U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-KSB
(Mark One)
X 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, 1999
___ 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 65-2954561
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
615 Centerville Road, Lancaster, PA 17601
(Address of principal executive offices) (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 $5,443,604.
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 October 29, 1999 was approximately
$1,682,900.
As of June 30, 1999 27,548,334 shares of Common Stock, no par value, of the
registrant were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE:
None
Transitional Small Business Disclosure Format (Check One): Yes [ ] No [X]
<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 PhotoScreener(TM), 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.
Effective April 1, 1999 the Company acquired certain key operating assets of the
thermometer business of Florida Medical Corporation, a former manufacturer of
glass thermometers and distributor of digital thermometers. Florida Medical has
been in business for over twenty years and brings a substantial customer base in
the retail market. The purchase requires that both Companies equally split the
profit for the next several years. No up front cash or stock was required to be
issued as part of the purchase price.
Product Lines
The 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 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 PhotoScreener 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 Steritemp(R) 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
Steritemp(R)'s own branded electronic thermometer and probe cover kits. A
non-sterile economy sheath/probe cover line, Value Brand(TM), 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-G(TM) and SofSeat(TM), 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.
<PAGE>
Marketing and Distribution
The Company markets the PhotoScreener(TM) domestically and internationally
through a combination of direct sales representatives and independent
distributors. The Company markets the PhotoScreener(TM) 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 PhotoScreener(TM) 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 PhotoScreener(TM). 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.
As part of the acquisition of Florida Medical, the Company obtained the right to
use the trademarks RECOVER and TEMCOM with devices for taking temperatures
including glass and digital thermometers.
Government Regulation
Certain aspects of the Company's business, principally the manufacture and sale
of the PhotoScreener(TM) 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 PhotoScreener(TM) 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 PhotoScreener(TM). 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, 1999 and 1998, the Company employed 38 full-time employees. None
of the Company's employees are represented by a labor union, and the Company
considers its employee relations to be good.
<PAGE>
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 PhotoScreener(TM) 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 PhotoScreener. 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 alleged 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 claimed damages
of $750,000 for the alleged failure of the Company to fulfill its obligations
under the original conversion rights and investment banking fees for alleged
services in connection with the restructuring.
In December of 1998, the Company settled this action by agreeing to pay Faisal
an amount approximately equal to the amount they would have received had they
originally tendered their shares in October of 1997.
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 April 12, 1999:
1. The following directors were elected, along with his respective votes
received:
<TABLE>
<CAPTION>
Director Term Votes For Votes Against Votes Abstain
- -------- ---- --------- ------------- -------------
<S> <C> <C> <C> <C>
Jeremy P. Feakins 3 yr. 24,049,210 4,860 256,968
Dennis A. Surovcik 3 yr. 24,053,760 310 256,968
</TABLE>
2. Simon Lever & Company was ratified as the independent certified public
accountants by a vote of 24,232,907 in favor, 1,950 votes against and
76,181 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.
<TABLE>
<CAPTION>
Quarter Ending High Low Quarter Ending High Low
<S> <C> <C> <C> <C> <C> <C>
September 30, 1998 $ .27 $ .25 September 30, 1997 $.25 $.11
December 31, 1998 .20 .08 December 31, 1997 .69 .21
March 31, 1999 .18 .15 March 31, 1998 .35 .22
June 30, 1999 .15 .15 June 30, 1998 .40 .18
</TABLE>
As of June 30, 1999, there were approximately 683 recordholders of common stock.
Such amounts do not include common stock held in "nominee" or "street" name.
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, 1999 as Compared to 1998
Revenues for the fiscal year 1999 increased by $902,232 or a 20% increase.
Almost 74% of this increase results because of increased demand for the
PhotoScreener primarily from retail optical chains, and to lesser extent service
clubs and schools combined with a 7% growth in the core Steridyne business.
Gross profit for the fiscal year 1999 increased by 58% versus the comparable
period in fiscal 1998 mostly due to increased sales of MTI products as overall
margins are comparable between the two periods. MTI products generally have
higher profit margins than Steridyne products.
