MEDISYS
TECHNOLOGIES,
INC.
1996 ANNUAL REPORT
<PAGE>
United States Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] Annual Report Pursuant to Section 13 or 15(d) of The
Securities Exchange Act of 1934
For the Fiscal Year Ended December 31, 1996
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Commission File Number 0-21441
MEDISYS TECHNOLOGIES, INC.
(Name of small business issuer in its charter)
Utah 72-1216734
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9624 Brookline Avenue, Baton Rouge, Louisiana 70809
(Address of principal executive officers) (Zip Code)
Issuer s telephone number: (504) 926-0422
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, par value $0.0005 per share
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 [ ]
Check if there is no disclosure of delinquent filers in
response to Item 405 of Regulation S-B contained in this form, and
no disclosure will be contained, to the best of registrant s
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ ]
State issuer s revenues for its most recent fiscal year.
$2,182
State the aggregate market value of the voting stock held by
non-affiliates computed by reference to the price at which the
stock was sold, or the average bid and asked prices of such stock,
as of a specified date within the past 60 days. $17,444,840
(Based on price of $2.00 per share on April 4, 1997)
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 March 28, 1997
Common Stock, Par Value $0.0005 12,355,340
DOCUMENTS INCORPORATED BY REFERENCE
Transitional Small Business Disclosure Format. Yes [ ] No [X]<PAGE>
MEDISYS TECHNOLOGIES, INC.
TABLE OF CONTENTS
PART I
Item 1. Business. . . . . . . . . . . . . . . . . . . . . . 3
Item 2. Properties. . . . . . . . . . . . . . . . . . . . .18
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . .18
Item 4. Submission of Matters to a Vote of Security Holders18
PART II
Item 5. Market for Registrant s Common Equity and Related
Stockholder Matters . 19
Item 6. Management s Discussion and Analysis of Financial
Condition and Results of Operations 20
Item 7. Financial Statements and Supplementary Data . . . .22
Item 8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure. 41
PART III
Item 9. Directors and Executive Officers of the Registrant.41
Item 10. Executive Compensation . . . . . . . . . . . . . .45
Item 11. Security Ownership of Certain Beneficial Owners
and Management . 46
Item 12. Certain Relationships and Related Transactions . .47
PART IV
Item 13. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K. 48
Signatures.. . . . . . . . . . . . . . . . . . . . . . . . .49
<PAGE>
PART I
Item 1. Business
Medisys Technologies, Inc. ( Medisys or the Company ) is a
development stage company with a focus on the delivery of
innovative, cost-effective products to the Women s Healthcare and
Medical Safety Device markets. The Company is primarily addressing
the obstetrical market by developing a range of proprietary
products aimed at enhancing safety and reducing the cost associated
with the birthing process.
The Company was incorporated on March 17, 1983 under the laws
of the State of Utah as Whitewater Products, Ltd. and initially
engaged in the business of manufacturing and marketing sporting
goods, primarily sailboards. The Company subsequently ceased its
original business activity in 1985 and thereafter primarily
investigated and sought new business opportunities and was
reclassified as a development stage Company as of March 1, 1989.
On August 6, 1992, the Company acquired Medisys Technologies,
Inc., a Louisiana corporation, engaged in the business of
developing a device for the assistance of childbirth under a patent
which was applied for in May 1990 and granted on June 15, 1992.
Subsequent to the acquisition, all of the Company s activities have
been related to the development of medical devices for use
primarily in the Women s Healthcare and Medical Safety Device
markets. For accounting purposes the acquisition was treated as a
recapitalization of Medisys-Louisiana with Medisys-Louisiana as the
acquirer (reverse acquisition). The acquisition was perfected by
a share exchange, which resulted in former Whitewater
shareholders owning 7% of the shares in the new company in the
aggregate, while former Medisys shareholders owned 93% of the
shares in the new company, in the aggregate. Also on August 6,
1992 the Company changed its name to Medisys Technologies, Inc.
Prior to the acquisition, there was no affiliation between
Whitewater and the Louisiana Company, Medisys. The president of
Whitewater was H. DeWorth Williams and the Secretary was Janis
Patterson, both residents of the State of Utah. The principal
shareholders of Whitewater were Mr. Williams, John and Jona
Price, residents of Hawaii.
During 1996 the Company spent $496,446 and in 1995 the
Company spent $255,486 on product research and development costs.
Primary Products:
WOMEN S HEALTHCARE - SOFCEPS
The Company is the exclusive assignee of all rights in and to
certain United States patents for an obstetrical tractor (birth
assistance delivery device) known as SOFCEPS which, in part, is
designed to replace traditional steel obstetrical forceps and
vacuum extractors used to assist child birth. SOFCEPS is intended
to offset the possible negative obstetrical consequences of
epidural anesthesia which may slow or interrupt the descent of the
fetus through the birth canal and may diminish maternal ability to
produce voluntary and involuntary contractions during delivery.
SOFCEPS is a disposable soft and thin double-walled multifiber
braided axial gripping cylinder which is placed over the fetal
skull with a simple application system. It is designed to
uniformly distribute assisting traction forces about the
circumference and longitudinal surface areas of the fetal skull.
The predecessor devices that SOFCEPS is designed to replace
are traditional steel obstetrical forceps and vacuum extractors and
the Company believes that maternal/fetal injuries associated with
the use of these predecessor devices will be reduced with the
adoption of this new alternative device. Maternal injuries
potentially caused by forceps, or by their improper use, range from
spiral lacerations of the pelvic floor and its associated
structures, to severe lacerations of the cervix resulting in
increased in-patient time, major surgical repair, incontinence,
sexual disorders, protracted discomfort, death, and substantial
increases in health care costs. Objective fetal injuries
potentially secondary to the use of forceps include minor "forceps
marks", fractures of the fetal skull, central nervous system (CNS)
deficit (cerebral palsy), severe mental retardation, blindness,
deafness, and death. Subjective injuries may include slowed
development of motor skills and learning disability. The use of
forceps when the fetus is at or above the midplane of the pelvis is
proscribed under current standards of care in the practice of
obstetrics.
The vacuum extractor was developed as an alternative to
traditional steel obstetrical forceps, but after over thirty years
of development its use still presents potential clinical problems.
The operative feature of the device is basically a suction cup
which is applied over the crown portion of the fetal skull where
traction forces are concentrated. Traction can result in hydraulic
transfer of traction forces through the fontanel to the
intracranial area. Off axis traction can result in the device
"popping" off the fetal skull with secondary rebound trauma being
transmitted to the intracranial area. Hematomas over the skull
have been noted secondary to the use of the vacuum extractor. Use
of both forceps and vacuum extractors requires a high degree of
skill and training.
When the mother opts for epidural anesthesia during delivery,
as most do, arrest or substantial delay of fetal descent in the
mid-pelvis range of the birth canal frequently occurs and the
obstetrician has no means available to beneficially promote
descent. In many cases delivery will be unduly prolonged and the
physician must resort to Cesarean section delivery. Unlike
traditional forceps, SOFCEPS can be applied when the fetus is at
or slightly above mid-pelvis of the birth canal, thereby providing
the obstetrician with an in place device to which traction can be
applied to offset the arrest or delay of descent. The Company
believes this will result in significant reductions in the rate of
Cesarean section deliveries secondary to arrest of fetal descent in
the mid-pelvis range.
The use of outlet forceps has become so much a part of normal
obstetrics that it is considered by some to be a part of a normal
delivery. Up to 1975, the use of forceps at all levels was
reported in the United States to be as high as 25% to 33 1/3%. By
1980, one study showed a 26.7% forceps use in "first child"
deliveries and over 15% in all deliveries. The Company estimates
that the percent of forceps deliveries in the United States today
is somewhere between 12% and 26%, depending on the region of the
Country surveyed. In recent years there has been a surge in
Cesarean section births in the United States. As the Cesarean
section rate increases, the use of obstetrical forceps tends to
decrease. Studies indicate that vacuum extractors delivery rates
are roughly equivalent to forceps delivery rates.
SOFCEPS combines centuries old non-obstetrical concepts with
modern medical and engineering technology. Using state of the art
braiding technology, a soft, thin mesh cylinder of synthetic fabric
is fabricated for application over the fetal head. Application is
accomplished with a simple and effective system which includes
accommodation for cephalic curvature. The application system is
then removed. After application, assisting traction is applied by
the physician to the portion of the cylinder which protrudes from
the vagina. A unique traction handle permits anterior, posterior,
or lateral traction as required to promote fetal descent. As
assisting traction is applied, the cylinder exerts uniform axial
gripping about the circumference of the fetal head. Unlike steel
forceps, gripping forces are not point concentrated but are spread
evenly over the fetal head and facial surfaces. Importantly,
traction can be applied concurrent with expulsive maternal
contractions thereby permitting efficient use of maternal reserves
of energy. The device has no edges which can cause lacerations
and, because it is much thinner than traditional forceps, it will
not exacerbate, and in many cases will offset, minimal
cephalo-pelvic disproportion (CPD) where the fetal head tightly
engages the birth canal. Because of the simplicity of the device,
the Company believes the average board certified obstetrician can
become proficient in its use within a nominal number of deliveries.
The device, including its application system, is disposable after
a single use.
Comprehensive clinical testing of SOFCEPS began at Baylor
College of Medicine, Houston, Texas, in October 1993. Under a
protocol approved by the Baylor Human Investigative Review
Board ("IRB"), assessments of successive prototypal configurations
were made using term fetal demise infants in order to evaluate the
components and function of the device. During the first year of
testing, it was determined SOFCEPS presented little, if any, risk
of maternal injury. Traction testing on several stillborns
demonstrated that force more than sufficient to promote fetal
descent in the birth canal resulted in no objective evidence of
fetal head feature trauma and permitted clinical conclusion that
the device was very likely to be less injurious to a fetus than
traditional devices.
On April 6, 1995 a developmental milestone occurred when a
term stillborn was successfully delivered with the device. During
this procedure, application over the fetal head was accomplished
and the Company concluded the device was clinically effective in
assisting completion of the delivery. Several modifications of the
delivery system have been made and with the completion of a minimal
number of still born deliveries, the results expected from the
Phase One testing protocol were considered by the Company to have
been met. Application for approval of Phase two protocol governing
live deliveries has begun. Deliveries are planned in the Phase Two
program for the fourth quarter of 1997 and the first quarter of
1998. Internationally, clinical sites at the Perinatal Institute
in Bern, Switzerland, the Hospital Central in Mexico, and the
Kenyaatla National Hospital in Kenya have been selected for
consideration of live birth testing. This testing has not commenced
at present and is anticipated to begin in the fourth quarter of
1997, first in Mexico and later in Switzerland and/or Kenya. In
the United States, a letter of intent has been signed with
physicians at the University of Maryland to begin live birth
testing.
