June 30, 1995, Dr. Kenneth Blackman resigned as a Director and
Secretary of the Company and as an officer and director of ABC.
The Underwriting Agreement entered into between the Company and the
Underwriters of the Company's public offering completed in December 1994
provides that the Company will use its best efforts for a period of five years
to nominate and have elected to its Board of Directors one nominee designated by
Starr Securities, Inc., ("Starr") to whom the Company has no reasonable
objection, or to permit a designee of Starr to serve as an observer at meetings
of the Company's Board of Directors. In connection with the August, 1995 Annual
Meeting, Starr advised the Company that its designee would be Robert Fagenson.
Mr. Fagenson was elected as a director at the Annual Meeting.
All officers of the Company and of ABC serve at the discretion of their
respective Boards of Directors. The following sets forth certain biographical
information for each Director and Officer:
J. MARVIN FEIGENBAUM. Mr. J. Marvin Feigenbaum was first elected to the
Board of Directors in June 1994, at which time he was also elected to the Board
of Directors of ABC and appointed Chief Executive Officer of the Company and of
ABC. From August 1993 to June 1994, Mr. Feigenbaum served as a consultant to the
Company, primarily with respect to the Company's business development and plans
and programs relating to the marketing and exploitation of the Company's
laboratory and medical testing services. From 1987 to June 1994, Mr. Feigenbaum
acted as an independent consultant in the medical and health care industry. He
has over 20 years of experience in the health care industry. Prior to being an
independent consultant, Mr. Feigenbaum, from 1982 to mid-1987, served as
Chairman, President and Chief Executive Officer of Temco Home Health Care
Products, Inc., a durable medical equipment manufacturer. Mr. Feigenbaum
presently serves as a member of the Board of Directors and Vice-Chairman of
Comprehensive Care Corp., a publicly owned company engaged in the health care
business, which is listed on the New York Stock Exchange. On February 24, 1995,
a group of holders of CompCare 7 1/2% Convertible Subordinated Debentures filed
an involuntary petition against CompCare under Chapter 7 of the United States
Bankruptcy Code in
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<PAGE> 28
the United States Bankruptcy Court for the Northern District of Texas, Fort
Worth Division. This petition was dismissed by the Court on March 7, 1995 upon
the joint motion of CompCare and petitioners.
EDMOND E. CHARRETTE, M.D. Dr. Edmond Charrette, was elected a Director
on May 4, 1993. Dr. Charrette is board certified in Internal Medicine and
Medical Oncology. From 1981 to 1985, Dr. Charrette served as Senior Vice
President of AdvantageHEALTH Corporation in Woburn, Massachusetts, a publicly
traded corporation. Currently, Dr. Charrette serves as the Executive Vice
President and Chief Medical Officer of AdvantageHEALTH Corporation. Dr.
Charrette is the immediate past Chairman of the American Congress of
Rehabilitation Medicine -- Task Force for Cancer Rehabilitation. He is
co-founder and member of the Board of Directors of Health Resources.
LEONARD GREEN. Mr. Leonard Green was elected to the Board of Directors
in September 1994. Mr. Green has been the President and Chief Executive Officer
of Green Management and Investment Co., a New York private investment firm,
since 1985. From 1980 to 1985, Mr. Green was President and Chief Executive
Officer of Yuma Management Corp. Prior to such time, from 1972 to 1980, Mr.
Green served as Chairman and Chief Executive Officer of Quality Care, Inc. Mr.
Green received his Bachelor of Science degree from George Washington University.
Mr. Green also serves on the Board of Directors of Apria Healthcare, Inc. and
OrNda Health Corp.
DAVID A. STERLING. Mr. David A. Sterling was elected to the Board of
Directors on December 6, 1994. Mr. Sterling, for in excess of seven years, has
been President of Sterling & Sterling, Inc., a general insurance agency. Mr.
Sterling holds a BBA Degree from Hofstra University, New York.
CHRISS W. STREET. Mr. Chriss W. Street, 45 years of age, is a Class 3
Director of the Corporation. Mr. Street is the President of Chriss Street and
Company, Inc., a financial advisory firm which provides a wide variety of
financial advisory and research services. Mr. Street founded the firm in 1992.
Prior thereto, and from 1987 to 1992, Mr. Street was a Managing Director of
Seidler Amdec Securities, Inc. Mr. Street has, since 1993, served as Chairman
and, since 1994, has additionally served as President and Chief Executive
Officer of Comprehensive Care Corporation ("CompCare"), a behavioral health care
company listed on the New York Stock Exchange. On February 24, 1995, a group of
holders of CompCare 7 1/2% Convertible Subordinated Debentures filed an
involuntary petition against CompCare under Chapter 7 of the United States
Bankruptcy Code in the United States Bankruptcy Court for the Northern District
of Texas, Fort Worth Division. This petition was dismissed by the Court on March
7, 1995 upon the joint motion of CompCare and petitioners. Mr. Street is Chief
Financial Officer of Hacienda Village Modernization Corp., which is a joint
venture construction firm founded by Mr. Street in 1994 to bid for
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<PAGE> 29
federally funded construction contracts rehabilitating housing projects in Los
Angeles, California inner city neighborhoods. In addition, in March 1995, he was
elected as a Director of Micropolis Corporation, a company traded on the Nasdaq
Stock Market.
ROBERT B. FAGENSON. Mr. Robert B. Fagenson, 46 years of age, is a Class
1 Director as the nominee of Starr Securities, Inc., the Corporation's
investment banking firm. Under the terms of its underwriting agreement with
Starr Securities entered into in December 1994 in connection with the
Corporation's public offering, the Corporation agreed to use its best efforts
for a period of five years to nominate and have elected to its Board of
Directors one nominee of Starr Securities. Mr. Fagenson has, for more than the
past five years, been President and a Director of Fagenson & Co., Inc., a
registered broker-dealer, and Vice-President and Director of Starr Securities
Inc., a registered broker-dealer. Mr. Fagenson is a Director of the New York
Stock Exchange. He is also a Director of The Microtel Franchise and Development
Company, a developer of economy lodging facilities; Autoinfo, Inc., a dealer in
computerized products and services for after-market motor vehicle parts;
Rent-Way, Inc., a multi store retail chain in the rent-to-own industry; and
Healthy Planet Products, Inc., a publicly-held greeting card company listed on
the American Stock Exchange.
PATRICIA A. MEITNER, PH.D. Dr. Patricia A. Meitner joined ABC in April
1988 as Product Manager and Laboratory Director. In December 1991, she was
elected as Vice President of Science. Dr. Meitner has a Ph.D. in Physiological
Chemistry from the University of Birmingham, England, and has been involved in
the cancer research field for over 20 years.
Indemnification of Directors and Officers
The General Corporation Law of Delaware provides generally that a
corporation may indemnify any person who was or is a party to or is threatened
to be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative, or investigative in nature,
by reason of the fact that he is or was a director, officer, employee or agent
of the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys' fees)
and, in a proceeding not by or in the right of the corporation, judgments, fines
and amounts paid in settlement, actually and reasonably incurred by him in
connection with such suit or proceeding, if he acted in good faith and in a
manner 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
reason to believe his conduct was unlawful. Delaware law further provides that a
corporation will not indemnify any person against expenses incurred in
connection with an action by or in the right of the corporation if such person
29
<PAGE> 30
shall have been adjudged to be liable for negligence or misconduct in the
performance of his duty to the corporation unless and only to the extent that
the court in which such action or suit was brought shall determine that, despite
the adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for the expenses
which such court shall deem proper.
The By-Laws of the Company provide for indemnification of officers and
directors of the Company to the greatest extent permitted by Delaware law for
any and all fees, costs and expenses incurred in connection with any action or
proceeding, civil or criminal, commenced or threatened, arising out of services
by or on behalf of the Company, providing such officer's or director's acts were
not committed in bad faith. The By-Laws also provide for advancing funds to pay
for anticipated costs and authorizes the Board to enter into an indemnification
agreement with each officer or director.
In accordance with Delaware law, the Company's Certificate of
Incorporation contains provisions eliminating the personal liability of
directors, except for (i) breaches of a director's fiduciary duty of loyalty to
the Company or to its stockholders, (ii) acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of the law, and
(iii) any transaction in which a director receives an improper personal benefit.
These provisions only pertain to breaches of duty by directors as such, and not
in any other corporate capacity, e.g., as an officer. As a result of the
inclusion of such provisions, neither the Company nor its stockholders may be
able to recover monetary damages against directors for actions taken by them
which are ultimately found to have constituted negligence or gross negligence,
or which are ultimately found to have been in violation of their fiduciary
duties, although it may be possible to obtain injunctive or equitable relief
with respect to such actions. If equitable remedies are found not to be
available to stockholders in any particular case, stockholders may not have an
effective remedy against the challenged conduct.
The Company has entered into Indemnification Agreements with each of
its directors and officers (the "Indemnitees") pursuant to which it has agreed
to provide for indemnification, to the fullest extent permitted by law and the
Company's By-Laws, against any and all expenses, judgments, fines, penalties and
amounts paid in settlement arising out of any claim in connection with any
event, occurrence or circumstance related to such individual serving as a
director or officer of the Company. Such indemnification includes the advance of
expenses to the Indemnitees (including the payment of funds in trust therefor
under certain circumstances) and is subject to there not having been determined
that the Indemnitee would not be permitted to be indemnified under applicable
law. The rights of indemnification are in addition to any other rights which the
Indemnitees may have under the Company's Certificate of
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<PAGE> 31
Incorporation, By-Laws, the Delaware General Corporation Law or otherwise.
Section 16 Reporting
No person who, during the fiscal year ended December 31, 1995, was a
director, officer or beneficial owner of more than ten percent of the Company's
Common Stock (which is the only class of securities of the Company registered
under Section 12 of the Securities Exchange Act of 1934 (the "Act") (a
"Reporting Person") failed to file on a timely basis, reports required by
Section 16 of the Act during the most recent fiscal year or prior years. The
foregoing is based solely upon a review by the Company of Forms 3 and 4 during
the most recent fiscal year as furnished to the Company under Rule 16a-3(d)
under the Act, and Forms 5 and amendments thereto furnished to the Company with
respect to its most recent fiscal year, and any representation received by the
Company from any reporting person that no Form 5 is required.
MEDICAL AND SCIENTIFIC ADVISORY BOARD
The Company has established a Medical and Scientific Advisory Board
consisting of knowledgeable individuals in the fields of medical and surgical
oncology, cancer research, micro and cellular biology, pathology and general
medicine. The individuals comprising the Scientific Advisory Board may vary from
time to time depending upon the availability of such individuals and the
addition or substitution of individuals on the Board. Individuals serving on the
Scientific Advisory Board will have no obligation or responsibility for the
Company's management, business, plans, programs or finances. They will, however,
be available to consult and assist the Company's senior management and Directors
and officers with respect to various scientific aspects of the Company's
business. The Company has adopted a compensation policy pursuant to which
members of its Scientific Advisory Board are to receive the sum of $1,500 for
each Scientific Advisory Board meeting attended. The individuals who presently
serve as Scientific Advisory Board members are as follows:
JAMES F. HOLLAND, M.D. Dr. Holland is Professor of Neoplastic Diseases,
Mount Sinai School of Medicine, New York. Dr. Holland received his M.D. at
Columbia University College of Physicians and Surgeons. He formerly served as
the first Director of the Derald H. Ruttenberg Cancer Center at Mount Sinai
Medical Center. Dr. Holland has served as President of the American Association
for Cancer Research and as President of the American Society of Clinical
Oncology.