Operating expenses during the fiscal year 1999 compared to fiscal 1998 increased
by 1% or $33,657. Overall costs reduction programs undertaken in the beginning
of fiscal 1999 were offset by increased commissions and royalties relative to
increased PhotoScreener sales and certain non-recurring costs associated with
employee severance arrangements. Management expects to continue to reduce costs
in all areas in line with ongoing sales levels. Interest expense for fiscal 1999
decreased by $44,930 or 19% versus fiscal 1998 mainly due to the sale of the
former headquarters building and pay down of the mortgage and the conversion of
$379,500 of notes into Company common stock.
Information about the Company's Industry Segments is included in Note 16 to the
Notes to Consolidated Financial Statements.
Liquidity and Capital Resources
At June 30, 1999, the Company had cash of $90,581 and working capital of
($613,415) as compared to $38,247 and ($1,163,005) at June 30, 1998. The
decrease in the working capital deficit is mostly due to the exclusion of
$822,601 of secured notes incurred to fund the Series A restructuring which were
converted into Company common stock in October of 1999.
Management is in the process of consolidating its operations into a single
location and cutting back on administrative staff in line with present sales
levels. The reorganization should be substantially completed by the end of the
second quarter of fiscal 2000.
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.
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. This commitment has expired. Unless the
customer executes a national vision screening marketing program mentioning the
PhotoScreener, sales of PhotoScreeners in fiscal 2000 could decline.
The Chief Executive Officer and a former director personally signed a guarantee
with a local bank to provide a $250,000 line of credit to the Company which
terminated in January of 1999 but was extended until December 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.
<PAGE>
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. Additionally, the Company has made inquiries
with some of its largest customers and suppliers and determined that any
possible negative impact with regard to non-compliance with year 2000
programming issues are minimal.
The Company is also establishing a back up contingency plan which will allow it
to continue to operate its computer systems in the event unforeseeable external
factors disrupt normal operations in the year 2000.
<PAGE>
Item 7. Financial Statements
Index to Consolidated Financial Statements: Page
Report of independent auditors for the years
ended June 30, 1999 and 1998 F-1
Consolidated balance sheets as of June 30, 1999 and 1998 F-2
Consolidated income statements for the years ended
June 30, 1999 and 1998 F-3
Consolidated statements of stockholders' equity
for the years ended June 30, 1999 and 1998 F-4
Consolidated statements of cash flows for the years ended
June 30, 1999 and 1998 F-5
Notes to consolidated financial statements F-6
<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, 1999 and 1998,
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, 1999 and
1998, and consolidated results of their operations and their consolidated cash
flows for the years then ended in conformity with generally accepted accounting
principles.
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in Note
18 to the consolidated financial statements, the Company has suffered recurring
losses from operations and has a net working capital deficit that raises
substantial doubt about its ability to continue as a going concern. Management's
plans in regard to these matters are also described in Note 18. The consolidated
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
/s/ SIMON LEVER & COMPANY
- -----------------------------
Lancaster, Pennsylvania
November 23, 1999
F-1
<PAGE>
<TABLE>
<CAPTION>
Medical Technology & Innovations, Inc.
Consolidated Balance Sheets
June 30
Assets
1999 1998
----------- ----------
<S> <C> <C>
Current Assets:
Cash $ 90,581 $ 38,247
Accounts Receivable, less allowances of
$21,174 and $36,367, respectively 438,207 287,114
Inventory 513,358 393,148
Prepaid Expenses 91,002 30,740
---------- ----------
Total Current Assets 1,133,148 749,249
---------- ----------
Fixed Assets:
Land 182,000 382,000
Property & Equipment 1,163,166 1,194,104
Less accumulated depreciation (494,006) (364,567)
---------- ----------
Fixed Assets, net 851,160 1,211,537
---------- ----------
Other Assets:
Intangible and Other Assets 2,134,155 2,345,530
--------- -----------
Total Assets $4,118,463 $4,306,316
========== ===========
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts Payable 908,139 $ 505,824
Accrued Liabilities
Payroll and payroll taxes 180,472 84,498
Royalties 147,961 111,786
Other 94,155 174,274
Current Maturities of Long-Term Debt 415,836 1,035,872
--------- ----------
Total Current Liabilities 1,746,563 1,912,254
Long-Term Debt, Net of Current Maturities 1,321,158 1,117,545
--------- ----------
Total Liabilities 3,067,721 3,029,799
--------- ----------
Stockholders' Equity
Common Stock, no par value, authorized
700,000,000 shares, outstanding 27,548,334
and 26,385,279 shares, respectively 10,190,092 9,632,183
Series A Convertible Preferred Stock, $100
par value, authorized 70,000 shares,
outstanding nil shares - 0 - - 0 -
Series B Convertible Preferred Stock,
$100 par value, authorized 1000 shares,
266 and 267 shares outstanding, respectively 1,596,000 1,602,000
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 (1,973,531 and
1,373,531 shares, respectively) (436,799) (309,742)
Accumulated Deficit (10,321,051) (9,670,424)
------------ -----------
Total Stockholders' Equity 1,050,742 1,276,517
------------- -----------
Total Liabilities and Stockholders' Equity $ 4,118,463 $4,306,316
============= ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-2
<PAGE>
<TABLE>
<CAPTION>
Medical Technology & Innovations, Inc.
