11-1924 Appendix 1 For USA

11-1924
United States Court of Appeals

FOR THE SECOND CIRCUIT
Docket No. 11-1924
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
v.
DANIEL B. KARRON,
Defendant-Appellant.
ON APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF NEW YORK
APPENDIX FOR PLAINTIFF-APPELLEE
VOLUME I OF II
(Pages A-1 to A-255)
PREET BHARARA,
United States Attorney for the
Southern District of New York,
Attorney for Plaintiff-Appellee.
86 Chambers Street, 3rd Floor
New York, New York 10007
(212) 637-2793
Case: 11-1924 Document: 45 Page: 1 02/21/2012 531218 261
31589 SDNY Table of Contents AL 2/21/12 10:40
TABLE OF CONTENTS
PAGE
District Court Docket Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
Complaint, dated November 24, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-9
Order, filed March 17, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-24
Memorandum and Order, filed May 18, 2009 . . . . . . . . . . . . . . . . . . . . . A-26
Mandate of the United States Court of Appeals for the
Second Circuit, filed October 21, 2009 . . . . . . . . . . . . . . . . . . . . . . . . A-29
Notice of Motion for Summary Judgment, filed June 18, 2010 . . . A-31
Declaration of Melinda S. Chukran in Support of the
United States Motion for Summary Judgment,
filed June 18, 2010, with exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-32
Exhibit A. Amendment No. 4 to the Financial Assistance
Award for Computer Aided Surgery, Inc.,
dated July 23, 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-36
Exhibit B. Requests for Advance or Reimbursement,
signed by Daniel B. Karron . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-39
Exhibit C. Forms SF-272, signed by Daniel B. Karron . . . . . . . A-58
Exhibit D. Financial Status Reports,
signed by Daniel B. Karron . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-65
Declaration of Assistant United States Attorney Michael J.
Byars in Support of the United States Motion for
Summary Judgment, filed June 18, 2010, with selected
exhibits from criminal trial in United States v. Karron,
07 Cr. 0541 (RPP) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-69
PAGE
ii
Government Exhibit 2. General Terms and Conditions of
the Advanced Technology Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-72
Government Exhibit 10. Application, dated July 6, 2001 . . . . . A-90
Government Exhibit 10A.
Application, dated August 6, 2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . A-118
Government Exhibit 11. Letter from Marc G. Stanley,
Acting Director of the Advanced Technology Program,
to Dr. D.B. Karron, dated October 2001 . . . . . . . . . . . . . . . . . . . . . . A-135
Government Exhibit 12. Financial Assistance Award . . . . . . . A-136
Government Exhibit 13. Special Award Conditions . . . . . . . . . . A-137
Government Exhibit 14. Revised Budget,
dated September 20, 2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-139
Government Exhibit 21. Amendment to Financial
Assistance Award, dated November 7, 2001 . . . . . . . . . . . . . . . . . A-140
Government Exhibit 26. Amendment to Financial
Assistance Award, dated June 27, 2003 . . . . . . . . . . . . . . . . . . . . . . A-144
Government Exhibit 40. Financial Status Report
for Fourth Quarter 2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-149
Government Exhibit 40A. Revised Financial Status
Report for Fourth Quarter 2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-150
for First Quarter 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-151
Report for First Quarter 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-152
for Second Quarter 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-153
Report for Second Quarter 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-154
PAGE
iii
for Third Quarter 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-155
Report for Third Quarter 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-156
for Fourth Quarter 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-157
for First Quarter 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-158
for Second Quarter 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-159
Government Exhibit 62. Final Audit Report for
CASI Award, dated August 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-160
Government Exhibit 114. Summary of CASI financial
records prepared by Belinda Riley . . . . . . . . . . . . . . . . . . . . . . . . . . . A-233
Excerpts of transcript of June 2008 trial in
United States v. Karron, 07 Cr. 0541 (RPP) . . . . . . . . . . . . . . . . . . A-234
Transcript of October 20, 2008, sentencing proceeding in
Statement of Material Facts, pursuant to
Local Civil Rule 56.1, dated June 18, 2010 . . . . . . . . . . . . . . . . . . A-354
Amended Declaration of Assistant United States Attorney
Michael J. Byars in Support of the United States
Motion for Summary Judgment, filed June 24, 2010 . . . . . . . . A-360
Statement of Material Facts, pursuant to Local Civil Rule
56.1, filed by D.B. Karron, filed August 23, 2010 . . . . . . . . . . . . A-363
Declaration of D.B. Karron in Opposition to Plaintiffs
Motion for Summary Judgment, filed August 23, 2010,
with selected exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-400
PAGE
iv

Exhibit 11. Spending Summary for Fourth Quarter 2001 . . . A-408
Exhibit 12. Spending Summary for First Quarter 2002 . . . . . A-410
Exhibit 13. Spending Summary for Second Quarter 2002 . . . A-412
Exhibit 14. Spending Summary for Third Quarter 2002 . . . . . A-414
Exhibit 17. NIST ATP CASI Technical Report 3 . . . . . . . . . . . . . A-416
Exhibit 53. Cover page of transcript of trial in
Exhibit 54. Excerpt of transcript of trial in
Declaration of Deborah A. Dunleavy in Opposition to
Plaintiffs Motion for Summary Judgment,
filed August 23, 2010, with selected exhibits . . . . . . . . . . . . . . . . A-434
Forensic Reconstruction of CASI Entities
for October 2001 to December 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . A-447
Exhibit A1. Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-449
Exhibit AA 002. Amended SF 269A Report of Spending . . . . . A-453
Exhibit AA 003. D.B. Karron Gross Salary Discrepancy . . . . . A-454
Exhibit AA 004. D.B. Karron Co-Funding Discrepancy . . . . . . A-455
PAGE
v
Exhibit AA 005. Equipment and In-Kind
Contribution Discrepancy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-456
Exhibit AA 006. Monies to and from D.B. Karron . . . . . . . . . . . A-457
Exhibit AA 007. Monies to D.B. Karron,
September 30, 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-458
Exhibit AA 008. Monies to D.B. Karron,
December 31, 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-459
Exhibit AA 009. Monies from D.B. Karron,
September 30, 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-460
Exhibit AA 010. Monies from D.B. Karron,
December 31, 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-461
Exhibit A2. Index of Submitted Items . . . . . . . . . . . . . . . . . . . . . . . . A-462
CASI Entities General Ledger, Balance Sheet Accounts,
for October 1, 2001, to December 31, 2003 . . . . . . . . . . . . . . . . . . . A-467
CASI Entities General Ledger, Income and Expense
Accounts, for October 1, 2001, to December 31, 2003 . . . . . . . . A-470
CAC 291 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-477
Transcript, dated March 7, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-478
Notice of Appeal, filed April 19, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-507
A-1
SDNY CM/ECF Version 4.2 Page 1 of8
CLOSED, APPEAL,ECF
U.S. District Court
Southern District of New York (Foley Square)
CIVIL DOCKET FOR CASE #: 1:08-cv-10223-NRB
United States of America v. Karron
Assigned to: Judge Naomi Reice Buchwald
Date Filed: 1112412008
Date Terminated: 04113/2011
Jury Demand: None Case in other court: US Court of Appeals, Second Circuit,
09-02530-cv Nature of Suit: 890 Other Statutory
Actions
Cause: 28:1391 Personal Injury
Jurisdiction: Federal Question
Plaintiff
United States of America represented by Matthew Lane Schwartz
United States Attorney's Office
Southern District of New York
86 Chambers Street
V.
Defendant
Daniel B. Karron
Date Filed
11/24/2008
11124/2008
11124/2008
#
1
Docket Text
New York, NY 10007
(212) 637-1945
Fax: (212) 637-2750
Email: matthew.schwartz@usdoj.gov
LEAD ATTORNEY
ATTORNEY TO BE NOTICED
Michael J. Byars
U.S. Attorney's Office, SDNY
(Chambers Street)
86 Chambers Street
New York, NY 10007
(212) 637-2793
Fax: (212) 637-2717
Email: michael. byars@usdoj.gov
LEAD ATTORNEY
COMPLAINT against Daniel B. Karron. Document filed by United States of
America.(mbe) (Entered: 1112912008)
SUMMONS ISSUED as to Daniel B. Karron. (mbe) (Entered: 11/29/2008)
Magistrate Judge Douglas F. Eaton is so designated. (mbe) (Entered:
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A-2
SDNY CMIECF Version 4.2 Page 2 of8
11/29/2008)
11/24/2008 Case Designated ECF. (mbe) (Entered: 11/29/2008)
12/08/2008
~
AFFIDA VIT OF SERVICE of Summons and Complaint. Daniel B. Karron
served on 12/3/2008, answer due 12/23/2008. Service was accepted by Daniel
B. Karron. Document filed by United States of America. (Schwartz, Matthew)
(Entered: 12/08/2008) J
12/30/2008
J
STIPULATION AND ORDER; that Karron's time to answer or otherwise
respond to the complaint shall be extended to 1123/2009. SO ORDERED .
. (Signed by Judge Naomi Reice Buchwald on 12/29/2008) (tve) (Entered:
12/30/2008)
12/30/2008 Set/Reset Deadlines: Daniel B. Karron answer due 1/2312009. (tve) (Entered:
02/24/2009)
02/02/2009 4 ANSWER to Complaint. Document filed by Daniel B. Karron.Gmi) (Entered:
03/04/2009)
03/05/2009
2
ORDER: that plaintiffs motion for a default judgment is denied. Defendant
shall serve all correspondence with the Court and pleading on plaintiff.
Plaintiff shaH respond to defendant's request to stay proceedings pending her
criminal appeal by 311112009. (Signed by Judge Naomi Reice Buchwald on
3/4/2009) Copies Mailed By Chambers.(tve) (Entered: 03/05/2009)
0311712009 Q ORDER: that the following briefing schedule for summary judgment is
adopted: Government to move on or before April 17, 2009; Karron to oppose
on or before June 5, 2009; and Government to reply on or before June 19,
2009. SO ORDERED. (Signed by Judge Naomi Reice Buchwald on
3116/2009) Copies Mailed By Chambers. (tve) Modified on 4/8/2009 (tve).
(Entered: 03117/2009)
04/06/2009 7 MOTION for'Reconsideration for a stay of the above cited proceedings.
Document filed by Daniel B. Karron.( djc) (Entered: 04/10/2009)
04117/2009
lQ
NOTICE OF INTERLOCUTORY APPEAL from Q Order, Set Deadlines.
Document filed by Daniel B. Karron. Copies mailed to attomey(s) of record:
A.U.S.A. (tp) (Entered: 06112/2009)
04/17/2009 Appeal Remark as to lQ Notice of Interlocutory Appeal filed by Daniel B.
Karron. $455.00 APPEAL FEE DUE. IFP DENIED 5115/09. (tp) (Entered:
06112/2009)
05118/2009
~
MEMORANDUM AND ORDER: Insofar as defendant has endeavored to file
a motion for reconsideration of our March 17, 2009 Order, entry #7 on the
docket sheet, such motion is denied. (Signed by Judge Naomi Reice Buchwald
on 5115/2009) Copies Mailed By Chambers. Gfe) (Entered: 05/18/2009)
06/05/2009 9 MOTION for the Court to Request Counsel (Version 2) Document filed by
Daniel B. Karron.(djc) (Entered: 06110/2009)
06112/2009 Transmission of Notice of Appeal and Certified Copy of Docket Sheet to US
Court of Appeals re: lQ Notice ofInterlocutory Appeal. (tp) (Entered:
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06/12/2009)
06/12/2009 Transmission of Notice of Appeal to the District Judge re: lQ Notice of
Interlocutory Appeal. (tp) (Entered: 06/12/2009)
06/12/2009
11
Appeal Record Sent to USCA (Index). Notice that the O!iginal index to the
record on Appeal for lQ Notice ofInterlocutory Appeal filed by Daniel B.
Karron 3 Copies of the index, Certified Clerk Certificate and Certified Docket
Sheet were transmitted to the U.S. Court of Appeals. (tp) (nd). (Entered:
06112/2009)
06112/2009 Appeal Record Sent to USCA (File). Indexed record on Appeal Files for lQ
Notice ofInterlocutory Appeal filed by Daniel B. Karron were transmitted to
the U.S. Court of Appeals. (tp) (Entered: 06/12/2009)
06/17/2009 USCA Case Number 09-2530-cv from the US Court of Appeals, Second
Circuit assigned to lQ Notice ofInterlocutory Appeal filed by Daniel B.
Karron. (nd) (Entered: 06117/2009)
07/02/2009 12 First Supplemental ROA Sent to USCA (Index). Notice that the Supplemental
Index to the record on Appeal for lQ Notice of Interlocutory Appeal filed by
Daniel B. Karron USCA Case Number 09-2530-cv, 3 Copies of the index,
Certified Supplemental Clerk Certificate and Certified Docket Sheet were
transmitted to the U.S. Court of Appeals. (tp) (nd). (Entered: 07/02/2009)
07102/2009 First Supplemental ROA Sent to USCA (File). Supplemental Indexed record
on Appeal Files for lQ Notice of Interlocutory Appeal filed by Daniel B.
Karron were transmitted to the U.S. Court of Appeals. (tp) (Entered:
07/02/2009)
1012112009
11
MANDATE of USC A (Certified Copy) as to lQ Notice of Interlocutory
Appeal filed by Daniel B. Karron USCA Case Number 09-2530-cv. The
Government moves to dismiss this appeal for lack of jurisdiction, or in the
alternative for summary affirmance. Appellant, pro se moves for a stay
pending appeal, leave to proceed in forma pauperis, and appointment of
counsel. Upon due consideration, it is hereby ORDERED thatthe
Government's motion is GRANTED and the appeal is DISMISSED for lack of
appellate jurisdiction. The order appeal from is not an appealable interlocutory
order under 28 U.S.C. & 1292(a)(1). Furthermore, the collateral order doctrine
does not apply. See Gulfstream Aerospace Corp. v. Mayacamus Corp., 485
U.S. 271, 276 (1988). It is further ORDERED that Appellant's motions are
DENIED as moot. Catherine O'Hagan Wolfe, Clerk USCA. Issued As
Mandate: 10/20/2009. (nd) (Entered: 10/21/2009)
10/21/2009 Transmission of USCA MandatelOrder to the District Judge re: 11 USCA
Mandate.(nd) (Entered: 10/2112009)
12/02/2009 14 ORDER: Based upon the record submitted to date, I cannot conclude that
defendant has demonstrated a likelihood of success on the merits that would
support the appointment of counsel. Thus, the application is denied without
prejudice to reconsideration at a later time should future developments warrant
a different result. So Ordered. (Signed by Judge Naomi Reice Buchwald on
12/9109) Us) (Entered: 12/02/2009)
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12/02/2009
U
ENDORSED LETTER: addressed to Judge Naomi Reice Buchwald from Preet
Bharara dated 11112109 re: Counsel for plaintiff requests that this case be
converted to ECF. ENDORSEMENT: Application to place this case on the
ECF system is granted. So Ordered. (Signed by Judge Naomi Reice Buchwald
on 12/2/09) Us) (Entered: 12/0212009)
12/0212009 Case Designated ECF. Us) (Entered: 12/0212009)
12/0412009 Appeal Record Returned. Indexed record on Appeal Files for Appeal Record
Sent to USCA - File USCA Case Number 09-2530-cv, returned from the U.S.
Court of Appeals. (nd) (Entered: 01/1212010)
12/04/2009 First Supplemental ROA Returned. Supplemental Indexed record on Appeal
Files for lQ Notice ofInterlocutory Appeal filed by Daniel B. Karron USCA
Case Number 09-2530-cv, returned from the U.S. Court of Appeals. (nd)
(Entered: 0111512010)
03/23/2010 16 ENDORSED LETTER addressed to Judge Naomi Reice Buchwald from
Michael 1. Byars dated 3/1912010 re: Counsel respectfully request that this
Office be permitted to provide a further update to the Court one month from
today's date on or before 4/1912010. ENDORSEMENT: This is the last
extension. Either the parties resolve the case by settlement or the government
should make its summary judgment motion. So Ordered. (Signed by Judge
Naomi Reice Buchwald on 3/2312010) Ufe) Modified on 3/3012010 Ufe).
(Entered: 03/23/2010)
05/14/2010 . Minute Entry for proceedings held before Judge Naomi Reice Buchwald:
Conference held on 5114/2010. (mro) (Entered: 05/24/2010)
0611812010 17 MOTION for Summary Judgment. Document filed by United States of
America. Responses due by 71712010(Byars, Michael) (Entered: 0611812010)
06/1812010
li
MEMORANDUM OF LA W in Support re: 17 MOTION for Summary
Judgment.. Document filed by United States of America. (Byars, Michael)
(Entered: 0611812010)
0611812010
12
DECLARATION of Melinda S. Chukran in Support re: 11 MOTION for
Summary Judgment.. Document filed by United States of America.
(Attachments: # 1 Exhibit A,# 2 Exhibit B, # 1 Exhibit C, # 1. Exhibit D)
(Byars, Michael) (Entered: 06118/2010)
0611812010 20 DECLARATION of Michael 1. Byars in Support re: 11 MOTION for
Summary Judgment.. Document filed by United States of America.
(Attachments: # 1 Exhibit GX2, # 2 Exhibit GXl 0, # 1 Exhibit GXl OA, # 1.
Exhibit GXll, #.2. Exhibit GXI2, # Q Exhibit GX13, # 1 Exhibit GXI4, # ~
Exhibit GX21, # 2. Exhibit GX26, # lQ Exhibit GX40, # 11 Exhibit GX40A, #
12 Exhibit GX41, # II Exhibit GX41A, # 14 Exhibit GX42, # U Exhibit 42A,
# lQ Exhibit GX43 , # 11 Exhibit GX43A, # li Exhibit GX44, # 12 Exhibit
GX45, # 20 Exhibit GX46, # 21 Exhibit GX62, # 22 Exhibit GX114, # 23
Exhibit Trial Transcript (excerpts), # 24 Exhibit Sentencing Transcript)(Byars,
Michael) (Entered: 0611812010)
06/18/2010 21 RULE 56.1 STATEMENT. Document filed by United States of America.
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(Byars, Michael) (Entered: 0611812010)
06118/2010 22 NOTICE of To Pro Se Litigant Opposing A Motion For Summary Judgment
re: 11 MOTION for Summary Judgment.. Document filed by United States of
America. (Attachments: # 1 FRCP 56 and LR 56.1)(Byars, Michael) (Entered:
0611812010)
06118/2010 23 CERTIFICATE OF SERVICE of Notice of Motion, Memorandum of Law,
Rule 56.1 Statement, Declaration of Melinda S. Chukran, Declaration of
Michael J. Byars, Local Rule 56.2 Notice, unpublished decisions (7) served on
Daniel B. Karron on 6118/2010. Service was made by Mail. Document filed by
United States of America. (Byars, Michael) (Entered: 06118/2010)
06/2412010 24 DECLARATION of Michael J. Byars (amended) in Support re: 11 MOTION
for Summary Judgment.. Docuinent filed by United States of America. (Byars,
Michael) (Entered: 06124/2010)
06/29/2010 25 ENDORSED LETTER addressed to Judge Naomi Reice Buchwald from
MIchael Byars dated 612411 0 re: Request that the time to file its reply be
extended from 7116 to 7/28110. ENDORSEMENT: So Ordered. Set
Deadlines/Hearing as to 11 MOTION for Summary Judgment. Response due
7119110. (Reply due by 7128/2010.) (Signed by Judge Naomi Reice Buchwald
on 6/2811 0) (cd) Modified on 7112/2010 (cd). (Entered: 0612912010)
06129/2010 Set/Reset Deadlines as to 11 MOTION for Summary Judgment. Response due
by 7119/2010 (cd) (Entered: 0711212010)
07116/2010 26 ENDORSED LETTER addressed to Judge Naomi Buchwald from Michael J.
Byars dated 711411 0 re: Request to enlarge the briefing schedule on the
Government's motion for summary judgment. ENDORSEMENT: While the
Court will grant these extension requests, it should be clear that no further
extensions will be granted. Also, it should be clear that the Court requires
complete copies of the papers in hard copy to be delivered to chambers. Set
Deadlines/Hearing as to 11 MOTION for Summary Judgment. (Response due
by 7/26/2010. Reply due by 8/4/2010.) (Signed by Judge Naomi Reice
Buchwald on 711611 0) (cd) (Entered: 07116/2010)
07/3012010 27 MEMORANDUM AND ORDER. On July 27, 2010, the Court received the
defendant's opposition to the plaintiffs motion for summary judgment. The
opposition comprises over one thousand pages, including a 91- page
memorandum of law and a Rule 56.1 counter statement that is not fully
supported by admissible evidence. The filing is hereby rejected, and the Clerk
of the Court is directed to strike the filing from the docket, as it fails to comply
with the Individual Practices of the undersigned and the Local Rules of this
Court. The fact that a litigant in this Court is proceeding pro se does not
exempt that individual from the practices and rules that ordinarily apply. Cf.
Agiwal v. Mid Island Mortg. Corp., 553 F.3d 298 (2d Cir. 2009). The
defendant may file and serve a revised submission -- compliant with the
Court's rules -- no later than August 23,2010. The plaintiffs reply, if any, shall
be due August 30,2010. (Signed by Judge Naomi Reice Buchwald on
7/30/10); Copies mailed by Chambers. (djc) Modified on 8/312010 (djc).
Modified on 8/312010 (djc). 07/30/2010)
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07/30/2010 Set DeadlineslHearings: Replies due by 8/30/2010. Responses due by
8/23/2010 (djc) (Entered: 08/0312010)
08/23/2010 28 RESPONSE in Opposition re: 21 Rule 56.1 Statement. Document filed by
Daniel B. Karron. (mbe) (Entered: 08/31/2010)
0812312010 29 MEMORANDUM OF LA W in Opposition re: 17 MOTION for Summary
Judgment. Document filed by Daniel B. Karron. (Attachments: # 1 part 2)
(mbe) (Entered: 08/3112010)
08/2312010 30 DECLARATION ofD. B. Karron and the exhibits thereto re: 11 MOTION for
Summary Judgment. Document filed by Daniel B. Karron. (mbe) Modified on
5/4/2011 (ae). (Entered: 08/3112010)
0812312010 32 DECLARATION of Deborah A. Dunlevy in Opposition re: 17 MOTION for
Summary Judgment. Document filed by Daniel B. Karron. (mro) (Additional
attachment(s) added on 9/29/2010: # 1 Declaration Part 2, # 2. Declaration Part
3, # l Declaration Part 4, #.1 Declaration Part 5, # 1 Declaration Part 6, # Q
Declaration Part 7, # 1 Declaration Part 8, # ~ Declaration Part 9, # 2.
Declaration Part 10, # lQ Declaration Part 11) (ad). (Additional attachment(s)
added on 9129/2010: # 11 Declaration Part 12, # 12 Declaration Part 13, # U
Declaration Part 14, # 14 Declaration Part 16, # 12 Declaration Part 16, # 17
Declaration Part 17, # li Declaration Part 18) (ad). (Additional attachment(s)
added on 5/412011: # 19 Exhibit Declaration Part 15, # 20 Exhibit Declaration
Part 19, # 21 Exhibit Declaration Part 20) (ae). (Entered: 09109/2010)
0910212010
n
ENDORSED LETTER addressed to Judge Naomi ReiceBuchwald from D B
Karron dated 9/1/2010 re: request that we delay our Digital Supplemental to
our Motion Papers in Opposition to Summary Judgment submission to
Tuesday, 9/712010. ENDORSEMENT: So Ordered. (Signed by Judge P. Kevin
Castel on 9/2/2010 - for Judge Buchwald) Gar) (Entered: 09102/2010)
09108/2010 33 AFFIRMATION OF SERVICE ofDVD containing the following: Judge
Buchwald cover letter, Memorandum of Law in opposition to plaintiffs motion
for summary judgment, Opposing 56.1 statement of material facts, Declaration
of Deborah Anne Dunlevy, Declaration of Eric A. Eisen and Declaration ofD.
B. Karron served on Michael 1. Byars on 9/7/10. Document filed by Daniel B.
Karron. (mro) (Entered: 09113/2010)
0911712010 34 REPL Y MEMORANDUM OF LAW in Support re: 17 MOTION for Summary
Judgment.. Document filed by United States of America. (Byars, Michael)
(Entered: 09/17/2010)
03/0712011 Minute Entry for proceedings held before Judge Naomi Reice Buchwald: Oral
Argument held on 3/7/2011. (mro) (Entered: 0311112011)
03/23/2011 35 MEMORANDUM AND ORDER: For the foregoing reasons, the motion
(docket no. 17) is granted in part and denied in part. Additionally, based on the
Governments statement at oral argument that a finding for the Government on
the FCA claims would eliminate the need to address the pending state law
claims, we dismiss the remaining state law claims. Within two weeks, the
Government shall advise the Court in writing about its proposed course of
action regarding its request for civil penalties. If the Government determines
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not to pursue its claims for additional civil penalties, it shall submit a judgment
on notice. (Signed by Judge Naomi Reice Buchwald on 3/22/2011) Copies
Mailed By Chambers. Gpo) (Entered: 03/23/2011)
04/0112011 36 TRANSCRIPT of proceedings held on March 7,2011 4:10 p.m. before Judge
Naomi Reice Buchwald. (ajc) (Entered: 04/0112011)
04/13/2011 37 mDGMENT #11,0691 in favor of United States of America against Daniel B.
Karron in the amount of $ 4,042,000.00,less any amount that defendant has
paid or will pay in restitution in connection with the case captioned United
States v. Daniel B. Karron, S2 076 Cr. 541 (RPP) (S.D.N.Y.), with interest
accruing thereafter providedby law, and that plaintiff have execution therefor,
and that the state law claims are dismissed. (Signed by Judge Naomi Reice
Buchwald on 4/13/11) (Attachments: # 1 Notice of Right to Appeal)(dt)
(Entered: 04/13/2011)
04/19/2011 39 MOTION to Correct the Record. Document filed by Daniel B. Karron.(mbe)
(Entered: 04/21/2011)
04/19/2011 40 REQUEST TO PROCEED IN FORMA PAUPERIS ON APPEAL. Document
filed by Daniel B. Karron.(rmj) (Entered: 04/22/2011)
04/19/2011 45 NOTICE OF APPEAL from 37 Judgment. Document filed by Daniel B.
Karron. (tp) (Entered: 05/10/2011)
04/19/2011 Appeal Remark as to 45 Notice of Appeal filed by Daniel B. Karron. NO FEE.
IFP GRANTED 5/3/11. (tp) (Entered: 05110/2011)
04/2112011 38 Letter addressed to Honorable Naomi R. Buchwald from Daniel B. Karron
dated April 19, 2011 re: Appeals. :?ocument filed by Daniel B. Karron.Gnm)
(Entered: 04/2112011)
05/02/2011 41 DECLARATION of Eric A. Eisen in Opposition to Plaintiffs Motion for
Summary Judgment. (ae) (Entered: 05/02/2011)
05/03/2011 42 MEMO ENDORSEMENT on re: 40 Declaration in Support ofI.F.P. filed by
Daniel B. Karron. ENDORSEMENT: Application granted. So Ordered.
(Signed by Judge Naomi Reice Buchwald on 5/3/2011) Gfe) (Entered:
05/03/2011)
05/04/2011 43 VIDEO FILE enclosed on CD. Document filed by Daniel B. Karron. (ae)
(Entered: 05/04/2011)
05/05/2011 44 ORDER. It is hereby ORDERED that Dr. Karron's motion to correct the record
(docket no. 39) is granted only to the extent described herein and is otherwise
denied and the Clerk of the Court need not take any further action to
supplement the record. Granting in part and denying in part 39 Motion to
Amend/Correct. (Signed by Judge Naomi Reice Buchwald on 5/5/11) Copies
Mailed By Chambers. (rjm) (Entered: 05/05/2011)
05/10/2011 Transmission of Notice of Appeal and Certified Copy of Docket Sheet to US
Court of Appeals re: 45 Notice of Appeal. (tp) (Entered: 05/10/2011)
05/10/2011 Transmission of Notice of Appeal to the District Judge re: 45 Notice of
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SDNY CM/ECF Version 4.2 Page 8 of8
Appeal. (tp) (Entered: 05110/2011)
05110/2011 46 Appeal Record Sent to USCA (Index). Notice that the Original index to the
record on Appeal for 45 Notice of Appeal filed by Daniel B. Karron 3 Copies
of the index, Certified Clerk Certificate and Certified Docket Sheet were
transmitted to the u.S. Court of Appeals. (tp) (nd). (Entered: 05110/2011)
05110/2011 Appeal Record Sent to USCA (File). Indexed record on Appeal Files for 45
Notice of Appeal filed by Daniel B. Karron were transmitted to the U.S. Court
of Appeals. (tp) (Entered: 05/16/2011)
I
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By: MATTHEW L. SCHWARTZ
Assistant United States Attorney
86 Chambers Street
New York, New York 10007
Telephone: (212) 637-1945
Facsimile: (212) 637-2750
E-mail: matthew.schwartz@usdoj.gov
UNITED STATES DISTInCT COURT
SOUTHERN DISTRICT OF NEW YORK
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
Plaintiff,
v.
DANIEL B. KARRON,
Defendant.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
10
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'
- \. .
CO
ECF CASE
08Civ. __ _
Plaintiff the United States of America, by its attorney Michael J. Garcia,
United States Attorney for the Southern District of New York, herein alleges for its
complaint as follows:
INTRODUCTION
1. This is a civil action brought by plaintiff, the United States of America,
on behalf of its agency the United States Department of Commerce ("Commerce"),
against the defendant, Daniel B. Karron ("Karron"), under the provisions of the
False Claims Act, 31 U.S.C. 3729, et seq. (the "False Claims Act"), to recover
damages sustained by, and penalties owed to, the United States as a result of
Karron's having knowingly presented or caused to be presented to the United States
A-10
false or fraudulent claims for payment in connection with cooperative agreements
under Commerce's Advanced Technology Program ("ATP") to Computer Aided
Surgery, Inc. ("CASI").
2. The United States brings additional claims against Karron under the
common law for conversion, unjust enrichment, fraud, and payment under mistake
of fact.
PARTIES
3. Plaintiff is the United States of America, on behalf of the United
States Department of Commerce.
4. At the time of the events alleged in this Complaint, Karron was the
President and Chief Technical Officer of CASI, as well as a 90% shareholder.
Karron resides at 300 East 33rd Street, Suite 4N, New York, New York 10016.
5. CASI is a limited liability corporation organized under the laws of the
State of New York with its principal place of business at 300 East 33rd Street, Suite
4N, New York, New York 10016.
JURISDICTION AND VENUE
6. This Court has jurisdiction over the claims brought under the False
Claims Act pursuant to 31 U.S.C. 3730(a) and 28 U.S.C. 1331 and 1345, over
the remaining claims pursuant to 28 U.S.C. 1345, and over all claims pursuant to
the Court's general equitable jurisdiction.
7. Venue lies in this District pursuant to 31 U.S.C. 3732(a) and 28
U.s.C. 1391(b) and 1391(c) because Karron's last known address is 300 East 33rd
2
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Street, Suite 4N, New York, New York 10016, which is located in the Southern
District of New York.
FACTUAL ALLEGATIONS
8. ATP was designed by Commerce to support high-risk scientific
research, and is administered by the National Institute of Standards and
Technology.
9. On or about July 6, 2001, and August 6, 2001, Karron submitted an
ATP proposal to Commerce on behalf of CASI entitled "Anatomic Computer
Modeling for Precise and Accurate Therapies." Karron signed the proposal as
CASI's "Authorized Company Representative."
10. According to the proposal, CAS I was going to "develop an application
to upload calibrated, encrypted raw images from medical imaging instrumentalities
(MRI, CT, Ultrasound, etc.), over the Internet. The system will generate precise
and accurate, encrypted 3D tiled models with variable Level of Detail ... for
applications including: Radiation Therapy (RT), robotic minimally invasive
surgery, patient communication, education and other customer applications via the
Internet. . .. The novel idea that enables this technological leap forward is Digital
Morse Theory (DMT)." (Emphasis omitted).
11. The proposal included an estimated three-year budget that projected
CASI's costs at $2,100,500, with $2,000,000 of that expected to come from
Commerce, via ATP.
12. As part of the pr.ocess of applying for an ATP cooperative agreement,
3
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Karron submitted a Severability Statement, which set out performance benchmarks
over the term of the agreement. By the end of Year 1, CASI was to have installed a
server capable of doing DMT decomposition of two dimensional images supplied via
the Internet. At the end of Year 2, CASI was supposed to apply DMT to stacks of
two dimensional images. And by the end of Year 3, CASI was to have DMT
completely "up and running" for testing by third parties.
13. On or about September 29,2001, Commerce awarded CASI an ATP
cooperative agreement of $2,100,500, with $2,000,000 of that coming from
Commerce, payable over three years, beginning on October 1, 2001, and concluding
on September 30, 2004 (the "Grant"). The Grant included an annual salary to
Karrori of $175,000, and specified that he was to spend 100% of his time on the
Grant project.
14. Karron signed the Grant documents on or about October 5, 2001. By
doing so, Karron certified that he "agree[d] to comply with [certain] Award
provisions," including (i) Commerce's Financial Assistance Standard Terms and
Conditions; (ii) 15 C.F.R. Part 14, Uniform Administrative Requirements for Grants
and Agreements with Institutions of Higher Education, Hospitals, Other Non-
Profit, and Commercial Organizations; (iii) 48 C.F.R. Part 31, Contract Cost
Principles and Procedures; (iv) General Terms and Conditions of the ATP; (v)
Program Specific Audit Guidelines for ATP Cooperative Agreements with Single
Companies; and (vi) Special Award Condition #6.
15. In particular, the Grant was conditioned on using the Grant funds in
4
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accordance with Commerce-approved budgets, including using those funds only on
direct costs associated with the Grant project. See also 15 U.S.C. 278n(b)(5)
("Federal funds awarded under [ATP] may be used only for direct costs and not for
indirect costs, profits, or management fees of a contractor."); 15 C.F.R. 295.2(d) &
(h) (defining "direct costs" and "indirect costs" for purposes of ATP). Any variations
from the Commerce-approved budget had to be approved in advance. CASI was also
prohibited from applying Grant funds towards expenses incurred prior to October 1,
2001.
16. Karron signed Amendments to the Grant on or about November 7,
2001; January 17, 2002; July 24,2002; July 29,2002; and December 21,2002. The
Amendments reiterated the requirements of the previous paragraph.
17. In addition, Karron signed numerous quarterly Financial Status
Reports. Each Status Report indicated CASI's quarterly outlay related to the
Grant, and contained an explicit certification that the "report is correct and
complete and that all outlays and unliquidated obligations are for the purposes set
forth in the award documents."
18. In addition to signing numerous certifications stating that he would
comply with all applicable regulations, Karron was personally and repeatedly
. informed about ATP's requirements.
19. At a "kickoff meeting" in November 2001, for example, Bettijoyce Lide,
the ATP program manager responsible for the Grant, conducted a slide-show
presentation for Karron and the rest of the CASI team that set forth the terms and
5
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conditions of the Grant, including, most notably, the requirement of "prior
approval" for all expenditures outside of the ATP-approved budget. Karron
specifically asked whether ATP funds could be used for rent based on CASI's alleged
"unique circumstances," but Lide reiterated the need for prior approval. Karron
later asserted that "no approval would be needed if he would just come and
schmooze and take [Lide and the ATP staff] to lunch."
20. Before that meeting in November 2001, Karron had asked Hope
Snowden, an ATP grant specialist responsible for reviewing CASI's budget
submissions, whether ATP funds could be used to pay for rent and utilities. Karron
and his business manager Lee Gurfein called her repeatedly, "like a day apart, and
they would consistently get the same exact answer": "the answer was no, time and
time again." Snowden repeated that answer at the November 2001 kickoff meeting
as well, and also explained the rules against using ATP funds to pay for indirect
costs. Even after the November 2001 meeting, Karron continued to call, asking if
he could use ATP funds for rent and utilities.
21. Despite these explicit and repeated warnings, both written and oral,
Karron wilfully violated the terms of the Grant, misapplying nearly half a million
dollars towards unauthorized expenses and then lying about it.
22. On or about June 27, 2003, Commerce suspended the Grant for non-
compliance with its terms. Commerce cited the failure to comply with Special
Award Condition #7, which prohibited expenditure of Grant money on indirect
costs, and imposed a cost sharing ratio for direct costs that required CASI to
6
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contribute $110,500 over the life of the Grant.
23. Among other things, Commerce determined that CASI had never made
its contribution of matching funds, as required by the Grant.
24. Commerce also determined that CAS I had drawn down several
hundred thousand dollars of advances on ATP funds that were spent on items that
had nothing to do with the Grant project at all, concluding tha't CASI's "only source
of revenue during the period of the award has been the [ATP] funds."
25. Among other things, Karron used ATP Grant funds to pay for: rent and
utilities for Karron's apartment; improvements to his apartment, including a track
lighting system and a cleaning service; Karron's medical and related bills, including
for medications, psychotherapy, dental work, and electrolysis; restaurant meals;
household items such as blenders, vacuum cleaners, power drills, and a GPS
navigation device; and childcare for a CASI employee.
26. In addition, Karron intermingled the ATP Grant funds with other
money, disbursing the Grant money into three accounts: an ATP-specific account, a
general CASI account, and Karron's own personal bank account.
27. Karron was the only person to have signatory authority at any of these
accounts, and each expenditure of the ATP funds is directly traceable to him.
28. Commerce also concluded that Karron had falsified the quarterly
Financial Status Reports to cover up these violations, falsely overstating the
project-related expenditures to hide the impermissible draw-downs, and falsely
claiming that CASI had made its contribution of matching funds.
7
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29. There is no doubt that these violations were intentional. In addition to
the repeated warnings from Commerce personnel about the Grant's requirements,
CASI's own employees repeatedly warned Karron to stop misapplying the Grant
funds.
30. For example, Frank Spring, a bookkeeper Karron hired in July 2002 to
manager CASI's books, had a series of conversations with Karron after he noticed
that certain non-Grant-related expenses - "rent, utilities, certain amounts of
capital expenditures ... , and medical expenses" - were classified as ATP expenses
in CASI's books and records. Moreover, "between one dozen and two dozen times,"
Karron changed items that Spring had treated as non-ATP expenses in CASI's
books to allowable expenses.
31. Likewise, Karron's business manager Gurfein warned him that hewas
violating the terms of the Grant. Karron admitted to Gurfein that he had
transferred $75,000 out of the initial $150,000 of the Grant to his own account, to
payoff "personal obligations to his family" and credit card debts. Gurfein
responded that Karron "couldn't do that," and reminded him that he needed to
"apply for a written approval" to deviate from the ATP-approved budget.
32. A subsequent business manager, Robert Benedict, went so far as to ask
CASI's board of directors to have CASI's checkbooks, along with the company's
books and records, turned over to the bookkeepers for safeguarding, because of his
fears about Karron's misapplication of the Grant money. Karron then began using
PayPal, an electronic bills-paying service, to circumvent this restriction, using
8
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PayPal to write checks and then paying PayPal using the company's American
Express card. Benedict told Karron that "this was very serious" and that "he could
go to jail for this," noting that "he could have between. 300[,000] and 500,000 of
disallowed expenditures."
33. Karron's wilfullness is also evidenced by his lies to cover up the
misapplication. For example, Karron devised a scheme to shoehorn rent and
utilities into the Grant, whereby he would pretend to live in Connecticut, rather
than the truth, which is that he was operating CASI out of his own apartment. In
an e-mail to a friend on December 18, 2002, for example, Karron wrote that "I will
make a lease with Windy [in Connecticut] and make like I only keep a folding bed
on 33rd Street. If ATP buys into this idea, then I can charge my rent on the
apartment to the grant and pay my mortgage."
34. Commerce paid out $1,345.500.00 under the Grant before it was
suspended in June 2003.
35. Commerce would not have awarded CASI the $2,100,500 Grant and
paid out $1,345,500.00 under the Grant if it had known that, in fact, CASI's
proposal was false, and that Karron intended to misapply the funds towards
unallowable indirect costs and non-project-related costs, and that Karron intended
not to contribute CASI's matching share towards the project.
36. Likewise, Commerce would not have continued to make payments
under the Grant if it had known that Karron's quarterly Financial Status Reports
were false, and designed to cover up his misapplication of the Grant money.
9
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37. On or about June 13, 2007, a federal grand jury in the Southern
District of New York indicted Karron on one count of misapplying federal grant
funds, in violation of 18 U.S.C. 666. On or about May 21, 2008, a superceding
indictment was filed in United States v. Karron, 07 Cr. 541 (RPP), adding a
forfeiture count.
38. On or about June 11, 2008, a federal jury convicted Karron of violating
18 U.S.C. 666 in connection with the Grant.
39. On or about October 24 and 31,2008, the Hon. Robert P. Patterson
sentenced Karron to a term of seven and a half months imprisonment, three years
supervised release, a $100 mandatory assessment, and restitution in the amount of
$120,000.00.
FIRST CLAIM
(FALSE CLAIMS ACT, 31 U.S.C. 3729(a)(I
40. The United States incorporates by reference paragraphs 1 through 39
above as if fully set forth herein.
41. The United States seeks relief against Karron under Section 3729(a)(I)
of the False Claims Act, 31 U.S.C. 3729(a)(1).
42. As set forth above, Karron knowingly, or with reckless disregard for
the truth, presented and caused to be presented to an officer, employee or agent of
the United States, through Commerce, either directly or indirectly, false or
fraudulent claims for ATP Grant payments.
43. The United States, through Commerce, paid such false or fraudulent
claims because of the acts and conduct of Karron.
10
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44. By reason of Karron's false claims, the United States has sustained
damages in an amount to be determined at trial.
SECOND CLAIM
(FALSE CLAIMS ACT, 31 U.S.C. 3729(a)(2
46. The United States seeks relief against Karron under Section 3729(a)(2)
of the False Claims Act, 31 U.S.C. 3729(a)(2).
47. As set forth above, Karron knowingly, or in reckless disregard for the
truth, made, used, and caused to be made and used, false records and statements to
get false and fraudulent claims for ATP Grant money paid by Commerce.
48. The .united States, through Commerce, paid such false or fraudulent
claims because of the acts and conduct of Karron.
49. By reason of these false claims, the United States has sustained
damages in an amount to be determined at trial.
THIRD CLAIM
(CONVERSION)
51. All ATP Grant payments up to the amount of $1,345.500.00 made to
CASI are the lawful property of the United States of America.
52. Karron knowingly converted these funds for his own use, in derogation
of the rights of the United States, which is entitled to these funds.
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53. As a result of the conversion by Karron, the United States has been
damaged in the amount of $1,345.500.00, representing the ATP Grant payments
Karron has wrongfully withheld from the United States.
FOURTH CLAIM
(UNJUST ENRICHMENT)
55. The United States made ATP Grant payments to CASI and for the
benefit of Karron when they were not entitled to those payments.
56. Karron has been unjustly enriched by retaining the use and enjoyment
of the ATP Grant payments, to which he was not entitled.
57. Karron has been unjustly enriched in the amount of $1,345.500.00, .
representing the ATP Grant payments which he used for his own benefit, but to
which he was not entitled.
58. The circumstances of Karron's receipt of these ATP Grant payments
are such that, in equity and good conscience, Karron should not retain these
payments.
FIFTH CLAIM
(FRAUD)
60. Karron made material misrepresentations of fact to the United States,
through Commerce, with knowledge of, or in reckless disregard of, their truth, in
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connection with CASI's claim for ATP Grant payments.
61. Karron intended that .the United States rely upon the accuracy of the
false representations referenced above.
62. The United States made substantial payments of money to CASI in
justifiable reliance upon their false representations.
63. Karron's actions caused the United States to be damaged in an amount
to be determined at trial.
SIXTH CLAIM
(PAYMENT MADE UNDER MISTAKE OF FACT)
65. The United States seeks relief against Karron to recover monies paid
under mistake 'of fact.
66. The United States made ATP Grant payments to CASI under the
erroneOus belief that the information in Karron's claims for payment complied with
the appliqable rules and guidelines. This erroneous belief was material to the
United States' decision to make these payments. In such circumstances, payment
was by mistake and was not authorized.
67. Because of these payments by mistake, Karron has received money to
which they are not entitled.
68. By reason of the foregoing, the United States was damaged in an
amount to be determined at trial.
WHEREFORE, plaintiff, the United States of America, requests that
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judgment be entered in its favor and against defendant Daniel B. Karron as follows:
(a) On all Claims for relief, summary judgment as to liability pursuant to
the estoppel provisions of the False Claims Act, 31 U.S.C. 3731(d),
and the doctrines of collateral estoppel and res judicata, based on
Karron's conviction.
(b) On the First and Second Claims for relief (Violations of the False
Claims Act, 31 U.S.C. 3729(a)(1) and (2, for treble the United
States' damages, $1,345.500.00, plus an $11,000.00 penalty for each
false claim presented;
(c) On the First and Second Claims for relief, an award of costs pursuant
to 31 U.S.C. 3729(a);
(d) On the Third Claim for relief (Conversion), in an amount to be
determined at trial, together with costs and interest;
(e) On the Fourth Claim for relief (Unjust Enrichment), in an amount to
be determined at trial, together with costs and interest;
(f) On the Fifth Claim for relief (Fraud), in an amount to be determined at
trial, together with costs and interest;
(g) On the Sixth Claim for relief (Payment Made Under Mistake of Fact),
in an amount to be determined at trial, together with costs and
interest; and
(h) awarding such further relief as is proper.
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Dated: New York, New York
November 24,2008
By:
Telephone: (212) 637-1945
Facsimile: (212) 637-2750
E-mail: matthew .schwartz@usdoj.gov
15
Case 1:08-cv-10223-NRB Document 6 Filed 03/17/09 Page 1 of 2
A-24
0N:TED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEI' YORK
----------------------------------X
Plaintiff,
- v -
DANIEL B. KARRON,
Defendant.
----------------------------------x
NAOMI MICE llUCHlIlILD
UllITED STA'l'li:S DISTRICT JIlI)GE
USDSSllNY
DOCUMENT
ELECTRONICALLY FILED
DOC #: ::::--:--::t-r:='I""-'
DATEPILEO:
ORDER
08 Civ. 10223 (NRB)
WHEREAS defendar.t requested in a letter received by the
Se on February 2, 2009 a stay of civil case pending
the appeal of defendant's crininal conviction; and
WJD:REAS plaintiff submitted a letter dated March 11, 2009
arguing that such a stay is unwarranted; and
WHEREAS plaintiffl 5 arguments are persuasive; it is hereby
ORDERED that defendant's request for a stay is denied; and
it is further
ORDERED that the following briefing schedule for summary
judgment is adopted;
Goverr.ment to move on or before April 17, 2009
Karron to oppose on or before June 5, 2009
Government to reply on or before June 19, 2009
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Dated: York, New York
March 16, 2009
,

MI REICE BUCHWALD
STATES DISTRICT
A copy of the foregoing Order has been mailed on date
to the fol:owing:
Matthew Lane SchwartzI Esq.
Assistant United States
United States Attorney's
southern District of New York
86 Chambers Street
New York, NY 10n07
Daniel B. Karron
a/k/a/ Dianne Karren
160101-054
Federal prison Camp
Post Office Box A
Alderson, WV
Daniel B. Karron
a/k/a Dianne Karron
348 E. Fulton Street
Long Beach, NY 1156:
A-26
UNITED STATES DISTRICT COURT
- _________________________________ x
Plaintiff,
- v -
DANIEL B. KARRON,
Defendant.
----------------------------------x
NAOMI REICE BUCHWALD
UNITED STATES DISTRICT JUDGE
USDSSDNY
ooc:::tJMENT
ELEt1'RONICALLY F.Il..SD
DOC#:

bA'n,? Fll..BD:
MEMORANDUM & ORDER
08 civ. 10223 (NRB)
In its March 17, 2009 Order, this Court denied defendant's
request to stay this case pending the resolution of defendant's
criminal appeal. On April 17, 2009, defendant filed a notice of
appeal from this non-final order. Now before the Court is
defendant's motion under 28 U.S.C. 1292(b) to certify this
decision for interlocutory appeal and defendant's request to
proceed in forma pauperis pursuant to Rule 24 of the Federal
Rules of Appellate Procedure.
We find that this appeal does not meet the requirements for
certification for an interlocutory appeal and thus we decline to
the requested certification. The case law clearly establishes
plaintiff's right to proceed despite the pendency of defendant's
criminal appeal. As the government has already proven
defendant's guilt in a criminal proceeding, the standard of proof
1
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in this civil action has already been exceeded.
For the same
reasons, we also deny defendant's motion to proceed in forma
pauperis.
If and when this action is again before this Court, we are
prepared to adjourn the briefing of plaintiff's proposed motion
for summary judgment until defendant is released from custody.
Insofar as defendant has endeavored to file a motion for
reconsideration of our March 17, 2009 Order, entry if7 on the
docket sheet, such motion is denied.
May 15, 2009

NAOMI REICE BUCHWALD
UNITED STATES DISTRICT JUDGE
A copy of the foregoing Order has been mailed on this date
to the following:
Matthew Lane Schwartz, Esq.
United States Attorney's Office
86 Chambers Street
New York, NY 10007
Daniel B. Karron
a/k/a/ Dianne Karron
2
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#60101-054
Federal Prison Camp
Post Office Box A
Alderson, WV 24910
Daniel B. Karron
a/k/a Dianne Karron
348 E. Fulton Street
Long Beach, NY 11561
3
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'-,
USDC s:Jny
DOCUMENT
ELECTRONICALLY FILED
DOC#:_
DATE FILED-: -PC-::'l-Z-=-l"C":2UU9C:=-
United States Court of Appeals
fOR TIlE
SECOND CIRCUIT
S.D.N.Y.-N.Y.C.
08-cv- J 0223
Buchwald, J.
At a stated term of the United States Court of Appeals for the Second
Circuit, held at the Daniel Patrick Moynihan United States Courthouse, 500 Pearl
Street, in the City of New York, on the ,;zt\lay of two thousand nine,
Present:
Dennis Jacobs,
Chief Judge,
Jon O. Newman,
Circuit Judge,
David G. Trager;
District Judge.
United States of America,
Plaintiff-Appellee,
v.
Daniel B. Karron,
Defendant-Appellant.
09-2530-cv
The Government moves to dismiss this appeal for lack of jurisdiction, or in the alternative for
summary affirmance. Appellant, pro se, moves for a stay pending appeal, leave to proceed in forma
pauperis, and appointment of counsel. Upon due consideration, it is hereby ORDERED that the
Government's motion is GRANTED and the appeal is DISMISSED for lack of appellate
jurisdiction. The order appealed from is not an appealable interlocutory order under 28 U.S.C.
I 292(a)(1 ). Fw:thermore, the collateral order doctrine does not apply. See Gulfstream Aerospace
'David G. Trager, Senior Judge of the United States District Court for the Eastern District
of New York, sitting by designation.
SAo.MW'!.. cony
Catherine W;lfe, Clerk
fl ._iiliiiiiiliiliiliiiiiil .. _llliiiiiillliiiiiiiiiiiiil_.
.... --.....;..;;..;.;..;.,,;;.;;,,;.------ISSUED AS MANDATE: OCT 0 ;J.ftD 1
-
A-30
Corp. v. Mayacamas Corp., 485 U.S. 271, 276 (1988). It is further ORDERED that Appellant's
motions are DENIED as moot.
FOR THE COURT:
Catherine O'Hagan Wolfe, Clerk
j
f /)
B , p ~ t ?
SAO-MWG
2
--------------------------------------------------------------------- x
Plaintiff,
- v. -
DANIEL B. KARRON,
Defendant.
:
:
:
:
:
:
:
:
08 Civ. 10223 (NRB) (DFE)
NOTICE OF MOTION
--------------------------------------------------------------------- x
PLEASE TAKE NOTICE that, upon the accompanying Memorandum of Law in Support
of Plaintiffs Motion for Summary Judgment, Rule 56.1 Statement, Declaration of Melinda S.
Chukran, Declaration of Michael J. Byars, plaintiff the United States of America, by and through
its attorney, Preet Bharara, United States Attorney for the Southern District of New York, will
move this Court for summary judgment under Rule 56(c) of the Federal Rules of Civil Procedure
as to defendants liability for and the amount of damages and penalties under the False Claims
Act, 31 U.S.C. 3729 et seq.
June 18, 2010
Respectfully submitted,
PREET BHARARA
United States Attorney
By: s/ Michael J. Byars `
MICHAEL J. BYARS
Telephone: (212) 637-2793
Facsimile: (212) 637-2717
Email: michael.byars@usdoj.gov
A-31
A-32
--------------------------------------------------------------------- x
Plaintiff,
- v. -
DANIEL B. KARRON,
Defendant.
--------------------------------------------------------------------- x
08 Civ. 10223 (NRB) (DFE)
DECLARATION OF
MELINDA S. CHUKRAN
IN SUPPORT OF PLAINTIFF'S
MOTION FOR SUMMARY
JUDGMENT
I, MELINDA S. CHUKRAN, declare the following pursuant to 28 U.S.C. 1746 under
penalty of perjury:
1. I am employed as a Non-Supervisory Grants Specialist (AuditIPolicy) by the
United States Department of Commerce, National Institute of Standards and Technology
("NIST"). I have worked in the Grants Office at NIST since 1993 and have held various grants
specialist positions since that time. The statements I make in, this declaration are on the basis of
my personal knowledge and my review ofNIST records relating to the above-captioned matter.
I submit this declaration in support of the United States of America's motion for summary
judgment.
2. At the time that the cooperative agreement at issue in this case was entered into,
applicable regulations and agency policies required a recipient of government research funding
(a "Recipient") regularly to file certain financial reports that were to be certified by an
"Authorized Certifying Official" of the Recipient.
A. The "Request for Advance or Reimbursement" Form (Form SF-270)
3. Department of Commerce regulations require requests for advance payment to be
submitted on' a form entitled "Request for Advance or Reimbursement" or SF-270. See 15
A-33
C.F.R. 14.22. The regulations provide for an exception to this requirement where "advance
payments are made to the recipient automatically through the use of a predetermined payment
schedule or if pre,eluded by special [Department of Commerce] instructions for electronic funds
transfer." Id. 14.22(d). Forms SF-270 may be submitted on a monthly basis. Id. 14.22(c)(3).
4. Form SF-270 requires an Authorized Certifying Official of the Recipient to make
the following (or a substantially similar) certification:
I certify that to the best of my knowledge and belief the data on the
reverse are correct and that all outlays were made in accordance
with the grant conditions or other agreement and that payment is
due and had not been previously requested.
5. In July 2002, the special award conditions for the CAS I cooperative agreement
were amended to change the payment method to the Department of Treasury's Automated
Standard Application for Payment ("ASAP") system ("Amendment No.4"). Amendment No.4
excused CASI from the filing requirement for Form SF-270. Attached as Exhibit A is a true and
cOrrect copy of Amendment No.4.
6. Attached as Exhibit B are true and correct copies of nine Requests for Advance or
Reimbursement dated between the inception of the award in October 2001 and the date of
Amendment No.4 and signed by defendant Daniel B. Karronas the Authorized Certifying
Official for Computer Aided Surgery, Inc. ("CASI").
B. The "Federal Cash Transactions Report" Form (Form SF -272)
7. When funds are advanced to a Recipient, Department of Commerce regulations
require the Recipient to submit a form entitled "Federal Cash Transactions Report" or SF-2n.
See 15 C.F.R. 14.52(a)(2)(i). The regulations provide for various exceptions to this
requirement, ineluding where "electronic payment mechanisms provide adequate data." Id.
14.52(a)(2)(v). Section A.Ol of the Department of Commerce's Financial Assistance Standard
2
A-34
Terms and Conditions also requires submission of Form SF-272. Section 7(c)(3)(b) of the
ATP's General Terms and Conditions for cooperative agreements requires monthly submission
ofa Form SF-272 for awards over $1 million, such as the CASI award at issue in this matter.
See GX 2.1
8. Form SF-272 requires an Authorized Certifying Official of the recipient to make
the following (or a substantially similar) certification:
I certify to the best of my knowledge and belief that this report is
true in all respects and that all disbursements have been made for
the purpose and conditions of the grant or agreement.
9. Amendment No.4 also excused CASI from the filing requirement for Form SF-
272. See Exhibit A ~ ~ II(c), (f).
10. Attached as Exhibit C are true and correct copies of seven Forms SF-272 dated
between the inception of the award in October 2001 and the date of Amendment No.4 and
signed by defendant Daniel B. Karron as the Authorized Certifying Official for Computer Aided
Surgery, Inc. ("CASI").
c. The "Financial Status Report" Form (Form SF-269)
11. Department of Commerce regulations require a Recipient "to report the status of
funds for all nonconstruction projects or programs" on a form entitled "Financial Status Report"
or SF-269. See 15 C.F.R. 14.52(a)(1)(i).
12. Form SF-269 requires an "Authorized Certifying Official" of the recipient to
make the following (or a substantially similar) certification: .
I certify to the best of my knowledge and belief that this report is
correct and complete and that all outlays and unliquidated
obligations are for the purposes set forth in the award documents.
I GX 2 is attached to the Declaration of Michael J. Byars dated June 18, 2010.
3
A-35
13. Attached as Exhibit D are true and correct copies of four Financial Status Reports
dated between the inception of the award in October 2001 and the date the award was suspended
in June 2003 and signed by defendant Daniel B. Karron as the Authorized Certifying Official for
Computer Aided Surgery, Inc. ("CASI") for purposes of receiving the funds under the
Cooperative Agreement at issue in this case.
I declare that the forgoing is true and correct under penalty of perjury pursuant to 28
U.S.C. 1746.
Dated: Gaithersburg, Maryland
June 18,2010
4
A-36
F'RM CDAS1 U.S. DEPARTMEhot' OF COMMERCE [J GRANT X COOPERATIVE AGREEMENT
!REV 10/981
ACCOUNTING CODE
AMENDMENT TO
cc; 2/4721348 Obj. Class; 4110
FINANCIAL ASSISTANCE AWARD
Req. No. 2/472-2106 $0.00
AWARD NUMBER
70NANB1H3050
RECIPIENT NAME
AMENDMENT NUMBER
Computer Aided Surgery, Inc.
'04
STREET ADDRESS EFFECTIVE DATE
300 East 33,d Street, Suite 4N
JUL
2 3 2002
-
CITY, STATE. ZIP CODE EXTEND WORK COMPl.ETlON TO
New York, NY 10016
CFDA NO. AND PROJECT TITLE: 11.612. Advanced Technology Prog"'m IATP), Proposal No. 0000-4607
Proiect Title: Anatomic Computer Modaling 10. Pre-c],.e- and Accurate The-rupiol
COSTS ARE REVISED PREVIOUS .. DO DEDUCT TOTAL
AS FOLLOWS; ESTIMATED COST
ESTIMATED COST
FEDERAL SHARE OF COST
$1,400,000.00 '0 '0 $1,400,000.00
';C1PIENT SHARE OF COST
$ 67,000.00 $0
'0 $67,000.00
TOTAL ESTIMATED COST
$, ,467 ,000.00 '0
$0
$1,467,000.00
REASON{S) FOR AMENDMENT
This cooperative agreement is being amended to {l) incorporate a special award condition on the" Automated
Standard Application for Payments," System; and (21 indicate on the attached, those terms and r::onditions affected
by any administrative or statutory requirements.
This Amendment approved by the Granls Officer Is issued in triplicate and constitutes an obligation of Federal funding. By signing the
three documents. the Recipient <'IIgrees to comply with the Amendment provlsions checked below <'lind attached, as well as pre\lious
provisions IncorpOT<'IIted into the Award. Upon acceptance by the Recipient, two signed Amli'ndJ:nant documents shall be returned to
the Grents Officer and the third document shall be ratained by the Recipient. II not signed and relumed without modification by the
Recipient within 30 d<'llYs of receipt, the Grams Officer may unilaterally terminate this Amendment.
X Special Award Conditions
GOVERNMENT
EXHIBIT
Lina Item Budget
24
Other{s)
(l7 Cr. 54l (RI'P) (10)
B-AE93-N-C-F-N-A36-51000 E1N; 1338809180 472/B.J. Lide
SIGNATURE OF DEPARTME-A COMMERfE ..-
DATE
Marilyn Goldstein .... /
7-J3-d-2.
-:T '7
I
'(PEO YPEO TITLE, AND SIGNATURE' OF AUTHORIZED RECIPIENT OFFICIAL
\J '( J (lffiN\- I-TJ.1

