<PAGE> 1
FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(x) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1996
-----------------
or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 for the transition period from ___________to ____________.
Commission File Number:
0-22390
------------------------
U.S. MEDICAL SYSTEMS, INC.
--------------------------
Delaware 68-0206382
- --------------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
7600 Burnet Road, Suite 350, Austin, TX 78757
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code. . . . . . . .(512) 795-0440
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Act of 1934
during the preceding 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
------- ------
Number of shares outstanding of the issuer's common stock, as of December 31,
1996: 2,332,023
The accompanying notes are an integral part of these
unaudited consolidated financial statements.
Page 1 of 14
<PAGE> 2
U.S. MEDICAL SYSTEMS, INC.
INDEX
<TABLE>
<S> <C>
PART I FINANCIAL INFORMATION PAGE
- -------------------------------------------------------------- ----
Item 1. Financial Statements
Unaudited Condensed Consolidated Balance Sheets -
December 31, l996 and June 30, 1996 3
Unaudited Condensed Consolidated Statements of
Operations - For the three months ended
December 31, l996 and December 31, 1995 4
Unaudited Condensed Consolidated Statements of
Operations - For the six months ended December 31, 1996
And December 31, 1995 5
Unaudited Condensed Consolidated Statements of
Cash Flows - For the six months ended
December 31, l996 and December 31, 1995 6
Notes to the Unaudited Condensed Consolidated
Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Conditions and Results of Operations 9
PART II. OTHER INFORMATION
- --------------------------------------------------------------
Item 1-4. 13
Item 5-6. 14
Signature 14
</TABLE>
Page 2 of 14
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
U.S. MEDICAL SYSTEMS, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1996 1996
------------ ----------
<S> <C> <C>
ASSETS
Current Assets
Cash $ 235,742 $ 22,014
Accounts receivable, net allowance for doubtful accounts
and returns of $5,000 37,141 67,479
Inventory 56,130 111,043
Prepaid expenses 7,583 7,720
---------- ----------
TOTAL CURRENT ASSETS 336,596 208,256
Other Assets
Property and equipment, net 20,179 25,346
Intangible assets, net 85,349 141,796
---------- ----------
TOTAL OTHER ASSETS 105,528 167,142
---------- ----------
TOTAL ASSETS $ 442,124 $ 375,398
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 91,599 $ 53,174
Accrued liabilities 240,625 114,724
Current portion of long-term debt due to stockholders 49,500 796,950
---------- ----------
TOTAL CURRENT LIABILITIES 381,724 964,848
---------- ----------
TOTAL LIABILITIES 381,724 964,848
---------- ----------
Stockholders' Equity
Common stock, 20,000,000 shares authorized, $ .01 par
value, 2,332,023 issued and outstanding 23,320 117,246
Additional paid-in capital 6,773,901 5,826,636
Accumulated deficit (6,736,821) (6,533,332)
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 60,400 (589,450)
TOTAL LIABILITIES AND STOCKHOLDERS' ---------- ----------
EQUITY $ 442,124 $ 375,398
========== ==========
</TABLE>
Page 3 of 14
<PAGE> 4
U.S. MEDICAL SYSTEMS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATION
<TABLE>
<CAPTION>
For the three months For the three months
ended December 31 ended December 31
1996 1995
-------------------- --------------------
<S> <C> <C>
Net Sales $ 112,898 $ 173,913
Cost of sales (58,220) (34,975)
---------- ---------
GROSS PROFIT 54,678 138,938
Costs and expenses
General and administrative 90,202 72,327
Selling and marketing 30,536 20,852
Research and development 667 31,041
Depreciation and amortization 40,369 45,438
---------- ---------
TOTAL COST AND EXPENSES 161,774 169,658
---------- ---------
LOSS FROM OPERATIONS (107,096) (30,720)
Other income (expense)
Interest income 386 406
Interest expense (7,878) (19,923)
Miscellaneous income (expense), net 8,242 (1,935)
---------- ---------
TOTAL OTHER INCOME (EXPENSE) 750 (21,452)
---------- ---------
NET LOSS $ (106,346) $ (52,172)
========== =========
Net income (loss) per share $ (0.08) $ (0.01)
========== =========
Weighted average shares outstanding 1,372,578 8,509,000
</TABLE>
Page 4 of 14
<PAGE> 5
U.S. MEDICAL SYSTEMS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATION
<TABLE>
<CAPTION>
For the six months For the six months
ended December 31 ended December 31
1996 1995
------------------ ------------------
<S> <C> <C>
Net Sales $ 216,266 $ 269,337
Cost of sales (131,754) (114,953)
---------- ----------
GROSS PROFIT 84,512 154,884
Costs and expenses
General and administrative 164,931 190,915
Selling and marketing 38,805 95,058
Research and development 7,015 99,489
Depreciation and amortization 60,976 92,099
---------- ----------
TOTAL COSTS AND EXPENSES 271,727 477,561
---------- ----------
LOSS FROM OPERATIONS (187,215) (322,677)
Other income (expense)
Interest income 614 1,919
Interest expense (28,482) (39,846)
Miscellaneous income (expense), net 11,594 (5,179)
---------- ----------
TOTAL OTHER INCOME (EXPENSE) (16,294) (43,106)
---------- ----------
NET LOSS $ (203,489) $ (365,783)
========== ==========
Net income (loss) per share $ (0.15) $ (0.04)
Weighted average shares outstanding 1,294,085 8,509,140
</TABLE>
Page 5 of 14
<PAGE> 6
U.S. MEDICAL SYSTEMS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the six months For the six months
ended December 31 ended December 31
1996 1995
------------------ ------------------
<S> <C> <C>
Cash flows from operating activities
Net Loss $(203,489) $(365,783)
Adjustments to reconcile net loss to net cash used for
operating activities:
Provision for bad debts and returns
Depreciation and amortization 60,976 61,551
Loss on disposition of excess equipment 638
Changes in assets and liabilities
Accounts receivable 30,338 20,044
Inventories 54,913 3,811
Prepaid expenses and other assets 137 26,036
Accounts payable and accrued liabilities 56,940 -
--------- ---------
Net cash used for operating activities 453 (254,174)
--------- ---------
Cash flows from investing activities:
Proceeds from sales of furniture and equipment - 59,257
--------- ---------
Net cash provided by (used for) investing activities - 59,257
--------- ---------
Cash flows from financing activities:
Additional paid in capital - 59,400
Proceeds from issuance of common stock - 600
Private Placement shareholders' investment 213,275 -
--------- ---------
Net cash provided by financing activities 213,275 60,000
--------- ---------
Increase in cash 213,728 (134,917)
Cash and cash equivalents at beginning of year 22,014 194,969
--------- ---------
Cash and cash equivalents at beginning of year $ 235,742 $ 60,052
========= =========
Supplemental non-cash financing activities:
The following occurred in December 1996.