Consolidated Income Statements
For the Years Ended June 30
1999 1998
----------- -----------
<S> <C> <C>
Revenues $5,443,604 $ 4,541,372
Cost of Goods Sold 3,215,247 3,138,479
------------ -----------
Gross Profit 2,228,357 1,402,893
----------
Operating Expenses
Advertising 7,764 128,640
Selling, General,
and Administrative 2,684,920 2,530,387
----------
Total Operating Expenses 2,692,684 2,659,027
----------
(Loss) from Operations (464,327) (1,256,134)
Interest expense, net 186,300 231,230
----------- -----------
Net (Loss) from Operations $(650,627) $(1,487,364)
Add: Gain on Restructuring of Series A
Preferred Stock - 0 - 948,163
----------- ------------
Net (Loss) Attributable to Common Stock $ (650,627) $ (539,201)
============= ============
Net (Loss) per common share $ ( .024) $ ( .069)
(basic and diluted)(*) ============= ============
Net (Loss) per common share after
Gain on Restructuring of Series A
Preferred Stock (basic and diluted)(*) $ ( .024) $ ( .028)
============ ============
Weighted Average Outstanding Shares 27,087,143 23,041,184
============ ============
</TABLE>
(*) Calculated including Series B Preferred Stock accretion of $128,160 and
$96,120 for the fiscal years ended June 30, 1999 and 1998; respectively
The accompanying notes are an integral part of the financial statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
Medical Technology & Innovations, Inc.
Consolidated Statements of Stockholders' Equity
For the Years Ended
Series A Series B
Convertible Convertible Total
Common Common Preferred Preferred Preferred Treasury Accumulated Stockholders
Shares Stock Stock Stock Stock Stock Deficit Equity
------ ----- ---------- --------- ---------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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 76,000 (76,000)
Series A Preferred Stock
into common stock 500,000
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 (1,602,000) 1,602,000
Preferred
---------- ---------- ----------- ---------- --------- --------- ------------ -----------
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
---------- ---------- ----------- ---------- --------- --------- ------------ -----------
Purchase of Treasury Shares (600,000) (127,057) (127,057)
Net Loss (650,627) (650,627)
Stock Issued for Services 983,974 172,409 172,409
Conversion of Series B 54,081 6,000 (6,000)
Preferred
Stock into common stock
Conversion of Subordinated
Notes into common stock 725,000 379,500 379,500
----------- ---------- ----------- ---------- --------- ----------- ------------ ----------
Balance at June 30, 1999 27,548,334 $10,190,092 - 0 - $1,596,000 $ 22,500 $(436,799) $(10,321,051) $1,050,742
========== =========== =========== ========== ========= ========== ============= ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
Medical Technology & Innovations, Inc.
Consolidated Statements of Cash Flows
For the Years Ended June 30
1999 1998
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net Loss $ (650,627) $ (1,487,364)
Adjustments to reconcile net loss to net cash provided
(used) in operating activities:
Depreciation and Amortization 368,085 365,474
(Increase) Decrease in Accounts Receivable (151,093) 120,519
(Increase) Decrease in Inventory (120,210) 299,125
(Increase) Decrease in Prepaid Expenses (60,261) 5,737
Increase in Accounts Payable 402,315 87,483
Increase (Decrease) in Accrued Liabilities 52,030 (14,437)
Stock issued for services 172,409 296,113
------------ ----------
Net cash provided (used) in operating activities 12,648 (327,350)
Cash flows from investing activities:
Sale of Headquarters Land and Building 232,725 - 0 -
Purchase of Fixed Assets (29,060) (13,835)
Net cash provided (used) in investing activities 203,665 (13,835)
Cash flows from financing activities:
Costs incurred for restructuring of
Series A Preferred Stock, net - 0 - (250,000)
Proceeds from revolving credit facility 235,000 - 0 -
Proceeds from issuance of Stock, net - 0 - 25,000
Acquisition of Treasury Stock (127,057) - 0 -
Proceeds from issuance of Notes Payable - 0 - 728,750
Repayment of Notes Payable (271,922) (182,408)
----------- ----------
Net cash (used) provided from financing activities (163,979) 321,342
----------- ----------
Net increase (decrease) in cash 52,334 (19,843)
Cash at beginning of year 38,247 58,090
----------- ----------
Cash at end of year $ 90,581 $ 38,247
=========== ==========
Supplemental Disclosure:
Cash paid during the year for interest $ 159,915 $ 118,337
========== =========
Conversion of subordinated notes into common stock $ 379,500 - 0 -
========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-5
<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.
