SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
- -------------------------------------------------------------------------------
Form 10-Q
Quarterly Report Pursuant to Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For quarter ended April 30, 1997
Commission File Number 0-14026
DALTEX MEDICAL SCIENCES, INC.
(Exact Name of Registrant As Specified In Its Charter)
Delaware 13-3174562
(State of Incorporation) (IRS Employer Identification No.)
50 Kulick Road
Fairfield, New Jersey 07004
(Address of Principal Executive Offices)
(201) 227-5066
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes X No .
Indicate the number of shares outstanding of each of the registrant's
classes of Common Stock, as of the latest practicable date.
Class Outstanding at June 4, 1997
Common Stock, par value $.01 8,632,699
per share
<PAGE>
DALTEX MEDICAL SCIENCES, INC.
INDEX
Page
PART 1 - FINANCIAL INFORMATION
Item 1 - Financial Statements
(a) Condensed balance sheets as of April 30, 1997
(Unaudited) and July 31, 1996. 1-2
(b) Condensed statements of operations and deficit
accumulated during the development stage for
the three months ended April 30, 1997
(Unaudited) and April 30, 1996 (Unaudited),
nine months ended April 30, 1997 (Unaudited)
and April 30, 1996 (Unaudited), and for the
period July 28, 1983 (Date of Incorporation) to
April 30, 1997 (Unaudited) 3
(c) Condensed statements of cash flows for the nine
months ended April 30, 1997 (Unaudited) and
April 30, 1996 (Unaudited), and for the period
July 28, 1983 (Date of Incorporation) to April
30, 1997 (Unaudited) 4
(d) Notes to condensed financial statements
(Unaudited) 5-7
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 7-13
PART II - OTHER INFORMATION
Item 5 - Other Information 13-14
Item 6 - Exhibits and Reports on Form 8-K 14
<PAGE>
PART 1 - FINANCIAL INFORMATION
Item 1 - Financial Statements
Daltex Medical Sciences, Inc.
(A Development Stage Enterprise)
Condensed Balance Sheets
April 30,
1997 July 31,
(Unaudited) 1996 (A)
Assets
Current assets:
Cash and cash equivalents $12,689 $49,926
Other receivables 20,319 15,319
Prepaid royalty 60,000 60,000
-------- --------
Total current assets 93,008 125,245
Net plant and equipment, at cost
Patents, net of accumulated amortization of
$134,426 at April 30, 1997
and $134,426 at July 31, 1996 -- --
Other assets, net 3,375 3,375
Deferred royalty costs (note 2) 140,000 185,000
-------- --------
$236,383 $313,620
======== ========
See accompanying notes to condensed financial statements.
(A) Amounts at July 31, 1996 are from audited financial statements.
1
<PAGE>
Daltex Medical Sciences, Inc.
(A Development Stage Enterprise)
Condensed Balance Sheets
<TABLE>
<CAPTION>
April 30,
1997 July 31,
(Unaudited) 1996 (A)
<S> <C> <C>
Liabilities and Stockholders' Deficiency
Current liabilities:
Accounts payable & accrued expenses (note 3) $917,781 $885,942
Advance royalty payments (note 2) 120,000 120,000
----------- -----------
Total current liabilities 1,037,781 1,005,942
----------- -----------
Advance royalty payments (note 2) 280,000 370,000
----------- -----------
Stockholders' deficiency:
Common Stock, par value $.01 per share
Authorized 20,000,000 shares; issued
8,632,699 at April 30, 1997 and
8,632,699 at July 31, 1996 86,327 86,327
Paid in capital 6,816,369 6,816,369
Deficit accumulated during the (7,984,094)
development stage (7,965,018)
----------- -----------
Total stockholders' deficiency (1,081,398) (1,062,322)
----------- -----------
$236,383 $313,620
=========== ===========
</TABLE>
See accompanying notes to condensed financial statements
(A) Amounts at July 31, 1996 are from audited financial statements.
2
<PAGE>
Daltex Medical Sciences, Inc.
(A Development Stage Enterprise)
Statements of Operations and Deficit
Accumulated During the Development Stage
<TABLE>
<CAPTION>
For The Period
28-Jul-83
Three Months Three Months Nine Months Nine Months (Date of
Ended Ended Ended Ended Incorporation)
April 30, April 30, April 30, April 30, To April 30,
1997 1996 1997 1996 1997
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
Revenues:
Sales - Patents & related technology $ -- $ -- $ -- $ -- $300,000
Sales - Gloves -- -- -- -- 208,440
Interest and other income (note 5) 85 199 342 75,199 1,712,903
License fees and royalties 158,653 104,706 284,790 214,310 2,654,886
------------ ------------ ------------ ------------ ------------
Total revenues 158,738 104,905 285,132 289,509 4,876,229
------------ ------------ ------------ ------------ ------------
Expenses incurred in the development stage:
Cost of sales -- -- -- -- 313,243
Research & development -- -- -- 6,400 3,335,251
General & administrative 112,689 132,000 304,208 358,582 9,211,829
------------ ------------ ------------ ------------ ------------
Total expenses incurred in the
development stage 112,689 132,000 304,208 364,982 12,860,323
------------ ------------ ------------ ------------ ------------
Net income (loss) 46,049 (27,102) (19,076) (75,473) (7,984,094)
------------ ------------ ------------ ------------ ------------
Deficit accumulated during the development stage:
Beginning of period (8,030,143) (7,881,145) (7,965,018) (7,832,774) --
------------ ------------ ------------ ------------ ------------
End of period $(7,984,094) $(7,908,247) $(7,984,094) $(7,908,247) $(7,984,094)
============ ============ ============ ============ ============
Net income (loss) per common share 0.01 -- -- (0.01) (1.02)
============ ============ ============ ============ ============
Weighted average number of
shares outstanding 8,633,000 8,633,000 8,633,000 8,633,000 7,810,000
============ ============ ============ ============ ============
</TABLE>
See accompanying notes to condensed financial statements.
3
<PAGE>
<TABLE>
Daltex Medical Sciences, Inc.
