UNITED STATES
| þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
2015
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
21,055,990 2015 To use the well-established brand of MEDITE and to have a better description of the company’s business, the Board approved the name change to “MEDITE Cancer Diagnostics, Inc.” As a result, the Company’s trading symbol was changed to “MDIT”. to 19,427,331 from 1,942,733,100. Shareholders during 2015. After closing common shares through October 28, 2014, subject to the terms of the private placement agreement which was in effect before and during the closing of the acquisition. To continue financing the business development of the Company, a subsequent private placement of unregistered common stock of up to $800,000 for a price of $1.60 per share for the period of November 1, 2014 until April 30, 2015 was offered to investors in exchange for 500,000 shares of common stock pursuant to Section 4(2) and Regulation D of the Securities Act of 1933 (the “Second Private Placement”). $1.60 per share. Company expects that trend to continue. Also this high throughput staining equipment will undergo a revision in 2016 to increase its capacity by 50% to 1,500 slides per hour for the higher demand from larger laboratories. 2nd quarter of 2016. and tissues. This product was presented at European cytology meetings in 2015, and got some interest from the market. U.S. A product manager was hired in the beginning of 2016 to manage its market introduction in the U.S. and worldwide for this innovative product. market introduction, starting in Europe. Several cytology laboratories as well as gynecologists have already showed interest in this new product and expect a very good business with it. histology. future. representatives. 2016. the Company. at his own discretion in the interest of patient safety. decisions. attributed to research and development is anticipated to decline, even with the expenditures increasing. adaptable, and can be adjusted for significant swings in oil prices. limit its exposure. vendors, if possible. 90 days. capital needs. countries we intend to do business. Small Business Filer The Company is working to lessen the impact of the Euro’s decline versus the dollar by increasing the percentage of overall product sales in the U.S. and other countries such as China whose currency is not pegged to the Euro. impairments. thousands) have on hand certain levels of inventory to meet their obligations. Revenues for SureThin, exclusive of the USD/EURO conversion increased 43% in 2015, from 2014 levels. The Company’s own manufactured instruments increased 19%, exclusive of the USD/EURO conversion in 2015, as compared to 2014 revenues. Management anticipates the level of growth in SureThin and our own manufactured instruments to continue to increase in 2016. 2014. The costs remained the same partly caused by the lower USD/Euro exchange rate and by shifting engineering capacity from Germany to the lower cost country of Poland. The Polish operations were not started until the end of 3rd quarter 2014, and the consolidated statement of operations did not include CytoCore’s expenses for 2014 prior to April 3, 2014, the effective merger date. Operations did not include CytoCore’s expenses for 2014 prior to April 3, 2014, the effective merger date. Loss year ended December 31, 2015 as discussed above. year ended December 31, 2014. year ended December 31, 2015 as discussed above. China and other Asian countries. two private placement offerings of our common stock. disclosures. Age 72, Director www.medite-group.com. 2016. 2015. Germany. Germany. repaid the secured promissory notes on its maturity date of March 31, 2016. Mr. Lewis will receive 10% of his principal balance outstanding in warrants for every month that the notes are not repaid. terminated totaling $15,000 to be paid at the Company’s discretion in stock or cash. In addition Dr. Ocana receives standard board fees. 2014. Exhibits and Financial Statement Schedules Stock Purchase Agreement by and among CytoCore, Inc., MEDITE Enterprises, Inc., MEDITE GMBH, Michael Ott and Michaela Ott dated January 11, 2014 (incorporated herein by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K dated January 11, 2014.) Stockholders and Subsidiaries audit. principles in the United States of America. LOSS thousands, except share and per share amounts) the warranty reserve is included in accounts payable and accrued expenses, respectively, and is recorded when revenue is recognized. The Company periodically assesses the adequacy of its recorded warranty reserve and adjusts the amounts as necessary. The Company issued warrants in 2015 and these have been recognized at their fair value using Level 3 inputs. We have not determined the fair value of the Notes Due to Employees or Advance – related party. Accounting standards define fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). We measure our assets and liabilities using inputs from the following three levels of the fair value hierarchy: due to employees to equity at a discounted priced defined in the agreement. this advance. 2015. 2015. expense. of $0 as of December 31, 2015 and 2014. These unrecognized tax benefits, if recognized, would not affect the effective tax rate. There was no interest or penalties accrued at the adoption date and at December 31, 2015. claims against the Company settled in February 2016. Technology. has filed a complaint to the Federal Supreme Court. The Federal Supreme Court must file an opinion on the lower court ruling which has not been issued at the time of this filing. The Company is to receive partial reimbursement of its legal fees. This settlement had no financial impact to the Company at December 31, 2015. Delaware 36-4296006 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 32811 (Address of principal executive offices) (Zip Code) Title of each class Name of each exchange on which registered None Not Applicable ¨ Noþ¨ Noþ¨¨ ¨¨ Noþ$9,145,062,$3,444,969, based upon the closing price of shares of the Company’s common stock, $0.001 par value per share, of $3.00$1.15 as reported on the OTC Bulletin Board on December 31, 2014,2015, the last day of the Company’s most recently completed second fiscal quarter. Shares of common stock held by each current executive officer and director and by each person who is known by the Company to own 5% or more of the outstanding common stock have been excluded from this computation in that such persons may be deemed to be affiliates of the Company. This determination of affiliate status is not a conclusive determination for other purposes.May 07, 2015April 12, 2016 was 19,664,781 As Restated Goodwill $ 2,453 $ 2,205 $ 4,658 Total Assets $ 16,439 $ 2,205 $ 18,644 Deferred income tax liability – long-term $ - $ 2,205 $ 2,205 Total liabilities and stockholders’ equity $ 16,439 $ 2,205 $ 18,644 2014CONTENTSCONTENTS Page Item 1.Business31A.1.171 2.1A.2418 3.2.2418 18 2418 2419 2620 2621 2925 2925 2926 3027 PART III 3028 3331 3533 3735 3936 4037 4239 These uncertainties are described in more detail in Part I, Item 1A. “Risk Factors” of this Annual Report on Form 10-K. All subsequent written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by the foregoing. We do not undertake to update our forward-looking statements.Inc.Inc., is a medical technology company specializingspecialized in the development, engineering, manufacturing, and marketing of molecular biomarkers, premium medical devices and consumables for detection, risk assessment and diagnosis of cancer, precancerous conditions and related diseases. Depending upon the type of cancer, segments within the current target market of approximately $5.8 billion are growing at annual rates between 10 and 30%.waswhich provided it with a transition year and very important forwell-developed infrastructure in the company with challenges, tremendous achievements and changes for the company. By acquiring MEDITE the company changed from solely research operations to an operating company with 76medical industry; 80 employees in three countries, a distribution network to aboutapproximately 70 countries worldwide, a well-known and established brand name and a wide range of selling products for anatomic pathology, histology and cytology laboratories is available for sale.established infrastructure necessaryUSD-EURO exchange influence, it would have resulted in a 6.3% revenue increase. With the exchange rate influence, the overall revenues for a company actingthe Company were $9.9 million in the medical industry. Both company structures and cultures were successfully merged2015 compared to one new company organization.Even during this transition year the company was successfully growing by 10 % to$11.0 million for 2014, a revenue of $11 million on a consolidated basis.Several synergies were realized with this strategy, e.g. a cost reduction of $1.1 million or 9.97%.former CytoCore research segment by about 50 %, complementary products in the cytology product segment in now addressing all components from cell collection through cell processing to finally diagnostic tools like cancer markers and screening systems. Some of them are already selling and some are in a late stage of development expecting to sell within one or two years.The cancer markers developed by the former CytoCore over the last three years are showing excellent results in internal studies but have not yet been tested in formal clinical trials. In our opinion, one of the tests based upon these biomarkers has the potential for displacing the current expensive Human Papilloma Virus (HPV) testing methods in both initial and follow up testing resulting in less costs for the patient, laboratory and payor. We believe the test may identify cancerous and precancerous cells regardless of the presence of HPV. The company hopes to market the test globally outside the United States in 2015 and in the United States by 2017.Another major goal achieved in 2014 was thesuccessful market entrance into China in 2014, the Company increased its revenue in this market to approximately $1 million in 2015, compared to no sales and approximately $300,000 of orders in 2014, with anticipated sales in 2016 of approximately $2 million. The Chinese market is the fastest growing market, and by 2016 we expect tothe Company expects it will be the largest market for ourits products. With ourWe anticipate significant orders could increase revenues in China based on a large order backlog for this region. By working with its Chinese distributor, UNIC Medical, wethe Company has successfully received China Food and Drug Administration (“CFDA”) approval for all MEDITE histology laboratory devices.devices at the end of 2014, and for the Cytology device in 2015. The UNIC Medical sales team now can sellis selling MEDITE products in China and currently we are successfully doing so. By the date of this report orders for over $500,000 from China are already placed.with increasing volumes. Also, together with UNIC, we are part of a government supported project to standardize the histology laboratory process therein China using MEDITE equipment and consumables for the processing, part of the process, CytoCorenewly develop assays, and the UNIC technologymedical for digitalization and computer aided diagnostics utilizing the latest cloud technology.Severalproduct developments were broughtproducts closer to marketability during 2015 as listed above. Also, in 2014. As of this filing,early 2015, the German priority patent for a fully automated system used in the histology lab, a “Lab-In-One” unit, has beenwas granted. This technology, if successfully accepted by the market, has the ability to change the competitive landscape within the industry.In our cytology product line the SureThin product line revenue grew in Europe. To sell the complete set in the UStherefore compete against the dominant suppliers, a US Food and Drug Administration (“FDA”) application is required to be submitted and approved which currently is in the preparation process and is expected to be submitted soon. If our Sure Thin product is successfully sold in the USA market, the company could garner significant share of a $600m market.Finally several important formal achievements for the OTC listing were also realized in changing the Company’s name to MEDITE Cancer Diagnostics, Inc., using the worldwide established brand and having a better description of the Company’s focus in it. We also completed a 1:100 reverse split of ourits common stock of 1:100 to support its present capital needs and future anticipated growth. This reverse split was effective March 12, 2015. As a result of the reverse split, the Company’s issued and outstanding common stock which significantlywas reduced the amount of our outstanding shares of common stock and also had the effect of increasing our share price.We wereRecent DevelopmentsCytoGlobe,CytoCore Inc., ., the “Company”) entered into a Stock Purchase Agreement (the “Purchase Agreement”) with MEDITE Enterprises, Inc., a Florida corporation (“MEDITE”), MEDITE GmbH, a corporation organized under the laws of Germany and wholly owned by MEDITE (the “Subsidiary”), Michael Ott and Michaela Ott, the sole shareholders of the CompanyMEDITE (collectively, the “Shareholders”).providesprovided that 3,750,000 of the Shares will bewas deposited with the Company and held for a period of 12 months to cover certain indemnification claims that the Company may have against the Shareholders.MEDITE specializes in These shares were released to the development, manufacture and distribution of medical laboratory automation equipment and supplies for the cancer diagnostic segments of pathology, histology and cytology. MEDITE’s focus is on the development of medical devices and consumables for detection, risk assessment and diagnosis of cancer and related diseases.of shares of common stockat a price $1.60 in the Private Placement, the Company shall bewas required to issue up to an additional 312,500 shares of common stock to the Shareholders. The Company issued these shares during 2015. Also during 2014, prior to the reverse merger, the Company issued 697,234 shares of common stock for payment of certain accrued wages of the Company.this Private Placement wasof the acquisition on April 3, 2014, The Company continued until October 28, 2014, and the Company received the amount ofreceiving equity funds for $295,000 in exchange for the issuance of an additional 184,375 shares.As ofFrom January 1, 2015 to April 15, 2015, $540,000 was received by the Company in exchange for 337,500 shares pursuant to the Second Private Placement. 3,500,000,000.3,500,000,000 (Not adjusted for the reverse split discussed below). This was approved by the board of directors of the Company (the “Board”) pursuant to a Resolution dated October 9,th, 2014.To usewell-established brandyear ended December 31, 2015, the Company issued 1,326,875 shares of MEDITEunregistered common stock to qualified individuals pursuant to exemptions from registration under Regulation D and to have a better descriptionSection 4(2) of the company’sSecurities Act of 1933 at $1.60 for proceeds of $2,124,000, net of $70,000 of issuance costs. Further, the Company issued 12,100 shares of common stock in a Series D Preferred Stock conversion as further discussed in Note 8 in “Part II Item 8 Financial Statement – Notes to the Consolidated Financial Statements”. Included in the total shares issued during 2015 were 1,086,250 shares of common stock at $1.60 for proceeds of $1,739,400 to the President of UNIC Medical of China. UNIC is the Company’s distributor in China and other Asian countries. In addition, the Company issued Michaela Ott and Michael Ott the remaining shares of 156,250 each, total of 312,500 shares, to complete the 15,000,000 shares required in conjunction with the 2014 Purchase Agreement.name changerenegotiated terms with the warrant holders to “MEDITE Cancer Diagnostics, Inc.” Asremove the anti-dilution feature in the warrant agreement for the increase of warrants received from 250,000 to 500,000 with a result, the Company’s trading symbol was changed to “MDIT”.The Company authorized and completed a reverse splitfixed exercise price of its common stock of 1:100 to support its present capital needs and future anticipated growth. This was effective March 12, 2015. As a result of the reverse split, the Company’s issued and outstanding common stock was reduced$0.80 from 1,942,733 to 19,427,331. Definition: Brandbrand stands for innovative and high quality products – most equipment made in Germany – and competitive pricing.assay.assays. These new developments are cost effective solutions able to replace more expensive competitive products, and therefore are also becoming the first choice for the growing demand in emerging countries.ourthe Company’s operations during the reporting period were conducted and managed within these two segments,this segment, with management teams reporting directly to our Chief Officers. For information on revenues, profit or loss and total assets, among other financial data, attributable to our operations, see the consolidated financial statements included herein.5US,U.S., while about 70 more countries worldwide are covered with an existing and continuously expanding network of independent distributors. A general goal of MEDITE in sales is to act as a one- stop-shop for its customers. Instrument purchases are usually bigger investments, with prices often above the $50,000 level, which are more seasonal and depend significantly on investment budgets. Therefore, MEDITE also offers to sell the day to day consumables and sees its brand not just on the devices, but also on the supply products. The USU.S. headquarters in Orlando, Florida manages the Company group and is developing, setting and realizing the strategic goals of the Company. It also acts as distributor for the Americas, maintaining a warehouse with instruments, repair parts and consumables available for sale and for warranty obligations to its customers, and taking care of centralized marketing, regulatory issues and finance. A second location in the USU.S. operates as our research laboratory for cancer markerassays and other cytology developments, and is located in the Chicago area. In 2014, we established a new research and development facility in Poland, so that wethe Company can derive local cost comparative advantages (facilities and salaries) with good availability of engineers for electronics, software and product design at a lower cost level than in Germany or the USU.S. to expand the Company’s development capabilities.USA,U.S., Europe and China. While the USU.S. is currently the biggest potential market for ourMEDITE products, at present, it is expected that China will surpass the USU.S. market by 2016 due to much higher growth rates that China isthan Europe and the U.S. are currently experiencing, and we expect such growth will continue in the future.ourMEDITE’s principal customers are histology and cytology laboratories associated with hospitals or research institutions and independent laboratories in markets with direct sales and distributors in markets covered by them. In the USU.S. market, MEDITE executed several distribution contracts with third party sales organizations additionally to its direct sales. It also successfully achieved and renewed contracts with three of the largest Hospital Group Purchasing Organizations: HealthTrust Purchasing Group, Brentwood, MA (“HealthTrust”), which oversees approximately 1,400 hospitals and 2,600 other sites, Premier, Charlotte, NC, which oversees 2,500 hospitals, and another 70,000 other healthcare sites and Mid-Atlantic Group Network of Shared Services (“Magnet”) with over 600 hospitals and approximately 4,000 other healthcare sites.recent newpipeline of newly developed and currently under development of innovative devices, consumables and cancer markersnewly developed assays to set new standards in the industry, create new markets and to take over additional market shares from its competition.canmay be necessary to decalcify them ifthem; for example from bone. TheUSE33is an ultrasonic decalcification instrument that automatically runs the process under controlled temperatures. Due to this innovative technology, it can increase the speed of decalcification by 300 %300% compared to just using acid. Instead of days or even weeks, the biopsies are ready much earlier for further processing, which shortens the patient’s diagnosis waitingwait time. This specific instrument also is often used in research labs.is run automatically by the laboratory overnight with no human supervision. OurMEDITE’s instrument, theTPC15Duo or Trio, offers a very high capacity of 440 or 660 biopsies per run and also offers two or three independent protocols. Therefore, depending on the size and kind of tissue, it can process simultaneously the different steps, and therefore is replacing two or three not so flexible competitiveinstruments of similar competitor’s instruments. It also offers a very high level of safety. In the unlikely situation of an error or just a power outage, it has a back-up battery, and the emergency mode puts the biopsies into a safe position. The price of the unit is very competitive in its market based on its high capacity.WeMEDITE offer two types: the low cost setTES99when pricebudget matters, and the high end versionTES Validawhen design and technology is more important. The TES Valida is recognized as the best system currently available worldwide. Every histology lab has at least one system, but usually two or more like thisof these embedding centers in place – meaninghistorically the market consists of sales of several thousand units placed each year.there area manual microtomes with no need for power, in the middle there is thea semi-automatic version, and on the high end, a fully automatic microtome. While originally all microtome manufacturers were located in Europe (Germany or UK), today only MEDITE still manufactures its microtomes in Germany. For a microtome, the most critical functionality is extremely precise mechanics able to cut slices of 1 or 2 microns in thickness. Five years ago, MEDITE developed first the semi-automatic versionM530,first, then the fully automatic versionA550and started in 2014 the development of the manual versionM380– mainly for the Chinese market – which we expect to start selling sometime in the first halfproduction of 2015.these units were sold in August 2015 and this new product has shown heavy interest and increased demand from China and other emerging and developing countries. As part of thetissue sectioning, the freezing microtome, cryostat,called “cryostat”, is used for fast biopsies when a patient needs a diagnosis immediately e.g. still being in the operational theater. This is a current development for MEDITE with firstThe prototypes of theM630testingwere tested in the field and we plan to start selling in the secondserial manufacturing for this big instrument will be set up during the first half of 2015. Our2016, and material for the first 75 units has been ordered during the first quarter of 2016. Based on the forecast of the Distributor, we expect to sell the 75 units within the first year. The Company’s strategic goal for the cryostat, is to offer a high quality device for a competitive price to win 20 to 30 %30% of the market (1,500 to 2,500 units annually).in 2014 using a clear film instead of cover glass. This triples the capacity of a glass coverslipper up to 1,200 slides per hour. The prototypesfirst production of 10 units of this new development are currently being tested in real laboratory environmentspartially sold, and the remaining are expected to be available to sell inused for customer demonstrations. The regular serial production is scheduled for the near future.here.herein. These products are usually competing mainly on price, but quality is still important.lab.laboratory. This includes embedding cassettes, microscope slides, paraffin, staining solutions, reagents and other products. Some of the consumable products are MEDITE developments and exclusively manufactured by or for us.it. Others products are MEDITE branded, but manufactured and delivered from external high quality vendors. The procurement focus therefore is on high quality, not lowest price.systems but, in addition others are specific for this segment.The starting point in any diagnostic test is the collection of a sample that contains the analyte of interest. To a very large extent, the characteristicssystems. Characteristics of the sample collected determine the quality of the results of any tests performed on the sample. The sensitivity and/or accuracy of a test is, for example, likely to be reduced if the sample collection device or method does not capture a sufficient amount of the target analyte, alters the analyte of interest, or collects significant quantities of substances that interfere with the analysis. For this reason,The Company’s major focus for product development is in the area of sample collection of samples fromfor specific cells or tissues is one of our major focuses.former CytoCoreCompany developed theSoftPAP device for the collection of cervical cell samples that are used in the detection of cervical dysplasia, cancer and human papillomavirus (“HPV”) infections. We believe that SoftPAP, which has been cleared by the Food and Drug Administration (‘FDA”) for sale in the United States,U.S., which is CE Marked for international distribution, and is positioned as a premium value-added alternative to the spatula, broom and brush-style devices that have traditionally been used for these purposes. Unlike these traditional devices, SoftPAP collects only exfoliated cells and does not scrape, cut or abrade the cervix. This unique sample collection method has been shown in clinical trials to reduce the frequency of false negative and false positive results when the sample is evaluated by cytological methods to detect the presence of dysplasia and cancer. In addition, women have reported that having a cervical sample taken usingSoftPAP is more comfortable than when a traditional device is used. Having granted the priority US patent, weThe Company has applied for the national patent applications in Germany, UK, China and India as well in 2014. For 2015, we are planningmultiple countries. The Company currently is going to finish the final design of SoftKit for the collection of cellular samples that can be screened for a variety of gynecological cancers (including cervical, endometrial, and ovarian), and for the collection of gynecological samples to be tested for the presence of HPV and variety of gynecological cancers and additional indications such as sexually transmitted disease (“STD”) testing. SoftKit addresses a number of market niches and segments that are not addressedsupported effectively by SoftPAP or traditional gynecological sampling devices. SoftKit is designed to eliminate the need for assistance from a medical professional when collecting gynecological samples for many screening applications. We believeThe Company believes that this feature, in addition to the range of tests that can be performed on a SoftKit sample and SoftKit’s low cost, makes SoftKitit particularly attractive for use in large scale public health screening programs. We are also investigating the use of SoftKit in an internet-based, fee-for-service testing program outside of the United States40.40 to 45. These methods, however, are widely recognized as not providing the sensitivity needed in order to detect small early stage lesions, and are adversely affected by the