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 $854,963 and $643,589 at
June 30, 1999 and 1998, 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.
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
F-6
<PAGE>
determined without reference to their discounted present value. Management
believes that the Company's projected results of future operations, the
period of the forecasts and the trend of the results over the forecast
period are its best estimate and are indicative that the carrying value of
long-lived assets is not impaired.
3. Inventories. Inventories consisted of the following at June 30, 1999 and
1998:
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Raw materials $ 314,693 $ 271,878
Work in process 39,712 50,305
Finished goods 158,953 70,965
--------- -----------
$ 513,358 $ 393,148
======== ========
</TABLE>
4. Fixed Assets. Fixed assets consisted of the following at June 30, 1999 and
1998:
<TABLE>
<CAPTION>
1999 1998
----------- ----------
<S> <C> <C>
Plant & equipment $ 865,525 $ 930,147
Land 182,000 382,000
Computer equipment and software 179,714 163,618
Furniture and fixtures 117,927 100,339
----------- -----------
1,345,166 1,576,104
Less: Accumulated Depreciation (494,006) (364,567)
----------- -----------
$ 851,160 $1,211,537
=========== ==========
</TABLE>
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, 1999
and 1998:
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
12% subordinated convertible notes, due May 1998 $ - 0 - $ 376,750
8.5% note, due February 1, 1999, interest payable
monthly, secured by a mortgage - 0 - 234,000
11.25% note, due September 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 51,624 73,095
8% convertible notes, due March 1999, interest payable quarterly,
secured by certain assets of a subsidiary;
guaranteed by the Company 822,601 798,643
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 82,808 87,139
10.0% convertible note, due March 2001, interest
payable quarterly 80,816 78,829
10.0% convertible note, due March 2002, interest
payable quarterly 80,816 79,486
Revolving $250,000 credit line due December 1999, unsecured, interest
payable monthly at prime plus 2%, facility guaranteed by the
Company's President and a
major stockholder 235,000 - 0 -
9.5% note, due December 2011, principal and
interest payable monthly, secured by mortgage 228,725 238,551
Variable rate note payable, interest payable monthly
at prime rate plus 7%, secured by Company's inventory 35,339 60,000
Unsecured notes payable, due various dates, interest
payable various at 0% to 10% 119,265 126,924
--------- ---------
Total notes payable 1,736,994 2,153,417
Less: amounts due in one year (415,836) (1,035,872)
---------- ----------
$1,321,158 $1,117,545
========== ==========
</TABLE>
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 were converted at the Company's
election into 5,436,733 shares of common stock in October of 1999.
Accordingly, this amount has been excluded from future notes payable
maturities.
The amount of long-term debt maturing in each of the next five fiscal years
is $415,836 in 2000, $135,800 in 2001, $100,688 in 2002, $8,160 in 2003,
and $8,160 in 2004.
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, 1999. Rent expense for
the fiscal years ended June 30, 1999 and 1998 amounted to $81,396 and
$48,031, respectively:
Fiscal Lease
Year Payments
------ ----------
2000 $ 74,456
2001 48,378
2002 39,639
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 27,087,143 and
23,041,184 for the fiscal years ended June 30, 1999 and 1998 respectively.
The Dilutive potential common shares were anti-dilutive for the years
ending June 30, 1999 and 1998 and, accordingly, basic and dilutive earnings
(loss) per share was approximately the same.
