SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended: Commission File Number:
September 30, 1996 0 - 19957
Quantech Ltd.
(Exact name of registrant as specified in its charter)
Minnesota 41-1709417
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) identification No.)
1419 Energy Park Drive
St. Paul, MN 55108
(Address of principal executive offices) (Zip code)
(612)-647-6370
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO ____
Indicate the number of shares outstanding of each of the issuer's
classes of common stock as of the latest practicable date: 47,095,759 shares of
Common Stock, par value $.01 per share, outstanding as of November 11, 1996.
<PAGE>
Index
PART I. FINANCIAL INFORMATION Page No.
Item 1: Financial Statements:
Balance Sheets as of September 30, 1996 and June 30, 1996 3
Statement of Operations for the Three Months Ended September 30,
1996 and 1995 and from inception to September 30, 1996 4
Statement of Stockholders' Equity from inception to September 30,
1996 5
Statement of Cash Flows for the Quarters ended September 30,
1996 and 1995 and from inception to September 30, 1996 6
Notes to Financial Statements 7
Item 2: Management's Discussion and Analysis or
Plan of Operation 8
PART II. OTHER INFORMATION 10
<PAGE>
PART I
QUANTECH LTD.
(A Development Stage Company)
BALANCE SHEET
<TABLE>
<CAPTION>
(Unaudited)
September 30, June 30,
1996 1996
------------- -----------
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 2,267,172 $ 2,942,871
Other current assets 68,974 41,269
----------- -----------
2,336,146 2,984,140
----------- -----------
EQUIPMENT
Equipment 332,712 268,058
Leasehold Improvements 15,000 15,000
----------- -----------
347,712 283,058
Less:accumulated depreciation (92,498) (78,657)
----------- -----------
255,214 204,401
OTHER ASSETS
License agreement, at cost, less amortization 2,264,390 2,320,334
Organization expenses, at cost, less amortization 887 4,675
----------- -----------
2,265,277 2,325,009
----------- -----------
TOTAL ASSETS $ 4,856,637 $ 5,513,550
=========== ===========
LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)
CURRENT LIABILITIES
Short term debt $ 19,850 $ 24,455
Accounts Payable 155,866 114,934
Accrued Expenses:
Spectrum Diagnostics Inc. obligations 49,360 53,637
Other 8,894 0
----------- -----------
Total Current Liabilites 233,970 193,026
----------- -----------
LONG-TERM OBLIGATIONS
Minimum Royalty Commitment 56,250 37,500
----------- -----------
STOCKHOLDERS EQUITY (DEFICIT)
Common stock, $.01 par value; authorized 60,000,000 shares
issued and outstanding 46,910,759 shares at September 30,
1996; and 46,900,759 at June 30, 1996 $ 469,108 $ 469,008
Additional paid-in capital 15,286,946 15,296,856
Deficit accumulated during the development stage (11,189,637) (10,482,840)
----------- -----------
Total Stockholders Equity (Deficit) 4,566,417 5,283,024
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY $ 4,856,637 $ 5,513,550
=========== ===========
</TABLE>
<PAGE>
QUANTECH LTD.
(A Development Stage Company)
STATEMENT OF OPERATIONS-UNAUDITED
<TABLE>
<CAPTION>
Period From
September 30,
1991
Three months Three months (Date 0f
Ended Ended Inception), to
September 30, September 30, September 30,
1996 1995 1996
------------ ------------ ------------
<S> <C> <C> <C>
Interest Income $ 34,692 $ 1,151 $ 124,619
------------ ------------ ------------
Expenses:
General & Administrative 357,494 228,663 6,498,965
Research and development 362,832 235,734 2,893,951
Minimum royalty expense 18,750 43,750 906,250
Loses resulting from transactions
with Spectrum Diagnostics Inc. -- -- 556,150
Net exchange (gain) -- -- (67,172)
Financing 2,413 51,071 483,517
------------ ------------ ------------
741,489 559,218 11,271,661
------------ ------------ ------------
Loss before income taxes (706,797) (558,067) (11,147,042)
Income taxes -- -- 42,595
============ ============ ============
Net loss $ (706,797) $ (558,067) $(11,189,637)
============ ============ ============
Loss per common share $ (0.02) $ (0.07)
Weighted average common shares
outstanding 46,902,063 8,319,094
</TABLE>
<PAGE>
QUANTECH LTD
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY-UNAUDITED
Period From September 30, 1991 (date of Inception), to September 30, 1996
<TABLE>
<CAPTION>
Deficit
Accumulated
During
Par Additional the Paid for
Shares Value Paid-In Development Subscriptions Not
Issued Amount Capital Stage Receivable Issued
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at Inception
Net Loss ($3,475,608)
Common stock transactions:
Common stock issued,
October 1991 3,200,000 $3,154,574
Common stock issued,
November 1991 600,000 $611,746 $1,788,254
Common stock issuance costs ($889,849)
Cumulative translation adjustment
Common stock issued,
September 1992 700,000 $699,033 $875,967 ($53,689)
Common stock issuance costs ($312,755)
Common stock to be issued $120,000
Cumulative translation adjustment
Elimination of cumulative translation
adjustment
Officers advances, net
------------------------------------------------------------------------------
Balance, December 31, 1992 4,500,000 $4,465,353 $1,461,617 ($3,475,608) ($53,689) $120,000
Net loss ($996,089)
Common stock transactions:
Common stock issued,
January 1993 160,000 $1,600 $118,400 ($120,000)
Common stock issued,
April 1993 30,000 $300 $11,700
Change in common stock par
value resulting from merger
Change in common stock par
value resulting from merger ($4,420,353) $4,420,353
Repayments
------------------------------------------------------------------------------
Balance,June 30, 1993 4,690,000 $46,900 $6,012,070 ($4,471,697) ($53,689) $0
Net loss ($1,543,888)
240,000 shares of common
stock to be issued $30,000
Repayments $53,689
------------------------------------------------------------------------------
Balance, June 30, 1994 4,690,000 $46,900 $6,012,070 ($6,015,585) $0 $30,000
Net loss ($2,070,292)
Common stock issued, June 1995 2,150,000 $21,500 $276,068 ($20,000) ($30,000)
Warrants issued for services $40,200
------------------------------------------------------------------------------
Balance June 30, 1995 6,840,000 $68,400 $6,328,338 ($8,085,877) ($20,000) $0
Common stock issued, net of
issuance costs of $848,877:
July, 1995 6,160,000 $61,600 $1,304,450
August, 1995 717,600 $7,176 $161,460
September, 1995 13,807,296 $138,073 $2,370,389
November, 1995 1,897,840 $18,978 $425,482
December, 1995 11,217,157 $112,172 $1,292,473
May, 1996 6,275,000 $62,750 $3,300,422
June, 1996 5,058 $51 $3,650
Payments received on
subscription receivable (19,192) ($192) ($14,808) $20,000
Compensation expense recorded
on stock options $125,000
Net loss ($2,396,963)
------------------------------------------------------------------------------
Balance, June 30, 1996 46,900,759 $469,008 $15,296,856 ($10,482,840) $0 $0
Common stock issued Sept., 1996 10,000 $100 $2,400
Stock offering costs ($12,310)
Net loss ($706,797)
------------------------------------------------------------------------------
Balance, September 30, 1996
(Unaudited) 46,910,759 $469,108 $15,286,946 ($11,189,637) $0 $0
==============================================================================
</TABLE>
<PAGE>
QUANTECH LTD
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY-UNAUDITED (continued)
Period From September 30, 1991 (date of Inception), to September 30, 1996
<TABLE>
<CAPTION>
Due Cumulative
From Translation
Officers Adjustment
----------------------------
<S> <C> <C>
Balance at Inception
Net Loss
Common stock transactions:
Common stock issued,
October 1991
Common stock issued,
November 1991
Common stock issuance costs
Cumulative translation adjustment $387,754
Common stock issued,
September 1992
Common stock issuance costs
Common stock to be issued
Cumulative translation adjustment ($209,099)
Elimination of cumulative translation
adjustment ($178,655)
Officers advances, net ($27,433)
--------------------------
Balance, December 31, 1992 ($27,433) $0
Net loss
Common stock transactions:
Common stock issued,
January 1993
Common stock issued,
April 1993
Change in common stock par
value resulting from merger
