-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CeYaKKaMEytX++bsC0CMxOkzqXBYrukZQB16J+WppoEZ0m8LUwfIG6u4SUR4cpPR leeUaXxu/mfgsVMG6SOavQ== 0000950133-01-001169.txt : 20010409 0000950133-01-001169.hdr.sgml : 20010409 ACCESSION NUMBER: 0000950133-01-001169 CONFORMED SUBMISSION TYPE: 10KSB PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20001231 FILED AS OF DATE: 20010402 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CRYOMEDICAL SCIENCES INC CENTRAL INDEX KEY: 0000834365 STANDARD INDUSTRIAL CLASSIFICATION: ELECTROMEDICAL & ELECTROTHERAPEUTIC APPARATUS [3845] IRS NUMBER: 943076866 STATE OF INCORPORATION: DE FISCAL YEAR END: 1227 FILING VALUES: FORM TYPE: 10KSB SEC ACT: SEC FILE NUMBER: 000-18170 FILM NUMBER: 1589752 BUSINESS ADDRESS: STREET 1: 1300 PICARD DR STE 102 CITY: ROCKVILLE STATE: MD ZIP: 20850 BUSINESS PHONE: 3014177070 MAIL ADDRESS: STREET 1: 1300 PICCARD DRIVE SUITE 102 CITY: ROCKVILLE STATE: MD ZIP: 20850 10KSB 1 w47348e10ksb.txt FORM 10KSB 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 ------------------------ FORM 10-KSB (MARK ONE) [X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the year ended December 31, 2000 ----------------- OR [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 0-18170 ------- ------------------------ CRYOMEDICAL SCIENCES, INC. ( Name of Small Business Issuer in its Charter) DELAWARE 94-3076866 -------- ---------- (State of Incorporation) (IRS Employer Identification Number) 820 BEAR TAVERN ROAD, EWING, NEW JERSEY 08628 --------------------------------------- ----- (Address of principal executive offices) (Zip Code) ------------------------ Issuer telephone number, including area code: (609) 771-1100 -------------- 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 $.001 per share --------------------------------------- Title of Class Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act 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 --- --- Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B contained in this form, and will not 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 [X]. Issuer's revenues for the fiscal year ended December 31, 2000 were $1,189,505. As of March 1, 2001, the aggregate market value of voting stock held by nonaffiliates of the registrant was $4,847,450. As of March 1, 2001, there were 12,413,209 shares of Common Stock (par value $.001 per share) outstanding. Documents Incorporated by Reference ----------------------------------- None ============================================================================== 1 2 PART I ITEM 1. DESCRIPTION OF BUSINESS GENERAL Cryomedical Sciences, Inc. (the "Company") is engaged in the research, development, manufacture and marketing of products for use in the fields of cryoablation and preservation of cells, tissues, and organs in low temperature environments. The Company has developed cryosurgical systems called the CMS AccuProbe(R) System (the "AccuProbe"), the CMS Blizzard(TM) Series (the "Blizzard"), and the Cryo-Lite(R) Series (the "Cryo-Lite"). The AccuProbe, the Blizzard and the Cryo-Lite are sophisticated cryosurgical devices designed to freeze and destroy diseased tissue. They are particularly applicable where diseased tissue cannot be removed surgically or where surgery is likely to have extensive adverse side effects. The Company plans to utilize its AccuProbe, Blizzard and Cryo-Lite in the various fields for which the devices have received clearance from the United States Food and Drug Administration (the "FDA"). The Company completed initial development of the AccuProbe in 1992 and has marketed this system to hospitals, surgeons and radiologists in the United States and abroad. In addition to the AccuProbe, the Company sells single use probes and other disposables used with the AccuProbe and offers service warranty contracts. Although the Cryo-Lite received FDA clearance in July 1997 and the Blizzard received FDA clearance in February 1998, no Blizzard or Cryo-Lite devices have been shipped for commercial sale. Sales and other revenues totaled $1,189,505 and $1,776,553 for the twelve-month period ended December 31, 2000 and the twelve-month period ended December 26, 1999, respectively. The Company is also attempting to develop and commercialize a series of hypothermic preservative solutions (the "Solutions"). Some of these Solutions are designed to maintain the fluid and chemical balances of human organs while body temperature is significantly lowered. Other Solutions have been developed that may be utilized in preserving certain cells and tissues utilized by scientists in research labs and academic institutions. All of these Solutions continue to be tested in laboratory settings. Commercialization of certain Solutions is presently being pursued for those markets not subject to FDA regulations through the Company's wholly-owned subsidiary, BioLife Solutions, Inc. ("BioLife"), formed in 1998. At present, development of the Solutions for human organ transplantation is in the laboratory and preclinical stage. The Company is seeking funds from various government and non-government granting agencies as well as third party investors to continue the development of the Solutions. The total research and development expenses of the Company for the twelve-month period ended December 31, 2000 were $1,373,500. For the twelve-month period ending December 26, 1999 total research and development expenses were $687,450. The Company was incorporated in Delaware in November 1987. BioLife was incorporated in March of 1998. Unless the context requires otherwise, references to the Company include BioLife. The Company's principal executive offices are located at 820 Bear Tavern Road, Ewing, New Jersey 08628 and its telephone number is (609) 771-1100. 2 3 CMS CRYOSURGICAL SYSTEMS BACKGROUND AND TECHNOLOGICAL OVERVIEW Cryosurgery is a surgical procedure that uses freezing temperatures to destroy unwanted tissue by circulating a refrigerant through the tip of a cryoprobe (an instrument for applying extreme cold to tissue) applied directly to the tissue to be destroyed. Some surgeons have commenced targeting diseased tissue in the fields of urology, general surgery, and gynecology by use of cryosurgery. The Company believes that cryosurgery has a number of advantages over other options for managing such diseased tissue. First, unlike surgical resection, cryosurgery does not require removal of large volumes of healthy surrounding tissue. Second, because freezing temperatures can be applied to certain areas and not others, multiple diseased tissue sites can be targeted individually, leaving more healthy tissue. However, many surgeons continue to use traditional methods because of their belief that cryosurgery has not yet proved to be effective over an extended period of time. THE CMS ACCUPROBE SYSTEM, BLIZZARD SERIES AND CRYO-LITE SERIES The Company has developed certain proprietary designs intended to make its cryosurgical instrumentation more efficient and more precise than previous cryosurgical instrumentation. The CMS AccuProbe System, the Blizzard Series, and the Cryo-Lite Series are the Company's three cryosurgical instrument product lines. In April 1991, the FDA accepted the Company's 510(k) premarket notification for the AccuProbe, thus allowing commercial marketing of the product at the Company's discretion. The prototype of the CMS AccuProbe was first used on patients in October 1991. The commercial development of the CMS AccuProbe was completed in 1992 and marketing of the AccuProbe commenced. In December 1995, the Company received 510(K) marketing approval from the FDA for the two new models of the AccuProbe 500 Series (Model 530 and Model 550), in March 1997 it received such approval for the AccuProbe 600 Series, and in September 1998 it received such approval for the AccuProbe 800 series. The Accuprobe 800 series is in development, represents new technology, and is intended to replace all other AccuProbes, the Blizzard Series and the Cryo-Lite Series. In addition, the Company markets a full complement of accessory products for the AccuProbe which are being marketed along with the AccuProbe system and single-use probes. In July 1997 the Company received FDA clearance for its Cryo-Lite series of cryosurgical instrumentation. The Cryo-Lite Series differs from the AccuProbe Systems in that Cryo-Lite is a hand held device capable of utilizing cryogens (refrigerants) other than liquid nitrogen. The AccuProbe was designed to use only liquid nitrogen as a cryogen. In February 1998 the Company received FDA clearance for its Blizzard series of cryosurgical instrumentation. The Blizzard Series also differs from the AccuProbe Systems in that Blizzard devices are capable of utilizing cryogens (refrigerants) other than liquid nitrogen. The AccuProbe was designed to use only liquid nitrogen as a cryogen. The backlog of orders at December 31, 2000 totaled $2,500, as compared to $24,860 at December 26, 1999. The Company expects all of December 31, 2000 back orders to generate revenues in the fiscal year ending December 31, 2001. 3 4 A substantial portion of the Company's revenue in each quarter results from orders received in that quarter. Generally, orders placed directly by customers are shipped within 30 days of the order date. CMS HYPOTHERMIC PRESERVATIVE SOLUTIONS BACKGROUND AND TECHNOLOGICAL OVERVIEW Lowering body temperature during certain surgical procedures helps to minimize the chance of damage to the patient's organs by reducing the patient's metabolic rate, thereby decreasing the patient's needs during surgery for oxygen and nutrients that normally flow through the blood. This is also true with respect to the preservation of individual organs and tissues to be used in transplant surgery during the interval between removal from the donor and transplant into the recipient. Grant subsidized research and development activities with respect to development of the Solutions for cell and tissue preservation have previously taken place at Allegheny-Singer Research Institute ("ASRI"), a subsidiary of Allegheny Health Services, Pittsburgh Pennsylvania and State University of New York at Binghamton ("SUNY"). The company continues to fund work at SUNY, but is not currently funding research at ASRI. The Solutions have not been fully tested nor has the regulatory clinical testing and approval process begun for human organ transplantation. Accordingly, there is no assurance that any of the proposed applications will prove viable in human surgical procedures. The Company anticipates that upon successful completion of funding of BioLife, for which there can be no assurance, clinical trials will begin to support FDA approval of the Solutions for purposes of human organ transplantation. THE SOLUTIONS The Solutions are complex synthetic, aqueous solutions containing, in part, minerals and other elements found in human blood which are necessary to maintain fluids and chemical balances throughout the body at near freezing temperatures. The use of the fluid is limited to low temperature applications because the Solutions do not carry sufficient oxygen to maintain organ integrity at warm temperatures. At lower temperatures, scientists have determined that human organs require less oxygen primarily because of the resulting reduced metabolism. The products which may result from the development of the Solutions include, but are not limited to media for preservation of organs used in human transplantation procedures, cardioplegia (stopping of the heart) applications, and media utilized in cell and tissue culture preservation. Additional applications may include cryogenic preservation (-196 degrees Celsius) of certain tissues and organs. 4 5 RESEARCH PROJECT AGREEMENTS In January 1997, the Company entered into a Research Project Agreement with Dr. Robert van Buskirk of SUNY, pursuant to which Dr. van Buskirk conducted research at SUNY's Center for Cryobiological Research in Binghamton, New York, with respect to the Solutions. In January 1998 the Agreement with Dr. Robert van Buskirk was extended through September 1, 1999. In January 2000, the Company entered into a Consulting and Proprietary Information Agreement with Dr. van Buskirk, pursuant to which Dr. van Buskirk is engaged as a consultant for a indefinite term unless thirty (30) days written notice of termination is received by either party. In March 1999, BioLife signed an Incubator Licensing Agreement with SUNY whereby BioLife will conduct research and development in the field of cryogenic science and in particular solution technology. The Company will pay the University $1,005 per month during the five year term of the License and all inventions conceived as a result of these research and development efforts will belong to BioLife. MARKETS AND MARKETING The Company currently markets its AccuProbe system to hospitals, surgeons, and radiologists through a national sales force and clinical support team. The sales force, covering the U.S. in eight territories, consists of six highly experienced medical technology sales people, supported by two clinical specialists, under the leadership of the Company's Vice President of Sales and Marketing. In November 1998, the Company signed a distribution agreement with Sino America Commerce Corporation for marketing, sales and distribution of its products in Mainland China and other Far East countries. The Company may also arrange with other third parties to market or distribute its products in the United States or other countries. The Company has expended significant resources educating surgeons and healthcare professionals in formal training programs as to the uses and benefits of the Company's cryosurgical instrumentation through both in-house educational seminars and practical applications outside the Company's training facility. Sales of the AccuProbe are affected by the level of reimbursement by public and private insurers in connection with procedures for which the AccuProbe is utilized. The availability of consistent, uniform insurance reimbursement guidelines for hospitals and physicians is an important factor often considered by some potential customers when making a decision regarding the purchase of any new medical device, including the AccuProbe system. Reimbursement of hospitals and urologists by public and private insurers such as Medicare and Blue Cross and Blue Shield is a necessary part of gaining general acceptance for use of the AccuProbe for urological cryosurgery. In 1996 Medicare's Health Care Financing Administration ("HCFA") put into effect a national non-coverage policy in regard to cryosurgical ablation of the prostate. In February 1999, HCFA announced that it was going to provide coverage for cryosurgical ablation of the prostate for localized prostate cancer, effective July 1999. Temporary reimbursement codes and guidelines were subsequently issued by HCFA to be administered on a regional basis. Effective January 2001 HCFA issued a national CPT code for cryosurgical ablation of the prostate. The new national guidelines provide physicians with reimbursement for both primary and salvage prostate cryosurgical procedures. In spite of HCFA's activities in regard to reimbursement for cryosurgery of the prostate there can be no assurance that reimbursement will be sufficient to encourage use of the AccuProbe System by hospitals and physicians. 5 6 MANUFACTURING The Company's manufacturing operations are conducted at its facilities in Baltimore, Maryland, and consist primarily of the purchase and quality control of materials, components and subassemblies, and the final assembly and testing of single-use probes and other accessory products. While the typical lead time required for suppliers varies depending upon the components, the quantity required, and other factors, the lead times in some cases can be as long as three months. However, because the Company typically purchases components in advance in anticipation of future orders, the Company is generally able to deliver single use probes from its inventory within 30 days of its receipt of an order. Although the Company generally uses standard parts and components for its products, certain components, such as liquid nitrogen dewars and probe tips, are currently available only from a limited number of sources. The Company does not have long-term agreements with all of these suppliers. To date, the Company has been able to obtain adequate supplies of such components in a timely manner from its existing sources. Although the Company believes it could develop alternative sources of supply for most of these components within a reasonable period of time, the inability to develop alternative sources, or a reduction or interruption in supply or a significant increase in the price of materials, parts or components, could materially and adversely affect the Company's results of operations. The Company also maintains an inventory of finished goods consisting primarily of single-use probes and other accessory products in anticipation of future orders. The Company anticipates that in the future it will outsource the manufacture of all products. To the extent that other parties are manufacturing parts or subassemblies for the Company, the Company has less control over the quality of products and timeliness of delivery than if manufactured by the Company. The Company presently is outsourcing the manufacture of solutions and plans to continue doing so in the future. The Company does not have a written agreement for the manufacture of the solutions, but anticipates entering into a written agreement at such time that large quantities are required. There are multiple sources available from which the Company can obtain the solutions. The solutions are manufactured in accordance with Company formulas under confidentiality agreements. GOVERNMENTAL REGULATION Governmental regulation in the United States and other countries is a significant factor affecting the research and development, manufacture and marketing of the Company's products. In the United States, the FDA has broad authority under the Federal Food, Drug and Cosmetic Act and the Public Health Service Act to regulate the distribution, manufacture and sale of medical devices. Foreign sales of medical devices are subject to foreign governmental regulation and restrictions which vary from country to country. Medical devices intended for human use in the United States are classified into one of three categories, depending upon the degree of regulatory control to which they will be subject. Such devices are classified by regulation into either class I (general controls), class II (performance standards) or class III (pre-market approval) depending upon the level of regulatory control required to provide reasonable assurance of the safety and effectiveness of the device. Good Manufacturing Practices, labeling, maintenance of records and filings with the FDA also apply to medical devices. A subset of medical devices categorized as class I or II devices that were commercially distributed before March 28, 1976 or are substantially equivalent to a device that was in commercial 6 7 distribution before that date may be marketed after the acceptance of a pre-market notification under a 510(k) exemption. Medical devices that do not meet the criteria for the 510(k) exemption would have to go through a more stringent premarket approval ("PMA") process. The process of obtaining FDA and other required regulatory clearances or approvals is lengthy and expensive. There can be no assurance that the Company will be able to obtain necessary clearances or approvals for clinical testing or for manufacturing or marketing of those of its products that currently do not have clearance. Failure to comply with applicable regulatory approvals can, among other things, result in warning letters, fines, suspensions of regulatory approvals, product recalls, operating restrictions and criminal prosecution. In addition, governmental regulations may be established which could prevent, delay, modify or rescind regulatory clearance or approval of the Company's products. Regulatory clearances or approvals, if granted, may include significant limitations on the indicated uses for which the Company's products may be marketed. In addition, to obtain such clearances or approvals, the FDA and foreign regulatory authorities may impose numerous other requirements on the Company. FDA enforcement policy strictly prohibits the marketing of approved medical devices for unapproved uses. In addition, product approvals can be withdrawn for failure to comply with regulatory standards or the occurrence of unforeseen problems following initial marketing. There can be no assurance that the Company will be able to obtain regulatory clearances or approvals for products on a timely basis or at all, and delays in receipt of or failure to receive such approvals, the loss of previously obtained approvals, or failure to comply with existing or future regulatory requirements would have a material adverse effect on the Company's business, financial condition and results of operations. The following of the Company's products have received 510(k) clearance from the FDA and may be commercially marketed for their cleared indications of use: - AccuProbe 400 Series in April 1991 - AccuProbe 500 Series (Models 530 and 550) in December 1995 - AccuProbe 600 Series in March 1997 - Cryo-Lite Series in July 1997 - Blizzard Series in June 1998 - AccuProbe 800 Series in September 1998 The Company will attempt to market its Solutions for organ preservation pursuant to a 510(k) exemption. However, there can be no assurance that the more stringent PMA process will not be required by the FDA. For clinical testing, manufacture or marketing of Solutions for organ transplantation, it is probable that the FDA will require a full review and approval process, either by means of the medical device PMA process, or, in the event the use of Solutions for such a procedure is determined to be a drug, by means of a New Drug Application or a biological Product License Application and Establishment License Application. The inability to obtain, or delays in obtaining, any such required approvals or clearances would materially adversely affect the Company's ability to commence marketing the Solutions for such application. In September 1997, the Company was advised by FDA that it could no longer promote its products for gynecological applications which referenced endometrial ablation. It is FDA's opinion that there is not enough clinical data to support the use of cryosurgical techniques in the uterus, specifically endometrial ablation. The Company is complying with this new FDA directive, even though it does have intended use clearance in the field of gynecology. 7 8 PROPRIETARY RIGHTS The Company relies on a combination of trade secret, patent and trademark law, and confidentiality and non-disclosure agreements to establish and protect its proprietary rights in its products. Despite these precautions, it may be possible for unauthorized third parties to copy certain aspects of the Company's products or to obtain and use information that the Company regards as proprietary. The laws of some foreign countries in which the Company may sell its products do not protect the Company's proprietary rights to the same extent as do the laws of the United States. In total, the Company owns eleven issued U. S. patents and seven issued or allowed foreign patents. At least three additional pending U. S. patent applications have been allowed or have been found to contain patentable subject matter. There can be no assurance that any additional patents will be granted. In addition, to the extent that any unique applications of the Company's technologies are developed by the Company's scientists, such applications or procedures may not be subject to any protection. There can also be no assurance that the Company will develop additional patentable processes or products or, if developed, that the Company would be able to obtain patents with respect thereto, or that others may not assert claims successfully with respect to such patents or patent applications. Furthermore, the Company might not be able to afford the expense of any litigation which might be necessary to enforce its rights under any patents it may obtain, and there can be no assurance that the Company would be successful in any such suit. There is also no assurance that the Company's proposed products will not infringe patents owned by others, licenses to which may not be available to the Company. The Company intends to rely to a large extent on the technological expertise of its scientific staff. There can be no assurance that others will not independently develop such technological expertise or otherwise obtain access to the Company's technological expertise. COMPETITION The medical products industry is highly competitive. Most of the Company's potential competitors have considerably greater financial, technical, marketing, and other resources than the Company. With respect to the Company's cryosurgical instrumentation, the Company faces competition from other firms engaged in the business of developing or marketing cryosurgical devices as well as other firms engaged in developing or marketing medical devices that destroy diseased tissues by means other than freezing. The Company is aware that cryogenic devices used to freeze tissue have been available for at least 20 years, although with limited market acceptance. Engaged in the business of developing, manufacturing and marketing of instruments used to freeze tissue are Endocare, Inc., Frigitronics Inc., and Cryogen, Inc., American companies; a German company, Erbe Incorporated; a Israeli company, Galile; a Canadian company Cryocath, Inc.; and Candela Laser Corporation, an American company which distributes products manufactured by Spembly, an English company. The Company's cryosurgical instrumentation also competes with other companies that employ techniques for destroying diseased tissue by, but not limited to, radiofrequency and thermal (hot) devices. With respect to the Solutions, the Company also faces competition in the overlapping areas of research with respect to blood substitutes, organ preservation, and hypothermic medicine. Currently, there are four known organ preservation solutions marketed as Viaspan, Collins Solutions, Euro Collins Solutions, and Ringers Lactate solution. These solutions are marketed by DuPont Co. and Barr Laboratories, Inc., Abbott Laboratories, Kendall-McGaw Laboratories, and Baxter, Inc., respectively. The 8 9 Company understands that other groups or companies are also researching and developing organ preservation techniques and solutions. The Company expects competition to intensify with respect to the areas in which it is involved as technical advances are made and become more widely known. EMPLOYEES The Company's business is highly dependent upon its ability to attract and retain qualified scientific, technical and management personnel. The Company had 14 full-time employees at December 31, 2000. The Company is not a party to any collective bargaining agreements. ITEM 2. DESCRIPTION OF PROPERTY The Company's prior administrative, manufacturing and research and development facilities consisted of approximately 10,000 square feet located in Rockville, Maryland. In May 2000, the Company moved its corporate headquarters to Ewing, New Jersey. The Company rents these new facilities under a five-year lease. Rental expense for facilities for the 12-month period ended December 31, 2000 totaled $135,190. In March 1999, the Company's wholly owned subsidiary, BioLife Solutions, Inc., entered into an Incubator License agreement for approximately 859 square feet of space at the State University of New York at Binghamton at a rental of $1,074 per month. BioLife pays an additional $105 per month for the use of furnishings and equipment. The license was originally for a one-year period and has been extended though February 28, 2002. In April 2000, the Company entered into a lease for approximately 1,500 square feet of space in Baltimore, Maryland for use as a manufacturing facility. The lease was effective April 22, 2000 through May 15, 2001 at a monthly rental of $750. The lease was subsequently amended to extend through May 14, 2002 and an additional approximately 1,500 square feet was added for an aggregate rental of $1,575. The Company has the right to renew such lease for four consecutive one-year periods. Development work on cryosurgical instrumentation was relocated to the State University of New York in Binghamton under an incubator agreement presently being negotiated. ITEM 3. LEGAL PROCEEDINGS On April 6, 2000, Endocare, Inc. filed a suit against the Company in the United States District Court, Central District of California, alleging that the Company is infringing United States Letters Patent No. 5,647,868 (the "868 patent"), entitled "Cryosurgical Integrated Control and Monitoring System and Method," owned by Endocare, Inc. as assignee, in that the Company is manufacturing, using and selling and offering for sale products embodying the patented invention. The complaint among other things, seeks to enjoin the Company from infringing the 868 patent and to recover lost profits, compensatory damages, treble damage for willful infringement, and costs and attorneys fees. The Company filed an answer to the complaint denying the critical allegations therein and counterclaiming for a declaratory judgment of invalidity, unforceability, and noninfringement of the 868 patent, on the basis of prior art and the fact that the patent applicant, or those acting on his behalf, failed to exercise the duty of candor and to meet the duty of disclosure that is required of those seeking a patent, damages, and reasonable attorneys fees and costs because Endocare's actions make this an exceptional case. In December, 2000, the parties entered into a settlement agreement providing for (a) the cross licensing of certain patents, (b) 9 10 dismissal of the lawsuit and counterclaim with prejudice, and (c) the filing of a Consent Judgment which (i) states that for purposes of the settlement agreement Cryomedical has stipulated that the Endocare patent is valid and enforceable, (ii) states that Cryomedical has not proved that the Endocare patent is either invalid or unenforceable, and (iii) states that Endocare has not proved that CMS infringed the Endocare patent. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. PART II ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS PRICE RANGE OF COMMON STOCK The Common Stock, par value $.001 per share, of the Company ("Common Stock") is traded on the OTC Bulletin Board. The following table sets forth the high and low closing prices for the Common Stock for the periods indicated.