EMIL FREI, III, M.D. Dr. Frei is Physician-in-Chief, Emeritus, of the
Dana-Farber Cancer Institute (Harvard Medical School affiliated), Boston. He
received his M.D. at Yale University School of Medicine. Dr. Frei had ten years
experience at the National Cancer Institute, Bethesda, Maryland, as Chief of the
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<PAGE> 32
Medicine Branch and Associate Scientific Director for Experimental Therapeutics.
He and Dr. Holland are the senior editors of Cancer Medicine, the prime text in
the field.
J. DIRK IGLEHART, M.D. Dr. Iglehart is Associate Professor of Surgery
and Assistant Professor of Cell Biology at Duke University Medical Center,
Durham, North Carolina. He received his M.D. at the Harvard University School of
Medicine, Boston, Massachusetts. Dr. Iglehart is Chairman of the Clinical Cancer
Committee of Duke Comprehensive Cancer Center and Director of the Duke Breast
Oncology Clinic.
ANNE W. HAMBURGER, PH.D. Dr. Hamburger is Head, Division of Cell and
Molecular Biology, Professor, Department of Pathology and Program of Oncology at
University of Maryland Cancer Center. She received her Ph.D. in Biology at New
York University. Dr. Hamburger is a pioneer in cancer research in the area of in
vitro chemosensitivity assays. She co-developed the Hamburger/Salmon test (a
stem cell assay), published in the New England Journal of Medicine, which
measures the growth of tumor cells and their response to chemotherapy.
ITEM 10. EXECUTIVE COMPENSATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following provides certain information concerning all Plan and
Non-Plan (as defined in Item 402 (a)(ii) of Regulation S-B) compensation awarded
to, earned by, paid or accrued by the Company during the years ended December
31, 1995, 1994 and 1993 to the Chief Executive Officer and each of the named
executive officers of the Company.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
------------------- ----------------------
Other
Annual Awards Payouts
------ -------
Compen- Restricted Securities All Other
Salary sation Stock Underlying Compen-
Name and Principal Position Year ($) ($) Award(s) Options sation($)
- --------------------------- ---- --- --- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
J. Marvin Feigenbaum 1995 $182,000 $108,000(2) 943,750(3) 0 $6,000(4)
Chief Executive and Chief 1994 $153,250(1) 0 $175,000 150,000 $6,544(5)
Financial Officer (1) 1993 $39,000(6)
Kenneth E. Blackman, Ph.D. 1995 $130,000 0 0 0 $10,707(7)
President and Chief Operating 1994 $117,063 0 $23,888(8) 25,000 $1,019(9)
Officer of ABC (12) 1993 $ 90,000 $2,722(10) 0 2,857(11) $1,889(9)
</TABLE>
- ---------------
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<PAGE> 33
(1) President, Chief Executive and Chief Financial Officer commencing June
1, 1994. Includes consulting compensation in the amount of $47,667 for
portion of fiscal year from January 1, 1994 to June 1, 1994.
(2) Represents a one time bonus accrued for 1994 and paid during fiscal
year 1995 representing the approximate combined federal and state tax
associated with the grant of 50,000 shares of Common Stock during
fiscal 1994.
(3) On June 8, 1995, the Company granted Mr. Feigenbaum 100,000 restricted
shares of Common Stock. Represents the fair market value of the 100,000
shares based upon the market value of the Common Stock of $9.43 per
share on June 8, 1995. The restricted shares vest at the rate of 5,000
per year over a twenty year period commencing December 31, 1995. See
further description under "Employment Agreements".
(4) Represents automobile expenses paid by the Company.
(5) Represents automobile expenses paid by the Company in the
amount of $5,500 and life insurance premiums in the amount of $1,044.
(6) Represents consulting compensation for the period from August 1993
through December 31, 1993.
(7) Represents automobile expenses paid in 1995 for 1995 and 1994
in the amount of $6,000 and $3,000, respectively, and life insurance
premiums paid in 1995 of $1,707.
(8) On June 30, 1994 the Company granted Dr. Blackman 6,825 shares of
restricted stock. Represents the fair market value of the 6,825 shares
based upon the market value of the Common Stock of $3.50 per share on
June 30, 1994.
(9) Reflects life insurance premiums paid by the Company.
(10) Reflects a bonus earned during 1993 but paid in 1994.
(11) Gives effect to cancellation of 4,286 options in September, 1994.
(12) Effective June 30, 1995, Dr. Blackman resigned from his positions as an
officer and Director of the Company and ABC.
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
No options or stock appreciation rights were granted during fiscal year
1995 to the executive officers named in the Summary Compensation Table. On June
8, 1995, the Company granted Mr. Feigenbaum 100,000 restricted shares of Common
Stock. The restricted shares vest at the rate of 5,000 per year over a twenty
year period commencing December 31, 1995. See further description under
"Employment Agreements".
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<PAGE> 34
AGGREGATED OPTIONS/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTIONS/SAR VALUES
The following table summarizes options exercised by the named executive
officers during fiscal year 1995 and the number and value of options held by all
executive officers named in the Summary Compensation Table at year end. The
Company does not have any outstanding stock appreciation rights granted to
executive officers.
<TABLE>
<CAPTION>
Number of
Unexercised Value of In-the-
Options at Money Options at
Shares FY-End FY-End ($)
Acquired on Value Exercisable/ Exercisable/
Name Exercise Realized Unexercisable Unexercisable(1)
---- -------- -------- ------------- ----------------
<S> <C> <C> <C> <C>
J. Marvin Feigenbaum(2) 0 0 150,000/0 $1,190,625/0
Kenneth E. Blackman, Ph.D.(3) 0 0 33,571/0 $255,468/0
</TABLE>
- ---------------
(1) The average of the closing bid and closing asked prices for the
Company's Common Stock as reported on the Nasdaq SmallCap Market on
December 29, 1995, was $14.9375. Value is calculated on the basis of
the difference between the option exercise price and $14.9375
multiplied by the number of shares of Common Stock underlying the
options.
(2) Mr. Feigenbaum holds options to purchase 150,000 shares of
Common Stock with an exercise price of $7.00 per share.
(3) Effective June 30, 1995, Dr. Blackman resigned as an officer
and director of the Company and ABC. Dr. Blackman owns
options to purchase: (i) 25,000 shares with an exercise price
of $7.00 per share; (ii) 5,714 shares with an exercise price
of $6.30 per share, and (iii) 2,857 shares with an exercise
price of $12.25 per share.
Employment Agreements
On June 1, 1994, Mr. J. Marvin Feigenbaum was elected Chairman of the
Board of Directors, Chief Executive and Chief Financial Officer of both the
Corporation and Analytical Biosystems Corporation. Mr. Feigenbaum also serves as
President, Chief Executive and Chief Financial Officer of the Corporation. On
September 22, 1994, Mr. Feigenbaum entered into an Amended and Restated
Employment Agreement with the Corporation for a term of three years and six
months commencing June 1, 1994 through November 30, 1997. Mr. Feigenbaum's
Employment Agreement provides for a salary at the rate of $182,000 per annum. In
addition, Mr. Feigenbaum is provided with health and other benefits and a policy
34
<PAGE> 35
of life insurance in the amount of $500,000 payable to a beneficiary to be named
by Mr. Feigenbaum. He also receives an automobile allowance of $500 per month
and reimbursement for expenses incurred on behalf of the Corporation and in
connection with the performance of his duties. In connection with his Employment
Agreement as amended, Mr. Feigenbaum was issued, in lieu of a cash bonus for
past services rendered to the Corporation, while acting as a consultant to the
Corporation, 50,000 shares of Common Stock of the Corporation which has been
valued at $3.50 per share. All of said shares are immediately vested, and the
Corporation paid Mr. Feigenbaum, on April 14, 1995, a one time cash bonus equal
to $108,000 representing the amount of the combined federal and applicable state
and city income tax associated with such stock grant. In addition, Mr.
Feigenbaum was granted options to purchase 150,000 shares of the Corporation's
Common Stock exercisable commencing in June, 1995 through December 31, 2002 at
an option exercise price equal to the $7.00 per share. Mr. Feigenbaum's
Employment Agreement provides that in the event of a change in control of the
Corporation (as defined) , Mr. Feigenbaum will be paid for the remainder of the
unexpired term of his Agreement plus an additional sum of $182,000.
On June 8, 1995, the Company granted and issued to its President, Mr.
J. Marvin Feigenbaum, 100,000 restricted shares of its Common Stock, $.01 par
value (the "Restricted Shares"). The Restricted Shares are subject to vesting at
the rate of 5,000 shares per year (the "Annual Vested Shares") over a 20-year
period commencing December 31, 1995 and continuing at the rate of 5,000 Annual
Vested Shares per year on December 31 of each successive year for 19 years
thereafter; provided, however, that with respect to each year in which Annual
Vested Shares are to vest, such shares shall not vest if any change to the
Company's profit and loss statement for that year associated with the vesting of
such Annual Vested Shares shall cause the Company to report a loss from
operations, which loss is attributable to the vesting of the Annual Vested
Shares; and provided further, however, that in all cases the Annual Vested
Shares shall vest if the average bid and ask price for the Company's Common
Stock for the 10 days immediately preceding the vesting is $11.50 per share or
greater. The vesting of the Restricted Shares is subject to acceleration upon
the occurrence of certain events of acceleration as described below. With
respect to all Restricted Shares which may become vested, the Company is to pay
to Mr. Feigenbaum, a bonus equivalent to the amount of the combined federal and
applicable state and city income taxes associated with the Restricted Shares
that have become vested. The grant of the Restricted Shares to Mr. Feigenbaum
was in furtherance of the desire of the Company to provide an incentive to Mr.
Feigenbaum to maximize the business of the Company, and maximize the value of
the Company for all of its shareholders.
While the Restricted Shares have been issued and Mr. Feigenbaum is
entitled to vote said shares, all Restricted Shares are held in escrow until
their vesting and said shares may not be
35
<PAGE> 36
sold, assigned, transferred or hypothecated until the time they have become
vested.
In addition to the vesting of the Annual Vested Shares, an additional
number of Restricted Shares shall vest as follows: (i) for each fiscal year of
the Company, 1,000 additional Restricted Shares shall vest for each $1,000,000
of net sales of the Company as reported for that year; provided that the Company
reports a net pre-tax profit or the average bid and ask price for the Company's
common stock for 10 days preceding the end of the fiscal year is $11.50 or more;
(ii) in the event the Company effects a merger, acquisition, corporate
combination or purchase of assets (an "Acquisition Event") 1,000 additional
Restricted Shares shall vest for each $1,000,000 of Acquisition Event value paid
by the Company; and (iii) as of December 31 of each year, for each 1% of
increase of market value of the Company's voting securities above 120% of the
market value as of December 31 of the preceding year, 1,000 additional
Restricted Shares shall vest provided that Mr. Feigenbaum remains employed by
the Company on the first anniversary after the vesting event.
Provision is made for the acceleration of the vesting of the Restricted
Shares upon the occurrence of (a) the approval by the stockholders of the
Company of an Approved Transaction, as defined; (b) a Control Purchase, as
defined; (c) a Board change; or (d) the failure by the Company to renew Mr.
Feigenbaum's employment agreement on the conclusion of its term on November 30,
1997 or any subsequent or renewed term, on terms identical to those in the
employment agreement then prevailing. Upon the death or total disability of Mr.
Feigenbaum prior to the complete vesting of the Restricted Shares, all
Restricted Shares not theretofore vested shall become vested.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Feigenbaum, the Corporation's Chairman, Chief Executive Officer and
a Class 1 Director, serves as a member of the Board of Directors and
Vice-Chairman of Comprehensive Care Corporation, and is a member of its
Compensation Committee.
