As filed with the Securities and Exchange Commission on September 27, 1996
Registration No. __________
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRANTS OF SECURITIES OF SMALL
BUSINESS ISSUERS
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
MEDISYS TECHNOLOGIES, INC.
(Name of Small Business Issuer in its charter)
Utah 72-1216734
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9624 Brookline Avenue, Baton Rouge, Louisiana 70809
(Address of principal executive officers) (Zip Code)
Issuer s telephone number: (504) 926-0422
Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
N/A N/A
Securities to be registered under Section 12(g) of the Act:
Common Stock, par value $.0005 per share
(Title of Class)
<PAGE>
MEDISYS TECHNOLOGIES, INC.
FORM 10-SB
TABLE OF CONTENTS
PAGE
PART I
ITEM 1. Description of Business. . . . . . . . . . . . 1
ITEM 2. Management s Discussion and Analysis or
Plan of Operation. . . . . . . . . . . . . . 17
ITEM 3. Description of Property. . . . . . . . . . . . 20
ITEM 4. Security Ownership of Certain Beneficial
Owners and Management. . . . . . . . . . . . 20
ITEM 5. Directors, Executive Officers, Promoters
and Control Persons. . . . . . . . . . . . . 22
ITEM 6. Executive Compensation . . . . . . . . . . . . 25
ITEM 7. Certain Relationships and Related Transactions
ITEM 8. Description of Securities. . . . . . . . . . . 27
PART II
ITEM 1. Market Price of and Dividends on Registrant s
Common Equity and Other Shareholder Matters. 28
ITEM 2. Legal Proceedings. . . . . . . . . . . . . . . 29
ITEM 3. Changes in and Disagreements with Accountants. 29
ITEM 4. Recent Sales of Unregistered Securities. . . . 29
ITEM 5. Indemnification of Directors and Officers. . . 30
PART F/S
Financial Statements . . . . . . . . . . . . . 31
PART III
ITEM 1. Index to Exhibits. . . . . . . . . . . . . . . 65
ITEM 2. Description of Exhibits. . . . . . . . . . . . 65
Signatures . . . . . . . . . . . . . . . . . . 66
<PAGE>
PART I
ITEM 1. Description of Business
Medisys Technologies, Inc. ("Medisys" or the "Company") is a
development stage company with a focus on the delivery of
innovative, cost-effective products to the women s healthcare and
medical safety device markets. The Company is primarily addressing
the obstetrical market by developing a range of proprietary
products aimed at enhancing safety and reducing the cost associated
with the birthing process.
The Company was incorporated on March 17, 1983 under the laws
of the State of Utah as Whitewater Products, Ltd. and initially
engaged in the business of manufacturing and marketing sporting
goods, primarily sailboards. The Company subsequently ceased its
original business activity in 1985 and thereafter primarily
investigated and sought new business opportunities and was
reclassified as a development stage Company as of March 1, 1989.
On August 6, 1992, the Company acquired Medisys Technologies,
Inc., a Louisiana corporation ("Medisys-Louisiana"), engaged in the
business of developing a device for the assistance of childbirth
under a patent which was applied for in May 1990 and granted on
June 15, 1992. Subsequent to the acquisition, all of the Company s
activities have been related to the development of medical devices
for use primarily in the women s healthcare and medical safet-y
device markets. For accounting purposes the acquisition was treated
as a recapitalization of Medisys-Louisiana with Medisys-Louisiana
as the acquirer (reverse acquisition). Also on August 6, 1992 the
Company changed its name to Medisys Technologies, Inc.
Primary Products:
WOMEN S HEALTHCARE - SOFCEPS
The Company is the exclusive assignee of all rights in and to
certain United States patents for an obstetrical tractor (birth
assistance delivery device) known as SOFCEPS (Registered Trademark,
hereinafter "SOFCEPS") which, in part, is designed to replace
traditional steel obstetrical forceps and vacuum extractors used to
assist child birth. SOFCEPS is intended to offset the possible
negative obstetrical consequences of epidural anesthesia which may
slow or interrupt the descent of the fetus through the birth canal
and may diminish maternal ability to produce voluntary and
involuntary contractions during delivery. SOFCEPS is a disposable
soft and thin double-walled multifiber braided axial gripping
cylinder which is placed over the fetal skull with a simple
application system. It is designed to uniformly distribute
assisting traction forces about the circumference and longitudinal
surface areas of the fetal skull.
The predecessor devices that SOFCEPS is designed to replace
are traditional steel obstetrical forceps and vacuum extractors and
the Company believes that maternal/fetal injuries associated with
the use of these predecessor devices will be reduced with the
adoption of this new alternative device. Maternal injuries
potentially caused by forceps, or by their improper use, range from
spiral lacerations of the pelvic floor and its associated
structures, to severe lacerations of the cervix resulting in
increased in-patient time, major surgical repair, incontinence,
sexual disorders, protracted discomfort, death, and substantial
increases in health care costs. Objective fetal injuries
potentially secondary to the use of forceps include minor "forceps
marks", fractures of the fetal skull, central nervous system (CNS)
deficit (cerebral palsy), severe mental retardation, blindness,
deafness, and death. Subjective injuries may include slowed
development of motor skills and learning disability. The use of
forceps when the fetus is at or above the midplane of the pelvis is
proscribed under current standards of care in the practice of
obstetrics.
The vacuum extractor was developed as an alternative to
traditional steel obstetrical forceps, but after over thirty years
of development its use still presents potential clinical problems.
The operative feature of the device is basically a suction cup
which is applied over the crown portion of the fetal skull where
traction forces are concentrated. Traction can result in hydraulic
transfer of traction forces through the fontanel to the
intracranial area. Off axis traction can result in the device
"popping" off the fetal skull with secondary rebound trauma being
transmitted to the intracranial area. Hematomas over the skull
have been noted secondary to the use of the vacuum extractor. Use
of both forceps and vacuum extractors requires a high degree of
skill and training.
When the mother opts for epidural anesthesia during delivery,
as most do, arrest or substantial delay of fetal descent in the
mid-pelvis range of the birth canal frequently occurs and the
obstetrician has no means available to beneficially promote
descent. In many cases delivery will be unduly prolonged and the
physician must resort to Cesarean section delivery. Unlike
traditional forceps, SOFCEPS can be applied when the fetus is at or
slightly above mid-pelvis of the birth canal, thereby providing the
obstetrician with an in place device to which traction can be
applied to offset the arrest or delay of descent. The Company
believes this will result in significant reductions in the rate of
Cesarean section deliveries secondary to arrest of fetal descent in
the mid-pelvis range.
The use of outlet forceps has become so much a part of normal
obstetrics that it is considered by some to be a part of a normal
delivery. Up to 1975, the use of forceps at all levels was
reported in the United States to be as high as 25% to 33 1/3%. By
1980, one study showed a 26.7% forceps use in "first child"
deliveries and over 15% in all deliveries. (Source: Notzon,
Francis C. International Differences in the Use of Obstetric
Interventions, JAMA, June 27, 1990-Vol. 263, No 24 U.S. Dept. of
Health & Human Services, National Center for Health Statistics
National Hospital Discharge Survey, 1990 Series 13: "Data from the
National Health Survey," No. 113). The Company estimates that the
percent of forceps deliveries in the United States today is
somewhere between 12% and 26%, depending on the region of the
Country surveyed. In recent years there has been a surge in
Cesarean section births in the United States. As the Cesarean
section rate increases, the use of obstetrical forceps tends to
decrease. Studies indicate that vacuum extractors delivery rates
are roughly equivalent to forceps delivery rates.
SOFCEPS combines centuries old non-obstetrical concepts with
modern medical and engineering technology. Using state of the art
braiding technology, a soft, thin mesh cylinder of synthetic fabric
is fabricated for application over the fetal head. Application is
accomplished with a simple and effective system which includes
accommodation for cephalic curvature. The application system is
then removed. After application, assisting traction is applied by
the physician to the portion of the cylinder which protrudes from
the vagina. A unique traction handle permits anterior, posterior,
or lateral traction as required to promote fetal descent. As
assisting traction is applied, the cylinder exerts uniform axial
gripping about the circumference of the fetal head. Unlike steel
forceps, gripping forces are not point concentrated but are spread
evenly over the fetal head and facial surfaces. Importantly,
traction can be applied concurrent with expulsive maternal
contractions thereby permitting efficient use of maternal reserves
of energy. The device has no edges which can cause lacerations
and, because it is much thinner than traditional forceps, it will
not exacerbate, and in many cases will offset, minimal
cephalo-pelvic disproportion (CPD) where the fetal head tightly
engages the birth canal. Because of the simplicity of the device,
the Company believes the average board certified obstetrician can
become proficient in its use within a nominal number of deliveries.
The device, including its application system, is disposable after
a single use.
Comprehensive clinical testing of SOFCEPS began at Baylor
College of Medicine, Houston, Texas, in October 1993. Under a
protocol approved by the Baylor Human Investigative Review
Board ("IRB"), assessments of successive prototypal configurations
were made using term fetal demise infants in order to evaluate the
components and function of the device. During the first year of
testing, it was determined SOFCEPS presented little, if any, risk
of maternal injury. Traction testing on several stillborns
demonstrated that force more than sufficient to promote fetal
descent in the birth canal resulted in no objective evidence of
fetal head feature trauma and permitted clinical conclusion that
the device was very likely to be less injurious to a fetus than
traditional devices.
On April 6, 1995 a developmental milestone occurred when a
term stillborn was successfully delivered with the device. During
this procedure, application over the fetal head was accomplished
and the Company concluded the device was clinically effective in
assisting completion of the delivery. Several modifications of the
delivery system have been made and with the completion of a minimal
number of stillborn deliveries, the results expected from the Phase
One testing protocol were considered by the Company to have been
met. Application for approval of Phase two protocol governing live
deliveries has begun. Deliveries are planned in the Phase Two
program for the fourth quarter of 1996 and the first quarter of
1997. Internationally, clinical sites at the Perinatal Institute
in Bern, Switzerland, the Hospital Central in Mexico, and the
Kenyaatla National Hospital in Kenya have been selected for
consideration of live birth testing. In the United States, a letter
of intent has been signed with physicians at the University of
Maryland to begin live birth testing.
MEDICAL SAFETY DEVICES - COVERTIPTM
Medical device safety is a large and growing issue within the
healthcare community. The transfer of infectious diseases result
in enormous economic and social costs. With AIDS, Hepatitis and
other communicable disease, the possibility of accidental infection
is a critical issue to healthcare workers and professionals. The
Center for Disease Control (CDC) in Atlanta reports that for every
250 syringe injections an accidental needle stick occurs to the
person administering the injection. The cost for subsequent
mandatory testing is between 250 to 700 dollars. While the
incidence of AIDS contracted through accidental needle sticks is
low (less than 50 cases reported in the U.S. to date) the impact to
the individuals tested and the cost of both the testing and
treatment is enormous.
The current syringe market approaches 2.5 billion dollars in
the U.S. alone. Currently, safety syringes comprise a relatively
small portion, less than 10% of the total market. The desire to
use a safety syringe has been impeded by both cost and technique
requirements of currently available safety syringes. Current safety
syringes are 3-4 times the cost of standard syringes. Safety
syringe devices currently in the market are difficult to use and
require hospital training and ongoing inservice. These products
do not cover the needle prior to removal from the skin and can pose
a danger upon extraction from the patient.
In contrast to other safety syringes, the CoverTipTM device s
unique design covers the tip of the needle while in the skin and
locks in place protecting the healthcare worker during the
injection process and during disposal of the used syringe. Use of
the CoverTipTM requires no additional instruction. CoverTipTM is in
the final design stage with performance testing scheduled to begin
in the fourth quarter of 1996.
The Company believes that substantial capital barriers may
preclude direct entry of the safety products by Medisys in the U.S.
Therefore, the Company will likely seek a license arrangement with
a major medical company. Foreign markets may offer similar
opportunities and are being explored. The Company has received
inquiries concerning the CoverTipTM product from the three largest
suppliers of syringes in the United States but has elected not to
engage in active negotiation of any licensing agreement until FDA
filings are underway.
The Company believes that the CoverTipTM safety device should
qualify for 510(K) FDA approval and preparation for a 510(K)
exemption from pre-market approval has begun.
Other Opportunity Products
The Company is also presently developing other products termed
Other Opportunity Products which may generate revenue for the
company. A brief non-inclusive outline of opportunity products
available to the Company are as follows:
MEDISYS VETERINARY OBSTETRICAL TRACTOR
VETCEPSTM is a veterinary application of the SOFCEPS
obstetrical tractor. The Company enjoys patent protection for
veterinary application in bovine (cattle), ovine (sheep), and
equine (horse) obstetrics within its original patents. Development
thus far has been limited in large measure to the bovine
application because of its substantial potential market and because
it appears to offer an obvious solution to problems which arise
with the use of commonly used steel veterinary obstetrical fetlock
chains. The device has been successfully used to deliver live
calves in certain applications. The Company has sold approximately
100 units although sales were discontinued in the first quarter of
1996. VETCEPSTM has undergone design changes and is scheduled to
be reintroduced to the veterinary market by year-end 1996.
DISKLIPTM
DISKLIPTM ("DISKLIP") is a device used in connection with the
standard intravenous administering of medication ("I.V.") and to
secure other medical tubing. The DISKLIP is a simple, inexpensive,
one piece, disposable after single use device which is designed to
prevent inadvertent or accidental tug trauma to an I.V. site and to
afford the medical provider with an easier and more efficient means
of attaching other medical tubing. The Company believes that
DISKLIP will require little or no personnel training and will
result in savings in nursing time, reduction of instances of site
inflammation and irritation of vein walls (lumens), reduction of
instances of infiltration and veil wall puncture, reduction of risk
of sepsis, and reduction of patient discomfort. The Company's
expectations with regard to DISKLIP are currently being proven by
field testing. That testing has revealed a need to improve the
adhesive used in the product. The Company is currently addressing
that need through research.
Backlog
The Company has a backlog of 20 VETCEPSTM devices with an
approximate value of one thousand dollars.
Market Analysis and Competition - SOFCEPS
The market for obstetrical products, both in the U.S. and
worldwide, is substantial. While declining birthrates are a factor
for consideration in western countries, even a slight decline
indicates a stable U.S. market of about 4 million births per year
for the next 10 years. Management believes that the rapidly
expanding population growth of third world and Pacific rim
countries represents a marketing opportunity for assisted delivery
devices and obstetrical products in general. The simple technology
that SOFCEPS employs will be of particular appeal in third world
countries and should offer strong market opportunities.
The primary assistance device in use today is stainless steel
obstetrical forceps. They were actually developed in the latter
part of the 16th Century. Actual traction is exerted slightly
below or underneath the mandible and is point concentrated.
Slippage of the forceps is almost invited because of natural
lubrication, refusal of the fetal skull to conform to existing
forceps design, and a myriad of variables which exist from one
fetal skull/pelvic relationship to another. Virtually every
forceps assisted delivery involves risk of injury to the mother and
the baby.
Stainless steel forceps apply a concentrated gripping force on
the fetal head which can result in a series of injuries from minor
"forcep marks" to skull fractures, central nervous system damage
and fetal death. The manipulation of the steel forceps in the
birth canal often causes maternal injuries ranging from spiral
lacerations of the pelvic floor to severe lacerations to the
cervix. In both instances, these injuries result in significantly
increased healthcare costs associated with post-delivery
complications and increased inpatient days.
Statistics have shown that forceps are used to assist up to
26% of vaginal deliveries. Injuries to the fetus range from minor
abrasions or "forceps marks" to skull fractures with massive brain
damage. The mother is at risk of lacerations of the cervix, which
can be life threatening, and the floor of the pelvis. Such
injuries are exhaustively dealt with in the medical literature and
the obstetrical community would welcome a device which promises a
significant reduction in maternal and fetal morbidity.
The only other significant attempt to introduce a new product
into this forceps arena has been the vacuum system. The vacuum
unit was patented in the late fifties and in spite of numerous
attempts toward refinement, the approach still remains plagued with
disadvantages. The system grips the upper half of the fetal skull
with a suction device and traction is then applied. Use of the
system frequently results in hematoma over the fetal skull as well
as rebound trauma caused by the device popping off the fetal skull.
Once in place, the device precludes manual rotation of the skull.
Rotation is frequently required to ease passage through the pelvis.
Many obstetricians have experienced difficulties because they
resort to twisting on the extractor to accomplish rotation. This
can result in serious fetal injury. For these and other reasons,
the vacuum system has largely fallen into disfavor and the majority
of obstetricians have returned to the use of traditional forceps.
1. Customer Characteristics
Potential customers for the SOFCEPS product varies. They
include obstetricians, managed care organizations, hospitals and
patients (consumers).
a. Obstetricians
The need for safe, reliable birth assistance creates a base
need for replacement of current devices. Documentation of
successful deliveries, with reduction of risk to both mother
and infant, will be a strong motivator influencing the
adoption of the SOFCEPS device by the obstetrical community as
well as hospitals (health care providers), and physicians.
b. Managed Care Organizations
Managed care organizations, insurers and employers all have a
financial need to reduce health care costs. The opportunity
to do so with reductions in hospital length of stay, reduction
in C-Section rates, and a positive impact on malpractice
insurance costs will all be motivators to the managed care
community. Also, a reduction in C-Section rates would result
in curt (?) productions.
c. Hospitals (Health Care Providers)
Management believes that obstetrical care is being
consolidated in communities to establish a cost effective
delivery system for this service. Hospitals are increasingly
under pressure to reduce costs, while maintaining quality of
care. SOFCEPS offers these healthcare providers the
opportunity to increase the quality of the delivery process,
while reducing the overall cost of care. An additional
opportunity is the economic potential for reduced malpractice
insurance and C-Section rates. As hospitals and health care
providers move toward captative care, the pressure to decrease
length of stay costs, while maintaining quality, will
increase.
d. Patients (Consumers)
Patients are increasingly aware of the need to reduce health
care costs, but at the same time are concerned over the
quality of care. Forceps use and the concept of vacuum
extractor assisted deliveries are innately unpleasant to the
average consumer. Therefore, management believes that the
SOFCEPS product, as well as other simple products produced by
the Company, represent viable alternatives to the general
consumer community, including women's health and pediatric
advocacy groups.
2. Competitive Evaluation
The competitive product situation for obstetrics includes
products that are a part of diversified health care corporations
with slight focus on obstetrics. In the device arena, products for
obstetrics are produced from divisions of various companies whose
products are broadly based in many areas of health care. Equipment
companies such as Utah Medical and Hewlett Packard market
monitoring equipment and diagnostic tools for obstetrics.
Advertised as the only company exclusively focused on women's
health issues, GynoPharma had a broad range of products primarily
pharmaceutical and over the counter drugs.
In the specific area of competition to SOFCEPS, instrument
manufacturers such as the Codman Division of Johnson & Johnson,
V. Muellar, and Weck manufacture obstetrical forceps in various
forms. Vacuum extractors are manufactured by Mityvac and others.
Instrument companies do not look at forceps as a major product
line, but can be expected to respond with alternative methods of
assisted delivery once the SOFCEPS product is introduced into the
market place. The same can be said for the vacuum extractor
companies.
3. Market Potential
As set forth herein, SOFCEPS is intended to be multi-
dimensional in use and is designed to be applied in a prophylactic
manner in all cases where mother and fetus do not present with
contraindications. Less than one half of section deliveries result
from maternal/fetal clinical presentation, that is inadequate
pelvic architecture, cephalo pelvic disproportion, vaso or
placenta-previa, etc., and one half of section deliveries are labor
related and perhaps preventable through use of a beneficial
obstetrical tractor.