Price Range ----------- High Low ---- --- Quarter Ended: ------------- March 28, 1999 1.0312 .0625 June 27, 1999 .7031 .2500 September 26, 1999 .4844 .2500 December 26, 1999 .5625 .1406 March 26, 2000 .7969 .1562 1 for 5 reverse stock split on June 16, 2000 June 25, 2000 4.7500 .2500 September 24, 2000 1.8750 .8750 December 31, 2000 1.8125 .4062
HOLDERS As of March 1, 2001, there were more than 1,100 holders of record of the Common Stock. DIVIDEND HISTORY AND POLICY The Company has never paid cash dividends on its Common Stock and does not anticipate that any cash dividends will be paid for the foreseeable future. 10 11 ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION The Company is engaged in the research, development, marketing and manufacturing of products for use in the field of cryoablation and preservation of cells, tissues, and organs in low temperature environments. In March 1998 the Company created a wholly owned subsidiary, BioLife Solutions, Inc. for the purposes of commercializing the company's preservative Solutions. On July 25, 1996, the Board of Directors of the Company authorized a change in the Company's fiscal year from a period beginning July 1 and ending on June 30 to a variable period that usually ends on the last Sunday of the calendar year. The 52-week year consisted of two four-week and one five-week periods per quarter ending on a Sunday. For the year 2000 and thereafter, the Board of Directors of the Company authorized a change in the Company's fiscal year to correspond to the calendar year with three calendar months in each quarter and the end of each fiscal year being on the last day of the year. The change in the Company's fiscal year conforms to an annual reporting utilized by a majority of the public companies with a sales and marketing focus. RESULTS OF OPERATIONS Throughout the year 2000 the Company continued to have its revenues negatively influenced by the lack of a national HCFA reimbursement CPT code in regard to cryoablation of the prostate. This situation was compounded by the fact that the Company did not have the financial resources until May 2000 to assist in the reestablishment of the many cryosurgical programs it had originally started many years ago. Effective January 2001 HCFA issued a national CPT code for cryosurgical ablation of the prostate. The issuance of this new CPT code we believe has added an additional incentive for physicians to restart their cryosurgical programs. After receipt of the funding in May 2000 the Company initiated a rebuilding program in regard to all aspects of its operations Additional personnel were hired in the third and fourth quarters to initiate marketing and sales programs as well as to continue with the development efforts in regard to the Accuprobe 800 series. The Company also intensified its efforts in regard to it overseas marketing and sales efforts. The Company has initiated national sales and marketing programs, which are supported by clinical application specialists throughout the United States. Initial results of these programs are positive. The Company's marketing message is being well received and the Company's name is again becoming prevalent in the medical community. It is anticipated that the continuation of these marketing and sales programs, combined with the formal introduction of the new Accuprobe 800 series in June 2001, will result in the Company's reemergence as a major player in the cryosurgery industry. The revenues of the Company were also negatively impacted in 2000 by the continuing FDA prohibition on the promotion of cryosurgical techniques that may be used in the uterus, specifically endometrial ablation. The Company is anticipating that this prohibition may be lifted some time this year, although there is no assurance that this will happen Sales and other revenues for the year ended December 31, 2000 and the year ended December 26, 1999 are $1,189,505 and $1,776,553, respectively. The decrease in revenue results from a decline in the number of AccuProbe systems sold and fewer procedures performed using single-use AccuProbe accessories. The Company anticipates an increase in revenues in 2001 based upon increased sales of Accuprobe systems and accessories. Gross profits for the year ended December 31, 2000 and the year ended December 26, 1999 are $654,374 and $812,101, respectively. Gross profits as a percentage of revenues in 2000 and 1999 were 55% 11 12 and 46%, respectively. The Company can give no assurance that there will be stabilization in gross profits as a percent of sales during the year ending December 31, 2001. Research and development expenses for the year ended December 31, 2000 and fiscal year 1999 were $1,373,500 and $687,450, respectively. The research and development expenses for 2000 were incurred primarily in the continuing development of the Accuprobe 800 Series and the continuing research and development on the Hypothermosol preservative solutions. Sales and marketing expenses for the year ended December 31, 2000 and fiscal year 1999 were $465,101 and $355,864, respectively. The trend in increasing sales and marketing expenses is anticipated to continue in future years as the Company retains additional sales and marketing personnel, increases participation in marketing and trade shows, and realizes increases in related travel expenses. General and administrative expenses for year ended December 31, 2000 and fiscal year 1999 were $1,685,773 and $913,689, respectively. This increase in general and administrative expenses is primarily due to an increase in legal and consulting expenses, the settlement of a lawsuit with a former employee, and an increase in staff related expenses. The Company sustained net losses for the year ended December 31, 2000 and fiscal year 1999 in the amount of $2,771,927 and $1,175,722, respectively. The Company anticipates continuing losses in the year 2001 based upon its planned increases in sales and marketing expenses, and research and development expenses. LIQUIDITY AND CAPITAL RESOURCES At December 31, 2000 the Company had cash and cash equivalents totaling $2,150,112 and working capital of $2,666,295. The working capital of the Company was $33,207 at December 26, 1999. The Company's working capital position increased in the year ended December 31, 2000 as a result of the proceeds of $5,397,242 obtained from the May 2000 equity placement, net of a net loss of $2,771,927 during the year. Capital expenditures for leasehold improvements, furniture and equipment totaled $185,743 in the year ended December 31, 2000 compared to $0 in fiscal year 1999. The Company has budgeted $500,000 for additional capital expenditures in the year ending December 31, 2001. On February 25, 2000, the Company received $500,000 from the sale of promissory notes to two individuals, each note being in the amount of $250,000 and bearing interest at the rate of 10% per annum. The notes were due and payable three years from the date of issuance and, in the event they are outstanding at the time of an equity financing which equals or exceeds $2,500,000 ($500,000 under certain circumstances), together with accrued and unpaid interest, automatically convert into equity securities of the Company on the same terms and conditions provided for in such equity offering. These notes were converted into equity securities upon the completion of the equity financing in May 2000. During May 2000, the Company sold 2,234,000 units under unit purchase agreements with each unit consisting of two shares of the Company's common stock and one warrant to purchase a share of Common Stock on or before March 31, 2001 for $1.25 per share. The units were sold for $2.55 ($1.25 per common share plus $.05 per warrant) before expenses of sale. The Company anticipates that its current cash balances will be sufficient to meet its cash requirements into September 2001. Additional capital will be necessary to ensure the Company's viability. In this respect, the Company currently is pursuing an additional equity financing. There can be no assurance that any such transaction will be available on terms acceptable to the Company, if at all, or that any financing transaction will not be dilutive to current stockholders. If the Company is not able to raise additional funds, it may be required to significantly curtail or cease its operating activities. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. 12 13 SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS UNDER THE SECURITIES LITIGATION REFORM ACT OF 1995; RISK FACTORS This Annual Report on Form 10-K and other reports, releases, and statements (both written and oral) issued by the Company and its officers from time to time may contain statements concerning the Company's future results, future performance, intentions, objectives, plans, and expectations that are deemed to be "forward-looking statements." Such statements are made in reliance upon safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The Company's actual results, performance, and achievements may differ significantly from those discussed or implied in the forward-looking statements as a result of a number of known and unknown risks and uncertainties including, without limitation, those discussed below and in "Management's Discussion and Analysis or Plan of Operation." In light of the significant uncertainties inherent in such forward-looking statements, the inclusion of such statements should not be regarded as a representation by the Company or any other person that the Company's objectives and plans will be achieved. Words such as "believes," "anticipates," "expects," "intends," "may," and similar expressions are intended to identify forward-looking statements, but are not the exclusive means of identifying such statements. The Company undertakes no obligation to revise any of these forward-looking statements. The risks presented below may not be all of the risks the Company may face. These are the factors that the Company believes could cause actual results to be different from expected and historical results. Other sections of this report include additional factors that could have an effect on the Company's business and financial performance. The industry that the Company competes in is very competitive and changes rapidly. Sometimes new risks emerge and management may not be able to predict all of them, or be able to predict how they may cause actual results to be different from those contained in any forward-looking statements. You should not rely upon forward-looking statements as a prediction of future results. HISTORY OF LOSSES. The Company has incurred annual operating losses since inception, and expects to continue to incur operating losses because new products will require substantial development, clinical, regulatory, manufacturing, marketing and other expenditures. For the fiscal years ended December 31, 2000 and December 26, 1999, the Company had net losses of $2,771,927 and $1,175,722, respectively. As of December 31, 2000, the Company's accumulated deficit was $33,300,727. The Company may not be able to successfully develop or commercialize its current or future products, achieve significant revenues from sales or procedures, or achieve or sustain profitability. Successful completion of the Company's development program and its transition to attaining profitable operations is dependent upon achieving a level of revenues adequate to support its cost structure and obtaining additional financing adequate to fulfill its research and development activities to continue refining its existing products and developing and commercializing new products. UNCERTAIN MARKET ACCEPTANCE FOR CRYOSURGERY; NEED FOR INSURANCE REIMBURSEMENT. The Company's ability to successfully market its cryosurgical devices is dependent upon acceptance of cryosurgical procedures in the United States and certain international markets. Cryosurgery has existed for many years, but has not been widely accepted due to cost, competing products and limited reimbursement by third party payers. In the United States, health care providers, such as hospitals and physicians, that purchase the Company's cryosurgical products generally rely on third party payers, principally Federal Medicare, state Medicaid and private health insurance plans, to reimburse all or part of the cost of medical procedures involving such products. In 1996, Medicare's Health Care Financing Administration ("HCFA") put into effect a national non-coverage policy with regard to cryoablation of the prostate. In February, 1999, HCFA reversed field and announced that, effective July, 1999, it was going to provide coverage for cryosurgery of the prostate for localized prostate cancer. Effective January 2001, HCFA 13 14 issued a National CPT Code for cryosurgical ablation of the prostate. The new guidelines provide physicians with reimbursement for both primary and salvage prostate cryosurgical procedures. Certain private health insurance companies pay for procedures in which the Company's products are used in certain areas of the United States, but private insurance reimbursement may not be adopted nationally or by additional insurers. Reimbursement from Medicare or private insurers may not be sufficient to induce physicians to perform, or patients to elect, cryosurgery. The acceptance of cryosurgery by the general population may be negatively affected by its price, concerns relating to its safety and efficacy, the accepted effectiveness of alternative methods, and the level of reimbursement from private insurers. Any future reported adverse events or other unfavorable publicity involving patient outcomes from the use of cryosurgery, whether from the Company's products or the products of the Company's competitors, could also adversely affect acceptance and reimbursement for cryosurgery. Emerging new technologies and procedures also may negatively affect the market acceptance of cryosurgery. NEED TO DEVELOP EFFECTIVE SOLUTIONS. The Company's growth depends, in part, on continued ability to successfully develop, commercialize and market the Company's Solutions. Clinical trials may identify significant technical or other obstacles that must be overcome prior to obtaining necessary regulatory approvals. Even if the Solutions overcome these obstacles, they will not be used unless they present an attractive alternative to competitive products and the benefits and cost savings achieved through their use outweigh the cost of the Solutions. The Company believes that recommendations and endorsements of physicians will be essential for market acceptance of the Solutions. NEED FOR ADDITIONAL FINANCING. The Company believes that its existing cash resources and anticipated cash flow from future operations will provide sufficient resources to meet present and reasonably foreseeable working capital requirements and other cash needs into September 2001. The Company expects that to execute is operating plan it will need to raise substantial additional funds through the sale of equity securities, the incurrence of debt, or through collaborative arrangements. Any additional equity financing may be dilutive to stockholders, and debt financing, if available, may involve restrictive covenants. Collaborative arrangements, if necessary to raise additional funds, may require the Company to relinquish rights to certain of its technologies, products or marketing territories. The failure to raise capital when needed could have a significant negative effect on the Company's financial condition. COMPETITION. Currently, the Company markets cryosurgical systems. Significant competitors in the area of cryosurgical instrumentation include Endocare, Inc., Frigitronics Inc., and Cryogen, Inc., American companies; a German company, Erbe Incorporated; a Israeli company, Galile; a Canadian company Cryocath, Inc.; and Candela Laser Corporation, an American company which distributes products manufactured by Spembly, an English Company. The Company's cryosurgical instrumentation also competes with other companies that employ techniques for destroying diseased tissue by, but not limited to, radiofrequency and thermal (hot) devices. With respect to the Solutions, the Company also faces competition in the overlapping areas of research with respect to cell, tissue and organ preservation, organ transplantation, and hypothermic medicine. Currently, there are four known organ preservations solutions marketed as Viaspan, Collins Solutions, Euro Collins Solutions, and Ringers Lactate solution. These solutions are marketed by DuPont Co. and Barr Laboratories, Inc., Abbott Laboratories, Kendall-McGaw Laboratories, and Baxter, Inc., respectively. The Company understands that other groups or companies are also researching and developing organ preservation techniques and solutions. Many of the Company's competitors are significantly larger than the Company and have greater financial, technical, research, marketing, sales, distribution and other resources than the Company. Additionally, the Company believes there will be intense price competition with respect to the Company's products. There can be no assurance that the Company's competitors will not succeed in developing or marketing technologies and products that are more effective or commercially attractive 14 15 than any that are being developed or marketed by the Company, or that such competitors will not succeed in obtaining regulatory approval, introducing, or commercializing any such products prior to the Company. Such developments could have a material adverse effect on the Company's business, financial condition and results of operations. Further, there can be no assurance that, even if the Company is able to compete successfully, that it would do so in a profitable manner. TECHNOLOGICAL OBSOLESCENCE. The medical device industry is characterized by rapid technological change, changing customer needs, and frequent new product introductions. The development by others of new or improved products, processes or technologies may make the Company's current or proposed products obsolete or less competitive. RELIANCE ON KEY PERSONNEL. The Company's future success depends to a significant degree upon the continued service of Richard J. Reinhart, Ph.D., the President and CEO of the Company, and John G. Baust, Ph.D., the Company's CSO. The Company does not have key man insurance on either of their lives. The Company's future success also depends on its continuing ability to attract, retain and motivate highly qualified technical, managerial and sales personnel. The inability to retain or attract qualified personnel could have a significant negative effect upon the Company's financial condition. GOVERNMENT REGULATION. Government regulation in the United States and other countries is a significant factor affecting the research and development, manufacture and marketing of the Company's products. In the United States, the FDA has broad authority under the Federal Food, Drug and Cosmetic Act and the Public Health Service Act to regulate the distribution, manufacture and sale of medical devices. Foreign sales of drugs and medical devices are subject to foreign governmental regulation and restrictions which vary from country to country. The process of obtaining FDA and other required regulatory approvals is lengthy and expensive. The Company may not be able to obtain necessary approvals for clinical testing or for the manufacturing or marketing of its products. Failure to comply with applicable regulatory approvals can, among other things, result in fines, suspension of regulatory approvals, product recalls, operating restrictions, and criminal prosecution. In addition, governmental regulations may be established which could prevent, delay, modify or rescind regulatory approval of the Company's products. Any such position by the FDA, or change of position by the FDA, may adversely impact the Company's business and financial condition. Regulatory approvals, if granted, may include significant limitations on the indicated uses for which the Company's products may be marketed. In addition, to obtain such approvals, the FDA and foreign regulatory authorities may impose numerous other requirements on the Company. FDA enforcement policy strictly prohibits the marketing of approved medical devices for unapproved uses. In addition, product approvals can be withdrawn for failure to comply with regulatory standards or the occurrence of unforeseen problems following initial marketing. The Company may not be able to obtain regulatory approvals for its products on a timely basis, or at all, and delays in receipt of or failure to receive such approvals, the loss of previously obtained approvals, or failure to comply with existing or future regulatory requirements would have a significant negative effect on the Company's financial condition. PRODUCT LIABILITY CLAIMS AND UNINSURED RISKS. The manufacture and sale of medical products entails significant risk of product liability claims or product recalls. The Company's existing insurance coverage limits may not be adequate to protect the Company from any liabilities it might incur in connection with clinical trials or sales of products. A successful product liability claim or series of claims brought against the Company in excess of its insurance coverage, or a recall of the Company's products, could have a significant negative effect on the Company's business and financial condition. RISKS RELATED TO HEALTH CARE REFORM. Political, economic and regulatory influences are subjecting the health care industry in the United States to fundamental change. The Company anticipates that the Congress, state legislatures and the private sector will continue to review and assess alternative health care delivery and payment systems. Potential approaches that have been considered include mandated 15 16 basic health care benefits, controls on health care spending through limitations on the growth of private purchasing groups, price controls, and other fundamental changes to the health care delivery system. Legislative debate is expected to continue in the future, and market forces are expected to demand reduced costs. The Company cannot predict what impact the adoption of any Federal or state health care reform measures, future private sector reform or market forces may have on the Company's business. PATENT AND PROPRIETARY RIGHTS. The Company's ability to effectively compete may depend upon the proprietary nature of its technologies. The Company owns several patents and has other applications pending. The Company expects to file additional patent applications in the future. There can be no assurance, however, that other companies are not investigating or developing other technologies that are similar to the Company's technologies, or that any additional patents will be issued to the Company or that such patents will afford the Company sufficiently broad patent coverage to provide any significant deterrent to competitive products. Even if a competitor's products were to infringe products owned by the Company, it could be very costly for the Company to enforce its rights in an infringement action. The validity and enforceability of such patents may be significant to the Company and may be important to the success of the Company. The Company, however, believes that the best protection of proprietary technology comes from market position, technical innovation and product performance. There can be no assurance that any of these will be realized or maintained by the Company. Third parties may claim that the Company's products infringe their intellectual property rights. If valid patents are infringed, the patent owner will be able to prevent the future use, sale and manufacture of the subject products by the Company and also will be entitled to damages for past infringement and license fees or royalties on future sales of the infringing components of its systems. Infringement of any patents also may render the Company liable to purchasers and end-users of the infringing products. If a patent infringement claim is asserted against the Company, then, whether or not the Company is successful in defending such claim, the defense of such claim may be very costly. While the Company is unable to predict what such costs, if any, will be incurred if the Company is obligated to devote substantial financial or management resources to patent litigation, its ability to funds its operations and to pursue its business goals may be substantially impaired. RESEARCH AND DEVELOPMENT. The Company is active in research and development of new products and technologies. The Company's research and development efforts may not lead to the successful introduction of new or improved products. The Company may encounter delays or problems in connection with its research and development efforts. New products often take longer to develop, have fewer features than originally considered desirable and achieve higher cost targets than initially estimated. There may be delays in starting volume production of new products and new products may not be commercially successful. Products under development are often announced before introduction and these announcements may cause customers to delay purchases of existing products until the new or improved versions of those products are available. Delays or deficiencies in development, manufacturing, delivery of or demand for new products or of higher cost targets could have a negative effect on the Company's business, operating results or financial condition. MANUFACTURING. The Company assembles its products at its facilities in Baltimore, Maryland. If use of the Company's manufacturing facilities were interrupted by natural disaster or otherwise, the Company's operations could be negatively affected until the Company could establish alternative production operations. In addition, the Company may experience production difficulties and product delivery delays in the future as a result of changing process technologies, ramping production, installing new equipment at its manufacturing facilities, and shortage of key components. The Company's success will depend in part on its ability to manufacture its products in compliance with the FDA's Good Manufacturing Practices regulations and other regulatory requirements in sufficient quantities and on a timely basis, while maintaining product quality and acceptable 16 17 manufacturing costs. Failure to increase production volumes in a timely or cost-effective manner or to maintain compliance with the FDA's Good Manufacturing Practices or other regulatory requirements could have a significant negative effect on our financial condition. DEPENDENCE ON SUPPLIERS. The Company relies on outside suppliers for all of its manufacturing supplies, part and components. Most parts and components used by the Company currently are available from multiple sources. However certain components, such as liquid nitrogen dewars and probe tips, currently are available from a limited number of sources. The Company does not have long-term agreements with all of these suppliers. To date, the Company has been able to obtain adequate supplies of such components in a timely manner from its existing sources. Although the Company believes it could develop alternative sources of supply for most of these components within a reasonable period of time, there can be no assurance that, in the future, its current or alternative sources will be able to meet all of the Company's demands on a timely basis. Unavailability of necessary parts or components could require the Company to re-engineer its products to accommodate available substitutions which would increase costs to the Company and/or have a material adverse effect on manufacturing schedules, products performance and market acceptance. 17 18 ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA CRYOMEDICAL SCIENCES, INC. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page Number Independent Auditor's Report 19 Consolidated Balance Sheet 20 Consolidated Statements of Operations 21 Consolidated Statements of Cash Flows 22 Consolidated Statements of Changes in Stockholders' Equity 23 Notes to Consolidated Financial Statements 24-36
