UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of The
Securities Exchange Act of 1934
For the Quarter Ended March 31, 1997
[ ] Transition Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
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)
Issuer s telephone number: (504) 926-0422
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act 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
issuers classes of common equity, as of the latest practicable
date:
Class Outstanding as of April 25, 1997
Common Stock, 12,349,040
Par Value $0.0005 per value
Transitional Small Business Disclosure Format (check one):
Yes [ ]; No [ X ]
<PAGE>
MEDISYS TECHNOLOGIES, INC.
TABLE OF CONTENTS
PART I
Item 1. Financial Statements . . . . . . . . . . . 3
Item 2. Management s Discussion and Analysis or Plan
of Operation . . . . . . . . . . . . . . . 20
PART II
Item 1. Legal Proceedings. . . . . . . . . . . . . 21
Item 2. Changes in Securities. . . . . . . . . . . 21
Item 3. Defaults Upon Senior Securities. . . . . . 22
Item 4. Submissions of Matters to a Vote of Security
Holders. . . . . . . . . . . . . . . . . . 22
Item 5. Other Information. . . . . . . . . . . . . 22
Item 6. Exhibits and Reports on Form 8-K . . . . . 22
SIGNATURES . . . . . . . . . . . . . . . . . . . . . 23
<PAGE>
PART I
Item 1. Financial Statements
The following unaudited Financial Statements for the period
ended March 31, 1997, have been prepared by the Company.
Medisys Technologies, Inc.
(a Development Stage Company)
Consolidated Financial Statements
March 31, 1997 and 1996
<PAGE>
MEDISYS TECHNOLOGIES, INC.
(A Development Stage Company)
Consolidated Balance Sheets
ASSETS
March 31, December 31,
1997 1996
(Unaudited)
CURRENT ASSETS
Cash $ 209,140 $ 669,604
Accounts receivable, net
of allowance for bad debt 29,273 -
Inventory 19,668 8,571
Prepaid expenses 27,832 6,997
Total Current Assets 285,913 685,172
FIXED ASSETS
Leasehold improvements 2,195 2,195
Automobiles 67,950 67,950
Furniture and equipment 76,729 66,092
Leased equipment 10,010 10,010
Accumulated depreciation (85,934) (79,934)
Total Fixed Assets 70,950 66,313
OTHER ASSETS
Security deposits 4,000 4,000
Patent costs 345,711 295,704
Organizational costs 311 311
Total Other Assets 350,022 300,015
TOTAL ASSETS $ 706,885 $1,051,500
<PAGE>
MEDISYS TECHNOLOGIES, INC.
(A Development Stage Company)
Consolidated Balance Sheets (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
March 31, December 31,
1997 1996
(Unaudited)
CURRENT LIABILITIES
Accounts payable $ 286,160 $ 276,014
Accrued expenses (Note 3) 119,848 105,441
Loans payable-shareholders (Note 2) 45,981 45,981
Contracts payable - current
portion (Note 4) 14,243 14,243
Notes payable - current
portion (Note 5) 43,908 45,381
Total Current Liabilities 510,140 487,060
LONG-TERM DEBT
Contracts payable - less
current portion (Note 4) 2,467 6,334
Total Long-Term Debt 2,467 6,334
TOTAL LIABILITIES 512,607 493,394
COMMITMENTS (Note 6) - -
STOCKHOLDERS' EQUITY
Common stock: 100,000,000 shares
authorized of $0.0005 par value,
12,345,340 and 12,337,940 shares
issued and outstanding, respectively 6,173 6,167
Additional paid-in capital 5,464,222 5,429,958
Stock subscriptions receivable
(Note 7) (175,000) (175,000)
Deficit accumulated during the
development stage (5,101,117) (4,703,019)
Total Stockholders' Equity 194,278 558,106
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 706,885 $1,051,500
<PAGE>
MEDISYS TECHNOLOGIES, INC.