Mr. Street, a Class 3 Director, is Chairman, President and Chief
Executive Officer of Comprehensive Care Corporation. Mr. Street serves on the
Stock Option Committee of the Board of Directors.
Compensation of Directors
Directors who are employees of the Company do not receive any fee in
addition to their regular salary for serving on the Board of Directors.
Directors who are not employees of the Company receive a directors fee of $6,000
per annum, paid quarterly, and an attendance fee of $500 per meeting attended.
In addition, Directors are reimbursed for travel expenses for attendance at
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<PAGE> 37
board meetings. Non-Employee Directors are also eligible for an initial and
annual grant of stock options under the Company's NonEmployee Director Stock
Option Plan (see "Non-Employee Director Stock Option Plan" below).
1994 Incentive Stock Option Plan
In August, 1994, the Board of Directors adopted a 1994 Incentive Stock
Option Plan (the "Plan") which Plan was approved and adopted by the stockholders
of the Company on November 16, 1994. The Plan provides for the issuance of up to
350,000 shares of the Company's Common Stock upon the exercise of options
granted to officers, directors, full time employees and consultants rendering
services to the Company. Under the terms of the Plan, options granted thereunder
will be designated as options which qualify for incentive stock option treatment
("ISO's") under Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code"), or options which do not so qualify ("Non-ISO's"). Unless sooner
terminated, the Plan will expire on August 1, 2004 and options may be granted at
any time or from time to time through such date. The purpose of the Plan is to
promote the interests of the Company and its stockholders by strengthening the
ability of the Company to attract and retain officers, employees and consultants
by furnishing suitable recognition of their ability to contribute to the success
of the Company and to align their interests and efforts with the long term
interest of the Company. The Plan succeeds the Company's 1992 Incentive Stock
Option Plan, which has been terminated except for options to acquire 13,715
shares thereunder.
The Plan is administered by the Board of Directors or by a Stock Option
Committee designated by the Board of Directors (the "Plan Administrator"). The
Plan Administrator has the discretion to determine the eligible employees and
consultants to whom, and the times and the prices at which, options will be
granted; whether such options shall be ISO's or Non-ISO's; the periods during
which each option will be granted; and the number of shares subject to each
option. The Plan Administrator shall have full authority to interpret the plan
and to establish and amend rules and regulations relating thereto.
Under the Plan, the exercise price of an option designated as an ISO
shall not be less than the fair market value of the Common Stock on the date the
option is granted. However, in the event an option designated as an ISO is
granted to a ten percent stockholder (as defined in the Plan) such exercise
price shall be at least 110% of such fair market value. Exercise prices of
Non-ISOs may not be less than 85% of such fair market value. The aggregate fair
market value of shares subject to an option designated as an ISO for which any
participant may be granted such an option in any calendar year, shall not exceed
$100,000 plus any unused carryovers (as defined in Section 422 of the Code) from
a prior year. The "fair market value" will be the closing Nasdaq bid price or,
if the Company's
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<PAGE> 38
Common Stock is not quoted by Nasdaq, the low bid as reported by the National
Quotation Bureau, Inc. or a market maker of the Company's Common Stock or, if
the Common Stock is not quoted by any of the above, by the Board of Directors
acting in good faith.
Options may be granted under the Plan for such periods as determined by
the Plan Administrator; provided however that no option designated as an ISO
granted under the Plan shall be exercisable over a period in excess of ten
years, or in the case of a ten percent stockholder, five years. Options may be
exercised in whole at any time or in part from time to time. Options are not
transferable except to the estate of an option holder; provided, however, in the
case of a Non-ISO, and subject to Rule 16b-3 promulgated under Section 16 of the
Securities Exchange Act of 1934 (the "Exchange Act") and prevailing
interpretations thereunder by the staff of the Securities and Exchange
Commission, a recipient of a Non-ISO may, with the consent of the Plan
Administrator, designate a named beneficiary of the Non-ISO in the event of the
death of such recipient, or assign such Non-ISO.
Except as described below, the Plan Administrator may from time to time
amend the Plan as it deems proper and in the best interests of the Company
without further approval of the stockholders.
The Board of Directors and the Plan Administrator may not amend certain
features of the Plan without the approval of the Company's stockholders to the
extent such approval is required for compliance with Section 422 of the Code
with respect to ISO's, Section 162(m) of the Code with respect to Non-ISO's or
Rule 16b-3 promulgated under Section 16 of the Exchange Act with respect to
awards made to individuals subject to Section 16 of the Exchange Act. Such
amendments would include (a) increasing the maximum number of shares of Common
Stock that may be issued under the Plan, (b) materially modifying the
requirements as to eligibility for participation in the Plan, or (c) otherwise
materially increasing the benefits accruing to participants under the Plan.
Options for a total of 176,100 Shares have been granted under the Plan,
including options for 150,000 shares to Mr. Feigenbaum and 25,000 shares to Dr.
Blackman, at exercise prices equal to $7.00 per share.
Non-Employee Director Stock Option Plan
In August, 1994, the Board of Directors adopted the NonEmployee
Director Stock Option Plan (the "Director Plan") which Director Plan was
approved and adopted by the stockholders of the Company on November 16, 1994.
The Director Plan provides for issuance of a maximum of 75,000 shares of Common
Stock upon the exercise of stock options granted under the Director Plan.
Options may be granted under the Director Plan until August 1, 2004 to the
Company's non-employee directors (as defined). The Director Plan
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<PAGE> 39
provides that each non-employee director will automatically be granted an option
to purchase 5,000 shares upon joining the Board of Directors (or, for those
persons who are directors on the date of approval of the Director Plan by the
stockholders, on such date), and options to purchase 3,000 shares on each
anniversary of the initial date of service or date of approval, as the case may
be.
Under the terms of the Director Plan, the sum of the number of shares
to be received upon any grant multiplied by the fair market value of each share
at the time of grant may not exceed $75,000. All awards shall be reduced to the
extent they exceed such amount. The exercise price for options granted under the
Director Plan shall be 100% of the fair market value of the Common Stock on the
date of grant. Until otherwise provided in the Director Plan, the exercise price
of options granted under the Director Plan must be paid at the time of exercise,
either in cash, by delivery of shares of Common Stock of the Company or by a
combination of each. The term of each option is five years from the date of
grant, unless terminated sooner as provided in the Director Plan. The Director
Plan is administered by a committee of the Board of Directors composed of not
fewer than two persons who are officers of the Company (the "Committee"). The
Committee has no discretion to determine which non-employee director will
receive options or the number of shares subject to the option, the term of the
option or the exercisability of the option. However, the Committee will make all
determinations of the interpretation of the Director Plan. Options granted under
the Director Plan do not qualify for incentive stock option treatment.
Options for a total of 34,000 shares have been granted under the
Director Plan, including options for 8,000 shares to each of Dr. Charrette and
Messrs. Sterling and Green and 5,000 shares to each of Mr. Street and Mr.
Fagenson.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE> 40
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain information as of March 6, 1996
with respect to the ownership of Common Stock by (i) the persons (including any
"group" as that term is used in Section 13(d)(3) of the Securities Exchange Act
of 1934, as amended), known by the Company to be the beneficial owner of more
than five percent of any class of the Company's voting securities, (ii) each
director and each officer identified in the Summary Compensation Table, and
(iii) directors and executive officers as a group:
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT OF AND NATURE PERCENTAGE
OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP OF CLASS
- ------------------- ----------------------- --------
<S> <C> <C>
J. Marvin Feigenbaum 300,316(1) 15.9%
55 Access Road
Warwick, RI 02886
Edmond E. Charrette, M.D. 11,666(2) *
304 Cambridge Road
Woburn, MA 01801
Leonard Green 8,000(3) *
55 Access Road
Warwick, RI 02886
David A. Sterling 8,000(3) *
55 Access Road
Warwick, RI 02886
Michael G. Jesselson 189,526(4) 10.7%
1301 Avenue of Americas
New York, New York
Chriss W. Street 5,000(5) *
Chriss Street & Company
1111 Bayside Drive - Suite 100
Corona del Mar, CA 92625
Robert B. Fagenson 5,000(5) *
19 Rector Street
New York, NY 10006
All Officers and Directors as
a Group (5 persons in number) 337,982(1)(2)(3)(5) 17.5%
</TABLE>
- ---------------
* Less than 1%.
(1) Includes (i) 50,000 shares of Common Stock owned by Mr. Feigenbaum;
(ii) options to purchase 150,000 shares of Common Stock exercisable
commencing June, 1995; (iii) 317 shares of Common Stock owned by Mr.
Feigenbaum's minor son, as to which
40
<PAGE> 41
Mr. Feigenbaum has power to direct voting and disposition; and (iv)
includes 100,000 shares of Common Stock which vest over 20 years
commencing December 31, 1995 at the rate of 5,000 shares per year
subject to acceleration in certain circumstances.
(2) Includes (i) 3,809 shares of Common Stock, (ii) presently exercisable
options to purchase 2,857 shares of Common Stock and (iii) options to
purchase 5,000 shares of Common Stock granted under the Corporation's
Non-Employee Director Plan.
(3) Includes options to purchase 8,000 shares of Common Stock under the
Corporation's Non-Employee Director Plan.
(4) Represents shares of Common Stock and Common Stock Purchase Warrants
owned by several trusts of which Michael G. Jesselson is a trustee,
co-trustee and/or a beneficiary and therefore holds shared voting power
as follows: (i) Michael Jesselson & Lucy Lang TTEES UIT FBO Yosepha
Jesselson - 4,285 shares of Common Stock and 8,571 Common Stock
Purchase Warrants; (ii) Michael Jesselson & Linda Jesselson TTEES UIT
Fbo Jonathan Judah Jesselson - 4,285 shares of Common Stock and 8,571
Common Stock Purchase Warrants; (iii) Michael Jesselson & Linda
Jesselson TTEES UIT FBO Yaira Jesselson - 4,285 shares of Common Stock
and 8,571 Common Stock Purchase Warrants; (iv) Michael Jesselson &
Linda Jesselson TTEES UIT FBO Maya Ariel Ruth Jesselson - 4,285 shares
of Common Stock and 8,571 Common Stock Purchase Warrants; (v) Erica
Jesselson, Lucy Lang, Claire Strauss, Michael Jesselson & Benjamin
Jesselson TTEES UIT FBO Benjamin Jesselson - 33,333 shares of Common
Stock and 12,699 Common Stock Purchase Warrants; (vi) Erica Jesselson ,
Lucy Lang, Claire Strauss, Michael Jesselson & Benjamin J. Jesselson
TTEES UIT FBO Michael Jesselson - 33,334 shares of Common Stock and
12,700 Common Stock Purchase Warrants; and (vii) Michael Jesselson,
Erica Jesselson, Lucy Lang, Clair Strauss and Benjamin J. Jesselson,
TTEES UIT FBO Grandchildren - 33,333 shares of Common Stock and 12,699
Common Stock Purchase Warrants.