18 19 Independent Auditor's Report To the Board of Directors and Stockholders of CRYOMEDICAL SCIENCES, INC. Ewing, New Jersey We have audited the accompanying Consolidated Balance Sheet of Cryomedical Sciences, Inc. and Subsidiary as of December 31, 2000, and the related Consolidated Statements of Operations, Cash Flows and Stockholders' Equity for the years ended December 31, 2000 and December 26, 1999. 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 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 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 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 consolidated financial position of Cryomedical Sciences, Inc. and Subsidiary as of December 31, 2000, and the results of their operations and their cash flows for the years ended December 31, 2000 and December 26, 1999, in conformity with accounting principles generally accepted in the United States. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has suffered recurring losses from operations and may not have sufficient liquidity to meet its financial obligations in the future. This condition raises substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. /s/ ARONSON, FETRIDGE & WEIGLE Rockville, Maryland February 16, 2001 19 20 CRYOMEDICAL SCIENCES, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEET
December 31, 2000 ---- ASSETS Current assets Cash and cash equivalents $ 2,150,112 Receivables, net of allowance for doubtful accounts of $13,018 86,956 Inventories 653,945 Prepaid expenses and other current assets 135,547 -------------- Total current assets 3,026,560 Fixed assets, net of accumulated depreciation and amortization of $1,879,927 433,655 Intangible assets, net of accumulated amortization of $46,634 512,320 Other assets 16,284 -------------- Total assets $ 3,988,819 ============== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accounts payable $ 120,066 Accrued expenses 225,195 Accrued warranty costs 4,146 Note payable 10,858 -------------- Total current liabilities 360,265 -------------- Total liabilities 360,265 -------------- Stockholders' equity Preferred stock, $.001 par value per share, 1,000,000 authorized; 0 shares issued and outstanding - Common stock, par value $.001 per share, 25,000,000 shares authorized; 12,413,209 shares issued and outstanding 12,413 Additional paid-in capital 36,916,868 Accumulated deficit (33,300,727) -------------- Total stockholders' equity 3,628,554 -------------- Total liabilities and stockholders' equity $ 3,988,819 ==============
The accompanying notes are an integral part of these financial statements. 20 21 CRYOMEDICAL SCIENCES, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS
Year ended December 31, December 26, -------------------- ---------------- 2000 1999 ---- ---- Revenues Product sales $ 586,401 $ 1,045,869 Services and other 603,104 730,684 -------------------- ---------------- Total Revenue 1,189,505 1,776,553 Cost of sales Product sales 305,679 585,047 Services and other 229,452 379,405 -------------------- ---------------- Total cost of sales 535,131 964,452 Gross profit 654,374 812,101 Expenses Research and development 1,373,500 687,450 Sales and marketing 465,101 355,864 General and administrative 1,685,773 913,689 -------------------- ---------------- Total expenses 3,524,374 1,957,003 -------------------- ---------------- Operating loss (2,870,000) (1,144,902) Interest income 156,116 2,502 Interest expense (58,043) (33,322) -------------------- ---------------- Net loss $ (2,771,927) $ (1,175,722) ==================== ================ Basic net loss per common share $ (0.28) $ (0.17) ==================== ================ Weighted average number of common shares outstanding 9,921,056 6,728,778 ==================== ================
The accompanying notes are an integral part of these financial statements. 21 22 CRYOMEDICAL SCIENCES, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended December 31, December 26, --------------- --------------- 2000 1999 ---- ---- Cash flows from operating activities: Net loss $ (2,771,927) $ (1,175,722) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation 231,961 271,307 Amortization 34,213 12,421 Provision for bad debts 31,764 84,148 Write-off of accounts receivable (33,697) (749,855) Stock based compensation 23,586 - Sale of rental equipment - 14,548 Loss on disposal of fixed assets, net 14,579 - Changes in operating assets and liabilities: Decrease in receivables 161,413 906,044 Decrease in inventories 298,353 273,684 (Increase) decrease in prepaid and other current assets (56,175) 1,138 (Increase) decrease in other assets (7,956) 10,399 (Decrease) increase in accounts payable (528,512) 55,557 (Decrease) increase in accrued expenses (259,278) 117,369 Decrease in unearned revenue (19,608) (41,231) Decrease in warranty reserves - (11,400) Decrease in accrued warranty costs (9,949) (16,180) Decrease in deferred rent (7,399) (18,485) --------------- --------------- Net cash used in operating activities (2,898,632) (266,258) --------------- --------------- Cash flows from investing activities: Increase in intangibles (15,000) (220,218) Purchase of fixed assets (185,743) - --------------- --------------- Net cash used in investing activities (200,743) (220,218) --------------- --------------- Cash flows from financing activities: Issuance of preferred stock - 400,000 Issuance of common stock 5,397,242 - Decrease in short-term credit facility (120,000) - Principal payments on capital leases and notes payable (35,707) (40,755) --------------- --------------- Net cash provided by financing activities 5,241,535 359,245 --------------- --------------- Net increase (decrease) in cash and cash equivalents 2,142,160 (127,231) Cash and cash equivalents at beginning of period 7,952 135,183 --------------- --------------- Cash and cash equivalents at end of period $ 2,150,112 $ 7,952 =============== =============== Supplemental Cash Flow Information: Cash paid for interest $ 30,883 $ 33,322 =============== =============== Supplemental Schedule of Non-Cash Investing and Financing Activities: Common Stock issued for legal settlement in perfecting patent rights, capitalized as intangible assets $ 161,256 $ 162,480 =============== ===============
The accompanying notes are an integral part of these financial statements. 22 23 CRYOMEDICAL SCIENCES, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Common stock Convertible Preferred Stock ------------------------ --------------------------- Shares Amount Shares Amount ================================================================================================================= Balance, December 27, 1998 6,690,889 $ 6,691 128 $ - Issuance of Series E Convertible Preferred Stock - - 256 - Issuance of common stock - settlement 80,000 80 - - Net loss - - - - - ----------------------------------------------------------------------------------------------------------------- Balance, December 26, 1999 6,770,889 6,771 384 - Issuance of common stock - offering 4,754,320 4,754 - - Issuance of common stock - settlement 120,000 120 - - Issuance of warrants and options - - - - Conversion of preferred shares 768,000 768 (384) - Net loss - - - - - ----------------------------------------------------------------------------------------------------------------- Balance, December 31, 2000 12,413,209 $12,413 - $ - =================================================================================================================
Additional Total paid-in Accumulated stockholders' capital deficit equity ====================================================================================================== Balance, December 27, 1998 $ 30,778,026 $ (29,353,078) $ 1,431,639 Issuance of Series E Convertible Preferred Stock 400,000 - 400,000 Issuance of common stock - settlement 162,400 - 162,480 Net loss - (1,175,722) (1,175,722) - ------------------------------------------------------------------------------------------------------ Balance, December 26, 1999 31,340,426 (30,528,800) 818,397 Issuance of common stock - offering 5,392,488 - 5,397,242 Issuance of common stock - settlement 161,136 - 161,256 Issuance of warrants and options 23,586 - 23,586 Conversion of preferred shares (768) - - Net loss - (2,771,927) (2,771,927) - ------------------------------------------------------------------------------------------------------ Balance, December 31, 2000 $ 36,916,868 $ (33,300,727) $ 3,628,554 =======================================================================================================
The accompanying notes are an integral part of these financial statements. 23 24 CRYOMEDICAL SCIENCES, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2000 AND DECEMBER 26, 1999 NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (A) Organization and condition of the Company The Company was organized November 5, 1987, as a Delaware corporation. On March 5, 1998, BioLife Solutions, Inc. (BioLife) was incorporated under the laws of the State of Delaware and is wholly owned by the Company. Cryomedical Sciences, Inc. (the Company) is engaged in the research and development of products for use in the field of cryoablation and preservation of cells, tissues, and organs in low temperature environments. The Company is engaged in the development, manufacturing and marketing of cryosurgical devices used to freeze and destroy diseased tissue through the application of subfreezing temperatures. The first such device was shipped in June 1992. Hypothermic solutions, being developed by the Company's subsidiary, may allow heretofore difficult or impossible surgical techniques to be performed and may be useful in increasing the period in which organs may be preserved for transplantation. The Company's management has estimated that it does not believe it has sufficient funds to meet its obligations through the end of fiscal year 2001. The Company has experienced recurring operating losses and continuing negative cash flows from its business activities. Additionally, past and expected future revenue is based upon cryomedical devices used to freeze and destroy diseased tissue. There can be no assurance that this technology will continue to be attractive to the market or that procedures performed using the technology will be subject to reimbursement by public and private insurers. The Company is currently developing a market for its hypothermic solutions and has been awarded grants from two agencies of the United States government. One grant from the National Sciences Foundation for $100,000 was substantially funded and recognized in 2000. The second and third grants from the United States Department of Health and Human Services for a combination of $189,747 were funded, in part, through December 31, 2000. The remaining funds for these grants should be fully funded and recognized in 2001. The Company anticipates additional grants to be awarded. Except for the proceeds from the sale of its products and issuance of equity securities, the Company has no other major sources of liquidity. Management intends to fund its operations, including future research and development, through the profitable sales of the Company's products and services, and continues to search for additional financing, either in the form of debt or the sale of equity securities. 24 25 CRYOMEDICAL SCIENCES, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2000 AND DECEMBER 26, 1999 NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (A) Organization and condition of the Company (continued) The Company has assessed its current position and has taken steps to increase the utilization of its technology in areas other than urology, including general surgery and gynecology. In attempting to achieve this goal, the Company spends significant resources to educate surgeons and healthcare professionals in formal training programs as to the uses and benefits of the Company's cryomedical technology and has developed focused technology for other cryosurgical applications. The Company has no significant long-term debt outstanding. These financial statements assume that the Company will be able to continue as a going concern. If the Company is unable to continue as a going concern, the Company may be unable to realize its assets and discharge its liabilities in the normal course of business. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or to amounts and classification of liabilities that may be necessary should the entity be unable to continue as a going concern. (B) Principles of consolidation The financial statements include the accounts of Cryomedical Sciences, Inc., and its wholly owned subsidiary BioLife. All significant intercompany accounts and transactions have been eliminated in consolidation. (C) Change in fiscal year end Effective in 2000, the Company changed its fiscal year from at 52-53 week year ending on the Sunday closest to December 31 to a calendar year ending on December 31. The change in fiscal year did not have a material effect on consolidated financial condition, results of operations or cash flows for the year 2000. (D) Basic net loss per share The basic net loss per common share is computed by dividing the net loss by the weighted average number of common shares outstanding during the period. Because the Company has incurred losses, fully diluted per share amounts are not presented. If fully diluted per share amounts were reported, options and warrants would be considered in the computations as dilutive common stock equivalents. (E) Cash equivalents Cash equivalents consist primarily of interest-bearing money market accounts. The Company considers all highly liquid debt instruments purchased with an initial maturity of three months or less to be cash equivalents. The Company maintains cash balances which may exceed Federally insured limits. The Company does not believe that this results in any significant credit risk. 25 26 CRYOMEDICAL SCIENCES, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2000 AND DECEMBER 26, 1999 NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (F) Inventories Inventories are stated at the lower of cost or market. Cost is determined using the first-in, first-out ("FIFO") method. (G) Equipment and leasehold improvements Furniture and equipment are stated at cost and are depreciated using the straight-line method over estimated useful lives of three to ten years. Leasehold improvements are stated at cost and are amortized using the straight-line method over the lesser of the life of the asset or the remaining term of the lease. Equipment also includes Accuprobe consoles on rent or on loan which are depreciated using the straight-line method over an estimated useful life of five years. (H) Revenue recognition The Company receives revenue from sales of products, services and from the rental of Accuprobe consoles. The Company generally recognizes revenue related to the sales of its products, primarily its Accuprobe consoles and disposable probes, at the time of shipment. Revenue from extended warranties and service contracts is deferred and recognized on a straight-line basis over the contract periods. Revenue from the lease of Accuprobe consoles is recognized over the course of the non-cancelable lease term. (I) Warranties The Company generally warrants its United States sales of Accuprobe consoles for one year. The estimated cost to repair or replace systems under warranty is provided by charges to cost of sales in the period in which the system is shipped. (J) Income taxes The Company accounts for income taxes using an asset and liability method which generally requires recognition of deferred tax assets and liabilities for the expected future tax effects of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are recognized for the future tax effects of differences between tax bases of assets and liabilities, and financial reporting amounts, based upon enacted tax laws and statutory rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to amounts expected to be realized (Note 5). (K) Use of 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 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. 26 27 CRYOMEDICAL SCIENCES, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2000 AND DECEMBER 26, 1999 NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (L) Employee stock options The Company has chosen to account for stock-based compensation to employees using the intrinsic value method prescribed in Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" and related interpretations. Accordingly, compensation cost for stock options is measured as the excess, if any, of the quoted market price of the Company's stock at the date of the grant over the amount an employee must pay to acquire the stock. (M) Fair value of financial instruments The fair value of the financial instruments included in the consolidated financial statements, except as otherwise discussed in the notes to financial statements, approximates their carrying value. (N) Business segments As described in (A) above, the Company's activities are directed at the fields of cryoablation devices and hypothermic solutions. These activities are conducted independently within the Company and represent separate business segments. The Company has not included separate segment disclosures because of the relative insignificance of the revenues, expenses, and assets associated with its hypothermic solutions segment. NOTE 2 - INVENTORIES
Inventories consist of the following at December 31, 2000: Raw materials and purchased parts $ 264,254 Work in process 9,643 Finished goods 380,048 ----------- $ 653,945 ===========
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment consist of the following at December 31, 2000: Leasehold improvements $ 1,377 Furniture and office equipment 155,216 Manufacturing and other equipment 2,156,989 ----------- 2,313,582 Less accumulated depreciation and amortization (1,879,927) ----------- $ 433,655 ===========
27 28 CRYOMEDICAL SCIENCES, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2000 AND DECEMBER 26, 1999 NOTE 4 - INTANGIBLE ASSETS The Company perfected its rights to a patent on the cryoprobe during 1999. Legal and other costs associated with this action were capitalized and are being amortized on a straight-line basis over the remaining life of the patent of 168 months (Note 10). Intangible assets at December 26, 2000 are as follows:
Patents $ 588,954 Less: Accumulated amortization (46,634) ---------- $ 512,320 ==========
28 29 CRYOMEDICAL SCIENCES, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2000 AND DECEMBER 26, 1999 NOTE 5 - INCOME TAXES The Company has not realized any taxable income since its inception and as of December 31, 2000, has net operating loss carryforwards for both federal and state tax purposes and research and development (R&D) tax credit carryforwards for federal income tax purposes approximately as follows:
Net R&D Year of Operating Tax Expiration Losses Credits ---------- ------------- ------------- 2003 $ 76,000 $ - 2004 472,000 20,000 2005 1,747,000 42,000 2006 2,523,000 88,000 2007 4,505,000 125,000 2008 5,893,000 150,000 2009 1,431,000 114,000 2010 1,562,000 145,000 2011 5,137,000 33,000 2012 1,570,000 - 2018 1,260,000 - 2019 1,175,000 - 2020 2,758,000 - ----------- ------------- Total $ 30,109,000 $ 717,000 ============ =============
At December 31, 2000, the Company has a deferred tax asset related primarily to the net operating loss carryforward and the R&D tax credit carryforward of approximately $11,947,000, against which the Company has provided an allowance for the full amount as management has determined that more likely than not the deferred tax asset will not be realized. In the event of a significant change in the ownership of the Company, the utilization of such loss and tax credit carryforwards could be substantially limited. NOTE 6 - STOCKHOLDERS' EQUITY On October 20, 1998, the Company entered into an agreement for the private placement of 384 Series E Units. Each Unit consisted of one share of Series E Convertible Preferred Stock (the "Series E Preferred Stock"), convertible into 2,000 shares of common stock and a warrant to purchase 1,000 shares of common stock at $1.25 per share. The net proceeds of the offering totaled $600,000, of which $200,000 was received in 1998 and the remaining $400,000 was received on February 10, 1999. On June 16, 2000, the Company amended its Certificate of Incorporation to effect a one-for-five reverse stock split and reduced the number of authorized shares of common stock from 50 million shares to 25 million shares. It also reduced the number of authorized shares of preferred stock, par value $.001 per share, from 9,378,000 shares to 1 million shares. In connection with the reverse stock split, each share of Series E Preferred Stock was converted into 2,000 shares of Common Stock for a total of 768,000 shares. 29 30 CRYOMEDICAL SCIENCES, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2000 AND DECEMBER 26, 1999 NOTE 6 - STOCKHOLDERS' EQUITY (CONTINUED) All references in the financial statements and related notes to shares and per share information for all years presented have been adjusted to reflect the reverse stock split. The Company has granted options and warrants to consultants and others who have provided, or will provide, services to the Company at an exercise price per share not greater than the market price of the common stock on the date of grant. The expiration of such options and warrants range from one to ten years with various vesting arrangements. In August 1998, the Company granted warrants to two consultants to the Company to purchase 1,296,000 shares of the Company's common stock at a price of $1.25 per share. The fair value of the Company's common stock at the date of the grant was $.781. The warrants are exercisable immediately after issuance and until the termination date of August 30, 2008. In 1999, the Company granted warrants to an investor to purchase 384,000 shares of the Company's common stock at a price of $1.25 per share. The warrants are contingent and are exercisable only upon the grantee providing access to funding through a new common stock offering. No funding has been provided and the Company does not anticipate that these warrants will become exercisable. The Company also granted additional warrants to purchase 2,000 shares of the Company's common stock at a price of $2.00 for prior work performed. The market price of the Company's common stock at the date of the grant was $2.00. The warrants are exercisable 500 immediately, 1,000 in one year and 500 in two years from the date of the grant. On February 25, 2000, the Company entered into two Note Purchase Agreements with subscribers wherein the Company issued to the subscribers promissory notes aggregating $500,000, bearing interest at 10% per annum, due and payable three years from the date of issuance. The promissory notes plus accrued interest thereon were converted into common stock of the Company on April 10, 2000. During May 2000, the Company sold 2,234,000 units under unit purchase agreements with each unit consisting of two shares of the Company's common stock and one warrant to purchase a share of Common Stock on or before March 31, 2001 for $1.25 per share. The units were sold for $2.55 ($1.25 per common share plus $.05 per warrant) before expenses of sale. During 2000, the Company granted a ten year warrant to acquire 25,000 shares of the Company's common stock for $1.25 per share to an employee as consideration for the Company's right to the use of a patent. 30 31 CRYOMEDICAL SCIENCES, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2000 AND DECEMBER 26, 1999 NOTE 6 - STOCKHOLDERS' EQUITY (CONTINUED) The following table summarizes warrant activity for the years ended December 31, 2000 and December 26, 1999:
Year Ended Year Ended December 31, 2000 December 31, 1999 ---------------------- ---------------------- Wgtd. Wgtd. Avg. Avg. Shares Exercise Shares Exercise -------- Price -------- Price --------- --------- Outstanding at beginning of year 1,743,000 $ 1.59 1,357,000 $ 1.69 Granted 2,259,000 1.25 386,000 1.25 Exercised - - - - Cancelled - - - - ---------- ------ --------- ------ Outstanding at end of year 4,002,000 $ 1.40 1,743,000 $ 1.59 ========== ====== ========== ====== Warrants exercisable at year end 3,617,500 $ 1.41 1,357,500 $ 1.69 ========== ====== ========== ======
Stock Compensation Plans The Company's 1988 Stock Option Plan was approved and adopted by the Board of Directors in July 1988 and had a term of ten years. The plan expired in 1998. The options are exercisable for up to ten years from the grant date. During 1998, the Company adopted the 1998 Stock Option Plan. Under the 1998 Stock Option Plan, an aggregate of 4,000,000 shares of common stock are reserved for issuance upon the exercise of options granted under the plan. The purchase price of the common stock underlying each option may not be less than the fair market value at the date the option is granted (110% of fair market value for optionees that own more than 10% of the voting power of the Company). The options are exercisable for up to ten years from the grant date. The plan expires August 30, 2008. 31 32 CRYOMEDICAL SCIENCES, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2000 AND DECEMBER 26, 1999 NOTE 6 - STOCKHOLDERS' EQUITY (CONTINUED) The following table provides information pertaining to stock options under both plans:
Year Ended Year Ended December 31, 2000 December 26, 1999 ---------------------- ---------------------- Wgtd. Avg. Wgtd. Avg. Exercise Exercise Shares Price Shares Price --------- --------- -------- --------- Outstanding at beginning of year 2,588,840 $ 1.95 2,614,920 $ 2.25 Granted 125,000 1.25 40,000 1.25 Exercised - - - - Cancelled (200,780) 1.80 (66,080) 8.50 ---------- ------- ---------- --------- Outstanding at end of year 2,513,060 $ 2.04 2,588,840 $ 1.95 ========== ======= ========== ========= Stock options exercisable at year end 2,403,560 $ 1.94 2,416,840 $ 1.75 ========== ======= ========== =========
The following table summarizes information about stock options outstanding at December 31, 2000:
Range of Number Weighted Average Exercise Outstanding Remaining Weighted Average Prices at December 31, 2000 Contractual Life Exercise Price - ----------------- -------------------- ---------------- ---------------- $ 1.25 2,248,000 7.75 $ 1.25 2.50 - 10.94 265,000 5.01 8.75 16.88 60 4.08 16.88 --------- ---- ----- 2,513,060 7.46 2.04 ========= ==== =====
Number Exercisable at Weighted Average December 31, 2000 Exercise Price --------------------- ---------------- 2,403,560 1.94
32 33 CRYOMEDICAL SCIENCES, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2000 AND DECEMBER 26, 1999 NOTE 6 - STOCKHOLDERS' EQUITY (CONTINUED) The Company uses the intrinsic value method in Accounting Principles Board Opinion No. 25 and related interpretations in accounting for its employee stock options and warrants. Had compensation cost for the Company's stock options and warrants been determined based on the fair value method under Financial Accounting Standards Board Statement No. 123, the Company's net loss and loss per share for the years ended December 31, 2000 and December 26, 1999, would have been the pro forma amounts indicated below:
2000 1999 ------------ ------------ Net loss to common shareholders As reported $(2,771,927) $(1,175,722) Pro forma (3,084,726) (1,194,178) Net loss per basic common share As reported (.28) (.17) Pro forma (.31) (.18)