(A Development Stage Company)
Consolidated Statements of Operations
(Unaudited)
From
Inception on
January 21,
For the Three Months 1991 through
Ended March 31, March 31,
1997 1996 1997
REVENUES $38,873 $ 2,182 $ 43,857
OPERATING EXPENSES
Cost of product sold 7,880 1,256 9,721
Product development 193,395 87,595 1,877,983
Salaries 65,012 43,221 1,103,918
Professional services 26,548 2,605 775,018
Depreciation and amortization 6,021 6,021 106,100
General and administrative 136,340 96,287 1,139,580
Total Operating Expenses 435,196 236,985 5,012,320
OPERATING LOSS (396,323) (234,803) (4,968,463)
OTHER INCOME (EXPENSES)
Interest income 4,232 - 17,426
Interest expense (6,007) (2,623) (96,653)
Bad debt expense - - (53,427)
Total Other Income (Expense) (1,775) (2,623) (132,654)
LOSS BEFORE INCOME TAXE (398,098) (237,426) (5,101,117)
INCOME TAXES - - -
NET LOSS $(398,098)$(237,426)$(5,101,117)
NET LOSS PER SHARE OF
COMMON STOCK $ (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 1,768,500 884 (41,557) -
Private placement of common
stock at $2.00 per share 250,000 125 499,875 -
Canceled 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 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 $1.26 per share 60,016 30 75,581 -
Contributed capital by shareholders - - 513,812 -
Common stock issued in settlement
of shareholder loans at
approximately $2.16 per share 200,000 100 431,495 -
Forgiveness of wages and fees
by shareholders - - 215,565 -
Balance forward 10,005,264 $ 5,003 $1,786,927 $(1,080,556)
<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 forward 10,005,264 $ 5,003 $1,786,927 $(1,080,556)
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)
Issuance of stock at an average
price of $1.05 per share 627,937 314 659,562 -
Issuance of stock for services
rendered at an average price of
$1.26 per share 121,939 61 153,789 -
Issuance of common stock for
prepaid rent at $0.35 per share 42,000 21 14,952 -
Sale of common stock options - - 431,800 -
Transfer of stock in settlement of
debt - - 111,699 -
Net loss for the year ended
December 31, 1995 - - - (1,162,772)
Balance, December 31, 1995 10,797,140 5,399 3,060,938 (3,204,294)
Issuance of common stock for
cash at an average price of
$1.50 per share 1,342,331 670 2,012,830 -
Common stock offering costs - - (85,420) -
Issuance of common stock for
consulting and professional services
rendered at an average price of
$3.39 per share 36,769 17 124,687 -
Balance forward 12,176,240 $ 6,086 $5,113,035 $(3,204,294)
<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 forward 12,176,240 $ 6,086 $ 5,113,035 $(3,204,294)
Issuance of common stock from
expense of common stock
warrants at $1.50 and $1.25
per share 41,700 21 52,529 -
Issuance of common stock in
satisfaction of note payable at
$2.80 per share 20,000 10 55,990 -
Issuance of common stock for
warrants exercised at $1.75 per
share for subscription
receivable 100,000 50 174,950 -
Common stock warrants issued for
extension of payable payment - - 33,454 -
Net loss for the year ended
December 31, 1996 - - - (1,498,725)
Balance, December 31, 1996 12,337,940 6,167 5,429,958 (4,703,019)
Issuance of stock for services
rendered at an average price
of $1.91 (unaudited) 7,400 6 14,100 -
Contribution of capital by
shareholders (unaudited) - - 20,164 -
Net loss for the three months
ended March 31, 1997 (unaudited) - - - (398,098)
Balance, March 31, 1997
(unaudited) 12,345,340 $ 6,173 $ 5,464,222 $ (5,101,117)
<PAGE>
MEDISYS TECHNOLOGIES, INC.