presence of high density breast tissue. The high error rates associated with the use of imaging modalities, such as mammography on women having dense breasts (dense breasts being common in women under the age of 40), has led to medical societies and health authorities recommending against the use of these imaging methods when screening a woman under the age of 40 for breast cancer. Since the early 1990’s, it has been known that nipple aspirate fluid (NAF) can be used as a sample in the assessment of a woman’s risk of developing breast cancer, and that this method is applicable to the screening of women who have dense breasts. In our opinion, currently available collection devices for that application offerredoffered by the competition lack either usability or market orientation and are much too expensive. The former CytoCore teamBased on the researched market needs the Company started the development of the more market- and user-orientatedbreast cancer risk assessment device BreastPap device.. After the acquisition of MEDITE, their engineering team took overadvanced the project and are presently close to finishingcompleting the prototype. The goal is to sell affordable electro-mechanical-devices to cytology labs physicians and clinics which then can be forwarded to their gynecologist clients. The gynecologist offices then will offer this breast cancer risk assessment test to its female patients in the age of 20 and up at a rate of approximately $75.up. . MEDITE will therefore offer the collection device, the consumable set (including hygienic barrier) and also the necessary cancer markerassay. . The new developed device is expected to be ready in the third quarter of 2016 for the diagnosis.United States (“U.S.”), but despite the technical benefits of LBPs, only about 20% of the cervical cytology slides in the European Union and much lower percentages in the rest of the world are prepared in this manner. The primary limitations to greater adoption of LBPs outside of the United StatesU.S. are the high equipment and ancillary supply costs associated with the two predominant LBP methods. With the acquisition of MEDITE, we sellthe Company sells two alternative LBP methods product lines, theSureThinline which is competing against the market leader Hologic, and theSafePrep line which is competing against the second largest market player Becton-Dickinson. Both product lines cover the complete set of consumables necessary to preserve, extract and process cells onto a microscopic slide. For the SureThin line, MEDITE also offers a processing device automatically extracting the cells from the preservative vial and transferring it on the slide. Both systems have a significantly lower price than the competition, which is increasingly important for some markets like the US, where a cytology laboratory needs to lower its cost due to lower reimbursement rates. This lower price level itself also creates new markets, where it is now more affordable even to smaller laboratories and can better compete against the traditional papPap smear.We areThe Company is developing several proprietary stains for use in cervical cytology and other screening applications. These stains are designed for first evaluation using our automated slide imaging and analysis system, but some may also be evaluated visually or using a flow cytometer. already mentioned in the overview paragraph above, we are developing a family of immunocytological newly developed assays that combine the measurement ofbio molecular cancer markers and cell morphology in a single test. These assays are intended to detect the presence of specific proteins and other markers that are indicative of the presence of a target disease; allow characterization of abnormal cells in terms of the stage of disease present;cells; or provide an estimate of the risk of disease progression. These assays are specifically designed to be compatible with each other and with our proprietary stains, and may be evaluated using our automated slide imaging and analysis system. An added benefit of our proprietary stains is that after the specimen has been evaluated using these stains, it can be counterstained with Pap stain for conventional confirmation and archiving. Internal laboratory test are showing a very high level of specificity and sensitivity, and wethe Company currently prepareis preparing a strategy for the clinical evaluation of at least one of these assays which will be starting soon.evaluation. A system like this has the ability to displace the current expensive HPV testing methods (e.g. from Roche) by offering a significantly higher specificity and sensitivity, which meansmanagement believes offers a significant market opportunity.former CytoCore teamMEDITE developed the prototype ofsoftware for an imaging system for computer aided diagnosis of the slides.slides including its new stain SURECYTE and its revolutionary new biomarker SURECYTE+. The intent of a medical screening system like this is to differentiate between patients who show no evidence of the target disease state (“normals”) and those who do (“abnormals”). Patients who have abnormal screening results are offered follow-up testing to confirm, diagnosis, classify and determine the extent of disease and, where appropriate, determine the appropriate treatment. Patients who have a normal screening result are not offered these services. In order to allow scarce medical resources to be focused upon those patients having the greatest need, screening programs are structured to differentiate between normal and abnormal patients as accurately, rapidly, reliably and cost effectively as possible.WeThe Company believe that ourits imager will be marketable at a price that will be affordable for most laboratories.OurImagerhighly advanced version ofconcern that an abnormal was missed because the AccuMed TracCell location-guided cytology screening system that has beenslide was inadequate. Our Software will be designed to the point where it can reliably identify endocervicals morphologically which would allow the Company to deliver an automatic adequate/inadequate call along with the morphology results thus reducing the need for a tech to visually look for these cells.ourthe described proprietary stains and assays. As these stains and assays are designed to be more effective in highlighting the cellular abnormalities associated with cancer and precancerous conditions than the traditional Pap and thioninThionin stains used in conjunction with other automated cytology screening instruments, our Imagerimager is expected to deliver superior performance when used in cytological screening applications.In Since 2014, with the increasingly deepening relationship to the Chinese distribution partner UNIC Medical, who is specialized and has developed digitalization systems for slides, we begunthe Company began to merge both technologies together to shorten the time to market for this development.ourits Polish R&D facility which includesin 2014, the addition of eightCompany employs 15 people for software, electrical and mechanical design engineers, our 15 person engineering team’sengineers. The strategic goal is to optimize development processes to shorten the development period and time to market for several ongoing and new R&D projects.The formerbio molecular cancer markersresearch laboratory in downtown Chicago was relocated to the northern suburb of Chicago in 2014, resulting in significant cost savings including much lower facility rent and reduced salaries. The team of experienced researchers in biochemistry, with successful track records and a very high reputation in that segment, are working on revolutionizing the diagnosis of pre-cancerous conditions in cytology and histology. Several markers are already found and the related intellectual property is secured.All other developments in particular related to engineering skills and capabilities were transferred to the MEDITE product development department, including the new team in Poland. One example is the BreastPap development which was originally ordered from an external developing company, but is now improved and continued in its development by the new Polish engineering team. Due to its purpose of collecting breast aspirate cells for breast cancer risk assessment, the project manager is a female design engineer. 20142015 was working on innovative and new products like the cryostat M630, the manual microtome M380, the film coverslipper TWISTER, a cytology processor, the BreastPap and several module developments, including an new control computerupdates and modernization projects for existing instruments.updating related control interface boards,successful track records and a new X-Y-Z robotic movement technology for the multistainervery high reputation in that segment, are working on detection s of pre-cancerous and tissue processor, a new user interface standard for all instruments,cancerous conditions in cytology and a new standard control unit with color touch screen for most smaller instrumentsdetailedspecific market, cancer segment and country. early diagnoses detection of cancer with superior sensitivity for detecting precancerous and cancerous conditions, and provide the basis for more efficient and cost effective treatment through superior specificity which eliminates unnecessary tests and treatment for benign conditions originally suspected as precancerous or cancerous.detection The net effect of utilizing MEDITE’s anatomic pathology (tissue based) and cytology (cell based) products willmay result in more lives saved at lower costs.ourthe Company’s sales and marketing efforts are in particular focused on the three major regionsmarkets of USA,U.S., China and Europe.weit sell directly to these laboratories, while in other countries weit sell indirectly to them through ourits international network of distributors. Several of the products that we are currently developing by the Company may also be sold to national health programs and/or non-governmental public health agencies, or possibly directly to consumers. WeThe Company use several means like sales and technical training, advertising materials, special offers etc. to motivate ourits distributors selling MEDITE products. Depending on local markets, the contact to public health care organizations or other public authorities responsible for purchasing medical product is important. While in many markets the laboratories directly can decide about purchases, in others they have to undergo a tender process. Therefore it is important for MEDITE sales and marketing to act adapted to the final customer.for each of these tests amounts tois approximately 1.5 to 1.8 billion women.women for each of these tests. Bio-molecular screening, diagnostic, and treatment products consequently are being developed to detect disease states early so they can be dealt with before they become life threatening and expensive to treat. We areThe Company is designing and developing products to satisfy this paradigm shift and focus more on diagnostic methods and tools for early detection.thetheir development, like the BreastPap or the SoftKit, we arethe Company is targeting different groups of end-users and establishing the logistics needed to reach and support these users. The BreastPap needs more public relations to inform women about the potential of having an easy and cost effective breast cancer risk assessment. Similarly, in addition to marketing to laboratories, the SoftKit is expected to be marketed to public health agencies as well as being directly marketed to the patient to motivate them buying it on the internet, a pharmacy or similar store. WeMEDITE will continue to adjust ourits marketing to the specific-specific need of each product group.we usually have annualthe Company distributes national or international product catalogs each year with a wide overview of the related product lines. These are available in English, German and Polish languages and offered as export catalogs to ourits international distributors who translate them into the appropriate local languages. The catalogs are sent directly to the laboratories where we areMEDITE is selling directly.USU.S. or “Der Pathologe” or “Cyto-Info” in Germany to both offer specific products and to increase the overall brand recognition. OurIts international distributors usually do the same in their specific country.USA,U.S., the ECP in Europe, the Arab Health exhibition in Dubai, and the Medica exhibition in Germany and many more. USA,U.S., Europe and China.distributorindependent distributors contacted MEDITEthe Company to sell ourMEDITE products in the future instead.USA,U.S., as it is currently ourthe potentially biggest market, sales and distribution is more diversified. MEDITE has managed to become an approved vendor for three of the largest hospital group purchasing groups, Premier, HealthTrust and Magnet, with a total of over 5,000 member hospitals and health care providers. The contractcontracts with Premier, wasHealthTrust and Magnet were successfully renewed in 2015, and with Magnet as well by the date of this report.2015. About 98 % of health care providers are members of one or more group purchasing companies, and therefore it is very important in the US to be a registered vendor to realize sales with their members. Being a registered vendor means usually being just one out of two or three vendors in that segment for the member hospitals, and also being released from individual purchase contracts with each customer in using the general term of the hospital group purchasing organization. While in 2014 we have stilluntil now the Company has not utilizedrealized the full potential of this distribution channel, we areit is working on realizing more in the future.to gain its share of this market. A second distribution channel in the USU.S. is selling MEDITE products through other established sales organizations, utilizing their sales agreements with end users and through their sales representative network. This wasnetwork is increasingly an important part of the distribution network to growMEDITE’s sales in 2014, and will be in the future.growth. The third distribution channel is direct sales using employed product specialist e.g. in cytology or even using our service employees for technical assistance, training, installation and sales. The channel of directs sales will be increased in the future using the Company’s own employees or sales representatives is planned to be extended in the future.theseits sales partners are working with MEDITE for more than a decade. Also MEDITE offersis scheduling several dates each year for sales training of distributors sales and technical training for their technical service employees for free each year to keep a high experience level for ourof experienced staff knowing MEDITE products worldwide, and also to collect feedback information for product improvement and development.entered intois using a strategic distribution agreement with its local partner UNIC.UNIC Medical. The major shareholder and CEOpresident is a professor of pathology and has established a wide network of sales teams in China and other Asian countries. With histheir help, the brand name MEDITE has attained recognition already went up to the second place in theits segment. MEDITE together with UNIC successfully got CFDAChinese FDA approval for all MEDITE histology instruments in 2014 and for the cytology instrument late 2014.in 2015. Since then the UNIC team has been increasingly successful is selling MEDITE products in China with ordersanticipated sales of over $500k as of the date of this report.about $1 million for 2016. The combinedshared goal in China is to become the market leader in the histology and cytology market.coveredsupported by an experienced team of export professionals at the German facility also acting as the Company’s logistic center. Especially in the medical area, a deep knowledge of customs,custom tariffs and rules, international regulatory restrictions, international payment terms and dangerous goods shipment regulations, are major skills needed by these employees. MEDITE is approved and authorized by the AEO to manage several customs issues directly.In the US and in Germany MEDITE also sells its consumables in online shops from its local websites, but still in a low volume.United States,U.S., our products are regulated under the Medical Device Amendments to the Food, Drug and Cosmetic Act (the “FD&C Act”) and cannot be sold, shipped or promoted in interstate commerce without prior “clearance” or “approval” by the FDA. In the European Union (“EU”), medical devices are regulated under the Medical Device, In-Vitro Device and other Directives that require that each product be CE Marked to show that it conforms to all of the requirements of the applicable Directive(s) before it can be imported into or sold in the EU. MEDITE products which are selling in the USU.S. are FDA registered and all have the CE mark. MEDITE is allowed to declare the CE mark due to its ISO certificate. USU.S. most low to moderate risk medical devices that have legally marketed predicates receive “clearance” to market through a process described in Section 510(k) of the FD&C Act. In order to receive clearance under this so-calledthe 510(k) process, a product must be shown to be “substantially equivalent” to an appropriate legally marketed “predicate device”. High risk devices and devices that do not have a predicate require “approval” via a Pre-Market Approval (“PMA”) submission in which de-novo demonstration of the safety and efficacy must be established. Changes to a product, its intended use, and/or its labeling often require the submission of another 510(k) or PMA application. Obtaining approval to market via the PMA process takes substantially longer and is far more expensive than obtaining clearance to market via the 510(k) notification process.2015. be incur higher regulatory costs in order to maintain the CE Mark on the affected product(s). Global Harmonization Taskforce (GHTF),GHTF, which is comprised of representatives from major medical device regulatory agencies such as the FDA, has developed a single unified medical device identification system that will be mandatory as it is implemented worldwide. These regulations went into effect in many countries during 2014, and will be going into effect in additional countries overby the next two years. We areend of 2016. The Company is well positioned to comply with these new regulations as we have both the company and product specific codes mandated under this regulation for our current products and have the mechanisms in place to obtain additional such codes and the registrations of the affected products, if needed, in the future. In a number of countries these regulations include user fees that will increase our cost of regulatory compliance.We complyThe Company complies with the RoHS Directive by requiring ourits suppliers to use only RoHS complaint materials in the construction of ourits products.significantadditional costs to us.year or twoyears. Certain of the changes that have been proposed under the Affordable Care Act (ACA) would require that the cost effectiveness of novel new products be demonstrated in actual clinical use before CMS (theCenters for Medicare and Medical Services (“CMS”), the agency that manages Medicare)Medicare and Medicaid is allowed to provide reimbursement for such products. Historically, however, the medical community has generally been reluctant to adopt, or in some cases even to evaluate, novel products unless reimbursement is available. If these proposed ACA rules go into effect in their present form, it is anticipated that the cost and time required to introduce a novel product into the US market will be substantially increased.inat the payer’s discretion. United States.U.S. In recent years, the U.S. market has also become much more cost conscious. We believeThe Company believes technological innovations incorporated into certain of ourits products offer cost-effective benefits that address this particular market opportunity.segmentsfields of the anatomic pathology market. Each of these segments is dominated by only 2 – 3 major players. In histology our ownthe Company’s manufactured instrument line competes with those from Leica, Sakura and Thermo-FisherThermo Fisher while in cytology ourits current SureThin and SafePrep product lines compete with products from the Cytyc Divisiondivision of Hologic and the TriPath Divisiondivision of Becton-Dickinson. Unlike certain of these competitors, MEDITE is a global one-stop supplier for all histology and cytology laboratories.our newthe Company’s recently patented fully automated system “Histo-Revolution” will become the only system worldwide which can provide a fully automated lab-in-one solution in histology. Due to ourthe Company’s patent protection for this technology, isn’t replaceableit is protected from replication until 2032 and no other company will be able tocan duplicate this.we arethe Company is currently developing a versatile fully-automated, objective analysis, screening and diagnosticevaluation system for cancer screening that can be used with ourits current liquid based cytology SureThin line and the former CytoCore developed C1SureCyte stain, which is highly reproducible and produces staining results within seconds. This same system can be used with ourthe Company’s newly developed Biomarker IL10 for cancer risk assessmentSureCyte+ newly developed assays and, unlike the few competing systems, it is specifically designed to perform cytological screening for a broad range of cancers when equipped with the appropriate software and reagent modules.We are also preparing the former CytoCore products Softkit, SoftPap and BreastPap for market introduction, CE marking and FDA and CFDA approval. As a result of recent advances in the area of molecular diagnostics, we believe the market for such improved sample collection products will significantly increase over the next years. we believethe Company believes that ourits products must compete primarily on the basis of clinical performance, accuracy, functionality, reliability, quality, product features and effectiveness in standard medical applications while being sufficiently versatile to support future applications. WeIt also believebelieves that cost control and cost effectiveness are additional key factors in achieving and maintaining a competitive advantage. We focusIt focuses a significant amount of its product development effortefforts on producing systems and tests that will not add to overall healthcare cost.Ourare divided inconsist of sales and marketing, research and development (including information technology), technical service, accounting and administration and manufacturing. TheIts quality assurance manager is manage internally independent and authorized to act when necessary without a management agreement.ourthe Company’s factory in Burgdorf, Germany. Product manufacturing is monitored by Underwriters Laboratories (UL)TUV Sud for the UL (“Underwriter Laboratories”, US electrical standard testing) while ourits quality system is periodically audited by TUV-Sud.DQS. Small lot manufacturing with Kanban flow control and ERP management is used to ensure the timely delivery of our smaller instruments while minimizing our finished goods inventories. Larger instruments, most of which are customized to meet the unique requirements of their purchasers, are manufactured to order with a short turnaround. Extra safety stock is maintained for the few single source items that are used in ourits products, while qualified second sources are maintained for all other critical items. All incoming purchased goods intended for resale, whether or not under the MEDITE brand name, or for use in the manufacture of MEDITE products, are subject to intensive incoming inspection, and all finished MEDITE manufactured products receive intense final quality control testing including 24-48 hour burn-in, as appropriate, to the specific product before shipment. MEDITE additionally audits and monitors the quality systems of third party suppliers of MEDITE-branded consumables and supplies. package that handles sales, material management and production planning. It is also automatically connected to the accounting system, transferring customer and supplier invoices, payments and the material consumption as a just in time controlling tool. We relyWe considerIt considers such security and protection a very important aspect of the successful development and marketing of ourits products in the U.S., Germany, China and other foreign markets.ourMEDITE’s intellectual property worldwide. As we manufacturethe Company manufactures and sellsells products globally, we haveit has designed ourits intellectual property strategy to provide the necessary protection while containing and managing the associated costs. Two of the major components of this strategy are the aggressive filing of “provisional” patent applications in the US, and of filing utility patent applications under the Patent Cooperation Treaty (PCT) or similar entry points into national patent offices worldwide.US, however, is unique in offeringU.S. offers the opportunity to file “provisional” patent applications that, while not being in form for examination and not providing any formal rights or protections, is accepted by almost all countries as officially establishing the “priority” or invention date for utility applications that are derived from it within one year of the date of the filing of the provisional application. Provisional applications therefore provide a means of obtaining the earliest possible priority date while allowing time to refine and expand the scope of the invention and associated claims that are included in any resulting utility application. OurThe Company’s practice is to convert each of ourits provisional patent applications into some number of utility patent applications within this 12-month period. In most cases each provisional application results in one utility filing. However, in some cases a single provisional application can generate two or more separate utility applications and/or multiple provisional applications can be consolidated into a single utility application. During the examination of a utility application, the examining patent office may require usthe Company to divide the application into two or more separate applications or weit may file a continuation-in-part patent application that expands upon the technology disclosed in an earlier patent application and which has the potential of superseding or improving upon the disclosure of the earlier application. For these reasons, estimating the number of patents that are likely to be issued based upon the number of provisional and utility applications filed is difficult.we reviewthe Company reviews the application to determine whether obtaining patent coverage for the invention outside of the United StatesU.S. is necessary or desirable to support our business model. If so, a utility patent application is filed through a Patent Cooperation Treaty (“PCT”) receiving office. This approach allows usit to select the most appropriate receiving office to perform the initial patentability assessments while providing a single entry point into over 120 national patent offices worldwide. Depending upon the nature of the invention and business considerations, weit typically nationalize PCT applications in some number of countries, the number depending upon anticipated market size and the locations of potential competitors.Weprepareprepares and intendintends to continue to prepare additional patent