The fair value of each option/warrant granted is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions used for grants in fiscal years 2000 and 1999: expected volatility of 93 percent; risk-free rate of approximately 5.3 percent; and expected lives of ten years. Stockholder Rights Plan On August 21, 1995, the Board of Directors declared a dividend of one preferred share purchase right (a "Right") for each outstanding share of common stock for stockholders of record on September 11, 1995. Each Right entitles the holder to purchase from the Company one one-hundredth of a share of Series B Junior Preferred Stock, par value $.001 per share (the "Preferred Shares"), of the Company at a price of $10 per one one-hundredth of a Preferred Share (the "Purchase Price"), subject to adjustment. The Rights will be exercisable (i) 10 days following a public announcement that a person or group acquires beneficial ownership of 20% or more of the outstanding common stock of the Company (an "Acquiring Person"), or (ii) 10 business days (or later as determined by the Board of Directors) following the commencement of, or an announcement of an intention to make, a tender offer or exchange offer, the consummation of which would result in the beneficial ownership by a person or group of 20% or more of the outstanding common stock of the Company (the earlier of such dates being called the "Distribution Date"). Until a Right is exercised, the holder thereof will have no rights as a stockholder of the Company. Until the Distribution Date (or earlier redemption or expiration of the Rights), the Rights will be transferred with and only with the common stock. In the event that any person or group becomes an Acquiring Person, each holder of a Right, other than Rights beneficially owned by the Acquiring Person, will thereafter have the right to receive upon exercise that number of shares of common stock of the Company having a market value of two times the Purchase Price, and in the event that the Company is acquired in a business combination transaction or 50% or more of its assets are sold, each holder of a Right will thereafter have the right to receive upon exercise that number of shares of common stock of the acquiring company which at the time of the transaction will have a market value of two times the Purchase Price. 33 34 CRYOMEDICAL SCIENCES, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2000 AND DECEMBER 26, 1999 NOTE 6 - STOCKHOLDERS' EQUITY (CONTINUED) At any time after any person becomes an Acquiring Person, and prior to the acquisition by such person or group of 50% or more of the outstanding common stock of the Company, the Board of Directors of the Company may cause the Rights (other than Rights owned by such person or group) to be exchanged, in whole or in part, for common stock at an exchange rate of one share of common stock per Right. At any time prior to the acquisition by a person or group of beneficial ownership of 20% or more of the outstanding common stock, the Board of Directors of the Company may redeem the Rights in whole at a price of $.001 per Right. The Rights have certain anti-takeover effects, in that they will cause substantial dilution to a person or group that attempts to acquire a significant interest in the Company on terms not approved by the Board of Directors. The Stockholder Rights Plan was amended on April 7, 2000 to provide, in essence, that the rights would expire upon the consummation of a financing transaction involving the placement of units of equity securities of the Company in conjunction with a reverse stock split, each unit consisting of two (2) shares of Common Stock and one (1) warrant to purchase a share of Common stock at $.25 (pre-reverse stock split), at a price of $.51 per unit (pre-reverse split) (the "Equity Financing"). The Equity Financing was consummated in June 2000 and the Rights expired. NOTE 7 - RELATED PARTY TRANSACTIONS The Company incurred $261,271 and $49,985 in legal fees during the years ended December 31, 2000 and December 26, 1999, respectively, for services provided by a law firm in which a director and stockholder of the Company is a partner. The Company incurred $60,000 and $34,750 of human resources consulting fees during the years ended December 31, 2000 and December 26, 1999, respectively, for services provided by the spouse of an officer, director, and stockholder of the Company. During the year ended December 31, 2000, the Company paid $13,000 in consulting fees to the son of an officer, director, and stockholder of the Company. NOTE 8 - COMMITMENTS (A) Leases The Company rents office space as lessee under a five year operating lease that commenced May 1, 2000. The lease requires monthly payments of $3,717 plus the Company's pro-rata share of the landlord's expense in the operation of the property and a management fee not to exceed 5% of the base rent. Rental expense for facilities and equipment operating leases for the years ended December 31, 2000 and December 26, 1999, totaled $135,190 and $160,516, respectively. Future minimum lease obligations each year under this noncancelable operating lease are $44,602 through 2004 and $14,867 in 2005. 34 35 CRYOMEDICAL SCIENCES, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2000 AND DECEMBER 26, 1999 NOTE 8 - COMMITMENTS (CONTINUED) (B) Employment agreement The Company has an employment agreement with a key executive officer which expires on September 30, 2001. In addition to an annual base salary of $180,000, the agreement provides for an automobile allowance and certain pre-determined bonuses based on various approvals and shipments of new products. The agreement may be extended for two additional one-year periods under the same terms. (C) In March 1999, BioLife signed an Incubator Licensing Agreement with SUNY whereby BioLife will conduct research and development in the field of cryogenic science and in particular solution technology. The Company will pay the University $1,005 per month during the five year term of the License and all inventions conceived as a result of these research and development efforts will belong to BioLife. NOTE 9 - NOTE PAYABLE At December 31, 2000, note payable consists of a note agreement with a bank with a remaining balance of $10,858. The note is secured by an automobile and requires monthly payments of $1,033. The note bears interest at 9.153% and matures in November 2001. NOTE 10 - LITIGATION On July 12, 1999, the Company entered into a Settlement Agreement with Concept Group, Inc. (Concept) in connection with a lawsuit filed in June 1997 by Concept against the Company in the United States District Court for the Eastern District of Pennsylvania. Pursuant to the Settlement Agreement, in addition to granting to Concept a world-wide, non-transferable, royalty-free license to make, have made, sell, use, import, manufacture, produce and/or market cryogenic surgical instruments based upon the techniques and specifications as described and detailed in U.S. Patent Number 5,573,532, the Company (a) issued to Concept and its attorney an aggregate of 80,000 shares of the Company's common stock (the Initial Shares), and (b) if the aggregate average cash value (as defined in the Settlement Agreement) of the Initial Shares is less than $550,000 one year from the execution of the Settlement Agreement, agreed to issue such additional shares of common stock (up to a maximum of 120,000 shares) (Contingent Shares) such that the total shares issued (initial shares plus contingent shares) shall be worth not less than $550,000. On July 12, 2000, 120,000 shares were issued to Concept in accordance with the agreement. The legal and settlement costs incurred to perfect the patent rights have been capitalized as an intangible asset on the Balance Sheet (Note 4). 35 36 CRYOMEDICAL SCIENCES, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2000 AND DECEMBER 26, 1999 NOTE 10 - LITIGATION (CONTINUED) In February 1999, Alan A. Rich, formerly Vice President of Sales and Marketing for the Company, filed a suit against the Company in the Superior Court of the Commonwealth of Massachusetts, Middlesex County, for breach of contract, breach of the covenant of good faith and fair dealing, promissory estoppel and violation of the Maryland Wage Payment and Collection Law based upon an allegation that the Company constructively discharged the plaintiff from his employment with the Company, breach of Rich's stock option agreement and failure to issue a COBRA notice. In early 2000, the Company paid Rich $91,719 to satisfy his claim for unpaid compensation, vacation time and expenses plus prejudgment interest on that claim as discovery indicated there was no viable defense to the claim. On September 5, 2000, the Court found in part, on the other matters, in favor for the plaintiff. Under an agreement whereby both parties agreed to waive their right to appeal, the Company paid Rich $155,000 in full settlement of this matter. In March 1999, EndoCare, Inc. ("EndoCare") filed a suit against the Company, Dr. Richard J. Reinhart, the Company's President and Chief Executive Officer and John G. Baust, the Company's Senior Vice President of Research and Development in the Superior Court of California, County of Orange based upon the alleged dissemination of information to the effect that EndoCare's cryosurgical devices are unsafe and have a history of putting patients, upon which the devices were used, in danger. The Company confirmed to EndoCare that the device in question was not an EndoCare device and the suit was dismissed in 1999. On April 6, 2000, EndoCare, Inc. filed a suit against the Company in the United States District Court, Central District of California, alleging that the Company is infringing United States Letters Patent No. 5,647,868 (the "868 patent"), entitled "Cryosurgical Integrated Control and Monitoring System and Method", owned by EndoCare as assignee, in that the Company is manufacturing, using, selling and offering for sale products embodying the patented invention. The complaint, among other things, seeks to enjoin the Company from infringing the 868 patent and to recover lost profits, compensatory damages, treble damage for willful infringement, and costs and attorney's fees. The Company filed an answer to the complaint denying the critical allegations therein and counterclaiming for a declaratory judgment of invalidity, unenforceability, and noninfringement of the 868 patent, on the basis of prior art and the fact that the patent applicant, or those acting on his behalf, failed to exercise the duty of candor and to meet the duty of disclosure that is required of those seeking a patent, damages, and reasonable attorneys fees and costs because EndoCare's actions make this an exceptional case. In December, 2000, the parties entered into a settlement agreement providing for (a) the cross licensing of certain patents, (b) dismissal of the lawsuit and counterclaim with prejudice, and (c) the filing of a Consent Judgment which states that (i) for purposes of the settlement agreement the Company has stipulated that the EndoCare patent is valid and enforceable, (ii) the Company has not proved that the EndoCare patent is either invalid or unenforceable, and (iii) EndoCare has not proved that the Company infringed the EndoCare patent. 36 37 ITEM 8: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None PART III ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The directors and executive officers of the Company are as follows:
Position and Offices Name Age With the Company - ---- --- -------------------- Richard J. Reinhart, Ph.D. 59 Chairman and Chief Executive Officer and Director John G. Baust, Ph.D. 58 Senior Vice President and Chief Scientific Officer and Director Howard S. Breslow 61 Director, Secretary Roderick deGreef 40 Director Raymond Cohen 42 Director
Set forth below is a biographical description of each of the directors and executive officers identified above based on information supplied by them. Richard J. Reinhart, Ph.D., has been President, Chief Executive Officer and a director of the Company since May 1996. From 1994 to 1996, Dr. Reinhart was a consultant to Medical Resources, Inc., a diagnostic imaging company, while also working with several other health care companies. From 1988 to 1994, Dr. Reinhart was Managing Director for Medical Resources, Inc. From 1981 through 1988, Dr. Reinhart was Chief Executive Officer of several small entrepreneurial medical device and instrumentation companies. From 1969 to 1981, Dr. Reinhart was employed by Roche Medical Electronics (a subsidiary of Hoffman La Roche) where, after serving in several senior management positions, he became President and Chief Executive Officer in 1978. John G. Baust, Ph.D., has been Senior Vice President of the Company since January 1995, Chief Scientific Officer since August 1993, served as Vice President, Research and Development, of the Company from July 1990 to January 1995, and served as a consultant to the Company from April 1990 to July 1990. Dr. Baust became a director of the Company on October 13, 2000. Since 1987, Dr. Baust has also been a Professor and the Director of the Center for Cryobiological Research at State University of New York at Binghamton, and since July 1994, Dr. Baust has also been Adjunct Professor of Surgery, Medical College of Pennsylvania. From 1984 to 1987, he was a Professor and the Director of the Institute of Low Temperature Biology at the University of Houston. 37 38 Howard S. Breslow has served as a director of the Company since July 1988. He has been a practicing attorney in New York City for more than 35 years and is a member of the law firm of Breslow & Walker, LLP, New York, New York, which firm serves as general counsel to the Company. Mr. Breslow currently serves as a director of Excel Technology, Inc., a publicly-held company engaged in the development and sale of laser products; FIND/SVP, Inc., a publicly-held company engaged in the development and marketing of information services and products; Vikonics, Inc., a publicly-held company engaged in the design and sale of computer-based security systems; and Lucille Farms, Inc., a publicly-held company engaged in the manufacture and marketing of dairy products. Roderick de Greef has served as a director of the Company since June 19, 2000. From March 2001 to present, Mr. de Greef has served as Executive Vice President, Chief Financial Officer and Secretary of Cardiac Sciences, Inc., a public company. Since 1995 Mr. de Greef has provided corporate finance advisory services to a number of early stage companies, including the Company, where he was instrumental in securing the Company's equity capital beginning in June 2000, and advising on merger and acquisition activity. From 1989 to 1995, Mr. de Greef was Vice President and Chief Financial Officer of BioAnalogics, Inc. and International BioAnalogics, Inc., publicly held, development stage medical technology companies located in Portland, Oregon. From 1986 to 1989, Mr. de Greef was Controller and then Chief Financial Officer of Brentwood Instruments, Inc., a publicly held cardiology products distribution company based in Torrance, California. From 1983 to 1986, Mr. de Greef held financial analysis positions with W.R. Grace and Co., and Santa Fe Minerals, Inc., in Dallas, Texas. Mr. de Greef has a B.A. in Economics and International Relations from California State University at San Francisco and an M.BA. from the University of Oregon. Raymond W. Cohen has served as a director of the Company since June 19, 2000. Since January 1997, Mr. Cohen has been the President, Chief Executive Officer, and a member of the Board of Directors of Cardiac Sciences, Inc., a public company. Prior to 1997, Mr. Cohen was President of Diagnostic Monitoring, a privately held manufacturer and international distributor of non-invasive cardiac monitoring devices and was Vice President, Sales & Marketing of DM Software, Inc., a developer of cardiac monitoring software. From 1988 to 1990, Mr. Cohen was President of BioAnalogics, Inc., a publicly held development-stage medical company located in Beaverton, Oregon. From 1982 to 1988, Mr. Cohen was Vice President, Sales and Marketing for Brentwood Instruments, Inc., a publicly held cardiology products distribution company based in Torrance, California, where he was instrumental in the company being ranked in Inc. Magazine's list of Fastest Growing Small Public Companies from 1986 through 1988. Mr. Cohen holds a B.S. in Business Management from the State University of New York at Binghamton. All directors of the Company hold office until the next annual meeting of stockholders of the Company or until their successors are elected and qualified. Executive officers hold office until their successors are elected and qualified, subject to earlier removal by the Board of Directors. No family relationship exists between any director or executive officer and any other director or executive officer of the Company. SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE The Company's executive officers, directors, and beneficial owners of more than 10% of any class of its equity securities registered pursuant to Section 12 of the Securities Exchange Act of 1934 (collectively, the "Reporting Persons") are required to file reports of ownership and changes in beneficial ownership of the Company's equity securities with the Securities Exchange Commission. Copies of those reports also must be furnished to the Company. Based solely on a review of copies of the reports 38 39 furnished to the Company, the Company believes that during the fiscal year ended December 31, 2000 all of these filing requirements have been satisfied. ITEM 10. EXECUTIVE COMPENSATION The following table sets forth certain information concerning the compensation paid by the Company to its Chief Executive Officer and to each of its executive officers (other than the Chief Executive Officer) who received salary and bonus payments in excess of $100,000 during the fiscal year ended December 31, 2000 (collectively the "Named Executive Officers"). SUMMARY COMPENSATION TABLE
Annual Compensation ------------------- Other Annual Name and Principal Fiscal Salary Bonus Compensation Positions Year ($) (2) ($) ($) - ----------------- ------------- --------- ------ ------------- Richard J. Reinhart, Ph.D. 2000 195,000 - 8,266 Chairman, Chief 1999 100,000 - 8,183 Executive Officer and Director John G. Baust, Ph.D. 2000 180,000 - 6,454 Senior Vice 1999 100,000 - 6,377 President, Research and Development, Director Long Term Compensation ---------------------- Awards Payouts ------ ------- Restricted Stock Options/ LTIP All Other Name and Principal Award(s) SARs Payouts Compensation Positions ($) (#) (1) ($) ($) - ----------------- ----------------- --------- ------- ------------- Richard J. Reinhart, Ph.D. - - - - Chairman, Chief - - - - Executive Officer and Director John G. Baust, Ph.D. 100,000 Senior Vice - - - - President, Research and Development, Director
- -------------------------------------------- (1) Options to acquire shares of Common Stock. (2) Salaries for fiscal year 1999 reflect voluntary salary reductions by Reinhart and Baust. OPTION/SAR GRANTS IN YEAR-ENDED DECEMBER 31, 2000 In 2000, the Company issued 100,000 options/SAR grants to purchase common stock to one executive officer, John Baust. AGGREGATED OPTION/SAR EXERCISES DURING THE 2000 FISCAL YEAR AND THE 2000 FISCAL YEAR OPTION/SAR VALUES The following table provides information related to options exercised by each of the Named Executive Officers during the 2000 fiscal year and the number and value of options held at December 31, 2000. The Company does not have any outstanding stock appreciation rights. None of the options were in the money at year ended December 31, 2000. 39 40
Number of Securities Value of Unexercised Underlying Unexercised in the money Options/SAR Options/SAR At Fiscal Year End (#) At Fiscal Year End ($) (1) ---------------------- -------------------------- Shares Acquired Value Name On Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable - -------- ---------------- ------------ ----------- ------------- ----------- ------------- Richard J. Reinhart, Ph.D. - - 1,590,000 50,000 - - John G. Baust, Ph.D. - - 568,000 4,000 - -
- ---------------------------------- (1) The closing price for the Common Stock as reported on the OTC Bulletin Board on December 31, 2000 was $.50. Value is calculated on the basis of the difference between the option exercise price and $.50 multiplied by the number of shares of Common Stock underlying the option. - ---------------------------------- EMPLOYMENT AGREEMENTS The Company has an employment agreement between the Company and John G. Baust its Senior Vice President. Each officer has executed a Proprietary Information and Inventions Agreement pursuant to which each agreed, among other things, to keep the Company's information confidential and assigned all inventions to the Company, except for certain personal inventions not related to the Company's work, whether existing or later developed. CONSULTANTS At December 31, 2000, the various consultants to the Company held exercisable warrants to purchase an aggregate of 61,000 shares of Common Stock. The Company has obtained the services of consultants to render advice with respect to various areas of the Company's research. The Company has entered into one year consulting agreements with automatic one year renewals (absent notice to the contrary by either party) with Jay Pachrica, M.D. (July 1997), Chairman and Professor of Gastroenterology, University of Texas, Austin, Texas and Anthony Kallo, M.D. (July 1997), Johns Hopkins School of Medicine, Baltimore, Maryland. The Company has also entered into a Consulting and Proprietary Information Agreement with Robert van Buskirk, Ph.D. (January 2000), State University of New York Cryobiological Research in Binghamton, New York, pursuant to which Dr. van Buskirk is engaged as a consultant for a indefinite term unless thirty (30) days written notice of termination is received by either party. These consultants have either received warrants to purchase Common Stock or is entitled to cash compensation. No consultant has agreed to devote any specified amount of time to Company activities. Consultants to the Company may be employed by or have consulting agreements with entities other than the Company, some of which may conflict or compete with the Company, and the advisors and consultants are expected to devote only a small portion of their time to the Company. Most are not expected to actively participate in the Company's development. Certain of the institutions with which the advisors and consultants are affiliated may have regulations and policies which are unclear with respect to the ability of such personnel to act as part-time consultants or in other capacities for a 40 41 commercial enterprise. Regulations or policies now in effect or adopted in the future might limit the ability of the advisors and consultants to consult with the Company. The loss of the services of certain of the advisors and consultants could adversely affect the Company. Furthermore, inventions or processes discovered by the advisors and consultants will not, unless otherwise agreed, become the property of the Company but will remain the property of such persons or of such persons' full-time employers. In addition, the institutions with which the advisors and consultants are affiliated may make available the research services of their scientific and other skilled personnel, including the advisors and consultants, to entities other than the Company. In rendering such services, such institutions may be obligated to assign or license to a competitor of the Company patents and other proprietary information which may result from such services, including research performed by an advisor or consultant for a competitor of the Company. COMPENSATION OF DIRECTORS Outside directors are compensated at the rate of $1,000 for attending board meetings and $500 for telephonic board meetings. 41 42 ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth, as of December 31, 2000, certain information regarding beneficial ownership of Common Stock by (i) all persons known by the Company to own beneficially more than 5% of the outstanding shares of the Common Stock, (ii) each director, (iii) each Named Executive Officer, and (iv) all executive officers and directors of the Company as a group.
Amount and Nature of Percent Name (and Address of 5% Holder) Beneficial Ownership (1) of Class ------------------------------- ------------------------ -------- Richard J. Reinhart.............. 1,732,000 (2) 12.3% Howard S. Breslow................ 1,498,600 (3) 10.8% John G. Baust.................... 576,000 (4) 4.4% Rod de Greef..................... 475,560 (5) 3.8% Ray Cohen........................ 95,000 (6) 0.8% All officers and directors as a group (5 persons)........... 4,377,160 (7) 27.0%
--------------------------------------- (1) Unless otherwise indicated below, all shares are owned beneficially and of record. (2) Includes an aggregate of 1,640,000 shares underlying stock options. (3) Includes an aggregate of 159,000 shares underlying stock options and 1,296,000 shares underlying warrants owned indirectly through Breslow & Walker, LLP and B&W Investments. (4) Includes an aggregate of 572,000 shares underlying stock options. (5) Includes an aggregate of 163,060 shares owned by de Greef & Co. and 100,000 underlying warrants. (6) Includes an aggregate of 30,000 shares owned by MedCorp Advisors, Inc. and 20,000 underlying warrants. (7) Includes an aggregate 3,787,000 shares underlying options and warrants. ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Howard S. Breslow, a director of the Company, is a member of Breslow & Walker, LLP, general counsel to the Company. Mr. Breslow currently owns 43,600 shares of Common Stock of the Company and holds options to purchase an aggregate of 1,455,000 additional shares pursuant to stock options and warrants issued to him and/or affiliates. During the period ended December 2000, Breslow & Walker, LLP billed the Company $261,271 for legal fees. On February 25, 2000, Roderick de Greef, a director of the Company since June 19, 2000, loaned to the Company the sum of $250,000, bearing interest at the rate of 10% per annum, due and payable three years from the date of the loan, and automatically convertible into equity securities of the Company upon the consummation of certain financing events. The loan was converted into common stock and warrants of the Company on April 10, 2000 in connection with the sale of units by the Company. 42 43 PART IV ITEM 13. EXHIBITS, LISTS, AND REPORTS ON FORM 8-K (a) The following documents are filed as part of this report: (1) Financial Statements The financial statements filed as part of this report are listed in the Index to Consolidated Financial Statements on page 18. (2) Schedules No Schedules are furnished as the information is presented elsewhere in this document or is inapplicable. (3) Exhibits
Exhibit Number Document ------- -------- 3 (a) Certificate of Incorporation, as amended. (1) (b) By-Laws(1), and amendment, dated March 19, 1990, thereto. (2) 4 (a) Specimen of Common Stock Certificate. (1) 10 (a) Stock Option Plan, dated July 7, 1988, and amendment, dated July 19, 1989. (1) (b) 1998 Stock Option Plan (5) (c) Form of Scientific Advisory Board Member Agreement (1) (d) Lease Agreements, dated May 1, 1995, between Ward Corporation and The Company, and addendum thereto dated June 21, 1995, relating to the Company's executive offices, laboratory facilities and manufacturing facilities in Rockville, Maryland. (3) (e) Stock Purchase Agreement dated September 30, 1998 between the Company and ValorInvest, LTD. (4) (f) Lease Agreement, dated the 7th day of April, 2000, between the Company and Mountain View Office Park relating to the Company's executive offices in Ewing, New Jersey. (g) Lease Agreement, dated April 27, 2000, between the Company and Old Carriage Associates, and Supplements thereto dated the 23rd day of January, 2001 and the 23rd day of January, 2001, relating to the Company's manufacturing facilities in Baltimore, MD. (h) Employment Agreement, dated October 1, 2000 between the Company and John G. Baust. (i) Incubator License Agreement, dated the first day of March 1999, between BioLife Technologies, Inc. (the Company's wholly owned subsidiary - name subsequently changed to BioLife Solutions, Inc.) and The Research Foundation of the State University of New York, and extensions thereto, dated February 23, 2000 and February 7, 2001 relating to the incubator space at the State University of New York at Binghamton.