(A Development Stage Enterprise)
Condensed Statements of Cash Flows
<CAPTION>
For the Period
July 28, 1983
(Date of
Incorporation)
April 30, April 30, to April 30,
1997 1996 1997
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C>
Cash flows from operations
Net loss: ($19,076) ($75,473) ($7,984,094)
Non-cash expenses included in net loss:
Depreciation and amortization -- 16,440 310,234
Non-cash compensation charges -- -- 889,130
Abandoned equipment -- -- 53,386
Write-off of patents -- -- 105,221
Write-off of inventory/advance payments -- -- 115,048
Other -- -- 4,499
Changes in current assets & liabilities:
(Increase) in inventory & advance payments -- -- (115,048)
(Increase) decrease in grant & other receivables (5,000) 43,448 (20,319)
(Increase) decrease in deferred royalty costs 45,000 (260,000) (200,000)
Increase (decrease) in accounts payable & accrued expenses 31,839 (178,874) 920,103
Increase (decrease) in advance development
& royalty payments (90,000) 520,000 400,000
----------- ----------- -----------
Net cash flows of operations (37,237) 65,541 (5,521,840)
----------- ----------- -----------
Cash flows from investing activities:
Purchase of U.S. government obligations -- -- (8,813,987)
Redeemed U.S. government obligations
and other short-term investments -- -- 8,810,987
Purchase of equipment & furniture -- -- (159,370)
Purchase of patent & trademark -- -- (171,750)
(Increase) decrease in due from officer & stockholder -- -- (110,601)
(Purchase) sale of other assets -- -- (30,095)
----------- ----------- -----------
Net cash flows of investing activities -- -- (474,816)
----------- ----------- -----------
Cash flow from financing activities:
Proceeds from sale of common stock & warrants -net -- -- 6,009,344
Net increase (decrease) in cash (37,237) 65,541 12,689
Cash, including certificates of deposit:
Beginning of period 49,926 10,862 --
----------- ----------- -----------
End of period $12,689 $76,403 $12,689
=========== =========== ===========
</TABLE>
See accompanying notes to condensed financial statements.
4
<PAGE>
NOTES TO CONDENSED FINANCIAL STATEMENTS-April 30, 1997 (Unaudited)
(1) Basis of Presentation
The unaudited condensed financial statements have been prepared
from the books and records of Daltex Medical Sciences, Inc. (the
"Company") in accordance with generally accepted accounting
principles for interim financial information pursuant to Rule
10-01 of Regulation S-X. Accordingly, they do not include all of
the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation
have been included. Interim results are not necessarily
indicative of the results that may be expected for the fiscal
year.
(2) Advance Royalty and Development Phase Payments
In October 1995, the Company and Arrow International, Inc.
("Arrow") agreed to modify the terms of the existing Arrow
License (the "Modified Arrow License") concerning only those
license fees payable to the Company by Arrow for antimicrobially
treated multi-lumen central venous catheters (exclusive of the
silicone Hickman/Broviac type, implantable port or peripherally
inserted central venous catheters). During the quarter ended
October 31, 1995 and pursuant to the Modified Arrow License,
Arrow paid the Company a one time royalty of $600,000 (in lieu of
the periodic royalty paid to the Company pursuant to the Arrow
License for such catheters) for the period August 31, 1995
through September 1, 2000, of which 50% was paid to Columbia
University (the "University") in November 1995 pursuant to the
terms of a 1987 license agreement between the Company and the
University (the " 1987 University License"). Revenue, as well as
the expense for the amounts paid to the University, will be
recognized each quarter through September 1, 2000 in equal
amounts, and accordingly, $30,000 of revenue and $15,000 of
related expense were recognized during the quarter ended April
30, 1997. After September 1, 2000, the periodic royalty payments
provided for in the existing Arrow License with respect to the
antimicrobially treated multi-lumen central venous catheters will
resume and will be adjusted to reflect increases in the Consumer
Price Index through September 1, 2000. All other terms and
conditions of the existing Arrow License (including Arrow's
obligation to make quarterly royalty payments based on sales of
percutaneous sheath introducer ("PSI") units sold, and quarterly
development phase payments for those products Arrow is developing
or has developed incorporating the Company's antimicrobial
technology), except those terms modified by the Patent Settlement
Agreement of January 1, 1995, remain in full force and effect.
The Modified Arrow License does not modify or alter the terms of
the Patent Settlement Agreement. For a discussion of the Patent
Settlement Agreement and the resolution of the Patent
Interference Proceedings, see "Item 3. Legal Proceedings" of the
Company's Annual Report on Form 10-K for the fiscal year ended
July 31, 1995.
During the quarter ended April 30, 1997, the Company received
nominal royalty payments from Arrow based on limited sales of PSI
units sold during this period, and
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<PAGE>
quarterly development phase payments for two other products which
Arrow is developing or has developed incorporating the Company's
antimicrobial technology.
Additionally, in November 1996, the Company received an advanced
annual payment (which was not scheduled to be paid until April 1,
1997) from W.L. Gore & Associates, Inc. ("Gore"), another of the
Company's sublicensees, in the amount of $45,000. Included in
this amount was $15,000 representing an advance against annual
minimum royalties to be paid to the Company based on sales of
antimicrobialy treated hernia patches which have recently been
introduced to the marketplace by Gore, and $30,000 representing
advanced annual development phase payments for two other product
segments also licensed to Gore pursuant to the terms of the May
1992 License Agreement between the Company and Gore. Such $45,000
was recognized as revenue in the quarter ended April 30, 1997.
(3) License Agreement and Research Agreement
The Company currently has various license agreements and research
agreements with the University related to certain antimicrobial
technologies (see "Management's Discussion and Analysis of
Financial Condition and Results of Operations").
As of April 30, 1997, the Company owes the University $165,706
for the University's past due share of sublicensing and royalty
payments received by the Company through 1994. Additionally, the
Company owes the University $410 representing the University's
50% share of royalties received by the Company from Arrow based
on sales of PSI units, and $2,500 representing the University's
50% share of quarterly development fees received by the Company
from Arrow in May 1997. Moreover, the Company has been billed
$643,294 as of April 30, 1997 by the University's patent counsel
for patent work undertaken in connection with the Company's
license agreements with the University, although the Company is
currently disputing a substantial portion of these legal fees.