The device is a totally new concept which the Company intends
to market on a worldwide basis. The market is limited only by the
eventual degree of acceptance in the obstetrical community and by
the number of live births in each given market area. The device is
disposable after a single use, so potential market volume repeats
on an annual basis. The degree of market penetration will depend
upon product acceptance and effectiveness of marketing efforts.
The medical marketplace is receptive to new products which can
provide better patient care, savings in medical costs, benefits to
the health care industry, and which represent advances in risk
reduction. The Company is poised to effectively demonstrate that
the device will meet the criteria of today's managed healthcare
marketplace.
There are no past or present medical comparables to SOFCEPS
and pricing is based on costs of manufacture and distribution,
including usual administrative items, as well as preliminary price
sensitivity analysis. The Company believes that a price of
approximately $300 per device will meet the requirements of the
managed care environment.
4. Non-Controllable Elements
With health care reform on a massive scale apparently
postponed for the foreseeable future, government intervention would
appear only to enhance the prospects for SOFCEPS as well as other
simple, easy to use, technologies of the Company. The managed care
companies should encourage the use of SOFCEPS, and economic studies
are planned in order to document the value.
The greatest elements outside immediate control would be the
introduction of similar birth assist products and the uncertainty
of the FDA approval process.
5. Marketing Plan
The Company currently plans to market SOFCEPS on a direct
basis or through a co-marketing arrangement with supplemental sales
support from dedicated brokers. This approach is intended to
achieve appropriate marketing activity while minimizing selling
expenses. Internationally, the Company plans to distribute its
products worldwide through international market development
brokers.
The market for an effective delivery assistance device is
worldwide. Concurrent with development and refinement efforts, the
Company will employ comprehensive measures designed to apprise the
obstetrical world of what is forthcoming. Management will endeavor
to have customers ready and waiting when the device enters mass
production. These efforts have begun with public relations and
preliminary market communications which are underway.
Selling strategy will take a multi-focused approach centered
around the following customer groups:
During the final development stage, the Company will
communicate with Obstetricians via direct mail and convention
exposure at major obstetrics meetings to introduce the concept
idea of SOFCEPS. In addition, after successful live birth
clinical testing, educational seminars will be conducted on
the appropriate use of the SOFCEPS device by targeting the
thought leaders and volume delivery obstetrical centers.
Major benefits that will be positioned to the obstetrician
will include an increase in patient care and potential for
reduced malpractice insurance.
Major obstetrical societies will be contacted and requests
made for endorsements of the SOFCEPS product vs. forceps use.
After product testing, the Company plans to commission a panel
of distinguished obstetricians as an advisory group to provide
broad input and endorsement support.
Obstetrical Nurses will be introduced to the product through
convention activity at major meetings, select targeted direct
mail to key association officers, and thought leaders within
the major metropolitan markets.
Providers/Hospitals - A direct selling strategy will be
employed to the top 200 obstetrical hospitals. In addition,
group purchasing organizations will be contacted for inclusion
of the SOFCEPS product into their "formulary." The major
selling appeal to providers is the potential to increase care
quality and the potential for reduction of C-Section rates and
malpractice occurrence.
While physician obstetricians will be the final users, the
device is considered a hospital supply item. Exclusively,
hospitals with obstetrical units will be the customers of the
Company.
Managed care organizations have established a list of
procedures which they feel are being excessively used within
the health care community. Included as one of the highest
within this list are C-Section rates. C-Sections currently
cost about $4,570 more than normal deliveries and there are
wide variations of occurrence by institution and geography.
Management believes that the use of SOFCEPS should generate a
net savings over C-Section delivery.
The Company s selling strategy will include contacting major
women's and children's advocacy organizations. The
development of a press kit for use in local areas where
SOFCEPS has been adopted for use will provide an efficient
tool for local media, physicians, and hospitals thereby
enhancing general media public relations.
Insurers - If SOFCEPS proves clinically successful and
produces a relatively short track record of safe and injury
free deliveries, the Company believes that medical malpractice
and health insurers will support the transitioning of insured
obstetricians from the continued use of forceps. A single
instance of infant brain damage can cost an insurer in excess
of $40 million dollars. A demonstration that SOFCEPS will
reduce the number of such instances will ingratiate insurers
and compel their collective assistance.
Women s Groups - In addition, the Company intends to advertise
and solicit various consumer periodicals that target a
predominantly female readership. By using the family
periodicals as communication tools, the message of the
benefits of a SOFCEPS delivery will be widespread.
Education - From a services standpoint, the Company intends to
provide user training through seminars, literature, clinical
video programs, and clinical workshops. Emphasis will
initially be placed on working through teaching hospitals in
the various geographic markets. Planning is underway for a
detailed and intense education program. Plans are to conduct
at least one seminar per month at strategic geographical areas
across the United States.
6. Advertising and Promotions
Initial promotional and market education activity has begun,
particularly targeted to each of the major customer groups. This
initiative has consisted of periodical news releases and
publication in a limited number of business and professional
publications about the Company in general, and SOFCEPS as a birth
assistance alternative concept. Further advertising and public
relations will be targeted to each category. For example, although
hospitals will be the purchasers, obstetrical physician users will
dictate whether the purchases are made which will require a blanket
effort to insure wide familiarity with the device within the
obstetrical community.
Medical literature, in this case the various obstetrical
journals, is a primary key in dissemination of new information to
individual obstetrical practitioners. Appropriate physician
authored informative articles will be provided to these journals
for publication and distribution to individual subscribers.
Results of human clinical trials are being reported with clinical
details of each delivery.
7. Product Warranties
The Company will attempt to develop reasonable warranties with
application of the SOFCEPS product and these will be contained in
the product package insert which will be included with every
SOFCEPS unit sold or distributed.
Market Analysis - CoverTipTM
Currently $2.5 billion of sales volume is generated with the
use of syringes in the United States with safety syringes purchases
during this annual period approximating $300 million of this
amount. The penetration rate of safety syringes is driven by
concern over the health of the doctors, nurses, and other
healthcare professionals as well as cost associated with their care
and the testing necessary in response to the occurrence of
accidental needle sticks. The rate of accidental needle stick
reported by the Center for Disease Control (CDC) was one occurrence
for every 250 injections made. Although the number of confirmed
cases of AIDS contracted accidental dirty needle sticks remains
small (less than 50 individuals) the occurrence of hepatitis and
other infectious diseases compounds the problem and cumulatively
results in tremendous cost, liability, long-term care and
productivity losses. Requirements for reporting all accidental
dirty needle sticks result in subsequent testing cost for each
event from between $250 -$700 .
Although there is support from the healthcare worker community
for safety syringes, there are still various obstacles such as
their higher cost, (3 to 5 times higher than standard syringes) as
well as the difficult technique changes necessary to use many of
these currently cumbersome devices. The inservice cost to train a
myriad of healthcare practitioners using syringes places an added
burden on the conversion rate due to the awkward nature of
currently existing safety syringes. Many of these products require
two-handed application techniques which can, at times, present
accidental stick opportunities.
Customer characteristics
Customers for the CoverTipTM safety syringe include all
healthcare workers, nurses, physicians, hospitals, clinics, managed
care organizations as well as insurers.
a. Doctors, nurses, and healthcare providers.
The desire to reduce the likelihood of an accidental dirty
needle stick is strong with all healthcare workers. Individuals
who have contracted AIDS, hepatitis and other life threatening
contagious disease have become advocates for the adoption of safety
devices within the healthcare community. These individuals and
organizations supporting healthcare worker safety provide impetus
for the use of safety syringes.
b. Hospitals.
The need to reduce the cost of testing associated with
accidental needle sticks as well as reduction in liability and in
negative publicity and pressure from healthcare worker
organizations are strong motivators to the hospital in adopting a
relatively low cost easy to use safety syringe.
c. Managed Care/Insurance
Managed Care organizations and Insurers assume the burden of
liability both for treatment and damages associated with accidental
needle sticks. These groups appear supportive of efforts to reduce
the incidence of infectious disease contracted by cross
contamination.
Competitive Evaluation
Within the syringe business in the United States, Becton -
Dickenson enjoys the largest market share position approximating
60% of the market. Sherwood Medical a division of American Home
Products has approximately 30% with the remainder of the market
divided among numerous private label as well as foreign companies
such as Terumo. The safety syringe market is sub-divided in
similar fashion. Over 450 patents have been issued on various
types of safety needles and/or syringes. In spite of the
proliferation of interest and effort to convert these products, the
difficulty in changing behavior of the application technique of the
healthcare worker as well as the prohibitive cost has inhibited
the penetration of safety syringes into the overall standard
syringe marketplace. CoverTipTM is in the final design stage and
is being readied for performance testing and 510(K) FDA submission.
Marketing Plan
Due to the large capital investment required to manufacture
multiple large quantities of the CoverTipTM product, the primary
strategy of the CoverTipTM selling campaign will be designed to
obtain a third party large company partner with the manufacturing
distribution resources and expertise needed to rapidly introduce a
product with this enormous opportunity.
Patents and Trade Secrets
The Company has aggressively pursued obtaining patent rights
to those products which it anticipates marketing. The Company
already is the owner of five U.S. patents (U.S. Patent 5,122,148,
U.S. Patent 5,217,467, U.S. Patent 5,318,573, U.S. Patent
5,460,611, and U.S. Patent 5,496,283) for the Company's SOFCEPS,
COVERTIPTM, and DISKLIPTM devices. In addition, a new U.S. patent
application has been filed covering the latest generation of the
SOFCEPS. The Company has also pursued its foreign patent
applications relating to SOFCEPS in twenty countries. The Company
also has pending a U.S. patent applications covering VETCEPSTM, the
veterinarian version of SOFCEPS, which is approved but not yet
issued, and a U.S. patent application relating to the DISKLIPTM I.V.
tubing retainer, the first of which has been approved.
The Company has filed six U.S. trademark applications
preserving its right to use the trademarks "SOFCEPS", "VetCepsTM",
the "MedisysTM" logo, "DisKlipTM", SofDermTM", and "CoverTipTM" to
identify the various Company products. As the Company proceeds
forward with the commercialization of these and other products,
U.S. and foreign trademark applications will be filed to protect
their product name.
The Company intends to obtain copyright protection on its
product packaging, instruction sheets, and such other Company
materials that the Company believes significant to warrant
procurement of copyrights.
The Company has obtained through its research and development
efforts during the past four years, a large body of trade secrets
relating to the design and construction of SOFCEPS. In addition,
the Company has obtained substantial proprietary business
information relating to the manufacturing costs, marketing and
selling of the Company's various products.
Product Liability and Insurance
The Company may be exposed to potential product liability
claims by users of its products. The Company currently maintains
general business liability insurance limited to $1,000,000 coverage
per occurrence and in the aggregate. The Company's clinical
testing for human fetal demised deliveries has been through
St. Paul insurance Company with coverage limits of $5,000,000 per
occurrence and $15,000,000 aggregate coverage.
Government Regulation
All medical devices are subject to FDA regulation under the
Medical Device Amendments of the Federal Food, Drug and Cosmetic
Act. Prior to the Phase I testing of SOFCEPS, the Company applied
to the FDA for a 510(k) exemption from Pre Market Approval ("PMA")
for marketing the SOFCEPS device. PMA could require a lengthy
testing and approval process. The FDA has reviewed the Company's
application and testing protocol. Based on Phase I data, the
Company was allowed to continue its fetal demised clinical testing.
An Investigational Device Exemption ("IDE") Draft for Phase II
testing has been submitted to the Office of Device Evaluation
(ODE/OB-GYN) for review and comment. The Company has established
a positive dialogue with the FDA and believes that the IDE process
will be postured to proceed with Phase II testing when Phase I is
successfully completed. The Company intends to resubmit a 510(K)
application to the FDA concurrent with the accumulation of live
human clinical test data.
The Company believes that the CoverTipTM safety device should
qualify for 510(K) FDA approval and preparation for a 510(K)
exemption from pre-market approval has begun.
Facilities
The Company leases office facilities consisting of
approximately 3,532 square feet located in Baton Rouge, Louisiana.
The office is primarily devoted to product development, new product
design and administrative activities. The Company believes that
all of its initial requirements for manufacturing, packaging, and
storage will be met by its contract manufacturers.
To support the development efforts without assuming fixed
costs, the Company has contracted with Hayes Medical, Inc. for
engineering, design specification, prototype manufacturing, cost
projections and schedules. This association will also aid the
Company with the FDA s 510-K approvals.
The Company also presently contracts for laboratory facilities
with "TechniMark" in Clearwater, Florida to assemble its handmade
clinical devices of SOFCEPS as well as the production of VETCEPSTM.
Although not currently anticipated, future manufacturing may be
done by the Company itself which would most likely require further
financing.
Litigation
The Company is not a party to any material pending legal
proceedings and no such action by, or to the best of its knowledge,
against the Company has been threatened.
Employees
As of June 30, 1996 the Company employed 7 full-time
individuals, consisting of 3 executive officers and 4 office staff
personnel. In addition to its full-time employees, the Company
uses the services of certain consultants on a contract basis.
These consultants include, William D. Kiesel, a patent attorney and
director of the Company; Paul R. Radle, Jr., a CPA and director,
treasurer, and CFO of the Company; Joel Faden, a FDA consultant;
and Coastline Financial Corporation, financial consultants.
Mr. Kiesel is reimbursed for patent costs and expenses only. Prior
to 1996, Mr. Radle received restricted shares of the Company s
common stock as reimbursement for his services. After January 1,
1996, Mr. Radle has been compensated on as hourly basis. Mr. Faden
will be compensated on an hourly basis as services are needed.
Coastline Financial is to receive restricted shares of the
Company s common stock as reimbursement for their services.
ITEM 2. Management s Discussion and Analysis or Plan of
Operation
The following information should be read in conjunction with the
consolidated financial statements and notes thereto appearing elsewhere in
the Form 10-SB.
Results of Operations
Prior to the date hereof, the Company has been deemed a
development stage company primarily engaged in the research and
development of its childbirth assistance device its medical safety
devices and other medical products. The Company has only realized
minimal sales revenues from its veterinary birth assistance device
and has not marketed any of its other products.
Six Months ended June 30, 1996 Compared to Six Months Ended June 30, 1995
For the six months ended June 30, 1996 ("first half of 1996"),
the Company had revenues of $5,873 compared to revenues of $0 for
the six months ended June 30, 1995 ("first half of 1995"). The
Company expects only nominal revenues until one or more of its
products reaches the full marketing stage. Product development
increased 46% for the first half of 1996 compared to the first half
of 1995 reflecting the Company continuing and increasing
development of its products. Salaries increased 17% for the first
half of 1996 compared to the 1995 period and general and
administrative expenses increased 51% for the same period.
Increased expenses are attributed to continued expenditures related
to the further development of the Company s products. The Company
had a net loss of $516,214 for the first half of 1996, an increase
of approximately 36% from the first half of 1995.
Year Ended December 31, 1995 Compared to Year Ended December 31, 1995
For the year ended December 31, 1995 ("1995"), the Company
experienced a net loss of $984,972 compared to a net loss of
$960,966 for the year ended December 31, 1994 ("1994"). During
1995 the Company expended $255,486 for product development expenses
including compensation paid to the Company s Vice President for
services related thereto compared to $467,541 for 1994. For the
year ended December 31, 1995 the Company also paid salaries of
$207,980 and general and administrative expenses of $473,529 which
included rent, utilities, travel and entertainment, and general
office expenses as compared to salaries of $288,050 and general and
administrative expenses of $148,076 for 1994. The remainder of
expenses for the year ended December 31, 1995 consisted of
depreciation and amortization and interest expense which totaled
$50,779 as compared to $57,299 for 1994.
It is anticipated that following the successful completion of
the current private placement of certain equity securities, the
Company will commit the majority of the net proceeds therefrom to
the final development and preliminary marketing of its SOFCEPS and
CoverTipTM products. As of the date of this filing the Company has
raised in excess of $1,600,000 in it current private placement.
The Company also intends to apply a portion of the net proceeds
from the current offering to the development of new products.
Financing and Capital Resources
Since July 1992, the Company has expended approximately
$3,542,708 on product research and development, organization and
administration. Of the $3,542,708 expended by the Company,
$516,214 was expended through June 30, 1996, $984,774 was expended
in 1995, and $960,966 in 1994. The Company has previously raised
funds through two private placements of debt and equity securities
and is currently raising additional funds through its third private
placement of equity securities. Management has determined that the
Company will require approximately $7,000,000 in future funding, to
be accomplished in two phases, $3,000,000 which is the subject of
the current offering, and $4,000,000 which may be through an
offering or from internally generated funds. Funding from the
current offering will allow the Company to complete SOFCEPS and
COVERTIPTM development, begin preliminary marketing and product
production, and assist development and marketing of "opportunity
products" to create a revenue stream. The funding of $4,000,000
will be for production, sales, and marketing of SOFCEPS and
COVERTIPTM.
Net Operating Loss
Prior to 1996, the Company has been a non-revenue producing
company which has accumulated in excess of $3,000,000 of net
operating losses. These net operating losses may be used to reduce
taxable income and income taxes in future years. Use of these
losses to reduce future income taxes will depend on the generation
of sufficient taxable income prior to the expiration of the net
operating loss carryforwards. The carryforwards will begin to
expire in the year 2007. In the event of certain changes in
control of the Company, there will be an annual limitation on the
amount of net operating loss carryforwards which can be used.
Liquidity and Capital Resources
Historically, the Company s working capital needs have been
satisfied through the private sale of securities. Working capital
at June 30, 1996 was $144,889 compared with $(470,270) at December
31, 1995. Working capital was primarily affected by increases in
cash balances and decreases in current portion of notes payable.
The Company anticipates meeting its working capital needs
during the current fiscal year through private placement of
securities from which the Company has realized $1,548,000 to date
hereof. An additional $1,452,000 may be raised pursuant to the
current placement. The Company is also investigating the
possibility of other interim financing to provide working capital
and to further the development of its products. Although
management has not made any arrangements or definitive agreements,
the Company is contemplating both the private placement of
securities and/or a public offering. If the Company is unable to
secure financing from the sale of its securities or from private
lenders, it may experience a working capital shortage beginning in
the second quarter of 1997.
As of June 30, 1996, the Company had total assets of $942,648
and total stockholders equity of $442,902 compared to total assets
of $406,531 and total stockholders equity of $(191,384) as of
December 31, 1995. For this same period, cash increased
approximately 732% from $82,149 to $601,500 reflecting the cash
raised through June 30, 1996 from the Company s private placement
of securities. Also for this period, total current assets
increased 583% which can be attributed to the increase in the
Company s cash balances explained above. Total current liabilities
decreased 83% attributed to reductions in the Company s current
portion of long term debt and the payment of various accrued
expenses. During the second quarter of 1996, the company realized
$1,080,514 from financing activities compared with proceeds from
financing of $282,660 in the second quarter of 1995. During this
period, the Company did not make principal payments on its long
term debt balance of $20,577.
In the opinion of management, inflation has not had a material
effect on the operations of the Company.
ITEM 3. Description of Property
The information required by this Item 3, Description of
Property, is set forth in Item 1, Description of Business, of this
Form 10 - SB.
ITEM 4. Security Ownership of Certain Beneficial Owners and
Management
The following table sets forth information, to the best
knowledge of the Company, as of June 30, 1996, with respect to
each person known by the Company to own beneficially more than 5%
of the outstanding Common Stock, each director and all directors
and officers as a group.