1. 3,177,325 shares of common stock held in escrow
were canceled
2. A one-for-seven reverse split of common stock
was completed.
3. 1,110,983 shares of common stock were issued in
exchange for notes payable totaling $747,450 and
accrued interest totaling $105,889.
</TABLE>
Page 6 of 14
<PAGE> 7
U.S. MEDICAL SYSTEMS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. ORGANIZATION
U.S. MEDICAL SYSTEMS, INC. (the "Company"), (formally Medical Polymers,
Inc.), through its wholly-owned subsidiary U.S. Medical, Inc., develops,
produces and markets products directed at the over-the-counter consumer
market and products related to infection prevention for the professional
dental health care industry.
The Company's current cash resources have not been sufficient to support
the Company's current debt interest payments and extensive consumer
promotion of existing products. As such, the Company is focusing its
strategy on the Miracle Grip(R) and PDS(R) Clean products. Due to the
extensive capital requirements for consumer advertising, the Company will
curb new product launches in 1997 and only market its two revenue
producing products. The Company completed a restructuring and $853,000
of its long term debt was converted to equity in this reporting period.
2. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with the rules and regulations of the
Securities and Exchange Commission and, accordingly, do not include all
information and footnotes required under generally accepted accounting
principles for complete financial statements. In the opinion of
management, these interim condensed consolidated financial statements
contain all adjustments (consisting of normal recurring adjustments)
considered necessary for a fair presentation of the financial position of
the Company as of December 31, l996, and the results of the Company's
operations and its cash flows for the three months and six months ended
December 31, l996 and l995. These condensed consolidated financial
statements should be read in conjunction with the Company's Annual Report
on Form 10-KSB/A-1 filed on September 19, 1996.
3. INVENTORIES
At December 31, 1995 and 1996, inventories consisted primarily of
finished products, work in progress and raw chemicals. The balance of
inventory consisted of packaging materials for Miracle Grip(R).
4. LONG TERM DEBT
The Company completed a private placement of 10% subordinated debt with
warrants to existing shareholders on March 1, 1995 for $805,000. This
private placement included one stock purchase warrant exercisable for
approximately 2.9 shares of $.01 par value Common Stock of the Company
for every $1.00 of principal. One cent of each dollar invested was
attributed to the purchase of the warrants and $0.99 was attributed to
the notes. The warrants were exercisable at any time after September 1,
1995 until February 27, 2000 at an exercise price of $0.15 per share of
common stock, subject to adjustment. Terms of debt were 10% interest
only to be paid March 1, 1996; 10% interest and one-half of the principal
to be paid March 1, 1997; and 10% interest and the balance of the
principal was to be paid March 1, 1998. The amount of the proceeds
attributable to the warrants ($8,050) was recorded as a discount to debt
(to be amortized over the
Page 7 of 14
<PAGE> 8
life of the debt) and an increase to additional paid-in capital. Offering
expenses of $35,000 were incurred and recorded as an intangible asset in
the financial statements. However, the remaining unamortized offering
expense of $21,000 were written off in December 1996, when the debt was
converted to equity. These expenses were being amortized over the life of
the debt. On November 19, 1996, stockholders approved a reorganization
plan which converted $853,000 of the principle and interest of this debt
to equity. On December 17, 1,110,983 shares of common stock was issued to
satisfy the above debt. Warrants related to this private placement were
canceled as part of the reorganization. There is one debt holder
remaining which represents $49,500 of principle and approximately $7,600
in interest. The Company is seeking to restructure this debt.
5. REORGANIZATION PLAN
In order to address the Company's financial problem and return the
Company to a stable financial condition, management, with the approval of
the Board of Directors, devised a Reorganization Plan. The
Reorganization Plan called for the cancellation of all the indebtedness
of the Company to its noteholders through an offer to exchange the
outstanding notes for the Company's Common Stock. On June 10, 1996, the
Vancouver Stock Exchange indicated that it had no objection to the
proposed debt settlement with the noteholders. Written approval was
secured by twenty-three of the noteholders. The stockholders approved
the debt settlement on November 19, 1996. Stockholders also approved, as
part of the reorganization, a consolidation of the Company's shares on a
one-for-seven reverse split and approved a change of the name of the
Company to U. S. Medical Systems, Inc. Other items the Company took
action on as part of the reorganization, which did not require
stockholder approval, were: cancellation of 3,177,325 escrowed shares
and a private placement which raised approximately $270,900. On December
17, 1996, the Vancouver Stock Exchange approved the reorganization and
the company began trading as U.S. Medical Systems, Inc. on the Vancouver
Stock Exchange (Symbol: USS) and the NASD Bulletin Board (Symbol:
USME). On January 22, 1997, the Vancouver Stock Exchange approved the
private placement. Since the private placement was not approved until
January 1997, $213,275 received in December 1996 from investors in the
private placement was recorded as U.S. Medical Systems, Inc. liabilities
and included in accrued liabilities in the accompanying financial
statements.
6. NET LOSS PER SHARE
Net loss per share is computed by dividing net loss by the weighted
average number of common shares and common share equivalents (if
dilutive) during each period. As required by accounting principles
generally accepted in the United States, issued and outstanding shares of
common stock which are held in escrow are excluded from the weighted
average number of common and common equivalent shares because the release
of such shares is contingent upon the Company reaching certain financial
goals which have not yet been attained. In this period due to the one
for seven reverse split, the weighted averages were recomputed. On
December 31, 1996, the weighted average, excluding escrow shares, was
1,294,085 for the six month period and 1,372,578 for the quarter being
reported.
Page 8 of 14
<PAGE> 9
ITEM 2.