All of these amounts are included in accounts payable at April
30, 1997 on the accompanying condensed balance sheets. This
$643,294 includes: (i) approximately $128,954, representing
charges in connection with the Company's protection of its
intellectual property rights through domestic and foreign patent
filings and related matters; (ii) approximately $108,560,
representing charges in connection with two AIDS-related patents
and a patent application for antimicrobially treated condoms
which the Company and the University have agreed in principle to
reassign to the University, because the Company has been
unsuccessful in licensing these technologies to third parties;
and (iii) approximately $401,000, representing charges in
connection with the previously disclosed Patent Interference
Proceedings and subsequent Patent Settlement Agreement. The
Company disputes the Company's responsibility for this $401,000,
and the Company and the University are continuing efforts to
negotiate a settlement. Because the Company has proposed to
reassign the two AIDS-related patents and one patent application
for antimicrobially treated condoms to the University, the
Company has requested that the University credit the Company for
the $108,560 outstanding amount due the University's patent
counsel related to these matters. The University has continued to
work with the Company with respect to these matters and the
Company's financial condition and its relation to the University.
Although the Company is continuing its attempts to resolve these
matters, there can be no
6
<PAGE>
assurance that the Company will be successful in reaching a
resolution with the University.
(4) License Amendment Agreement between the Company and W.L. Gore &
Associates
In February 1997, the Company and Gore entered into a License
Amendment Agreement, dated as of January 1, 1997, clarifying the
specific product and market application segments set forth in the
existing license agreement entered into by the Company and Gore in
May 1992. In consideration for the Company's cooperation with
respect to such License Amendment Agreement and to help fund the
payment of legal and filing costs incurred by the Company in
connection with such Agreement, the Company received a payment
from Gore in February 1997 in the amount of $50,000. Such payment
is included in revenues in the quarter ended April 30, 1997. The
Company and Gore have also agreed to a royalty rate of 5% for any
product sold by Gore that is not otherwise covered by any other
categories set forth in the License Amendment Agreement, but which
are covered by Licensed Products (as defined therein). All other
terms and conditions set forth in the existing 1992 license
agreement remain in full force and effect.
Item 2
Management's Discussion and Analysis of
Financial Condition and Results of Operation
The following discussion contains forward looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995
relating to the Company's plans with respect to its continually
deteriorating financial condition. Actual results could differ materially
from management's plans and there can be no assurance that the Company will
be successful in its plan (i) to sell or license the rights to certain
applications of its antimicrobial technology, (ii) to sell all or
substantially all of its assets, (iii) to negotiate the forgiveness of
certain debt owed to the University or (iv) to continue as a going concern.
The Company is in the development stage and has been principally
engaged in research and development activities with the objective of
developing and commercializing certain cost-reducing medical device and
pharmaceutical technologies. Since March 1, 1994, the Company has engaged
in extremely limited research and development efforts. In an effort to
commercialize its more fully developed technologies, the Company had
focused, from 1990 to March 1994, its research, development and
commercialization efforts principally on its infection-reducing,
antimicrobial technologies, including the manufacture and marketing through
distributors of the Company's antimicrobial gloves and the licensing of
other applications of the antimicrobial technology to larger companies. In
the first three quarters of fiscal 1997, as well as in fiscal 1996, the
Company had no sales of any of its technologies or its antimicrobial
medical gloves. See "Item 1. Business" of the Company's Annual Report on
Form 10-K for the fiscal year ended July 31, 1996 for a discussion of the
dispute with the University concerning the license for the antimicrobial
glove technology, and a discussion of
7
<PAGE>
the terms of the Patent Settlement Agreement dated as of January 1, 1995
among the Company, the University, Arrow and Becton Dickinson.
Given the continually deteriorating financial condition of the
Company, the Board of Directors of the Company has authorized Bruce
Hausman, President and Chief Executive Officer of the Company, to negotiate
the sale of the Company's rights to various applications of the
antimicrobial technology to certain sublicensees of the Company. These
applications constitute substantially all of the assets of the Company. In
the event that the Company is successful in selling substantially all of
its assets, the Company will either endeavor to sell the remaining
corporate shell to a third party or to liquidate any remaining assets. The
Company has not entered into any agreement to date for the sale of its
rights to the antimicrobial technology or any other assets, and there can
be no assurance that the Company will be successful in entering into such
agreement.
In the event that the Company is unsuccessful in negotiating a
sale of its rights to the antimicrobial technology, the Company may seek to
transfer this technology back to the University in exchange for the
forgiveness by the University of all of the outstanding amounts owed by the
Company to the University.
During the first three quarters of fiscal 1997 and for the fiscal
years ended July 31, 1996 and 1995, the Company received revenues
principally from royalty payments and development fees pursuant to two
licenses with sublicensees of applications of the Company's antimicrobial
medical technology, and the one-time royalty payment, both discussed below.
Additionally, in June 1997, the Company received a one-time,
non-refundable, non-creditable fee of $100,000 from Arrow, of which $50,000
was paid on June 5, 1997 to the University pursuant to the terms the 1987
University License, for those additional "Fields of Application" set forth
in the Second Modification to License Agreement between the Company and
Arrow dated as of May 30, 1997 (the "Second Modified Arrow License"), as
described under "Item 5 - Other Information."
In October 1995, the Company received a one-time royalty payment
of $600,000 from Arrow, of which 50% was paid in November 1995 to the
University pursuant to the 1987 University License. Additionally, in
November 1995, the Company received $75,000 from Arrow to help fund the
payment of legal costs incurred by the Company in connection with the
Patent Interference Proceedings and the Patent Settlement Agreement. See
"-Results of Operations" and "-Liquidity and Capital Resources."
Except for those products covered by the Second Modified Arrow
License, the Company will continue to receive quarterly development phase
payments on the other products incorporating the Company's antimicrobial
technology which the Company's sublicensees are developing or have
developed which have not yet received clearance from the U.S. Food and Drug
Administration ("FDA"), or have not yet reached the marketplace, as well as
quarterly royalty payments from Arrow based on sales of PSI units. As a
result of the introduction of the PSI to the marketplace, quarterly
development phase payments from Arrow have been reduced from $7,500 to
$5,000, which will be partially offset by royalty payments related to such
product. The Company will also continue to receive annual minimum royalty
payments in the amount of $15,000 for the first three years of sales from
Gore based on sales of one product segment which has received FDA clearance
and has recently been introduced to the marketplace. The minimum annual
royalty payment is equal to the annual development
8
<PAGE>
payment the Company had been receiving for such product segment. The
Company is unable to assess at this time whether and to what extent such
royalty payments will increase in the future.