(5) Includes options to purchase 5,000 shares of Common Stock under the
Corporation's Non-Employee Director Plan.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Corporation's subsidiary, ABC, borrowed $150,000 on February 11,
1993 and $100,000 on February 25, 1993 from the Small Business Loan Fund
Corporation ("SBLFC"). Both loans bear interest at the rate of 5.4%, are secured
by the Corporation's accounts receivable, inventory and equipment and are to be
repaid over a five year period ending in February 1998. In conjunction with the
above loans, the Corporation issued a warrant to SBLFC for 2,857 shares of
Common Stock at an exercise price of $15.75 per share. Additional debt financing
of $250,000, $166,000 and $125,000 was received from SBLFC on April 19, 1993,
October 22, 1993, and
41
<PAGE> 42
February 14, 1994, respectively. These financings also bear interest at 5.4%,
are secured by the Corporation's accounts receivable, inventory, equipment, and
intangible assets (including patents) and are to be repaid over five year
periods from the respective loan dates. In conjunction with the April 19, 1993
loan, the Corporation issued to SBLFC a warrant for 42,857 shares of Common
Stock at an exercise price of $28.35 per share. The proceeds of the SBLFC loans
were used for working capital. SBLFC has certain demand and piggyback
registration rights with respect to the shares issuable upon exercise of its
warrants, which rights as to a demand registration the SBLFC has agreed to defer
for 24 months until December, 1996.
For information concerning the Employment Agreement of J. Marvin
Feigenbaum, see "Executive Compensation - Employment Agreements."
Effective, July 1, 1994 the Company entered into an amended employment
agreement with Dr. Kenneth Blackman pursuant to which Dr. Blackman's employment
as President and Chief Operating Officers of ABC, was continued for a one year
term terminating June 30, 1995. This Agreement was not renewed on its
termination date. Dr. Blackman received a salary at the rate of $130,000 per
annum and had been provided with the Corporation's standard health and other
benefits as presently provided to him. He also received an automobile allowance
of $500 per month and reimbursement for expenses incurred on behalf of the
Corporation in connection with the performance of his duties. Upon the execution
of his Employment Agreement, Dr. Blackman was issued, in lieu of a cash bonus
for services rendered, 6,825 shares of Common Stock valued at $3.50 per share.
Such shares vested on June 30, 1995. In addition, and on or before April 15,
1996, the Corporation will pay to Dr. Blackman a one time cash bonus equal to
the amount of combined federal and applicable state income taxes associated with
such stock grant. Dr. Blackman was granted options to purchase 25,000 shares of
the Corporation's Common Stock exercisable through December 31, 2002 at an
option exercise price equal to $7.00 per share.
ITEM 13. EXHIBITS, LIST AND REPORTS ON FORM 8-K
(A) 1. Financial Statements
See Index to Financial Statements Attached hereto.
2. Financial Statement Schedules
See Index to Financial Statements attached hereto.
3. Exhibits:
Incorporated by reference to the Exhibit Index at the end of this
Report.
42
<PAGE> 43
(B) Reports on Form 8-K
During the last quarter of the period covered by this Report, the
following reports on Form 8-K were filed by the Registrant:
<TABLE>
<CAPTION>
Description
Date of Report Item Reported of Item
- -------------- ------------- -----------
<S> <C> <C>
December 8, 1995 Item 5. Other The Company reported its entry
Events into a Letter of Intent to
acquire American Cytogenetics,
Inc.
</TABLE>
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK]
43
<PAGE> 44
CONSOLIDATED FINANCIAL STATEMENTS
NU-TECH BIO MED, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
YEARS ENDED DECEMBER 31, 1995 AND 1994
AND THE PERIOD OF FEBRUARY 1, 1982 (INCEPTION)
TO DECEMBER 31, 1995
<PAGE> 45
Nu-Tech Bio-Med, Inc. and Subsidiary
(A Development Stage Enterprise)
Consolidated Financial Statements
Years ended December 31, 1995 and 1994
and the period of February 1, 1982 (inception)
to December 31, 1995
CONTENTS
<TABLE>
<S> <C>
Report of Independent Auditors ........................................... 1
Audited Consolidated Financial Statements
Consolidated Balance Sheets .............................................. 2
Consolidated Statements of Operations .................................... 4
Consolidated Statements of Stockholders' Equity .......................... 5
Consolidated Statements of Cash Flows .................................... 9
Notes to Consolidated Financial Statements ............................... 11
</TABLE>
<PAGE> 46
Report of Independent Auditors
To the Stockholders
Nu-Tech Bio-Med, Inc.
We have audited the accompanying consolidated balance sheets of Nu-Tech Bio-Med,
Inc. and subsidiary (a development stage enterprise) as of December 31, 1995 and
1994, and the related consolidated statements of operations, cash flows, and
stockholders' equity for the years then ended and for the period of February 1,
1982 (inception) to December 31, 1995. 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 audits.
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 consolidated financial position of Nu-Tech Bio-Med,
Inc. and subsidiary at December 31, 1995 and 1994, and the consolidated results
of their operations, cash flows, and stockholders' equity for the years then
ended and for the period of February 1, 1982 (inception) to December 31, 1995,
in conformity with generally accepted accounting principles.
March 5, 1996
1
<PAGE> 47
Nu-Tech Bio-Med, Inc. and Subsidiary
(A Development Stage Enterprise)
Consolidated Balance Sheets
<TABLE>
<CAPTION>
DECEMBER 31
1995 1994
---------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $2,538,002 $3,803,189
Accounts receivable (net of allowance for uncollectible
claims of approximately $16,700 and $23,600 at
December 31, 1995 and 1994, respectively) 67,480 29,850
Prepaid expenses 82,737 4,537
Other current assets 78,581 21,073
-------------------------
Total current assets 2,766,800 3,858,649
Equipment and leasehold improvements (net of
accumulated depreciation and amortization of
approximately $215,000 and $197,000 at
December 31, 1995 and 1994, respectively) 471,517 38,236
Goodwill (net of accumulated amortization of
approximately $441,200 and $366,200 at December 31,
1995 and 1994, respectively) 308,816 383,816
Patents (net of accumulated amortization of
approximately $73,700 and $62,700 at December 31,
1995 and 1994, respectively) 141,596 107,180
Acquisition costs 129,846 -
-------------------------
Total assets $3,818,575 $4,387,881
=========================
</TABLE>
2
<PAGE> 48
<TABLE>
<CAPTION>
DECEMBER 31
1995 1994
------------------------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 109,815 $ 42,784
Accrued expenses 445,950 572,094
Contract payable 105,571 105,571
Current portion of long-term debt 197,246 192,149
Current portion of capitalized lease obligations 13,050 -
------------------------------
Total current liabilities 871,632 912,598
Debt 319,521 516,767
Capitalized lease obligations 33,624 -
Deferred income 5,540 7,640
Stockholders' equity:
Preferred stock, $.01 par value; 1,000,000 shares
authorized, none outstanding - -
Common stock, $.01 par value; 12,000,000 shares
authorized, 1,742,148 and 1,429,128 shares issued
and outstanding at December 31, 1995 and 1994,
respectively 17,422 14,291
Capital in excess of par value 17,544,715 14,724,150
Unvested common stock grant (946,107) -
Deferred consulting expense (151,250) -
Deficit accumulated during the development stage (13,876,522) (11,787,565)
------------------------------
Total stockholders' equity 2,588,258 2,950,876
------------------------------
Total liabilities and stockholders' equity $ 3,818,575 $ 4,387,881
==============================
</TABLE>
See accompanying notes.
3
<PAGE> 49
Nu-Tech Bio-Med, Inc. and Subsidiary
(A Development Stage Enterprise)
Consolidated Statements of Operations
<TABLE>
<CAPTION>
CUMULATIVE
AMOUNT FROM
FEBRUARY 1,
1982 (INCEPTION)
YEAR ENDED DECEMBER 31 TO DECEMBER 31
1995 1994 1995
---------------------------- ------------
<S> <C> <C> <C>
Revenues:
Assay sales $ 161,701 $ 157,973 $ 1,172,107
Contract revenues - - 730,511
Investment and interest income 158,977 3,831 2,414,186
Fee income - - 100,000
Other 2,100 60,780 473,517
---------------------------- ------------
Total revenues 322,778 222,584 4,890,321
Expenses:
General and administrative 1,430,354 1,072,694 10,080,297
Lab expense 186,405 175,865 1,123,257
Research and development 77,066 - 4,649,239
Loss on sale of investments - - 577,423
Interest 33,514 51,370 202,335
Rent 24,972 24,448 446,205
Depreciation and amortization 659,424 291,728 1,515,791
Loss on disposal of equipment,
furniture and fixtures - - 34,100
---------------------------- ------------
Total expenses 2,411,735 1,616,105 18,628,647
---------------------------- ------------
Loss from continuing operations (2,088,957) (1,393,521) (13,738,326)
Discontinued operations:
Loss on disposition - - (112,010)
Loss from discontinued operations - - (172,530)
---------------------------- ------------
Loss from discontinued operations - - (284,540)
---------------------------- ------------
Loss before extraordinary item (2,088,957) (1,393,521) (14,022,866)
Extraordinary item:
Gain on forgiveness of debt - - 146,344
---------------------------- ------------
Net loss $(2,088,957) $(1,393,521) $(13,876,522)
============================ ============
Net loss per common share $ (1.33) $ (2.15)
============================
Weighted average common shares
outstanding 1,570,498 647,501
============================
</TABLE>
See accompanying notes.
