U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-KSB
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 (Fee Required)
For the fiscal year ended June 30, 1998
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 (No Fee Required)
For the transition period from to
---------------------------------------------
Commission File Number: 33-27610-A
MEDICAL TECHNOLOGY & INNOVATIONS, INC.
(Name of small business issuer in its charter)
Florida
(State or other jurisdiction of
incorporation or organization)
615 Centerville Road, Lancaster, PA
(Address of principal executive offices)
65-2954561
(I.R.S. Employer Identification No.)
17601
(Zip Code)
(717) 892-6770
(Issuer's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, no par value
(Title of each class)
Securities registered pursuant to Section 12(g) of the Act:
None
(Title of Class)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days. YES [X]
No [ ]
Check if there is no disclosure of delinquent filers pursuant to Item 405
of Regulation S-B is not 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. [ ]
The issuer's revenues for its most recent fiscal year were $4,541,372.
The aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock was sold or the average
bid and asked prices of such stock as of August 31, 1998 was approximately
$9,100,000.
As of June 30, 1998 26,385,279 shares of Common Stock, no par value, of the
registrant were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE:
None
[GRAPHIC OMITTED]
<PAGE>
PART I.
Item 1. Description of Business
General
Medical Technology & Innovations, Inc., f/k/a SouthStar Productions, Inc. (the
"Company") was incorporated in the state of Florida in January 1989. The Company
operates through its wholly-owned subsidiary, Medical Technology, Inc. ("MTI").
MTI was incorporated in the state of Iowa in April 1993.
The Company acquired control of MTI in October of 1995 under the terms of a
Share Exchange Plan ("the Plan") with SouthStar Productions, Inc. (
"SouthStar").
The Company manufactures and distributes the MTI PhotoScreenerO, which is a
specialized Polaroid-type instant film camera designed to detect conditions that
lead to amblyopia ("lazy eye") and other eye disorders.
On August 1, 1996 the Company acquired the net assets of Steridyne Corporation,
a Florida Corporation ("Steridyne"). Steridyne is a manufacturer and distributor
of thermometer sheaths, probe covers, and anti- decubitus gel cushions.
Steridyne also distributes both glass and digital thermometers.
Product Lines
The MTI Photoscreener is designed to take a photograph of a child's eye and
detect factors which can lead to amblyopia (lazy eye), including strabismus
(misalignment of the eye), cataracts (cloudy lenses), and asymmetric or other
abnormal refractive errors, including myopia (nearsightedness), hyperopia
(farsightedness), and astigmatism.
The MTI Photoscreener consists of a single flash placed close to the center of
the lens of the subject's eye to accentuate the "red eye" appearance of a
subject for diagnostic purposes. By placing the flash close to the lens
aperture, abnormal refractive errors of the eye are imaged as white crescents in
the red eye reflex, a process scientifically known as "photo refraction".
The MTI PhotoScreenerO consists of approximately 40 components, plus screws and
fasteners. Major components include molded plastic parts, optic lenses, printed
circuit boards, an instant film back, a strobe flash, optic mirrors, a battery
pack, a power supply, and a battery charger.
Steridyne's primary professional product line is the Steritempa sterile
thermometer sheath and Steritemp II probe cover, a universal probe cover for the
small hand-held electronic thermometer. These clinical products are packaged in
over 30 distinct put-ups for the varied marketplace. This includes Steritempa's
own branded electronic thermometer and probe cover kits. A non-sterile economy
sheath/probe cover line, Value BrandO, was recently introduced.
Steridyne's retail products include Glass thermometer kits, electronic
thermometer kits, sheath/probe covers, and forehead temperature indicators.
Steridyne has two extensive wound management product lines in the home
healthcare market: Zero-GO and SofSeatO, a range of gel flotation cushions
offering full support at economical price levels.
Certain geographic segment information is described in Note 16 to the Company's
financial statements included as Item 7 of this Form 10-KSB.
Marketing and Distribution
<PAGE>
The Company markets the MTI PhotoScreenerO domestically and internationally
through a combination of direct sales representatives and independent
distributors. The Company markets the MTI PhotoScreenerO to pediatricians,
public health and education departments, preschools, day care centers, family
and general physicians, eye doctors, hospitals, volunteer organizations, managed
care and health maintenance organizations, and national eye care chains.
Steridyne products are distributed through an authorized dealer network
utilizing sales representatives throughout the nation. There are three
divisions: professional (ethical), home healthcare and retail. The independent
sales representatives are directed by a sales executive of Steridyne.
Competition
The vision screening business has attracted several companies, both domestic and
foreign. Although other vision screening devices currently exist and are on the
market, the Company believes the MTI PhotoScreenerO has competitive advantages
over all other such devices. These advantages include instant film capability,
relatively low cost, portability, and ease of interpretation and use.
The Company's temperature taking and wound management products operate in a
highly competitive retail market in which the Company has a minor share. Most of
its business is in the clinical area where it is estimated that it has about 25%
of the U.S. market.
Although the Company believes its products have advantages over competing
products, no assurances can be made that current competitors or new entrants
into the market will not develop more competitive products. Such potential
competitors would most likely have considerably more financial resources than
the Company.
Patents and Trademarks
In 1993, the Company obtained rights to U.S. Patent No. 4,989,968 for a
photoscreening camera system, which is now known as the MTI PhotoScreener. The
above patent was initially granted to Dr. Howard Freedman and subsequently
assigned to the Company. The Company has filed patent applications in Canada,
Europe, and Japan.
As a result of the acquisition of Steridyne in August 1996, the Company has
obtained rights to patents No.4672700, No.4753705, No.4967758, No.4614442, and
No. 4593699, covering thermometer sheaths and probe covers, decubitus cushions
and disposable liners for blood pressure cuffs. Steridyne's trademarks include
Steritemp, Zero-G, Dr. T.Rex and Sofseat.
Government Regulation
Certain aspects of the Company's business, principally the manufacture and sale
of the MTI PhotoScreenerO and the Steridyne products are subject to regulation
by the U.S. Food and Drug Administration (FDA) as a medical device. The Company
has received a 510(k) clearance to market the MTI PhotoScreenerO and all of the
Steridyne products with the exception of the gel floatation cushions and sheaths
which only require listing with the FDA and that has been accomplished. The
Company believes that it has completed all necessary governmental processes to
market the MTI PhotoScreenerO. However, if the FDA should determine the Company
has not complied with its regulations, the FDA has the authority to order the
Company to cease production of its products and recall products already sold.
Employees
As of June 30, 1998, the Company employed 38 full-time employees. This compares
with the employment of
<PAGE>
46 full-time employees at June 30, 1997. None of the Company's employees are
represented by a labor union, and the Company considers its employee relations
to be good.
Item 2. Description of Properties
The Company's principal executive and administrative offices are located in
Lancaster, Pennsylvania. In July of 1998, the Company sold the building and
moved its headquarters to a smaller leased facility in Lancaster, Pennsylvania.
In August of 1996, the Company moved its MTI PhotoScreenerO manufacturing to
leased facilities in Waterloo, Iowa. The Company also owns a manufacturing
facility in Riviera Beach, Florida where manufacturing, distribution and
administrative functions of Steridyne Corporation are conducted. The facility is
subject to a mortgage of approximately $230,000. The Company believes that its
properties are well maintained, and its manufacturing equipment is in good
operating condition and sufficient for current production.