applications for processes and inventions arising from ourits research and development process. The protections provided by a patent are determined by the claims that are allowed by the patent office that is processing the application. During the patent prosecution process it is not unusual for the claims made in the initial application to be modified or deleted or for new claims to be added to the application. For this reason, it is not possible to know the exact extent of protection provided by a patent until it issues.is issued. Recent changes in US patent law, particularly conversion to a “first to file” system and introduction of a challenge period after a patent is granted may influence our IP strategy, especially as related to the filing of provisional applications. Several recent court decisions are also expected to influence these decisions as will the possible availability of the long awaited unitary EU patent. in the U.S. are maintained in secrecy until any resulting patents haveare issued. As there have been examples of U.S. patent applications that have remained “in prosecution” and, therefore, secret for decades, it is not possible to know with certainty that any U.S. patent that we may own, file for or have issued to us will not be pre-empted or impaired by patents filed before ours and that subsequently are issued to others. Utility patent applications filed in the United StatesU.S. after November 29, 2000, are published 18 months after the earliest applicable filing date. This revised standard reduces the chances that such a “submarine” patent will impair our intellectual property portfolio. Foreign patent applications are automatically published 18 months after filing. As the time required to prosecute a foreign utility patent application generally exceeds 18 months and the foreign patents use a “first to file” rather than a “first to invent” standard, we dothe Company does not consider submarine patents to be a significant consideration in ourits patent protection outside of the United States.OurU.S.we considerit considers to be important to ourits business. We ownIt owns the trademarks relevant to these products and may file additional U.S. and foreign trademark and copyright applications in the future. Our futureWewethe Company cannot be sure that someone will not independently develop similar technologies or products, duplicate our technology or design around the patented aspects of our products. The protection provided by patents depends upon a variety of factors, which may severely limit the value of the patent protection, particularly in foreign countries. We intend to protect much of our core technology as trade secrets, either because patent protection is not possible or, in ourmanagement’s opinion, would be less effective than maintaining secrecy. However, wethe Company cannot be sure that our efforts to maintain secrecy will be successful or that third parties will not be able to develop the technology independently.OurUnited States,U.S., Germany and Poland. We believetheour success of ourand business strategy. Our researchResearch work in the area of chemical and biological components is expected to continue for the foreseeable future as we seek to refine the current process and add additional capabilities to our analysis procedure,procedures, including the detection of other forms of cancer and precursors to cancer. We anticipate the need to invest a substantial amount of capital, including the cost of clinical trials, required to complete current developments and bring it to market.ourthe Company’s competitiveness we believeand management intends to spend a certain percentage of our revenue also in future years.on an on-going basis. With a further growing level of revenues we expect thatincreased revenue, the percentage decreasing.noa significant influence to theon our manufacturing costs.is fluctuatingfluctuates depending on the raw material price. Therefore also ourcommodity markets. Management believes that the sales prices are flexible.dependingdependent on specific chemicals where the price also is fluctuating. Usually we try to havefluctuates. The Company typically will negotiate a fixed price fixed with our supplier for a term of one year to cover that risk.issue we arechallenge the Company closely monitor. Formonitors. The Company has negotiated with our critical parts our suppliers give us ato provide 12 month notice before discontinuing parts and, the Company if necessary, wewill place a one-timelast large order for a sufficient number of these parts to support the continued manufacture and support of all MEDITE products that use the part for the anticipated life of the MEDITE product. In addition we takeit takes advantage of the extended availability programs that are offered by some manufacturers of electronic components and assemblies. WeThe Company also tryattempts to transfer this discontinuingdiscontinuation risk to our external circuit board module supplier.For further growth our needis expected to increase too. Moresupport our growth. The increases in revenue also means an increase ofin inventory necessaryrequirements to fulfill orders in timewithin delivery timeframes and also an increaseincreased trade account receivables, typically with payment terms of receivables. While the Company creates cash-flow from its operations, this is expectedbetween 30 to be insufficient to finance the necessary increase of working capital.isshortfalls have been partially financed by equitysales of common stock and working capital credit lines from the bank of the German subsidiaries. However,secured promissory notes offset by reductions in our credit lines with a German bank. During 2015 the Company’s bank credit lines have only very limited availability.utilized working capital. In order for us to continue to growgrowing the business, we plan on raisingthe Company is planning to raise additional funds through the sale of equity securities.Wesecurities or convertible debt, as available in the marketplace. To that objective the Company expects to consummate a $5.0 million convertible note offering, utilizing the services of an investment banker on or about April 30, 2016.MEDITE products and cost controls will contribute higherto improved operational cash-flowscash flows to partially finance our immediate working capital.2014, we2015, the Company employed a total of 7680 employees including 87 trainees and 74 part time employees which means 67represents 74 full-time-equivalent. None of our employees are members of a labor union.ourthe Company’s business strategy. Any business that operates on a worldwide basis and conducts its business in one or more local currencies is subject to the risk of fluctuations in the value of those currencies against the dollar, as well as foreign economic conditions. Such businesses are also subject to changing political climates, differences in culture and the local practices of doing business, as well as North American and foreign government actions such as export and import rules, tariffs, duties, embargoes and trade sanctions. We doThe Company does not regard these risks, however, as a significant deterrent to our strategy to introduce our MEDITE product lines to foreign markets in the future. OurThe Company’s current operations include payments and receivables in the three currencies of USD, EURO and Yen. For USD and Euro we try to naturally hedge them by having revenues and expenses in both currencies. Even in not handling other currencies directly, the exchange rates to thein both USD and Euro mightmay influence our costcosts and prices directly and/or indirectly. We will attemptThe Company intends to adopt strategies to minimize the risks of changing economic and political conditions within the foreign countries.st, 2014, we 2015, the Company had direct foreign operations in Germany, Poland and Austria and distributed to approximately 70 countries in total. Item 1A.Risk FactorsYou should carefully consider the following risk factors that affect our business. Such risk factors could cause our actual results to differ materially from those that are expressed or implied by forward-looking statements contained herein. Some of the risks described relate principally to our business and the industry in which we operate. Others relate principally to the securities market and ownership of our capital stock. The risks and uncertainties described below are not the only ones we face. Additional risks are described elsewhere in this report under the Item 1 – Business, Item 3 – Legal Proceedings, and Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operation sections, among others. Other risks and uncertainties that we are unaware of, or that we currently deem immaterial, also may become important factors that affect us. Our business, financial condition or results of operations could be materially and adversely affected by any of these risks, and the trading price of our common stock could decline. The discussion of our risk factors should be read in conjunction with the financial statements and notes thereto included herein. Risks Related to Our BusinessThere is no guarantee of future profitability.With the completion of the merger between MEDITE and the former CytoCore, the operations of MEDITE are now burdened with the R&D and general administrative overhead of CytoCore, including the burden of now being a Securities and Exchange Commission registrant company. Future revenue growth and expense control will be dependent upon a number of factors, which may or which will be out of our direct control. We therefore cannot guarantee that we will be able to achieve full profitability in the near- or long-term future.We may be unable to grow our business.The Company has traditionally funded its operations in Germany through its income from operations and through working capital lines of credit with a local bank in Hannover. As of the date of this filing, the Company has only very limited availability under its master credit lines and therefore in order to grow the business will be dependent upon raising capital in the form of equity or debt. The Company is unable to guarantee that it will have readily available funds in the form of equity or debt or that that funding, if it should become available will be on terms acceptable to the Company. If the Company is unable to raise additional funds when necessary, it may be unable to take advantage of profitable growth opportunities in new and emerging markets or be unable to develop new products to meet the needs of its customersOur future success will depend on our ability to develop new products and respond to technological changes in the markets in which we compete.Our long-term ability to generate product-related revenue will depend, in part, on our ability to identify products and product ideas that may utilize the different components of the MEDITE product lines. Our ability to successfully continue developing new and updating our existing product line is important to keep and increase our competitiveness.In addition, the markets for our products are characterized by rapid technological developments and innovations. Our success will depend in large part on our ability to correctly identify emerging trends, enhance capabilities, and develop and manufacture new products quickly, in a cost-effective manner, and at competitive prices. The development of new and enhanced products is a complex and costly process. We may need to make substantial capital expenditures and incur significant research and development costs to develop and introduce such new products and enhancements. Our choices for developing products may prove incorrect if customers do not adopt the products we develop or if the products ultimately prove to be medically or commercially unviable. Development schedules also may be adversely affected as the result of the discovery of performance problems. If we fail to timely develop and introduce competitive new products, our business, financial condition and results of operations would be adversely affected.Our products are subject to government regulation and they may not receive necessary government approvals.The development, manufacture, sale and use of our products in the U.S. is subject to extensive regulation by the FDA as well as other governmental agencies at both the federal and state level. We must meet significant FDA requirements before we receive clearance or approval to market our products. Included in these FDA requirements may be the performance of lengthy and expensive clinical trials to prove the safety and efficacy of the products. We have limited experience in conducting and maintaining the preclinical and clinical trials necessary for regulatory approval, and face the risk that results in later trials may be inconsistent with results from earlier trials. A number of companies have suffered significant setbacks in advanced clinical trials, even after promising early trial results. Delays in receiving governmental approvals can be costly in terms of lost sales opportunities and increased clinical trial costs. The speed with which we complete such trials and receive approval will depend on several factors, many of which are beyond our control, including but not limited to, the rate of patient enrollment and retention, negative tests results, analysis of data obtained from testing activities and changes in regulatory policies. The FDA is in the early stages of a system level review that is widely expected to result in significant changes in the way that medical devices are regulated in the United States. Similarly, the European Union is in the later stages of revising the Directives that apply to the regulation of medical devices in the EU, and other countries, particularly in Asia and Latin America, are undertaking similar efforts. Even if these trials are successfully completed, we cannot be certain that regulatory approval to market these products will be granted, or that approval, if granted, will not be limited to specific indications for use or product claims. Obtaining regulatory approval is expensive, time-consuming and uncertain, and is expected to become even more so as a consequence of legislative and regulatory changes and initiatives that have recently been initiated in the United States, European Union and other jurisdictions.Sales of medical devices and diagnostic tests outside the United States are subject to foreign regulatory requirements that vary from country to country. The time required to obtain regulatory clearance in a foreign country may be longer or shorter than that required for FDA marketing clearance. Export sales of certain devices that have not received FDA marketing clearance may be subject to regulations and permits, which may restrict our ability to export the products to foreign markets.Once a product gains regulatory approval, whether in the United States or abroad, the product remains subject to regulatory requirements, including the monitoring of the performance of the product and the reporting of any adverse events that may occur to the pertinent regulatory authorities. Failure to comply with post-approval requirements can, among other things, result in warning letters, recalls, fines, injunctions and suspensions or revocations of marketing licenses. Any enforcement action, even if unsuccessful, would be time-consuming, expensive, and potentially damaging to our reputation.Finally, we may be restricted or prohibited from marketing or manufacturing a product, even after obtaining product approval, if the regulatory criteria change or if any unknown problems arise with respect to the product, its use or manufacture,. With the widespread use of any product or device, serious adverse events may occur. Any safety issues could cause us to suspend or cease marketing our approved products, possibly subject us to substantial liabilities, and adversely affect our ability to generate revenues.18Risk Factors Changes in third-party reimbursement may negatively affect us.Widespread adoption and commercial acceptance of our product lines in the United States and other countries is, in part, dependent upon the ability of healthcare providers and laboratories to secure adequate reimbursement from third-party payers suchprivate insurance plans, managed care organizations, Medicare and Medicaid, and foreign governmental healthcare agencies. We cannot guarantee that third parties will add our products to the coverage and that reimbursement will in fact be provided, that it will continue to be available, or that reimbursement levels will be adequate to enable healthcare providers and laboratories in the United States and other countries to use our products instead of conventional methods or existing therapies.Reimbursement and healthcare payment systems in international markets vary significantly by country and include both government-sponsored healthcare and private insurance. There can be no assurance that foreign third-party payers will provide or continue to provide coverage, which third-party reimbursement will be made available at adequate levels, if at all, for our products under any such foreign reimbursement system or that healthcare providers or clinical laboratories will use our products in lieu of other methods. We also will be required to secure adequate reimbursement for any new products we develop or acquire, and we may not be able to do so successfully. In addition, in a significant number of countries the purchase of medical products of the types sold by MEDITE is by way of competitive tender bids at the local, regional and/or national level. We cannot be certain of winning any or all of the tender competitions that we enter. Such tender programs can also impose price caps and/or other constraints upon the revenues that we can realize from such programs.Healthcare policy changes, including recently passed healthcare reform legislation, may have a material adverse effect on our business, financial condition, results of operations and cash flows.Political, economic and regulatory influences are subjecting the healthcare industry to potential fundamental changes that could substantially affect our results of operations. Government and private sector initiatives to limit the growth of healthcare costs, including price regulation, competitive pricing, coverage and payment policies, comparative effectiveness of therapies, technology assessments and alternative payment models, are continuing in many countries where we do business, including the U.S. These changes are causing the marketplace to put increased emphasis on the delivery of more cost-effective treatments. Our strategic initiatives include measures to address this trend; however, there can be no assurance that any of our strategic measures will successfully address this trend.The Patient Protection and Affordable Care Act and Health Care and Education Affordability Reconciliation Act of 2010 were enacted into law in the U.S. in March 2010. As a U.S. headquartered company, this healthcare reform law will materially impact us. Certain provisions of the law will not be effective until 2015 and there are many programs and requirements for which the details have not yet been fully established or consequences not fully understood. However, on June 28, 2012, the United States Supreme Court upheld the constitutionality of the law's mandate requiring individuals to purchase health insurance but rejected specific provisions that would have penalized states that did not expand their current Medicaid programs. As a result of this ruling and other factors, we expect implementation of most of the major provisions of the law to continue. As currently enacted, the law imposes on medical device manufacturers a 2.3 percent excise tax on gross U.S. sales of Class I, II and III medical devices beginning in 2013. This tax burden may have a material, negative impact on our results of operations and our cash flows. Other provisions of this law as currently enacted, including comparative effectiveness research, an independent payment advisory board, and pilot programs to evaluate alternative payment methodologies, could meaningfully change the way healthcare is developed and delivered, and may adversely affect our business and results of operations. Further, we cannot predict what healthcare programs and regulations will be ultimately implemented at the federal or state level, or the effect of any future legislation or regulation in the U.S. or internationally. However, any changes that lower reimbursements for our products, reduce medical procedure volumes or increase cost containment pressures on us or other participants in the healthcare industry could adversely affect our business and results of operations.Our international operations will expose us to additional risks.We expect that international sales will continue to account for a significant portion of our revenues and believe it is a key element to our future success. As a result, we may be subject to the risks of doing business internationally, including:·imposition of tariffs or embargoes;·trade barriers and disputes;·regulations related to customs and export/import matters;·fluctuations in foreign economies and currency exchange rates;·longer payment cycles and difficulties in collecting accounts receivable;·the complexity and necessity of using foreign representatives and consultants;·tax uncertainties and unanticipated tax costs due to foreign taxing regimes;·the difficulty of managing and operating an enterprise spanning several countries, including difficulties in maintaining effective communications with employees and customers due to distance, language and cultural barriers;·the uncertainty of protection for intellectual property rights and differing legal systems generally;·compliance with a variety of laws; and·economic and geopolitical developments and conditions, including international hostilities, armed conflicts, acts of terrorism and governmental reactions, inflation, trade relationships and military and political alliances.The integration of future acquisition may present challenges and impair our ability to realize the anticipatedIt might be possible to manage future acquisition to further increase the competitiveness of MEDITE. This may face significant challenges in combining operations in a timely manner. The failure to successfully integrate future acquisitions into our company and to successfully manage the challenges presented by the integration process may result in us not achieving the anticipated benefits of the acquisition including operation and financial synergies of the acquisition which may have the effect of depressing the market price of our common stock.We may not be able to compete with companies that are larger and have more resources.We compete in the highly competitive medical device and diagnostics marketplace and have several U.S. and foreign competitors, both publicly-traded and privately-held. Most of these companies have substantially greater financial, technical and research and development resources, established sales and marketing organizations and distribution networks, greater name recognition and longer-standing relationships with customers. Competitors with greater financial resources can be more aggressive in marketing campaigns, can survive sustained price reductions in order to gain market share, and can devote greater resources to support existing products and develop new products. Any period of sustained price reductions for our products would have a material adverse effect on the Company’s financial condition and results of operations. We may not be able to compete successfully in the future and competitive pressures may result in price reductions, loss of market share or otherwise have a material adverse effect on our financial condition and results of operations.It is also possible that competing products will emerge that may be superior in quality, effectiveness and performance and/or less expensive than our products, or that similar technologies may render our products obsolete or uncompetitive and prevent us from achieving or sustaining profitable operations. In addition, many of our competitors have significantly greater experience in conducting preclinical testing and clinical trials of products and obtaining regulatory approvals to market such products. Accordingly, our competitors may succeed in obtaining FDA approval for products more rapidly, which may give them an advantage in achieving market acceptance of their products.We may not be able to market our products.Our success and growth depend on the market acceptance of our existing and future products. We do intend to maintain and increase a direct sales force to certain markets and sell our products but also depend on third party sales structures like distributors in many countries. Therefore, in order to successfully market and sell our products, we must be able to negotiate profitable distribution, marketing and sales agreements with organizations that have direct sales forces calling on domestic and foreign market participants that may use our products. We would not have the ability to control any such third party distributors and such third parties may focus resources on other products that generate larger profit contribution for them.The accuracy, performance and cost of our products are critical to our business and reputation.Due in part to increased competitive pressures in the healthcare industry to reduce costs, our ability to gain market acceptance of our products will depend, among other things, on our ability to keep product costs low and/or demonstrate that any increased cost of using our products is offset by the increased accuracy and performance achieved by using them. In particular, we need to convince healthcare providers, insurance companies and other third-party payers, as well as clinical laboratories, of the clinical benefits and cost-effectiveness of our products.Occasionally, some of our products may have quality issues resulting from the design or manufacture of the product or, in the case of the platform, the hardware and software used in the product. Often these issues can be discovered prior to shipment and may result in shipping delays or even cancellation of orders by customers. Other times problems could be discovered after the products have shipped, which would require us to resolve issues in a manner that is timely and least disruptive to our customers. Such pre-shipment and post-shipment problems would have ramifications for us, including cancellation of orders, product returns, increased costs associated with product repair or replacement, and a negative impact on our reputation.We may be subject to product liability actions.In addition, the sale and use of our products entail a risk of product failure, product liability or other claims. Coverage is confirmed by an insurance company up to $5milion, becoming increasingly expensive, and we may not be able to obtain adequate coverage at an acceptable cost in the future or the coverage may not be sufficient. Any product liability claims and related litigation would likely be time-consuming and expensive, may not be adequately covered by our insurance coverage, and may delay or terminate research and development efforts, regulatory approvals and commercialization activities. Until now we never had a case of liability actions against the company.20Properties We may not be able to adequately protect our intellectual property.Our success in large part depends on our ability to maintain the proprietary nature of our technologies, trade