..
Onglnal
C)y
A-37
SPECIAL AWARD CONDITIONS
ADVANCED TECHNOLOGY PROGRAM - SINGLE RECIPIENT
COMPUTER AIDED SURGERY, INC.
COOPERATIVE AGREEMENT NO. 70NANB1H3050
AMENDMENT NO. 04
THE FOLLOWING SPECIAL AWARD CONDITIONS ARE
AMEN_OED:
11. AUTOMATED 5T ANDARD APPLICATION FOR PAYMENT
SYSTEM !ASAP)
a. This SAC amends the Department of Commerce Financial
Assistance Standard Terms and Conditions, dated October
1998, Section A.02, Award Payments, and the Advanced
Technology Program (ATP) General Terms and Conditions;
dated August 2001.
b. The advance method of payment stlaU be authorized unless
otherwise specified in a special award condition.
c, Payments will be made through electronic funds transfers,
using the Department of Treasury's Automated Standard
Ar "--;8tion lor Payment (ASAP) system, and in accordance
v>. .he requirements of the Debt Collection Improvement Act
of 1996. The following information is required when making
withdrawals for this award; (1J ASAP accounl identification lid)
~ award number found on the cover sheet of this award; 121
Agency Location Code (ALC) =0 13060001; and j3) Region
Code = 01. Recipients 00 NOT need to submit a "Request for
Advance or Reimbursemem
w
(SF270) or a "Federal Cash
Transactions Rapon" (SF272) for payments ralating to this
award. If you are not enrolled as an ASAP Recipient
OrganiHtion you must .complete the enrollment process with
your Federal Reserve Bank, Regional Finance Center.
Enrollment applications and information can be found at the
following web site:
http://ww w . Ims. ue as. govlas ap/h andboo k, html
If you need a paper copy of the enrollment documentation
please contact the Grant Specialist responsible tor this award.
Advances taken through the ASAP shal! be limited to the
minimum amounts necessary to meet immediate disbursement
needs. Advanced funds not disbursed in a timely manner must
be promptly returned, via an ASAP credit, to the account from
which the advanced fundif'lg was withdrawn. Advances shall
be for periods not to exceed 30 days.
d, Funds that have been withdrawn through ASAP may be
returned to ASAP via the Automated Clearing House IACH) or
vh FEOWIRE. The ACH or FEOWIRE transactIon can only be
{ by the Recipients financial institution. FuU or partial
aniounts of payments received by a Payment
Requestor/Recipient Orgar)ization may bEl returned to ASAP.
All funds returned to the ASAP system will be credited to the
ASAP Suspense Account. The Suspense Account allows tile
Regiona.l Financial Center to monitor returned items and ensure
that funds are properly credited to the correct ASAP account.
Returned funds that cannot be identified and classified 10 an
ASAP account will be dishonored and returned to the
originating depositary financial institution 10DFI).
It is essential that the Payment Requestor/Recipient
Organization provide its financial institution with ASAP account
information (ALC, Recipient 10 and Account ID) to which the
return is to be credited. Additional detailed information can be
found at
http://www . fms/treas,gov lasap/p ay-return 2. pd f .
B. This award has the following control or withdraw limits set
in ASAP:
_...K. None
Agency Review required for al! withdrawals (see
explanation below)
Agency Review required tor all withdrawal requests
over $ (see explanation below)
Maximum Oraw Amount controls (see explanation
bei;;"w);
':===== each month
" each quarter
each year
f. Term II 7.c(3Hbl TO THE ATP General Terms and Conditions,
dated August 2001, is deleted in its entirety to remove the
requirement for a ~ F e d e r a l Cash Transactions Report" lSF-2721.
g. Term II 14. TO THE ATP General Terms and Conditions,
dated August 2001, is deleted in its entirety and replaced with
the following:
REFUNDS
This special award condition remains in effect under this award
and applies to all payments that the Recipient received outside
of the ASAP system. The Recipient shall promptly submit all
refund checks lincluding interest earned on advances) to the
following address identified below and notify the Grants Office
upon submission. Each check must identify on its fa.ce the
NIST award number, and no more than a two-word description
to identify the reason for the refund. Submit \0:
"<--! I
, f
A-38
National Institute of Standards and Technology
Accounts Receivable
1 ao Bureau Drive, Stop 3751
Bldg. 101, Room A8a9
Gaithersbur'g, MD 208993751
A-39
July 24, 2002
Dr. D. B. Karron
300 East 33
rd
Street
Suite 4N
New York, NY 10016
RE: Cooperative Agreement No. 70NANB1H3050
Amendment No. 04
Dear Dr, Karron:
The National Institute of and Technology (NlST) started using the Department of
Treasury's Automated Standard Application [or Payment (ASAP) system in July 2001. This
payment system aiiows grant and cooperative agreement recipients to withdraw funding directly
from an established ASAP account for each award. Withdrawn amounts are posted directly into
the bank. account identified by the recipient during the enrollment process. We have identified
the foHowing award and funds available [or withdrawa1 for to ASAP:
NlST Award Number 70NANBlH3050 $70,000.00
Enclosed are 3 copies of the above award amendment authorizing yOll to begin withdrawing
funds from the, ASAP system. In order to certify the available balance for withdrawal, please
sign, date and return 2 copies immediately to:
National Institutes of Standards and Technology
Grants and Agreements Management Division
100 BUreau Drive, STOP 3580
TRF Building 411, RoomA120
Gaithersburg, Maryland 20899-3580
Attention: Hope Snowden
Please retain one (1) copy for your records.
Should you have any questions concerning this amendment., you may contact me at (301) 975-
6002.
Sincerely.
Hope Snowden
NlST Grants Specialist
Enclosures
bc: file, reader, B.J. Lide Project Manager
NlST/ONGAMD(358.00;Hope Snowden:975-600ZTAl
Official file located in Bldg. 411, Room A-120
A-40
OIIJAf'!'ROVALtn
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1
I
2
REQUEST FOR ADVANCE
,.,.
L '!IC"'''''or1a!ltbalw
2.IIASISOFRS3.ESf
OR REIMBURSEMENT

mADVANC! 0_0.
""''''
MEN\' IXI'CASH
PA""'"
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"""'"""
[IFliw. [IpAlmAl. [JACCALW.
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1I,P'AJ(fW.PAvt.elJ"REJIESI'
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70NANB1H3050
.
7.RECIPENI':!SN:t:t::AMftUESl
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.
.13-3889180 131068299665
November 1! 2001
November 30;-200 1
Il Re:::l'lEHTCfiOANIZAmM 10. PA.Ye M"-c:IHIdc,. bbe-tl'crl\JIW)ffllMlItI'II
IMmf:Comouter Aided Suraerv. Inc
N.".:
,..,..,.
300 East 33rd Street
-
and ..... Suite 4N ........
...... New York, NY 10017 cty,-
IIIIIi ZIP CD: 1InIIZ1PCV#:
11, . COMPUTATION'OF'AMOUm: OF. BElMBURSEMENTSIADVANCES REQUESTED .
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PROsRAM9lFUNCTlONSJAr:nVmES ..
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do netc:.el\ otJSfayi
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150,000
f. Ncn-FedfnJ shah dllll'lClt.llt tin IN.
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ALTERNATE COMPUTATION FOR ADVANCES ONLY
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b.Lo# Fodonsl am: on hand lISe(
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A\JlHORIZO FOR l.0CAl. REPRODUCTION
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SF-27D 1.1.max
A-41
I certify lhat tD tha 'beat 01' my knowledge
and belief Ihe data on lJIa ravena are
ccrrect IUId IfIat all auUays' ware made In
accordanca wllh !he grant conditions or
. othor sgreemant and that pa)'\TIenJ: III due
and haS not bll6l1 previouslY' feqU"t5d.
.",1 .... '"
PUblIc raportIng bunfllfJ fer thl8 collacilon oflnfonnallon II; NIlmBIad to av&r.lgll 60 mlnufa pet reapona&,
IqdtH1ln; time fer rmewlng 1n:strut1fons, altllrtfllng DXIsUnIJ data aoun::es, gathering and maintaining Ihe
daIS l1&OCfed .. amJpIl!lIng and ItKI '" Inftmnatlon. Sondcommonb reganIlng Itfa
burden estimate erany other aspect of Ihls coIIadton ollnformaikm.lndud!ng suggestions fer reducing this
burden. 10 the omca of ManagetllII.I1t and Budget, PapBfWOl'k Reducllcn Project (OM8-0004). WsshIng!cn.
DC20!503. .
DO Nat RETURN YOUR COMPLETED FORM TO THE OFfICE OF MANAGEMENT AND
BUDGET, SEND rrTO TItE ADDRESS PROVlDED BYTIlE SPONSORlNG AOENCV.
INSTRUcnONS
Please type or pJ1ntSeglbly. Items 1, 3, 5, 9, 10, 11c. 119, 11f, 11g, 111, 12 and 13 am speclflc
instructions fOr other Items are as kllklwS: .
Item Entry
2 Indlcals whether Is prepared on cash or accrued
axpandltura basIs. All requests for advanees shal[ be
prepared on a basis.
.. EllioT the Federal grant numbn. 0/' oIhoir klen1tfy\ng number
assigned by 11111 Federal SJ)CII'I3Oring agllrlC:Y. tr the acMmCII cr
reimbursement 115 ror more than one grant Dr other
agreement, iMart N1A; than, abow 11111 8ggr&gala amounts.
on a separate al1l1al, list each grant or agreement numll&!' and
tho Federal Mara of outlays made agalnlllihe grant or
-,
8 EJ:!lar the employur ldonliftcaHon Rumbar assIgned b1\ha
U.S. Jnloma! RWEIflue Servlce,OI thll F1CE (lnsHlullon) coda II
requested by !tilt Fac:!llrei agency.
7 This space II res-erved for an account numbot or olhor
ldenUfy\:1g nW'nbar IN! may bs assigned by the reclplenL .
8 Entar the month, day, and year fer the beglNmg and ending
of the period coventd in this mqtIasL If the requast Is ftIr an
advance 01' for both an IIdvance ami retmbUrsemaflt, I5bcw
the period DIal thD advance will COVIll. Ir ttls raquest b for
rellTibutsement, show !he pe!SOd for whIch \he re1nilulsement
Ia requuted.
Nota: Tha Fed&ral sponsor1ng agendes huve the opllon or raquilfng
racJp!enb to CIlrnplem HeINl 11 or 12, but not bo!h. Item 12
:should be used when only II m1nlmum amount of
Information Is needed to make an advance and oullay
Information conlolnad In Il&m 11 can be obtaIned III a IImely'
IMMel" frOm oIhar reports.
11 The pu!pou or the Y8r11cal cdumns (a), (b), Bnd Ie). la to
PrOYkIe space lor saperam C:CSI bralUldawns whGl'l a prqea hBS
been planned and bYdgllbtd b)I program. fundlcn. CW" aclMty.
If additional colUIMs are naaded. usa as .many additional
fom1s 'Q!I needed and lndlcalo page numblltln l!pace pruvlded
In Upper flghl; however, the summary .tolals of all
fundic:m, 0" adlvllllUo be Iflown In the "lola!"
cclumn on Itts tntpaga.
11b Enter the cumulative C3l!h IncomD recelvlld to date, If
raqUDJIs we prepared on" c::Wl bMl!, Fbt t&qUests
on an accrullfJ expeocUIura baSIs, ent&r Ule cumulative Il1com&
earned ID da!&.. Under ellber bas!s, enter only the amaWlt
eppitcabla 10 pItlgram Il'i"cO/llB"that was T$qU1rod 10 be usad fQr ...
tho proJoct or program by the terma of the grant or other
agmertlenL
11d Onlv making TBQu&sb far atMlnca paymenl3, enlar
thlill total IiIIstimillad amount of C<ish ouUaya that yjlll be
made during !he peIIod owar&d by !he advance.
13 (;applela the cw1ItIcallon before aubmlWng this r!qtlert.
SF-270 1.1.max
A-42
REQUEST FOR ADVANCE
OR REIMBURSEMENT
.13-388 9180 131 068299665
IRmw:Computer Aided Surgery, Inc
"""'" 300 East 33rd street
w..... Suite 4N
"'" s,.,. New Ybrk, NY 10017
IIItdl1PCPo1f.:
J. Idwar.cII flq.ahd. 11
---
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"PI'acbe iila 1\fwrR:n
SF-270 2.1.max
Copy of Page 1.max
>
1 2
[J-
TOTAL
A-43
f9P.OIIn; burdon I:!r this of!tlbrnlatlOn II lei averup UI rn!ntdes pfIt
Ir\dudlng limo far revIcWInll' HlIn:fIitl{l', oxlstIng .. ta soun:Q. galhllrlng antf malntllnln; the
data needed. and tamp/ftUnQ and J1MMrQ tile of Il\fI:Jm1al(m Send a:II'IWMIItII regarding the
bumsn $5l1mam Clrany oilPI' alIpm:l ollhls ccIlec!Ion of,; .. fot ,.talla.l,lrn:fudIng $UQgtSilDn$ fOrredudng thla
butden. 10 the omC$ of and Budget, Paptll'WOtk Rec!ucUon Pt*d: (0348 0004). WBtf1Inoton,
00_ .
PLEASE DO NOT RET1JRN YOUR COMPLETED FORM TO THE Dmc& OF UAIfAGEMEtlT
DUDG6T! SEND ino THE ADDRESS PRO'YlllED BV'niE SPONSORING AGENCY.
INSTRUCTIONS
PleasatypaorprlnHeglbly. Ham31, 3, 5, 9, 10. 110. 119, 11f, 11g, 111, 12 and
lMtnJd(ona fOr otMr ftetnll are as fcl!Dwt: .
2 Indlc;:ate whe\h8r roque$1 b ptflpal'EJf;l on each or lIocrued
flxpend1hnu All ruqu8cla ror adViln .. lts ehall bo
pr8paredcn a caM boUilI'.
4 EnlGr tho FodonJ rant IIU'Jl1b4r. Dl otho;i klenllfyInQ nunbar
a:ss/gnod .by tha RKtoraI agency. If 1he advance or
relmbllraemanl Is tor more than one gmnt or other
agreemtnt. ""en N/A: ,then. IhoW the aggtGgato amounts.
on a Ill1pamte lIat: sach grant Of agraarnent numhur iInd
the Federal share at oul1aya made agaInllt the grant Of
."...,.."

7 This Js re9Qrva12 for an account Dr olllar
kfanll!'J1fla nI.IIfIbM Ihaf may be assfgned by the recipient.
Notn! The F&dMDI agencIM have III option of requliJl'I;
recipients to complete Hem. 11 12. but f'lQt boih. l!:em 12
should be used wl'Jen only II minimum IlImou)lt of
InformatloR 115 naodad 10 maka iln advanca lind' ouUay
Infonnallon Coillalnod In ill!m 11 can ba oIllBlnQi:l In iI llmaly
manner Iitm report!..
.... """
"'1111
If add'ilkmal columns ,are nladed. "'$'IS 8$ .many addillonid
fonnI as nae<l1WI &mil J!ldlcala 1lA{J(ll'lUll1bar In spat:a pttlVldEHi
In upPDr right;' howaver. the summary tala.la of all
prqQrQlm. fundlcna. or ItcIMtles IlhDUld be ahown In Ihu "tatIJ"
fdulM en 1M page.
11d 0nI;r when mak1ng: reque.st!I for eiMmce PilyrrtIIfli:s, Mlir
tha total esHmatlld amourrt of cash ooUays \hat will bit
mada durfng Iha plllb:! covered by lila
13 Compels the t&rtIflcallon befDfu submlttlng Ihls reqtlllSl
................. ......... D"l'"Vm ...
SF-270 2.1.max
Copy of Untitled (4).max
A-44
,,'
----
REQUEST FOR ADVANCE
OR REIMBURSEMENT
,
NISTATP
(SM inslIuctJOf'Is on back)
,
ij. EMPLOYER
NUMBER ORIDEN71FYIHG NUMBER
Name: Computer Aided SUrgery, Inc.
Number 300 East 33rd Street
and SilBet: Suite 4N
City, state
and Z/PCDO&; New York, NY 10016
PROGRAMS/FUNCTIONS/ACTIVITIES ...
j. Advances required bY
month, when requested
by Federal grantor
agency for in making
preschedu!ed advances
g
$
tDENllFYlNG NUMBER !\SSIGNEO
BYFEOERAlAGENcY
2001
o REIMBURSE
PARTIAL
Prescribed
2
BASIS OF REQUEST
I!I CASH
o ACCRUAL
NUMB!OR
TOTAL
0.00
A-45
"'---0:------/:;;;;;;;;;;;=
CERTIFICATION
(tIIf ").." .., .oio"ll
raVill'SQ aro dW9ct and thai 911 oUl!ays 'V-fYUY\/ I. Ih . r- <If-<JV
\!\'ere made In aClrdance wilh the
'OATEREO\JEST
SLBMITTED
grim! comjllions or other CODE. NUMBER,
and thai pa)'(nent fs dUG and has not () 11/- I"..J ::z.U(
beenpreviouslyrequEs!ed. .v I.J kAr<J.7..orJ "" r,p.aW 'If" T-(
This space for agency use
PublIo repor1ing burden for this collection of information is \0 average 60 minutes per
response, lncludinl:J time for relje"';ng instructions, searching existing data sources, gathering and
maintaining the data no;.roed, al'ld completing and reviewing 'the collection of lr.formaUon. Send
oomments regarding the burden or any other aspect of this ooliecHon of information,
Including \3uggeBtlons for reduolr\g burden, to the Office of Management and 8udget, Paperwork
Reduction Project (034e.0004), WaShington. DC 2050:'.
PLEASE DO NOT RETURN YOUR COMPLETED FORM TO THE OFFICE OF MANAGEMENl
ANO BUDGET. SEND IT TO THE AODRESS PROVIOED BY THE SPONSORING ACOiENCY.
INSTRUCTIONS
Please type or print legibly. Items 1, 3, {), 9, 10, 11 e, 11f, 11 g, 111, 12 and 13 are self-eXplanatory; specific
instruc1ions for other items are as follows:
"em EnttY ____________ ________________________ __
2 Indicate whether request is prepared on cash or accrued
expenditure basis, All requests for advances shall be
prepared on a cash basis,
4 Enter the Federal grant number, Of' otller Ideniifying
number by the Federal sponsoring a!=jency. 1f
the advamce or reimbursement is for more than one grant
or other agreement, Insert N/A; then, show the aggregate
amounts. On a separate sheet, list each grant or
number and the Federal share of outlays
made against the grant or a9reement.
6 Enter the employer i'Cientification number assigned by the
U,S. Interna! Revenue Service, or the FleE (institution)
code if by the Federal agency.
7 This space is reserved for an account number or other
identifying number that may be assigned by the reCipient.
8 Enter the month, day, and year for the beginning and
ending Mthe per10d cOl/ered in this request. Itthe request
is for an advance or for bolfl an advance and
reimbursement, show the period that the adVance wilt
cover. If the request is. for reimbursement, show the
period for 'Nhich the reimbursement is requested.
Note: The Federa] sponsoring agencies have the o!,\ion of
requiring recipients 'to complete items 11 or 12, but not
both. Item 12 should be used when only a minimum
amount of information is needed \0 make an adVance and
outlay information conteiMd in item 11 oan be obtained in
a timety manner from other raports.
11 The purpose ofthe Yertlcal columns (a), (b). and (C) is to
provide space for separate cost breakdowns when a
pmject has been planned and bUdgeted by program,
fUnction, or
activity. If additional columns are needed, use as many
additional forms as needed and indicate page number In
space provided in upper right however, tl'1e summary
totals of ell programs, functions, or aclivlties should be
shown in the column on the first page.
11a Enter in "as of date," month, day, and year of the
ending of the accounting period to which this amount
IlPp!ies. . .Enter program outlays to date (netof refunds,
rebates., and discounts), In the appropriate columns. For
requests prepared on a cash basis, outlays are the sum
of actual cash disbun;ements for goods and services,
the amount of indirect expenses charged, the value of in-
kind contdbuiio(1s applied, and the amount of
ad .... ances and payments made to subcontractors and
subrecipients. For requests prepared on an accrued
expenditure basis, outlays are the sum of the actual
cash disbun;ements, the amount of indirect expenses
jncurred, end tile net increase (or decrease) in the
amounts owed by the recipient for goods and other
property received and for services petiormed by
employees, contracts. subgrantees and other payees.
11b Enter the cumulative cash income received to date, if
requests are prepared on a cash basis. For requesls
prepared on an accrued expenditure basis, enter the
cumulative income earned to date. Under either basis.,
enter only tfle amount applicable to program income that
was required to be used io[ the project or program by
the terms of the grant or other agreement
11d Only when making requests for paymsnts,
enter the total estimated amount of cash outlayS that will
be made during the period covered by the advance.
13 Complete {he certification before submItting this requ est.
A-46
-
OMS .o.P'ffiOVAl NO. PAGE
"
REQUEST FOR ADVANCE
0348-0004 1 I 2 PAGES
a, 'X'0ll9",/>oIJIbox"" it BASIS Of' RE':QUEST
OR REIMBURSEMENT
,.
IX! ADVANCE
0

l'(PEOF MENT 18] CASH
PAYMOO- b. ?lhs"ppi1ie
(,st JnsfJucUons on hack) REQUE.srEO
o FINAL D?ARTIAL
DACCRUAL
.-
if<'E'DEAAL Si'ONsoruNG AGENCY" ANDORGIINIZA110NAJ. EtSl1EN1'TO 4. FeoEJV\l. GRANT OR OTl-lER S.PARTIAL'P.AYII!NTREOtJESr. : ,.
".'
..vvIiICH THIS REPORT IS S\.IiItfo\rnD
loemF'YiNG NUMBER ASSIGNED NUMBER FOR 11-IIS ReQUEST
BYFa\ER1IlAGe.lr:y
NIST ATP 70NANB1H3050
.
-;:
IDEi'fr!FlCATlOlll 7. RECIPIENT'S /lCCQlJNT NUMBER

PERIOD COVERED BY THIS REQUEST
,...LJMBER
OR NUMBER FROM (mMlil, VOOI1 TO (1/WlI1Il. da1, wa1
1.:3_3889180 131 068 299 665 Februarv 1, 2002 Februarv 28, 2002
-; A'.eCll'1ENT OROANIZiITlON
10. PAYEE fWhS/'(I chGCk. '$ to be sMIIfd1tremnf limn !lam 9)
..
uo71
e
:
Computer Aided'Surgery, Inc. Nome:
NurTI
bef 300 East 33rd Street Number
d
Sulfe4N
anrJ street:

SllJls
C/tf, Sftte
,?IPCOriB: New York, NY 10016 ilndZlPCoda:
,.
-
11_
COMPUTATION OF AMOUNT OF REIMBURSEMENTS/ADVANCES REQUESTED
"J
'oj
PROGRAMS/FUNCTJONS/ACTNlTfES ..
-
TOTAL
ota' program
, e, to date
(As ofdalrJ) .
$ 282,308.65 $ $ $ 282,308.65
LOst!.: Cumulative Jmigram lm:iome
0.00 0.00
b, Net outlays (!Jne a-mllllls
282,308.65 282,308.65 o. b
ed net outlays for actvane .
62,735.26 62,735.26
. 0",,0<1
e. (Sum of lines c & dJ
345,043.91 345,043.91
r. NOn-Federal sha"" of amount on JInee
15;043.91 15,043.91
, share of amount on nne e
,330,000.00 330,000.00
h WYmants p.JE\10IJsij requesle\l
270,000.00 270,000.00
. 'Federal share now requested (/Jrl6 g
60,000.00
0.00 0.00
60,000.00
1.
J. required by
1st month
60,000.00 60,000.00
mllnll!, when requested
b FedernJ 9IBnJor
2nd month 60,000.00 60,000_00
/ epr:{ fCI nse rn mal:lnll
9 scltedUled advances
3rd month
60,000,00 60,000_00
po
".
Esiimafed Federal cash outlays lhat wllJ be- made during period covered by Ihe advance
$
, ,
b. LeSS: Eslimaled balanC(l of Federal oash on hand as of beQinnim. of adVance period
A ounl aJne e mtnusllnfJ'b)
$.
.0.00
c. m jZED FOR LOCAL REPRODUCTION (Con5nlJerl OIl Reverse) STANDARD FORM 270 (Ree. 7-'iJ7)
AUTHOR
Presoribed by OMS Circulars A-102 and A-i 10
sf27D'-feb.max
A-47
13: .- CERTIFICATION
,SIGNA OR,,_,HORlZm CERllFYING OFFICIAL :vj- ...... ::J,./ :. , O .... lEREQUEST
SUSMmED ! cerlJ1'y Ihat 10 tho best of my .. ' .('t . .f),:r:-
re'lerllE! b.Je comet and thill all outlay; 'u- B, Io;ru;:'" January 11, :2002 and benef Ihe (!a\:a, on the __ __ _
Wefe milde In eccdanee- v.t!h the n'PEQOR PR-ImED ME ANOllnE TELEPHONE (IIREA
grant cQnditlol'l9 or other E>lreernenl coo1o. NUMBER,
and that payment \s du,;. and has rtOl EXTENSION)
been previously reque$\ea'. Dr D B Karran, Presiden1 212-686-9748
Thisspllct! ror agency use
Public reporting burden ror this collection 01 llformlll:\on Is estimated to 8i'erage 60 minutes per
reeponse, Including I1me for rev1eWlng instru;tlons, searching el(\!dlng dalll eources, gathering and
maintaining the da:taI needed, and oompieting ;:md re'i1ewlng: file collectloll of Information. Send
comments regarding Ihe burden estim!!.te or any of Ihlll coliectiOfl of Information,
Inclurlin;;l sUggEStions lor reducing this to the Office or Managernef1\ and Buclgel, PaperworX
Projei::! Washington., DC 20SG3,
PLEASE DO NOT RETURN YOUR COMPlETED FORM TO THE OFFICE OF MANAGEMENT
AND BUDGET, SEtlD IT TO THEADORESS PROVIDEO BY THE SPONSORING AGENcY.
INSTRUCTIONS
type or print !eglbly. ftems 1, 3, 5, 9, 10, 11e, 11f, 11g, iii, 12 and 13 are setf--exp!anatory: specific
instructions for other ilems are as follows:
l/em Entry "'=.m'--______ ____________ _
2 Indicate whether is prepared on cash or accrued
expenditure basi!>. AI! requests for advances shall be
prepared on. a cash basis.
4 Ellter the Federal gran! number, or other identifying
number assigned by the Federal sponsoring agency. 11
e:dvanca or reimbl.1rsement is for more than on" grant
(lr other agreement, insert N/A; then, show the a<:lgregale
agreement- number and the Federal share of outlays
made grant or agreement.
6 Enter the employer identification number aSSigned by the
U.S. Internal Revenue Service, or the FleE (institution)
code if requested by the Federal agency.
1do!ntifYing numberlhai may be assigned by the rridpient.
8 Enter the monttl, day, Md year for the beginning and
ending oUhe period covered in this request, If the request
is tor an ad .... ance or for both an advance and
reimbursement, show the period tl1at the advance will
cover, lr the request is for reimbursement, show lhe
period for which the reimbursement is requested.
Note; The Federal sponwring agencies have the oplion of
requiring recipients to complete items 11 or 12, but not
both. Item 12 shOUld be used when only a minimum
amount of inform.ation is needed 10 make an advanee and
outlay information contained In item 11 can be obtained in
a timely manner from other reports
11 The purpose of "the vertical columns (a), (b), and (c) is to
prOVide lor separate cost breakcloYJl'IS when a
project has been planned and bUdQeted by program,
fUnction, or
additional forms as needed and Indicate page number In
space provided In upper right; however, the summary
totals of all programs, functions., or activitIes should be-
shown in the '';otal'' column on the first page.
118. Enter in of date," month, day, and year of the
applies. Enter program outlays 10 data (net of refunds,
rabates, and discounts), in the ilppropriate columns. For
requests prepared on a cash baGis, ou:tlays are the sum
of actual C<lsh disbursements for goods and serv.lces,
the 3.mot.Jnt of indirect expenses charged, the value of
kind contribution::, applied, and the amount of cash
advances and payment:;; made to sUboonlractors and
sub recipients. For requests prepared on an accrued
eXpendrture ba:;;is, outlays arc the sum of the actual
cash disbursements, the amount of indirect exp!;tnse:;;
incurred, and net increase (or decrease] in the
property recejved and for services performed by
employees, contracts, subgrantees <Ind other payee8.
11b Enter the cumulative eesh income rc:ceived to date, If
requests are prepared on a cash basis. For requests
prepared on an accrued expenditure basjs, enter the
cumulative income earned to da:te. Under either basis,
enter only the amount applicable to progrl'lm income lt1at
was required 10 be used for Ihe project or program by
the terms of the grant or other agreemant.
11d Only when making requests fOT advance payments,
enter the total estimated amount of cssh outlays that will
be made during Ihe period .covered by the advance.
13 Complete Ihe certificHtion before submittiF19 this request.
rOfl.M (fl. ... 7-111)
st270-feh.mror
A-48
OMBAPPROVAL NO. PAGE
"
0348-0004
1
I
2
PAGES
REQUEST FOR ADVANCE
a. 'X. ...-bo!ll b"" ... BASJSOFRE"QUEST
OR REIMBURSEMENT
,.

0
REIMBURSE
TYPEOF MENT
PA'tMENf 1>. 'X" v""
(Sa a InslJuctions 011 back,) REQUESI"EI}
o FINAL o PARTlAl
o ACCRUAL
3. FEDERAL SPONSORING AGENCY AND OJ'(GANlZA110NAL ELEMENT TO 4, FEDERAL GRANT OR OTHER 0, PARTlIlL PAYMeNT REQUEST
WI-UCH THIS REPORT IS SIJBMmEll IDEN11F"!1I'1G NUMBER ASSiGNED NUMBER fOR THIS REQUEST
BY FEDERAL AGENcY
N1ST ATP
70NANB1H3050
6, EMPLOYER IOEl-mFICA110N 7. RECIPIENT'S ACCOUNT NUMSER 6. PERIOD COVERED BY THIS REQUEST
NUMBER OR IDBiTlFYlNG NUMBER FROM (m_nUl. )'9m) TO (mcIl1h. day, )<e4'J
13-3889180 131 068 299 665 March 1, 2002 March 31, 2002
9. RECIPIENT ORGANIZATION 10. PAYEE IS to Wt SElnt If dlf{elMt IMm item 9)
Name: Computer Aided Surgery, Inc. Namrt:
Number 300 East 33rd Street Nl.g1Iber
andS/rtiat:
Suite 4N
t1nd StrlHli"
city, Slate City, St&t&
aT/d :ZIP Coda; New York, NY 10016
,mriZIPCode:
11. COMPUTATION OF AMOUNT OF REIMBURSEMENTS/ADVANCES REQUESTED
i'i
PROGRAMS/FUNCTioNS/ACTiVITIES ....
(b) (oJ
TOTAL
a. Tolal progrnm
outlaYs 10 dale
(MaldDte)
$ $ $ $
345,095.88
b. Less: CumUlative program Income
0.00
o. Net outlays (Ul1e a minus
Dna b
345,095.88
d. Estimated net cash outlays for advance

62,698.21
e. Total ($um of Dnes c & a
.42.b794.09
f. t./on-Faderal share of amount on linea
17,794.09 \
g. Federal share of amount on line e
390,000.00
h. Federal paYments previousII' reQuested
330,000.00
i. now requested (UlJe 9
minlJsfineh
60,000.00
J. required
"
60,000.00
month, Wben requested 1st month
b, Federal grantor
60,000.00
agency for use in making
2ndmonlh
prcscbeduled
3rd month
60,000.00
12. ALTERNATE COMPUTATION FOR ADVANCES ONLY
-
a. EstilTl2lted Federal cash outlays that wm be made durin.:; period covered by the advance
$
b. Less: Estimated balance of Federal cash on hand as of beainnlm. of advance period
c. Amount reauested lJIIa II minus fiT/II {)}
$ 0.00
AUTHORIZED FOR LOCAL REPRODUCTION Contfnued on Reveroe STAHOAROF M

OR Z7 (Roo. 7 W)
Prescribed by OMS Circulars A-l02 and Al10
sf270-mar02-unsigned.max
A-49
13. CERTIFICATION
I certify that tu the besl of my
fmowledge and belief the data on the
rever!H! are correct and that all outlays
were made in accordance with the
grant Of other agreement
and thai payment Is due and has not
been requested.
TYPEO OR PRINTED NAME liND IDLE
Dr. D B Karron, President
DATE REQUEST
SUBMI1TD
TElEPHONE \AREA
CODE. NUM8ER,
EXlENSION)
212-68-6-8748
Publlc reporting burden for this collec\lon of informaUon Is esllmated to average 60 minutes per
resPQnse, :ncll.!dlng time for reviewing InstrllctiEms, ... rchlng eXisting d<lla SOUrOO$, gathering and
maintaining the data ni!eded, and eompJellng 81'\d rowilWling the eollecl]on of infcrmalion. Send
eommenls regardln,g the burden estimate or any other aspect of this collection of information,
Includirl9 suggestions for reclucing' thls"burden, lothe Offica Qf Management and Budget, PapeIWorX
Reduction ProJeot (034B-0004), Washington, DC 20503.
PLEASE DO NOT RETURN YOUR COMPLETED FORM TO THE OFFICE OF MANAGEMENT
AND BUDGET, SEND IT TO THE ADDRESS PROVIDED BYTHE SPONSORING AGENCY.
INSTRUCTIONS
Pleas&type or print legibly. Items 1, 3, 5, 9, 10, 11e, 11f, 11g, 111, 12 and 13 areself-explanatoty; specific
instructions for other items are as follows:
Item Enlrv _'."cm'--______ "Ee'e'''''-___________ _
expenditure basis. All requests for advances shall be
prepared on a cash basis.
4 Enter the Federal grant number, or other identifying
number assigned by the Federal sponso(mg agency. If
the advance or reimbursement is for mere than one grant
or other agreement, NfA; then, show the aggregate
amounts, On a separate sheet, list each grant or
agreement number and the Federal share of outlays
mede against the grant Of agreement.
6 Enter the employer Identillcation number assigned by the
U.S. Internal Revenue Service, or the FleE (institution)
code jf requested by the Federal agency.
7 This spec& is reServed fOr an account number or other
identifying number that may be assigned by Ihe rec'lpient
ending of tha period covered in this request. If the request
is for an advance or for both an advence and
reimbursement, show the period thai the advance will
cover. If the request is for reimbursement, show the
period for which the reimbUrsement is requested.
Note: The Federal sponsoring agencies have Ihe option of
amount ofinformaUon 'IS needed 10 make an advance and
outlay information contained in ilem 11 can be obtained in
a timely manner from other reports.
11 The purpose of the Vertical columns (a), (b), and (c) is to
provide space for separate cost breakdovms when a
project has been planned and budgeted by program,
function, or
actIvity. If additional columns are needed, use as many
additional forms as needed and Indicate page number in
space provided In upper right: however, the summary
tolals of all programs, functions, or activities should be
shown In the ";'oIal" column on the first paga.
11a Enter in "as of date," month, day, and year of the
applies. Enter program outlays to date Cnet of refunds,
rebates, and In the appropriate columns. For
of actual cash for goods and services,
the amount of indirect expenses charged, the value of
kind contributions applied, and the amount of cash
advances and payments made to subcontractors and
expenditure basis, outlays are the sum of Ihe actual
cash disbursement::;, the amount of indirect expenses
Incurred, and the net increase (or decrease) in the
property received and for services performed by
employees, contracts, subgrantees and other payees.
11b Enter the cumulative cash income received to date, If
cumulative income earned to date: Under either basis,
enter only the amount applicable to program income that
was requIred to be used for the project or program by
11 d Only when making requests for advance payments,
enter the total estimated amount of cash outlays that will
be made during the period covered by the advence.
13 Completelhe certificelion before submitting this request.
$TANDARO FORM 270 CR.... ].fir) Batf
sf270-mar02-unsigned.max
A-50
01018 APFI\OVAL NO, PAGE
0'
0348-0004
1
I
2
PAGES
REQUEST FOR ADVANCE
<t. 'Xoo/1erbolhbox .... ,t BASIS Of" REQUEST
OR REIMBURSEMENT
,.

0

l'fPEOF MENT I!l CASH
PAYMEtfl" b.
(See instructions- on back) REQlJESl"ED
o FINAL DpARnAL
o ACCRUAL
3, FEDERAL SPONSORING AGENCY AND ORGANlZAll0NAl ELEMENl"TD 4". FBlERAL GRAtil' OR OTi-iER 5. PARTIAL PAYMENT REQUEST
WHICH TIllS IS
IOENllfYlNG HUMIlffi ASSIGNED NUMBER FOR TIllS REOUEST
BY fEDERAL AGENC'!'
NIST ATP
70NANB1H3050
6. EMPLO'l'ER IDENllFlCAll0/li 7. REC1pjENTS ACCOUNT NUMBER

PEroOD COVERED BY THIS REQUEST
NUMBER OR IlJEWlfYlNO NUMBER FROM (IIlMIi>. d8}', yOOl.l TO (monY" d8}', l'<w.!
131 068299665
AprIl 1, 2002
April 3D, 2002
a. RECIPIENT ORGANW,110N 10, PAYEE ch9f:k (s 10 be srmt If d/fTefWIt than lIam 9)
Name: Computer Aided Surgery, inc.
Name:
Number 30b East 33rd street Numbel
alldSfrnat
Suite 4N
and Street:
Ci/y, state City, State
and ZIP Code: New York, NY 10016
and ZIP Code:
11. COMPUTATION OF AMOUNT OF REIMBURSEMENTS/ADVANCES REQUESTED
PROGRAMSIFUNCTIONS/ACTlViTIES ...
M M (0)
TOTAL
a, Tct:al program
outlays 10 dale
(A' cldQ(e)
$ $ $ $ 407,821.82
b, Less: Cumulative prooram Income
0.00
c, Nel program outlays {Une a minus
line bJ
407,821.82
d, Estimated nel cash oUllays for advance

62,741.81
e,Tctal (&imolllnesc&d)
,
470,563.63
r, Non-Federal share ofamounl on line e
20,563.63
q, Federal share of amount on line e
450,000.00
h, Federal Davments DreVlouslV requested
390,000.00
L Federal now requested (/.ine g
minus/fnah
60,000.00
;. Advances by
month, When rsquested
1st month
by Federal QllmlDr
agency ror use in making
2nd month
prescheduled advances
3rd month
".
ALTERNATE COMPUTAT10N FOR ADVANCES ONLY
H, Estimated Federal cash thai will ba made dunno Oi nod covered bvthe advance
$
b. Less: Estimated balance of Fedina(cash on hand asor be innlno of
,,'"
c, Amoutlt requested /l-ne e minus line b)
$
AUTHORIZED FOR LOCAL REPRODUCTION Conlinued on RevelSe STAt/DARD FORM 710 . ,
n
Prescribed by OMB Circulars A102 and A-l10
A-51
13, CERTIFICATION
SlGNATIJ EaR AtmiORiZEO CERTIFYING O!'l'iCI/IL DATE Re:o.ueSf
I certifY that to the best of my

SUBMlIJED
knowledge and belief the data on the
:3 II
).,dQZ- revarse are IXlrreet and Ihat all outlays
. {J'(f I
were made In accordance wilh the
TYPEOOR PRINTED NAME AND TTIl.E ONE(A EA
grant or other agreement CODE, NUMBER,
and that payment Is dUe and has net
been previeus!y reque1;te d.

ce fOTa This spa geney U
"
Publio reporting burden for 1hls conection of informlJllon Is esUmaled 10 average 60 minutes per
respon:>e, including time for reYiewing IlIStructlons, searching existing data sources, gathering and
maintaining Ihe data nooded, and complellng and reviewing Ihe colJeollrm of Information. Send
comments regarding Ihe burden estimate or arry other aspect of this collection of informat!on,
Including suggest!ons for reduolr1S this burden, to the Office of Management and Budget, PapelWork
Reduction Project (0348-0004), Washing lon, DC 20503,
PLEASE DO NOT RETURN yoLJR COMPLETED FORM TO THE OFFICE OF MANAGEMENT
AND BUDGET. SEND IT TO THE ADDRESS PROVIDED BY'THE SPONSORING AGENCY.
INSTRUCTIONS
Please type or print legiblY. !lems 1, 3, 5, 9,10, 11e, 11f, 11g, iii, 12 and 13 are specific
Item Entrt BIt.'m"-______ -'Err"'""''-____ ______ _
2 Indioate whether request is prepared on cash or acorued
expenditure basis. All requests for advances shal! be
.01 Enter the Federal grant number, or other identifying
number assigned by the Federal sponsoring agency. If
the advance or reimbursement is for more than one grant
or other agreement, Insert N/A; then, show the aggregate
made against the grant or agreement.
6 Enter the employer identification number assigned by the
U.S. Internal Revenue SelVice, or the FleE (Institution)
7 This space is reserved for an acoount number or other
identifying number that may be assigned by the recipient.
ending oHM period covered in this request. If the request
is for an advance or for both an advance and
reimbursement, show the period that the advance will
cover. If the request is for reimbursement. show the
Nole: The Federal sponsoring agencies have the option of
amount of information is needed to make an advance and
outlay information contained in item 11 can be obtained in
11 The purpose of the vertical colUmns (a), (b), and (c) is to
provide space tor separate cost breakdowns when a
function, or
activity, If additional columns are needed, use as many
additional forms as needed and indicate page number In
space provided in upper right; however, the summary
totals of all programs, functions, or should be
shown in the "total" column on the first page.
11a Enter in of date," month, day, and year of the
applies. Enter program outlays to date (net of refunds,
rebates, and discounts), in the appropriate columns. For
of actual cash disbursements for goods and services,
the amount of indirect expenses charged, the value of in
kind contributions applied, and the amol.lnt of cash
cash disbursements, the amount of indirect expenses
incurred, and the net increase (or decrease) in the
11 b Enter the cllmulative cash income received to date, if
requests are prepered on a cash basis. For requests
cumulative income earned to date. Under either basis,
enter only the amount applicable to program Income that
was required to be used for the project or program by
the terms of the grant or other agreement.
11 d Only when making requesls for advance payments,
enter the tolal estimated amount of cash outlays that vvill
be made during Ihe period covered by the advance.
13 Complete the certification before submitting this request.
STANDAADFoRM270(R ... 7.97)B.1Il b"""" BASIS OF REQUEST
OR REIMBURSEMENT
;.
!KI ADVANCE
0
REIMBURSE_
TIPEOF MENT I!l CASH
PAYMEtrr b. "X'!heepplicrffle 9""
(See Instructions on back) REQUESfED
o FINAL DPARllAL
o ACCRUAL
3. fEDERAL SPONSORINtl AGENCY AND ORGAN!ZATIONAl ELEMENT TO FEDERAL GRAm OR OTHER 5. PARTIAL PA'l'MENT REQUEST
WHICH TIllS REPORT lS SVSMf11B) I08mFYlN13 NUMBER ASSlGNEO NUMBER FOR TIllS REQUEST
BY FEDERAL AGENCY
NISTATP
70NANB1 H3050
6. EMPt.O'lER IDemRCAllON 7. RECIPJENl'S Accoum NUMBER

. NUMBER OR IOEtmFYING NUMBER FROM (lIlM!Ir, doy, ), ...... j TO day,
13-3889180 131068299665 May 1, 2002
May31,2002
9. RECIPIENT ORGANIZATION 10. PAYEE (mlsf9c/ieck fs lobe SSf!1 ffdj/Tflf9lJtlilan Item 9)
NlJme: Computer Aided Surgery, Jnc. Name:
Number 300 East 33rd Street Numbe!
and street:
Suite 4N

city, stab) City,
amfZlPCOde,' New York, NY 10016
fmrj ZIP Code:
11, COMPUTATION OF AMOUNT OF REIMBURSEMENTS/ADVANCES REQUESTED
"J
M
PROGRAMS/FUNCTIONS/ACTIVITlES ...
(0)
TOTA.L
a. Total progrnm
outlaYs to date
(AsoldaJe)
$ $ $ $ 476,783,10
b. Less: CumulatiVe tam Income
0,00
c. Net (Une a minus
line b
,
.
-
476,783,10
d. Estimated net cash outlays ror
66,945,20
. period
e. Tolal "Sum oflines c & dl
543,728,30
..
r. Non-Fedetal share or amount on Jine'e
,- 23,728,30
federal share of amount on line e
520,000,00
h. federal payments previouslY requested
450,000,00
f. Federal share now requested (Line g
70,000,00
minus fine h).
J. required by
month, r8quosled
lsi month
by Federal
agency lor use In making-
2nd month
preseheduled advances
Srd month
"
ALTERNATE COMPUTATION FOR AOVANCES ONLY
a. Eslimai:ed Federal cash outlayslhat Will be made during period covered by the advance
$
b. Less: Estimated balance of Federal cash cn hand as of beJllnn!nJl of advanoe perIod
C. Amount recuested rUM fI minus line b
$
AUTHORIZED FOR LOCAL REPRODUCTION (Con(jnued {)II Reverse) STANDARO FORM270 (!lee.
Presoribed by OMS Clroulars A-102 and A-l10
A-53
ERTIFICATION 13.
-
C
'""1'ii;;;:;"'"""
DAlE ReaUEST
I certify that to Ihe best of my
i'70f,tbbL
knowledge and belIef tile data on the
reverse are correct and that all outlays
were made in aocordance with Ihe
1Y?ED OR pmmEO NAME ANDlTll.E ,a
ONE (AREA
91<lnl or olher agreement CODE. NUMBER,
and !hm payment Is due and has not
OOENSIW)
been previcus\y requested.

Publl('; reporting burden for this collection of informEIIlon Is e5timated to average 0 mlnules per
response, Includlng lime for reviewing inslructlons, seaToNng exlsting data sources, gathering and
maintaining the data and comptellllg and revlewing the oollecUon of Information. Send
commel1ls regarding ilie burden estimate or any olller aspeet of \his collection of information,
!ncluding suggestions for reducing thIs burden, to the Office of Manaaement ancl Budget, PapelWOrk
Reduction Project (0348-0004), Washington, DC 20503,
ANI! BUDGET, SEND IT TO THE ADDRESS PROVIDED BY THE SPONSORING AGENCY,
INSTRUCTIONS
Please type or printleg!bly. Items 1, 3, 5, 9, 10, 11e, 11f, 11g, '111,12 and 13 are self-e)(planatory: specific
flem Entry l""".m'---______ "En"""'L ___________ _
2 Indicate whether request' is prepared on cash or accrued
expenditure basis. All requests lor advances shall be
number assigned by Ihe Federal sponsOring agency, If
the advance or reimbursement is for more tnan one grant
or other agreement, (nseri N/A; then, show the aggregate
made against the grant Of agreement. .
6 Enterthe employer identification number assigned I>y the
U.S. Internal Revenue Servioe, or the FICE (Institution)
code if requested by the Federal agenoy.
identifYing number that may be assigned by lhe recipient.
.. B Enter the month, day, and year for the beginning and
ending of the period covered in this request. If the request
reimbursement, show the period that the advance will
cover. If the request is for rejmbursement, show the
Note: The Federal sponsoring agencies have the option of
amount of information is needed to maf;(j an adVance and
a timely manner from othAr reports.
11 The purpose of the vertical columns (e), (b), and (c) is to
provide space for separate cost breakdowns. when a
function, or
activity, If additIonal columns are needed, use as many
additional forms as needed and Indicate page number in
spaoe provided In upper right; however, the sUlT!mary
totals of all programs, functions, or acttvitles should be
shown In the column on the first page.
l1a Enter in "as of dat,,:." month, day, and year of the
rebates, and discounts), In the appropriate columns. For
requests prepared on a oash basis, outlays are the sum
of actual cash disbursemehts for goods and services,
the amount of indirect expenses Charged, the value of
kind contributions applied, and the amount of cash
advances and payments made'to suboontractors and
subreoipients. For requests prepared on an accrued
expenditure basis, outlays are the sum of ihe actual
incurred, and -the net increase (or decrease) in the
lib Enter the cumUlative cash income received to date, If
requests are prepared on a cash basis, For requests
cumulative income eerned !o date. Under either basis,
enter only the amount applicable to program inoome that
the terms ofthe grant or other agreement.
11d Only when making requests for advance payments,
enter the total estimated amount of cash outlays that wi!!
be made during the period covered by the advance.
-STANDARD FORM 270 (Reo, B:ocP
A-54
OMS A?Pfl.OVAL NO. PAGE::
0'
03480004
1
I
2
PAGES
REQUEST FOR ADVANCE
. 3. ')("' e boJh-' BASIS OF REQUEST
OR REIMBURSEMENT
,.
IRl ADVANCE
0
REIMBURSE.
TYPE OF MENT I!I CASH
MYMENr b. ,)(",Iho oppii<:c'fle fa<
(See iT/stn;clfr1l1s on back)
o FINAL o PARTIAL
o ACCRUAL
3. FEDERAL SPONSORING AGENCY AND ORGANIZATIONAL ELEMENTTO 4.I'EDERAL GRANT OR OTHER PARTIAL
wtJlCH THIS REPORT IS SUBMiTJE) IDENTIFYING NUMBER ASSIGNED HUMBER FOR THIS REQUEST
BY FEDERAL AGENC'f
NiST ATP
70NANB1H3050
6. Er"PLOYER IDENTIFICATION 7. RECIPIENTS I\CCOUNf NUMBER

NUMBER OR IDENllFY1NG NUMBER FROM (mM!i!, da): )IIl8I) TO ,'<'<II>
133889180 131068299665 June 1, 2002
June 3D, 2002
S. RECIPIENT ORGANIZATION 10. PAYEE (Wnero chook Is 10 b& sent If different th,m lIem 9)
NamIJ: Computer Aided.'surgery, Inc. Ni1me:
Number 300 East 33rd Street Number
and S/Jeet
Suite 4N
and Straet:
City, state City, state
anriZlPCode; New York, NY 10016
and ZIP CadlJ;
11. COMPUTATION OF AMOUNT OF REIMBURSEMENTSfADVANCES REQUESTED
,,)
PROGRAMS/FUNCTIONS/ACTIVITIES
M (0)
TOTAL
a. Total program
10 dale
(M ",dille)
$ $ $ $ 549,973,55
b. Lass: Cumulative ""' ram Income
0,00
o. Nel bj09ram outlays rUne a minus
lineb
549,973,55
d, net cash outlays foracIVance
eriod
66,945.20
e. Tolal (Sumoflinesc &'d
616,918.75
r. NonFederal share of amount on line' e
26,918,75
Federal share of amount on Une e
590,000,00
h. Federal oo\llTlentsll!eViouslY reauested
520,000,00
i. Federal now mquested {!.ina g
70,000.00
minuslinah
J. Advances required by
,
month, when requested 1sl month
by FedelBl 9IBntor
agency IQT dse In makln9
2nd month
plssclleduJed adv
Srd'month
".
a. Es1[mated Federal cash outlavs that will be made durino Deried covered bvfhe advance
$
b. Less: Es!!mated balance of federal cash on as of be,.,lnnincr of advance oeriod
c. Amoulll re"uested n InIl a minus line b
$
AUTHORIZED FOR LOCAL REPRODUCTION on Reverse) STANDARD FORM270 (Ree. 7-W)
Prewr\bed by OMS Circulars A102 and Al10
A-55
13. CERTIFICATION
certii)' that to the besl of my
knowledge and belief the dala on the
reverse are correct and that aU outlays
were made In accordance with the
grant condttions or other agreement
and that payment Is due and has not
been previously requested.
ThIs space for aaency use
SIGN"lURE OR "UTHORiZED CERltPflNG OFFICIAL
TYPEO OR PRINTED N"ME ANOIDLE
-
D"TE REQUEST

TELEPHONE (MEA
COllE, NUMBER.
ElITENSIONj
212-686-8748 .
?Ubnc repcrtlng burden for collection of Infmmalion ,is estimated to mrerage 60 minutfls per
response, Including Ume for revieWing lnetruc\ioTls, searching existing data sources, gathering and
melntalnlr"lg the data and completing and reviewing the colleellon of Information. Send
comments regarding the burden eslimate or any otl1er aspee! of. this coUeeilon of Information,
including :suggestions for reducing this burden, to the Office of Management and Budget, Paperwork
Reducllon Project (0346:-0004), Washington, DC 20503.
AND BUDGET. SEND lTTO THE AnDRESS BY 'THE SJ>ONSORIr-JG AGENCY.
INSTRUCTIONS
Please type or print le9ibly. fiems 1, 3, 5, 9, 10, 11e, 11f, 11g, iii, 12 and 13 are self-explanatory; specific
instructions for other ilems ara as foUoVv'S:
[tem EntN ll"'''''m'---______ "EO',W'-___________ _
2 Indicate wl1ethar request is preparad on cash or accruad
expenditure basiS. All requests for advances shall be
4 Enter the Federal grant number, or other identifYing
number assigned by tM Federal sponsoring agency. lf
ihe advance or reimpufse-ment Is for more than one grant
or other tnsert N/A; then, show the aggregate
amounts. On a separate 'Sheet, list each grant or
6 Enter the employer identification number assigned by the
U.S. Internal Ravenue Sar-Ilee, or the FlCE (institution)
code If requested by the Federal agency.
identifying number that may be assigne? by the recipient.
8 Enter the month, day. and year for the beginning and
ending of the period covered in this request. If the request
reimbUrsement, .show the period that the advance Will
cover. If the request is for reimbursement, show the
period for Which the reimbursement is requested.
Note; The Federal sponsoring agencies have the option of
reqUiring recipients to complete items 11 or 12, but not
both. Item 12 should be used When only a minimum
amount of information is needed to make an advance and
11 The purpose of the Vertical columns (a), (b). and (c) is to
function, or
additional forms as needed Bnd IndIcate page number In
space provided in upper right; however, tha summary
totals of all programs, functions, or acilvltles should be
shown in Iha '';olal" column on the first page.
11a Enter in "as of date," ?he month, day, and year of the
rebates, and discounts), 1n the appropriate columns. For
of actual cash disbursements for goods and services,
the amount of indirect expenses charged, the value of in-
kind oontribulions applied, and the amount of cash
subrecipients. For requests prepared 'on an accrued
expenditure basis, outleys are Ine sum of the actual
incurred, and the net increase (or decrease) in the
11b Enter the cumulative cash income received to date, 1f
prepared on an accrued expenditure baSiS, enter the
cumulatiVe income earned to date. Under either basiS,
enter only the amount applicable to program income that
the of the grant or other agreement.
11d Only when making requests for advance payments,
enter the total estimated amount of cash outlays that will
be made during the period oovered by the adVance.
13 Complete Ihe certification before submitting this request.
STANOAAD FORM270 (Reo. 791}Baol'
A-56
OMS APFROVAt NO, PAGE 0>
0348-0004
1
I
2

REQUEST FOR ADVANCE
a. ... boliJb,","" ii:. BASIS Of REQUEST
OR REIMBURSEMENT
,.
!IDADVANCE
0
REIMBURSE
lYPEOF MENT
!!I CASH
PA'flIIE!1r b. 'X'1he8pplk;cfi/e p""
(See ins/ruoliMs on baok)
o FINAL DpARl1AL
OACCRUAL
"3. SPONSORING AGENCY AND ORGANIZATIONilL ELEMENT TO 4. FEllERAL GRANT OR OlHER 5. PARTIAL P/I'flIIENT REQUEST
WHICH"rn1S R9'ORT IS SUBMITTEO IDENTIFYING NUMBER ASSlGNED NUMBER FOR llilS REQUEST
BY FEDERAL AGENCY
N1ST ATP
70NANB1 H3050
S, EMPLQYER IDENTIFlCATlON 7. RECIPIENT'S I>.CCOUNT NUMBER s. PERIOD COVERED BY THIS REQUEST
NUMBER OR IDENTIFYING NUMBER FROM (1IIM!h, doY, yoo.r:l 10 cfslf, yawj
13-3889180 131068299665 July 1,2002
July 31, 2002
9. RECIPIENT ORGANIZATION 10. PAYEE (W/leI9 Ch9Ck Is 10 b9soo1 "d!f{eronl 'Mn Ilem it)
Name: Computer Aided Surgery, Inc. Name:
NIJmber 300 East 33rd Street Number
and Swet:
Suite 4N
and Street
city, Sia/a City, Slate
ami ZlP Coda: New York, NY 10016
end ZiP Coda:
11. COMPUTATION OF AMOUNT OF REIMBURSEMENTSIADVANCES REQUESTED
M
(h)
M
PROGRAMS/FUNCTIONS/ACTIVITIES ....
TOTAL
a. To!a! progttltn
oullaVs to date
(As oldale)
$ $ $ $ 621,853.37
b. Less: Cumulative roaram InCllme
0.00
0, Net 1rram outlays (Une a minIJs
Uneb
621,853.37
d. Estimated net cash outlays for advance
66,945.20
period
a Total (Sum of liiles c & cj)
688,798.57
(, NonFederal share of amollnton lina e
28,798.57
rI. Federal share of amount oli line e
.660,000.00
h. Federal paYments preVloustv fe<lUested
590,000.00
i. Federal now !"(>quested {Una g
minus5neh
70,000.00
J. required
"
mDnth, when requested
1st month
'Y
Fedeml glllnlor
{Dr in making
2nd monlh

Srd month
12. ALTERNATE COMPUTATION FOR ADVANCES ONLY
a. Esiimated Federal cash oUllavs Ihat wnl be made durin!! period covered bvthe adVance
$
b. Less: Estimated balance of Federal cash on hand as of beronnlno of advance DEriod
c'. Amount reauested rUna fl mlnusline bl
$
AUTHOR lZEDFO R LOC L E o U 10 ARPRDCTN
,
d (C nlinue on Revr:($e) $TANOAllO FORM21O
. "
Prescribed by OMS Circulars A-1 02 and A-11 0
sf270-juI02-unsigned.max
A-57
13. CERTIFICATION
AIJTHORIlEDCEmPl1NG OFFICIAL
DAlli
I certify that 10 lhe best or my
knowledge and belief the data onlhe
ate correct and Ihat all oullayt
were made in accordance wHh the
grant condHions or other agreement
and that payment Is due and has !'lei
been prevlousty reque6ted.