MEDICAL SAFETY DEVICES - COVERTIP
Medical device safety is a large and growing issue within the
healthcare community. The transfer of infectious diseases result
in enormous economic and social costs. With AIDS, Hepatitis and
other communicable disease, the possibility of accidental infection
is a critical issue to healthcare workers and professionals. The
(CDC) Center for Disease Control in Atlanta reports that for every
250 syringe injections an accidental needle stick occurs to the
person administering the injection. The cost for subsequent
mandatory testing is between 250 to 700 dollars. While the
incidence of AIDS contracted through accidental needle sticks is
low (less than 50 cases reported in the U.S. today) the impact to
the individuals tested and the cost of both the testing and
treatment is enormous.
The current syringe market approaches 2.5 billion dollars in
the U.S. alone. Currently, safety syringes comprise a relatively
small portion, less than 10% of the total market. The desire to
use a safety syringe has been impeded by both cost and technique
requirements of currently available safety syringes. Current safety
syringes are 3-4 times the cost of standard syringes. Safety
syringe devices currently in the market are difficult to use and
require hospital training and ongoing inservice. These products
do not cover the needle prior to removal from the skin and can pose
a danger upon extraction from the patient.
In contrast to other safety syringes, the CoverTip device s
unique design covers the tip of the needle while in the skin and
locks in place protecting the healthcare worker during the
injection process and during disposal of the used syringe. Use of
the CoverTip requires no additional instruction.
The Company believes that substantial capital barriers may
preclude direct entry of the safety products by Medisys in the U.S.
Therefore, the Company will likely seek a license arrangement with
a major medical company. Foreign markets may offer similar
opportunities and are being explored. The Company has received
inquiries concerning the CoverTip product from the three largest
suppliers of syringes in the United States but has elected not to
engage in active negotiation of any licensing agreement until FDA
filings are underway.
On March 31, 1997 the Company submitted a 510(K) Exemption
from Pre-Market approval for CoverTip to the Food and Drug
Administration (FDA). The Company believes that the CoverTip
safety device should qualify for 510(K) FDA approval based on the
fact that to the best of the Company s knowledge all other safety
syringes are so classified by the FDA. It is anticipated that
favorable approval by the FDA should occur in the third quarter of
1997.
Other Opportunity Products
The Company is also presently developing other products termed
Other Opportunity Products which may generate revenue for the
company. A brief non-inclusive outline of opportunity products
available to the Company are as follows:
MEDISYS VETERINARY OBSTETRICAL TRACTOR
VETCEPSTM is a veterinary application of the SOFCEPS
obstetrical tractor. The Company enjoys patent protection for
veterinary application in bovine (cattle), ovine (sheep), and
equine (horse) obstetrics within its original patents. Development
thus far has been limited in large measure to the bovine
application because of its substantial potential market and because
it appears to offer an obvious solution to problems which arise
with the use of commonly used steel veterinary obstetrical fetlock
chains. The device has been successfully used on both foreleg and
hindleg to deliver live and stillborn. This product is now being
sold commercially. The Company introduced the device generating
sales of approximately 100 units during 1996 to test market
VETCEPSTM. Sales were discontinued in the first quarter of 1996
because the original product proved to be too large to accommodate
the fetlock (leg) of the majority of newborn calves. Subsequently
the product has been redesigned and is available in three different
sizes more closely accommodated the majority of newborn calves.
The device was reintroduced to the veterinary market in January
1997.
DISKLIPTM
DISKLIPTM ("DISKLIP") is a device used in connection with the
standard intravenous administering of medication ("I.V.") and to
secure other medical tubing. The DISKLIP is a simple, inexpensive,
one piece, disposable after single use device which is designed to
prevent inadvertent or accidental tug trauma to an I.V. site and to
afford the medical provider with an easier and more efficient means
of attaching other medical tubing. The Company believes that
DISKLIP will require little or no personnel training and will
result in savings in nursing time, reduction of instances of site
inflammation and irritation of vein walls (lumens), reduction of
instances of infiltration and veil wall puncture, reduction of risk
of sepsis, and reduction of patient discomfort. The Company's
expectations with regard to DISKLIP are currently being proven by
field testing. This field testing consisted of actual patient use
at several hospitals in Mexico as well as application and wear by
various Medisys personnel. It also included one market evaluation
by potential customers in the Unites States and Mexico. The
adhesive backing has been improved to incorporate a foam tape
approach that allows for skin breathability and reduced allergic
reaction (hypoallergenic). Additional designs are being
constructed to accommodate various locations of the body where
medical tubing is applied and the company is currently addressing
that need through additional research and development.
Backlog
The Company has no backlog of the VetCepsTM, veterinary
birth assistance device.
Market Analysis and Competition - SofCeps
The market for obstetrical products, both in the U.S. and
worldwide, is substantial. While declining birthrates are a factor
for consideration in western countries, even a slight decline
indicates a stable U.S. market of about 4 million births per year
for the next 10 years. Management believes that the rapidly
expanding population growth of third world and Pacific rim
countries represents a marketing opportunity for assisted delivery
devices and obstetrical products in general. The simple technology
that SofCeps employs will be of particular appeal in third world
countries and should offer strong market opportunities.
The primary assistance device in use today is stainless steel
obstetrical forceps. They were developed in the latter part of the
16th Century. Actual traction is exerted slightly below or
underneath the mandible and is point concentrated. Slippage of the
forceps is almost invited because of natural lubrication, refusal
of the fetal skull to conform to existing forceps design, and a
myriad of variables which exist from one fetal skull/pelvic
relationship to another. Virtually every forceps assisted delivery
involves risk of injury to the mother and the baby.
Stainless steel forceps apply a concentrated gripping force on
the fetal head which can result in a series of injuries from minor
forcep marks to skull fractures, central nervous system damage
and fetal death. The manipulation of the steel forceps in the
birth canal often causes maternal injuries ranging from spiral
lacerations of the pelvic floor to severe lacerations to the
cervix. In both instances, these injuries result in significantly
increased healthcare costs associated with post-delivery
complications and increased inpatient days.
Statistics have shown that forceps are used to assist up to
26% of vaginal deliveries. Injuries to the fetus range from minor
abrasions or "forceps marks" to skull fractures with massive brain
damage. The mother is at risk of lacerations of the cervix, which
can be life threatening, and the floor of the pelvis. Such
injuries are exhaustively dealt with in the medical literature and
the obstetrical community would welcome a device which promises a
significant reduction in maternal and fetal morbidity.
The only other significant attempt to introduce a new product
into this forceps arena has been the vacuum system. The vacuum
unit was patented in the late fifties and in spite of numerous
attempts toward refinement, management feels that the approach
still remains plagued with disadvantages. The system grips the
upper half of the fetal skull with a suction device and traction is
then applied. Use of the system frequently results in hematoma
over the fetal skull as well as rebound trauma caused by the device
popping off the fetal skull. Once in place, the device precludes
manual rotation of the skull. Rotation is frequently required to
ease passage through the pelvis. Many obstetricians have
experienced difficulties because they resort to twisting on the
extractor to accomplish rotation. This can result in serious
fetal injury. For these and other reasons, the vacuum system has
largely fallen into disfavor and the majority of obstetricians have
returned to the use of traditional forceps.
1. Customer Characteristics
Potential customers for the SofCeps product varies. They
include obstetricians, managed care organizations, hospitals and
patients (consumers).
a. Obstetricians
The need for safe, reliable birth assistance creates a base need
for replacement of current devices. Documentation of successful
deliveries, with reduction of risk to both mother and infant, will
be a strong motivator influencing the adoption of the SofCeps
device by the obstetrical community as well as hospitals (health
care providers), and physicians.
b. Hospitals (Health Care Providers)
Management believes that obstetrical care is being consolidated in
communities to establish a cost effective delivery system for this
service. Hospitals are increasingly under pressure to reduce
costs, while maintaining quality of care. SofCeps offers these
healthcare providers the opportunity to increase the quality of the
delivery process, while reducing the overall cost of care. An
additional opportunity is the economic potential for reduced
malpractice insurance and C-Section rates. As hospitals and health
care providers move toward captative care, the pressure to decrease
length of stay costs, while maintaining quality, will increase.
c. Patients (Consumers)
Patients are increasingly aware of the need to reduce health care
costs, but at the same time are concerned over the quality of care.
Forceps use and the concept of vacuum extractor assisted deliveries
are innately unpleasant to the average consumer. Therefore,
management believes that the SofCeps product, as well as other
simple Medisys products, represent viable alternatives to the
general consumer community, including Women's health and pediatric
advocacy groups.
2. Competitive Evaluation
The competitive product situation for obstetrics includes
products that are a part of diversified health care corporations
with slight focus on obstetrics. In the device arena, products for
obstetrics are produced from divisions of various companies whose
products are broadly based in many areas of health care. Equipment
companies such as Utah Medical and Hewlett Packard market
monitoring equipment and diagnostic tools for OB. Advertised as
the only company exclusively focused on women's health issues,
GynoPharma had a broad range of products primarily pharmaceutical
and over the counter drugs.
In the specific area of competition to SofCeps , instrument
manufacturers such as the Codman Division of Johnson & Johnson, V.
Muellar, and Weck manufacture obstetrical forceps in various forms.
Vacuum extractors are manufactured by Mityvac and others.
Instrument companies do not look at forceps as a major product
line, but can be expected to respond with alternative methods of
assisted delivery once the SofCeps product is introduced into the
market place. The same can be said for the vacuum extractor
companies.
3. Market Potential
As set forth herein, SofCeps is intended to be multi-
dimensional in use and is designed to be applied in a prophylactic
manner in all cases where mother and fetus do not present with
contraindications. Less than one half of section deliveries result
from maternal/fetal clinical presentation, i.e. inadequate pelvic
architecture, cephalo pelvic disproportion, vaso or placenta-
previa, etc., and one half of section deliveries are labor related
and perhaps preventable through use of a beneficial obstetrical
tractor.
The SofCeps device is a totally new concept which the Company
intends to market on a worldwide basis. The market is limited only
by the eventual degree of acceptance in the obstetrical community
and by the number of live births in each given market area. The
device is disposable after a single use, so potential market volume
repeats on an annual basis. The degree of market penetration will
depend upon product acceptance and effectiveness of marketing
efforts. The medical marketplace is receptive to new products
which can provide better patient care, savings in medical costs,
benefits to the health care industry, and which represent advances
in risk reduction. The Company is poised to effectively
demonstrate that the device will meet the criteria of today's
managed healthcare marketplace.
There are no past or present medical comparables to SofCeps
and pricing is based on costs of manufacture and distribution,
including usual administrative items, as well as preliminary price
sensitivity analysis. Medisys believes that a price of
approximately $300 per device will meet the requirements of the
managed care environment.
