UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 1
to
FORM 10-QSB/A
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of The
Securities Exchange Act of 1934
For the Quarter Ended June 30, 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 July 21, 1997
Common Stock, 12,607,640
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. . . . . . . . . . . . . 22
Item 2. Changes in Securities. . . . . . . . . . . 22
Item 3. Defaults Upon Senior Securities. . . . . . 23
Item 4. Submissions of Matters to a Vote of Security
Holders. . . . . . . . . . . . . . . . . . 23
Item 5. Other Information. . . . . . . . . . . . . 23
Item 6. Exhibits and Reports on Form 8-K . . . . . 23
SIGNATURES . . . . . . . . . . . . . . . . . . . . . 24
<PAGE>
PART I
Item 1. Financial Statements
The following unaudited Financial Statements for the period
ended June 30, 1997, have been prepared by the Company.
Medisys Technologies, Inc.
(a Development Stage Company)
Consolidated Financial Statements
June 30, 1997 and 1996
<PAGE>
MEDISYS TECHNOLOGIES, INC.
(A Development Stage Company)
Consolidated Balance Sheets
ASSETS
June 30, December 31,
1997 1996
(Unaudited)
CURRENT ASSETS
Cash $ 44,576 $ 669,604
Accounts receivable, net of
allowance for bad debt 21,584 -
Inventory 57,156 8,571
Prepaid expenses 26,470 6,997
Total Current Assets 149,786 685,172
FIXED ASSETS
Leasehold improvements 2,195 2,195
Automobiles 22,650 67,950
Furniture and equipment 76,946 66,092
Leased equipment 10,010 10,010
Accumulated depreciation (51,938) (79,934)
Total Fixed Assets 59,863 66,313
OTHER ASSETS
Security deposits 4,000 4,000
Patent costs 380,061 295,704
Organizational costs 311 311
Total Other Assets 384,372 300,015
TOTAL ASSETS $ 594,021 $1,051,500
<PAGE>
MEDISYS TECHNOLOGIES, INC.
(A Development Stage Company)
Consolidated Balance Sheets (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
June 30, December 31,
1997 1996
(Unaudited)
CURRENT LIABILITIES
Accounts payable $ 305,204 $ 276,014
Accrued expenses (Note 3) 143,804 105,441
Loans payable-shareholders (Note 2) 48,481 45,981
Contracts payable - current portion
(Note 4) 4,281 14,243
Notes payable - current portion
(Note 5) 43,153 45,381
Total Current Liabilities 544,923 487,060
LONG-TERM DEBT
Contracts payable - less current
portion (Note 4) - 6,334
Total Long-Term Debt - 6,334
TOTAL LIABILITIES 544,923 493,394
COMMITMENTS (Note 6) - -
STOCKHOLDERS' EQUITY
Common stock: 100,000,000 shares
authorized of $0.0005 par value,
12,589,440 and 12,337,940 shares
issued and outstanding, respectively 6,295 6,167
Additional paid-in capital 5,736,669 5,429,958
Stock subscriptions receivable
(Note 7) (175,000) (175,000)
Deficit accumulated during the
development stage (5,518,866) (4,703,019)
Total Stockholders' Equity 49,098 558,106
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 594,021 $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 For the Six Months 1991 through
Ended June 30, Ended June 30, June 30,
1997 1996 1997 1996 1997
REVENUES $ 24,577 $ - $ 63,450 $ 2,182 $ 68,434
OPERATING EXPENSES
Cost of product sold 5,679 - 13,559 1,256 15,400
Product development 191,801 127,754 385,196 215,349 2,069,784
Salaries 74,318 71,646 139,330 114,867 1,178,236
Professional services 27,206 18,906 53,754 21,511 802,224
Depreciation and
amortization 3,021 6,021 9,042 12,042 109,121
General and
administrative 144,149 51,382 280,489 147,669 1,283,729
Total Operating
Expenses 446,174 275,709 881,370 512,694 5,458,494
OPERATING LOSS (421,597) (275,709) (817,920) (510,512) (5,390,060)
OTHER INCOME
(EXPENSES)
Gain on sale of assets 8,695 - 8,695 - 8,695
Interest income 1,555 - 5,787 - 18,981
Interest expense (6,402) (3,079) (12,409) (5,702) (103,055)
Bad debt expense - - - - (53,427)
Total Other Income
(Expense) 3,848 (3,079) 2,073 (5,702) (128,806)
LOSS BEFORE INCOME
TAXES (417,749) (278,788) (815,847) (516,214) (5,518,866)
INCOME TAXES - - - - -
NET LOSS $(417,749) $(278,788) $(815,847) $(516,214)$(5,518,866)
NET LOSS PER SHARE
OF COMMON STOCK $ (0.04) $ (0.02) $ (0.07) $ (0.04)
<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 $1.03 per share
(unaudited) 121,500 66 125,507 -
Issuance of stock for cash at
$1.25 to $1.50 per share
(unaudited) 130,000 62 164,938 -
Common stock warrants issued
for services (unaudited) - - 16,266 -
Net loss for the six months
ended June 30, 1997 (unaudited) - - - (815,847)
Balance, June 30, 1997
(unaudited) 12,589,440 $ 6,295 $5,736,669 $(5,518,866)
<PAGE>
MEDISYS TECHNOLOGIES, INC.