NUMBER,
EXTENSION)
212-686-8748
Public reporting bll[den for this collection of informallon !s estimated to average 60 minutes per
response, includlns Urns for reviewing Instructions, searchIng eldsttn(l data sources, gathering and
malntalnlt\g tile data needed, and ctlmpJeling and IIlViawing the collection of Send
comments regarding the burden estimate or any other asp<'tJ of 1hls collecllon of II'Irormallon,
Including suggestions for reducing thIs burden, tolhe Offtce of Milnagement -and Budget, Paperwoill
Reduction ProJeot (0348-OC104), Washington, DC 20503.
AND BUDGET. SEND IT TO THE ADDRESS PROVIDED BY niE SPONSORING AGENCY.
INSTRUCTIONS
Please type or prInt legibly. Items 1, 3, 5,9, 10, 11e, 11f, 11g, 11i, 12 and 13 are, self-explanatory: specific
instructions for other items are as foBows:
ltem Entry
exPenditure basis. All requests for advances shall be
number assigned by the Federal sponsoring agency. 1f
the'adllance or reimbursement is for more than one grant
or other agreement, lnsert NlA: then, shOw the aggregate
6 Enter the employer identificatlon number assigned by the
U.S. Interna! Revenue SeMce, or the FleE (Institution)
7 T'his space is reserved for an account number or other
identifying number that may be assigned by the recipient.
ending of the period eovered In this request. If the request
reimbursement, show the period that the advance w'i1l
cover. If the request Is for reimbursement, show the
Note: The Federal sponsoring agencies have the option of
requiring recipients to complete Items 11 or 12, but not
bolh. Item 12 should be used When only a' mInimum
amount of information is needed to make an adVanca and
oullay information contained in item 11 can be obtained in
11 The purpose of the Vertical columns (a), (b), and (c) is to
function, or
lrem
11.
Entry
activIty. If addItIonal columns are needed, use as many
additional forms as needed'and Indicate page number In
space provided In LIPper rtgh1; .. -t.iowever, the summary
totals of all progr@iiff'
7
fU,Dct!ons, or activities should
shown In the "'otal" column on the first page.
Enter in "as of date," he month, day, and year of the
applies. Enter program outlays to date (net. of refunds,
rebates, and discounts), In the appropriate- columns. For
requests prepared on a cash basis, oullays are the,sum
of ectual cash disbursements for goods alld services,
the amount of Indirect expenses charged, the vall!e of in-
kind contrlbutlons applied, and the amount of cash
subrecipienls. For requests prepared on an accrued
incurred, and the net increase (or decrease} in the
property received and for seNices performed by
employees, contrects, subgrantees and other payees,
11 b Enter the cumulative casn income received to date, If
requests afe prepared on a cash basis. For requests
prepared on an accrued expenditure basis, enter tna
cumulative income earned to date. Under either basis,
en1er only the amount applicable to program income that
was required 10 be used for the project Of program by
11' Only when making- requests for advance payments,
enter the total estimated amount of cash outlays that witl
be made during the period covered by the- advance.
STANDARD FORM 270 (R .... 74>7) Baof
sf270-juI02-unsigned.max
A-58
J OMBAr ",VAL NO. 03480003
FEDERAL CASH TRANSACTIONS REPORT 1. 1'edem! and "'llanizational "Iemonl towhlch Illl. '.p,,,t
"'s!JbmIH.d
(See inslructions on /he back. If[epat is for mere than one grant or
NIST ATP
asslstence agreement, attach compJeted SfancfardForm 272A)
2. RECIPIENT ORGANIZATION
4. Fadoral 9",n! orother Id.f1Iifical,lon S. Recipients e<>CQlln! numbe, or
numb.r Id.I1III'i"'9 number
Name:
Computer Aided Surgeru, Inc. 70NANB1 H30S0 13-1 068299665
6. lelle, of numbar 7. Las! payment vOu<:hor numbe,
Number
300 East 33rd S1reet
and Street:
Suite 4N
Give total number for this period
City, staw
NewYoTK, NY 10016
6. Paymvnl YQudlen; o;:rernt6d jg e, TrVaSlJry >:hedlo n":tOwad (wlrtJl!Jar
and ZIP Code:
I"ur accounl or nofdeposired)
'0.
PERIOD COVERED BY THIS REPORT
3. FEDERAL EMPLOYER FROM (monlh, dey, year)
]DENTlFICATION NO.
.. 13-3889180
Nove
a. Cash on hand beginning of reporting period
b. Letter of credit wthdray,ts
.
11, STATUS OF
c. Treasury check payments
FEDERAL
d. Total receipts (Sum af1!rlSs b end c)
CASH
e. Total cash available (Sum afl/nes e and d)
f. Gross disbursements
(See specific
instructions
g. FadElrnl share of program Incoma
on the beck)
h. Nat disbursements (Line f mEnus line QJ
I. Adjustments of prior pllriods
J. Cash on hand end of period
12.
""
AMOUNT SHOWN 13. OTHER INFORMATION
ON LINE 11), ABOVE,
REPRESENTS CASH RE-
a Inierest Income
QUlREMENn; FOR
'H'
ENSUING
b. Advanclls 10 subgrantees: or 'subcontractors
Days
..
14. REMARKS (Attllch additlOnel sheets of pillm paper, if more space IS required)
15 CERIFICAlTON
I certify to !he best of my
knDVIledge and b,enef !hat thIs
report Is true In all and

., dlslxlrsements have
been made for the purpose and
co.,llltlons
"'
.,

"'
agnement.
TIllS SPACE FOR AGENCY USE
NSN 7540.Q1-U16-5<134
27211)3
AUTHORIZED
CERllFYING 1YPEO OR PRINTED NAME AND llT1.E
OFFICIAL
Dr.D.S. Karron, President
ber 1 2001
TO(momll, dey. YfJ8rl
November 30 2001
,
150,000.00
$150,000,00
150,000.00
$150,000.00
,
0.00
,
.
,
DAlE REPORT SI,lJ'lMlTTED
Decmber 19, 2001
TELEPHONE (Ams Code,
Number, Extension)
212-686-8748
STANOARD FORM 212 (Rev.
Proscrlb.d by OMS Clro::ula", A_102 and A_110
A-59
.>
- ,
,
OM6APPRL .L. NO. 0348-0003
FEDERAL CASH TRANSACTIONS REPORT 1, Fed6m1 'pon,OI1og agllncy and .'lI"mSboM1.1""",,] tormieh tills "'PCJt
is ,rnm;lIlld
(Sell insfrur:/ir)flS 017 /he bar;k.lfreporl./s fiY more than one !)fllnt or NIST ATP
asslslance a ftech completed Stendard Form 272A.)
4. Fedo"" or olnerid.nlificalToll 5, ""ClJool !1Umboror
romb., """,b.r
Name:
Computer Aided Surgery, Inc. 70NANB1H3050 131 068 299 665
S. lotterol cradl ncml>er 7, Lasl P6\01l10'" ,ouche< number
. ,- - .
--
Number
300 East 33rd street
and street:
Suite 4N
Give lOW/ numberforrflls pertod
City, Stare
New York, NY 10016
s, f'ilymgnl Vwohllro; to g. TruclUry GOO';'. mO>il'lIK! (whfllllw
emf ZIP Code: )<lUr """"en! or nOrdaf>O$/I:FJ<J)
10- PERIOD COVERED BY TIllS REPORT
J. FeDERAL EMPLOYER FROM (Iron/h, <loy, ,09')
IDENllFICAllON NO.
...
December 1 2001
a. Cash onltand beginning ofra?ortlng pallod
b. Letter ofcredltYlfthdriI"Ms
11. STATUS OF
c. Treasury check pilYJmmts
FEDERAL
d. Total recelpls (Sum oflmes band eJ
CASH
9. Total cash aVailable (Sum of lloos II and d)
f. Gross dlsblirsemems
(See specific
ins!ruetIons
g. Federal share. ofprogrnm Ineoma
on lhebfletJ
h. Nel dlsbursements(l,.InB f minus line g)
I. Adjustf'!lents.pf p'enods
J. Cash on hand end ofperlod
12_ ruE AMOUNT SHOWN 13_ OTHER INFORMATION
,.
LINE 11J. ABOVE,
REPRES'ENTS CASH RE-
a Inlerest Income
QUIREMeNTS FOR THE
ENSUING
b. Advan.::es 10 subgreniees or subcontractors
Days
14. R R S Allae EMA K (. dd
,
h II l1/on81 he ats ar lain d .. p paper. roof po cs sre ur.
I cenny to the best oT my
HnoW1ellge and belle! that lhls
report Is true In a1l mspects BIll!
lhlll. all dlsbursements have
be"" made ror the purposa anI!
conditions or the grant or
lIlIreemel1l.
NSN T540-01oC16-64J4
"l12103
AUTHORIZED
CERTIFYING
OFFICIAL
D B Karron, President
sf272dec.max
.
TO (".,nlb, doy; rear)
December 31 2001
$
60,000.00
$60,000.00
60,000.00
$60,000.00
$
0.00
$
$
2002
(Area Code,
212--686-8748
STANDAIW FORM 212 (R.'II. 7-811
W Clrculon A_102 ana A_110
A-60
OM" NO. 034a.tlO03
FEDERAL CASH TRANSAI: jlNS REPORT 1. Fedor!ll Spoll5oring lIOoney ond Oft 1""el olomenlle which .... ..,rt
- fo-.lb:I1iUed ..... .'
(S&e Instrucliom on the back.. ffrepa1./s fer Ifn'"e lOOn om rTSnta-
NIST ATP \-\
8ssisIBnaJ aQleemellt atllleh SlBnd81'd Form 272A)
FedElmi ",,111 oroltlorlcleriifieetfon 5. R9dFlMrS 9CC<U\t rurrb ... or
. Computer Aided' Surgery, Inc.
1'lXII00r 70NANB1H3050 131 068299665
NalT'/l!t:
s. loltar clerodl ntrnbar 7. LB!:l Pll\<l1ort VllI>:horn\.mbar
NurrtJer 300 East 33rd Street
and Street: Suite 4N
Give If1tal numl1erfor this perforI
City, SIBle New York, NY 10016 8. PlI)<I\oot voudlals 1l1I00tad to T",,,,,,,'Y <=i'lad<!l receNod (whelher
a/XtllP Code:

,0. PERIOD COVERED BY THIS REPORT
3. FEDERAL EMPLOYER
.. 13-3889180
fROM (1t01)1I1, dsy, y68l1
JDENlIFICAnON NO.
January 1, 2002
a. Cash on hand b,egJnnJng I?frapOl1Jng partod
b. LaUer of credit VoIIlhdr ... s
11. STATUS OF
t. TrOiJ$ury chock paymonts
FEDERAL
d. Tetal roclJlpts (sumafl/TJe$ b and c)
CASK
e. Tolal cash available (Sum aflioo$a and cI)
(Soo specific
g . Foderal share of program Income
fnstrucUons
on tlmb91:/rJ
h. Nat dlsbursements(1.he fmInus line g)
I. AdJuslmllnts of prior perfods .
J. cash on hand end ofpllrlod
12. me: AMOUNT SHOWN 13. OTHER INFORMATION
ON LINE 11j. AI!II)ve,
R5'ReSEHT8 CAtItI RI!
a. Intel'llst Incoma
!"'OR THE!
ENSUING
b. AdVances to sub grantees or subcontractors
D,ys
14. REMARKS (Attach sheets of pleIn paper. If m;lt" splice Is requRd)
15. CERlJ'JtA1l0N
, I eentry to tile but of my
AUTHORIZEO

knowtledge end bllilif 111111 tNt
II true "'." rnpecb- ud
... ell dlsblnftnltnts ..... CERTlFYINO TYPI!D DR PIlINTEOHAM! ANti Tl11..
blllI1 marJefOf the ptI'pOA and
eOflliUont d
."
-
"
Ofl'ICIAL

Dr. 0 B Karren, President
THIS SPACE FOR AGENCY USE
sf272-jan02-unsigned.max
TO (".,nlh, ooy. )'&Of)
January 31, 2002

60,000.00
60,060:00
60,000.00
60,000."00
,
0.00

DATE REPORT SUSNITTED
/I (-d.;) ;J.()OV
TEU!PHDHE Ii'\rN CodlI,
Numb.
212-686-8748
STA.HOARD FDRN7T2 (F\ rolin
Pnlmb,d by 0"'9 CI","'..aA_l02.1'd "'_110
A-61
.
OMS' ," "'ROVAL NO. 0348-0003
FEDERAL CASH TRANSAC JNS REPORT ,. spon;Olitl\l and .I.mont tcwhlch 1111, report
.. Is ' .. ;'
(Sea/tlstruc/JonsOll fht: trrepor1/s Ibr more then one 9flInfa
NIST ATP
assis!/ince agreeme-nt attach IXJmplded S!Bntiard Fcrm 272AJ
2. RECIPIENTORGANlZA110N
4. f&dond grart or oIhorideriiRr:elion S. Rot:lplenrs eccoont numb or
nUmber 70NANB1H3050 131 068299665
Nsme:
5. ...... b9r l.ts,! pa;monl vcucl10r numbar
Nurwer 300 East 33rd Street
Give total number for this perfod
CII:y, Stale NewYor!<, NY 10016 a. Pa;mQnl Voudlrlrs ""dilod to 9, TIU=rych&d> reOliv8(! ('Nha/lIe{
snd ZIP Code:
arnolrferoslod)
1 PERIOD COVERED BY nts REPORT
3. FEDERAL EMPLOYER
.. 13-3889180
FROM (monlh, day, fOOl)
IDENliFICAll0N NO.
February 1, 2002
a Cash on hartd beginning pollod
b. Letter of crOOlt wthdral'o4$
11. STA11JS OF
c, Troasury chock Pi!Yffionls
FEDERAL
d. Tolal recolpls(Sum ofllnes b and c)
CASH
o. Total cash illvallablo (Sum of {/rntS 8 and d)
f. Gross dlsburslJmonls
(See 3pecfflC
g., Federal share ofproQram Income
..
on lheboclt)
h. Nat dlsbursomams(l..1M fmlnus/loo g)
I. Ad]uslments of prior penods
J. Cash on h;snd of period
.
12. llIE 'AMOUNT SHOWN 13. OTHER INFORMAllON
ON UNO 11J. ABO,,",
REPRESENTS CASH
a Intared Income
QUIAElEtTS !'OR THE
EN8urNc.
b. Advances to subgranteos or subcontractors
Days
14. REMARKS (Atlaeh atfdlllcmaf sheets of plain paper, If rn:re- splice /s
15.
.
CERIFiCAliON
I certify tQ 1M beat or my
, I'V\

IQI belief thllt II'1Is
AUTlfORIZED
'JY'I1f
,"peds: and
IhS 1111 dlbtnMlenls haft CERT1FYING TYPal oRPRrNTEOHAM! AND nTLe:
betll1 made for the and
conditionS d Itte gJalrt or Ol'P'ICLAl
Dr. 0 B Karran, President
."' .....
CE FOR AGENCY USE lHlSSPA
sf272-unsigned.max
TO (month, rf9Y, y<JlU)
February 28, 2002
,
60,000.00.
60,000.'00
60,000.00
60,000.'00
,
0.00
,
,
OA TI!: REPORT
l(
laEPHONE ccxte.
Nurn1xN,

STANDARD FORM m {ROY. r"'7}
rnlOl1bO<l by C!rt:uiI ... A-1C!l MIl 110
A-62
OMS P--..... OVAL NO. 0348.0003
FEDERAL CASH TRANSACT .. S REPORT 1. FeO!Oml sponsOOOj,lllllor.cy OIId 01"\1";. .",1 olemenll. which 11111; raport
-
fs submmnd
':'-'
(See Ins/nICt!onli 011/00 beck. "fepat Is fr7 TJD"eo then (JOO grunt rx
NIST ATP

B.$SSstance attach competJ!:d Slsndant FCII1TI272A)
2. RECIPlENTORGANlZAllON
Fod.1lI! g"'l1. or alhe;]d.rtifiwllon 5. Recipients aeo:>Ul1l numbwor
Aided Surgery, !nc.
numbar 70NANB1H3050
Id.nllf)'ngrunb9r 131068299665
Name:
5. Lettero! er&dt I"UIlNr 1. LMtr>aj.\TtOl"lt voUc!wtllU"llbll!"
Give tI1taJ number for this period
City. Stete New York. NY 10016 B. ?6\<1lMI vouchers crndIt.d 10 Q. Traewl}l ch&ck. raOlllvod {whfHhflI"
and lIP Code:
-""""'
or (!Qfdl)pOded)
10. PERIOD COVERED BY THIS REPORT
3. FEDERAL EMPLOYER
..
FROM (I1>Onlh, doy. YDllr)
IDENi1FICAllON NO.
March 1, 2002
a. cash on hand pertod
b. Letter of credit wthdr"aYlts
11. STAlUS OF
c. Treasliry chB!:k payments
FEDERAL
d. TOtal reeolpts(Sum of lloos b and c)
CASH
o. Total cash available (Sum oflfoos e end cf)
!>.,
f. Gross dlsbursemBnts
(500 specific
g ... peiieraJ of program Income
Instructions
on /he back)
.
h. Net f minus 11M g)
I. Adjustment!i ofpflor panods
j. cashon hand end of period
12. 1M!:! AMOUNT SHOWN 13. OTHER INFORMA110N
.. u ." ABOVE.
REPRe1EltTB CASH RE
a.lnteJost Income
QUIRe.HT9 'OR TH.
EHQUIlIO
b. Advances to subgranteos or sub!:ontractors
Day,
14. REMARKS (Attach additional sheets "'plaIn paper, if malt spaC"fJ IS requfred)
15. CERlFlCAi10N
I certll'y to the best of my
AUTHORIZED
.... -:.'l','a., I I
knowledge ... d belief thld: tI"lJII
lUYYl5!/\
III true m IIIIlupecb and
tIl!lt 1111 dstJurUll1Irm haW CERTlFYIHG TYPED OR PRINTED HAre AHD"TTI"lE
bcm millIe for the purpose and
ccndlllcITIs I the IlIlUIt. or QPPlCIAl.
Dr. D B Karron, President IOIgreement.
THtssp AC E FOR AGENCY USE
TOfl1>Onlh; dsy, Y!Hlr)
March 31. 2002

60,000.00
', .. '
60,000.00
60,000.00
60,000:00

0.00

TEl..9HOH ""'"
Number, EmnsbnJ
212../386-8748
STANIlAJtD fORM zn (ReI. T-8J)
Pr .. Cf1l>od loy OMD Circulus A102 lJ"IOiI A110
A-63
OM' tJtOVAL NO.
FEDERAL CASH TRANSAC.
!
.SREPORT .< 1, Fu<leml SjlOnsM!l\I9\lOOCY Md ohI"",- .111\ 'lIomon' h>nhld11h1!! r!lpOJ!.
- '" -aItI!n-rttod ..
.. v\S.
: "". '
(Sse t/sfnJcl/onsOf1 too bar;/(."repa1 /sl'ir mere !han Om grnn! or
. .
aUach corrpleled'standanf Fam 272A)
NIST ATP
2. RECIPIENT ORGAN1ZA.ll0N
,. FD<lBmI 5. Redplunrs accounil'lJrMsr.or
lUll"'" 70NANB1H3050
rctartlfinorunbo, 131 068299665
Name:
6. Leltnr o! crodhUTlbGr 7. Lest pS)morJ: VOlIChGr n\Jllb&r
and SIreeI.: Suile4N
Give total number lor this period
C/Iy, Slate New York, NY 10016 8. Pa\m8l1IVOIlcllll<S tnI"t!l!l to II. Tmasury c!lOdts race/lMd rwt>e/I>Or
and ZIP Code:
.... ..,...

10 . PERIOD COVERED BY lHS REPORT
1 FEDERAL EMPLOYER
.. 13-3889180
.
FROM (rwnlb. day. y9lO')
IDENlIFICAnON NO.
Apri11,2002
a cash on hand baglMlng !!1reportlng plJl10d
b. oftrEldlt v.tthdrawts
11.STAl1JSOF
c. TrOHUry chadi payments
fEDERAL
d. Total racolpts(,Sumofllnesb and c)
CASH
e. Tata! cash available (Sum ofllnes e end d)
(see specifrc
g . Federal share of program Incoma
Ins/rur:f!ons
on Iho bacll)
h. Net fmlnus/IM g)
I. Adjustments of prior perlods
J. Cash on hand IKld ofporlod .
12. m! AMOUNT SHOWN 13. ontER INFORMAnON
ON UN.
",
ABOW,
.
IlS'RSHTB CASH RE
a.lnlerost Incomo
QUIRa.tfNTB I"OR THE
ENSUING
b. Advances to subgrante8S ar subcontraotors
Da"
14. REMARKS (AffRch eddllbllfJl sheeu ofp/a/n paper, If m:n space Is required)
15.
CERlFlCA1l0N
SIGN

I certify to the best or my
AUTHORIZED
,
knO'llhKlge aid beQI!!' that: this
I'l!pOrtls IlQe In IIlI reipects and
th& IiII dsbUnl!!rflents have
CER:llFYINO TYPED OR PRINTED NAMI! AND TT11.E
be.,.. (mille for the purpose and
conclltlons of the
-"
DI"I'1ClA.L
Dr. 0 B Karron, President
ol/fHlllent.
THIS SPACE FOR AGENCY USE
TO (nmt/h, day'
April 30, 2002

60,000.00
60,000.06
60,000.00
60,000:00
,
0.00
,

'TaEPHONE (ArofI CcrlII,
NumOOt. Ext.mkmJ
212-686-8748
STANDARD FQ!U,I; 7T2 (RtY. T,jITJ
I>y OMB Cl=l ... "102 and ",no
A-64
c.
OMr >VAL NO. 0348-0003
FEDERAL CASH TRANSAl. __ L.os REPORT
,
1. FIKIeIlll spo".OIiI'l\l a.g.&1lY ""d """'lIOtlowh!ch Ih" roport
. i<"<lt>mi1!od . '. .
(S&8 ,hs6'tlcoons on the back. ",epa1/s b" /IUlI'!han tIIJe fT8nta-
NIST ATP
8U/Stanc/J 8 fl&ch corrplered SIBndlUd Fam 27M)
2. RECIPiENT ORGANIZA nON
. Fodorel IJ'Ort S. Rsdplunt's !IC(:QIjI1 rtJni>OI' or
NamtJ: Computer Aided' Surgery, Inc.
runber 70NANB1H3050 1!IDrilJ"""g11.mW 131068299665
6. Lettar 01 CfOIlllUllbor 1, L ... I .oucIIornl61l'<>er
NurriJlS 300 East 33rd Street
800 Sfreel: Suite 4N
Give total numberfor this period
CIIy, SIBte New York, NY 10016 B. p"o,.n9(\1 "",dHod to 9, Tro5SU1Y dIGcI<!; moeivad (whtlll>o!
and ZIP Cod,,:

1a PERIOD COVERED BY THIS REPORT
3. FEDERAL EMPLOYER FROM (".mll!, If By' y..." 1O(IOOIIIh,.wy' y&I3I)
IDENTIFICATION NO.
.. '13-3889180
May 1, 2002 May 31, 2002
a. Cash en hand beglnnlng ofreportIn9 plll10d

70,000.00
b.- Letter ofCl'adlt Ylflhdsav.ts
11. STATUS OF
c. ll"easury chgcll: paym8f\ts
FEDERAL
d. Total IlII:BJpts(Surn DfflrtM b 9nd c)
CASH
B. Total cash a\f!lliable (Sum Dfllrm!i a and cO 70,000:00
J. Gross dlsblR'"sl!Imonts 70,000.00
($00 specifir:
g., FodBra! share of program Inr:oroo
InStructions
C!I'/ roo olir;k)
h. Nat (Li'Je fmlnlm JlfJ(I g)
70,000:00
I. AdJustment$ of prlDr pal'lads
1- Cash on hand ondoJper1od

0.00
12. THE AMOUNT SHOWN 13. OTHER INFORMAlION
ON LINE .. ,
"'''' ..
AEPREBENT8 CA8H' RE.
a.lnbnllitincomlt
,
Q1JIREMENT8 1H!'
ENSUING
b. Advanc:es to subgrantoBs or subr;onlractors

"'''
14. REMARKS (ArrlCh sddittmei sflclel$ otplliln papet, If mxe $pIlr;e fs mqundj
i, CERlFlCAlION
SIGHAru

I 10 1M belli of my
AUntOA2eD
J -OW -'J...bt)
knO'lllledge mil. Dell .. dnd ltd.
n.port IslnJa In 11K respem ami
that 1111 dlsburnmel'ltc I'nIYe el!RTlPVlNa
""'" OR
RINTED AlE AfiD TIlL! TlLJIHOHE (Aru Ca.
b., m.de for thII pWp1I.a !lAd
Numb,
condillons rt the grant 01'"
OI"I'lCIAL
Dr. 0 B Karron, President 212-686-8748
.11"'--.
TIllS SPACE FOR AGENCY USE
STANDARD FORM 712 (fin. 1.111)
f'n>IG1Ib.d by aMB CI"",)onA.1D2 UK! A.ll0
sf272-may02-unsigned.max
A-65
i tI
NtST ATP
Compuer Aided Surgery, Inc.
300 East 33rd Street, Suite 4N
New York, NY 10016
13-3889180
10.
,.
share of oullays
o. Federal shareofclllUays
d . T alai unliquidated obllgallolls
..
g.
h.
Unobligated balance of Federal
1. Indirect
Expense
II
Ii
FINANCIAL STATUS REPORT
(Short Form)
(Follow inslructiorl9 on the back)
I I
ibNANB1H3'050
131068299665
Year)
No
i
Cash 0
(Month, DaY, Year)
12/31/2001
219,573.40 219,573.40
9,573.40 9,573.40
210,000.00 210,000.00
210,000.00
800,000.00
590,000,00
12. Remarks: Attach any explanations deemed necessary or required by Federal
Ii
Dr. 0 B Karran, President
I I
1/31/2002
Standard Form 269A{REV 4_88)
Prescribed by OMS Circulars A-102 and A-110
sf269a short form 10 1-12_31.max
A-66
NIST ATP
Recipient OrganlzaUon
New York, NY 10016
13-3889180
,.
; ,
O. n
e. I I
(Short Form)
(Follow InslrllcUons on lhe bClck)
70NANB1H30S0
131 06S"299665
To: (Monlh, Day, Year) From: {Month,
f. Federalshare ofunUquJda\ed obllg:Jtions
g. TolOlI Federal share (Sum of lines c and I)
h
11. Imlirect
Expense
aulhorized
ill
"
I period
fixed form.max
OM'
No.
No o A,,",,,I
To: (Month, Day, Year)
"
Th,.
Period
Fixed
Standard Form 269A (REV 4-88)
Prescribed by OMB GirculClrsA-102 and A-l1D
A-67
,
,
NIST ATP
"
300 East 33rd Sireet, Suite 4N -
New York, NY 10016
i Number
13-3889180
10.
,
b.
0
"
"
o.
g.
(Short Form)
(Follow Instructions 011 the b a c ~ )
70NAN81H3Q50
,I
, Rec1pienlAccounl Numberor Identifying
131068299665
To: (Mortlh, Day, Yaar)
09/30/2002
Total Federalfunds authorized lor this lUnding penod
t. Indirect
Exp...,se
Remarks:
13. Gerlifltation:
'"
00'
Dr. D 8 Karron, President
Predetermln&d
; I I
I I
DYes m No o Accrual
To: (Month, Day, Year)
a6/30f2002.
"
$208,726.84
$8,726.84
$590,000.00
$21
FInal FiKed
"
212-686-8748
Standard Form 269A (REV 4-88)
Pre!'icrlbedby OMB Cln;ulars A-l02 and A-l1D
A-68
NIST ATP
300 East 33rd s t r e ~ l , Suite 4N
New York, NY 10016
133889180
,.
b.
c. feder'al share ofoullays
e. I I
f.
(Short Form)
(Follow illslruclionson Ine back)
70NANB1 H3050
I I
131068299665
(Monlh. Day, Year)
09/30/2002
$616,523.06
$26,523.06
$590,000.00
g. Tola) Federal share IInescandl)
I Federal funrls aUlhorizedforfhis funding period
11. Indirect
Expense
13. CerUficalion:
Dr. 0 B Karron, President
I
I
rzI Yes 0 No Cash 0 Accrual
To: (Monlh. Day, Year)
09/30/2002
$212,976.94 $829,500,00
$2,976.94
$210,000.00 $800,000.00
$800,000.00
$SPO,ooo.OO
$0.00
I I
(Area code, number and extension)
212-686-8748
Slandard Form 269A (REV 4-88)
Prescribe:d by OMB Circular.; A-102aml A-l1D
--------------------------------------------------------------------- x
Plaintiff,
- v. -
DANIEL B. KARRON,
Defendant.
:
:
:
:
:
:
:
:
08 Civ. 10223 (NRB) (DFE)
DECLARATION OF MICHAEL
J. BYARS IN SUPPORT OF
PLAINTIFFS MOTION FOR
SUMMARY JUDGMENT
--------------------------------------------------------------------- x
I, MICHAEL J. BYARS, pursuant to 28 U.S.C. 1746, declare under the penalty of
perjury as follows:
1. I am an Assistant United States Attorney in the Southern District of New York. I
make this declaration in support of plaintiffs Motion for Summary Judgment dated June 18,
2010 (the Motion) to place before the Court certain documents relating to the Motion.
2. A true and complete copy of the following exhibits admitted into evidence at the
June 2008 criminal trial in United States v. Karron, No. 07-CR-541 (RPP), is attached hereto
under tabs bearing the respective exhibit number in the form GX __:
Exhibit No. Exhibit
GX 2 General Terms and Conditions, Advanced Technology Program
GX 10 Application dated July 6, 2001
GX 10A Application dated August 6, 2001
GX 12 Financial Assistance Award
GX 13 Special Award Conditions
GX 14 Revised Budget dated September 20, 2001
GX 21 Amendment to Financial Assistance Award dated November 7, 2001
A-69
Exhibit No. Exhibit

GX 26 Amendment to Financial Assistance Award dated June 27, 2003
GX 40 Financial Status Report for October through December 2001, dated
January 10, 2002
GX 40A Revised Financial Status Report for October through December
2001, dated August 13, 2003
GX 41 Financial Status Report for January through March 2002, dated
April 12, 2002
GX 41A Revised Financial Status Report for January through March 2002,
dated August 13, 2003
GX 42 Financial Status Report for April through June 2002 (undated)
GX 42A Revised Financial Status Report for April through June 2002, dated
August 13, 2003
GX 43 Financial Status Report for July through September 2002, dated
October 28, 2002
GX 43A Revised Financial Status Report for July through September 2002,
dated August 13, 2003
GX 44 Financial Status Report for October through December 2002, dated
August 13, 2003
GX 45 Financial Status Report for January through March 2002, dated
August 13, 2003
GX 46 Financial Status Report for April through June 2002, dated August
13, 2003
GX 62 Final Audit Report for CASI Award dated August 2004
GX 114 Summary of CASI financial records prepared by witness Belinda
Riley
1
1
Ms. Riley testified that she prepared GX 114 using canceled checks and American
Express statements [as] the main source documents, and GX 114 was admitted into evidence
without objection. Trial Tr. 549:22-550:10.
2
A-70
3
3. A true and complete copy of the excerpts of the transcript of the June 2008 trial in
United States v. Karron, No. 07-CR-541 (RPP), cited in plaintiffs moving brief is attached
hereto under the tab marked Trial Transcript.
4. A true and complete copy of the transcript of the October 20, 2008, sentencing
proceeding in United States v. Karron, No. 07-CR-541 (RPP), is attached hereto under the tab
marked Sentencing Transcript.
I declare under the penalty of perjury that the foregoing is true and correct.
Signed this 18th day of June 2010, in New York, New York.
By: s/ Michael J. Byars `
MICHAEL J. BYARS
Telephone: (212) 637-2793
Facsimile: (212) 637-2717
Email: michael.byars@usdoj.gov
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A-72
GENERAL TERMS AND CONDITIONS
ADVANCED TECHNOLOGY PROGRAM
August 2001
1. Order of Precedence ofTenns and Conditions of Award
2. Referenced Requirements
3. Authority to Modify
4. Requirements for Continuing Financial Assistance
5. NIST Project Management Team
6. Substantial Involvement
7. Technica1lBusinesslFinancial Reports and Plans
8. Kick-off Meetings, Annual Reviews, Closeout Meetings
And Special Studies
9. Prior Approval Requirements
10. Unallowable Project Costs
I 1. Program Income
12. Equipment
13. Non-Compliance with Statutory Purpose
14. Refunds
15. Audits
16. Closeout of Cooperative Agreement
17. Use ofNarne or Endorsements
18. Publication Guidelines
19. Protection of Human Subjects
20. Care and Use of Vertebrate Animals
21. Bureau of Export Administration (BXA) Clearance
22. North American Free Trade Agreement Patent
Notification Procedures
23. Liability
24. Informal Collaborators
25. Intellectual Property
Attachment A - Optional Guidelines for Quarterly R&D
Performance Reports (5 Pages)
Attachment B - Guidelines for Reporting on Business Progress
/ and Economic Impacts (2 Pages)
Genltral Terms and Conditlons/ATP/1l8-01
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GOVERNMENT
EXHIBIT
2
Cl7 CI-54I(RPP) (10)
.
A-73
GENERAL TERMS AND CONDITIONS
ADVANCED TECHNOLOGY PROGRAM (ATP)
August 2001
dor:umflnt to wI Rl1clpienbl of the A TP
Coopefatitla Ayteflmfmts. ATP Fl8r:ipl8nl is d9fin6d to
Include ell Jlfng/8 company Recipisnr;r and 8ach indivirfu81
compBrly that i:z idsnrified in th8 Special Award Corllfit/ons
f II Joint Venture participB(lt.
1. ORDER OF PRECEDENCE OF TERMS AND
CONDJTWNS OF AWARD
Where the terms oflhe award and proposal differ the terms
afthe award shall prevail. The Recipient is obligaied to bring
the attention of the Grants Specialist any perceived
difference between any tenns and ronditions and the
proposal.
2. REFERENCED REQUIREMENTS
The ATP Statute, IS U.S.C. Sec. 278n; the ATP Rule, 15
CFR Pw1295.; the ATP Notice of AvaIlability of Funds, 66
Fed. 96, (January 2001); and the ATP Proposal
PrepElJahon KIt (November 2000) are hereby incorporated
into the award by reference.
3. AUTHORITY TO MODIFY
The arllIlts Officer is the ONLY authorized agent at NIST
wilh the authority to bind the Federal Government and to
take actions to amend, suspend, and terminate the cooperative
agreement.
4. REQUmEMENTS FOR CONTINUING
FrNANCIAL ASSJSTANCE
a. With rcspect to any technology arising frOm assistance
provided by NIST under this award, the Recipient shall
promote the manufacture of products resulting from that
technology within the United States IllId Shall procure
parts and materials from competitive United States
suppliers to the eden! practical.
b. AI any time within the life of this award should the
cease to have conlTol or ownerShip
by mdlVlduals who are clt!1;ens ofthe United States, the
shall rrotify the NEST Grants OjJicl:r of that
fact, In writing, witkin FIFTEEN (15) days.
c. In accordance with 15 U.S,C. 278n Sec. (d) (9) and (e),
General Terms and Condieions/ATP/08'Ql 1
NIST may, within thirty (30) days atter notice to
Congress, suspend a company from continued assistance
under this award if NIS-: detennine.s that the COmpany or a
parent company has failed to satisfy any of the criteria
contained in paragraphs a. and b. ofthis term, and that it is in
the national interest of the United States to do so.
5. NIST PROJECT MANAGEMENT TEAM
The NIST Project Management Team (PMT) ineludes an
ATP Project l'danager, a NIST Grants Specialist. and one or
more ATP technical and business speCialists. The ATP
is responsible for working with the
ReCIpIent, meludmg making recommendations to the NIBT
Grants Officer throughout the life orthe project to ensun: that
the project progresses towards the objectives stated in the
proposal in an optimal way. The A 1P Project Manager(Wld
olher.members of;he PMT as. appropriate) shall participate in
a project start or klckoffmeeting, annual reviews, and aclose-
out meeting prior to the expiration of the award. The A TP
Project Manager is responsible for the fo[Iowrng:
a, General oversight and project management functions
associated with this coopCTativc agreem!mt.
b. Arranging kickoffmeetings, annual review meetings and
final closeout meetings. '
c. Monitoring the project to ensure Ihat it is executed in
the proposal and thIs award; this
Incllldes analyzmg the qllarterly, annllal, and final reports
and consulting with other members ofthe PMT to asses;
progress
d. Recommending appropriate action to the NIST Grants
Officer ;fthe project is failing te meet its objectives.
6. SUBSTANTIAL INVOLVEMENT
NIST has selected a cooperative agreement as the funding
instrumlm! for this project. Accordingly, the NrST Project
Management Tcam will be substantially involved in the
following arcas:
a. Approval of go/no go decision points at various project
stages before subsequent stlges ofa project may continue
lfspec1fied in the Special Award Conditions; ,
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b. with sole procurements in excess of
$100,000;
c. Approval of key personnel specified in the proposal
(including such pOSitions as Financial Officer,
Administrator, Prineipal Investigator, and/or Project
Manager); and
d. ApproYal of changes in Joint Venture membership.
7. TECHNICALfBUSINESS/FINANCIAL REPORTS
AND PLANS
The Recipient shal! provide access to infol1l1ation that is
required ID assess the project's progress throughout the
project !ife c)-de. In addition to monitoring the technical
work, NIST requires business information pertaining to the
project during the life oflhe project and for six Yl:"ars after its
end to assess progress towards commercialization, the degree
of adoption of the technology, and the impact of the project
on the ecunomy.
3. Technkal Reponing:
The Recipient shall submit technical performance repons in
triplieate (one original and two copies). Two copies shall be
submitted to the A TP Project Manager and the original report
to the Grants Officer in the same frequency as the Financial
Status Report (SF-269). Technical perforrn:lncc reports shall
ccntain information as prescribed in 1,5 CFR 14.51. (See
Attachment A for an optional structure or format for the
technical report.)
b. Business Reporling:
The Recipient shall submit business repons in accordance
wilh the "Guidelines for Reporting on BUs!rless Progress and
Economic Impacts" (see Attachment B).
c. Fini!l1cial Reponing:
(l).Actual or Incurred Costs
By signing this award the Recipient agrees to ensure
that only actual costs incurred will be charged to the
award and that all costs wil1 be reasonable, allocable,
and aHowab!e in accordance with the 'applicable
Federal Cost Principles. See 15 CFR 14.27. The
Recipient shall also ensure that all salaries/wages
(technical and administrative), fringe benefits, fiaveJ,
materials and supplies, equipment, suhcontracts, other
costs, and indirect costs proposed and to be incurred
under this award are consistent with costs incurred for
like or similar items on all other Federo.l and non-
Fedenl projects or cost centers (exclusive of any
profits or fees) of the Recipient (including its Joint
Venture Partners when applicable).
Terms and Conditiona/ATPj06-01 2
(2) Cost Share
The Joint Venture (N) Administrator is responsible for
conducting a review oflhe financial status reports for
each JV participant to ensure that the financial
information is with each participant's
approved budget and consistent with Chapter 5,
Examination Procedures, item 4. ofthe NlSTProgram-
Specific Audit Guidelines for Advanced Technology
Program Cooperative Agreementswith loint Ventures,
dated September 1999. Any discrepancies must be
resolved by the JV Administrator prior to submitting
financial reports or requesting payments from NIST.
The N Administrator must ensure that the overall
award costshare requirements are met throughout the
award. In add ilion, eaeh JV member is responsible for
meeting its cost share in accordance with its approved
budget throughout the award.
(3) Submission of Financial Repor1s
For ATP Recipients, Anicle A.OI of the DoC
Financial Assistance Standard Tcnns and Conditions
datcd October 1998 is revised as follows:
(a) The Recipient shall submit a "Financial Status
Report" (SF-Z69) on a calendar quarter basis
for the periods ending March 31, June 30,
September 30, lind December J 1, or any
portion thereof, unless otherwise specified in a
special award condition. ReportS are due no
later than 30 days following the end of each
reponing period. A final SF-269 shall be
submitted within 90 days after the expiration
date of the award.
(b) The Recipient shall submit a "Federal Cash
Transactions Report" (SF-272) for each award
where funds are advanced 10 Recipients. The
SF-Z7Z is due 15 working days following the
end of each calendar quarter for awards under
$1 million dollars; or 15 working days
following the end of each month fOT awards
over $1 million dollars; or unless otherwise
specified in a Special award condition.
(c) All (mancia! reports shall be submined 111
triplicate (one originClI and two copies) to the
NIST Grants Office.
8. KICKOFF MEETINGS, ANNUAL REVIEWS,
CLOSEOUT MEETJNGS,ANDSPECIAL STUDIES
The ReCipient and cach Joint Ven\nre panicipant, if
applicable, shall participate in kick-off, annual review, and
closeout meetings. The ATP Project manager will proyide
the Recipient vrilh meeting instructions in advance of these
meetings.
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Consistent with the requirements of the Government
Perfonnance and Resulis Act of ! 993, Recipients may be
asked from time to time to participate in special economic
studies or case studies. All requests for participation in such
studies will 'be in accordance with the Paperwork Reduction
Act (PM) requirements as implemented by 5 CFR 1320,and
will display a PM approval number.
9, PRIOR APPROVAL REQUIREMENTS
The prior approval requirements in IS CFR 14.25,
paragraph (e) MAY NOT be waived automatically by the
Recipient and require written approval from Ihe Grants
Officer.
In addition to the requirements specified in 15 CFR 14.25,
Recipients shmll obtain prior written approval from the NIST
Grants Offieer for the following changes:
a. The trnnsfer of funds among direct cost categories must
be approved in advance by the Grants Officer if the
transfer exceeds 10% ofthe approved tolal annual budget
for each single Recipient OT Joinl Ventul"\' participant for
each approved project year. Recipients are not authorized
to create new budget categories without prior approval.
The Recipients are not authorized at any time to transfer
amounts budgeted for direct costs to the indirect costl!ne
item
b. Revisions to Ownership andlor Dissolution of
Recipient (ReCipient iTlcludes thc single company or any
loint Vent.ure participant)must be approved in advance by
the Gr8Jlts Officer. These changes include but are not
limited to the following:
(1) In the event Ihat a company is acquired by, or
mcrges with, any other company, including a foreign
company, the Rccipient shall include in thcwrittl:"ll
notification to the NIST Grants Officer the following
information: date of final acqUisition or merger;
name and address of any new foreign parent and
amount of ownership; whether the Recipient intends
\0 complete its assigned tasks with the same
commitment and at the same location; and how this
change in ownership will aITect the project's
projc.cted benefits to the United States. Thc NIST
Grants Officer reserves the right to ask for
c\aril1cation andlor additional information.
(2) When the company is no longer majority-owned
by U,S. citizens, the Recipient should providc
details of the change in ownership and adiscussion
of whether the change alIee!s the Recipient's
assi gncd tasks in any way.
(3) When only two fOT profit l;ompanies are
participating in a Joint Venture and one of them
ceases participation, the Recipient shall provide
TermB 4nd conditiona/ATP/OB-Ol 3
details regarding the circumstances of the
departure, and plans for replacing the depar1ing
company with anotner for-profit organization.
e. Any substitution, addition, or withdrawal of participants
to a joint venture must be approved in advance by the
Grants Officer. In the event there is a proposed change
to the Joint Venture, all neWly-proposed Joint Venture
participants shall submit the following documents
through the Joint Venture Administrator to the Grants
Officer for and approval: CD.51l, SF-414B,
NIST-J263, CD346, SF-LLL. New panicipants must
also satisfy the requirements of Artil;le A.O.'l.c of the
Department of Commerce (DoC) Financial Assistance
Standard Te1lTlS and Conditions. The loint Venture
Administrator must provide to the NISTGrants Officer a
revised Joint Venture Agreement and documentation of
the Recipient's notification 10 the Department of Jllstice
and the Federal Trade Commission of the changes,
additions and/or deletion of panieipants.
10, UNALLOWABLE PROJECT COSTS
Those costs Ihat are designated iI5 being unallowable in
Chapter 1, Sections C.4 and COS ofthe November 2000
ATP Proposal Preparation Kit will bc unallowable undcrthis
award.
11. PROGRAM INCOME
a. Program income earned during the project period shall
be retained by Ihe recipient and shall be used to
finance any non-Federal share of the project.
b. Recipients shall have no obligation to the Fcderal
Govcmment regarding program income earned after the
cnd of the project period.
c. Costs incidl:"lltal to thc generation of program income
may be deducted from gross income to determine
program income, providcd these costs have not been
charged to the award
d. Proceeds from thc sale of property shall be handled in
accordance with the requircments ofPropeny Standards
in 15 CFR 14.30 through 14.37.
e. Recipients shall have no obligation to the Federal
Government with respect to program income camed from
license fees aIld royalties for cop)Tighled material,
patents, patent applications, trademarks, and inventions
produced under an award.
12. EQUJP'MENf
Upon expiration of the project period, the Recipient shall
submit to the NlST Grants Officer an inventory ofC<juipment
acquired with Federal funds, as prescribed in ] 5 CFR 14.34,
along with an "Equipment Disposition Cenification." The
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certification provides the Recipient an opportunity to request
authorization to continue to utililc the equipment for the
purposes of the CQmmercialization initiative. [fapproved by
the NIST Grants Officer, the Recipient shall report \0 NIST
evcry two years the condition ofthe equipment as long as the
current market value is more than $5,000.
For Joint Ventu1e awards, title to any equipment purchased
under the award, including intangible property that meets the
definition of equipment in 15 CFR 14.2(n), Ihatmaybein the
name or a departing participant, and that is vital to the
project, shall be transferred to another Joint Venture
participant IS instructed by the Joint Venture
Administntol" for continued use on tht projed, The Joint
Venture shall make eompensation 10 the departing participaIlt
for its contribution to the purchase of the equipment by
applying its percentage oflhe cost of the equipment to the
current fair market value of the equipment the
equipment no longer be needed on the project, the departing
participant shal! request disposition instructions in
accordance with 15 CFR 14.34.
13. NOf\lCOMPLIANCE WITH STATUTORY
PURPOSE
IfNIST determines that the statutory purposes of research
and development under 15 USC 278n can no longer be
served (e.g.,lhe project is no longer high-risk), the
Reeipient shall be deemed in materialnoncompliance with
award requirements. As a result, NIST may terminate the
award pursuant to 15 CFR 14.6 J.
14. REFUNDS
The Redpient shall promptly submit all refund checks
(including interest earned on advances) to the DoC
aceounting office identified below and notify the Grants
Office npon submission. Bach check must idenlifyon its fae
the NIST award number, aIld no more thaIl a two-word
description to identify the reason for the refund. Submit 10:
National Institute of Standards and Tet:hno1ogy
Accounts Receivable
15. AUDITS
100 Bureau Drive, Stop 375 I
Bldg. 101, Room A820
Gaithersburg, MD 20899-3751
Project audits (of Fe de raJ and non-Federa! funds) are requin:d
for all ATP Recipients except when those Recipients are
required to cornplywith the Single Audit Act of 1996 and lhe
audit requirements of Office of Management and Budge!
(OMB) Circn!ar A-133, "Audits of States, Local
Governments and Non-Profit Organizations."
Subcontraetors/subawardees, including universitics, who
receive total funding under an A TP project totaling more than
5300,000 each. are also subject to the audit requirement. A
su beon tractor(subawardee is defined as an organization which
receives a portion of the finandal assistanee fium the
General Terms and 4
recipient/awardee and assists the A TP recipient/awardee in
meeting the project goals, but docs not include the
procurement of goods and services.
8. ALL ATP Recipients, including each Joint Venture
participant (ira Joint Venture project), are required to
provide suffieient funds as direct costs (unless included
as indirect) in the project's multi-year budget to have
project audits performed according to the Schedule
shown in b. below.
b. All Recipients shn.ll schedule audits as (ollows:
(I) For awards less than 24 months. an audit is
required within 90 days from the project expiration
date.
(2) For 2-,3-, or 4-year mvards, an audit is required
within 90 days !lfter the cnd of the first year and
within 90 days from the project expiration date.
(3) For 5-yC<lr awards, an audit is required within 90
days after the end ofthc first year EUld third year,
and within 90 days from the projeet expiration date.
e. Audits of all Recipients shall be conducted in
accordance with Gavenlmf!llt Audl/f/lg Standards (GAS),
issued by the Comptroller Genera! of the United States
(the Yellow Book). Ifan ATP Recipient is required to
have an audit performed in aecordance with OMB
Circular A-133, "Audits of Slates, Loeal Government.
and Non-Profit Organizations", the annual OMB
Circular A-ID audit is deemed to meet lhe ATP audit
requirement. If an A TP Recipient does not have an
annual OMB Cireular A-J3J audit perfonned, the
Recipient should follow the following project audit
reqnirements:
(I) AUdits for single company Recipients shaH be
conducted using the HIST Program-Specific Audit
Guide/i/lf$ for Advu/lced Technology Program
(ATP) Cooperative Agreemenrs with Single
Companies.
(2) Audits for joint venture Recipients shall be
conducted using the NIST Pragram-Specific Audit
Guidelines for Adva/lced Technology Program
(ATP) Cooperalive Agrumen/s with Joint
Ventures.
The program specific guidelines may be useful in identifying
the allowability of specific cost elements and other
programmatic compliance requirements for those recipients
required to have an OMS Circular audit.
d, The Recipient shall submit two (2) copies ofeaeh audit
report, one to the address shown in Article D,OI.c. oftlJe
DoC Financial Assistance Standard Terms and
Conditions dated October 1998, and one copy to the
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NlST Grants Omcer.
16. CLOSIi:OUT OF COOPRRATIVIi: AGREEMENT
a. In accordance with the guidelines established in 15 CFR
14.7 i and the DoC rinancial Assistance Standard Terms
and Conoitions dated October 1998, article number
A.06, the Grants Officer will allow only those costs
associated with compiling the final reports (technical,
business, financial, patent/invention, equipment
inventory, and c!oseol,lt audit), during the ninety (90)
day closeout period.
b. The final technical progress (closeout) meeting with the
ATP is not considered a closeout-relate<! actiyity.
Therefore, the closeout (end-of-project) mceting with
NIST officials must be conducted prior to the
expiration date of the award. The Recipient must
provide adequate funds in the project budget to ensure
participation by all appropriate members in thecloseoul
meeting.
17. USE OF NAME OR ENDORSEMENTS
n. The Recipient and/or its subrccipients or subconrractors
shall not, without the prior approval ofN[ST, usc the
name ofNIST or the Department ofCommeree on any
product or service which is directly or indim:llyrclated
to either this aWElTd or any patent license or assignment
agreement which relates to this award.
b. By entering into this award, NIST does not direetly or
indirectl), endorse aIly product or service provided orlo
be provided by the Recipient, its sueeessors, assignecs,
or licensees. The Recipient and its subredpienls and
subcontractors, shall not in any way imply that this
award is an endorsement orany such product or service.
t8. PUBLICATION GUIDELINES
In any publications, the Recipient shal! acknowledge support
of the technology development by NIST. Normally this is
done by a foolnote reading, "This work was performed under
the support of the U.S. Department of Commerce, National
Institute ofSlandards and Technology, AdvancedTechnology
Program, Cooperative Agrecment Number
70NANBXHXXXX," or words to that effect.
19. PROTECTION OF HUMAN SUBJECTS
Research involving human subjects is not permitted under
this award unless e:o;pressly authorized by a Special Award
Condition or otherwise in writing by the NISTGranls Officer.
The Fedcral Policy for the Protection of Human Subjects
(The Common Rule), codified by the Department of
Commerce at 15 CrR Part 27, requires Recipients to maintain
General TermB and 5
appropriate policies and procedures for the protection of
human subjects in research. The Common RuJe defines a
"human subjed" as a living individual about whom an
investigator couducting research obtains 1) data through
intervention or interaction with the individual, or 2)
identifiable prjvate information. The term "research" means a
s}'5tematic investigation, including research development,
testing and evaluation, deSigned to develop or coutribute to
generalizable knowledge. The Common Rule also sets fonh
the catcgories of research that may be eonsidered exempt
from this policy.
In the event it beeomes evident that a human subject may be
involved in Ihis project, the Recipient shall submit
appropriate documentation to the ATP Project Manager for
NIST inslitutional review and approval. This documentation
may include the following:
(I) Documentation establishing review and approval of
the project by a qualified Institutional Review
Board (IRB). [NOTE: Recipients must provide
documentation of continUing IRE approval by the
cognizant IRE at appropriate intervals as
designated by the !RB, but not less thaIl annually);
(2) Documentatiou to support an exemptiou for the
project from The Common Rule [NOTE: This
oplion is not available for activities that fall under
45 CFR Part 46 Subpart B or CJ:
(3) Documentation to support a request for a deferral
ofrevicw for rescarch involving human subjects
beginning aller year I of the project [NOTE: This
option is nol available for activities that involve the
use of human subjects as defined under45 eFR 46
subpart 0, which must be approved before an
award be made]
(4) Documentation of IRB approval of any
modification to an IRE-approve<! existing protocol
or informed consenl form must be su bmined to the
A TPProject Managerfor NfSTInstitutionaI review
and approval.
No work Involving human subject5 may be undertaken,
conducted, or costs incurred and/or charged to the project,
until the NIST Grants Officer approves the required
approprlale documentation in writing.
20. CARE AND USE OF LIVE VERTEBRATE
ANIMALS
Research involving live vertebrate animals is not permitted
under this award unless expressly authorized by a Special
AWllrd Condition or otherwise in writing bylhe NIST Grants
Officer.
A-78
The Department of Commercc requires Recipicnts of
financial assistance awards to comply, as applicable, with the
Anilll!ll Welfare Act as amended, and implementing
regulalions found at 7 USC 2131-2157, 9 CFR parts 1,2, and
3.
In the event it becomes evident that live vertebrate animals
may be involved in Ihis project, the Recipient shall submit
appropriate documentation to the ATP Project Manager fur
NISTinstiturional review and approval. This documentation
may include the following:
(1) Documentation of the ReCipient's United Siales
Department of Agriculture (USDA) Animal We!fareAct
certification, or Animal Welfare assurance from the
Office of Laboratory Animal Welfare (OLA W) of the
Public Health Scnoice/NationBI Institutes of Health
(PHSINlH), or if only using rodents, birds or fish, and
the above USDA or OlA W documents have not been
attained, evidence of full accreditation from the
Association for the Assessment and Accreditation of
Laboratory Animal Care (AAALAC);
(2) A coPy of Ihe Institutional Animal Care and Use
Committee (lACUC}-approved Animal Study Protocol
(ASP) that includcs all signature(s) lIS required by the
organizational IACUC. The Recipient shall provide
documentation, in the ASP or a separate cenific<ltion
approved by Ihe IACUe, that the Principal Investigator
and other personnel involved in the care and use of the
animals 8J'e trained and experienced in the procedures to
be used in the Protocol in accordance with the N<ltion<ll
Rese<lrch Council " Guide for the Care and Use of
Labor<ltory Animals" (NRC Guide);
(3) A coPy of the IACUC approval letter for the approved
ASP. {NOTE: Documentation of continuing IACUC
review by the cognizant IACUC must be submitted to
the A TP Project Manager <IS it occursJ;
(4) Documentation oflACUCapproval oranymodification
to an IACUe.approved existing, protocol must be
submitled to the A TP Project Manager for NIST
Institutional review and approvaL
No work involving live vertebrate "!limals may be
under1<1ken, conducted, and/or cosh; Incurred and/or
charged to the project, until the NlST Gnnls Officer
approvCl; the required appropriate doeumentatlon In
writing,
21. BUREAU OF EXFORT ADMINtSTRATION(BXA)
CLEARANCE
<I. The Recipient agrees 10 adhere to the U.S. Export
Oeneral Terms and Conditiona/ATP/Oa-Ol 6
Administration laws and regulations and shall not export
or re-export, direclly or indirectly, any technic<ll d<lta
cre<lted with Government funding under Ihis award 10
any country for which the United States Government or
any <lgency thereof, at the time of such export or reo
export, requires an export license or otherGovemmen!<ll
approval without first obtaining such licenses or
approval and the written clearance of the NIST Grants
Officer.
b. The Bureau of Export Administration (BXA) shall
conduct an annual review for IIny relevant infonnation
<lbout the Recipient's compliance with U.S. export laws.
NIST reserves the right to take appropriate action in
accordance with 15 CFR 14.62 and Article L.Ol of the
Dep<lrtmen! ofComme)'Ce Financial Assistance Standard
Terms and Conditions, if the BXA reports significant
adverse inform<ltion about the Recipient to Ihe NIST
Grants Officer.
22, NORTH AMERICAN FREE TRADE AGREEMENT
PATENT NOTIFICATION PROCEDURES
PursU<Iilt to Executive Order 12889, the DoC is required to
notify the owner of any v<lHd patent covering technology
whenever the DoC or its financial a'lsistance Recipient,
without making a p<!tent search, knows (or has demonstntble
reasonable grounds to know) that technology covered by a
v<llid United Slates patent has. been or will be used without <I
license from the owner. To ensure proper notification, if the
Recipient u ~ e s or has used patented technology under this
award without a license or pennission from the owner, ttle
Recipient must notify the DoC Patent Counsel at Ihe
following address, with a copy to the NIST Grants Officer:
Departmen! of Commerce
Office of Chief Counsel for Technology
Patent Counsel
14th StTcct and Constitution Avenue, NW
RoomH-4610
Washington, DC 20230
Thc notific<ltion shall include the following information:
a. The awa.rd number
b. The uame of the DoC awarding agency
c. A copy oflhe patent
d. A description of how the patented technology was used
e. The mune of the ReCipient contact, including an address
and telephone number
23. LrAB1L1TY
< I . ~
The U.S. Govomment shall not be responsible for d<lmage to
or resulting from any property provided 10 the Recipient,
A-79
and/or its subrecipien[s and/or subcontraCtors, and/or
acquired by tile Recipient, and/or its subrecipienls and/or
subcontractors, purslIanl 10 this award.
b. No Warranty
NTST makes no express or implied warranly as (0 any matter
whatsoever, including the conditions of the or any
invention or product, whether tangible or intangible, mude, or
developed under this award, or the ownership,
merc-hantabiliIY. or fitness for a particular pUrpose of the
research or any invention or product made or developed
undcr this award.
c. Disclaimer
(I) The United States expressly disclaims any and all
responsibility to the Recipients or third persons for
the actions of tbe Recipient or third persons
T('SUlting in death, bodlly injury, property damage,
or any other losscs resulting in any way from the
performance of this award or any subaward or
subcontract under this award.
(2) The ofthis award by the Recipientdoes
not in any way eonstitute an agency relationship
between the United States and the Recipient.
d. Indemnification
(1) The Recipient, andlor its sllhrecipients andlor
subcontractors, agree to indemnify and hold
harmless the U.S. Government for all liabilities,
demands, damages, expenses III1d losses arising out
of the use by the Recipient, its subrecipients,
subcontractors, andlor any party acting on their
beohalf or under their authorization, of products
made by the use oftechnical developments arising
undc:r this agreement. This provision shall survive
termination of this !!Ward.
(2) The Recipient, and/or its subrecipients and/or
subcontractors. agree to indemnify and hold
hannless the U.S. Government for any loss, claim,
damage, or liability of any kind involVing the
Recipient's, subrecipienl's, andlor subcontractor's
employees arising in connection with this award.
e. Force Majeure
Neither party shall be liabJe for any unforeseeable event
beyond its reasonable control not caused by the fault or
negligence of such party. which causes such party to be
unable to perform its obligations under this award (and which
it has been unable to overcome by the exereise of due
diligence), including, but not limited to: flood, drought,
earthquake, slonn, fire, pestilence, lightning and other natural
General Terms and 7
catastrophes, epidemic, war, riol, civil disturbllI1ce Dr
disobedience, strikes, labor dispute, or failure, threat of
faLlure, or sabotage of Ihe Recipient or subcontractor
facilities, or any orderor injunction made by a court Of public
agency. In the event of the occurrence of sueh a force
majeure event, the party unabJe to perfonn shaH promptly
notifY the other party. It shall further use its best efforts to
femme perfonnance as quickly as possible and shall suspend
performance only for such period of time as is necessary as a
result of the force majeure event.
24. INFORMAL COLLABORATORS
All infonnal collaborators in ATP awards are subject to ATP
intellectual property regulations as specified in 15 CFR
295.8. lnformal collaborator means any individual or
organization which COnSl}Jls, cooperates with, or participates
in the perfonnance oflhis award, and is not included in the
approved award budget.
25. INTELLECTUAL PROPERTY
a. Rights In Data
(!) The Governmcnt shall have certain rights to usedata
first produeed in the performance of the award,
whether, or not the data is copyrighted. The
Recipient may establish claim' to copyright
subsisting in any dam first produced in the
performance of the award. When claim is made to
copyright, the Recipient shall affix the applicable
copyright notice ofl7 U.S.C. Sec. 401 or 402 and
acknowledgment ofGovemment sponsorship to thc
data when and if the data are delivered to
Government, are published, or are deposited for
registration as a published work in the U.S.
Copyright Office. The Recipient shalt grant to the
Government, and others acting on its behalf, a paid
up, nonexclusive, irrevocable, worldwide license for
all such data to reproduce, prepare derivative works,
perform and display publicly, and for data other than
computer software to distribute to the publie by or
on behalf of the Government.
(2) The Iiccnses granled 10 the Government under this
Term shall not be considered as a waiver of the
nondisclosure requirements of J 5 U.S.C. Section
278n(d)6: "Intellectual property owned or
developed by any business receiving funding may
not be disclosed by any officer Of employee of the
Federal Government e)(cept in accordance with a
written agreement berween the owner or developer
and the Program.
H
h. Pa1tnt Rights
(l) Definitions
A-80
(a) "Compat1y" means a for-pront organization,
including sole proprietors, partnerships, or
corporations.
(b) "Invention" means any invention or discovery
which is or may be patentable or othelWise
prolectable under Title 3S of the United States
Code.
(c) "Made" means, when used in relation to any
hwentlon, Ihe conception or first aetna! reduction
to practice of such invention.
(d) "Practieal Application" means to manufacl1Jre in
the case ofa composition or product, TO practice in
the case ofa process or method, orto oprnle in the
ease of a machine or system; and in each ease,
under such conditions as to establish that the
invention is being utilized aIld that its benefilS are,
to the extent permitted by law or government
regulations, available 10 the publie on reasonable
terms.
(e) "Subjeet Invention" means any inyention of the
Recipient eonceiverl or first actually reduced to
practice in Ihe performance of work nnder this
award.
(2) Ownership of Inventions
Pursuant to the statute that establishes the ATP (15 U.S.C.
278n(d)(11 n, this paragraph takes precedence oYer 15 CFR
14.36 and DoC Finaneial Assistmce Standard Terms and
Conditions, daled October 1998, article C,02. The Recipient
or, if appropriate, its $ubrecipients, tontractor(s) and/or
subcontractor(s), shall have the entire right, title, and interest
throughout the world to each Subject Inyention according to
the provisions of this elause, provided that this party is a
company or companies organized in the United States. 10int
venlures shall provide to NIST a copy of their wriuen
agreement which defineslhe disposition of ownership rights.
among the members onhe joint venture, and their contractor
and/or subcontractors, BS appropriate, in accordance with the
seco-nd sentence of this paragraph. HflweYer. the United
States hereb), reserves II nonetcluslve, nflntransferable.
Irreyocable litenn 10 haye practiced (fiT, OT on
behalf of, the United Stliles, any such Invention. Tille 10
any such invention shall not be transfeTTcd or passed, except
to a company organized in .the United Stales, until Ihe
expiration ofthe first patent obtained in connection with such
invention.
(3) Invention Diselosure United Stales License and Filing of
Patent Application by Recipient
(a) The Recipient shall disclose each subject invention
to NIST within two monlhs after the Inventor
and Conditions!ATPj09-01 8
discloses it in writing to Recipient personnel
responsible for palcnt matters. The disclosure to
NIST sha!] be in Ihe form of a written repon and
shall identify the award under which Ihe invention
WIlS made and the inventor(s). It shan, at a
minimum, contain the following information:
the title of the invention;
.. the names of all inventors;
the name and address of the assignee (if any);
an acknowledgement that the United Stales
. has rights in the subject invention (Le., the
GOYernmental Use License);
the filing date of the present invention;
an abstract of the disclosure;
.. a description or summary oflhe present
invention;
the baekground of the present invention or
the prior art;
a description of the preferred embodiments
what matter is daimcd
One original and two copies of Elli patent reports shall be
submitted to;
NIST
100 Bureau Drive, MAll STOP 3580
Building 411, Room A143
Marked FOR: Agreement Number. __ _
Each report shall also include the nse of the invention and
whether a manuscript describing the invention has been
submitted for publication and, if so, whether it has been
accepted for publication at the time of disclosure. In
addition, after disclosure to NIST, the Recipient will
promptly notify NIST of acceptance of any manuscript
describing the invention for publication or of any sa]., or
public use planned by Ihe Recipient.
(b) The Reeipient shall notifY NIST wifhin two years
of disclosure 10 NISTwhether or not the Recipient
intends to file a patent application on any subject
invention.
Ifa patent is issued, the Recipient(s) must submit
the following to the Grants Office:
The award number under which tlu: invention
was made:
The serial number oflhe patent issued;
The dale of issuance;
A copy ofthe disclosure as ir;.sued (including
the drawings) and;
A-81
The name(s), address, and telephone
numbcr(s) of an assignee.
In a ]V award, fhe administrator submit the
palent information 10 NIST for all participants. In
order to prevent disclosure of information to the
general public under the Fleedom of Information
Act (FOIA) or any other statute, each page of each
palent report should be marked,
"CONF]DENTIAUPRQPRIETARY."
(c) Requests for extension of the lime for disclosure,
election, and filing under paragraphs 24.b.(3)(a)
and (b) of this Term may be permitted at the
discretion ofNIST.
(4) Reejoienf Action 10 Proteet the Government's Interest
(a) The Recipient agrees to execute or to have
and promptly deliver to N1ST al1
instruments necesw-y to establish or conflrmlhe
rights the United States Government has
throughout the world in those subject inventionsto
which the Recipient has filed a patent application
in which the United States has reserved a non-
exclusive license.
(b) The Recipient shal! require, by written agreement,
its employees, other than clerical and nontechnical
employees, to disclose promptly in writing to
personnel identified as responsible for the
administration of patent mauers and in a format
suggested by the Recipient, each subjcct invention
mane under tbe award in order lhallhe Recipient
can comply with the disclosure provisions of
paragTllph b.3. of Ihis Term, and to execute all
papers necessary to file palent applications on
subject inventions and 10 establish the
Goyemment's rights in the subject inventions. This
dise!osure format should require, as a minimum,
the information required by b.3.(a) of this Term
The Recipient shall instruct such employecs
through employee agreements or other suitable
education program; on the imponance ofrepor1ing
inventions in sufficient time to permit the filing of
patent applications prior to United States or foreign
statutory bars.
(c) The Recipient shall promplly nolify NIST of any
decisions not to continue the prosecution of a
patent application. the payment of maintenance
fees, or the dcfense in a reexamination or
opposition proceeding on a palent in any country.
(d) The Recipient agrees to include. within the
specification of any United States patent
and any patent issuing thereon covering
and Conditiona!ATP/OB-Ol 9
a subject invention, the following statements:
This irnoen(ion WILl" made with United Slates Government
support under (iden rib the coopero(ive ag,.,eftunt nUMber)
awarded by the National lnstirufe of Standards and
Technology (NIST).
The United States has cutllin rights i" the
bn'f!ntioll_
(5) Subawards and Subcontl1lcts
The Recipient shall indude in all subawards and
regardless of tier, for experimental,
developmcnla!, or researeh work, a patent rights clause, as
appropriately modifIed, comparable to this term. However,
pursuant to the statute establishing the ATP (IS U.S.C.
278n(d)( II, if the subrecipiellt or is not a
company organized in the United Stales, the patent rights
dause shall provide that title fo eaclJ subject invention made
by the subrecipient or subcontractor shall vest with a
eompany or companies incorporated in the United States.
(6) Reporting on Utiliwtion ofSublect Inventions
The Recipient agrees to submit on request, no morc
frequently than annually, periOdic reports on the utilization
of a subject invention or on efforts at obtaining such
utilization that are hemg mw:le by the ReCipient or its
licensees or assignees. Such reports shaH include information
regarding the status of development, date offlrst commercia]
sale or use, gross royalties received by the Recipient, and
such other data and. information as NIST may reasonably
specify. The RecipIent also agrees to provide additional
reports as may be requested by NIST in connection with any
proceeding undertaken byNIST in accordance with
paragraph b.B. of this Term. Such information shall be
treated by NIST as commercial and financial information and
thus as privileged and confidential and not subject 10
disclosure under section 552 of Title 5 of the United Sates
Cade.
(7) Preference for United States Industry
Notwithstanding any other provision of this Term, thc
Recipient agrees that neither it nor any assignee will grant to
any person the exclusive right to use or sell any subject
inventions in the United States unless such person agrees that
any prodUcts embodying the inventions will be manufactured
substantially in the United States. However, in individual
cases, the requirement for such an agreement may be waived
by NISTupon a showing by the Recipient or its llSSignee that
reasonable but unsuccessful efforts have been made to grant
licenses On similar terms to potential licenseeS that would be
likely to manufac!\lre substantially in the United States or
that, under the circumstances, domestic manufacture is not
commercially feasible.
A-82
(8) March-in Rights
The Recipient agrees thai, with respect to any subject
invention in which it has acquired title, NIST has the right, in
aeeordance with procedures in 37 CPR 401.6 and any
supplemental regulations of NIST, to n:quire the Recipient,
an assignee, oran exclusive licensee ofa subject invention to
grant a nonex:dusive, partially exclusive, or cxclusive license
in any field of use to a responsible applieant or applicants,
upon terms tnat are reasonable under the circufll!>tanees. If
the Recipient,. assignee, or eAclusive licensee refuses such a
request, NIST has the righl 10 grant such a license itself if
NIST determines that:
(a) Such action is necessary because the Recipient or
assignee has nol taken, or is not expected 10 take
wilhin a reaso[l.able time. effective steps to achieve
practical application of the subject invention in
such field of use;
(b) Such action is necessary to alleviate health or
safety needs which are not reasonably satisfied by
the Recipient, assignee, or licensees;
(c) Such action is neeessary to meet reqUirements for
public use specified by Federal regulations and
such requirements are not reasonably satisfied by
the Recipient, or licensees; or
(d) Such action is necessary the agreement
required by pMagraph b.7. of this Term has not
been obtained or waived or beeause a licensee of
the exclusive right to use or seU any SUbject
invention in Ihe United States is in breach of the
agreement required by paragraph b.7 ofthis Term
General Terms and Conditiona/ATP/08-01 10
A-83
ATTACHMENT A
AUGUST 2001
NIST ADY ANCED TECHNOLOGY PROGRAM
OPTIONAL GUIDELINES FOR QUARTERLY R&D PERFORMANCE REPORTS
OVERVIEW
The Advanced TechnOlogy Program (ATP) General TertIl5 and Conditions incorporated into the
Cooperative Agreement between your organization(s) and the A TP calls for quarterly R&D
performance reports that are the main source of infonnation provided to the ATP. The content of
these reports, as requested by ATP, is consistent with 15 CFR 14.51 . A suggested struCture is
outlined below and is designed to not be overly burdensome to your organization. This specific
structure or format is optional, but the content is required. If your orgairization has iLS own format for
such reports and all the requested infonnation is provided, ATP will accept your format.
ATP relies on these quarterly R&D perfonnance reports to monitor technical developments in
projects. In addition, these reports are used in preparing derivative reJXlrts to
Congress and Executive Agencies of the Government that oversee ATP. ATP policy prohibits release
of proprietary information contained in these reports and limits internal distribution to those directly
involved in management and administration of the specific cooperative agreerrent. ATP will clear
information abstracted from the reports by A TP through your organization in advance of release. The
report fonnat outlined here provides for a systematic and logical structuring of key progress elements,
and promotes tracking of developments. For each perormance year, a core report is initially
and subsequent reports simply update this core. Besi&s keeping the ATP Project
Manager up to date on progress, these reports will provide a history of the project over its life.
CONTENT
The quarterly R&D performance report should:
a) Identi.fY project objectives, the initial "baseline" for tracking project developments, and
milestones through the end of the current performance year;
b) Provide evidence that projects are attaining technical milestones necessary to meet the objectives
of the original proposal;
.. 15 CFR Part 14 can be found directly at http://www.doc.gov/oebamlcfr14.htm
1
8/01
A-84
c) Identify and explain changes in the composition, direction, Or key personnel associated with the
project;
d) Identify problems or special opportunities that are critical to the progress of the research, and areas
which may benefit from consultation with specialists at NIST.
Two copies of each quarterly R&D performance report shall be submitted to the A TP Proje-ct
Manager, and the original report to the Grants Officer. If there are teclmical graphics that do not copy
well, please include originals in the copies of the report. Please r.efer to Special Award Conditions [or
mailing addresses.
In the following sections, -each element of the quarterly R&D performance report is discussed.
Jfyou wish to submit a more extensive report of technical progress for a given quarter, you may
append it to the formal report. If there is no additional progress to report under a given heading, a
statement to that effect should be included for the performance period. Please date aT! additions and
mark each page of the report nproprietary,"
PROJECT OBJECTIVES
The first section of the first quarterly R&D performance report should state the overall teclmical goal
of the project and list speciftc objectives. These should be drawn from the proposal with
amplification as required to provide quantitative bases foi success, or additional detail. The
objectives should remain unchanged throughout the project unless results dictate a shift or major
technical problems require re-planning a portion of the work. Changes should be addressed in the
section entitled "Summary of Project Changes:' Ifthe project objectives are unchanged, they may
be put in an appendix to the report,
PROJECT'BASELINE
In order to contrast the state of the art before and after completion of each ATP project, establish a
baseline to describe the status of key elements of the technology at the project outset. Define the
baseline in the context of specific targets tint are expected to constitute success, and are cQDsistent
with project objectives. These may include initial per-unit-costs, physical performance
characteristics, or specific technical capabilities. If quantitative rreasures are not applicable, provide
qualitative staterrents describing the state of the art at the time of project irritiation. Identify any
changes s ~ n c e the proposal was prepared. The ATP Project Manager will assist you in identifying
appropriate baseline characterizatirn as part of the project kickoff'. Once established, the project
baseline may be moved to an appendix to the report.
TECHNICAL MILESTONES
The quarteTly reports should present appropriate milestones through the current performance year and
relate the contribution of current year milestones to the overall project milestones. Current year
milestones are generally presented and/or modified during the kiCkoff meeting, and subsequently ,
2
a/01
A-85
extended as part of each annual review. The level of detail will depend on the nature of each project,
and the concurrence ofthe principal investigator and the ATP Project Manager. A time line chart of
the current year and the overall project milestones may be included in this section with clear
identification of major decision points. Once established, this list of milestones with appropriate due
dates should not be changed unless technical results or new opportunities dictate. Such changes
should be addressed in the section entitled "Summary of Project Changes."
TECHNICAL PROGRESS AND IMPACT
This is the heart of the quarterly R&D performance report, and will occupy the majority of the
text. This section includes a discussion of technical progress for the specific performance quarter
against the current perfonnance year milestOnes identified in the preceding sectiOIl Sufficient
discussion should be provided to allow an accurate assessment of progress, and identification of both
successes and teclmical difficulties against the milestones. Discussion of progress (and technical
setbacks) should include implications for the overall objectives of the project. At the end ofthis
section please identify the most significant technical advance to date in the project, and include a short
discussion of its signi ficance. Please list any patent applications as well as major equipmenl
purchases.
SUMMARY OF PROJECT CHANGES
In this section, succinctly summarize substantive changes in project planning, personnel, or execution
that have occurred over the reporting quarter. These should be derived from the main elements ofthe
report as this section is intended only as a summary. If approval ofa change is being requested please
note that specifically. All substantive changes to the technical scope of work or budget changes must
be discussed in advance with the ATP Project Manager, who must recommend an amendment to the
award by the NIST Grants Officer. The criteria for obtaining 'Prior Approval' are specified in 15
CFR Part 14 and the ATP General Terms and Conditions in the award document. Mapr
changes can be discussed with the ATP Project Manager at ANY time; you do not have to wait to
request them in a quarterly report.
PROBLEMS AND OPPORTUNITIES
This section should provide a synopsis or'technical problems that must be resolved as well as
developing technical and business opportunities. Please also make us aware of areas that may benefit
from consultation with specialists at NIST. This infonnation maybe integrated into the above
sections.
BUSINESS ISSUES
This section is for any business development, commercializatirn, or market issues that have a r i ~ e n
since your last Business Report.
UPCOMrNG MEETINGS
3
S/Ol
A-86
If you wish to set up a meeting at NIST, or to request the attendance of either or both 0 f the ATP
Technical or Business Project Managers at any meeting, you may use this section to make the request
and to provide an overview of the meeting. It is often helpful to present a proposed project
coordination meeting schedule for the year in this section, to note when subcontractors' progress will
be reviewed, when input from commercializatirn units may OCCUT, etc. The meeting calendar may
include formal or infonnal meetings of the project principals or formal technical meetings where
work, which is related to the project, is addressed. It should include a planned general time frame and
expected location for the annual project review, which is to be during the last quarter of the
project year (not the calendar year).
FINAL TECHNICAL kEPORT FOR THE TOTAL PROJECT PERIOD
Provides an executive summary that could be read and understood by someone not skilled in the
particular technology. The final teclmical report is proprietary, just like past technical quarterly
reports and the original proposal.
The summary should provide an overview of the technolngy that was developed and the
problems that were solved and unsolved in its development.
The summary should identify the key perforllUlnce parameters and describe how end-of-
project performance compared with performance.
The summary should also discuss the significance of (he project accomplishments in terms of
economic or commercial impact.
Important remaining technical arid non-technical barriers to commerclaJizatirn should be
identified.
A sepamte project overview of R&D accomplishments and potential benefits that
may be used in a project ATP press release should be clearly identified as part of the final
technical report. The final ATP press OT other publication use will be reviewed with the company
prior to release.
8/01
A-87
ATP QUARTERLV R&D PERfORMANCE REPORT
Date of Summary: mm/dd/vv
Project Title: Cooperative Agreement Number:
Performing Organization(s):
Address(es)
Subcontractor(s):
Address(es)
Project Manager: Administrative Contact:
Tide: Title:
Telephone Number: Telephone Number:
Facsimile Number: Facsimile Number:
Electronic Mail Address: Electronic Mail Address:
Type of Project: Single.Business __ joint Venture __
Date Initiated mm/yy Duration months
Total ATP Funding Requested: ($M) Total Industry Funding Committed: ($M)
Current Performance Year mmlw-mrrJW Quarterly Report Period mmlyy-mm/vv
ATP Project Manager:
Proiect Obiectives:
Project Baseline:
Technical Milestones:
Technical Progress and Impact: (including Most Significant Technical Advance to Date)
Summary of Project Changes:
Problems and Opportunities:
Business Issues: (not covered on business diskette)
Upcoming Meetings:
8/01
A-88
ATTACHMENT B
August 2001
GUIDELINES FOR REPORTING ON BUSINESS PROGRESS AND
ECONOMIC IMPACTS
The following reports should be prepared by the persons with primary responsibility for developing
and executing bUsiness strategies leading to commercializatim of the tecimologies resulting' from the
ATP-funded project. A questionnaire format is'used to fucilitate efficiert reporting and analysis.
Because members of ajoint venture have different business goals and different roles in
conunercializatian and diffusion of frIe ATP-funded technology, each member of a joint venture, as
well as each single applicant, has a business reporting responsibility and must file a separate report.
The Economic Assessment Office, A TP, will provide materials customized for the individual
reporting organizations in time for preparation of the reports on a timely basis.
Baseline Report
When Due:
Contents;
Format:
Thirty days after the end of the first calendar quarter of ATP funding. If you
begin your project during a calendar quarter, the Baseline Report is due thirty
days after the end of that quarter.
In this report we ask you to identify potential areas of application of the
technology (e.g., consumer electronics, avionics, medical devices), key
attributes of the technology needed to achieve these goals (e.g., quantitative
cost, size, performance characteristics) am planned strategies for
cornmercializaticn (e.g., production, licensing, strategic allian:;es,
etc.); to identify strategies for protecting intellectual property; and to identify
plans for disserrrination of non-proprietary information.
Electronic questionnaire submitted over ATP's secured website.
Quarterly Short-Form Reports
When Due:
Contents:
Format;
S/Ol
Thirty days after the end of the second, third, and fourth quarters annually.
No Short-Form Report is due for the Baseline or Anniversary quarters.
In this brief report we ask you to review the organization
address/telephone/contact information currently recorded in the ATP database
and to report significant business developments related to the A TP project for
the quarter.
Hard copy, fax, or e-mail
1
A-89
A TT ACHMENT B (continued)
August 2001
GUIDELINES FOR REPORTING ON BUSINESS PROGRESS AND
ECONOMIC IMPACTS
Anniversary Report
When Due:
Contents:
Format:
Close-out Report
When Due:
Contents:
Format:
Post-Project Reports
When Due:
Contents:
Format:
B(Ol
One year after the Baseline Report and subsequently on an annual basis over
the duration of the A TP project.
In this report, we ask you to update infonnation provided in the Baseline or
prior Anniversary Reports. The Anniversary Report expands upon the
Basellne Report to cover progress towards implementing commercializatim
strategies (e.g., an agreement with company X--an end user--for testing
laboratory prototypes); early economic impacts orthe ATP project;
collaboration experiences; attractioo of new funding; new intellectual property
created; dissemination ofinforrnation through conferences, publications, and
othermechanism.s; and a summary of company financial data.
Ninety days after end of A TP project performance period.
In this part we ask you to review and update infonnation presented in prior
anniversary reports in light of your technical accomplishments. In addition,
we ask YOll to identify anticipated remaining technical and business barriers to
commercialization of the technology, to define your specific business goals
related to the ATP funded technology for the five-year period following the
end of ATP funding, and to consider future effects of the ATP project outside
your organization.
Report three times--once every two years following the end of ATP funding.
In this report we ask you to report your actual progress in commercializing the
technology, and the related impacts inside and outside your organization.
Not yet determined (telephone survey OR electronic questionnaire submitted
over A TP's secured website).
2
A-90