secrets and other proprietary information. To protect our intellectual property and proprietary information, we rely primarily on patent, copyright, trademark and trade secret laws, as well as internal procedures and contractual provisions. We hold a variety of patents and trademarks and have applied for a number of additional patents and trademarks with the U.S. Patent and Trademark Office and foreign patent authorities. We intend to file additional patent and trademark applications as dictated by our research and development projects and business interests. We cannot be certain that any of the currently pending patent or trademark applications, or any of those which may be filed in the future, will be granted or that they will provide any meaningful protection for our products or technologies or any competitive advantage. In order to provide protection, patents and trademarks must be enforced, which is costly and time-consuming, and trade secret and copyright laws afford only limited protection. In addition, the laws and enforcement mechanisms of some foreign countries may not offer the same level of protection as do the laws of the United States. Legal protections of our rights may be ineffective in such countries, and technologies developed in such countries may not be protected in jurisdictions where protection is ordinarily available. Our inability to protect our intellectual property both in the United States and abroad would have a material adverse effect on our financial condition and results of operations.We protect much of our core technology as trade secrets because our management believes that patent protection would not be possible or would be less effective than maintaining secrecy, and we have in place certain internal procedures and contractual provisions designed to maintain such secrecy. Despite our efforts to safeguard and maintain our proprietary rights, we may not be successful in doing so. steps taken by us may be inadequate to deter unauthorized parties from misappropriating our technologies or prevent them from obtaining and using our proprietary information, products and technologies. Moreover, our competitors may independently develop similar technologies or design around patents issued to us.If we fail to protect, defend and maintain the intellectual property rights associated with our products or if we are subject to a third-party claim of infringement, the competitive position of our products could be impaired. We may be required to obtain licenses from third parties to avoid infringing third-party patents or other proprietary rights, yet there can be no assurance that such licenses would be available to us on acceptable terms, if at all. If we are unable to obtain required third-party licenses, we may be delayed in or prohibited from developing, manufacturing or selling products that require such licenses. In addition, infringement, interference and other intellectual property claims and proceedings, with or without merit, are expensive and time-consuming to litigate, divert resources, and could adversely affect our business, financial condition and operating results.We may not be able to maintain effective product distribution channels.We currently rely on third-party distributors for the sale and distribution of our products in most countries. Our relationships with these distributors, therefore, must remain positive. We have a good history of working with these companies but have only limited control over their performance. We cannot predict the success of these relationships or the efforts of these companies in marketing the MEDITE product line. Our sales and marketing efforts, including those of our distributors, may not be sufficient to successfully compete against more extensive and well-funded operations of certain of our competitors. In addition, we must manage sales and marketing personnel in numerous countries around the world with the concomitant difficulties in maintaining effective communications due to distance, language and cultural barriers. Our quarterly operating results may fluctuate and our future revenues and profitability are uncertain.We anticipate substantial fluctuations in our future operating results. A number of factors contribute to such fluctuations, including but not limited to:·introduction and market acceptance of new products and product enhancements by both us and our competitors;·timing and execution of distribution and sale contracts;·competitive conditions in the medical device and diagnostic markets;·product development, sales and marketing expenses;·third-party reimbursement levels; and·changes in general economic conditions.The loss of existing key management and technical personnel or the inability to attract new hires could have a detrimental effect on us.Our success depends on identifying, hiring, training, and retaining qualified professionals. Competition for qualified employees in our industry is intense and we expect this to remain so for the foreseeable future. If we were unable to attract and hire a sufficient number of employees, or if a significant number of our current employees or any of our senior managers resign, we may be unable to complete or maintain existing projects or develop and implement new projects of similar scope and revenue. Our success is particularly dependent on the retention of existing management and technical personnel, including Michaela Ott, Chief Executive Officer, Robert F. McCullough, Jr., Chief Financial Officer, Michael E. Ott, Chief Operating Officer, Richard A. Domanik, Ph.D., Michael Jolley, Ph.D, both key researcher. The loss or unavailability of the services of these executives could impede our ability to effectively manage our operations.We may not be able to get a written settlement on the legal proceeding with D&D Technology and may need to continue defending that caseWe have a litigation case with D&D Technology, Inc., Union, NJ, about third party development costs. As of the filing this case is verbally settled with a final payment of $15,000 by MEDITE to D&D Technology, the written settlement is pending. While both parties’ attorneys verbally agreed on this settlement there is a risk that the final written settlement will not be executed and we need to continue to defend the case which would result in additional attorney fees, higher settlement amount and additional court expenses.We have an on-going lawsuit with Hologic Deutschland GmbH (Germany)On August 2013, the German local state court ruled the Company was not in breach of claims pursued by plantiff, Hologic Deutschland GmbH, Germany. However, the court ruled the Company must clearly differentiate their products in the German market from those offered by Hologic or be subject to court imposed penalties with a limit of $304,000. Hologic has appealed the verdict and in addition the Company has appealed the provision of the verdict which applies to the possible penalty as described.We may need to expand our operations and we may not effectively manage any future growth.As of December 31, 2014, we employed 76 persons. In the event our products and services obtain greater market acceptance, we may be required to expand our management team and hire and train additional technical and skilled personnel. We may need to scale up our operations in order to service our customers, which may strain our resources, and we may be unable to manage our growth effectively. If our systems, procedures, and controls are inadequate to support our operations, growth could be delayed or halted, and we could lose our opportunity to gain significant market share. In order to achieve and manage growth effectively, we must continue to improve and expand our operational and financial management capabilities. Any inability to manage growth effectively could have a material adverse effect on our business, results of operations, and financial condition.Risks Related to Our Common StockTrading in our common stock has been limited, there is no significant trading market for our common stock, and purchasers of our common stock may be unable to sell their shares.Our common stock is currently eligible for quotation on the OTCQB - the middle tier of the three marketplaces for trading over-the-counter stocks provided and operated by the OTC Markets Group - however trading to date has been limited. If activity in the market for shares of our common stock does not increase, purchasers of our shares may find it difficult to sell their shares. We currently may not meet the initial listing criteria for any registered securities exchange. The OTCQB is a less recognized market than the foregoing exchanges and is often characterized by low trading volume and significant price fluctuations. These and other factors may further impair our stockholders’ ability to sell their shares when they want to and/or could depress our stock price. As a result, stockholders may find it difficult to dispose of, or to obtain accurate quotations of the price of, our securities because smaller quantities of shares could be bought and sold, transactions could be delayed and security analyst and news coverage of our Company may be limited. These factors could result in lower prices and larger spreads in the bid and ask prices for our shares of common stock. The historically volatile market price of our common stock may affect the value of our stockholders’ investments.The market price of our common stock has in the past been highly volatile. In fiscal years 2014 and 2013, the price of our common stock traded in a range of $0.50 to $10.00 per share (adjusted by the 1:100 reverse split). This volatility is likely to continue for the foreseeable future. Factors affecting potential volatility include:·announcements of new products or technology by us or our competitors;·announcements of the FDA relating to products and product approvals;·announcements of private or public sales of securities;·ability to finance our operations;·announcements of mergers, acquisitions, licenses and strategic agreements;·fluctuations in operating results; and·general economic and other external market factors.In addition, the occurrence of any of the risks described in this Risk Factors section could have a material adverse impact on the price of our common stock.We have never been paid dividends on our common stock and do not anticipate paying dividends in the foreseeable future.We have never declared or paid a cash dividend or distribution on our common stock and we do not anticipate doing so for the foreseeable future. Our ability to declare dividends on our common stock is further limited by the terms of certain of our other securities, including several series of our preferred stock. We intend to reinvest any funds that might otherwise be available for the payment of dividends in the further development of our business. Accordingly, investors seeking cash dividends should not purchase our shares.There are currently outstanding a substantial number of securities convertible into shares of our common stock and we intend to raise additional funds in the future through issuances of shares of common stock or securities convertible into shares of our common stock, which will be dilutive to existing stockholders or impose operational restrictions.We are authorized to issue up to 10,000,000 shares of preferred stock. As of December 31, 2014, we had: 47,250 shares of Series A convertible preferred stock outstanding, which convert into approximately 21 shares of our common stock; 93,750 shares of Series B convertible preferred stock outstanding, which convert into approximately 375 shares of our common stock; 38,333 shares of Series C convertible preferred stock outstanding, which convert into approximately 192 shares of our common stock; 175,000 shares of Series D convertible preferred stock outstanding, which convert into approximately 1750 shares of our common stock; and 19,022 shares of Series E convertible preferred stock outstanding, which convert into approximately 524 shares of our common stock. There are cumulative dividends due on the Series B, Series C, Series D, and Series E convertible preferred stock, which may be paid in kind in shares of our common stock. Our Certificate of Incorporation permits our Board of Directors to issue the remaining 5,143,137 undesignated shares of preferred stock with such voting rights, if any, designations, rights, preferences and limitations as the Board may determine. At December 31, 2014, we had outstanding warrants to purchase an aggregate 58,515 shares of our common stock. The issuance of shares of our common stock upon the conversion of our preferred stock, or upon exercise of outstanding warrants, would cause dilution of existing stockholders’ percentage ownership of the Company. In addition, in connection with our acquisition of MEDITE, we issued 14.68 million shares of our common stock to the stockholders of MEDITE. Holders of our preferred and common stocks do not have preemptive rights, meaning that current stockholders do not have the right to purchase any new shares in order to maintain their proportionate ownership in the Company. Such stock issuances and the resulting dilution could also adversely affect the price of our common stock. In addition, we intend to raise additional capital in the future to fund our operations through sales of shares of our common stock or securities convertible into shares of our common stock, as well as issuances of debt. Such additional financing will be dilutive to our stockholders, and debt financing, if available, may involve restrictive covenants which may limit our operating flexibility. If additional capital is raised through the issuances of shares of our common stock or securities convertible into shares of our common stock, the percentage ownership of existing stockholders will be reduced. These stockholders may experience additional dilution in net book value per share and any additional equity securities may have rights, preferences and privileges senior to those of the holders of our common stock.Applicable SEC rules governing the trading of “penny stocks” may limit the trading and liquidity of our common stock which may affect the trading price of our common stock.Our common stock is a “penny stock” as defined under Rule 3a51-1 of the Exchange Act, and is, therefore, subject to SEC rules and regulations that impose limitations upon the manner in which our common stock can be publicly traded. Penny stocks generally are equity securities with a per share price of less than $5.00 (other than securities registered on some national securities exchanges). The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document that provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, and, if the broker-dealer is the sole market maker, the broker-dealer must disclose this fact and the broker-dealer’s presumed control over the market, and monthly account statements showing the market value of each penny stock held in the customer’s account. In addition, broker-dealers who sell these securities to persons other than established customers and “accredited investors” must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. Consequently, these requirements may have the effect of reducing the level of trading activity, if any, of our common stock and reducing the liquidity of an investment in our common stock.Provisions of our certificate of incorporation, bylaws and Delaware law may make a contested takeover of us more difficult.Certain provisions of our certificate of incorporation, bylaws and the General Corporation Law of the State of Delaware ("DGCL") could deter a change in our management or render more difficult an attempt to obtain control of us, even if such a proposal is favored by a majority of our stockholders. For example, we are subject to the provisions of the DGCL that prohibit a public Delaware corporation from engaging in a broad range of business combinations with a person who, together with affiliates and associates, owns 15% or more of the corporation’s outstanding voting shares (an "interested stockholder") for three years after the person became an interested stockholder, unless the business combination is approved in a prescribed manner. Our certificate of incorporation also includes undesignated preferred stock, which may enable our board of directors to discourage an attempt to obtain control of us by means of a tender offer, proxy contest, merger or otherwise. Finally, we are currently authorized to issue 2 billion shares of common stock. Our Board of Directors has the authority to issue a significant number of shares of our common stock without further stockholder approval. Each of the foregoing may have an anti-takeover effect of delaying or preventing a change of control which may be beneficial to our stockholders.Item 2.PropertiesWe occupyoccupies a total of 68,208 square feet of property of which 24,324 is leased space. The owned building at the address Wollenweberstrasse 12, 31303 Burgdorf, Germany, has a size of 43,884 square feet. In addition, we useoccupy a leased neighborhood building with an additional 11,302 square feet in space for manufacturing. This contract has a three month termination term.clause. The headquarter facility at the address 4203 SW 34thUSAU.S. with a space of 5,520 square feet is leased until July 31st, 2018 and the research laboratory facility at address Unit 306, 888 E. Belvidere Road, Gryslake,Grayslake, IL 60030, USAU.S. with a space of 1,904 square feet is leased untilwith a lease expiration of June 30th, 2016. The facility in Poland for R&D and some manufacturing in Poland has a size of 5,597 square feet at the address of ul. Zabia 2, 65-158 Zielona Gora, Poland and while lease contract is endingleased through August 2017, we are able to usewith a threesix month termination term too. We considerclause. The Company considers our facilities to be well utilized, well maintained, and in good operating condition. Further, we consider the facilities to be suitable for theirour intended purposes and to have capacities adequate to meet current and projected needs for our operations. leases vary from 3 months’ notice for part of the German operation and 6 month notice for the Poland facility to a term agreement until June 30, 20152016, for the laboratory facility in the Chicago area, and until July 31, 2018, for the Orlando facility. The monthly rent for the Orlando facility will increase from $2,416 currently $2,345 to $ 2,563 per month in the last year.year of the lease. The previous down town Chicago facility lease contract term isterminates on October 30, 2016, with a monthly lease of $4,270. This$4,526 and this facility currently is subleased for $3,948 per month through the end of the lease. The Company determined at $3,816 per month.December 31, 2014 that the facility was to be closed and subleased the facility and expensed the cost to the Company at that time.Legal Proceedings We havelitigation case with D&D Technology, Inc., Union, NJ, about third party development costs. Ascourt settlement on an alleged breach of the filing this case is verbally settledGerman competition law with a final payment of $15,000 by MEDITE to D&D Technology, the written settlement is pending. All expected liabilities are accrued in our financial statement.On August 2013, the German local state court ruled the Company was not in breach of claims pursued by plantiff, Hologic Deutschland GmbH Germany. However,(“Hologic”) from August 2013. This matter was decided by the court ruledcompletely in favor of the Company must clearly differentiate their products inand it was determined that the German market from those offered by Hologic or be subject to court imposed penalties with a limitCompany did not improperly infringe on the product design of $304,000.Hologic. Hologic has appealedfiled a complaint to the verdict and in additionFederal Supreme Court. The Federal Supreme Court must file an opinion on the lower court ruling which has not been issued at the time of this filing. The Company is to receive partial reimbursement of its legal fees. This settlement had no financial impact to the Company at December 31, 2015.appealedprovided counter-evidence. Richard-Allan also failed to purchase further quantities as agreed between the provisionparties. After attempting to resolve the matter through consultation, MEDITE is now preparing to initiate binding arbitration to recover the $115,275 and $1,073,700 contractually available to it for Richard-Allan's failure to purchase further quantities under the contract and $72,000 for inventory produced specific to the contractual terms. The Company has reserved a portion of the verdict which applies to the possible penalty as described.outstanding balance of $115,275, pending final resolution of this matter.Mine Safety Disclosures PART IIMarket for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Ouron the OTC Bulletin Board under the symbol “MDIT”. on the OTCQB. The OTCQB is the middle tier of the three marketplaces for trading over-the-counter stocks provided and operated by the OTC Markets Group.24 High Low Year Ended December 31, 2014 1st Quarter $ 10.00 $ 1.01 2nd Quarter $ 3.75 $ 1.90 3rd Quarter $ 3.10 $ 0.52 4th Quarter $ 9.00 $ 1.50 Year Ended December 31, 2013 1st Quarter $ 2.60 $ 0.54 2nd Quarter $ 2.50 $ 1.10 3rd Quarter $ 2.00 $ 0.50 4th Quarter $ 2.00 $ 1.00 Year Ended December 31, 2015 High Low 1st Quarter $ 9.00 $ 1.89 2nd Quarter $ 2.40 $ 1.60 3rd Quarter $ 2.40 $ 1.60 4th Quarter $ 1.38 $ 0.65 Year Ended December 31, 2014 1st Quarter $ 10.00 $ 1.01 2nd Quarter $ 3.75 $ 1.90 3rd Quarter $ 3.10 $ 0.52 4th Quarter $ 9.00 $ 1.50 May 6, 2015, weApril 7, 2016, the Company had approximately 440536 record holders of shares of our common stock.We haveourMEDITE common stock, and our Board of Directors is not contemplating paying dividends at any time in the foreseeable future. The terms of certain of our securities, including our Series B, C, D and E preferred stock, prohibit usthe Company from declaring any dividends on our common stock (or any other stock junior to such security) except for dividends payable in shares of stock of the Company of any class junior to such security, or redeem or purchase or permit any subsidiary to purchase any shares of common stock or such junior stock, or make any distributions of cash or property among the holders of the common stock or any junior stock by the reduction of capital stock or otherwise, if any dividends on the security are then in arrears.We have$ 1,890,251$1,320,638 at December 31, 2015, $1,886,499 at December 31, 2014, $ 1,763,395 at December 31, 2013, which we intend to paysettle through the issuance of shares of our common stock, if and when the holders of the preferred shares elect to convert their shares into common stock.OurDuring the year ended December 31, 2013, the former CytoCore issued an aggregate of 150,000 shares of restricted, unregistered common stock to qualified investors for $300,000, or $2.00 per share.During the year ended December 31, 2013, the former CytoCore issued to two of its directors, Mauro Scimia (“Scimia”) and Xavier Carbonell (“Carbonell”), 9,028 and 18,055 shares of restricted, unregistered common stock, respectively, for consulting services rendered, and the Company recorded a charge of $52,500, or $2.00 per share, as a selling, general and administrative expense.The former CytoCore during the year ended December 31, 2013, also issued 23,461 shares of restricted, unregistered common stock to a consultant for services rendered, and recorded $36,000 as a selling, general and administrative expense.During the year ended December, 2013, Robert McCullough, our Chief Executive Officer and Chief Financial Officer, converted $3,250,000 of debt owed to him into 1,625,000 shares of restricted, unregistered common stock at a price of $2.00 per share.In addition, the former CytoCore issued to two current independent directors, Alexander Milley and Dr. John Abeles, an aggregate 75,000 shares of restricted, unregistered common stock, respectively, for past directors fees totaling $150,000, or $2.00 per share. Also, the Company recorded the payment of $50,000 for services rendered to a former director in the form of 25,000 shares of restricted, unregistered common stock valued at $2.00 per share. These shares have not yet been issued.During the year ended December 31, 2013, the former CytoCore issued to Augusto Ocana (“Ocana”), a director and vice president of the Company, 18,055 shares of restricted, unregistered common stock, for services rendered. The former CytoCore recorded a charge of $35,000, or $2.00 per share, as a selling, general and administrative expense.companyCompany issued 1,259,6251,237,125 shares for $2,024,400$1,979,400 in equity proceeds emanating from the sale of unregistered stock associated with two private placements (PIPE) “Private Placement in Public Entity” at $1.60 per share.companyCompany issued 240,625 shares at $1.60 for proceeds of $385,000.The Company owes Ventana Systems approximately $21,000 under a 2001 promissory note in$385,000 relating to the original principal amount of approximately $62,000. The note matured in 2003 and has been in default since then. PIPE discussed above.$660,000$656,250 into 12,100 shares of the Company’s unregistered common stock.pay Ventana Medical Systems remaining outstanding principleissue to the Purchasers secured promissory notes in the aggregate principal amount of $500,000 with interest accruing at an annual rate of 15% and interestwarrants to purchase up to an aggregate amount of $38,281250,000 shares of the common stock, par value $0.001 per share, of the Company. The Notes mature on the earlier of the third (3rd) month anniversary date following the Closing Date, as defined in the Note, or the third (3rd) business day following the Company’s receipt of funds exceeding one million dollars ($1,000,000) from an equity or debt financing, not including the financing contemplated under the Purchase Agreement. The Notes are secured by the Security Agreement. The Warrants have an initial exercise price of $1.60 per share, which are subject to adjustment, and will be exercisable for a note dated November 30, 2003 currentlyperiod of five (5) years. If the Notes are not redeemed by the Company, each Purchaser is entitled to receive 10% of the principal balance of the Notes outstanding in default.Wewarrants for every month that the Notes are not redeemed.weIt had prior relationships, without engaging in any general solicitation, and without payment of underwriter discounts or commissions to any person.Management’s Discussion and Analysis of Financial Condition and Results of Operations OverviewMEDITE Cancer Diagnostics, Inc. (the “Company”, “we”,“us”), formerly CytoCore, Inc.,Statements of Stockholders’ Equity for the applicable periods. For additional background on the restatement, please see Note 1 to our Consolidated Financial Statements found on page F-8 and “Part II. Item 9A. Controls and Procedures.” ($ in thousands) As Restated Goodwill $ 2,453 $ 2,205 $ 4,658 Total Assets $ 16,439 $ 2,205 $ 18,644 Deferred income tax liability – long-term $ - $ 2,205 $ 2,205 Total liabilities and stockholders’ equity $ 16,439 $ 2,205 $ 18,644 The year 2014 was a transitional year and very important for the Company, with challenges, tremendous achievements and changes for the Company. 