UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1
to
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (date of earliest event reported): October 1, 1998
MEDISYS TECHNOLOGIES, INC.
(Exact Name of Registrant as Specified in its Charter)
UTAH 0-21441 72-1216734
State or Other (Commission (IRS Employer
Jurisdiction) File Number) Identification Number)
144 Napoleon Street, Baton Rouge, Louisiana 70802
(Address of Principal Executive Offices and Principal Place of Business)
Registrant's Telephone Number, Including Area Code: (225) 343-8022
<PAGE>
FORM 8-K
Item 2. Acquisition or Disposition of Assets.
On October 1, 1998 Medisys Technologies, Inc. (the "Company")
entered into a Letter of Intent with Phillips Pharmatec Labs, Inc.,
a Florida corporation ("PPL"), related to the intended acquisition
by the Company of one hundred percent (100%) of the issued and
outstanding shares of capital stock of PPL. In reliance upon and
pursuant to the basic terms of the Letter of Intent, the Company
and PPL entered into an Acquisition and Share Exchange Agreement
(the "Agreement") whereby PPL assigned all title and interest and
obligations in that business to Medisys in exchange for Medisys
common stock equal to 50% of the outstanding shares of Medisys
Technologies, Inc. The Agreement simultaneously provided for the
purchase of all the issued and outstanding capital stock of PPL
from Brett Phillips, Marilyn Morris, Carl Anderson and Ronnie
Anderson.
Phillips Pharmatech Labs, Inc., (PPL) was founded in December,
1994, by Brett Phillips and two other major stockholders. PPL was
organized as a subchapter S corporation in the State of Florida and
is located in Largo, Florida. The prime goal of PPL is the
manufacturing, forming, and packaging of over-the-counter health
and dietary products for other companies to distribute and sell
under private labels. Major product types are vitamins, mineral
supplements, herbal therapy, and diet aids. PPL acts as a contract
manufacturer with the expanded capability of manufacturing and/or
assembling product lines consistent with the types of products
developed by Medisys. This acquisition provides Medisys production
packaging, labeling and shipping capabilities for medical devices
as well as PPL nutritional products.
PPL's financial statements for the year ended December 31,
1997 and the Medisys consolidated pro forma financial statements
for June 30, 1998 are attached hereto.
<PAGE>
Item 7. Financial Statements and Exhibits.
(a) Financial statements for Phillips Pharmatec Labs, Inc.
for the year ended December 31, 1997.
(b) Consolidated pro forma financial statements for Medisys
Technologies, Inc. for June 30, 1998.
(c) Exhibits included herewith:
* Exhibit 2.1 Letter of Intent
* Exhibit 2.2 Acquisition and Share Exchange Agreement (Draft)
* Exhibit 99.1 Letter of Auditability
_____________
* Previously filed with original Form 8-K filed October 15, 1998.
SIGNATURES
In accordance with the requirements of the Securities Exchange
Act of 1934, the Registrant caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
MEDISYS TECHNOLOGIES, INC.
Date: April 8, 1999 By: /S/ Kerry M. Frey
KERRY M. FREY, President and
Chief Operating Officer
<PAGE>
PHILLIPS PHARMATECH LABS, INC.
FINANCIAL STATEMENTS
December 31, 1997
<PAGE>
C O N T E N T S
Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . 3
Balance Sheet. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Statement of Operations. . . . . . . . . . . . . . . . . . . . . . . 6
Statement of Stockholders' Equity. . . . . . . . . . . . . . . . . . 7
Statement of Cash Flows. . . . . . . . . . . . . . . . . . . . . . . 8
Notes to the Financial Statements. . . . . . . . . . . . . . . . . . 9
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Phillips Pharmatech Labs, Inc.
Largo, Florida
We have audited the accompanying balance sheet of Phillips
Pharmatech Labs, Inc. as of December 31, 1997 and the related
statements of operations, stockholders' equity and cash flows
for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audits to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial
position of Phillips Pharmatech Labs, Inc. as of December 31,
1997 and the results of its operations and its cash flows for
the year then ended, in conformity with generally accepted
accounting principles.