Item 3. Legal Proceedings
In March 1997, the Company was sued by Lehman-Millet Incorporated "LMI" in
Suffolk County Superior Court in Boston, Massachusetts concerning an alleged
agreement to provide public relations and promotional assistance with respect to
the MTI PhotoScreener(TM). This lawsuit was settled in March of 1998.
In November, 1997 the Company initiated a law suit against Faisal Finance
(Switzerland) S.A. to recover damages related to restructuring the conversion
rights of its Series A Preferred Convertible shares and associated financial
transactions. That action was filed in Pennsylvania and subsequently Faisal
Finance challenged the jurisdiction of the court and filed an action against the
Company in Florida. The Company then joined the two actions in Florida.
The Company alleges that Faisal Finance breached its agreement to provide
funding for, as well as to participate as an investor in, the restructuring,
purposefully delayed the transactions knowing the precarious financial condition
of the Company at the time and allowed conflicting interests to interfere with
their obligations as a financial advisor to the Company. Faisal is claiming
damages of $750,000 for the alleged failure of the Company to fulfil its
obligations under the original conversion rights and investment banking fees for
alleged services in connection with the restructuring.
Management believes that the Company's claim against Faisal Finance is well in
excess of Faisal's claim against the Company and that the facts, circumstances
and merits surrounding the Company's claim will prevail against any defense or
counter claim that Faisal Finance may attempt.
Special counsel advises that it is probable that the Company will prevail in its
claim against Faisal Finance and that the likelihood of Faisal Finance
recovering anything beyond the $76,000 that the Company attempted to pay them
for their shares in connection with the restructuring is remote.
MTI, the Company and Steridyne are also parties to other pending legal
proceedings in the ordinary course of their business. The Company does not
expect these legal proceedings to have a material adverse effect on the
Company's financial condition.
Item 4. Submission of Matters to a Vote of Security Holders
The following items were considered and acted upon at the Company's 1998 annual
meeting of stockholders which was held February 23, 1998:
1. The following director was elected, along with his respective votes received:
<PAGE>
Director Term Votes For Votes Against Votes Abstain
Robert Brennan 3 yr. 17,813,523 293 3,999
2. Simon Lever & Company was ratified as the independent certified public
accountants by a vote of 17,397,433 in favor, 1,953 votes against and 418,429
abstain votes.
PART II.
Item 5. Market for Common Equity and Related Stockholder Matters
The Company's common stock is listed on the Over the Counter Electronic Bulletin
Board under the symbol "MTEN." Prior to October 1995, the Company's common stock
was neither listed nor traded on any market. The following table sets forth the
range of the high and low bid prices for the common stock during the periods
indicated, and represents interdealer prices, which do not include retail
mark-ups and mark-downs, or any commission to the broker-dealer, and may not
necessarily represent actual transactions.
Quarter Ending High Low Quarter Ending High Low
September 30, 1997 $.25 $.11 September 30, 1996 $1.44 $1.19
December 31, 1997 .69 .21 December 31, 1996 .81 .75
March 31, 1998 .35 .22 March 31, 1997 .50 .25
June 30, 1998 .40 .18 June 30, 1997 .38 .19
As of June 30, 1998, there were approximately 686 recordholders of common stock.
Such amounts do not include common stock held in "nominee" or "street" name.
<PAGE>
In fiscal 1998, the Company sold 144,509 shares of common stock for total
consideration of $25,000 pursuant to Rule 506 of Regulation D as promulgated
under the Securities Act of 1933.
The Company has not paid cash dividends on its common stock since its inception.
At the present time, the Company's anticipated working capital requirements are
such that it intends to follow a policy of retaining any earnings in order to
finance the development of its business.
Item 6. Management's Discussion and Analysis or Plan of Operation
This analysis should be read in conjunction with the consolidated financial
statements and notes thereto.
This form 10-KSB includes " forward looking statements" concerning the future
operations of the Company. It is management's intent to take advantage of the
"safe harbor" provision of the Private Securities Litigation Reform Act of 1995.
This statement is for the express purpose of availing the Company of the
protections of such safe harbor with respect to all "forward looking statements"
contained in this Form 10-KSB. We have used "forward looking statements" to
discuss future plans and strategies of the Company. Management's ability to
predict results or the effect of future plans is inherently uncertain. Factors
that could effect results include, without limitation, competitive factors,
general economic conditions, customer relations, relationships with vendors, the
interest rate environment, governmental regulation and supervision, seasonality,
distribution networks, product introductions, acceptance, technological change,
changes in industry practices and one-time events. These factors should be
considered when evaluating the "forward looking statements" and undue reliance
should not be placed on such statements. Should any one or more of these risks
or uncertainties materialize, or should any underlying assumptions prove
incorrect, actual results may vary materially from those described herein.
Results of Operations
Fiscal Year Ended June 30, 1998 as Compared to 1997
Revenues for the fiscal year 1998 increased by $909,091 or a 25% increase. This
increase results because of increased demand for the MTI PhotoScreener(TM) from
retail optical chains, service clubs and schools combined with a 12% growth in
the core Steridyne business. Gross profit for the fiscal year 1998 increased by
84% versus the comparable period in fiscal 1997 mostly due to sales increases
and mix as overall margins are comparable between the two periods. MTI products
generally have higher profit margins than Steridyne products.
Operating expenses decreased by 36% from $4,125,498 in fiscal 1997 to $2,659,027
in fiscal 1998. This reduction is evident in almost all expense categories with
the greatest savings in the employment and public relations areas. Management
expects ongoing general and administrative costs to stabilize at levels
experienced in the fourth quarter of fiscal 1998. Interest expense has increased
60% to $231,230 for fiscal 1998 versus 1997 because of the debt incurred to fund
the restructuring of the Series A Preferred shares and higher interest costs
associated with factoring the Company's receivables to increase cash flow.
Management expects a lower net loss for the first fiscal quarter 1999 because of
increased sales and continued cost controls.
Liquidity and Capital Resources
At June 30, 1998, the Company had cash of $38,247 and working capital of
($1,163,005) as compared to $58,090 and ($341,860) at June 30, 1997. The
increase in the working capital deficit is mostly due to the inclusion of
$798,000 of secured notes incurred to fund the Series A Restructuring which are
payable or convertible into Company common stock in March of 1999. Included in
long-term debt at June 30, 1998 is a mortgage on the headquarters facility of
$234,000 which was satisfied in July of 1998 and $376,750 of subordinated
convertible
<PAGE>
notes were converted into 725,000 shares of common stock in July of 1998.
In September of 1997 the Company reached an agreement with the holders of the
Series A Preferred shares issued in July of 1996 to amend certain terms and
conditions of the issue subject to the Company completing the required
financing. All Series A Preferred shareholders were given the choice of electing
("Option 1") a cash payment of $3,800 per share or ("Option 2") 10,000 shares of
the Company's common stock and a new Series B Preferred share with a $6,000 face
in exchange for 1 share of the original Series A Preferred. All Series A
Preferred shareholders will also have the exercise price reduced on all warrants
applicable to tendered Series A Preferred Shares from $2.72 to $1.00. The new
Series B Preferred Stock is convertible into common stock of the Company from
October 1, 1998 at a fixed price of $1.00. Conversion is limited to 10% of the
holding for the first four months following October 1, 1998 then it is increased
to 20% per month thereafter. The Series B Preferred stock can be redeemed by the
Company at any time in cash at 110% of the face value or in common stock at 120%
of the face value, with mandatory redemption required by September 30, 2000.