Results of Operations for the Three Months Ended April 30, 1997
Revenues for the quarter ended April 30, 1997 totaled $158,738,
an increase of 51.3% over the $104,905 in revenues during the corresponding
period in fiscal 1996 primarily due to factors described below. Revenues
from licensing fees in the third quarter of fiscal 1997 were $85,000, an
increase of 70% over the $50,000 in licensing fees recorded in the
corresponding period in fiscal 1996 as a result of the Company's receipt in
February 1997 of $50,000 from Gore described in note 4 above. Revenues from
royalties were $73,653, an increase of 34% over the $54,706 in royalty
payments received during the third quarter of fiscal 1996 as a result of a
$27,834 payment made by Arrow to the Company pursuant to the Patent
Settlement Agreement which provides for certain royalties to be paid by
Arrow to the Company and for such royalties to be paid by the Company to
another party to such Patent Settlement Agreement, a slight increase in
royalty payments from Arrow, of $820, of which 50% is owed to the
University, related to sales of PSI units, and the replacement of one
annual development phase payment with minimum annual royalty payments of
$15,000 received from Gore. Included in revenues from royalties is $30,000
representing royalties earned for the quarter ended April 30, 1997, which
is derived from the $600,000 advance royalty payment received by the
Company from Arrow in October 1995. (See notes 2 and 3 above.) The unearned
portion of $400,000 is reflected as deferred revenue in the liability
section and the remaining $200,000 of the $300,000 paid to the University
is reflected as deferred royalty costs in the assets section of the balance
sheets.
Although the Company had no sales of its antimicrobial gloves in
the current quarter, there were no glove sales in the corresponding period
of fiscal 1996 either. The Company maintains its belief that such lack of
glove sales continues to be due to the difficulty it faces as a small
company with extremely limited resources in introducing and marketing a new
product internationally without the benefit of a domestic sales base or
regulatory clearance by the FDA.
Expenses incurred during the three months ended April 30, 1997
totaled $112,689, a decrease of 14.6% from the $132,008 of expenses
incurred in the three months ended April 30, 1996 primarily due to the
reduction of legal costs incurred by the Company in connection with the
protection of its intellectual property rights.
The Company had a net income of $46,049 for the quarter ended
April 30, 1997, as compared to a recorded net loss of $27,102 in the
corresponding period in fiscal 1996 due primarily to the Company's receipt
in February 1997 of $50,000 from Gore described in note 4 above, and the
reduced legal costs described above.
Results of Operations for the Nine Months Ended April 30, 1997
Revenues for the nine months ended April 30, 1997 totaled
$285,132, a decrease of 1.5% from revenues of $289,509 in the corresponding
period last year. This decrease in revenues was due to the Company's
receipt from Arrow in fiscal 1996 of the one-time payment
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of $75,000 to help fund the payment of legal costs incurred by the Company
in connection with the Patent Interference Proceedings and Patent
Settlement Agreement, the fixed royalties recognized for the first nine
months of fiscal 1997 as a result of the modification to the license
agreement between the Company and Arrow (see note 2 to the financial
statements), and to a lesser extent, the replacement of quarterly
development payments with nominal royalty payments from Arrow based on
sales of PSI units. This reduction was partially offset by the $50,000
received from Gore. In addition, revenues in fiscal 1997 included $82,905
as a result of the Patent Settlement Agreement which provides for certain
royalties to be paid by Arrow to the Company and, in turn, paid by the
Company to another party to such agreement, as discussed above.
Expenses incurred during the nine months ended April 30, 1997
totaled $304,208, a decrease of 16.6% from the $364,982 of expenses
incurred in the nine months ended April 30, 1996. This decrease was due
primarily to the reduction in legal costs incurred by the Company in
connection with the Company's protection of its intellectual property
rights, and to a lesser extent, the fixed royalties recognized for the
first nine months of fiscal 1997 as a result of the modification to the
license agreement between the Company and Arrow, a portion of which is
recorded in expenses as a payment to the University. (See note 2 to the
financial statements.) This decrease was partially offset by payments
totaling $82,905 made by the Company to another party to the Patent
Settlement Agreement, as discussed above.
The Company sustained a net loss of $19,076 for the nine months
ended April 30, 1997, a substantial reduction from the net loss of $75,473
in the corresponding period in 1996. The decrease in the net loss for the
nine month period is due primarily to the aforementioned reduced expenses.
Liquidity and Capital Resources
At April 30, 1997, the Company had a working capital deficit of
approximately $944,000, which represented an increase of approximately
$63,000 in such deficit from July 31, 1996. During the nine months ended
April 30, 1997, the Company had a decrease of $37,237 in cash flows from
operations principally due to the receipt in October 1995 of the one-time
advance royalty payment of $600,000 from Arrow which enabled the Company to
reduce its outstanding accounts payable, and the one-time receipt from
Arrow in November 1995 of $75,000 to help fund the payment of legal costs
incurred by the Company in connection with the Patent Interference
Proceedings and the Patent Settlement Agreement. It is expected that future
cash flows will be substantially less than reported revenues due to the one
time advance royalty payment from Arrow described in note 2 above, the
one-time payment from Gore described in note 4 above and the one-time
payment received from Arrow described below in Part II - Other Information
- Item 5. As a result of the aforementioned payments to the University,
payments to legal counsel associated with corporate and intellectual
property matters, and costs associated with general operations, at April
30, 1997, the Company had cash and cash equivalents of $12,689. The Company
and Arrow entered into a Second Modification to the Arrow License to modify
certain terms of the existing Arrow License to include four additional
Fields of Application. In consideration of the additions to the Fields of
Application under the existing Arrow License, Arrow paid to the Company a
one-time, non-refundable, non-creditable fee of $100,000, of which $50,000
was paid on June 5, 1997 to the University pursuant to the terms of the
1987 University License.
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The Company currently owes the University $168,616 (see notes 2
and 3 to the financial statements). The Company has recently negotiated a
sublicense, which is awaiting approval by the University pursuant to the
terms of the 1987 University License, with a glove manufacturer for the
right to sublicense the Company's antimicrobial glove technology. The terms
of the sublicense will include negotiated royalty rates based upon future
sales, if any, of gloves incorporating the antimicrobial technology.