Name and Address of Number of Shares Percentage
Beneficial Owner Beneficially Owned Ownership(1)
Gary E. Alexander * 1,399,060(2) 11.9%
9624 Brookline Avenue
Baton Rouge, LA 70809
Robert McNamee 1,172,860(3) 10.1%
9624 Brookline Avenue
Baton Rouge, LA 70809
Jerry L. Phipps 1,177,860(4) 10.0%
9624 Brookline Avenue
Baton Rouge, LA 70809
Alan Chervitz 880,880(5) 6.9%
152 South 600 West
Logan, Utah 84321
William D. Kiesel * 877,380(6) 7.5%
2355 Drusilla Lane
Baton Rouge, LA 70809
Edward P. Sutherland * 875,100(7) 7.4%
9624 Brookline Avenue
Baton Rouge, LA 70809
Kerry Frey * 518,500(8) 4.5%
9624 Brookline Avenue
Baton Rouge, LA 70809
Paul R. Radle, Jr. * 148,500(9) 1.3%
9624 Brookline Avenue
Baton Rouge, LA 70809
Directors and officers 4,733,420(10) 38.6%
as a group (7 persons)
* Director
** Unless otherwise indicated in the footnotes below, the Company
has been advised that each person above has sole voting power
over the shares indicated above.
(1) As of August 31, 1996, there were 11,598,668 shares of common
stock outstanding, which figure takes into consideration
stock purchase options owned by certain officers, directors
and principal shareholders, entitling the holders to purchase
an aggregate of 1,570,000 shares of common stock and which are
currently exercisable. Therefore, for purposes of the table
above, as of the date hereof, 13,168,668 shares of common
stock are deemed to be issued and outstanding in accordance
with Rule 13d-3 adopted by the Securities and Exchange
Commission under the Securities Exchange Act of 1934, as
amended. Percentage ownership is calculated separately for
each person on the basis of the actual number of outstanding
shares as of August 31, 1996 and assumes the exercise of stock
purchase options held by such person (but not by anyone else)
exercisable within sixty days.
(2) Includes 167,000 shares which may be acquired by Mr. Alexander
pursuant to the exercise of stock purchase options exercisable
within sixty days at the average exercise price of $1.59 per
share.
(3) Includes 29,000 shares which may be acquired by Mr. McNamee
pursuant to the exercise of stock purchase options exercisable
within sixty days at the average exercise price of $1.125 per
share.
(4) Includes 144,000 shares which may be acquired by Mr. Phipps
pursuant to the exercise of stock purchase options exercisable
within sixty days at the average exercise price of $1.58 per
share.
(5) Includes 59,000 shares which may be acquired by Mr. Chervitz
pursuant to the exercise of stock purchase options exercisable
within sixty days at the average exercise price of $1.39 per
share.
(6) Includes 114,000 shares which may be acquired by Mr. Kiesel
pursuant to the exercise of stock purchase options exercisable
within sixty days at the average exercise price of $1.57 per
share.
(7) Includes 173,000 shares which may be acquired by
Mr. Sutherland pursuant to the exercise of stock purchase
options exercisable within sixty days at the average exercise
price of $1.58 per share.
(8) Includes 17,000 shares which may be acquired by Mr. Frey
pursuant to the exercise of stock purchase options exercisable
within sixty days at the average exercise price of $2.35 per
share.
(9) Includes 47,000 shares which may be acquired by Mr. Radle
pursuant to the exercise of stock purchase options exercisable
within sixty days at the average exercise price of $1.80 per
share.
(10 Includes 669,000 shares which may be acquired by the Company's
officers and directors pursuant to the exercise of stock
purchase options exercisable within sixty days at exercise
prices ranging from $1.125 to $4.25 per share.
<PAGE>
ITEM 5. Directors, Executive Officers, Promoters and Control
Persons
Executive Officers and Directors
The executive officers and directors of the Company are as
follows:
Name Age Position
Edward P. Sutherland 50 President, Chief Executive Officer and Director
Gary E. Alexander 51 Vice President, Chief Technology Officer and
Director
Kerry M. Frey 50 Vice President, Chief Operating Officer and
Director
Paul R. Radle, Jr. 42 Vice President, Chief Financial Officer,
Treasurer and Director
William D. Kiesel 50 Corporate Secretary and Director
Jane Cooper 42 Director
Dr. Robert L. diBenedetto 66 Director
______________
All directors hold office until the next annual meeting of
stockholders and until their successors have been duly elected and
qualified. The Executive Committee of the Board of Directors, to
the extent permitted under Utah law, exercises all of the power and
authority of the Board of Directors in the management of the
business and affairs of the Company between meetings of the Board
of Directors. Each executive officers serves at the discretion of
the Board of Directors.
The four principal managers of the Company are:
EDWARD P. SUTHERLAND is the President/CEO and a co-founder of the
Company. Mr. Sutherland received a Bachelor of Arts Degree from
Louisiana State University in 1968, and a Juris Doctor Degree from
Louisiana State University in 1974. He was in private law practice
from 1974 until he co-founded the Company in 1992. Mr. Sutherland
has over 25 years of business, professional and personnel
management expertise in the private and public sector including
over five years of experience in forming, developing and managing
a start-up company in the medical R&D industry. His background
includes strategic planning, financing, administration, policy
formulation and execution, personnel education, general office
management, bookkeeping, taxation, and interface with governmental
agencies including FDA and SEC. While practicing as an attorney,
Mr. Sutherland also developed a comprehensive background in
hospital and medical practice, and product liability litigation.
GARY E. ALEXANDER is the Vice President, Chief Technical Officer
and co-founder of the Company. He is the principle inventor of
SOFCEPS. and most of the Company s other products and is in charge
of research and development. Mr Alexander received his Juris
Doctor Degree in law from Louisiana State University in 1976 and
was engaged in private law practice from 1976-1991, specializing in
medical liability matters with emphasis on obstetrics. In 1989,
Mr. Alexander conceived the SOFCEPS product and in 1990 began full
time development of the product. He has spent the last six years
devoting himself to invention, research, and developing of products
for ultimate commercialization. His broad based career began early
in 1967 being named the number one Junior Salesman in the United
States for AM Corporation, a source data collection and conversion
company. Mr. Alexander has owned and operated several businesses
in building, general contracting, and construction equipment sales,
where he managed up to 75 employees and sub-contractors and managed
the materials flow accounting, invoicing, accounts payable and
receivable, and exclusive service contracts with major appliance
manufacturers. In connection with those businesses, he acquired
the special skills and expertise in engineering principles, design,
drawings, welding, carpentry, materials evaluation, electrical and
mechanical sciences which have led to his inventing successes. His
background in law resulted in multiple areas of business expertise
including the management of accounts in the real-estate sector, and
he has advised several manufacturing clients on both domestic and
international businesses contracts, research and development,
operations, sales and mergers. He has also served as advisor and
counsel for several financial institutions and has interfaced with
several governmental agencies including FDA and SEC and has
represented the SBA.
KERRY M. FREY, Vice President and Chief Operating Officer has
over 22 experience in the health care industry. Mr. Frey received
a Bachelor of Arts Degree from Southeastern Louisiana University in
1969. His background includes marketing and sales, as well as
general management. Mr. Frey was associated with Johnson and
Johnson Hospital Services for ten years in the development of
multi-company corporate marketing programs and services. He served
as Vice President of Marketing as well as VP of Sales. Mr. Frey
has coordinated strategic assessment of the dynamic healthcare
market, including managed care, integrated provider systems and
healthcare reform. He led the development of corporate value added
marketing programs for multi-hospital groups, large regional
hospital systems, surgical supply distributors and service
marketing programs for Johnson & Johnson in the professional
healthcare marketplace. Previous consulting assignments have
included integrated healthcare systems such as the General Health
System and the Florida Hospital; futuristic health delivery
planning with Walt Disney Development Company. He also consulted
for Qualitycare, Inc., a medical distributor company, and has
served on the boards of a medical software company, a start-up
minority distributor, and three other successful development stage
companies.
PAUL R. RADLE, JR. is the Company s Vice President, Chief
Financial Officer and Treasurer. Mr. Radle received from the
University of New Orleans a B.S. Degree in Accounting in 1978 and
was licensed to practice as a Certified Public Accountant in the
State of Louisiana in 1983. From 1974 to 1981, was employed by CNG
Producing Company serving in various accounting functions. From
1982 to 1995, Mr. Radle has served as Vice President, Finance for
Arrowhead Exploration Company, an independent oil and gas
exploration and production company. Mr. Radle s background
includes strategic planning, financial reporting, taxation, MIS,
and corporate administration. He is experienced in negotiating
contracts and agreements, performing business valuations and
economic analysis of business opportunities and investments. Mr.
Radle is a member of the Louisiana Society of CPA's, the American
Institute of CPA's, the Independent Petroleum Association of
American Tax Committee, and is a board member of the General Health
System Foundation and the Louisiana State University School of
Social Work.
The Company s Secretary and Consultant on Intellectual
Property is:
WILLIAM DAVID KIESEL is a Director and a co-founder of the
Company. During the past 25 years he has been actively engaged in
advising numerous start-up businesses. During that period he has
supported more that 100 start-up companies in all aspects of their
businesses, including structuring of R&D programs, financial
planning, management, as well as, marketing and sales of their new
products. These companies have varied in size and encompass
organizations offering a wide spectrum of products, including
medical devices and pharmaceutical products. In addition to his
current position with Medisys, he serves as the business manager of
his own 25 person patent law firm. He has also provided to his
clients fair market and liquidation s evaluations of patents,
trademarks, and other intellectual property. Mr. Kiesel received
from Louisiana State University a B.S. Degree in Mathematics in
1966, a M.S. Degree in Nuclear Engineering in 1970, and a Juris
Doctor Degree in law in 1970. Mr. Kiesel has been a registered
patent attorney and engaged in the private practice of law since
1971 specializing in patent law and related legal areas. Mr.
Kiesel has served as Adjunct Professor at the Louisiana State
University Law School teaching courses in Patent Law.
DR. ROBERT L. diBENEDETTO a director and co-founder of the
Company, received his Doctorate of Medicine in 1952 from the
Louisiana State University Medical School and served his internship
at Mercy Hospital from 1952 to 1953, and his residency in
Obstetrics and Gynecology at Charity Hospital, New Orleans,
Louisiana from 1956 to 1959. Dr. diBenedetto has been engaged in
the private practice of Obstetrics and Gynecology from 1959 to the
present and has recently received recognition as one of the top
fifty physicians in the United States. His hospital affiliations
include Woman's Hospital Foundation, Baton Rouge, Louisiana where
he has served as Chairman of the Board of Directors from 1984 to
1990, and he is also affiliated with Our Lady of the Lake Hospital,
Baton Rouge General Hospital and Earl K. Long Hospital. Dr.
diBenedetto is also currently President and CEO of the Louisiana
Medical Insurance Company, a major provider of medical malpractice
insurance. He also serves on the following committees: Chairman,
Dialogue with Congress; Area-wide Health Planning; Liaison with
Organized Specialties; Chairman, Maternal & Child Health; Member,
Committee on Professional Liability of American College of
Obstetrics and Gynecology; Member, Committee on Ethics of
American College of Obstetrics and Gynecology; Past Chairman,
Louisiana Delegation to American Medical Association. His
professional organizations include: Chairman & Legislative
Liaison, Louisiana Section of the American College of Obstetricians
and Gynecologists; Past Chairman, Louisiana Delegation to the
American Medical Association; South Central OB/GYN Society;
clinical Associate Professor of OB/GYN, L.S.U. School of Medicine -
New Orleans, Louisiana; American Fertility Society; Treasurer,
Louisiana Medical Political Action Committee.
JANE COOPER is a director of the Company. Ms. Cooper is the
founder, President, and CEO of Healthcare Advantage, Inc., a
regional managed care company headquartered in New Orleans,
Louisiana. Healthcare Advantage offers a variety of managed care
products including Advantage Health Plan, a commercial HMO and a
Medicare HMO, and serves over 325,000 members in eight states.
Originally from Wisconsin, Ms. Cooper attended Augustana College
for her undergraduate work and received her Master s Degree from
the University of Illinois. Since 1982 Ms. Cooper has worked in
the managed care industry and has been in managed care in New
Orleans since 1985. Ms. Cooper is on the executive Committee of
the Louisiana Managed Healthcare Association (LMHA) and is on the
Board of Directors and serves as Secretary of the American
Association of PPO s (AAPPO).
ITEM 6. Executive Compensation
The Company has not had a bonus, profit sharing, or other
deferred compensation plan for the benefit of its employees,
officers or directors.
The following table sets forth all cash compensation actually
paid (and not deferred) by the Company for services rendered to the
Company for the years ended December 31, 1994 and 1995, and the six
month period ended June 30, 1996 to the Company s Chief Executive
Officer, Chief Technical Officer, and Chief Operating Officer.
<PAGE>
Summary Compensation Table
Name and Principal
Position Year Salary Bonus Other Annual All Other
Compensation Compensation
Edward P. Sutherland, 1994 $ 52,000 $ -0- $ -0- $ 2,000
1995 118,156 -0- -0- -0-
1996 68,224 -0- -0- -0-
Gary E. Alexander, 1994 49,958 -0- -0- 2,000
Chief Technical 1995 67,600 -0- -0- -0-
Officer and Vice
President
Kerry M. Frey, 1995 -0- -0- -0- 53,000
Vice President 1996 78,250 -0- -0- 20,886
and COO
Employment Agreements
On January 12, 1993 the Company entered into three-year
employment agreements with each of Edward P. Sutherland, Gary E.
Alexander, and Jerry Phipps, pursuant to which they were to
receive annual salaries of $114,000, $109,000 and $57,800
respectively. These agreements have all expired.
In September 1996, the Company entered into new employment
contracts with Mr. Sutherland and Kerry M. Frey. Both agreements
acknowledge that since November 1, 1995, Messrs. Sutherland and
Frey had been working under an oral employment agreement and had
accrued part of their compensation. Therefore, the agreements were
effective as of November 1 1995 for Mr. Frey and January 1, 1996
for Mr. Sutherland and both agreements expire December 31, 1997.
Pursuant to the terms of Mr. Sutherland's agreement, for his
duties as President and Chief Executive Officer, he is to receive
a monthly base salary of $12,500. In addition, upon execution of
his agreement, Mr. Sutherland was to be paid all of his accrued
back salary. In the sole discretion of the Company, Mr. Sutherland
can be awarded additional monetary compensation based on
performance.
Mr. Frey is employed as the Vice President of Sales and
Marketing and Chief Operating Officer and will receive a base
monthly salary of $12,000. In addition, upon execution of his
agreement, Mr. Frey was to be paid $12,000 in consideration for
past services rendered. Further, the Company agreed to issue to
Mr. Frey a five year stock purchase warrant for the purchase of
2,000 shares of the Company's common stock at the exercise price of
$5.00 per share. In the sole discretion of the Company, Mr. Frey
can be awarded additional monetary compensation based on
performance.
ITEM 7. Certain Relationships and Related Transactions
On August 6, 1992 the Company, then known as Whitewater
Products, Ltd., entered into a certain Acquisition Agreement and
Plan of Reorganization (the "Agreement") with Medisys Technologies,
Inc., a privately held Louisiana corporation ("Medisys-Louisiana").
Prior to entering into the Agreement, the Company was engaged in
only minimal activities and Medisys-Louisiana was engaged in the
research and development of SOFCEPS. As per the terms of the
Agreement, the Company acquired all the issued and outstanding
shares of common stock of Medisys-Louisiana in exchange solely for
9,250,000 shares of the Company's authorized but previously
outstanding Common Stock, issued to the shareholders of
Medisys-Louisiana and their designees. Medisys-Louisiana became a
wholly owned subsidiary of the Company and the Company changed its
corporate name to Medisys Technologies, Inc., under the laws of the
State of Utah. For accounting purposes, the transaction has been
treated as a recapitalization of the Company, or reverse
acquisition, with Medisys-Louisiana deemed the acquirer.
ITEM 8. Description of Securities
Common Stock
The Company is authorized to issue 100,000,000 shares of
Common Stock, par value $.0005 per share, of which 11,598,668
shares are issued and outstanding as of the date hereof. All
shares of Common Stock have equal rights and privileges with
respect to voting, liquidation and dividend rights. Each share of
Common Stock entitles the holder thereof to (i) one non-cumulative
vote for each share held of record on all matters submitted to a
vote of the stockholders; (ii) to participate equally and to
receive any and all such dividends as may be declared by the Board
of Directors out of funds legally available thereof; and (iii) to
participate pre rata in any distribution of assets available for
distribution upon liquidation of the Company. Stockholders of the
Company have no preemptive rights to acquire additional shares of
Common Stock or any other securities. All outstanding shares of
Common Stock are non-assessable.
<PAGE>
PART II
ITEM 1. Market Price of And Dividends on the Registrant s Common
Equity and Other Shareholder Matters
No shares of the Company s Common Stock have been registered
with the Securities and Exchange Commission or any state securities
agency of authority. The Company s Common Stock has been traded in
the over-the-counter market and quotations are published on the
NASD Electronic Bulletin Board under the symbol "SCEP , and in the
National Quotation Bureau, Inc. "pink sheets" under Medisys
Technologies, Inc..
The following table sets forth the range of high and low bid
prices of the Common Stock for each calendar quarterly period since
the first quarter of 1994 as reported by the National Quotation
Bureau, Inc. ("NQB"). Prices reported by the NQB represent prices
between dealers, do not include retail markups, markdowns or
commissions and do not represent actual transactions.
High Low
1994
First Quarter $3.50 $2.00
Second Quarter 3.00 2.75
Third Quarter 2.25 2.00
Fourth Quarter 2.00 2.375
1995
First Quarter 1.75 1.00
Second Quarter 2.75 1.00
Third Quarter 2.00 0.75
Fourth Quarter 3.125 1.00
1996
First Quarter 4.1875 1.50
Second Quarter 5.125 3.875
Third Quarter(1) 4.25 3.0625
(1) As of September 23, 1996.
As of August 31, 1996 there were 1,445 holders of record of
the Company s Common Stock, which figure does not take into
account those shareholders whose certificates are held in the
name of broker-dealers.
Dividend Policy
The Company has not declared or paid cash dividends or made
distributions in the past, and the Company does not anticipate that
it will pay cash dividends or make distributions in the foreseeable
future. The Company currently intends to retain and invest future
earnings to finance its operations.<PAGE>
ITEM 2. Legal Proceedings
There are presently no material pending legal proceedings to
which the Company or any of its subsidiaries is a party or to which
any of its property is subject and, to the best of its knowledge,
no such actions against the Company are contemplated of threatened.
ITEM 3. Changes in and Disagreements With Accountants
There have been no changes in or disagreements with
accountants.
ITEM 4. Recent Sales of Unregisterd Securities
During the months of October and November 1993, the Company
sold shares of restricted common pursuant to a private placement to
2 institutional investors. A total of 45,248 shares of restricted
common stock were issued and the proceeds of which totaled
$100,000.
During 1994, 260,016 shares of restricted common stock were
issued to approximately 79 investors with proceeds of $1,236,583
through various private placements.
During 1995, 627,937 shares of restricted common stock were
issued pursuant to Regulation S to approximately 38 investors with
proceeds totaling $644,832 through various private placements.
Also during 1995, the Company received payments totaling $60,411 on
stock subscriptions receivable. An additional $50,427 in stock
subscriptions receivable were added during the year.
During April 1995, 100,000 shares of restricted common stock
were issued to an officer of the Company for services rendered. An
additional 42,939 shares were issued to two individuals in payment
of services rendered. The Company also issued 21,000 shares of
common stock to 3 individuals for payment of rent.
During December 1995, the Company transferred 120,000 shares
in settlement of a note with a balance of $100,000 plus accrued
interest of $11,699. The shares were issued in the name of the
Company during 1994 as collateral for the loan.