4. Non-Controllable Elements
With health care reform on a massive scale apparently
postponed for the foreseeable future, government intervention would
appear only to enhance the prospects for SofCeps as well as other
Medisys ' simple, easy to use, technologies. The managed care
companies should encourage the use of SofCeps , and economic
studies are planned in order to document the value.
The Company intends to participate in economic studies of
various products to demonstrate their positive cost outcome versus
standard care and other competitive methods of treatment. These
economic studies may be conducted from assessment of currently
available data and/or specific studies to demonstrate reduction in
overall cost through use of Medisys products. These studies are
anticipated to commence simultaneously to market introduction of
the various products and take varying amounts of time to complete
based on their complexity. While these studies are proof
statements to various benefits of Medisys products, they are not
anticipated to be critical to market introduction but rather
enhancements to each of the product s value to key decision makers.
The greatest elements outside immediate control would be the
introduction of similar birth assist products and the uncertainty
of the FDA approval process.
5. Marketing Plan
Medisys currently plans to market SofCeps on a direct basis
or through a co-marketing arrangement with supplemental sales
support from dedicated brokers. This approach is intended to
achieve appropriate marketing activity while minimizing selling
expenses. Internationally, the Company plans to distribute
Medisys products worldwide through international market
development brokers.
The market for an effective delivery assistance device is
worldwide. Concurrent with development and refinement efforts,
Medisys will employ comprehensive measures designed to apprise the
obstetrical world of what is forthcoming. Management will endeavor
to have customers ready and waiting when the device enters mass
production. These efforts have begun with public relations and
preliminary market communications which are underway.
Selling strategy will take a multi-focused approach centered
around the following customer groups:
During the final development stage Obstetricians will be
communicated with via direct mail and convention exposure at
major OB meetings to introduce the concept idea of SofCeps .
In addition, after successful live birth clinical testing,
educational seminars will be conducted on the appropriate use
of the SofCeps device by targeting the thought leaders and
volume delivery obstetrical centers. Specific effort will be
made to establish SofCeps advocates in the top 20 markets
nationally. Major benefits that will be positioned to the
obstetrician will include an increase in patient care and
potential for reduced malpractice insurance.
Major obstetrical societies will be contacted and requests made
for endorsements of the SofCeps product vs. forceps use.
After product testing, the Company plans to commission a panel
of distinguished obstetricians as an advisory group to provide
broad input and endorsement support.
Obstetrical Nurses will be exposed to the product through
convention activity at major meetings, select targeted direct
mail to key association officers, and thought leaders within the
major metropolitan markets.
Providers/Hospitals - A direct selling strategy will be employed
to the top 200 obstetrical hospitals. In addition, group
purchasing organizations will be contacted for inclusion of the
SofCeps product into their "formulary." The major selling
appeal to providers is the potential to increase care quality
and the potential for reduction of C-Section rates and
malpractice occurrence.
While physician obstetricians will be the final users, the
device is considered a hospital supply item. Exclusively,
hospitals with obstetrical units will be the customers of the
Company.
Managed care organizations have established a list of procedures
which they feel are being excessively used within the health
care community. Included as one of the highest within this list
are C-Section rates. C-Sections currently cost about $4,570
more than normal deliveries and there are wide variations of
occurrence by institution and geography. Management believes
that the use of SofCeps should generate a net savings over C-
Section delivery.
The Company s selling strategy will include contacting major
women's and children's advocacy organizations. The development
of a press kit for use in local areas where SofCeps has been
adopted for use will provide an efficient tool for local media,
physicians, and hospitals thereby enhancing general media public
relations.
Insurers - If SofCeps proves clinically successful and produces
a relatively short track record of safe and injury free
deliveries, the Company believes that medical malpractice and
health insurers will support the transitioning of insured
obstetricians from the continued use of forceps. A single
instance of infant brain damage can cost an insurer in excess
of $40 million dollars. A demonstration that SofCeps will
reduce the number of such instances will ingratiate insurers and
compel their collective assistance.
Women s Groups - In addition, the Company intends to advertise
and solicit various consumer periodicals that target a
predominantly female readership. By using the family periodicals
as communication tools, the message of the benefits of a
SofCeps delivery will be widespread.
Education - From a services standpoint, the Company intends to
provide user training through seminars, literature, clinical
video programs, and clinical workshops. Emphasis will initially
be placed on working through teaching hospitals in the various
geographic markets. Planning is underway for a detailed and
intense education program. Plans are to conduct at least one
seminar per month at strategic geographical areas across the
United States.
6. Advertising and Promotions
Initial promotional and market education activity has begun,
particularly targeted to each of the major customer groups. This
initiative has consisted of periodical news releases and
publication in a limited number of business and professional
publications about the Company in general, and SofCeps as a birth
assistance alternative concept. Further advertising and public
relations will be targeted to each category. For example, even
though hospitals will be the purchasers, obstetrical physician
users will dictate whether the purchases are made which will
require a blanket effort to insure wide familiarity with the device
within the obstetrical community.
Medical literature, in this case the various obstetrical
journals, is a primary key in dissemination of new information to
individual obstetrical practitioners. Appropriate physician
authored informative articles will be provided to these journals
for publication and distribution to individual subscribers.
Results of human clinical trials are being reported with clinical
details of each delivery.
7. Product Warranties
The Company will attempt to develop reasonable warranties with
application of the SofCeps product and these will be contained in
the product package insert which will be included with every
SofCeps unit sold or distributed.
Market Analysis - CoverTip
Currently $2.5 billion of annual sales volume is generated
with the use of syringes in the United States with safety syringes
purchases during this annual period approximating $300 million of
this amount. The penetration rate of safety syringes is driven by
concern over the health of the doctors, nurses, and other
healthcare professionals as well as cost associated with their care
and the testing necessary in response to the occurrence of
accidental needle sticks. The rate of accidental needle stick
reported by the Center for Disease Control (CDC) was one occurrence
for every 250 injections made. While the number of confirmed
cases of AIDS contracted accidental dirty needle sticks remains
small (less than 50 individuals) the occurrence of hepatitis and
other infectious diseases compounds the problem and cumulatively
results in tremendous cost, liability, long-term care and
productivity losses. Requirements for reporting all accidental
dirty needle sticks result in subsequent testing cost for each
event from between $250 -$700 .
Although there is support from the healthcare worker community
for safety syringes, there are still various obstacles such as
their higher cost, (3-5 times standard syringes) as well as the
difficult technique changes necessary to use many of these
currently cumbersome devices. The inservice cost to train a myriad
of healthcare practitioners using syringes places an added burden
on the conversion rate due to the awkward nature of currently
existing safety syringes. Many of these products require two-
handed application techniques which can, at times, present
accidental stick opportunities.
Customer characteristics
Customers for the CoverTip safety syringe include all
healthcare workers, nurses, physicians, hospitals, clinics, managed
care organizations as well as insurers.
a. Doctors, nurses, and healthcare providers.
The desire to reduce the likelihood of an accidental dirty
needle stick is strong with all healthcare workers. Individuals
who have contracted AIDS, hepatitis and other life threatening
contagious disease have become advocates for the adoption of safety
devices within the healthcare community. These individuals and
organizations supporting healthcare worker safety provide impetus
for the use of safety syringes.
b. Hospitals.
The need to reduce the cost of testing associated with
accidental needle sticks as well as reduction in liability and in
negative publicity and pressure from healthcare worker
organizations are strong motivators to the hospital in adopting a
relatively low cost easy to use safety syringe.
c. Managed Care/Insurance
Managed Care organizations and Insurers assume the burden of
liability both for treatment and damages associated with accidental
needle sticks. These groups appear supportive of efforts to reduce
the incidence of infectious disease contracted by cross
contamination.
Competitive Evaluation
Within the syringe business in the United States, Becton -
Dickenson enjoys the largest market share position approximating
60% of the market. Sherwood Medical a division of American Home
Products has approximately 30% with the remainder of the market
divided among numerous private label as well as foreign companies
such as Terumo. The safety syringe market is sub-divided in
similar fashion. Over 450 patents have been issued on various
types of safety needles and/or syringes. In spite of the
proliferation of interest and effort to convert these products, the
difficulty in changing behavior of the application technique of the
healthcare worker as well as the prohibitive cost (3-5 time
standard syringes) has inhibited the penetration of safety
syringes into the overall standard syringe marketplace. On March
31, 1997 the Company submitted a 510(K) Exemption from Pre-Market
approval for CoverTip to the FDA.
Marketing Plan
Due to the large capital investment required to manufacture
multiple large quantities of the CoverTip product, the primary
strategy of the CoverTip selling campaign will be designed to
obtain a third party large company partner with the manufacturing
distribution resources and expertise needed to rapidly introduce a
product with this enormous opportunity.
The CoverTip safety syringe will address each of the major
issues associated with current safety syringes as well as provide
benefits over standard intramuscular (IM) syringes. While standard
syringes cost between $0.08 and $0.12 each, it is anticipated that
the CoverTip safety syringe will be priced at less than $0.20
each. Specific costs will be developed once full production plans
are implemented.
As the CoverTip safety syringe requires no change in
technique, and is currently identical in use to a standard syringe,
it will eliminate educational (inservice) requirements that
currently exist with many safety syringes on the market.
Additionally, because of the unique design of the CoverTip safety
syringe, the needle tip is actually protected prior to removal from
the patients skin. This greatly reduces any contaminated needle
exposure to the healthcare worker and offers an advantage to other
safety syringes that require extraction from the patient s skin
prior to implementation of various needle tip protection methods.
Patents and Trade Secrets
The Company has aggressively pursued obtaining patent rights
to those products which it anticipates marketing. The Company
already is the owner of seven U.S. patents (U.S. Patent 5,122,148,
U.S. Patent 5,217,467, U.S. Patent 5,318,573, U.S. Patent
5,460,611, U.S. Patent 5,496,283, U.S. Patent 5,573,539, and U.S.
Patent 5,593,413) for the Company's SOFCEPS , COVERTIP , VETCEPTM
and DISKLIP devices. In addition, a new U.S. patent application
has been filed covering the latest generation of the SOFCEPS . The
Company has also pursued its foreign patent applications relating
to SOFCEPS in twenty countries and has obtained Australian Patent
669116. The Company also has pending a U.S. patent applications
covering VETCEPSTM, the veterinarian version of SOFCEPS , which is
approved but not yet issued, and a U.S. patent application relating
to the DISKLIPTM I.V. tubing retainer, the first of which has been
approved.
The Company has filed six U.S. trademark applications
preserving its right to use the trademarks "SofCepsTM", "VetCeps ",
the "Medisys " logo, "DisKlipTM", SofDerm , and "CoverTipTM" to
identify the various Company products. As the Company proceeds
forward with the commercialization of these and other products,
U.S. and foreign trademark applications will be filed to protect
their product name.