Jones, Jensen & Company
Salt Lake City, Utah
December 28, 1998
<PAGE>
PHILLIPS PHARMATECH LABS, INC.
Balance Sheet
ASSETS
December 31,
1997
CURRENT ASSETS
Cash $ 87,506
Accounts receivable, net (Note 1) 293,560
Inventory (Note 1) 362,098
Prepaid expenses 6,946
Due from related party 4,259
Total Current Assets 754,369
FIXED ASSETS (Note 1)
Leasehold improvements 63,250
Furniture and fixtures 14,838
Office equipment 12,973
Machinery and equipment 301,500
Vehicles 19,915
Accumulated depreciation (106,671)
Total Fixed Assets 305,805
OTHER ASSETS
Deposits 35,930
Total Other Assets 35,930
TOTAL ASSETS $ 1,096,104
<PAGE>
PHILLIPS PHARMATECH LABS, INC.
Balance Sheet (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
December 31,
1997
CURRENT LIABILITIES
Accounts payable $ 616,082
Accrued expenses 24,542
Payable - stockholders (Note 2) 57,249
Line of credit (Note 3) 187,200
Notes payable - current portion (Note 4) 41,609
Total Current Liabilities 926,682
LONG-TERM DEBT
Notes payable (Note 4) 122,525
Total Long-Term Debt 122,525
TOTAL LIABILITIES 1,049,207
COMMENTS AND CONTINGENCIES (Note 5)
STOCKHOLDERS' EQUITY
Common stock: 1,000 shares authorized of $1.00 par value,
900 shares issued and outstanding 900
Additional paid-in capital -
Retained earnings 45,997
Total Stockholders' Equity 46,897
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,096,104
<PAGE>
PHILLIPS PHARMATECH LABS, INC.
Statement of Operations
For the
Year Ended
December 31,
1997
NET SALES $ 3,621,413
COST OF SALES 2,701,070
GROSS MARGIN 920,343
OPERATING EXPENSES
Salaries 336,764
Professional services 29,330
Depreciation and amortization 52,899
Rent 77,039
General and administrative 389,809
Total Operating Expenses 885,841
INCOME BEFORE OTHER EXPENSES 34,502
OTHER EXPENSES
Interest expense (40,138)
Bad debt expense (46,152)
Total Other Expenses (86,290)
LOSS BEFORE INCOME TAXES (51,788)
INCOME TAXES -
NET LOSS $ (51,788)
BASIC LOSS PER SHARE OF COMMON STOCK $ (57.54)
<PAGE>
PHILLIPS PHARMATECH LABS, INC.
Statement of Stockholders' Equity
Additional
Common Stock Paid-In Retained
Shares Amount Capital Earnings
Balance, December 31, 1996 900 $ 900 $ - $ 97,785
Net loss for the year ended
December 31, 1997 - - - (51,788)
Balance, December 31, 1997 900 $ 900 $ - $ 45,997
<PAGE>
PHILLIPS PHARMATECH LABS, INC.
Statement of Cash Flows
For the
Year Ended
December 31,
1997
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (51,788)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 52,899
Allowance for doubtful accounts 46,152
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable (44,527)
(Increase) decrease in inventory 72,539
(Increase) decrease in prepaid expenses 1,674
(Increase) decrease in deposits (4,184)
(Increase) decrease in related party receivables 7,260
Increase (decrease) in accounts payable 25,586
Increase (decrease) in accrued expenses 2,059
Net Cash Provided by Operating Activities 107,670
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets (62,056)
Net Cash Used by Investing Activities (62,056)
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings from shareholders 1,333
Borrowings from notes payable 20,000
Payment on notes payable (49,497)
Borrowings from line of credit 41,721
Net Cash Provided by Financing Activities 13,557
NET INCREASE IN CASH AND CASH EQUIVALENTS 59,171
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 28,335
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 87,506
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
CASH PAID FOR:
Income taxes $ -
Interest $ 40,138
<PAGE>
PHILLIPS PHARMATECH LABS, INC.
