UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended September 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
Commission File Number 0-21441
MEDISYS TECHNOLOGIES, INC.
(Exact name of small business issuer as specified 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)
Registrant s telephone no., including area code: (504) 926-0422
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the past 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been
subject to such filing
requirements for the past 90 days.
Yes X No
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the
issuer s classes of common equity, as of the latest practicable
date.
Class Outstanding as of September 30, 1996
Common Stock, 12,099,473 shares
$0.0005 par value
<PAGE>
TABLE OF CONTENTS
Heading Page
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements . . . . . . . . . . . . 1
Balance Sheets - September 30, 1996 and
December 31, 1995. . . . . . . . . . . . . . 2
Statements of Operations - nine months
ended September 30, 1996 and 1995. . . . . . 4
Statement of Stockholders Equity (Deficit). 5
Statement of Cash Flows - nine months ended
September 30, 1996 and 1995. . . . . . . . . 7
Notes to Financial Statements. . . . . . . . 10
Item 2. Management s Discussion and Analysis and
Results of Operations. . . . . . . . . . . . 20
PART II - OTHER INFORMATION
Item 1. Legal Proceedings. . . . . . . . . . . . . . 20
Item 2. Changes in Securities. . . . . . . . . . . . 20
Item 3. Defaults Upon Senior Securities. . . . . . . 20
Item 4. Submissions of Matters to a Vote of
Securities Holders . . . . . . . . . . . . . 20
Item 5. Other Information. . . . . . . . . . . . . . 20
Item 6. Exhibits and Reports on Form 8-K . . . . . . 20
SIGNATURES . . . . . . . . . . . . . . . . . 21
-i-
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
The following unaudited Financial Statements for the period
ended September 30, 1996, have been prepared by the Company.
Medisys Technologies, Inc.
(a Development Stage Company)
Consolidated Financial Statements
September 30, 1996 and 1995
<PAGE>
MEDISYS TECHNOLOGIES, INC.
(A Development Stage Company)
Consolidated Balance Sheets
ASSETS
September 30, December 31,
1996 1995
(Unaudited)
CURRENT ASSETS
Cash $ 919,755 $ 82,149
Accounts receivable, net of allowance for bad debt 2,494 513
Inventory 17,899 4,426
Loans receivable - stockholder (Note 2) 2,500 5,007
Prepaid expenses - 14,973
Total Current Assets 942,648 107,068
FIXED ASSETS
Automobiles 67,950 67,950
Furniture and equipment 60,592 42,467
Leased equipment 10,010 10,010
Accumulated depreciation (73,736) (55,673)
Total Fixed Assets 64,816 64,754
OTHER ASSETS
Deferred offering costs 78,669 25,319
Security deposits 3,141 3,141
Patent costs 264,924 205,938
Organizational costs 311 311
Total Other Assets 347,045 234,709
TOTAL ASSETS $1,354,509 $ 406,531
<PAGE>
MEDISYS TECHNOLOGIES, INC.
(A Development Stage Company)
Consolidated Balance Sheets (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
September 30, December 31,
1996 1995
(Unaudited)
CURRENT LIABILITIES
Accounts payable $ 29,198 $ 138,981
Accrued expenses (Note 3) 268,999 212,606
Loans payable-shareholders (Note 2) 48,481 3,199
Contracts payable - current portion (Note 7) 1,666 13,132
Capital lease payable - current portion (Note 4) - 1,444
Notes payable - current portion (Note 9) 48,210 207,976
Total Current Liabilities 396,554 577,338
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 417,131 597,915
COMMITMENTS (Note 6) - -
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock: 100,000,000 shares
authorized of $0.0005 par value,
12,099,473 and 10,797,140 shares
issued and outstanding, respectively 6,050 5,399
Additional paid-in capital 4,845,986 2,883,138
Stock subscriptions receivable (Note 8) (53,427) (53,427)
Deficit accumulated during the development stage (3,861,231) (3,026,494)
Total Stockholders' Equity (Deficit) 937,378 (191,384)
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY (DEFICIT) $1,354,509 $ 406,531
<PAGE>
MEDISYS TECHNOLOGIES, INC.