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P. WI"E OF PRINCIPAl IwasTIGATOR AT SUBMrmNG. ORGANlZAnoo
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Chief Technical Officer
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E-MAIL ,Q.ODRES-S;
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Anatomic Computer Modeling for Precise and Accurate Therapies
-------------- -----------_._-- -- ---- --
IJ. NO,.-PROPR!ETARY ffiOI'OSJlJ.. ABSTRACT
pomputer Aided Surgery, Inc. will dewlap a new computer application server that WIll take caHblaled. encrypted raw
mages from a dients' medica! imaging instrumentation (MRI, CT, Ultrasound, etc.). over the Internet.
pur system will rapidly generate encrypted, precise, accurate, and variable resolution three
GOVERNMENT
imensionalliled models applicable for diYerse applications as radiation therapy, surgical
EXHIBIT
lanning, intraoperative guidance, rapid manufacturing of prosthesis, verffica1ion of surgical
esults, robotic surgery trajectory planning. palient communication, education and other
10
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01 Cr. 541 (RPP) (10)
he nove! idea, that enable.s the technological Jeap forward is Digital Morse Theory.
he essential insight of Digital Morse Theory is that it describes the behaviour of three dimensional SpiderWeb surfaces
urfaces in terms of Morse Critical featIJres.
hese surfaces are the computational building tiles of the biologically and medically important objects we wish to parse from
n opaque brick of bytes that compromise a volume data set.
We can build an index of all of the Objects in a Volume to utilize these elements in terms of their generator
ritica! points. Our nOlle! geometric construction algomhms wi!! be embodied in a network
I application service plDvider mOdel. The seNerwi!! upload from the radiological diagnostic image
,ducer, and download to the therapeutic consumer model. We wjlJ function as a unique, super specialty medical imaging
ntemet Service Provider.
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TYPE Of ORGAHIlATIOM (CHECK AU THAT APPLy)
Institute for Software Design and Development
;jty University Of New York. Graduate Center
365 5th Avenue
Room 4319
New York, New York. 10016
NAME Of' caHTACT: and Exec Officer Theodore Brown
HuunERo+1 (2.12) 817-8191
+1 (212) 817,1510
ADDRESS:
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A-94
Computer Aided Surgerr.1uc (CASD
2 Executive Summary
2.1 Scientific and Technological Merit
Page 5 of 27
CASI (Computer Aided Surgery, Inc,) will develop an application to upload calibrated, 'encrypted
raw images from medical imaging irntrumentation (tvfRI, CT, rntrasound, etc.), over the Internet. The
system will genera.te precise and accurate, encrypted 3D tiled models with variable Level ofDetaiJ (LOD,
variable resolution) for applications including: Radiation Therapy (RT), robotic minimally invasive surgery,
patient commurrication, education and other customer applications via the Internet.
Current technology is deficient because it is time consuming. labor intensive, not automatic, and
difficult to use. Expert operators produce results for each study that vary, even with the same data
reprocessed by the same operator. It is not dimensionally stable or suitably precise for critical radiation or
surgical therapy. Extensive hand retouching of the images and smoothing is needed. to finish the models.
Current segmentation and modeling technology is currently only practiced in research medical centers, and
for expensive medical illmtratioD for advertisements.
Competing methods reformat and reorient image planes using ad hoc inaccurate methods. CASI's
improvement will me 3D surface modeling to rapidly obtain stable measurements delivered via web
browser.
2.Ll.l Tedinological Innovation
The novel idea that enables this technological leap forward is DigitaJ Morse Theory (OlvIT). It
describes the behavior of SpiderWeb surfaces by Morse critical features. These surfaces are the
computational building tiles of bio-medicaJIy important objects. The algorithm indexes aU the objects in a
volume and segmentation is accomplished by object selection from the index. (OMT graph). These Dovel
geometric algorithms will be embodied as a network based application service provider. CAS! will function
as an Application Service Provider (ASP). 'Th.is enterprise will function as a computer based geometric
foundry for the casting of anatomical structures for biological, surgical, and educational purposes.
CAS! will deliver the product models via Virtual Reality Modeling Language (VRML). CUstomers
will manipulate models by mouse, and other virtual reality methods. The click stream behavlor of the client
will be learned by neural net content personalization tecbnology.
DlvIT insight enables users to select entire assemblages of components to build desired features
without inlroducing artifacts (segmentation 'tool marks'). With novel mathematical theory, computer
graphics prog:ra.mrrUng experience, and clinical research CAS! is 4 years to market dominance
in high tech medical modeling. We win offer a rapidly delivered. internet based solution for practical
patient-specific, tailored requirements, resulting in better diagnosis and better therapeutic. quality assurnnce
at mass production costs.
2.1.1.2 High Tedmica' Risk. and Feasibility
The technical risk is that the medical user may have difficulty finding desired objects. For most
situations, the: ohject is selected from the DMT graph. In difficult or weak: images, additional processing
may be required for adjusting contnIst and surfaces to suit the user requiremenls and retain dimensional
fidelity. DMr is an innovative algorithm with an unproven ability to solve real modeling problems in a
production setting. Conunon wisdom in the field teaches that volume imaging is the technology of choice
for many applications because tiling algorithms make too many tiles, behave poorly with noisy: data, and
connect extraneous objects therefore confusing the model. Iso- contow;s aod surfaces are used in
topographic mapping, meteorology, and other fields, so that there are spillover benefits.
The feasibility of the project is based on preliminary 'research sponsored by DARPA and results
through subcontract with the Nrn Visible Human Project ('Illll).
2..2 Potential for"lJroad.8ased EcoakAilM:: Benefits
CASI will leverage the large national investment in medical imaging industry by improving image
understanding and the quality of decisions based on 3D image stacks. CAS! will create new markels for
computcr biomedical modeling, and propel diffusion of this information to plIysicians and their patients.
There is an established industry of medical illustration by commercial medical iilustrators for
medical education.., and advertising. The market for patient specific, cheap and rapid
anatomic models for critical application will be clearly much larger than diagnostic imaging and meilical
A-95
AnatomiC" Computer Modeling for Precise and Accurate Therapies Page 6 of 27
Computer Aided Surgery.lnc (CASn
illustration CAS! modeling technology. both physical and computer, real.and virtual, will benefiJ the nation
by better patient diagnosis. treatment, corrununication, and teaching. Tbe technology will improve the
realization of treatment plans, reduce hospital stays, and enable surgical robot motion planning for
minimally invasive surgery, better radiation therapy planning, etc. Patient workups will have the artistic
eq,uivalent of an oil portrait by a master painter in the hyperrealism school drawn with the dimensional
fidelity ofan architectural template. The technology will draw with the accuracy of a micrometer caliper,
the precision of an industrial robot, with a reasonable cost, with a market value to the patient/customer in
thouS8Ilds of dollars, with the speed of a Polaroid - Land instant snapshot
2. 2.1 National Economic Benefits
The nation will benefit by improved health care that will prolong the quality of life. Reduced
employee sick leave y.iU decrease disability related payouts and reduce costs to insurers. The efficient use
of medical informati'on will produce better yield on capital in imaging technology. Better patient and
physician communication,. treatment results, and patient satisfaction will result in less litigation and
insurance costs. CASI will create new markets for model-based infonnation as the core competency is
established that wiU go beyond our initial Radiation Treatment project. As the medical imaging industry
matures into the medical modeling industry, CASI will seek new markets for services, only dreamed of at
present.
2.2.2 Need for ATP Funding
ATP Funding is required becaUse CASI's goal is to make a technical forward leap with the DMT
based modeling and develop a business to bring it to market. CASI needs the funding to focus on the
production of anatomic models for radiation troabnent planning, neurosurgery and medical computeT
graphics and animations. Building on !.he Nlli Visible Human Project (VHP) preliminary results, CAS! will
creates new roarkets that will be profitable witllln 5-years time. The CASI vision time frame, along with no
nearterrn profit projections, is too long for conventional commercial funding,
2.2.3 Pathway to Economic Benefits
This Internet solution will grow explosively, as it is accepted in the state of the art Internet payment
systems provide the infrastructure for direct revenue recovery and interaction with customers. Insurance
carriers reimburse costs of 3D reconstruction studies at the two to three hundred dollar levels. The high cost
of preparing 3D renderings, and difficulty making critical decisions based on them. had made Ulls
unprofitable until CASI.
CASI's intends to become the clinical modeling resource fIrm. CASI will go beyond medical
illustration, becoming a reference standard for climensionally precise and accurate anatomlc models. These
will be used for critical treatment applications. The goal is to reduce the cost of generating these models
from tens of thousands of dollars and hundreds of man-bours to pennies and the labor time to seconds -
btemlly.
Compared to the established market for high-resolution graphical representations in the medical
illustration and advertising industry, there is a much larger market for cheap patient specific diagnostic 3D
models.
CASI's first market entry is Radiation Therapy. CASI will leverage many other market sectors by
licensing and technical support including direct competitors, forensic image processing companies,
histopathology image processing companies, surgical robotics comparues, medical imaging eq,uipment
manufacturing companies, and picture archiving companies. The state of the art will benefit, in area as
diverse as semiconductor process engineering to weather prediction. Any field that uses isosurfaces to
lll1derstand an lll1derlying physical process will benefit.
A-96
Computer Aided Surgery. Inc (CASn
3 Project Narrative
3.1 ScientifIC and Technical Merit
Page 7 of 27
CAS! will build a clinical geomelTy "foundry" casting clinical models in simplicial complexes of
triangular tiles that define intricate, real surfaces in three dimensions. Instead of plaster, palladium, or plastic
we use surface modeling technology. These models will be used for solving problems as calculating
trajectories for radiation beams.
CASl will do this by using a new mathematical theory Digital Morse Theory (DMI) that describes
the behavior of isosurfaces. Digital Morse Criticalities are special patterns in the data values where
isosurface objects appear, merge, separate, or disappear as the threshold value is varied. These criticalities
are, in general, local maxima (peaks), local minima (pits), and various kinds of saddles (passes) in the
dataset. By building a list of the locations and values of the Crilicalities, CAS! software can index (tree
graph) all of the objects in a volume data relative to each, in terms of Objects thai surround other objects
(parents), peers (connected by saddles), or are enclosed by other objects (progeny). This index graph is used
to enable extremely rapid segmentation and interactively build biologically salient composite surface
models fium the component isosurface objects.
Further, we will accomplish important image processing ;md model fusion operations based on
matching (registration) images containing conunon features between models from different imaging
modalities of the same anatomic region. We can track and quantify model changes during growth,
pathology, and therapy. We can measure several difficult to precisely measure memes such as surface area,
volmne, and various moments (center of area, center ofma5s, standard variability, kurtosis and so on). We
can also construct various m:inlmal space curves oftrnjectories for optimal surgical approaches in terms of
Critical Lines (minima and maxima paths between objects), and other applications of computational
geometry properties from DMT derived models.
When: We expect to have working alpha prototype systems operating on the web "Within two years,
and beta site clients functioning in four years
We do this because many applications in medicine and the biosciences requrre a geometric
understanding to solve problems at a fundamental level, from which to make critical therapeutic and tactical
decisions. These decisions are based on critical dimensions, clearances, access trajectories, and to minimize
trauma to no-go regions that mllit be zealously protected during invasive surgical procedures. The
biomeilical industry needs patient specific maps, inexpensively produced, with high fidelity for a wide
range of therapies. These include radiation therapy, image gujded therapy, keyhole brain surgery, minimally
invasive robotic surgery, functional modeling of the brain, protein and enzyme kinetics, to cite a few.
Engineering solutions to these, apparently simple binary decisions are based on biologjcal morpbology from
DMT based models are an important problems. The PI's experience in the computational geometry,
morphometries, computer graphics skills, and the insight thai OMT provides, propel the PI to make the
fruits ofDMr widely Internet accessible to physicians and patients.
Th.is project wiil integrate a range of computer and engineering technologies to connect medical
image generators to medical model consumers via web browser based technology. The key to the success is
not in the eJdsting tecbnology. Success will be due to the implementation of Digital Morse Theory into a
new technology, StlpJXlrted by these ancillary data collection and delivery technologies.
Innovatiop in computer anatomic modeling technology is by irmovation in applied mathematical
theory.
Our project is feasible because ofprelirnioary promising results "With in the NIH Visible Human
Project (VHP) female "Eve" data setl. The PI has powerful theoretical results
2
that are just being published
in the field. Our business prospects are feasible because of the CAS} patent position
3
. CASI has been in
business since 1995 as an advanced research and technology research fum, and brnefits from the PI's long
background in the surgical/medical computer graphics field with publications in !be field from 1985
lK=u2001
1 Cox. ilIId Karron 2001
l Karron, Cox.. and Mishra US Paten! #5,898,793
A-97
Anatomic Computer Modeling for Precise and Accurate Therapies Page 8 of 27
Computer Aided SlJrgerv.lnc (CASQ
A promising opnortunity: The explosion of interest in digital anatomy, virtual humans, visible
humans, visible embryos, and even the visible frog project bas popularized the concept of computer
representations of internal biological and medical anatomy. Two recent Hollywood movies were based on
anatomic computer graphics special effec[S. MUltimillion-dollar contracts are being negotiated with
computer animation and medical illustration firms for major media outlets (National Geographic and the
Discovery Charmel). However, the state of the art has not kept up with the demand for much more than
pretty pictures and stunning animations. These flrms hire a large numbers of technicians to hand segment
and retouch manually segmented contour rings from a very large number of slices. Various power assist
algorithms are used to reduce the labor intensity of this work., but the size of the raw data sets outpaces the
ability of animation staffs to segment, retouch, and render imagery. Computer graphics researcbers are
developing animation techniques based on this primitive and painstakingly produced geomeb"y. Anatomists
spend yeaIS developing hand tiled ,geometric models and animating them. US contractors are failing to meet
their milestones and contract deadlines with the VHP data. Firms are leaving the field of medical based
animation derived from real data because of the very high costs and long lead times for segmenting desired
objects out of pixel anatomlc data. Clinical researchers and biologjcal scientists are calling for more data
sets of a representative samples of the American population while others are calling for increased resolution
imaging of each digitized human. With the potential for a large population of male, female, pediatric,
pubescent, adult, and geriatric representatives. of each ethnic group, we can expect a very large national
sample terabyte scale digital humans. That is one terabyte per sample person so digitized. Clearly, ncw
Level of Detail Management (LOD) technology is required and is a benefit ofD:tvIT technology.
This project will advance the state of the art in computer-aided design for biomedical applications,
3D computer graphics, applied computational geometry, rapid protoryping and manufacturing, and robotic
surgery. When the PI started this researcb, the motivation was to produce "correct" isosurfaces for
neuromagnetic modeling. Nagging problems with isosurfaces produced by the popular Marching Cubes
algorithm of Lorensen and Cline prompted our fonnalization of a Digital Morse Theory from classical
Morse Theory to establish a correct connectivity while moving through all values The
marching cubes approach is based on a fixed look up table to build triangular tiles in a voxel (defined as
boxes with data values at the box vertices). Various fixes to the apparently minor problems in the algorithm
are in the computer graphics literature. The flaws were rare, and the frequentlY invisible in an object with
hundreds of thousands of triangular tiles. The fixes solved the problems with small holes in the data in noise
by tiling ambiguous cases with a consistent fixed tile orientation. However, for critical measurements and
establishing topological, connectivity between objects, in noisy data, isosurface shell models are
not considered the approach of choice.
The PI's basic research finding was that there are interstitial critical saddle points. The traOsition in
connectivity occurs precisely at that point and Ihreshold value. This saddle depends only on the boxel (2D
box element, and voxel face) vertex corners, even for voxels (3D vplume element, a 3D cube with volume
with data values at the corners). A corollary of this fmding is that any fixed lookup table approacb to
isosurface tiling in the immediate vicinity of a saddle critical point (The so-called "ambiguous" or "4
threshold crossing" tiling cases) results in connectivity errors in general with a probability of . Saddle
critical points are recognized by their characteristic pattern ofhighllowlbigbflow vertex values as we
circulate around the boxel perimeter. D:tvIT resolves these saddles by subdividing the boxel on the saddle
point, effectively changing it into a vertex saddle point. This is different from tetrahedral (or other simplicial
decomposition) composition of an ambiguous voxel, because there are still multiple apparently equiValent
tetrahedral decompositions. Tetrahedral decomposition moves the ambiguity from the tiling to the
tetrahedralization. There is no ambiguity in the DNfT subdivided voxelJboxel, as it can never have hits
(threshold crossings) on the added subdivision edges. Thus, the oriemation of the connections changes
relative to the critical value. In this way, as we sweep the iso-value through the saddle critical value, there is
only one connection change, precisely at the critical value, and no other value 4AIry other change in
connectivity is spurious and causes multiple connectivity jumps as we smoothly sweep through the volllIDe
Karron and 1995
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element. Further, the wonderful hierarchical nesting property that Jordan Manifold surfaces exhibit is those
we expect in continuous Morse Theory. This important property is destroyed under any other rule set.
The PI believe that other graph based analysis of images in tenus of isosurfaces or edge extraction
algorithm was not successful becall'>e of the faulty nature of the surfaces. Graph based image analysis
produced complex graphs that were difficult to lUlderstand. DMT graphs are by their very nature
hierarchical and rooted in the image/volume.
Spillover Benefits are that isosurfaces are widely used in a number of disparate data analysis
sihlations, i.e., petrology, meteorology, forensic image analysis, hyperspectral imaging, image compression,
and understanding. Scientists in other application areas will uo;e our server to build market and problem
specific application services. SpiderWeb mcxiel5CIDl represent turbulent fluid flow shellI surfaces,
separation surfaces, cavitation phenomena, and other highly intricate surfaces. SpiderWeb models are noise
proof, in that they properly model poise instead of breaking apart or connecting incorrectly, We can
represent the relationship between Intricate fluid flow structures by the DMT graph rcpresentatiDn where
computer graphics does not reveal internal structures. We expect that research into many important
biophysical phenomena, Sllch as cell membrane porosity. receptor mechanics, and enzyme mechanics will
benefit from our tool and analysis. From the preceding list of spillover benefits one can see the contribution
. to the United States scientific and technical knowledge base. as any application that makes use of surface
analysis will benefit by using our tecbnology and ASP.
Project team qualifications; The PI fonned the prime contractor company, CASI in 1995. The PI bas
combined expertise in plastic surgery and neuromagnetic functional imaging dating back to the 1980s
(Cutting et aI 1986) and ad_ced mathematical theory in !he 1990's (Karton 1992). Our original
motivation for geometric modeling was derived from research on neuromagnetic brain anatomy structural
and functional modeling. The research evolved into work with cinematic cardiac modeling. The company
was founded with a Phase I SBIR Grant from DARPA Advanced Biomedical Technology Grant and went
on to do a Phase II grant, and a Phase ill add on grant We also obtained DARPA ftmding for Digital Morse
Theory in the Advanced Computational and Applied Math program at the DARPA Defense Sciences
Office. Dr. Karron has run the company web site and ISP since 1995. CASr was fOlUlded to be a
superspeciality medical StIrglcal ISP. Our web site has been on the air for 6 years, and is well" indexed by all
of the leading indexing services. This is the basis for our inspiration to run a 'computer anatomic foundry'
as an ASP. Dr, J. Cox has been working on the mathematical underpinnings of DMT with Dr. Karren since
its inception. Dr. Cox. has extensive theoretical and practical experience in new algorithm mathematical
description, proof, efficiency evaluation, optimization, and coding in C++ and derived languages. Dr. G
Wolberg has many years experience in dlgital image warping, regjstratioll, and is an expert imaging
scientist.
3.1.1 Technical Rationale
3.1.1.1 Technical rationale introduction and perspective
The goal is to build 5Urfaces that can b ~ moo for object modeling and trajectory analysis. Users will
make vital decisions based on the distances between Objects, surfaces, and points. Lives "Will depend on
these measurements. Many algorithms and technologies from computer graphics are not of high enough
quality for these critical applications. Good enough for graphks display, is not good enough; too time
consuming, not repeatable, or too expensive for many important medical applications. CASI requires
topological surface tiling make correct connections. Geometric calilmitions from the source .images must be
preserved, and segmentation artifacts (i.e., tool marks) must be eliminated or minimized. \Vhere the image
is manipulated., the 'cut' surfaces must be clearly marked so that the user knows what is artifact rurfuce.
Hand retouching of objects is expensive, time conswiring and introduces additional warpage issues, which
reduces confidence on these objects for critical measurements. By preserving calibration at the imaging
equipment level, we can precisely and accurately manage warpage and coordinate system disparities
between multiple data sources.
Technical challenges that display significant recognized uncertainty of success hyexperts in the
field: Computer graphics and computer modeling are distinct fields. Goed enough for computer graphics
wiU not be good enough for our surgical and treatment applications. Measurements of biological shapes are
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made difficult by the lack of best practices and standards in the field. This project wiil help establish best
practices for (his emerging field. The field biornorphometrics is contentious. Biological shapes require new
technology to understand, measure, and manipulate. There are no straight reference edges. circular arcs, or
fixed points on which to base a Cartesian coordinate system. Living things are constantly in motion, over
time scales ofsfXOnds to years. There are a large number of parameters required to describe geometric
regions, and no generally accepted theory for a complete description oran organisms shape, much less for
diagnostic and therapeutic manipulations of this shape. lndustrial metrology is ill suited for such
complexities. We intend to extend the limits of the field
lsoswface methods are be used to provide object geometry. However, isosurface methods are not
generally considered a preferred segmentation method. This is because previously we bave not been able to
calculate or visualize exactly, where a particulaI isosurface object connects to other objects that we
do not wish to include in our intenfled object (the Segmentation Problem). Indeed, the very surface from an
object we wish to extruct generally obscures the attachment saddle points where our desired object connects
to undesired objects. This has been the difficulty in three-dimensional isosurface based rendering.
Other methods, sucb as volume rendering, are aesthetically pleasing but do not provide geometric rigor and
insight required for future analysis and 1L5e. Refinements in volume geometry based au volume imaging do
not consider topological issues. An algorithm that fit a surface around a cloud of points, or shrink-wraps a
minimal area surface around a volume object, forces the topology to that of a single object. It is possible.to
iteratively build volume image objects into multiple objects, but it is tedious, expensive, and fraught with
geometric problems. Unguided isosurfuce marching geomerry rum; amuck, covering adjacent objects and
obscuring the scene. For critical applications, such as surgical anatomic modeling, we need properly
connected surface geometry. Hand segmented objects contain segmentation artifacts, and do not ne!ct
properly inside superior and surround inferior objects. New thinking is required to overcome these
difficulties ""';thout resorting to brute force segmentation by hand drawing slice wise rings, no matter how
quickly a professional segmentor can draw rings. There are always going to be 1.00 many slices. Artifacts
introduced by the illustrator'S band are unaccepl.ahle for precise analysis.
There are serious limitations of the state of the art in segmentation technology and theory.
Currently, selecting objects in' one slice only is a time consuming and frustrating exercise. The partial
solution is that the segmenlor can see a portion of the object in the image plane. With rapid 2D contouring,
the 1L5er can quickly find a suitable contour ring from a 'Seed point. This line represenlS the inter.>ection of a
larger surface through the seed slice pixel image plane. We then use this to seed a three dimernional
surface. However, the segmentor may find that the smface may have attachments to other objects we do not
wish to include in our desired object. The segmentor '."rill need to hWlt down the attachment points and do
'something' damming. This is the current state of the art in segmentation.
DMr calculates the connections (DMr Criticalities), D'MT segmentation minimally perturbs the
contrast at attaclunent points to achieve the separation we desire, In RGB space, the segmentor may find
that there are attachmenlS in one portion of color space, and a suitable segmentation surface exists in
another portion of color space. The goal of the segmentor menu is to navigate a segmentation surface
through color and olher (IT, l\.1Rl) spaces; a task 3D interactive computer graphics does not make simple
or belp visualize.
lsosurface algorithms generally over-tile a surface. Each triangular tile is constructed independently
of its neighbor. The size scale oflhe triangles is less than the voxel size, and in a large data set,. the number
of triangular tiles can become burdensome to manipulate and display, particularly in real time. The cum:nt
state of the art is to build a marching tiled surface, then use triangle decimation to collapse almost co-planar
triangular tiles into one another. llis approach generatl':S large intermediate memory consumption (bloom)
of having to build a fully resolved surface then decimate it This approach, while functional for graphic
display PlJllXlses, is not deterministic. This means the resultant tiling is very different for seed tile
used to decimate a surface. Decimation changes the geometry of the decimated object in an uncontrolled
and possibly unsilltable way.
Digital Morse Theory can provide a solution to these iinUtations in the state of the art. It can be used
as a novel basis for segmentation, data fusion, and LOD management. The techrtical risks are than that the
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algorithm has not been fully implemented, tested, power tested, and accepted in the image and Illodeling
processing commlJIlity. The algorithm may have computational bottlenecks as we scale up service to
production levels on very large images. We ameliorate this risk by using a heavy-duty computer server that
can manage large intermediate calculations and memOJ)' requirements.
Related topics are hot research on level set theory. isosurfuce methods, differential equations, and
Morse theory. An exhaustive bibliography is beyond the scope and page limits of this proposal, but we refer
to the work of J.A. Sethian, Jack Snoeyink, Chandrajit Bajaj, Robin Fonnan, Stan Osher, John Hart, Carroll
K. Johnson, and others. Some of the key theoretical ideas we seekirig to develop in medical modeling
(Segmentation manipUlation by DMT Grapb) were explored by c.K. Wall in "Surgeries on Compact
Marrifolds" (I 964, republished 1970, and 1999) by the American Mathematical Society. Marsdon Morse
published "The Calculus of Variations in the Large" in ]932. Our principal contribution to the field is the
realization of Morse Theory in discrete representations oftbe underlying continuous world. We make
MOI'.)e Theory computable. Very recent applications of Braid Theory in MOI'.)e Theory have been discussed
in applications as diverse as fluid flow and air traffic control avoidance trajectory planning. The intellectual
a1Inosphere is embracing MOI'.)e Theory. CASI's computational approach in Digital MOI'.)e Theory will
llave wide applications that we are most keenly aware. Indeed, medical surgery can be considered changing
the topology of the patient; Mathemaricaland computer SlJIgery on DMT object models is the nex:t step
logical step in computer modeling of surgical procedures.
3.1.1.2 What is Digital Morse Theory?
Digital Morse Theory describes the behavior of SpiderWeb iso=valued surfaces (US Patent
#5,898,(93). These surfaces are composed of a simplicial complex of triangular tiles. The surl'ace has the
property of being Jordan (no holes). The surface is manifold (no Klein bottles, with consistent Donnal
vectors, a well defined inside and outside). The surfaces within any particular family are "Morseian,"
(family member surfaces nest entirely inside or outside each other. A1:. we raise or lower the threshold
isovalue, the surfaces arise or disappear at well-defined Morse Criticalities. These are kinds oflocal
maxima, local miDirna, and various kinds of saddles. The surfaces arise from maxima (sources), disappear
at minima (sinks), and merge at sadd1es.. Therefore, by scanning through a dataset, we can identify aU these
component objects by cataloging only the criticalities by their characteristic bit patterns. This is
computationally very efficient.
These SpiderWeb surfaces capture essential inflections (transitions from concavity to convexity) in
Object geometry. Fine scale features (noise) in the geometry create excessive numbers of triangular tiles.
DMTprovides a method that can reduce the density of tiling by removing smaller through larger scale
geometry features in the surface. This is the basis for Level of Detail (LOD) managernenL For example, if
we are using:fucial features to defme a patent based coordinate system, a natural fiducial point such as
Nasion (the saddle point on the bridge of nose), can, shift unpredictably in triangle decimation technology.
In DMT theory, the larger-scale saddle point remains stable while the smaller, noisy surface features are
relaxed smaller to larger, in a ruerarcrucaJ fashion.
A family ofisoSur:fru::es is the collection of swfaces that shares a "one to one" mapping for any point
an any member surface to any other such member surface. At Morse criticalities, and only at criticalities,
does the mapping property change. 'Th.is is due to the creation of a new object, the destruction of an object,
or the connection to another, object. By showing the Morseian relationship between criticalities (nesting),
we establish the relationship between families of surfaces. Because the server can quickly find the Digital
Morse Criticalities as bit patterns in the data, we have a new, powerful, and fast way to make topologlcally
coherent, geometrically sound, realizable objects from 8Jl image data stack.
A Digital Morse Theory Graph (DMT Graph) is a hierarchical linked list (graph) of all of the
separable Objects in an image. Each object is identified by its source criticality. We cannot see all of these
objects simultaneously because most of the objects are inside other objects, and therefore obscured
Computer graphics does not elucidate the relationship between objects. The hierarchical nature of the DMT
Graph is derived from the isosurl'ace families being Jordan IYfanifold.
There are a number ofimportmt practical uses for this insight. We can supply instructions. to a rapid
prototyping system for making any object or collection of objects in our images. We can rapidly
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manufacture fixtures to hold patients precisely and accurately for RT beam steering. Fwtber, we. can define
optimal paths between these objects, such as minimal clistance paths, minimal height paths, or minimal
paths subject to some other type of constrainl CoIlS1:nlins surfaces would include maximal avoidance from
no-go regions (blood vessels, eloquent brain cortex, or some such vital structure that must not be affected by
OLl! surgical robot manipulator). Very recent applications of braid theory to these Mon;eian paths may be a
very efficient method to calculate robotic trajectories and radiation treatment beam plans.
3.1.1.3 The FISh Tank thought experiment: Counting Islands as the water- level changes
The essential insight of continuous Morse Theory can be intuited by a thought experiment Consider
a rectangWar fish tank. Into this tank, we pour smalJ quantity of sand such that we have two smoothly
sloping sman hills, one taller than the other. Now, we fill this tank to the brim with water. We now start a
count of the number of island objects as we very slowly drain the tank. Our first observation is that there are
no island features in our tank scene. As the water level drops, we observe the water level just coincident
with the peak: of the tallest sand hifl. We notice behavior of the water at the critical peak of the bilL We get a
degenerate point island contour, with zero area, zero perimeter, and infinite curvature. A vanishing small
change ic. the water level and this })Jint contour expand into a tiny island. We increment our island object
count by +1. We continue to drain water from the tank and observe the birth of the second island at the peak
of the second little hill. We again increment out island object cOWlt by +1 to two objects. As we continue to
observe the drop in wal.er level in our tank, we observe the two island contours expand and grow toward
each other. As the water level reaches the level of the critical saddle point between the two hills the island
contoUIS touch at precisely the saddle p:>int We observe that our object count decrements by -1 to give a
total island count of One. The essential feature of this rubric is that we only need to cmmt the peaks and
passes to inventory all of the object islands in our scene. This approach works even as we increase the
complexity of the scene. We can use the same idea of enumerating peak, pits and passcriticalities in a very
complex archipelago of island features, at any size scale, or any range of size scales, including noise at any
size scale.
3.1.1.4 Why;a Digital version of Morse Theory?
Morse theory works precisely because it solves the problem of singularities in data models. CASl
will use its. digital ver5ion of Morse Theory that works on computers with pixilated data., which wll1 yield
the same resmts BS continuum Morse theory aD analytic Morseian functions. Digital Morse Theory extends
Morse Theory to discrete data., such as a digital image. Digital Morse Theory describes the behavior of
SpiderWeb swfaces and objects. There has been significant research effort to build quickly computable
surfaces. There is little work on technology that effectively describes all of the isosurface objects in a
volume data set. No research provides a practical method of indexing all of these objel::ts in a useful and
comprehensive fashion. In order to make Morse Theory work in this digital setting, DMT adapted the
notion Peaks, Pits. and Passes in subtle but important ways. We extended the idea of a Peak to include not
just a point peak or pit, but plateau peaks, and pits. Criticalities can also be ridges, extremum of curvature,
and umbilicus of curvature (a curvature saddle). Saddles had to be extended to include not just vertex
saddles (where the saddle point is collocated OIL a vrntex.) but also the most common interstitial saddle point
This solved the so-called problem of "ambiguous" voxels. This means that the surface is completely
determined, unambiguously tiled, and stable surface representation in any texture or Doise.
3.1.1.5 Digital Morse Theory for rapid effective semiautomatic segmentation
The eye sees :interesting objects in a 2D image and the mind would like to reach into the image and
isolate (segment) that object from the sllITOundillg pixels. If the 2D Unage is a slice through a stack of slices
imaging a 3D volume, we can attempt to segment the entire object from the surrounding voxels, including
the unseen portions above and below our planar sub-sample. Ifwe are lucky, we can use 2D iSQContours
lines to estimate 3D objects. The current state of the art in segmentation is to select a seed location and use
that seed to start propagating contours lines in the reference image plane and contour surfaces in the volume
image stack. The problems arise where we have a likely look..irtg contour ring object, and use that to seed a
volume object surface. What may look appropriate in one slice will frequently nm amuck and connect
inappropriately to other extraneous objects in other slices. The segmentor needs some guidance as to where
the object that we wish to segment in anyone image sl.ice will connect to other objects anywhere in the
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volume image stack; including the currently visible slice, and/or in slices above or below. To m,*e matters
worse, the very swface we are seeking to grow obscures the critical features where it connects to other
objects.
The C1.lITent state of the art is to build pixel fences of higher valued pixels to constrain a growing
surface. This is a modified kind of image retouching. We are attempting to retouch not the object, but just a
vanishing dis[ance beyond the objects' borden;. It is retouching almost blindly> in hope that we are
corralling Our emergent surface appropriately. A lot of fencing may be used in a complicated object. While
not all fence objects are required, they will change the shape of the object in the immediate vicinity. In order
to guarantee that our surface won't leap over the pixel fence, we have to use a very high value, typically
fully saturated white values at the upper end of Lbe image histogram. By raising a high fence around the
object, we are changing the strength of the swface. The strength of the swface is the intensity of the
gradient normal to the surface. A surface can be weak if the delta intensity crossing from inside to outside is
very small, or an identical surface have a very large inten<>ity change across the threshold wine. The
only way the surfaces can be independent of the strength of the surface is for the strength of the surfaces be
at all points. Therefore, any uneven changes in the strength of the surface (which would result
from hand carving or hand fencing by changing pixel values) would introduce geometric changes in the
sUIface that we have dubbed <tool marks'. Typically, these artifactual features are removed by post
processing operations to smooth out rough spots. This makes using this technology for modeling expensive,
time comuming, and requires an expert operator.
Edisonian invention vs. Advanced Math Insigbt: The state of the art in image segmentation is trial
and error, cut and fit, iterate, and refine; reminiscent of Edison's attempts at managing the voltage drops in
the early DC power d.lstribution grids. Edison built scale models of the grid with copper wlre, and measured
the voltages !he subscribers on the grid would see. A young scientist came to Edison looking for ajob,
boasting that he could calculate the voltage drops without trial and error estimation. Edison needed a hard
worker, but resented the hubris of the man. Eventually Edison evenruaUy threw Telsa out. DMf afford a
way to directly map/graph the objects in a data volwne at every threshold, without browsing or exploring
the volume with 3D interactive computer graphics. CASI will move tbe state oftbe art out of Edisonian
segmentation and into the deep insight that DMT provides; an application of advanced math to solve a
multi-industry problem.
3.1.1.6 Deoomposilion of pixel image intD DMT graph representation
The D1vfT graph is the flrst step in the analysis ofan image in terms of its swface defined objects.
All objects are composed of various implicit isOSlUface objects. Ibis graph representation is a hierarchical
index of all of the component objects in the data volume. Additional information can be encoded into the
graph with the geometric shape information of each implicit object. Essentially this operation recodes the
image intensity information into a system of peaks, pits and passes organized into parents, peers, and
progeny (the PPP to ppp relationship). Further, each component of the object shape can be fiuther graphed
as a system of concavities, convexities, and their umbilici (the region between where the surface passes
through flat Smce each object is a closed, manifolcL this enforces the surprising and useful parent to
progeny hierarchical organizatioIt DMT analysis effectively turns a pixel image into a vector drawing in
terms of contour line and simplicial triangular tiles.
3.1.1.7 Application of Union and Intersection opel'i!ltions to establish homoklgy between images
Because each related images is a rooted tree graph, we can start matching trees by various graph-
matcrung algoritluns we will be desigrilng with our computational geomerry colleagues at the CUNY. Our
algorithm design approach is based on the idea that the root of an image graph contains all of the area of the
image. Each node under the root contains a normalized fraction of the image area relative to the whole of
the image. In this way, the DMf graph is a completely dimerJ,5jonless representation of an image in terms of
area/volume fraction and Morse criticality a union image graph is all of the conunon image features
between two related images, such as an MRl and a cr image. It is calculated by recursive descent searching
into each node, then sub node. The intersection image is all of the independent features not conunon
between two images. The novel applications of such a graph will be among the most exciting and useful
new finding expected to come from this research. We believe that the brain uses this approach for steriopsis
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and the synthesis of range information from two related points of view. Previous efforts at image_ graph
decomposltioTI were confusing and generally considered not fruitful. Because the SpiderWeb surfaces are
Jordan Manifold, they decompose narurally into a tree graph (because the swfaces don't interpenetrate and
jDin only at critical nodes), and the results are natural to understand.
3.1.1.8 Medical Illustration and Medical Modeling
Medical illustration is the communication of a medical concept from the mind of fue artist to the
mind of the viewer. It is intended as an educational process, not necessary as data display and analysis.
Medical Modeling. as we wish to compare and contrast against, is the technology for the building of
geometric models of anatomic features. Without suitable tools for the segmentation and modeling of
geometty from med.lcal images, medical modeling can become medical i111lS1:rntion using three dimeru;ional
computer graphics Df excessive hand retouching and smootlllng. While computer graphics is an
important part displaying our computer anatomy, oomputer graphics is not the product and imaging it not
out intention. We coruider this a biomedical engineering project. However, we recognize that there is a
significant need and highly profitable market in medical illustration and animation industry that we can
serve and derive a Significant revenue stream. This is becausE'; our technology can reduce the extreme costs
of preparation of high-resolution anatomic images and animations significantly.
3.1..1.9 Computer gl"ilphics and the curse of dimensionality
As technology provides us with more raw data chan.nels, at faster rates, at greater resolution,. our
abiLity to comprehend it is lipUted by our ability to visualize it in three dimensions. in three primary coloIS,
interactively. High-speed interactive computer graphics, and advanced rendering algorithms, require slow,
careful, and expensive examination of the spatial nature of the data by a dedicated expert. Each channel of
information may be dependent on each other. Additional resolution may not increase our understancling of
the relationship' between objects. We need new ways to understand higher dimensional data where
computer grapbics overwhelms the visual system of the observer, or requires extensive interactive
exploration, observation, and analysis of an expert operator. As technology give lli: more channels of data,
computer graphics can compound the "curse" of too many dimensions of data.
ADMT graph basedtopologlcal understanding ofcomplex higher dimeosional (Color, CT, MRl,
PET information dimensions) spatial relationship is our proposed "cure" for the "curse" of higher
dimensional data charmels. This is because a topologlcaJ relationship can be represented independently Df
the dimensionality of the data; A ball in 3-dimensions is Dne node on the graph, as is a ball in 20
hypernpectral COIOIS.
l.t.LtO Desoiption of tedmical dlallenges and barriers we will tackle
3.Ll.10.l DMT for segmentation
Segmentation for precise and accurate application requires the segmentor make no., or minimal
changes in the image. For many images, we only need to:find a path (segmentation plane) around an object.
Where none exists, We need to 'carve' one. We require well-defined minimal 'surgical' changes in the
image sucb that we minimize warpage in the resultant objects' geometry. We define a 'DMT Segmentation
Operator' to manipulate connecting saddle values to enable wholesale connection or disconnection of
object:;;; effectively carving (separating) and gluing Goining) objects:with single mouse clicks.
In noisy data, or when segmenting in uneven difficult geometry (blood vesicles, nerves, fuin bone),
in order to separate an ohject mUltiply connected to its proximate objects, we have to introduce additional
COntrast to se:pa::rnte the desired object. We can restate the problem: what pi.>:.e1locations wlth what value
changes need to be applied to achieve the separation we specify. We employ a contrast mask image layer, to
preserve the original pixel data values. Using .the DMT graph, the user select the most proxim2te saddle
nodes and applies the 'segment' opern.tion to elevate or depress saddles as required to parse an object from
its neighbors. We then mark this 'cut' smface so that we are aware that this is an artificial surface. M we
make only the minimWIl changes in gradient, we minimize the introduction of 'tool marks', and maximally
generate a smooth cut surface. Preliminary testing of this procedure bas been most promising.
3.1.1.10.2 DMT for image registration
[mage registratiDn is any of a number of methods that translate, scale, and rotale an image such that
cOrrunon features in both linages are made to be co-incident. The determination of the common features, Or
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homologous points, lines, and regions, is typically specified by a technician's eye. The popular
effect ofmorphing one {somewhat) related image into another image requires a lot of human interpretation
to specifY which points and image regions are to be warped into another. An important application in
medical imaging is the combination of multiple imaging modalities into one image representing the fusion
of features between both images. Manual determination of common features, particularly in cinematic
medical image series, can be time conswning and expensive. Automatic or semiautomatic methods are
needed. Digital Morse Theory provides a new means of image tmderstanding to identify common features
between one or many images.
3.1.1.10.3 Registration of images by DMf union operators and digital image warping
The goal of registration is to recognize homologous features in disparate view of the same scene.
Decomposition of disparate images into DMT graphs is the approach for this project. An example would be
calculating range information from two closely spaced Point of View (pOY) images, or varying the tvm.J.
pulse sequence progressively from one sequence to another. At very small POV disparity (in distance, or
pulse sequence), we increase the disparity between the two images. We will conduct experiments where we
continuously calculate the DMT scene graph from two views with increasing disparity between the views.
Our aim is to validate algorithms for calculating the DMT Union and Intersection grapb. With a validated
algorithm for calculating the Union between two scenes, we can do fully automatic regjstration betWeen
scenes and solve an important problem in image fusion, automatic steriopsis, and the CASI modeling
service.
We can register disparate but similar images by calculating the common featw"es of the images
(union) without the disparate features (the intersection of the images). From the union graph, we can
calculate the digital affine transfonn required to match each homologous node to occupy the same space
(An affine matrix at eacb Morse criticality node). We can then app1y the intersection image at each parent
nocle to genemte a topologically correct but warped to fit the union fusion image that is geometrically
calibrated by one of the images' calibrations.
3.1.1.10A Bandwidth management
DMT based n:presentatioDS can be used to tran:;mit an image from large features to progressively
smaller imHges. This will be an important spillover benefit, in that we will be able to send images efficiently
through limited bandw:idth by organizing the image for transmission from largest to smallest component.
We w:ill be able to transmit a pixel image without drawing any pixels. We willll"aDsIIlit the image as large
component contourn fust. Successively smaller and smaller contour objects will build on the client web
browser, but the essential geometry ofan image will build in the [lISt data packets of the image. We will
draw me vector geometry of pix.el images at significant bandwidth savings. That way the image will mOre
qwckly recognizable very early in the image build process. Optimized picture over the web
important for sending images echoing clients data back down to clients browser.
3.1.1.105 Trajectory planning for surgery: Braided Digital Morse Theory
The state of the art in Surgical Robotics is remote actuators with video andlor haptic feed back. A
true robot bas some algorithm and model about the environment it is attempting to navigate. Improved
algorithms for navigating inside the body are required which need models from which we can calculate
internal trajectories. "Tb..is is a technical challenge we believe we can tackle in this project because we can
calculate optimal paths between criticalities. Between two peak criticatities, there must be a saddle
criticality .. New Variational Calculus and Morse Theory methods can provide a "least distance" or
"minimum height" path between the two. We will research new concepts in Braid theory applied to DMT
(Braided Digjtal Morse Theory) with Braid ex.pert Professor. M. Anshel.
3.1.1.10.6 Trajectory planning for Radiation Therapy Beams
A particularly difficult 1llmor location to treat with radiation or electron beams is the breast The
goal is to destroy the cancerous tissue, which mayor may not be a well-defined mass inside the breast,
overlaying the "thorax and in dangerous proximity to the heart and lungs. Patient fixation and re-flxation
during the course of radiation therapy is difficult. In the current state of the art, it is expected that coUateral
damage be inflicted to the heart and lungs during high-energy breast RT. CASl and its clinical collaborators
at NYUMC believe that with better modeling of the breast, the tumor, and the thorax, we can design better
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Computer Aided Surgery. {lie (CASn
therapies. RT requires serial models the tumor dwing the course of therapy. CAS! will be able to _buiJd
models of critical organ geometry, design fixation jigs for the patient, and beam trajectories.
3.1.1 Assessment of SUCCESS of the project approaches and altematives
Our assessment of the success of this project is based these positive and negative features of our
proposal:
3.LL1 PLUS
We have a comprehensive new theory that solves important problems in the state of the art in a
nwnber of fields. The theory is proven, and based on classical Morse Theory, and is a hot research topic
(Braided MOISe Theory, Levol Set Theory, umlour Trees). Theprtacipals and faculty ore world-class
graphics programmers, applied mathematicians, expert in aigoritlun design. optimization.. and complexity
analysis, expert in ISP and web site management, and the DlCOM Imaging Instrument interchange
standard. The PI's preliminary results with 2D ROB (color) Visible Human project data are encouraging.
3.1.2..2 MIN US
The utiliti of our new algorithms are not established in surgical or radlological practice. The
software is written as academic demonstrations and proof of concepts only. Significant work is required to
make the applied math solve our customers problems. We need to educate technologists and profeSsionals
in the field, as DMf graph segmentation is based on a new paradigm. Technical superiority of a new
algorithm alone will not necessarily lead to widespread acceptance. The delivery of a solution and the ease
of its usc' can be more important to market adoption.
We must understand the biology as wen as the anatomy of what we are modeling. Using only
anatomic imaging to attempt to pin down issues of precision, accuracy, in a living, highly variable, perverse
human popUlation is going to fail. Intraoperative visualization is the way to get geometric feedback. for
accurate geometric placement, but it wi!lnot necessarily improve patient treatment results. f"lmctional
imaging may show that the source of pathology is not at the center of the anatomy. Functional imaging
(functional MRI, volume impedance tomography or neuromagnetic sowce imaging) will ultimately be the
solution. CAS1 DMT can manage issues of precision and accuracy in data fusion between widely disparate
resolution scales typically fOl.Uld in functional images fusion. The biology of the pathology will most
certainly complicate the geometry in novel and exciting ways.
3.1.3 Implementation details rational
Tbe main interl'ace to the CASI system will be by connecting to the CASI web site at
httn:ffwww.casi net! and logging in via a secured socket level connection, with all image and model
1nmsactions encrypted to the appropriate privacy standards for patient information (H]PPA). There are two
fundamental operations on the server. The first is uploading raw image data and then generating the
topological decomposition and recoding into a DMT graph. The DtvIT graph indexes each object.in a
volume, and eacb feature in the object geometry. The graph of a volume contains the same infonnation as
the pixel d a t a ~ but in a hierarchical segment able object format The second fundamental operation is tiling
from a node on the DMT graph. The model is created at a bandwidth appropriate tile density and
downloaded to the user. This is possible at interactive speeds because the Dill graph is an index into the
volume, enabling rapid segmentation and model generation.
The model server is the heart and soul of our effort,. the ''forge'' through which pixels become
anatomy. Raw image stacks are uploaded. A DMT graph is presented hack to the user. As the user moves
the mouse, tiled models are forwarded to the client for real time interactive approval or further pick, drag
and drop assembly.
The ra.ctiologlcal client uc;er wiIllog into their account at CASI, on a client machine on. their local
network, which will also connect to the imaging equipment via the radiologist facility TCPfIP net to a
DIeOM (Digil:allrnage Conununication) protocol for interchange of medical images thatnms on all
medium to high end medical imaging equipment. Each radlological facility will provide access to its
imaging equipment image files. We will "Write code that will enable the client to push the code up to the
server, or the server will be able to automatically pull client images as they are produced. The images and
associatro patient identifYing infonnation win be encoded and encrypted to HIPPA (Health Insurance
Portability and Accountability Act of 1996.) Software features are a universal file and clirectory recognition
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Computer Aided Surgery. lllc (CASn
system, that can learn the format of any medlcal imaging instrument file format., and any popular digital
image format so that installation in a client radiological site is quick and trouble free. We will also build a
universal calibration service into the radiological client. Most imaging equipment has maintenance contracts
and quality assurance requires that the equipment be calibrated by imaging an imaging phantom with
known geometry and dimensions. We propose to provide a uniform calibration service La insure uniform
model fidelity for all of our client images. In that way we can provide a cross instrument, cross instrument
manufacturer, calibration standard so that our geometric models are of well defined quality, independent of
the standards of instrument care the client maintenance standards call for, and meet CASI defmed standards.
The design goal for the referring ohysician client software is to have immediate access to the
imaging study and minimize the work required to do a work up. The referring physician,
the attending sm-geon and any of the consulting caregjvers authorized by the referring physician, can access
the images, the patient models, and any study tools, annotations, and other material. TIlls may include
medical illustrations., reference materials, annotated treatment plan models, pre, pos1 treatment photographs,
intraoperative photographs, and so on. The materials may be to educate the patient as to the upComing
procedure, document the procedure plan, report !he procedure results, or even sell a prospective case to an
uncertain patient Because we are going La be doing interactive computer graphics on the
downloaded anatomic models, we will enforce a minimum level of graphics resolution and triangle
rendering speed by the client. These standards are approxllnately the same as available in any high-end
computer video board with OpenGL support. These boards cost approximately 100 to 1,000 dollars with a
polygon draw rate of at least 30 million illuminated, z buffered triangles per second. TIlls a standard value
for a PC workstation class graphics accelerator board, or a high end computer game OpenGL board
The patient client software can display study models permitted to the patient by the referring
physician<;:' client. This is a limited functionality physician interface. In this, the physician can educate,
inform, or sell the case to the patient.
We win use VHP ROB data and register the base anatomy to the CT and:MRl patient specific
images. We will build detailed models that contain the diagnostic infonnation particular to the patient. Our
goal is to generate a fused composite model of the patient, containing standardized anatomic data scaled and
regjstered into the patient coordinate system, to provide color and other inferred structure detaillhat
and CT do not measure. As we validate our code, and the radiology facil.ities client code approaches
completion, we will move to using patient specific lv1RI and cr source data.
Level of Detail (WD) management is key to the conunercial success of this project. The models, as
built on the server wi\! be over tiled (have more triangles than required to solve most modeling and
trajectory problems). Delivery of the product models and images \0 the client computer millt be appropriate
to the available client bandwidth, display resolution, and the client computer storage capacity. Intcrnctivity
requires rapid LOD management so server downloads onJy enough detail to pennit the client computer to
display the model on its OpenGL graphics accelerator subsystem. Failure to achieve the desired bandwidth
and latency by the project termination data will be offset by the expected grmvth in next generation Internet
bandwidth and yet even faster graphics chip sets. Should hardware technology obviate the aeed for an
extensive LOD management subsystem, we will scale back our effort in this area appropriately.
We will close the loop with our users by installing a ciick stream subsystem to monitor bow our
users interact with the selection/segmentation menu. From are able to optimize the interface to minimize the
selection, and segmentation clicks required of our users. Selecting objects can require a lot of picking and
selecting on a deep the D"MT graph menu. We expect that most users will make canonical selections, and by
monitoring patterns in the selection behaviour, we believe we can intuit users intention., taste, and desired
objects after they make similar choices in different palient datasets. As our system gains experience with
alpha testers ad users, we will test to see if this facility makes using our system intuitive and decreases each
users number of selection clicks to fmd the models they wish. In this way the user interface and the speed
and quality of the users' modeling effort is improved.
We will build a Radiation and Oncology Physician Client Interface that implements special features
requested by our Radiation Therapy (RT) collaborators at NYUMc. We will use our core technoIogy to
segment and build models. but also track successive tumor model changes during treatment, develop beam
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Comouter Alderl Surgery. Inc (CASD
trqjectories (via Braided DMT) through the target (the breast tumor) and no-go regions (the h m g ~ and
heart). We will develop ablation isodose isosurfaces (surfaces of dosage intensity great enough to ablate
tissue). and low dose isodose surface (the surfaces of dosage intensity safe fur healthy tissue), for no go
region. We will build union and interslXtions of rnese organ and isodose objects using our DMT graph
technology to highlight dangerous problems before the patient is burt, and to Validate treabnent plans prior
to treatment
y.le will begin by doing breast cancer cases using the generalized physician client with the radiation
oncology department at NYUMc. We will be building patient models from CT slices, and modeling tumors
during the coun;e oftrea1rnent. We win also develop isodose suIface maps of total radiation absorbed as
well calculating beam trajeCtories. Our goal is to m.ini.mize the radiation dosage in the thorax and maximize
dosage in the targeted tumor. The researcb challenge is to do difficult beam trajectOIies that the department
software cannot manage because of the geometric complexity or lack of critical organ models.
We will build a NeurosunTIcal client interface, to provide steriotactic brain surgery planrting for
keyhole surgery. We wil1 incorporate features requested by our Neurosurgical colleagues at St. Louis
University (SLU). We use our modeling teclmology to build no go regions such 3.'i articulate WI-diseased
brain and major blood vessels, and tbe target region we wish to biopsy, ablate, or deliver therapeutic agents.
We can model the union oftbe no go regions and "the access path to validate surgical plans prior to surgery.
Any volume in that object class will immediately flags a problem.
3.1.4 State of the art. before project:
The current state of the art for anatomic modeling is hand pixel picking or semi-automatic power
hand assists (snakes, dilation / erosion operators, flooding regions, etc.), drawing contour rings, sewing a
smface between rings. Marching cubes and friends tiles all objects at a threshold value, regardless of their
connectivity. Various advanced tecbrllques require band drawing pixel "dams" to contain swi'aces from
spilling into inappropriate regions, or "roughing in objects" prior to contouring. These techniques distort the
object geometry, are imprecise, create tool marks, and other dimensional iru>tabilities. They require an
expert operator, are not repeatable, even with the same operator on the same data. Critical radiation therapy
simulation modeling for beam trajectory planning is done by the seat of the pants, line of sight, with
insufficient computational geometry support on pilysical simulators. Robotic surgery is not; there is no
theoretical, robotics technology to makes calculation of intraoperative trajectories possible without good
anatomic modeling. Currently, neuroSUtgjcal trajectories are typically simple stralght lines avoiding large
internal obstacles (blood vesicles or eloquent cortex). Anatomic computer animation for medical or
commercial illustration requires many technicians working on multiple packages doing bundreds ofbours
of hand editing to make seconds of firu'shed rendered animation frames.
3.1.5 State of the art after project
Within three to four years from the start of this project, segmentation wjll be accomplished in
seconds; simply by moving a mouse over a DM! graph (specifying a. threshold value and parent criticality)
browser widget, and immediately seeing the 3D object selected. lflhe object is not simply sellXtable (the
desired object is has multiple connection nodes to other objects), !:be user can click. on the graph node to
have the proximate connecting nodes disconnected by changing the minimum number of pixels the
mirrimum contrast. Surgical robots wjll use real time updated anatomic model information to navigate deep.
inside the body. Difficult to reach breast tumors will be treated with no burnt lungp. The segmented models
will be precise, accurate, and suitable for Hollywood computer anlination, deep brain ::;urgery, and high
school student science fair projects. The tecbnicalleverage oflli1derstanding surfaces, objects, and being
able to manipulate them adroitly are manifold. Any engineering or scientific application that typically uses
isosurfaces for analysis will benefit from DMT grapb analysis.
3.1.6 Technical leverage into a broad spectrum of spillover benefits
The technicallevernge of Wlderstanding images, surfaces, objects, and being able to manipUlate
them adroitly are manifold. We will be able to effectively transmit large pixel images as nested large to
small contour objects. Any engmeering or scientific application that typically uses isosurfaces for analysis
will bencfit from DMT graph analysis.
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3.1.7 Technical Rational and Advancement of the State of the Art (TABLEL
Projected CWTe!lt Stale of
PiIDlreofMl'l'it To::1luical Ta!l':ets moAn Tedmica! Batriers Innovative ApproildJ
R=lution (DisLaoo::) No Resolution Scaruta device pi1o;d typically, Ve:;tOf from pb.ds
Limil5. size imagingdevic.t:Sprnduce too many
pixels 10 1Ne ii1I of iofonnarjon
effectively
Efful1 (Time) l,2=oth, H!JUI1>, dnyl>. Patience of optr.llO!". cxct:;SSive DMTGIl!{Jh specified objecu
pof<Sib/y
."," re!ll\l,Itioo of irnase d:ua. Objcxu 10 = hiarudlal, so gIO\Ifls of
iolelrivespeo:ls be e;o;1!aCtal requin: specil)riJIg C'l1Tj obp:lscanbemmipul&ed
(11311' se>:;ood) I oixel,oreY eteroixel. in>tea1 of individual pixels.
Cost of Professional 200,00 ttl sao.OO f IO,OOfmil!l Low pmdut:livily Of=1
Single clicks s.e:gment
E!lim man holl!' algorithms and softwaJe
obj0a5
.
Ac:cunq (SlOlllchrd 4. pixcls SegmeDlOT tD:Jmicim hand worlc; Rapid JTDdeliog minimizes
Devii'llioo Di.llaDa:) Movmleni ofpazienl during surgery. chll!lges due to time delay frorn
Iiom irna8ing [0 imaging!O Real lime
trea/nleni cam.:e m=1S drift poSSIble
,,% ,,% P7ttise ddmIlioatioo of pa!hology IIIld pm::ise modeling
(peJttWlmpro\II:TD\'nl) locatiao pr='Ying imaging c:aliblillio!l
3.2 Resea<Ch and Development Plan
3.2.1 R&D Plan overview
The development strategy is a simultaneous attack on the math and implementation problem;
algori1hm design,. and software engineering problem. The principle division of tasks is between the user
interfaces (client side Java development) and the DlYIT image receding, graph generation, union and
intersection matching, of Detail (LOD) management, bandwidth management, and warping tasks
(server side math and remote graphics), The PI will program the DMT decomposition and graphing code, A
core algorithm research and programming team will be assembled from the faculty and PhD student pooL
Dr. Walberg will program manual and automatic image registration. CUNY faculty will do algorithm
development and analysis. NYUMC RT and SLU Neurosurgery faculty wiU be our alpha clients. PhD
students with Java and C++ experience will program the client side browser plug-inc;. The math research
milestones are the development of the Server image graphing, matching, registration, and LOD
management. CAS} will launch its alpha test network based client-server image-processing services directly
to the public, to imaging facilities and physicians (and their patients) even before all of the server services
are functional or coIDplete. By having the client lei::hno!ogy base working, even at mock-up prototype
functionality, CAS! will1:ransitionresea:rch milestones rapidly, effectively, and explosively diffusing the
technology into clients' lap (tops).
3.2.2 Technical Barriers Overcome by_ CASI that will yield Economic Benefits (TABLE)
T edm.icm BiIIlh New Tedmolo Wmornic BQldiI
ExlCllsivc, human seg!Tl:llLation DMT criticaJ. poillt manipulaIioo CR:atiau of l1C'Ii markellow =s! =mpu\a
by pi::l:ru, hand dawn OJlllC:lOm, hand drawn preciscly II!gJI1alts obje::ts. m<><lclll<
pixel dams, segmo::otalioo snaklS. IQId olher Cheap paLic:nt .-;pecific gr<!phic.s and
CU/reIl[ indIealve tedlnology: :m.imaIio1l5,
",d_
Smoolhing vpaalions on hand scgmemcd Maximal \l11001h 'au' Rtrluced dep:-;ndroee on studel11 4Ild
obiects.' Warosob' segmeolDliau SI.l1faces teeho.ician for reloU!:hiog and smoothiDg
Diux:usDoalFidelily of mario: in palieol spediX: imaging
smootbed obj=; lDabiliry 10 prewve of and modeliog,
IDstrum:ul cslibr.uious from image 10 model
RotolicSurgical Planning: 00 tedlnology 10 Bwded Digila/ Mol'S(: Theory for B= sw-gical =lts. Less in=ance coSll,
in paliCll palhs ber:w= frztu= Lower OJSIS, Lc:s> h05pitl!l
no !O oodel c;onsttairn sp3Cl: (no-go Iim::, Less disability 1l'IY0tIt, loOPlSCd wortr:f
DO W<rj tocakul<teoptimal pro:luctivily
rr),jectories
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Anatomic Computer Modeling for Precise .and Accurate Therapies
Comouter AMed Sumerv.lnc (CASn
PSf!e 20 of 27
Radiation TrealmentP!(IIlning, inability \0 NO surgayrcquin:d, Bdlef ~ C l l l ~
I!d. pro::cise BDd Ilf;OlnI!e simulator modcls; Less insur3nc:e costs, Reduced hospilalllari:ln
00 Ic:Chnology 10 c n I . ~ optimal bo::am CQstt, L= dis;lbility payoot
!f?Jeaoril:S subjc:a to COnsn-ain.spaxli (oo8o
regioos):
T realmetl! R=.tlts Evaluation: n::pe.at::d hand Reliablt tracking of ilisue Quantitative measure oftrealJl1aJt effect
modeliDg of him or "'&et OJg;!ll during TIlOJPhobgic:al dJanges fiom (TumOI volumt: shrinkage.qualltllive
Ihernpy 100 expemwe, impn:rill::, iI/ld labol r.rliaIion or surgery over lime. lIlolphobgy iroprovcme!lL. de)
inlalSivc
. . .
J.3 _ of project"'- and antieipated accompnslunenls
3.3.1 First year project milestones
For the first project year, we will focus on algorithm development and implementation to efficiently
produce and manipulate the images WId models by their DMT graph node. Concurrently, the client side
interface team will design, mock up, and write browser-based interfaces for our intended medical imaging
shops and clients. This will demonstrate ofDMT principle ofpioducing map of objects that do not require
contrast enhancement to be parsed out of their proxnnate objects. We will root up our network services
server on the Internet,
33.1.1 MILESTONE 1: Senter' live on Internet
We will launch our project with the purchase and configuration of the CASI project web site server.
TASK: install the project management software, and es1ablish protocols for collaborative
programming with the team members.
33.1.2 MILESTONE 2: Public dient mode-up facility life on Internet
Publish concept mock up our system into which we will insert the real functionality as that
milestone is achleved.
TASK: Design various user interfaces for radiological, RT. Neurosurgical, patient and public 1l'ie
classes.
33.U MILfSTONE 3: Surface tiled models from DMT graphs
Generate a tiled surface model in RGB Color image data from a U'ier selected threshold value and a
DMT grnpb node.
TASK: Program SpiderWeb algoritbm and DMT graph decomposition
33.lA MILESTONE 4: Generate OMT graph rrom image stadcs
Generate DMT Grny scale grnpb froID MRl and cr from the YHP. Ge=ate DMT graph of the
color (RGB) VliP pixel data, We will USe the female 'Eve' d3:ta set, and do the thorax and abdomen.
TASK
].].2 Second year project rrn1estones
The second year of the project wHl focus on the DMT segmentation operator and registration,. then
delivering them into network clients.
33.2.1 MILESTONE 5: Gray scale and RGB Image grnph matdling (regtstr'ation precursor)
We will build the union graph of the RGB and one or more of the CT andMRI image stacks for
manageable subset of the VHP data.
TASK
33.2.2 MILESTONE 6: Segmentation functionality demonstration
Using the public VHP data, we will demonstrntion on the website DMT graph selection of
component objects. Users will select DMT objects from the RGB. CT, or'MRl data sets. D:MT
segmentation operator demonstration, by clicking on the DMT grapb node, the user will move saddle
connections up or down to connect or disconnect objects.
TASK: Write saddle criticality navigator (:finds segmentation plane if possible), else edit saddle
values to edit DMf .graph edges.
33.2.3 MIlESTONE 7: lhe Patient, RT Physician and steriotCIc:tic Neurosuryery Cient demonstration
goes live
TASK
3.].] Third year project milestones
CASI focuses on the problem of object registration and delivery of reduced density images and
models,
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CllmnulH Aided Surgery,Inc fCASD
333.1 MIlESTONE 8: Registration at models by DMT graph demonstration
We will demonstrate the union and w!rrping of DMT graphs from selected subsets of each data set
resulting in a fused model.
TASK:
333.2 MlL..ESTONE 9: l.eYel of Detail management 10-x reduction in tile density
We wiU demonstrale a minimum oflO-x reduction in tile density, with a maximum reduction of tile
density of an object into a tetrahedron (4 triangular tiles).
TASK:
333.3 MILlSTONE 10: Segmentation dick stream leaming capblres segmenbJr insight
We will demonstrate a lOx reduction in the number of clicks to segment major components by
learning patterns that will enable us to intuit objects to segment.
TASK:
N
2 Public client m:xk up facility de>ign t;cl(
3
4
5 [IJ of rmil. sorting.
JTll!ICh.iDg ro:Ie for UrUon znd lnll7"S6:lilln
6 WriteSlddkCrit nzvigalOf d 00iI0r
7 WriI DlCOM. uplolli. dovm100d
eoo;yption, niliobgica1,
1.=1
10 on cliem"
4125 Server live on Inll'met
JlI
JlI
202
210
models from OM!'
and RGB Image graph
maIChing (registralion pn:aJl>Of)
Web bared upload II!Id dmvnlood of
raw image; and tiIedrnoo:f..o,ls
3A Howwm our ploject handle tectmical and managerial pioblaiLS we wiD encounter
3.4.1 Computational load probll:!ms in laller scale image stacks
There may be complexity issues as the images scale, the number of image dimensions increases
(independent or dependant image channels). Scaling up to a production system may overload the server, or
increases in image resolution in future cr and lvfRI systems may similarly overload the server. Interactivity
may suffer. The NP completeness of these algorithms has DOt yet been analyzed. Software optimization as
well as new capital to buy a larger server may required as we process more and larger alpha client datasets.
3.4.2 Computationallntermediate solution memory "bloom"
Registration of large images with disjoint area may cause problems. If the two images bave the
same borders, then the root of the graphs will be the same and graph matching can start at the same depth
levels on each graph. If the two images are dlsjoint, i.e., there is amy a small common area between the two
images, and then the graph-matching algorithm will exhaustively search for matches in the regions where
no such match is possible. Tills unproductive seaIChing may cause problems with excessive temporary
memory requirements. Images that have no common features may produce spurious matches, perhaps
matching textures and small features only, while assigning most fearures to the intersection list
3.4.3 Automatic registration problems: managing matdling incomplete graphs
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Computer Aided SurgeD'. Inc (CASn
An incomplete graph is a graph of a portion of the object that we wish to register. It is important we
start with a complete view of the structure we wish to register, but the algorithm should be able to find the
best matchillg node tree segment by exhaustive searching.
The worst-case situation is that automatic grapb matching cannot be made to work fully
automatically 10 our satisfaction. In that situation, and Wltil we can design a fully automatic graph matching
algorithm, we will ask users provide a starting point on graph pairs to the matching process.
3.4.4 Segmentation of djff1CU1t 1mi'tges
A difficult image is an image that contains features that distort isosurlaces on a large scale, ruld or
fme grain noise that causes a very large number of small noise objeclS, We can elirrri.nate small-scale
fearures by truncating our graph below an object size, typically on the scale of twa or four pixel lengths.
Large-scale clistortions include bright rvoo antenna fields, a 'tilted' image background, where the image is
distinctly lighter on One side, and darker on another side. Other problems we have encountered are bright
'hot' spots produced by MRl pickup antentllls placed directly on the patient to improve image resolution in
the immediate vicinity. TIlls causes an intense detailed and bright hot region whose brightness decays away
from the antenna. For those images. we have to model and brightness compensate the antenna field.
We are prepared to do additional traditional image processing, even hand editing, as part of our
technical assistance to the user, until we can design and implement automatic methods to roinimize this
kluge step. This experience is a necessary and unpredictable part of dealing with real images that we expect
from our clients.
3.4.5 Management lssues
Access to necessary research facillties by proximity; We will have access to offices of the City
University York (CUNY) Gradua1e Center (GC) on 34!h street and 5
111
Ave, a short distance from
CASI on 33
ti1
street and 2nd Avenue. Team programmers will have the option to work directly on the
machine for very fast rendering, and manipulation, or work from PC clients on site or remotely.
Clinical coUaborators are all weU Internet coPnected, and maioly at New York Univenity Medical Center
(NYUM'C) on 3411l Street and at St. Louis University (SLU). As we move from computer modeling to
clinical modeling, we expect to be worlcing extensively on site a1 the Radiation Oncology facilities directly
across the street from CASt. The PI has many years standing as fonner faculty at NY1.JM:C and
collaborations there are easy to negotiate as required.
3.4.6 Fostering a team approach and team member communications
3.4.6.1 Project Management Polities
We will establish a simple task delegation and completion policy, as well as regular weekly face-to-
face meetings at CASl and at the CUNY Grad Center. A good interpersonal working envrronment is vital to
any network based ,collaboration with deadlines, milestones, validation tests, release dates, and other
organizational stresses. We will also sponsor bi-monthly retreat activities to relieve stress and to foster a
unity of purpose. We will hold quarterly progress reviews, and in the second year, start a monthly business
development meeting to focus on marketing our emerging technology and recruiting alpha test customers.
3.4.6.2 Project Management Software
Our company will use an open source development model. Open Source developers use
SourceForge for nmvork access to source code version management systems (code cbeck-in, check out),
mailirig lists, bug tracking, message boards I forums, and task assignment, ownership, completion. and
management. We will install the SourceForge project management software as private instance of the
popular open source collaboration SourceForge.net web site. The principles behind SourceForge are use to
hosts more than 12,000 open source projects.
We will support a DMT project at the CUNY Graduate Center on 34th St. and 5
th
, directly cross-
lown on is NYUMc. The CUNY Institute for Software Design and Devel.opment (CISDD) is a University
Consortium that will act as the conduit for this project The computer team is a short walk from the clinical
facilities, wmch is crucial for fostering communication with our ultimate clients and customers.
3!!3 Team members fABLE)
I Core Manbm LAfflllatioJJ 1 Role, ExpaIUsa IIndTBSk Areas
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V
v
V
\
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Page 23 of27
Aided SUlVeJ"1 Im:fCASD
Professor D. 8. Karron, PhD
I CAS! PI CCNY
PI. DMT Inventor, CH. ComputaIionaJ Gromctry, Compute'
G,""hics, Algorithm Development, Will writeDtvIT rm:xIini
CO"" on 5<'JY0", marl<:ct tcehnology LO plOsp:r;UVC 3lphacunom=
and industries
Professor G Woll::ot:tE. PhD CASI,CCNY Pro!)Iilllllll!:l". C++ programmO", a1goriUun tkYclopmeDt,
digital iIna):c W!l!lliM c:;<;pert
Professor J L. Co)(,PhD CCNY
DMT devl;lop::!", Throretical computer scietltist, aIlalysis of
iIl}:Orithms
Conoultio _
ElluypriOD. Bmid Theol)', ctlmputalioaal goomeuy. dr:veJopmml
P:t:of=r M Aruhcl, PhD CCNY ofBraicled DMT fOl"TrnjcclOl)' Planning atld Analysis
Haman.PhD CCNY ThCOl)' of swf3::!'S, image segrnmtatioD, digitill topology
BOQkstcin, PhD Univ=ity of Michigan Morphometries, medical imaging aollapplied mazh
Mr. E. Gurfein, MBA Meridillll Rerouru: iDId VC fulldrnising for bioflX:b, medic:al deviCt:, and chanistry
De--lelopment, Lid. eogineffing ven!lIre rnpil3l, fin;mcial managc:meul and
I1lil:I"kcting
Clinical Prid
NYUMC Rzdi3Iion Oncology Breas1 eIDo::r warmf using ra::fiation tha"ilpy beams.
ChairS. FOOlle;[ui, MD PbD
Professor 1. K.Dewyng;a1, PhD NYUMC Radiation Ourology Rtrliafun Specialist in prDS!ale =di using
radi8ll0D llIld l{a;hiotb
Col (Ret) R. A. Yak: Univo-sity MedicalCcnIC" EndoswpiCl\Ild VinualReality in Mfrlicine pioneer
." 7 h-
/'