43 44
21 BioLife Technologies, Inc., a Delaware Corporation (b) Reports on Form 8-K
(1) Incorporated by reference to the Company's Registration Statement on Form S-1 (Reg. No. 33-31420) which became effective with the Securities and Exchange Commission on November 22, 1989. (2) Incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1990. 38) Incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1995. (4) Incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1996. (5) Incorporated by reference to the Company's Definitive Proxy Statement for the special meeting of Stockholders held on December 16, 1998. 44 45 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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. CRYOMEDICAL SCIENCES, INC. Date: April 2, 2001 By: /s/Richard J. Reinhart -------------------------- Richard J. Reinhart, Ph.D. Chairman and Chief Executive Officer (Principal Executive Financial and Accounting Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Date: April 2, 2001 /s/Richard J. Reinhart ---------------------------- Richard J. Reinhart, Ph.D. Director Date: April 2, 2001 /s/Roderick de Greef ---------------------------- Roderick de Greef Director Date: April 2, 2001 /s/Raymond Cohen ---------------------------- Raymond Cohen Director Date: April 2, 2001 /s/John G. Baust ---------------------------- John G. Baust Director Date: April 2, 2001 /s/Howard S. Breslow ---------------------------- Howard S. Breslow Director 45 EX-10.(F) 2 w47348ex10-f.txt LEASE AGREEMENT 1 EXHIBIT 10.f LEASE OF BUSINESS PREMISES THIS LEASE, dated the 7th day of April, 2000, between MOUNTAIN VIEW OFFICE PARK, a partnership with offices at 3131 Princeton Pike, Building 4, Suite 209, Lawrenceville, New Jersey 08648 hereinafter referred to as Landlord, and CRYOMEDICAL SCIENCES, INC. with offices at 820 Bear Tavern Road, Ewing, New Jersey 08628, hereinafter referred to as the tenant. WITNESSETH: That the Landlord hereby demises and leases unto the Tenant, and the Tenant hereby hires and takes from the Landlord for the term and upon the rentals hereinafter specified, the premises described as follows: The demises premises shall be situated in the Township of Ewing, County of Mercer and the State of New Jersey. The suite shall be located in Mountain View Office Park, Building 820, on the first floor of the building, and consists of 3,076 rentable square feet (2,698 usable square feet) as shown on the sketch attached hereto and made a part thereof as "ATTACHMENT 'A'". THE initial term of this demise shall be for five (5) years beginning May 1, 2000 and ending April 30, 2005. The base rent for the initial term shall be TWO HUNDRED TWENTY-THREE THOUSAND, TEN AND 00/100 ($223,010.00) DOLLARS, which shall accrue at the yearly rate of FORTY-FOUR THOUSAND, SIX HUNDRED TWO AND 00/100 ($44,602.00) DOLLARS. The said rent is to be payable monthly, in advance on the first day of each calendar month for the term hereof, in installments of THREE THOUSAND, SEVEN HUNDRED SIXTEEN and 83/100 ($3,716.83) DOLLARS, at the office of MOUNTAIN VIEW OFFICE PARK, 3131 Princeton Pike, Building 4, Suite 209, Lawrenceville, New Jersey 08648 or as may be otherwise directed by the Landlord in writing. THE ABOVE LETTING IS UPON THE FOLLOWING CONDITIONS: FIRST: The Landlord covenants that the Tenant, on paying the said rent and performing the covenants and conditions in this Lease contained, shall and may peaceably and quietly have hold and enjoy the demises premises for the term aforesaid. SECOND: The Tenant covenants and agrees to use the demised premises as general office space (retail operations not permitted) only and agrees not to use or permit the premises to be used for any other purpose without the prior written consent of the Landlord endorsed herein, which consent will not be unreasonable withheld. THIRD: The Tenant shall, without any previous demand therefore, pay to the Landlord, or its agent, the said rent at the times and in the manner above provided. In the event of the non-payment of said rent, or any installment thereof, at the times and in the manner above provided, and if the same shall remain in default for ten (10) days after receipt of written notice, or if the Tenant shall be dispossessed for non-payment of rent, the Landlord or its agents shall have the right to and may enter the said premises as the agent of the Tenant, through operation of law, without being liable for any prosecution or damages therefore, and may relet the premises as the agent of the Tenant, and receive the rent therefore, upon such terms as shall be satisfactory to the Landlord, and all rights of the Tenant to repossess the premises under this Lease shall be Page 1 of 13 2 forfeited. Such re-entry by the Landlord shall not operate to release the Tenant from any rent to be paid or covenants to be performed hereunder during the full term of this Lease period. For the purpose of reletting, the Landlord shall be authorized to make such repairs to a building standard condition in or to the lease premises as may be necessary to place the same in good order and condition. The Tenant shall be liable to the Landlord for the reasonable cost of such repairs, and all reasonable expenses of such reletting. If the sum realized or to be realized from the reletting is insufficient to satisfy the monthly or term rent provided in this Lease, the Landlord, at its option, may require the Tenant to pay such deficiency month by month, or may hold the Tenants in advance for the present value of the entire deficiency to be by realized during the term of the reletting. The Tenant shall not be entitled to any surplus accruing as a result of the reletting. The Landlord is hereby granted a lien, in addition to any statutory lien or right to distrain that may exist, on all personal property of the Tenant in or upon the demised premises, to secure payment of the rent and performance of the covenants and conditions of this Lease. The Landlord shall have the right, only after Landlord has taken procession of the Lease property pursuant to this paragraph, as agent of the Tenant, to take possession of any furniture, fixtures or other personal property of the Tenant found in or about the premises, and sell the same at public or private sale and to apply the proceeds thereof to the payment of any moneys becoming due under this Lease, the Tenant hereby waiving the benefit of any laws exempting property from execution, levy and sale on distress or judgment. The Tenant agrees to pay, as additional rent, all attorney fees and other expenses incurred by the Landlord enforcing any of the obligations under this lease. FOURTH: The Tenant shall not sublet the demised premises nor any portion thereof, nor shall this Lease be assigned by the Tenant without the prior written consent of the Landlord endorsed hereon, which consent shall not be unreasonably withheld. Tenant, however, shall have the right to assign this Lease in the event of a corporate reorganization or merger to any new corporate entity of which CRYOMEDICAL SCIENCES, INC. would be a part. Notwithstanding anything to the contrary contained herein, this Tenant shall have the right to sublet the demised premises under the following terms and conditions: (1) If Tenant is intending to sublet the demised premises to a third party, Tenant must first present to the Landlord the terms and conditions of the proposed sublease with the new Tenant. This proposal must be delivered in writing to the Landlord sixty (60) days prior to the date on which the sublease is to take effect. Upon receipt, Landlord shall have the irrevocable right to recapture the space presently lease to Tenant, which right must be exercised within ten (10) days of the receipt of the written notice from Tenant herein. If Landlord agrees to recapture the space, then in that event, the Tenant shall have no right to subject the demised premises to a third party; however, if in fact the Landlord opts not to recapture the space leased to Tenant, the Tenant shall have the right to sublet the premises under the further condition that Tenant shall pay to Landlord the difference between the rent Tenant currently pays to the Landlord under the terms and conditions of this lease and the rent to be paid by the subtenant to Tenant. Additionally, should Landlord fail to respond within the said ten (10) day period to Tenant, then Tenant shall have the right to sublet the premises under the terms and conditions set forth in this paragraph. Any sublease or assignment shall be at the base rate as provide in this Lease. FIFTH: The Tenant has examined the demised premises, and accepts them in their present condition (except as otherwise expressly provided herein) and without any representations on the part of the Landlord or its agents as to the present condition of the said premises. The Tenant shall keep the demised premises in good condition, and shall redecorate, paint and renovate the said premises as may be necessary to keep them in repair and good Page 2 of 13 3 appearance. The Tenants shall quit and surrender the premises at the end of the demised term in as good condition as the reasonable use thereof will permit. Then Tenant shall not make any alterations, or improvements to said premises without the prior written consent of the Landlord, which consent shall not be unreasonable withheld. All erections, alterations and improvements, whether temporary or permanent in character, which may be made upon the premises either by the Landlord or the Tenant, except furniture or movable trade fixtures installed at the expense of the Tenant, shall be the property of the Landlord and shall remain upon and be surrendered with the premises as a part thereof at the termination of the Lease, without compensation to the Tenant. The Tenant further agrees to keep said premises and all parts thereof in a clean and sanitary condition and free from trash, flammable material and other objectionable matter. SIXTH: In the event than any mechanics' lien is filed against the premises as a result of alterations, additions or improvements made by the Tenant, the Landlord, at its option, after thirty (30) days notice to the Tenant, may terminate this Lease and may pay the said lien, without inquiring into the validity thereof, and the Tenant shall forthwith reimburse the Landlord the total expense incurred by the Landlord in discharging the said lien, as additional rent hereunder. SEVENTH: The Tenant agrees to replace, at the Tenant's expense, any and all glass which may become broken in and on the demised premises, through Tenants (including Tenant's agents, servants, employees, guests and the like) negligence. Plate glass and mirrors, if any, shall be insured by the Tenant at their full insurable value with a company satisfactory to the Landlord. Said policy shall be at the full premium type, and shall be deposited with the Landlord or its agent. Tenant shall only be required to give Landlord a Certificate of Insurance. Parties agree that Tenant shall have the right to self insure for glass damage. EIGHTH: The Landlord shall not be responsible for the loss of or damage to property, or injury to persons, occurring the or about the demised premises, by reason of any existing or future condition, defect, matter or thing in said demised premises or the property of which the premises are a part, or for the acts, omissions or negligence of other persons or tenants in and about the said property, unless caused by Landlord's negligent or willful wrongful act. The Tenant agrees to indemnify and save the Landlord harmless from all claims and liability for losses of or damage to property, or injuries to persons occurring in or about the demised premises, unless caused by Landlord's negligent or willful wrongful act. NINTH: Utilities and services furnished to the demised premises for the benefit of the Tenant shall be paid for by the Tenant. Tenant agrees to pay monthly to the Landlord its estimated pro-rated share of the cost of all utilities and maintenance not directly billed to Tenant, including but not limited to real estate taxes, insurance, sewer, maintenance and air conditioning. The estimated pro-rated utility and maintenance charges shall be adjusted at the end of the fiscal year. The Landlord shall not be liable for any interruption or delay in any of the above services for any reason unless caused by Landlord's negligent or willful wrongful act. Attached hereto and made apart hereof as ATTACHMENT "B" is a list of currently known expenses. If, during the initial term or any renewal term, additional expenses are added to this list, Tenant shall be notified. TENTH: The Landlord, or its agents, shall have the right to enter the demised premises upon reasonable notice to Tenant, at reasonable hours in the day or night to examine the same, or to run telephone or other wires, or to make such repairs, additions or alterations as it Page 3 of 13 4 shall deem necessary for the safety, preservation or restoration of the improvements, or for the safety, preservation or restoration of the improvements, or for the safety or convenience of the occupants or users thereof (there being no obligations, however, on the part of the Landlord to make any such repairs, additions or alterations), or to exhibit the same to prospective purchasers and to put upon the premises a suitable "For Sale" sign. For three (3) months prior to the expiration of the demised term, the Landlord, or its agents, may similarly exhibit the premises to prospective tenants, and may place the usual "To Let" signs thereon. The Tenant acknowledges that for security reasons the entrances to the common area shall be open from 7:00 a.m. until 6:00 p.m. at which time the doors will electronically lock. Should special arrangements be necessary to accommodate Tenant's needs for access to the premises, these arrangements are to be made to the satisfaction of the Landlord and the Tenant. ELEVENTH: In the event of destruction of the demises premises or the building containing the said premises by fire, explosion, the elements or otherwise during the term hereby created, or previous thereto, or such partial destruction thereof as to render the premises untenantable or unfit for occupancy, or should the demised premises be so badly injured that the same cannot be repaired within ninety (90) days from the happening of such an injury, then and in such case the term hereby created shall, at the option of the Landlord, cease and become null and void from the date of such damage or destruction, and the Tenant shall immediately surrender said premises and all the Tenant's interest therein to the Landlord, and shall pay rent only to the time of surrender, in which event the Landlord may re-enter and repossess the premises thus discharged from this Lease and may remove all parties therefrom. Should the demised premises be rendered untenantable and unfit for occupancy, but yet be repairable within ninety (90) days from the happening of said injury, the Landlord shall enter and repair the same with reasonable speed, and the rent shall not accrue after said injury or while repairs are being made, but shall recommence immediately after such repairs shall be completed. But if the premises shall be so slightly injured as not to be rendered untenantable and unfit for occupancy, then the Landlord agrees to repair the same with reasonable promptness and in that case the rent accrued and accruing shall not cease or determine. The Tenant shall immediately notify the Landlord in case of fire or other damage to the premises. In the event of partial destruction, Landlord must notify Tenant within thirty (30) days of its intent to rebuild or not and if there is no notification, Tenant shall have the right to cancel this Lease. TWELFTH: The Tenant agrees to observe and comply with all laws, ordinances rules and regulations of the Federal, State, County and Municipal authorities applicable to the business to be conducted by the Tenant in the Demised premises. The Tenant agrees not to do or permit anything to be done in said premises, or keep anything therein, which will increase the rate of fire insurance premiums on the improvements or any part thereof, or on the property keep therein, or which will obstruct or interfere with the right of other tenants, or conflict with the regulation of the Fire Department or with any insurance policy upon said improvements or any part thereof. In the event of any increase in insurance premiums resulting from Tenant's occupancy of the premises, or for any act or omission on the part of the Tenant, the Tenant agrees to pay said increase in insurance premiums on the improvements or contents thereof as additional rent. THIRTEENTH: No sign, advertisement or notice shall be affixed to or placed on any part of the demised premises by the Tenant, except in such a manner, and of such a size, design and color as shall be approved in advance in writing by the Landlord. Tenant shall be entitled to one entry on the Landlord's exterior directory. In the event that Landlord permits Page 4 of 13 5 Tenant to sublet the premises to a subtenant, in no event shall the subtenant be permitted an entry on Landlord's directories unless Tenant agrees, in writing, to have Tenant's name removed from Landlord directories and the subtenant name installed. The cost of the name change shall be borne by the subtenant and paid directly to Landlord. FOURTEENTH: This Lease is subject and is hereby subordinated to all present and future first mortgages, first deeds of trust and other encumbrances affecting the demised premises or the property of which said premises are a part. The Tenant agrees to execute, at no expense to the Landlord, any instrument which may be deemed necessary or desirable by the Landlord to further effect the subordination of this Lease to any such first mortgage, fit deed of trust or first encumbrance. FIFTEENTH: The rules and regulations regarding the demises premises, ATTACHMENT "C", as well as any other further reasonable rules and regulations which shall be made by the Landlord, shall be observed by the Tenant and by the Tenant's employees, agents and customers. The Landlord reserves the right to rescind any presently existing rules applicable to the demised premises, and to make such other and further reasonable rules and regulations as in its judgment may from time to time be desirable for the safety, care and cleanliness of the premises, and for the preservation of good order therein, which rules, when so made and notice thereof given to the Tenant, shall have the same force and effect as if originally made a part of this Lease. Such other and further rules shall not, however, be inconsistent with the proper and rightful enjoyment by the Tenant of the demised premises. All such rules and regulations shall be enforced against all Tenants in a like and similar fashion. SIXTEENTH: In case of violation by the Tenant of any of the covenants, agreements and condition of this Lease, or of the rules and regulations now or hereafter to be reasonable established by the Landlord, and upon failure to discontinue such violation within ten (10) days after receipt of written notice thereof give to the Tenant, this Lease shall thenceforth, at the option of the Landlord, become null and void, and the Landlord may re-enter without further notice and demand. The rent, in such case, shall become due, be apportioned and paid on and up to the day of such re-entry, and the Tenant shall be liable for all loss or damage resulting from such violation as aforesaid. No waiver by the Landlord of any violation or breach of condition by the Tenant before the Landlord shall exercise its option under this paragraph operate to defeat the right of the Landlord to declare this Lease null and void and to re-enter upon the demised premises after the said breach or violation. SEVENTEENTH: All notices and demands, legal or otherwise, incidental to this Lease, or the occupancy of the demised premises, shall be in writing. If the Landlord or its agents desires to give or serve upon the Tenant any notice or demand, it shall be sufficient to send a copy of thereby registered mail, return receipt requested, addressed to the Tenant at the demised premises. Notices from the Tenant to the Landlord shall be sent registered mail, or delivered to the Landlord at the place hereinbefore designated for the payment of rent or place as the Landlord may from time to time designate in writing. EIGHTEENTH: It is further agreed that if at any time during the term of this Lease the Tenant shall make any assignment for the benefit of creditors, or be decreed insolvent or bankrupt according to law, or if a receiver shall be appointed for the Tenant, then the Landlord may, at its option, terminate this Lease, exercise of such option to be evidenced by notice to that effect served upon the assignee, receiver, trustee or other person in charge of the liquidation of Page 5 of 13 6 the property of the Tenant or the Tenant's estate, but such termination shall not release or discharge any payment of rent payable hereunder and then accrued, or any liability then accrued by reason of any agreement or covenant herein contained on the part of the Tenant, or the Tenant's legal representatives. NINETEENTH: In the event that the Tenant shall remain in the demised premises after the expiration of the term of this Lease without having executed a new written Lease with the Landlord, such holding over shall not constitute a renewal or extension of this Lease. The Landlord may, at its option, elect to treat the Tenant as one who has not removed at the end of his term, and thereupon be entitled to all the remedies against the Tenant provided by the law in that situation, or the Landlord may elect, at its option, to construe which holding over as a tenancy from month to month, subject to all the terms and conditions of this Lease, except as to duration thereof, and in that event the Tenant shall pay monthly rent in advance at twice the rate provided herein as effective during the last month of the demised term. TWENTIETH: If the property or any part thereof wherein the demised premises are located shall be taken by public or quasi-public authority under any power of eminent domain or condemnation, this Lease, at the option of the Landlord, shall forthwith terminate and the Tenant shall have no claim or interest in or to any award of damages for such taking, provided this clause shall not prevent the Tenant from making a claim on its own behalf separate and apart for any claims of the Landlord. TWENTY-FIRST: The Tenant has this day deposited with the Landlord the sum of $3,716.83 as security for the full and faithful performance by the Tenant of all the terms, covenants and conditions of this Lease upon the Tenant's part to be performed, which said sum shall be returned to the Tenant after the time fixed as the expiration of the term herein, provide the Tenant has fully and faithfully carried out all of said terms, covenants and conditions of Tenant's part to be performed. In the event of a bona fide sale, subject to this Lease, the Landlord shall have the right to transfer the security to the vendee for the benefit of the Tenant and the Landlord shall be considered released by the Tenant from all liability for the return of such security; and the Tenant agrees to look to the new Landlord solely for the return of the said security, and it is agreed that this shall apply to every transfer or assignment made of the security to a new Landlord. The security deposited under this Lease shall not be mortgaged, assigned or encumbered by the Tenant without written consent of the Landlord. TWENTY-SECOND: No rights are to be conferred upon the Tenant until this Lease has been signed by the Landlord, and an executed copy of this Lease has been delivered to the Tenant. TWENTY-THIRD: The foregoing rights and remedies are not intended to be exclusive but as additional to all rights and remedies the Landlord would otherwise have by law. TWENTY-FOURTH: All the terms, covenants and conditions of this Lease shall inure to the benefit of and be binding upon the respective heirs, executor, administrators, successors and assigns of the parties hereto. TWENTY-FIFTH: This Lease and the obligation of the Tenant to pay rent hereunder and perform all of the other covenants and agreements hereunder on part of Tenant to be performed shall in no way be affected, impaired or excused because Landlord is reasonable Page 6 of 13 7 unable to supply or is delayed in supplying any service expressly or impliedly to be supplied or is delayed to make, or is delayed in making any repairs, additions, alterations or decorations or is unable to supply or is delayed in supplying any equipment or fixtures if Landlord is prevented or delayed from so doing by reason of governmental preemption in connection with the National Emergency declared by the President of the United States or in connection with any rule, order or regulation of any department or subdivision thereof of any governmental agency or by reason of the conditions of supply and demand which have been or are affected by war. TWENTY-SIXTH: This instrument may not be changed orally. TWENTY-SEVENTH: It is understood and agreed between the parties that this is a net-net Lease and that the Tenant will pay for all of the Landlord's expense in the operation of the property including but not limited to all utilities and maintenance billed directly to it and will pay, to the Landlord, for its pro-rata share of all other items of maintenance and services paid for by Landlord, including a management fee not to exceed five (5%) percent of the base rent. Parties agree that the Tenant's pro-rate share be equal to six (6%) percent of such costs. Parties have agreed that electric shall be metered separately and paid for directly by the Tenant. Snow removal, lawn