Manufacturing
From the Annual Report (10K) Filed on March 30,1998, updated by the Quarterly Report (10Q) dated August 14, 1998
...One element of the Company's business strategy is to outsource the production of the components and final assembly of the Colormate(TM) Bilirubin Device (including the associated disposable calibration standard components) by subcontracting under arrangements with third-party manufacturers.
The Company is presently negotiating with certain third-party manufacturers for the production of the light sensors, disposable calibration standard components and hardware components of the Colormate(TM) Bilirubin Device. The Company believes, although there can be no assurance, that it will be able to outsource the production and assembly of additional Colormate(TM) units, including for custom application use, such as monitoring for bilirubin infant jaundice, at commercially marketable prices.
The Company has limited experience in outsourcing the production of such products in the volumes that would be necessary for the Company to achieve significant commercial sales, but demonstrated its ability to do so when it arranged for mass manufacturing of its Colormate(TM) units for Avon. The Company believes, based on discussions with suppliers of components used in its Colormate(TM) Bilirubin Device and published price lists, that the components can be purchased in quantities of 1,000 or more on terms acceptable to the Company.
The Company believes that its relations with the parts manufacturers and assemblers of the Colormate(TM) units held in its inventory are good and the Company believes that it will be able to obtain any necessary parts manufacturers or assemblers on terms acceptable to the Company.
The Company intends initially to retain the services of one medical device manufacturer in order to subcontract production of the Colormate(TM) Bilirubin Device......
...In connection with the Company's efforts to distribute the Colormate(TM) Bilirubin Device, the Company commenced purchasing equipment and component parts in the second quarter of 1998 (approximately $800,000 in the quarter). At this time, the Company is uncertain as to whether it will sell or lease such equipment to customers; accordingly, the cost of such items, as well as units previously obtained from Avon Products, Inc. in connection with a prior license agreement, has been classified as a non-current asset in the accompanying consolidated balance sheets.
...Although the Company has been in ongoing negotiations to reach a definitive agreement for global distribution of the Colormate(TM) TLc - Bilitest(TM), the Company has experienced delays in concluding these negotiations in order to provide additional due diligence and supporting materials requested as a result of the recent flurry of press reports and legal activity surrounding the Asensio allegations. While the Company's board of directors, executive, financial consultants and legal advisors intend to evaluate the distribution proposals, accommodate due diligence requests and review applicable legal documentation,due to the requests from the medical community for the Colormate(TM) TLc - Bilitest(TM) generated by the Company's recent exhibitions of the Colormate(TM) TLc - BiliTest(TM) to the medical community the Company is currently negotiating for the assembly of the Colormate(TM) TLc - BiliTest(TM) with a contract manufacturer........
...The Company does not itself manufacture the Colormate(TM) units, the Colormate(TM) Bilirubin Device or the Beauty-Aid Products, and in the past has been wholly dependent on third-party OEMs of parts, assemblers, cosmetics suppliers and textile suppliers. The Company will have to establish relationships with such third-party suppliers, manufacturers and assemblers for the production of its devices. Although the Company is negotiating with certain manufacturers/assemblers, the Company does not have any current arrangements with manufacturers or assemblers for the mass production of any additional Colormate(TM) devices......
.....In connection with any future manufacturing of the Colormate(TM) units, the Company could be required to make significant advance payments, obtain letters of credit, cause potential customers or licensees to advance funds under their agreements entered into with the Company or otherwise secure its payment obligations to third-party manufacturers...... |