Change in common stock par
value resulting from merger
Repayments $5,137
----------------------------
Balance,June 30, 1993 ($22,296) $0
Net loss
240,000 shares of common
stock to be issued
Repayments $22,296
----------------------------
Balance, June 30, 1994 $0 $0
Net loss
Common stock issued, June 1995
Warrants issued for services
----------------------------
Balance June 30, 1995 $0 $0
Common stock issued, net of
issuance costs of $848,877:
July, 1995
August, 1995
September, 1995
November, 1995
December, 1995
May, 1996
June, 1996
Payments received on
subscription receivable
Compensation expense recorded
on stock options
Net loss
----------------------------
Balance, June 30, 1996 $0 $0
Common stock issued Sept., 1996
Stock offering costs
Net loss
----------------------------
Balance, September 30, 1996
(Unaudited) $0 $0
============================
</TABLE>
<PAGE>
QUANTECH LTD
(A Development Stage Company)
STATEMENTS OF CASH FLOWS - UNAUDITED
<TABLE>
<CAPTION>
Period From
September 30,
Three Three 1991
Months Months (Date of
ended ended Inception), to
September 30, September 30, September 30,
1996 1995 1996
---------- ------------ ------------
<S> <C> <C> <C>
Cash Flows From Operating Activities
Net Loss $(706,797) $ (558,067) $(11,189,637)
Adjustments to reconcile net loss to net cash used in
operating activities:
Elimination of cumulative translation adjustment -- -- (178,655)
Depreciation 13,841 6,695 138,852
Amortization 59,732 59,732 1,188,011
Noncash compensation and interest -- -- 489,250
Losses resulting from transactions with
Spectrum Diagnostics Inc. -- -- 556,150
Write down of investment -- -- 67,500
Change in assets and liabilities, net of effects from
purchase of Spectrum Diagnostics Inc.:
(Increase) decrease in prepaid expenses (27,705) 7,722 7,463
Increase (decrease)in accounts payable 40,932 (512,566) 154,311
Increase (decrease) in accrued expenses 23,367 (285,710) 388,628
--------- ---------- -----------
Net cash used in operating activities (596,630) (1,282,194) (8,378,127)
--------- ---------- -----------
Cash Flows From Investing Activities
Purchase of property and equipment (64,654) (65,962) (387,095)
Organization expenses -- -- (97,547)
Officer advances -- -- (109,462)
Purchase of investment -- -- (225,000)
Purchase of license agreement -- -- (1,950,000)
Advances to Spectrum Diagnostics, Inc. -- -- (320,297)
Prepaid securities issuance costs -- -- (22,943)
Purchase of Spectrum Diagnostics, Inc., net of cash -- -- --
and cash equivalents acquired -- -- (1,204,500)
--------- ---------- -----------
Net cash used in investing activities (64,654) (65,962) (4,316,844)
--------- ---------- -----------
Cash Flows From Financing Activities
Net proceeds from the sale of common stock $ 2,500 $2,882,952 $12,610,736
Proceeds on debt obligations -- -- 2,658,435
Payments received on stock subscription receivables -- -- 5,000
Stock offering costs (12,310) -- (12,310)
Payments on debt obligations (4,605) (335,893) (502,960)
--------- ---------- -----------
Net cash provided by financing activities (14,415) 2,547,059 14,758,901
--------- ---------- -----------
Effect of Exchange Rate Changes on Cash -- -- 203,242
--------- ---------- -----------
Net decrease in cash (675,699) 1,198,903 2,267,172
Cash
Beginning 2,942,871 4,276 --
--------- ---------- -----------
Ending $2,267,172 $1,203,179 $ 2,267,172
--------- ---------- -----------
</TABLE>
<PAGE>
QUANTECH LTD.
( A Development Stage Company )
NOTES TO UNAUDITED FINANCIAL STATEMENTS
Note 1. BASIS OF PRESENTATION
In the opinion of the management of the Company, the accompanying unaudited
financial statements contain all adjustments (consisting of only normal,
recurring adjustments) necessary to present fairly the financial position of the
Company as of September 30, 1996 and the results of operations and its cash
flows for the three-month periods ended September 30, 1996 and 1995. The results
of operations for any interim period are not necessarily indicative of the
results for the year. These interim financial statements should be read in
conjunction with the Company's annual financial statements and related notes in
the Company's Annual Report on Form 10-KSB for the year ended June 30, 1996.
Note 2. LICENSE AGREEMENT
The Company has a license agreement for certain patents, proprietary information
and associated hardware related to SPR technology. The license calls for an
ongoing royalty of 6 percent on all products utilizing the SPR technology which
are sold by the Company. In addition, if the Company sublicenses the technology,
the Company will pay a royalty of 15 percent of all revenues received by the
Company under any sublicense. If the cumulative payments of these two royalties
fail to reach at least $1,000,000 by December 31, 1997, the licensor has the
right to deprive the Company of its exclusive rights under the license
agreement. As of September 30, 1996 the Company has paid $850,000 of the
cumulative royalty payments. The Company has also ratably accrued additional
minimum royalty payments of $37,500 as of June 30, 1996, because sales or
sublicense revenues through December 31, 1997 may not be adequate to meet the
cumulative minimum royalty payments. The Company intends to accrue the entire
$150,00 by December 31, 1997.
<PAGE>
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATION
History
Quantech Ltd. ("Quantech" or the "Company") was formed under the laws
of Minnesota for the purpose of effecting the change of domicile of Spectrum
Diagnostics S.p.A ("SDS") from Italy to the state of Minnesota through the
merger with SDS on April 14, 1993. Quantech had no operations prior to the
merger and is continuing the business of SDS to commercialize Surface Plasmon
Resonance ("SPR") technology licensed from Ares-Serono. SPR, the core technology
of Quantech's proposed medical diagnostic system, enables the Company to
integrate the existing diagnostic methodologies of immunoassays, DNA probes and
chemical binding into a single, simple economical system in order to provide
rapid, quantitative, diagnostic results. The Quantech system configuration will
consist of a small, bench top instrument and a series of disposable slides with
multiple tests per slide. It is anticipated that the Quantech system will have
the ability to analyze body fluids (e.g. whole blood, urine, saliva) without
preparation or addition of reagents. The Company's initial focus is to develop
its SPR instrument for Critical Care Units of hospitals; initially for the
emergency department of such Units. Its first test will aid physicians in
assessing whether a patient has suffered a heart attack.
Quantech is a development stage company which has suffered losses from
operations and will require additional financing to commercialize its product.
The Company's product development must be completed, FDA approval obtained, the
product introduced to the market and ultimately Quantech will need to
successfully attain profitable operations. These factors raise substantial doubt
about the Company's ability to continue as a going concern.
Results of Operations
The Company has incurred a net loss of $11,189,637 from September 30,
1991 (date of inception) through September 30, 1996 due to expenses related to
formation and operation of SDS in Italy, continuing costs of raising capital,
normal expenses of operating over an extended period of time, funds applied to
research and development, royalty payments related to the SPR technology, losses
due to expenses of Quantech's predecessor, Spectrum Diagnostics Inc. and
interest on borrowed funds. In addition, an investment of $3,356,629 was made
when Quantech purchased the exclusive rights to the SPR technology.
For the three months ended September 30, 1996 the Company had interest
income of $34,692 compared to $1,151 for the same period in 1995 as a result of
cash on hand obtained from Quantech's private placements. General and
administration expenses increased from $228,663 for the three months ended
September 30, 1995 to $357,494 for the three months ended September 30, 1996.