8. Income Taxes. The Company did not incur any income tax expense for its
fiscal years ending June 30, 1999 and 1998 respectively. As of June 30,
1999 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 $111,996 and $68,644 for its fiscal
years ending June 30, 1999 and 1998 respectively under this agreement.
In accordance with the terms of the purchase agreement with Florida Medical
Corporation, the Company and the former owner of Florida Medical
Corporation agreed to equally share in the profits resulting from the
Company's thermometer sales to former Florida Medical customers.
Accordingly, the Company has accrued $119,782 of royalty expense at June
30, 1999 due to the former owner of Florida Medical Corporation.
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.
Accretion as of June 30, 1999 and 1998 was $224,280 and $96,120,
respectively and is not reflected in the Company balance sheets.
F-7
<PAGE>
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:
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 were exercisable ratably over a
trading 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 1999 and fiscal 1998, 120,000 and 500,000 options
respectively, have been granted. All options granted in fiscal 1998 and
20,000 options granted in fiscal 1999 are exercisable ratably over a
three-year period commencing with the grant date at an exercise price of
$.25 per share. The remaining options granted in fiscal 1999 were
exercisable immediately at an exercise price of $.50 per share.
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:
<TABLE>
<S> <C>
1999
----------
Outstanding, beginning of year 3,239,936
Options granted 120,000
Options exercised 0
Options cancelled (1,979,936)
------------
Outstanding, end of year 1,380,000
=========
Exercisable, end of year 1,199,996
============
</TABLE>
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 3.6
million shares of common stock as of June 30, 1999. 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 $1.00 to
$2.72 per share. Approximately 3 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.
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.
During the fiscal year ended June 30, 1999 the Company borrowed $40,000
from an affiliate of the Chief Executive Officer and a Director of the
Company. On June 30, 1999, the amount was outstanding and included in the
balance sheet as of the same date.
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, former Chief Operating Officer and a family member of
the former Executive Vice President loaned a subsidiary of the Company
approximately $411,000. These loans were repaid in the Company's Common
Stock in October 1999.
During the fiscal year ended June 30, 1998 the Company issued common shares
with a value approximating $100,000, to a former company director for
performing investment banking, consulting and financial advisory services.
The Chief Executive Officer and a former director personally signed a
guarantee with a local bank to provide a $250,000 line of credit to the
Company which terminates in December 1999. Both individuals were granted
options to acquire 50,000 shares of the Company's common stock at an
exercise price of $.50 per share.
14. Fair Value of Financial Instruments. The estimated fair values of the
Company's financial instruments as of June 30, 1999 and 1998 are as
follows:
<TABLE>
<CAPTION>
1999 1998
Carrying Fair Carrying Fair
Amount Value Amount Value
-------------------------- --------------------------
<S> <C> <C> <C> <C>
Accounts Receivable $ 438,207 $ 438,207 $ 287,114 $ 287,114
Accounts Payable 908,139 908,139 505,824 505,824
Accrued Expenses 422,588 422,588 370,558 370,558
Long-term Debt 1,736,994 1,736,994 2,153,417 2,153,417
</TABLE>
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 fiscal year ended June 30, 1999 the Company had
one major customer that accounted for approximately 27% of sales. In fiscal
1998, the Company had no major customer that accounted for more than 10% of
sales.
F-8
<PAGE>
16. Industry Segments. Statements of Financial Accounting Standards No. 131,
"Disclosures about Segments of an Enterprise and Related Information",
requires the presentation of description information about reportable
segments which is consistent with that made available to the management
ofthe Company to assess performance. Since the Company subsidiaries operate
in separate distinct industry segments, management of the overall business
is conducted by separate subsidiaries. The Corporate segment includes
salary and fringe benefits of the Chairman and a portion of similar costs
related to the Chief Financial Officer, financial public relations costs
and other costs not directly related to the operations of the business
segments.