Additionally, the Company is currently negotiating with certain of its
sublicensees for the sale of the certain other rights of the Company to
various applications of the antimicrobial technology. In the event that the
Company is successful in selling its rights to this technology, the Company
would use the funds received from such sale to satisfy its outstanding
financial obligations, including undisputed amounts owed to the University
and the University's patent counsel. There can be no assurance, however,
that the Company will be successful in selling its rights to the
antimicrobial technology to a third party or sublicensing its rights to the
antimicrobial glove technology.
In the event that the Company does not receive approval for the
negotiated sublicense for the rights to its antimicrobial glove technology
from the University or is unsuccessful in negotiating a sale of certain
other rights of the Company to various applications of the antimicrobial
technology, the Company may seek to transfer this technology back to the
University in exchange for the forgiveness by the University of all of the
outstanding amounts owed by the Company to the University.
The Company is still in the development stage, and its business
operations have only generated a nominal amount of revenues to date. There
can be no assurance that the Company will be successful in raising
additional funds or that the Company will continue as a going concern. The
report of the Company's independent auditors on the Company's financial
statements for the fiscal years ended July 31, 1996, 1995 and 1994 included
an explanatory paragraph which stated that the Company's recurring losses
and working capital and total stockholders' deficits raised substantial
doubt about the Company's ability to continue as a going concern and
precluded the expression of an opinion on the Company's financial
statements as of and for the years ended July 31, 1996, 1995 and 1994. The
financial statements did not include any adjustments that might result from
the outcome of that uncertainty. Because of the continued working capital
deficit, the Company is attempting to sell its rights to various
applications of the antimicrobial technology, as discussed above. In any
event, the Company is continuing its attempts to resolve the dispute with
the University over the license for the antimicrobial glove technology and
legal fees billed to the Company by the University's patent counsel.
Furthermore, the Company will continue its attempts to curtail
expenditures. There can be no assurance that the Company will be successful
in any of the foregoing.
In the event that the Company is unsuccessful in its attempt to
sell its rights to the antimicrobial technology, sublicense its rights to
the antimicrobial glove technology or to transfer such technology to the
University, the Company does not have any other plans to raise additional
capital and there can be no assurance that it will be able to continue as a
going concern or avoid liquidation, even with further cost-cutting
measures.
In an attempt to raise additional capital in order to continue to
pursue potential acquisition and/or merger possibilities, including a sale
of the Company, in April 1997, the Company extended the expiration dates of
its Class A and Class B Warrants. The expiration date of the Company's
Class A Warrants was extended from April 30, 1997 to 5:00 p.m. (New York
City time) on December 31, 1997; the exerise price of the Class A Warrants
remains $0.25. The expiration
11
<PAGE>
date of the Company's Class B Warrants was extended from October 31, 1997
to 5:00 p.m. (New York City time) on December 31, 1997; the exerise price
of the Company's Class B Warrants remains $1.00. Under Federal securities
laws, the Company is unable to accept the exercise of any Class A or Class
B Warrants until such time, if any, as the Company's independent auditors
may express an opinion on the Company's financial statements, as discussed
above. At such time, if any, as the Company may accept such exercise, the
Company intends to use any proceeds received from the exercise of its Class
A and Class B Warrants for working capital, general corporate purposes and,
if possible, the reinitiation of its research and development efforts.
Regulatory Developments
In May 1989, the Company filed a pre-market 510(k) notification
seeking consent to market its antimicrobial latex examination gloves. Since
this initial 510(k) submission, the Company had, from 1991 to 1993, amended
and resubmitted the 510(k) several times in an effort to obtain a
determination of "substantial equivalence" to previously marketed latex
examination gloves. The FDA Office of Device Evaluation ("ODE") had
notified the Company, in response to each of these submissions, that the
Company's antimicrobial latex examination gloves are not "substantially
equivalent" since the gloves have a new indication for an examination glove
which may affect the prophylactic effect, thus constituting a new intended
use. The ODE had further stated that no accepted scientific methods
presently exist for assessment of the effectiveness of antiviral activity
for topical antimicrobials, particularly under glove-use conditions.
On March 11, 1996, Dr. Shanta M. Modak of the Department of
Surgery, Columbia University, where the antimicrobial glove technology was
developed, and Dr. Louis R.M. Del Guercio, the Company's Chairman, made a
presentation, on the Company's behalf, concerning the Company's gloves
before the FDA's Independent Advisory Committee, General Hospital and
Personal Use Devices Panel, Center for Devices and Radiological Health. Mr.
Lester Sampath, also of the Department of Surgery, Columbia University, was
there as an observer. The Panel acts in an advisory capacity and makes
recommendations to the FDA regarding whether or not certain device
submissions should receive FDA clearance to be marketed. While the Panel
did not make any recommendation to the FDA at the March 11, 1996 meeting,
the Panel voted to accept a previously distributed opinion of an
independent consultant indicating that the Company's examination gloves do
not have a positive impact on disease control. Since the March 11, 1996
meeting, the Company and Dr. Modak have remained in contact with the ODE,
particularly with Mr. Terrell Cunningham, Nurse Consultant of the ODE.
By letter dated February 27, 1997, the Company was informed by
Mr. Ulatowski of the ODE that, should the Company wish to continue with its
efforts to bring its antimicrobial gloves to market, the ODE recommends
that the Company submit a new 510(k), with the focus of the submission
directed at the recommendations outlined in Mr. Ulatowski's letter relating
to certain labeling claims and additional testing.
At present, the Company does not have sufficient financial
resources to fund additional clinical testing and to prepare the new 510(k)
submission necessary to ready its
12
<PAGE>
antimicrobial gloves for the marketplace. In April 1997, the Company
entered into a letter of intent agreement, as described below, relating to
a sublicense agreement with a glove manufacturer concerning the patents for
the antimicroibial glove technology currently owned by the University and
licensed to the Company. The Company and the glove manufacturer recently
executed such sublicense agreement, subject to appproval by the University.
However, there can be no assurance that the Company will receive approval
from the University for such sublicense.
PART II - OTHER INFORMATION
Item 5 - Other Information
(a) Nalpak Industries, Inc, and the Company Executed a Letter of
Intent Agreement Concerning the Company's Antimicrobial Glove
Technology
In April 1997, the Company and Nalpak Industries, Inc. ("Nalpak"),
a medical glove manufacturer, entered into a letter of intent
agreement concerning the patents which are licensed to the Company
from the University relating to antimicrobial latex examination
and surgeons' gloves used to prevent or reduce infection and to
inhibit the transmission of infectious diseases.