This increase in Quantech's general and administration expenses was in part a
result of adding general and administration personnel and other costs associated
with Quantech continuing to build its infrastructure in anticipation of
commercial production of its system. A portion of the increase was also
attributable to increased public relations expenditures as the Company incurred
costs for its year end materials (Form 10-KSB and Annual Report), proxy
materials, prospectus for selling shareholders and investor packages requested
by potential shareholders and brokers. General and administration expenses are
not anticipated to increase significantly in the next quarter, but will continue
to grow in the future as the Company nears market introduction of, and begins to
sell, its system.
Research and development costs increased from $235,734 in the three
months ended September 30, 1995 to $362,832 in the same period of 1996. This
increase is a result of accelerated research and development activity including
hiring of employees and consultants and engaging firms to perform contract
development work. Minimum royalty expense decreased in the three months ended
September 30, 1996 as compared to the same 1995 period as a result of the
declining minimum royalties owed under Quantech's license with Ares-Serono.
<PAGE>
For the three months ended September 30, 1996 Quantech had a loss of
$706,797 as compared to $558,067 for the same period ended September 30, 1995.
This increase was a result of the rise in research and development and general
and administrative expenses in the 1996 period exceeding decreases in such
period in minimum royalty and financing expenses and the increase in interest
income.
In the three months ended September 1996, the Company has continued to
contract for the development of its prototype instrument and its manufacture;
continued to develop the chemistries necessary to do specific tests and
contracted the development of the disposable slides for the tests. Management
anticipates that the Company will be able to submit its system to the FDA for
approval around the end of calendar year 1996. Such FDA approval is anticipated
in the spring of 1997. After such approval the system will be marketed in the
United States. This timetable will be influenced by the Company's ability to
complete prototype development of its system and necessary testing for
submission of its FDA filing and delays it may encounter with the FDA in its
review of the system.
Liquidity and Capital Resources
From inception to September 30, 1996, Quantech has raised approximately
$15,500,000 through a combination of public stock sales, private stock sales and
debt obligations. Additional funds will be needed to establish sales and
marketing and production capabilities and to begin any significant sales of the
Company's product once development is completed. Although current funds are
expected to allow the Company to proceed through FDA approval of its system,
Quantech will not have sufficient funds to commence commercial production of its
system. Although the Company has a limited lending arrangement with its bank, it
does not anticipate receiving significant funding from lenders. There can be no
assurance that the Company will obtain additional capital when needed or that
additional capital will not have a dilutive effect on current shareholders.
Quantech incurred capital expenditures of approximately $65,000 in the
three months ended September 30, 1996. The Company anticipates significant
capital expenditures in fiscal 1997 for laboratory and production equipment and
office expansion as the Company nears product introduction. The timing and
amount of such expenditures will be governed by the Company's development and
market introduction schedules which are subject to change due to a number of
factors including development delays, FDA approval and availability of future
financing. In addition, to capital expenditures, the Company has a final minimum
royalty payment of $150,000 due to Ares-Serono on December 31, 1997.
The Company currently has outstanding 47,080,759 shares of Common
Stock. It also has options and warrants outstanding to purchase an additional
16,153,603 shares.
Issued But Not Yet Adopted Accounting Standard
In October 1995, the Financial Accounting Standards Board (FASB) issued
Statement No. 123, "Accounting for Stock-Based Compensation", which establishes
financial accounting and reporting standards for stock-based employee
compensation plans. The Company will be required to adopt Statement No. 123 in
fiscal 1997. The Company does not intend to adopt Statement No. 123 in measuring
expense, however it will present the proforma disclosures and those pro forma
amounts will likely be less than the amounts shown in future statements of
income.
<PAGE>
Cautionary Statements
As provided for under the Private Securities Litigation Act of 1995,
the Company wishes to caution investors that the following important factors,
among others, in some cases have affected and in the future could affect the
Company's actual results of operations and cause such results to differ
materially from those anticipated in forward-looking statements made in this
document and elsewhere by or on behalf of the Company:
No History of Operations; Development Stage Company; Going Concern Uncertainty
To date, the Company does not have a product ready to be brought to
market and its proposed operations are subject to all of the risks inherent in a
new business enterprise, including completion of commercial development and FDA
approval of its products within reasonable time frames and budget constraints,
lack of marketing experience and lack of production history. The likelihood of
the success of the Company must be considered in light of the expenses,
difficulties and delays frequently encountered in connection with the start-up
of new businesses, the development of a new product and the competitive
environment in which the Company will operate. The report of the independent
auditors on the Company's financial Statements for the period ended June 30,
1996, includes an explanatory paragraph relating to the uncertainty of the
Company's ability to continue as a going concern. The Company is a development
stage company which has suffered losses from operations, requires additional
financing, and ultimately needs to successfully attain profitable operations.
These factors raise substantial doubt about the Company's ability to continue as
a going concern. There can be no assurance that the Company will be able to
develop a commercially viable product or marketing system or attain profitable
operations.
Future Capital Needs
The Company does not have sufficient funds to commence commercial
production and sales of its system, but anticipates that its current funding is
adequate to complete FDA approval of its first product and start preproduction
and premarket activities. The Company's ability to begin commercial production
and sales of its system will depend upon the continued availability of
investment capital, funding made by strategic partner(s) or licensing revenues,
until the revenues from sale of the instruments and associated test disposables
are sufficient to maintain operations. Additional funds may have to be raised
through equity or debt financing which could dilute current shareholders. If
funding is not available when needed, the Company may be forced to cease
operations and abandon its business. In such event, Company shareholders could
lose their entire investment
Other Factors
As described in the Company's Form 10-KSB for the year ended June 10,
1996 under Cautionary Statements and Prospectus dated September 12, 1996 under
Risk Factors, there are additional factors concerning the Company that should be
considered including: uncertainty of market acceptance of Quantech's product
once introduced, inability or delay in , affects of government regulation on
product and its sale, ability to manufacture product, exposure to the risk of
product liability and market for the Company's shares.
<PAGE>
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
Not Applicable
Item 2. Changes in Securities
Not Applicable
Item 3. Defaults upon Senior Securities
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable
Item 5. Other Materially Important Events
On April 23, 1996, a group of three shareholders of Quantech Ltd.,
calling itself The Group for the Maximization of Shareholder Value of Quantech
Ltd. (the "Group"), notified the Company that it had filed a Schedule 13D with
the Securities and Exchange Commission. The Group on September 15, 1996 withdrew
its Schedule 13D and the Group disbanded.
Item 6. Exhibits and Reports on 8-K
a. Exhibits - See "Exhibit Index" on page following signatures.
b. Reports on 8-K - None
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
QUANTECH LTD
/s/ R.H. Joseph Shaw
R.H. Joseph Shaw
President and Chief Executive Officer
/s/ Gregory G. Freitag
Gregory G. Freitag
Chief Financial Officer
Date: November 12, 1996
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C.
EXHIBIT INDEX TO FORM 10-QSB
OF
QUANTECH LTD.
For The Quarter Ended September 30, 1996
Commission File Number: 0-19957
Exhibit Description
Number
10.1 Design proposal with Robert Case + Associates, Inc. dated
October 2, 1996
10.2 Design proposal with Robert Case + Associates, Inc. dated
October 15, 1996
EXHIBIT 10.1
Proposal (Confidential)
PN 3222
(QTECH100296)
Quantech Ltd.
St. Paul, MN
SPR System Disposable Development
October 2, 1996
<PAGE>
Quantech Ltd.
SPR System Disposable Development
PN 3222/(QTECH100296)
Introduction/Assumptions
Quantech Ltd. (Quantech) is a development stage company seeking to commercialize
its SPR technology. The Company's initial focus is the development of SPR for
the hospital critical care diagnostic market. SPR, the core technology of
Quantech's proposed medical diagnostic system, enables the Company to integrate
the existing diagnostic methodologies of immunoassays, DNA probes and chemical
binding into a single, simple, economical system in order to provide rapid,
quantitative, diagnostic results. The Quantech system configuration will consist
of a small, bench top instrument and a series of disposables each offering a
particular test or series of tests. The Quantech system has the ability to
analyze body fluids (e.g., whole blood, urine, saliva) without user preparation
or addition of reagents.