Notes to the Financial Statements
December 31, 1997
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
a. Business Organization
Phillips Pharmatech Labs, Inc. (Phillips) was organized
under the laws of the State of Florida on December 13, 1994
as a subchapter S corporation. Phillips is engaged in the
manufacturing of health supplements and other health
related and natural products.
b. Fixed Assets
Fixed assets are stated at cost less accumulated
depreciation. Expenditures for small tools, ordinary
maintenance and repairs are charged to operations as
incurred. Major additions and improvements are
capitalized. Depreciation is computed using the straight-
line method over estimated useful lives as follows:
Leasehold improvements 39 years
Furniture and fixtures 5 years
Office equipment 5 years
Machinery and equipment 5 to 7 years
Vehicles 5 years
Depreciation expense for the year ended December 31, 1997
was $52,899.
c. 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.
d. Federal and State Income Taxes
The Company has elected subchapter S status under the
provisions of the Internal Revenue Code. This requires
reporting of income and losses on the shareholders'
individual income tax returns. Therefore, no accrual of
federal and state income taxes is necessary.
e. Accounting Method
The Company's financial statements are prepared using the
accrual method of accounting. The Company has elected a
December 31 year end.
<PAGE>
PHILLIPS PHARMATECH LABS, INC.
Notes to the Financial Statements
December 31, 1997
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
(Continued)
f. Inventory
Inventory is carried at the lower of cost or market value
using the first-in, first-out method. Inventory consisted
of he following at December 31, 1997:
Amount
Raw materials $ 326,062
Work-in-process 36,036
Total $ 362,098
g. Basic Loss Per Common Share
Basic loss per common share has been calculated based on
the weighted average number of shares of common stock
outstanding during the period.
h. Credit Risks
The Company maintains its cash accounts primarily in one
bank in Florida. The Federal Deposit Insurance Corporation
insures accounts to $100,000. The Company's accounts
occasionally exceed the insured amount.
i. Revenue Recognition
Revenue is recognized upon shipment of goods to the
customer.
j. 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.
k. Accounts Receivable
Accounts receivable are shown net of the allowance for
doubtful accounts of $108,513 for the year ended December
31, 1997.
l. Advertising
The Company follows the policy of charging the costs of
advertising to expense as incurred.
<PAGE>
PHILLIPS PHARMATECH LABS, INC.
Notes to the Financial Statements
December 31, 1997
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 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 payable has been reflected as
current in the accompanying financial statements. At
December 31, 1997, there was a balance outstanding payable
to stockholders totaling $57,249. The advances are
unsecured and non-interest bearing.
NOTE 3 - LINE OF CREDIT
An analysis of the line of credit with Nations Bank as of
December 31, 1997 is shown below:
Available
Line of Debt
Credit Outstanding
$ 250,000 $ 187,200
Borrowings under the line of credit are guaranteed by the
Company's inventory and accounts receivable. Interest
accrues at the bank's prime rate plus 2.75% (10.25% at
December 31, 1997).
NOTE 4 - NOTES PAYABLE
Notes payable at December 31, 1997 consisted of the following:
Note payable to Nations Bank, collateralized by a
vehicle of the Company, interest at 8.99%, principal
and interest payments of $303 are due monthly,
matures on September 11, 2000. $ 10,737
Note payable to Nations Bank, collateralized by
equipment of the Company, interest at 12.5%, principal
and interest payments of $450 are due monthly,
matures on November 4, 2002. 18,412
Note payable to Nations Bank, collateralized by certain
assets of the Company, interest at the bank's prime rate
plus 2.25%, interest payments due monthly along with
principal payments of $3,333, matures on June 12, 2001. 134,985
Total notes payable 164,134
Less: current portion (41,609)
Long-term notes payable $ 122,525
<PAGE>
PHILLIPS PHARMATECH LABS, INC.