(A Development Stage Company)
Consolidated Statements of Cash Flows
(Unaudited)
From
Inception on
January 21,
For the Three Months For the Six Months 1991 through
Ended June 30, Ended June 30, June 30,
1997 1996 1997 1996 1997
CASH FLOWS FROM
OPERATING ACTIVITIES
Loss from operations $(417,749)$(278,788)$(815,847)$(516,214)$(5,518,866)
Adjustments to reconcile net
income to net cash provided
(used) by operating activities:
Operating expenses paid by
issuance of common stock 122,507 - 122,507 - 431,078
Common stock options and
warrants for services - - - - 211,254
Depreciation and
amortization 3,021 6,021 9,042 12,042 110,516
Allowance for doubtful
accounts - - - - 53,070
Gain on sale of assets (8,695) - (8,695) - (8,695)
Changes in operating assets
and liabilities:
(Increase) decrease in accounts
receivable 7,689 (3,691) (21,584) (1,981) (21,584)
(Increase) decrease in
inventory (37,488) (3,914) (48,585) (8,805) (57,156)
(Increase) decrease in
prepaid expenses 1,362 7,486 (19,473) 14,973 (26,470)
(Increase) decrease in security
deposits - - - - (4,000)
(Increase) decrease in
organizational costs - - - - (311)
Increase (decrease) in
accounts payable 19,044 (31,152) 29,190 11,564 305,204
Increase (decrease) in
accrued expenses 23,956 (30,287) 38,363 (39,749) 143,804
Net Cash (Used) by
Operating Activities (286,353) (334,325) (715,082) (528,170) (4,382,156)
CASH FLOWS FROM
INVESTING ACTIVITIES
Sale of equipment 16,627 - 16,627 (26,792) 16,627
(Increase) decrease in
patent costs (34,371) (12,176) (84,399) - (381,497)
Acquisition of subsidiary - - - - (40,673)
Purchase of fixed assets 217 (4,014) (10,420) (4,377) (94,267)
Net Cash (Used) by
Investing Activities $(17,527) $(16,190) $(78,192) $(31,169) $ (499,810)
<PAGE>
MEDISYS TECHNOLOGIES, INC.
(A Development Stage Company)
Consolidated Statements of Cash Flows (Continued)
(Unaudited)
From
Inception on
January 21,
For the Three Months For the Six Months 1991 through
Ended June 30, Ended June 30, June 30,
1997 1996 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 - (429) - (1,444) (10,010)
Payments on contracts payable(12,429) (3,822) (16,296) (7,644) (58,119)
Borrowings from shareholders 2,500 - 2,500 67,465 492,970
Payments on payable -
stockholders - (25,831) - (24,007) (20,984)
Borrowings from notes payable - - - - 338,500
Payment on notes payable (755) (86,622) (2,228) (106,180) (139,347)
Stock subscriptions receivable - - - - 53,427)
Issuance of common stock 150,000 1,018,000 184,270 1,150,500 4,150,788
Proceeds from sale of
stock options - - - - 254,000
Proceeds from exercise of
common stock options - - - - 52,550
Net Cash Provided by
Financing Activities 139,316 901,296 168,246 1,078,690 4,926,542
NET INCREASE (DECREASE)
CASH AND CASH EQUIVALENTS (164,564) 550,781 (625,028) 519,351 44,576
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 209,140 50,719 669,604 82,149 -
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 44,576 $ 601,500 $ 44,576 $601,500 $ 44,576
SUPPLEMENTAL DISCLOSURES
OF CASH FLOW INFORMATION
CASH PAID FOR
Income taxes $ - $ - $ - $ - $ -
Interest $ 6,402 $ 3,079 $ 12,409 $ 5,702 $ 55,589
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 $122,507 $ - $ - $ - $431,078
<PAGE>
MEDISYS TECHNOLOGIES, INC.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
June 30, 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 June 30, 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
June 30, 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 June 30, 1997 and
1996 due to operating losses. The minimum state franchise tax has
been accrued.