<TABLE>
<CAPTION>
Fiscal 1999 Medical Steridyne Corporate Total
----------- ------------ ----------- ----------- ----------
<S> <C> <C> <C> <C>
Revenues $ 2,000,857 $ 3,442,747 $ - 0 - $ 5,443,604
Operating Income (Loss) 166,117 (218,522) (411,922) (464,327)
Net Interest 63,387 98,955 23,958 186,300
Pre Tax Income (Loss) 102,730 (317,477) (435,880) (650,627)
Net Income (Loss) 102,730 (317,477) (435,880) (650,627)
Assets 480,640 3,628,545 9,278 4,118,463
Depreciation and amortization 46,217 321,868 - 0 - 368,085
Addition to long-lived assets 19,782 - 0 - 9,278 29,060
Fiscal 1998 Medical Steridyne Corporate Total
----------- ----------- ----------- ----------- ------------
Revenues $ 1,336,267 $ 3,205,105 $ - 0 - $ 4,541,372
Operating (Loss) (397,301) (448,184) (410,649) (1,256,134)
Net Interest 85,826 97,487 47,917 231,230
Pre Tax (Loss) (483,127) (545,671) (458,566) (1,487,364)
Net (Loss) (483,127) (545,671) 489,597 (539,201)
Assets 635,561 3,670,755 - 0 - 4,306,316
Depreciation and amortization 46,129 319,345 - 0 - 365,474
Additions to long-lived assets 13,835 - 0 - - 0 - 13,835
United
Geographic Area Information States Europe Asia Total
--------------------------- ---------- ---------- --------- ----------
1999 Sales $5,367,805 $ 23,791 $ 52,008 $5,443,604
Long-lived Assets $2,985,315 - 0 - - 0 - $2,985,315
1998 Sales $4,341,321 $ 22,070 $ 177,981 $4,541,372
Long-lived Assets $3,557,067 - 0 - - 0 - $3,557,067
</TABLE>
17. Commitment. In August of 1998, the Company received its largest order ever
to deliver approximately 700 PhotoScreeners 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.
This commitment has expired.
18. Going Concern. The accompanying consolidated financial statements have been
prepared assuming that the Company will continue as a going concern. The
Company has suffered recurring losses from operations and has a net working
capital deficit that raise substantial doubt about its ability to continue
as a going concern. The consolidated financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
In view of these matters, realization of a major portion of the assets in
the accompanying consolidated balance sheet is dependent upon continued
operations of the Company, which in turn is dependent upon consolidating
the Company's ability to meet its financing requirements and the success of
its future operations. Management is in the process of consolidating its
operations into a single location and cutting back on administrative staff
in line with present sales levels. The reorganization should be
substantially completed by the end of the second quarter of fiscal 2000.
Management believes that actions presently being taken to revise the
Company's operating and financial requirements will provide the opportunity
for the Company to continue as a going concern.
F-9
<PAGE>
Item 8. Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure
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
<TABLE>
<CAPTION>
NAME POSITION DATE ELECTED TERM OF
NAME WITH COMPANY DIRECTOR OFFICE AGE
- ------------------ ----------------- --------------- ---------- ---
<S> <C> <C> <C> <C>
Jeremy Feakins Director, Chief April 1999 3 years 46
Dennis Surovcik Director, Chief April 1999 3 years 53
Mathew Crimmins Director January 1997 3 years 67
</TABLE>
BUSINESS EXPERIENCE OF DIRECTORS
Mr. Feakins was originally 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 Secretarial and
Accounting College, Chatham, Great Britain.
Mr. Surovcik joined the company in January 1998 as Senior Vice President, Chief
Financial Officer and Secretary. He was a senior accountant for Price Waterhouse
in New York from 1968 to 1973. From 1974 to 1993 he was employed as Audit
Director and Group Controller for Dentsply International, Inc. ("Dentsply") a
worldwide manufacturer and distributor of dental and medical products (NASDAQ:
XRAY). Mr. Surovcik, a CPA, was President and Owner of DBK Distributors, Inc.,
from 1994 to 1997, 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.
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.
BUSINESS EXPERIENCE OF SIGNIFICANT OFFICERS
Mr. Joseph Del Vecchio joined the Company in November 1998 as Senior Vice
President and General Manager of Steridyne Corporation. Mr. Del Vecchio was
previously employed by Sulzer Oscar, Inc. He started as a technical, sales and
marketing consultant in 1988, was appointed Vice President/General Manager in
August 1991 and President in April 1998. He had responsibility for
manufacturing, facility operation, and distribution of class III and class II
medical devices. Corporate marketing, administrative, technical, regulatory and
production personnel were also under his direction. Mr. Del Vecchio's
organization achieved ISO-9000 certification for the facility in 1996. Mr. Del
Vecchio is a CMR Graduate from the Certified Medical Representative Institute,
Roanoke Virginia.