maintenance, parking yard maintenance, utilities for common areas, water service, sewer service and the management fee shall be paid for by the Landlord and apportioned to Tenant as aforesaid and paid for by the Tenant on a monthly basis. TWENTY-EIGHTH: In addition to the rent heretofore provided, Tenant shall pay on a monthly basis to the Landlord six (6%) percent of the real estate taxes assessed against the property by Township of Ewing. In addition, parties acknowledge that the demised premises are currently insured with coverage including amount other things, fire and liability, as more specifically defined in the insurance policy covering the demised premises. Landlord will continue to pay premiums for such insurance and the Tenant agrees to pay six (6%) percent of the costs thereof payable monthly to the Landlord. Landlord agrees to furnish Tenant with actual copies of the policies as proof of payment. Tenant will be obligated to carry fire and extended coverage insurance on the contents of the property leased and will provide to Landlord copies of such insurance policies. TWENTY-NINTH: Landlord agrees, at its expense, to promptly make all structural repairs to the building. THIRTIETH: Tenant agrees that in the event it is more than ten (10) days late in the payment of any rent provided for in the within Lease, Tenant shall pay a sum equal to four (4%) percent of the payment that was due as a late charge. THIRTY-FIRST: Wherever the consent of the Landlord is required in this Lease, said consent shall not be unreasonable withheld or delayed. THIRTY-SECOND: It is fully understood and agreed that Tenant, upon vacating the demised premises, shall leave the premises as it found them, subject to normal wear and tear and damage from an insured casualty and approved alterations. THIRTY-THIRD: It is fully understood and agreed by and between the parties hereto that Tenant shall have the right, at it option, to contest the amount of real estate taxes Page 7 of 13 8 'assessed by the Tax Assessor of the Township of Ewing insofar as same relates to Mountain View Office Park, the cost of which is to be borne solely and exclusively by Tenant. THIRTY-FOURTH: Each party hereto waives any and every claim which arises or may arise in its favor and against the other party hereto during the term of this Lease or any renewal or extension thereof for any and all loss of or damage to any of its property located within or upon, or constituting a part of the premises leased to Tenant hereunder, which loss or damage is covered by valid and collectible fire and extended coverage insurance policies, to the extent such that loss or damage is recoverable under said insurance policies. Said mutual waivers shall be in addition to and not in limitation or derogation of, any other waiver or release contained in this Lease with respect to any loss of, or damage to property of the parties hereto. Inasmuch as the above mutual waivers preclude the assignment of any aforesaid claim by way of subrogation (or otherwise) to an insurance company (or any other person), each party hereto hereby agrees immediately to give each insurance company which has issued to it policies of fire and extended coverage insurance, written notice of the terms of said mutual waivers, and to have said insurance policies properly endorsed, if necessary, to prevent the invalidation of said insurance coverages by reason of said waivers. THIRTY-FIFTH: Landlord acknowledges with the Tenant that as part of the consideration of the Tenant's entering into this Lease, Landlord shall provide to Mountain View Office Park, a portion of which will be occupied by Tenant, a total of 275 paved parking spots. Of these parking spots, Tenant shall have the right to use a maximum of fourteen (14) parking spaces. Except for handicapped parking, no assigned or reserved parking is permitted. THIRTY-SIXTH: Parties agree that with the exception of a default in payment of rent, the Tenant shall have the right to cure any defaults within thirty (30) days of notice in writing by the Landlord, provided, however, that if the matter of the default is such that it cannot be cured within thirty (30) days, Tenant shall have a reasonable period of time within which to cure such default within ninety (90) days. Notice of any default shall be served on the Tenant personally or by certified mail, return receipt requested. THIRTY-SEVENTH: The Tenant shall be responsible for the maintenance of any special equipment installed by it or on its behalf including plumbing and air conditioning equipment over and above normal building standard. THIRTY-EIGHTH: Landlord and Tenant agree that provided Tenant is not in default of any of the terms and conditions of this Lease, then Tenant is hereby granted an option to renew this Lease for one (1) additional five (5) year term under the same terms and conditions, except rent charged for said term shall be equal to the then current rent charged for similar space on the premises, in addition to all other charges and costs associated with said rental. Tenant's option to renew this Lease must be exercised in writing to Landlord no later than six (6) months prior to the expiration of this Lease term and any renewal thereof. THIRTY-NINTH: Parties agree that the Tenant work as set forth on ATTACHMENT 'D' shall be at no cost to Tenant. FORTIETH: In the event the date of occupancy is delayed, the term of this Lease shall commence on the actual date of occupancy as agreed to by Landlord and Tenant. If Page 8 of 13 9 Tenant takes possession any time after the first of the month, the rent and estimated nets shall be pro-rated for the number of days the Tenant has actual possession. FORTH-FIRST: Tenant acknowledges that the HVAC system installed by Landlord and utilized by Tenant are preset to service the demised premises from 7:00 a.m. to 9:00 p.m. Monday through Friday, in order to economize the cost of same to Tenant. The HVAC units are preset, computerized floor by floor, and can be, upon reasonable notice by Tenant to Landlord, adjusted to meet the Tenant's HVAC needs over and above the preset time and conditions set by Landlord. Should Tenant desire additional or different HVAC services other than those preset by Landlord, Tenant shall be billed for any addition costs, which costs are currently at a rate of $55.00 per hour, which may change from time to time for the HVAC over and above normally provided by landlord as additional rent. Landlord shall not be required to provide additional HVAC service to Tenant should the said written request not be tendered to Landlord in a timely fashion. IN WITNESS WHEREOF, the said parties have hereunto set their hands and seals the day and year first above written. WITNESS: MOUNTAIN VIEW OFFICE PARK /s/ JOSEPH R. JINGOLI - -------------------- --------------------------------------- Joseph R. Jingoli, Partner WITNESS: CRYOMEDICAL SCIENCES, INC. [SIG] /s/ RICHARD J. REINHART - -------------------- --------------------------------------- Richard J. Reinhart, President & CEO Page 9 of 13 10 ATTACHMENT A FLOOR PLAN 11 ATTACHMENT 'B' CURRENT NETS FOR MOUNTAIN VIEW OFFICE PARK Answering Service Custodial (Common Areas) HVAC Maintenance Elevator Insurance Lawn Maintenance Tenant Miscellaneous Non-Structural Repairs Paving Restoration PSE&G Parking & Core PSE&G HVAC Plants Trash Removal Security Guard Sewer Snow Removal Real Estate Taxes Public Telephone Washroom Supplies Water 5% Management Fee on Rent Page 11 of 13 12 ATTACHMENT 'C' RULES AND REGULATIONS REGARDING THE DEMISED PREMISES For the safety, care and cleanliness of the premises, and for the preservation of good order therein, no smoking is permitted in the in the common areas of the premises by the tenant, its agents, employees or guests. Common areas include, but are not limited to, the vestibule, corridors, bathrooms, elevators and stair towers. For the safety, care and cleanliness of the premises and for the preservation of good order therein, no pets are allowed on or about the demised premises by the tenant, its agents, employees or guests. In order to preserve the professional atmosphere and for the care and safety of the visitors, guests and occupants of the building, it is understood and agreed Tenant shall not allow minor children to go into the corridors and bathrooms unattended. Any damage to the building caused by the Tenant's clients, visitors or guests shall be the sole responsibility of the Tenant. For the care and cleanliness of the demised premises and for the preservation of good order therein, Tenant is restricted from placing signs, posters, advertisements or the like in the windows or on the doors of the demised premises. For the care and cleanliness of the premises and for the preservation of good order therein, Tenant is restricted from placing signs, posters or advertisements on the grounds, parking area, automobiles or the like throughout Mountain View Office Park. Page 12 of 13 13 ATTACHMENT 'D' In consideration of a five (5) year Lease, Landlord will perform the following work at no cost to Tenant: - - Replace defective closers on existing millwork with the same or similar type of device to insure all cabinets open and close properly - - Remove existing mail slot unit - - Construct a wall, on top of existing counter to close opening Page 13 of 13 EX-10.(G) 3 w47348ex10-g.txt LEASE AGREEMENT 1 EXHIBIT 10.g LEASE AGREEMENT BETWEEN OLD CARRIAGE ASSOCIATES, LANDLORD AND CRYOMEDICAL SCIENCES, INC., TENANT Section Page 1. DESCRIPTION OF THE PROPERTY 1 (a) Demised Premises 1 (b) Common Areas 1 2. TERM 1 3. USE OF PREMISES 1 4. RENT 1 (a) Base Rent 1 (b) Renewal Option 1 (c) Timely Payment 2 5. SECURITY DEPOSIT 2 6. UTILITIES AND SERVICES 2 (a) Costs 2 (b) Interruption of Service 2 7. MAINTENANCE AND REPAIRS 3 (a) By Landlord 3 (b) By Tenant 3 8. ALTERATIONS 3 (a) By Landlord 3 (b) By Tenant 3 9. INDEMNIFICATION AND LIABILITY OF LANDLORD 3 (a) Indemnification by Tenant 3 (b) Limited Liability of Landlord 3 10. INSURANCE 3 11. CASUALTY OR CONDEMNATION 3 12. ASSIGNMENT AND SUBLETTING 4 13. TENANT'S DEFAULT 4 (a) Events of Default 4 (b) Landlord's Remedies 4 14. COSTS OF COLLECTION AND ENFORCEMENT 4 15. SUBORDINATION 4 16. ATTORNMENT 5 17. ESTOPPEL CERTIFICATES 5 18. SURRENDER OF PREMISES 5 19. LEASING COMMISSIONS 5 2 20. GENERAL PROVISIONS 5 (a) Entire Agreement 5 (b) Time of the Essence 5 (c) Separability 5 (d) No Waiver 5 (e) Cumulative Remedies 6 (f) Captions 6 (g) Notices 6 (h) Authority 6 (i) Applicable Laws 6 EXHIBIT B Rules and Regulations 3 LEASE AGREEMENT THIS LEASE is executed this 27th day of April, 2000 by and between OLD CARRIAGE ASSOCIATES, having a business address at 8843 Orchard Tree Lane, Towson, Maryland 21286 (the "Landlord") and CRYOMEDICAL SCIENCES, INC., having a business address at 2313 Maple Road, Baltimore, Maryland 21219 (the "Tenant"). 1. DESCRIPTION OF THE PROPERTY. (a) Demised Premises. Subject to the terms and conditions of this Lease, and in consideration of the rent to be paid by Tenant and the agreements to be observed and performed by Tenant, Landlord hereby leases approximately 1,500 rentable square feet of the one-story building (the "Building") located at 1113 Old North Point Road, Unit 1, Baltimore, Maryland 21222 (the "Property"). (b) Common Areas. Tenant will have the right, in common with others, to use and enjoy the parking areas, driveways, entrances, walkways, and other common facilities or improvements serving the Premises. 2. TERM. The initial term of this Lease (the "Lease Term") will be for a period of one (1) year. The Term will commence at 8:00 a.m. on May 15, 2000 and will terminate at 5:00 p.m. on May 14, 2001. 3. USE OF PREMISES. Tenant will use the Premises only for warehouse and manufacturing of medical equipment and for no other purpose. In its use of the Premises and the Building, Tenant will not violate any public law, ordinance or regulation. No hazardous materials, except normal office equipment solvents, etc., shall be used by Tenant on the Premises. In addition, Tenant will comply with all rules and regulations from time to time promulgated by the Landlord for operation of the Building. A copy of the current rules and regulations for the Building is attached as Exhibit B. A violation of any of the rules and regulations constitutes a default by Tenant under this Lease. 4. RENT. (a) Base Rent. Tenant will pay to Landlord base rent (the "Base Rent") in accordance with the following schedule: 05/15/00 - Rent abated in lieu of Tenant making all improvements to the space 06/14/00 06/15/00 - $750.00 per month for 11 months 05/14/01 1 4 Payments of Base Rent will be made in advance, without notice being sent to Tenant or demand being made by Landlord, on the first day of each month; if only a part of a calendar month falls within the Lease Term, a per diem adjustment in Base Rent will be made with respect to such month. (b) Renewal Option. It is agreed that the Tenant shall have the privilege of renewing this lease for one (1) additional term of one (1) year under the same terms and conditions contained in this lease, except said rental for the one (1) year option period shall be adjusted to Nine Thousand Four Hundred Fifty Dollars ($9,450.00) per annum, which shall be payable in equal monthly installments of Seven Hundred Eighty Seven Dollars and Fifty Cents ($787.50). Notice of election to exercise this renewal must be given Landlord in writing at least ninety (90) days prior to the expiration of the then current term of this lease. (c) Timely Payment. All payments of Base Rent, and any other item of additional rent will be made by Tenant without right of off-set or deduction, at such address as the Landlord may from time to time designate. If Tenant fails to make any payment on the date such payment is due, Tenant will pay to Landlord as additional rent on the date the next payment of Base Rent is due (i) a late charge equal to 10% of the amount of such late payment and (ii) default interest equal to 12% per year for each day that such payment remains due but unpaid. 5. SECURITY DEPOSIT. Landlord acknowledges receipt of a security deposit from Tenant in the amount of Seven Hundred Fifty Dollars ($750.00). Provided there exists no breach of this Lease by Tenant, the security deposit will be returned to Tenant, without interest, at the termination of the Lease Term. If all or any part of the security deposit is applied to an obligation of Tenant under this Lease, Tenant will upon request by Landlord immediately restore the security deposit to its original amount. Tenant will not have the right to call upon Landlord to apply all or any part of the security deposit to cure any default or fulfill any obligation of Tenant, but such use will be solely in the discretion of Landlord. Upon a transfer of Landlord's interest under this Lease, the security deposit may be delivered to Landlord's successor. Upon such delivery, Tenant agrees to look solely to any such successor, and hereby releases Landlord of all liability with respect to the security deposit. 6. UTILITIES AND SERVICES. (a) Costs. The cost of furnishing utilities and other services to the Premises will be allocated as follows: 2 5 Tenant's Sole Utility or Cost and Include in Service Responsibility Base Rent - ------------- ------------------ -------------- Water and Sewage X Fuel for X hot water Electricity X Heat X Air X Conditioning Janitorial X service and supplies Parking Tenant will be entitled to open parking spaces at no charge. Landlord reserves the right to designate the location of Tenant's parking spaces and Tenant agrees that Tenant and Tenant's employees will use only the spaces so designated. (b) Interruption of Service. If any of the utilities or services furnished to the Premises or the Property fails or is temporarily disrupted for any reason beyond the reasonable control of Landlord, then (i) Landlord will use reasonable diligence to effect a resumption of the utility or service; (ii) Landlord will not be liable for any damage suffered by Tenant or others due to such failure or disruption; and (iii) there will be no off-set or deduction from Base Rent, or any other item payable as additional rent under this Lease. 7. MAINTENANCE AND REPAIRS (a) By Landlord. Landlord will, at its expense, maintain the common areas and the exterior of the Building in a clean, safe and sanitary condition and will make all necessary structural repairs or replacements to the Building and the Premises. Tenant will, however, be responsible for reimbursing Landlord for any maintenance, repairs or replacements necessitated by the negligent or willful acts of Tenant, its agents, employees, customers, contractors, visitors or licensees. Tenant will pay to Landlord, as additional rent, the cost of any such maintenance, repairs or replacements within thirty (30) days after receipt of a statements from Landlord indicating the amount due. Tenant will give Landlord prompt written notice of the necessity for such maintenance, repairs or replacements, regardless of the cause. 3 6 (b) By Tenant. Tenant will, at its expense, maintain the Premises in a clean, safe and sanitary condition and will make all necessary non-structural repairs or replacements to the Premises. 8. ALTERATIONS. (a) By Landlord. The Premises are leased to Tenant in "as is" condition, and Landlord will have no obligation to make any alterations including air conditioning system. Landlord grants permission to Tenant to make any tenant improvements at the Tenant's entire expense. (b) By Tenant. Tenant will not make any installations, alterations, additions or improvements to the Premises or the Building without the prior written consent of the Landlord. All such alterations, installations, additions or improvements will be done at the sole cost of Tenant by contractors approved by Landlord, and will be done at such times as Landlord may designate. All alterations, installations, additions or improvements, excluding only Tenant's office furniture, trade fixtures and equipment removable without damage to the Premises, will be the property of Landlord and will remain upon or a part of the Premises upon the termination of this Lease. 9. INDEMNIFICATION AND LIABILITY OF LANDLORD. (a) Indemnification by Tenant. Tenant agrees to indemnify, defend, and save the Landlord harmless from and against any cause of action, suit, claim, damage, loss or expense (including reasonable attorneys' fees) that may arise from the use of the Premises or Building-by Tenant, its agents, employees, customers, contractors, visitors or licensees, unless such cause of action, suit, claim, damage, loss or expense arises from any omission, fault, negligence or other misconduct of the Landlord. Tenant will not settle any cause of action, suit or claim against Landlord without Landlord's prior written consent, which consent will not be unreasonably withheld. (b) Limited Liability of Landlord. Tenant acknowledges that upon any default of this Lease by Landlord, Tenant's sole remedy will be against the interest of Landlord in the Property. Tenant further acknowledges that neither the Landlord nor any partner nor shareholder of Landlord shall have any personal liability with respect to any claim arising out of this Lease. 10. INSURANCE Tenant will maintain public liability and property damage insurance with respect to the Premises and the business of Tenant, with limits of liability of $1,000,000.00 in respect to injuries to or death of any one person, $1,000,000.00 in respect to any one occurrence, and $500,000.00 in respect to destruction or damage to property. Tenant's insurance policy will name Landlord as an additional insured, and will provide that Landlord will be given at least ten (10) days advance written notice in the event of cancellation. Tenant will deliver to Landlord on demand evidence of such insurance coverage. 11. CASUALTY OR CONDEMNATION. If at any time during the Lease Term all or substantially all of the Premises or Building is destroyed by fire or other casualty, or if all or substantially all of the Building is taken by the exercise of the governmental power of eminent domain, this Lease will automatically terminate as of the date of such 4 7 destruction or taking. If, however less than all or substantially all of the Premises or Building is damaged by fire or other casualty, Landlord shall have the option either (i) to repair promptly and diligently such damage, in which case this Lease shall remain in effect without any abatement of Tenant's obligations or (ii) to terminate this Lease as of the date of such damage. If this Lease is terminated in accordance with this Section 11 then, provided the damage to the Premises or the Building was not caused by Tenant, its agents, employees, customers, contractors, visitors or licensees, Tenant will be released from all further liabilities under this Lease and Tenant hereby agrees to release Landlord from all further liabilities, including any claim for damages Tenant may otherwise have had. 12. ASSIGNMENT AND SUBLETTING. Tenant may not, without Landlord's prior written consent (such consent not be unreasonably withheld or delayed), assign this Lease or make any sublease or permit occupancy of the Premises by anyone other than Tenant. 13. TENANT'S DEFAULT. (a) Events of Default. The occurrence of any of the following will constitute an event of default by Tenant under this Lease: (i) Tenant's failure to pay Base Rent, or any other item of additional rent required of the Tenant under this Lease within five (5) days after written notice from Landlord; (ii) Tenant's failure to perform or observe any other agreement or condition on the Tenant's part to be performed or observed under this Lease within ten (10) days after receipt of written notice from Landlord; or (iii) the filing by Tenant of a voluntary petition in bankruptcy, the filing of an involuntary petition in bankruptcy against Tenant, Tenant's adjudication as bankrupt or insolvent, or any other action pursuant to which Tenant seeks the protection of the state or federal bankruptcy laws. (b) Landlord's Remedies. Upon the occurrence of an event of default by Tenant under this Lease, Landlord may, in addition to any other remedies it may have available at law or in equity, retake possession of the Premises without further notice to Tenant and with or without process of law. Tenant hereby waives its statutory rights (including without limitation, rights of redemption and rights to trial by jury to the extent such rights may be lawfully waived). Landlord may, without notice to Tenant, store Tenant's furnishings, equipment, and other items of personal property and those of any person claiming through or under Tenant, at the expense and risk of Tenant and, if Landlord so elects, may sell such furnishings, equipment and personal property at public or private sale and apply the net proceeds to the payment of all sums due to Landlord from Tenant, and pay over the balance, if any, to Tenant. Notwithstanding that Landlord has retaken possession of the Premises, Tenant shall continue to be liable to Landlord for all payments of Base Rent, during the remaining term of this Lease until such time as Landlord has relet the Premises on terms no less favorable than those contained in the Lease. 5 8 14. COSTS OF COLLECTION AND ENFORCEMENT. Tenant will be liable for any costs or expenses incurred by Landlord in enforcing any terms of this Lease, or in pursuing any legal action for enforcement of Landlord's rights, including reasonable attorney's fees and any other related costs or expenses, should Landlord prevail in any enforcement action. Landlord will be liable for any costs or expenses incurred by Tenant in enforcing any terms of this Lease, or in pursuing any legal action for enforcement of Tenant's rights, including reasonable attorney's fees and any other related costs or expenses, should Tenant prevail in any enforcement action. 15. SUBORDINATION. Tenant accepts this Lease and the tenancy created by this Lease, subject to and subordinate to any mortgage, deed of trust, or other security interest now existing or hereafter made against the Property or any part of the Property. Although such subordination will be automatic, without further act by Tenant, upon request of Landlord or request of the owner of the Property, Tenant will execute any instrument that may be reasonably requested for the purpose of confirming that this Lease is subject and subordinate to any such mortgage, deed of trust, or other security interest. 16. ATTORNMENT. Tenant agrees that upon any termination of Landlord's interest in the Property, Tenant will, upon request, attorn to the Landlord's successor and subsequent successors, and will pay to such successor the Base Rent, and all other items of additional rent required to be paid by the Tenant and perform all other terms, covenants, conditions, and obligations of Tenant provided in this Lease. 17. ESTOPPEL CERTIFICATES. Landlord and Tenant agree at any time and from time to time, upon written request by the other party, to execute, acknowledge and deliver to such other party a statement in writing certifying that this Lease is unmodified and in full force and effect (or, if there have been any modifications, that the Lease is in full force and effect as modified, and stating the modifications), the dates to which Base Rent, has been paid, and whether there is any existing notice of default served by either Landlord or Tenant. It is intended that such statement delivered pursuant to this Section 17 may be relied upon by a prospective purchaser or any lender. 