Over 60% of the parties who purchased the Series A Preferred shares and
converted them into shares of the Company's common stock agreed to a lock-up
which limited sales to 8% of the amount purchased per month with no limit on
salability after October 1, 1998. Common stock issued to Series A Preferred
Stockholders electing Option 2 is subject to a lock-up which ends on October 1,
1998.
In connection with securing financing for Option 1 of the Series A Preferred
restructuring, the Company raised an additional $719,000 for general working
capital purposes. The Company recruited new senior management who instituted
significant reductions in employees, inventory management programs and cutbacks
in operating expenses in all parts of the business. Management also broadened
its sales and marketing emphasis to target large retailers and national public
service organizations rather than individual healthcare professionals.
Management believes these actions will improve operating performance and cash
flow in the near term.
In August of 1998, the Company received its largest order ever to deliver
approximately 700 PhotoScreeners during fiscal 1999. The order which
approximates $1.5 million places certain restrictions on the Company from
selling the PhotoScreener in certain markets. In connection with this order and
provided the customer spends several millions of dollars in national advertising
mentioning the PhotoScreener, the Company has provided the customer with
warrants to purchase 1.2 million shares of the Company's stock at an exercise
price in excess of the current market.
The Chief Executive Officer and a director personally signed a guarantee with a
local bank to provide a $250,000 line of credit to the Company which terminates
in January of 1999.
For the past several years the Company has financed its operations primarily
through private sales of securities and revenues from the sale of its products.
Since June of 1993 the Company has received net proceeds of approximately $10.0
million from the private sale of securities and debt. The Company may raise
additional capital through private and/or public sales of securities in the
future.
Year 2000 Compliance
The Company is aware of the issues associated with the programming code in
existing computer systems as the millennium (Year 2000) approaches. All software
used for the Company systems is supplied by software vendors or outside service
providers. The Company has confirmed with such providers that its present
software is Year 2000 compliant.
<PAGE>
Item 7. Financial Statements
Index to Consolidated Financial Statements:
Page
Report of independent auditors for the years ended June 30, 1998 and 1997 8
Consolidated balance sheets as of June 30, 1998 and 1997 9
Consolidated income statements for the years ended June 30, 1998 and 1997 10
Consolidated statements of stockholders' equity for the years ended
June 30, 1998, 1997 and 1996 11
Consolidated statements of cash flows for the years ended
June 30, 1998 and 1997 12
Notes to consolidated financial statements 13
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Medical Technology & Innovations, Inc.
Lancaster, Pennsylvania
We have audited the accompanying consolidated balance sheets of Medical
Technology & Innovations, Inc. and subsidiaries as of June 30, 1998 and 1997,
and the related consolidated statements of income, stockholders' equity, and
cash flows for the years then ended. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated 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 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Medical Technology & Innovations, Inc. and subsidiaries as of June 30, 1998 and
1997, and consolidated results of their operations and their consolidated cash
flows for the years then ended in conformity with generally accepted accounting
principles.
/s/SIMON LEVER & COMPANY
Lancaster, Pennsylvania
October 9, 1998
<PAGE>
Medical Technology & Innovations, Inc.
Consolidated Balance Sheets
June 30
<TABLE>
<S> <C> <C>
Assets
1998 1997
------------ -----------
Current Assets:
Cash $ 38,247 $ 58,090
Accounts Receivable, less allowances of
$36,367 287,114 407,633
Inventory 393,148 692,273
Prepaid Expenses 30,740 36,477
--------- ----------
Total Current Assets 749,249 1,194,473
-------- ---------
Fixed Assets:
Land 382,000 382,000
Property & Equipment 1,194,104 1,180,269
Less accumulated depreciation (364,567) (223,881)
--------- ---------
Fixed Assets, net 1,211,537 1,338,388
--------- ---------
Other Assets:
Intangible and Other Assets 2,345,530 2,716,280
--------- ---------
Total Assets $4,306,316 $5,249,141
========= =========
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts Payable $505,824 $418,341
Accrued Liabilities 370,558 384,995
Current Maturities of Long-Term Debt 1,035,872 732,997
--------- ----------
Total Current Liabilities 1,912,254 1,536,333
Long-Term Debt, Net of Current Maturities 1,117,545 1,020,040
--------- ---------
Total Liabilities 3,029,799 2,556,373
--------- ---------
Stockholders' Equity
Common Stock, no par value, authorized
700,000,000 shares, outstanding 26,385,279
and 16,730,729 shares, respectively 9,632,183 6,755,260
Series A Convertible Preferred Stock, $100
par value, authorized 70,000 shares,
outstanding nil and 496 shares,
respectively - 0 - 4,407,810
Series B Convertible Preferred Stock,
$100 par value, authorized 1000 shares,
267 outstanding 1,602,000 - 0 -
Preferred Stock, authorized 100,000,000 shares
$1,000 par value, 12%, noncumulative,
outstanding 22.5 shares 22,500 22,500
Treasury Stock, at cost (309,742) (309,742)
Accumulated Deficit (9,670,424) (8,183,060)
----------- -----------
Total Stockholders' Equity 1,276,517 2,692,768
--------- ---------
Total Liabilities and Stockholders' Equity $4,306,316 $5,249,141
=========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
Medical Technology & Innovations, Inc.
Consolidated Income Statements
For the Years Ended June 30
<TABLE>
<S> <C> <C>
1998 1997
----- -----
Revenues $4,541,372 $3,632,281
Cost of Goods Sold 3,138,479 2,870,196
---------- -----------
Gross Profit 1,402,893 762,085
----------
Operating Expenses
Advertising 128,640 454,828
Selling, General,
and Administrative 2,530,387 3,670,670
----------
Total Operating Expenses 2,659,027 4,125,498
----------
(Loss) from Operations (1,256,134) (3,363,413)
Interest expense, net 231,230 144,146
-----------
Net (Loss) from Operations ($1,487,364) ($3,507,559)
Add: Gain on Restructuring of Series A
Preferred Stock 948,163 - 0 -
----------------
Net (Loss) Attributable to Common Stock ($539,201) ($3,507,559)
============
Net (Loss) per common share (basic and diluted) ($.065) ($.247)
============
Net (Loss) per common share after
Gain on Restructuring of Series A
Preferred Stock (basic and diluted) ($.024) ($.247)
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
Medical Technology & Innovations, Inc.