(A Development Stage Company)
Consolidated Statements of Cash Flows
(Unaudited)
From
Inception on
January 21,
For the Three Months 1991 Through
Ended March 31, March 31,
1997 1996 1997
CASH FLOWS FROM
OPERATING ACTIVITIES
Loss from operations $ (398,098) $ (237,426) $ (5,101,117)
Adjustments to reconcile net income
to net cash provided (used) by
operating activities:
Operating expenses paid by
issuance of common stock - - 308,571
Common stock options and warrants
For services - - 211,254
Depreciation and amortization 6,021 6,021 107,495
Allowance for doubtful accounts - - 53,070
Changes in operating assets and liabilities:
(Increase) decrease in accounts
receivable (29,273) 1,710 (29,273)
(Increase) decrease in inventory (11,097) (4,891) (19,668)
(Increase) decrease in prepaid
expenses (20,835) 7,487 (27,832)
(Increase) decrease in security deposits - - (4,000)
(Increase) decrease in organizational
costs - - (311)
Increase (decrease) in accounts
payable 10,146 42,716 286,160
Increase (decrease) in accrued
expenses 14,407 (9,462) 119,848
Net Cash (Used) by
Operating Activities (428,729) (193,845) (4,095,803)
CASH FLOWS FROM INVESTING ACTIVITIES
(Increase) decrease in patent costs (50,028) (14,616) (347,126)
Acquisition of subsidiary - - (40,673)
Purchase of fixed assets (10,637) (363) (94,484)
Net Cash (Used) by
Investing Activities $ (60,665) $ (14,979) $(482,283)
<PAGE>
MEDISYS TECHNOLOGIES, INC.
(A Development Stage Company)
Consolidated Statements of Cash Flows (Continued)
(Unaudited)
From
Inception on
January 21,
For the Three Months 1991 through
Ended March 31, March 31,
1997 1996 1997
CASH FLOWS FROM FINANCING ACTIVITIES
Payments of stock offering costs $ - $ - $ (90,389)
Proceeds from capital lease - - 10,010
Payments on capital lease - (1,015) (10,010)
Payments on contracts payable (3,867) (3,822) (45,690)
Borrowings from shareholders - 69,289 490,470
Payments on payable - stockholders - - (20,984)
Borrowings from notes payable - - 338,500
Payment on notes payable (1,473) (19,558) (138,592)
Stock subscriptions receivable - - (53,427)
Issuance of common stock 34,270 132,500 4,000,788
Proceeds from sale of stock options - - 254,000
Proceeds from exercise of common
stock options - - 52,550
Net Cash Provided by
Financing Activities 28,930 177,394 4,787,226
NET INCREASE (DECREASE)
CASH AND CASH EQUIVALENTS (460,464) (31,430) 209,140
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 669,604 82,149 -
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 209,140 $ 50,719 $ 209,140
SUPPLEMENTAL DISCLOSURES
OF CASH FLOW INFORMATION
CASH PAID FOR
Income taxes $ - $ - $ -
Interest $ 6,007 $ 2,623 $ 49,187
NON CASH FINANCING ACTIVITIES
Purchase of automobiles on contract$ - $ - $ 62,400
Conversion of shareholder loans
to equity $ - $ - $ 599,294
Stock issued in payment of operating
expenses $ - $ - $ 308,571
<PAGE>
MEDISYS TECHNOLOGIES, INC.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
March 31, 1997 and 1996
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 (the 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 15, 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. (Medisys). For
accounting purposes the acquisition has been treated as a
recapitalization of Medisys with Medisys as the acquirer.
b. Fixed Assets
Fixed assets 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 capitalized costs of obtaining patents consists of legal fees
and associated filing costs. These patent costs will be amortized
over the shorter of their legal or useful lives. The Company has
numerous patents in various stages of development and the
application process. Several patents have been granted but are
being developed further in a continuation-in-part (CIP) status
until the development of a commercial product is complete, the
related product has received FDA (Food and Drug Administration)
approval and is in a marketable condition ready for sale. Once
patents have been granted, FDA approval obtained, and sales
commenced, no further costs associated with the patent are
capitalized. As of March 31, 1997, the Company did have one
patented product for which sales have commenced with the related
costs being amortized over the estimated useful life of the patent.