During 1996, 743,666 shares of restricted common stock have
been issued as of June 30, 1996 with proceeds totaling $1,115,500
through a private placement to 53 investors.
With respect to the issuance and/or sale of the aforementioned
shares, the Company relied on the exemption from registration
provided by Sections 4(2) and 4(6) of the Securities Act of 1933,
as amended (the "Act"), Regulation D Rule 506, and/or Regulation S
promulgated thereunder. The Company has also made available to
purchasers of its common stock its business plan and/or Private
Placement Memorandum. All of the shares issued to the
aforementioned persons bore restrictive legends preventing their
transfer except in accordance with the Act and the regulations
promulgated thereunder. In addition, stop transfer instructions
pertaining to these shares will be lodged with the Company's
transfer agent.
ITEM 5. Indemnification of Directors and Officers
As permitted by the provisions of the Utah Revised Business
Corporation Act (the "Utah Act"), the Company has the power to
indemnify an individual made a party to a proceeding because they
are or were a director, against liability incurred in the
proceeding, if such individual acted in good faith and in a manner
reasonably believed to be in, or not opposed to, the best interest
of the Company and, in a criminal proceeding, they had no
reasonable cause to believe their conduct was lawful.
Indemnification under this provision is limited to reasonable
expenses incurred in connection with the proceeding. The Company
must indemnify a director or officer who is successful, on the
merits of otherwise, in the defense of any proceeding or in defense
of any claim, issue, or matter in the proceeding, to which they are
a party to because they are or were a director of officer of the
Company, against reasonable expenses incurred by them in connection
with the proceeding or claim with respect to which they have been
successful. The Company s Articles of Incorporation empower the
Board of Directors to indemnify its officers, directors, agents, or
employees against any loss or damage sustained when acting in good
faith in the performance of their corporate duties.
The Company may pay for or reimburse reasonable expenses
incurred by a director, officer employee, fiduciary or agent of the
Company who is a party to a proceeding in advance of final
disposition of the proceeding provided the individual furnishes
the Company with a written affirmation that their conduct was in
good faith and in a manner reasonably believed to be in, or not
opposed to, the best interest of the Company, and undertake to
repay the advance if it is ultimately determined that they did not
meet such standard of conduct.
Also pursuant to the Utah Act, a corporation may set forth in
its articles of incorporation, by-laws or by resolution, a
provision eliminating or limiting in certain circumstances,
liability of a director to the corporation or its shareholders for
monetary damages for any action taken or any failure to take action
as a director. This provision does not eliminate or limit the
liability of a director (i) for the amount of a financial benefit
received by a director to which they are not entitled; (ii) an
intentional infliction of harm on the corporation or its
shareholders; (iii) for liability for a violation of Section 16-
10a-842 of the Utah Act (relating to the distributions made in
violation of the Utah Act); and (iv) an intentional violation of
criminal law. To date, the Company has not adopted such a
provision in its Articles of Incorporation, By-Laws, or by
resolution. A corporation may not eliminate or limit the liability
of a director for any act or omission occurring prior to the date
when such provision becomes effective. The Utah Act also permits
a corporation to purchase and maintain liability insurance on
behalf of its directors, officers, employees, fiduciaries or
agents.
Transfer Agent
The Company has designated Interstate Transfer Co., 56 West
400 South, Suite 260, Salt Lake City, Utah 84101, as its transfer
agent.
PART F/S
The financial statements for Medisys Technologies, Inc. for
the fiscal year ended December 31, 1995 and 1994 have been
examined to the extent indicated in their reports by Jones,
Jenson & Company, independent certified public accountants, and
have been prepared in accordance with generally accepted
accounting principles and pursuant to Regulation S-B as
promulgated by the Securities and Exchange Commission and are
included herein in response to Item 15 of this Form 10-SB.
Financial statements for the period ending June 30, 1996 and June
30, 1995 have been compiled by Jones, Jenson & Company,
independent certified public accounts, are included herewith.
These statements were not audited or reviewed by Jones, Jenson &
Company and, accordingly they did not express an opinion or any
other form of assurance on them.
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Medisys Technologies, Inc.
(a development stage company)
Baton Rouge, Louisiana
We have audited the accompanying consolidated balance sheets of
Medisys Technologies, Inc. and its wholly owned subsidiary (a
development stage company) as of December 31, 1995 and 1994, and
the related consolidated statements of operations, stockholders'
equity (deficit), and cash flows for the years ended December 31,
1995, 1994 and 1993 and from inception on January 21, 1991 through
December 31, 1995. 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
consolidated financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall consolidated
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 financial
position of Medisys Technologies, Inc. and its wholly owned
subsidiary (a development stage company) as of December 31, 1995
and 1994, and the results of their operations and their cash flows
for the years ended December 31, 1995, 1994 and 1993 and from
inception on January 21, 1991 through December 31, 1995 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 10 to the financial statements, the
Company incurred a significant loss from inception, relating to its
research and development efforts. Management's plans in regard to
these matters are also described in Note 10. The financial
statements do not include any adjustments that might result from
the outcome of this uncertainty.
Jones, Jensen & Company
March 26, 1996
<PAGE>
MEDISYS TECHNOLOGIES, INC.
(a development stage company)
Consolidated Balance Sheets
ASSETS
December 31,
1995 1994
CURRENT ASSETS
Cash $ 82,149 $ 39,739
Accounts receivable, net of
allowance for bad debt 513 -
Inventory 4,426 -
Loans receivable - stockholder (Note 2) 5,007 2,500
Prepaid expenses 14,973 4,485
Total Current Assets 107,068 46,724
FIXED ASSETS
Automobiles 67,950 67,950
Furniture and equipment 42,467 24,861
Leased equipment 10,010 10,010
Accumulated depreciation (55,673) (36,018)
Total Fixed Assets 64,754 66,803
OTHER ASSETS
Deferred offering costs 25,319 -
Security deposits 3,141 3,151
Patent costs 205,938 141,268
Organizational costs 311 311
Total Other Assets 234,709 144,730
TOTAL ASSETS $ 406,531 $ 258,257
<PAGE>
MEDISYS TECHNOLOGIES, INC.
(a development stage company)
Consolidated Balance Sheets (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
December 31,
1995 1994
CURRENT LIABILITIES
Accounts payable $ 138,981 $ 90,098
Accrued expenses (Note 3) 212,606 202,548
Loans payable-shareholders (Note 2) 3,199 -
Contracts payable - current portion
(Note 7) 13,132 10,574
Capital lease payable - current portion
(Note 4) 1,444 2,178
Notes payable - current portion (Note 9) 207,976 239,500
Total Current Liabilities 577,338 544,898
LONG-TERM DEBT
Notes payable - less current portion
(Note 9) - 89,000
Contracts payable - less current
portion (Note 7) 20,577 33,709
Capital lease payable - less current
portion (Note 4) - 1,444
Total Long-Term Debt 20,577 124,153
TOTAL LIABILITIES 597,915 669,051
COMMITMENTS (Note 6) - -
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock: 100,000,000 shares
authorized of $0.0005 par value,
10,797,140 and 10,005,264 shares
issued and outstanding, respectively 5,399 5,003
Additional paid-in capital 2,883,138 1,689,136
Stock subscriptions receivable
(Note 8) (53,427) (63,411)
Deficit accumulated during the
development stage (3,026,494) (2,041,522)
Total Stockholders' Equity
(Deficit) (191,384) (410,794)
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY (DEFICIT) $ 406,531 $ 258,257
<PAGE>
MEDISYS TECHNOLOGIES, INC.
(a development stage company)
Consolidated Statements of Operations
From
Inception on
January 21,
1991 through
For the Years Ended December 31, December 31,
1995 1994 1993 1995
REVENUES $ 2,802 $ - $ - $ 2,802
EXPENSES
Product development 255,486 467,541 355,669 1,188,142
Salaries 207,980 288,050 207,316 748,050
Depreciation and amortization 19,763 30,769 21,515 74,531
Interest 31,016 26,530 6,366 64,080
General and administrative 473,529 148,076 211,472 954,493
Total Expenses 987,774 960,966 802,338 3,029,296
NET LOSS $(984,972) $(960,966) $(802,338) $(3,026,494)
Net Loss Per Share of
Common Stock $ (0.08) $ (0.10) $ (0.08) $ (0.35)
<PAGE>
MEDISYS TECHNOLOGIES, INC.
(a development stage company)
Consolidated Statements of Stockholders' Equity (Deficit)
Deficit
Accumulated
Additional During the
Common Stock Paid-In Development
Shares Amount Capital Stage
Balance, January 21, 1991 - $ - $ - $ -
Common stock issued during
1991 at $.0001 per share 8,100,000 4,050 (3,060) -
Net loss for the year ended
December 31, 1991 - - - (8,667)
Balance, December 31, 1991 8,100,000 4,050 (3,060) (8,667)
Effect of reverse acquisition
(Note 1) 1,768,500 884 (41,557) -
Private placement of common
stock at $2.00 per share 250,000 125 499,875 -
Cancelled shares (418,500) (209) 209 -
Net loss for the year ended
December 31, 1992 - - - (269,551)
Balance, December 31, 1992 9,700,000 4,850 455,467 (278,218)
Issuance of stock at an
average price of $2.21
per share (Note 8) 45,248 23 99,977 -
Payment of stock offering costs - - (4,970) -
Net loss for the year ended
December 31, 1993 - - - (802,338)
Balance, December 31, 1993 9,745,248 4,873 550,474 (1,080,556)
Issuance of stock at an
average price of $4.75
per share (Note 8) 260,016 130 1,236,453 -
Payment of stock offering costs - - (97,791) -
Net loss for the year ended
December 31, 1994 - - - (960,966)
Balance, December 31, 1994 10,005,264 $ 5,003 $1,689,136 $(2,041,522)
<PAGE>
MEDISYS TECHNOLOGIES, INC.
(a development stage company)
Consolidated Statements of Stockholders' Equity (Deficit)
Deficit
Accumulated
Additional During the
Common Stock Paid-In Development
Shares Amount Capital Stage
Balance, December 31, 1994 10,005,264 $ 5,003 $1,689,136 $(2,041,522)
Issuance of stock at an average
price of $1.02 per share (Note 8) 627,937 314 644,518 -
Issuance of stock for services
rendered at an average price of
$1.04 per share (Note 8) 142,939 71 168,823 -
Issuance of stock for prepaid rent
at $0.71 21,000 11 14,962 -
Sale of stock options at $0.50
per option - - 254,000 -
Transfer of stock in settlement of
debt (Note 8) - - 111,699 -
Net loss for the year ended
December 31, 1995 - - - (984,972)
Balance, December 31, 1995 10,797,140 $ 5,399 $2,883,138 $(3,026,494)
<PAGE>
MEDISYS TECHNOLOGIES, INC.
(a development stage company)
Consolidated Statements of Cash Flows
From
Inception on
January 21,
1991 through
For the Years Ended December 31, December 31,
1995 1994 1993 1995
CASH FLOWS FROM
OPERATING ACTIVITIES
Loss from operations $ (984,972) $ (960,966) $ (802,338) $ (3,026,494)
Adjustments to reconcile
net income to net cash
provided (used) by
operating activities:
Operating expenses paid by
issuance of common stock 183,867 - - 183,867
Depreciation and amortization 19,763 30,769 21,515 74,531
Changes in operating
assets and liabilities:
(Increase) decrease in
accounts receivable (513) - - (513)
(Increase) decrease in
inventory (4,426) - - (4,426)
(Increase) decrease in
prepaid expenses 4,485 94,723 (80,625) -
(Increase) decrease in
loans receivable -
stockholders (2,507) (2,500) 2,564 (5,007)
(Increase) decrease in loan
fees - - (18,750) (18,750)
(Increase) decrease in security
deposits 10 - (2,721) (3,141)
(Increase) decrease in patent
costs (64,778) (73,195) (36,008) (206,046)
(Increase) decrease in
organizational costs - - - (311)
Increase (decrease) in
accounts payable 48,883 (41,194) 128,772 138,981
Increase in accrued expenses 6,784 38,504 111,320 209,332
Net Cash (Used) by
Operating Activities (793,404) (913,859) (676,271) (2,657,977)
CASH FLOWS FROM
INVESTING ACTIVITIES
Purchase of fixed assets (17,606) (3,375) (11,537) (58,027)
Net Cash (Used) by
Investing Activities $ (17,606) $ (3,375 $ (11,537) $ (58,027)
<PAGE>
MEDISYS TECHNOLOGIES, INC.
(a development stage company)
Consolidated Statements of Cash Flows (Continued) From
Inception on
January 21,
1991 through
For the Years Ended December 31 December 31,
1995 1994 1993 1995
CASH FLOWS FROM
FINANCING ACTIVITIES
Acquisition of subsidiary $ - $ - $ - $ (40,673)
Deferred offering costs - 97,791 (67,791) -
Payments of stock offering
costs (25,319) - (4,970) (30,289)
Proceeds from capital lease - - - 10,010
Payments on capital lease (2,178) (3,507) (2,539) (8,566)
Payments on contracts payable (10,574) (11,163) (6,954) (28,691)
Borrowings from shareholders 3,199 - 431,595 447,688
Borrowings from notes payable 10,000 141,000 187,500 338,500
Payment on loans payable
- shareholders (30,524) - - (43,418)
Stock subscriptions receivable 9,984 (63,411) - (53,427)
Issuance of common stock 644,832 707,197 100,000 1,953,019
Proceeds from sale of
stock options 254,000 - - 254,000
Net Cash Provided by
Financing Activities 853,420 867,907 636,841 2,798,153
NET INCREASE (DECREASE)
CASH AND CASH EQUIVALENTS 42,410 (49,327) (50,967) 82,149
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 39,739 89,066 140,033 -
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 82,149 $ 39,739 $ 89,066 $ 82,149
SUPPLEMENTAL DISCLOSURES
OF CASH FLOW INFORMATION
CASH PAID FOR
Income taxes $ - $ - $ - $ -
Interest $ 15,285 $ 14,549 $ 3,246 $ 33,248
NON CASH FINANCING ACTIVITIES
Purchase of automobiles
on contract $ - $ - $ 62,400 $ 62,400
Conversion of shareholder
loans to equity $111,699 $ 431,595 $ - $ 543,294
Stock issued in payment of
operating expenses $ 183,867 $ - $ - $ 183,867
<PAGE>
MEDISYS TECHNOLOGIES, INC.
(a development stage company)
Notes to the Consolidated Financial Statements
December 31, 1995 and 1994
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Business Organization
The Company was incorporated on March 17, 1983 under the laws
of the State of Utah. The Company subsequently ceased its
original business activity in 1985 and thereafter primarily
investigated and sought new business opportunities and has been
reclassified as a development stage Company as of March 1, 1989.
The Company has a wholly owned subsidiary which was incorporated
in the State of Louisiana on January 21, 1991, for the purpose
of developing a device for the assistance of childbirth under
a patent which was applied for in May 1990 and granted on June
16, 1992.
The Subsidiary has been classified as a development stage
company since all activities to date have been related to the
development of the childbirth assistance device as well as other
medical devices.
On August 6, 1992 the Company acquired all of the outstanding
common stock of Medisys Technologies, Inc. For accounting
purposes the acquisition has been treated as a recapitalization
of Medisys Technologies, Inc. (Medisys) with Medisys as the
acquirer (reverse acquisition).
b. Property and Equipment
Property and equipment are stated at cost less accumulated
depreciation. Depreciation on equipment and furniture is
provided using the straight-line method over an expected useful
life of five years.
c. Patent Costs
The costs of obtaining the patent, including legal fees, will
be amortized over the seventeen year life of the patent
beginning December 1, 1995.
d. Organization Costs
The Company's organization costs will be amortized over a 60
month period using the straight-line method when it begins its
principal activities.
<PAGE>
MEDISYS TECHNOLOGIES, INC.
(a development stage company)
Notes to the Consolidated Financial Statements
December 31, 1995 and 1994
NOTE 1- ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
e. Cash and Cash Equivalents
For purposes of financial statement presentation, the Company
considers all highly liquid investments with a maturity of three
months or less, from the date of purchase, to be cash
equivalents.
f. Income Taxes
No provision for federal income taxes is made at December 31,
1995 and 1994 due to operating losses. The minimum state
franchise tax has been accrued.
The Company has accumulated $3,018,418 of net operating losses
as of December 31, 1995, which may be used to reduce taxable
income and income taxes in future years. The use of these
losses to reduce future income taxes will depend on the
generation of sufficient taxable income prior to the expiration
of the net operating loss carryforwards. The carryforwards
expire as follows:
Net Operating
Loss Year of Expiration
$ 8,667 2006
267,504 2007
800,372 2008
959,825 2009
982,050 2010
Total $ 3,018,418
In the event of certain changes in control of the Company, there
will be an annual limitation on the amount of net operating loss
carryforwards which can be used.
g. Principles of Consolidation
The consolidated financial statements include the accounts of
Medisys Technologies, Inc., (parent) and Medisys Technologies,
Inc., a wholly owned subsidiary. All significant intercompany
accounts and transactions have been eliminated in consolidation.
h. Deferred Offering Costs
The Company has recorded as a deferred charge, the costs
incurred in connection with its stock offering in 1993. The
offering was completed in 1994 and the costs have been charged
against the proceeds during 1994.
i. Inventory
Inventory is carried at the lower of cost or market value using
the first-in first-out method.
<PAGE>
MEDISYS TECHNOLOGIES, INC.
(a development stage company)
Notes to the Consolidated Financial Statements
December 31, 1995 and 1994
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
i. Loss per Share
Earnings (loss) per share is computed using the weighted average
number of common shares outstanding during each period.
Pursuant to the requirements of Securities and Exchange
Commission Staff Accounting Bulletin No. 83, common shares
issued by the Company during the twelve months immediately
preceding the initial public offering at a price below the
initial public offering price have been included in the
calculation of the shares used in computing earnings (loss) per
share as if they were outstanding for all periods presented.
There are no common stock equivalents.
j. Forward Stock Split
On July 20, 1992 the Subsidiary forward split its shares of
common stock on a 8,100 shares for 1 share basis. All
references to shares outstanding and earnings per share have
been restated on a retroactive basis.
k. Credit Risk
The Company maintains its cash accounts primarily in one bank
in Louisiana. The Federal Deposit Insurance Corporation insures
accounts to $100,000. The Company's accounts occasionally
exceed the insured amount.
NOTE 2 - LOANS RECEIVABLE/LOANS PAYABLE - SHAREHOLDERS
From time to time the Company received loans from certain
shareholders for the purpose of providing funds for the
Company's operating expenditures. The Company has also advanced
funds to shareholders. These loans have not, to date, been
documented to specify the terms of the Company's obligations to
these shareholders.
NOTE 3 - ACCRUED EXPENSES
Accrued expenses consist of the following:
December 31,
1995 1994
Payroll taxes payable $ 1,395 $ 605
Accrued salaries and directors fees 171,321 186,842
Accrued interest payable 9,004 15,101
Contract labor payable 30,886 -
$ 212,606 $ 202,548
The accrued salaries and directors fees are to be paid over the
next 36 months or when the Company is adequately financed.
<PAGE>
MEDISYS TECHNOLOGIES, INC.