18. SURRENDER OF PREMISES. Upon the expiration or earlier termination of this Lease, Tenant will, without notice from Landlord, surrender possession of Premises broom clean and in as good condition and repair as the Premises are on the date of this Lease, reasonable wear and tear excepted. If Tenant fails to surrender immediately possession of the Premises, then Tenant will, at Landlord's sole election, become a tenant from month to month upon all the terms, covenants and conditions of this Lease except that Tenant will be liable for twice the monthly Base Rent, to be payable to Landlord in monthly installments, in advance, on the first day of each calendar month for so long as Tenant shall remain in possession of the Premises. 6 9 Tenant will continue to be liable to Landlord for any damages that Landlord may sustain by virtue of Tenant's failure to surrender the Premises, and Landlord will continue to be entitled to retake possession of the Premises without notice and with or without process of law. 19. LEASING COMMISSIONS. Landlord, its successors and assigns, agrees to pay to MacKenzie Commercial Real Estate Services, LLC, real estate commissions upon the initial term of this Lease, upon any renewals of this Lease and upon the leasing of expansion area during the initial or any renewal term of this Lease, of 7% the first year, 4% the second year, 4% the third year, 3% the fourth year, 3% the fifth year and 2% per year thereafter, all in accordance with the applicable provisions of the commission schedule currently in use by said Realtor, a copy of such schedule having been furnished to the Landlord. In addition, Landlord, its successors and assigns, agrees to pay said Realtor commissions, in accordance with the applicable provisions of the Realtor's schedule, upon the exercising by the Tenant of any purchase options or rights of first refusal pursuant to this Lease. 20. GENERAL PROVISIONS. (a) Entire Agreement. This Lease (including all attached exhibits) constitutes the entire agreement between the Landlord and Tenant, and modification of this Lease will not be binding unless such modification is in writing and signed by the Landlord and Tenant. The Landlord will not be deemed to have given the Tenant any option or right of first refusal with respect to the Premises, unless such option or right of first refusal has been given expressly and in writing. (b) Time of the Essence. Time is of the essence of each of the provisions of this Lease. (c) Separability. The invalidity or unenforceability of any provision of this Lease will not affect or impair any other provisions or the validity or enforceability of the remainder of this Lease. (d) No Waiver. Neither the Landlord nor Tenant shall be deemed to have waived the exercise of any right which it holds under this Lease unless such waiver is made expressly and in writing, and no delay or omission in exercising such right shall be deemed to be a waiver of its future exercise. Further, no such waiver as to any instance involving the exercise of any such right will be deemed a waiver as to any other such instance, or any other such right. (e) Cumulative Remedies. The specific remedies to which Landlord may be entitled under the terms of this Lease are cumulative and are not intended to be exclusive of any other remedies or means of redress to which Landlord may be lawfully entitled with respect to any breach or threatened breach by the Tenant of any provision of this Lease. (f) Captions. The captions and headings used in this Lease are for convenience and reference only, and shall not be used to construe or interpret this Lease. 7 10 (g) Notices. No notice, approval, requested consent or required election to be given or made in accordance with the terms of this Lease shall be effective unless the same is in writing and either hand-delivered against receipted copy or mailed by registered or certified mail, return receipt requested, to Landlord or Tenant at their business addresses as set forth above. (h) Authority. If any party to this Lease is a corporation or partnership, the person signing on behalf of such corporation or partnership covenants that he was authorized to do so and that the corporation or partnership is validly existing and qualified to do business in the State of Maryland. (i) Applicable Laws. This Lease will be governed and construed under the laws of the State of Maryland. With respect to any action or proceeding arising out of this Lease, the Landlord and Tenant consent to the jurisdiction of any state court sitting in the city or county where the Property is located or the federal court for the District of Maryland in Baltimore City. IN WITNESS WHEREOF, the parties hereto have executed this Lease on the day and year first above written. WITNESS/ATTEST: LANDLORD: OLD CARRIAGE ASSOCIATES By: /s/ [SIG] (SEAL) - ------------------ ------------------------------- Title: Partner ---------------------------- TENANT: CRYOMEDICAL SCIENCES, INC. By: /s/ RICHARD REINHART (SEAL) - ------------------ ------------------------------- Title: 4/27/00 ---------------------------- 8 11 EXHIBIT B Rules and Regulations 1. Use of Premises and Common Areas. Tenant, its agents, employees, customers, contractors, visitors and licensees will not (a) obstruct the driveways, entrances, walkways, halls, stairways or elevators or use them for any purpose other than ingress or egress to and from the Premises. No doormats, trash receptacles or other articles may be placed in the walkways, halls, stairways or other common areas without Landlord's prior written consent. (b) make or permit any improper noises, odors or disturbances of any kind or interfere with the use of the Property by other tenants, their agents, employees, customers, contractors, visitors and licensees. No radio, television, musical instrument or recorded music may be played in a loud manner such as to disturb or annoy others. (c) use the plumbing, electrical, heating and air conditioning facilities or any purpose other than those for which they were constructed. No sweepings, ashes, rags, trash, chemicals or other substances may be thrown into the plumbing facilities. The electrical wiring may not be overloaded and there will be no interference or tampering with the heating and air conditioning facilities. Waste and excessive use of the plumbing, electrical, heating and air conditioning facilities is prohibited. (d) permit, store or use on the Property any material which could cause a fire or explosion or which could produce fumes or vapors. (e) conduct any peddling, canvassing or auctioning activities on the Property or manufacture or store any goods or merchandise except the storage of supplies and inventory to be used by Tenant in the conduct of its business. 2. Daily Closing of Premises. Before closing and leaving the Premises at the end of business hours each day, Tenant will make certain that all windows and all entrance doors are locked and will turn off all lights and all standard electrical office equipment. 3. Keys and Locks. No additional lock will be installed and no existing lock shall be changed by Tenant, its agents or employees without Landlord's prior written consent. Two keys will be furnished to Tenant and any additional keys required will be secured from Landlord and paid for by Tenant. Extra keys will not be made without Landlord's prior written consent. All keys will be returned to Landlord at the termination of the Lease. Tenant will reimburse Landlord for the costs of changing any locks or replacing any keys lost or damaged by Tenant, its agents or employees. 1 12 4. Damage or Theft of Property. Landlord will not be responsible for any damage to, loss or theft of personal property, equipment, money or jewelry from the Property, whether or not such damage, loss or theft occurs when the Premises or the Building is locked against entry. 5. Tenant's Advertising. Landlord will have the right to prohibit any advertising by Tenant which in Landlord's opinion tends to impair the reputation of the Building or its desirability as a building for offices, and upon written notice from the Landlord, Tenant will refrain from or discontinue such advertising. 6. Signs. Tenant will not, without the prior written consent of the Landlord, place or permit to be placed or maintained any signs, lights, advertising matter, decoration or other similar item on or about the Premises if such item would be visible from the exterior of the Premises. 7. Landlord's Right to Inspect. Tenant will permit Landlord and its agents to enter the Premises to inspect and protect the Premises and the Building and to make such alterations and/or repairs as in Landlord's judgment may be necessary, or to show the Premises and/or Building to prospective tenants or purchasers during the Lease term. Landlord to provide 24 hour notice to inspect property unless it is an emergency. 8. Property and Rights Reserved to Landlord. Landlord hereby reserves to itself, its successors and assigns any and all rights not granted to Tenant hereunder, including by not limited to, the following: (a) the exclusive right to use of the name of the Building for all purposes, except that Tenant may use the name as its business address and for no other purposes; (b) the right to change the name or address of the Building, without incurring any liability to Tenant for so doing; (c) the right to install and maintain a sign or signs on the exterior of the Building or on any other part of the Property; (d) the right to use all or any part of the roof of the Building, to construct additional stories or other structures adjacent to or over all or any part of the Building, the right to erect temporary scaffolds and other aids of construction provided the front access (and rear access, if any) of the Premises is not denied, and the right to use the side or rear walls of the Premises and the Building provided that such use does not encroach on the interior of the Premises, (e) the right to limit the space on the directory of the Building to be allotted to Tenant; and (f) the right to permit any particular business or undertaking in the Building. 2 13 9. Enforcement. Tenant acknowledges that Landlord shall have no duty or obligation to enforce these Rules and Regulations as against any other tenant, and Landlord shall not be liable to Tenant for violation of the same by any other tenant, its agents, employees, customers, contractors, visitors or licensees. 3 14 FIRST SUPPLEMENTAL LEASE AGREEMENT The FIRST SUPPLEMENTAL LEASE AGREEMENT made this 23 day of January, 2001 between OLD CARRIAGE ASSOCIATES, hereinafter referred to as "Landlord") and CRYOMEDICAL SCIENCES, INC., (hereinafter referred to as "Tenant"). WHEREAS, the parties have entered into an Agreement of Lease dated April 27, 2000, for the rental to Tenant of 1113 Old North Point Road being 1,500 square feet, Unit I. WHEREAS, the Tenant has agreed to exercise its option to renew for one (1) year effective May 15, 2001. WHEREAS, the Tenant desires to lease the adjacent Unit "J" effective March 1, 2001 to May 14, 2002. Tenant may have occupancy of the suite for purposes of renovation upon execution of Lease by all parties. BGE meter to be put in Tenant's name upon receipt of key. NOW, THEREFORE, in consideration of the Premises and of the payment of rent and of other good and valuable considerations, the parties hereby agree as follows: 1. Commencing March 1, 2001 rent for Unit J shall be: 3/1/2001 to 4/30/2001 - $750.00 per month 5/1/2001 to 5/14/2001 - $375.00 per month The rent for Units I and J shall be: 5/15/2001 to 5/14/2002 - $18,900.00 per year $ 1,575.00 per month 2. It is expressly agreed by the parties hereto that all sums of money due from Tenant to Landlord pursuant to the terms of the referenced Agreement of Lease, or any Amendment hereto, shall be deemed additional rent and subject to all provisions of the Lease or applicable law with respect to rent. 3. Except as herein modified, the terms and conditions of the Agreement of Lease dated April 27, 2000, shall remain in full force and effect. 4. Tenant, at its expense, shall make all improvements to the space. Landlord grants to Tenant permission to make opening in block wall so that there is access between Unit I and J. Tenant, at its expense, shall enclose opening with similar block materials upon vacating space. 5. Landlord, at its expense, shall repair or replace rear personnel door. IN WITNESS WHEREOF, the parties hereto have executed this First Supplemental Lease Agreement, or have caused the same to be executed by their duly authorized representatives, the date and year first above written. 15 WITNESS: LANDLORD: OLD CARRIAGE ASSOCIATES [SIG] [SIG] ------------------------- BY:------------------------------ The Landlord WITNESS: TENANT: CRYOMEDICAL SCIENCES, INC. [SIG] [SIG] ------------------------- BY:------------------------------ The Tenant 16 SECOND SUPPLEMENTAL LEASE AGREEMENT The SECOND SUPPLEMENTAL LEASE AGREEMENT made this day of March, 2001 between OLD CARRIAGE ASSOCIATES, (hereinafter referred to as "Landlord") and CRYOMEDICAL SCIENCE, INC., (hereinafter referred to as "Tenant"). WHEREAS, the parties have entered into an Agreement of Lease dated April 27, 2000 and amended January 23, 2001, for the rental to Tenant of a portion of 1113 Old North Point Road, Units I & J being 3,000 square feet. NOW, THEREFORE, in consideration of the Premises and of the payment of rent and of other good and valuable considerations, the parties hereby agree as follows. It is agreed that the Tenant shall have the privilege of renewing this lease for four (4) additional terms of one (1) year under the same terms and conditions contained in this lease, except said rental for each year option period shall be as follows: 1. The "Commencement Date" of the option terms of the Lease shall May 15, 2002, and the termination date of the option terms shall be May 14, 2006. 2. Commencing May 15, 2002 and ending May 14, 2003, the Base Rent described in the Original Agreement will be the annual sum of Nineteen Thousand Four Hundred Sixty Seven Dollars ($19,467.00) payable in equal monthly payments of One Thousand Six Hundred Twenty Two Dollars and Twenty Five Cents ($1,622.25) each. 3. Commencing May 15, 2003 and ending May 14, 2004, the Base Rent described in the Original Agreement will be the annual sum of Twenty Thousand Fifty One Dollars and One Cents ($20,051.01) payable in equal monthly payments of One Thousand Six Hundred Seventy Dollars and Ninety Two Cents ($1,670.92) each. 4. Commencing May 15, 2004 and ending May 14, 2005, the Base Rent described in the Original Agreement will be the annual sum of Twenty Thousand Six Hundred Fifty Two Dollars and Fifty Four Cents ($20,652.54) payable in equal monthly payments of One Thousand Seven Hundred Twenty One Dollars and Five Cents ($1,721.05) each. 5. Commencing May 15, 2005 and ending May 14, 2006, the Base Rent described in the Original Agreement will be the annual sum of Twenty One Thousand Two Hundred Seventy Two Dollars and Twelve Cents ($21,272.12) payable in equal monthly payments of One Thousand Seven Hundred Seventy Two Dollars and Sixty Eight Cents ($1,772.68) each. Notice of election to exercise this renewal must be given Landlord in writing at least one hundred twenty (120) days prior to the expiration of the then current term of this lease. 6. It is expressly agreed by the parties hereto that all sums of money due from Tenant to Landlord pursuant to the terms of the referenced Agreement of Lease, or any Amendment hereto, shall be deemed additional rent and subject to all provisions of the Lease or applicable law with respect to rent. 7. Except as herein modified, the terms and conditions of the Agreement of Lease dated April 27, 2000 and amended January 23, 2001, shall remain in full force and effect 17 Page 2 IN WITNESS WHEREOF, the parties hereto have executed this Second Supplemental Lease Agreement, or have caused the same to be executed by their duly authorized representatives, the date and year first above written. WITNESS: LANDLORD: OLD CARRIAGE ASSOCIATES ______________________ By: ______________________ The Landlord WITNESS: TENANT: CRYOMEDICAL SCIENCE, INC. ______________________ By: ______________________ The Tenant EX-10.(H) 4 w47348ex10-h.txt EMPLOYMENT AGREEMENT 1 EXHIBIT 10.h The EMPLOYMENT AGREEMENT originally dated October 1, 2000, is hereby amended and restated in its entirety as of the 1st day of October, 2000 by and between CRYOMEDICAL SCIENCES, INC., a Delaware corporation (hereinafter referred to as the "Company"), and John G. Baust, residing at 175 Raish Hill Road, Candor, NY 13743 (hereinafter referred to as "Employee"). W I T N E S S E T H: WHEREAS, the Company desires to employ Employee, and Employee is willing to accept such employment, all on the terms and subject to the conditions hereinafter set forth. NOW, THEREFORE, in consideration of the terms and conditions hereinafter set forth, the parties hereto agree as follows: 1. Employment The Company hereby employs Employee, and Employee hereby accepts employment with the Company, as Senior Vice President and Chief Scientific Officer, on the terms and conditions herein set forth. 2. Term of Agreement Unless terminated sooner pursuant to the express provisions hereof, the term of employment hereunder shall commence on the date hereof (the "Commencement Date"), shall continue through September 30, 2001 (the "Original Term"), and shall be automatically extended for two additional one-year periods upon the terms and subject to the conditions contained herein, unless (a) the Original Term is terminated pursuant to Section 6 hereof (or otherwise), or (b) not less than 90 days prior to the commencement of any such one year period the Company notifies 1 2 Employee, in writing, that the term of employment shall not be extended. The period commencing with the Commencement Date through the end of the term of Employee's employment hereunder is hereinafter referred to as the "Employment Period." 3. Duties During the Employment Period, Employee shall perform such functions as are normally carried out by the Senior Vice President and Chief Scientific Officer of a business of the type in which the Company is engaged, and such other functions as the Chairman and CEO shall from time to time reasonably determine. Employee shall devote his time, energies and abilities to the Company's business pursuant to, and in accordance with, reasonable business policies and procedures, as fixed from time to time by the Board. Nothing contained herein shall preclude the Employee from devoting his time, energies and abilities to his position at SUNY-Binghamton. Employee covenants and agrees that he will faithfully adhere to and fulfill such policies as are established from time to time by the Chairman and CEO. Employee shall not be assigned, by the Chairman and CEO, responsibilities, in any material manner, inconsistent with his position as Senior Vice President and Chief Scientific Officer. 4. Compensation 4.1 During the Employment Period, Employee's base salary shall be in the amount of $180,000 per annum, payable in accordance with the Company's normal payroll procedures. 4.2 During the Employment Period, in addition to Employee's base salary, Employee shall be entitled to bonuses as follows: (a) Upon commercial shipment of the "800" Series-$15,000 (b) Upon receipt of 510(k) approval for abdominal organ solutions-$15,000 (c) Upon receipt of 510(k) approval for islet preservation solution-$15,000. 4.3 During the Employment Period, Employee shall be entitled to a non 2 3 accountable automobile allowance of $600.00 per month. 4.4 Employee shall also be eligible, to the extent he qualifies, to participate in such fringe benefit plans (including retirement, pension, life or other similar employee benefit plans), if any, which the Company may from time to time make available to its employees, provided that the Company shall have the right from time to time to modify, terminate or replace any and all of such plans. 4.5 The Company shall reimburse Employee on a timely basis for all reasonable business expenses incurred by Employee in connection with the performance of his duties hereunder, provided Employee submits supporting vouchers for such expenses. 4.6 Employee shall be entitled to a four week paid vacation each year during the Employment Period, to be taken at such time as is consistent with the needs of the Company and the convenience of Employee. 5. Stock Options Employee shall be entitled to stock options as may from time to time be granted by the Board of Directors of the Company in their sole and absolute discretion. 6. Termination The Employment Period shall terminate upon the happening of any of the following events: 6.1 Automatically and without notice upon the death of Employee. 6.2 Employee leaves the employ of the Company. 6.3 Upon written notice of termination from the Chairman and CEO and the Board of Directors of the Company to Employee in the event that Employee becomes physically or mentally disabled ("Disability") during the Employment Period such that (a) in the Chairman's and CEO's and the Board's good faith judgment, Employee is permanently incapable of properly performing the duties customarily performed by him hereunder, or (b) such Disability lasts for a 3 4 period of 60 consecutive days or 90 days in any 150 day period and the Board elects to treat such Disability as being permanent in nature; 6.4 Upon discharge of Employee, on written notice, by the Chairman and CEO and the Board for cause. For purposes of this Agreement, "cause" shall mean the following: the commission of a felony, crime involving moral turpitude or other act causing material harm to the Corporation's standing and reputation, failure to carry out, after reasonable written notice of such failure, the reasonable policies of the Chairman and CEO as they may relate to Employee's duties hereunder (other than for reasons beyond his control), persistent absenteeism, a material default or breach of any of the covenants made by Employee in this Agreement, a breach of Employee's duty of loyalty to the Company or any act of dishonesty or fraud with respect to the Company, or the wilful engaging by Employee in misconduct materially injurious to the Company. 6.5 In the event any one of the foregoing events shall occur, the Company shall be obligated to pay to Employee the compensation due him under Section 4 hereof up to the date of termination only and Employee shall not be entitled to receive any additional compensation of any nature whatsoever. 6.6 In the event that Employee's employment with the Company is terminated by the Chairman and CEO and the Board during the Employment Period for a reason other than as is set forth above in Sections 6.1 through 6.4, the Company shall be required to continue to pay Employee the salary provided for in Section 4.1 hereof for a period of one (1) year. 7. Non Competition 7.1 In view of the unique and valuable services that Employee has rendered and is expected to render to the Company, the Employee's knowledge of the business of the Company and proprietary information relating to the business of the Company and similar knowledge regarding the Company that Employee has obtained and is expected to obtain during the course of 5 his employment with the Company and in consideration of the compensation to be received by Employee hereunder, Employee agrees that (a) during the Employment Period and for a period of twenty four months immediately following the termination or expiration thereof (the Employment Period and the subsequent twenty four month period being hereinafter collectively referred to as the "Covenant Period"), he will not compete with, or, directly or indirectly, own, manage, operate, control, loan money to, or participate in the ownership, operation or control of, or be connected with as a director, partner, consultant, agent, independent contractor or otherwise, or acquiesce in the use of his name in any other business or organization which is in competition with the Company in any geographical area in which the Company is then conducting business or any geographical area in which, to the knowledge of Employee at the time of cessation of employment, the Company plans to conduct business within twenty four months from the date thereof; provided, however, that Employee shall be permitted after the cessation of his employment but during the Covenant Period to own less than a 5% interest as a shareholder in any company which is listed on any national securities exchange even though it may be in competition with the Company, and (b) during the Covenant Period, he will not, directly or indirectly (through the use of students or otherwise), perform services that in any manner benefits a competitor of the Company in the field of tissue, cell or organ preservation; provided that Employee may participate in University sponsored lectures that may indirectly have the effect of benefiting competitors of the Company. 7.2 Employee will not, during the Covenant Period, solicit or interfere with, or endeavor to entice away from the Company, any of its employees or customers without the written consent of the Company or unless such employee is Employee's personal secretary. 7.3 Since a breach of the provisions of this Section 7 could not adequately be compensated by money damages and will cause irreparable injury to the Company, the Company shall be entitled, in addition to any other right or remedy available to it, to an injunction or restraining order restraining such breach or a threatened breach, and no bond or other security shall 5 6 be required in connection therewith, and Employee hereby consents to the issuance of any such injunction or restraining order. Employee agrees that the provisions of this Section 7 are reasonable and necessary to protect the Company and its business. It is the desire and intent of the parties that the provisions of this Section 7 shall be enforced to the fullest extent permitted under the public policies and laws applied in each jurisdiction in which enforcement is sought. If any restriction contained in this Section 7 shall be deemed to be invalid, illegal or unenforceable by reason of the extent, duration or geographical scope thereof, or otherwise, then the court making such determination shall have the right to reduce such extent, duration, geographical scope or other provision hereof and in its reduced form such restriction shall then be enforceable in the manner contemplated hereby. 