This quarterly report on Form 10-Q contains certain forward-looking
statements and information relating to the Company and its subsidiaries that
are based on the beliefs of the Company's management as well as assumptions
made by and information currently available to the Company's management. When
used in this report, the words "anticipate," "believe," "estimate" and "intend"
and words or phrases of similar import, as they relate to the Company or its
subsidiaries or Company management, are intended to identify forward-looking
statements. Such statements reflect the current risks, uncertainties and
assumptions related to certain factors including, without limitations,
competitive factors, general economic conditions, customer relations,
relationships with vendors, governmental regulation and supervision,
seasonality, distribution networks, product introductions and acceptance,
technological change, changes in industry practices, onetime events and other
factors described herein. Based upon changing conditions, should any one or
more of these risks or uncertainties materialize, or should any underlying
assumptions prove incorrect, actual results may vary materially from those
described herein as anticipated, believed, estimated, expected or intended.
The Company does not intend to update these forward-looking statements.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The discussion below analyses changes in the consolidated operating results and
financial conditions of the Company during its second quarter of fiscal 1996
and 1997.
GENERAL
The Company experienced an decrease in net sales, increased operating losses
and a net loss for the fiscal quarter ended December 31, 1996. Net sales
decreased 35% during the second quarter from $174,000 in 1995 to $113,000 in
1996. Operating losses increased 248% from $30,721 in fiscal 1996 to $107,000
in fiscal 1997. Net losses increased 103% from $52,000 in 1995 to $106,300 in
1996. The Company's gross margin decreased to 48.5% in 1996 from 79% in 1995.
The decrease in gross margin was due primarily to the reduced sales of the
PDS(R) product line in this quarter. Losses are anticipated in 1997 as the
Company continues its efforts to obtain increased market acceptance for its
Miracle Grip(R) product line.
The decrease in sales for the current period is attributable to the
inconsistent sales in PDS(R) line, and dropping the QUITCH(R) line. Likewise,
increases in operating losses are related to increases in general and
administrative expenses due to the reorganization, special meeting and private
placement. Selling expenses were due to the increased promotion costs for
Miracle Grip(R). It is expected that overhead expenses should decline in the
next period.
The Company continues to seek increases in sales of the Miracle Grip product
line through major food and drug chains in the United States. Likewise, the
Company has completed a direct mail test in areas of the country where Miracle
Grip(R) is not sold and may continue to pursue sales through that channel as
well. Strategically, the Company will require additional capital to
manufacture and market existing and future products developed internally.
During the period, the Board of Directors completed a reorganization plan to
restructure the Company and convert debt to equity. There can be no assurance
that the reorganization approved by stockholders in November and by the
Vancouver Stock Exchange will ensure financial success. Likewise, there can be
no assurance that the Company will be able to sustain operations through 1997,
convert its remaining raw materials and packaging inventories into salable
products and successfully market its products. At the
Page 9 of 14
<PAGE> 10
Company's annual meeting, stockholders were told that the Company might seek to
sell one or all of its existing product lines and seek to acquire an existing
company.
The Company has suffered significant net losses, has a substantial accumulated
deficit and has generated significant negative cash flows from operations.
Marketing and costs to maintain inventory during fiscal 1997 will require
significant cash resources. The Company obtained $270,900 in December of 1996
in connection with the private placement of equity and warrants. However,
there can be no assurance that the additional cash resources will enable the
Company to sustain operations in the next fiscal year, convert its remaining
raw materials and packaging inventories into salable products and successfully
market its products. In consideration of this, additional financing may be
required in order to continue to fund operations. See the discussion under
"Liquidity and Capital Resources" below.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain items from
the Company's Condensed Consolidated Financial Statements of Income, expressed
as a percentage of revenue:
<TABLE>
<CAPTION>
Three months ended
December 31
1996 1995
------- -------
<S> <C> <C>
NET SALES 100.0% 100.0%
COSTS AND EXPENSES
Cost of sales (51.5%) (20.1%)
General and administrative (79.9%) (41.6%)
Selling and marketing (26.9%) (12.0%)
Research and development (.7%) (17.8%)
Depreciation and amortization (35.8%) (26.1%)
------- -------
OPERATING EXPENSES (194.9%) (117.6%)
INCOME (LOSS) from operations (94.9%) (17.6%)
Total other income (expense): .07% (12.3%)
------- -------
NET INCOME (LOSS) (94.2%) (29.9%)
------- -------
</TABLE>
COMPARISON OF THREE MONTHS ENDED DECEMBER 31, 1996 AND 1995
Net sales for the three months ended December 31, l996, decreased 35% to
$113,000 from $174,000 for the same period last year. Most sales were related
to Miracle Grip(R) consumer product for the retail market which has lower
margins, increased cost of goods and higher marketing costs. Sales of the
polymer film product line increased 23% from last year's period. Net sales
of the discontinued stick technology decreased 62% compared to the corresponding
fiscal 1996 period. Sales of the PDS(R) line were flat for this period.
Cost of goods sold as a percentage of net sales increased to 52% from 20% in
the fiscal 1996 period. The increase was primarily the result of a shift in
mix of sales, with reduced sales in the PDS(R) technology to the film technology
products and lower gross margins of products sold in the current period. Gross
margins are expected to improve in future quarters with larger manufacturing
runs, increased sales in the PDS(R) lines and new techniques to recycle finished
polymer film material.
Page 10 of 14
<PAGE> 11
General and administrative expenses increased by $17,875, or 24.7% in the
second quarter 1997 period primarily as a result of nonrecurring expenses of
approximately $57,000 related to legal, accounting, shareholder communications
expenses due to the reorganization, special meeting and private placement in
this period. Overhead expenses are expected to be stable in the next quarter.
Management plans to continue cost cutting efforts in this area.
The increase of $10,000 or 50% in sales and marketing expenses in the second
quarter 1997 period was largely associated with promotional and advertising
cost on the Miracle Grip(R) product line. Currently twenty-four brokers
representing the Company market the Miracle Grip(R) product. Selected
advertising and in-store promotions will continue during fiscal 1997.
Research and development expenses decreased 98% to less than $1,000 in the
current period. The decrease was attributed to the substantial completion of
the development of the polymer film and stick technologies and the termination
of all development fees to NewForm Development Labs
Interest expense decreased 60.5% to $7,878 attributable to the debt conversion
of $853,000 of principle and interest. The interest income remained flat in
the period. There was an increase of 526% in miscellaneous income due to an
insurance refund from the previous fiscal year.
As a result of the above activities, the Company's losses increased from
$52,200 in the fiscal 1996 period, or $0.01 per share to $106,300, or $0.08 per
share in fiscal 1997's second quarter. The significant increase in loss per
share is due to the one for seven reverse split in the period thereby reducing
the weighted average number of shares to 1,372,578. If the Company is able to
enhance advertising support for Miracle Grip(R) in 1997, management anticipates
the sales volumes should increase for the Miracle Grip(R) product line.