The Company intends to obtain copyright protection on its
product packaging, instruction sheets, and such other Company
materials that the Company believes significant to warrant
procurement of copyrights.
The Company has obtained through its research and development
efforts during the past four years, a large body of trade secrets
relating to the design and construction of SOFCEPS . In addition,
the Company has obtained substantial proprietary business
information relating to the manufacturing costs, marketing and
selling of the Company's various products.
Product Liability and Insurance
The Company may be exposed to potential product liability
claims by users of its products. The Company currently maintains
general business liability insurance limited to $1,000,000 coverage
per occurrence and in the aggregate. The Company's clinical
testing for human fetal demised deliveries has been through St.
Paul insurance Company with coverage limits of $5,000,000 per
occurrence and $15,000,000 aggregate coverage.
Additionally, the Company has obtained product liability
insurance for the VetCepsTM product from American Equity Insurance
Company. The coverage limit on this policy is $1,000,000 per
occurrence with a $1,000,000 general aggregate.
Government Regulation
The two primary products of the Company are SofCepsTM birth
assistance device and CoverTipTM Safety Syringe. Both are subject
to market introduction regulation by the Food and Drug
Administration (FDA).
Generally, all medical devices are subject to FDA regulation
under the Medical Device Amendments of the Federal Food, Drug and
Cosmetic Act and are classified into one of three categories, Class
I, Class II or Class III, depending on their intended use and upon
the degree of regulation necessary to provide reasonable assurance
of their safety and effectiveness. The class into which any
specific device is placed determines the requirements that must be
met before a manufacturer may distribute the device in interstate
commerce. Section 510(K) of the Medical Device Amendments provides
for a pre-market notification requirement whereby manufacturers
intending to market a new or significantly modified device are
required to submit a pre-market notification to the FDA in order to
establish substantial equivalence in terms of safety and
effectiveness to a device already on the market in the United
States prior to 1976, or to a device marketed after that date that
has been determined to be substantially equivalent. This
notification is required to be submitted at least 90 days prior to
introducing the device into interstate commerce, or otherwise
holding or offering the device for commercial distribution. No
prototype is required, however, additional data from testing may be
requested.
Within 90 days of receipt of the pre-market notification, the
Center for Devices and Radiological Health ( CDRH ) determines
whether the device is equivalent . If the device is deemed
equivalent, it cam be marketed. If the CDRH determines that a
device is not equivalent, the manufacturer may resubmit the 510(K)
notification with new data, file a reclassification petition, or
submit a pre-market approval application ( PMA ). A PMA is
required instead of the Section 510(K) process only if the device
is held to be a Class III device. Class III devices are those
represented to be life-sustaining or life-supporting, are implanted
in the body, or present potential unreasonable risk of illness or
injury. Class III devices are subject to more the rigorous FDA
approval process which generally required the completion of three
major steps. The first step involves the granting by the FDA of an
Investigational Device Exemption ( IDE ) which permits the proposed
product to be used in controlled human clinical trials. Upon
completion of a sufficient number of clinical cases to determine
the safety and effectiveness of the proposed device for specific
indication, a PMA is then prepared and submitted to the FDA for
review. This extensive submission includes design, manufacturing,
quality control and clinical data to substantiate the proposed
device s compliance with FDA manufacturing regulations as well as
to support its medical effectiveness. Upon acceptance by the FDA
of the PMA, the third major step, a public review if the data by an
advisory panel of the FDA, industry and medical professionals takes
place. Prior to receiving final approval, a company is inspected
by the FDA to verify that its manufacturing procedures meets all
requirements of the FDA regulations.
The Company believes that both of its primary products are
substantially equivalent to devices already marketed and are
therefore exempt from PMA.
However, the fact that the SofCepsTM device involves the
birthing of babies, the Company s approach has been and remains
determined to follow a protocol consistent with all FDA guidelines
and to complete all good manufacturing practices prior to marketing
the product.
A discussion of where the Company stands with regard to the
FDA process is included under each product heading.
Prior to the Phase I testing of SOFCEPS , the Company applied
to the FDA for a 510(K) exemption from Pre Market Approval (PMA)
for marketing the SofCeps device. PMA could require a lengthy
testing and approval process. The FDA has reviewed the Company's
application and testing protocol. Based on Phase I data, the
Company was allowed to continue its fetal demised clinical testing.
An Investigational Device Exemption (IDE) Draft for Phase II
testing has been submitted to the Office of Device Evaluation
(ODE/OB-GYN) for review and comment. The Company has established
a positive dialogue with the FDA and believes that the IDE process
will be postured to proceed with Phase II testing when Phase I is
successfully completed. The Company intends to resubmit a 510(K)
application to the FDA concurrent with the accumulation of live
human clinical test data.
The Company believes that the CoverTip safety device should
qualify for 510(K) FDA approval. On March 31, 1997 the Company
submitted a 510(K) Exemption from Pre-Market approval to the FDA.
Other than the FDA, the Company does not believe that there
are any existing or probable governmental regulations that would
adversely affect the Company or its business.
All materials used in Medisys disposable products are standard
medical materials compatible with present methods of hospital
disposal in accordance with accepted practices and applicable laws.
Employees
As of March 31, 1997 the Company employed 8 full-time
individuals, consisting of 3 executive officers and 5 office staff
personnel. In addition to its full-time employees, the Company
uses the services of certain consultants on a contract basis.
These consultants include, William D. Kiesel, a patent attorney and
Director of the Company; Paul R. Radle, Jr., a CPA and Director,
Treasurer, and CFO of the Company; Clayton Simpson, a CPA and
Controller of the Company; Joel Faden, a FDA consultant; and
Coastline Financial Corporation, financial consultants. Mr. Kiesel
is reimbursed for patent costs and expenses only. Prior to 1996,
Mr. Radle received restricted shares of the Company s common stock
as reimbursement for his services. After January 1, 1996, Mr.
Radle has been compensated on an hourly basis. Mr. Simpson has
been compensated on an hourly basis. Mr. Faden will be compensated
on an hourly basis as services are needed.
Coastline Financial was contracted with to provide financial
consulting services to the Company. It was felt by management that
through their existing contacts and through contacts that they
would be able to make that the Company would be better able to find
the financing it needed to continue the development of its products
and continue the operations of the Company. The shares issued and
to be issued to Coastline come from stock held by the founders of
the Company. The formula for determining the number of shares to
be issued to Coastline was developed through negotiations with the
parties involved. In addition Coastline receives a fee of $1,000
per month.
Item 2. Properties
The Company leases office facilities consisting of
approximately 3,532 square feet located in Baton Rouge, Louisiana.
The lease calls for a monthly payment of $2,942 including utilities
and is an annual lease renewable in December of each year. The
office is primarily devoted to product development, new product
design and administrative activities. Additionally, the Company
leases 450 square feet of office space in Far Hills, New Jersey at
a cost of $1,000 per month. The Company believes that all of its
initial requirements for manufacturing, packaging, and storage will
be met by its contract manufacturers.
To support the development efforts without assuming fixed
costs, the Company has contracted with Hayes Medical, Inc. and GVO,
Inc. for engineering, design specification, prototype
manufacturing, cost projections and schedules. This association
will also aid the Company with the FDA s 510(K) approvals as well
as SofCeps prototype development and testing.
The Company also presently contracts for laboratory facilities
with TechniMark, Inc. in Clearwater, Florida to assemble its
handmade clinical devices of SOFCEPS as well as the production of
VETCEPSTM.
Item 3. 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 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of the Company s
Securities Holders during the fourth quarter of the Company s
fiscal year ending December 31, 1996.
<PAGE>
PART II
Item 5. Market for Registrant s Common Equity and Related
Stockholder Matters
No shares of the Company s Common Stock have been registered
with the Securities and Exchange Commission or any state securities
agency of authority. The Company s Common Stock has been traded in
the over-the-counter market and quotations are published on the
NASD Electronic Bulletin Board under the symbol SCEP , and in the
National Quotation Bureau, Inc. pink sheets under Medisys
Technologies, Inc.
The following table sets forth the range of high and low bid
prices of the Common Stock for each calendar quarterly period since
the first quarter of 1995 as reported by the National Quotation
Bureau, Inc. ( NQB ). Prices reported by the NQB represent prices
between dealers, do not include retail markups, markdowns or
commissions and do not represent actual transactions.
High Low
1995
First Quarter 1.75 1.00
Second Quarter 2.75 1.00
Third Quarter 2.00 0.75
Fourth Quarter 3.12 1.00
1996
First Quarter 4.18 1.50
Second Quarter 5.12 3.87
Third Quarter 4.25 3.00
Fourth Quarter 3.25 1.87
As of December 31, 1996 there were approximately 450 holders
of record of the Company s Common Stock, which figure does not take
into account those shareholders whose certificates are held in the
name of broker-dealers. The Company estimates that in excess of
1,000 shareholders of the Company hold their shares in the name of
broker-dealers.
Dividend Policy
The Company has not declared or paid cash dividends or made
distributions in the past, and the Company does not anticipate that
it will pay cash dividends or make distributions in the foreseeable
future. The Company currently intends to retain and invest future
earnings to finance its operations.
Recent Sales of Unregistered Securities
A 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 which
can be found elsewhere within this Form 10-KSB.
Item 6. Management s Discussion and Analysis of Financial
Condition and Results of Operations
The following information should be read in conjunction with
the Consolidated Financial Statements and Notes thereto appearing
elsewhere in this Form 10-KSB.
Results of Operations
The net loss for the year ending December 31, 1996 increased
28.89% to $1,498,725 when compared to the corresponding 1995
period. These results continue to be primarily attributable to the
Company s increased effort in the development of its products.
Operating expenses for the year ending December 31, 1996
increased 26.47% when compared to the corresponding 1995 period,
primarily attributed to increases in the following items: product
development (94.31% increase for the year ending December 31,
1996); salaries (39.85% increase for the year ending December 31,
1996) due to the addition of a Vice President and Chief Operating
Officer and annual salary increases; depreciation and amortization
(29.27% for the year ending December 31, 1996) due to the addition
of computer and office equipment; general and administrative
expenses (22.31% for the year ending December 31, 1996) due to
increases in contract labor, travel expenses, and expenses related
to the addition of an office in Far Hills, New Jersey. Interest
expense decreased 14.35% for the year ending December 31, 1996.
Professional services decreased 25.58%. This decrease was primarily
due to the addition of the Company s Chief Operating Officer to the
Company s staff. This individual was formerly a consultant to the
Company and became an employee on January 1, 1996.