7680 employees in threefour countries, a distribution network to about 70 countries worldwide, a well-known and established brand name, a wide range of selling products and the established infrastructure necessary for a company acting in the medical industry. Both company structures and cultures were successfully merged to one new company organization.Even during this transitional year, the Company was successfully growing by 10 % to revenues of $11 million on a consolidated basis.e.g. afor example cost reduction of the former CytoCore research segment by about 50 %, complementary products in the cytology product segment inwhich is now addressing all components from cell collection through cell processing to finally diagnostic tools like cancer markers and screening systems. Some of these productsthem are already selling and some are in a late stage of development expecting to sell within one or two years.The cancer markers developed byformer CytoCore over the last three years are showing excellent results in internal studies. Clinical trials have not been started yet. In management’s opinion, one of the prognostic cancer markers has the ability to displace the current expensive HPV testing methods (e.g. from Roche) by offering a significantly higher specificity and sensitivity. It is not just indicating there is a risk of cancer because of the detection of an HPV virus. Instead it identifies the small fraction of HPV infections that are likely to progress to cancer. It is testing all cells and therefore is showing much better results. It even reduces the cost and disadvantages for the patient of false positive diagnosis. By bringing this promising product into theChinese market, which the Company already set a strategy which will be a major goal for the next two years.Another major goal achievedentered in 2014 was the market entrance into China,2014. It is the fastest growing, and by 2016, we expect tomanagement expects it will be the largest market for ourthe Company’s products. With ourThis is due to its Chinese distributor UNIC Medical we successfully received Chinawho was successful in receiving the Chinese Food and& Drug Administration (“CFDA”) approval for all MEDITE histology and cytology laboratory devices. The UNIC sales team now canis able to sell MEDITE products in China, and currently successfully is successfully doing so already. Byso. During the date of this report, orders for over $500,000 from China have already been placed.year ended December 31, 2015, the Company trained 50 UNIC sales employees and representatives to sell MEDITE equipment. In 2015, MEDITE and UNIC attended a larger Chinese Cytology show and presented MEDITE’s cytology product line. Also, together with UNIC, we arethe Company is part of a government supported project to standardize the histology laboratory process there using MEDITE equipment and consumables for the processing aspectpart of the process, CytoCore assays,MEDITE immuno-assays, and the UNIC technology for digitalization and computer aided diagnostics utilizing the latest cloud technology.Severalproduct developments were broughtproducts closer to marketability during 2015 as listed above. Also, in 2014. As of the date of this filing,early 2015, the German priority patent for thea fully automated system used in the histology lab, a Lab-In-One“Lab-In-One” unit, has beenwas granted. This technology, is in demand withinif successfully accepted by the market following the trend toward higher automation in the industry and has the ability to change the competition in histology.Incompetitive landscape within the industry.segment,product line, the SureThin product line revenue grew in Europe. To sell the complete setEurope and U.S. (non-Gyn applications) during 2015. The Company is in the US, and therefore compete against Hologic’s products, a USprocess of preparing an application to the U.S. Food and Drug Administration (“FDA”) applicationfor SureThin Gyne applications and once approved can compete with some of the dominant suppliers in this $600 million market.Definition: Histology - Cancer diagnostics based on the structures of cells in tissues Cytology - Cancer diagnostics based on the structures of individual cells preparation processfield of cervical, bladder, breast, lung and is expectedother cancer types. It also developed an innovative new type of easy to be submitted soon. This would openuse standardized staining solutions, and a great opportunityvery innovative and effective early cancer detection marker-based assay. These new developments are cost effective solutions able to offer a much cheaper alternative toreplace more expensive competitive products, and therefore are also becoming the existing market leading brand and to win market share of this $600m market.Finally, several important formal achievementsfirst choice for the OTC listing were also realizedgrowing demand in changing the Company’s nameemerging countries.MEDITE Cancer Diagnostics, Inc., using the worldwide established brand which better describes the Company’s focus. We also completed a 1:100 reverse splitpromising innovative new products for cancer risk assessment and an increasing number of our outstanding common stock which significantly reduced the amount of our outstanding shares of common stock and also had the effect of increasing our share price.OutlookManagement believes that its current business will continue to grow and to improve profitability and cash-flows because of new promising products, additional distributiondistributions contracts executed in the last two years, management believes the profitability and the general growthcash-flow of the segment. Significantbusiness will grow and improve. However, significant on-going operating expenditures willmay be necessary to successfully implement our business plan and to develop, manufacture and market our products.new and existing products to achieve the accelerated sales growth targets outlined in the Company’s business plan. To realize the planned growth potential, management will focus its efforts in finishingon 1.) Finishing and gaining approval for the products currently under development increaseand 2.) Increase direct sales in the USAU.S. and continue to work onexpand Chinese market sales by broadening the Chinese marketCompany’s collaborations with the local distributor UNIC. We also will work on continuously optimizing manufacturing costcapacity to increase our gross margin. Implementation of our plans will be contingent upon securing substantial additional debt and/or equity financing, and management will develop strategies to raise additional capital duringfinancing. If the year 2015. If we areCompany is unable to obtain additional capital or generate profitable sales revenues, we may be required to curtail product development and other activities, and in the extreme case, cease operations. No assurances can be given about our ability to obtain capital.activities. The consolidated financial statements presented herein do not include any adjustments that might result from the outcome of this uncertainty.In 2013dailyCompany’s sales primarily are generated in Euro currency. While in 2014 the average exchange rate from USD/Euro to USD was approximately $1.328. In 2014 theexchange rate was approximately $1.329. However, in 2015 through the date of the filing, the daily average rate$1.3290, it has dropped to $1.112. Should that reduction continue throughout the year, our results$1.1097 in 2015, a 16.5% decrease. MEDITE’s sales in USD will appearwere lower on a year over year basis as approximately 90%80% of our activitysales currently occurs in Euros.United StatesU.S. requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.WefootnoteNote 2: Revenue recognition, allowance for doubtful accounts, use of estimates and consolidation.20142015 as compared to Fiscal Year Ended December 31, 20132014 (Dollars in thousand)Because our merger between the former CytoCore, Inc. and MEDITE Enterprise, Inc. was recorded for accounting purposes as a reverse merger, the historical financial statements of the Company became those of MEDITE Enterprise, Inc. All of the transaction history of the former CytoCore, Inc. prior to the merger is no longer included in the attached financial statements. Therefore certain items in the statement of operations are not directly comparable from 2013 to 2014 because they include the results of the former CytoCore, Inc. in 2014 but only the results of MEDITE Enterprise, Inc. are shown in the results for 2013. fiscal year ended December 31, 2014, represented an increase of $1,025, or 10.3%, froma decrease in revenues of $9,958 for the fiscal year ended December 31, 2013. This increase was mainly a result$1,096 or 9.98%. Currently, approximately 80% of the growingCompany’s sales are generated in Euro currency. During 2014, on average, $1.21416 was received for every Euro compared to 2015, where the average exchange rate of Euro for dollars dropped to $1.09061 which decreased the reflected USD value of its EURO revenues by 10.18%. Therefore, the Company’s revenues translated from Euro into dollars may be down year over year, if the exchange rate remains at a constant level, sales would have increased 6.3 % to $11,510. The Company is working to lessen the impact of the Euro’s decline versus the dollar by increasing the percentage of overall product sales in the U.S. and other countries such as China whose currency is not pegged to the Euro. In addition to the decline in revenues related to the USD/EURO conversion, the 2015 revenues were impacted by the decline in sales of the recently market launched cytology product lines to $1,852 (+38 %)CoverTape and the growing revenuedispute discussed under Item 3 – Legal Proceedings with Richard-Allan Scientific Research Company (‘Richard-Allan”), whereby the Company sold $63 of CoverTape in 2015, compared to $734 in 2014. The contract with Richard-Allan required them to meet certain contractual purchase obligations of approximately $1.1 million, and the USACompany was required to $1,396 (+107%).2014, as compared to $5,746 (58% of revenue) for the year ended December 31, 2013.2014. This mainly resulted from a higher percentageshare of distributorsales of own manufactured equipment with slightly higher margins versus direct salesmerchandise supply goods in 20142015, compared to 2013.ourthe Company’s business to keep our existing products competitive and to develop new innovative solutions with interesting market potential that will help us grow future revenues. These expenses include research work for cancer marker consumables and developing work, including engineering and industrial design, for histology and cytology laboratories worldwide. Major parts of these expenses are payroll-related costs for in-house scientific research, mechanical and electrical engineering, instrument related software development staff, prototype expenses and material purchased for R&D.20142015 fiscal year, research and development expenses increased minimally to $1,278 compared $1,243 compared to $934 for 2013. This increase of $309 or 33% is the result of the inclusion of the former CytoCore, Inc. results in 2014, which added approximately $194 versus none in 2013 and internal growth in our R&D in Germany of $115. We expect to continue2014. The Company continues to expend considerable effort and resources necessary to continue to grow our product offerings.2014,2015, SG&A expenses were $2,947 compared to $2,800 versus $2,798 in 2013. Our 2014, costs are now burdened with the administrativean increase of $147. The Company incurred costs of the former CytoCore, Inc. which amounted to approximately $440, which also included one-time audit costs$160 for MEDITE Enterprise Inc. Our SG&A for MEDITE therefore decreased on a year over basis of approximately $438 as a result of a settlement with our former accountants and expenses for overhead for 2015. Another reason for the Increase is the Consolidated Statement of $266 with a former subsidiary of MEDITE and cost reductions of $172.Income$394$599 for 2015 compared to the operating profit of $294 in 2013 MEDITE was primarily the result of inclusion$394 in 2014, is due to the results post-mergerlower net contribution on sales and higher SG&A expenses for the former CytoCore, Inc. which was approximately $638 in operating losses. increase in income tax expense in 20142015 was primarily the result of recording an allowancea reduced tax asset for US deferred tax assetsthe German Subsidiary MEDITE GmbH for net operating losses incurred byits profit in 2015. Overall the US subsidiary of MEDITE, which are now combined with those of the former CytoCore for US income tax reporting purposes. This allowance resulted in the Company is recording income tax expense of approximately $129$78 for 2015, compared to $104 for the US subsidiary of MEDITE. Because of the history of losses for the former CytoCore, Inc. the company has allowed for all the deferred tax assets in the US that result primarily from net operating loss carryforwards.2014, totaled $699, as2015, was $859 compared to the year ended December 31, 2014, of $699 is due to the lower net income of $54. As noted above the primary reasoncontribution on sales and higher SG&A expenses for the loss was the inclusion of the results of the former CytoCore, Inc. and the income tax that resulted from the allowance of the US deferred tax assets.As of20142015, we had a working capital deficitnet cash used in operations of approximately $1,009. However, that deficit includes approximately $2,335$388 compared to $891 for the same period in 2014. During 2015, cash used in operations consisted of higher loss for the period offset by operations comprised of higher collections on accounts receivable for the period, reductions in inventories offset by higher payments on accounts payable and accrued wages and payroll taxes and franchise taxes that we do not intendexpenses.pay until such time as we raise substantial additional cash either through operations or through future equity and debt raises.In 2014$462 for the Company raised gross proceedssame period in 2014. The improvement in this activity relates to less purchases of $1,979equipment in two private placement offerings of its common stock.2015 compared to 2014.$325$385 in the second offering and has contracted with a broker/dealer that was part of the 2014 offeringsprivate placement offering. The Company issued 1,086,250 shares of common stock at $1.60 for proceeds of $1,739 to help the Company raise up to $5 millionPresident of UNIC Medical of China during 2015. UNIC is the Company’s distributor in additional equity in 2015.January2015, the Company’s lines of credit and term notes were repaid by $802 and $162 for 2014. During 2015, MEDITE GmbH reduced its outstanding indebtedness under its master credit line with Hannoversche Volksbank from Euro 1.8 million ($2.0 million as of December 31, 2015) to be under the Euro 1.61.1 million limit imposed by the Bank.($1.2 million as of December 31, 2015). The Company is required to pay down itsremaining line of credit with Hannoversche Volksbank further, by approximately Euro 500,000 on or before May 31, 2015 toof Euro 1.1 million. The bankmillion has already granted extensions to the Companyno maturity date and the Company believes that the bank will workcontinue working with the Company as it raisesattempts to raise additional capital resources through debt or equity. Should the bank be unwillinglook for additional reductions to grant further extensions,the Company’s line of credit, the Company believes that it can obtain bank fundingfinancing elsewhere at equivalent terms or if necessary raise the funds needed through operations.Off-Balance Sheet ArrangementsAs of The balance at December 31, 2014, we did2015 of this master credit line is $1,120, below the required balance.any relationships with unconsolidated entities or financial partners, such as entities often referredan initial exercise price of $1.60 per share, which are subject to as structured finance or special purpose entities, establishedadjustment, and are exercisable for a period of five (5) years. If the Notes are not redeemed by the Company on maturity, each Purchaser is entitled to receive 10% of the principal balance of the Notes outstanding in warrants for every month that the Notes are not redeemed. On March 31, 2016, these Notes matured and the Company has agreed to pay the Purchasers the 10% of the principal balance of the Notes in warrants for the purposemonth of facilitating off-balance sheet arrangementsApril 2016.other contractually narrowin the form of completed or limited purposes. As such, we are not materially exposedexpected to any financing, liquidity, marketbe completed debt/equity raises, to fund our operations for this period and meet all our operating and financial obligations. To that objective, the company expects to consummate a $5.0 million convertible note offering utilizing the services of an investment banker on or credit risk that could arise if we had engagedabout April 30, 2016.such relationships.Item 8.Financial Statements and Supplementary Data20142015 and 2013,2014, together with the reportreports of L J Soldinger Associates LLC, dated April 14, 2014, and the notes thereto,our Independent Registered Public Accounting Firms are filed as part of this Annual Report on Form 10-K commencing on page F-1 and are incorporated herein by reference.Item 9.Changes in and Disagreements With Accountants on Accounting and Financial DisclosureNot Applicable.Item 9A.Controls and ProceduresAn evaluation of the effectiveness of ourorand 15d-15(e) under the Securities Exchange Act of 1934) was carried out by us under the supervision and with the participation of our Chief Executive Officer, who serves as our principal executive officer, and our Chief Financial Officer, who serves as our principal financial officer. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of December 31, 2014, our disclosure controls and procedures were not effective to ensure (i) that information we are required to disclose in reports that we file or submit under the Securities Exchange Act of 1934 is(the “Exchange Act”), that are designed to ensure that information required to be disclosed in our Exchange Act reports are recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms of the Securities and (ii)Exchange Commission, and that such information is accumulated and communicated to our management, including our Chief Executive OofficerOfficer and Chief Financial Officer, in orderas appropriate, to allow timely decisions regarding required disclosure.Ourourits management, including ourits Chief Executive Officer, who serves as our principal executive officer, and ourits Chief Financial Officer, who serves as our principal financial officer, we conducted an assessment of the effectiveness of our internal control over financial reporting. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (‘‘COSO’’) in Internal Control — Integrated Framework. Based on management’s assessment based on the criteria of the COSO, weit concluded that, as of December 31, 2014, our2015, its internal control over financial reporting is not effective at the reasonable assurance level.Our (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the U.S., and that receipts and expenditures of the Company are being made only in accordance with authorization of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our consolidated financial statements. Theresystem over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) during the third and fourth quarters of 2014 and the first, second and third quarters of 2015 and our fiscal quarteryears ended December 31, 2015 and 2014 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.ourits acquisition of MEDITE. Mr. Domanik continues as an employee. There were no disagreements between usthe Company and Dr. Domanik on any matter relating to ourits operations, policies, or practices which led to his resignation.PART IIIName Age Positions with the Company Michaela Ott 4950 Chief Executive Officer and Director Michael Ott 5051 President, Chief Operating Officer and Director Robert F. McCullough, Jr. 6061 Chairman, Chief Financial Officer and Director John H. Abeles, M.D. 71 Director Alexander M. Milley 63 Director (until February 12, 2016) Augusto Ocana M.D. and J.D, 72 Director W. Austin Lewis, IV 40 Director, Head of Audit Committee (since February 12, 2016) Weourits business. We believe that experience, qualifications, or skills in the following areas are most important: accounting and finance; design, innovation and engineering; strategic planning; human resources and development practices; and board practices of other corporations. These areas are in addition to the personal qualifications described in this section. We believeThe Company believes that all of our current Board members possess the professional and personal qualifications necessary for board service, and have highlighted particularly noteworthy attributes for each Board member in the individual biographies below. The principal occupation and business experience, for at least the past five years, and educational background of each current director is as follows:ourthe acquisition of MEDITE on April 3, 2014. Mrs. Ott has served as Co-President of MEDITE GmbH since 2006 and as a director of MEDITE Enterprises, Inc. since 2013. Ms. Ott has a degree in Industrial Business Management, was a major shareholder and COO of a Fiber Optic manufacturer company before and possesses particular knowledge and experience that strengthen the Board’s collective qualifications, skills, and experience.experience. Mrs. Ott is not an officer or director of any other publicly traded company.ourthe acquisition of MEDITE on April 3, 2014. Mr. Ott has served as Co-President of MEDITE GmbH since 2006 and as Chief Executive Officer and President of MEDITE Enterprises, Inc. since 2013. Mr. Ott has a Master of Business Administration in international management, has experience as CFO of a German medical device stock listed company, served as CEO of a German laser technology company and possesses particular knowledge and experience that strengthen the Board’s collective qualifications, skills, and experience. Mr. Ott is not an officer or director of any other publicly traded company.In a civil action brought by the SEC in January 2011, the SEC alleged that Mr. McCullough failed to report transactions in Company securities, failed to accurately report his beneficial ownership of Company securities in our proxy statement, and aided and abetted us in violating Section 15(a) of the Exchange Act. In February 2011, Mr. McCullough consented to the entry of a final judgment pursuant to which he was permanently restrained and enjoined from violating Section 14(a) of the Exchange Act, Section 16(a) of the Exchange Act, and from aiding and abetting violations of Section 15(a) of the Exchange Act and paid a civil penalty in the amount of $100,000. Mr. McCullough is not an officer or director of any other publicly traded company.DUSADU.S. Pharmaceuticals, Inc. and CombiMatrix Corp. Dr. Abeles has also served as a director of I-Flow Corporation (now a subsidiary of Kimberly Clark Corporation) and Oryx Technology Corp. Dr. Abeles possesses particular knowledge and experience in medical education, venture capital and finance, and the pharmaceutical industry that strengthen the Board’s collective qualifications, skills, and experience.Alexander M. Milleyhas been a director of the Company since 1989. Mr. Milley is currently President, Chief Executive OfficerChairman of the Board of ELXSI Corp.J.D., a publicly-held holding company with subsidiaries operating in the restaurant and environmental inspection equipment industries. Mr. Milley has served as Chairman and CEO of ELXSI since September 1989, and was elected President of that company in August 1990. He is also President and Chairman of the Board of Azimuth Corporation, a holding company with subsidiaries operating in the trade show exhibit, retail environment design, and electrical components and fastener distribution industries. From 1988 until 2004, Mr. Milley served as a director and Vice President of Contempo Design, Inc., a designer and manufacturer of trade show exhibits. Contempo Design, Inc. filed a petition a petition under Chapter 11 of the federal Bankruptcy Code in 2004. Mr. Milley was Chairman of the Board and Chief Executive Officer of Bell National Corporation, our predecessor, until December 1998 and was President of Bell National from August 1990 until December 1998. Mr. Milley is the founder, President, sole director and majority stockholder of Milley Management, Inc., a private investment and management-consulting firm. Mr. Milley is also a director and executive officer of Cadmus Corporation, a private investment and management consulting firm, and Winchester National, Inc., an investment holding company. Mr. Milley possesses particular knowledge and experience in finance, management, marketing and public company governance that strengthen the Board’s collective qualifications, skills, and experience.ourthe Company’s executive officers and directors, and holders of more than 10% of the outstanding shares of ourits common stock, to file initial reports of ownership and reports of changes in ownership with the Commission. They are also required to furnish usthe Company with copies of all Section 16(a) forms that they file with the SEC. Based solely on ourthe Company’s review of copies of such forms received by usit and/or any written representations from such persons that no other reports were required with respect to 2014,2015, we believe that all Section 16(a) filing requirements were satisfied in a timely fashion during our fiscal year ended December 31, 2014,2015, except that Drs. Abeles, Mr. MilleyOcana and Mr. OcanaMilley failed to timely file Form 4s.We haveourits Code of Ethics and Business Conduct for Officers, Directors and Employees that applies to all of our officers, directors and employees, including ourits principal executive officer, principal financial officer, and principal accounting officer or controller, or persons performing similar functions. WeThe Company filed the code as an exhibit to our Annual Report on Form 10-KSB for the fiscal year ended December 31, 2003, as filed with the Commission on April 14, 2004. The Code of Ethics is also available on our website at www.medite-group.com.threeone standing committeescommittee – the Audit Committee, theCommittee. The Compensation Committee and the Nominating and Corporate Governance Committee. The Compensation Committee and Nominating and Corporate Governance Committees were established byare going to be re-established with current Directors of the Board in 2008.(Chairman)(Chairman until February 12, 2016) and Dr. Abeles, both of whom are independent under applicable independence requirements. The Board of Directors has determined that Mr. MilleyLewis qualifies as an “audit committee financial expert” as defined in Item 407(d) (5) (ii) of Regulation S-K promulgated under the Exchange Act.2014.ourthe Company’s board of directors during the 20142015 fiscal year.Executive Compensation 20142015 and 2013.Name and Principal Position Year Salary ($) Bonus ($) Stock awards
($) Option
awards ($) (a) (b) (c) (d) (e) (f) Michaela Ott (1) 2014 159,516 (2) - - - CEO 2013 226,347 (2) - - - Michael Ott (3) 2014 159,516 (4) - - - COO anc President 2013 218,395 (4) - - - Robert F. McCullough, Jr. (5) 2014 140,000 (6) - - - CFO and Chairman of the Board 2013 180,000 (6) - - - Richard A. Domanik, Ph.D. (7) 2014 37,500 (8) - - - COO until April 3th, 2014 2013 150,000 (8) - - - Name and Principal Position Year Nonequity
incentive
plan
compensation ($) Nonqualified
deferred
compensation
earnings ($) All other