Quantech's business strategy is to capitalize on the flexibility, extreme
sensitivity and relatively low cost of its diagnostic system to penetrate and
expand the POC market. Quantech's intended entry into the POC market will be
Critical Care Units of hospitals, the first unit being the Emergency Department
where the most pressing and unmet customer needs are found.
The Disposable
Quantech's disposable consists of an injection molded plastic carrier containing
up to four gold coated grating surfaces. The gold surface is overlaid with
reagents that react specifically with the analyte to be identified and measured.
A unique aspect of the Quantech disposable will be the ability to attach a
standard vacutainer tube, complete with its top intact, directly to the
disposable so that it is easy to use and the user does not come in direct
contact with the patient sample. Future disposables for certain tests may also
be configured to handle samples of urine, saliva, or other body fluids.
Unlike the majority of other disposables on the market, Quantech's disposables
do not require the addition of reagents by the user. This simplicity translates
into lower production costs, quicker development time, easier use, immediacy of
results and reduced costs to the user. Individual disposables will be packaged
in a sterile pouch to provide extended shelf life. Disposables will be
configured to provide single tests or panels of up to three
diagnostically-related tests. When the test disposable is inserted in the
instrument, a bar-code reader will identify the type of test to be performed and
contain certain calibration information necessary to effectively maintain
quality control.
The development team of Robert Case + Associates, Inc. (RC+A) and the Product
Design Center (PDC) propose to assist Quantech in developing and/or specifying
the detailed, commercial part and assembly design and specifications for the
disposable sub-system, which consists of:
1. Molded plastic disposable sample preparation/processing assembly,
including:
a. primary sample tube connection
b. red blood cell filtration chamber
c. sample temperature control chamber
d. sample introduction pressure/vacuum connection
e. assay reaction/read chamber
f. assay identification/QC bar code label target area
<PAGE>
Quantech Ltd.
SPR System Disposable Development
PN 3222/(QTECH100296)
2. Mechanical articulation and disposable positioning components of the
instrument "drawer".
3. Sample introduction pressure/vacuum components and fluid circuit.
4. Sensor components for:
a. disposable positioning
b. reaction chamber sample volume fill
c. bar code reading target
Note: It is assumed that the following specifications will be provided by
Quantech:
a. red blood cell filtration material
b. sample temperature/tolerance
c. sample reaction volumes/tolerance
d. disposable positioning tolerances
e. bar code reading target area
ROBERT CASE + ASSOCIATES, INC./PRODUCT DESIGN CENTER
As specialists in health care product development, RC+A/PDC has distinguished
itself through integrated application of our core competencies of customer/user
research, industrial design and product engineering, focused toward our clients
rapid product development needs.
The key results for our clients are: 1) rapid specification of customer and
technical product design requirements through customer and user product
evaluations; 2) integration of the customer/user requirements into the detailed
product design, engineering and production specifications; 3) single-point
accountability for delivery of product engineering, prototypes and production
specifications.
This fully integrated product development process has repeatedly enabled our
clients to develop Better Products, Faster.
Work Program
Phase I Sample Introduction and Preparation Feasibility Breadboard
Deliverables: - Design specifications and documentation of the
disposable fluid path, prep/processing
chambers and connectology.
- Design specifications and documentation of the
sample introduction pressure/vacuum components
and fluid circuit.
- Industrial design concepts (ergonomics &
aesthetics) for the disposable assembly.
- Fabrication of a functional disposable and
sample introduction/prep breadboard.
- Detailed plan for development of the
commercial sub-system.
Phase II Production Design Development
Deliverables: - Production Design Specifications and
Documentation
<PAGE>
Events and tasks for the phases of activity are detailed below. Subsequent
phases will be further detailed and quoted as the necessary information becomes
available. The Fees Outline defines the project budget and Appendix B - General
Provisions describes the contract terms.
Phase I - Sample Introduction and Preparation Feasibility Breadboard
Deliverables
- - Design specifications and documentation of the disposable fluid path,
prep/processing chambers and connectology.
- - Design specifications and documentation of the sample introduction
pressure/vacuum components and fluid circuit.
- - Industrial design concepts (ergonomics & aesthetics) for the disposable
assembly.
- - Fabrication of a functional disposable and sample introduction/prep
breadboard.
- - Detailed Phase II plan for development of the commercial sub-system.
Activities
1.1 Product Requirements Review
RC+A/PDC will review the current project/product requirements and
specifications for the disposable sub-system with Program Management.
The results of this review will provide the basis on which the balance
of this phase will proceed.
Note: The initial review was conducted on September 24, 1996 at the
RC+A office in Chicago. It is anticipated that a telephone review will
be scheduled during the week of October 7, 1996 to further discuss
design concepts and the recent results of Quantech research with
appropriate team members.
1.2 Disposable Sub-system Design Development
RC+A/PDC will develop and/or specify the functional part and assembly
design for the disposable sub-system, consisting of:
1. Plastic disposable sample preparation/processing assembly,
including:
a. primary sample tube connection
b. red blood cell filtration chamber
c. sample temperature control chamber
d. sample introduction pressure/vacuum connection
e. assay reaction/read chamber
f. assay identification/QC bar code label target area
2. Disposable mechanical positioning components.
3. Sample introduction pressure/vacuum components and fluid circuit.
A Pro/Engineer Rev. 16 CAD data base will be developed of all parts
designed by RC+A/PDC as a part of this project, in conjunction with
required FEA-based mechanical, thermal and flow analysis.
Industrial design concept sketches of the proposed disposable ergonomic
and aesthetic details will be provided in conjunction with the
engineering feasibility database/drawings.
<PAGE>
1.3 Program/Design Review
RC+A/PDC will conduct a review of the proposed disposable design
documentation with Program Management and the impact on the program
plan, if any.
Phase I - Sample Introduction and Preparation Feasibility Breadboard
1.4 Engineering Breadboard Fabrication and Testing
RC+A/PDC will fabricate a functional engineering breadboard which will
demonstrate feasibility for the proposed disposable sub-system design.
The breadboard will include the following functional components:
1. Machined/purchased component disposable sample preparation/
processing assembly, including:
a. primary sample tube connection
b. red blood cell filtration chamber/material
c. sample temperature control chamber
d. assay reaction/read chamber
e. sample introduction pressure/vacuum connection
2. Disposable mechanical positioning components.
3. Sample introduction pressure/vacuum components and fluid circuit.
Tests will be conducted and documented with the breadboard, and
necessary revisions made, to ensure functionality to specification
prior to delivery to Quantech R&D.
1.5 Program/Design Review
RC+A/PDC will conduct a review of the breadboard, test data and revised
engineering documentation with Project Management. The results of this
review will determine the requirements for the detailed production
design phase of the project.
<PAGE>
Phase II - Production Design Development
Deliverables
Detailed production design specifications and documentation for the Disposable
Sub-system.
Activities
2.1 Production Requirements Review
RC+A/PDC will conduct a review session with Program Management and the
Program Team to confirm the manufacturability and performance
requirements and specifications for the disposable sub-system.
The deliverables of this phase will provide detailed production design
specifications and documentation for the commercial parts and
assemblies of the following items:
1. Molded plastic disposable sample preparation/processing assembly,
including:
a. primary sample tube connection
b. red blood cell filtration chamber
c. sample temperature control chamber
d. assay reaction/read chamber
e. sample introduction pressure/vacuum connection
f. assay identification/QC bar code label target area
2. Mechanical articulation and disposable positioning components of
the instrument "drawer".