4
<PAGE> 50
Nu-Tech Bio-Med, Inc. and Subsidiary
(A Development Stage Enterprise)
Consolidated Statements of Stockholders' Equity
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF COMMON CAPITAL IN UNVESTED
COMMON STOCK AT $.01 EXCESS OF COMMON
STOCK PAR VALUE PAR VALUE STOCK GRANT
--------------------------------------------------
<S> <C> <C> <C> <C>
Balance, February 1, 1982 (inception) - $ - $ - $-
February 1982 common stock issued to private
investors, employees, scientific and financial
advisors at $.35 per share 57,429 574 19,526 -
June 1982 common stock issued at $17.50 per share 61,286 613 1,059,387 -
Net loss - - - -
---------------------------------------------
Balance, December 31, 1982 118,715 1,187 1,078,913 -
Exercise of stock options at $17.50 per share 4,514 45 78,955 -
May 10, 1983, public offering of $131.25 per unit
net of commissions, underwriting expenses and
other costs of $513,722 66,000 660 2,373,118 -
Net loss - - - -
---------------------------------------------
Balance, December 31, 1983 189,229 1,892 3,530,986 -
Exercise of stock options at $17.50 per share 343 3 5,997 -
Net loss - - - -
---------------------------------------------
Balance, December 31, 1984 189,572 1,895 3,536,983 -
Exercise of stock options at $17.50 per share 1,257 13 21,987 -
Net loss - - - -
---------------------------------------------
Balance, December 31, 1985 190,829 1,908 3,558,970 -
Exercise of warrants:
Class A warrants at $61.25 per share 59,440 594 3,544,202 -
Class B warrants at $87.50 per share 69 1 2,436 -
Exercise of options:
Incentive at $9.80 - $17.50 per share 1,429 14 19,486 -
Nonqualified at $9.80 - $17.50 per share 743 7 10,793 -
Net loss - - - -
---------------------------------------------
Balance, December 31, 1986 252,510 2,524 7,135,887 -
</TABLE>
<TABLE>
<CAPTION>
DEFICIT
ACCUMULATED
DEFERRED DURING THE TOTAL
CONSULTING DEVELOPMENT STOCKHOLDERS'
EXPENSE STAGE EQUITY
---------------------------------------
<S> <C> <C> <C>
Balance, February 1, 1982 (inception) $- $ - $ -
February 1982 common stock issued to private
investors, employees, scientific and financial
advisors at $.35 per share - - 20,100
June 1982 common stock issued at $17.50 per share - - 1,060,000
Net loss - (59,361) (59,361)
-------------------------------
Balance, December 31, 1982 - (59,361) 1,020,739
Exercise of stock options at $17.50 per share - - 79,000
May 10, 1983, public offering of $131.25 per unit
net of commissions, underwriting expenses and
other costs of $513,722 - - 2,373,778
Net loss - (268,037) (268,037)
-------------------------------
Balance, December 31, 1983 - (327,398) 3,205,480
Exercise of stock options at $17.50 per share - - 6,000
Net loss - (825,694) (825,694)
-------------------------------
Balance, December 31, 1984 - (1,153,092) 2,385,786
Exercise of stock options at $17.50 per share - - 22,000
Net loss - (424,719) (424,719)
-------------------------------
Balance, December 31, 1985 - (1,577,811) 1,983,067
Exercise of warrants:
Class A warrants at $61.25 per share - - 3,544,796
Class B warrants at $87.50 per share - - 2,437
Exercise of options:
Incentive at $9.80 - $17.50 per share - - 19,500
Nonqualified at $9.80 - $17.50 per share - - 10,800
Net loss - (230,494) (230,494)
-------------------------------
Balance, December 31, 1986 - (1,808,305) 5,330,106
</TABLE>
5
<PAGE> 51
Nu-Tech Bio-Med, Inc. and Subsidiary
(A Development Stage Enterprise)
Consolidated Statements of Stockholders' Equity (continued)
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF COMMON CAPITAL IN
COMMON STOCK AT $.01 EXCESS OF
STOCK PAR VALUE PAR VALUE
------------------------------------
<S> <C> <C> <C>
Exercise of stock options 3,086 31 53,969
Exercise of Class B warrants at $87.50 per share 11,234 112 937,870
Net loss - - -
-----------------------------------
Balance, December 31, 1987 266,830 2,667 8,127,726
Exercise of stock options 286 3 2,797
Net loss - - -
-----------------------------------
Balance, December 31, 1988 267,116 2,670 8,130,523
Net loss - - -
-----------------------------------
Balance, December 31, 1989 267,116 2,670 8,130,523
Issuance of common stock 1,524 15 19,985
Issuance of stock for purchase of affiliate 34,286 343 749,657
Net loss - - -
-----------------------------------
Balance, December 31, 1990 302,926 3,028 8,900,165
Issuance of unregistered common stock to private
investors at $2.45 per share (net of issuance costs) 114,287 1,144 254,896
Issuance of unregistered common stock to private
investors at $6.30 per share via relinquishing of
stock options (net of issuance costs) 47,619 477 289,523
Issuance of unregistered common stock for
forgiveness of debt at $6.30 per share 3,714 37 23,363
Issuance of unregistered common stock for
forgiveness of debt at $2.45 per share 2,857 29 6,971
Net loss - - -
-----------------------------------
Balance, December 31, 1991 471,403 4,715 9,474,918
</TABLE>
<TABLE>
<CAPTION>
DEFICIT
ACCUMULATED
UNVESTED DEFERRED DURING THE TOTAL
COMMON CONSULTING DEVELOPMENT STOCKHOLDERS'
STOCK GRANT EXPENSE STAGE EQUITY
---------------------------------------------------------
<S> <C> <C> <C> <C>
Exercise of stock options - - - 54,000
Exercise of Class B warrants at $87.50 per share - - - 937,982
Net loss - - (1,001,834) (1,001,834)
---------------------------------------------
Balance, December 31, 1987 - - (2,810,139) 5,320,254
Exercise of stock options - - - 2,800
Net loss - - (2,355,743) (2,355,743)
---------------------------------------------
Balance, December 31, 1988 - - (5,165,882) 2,967,311
Net loss - - (1,487,748) (1,487,748)
---------------------------------------------
Balance, December 31, 1989 - - (6,653,630) 1,479,563
Issuance of common stock - - - 20,000
Issuance of stock for purchase of affiliate - - - 750,000
Net loss - - (1,657,107) (1,657,107)
--------------------------------------------
Balance, December 31, 1990 - - (8,310,737) 592,456
Issuance of unregistered common stock to private
investors at $2.45 per share (net of issuance costs - - - 256,040)
Issuance of unregistered common stock to private
investors at $6.30 per share via relinquishing of
stock options (net of issuance costs) - - - 290,000
Issuance of unregistered common stock for
forgiveness of debt at $6.30 per share - - - 23,400
Issuance of unregistered common stock for
forgiveness of debt at $2.45 per share - - - 7,000
Net loss - - (260,055) (260,055)
-------------------------------------------
Balance, December 31, 1991 - - (8,570,792) 908,841
</TABLE>
6
<PAGE> 52
Nu-Tech Bio-Med, Inc. and Subsidiary
(A Development Stage Enterprise)
Consolidated Statements of Stockholders' Equity (continued)
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF COMMON CAPITAL IN UNVESTED
COMMON STOCK AT $.01 EXCESS OF COMMON
STOCK PAR VALUE PAR VALUE STOCK GRANT
---------------------------------------------------
<S> <C> <C> <C> <C>
Issuance of unregistered common stock to private
investors at $20.30 per share (net of issuance costs) 35,424 354 675,617 -
Issuance of unregistered common stock to private
investors at $2.45 per share via exercise of stock
options 28,118 281 68,608 -
Issuance of unregistered common stock to private
investor at $6.30 per share via exercise of stock
warrant 5,714 57 35,943 -
Issuance of unregistered common stock to private
investor at $7.70 per share via exercise of stock
options 714 7 5,493 -
Net loss - - - -
---------------------------------------------------
Balance, December 31, 1992 541,373 5,414 10,260,579 -
Exercise of stock options at $2.45 per share 9,978 100 24,346 -
Issuance of unregistered common stock to private
investors at $6.30 per share (net of issuance costs) 17,619 176 108,824 -
Issuance of unregistered common stock to private
investors at $6.30 per share 16,190 162 101,838 -
Net loss - - - -
---------------------------------------------------
Balance, December 31, 1993 585,160 5,852 10,495,587 -
Issuance of unregistered common stock to officers at
$3.50 per share 56,825 568 198,319 -
Issuance of unregistered common stock to investors
at $3.50 per share (net of issuance costs) 57,143 571 185,204 -
Issuance of 114,286 common stock purchase warrants - - 20,000 -
December 28, 1994, public offering at $7.00 per
share, net of commissions and underwriting
expenses 730,000 7,300 3,825,040 -
Net loss - - - -
---------------------------------------------------
Balance, December 31, 1994 1,429,128 14,291 14,724,150 -
</TABLE>
<TABLE>
<CAPTION>
DEFICIT
ACCUMULATED
DEFERRED DURING THE TOTAL
CONSULTING DEVELOPMENT STOCKHOLDERS'
EXPENSE STAGE EQUITY
-----------------------------------------------
<S> <C> <C> <C>
Issuance of unregistered common stock to private
investors at $20.30 per share (net of issuance costs) - - 675,971
Issuance of unregistered common stock to private
investors at $2.45 per share via exercise of stock
options - - 68,889
Issuance of unregistered common stock to private
investor at $6.30 per share via exercise of stock
warrant - - 36,000
Issuance of unregistered common stock to private
investor at $7.70 per share via exercise of stock
options - - 5,500
Net loss - (1,018,701) (1,018,701)
-------------------------------------------
Balance, December 31, 1992 - (9,589,493) 676,500
Exercise of stock options at $2.45 per share - - 24,446
Issuance of unregistered common stock to private
investors at $6.30 per share (net of issuance costs) - - 109,000
Issuance of unregistered common stock to private
investors at $6.30 per share - - 102,000
Net loss - (804,551) (804,551)
-------------------------------------------
Balance, December 31, 1993 - (10,394,044) 107,395
Issuance of unregistered common stock to officers at
$3.50 per share - - 198,887
Issuance of unregistered common stock to investors
at $3.50 per share (net of issuance costs) - - 185,775
Issuance of 114,286 common stock purchase warrants - - 20,000
December 28, 1994, public offering at $7.00 per
share, net of commissions and underwriting
expenses - - 3,832,340
Net loss - (1,393,521) (1,393,521)
-------------------------------------------
Balance, December 31, 1994 - (11,787,565) 2,950,876
</TABLE>
7
<PAGE> 53
Nu-Tech Bio-Med, Inc. and Subsidiary
(A Development Stage Enterprise)
Consolidated Statements of Stockholders' Equity (continued)
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF COMMON CAPITAL IN UNVESTED
COMMON STOCK AT $.01 EXCESS OF COMMON
STOCK PAR VALUE PAR VALUE STOCK GRANT
------------------------------------------------------------
<S> <C> <C> <C> <C>
Issuance of unregistered common stock to
investors at $6.00 per share and 45,714
common stock purchase warrants (net of issuance costs of
$53,700) 120,000 1,200 668,586 -
Grant of unregistered common stock to officer at
$14.81 per share 100,000 1,000 1,480,200 (1,481,200)
Grants of warrants to consultant at $7.00 per share - - 165,000 -
Issuance of unregistered common stock to
investors at $6.00 per share and 35,408 common
stock purchase warrants (net of issuance costs of
$54,090) 93,335 934 506,776 -
Other (315) (3) 3 -
Amortization of unvested common stock grant - - - 535,093
Amortization of deferred consulting expense - - - -
Net loss - - - -
------------------------------------------------------------
Balance, December 31, 1995 1,742,148 $ 17,422 $17,544,715 $ (946,107)
============================================================
</TABLE>
<TABLE>
<CAPTION>
DEFICIT
ACCUMULATED
DEFERRED DURING THE TOTAL
CONSULTING DEVELOPMENT STOCKHOLDERS'
EXPENSE STAGE EQUITY
------------------------------------------
<S> <C> <C> <C>
Issuance of unregistered common stock to
investors at $6.00 per share and 45,714
common stock purchase warrants (net of issuance costs of
$53,700) - - 669,786
Grant of unregistered common stock to officer at
$14.81 per share - - -
Grants of warrants to consultant at $7.00 per share (165,000) - -
Issuance of unregistered common stock to
investors at $6.00 per share and 35,408 common
stock purchase warrants (net of issuance costs of
$54,090) - - 507,710
Other - - -
Amortization of unvested common stock grant - - 535,093
Amortization of deferred consulting expense 13,750 - 13,750
Net loss (2,088,957) (2,088,957)
------------------------------------------
Balance, December 31, 1995 $ (151,250) $(13,876,522) $2,588,258
==========================================
</TABLE>
See accompanying notes.