(A Development Stage Company)
Consolidated Statements of Operations
(Unaudited)
From
Inception on
January 21,
For the Nine Months For the Three Months 1991 through
Ended September 30 Ended September 30, September 30,
1996 1995 1996 1995 1996
REVENUES $ 9,561 $ - $ 3,688 $ - $ 12,363
EXPENSES
Product development 367,649 208,913 152,300 61,392 1,555,791
Salaries 193,781 149,862 78,914 52,479 941,831
Depreciation and
amortization 18,063 14,823 6,021 4,941 92,594
Interest 6,211 13,081 509 3,281 70,291
General and
administrative 258,594 165,816 84,467 50,377 1,213,087
Total Expenses 844,298 552,495 322,211 172,470 3,873,594
NET LOSS $(834,737) $ (552,495) $(318,523) $(172,470)$(3,861,231)
Net Loss Per Share
of Common Stock $ (0.07) $ (0.06) $ (0.03) $ (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) 1,227,333 614 1,840,385 -
Issuance of stock at $1.25 per
share (Unaudited) 40,000 20 49,980 -
Issuance of stock at $2.00 per
share (Unaudited) 25,000 12 49,988 -
Issuance of stock at $2.25 per
share (Unaudited) 10,000 5 22,495 -
Net loss for the nine months
ended September 30, 1996
(Unaudited) - - - (834,737)
Balance, September 30, 1996
(Unaudited) 12,099,473 $ 6,050 $4,845,986 $(3,861,231)
<PAGE>
MEDISYS TECHNOLOGIES, INC.
(A Development Stage Company)
Consolidated Statements of Cash Flows
(Unaudited)
From
Inception on
January 21,
For the Nine Months For the Three Months 1991 through
Ended September 30, Ended September 30, September 30,
1996 1995 1996 1995 1996
CASH FLOWS FROM
OPERATING ACTIVITIES
Loss from operations $(834,737)$(552,495)$(318,523)$(172,470)$(3,861,231)
Adjustments to reconcile net
income to net cash provided
(used) by operating activities:
Operating expenses paid by
issuance of common stock - - - - 183,867
Depreciation and amortization18,063 14,823 6,021 4,941 92,594
Changes in operating assets
and liabilities:
(Increase) decrease in accounts
receivable (1,981) - - - (2,494)
(Increase) decrease in
inventory (13,473) - (4,668) - (17,899)
(Increase) decrease in prepaid
expenses 14,973 - - - 14,973
(Increase) decrease in loans
receivable - stockholders 2,507 (15,981) 4,331 (9,181) (2,500)
(Increase) decrease in loan fees - - - - (18,750)
(Increase) decrease in security
deposits - - - - (3,141)
(Increase) decrease in
patent costs (58,986) (13,280) (32,194) (5,008) (265,032)
(Increase) decrease in
organizational costs - - - - (311)
Increase (decrease) in
accounts payable (109,783) 66,278 (121,347) (4,629) 29,198
Increase (decrease) in
accrued expenses 56,393 (4,559) 96,142 2,096 265,725
Net Cash (Used) by
Operating Activities (927,024)(505,214) (370,238) (184,251) (3,585,001)
CASH FLOWS FROM
INVESTING ACTIVITIES
Purchase of fixed assets (18,125) (6,803) (13,748) (5,921) (76,152)
Net Cash (Used) by
Investing Activities$(18,125) $ (6,803) $ (13,748) $ (5,921) $(76,152)
<PAGE>
MEDISYS TECHNOLOGIES, INC.
(A Development Stage Company)
Consolidated Statements of Cash Flows (Continued)
(Unaudited)
From
Inception on
January 21,
For the Nine Months For the Three Months 1991 through
Ended September 30, Ended September 30, September 30,
1996 1995 1996 1995 1996
CASH FLOWS FROM
FINANCING ACTIVITIES
Repayment of shareholders $(24,007) $ - $ - $ - $ (24,007)
Acquisition of subsidiary - - - - (40,673)
Payments of stock offering
costs (53,350) - (53,350) - (83,639)
Proceeds from capital lease - - - - 10,010
Payments on capital lease (1,444) (1,638) - (546) (10,010)
Payments on contracts
payable (11,466) (21,979) (3,822) (13,866) (40,157)
Borrowings from shareholders 69,289 - - - 516,977
Borrowings from notes payable - - - - 338,500
Payment on notes payable (159,766) - (53,586) - (203,184)
Stock subscriptions receivable - - - - (53,427)
Issuance of common stock 1,963,499 576,865 812,999 285,000 3,916,518
Proceeds from sale of
stock options - - - - 254,000
Net Cash Provided by
Financing Activities 1,782,755 553,248 702,241 270,588 4,580,908
NET INCREASE (DECREASE)
CASH AND CASH
EQUIVALENTS 837,606 41,231 318,255 80,416 919,755
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 82,149 39,739 601,500 554 -
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $919,755 $ 80,970 $919,755 $ 80,970 $ 919,755
<PAGE>
MEDISYS TECHNOLOGIES, INC.