3. Sample introduction pressure/vacuum components and fluid circuit.
4. Sensor components for:
a. disposable positioning
b. reaction chamber sample volume fill
c. bar code reading target
Note: It is assumed that the following specifications will be
provided by Quantech:
a. red blood cell filtration material
b. sample temperature/tolerance
c. sample reaction volumes/tolerance
d. disposable positioning tolerances
e. bar code reading target area
Quantech will supply RC+A/PDC with specifications, sources and/or
samples of all purchased parts and components which will interface with
the disposable sub-system.
2.2 Detailed Component Design/Engineering
2.2.1 Design Layout/Pro-E CAD Model
RC+A/PDC will develop a Pro-E model for the commercial design of the
sub-system. The CAD model will be reviewed with Program Management and
Quantech development resources for confirmation of component and
subsystem functional and assembly requirements.
<PAGE>
RC+A/PDC will coordinate with Quantech selected vendors regarding
costing and timing for production implementation.
Phase II - Production Design Development
2.2.2 Final Part Drawings & Database
RC+A/PDC will produce detailed engineering drawings, material/process
specifications and updated Pro-E database for the sub-system.
2.3 Program/Design Review
A detailed design review of the production documentation,
specifications, schedule and costs will be conducted with Program
Management and selected production vendor(s). Program Management will
determine the level of support required for further prototype and
production execution.
<PAGE>
Fees Outline
Robert Case + Associates, Inc./Product Design Center
Client: Quantech Ltd. - Joe Shaw
Project: SPR System Disposable Development
Project No: 3222/(QTECH100296)
Date: October 2, 1996
Phase Activity Fees
I Sample Introduction and Preparation Feasibility Breadboard
A. Disposable Sub-system Design Development $47,600
(Activity 1.1-1.3)
B. Engineering Breadboard Fabrication & Testing $12,400*
(Activity 1.4-1.5)
Reimbursable Expenses $2500*
II Production Design Development $125,000*
(*) Budget Estimates
Notes:
1. Estimates
The budget estimated fees will be quoted for Client approval upon
completion of each previous phase.
2. Fees
The fees quoted by RC+A/PDC in the proposal do not include reimbursable
expenses incurred by RC+A/PDC which include but are not restricted to
transportation, lodging, meals and long-distance telephone calls,
delivery services and the cost of documentation and reproduction
excessive of the normal development process. These fees will be billed
on monthly progress billings. The quoted out-of-pocket expenses are
estimates only.
The fees and costs quoted in the proposal will remain in effect for
sixty (60) days from the date of the proposal subject only to
fluctuations in the cost of materials, outside services and time delays
caused by factors beyond RC+A/PDC control. The fees and costs presented
to Client have been estimated according to Client's goals and
objectives as originally stated and set forth in the proposal, and are
subject to revisions by RC+A/PDC as changes are made over the course of
the project. The fees and costs have been estimated according to using
RC+A/PDC resources except where Client has indicated specific resources
to be used prior to project quotation. Should Client require specifying
resources to be used after RC+A/PDC has submitted a project quotation,
the fees and costs are subject to revisions by RC+A/PDC as dictated by
such Client specified resources. Status updates and projections will be
made by RC+A/PDC at the intervals outlined in the proposal.
<PAGE>
Appendix A - Phase Approval
Robert Case + Associates, Inc./Product Design Center
Client: Quantech Ltd. - Joe Shaw
Project: SPR System Disposable Development
Project No: 3222/(QTECH100296)
Date: October 2, 1996
Phase Activity Fees
I Sample Introduction and Preparation Feasibility Breadboard
A. Disposable Sub-system Design Development $47,600
(Activity 1.1-1.3)
B. Engineering Breadboard Fabrication & Testing $12,400*
(Activity 1.4-1.5)
Reimbursable Expenses $2500*
(*) Budget Estimate
The undersigned hereby authorizes RC+A/PDC to proceed with the above Phase(s)
and agrees to the attached Appendix B General Provisions of the Proposal
(Revision Date 12-21-95).
Client Acceptance and Approval RC+A/PDC Acceptance and Approval
By: By:
(Authorized Signature) (Department Manager)
Date: Date: 10/4/96
Name: Upon approval, please send signed
copies of
Title: Appendix A & B to:
Client Purchase Order No:2007 Robert Case + Associates, Inc.
640 North LaSalle Street, Suite #282
Chicago, Illinois 60610
<PAGE>
Appendix B - General Provisions of the Proposal
Robert Case + Associates, Inc.
- ----------------------------------------------------------------
This Appendix is attached to and made a part of the proposal given by Robert
Case + Associates, Inc. (hereinafter referred to as "RC+A").
1. General Terms
RC+A is a professional organization providing independent consulting
services to our clients. All Client documents and information will be
considered confidential. All Client work in progress will be open for
inspection and consultation by authorized employees (as designated by
Client). The rights to any patentable inventions that may be developed
during the course of the project will be assigned to Client. All actions or
costs necessary to obtain a patent or to reserve any other rights will be
Client's sole responsibility. Client hereby releases, hold harmless and
indemnifies RC+A and its agents from any and all claims, damages, or
attorneys' fees of any third parties relating in any way to this proposal,
including design, production, sale or use of items which are the subject of
this proposal. Client agrees that RC+A and its Agents shall have no
liability to Client for claims or damages of any kind which may result from
RC+A services in relation to the subject matter of this proposal.
2. Authorization to Proceed
Upon receipt of Appendix A - Proposal Approval signed by Client, or other
specific approval, RC+A will commence the work set forth in the approved
phase(s). A written Purchase Order signed by an authorized agent of Client
must follow within 15 days from RC+A's commencement of work. In the event
such Purchase Order is not received on a timely basis, RC+A may in its sole
discretion in addition to all other rights and remedies it may have, elect
to discontinue work on the phase.
Should work on a phase be discontinued by Client or RC+A, Client will be
responsible for all fees and expenses incurred by RC+A up to the time work
on the phase is discontinued, including a start-up and shut-down fee
(estimated to be 15% of the total proposed phase fees) as well as all
additional fees and expenses incurred by RC+A as a result of said
discontinuance.
3. Fees and Expenses
All fees, and costs quoted in the proposal will remain in effect for 30
days from the date of the proposal. Time schedules will be adjusted based on
start date. Fees, costs, and time schedules are based on the use of RC+A
resources except where Client has requested the use of specific resources and
these resources are specified in the project proposal. Fees are subject to
fluctuations in the cost of outside services and changes or additions requested
by the client. The time schedules set forth in this proposal are best estimates
of RC+A and subject o changes over the course of the project.
The fees quoted by RC+A in this proposal do not include reimbursable
expenses which include but are not limited to transportation, lodging, meals,
travel incidentals and honoraria. Expenses will be periodically invoiced during
the course of the project. Because of delays in third party billing, expenses
may be invoiced as late as 90 days after the final project billing. Upon written
request, documentation of expenses will be provided. Quoted out-of-pocket
expenses are estimates for budgeting purposes only.
<PAGE>
4. Billing
Upon authorization, Client will be invoiced for 100% of the approved fees
and/or estimated costs for proposals of less than $5,000, and 50% of the
approved fees and/or estimated costs for proposals in excess of $5,000. Payment
will be due upon receipt and shall be applied to the first fifty (50%) percent
of the quoted fees and estimated costs of each phase of the proposal. Progress
billings will be made upon commencement of work for the remaining fees and
expenses incurred by RC+A and will be due upon receipt. Any balance remaining
will be due upon completion and delivery of the finished project as defined in
the proposal. RC+A shall retain title and rights to all work produced until it
has received Client's final payment. Client grants RC+A security interest to
secure payment to RC+A for all fees or other amounts due pursuant to all phases
of this proposal or any other proposals in Clients fixtures, furniture, office
equipment, patents, accounts receivable, bank accounts, motor vehicles, and any
proceeds from their sale or deposition. Interest on unpaid invoices shall accrue
at 1 1/2% per each full or partial month after due date.