8
<PAGE> 54
Nu-Tech Bio-Med, Inc. and Subsidiary
(A Development Stage Enterprise)
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
CUMULATIVE
AMOUNT FROM
FEBRUARY 1,
1982 (INCEPTION)
YEAR ENDED DECEMBER 31 TO DECEMBER 31
1995 1994 1995
---------------------------- ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss $(2,088,957) $(1,393,521) $(13,876,522)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 659,424 116,729 1,806,946
Loss on disposal of equipment - - 34,100
Loss on investments - - 349,224
Loss on sale of subsidiary - - 112,010
Losses of affiliated company - - 365,614
Changes in assets and liabilities:
Accounts receivable, prepaids and
other current assets (126,664) 140,829 (209,187)
Investment in and advances to
affiliate - - (431,802)
Accounts payable and accrued
expenses (138,396) 308,686 73,097
Accrued compensation 79,283 130,990 210,273
Other liabilities - (10,000) (76,840)
Deferred income (2,100) (1,930) 5,540
---------------------------- ------------
Net cash used in operating activities (1,617,410) (708,217) (11,637,547)
INVESTING ACTIVITIES
Proceeds from sale of equipment - - 10,407
Capital expenditures (503,278) (29,527) (762,065)
Organization costs - - (19,778)
Purchase of long-term investments and
other assets - - (95,974)
Proceeds from loan receivable from
officer - - (20,000)
Cash acquired in purchase of company,
net - - (820,390)
Sale of company, net of cash sold - - 413,000
---------------------------- ------------
Net cash used in investing activities ........... (503,278) (29,527) (1,294,800)
</TABLE>
9
<PAGE> 55
Nu-Tech Bio-Med, Inc. and Subsidiary
(A Development Stage Enterprise)
Consolidated Statements of Cash Flows (continued)
<TABLE>
<CAPTION>
CUMULATIVE
AMOUNT FROM
FEBRUARY 1,
1982 (INCEPTION)
YEAR ENDED DECEMBER 31 TO DECEMBER 31
1995 1994 1995
--------------------------- -----------
<S> <C> <C> <C>
FINANCING ACTIVITIES
Proceeds from issuance of notes payable - 125,000 1,116,000
Repayment of notes payable (192,149) (82,084) (382,889)
Proceeds from 7% promissory notes - 400,000 400,000
Repayment of 7% promissory notes - (400,000) (400,000)
Advances from officer - - 100,000
Repayment of advances from officer - - (100,000)
Proceeds from sale of common stock
and warrants 1,177,496 4,237,002 15,115,537
Repayment of note payable to
stockholder - - (266,601)
Capitalization of interest on note
payable to stockholder - - 18,148
Acquisition costs (129,846) - (129,846)
--------------------------- -----------
Net cash provided by financing activities 855,501 4,279,918 15,470,349
--------------------------- -----------
Net increase (decrease) in cash and cash
equivalents (1,265,187) 3,542,174 2,538,002
Cash and cash equivalents at beginning
of period 3,803,189 261,015 -
--------------------------- -----------
Cash and cash equivalents at end of
period $ 2,538,002 $3,803,189 $ 2,538,002
=========================== ===========
Noncash transactions:
During 1989, the Company extinguished
a liability via the issuance of common
stock at a value of $20,000 $ - $ - $ 20,000
During 1990, the Company acquired
the remaining 50% interest in
Analytical Biosystems Corporation
with the issuance of 34,286 shares
of common stock - - 750,000
During 1991, the Company capitalized
$49,869 of accrued interest from 1990
into the note payable to stockholder - - 49,869
During 1991, the Company extinguished
liabilities via the issuance of common
stock at a value of $30,400 - - 30,400
</TABLE>
See accompanying notes
10
<PAGE> 56
Nu-Tech Bio-Med, Inc. and Subsidiary
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
December 31, 1995 and 1994
1. BASIS OF PRESENTATION
Nu-Tech Bio-Med, Inc. (formerly Applied DNA Systems, Inc.) (the Company) was
incorporated in September 1981 and commenced operations on February 1, 1982. The
Company, primarily through collaborative ventures with universities and
biotechnology companies, is engaged in biomedical research and development,
using biotechnological techniques or processes, which the Company will sell or
license to other companies, primarily in the pharmaceutical and chemical
industries. The Company is now primarily engaged in the commercial development
of chemosensitivity assays.
The Stockholders of the Company adopted a series of resolutions on November 16,
1994, authorizing the amendment to the Company's Certificate of Incorporation to
effect (i) a reverse Common Stock split on a one-for-thirty-five basis and (ii)
reducing the number of authorized shares of Common Stock to 12,000,000.
Accordingly, all share and per share data included in the accompanying
consolidated financial statements have been restated for the effect of the
reverse stock split.
The consolidated financial statements for December 31, 1995 and 1994, include
the accounts of the Company and its wholly owned subsidiary, Analytical
Biosystems Corporation (ABC). All material intercompany transactions and
balances have been eliminated. Where appropriate, prior year amounts have been
reclassified to permit comparison.
The consolidated financial statements have been prepared in accordance with the
provisions of Statement of Financial Accounting Standards No. 7, "Accounting and
Reporting by Development Stage Enterprises" since the Company's planned
principal operations have commenced, but there has been no significant revenue
therefrom. Successful completion of the Company's development program and its
transition to ultimately attaining profitable operations is dependent upon
achieving a level of sales adequate to support the Company's cost structure.
11
<PAGE> 57
Nu-Tech Bio-Med, Inc. and Subsidiary
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
The Company considers money market funds to be cash equivalents.
EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Equipment and leasehold improvements are recorded at cost. Depreciation has been
provided using the straight-line method over the estimated useful lives of the
assets ranging from 5-7 years for financial reporting purposes.
In 1995, certain equipment was acquired under capitalized lease obligations.
These assets total $46,700, with related accumulated amortization of $3,200 at
December 31, 1995.
OTHER ASSETS
In March 1995, the FASB issued Statement No. 121, Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed Of, which requires
impairment losses to be recorded on long-lived assets used in operations when
indicators of impairment are present and the undiscounted cash flows estimated
to be generated by those assets are less than the assets' carrying amount.
Statement 121 also addresses the accounting for long-lived assets that are
expected to be disposed of. The Company will adopt Statement 121 in the first
quarter of 1996 and, based on current circumstances, does not believe the effect
of adoption will be material.
12
<PAGE> 58
Nu-Tech Bio-Med, Inc. and Subsidiary
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The Company accounts for goodwill at the lower of amortized cost or fair value.
On an ongoing basis, management reviews to determine if "impairment indicators"
are present. If impairment indicators are present, the Company will perform a
periodic assessment of assets for impairment. This review would consist of the
Company reevaluating significant assumptions used in determining the original
cost of the acquired business and related goodwill. These assumptions include
operating results, cash flows and other indicators of value. Based upon this
periodic assessment, management would determine whether there has been a
permanent impairment of the value of goodwill and would adjust the carrying
value accordingly. The Company would determine fair value based upon independent
appraisals or cash flows discounted at a risk adjusted rate, as appropriate in
the circumstances. The goodwill is a result of the acquisition of ABC (see Note
3).
Amortization is provided using the straight-line method over the estimated
useful lives of the assets as follows:
Patent 17 years
Goodwill 10 years
STOCK BASED COMPENSATION
The Company grants qualified stock options for a fixed number of shares to
employees with an exercise price equal to the fair value of the shares at the
date of grant. The Company accounts for stock option grants in accordance with
APB Opinion No. 25, Accounting for Stock Issued to Employees, and, accordingly,
recognizes no compensation expense for the stock option grants.
For certain non-qualified stock options, restricted stock and warrants granted,
the Company recognizes as compensation expense the excess of the deemed fair
value of the common stock issuable upon exercise of such options over the
aggregate exercise price of such options. The compensation is amortized over the
vesting period of each option or the recipient's term of employment, if shorter.
13
<PAGE> 59
Nu-Tech Bio-Med, Inc. and Subsidiary
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES
The liability method is used to account for income taxes. Deferred tax assets
and liabilities are determined based on differences between financial reporting
and income tax bases of assets and liabilities as well as net operating loss
carryforwards and are measured using the enacted tax rates and laws that will be
in effect when the differences reverse. Deferred tax assets are reduced by a
valuation allowance to reflect the uncertainty associated with their ultimate
realization.
NET LOSS PER COMMON SHARE
Net loss per common share is computed using the weighted average number of
common shares outstanding during the period. Fully-diluted earnings per share,
assuming conversion of outstanding warrants and options, are not presented since
the effect would be antidilutive.
SALES
Substantially all of the Company's assay sales are billed to third-party payors
and recognized net of billing adjustments, when results of an assay are complete
and sent to a
physician. Payment from third-party payors is dependent upon the specific
benefits included in each patient's policy. The Company provides an allowance
for billing adjustments to cover estimated differences between the Company's
billed charges and anticipated collection from third-party payors and patients.
The amount of these billing adjustments, relating to assay sales during 1995 and
1994, were approximately $22,000 and $77,000, respectively.
3. INTANGIBLE ASSETS
On February 12, 1990, the Company completed its acquisition of the remaining
outstanding shares of ABC, not previously owned by the Company. As a result of
this transaction, the Company recorded $750,000 of excess cost over the fair
market value of net assets acquired ("goodwill") related to this transaction.
Patent costs capitalized include related legal and filing fees.
14
<PAGE> 60
Nu-Tech Bio-Med, Inc. and Subsidiary
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements (continued)
3. INTANGIBLE ASSETS (CONTINUED)
The Company amortized $75,000 of goodwill in each of 1995 and 1994, and
approximately $11,000 and $10,000 of patents, in 1995 and 1994, respectively.
4. ACCRUED EXPENSES
Accrued expenses are as follows:
DECEMBER 31
1995 1994
--------------------
Employee compensation $280,210 $213,838
External services 137,139 153,800
Offering expenses - 175,054
Other 28,601 29,402
--------------------
$445,950 $572,094
====================
5. STOCK OPTION PLANS
At December 31, 1995, the Company has three stock option plans as follows:
1994 PLANS
In 1994, the Company reserved 350,000 shares of common stock under the 1994
Employee Stock Option Plan (the 1994 Plan). Options granted under the 1994 Plan
may be incentive options or nonqualified stock options, and shall be designated
as such at the time of grant. The 1994 Plan permits the granting of incentive
options only to officers and full-time employees of the Company, at no less than
100% of the fair market value of the Company's common stock at the date of the
grant. Nonqualified stock options may be granted to officers, employees,
consultants, and advisors of the Company, as well as to members of the Board of
Directors, at a price determined by the Plan administrator but in no case less
than 85% of the fair market value of the Company's common stock at the date of
the grant. To the extent that any option intended to be an incentive option
shall fail to qualify as such under Section 422 of the Internal Revenue Code of
1986, such options shall be deemed to be nonqualified options. The 1994 Plan is
administered by the Option Committee of the Board of Directors, which has full
power to determine the specific terms of each option granted, subject to the
provisions of the 1994 Plan.
15
<PAGE> 61
Nu-Tech Bio-Med, Inc. and Subsidiary
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements (continued)
5. STOCK OPTION PLANS (CONTINUED)
Stock option activity of the 1994 Plan since its inception through December 31,
1995, is summarized as follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES PRICE
SUBJECT TO OPTION PER SHARE
-----------------------------
<S> <C> <C>
Options granted 175,000 $7.00
-----------------------
Outstanding - December 31, 1994 175,000 7.00
Options canceled (400) 7.00
Options granted 1,500 7.00
-----------------------
Outstanding - December 31, 1995 176,100 $7.00
=======================
</TABLE>
Also in 1994, the Company reserved 75,000 shares of common stock under the Non-
Employee Director Stock Option Plan (the Director Plan). Each non-employee
director, upon election of the Company's Board of Directors, shall be granted
options for 5,000 shares of common stock, and each shall be granted on
subsequent annual anniversary dates of the initial grant additional options for
3,000 shares of common stock. The exercise price of each option shall be 100% of
the fair market value of the Company's common stock at the date of the grant.
The Director Plan is administered by the Director Plan Committee, which is
comprised of not less than two directors of the Company who are not entitled to
participate in the Director Plan.
Stock option activity of the Director Plan since its inception through December
31, 1995, is summarized as follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES PER SHARE
SUBJECT TO OPTION PRICE RANGE
--------------------------------------
<S> <C> <C>
Options granted 15,000 $ 7.00
-----------------------------
Outstanding - December 31, 1994 15,000 7.00
Options granted 19,000 11.07
-----------------------------
Outstanding - December 31, 1995 34,000 $7.00 - $11.07
=============================
</TABLE>
16
<PAGE> 62
Nu-Tech Bio-Med, Inc. and Subsidiary
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements (continued)
5. STOCK OPTION PLANS (CONTINUED)
1992 PLAN
In 1992, the Company reserved 28,571 shares of common stock under a 1992 Stock
Option Plan (1992 Plan). The 1992 Plan permits the granting of incentive options
only to
officers and employees of the Company and nonqualified options to directors,
officers, other key employees and consultants of the Company. Incentive options
may be granted at no less than 100% of the fair market value of the Company's
common stock at the date of the grant. The 1992 Plan is administered by the
Option Committee of the Board of Directors. This Committee has full power to
determine the specific terms of each option granted, subject to the provisions
of the 1992 Plan.