Product Development
Product Development costs increased 94.31% to $496,446 for
the year ending December 31, 1996 primarily due to the increased
effort in the development of SofCeps and CoverTip , the Company s
flagship products.
Prior to 1996, work on products under development was
performed in-house, with the exception of prototype work performed
by TechniMark, Inc. in Clearwater, Florida. In January, 1996 the
Company contracted with Hayes Medical, Inc., a contract medical
engineering firm out of Sacramento CA, to assist in the development
of several prototype application systems for SofCeps, the Company s
birth assistance device. Additionally, two dimensional and three
dimensional models were developed to test the effectiveness of the
SofCeps device. The Company also entered into a technology
transfer agreement with A&P Technology to assist in the development
of various braid configurations for the SofCeps bonnet . Product
Development will continue on SofCeps during 1997. The Company has
contracted with GVO, Inc. to move into the next phase of prototype
development of SofCeps with the goal of live birth testing of the
device in late 1997 or early 1998.
Hayes Medical, Inc. also assisted the Company in development
work performed on CoverTip, a safety syringe under development.
Work performed in 1996 primarily centered around prototype
development and testing. The Company submitted an application for
510(K) Exemption from Pre Market Approval with the Food and Drug
Administration on March 31, 1997.
Liquidity and Capital Resources
Historically, the Company s working capital needs have been
satisfied through its financing activities including private loans
and raising capital through the sale of securities. Working
capital as of December 31, 1996 was $198,112 as compared to a
working capital deficit of $470,270 as of December 31, 1995. The
improvement in working capital over 1995 is primarily attributable
to an increase in the Company s cash balances of $587,455 due to
the private placement of the Company s common stock and a decrease
of $162,595 in the current portion of notes payable.
The Company completed the most recent private placement of its
common stock on December 17, 1996 having raised $2,013,500.
Expenses related to the private placement totaled $85,420. The
Company issued 1,342,331 shares of common stock pursuant to the
private placement at a price of $1.50 per share. The Company also
issued one stock purchase warrant for each share of common stock
issued. The warrants constitute an option to buy, at a price of
$1.50 per share, unregistered shares of common stock for a period
of four years from date of issue of the common stock acquired
through the private placement. The issuance price of the common
stock for the private placement was determined by the Company s
Board of Directors. The Board took into consideration such things
as the current market price for its trading common stock at the
time the Private Placement was offered, shareholder dilution, and
the Company s current stage of development.
Net cash used by operations for year ending December 31, 1996
was $1,223,232 compared to net cash used of $728,626 for the
comparable 1995 period, primarily attributed to the increase in the
net loss from operations during 1996 period. Net cash from
financing activities for the year ending December 31, 1996 was
$1,927,560 compared to $853,420 for the comparable 1995 period,
primarily due to the sale of common stock.
The Company is currently in default on three notes payable to
various individuals totaling $45,381. One of the three notes had
called for monthly payments of $500 with the balance being payable
on March 1, 1996. The Company continues to make the monthly
payment of $500. None of the three note holders have demanded
repayment and the Company continues to accrue interest on all
outstanding notes payable
As of December 31, 1996 the Company had total assets of
$1,051,500 and stockholders equity of $558,106. In comparison, as
of December 31, 1995 the Company had total assets of $406,531 and
total stockholders deficiency of $191,384. The 158.65% increase
in total assets for the year ending December 31, 1996 is primarily
due to cash realized from the Company s financing activities.
Management believes that the Company has sufficient capital
resources to fund anticipated operations until some time in the
early third quarter of 1997. Management estimates that its current
level of operations require approximately $125,000 per month in
cash based upon average monthly cash flows during the fourth
quarter of 1996. Unless the Company is able to substantially
increase current 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 third
quarter of 1997. The Company intends to seek additional equity or
debt capital through private sources and/or a public offering,
although there can be no assurance that the Company could
successfully complete any such offering. As of the date hereof,
the Company has not entered into any firm agreements or
understandings for the raising of capital from public or private
sources. 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.
In the opinion of management, inflation has not had a material
effect on the operations of the Company.
Item 7. Financial Statements and Supplementary Data
The Company s Consolidated Balance Sheet as of December 31,
1996 and the related Consolidated Statements of Operations,
Stockholders Equity, and Cash Flows for the years ended December
31, 1996, and 1995, and from inception on January 21, 1991 through
December 31, 1996 have all been examined to the extent indicated in
their report by Jones, Jensen & Company, independent Certified
Public Accountants, and have been prepared in accordance with
generally accepted accounting principals and pursuant to Regulation
S-B as promulgated by the Securities and Exchange Commission. The
aforementioned financial statements are included herein in response
to Item 7 of this Form 10-KSB.
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Medisys Technologies, Inc. and Subsidiary
(Development Stage Companies)
Baton Rouge, Louisiana
We have audited the accompanying consolidated balance sheet of
Medisys Technologies, Inc. and Subsidiary (development stage
companies) as of December 31, 1996, and the related consolidated
statements of operations, stockholders' equity, and cash flows for
the years ended December 31, 1996, and 1995 and from inception on
January 21, 1991 through December 31, 1996. These consolidated
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall consolidated
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of Medisys Technologies, Inc. and Subsidiary (development
stage companies) as of December 31, 1996, and the results of their
operations and their cash flows for the years ended December 31,
1996, and 1995 and from inception on January 21, 1991 through
December 31, 1996 in conformity with generally accepted accounting
principles.
The accompanying consolidated financial statements have been
prepared assuming that the Company will continue as a going
concern. As discussed in Note 10 to the consolidated financial
statements, the Company has incurred significant losses since
inception relating to its research and development efforts and has
had no significant operating revenues, all of which raise
substantial doubt about the Company's ability to continue as a
going concern. Management's plans in regard to these matters are
also described in Note 10. The consolidated financial statements
do not include any adjustments that might result from the outcome
of this uncertainty.
Jones, Jensen & Company
February 26, 1997
<PAGE>
MEDISYS TECHNOLOGIES, INC. AND SUBSIDIARY
(Development Stage Companies)
Consolidated Balance Sheet
ASSETS
December 31,
1996
CURRENT ASSETS
Cash $ 669,604
Inventory 8,571
Prepaid expenses 6,997
Total Current Assets 685,172
FIXED ASSETS
Leasehold improvements 2,195
Automobiles 67,950
Furniture and equipment 66,092
Leased equipment 10,010
Accumulated depreciation (79,934)
Total Fixed Assets 66,313
OTHER ASSETS
Security deposits 4,000
Patent and trademark costs, net (Note 1) 295,704
Organizational costs (Note 1) 311
Total Other Assets 300,015
TOTAL ASSETS $ 1,051,500
<PAGE>
MEDISYS TECHNOLOGIES, INC. AND SUBSIDIARY
(Development Stage Companies)
Consolidated Balance Sheet (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
December 31,
1996
CURRENT LIABILITIES
Accounts payable $ 276,014
Accrued expenses (Note 3) 105,441
Payable-stockholders (Note 2) 45,981
Contracts payable - current portion (Note 4) 14,243
Notes payable (Note 5) 45,381
Total Current Liabilities 487,060
LONG-TERM DEBT
Contracts payable - less current portion (Note 4) 6,334
Total Long-Term Debt 6,334
TOTAL LIABILITIES 493,394
COMMITMENTS AND CONTINGENCIES (Note 6)
STOCKHOLDERS' EQUITY (Notes 7 and 8)
Common stock: 100,000,000 shares
authorized of $0.0005 par value,
12,337,940 shares issued and outstanding 6,167
Additional paid-in capital 5,429,958
Stock subscriptions receivable (Note 7) (175,000)
Deficit accumulated during the development stage(4,703,019)
Total Stockholders' Equity 558,106
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,051,500
<PAGE>
MEDISYS TECHNOLOGIES, INC. AND SUBSIDIARY
(Development Stage Companies)
Consolidated Statements of Operations
From
Inception on
January 21,
For the Years Ended 1991 through
December 31, December 31,
1996 1995 1996
REVENUES $ 2,182 $ 2,802 $ 4,984
OPERATING EXPENSES
Cost of product sold 1,267 574 1,841
Product research and development 496,446 255,486 1,684,588
Professional services 272,161 365,727 748,470
Salaries 290,857 207,980 1,038,906
Depreciation and amortization 25,548 19,763 100,079
General and administrative 348,186 284,671 1,003,240
Total Operating Expenses 1,434,465 1,134,201 4,577,124
OPERATING LOSS (1,432,283)(1,131,399) (4,572,140)
OTHER INCOME (EXPENSES)
Interest income 13,194 - 13,194
Interest expense (26,566) (31,016) (90,646)
Bad debt expense (53,070) (357) (53,427)
Total Other Income (Expenses) (66,442) (31,373) (130,879)
LOSS BEFORE INCOME TAXES (1,498,725)(1,162,772) (4,703,019)
INCOME TAXES - - -
NET LOSS $(1,498,725)$(1,162,772) $ (4,703,019)
NET LOSS PER SHARE OF COMMON STOCK$ (0.13 ) $ (0.10)
<PAGE>
MEDISYS TECHNOLOGIES, INC. AND SUBSIDIARY
(Development Stage Companies)
Consolidated Statements of Stockholders' Equity
Deficit
Accumulated
Additional During the
Common Stock Paid-In Development
Shares Amount Capital Stage
Balance, January 21, 1991 - $ - $ - $ -
Common stock issued for cash
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 acquisition1,768,500 884 (41,557) -
Private placement of common
stock for cash 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 common stock for
cash at an average price of
$2.21 per share 45,248 23 99,977 -
Common 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)
<PAGE>
MEDISYS TECHNOLOGIES, INC. AND SUBSIDIARY
(Development Stage Companies)
Consolidated Statements of Stockholders' Equity (Continued)
Deficit
Accumulated
Additional During the
Common Stock Paid-In Development
Shares Amount Capital Stage
Balance, December 31, 1993 9,745,248 $ 4,873 $ 550,474 $(1,080,556)
Issuance of common stock for
cash at an average price
of $1.26 per share 60,016 30 75,581 -
Contributed capital by shareholders - - 513,812 -
Commons 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 -
Common 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 common stock for cash
at an average price of $1.05
per share 627,937 314 659,562 -
Issuance of common 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 common 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)
<PAGE>
MEDISYS TECHNOLOGIES, INC. AND SUBSIDIARY
(Development Stage Companies)
Consolidated Statements of Stockholders' Equity (Continued)
Deficit
Accumulated
Additional During the
Common Stock Paid-In Development
Shares Amount Capital Stage
Balance, December 31, 1995 10,797,140 $ 5,399 $3,060,938 $(3,204,294)
Issuance of common stock for
cash at a 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 -
Issuance of common stock from
exercise 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)
<PAGE>
MEDISYS TECHNOLOGIES, INC. AND SUBSIDIARY
(Development Stage Companies)
Consolidated Statements of Cash Flows
From
Inception on
January 21,
For the Years Ended 1991 through