However, the Company operates in a highly competitive industry with companies
that are better established in the market place and have vastly greater
resources than the Company. Therefore, there can be no assurances that demand
for the Company's Miracle Grip(R) product line will continue to grow.
COMPARISON OF SIX MONTHS ENDED DECEMBER 31, 1996 AND 1995
Net sales for the six months ended December 31, 1996 decreased $54,000 or 20%
to $216,000 as compared to $270,000 for the same period of the previous year.
The decrease in net sales was attributable to reduced purchases of the PDS(R)
product line and the discontinuance of the solid stick technology. Sales of
Miracle Grip(R) increased by 23% in the period over the second quarter of fiscal
1996.
Costs of goods sold as a percentage of net sales declined to 61% from 43% in
the fiscal 1996 period. This increase resulted from the mix of products being
manufactured.
General and administrative expenses decreased by $26,000 or 14% to $165,000 in
the six month period. This was due primarily to reduced staff throughout the
period, reduction of unnecessary office and lab space, the elimination of
certain insurance, consulting and advertising services as well as the
completion of computer leases. The Company incurred a one time expense of
approximately $57,000 for the costs associated with restructuring, special
meeting and a private placement. The Company expects that general and
administrative expenses will continue to decrease since the Company is
currently placing emphasis on cost controls and limiting non-essential spending
whenever feasible.
Sales and Marketing expenses also decreased by $56,200 or 69% to $38,800 from
$95,000 in the six month period last year. This improvement resulted from the
management decision to eliminate the costly
Page 11 of 14
<PAGE> 12
master broker arrangement, temporarily hire an experienced sales manager to
restructure the national broker force, and reduce broad based national
advertising until distribution expands.
Research and development expenses decreased 93% to $7,000 in the six month
period. This resulted from the completion of clinical studies, selected
stability studies and the completion of development on current and future
products with New Form Labs. Costs related to monthly contract services and
the leasing of the lab facilities by the Company for New Form Labs ended on
October 31, 1995. The Company expects that research and development costs will
be minimal through the remainder of fiscal year 1997.
Interest expense decreased to $28,500 attributable to the debt to equity
conversion by stockholders from the debt financing of $805,000 on March 1,
1995. The decrease in interest income of $1,200 from the previous six month
period last year was a result of less interest bearing investments during the
current period due to the operational losses of the Company. The increase in
miscellaneous income by $17,000 in the six month period from last year is
attributed to a one time refund of insurance premiums from the previous year.
Net losses of $203,500 were down $162,300 or 52% from the corresponding fiscal
1996 six month period. The continued reduction is losses resulted from a
steady focus of management cost controls including less expensive manufacturing
processes and completion of major R&D work on the stick technology.
LIQUIDITY AND CAPITAL RESOURCES
Working capital deficit at December 31, l996 was $45,128 compared to a deficit
in working capital at June 30, 1996 of $756,592. Current ratio was 0.88 from
0.22 at June 30, 1996. The increase in working capital is due to the
conversion of $853,000 of the Company's debt to equity and an cash infusion of
$270,900 due to the closing of a private placement in the period.
There were no capital expenditures in this period.
Total long term debt outstanding was $57,000, including accrued interest on the
debt, at December 31, l996, which was a 94% reduction from the prior quarter.
Interest on the remaining debt is being accrued monthly.
The Company completed a reorganization plan which included the conversion
$853,000 of debt and interest through November 1, 1996 to equity. This
transaction was approved by 23 of the 24 noteholders representing 94% of the
Company's outstanding debt. The Company is negotiating to restructure the
remaining 6% of the debt.
Management believes the reorganization, including the debt conversion to
equity, together with existing cash resources and net proceeds from sales of
its products and the completed private placement will be satisfactory to fund
operations for the next six to nine months. There can be no assurance that the
Company will be able to obtain financing on acceptable terms, if at all, to
fund operations beyond that time frame.
Page 12 of 14
<PAGE> 13
PART II
OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS
NONE
ITEM 2 RECENT SALES OF UNREGISTERED SECURITIES
On December 6, 1996, 541,800 units consisting of one transferable
share purchase warrant and one share of Common Stock were sold to
current stockholders, directors and noteholders and the Company.
Each unit sold at $.50 (US) along with one non-transferable share
purchase warrant, two of such warrants entitling the holder to
acquire one additional share of Common Stock at a price of $.75
(US) per share until December 6, 1997 and at a price of $1.00 (US)
until December 6, 1998. The Company received $270,900 (US) from
this offering less legal, printing and accounting expenses of
approximately $25,000.
Exemption under Securities Act: Section 4(2)., the offering
was made exclusively to accredited investors. Total offering
was less than $1,000,000.
ITEM 3 CHANGES IN SECURITIES
DEFAULTS UPON SENIOR SECURITIES
As reported in the Company's 10KSB/A-1 of September 19, 1996, the
Company was in arrears of interest due on a debt obligation of
$797,000 in debentures to 24 noteholders issued in February 1995.
The Company defaulted on a majority of the interest due under the
note arrangement agreement on April 1, 1996. Under a
reorganization plan submitted to the stockholders in November
1996, debt and interest of 23 noteholders was converted to equity.
In December 1996, $853,000 of principle and interest were
exchanged for 1,110,983 post-reorganization shares. The Company
is negotiating to restructure approximately $57,000 of outstanding
debt remaining.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) Special Meeting of Stockholders was held November 19, 1996.
(b) Three directors were reelected: Lee Cooke, Dr. Clark
Gunderson and Sharri McAnally
(c) The Company received approval on five items with 9,142,061
shares voting at the Special Meeting on the following:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
FOR AGAINST ABSTAIN SPOILED
<S> <C> <C> <C> <C>
ITEM #1
Directors:
Lee Cooke 9,018,106 -0- 56,455 67,500
Clark Gunderson 9,049,406 -0- 25,155 67,500
Sharri McAnally 9,409,106 -0- 25,155 67,500
</TABLE>
Page 13 of 14
<PAGE> 14
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
ITEM #2
Amendment for 1:7
reverse split 8,780,901 242,626 118,534
ITEM #3
Name Change to
U.S. Medical Systems Inc. 8,907,656 226,981 7,424
ITEM #4
Debt for Equity Exchange 6,793,897 241,531 2,106,633
ITEM #5
Ratify Auditors 9,109,202 15,000 18,859
- --------------------------------------------------------------------------------
</TABLE>
ITEM 5 NONE
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
The exhibit listed below is filed as part of this report.