Consolidated Statements of Stockholders' Equity
For the Years Ended
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Series A Series B
Convertible Convertible Total
Common Common Preferred Preferred Preferred Treasury Accumulated Stockholders'
Shares Stock Stock Stock Stock Stock Deficit Equity
Balance at June 30, 1995 11,205,036 $1,435,407 $56,000 ($2,781,730) ($1,290,323)
Issuance of Common Stock 1,306,409 1,147,076 1,147,076
Exercise of Stock Options 735,084 1,102,427 1,102,427
Stock Issued for Services 217,520 462,230 462,230
Purchase of Treasury Shares (1,316,750) ($250,000) (250,000)
Net Loss _______ _________ _________ ________ (1,893,771) (1,893,771)
----------- -----------
Balance at June 30, 1996 12,147,299 $4,147,140 $56,000 ($250,000) ($4,675,501) ($722,361)
Sale of 70,000 Series A
Convertible Preferred Stock,
Net of issuance costs $6,220,700 6,220,700
Conversions of Preferred Stock
Into Common Stock 3,697,576 1,846,390 (1,812,890) (33,500)
Exercise of Stock Options 194,737 292,105 292,105
Issuance of Common Stock 532,898 270,250 270,250
Stock Issued for Services 215,000 199,375 199,375
Purchase of Treasury Shares (56,781) (59,742) (59,742)
Net Loss ________ _________ __________ ________ _______ (3,507,559) (3,507,559)
- -----
Balance at June 30, 1997 16,730,729 $6,755,260 $4,407,810 $22,500 ($309,742) ($8,183,060) $2,692,768
--------- -------------
Net Loss (1,487,364) (1,487,364)
Issuance of Common Stock 144,509 25,000 25,000
Stock Issued for Services 1,156,864 296,113 296,113
Conversion of Series A Preferred
Stock into common stock 7,853,177 1,531,647 (1,531,647)
Conversion of subscribed Series A 500,000 76,000 (76,000)
Preferred Stock into common stock
Gain on Restructuring of Series A
Preferred Stock 948,163 (1,198,163) (250,000)
Issuance of Series B Preferred
in exchange for Series A Pf'd _________ ________ (1,602,000) 1,602,000
Balance at June 30, 1998 26,385,279 $9,632,183 - 0 - $1,602,000 $22,500 ($309,742) ($9,670,424) $1,276,517
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
Medical Technology & Innovations, Inc.
Consolidated Statements of Cash Flows
For the Years Ended June 30
<TABLE>
<S> <C> <C>
1998 1997
Cash flows from operating activities:
Net Loss ($1,487,364) ($3,507,559)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and Amortization 365,474 312,845
Decrease (Increase) in Accounts Receivable 120,519 299,800
Decrease (Increase) in Inventory 299,125 2,244
Decrease (Increase) in Prepaid Expenses 5,737 132,010
Increase (Decrease) in Accounts Payable 87,483 198,932
(Decrease) Increase in Accrued Liabilities (14,437) 259,929
Stock issued for services 296,113 199,375
------- -------
Net cash used in operating activities (327,350) (2,102,424)
Cash flows from investing activities:
Purchase of Net Assets of Steridyne - 0 - (4,406,635)
Purchase of Fixed Assets (13,835) (244,986)
Net cash used in investing activities (13,835) (4,651,621)
Cash flows from financing activities:
Costs incurred for restructuring of
Series A Preferred Stock, net (250,000) - 0 -
Proceeds from issuance of Series A
Preferred Stock, net - 0 - 6,220,700
Proceeds from issuance of Stock, net 25,000 270,250
Proceeds from exercise of Stock options, net - 0 - 292,105
Acquisition of Treasury Stock - 0 - (59,742)
Proceeds from issuance of Notes Payable 728,750 266,000
Repayment of Notes Payable (182,408) (451,120)
--------- ----------
Net cash from financing activities 321,342 6,538,193
--------- ---------
Net (decrease) in cash (19,843) (215,852)
Cash at beginning of year 58,090 273,942
------ -------
Cash at end of year $38,247 $58,090
======= =======
Supplemental Disclosure:
Cash paid during the year for interest $118,337 $76,000
======== =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
Medical Technology & Innovations, Inc.
Notes to Consolidated Financial Statements
1. Organization. Medical Technology & Innovations, Inc. (the Company), f/k/a
SouthStar Productions, Inc., is a Florida corporation engaged in the design,
manufacture, and distribution of medical screening devices for medical
professionals primarily involved in vision screening through its wholly-owned
subsidiary, Medical Technology, Inc. (MTI). The Company's other subsidiary,
Steridyne Corporation, distributes digital and glass thermometers, and
manufactures and distributes probe covers, sheaths, and anti-decubitus devices
for hospitals, medical offices, nursing homes and retail outlets. The Company
derives the majority of its revenues from sales of Steridyne's products.
2. Summary of Significant Accounting Policies.
Principles of Consolidation. The consolidated financial statements include the
Company and its wholly owned subsidiaries. All significant intercompany items
have been eliminated.
Reclassifications. Certain amounts in the prior years' consolidated financial
statements have been reclassified to conform to the current year presentation.
Revenue Recognition. Revenue from product sales are recognized at the time
product is shipped.
Inventories. Inventories are stated at the lower of cost or market, with cost
determined under the first-in, first-out (FIFO) method.
Property and Equipment. Property and equipment are stated on the basis of cost
less accumulated depreciation. The Company provides for depreciation over the
estimated useful lives of property and equipment using the straight-line method.
Intangible and Other Assets. Intangible and other assets consist primarily of
goodwill associated with the acquisition of Steridyne and are amortized on a
straight-line basis over their estimated remaining lives. Accumulated
amortization on intangibles and other assets total $643,589 and $272,841 at June
30, 1998 and 1997, respectively.
Income Taxes. Deferred income taxes are provided on a liability method whereby
deferred tax assets are recognized for deductible temporary differences and
operating loss and tax credit carryforwards and deferred tax liabilities are
recognized for taxable temporary differences. Temporary differences are the
differences between the reported amounts of assets and liabilities and their tax
bases. Deferred tax assets are reduced by a valuation allowance when, in the
opinion of management, it is more likely than not that some portion or all of
the deferred tax assets will not be realized. Deferred tax assets and
liabilities are adjusted for the effects of changes in tax laws and rates on the
date of enactment.
Advertising. Advertising costs are expensed as incurred.
Estimates. The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
<PAGE>
Long-Lived Assets - Long-lived assets to be held and used are reviewed for
impairment whenever events or changes in circumstances indicate that the related
carrying amount may not be recoverable. When required, impairment losses on
assets to be held and used are recognized based on the fair value of the asset
and long-lived assets to be disposed of are reported at the lower of carrying
amount or fair value less cost to sell. Impairment losses are recognized when
the aggregated future cash inflows (less outflows) to be generated by an asset,
are less than an asset's carrying value. Future cash inflows include an estimate
of the proceeds from eventual disposition of the assets. For purposes of this
comparison, future cash flows are determined without reference to there
discounted present value.
New Financial Accounting Standards- In June 1997, the FASB issued Statement No.
130, "Reporting Comprehensive Income" and Statement No. 131, "Disclosures About
Segments of an Enterprise and Related Information". Both statements are
effective for periods beginning after December 15, 1997. Statement No. 130
establishes standards for the reporting and display of comprehensive income and
its components in a full set of financial statements and requires that all items
that are required to be recognized as components of comprehensive income be
reported in a financial statement that is displayed with the same prominence as
other financial statements. Statement No.131 establishes standards for the way
public enterprises report information about operating segments in annual
financial statements and requires them to report selected information about
operating segments in interim financial reports issued to shareholders. It also
establishes standards for related disclosures about products and services,
geographic areas and major customers. The impact of both statements will require
additional disclosures to the Company's 1999 financial statements.
3. Inventories. Inventories consisted of the following at June 30, 1998 and
1997:
1998 1997
--------- --------
Raw materials $271,878 $462,987
Work in process 50,305 71,509
Finished goods 70,965 157,777
--------- ---------
$393,148 $692,273
4. Fixed Assets. Fixed assets consisted of the following at June 30, 1998 and
1997:
1998 1997
------- -------
Plant & equipment $930,147 $916,647
Land 382,000 382,000
Computer equipment and software 163,618 163,618
Furniture and fixtures 100,339 100,004
------- -------
1,576,104 1,562,269
Less: Accumulated Depreciation (364,567) (223,881)
$1,211,537 $1,338,388
In July of 1998, the Company sold its headquarters facility and repaid the
$234,000 mortgage on the realty.