Notes to the Financial Statements
December 31, 1997
NOTE 4 - NOTES PAYABLE (Continued)
Maturities of notes payable are as follows:
Year Ending
December 31, Amount
1998 $ 41,609
1999 46,754
2000 46,608
2001 24,531
2002 4,632
2003 and thereafter -
Total $ 164,134
NOTE 5 - COMMITMENTS AND CONTINGENCIES
Office Lease
The Company is leasing its office on a month to month basis
at $3,784 per month.
The Company is leasing its warehouse at $3,766 per month
until January 2000.
NOTE 6 - SUBSEQUENT EVENT
The Company has entered into an agreement with a public
company whereby all of its shares will be exchanged for
shares of the public company.
<PAGE>
MEDISYS TECHNOLOGIES, INC.
AND SUBSIDIARIES
CONSOLIDATED PROFORMA FINANCIAL STATEMENTS
June 30, 1998
<PAGE>
C O N T E N T S
Consolidated Proforma Balance Sheet. . . . . . . . . . . . . . . . 3
Consolidated Proforma Statement of Operations. . . . . . . . . . . 5
Statement of Assumptions and Disclosures . . . . . . . . . . . . . 6
<PAGE>
MEDISYS TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Proforma Balance Sheet
June 30, 1998
(Unaudited)
ASSETS
Medisys Proforma
Technologies, Phillips Adjustments
Inc. and Pharmatech, Increase Proforma
Subsidiaries Inc. (Decrease) Consolidated
CURRENT ASSETS
Cash $ 41,001 $ - $ - $ 41,001
Accounts receivable, net 2,874 521,491 - 524,365
Inventory 6,131 357,394 - 363,525
Work in progress - 16,169 - 16,169
Prepaid expenses 21,500 17,361 - 38,861
Loans to officers 6,192 - - 6,192
Total Current Assets 77,698 912,415 - 990,113
FIXED ASSETS
Leasehold improvements 2,195 - - 2,195
Furniture and equipment 76,946 311,415 - 388,361
Leased equipment 10,010 - - 10,010
Other - 63,250 - 63,250
Accumulated depreciation (58,964) (72,777) - (131,741)
Total Fixed Assets 30,187 301,888 - 332,075
OTHER ASSETS
Deferred offering costs 2,250 - - 2,250
Security deposits 4,000 - - 4,000
Patent and trademark costs, net 401,096 - - 401,096
Deposits - 41,130 - 41,130
Organizational costs 311 1,500 - 1,811
Total Other Assets 407,657 42,630 - 450,287
TOTAL ASSETS $ 515,542 $ 1,256,933 $ - $ 1,772,475
<PAGE>
MEDISYS TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Proforma Balance Sheet (Continued)
June 30, 1998
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Medisys Proforma
Technologies, Phillips Adjustments
Inc. and Pharmatech, Increase Proforma
Subsidiaries Inc. (Decrease) Consolidated
CURRENT LIABILITIES
Bank overdraft $ - $ 26,099 $ - $ 26,099
Accounts payable 329,082 453,079 25,000 807,161
Accrued expenses 587,919 - - 587,919
Payable-stockholders 49,081 57,249 - 106,330
Notes payable 31,722 - - 31,722
Total Current Liabilities 997,804 536,427 25,000 1,559,231
LONG-TERM DEBT
Notes payable - less current
portion 480,000 374,448 - 854,448
Total Long-Term Debt 480,000 374,448 - 854,448
TOTAL LIABILITIES 1,477,804 910,875 25,000 2,413,679
COMMITMENTS AND
CONTINGENCIES
STOCKHOLDERS' EQUITY
(DEFICIT)
Common stock: 100,000,000
shares authorized of $0.0005
par value, 6,222,104 shares
issued and outstanding,
respectively 6,588 900 (4,377) 3,111
Additional paid-in capital 6,412,198 - 324,535 6,736,733
Stock subscriptions receivable (175,000) - - (175,000)
Deficit accumulated during
the development stage (7,206,048) 345,158 (345,158) (7,206,048)
Total Stockholders' Equity
(Deficit) (962,262) 346,058 (25,000) (641,204)
TOTAL LIABILITIES AND
STOCKHOLDERS EQUITY
(DEFICIT) $ 515,542 $ 1,256,933 $ - $ 1,772,475
MEDISYS TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statement of Operations
June 30, 1998