<PAGE>
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 and Surovcik
did not timely file Forms 3,4, or 5 for the fiscal year ending June 30, 1999 as
follows:
No. of Late
Name Reports
- -------------- ----------
Jeremy Feakins 3
Dennis Surovcik 3
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, 1999 and 1998.
<TABLE>
<CAPTION>
Name and
Principal Fical All Other
Position Year Annual Compensation Long-Term Compensation Compensation
Salary Bonus Other Awards Payouts
- ----------------- -------- ----------- --------- ------------- ------------------------------ --------- ---------------
Restricted Stock LTIP
Awards Options/SARs Payouts
- ----------------- -------- ----------- --------- ------------- ----------------- ------------ --------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
J. Feakins, 1999 $152,528 0 0 50,000 0 0
D. Surovcik, 1999 $125,519 0 0 0 0 0
R. Brennan 1999 $ 71,814 0 0 0 0 0
J. Stefanick 1999 $97,900 0 0 0 0 0
</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.
<PAGE>
<TABLE>
<CAPTION>
STOCK OPTION GRANTS IN LAST FISCAL YEAR
(Individual Grants)
--------------------
No. of Shares Common % of Total Options
Common Stock Granted to
Underlying Options Employees in Exercise of
Name Granted Fiscal Year Base Price Expiration Date
- ----------- -------------------- -------------------- ------------- ----------------
<S> <C> <C> <C> <C>
J. Feakins 50,000 71% $0.50 (1)
</TABLE>
1. 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, 1999
AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
No. of Shares of
Common Stock Value of
Underlying Unexercised in
No. of Shares Unexercised the money Options
Acquired on Value Options @ Fiscal Exercisable/ Exercisable/
Name Exercise Realized Year End Unexercisble Unexercisble
- -------------- -------------- ----------- ------------------- ----------------- ------------------
<S> <C> <C> <C> <C> <C>
J. Feakins 0 0 350,000 350,000/0 0
- -------------- -------------- ----------- ------------------- ----------------- ------------------
R. Ballheim 0 0 300,000 300,000/0 0
- -------------- -------------- ----------- ------------------- ----------------- ------------------
D.Surovcik 0 0 500,000 333,328/166,672 0
- -------------- -------------- ----------- ------------------- ----------------- ------------------
G. Hartman 0 0 160,000 160,000/0 0
- -------------- -------------- ----------- ------------------- ----------------- ------------------
</TABLE>
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, 1999.
<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENT OF
NAME POSITION OF BENEFICIAL OWNERSHIP OWNERSHIP
- ------------------ ------------------- ----------------------- -------------
<S> <C> <C> <C>
Jeremy Feakins Director, Chief 5,713,175 20.0%
Executive Officer
Dennis Surovcik Director, Chief 0 0.00%
Financial Officer
Mathew Crimmins Director 0 0.00%
</TABLE>
Item 12. Certain Relationships and Related Transactions
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.
During the fiscal year ended June 30, 1999 the Company borrowed $40,000 from an
affiliate of the Chief Executive Officer and a Director of the Company. On June
30, 1999, the amount was outstanding and included in the balance sheet as of the
same date.
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
were repaid in the Company's common stock in October of 1999.
During the fiscal year ended June 30, 1998 the Company issued common shares with
a value approximating $100,000, to a former Company director for performing
investment banking, consulting and financial advisory services.
The Chief Executive Officer and a former director personally signed a guarantee
with a local bank to provide a $250,000 line of credit to the Company which
terminates in December 1999. Both individuals were granted options to acquire
50,000 shares of the Company's common stock at an exercise price of $.50 per
share.
<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]
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.]
10.8 * Purchase Agreement dated March 8, 1999 between Medical Technology &
Innovations, Inc., Steridyne Corporation and Florida Medical
Industries, Inc.
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 25 of this Form 10-KSB.
27.1 * Financial data schedules.
(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.
*(filed herwith, all other exhibits previously filed.)
<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, Chief Dennis A. Surovcik, Senior Vice
Executive Officer President, Chief Financial
Officer and Secretary
Date: December 8, 1999
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
------------------------
Jeremy P. Feakins, Chief
Executive Officer,
Chairman, and Director
/s/ MATHEW CRIMMINS*
-----------------------
Matthew Crimmins, Director
/s/ DENNIS A. SUROVCIK
----------------------
Dennis A. Surovcik, Director
*Pursuant to Power of Attorney
Date: December 8, 1999
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