Nalpak has received an expression of interest from a financing
partner (collectively, the "Medpac Group") to sublicense from the
Company the exclusive worldwide rights to the antimicrobial
patents for use with medical examination and surgeons' gloves
currently owned by the University and licensed to the Company.
(Due to the Company's extremely limited financial resources, the
Company is unable at this time to cover the costs associated with
obtaining FDA clearance to market its antimicrobial latex
examination and surgeons' gloves in the United States.) The
execution of such Letter of Intent Agreement by the Company and
Nalpak does not create any legally binding obligations on the part
of either party, but is intended solely as an outline of the major
terms upon which the Medpac Group intends to proceed, and as a
guideline for the preparation of documentation for the
transaction. There can be no assurance that the Company and Nalpak
will be successful in entering into a definitive sublicense
agreement.
(b) Subsequent Event - Second Modification to License Agreement
between the Company and Arrow International, Inc.
The Company and Arrow entered into a Second Modification to the
Arrow License to modify certain terms of the existing Arrow
License to include four additional Fields of Application. In
consideration for the additions to the Fields of Application under
the existing Arrow License, Arrow paid to the Company a one-time,
non-refundable, non-creditable fee of $100,000, of which $50,000
was paid on June 5, 1997 to the University pursuant to the terms
of the 1987 University License. Further to the terms of the Second
Modified Arrow License, the Company will be entitled to receive a
running royalty rate of 5% percent of unit net sales of products
sold by Arrow which are included in the additional Fields of
Application. For a licensed product or products within the
additional Fields of Application that is sold together with other
13
<PAGE>
non-licensed products in a single package to a customer, the
running royalty rate will apply only to the established unit net
sales price of the licensed product or products. Moreover, the
Company has agreed to waive, for the first three years of the
Second Modified Arrow License, development fees and minimum annual
royalties due for products sold by Arrow falling under the
additional Fields of Application. After the third full year the
Second Modified Arrow License is effective, Arrow will be
obligated to pay the Company development fees of $2,500, payable
quarterly in advance, for each of the additional Fields of
Application, during their development phase and prior to Arrow's
sales of product in each of the additional Fields of Application.
Arrow's obligation to pay development fees will cease in the
quarter following Arrow's sale of a product in each of the
additional Fields of Application. After such time as a sale is
made, Arrow will pay the Company the running royalty rate of 5% of
net sales, and at a minimum, shall pay a minimum royalty of $2,500
payable quarterly in advance, for each of the additional Fields of
Application. Except as expressly modified in the Second Modified
Arrow License, all terms and conditions of the existing Arrow
License and the terms of the first Modified Arrow License, remain
in full force and effect. In addition, the Second Modified Arrow
License does not modify or allter the terms of the Patent
Settlement Agreement dated as of January 1, 1995, among the
University, the Company and Becton Dickinson and Company.
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Letter of Intent dated as of April 15, 1997 between the
Company and Nalpak Industries, Inc.
10.2 Amendment No. 9 to Warrant Agreement dated as of April 22,
1997 between the Company and Continental Stock Transfer and
Trust Company.
10.3 Sixth Lease Extension Agreement dated as of May 8, 1997
between the Company and I.C.E. Associates.
10.4 Second Modification to License Agreement dated as of May 30,
1997 between the Company and Arrow International, Inc.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended April
30 1997.
14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
DALTEX MEDICAL SCIENCES, INC.
Date: June 16, 1997 By:/s/Bruce Hausman, Esq.
----------------------
BRUCE HAUSMAN, ESQ.
President and Chief Executive
Officer
Date: June 16, 1997 By:/s/Herbert J. Mitschele, Jr.
----------------------------
HERBERT J. MITSCHELE, JR.
Treasurer, Secretary
and Chief Financial Officer
NALPAK INDUSTRIES, INC.
P.O. Box 165
Bedford Hills, New York 10507
Phone: (914) 234-1212
Fax: (914) 234-6166
April 15, 1997
Mr. Bruce Hausman (BY FAX)
President and Chief Executive Officer
Daltex Medical Sciences, Inc.
4642 Bocaire Blvd.
Boca Raton, Florida 33487
Dr. Louis R.M. Del Guercio (BY FAX)
Chairman of the Board
Daltex Medical Sciences, Inc.
14 Pryer Lane
Larchmont, New York 10538
Mr. James O. Leonard
Chairman of Executive Committee
Daltex Medical Sciences, Inc.
18 King's Lane
St. Simon's Island, Georgia 31522
Re: Sublicense of Technology
Gentlemen:
This letter will set forth our intention, subject to the terms and conditions
set forth, to enter into the arrangements concerning the patents which are
licensed by Daltex Medical Sciences, Inc. ("Daltex") from the Trustees of
Columbia University in the City of New York ("Columbia") for antimicrobial latex
examination and surgeons' gloves to prevent or reduce infection and to inhibit
the transmission of infectious diseases.
Nalpak Industries, Inc., ("Nalpak") which has been in the glove business for a
decade and whose principal, Woody Kaplan, is well-known to you, has received an
expression of interest from a financing partner (collectively, the "Medpac
Group") to sublicense from Daltex the exclusive worldwide rights to the
anti-microbial patents currently owned by Columbia and which patents are
currently licensed to Daltex (the "License") pursuant to a License Agreement
dated December 28, 1987, as amended, for use with gloves. It is our
understanding that Daltex is
<PAGE>
interested in maximizing the potential of the patents it is licensing but cannot
afford the expenses associated with obtaining clearance in the United States
from the U.S. Department of Health and Human Services, Food and Drug
Administration (the "FDA") for the sale of such gloves.
The Medpac Group understands that the fees and expenses associated with
procuring FDA approval are approximately $100,000, and subject to the next
sentence, the Medpac Group is willing to assume such liability in connection
with obtaining the sublicense for the exclusive worldwide rights to the patent
for use with the gloves. The Medpac Group and Daltex acknowledge that the costs
associated with procuring FDA approval shall be kept to an absolute minimum, and
that the $100,000 approximate cost includes legal fees and other costs
associated with filing the necessary documents with the FDA. With regard to the
payment of any legal fees other than those associated with obtaining FDA
approval, Daltex agrees that Nalpak and the Medpac Group are not liable for any
of Daltex' legal fees due to Columbia or any other party.