5. Interpretation and Enforcement
Parties hereby agree that interpretation and enforcement of this agreement
will be governed by Illinois law and venue of any claim or lawsuit shall be
Chicago, Illinois. Any controversy or claim arising out of or relating to
this agreement or the breach thereof shall be settled by arbitration in
accordance with the rules of the American Arbitration Association and
judgment upon the award rendered shall be entered in any court having
jurisdiction thereof. Any arbitrator's award or finding or any judgment or
verdict thereon shall be final and u unappealable. All parties agree that
venue for said arbitration shall be in Chicago, Illinois and that any
litigation or arbitration commenced in any other venue shall be transferred
instanter to Chicago, Illinois upon the written request of any party to
this agreement. The prevailing party shall be entitled to reimbursement for
attorneys' fees, costs or other expenses pertaining to said arbitration or
any litigation and said attorneys' fees, costs and other expenses shall
become a part of any award, judgment or verdict. All arbitration's shall
have (3) three individuals acting as arbitrators. One arbitrator shall be
selected by RC+A . One arbitrator shall be selected by Client. Both
arbitrators shall select a third arbitrator. Any arbitrator selected by a
party shall not be affiliated, associated or related to the parties
selecting that arbitrator by blood, marriage, business or otherwise. The
decision of the majority of the arbitrators shall be binding upon all
parties. Client grants RC+A security interest to secure payment to RC+A for
all fees or other amounts due pursuant to all phases of this proposal or
any other proposals in Clients fixtures, furniture, office equipment,
patents, accounts receivable, bank accounts, motor vehicles, and any
proceeds from their sale or deposition. This Agreement shall be binding
upon and inure to the benefit of the parties hereto, their legal
representatives, heirs, administrators, executors, successors and assigns.
The waiver by either party of any breach of any provision of this Agreement
shall not operate or be construed as a waiver of any subsequent breach by
either party. Each party agrees to perform any further acts and to execute
and deliver any documents which may be reasonably necessary to carry out
the provisions of this Agreement.
Client Acceptance & Approval: Date:10/4/96
(Rev. 12-21-95)
EXHIBIT 10.2
Proposal (Confidential)
PN 3224
(QTECH101596)
Quantech Ltd.
St. Paul, MN
SPR STAT System Instrument Development
October 15, 1996
<PAGE>
Quantech Ltd.
SPR STAT System Instrument Development
PN 3224/(QTECH101596)
Introduction/Assumptions
Quantech Ltd. (Quantech) is a development stage company seeking to commercialize
its SPR technology. The Company's initial focus is the development of SPR for
the hospital critical care diagnostic market. SPR, the core technology of
Quantech's proposed medical diagnostic system, enables the Company to integrate
the existing diagnostic methodologies of immunoassays, DNA probes and chemical
binding into a single, simple, economical system in order to provide rapid,
quantitative, diagnostic results.
Quantech's business strategy is to capitalize on the flexibility, extreme
sensitivity and relatively low cost of its diagnostic system to penetrate and
expand the POC market. Quantech's intended entry into the POC market will be
Critical Care Units of hospitals, the first unit being the Emergency Department
where the most pressing and unmet customer needs are found.
The SPR System
The first generation Quantech system, the SPR STAT System, will consist of a
small, bench top instrument and a series of disposables each offering a
particular test or series of tests. The Quantech system has the ability to
analyze body fluids (e.g., whole blood, urine, saliva) without user preparation
or addition of reagents.
Disposables will be configured to provide single tests or panels of up to three
diagnostically-related tests. When the test disposable is inserted in the
instrument, a bar-code reader will identify the type of test to be performed and
contain certain calibration information necessary to effectively maintain
quality control.
Customer research has indicated the following Customer Requirements which shall
serve as the basis for development of the system:
Disposable
- - Disposal in standard biohazardous waste vs. sharps waste
- - Specific test must be easy to identify; color code disposable for each
different test
- - Safe to handle under high stress conditions; no sharps hazard
- - Minimum space required for standby storage
- - Patient ID label area
- - Specimen collection method must be easy and simple; familiar device(s) and
technique
- - Non-breakable and no sample spillage
- - Easily handled shape; wet, gloved hands
- - Easy to distinguish sample from unit; color
- - Easy, foolproof interface with sample tube
- - User does not have to transfer blood from sample tube to disposable
Instrument
- - Easily readable, illuminated readout; recognize output at a distance from
the bench
- - Minimal manual steps; easy to operate
- - Easy and foolproof to put disposable into instrument
- - Easy to maintain reliable operation
- - Liquid/debris resistant membrane switches
<PAGE>
Quantech Ltd.
SPR STAT System Instrument Development
PN 3224/(QTECH101596)
- - Fit on the existing ER countertops
- - Easy to wipe clean; look clean (not dark)
- - Appearance of a professional, high quality instrument
- - Display viewing angle adjustable to reduce screen glare; readable for
5th-95th %-tile standing users
- - High reliability and durability
- - "Walk-away" level of test automation and patient ID
- - Provide standby storage to hold new test disposables
- - Rounded, smooth edges to avoid cuts and abrasions
- - Easy to visually locate under crowded, high stress conditions (color/form)
- - Display and controls built into instrument
- - Weigh enough to not be accidentally knocked off counter, or be easily
walked away with
The development team of Robert Case + Associates, Inc. (RC+A) and the Product
Design Center (PDC) propose to assist Quantech in developing and/or specifying
the detailed, commercial part and assembly design and specifications for
selected sub-systems of the instrument. These sub-systems consist of the
following items at the initiation of this program, and will be further defined
as development proceeds.
1. Enclosure, EMI/RFI shielding and electronic components support "chassis".
2. Mechanical articulation and disposable positioning components of the
instrument "drawer".
3. Sample introduction pressure/vacuum components and fluid circuit.
4. Sensor components for:
a. disposable positioning
b. reaction chamber sample volume fill
c. bar code reading target
5. Temperature control components
Note: It is assumed that the following specifications will be provided by
Quantech:
a. sample temperature/tolerance
b. disposable positioning tolerances
c. bar code reading target area
ROBERT CASE + ASSOCIATES, INC./PRODUCT DESIGN CENTER
As specialists in health care product development, RC+A/PDC has distinguished
itself through integrated application of our core competencies of customer/user
research, industrial design and product engineering, focused toward our clients
rapid product development needs.
The key results for our clients are: 1) rapid specification of customer and
technical product design requirements through customer and user product
evaluations; 2) integration of the customer/user requirements into the detailed
product design, engineering and production specifications; 3) single-point
accountability for delivery of product engineering, prototypes and production
specifications.
This fully integrated product development process has repeatedly enabled our
clients to develop Better Products, Faster.
<PAGE>
Quantech Ltd.
SPR STAT System Instrument Development
PN 3224/(QTECH101596)
Work Program
Phase I Instrument Concept Optimization
Deliverables: - Functional Sub-System Pro-E 3-D Solids Model
- 3-D Form Factor Mockup
- Pro-E Appearance Renderings
- Preliminary Costing Data
- Operator Interface Demonstration Mock-Up
Phase II Clinical Prototype Instrument Development
Deliverables: - Instrument Pro-E CAD Database and Detailed
Engineering Documentation/Specifications
- Instrument FEA Modeling and Analysis
- Material and Process Specifications
- Preliminary Cost Roll-up
Events and tasks for the phases of activity are detailed below. Subsequent
phases will be further detailed and quoted as the necessary information becomes
available. The Fees Outline defines the project budget and Appendix B - General
Provisions describes the contract terms.
<PAGE>
Phase I - Instrument Concept Optimization
Deliverables
- - Functional Sub-System Pro-E 3-D Solids Model
- - 3-D Form Factor Mockup
- - Pro-E Appearance Renderings
- - Preliminary Costing Data
- - Operator Interface Demonstration Mock-Up
Activities
1.1 Product Requirements Review/Development Support
RC+A/PDC will review the following project/product requirements and
specifications for the instrument system with Program Management:
- Customer/Product Requirements
- Business/Technology/Product Plan
- Patent Strategy
- Regulatory/Safety Strategy
- Functional Specification
The results of this review will provide the basis on which the balance
of this program will proceed. RC+A/PDC will support Functional/Design
Specification development by providing Program Management with system
specifications at appropriate points in the program. This activity will
continue over the course of the entire program.