5. Long-Term Debt. Long-Term Debt consisted of the following at June 30, 1998
and 1997:
1998 1997
------ ------
12% subordinated convertible notes, due May 1998 $376,750 $343,750
8.5% note, due February 1, 1999, interest payable
monthly, secured by a mortgage 234,000 234,000
11.25% note, due February 1999, principal and
interest payable monthly, secured by substantially
all of the assets of a subsidiary of the Company,
except for the Company's patent, and guaranteed by
the Company's President and major stockholder 73,095 115,672
8% convertible notes, due March 1999,
interest payable quarterly, secured by certain
assets of a subsidiary; guaranteed by the Company 798,643 - 0 -
11.25% note, due March 2001, principal and
interest payable monthly, secured by substantially
all of the assets of a subsidiary of the Company,
except for the Company's patent and guaranteed by the
Company's President and major stockholder 87,139 106,584
10.0% convertible note, due March 2001, interest
payable quarterly 78,829 75,643
10.0% convertible note, due March 2002, interest
payable quarterly 79,486 76,329
Secured notes payable, due various dates, interest
payable various at 0% to 16% -0- 7,036
9.5% note, due December 2011, principal and
interest payable monthly, secured by mortgage 238,551 238,660
Variable rate note payable, interest payable monthly
at prime rate plus 7%,secured by Company's inventory 60,000 50,000
<PAGE>
Unsecured notes payable, due various dates, interest
payable various at 0% to 10% 126,924 505,363
------- -------
Total notes payable 2,153,417 1,753,037
Less: amounts due in one year (1,035,872) (732,997)
$1,117,545 $1,020,040
The 12% subordinated convertible notes due May 1998 were converted into 725,000
shares of the Company's common stock in July of 1998.
The 10.0% convertible note due March 2001 and the 10.0% convertible note due
March 2002 are convertible, at the election of the note holder, into 158,010
shares and 131,675 shares respectively adjusted for certain antidilutive events
upon the earlier of: (1) March 1, 1998, (2) an initial public offering of the
Company's Common Stock, or (3) the sale of all or substantially all of the
assets of the Company.
The 8% convertible notes due in March 1999 are convertible at the Company's
election into common stock in an amount equal to 115% of the outstanding
principal then due and payable plus accrued and unpaid interest, divided by the
average bid and asked quotes for the Company's common stock for the previous
thirty trading days.
The amount of long-term debt maturing in each of the next five fiscal years is
$1,035,872 in 1999, $35,557 in 2000, $118,298 in 2001, $83,185 in 2002, and
$8,185 in 2003.
6. Lease Expense. The Company leases various equipment and office space under
operating lease agreements. Future minimum annual rentals for subsequent fiscal
years are as follows at June 30, 1998:
Fiscal Lease
Year Payments
------ --------
1999 $53,021
2000 34,934
2001 16,501
7. Earnings(Loss) Per Share. Earnings (loss) per common share is computed by
dividing net income(loss) by the weighted average number of common shares and
dilutive potential common shares outstanding. The average number of shares used
to compute basic earnings per share was 23,041,184 and 14,189,150 for the fiscal
years ended June 30, 1998 and 1997 respectively. The Dilutive potential common
shares were anti-dilutive for the years ending June 30, 1998 and 1997 and,
accordingly, basic and dilutive earnings (loss) per share was approximately the
same.
<PAGE>
8. Income Taxes. The Company did not incur any income tax expense for its fiscal
years ending June 30, 1998 and 1997 respectively. As of June 30, 1998 the
Company has sustained in excess of $9 million in net operating losses (NOLs) for
tax purposes. These NOLs will expire in various amounts if not utilized between
2004 and 2013 and are subject to limitations should the ownership of the Company
significantly change. The deferred tax asset resulting from the above NOL
carryforwards has not been recorded in the accompanying financial statements
since management believes a valuation allowance is necessary to reduce the
deferred tax asset. Realization of deferred tax assets is dependent upon
sufficient future taxable income during the period that deductible temporary
differences and carryforwards are expected to be available to reduce taxable
income.
9. Royalty Agreement. The Company is the owner of a patent on a photoscreening
device from which MTI derives substantially all of its revenues. The terms of
the royalty agreement require the Company to pay a royalty to the inventor of
six percent (6.0%) of net PhotoScreener sales. The amount of royalties accrued
by the Company were $68,644 and $56,952 for its fiscal years ending June 30,
1998 and 1997 respectively under this agreement.
10. Preferred Stock. The Company has three classes of preferred stock. The
$1,000 par value convertible preferred stock is convertible into 14,985 shares
of the Company's common stock.
The Series A convertible preferred stock was convertible into approximately 30
million shares of the Company's common stock as of September 30, 1997. The
Series A preferred stock conversion rate was the lower of the approximate market
rate or $2.72.
During September of 1997, the Company renegotiated terms with the Series A
Preferred Shareholders and as a result, Series A Preferred Shares were exchanged
for a combination of cash, common stock, a new Series B Preferred stock and an
amended warrant certificate with an exercise price of $1.00 per share in cash.
Series A Preferred shareholders owning 217 outstanding shares elected to receive
$3,800 in cash in exchange for their Series A Preferred shares with a face value
of $10,000. The Series A Preferred shares were eventually converted into
5,425,000 of the Company's Common Stock. Over 60% of the parties who ultimately
purchased the Series A Preferred shares and converted them into common shares of
the Company agreed not to sell any common shares before April 1, 1998 and limit
sales to 8% of the amount purchased per month thereafter with no limit on
salability once 360 days have lapsed since the closing. Series A Preferred
shareholders owning 267 outstanding shares agreed to exchange their Series A
Preferred shares for a new Series B Preferred share with a $100 par value, a
face value of $6000 with accretion at 8% from October 1, 1997 plus 10,000 shares
of the Company's common stock. The new Series B Preferred stock is convertible
into common stock beginning October 1, 1998 at a fixed conversion price of $1.00
per share. Conversion is limited to 10% per month of the shares held until
February 28, 1999 and 20% per month thereafter. The conversion feature doubles
provided the Company's common stock closing bid price for ten consecutive days
is greater than $2.00 per share.
The Company has the option of redeeming the Series B Preferred shares at any
time in cash, at 110% of the original face value of the Series B Preferred
shares including accretion, or in the Company's common stock valued at the
average closing bid price for the 30 days prior to the redemption at 120% of the
original face value of the Series B Preferred shares including accretion. The
Company is required to redeem the Series B Preferred stock on September 30,
2000. The common stock issued to Series B Preferred shareholders is subject to
the following lockup schedule:
<PAGE>
Maximum
Date Tradeable
December 1, 1997 250 shares
January 1, 1998 750 shares
February 1, 1998 1,500 shares
April 1, 1998 2,500 shares
July 1, 1998 5,500 shares
October 1, 1998 10,000 shares
As a result of the restructuring of the Series A Preferred Stock, the common
stock holders have received a gain of approximately $948,000.
11. Stock Option Plans. In October of 1995 officers of the Company were granted
options to acquire up to 2.0 million shares of common stock at an exercise price
of $1.50 per share. The options are exercisable ratably over a three year period
commencing with the quarter ending June 30, 1996.