EXHIBIT NUMBER DESCRIPTION
- -------------- -----------
4.4 Warrant Agreements dated December 6, 1996.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
U.S. MEDICAL SYSTEMS, INC.
THE REGISTRANT
Date: February 7, 1997
/s/ SHARRI MCANALLY
------------------------------------
Sharri McAnally
Corporate Secretary
(an authorized accounting officer on
behalf of the registrant)
Page 14 of 14
<PAGE> 15
EXHIBIT INDEX
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EXHIBIT NUMBER DESCRIPTION
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4.4 Warrant Agreements dated December 6, 1996
27 Financial Data Schedule
<PAGE> 1
EXHIBIT 4.4 WARRANT AGREEMENT DATED DECEMBER 6, 1996
MEDICAL POLYMERS TECHNOLOGIES, INC.
Suite 350, 7600 Burnet Road
Austin, TX 78757
December 6, 1996
To:
Dear Sirs:
Medical Polymers Technologies, Inc., a Delaware corporation (the
"Company"), hereby agrees to issue in connection with the private offering of
its common stock with a $0.01 par value ("Common Stock"), Stock Purchase
Warrants entitling the holders to purchase an aggregate of ____________shares
of the Common Stock on a 7:1 post-consolidated basis, each two Warrants
currently being equal to one share of Common Stock of the Company, to be
evidenced by an instrument in the form attached hereto as Schedule "A"
(hereinafter referred to as the "Warrant", and the Warrant and all instruments
hereafter issued in replacement, substitution, combination or subdivision
thereof being hereinafter issued in replacement, substitution, combination or
subdivision thereof being hereinafter collectively referred to as the
"Warrants"). The number and character of shares of Underlying Securities
purchasable upon exercise of the Warrants are subject to adjustment as provided
in Section 6 below. The Warrants will be exercisable by each Warrantholder as
to all Common Stock covered thereby at the Purchase Price per share, as defined
below, at any time and from time to time after the date hereof and ending at
5:00 p.m., Austin time, on December 6, 1998.
1. Definitions.
As used herein, the following terms, unless the context otherwise
requires, shall have for all purposes hereof the following respective meanings:
(a) The term "Act" refers to the Securities Act of 1933, as amended
from time to time.
(b) The term "Commission" refers to the Securities and Exchange
Commission or the British Columbia Securities Commission.
(c) The term "Common Stock" refers to the Company's common stock
with a $0.01 par value.
<PAGE> 2
(d) The term "Other Securities refers to any securities of the
Company or any other person (corporate or otherwise), any property
(including cash), and any right to receive any securities or property
that the holders of the Warrants at any time shall be entitled to
receive, or shall have received, upon the exercise of the Warrants, in
lieu of or in addition to Common Stock, or which at any time shall be
issuable or shall have been issued in exchange for or in replacement of
Common Stock or Other Securities pursuant to Section 6 hereof or
otherwise; provided, however, that Other Securities does not include cash
dividends payable upon Common Stock or Other Securities, which cash
dividend was payable to holders of record prior to the date of exercise
of a Warrant.
(e) The term "Purchase Price" means $0.75 (U.S.) per share prior to
5:00 p.m. Austin Time on December 6, 1997, or $1.00 (U.S.) per share
after 5:00 p.m. Austin Time on December 6, 1997 and prior to 5:00 p.m.
Austin Time on December 6, 1998, subject to adjustment as set forth in
Subsection 6(a).
(f) The term "Underlying Securities" refers to the shares of Common
Stock and Other Securities issuable under this Warrant Agreement and the
Warrants pursuant to the exercise of the Warrants; provided, however,
that "underlying Securities" does not include Common Stock or Other
Securities, the right to purchase of which has been waived pursuant to
Subsection 6(b) hereof.
(g) The term "Warrantholder" refers to the initial recipients of the
Warrants and any transferee or transferees thereof permitted by Section
3(a) below.
2. Representations and Warranties.
The Company represents and warrants to you as follows:
(a) Existence. The Company has been duly incorporated and is
validly existing as a corporation in good standing under the laws of its
jurisdiction of incorporation.
(b) Corporate and Other Action. The Company has all requisite power
and authority (corporate and other), and has taken all necessary corporate
action, to authorize, execute, deliver and perform this Warrant Agreement;
to execute, issue, sell and deliver the Warrants and a certificate or
certificates evidencing the Warrants; to authorize and reserve for issuance
and, upon payment from time to time of the Purchase Price, to issue, sell
and deliver the shares of the Underlying Securities issuable upon exercise
of the Warrants; and to perform all of its obligations under this Warrant
Agreement and the Warrants. This Warrant Agreement has been duly executed
and delivered by the Company and is a legal, valid and binding agreement of
the Company enforceable in accordance with its terms. No authorization,
approval, consent or other order of any regulatory authority is required
for such authorization, issue or sale.
<PAGE> 3
(c) Corporate and Other Action. The execution and delivery of this
Warrant Agreement, the consummation of the transactions herein
contemplated, and the compliance with the terms and provisions of this
Warrant Agreement and of the Warrants will not conflict with, or result in
a breach of, or constitute a default or an event permitting acceleration
under, any statute, the Certificate of Incorporation or Articles of the
Company, or any indenture, mortgage, deed of trust, note, bank loan, credit
agreement, franchise, license, lease, permit or any other agreement,
understanding, instrument, judgment, decree, order, statute, rule or
regulation to which the Company is a party of by which it is bound.
(d) Validity. The Warrant, when delivered to you, will be duly
authorized, executed and delivered and will be a legal, valid and binding
obligation of the Company enforceable in accordance with its terms. The
shares of Common Stock of the Company, when delivered to you upon payment
of the Purchase price, will be duly authorized and validly issued and
outstanding, fully paid and nonassessable, and free of preemptive rights.
3. Compliance with the Act.
(a) Purchase for Investment; Transferability. You represent and
warrant to the Company that the Warrants and the shares of Underlying
Securities are being acquired for investment and not with a view to the
distribution or resale thereof. You agree that the Warrants and the
Underlying Securities may not be transferred, sold, assigned or
hypothecated, except pursuant to a registration statement that has become
effective under the Act, setting forth the terms of such offering, the
underwriting discount and commissions and any other pertinent data with
respect thereto, unless you have provided the Company with an opinion of
counsel reasonably acceptable to the Company that such registration is not
required.