(a development stage company)
Notes to the Consolidated Financial Statements
December 31, 1995 and 1994
NOTE 4 - CAPITAL LEASE PAYABLE
The Company has entered into the following lease which has been
capitalized for financial statement presentation:
December 31,
1995 1994
Capital lease with monthly payments of
$254 to Lease America Corporation $ 1,444 $ 3,622
Less current portion (1,444) (2,178)
Long-term portion $ - $ 1,444
The Company's future minimum lease payments are as follows:
1996 $ 1,825
Less imputed interest (381)
Total $ 1,444
NOTE 5 - STOCK WARRANTS
In addition to the warrants described in Note 8, stock
warrants issued during 1994 and 1995 consist of the
following:
Potential
Date Expiration Exercise Warrant
Warrants Issued Date Price Proceeds
480,000 April 1994 Feb. 28, 1997 $ 2.50 $ 1,200,000
160,000 Sept. 1994 July 21, 1997 2.50 400,000
12,500 Oct. 1994 Oct. 19, 1996 1.75 21,875
100,000 Oct. 1994 Oct. 18, 1997 1.75 175,000
137,500 Oct. 1994 Oct. 1, 1997 1.75 240,625
300,000 Oct. 1995 Oct. 23, 1998 1.75 525,000
$2,562,500
<PAGE>
MEDISYS TECHNOLOGIES, INC.
(a development stage company)
Notes to the Consolidated Financial Statements
December 31, 1995 and 1994
NOTE 6 - COMMITMENTS
The Company has not had a bonus, profit sharing, or
deferred compensation plan for the benefit of its employees,
officers or directors.
Commencing July 1, 1992, the Company agreed to pay its
directors a monthly fee of $1,000. These fees have been accrued
and will be paid from proceeds of a proposed public offering.
In December 1994 the Company's board of directors determined
that director fees would no longer be paid or accrued.
On January 12, 1993 the Company entered into three-year
employment agreements with each of Edward P. Sutherland, Gary
E. Alexander, and Jerry Phipps, pursuant to which they will
receive annual salaries of $114,000, $109,000 and $57,800
respectively. Pursuant to the terms of his agreement, Mr.
Sutherland would have received an annual salary of $137,940
during the third year, however he voluntarily renegotiated the
contract to be paid $110,900 for 1995. Mr. Sutherland is also
entitled to receive as an annual bonus on each anniversary of
his employment, the sum equivalent to 0.50% of the net pre-tax
profits, if any, earned by the Company during the preceding
year. Pursuant to the terms of Mr. Alexander's agreement, he
would have received an annual salary of $119,900 during the
second year of employment and an annual salary of $131,890
during the third year, however he voluntarily renegotiated the
contract to be paid $109,983 for 1995. Mr. Alexander is also
entitled to receive as an annual bonus on each anniversary of
his employment, the sum equivalent to 0.75% of the net pre-tax
profits, if any, earned by the Company during the preceding
year. The renegotiated contract requires a bonus to be paid
which would reinstate the original salary if the Company is
adequately financed in 1995. Mr. Phipps' contract was
renegotiated and cancelled in 1994. Month to month compensation
was substituted and accrued for the balance of 1994. In 1995
Mr. Phipps was given a new contract for $52,500 with no bonus
provision.
Any additional compensation to the three employees is to
be in the form of an annual bonus at the discretion of the Board
of Directors, and/or in the case of Messrs. Sutherland and
Alexander, additional bonuses in the form of stock options at
the discretion of the Board of Directors. In the event any of
the agreements are terminated by the Company without cause, the
terminated employee shall be entitled to receive the balance due
under the agreement through the scheduled termination date of
the agreement, and in the case of Mr. Phipps, in a lump sum.
On March 29, 1995 the Company entered into a contract with
a medical institution to perform a clinical study of the
Company's SofCepts product. The contract required that payments
totaling $247,262 be made by the Company to the medical
institution. During 1995, the contract was amended with
additional payments totaling $266,652. The contract was later
terminated before its completion. The Company had made payments
of $265,465 leaving an accrued outstanding balance of $133,326.
The medical institution has sought payment of the remaining
balance, but management feels that it has adequately completed
its financial commitment. Management believes that the
probability that the Company will be required to make additional
payments is remote.
<PAGE>
MEDISYS TECHNOLOGIES, INC.
(a development stage company)
Notes to the Consolidated Financial Statements
December 31, 1995 and 1994
NOTE 7 - CONTRACTS PAYABLE
The Company has entered into purchase contracts for three
automobiles as follows:
Premier Bank, with total monthly payments of principal
and interest of $1,275, for 60 months, secured by the
automobiles. $ 33,709
The maturities of contracts payable are as follows:
1996 $ 13,132
1997 14,243
1998 6,334
Thereafter -
$ 33,709
NOTE 8 - STOCK ISSUANCES
During the months of October and November 1993, the Company had
a private placement of restricted common stock. 45,248 shares
of restricted common stock were issued, the proceeds of which
totalled $100,000. The Company also issued redeemable notes
totalling $187,500. During 1994 the proposed stock offering did
not take place and new notes were written to replace the old
notes outstanding. The notes bear interest at 8% per annum and
each note has attached one warrant for every dollar loaned.
Each warrant allows the holder to purchase one share of common
stock at an estimated price of $3.25 per share for a period of
3 years from the date of issuance. The price per share is based
on the per share price on the date the notes were issued.
During 1995, 627,937 shares of common stock were issued with
proceeds of $644,832 through various private placements. During
1995, the Company received payments totaling $60,411 on stock
subscriptions receivable. An additional $50,427 in stock
subscriptions receivable were added during the year.
During April 1995, 100,000 shares of common stock (valued at
$120,000) were issued to an officer of the Company for services
rendered. An additional 42,939 shares were issued to other
individuals in payment of services rendered valued at $68,823.
The Company also issued 21,000 shares of common stock for
payment of rent valued at $14,973 for 1996.
During December 31, 1995, the Company transferred 120,000 shares
in settlement of a note with a balance of $100,000 plus accrued
interest of $11,699. The shares were issued in the name of the
Company during 1994 as collateral for the loan.
<PAGE>
MEDISYS TECHNOLOGIES, INC.
(a development stage company)
Notes to the Consolidated Financial Statements
December 31, 1995 and 1994
NOTE 9 - NOTES PAYABLE
Notes payable consisted of the following:
December 31,
1995 1994
Note payable to Richard L. Apel, unsecured,
dated November 2, 1993 at 8%, principal and
interest due on August 18, 1994. $ 12,500 $ 12,500
Note payable to David King, unsecured, dated
October 1, 1994 which replaces the October 27,
1993 note, at 8%, monthly payments of $500
commencing October 1, 1994 with a single
balloon payment of $7,500 plus accrued interest
due on October 1, 1995. 6,981 11,500
Note payable to Garry J. Patton, M.D., secured
by 25,000 stock purchase warrants dated
March 9, 1995 which replaces the November 2,
1993 note, at 8%, monthly payments of $300
commencing March 1, 1995 with a single balloon
payment for the remaining balance plus interest
due on March 1, 1996. 24,511 26,000
Note payable to Piping Analysis Incorporated,
unsecured, dated March 9, 1995 which replaces the
November 9, 1993 note, at 8%, monthly payments
of $300 commencing March 1, 1995 with a single
balloon payment for the remaining balance plus
interest due on March 1, 1996. 10,710 13,000
Note payable to Cynthia F. Vatz, unsecured, dated
October 19, 1993 at 8%, principal and interest due
on August 18, 1994. 12,500 12,500
Note payable to Don and Linda Hansen, unsecured,
dated March 9, 1995 which replaces the September
10, 1993 note, at 8%, monthly payments of $300
commencing March 1, 1995 with a single balloon
payment for the remaining balance plus interest
due on March 1, 1996. 10,710 13,000
Balance forward $ 77,91 $ 88,500
<PAGE>
MEDISYS TECHNOLOGIES, INC.
(a development stage company)
Notes to the Consolidated Financial Statements
December 31, 1995 and 1994
NOTE 9 - NOTES PAYABLE (CONTINUED)
December 31,
1995 1994
Balance forward $ 77,912 $ 88,500
Note payable to Abraham B. and Adele L. Eckstein,
unsecured, dated March 1, 1995 which replaces the
October 6, 1993 note, at 8%, monthly payments of
$500 commencing March 1, 1995 with a single
balloon payment for the remaining balance plus
interest due on March 1, 1996. 24,573 28,000
Note payable to LaWayne and Rita Miller, unsecured,
dated March 9, 1995 which replaces the September 7,
1993 note, at 8%, monthly payments of $300
commencing March 1, 1995 with a single balloon
payment for the remaining balance plus interest
due on March 1, 1996. 24,510 26,000
Note payable to Sunburst Bank, secured by deposit
accounts, dated December 14, 1994, at prime plus
1.5%, monthly interest payments of $349 with
principal due until June 14, 1995. 20,981 36,000
Note payable to William and Sheila Gassie, secured
by 120,000 shares on common stock, dated October
18, 1994 at 10% principal and interest due on or
before the earliest to occur of either a)
completion of an equity funding in excess of
$750,000 b) by tendering 25% of net income of
the Company until paid or c) by exercising the
option to convert pledged stock. - 100,000
Note payable to Socrates Skiadus, unsecured, dated
October 27, 1993 at 8%, principal and interest
due on August 18, 1994. 50,000 50,000
Note payable to David Kiesel, unsecured, dated
February 17, 1995 at 8%, principal and interest
due on February 18, 1996. 10,000 -
Total 207,97 328,500
Less current portion (207,976) (239,500)
Total Long-Term Portion $ - $ 89,000
<PAGE>
MEDISYS TECHNOLOGIES, INC.
(a development stage company)
Notes to the Consolidated Financial Statements
December 31, 1995 and 1994
NOTE 10 - GOING CONCERN
The Company's financial statements are prepared using generally
accepted accounting principles applicable to a going concern
which contemplates the realization of assets and liquidation of
liabilities in the normal course of business. The Company has
incurred significant losses from inception, which result in a
large deficit in stockholder's equity at year end. The
management of the Company plans to raise additional capital
through a private placement of its common stock or a public
offering.
<PAGE>
MEDISYS TECHNOLOGIES, INC.
(A Development Stage Company)
Consolidated Balance Sheets
ASSETS
June 30, December 31,
1996 1995
(Unaudited)
CURRENT ASSETS
Cash $ 601,500 $ 82,149
Accounts receivable, net of allowance
for bad debt 2,494 513
Inventory 13,231 4,426
Loans receivable - stockholder (Note 2) 6,831 5,007
Prepaid expenses - 14,973
Total Current Assets 624,056 107,068
FIXED ASSETS
Automobiles 67,950 67,950
Furniture and equipment 46,844 42,467
Leased equipment 10,010 10,010
Accumulated depreciation (67,715) (55,673)
Total Fixed Assets 57,089 64,754
OTHER ASSETS
Deferred offering costs 25,319 25,319
Security deposits 3,141 3,141
Patent costs 232,730 205,938
Organizational costs 311 311
Total Other Assets 261,501 234,709
TOTAL ASSETS $ 942,646 $ 406,531
<PAGE>
MEDISYS TECHNOLOGIES, INC.
(A Development Stage Company)
Consolidated Balance Sheets (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
June 30, December 31,
1996 1995
(Unaudited)
CURRENT LIABILITIES
Accounts payable $ 150,545 $ 138,981
Accrued expenses (Note 3) 172,857 212,606
Loans payable-shareholders (Note 2) 48,481 3,199
Contracts payable - current portion
(Note 7) 5,488 13,132
Capital lease payable - current portion
(Note 4) - 1,444
Notes payable - current portion
(Note 9) 101,796 207,976
Total Current Liabilities 479,167 577,338
LONG-TERM DEBT
Notes payable - less current portion
(Note 9) - -
Contracts payable - less current
portion (Note 7) 20,577 20,577
Capital lease payable - less current
portion (Note 4) - -
Total Long-Term Debt 20,577 20,577
TOTAL LIABILITIES 499,744 597,915
COMMITMENTS (Note 6) - -
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock: 100,000,000 shares
authorized of $0.0005 par value,
11,570,806 and 10,797,140 shares
issued and outstanding, respectively 5,786 5,399
Additional paid-in capital 4,033,251 2,883,138
Stock subscriptions receivable (Note 8) (53,427) (53,427)
Deficit accumulated during the
development stage (3,542,708) (3,026,494)
Total Stockholders' Equity
(Deficit) 442,902 (191,384)
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY (DEFICIT) $ 942,646 $ 406,531
<PAGE>
MEDISYS TECHNOLOGIES, INC.
(A Development Stage Company)
Consolidated Statements of Operations
(Unaudited)
From
Inception on
January 21,
For the Six Months For the Three Months 1991 through
Ended June 30, Ended June 30, June 30,
1996 1995 1996 1995 1996
REVENUES $ 5,873 $ - $ - $ - $ 8,675
EXPENSES
Product development 215,349 147,521 127,754 56,494 1,403,491
Salaries 114,867 97,383 71,646 54,021 862,917
Depreciation and
amortization 12,042 9,882 6,021 4,941 86,573
Interest 5,702 9,800 478 3,379 69,782
General and
administrative 174,127 115,439 76,580 67,211 1,128,620
Total Expenses 522,087 380,025 282,479 186,046 3,551,383
NET LOSS $(516,214) $(380,025) $ (282,479) $(186,046) $(3,542,708)
Net Loss Per Share
of Common Stock $ (0.04) $ (0.04) $ (0.02) $ (0.02)
<PAGE>
MEDISYS TECHNOLOGIES, INC.
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity (Deficit)
Deficit
Accumulated
Additional During the
Common Stock Paid-In Development
Shares Amount Capital Stage
Balance, January 21, 1991 - $ - $ - $ -
Common stock issued during
1991 at $.0001 per share 8,100,000 4,050 (3,060) -
Net loss for the year ended
December 31, 1991 - - - (8,667)
Balance, December 31, 1991 8,100,000 4,050 (3,060) (8,667)
Effect of reverse acquisition
(Note 1) 1,768,500 884 (41,557) -
Private placement of common
stock at $2.00 per share 250,000 125 499,875 -
Cancelled shares (418,500) (209) 209 -
Net loss for the year ended
December 31, 1992 - - - (269,551)
Balance, December 31, 1992 9,700,000 4,850 455,467 (278,218)
Issuance of stock at an
average price of $2.21
per share (Note 8) 45,248 23 99,977 -
Payment of stock offering costs - - (4,970) -
Net loss for the year ended
December 31, 1993 - - - (802,338)
Balance, December 31, 1993 9,745,248 4,873 550,474 (1,080,556)
Issuance of stock at an
average price of $4.75
per share (Note 8) 260,016 130 1,236,453 -
Payment of stock offering costs - - (97,791) -
Net loss for the year ended
December 31, 1994 - - - (960,966)
Balance, December 31, 1994 10,005,264 $ 5,003 $1,689,136 $(2,041,522)
<PAGE>
MEDISYS TECHNOLOGIES, INC.
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity (Deficit)
Deficit
Accumulated
Additional During the
Common Stock Paid-In Development
Shares Amount Capital Stage
Balance, December 31, 1994 10,005,264 $ 5,003 $1,689,136 $(2,041,522)
Issuance of stock at an
average price of $1.02
per share (Note 8) 627,937 314 644,518 -
Issuance of stock for services
rendered at an average price of
$1.04 per share (Note 8) 142,939 71 168,823 -
Issuance of stock for prepaid
rent at $0.71 21,000 11 14,962 -
Sale of stock options at $0.50
per option - - 254,000 -
Transfer of stock in settlement
of debt (Note 8) - - 111,699 -
Net loss for the year ended
December 31, 1995 - - - (984,972)
Balance, December 31, 1995 10,797,140 5,399 2,883,138 (3,026,494)
Issuance of stock at $1.50
per share (Unaudited) 733,666 367 1,100,133 -
Issuance of stock at $1.25
per share (Unaudited) 40,000 20 49,980 -
Net loss for the six months
ended June 30, 1996
(Unaudited) - - - (516,214)
Balance, June 30, 1996
(Unaudited) 11,570,806 $ 5,786 $4,033,251 $(3,542,708)
<PAGE>
MEDISYS TECHNOLOGIES, INC.
(A Development Stage Company)
Consolidated Statements of Cash Flows
(Unaudited)
From
Inception on
January 21,
For the Six Months For the Three Months 1991 through
Ended June 30, Ended June 30, June 30,
1996 1995 1996 1995 1996
CASH FLOWS FROM
OPERATING ACTIVITIES
Loss from operations $(516,214) $(380,025) $(282,479) $(186,046) $(3,542,708)
Adjustments to reconcile
net income to net cash
provided (used) by
operating activities:
Operating expenses
paid by issuance
of common stock - - - - 183,867
Depreciation and
amortization 12,042 9,882 6,021 4,941 86,573
Changes in operating
assets and liabilities:
(Increase) decrease in
accounts receivable (1,981) - - - (2,494)
(Increase) decrease in
inventory (8,805) - (3,914) - (13,231)
(Increase) decrease in
prepaid expenses 14,973 - 7,486 - 14,973
(Increase) decrease in
loans receivable -
stockholders (1,824) (6,800) (1,824) (6,800) (6,831)
(Increase) decrease in
loan fees - - - - (18,750)
(Increase) decrease in
security deposits - - - - (3,141)
(Increase) decrease in
patent costs (26,792) (8,272) (12,176) (5,765) (232,838)
(Increase) decrease in
organizational costs - - - - (311)
Increase (decrease) in
accounts payable 11,564 70,907 (31,152) 62,061 150,545
Increase (decrease) in
accrued expenses (39,749) (6,655) (30,287) (15,570) 169,583
Net Cash (Used) by
Operating
Activities (556,786) (320,963) (348,325) (147,179) (3,214,763)
CASH FLOWS FROM
INVESTING ACTIVITIES
Purchase of fixed
assets (4,377) (882) (4,014) (507) (62,404)
Net Cash (Used) by
Investing
Activities $ (4,377) $ (882) $ (4,014) $ (507) $ (62,404)
<PAGE>
MEDISYS TECHNOLOGIES, INC.
(A Development Stage Company)
Consolidated Statements of Cash Flows (Continued)
(Unaudited)
From
Inception on
January 21,
For the Six Months For the Three Months 1991 through
Ended June 30, Ended June 30, June 30,
1996 1995 1996 1995 1996
CASH FLOWS FROM
FINANCING ACTIVITIES
Repayment of
shareholders $ (24,007) $ - $ (24,007) $ - $ (24,007)
Acquisition of
subsidiary - - - - (40,673)
Payments of stock
offering costs - - - - (30,289)
Proceeds from capital
lease - - - - 10,010
Payments on capital
lease (1,444) (1,092) (429) (546) (10,010)
Payments on contracts
payable (7,644) (8,113) (3,822) (3,779) (36,335)
Borrowings from
shareholders 69,289 - - - 516,977
Borrowings from notes
payable - - - - 338,500
Payment on notes
payable (106,180) - (86,622) - (149,598)
Stock subscriptions
receivable - - - - (53,427)
Issuance of common
stock 1,150,500 291,865 1,018,000 - 3,103,519
Proceeds from sale
of stock options - - - - 254,000
Net Cash Provided by
Financing
Activities 1,080,514 282,660 903,120 (4,325) 3,878,667
NET INCREASE (DECREASE)
CASH AND CASH
EQUIVALENTS 519,351 (39,185) 550,781 (152,011) 601,500
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 82,149 39,739 50,719 152,565 -
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $601,500 $ 554 $601,500 $ 554 $ 601,500
<PAGE>
MEDISYS TECHNOLOGIES, INC.