1.2 Instrument Concept Improvements
RC+A/PDC will perform the following activities to update and improve
the current instrument concept based on on-going marketing requirements
investigation and R&D results.
1.2.1 Engineering Configuration Modeling
System performance specifications will be reviewed with Program
Management. This review will establish requirements for materials and
processes research, DFM/DFA research and packaging, shipping, disposal,
and environmental criteria determination.
RC+A/PDC will develop a functional sub-system Pro-E 3-D solids model
which will define the physical and spacial relationships of the core
functional components in a electronic database. This model will also
serve to define the overall enclosure configuration (form factors) of
the instrument, and provide a technical basis for engineering
development in Phase II.
1.2.2 Industrial Design Concept
Usability and human factors requirements will be reviewed based on the
current Customer Requirements. Based on this review operator interface
design studies will be conducted and a 3-D mockup of the critical
interface tasks will be constructed and evaluated. A 3-D form factor
mockup will then be developed to confirm overall instrument geometry.
<PAGE>
Phase I - Instrument Concept Optimization
The aesthetic options for the instrument enclosure will be depicted in
a series of Pro-E appearance renderings, based on the 3-D solids model.
1.3 Design Review
RC+A/PDC will conduct a review of the proposed instrument engineering
and industrial design concepts with Program Management. A concept
direction will be selected for finalization.
1.4 Concept/Component Integration
1.4.1 Pro-E Configuration Model
The functional sub-system Pro-E 3-D solids model will be updated and
revised as required to reflect the design direction selected by Program
Management.
1.4.2 Pro-E Appearance Renderings
The 3-D form factor mockup and the Pro-E appearance renderings, will be
updated and revised based on the 3-D solids model and the design
direction selected by Program Management.
1.5 Design/Cost Review
RC+A/PDC will conduct a review of the revised engineering
documentation, 3-D form factor mockup and the Pro-E appearance
renderings with Project Management. The results of this review will
determine the requirements for the detailed design phase of the
program.
1.6 Demonstration Mock-Up Development/Evaluation
RC+A/PDC will develop a set of design control drawings and fabricate an
operator interface simulation mockup of the instrument. Selected
functional components will be purchased and integrated into the mockup
as required to demonstrate the critical operator tasks.
The mockup will serve to verify the human factors and workflow
characteristics of the instrument design by conducting informal
hands-on evaluations of the instrument interface.
1.7 Program/Design Review
A detailed design review of the design documentation and evaluation
information, specifications, schedule and costs will be conducted with
Program Management and selected production vendor(s) candidates.
Updates and revisions to the program plan will be made as required.
<PAGE>
Phase II - Clinical Prototype Instrument Development
Deliverables
- - Instrument Pro-E CAD Database and Detailed Engineering Documentation/
Specifications
- - Instrument FEA Modeling and Analysis
- - Material and Process Specifications
- - Preliminary Cost Roll-up
Activities
2.1 Performance Specification Development
RC+A/PDC will conduct a review session with Program Management and the
Program Team to confirm the functional, DFM/DFA, regulatory, safety,
and patent requirements and specifications for the instrument.
The requirements and specifications identified and developed in this
phase of activity will be documented and provided to Program Management
as part of the on-going system specification support.
Quantech will supply RC+A/PDC with specifications, sources and/or
samples of all purchased parts and components which will be included in
the instrument that are being specified/developed by other members of
the SPR STAT System development team.
2.2 Vendor and Contract Manufacturer Sourcing
RC+A/PDC will support Program Management in the identification,
qualification and selection of clinical prototype and production
vendors and a contract manufacturer.
It is highly recommended that a selected contract manufacturer be
employed to construct the clinical prototypes from prototype
engineering documentation to become familiar with the system
requirements and to provide recommendations for system
manufacturability, reliability and cost optimization.
2.3 Detailed Component Design/Engineering
2.3.1 Design Layout/Pro-E CAD Database
RC+A/PDC will develop a complete Pro-E database for the commercial
design of the instrument sub-systems/components it is responsible for
developing. The CAD database will be reviewed with Program Management
and Quantech development resources for confirmation of component and
subsystem functional and assembly requirements.
RC+A/PDC will coordinate with Quantech selected vendors/contract
manufacturer(s) regarding costing and timing for production
implementation planning.
2.3.2 Performance Criteria Verification
FEA modeling and analysis will be conducted as required to confirm the
mechanical, thermal and mold flow specifications for the instrument
components under development by RC+A/PDC.
<PAGE>
Phase II - Clinical Prototype Instrument Development
2.3.3 Prototype Part Documentation
RC+A/PDC will produce detailed engineering drawings and updated Pro-E
database for the instrument. The database will be capable of being
directly employed in tooling production by vendors with appropriate
CAD/CAM capabilities.
2.3.4 Material and Process Specifications
RC+A/PDC will develop and document the material/process specifications
for the instrument.
2.3.5 Preliminary Cost Roll-up
Quotes from vendors and suppliers will be used to develop a preliminary
cost estimate for instrument parts, tooling, fixturing and labor.
2.4 Design Review
A detailed design review of design/performance specifications, DFM/DFA
requirements, regulatory, safety, environmental, patent and tooling
lead times and cost will be conducted.
2.5 Design Engineering Modifications
The instrument design and specifications will be revised per the
mutually agreed to results of the review Activity 2.4 above.
2.6 Program/Design Review
A detailed design review of the design documentation, specifications,
schedule and costs will be conducted with Program Management and
selected production vendor(s) candidates. Updates and revisions to the
program plan will be made as required.
Note: Future phases of this program will be defined per the requirements
identified by Program Management and RC+A/PDC. Currently those phases are
anticipated to be:
Phase III - Clinical Prototype Instrument Production Support
Phase IV - Production Design/Specification Support
Phase V - Release to Production Support
RC+A/PDC proposes to support Quantech in the execution of these activities, but
does not anticipate having primary deliverables responsibility for them, in that
production resources should be available within the required timeframe.
<PAGE>
Fees Outline
Robert Case + Associates, Inc./Product Design Center
Page 1 of 2
Client: Quantech Ltd. - Joe Shaw
Project: SPR STAT System Instrument Development
Project No: 3224/(QTECH101596)
Date: October 15, 1996
Phase Activity Fees
I Instrument Concept Optimization
A. Concept Improvements/Integration $82,300
(Activity 1.1-1.5)
B. Demonstration Mockup Development $22,000
(Activity 1.6-1.7)
Reimbursable Expenses $4,000*
II Clinical Prototype Instrument Development $193,700*
(Activity 2.1-2.6)
Reimbursable Expenses $6,000*
III-V Clinical Prototype/Production Support TBD
(Activities To Be Determined Per Quantech/RC+A)
* Budget Estimates
<PAGE>
Fees Outline
Robert Case + Associates, Inc./Product Design Center
Page 2 of 2
Client: Quantech Ltd. - Joe Shaw
Project: SPR STAT System Instrument Development
Project No: 3222/(QTECH101596)
Date: October 15, 1996
Notes:
1. Estimates
The budget estimated fees will be quoted for Client approval upon
completion of each previous phase or activity.
2. Fees
The fees quoted by RC+A/PDC in the proposal do not include reimbursable
expenses incurred by RC+A/PDC which include but are not restricted to
transportation, lodging, meals and long-distance telephone calls,
delivery services and the cost of documentation and reproduction
excessive of the normal development process. These fees will be billed
on monthly progress billings. The quoted out-of-pocket expenses are
estimates only.