"
SilliNa,MD Dr:parttr.o..I of Surgery .bAil PI'", -
;t.L<
ProfessorL. Uebis, PhD NYUMC instrumeutalioll specialist. Stttistical ir.I=i:llogy.
Chair R Bucholz MD, St Louis Univmity Mrrlical Endosrnpic mrgeoo and medical teclwology ""'1rt:prI:IleW"
,
Ceulef, DepllIttDelll of Neurosurg= and SleriolaCtic =ngay system inventor r,.V$.J
1;"
hJ:I: L.JI cdru
SIf;ven5 lnstibJ[.r:: ofTechoology TedJJlology fOI (TIMA), robotic: surgery
expert and prOlnote<"
Post POC/Vlsltlng Sclerrtlst
C++ image prog.amming registrnIiolll\lld wrupmg, 3D 1ll<XIel..ing.
J. PlIIricb=; PhD (C)(P:C:Lerl
GrocIuruU:!g from Mayo Clinic
2002)
Medical lmagiog PhD Progr.un
PhD
-""""""
CUNY GJadUillI: QuLof Java programmer, System Illinin.is!ralo, Web silc designer and
Tobe named:3 total user inl!!din: tester
3.5 Potential for Broad-Based Economic Benefits
The nation will benefit by improved health care that will prolong the quality of life. Reduced
employee sick leave will decrease disability related payouts and reduce costs to insurers. The efficient use
of medical information will produce better yield on capital in imaging technology. Better patient and
physician communication, treatment results, and patient satisfaction will result in less litigation and
insurance costs. CAS! will create new markets for model-hased information as the core competency is
established that will go beyond our initial Radiation Treatment project. A.B the medical imaging industry
matures into the medicElI modeling industry, CAS! wiU seek new mElrkets for services, only dreamed of at
present.
High technology medicine is widely viewed as beneficial the public, mainly because of the
probability that anyone of us may unexpectedly become the beneficiary of a new !.ife saving therapies;
However the COSLS of such technology to insurers, taxpayers, and the underinsured can be staggering.
Expensive new- hardware and drug offerings bombard the medical market. 10 a situation,
these high CXlSts are relegated to a lower priority. When the bills have to be paid, and policy:makers review
galloping high technology medicine costs, they must consider the value to our society of''big iron" capital-
intensive purchases such as multimillion-dollar diagnostic imaging faci!.ities and therapeutic equipment.
The value added to our nations' economy is that CASI.....-vill be a filter and condu.it to increase the worth of
this investment, by increasing the ability of medical diagnostic imaging to accomplish iLS promise; Save
lives and keep us healthy.
3.5.1 National Economic Benefits
America is underutilizing the product of its diagnostic imaging CElpitai base. The meclicElI imaging
industry is Dot making the best use of the megEl pixels <?fpatient data these systems generate. From an
-; J ("-<- ....
A-113
Comouter Aided Surgcrv. Inc (CASn
information theoretic perspective, we estimate that 99% of that information is not contributing to the
making of therapeutic decisions. We are not disseminating this information to all concerned parties rapidly
and effectively. This is partly because we do not understand, use, or effectively modellhe important
features in these images. This is because of limitations in the state of the art forun<ierstanding modeling key
features, and applying this information in rapid and effective ways for broad base of radiologists,
physicians, surgeons, and therapists. Further, we need to make it understandable to the ultimate customer,
the patient, and I or the patients' family. New picture archiving and network distribution systems are
helping to manage the raw data, the Next Generation Internet can make more of the raw data move faster,
but the nation needs better technology to understand these images, make consistent precise patient specific
determinations, and maximize the effective use for tills data as essential insight. CASI will decrease the
entropy and increase the pragmatic value of medlcal pixels by winnowing them duwn to geometric models,
trajectory vectors, and critical points.
Customers include any radiologlst, radiology practice, imaging facility, medical cenler, and
associated diagnostic or therapeutic practitioner. The patient needs to be kept in the loop as the uliimate
paying cu<>tomer, and consumer of tiw therapeutic decisions based' on thls infonnation. The customers that
'Will benefit the most are any interpretative method ofeT, MRl, PET, SPECT, etc. that currently is hand
contouring stacks of images prefatory to designing a patient treatment, are evaluating the ongoing results of
treatment. Similarly. anyone attempting to spot critical surgical targets, such as in steriolactlc brain surgery,
by sighting by the center of blob by objects in hundreds of slices will be a customer. Radiation Therapy (RT)
practitioners were most eager to find better methods to eliminate this time consuming drudgery in their
practice.
Comnetitors are scattered across various application area, using mainly volume rendering technology
instead of shell surface technology. Most imaging companies are focused on one technology, almost to the
exclusion of other application areas. Typically, these [urns arise from image cOllsulting firms working 'With
one large customer with a specific application in petrology, liistology) computer graphics, and so on, There
are general-purpose visualization systems sponsored by government research labs (NCAR), and
commercialization oflarge university programs (ANALYZE from Rich Robb's group at the Mayo Clinic),
3DVIEWNIX (From Jay Udupa's group at U. Penn). Commercial packages include Voxel View, A VS
(Advanced Visualization System), Resolution3D, KhOTOS, IBM Data Explorer (DX), Iris Explorer, VTK
tool klt (From Kitware) are but a few of the more popular general packages. Some have exceptional
intcrll.ctivity based on then- optimization to special graphics accelerator bardware, now common with the
explosion of the computer game industry). Many have intricate and comprehensive facilities for hand
segmentation, contouring, snake segmentation, thresholding, flood filling, edge detection, marching cubes,
and so OIL None have anything that approacbes the power and insight lhat Digital Morse Theory based
segmentation can do to simplify many segmentation tasks. We will never manage to penetrate such a broad
spread of markets, but we expect that we will license our technology and that will become an important
source of revenue and diffusion of our technology and theory into the industry and broader national
economy in ways we can barely foresee
End users are generally serviced by consultant using any of the above visualization packages. We
will focus initially on the niche markets of R&::iiation Therapy and Neurosurgery as vehicles 'to develop our
core technology. However, most of direct users will be software developers integrating our technology in
their software packages for use by their individual specialty markets.
It is our plan to license our technology to other industries that can apply our teclmology are industrial
non-destructive testing (industrial CT), meteorology, metroiogy, histopathology imaging, entertainment
industry animation, medical illustration, commercial computer graphics for adver1ising, virtual reality, air
traffic control, multimedia, medical education and training, simulation, topography, mapping, surveying,
(not topology) fluid mechanics and dynamics modeling and visualization, byperspectral scanner imaging,
Earth Imaging Systems (for interpreting satellite imagery)
The benefits to the public are longer life, better quality of life, through improved medical care, at
reduced cost through more effective delivery and utilization if medical imagery.
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Anatomic Computer Modeling for Precise and Accurate Therapies Page 2S or 27
35.1.1 Busimss opportunities addressed and economic importimce to proposer and the nation
Our business opportunity is the expense and time required to produce imprecise and inaccUrate
segmentations from which 3D models are generated for many disparate applications. There is no underlying
paradigm for understanding how segmentation works. Most of the thinking current segmentation theory is
ad-hoc, problem, and image specific, not repeatable, and requires an expert user. Discussions with robotic
surgery designers and manufactures point out the problem designing robotic trajectories are bottlenecked
with the patient specific modeling. Our core technology is being hailed as a breakthrough, if we can develop
working systems from our concept demonstration. Alpha site customers and business interest is building as
word of our possible technology circulates in our target markets. NYUMC Radiation and Oncology and St.
Lows University have agreed to participate in our development effort as alpba test sites.
The economic imPOrtant tD CASI of this technology is based getting meaningful assistance in surgery
from computer imagjng. "This requires 3D modeling on a rapid patient specific basis with precisiDn,
accuracy, and dllnensional fidelity: This technology gap prompted the PI's research in this area and
prompted our request fDr funding to develop this technology.
The economjc imoortance to the nation is improving the utility and distnbution of medical imaging
infol1Ilation, and will improve the value ofthls expensive technology with our inexpensive. but Internet
pervasive technolDgy. Further, Ibis is not a comparatively expensive technology in its became
we will use centralized computer servers, connected eventually, but not necessarily by Next Generation
Internet Df Internet II. Our value added is our intellectual property that will lead to improve health and
longer ufe of American citizens.
3.S.L2 Disalssion of potential users of this technology
Patient specific anatomic modeling from medicaL imaging and true three-dimensional modeling is
required by many medical specialties. The specialization of the physician based research groups and the
lack of a common language and commtmication leads fuctionation of effort. The results of style of research
effDrt tends to degenerate the state of the art into a large collectiDn Dftricks, technlques, conflicting
algorithms, and overloaded 1oolboxes. Most of these techniques lack an underlying mathematical rubric,
unifol1Il precision, and validation. Computer graphics has not provided the 'sound' solutions that it appears
to illustrate. llis is due to the lack of computational geometry and advanced math sophistication in the
graphics industry. We 'see a wide range of medical, engineering, tedmlcal, and scientific users for our
unifoI1Il approach and new technology.
CASI's DJvIT based technology bas a nwnber of potential users and applications. Our initial target
markets 31l': breast Radiation Therapy and neurosurgical steriotactic surgery. Once our technology has been
show to be advantageous, it is expected that other specialties will utilize it. We win cultivate bellwether
client cDllaborations in each surgical specialty, and market through their training programs with their
residents and fellows, post doctoral students and visiting scientists. Expected application areas include:
Cosmetic plastic surgery (mDdeling skin profile changes to sen cases to patients), Crauiofacial surgery
(model bone cuts, skin recDnstructiDn due to trawna., birth defects, and cancer), Obstetrics (pelvis
measurements are key parts of the decision to perfonn a caesarian), Oral surgery (tooth implants),
Orthodontics (bone growth and effect of braces, selling cases to parents), Histopathology (cancer detection,
cell type recognition, and cell counting), Biological shape anaJysis for surgical application.
, 35.1.2.1 Market estimates
At the end of this proposal, this technology will be successful for RT and Neurosurgery. At that time,
for a cost of one hundred dollars !he attending physician will a model of a patient's tumor, and be able to
plan and demonstrate that plan for surgery or.radiation.
In the RT focus area of our project, we measure the total market from cancer epidemiology.
Unfortunately, we can expect an increased cancer rate in the future caused by environmental pollution. The
survival rate due to bettei- trealment technology will also increase. This increases the CASl market by an
estimated 20010. CASI technology will be a part of that survival improvement.
Breast Cancer, the target of our RT collaboration at NYUMC saw -176,300 new cases and 43,700
deaths in 1999. Prostate cancer bad -136 new cases per 100,000 men. Surgical treatment brachioilierapy
(treatment by implanting highly radioactive seed in the cancer) and RT are all require modeling and
A-115
Anatomic Computer Modeling for Precise and Accurate Therapies Page 26 or 27
targeting tecbnology that is CASI's core technology.
Expected grmvth of markets opportunlty by increased. cases and increased' survival of 20 % is
assumed as CASl technology is embraced by medicine. Assurnillg a 20% market capture share, that means
that in breast RT we can expect by the time ofprodQctroll out in 4 yean; to 42,000 cases fyear. We can
estimate a similar participation in prostate cancer thmpy at 50,000 cases! year.
3.5.1.2.2 Markets mange and new markets from new technology.
Our initial focus area is breast RT and Brain surgery. As we penetrate in these markets CASI will
license its technology into other market areas; because we will need to focus the R&D effort on the
generalized problem, and a few Jirrrited specific problem areas at a time. CASI will effectively franchise its
technology into market application areas for maximal rapid diffusion. We estimate that we will be doing
weU over lOx our base RT revenue by franchising. CASI will promote bellwether researchers to adopt our
technology for their specific applicatioo area by doing custom web interfaces to their spec, as CASI are
developing our generalized application area.
3.5.2 Heed fOl" ATP funcfing
A TP funding is required to enable CASI to complete our ongoing research and make the
tecbnologicalleap 10 market oflow cost, network based anatomic computer 'foundry' modeling. We will
build on the progress we started making as a subcontractor OIl the Nlli Visible Human Project (VHP)
female 'Eve' dataset The primary mission of the VHP program is to supply anatomic content for medical
school educatioo. CASl's broader therapeutic vision requires A TP development fimding because the NIH
mission in this area at this time is limited.
Segmentation and Registration issues impede progress in many disparate medical and scientific
fields. No one industry or medical superspeciality has the patience to fund this development effort in the
general case. Few programs share the vision of this technology for its broad applicability to medlcine,
technology. and science.
The visu.a.1i21ltion and modeling technology is not being effectively developed in the United. States.
The medical imaging industry is dominated by foreign O'Mled and controlled companies such as Sony,
Picker, Hitachi, Siemens, and General Electric. We believe that the market for pixel intensive bardware-
accelerated graphics is wedged in the Internet last mile bottleneck. Wide diffusioo for imagebased
infonnation will require new thinking, oot jU'>! more bandwidth. CASI will mOVe from a ''pixel based high
entropy high bandwidth" representation to a "DMT based object geometry "representation with low entropy
and high information theoretic pragmatic value.
3.5.2..1 Summary of efforts to get extemal and private funding
The CASl vision is to provide patient specific precise and accurate Level of Detail (LOD) models
for diagnostic and therapeutic applications. CASI's raw input is medlcal images uploaded over the Internet.
The time for development of this technology is too long for Venture Capitalist window of opporturtity. We
do oot intend to become a medical computer graplrics-imaging house, medical informatics consulting finn,
or a surgical robotics firm. Our goal is to focus on solving the problems that are hindering the start of the art
in radiation therapy, surgical robotics, 3D modeling, animation, and many other application areas. CASI's
solutioo will become our core competency. The PI intends to aggressively grow the company into this
wide-open opportunity field. CASI's broad therapeutic vision frightens private venture capitalists. and their
funding. CASI is currently funded by angel investors and the PI. CASI will leap into the modeling business
with A TP funding, and be able to focus on the long-term benefits of this technology.
CASI believes that it become profitable within 5 years, which is longer than the private equity
market wiU tolerate. As we demonstrate OUT core technology by the third year, we expect that we will be
able to rise significant private funding, but oat before.
35.2..2 Description of how the technoklqy will be broadly diffu!;ed
Broad diffusion of our technology will occur because of the strong need in a broad variety of
medlcal and general scientific modeling applications. This strong gradient will pull our technology out of
our lab and into oonunercial franchise or licensure-based adoption. Because the application runs as an ASP,
anyone who can upload an image file will be able to run their image for a demonstratioo of the modeling
facility, and see how the CAS! system will solve their problems. The short time constant-of internet based
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Anatomic Computer Modeling for Precise and ACCUl<lte Thentpies Page 27 of 27
Comnuter Aided Surgery. Inc (CAsn
technology diffuses out into me global community, and me strong needs gradient, means we CaILexpect
explosive growth in demand as we start public demonstrations and reporting our results in the literature and
major scientific and medical meetings. CASl is preparing for this onslaught arid will carefully not oversell
its solutiom and permit it to grow in managed-and healthy manor for maximal benefit to the nation and for
the company.
3.5.2.3 Business experience of PI and Staff
CAS! was fOlmded in 1995, while the PI was research professor of surgery at NYUMC. The PI has
managed approximately one million dollars in DARPA funding, as well as such administrative tasks as
running a :'lUbconrracting, DoD audits, Federal and State audits, bank audits, invoicing, collections,
financing, and aCCOlmts payables with and without an adminislJative staff. CAS! has kept meticulolli
records and attained a bigh professional standard under difficult bll5iness conditions. The PI has
demonstrated fiscal responsibility managing significant federal funds responsibly. The PI has extensive
technical management experience.' Mr. E. Gurfein will be joining our team as our business manager,
bringing his experience in scientific startup funding, finance, management, and marketing.
3.6 Bibliogr.ophy
Karron, D. B. (2001) Leveling Eve: Digital Morse theory ofisocontours in RGB space. To be presented at SIAM Activity
Group on Imaging Sdance: Imaging Scierce 2001, September 22-24, 2001 Bostoo USA. Mini-symp;Jslum
entitled: NavigatiTYJ !he VLSjble Human: Geometry and ComputationEII Anatomy. Invited by Fred
B:lokstein, University of MK:higan, Ann Arbor, USA
Cox, J, and KafTOn, D. B. On press 2001): Digital Morse Theory with Selected Appli;ations. Accepled pendirlJ rewrite 10
Graphical Models am Irrage Processing (GIMP) of Academe Press
Karron, D.: Cox, James; and Mishra, B. (1999); System and Method for Surface Rendering of Intemal StrLdures within
the Interior of a Solid Object; Pa1erlt#5,898,793
KaITOn, D. B. and Cox,J. (1995): ExbactilYJ 3D Objects from Volume Dala using Digital Morse Theory. In Computer
Vision, Virtual Reality and Robotics in Medicine, Nicholas Ayache, Editor; Lecture Notes in Computer Science,
Vol. 905, pages481-486.
Karren, D (1994) NBV Findings from the SpiderWeb Algorithm: Toward a D9itaJ Morse Theory. Visualization in
Biomedical Computing (VBC) '94
Karron, D.; Grossi, E.A; Weinreb, J.; Stephenson,J.; Porte, B.; (1994) The SpiderWeb algorithm applied in 4D: Using a
tap;Jlogically correct isosurface tra(;king algorithm to follow the moving surfaces of the heart 1994 Society of
Nuclear Mel1cine Computar and Instrumentation Council Midwinter Meeting if'] Seal!ls, Washington, February 7-
9, on"Dedlcated Inslrumenls and Computer Processing Techniques for Cardiac ard Brain Imaging."
Cox, J.; Karron, D.; and Mishra. B. (1993): The SpiderWeb Surface rendering algorithm Innovation Wld Technology in
Biology and Medicine (fTBM Volume 14, Number 6, Page 634 - 655. December 1993
Karmn, D. (1993) Novel Surface Aerdering am Object Registration Methoc:ls tor Three Dirrensional Medcal Imaging:
The" SpiderWeb" Surface Algorithm and the" Painters" Technique for Images. Ph.D.
Dissertalion
Karron, D., and Cox, J. (1992) MathemakalAnaJysis of"SpiderWeb" Surface ConstnJc1ion Algorithm. ProceedirlJs of
the 14th Annuallntemational Conference of the IEEE Er.gineeriTYJ in Medicine and Biology Society, J. P. Morucci,
R. P!onsey,J. L. Coabieux, and S.l.m:rninarayWl, Editors_ Pages 1250-1252.
Karron, D. (1992) The "SpiderWeb" Surface Construction Algorithm for Building Triangle Mesh Surfaces in Noisy
Volume Data. Proceedings of the 14th Annual International Conference of the IEEE Er.gioeerir.g in Medcine aoo
Biology Society", J. P. Marucci, A. Plonsey, J. L. Coabiew<, and S. Laxminarayan, Edilors. Pages 2084-2086.
Karron, D. (1992): The .. SpiderWeb" algorithm tor surface construction in noisy volume da1a. Proceedings of the
Visualization in Biomedical Computing Conference '92, Chapel Hill, Nortll Carolina; Richan:lA. Aobb, Editor.
Society of Pho1D-Optical Instrumentation Engineers; Proceedings Volume 1808, Pages 462--576.
KaITOn, D. (1992): The "SpiderWeb" algorithm for surface conslruction in noisy volume da1a. NYU, Dapartrnentof
Report
Karron, D. (1991): A novel algorithm for caJculatirlJ !he cbsest approach of skew lines using singular value
decomposition. NYU, Department of Robotics Technical Report
Cutting, C. B. 800 McCarIt1Y,J. G. Wld KaITOn, D. B. (1988) Three--DimensilYlal Input of Body Surtace Dala Using a
Laser ugh1 Scanner, Mnals of Plastic Surgery. 21:1 (July), Pages 38--45.
NlST AT!' Prop=I_ CII. [I.I<1><FQ).FIe _ H[I:S!=" .... SIm'nio";Aro i'ttlJ<d 2 7/6IDI 11:11Al'1
A-117
[PAGE INTENTIONALLY LEFT BLANK]
A-118
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APPROVIa!. NUMBER: CBlIl.ooov
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&UIIMrtTEC COMPEnnO/t WMIIERI8)
NONE NONE
i. LEG.Ol. NAME. ADt>RaI3. AAO WE&a1TE OF . -
Computer Aided Surgery, I))C.
[gJ I'1UlFIT SMAU llU6\!{E" D PROFIT lAAGE
Suite 4N
o PROFrY MEDlUIol BU&IIIEaS 0 u.s SUSSlDU.RY
NewYoJ1l., NewYorX 10016
1. EMPlOYlER IDfHTIFlc:ATlON a. DUN AND MADSTJ!!B" HUMBER
(EIN)
D-U-N-S 94-285---4266
___ #13-388-9180
11. OF PRlNC:lPAL !HVEIITJ;aTOR AT SUBMITTING ORGANIZATION 1<1. NAME OF GItMTICOI<T .... cr MANAGER AT 5UDIN!TlNG ORG.l.NlZA1l0N
(Mdrus "dl!!_ .... n _ II lAildrau ""lui..!, II ttIan I!o:m
OLD. B. Karron (Ph.D.) Dr. D. B. Karren
Chief Technil;al Officer President
Computer Aided Surgery, Inc, Compuler Aided Surgery, Inc.
IILlMBEp.,+1 (212) 686 8748
fAX HUMBER: +1 (212) 448 0261
E..J.WL ADDRESS:
karron@casi.ne!
ULI<l"IIOHE WM8S",+1 (212)6868748
fAA HLlIrl8l;R: +1 (212) 448 0261
E--I!AIL ADDRE&!: kanon@casi.nel
________ t.--;;-;;;;YEAR ONE YEAR
I<. ATP Co::lfS ONLT) __ ' 600,000 $ 600,000 $ 2,000,0'00' __ -1
II. PlIOI'\;ISE"R 1$ 30,000 f 30,000 1"$40000 $ 100,000 __
c. TOTAL1A<-BI $ 830,000 $ 630,000 --fr640000 $2100000
---- --' , , --
n. PROPO&J\L 1JJl.E-----
Anatomic Computer Modeling for Precise and ACCurate Therapies
n. Hi.lN-"ROPfflETAAT ,o.aSTlVlCT
omputer Aided Surgery, Inc. will develop a new computer application server that w!l! tak.e calibrated, encrypted raw
mages from a clients' medical imaging instrumentation (MAJ, CT, Ultrasound, etc.), over the Intemet. ,. .. ...... - ...... -ol
UT system will rapidly generate encrypted, pn::cise, accurate, and variable resolutiOn Ihree GOVERNMENT
imensionalliled models applicable for diverse applications as radiation therapy, surgical EXHIBIT
anning. intraoperalive gUidance. rapid manufacturing of prosthesis, verification of surgical lOA
-esutis, robotic surgeI)' trajectory planning, patient communication, education and other
ustomer specific applications
07 Cr. )'41 (RPP) (lD)
he novel idea, that enables the technological leap forward is Digital Morse Theory.
he essential insight of Digital Morse Theory is that if describes the behaviour of three dimensional SpiderWeb surfaces
urfaces in lenns of Morse' Crff.Jcal features.
\lllese surfaces are the computational building tiles of the biologicaUy and medica1Jy important we wish \0 parse from
bn opaque brick of byles that compromise a volume data set.
t
e can build an index of all of the objects in a volume to utilize these elements in terms of their generator
mica! points: Our novelgeometnc cons1ruction algorithms will be embodIed in a network
ased application service provider model. The serverwiH upload from the radiological diagnostic image
,
producer. and download to the therapeutic consumer model. We will function as a unique, super speciatiy medical imaging
Inlemet Service Provider.
I L _____________
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A-119
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ASI's reputation as a basic research company has made ollr effortlS to raise prilfate capital for this high risk project difficult
paths to commerca!ization financing would require many yeers of academic research,
which prilfate equity will net fund.
Our goal is 10 use ATP funding to go directly from preliminary results with a nOl/el proven theory to mafi(et dominance
intellectual property alfanable \0 all medIcal and scIentific customers over the intemet
REV. l-ZOOo) IPAGE 1)
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A-120
CCmwer AA1ed s.u.m Inc run
3 The National Opportunity
Page30f17
Computer Aided Surgery, Inc. (CASn will build a new Application Service Provider (ASP)
on the Internet for uploading stacks of pixel images from varied medical imaging producers and
downloading to client PC's dimensionally accu.rate and precise 3D models. These models are for
treatment planning, simulation, rehearsal, patient, and medical educ8tlon. The fealllre of the
CAS! service is that it produces a novel '.graph' or index into all of the volume objects end a 3D
model, not just an image. The \1<;e[ manipulates the model on the client computer equipped v,rith a 3D
interactive graphics accelerator board, commonly used for computer games, via web broWser plug-in
software. The mode! is used for making t::rc.atment decisions, such as planning radiation beam
trajectories. This is a surgical analomic "blueprint" for trea..tment planning and evaluaaon, intended to
model and rlemo:nstrate properties of patient data. Digital Morse Theory (DMf) permits rapid
segmentaJ:ion and converts pixels into contoW'S enabling rapid internction by users via the Internet.
CASI offers a unique opportJ.mity for broad-bas national benefits by improving the quality
and standards of nariona1 medical care with reduced cost, patient mortality and morbidity with faster
throughput in many application areas. In this proposal, CAS! will target Radlation and Oncology with
R.adiation Treatment (R1) planning technology.
Current teclmology for anatomic modeling and treatment planning consumes time, labor, and
is complicated to use. Currently, professiOllal operators are producing varied results, even with the
same data, reprocessed by the same oper.1lor. It is not suitably precise for critical radiation or surgic::.al
thaapy. CAST's improvement will use its DMT 3D surface to rapidly obtain stable measurements
delivered via web brow:;er. CASl technology anticipates demands for trajectory planning in the
emerging markets of surgical robotics, racliation treabnent, and image-guided therapy. Support of
these industries will reap broad societal benefits induding better medical care, improved national
worker productivity, and longer life.
3.1 Prop sed TecIInologieal Solution
CAST will build a clinical geometry "foundry", casting clinical modds in triangular tiles that
define intricate, real surfaces in three dimensions. These models will be used fur solving problems
such as calculating trajectories for radiation beams to Ileat cancer. CASI's improvement will use J D
surface modeling to rapidly obtain stable measurements delivered via web browser. CAS! will
embody its novel geometric algorithm as a necwork ASP and will 'cast' anatomical structures for
biological, surgical, and educational purposes. With novel ma1hematical theory. computer graphics
programming experience, and clinical resean:h experience, CASl will deliver in many high tech
medical and non-medicai modeling applications.
3.2 National Economic Benefits
The nationwill benefit by improved health ca:re that will prolong the quality of life. Reduced
employee sick: leave will decrease disability related payouts and reduce costs to insurers. The efficient
use of medical information w1U produce better yield on capital in imaging ledmology. Better patient
and physician communication, treatment results, and patient satisfaction win result in less litigation
and insurance costs. It will also simplify clinical care. CAS} will create new markets for model-based
information as the core competmcy is established that will go beyond the irutial applications. There
are many potential mmkets. CASI is not selling a software product It is providing a network-based
service for manipulating user pixels into useful geometric constructs. CASI's business model is of
software as an Application Service Provider (Torode 2(01).
The visualization and modeling indll'>try and teGhnology are not being effectively developed in
the United States. Wide diffusion of insight from information will require new thlnking,
not just more bandwidth. CASI will move from a 'pixel based low information representation' to a
r. A 11= n .. rl pnTVl\JTl AT ')::nJ? R:1?nA n.. J::rnlJn'll..rrr
A-121
Ctm!X.lEr Aided Sugery 1re!tASl!
'OMf based object geometry representation' ""';th high pragmatic infonnation contenL
Page 4 of 17
Industries benefiting from this teclmology include medical imaging, anirnation, as wen as
Hollywood animation, and weather predlction in met:Qrology. The ultimate benefit to the public is
better dlagnosis and treatment for various cancers, ..,.,;th increased quality of life.
A TP fimdIDg is required because of short R01 period demanded by private investors, the
relatively long development time required for this research, and the many broad areas beyOnd the
immediately targeted medical application. CASl opportunities are in many'dlsparate markets. The
national OppOrtunlty is in the broad diffusion into:many needed applications, and the A TI program is
the only fimdIDg agency thai Q}Il take such a broad view of the long term and ftmd it significantly.
3.2.1 Pathway to Economic Benefits
The CASI Inlemet solution will gtO'W' explosively once released. Internet pa)'TIleOt systems
provide the infrastructure for direct revenue recovery and interaction with customers. Insurance
carriers reimburse costs of3D studies at the one to three hundred dollar levels. Compared to the
established market for high-resolution grnphical representations in the medical illustrntion and
advertising industry, it is clear that there is a much larger market for inexpensive patient specific
diagnostic 3D models. CASI's intends to become nIB clinical modeling resource firm, going beyond
medical illustration, and becoming a reference standard for dimensionally precise and accurate
anatomic models. The CASI will reduce: the cost of generating models from tens of thousands of
dollars and hundreds of person-hours to pennies and seconds.
The PI nas extensive 'intrape:neurial' experience, starting with early computer networking
within medical school in the early 80's (the ability to promote and launch projects inside large
organizations). The PI bas managed to attract bellwether early adopters in various medical specialties
for early stage research collaboration. The PI's exterulive medical cetltt;reJqlmenre and professional
standing enables CASI to effectively collaborate with clinical departments. T h ~ e skills iMure the
broad diffusion of national benefits from CASI resean:h into commercial development for the long.
term success of the company and the return on the government's investment
The PI has also recruited the participation oflvfr. E. Gmfein, MBA, as the CAS! project manager. Mr.
Gurfein ha:; over twenty years of experience in the marketing and commen:iali7.ati.on of R&D with
companies such as Sperry Rand, Perkin-Elmer, and Engelhard.
4 Potential for Broad-Based Economic Benefits
As dlscussed above, the broad based economic benefit to the nation will be improved health
care that will prolong and improve the quality of life, reduce employee sick leave, will decre.ase
disability related payouts, and reduce costs to insurers. The effic ient use of medical information will
produce better yield on capital in imaging technology. Better patient and physician communication,
treatment results, and patient satisfaction wiU result in less litigation and in.su.rnnce costs.
America is underutilizing the product of its diagnostic imaging capital base. The medical
imaging industry is not making the best use of the mega pixds of patient data these systems generate.
From an in:forrrm.tion theoretic perspective, CASI estimales that 99% of thai infonnation is not
contributing to the maldng oftheI3peutic decisions. The diagnostic imaging industry is not
disseminating this information to all concerned parties rapidly, effectively, and usefully. New picture
archiving and network distribution systems are helping to manage the raw data, the Next Generation
Internet can make more of the raw data move taster, but what our nation needs from this data is
essential insight CASI will increase the information content and the pragmatic value (Weinberger
2001) of medical pixels by winnowing them down to geometric models, trajectory vectors, and eri tical
features/points. DMf solves significant practical problems in image understanding and 3D modeling,
as well as information compression. This leads directly to improved diagnostic accuracy, and
therapeutic precision. Analysis of medical images is expensive because oftbe extensive and
expensive human photo interpretation, hand contouring, and guesswork that is the current practice.
A-122
CQrmWf Med.5!(!!!'1y In:; !CM9
Page 5 of 17
Medicine needs a rapid 3D modeling capability for precision image guided therapies. This is a
particular problem in medical image analysis. CAS! addJxsses the: hard probJem of bringing advanced
mathematical insight directly to various application markelS. and improving the yield, efficimcy. and
cost effectiveness of image based diagnosis and therapies. For our primary example application, this
is the critical measurement of accurate twnor border and surrounding anatomy geometry required for
precise targeting for surgical and radiation therapy
4.1 Specffic Broad Based Economic Benefit
Broad based economic benefits will result from the CASr development plan., which consists of
the direct development into specialized application areas. CASI will accomplish
further development by fostering a network ofbeUwether early adopters profussionals in other areas,
leading to indirect national economic benefits. leading application area is improved trea1ment
of breast cancer, followed by the prostate.
The second greatest killer of Americans is cancer. Breast cancer continues tD be the se:cond
leading cancer in women in the US, with more than 4SK deaths this year (Greenlee et al200l).
Cancers of the prostate, colon, and rectum combined to contribute 45% of cancer deaths among men
As baby boomers mature and become more suscepbble to cancel5 in the next 10 to 20 years, these
rates are expect to increase at a rate much greater than the general population growth.
Improved treatment ofbreasl cancer is CASPs primary application area, followed by prostate
"",cern
4.1.1 CAS! application devclopment areas
Radiation Treatment (RD beam trajectory planning in collaboration with Sylvia Formenti
MO, and Keith DeWyngaert PhD at New York Univen;ity Medical Center will be CASI's first
application area RT is the preferred way to target many types of cancerous tumOl5; however,
localization of therapeutic intensity without collateral damage to healthy tissue is a serious problem.
Improved diagnosis and earlier trealment have produce significaI1: reductions in mortality. CASI
tecbnology improves treatment and affects the reduction of the morbidity (symptoms) of the disea:se
increasing the quality of life during and after treatment.
Early detection, improved ffil[gical teclmiques, and aggressive systemlc therapy have
improved quality of life and survival for patients with less advanced breast cancer Tumor regression is
the result of the targeted radiation,
The nature of prosOlte cancer, similar to the breast, is that more nsdiation produces a better
cure. Better targeting !.a::bnoJogy will have B profound effect on morbidity and mortllity.
However. the potential for RT of solid tumors has not been realized mainly due to !he dose.
limiting toxicity associated with systemic large levels of radioactivity. The technology to be
developed will increase the radiation delivered precisely and accurately to the tllmor site and decrease
the dosage to the non-target regions, a signilicant improvement in the treatment outcome can be
expected Even greater improverrent in treatment outcome is expected wben targeting technology is
coupled with a variety of methods under investigation at NYUMC to improve the tumor targeting of
radioinuitunoconjugates inCluding the use of antibody fragments, recombinant single-chain
<Ultibodies, and drugs to modulate tumor vasculature. This technology will also be useful in other
cancers including prostate, head and neck and colOn.
Radlosurgery is the use of carefully tugeted rndiation instead of surgery to treat rumors,
generally in the head and neck This expenc;ive high technology treatment can spare the patient from
invasive dissection surgery, with low morbidity. Treatment pIarullng is a vj'1al and much larger part of
these procedures. and CASI modeling teclmology is expected to playa significant part in reducing
costs and increasing throughput (Karron 1992).
4.1.2 Specific National Economic Benefits Table
A-123
Anatomic Computer Modeling for Precise and Accurale Therapies
Comptdef Aided S!.me'Y Inc !CASD
IPatielJt PoflJIatb10ass NewC3sesio CcsI Po:r Case II K$ _ity.(lJ)
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Pmstat2c.ocers 198,100 JO 20
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40 30 30 10 1 VG
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Good 6.B .29
,25%
Good 4.9 .27
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The value. of the CASI Ireatm.ent is in reduction
patient mOIDldity and cost, WIIh an mcrea.sed productiVIty. The estimated cost savmgs of CAS I
teChnology il:I RT planning is a1"eduction from ilK per average with a savings 0[$500 in cost savings
for the Medical Physics component, a reduction froro $4Kper case with a savings of $IK for the
Physician Oncologist Treatment Planning, and a reduction estimated of$2K for Radiosurgery. RT
treatment typically bills separately for the Medical Physics and the Oncologist treatment plans, so the
savings are additive. Taking these cost savings to the nallonal cas.e1oad will result m an estimated
national total savings of approximately S.5B I year, if CASl were in production tOdar. Judging
from the response to CAS! collaboration offers by various medical Specialty groups, there will be
strong demand formE technology. Assuming an average study produces at a $100 charge on the
server I:oroputer, a 20% capture or the 400KlYeJrr new cases for RT treatment planning market.,
@ 2 studies I case, CAS! can reasonably expect a gross revenue of $] 6M per year from this
application alone
3
. Finally, as explained above above, the national cancer rate is expect to grow
faster than .the national population growth, given the ageing of the baby boom cohort into middle and
old age, where cancer strikes the most. Because CASl will become a web 'monopoly', it will beCOme
pan of the standard of for many RT and rnrgical proced\.lTt":5, CASI can expect much greater
market share, as this market opens up and matures.
There are compelling intangible reasons for CASI technology beyond national cost savings
and projected CAS! revenue. Improved targeting means less total radiation dosage is used. That
which is used is more concentrated, thus more effective in tumor shrinkage with less systemic toxicity,
and less treatment morbidity (e.g., radiation damage to the heart, and/or lungs in breast cancer
trea1ment. or the rectum and I or bladder in prosmte treatment). Benefit'; for the patient are due to
faster treatment planning, better targeting, with less Ireaiment morbidity, and faster recovery.
B.enefits to Insurance Companies and HMO's are better quality control; better ROI for
imaging studies, and cheaper, faster, and better treatment planning. Insurance pays for 3D
reconstruction studies, and RT plaruring, but at a price that does not permit adequate recovery of
capital intensive romputers they nul on, and expensive software licenses, much less the time and
expense of a professional to draft the studies. Typically, the studies cost so much more than insurance
pays for them that they are not ordered, and are considered of marginal diagnostic value.
CASI can afford to charge as little as $100 per study, and is shown above, make significant
revenue at a price third party payers reimburse. Depending on the application rnadcel, CASI or its
franchisors, can charge more or less and still make mane)' by the economics of scale, and the low cost
and demands on its computer clients.. CASl captures benefits from broad dlffusion by charging for
ASP time and usage, and as such directly benefits. from broad diffusion via its bellwether and
1
, Doil:I is !ian typical NYUMC cl"';ca! coltlbomrm bill",&-
J EstilT\3ted revenue lin<:arly<:XttllpOla!cd Iiom tlYUMCoIinicod billing and Cancer St<1liocs 2001 figu,t>.
(iA"T"'H' n f)pt ... i!",rI POTI'NTTA' ]:"OR RROA n_RA Q):;lI
A-124
C9!!lPUler M!ed siIDPN In,;; fCASD
5 National Economic Benefits
Page 7 0(17
Business opportunities addressed by this proposal are the technology gap in precise and
accurate surface modeling for critical surgical ani radiation trealment plarming, as well as many
scientific applicatioru. By using DW technology for image and model compression, we will develop
the research as an Internet based ASP. CAS! will develop its core I.edmology for applications in
Radiation Treatment of Breast and Prostate cancer, as well as in neurosurgical planning.
End useIS and customers include any radiology practice, imaging facility, medlcal center, and
associated individual practitioncrs. Patients will benefit the most from the interpretative method of
CT, JvfRI, PET, SPEer, etc !hat c:urrmtly use hand processed stacks of images in designing a
treattnent. Similarly, anyone attempting to spot critical surgical targets, such as in steriotactic brain
surgery, by sighting by the center ofbbbby objects in hlmdreds of slices will be a customer. RT
practitioners are most eager to find better methods to eliminate this drudgery, to more precisely locate
tumors borders, and are project collaborators.
Competitors are scattered across various application area, using mainly volwne reIldering
techno1ogy instead of shell surface teclmology. Most imaging companies are focused on one
technology. Typically, Ihest: firms arise from image c<)Qsulting firms working with one large
customer with a specific application in petrology, histology, computer graphics, and so on. TheTe are
general-purpose visualization systems sponsored by government research labs (NCAR), and
conunercialization of large tm.iversity programs such as ANALYZE (Mayo Clinic), 3DVIEWNIX (lJ.
Penn). Commercial packages include Voxel View, AVS (Advanced Visualization System),
Resolution3D, Khoros, Data Explorer DX (IBM) Iris Explorer, VIK tool kit (Kitware) are buta few
of the more popular general packages. Some have exceptional interadivity based on their
optimization to special graphics a.ccelemtor hardware, now common with the explosion of the
computer game industry). Many have intricate and comprehensive fudlities for hand segmentation,
contouring, snake segmentation, thresholding, flood filling, edge detection, ~ c h i n g cubes, etc.
None have the power and insight that Digital Morse Theory based segmentation can do to simplify
many segmentation tasks. CAS! will never rrumagc to penetraJ:e such a broad spread of markets, but
expects that it williioense its technology and that will become an important source of revenue and
diffusion of our technology and theory into various industry sectors and broader national economy in
ways that can bareJy be foreseen.
Competing RT planning software generally runs on Unix super workstations, based on a sHce-
by-slice hand drawn or computer assisted contouring. These insta11ations are a department fixed
resource. Packages fielded by RT hardware makers are tied to the vendors hardware. Independent
RT software houses include Prism Microsystems, and RAHD Oncology planning products. Some
sport names like Prowess Systems, for prostalP. bracbytherapy (selling supplies and training through
their web si1e) and Nomos Corporntion specializes in Intensity Modulated Radiation Treatment
(IMR1) with CORVUS Inverse Treatment Planning. The Radiation Physics deparnnents, at the
University of Florida, use and promote the Pinnacle3 Treatment Planning from spun out companies.
Oak Ridge National Labs distributes software for RT using Visible Hwnan Data. Most U<;e volume
visua:liz.ation as an aid to review slice-by-slice layout results. None make use of3D surface
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Anatomk Computer Modeling for Precise and Accumte Therapies
ComptLer Aided SlJW'f n:!CA5f\
technology because of problems with lhe technology that CASI solves.
Page8of17
None of these companies is able to directly offer their services via the Internet because of
image oompression issues and int:eractivity latency issues, All ofthesc systems wm: dt:Veiopeci
before the Internet boom. It will be extremely difficult for them to reinvent themselves as competing
ASP's due to the image understanding, modeling, and compression bmie:rs that D:MT IP solves.
It is CASI's plan to license its technology to other industries that can apply its technology.
Among there are industrial non.destructive testing (industrial en, metoorology, metrology,
histopathology imaging, entertainment industry animation, medical illustration, commercial computer
graphics for advertising, virtual reality, air traffic control, multimedia, medical education and training,
simulation, topography, mappmg, surveying, (not topology) fluid mechanics and dynamics modeling
and visualization, hyperspectraJ scanner imaging, and Earth Imaging Systems (for interpreting satellite
imagery).
CASI leads with new ideas that will solve hard multiple industry wide problems. CASI is
behind in implementation and building a customer base. CASI will catch up by a leapfrog strategy,
taking the fruit; of its research directly to the customer and end user.
The core technology intellectual property is protected by US l2!!E!!. #5,898,793 (Karron, Cox,
and Mishra, 1999), and so advanced; that there is moderate risk of failing to achieve successful
oommercialization goals in time.
The benefits to the public are longer life, bet1er quality of life, through improved medical care,
at reduced cost through more effective delivery and utiliza.t:ion of medical imagery.
CASI's case for goverrunent use of taxpayer ftmds are based on the large benefits outlined
previously. Benefits to the nation beyond those received by CASI are better citizen health and
recovery from cancer; a major national health concern and cost CASl's opporturrities in the
immediate future are the development of better cancer treatments within a price that third party payers
reimburse.
Broader impacts in the more distm:!t future are the scientific discoveries enabled by better and
rapid segmentation ofvolumetric data, and better understanding of complex data relationships where
computer graphics tends to obscure intricate objects. Applications include x-my crystallography and
proteomics, advanced computer graphics.
DMT research is path breaking because it enables a novel method of analysis for difficult
problems in hyperspectral image understanding, x-ray crystallographic determination of molecular
structure, and wry large data set understanding. These applications are beyond the scope of CASI 's
immediate research plans, but CASI is I!JlXiOtl'> to support activities in these areas by business and
scientific colleagues in these areas. CASI's development plans for DMf resean:;h permit any
researchers to submit image stacks of any subject for online analysis. As the usefulnl!SS of the analysis
becomes clear, the CASI ASP infrastructure can support multiple industries and technologies. For
example, Semlconductor epiaxlal ultrn lithography, or the deposition of nanoscale structures in
semiconductor fubrication requires modeling of the crystal front growth. Isosurfaces and level set
analysis is being used as an important modeling method for this industry. DMf ana1ysis can be
adapted for investigating and modeling seed crystal growth, and the role of perturbations and faults in
the crystal lattice.
CASI's research opens many pathways to econorriic activity, many of which we can only
dimly foresee at this point. DMf is a now:l approach 10 computational geometry ana1ysis from image
data. DMf research is a career path for many young scientists in medical imaging and computational
geometry; demonstration of the economic potential will attract entrepreneurial scientists 10 explore
applicaI:ions and launch new industries outside of a.c:<J.rltmia..
CASI core technology will enable fast and cheap segmentation and registration ofIarge
datasets. CASI will exploit this technology for fust and low cost radiation trea1ment planning, over the
lnterne1. The time required for billable studies will be reduced by hours for faster study throughput.
A-126
Anatomic Computer Modeling for Pm:ise and Accurate Therapies
COOUill! Ati>d Suwi !rc fCASfI
Page90fl7
The main benefit is to patients, with less moroidity from cancer and better treatment
throughput for trea1ment pIannen; by physicians end medical physicists. Many hospitals und private
practices win benefit, as they win not need to invest in expensive compuler:i and software licenses to
use CASI technology via its ASP web browser clients.
Ioosurface modeling is an importlJlt method of data analysis in many physical science areas.
Isosurfaces are of J'Ilajor benefit to meteorology, fluid and thermal dynamics, hydrodynamics, and
solid-state physics. Isorurf"aces are vital. in x-ray diffraction studies to establish molecular structure for
many biocn:nllc;ll applications, including proteomi.cs. Traditionally, these are painstaking, long
studies, where the two main bol1lenecks are getting an unknown substance to crystallize, and the other
is to fit a molecular backbone around the electron den:'lity isoSUI"flces. A.<; CASI D:tvIT provides an
index of all of the objec15 in a density field. this will have important spillover benefits in the physical
and basic medical sciences.
, Synergy will be achieved with other computational geometry groups working in level set
theory and advanced computational geometry research. CASI offers a cheap and accessible
embOOiment of Digital. Morse Theory object mapping that will promote research in other groups that
may not have the computing resources to model larger data sets, or money for expensive software
packages. Surface modeling is c:omplementary to volume imaging, which is the dominant
visualization technOlOgy for computer graphics.
By developing DMT tedmology as an ASP, it will not require extensive technical abilities for
others to nm. sample stndlcs. Casual web surfers can also submit images or image stacks for sample
analysis and modeling.
The PI and CASI have published its research findings in both the professionallit:erature and
via the CASI corporate web site at http://www.casi.netl. Publications range from Cox, Karron, and
Mishra in 1993 to Karron and Cox., Karron, and Ferdous in 200 I. Additional papers and presentations
are underway for other national meetings such as Medicine Meets VinuaJ Reality 2002.
6Need for ATP Funding
A TP Funding is needed because CAST's goa] is to make a technical forward leap with the
DMf based modeling and develop a business model to rapidly bring it to market. CASI needs the
funding to fucus on its core technology, and then the production of anatomic modeling for RT
planning. Building on preliminary results with the NUl Visible Human Project (VHP), CAS[ will
create new markets that will be pro.fitable within five years.
Equity markets, in general, ha ve a cloud of uncertainty over them at this time, which translates
into investors staying on the sidelines. While we obsenre this somewhat in publicly traded equities, 11.
is even truer of !he illiqwd private equity marketplace. Generally, the current requirements, among
others, for private equity inverors is that:
L Profitability can be expected within two years.
2. The technology is reduced 10 practice.
CASI had made a significant efIan to obtain private equity funding for this activity. A
number of high net worth individual investors have been approached, as well as venture capitll. funds
and corporar..ions with bids to Toucan Capital Corp, Global Business Network, Ov1MC Ventures, Inc,
Sumitorno Corporation of America, lvIad.ison Partners, Bristol Meyers Squibb, Paramount Capitll. and
the Herrick Fund. CAST's proposal was urrifonnly rejected mainly for the reasons cited above.
Other potential sources of funding, which are not appropriate as follows:
I. NIH clinical fimding is appropriate for funding specific disease applications, but not for funding
the basic core modeling technology. Nlli Funding will be pursued with our clinical
collaborators in this project.
2. NSF funds universities. The pum..rit of widespread academic acceptance is slow, and will not
solve critical medical and industrial problems. NSF SBIR. grants are inadequate and too short
A-127
eomrw- Ak!ed Sr!OO"( (1}:!CAS!l
Ierw.
Page 10 of 17
3. Medical and other imaging companies have stake in Iheir own product:; and may fund research
in tlIeir specific imaging technology, CAST's experience wilh imaging hardware companies is
!hat they tend to restrict the research, with unacceptable intellectual property, publication, and
marlceting demands. Previous corporate SponsOTS of this research (SGI) pulled Ihe plug with
nuuket downturns and when individual sponsorn within the corporate struc:nu-e leave, so does
their SIlJlPOn.
4. DoD SBIR Funding is too'smal.l and short term,. with a heavy reporting burden. CASI has
expe:rience with staccato 6-rnonth Phase I; halt, l8-moolh Phase IT efforts. This is a suitable
mechanism for applied development efforts of more mature technology, but not for the
sustained fundamental research proposed here.
6.1 The An> difference
No one indu<;!ry or medical superspeciality bas the patience and broad view to fimd this etfurt
fur the general utility. Segmentation and registration issues impede progress in many disparare
medical and scientific fields.
A'IF can support the technical innovation and business risk: of developing DM! technology
into an infrastructural network resource fur everyone on the lntemel TIlls has too long of a R O ~ and
is too broad in its ultimate utility for private investors. A TP sponsorship will enable CAS! tn
implement DMT algorithms for everyone on the net instead of proving them on paper for other
mathematicians. DMT grew tn solve the PI's painful problems doing image analysis projects for
anatomic modeling, Anyone doing these studies can appreciate the utility and need for this proposed
resource. CAS! could win many more contracts if the facilities proposed here, were already in
production. Clients feel ignored because CASI is focusing on research instead of directly applying
itself to the clients' immediate problems with conventional hand edlting solutions. CASI prefers not
tn give up the [ntellectual property rights. TIlls broad risk weighed aganst broad national benefit
requites a funding agalCY with a broad view and wiIlingness tn take a patient return on investment.
People are dying:from treatment failures. Better trealment planning and evaluation will avert
these deaths. Academic, industrial then conunercial di.lfusion is too slow and ponderous; CAS! will
bring the frtrits of its research directly and immediately to its clirUcal collaborators; and then to the
medical and scientific public at larg= via its rapid ASP development plan. Working in parallel with
commercial franchise implementcrs will further speed up the diffusion of CASI technology from a
Brownian motion to a directed explosion.
6.2 ATPacceleration of the technology development
A TP's spOIlSOrship provides not only acceleration m' Ihe rate of DMT computational geometry
research. but a qualitative difference in Ihe way this academic research is perr.eived. Demonstrating
the economic value of this deep malhematical insight will stimulate IlDre research to be developed by
mathematically oriented scientists into economically and nationally beneficial prcYects.
The Emopean Union (EU) has traditionally respected advanced rrurthematical concepts, as
evidenced by EU investments in computer vision and graphics research. American tedmology
development has tended to focus more on exprnsive hardware, and possibly neglected the benefits
that a deeper understanding can bring (cheaper hardware, less overbuilt systems, better precision and
=cy),
If A TP declines to fund this project, the DMT research will limp along as a sideline to CASI
image contracting and the PI's student diSsertations.
Without A'IF ftmding CAS! will become a contract progrnmming shop, hindered by its
unhnplemented ideas, Meanwhile the EU will move first into advanced image undeIsta:nding on a
theoretical level. Buggy academic software packages 'Will fullow from graduate students. New
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modeling tfClmology will appear first in Siemens medical imaging equipment, and then GE will
license it. Eventually the state of the art in computational geomelry will ca.l:ch up to DMT. Research
implementations oould start appearing in 6 years, and software-containing DMT inspired package
fe.atuIis appearing in 8 to 10 years.
CASI's goal is to leapfrog this slow, wasteful. and ponderous mechanism of incremental and
diffusive scientific advancement
6.3 CASI angel and VC private funding eIIorts
:Mr. E. Gurfein, an early technology participant, with long experience in early technology
development, was attracred to CASt .Mr. Gurfein cannot raise priva1e equity funding at this stage,
yet he is 'Willing to invest significant personal effon managing this project wi!h the intent of raising
private capital as CASI risk decreases sufficiently for private investment
This research is in danger of failure caused by CASI cannot do production
contract programming and push the state of the art without adequate i.mding for research as well as
production coders, product support, and businesslmarlceting people.
7 Pathway toEconomic Benefits: CAS! commercialization strategy
CASI prospective customers are in two broad classes: Primary customers deal directly with
the CASI ASP in the RT markets, while secondary customers deal with franchisors, who resell and
package the CASI ASP server lUlder their own labeL
Primary cwtDmers include radiologicallmage producers, medical imaging practices, and
image consumers. They will use the CASl web services for better communication and distribution
of their product with their client physicians. The I:t:chnology will enable RT collaborative planning
(studies with multiple drafters) a1 academic medical physics departments, as well as at physicians'
homes, on the road, and at primary care community hospitals (which generally don't have the most
sophisticated resources).
Secondary customers are customers attracted by franchisors' and CASI marketing activities
for secondary application area Example include cosmetic plastic surgeons plaruring craniofacial
implant oral surgeons planning a full mouth implant procedure, as well as computer grnphics
firms. Patents will demand it oftbeir surgeons., particularly if the patimts currently of patients as
informed consumers, shopping for doctor:'i. Patents increasinglY'want to know precisely what tbeir
surgeon will do to and for them. An emerging class of medical imaging applications is vanity
radiology and imaging, particularly if the images are animated. colorful, engaging, and fun and e.asy to
explore. Patients are doing full body scans at their own expense withour any motivating clinical
reason, looking or subcJinjcal problems, as part oftbe trend In comprehensive and
expensive wellness medicine (Tuller 2(01).
7.1 CASlledmology de'ielopment through bel_ eaJty adopters and
implementel'franchisers
Bellwether early adopters are a special class of clinical and scientific professionals who are the
first to recognize and try to use early stage I:t:chooJogy. These are technically sophisticated users
willing to pay a high price for new technology and can manage to use it despite the bugs and
problems. Their motivation is not profit They are generally employed at academic medical centers
and are highly respected by their peers and colleagues. Their recommendation for a new technology
can catapult it into the broadec marlcet ofless sophisticated l.lSCT"S. The PI knows a number of these
professionals in dentistry, er:doscopic surgery, NT, plastic surgery, craniofacial surgery, oral surgery,
neurosurgery, ophthalmic, retinal, histopathology, obstetric surgery, orthopedk surgery, among
others. CASI will collaborate by assisting these users in the development of CAS I core technology in
their specialty.
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CAS! wiU foster the business development of its technology in other application areas by
working with franchisors. These are profit oriented software developers who sec the utility of CASI
technology in a probJem area they have expertise in, and have the sophistic:arion to write from-end
browsers that address specific problems of the application area They can be affiliated with bellwether
early adopters. CASI will host private label web sites that have a special look and field given to it by
its implementation franchiser. CAS! will support JXItential implementer-ftanchl:;ors by the
de'leiopment sample applications to stoke and dernoI1Sl:r81e demand Franchisee fees \Vill belp fund for
implementation costs. Each use of the CASI modeling technology wiU result in a charge to the
account holder, and a credit to the franchiser. CAS! technology is not specifically licensed, but leased
to a fumchise holder. CASI manages the back end image decomposition and segmentation, as well as
billing and royalty collection. An example potential fumchisor and end user is the Anatomic
Travelogue (htto://www.anatomicaltra.le1.co!!t).aneighboringNYC medical computer animation
house.
CASI will take the major role in introducing the technology to marketp)ar:e through the CASI
web site. professjonal marketing, communications, and commercialization activities. These consist of
publication of papen; in archiVal journals, conference presentations, and software dernOIl51:ral:ion at
booths rented at major meetings. The CASI web site will provide free samples of the technology as
the research emerges and becomes a working application. See the table below for representative
professional outlets that the PI has presented is invited to present ar., is publishing at, and will
publish in. CASI understmds the market from many perspectives, from surgical virma.l reality,
surgical simulation to functional neuromagnetic modeling iilld merucal iIlust:rationlanimation. The PI
has observed the nature of the medical image market as a fragmented industry, with many
independent minded clinical academic researchers with little cross specialty corrununication.
7.2. Prvfessional MarI<eting Venues and Outlets
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CASI submitted abstracts and made prOVlSlonal reservatlOns for a booth at Medicme Meets
Vutua.! Reality 2002. CASI has standing invitations to publish in major mathematical computational
geometry jownals, and invitations for varDUS specialty meetings. CASI will also publish and sporu;or
publication in the clinicallitetature, specifically in the Radiation and Oncology literature, the
Neurosurgical literature, and present at 'ImoDS national meetings with its clinical collaborators.
Bellwether academh: collaborators are particularly eager for the publicarion opportunities CASl
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Page 13 of 17
presents. CASl expects to present at 12 major meetings a year by the third year of the project as PI
and as collaborator.
7:3 Sbehgll., Weaknesses, Opportunities, Compe!ilill .. en",>ss
CASI SUUigth is its strong theoretica1 rubric (a broad setting bigger than just the algorithm
being CQUlIllercialized here) that can tie together many disparatl;: :r;chools of imaging science. DlvIT is
becoming a popular idea, and students are seeking the PI as a dissertation research advisor.
CASI's weakness is the lack of widely available computer demonsb:atioos. Orrrently, CASI
sofuvare nms only on high-end SGI graphics workstations. This will be changed with ATP SUPPOrt.
so that DMf analysis can be obtained from any web browser with !he hard pixel crunchiDg
occurring on a much larger and capable server bast
CASI opportunities from a competitive standpoint are strong; there are no web based medica1
image to 3D modeling services in operating, or under development in the near term
CASI has no direct competition to its core technology of the indexing and segmentation of
large image datasets via thin web clients in an ASP environment as of now.
The international markets on the Internet do 110t respect national boundaries, only cultural,
intellectual, and language barriers. There is better acceptance and understanding for computational
mathematics in the BU, as The PI's first isosurface papen; were published in France. Intemationa 1
diffusion will be faster in Ibe Eli as the main locatiOIlB for basic R&D in medical imaging are
European. This is evidenced by the sponsorship by the French Government Research Consortia
INRlA and the Siemens Corporate Research and Development organization of two important research
conferences in the closest related areas. These are the IEEE Workshop Variational and Level Set
Methods in Computer Vision at the University of British Columbia. and Scale-Space'Ol: IEEE
Workshop on Scale-Space and Morphology in Computer Vision in 2001, and the annual Eurographics
conference
7 A CASr plan for bringing initial application to market
CASI teclmology's primary application is RT planning. CASI will develop an ASP fOf its
DMT modeling tec1mo!ogy, and develop specialized web based fronl ends for RT with its clinical
collaboratorn atNUMC Radiation Physics. As the tt:hnology matures, users (Of their patients) will
begin to pay for connect hours and pixels/vertices processed, with the average Case biUing from $100
to $500; taking approximately lO to 90 minutes. Physician users will keep saved cases on the server,
and be able to allow patients to log in and see exactly what the clinician is proposing for the patient.
This will help sell the case to the and to 1hlrd party payers. Additionally, records of the patient
(patient electronic camera images, intraoperative photographs, patient video and audio) can be stared
and fused with the radiological information to provide a comprebensive electronic patient multimedia
record.
CASl's direct cus1Dmen: are breast cancer and prostate cancer patients, and their insurers. End
are the patients physicians, medical physicists and oncologists doing patients cancer cases.
Patients, insurance companies, and other third party payers will be directly charged for CAS! and I or
study fees directly over the Internet B2B tf,;:;hnology with on-line credit card charges or- deposit
accounts. ,
There are other competing image processing, virtual reality, and RT packages, all discussed
above. These packages have? high capital cost, and require significant computers. None are
mailable as ASP services due to current w;:;hnology limitations in image compression and network
bandwidth and latency. Established users of these packages will be attracted by CASI teclmology by
free sample sbJdies with their data. CASI will package its technology using emulation "skins", even
emulating the features that CAS! obsoletes so that users of competing packages gel what they want,
expect, and think they need.
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SlJooy Inc rcASP
Pagel4of17
CAS! has an ambitious, but robust re5e<ll'Ch plan. The most significant research risk is the
failure to achieve acceptable interactivity for image segmentl.tion and model manipulation over slower
Internet connections of the expected of many small physician users. CASI expects that faster and
cheaper Internet bandwidth will become ubiquitous, and reduce the project dependence Qn extreme
data compression that is characteristic of most web based multimedia software. Should it bec:ome
necessary, CAS! will market a version of its software to run on Linux workstations with graphics
accelerator cards, with traditional software licensing. Some customers may insist of this model of
Software as product, not service.
The next level of research risk is oomputationalloading of the CAS! server with image
incIemtg and modeling code !bat bogs down the system and create5 unacceptable w;er performance.
User.; who submit very large image stacks may cause problems for all U'iers on a shared server.
Significant work will be invested in optimizing the code to run in a high-level server computer
environment with maximal efficiency. By the third year of this project CASl will have experience
with issues of alpha tester oomputarionalloading to be able to estimate the costs of scaling the server
to meet user demand grov.rth projections. The worst case is tha1 CAS! will have to utilize
supercomputers instead of server computers
Many corrunercially successful medical, ani.mation, and image processing software packages
do not push tIl! state-ofMtheMart. Sw::cessful softv.iare packages are mainly customer driven. not
reseaIcll I tet:hnology driven. Software is a service industry. M.long as CASI customers obtain a
superior service. even before the core technology development is completed, the company can
produce a uo;efu} and profitable product CASI will have responsive and productive programmm:
building software for our alpha customers. CASI will build demonstrations that convince prospective
clients tha:t DMT is the way to solve their problem. It will take three years to do this. A TP funding is
required to build the software services that will solve customer problems before they realize that they
need it, and convince them that they cannot live without it However, should there be problems with
the PI's technology development, CASI progmmmers can fall back to what more conventional
technology customers expect, and in the absolute worst case, produce a useful and profitable program
without full utilization ofDMr based modeling or ASP fi.mctionality.
CAST intellectual property protection is by PI's key US Patent#5,898,793, issued in 1999
under the old patent rules, so that the term oftbe patent is valid for the next 15 years. CASl
technology is an ASP, and since the algorithms run on a CASI server; the algorithm is protected
because it never leaves the company premises.
8 People and Organizations: Experience, Qualifications and CAS]
Commitment
CASI facilities and equipment consist offully networked office space for three full time
programmers, three SGI indlgo2 extreme graphics super-workstations, three client PD, a NT4
file server. and a Power PC PowerMac. The CASI computing and network environment is superior to
many academic and medical departments, due to the PI's experience as system administrator for
computer ope.rn.tions in various medical departments. The PI has been running the www.casi.net
website for five years and it is a wellMkno"W]l and indexed Internet resource. The website attracts
cornulting clients, contract work, as '.'.ell as medical and doctoral students. The site hosts the PI's
academic BioInformatics graduate class web site. CAS! a.drninistrative resources include online
payroll processing; record keeping, aC"COl.Olting, and budget management and fiscal reporting. The PI
has experience with the FAR and DF AR
Subcontractors CISDD provide access to CUNY faculty, and coUaborators at New York
University Medical Center will provide clinical facilities, Medical Physics and clinical expertise, and
medical imaging dat:l. and equipment.
The PI has entrepreneurial experience ranging from building a trucking company to East
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AIOOdSIJ"!m roc iCASH
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Village NYC real estate (RE) renovation and development, all while in college. The RE financed the
PI's pre-medical academic bid for medical school; that led to a job in the plastic surgery department at
NYUMC. The PI also has extensive 'intrapeneurial' experience, promoting early compUll:r
networking technology within med.ical school in ilie early 80's. This is !he ability to promote and
launch projec15. imide large organizations . .Aftcr earning a PhD al NYU Applied Science in
Biomedical Engineering in 1993 and serving as a- medical school I\:SeB;ch professor, !he PI won the
first oflhree DARPA SBm grants and lalUlched CAS! in 1995, The PI's father was an entrepreneur,
with a family manu:fucturing business reaching back two generations.
Mr. E. Gurfein is President and Principal of Meridian R.eoources and Development, Ltd in
Englewood, Nl, which provides consulting and equity financing for companies and projects. He was
previously with Philipp Brothers, Inc., (now Salomon Brothers), New York as Vice President for
projects, performing analysis, negotiations, and financing of major international and domestic
infrastructUre projects involving mines, petrochemicaJs, metal processing, oil and gas pipelines, and.
powc::r generation He has served as. Project Finance Manager for pipeline COn<>truction projects in
Bolivia and Argentina from 1969 to (972. He wa.5 a member of the Board of Directors of The Mates
Fund, a mutual fur:d in New York. from 1969 ID 1974. He servoo as Programo:;
Department and NASA projects for Perkin-Elmer Corporation. His principal marketing responsibility
was for the Hubble Telescope, among other space projects. Mr. Gurfuin earned a BS at The City
College of New York, a Diploma at the Industrial College of the Armed Forces, and an MBA at The
Univernty of Connecticut Mr. Gurfein was a Captain in the US Army Ordnance Corps, serving as a
ballistic missile R&D officer. Publications 1l1clude ''Infrastructure Project Finance;" (1997) by the
United Nations Department of Economic and Social Affairs. Interregional Workshop on Developing
Project Financing, Bangkok
Dr. G. Wolberg earned a BE and JvlE (EE) at. the Coopc::r- Union in 1985 and a PhD in
Computer Science at Columbia University in 1990. He wrote "Digital Image Warping" in 1990 and
the following year he was awarded a NSF Presidential Young Award.
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Notes on Above. Dr. Wolberg will devote part time effort to this project m the:first year,
increasing to full time in the second and third year, depending on the demands of the NAvY SBIR for
whi:h he is PI and will be an employee. Mr. Gw-fein wiU devote more than halftime professional
effort to thls project, increasing to full time in year three (not indicated in original budget). Drs.
Herman, Cox, and Anshel will be funded through the ClSDD subcontractor since th!;)" are full time
amy ccnured fuc.ulty working summer and part time during the academic year involvement is
subject to release from teaching load by their respective departments. Non-tenured faculty are not
rubject to this requirement. Dr. Bookstein and Dr. Satava will be employed as a private consultant at
the rnlf; of I OO$lhour for a maximum of$2000fY, to change in project year maximum.
C1inical Collaborators Drs. Formenti, Liebis, Dewyngaert, and Bucholz are not going to be:
compensated in the tim year because CASI will be focusing on researching its cote modeling
technology, not clinical applications. CAS! will be participating in obtaining NIH clinical funding
that will pay for CASI clinical development and NYUMC research in alpha prexiuct development and
professional commercialization. This is subject to change in the second and third project year
depending on the availability of NIH fimding.
9 Brief CASI history and performance
CASI incorporated in 1995, and is less than IO years old. CASI formed while the PI was a
research professor of surgery in cardiothora.o;cic surgery at NYUMc. The PI won a DARPA Phase I
SBIR. (lOOK). The PI left NYUMC to devote full professional effort to the DARPA project
Subsequently, CASI wOn various srilall consulting su bcontra:.cts, a Phase IT SBIR (650K.$), Phase ill
(lOOKS). and a contract to explore Digjtal Morse Theory also at DARPA. The PI is President and
CfO. CASI is a NY class C Corporation. The PI owns JOO% of CAS I, which is a small business.
Sponsored by Col (Ret) R. Satava, MD at DARPA, Tactical Audio Displ!IJ5 (TAD) helped
launch CASI, which developed SUTgjca1 navigation technology using computer music and 3D spatial
sonification, enabling surgeons to navigate instruments jru;ide me body without looking at or through a
visual display. A US Patent was obtained (Wegner and Karron. 2000). The PI's effort to build or find
a market for !his teclmology has not yet achieved success. Adopters have been other university
professors (E. Jovancv and M. Quinn). DNA and Protein sequence sonification was another effort to
apply computer music and sanification teclmology
SiJ1i!icart Federal R&D awards v.ith'rl the past live VealS 11 tre same QEnefaI !edrical area iIldical"ng feasibility ct technical claims
Agenty
y",
Description of the work Actomplisfun;!f!ts PI P.
DARPA 1998 1999 I]gi1a1 Morse Theory Rapi4 20 con\OurifJg. Critical DBK O. Healy. OARPAACMP
Explora!cry Studies Point Identification. DMT dl\ealy@'darpamil
KafTon/Cox/Ferd!)us
Oissertation and Paper
NIHVHPIUol 200J 2001 ({)[ medical 3D Color contolEing. rapid DBK O. Jen\(ff15 NIH
Mictigan educauoo content segmentation: Karron 2001 jenklnsOnlm.nih.goY
devebpment presentation T. Yoo. NIH, ),oo@nlntnih.gov
B. Athey. U Mieh bieu@lumlm.edll
" CASI IS subnuttmg a NAVY Phase I SBIR for Omrudirect:ional 5U!Veillance of carner flight deck
activity", The proposal eliminates camera operato"f5 and TV cameras that record aircraft takeoff and
recovery operations with omnidirectional video systems. The geometric distortion is corrected using
computer image warping and fused using DMT technology. The PIon this project is Dr. G. Wolberg
9.1 Financial and Employment Information
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Coom!!1" A&l Sunery 11"1; fCASD
Page 170f17