It is understood that the consummation of any transaction between Daltex and the
Medpac Group is subject to the approval of the respective Boards of Directors of
each company as well as obtaining such consents from and satisfying any
conditions of Columbia. This letter is intended solely as an outline of the
major terms upon which the Medpac Group intends to proceed. The execution of
this letter by representatives of either party shall not create any legally
binding obligations on the part of either party, but is intended only as a
guideline for the preparation of documentation leading to the consummation of
such transaction. This letter and the transactions and agreements contemplated
hereby are subject in all respects to the preparation and negotiation of
appropriate agreements and instruments which must be mutually acceptable to the
parties.
Notwithstanding the foregoing, each of us acknowledge that the sublicense
described herein has been set forth in a draft License Agreement which was
negotiated between us over several months in 1996 and the final form was
substantially agreed upon by us in September 1996, subject to the approval of
Columbia. Each of us acknowledge that the basic terms and conditions of the new
agreement will be substantially identical to the draft agreement already in
place, subject to certain changes as well as the changes as follows: 1) Daltex
acknowledges that Nalpak may assign the sublicense agreement and all of Nalpak's
rights therein to any person or entity which is a part of the Medpac Group, 2)
Upon execution of the License Agreement, Dr. Shanta Modak of Columbia University
has agreed to be available to make a presentation in New York City to members of
the Medpac Group regarding the patents being sublicensed, and 3) Nalpak or the
2
<PAGE>
Medpac Group is willing to assume the liability associated with procuring FDA
approval as aforementioned above.
Very truly yours,
NALPAK INDUSTRIES, INC.
By: /s/ Woody Kaplan
Woody Kaplan, President
AGREED AND ACCEPTED:
DALTEX MEDICAL SCIENCES, INC.
By: /s/ Bruce Hausman
Bruce Hausman, President
3
AMENDMENT NO. 9
TO THE WARRANT AGREEMENT
AGREEMENT dated as of April 22, 1997 by and between Daltex
Medical Sciences, Inc., a Delaware corporation (the "Corporation") and
Continental Stock Transfer and Trust Company, a limited purpose trust company.
RECITALS
WHEREAS, the Corporation has extended the expiration dates of
its Class A Warrants and Class B Warrants pursuant to Section 2.05 of the
Warrant Agreement dated as of October 2, 1984 (the "Warrant Agreement");
WHEREAS, the parties desire to amend the Warrant Agreement as
set forth herein.
NOW, THEREFORE, in consideration of the mutual agreements
contained herein, the parties hereto agree as follows:
SECTION 2.02 Warrant Rights and Term. Exercise of each Warrant
shall entitle the person in whose name such Warrant
Certificate shall then be registered on the books maintained
by the Warrant Agent (the "Warrant Holder"), subject to the
provisions of this Agreement and the Warrant Certificate,
including provisions relating to adjustments, to (i) in the
case of the exercise of a Class A Warrant at the then Class A
Exercise Price, one fully paid and non-assessable share of
Common Stock and one Class B Warrant at any time on and after
the date hereof until the expiration of such Class A Warrant
at 5:00 p.m., New York City time on December 31, 1997, or such
later date as may be established pursuant to Section 2.05 or
such earlier date as may be established pursuant to Section
2.06(e) (the "Class A Expiration Date") and (ii) in the case
of the exercise of a Class B Warrant, at the then Class B
Exercise Price, one fully paid and non-assessable share of
Common Stock at any time on and after such Class B Warrant has
become issuable until the expiration of such Class B Warrant
at 5:00 p.m., New York City time, on December 31, 1997, or
such later date as may be established pursuant to Section 2.05
or such earlier date
<PAGE>
as may be established pursuant to Section
2.06(e) (the "Class B Expiration Date").
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto duly authorized,
as of the date first above written.
DALTEX MEDICAL SCIENCES, INC.
By: /s/ Diane E. Fritz
Diane E. Fritz
Vice President and Assistant
Corporate Secretary
CONTINENTAL STOCK TRANSFER AND TRUST
COMPANY, as Warrant Agent
By: /s/ William F. Seegraber
Name: William F. Seegraber
Title: Vice President
2
SIXTH LEASE EXTENSION AGREEMENT
THIS AGREEMENT dated the 8th day of May, 1997, by and between
ICE ASSOCIATES, having an address of 15 Green Street, Hackensack, New Jersey
(hereinafter called "Landlord") and DALTEX MEDICAL SCIENCES, INC. having an
address of 36-52 Kulick Road, Fairfield, New Jersey 07004 (hereinafter called
"Tenant").
W I T N E S S E T H T H A T:
WHEREAS, Landlord and Tenant entered into a Lease Agreement
("Lease") dated May 24, 1989 by which Landlord leased to Tenant 1,800 square
feet located at 36-52 Kulick Road, Fairfield, New Jersey 07004 (hereinafter
"Initial Lease Agreement"); and
WHEREAS, said Initial Lease Agreement as extended by Lease
Extension Agreement, Second Lease Extension Agreement, Third Lease Extension
Agreement, Fourth Lease Extension Agreement and Fifth Lease Extension Agreement
shall terminate on June 14, 1997; and
WHEREAS, the parties hereto wish to extend the term of the
initial Lease Agreement/Lease Extension Agreement/Second Lease Extension
Agreement/Third Lease Extension/Fourth Lease Extension/Fifth Lease Extension
under the same terms and conditions contained therein, with the exception of
those items enumerated below.
NOW, THEREFORE, in consideration of the mutual promises
contained herein, the parties hereto agree as follows:
1. The Fifth Lease Agreement is hereby extended for one year
term commencing June 15, 1997 and terminating June 14, 1998 (hereinafter "Sixth
Lease Extension Agreement").
2. Tenant has the right to cancel this Agreement any time
after September 14, 1997 by giving the Landlord ninety (90) days written notice.
3. The Tenant acknowledges that is presently in possession of
the leased premises and agrees except as provided in the Lease as amended and
subject to provision of the Lease to retain possession of the same without any
representations, warranties, or covenants on the part of the Landlord and in the
condition commonly referred to as "As Is".
4. Except as particularly modified by the terms hereof, the
Initial Lease Agreement/Lease Extension Agreement/Second Lease Extension
Agreement/Third Lease Extension Agreement/Fourth Lease Extension Agreement/Fifth
Lease Extension Agreement shall remain in full force and effect during the term
<PAGE>
of the Lease as contained herein, which terms and conditions are hereby
reaffirmed by the parties hereto.