In April of 1996 the Company's shareholders approved the 1996 Stock Option Plan,
which allows the board of directors to grant up to 3.0 million options. During
fiscal 1997 and fiscal 1998, 1,250,000 and 500,000 options respectively, have
been granted. The options are exercisable ratably over a three year period
commencing with the grant date.
In September of 1997 and February of 1998, the Board of Directors reduced the
exercise price on all options granted to Company Executives to $.25 per share.
The following is a summary of stock option transactions:
1998
Outstanding, beginning of year 3,239,936
Options granted 500,000
Options exercised 0
Options cancelled (500,000)
Outstanding, end of year 3,239,936
Exercisable, end of year 1,898,270
The proforma disclosures required by SFAS 123 "Accounting for Stock-based
Compensation", is not applicable due to immateriality.
12. Warrants. The Company has issued warrants to purchase approximately 3.0
million shares of common stock as of June 30, 1998. The warrants relate to
grants made in connection with an equity issuance and various services rendered.
The warrants can be exercised at prices ranging from $.25 to $2.72 per share.
2.4 million warrants expire in July 2001. Pursuant to terms renegotiated in
September of 1997 between the Company and holders of Series A Preferred Shares
issued in July of 1996, the exercise price of approximately 1.8 million warrants
was reduced from $2.72 to $1.00.
13. Related Party Transactions. The Company and its wholly-owned subsidiaries
have had transactions with various entities, certain of whose principals are
also officers or directors of the Company or MTI.
During the fiscal year ended June 30, 1997 the Company borrowed $90,000 from an
affiliate of the Chief Executive Officer and a Director of the Company. On June
30, 1997, both amounts were outstanding and were included in the balance sheet
as of the same date. Both loans were repaid during fiscal 1998.
In May of 1997, the Company borrowed $50,000 from a director of the Company
which was repaid by the Company in October of 1997.
In connection with financing required to fund the restructuring of the terms of
the Series A Preferred shares in September 1997, the Chief Executive Officer,
Chief Operating Officer and a family member, Executive Vice President and a
director loaned a subsidiary of the Company approximately $411,000. These loans
are secured by certain assets of the subsidiary, bear interest at 8% payable
quarterly and are due to be repaid or converted into shares of the Company's
common stock in March of 1999.
During the fiscal year ended June 30, 1998 the Company issued common shares with
a value approximating $100,000, to a company director for performing investment
banking, consulting and financial advisory services.
The Chief Executive Officer and a director personally signed a guarantee with a
local bank to provide a $250,000 line of credit to the Company which terminates
in January 1999.
14. Fair Value of Financial Instruments. The estimated fair values of the
Company's financial instruments as of June 30, 1998 and 1997 are as follows:
1998 1997
Carrying Fair Carrying Fair
Amount Value Amount Value
Accounts Receivable $287,114 $287,114 $407,633 $407,633
Accounts Payable 505,824 505,824 418,341 418,341
Accrued Expenses 370,588 370,588 384,995 384,995
Long-term Debt 2,153,417 2,153,417 1,753,037 1,753,037
The estimated fair value of long-term debt approximates the carrying amount
based upon the borrowing rates currently available to the Company for loans with
similar terms and maturities. The fair value of accounts receivable, accounts
payable, and accrued expenses approximates their carrying amount.
15. Major Customers. For the years ended June 30, 1998 and 1997 the Company had
no major customers that accounted for more than 10% of sales.
<PAGE>
16. Geographic Area Information. The Company sells its products both
domestically and internationally. All international transactions are conducted
in U.S. currency. Information concerning operations by principal geographic area
was as follows:
United Asia/
States Pacific Europe Consolidated
June 30, 1998
Revenues $4,341,321 $22,070 $177,981 $4,541,372
Net Earnings (Loss) (1,342,619) (30,327) (114,418) (1,487,364)
Identifiable Assets 4,292,376 - 0 - 13,940 4,306,316
June 30, 1997
Revenues $3,349,691 $240,304 $42,286 $3,632,281
Net Earnings (Loss) (3,169,081) (232,161) (106,317) (3,507,559)
Identifiable Assets 5,195,114 23,541 30,486 5,249,141
17. Commitment. In August of 1998, the Company received its largest order ever
to deliver approximately 700 MTI PhotoScreeners(TM) during fiscal 1999. The
Company and the customer agreed, that in consideration of the customer funding
and executing a national vision screening marketing program mentioning the
PhotoScreeners, the cost of which will be several million dollars, the Company
shall grant the customer warrants to purchase 1,200,000 shares of common stock
of the Company at an exercise price of $0.88 per share.
Item 8. Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure
<PAGE>
There were no disagreements between the Company and their independent
accountants.
PART III.
Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
With Section 16(a) of the Exchange Act
NAME POSITION WITH DATE ELECTED TERM OF OFFICE AGE
COMPANY DIRECTOR
Jeremy Feakins Director, Chief April 1996 3 years 45
Executive Officer
Robert Brennan Director, Chief February 1998 3 years 56
Operating Officer
John Behrmann Director January 1997 3 years 63
Mathew Crimmins Director January 1997 3 years 66
BUSINESS EXPERIENCE OF DIRECTORS
Mr. Feakins was elected to the board in April of 1996. Since 1989, he has served
as President of Medical Technology, Inc. (MTI) and in October 1995, became the
President and Chief Executive Officer of Medical Technology & Innovations, Inc.
From 1980 to 1986, he was the managing Director of Craft Master, Limited, a
South African corporation, which was a manufacturer and exporter of point of
purchase display systems. Mr. Feakins received his degree in accounting and
computer studies from the Royal Naval College, Secretarial and Accounting
College, Chatham, Great Britain.
Mr. Brennan joined the Company in February 1997 as President and Chief Operating
Officer. Prior to joining the Company, Mr. Brennan was Vice President-General
Manager of the Trubyte division of Dentsply International, Inc. ("Dentsply"), a
worldwide dental and medical product manufacturer and distributor (NASDAQ:XRAY).
His prior experience included Vice President-General Manager of Dentsply's F&F
Koenigkramer division, a fully integrated ophthalmologic equipment company, and
Vice President-Operations of the Deseret division of Warner Lambert Company, a
hospital product manufacturer of IV catheters and operating room supplies. Mr.
Brennan received a B.S. degree in Business Administration and an M.B.A. in
Management Development from Drexel University.
Mr. Behrmann has been a director since April 1996. Mr. Behrmann is a Chairman of
First American Health Concepts, Inc., a public company in the optical insurance
business and owner and operator of Evergreen Industries, Inc., a company with
interests in commercial deer farming and real estate. He is also a stockholder
and Chairman of Preston Reynolds & Co., Inc., an investment banking firm with
special emphasis on the oil and gas industry and a stockholder and Chairman of
Redstone Resources, Inc., a company engaged in natural gas exploration. Mr.
Behrmann was formerly a Senior Vice President, Chief Financial Officer, and
director of Dentsply International, Inc., a health care company, is a C.P.A. and
holds a B.S. degree in Commerce and Finance from Bucknell University, Lewisburg,
Pennsylvania.
Mr. Crimmins has been a director since April 1996. From 1965 to 1995, he was
with Polaroid Corporation where he held a number of executive positions with
responsibility in many functional areas including, commercial, technical, and
manufacturing operations. He was a Senior Director of Polaroid at retirement.
Mr. Crimmins received a B.S. (Physics) degree from Holy Cross, a M.S.
(Electrical Engineering) degree from Northeastern, and a M.B.A. from Boston
College.