compensation Total ($) (a) (b) (g) (h) (i) (j) Michaela Ott (1) 2014 - - - 159,516 CEO 2013 - - - 226,347 Michael Ott (3) 2014 - - - 159,516 COO anc President 2013 - - - 218,395 Robert F. McCullough, Jr. (5) 2014 - - - 140,000 CFO and Chairman of the Board 2013 - - - 180,000 Richard A. Domanik, Ph.D. (7) 2014 - - - 37,500 COO until April 3th, 2014 2013 - - - 150,000 2015 144,691 (2) - - - CEO 2014 159,516 (2) - - - 2015 144,691 (4) - - - COO and President 2014 159,516 (4) - - - 2015 100,000 (6) - - - CFO and Chairman of the Board 2014 140,000 (6) - - - 2015 - - - - COO until April 3th, 2014 2014 37,500 - - - 2015 - - - 144,691 CEO 2014 - - - 159,516 2015 - - - 144,691 COO and President 2014 - - - 159,516 2015 - - - 100,000 CFO and Chairman of the Board 2014 - - - 140,000 2015 - - - - COO until April 3th, 2014 2014 - - - 37,500 (1) (2) EURO 120,000(3) (4) EURO 120,000(5) our Chief Executive Officer from October 2007 through April 3, 2014, and as our Chief Financial Officer since September 2005.(6) 20142015 and 2013.2014.(7) Dr. Domanik served as our Chief Operating Officer from October 2007 through April 3, 2014, and has also served as our President from May 2007 until August 2008. (8)Dr. Domanik has deferred payment of 100% of his salary earned in 2013 and through March 31, 2014.Our20142015, as we havethe Company has no plans in place (see below). and $ 226,347 in 2013 based on the employment agreement with MEDITE GmbH. The higher amount in 2013 results form a royalty for profits in the fiscal year 2012 of the subsidiary MEDITE GmbH,$ 159,516$144,691 in 20142015 and $ 218,395$159,516 in 20132014 based on the employment agreement with MEDITE GmbH. The higher amount in 2013 results form a royalty for profits in the fiscal year 2012 of the subsidiary MEDITE GmbH,$ 140,000$100,000 in 20142015 and $180,000$140,000 in 2013,2014, respectively, and has elected to defer payment of 100% of such salary.We havehavehad been established. Specifically, we payit paid Dr. Domanik an annual salary of $75,000 (before$150,000 before April 2014: $150,000),3, 2014, standard benefits as provided to other employees, and reimbursement of reasonable business expenses. Dr. Dominick elected to defer salary totaling $150,000 for the 2013 and $37,500 for the first quarter of 2014 until fiscal years.In 1999, we adopted the 1999 Equity Incentive Plan and the 1999 Employee Stock Purchase Plan, both of which expired in 2009. For additional information, see“Equity Incentive Plan and Employee Stock Purchase Plan” in Item 12 below.We do20142015 fiscal year. Fees Earned or Paid in Cash Total Name ($) ($) Michaela Ott 159,516 (1) 159,516 Michael Ott 159,516 (1) 159,516 Robert F. McCullough 140,000 (1) 140,000 John H. Abeles, M.D. 20,000 (2) 20,000 (3) Alexander M. Milley 20,000 (2) 20,000 (3) Augusto Ocana 20,000 (4) 20,000 (3) (1) Mrs. Ott, Mr. Ott and Mr. McCullough are management members of our board of directors and not separately compensated for his service on the board of director(2) Represents director fees with respect to fiscal year 2014. This amount includes $5,000 in fees payable to each director which were paid through the issuance of common stock.(3) As of December 31, 2014, each of these directors is entitled to receive 1,000 (100,000 before the reverse split) shares of common stock in connection with a stock bonus provided to each of our directors in 2009. (4) Does not include consulting fees and sales commissions earned in 2014. See“Certain Relationships and Related Transactions, and Director Independence” in item 13 below. Michaela Ott 144,691 (1) 144,691 Michael Ott 144,691 (1) 144,691 Robert F. McCullough 100,000 (1) 100,000 John H. Abeles, M.D. 20,000 (2) 20,000 (3) Alexander M. Milley 20,000 (2) 20,000 (3) Augusto Ocana M.D. and J.D. 20,000 (4) 20,000 (3) (1) Mrs. Ott, Mr. Ott and Mr. McCullough are management members of our board of directors and not separately compensated for his service on the board of director (2) Represents director fees with respect to fiscal year 2015. This amount includes $5,000 in fees payable to each director which were paid through the issuance of common stock. (3) As of December 31, 2015, each of these directors is entitled to receive 1,000 (100,000 before the reverse split) shares of common stock in connection with a stock bonus provided to each of our directors in 2009. (4) Wepay ourpays its outside directors a quarterly fee of $5,000 as compensation for their service on ourits board of directors. Since 2009, ourits directors have deferred receipt of such fees. WeIt also reimbursereimburses all directors for their reasonable expenses incurred in connection with attendance at meetings of the board of directors.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 20142015, with respect to holdings of our common stock by (i) each person known by us to be the beneficial owner of more than 5% of the total number of shares of common stock outstanding as of such date, (ii) each of our directors and executive officers, and (iii) all directors and executive officers as a group. Except as otherwise indicated, the address of each person is c/o MEDITE Cancer Diagnostics, Inc., 4203 SW 34th Street, Orlando, FL 32811, USA. Amount and Nature of Percent Name and Address of Beneficial Owner Beneficial Ownership(1) of Class Michaela Ott 14,687,500 (2) 75.7 % Michael Ott 14,687,500 (3) 75.7 % Robert F. McCullough, Jr. 1.676,907 (4) 8.6 % Augusto Ocana 124,422 * Alexander M. Milley 46,530 (6) * John H. Abeles, M.D. 126,256 (5) * All current directors and executive officers as a group
(6 persons) 16,661,615 85.9 % Name and Address of Beneficial Owner Michaela Ott 15,000,000 (2) 71.2 % Michael Ott 15,000,000 (3) 71.2 % Robert F. McCullough, Jr. 1,676,907 (4) 8.0 % Zhongxi Zheng, M.D. 1,086,250 5.2 % Augusto Ocana, M.D. and J.D. 124,422 * Alexander M. Milley 46,530 (6) * John H. Abeles, M.D. 126,256 (5) * 18,060,365 85.8 % ·Less than one percent(1) Unless otherwise indicated, each of the persons named in the table has sole voting and investment power with respect to the shares set forth opposite such person’s name. With respect to each person or group, percentages are calculated based on the number of shares beneficially owned, including shares that may be acquired by such person or group within 60 days of December 31, 20142015 upon the exercise of stock options, warrants or other purchase rights, but not the exercise of options, warrants or other purchase rights held by any other person. There were 19,400,66121,055,890 shares of common stock outstanding as of the close of business on April 15, 2015.7, 2016. (2) Includes: (i) 7,343,7507,500,000 shares held by Mrs. Ott’s husband, Michael Ott.(3) Includes: (i) 7,343,7507,500,000 shares held by Mr. Ott’s wife, Michaela Ott.(4) Includes an aggregate 1,662 shares owned by various trusts of which Mr. McCullough is trustee as follows: MJM Educational Trust (150) shares, PFM Educational Trust (150 shares), CDM Educational Trust (150) shares and the MPC Trust (1,212 shares). (5) Includes: (i) 67,756 shares owned by Northlea Partners, Ltd., of which Dr. Abeles is General Partner; and (ii) 1000 shares of common stock awarded in 2009 that have not yet been issued. Dr. Abeles disclaims beneficial ownership of all shares owned by, or issuable to, Northlea Partners except shares attributable to his 1% interest in Northlea Partners as General Partner. (6) Includes: (i) 1,496 shares held by Azimuth Corporation, of which Mr. Milley is President and Chairman of the Board of Directors, 4,293 shares held by Cadmus Corporation, of which Mr. Milley is President and a director, 803 shares held by Milley Management, Inc., of which Mr. Milley is President, sole director and majority stockholder, and 237 shares held by Winchester National, Inc., of which Mr. Milley is a director and executive officer; and (ii) 1,000 shares of common stock awarded in 2009 that have not yet been issued. An aggregate of 4,029 shares of common stock held directly by Mr. Milley, Cadmus Corporation, Winchester National and Milley Management have been pledged to ELXSI Corp., of which Mr. Milley is President, Chief Executive Officer and Chairman of the Board. as of April 15, 2015 with respect to holdings of our Series E Convertible Preferred Stock by (i) each person known by us to be the beneficial owner of more than 5% of the total number of shares of ourthe Company’s Series E Convertible Preferred Stock outstanding as of such date, (ii) each of our directors and executive officers, and (iii) all directors and executive officers as a group. Amount and Nature of Percent Name and Address of Beneficial Owner(1) Beneficial Ownership(2) of Class Kevin F. Flynn June 1992 Non-Exempt Trust 68 (3) 35.8 % 120 South LaSalle Street Chicago, IL 60602 Rolf Lagerquist 20 (4) 10.5 % 4522 CO Road 21 NE Elgin, MN 55932 68 (3) 35.8 % 20 10.5 % (1) No executive officers or directors own any shares of Series E Convertible Preferred Stock. (2) Unless otherwise indicated, each of the persons named in the table has sole voting and investment power with respect to the shares set forth opposite such person’s name. With respect to each person or group, percentages are calculated based on the number of shares beneficially owned, including shares that may be acquired by such person or group within 60 days of April 15, 2015 upon the exercise of stock options, warrants or other purchase rights, but not the exercise of options, warrants or other purchase rights held by any other person. There were 190 shares of Series E Convertible Preferred Stock outstanding as of the close of business on April 15, 2015.7, 2016.(3) Converts into 407 shares of common stock, including shares issuable upon payment of cumulative dividends. (4) Converts into 123 shares of common stock, including shares issuable upon payment of cumulative dividends. Number of securities Number of securities remaining available for future to be issued upon Weighted-average issuance under equity exercise of outstanding exercise price of compensation plans (excluding options, warrants and outstanding options, securities reflected in column Plan category rights warrants and rights (a)) (a) (b) (c) Equity Compensation Plans Approved by Security Holders None — — — Equity Compensation Plans Not Approved by Security Holders Warrants issued for officer, director and employee compensation (1) 390 $ 1.00 — Total 390 $ 1.00 — Plan category (a) (b) (c) Equity Compensation Plans Approved by Security Holders None — — — Equity Compensation Plans Not Approved by Security Holders Warrants issued for officer, director and employee compensation (1) 390 $ 1.00 — Total 390 $ 1.00 — (1) 1)We haveThe Company has issued warrants in lieu of cash payment for employment services, for achieving certain goals or for other corporate reasons. During fiscal year 2014, we2015, it issued no employee warrants to that non-executive employee which his contract was terminated by April, 2014.75.771.2 % of the company’s common stock.Certain Relationships and Related Transactions, and Director Independence usthe Company and certain related persons. For more information on the compensation received by ourthe Company’s directors and officers, and the beneficial ownership of equity securities of the Company by such individuals, see Item 11 “Executive Compensation ” and Item 12 “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters ” above.Chairman of the Board of Directorsusthe Company an aggregate $159,500 during the 2013fiscal year, respectively. The amount of 10,0002013 fiscal year. $10,000 was repaid in 2014 and $40,000 was repaid during 2015. On May 20, 2013, we issued 1,625,000 shares of our common stock to Mr. McCullough for the cancellation of $3.25 million of outstanding indebtedness payable by us to Mr. McCullough. The Company owes an aggregate outstanding balance of $110,006$70,000 as of December 31, 2015 which is payable upon demand plus $1,700 of imputed interest.doesChairman of the Audit Committeeaccrue interest.2014,2015, we engaged in the following transactions with ourits directors:2013 we2014, the Company issued 18,05533,514 shares of common stock to Dr. Augusto Ocana in payment of consulting services and paid $8,875 to Mr. Ocana in payment of commissions and reimbursement of expenses incurred on sales of our products. In 2014 we issued 33,514 shares of common stock to him in payment of consulting services untilaccrued through April 30, 2014 and2014. At December 31, 2015, the Company accrued payments of $5,000 per month forfrom May 1, 2014 to July 31, 2014, when isthe contract was terminated.ourthe Company’s decisions are based on considerations other than the best interests of usit and ourits stockholders. The Board of Directors, therefore, adopted a written policy in May 2008, that requires the review, approval or ratification of all such transactions by the Audit Committee of the Board of Directors in accordance with the procedures established for such transactions.wethe Company or any subsidiary is, was or will be a participant and in which a related person has, had or will have a direct or indirect interest. A “related person” includes executive officers, directors and nominees for election as a director, five percent holders, and any immediate family members of the foregoing. It also includes entities in which any of the foregoing is employed or is a partner or principal or in a similar position, or in which such person has a five percent or greater beneficial ownership interest.usthe Company for the coming calendar quarter, including the material terms of such transactions, the parties involved, the interests of the related person(s) in such transactions, and the proposed aggregate value of each such transaction (if calculable). After review, the Audit Committee must approve or disapprove such transactions and at each subsequently scheduled meeting, management must update the Audit Committee as to any material change to those proposed transactions. If advance approval of a related person transaction is not feasible, such transactions may be preliminarily entered into by management, subject to ratification by the Audit Committee at its next meeting. A transaction also may be approved by the Chairman of the Audit Committee, who possesses delegated authority to act between meetings, in circumstances where it is not practicable or desirable for usthe Company to wait until the next committee meeting. · the risks and benefits of such transaction to us;the Company; · the extent of the related person’s interest in the transaction; · the impact on a director’s independence in the event the related person involved in the transaction is a director, an immediate family member or an affiliated entity; · if applicable, the availability of other sources of comparable products and services; and · whether such transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances. ourthe Company’s stockholders, as the Audit Committee determines in good faith. The committee may also determine to provide standing approval of certain types of transactions. No director shall participate in any discussion or approval of a related person transaction for which he or she is a related person, except that the director is required to provide all material information concerning such transaction as requested by the Audit Committee or the Board of Directors.we havethe Company has determined that Dr. Abeles and Mr. Milley are independent. With regard to ourthe Company’s audit committee, the board of directors has determined that Dr. Abeles and Mr. Milley, who constitute all members of the audit committee, are independent with respect to the independence criteria for audit committee members set forth in Rule 5605(c)(2) of the rules of the NASDAQ Stock Market and Rule 10A-3(b)(1) of the Exchange Act.Principal Accountant Fees and Services ourthe Company’s independent registered public accounting firm each ofuntil the May 8, 2015 for the fiscal years endingended December 31, 2014 and 2013.20132015 and 2012,2014, respectively:Services Performed 2014 2013 Audit Fees(1) $ 205,961 $ 80,000 Audit-Related Fees(2) 4,644 1,680 Tax Fees(3) 3,598 4,352 All Other Fees(4) — — Total Fees $ 214,203 $ 86,032 Services Performed 2015 2014 Audit Fees(1) $ 174,929 $ 205,961 Audit-Related Fees(2) - 4,644 Tax Fees(3) 9,472 3,598 All Other Fees(4) 160,000 — Total Fees $ 344,401 $ 214,203 (1) Audit fees represent fees billed for professional services rendered for the audit of our annual financial statements and review of the financial statements included in ourthe Company’s quarterly reports or services that are normally provided in connection with statutory and regulatory filings or engagements.(2) Audit-related fees represent fees billed for assurance and related services reasonably related to the performance of the audit or review of our financial statements not reported in (1) above, including those incurred in connection with securities registration and/or other issues resulting from that process. (3) Tax fees represent fees billed for professional services rendered for tax compliance, tax provision, tax advice and tax planning services. (4) All other fees principally would include fees billed for products and services provided by the accountant, other than the services reported under the three captions above. The Company’s former auditor L.J. Soldinger and Associates filed a claim against the Company in Illinois’ Lake County Superior Court. The Company believes the claims are without merit and has adequately reserved for costs associated with the claim at December 31, 2105. In February 2016, the Company settled with our former accountants in the amount of $160,000 and upon reaching a settlement, L. J. Soldinger and Associates filed a dismissal of all claims with the court. ourthe Company’s independent registered public accounting firm. In connection with such responsibilities, the Audit Committee is required, and it is the Audit Committee’s policy, to pre-approve the audit and permissible non-audit services (both the type and amount) performed by ourits independent registered public accounting firm in order to ensure that the provision of such services does not impair the firm’s independence, in appearance or fact.usthe Company during fiscal 2014. Non-audit services provided to us during fiscal year 2014 were for tax compliance.1.Financial Statements2.Financial Statement Schedules3.ExhibitsExhibit No. Description 2.1 2.2 Amendment No. 1 to Stock Purchase Agreement by and among CytoCore, Inc., MEDITE Enterprises, Inc., MEDITE GMBH, Michael Ott and Michaela Ott dated March 15, 2014 (incorporated herein by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K dated March 15, 2014.) 2.3 Amendment No. 2 to Stock Purchase Agreement by and among CytoCore, Inc., MEDITE Enterprises, Inc., MEDITE GMBH, Michael Ott and Michaela Ott dated March 15, 2014 (incorporated herein by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K dated April 1, 2014.) 3.1 Certificate of Incorporation of the Company (incorporated herein by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K dated September 26, 2001.) 3.2 By-laws of the Company (incorporated herein by reference to Appendix E to the 1999 Proxy Statement.) 3.3 Certificate of Designation, Preferences and Rights of Series A Convertible Preferred Stock of the Company (incorporated herein by reference to Exhibit 3.5 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2000, as filed with the SEC on March 29, 2001) 3.4Certificate of Designation, Preferences and Rights of Series B Convertible Preferred Stock of the Company (incorporated herein by reference to Exhibit 3.6 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2000, as filed with the SEC on March 29, 2001)3.5 Section 6 of Article VII of the By-laws of the Company, as amended. (incorporated herein by reference to Exhibit 3.3 to the Company’s registration statement on Form S-4 (Reg. # 333-61666), as filed with the SEC on May 25, 2000) 3.6 Certificate of Designation, Preferences and Rights of Series CA Convertible Preferred Stock (incorporated herein by reference to Exhibit 3.4 to the Company’s registration statement on Form S-2 (Reg. # 333-83578), as filed with the SEC on February 28, 2002) 3.7 Certificate of Amendment of Certificate of Designation, Preferences and Rights of Series CB Convertible Preferred Stock (incorporated herein by reference to Exhibit 3.5 to the Company’s registration statement on Form S-2 (Reg. # 333-83578), as filed with the SEC on February 28, 2002) 3.8 Certificate of Amendment of Amended Certificate of Designation, Preferences and Rights of Series C Convertible Preferred Stock (incorporated herein by reference to Exhibit 3.6 to the Company’s registration statement on Form S-2 (Reg. # 333-83578), as filed with the SEC on February 28, 2002) 3.9 Certificate of Designations, Preferences and Rights of Series D Convertible Preferred Stock (incorporated herein by reference to Exhibit 3.7 to the Company’s registration statement on Form S-2 (Reg. # 333-83578), as filed with the SEC on February 28, 2002) 3.10 Certificate of Designation, Preferences and Rights of Series E Convertible Preferred Stock (incorporated herein by reference to Exhibit 3.8 to the Company’s registration statement on Form S-2 (Reg. # 333-83578), as filed with the SEC on February 28, 2002) 3.11 Certificate of Amendment to Certificate of Incorporation of the Company, dated August 5, 2004 (incorporated herein by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-QSB for the quarter ended June 30, 2004, as filed with the SEC on August 16, 2004) 3.12 Certificate of Amendment to Certificate of Incorporation, dated June 22, 2006 (incorporated herein by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-QSB for the quarter ended June 30, 2006, as filed with the SEC on August 21, 2006) 3.13 Certificate of Amendment to Certificate of Incorporation of the Company, dated June 22, 2007 (incorporated herein by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-QSB for the quarter ended June 30, 2007, as filed with the SEC on August 17, 2007) 3.14 Certificate of Amendment to Certificate of Incorporation of the Company, dated November 19, 2007 (incorporated herein by reference to Exhibit 3.14 to the Company’s Annual Report on Form 10-KSB for the year ended December 31, 2007, as filed with the SEC on April 2, 2008)4.1 Registration Rights Agreement in connection with $7 million maximum offering of Units completed in March 2008 (incorporated herein by reference to Exhibit 4.22 to the Company’s Annual Report on Form 10-KSB for the year ended December 31, 2007, as filed with the SEC on April 2, 2008) 4.2 Form of Warrant in connection with $7 million maximum offering of Units completed in March 2008 (incorporated herein by reference to Exhibit 4.23 to the Company’s Annual Report on Form 10-KSB for the year ended December 31, 2007, as filed with the SEC on April 2, 2008) 10.1 Service agreement with Cell Solutions, LLC. Dated October 9, 2009 (incorporated herein by reference to Exhibit 10.25 to the Company’s annual report on Form 10-K for the year ended December 31, 2009, filed with the SEC on May 15, 2010) 10.2 Distribution Service Agreement with Amsino International, Inc. dated April 14, 2010 (incorporated herein by reference to Exhibit 10.28 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2009, filed with the SEC on May 15, 2010) 10.3 Consulting Agreement with Dr. Mauro Scimia dated April 14, 2010 (incorporated herein by reference to Exhibit 10.27 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2009, filed with the SEC on May 15, 2010)10.4 Securities Purchase Agreement dated December 31, 2015 filed on January 7, 2016 on Form 8-K (incorporated herein by reference to Exhibit 10.4 herein) 10.5 Form of Secured Promissory Note dated December 31, 2015 filed on January 7, 2016 on Form 8-K (incorporated herein by reference to Exhibit 10.5 herein) 10.6 10.7 Form of Warrant dated December 31, 2015 filed on January 7, 2016 on Form 8-K (incorporated herein by reference to Exhibit 10.7 herein) 14.1 Code of Ethics and Business Conduct of Officers, Directors and Employees of CytoCore, Inc. (incorporated herein by reference to Exhibit 99.1 to the Company’s Annual Report on Form 10-KSB for the year ended December 31, 2003, filed with the SEC on April 14, 2004) 31.1* Certification of the Chief Executive Officer of the Company pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2* Certification of the Chief Financial Officer of the Company pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1* Certification of the Chief Executive Officer of the Company pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 32.2* Certification of the Chief Financial Officer of the Company pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 101.INS** XBRL Instance Document 101.SCH** XBRL Taxonomy Extension Schema Document 101.CAL** XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF** XBRL Taxonomy Extension Definition Linkbase Document 101.LAB** XBRL Taxonomy Extension Label Linkbase Document 101.PRE** XBRL Taxonomy Extension Presentation Linkbase Document MEDITE Cancer Diagnostics, Inc. By: /s/ Michaela Ott Michaela Ott Date: May 08, 2015 By: /s/ Robert McCullough, Jr. Robert McCullough, Jr. Chief Financial Officer Principal Financial Officer Date: May 08, 2015April 12, 2016 Signature Title Date /s/ Michaela Ott Chief Executive Officer May 08, 2015April 12, 2016 Michaela Ott (Principal Executive Officer) and Director /s/ Michael Ott Chief Operating Officer and May 08, 2015 Michael Ott Director /s/ Robert McCullough, Jr. Chief Financial Officer May 08, 2015Robert McCullough, Jr. (Principal Financial Officer) and Director /s/ Alexander M. MilleyW. Austin Lewis IV Director May 08, 2015Alexander M. MilleyW. Austin Lewis IV /s/ John Abeles, M.D. Director May 08, 2015John Abeles, M.D. /s/ Augusto Ocana M.D., J.D. Director May 08, 2015Augusto Ocana
MEDITE CANCER DIAGNOSTICS, INC. AND SUBSIDIARIES Page ReportReports of Independent Registered Public Accounting FirmFirmsF-2 Consolidated Balance Sheets F-3Consolidated Statements of Operations and Comprehensive IncomeF-4 Consolidated Statements of Cash FlowsOperations and Comprehensive LossF-5 Consolidated Statements of Stockholders’ EquityCash FlowsF-6 Notes to FinancialConsolidated Statements of Stockholders’ EquityF-7 Notes to Consolidated Financial Statements F-8 REGISTEREDREGISTRERED PUBLIC ACCOUNTING FIRMTo the of Medite, Inc.sheetssheet of MEDITE Cancer Diagnostics, Inc. and Subsidiaries (the Company) as of December 31, 2015, and the related consolidated statements of operations and comprehensive loss, cash flows, and stockholders' equity for the year then ended. These consolidated financial statements are the responsibility of the entity’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. The consolidated financial statements of MEDITE Cancer Diagnostics, Inc. and Subsidiaries as of and for the year ended December 31, 2014, were audited by other auditors who expressed an unmodified opinion on those statements in their report dated May 8, 2015.2013, and the related consolidated statements of operations and comprehensive income (loss), shareholders' equity and cash flows, and stockholders' equity for the years ended December 31,year then ended. The 2014 and 2013. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.auditsaudit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of its internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provideaudit provides a reasonable basis for our opinion.2013 and the results of their operations and cash flows for the yearsyear then ended December 31, 2014 and 2013, in conformity with U.S. generally accepted accounting principles.