Management has determined that estimated future cash flows from
this product will be sufficient to recover the capitalized basis of
the costs associated with that patent. The other patents for which
costs have been capitalized are considered to have continued
viability according to management of the Company with no
significant events occurring which would impair the value of the
capitalized costs associated with the individual patents.
The Company has also incurred costs associated with obtaining
trademarks related to the Company's existing and future products.
Those costs have been capitalized and will be amortized over the
estimated useful life of the trademarks once approval has been
received and usage begins. These trademarks are considered to have
continued viability according to management with no significant
events occurring which would impair the value of the capitalized
costs associated with the trademarks.
<PAGE>
MEDISYS TECHNOLOGIES, INC.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
March 31, 1997 and 1996
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
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, 1997 and
1996 due to operating losses. The minimum state franchise tax has
been accrued.
The Company has accumulated $5,091,041 of net operating losses as
of March 31, 1997, 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
1,159,850 2010
1,496,725 2011
398,098 2012
Total $ 5,091,041
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. The potential tax benefits of
the net operating loss carryovers have been offset by a valuation
allowance of the same amount.
g. Principles of Consolidation
The consolidated financial statements include the accounts of
Medisys Technologies, Inc., (Parent) and Medisys Technologies,
Inc. (Subsidiary), a wholly owned subsidiary. All significant
intercompany accounts and transactions have been eliminated in
consolidation.
h. 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
March 31, 1997 and 1996
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
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 Risks
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. The Company also has $137,926 in a money
market fund with a brokerage house.
l. Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
m. Unaudited Financial Statements
The accompanying unaudited financial statements include all of the
adjustments which in the opinion of management are necessary for
a fair presentation. All such adjustments are of a normal,
recurring nature.
NOTE 2 - 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. The outstanding balances of these advances fluctuate
during the year and do not have specific repayment terms although
the advances are generally considered to be due or payable on
demand. Accordingly, the related receivable or payable has been
reflected as current in the accompanying consolidated financial
statements. At March 31, 1997, there was a balance outstanding
payable to stockholders totaling $45,981.
MEDISYS TECHNOLOGIES, INC.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
March 31, 1997 and 1996
NOTE 3 - ACCRUED EXPENSES
Accrued expenses consist of the following:
December 31,
1996
Payroll taxes payable $ 1,318
Accrued salaries and directors fees 85,851
Accrued interest payable 4,636
Contract labor payable 13,636
$ 105,441
The accrued salaries and directors fees are to be paid over the
next 24 months or when the Company is adequately financed.
NOTE 4 - CONTRACTS PAYABLE
The Company has entered into purchase contracts for three
automobiles as follows:
March 31,
1997
Bank One, with total monthly payments of
principal and interest of $1,275, for
60 months, secured by the automobiles. $ 16,710
The maturities of contracts payable are as follows:
1997 $ 10,376
1998 6,334
Thereafter -
$ 16,710
<PAGE>
MEDISYS TECHNOLOGIES, INC.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
March 31, 1997 and 1996
NOTE 5 - NOTES PAYABLE
Notes payable consisted of the following:
December 31, March 31,
1996 1997
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 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 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. 20,381 18,908
Total 45,381 43,908
Less current portion (45,381) (43,908)
Total Long-Term Portion $ - $ -
These notes are in default. None of the related note holders have
demanded repayment and the Company is in the process of negotiating
repayment terms. The Company continues to pay the $500 monthly
installments on the note payable to Mr. and Mrs. Eckstein and
continues to accrue interest on these and all outstanding notes
payable.