The Company has accumulated $5,508,790 of net operating losses as
of June 30, 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
815,847 2012
Total $5,508,790
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
June 30, 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 $4,467 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 June 30, 1997, there was a balance outstanding
payable to stockholders totaling $48,481.
<PAGE>
MEDISYS TECHNOLOGIES, INC.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
June 30, 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:
June 30,
1997
Bank One, with total monthly payments of principal
and interest of $425, for 60 months, secured by the
automobile. $ 4,281
The maturities of contracts payable are as follows:
1997 $ 4,281
1998 -
Thereafter -
$ 4,281
<PAGE>
MEDISYS TECHNOLOGIES, INC.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
June 30, 1997 and 1996
NOTE 5 - NOTES PAYABLE
Notes payable consisted of the following:
December 31, June 30,
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 18,153
Total 45,381 43,153
Less current portion (45,381) (43,153)
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
prorata 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
June 30, 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
SofCepts 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
June 30, 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 six months of 1997, the Company issued 121,500 shares
of common stock for services valued at $125,573 or $1.03 per share.
The Company also issued 120,000 shares at $1.25 per share and 10,000
shares at $1.50 per share for cash proceeds of $165,000.
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
180,739 1997 2000-2002 $ 1.6875 - 2.125 239,505
$9,309,768
MEDISYS TECHNOLOGIES, INC.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
June 30, 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 securities
and the Company anticipates generating additional revenue from
increased product sales.
<PAGE>
Item 2. Management s Discussion and Analysis or Plan of Operation
Results of Operations
The net loss for the three month period ended June 30, 1997
("second quarter of 1997") increased 50% to $417,749 when compared
to the corresponding 1996 period, primarily due to the Company's
increased effort in the development of its products. Net loss for
the six month period ended June 30, 1997 ("first half of 1997")
increased 58% to $815,847 when compared to the corresponding 1996
period.
Revenues increased to $24,577 for the second quarter of 1997
compared to no sales for the second quarter of 1996, and increased
to $63,450 for the first half of 1997 compared to $2,182 for the
corresponding 1996 period. These increases are attributed to
initial sales of the Company's VetCeps product.
Cost of product sold increased to $5,679 for the second
quarter of 1997 compared to zero for the second quarter of 1996,
and increased to $13,559 for the first half of 1997 compared to
$1,256 for the corresponding 1996 period. These increases are also
attributed to initial sales of the Company's VetCeps product.
Product development costs for the second quarter and first
half of 1997 were $191,801 and $385,196, respectively, compared to
$127,754 and $215,349 for the comparable 1996 periods. The 50% and
79% increases for the second quarter and first half of 1997,
respectively, are primarily due to increased effort in the
development of SofCeps and CoverTip , the Company's flagship
products.
Salaries for the second quarter and first half of 1997 were
$74,318 and $139,330, respectively, compared to $71,646 and
$114,867 for the comparable 1996 periods. The 4% and 21% increases
for the second quarter and first half of 1997, respectively, are
attributed to the addition of a Vice President and Chief Operating
Officer and annual salary increases for other personnel.
Professional services increased 44% to $27,206 for the second
quarter of 1997 compared to $18,906 for the second quarter of 1996,
and increased 150% to $53,754 for the first half of 1997 compared
to $21,511 for the corresponding 1996 period. These increases
relate to additional costs associated with becoming a reporting
company under the Securities Exchange Act of 1934, as amended.
Depreciation and amortization decreased to $3,021 for the
second quarter of 1997 compared to $6,021 for the second quarter
of 1996, and decreased to $9,042 for the first half of 1997
compared to $12,042 for comparable 1996 period. These decreases
are attributable to the sale of two company automobiles.
General and administrative costs for the second quarter and
first half of 1997 were $144,150 and $280,490, respectively,
compared to $51,382 and $147,669 for the comparable 1996 periods.
The 181% and 90% increases for the second quarter and first half of
1997, respectively, also relate to costs associated with being a
reporting company.
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 June 30, 1997 was a negative $395,137
compared to $198,112 at December 31, 1996. This decline in working
capital is primarily attributable to the decrease in cash of
$625,028 during this period.