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FiscaI_aIld Tabl" Notes, The CASl TAD fund I Jor
$850K in I, II and ill:fi:um 1996 through 1999, !he bulk of which was used in
1997 and not show on this table. The company entered the technology development 'valley of death',
where basic R&D fimding ends and commercial funding picks up the research. The PI has. decided
not to further pUIS\le TAD commercialization, and is negotiating with coUeagues interested in picking
up academic funding with the CAST prototype equipment The crash in CASl mCllme in 2000 was
due to two dlsastrollS m11itary and academjc subcontracts
10 References
Kanm, D.8.(2001) LeYeIlrqEw: Digital Mcr3attwxyo! ro:x.:ntwrs il RGB spare. TD re SlAM/'dMyGmup co Imaging.
Scieo::e: hlaglrg Sderce 2001, SepIember 22-24, 2001 Ih;Irn US<\.. entitled: I!'le VSbIe Human:
Ge:rnetryand ffliIed by Fred BcdG!Ein, 1Jri\eIsItyofMi:tgn,ftmArtD, USA.
C',a(, J, 8m Kam:n, D, B l!I"d FMhIs, N. (2001): Zcrle Seg.rneJna1X.n o! SCalarVdl.ll1e Da!a. pe!"ding rewrile to
CunpuIer VISOl l!I"d Image F'Io::essQJ. KlI1o'lefPress-
Kanm, D.; COx, JOO"I!IS; and Mish'a. B. (1999); System and MeIto.l b" SIsface Reo:Ie<'l>g o! Internal S!Juctlms wiU'ltn Ite jnleoicr 01 a Scfoj
Ot:;ect; US Paten! /lS,S98.793
Karn:rJ, D.S. an:lCm,J. (1995): Exlr<ding3D0bjeds Vcbne 001a usirq Di;jl3fMnel1':a:ly. 1<1 C'.anp.rlerVISim, VII'\lJaI ReaR;' and
Med"dne, NAyad"e. Edtor; l>ttesil SOerxll. Yd. 005, Pages 481-486.
Karren, D (1S94) N'fN FirdJ\"lS rrc.n!he SpiderWeb AQ:riIl-m; Tc:ward a I:l'oj!a !.bse l1':a:Iy. lr1 Bicrned"cal CCr"r1p.mrg (\/Be}
Co;!(, 0.: and MOstva, 8. (1993): Thl $pIdeIWeb s..ua:e lrn:::Jv.I!icrl BrXf TedTJdogy in E\Ictcqy and Me6tine
(ITBMVdume 14, tffi1te-5Pages634 -6550e00rri.ler
Kan'al, D. (1991): A f"lCMeI aIgaiIhrn b" calwlaling the of 6kew linas using slngi.da!"valE.16 dectmpositioo. NYU Rc:bdies
Tedri::aI R$:rt
KamJrl, D. (1993)NOYeI Surfa:;e Reo:iemgand Meh:dsfrrJD Med"callrmglrq. The ""SpdeM'etJ 9.Jrfa::e Ago::riImt an::I
the 7''dnle<sTec!'v1Q..I3 frrlJ1lt9ating Ph.D. Disserta\ioo
R T., liH-lar1lnl. M. B .. MlnaY. T. arrl"TlUl, M. (2001) S1irti5fi::s 2001. CA c.ara.- .J;u"rIaI b" Oiriciar<s
Tortde, C. (2001) CRN N3P Raln::ltatie: N3P elI:eOItIves are tv.OO<ing \heir Ilusirffls to spur d:iOftware as a
servlce:N3Psmaketl"fiiro:::a!B. CRN fW11 Page 1426
Well, Pard VtIaIi. M. R. (2001) P'a;;e 10 Space: Migrating IOE-l:l$less rocd!ts. Harva-d Busress Sctxx:i P\tiistioQ Corpa'aIi:x1
E.{:2001):F'IagnaII:Woma\h1Theay.
Jcv.nN. E: starevC. D.: Weg:-er, K; Karro1, 0.8.; v. (1008) Al:rus!ic Ren:lemg as St:9Crt b" SiJstlined Atl!'!llirn dlEirg
BUnec:fcal PrcnldlXeS. In Prcceedi-gs d the Fifth tiIEmat"cnaI W1femncB en I'OOtcJy ()splay (ICAD). GIasgoN. UK, NIl'I. 1-4.
WIi!fTl'<'l", K ard Kam:n. 0.8. (1997) N>3vigatico I..ISng PIiD Feedback. In F'rtn!edings d the F"dIt!Mnual Me6idne Meets Vll\ual
Reaity(';mfereno.:!. San Diego. IDS Press, JImstBctIam; Jan
K andKatrt;n, DB.21XO: St6gi(2I NaIOga!lcrl Sy.;tern an:l Melted UsngAl.ldo Faedbad<. U.S. P<!Ia11 #5,898.793
TIJI9r, 0(2001):lheSlaN:lardC/ledwp? k.>g6
A-135
UNITED STATES DEPARTI\J1ENT OF ""CE
National Institute of Standards "r1("
Gaithersburg. MSrjland 2089S-
Dr. D. B. Karron
'Computer Aided Surgery; Inc.
300 East 33'" Street
Suite 4N
New York, New York 10016'
Reference: Advanced Technology Program Award Number 70NANBIH3050
Dear Dr. Karron:
I am, pleased to transmit three (3) copies of the referenced award. Please review the award
documents thoroughly and if you agree with the provisions, sign the three (3) copies of the
Financial Assistance Award (CD-450) and return two (2) originally signed copies, including the
Special Award Conditions and budget, to:
National Institute of Standard, and Te<:hnoiogy
100 Bureau Drive, Building 411, Room A143, Stop 3580
You are to retain the third copy of the award document and p:rovisions for your records. This
award becomes void ifnot signed and returned within t1rirty (30) days ofreceipt. If you have
any questions concerning this award, please contact the NIST Grants Specialist identified in the
cooperative agreement special award conditions.
We congratulate you on receiving this award and wish you Success in the development and broad
dissemination of challenging high-risk technologies that could offer the potential for significant,
broad-based economic benefits for the nation.
Sincerely,
(\\Cc\C
Marc G. Stanley
Acting Director, Advanced Technology Program
Enclosures
GOVERNMENT
EXHIBIT
11
07 Cr. 54l (Rl'P) 00)
6ft'
NISI
A-136
'-'50 U.S. DEPJ., MENT OF COMMERCE

.d81
(,;,,, ... NT X COOPr:,:;,1'
ACCOUNTING ceDE
I
cc: 114721348
Req. No. 1/472-2136
-
I
RECIPIENT NAME AWARD NUMBER
Computer Aided Surgery. Inc. 70NANB1H305o
-."J.
-
STREET ADDRESS FEDERAL SHARE OF COST
300 East 33,d Street. Suite 4N $ BOO.OOO.OO
CITY, STATE. ZIP CODE RECIPIENT SHARE OF COST
New York. NY 10016 $ 36,500.00
AWARD PERIOD TOTAL ESTIMATED COST
October.1, 2001 through September 30, 2004 {project periotW $843.000.00
AUTHORITY
P.L. 100-418. Section 6131lcodified at 16 USC 278nJ as modified by P.L. 102-245
CFDA NO. o!\ND PROJECT TITLE 11.612, AdvlIflced Technology Progmm lATP}, PropoSllI No. 00-00-4607
Project TItle: AnatomIc Computer Modeling for Precise altd Accurato Therapies
This Award approved by the Grants Officer is i9sued in triplicate and constitutes an obligation of Federal funding.
By signing the three documents, the Recipient agrees to comply with the Award provisions checked below and
attached. Upon acceptance by the Recipient. two signed Award documents shall be retumed to the Gmnts Officer
and the third document shall be retained by the Recipient. If not signed and returned without modification by the
Recipient within 30 days of receipt, the Grants Officer may unilaterally terminate this Award_
X Department of Commerce Financial Assistance Standard Terms and Conditions
Specia1 Award Conditions
X line Item Budget
X 15 CFR Part 14, Uniform Administrative Requirements for Grants and Agreements with Institutions of Higher
Education, Hospitals, Other Non-Profit, and Commercial Organizations
0 15 CFR Part 24, Uniform Administrative Requirements for Grants and Agreements to State and Local
Governments
0 OMS Circular A-21, Cost Principles for Educational Institutions
GOVERNMENT
EXHIBrr
0 OMS Circular A-8 7. Cost Principles for State, Local, and Indian Tribal Governments
12
0 OMS Circular A-' 22, Cost Principles for Nonprofit Organizations OJ Cr_ 54! (RPP) (1D)
X 48 CFR Part 31, Contract Cost Principles and Procedures
0 OMS Circular A-l 33, Audits of States, local Governments, and Non-Profit Organizations
X Other(s) Gemual Ie:[ffiS ami IeebDQIQ9Y: E'[QQ[am L6IE'l!6lQll' ErQgram SQ!lQifie 8tlQil:
Guidelines for 8IE CO:QQeralive: !:;Q!IJQl,mies {9:i9:9:1
" MI!lti-:!/::ii![ frQi!:lQt S:!'l: SU:tli,fti C2DQi1iQO # Q6
8-AE93-N-C-F-N-A-36-51DOO EIN: 13-388-9180 472/S.J_Lide
SIGNATURE OF
TiTlE OATE
GRANTS OFFICER
9-c7fI-
Ci
/
""-rilYTI Go!dstein .t.
r"PED NAME AND 1 AUTHO;ED RECIPIENT OFFICIAL
T!TLE

DATE
.: -OC"i" 0\
ORIGINAL tS;- y,
A-137
ADVANCED TECHNOLOGY PROGRAM - SINGLE RECIP!EN'
,. REClPlENT ADMINISTRATOR CONTACT
The Recipient Administrator Contact's name, title, address, and
telepl10ne number are:
{Technical) Dr. D,S. Karran
Principal Investigator
(212)
(Administrative) Dr. D.B. Karran (llZ) 686-8748
President
Computer Aided SUrgery, Inc. leASI)
300 East 33,4 Street
Suite 4N
New York. NY 10016
Fa)(: 12121 448-0261
E-Mail: karron@l:asi.net
2. GRANTS OFFICER
The Grants Officer's name, address, ancl telephone number are:
Mari:lyn J. Goldstein
I Bureau Dri .... e, Bldg. 411, Room A-l 43, Mail Stop 3580
(30t) 975-6359
3. GRANTS
The Grant SpBcialist's name, address, and telephone number are:
Hope Snowden
100 Bureau Dri .... e. Bldg. 411, Room A"143, Mail Stop 3580
Gaithersburg, MD 20899-35BO
(301) 975-6002
4. PROGRAM OFFICERS
a. The Technical Manager's name, address, and telephone
number
BetTijoYl:e Lide
National Institute of Standards ana Technology
100 Bureau Drive, Bldg. 101, Mail Stop 4720
(301)975-2218
Special Award Condltions/ATP
b, The Project Manager's name, address, and telephOne
number are:
Jayne'Orthwein
Nationallnstirute of Standards and Technology
100 Bureau Drive, Bldg. 101, Mail Stop 4720
Gaithersburg. MD 20899-4720
(301) 975-3176
5. PROJECT DESCRIPTION
All research shall be conducted in accordance with the
Recipient's proposal dated 07/06/01 (Gate 1), and 06/06/01
(Gate 2), and all re .... isions!Jate documentation dated 08/21/01,
06/27/01, 09/06/01, 09/12/01, 09/14/01, and 09/-"/01,
including revised budget dated 09/-"/01.
6. FUNDING LIMITATIONS
The scope of work and budget incorporated into this award co .... er
a tbn"_ye,,r period (referred 10 as the "project period") tor a total
amount of $2 OQQ,QQQ,OQ in Federal funds, However, Federal
funding available at this time is limited to SHOO 000 00 for the
first year period from OctoWr 1 2001 through September 30
ZQQZ !referred to as the "budget period "I. The Grants Officer
may require additional clarification to support the budget. If that
results in changes to the budget or budget narrative, the
Recipient shall submit, in writing, a revised budget and/or budget
narrative 10 the Grants Officer for approval. Receipt of any
funding beyond the first year up to the level projected under this
award is contingent Upon the availability of funds from Congress,
satisfactory performance, and will be at the sole discretion of the
National Institute of Standards and Technology !N\ST). The
Recipient may not obligate, incur any expenditure, nor engage in
any activity that Invol .... es a commitment of Federal funds under
this Agreement in excess of the Federal amount presently
available. No legal liability exists or will result on the part of the
Federal Government fOr payment of any portIon of the remaining
funds, which have not been made available under the award. If
additional funds are not made available, any expanses incurred
related to closeout activities must be funded from the amount
already made avaiiOible under this award. The notice of
OIvailabiliTy or non-availability of additional funding for the.Kl<Jl.D..l1
and lh!.!d year!sl will be made in writing by the Grants Qfficer,
Only tl1e Grants Officer is authorized to obligate funds. No other
verbal or written notice should be relied upon by the Recipient.
In the absence of a written notice 01 additional 'funding, no
assumption should be made by the Recipient Ihat tl1a funds will
be forthcoming.
GOVERNMENT
EXHIBIT
13
07 Cr. S4! (RP1'){lD)
2-/
75
A-138
Projected budget amounts: and periods:
y 2: $600,000.00 iFrom 10/01102 to 09/30103)
V",_, 3; $600,000.00 (From 10/01/03 to 09/30104)
7. COST SHARE
For the first year period, the cost sharing ratio {dIrect' costs
.QDh1 applicable to this award is the Recipient's contribution of
3.81 % ( ~ 3 0 , 0 0 0 . 0 0 1 and NIST's contribution of 96,39%
1$800,000.00).
8, PERSONNEl AND CONSULTANT REQUIREMENT
The Recipient must provide to the A TP Project Manager in writing
w'lthin 60 days of project start dilte, identificat'lon of the
personnel on the project and the percentage of time including
cOr'lSultants.
g. REQUIREMENT OF ACCOUNTING SYSTEM CERTIFICATION
The Recipient, whether receiving Federal Funds or only providing
matching funds, must have a functioning financial management
system that meets the provisions of 15 CFR 14.21 to ensure
proper accountability of funds. Therefore, Computer Aiaed
SurgerY, Inc" must submit an accounting system (:ertifit:!ltion
issued by an Independent Cenified Public Accountant !CPA) to
the NIST Grants Officer within 90 days from the date of this
award.
l' ')EFERRAL OF REVIEW OF USE OF HUMAN SUBJECTS
Based upon a review of the proposal dated July 6, 2001,
NIST has determined that the involvement of human subjects in
research identified herein meets the criteria to qualify for a
deferred review, This award is made in accordance with 15
CFR 27,118, which permits research that does not involve
human subjects to proceed even though human subjects may
be involved at a later stage during the project period. In
accordance with the 8/01 ATP Genera! Terms and Conditions
1119, the Recipient must submit the following documentation
prior to year 3 of the project and prior to any research that
may involve human subjects, to the ATP Project' Manager for
rev'lew and approval by appropriate NI5T officials:
a) Documentarian establishing approval of the project by an
Institutional Review BO<lrd qualified under 15 CFR
27.103, OR
b) Documentation to support an exemption for the
project pursuant to 15 CFR 27,lOl(b).
Tha documentation requirem!;lnts are available on the ATP
website at hrtpt1www alp nlst gQV, outlined in the ATP
book.let titled "Guidelines and Documentation Requirements for
Research Involving Human and Animal Subjects. H No
involvement of human subjects in research may ba undenakan
or conducted, or costs involving human subjects research
incurred or charged to the project, until the NIST Grants
( 1r's approval of the above documentation is obtained in
W1, .. ng,
Special Award CondltlonsfATP
'"-
A-139
I
I
I
-y/.,}?
:If 1
A
;/I/I}/ fj / 1/ &J5l)
EST ,-ED MULTIYEAR BUDGET
YEAR ONE
1 OBJECT CLASS CATEGORY
Salaries I Wages $375,000
Personnel Frit}ge Benefits (34%) $127,500
p_ Travel $4,000
p. Equipment $120,000
E. Materials/Supplies
$200,000
p. Other $10,000
Total Direct Costs (Lines A thru G} $836,500
Tolal Direct Cosls Requesled from ATP $800,000
Total Direct Costs Shared by Proposer $36,500
r-. Tolallndirec( Costs Absorbed by Proposer $6,500
r- Tolal Cosls (Lines H + K) $843
1
000
SOURCES OF FUNDS
ATP (Same as Line I $800,000
PI $30,000
YEAR TWO VEAR TflRE!:
$375,000 $375,000 $1,125,000
5127,500 $127,500 $382,500
$9,000
512,000 $25,000
$9,000 $9,000 -$138,000
___ ---"'c.'"'0,,,,O=0,,-O ____ -,$:c',,20::o,O:::O::O __ _
$630,500
$600,OQO
$30,500
$500
$631,000
$600,000
$30,000
$10,000' $20,000
$643,500
$600,000
$43,500
$3,500
$647,000

$40,000
$2,110,500
$2.000,000
$110,500
$10,500
$2,121,000
$2,000,000
$110,500
--
__ Pl Indirect absorbed costs ________ '_6':cs_Oo _____ ,."s"O"O _____ :::'3"'s:::O::O'--_____ $_'_0'--,S_OO ____
Total Sources of Funds (Same as Line l)
$643,000
TASKS
1 Server hardware install and config $ 419,000
.2 Pubhc clienl deSign mock-up $ 11 \,000
$631,000
$647,000
$2,121,000

$1110:: I
b. 3 Program SpiderWeb surface ge"'n'--__ -'$'-'"_,',,,,O"'O"'O ___ + ______ -I-________ ..
p. 4 Recog, sari Crils, Graph display $ 202,000 $ 202,000
.,5 Wrie Union/Intersection operator $ 210,500 .$ 210,500
r 6 Write saddle erll _____ .......
G. 7 Write OICOM, up/down load compres/crypt $ 210,500 .$ 210,500
8 Node warpin_Q, "'co"d,ce ______________ + ______ _____
- Z iii
I. 9 Write Level of Detail Management code $ 211 ,000 $ 211 ,000 _ i
____________ +-_________ ______ ..
I
$631,000 $647,000 S 3
$2,121,000 -,
J 10: click stream technology on clients
,<. Tolal Costs of All Tasks (Same as Line L) $843,000
A-140
r--'-' ..
FORM CD:451 u.s. DEPARTMI:.I,<r OF COMMERCE o GRANT X COQPERATI',,-. 'IT
(REV 10/98)
.. _, .
-
ACCOUNTING CODE
AMENDMENT TO
cc: 1/4721348
,
111
Req. No. 1/472-2136 h
" ..
AWARD NUMBER ,
'.
70NANBl H3050
RECIPIENT NAME AMENDMENT NUMBER
Computer Aided Surgery, I(lc.
#01
STREET ADDRESS EFFECTIVE DATE
300 E",51 33'0 Street. Suite 4N
.
CITY, STATE, ZIP CODE EXTEND WORK COMPLETION TO
New NY 10016
0"
CFDA NO. AND PROJECT TITLE: 11.612. Advanced Technology Program (AlP), Proposal No. 00-00.4507
Project Title, Comput"'t Modeling fM and Accun'ltu Thataplas
,
COSTS ARE REVISED I PREVIOUS ADD DEDUCT TOTAL
AS FOLLOWS: ESTIMATED COST
ESTIMATED COST
FEDERAL SHARE DF COST
$800,000.00 $0 $0
$-800,000.00
"r::IPIENT SHARE OF COST
$ 36,500.00 $0 $0
$-36,500,00
TOTAL ESTIMATEO COST
$843,000.00 $0 $0
$843,000.00
REASON(S) FoR AMENDMENT
This cooperative agreement is being amended to change the administrative contact.
This Amendment approved by the Grants Officer Is issued In triplicate Elnd constitutes an obligation of Fei:lerElI funding. By 8igni09 the
three documents. the Recipient agrees to comply with the Amendment provisions checked below end anached. as well as prEl"lous
pro"isions incorpOrated Into the Award. Upon acceptance by the Re<:Jplent, two Signed Amendmllnt documents shall be retumed to
tha Grants Officer Btld the thlrd document .. hall be ratained by the Recipient. If not sIgned and returned without modification by the
Reclplent wIthin 30 -days of racaipt, mEl Grants Officer may unllateraliy tenninate this Amendment,
X Special Award Conditions
GOVERNMENT
EXHIBIT
Une Item Budget
21
Dtherls)
07Cd41 (RPP)(lD)
SIGNATURE OF DEPARTMENT OIY.COMMERCE Ga,,;,t OFFICER r
Marilyn Goldstein . ./( a:. .I
, () 7
DATE
./ 0 -,:2 y-C) I
I
Y
1; REGI

DAl\\ t l tJ\
Onglnal
A-141
ADVANCED TECHNOLOGY PROGRAM - SINGLE RECiPiENT
COOPERATIVE AGREEMENT NO. 70NANB1 H3050
AMENDMENT #01
THE FOLLOWING S.PEC1Al AWARD CONDITIONS ARE
AMENDED:
1. RECIPIENT ADMINISTRATOR CONTACT
Tna Recipient Administrator Cont6ct's name, title, address, and
telephone number are:
(Administralive) Lee GtJrfein
300 East 33'd Street, Suite N
New York, NY 10016
Phone: (212) 686-8748
, Fi!ox: (2.12)44802.61
ALL PRIOR TERMS ANO CONDITIONS REMAIN THE SAME.
Spacial Award ConditlooslATP
A-142
computer Aided Surgery, Inc.
D. B. Karron, Ph.D.
Presldlmt and ChiefTech:ucs] Officer
300 East 33'0 Sb'eel., Suite 4N
New York,. New York, 10016
Telepho"r! f1JJd VoicIfMCli1: +1 (21.2) 686 BHB,Fax: +1 (212) 41a
E/21;/ronic Mall: ka:r:ron@c:asi . net b,tme/fWorJd Wide http://W.rM.casi.net
TO: Jayne
National Institute of Standards and Technology 100 Bureau Drive
Building 101
Mail stop '1720
By fa>; to + 1 (301)
Re: Lee Gurfein
Deu Ms. Hope Snowden.
This letter BUthOrizeS Mr. Lee Gurfein as adrninistretive contact on Cooperative Agreement No 70NANB1ID050
with Compu[er Aided Surgery, Inc.
This authorization is \'alid for rile period of one year from the start of the on October 1. 2001 through
Sept 30. This Butrorization can be revoked in 'NTiting to you and him by myself at any time this authorization is in
effect Until specifically authorized to do so,:Mr. Gurlein is not an officer of the corporation. and is not authorized to
for the corporation. The authorization for lv{r. Gurfe;in to commit the corporation will be made by separate letter
authorization if the need
Sincerely,
This file is "Authorizing Gurfein uua. Ijot" Uta/cd wich 'r .loS! DBK New LetlcrhctdOI.dot', created at Tuesday. October 09, 2001
12;25:00 H,
Saved a/ TIwrsday, October! I. 1001 18:09;00 H and printed JI TIwlSdilY. Oc!oba 11.2001 18:09:00 H
- ..., .. "".-... ,,---
A-143
October 26,2001
Dr. D. B. Karran
300 East 33
rd
Street
Suite 4N
New York, NY 10016
RE: Cooperative Agreement No. 70NANBIH3050
Amendment No. 01
Dear Dr. Karron:
Enclosed please fmd an original and two (2) copies of Amendment No. 01 to the above referenced
Cooperative Agreement. Within thirty (30) days of receipt of these documents, ptease have an
authorized individual sign and date the documents, and return the original and COpY number 2 to
my attention aJ;
Grants Office
100 Bureau Drive, Building 411, STOP 3580
Gaitbersburg, MD 20899-3580.
You may retain copY number 3 for your files. If you have any questions, please feel free to contact
me at (301) 975-6002 or by fax at (301) 840-5976 or via e-mail at hope.snowden@nisLgov.
Sincerely,
~ { c 1
Hope Snowden
Grants Specialist
Enclosures: Form CD-451 (3)
be: File, Reader ,BJ _ Lidel ATP Project Manager
NIST/OA/GAMD (358): H.Snowden:975-6002
(DOC:letters/ament):wp61\File in Bldg 411, A-143
A-144
,0,

.
U,S. DEPARTMENT OF COMMERCE o GRANT X COOPERATIVE AGREEMENT
(REV 10/9,)
ACCOUNTING CODE
AMENDMENT TO
cc: 2/4/21348 OD) Class:4110
Req. No. 214"72.2106 SiD 00
AWARD NUMBER
70NANB1HJ050
RECIPIENT NAME
AMENDMENT NUMBER
Computer Aided Surgery, II1C.
.06
STREET ADDRESS EFFECTIVE DATE JUN
2 7 L003
300 E:lIst JJRI Streel, Suits 4N
CITY, STATE. ZIP CODE EXTEND WORK COMPLETION TO
New York, NY 10016
CFDA NO. AND PR.OJECT TITLE: t 1.1512, Advanced Te!:hoology Program (ATP), No. OOOIJ-4G07
project nllll: AnatomiC Computer MQliltllng fur Precise lind Aec;urate Thol1!plu.
COSTS ARE REVlSED PREVIOUS ADO OEDUCT TOTAL
AS FOLLOWS: ESTIMATED COST
ESTIMATEO COST
FEDERAL SHARE OF COST
$1,400,000.00 $0 $0
$1,4DO.OOO.OO
RECIPIENT SHARE OF
CDST $ 67,000.00 $0 $0
67,000.00
TOTAL ESTIMATED CosT
if,1,467.000.00 $0 $0 $1.467.000.00
REASON(S) FOR AMENDMENT
This cooperative agreement is being emended to suspE'nd this award, effective Immediately, for of
Special Award #7
Thll5 AmandmO!nfapp-Tovad by1he Grants Offlc&ri& issued in triplicato! and an obligation ofFO!dera!funding. 8yslgn1ng
the lt1ree doc;umenb, the Reu;;Jpient agre9s to comply with thO! Amltndm9nt provisions checked beloW and attached, .J!i well a5
previous provisions !ncOrporal&d Into the Award. Upon aCC8ptance the two slgngd Amandmentdoeumentl> shall be
returned to th", Grants Offioor and thg third document shall bit retainad by the Recipient. If not 8ignlld and reluHUld without
modlncation by mil Recipient within 30 of receipt. tile Gran1B Officer may unilaterally terminato thi& Amendmant
x Special Award Conditions GOVERNMENT
i..1 Une Item. 8ud{let
EXHIBIT
26
n Other{s)
07 Ce. 1 (RPP) (ID)
BAE93-N C-F-N-A-36-51000 E1N: 13-38809180 472fB.J. lidelJ Qr1hwein
-
SIGNATURE OF GRA TS OFFICER DATE.
Marilyn Goldstein t- L ,;.-'
l oj?-tl J
/l 1 LO '-
TYPEO NAME, TYPED TITlE, A.ND SIGNATuRE'-6r AUTHORIZED RECIPIENT OFt=ICIAl OA11'
I
4
A-145
ADVANCED TECHNOLOGY PROGRAM - SINGLE RECIPIENT
12. SUSPENSION
AMENDMENT #06
Pursuant to OMS CIrcular A110 Section_,51 and Department of
Commerce regulations at 15 CFR sec, 14.62 (e) (1) and (3), this
I;ooperalive agreement is suspellded effect/va a.s of tne dale of this
amendment, Ba90t\ upon preliminary audit information, you are. 1n
of Special Award Condition #7 'COst Sl'Iara", No
further coata lIh.all bQ Incurred under this award without tho
express written approval oftha NIST Grants Offlcar. Puntuanlto
15 CFR. soc. 14.62 (c).
Tills award will ",main 8Uflpended until Rs(;1plant pro'o'ldu!;
evldanC8, 8atiSJEtory to thl' Grants omcor that It is in full
compliance wIth $paC:lal Award Condition #7'.
l PRIOR TERMS AND CONDITIONS REMAIN THE SAME.
A-146
In
To: hcpe.soowden@nist.gov
Subject: 1 H3050
........ '-''''''''''''':> vrr, .... <:.
Cc: jayne Orthwein <jayne.orthwein@nist.gcy>
Jayne Orthwein and I oonour witl1 tI1e deoision of the Grants Office to suspend award 1H3050
immediately, based on noncompliance.
Thank you.
BetUjOYC8 Lide
prugram ManagBr, Hea.!thcare InforrnatllS
Competitions- Manager
Adwneed Technology Program
phone (301) 975-2218
fax (301) 9269524
e-mail: bettijoyce.Ht:le@nistgo
y
Pr1nted for Hope Snowden <hope.snowden@nist.gov>
A-147
In
To: hope.snowden@nist.gov
SLlbjec1: Suspension
Cr;: bjlide@nist.gov
Hope,
BaSed upon the information receiVed from the auditor positioned at CASI, I agree with the Grants
recommendation for immediate suspension.
Jayne
Printed for Hope Snowden <hope,snQwden@nist.gov>
1
A-148
June 27, 1003
Dr. D. B. KaHon
300 East 33
rd
Street
Suite 4N
New York, NY 10016
RE: Cooperative Agreement No. 70NANBIH30S0
Amendment No. 06
Dear Dr. Karron:
Enclosed please frod an original and !wo (2) copies of Amendment No. 06 to rhe above referenced
Cooperative Agreement. Within thirty (30) days of receipt of these documents, please have an
authorized individual sign and date the docUments. and return rhe original and copy number 2 to
my attention at;
NatioDallostilnte of Standards aod Technology
Grants Office
100 Bureau Drive
t
Building 411, STOP 3580
GBith .... burg,MD 20899-3580.
You may retain CODY number 3 for your files. lfyou'b.I!.ve any questions, please feel free to contaCt
me at (301) 9756002 or by fax a< (301) 840-5976 or via email aI hope.snowden@ni9t.gov.
Si]](;erely.
J
Hope Snowden
Grants
Enclosur",,: Form CD-451 (3)
be: File, Re,der,BL Lidel I. Orthwein ATP Project Man,ger
NIST/OA/GAMD (358): H.Snowden:975-{i()02:B.RiveTa
(DOC:leru:rs/ament):wp61IFile in Bldg 411. A143
TOTRL P.05
'6
A-149
,
F.de,." .f>(! 0",'0"'"'''''''' EIornonl
Report .. Submil'ed
NIST ATP
(Long Form)
(Follow lfls/roCllOns on t e bac
r FoKIe'.' G,.n, 0, Oih .. 'oonUlylng Num'- Anlgnod
ByFedet;lIJ'\l<ncy
lDNANB1H3050
3, RCClpi.ol (N""", and eompl.t. addN: ...
Computl)l A'ded SUfgBry. Inc . 300 EaSI33rd Street. Suite 4N. New York, NY 10016
4. Emp'OY" Idcntiic:oUo" Numbo, IS' RecJplenl """"'01 N</mOOr or Idefl'ilyiog Numbo, 6. Fha' ReP<lrl
133889180 131 068299 665 C YQa
" ",
"
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Frnm' (M""Lh, Oay, Year) IT", jMr::nIh. Day. Yo"') F.-: Day. y"",)
10ltl200 1 i lVJ112001 10/112001
10.1",""""""".
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p,"";ou'" Re This
,
T 01., , may.
282.320.00

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,
P'OGram Income u.O<lI. accoo;lon"" lite dedt>Cl!on all.maU""

No, OJUII'/' (Une &. 16,. ''''' ,urn cliinos b 0)
0.00 282,320.00
Roclplon\" -sIl ... of nat aunoya, eOIlSI.Hng 01:

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,
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"
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12.320.00
,
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0.00 12.320.00
, Fod.nl .h.,e Of net oulloy. (flnb d Io.s I",,, I)
0_00
270.000.00

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,
l'I=penrs .ha'" 01 unloQuidal"':!
"
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"
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U3<18..{1039
pag ..
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12/3112001
m
CUmoJ'''''''''
282.320.00
0.00
0,00
282.320.00
0.00
0.00
0.00
12,32000
12.320 DO
270,000.00
270.000.00
270.000.00
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GOVERNMENT
"
Ram. r1<, .nr orplanolloo. r!<>&mort no"".sal}' Of lol",mol;,,-, mqulrno Fod ... 1 .pon.orlng agent:)' In =mpI18n"" "'/n EXHIBIT
""""" Img 1"",,,,5"1>
40
070.541 (RPP)(lD)
IJ. , eonl", '" bQ" "I my nd ".Itollho' 1111.... po<1ls cc ... "c1 ond ond tll., oil """av. and
""" "'datod obI, ,"on5 &rn f.r 111"
"
0'.' nl lorl!> I" Ihe doe"m.n'"
or Plinl.d lille
Dr 0 B Karlon. Pres,dent
Si9n.'"'" Of Au'hO,ked 0,,",,;,1
Pr""i"", f.d",ao
NSN 7S'[l.D,.O'Z .

.. "",;or' <M.'
269.1 4 o
r (fin. code. num.o, .. 'on,lonl
212-6668748
Dal. Report 5"\>,,,1".<1
JanUal)' 10. 2002
Sla,..,.", Fon-n 269 (Rev )97)
t>')' OMS O''''''B'' A-I02 />..1,0
A-150
FINANCIAL S-TA"lUS REPORJ
(l,QnI1 Form)
FOliOw Of' /ht: bllok
,

omGn!
J< :.... <l< ...
'"
I ....