NOTE 6 - COMMITMENTS
During 1996, the Company adopted a Simplified Employee Pension
(SEP) Plan. The Plan enables the Company to make an annual
discretionary contribution to be allocated to employees on a pro
rata basis according to their compensation for the year. In
addition, employees have the option to make voluntary Retirement
Savings Contributions in amounts not to exceed 15% of their annual
compensation. The Company elected to not make a contribution for
the year ended December 31, 1996. The Company has no other bonus,
profit sharing or deferred compensation plans for the benefit of
its employees, officers or directors except if discussed elsewhere.
The Company entered into employment agreements with Edward P.
Sutherland and Kerry Frey on September 3, 1996 and September 4,
1996, respectively, pursuant to which they will receive annual
salaries of $150,000 and $144,000, respectively. These employment
agreements expire on December 31, 1997.
Any additional compensation to these employees is to be in the form
of an annual cash bonus or the granting of stock options at the
discretion of the Board of Directors not to exceed 50% of their
annual compensation.
<PAGE>
MEDISYS TECHNOLOGIES, INC.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
March 31, 1997 and 1996
NOTE 6 - COMMITMENTS (Continued)
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 for
testing services. During 1995, the contract was amended with
additional payments to be made based on services to be performed.
The contract was later terminated before its completion. The
Company had made payments of $265,465 for services performed
pursuant to the contract. The medical institution has claimed an
unpaid balance of $133,326 which the Company disputes. The Company
contends that the services stipulated by the terms of the contract
were not performed by the medical institution and that no
additional amounts are due and payable related to this contract.
No amount has been accrued in the accompanying consolidated
financial statements related to this transaction. The Company
intends to vigorously contend any further claims with respect to
this contract and believes that the probability that the Company
will be required to make additional payments is remote.
On January 1, 1994, the Company entered into an agreement to lease
3,532 square feet of office space. The lease has a term of two
years with an extension option for an additional two years through
December 31, 1997. The Company exercised the option to lease the
office facilities for 1997 at a cost of $2,942 per month, including
utilities, for a total annual cost of $35,304.
On October 1, 1996, the Company entered into an agreement to lease
450 square feet of office space in Far Hills, New Jersey at a cost
of $1,000 per month, including utilities, for an annual cost of
$12,000. The New Jersey lease has a term of ten months through
July 31, 1997.
NOTE 7 - COMMON STOCK
During the months of October and November 1993, the Company had a
private placement of restricted common stock. 45,248 shares were
issued, the proceeds of which totaled $100,000.
60,016 shares of common stock were issued during 1994 with proceeds
of $75,611 through a private placement.
In April 1994, the Company retired the stock of an officer and
reissued the shares in a private placement, with the total proceeds
of $513,812 being contributed to additional paid-in capital.
During August 1994, 200,000 shares of common stock were issued for
cancellation of shareholder loans totaling $431,595.
During 1994, officers and directors of the Company determined that
the accrued salaries and fees owed them totaling $215,565, would be
forgiven and were converted to additional paid-in capital.
During 1995, 627,937 shares of common stock were issued through
various private placements with cash proceeds of $659,876.
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 21,939 shares were issued to other
individuals in payment of services rendered valued at $33,850. The
Company also issued 42,000 shares of common stock for payment of
rent valued at $14,973 for 1995.
<PAGE>
MEDISYS TECHNOLOGIES, INC.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
March 31, 1997 and 1996
NOTE 7 - COMMON STOCK (Continued)
During December 1995, the Company transferred 120,000 shares of
common stock in settlement of a note payable with a balance of
$100,000 plus accrued interest of $11,699. These shares had been
issued previously in the name of the Company as collateral on
notes payable.
The Company conducted a private placement of its common stock
during 1996. 1,342,331 shares of restricted common stock were sold
at $1.50 per share resulting in total cash proceeds of $2,013,500.
1,192,331 of the shares sold carry with them a warrant to purchase
one additional share of common stock at $1.50 per share (see Note
8). $85,420 of costs were incurred in connection with this
offering and have been deducted from additional paid-in capital in
the accompanying consolidated financial statements.