Stock option activity relating to the 1992 Plan since inception of the Plan
through December 31, 1995, is summarized as follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES PER SHARE
SUBJECT TO OPTION PRICE RANGE
------------------------------------
<S> <C> <C>
Outstanding - December 31, 1992 - $
Options granted 24,000 6.30 - 12.25
-------------------------------
Outstanding - December 31, 1993 24,000 6.30 - 12.25
Options granted 2,857 7.00
Options canceled or lapsed (11,428) 6.30
-------------------------------
Outstanding - December 31, 1994 15,429 6.30 - 12.25
Options canceled or lapsed (1,714) 9.84 - 12.25
-------------------------------
Outstanding - December 31, 1995 13,715 $6.30 - $12.25
===============================
</TABLE>
The Company has also issued options not under any specific plan. Activity since
the commencement of operations through December 31, 1995, is as follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES PER SHARE
SUBJECT TO OPTION PRICE RANGE
---------------------------------
<S> <C> <C>
Outstanding - February 1, 1982 - -
Options granted 3,000 $17.50
--------------------------
Outstanding - December 31, 1982 3,000 17.50
Options granted 2,800 17.50 - 21.00
Options exercised (3,886) 17.50
--------------------------
Outstanding - December 31, 1983 1,914 17.50 - 21.00
</TABLE>
17
<PAGE> 63
Nu-Tech Bio-Med, Inc. and Subsidiary
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements (continued)
5. STOCK OPTION PLANS (CONTINUED)
<TABLE>
<CAPTION>
NUMBER OF SHARES Per Share
SUBJECT TO OPTION Price Range
--------------------------------------
<S> <C> <C>
Options granted 3,229 17.50
Options exercised (343) 17.50
----------------------------------
Outstanding - December 31, 1984 4,800 17.50 - 21.00
Options granted 2,429 9.80 - 17.50
Options canceled or lapsed (1,000) 17.50 - 21.00
----------------------------------
Outstanding - December 31, 1985 6,229 9.80 - 21.00
Options granted 7,429 61.25 - 70.00
Options exercised (743) 9.80 - 17.50
Options canceled or lapsed (915) 17.50
----------------------------------
Outstanding - December 31, 1986 12,000 9.80 - 70.00
Options exercised (2,457) 17.50
Options canceled or lapsed (3,400) 17.50 - 70.00
----------------------------------
Outstanding - December 31, 1987 6,143 9.80 - 70.00
Options granted 2,771 52.50 - 98.35
Options exercised (285) 9.80
----------------------------------
Outstanding - December 31, 1988 8,629 9.80 - 98.35
No option activity - -
----------------------------------
Outstanding - December 31, 1989 8,629 9.80 - 98.35
Options granted 11,857 7.70 - 18.55
Options canceled or lapsed (2,815) 18.55 - 98.35
----------------------------------
Outstanding - December 31, 1990 17,671 7.70 - 98.35
Options granted 86,429 2.45 - 6.30
Options relinquished (47,619) 2.45
Options reclassed to incentive stock option plan (1,000) 98.44
Options canceled or lapsed (8,700) 10.94 - 70.00
----------------------------------
Outstanding - December 31, 1991 46,781 2.45 - 52.50
Options granted 20,143 6.30 - 11.81
Options exercised (28,832) 2.45 - 7.70
Options canceled or lapsed (2,815) 17.50 - 52.50
----------------------------------
Outstanding - December 31, 1992 35,277 2.45 - 18.60
</TABLE>
18
<PAGE> 64
Nu-Tech Bio-Med, Inc. and Subsidiary
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements (continued)
5. STOCK OPTION PLANS (CONTINUED)
<TABLE>
<CAPTION>
NUMBER OF SHARES PER SHARE
SUBJECT TO OPTION PRICE RANGE
--------------------------------------
<S> <C> <C>
Options granted 7,142 6.30 - 12.25
Options exercised (9,977) 2.45
Options canceled or lapsed (3,571) 4.38
-------------------------------
Outstanding - December 31, 1993 28,871 4.38 - 20.30
Options canceled or lapsed (4,286) 6.30
-------------------------------
Outstanding - December 31, 1994 24,585 4.38 - 20.30
Options canceled or lapsed (8,729) 7.70 - 18.60
-------------------------------
Outstanding - December 31, 1995 15,856 $6.30 - $20.30
===============================
</TABLE>
At December 31, 1995, options to purchase 239,671 shares are exercisable under
all plans.
6. WARRANTS
The Company grants warrants to secure financing, to raise capital and as a form
of compensation to various consultants. At December 31, 1995, the Company has
the following common stock purchase warrants outstanding:
<TABLE>
<CAPTION>
PARTY WARRANT NUMBER OF WARRANTS EXERCISE PRICE EXPIRATION
ISSUED TO OUTSTANDING PER SHARE DATE
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
SBLFC 2,857 $15.75 February 1998
SBLFC 42,857 28.35 April 1998
Consultant 7,143 6.30 October 1998
Investors 114,286 7.00 July 2001
Law firm 30,000 7.00 December 2001
Consultant 30,000 7.00 December 1999
Underwriter 73,000 9.10 December 1999
Investors 45,714 7.00 July 2001
Investors 35,408 7.00 July 2001
Consultant 30,000 7.00 September 1998
</TABLE>
Relative to the grant of 30,000 warrants to a consultant, the excess of the fair
value over the exercise price has been set up as deferred consulting expense and
will be amortized over the term of the agreement (three years).
19
<PAGE> 65
Nu-Tech Bio-Med, Inc. and Subsidiary
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements (continued)
6. WARRANTS (CONTINUED)
In addition, in 1995, the Company entered into an agreement with an investment
banker whereby the investment banker can earn up to 200,000 warrants with an
exercise price of $9.50 if certain events, as defined, occur. This agreement
expires in June 2000.
7. EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Equipment and leasehold improvements consists of the following:
<TABLE>
<CAPTION>
1995 1994
---------------------------
<S> <C> <C>
Office equipment $ 101,764 $ 51,647
Computer equipment 51,451 31,172
Laboratory equipment 454,131 94,790
Leasehold improvements 79,114 57,627
--------------------------
686,460 235,236
Less accumulated depreciation (214,943) (197,000)
--------------------------
$ 471,517 $ 38,236
==========================
</TABLE>
Depreciation expense was approximately $24,500 and $31,500 for the years ended
December 31, 1995 and 1994, respectively.
8. LEASE COMMITMENTS
The Company leases various office and research facilities and certain equipment
under noncancelable operating and capitalized leases. The leases expire at
various times beginning October 1996 through August 2000, at which time the
Company will have the option to renew leases from one to three years.
20
<PAGE> 66
Nu-Tech Bio-Med, Inc. and Subsidiary
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements (continued)
8. LEASE COMMITMENTS (CONTINUED)
The Company's future minimum lease payments under capital and operating leases
are as follows as of December 31, 1995:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
----------------------
<C> <C> <C>
1996 $19,917 $ 75,000
1997 19,917 55,000
1998 19,902 55,000
1999 - 55,000
2000 - 37,000
----------------------
Total minimum lease payments 59,736 $277,000
========
Less interest 13,062
-------
Present value of minimum lease payments 46,674
Less capital lease obligations due within one year 13,050
-------
Capital lease obligations - long-term portion $33,624
=======
</TABLE>
9. DEBT
Upon receiving private equity financing, the Company during 1994 and 1993
received matching loans totaling $791,000 from the State of Rhode Island's Small
Business Loan Fund Corporation (SBLFC). The loans bear interest at 5.4% and are
secured by virtually all assets of the Company. Future principal payments on
long-term debt due in each of the next five years are as follows:
<TABLE>
<S> <C>
1996 $197,246
1997 208,166
1998 105,590
1999 5,765
</TABLE>
The Company paid approximately $33,514 and $80,000 in interest expense during
the years ended December 31, 1995 and 1994, respectively.
The carrying amount of debt, using the discounted cash flow method, approximates
its fair value.
21
<PAGE> 67
Nu-Tech Bio-Med, Inc. and Subsidiary
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements (continued)
10. CONTRACT RESEARCH
RESEARCH FUNDING AGREEMENT
On December 14, 1990, the Company entered into an agreement with the Rhode
Island Partnership for Science and Technology (RIPSAT) to fund research,
development, testing and validation of an in vitro assay to predict the outcome
of x-ray mediated chemotherapy enhancement anticancer therapy (the project) or
radiation mediated chemotherapy enhancement (RMCE; the product).
The project consists of two phases as follows:
Applied research--RIPSAT will fund operating and capital costs incurred in
the performance of the Applied Research Phase up to a maximum of $320,338.
RIPSAT will not fund more than 60% of the total project cost. Such research
is paid for by the Company and reimbursed by RIPSAT. Through December 31,
1993, approximately $531,500 of total operating costs have been expended on
this project. These operating costs included $362,255 in reimbursable costs
expended by Brown University of which $320,338 of these reimbursable costs
(the total grant) were reimbursed by RIPSAT. RIPSAT has been informed and
has acknowledged that the Applied Research Phase will not be completed for
an indeterminate period of time.
Commercialization--During the Commercialization Phase, the Company will pay
amounts to RIPSAT equal to the funds received during the Applied Research
Phase. Payment will begin at the end of the first calendar quarter in which
sales of the product are recorded. Payments will be calculated as follows
(i) 3% of quarterly net sales of the FCA, but not exceeding an aggregate of
$107,000, and (ii) 5% of quarterly net sales of the RMCE. The 3% and 5%,
under certain circumstances, may be increased to 6% and 10%, respectively.
At December 31, 1995, the Commercialization Phase has not commenced.
RESEARCH AND LICENSE AGREEMENT
In May 1991, the Company entered into a Research Agreement with Brown University
(Brown). Under the agreement, the Company will fund Brown for all direct and
indirect costs incurred in the performance of the research which shall not
exceed $375,604 without written authorization from the Company. The total
reimbursable costs expended by Brown University under this agreement through
December 31, 1993, were $362,255, of which $320,338 was reimbursed to the
Company by RIPSAT. Of the $362,255, the Company has paid $256,684 to Brown
leaving a balance of $105,571.
22
<PAGE> 68
Nu-Tech Bio-Med, Inc. and Subsidiary
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements (continued)
10. CONTRACT RESEARCH (CONTINUED)
Under the provisions of the agreement, the Company has an option to license
intellectual property developed in the performance of the agreement. The Company
will pay royalties to Brown at a rate of 2% of sales which shall commence two
years from issuance of a patent and extend for the life of the license.
CLINICAL TRIAL AGREEMENT
On August 14, 1995, the Company entered into an Agreement with a research
institution to conduct a clinical trial. The cost of this clinical trial is not
to exceed $568,000. No
costs have been incurred under this Agreement to date.
11. STOCKHOLDERS' EQUITY TRANSACTIONS
During the second and third quarter of 1994, the Company issued 50,000 shares of
unregistered common stock valued at $175,000 to the Company's chairman for past
services and for entering into an employment agreement which provided for a cash
bonus of approximately $128,000 which was paid in 1995.
On August 9, 1994, the Company completed a private offering of its securities to
15 investors for an aggregate of $620,000. The securities sold by the Company
comprised (i) $400,000 principal amount of 7% Promissory Notes which, under
terms of the agreement, were repaid in conjunction with the public offering
described below in December 1994; (ii) 57,143 shares of common stock for an
aggregate of $200,000; and (iii) 114,286 common stock purchase warrants for an
aggregate of $20,000.