<PAGE>
BUSINESS EXPERIENCE OF SIGNIFICANT OFFICERS
Mr. Stefanick joined the company in April 1997 as Executive Vice President of
Sales and Marketing. Prior to joining the Company, Mr. Stefanick was President
of Organizational Resources, Inc., a management consulting firm. His prior
experience included Vice President, Sales and Marketing for Dentsply's Ceramco
division, the world's leading supplier of dental ceramic products, and Director
of Sales and Marketing for Johnson & Johnson's Ceramco division. Mr. Stefanick
received a B.S. from West Chester University.
Mr. Surovcik joined the company in January 1998 as Senior Vice President, Chief
Financial Officer and Secretary. He formerly was a staff accountant for Price
Waterhouse in New York and later, Audit Director and Group Controller for
Dentsply International. Mr. Surovcik, a CPA, most recently was President and
Owner of DBK Distributors, Inc., a small distribution company serving over 1,000
grocery stores in the Mid Atlantic States. Mr. Surovcik received a BS in
accounting from Susquehanna University.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than ten percent of its Common
Stock, to file reports of ownership and changes of ownership with Securities and
Exchange Commission (SEC). Officers, directors, and greater than ten-percent
stockholders are required by SEC regulation to furnish the Company with copies
of all ownership forms they file.
Based solely on its review of the copies of such form received by it, or based
upon representations that no Form 5 was required, Messrs. Feakins, Ballheim,
Behrmann, Brennan, Stefanick, and Surovcik did not timely file Forms 3,4, or 5
for the fiscal year ending June 30, 1998 as follows:
Name No. of Late Reports
Jeremy Feakins 3
Robert Ballheim 1
John Behrmann 3
Robert Brennan 3
John Stefanick 3
Dennis Surovcik 3
<PAGE>
Item 10. Executive Compensation
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning the compensation of the
Company's Executive Officers whose compensation exceeded $100,000 for the fiscal
years ending June 30, 1998 and 1997.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Name and Fiscal Annual Compensation Long-Term Compensation All Other
Principal Year Compensation
Position(1)
Salary Bonus Other Awards Payouts
Annual
Comp.
Restricted Stock Options/SARs LTIP
Award(s) Payouts
J. Feakins, 1998 $133,500 0 0 0 0 0
Chief
Executive 1997 $146,250 0 0 0 0 0
Officer
R. Brennan, 1998 $117,187 0 0 0 0 0
Chief
Operating
Officer
J. Stefanick 1998 $135,186 0 0 0 0 0
Executive
Vice
President
</TABLE>
- ----------
1. Each executive is furnished with an automobile for business and personal use.
The compensation specified in the preceding table does not include the value of
non-business use as the amount is not material.
STOCK OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<S> <C> <C> <C> <C>
(Individual Grants)
Name No. of Shares Common % of Total Options Exercise of Base Price Expiration Date
Stock Underlying Granted to Employees ($/share)
Options Granted in Fiscal Year
- -------------------------- -------------------------- -------------------------- --------------------------- ----------------
D. Surovcik 500,000 (1) 100% $0.25 (2)
- ------------------------- --------------------------- -------------------------- --------------------------- -----------------
</TABLE>
- -------------
1. Options become exercisable at the rate of 8.33% of options granted per
calendar quarter for twelve quarters beginning July 1, 1997 for Mr. Surovcik.
Options not yet exercisable in the event of cessation of employment are
forfeited by the individual participant unless there is a change of control in
the Company, in which event, all options granted are immediately exercisable. 2.
The expiration dates for the options granted are two (2) years from the date the
options become exercisable.
AGGREGATED OPTION EXERCISES IN
THE FISCAL YEAR ENDED JUNE 30, 1998
AND FISCAL YEAR END OPTION VALUES
<TABLE>
<S> <C> <C> <C> <C> <C>
Name No. of Shares Value Realized No. of Shares of Exercisable/Un- Value of
Acquired on Common Stock exercisable Unexercised in-
Exercise Underlying the-money Options
Unexercised Exercisable/Un-
Options @ Fiscal exercisable
Year End
- ---------------------- --------------------- ---------------------- ---------------------- ---------------------- ---------------
J. Feakins 0 0 500,000 400,000/100,000 0
- ---------------------- --------------------- ---------------------- ---------------------- ---------------------- ---------------
R. Ballheim 0 0 500,000 400,000/100,000 0
- ---------------------- --------------------- ---------------------- ---------------------- ---------------------- ---------------
D.Surovcik 0 0 500,000 166,667/333,333 0
- ---------------------- --------------------- ---------------------- ---------------------- ---------------------- ---------------
G. Hartman 0 0 489,936 389,936/100,000 0
- ---------------------- --------------------- ---------------------- ---------------------- ---------------------- ---------------
R. Brennan 0 0 750,000 375,000/375,000 0
- ---------------------- --------------------- ---------------------- ---------------------- ---------------------- ---------------
J. Stefanick 0 0 500,000 166,667/333,333 0
- ---------------------- --------------------- ---------------------- ---------------------- ---------------------- ---------------
</TABLE>
<PAGE>
Item 11. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information concerning all persons known to the
Company to be the beneficial owners of more than 5% of the Company's Common
Stock, (ii) the ownership interest of each director and nominee, and (iii) by
all directors and executive officers as a group calculated as of June 30, 1998.
NAME POSITION AMOUNT AND NATURE OF PERCENT OF
BENEFICIAL OWNERSHIP OWNERSHIP
Jeremy Feakins Director, Chief Executive 5,685,278 21.55%
Officer
John Behrmann Director 1,501,618 5.69%
Mathew Crimmins Director 0 0.00%
Robert Brennan Director, Chief Operating 426,962 1.62%
Officer
All Executive Directors
and Officers as a Group 8,022,304 30.4%
Item 12. Certain Relationships and Related Transactions
From November 1995 to May 1996, a Director loaned the Company approximately
$108,000. The above loan was an unsecured promissory note and was interest
bearing. The loan was repaid by the Company in July, 1996.
In March and April of 1997, a Company affiliated with the chief executive
officer and director of the Company made an unsecured demand loan to the Company
for $90,000 supported by a promissory note bearing interest at 9% per annum. The
loan was partially repaid in October 1997 and in full in May 1998.
In May of 1997, a director of the Company made an unsecured loan to the Company
for $50,000 supported by a promissory note bearing interest at 9% per annum. The
loan was repaid by the Company in October of 1997.
In connection with financing required to fund the restructuring of the terms of
the Series A Preferred shares in September 1997, the Chief Executive Officer,
Chief Operating Officer and family member, Executive Vice President and a
Director loaned a subsidiary of the Company approximately $411,000. These loans
are secured by certain assets of the subsidiary, bear interest at 8% payable
quarterly and are due to be repaid or converted into shares of the Company's
common stock in March of 1999.
During the fiscal year ended June 30, 1998 the Company issued common shares with
a value approximating $100,000, to a Company director for performing investment
banking, consulting and financial advisory services.
The Chief Executive Officer and a director personally signed a guarantee with a
local bank to provide a $250,000line of credit to the Company which terminates
in January 1999.