December 31, December 31,
1996 1995 1996
CASH FLOWS FROM OPERATING ACTIVITIES
Loss from operations $(1,498,725) $(1,162,772) $(4,703,019)
Adjustments to reconcile net income to net
cash provided (used) by operating activities:
Operating expenses paid by issuance of
common stock 124,704 183,867 308,571
Common stock options and warrants
for services 33,454 177,800 211,254
Depreciation and amortization 25,548 19,763 101,474
Allowance for doubtful accounts 53,070 - 53,070
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable 870 (513) -
(Increase) decrease in inventory (4,145) (4,426) (8,571)
(Increase) decrease in prepaid expenses 7,976 4,485 (6,997)
(Increase) decrease in loans
receivable - stockholders 5,007 (2,507) -
(Increase) decrease in security deposits (859) 10 (4,000)
(Increase) decrease in organizational costs - - (311)
Increase (decrease) in accounts payable 137,033 48,883 276,014
Increase (decrease) in accrued expenses (107,165) 6,784 105,441
Net Cash (Used) by Operating
Activities (1,223,232) (728,626) (3,667,074)
CASH FLOWS FROM INVESTING ACTIVITIES
Increase in patent costs (91,053) (64,778) (297,098)
Acquisition of subsidiary - - (40,673)
Purchase of fixed assets (25,820) (17,606) (83,847)
Net Cash (Used) by Investing Activities $(116,873) $ (82,384) $ (421,618)
<PAGE>
MEDISYS TECHNOLOGIES, INC. AND SUBSIDIARY
(Development Stage Companies)
Consolidated Statements of Cash Flows (Continued)
From
Inception on
January 21,
For the Years Ended 1991 through
December 31, December 31,
1996 1995 1996
CASH FLOWS FROM FINANCING ACTIVITIES
Payments of stock offering costs $ (60,100) $ (25,319) $ (90,389)
Proceeds from capital lease - - 10,010
Payments on capital lease (1,444) (2,178) (10,010)
Payments on contracts payable (13,132) (10,574) (41,823)
Borrowings from stockholders 42,782 3,199 490,470
Borrowings from notes payable - 10,000 338,500
Payment on loans payable - stockholders - - (20,984)
Payment on notes payable (106,596) (30,524) (137,119)
Stock subscriptions receivable - 9,984 (53,427)
Issuance of common stock 2,013,500 644,832 3,966,518
Proceeds from sale of stock options - 254,000 254,000
Proceeds from exercise of common
stock options 52,550 - 52,550
Net Cash Provided by Financing
Activities 1,927,560 853,420 4,758,296
NET INCREASE (DECREASE) CASH AND
CASH EQUIVALENTS 587,455 42,410 669,604
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 82,149 39,739 -
CASH AND CASH EQUIVALENTS AT END
OF PERIOD $669,604 $ 82,149 $ 669,604
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION
CASH PAID FOR
Income taxes $ - $ - $ -
Interest $ 9,932 $ 15,285 $ 43,180
NON CASH FINANCING ACTIVITIES
Purchase of automobiles on contract $ - $ - $ 62,400
Conversion of stockholder loans to
equity $ 56,000 $ 111,699 $ 599,294
Stock issued in payment of operating
expenses $ 124,704 $ 183,867 $ 308,571
<PAGE>
MEDISYS TECHNOLOGIES, INC. AND SUBSIDIARY
(Development Stage Companies)
Notes to the Consolidated Financial Statements
December 31, 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 was
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 a 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 and Trademark 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 December 31, 1996, 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.
<PAGE>
MEDISYS TECHNOLOGIES, INC. AND SUBSIDIARY
(Development Stage Companies)
Notes to the Consolidated Financial Statements
December 31, 1996 and 1995
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
(Continued)
c. Patent and Trademark Costs (Continued)
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.
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 has been made at December
31, 1996 and 1995 due to accumulated operating losses. The
minimum state franchise tax has been accrued.
The Company has accumulated approximately $4,692,943 of net
operating losses as of December 31, 1996, which may be used to
reduce taxable income and income taxes in future years. The use
of these losses to reduce future income taxes will depend on the
generation of sufficient taxable income prior to the expiration
of the net operating loss carryforwards. The carryforwards
expire as follows:
Year of Net Operating
Expiration Loss
2006 $8,667
2007 267,504
2008 800,372
2009 959,825
2010 1,159,850
2011 1,496,725
$4,692,943
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 carryforwards have been offset by a
valuation allowance of the same amount.
<PAGE>
MEDISYS TECHNOLOGIES, INC. AND SUBSIDIARY
(Development Stage Companies)
Notes to the Consolidated Financial Statements
December 31, 1996 and 1995
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
(Continued)
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. Presentation of Consolidated Financial Statements
Certain balances for the prior period have been reclassified to
conform to the current year presentation.
i. Inventory
Inventory is carried at the lower of cost or market value using
the first-in first-out method.
j. Net Loss Per Share
Net 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 net loss per share as if they were outstanding for
all periods presented. There are no common stock equivalents.
k. 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.
l. 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 $633,694 in a
money market fund with a brokerage house.
m. 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.
<PAGE>
MEDISYS TECHNOLOGIES, INC. AND SUBSIDIARY
(Development Stage Companies)
Notes to the Consolidated Financial Statements
December 31, 1996 and 1995
NOTE 2 - PAYABLE - STOCKHOLDERS
From time to time the Company receives advances from certain
stockholders for the purpose of providing funds for the
Company's operating expenditures. The Company has also advanced
funds to stockholders. The outstanding balances of these
advances fluctuates 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 December 31,
1996, there was a balance outstanding payable to stockholders
totaling $45,981.
NOTE 3 - ACCRUED EXPENSES
Accrued expenses at December 31, 1996 consist of the following:
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:
Bank One, with total monthly payments of principal
and interest of $1,275, for 60 months, secured by the
automobiles. $ 20,577
The maturities of contracts payable are as follows:
1997 $ 14,243
1998 6,334
Thereafter -
$ 20,577
<PAGE>
MEDISYS TECHNOLOGIES, INC. AND SUBSIDIARY
(Development Stage Companies)
Notes to the Consolidated Financial Statements
December 31, 1996 and 1995
NOTE 5 - NOTES PAYABLE
Notes payable consisted of the following:
December 31,
1996
Note payable to Richard L. Apel, unsecured, dated
November 2, 1993 at 8%; principal and interest
due on August 18, 1994. $ 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
Note payable to Abraham B. and Edele Eckstein, unsecured,
dated March 1, 1995 which replaces an 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
Total 45,381
Less current portion (45,381)
Total Long-Term Portion $ -
These notes payable 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 one note payable to
Mr. and Mrs. Eckstein and continues to accrue interest on these
and all outstanding notes payable.
NOTE 6 - COMMITMENTS AND CONTINGENCIES
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.
On January 21, 1993, the Company entered into three-year
employment agreements with each of Edward P. Sutherland, Gary
Alexander, and Jerry Phipps. These contracts expired on January
21, 1996 and were not renewed. 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. AND SUBSIDIARY
(Development Stage Companies)
Notes to the Consolidated Financial Statements
December 31, 1996 and 1995
NOTE 6 - COMMITMENTS AND CONTINGENCIES (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 totalled $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 totalling $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.
<PAGE>
MEDISYS TECHNOLOGIES, INC. AND SUBSIDIARY
(Development Stage Companies)
Notes to the Consolidated Financial Statements
December 31, 1996 and 1995
NOTE 7 - COMMON STOCK (Continued)
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.
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.
<PAGE>
MEDISYS TECHNOLOGIES, INC. AND SUBSIDIARY
(Development Stage Companies)
Notes to the Consolidated Financial Statements
December 31, 1996 and 1995
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 1999-201 $1.00 - $4.25 6,600,388
$9,070,263
762,000 common stock warrants were issued to current and former
officers, directors and affiliates of the Company for incurring
personal liability for the Company's indebtedness. The exercise
price of these warrants was equal to the fair market value of
the underlying common stock.
Of the outstanding common stock warrants, 212,500 were issued to
holders of the Company's notes payable as collateral and also in
return for the extension of repayment terms. In November 1995,
300,000 common stock warrants were issued to the Company's
patent attorney for deferring payment of legal fees. The
exercise price of all of these warrants was equal to the fair
market value of the underlying common stock on the date the
common stock warrants were granted.
261,000 common stock warrants have been issued in return for
directors of the Company forfeiting their claim to director fees
from prior periods. In addition, officers, directors and
affiliates have been issued a total of 1,172,597 common stock
warrants in exchange for common stock which they surrendered and
were issued to an unrelated entity for their assistance in
raising equity capital for the Company. In both cases, the
exercise price of the warrants was equal to the fair market
value of the related common stock on the date the common stock
warrants were granted.
During the period August through December 1996, the Company
issued a total of 23,102 common stock warrants having exercise
prices between $1.00 and $3.50 per share at a time when the fair
market price of the underlying common stock was $2.75 to $3.50
per share. The aggregate difference between the exercise price
and fair market value of the common stock totaling $33,454 has
been reflected as professional services with a corresponding
charge to additional paid-in-capital.
<PAGE>
MEDISYS TECHNOLOGIES, INC. AND SUBSIDIARY
(Development Stage Companies)
Notes to the Consolidated Financial Statements
December 31, 1996 and 1995
NOTE 8 - COMMON STOCK WARRANTS(Continued)
During 1996, the Company conducted a private placement of its
common stock (see Note 7), wherein the purchaser of one share of
the Company's common stock also received a warrant to purchase
one additional share of common stock at $1.50 per share. The
Company issued 1,192,331 common stock warrants pursuant to this
private placement, 1,700 of which were exercised prior to
December 31, 1996 (See Note 7). Any difference between the
exercise price of the common stock warrants and the fair value
of the Company's common stock on the date the shares of common
stock were purchased has been included in the proceeds from the
sale of the common stock as part of additional paid-in capital.
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 8. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure
There have been no changes in or disagreements with accountants.
PART III
Item 9. Directors and Executive Officers of the Registrant
The Executive Officers and Directors of the Company are as follows:
Name Age Position
Edward P. Sutherland 50 President, Chief Executive
Officer and Director
Gary E. Alexander 52 Vice President, Chief
Technology Officer and Director
Kerry M. Frey 51 Vice President, Chief Operating
Officer and Director
Paul R. Radle, Jr. 42 Vice President, Chief Financial
Officer, Treasurer and Director
William D. Kiesel 52 Corporate Secretary and
Director
Wade Fallin 34 Chief Engineering Consultant
and Director
Dr. Timothy Andrus 47 Director
Jane Cooper 42 Director
Dr. Robert L. diBenedetto 69 Director
All Directors hold office until the next annual meeting of
stockholders and until their successors have been duly elected and
qualified. The Executive Committee of the Board of Directors, to the
extent permitted under Utah law, exercises all of the power and
authority of the Board of Directors in the management of the business
and affairs of the Company between meetings of the Board of Directors.