MEDITE CANCER DIAGNOSTICS, INC. AND SUBSIDIARIES December 31, 2014 2013 Assets Current Assets: Cash $ 230 $ 75 Accounts receivable, net of allowance for doubtful accounts 1,991 1,594 Inventories 3,415 3,953 Prepaid expenses and other current assets 154 487 Total current assets 5,790 6,109 Property and equipment, net 2,091 1,867 In-process Research and Development 4,620 Trademarks, trade names 1,240 Goodwill 2,453 - Other Assets 245 194 Total assets $ 16,439 $ 8,170 Liabilities and Stockholders’ Equity Current Liabilities: Secured lines of credit and current portion of long-term debt $ 2,555 $ 2,739 Account payable and accrued expenses 4,134 1,236 Advance – Related Parties 110 - Total current liabilities 6,799 3,975 Long term debt, net of current portion 1,209 1,571 Total Liabilities 8,008 5,546 Commitments and Contingencies Stockholders’ Equity : Preferred stock, $0.001 par value; 10,000,000 shares authorized; 373,355 shares issued and outstanding as of December 31, 2014 (liquidation value of all classes of preferred stock $2,871 as of December 31, 2014) 1,487 - Common stock, $0.001 par value; 3.5 billion shares authorized, 19,427,331 and 14,687,500 issued, issuable and outstanding as of December 31, 2014 and 2013 respectively 19 15 Additional paid-in capital 5,763 (15 ) Treasury Stock (327 ) - Accumulated other comprehensive income (loss) (149 ) 287 Retained Earnings 1,638 2,337 Total stockholders’ equity 8,431 2,624 Total liabilities and stockholders’ equity $ 16,439 $ 8,170 *Derived from audited information December 31, 2015 Assets Current Assets: Cash $ 587 $ 230 Accounts receivable, net of allowance for doubtful accounts of $83 and $200 1,798 1,991 Inventories 3,075 3,415 Prepaid expenses and other current assets 186 154 Total current assets 5,646 5,790 Property and equipment, net 1,941 2,091 In-process research and development 4,620 4,620 Trademarks, trade names 1,240 1,240 Goodwill 4,658 4,658 Other assets 273 245 Total assets $ 18,378 $ 18,644 Liabilities and Stockholders’ Equity Current Liabilities: Secured lines of credit and current portion of long-term debt $ 2,857 $ 2,555 Notes due to employees, current portion 202 Account payable and accrued expenses 3,032 4,134 Advance – related party 70 110 Total current liabilities 6,161 6,799 Long term debt, net of current portion 121 1,209 Notes due to employees, net of current portion 725 - Deferred tax liability – long-term 2,205 2,205 Total Liabilities 9,212 10,213 Commitments and Contingencies Stockholders’ Equity : Preferred stock, $0.001 par value; 10,000,000 shares authorized; 198,355 and 373,355 shares issued and outstanding as of December 31, 2015 and 2014, respectively (liquidation value of all classes of preferred stock $2,442 and $2,871 as of December 31, 2015 and 2014, respectively) 962 1,487 Common stock, $0.001 par value; 35 million shares authorized, 21,055,990 and 19,427,331 issued and outstanding as of December 31, 2015 and 2014, respectively 21 19 Additional paid-in capital 8,340 5,763 Treasury stock (327 ) (327 ) Accumulated other comprehensive (loss) (609 ) (149 ) Retained earnings 779 1,638 Total stockholders’ equity 9,166 8,431 Total liabilities and stockholders’ equity $ 18,378 $ 18,644 INCOME Year Ended December 31, 2014 2013 Net Sales $ 10,983 9,958 Operating Expenses Cost of revenues 7,164 5,746 Depreciation and amortization expense 170 202 Research and development 1,243 934 Selling, general and administrative 2,800 2,782 Total cost and expenses $ 11,377 9,664 Operating Income (Loss) $ (394 ) 294 Other Expenses Interest expense 276 314 Interest Income - (48 ) Other expenses (income) (75 ) (45 ) Total other expenses 201 221 Income (loss )from operations before income taxes $ (595 ) 73 Income taxes (benefit) 104 19 Net Income (loss) $ (699 ) 54 Preferred dividend (109 ) - Net Income (loss) to common stockholders (808 ) 54 Statement of Comprehensive Income Net Income (loss) (699 ) 54 Other Comprehensive income (loss) Foreign currency translation adjustments (436 ) 168 Comprehensive income (loss) (1,135 ) 222 Earnings Per Share Net income (loss) to common stockholders (808 ) 54 Basic and diluted earnings per share (0.04 ) 0.00 Weighted average basic and diluted shares outstanding (after 1:100 reverse split) 18,116,000 14,687,500 Years Ended December 31, 2015 2014 Net Sales $ 9,887 $ 10,983 Operating Expenses Cost of revenues 6,084 7,164 Depreciation and amortization expense 177 170 Research and development 1,278 1,243 Selling, general and administrative 2,947 2,800 Total cost and expenses 10,486 11,377 Operating loss (599 ) (394 ) Other Expenses Interest expense, net 204 276 Other income (22 ) (75 ) Total other expenses 182 201 Loss before income tax expense (781 ) (595 ) Income tax expense 78 104 Net loss (859 ) (699 ) Preferred dividend (78 ) (109 ) Net loss available to common stockholders $ (937 ) $ (808 ) Statements of Comprehensive Loss Net loss $ (859 ) $ (699) Other comprehensive loss Foreign currency translation adjustments (460) (436) Comprehensive loss $ (1,319) $ (1,135) Loss Per Share Net loss available to common stockholders $ (937) $ (808) Basic and diluted loss per share $ (0.05) $ (0.04) Weighted average basic and diluted shares outstanding 20,194,732 18,116,000
MEDITE CANCER DIAGNOSTICS, INC. AND SUBSIDIARIES Year Ended December 31, 2014 2013 Cash Flows from Operating Activities: Net Income (loss) $ (699 ) $ 54 Adjustments to reconcile net income (loss) to cash (used in) provided by operations Depreciation and amortization 170 202 Deferred taxes 80 (33 ) Non-cash Interest 2 - Changes in assets and liabilities: Accounts receivable and allowance for doubtful accounts (594 ) (141 ) Inventories 146 (557 ) Prepaid expenses and other current assets 114 177 Accounts payable and accrued liabilities (110 ) (106 ) Net cash (used in) provided by operating activities (891 ) (404 ) Cash Flows from Investing activity: Purchase of Equipment (463 ) (95 ) Cash Acquired in Merger 1 - Net cash provided from (used in) investing activities (462 ) (95 ) Cash Flows from Financing activities: Advances net of repayments on lines of credit 40 644 Proceeds from Sale of Common Stock 1,979 - Term note repayments (202 ) (210 ) Repayment of related party advance (10 ) Equity raise costs (103 ) - Net cash provided by (used by) financing activities 1,704 434 Effect of exchange rates on cash and cash equivalents (196 ) 75 Net increase in cash and cash equivalents 155 10 Cash and cash equivalents at beginning of year 75 65 Cash and cash equivalents at end of the period $ 230 $ 75 Supplemental disclosure of cash flow information: Cash paid for interest $ 276 $ 314 Cash paid for income taxes $ 124 $ - Years Ended December 31, 2015 2014 Cash Flows from Operating Activities: Net loss $ (859 ) $ (699 ) Adjustments to reconcile net loss to cash used in operations Depreciation and amortization 177 170 Deferred tax expense 78 80 Non-cash Interest - 2 Changes in assets and liabilities: Accounts receivable and allowance for doubtful accounts 193 (594 ) Inventories 340 146 Prepaid expenses and other current assets (32) 114 Accounts payable and accrued liabilities (285 ) (110 ) Net cash in operating activities (388 ) (891 ) Cash Flows from Investing activity: Purchase of other assets (146 ) - Purchase of Equipment (208 ) (463 ) Cash Acquired in Merger - 1 Net cash used in investing activities (354 ) (462 ) Cash Flows from Financing activities: Repayments on secured lines of credit and long-term debt (802 ) (162 ) Proceeds from sales of common stock 2,124 1979 Proceeds from secured promissory notes 500 - Repayment of related party advance (40 ) (10 ) Stock issuance costs (70 ) (103 ) Net cash provided by financing activities 1,712 1,704 Effect of exchange rates on cash and cash equivalents (613 ) (196 ) Net increase in cash 357 155 Cash at beginning of year 230 75 Cash at end of the period $ 587 $ 230 Supplemental disclosure of cash flow information: Cash paid for interest $ 197 $ 276 $ 77 $ 124 Issuance of warrants related to secured promissory notes classified as warrant liability and discount on secured promissory notes $ 90 $ - Debt issuance costs included in accounts payable and accrued expenses $ 20 $ - Conversion of accrued wages into notes to employees $ 927 $ - Conversion of preferred stock to common stock $ 525 $ -
MEDITE CANCER DIAGNOSTICS, INC. AND SUBSIDIARIES (DEFICIT)thousands) Accumulated Preferred Stock Common Stock Additional Other Total Par Value $0.001 Par Value $0.001 Treasury Stock Paid-In Comprehensive Stockholders’ Shares Amount Shares Amount Shares Amount Capital Retained
Earnings Income Deficit January 1, 2013 - $ - 14,687,500 $ 15 - $ - $ (15 ) $ 2,283 $ 118 $ 2,401 Other comprehensive income 169 169 Net Income (loss) 54 54 December 31, 2013 - - 14,687,500 15 - - $ (15 ) $ 2,337 $ 287 $ 2,624 Merger 373,335 1,487 3,502,706 3 (19,209 ) (327 ) 3,901 - - 5,064 Sale of common stock - - 1,237,125 1 - - 1,978 - - 1,979 Issuance costs - - - - - - (103 ) - - (103 ) Imputed interest - - - - - - 2 - - 2 Other comprehensive income - - - - - - - Net Income (loss) - - - - - - - (699 ) (436 ) (1,135 ) December 31, 2014 373,335 $ 1,487 19,427,331 $ 19 (19,209 ) $ (327 ) $ 5,763 $ 1,638 $ (149 ) $ 8,431 Treasury Stock Shares Amount Shares Amount Shares Amount Capital Earnings Income (Loss) Equity January 1, 2014 - $ - 14,687,500 $ 15 - $ - $ (15 ) $ 2,337 $ 287 $ 2,624 Merger 373,355 1,487 3,502,706 3 (19,209 ) (327 ) 3,901 - - 5,064 Sale of common stock - - 1,237,125 1 - - 1,978 - - 1,979 Issuance costs - - - - - - (103 ) - - (103 ) Imputed interest - - - - - - 2 - - 2 Other comprehensive loss - - - - - - - (436 ) (436 ) Net loss - - - - - - - (699 ) (699 ) December 31, 2014 373,355 1,487 19,427,331 19 (19,209 ) (327 ) 5,763 1,638 (149 ) 8,431 Conversion of Preferred Shares – Series D (175,000 ) (525 ) 12,100 - - - 525 - - - Sale of Common Stock - - 1,326,875 2 - - 2,122 - - 2,124 Issuance costs - - - - - - (70 ) - - (70 ) Issuance of remaining shares Relating to merger - - 312,500 - - - - - - - Adjustment - - (22,816 ) - - - - - - - Other comprehensive loss - - - - - - - (460 ) (460 ) Net loss - - - - - - - (859 ) - (859 ) December 31, 2015 198,355 $ 962 21,055,990 $ 21 (19,209 ) $ (327 ) $ 8,340 $ 779 $ (609 ) $ 9,166 Note 1.The Company and Basis of Presentation December 31, 2014 Correction of As Previously Reported Deferred Income Tax Liability As Restated Goodwill $ 2,453 $ 2,205 $ 4,658 Total Assets $ 16,439 $ 2,205 $ 18,644 Deferred income tax liability – long-term $ - $ 2,205 $ 2,205 Total Liability and stockholders’ equity $ 16,439 $ 2,205 $ 18,644 (unaudited) March 31, 2015 (unaudited) June 30, 2015 (unaudited) September 30, 2015 As Restated As Restated As Restated Goodwill $ 2,453 $ 2,205 $ 4,658 $ 2,453 $ 2,205 $ 4,658 $ 2,453 $ 2,205 $ 4,658 Total Assets $ 16,858 $ 2,205 $ 19,063 $ 16,288 $ 2,205 $ 18,493 $ 16,745 $ 2,205 $ 18,950 Deferred income tax liability – long-term $ - $ 2,205 $ 2,205 $ - $ 2,205 $ 2,205 $ - $ 2,205 $ 2,205 Total liabilities and Stockholders' equity $ 16,858 $ 2,205 $ 19,063 $ 16,288 $ 2,205 $ 18,493 $ 16,745 $ 2,205 $ 18,950 , the “Company”, “we” and “us”) and its wholly owned subsidiaries, which consists of MEDITE Enterprise, Inc., MEDITE GmbH, Burgdorf, Germany, MEDITE GmbH, Salzburg, Austria, MEDITE Lab Solutions Inc. (formerly MEDITE Inc.), Orlando, USA, MEDITE sp. z o.o., Zilona-Gora, Poland and CytoGlobe, GmbH, Burgdorf, Germany.FootnoteNote 3, the shareholdersstockholders of the Company consummated a transaction in which 100% of the issued and outstanding shares of MEDITE Enterprise, Inc. were acquired by CytoCore, Inc. in exchange for the issuance by CytoCore, Inc. of 14,687,500 shares of its common stock to the shareholdersstockholders of the Company. The result of this transaction was for the Company and its wholly owned subsidiaries to become wholly owned subsidiaries of CytoCore, Inc., a US public company. In addition, the shareholdersstockholders of the Company became the majority owners of CytoCore, Inc., which resulted in the transaction being accounted for as a reverse merger, in which the financial statements of MEDITE Enterprise, Inc. and its subsidiaries became those of CytoCore, Inc., now MEDITE Cancer Diagnostics, Inc. companyCompany changed from solely research operations to an operating company with 7680 employees in three countries, a distribution network to about 70 countries worldwide, a well-known and established brand name, a wide range of selling products and the established infrastructure necessary for a company acting in the medical industry.Note 2.Summary of Significant Accounting Policiesare required in the valuationconsist of the allowance for doubtful accounts, useful lives of property and inventory, valuationequipment, fair value of intangible assets acquired in the reverse merger and deferred tax asset valuations. Changes in facts and circumstances may result in revised estimates and actual results may differ from these estimates.occurred;occurred or risk of loss transfers to the customer; (3) the selling price of the product is fixed or determinable; and (4) collectability is reasonably assured. The Company generates the majority of its revenue from the sale of inventory. The Company recognizes revenue when title and risk of loss transfer to the customer and all other revenue recognition criteria have been met. For a small subset of sales,its German subsidiaries, the Company and its customers agree in the sales contract that risk of loss and title transfer upon the Company packing the items for shipment, segregating the items packaged and notifying the Customercustomer that their items are ready for pickup. The Company records such sales at time of completed packaging and segregation of the items from general inventory and notification has been confirmed by the customer.and Cash Equivalentsconsidershas not experienced, nor does it anticipate, any losses in such accounts.cashequipment sold for a period of one year from date of sale. The Company recognizes warranty costs based on depositestimates of the costs that may be incurred under its warranty obligations. The warranty expense and highly-liquid debt instruments purchased with original maturitiesrelated accrual is included in the Company’s cost of three months or less to be cashrevenue and cash equivalents.Buildings 33 yrs Machinery and equipment 3-10yrs Office furniture and equipment 2-10 yrs Vehicles 5 yrs Computer equipment 3-5 yrs MediteMEDITE will make a determination as to the then useful life of the intangible asset, generally determined by the period in which the substantial majority of the cash flows are expected to be generated, and begin amortization. The Company tests IPR&D for impairment at least annually, or more frequently if impairment indicators exist, by first assessing qualitative factors to determine whether it is more likely than not that the fair value of the IPR&D intangible asset is less than its carrying amount. If the Company concludes it is more likely than not that the fair value is less than the carrying amount, a quantitative test that compares the fair value of the IPR&D intangible asset with its carrying value is performed. If the fair value is less than the carrying amount, an impairment loss is recognized in operating results.We allocate goodwillreporting units based on the reporting unit expected to benefit from theassets acquired and liabilities assumed in a business combination. We evaluate our reporting unitsThe Company’s Goodwill relates to the reverse merger that occurred on an annual basis.April 3, 2014. Goodwill is tested for impairment at the reporting unit level (operating segment or one level below an operating segment) on an annual basis (December 31 for us) and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. These events or circumstances could include a significant change in the business climate, legal factors, operating performance indicators, competition, or sale or disposition of a significant portion of a reporting unit. Unless events or circumstances have changed significantly, we generally do not re-test at year end assets acquired from a business combination in the year of acquisition.unit. The fair value of each reporting unit is estimated using a discounted cash flow methodology. This analysis requires significant judgments, including estimation of future cash flows, which is dependent on internal forecasts, estimation of the long-term rate of growth for our business, estimation of the useful life over which cash flows will occur, and determination of our weighted average cost of capital.notes payablesecured lines of credit and long-term debt approximate their respective fair values due to their short maturities.20142015 and 20132014 as the effect would be anti-dilutive (i.e. would reduce the loss per share).itits reported net loss and reports the same on the face of its statement of operations.RecastingCertainASU 2016-02 is that an entity should recognize on its balance sheet assets and liabilities arising from a lease. In accordance with that principle, ASU 2016-02 requires that a lessee recognize a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying leased asset for the lease term. The recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee will depend on the lease classification as a finance or operating lease. This new accounting guidance is effective for public companies for fiscal years beginning after December 15, 2018 (i.e., calendar years beginning on January 1, 2019), including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact the adoption of ASU 2016-02 will have on the Company’s consolidated financial statements.Period InformationDuring 2014, we changed our reportingperiods have been retrospectively adjusted. show depreciationmeasure in scope inventory at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Subsequent measurement is unchanged for inventory measured using LIFO or the retail inventory method. The amendments do not apply to inventory that is measured using last-in, first-out (LIFO) or the retail inventory method. The amendments apply to all other inventory, which includes inventory that is measured using first-in, first-out (FIFO) or average cost. The Company does not expect this amendment to have a material impact on its consolidated financial statements.as its own line item within our statement of operations and comprehensive income. We have updated the results from 2013 to reflect these changesdebt issuance costs is reported in 2014.Recent Accounting PronouncementsIn May 2014, the Financial Accounting Standards Board issued amended accounting guidance on revenue recognition that will be applied to all contracts with customers. The objective of the new guidance is to improve comparability of revenue recognition practices across entities and to provide more useful information to users of financial statements through improved disclosure requirements. This guidanceinterest expense. ASU No. 2015-03 is effective for annual and interim periods beginning in 2017.after December 15, 2015, and interim periods beginning after December 15, 2016. Early adoption is allowed for all entities for financial statements that have not permitted.been previously issued. Entities would apply the new guidance retrospectively to all prior periods (i.e., the balance sheet for each period is adjusted). The Company adopted this ASU No. 2015-03 in December 31, 2015. Accordingly, $20,000 of debt issuance costs have been presented on the balance sheet as a direct deduction from the related debt liability as of December 31, 2015. The Company had no debt issuance costs as of December 31, 2014.assessingevaluating the impact of adoption on itsthe updated guidance for the Company’s consolidated financial statements.Note 3.Reverse mergerOn April 4, 2014 the Company closed on a private placement in which it received gross proceeds of $1.529 million and issued 955,875 shares of its common stock. The merger closed on April 4,3, 2014 with the owners of MEDITE Enterprise, Inc. receiving 14,687,500 shares of the Company’s common stock plus up to an additional 312,500 shares issuable if certain conditions arewere met, in exchange for 100% of the issued and outstanding stock of MEDITE Enterprise, Inc. As of the date of these financial statements, the Company has not yet determined if the additional shares should be issued. The consideration paid has been determined based the number of shares outstanding from the former CytoCore, Inc. of approximately 3,502,700 common shares at $1.60 per share (the same price per share in the concurrent private placement noted above).