(A Development Stage Company)
Consolidated Statements of Cash Flows (Continued)
(Unaudited)
From
Inception on
January 21,
For the Nine Months For the Three Months 1991 through
Ended September 30, Ended September 30, September 30,
1996 1995 1996 1995 1996
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
CASH PAID FOR
Income taxes $ - $ - $ - $ - $ -
Interest $ 6,211 $ 13,081 $ 509 $ 3,281 $ 39,459
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
September 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
September 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 September 30,
1996 and December 31, 1995 due to operating losses. The minimum
state franchise tax has been accrued.
The Company has accumulated $3,861,231 of net operating losses
as of September 30, 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
842,813 2011
Total $ 3,861,231
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 1996.
The costs will be charged against the proceeds of the offering
when it is 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
September 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
September 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, September 30,
1995 1996
Capital lease with monthly payments of
$254 to Lease America Corporation $ 1,444 $ -
Less current portion (1,444) -
Long-term portion $ - $ -
The Company's future minimum lease payments are as follows:
1996 $ -
Less imputed interest -
Total $ -
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
September 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
SofCeps 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
September 30, 1996 and 1995
NOTE 7 - CONTRACTS PAYABLE
The Company has entered into purchase contracts for three
automobiles as follows:
September 30,
1996
Premier Bank, with total monthly payments of principal
and interest of $1,275, for 60 months, secured by the
automobiles. $ 22,243
The maturities of contracts payable are as follows:
1996 $ 1,666
1997 14,243
1998 6,334
Thereafter -
$ 22,243
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
September 30, 1996 and 1995
NOTE 9 - NOTES PAYABLE
Notes payable consisted of the following:
December 31, September 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 1,743
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 $ 26,743
<PAGE>
MEDISYS TECHNOLOGIES, INC.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
September 30, 1996 and 1995
NOTE 9 - NOTES PAYABLE (CONTINUED)
December 31, September 30,
1995 1996
Balance forward $ 77,912 $ 26,743
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 21,467
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 -
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 48,210
Less current portion (207,976) (48,210)
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>
Item 2. Management s Discussion and Analysis and Results of
Operations
Results of Operations
The net loss for the third quarter and first nine months of
1996 increased 85% to $318,523 and 51% to $834,737, respectively,
when compared to the corresponding 1995 periods. These results are
primarily attributed to the Company s increased effort in the
development of its products.
Operating expenses for the third quarter and first nine months
of 1996 increased 87% and 53% respectively when compared to the
corresponding 1995 periods, primarily attributed to increases in
the following items: product development (148% and 76% increases
for the third quarter and first nine months of 1996, respectively)
due to increased effort in the development of SofCeps (Registered
Trademark} and CoverTipTM, the Company s flagship products; salaries
(50% and 29% increases for the third quarter and first nine months
of 1996, respectively) due to the addition of a Vice President and
Chief Operating Officer and annual salary increases; depreciation
and amortization (22% for the third quarter and first nine months
of 1996) due to the addition of computer and office equipment;
general and administrative expanses (68% and 56% for the third
quarter and first nine months of 1996, respectively) due to
increases in consulting charges, contract labor, and travel
expenses. Interest expense declined 84% and 53% for the third
quarter and first nine months of 1996 due to the retirement of
debt.
Liquidity and Capital Resources
Historically, the Company s working capital needs have been
satisfied primarily through its financing activities including
private loans and raising capital through the sale of securities.
Working capital as of September 30, 1996 was $546,094 compared to
a negative $470,270 at December 31, 1995. This improvement in
working capital is primarily attributable to the increase in cash
of $837,606 due to the private placement of the Company s common
stock and a decrease of $159,766 on the current portion of notes
payable.