Net cash used by operating activities for the second quarter
of 1997 was $286,353 compared to net cash used of $334,325 for the
comparable 1996 period. This decrease is primarily attributable to
the payment of operating expenses with common stock rather than
cash payments in the second quarter of 1997. Net cash used by
operating activities for the first half of 1997 was $715,082
compared to $528,170 for the 1996 period. This increase in cash
used is due to the increase in the loss from operations and
partially offset by the payment of operating expenses with common
stock rather than cash in the second quarter of 1997. Also, net
cash from financing activities during the second quarter and first
six months of 1997 was $139,316 and $168,246, respectively compared
to $901,296 and $1,078,690 for the respective comparable 1996
periods, primarily due to the sale of common stock in 1996.
The Company anticipates meeting its working capital needs into
the third quarter of 1997 with the cash reserves which 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. 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 June 30, 1997 the Company had total assets of $594,021
and stockholders' equity of $49,098. In comparison, as of December
31, 1996 the Company had total assets of $1,051,500 and total
stockholders' equity of $558,106. The 44% decrease in total assets
during the first half of 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
late third quarter of 1997. Unless the Company is able to begin
substantial sales of its products during the second 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 fourth 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.
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 second quarter of 1997, the Company issued 114,100
shares of common stock to individuals for services rendered to the
Company. The shares were valued at $.98 per share, or an aggregate
of $111,467. Also during the second quarter of 1997, the Company
issued an aggregate of 130,000 shares of common stock at an average of
$1.27 per share for cash proceeds of $165,000. For the six month period
ended June 30, 1997, the Company issued an aggregate of 121,500 shares
of common stock for services valued at $1.03 per share, or an aggregate
of $125,573. No shares were sold for cash during the first quarter of
1997. The funds from the cash sales were used for continued development
of the Company's products and for general business expenses. The issuances
of the shares were pursuant to private transactions and were 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
On Wednesday, May 14, 1997, pursuant to proper notice to
stockholders, the Company held its Annual Meeting of Stockholders
at the Radisson Hotel, Baton Rouge, Louisiana. At the Meeting, the
following incumbent directors were elected by the indicated vote to
serve as directors until the next Annual Meeting of Stockholders or
until their successors are elected and qualified.
Nominee For Against Abstain
Gary Alexander 7,468,834 0 31,700
Dr. Tim Andrus 7,468,834 0 31,700
Jane Cooper 7,468,834 0 31,700
Dr. Robert L. diBenedetto 7,468,834 0 31,700
Kerry M. Frey 7,468,834 0 31,700
William D. Kiesel 7,468,834 0 31,700
Paul R. Radle, Jr. 7,468,834 0 31,700
Edward P. Sutherland 7,468,834 0 31,700
In addition to the election of directors, the following
business was brought before and voted upon at the Annual Meeting of
Stockholders:
Stockholders ratified the appointment of Jones, Jensen &
Company as independent auditors for the Company's fiscal year
ending December 31, 1997 by a vote of 7,472,734 for, 500
against, and 27,300 abstaining.
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 June 30, 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: /S/ Edward P. Sutherland
(Signature)
EDWARD P. SUTHERLAND
President and Chief
Executive Officer and
DATE: August 19, 1997
BY: /S/ Gary Alexander
(Signature)
GARY ALEXANDER
Treasurer
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL
INFORMATION EXTRACTED FROM THE MEDISYS
TECHNOLOGIES, INC. FINANCIAL STATEMENTS FOR THE
PERIOD ENDED JUNE 30, 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 44,576
<SECURITIES> 0
<RECEIVABLES> 21,584
<ALLOWANCES> 0
<INVENTORY> 57,156
<CURRENT-ASSETS> 149,786
<PP&E> 111,801
<DEPRECIATION> 51,938
<TOTAL-ASSETS> 594,021
<CURRENT-LIABILITIES> 544,923
<BONDS> 0
0
0
<COMMON> 6,295
<OTHER-SE> 5,736,669
<TOTAL-LIABILITY-AND-EQUITY> 594,021
<SALES> 63,450
<TOTAL-REVENUES> 63,450
<CGS> 13,559
<TOTAL-COSTS> 881,370
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,409
<INCOME-PRETAX> (815,847)
<INCOME-TAX> 0
<INCOME-CONTINUING> (815,847)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (815,847)
<EPS-PRIMARY> (.07)
<EPS-DILUTED> (.07)
</TABLE>