Between May and December, 1996, the Company issued an additional
36,769 shares of restricted common stock to officers, directors,
consultants, professionals and vendors for services rendered. The
shares were priced at the fair market value of the common stock on
the date the shares were issued and have been valued at a total of
$124,704 in the accompanying consolidated financial statements for
an average per share price of $3.39.
During 1996, warrants representing 40,000 and 1,700 shares of
common stock were exercised at prices of $1.25 and $1.50 per share,
respectively, generating cash proceeds to the Company totaling
$52,550. See Note 8 regarding common stock warrants.
In July 1996, 20,000 shares of restricted common stock were issued
by the Company as payment of a $50,000 note payable along with
accrued interest of $6,000 resulting in a per share price of $2.80.
The Company issued 100,000 shares of restricted common stock upon
the exercise of common stock warrants representing the same number
of shares, having an exercise price of $1.75 per share. Payment
for the common stock was made with a non-interest bearing four year
promissory note. The related shares are being held by the Company
as collateral for the promissory note. The shares have ben
reflected as issued and outstanding with a corresponding $175,000
stock subscription receivable reflected as a reduction of
stockholders' equity.
In the first quarter of 1997, the Company issued 7,400 shares of
common stock for services valued at $14,106 or $1.91 per share.
NOTE 8 - COMMON STOCK WARRANTS
As of December 31, 1996, the Company had outstanding warrants for
the issuance of common stock as follows:
Number of Date Expiration Exercise Potential
Shares Issued Date Price Proceeds
777,750 1994 1997 $1.5625 - $2.50 $ 1,345,625
591,000 1995 1998-2005 $1.125 - $2.625 1,124,250
2,553,330 1996 1999-2001 $1.00 - $4.25 6,600,388
4,590 1997 2002 $ 2.125 9,754
$ 9,080,017
<PAGE>
MEDISYS TECHNOLOGIES, INC.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
March 31, 1997 and 1996
NOTE 9 - COMMON STOCK OPTIONS
On September 15, 1995, the Company issued options for the purchase
of 508,000 shares of common stock to certain shareholders, one of
which is also an officer and director of the Company. The Company
received $254,000 of consideration for the issuance of these
options or $0.50 per share which enabled the holders to acquire the
508,000 shares of common stock for additional consideration
totaling $76,000, or $0.15 per share. The fair market value of the
Company's common stock on the date the options were purchased was
$1.00 per share. The difference between the option exercise price
and the fair market value of the Company's common stock relative to
these options totaled $177,800 or $0.35 per share and has been
included as compensation in the accompanying consolidated statement
of operations for the year ended December 31, 1995. The options
expired unexercised on December 15, 1995. Accordingly, the
proceeds from the sale of these options and the difference between
the option exercise and fair market value of the common stock has
been reflected as additional paid-in capital in the accompanying
consolidated financial statements with no shares of common stock
issued.
NOTE 10 - GOING CONCERN
The Company's consolidated financial statements have been 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 since inception, relating
to its research and development efforts and has had no significant
operating revenues. In prior periods, the Company has had
substantial working capital and stockholders' equity deficits. In
1996, the Company was able to raise working capital through the
private placement of its common stock. However, cash flow
projections show that the Company's reserves are not adequate to
cover its needs for 1997. It is unlikely that the Company can
complete its research and development projects without additional
funds. Management of the Company plans to raise additional capital
through a private placement or a public offering of its common
stock and the Company anticipates generating additional revenue
from increased product sales.
<PAGE>
Item 2. Managements Discussion and Analysis or Plan of Operation
Results of Operations
The net loss for the first quarter of 1997 increased 68% to
$398,098 when compared to the corresponding 1996 period. This
result is primarily attributed to the Company s increased effort in
the development of its products.