The fees and costs quoted in the proposal will remain in effect for
sixty (60) days from the date of the proposal subject only to
fluctuations in the cost of materials, outside services and time delays
caused by factors beyond RC+A/PDC control. The fees and costs presented
to Client have been estimated according to Client's goals and
objectives as originally stated and set forth in the proposal, and are
subject to revisions by RC+A/PDC as changes are made over the course of
the project. The fees and costs have been estimated according to using
RC+A/PDC resources except where Client has indicated specific resources
to be used prior to project quotation. Should Client require specifying
resources to be used after RC+A/PDC has submitted a project quotation,
the fees and costs are subject to revisions by RC+A/PDC as dictated by
such Client specified resources. Status updates and projections will be
made by RC+A/PDC at the intervals outlined in the proposal.
<PAGE>
Appendix A - Phase Approval
Robert Case + Associates, Inc./Product Design Center
Client: Quantech Ltd. - Joe Shaw
Project: SPR STAT System Instrument Development
Project No: 3224/(QTECH101596)
Date: October 15, 1996
Phase Activity Fees
I Instrument Concept Optimization
A. Concept Improvements/Integration $82,300
(Activity 1.1-1.5)
B. Demonstration Mockup Development $22,000
(Activity 1.6-1.7)
Reimbursable Expenses $4,000*
* Budget Estimate
The undersigned hereby authorizes RC+A/PDC to proceed with the above Phase(s)
and agrees to the attached Appendix B - General Provisions of the Proposal
(Revision Date 12-21-95).
Client Acceptance and Approval RC+A/PDC Acceptance and Approval
By: By:
(Authorized Signature) (Department Manager)
Date: Date: 10/15/96
Name: Upon approval, please send signed copies of
Appendix A & B to:
Title:
Client Purchase Order No:2012 Robert Case + Associates, Inc.
640 North LaSalle Street, Suite #282
Chicago, Illinois 60610
<PAGE>
Appendix B - General Provisions of the Proposal
Robert Case + Associates, Inc.
- ------------------------------------------------------------------
This Appendix is attached to and made a part of the proposal given by Robert
Case + Associates, Inc. (hereinafter referred to as "RC+A").
1. General Terms
RC+A is a professional organization providing independent consulting
services to our clients. All Client documents and information will be
considered confidential. All Client work in progress will be open for
inspection and consultation by authorized employees (as designated by
Client). The rights to any patentable inventions that may be developed
during the course of the project will be assigned to Client. All actions or
costs necessary to obtain a patent or to reserve any other rights will be
Client's sole responsibility. Client hereby releases, hold harmless and
indemnifies RC+A and its agents from any and all claims, damages, or
attorneys' fees of any third parties relating in any way to this proposal,
including design, production, sale or use of items which are the subject of
this proposal. Client agrees that RC+A and its Agents shall have no
liability to Client for claims or damages of any kind which may result from
RC+A services in relation to the subject matter of this proposal.
2. Authorization to Proceed
Upon receipt of Appendix A - Proposal Approval signed by Client, or other
specific approval, RC+A will commence the work set forth in the approved
phase(s). A written Purchase Order signed by an authorized agent of Client
must follow within 15 days from RC+A's commencement of work. In the event
such Purchase Order is not received on a timely basis, RC+A may in its sole
discretion in addition to all other rights and remedies it may have, elect
to discontinue work on the phase.
Should work on a phase be discontinued by Client or RC+A, Client will be
responsible for all fees and expenses incurred by RC+A up to the time work
on the phase is discontinued, including a start-up and shut-down fee
(estimated to be 15% of the total proposed phase fees) as well as all
additional fees and expenses incurred by RC+A as a result of said
discontinuance.
3. Fees and Expenses
All fees, and costs quoted in the proposal will remain in effect for 30
days from the date of the proposal. Time schedules will be adjusted based
on start date. Fees, costs, and time schedules are based on the use of RC+A
resources except where Client has requested the use of specific resources
and these resources are specified in the project proposal. Fees are subject
to fluctuations in the cost of outside services and changes or additions
requested by the client. The time schedules set forth in this proposal are
best estimates of RC+A and subject o changes over the course of the
project.
The fees quoted by RC+A in this proposal do not include reimbursable
expenses which include but are not limited to transportation, lodging,
meals, travel incidentals and honoraria. Expenses will be periodically
invoiced during the course of the project. Because of delays in third party
billing, expenses may be invoiced as late as 90 days after the final
project billing. Upon written request, documentation of expenses will be
provided. Quoted out-of-pocket expenses are estimates for budgeting
purposes only.
4. Billing
Upon authorization, Client will be invoiced for 100% of the approved fees
and/or estimated costs for proposals of less than $5,000, and 50% of the
approved fees and/or estimated costs for proposals in excess of $5,000.
Payment will be due upon receipt and shall be applied to the first fifty
(50%) percent of the quoted fees and estimated costs of each phase of the
proposal. Progress billings will be made upon commencement of work for the
remaining fees and expenses incurred by RC+A and will be due upon receipt.
Any balance remaining will be due upon completion and delivery of the
finished project as defined in the proposal. RC+A shall retain title and
rights to all work produced until it has received Client's final payment.
Client grants RC+A security interest to secure payment to RC+A for all fees
or other amounts due pursuant to all phases of this proposal or any other
proposals in Clients fixtures, furniture, office equipment, patents,
accounts receivable, bank accounts, motor vehicles, and any proceeds from
their sale or deposition. Interest on unpaid invoices shall accrue at 1
1/2% per each full or partial month after due date.
<PAGE>
5. Interpretation and Enforcement
Parties hereby agree that interpretation and enforcement of this agreement
will be governed by Illinois law and venue of any claim or lawsuit shall be
Chicago, Illinois. Any controversy or claim arising out of or relating to
this agreement or the breach thereof shall be settled by arbitration in
accordance with the rules of the American Arbitration Association and
judgment upon the award rendered shall be entered in any court having
jurisdiction thereof. Any arbitrator's award or finding or any judgment or
verdict thereon shall be final and u unappealable. All parties agree that
venue for said arbitration shall be in Chicago, Illinois and that any
litigation or arbitration commenced in any other venue shall be transferred
instanter to Chicago, Illinois upon the written request of any party to
this agreement. The prevailing party shall be entitled to reimbursement for
attorneys' fees, costs or other expenses pertaining to said arbitration or
any litigation and said attorneys' fees, costs and other expenses shall
become a part of any award, judgment or verdict. All arbitration's shall
have (3) three individuals acting as arbitrators. One arbitrator shall be
selected by RC+A . One arbitrator shall be selected by Client. Both
arbitrators shall select a third arbitrator. Any arbitrator selected by a
party shall not be affiliated, associated or related to the parties
selecting that arbitrator by blood, marriage, business or otherwise. The
decision of the majority of the arbitrators shall be binding upon all
parties. Client grants RC+A security interest to secure payment to RC+A for
all fees or other amounts due pursuant to all phases of this proposal or
any other proposals in Clients fixtures, furniture, office equipment,
patents, accounts receivable, bank accounts, motor vehicles, and any
proceeds from their sale or deposition. This Agreement shall be binding
upon and inure to the benefit of the parties hereto, their legal
representatives, heirs, administrators, executors, successors and assigns.
The waiver by either party of any breach of any provision of this Agreement
shall not operate or be construed as a waiver of any subsequent breach by
either party. Each party agrees to perform any further acts and to execute
and deliver any documents which may be reasonably necessary to carry out
the provisions of this Agreement.
Client Acceptance & Approval: Date: 10/15/96
(Rev. 12-21-95)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Form 10-QSB for the quarter ended Sept. 30, 1996, and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> SEP-30-1996
<EXCHANGE-RATE> 1
<CASH> 2,267,172
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,336,146
<PP&E> 347,712
<DEPRECIATION> (92,498)
<TOTAL-ASSETS> 4,856,637
<CURRENT-LIABILITIES> 233,970
<BONDS> 0
0
0
<COMMON> 469,108
<OTHER-SE> 15,286,946
<TOTAL-LIABILITY-AND-EQUITY> 4,856,637
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,413
<INCOME-PRETAX> (706,797)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (706,797)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> (.02)
</TABLE>