BrF .,....'''>qaoq
NISTIATP 70NANB1
{)34B-Q0l9 1 1
3. Rodplonl b"' .... ""U"" ard ""...pl"" ..dd ...... 11l<'"oloQ ZIP GOde)
Compl!lar SUfllory, Irre.
JOO E. 33,d St, 1\1"", Yoll<, New Yo,k 10016
'. j S. AOCQI.O\I N._", I",n,,"g 1. lI.o<il
13383389180 131 DeB llYn
."
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B. Pdod (Su ,;, ...,..1"""1 9, Pooioo' C_ Irk fI.,p>II
fFtll'lT. (/tlontl!. 0001. 'I'D!) JTO: 1_. Doy. Y.r) """'" Ol'!. YIB"I
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12131{2001 101112001 1213112001

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"

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0.00
.
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0.00 210,000.00 210,000.00
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,
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>
orntt...,,1&o;oo 1i1n9 4 lou 11M
0.011 ;!1C,O()o.00 210,000.00
,
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Z (J{)O. c:<J
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,
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,

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, "'
II .......... no .. a .... l
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Dr. D. B. KQ[fon.
.. ol I'oVlno.1,..:i Cin!ly!<>;I Clmd.1
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212sa9B746
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(Long Form)
IFollowinsl=lions on Ih .. bach}
.... raI""'" "O\ha' .... "iIy""! """'''''' .... 9'0<1
Byf ..
70NANB lH30S0
O'll,,,ution (n."", and cemplO" .doI .... , ndL<l1ng l'P <>:>dol
Computer Aided Surgery. Inc., 300 East J3rd St .... et SU;'e 4N, N8W'I'or1<, NY 10016
f"'l'''''''''' "" ___ \5. """"'Ion''''''''''''' .. bot
6. F .... , ,,"1'1
13-3S-SS1S0 131 066299665 C'h.
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(5, .... 1"""."".) 0
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01/01/2002 03/3112002
10/0112001

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516B.213.64

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lI"otne,,,,,,;piomo,,,,.,....,. """""Qo ........ "OIg
16,213-64
T,,'.l "''''1''''''' .h ... oj n" _, '. ,no
$9,582,56 SB,213.64
j F ... .--.' .1", '" nol ."".,-./"'. d to", 'I
$210.000.00 $160.00000

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"
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$210.00D.00 5150,000.00
0 1""'1 fed.",' """" Io<'"i< luodl,.. p;;;jO<j
$210.000.00 $180,000.00
0 V_I._'ed b,"_ ,'F.d.",l'""". (l;n" 0 ';'0 01
pro-gn", ,,",,0"", 01:

0"",,"-"'1 O"'ll"'''' '''''''''. &>00"" 00 "'" < ..-<11o,
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$407,796.22
$407,796,22
$17.791;.22
Sf1,796.22
$390.001),00

$390,000.00
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GOVERNMENT
EXHIBIT
41
07Cr, 5<11 (RPP)(ID)
A-152
FINANCIAL STATUS FtEPORT
(Long Form)
'Follow /tI.s/ru.:Uon.:< on I/le Q8':/<)
. .... ...,<U!iQ",. SWMIlI
r ,-

OM8 AIlpro"",
'"L
II> 1111"U."""",orqo , ,
NISTlATP 70NANB 1 1-13050
..
1. Cl.Jpn\P-OOn .... /I<Id,.. ... , i""lud"",?IP_1
Compl,lt", Aided Inc.
331t1 51., \'otIOWYOrl<, N_York 10016
i.. &npb)'H h:lonjif""1"'" II ..... ..,.,. Id.n\!/vit>;1-""",.r FlnolRrpoMI "'''''''''''''''1
O,I'_C"'OAdt>J __
F""", .ro; F"",,". 1""''''1>. y"""
110: (\0lo<1III, Day.
1011120Q1 3131/2002 11112002 3131{2002
lQ.
, ,

"

Thl,!'
..
21<1,UOO,00 240,000.00 450,OOO,(l0
b.
O,OD

pl'l>!)tl!O> 0WId .. "'\h dwoatQIl el\IUI'III"'"
'"'
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210,000.00 2-4(l,000.00 450,000.00
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0.00
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0.00 0.00 0.00
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,
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..,. OMb Cl"'" ........
GOVERNMENT
EXHIBIT
41A
07e," 541 \RPP:(ID)
A-153
(Shorl Form)
(Follow InstruCllons on Ihe
, i ,I Element
NIST ATP
,
Computer Aided Surgery. Inc.
New York, NY 10016
14. I I I
133889180
70NANB 1 H3050
'.1
Ii i g Number
131 068299665
I To: (Monlh. Day, Year)
09/30/2002
9 ;Mo,,", I
1
10
Previously
Repor1ed
,
$407,796.22
b ,,'o.",y,
$17.796.22
$390,000.00
, " ", .. ,,'"
9 , , ,(S.m. lQ
II
i. I ,IFederal: i i
I
I P'g' 01
No
0348-0039
1 1
Final Report , Bas,s
DYes Q!J No IZI Cash 0 Accrual
To: (Month. Day, Year)
06/30/2002

." .
"!
$208,726.84
$61" "'"'
$8,726.84
"""
$200,000.00 ",
$800,000.00
$210,000.00
11 Indirect 0'
I 0 Predelermined 0 Final
.. nse
Ib Rate
12. Remarl<s: Al\achany
n, II 1
Ii i
Typed, Ii Til!e
Dr DB Karran. President
Ie. Base Id. TolalAmo<ml Ie federalShale
i I r i required by Federal sponsoring i Ii I I
,," 'o"h I.,
Submilled EXHIBIT II
42
07 Cr. 541 (RPP) (lD)
Standard Form 269A (REV 4_BB)
Prescribed by OMS CirclJlars A-1 02 and A-I 1 D
A-154
(lMI1 F'oJm)
o OW /J
"'00

(F II I stnKtkl th b elf)
1.
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W!'dl R"I',m '" IIy
03<48..0039 1 ... NISTIATP 70NAN61H3Q50
R,.opOi;>n! (H<>.... ,"" '_'.IrICluOina m> ..... )
ComF'uler Aid.llj S\lrgtof)', 11'0.
300 E. 3-31':1 St . New YOlk. N"w'(urlr 10016
....... Hu\Wo, 8. ,. 11",,1.
13-3669160 131 066299 6{lS e," .I!lI c "
IJ
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1011/2:001 6/31112002 4/1/2002 e;13012002
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400,000.00 140.000.00 690.000.00

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0.00
,
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4!\O.00O.OO 140,Q{)0.OO 590,000.00
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13... ... olhorl=l C ...... iog OIIid.ol

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13.2003 e.V 15
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_" Pm;ml :;.,p, I"s!"'''.:''m"
<".,'" V"'>r

FINANCIAL ST ATUS REPORT
(Shari 1'0"")
(",,:I;)w on IMe
l ()II",r Number
f\f,"ig",-,n By fn<lr-,.')!
70NAN811-3050
0'1,1'1 Aopro""l
"" 0348-0039
fi r',"",1 ;'
[2!J
1310611299865
T;) ,1,1""\,,. [)'W i"",!
09.')0/200<:
!]I I',,, 0 "'.'
f! " .. """I C',we,,,,d by lnis R"pon
..... ",. ('.I,mU>. Day, Yt:url
07/01/2002
I"
(M""lh, D"'/. '-""f!
09/30;2002
[".
ill

I

361(, sn 05 $212.97r'9A $829,5000C
326.52,3,06 S:?
",U-'i-
,-, -_,-,------'------1-------+-------+-------1
S29.500.00
00 S2' 0,00':; (Ji) 5;800.0000D
.. .. '.
:', ., .
5800.000,00
I' ... .. "".. I c"dll' to II", b".1 ei my fOre,; b :mdcomp("te and 10"1 6\1 ""tlay. :me; unllquldalod
oblig.1\1""._ ."" I", lh" P"'POSQ$"," IQr1h;" th" "-,,,ar.! QOCUmMls
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GOVERNMENT
EXHIBIT
43
07 Cr, S41 (RPP)(ID)
I
,
II
, I
I I
I I
I I
I I
I
A-156
FINANCIAL aT ....
(Lonll Form)
'FOllOw <>II luI",..1
, "'" """Y "lito.-
r .nl!J'!r'-.:lfM'\t..,. ....
mwToor I<) Wt,.:.11 R<po<1 0; !'>o<l... , i>.gOrcv
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70NANB1H3050
"",*"t<'II'l<IItoNUIion (1"0_ .oo """Ili"'. """"'N, ","UOIn(! ZIP _.)
Compl,I' .. r AldC(l Surgery, LLC
:JOO E. :J:Jrd .9L. NBw Yo,,", New YOTiI: JOO1(1
\6. Roq,itnr.AwMi, NIxlll>otQl" 1CI/Ir:I.ryI<>g Humbot 6, F ..... A"I""!
' ...
27-o0s.oo10 131 299 66' DY

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from [1o'n1l1,OI'II. 'tt11) t: DiI)'. YeoII)
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,

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800,000.00
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.010 IJIJD':" "l.ID DW
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GOVERNMENT
EXHIBrr
43A
o'} Ct. 54l (RPP':{ID)
A-157

to WI"", RI!!>O/t i' 5lJt;\'\tII>d
!'llST/ATP
FINANCIAl.. STATue REPORT

(Follow Im;/wr;//ons.an I Ollt
r ..
-
--
Q,F_.r"",,",.,
70NANEl1 H3050
3. >:>::1lXllng ZlP..,""')
Campl/lQ1 SvrQe\y, LLC
300 E. N_Yori<. N"wVcrn 10(11,.
.. Il..,....., I'. AQO'llml NlJI\lI>O' 0( l<loottyllQ N'rroe.-
2"7 00;>01)/0
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((.""1- 6, I'SJ or ... D lind cl
800,000.00 252.000.110
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(Fo/Iow i(llftrucflOO3 en bacl!,l
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CompU!9r $lIrgllry, LLC
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GOVERNMENT
EXHIBIT
45
01 Cr. 541 (RPI') (10)
A-159
I.

NISTIATP
FINANCIAL ST,lTU8 REPORT
(Longfann/
FollOW /(I$lroclkms 011 filII
:t W>! '"

10t-<ANBtHJO!l'O
IN ....... M """""I.,. "'W ..... ZlP <OOol
Computer Ald"d SurOQry, LlC
33,..,. Sf., Nil'" York. No;w York 10016
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1011/2001 4111:!OOJ
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GOVERNMENT
EXHIBIT
46
07 Cr, 541 (RPp) (lD)
A-160
AUG 2 5 ZlJ04
MEMORANDUM FOR:
FROM:
SUBJECT:
Angela McNerney, Chief
UNITED STATES DEPARTMENT OF COMMERCE
Office of Inspector General
Office of Audits
Al1..ANTA REGIONAL OFFICE
401 W. Pl!achl"", St . N.W., SUil" Z742
AtilUlla. GlIOrgla 30326
(404) 730278f! FAX
(4t14) 730-Z7eO
William F. BedweJI. Jr.
Regional Inspector Geneml
for Audits
FinIll Audit Report No. A TL-1609S-4-0002
Auditee: Computer Aided Surgery. Inc., NY
NIST Award No. 70NANBlH30S0
We are attaching a copy of the subject audit report for your action in accordance with
DAO 213-5, "Audit Resolution and Follow-up." The original report has been sent to the
auditee/recipient, who has thirty (30) days from the date of the transmittal to submit comments
and supporting docwnentation to you. We have also attached a copy of our transmittal letter.
Under DAO 213-5, you have sixty (60) calendar days from the date of this memorandum to
reach Ii decision on the actions you propose to take on each audit finding and recommendation
and to submit an Audit Resolution Proposal to this office. The format for the proposal is Exhibit
8 of the DAO. As applicable, your written proposal must include the rationale andlor legal basis
for reinstating any questioned cost in the report and should reference any supporting
documentation relied on. Under the DAO, the Office of the Inspector General must COIlC"llI" with
YO"lll" proposal before it may be issued as a final detennination and impJemented. The DAQ
prescribes procedures for handling any disagreements this office may have with the Audit
Resolution Proposal. Also, please copy us when the audit determination letter is sent to the
auditee.
To preclude disclosure of proprietJry infonnation protected by !he Omnibus Trade and
Competitiveness Act of 1988, we have limited distribution of this final report to NlST WId
Computer Aided Surgery officials.
GOVERNMENT
EXHIBIT
62
07 Cr. 54l (RPP)(lD)
I
I
1
I
I
I
A-161
Any inquiry regarding this report should be directed to me at (404) 731)..2780. All
correspondence should refer to the audit report number given above.
Atlachmeots
cc: . Sharon BisCQ, Audit Liaison, NIST
Marilyn Goldstein, Grants Officer, NIST
Barbara Lantbis, Policy nnd Operatiom Advisor, A TP
Hope Snowdeo, Granbi Management Specialist,. NIST ~ A 1 P
2
A-162
AUG 2 5 1004
UNITED STATES DEPARTMENT OF COMMERCE
Office oflnapector Geneml
Office of Audits
ATLANTA REGIONAl OFFICI:
401 W. SI.. N.W., Su:l1\3' 2:742:
Allarrla. Goor';!la 303m
(40..) 730-2768 FAX
(404) 730-27ao
TIlE A IT ACHED AUDIT REPORT MAY
CONTAlN PROPRIETARY INFORMATION
I>r. 1). Il. lCarron
ChiefTecbnical Officer
300 East 33'" Street, Suile 4N
New YDrk. New York 10016
DearI>r. Karron:
Enclosed is the Final Audit Report No. A concerning the following
Department of Commerce financial HSsistance award:
Recipient: Computer Aided Surgery, Inc.
Award No.: 70NANBIH3050
DOC Agency: Nationallnstitute of Standards and Technology
The final report W8.'j prepared by the Atlanta Regional Office of Audits. Office ofInspedor
General.
This lett-cr is notice of your opportunity and responsibility to review the report and to
a complete response that addreSSe3 each audit finding and recorru:nendatlon. Hyou believe
that the report is in error in any respect, or if you disagree with any of the findings and
recommendations, it is important that you explain the error or your reasons for disagreement
and either submit to the Department evidence which supports your oontentioIl8 or 'reference any
such evidence previously submitted to this office. You a150 must explain how each documentary
submission supports the position you are taking; otherwise, we may be unable to analyze the
infoIlDstion.
Your complete response will be considered by the Department in arriving at a decision on what
action to take with respect to the findings and rocommendations in the audit report. Enclosure 1
is an explanation of applicable administrative dispute procedures.
Your respo nse to this report must be postmarked no later than thirty (30) days from the date of
this letter. There will be no extensions to this deadline. If you do not submit a response within
the required time frame. you win have no other opportunity to submit comments, arguments or
documentation before the Department makes a decision on the audit report.
A-163
Please send your response (including doc1Uentary evidence) to the following audit action
official:
Angela McNerney, Chief,
NIST Grants and Agreements Management Division
U.S. Department of Commerce
100 Bureau Drive. Stop 3580
Building 411, Room A-143
Please send a copy of the response letter only to:
William F. Bedwell, Jr.
Regional Inspector General for Audits
U ,S, Department of Commerce
401 West Peachtree St, N.W. - Suite 2742
AUanta, GA 30308
After evaluating your response, the audit action official may provide. you with further guidance
or request clarification of your response. IU you prepare your response. if you have any
questions about lhis report or the process by which the Department reaches a:final decision,
please call me at (404) 730-2780, referring to the Eludit report number given above.
Sincerely,
1(a..0I-u" /J( a ~ ; : z : r
Regional Inspector General
for Audits
Enclosures
cc: Sharon Bisco, Audit Liaison, NlST
Marilyn Goldstein, Gnmts Officer, NIST
Barbara Lambis, Policy and Operations Advisor. A TP
Hope Snowden, Grants Management Specialist. NIST -A TP
Angela McNerney, Chief, Grants and Agreements Management Division. NIST
2
A-164
Enclosure 1
NOTICE TO AUDITEE
Financial Assistance Audit<;
1. Audit requirements applicabJe to a particular financial assistance award may be established
by law, regulation, policy or the terms of the rooipient's financial assistance agreement with
the Department of Commerce.
2. The results of any audit will be reported to the bureau or office administering the financial
assistance award and to the recipientlauditee. unless the Inspector General of the Department
determines that it is in the Government's interest to withhold release of the audit report.
3. The results of an audit may lead to adverse consequences for the auditee, including. but Dot
limited to the following actions (which are subject to applicable laws and regulations):
o suspension and/or tennination of current awards;
o referral of identified problems to other federal funding agencies and entities
as deemed necessary for remedial action;
o denial of eligibility for future awards;
o canceling the authorization for advance payment and substituting reimbursement
by check;
o establishment of special conditions in c\UT'eIl1: or future awards; and,
o disallowance of costs, which could result in a reduction in the amount of federal.
payments. the withholding of payments, the offsetting of amounts due the
Government against amounts due the auditee, or the establishment of a debt and
appropriate debt collection follow-up (iDciuding referrals to collection agencies).
Because of these and other possible consequences, an auditee should take seriously it<;
responsibility to respond to audit findings and recommendErtions with explanations and
evidence whenever audit results are disputed and the auditee has the opportunity to comment.
A-165
4. To ensure that audit reports are accurate and reliable, an auditee may have the following
opportunities to point out errors (of fact or law) that the auditee be1ieves were made in the
audit, to explain oilier disagreements with audit findings and recoromendations. to present
evidence that supports the auditee's positions, and to dispute final determinations:
o During the audit the auditee IllBy bring to the attention of the auditors at any time
evidence which the auditee believes affects the auditors' work.
a At the completion of the audit on-site, as a rrurtter of courtesy. the auditee usually
is given the opportunity to have an exit conference to discuss the preliminary
audit findings Wld to present a clear statement of the auditee's position on the
significant preliminary findings, including possible cost disallowvances.
o Upon issuance of the draft lIUdit report. the auditee may be given the opportunity
to comment and submit evidence during the 30-day period after the transmittal
of the report. (There are no extensioWi to this deadline.)
o Upon iSSlliUlce of the final audit report, the auditee is given the opportunity to
comment aIJd to present evidence during the 30-day period after the transmittal
of the report. (There are no ex.tensions to this
o Upon issuance of the Department's decision (the "Audit Resolution Determination"),
on the audit report's fmdings and recommendations, the auditee has the right to appeal
for reconsideration within 30 calendar days after receipt of the Determination letter if
monies are due the government. (There are no extensions to this deadline.) The
Determination letter will explain the specific appeal procedures to be followed.
o After an appeal is filed. Of after the oPPOrtunity for an appeal has expired, the
Department will not accept any further submissions of evidence concerning an
auditee's dispute of the Department's decisions on the resolution of the financial
assistance audit. If it is detemrined that the auditee O'WeS money or property to the
Department, the Department will take appropriate collection action but will not
thereafter reconsiderthe merits of the debt
o There are no other administrative appeals available in the Department.
A-166
bec: Lisa Barlow, Counsel to the Inspector General
Bill Bedwell, Deputy Assistant Inspector General for Regional Audjts
Tom McCaughey, Director, Financial Statements & Accountability DivisioD
ROD LiebeIDlIDl, Director, Business & Science Division
John Bunting. Denver Regional Inspector Oeneml for Audits
David Sheppard. Seattle Regional Inspector Geneml for Audits
Editor
Allnie Hohnes, Management Assistant
Jackie Day, Auditor
!G', Office
Follow-up File
Master File
Katie McKevitt
Belinda Riley
Keith Teamer
A-167
U.S. DEPARTMENT OF COMMERCE
NATIONAL INSTITUTE OF
STANDARDS AND TECHNOLOGY
New York, New York
NIST Cooperative Agreement
Number 70NANB1H3050
Final Audit Report No. ATL16095-4-0002 / August 2004
TIDS AUDIT REPORT MAY CONTAIN PROPRlETARY DATA
EXEMPTED FROM DISCLOSURE UNDER nm FREEDOM OF
INFORMATION ACT (.5 U.S.C. 552) BY THE OMNIBUS TRADE
AND COMPETITIVENESS ACI' OF 1988 (15 U.S,C, 278N)
Office of Audits, Atlanta Regional Office
A-168
u.s. Departmellf ojCommerce
Office pflnspector General
Report ATL-J6095-4_a002
.A.ugystZQ04
TABLE OF CONTENTS
Page
EXECUTIVE SUMMARy ...................................................................... ..
INTRODUCTION ................................................................................. .
OBJECTIVE, SCOPE AND METIlODOLOGY ........................ "." """" """.... 2
FINDINGS AND RECOMMENDATIONS 4
AWARDEE'S INADEQUATE FINANCIAL MANAGEMENT SYSTEM
CON1RlBUI'ED TO $547,426 IN QUESTIONED COSTS .. " ........ " ....... ".".... 4
A WARD ACTIVITY SINCE LIMITED
SCOPE AUDIT WAS ISSUED JULY 2003.. .... " .. " .... " .. " .. "" .... """" ... "..... 6
NIST Not Reimbursed for Excess Drawdowns." ........................... " ...... ".. 6
Financia1 Status Reports Remain Inaccurate...... ............... ........ ................ 6
RESULTS OF COMPLIANCE AUDIT:
$582,222 DUE TO FEDERAL GOVERNMENT.. ... " .. " ... "." .... " ......... """" 7
AWARDEE'S RESPONSE" ................... " ........................................ ".".... 7
OIG COMMENTS ........................ " ........................................... " .. ".".... 8
Recommendation...................................... .............................................. 9
OTHERMATIERS" ..... " .......... " ............. " ............... " ..... ".................... 10
APPENDIXES
I. SUMMARY OF FINANCIAUCOMPLIANCE AUDIT
II. JULY 2003 OIG AUDIT REPORT
III. AWARDEE'S RESPONSE TO DRAFT REPORT
A-169
US. Department of Commerce
Office a/Inspector GeJ!f?G!l
EXECUTIVE SUMMARY
Report AT.16095 ...,j.0002
August 2ooi/
In September 200 I, NlST aWllided 8 $2,110,500 Advanced Technology Program (ATP)
cooperative agreement to Computer Aided SmgeI)', Inc., a for-profit company researching
Computer and engineering technology. Under. the ATP program a single company can receive
up to $2 million in A 1P funds for the direct costs ofResellich and Development w:.tivities for
up to three years. Single company recipients are responsible for funding all of their own
overhead IUld indiIect costs. Computer Aided Smgery, Inc included in the award agreement
its commibnent to provide $110,500 of direct project costs in addition to it<>' agreement to pay
all of the indirect costs.
The agreement with Computer Aided Surgery was for a 3-year period With A 1P committing
$2 million in federal funds; $800,000 in the first year. $600,000 in the second year, and $600,000
in the third year. Computer Aided Surgery committed in the amrd agreement to provide a
4.57 pereent matching share of the direct costs as follows; $36,500 for the first year, $30,500
for the second year. and $43,500 for the third year. The total direct rosts of the project were
estimated to be $2,110,500. The PUIpOse of the project was to develop and demonstrate novel
computer and engineering technology based on Digital Morse Theory to enhance the quaJity and
usability of computerized anatomic models for precise and accurate cancer treatment therapies.
In the first year of the award, the company withdrew the entire $800,000 in federal funding. The
second year of the award began October 1, 2002, and by lune 2003. the company withdrew
$545,000 of the $600,000 available in federal funds. NIST Grant Officials asked our office to
perform an audit to determine whether the company had actual expenditures for the federal ftmds
that had been drawn down since the grants officials were baving difficulty getting accurate and
complete budget data from Computer Aided Surgery.
In July 2003, our office issued a very limited scope audit report (A'IL-16095-3000l) infonn.ing
NIST Utat the company had not contributed any of its reqUired $54,084 cost-share and had drawn
down $205,125 in ~ x c e s s of the federal share of AlP project costs based on the infonnation in its
own 8CCOlUlting records. In addition., the financial status reports submitted to NlST were
inaccurate. We recommended that NIST suspend the Ilward pa)'IDents lIDtil Computer Aided
Surgery reimburse NIST the $205,125 for funds drawn down in excess of federal share of A 1P
project expenses and tile corrected Financial Status reports for the period of the award. As of
March 31, 2004, Computer Aided Surgery has not reimbursed NIST for Ute funds drawn down in
excess of the federal share of A TP project costs and the award remains suspended.
In this second report we are questioning a total of $547 .426 in costs that were either unallowable,
unallocable or exceeded the budget limitations established in the ATP award. Our audit a100
found that while the rompany bas submitted revised fmanciaI status reports as required, the
reports remain inact;urate, The reJXlrts show the amOlIDt drawn down by electronic transfer for
each quarter rather than the actual costs incurred on the A TP project. We also reported under
Other Matters, the primary shareholder's inappropriate use of federal funds as a personal loan
aCCOlIDt.
A-170
u.s. Department QfConunerce
Office oUnweJ:tor General
Report ATL-J6095-4-0001
Augrw200.f
The officials at Computer Aided Surgery po not agree that any additional matching funds are due
NIST nor do they believe that there are any significant questioned costs. The awardee submitted
a general explanation of the financial difficulties that Computer Aided Surgery encountered since
receiving this award, their overall reasons for disagreeing with our draft report, and a point by
point rebuttal of each item of questioned costs. While additional explanations were provided for
our consideration, the awardee did not submit any additional documentation to supJX>rt the costs
we questioned in our draft report. We continue to recommend that the NIST ATP disallow
$547,426 in questioned costs and recover $582,222 in excess Moral funds disbursed.
ii
A-171
U.S. DepartmenJofCommerce
Office oflnspector GelJerar
INTRODUCTION
Report
Augwt2004
In September 2001, NlST awarded a $2,110,500 AdVllIle<d Technology Program (A TP)
cooperative agreement to Computer Aided Surgery, Inc., a for-profit company researching
innovative composite design and engineering technology. Under the ATP program a single
company can receive up to $2 million for the direct costs of Research and Development activities
for up to three years. Single company recipients are responsible for funding all of their own
overhead and indirect costs. Small companies like Computer Aided Surgery, Inc., are not
required to provide cost-sharing of direct costs; however. they may pay a portion of the direct
costs if they wish in addition to all tile indirect costs.
The agreement with Computer Aided Surgery was for a 3-year period with A TP committing
$2 million in federal funds; :800.000 in the first year, $600,000 in the second year. and $600,000
in the third year. Computer Aided Surgery committed in the award agreement to provide a 4,57
percent matching share of the direct costs as follows; $36,500 for the first year, $30,500 for the
second year, and $43,500 for the third year. The total direct costs of the project were estimated
to be $2,110,500. The purpose of the project was to develop and demonstrate novel computer
and engineering technology based on Digital Morse Theory to enhance the quality and Usability
of computerized anatomic models for precise and accurate cancer treatment therapies.
In the fIrSt year of the award. the company withdrew the entire $800.000 in federal funding, The
second year of the award began October 1,2002, and by Jooe 2003, the company withdrew
$545,000 of the $600,000 IIYailable in federal fund:!. NlST Graot Officials asked our offie< to
perform an audit to determine whether the company hru:l actual expenditures for the federal funds
that had been drawn down" since the grants officials were having difficulty getting accw-ate and
complete budget data from Computer Aided Surgery.
In July 2003. our office issued a very limited scope audit report (ATL-16095-3'OOOI) informing
NIST that the company had not contributed any of its required $54.084 cost-share and hru:l drS'WIl
down $205,126 in excess of the federal share of ATP project costs based on the information in its
own accoooting records, In addition, the financial status reports submitted to NlST were
inaccurate. We recommended that NlST suspend the award payments until Computer Aided
Surgery reimburse NIST the $205,126 for funds drawn down in excess of federal share of ATP
project expenses and file corrected Financial Status reports for the period of the award.
Computer Aided Surgery revised its Financial Status as requested. However, the
company also hired another accowrting fum after we completed our field work in June 2003 to
assist in the company's record keeping and to work with our office While we concluded the audit.
The primary owner of Computer Aided Surgery did not believe that it received proper credit for
all the project costs it incurred and the accounting fum made adjusting entries to the books and
to identify NISI-related expenses versus corporate costs, As a result, we perfonncd
additional fieldwork in December 2003 to review the revised records and additional
documentation that Computer Aided Surgery was providing to support its costs.
A-172
US. Department a/Commerce
Offlce of}/lSTJeCtor General
Report ATIA6095-UJOOl
AyfW(2Of}4
OBJECTIVES, SCOPE, AND METHODOLOGY
We peJfonned our audit of the NIST award in New York City at the company's office during
June 2003 and the accountant's office in December 2003. MST requested that our office
conduct the audit because the grants and program officials were concerned about Computer
Aided Surgery's ability to. accOlmt for federal funds being spent. The purpose of the audit was to
determine the finaIlJjjal status of the award, the reasonableness. and aIlowability of expenses
charged against the award and review compliance with applicable laws and regulations. The
audit covered the period from October 1, 2001. through June 27, 2003. As 11 result Dfour initial
fieldwork the award was suspended on June 27. 2003.
After OUI initial fieldwork, Computer Aided Surgery hired a new accounting fmn to adjust its
books and records to more accurately reflect government requirements. In addition, Computer
Aided Surgery submitted additional documentation to NlST to SUpPDrt its matching share
cDntribution to the project. We performed additional field audit work in December 2003 to
review the revised accOl.mting records, examine pertinent company documentation, and
interviewed agency and company Dfficials as deemed necessary
We examined a copy of the company's mDst recent 8IlIlual audit report for the year ending
September 30, 2002. That audit 'WaS conducted by an independent public accountant in
accordance with criteria CDn1Bined in the NISF Program Specific Audit Guideline.s.for adwmced
Technology Program (ATP) Cooperative Agreements with Single Companies dated May 1999.
The report disclDSed internal control weaknesses and questioned costs. We obtained our own
understanding of internal controls through inquiries with appropriate personnel, inspection of
relevant dDcumentatiDn and Dbservation of Computer Aided Surgery's DperatiDn to. fairly
evaluate the assertions included in the audit report. Our testing related to internal cDntrols was
focused Dnly on the contrDls related to. our audit objectives of reviewing the reported costs and
administrative practices and was not intended to. fonn an Dpinion of the adequacy of
managements controls. Weaknesses noted in our testing are discussed in the Findings and
Rec<JrnrnendatiDns Df this report.
We relied on computer-processed data supplied by the cDmpany as the basis for our audit
findings and recommendatiDns. Consequently, we tested the accuracy by tracing and comparing
the data to original source dDcunients and other supporting documents. Based on our tests, we
concluded tha! the computerized data was sufficiently relinble for use in meeting Dur Dbjectives.
We evaluated the corpDratiDn's compliance with federal laws and regulatiDns applicable to the
NIST cooperative agreement. We identified MST's General Terms and Conditions Advanced
Technology Program and DOC Financial Assistance Standard Terms and Condilfons and
Special Award Conditions as the applicable federal requirements. Since this is a for-profit
company, we also identified 48 CPR Part 31, Contract Cost Principles and Procedwes and
15 CFR Part J 4, Uniform Administraliw Requirements for Granis and Agreements with
Instirufions of Higher Education. Hospitols, Other Non-Profit and Commercial Organizations.
2
A-173
u.s. Department o/Commerce
Office o{[ruqector General
Report ATL-16095-4.../}002
AU?VSt 1004
We fOWld that the company was not in COplpUance. with certain cooperative agreement
requirements. The noncompliance issues are deemed material and are detailed in the "Findings
and Recommendations" section of this report. With regard to items not tested, nothing came to
our attention thHt: caused us to believe that the company had not complied in all material respects.
We conducted Ille audit in accordance with Government Auditing Standards issued by the
Comptroller General of the United States and included tests of the accounting records and other
auditing procedures lh.at we considered necessary 10 fully address the audit objectives. The audit
was performed under the authority of the Iospector General Act of 1978, as amended. and
Department Organization Order 10-13. dated May 22. 1980, as amended.
This final audit report supersedes our July 2003 audit report., and resolution of this report should
be deemed to constitute final action with respect to the prior report.
3
A-174
u.s. Deparrme"t a/Commerce
Office of/mpector General
F1NDINGS Al'iD RECOMMENDATIONS
AWARDEE'S INADEQUATE FINANCIAL
MANAGEMENT SYSTEM CONTRIBUTED TO
$547,426 IN QUESTIONED COSTS
Report ATL-1609S-4"'(}()()2
Augu:tl1004
Computer Aided Surgery improperly claimed $547,426 in award costs during the 21-month
project period ending June 27, 2003. The $547.426 in questioned costs represent<; arout
41 percent of the $1,345,500 drawn down prior to the avrard's suspension. Included in the
questioned costs were costs that should have been considered indirect cost<; but were claimed as
direct project costs, costs that were specifically not allowable per the budget and costs that
exceeded the budgeted amount Computer Aided Surgery's financial management system failed
to provide effective controls over the accOlmtability for a11 funds, including written procedures
for determining the reasonableness. al10cability and allowabiIity of costs and comparison of costs
to budget amounts. These inadequacies in the financial management system contributed to the
improper claims by Computer Aided Surgery and will result in a refund due NIST of $582,222.
The questioned costs are detailed in Appendix I.
Under the A 1P program a single company can receive up to $2 million for the direct costs of
Research and Development activities. Included in the $547,426 of questioned costs were costs
that should have been accounted for as indirect costs and absorbed by the company rather than
claimed as direct ATP award costs.
According to the A TP Proposal Preparation Kit.
"ATP projects are industry/government, cost shared projects. A company proposing
to recover 100 percent of the project costs (because all project costs are charged as
direct costs) from ATP is not complying with the spirit of the ATP statute because
the company has no funds of its own at risk:'
During the audited period, Computer Aided Surgery's only sourCe of external funding was the
NIST ATP award. The primary owner of the company paid for some of the corporate expenses
out of his personal funds. However. the fact that there is only a single federal funding source
does not imply that all costs incurred by the corporation should be claimed agaimt the A TP
award. While the main activity of Computer Aided Surgery was the Research and Development
Award, there were management and general activities including oversight, business
management, general record keeping, future fund-raising and related administrative activities
that comprise the overall administmtion of the business.
Recipients of A TP awards are required to have a financial management system that meets the
standards found in 15 CFR Part 14
j
Uniform Administrative Requiremfmf for Granl5 and
Agreements with Inrtitution of Higher Education Hospitals, Non-Profit and Commercia,
Organizalionr. Standards for financial management systems are found in Subpart C. Section 21
and require recipient's financial management system to include the following:
4
A-175
u.s, Department a/Commerce
Office oflnspeqtor Ge"era!
o "effective control over and accpuntabiJity for rul funds.,.",
Reporf ATI,-/6095-4-0002
August 2004
"written procedures for determining the reasonableness, ruJocability and allowability
of costs in accordance with the provision of the applicable federal cost principles and
the terms and conditions of the a w a r d , ~ ' and
"Comparison of outlays with budget amounts for each award,"
Since the A TP budget included only direct project COSIs. the financial management system needs
to be able to prOperly classify costs as either direct or indirect.
Computer Aided Surgery does not have a financial m!lDagement system that allows it to
deteIIDine readily which of its costs are direct and which are indirect. The general ledger does
not separate direct from indirect costs, and Computer Aided Surgery never prepared an indirect
cost proposal that identified each item of cost to be included in the indirect cost pools.
The cost principles identified in 48 CPR Part 31, Contract Cost Principles and Procedures, do
not provide any specific guidance On what would be typical indirect cosls. :However, A TP's
Proposal Preparation Kit states that typical examples' of indirect costs include general
admini.'rtlation. maintenance, library expenses. and accounting. The kit ruso states that if the
recipient has an adequate accounting system consistent with genera11y aceepted accounting
principles, then certain expense items should fan into indirect cost CB!egories, even for a new
start up company with only one project.
The Computer Aided Surgery financiru management system did not identify the cosls that Were
direct costs and those that were indirect costs. As a result., Computer Aided Surgery has
inappropriately charged the following indirect costs to the A TP awan!: rent, utilities, salary
costs and related fringe benefits for company employees that should have had their sruanes
allocated between the A TP project and other corporate duties. and legal and accounting costs.
Also. Computer Aided Surgery's financiru management system did not identify the costs that
were specifically UDrulowable per the award budget. As a result., Computer Aided Surgery
inappropriately charged the ATP project for costs that were specifically unallowable per the
budget and budget negotiation documents, These unallowable costs include: salaiy costs Blld
related fringe benefits of employees not approved to woIt on the project., specific travel and
transportation expenses, material and supply costs, and subcontractor expenses.
Finally, the financial management system did not compare the outlays with the budget amounts
for specific items in the budget. This resulted in Compmer Aided Swgery exceeding the
budgeted amount for equipment., supplies and other direct costs.
5
A-176
u.s. DEpanmeTit o/Commerce
Offire of/n:me.ctor Generol
AWARD ACTMTY SINCE LIMITED
SCOPE AUDIT ISSUED JULY 2003
Report ATL-16095-4-0002 .
August 1004
In July 2003. our office issued a very limited scope audit report (ATL 16095-3-0001) infonning
NIST that the company had not contributed any of its required $54,068 cost-share and had drawn
down $205,126 in excess of the federal share of ATP project costs based on the information in its
own accowrting records. In addition, the financial status reports submitted to NIST were
maccura'te and the reports for the second year of the award had not yet been submitted, We
recommended that NIST suspend the award payments until Computer Aided Surgery reimburses
N1ST for the excess drnwdowns including the cost-share not yet provided and file corrected
Financial Status reports for the period of the a'oVal"d.
NIST Not Reimbursed Cor Excess Drawdowns
Computer Aided Surgery didn't reimburse NIST for the $205,126 in excess drawdowns
identified in our July 2003 report. While the primary shareholder of Computer Aided Surgery
has said that he intends to contribute his own funds to the ATP project, the excess drawdo'Wlls
identified in our previous report are still classified as a loan Computer Aided Surgery owes
NIST. As shown in their combined balance sheet for June 30. 2003, Computer Aided Surgery
owes the ATP program $249,375 (See Other Matters, page 8).
Financial Status Reporis Remain ]Daecurute
Over the- course of the award, Computer Aided Surgery has had three separate accounting groups
managing the books and records of the corpomtion including the documentation and financial
reports required for ,the NlST ATP project. The financial reports present the company's
cumulative financial operations through each quarterly period. N1ST uses the quarterly reports
to monitor the awards and to ensure that recipients are managing funds:in accordance with the
cooperative agreement and the agency's administrative requirements. Therefore, it is essential
that the reports are submitted timely and are accurate.
Our original review disclosed that Computer Aided Smgery filed inaccurate Financial Status
Reports (SF-269's) for each of the four quarters during the period October I, 2001, through
September 30, 2002. The inaccurate reports show the amount of federal funds drawn down
rather than actual federal expenditures in the box designated "federal outlays for the quarter,"
1hereby. overstating expenditures. Additionally, Computer Aided Surgery claimed that it had
contributed the required cost-share funds. when in fact; no matching fimds have been
contributed. The Financial Status Reports had not been completed for any of the quarters in year
two of the award.
Computer Aided Surgery has since filed "revised ~ , Fmancial Status Reports for each of the four
quarters ending with September 30, 2002, and submitted Financial Status reports for the three
quarters during the period October 1.2002, through June 27. 2003, However. all of these reports
remain iruiccura1e. The reports continue to show the amount of federal fimds drawn down rather
than actual federal expenditures. These claims also show that total outlay.s were from federal
funds and Computer Aided Surgery did not contribute any ofits own funds.
6
A-177
u.s. Department of Commerce
Office o(Jn.rpector Genera'
Report ATL-lo095-4-()Q02
Allguti 2004
NIST General Terms and Conditions, Advance Technology Program, Section 7.c. (3)(a) states:
"The Recipient shall submit a Financial Status Report" (SF-269) on a calendar quarter
basis for the periods ending March 31, June 30, September 30, and December 31, or any
portion thereof, unless otherwise specified in a special awanl condition. Reports are due
no later than 30 days following the end of each reporting period:'
Since mST suspended the award on June 27.2003, and this audit covers the entire period of the
award, we are not making any recommendations on revising the Financial Status Reports.
RESULTS OF COMPLIANCE AUDIT:
$582,222 DUE TO FEDERAL GOVERNMENT
The compIia:rice audit of the three-year cooperative agreement covered the period October I,
2001, through June 27. 2003. During this period, the-company claimed $1,345.500 in project
costs. We are questioning $547,426 of this amount and. as it result, our audit sho\VS that the
company is entitled to only $763,278 in federal funds. Since $1,345,500 in federal funds Were
disbursed, we are recommending that $582,222 in excess funds be recovered, which includes
$205,126 from our July 2003 audit repon. The audit resu.lts are summarized below and detailed
in AppOlldix I.
Federal Funds Disbursed
Costs Claimed
Less: Costs Questioned
Costs Accepted
Federal Cost Sharing Ratio
Less: Federal FWlds Earned
Refund Due Federal Government
$1,345,500
547,426
$ 798,074
x .9564
$1,345,500
763:278
$ 582,222 (I)
(1) Includes refund due from our July 2003 Audit Report (See Appendix II)
Awardee Response
Computer Aided Surgery does not agree with the flndings and recommendations in our draft
repon. Specifically, officials at Computer Aided Surgery stated that no additionW. matching
funds are due NIST DOr are there any significant questioned costs. The financial problems the
company bas experienced can be attributed to 1) the company's inexperience with cooperative
agreements, and 2) bad advice from its w;countantl.uditor lhIIt ultimately misled CompU!'"
Aided Surgery, OIG and NiST A TP officials.
According to its response, Computer Aided Smgery's main issue with the draft repon is the
OIG's refusal to accept the word of it'> principal investigator thnt he bad verbal approval from
NIST officials for the oosts questioned in the report He asserts that because of the small size
7
A-178
u.s. Department a/Commerr:e
Ofllce of!1J5pector General
Report
AugwtlOO4
and unusual nature of Computer Aided S,,gery, the company cannot be expected to adhere to the
same governmental cost guidelines that are used by larger companies. Finally. the OIG is
reminded that it is more importaD.t to comply 'With the spirit of the law than the letter of the law.
Officials of Computer Aided Surgery stated that the OIG auditor has not considered the revised
financial statements submitted in December 2003. Furthennore, the company was not given
credit for its significantly improved business practices and fiscal control in the second year of the
award. Finally. Computer Aided Surgery officials stated that its scientific output outweighs any
accounting problems. Milestones are being met and basic science is being done.
The response included a point by point rebuttal attached as Exhibit I. The rebuttal expWns why
the company believes the questioned costs should be allowed
OIG Comments
We do not agree with the reSponse. While our flash report issued in July 2003 mu>
based on Computer Aided Surgery's earlier accounting records, our Draft Audit Report A 'fL..
16095-4-0001 relied on the revised books and records provided our office in December 2003.
We also accepted additional corrections forwarded to our office in February 2004.
We performed our audit in accordance with Government Auditing Standards which requiIe that
we obtain evidence to support our audit work:. In this audit. we examined the costs claimed by
Computer Aided Surgery agairu;t its own books and records and written correspondence with
A TP grant officers concerning budget negotiations. We evaluated the cOrporations compliance
with the Award's terms and conditions including the required cost principles (15 CFR Part 31)
and the program information found in the ATP Proposal Preparation Kit which is provided to
potential A TP recipients.
During year one budget negotialions, A TP grant officials did not approve many of the budget
revisions requested by Computer Aided Surgery. In addition. A TP officials continually
reminded Computer Aided Surgery that expenses' routinely considered to be indirect costs must
be absorbed by the company. This rationale is consistent with infonnarloo provided to NIST
recipients in the A TP proposal preparation kit.
We disagree 'With the recipients' observation that significant m.anagement improvements were
made dming the second year of the award. During year two, of the a"WaId, the principal
investigatorpaid himself salary checks in excess of twice his nonnal rate, thereby advancing
himself sa1ary payments. In addition. during the eight days the auditor 'WaS on-site (June 2003).
the principal investigator consistently violated financial controls put in place by his business
manager. For example, the business manager attempted to establish a policy where a check:
would not be written until he approved the invoice payment The principal investigator hand
wrote checks while we were on-site for invoices not submitted or approved by the business
mnnager.
8
A-179
u.s. Deparfment a/Commerce
Office Qfln.wector Ggneral
Report
d.J!guJt 2004
We find no merit to the argument that it is more important to adhere to the spirit of the law rather
than to the terms and conditions of the Award Agreement signed by both AT? officials and
Computer Aided Surgery.
Finally) we reviewed the point by point rebuttal of questioned costs attached as Exhibit] of the
response. The rebuttal did not provide any new documentation not already considered by the
auditor
J
and did not result in the 010 changing our position on the costs questioned.
Recommendation
We recommend that the NIST ATP Director disallow $547,426 in questioned costs and recover
$582,222 in excess federal funds disbursed.
9
A-180
u.s. Deparlmenf ojCommercf':
Q{(lCe ofInspeclor GeJ1era/
OTHER MATTERS
Report
August2004
Computer Aided Surgery's combined balance sheet for JWle 3D, 2003. shows that the corporation
owes NIST $249,375 offedeml funds that were drawn down over the 21-month period in excess
of the project related costs identified in the accounting records. These excess cirawdowru are
c'Wrent1y accOlDlted for as loans owed by Computer Aided Surgery to the A TP program.
We reviewed the transactions related to the loan account. Some of the transactions in the loan
at:COWlt ere due to the most recent accounting firms recording ofhown unallowable costs as
loans due NIST. However, other transactions in the loan account are due to the inappropriate use
of federal funds as a personal loan account by Coroputer Aided Surgery's primary owner who is
also the ChiefTecbnical Officer an the A TP Project.
As an example, on October 26. 2001, Computer Aided Surgery received its initial electronic
transfer of $150,000 affederal funds. TIris money was put into an existing checking account
with B. balance ofless than $5,000. On the swne day the Chief Technical Officer wrote himself a
check for $15,000 that was recorded initially as an advance on salary and later as part of the loan
account In addition. the Chief Technical Officer wrote himself.nine checks, $2,000 each. for
rent of office space covering the period January 2000 tlu"ough September 2000, a period of time
a full year before the start of the A1P award. This is a total of$93,OOO that went directly-to the
ChiefTecbnical Officer of the initial $150.000 electronic 'transfer. The ll'le of federal funds as a
personal loan IlCCOunt is completely inappropriate.
In addition to the geneml requirement fOWld in the finlmcial management standards that
a recipient should mlnim.jze the time elapsing between the transfer offtmds from the
u.s. TteB.SUIY, the Advanced Technology Program Special Award Conditions Section 9.c. states:
"Advances ... shall be limited to the minimum amounts necessary to meet inunediate
disbursement needs. Advanced funds not disbun;ed in a timely manner must be promptly
returned... AdVances shall be for periods not to exceed 30 days.
We cannot say for certain how much of 'the $249,375 is due to personal use of federal ftmds
because the accoWlt balances have been transferred between the persoml loan account and the
corpomte loan account and the :resulting co-mingled loan acCOWlt balances have been offset with
legitimate loan reducing payments such as the salary not paid to the ChiefTechnica1 Officer and
retained by Computer Aided Surgery to reduce the amount owed to NJST.