5. By execution of these present, each party acknowledges the
full and faithful performance by the other party of the obligations to be
performed by the other party under the Lease to the date hereof.
6. This Sixth Lease Extension Agreement shall bind and benefit
the parties hereto, their legal representatives, executors, administrators,
successors and assigns.
IN WITNESS WHEREOF, the parties have hereto executed this
Agreement the date and year first above written.
WITNESS: ICE ASSOCIATES;
as Landlord
/s/ John J. Horgan By: /s/ Salvatore V. Frassetto
Salvatore V. Frassetto, Partner
WITNESS: DALTEX MEDICAL SCIENCES, INC.;
as Tenant
/s/ Sylvia Leichter By: /s/ Diane E. Fritz
Diane E. Fritz, Vice President and
Assistant Corporate Secretary
2
SECOND MODIFICATION TO LICENSE AGREEMENT
THIS AGREEMENT entered into this 30th day of May, 1997 between
DALTEX MEDICAL SCIENCES, INC. (a corporation of the State of Delaware), having a
place of business at 50 Kulick Road, Fairfield, NJ 07004 ("Licensor") and ARROW
INTERNATIONAL, INC., (a Pennsylvania corporation), having a place of business at
3000 Bernville Road, Reading, PA 19605 ("Licensee").
WHEREAS, Licensor and Licensee have previously entered into a
License Agreement dated the 28th day of March, 1991 ("1991 License Agreement")
relating to certain technology set forth therein and which remains in full force
and effect;
WHEREAS, Licensor and Licensee have also previously entered
into a Modification to the 1991 License Agreement ("First Modification
Agreement") regarding the payment of royalties, which First Modification
Agreement remains in full force and effect; and
WHEREAS, Licensor and Licensee, to their mutual benefit,
desire to again modify the terms of the 1991 License Agreement for certain of
the Licensed Products in the Fields of Application.
NOW, THEREFORE, in consideration of the above premises and the
mutual covenants and conditions hereinafter contained, and for other good and
valuable consideration, the receipt and sufficiency of which is acknowledged by
the execution and delivery hereof, the parties hereby covenant and agree as
follows:
1. Definitions: The terms used in this Agreement
shall have the same meaning as those defined in Article 1 of the
1991 License Agreement.
2. Modification to 1991 License Agreement: The
following paragraphs are hereby added to Article 1(d) (Fields of
Application) of the 1991 License Agreement:
(v) Epidural catheters used to infuse
drugs into the epidural space in
the spinal column.
(vi) Implantable infusion ports and
pumps and their attached
catheters used for drug therapy
and access to the vascular
system.
(vii) Intra-aortic balloon catheters.
<PAGE>
(viii) Drainage catheters used to drain
chest cavities, surgical
incisions, wounds and abscesses.
3. Supplemental Modification to 1991 License
Agreement: The following paragraph is hereby added to Article 1
of the 1991 License Agreement (Definitions):
h) Running royalty rate is defined as Five
(5%) Percent of Unit Net Sales of
products sold by Licensee which fall
within the added Fields of Application
(v-viii) set forth above. For a
Licensed Product or Products within the
added Fields of Application (v-viii)
that is sold together with other non-
licensed products in a single package to
a customer, the Running royalty rate of
Five (5%) Percent shall apply only to
the established Unit Net Sales price of
the Licensed Product or Products.
4. Payments: In consideration of the foregoing
additions to the Fields of Application under the 1991 License
Agreement, upon execution of this Agreement, Licensee shall pay
Licensor a one-time, non-refundable, non-creditable fee of One
Hundred Thousand ($100,000.00) Dollars.
Upon execution of this Agreement, and for the first (3) years
thereafter, Licensor waives development fees and minimum annual royalties due
for products sold by Licensee falling under the added Fields of Application
(v-viii) set forth above.
After the third full year this Agreement is in force, Licensee
shall pay development fees of $2,500.00, payable quarterly in advance, for each
of the new Fields of Application (v-viii) set forth above, during their
development phase and prior to Licensee sales of products in each of the new
Fields of Application. Licensee's obligation to pay development fees shall cease
in the quarter following Licensee's sale of a product in each of the added
Fields of Application. After such time a sale is made, Licensee shall pay the
Running royalty rate defined above in Article 3(h) herein, and at a minimum,
shall pay a minimum royalty of $2,500.00, payable quarterly in advance, for each
of the new Fields of Application (v-viii) set forth above. All payment terms
herein are effective throughout the remaining term of the 1991 License Agreement
and in accordance with the payment and recording terms provided in Article 4 of
the 1991 License Agreement.
5. Net Sales: Net Sales are hereby defined as the
total invoiced amount of all sales by Licensee to the trade, less
cash and trade discounts, returns, allowances, free goods and
2
<PAGE>
replacements, taxes applicable to such sales, and government charges assumed and
delivery charges borne by Licensee.
6. Best Efforts: Licensee shall use all reasonable endeavors,
to manufacture, promote and sell the products with a view to achieving maximum
benefit in its judgment to the parties hereto, and Licensor shall be entitled to
call for information from time to time on the endeavors being made. In the event
that the Licensor considers that Licensee has failed properly to comply with
this provision, or a sub-licensee has so failed, Licensor may give Licensee six
months notice (accompanied by detailed reasons for its decision) of its
intention to convert the Field of Use to a non-exclusive right, unless
Licensee's, or sub-licensee's, performance has been remedied to the reasonable
satisfaction of Licensor.
7. The 1991 License Agreement: Except as expressly modified
herein, the provisions of the 1991 License Agreement between Licensor and
Licensee, and the terms of the First Modification Agreement, remain in full
force and effect. In addition, this second modification to the 1991 License
Agreement between Licensor and Licensee does not modify or alter the terms of a
Patent Settlement Agreement dated January 1, 1995, between the Trustees of
Columbia University, Daltex Medical Sciences, Inc., Arrow International Inc.,
and Becton Dickinson and Company.
THE PARTIES have duly executed this Second Modification
Agreement in duplicate executed counterparts, effective the first date written.
DALTEX MEDICAL SCIENCES, INC.
By: /s/Bruce Hausman
May 9, 1997
Date Title: President
ARROW INTERNATIONAL, INC.
By: Marlin Miller, Jr.
May 30, 1997
Date Title: President
3
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