Each executive officers serves at the discretion of the Board of
Directors.
The four principal managers of the Company are:
EDWARD P. SUTHERLAND is the President/CEO and a co-founder of the
Company. Mr. Sutherland received a Bachelor of Arts Degree from
Louisiana State University in 1968, and a Juris Doctor Degree from
Louisiana State University in 1974. He was in private law practice from
1974 until he co-founded the Company in 1992. Mr. Sutherland has over
25 years of business, professional and personnel management expertise in
the private and public sector including over five years of experience in
forming, developing and managing a start-up company in the medical R&D
industry. His background includes strategic planning, financing,
administration, policy formulation and execution, personnel education,
general office management, bookkeeping, taxation, and interface with
governmental agencies including the FDA and the Securities and Exchange
Commission (SEC). While practicing as an attorney, Mr. Sutherland also
developed a comprehensive background in hospital and medical practice,
and product liability litigation.
GARY E. ALEXANDER is the Vice President, Chief Technical Officer
and co-founder of the Company. He is the principle inventor of
SOFCEPS . and most of the Company s other products and is in charge of
product research. Mr. Alexander received his Juris Doctor Degree in law
from Louisiana State University in 1976 and was engaged in private law
practice from 1976-1991, specializing in medical liability matters with
emphasis on obstetrics. In 1989, Mr. Alexander conceived the SofCeps
product and in 1990 began full time development of the product. He has
spent the last six years devoting himself to invention, research, and
developing of products for ultimate commercialization. His broad based
career successes began early in 1967 being named the number one Junior
Salesman in the United States for AM Corporation, a source data
collection and conversion company. Mr. Alexander has owned and operated
several businesses in building, general contracting, and construction
equipment sales, where he managed up to 75 employees and sub-contractors
and managed the materials flow accounting, invoicing, accounts payable
and receivable, and exclusive service contracts with major appliance
manufacturers. In connection with those businesses, he acquired the
special skills and expertise in engineering principles, design,
drawings, welding, carpentry, materials evaluation, electrical and
mechanical sciences which have led to his inventing successes. His
background in law resulted in multiple areas of business expertise
including the management of accounts in the real-estate sector, and he
has advised several manufacturing clients on both domestic and
international businesses contracts, research and development,
operations, sales and mergers. He has also served as advisor and
counsel for several financial institutions and has interfaced with
several governmental agencies including FDA and SEC and has represented
the SBA.
KERRY M. FREY, Vice President and Chief Operating Officer has over
22 experience in the health care industry. Mr. Frey became an Officer
and a Director of the Company in November 1994. Mr. Frey received a
Bachelor of Arts Degree from Southeastern Louisiana University in 1969.
His background includes marketing and sales, as well as general
management. Mr. Frey was associated with Johnson and Johnson Hospital
Services for ten years in the development of multi-company corporate
marketing programs and services. He served as Vice President of
Marketing as well as VP of Sales. Mr. Frey has coordinated strategic
assessment of the dynamic healthcare market, including managed care,
integrated provider systems and healthcare reform. He led the
development of corporate value added marketing programs for multi-
hospital groups, large regional hospital systems, surgical supply
distributors and service marketing programs for Johnson & Johnson in the
professional healthcare marketplace. Previous consulting assignments
have included integrated healthcare systems such as the General Health
System and the Florida Hospital; futuristic health delivery planning
with Walt Disney Development Company. He also consulted for
Qualitycare, Inc., a medical distributor company, and has served on the
boards of a medical software company and a start-up minority
distributor.
PAUL R. RADLE, JR. is the Company s Vice President, Chief Financial
Officer and Treasurer. Mr. Radle became an Officer and a Director of
the Company in May 1995. Mr. Radle received from the University of New
Orleans a B.S. Degree in Accounting in 1978 and was licensed to practice
as a Certified Public Accountant in the State of Louisiana in 1983.
From 1974 to 1981, was employed by CNG Producing Company serving in
various accounting functions. From 1982 to 1997, Mr. Radle has served
as Vice President, Finance for Arrowhead Exploration Company, an
independent oil and gas exploration and production company. Mr. Radle s
background includes strategic planning, financial reporting, taxation,
MIS, and corporate administration. He is experienced in negotiating
contracts and agreements, performing business valuations and economic
analysis of business opportunities and investments. Mr. Radle is a
member of the Louisiana Society of CPA's, the American Institute of
CPA's, the Independent Petroleum Association of American Tax Committee,
and is a board member of the General Health System Foundation and the
Louisiana State University School of Social Work.
The Company s Secretary and Consultant on Intellectual Property is:
WILLIAM DAVID KIESEL is a Director and a co-founder of the Company.
During the past 25 years he has been actively engaged in advising
numerous start-up businesses. During that period he has supported more
that 100 start-up companies in all aspects of their businesses,
including structuring of R&D programs, financial planning, management,
as well as, marketing and sales of their new products. These companies
have varied in size and encompass organizations offering a wide spectrum
of products, including medical devices and pharmaceutical products. In
addition to his current position with Medisys, he serves as the business
manager of his own 25 person patent law firm. He has also provided to
his clients fair market and liquidation s evaluations of patents,
trademarks, and other intellectual property. Mr. Kiesel received from
Louisiana State University a B.S. Degree in Mathematics in 1966, a M.S.
Degree in Nuclear Engineering in 1970, and a Juris Doctor Degree in law
in 1970. Mr. Kiesel has been a registered patent attorney and engaged
in the private practice of law since 1971 specializing in patent law and
related legal areas. Mr. Kiesel has served as Adjunct Professor at the
Louisiana State University Law School teaching courses in Patent Law.
WADE FALLIN is a Director of the company and serves a Chief
Engineering Consultant. Mr. Fallin became a Director in October 1996.
Mr. Fallin is the Executive Vice President at Medicine Lodge, Inc., a
Utah based medical device company. Mr. Fallin provides Medisys with
extensive experience in medical device research, development, regulatory
affairs, manufacturing and broad based knowledge of the health care
industry. Previously a Vice President of Biomedical Consulting services
at Hayes Medical, Mr. Fallin has also been Director of Product
Development at Smith & Nephew and a Senior Development Engineer at
Bristol-Meyers Squibb. Mr. Fallin is an inventor on seven U.S. patents
and has several more pending. In addition, Mr. Fallin actively consults
within the medical device industry as an expert in the development and
market introduction of medical devices.
DR. TIMOTHY ANDRUS became a Director of the Company in November
1996. He has over seventeen years experience as an OB/GYN. Dr. Andrus
has served as the Associate Director of Gulf South Health Plans HMO for
the past five years. Formerly he was the Chief of Staff for Woman s
Hospital, the seventh largest private woman s hospital in the U.S., and
currently he is on their Board of Directors.
JANE COOPER became a Director of the Company in May 1996. Ms.
Cooper is the founder, President, and CEO of Healthcare Advantage, Inc.,
a regional managed care company headquartered in New Orleans, Louisiana.
Healthcare Advantage offers a variety of managed care products including
Advantage Health Plan, a commercial HMO and a Medicare HMO, and serves
over 325,000 members in eight states. Originally from Wisconsin, Ms.
Cooper attended Augustana College for her undergraduate work and
received her Master s Degree from the University of Illinois. Since
1982 Ms. Cooper has worked in the managed care industry and has been in
managed care in New Orleans since 1985. Ms. Cooper is on the executive
Committee of the Louisiana Managed Healthcare Association (LMHA) and is
on the Board of Directors and serves as Secretary of the American
Association of PPO s (AAPPO).
DR. ROBERT L. diBENEDETTO a Director and co-founder of the Company,
received his Doctorate of Medicine in 1952 from the Louisiana State
University Medical School and served his internship at Mercy Hospital
from 1952 to 1953, and his residency in Obstetrics and Gynecology at
Charity Hospital, New Orleans, Louisiana from 1956 to 1959. Dr.
diBenedetto has been engaged in the private practice of Obstetrics and
Gynecology from 1959 to the present and has recently received
recognition as one of the top fifty physicians in the United States.
His hospital affiliations include Woman's Hospital Foundation, Baton
Rouge, Louisiana where he has served as Chairman of the Board of
Directors from 1984 to 1990, and he is also affiliated with Our Lady of
the Lake Hospital, Baton Rouge General Hospital and Earl K. Long
Hospital. Dr. diBenedetto is also currently President and CEO of the
Louisiana Medical Insurance Company, a major provider of medical
malpractice insurance. He also serves on the following committees:
Chairman, Dialogue with Congress; Area-wide Health Planning; Liaison
with Organized Specialties; Chairman, Maternal & Child Health; Member,
Committee on Professional Liability of American College of Obstetrics
and Gynecology; Member, Committee on Ethics of American College of
Obstetrics and Gynecology; Past Chairman, Louisiana Delegation to
American Medical Association. His professional organizations include:
Chairman & Legislative Liaison, Louisiana Section of the American
College of Obstetricians and Gynecologists; Past Chairman, Louisiana
Delegation to the American Medical Association; South Central OB/GYN
Society; clinical Associate Professor of OB/GYN, L.S.U. School of
Medicine - New Orleans, Louisiana; American Fertility Society;
Treasurer, Louisiana Medical Political Action Committee.
Section 16(a) Beneficial Ownership Reporting Compliance
The Company became a public reporting entity on November 26, 1996.
As such, each Officer and Director of the Company was required to submit
a Form 3, Initial Statement of Beneficial Ownership of Securities, to
the SEC within 10 days. Each Officer and Director was additionally
required to file a Form 5, Annual Statement of Changes in Beneficial
Ownership, on or before the 45th day after the end of the fiscal year.
These reports were not filed on a timely basis. The required reports
were submitted to the SEC in March 1997 for every Officer and Director.
Compensation of Directors
Each member of the Board of Directors is compensated as follows.
Directors each receive 500 shares of common stock for every meeting
attended and will receive 5,000 stock purchase warrants annually. The
Chairman of the Board of Directors will receive 200 additional shares
per meeting. Out of town Directors are reimbursed for reasonable travel
expenses.
Additionally, members of the Compensation Committee will receive
100 shares per meeting with the Committee Chair receiving 150 shares.
Changes in Control
There are no present or contemplated arrangements, which may result
in a change in control of the Company.