Net cash used by operations for the third quarter of 1996 and
the first nine months of 1996 was $370,238 and $927,024,
respectively, compared to net cash used of $184,251 and $505,214
for the comparable 1995 periods, primarily attributed to the
increase in the net loss from operations during the 1996 periods.
Also, net cash from financing activities during the third quarter
of 1996 was $702,241 compared to $270,588 for the comparable 1995
period, primarily attributed to the sale of common stock. Net cash
from financing activities for the first nine months of 1996 was
$1,782,755 compared to $553,238 for the comparable 1995 period,
also due to the sale of common stock.
The Company anticipates meeting its working capital needs
during the current fiscal year with the cash reserves the Company
currently maintains. While the Company continues to pursue the
development of its products, it is actively pursuing financing to
provide future working capital needs and to prepare for the future
marketing and sales activities related to its products. Although
management has not made any arrangements or definitive agreements,
the Company is contemplating the additional private placement of
securities and/or a public offering, although there can be no
assurance that the Company could successfully complete any such
offering. If sales revenue from the Company s products under
development are not adequate to fund the Company s future
operations and it is unable to secure financing from the sales of
its securities or from private lenders, the Company could
experience additional losses which could curtail the Company s
operations. The continuation as a going concern is directly
dependent upon the success of its future operations and ability to
obtain additional financing.
As of September 30, 1996 the Company had total assets of
$1,354,509 and stockholders equity of $937,378. In comparison, as
of December 31, 1995 the Company had total assets of $406,531 and
total stockholders deficiency of $191,384. The 233% increase in
total assets for the nine month period ended September 30, 1996 is
primarily due to cash realized from the Company s financing
activities.
In the opinion of management, inflation has not had a material
effect on the operations of the Company.
Management believes that the Company has sufficient capital
resources to fund anticipated operations until some time in the
early second quarter of 1997. Management estimates that its
current level of operations require approximately $105,000 per
month in cash based upon average monthly cash flows during the
first nine months of 1996. Unless the Company is able to begin
sales of its products during early 1997 or is able to raise
additional sales of corporate debt or equity securities, the
Company may encounter a cash flow shortage during the second
quarter of 1997. To overcome this potential cash flow shortage,
management intends to seek additional equity or debt capital
through private sources, although there can be no assurance such
funds will be available. As of the date hereof, the Company has not
entered into any firm agreements or understandings for the raising
of capital from private sources.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
There are presently no material pending legal proceedings to
which the Company 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 or threatened.
Item 2. Changes in Securities
This item is not applicable to the Company.
Item 3. Defaults Upon Senior Securities
This item is not applicable to the Company.
Item 4. Submissions of Matters to a Vote of Securities Holders
This item is not applicable to the Company.
Item 5. Other Information
This item is not applicable to the Company.
Item 6. Exhibits and Reports on Form 8-K
(b) Reports on Form 8-K
No report on Form 8-k was filed by the Company during the
three month period ended September 30, 1996.
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities and
Exchange Act of 1934, the Registrant caused this report to be
signed on its behalf by the undersigned, thereunto duly
authorized.
MEDISYS TECHNOLOGIES, INC.
Date: November 14, 1996 By: /S/ Edward P. Sutherland
(Signature)
EDWARD P. SUTHERLAND, President
and Chief Executive Officer
Date: November 14, 1996 By: /S/ Paul R. Radle, Jr.
(Signature)
PAUL R. RADLE, JR., Vice
President, and Chief Financial
Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL
INFORMATION EXTRACTED FROM THE MEDISYS
TECHNOLOGIES, INC. FINANCIAL STATEMENTS FOR THE
PERIOD ENDED SEPTEMBER 30, 1996 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1996
<CASH> 919,755
<SECURITIES> 0
<RECEIVABLES> 2,494
<ALLOWANCES> 0
<INVENTORY> 17,899
<CURRENT-ASSETS> 942,648
<PP&E> 138,552
<DEPRECIATION> 73,736
<TOTAL-ASSETS> 1,354,509
<CURRENT-LIABILITIES> 396,554
<BONDS> 20,577
0
0
<COMMON> 6,050
<OTHER-SE> 4,845,986
<TOTAL-LIABILITY-AND-EQUITY> 1,354,509
<SALES> 9,561
<TOTAL-REVENUES> 9,561
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 838,087
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,211
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> (834,737)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (834,737)
<EPS-PRIMARY> (.07)
<EPS-DILUTED> (.07)
</TABLE>