(b) Legend. Each certificate representing Underlying Securities
shall be imprinted with a legend in substantially the following form:
The securities represented by this certificate were issued upon
exercise of a stock purchase warrant granted on December 6, 1996,
have not been registered or qualified under the Securities Act of
1933 or any applicable state securities laws, and may not be sold
or transferred in the absence of effective registration or
qualified under such laws or an exemption from registration or
qualification thereunder. The transfer of such security is also
subject to the conditions specified in the Warrant Agreement, dated
as of December 6, 1996, between the Corporation and certain
subscribers, and the Corporation reserves the right to refuse the
transfer of such security until such conditions have been fulfilled
with respect to such transfer. Upon written request, a copy of
such
<PAGE> 4
agreement will be furnished by the Corporation to the
holder thereof without charge. Any transferee of the
security represented by this certificate also agrees
to be bound by the terms and conditions of such
Warrant Agreement.
THE WARRANTS REPRESENTED BY THIS WARRANT CERTIFICATE
AND ANY SHARES ACQUIRED UPON THE EXERCISE THEREOF ARE
SUBJECT TO A HOLD PERIOD AND MAY NOT BE TRADED IN
BRITISH COLUMBIA UNTIL THE EXPIRY OF THE HOLD PERIOD
EXCEPT AS PERMITTED BY THE SECURITIES ACT (BRITISH
COLUMBIA) AND REGULATIONS MADE UNDER THE ACT.
(c) Unless the content otherwise requires, references in this
Section 3 to "you" or "your" shall mean and include a Warrantholder or a
holder of Underlying Securities, as the case may be.
4. Exercise of Warrants.
Warrants may only be exercised in full by the Warrantholder by surrender
of the Warrant, with the form of subscription at the end thereof duly executed
by such Warrantholder, to the Company at its principal executive offices,
accompanied by certified or bank cashier's cheque payable to the order of the
Company in the full amount obtained by multiplying the number of Units
represented by the respective Warrant or Warrants by the Purchase Price per
Unit.
5. Delivery of Stock Certificates, etc. on Exercise.
Any exercise of the Warrants pursuant to Section 4 hereof shall be deemed
to have been effective immediately prior to the close of business on the date
on which the Warrants with the subscription form and the cheque for the
aggregate Purchase Price shall have been received by the Company; except that
the Company shall not be required to open its stock transfer books in order to
effect an exercise, and the effective time in such event shall be the date the
stock transfer books are reopened. At such time, the person or persons in
whose name or names any certificate or certificates for shares of Underlying
Securities shall be issuable upon such exercise shall be deemed to have become
the holder or holders of record of the shares of Underlying Securities so
purchased. As soon as practicable after the exercise of any Warrant, the
Company, at its expense (including the payment by it of any applicable issue
taxes), will cause to be issued in the name of, and delivered to, the
purchasing Warrantholder, a certificate or certificates for the number of fully
paid and nonassessable shares of the Underlying Securities to which such
Warrantholder shall be entitled upon such exercise, plus in lieu of any
fractional share to which such Warrantholder would otherwise be entitled, cash
in an amount determined pursuant to Subsection 7(h) hereof. Such certificate
shall contain the legend required by Subsection 3(b) hereof.
<PAGE> 5
6. Anti-dilution Provisions.
The Warrants are subject to the following terms and conditions during the
term thereof:
(a) Stock Distributions, Splits and Combinations; Adjustments. In
case of (i) the outstanding shares of Common Stock (or Other Securities)
shall be subdivided into a greater number of shares, (ii) a non-cash
dividend in Common Stock (or Other Securities) shall be paid in respect of
Common Stock (or Other Securities), or (iii) the outstanding shares of
Common Stock (or Other Securities) shall be combined into a smaller number
of shares thereof, the number of shares of Underlying Securities subsequent
to such subdivision or combination or at the record date of such dividend
or distribution shall simultaneously with the effectiveness of such
subdivision or combination or immediately after the record date of such
dividend or distribution be equal to the number of shares of Common Stock
and Other Securities a holder would have owned and had a right to receive
as a result of such subdivision, combination, dividend or distribution if
such holder had actually held of record immediately prior to the
effectiveness of such subdivision or combination or immediately prior to
the record date of such dividend or distribution the number of Underlying
Shares purchasable immediately prior to the effectiveness of such
subdivision or combination or the record date of such dividend or
distribution.
(b) Reorganizations and Recapitalizations. In case the Company
shall be reorganized or recapitalized by the reclassifying its outstanding
Common Stock (or Other Securities) without par value to stock with par
value, then, as a condition of such reorganization or recapitalization,
each Warrantholder shall thereafter have the right to purchase, upon the
terms and conditions specified herein, the number of shares of Underlying
Securities that a holder would have owned and had the right to receive as a
result of such reorganization or recapitalization if such holder had held
of record the number of shares of Underlying Securities immediately prior
to such reorganization or recapitalization. If any consolidation or merger
of the Company with another corporation, or the sale of all or
substantially all of its assets to another corporation, shall be effected
in such a way that holders of Common Stock and Other Securities shall be
entitled to receive stock, securities or assets with respect to or in
exchange for Common Stock and Other Securities, then, as a condition of
such consolidation, merger or sale, immediately after the effective time of
such consolidation, merger or sale, the Warrantholders shall thereafter,
subject to the last sentence of this Subsection, have the right to purchase
and receive upon the basis and upon the terms and conditions specified in
this Warrant Agreement, the number of shares of Underlying Securities that
a holder would have owned and had a right to receive as a result of such
consolidation, merger or sale if such holder had actually held of record
immediately prior to such consolidation, merger or sale the number of
shares of Underlying Securities purchasable immediately prior to such
consolidation, merger or sale. If the Company is merged or consolidated
with another corporation under circumstances where the Company is not the
surviving corporation or where the Company will be a wholly-owned
subsidiary of another corporation (except where such merger or
consolidation is effected merely in order to recapitalize or
reincorporate the Company), or
<PAGE> 6
if the Company sells or otherwise disposes of all or substantially all of
its property or assets to another corporation, all outstanding Warrants
may be cancelled by the Board of Directors of the Company as of the
effective date of any such merger, consolidation or sale, provided that
(i) written notice of such cancellation is given to each holder of a
Warrant not later than 30 days prior to such effective date and (ii) each
holder of a Warrant shall have the right to exercise such Warrant in full
during the said 30-day period preceding the effective date of such merger,
consolidation or sale.