Item 10. Executive Compensation
The following table sets forth all cash compensation actually paid
(and not deferred) by the Company for services rendered to the Company
for the years ended December 31, 1994, 1995, and 1996 to the Company s
Chief Executive Officer, Chief Technical Officer, and Chief Operating
Officer. The total compensation for the remaining Executive Officers is
not reported as it did not meet the threshold for required reporting.
Summary Compensation Table
Name and Principal Other All Other
Position Year Salary Bonus Annual Compensation(1)
Compensation
Edward P. Sutherland, 1994 $52,500 $ -0- $ -0-$ 2,000
President and CEO 1995 118,156 -0- -0- -0-
1996 150,000 -0- -0- 33,915
Gary Alexander, 1994 49,958 -0- -0- 2,000
Vice President and Chief 1995 116,526 -0- -0- -0-
Technology Officer 1996 108,000 -0- -0- 34,257
Kerry M. Frey 1994 -0- -0- -0- -0-
Vice President and 1995 -0- -0- -0- 53,000
Chief Operating Officer 1996 144,000 -0- -0- 45,553
(1) 1996 Other Compensation includes amounts paid in 1996 that relate
to deferred salary accruals from prior years as follows: $33,915 for
Mr. Sutherland; $34,257 for Mr. Alexander; and $24,667 for Mr. Frey.
As of December 31, 1996 the Company has accrued salaries and directors
fees of $85,851 as disclosed in Note 3 to the Consolidated Financial
Statements contained elsewhere in this Form 10-KSB.
Employment Agreements
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 not to exceed 50% of their
annual compensation or the granting of stock warrants or options at the
discretion of the Board of Directors.
Item 11. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information, to the best knowledge of the
Company, as of December 31, 1996, with respect to each person known by
the Company to own beneficially more than 5% of the outstanding Common
Stock, each director and all directors and officers as a group.
Name and Address of Number of Shares Percentage Number of Average
Beneficial Owner Beneficially Owned Ownership Warrants Exercise Price
Owned
Gary E. Alexander *
9624 Brookline Avenue
Baton Rouge, LA 70809
1,275,8 93(2) 10.2% 167,000 1.59
Robert McNamee
1398 Oakley Drive
Baton Rouge, LA 70806
1,205,826(3) 9.5% 358,633 3.31
Jerry Phipps
7530 Old Sturbridge Ln.
Baton Rouge, LA 70806
1,215,826(4) 9.5% 473,632 2.91
Robert L. diBenedetto *
781 Colonial Drive
Baton Rouge, La 70806
930,480(5) 7.3% 377,000 2.75
William D. Kiesel *
2355 Drusilla Lane
Baton Rouge, LA 70809
1,201,813(6) 9.3% 565,166 2.61
Edward P. Sutherland *
9624 Brookline Avenue
Baton Rouge, LA 70809
877,900(7) 7.0% 173,000 1.58
Kerry Frey *
9624 Brookline Avenue
Baton Rouge, LA 70809
522,500(8) 4.2% 19,000 2.47
Paul R. Radle, Jr. *
9624 Brookline Avenue
Baton Rouge, LA 70809
160,000(9) 1.3% 57,000 1.81
Jane Cooper *
9624 Brookline Avenue
Baton Rouge, LA 70809
7,600(10) .06% 5,000 4.25
Timothy Andrus *
9624 Brookline Avenue
Baton Rouge, LA 70809
1,500 .01% 0 N/A
Wade Fallin *
9624 Brookline Avenue
Baton Rouge, LA 70809
1,000 .01% 0 N/A
Directors and officers
as a group (9 persons) 7,400,338(11) 50.9% 2,195,431 2.64
* Director
** Unless otherwise indicated in the footnotes below, the Company has
been advised that each person above has sole voting power over the
shares indicated above.
(1) As of March 28, 1997, there were 12,355,340 shares of common stock
outstanding, which figure does not take into consideration stock
purchase warrants owned by certain officers, directors and
principal shareholders, entitling the holders to purchase an
aggregate of 2,195,431 shares of common stock and which are
currently exercisable. Therefore, for purposes of the table above,
as of the date hereof, 14,550,771 shares of common stock are deemed
to be issued and outstanding in accordance with Rule 13d-3 adopted
by the Securities and Exchange Commission under the Securities
Exchange Act of 1934, as amended. Percentage ownership is
calculated separately for each person on the basis of the actual
number of outstanding shares as of April 11, 1997 and assumes the
exercise of stock purchase warrants held by such person (but not by
anyone else) exercisable within sixty days.
(2) Includes 167,000 shares which may be acquired by Mr. Alexander
pursuant to the exercise of stock purchase warrants exercisable
within sixty days at the average exercise price of $1.59 per share.
(3) Includes 847,193 shares held in the name of Robert W. and Geraldine
McNamee and 358,633 shares which may be acquired by Mr. McNamee
pursuant to the exercise of stock purchase warrants exercisable
within sixty days at the average exercise price of $3.31 per share.
(4) Includes 518,362 shares held in the name of Jerry L. and Barbara D.
Phipps and 473,632 shares which may be acquired by Mr. Phipps
pursuant to the exercise of stock purchase warrants exercisable
within sixty days at the average exercise price of $2.91 per share.
(5) Includes 377,000 shares which may be acquired by Dr. diBenedetto
pursuant to the exercise of stock purchase warrants exercisable
within sixty days at the average exercise price of $2.75 per share.
(6) Includes 565,166 shares which may be acquired by Mr. Kiesel
pursuant to the exercise of stock purchase warrants exercisable
within sixty days at the average exercise price of $2.61 per share,
of which 300,000 warrants are held in the name of Roy, Kiesel &
Tucker and 10,000 warrants are held in the name of Nu Vue Corp.
(7) Includes 350,000 shares held in the name of Diana B. Sutherland,
wife of Edward P. Sutherland and 173,000 shares which may be
acquired by Mr. Sutherland pursuant to the exercise of stock
purchase warrants exercisable within sixty days at the average
exercise price of $1.58 per share.
(8) Includes 19,000 shares which may be acquired by Mr. Frey pursuant
to the exercise of stock purchase warrants exercisable within sixty
days at the average exercise price of $2.47 per share.
(9) Includes 57,000 shares which may be acquired by Mr. Radle pursuant
to the exercise of stock purchase warrants exercisable within sixty
days at the average exercise price of $1.81 per share.
(10) Includes 5,000 shares which may be acquired by Ms. Cooper pursuant
to the exercise of stock purchase warrants exercisable within
sixty days at the average exercise price of $4.25 per share.
(11) Includes 2,195,431 shares which may be acquired by the Company's
officers and directors pursuant to the exercise of stock purchase
warrants exercisable within sixty days at exercise prices ranging
from $1.57 to $4.25 per share.
Item 12. Certain Relationships and Related Transactions
On August 6, 1992 the Company, a publicly traded entity known as
Whitewater Products, Ltd., entered into a certain Acquisition Agreement
and Plan of Reorganization (the "Agreement") with Medisys Technologies,
Inc., a privately held Louisiana corporation ("Medisys-Louisiana").
Prior to entering into the Agreement, the Company was engaged in only
minimal activities and Medisys-Louisiana was engaged in the research and
development of SOFCEPS . As per the terms of the Agreement, the Company
acquired all the issued and outstanding shares of common stock of
Medisys-Louisiana in exchange solely for 9,250,000 shares of the
Company's authorized but previously outstanding Common Stock, issued to
the shareholders of Medisys-Louisiana and their designees. Medisys-
Louisiana became a wholly owned subsidiary of the Company and the
Company changed its corporate name to Medisys Technologies, Inc., under
the laws of the State of Utah. For accounting purposes, the transaction
has been treated as a recapitalization of the Company, or reverse
acquisition, with Medisys-Louisiana deemed the acquirer.
The law firm of Roy, Kiesel & Tucker has been used for patent work.
William David Kiesel is a partner of Roy, Kiesel & Tucker and is the
Corporate Secretary and a Director of the Company. Mr. Kiesel does not
bill the Company for his time. However, other attorneys at his firm do
bill the Company for their time and the Company does reimburse Roy,
Kiesel & Tucker for expenses incurred on the behalf of the Company.
PART IV
Item 13. Exhibits, Financial Statement Schedules, and Reports on Form
8-K.
(a) Exhibits
*2.1 Acquisition Agreement and Plan of Reorganization.
*3.1(i) Articles of Incorporation and all amendments thereto
*3.2(ii) By-Laws of Registrant
*4.1 Specimen of Common Stock Certificate
*10.1 Lease Agreement on Registrant s principal place of
business
*10.2 Contract of Employment with Edward P. Sutherland
*10.3 Contract of Employment with Kerry M. Frey
*21.1 Subsidiaries
27 Financial Data Schedule
* Previously filed as Exhibit to Form 10-SB.
(b) No reports on Form 8-K were filed during the three month
period ended December 31, 1996.
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) 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: April 15,1997
In accordance with the Exchange Act, this report has been signed
below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
BY: Edward P. Sutherland
(Signature)
EDWARD P. SUTHERLAND
President, Chief Executive
Officer and Director
DATE: April 15,1997
BY: Gary E. Alexander
(Signature)
Gary E. Alexander
Vice President, Chief
Technology Officer and
Director
DATE: April 15,1997
BY: Kerry M. Frey
(Signature)
KERRY M. FREY
Vice President, Chief
Operating Officer and
Director
DATE: April 15,1997
BY: Paul R. Radle, Jr.
(Signature)
PAUL R. RADLE, JR.
Vice President, Chief
Financial Officer, Treasurer
and Director
DATE: April 15,1997
BY: William David Kiesel
(Signature)
WILLIAM DAVID KIESEL
Corporate Secretary and
Director
DATE: April 15,1997
<PAGE>
Medisys Technologies, Inc.
Selected Financial Data:
Statement of Operations Data:
1992 1993 1994 1995 1996
Revenue. . . . . . $ - $ - $ - $ 2,802 $ 2,182
Total operating expenses 269,383 795,972 934,436 1,134,201 1,434,465
Operating (loss) . . (269,383) (795,972) (934,436) (1,131,399) (1,432,283)
Other income (expenses). (168) (6,366) (26,530) (31,373) (66,442)
Net (loss) . . . . (269,551) (802,338) (960,966) (1,162,772) (1,498,725)
Income (loss) per share. . .(0.03) (0.08) (0.10) (0.10) (0.13)
Balance Sheet Data:
Working capital. . $ 103,758 $(738,909)$(498,174) $ 470,270 $ 198,112
Current assets . . 161,180 188,274 46,724 107,068 685,172
Total assets . . . 247,011 451,797 258,257 406,531 1,051,500
Current liabilities. . . 57,422 927,183 544,898 577,338 487,060
Long-term debt . . 7,490 49,823 124,153 20,577 6,334
Stockholders equity
(Deficit) 182,099 (525,209)(410,794) (191,384) 558,106