(A Development Stage Company)
Consolidated Statements of Cash Flows (Continued)
(Unaudited)
From
Inception on
January 21,
For the Six Months For the Three Months 1991 through
Ended June 30, Ended June 30, June 30,
1996 1995 1996 1995 1996
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
CASH PAID FOR
Income taxes $ - $ - $ - $ - $ -
Interest $ 5,702 $ 9,800 $ 478 $ 6,421 $ 38,950
NON CASH FINANCING ACTIVITIES
Purchase of
automobiles on
contract $ - $ - $ - $ - $ 62,400
Conversion of
shareholder loans
to equity $ - $ - $ - $ - $ 543,294
Stock issued in
payment of
operating expenses$ - $ - $ - $ - $ 183,867
<PAGE>
MEDISYS TECHNOLOGIES, INC.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
June 30, 1996 and 1995
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Business Organization
The Company was incorporated on March 17, 1983 under the laws
of the State of Utah. The Company subsequently ceased its
original business activity in 1985 and thereafter primarily
investigated and sought new business opportunities and has been
reclassified as a development stage Company as of March 1, 1989.
The Company has a wholly owned subsidiary which was incorporated
in the State of Louisiana on January 21, 1991, for the purpose
of developing a device for the assistance of childbirth under
a patent which was applied for in May 1990 and granted on June
16, 1992.
The Subsidiary has been classified as a development stage
company since all activities to date have been related to the
development of the childbirth assistance device as well as other
medical devices.
On August 6, 1992 the Company acquired all of the outstanding
common stock of Medisys Technologies, Inc. For accounting
purposes the acquisition has been treated as a recapitalization
of Medisys Technologies, Inc. (Medisys) with Medisys as the
acquirer (reverse acquisition).
b. Property and Equipment
Property and equipment are stated at cost less accumulated
depreciation. Depreciation on equipment and furniture is
provided using the straight-line method over an expected useful
life of five years.
c. Patent Costs
The costs of obtaining the patent, including legal fees, will
be amortized over the seventeen year life of the patent. Patent
costs relating to the VetCeps are being amortized beginning
December 1, 1995.
d. Organization Costs
The Company's organization costs will be amortized over a 60
month period using the straight-line method when it begins its
principal activities.
<PAGE>
MEDISYS TECHNOLOGIES, INC.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
June 30, 1996 and 1995
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
e. Cash and Cash Equivalents
For purposes of financial statement presentation, the Company
considers all highly liquid investments with a maturity of three
months or less, from the date of purchase, to be cash
equivalents.
f. Income Taxes
No provision for federal income taxes is made at March 31, 1996
and 1995 due to operating losses. The minimum state franchise
tax has been accrued.
The Company has accumulated $3,252,153 of net operating losses
as of March 31, 1996, which may be used to reduce taxable income
and income taxes in future years. The use of these losses to
reduce future income taxes will depend on the generation of
sufficient taxable income prior to the expiration of the net
operating loss carryforwards. The carryforwards expire as
follows:
Net Operating
Loss Year of Expiration
$ 8,667 2006
267,504 2007
800,372 2008
959,825 2009
982,050 2010
233,735 2011
Total $ 3,252,153
In the event of certain changes in control of the Company, there
will be an annual limitation on the amount of net operating loss
carryforwards which can be used.
g. Principles of Consolidation
The consolidated financial statements include the accounts of
Medisys Technologies, Inc., (parent) and Medisys Technologies,
Inc., a wholly owned subsidiary. All significant intercompany
accounts and transactions have been eliminated in consolidation.
h. Deferred Offering Costs
The Company has recorded as a deferred charge, the costs
incurred in connection with its proposed stock offering in 1993.
The costs have been charged against the proceeds of the offering
when it was completed.
i. Inventory
Inventory is carried at the lower of cost or market value using
the first-in first-out method.
<PAGE>
MEDISYS TECHNOLOGIES, INC.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
June 30, 1996 and 1995
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
i. Loss per Share
Earnings (loss) per share is computed using the weighted average
number of common shares outstanding during each period.
Pursuant to the requirements of Securities and Exchange
Commission Staff Accounting Bulletin No. 83, common shares
issued by the Company during the twelve months immediately
preceding the initial public offering at a price below the
initial public offering price have been included in the
calculation of the shares used in computing earnings (loss) per
share as if they were outstanding for all periods presented.
There are no common stock equivalents.
j. Forward Stock Split
On July 20, 1992 the Subsidiary forward split its shares of
common stock on a 8,100 shares for 1 share basis. All
references to shares outstanding and earnings per share have
been restated on a retroactive basis.
k. Credit Risk
The Company maintains its cash accounts primarily in one bank
in Louisiana. The Federal Deposit Insurance Corporation insures
accounts to $100,000. The Company's accounts occasionally
exceed the insured amount.
NOTE 2 - LOANS RECEIVABLE/LOANS PAYABLE - SHAREHOLDERS
From time to time the Company received loans from certain
shareholders for the purpose of providing funds for the
Company's operating expenditures. The Company has also advanced
funds to shareholders. These loans have not, to date, been
documented to specify the terms of the Company's obligations to
these shareholders.
NOTE 3 - ACCRUED EXPENSES
Accrued expenses consist of the following:
December 31,
1995
Payroll taxes payable $ 1,395
Accrued salaries and directors fees 171,321
Accrued interest payable 9,004
Contract labor payable 30,886
$ 212,606
The accrued salaries and directors fees are to be paid over the
next 36 months or when the Company is adequately financed.
<PAGE>
MEDISYS TECHNOLOGIES, INC.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
June 30, 1996 and 1995
NOTE 4 - CAPITAL LEASE PAYABLE
The Company has entered into the following lease which has been
capitalized for financial statement presentation:
December 31, June 30,
1995 1996
Capital lease with monthly payments of
$254 to Lease America Corporation $ 1,444 $ 429
Less current portion (1,444) (429)
Long-term portion $ - $ -
The Company's future minimum lease payments are as follows:
1996 $ 542
Less imputed interest (113)
Total $ 429
NOTE 5 - STOCK WARRANTS
In addition to the warrants described in Note 8, stock warrants
issued during 1994 and 1995 consist of the following:
Potential
Date Expiration Exercise Warrant
Warrants Issued Date Price Proceeds
480,000 April 1994 Feb. 28, 1997 $ 2.50 $1,200,000
160,000 Sept. 1994 July 21, 1997 2.50 400,000
12,500 Oct. 1994 Oct. 19, 1996 1.75 21,875
100,000 Oct. 1994 Oct. 18, 1997 1.75 175,000
137,500 Oct. 1994 Oct. 1, 1997 1.75 240,625
300,000 Oct. 1995 Oct. 23, 1998 1.75 525,000
$2,562,500
<PAGE>
MEDISYS TECHNOLOGIES, INC.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
June 30, 1996 and 1995
NOTE 6 - COMMITMENTS
The Company has not had a bonus, profit sharing, or deferred
compensation plan for the benefit of its employees, officers or
directors.
Commencing July 1, 1992, the Company agreed to pay its directors
a monthly fee of $1,000. These fees have been accrued and will
be paid from proceeds of a proposed public offering. In
December 1994 the Company's board of directors determined that
director fees would no longer be paid or accrued.
On January 12, 1993 the Company entered into three-year
employment agreements with each of Edward P. Sutherland, Gary
E. Alexander, and Jerry Phipps, pursuant to which they will
receive annual salaries of $114,000, $109,000 and $57,800
respectively. Pursuant to the terms of his agreement, Mr.
Sutherland would have received an annual salary of $137,940
during the third year, however he voluntarily renegotiated the
contract to be paid $110,900 for 1995. Mr. Sutherland is also
entitled to receive as an annual bonus on each anniversary of
his employment, the sum equivalent to 0.50% of the net pre-tax
profits, if any, earned by the Company during the preceding
year. Pursuant to the terms of Mr. Alexander's agreement, he
would have received an annual salary of $119,900 during the
second year of employment and an annual salary of $131,890
during the third year, however he voluntarily renegotiated the
contract to be paid $109,983 for 1995. Mr. Alexander is also
entitled to receive as an annual bonus on each anniversary of
his employment, the sum equivalent to 0.75% of the net pre-tax
profits, if any, earned by the Company during the preceding
year. The renegotiated contract requires a bonus to be paid
which would reinstate the original salary if the Company is
adequately financed in 1995. Mr. Phipps' contract was
renegotiated and cancelled in 1994. Month to month compensation
was substituted and accrued for the balance of 1994. In 1995
Mr. Phipps was given a new contract for $52,500 with no bonus
provision.
Any additional compensation to the three employees is to be in
the form of an annual bonus at the discretion of the Board of
Directors, and/or in the case of Messrs. Sutherland and
Alexander, additional bonuses in the form of stock options at
the discretion of the Board of Directors. In the event any of
the agreements are terminated by the Company without cause, the
terminated employee shall be entitled to receive the balance due
under the agreement through the scheduled termination date of
the agreement, and in the case of Mr. Phipps, in a lump sum.
On March 29, 1995 the Company entered into a contract with a
medical institution to perform a clinical study of the Company's
SofCepts product. The contract required that payments totaling
$247,262 be made by the Company to the medical institution.
During 1995, the contract was amended with additional payments
totaling $266,652. The contract was later terminated before its
completion. The Company had made payments of $265,465 leaving
an accrued outstanding balance of $133,326. The medical
institution has sought payment of the remaining balance, but
management feels that it has adequately completed its financial
commitment. Management believes that the probability that the
Company will be required to make additional payments is remote.
<PAGE>
MEDISYS TECHNOLOGIES, INC.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
June 30, 1996 and 1995
NOTE 7 - CONTRACTS PAYABLE
The Company has entered into purchase contracts for three
automobiles as follows:
June 30,
1996
Premier Bank, with total monthly payments of principal
and interest of $1,275, for 60 months, secured by the
automobiles. $ 29,065
The maturities of contracts payable are as follows:
1996 $ 5,488
1997 14,243
1998 6,334
Thereafter -
$ 26,065
NOTE 8 - STOCK ISSUANCES
During the months of October and November 1993, the Company had
a private placement of restricted common stock. 45,248 shares
of restricted common stock were issued, the proceeds of which
totalled $100,000. The Company also issued redeemable notes
totalling $187,500. During 1994 the proposed stock offering did
not take place and new notes were written to replace the old
notes outstanding. The notes bear interest at 8% per annum and
each note has attached one warrant for every dollar loaned.
Each warrant allows the holder to purchase one share of common
stock at an estimated price of $3.25 per share for a period of
3 years from the date of issuance. The price per share is based
on the per share price on the date the notes were issued.
During 1995, 627,937 shares of common stock were issued with
proceeds of $644,832 through various private placements. During
1995, the Company received payments totaling $60,411 on stock
subscriptions receivable. An additional $50,427 in stock
subscriptions receivable were added during the year.
During April 1995, 100,000 shares of common stock (valued at
$120,000) were issued to an officer of the Company for services
rendered. An additional 42,939 shares were issued to other
individuals in payment of services rendered valued at $68,823.
The Company also issued 21,000 shares of common stock for
payment of rent valued at $14,973 for 1996.
During March 31, 1995, the Company transferred 120,000 shares
in settlement of a note with a balance of $100,000 plus accrued
interest of $11,699. The shares were issued in the name of the
Company during 1994 as collateral for the loan.
<PAGE>
MEDISYS TECHNOLOGIES, INC.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
June 30, 1996 and 1995
NOTE 9 - NOTES PAYABLE
Notes payable consisted of the following:
December 31, June 30,
1995 1996
Note payable to Richard L. Apel, unsecured,
dated November 2, 1993 at 8%, principal and
interest due on August 18, 1994. $ 12,500 $ 12,500
Note payable to David King, unsecured, dated
October 1, 1994 which replaces the October 27,
1993 note, at 8%, monthly payments of $500
commencing October 1, 1994 with a single
balloon payment of $7,500 plus accrued interest
due on October 1, 1995. 6,981 4,273
Note payable to Garry J. Patton, M.D., secured
by 25,000 stock purchase warrants dated
March 9, 1995 which replaces the November 2,
1993 note, at 8%, monthly payments of $300
commencing March 1, 1995 with a single balloon
payment for the remaining balance plus interest
due on March 1, 1996. 24,511 -
Note payable to Piping Analysis Incorporated,
unsecured, dated March 9, 1995 which replaces the
November 9, 1993 note, at 8%, monthly payments
of $300 commencing March 1, 1995 with a single
balloon payment for the remaining balance plus
interest due on March 1, 1996. 10,710 -
Note payable to Cynthia F. Vatz, unsecured, dated
October 19, 1993 at 8%, principal and interest due
on August 18, 1994. 12,500 12,500
Note payable to Don and Linda Hansen, unsecured,
dated March 9, 1995 which replaces the
September 10, 1993 note, at 8%, monthly
payments of $300 commencing March 1, 1995
with a single balloon payment for the remaining
balance plus interest due on March 1, 1996. 10,710 -
Balance forward $ 77,912 $ 29,273
<PAGE>
MEDISYS TECHNOLOGIES, INC.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
June 30, 1996 and 1995
NOTE 9 - NOTES PAYABLE (CONTINUED)
December 31 June 30,
1995 1996
Balance forward $ 77,912 $ 29,273
Note payable to Abraham B. and Adele L. Eckstein,
unsecured, dated March 1, 1995 which replaces the
October 6, 1993 note, at 8%, monthly payments of
$500 commencing March 1, 1995 with a single
balloon payment for the remaining balance plus
interest due on March 1, 1996. 24,573 22,523
Note payable to LaWayne and Rita Miller, unsecured,
dated March 9, 1995 which replaces the September 7,
1993 note, at 8%, monthly payments of $300
commencing March 1, 1995 with a single balloon
payment for the remaining balance plus interest
due on March 1, 1996. 24,510 -
Note payable to Sunburst Bank, secured by deposit
accounts, dated December 14, 1994, at prime plus
1.5%, monthly interest payments of $349 with
principal due until June 14, 1995. 20,981 -
Note payable to Socrates Skiadus, unsecured, dated
October 27, 1993 at 8%, principal and interest
due on August 18, 1994. 50,000 50,000
Note payable to David Kiesel, unsecured, dated
February 17, 1995 at 8%, principal and interest
due on February 18, 1996. 10,000 -
Total 207,976 101,796
Less current portion (207,976) (101,796)
Total Long-Term Portion $ - $ -
NOTE 10 - GOING CONCERN
The Company's financial statements are prepared using generally
accepted accounting principles applicable to a going concern
which contemplates the realization of assets and liquidation of
liabilities in the normal course of business. The Company has
incurred significant losses from inception, which result in a
large deficit in stockholder's equity at year end. The
management of the Company plans to raise additional capital
through a private placement of its common stock or a public
offering.
<PAGE>
PART III
ITEM 1. Index to Exhibits
The following exhibits are filed with this Registration Statement:
Exhibit No. Exhibit Name
2.1 Acquisition Agreement and Plan of Reorganization.
3.1(i) Articles of Incorporation and all amendments thereto ("P")
3.2(ii) By-Laws of Registrant. ("P")
4.1 Specimen of Common Stock Certificate ("P")
10.1 Lease Agreement on Registrant s principal place of
business. ("P")
10.2 Contract of Employment with Edward P. Sutherland ("P")
10.3 Contract of Employment with Kerry M. Frey ("P")
21.1 Subsidiaries
27.1 Financial Data Schedule
ITEM 2. Description of Exhibits
See Item I above.
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities and Exchange Act
of 1934, the registrant caused this registration statement to
be signed on its behalf by the undersigned, thereunto duly
organized.
MEDISYS TECHNOLOGIES, INC.
(Registrant)
By: /S/ Edward P. Sutherland
(Signature)
Date: September 26, 1996 EDWARD P. SUTHERLAND
President
Exhibit Index
Exhibit No. Exhibit Name
2.1 Acquisition Agreement and Plan of Reorganization
3.1(i) Articles of Incorporation and all amendments thereto ("P")
3.2(ii) By-Laws of Registrant ("P")
4.1 Specimen of Common Stock Certificate ("P")
10.1 Lease Agreement on Registrant's principal place of business ("P")
10.2 Contract of Employment with Edward P. Sutherland ("P")
10.3 Contract of Employment with Kerry M. Frey ("P")
21.1 Subsidiaries
27.1 Financial Data Schedule
ACQUISITION AGREEMENT AND PLAN OF REORGANIZATION
THIS ACQUISITION AGREEMENT AND PLAN OF REORGANIZATION,
(hereinafter the "Agreement") is made and entered into as of the 6th
day of August, 1992, by and among WHITEWATER PRODUCTS, LTD., a Utah
corporation (hereinafter "WHITEWATER"); MEDISYS TECHNOLOGIES, INC., a
Louisiana corporation (hereinafter "MEDISYS"); and the individual
shareholders of MEDISYS as set forth on the signature page herein
(collectively referred to as "SHAREHOLDERS" and individually as
"SHAREHOLDER").
RECITALS
WHEREAS, WHITEWATER desires to acquire all of the issued and
outstanding shares of MEDISYS common stock in exchange for shares of
authorized but previously unissued WHITEWATER common stock, par value
One Twentieth of a Cent ($.0005) per share (the "Whitewater Common
Stock"), in an amount to be determined as set forth herein;
WHEREAS, SHAREHOLDERS desire to exchange all of their shares
of MEDISYS common stock for shares of Whitewater Common Stock and
other consideration; and
WHEREAS, the parties hereto desire to reorganize the
management and operations of WHITEWATER, to change the corporation
name to MEDISYS TECHNOLOGIES, INC., and to change the principal place
of business of the corporation to Baton Rouge, Louisiana.
NOW, THEREFORE, in consideration of the premises and mutual
representation, warranties and covenants herein contained, the parties
hereby agree as follows:
ARTICLE I
ACQUISITION AND EXCHANGE OF SHARES
SECTION 1.1 Acquisition and Plan of Reorganization. The parties
hereby agree that WHITEWATER shall acquire all of the issued and
outstanding shares of MEDISYS, in exchange for nine million
(8,350,000) shares of authorized but previously unissued shares of
Whitewater Common Stock, par value $.0005 per share. The parties
hereto hereby further agree that (i) at the Closing, management of
WHITEWATER shall be reorganized so as to replace the current officers
and directors of WHITEWATER with such persons as designated by
MEDISYS; (ii) as promptly as practicable after the effectiveness of
the Closing, WHITEWATER's corporate name shall be changed to MEDISYS
TECHNOLOGIES, INC.; and (iii) as promptly as practicable after the
Closing, the necessary steps shall be taken in order to reflect the
relocation of WHITEWATER's principal place of business to Baton Rouge,
Louisiana.
SECTION 1.2 Issuance of Shares.
(a) Upon the Closing of this Agreement, WHITEWATER shall cause
to be issued and delivered to SHAREHOLDERS or their designees,
stock certificates representing 8,350,000 shares of WHITEWATER
common stock (post-split as per SECTION 1.4 below).
(b) The shares of Whitewater Common Stock to be issued to
SHAREHOLDERS hereunder shall be authorized but previously
unissued shares of WHITEWATER common stock, and shall be issued
to SHAREHOLDERS or their designees in the respective amounts set
forth adjacent to each SHAREHOLDER's name on the signature page
hereof.
(c) All shares of Whitewater Common Stock to be issued hereunder
are deemed "restricted securities" as defined by Rule 144 of the
Securities Act of 1933 (the 1933 Act"), and SHAREHOLDERS or their
designees shall represent that they are acquiring said shares for
investment purposes only and without the intent to make a further
distribution of the shares. All shares of Whitewater Common
Stock to be issued to SHAREHOLDERS or their designees under the
terms of this Agreement shall be issued pursuant to an exemption
from the registration requirements of the 1933 Act, under Section
4(2) of the 1933 Act and the rules and regulations promulgated
thereunder.