(c) Effect of Dissolution or Liquidation. In case the Company shall
dissolve or liquidate all or substantially all of its assets, all rights
under this Warrant Agreement and the Warrants shall terminate as of the
date upon which a certificate of dissolution or liquidation shall be filed
with the Registrar of Companies, British Columbia (or, if the Company
theretofore shall have been merged or consolidated with a corporation
incorporated under the laws of another state or province, the state or
province of incorporation on the date upon which action of equivalent
effect shall have been taken); provided, however, that (i) no dissolution
or liquidation shall affect the rights under Subsection (b) hereof of any
Warrantholder and (ii) if the Company's Board of Directors shall propose to
dissolve or liquidate the Company, each Warrantholder shall be given
written notice of such proposal at the earlier of (i) the time when the
Company's shareholders are first given notice of the proposal or (ii) the
time when notice to the Company's shareholders is first required.
(d) Notice of Change of Underlying Securities. Whenever the number
of shares of Underlying Securities or the kind or amount of securities or
assets purchasable pursuant to the Warrants shall be adjusted pursuant to
any of the provisions of this Warrant Agreement, or the number of shares of
Underlying Securities or the kind or amount of securities or assets
receivable upon conversion of Underlying Securities shall be adjusted
pursuant to the terms thereof, the Company shall forthwith thereafter cause
to be sent to each Warrantholder a notice setting forth such adjustment and
also setting forth in detail the facts requiring such adjustments.
7. Further Covenants of the Company.
(a) Dilution or Impairments. The Company will not, by amendment of
its certificate of incorporation or through any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities, or
any other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms of the Warrant or of this Warrant
Agreement, but will at all times in good faith assist in the carrying out
of all such terms and in the taking of all such actions as may be necessary
or appropriate in order to protect the rights of the Warrantholders against
dilution or other impairment. Without limiting the generality of the
foregoing, the Company:
<PAGE> 7
(i) shall at all times reserve and keep available, solely for
issuance and delivery upon the exercise of the Warrants, all shares
of the Underlying Securities from time to time issuable upon the
exercise of the Warrants and shall use its best efforts to ensure
that the par value per share, if any, of the Underlying Securities
is at all time equal to or less than the then effective Purchase
Price per share of Underlying Securities; and
(ii) will take all such actions as may be necessary or
appropriate in order that the Company may validly and legally issue
fully paid and nonassessable shares of Common Stock and Other
Securities upon the exercise of the Warrants from time to time
outstanding.
(b) Title to Stock. All shares of Underlying Securities delivered
upon the exercise of the Warrants shall be validly issued, fully paid and
nonassessable; each holder of a Warrant shall receive good and marketable
title to the Underlying Securities, free and clear of all voting and
other trust arrangements, liens, encumbrances, equities and claims
whatsoever; and the Company shall have paid all taxes, if any, in respect
of the issuance thereof.
(c) Remedies. The Company stipulates that the remedies at law of
the Warrantholder or any holder of Underlying Securities in the event of
any default or threatened default by the Company in the performance of or
compliance with any of the terms of this Warrant Agreement or the
Warrants are not and will not be adequate and that such terms may be
specifically enforced by a decree of the specific performance of any
agreement contained herein or in the Warrants or by an injunction against
a violation of any of the terms hereof of thereof or otherwise.
(d) Exchange of Warrants. Subject to Subsection 3(a) hereof, upon
surrender or exchange of any Warrant to the Company, the Company at its
expense will promptly issue and deliver to or upon the order of the
holder thereof a new Warrant of like tenor, in the name of such holder or
as such holder (upon payment by such Warrantholder of any applicable
transfer taxes) may direct, calling in the aggregate for the purchase of
the number of shares of Underlying Securities called for on the face or
faces of the Warrant or Warrants so surrendered. The Warrants and all
rights thereunder are transferrable in whole or in part upon the books of
the Company by the registered holder thereof subject to the provisions of
Subsection 3(a) hereof, in person or by duly authorized attorney, upon
surrender of the Warrant, duly endorsed, at the principal office of the
Company.
(e) Replacement of Warrants. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation
of any Warrant, and in the case of any such loss, theft or destruction,
upon delivery of an indemnity agreement reasonably satisfactory in form
and amount to the Company, or in the case of such mutilation, upon
surrender and cancellation of such Warrant, the Company, at the
<PAGE> 8
expense of the Warrantholder, will execute and deliver, in lieu thereof,
a new Warrant of like tenor.
(f) Fractional Shares. No fractional shares of Underlying
Securities are to be issued upon the exercise of any Warrant, but the
Company shall pay a cash adjustment in respect of any fraction of a share
that would otherwise be issuable in an amount equal to such fraction
multiplied by the closing market price per share of Underlying Securities
on the day of exercise, as determined by the closing bid and asked price
regular way on the principal national securities exchange on which the
Underlying Securities are listed or admitted to trading, or if not listed
or admitted to trading on any national securities exchange, the average
of the highest reported bid and lowest reported asked price over the
preceding 30-day period as furnished by the National Quotation Bureau
Incorporated; provided, however, that if the Underlying Securities are
not traded in such manner that the quotations referred to herein are
available, the market price shall be deemed to be the fair market value
of such Underlying Securities as reasonably determined by the Board of
Directors.
8. Other Warrantholders.
The Warrants are issued upon the following terms, to all of which each
holder or owner thereof by the taking thereof consents and agrees: (a) any
person who shall become a transferee, within the limitations on transfer
imposed by Subsection 3(a) hereof, shall take such Warrant subject to the
provisions of Subsection 3(a) hereof and the other provisions hereof and
thereupon shall be authorized to represent himself as absolute owner thereof
and, subject to the restrictions contained in this Warrant Agreement, shall be
empowered to transfer absolute title by endorsement and delivery thereof to a
permitted bona fide purchaser for value; (b) each prior taker or owners waives
and renounces all of his equities or rights in such Warrant in favour of each
such permitted bonafide purchaser, and each such permitted bonafide purchaser
shall acquire absolute title thereto and all rights presented thereby; (c)
until such time as the respective Warrant is transferred on the books of the
Company, the Company may treat the registered holder thereof as the absolute
owner thereof for all purposes, notwithstanding any notice to the contrary; and
(d) all references to the words "you" and "your" in this Warrant Agreement
shall be deemed to apply with equal effect to any person to whom a Warrant has
been transferred in accordance with the terms hereof, and where appropriate, to
any person holding shares of the Underlying Securities.