In June 1995, the Company granted 100,000 restricted shares to the Company's
chairman that will vest periodically at a rate of 5,000 shares per year subject
to certain conditions and certain accelerated provisions The grant has been
accounted for as an increase in common stock and capital in excess of par value
at the fair value of the shares at the date of the grant (and modified
periodically to reflect current valuations) offset by an equal charge to equity
recorded as an Unvested Common Stock Grant. At December 31, 1995, conditions for
acceleration were achieved, subject to one year continued employment. The
Unvested Common Stock Grant is amortized over the vesting period and is included
in depreciation and amortization expense, which, at December 31, 1995,
represented approximately eighteen months ending December 31, 1996. In addition,
the Company has agreed to reimburse the officer for income taxes associated with
the grant. Such reimbursements are accrued in accordance with the vesting
schedule.
23
<PAGE> 69
Nu-Tech Bio-Med, Inc. and Subsidiary
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements (continued)
12. INCOME TAXES
At December 31, 1995, the Company has net operating loss carryforwards of
approximately $14,300,000 for income tax purposes that expire at various times
from 2001 to 2010. Approximately $3,100,000 of these losses relate to a
subsidiary of the Company that are limited in usage. In addition, utilization of
approximately $9,900,000 of the net operating loss carryforwards may be subject
to limitations pursuant to Section 382. No income tax benefit (expense) has been
recorded during the years ended December 31, 1995 and 1994.
The principal components of the Company's deferred tax assets were as follows:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards $ 5,732,000 $ 5,295,000
Federal general business tax credits 150,000 117,000
Other 25,000 26,000
------------------------------
5,907,000 5,438,000
Valuation allowance (5,907,000) (5,438,000)
------------------------------
Net deferred tax assets $ - $ -
==============================
</TABLE>
13. ACQUISITION COSTS
On December 14, 1995, the Company signed a letter of intent to acquire a
majority interest in American Cytogenetics, Inc. (ACI). Under the agreement, the
Company will
purchase ACI stock from three entities, at an aggregate price of $784,200, a
portion of which amount will be paid for in Company common stock and warrants.
Further, the Company will purchase common stock from ACI for $300,000. The final
agreement is contingent upon approval of the respective Boards of Directors of
the companies, due diligence, and the execution of a definitive agreement.
24
<PAGE> 70
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
Registrant caused this Report to be signed on its behalf by the undersigned,
thereunto duly authorized.
NU-TECH BIO-MED, INC.
By /s/ J. Marvin Feigenbaum
---------------------------
J. Marvin Feigenbaum
Chairman of the Board of Directors,
President, Chief Executive and
Chief Financial Officer, and
Principal Accounting Officer
Dated: March 26, 1996
In accordance with the requirements of the Securities Exchange Act of
1934, this Report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated.
/s/ J. Marvin Feigenbaum March 26, 1996
- -------------------------------
J. Marvin Feigenbaum
Chairman of the Board,
President, Chief Executive
and Financial Officer, and
Principal Accounting Officer
/s/ Chriss W. Street March 26, 1996
- -------------------------------
Chriss W. Street
Director
/s/ Edmond E. Charrette March 26, 1996
- -------------------------------
Edmond E. Charrette, M.D.
Director
/s/ Leonard Green March 26, 1996
- -------------------------------
Leonard Green
Director
/s/ David A. Sterling March 26, 1996
- -------------------------------
David A. Sterling
Secretary, Director
/s/ Robert B. Fagenson March 26, 1996
- -------------------------------
Robert B. Fagenson
Director
44
<PAGE> 71
EXHIBIT INDEX
The exhibits designated with an asterisk (*) have previously been filed
with the Commission and, pursuant to 17 C.F.R. Secs. 201.24 and 240.12b-32, are
incorporated by reference to the document referenced in brackets following the
descriptions of such exhibits.
Exhibit
No. Description
------- -----------
3.1* Amended and Restated Certificate of Incorporation
filed with the Secretary of State of Delaware on
November 16, 1994 [Exhibit 3.1.5 to Amendment No. 1
to Registration Statement on Form SB-2, File No.
33-84622]
3.2* Amended and Restated By-Laws effective November 16,
1994 [Exhibit 3.2.2 to Registration Statement on
Form SB-2, File No. 33-84622]
4.1* Form of Common Stock Certificate [Exhibit 4.1 to
Registration Statement on Form SB-2, File No. 33-
84622]
4.2* Form of Warrant and Warrant Agreement relating to
Warrants to purchase an aggregate of 114,286 shares
of Common Stock issued to certain individuals on
August 9, 1994 in connection with a Bridge Financing
[Exhibit 4.2 to Registration Statement on Form SB-2,
File No. 33-84622]
4.3* Form of and Warrant Agreement issued to Starr
Securities, Inc. and Stein, Shore Securities, Inc.
[Exhibit 4.4 to Registration Statement on Form SB-
2, File No. 33-84622]
4.4* Form of Registration Rights Agreement dated
August 9, 1994 between the Registrant and certain
individuals in connection with completed Bridge
Financing [Exhibit 4.5 to Registration Statement on
Form SB-2, File No. 33-84622]
10.1* Amended and Restated Employment Agreement with J.
Marvin Feigenbaum [Exhibit 10.2 to Registration
Statement on Form SB-2, File No. 33-84622]
10.2* Employment Agreement with Dr. Kenneth E. Blackman
as of July 1, 1994 [Exhibit 10.3 to Registration
Statement on Form SB-2, File No. 33-84622]
10.3* Patent No. 4,559,299 dated December 17, 1985
[Exhibit 10.4 to Registration Statement on Form SB-
2, File No. 33-84622]
45
<PAGE> 72
10.4* Patent No. 4,734,372 dated March 29, 1988 [Exhibit
10.5 to Registration Statement on Form SB-2, File
No. 33-84622]
10.5* Patent No. 4,937,298 dated June 26, 1990 [Exhibit
10.6 to Registration Statement on Form SB-2, File
No. 33-84622]
10.6* Assignment of Patent No. 4,559,299, recorded on
March 29, 1993, by Brown University Research
Foundation, in favor of Analytical Biosystems
Corporation [Exhibit 10.7 to Registration Statement
on Form SB-2, File No. 33-84622]
10.7* Assignment of Patent No. 4,734,372, recorded on
March 29, 1993, by Brown University Research
Foundation, Inc., in favor of Analytical Biosystems
Corporation [Exhibit 10.8 to Registration Statement
on Form SB-2, File No. 33-84622]
10.8* Assignment of Patent No. 4,937,187, recorded on
March 29, 1993, by Brown University Research
Foundation, Inc. in favor of Analytical Biosystems
Corporation [Exhibit 10.9 to Registration Statement
on Form SB-2, File No. 33-84622]
10.9* Consulting Agreement with Starr Securities, Inc.
[Exhibit 10.10 to Amendment No. 1 to Registration
Statement on Form SB-2, File No. 33-84622]
10.10* Funding Agreement dated December 14, 1990 between
Rhode Island Partnership for Science and Technology
and Analytical Biosystems Corporation [Exhibit
10.11 to Registration Statement on From SB-2, File
No. 33-84622]
10.11* Loan Agreement dated February 11, 1993 between State
of Rhode Island Economic Development Small Business
Loan Fund Corporation ("SBLFC") and Analytical
Biosystems Corporation in the amount of $150,000
[Exhibit 10.(iii) to Report on Form 10-KSB for the
fiscal year ended December 31, 1992]
10.12* Loan Agreement dated February 25, 1993 between
SBLFC and Analytical Biosystems Corporation in the
amount of $100,000 [Exhibit 10(iii) to Report on
Form 10-KSB for the fiscal year ended December 31,
1992]
10.13* Loan Agreement dated April 19, 1993 between SBLFC and
Analytical Biosystems Corporation in the amount of
$250,000 [Exhibit 10(i)(a) to Report on Form 8-K
dated April 30, 1993]
46
<PAGE> 73
10.14* Loan Agreement dated October 22, 1993 between SBLFC
and Analytical Biosystems Corporation in the amount
of $166,666 [Exhibit 10(iii)(d) to Report on Form
10-KSB for the fiscal year ended December 31, 1993]
10.15* Loan Agreement dated February 17, 1994 between
SBLFC and Analytical Biosystems Corporation in the
amount of $125,000 [Exhibit 10(iii)(e) to Report on
Form 10-KSB for the fiscal year ended December 31,
1993]
10.16* Security Agreement dated October 22, 1993 between
SBLFC and Analytical Biosystems Corporation
[Exhibit 10.17 to Registration Statement on From
SB-2, File No. 33-84622]
10.17* Patent Security Agreement dated April 19, 1993
between SBLFC and Analytical Biosystems Corporation
[Exhibit 10.18 to Registration Statement on From
SB-2, File No. 33-84622]
10.18* Patent Security Agreement dated October 22, 1993
between SBLFC and Analytical Biosystems Corporation
[Exhibit 10.19 to Registration Statement on From
SB-2, File No. 33-84622]
10.19* Form of Indemnification Agreements between
Registrant and Registrant's Directors and Officers
[Exhibit 10.20 to Registration Statement on From
SB-2, File No. 33-84622]
10.20* Lease Agreement as of November 1, 1994 for facility
located at 55 Access Road, Warwick, Rhode Island
02886 [Exhibit 10.21 to Amendment No. 1 to
Registration Statement on From SB-2, File No. 33-
84622]
10.21* Consulting Agreement and Warrant with Dr. Ellioth
Fishkin [Exhibit 10.22 to Amendment No. 1 to
Registration Statement on From SB-2, File No. 33-
84622]
10.22* Redacted copy of Clinical Trials Agreement dated
August 14, 1995 between Analytical Biosystems
Corporation and research institution and certain
individuals [Exhibit 10.1 to Report on Form 8-K
dated August 11, 1995]
10.23* Agreement dated April 10, 1995 between Analytical
Biosystems Corporation and Loats Associates
[Exhibit 10.1 to Report on Form 8-K dated April 20,
1995]
47
<PAGE> 74
21 Subsidiaries of Registrant
27 Financial Data Schedule
99.1* 1992 Stock Option Plan [Exhibit 28 to Report on
Form 10-Q for the quarter ended March 31, 1992]
99.2* 1994 Incentive Stock Option [Exhibit 99.2 to
Registration Statement on From SB-2, File No. 33-
84622]
99.3* Non Employee Director Stock Option Plan [Exhibit
99.3 to Registration Statement on From SB-2, File
No. 33-84622]
48
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
ANALYTICAL BIOSYSTEMS CORPORATION (100%)
49
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's audited financial statements for the period ended December 31,
1995 and is qualified in its entirety by reference to such financial
statements and notes thereto.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 2,538,002
<SECURITIES> 0
<RECEIVABLES> 84,168
<ALLOWANCES> 16,608
<INVENTORY> 0
<CURRENT-ASSETS> 78,581
<PP&E> 686,460
<DEPRECIATION> 214,943
<TOTAL-ASSETS> 3,818,575
<CURRENT-LIABILITIES> 871,632
<BONDS> 319,521
0
17,544,715
<COMMON> 17,422
<OTHER-SE> 3,818,575
<TOTAL-LIABILITY-AND-EQUITY> 161,701
<SALES> 322,778
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 2,378,221
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 33,514
<INCOME-PRETAX> (2,088,957)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,088,957)
<EPS-PRIMARY> (1.33)
<EPS-DILUTED> 0
</TABLE>