SECTION 1.3 Closing. The closing of this Agreement and the
transactions contemplated hereby (the "Closing") shall take place on
the day of , 1992 (the "Closing Date"), at a time and
place to be mutually agreed upon by the parties hereto, and shall be
subject to the provisions of ARTICLE X of this Agreement. At the
Closing:
(a) SHAREHOLDERS shall deliver to WHITEWATER all stock
certificates representing all of the issued and outstanding
shares of MEDISYS common stock, duly endorsed, so as to make
WHITEWATER the sole holder thereof, free and clear of all claims
and encumbrances;
(b) WHITEWATER shall deliver to SHAREHOLDERS or their designees,
stock certificates representing an aggregate of 8,350,000 shares
of Whitewater Common Stock and which certificates shall bear a
standard restrictive legend in the form customarily used with
restricted securities;
(c) WHITEWATER shall deliver an Officer's Certificate as
described in SECTIONS 9.1 and 9.2 hereof, dated the Closing Date,
that all representations, warranties, covenants and conditions
set forth herein by WHITEWATER are true and correct as of, or
have been fully performed and complied with by, the Closing Date;
and
(d) MEDISYS shall deliver an Officer's Certificate as described
in SECTIONS 8.1 AND 8.2 hereof, dated the Closing Date, that all
representations, warranties, covenants and conditions set forth
herein by MEDISYS are true and correct as of, or have been fully
performed and complied with by, the Closing Date;
SECTION 1.4 WHITEWATER Special Meeting of Shareholders. In
anticipation of this Agreement and prior to the Closing Date,
WHITEWATER shall have taken all necessary and requisite action to call
for a Special Meeting of Shareholders to be held on or before August
6, 1992, in order to transact the following business:
(a) To ratify this Agreement and all transactions contemplated
hereby;
(b) To amend the Articles of Incorporation to change the
corporate name to MEDISYS TECHNOLOGIES, INC., or any other name
deemed suitable by the shareholders;
(c) To amend the Articles of Incorporation to add to the
description of authorized capitalization of the corporation the
following: "There shall be such classes of stock or warrants as
are authorized by the Board of Directors of the corporation which
shall be non assessable, and with rights and preferences as
created by the Board of Directors";
(d) To ratify the proposal whereby the current issued and
outstanding shares of WHITEWATER common stock will be reverse
split on a one (1) share for two (2) shares basis;
(e) To amend the Articles of Incorporation to change the number
of directors of to a minimum of three (3) and a maximum of
fifteen (15) directors;
(f) To accept the resignation of the current directors of the
corporation and to nominate for election a new Board of Directors
consisting of eight (8) persons to be nominated by MEDISYS;
(g) To amend the Articles of Incorporation to change the purpose
of the corporation to the research and development of medical
products and any other lawful purpose; and
(h) To ratify the proposal to change the domicile of the
corporation to Louisiana and to give the Board of Directors the
discretion as to the date of the change.
SECTION 1.5 Consummation of Transaction. If at the Closing, no
condition exists which would permit any of the parties to terminate
this Agreement, or a condition then exists and the party entitled to
terminate because of that condition elects not to do so, then the
transactions herein contemplated shall be consummated upon such date,
and then and thereupon, WHITEWATER will file the necessary documents
that may be required by the State of Utah.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF WHITEWATER
WHITEWATER hereby represents, warrants and agrees that:
SECTION 2.1 Organization of WHITEWATER. WHITEWATER is a corporation
duly organized, validly existing and in good standing under the laws
of the State of Utah, is duly qualified and in good standing as a
foreign corporation in every jurisdiction in which such qualification
is necessary, and has the corporate power and authority to own its
properties and assets and to transact the business in which it is
engaged. There are no corporations or other entities with respect to
which (i) WHITEWATER owns any of the outstanding stock or other
interest, or (ii) WHITEWATER may be deemed to be in control because of
factors or relationships other that the quantity of stock or other
interest owned. WHITEWATER has all requisite corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. This Agreement is the legal, valid
and binding obligation of WHITEWATER, enforceable against WHITEWATER
in accordance with its respective terms except to the extent that such
enforcement may be limited by applicable bankruptcy, insolvency and
other similar laws affecting creditors' rights generally.
SECTION 2.2 Capitalization of WHITEWATER. The authorized capital
stock of WHITEWATER consists of 100,000,000 shares of common stock,
par value One Twentieth of a Cent ($.0005) per share, of which
1,737,000 shares are presently issued and outstanding. Immediately
following the proposed one share for two shares reverse stock split,
there will be approximately 868,500 shares of common stock outstanding
prior to the issuance of shares to SHAREHOLDERS as contemplated
herein. All issued and outstanding shares of WHITEWATER common stock
have been duly authorized and validly issued and are fully paid and
non-assessable. There are no options, warrants, rights, calls,
commitments or agreements of any character obligating WHITEWATER to
issue any shares of its capital stock or any security representing the
right to purchase or otherwise receive any such stock. Shares of
Whitewater Common Stock to be issued pursuant to this Agreement, when
so issued, will be duly authorized, validly issued, fully paid and
non-assessable.
SECTION 2.3 Charter Documents. Complete and correct copies of the
Articles of Incorporation and By-Laws of WHITEWATER and all amendments
thereto, have been or will be delivered to MEDISYS prior to the
Closing, and certified copies of the WHITEWATER Articles of
Incorporation and By-Laws are annexed hereto as Exhibit 2.3 and by
this reference made a part hereof.
SECTION 2.4 Financial Statements. WHITEWATER's financial statements
dated June 11, 1992, for the period ending February 29, 1992 a copy of
which is annexed hereto as Exhibit 2.4 and by this reference made a
part hereof, are true and complete in all material respects, having
been prepared in accordance with generally accepted accounting
principles applied on a consistent basis for the periods covered by
such statements, and fairly present, in accordance with generally
accepted accounting principles, the financial condition of WHITEWATER,
and results of its operations for the periods covered thereby. Except
as otherwise disclosed to MEDISYS in writing and as set forth herein,
there has been no material adverse change in the business operations,
assets, properties, prospects or condition (financial or otherwise) of
WHITEWATER taken as a whole from that reflected in the financial
statements referred to in this SECTION 2.4, or which MEDISYS based its
decision to enter into this Agreement.
SECTION 2.5 Absence of Certain Changes or Events. Since the date of
the WHITEWATER financial report for the period ending February 29,
1992 and except as disclosed otherwise herein, WHITEWATER has not (i)
issued or sold any promissory note, stock, bond, option or other
corporate security of which it was an issuer or other obligor, (ii)
discharged or satisfied any lien or encumbrance or paid any obligation
or liability, absolute or contingent, direct of indirect, (iii)
incurred or suffered to be incurred any liability or obligation
whatsoever, (iv) caused or permitted any lien, encumbrance or security
interest to be created or arise on or in any of its properties or
assets, (v) declared or made any dividend, payment or distribution to
stock holders or purchased or redeemed or agreed to purchase or redeem
any shares of its capital stock, (vi) reclassified its shares of
capital stock, or (vii) entered into any agreement or transaction
except in connection with the execution and performance of this
Agreement.
SECTION 2.6 Assets and Liabilities. WHITEWATER has good and
marketable title to all of its assets and property, free and clear of
any and all liens, claims and encumbrances, except as may be otherwise
explicitly set forth herein. As of date hereof, WHITEWATER does not
have any debts, liabilities or obligations of any nature, whether
accrued, absolute, contingent, or otherwise, whether due or to become
due, that are not fully reflected in the WHITEWATER Balance Sheet
dated February 29, 1992, except as may be explicitly set forth herein.
SECTION 2.7 Tax Returns and Payments. All of WHITEWATER's tax
returns (federal, state, city, county or foreign) which are required
by law to be filed on or before the date of this Agreement, have been
duly filed or extended with the appropriate governmental authority.
WHITEWATER has paid all taxes to be due on said returns, any
assessments made against WHITEWATER and all other taxes, fees and
similar charges imposed on WHITEWATER by any governmental authority
(other than those, the amount or validity of which is being contested
in good faith by appropriate proceedings). No tax liens have been
filed and no claims are being assessed with respect to any such taxes,
fees or other similar charges.
SECTION 2.8 Contracts. WHITEWATER is not a party to or bound by any
contract or commitment, whether written or oral, except as otherwise
disclosed herein.
SECTION 2.9 Required Authorizations. There have been or will be
timely filed, given, obtained or taken, all applications, notices,
consents, approvals, orders, registrations, qualifications waivers or
other actions of any kind required by virtue of execution and delivery
of this Agreement by WHITEWATER or the consummation by it of the
transactions contemplated hereby.
SECTION 2.10 Compliance with Law and Government Regulations.
WHITEWATER is in compliance with and is not in violation of,
applicable federal, state, local or foreign statutes, laws and
regulations (including without limitation, any applicable building,
zoning or other law, ordinance or regulation) affecting its properties
or the operation of its business.
SECTION 2.11 Litigation. There is no litigation, arbitration,
proceeding or investigation pending or threatened to which WHITEWATER
is a party or which may result in any material change in the business
or condition, financial or otherwise, of WHITEWATER or in any of its
properties or assets, or which might result in any liability on the
part of WHITEWATER, or which questions the validity of this Agreement
or of any action taken or to be taken pursuant to or in connection
with the provisions of this Agreement, and to the best knowledge of
WHITEWATER, there is no basis for any such litigation, arbitration,
proceeding or investigation.
SECTION 2.12 Investigation of Financial Condition. In addition to
making available for review by MEDISYS all financial statements, books
and records of WHITEWATER, and without in any manner reducing or
otherwise mitigating the representations contained herein, MEDISYS
shall have the opportunity to meet with WHITEWATER's accountants and
attorneys to discuss the financial condition of WHITEWATER and to make
whatever further independent investigation deemed necessary and
prudent.
SECTION 2.13 Trade Names and Rights. WHITEWATER does not use any
trade mark, service mark, trade name, or copyright in its business,
nor does it own any trade marks, trade mark registrations or
application, trade name, service marks, copyrights, copyright
registrations or application. No person owns any trade mark, trade
mark registration or application, service mark, trade name, copyright,
or copyright registration or application, the use of which is
necessary or contemplated in connection with the operation of
WHITEWATER's business.
SECTION 2.14 Governmental Consent. No consent, approval,
authorization or order of, or registration, qualification,
designation, declaration or filing with, any governmental authority on
the part of WHITEWATER is required in connection with the execution
and delivery of this Agreement or the carrying out of any transactions
contemplated hereby.
SECTION 2.15 Authority. WHITEWATER and its shareholders have
approved this Agreement and the transactions contemplated hereby and
duly authorized the execution and delivery hereof. WHITEWATER has
full power, authority and legal right to enter into this Agreement and
to consummate the transactions contemplated hereby, and all corporate
action necessary to authorize the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby
has been duly and validly taken. The execution and delivery of this
Agreement, the consummation of the transactions contemplated hereby
and compliance by WHITEWATER with the provisions hereof will not (a)
conflict with or result in a breach of any provisions of, or
constitute a default (or an event which, with notice or lapse of time
or both, would constitute a default) under, or result in the creation
of any lien, security interest, charge or encumbrance upon any of the
properties or assets of WHITEWATER under, any of the terms, conditions
or provisions of the Articles of Incorporation or By-Laws of
WHITEWATER, or any note, bond, mortgage, indenture, license, lease,
agreement or any instrument or obligation to which WHITEWATER is party
or by which it is bound; or (b) violate any order, writ, injunction,
decree, statute, rule or regulation applicable to WHITEWATER or any of
its properties or assets.
SECTION 2.16 Full Disclosure. None of the representations and
warranties made by WHITEWATER herein, or in any exhibit, certificate
or memorandum furnished or to be furnished by WHITEWATER, on its
behalf pursuant hereto, contains or will contain any untrue statement
of material fact, or omits any material fact, the omission of which
would be misleading.
ARTICLE III
COVENANTS OF WHITEWATER
SECTION 3.1 Conduct Prior to the Closing. Between the date hereof
and the Closing:
(a) WHITEWATER will not enter into any agreement, contract or
commitment, whether written or oral, or engage in any
transaction, without the consent of MEDISYS;
(b) WHITEWATER will not declare any dividends or distributions
with respect to its capital stock or amend its Articles of
Incorporation or By-Laws, without the prior consent of MEDISYS;
(c) WHITEWATER will not authorize, issue, sell, purchase or
redeem any shares of its capital stock without the prior written
consent of MEDISYS;
(d) WHITEWATER will comply with all requirements which federal
or state law may impose on it with respect to this Agreement and
the transactions contemplated hereby, and will promptly cooperate
with and furnish information to MEDISYS in connection with any
such requirements imposed upon the parties hereto in connection
therewith;
(e) WHITEWATER will not incur any indebtedness for money
borrowed, or issue or sell any debt securities, incur or suffer
to be incurred any liability or obligation of any nature
whatsoever, or cause or permit any lien, encumbrance or security
interest to be created or arise on or in any of its properties or
assets, acquire or dispose of fixed assets, change employment
terms, enter into any material or long-term contract, guarantee
obligations of any third party, settle or discharge any balance
sheet receivable for less than its stated amount or enter into
any other transaction other than in the regular course of
business, except to comply with the terms of this Agreement,
without the consent of MEDISYS;
(f) WHITEWATER shall grant to MEDISYS and its counsel,
accountants and other representatives, full access during normal
business hours during the period prior to the Closing to all its
respective properties, books, contracts, commitments and records
and, during such period, furnish promptly to MEDISYS and such
representatives all information relating to WHITEWATER as MEDISYS
may reasonably request; and
(g) Except for the transactions contemplated by this Agreement,
WHITEWATER will conduct its business in the normal course, and
shall not sell, pledge or assign its assets without the prior
written consent of MEDISYS.
SECTION 3.2 Affirmative Covenants. Prior to Closing, WHITEWATER will
do the following:
(a) Use its best efforts to accomplish all actions necessary to
consummate this Agreement, including satisfaction of all the
conditions contained in this Agreement;
(b) Promptly notify MEDISYS in writing of any material adverse
change in the financial condition, business, operations or key
personnel of WHITEWATER, any breach of its representations or
warranties contained herein, and any material contract,
agreement, license or other agreement which, if in effect on the
date of this Agreement, should have been included in this
Agreement or in an exhibit annexed hereto and made a part hereof;
(c) Obtain approval of this Agreement from its shareholders, if
such action is required;
(d) Nominate at the WHITEWATER Special Meeting of Shareholders a
new Board of Directors, nominees to be designated by MEDISYS;
(e) Reserve, and promptly after the Closing, issue and deliver
to MEDISYS or its designees the number of shares of Whitewater
Common Stock required hereunder;
(f) Take the necessary corporate action to amend its Articles of
Incorporation to change its name to MEDISYS TECHNOLOGIES, INC. or
any other name deemed suitable and approved by the shareholders.
(g) Take all other necessary corporate actions to accomplish
those items set forth in Section 1.4 hereof.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF MEDISYS AND SHAREHOLDERS
MEDISYS and SHAREHOLDERS hereby represent, warrant and agree
that:
SECTION 4.1 Organization of MEDISYS. MEDISYS is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Louisiana and is duly qualified and in good standing in every
jurisdiction in which such qualification is necessary. Unless
otherwise set forth in the MEDISYS Business Plan, its financial
statements, or as otherwise set forth in Exhibit 4.1 annexed hereto,
there are no corporations or other entities with respect to which (i)
MEDISYS owns any of the outstanding stock or other interest, or (ii)
MEDISYS may be deemed to be in control because of factors or
relationships other than the percentage of outstanding stock or other
interest owned in such entity. MEDISYS has all requisite corporate
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby.
SECTION 4.2 Charter Documents. Complete and correct copies of the
Articles of Incorporation and By-Laws of MEDISYS and all amendments
thereto, have been or will be delivered to WHITEWATER prior to the
Closing.
SECTION 4.3 Financial Statements / Assets and Liabilities. MEDISYS
has good and marketable title to all of its assets and property to be
delivered to WHITEWATER hereunder by way of tendering all of its
outstanding shares of common stock to WHITEWATER, free and clear of
any and all liens, claims and encumbrances, except as may be otherwise
set forth herein and in its financial statements and further set forth
in Exhibit 4.3 annexed hereto.
SECTION 4.4 Tax Returns and Payments. All of MEDISYS's tax returns
(federal, state, city, county or foreign) which are required by law to
be filed on or before the date of this Agreement, have been duly filed
or extended with the appropriate governmental authority. MEDISYS has
paid all taxes to be due on said returns, any assessments made against
MEDISYS and all other taxes, fees and similar charges imposed on
MEDISYS by any governmental authority (other than those, the amount or
validity of which is being contested in good faith by appropriate
proceedings). No tax liens have been filed and no claims are being
assessed with respect to any such taxes, fees or other similar
charges.
SECTION 4.5 Required Authorizations. There have been or will be
timely filed, given, obtained or taken, all applications, notices,
consents, approvals, orders, registrations, qualifications waivers or
other actions of any kind required by virtue of execution and delivery
of this Agreement by MEDISYS or the consummation by it of the
transactions contemplated hereby.
SECTION 4.6 Compliance with Law and Government Regulations. MEDISYS,
is in compliance with all applicable statutes, regulations, decrees,
orders, restrictions, guidelines and standards, whether mandatory or
voluntary, affecting its properties and operations, imposed by the
United States of America, and any state or foreign country or
government to which MEDISYS is subject.
SECTION 4.7 Litigation. There is no litigation, arbitration,
proceeding or investigation pending or threatened to which MEDISYS is
a party or which may result in any material change in the business or
condition, financial or otherwise, of MEDISYS or in any of its
properties or assets, or which might result in any liability on the
part of MEDISYS, or which questions the validity of this Agreement or
of any action taken or to be taken pursuant to or in connection with
the provisions of this Agreement, and to the best knowledge of
MEDISYS, there is no basis for any such litigation, arbitration,
proceeding or investigation.
SECTION 4.8 Investigation of Financial Condition. In addition to
making available for review by WHITEWATER certain corporate documents,
books and records of MEDISYS, and without in any manner reducing or
otherwise mitigating the representations contained herein, WHITEWATER
shall have the opportunity to meet with MEDISYS's accountants and
attorneys to discuss the financial condition of MEDISYS and to make
whatever further independent investigation reasonably deemed necessary
and prudent.
SECTION 4.9 Trade Names and Rights. If applicable, Exhibit 4.9
annexed hereto and by this reference made a part hereof, contains a
complete list of all trademarks, service marks, trademark and service
mark registrations, applications and licenses with respect to the
foregoing owned or held by MEDISYS. MEDISYS has no knowledge of any
facts and nothing has come to its attention that would lead it to
believe that it has infringed or misappropriated or is infringing upon
any trademark, copyright, patent or other similar right of any person.
No claim relating thereto is pending or to the knowledge of MEDISYS is
threatened.
SECTION 4.10 Governmental Consent. No consent, approval,
authorization or order of, or registration, qualification,
designation, declaration or filing with, any governmental authority on
the part of MEDISYS is required in connection with the execution and
delivery of this Agreement or the carrying out of any transactions
contemplated hereby.
SECTION 4.11 Authority. MEDISYS and its SHAREHOLDERS representing no
less than one hundred percent (100%) of the issued and outstanding
shares of MEDISYS common stock of record as of July 20, 1992, have
approved this Agreement and duly authorized the execution and delivery
hereof. SHAREHOLDERS have duly authorized MEDISYS to conclude and
execute this Agreement in their stead and to act on behalf of MEDISYS
and SHAREHOLDERS in relation to this Agreement and the transactions
contemplated hereunder. MEDISYS has full power, authority and legal
right to enter into this Agreement and to consummate the transactions
contemplated hereby, and all corporate action necessary to authorize
the execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby has been duly and validly taken.