<PAGE>
Item 13. Exhibits and Reports on Form 8-K
(a) Exhibits:
3.1 Articles of Incorporation of SouthStar Productions, Inc., n/k/a Medical
Technology & Innovations, Inc. [Incorporated by reference to Exhibit 3.1 to the
Company's Registration Statement on Form S- 18 (File No. 33-27610-A), filed
March 17, 1989]
3.2 Amendment to the Articles of Incorporation for SouthStar Productions, Inc.,
which changed its name to Medical Technology & Innovations, Inc. [Incorporated
by reference to the Company's Current Report on Form 8-K for an event on
September 21, 1995]
3.3 Restated Articles of Incorporation for Medical Technology & Innovations,
Inc. [Incorporated by reference to the Company's Annual Report on Form 10-KSB
(File No. 33-27610-A), filed September 30, 1996]
3.4 By-laws [Incorporated by reference to Exhibit 3.2 to the Company's
Registration Statement on Form S-18 (File No. 33-27610-A), filed March 17, 1989]
10.1 Share Exchange Plan between SouthStar Productions, Inc. and Medical
Technology, Inc. [Incorporated by reference to the Company's Current Report on
Form 8-K for an event on August 21, 1995]
10.2 Asset purchase agreement for the purchase and sale of certain assets of
Steridyne Corporation [Incorporated by reference to the Company's Current Report
on Form 8-K for an event on July 31, 1996]
10.3 Medical Technology & Innovations, Inc. 1996 Stock Option Plan.
[Incorporated by reference to the Company's Annual Report on Form 10-KSB (File
No. 33-27610-A), filed September 30, 1996.]
10.4 SouthStar Productions, Inc. Stock Purchase Plan 1995a (Financial Public
Relations Consulting Agreement) [Incorporated by reference to Exhibit 4.1 to the
Company's Registration Statement on Form S-8 (File No. 33-27610-A), filed August
23, 1995]
10.5 Medical Technology & Innovations, Inc. 1996b Stock Purchase Plan
(Consulting Agreement) [Incorporated by reference to Exhibit 4.1 to the
Company's Registration Statement on Form S-8 (File No. 33-27610-A), filed April
22, 1996]
<PAGE>
10.6 Form of Employment Agreement, Covenant not to Compete, and Stock Option
Agreement between the Company and key employees. [Incorporated by reference to
the company's Annual Report on Form 10-KSB (File No. 33-27610-A), filed
September 30, 1996.]
10.7 Purchase Agreement dated January 31, 1996 between the Company and Glenn and
Ruth Schultz. [Incorporated by reference to the Company's Annual Report on Form
10-KSB (File No. 33-27610-A), filed September 30, 1996.]
16.1 Letter on change in certifying accountant [Incorporated by reference to the
Company's Current Report on Form 8-K for an event on April 26, 1996]
21.1 Subsidiaries. Medical Technology, Inc. and Steridyne Corporation.
24.1 Powers of Attorney as indicated on Page 24 of this Form 10-KSB.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the last quarter of the
period covered by this report.
<PAGE>
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.
AND
BY: BY:
/s/ JEREMY P. FEAKINS /s/DENNIS A. SUROVCIK
Jeremy P. Feakins Dennis A. Surovcik, Senior Vice President
Chief Executive Officer and Chief Financial Officer and Secretary
Date: October 25, 1998
In accordance with the Exchange Act, 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/ JEREMY P. FEAKINS /s/ROBERT D. BRENNAN *
Jeremy P. Feakins, Chief Executive Officer, Robert D. Brennan, President
and Chairman, and Director
Chief Operating Officer
/s/ JOHN BEHRMANN
John Behrmann, Director
/s/ MATHEW CRIMMINS*
Matthew Crimmins, Director
Pursuant to Power of Attorney
Date: October 25, 1998
<PAGE>
Exhibit 24.1
LIMITED POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that Robert Brennan has made, constituted and
appointed, and by these presents does make, constitute and appoint Dennis
Surovcik, as his true and lawful attorney for me and in my name, place and stead
giving and granting unto said attorney above-named, full power and authority to
do and perform all and every act and thing whatsoever requisite and necessary to
be done in and about the premises as fully, to all intents and purposes, as I
might or could do if personally present, with full power of substitution and
revocation, hereby ratifying and confirming all that he my said attorney, or his
substitute shall lawfully do or cause to be done by virtue hereof as follows:
TO SIGN AND FILE WITH THE SECURITIES AND EXCHANGE COMMISSION ON MY BEHALF,
MEDICAL TECHNOLOGY AND INNOVATIONS, INC.'S FORM 10-KSB FOR THE FISCAL YEAR ENDED
JUNE 30, 1998.
IN WITNESS THEREOF, I have hereunto set my hand and seal this 20th day of
October, 1998.
/s/ Robert Brennan
Robert Brennan PA Dr Lic 11540362
STATE OF Florida
COUNTY OF Palm Beach
Subscribed and sworn to before me by the said Robert Brennan, this 20th day of
October, 1998.
/s/ Bertha M. Mcogg
Notary Public in and for the
State of Florida
My commission exp. Jan. 7, 2000
LIMITED POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that Mathew Crimmins has made, constituted and
appointed, and by these presents does make, constitute and appoint Dennis A
Surovcik, as his true and lawful attorney for me and in my name, place and stead
giving and granting unto said attorney above-named, full power and authority to
do and perform all and every act and thing whatsoever requisite and necessary to
be done in and about the premises as fully, to all intents and purposes, as I
might or could do if personally present, with full power of substitution and
revocation, hereby ratifying and confirming all that he my said attorney, or his
substitute shall lawfully do or cause to be done by virtue hereof as follows:
TO SIGN AND FILE WITH THE SECURITIES AND EXCHANGE COMMISSION ON MY BEHALF,
MEDICAL TECHNOLOGY AND INNOVATIONS, INC.'S FORM 10-KSB FOR THE FISCAL YEAR ENDED
JUNE 30, 1998.
IN WITNESS THEREOF, I have hereunto set my hand and seal this 22nd day of
October, 1998.
/s/ Mathew A. Crimmins
Mathew Crimmins
STATE OF Massachusetts
COUNTY OF Middlesex
Subscribed and sworn to before me by the said Mathew Crimmins, this 22nd day of
October, 1998.
/s/ Leighton Scheffy
Notary Public in and for the
State of Massachusetts
My commission expires Jan. 3, 2003
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements of Medical Technologies & Innovations, Inc. for June 30,
1998, and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<CIK> 0000847464
<NAME> Medical Technology & Innovations, Inc.
<MULTIPLIER> 1
<CURRENCY> U.S. Dollar
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> JUN-30-1998
<EXCHANGE-RATE> 1
<CASH> 38,247
<SECURITIES> 0
<RECEIVABLES> 323,481
<ALLOWANCES> 36,367
<INVENTORY> 393,148
<CURRENT-ASSETS> 749,249
<PP&E> 1,576,104
<DEPRECIATION> 364,567
<TOTAL-ASSETS> 4,306,316
<CURRENT-LIABILITIES> 1,912,254
<BONDS> 0
0
1,624,500
<COMMON> 9,632,183
<OTHER-SE> (9,980,166)
<TOTAL-LIABILITY-AND-EQUITY> 4,306,316
<SALES> 4,541,372
<TOTAL-REVENUES> 4,541,372
<CGS> 3,138,479
<TOTAL-COSTS> 2,659,027
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (539,201)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,487,364)
<DISCONTINUED> 0
<EXTRAORDINARY> 948,163
<CHANGES> 0
<NET-INCOME> (539,201)
<EPS-PRIMARY> (0.024)
<EPS-DILUTED> (0.024)
</TABLE>