(Unaudited)
Medisys Proforma
Technologies, Phillips Adjustments
Inc. and Pharmatech, Increase Proforma
Subsidiaries Inc. (Decrease) Consolidated
REVENUES $ 23,375 $ 1,686,618 $ - $ 1,709,993
OPERATING EXPENSES
Cost of product sold 5,332 1,066,949 - 1,072,281
Product development 79,625 - - 79,625
Salaries 95,101 132,930 - 228,031
Professional services 149,630 12,760 - 162,390
Depreciation and amortization 11,869 - - 11,869
General and administrative 90,290 268,516 - 358,806
Total Operating Expenses 431,847 1,481,155 - 1,913,002
OPERATING (LOSS) INCOME (408,472) 205,463 - (203,009)
OTHER EXPENSES
Interest expense (1,868) (16,981) - (18,849)
Total Other Expense (1,868) (16,981) - (18,849)
LOSS BEFORE INCOME TAXES (410,340) 188,482 - (221,858)
INCOME TAXES - - - -
NET (LOSS) INCOME $ (410,340) $ 188,482 $ - $ (221,858)
<PAGE>
MEDISYS TECHNOLOGIES, INC. AND SUBSIDIARIES
Summary of Assumptions and Disclosures
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
a. Business Organization
Medisys Technologies, Inc. (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.
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 Company has entered into an agreement to acquire 100%
of the shares of Phillips Pharmatech Labs, Inc. (Phillips)
for approximately 3,111,052 shares of the Company's common
stock. The acquisition will be accounted for as a purchase
of Phillips.
The acquisition is contingent upon the Company raising
between $3,000,000 and $5,000,000 in primary funding and
upon acquiring interim financing of approximately $200,000.
If the acquisition is completed, all Phillips common shares
owned by Phillips shareholders will be converted into
shares of the Company's common stock. The Company and
Phillips have agreed that the number of shares of the
Company's common stock to be issued to the Phillips
shareholders will represent 50% of the total shares of the
Company's common stock issued and outstanding immediately
following the acquisition. Therefore, the 900,000 shares
of Phillips common stock will be converted into
approximately 3,111,052 shares (post-split) of the
Company's common stock.
There are currently 15,555,260 shares of the Company's
common stock issued and outstanding. Anticipating that a
one share for five shares reverse split is effected as
proposed, this would result in approximately 3,111,052
shares of the Company's common stock outstanding prior to
the acquisition, without giving effect to the rounding-up
of fractional shares.
Also, Phillips shareholders will also be issued warrants or
options equal in number, exercise price and exercise date
to all of the Company's warrants outstanding on the date of
the closing of the acquisition.
<PAGE>
MEDISYS TECHNOLOGIES, INC. AND SUBSIDIARIES
Summary of Assumptions and Disclosures
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
(Continued)
a. Business Organization (Continued)
1. Record the purchase of Phillips Pharmatech Labs through the
issuance of 3,111,052 shares of common stock:
Common stock $ 1,556
Additional paid-in capital (1,556)
Total $ -
2. Record the estimated costs of the merger:
Accounts payable $ 25,000
Additional paid-in capital (25,000)
Total $ -
3. Record a 1 share for 5 shares reverse split of Medisys Technologies
and Subsidiaries:
Common stock $ (5,033)
Additional paid-in capital 5,033
Total $ -
4. Eliminate the equity of Phillips Pharmatech Labs, Inc.:
Common stock $ (900)
Additional paid-in capital 346,058
Deficit accumulated during the
development stage (345,158)
Total $ -