Operating expenses for the first quarter of 1997 increased 84%,
when compared to the corresponding 1996 period, primarily
attributed to increases in the following items: product
development (121% increase for the first quarter of 1997) due to
increased effort in the development of SofCeps and CoverTip , the
Company s flagship products; salaries (50% increase for the first
quarter of 1997) due to the addition of a Vice President and Chief
Operating Officer and annual salary increases; professional
services (919% increase to $26,548 for the first quarter of 1997)
due to additional costs associated with being a public reporting
company; general and administrative expenses (42% for the first
quarter of 1997) due to increases in consulting charges, contract
labor, and travel expenses.
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 March 31, 1997 was [$224,227] compared to
$198,112 at December 31, 1996. This decline in working capital is
primarily attributable to the decrease in cash of $460,464.
Net cash used by operations for the first quarter of 1997 was
$428,729, compared to net cash used of $193,845 for the comparable
1996 period, primarily attributed to the increase in the net loss
from operations during the first quarter of 1997. Also, net cash
from financing activities during the first quarter of 1997 was
$28,930 compared to $177,394 for the comparable 1996 period,
primarily attributed to the sale of common stock.
The Company anticipates meeting its working capital needs
during the second quarter of 1997 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 March 31, 1997 the Company had total assets of $706,885
and stockholders equity of $194,278. In comparison, as of
December 31, 1996 the Company had total assets of $1,051,500 and
total stockholders equity of $558,106. The 33% decrease in total
assets for the three month period ended March 31, 1997 is primarily
due to cash used in the Company s operating 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 third quarter of 1997. Unless the Company is able to begin
substantial sales of its products during the first half of 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.
PART II
Item 1. Legal Proceedings
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.
Item 2. Changes in Securities
Recent Sales of Unregistered Securities
During the first quarter of 1997, the Company issued an 7,400
shares of common stock to individuals for services rendered to the
Company. The shares were valued at $1.91 per share, or an
aggregate of $14,106. The issuance of the shares was pursuant to
a private transaction and was made in reliance on the exemption
from registration provided by Section 4(2) of the Securities Act of
1933, as amended. A complete description of recent sales of
unregistered securities can be found in the Consolidated Statements
of Stockholders Equity and Note 7 and Note 8 to the Consolidated
Financial Statements.
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.
Item 3. Defaults Upon Senior Securities
This Item is not applicable to the Company.
Item 4. Submissions of Matters to a Vote of Security Holders
No matters were submitted to a vote of the Company s Securities
Holders during the three month period ended March 31, 1997.
Item 5. Other Information
This Item is not applicable to the Company.
Item 6. Exhibits and Reports on Form 8-K
No report filed on Form 8-K was filed by the Company during the
three month period ended March 31, 1997.
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
MEDISYS TECHNOLOGIES, INC.
BY: Edward P. Sutherland
(Signature)
EDWARD P. SUTHERLAND
President and Chief
Executive Officer
DATE: May 20,1997
BY: Paul R. Radle, Jr.
(Signature)
PAUL R. RADLE, JR.
Vice President, Chief
Financial officer and
Treasurer
DATE: May 20,1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL
INFORMATION EXTRACTED FROM THE MEDISYS
TECHNOLOGIES, INC. FINANCIAL STATEMENTS FOR THE
PERIOD ENDED MARCH 31, 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 209,140
<SECURITIES> 0
<RECEIVABLES> 29,273
<ALLOWANCES> 0
<INVENTORY> 19,668
<CURRENT-ASSETS> 285,913
<PP&E> 156,884
<DEPRECIATION> 85,934
<TOTAL-ASSETS> 706,885
<CURRENT-LIABILITIES> 510,140
<BONDS> 0
0
0
<COMMON> 6,173
<OTHER-SE> 5,464,222
<TOTAL-LIABILITY-AND-EQUITY> 706,885
<SALES> 38,873
<TOTAL-REVENUES> 38,873
<CGS> 7,880
<TOTAL-COSTS> 435,196
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,007
<INCOME-PRETAX> (398,098)
<INCOME-TAX> 0
<INCOME-CONTINUING> (398,098)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (398,098)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
</TABLE>