9. Miscellaneous.
All notices, certificates, and other communications from or at the request
of the Company to any Warrantholder shall be mailed by first class, registered,
or certified mail, postage prepaid, to the address set forth herein, to such
address as may have been furnished to the Company in writing by such
Warrantholder, or, if no notice of transfer has been received by the Company,
to the address of the last holder of such Warrant. This Warrant Agreement and
any of the terms hereof may be changed, waived, discharged, or terminated only
pursuant to Subsection 6(b) hereof or by an instrument in writing signed by the
Company and the holders of Warrants to purchase in excess of 50% of the
Underlying Securities then subject to purchase pursuant to the
<PAGE> 9
Warrants. This Warrant Agreement shall be construed and enforced in accordance
with and governed by the internal laws of the Province of British Columbia. The
headings in this Warrant Agreement are for purpose of reference only and shall
not limit or otherwise affect any of the terms hereof. This Warrant Agreement,
together with the forms of instruments annexed hereto as Exhibit A, constitutes
the full and complete agreement of the parties hereto with respect to the
subject matter hereof.
THIS WARRANT AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES
WITH RESPECT TO THE WARRANT AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NOT
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, the Company has caused this Warrant Agreement to be
executed as of the 6th day of December, 1996, by its proper corporate officers,
thereunto duly authorized.
MEDICAL POLYMERS TECHNOLOGIES, INC.
By:
LEE COOKE,
Chairman
CONFIRMED:
SIGNATURE
Printed Name: ________________________
Title (if
applicable):
(Each co-owner or joint owner must sign.)
<PAGE> 10
SCHEDULE "A"
NEITHER THIS WARRANT NOR THE SECURITIES THAT MAY BE PURCHASED PURSUANT TO THIS
WARRANT HAVE BEEN REGISTERED WITH OR APPROVED BY THE UNITED STATES SECURITIES
AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES LAWS
OF ANY STATE. THIS WARRANT AND THE SECURITIES THAT MAY BE PURCHASED PURSUANT
TO THIS WARRANT ARE BEING OFFERED AND SOLD IN RELIANCE UPON CERTAIN EXEMPTIONS
AFFORDED BY SUCH ACTS AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN
ELECTIVE REGISTRATION STATEMENT UNDER SUCH ACTS OR AN OPINION OF COUNSEL
ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
Warrant No. ____
MEDICAL POLYMERS TECHNOLOGIES, INC.
STOCK PURCHASE WARRANT
THIS IS TO CERTIFY THAT ________________________________ is entitled
to purchase at any time or from time to time after the date hereof ________
post-consolidated shares of common stock with a $0.01 par value at a Purchase
Price of $0.50 (U.S.) per share if purchased prior to 5:00 p.m., Vancouver
Time, on December 6, 1997 and at a price of $1.00 (U.S.) per share if purchased
after 5:00 p.m. Vancouver Time on December 6, 1997 and prior to 5:00 p.m.
Vancouver Time on December 6, 1998. On the date hereof, each two warrants
represented herein are equal to one share post-consolidated of the common stock
without par value, of Medical Polymers Technologies, Inc., a Delaware
corporation (the "Company"), subject to adjustment pursuant to Section 6 of the
Warrant Agreement (defined below). This Warrant is issued pursuant to a
Warrant Agreement dated as of December 6, 1996 (the "Warrant Agreement"),
between the Company and certain subscribers, and all rights of the holder of
this Warrant are subject to the terms and provisions of the Warrant Agreement,
copies of which are available to inspection at the offices of the Company.
TRANSFER OF THIS WARRANT IS RESTRICTED AS PROVIDED IN THE
WARRANT AGREEMENT.
THE WARRANTS REPRESENTED BY THIS WARRANT CERTIFICATE AND ANY SHARES
ACQUIRED UPON THE EXERCISE THEREOF ARE SUBJECT TO A HOLD PERIOD AND MAY NOT BE
TRADED IN BRITISH COLUMBIA UNTIL THE EXPIRY OF THE HOLD PERIOD EXCEPT AS
PERMITTED BY THE SECURITIES ACT (BRITISH COLUMBIA) AND REGULATIONS MADE UNDER
THE ACT.
<PAGE> 11
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed and
its corporate seal to be hereunto affixed in Austin, Texas by its proper
corporate officers thereunto duly authorized as of this 6th day of December,
1996.
MEDICAL POLYMERS TECHNOLOGIES, INC.
By:
Lee Cooke,
Chairman
PACIFIC CORPORATE TRUST COMPANY
By:
Authorized Signatory
<PAGE> 12
FORM OF SUBSCRIPTION
(To be signed only upon exercise of Warrant)
To Medical Polymers Technologies, Inc.
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise the purchase right represented by such Warrant for, and to
purchase thereunder, ____________ post-consolidated shares of common stock with
a $0.01 par value of Medical Polymers Technologies, Inc. and herewith makes
payment of $_________ therefor, and requests that the certificate or
certificates for such shares be issued in the name of and delivered to the
undersigned.
Dated: ___________
_______________________________________
(Signature must conform in all respects
to name of holder as specified on the
face of the within Warrant)
_______________________________________
_______________________________________
Address
______________
* Insert here the number of shares called for on the face of the Warrant,
without making any adjustment for additional Common Stock, Preferred Stock or
any other stock or other securities or property or cash which, pursuant to the
adjustment provisions of the Warrant Agreement pursuant to which the Warrant
was granted, may be deliverable upon exercise.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 235,742
<SECURITIES> 0
<RECEIVABLES> 37,141
<ALLOWANCES> 5,000
<INVENTORY> 56,130
<CURRENT-ASSETS> 336,596
<PP&E> 20,179
<DEPRECIATION> 0
<TOTAL-ASSETS> 442,124
<CURRENT-LIABILITIES> 381,724
<BONDS> 0
23,320
0
<COMMON> 0
<OTHER-SE> 60,400
<TOTAL-LIABILITY-AND-EQUITY> 442,124
<SALES> 112,898
<TOTAL-REVENUES> 0
<CGS> 58,220
<TOTAL-COSTS> 164,774
<OTHER-EXPENSES> 750
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (7,878)
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> (107,096)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (106,346)
<EPS-PRIMARY> (0.08)
<EPS-DILUTED> 0
</TABLE>