7.4 No provision of this Agreement shall be deemed to preclude Employee from serving as a director on the board of companies not in competition with the Company or of charitable organizations, provided, that any such directorship or consulting activities do not reduce Employee's ability to attend to his duties on behalf of the Company. 8. Entire Agreement The provisions hereof and the agreements referred to herein constitute the entire agreement between the parties with respect to the subject matter hereof and supersede any prior oral understanding, and no modification, supplement or discharge hereof shall be effective unless in writing and executed on behalf of the Company and Employee. 6 7 9. Assignability This Agreement, and its rights and obligations may not be assigned by Employee. The Company may assign any of its rights and obligations hereunder to (a) Biolife Solutions, Inc., an affiliate of the Company, and (b) a successor or surviving corporation resulting from a merger or consolidation of the Company, the sale by the Company of all or substantially all of its assets or other similar corporate reorganization, upon condition that (i) the assignee shall assume, either expressly or by operation of law, all of the Company's obligations hereunder, and (ii) in the event the shareholders of the Company do not own more than fifty percent (50%) of the voting rights of the new entity, the Employee shall have consented to such assignment. 10. Waiver No waiver by either party of any condition, term or provision of this Agreement shall be deemed to be a waiver of any prior or succeeding breach of the same or of any other condition, term or provision thereof. 11. Notices All notices required or permitted to be given by either party hereunder shall be in writing and mailed by registered mail, return receipt requested, to the other party at the address set forth above or such different address as may be given by notice as provided for herein. Any notice mailed as provided above shall be deemed given seven (7) days after the date of mailing or on the date of receipt, whichever is sooner. 12. Counterparts This Agreement may be executed in several counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. 13. Construction This Agreement shall be construed in accordance with the laws of the State of Delaware. 7 8 IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day and year first above written. /s/ JOHN. G. BAUST ---------------------------------- JOHN G. BAUST CRYOMEDICAL SCIENCES, INC. By: ------------------------------ RICHARD J. REINHART CHAIRMAN AND CEO APPROVED FOR THE BOARD OF DIRECTORS BY: ---------------------- 8 EX-10.(I) 5 w47348ex10-i.txt INCUBATOR LICENSE AGREEMENT 1 EXHIBIT 10.i STATE UNIVERSITY OF NEW YORK AT BINGHAMTON INCUBATOR LICENSE License made this first day of March 1999 by and between THE RESEARCH FOUNDATION OF STATE UNIVERSITY OF NEW YORK, a nonprofit, educational corporation existing under the laws of the State of New York, having its principal place of business located at State University Plaza, Broadway, Albany, New York 12246 (mailing address: Office of Research and Sponsored Programs, P.O. Box 6000, Binghamton, New York 13902-6000) hereinafter referred to as "FOUNDATION", acting on behalf of the State University of New York at Binghamton, (hereinafter referred to as "BINGHAMTON) and BioLife Technologies, Inc. having its principal place of business located at 1300 Piccard Drive, Suite L-105, Rockville, MD 20850 (hereinafter referred to as LICENSEE). WHEREAS, the LICENSEE has developed competence and expertise in technical matters relating to preservation of cells, tissues and organs and the methods and techniques for use thereof as well as all applications of the Licensee's technology including, but not limited to, the Hypothermosol(R) line of solutions and all cryomedical based technology described in issued patents or pending patent applications relating to preservative solutions or other cryo related technologies (hereinafter referred to as the "FIELD); and WHEREAS, BINGHAMTON wishes to promote and foster campus-industry collaboration in the FIELD; and WHEREAS, BINGHAMTON wishes to make available to its faculty and students additional opportunities for practical application and study in the FIELD; and WHEREAS, the LICENSEE qualifies as a start-up company in the FIELD, as provided in the January 22, 1986, Resolution of the State University of New York Board of Trustees and the Incubator Guidelines of BINGHAMTON; and WHEREAS, by terms of the Agreement which was entered into between the State University of New York and the FOUNDATION on June 1, 1977, the State University of New 2 York has delegated to the FOUNDATION authority to administer funds and to utilize University facilities in connection with the conduct of research and research-related programs; and WHEREAS, LICENSEE has been organized for the purpose of undertaking research and development in areas related to the FIELD and requires certain incubator facilities for housing and servicing such activities; and WHEREAS, BINGHAMTON has such facilities available on the campus; and WHEREAS, the parties desire to enter into an agreement whereby BINGHAMTON, acting through the FOUNDATION, will make such facilities available to the LICENSEE as described in general in the Application for Use of Incubator Facilities set forth in Exhibit A; NOW, THEREFORE, be it known that a License is hereby granted to LICENSEE, subject to the terms and conditions as hereinafter provided, to use the facilities and services designated in this License. 1. BINGHAMTON shall supply all ordinary and necessary water, gas, and electrical services, heat and sewage services for premises. Telephone services will be provided in accordance with BINGHAMTON policy at the expense of the LICENSEE. LICENSEE may avail itself of other on-site services at the established third-party rates. LICENSEE may request upgrades of campus facilities to conduct its operations, and if approved by FOUNDATION, FOUNDATION will work with LICENSEE to arrange the upgrade. FOUNDATION shall not unreasonably deny such requests by LICENSEE. LICENSEE shall pay the FOUNDATION and/or BINGHAMTON, in advance, for the cost of any and all capital upgrades that are requested by LICENSEE. 2. LICENSEE shall pay an occupancy fee to FOUNDATION, in an amount that is the product of multiplying the number of square feet occupied by LICENSEE by the factor of $15.00 per square foot per year during the term of this License. It is initially estimated that LICENSEE will occupy 720 square feet of space which will result in the LICENSEE 3 regulations and policies and all laws, rules, orders, regulations, and requirements of federal, State and municipal governments applicable hereto. LICENSEE shall obtain and keep in force at its sole cost and expense any permits or Licenses that may be required in this jurisdiction for conduct of its operations. 6. LICENSEE agrees that the issuance of this LICENSE shall in no way diminish the statutory authorization of the State University of New York and BINGHAMTON to possession, pursuant to State Education Law, of State property to which this License relates; nor shall the dominion and control by BINGHAMTON over the said State property be in any way diminished. 7. LICENSEE specifically agrees that this License does not create the relationship of landlord and tenant between FOUNDATION, the State of New York or the State University of New York and LICENSEE regarding the use of State controlled property to which this License relates. Further, the relationship of LICENSEE to the FOUNDATION, the State of New York or the State University of New York arising out of this LICENSE shall not be that of employee-employer but that of independent contractor. 8. LICENSEE specifically agrees that this LICENSE shall be void and of no further force and effect upon any use of State-controlled property to which this LICENSE relates which is inconsistent with State law or which in any way conflicts with the purposes or objectives of BINGHAMTON. In the event such an inconsistency or conflict arises BINGHAMTON shall notify LICENSEE of the inconsistency or conflict and LICENSEE shall have a period of 30 days in which to correct the identified inconsistency of conflict. 9. LICENSEE specifically agrees to pay all costs related to the rehabilitation and construction of offices that LICENSEE requests, and that BINGHAMTON has approved. 4 BINGHAMTON shall not unreasonably withhold such approval and BINGHAMTON shall not be required to provide furnishings, fixtures or decorations. Notwithstanding the foregoing, BINGHAMTON agrees to provide LICENSEE with access to and normal use of furnishings and equipment set forth in Exhibit A of this License. In consideration for such use, LICENSEE agrees to pay BINGHAMTON the monthly sum of one hundred and five dollars ($105) which is one-twelfth of the annual estimated depreciation* cited in Exhibit A. Upon termination of the License, LICENSEE shall be required to return furnishings and equipment listed in Exhibit A in the condition assigned, normal wear and tear excepted. The first monthly payment is due as of the effective date of this License. In addition, LICENSEE shall be required to restore the premises to their original condition, normal wear and tear excepted, unless otherwise agreed upon by the parties. At its sole cost and expense, LICENSEE may remove any furnishings, fixtures and decorations belonging to LICENSEE. * of equipment listed in Item 9, 10. The LICENSEE shall have the right, so long as this License shall remain in force to enter upon the BINGHAMTON campus for the purposes set forth in this License. However, if in the judgement of FOUNDATION, in consultation with the State University of New York and BINGHAMTON, any activity of LICENSEE or its personnel or clients is deemed incompatible with the purpose of this LICENSE or the best interests of the FOUNDATION, the State University of New York or BINGHAMTON, then the FOUNDATION shall give written notice to LICENSEE of any such incompatibility or conflict in interests and LICENSEE shall have a period of 30 days to correct the identified incompatibility or conflict in interest. If the incompatibility is not corrected with in the 30 day period then the FOUNDATION may immediately terminate this License without liability of any kind, and LICENSEE and its personnel shall promptly vacate the Licensed premises within a 30 day period. Both the FOUNDATION and BINGHAMTON specifically acknowledge and understand that the LICENSEE is subject to inspections of the 5 LICENSEE'S activities in the space occupied by the LICENSEE by the Food and Drug Administration for purposes of compliance with the regulations of the Food and Drug Administration as they pertain to the activities of the LICENSEE. 11. LICENSEE specifically agrees not to hold itself out as representing the FOUNDATION, the State of New York, the State University of New York, or BINGHAMTON in connection with the use of State-owned property to which this License relates, nor shall the name of the FOUNDATION, the State of New York, the State University of New York, or BINGHAMTON be used by LICENSEE for any purpose without prior, specific written approval of the party whose name is to be used. Notwithstanding the above provision all parties to this License specifically acknowledge and understand that LICENSEE shall not be restricted from reporting on the nature of its relationship with BINGHAMTON and the FOUNDATION as required by SEC, NASDAQ and other oversight bodies and regulatory agencies in forms of dissemination of information consistent with the normal and accepted business practices of publicly held companies. 12. LICENSEE assumes all risks incidental to its use of Licensed facilities, appurtenances and surrounding grounds, and shall be solely responsible for any and all accidents and injuries to persons (including death) and property damage arising out of or in connection with such activities if caused by the actions of LICENSEE, its officers, employees, agents or assigns, and hereby covenants and agrees to indemnify and hold harmless the FOUNDATION, the State of New York, the State University of New York, and BINGHAMTON and their respective officers, employees, agents and assigns, from any and all claims, suits, actions, damages and costs of every nature and description arising out of or relating to the said use. LICENSEE further agrees, upon request, to assume the defense and to defend, at its own cost and expense, any action brought at any time against 6 the FOUNDATION, the State of New York, or the State University of New York with respect to such claims, suits, and losses. 13. LICENSEE agrees to provide evidence of appropriate insurance of the type and in the amounts set forth in Exhibit B of this License, naming the FOUNDATION, the State of New York, State University of New York and BINGHAMTON as additional insureds. 14. LICENSEE specifically agrees that if this License is canceled or terminated for any reason, LICENSEE shall have no claim against the Foundation, the State of New York, State University of New York, and BINGHAMTON nor their respective officers or employees, and further that the FOUNDATION, the State of New York, State University of New York and BINGHAMTON and their officers, employees, agents and assigns shall be relieved from any and all liability. 15. Any notice to either party hereunder must be in writing, signed by the party giving it, and shall be served either personally or by registered mail addressed as follows: TO: FOUNDATION Stephen A. Gilje, Associate Vice Provost Office of Research & Sponsored Programs The Research Foundation of SUNY at Binghamton P.O.Box 6000 Binghamton, NY 13902-6000 7 TO: LICENSEE Richard J. Reinhart, President and CEO BioLife Technologies, Inc. 1300 Piccard Drive, Suite L-105 Rockville, MD 20850 All Notices become effective upon receipt. 16. This License, including any Exhibits and Appendices, constitutes the entire agreement between the parties hereto and all previous communications between the parties, whether written or oral, with reference to the subject matter of this License is hereby superseded. 17. The term of this License shall be from March 1, 1999 through February 28, 2000, unless terminated earlier by either party or extended in writing in accordance with the terms of this LICENSE. Subject to the approval of the Advisory Committee for Scholarship and Research and the Vice Provost for Research and Outreach, LICENSEE may be granted an option to renew this agreement by providing written notice of its intent to renew to FOUNDATION sixty (60) days prior to expiration of this License If this option is exercised by LICENSEE, the fee for the renewal period may be modified, but in no case will the new fee increase by more than 5% of the amount paid under this License. Either party may terminate this License by giving thirty (30) days written notice of termination to the other, provided such termination notice is predicated upon a mutually agreed upon alternative for the LICENSEE and a satisfactory termination procedure for the FOUNDATION and BINGHAMTON. 18. In addition to those otherwise set forth herein, this License is subject to the following terms and conditions: 8 a) LICENSEE shall meet at least annually with FOUNDATION, at a time mutually determined by FOUNDATION and LICENSEE, for the purpose of reviewing the status of this License. b) General institutional services and all computer and computer-related services provided to the LICENSEE by BINGHAMTON must be paid for within 30 days after LICENSEE receives invoice for such services. c) LICENSEE may provide employment opportunities by hiring students during the academic year and the summer. d) Faculty and staff are permitted to consult with LICENSEE in strict accordance with the policies and guidelines of FOUNDATION and BINGHAMTON. LICENSEE will execute formal consulting agreements with faculty/staff and provide copies of such agreements to the Advisory Committee for Scholarship and Research. e) LICENSEE may submit proposals for collaborative efforts and joint ventures to BINGHAMTON for mutual benefit. Accepted proposals will be administered by separate contracts which shall in no way diminish or change any provision of this License. f) All faculty, staff and students whose services are retained by the LICENSEE shall sign jointly with the FOUNDATION and the LICENSEE a Letter of Notification and Agreement acknowledging the scope and assignments contained within this License and shall waive all claims to the technology, its improvements, new discoveries and like activities of the LICENSEE made within the licensed facilities. g) BINGHAMTON and the FOUNDATION specifically acknowledge and understand that the LICENSEE intends to apply for a DOC NIST Advanced Technology Program multi-year grant and various SBIR/STTR grants in which BINGHAMTON and the FOUNDATION will share involvement. All parties to this License acknowledge and understand that the award of these 9 EXHIBIT A A) STATE UNIVERSITY OF NEW YORK AT BINGHAMTON - APPLICATION FOR USE OF INCUBATOR FACILITIES B) BIOLIFE TECHNOLOGIES BUSINESS PLAN: DESCRIPTION OF THE PRESERVATION SOLUTIONS BUSINESS (CONFIDENTIAL DOCUMENT) C) NEWS RELEASE 10 EXHIBIT A (a) STATE UNIVERSITY OF NEW YORK AT BINGHAMTON APPLICATION FOR USE OF INCUBATOR FACILITIES 1. COMPANY NAME: BioLife Technologies 2. CURRENT COMPANY ADDRESS: 1300 Piccard Drive Rockville, MD 20850-4303 3. PRINCIPAL OFFICERS: Name Address Telephone number ---- ------- ---------------- Richard J. Reinhart 1300 Piccard Drive (301)417-7070 President and CEO Rockville, MD 20850 4. PERIOD OF OCCUPANCY REQUESTED: 12 months 5. FACILITIES REQUESTED (STATE BUILDING AND ROOM NUMBERS): Science III Rooms 107, 143a, 144, 147, 149 and 194 6. EXPLAIN PRIMARY ACTIVITIES/RESEARCH/PRODUCTS OF COMPANY: (ATTACH ADDITIONAL SHEETS IF NEEDED) See attached news release 7. EXPLAIN NEED FOR FACILITIES AND WAYS IN WHICH COMPANY CAN BENEFIT FROM CAMPUS ACADEMIC PROGRAMS OR RESEARCH ACTIVITIES OF FACULTY, STAFF AND STUDENTS: BioLife Technologies needs both laboratory space and molecular biology instrumentation to launch its research and development program. The laboratory space (re: #5) currently houses all the appropriate instrumentation thereby decreasing start-up costs by as much as $50,000. 11 8. EXPLAIN WAYS IN WHICH COMPANY WILL STIMULATE EMPLOYMENT OPPORTUNITIES FOR STUDENTS AND CONSULTING AND COLLABORATIVE RESEARCH ACTIVITIES WITH FACULTY: The presence of BioLife Technologies on campus will serve as a nucleating point for faculty, staff and students who would like to associate with biotechnology companies. As part of this agreement, BioLife Technologies will sponsor a Biotechnology Undergraduate Network -- a campus organization dedicated to helping undergraduates secure careers in the biotechnology industry. Dr. Van Buskirk has already initiated this project. 9. OUTLINE NEEDS FOR COLLEGE RESOURCES/SERVICES. (BE SPECIFIC, AS THIS DESCRIPTION WILL SERVE AS THE BASIS FOR ASSESSING FINANCIAL CHARGES.) We will need to use a laminar flow hood, a CytoFluor II, a cell culture incubator, gel electrophoresis systems and possibly a Western Blot apparatus. 10. SUBMIT BUSINESS PLANS INDICATING THE POTENTIAL FOR FUTURE EMPLOYMENT AND FOR RELOCATION TO NON-UNIVERSITY SPACE WITHIN A REASONABLE PERIOD OF TIME. THE BUSINESS PLAN SHOULD ADDRESS ANY FINANCIAL, LEGAL OR REGULATORY RISKS INHERENT IN THE COMPANY'S ACTIVITY. IF THE BUSINESS PLAN INVOLVES THE USE OF HUMAN OR ANIMAL SUBJECTS, BIOHAZARDS, CHEMICAL WASTES, RADIOACTIVE MATERIAL, CARCINOGENS, ETC., THE COMPANY MUST DEMONSTRATE ITS ABILITY TO MANAGE SUCH RISKS IN ACCORDANCE WITH UNIVERSITY, CITY, COUNTY, STATE, AND FEDERAL REGULATIONS. IF APPLICABLE, HOW DOES THE TENANT PLAN TO REMOVE HAZARDOUS MATERIALS FOLLOWING ITS DEPARTURE FROM THE INCUBATOR? ARE THERE ANY RISKS TO SUNY AT BINGHAMTON, AND IF SO, WHAT IS THE MAGNITUDE AND HOW WILL THEY BE MANAGED? The Business Plan is attached. No hazardous materials will be generated. 11. DESCRIBE THE POTENTIAL CONTRIBUTION OF THE COMPANY TO THE ECONOMIC DEVELOPMENT OF NEW YORK STATE. The growing need for preservation solutions of this type (see Business Plan) suggests that BioLife Technologies will expand to 15 or more employees in 5 years. 12 12. DEMONSTRATE THE CAPACITY OF MEETING USER FEE OBLIGATIONS AND/OR THE WILLINGNESS TO GRANT ROYALTIES OR OTHER FORMS OF COMPENSATION IN EXCHANGE FOR USE OF FACILITIES AND UNIVERSITY SERVICES. User fees obligations will come from (a) private investors and (b) NIH SBIR grants. BioLife Technologies will not grant royalties to the University. Such an arrangement would seriously impair BioLife's ability to secure outside investor support. PLEASE INCLUDE IF APPLICABLE: a) REQUEST FOR SPECIFIC FACILITY RENOVATION WITH JUSTIFICATION. None needed. b) REQUEST FOR ASSIGNMENT OF SPECIFIC EQUIPMENT. (USE FORM ATTACHED TO INCUBATOR LICENSE.) All equipment can be shared with the University. In cases where BioLife needs exclusive control over equipment for specific projects (NIH, SBIR), appropriate arrangements will be made. Note that all the critical equipment listed in this application exists in duplicate or triplicate, allowing exclusive use. NAME AND TITLE OF PRINCIPAL OFFICER: /s/ JOHN G. BAUST 3/24/99 - ------------------- ----------------- John G. Baust Date Professor 13 STATE UNIVERSITY OF NEW YORK AT BINGHAMTON AMENDMENT 1 TO INCUBATOR LICENSE This Amendment 1 to Incubator License is entered into as of February 23, 2000, by and between The Research Foundation of State University of New York, a non-profit, educational corporation organized and existing under the laws of the State of New York, with its principal business offices located at State University Plaza, Broadway, Albany, New York 12246 (mailing address: Office of Research & Sponsored Programs, Binghamton University, P.O. Box 6000, Binghamton, New York 13902-6000), hereinafter referred to as FOUNDATION, acting on behalf of State University of New York at Binghamton (hereafter referred to as BINGHAMTON), and Biolife Technologies, Inc., having its principal place of business located at 1300 Piccard Drive, Suite L-105, Rockville, Maryland 20850, (hereinafter called LICENSEE). LICENSEE and FOUNDATION agree that their Incubator License, effective March 23, 1999, (hereafter LICENSE), is hereby amended as follows to reflect the LICENSE renewal for an additional 12 month period: 17. The first sentence of this clause is revised as follows: The term of this LICENSE shall be from March 1, 1999, through February 28, 2001, unless terminated earlier by either party or extended in writing in accordance with the terms of this LICENSE. All other terms and conditions of the LICENSE remain the same. IN WITNESS WHEREOF, LICENSEE and FOUNDATION have caused this Amendment 1 to be signed in duplicate by their duty authorized representatives. BIOLIFE TECHNOLOGIES, INC. R.J. REINHART ------------------ Type or Print Name PRESIDENT & CEO -------------------------- Title /s/ R.J. REINHART 3/1/00 --------------------------- Signature Date THE RESEARCH FOUNDATION OF STATE UNIVERSITY OF NEW YORK Stephen A. Gilie ---------------- Type or Print Name Associate Vice Provost for Research ----------------------------------- Title /s/ STEPHEN A. GILIE 6 March, 2000 ----------------------------------- Date 14 STATE UNIVERSITY OF NEW YORK AT BINGHAMTON AMENDMENT 2 TO INCUBATOR LICENSE This Amendment 2 to Incubator License is entered into as of February 7, 2001, by and between The Research Foundation of State University of New York, a non-profit, educational corporation organized and existing under the laws of the State of New York, with its principal business offices located at State University Plaza, Broadway, Albany, New York 12246 (mailing address: Office of Research & Sponsored Programs, Binghamton University, P.O. Box 6000, Binghamton, New York 13902-6000), hereinafter referred to as FOUNDATION, acting on behalf of State University of New York at Binghamton (hereafter referred to as BINGHAMTON), and BioLife Solutions, Inc., having its principal place of business located at Mountain View Office Park, 820 Bear Tavern Road, Suite 106, Ewing, NJ 08628, (hereinafter called LICENSEE). LICENSEE and FOUNDATION agree that their Incubator License, effective March 23, 1999, and amended February 23, 2000 (hereafter LICENSE), is hereby amended as follows to reflect the LICENSE renewal for an additional 12 month period: 17. The first sentence of this clause is revised as follows: The term of this LICENSE shall be from March 1, 1999, through February 28, 2002, unless terminated earlier by either party or extended in writing in accordance with the terms of this LICENSE. All other terms and conditions of the LICENSE remain the same. IN WITNESS WHEREOF, LICENSEE and FOUNDATION have caused this Amendment 2 to be signed in duplicate by their duly authorized representatives. BIOLIFE SOLUTIONS, INC. JOHN G. BAUST ------------------------------------- Type or Print Name SR. VICE PRESIDENT ------------------------------------- Title /S/ JOHN G. BAUST 2-26-01 ------------------------------------- Signature Date THE RESEARCH FOUNDATION OF STATE UNIVERSITY OF NEW YORK Stephen A. Gilie ------------------------------------- Type or Print Name Associate Vice President for Research ------------------------------------- Title ------------------------------------- Signature Date -----END PRIVACY-ENHANCED MESSAGE-----