The execution and delivery of this Agreement, the consummation of the
transactions contemplated hereby and compliance by MEDISYS with the
provisions hereof will not (a) conflict with or result in a breach of
any provisions of, or constitute a default (or an event which, with
notice or lapse of time or both, would constitute a default) under, or
result in the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of MEDISYS under, any
of the terms, conditions or provisions of the Articles of
Incorporation or By-Laws of MEDISYS, or any note, bond, mortgage,
indenture, license, agreement or any instrument or obligation to which
MEDISYS is party or by which it is bound; or (b) violate any order,
writ, injunction, decree, statute, rule or regulation applicable to
MEDISYS or any of its properties or assets.
SECTION 4.12 Ownership of Shares. SHAREHOLDERS collectively and each
SHAREHOLDER individually represents to WHITEWATER that they are the
owners of all the shares of MEDISYS common stock to be transferred by
SHAREHOLDERS to WHITEWATER under this Agreement, and that they have
full power and authority to transfer such shares to WHITEWATER
hereunder, and that such shares are free and clear of any liens,
charges, mortgages, pledges or encumbrances and that such shares are
not subject to any claims as to the ownership thereof, or any rights,
powers or interest therein, by any third party.
SECTION 4.13 Investment Purpose . SHAREHOLDERS collectively and each
SHAREHOLDER individually represents that they, or their designees, are
acquiring the shares of Whitewater Common Stock to be issued hereunder
for investment purposes only and not with a view for further
distribution or resale. MEDISYS, SHAREHOLDERS and each SHAREHOLDER
individually further represents and acknowledges that the WHITEWATER
shares issued hereunder are "restricted securities" and may not be
sold, traded or otherwise transferred without registration under the
1933 Act or exemption therefrom.
SECTION 4.14 Full Disclosure. None of the representations and
warranties made by MEDISYS herein, or in any exhibit, certificate or
memorandum furnished or to be furnished by WHITEWATER, on its behalf,
contains or will contain any untrue statement of material fact, or
omit any material fact, the omission of which would be misleading.
ARTICLE V
COVENANTS OF MEDISYS
SECTION 5.1 Conduct Prior to the Closing. Between the date hereof
and the Closing:
(a) MEDISYS will not enter into any material agreement, contract
or commitment, whether written or oral, or engage in any
transaction, without the consent of WHITEWATER;
(b) MEDISYS will not declare any dividends or distributions with
respect to its capital stock or amend its Articles of
Incorporation or By-Laws, without the prior consent of
WHITEWATER;
(c) Except within the regular course of business, MEDISYS will
not incur any indebtedness for money borrowed or issue to sell
any debt securities, or incur or suffer to be incurred any
liability or obligation of any nature whatsoever, or cause or
permit any lien, encumbrance or security interest to be created
or arise on or in any of its properties or assets, without the
consent of WHITEWATER;
(d) MEDISYS will comply with all requirements which federal or
state law may impose on it with respect to this Agreement and the
transactions contemplated hereby, and will promptly cooperate
with and furnish information to WHITEWATER in connection with any
such requirements imposed upon the parties hereto in connection
therewith; and
(e) MEDISYS shall grant to WHITEWATER and its counsel,
accountants and other representatives, full access during normal
business hours during the period prior to the Closing to all its
respective properties, books, contracts, commitments and records
and, during such period, furnish promptly to WHITEWATER and such
representatives all information relating to MEDISYS as WHITEWATER
may reasonably request.
SECTION 5.2 Affirmative Covenants. Prior to Closing, MEDISYS will do
the following:
(a) Obtain the approval of its Board of Directors and
SHAREHOLDERS to proceed with this Agreement;
(b) Use its best efforts to accomplish all actions necessary to
consummate this Agreement, including satisfaction of all the
conditions contained in this Agreement; and
(c) Promptly notify WHITEWATER in writing of any materially
adverse change in the financial condition, business, operations
or key personnel of MEDISYS, any breach of its representations or
warranties contained herein, and any material contract,
agreement, license or other agreement which, if in effect on the
date of this Agreement, should have been included in this
Agreement.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.1 Expenses. Whether or not the transactions contemplated
in this Agreement are consummated, all costs and expenses incurred in
connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such expense or as
otherwise agreed to herein.
SECTION 6.2 Brokers and Finders. In connection with this Agreement
and the transactions contemplated hereunder, the parties have agreed
that certain fees and expenses are to be paid to certain individuals
who have been instrumental to the consummation of this Agreement. It
is therefore agreed that sum of FIFTY THOUSAND DOLLARS ($50,000) and
900,000 shares of the Company's authorized but previously unissued
Common Stock be delivered to the persons and as per the terms and
conditions set forth in Exhibit 6.2 annexed hereto and by this
reference made a part hereof. Each of the parties hereto represents,
as to itself, that with the exception of the terms of Exhibit 6.2, no
agent, broker, investment banker or other firm or person is or will be
entitled to any broker's or finder's fee or any other commission or
similar fee in connection with any of the transactions contemplated by
this Agreement.
SECTION 6.3 Necessary Actions. Subject to the terms and conditions
herein provided, each of the parties hereto agree to use all
reasonable efforts to take, or cause to be taken, all action, and to
do, or cause to be done, all things necessary, proper or advisable
under applicable laws and regulations to consummate and make effective
the transactions contemplated by this Agreement. In the event at any
time after the Closing, any further action is necessary or desirable
to carry out the purposes of this Agreement, the proper officers
and/or directors of WHITEWATER or MEDISYS, as the case may be, shall
take all such necessary action.
SECTION 6.4 Indemnification.
(a) MEDISYS and SHAREHOLDERS agree to defend and hold WHITEWATER
harmless against and in respect of any and all claims, demands,
losses, costs, expenses, obligations, liabilities, damages,
recoveries and deficiencies, including interest, penalties, and
reasonable attorney fees, that they shall incur or suffer, which
arise out of, result from or relate to any material breach of, or
failure by MEDISYS to perform any of its respective
representations, warranties, covenants and agreements in this
Agreement or in any exhibit or other instrument furnished or to
be furnished by MEDISYS under this Agreement.
(b) WHITEWATER agrees to defend and hold MEDISYS and
SHAREHOLDERS harmless against and in respect of any and all
claims, demands, losses, costs, expenses, obligations,
liabilities, damages, recoveries and deficiencies, including
interest, penalties, and reasonable attorney fees, that they
shall incur or suffer, which arise out of, result from or relate
to any material breach of, or failure by WHITEWATER to perform
any of its respective representations, warranties, covenants and
agreements in this Agreement or in any exhibit or other
instrument furnished or to be furnished by WHITEWATER under this
Agreement.
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF THE PARTIES
The obligations of the parties under this Agreement are
subject to the fulfillment and satisfaction of each of the following
conditions:
SECTION 7.1 Legal Action. No preliminary or permanent injunction or
other order by any federal or state court which prevents the
consummation of this Agreement or any of the transactions contemplated
by this Agreement shall have been issued and remain in effect.
SECTION 7.2 Absence of Termination. The obligations to consummate
the transactions contemplated hereby shall not have been canceled
pursuant to Article X hereof.
SECTION 7.3 Required Approvals. WHITEWATER and MEDISYS shall have
received all such approvals, consents, authorizations or modifications
as may be required to permit the performance by WHITEWATER and MEDISYS
of the respective obligations under this Agreement, and the
consummation of the transactions herein contemplated, whether from
governmental authorities or other persons, and WHITEWATER and MEDISYS
shall each have received any and all permits and approvals from any
regulatory authority having jurisdiction required for the lawful
consummation of this Agreement.
SECTION 7.4 Blue Sky Compliance. There shall have been obtained any
and all permits, approvals and consents of the Securities or "Blue-
Sky" Commissions of any jurisdictions, and of any other governmental
body or agency, which counsel for WHITEWATER may reasonably deem
necessary or appropriate so that consummation of the transactions
contemplated by this Agreement may be in compliance with all
applicable laws.
ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATIONS OF WHITEWATER
All obligations of WHITEWATER under this Agreement are
subject to the fulfillment and satisfaction by MEDISYS and
SHAREHOLDERS prior to or at the time of the Closing, of each of the
following conditions, any one or more of which may be waived by
WHITEWATER.
SECTION 8.1 Representations and Warranties True at the Closing. All
representations and warranties of MEDISYS and SHAREHOLDERS contained
in this Agreement will be true and correct at and as of the time of
the Closing, and MEDISYS shall have delivered to WHITEWATER a
certificate, dated the date of the Closing, to such effect and in the
form and substance satisfactory to WHITEWATER, and signed, in the case
of MEDISYS, by its president and secretary.
SECTION 8.2 Performance. The obligations of MEDISYS and SHAREHOLDERS
to be performed on or before the Closing pursuant to the terms of this
Agreement shall have been duly performed at such time, and MEDISYS and
SHAREHOLDERS shall have delivered to WHITEWATER a certificate, dated
the date of the Closing, to such effect and in form and substance
satisfactory to WHITEWATER.
SECTION 8.3 Authority. All action required to be taken by, or on the
part of MEDISYS and SHAREHOLDERS to authorize the execution, delivery
and performance of this Agreement by MEDISYS and the consummation of
the transactions contemplated hereby, shall have been duly and validly
taken.
SECTION 8.4 Absence of Certain Changes or Events. There shall not
have occurred, since the date hereof, any adverse change in the
business, condition, (financial or otherwise), assets or liabilities
of MEDISYS or any event or condition of any character adversely
affecting MEDISYS, and it shall have delivered to WHITEWATER,
certificates, dated the date of the Closing, to such effect and in
form and substance satisfactory to WHITEWATER and signed, in the case
of MEDISYS, by its president and secretary.
SECTION 8.5 Acceptance by MEDISYS Shareholders. The holders of
record as of July 20, 1992 of an aggregate of not less than one
hundred percent (100%) of the issued and outstanding shares of common
stock of MEDISYS have agreed to exchange their shares for shares of
Whitewater Common Stock specified herein.
ARTICLE IX
CONDITIONS PRECEDENT TO OBLIGATIONS OF MEDISYS AND
SHAREHOLDERS
All obligations of MEDISYS and SHAREHOLDERS under this Agreement
are subject to the fulfillment and satisfaction by WHITEWATER, prior
to or at the time of Closing, of each of the following conditions, any
one or more of which may be waived by MEDISYS and SHAREHOLDERS.
SECTION 9.1 Representations and Warranties True at the Closing. All
representations and warranties of WHITEWATER contained in this
Agreement will be true and correct at and as of the time of the
Closing, and WHITEWATER shall have delivered to MEDISYS a certificate,
dated the date of the Closing, to such effect and in the form and
substance satisfactory to MEDISYS, and signed, in the case of
WHITEWATER, by its president and secretary.
SECTION 9.2 Performance. Each of the obligations of WHITEWATER to be
performed on or before the Closing pursuant to the terms of this
Agreement shall have been duly performed at the time of the Closing,
and WHITEWATER shall have delivered to MEDISYS a certificate, dated
the date of the Closing, to such effect and in form and substance
satisfactory to MEDISYS, and signed, in the case of WHITEWATER, by its
president and secretary.
SECTION 9.3 Authority. All action required to be taken by, or on the
part of WHITEWATER, to authorize the execution, delivery and
performance of this Agreement by WHITEWATER, and the consummation of
the transactions contemplated hereby shall be duly and validly taken.
SECTION 9.4 Absence of Certain Changes or Events. There shall not
have occurred, since the date hereof, any adverse change in the
business, condition, (financial or otherwise), assets or liabilities
of WHITEWATER or any event or condition of any character adversely
affecting WHITEWATER and it shall have delivered to MEDISYS,
certificates, dated the date of the Closing, to such effect and in
form and substance satisfactory to MEDISYS and signed, in the case of
WHITEWATER, by its president and secretary.
SECTION 9.5 Directors of WHITEWATER. The current directors and
officers of WHITEWATER shall have submitted their resignations as
Directors and Officers of WHITEWATER effective on the Closing of this
Agreement.
ARTICLE X
TERMINATION
SECTION 10.1 Termination. Notwithstanding anything herein or
elsewhere to the contrary, this Agreement may be terminated:
(a) By mutual agreement of the parties hereto at any time prior
to the Closing;
(b) By the board of directors of WHITEWATER at any time prior to
the Closing if:
(i) a condition to performance by WHITEWATER under this
Agreement or a covenant of MEDISYS or SHAREHOLDERS contained
herein shall not be fulfilled on or before the time of the
Closing or at such other time and date specified for the
fulfillment for such covenant or condition; or
(ii) a material default or breach of this Agreement shall
be made by MEDISYS or SHAREHOLDERS; or
(iii) if the Closing shall not have taken place on or prior
to August 31, 1992.
(c) By the board of directors of MEDISYS or by SHAREHOLDERS at
any time prior to the Closing if:
(i) a condition to MEDISYS's or SHAREHOLDERS' performance
under this Agreement or a covenant of WHITEWATER contained
in this Agreement shall not be fulfilled on or before the
Closing or at such other time and date specified for the
fulfillment of such covenant or conditions;
(ii) a material default or breach of this Agreement shall
be made by WHITEWATER; or
(iii) if the Closing shall not have taken place on or prior
to August 31, 1992.
SECTION 10.2 Effect of Termination. If this Agreement is terminated,
this Agreement, except as to Sections 11.1, 11.2, shall no longer be
of any force or effect and there shall be no liability on the part of
any party or its respective directors, officers or stockholders;
provided however, that in the case of a Termination without cause by a
party or a termination pursuant to SECTIONS 10.1(b)(i) or 10.1(c)(i)
hereof because of a prior material default under or a material breach
of this Agreement by another party, the damages which the aggrieved
party or parties may recover from the defaulting party or parties
shall in no event exceed the amount of out-of-pocket costs and
expenses incurred by such aggravated party or parties in connection
with this Agreement.
ARTICLE XI
MISCELLANEOUS
SECTION 11.1 Cost and Expenses. All costs and expenses incurred in
connection with this Agreement will be paid by the party incurring
such expenses. In the event of any termination of this Agreement
pursuant to Section 10.1, subject to the provisions of Section 11.2,
WHITEWATER, MEDISYS and SHAREHOLDERS will each bear their own
respective expenses.
SECTION 11.2 Extension of Time: Waivers. At any time prior to the
Closing date:
(a) WHITEWATER may (i) extend the time for the performance of
any of the obligations or other acts of MEDISYS and SHAREHOLDERS,
(ii) waive any inaccuracies in the representations and warranties
of MEDISYS or SHAREHOLDERS contained herein or in any document
delivered pursuant hereto by MEDISYS and SHAREHOLDERS and (iii)
waive compliance with any of the agreements or conditions
contained herein to be performed by MEDISYS and SHAREHOLDERS.
Any agreement on the part of WHITEWATER to any such extension or
waiver shall be valid only if set forth in an instrument, in
writing, signed on behalf of WHITEWATER;
(b) MEDISYS and SHAREHOLDERS may (i) extend the time for the
performance of any of the obligations or other acts of
WHITEWATER, (ii) waive any inaccuracies in the representations
and warranties of WHITEWATER contained herein or in any document
delivered pursuant hereto by WHITEWATER and (iii) waive
compliance with any of the agreements or conditions contained
herein to be performed by WHITEWATER. Any agreement on the part
of MEDISYS and SHAREHOLDERS to any such extension or waiver shall
be valid only if set forth in an instrument, in writing, signed
on behalf of MEDISYS and SHAREHOLDERS.
SECTION 11.3 Notices. Any notice to any party hereto pursuant to
this Agreement shall be given by Certified or Registered Mail,
addressed as follows:
WHITEWATER PRODUCTS, LTD.
10 West Broadway
Suite 510
Salt Lake City, UT 84101
MEDISYS TECHNOLOGIES, INC.
Baton Rouge, LA
Additional notices are to be given as to each party, at such
other address as should be designated in writing complying as to
delivery with the terms of this SECTION 11.3. All such notices shall
be effective when sent, addressed as aforesaid.
SECTION 11.4 Parties in Interest. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and the respective
successors and designees. Nothing in this Agreement is intended to
confer, expressly or by implication, upon any other
person any rights or remedies under or by reason of this Agreement.
SECTION 11.5 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original and
together shall constitute one document. The delivery by facsimile of
an executed counterpart of this Agreement shall be deemed to be an
original and shall have the full force and effect of an original
executed copy.
SECTION 11.6 Severability. The parties hereto agree and affirm that
none of the provisions herein is dependent upon the validity of any
other provision, and if any part of this Agreement is deemed to be
unenforceable, the remainder of the Agreement shall remain in full
force and effect.
SECTION 11.7 Headings. The Article and Section headings are provided
herein for convenience of reference only and do not constitute a part
of this Agreement.
SECTION 11.8 Governing Law. This Agreement shall be governed by the
laws of the State of Utah. Any action to enforce the provisions of
this Agreement shall be brought in a court of competent jurisdiction
in the State of Utah and in no other place.
SECTION 11.9 Survival of Representations and Warranties. All terms,
conditions, representations and warranties set forth in this Agreement
or in any instrument, certificate, opinion, or other writing providing
for in it, shall survive the Closing and the delivery of the shares of
Whitewater Common Stock transferred hereunder at the Closing,
regardless of any investigation made by or on behalf of any of the
parties hereto.
SECTION 11.10 Assignability. This Agreement shall not be assignable
by any of the parties hereto without the prior written consent of the
other parties.
SECTION 11.11 Amendment. This Agreement may be amended with the
approval of the boards of directors of WHITEWATER and MEDISYS and by
SHAREHOLDERS at any time before or after approval thereof by
stockholders of WHITEWATER, if required, and MEDISYS and SHAREHOLDERS;
but after such approval by the WHITEWATER shareholders, no amendment
shall be made which substantially and adversely changes the terms
hereof. This Agreement may not be amended except by an instrument, in
writing,signed on behalf of each of the parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Agreement in a manner legally binding upon them as of
the date first above written.
"WHITEWATER"
WHITEWATER PRODUCTS, LTD.
ATTEST:
By: ________________________ ________________________
Its: President Secretary
"MEDISYS"
MEDISYS TECHNOLOGIES, INC.
ATTEST:
By: _______________________ ________________________
Its: President Secretary
"SHAREHOLDERS" WHITEWATER Common Stock
to be Issued
EXHIBIT 21.1
SUBSIDIARIES OF MEDISYS TECHNOLOGIES, INC.
The following are subsidiaries of Medisys Technologies, Inc.:
1. Medisys Technologies, Inc., a Louisiana corporation, 100% owned by
Medisys Technologies, Inc., a Utah corporation
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<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL
INFORMATION EXTRACTED FROM THE MEDISYS
TECHNOLOGIES, INC. FINANCIAL STATEMENTS FOR THE
PERIOD ENDED JUNE 30, 1996 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1996
<CASH> 601,500
<SECURITIES> 0
<RECEIVABLES> 2,851
<ALLOWANCES> 357
<INVENTORY> 13,231
<CURRENT-ASSETS> 624,056
<PP&E> 124,804
<DEPRECIATION> 67,715
<TOTAL-ASSETS> 942,646
<CURRENT-LIABILITIES> 479,167
<BONDS> 20,577
0
0
<COMMON> 5,786
<OTHER-SE> 4,033,251
<TOTAL-LIABILITY-AND-EQUITY> 942,646
<SALES> 5,873
<TOTAL-REVENUES> 5,873
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 516,385
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,702
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> (516,214)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (516,214)
<EPS-PRIMARY> (.04)
<EPS-DILUTED> (.04)
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