Under the purchase method of accounting, the Company assets acquired and liabilities assumed are recorded at their respective fair values as of the transaction date. In connection with the merger, the consideration paid, and the assets acquired and liabilities assumed, recorded at fair value on the date of acquisition, are summarized in the following table: In thousands Net assets acquired Cash $ 1 Other current assets 12 Property and equipment 81 Trade name /trademark 1,240 In-Process research and development 4,620 Goodwill 2,453 $ 8,407 Liabilities assumed Accounts payable & accrued expenses $ 3,220 Related party advances 102 Loans payable 21 $ 3,343 Net identifiable assets/consideration paid $ 5,064 Net assets acquired Cash $ 1 Other current assets 12 Property and equipment 81 Trade name /trademark 1,240 In-Process research and development 4,620 Goodwill 4,658 $ 10,612 Liabilities assumed Accounts payable and accrued expenses $ 3,220 Deferred tax liability 2,205 Related party advances 102 Loans payable 21 $ 5,548 Net identifiable assets/consideration paid $ 5,064 Note 4.Inventories December 31, December 31, 2014 2013 Raw materials $ 1,229 $ 1,748 Work in progress 33 137 Finished Goods 2,153 2,068 $ 3,415 $ 3,953 December 31, December 31, 2015 2014 Raw materials $ 1,170 $ 1,229 Work in progress 142 33 Finished Goods 1,763 2,153 $ 3,075 $ 3,415 20142015 and December 31, 2013,2014, respectively.Note 5.Property and Equipment December 31, December 31, 2014 2013 Land $ 233 $ 244 Buildings 1,291 1,352 Machinery and equipment 529 407 Office furniture and equipment 265 240 Vehicles 103 39 Computer equipment 110 86 Construction in progress 559 386 Less: Accumulated depreciation (999 ) (887 ) $ 2,091 $ 1,867 Note 6.Bank Debts and Lines of Credit December 31, December 31, 2015 2014 Land $ 209 $ 233 Buildings 1,158 1,291 Machinery and equipment 1,196 529 Office furniture and equipment 232 265 Vehicles 53 103 Computer equipment 87 110 Construction in progress 225 559 Less: Accumulated depreciation (1,219 ) (999 ) $ 1,941 $ 2,091 outstanding note payable indebtedness wassecured lines of credit and long-term debt were as follows as of (in thousands): December 31, December 31, 2014 2013 Hannoversche Volksbank credit line #1 $ 1,880 $ 2,092 Hannoversche Volksbank credit line #2 465 444 Hannoversche Volksbank term loan #1 135 211 Hannoversche Volksbank term loan #2 81 138 Hannoversche Volksbank term loan #3 270 393 Ventana Medical Systems, Inc. Promissory Note 21 - Related party advances 110 - DZ Equity Partners Participation rights 912 1,032 $ 3,874 $ 4,310 December 31, December 31, 2015 2014 Hannoversche Volksbank credit line #1 $ 1,120 $ 1,880 Hannoversche Volksbank credit line #2 383 465 Hannoversche Volksbank term loan #1 61 135 Hannoversche Volksbank term loan #2 24 81 Hannoversche Volksbank term loan #3 182 270 Ventana Medical Systems, Inc. Promissory Note - 21 Secured Promissory Note 500 - DZ Equity Partners Participation rights 818 912 Total 3,088 3,764 Discount on secured promissory notes and debt issuance costs (110) - Less current portion of long-term debt (2,857) (2,555) Long-term debt $ 121 $ 1,209 Euros.($2.0 million as of December 31, 2015). In January 2015, the master credit line was reduced to Euro 1.61.1 million and in March 2015 was to be reduced by a further Euro 500,000. The March 2015 reduction has been extended to May 31, 2015. The total credit line has a flexible use either as floating credit line with a variable interest rate of 8% per annum($1.2 million as of December 31, 2014, as “Eurocredit” fixed for one or more months with2015). Borrowings on the master line of credit agreement #1 bears interest at a short term fixed interestvariable rate based on Euribor (Euro Interbank Offered Rate) depending on the type of 3.77% asadvance elected by the Company and defined in the agreement. Interest rates depending on the type of advance elected ranged from 3.77 – 8.00% during the period ended December 31, 2014 or as bank guarantee and for letters2015. The line of credit in import business.has no stated maturity date. The line of credit is collateralized by the accounts receivable and inventory of MEDITE GmbH, Burgdorf, and a mortgage on the buildings owned by the Company and is guaranteed by Michaela Ott and Michael Ott, the former sole shareholdersstockholders of the Company. At December 31, 2014 the Company had an unused and fully available credit line of Euro 150,000 with Hannoversche Volksbank.Euros. The total credit line has a flexible use either as floating credit line with a variable interest rate of 8% per annum($436,244 as of December 31, 2014, as “Eurocredit” fixed for one or more months with2015). Borrowings on the master line of credit agreement #2 bears interest at a short term fixed interestvariable rate based on Euribor (Euro Interbank Offered Rate) depending on the type of 3.77% as ofadvance elected by the Company and defined in the agreement. Interest rates ranged from 3.77 – 8.00% during the period ended December 31, 2014 or as bank guarantee and for letters of credit in import business.2015. The line of credit has no stated maturity date but may be cancelled by the bank upon notice to the Company.date. The line of credit is collateralized by the accounts receivable and inventory of CytoGlobe GmbH, Burgdorf and is guaranteed by Michaela Ott and Michael Ott, the former sole shareholdersstockholders of the parent companyCompany, and the state of Lower Saxony (Germany) to support high-tech companies in the area.Euro($545,350 as of December 31, 2015) term loan agreement #1 with Hannoversche Volksbank with an interest rate of 3.4% per annum. The term loan has a maturity of September 2016 and requires semi-annual principal payments of approximately Euro 27,780 euros each.($30,296 as of December 31, 2015). The term loan is guaranteed by Michaela Ott and Michael Ott, the former sole stockholders of the Company and also a mortgage on the property of the Company.Euro($436,244 as of December 31, 2015) term loan #2 with Hannoversche Volksbank with an interest rate of 3.6 % per annum. The term loan has a maturity of June 2016, requires 18 semi-annual principal repayments of approximately Euro 22,220 Euro each.($24,233 as of December 31, 2015). The term loan is guaranteed by Michaela Ott and Michael Ott, the former sole stockholders of the Company and also hasis collateralized by subordinated assignments of all of the receivables and inventories of MEDITE GmbH, Burgdorf and also has a subordinated pledge of stockholdershare term life insurance policies.euro($436,244 as of December 31, 2015) term loan #3 with Hannoversche Volksbank with a variablean interest rate of approximately 4.7% per annum as of December 31, 2014.annum. The term loan has a maturity of December 31, 2018, and requires quarterly principal repayments of Euro 13,890 euro each.($15,148 as of December 31, 2015). The term loan is guaranteed by Michaela Ott and Michael Ott, the Ott’sformer sole stockholders of the Company, and also includesis collateralized by a partial subordinated pledge of the receivables and inventory of MEDITE GmbH, Burgdorf.whichwith a mezzanine lender agreed to advancewho advanced the Company up to Euro 1.5 million, euros($1.6 million as of December 31, 2015) in two tranches of Euro 750,000 euros each.each, ($817,958 as of December 31, 2015). The first tranche was paid to the Company at closing with the second tranche being conditioned on MEDITE GmbH, Burgdorf and its subsidiaries hitting certain performance targets. Those targets were not met and the second tranche was never called. The debenture pays interest at the rate of 12.15% per annum and matures at December 31, 2016.As of December 31, 2014 the remaining balance of approximately $21,000 on the note payable to Ventana Medical Systems, Inc. was in default, however, onThethe Company reached an agreement with Ventana Medical Systems, Inc. whereby both parties have agreed that Ventana Medical Systems, Inc. will accept $38,281 as payment in full for all outstanding principal and accrued interest. At December 31, 2014, the $21,000 is included in secured lines of credit and current portion of long-term debt on the consolidated balance sheet. As part of this agreement, Ventana Medical Systems, Inc. has agreed to convertconverted $1.75 million stated value of Series D Preferred stock and $525 of book value and all outstanding accrued dividends of $656,250 for 12,00012,100 shares of the companyCompany’s common stock. PriorAt the date of this report payment of $38,281 to Ventana was fulfilled.executionPurchasers secured promissory notes in the aggregate principal amount of $500,000 with interest accruing at an annual rate of 15% (the “Note(s)”) and warrants to purchase up to an aggregate amount of 250,000 shares of the common stock, par value $0.001) per share, of the Company (the “Warrant(s)”). The Notes mature on the earlier of the third (3rd) month anniversary date following the Closing Date, as defined in the Note, or the third (3rd) business day following the Company’s receipt of funds exceeding one million dollars ($1,000,000) from an equity or debt financing, not including the financing contemplated under the 2015 Purchase Agreement. The Notes are secured by the Company’s accounts receivable and inventories held in the United States. The Warrants have an initial exercise price of $1.60 per share, which are subject to adjustment, and are exercisable for a period of five (5) years. If the Notes are not redeemed by the Company on maturity, the Purchasers are entitled to receive 10% of the principal balance of the Notes outstanding in warrants for every month that the Notes are not redeemed. On March 31, 2016, these Notes matured and were not repaid. Therefore the Notes were in default as of the date of this agreementfiling. The Company agreed to pay the company had failedPurchasers 10% of the principal balance of the Notes in warrants for the month of April 2016. On March 15, 2016, the Board of Directors approved the renegotiated terms to make principalincrease the warrants issued to the Purchasers from a total of 250,000 warrants to 500,000 for certain considerations. See Subsequent Events in Note 13.payments when due on the outstanding balances. The monthly amounts increase over the payment term. The Notes Due to Employees have been presented separately on the consolidated balance sheet at December 31, 2015. These accrued wage amounts were included in accounts payable and is in breachaccrued expenses at December 31, 2014. (See Note 7) Certain employees may convert any of certain warranties and representations underthe amounts owed during the duration of the notes included above.Board for prior advances ofboard approximately $121,700. During 2015 and 2014, the Company had re-paidpaid $40,000 and $10,000, respectively, and imputed $1,700 of non-cash charge interest expensesexpense on these advances.indebtedness,debt at December 31, 2014 over the following five years2015 ($1,503 of secured line of credit have no maturity date but considered here as due in 2016) and Notes Due to Employees, at December 31, 2015 (in thousands):Year 2015 $ 189 2016 1,074 2017 68 2018 67 2019 - Total $ 1,398 Note 7.Accrued ExpensesYear 2016 $ 2,967 $ 202 2017 61 310 2018 60 338 2019 - 77 Total $ 3,088 $ 927 2014 2013 (in thousands) Accrued taxes and withholdings $ 445 211 Accrued warranty reserve 46 98 Accrued wages 2,064 57 Other accrued expenses 623 120 Total $ 3,178 $ 486 2015 2014 (in thousands) Accounts payable $ 652 $ 956 Accrued franchise taxes 342 445 Accrued directors fees 90 - Accrued professional fees 469 - Warranty reserve 49 46 Accrued salaries and related 1,152 2,064 Warrant liability 90- - Other accrued expenses 188 623 Total accounts payable and accrued expenses $ 3,032 $ 4,134 Note 8.Stockholders’ EquityEarnings (loss)earnings (loss)loss per share is as follows: For the Years Ended December 31, 2014 2013 Basic and Diluted: Reported net loss (in thousands) $ (699 ) $ 54 Less unpaid and undeclared preferred stock dividends (109 ) - Net loss applicable to common stockholder $ (808 ) $ 54 Weighted average common shares outstanding 18,116,000 14,687,500 Net income (loss) per common share $ (0.04 ) $ 0.00 For the Years Ended December 31, 2015 2014 Basic and Diluted: Reported net loss (in thousands) $ (859 ) $ (699 ) Less unpaid and undeclared preferred stock dividends (78 ) (109 ) Net loss applicable to common stockholder $ (937 ) $ (808 ) Weighted average common shares outstanding 20,194,732 18,116,000 Net loss per common share $ (0.05 ) $ (0.04 ) 142,308400,808 and 39143,308 shares in 20142015 and 2013,2014, respectively and preferred stock convertible into shares for the years ended December 31, 2015 and 2014, of 1,110 and 2013, of 4,991 and 4,738 common shares respectively, were not included in the computation of diluted loss per share applicable to common stockholders. Shares Issued & Preferred Stock Dividends Shares Outstanding Undeclared and Unpaid Offering Authorized 2014 2013 2014 2013 Series A convertible 590,197 47,250 47,250 — — Series B convertible, 10% cumulative 1,500,000 93,750 93,750 28,125 — Series C convertible, 10% cumulative 1,666,666 38,333 38,333 8,625 — Series D convertible, 10% cumulative 300,000 175,000 175,000 41,250 — Series E convertible, 10% cumulative 800,000 19,022 19,022 31,500 — Undesignated Preferred Series 5,143,137 — — — — Total Preferred Stock 10,000,000 373,355 373,355 109,500 — Shares Issued and Preferred Stock Dividends Shares Outstanding Undeclared and Unpaid Offering Authorized 2015 2014 2015 2014 Series A convertible 590,197 47,250 47,250 $ — $ — Series B convertible, 10% cumulative 1,500,000 93,750 93,750 558,162 520,663 Series C convertible, 10% cumulative 1,666,666 38,333 38,333 162,913 151,413 Series D convertible, 10% cumulative 300,000 - 175,000 - 656,250 Series E convertible, 10% cumulative 800,000 19,022 19,022 599,563 558,173 Undesignated Preferred Series 5,143,137 — — — — Total Preferred Stock 10,000,000 198,355 373,355 $ 1,320,638 $ 1,886,499 2014.Liquidation Value: $4.50 per share, $212,625 Conversion Price: $10,303 per share Conversion Rate: 0.00044—Liquidation Value divided by Conversion Price ($4.50/$10,303) Voting Rights: None Dividends: None Conversion Period: Any time Liquidation Value: $4.00 per share, $375,000 Conversion Price: $1,000 per share Conversion Rate: 0.0040—Liquidation Value divided by Conversion Price ($4.00/$1,000) Voting Rights: None Dividends: 10%—Quarterly—Commencing March 31, 2001 Conversion Period: Any time Cumulative dividends in arrears at December 31, 2015 were $558,162 Cumulative dividends in arrears at December 31, 2014 were $520,665Liquidation Value: $3.00 per share, $115,000 Conversion Price: $600 per share Conversion Rate: 0.0050—Liquidation Value divided by Conversion Price ($3.00/$600) Voting Rights: None Dividends: 10%—Quarterly—Commencing March 31, 2002 Conversion Period: Any time Cumulative dividends in arrears at December 31, 2015 were $162,913 Cumulative dividends in arrears at December 31, 2014 were $151,413Liquidation Value: $ 1,00010.00 per share, $ 525,000$525,000Conversion Price: $1,000 per share Conversion Rate: .01—Liquidation Value divided by Conversion Price ($10.00/$1,000) Voting Rights: None Dividends: 10%—Quarterly—Commencing April 30, 2002 Conversion Period: Any time Cumulative dividends in arrears at December 31, 2015 were $0 2014 were $ 660,000Liquidation Value: $22.00 per share, $418,488 Conversion Price: $800.00 per share Conversion Rate: .0275—Liquidation Value divided by Conversion Price ($22.00/$800) Voting Rights: Equal in all respects to holders of common shares Dividends: 10%—Quarterly—Commencing May 31, 2002 Conversion Period: Any time Cumulative dividends in arrears at December 31, 2015 were $599,563 Cumulative dividends in arrears at December 31, 2014 were $558,173companyCompany issued 1,237,125 shares for $1,979,400 in equity proceeds emanating from the sale of unregistered stock associated with two private placements (PIPE) “Private(Private Placement in Public Entity” at $1.60 per share.Ourshares.16,661,61516,974,115 shares of common stock which is approximately 86 %80.6% of our outstanding common stock. Weighted Weighted Average Average Aggregate Remaining Options and Exercise Intrinsic Contractual Warrants Price Value Life (Years) Outstanding at December 31, 2012 — $ — — — Granted — $ — — — Exercised — — — — Expired — — — — Outstanding at December 31, 2013 — $ — — — Outstanding as result of the merger 62,140 4.00 — 9.00 Granted 81,298 1.60 — 4.50 Expired (130 ) 4.00 — — Outstanding at December 31. 2014 143,308 $ 2.64 — 6.46 Note9.Leases Weighted Weighted Average Average Aggregate Remaining Options and Exercise Intrinsic Contractual Warrants Price Value Life (Years) Outstanding at December 31, 2013 — $ — — — Outstanding as result of the merger 62,140 $ 4.00 — 9.00 Granted 81,298 1.60 — 4.50 Expired (130) (4.00) — — Outstanding at December 31, 2014 143,308 $ 2.64 — 6.46 Granted 257,500 1.60 — 5.00 Outstanding at December 31. 2015 400,808 $ 2.29 5.18 20152016 for the laboratory facility in the Chicago area and until July 31, 2018 for the Orlando facility. The monthly rent for the Orlando facility will increase from currently $2,345$2,416 to $ 2,563 per month in the last year. The previous down towndowntown Chicago facility lease contract term is October 30, 2016 with a monthly lease of $4,270.$4,526. This facility currently is subleased at $3,816$3,948 per month. Total rental expenses was $157,136 in 2014.$128,000 and $157,000 for the years ended December 31, 2015 and 2014, respectively. The following table is not reduced by the sub-lease income of the Chicago facility.20142015 are: Operating Year Leases (in thousands) 2015 $ 112 2016 72 2017 33 2018 18 2019 Total $ 235 Note10.Income Taxes Operating Year Leases (in thousands) 2016 $ 148 2017 90 2018 35 Total $ 273 2014 2013 Federal $ 129 $ 19 State and local — — Foreign (25 ) — Total income tax expense $ 104 $ 19 2014 2013 Current 152 51 Deferred (48 ) (32 ) Total Income Tax Expense 104 19 At December 31, 2013, Medite had a deferred tax asset on the books of its US subsidiary of approximately $129,000, mostly as a result of prior year net operating loss carryforwards. Upon the consummation of the merger, the Company determined that the deferred tax asset had to be allowed for due to the subsidiary now be consolidated with the former CytoCore for income tax reporting purposes in the United States. The effect was to increase current year income tax expense by $129,000. 2015 2014 Federal $ — $ 129 State and local — — Foreign 1 23 Total current income tax expense $ 1 $ 152 Summary of Expense 2015 2014 Current 1 152 Deferred 77 (48 ) Total Income Tax Expense $ 78 $ 104 20142015 and 2013,2014, the provision for income taxes differs from the expected tax provision computed by applying the U.S. federal statutory rate to incomeloss before taxes as a result of the following: 2014 2013 Statutory U.S. federal rate (35.0 )% 25.0 % Permanent differences — — Change in estimate of German tax rates (10 )% — Application of valuation allowance to US deferred tax assets upon merger 18 % — Other — — Valuation allowance 44.0 % — % Provision for income tax expense(benefit) 17 % 25 % 2015 2014 Statutory U.S. federal rate (34.0 )% (35.0 )% Permanent differences 0.03 — Impact of differences related to foreign earnings (0.01 )% (10.00 )% Application of valuation allowance to US deferred tax assets upon merger — % 18.00 % Valuation allowance 43.87 % 44.00 % Provision for income tax expense 9.89 % 17.00 % 2014 2013 (in thousands) Deferred Tax Assets: Net Operating Loss Carryforwards $ 24,500 129 Accounts receivable timing differences 115 156 Property, plant and equipment 93 Total Deferred Tax Assets 24,708 285 Deferred Tax Liabilities: Inventory Adjustment - (16 ) Other (39 ) - Total Deferred Tax Liabilities (39 ) (16 ) Net Deferred Tax Asset 24,669 269 Valuation Allowance (24,500 ) - Net Deferred Tax Asset $ 169 269 2015 (in thousands) Deferred Tax Assets: Net operating loss carryforwards $ 3,548 $ 24,500 Accrued expenses 1,152 - Accounts receivable timing differences 29 76 Property and equipment 79 93 Total Deferred Tax Assets 4,808 24,669 Valuation Allowance (4,732 ) (24,500) Net Deferred Tax Asset 76 169 Deferred Tax Liability: In-process research and development and trademarks (2,205) (2,205) Net Deferred Tax Liability $ (2,129) $ (2,036) 2014,2015, the former CytoCoreCompany had net operating loss carry forwards for U.S. federal income tax of approximately $70$9.9 million, which will begin to expire in 2018. At December 31, 2015, the Company had net operating loss carry forwards for state income tax of approximately $1.6 million, which will begin to expire in 2027. At December 31, 2015, the Company had net operating loss carry forwards for foreign income tax of approximately $0.3 million, which will begin to expire in 2017 for Poland and will carry forward indefinitely for Germany and Austria. 2013 and 2014 the former CytoCore allowed its wholly owned subsidiaries to be administratively dissolved which resulted in the probable loss of their net operating loss carryforwards of approximately $3 million. For financial reporting purposes,entire amount of deferred tax assets related principally toFinancial Accounting Standards Board (FASB) issued interpretation ASC 740-10-50, "Accounting for Uncertainty in Income Tax". This pronouncement clarifies the net operating loss carry forwards has been offset by a valuation allowance due to uncertainty regarding the realization of the assets.In 2013 and 2014 the former CytoCore had a change in ownership greater than 50%. The result of these changes is that the net operating loss carryforwards derived from US tax losses have become subject to the limitation requirements of Section 382 of the Internal Revenue Code in the United States. Section 382 requires that the Company obtain a special valuation that will allow it to calculate the yearly allowable percentage of its net operating loss carryforwards that will be usable in a given year over the next 20 years.Tax UncertaintiesThe Company follows the provisions of FASC 740-10 in accounting for uncertainty in income taxes.taxes recognized in an enterprise's financial statements in accordance with Statement of Financial Accounting Standards ASC 740-10-50, "Accounting for Income Taxes". This guidanceinterpretation prescribes a recognition threshold and measurement parametersattribute for the financial statement recognition and measurement of a tax positionsposition taken or expected to be taken in the Company’s tax return. For thoseASC 740 also provides guidance on derecognition of tax benefits, to be recognized,classification on the balance sheet, interest and penalties, accounting in interim periods, disclosure and transaction. In accordance with ASC 740-10-50, the Company is classifying interest and penalties as a component of tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. The amount recognized is measured as the largest amount of benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement. following table summarizes the activity related to the Company’s grossCompany had unrecognized tax benefits (in thousands):AmountGross Unrecognized tax benefits at December 31, 2013$—Increases in tax positions for current year—Settlements—Lapse in statute of limitations—Gross Unrecognized tax benefits at December 31, 2014$—The Company’s accounting policyrecognize interestinitiate binding arbitration to recover the $115,275 and penalties related$1,073,700 contractually available to uncertain tax positions in income tax expense.Medite for Richard-Allan's failure to purchase further quantities under the contract and $72,000 for inventory produced specific to the contractual terms. The Company has not accrued interestreserved a portion of the outstanding balance at December 31, 2015 of $115,275, pending final resolution of this matter.any periods.Note11.Commitments and contingenciesLegal Proceedings2014NonePending as of December 31, 2014In 2014, we became subject to a lawsuit brought by D&D Technologies, Inc. (“D&D”) in the state of New Jersey for breach of contract and breach of implied covenant of good faith that occurred in 2013 and prior by the former CytoCore for failure to pay for past contractual services. The original complaint was dismissed and then refiled by D&D. D&D is seeking damages over $86,000 plus equitable relief. In2015andreached a settlement totaling $15,000 regarding outstanding litigation with D&D engaged in settlement negotiations and at the time of this filing had verbally agreed to settle the matter for approximately $15,000, however, no formal written settlement has yet been entered into.isGmbH, Germany, was subject to a court settlement on an alleged breach of the German competition law with Hologic Deutschland GmbH (“Hologic”) from August 2013. Both parties appealed the district court verdict at the higher regional court in September 2013, however at this time, the court has not schedule any further action and until such time as it does, theThis matter is at a standstill. As part of the decision from the local court, which the Company is appealing, the Company could be subject to a penalty up to a maximum of $304,000 if in the future it is foundwas decided by the court to havecompletely in favor of the Company and it was determined that the Company did not improperly infringedinfringe on the product design of Hologic. Hologic Deutchland GmbH.yearyears 2013, 2012, 2011, 2010 and 2009 have not been filed or paid. The Company believes that it has made adequate provision for the liability including penalties and interest. As the Company has moved its corporate headquarters out of the state of Illinois, it does not expect its liability going forward to increase substantially.Note12.Segment InformationGermany.Poland. The following table shows the breakdown of our operations and assets by Country (in thousands): United States Germany Poland 2014 2013 2014 2013 2014 2013 Total Assets $ 9,387 $ 811 $ 6,989 $ 7,359 $ 63 $ - Property & equipment, net 98 17 1,985 1,850 8 - Intangible Assets 8,315 2 58 63 4 - Revenues 1,349 673 9,633 9,285 1 - Net income (loss) (730 ) (20 ) 76 74 (45 ) - Note13.Subsequent EventDuring 2015, the company issued 240,625 shares of unregistered stock to qualified individuals under SEC Rule 144 at $1.60 for proceeds of $385,000.On February 23, 2015, United States Germany Poland Total 2015 2015 2014 2015 2014 2015 Total Assets $ 11,826 $ 11,592 $ 6,357 $ 6,989 $ 195 $ 63 $ 18,378 $ 18,644 Property and equipment, net 84 98 1,853 1,985 4 8 1,941 2,091 Intangible Assets 10,518 10,518 - - - - 10,518 10,518 Revenues 985 1,349 8,859 9,633 43 1 9,887 10,983 Net income (loss) $ (984 ) $ (730 ) $ 167 $ 76 $ (42 ) $ (45 ) $ (859 ) $ (699 ) reached anhas evaluated subsequent events occurring after the balance sheet. See discussion above in Note 6 regarding secured promissory notes and Note 8 relating to the warrants issued with these secured promissory notes.Ventana Medical Systems, Inc. whereby both parties have agreed that Ventana Medical Systems, Inc. accept $38,281 as paymenta fixed exercise price of $0.80 from $1.60 per share.fullIllinois’ Lake County Superior Court. The Company believed the claims were without merit and adequately reserved for costs associated with the claim at December 31, 2015. In February 2016, the Company settled for $160,000 with its former accountants and upon reaching a settlement, L. J. Soldinger and Associates filed a dismissal of all outstanding principalclaims with the court. The amount of the settlement is included in accounts payable and accrued interest. As part of this agreement Ventana Medical Systems, Inc. has agreed to convert $1.75 million stated value of Series D Preferred stock and all outstanding accrued dividends of $656,250 for 12,000 shares of the company common stock.To date the Company has reached a verbal settlement regarding outstanding litigation with D&D Technology which calls for a final payment of $15,000 by MEDITE to D&D Technology, the written settlement is pending. All expected liabilities are accrued in our financial statement.F-18