William F. Bedwell, Jr. Date
for Audits
10
A-181
U.S. Department ojCom",erce
Office ofinspector General
COltCatcgory
Roclll$$ified Com
COMPUTER AIDED SURGERY, INC
NlST AWARD NO. 70NANBUDOSO
SUMMARY OF FINANClAUCOMPI..IA.NCE AUDIT
OCTOBER 1,2001 THROUGH JUNE 27,2003
Report ATIA6095_if_0002
AuvutlO<U
APPENDIX I
Page loIS
a. :16,500 of costs claimed as "Subcontracts" was reclassified to "Other." This was dODe because the
.''Other'' catl:gory included the amount budgeted for !he audil
b. :S8,520 of costs claimed as "Supplies'" was reclllSSified to ''Equipment.'' The cost was for !he pocctmse ofa
scanner.
Computalion of funds due government
Federal Funds Disbursed
Cosl:& Claimed
Less: Costs Qu!:Stioned
(O$ts Accepted
Federal Cost Sharing Ratio
Le35: Federal Funds Earned
Refund Due Federal Government
$1,34.5,500
.547426
S 79&,074
x 9.564
S I ,34'.5,.500
763278
, 5&2,222 (I)
(I) Includes refund due from our July 2003 Audit Report (See Appendix II)
DRAFT
A-182
US, Dep/rrrenJ o/Commerce
Office oOrupector General
REFERENCE NOTES
1. Personnel Costs
Report ATL-16095-4-000Z
AIIW't2004
APPENDIX I
Page20f8
$1 04
7
683 in personnel costs are questioned because these costs ate not allocable Or
allowable to the A TP project.
$71,550 is not allocable to the A TP projecl 48 CFR Part 31.2014 states "A cost
is allocable if it is assignable or changeable to one or more cost objectives on the
basis of relative benefits received." While Computer Aided Surgery bas only one
federally funded project. the Chief Operating Officer and the Chief Technical
Officer spend time on organizational tasks for the business in addition to the work
performed on 1he NIST project. Based on inteIYiews concerning their
responsibilities, we allocated a pen;entage oftime for the non-NIST activities and
questioned that same percentage of salary cost.
o $25,000 of the $71,550 is questioned for the c;bief ()pcrating Officer due
to 25 percent of his time and salary" being allocated to non-NlST activities.
o $046,550 of the $ 71,550 is questioned for the Chief Technical Officer due
to 15 percent of his time and salary being allocated to non- NIST activities.
.. $33,133 is not allowable because NIST grants officials did not approve the salary
cost for two employees of Computer Aided Surgery. For B. cost to be considered
allowable. it must be reasonable and allocable and not prohibited by the
provi.sions oithe cost principles or contmctual tenns and conditlODS. Computer
Aided Surgery's Chief Technical Officer requested approval fortbe salary cost of
the following employees as part of its budget approval but did not receive NIST
approval.
o $15,222 ofllie $33.133 is questioned for the Fisca\ Control employee as
the position was never approved by NIST,
o $17.911ofthe $33.133 is questioned for the year two Business Manager as
the position was never approved by NIST.
DRAFT
A-183
u.s. Depwtmrmt a/Commerce.
Office oflrupector Geflrai
2. Fringe Benefits
Report ATlrl MJ95-4-0001
AyrostZOO.(
APPENDIX I
Page 30f8
$68,884 in fringe benefit costs are questioned because these costs are not allowable
according to the com principles or are not allocable to the A TP project
$52,,227 is not allowable because Computer Aided Surgery did not have a plan for
the various costs charged as fringe benefits. Fringe Benefits are considered as
part ofan employee's compensation. 48CFR Part 31- (.)(3) states, "The
compensation must be based upon and confunn to the tetms and conditions of the
oontractor's established compensation or practice followed so consistently as to
imply. in effect, an agreement to make the payment
o of the $52,227 is questioned for the medical expenses paid in
excess of employee's insurance reimbursements. These medical expenses
were primarily paid for one employee who is the Chief Technical Officer
on the project and the primary shareholder of the cotpOmtion. In addition,
to not baving an established plan, 48 CFR part 31 205 (b)(2) provides that
Wlder certain conditions the allowability of compensation requires closer
scrutiny such as in the case of compensation to owners of a closely held
cotpOmtion or where the business is such that its compensation levels are
not subjec.t to the restraint that nonnally occur in the conduct of
competitive business.
o $3,238 of the $52,,227 is questioned for education cost paid for an
empldyee of the cOtpOration. P'ayment for education expenses is not part
ofa statcd fringe benefit plan and is not an OIdinary expeme of the
cOIpOI3tion.
Go $14,196 of the $68.884 is questioned because it is a cost directly associated with
another questioned costs. 48 CFR 31-201- 6 (a) defines a directly associated
costs as any cost which is generated solely as a result of incurring another com
and which would not have been incurred had the other cost not been incurred.
When an unallowable cost is incurred, its directly associated costs are also
unallowable.
o of the $14,196 is questioned for health inrurance cost directly
associated with the re-alloca.tion of a percentage of the Chief Operating
Officer and Chief Technical Officer's salary to non-NIST activities.
o $2,600 of the $14,196 is questioned for childcare cost paid for the child of
the fiscal control staff. Since the salary of the fiscal oontrol staffperson
was not approved then the associated cost of childcare is questioned
DRAFT
A-184
u.s. Departmefll ojCommerce
Office o(fnspecto/ General
Report ATL-16095-40002
Augu,s120fJ4
APPENDIX I
Page 4 ofB
o $8,466 of the $14,196 is questioned for payroll tax expense directly
associated with the re-allocation of a percentage of the Chief Operating
Officer and CbiefTechnical Officer's salary to non-NIST activities.
Additionally, it includes the payroll tax expense directly associated with
the business manager's and the fiscal control employee's salary that were
never approved by NIST.
$355 of the $68,884 is questioned for miscellaneous fitness costs in excess of gym
membership paid,
$2,106 of the $68,884 is parking related costs for employees while they are at
work and for medical visits. NIST grants officials did not approve these costs as
part of the budget.
3. Travel
$23,998 in craveI costs are questioned, The travel expenses questioned included costs for
g l l S ~ local parking, taxis, tolls, meals and miscelIa.ir.eous other items. We allowed the
travel costs for conferences attended by the Chief Technical. Officer.
4, Equipment
$201,443 in equipment cost is questioned because these costs were not allowable
according to the cost principles, are not allocable to the A TP project, Or costs exceeded
the amount included in the budget for equipment. We reclassified $8,520 to the
equipment cost category from the supply cost category so the Adjusted Equipment Costs
claimed is $320,443.
o $18,424 of the $201,443 is questioned because the costs were for capital
improvements on the apartment owned by the primary shareholder of Computer
Aided Surgery and used by the company as its place of business. NIST Grants
Officials did not approve any aparfment reJated expenses as part of the A 1P
project.
o $3,500 of the $18,424 is questioned because even though :Mistretta
Electric was correctly identified in Computer Aided Surgery's accoWlting
records as capital improvement expenses these CQsts were incorrectly
charged to NIST as equipment expenses.
DRAFT
A-185
V,S. DepartmMt o/Commerce
Office q(lnsr;ectrJr General
Report ATL-1609S-4-0002
August 2004
APPENDIX I
PageS of8
o $14,924 of the $1 &,424 is questioned because these are costs for capital
improvement that were incorrectly identified in Computer Aided
Surg!:TY'S accounting records as equipment costs, The costs include:
Metro Solar $1,000; Jensen Tools $351: Figlia & Sons $ I , 9 9 S ~ Abe
Karron $14; HomefrontHarowareS6,313; HomefrontTroe Value $3,349;
Kips Bay Hardware $&0; 3DFX Cool $86; Micromark $986; Bator Bintor
$700; Home Depot $31; and Render $19,
$2,533 of the $201,443 is questioned beeause the costs were booked twice. TheSe
costs include: Office Depot $690; Jensen Tools $3; Homefront Hardware $229;
Cables America $717; Datavision Computer $9&; Kips Bay Hardware $35; Radio
Shack $100; Microsoft Technical $245; Real Audio Video $30; Techalcherny
Softwme $36; Ellerate $20; Apple Computers $32; RegSoft $40; and Software for
Science $25&.
$703 of the $201,443 is questioned because the costs were not allocable to the
ATP award. These costs Intuit QB.Payroll $129; Sid:s Bike Shop $17;
Regsoft.com $118; and PayPal $439.
$265 of the $201,443 is questioned because NIST grants officials did not approve
the costs of dues & subscription in the budget.
$179,518 of the $201,443 is questioned as the cost exceeded the amount included
in the budget fur equipment Since the cumulntive amount of the transfer
exceeded 10 percent of the total award, NIST must npprove the transfer of funds
between line items.
5. SUpplies
$24,0 I I in supply costs are questioned because these costs are not allowable azcording to
the cost principles or are not alJocable to the ATP project. We reclassified $8,520 from
the supply cost category tD the equipment cost category so the Adjusted Supplies Cost
Claimed is $39,344.
$21,506 of the $24,011is questioned because NIST grants officials did not
approve these costs in the budget.
o $378 for Chase montlJly bank analysis includes $30 in NSF cbarges.
o $2,952 for dues and subscriptions for American Express $623, Real_com
$129; ACM $198; IEEE $1,344; Qiosk $12; American Association $186
and Sigma Xi $460.
DRAFT
A-186
U,S. Department a/Commerce
O@ce oflnsfMClr.>r Googol
Report
Aum12004
APPENDIX)
Page 6 of8
o $599 for miscellaneous costs to Borders Books $49; Barnes & Nobel $18;
PayPa! $473; and Niestre $59.
o $285 for Internet costs paid to Thorn Conununication that was incurred
prior to the award period.
o $15.809 for cable hook-up of the Internet and monthly charges based on
internet usage. The proposa1listed the cost of the internet as an indirect
cost and therefore not an allowable direct project Cost. These costs
include: Thorn Communication $4.903; Webworqs $6,300; Janet Laylor
$161; Time Warner Cable $2,038; RCN $1,539; Verizon ISDN $238;
Verizon Wireless $82; T-Mobile $237; UnkoOVlll purchase $25: Sprint
$250; and JDT America $36.
o $1,014 was reclassified from the miscellHneous category to the Internet
category in the supply expense. This costs was to Black Box.
$2,323 of the $24,011 is questioned because the cost was booked twice. TllfIse
costs included: Q-Pass $50; PayPal $62; Jensen tools ($72); Office Depot $1,637;
Sigma Xi $460; and American Association $186.
It - $651 of the $24.011 is questioned because these costs are for capital
improvements paid to various vendors that were incorrectly identified in
Computer Aided Surgerys accounting records as supply costs. The costs include:
Denver Air Support $295. and Homefront Hardware $356,
The supplies budget was for $11.000. However. we did not question the costs that
exceeded the budgeted amount because NIST allows the recipjent-to re-allocate up to 10
percent of the total budget between direct cost categories without prior approval.
6. Subcontract
SfJ7.372 in subcontract costs are questioned because'these costs are not allowable
according to the cost principles or are not allocable to the A TP project. We reclassified
$16.500 from the subcontract cost category to the other cost category so the Adjusted
Subcontract Cost Claimed is $147. 153 .
$37,146 of the $67,372 is questioned because these costs should have been
coosidered indirect costs and are not allowable ATP direct project costs
o $2,465 is questioned for tax work done by the auditor and a training
course taken by the auditor that is not allocable to the ATP award.
DRAFT
A-187
u.s. DepartmenJafCammerce
Office oflropector General
Report ATlA6095-4_000Z
AJigusl2004
APPENDIXl
Page 7 of8
o $7,455 is questioned for legal costs, NIST grants officials did not approve
as part of the budget.
o $25,317 is questioned for bookkeeping service, NlST grants officia1s did
not approve this cost as part of the budget.
o $909 is questioned for clerical costs that are indirect costs and not
allowable direct ATP costs.
o $1,000 is questioned for work perfonned by Valley of the Mage
Consultants. NIST grants officials did not approve this cost as part of the
budgeL
$1,000 of the $67.3721s questioned for payments to the Chief Technical Officer's
Brother for.1he setting up a projector purchased with A TP funds. The purchase of
a projector was not in the budget or approved by NIST grants officials, and the
associated installation is not allowable.
$12.000 of the $67.372 is questioned for a subcontract with ATG consultants.
These are the COnsulWlts that assisted Computer Alded Surgery in preparing the
proposal for the A TP award.. NlST grants officials did not approve Uris
subcontract as part of the budget. It is also unallowable as a cost incurred priQr to
the amud.
$400 of the $67,372 is questioned because these costs are to Axiom, Inc., a
consulting fum hired to assist in the budget negotiations with NIST. NIST grants
official did not approve this subcontract as part of the budget.
$170 of the $67,372 is questioned because these costs were for a consultant for
PayPal that NIST grants officials did not approve as part of lhe budget.
$16,656 of the $67,372 is questioned for the cost of equipment installation that is a
capital improvement to the apartment and is unallowable to Ibis award. These
costs include: Mistretta Electric $ly900; Metro Solar $1,040; Bator Bintor
$12.059; and Columbia Interiors $1.657.
DRAFT
A-188
u.s. Deparlmenlo/Commerce
OfficI? oflrupector
7. Other
Report ATL-1609J-4"(}()Ol
AUfi'rL'rt 2004
APPENDIX!
Page 8 of8
in other costs are questioned beca.use these are costs booked to the non-NIST
cost<; on the Computer Aided Surgery. Inc., books. The costs CWlllot be specifically
identified to a category, as the amount is the difference btrt'Ween the NIST costs booked
and the cost claimed on the SF-269 (see page 6 of this report).- The nori-NIST cost
categories include: electricity, legal, rent, cleaning, telephone, and other costs of
operating Computer Aided Surgery, Inc. that should have been considered indirect costs
and not allowable as ATP direct project costs. We reclassified $16,500 to the other cost
category from the subcont:ract cost category so the Adjusted Other Cost Claimed is
$73,535.
The "Other" budget category only had $10,000 in the budget. However, we did not
question the costs that exceeded budget in this category because NIST allows up to 10
percent of the total budget to be re-a1located to direct cost categories without NIST
approval.
DRAFT
A-189
APPENDIX II
U.S. DEPARTMENT OF COMMERCE ~ ~
Office of Inspector General ',1AT/'
!;I?
. NATIONAL INSTITUTE OF
STANDARDS & TECHNOLOGY
Computer Aided Surgery Inc.
, New York, New York
ATP Award No. 70NANBIH3050
Audit Report No. ATL-16095-3-0001 /July 2003
TIllS AUDITREPORTMAY CONTAIN PROPRIETARY DATA
EXEMPTED FROMDISa.oSURE UNDER. TIm FREEDOM OF
INFORMATION ACf(5 U.S.C. 552)BYnm OMNIBUS TIWlE
AND COMPETITIVENESS ACf OF 198& (15 U.S.C. Z7KN)
I
I
Office of Audits, AlllJ1lta Regional Office - I
I
A-190
u.s: Depcu1rmnrt ofCommen:e
O/flu o[Jmpedor Genera!
::JIlL 252M3
MEMORANDUM FOR:
FROM:
SUBJECT:
Sbamim Shaikh, Acting Chief
APPENDIXn
AudIt Report ATL-I6095-3!JJ9f 2 of 6
Jvly 2001
Gnmts and Agreements Management Divisioo
for Auilits
NIST Coopenrtive Agreemeot Number 7DNANBIID05D
Computer Aided Surgery. Inc., NY
Final Report No. ATL-16095-J-OOOI
This report on our audit of the subject NJST Advanced Technology Program cooperative
agreement with Computer Aided Surgery, Inc. is to inform NIST officials of sigcifi.cant findings
that require their immediate attention. Based On Computer Aided Surgery's own accounting
-records.1he company should reimburse NIST S205.126. The corporation has not contributed any
ofits required cost-sbare
7
which currently totals $54,068. and has drawn down $205,126 in
excess of the federal share of A TP project costs identified in its 8CCOunting records. The
Financial Status Reports filed with NIST are inaccurate because they show that the company
contributed the required n:urtching funds and the reports overstaie A TP project expenses. We will
issue a separate comprehensive audit report including questioned costs and other non-compliance
issues covering the period October I, 2001, through June 27, 2003.
We are providing a copy of this report to Computer Aided Surgery. "However, we have not
requested the company prepare "a written "response to NIST addressing the report findings or
recommendations. We will include these findings in Ihe subsequent comprehensive audit report
to allow for due process. Requests from 1he public for copies oftbis report must be referred to
the Office of Inspector General, Office of Compliance and AdministrntiOD Publication Unit,
Room 7OO9C, Herbert C. Hoover Building, for response under the Freedom ofInfonnatioo Act.
AIly information or inquiry regarding this final report should be directed to me at
(404) 730-2780, or Kathleen McKevitt ofthls office at the same number-. We appreciate the
cooperation and courtesies extended by NIST officials during our audit.
A-191
u.s. DepartmerJI. ofCommen:e
Office of!nspectrN General
Introduction
APPENDIX II
P oJ of6
Auait Report
July200J
In September 2001, NIST awarded a $2, I 10,500 Advanced Technology Program cooperative
agreement to Computer Aided Surgery, Inc., a for-profit company involved in innovative
composite design and engineering. The agreement was for a 3-year period with $800,000 in
federal funds for the first year, $600,000 for the second year, and $600,000 in the third year. The
agreement required the company provide a matching' share of$36,500 for the finrt year, $30,500
for the second year, and $43,500 for the 1hird year.
The pwpose of the agreement was to develop and demonstrate novel computer and engineering
technology based on Digital Morse Theory.to enhance the quality and usability of computerized
anatomic models for precise and accurate cancer treatment therapies.
Purpose and Scope of Audit
We performed the audit of the NIST award at the company's office in New York City during
June 2003. NIST requested that our office conduct the audit becalEe the grants and program
officials were concerned about Computer Aided Surgery's ability to account for federal funds
being spent. The pwpose of the audit was to detennine the financial status of the award, the
reasonableness and allowabHity of expenses charged against the award and review compliance
with applicable laws B:tld regulations. The audit covered the period from October 1) 2001,
June 27, 2003. We examined pertinent NlST and company records, and interviewed
agency and company officials as deemed necessary.
We relied on computer-processed data supplied by the company as the basis for our audit
findings and recommendations. Consequently, we tested the accuracy by tracing and comparing
the data to original source documents and other supporting documents. Based ou our tests, -we
ooncluded that the computerized data was sufficiently reliable for use In meeting our objectives.
We conducted the audit in accordance with generally accepted govenunent auditing standards,
and performed it under the authority of the Inspector General Act of 1978, as amended, and
Department Organization Order 10-13, dated May 22, 1980, as amende<l.
Results of tbe Audit
During our audit, we found significant problems that we brought to the grants officers attention
with a Conference call on June 24, 2003 and are docwnentfug with this report. Computer Alded
Surgery bas not contributed any of its required matching funds, which currently totals
In addition, the company drew down $205,126 in excess of the federal share of ATP project
costs recorded in its accounting records. Finally, the Financial Status reports filed with NIST are
inaccurate because they overstate expenses to justify the exceSS draw-dovms and incJude a oost-
share wnount that was never coDtributed. NlST informed us that they suspended further award
paymeDts to Computer Aided Surgery as of June 27, 2003. We are working with the cotnpany to
obtain additional documentation so that we can provide a comprehensive audit of the
allowability and reasonableness of A TP project expenses for the period October 1, 200 I through
June 27> 2003.
2
A-192
u.s. Deparlmenl 0/ Commerce
Office qfbupectnr Gentra!
$54 068 of Required
Matching Funds Not Contributed
APPENDIX II
Page 4 of6
Audit Report ATL-16095-J-OOrJJ
Jllly2003
Computer Aided Surgery has not contributed any matching funds to the project even though the
NISTaward agreement requires a cost share of 4_57 percent The ChiefTechnicaI Officer of
Computer Aided Surgery identified the S1Jlte of New York as the source of the maIChing funds,
but the funding was not received due to the state's budget problems after September II, 2001.
While the primaIy owner 8Ild Chlef Technica1 Officer of Computer Aided Surgery intends to
contribute his own fimds to the A TP project, none of these required funds have been contributed
to date.
The matching funds required for the project based on the ATP identified expenses in the
company's accounting records are shown below:
Award
Period
Required ATP Project Costs . Required Cost-
Amendment
,
Cost-8hare Per Books Share
#2
10/01/2001 -
4.36% $ 779,905 $ 34.004
09130/2002
#3
1010112002 -
4.84% 414,537 20,064
0612712003
Total
$1,194,442 $ 54,068
$205.126 in Excess DrawdOWDS
Our audit revealed that Computer Aided Surgery drew down $205,126 of federal funds over the
21-rnontb period in excess of the federal share of ATP expenses identified in its own accounting
re"cords. A review of the company's financial records revealed that these excess draW-dOWIlS
were not spent on A TP project expenses. The amount of drnwdowns in excess of the federal
share of ATP project expenses for the period October 1. 2002lhrough June 27, 2003 is shown
below:
10101101- 10/01102-
CUmulative
09130/02 06127103
ATP Project Expenses Per Books $ 779,905 $ 414,537 1,194,442
Federal Shllre of Proiect 95.64% 95.16%
Federal Share of ATP Ewenses $745,901 $394,473 1,140,374
. Federal FUnds Drawn-down 800,000 545,500 1,345,500
Excess Draw-doWns of Federal Funds $ 54,099 $ 151,027 $ 205,126
As shown above, the company drew down $1,345,500 in federal funds between October 1. 2001
and June 27, 2003. However. a review of the genera11edger revealed only
3
A-193
u.s. Department afCommerT;e
Office of/rupf!Ctgr General
APPENDIX II
Page 5 of6
Audit Report ATL-/6IJ95-3-QOO/
JlIly2003
$1.194.442 in ATP project oosts during this same 21-month period and based on the project's
federal oost-share> Computer Aided Surgery was only entitled to $1,140,374. The $205,126
excess funds went to pay expenses not related to the ATP projecL It appears that Computer
Aided SUIgery'S only SOUIre of revenue during the period of the award has been the NlST funds.
The Advanced Technology Program Special Award Conditions Section 9. c. states:
"Advances ... shall be limited to the minimum amounts necessary.to meet
immediate disbursement needs. Advanced funds not disbUISed in a timelyrnanner
must be promptlyretumed .... Advances shall be for periods not to exceed 30
days."
Inaccwate Financial Status Reports
Computer Aided Surgery filed inaccurate Financial Status Reports (SF-269's) for each of the
fOUT quartetS during the period October I, 200 1 through September 30, 2002. The erroneous
reports show the amount of federal ftmds drawn do\1r'D rather than actual fedem1 expendituRs in
the box designated "fuderal outlays for the quartcr:'-.thereby. overstating expenditures.
Additionally, Computer Aided Surgery claimed that it had contributed the required oost-shore
funds, when in fact; DO matching funds have been oontributed. The Financial Status Reports
have not been completed for the periods ending December 31, 2002 or March 3}, 2003.
The Advan.ced Technology Program General Terms and CornJjtions Section 7.c. (I) states:
"By signing this award the Recipient agrees to ensure that Qruy actual costs incurred will
be charged to the award and that all costs will be reasonable, allocable, and allowable in
accordance with the applicable Federal Cost Principles.'"
Additionally section 7.c. (3Xa) states:
The Recipient shaH submit a "Financial Status Report" (SF-269) on a calendar quarter
basis for the periods endmg March 31, June 30, September 30. and December 31, or any
portion thereof. unless otherwise specified in a special award condition. RCJXlrts are due
no later than 30 days fuUowing the end of each reporting period."
4
A-194
us. Department of Commerce
Office oflr1Spector General
Recommendations
We are recommending that NIST:
APPENDIX II
Audit ReporlATL-160P'--J.._ 6 of 6
Juiv200J
I. Continue to suspend award payments to Computer Aided Surgery, Inc., until it
meets with the following requirements:
Reimburse NIST $205,126 for funds drawn down in excess of the rederaJ
share of ATP project expenses.
File the Financial Status Reports (SF-269) for the quarter> ending
December 31, 2002. and March 31. 2003.
2. Designate the company as a "high risk" organization and, at a minimum place it
on a reimbursenu;nt basis for future drawdowns, if the suspension of award
payments is removed. .
Funds to Be Put to Better Use
By implementing this recommendation, $205,126 in federal funds will be put to better
use by returning the fimds to NIST and ellSllring that the funds are used only for the NIST
project.
cc: Sharon Bisco. Audit Liaison, NlST
Marilyn Goldstein, NIST Graols Officer
Barbara Lambis. Policy and Operations-Advisor, ATP
Hope Snowden, Grants Management Specialist, NIST -ATP
Bettijoyce B. Lide, Program Manager, NlST-ATP
Dan Karran, ChlefExecutive Officer,
Computer Aided SurgeI)', Inc.
5
A-195
Computer Aided Surgery Informatics
Formerly known as Compu1Cf Aided SiU&ery, In'f
[n'iel:llors (DMT) for
Innovati'lt Me:dicql Modeling and Advancc:d Surgical SitPer--5pecialry Resc;w;h
D. B. Karron, Ph.D., President Md ChieFTechnical Officer
300 East 33,.! SITcd'l. Suitfl4N. New York, New York, 10016
and flD/ce Mail: +1 (212) 586 81018 Fax: +1. (212) 0148 0261.
E{tCfrcnic Mail: karrcn@cad.net /lIternerIWrJI'td Wide lYe": http://'INW .casi. net
10,.2004 atOI8:11:21 Hours
Response to Draft Audit Report on
Com puter Aided Surgery, Inc.
In the matter of NIST Cooperative Agreement Number
70NANB1H3050
Response.Material for Inclusion into
Draft Audit Report No. ATL-16095-4-0002' March 2004
Prepared by
Dr D B Xarron, with IISsi!rtance from
Mr. Me!\'io Spitz,
Mr. M Rothman,
Mr.} Cornwall, CPA,
Pruft:ssor J SchW9.U.. CPA, ESQ.
Mr. L Goldberg
APPENDIX III
Page 1 of38
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Mondoy, Mo)' 11),200418:11.00 H, .
.. cda( Monday, Mo:y 10.1004 18;!.l:OO H aIMond.y, May IO,2OOl18:II:OOH
oToim4),I'i14 by!"" or &436 _Jdo keyed in by db hn<>" P",,,, 3lI ",Ci!!
RECEIVED
MAY 1 1 2004
B
A-196
C.A.S.1.
Table of Contents
Al'PENDIX III
Pagelof38
.1. Response to Draft. Audit Report on Computer Aided Surgery, Inc. In the matter ofNIST Cooperative
Agreement Number 70NANBl H3050 Response Material for Inclusion into Draft. Audit Report No. ATL--
16095-400021 Man:.h 2004 .......... , .......................................................... _ ......... _ .............................................. 1
2. Table of Contents .. _ ......... __..................................... _ ..................................... _ .................. _ ......................... _ ... 2
3. Background ................................................................. .." ... _ .. , ......................... _ ........................................... , . " . .3
4. Introduction ............................................. , ....................... " ........ _ ..... _ .................. : ................................................ .3
5. The Proolem ........................................... _ ..... _ ......................................................... _ ............................................ 4
CommMtS' on OBJEcnVES, SCOPE, AND METHOOOLOGY orOIG report ..................................................... 7
on FINDINGS AND RECOMMENDA nONS in the OlG ..... _ ................................................. 7
NO Complaints on CAS! Researt:h ......................................................................................................................... 10
CASl misplaced ils falth in Hayes .............................................................. _ .......................................................... 10
6. COllclusions ....... : ... ,', ... , ...... ,." .... , ........................................................... .................................................. _ ....... ,10
CASl SlIVed the Government Money ........................................... _ .............................................................. _ ......... ll
NIST A TP misplaced its trust in Hsye:s., ............ ,: ....... " ........................... _ .......................................... , .............. 11
01G misplaced its trust in Hayes ............. " .................... , ......... , ........................................................................... 12
ImP.\'rtan! observations .................... , ..... , .. "', .............................................................. " ................................... : ....... 12
0v-r:r.U1 Conclusions ." ...................................................... , ... : ........ : .................................... , ............................. _ .. 13
7. Exhibits .. , .................................................... , .............................................................. _ .................................... _ .. 13
8. Exhibit 1 SummEll)' of Project Costs Blld Point by Point Rebultllt ofQlJestioned Co;ts . ., ................................... 14
Project summai)' [;Om, .......................................................... ,. ... " ......... , ................... _ .............. " ............. ", .......... 14
Exhibit Ib Poinl by Point rebuttals ................... "" ................................................................................................... 15
9. Exhibit II Payroll Reccnciliation ............. " ............. _ ............................. , ....................... _ .............. _ .. , .................. 24
I O. Exhibit l!l Consolidated Project Expenditures (Profil and Loss) BIld relaloo 'Bslanc-e Shcet-(9f.30102 6/30103-).26
II. ExhibitlVNIsT AlP ................................................... " .......................................................... 37
200] PreProjecl ................................................... " ......................... , ............................ , .. , ............... , ............ _ .. :0 .. 37
2001 Project Launcfl.: .... , .. " ................ "' ............................................... _ ........................................................... 37
2002 ...................... , .............................. , ...... , ...... _ ... , ....................... " .................................................................. .37
2003 ,,, ............................................... , ................ ,, .................................................................................... , ..... _ .. 37
2004 ............... , ................ ' ............................................................. _ ...... " ........ ,." ....... , .. " ................................ n ... 38
M[)?IrMY, May 10, 1(}0.( af 18: 1 {:].I Haurs
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FILE:" OIG R68pOnse CASI DBK New Lettemead 23.d!le"
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C.A.S.1.
computer Aided Surgery. Inc.
Background
APPENDIXUJ
Page 3 of38
In September 2001. NIST awarded II $2,000,000 Advam;al Technology Program (ATP) cooperative 8grconen\ to
Comput-cr Aida! SurgeI)'. Inc., II small fOC profit research finn. CAS! is II tiny entrepreneurial startup fum
employing at most 3 PhOs a:nd one MD to do advanced applied mEIth IUId computer reseoreh on imllgc and modeling
fOf surgery. CAS! was iii firm m;rllited to apply for this ATp gr[ll1! by the NlST ATP prog1U1l director. The PI
applied after c;d.ensiVt consultation anel suppor1 from cummland fonner ATP program management and leadership.
CAS! .hecn in businc:ss since 1995 principally doillg DARPA SBIR contracts 3lld has yet to bccomo profilllbie.
The PI, II fanner professor of Surgery at New York University Medical Center as well as II fanner Prnft:ssor of
Computer Science at City Univenity York, gave up IIll audemic 10 focus cxchJsi'iely on this
project. The other sciClTtists, physiciillls, illld students on this project ace ail CUNY lind or NYU faculty working
part time wilh the oompilllY, some uncompClWltcd, millly urn'lcr compensated wilh rcspect 10 their regular jobs. In
addition, life mMy experts who gave generously of their time and energy without compensation, strictly
because oflheir belief in the merits of the rw;earch.
Introduction
Prior to the inception of the NIST ATP and repell1c:dly i(l the first year, CASI was emphatically, pcrsollaUy,
illld corporately promised N""" York Stale oo-funding. The funded portion ofttlis project WIl!i' juropWu1ed
retroactive from October 1, Z001, io the middle of the t':drcmely ho;ctic dayli following the 9111 iUtLlcks In York
City, Given the abruptnc.o;s of the rotroitC'ljve funding start, Wld its incipcrience in this type of program, CASI made
inililli spending errDIS. These errors int::Orrectly Md mmginally o.ddressed by its accountant Qlid so-called
auditor, Ms JOilll Hayes, CPA. Hayes had taken onr responsibility for CASI ElCCQtInts on 11 February 2002 af\er
purchasiog the CPA PrtlCtice of the previous CASlacoourilBrJt, Jill C Feldman. CPA.
Because ofthe gross io'aCCUlllq oftbe first ywr program boolr.keeping IIdj\lstmenls, the la1crJ,eo;s of these cum:clions
and the' inept ofthe first-Yell books illld the ho!itile. non independent first audit; Hayes is the '
main reason for NIST ATP suspension ofits funding oflhis project. While the PI o.dmits responsibility for some
!>taff errors illihe progmm filings mostly in the lim )'tilf, these 1m' not the principal Ce.J.JSe of milllagt:meot
shot1comings. The principsl cause for these was advice followed io good faith from Hayes, much of
which was to be subsequeotly preved im:om:ro::f, coercive, selfscrving, or extremely destructive.
We will present a'timeline (EidJibitlV) for main program events in support of this contention. CASI was and is
on a track toward SUibility because it I=ed its ICS50ns from its initial mistakes. The PI hM corrcc\ed the 'technIcal'
problems has follOWl::d the 'spirit' oflhe gnmI in every WIty, It is elIQ:SSive and dlllOOnian 10 destroy CAS! and
it is vital because ofproblemsjumpstBrt!ng ils first government gl'8llt.
CASPs research program has emphasized scimcc over markl;ting, and self-promorioll. CASI research has advanctd
the state of the ;u1 by presentllllons a1 medica! and computer science/imaging/applied matn coofefences .NIST AlP
and the nalion is benefiting from the tireless work of Or, Kanon, his studcrns, and colleagues. MIII1Y ofthC!ie people
o;;Glltloued to work QfI the 1'C5CIIreh 00 pay, continuing to publish, and advance the stale of the art ,despite the
leclmical "'POrting problems that have iJJtel1llpted its fuoding. At no polntcan CASI be cited for oot putting its fiJll
effort into il5 rescarc;h, which is the main function for NIST ATP funding.. This KSearch had became very
tecllnology based lIIld the empha!;js had 10 mANGE, from subcontracting (tumkey) to an 'equipmenl' oriented
program by studerrts and committed professional raoolty, a!; voluntce'r5. Repeated wtempts at revising the
budget 'Yre:I"C complewly ignored, as were certain n:qucsts for staffing changes.
Mr;mdny, May 1fI, 2004 Q{ 18: J 1 :21 HOJUJ
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FilE;" OIG Ra!pOfl!!oR CAS! OBKN"", lsrterflaad IMoc"
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C.A..S.I.
ComplHer Aided Surgery, Inc.
The Problem
APPENDIX III
Page 4 of38
As a small single company fl:'Cipicnt, CAS! minimized costs and maximi:w:l productivity with its NIST ATP grant
The PI :zealously 10 the spirit orlbe NIST AlP guidelines. The grant t"lsc.an:.h has never been quemoned.
Because of error.; made in the first month ofthc grant by the PI based, on inexpollriUlce, WId on the bad advice IJfils
hostile and self serving accountant Joan Hmyes, CPA, tet:bllicaJ finllllcial cnom- were made, then repeatedly made
worse Wld wor.;c and worse by Hayes's of position. Hayes simullru!roU-sly served IlS trusted advisor to the PI,
Corpora!c Tax ACI;ountant, Personal Tax AewunlBllt.. de/acto management com;ultllllt, jury, judgt:, confessor,
master, whistiebloWt:r, and auditor for the government.
CAS! j;noluded in the award agreement a C(lmmitment to pruvidc,SlIO.500 of direct project costs, and in fact
provided 67,334.19 oftlJis co funding through !.I payroll holdback by Scptcmber2002 (The fim year of the project!).
See IIppendix 3, the payroll reconciliation. The NIST A TP progJam considers awmdees' cost sharing sufficIently
vitllilo ils progl'1llTl Ihat it will hall projects for lad:; of m-funding. Yet. there basic dirl:ct and vital cosls, such as
rent lind urilities, which are not rNlIy o'VCrhcad in Ihis instance, bUI bekmg in the 'olher' costs section. These MUST
be considered as part and pan::el of what was pr!:Yiously requested budget revisions. See Exhibit J.
CASI engaged ils long t.el:m accounling finn, Ji!! C. feldman CPA,to manago CASI's books. CASJ had II
fUnctioning ac;.counling S}'5lem althe time, Feldman became pregn.lUlt and soughl to retire after the benic days or
9111fZOOl. Feldman start::d !he process ofsc:lling her finn to M.s. JOall HlI)'es, Q>A in Dea:mber 2001. Joan Hayes
started worle on the CASI account at thi!l.time, Wld effectively took over CASI's oooks IIIld Pllp0r5 in Februacy 2002.
Hayc.s was charged with repairing problems caused by the PI's management oflbe grant at that time aJ\d bringing
CASI's books and records inID order for lucs, mlUlagement overSight, 'aJ\d for NIST ATP fiscal reporting.
The PI, NIST ATP, IUId the Departmenl of Commerce Office of the Inspector Geneml OIG were upable to obtain
reconciled BIld stable data os 10 vendor exper1diture:s, payllhla, payroJl, payroll o'VCrhead, IIIId other project COIit
information from ils accountam, Hayes. Hayes wu.ited unliEJun prior to becoming auditor to make important end of
first year adjlL'lbTienls (91301'2002), Hayes bungled and duplicated the calculations for these adjustments, and then
assumed the role of WI auditor, Tlliinquisfling her responsibilities lIS CPA,. and Btarted manipulating her client in

As project auditor, Hayes was revil:Wing her QWn work as projeCt ac.cow11Bnt, which destroyed her independence as
an audi,or. Hayes proceeded to mlUlipulu..te boUI CASr IUId NISTlATP with threlrts ofwistleblowing CASi to
uncover fraud iII1d major career-making to NIST A TP, by reporting the bungles and ellors she herself
cawed in the preYious year. She further manipula1ed the situation and the PI by 'churning' the neressary
bookkeeping and accounlingwork without 8lf'J useable re5ull!. She hid her own double billing invoices in the
regenerated two sets of so-called books'. In fud> the 'new books' as oppo:sed to the old books, were
incomplete and inaccWult because they locked consolidation all tnIJl.5actioll5l111d reconciliation of all relmed
'balance sheet' accounts, such as intef'1\O;Ount trensfcts (contJa-ltCCoOunts) and fonnal bank n;concilialions. Haw can
someone who may have had a hand in preparing so called 'books' independently them? Furlhennore. she
kepi mKing unfulfilled promiscs to NIST and the PI as to when the audit would be completed. She further soured
the PI's relationship with NIST A TP by f,alsely ilCCUsing the PI of withholding information and reSisting the audit
process. In fact, because of her ineptness in preparing!llld presenting the information to the OIG auditor, in lUI
organized f9shlon, !he finger ofaoousation points squan:!y at JOIUI Hayes, CPA.
If the PI was guilty of anything it was an overwhelming amount of bock up to all trans&l;tions which made il harder
10 see the big beclDlse of all of the de\lli\ infonnil1ion kept. HlI)'w alleged that she WIIS lInllbie to get
information from CASl, and the PI was resisling the IWdi! process-. She spent SO much time collecting and colliiling
data nom CAS] Ihlll she occupied the PI much more tho.n ret:fuired and hindered the research. Then she threalen.ed
to report to N!ST ATP thai the PI was not spending sufficient time on the project! With all Qfthis investipting III1d
collecting dllla, at the time ofthc 200) BIldit. she still fed unreliable and incolTtCt infonnation to the OIG lIudi1or,
IUld blcx:ked the OIG IlUditors' access 10 II 'V3lid, n:wnciled, and IDlditabJe set of project books.
Monday, May 10, 2()(N a118;J /;lJ Hours

Pagt40f38
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APPENDlXID
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The PI W<Il1ted to Haycs. In retrospect not terminating Hayes IImlallowing her to issue II grossly unooceplabtc
audit report was the biggest mislake made by the PI during th:: entire project Howevef. the NIST A 1P Grant
Specialist kept insisting that they get the audit (that they had for) finished, despite the fact thBi Hayes as aud ilor
was abusing her position both as accoUillallt and as BUditor to al1empt to extort more money from CAS!. In fact,
during this entire prOUSs., she never property reconciled, Md more imPQrtantly, consolidated the new sets of books
had generated. She never actllally supplied the PI or the OIG with oft-promised 'new books'_
Hayes h:pl changing figures during the budget negotiatioru:. Haye.'l could not slI!'Ply sllIble numbers for the (SF-269)
and she omitted exponditures summaries iIlldjus! showed gmnls I"l:ceivcd. Because oflhis., NIST A'JP WIlS to
request lin 010 audit, scheduled for June 2003. III July 2003, the DIG il:Sued a 'limited srope' audit report!Ikilr!&
that CASI had not paid My of !he adjusted lind reduced $54,084 cosl-share (tota.lly unllUe. see Exhibi! II) and had
drawn $205, 126 in exces:s of the federal share of the ATP project costs (based on pl1!!limimlJ}, audit figllrcs). This
was bllSe:d on the infOl"ll'lAtion in the unreoonciled' and incomplete books kept by its alX.lJuntanland so-called auditor,
Hayes. Furthermore, had repeatedly promised she wouJd hve books for NJST review virtually every
day ortne Clrtended visit by the OlG field agent. The PI was not aWlIre' ofc:riticallacing information that the PI
could ha .... e provided at that time, prior to the field visit. The auditor was inElPProprilltely given infurmation thal was
nol reoonciled, not up to date;or W'II.> otherwise incom:ct. The P] WItS not IIWIire at the time, oflhe horridly negatiw:
and false Hayes was giving the OlG unfil the IlISt day of the 01G fieldwork. Il1lItead of remaining
independent and neutral, 8Jld ptoviding-informa1ion as requested by tht DIG auditor, Hayes, by htr own
malfeasance, fed !he auditor misinformatioo of tho kind. The awlll"d WlI9 Y\':I)' abruptly suspended 8I1d the
PI continued 10 pay projecl cous as they came In, including audit costs, payroll and alX.lJunts payable, directly
related ID the project, lind funded by the PI's funds.. The CASI project to continue the project
withoul pay, or at vastly reduced pay.
Because of the incomplete data pres!:Iltcd 100 the DIG in June 2003, in November 2003, the PI visited NIST A TP and
requested a w-audlt (not a continuation of the previous failed audit biised on faulty data from Hayes). This was
based. on the OIG's admission of the Incomplete ofil:5 lim audit. A new accounting team headed by Mr.
Melvin Spitz, CPA, reconciled, consolidated. and corrected the books for Iftc full \2 and 9-month periods,
without changing the originw pO$tcd in the generated books. These two sets of'new boob' had
been nothing more than summane3 of two bank lICC(IU!1ts. Om: calla! CASI, and the other calla! NIST.ln fact, both
accounts were used for projtct expenditure.s., but the CASI a:eount has some compllny wide eKpwditures, which are
not necessarily aTroc:ated to N1ST. With thcpropersupport Md approach, Mr. Spitz WIlS able to rcoondle and
consolidate the books in a mutter offour weeks, while stalling: did nOlachieve this oV'Cr an I8-month period.
stollewa!Jing and abuse of position by Hayes is l::"YiOcnced by the following facts:
I. JOtul H"yes refused to submit her audit n::port to CASI at Wly promisa! time through October, evcn
givillg the OIG a copY of the essentially audit report in June. .
2. NIST ATP demanded its audit report. There WiI.9 a very real potential thai Hayu wOllld.DI::"YU submit her
audit report without pK}'ing exorbitant fees for unneo:.essary 'work'. The PI under intense to
supply the HiJ}'es audit by NIST ATP,
J. Repeated requo;sts from the Grant Specialist orNIST A TP for the HlI)'es audit report which. NIST A TP had
paid fOf, and they felt ww due NIST.
4. Complaints from the OIG auditor, to the PI thll1lhe orG WIlS unable to verifY 'he records presented by
even lifter being on site with CASI /IIld with Hayes for IQdays ! The DIG field auditor said 'her
negative n:sults were lBken from the CASI Books, and could not be verified'. She pretty much said she
could not do lin audit.
j. Moreover, the OIG was repeatedly and explicitly promised realllcila! set of CAS! books
8) m::i2I to the OIG first field visit,
b} multiple times during the DIG fim field vbl!, a:nd
c) Multiple times after the 010 fiTS! field visit
Mr. Melvin Spitz confirmed with the DIG BIlditor thaI they received a sci of new books from Hayes
during the OIO's subsequent field visit with Spitz in December.
Mondo.y. May 10. Z004 at 18: I I:ZI HOllrs
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FILe"' 01G Reap<l'l'l&Ol CAS1 DBK Hew Letterhead
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c. A. S. I.
Computer Aided. SurgeI)', Inc.
APPENDIXffi
Page 6 of38
The OIG auditar based its first flash audit Oil the misdirected and poisoned presenlation by Hayes during the its first
field visit culminating with the July 2003 flash audit report At the December OIG field visil, Spitz 10 the
DIG the fallowing:
a) Ne'N payroll and loan reconciliations
b) Detailed reports II1ld logo; of reimbursable spending on projoct oosl.s by the PI.
c) A e;omplete sub ledger on credil cards (AMEX) cMrgc.s (shortly after the field !ludit)
d) CASl's !Ie'Nly cgnsolidated books Ill1d =rds, including IriUJrlers, from the per.;;onal account. and
previously ignored Jl(;Oyity in the oow CASI LLC whilil hIId been missed in the first audit.
e) All persono.l contributions., repayments of loans, and reimbursable spending out aflhe PI's personal
account, which the 01G auditor togelher with Mr. Spitz confirmed as to being part oftlJe
consolidation.
l) Full exphmations afBoIi oftlJe a.djustments ma.de to Hayes books by Spitz..
The OIG auditor now had many opportunitie5 for re'Yuion of the July 2003 report, whiclJ ha.d been based on
incomplete records, This \Or'a5 much additional infomurtion th;rt had to be considerro fur the orG final drnft
This final DIG report should not have been l1li and major of the OIG's previous reported
questioned costs. In reality, all the new information should have enabled the O(G to IUlbsturtially reduce the
questioned COSIS. The new infoilll3tion justified most of the questioned .costs ..
Mr. Spitz at this paint asked if. based an this nC'W complete information, weather Spitz should issue nl5W corrected
SF269 quarterly and annual comparison to budge'! filings 10 rt:pllllt:C the incomplete lind erroneously filed IqIQrts
previously submitted based on Hayeli data. The OIG IWditor Sllid this was nol nec;es5a!)' since her BUdit would
accompfish this. Mr. Spitz also went aver Hayes's audit report point by point and without con!>llltstlon with the PI to
present an a.dequate and unbiased refutation of Hayes audit conclusions, Tlili Hs:ycs report farmed the foundation
for the July OIG flush audit report. Spitz was given the imprus;ion, after his confefem:e with the orG audilor, who
took copious notes, that full weight would be given to al! of this 'ncw inform!l11on'. This he.s obviously not been the
=.
The PI dis[;\Jssed wilh the OIG BUdi!or actions needed to wist the OIG's audit, given the previous unsatisfitdory
performance by Hayes during the first field visit. Mr. Melvin Spitz. \Or'a5 tasJc.ed solely to work wilh the OIG to
conclude this unelldillg audit. SpitzlIlllde adjusting entries b) the books and reoords that clearly identified nat only
identify e;.:penscs in very detailed form but a section for alloc:aled corporate expenses: Spitz noted
numerous deficiencies and duplications in the Hayes prq;Wed boOks, especially improper recording ofundercoul1.t
lransfers and non-recognition of monies adVIIIICed by the PI through CASI; to both fully fund CQ--payments and
repay erroneous salary advances taken at the begiIUling of the project 'The OIG in December 2003 to Il'Vlew
the reconciled and mud! improved books and records, W!I5 also proVidod with hard, and disk copies of the Spitz
consolidation.
[t came as a complete surprise an the issuance of the draft audit in MIlY thst the OIG had not considen:d the
c)ElJifying additiona( infurmation pre5=rted in the December visit. The OIG had instead chosen to re-affirm IIl]d
e;.:plllld the faulty Hayes conclusions III1d did nat reduce 1liiy of the July flaSh BUd!! fIndings. In fart, Spitz had
presentC'd as a compieml'.l1t 10 the income IIl]d ellpenditure consolidation figwesa so-called consolidated balance
sheet showing fully reconciled items such as cash in bank, intercompany trRIlsfC1'5 (SceElIhibit III). Also included
in this balarn;e sheet wert> tbe co--paymenl'l and repayments of elTon eo us PI salary advances. The draft report of the
OIG totally misinterprets \he intercomplillY tmnsfcrs once orwhleb is called 'due from CASl', and the other one WIl5
called 'due 10 NlST' which in fact counterbalancing amounts as beirlg proof that CASl admits to owing money
to the project. This is absolutely prirrllJjuce
Given thl!- gross malfcssance, lack: of independence, honility, and clear elTOts in the information preseTTlr:d bY Hayes
to the OJG, and lhe iniransigencc of the 01G in the face of the Hayes enurs, the PI is 10 request a
face n.egothnlon to dcfeoo its rights, rt:pu1ation, IIIId
Monday, May 10, 2"04 al 18:1/:21 Hours
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FILE:' OIG Relipcl15c CASI DBK He\lf letlE!Jtoeail Z3.doc
A-201
C.A.S.t
Computer Aided Surgery,lnc.
Comments on OBJECTiVES, SCOPE, AND METHODOLOGy of DIG report
APPENDIXm
Page 7 of38
The scope of the OIG audit was extended 10 include payments moot on costs incum:d prior to the June 21
suspem:ion, IIJld to ecrtlf)' parables still On the books. The Hayes scope only for the first year. As !;Uch
significant improVaJ1CflIs marl,c in CASI f13callllJd business processes were overlooked in the Hayes report, WId the
OlG draft which WIIS almosl based on Haye5 foulty repom[lg.
OlG examined II copy oftllc l;:omPIBiY'S mO$! recent annual IWdit report fur the year ending 30, 2002-
Thill audit was conducted by Hayes, who B.!i will demo.nstmle was NOT IllI independent certified public
aCCOUnte.nL Her audit was F10t in the spirit Wld rule ofthc NISr ProgrQlfl Specific Audit GuJdelitlesjQr acJ.rana'd
Technology ProgrfJtrl (.4 fP) Cooperqlille Agrelr"",,,t1 with SjngiJ! ComponjeJ dQtcd May 1999. The Hayes report
intamal wo:akne:sses and questioned cos1.:i. The alG obtaincO' their own undemanding of CAS I
internal controls throogh inquiries with appropriate per.JOnnel, inspection ofrelC:VMI documentation and observa.tion
ofCASl's operation 10 evaluate the assertions included in the audit re\XIl'l The weaknesses noted in OIG testing did
[lot observe the significent improvements in internal w[ltrols WId reduction in disallowed costs mOOe in the first year
to the seeond year. None of the improvements!ll1l dis-cussed in the and rccoIlllllcndations of the OIG d;aft

The DIG relied on dw supplied by the compllny as the basis for their audit IUId .
rerommendations. Consequently, the OIG tc.sted accuracy of this jnfDmlation by trocing and oomparing the data
to original $OUIce documents and other INP\XIrting stored as scanned images. Based on their tests, the
OIG concluded that the computerIzed dw wa.o; Sufficiently 'l"llliable for use in meeting our BElSed on this
statement costs for scanning c::quipment used to store, and the costs ofch::rlG. and bookkeepers to file IllJd input this
data should be allowed, Il5 it was the ba;is of the OIG's w::ceptancc of this infollJlldion.
The d("llfi audit '!;:pOrt states that it superr.edes the DIG July 200J-lIudit report, and resolution ofthi.5 n::port should be
W;TDed to conl;lifule (i[)l!llIctjon with n:!peQ to the prior CASI dlsa8fU,S and noles thai this n::pon is mealy
an extension and elBbonltion of the July 2003 rllport, nola cooection or II revision of the previous report, The
purpose oftbe CASi request for re.-audit fieldwork was to correct erroneous findings in !he July 2C03 report, not
rubberslamp the July findings. bllSed on new accurale Md revised boob.
Comments on FINDINGS AND RECOMMENDATIONS In the OIG report
The OIG blames the CASI inOOequu/.o:: financial management system as the main cause ofSS47,426 questioned
costs, CASt had an adequate filUll1.clal system until Hayes, lIS our auditor (in the secOnd yeu.r), demanded that CASI
redo its fiscal 5)'stem to her specifications, in order to pass hu litandards for the audit. She had the CASI
outside bookkeqJers; engnge in a ro::write of CAS I 's books, which Hayes closely and zealously supetVised.
Hayes ordered the splitling ofCASI's into two sel.i of boob. These caused unending problems and errors,
including vemlor$ never being paid, vendors being overpaid, vendors being paid !ate, accounts" running out of
control. and checb bouncing.. The PI was constantly runnillg10 Ule hank to beg the bank to n::fund these fees, which
the hIin<l did in all cases. These boob were neva reconciled and consolid;rted despite n::p!:81ed promises 10 both the
PI and the DIG,
According 10 the A TP Proposal Prepanrtion Kit;
"A l1" project!; life industry/government, cost shared project<;. A company propooing to n:covu 100 percent of the
project costs (beCIJUSIr all prajlrcl emU an charged as direct cQSI.J) from AU' is not oomplying with the spirit of the
AU' statute because the company has no funds ofits own at risk."
The company NEVER promis.ed 10 r:ovcr 100% oflhe project costs", The approved budget and all of the
SUbsequent proposed budget amendments ShOW5 the compllfly co-paying ovu 4% ofthe direct project costs.
Manda>'. May /0. 2004 all8;J ,;2/ Haw:s

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The main CASI issllc with the DIG draft findings is t1nu Lhe federal Cost principals have many special c:O;l:eptions
for small CIIlifies workillg 100% on IJ single federal projct;1. CASI expected and necdc:d A 11' \0 follow its previous
practice guidelines of giving special cansiderntion to small firms such as CASL This ClCpccl.atiOll was based on its
consultants and business mMager's many years previous experience IDllIlaging ATP programs in V!:l)'!w-p: firm.
CASl's failing was that it did not get each Wid every eligible c;.o.st being questioned specifically allowed in signed
memos. Many ofthcsc costs werr: explicitly allowed in verbal understandings. When the PI was advil;ed to get
these understanding documented in memos, the NIST ATP nevtI alJknow)edged ANY these memos in lID)'
documentary fashion, bye-mail. fax, IIIId paper memo. At OfIC point, !he PI made a special trip to NlST to discuss
these matlcrs IIlld the PI WIIS not allowed to visit in the cafe1eria with cn,. orlh" NIST persOI1nel. Durillg the writ1en
budget negotiations, !he com for lflld specifIC trip were specifically di581lowt:d for SIO.OO.
CASi maintains that !'Teeisely because it decided to focus excluswely on \he NlsT ATP project, partly due to the
collapse orthe investment mBl"ket IIlId ilS original, pr .. 9111 offer!. of New York state co funding, many of the
questioned costs called O'erhcad an: in fact direct costs under lJ1e spirit cnd letter orthe Cost Principles IS CFD Part
14.
The 010 report goes on further w state:
"Recipients of ATP awuds iIIe required to have II finlll10ial management system that me!:ts the standards found in IS
CFR Part 14, Unifunn Adminislnltive Requirement for Grant! and AgreemenlS with Institution of Higher Education,
Hospitals, NonProflt and Commercial OTEani..mions. Standards for financial manrtgementsys1MIl$ are foimd. in
Subpart C, SCGtion 21 and requin:: recipient's financial managelJ?tnt system ttl include the following:
"effective control over and aecounlability for all funds .. "
All CASllllld NIST funds were fully lICWunted fur in the C ..... SI boob imd records. AbUndant records made of
all transactions: as they flowed through 1hc'CAsl busine!3 process. Backup documentation was made end kept.
CAS! expended extensive resource to estalliish and maintain compliance with GAAP accOlUlting, as as CASI
business procedurel, under the dictatoriaj direction ofHaycs. She wCKIld later refute the CAST recorokecping
because it kept 'all dC'ta.ils and because these details would latC1 work 10 dooument various HII)'e5
mistakes. Later, we found she kepi. vital (such as from CASl in an attempt to
maintain sole ronlro! overthe lICCounl
Subpart C continues:
"Written prO(:edUfcs for determining the reasonableness, allOcability and Illlow ability of costs in acwrdanre with
the provision arthe applicable federal cosl princIples and !he \t:ITIlS and conditions of \he award . "
CASI adopted furms and procedures to identify allowable and eligible costs by1he following means:
The origilllli CASI books a 'CLASS" ofNIST costs in the CAST electronic books and records. Further, aU
!;ost!; that could be !;hlUl!ed w NIST were identified with NIST ATP as the customer for chargeback. biJljng ofmese
cosls. Finally, under Hayes direction, an entirely sepsrate $C1 orbooks of ONLY NIST Costs was pn:paraf out of
the CASt books. These books were never rttOllciled or conSOlidated, yet served as the !':."ItclLlSive basis offr!e,OIG
reports, Thete are signjficant differences of opini0l111$ to what lUi NIST A TP costs over the lift orthe gru.nl. Cost
and fund!i segregation (by a sep-aratll NIST checldng account with !;hlUl!eb;!ck class ragging) has been
incoqlOruted into the business process by CASt
The 010 further notes this citation from 15 CFR 14:
"Comparison ofoutJays with budgl:t amounts for each awlll1:l."
CASi, in good faith, continued il! research project in July 2002 after it started budget revision negotiations. Tn
rcirospect, the project should have been hailed by the PI as CASl spending diverged beyond 10"10 from its budgeted
cost5. However, there exists no medJanism lOr !he gnmtce tlJ!lop the project clockon aprqect. NIST ATP CIIll
stop a projec1.11.5 abruptly as it plta!;es, 11.5 illustrated in CASI"s case. Therefore the granlee is rorced into the
silu,lIion CASl finds itself in, WOcf1:by it cannot make budget corrections, and it has no lXCOurse but to
continue 10 usc up its pm:iolls projec1 time. It beI;ame clear "\hat its December 2001 budget W!!S woefully
Monday. May 10,1004 at 18:11:1/ Harus
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inadequate. How could CASI reoognize that it needed a. new budget ifit could not track ill: actual spending relative
to its budgeled spending? Oe1ll11, CAS! WB!> ElW1ICt: crlhe discrepRnC)' in its. ItClulli spending given the energy and
effort expended in attempting to obtain a n;vised budget. Therefore, CASi was in compliance with the ab<Jve CPR
citation. Had CAS! not attempted to negotiate a budget revision, then the above allegation would be clearly true; as
it would be evidence thai CASt w;u; unaware of the devi8l.iom oril'i spending ITom its budget.
The OIG report continue$ on \0 state:
"Since the AT? budget included only direct projeet costs, the financial management system needs to be able to
properly classify as either direct or indirect, "
Companies as small 8..!: CASI do notgene:rally seek, ot are awarded gJlIfI15 ofthls wIth such stridtlres. After
discussion with NIST officials, with Axiom consultlmts iIlld with ATG consultants, sJ1Cl'ific instruction ..
were given on how to do m9l1age the finances orthis grant so that minimal overhead WOlJId be inc.tllTed .. f1unher.
the PI unfortunately agreed to II complete of the CAS! books undn Hayes direction. Furthermore, Heyes
refused to consider or IlCOJunl for the origirmJ plan for how the gmnt 9I1d the PI WIluld manllgC and account for
overhead and indirect cosU.
The OIG report stales:
"Computer Aided Surgery does not have a fillllllcilil mBMgemeni system Ihlllallows it to determine readily which of
ils COSts are direct BIld which are indirect. The general ledger does not separate direct from indirect costs, IUId
Compumr Aided Surgery never prepared an indirect cost proposal that identified each ilem of cosllo be included in
the indin::ct cost pools."
Hayes undertooic Ihis rt:Sponsibility II!ld completely fuiled; The PI had C?riginally tagged C05I3 byusingtheQuicic
Books 'CLASS' facility, and cu5\omer cost chatgebllCk filcility; Hayell refused to consJder this;md insisled that II
completely sepiU'atco, stand-wone sci of books. She insiited this WilS required for CAS' and NIST ATP because of
the disparity or the Fcder.d reporting period and the CASI LLC and mc reporting periods. This m:1I1cd the
extremely convoluted and unnecessary that almost all entries be posted twice, into each sel of books.
This caused and accounts thilt Ilot.sUbject to'the proper oonwlidaliQn adjusroWll1!I dDne
by Spitz.
The OIG admits: .
"The cost principlt.S identified in 48 CFR Part 31, Corllr'()I;t Cost Prilfciple$ and ProcedJu-es. do net prO"Vicle any
specific guidance on \VOuld be indirm cc:stll. However, AIP's Proposal Preparation Kit st\lJ:es thaI
typiCII.l examples ofindirm costll include gcmeral administraiion, lnDirrlt.nanl;'e, JibruJ}' eXpeI15C9,_BI\d aD;Ountilllii.
The kit IIlw thui if the m:ipient hi!S lin adequaICaccowrting system consistent with gene11ll1y acoepfed
acCOUnting principles:, then c:ert.e:in expense items should falllnlo indirect cost categories, even for a new start up
company with only one project. "
Becau5e oflhe small size BIld unU!lual of CAS I, there was no dear guidance fOT a tiny company such il.'l CAS[
to es1nblish these costs ill the tradition of much lorgu compMies. CASI C(Interu:is that it is impossible 10 oohere
fully to the rO( large companies. This problem was acknowledged In early discussions between CASI and
NIST A TP. This problem has been acbiowlcdge throughll\ltthe federal govemme.Dt BDd is pari ofvllJ'i()us
legislative pack.ages. EveI)' company and project i.i unique and must comply with the Bpidt of the law.
CASI unquestionably did.
The PI, theIRS. NYS, iUld tbeNIST ATP IITId OIGvme never able toobwin from Hayes slable figures rorany
purpose whll1soever. More importantly, NIST A TP ras-ponded to nurnerM attemptS to revise the budget to
confirm to the emerging new realitiC!: of the Pfoject. thePl surmises lhat because oflhe bad n::latil>nship
by Hayes with the lUST ATP Gren! Specialist and CASI, and given the changing actual figures Hayes supplied
during the budget revision negotllllions, NIST A 11' lost all confidence in the PI and misplaced all or its confidence
in Hayes. Hayes, abusing the NIST ATr confidence in het as the auditm, procc:cd.cd to torpedo CAS! with bad
reports to NIST, bad and late reports to the IRS, and fighUng with the CAS] bOafd and lega! team. The PI can only
surmiSe why Hayes has so encrgt:tically and viciously undomnined hn client.
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The PI was never able to rely on Hayes for stable accoonting figure during het entire trnure with CAS!. Haye.J,
Q.cepl for occasional payroll filings (that were also in error) rNcry deadline she was ever respoJl5.iblc for. We
CIlIl Sire no Diner basis for such a huge aICQUn! OfUnCOffipal:>aled work Il.S other ll'wl to bankrupt CASI so it eQuid
not att8.Gk Hayes. CAS! has reported sud! grossly uDe1hicaJ behavior to the New York State Department of
Education, officcQfProfessionaJ Discipline and they have opened a pMding CIl5C for
NO Compiaints on CA5I R eli
It is clear from the scientific ovtpvt and profwional kudos ge.mered that CASI is doing world-class significant
BOd providing significant value to the NIST A TP progrtIITIlIS well as the Mllon, Which despite this
accounblofu:y nightrnaro::, is the real purpose oflhc program. Miles10nts are being met and important basic science is
. _ being done.
CASt misplaced Its fatth In Hayes.
H<lYes to put its in order, keep CASI out oflrouble. iIfld to make its NIST audit report; what in
fact he.ppened Hayestorpedocd nerything she was to prol<:C! as accounllinl, report as allditor, and advise
as a government grant! management authority and advisor.
Conclusions
The accompanying OlG draftaudil rt:port is ignoring addilioni!.! information on(baIanct: sheet type acoounls such 115
inter-company tnlnSfers and PI repayment offiwlty advlUlces IIIld co-payments separately atlached .to the
consolidated statement of fund receipts and eq:>enditures (See Exhibit ill).
The PI requires withoul a fac.e to face ifboth sides IIR flexible on settling this matter an
amicable: basis ae<:ep1able to all. Abave aU, Ih!! wa<: the main PIllpO$I: of the project, and should remain so.
ignonmcc oflmd with govemm'="-I gnmt technical guidelines led to some mistakCfi lit
the very beginning ofthe: project. These mislakes as 10 the interpmat:ion of program guidelines should nol
hINe been Bllowed to wreck the aim of the: project through its suspension.
People worked very han!, for nothing, IlIld the government saved a lotof moncy. Ifthis work werelo be done in a
government research laboratory, the cost of the projec1 wOllld h<lve been mUltiple millions of dolllllS. Many attempts
at revising the; budgel were nll:t with no from the NIST ATP sponsor. Ow- timelirle (EJdlibit IV) shD'INS thol.
we began this atlempt at revision fairly eIIl"ly in the proceJS IIJ1d our financial sppe::Jdix (Exhibitl) shows that had
the budg-et been properly adjusted the rc.sean:h would iwlve come in allLlllICCCable Cost.
Why did the pIQject nldv.fe change? Because as the PI was writing the propoSlll, it SI;Cmed at the time that using the
NlST A TP funding 10 hireling the bigge;t and presumably best computCT gmplIh:.s e:(pert obtainable, hBtne!y his
CUNY colleague Professor George Wolberg, help insure the projects success. This was notthe case; in tael,
some onhe most vitRl contributions to this project were malic: by peoPle who were never on the NISf ATP or any
CAS! payroll. As the project commCllccd, it became clear thatPtof; WQlberg had mUltiple faculty commitments aOO
was also in the prOoCeSS of starting his own busil'le$ll. The PI felt lhat Prtlf. Walberg could not givethis project the
attention il NCjuired. Further, Prof. Wolbefg insisted on U3'inghis own softwu.re Yr'hich he owned, and
would not give CASI source code to. Th5 creoded a.problem ofcxcessive dependcnc:y on Wolberg and his code,
something that NIST ATP was concerned about in their tim sile visit. The PI was spending too much lime
managing Walberg and specifying delailed contruct modifications for Wolboerg Md arguing over irwojces and not
..... hat the project needed. Howevct, Professor Cox, a..Iong with theCASI imcrwstudent Mr. DaSallu were
beovming more and more adept at bllSic 3D computer graphiLS, and a PhD sruclent from the U of Delaware, Mr.
Thiarejiunjoined our effort and Wll!l able to do more computer grophlcs than ProfWolberg Vr'BS able til do. Mr.
Thiarajillll appeared on the CAS! payroll, being funded entirely by the De!1ll'I'lUl: Biou:chnolGgy Institute ofU
Deiaw6le. When the PI started Ihrottling back on Prof. Wolberg-hours and funding. the PI started complaining to
NlST ATP.
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NIST ATP told Ih!:: PI U1a1 they would bad: the PI's and that it was the PI's decision to do whai WB.'i best
for the project. II was this vole of confidence. and the lack of responses from the grant specialist, thai gave the PI
the very clear and distinct impression that NIST A TP [rUsted 1hc PI and weI'('! willing to go with the PI's Frojec1.
decisions. These messages giving the PI autonomy were n:pealed in a numberofinstmces. The bw;intsS manager,
Gwfein,. kept asking the NIST A TP Grant Specialist many questions and pc:nnission fur all sorts of CAS!
decisions. Repeatedly. the Grant told Gurfein "you om YOUT busineu how yOLl see fit: we WOII't !ell you
what to do". All this"trust and confidence seems to have been poisoned by Hayt:s.
Bel:;ause orthc N1ST A TP ['Il:5istance to documenting any verbal undcn;tandings, amendments, and d1anges in key
people WilD proved vital to the proje-=!. their c0513 wert questiom:d although they w<=: a key part of the project. Not
withstanding this, even if1hey had been ar:cepted, this subcontractor portion /I.Ild payroll portion over the thrte year
period should have been subs1antially chElllged and trllllSfern:d tothe oornputcr technology. Outsoureing key
research rules by contractors caused the PI to loose control crverthe ttichnical direction of the prqject .. B:ause we;
had to do much mort of the project oJlsile, and given the efforts of Dr. Karron's PhD and MBSters stude:nll. as well
!IS the Seall they required, CAS] a place for the smWl staff, fllld the sophisticated equipment. This' eqUipment
is being LJsed almost around clock 10 1his day by students, volunteers, and uncO!l'lpensai=d fuculty who continut\
to work on the project A.s hfl.S been erroncously identified in the draft report oflhe auditor, the costs of the CAS!
office u opposed 10 outside contm"lors doing the work in their inferior facilities, was substantially more efficient
and che<lpel' with quicktr and more adVWlced results. We shCtuld not bepLl1lished fur trying to save the
money without slICrificing, but rather enhancing the The PI starrds by the decisions made 119 to what, was
best forthe project.
CAS. Saved the GMlemment Money.
CASI pruvided significant value fOf the government'S dollar. the PI, out ofm:cessity. did operate with
MrNlMAL OVERHEAD. To penalize the PI by reducing his sallU')' /I.Ild asking him to repiIY the salary of the
business lJ\3llager, when the were /lIttiirly budgeted IICld spent in good filith, along with necessary equipment
and a pla.t:e to house the two yearn later, will only serve to bankrupt CAS!.
The research spending was always frugally managtd by the PI. CASt built it its from components to get
research gmde sy:otems thai uniM!ilable commercially. The PI stayed with colleagues ilCId friends when traveling
on gllltlt busines.5'. The PI drove and did not fly whenever The PI's travel WlI5 not questioned (aCl:pt for
S 1 0 for a trip to
Spitz made the books WHOLE by rectlnciliation lind consolidating all pertinent tmn58ctiOns. Mr. Spitz's mono was
'Jet chips fall where tRey IJlllY'. ConsiderIng tbat during the past year, the PI has me.de lip rosll out of pocket and
has mortgaged his n::;idence to nmke trnnsfun ofpeTSonal fUnds totaling in of$106,OOO, in addition to co-
pays. ThePI NIST to consider thallh.e pl:I'iod ofsuspeDsion is punishment enougb fur technical errors.
Finally, the quality /I.Ild vallie of the res-e<an:;h does not warrant suspension. .
Te!t\linating this =atch by banbupling CASI is a disservice fo ils sponsor and the nation. The PI. firmly believes
that this is not what NIST ATP wents or is designed 10 do. NIST ATP practices and guidelines rull:.ll are designed
for large corporations with 1013 of governmcnt experience /I.Ild deep pockets to co-fund these high-risk projects.
CASl neither ofthe.se msources.
The PI has demonstrated it'5 persistence in the tace of incredible resistanl;;e by oontinuing to push for this grant and
by continuing ilS resean:h.
N1ST ATP misplacii!d its trust in Hayes
Hayes W\iS in continuous communlcatlon with NIST ATP for audit guidance, to protect henelffrom 3lJy suspicion
of error o-r wrongdoing by NIST A TP, /I.Ild was getting for her activities with the NIST A TP
Grant specialist, developing a reJalioruhip as the CASI 'tatt:!el', I1l1d poisoning the relatioruhip between CASI and its
sponsor. HilYe5 was telling the PI thErt she was going to save CAS! from ils initial erro.s, and Hayes was telling
Monday. May f(], 200.4'Df 18: 11:2! HfIUTS
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N]ST A TP that would uncover a major scandal and eam a whistlcblower reward for doing so. She would
then overcharge for excessive bookkeeping and accounting work. from CASI in the process. demanded
slavish from the PI in the minutest deloit, which the PI initially thougJJt WIlS appropriate if Hayes was
gOing (0 'repn!r' &r1ors caused early in the grant. Instead, Hayes pillan:d and exSCIlrbated all of the emlls to herovrn
with Ihc government and to further maJlipulate and control the PI and CASL She seemed to Lake
undue thrill and excitement to have so much control over so much funding. All oflhis was part of her desire to
control and maniP'>liale the siluation, to play both side& agarn'! the middle,. des1m)' CASI to protect her CPA license.
OIG misplaced its tr.u.st in Hayes.
Based on the above problems with Hayrs. CASI that the OlG should have thrown out the misleading
Hayes audit. In the ilIl.erests of objmivity IIJld fiUmess, OIG should have, IIJId CASI expected 010 to hIIve started
their audit a fresh with the Spitz reconciled and consolidated inrormation. which did not touch the basic IralIsactloltS.
but which clarified th!!l1l, and made them u$llble;. IIlld auditlllble. The OIG field representative seemed convinced by
the SpilZ audit data and its pre!iClltaiion. ltappeared at the time that CAS! was out from under its dark: cloud and
there was II distinct possibility that the grant would be resumed. CAS! is disappointed that OlG has not changed any
ofito.; opinioIlS based on the faully Hayes audit and the fresh information at the December 2003 field visit.
Hayes should have been fired and not permitted to submit the audit report TheP] did not fire Hayes because the PI
believoo the OIG would give an unbiased report not based on the Hayes audit report. CASI regrets not firing Hayes
but CASI had no choice III: the tIme.
Impoa tad: oIlsenations
The Dec 2001 was Blld is unviable: It was thrown lDge1her just before submitting the gmnt N1d CASI did not
have any hIstorical basi.s to estimate costs. It WlI5 based on C<lnjectures. CAS! at a year of opcnUion
10 get lUI aoeurat.e-sarnple of real costs for budgd: P'>lrposes. First year experience was needed to esteblish bo:scline
costs. CAS! did not 10 stable firf;! year actual figures forthe purpose ofbudgct revisions due 10 Hayes's
malfeasance. CASIImd upectcd il subslmTlial nxIuttion and elimination of the DIG questioned com per the July
2003 report for $205,125.00. CASI clarifications and rebut!l!.ls (Exhibit I) dtow thalmany disalloWBllce9 should not
stand because the rollowed the mi:Iil ofthe glllllt. based on a re'Yised vjable CAS! also cxpcetcd
previously budget revisions and some f1exibillty lIS to so-eallcd overhead (other costs section).
CASI is committed 100 % to this projoot. PI is 100% committed to this projecl and has worked on no others.
SigoifiCWlt management improvements have b= made subsequent to the fimyea:r. The OIG and audits do
nol difkrenliate in the comparison between the first year to the second year.
The PI made asigniffcanteffort to improw C<lIJlllianctl with tbe spirit and even the letter from Ihe flm yearlo tne
secum:l year.
Personnel very milch stabilillXl in sewnd year., Personnel Maying with project through the funding Sllsperu;ion make
their commitment clear: Cox, Rothman, Thiaraj!lIll, Benedict
As i1 small CASI cannot be asked 10 afford some of the more infie;l[ible C<lmpliance polici!::'!, such as
disallowed alternative fringes, not normally associakd with big corporal!:: structures, renl, electric, telephone,. BJld
neccssRlY project all.elRtions.
At no point was the value of the r!::'!earoh questions or the value the guvemment hIlS lUeived qUe.5tioned.
Monday, May 10.1004 at 18:11:11 HOIU$
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In (;{Inclusion, CASJ does not owe NIST ATP fur co-pa:ys, Program contributions already fully paid; CAS) does
lIot owe a significant amount for ineligible cosls (these already roimbursed by 2003). CASl 00e!; mx owe for
unbudgetcd costs because NIST ATP was poisoned by the Hayes fiB'lrell during budget negotimioll.'l Blld the
inac<:u.-aie audit report, into not negotlaling with CASt on 1I=st1l)' budget
CASI believes that NIST ATP should pennit CAS) 10 finish hs budget nmsiOllS (See Exhibit I) to eliminate
problems caused by the Dettmber 2001 unviable budget CAS} has demoJ\S1JBted signjfjC8r!tly improved busiooss
practices IUld f"lSC3l control in the second year IIIld the PI has steadtastly demom;trated his commitment to this projrd
during 1he year follOWing ill suspension. CAS! and the scie,Jtific: cornmUJIity beliEVe that NlST ATP shoold resume
the grant to permit the project to come to 11 succwful S(;ienlific: ronclusioll.
Exhibits
The following sectiol1s are ltJe techl1ical finBIlCial exhibits 10 offered as 5ubstantia1ion evidence irl the this CASI
NIST ATP Alldit rebllnal
Monday. May 1(/, 2(}(Wat 18:11:21 Hours
II b karT'Ofll II P karmn
PI!ge 1) oD8
FILE:" OIG R""POM9 CAS! OaK N_ L"'t!erh8<l1l 23..dQC:"
A-208
C. A. S.1.
Computer A.idcd Surgery, Inc.
Exhibit 1 Summary of Project Costs and Point by Point
Rebuttal of Questioned Costs
Awa.rd
Budget Per
Draft Report
Appendix I
Proposed
Revised
Budget Per
CASI
Computer Aided Surgery Inc.
NIST Award No, 70NANB1H3050
Summary of ProJect Costs
1011/01-6f27/03
Cost3 Claimed
per Draft
Repon

Questioned Per
Draft Report
Costs
Claimed
Per CASI
Change
In
claimed
costs -
PerCASI
Al'PENDIXffi
Page 14 of38
Personnel 700,000 635,000 569,911 104,683 56e,911 None
Error in
Fringe Benefits 238',000 175,000 156,576 68.884 161,75B 3,182 t:lassifica.tion
Travel 29,000 35,000 36,538 23,998 36,538 None
nan-equipment see
Equipment 119,000 250,000 320,443 201,443 236,677 (81,768) our response 'If7,
SUpplies 11,000 35,000 39,344 24,011 22,872 (16,472) Mostly Imeme!
SubcontraCl.s 360,000 150,000 147,153 87,372 144,888 (2.465) Conceded'costs
Other
Total
See QUI response
10000 187000 73535 57,035 169676 96,1411f7,
1,467,000 1,345,500 547,426 1,344,120 (1,380) Net Change
B C D
(A) Please note the budget is mr a 24-llIonth perioo.
(B) In genlCfaf, reductiolls in the subctmtractors' budget of$2IO,OOO and personnel and fringe benefits of
S125,OOO would fUnd increases to !:quipmentand "other" ca:legonr.s, so that $335,000 of disallowed
expenditures would be tiecause ofllie prop!'1 mision$ alone.
(C) Explanations for Bli questioned items and appear in the pages following this summary,
(D) These lIIlIOuno: ate on a revised budget as per above, and reclassifications as per oun:xplamrtion to
quet;\ioncd costs. Coocedod itelIll" hlfVe been subtracted from the total.
Monday, Mo/ Iq, 1()()4 ai 18: 11 :11 Hours
db hlTlln I d b karron
Page 14 of38
FlU::" OIG RIIS!XInge Q:!,S1 DBK New L"tlemead 23,doc"
A-209
Point by Point Rebuttals
Disallowances:
Please refer to Audit report ror refereuces!JIId full
exp!analions.
t. Per.:onnel Costs: $1 04,683 is questioned.
A. $ 71,550 is not alloca.ble to the ATP project.
!I. $ 25,000 ofthe Chid Operating
OffiCCT'S time was allOCilled to non-
NlST activities.
b. $ 46,550 of the ChlcfTcchnical
Officer's lime was: allocaledto non-
NIST activities.
B. S 33,133 ofemployees' :;atmyWBS not
approved b?, NlST officio.ls.
a. $ 15,222 in sallllY to the Fiscal
Control was not approved.
b. $17.911 in salary to the Business
was: not Bpproved. .
Answer:
APPENDIXID
PagelS of38
A, 100% is chargeable and allocable
to project.
a. Gurfein didn't devote
25% to other activities.
He wod:ed CXclu!:ive1y
on this project.
b. Or. Karron .
IS% to "org..nizationaJ"
activities. He "lived"
exhausting 16 - 18 hoW"
days.M!..IW devoted 10
the project.
B. None should be diso.llowcd.
II. Although, not approved
in writing. the graat
spcdalist verbally
approved this position.
Clearly, it is reasonable
and necesslll)' Iu the
project
b. This was the assumption
ofGurfein's slot at II
sUMIanUaIly cost
I1C\d much mOle
productivc persall.
Bulcdict WiIS mo." than
II "business managc::r".
He WIIS indispensable to
all oonecmed including
l1C\y oontact with
gOVCJIlml::nt, becauSl: of
his with !he
NlST ATP programs.
Thl:: gOYmlmenl i&"!:Is!m!.
Bttt:mpls to approve
Benedict, which was:
A-210
2. Fringe Benefits: S 68,834 arc quc<;tionoo.
A. S 52,221 is disallowed because CASl hwf
110 pian for the charges.
a. $48,989 is disallowed bec,ulsc
were paid In excess of
employee's insurDl1c:e
reimbllrsements.
b. $ 3,238 ofcduc.aLion is
disallowCd betausc it is not an
onIinllQ' expense I)ra
corpon.lion.
B. S 14.,196 is disallowed because it is Ii
c.ost directly associated with another
cost.
a. S 3,130 is for health inSUTlll10c
dircdly associated with a
perC/llage oflbe reallOCllll:d
salaries of the Chief Opereting
Officu & ChiefTcchnical
Offieu's nonNISr aclivifies.
APPENDIX III
Page 16 of38
dtltdmenml to his being
"in lhe loop". They
ignored him in their
with
CAS!. MCM'oIIhile the
program rontroi
improved dl1llTUl.tiQllly
under his watc!;!.
2. CASl did have II "cafr:teria" type plan,
which in the process of being
formalized. There is no ronnal 'apprtlVllI'
process. It was written policy. WId it was
in prw;ti!:e sinlJC CASI's formation in
1995 wilhout question or problem.
A, Total mnge benefits were
drarrurticaIly lowerthBll the 30%.
34% normally allowed hy .
govemmlmt prognuns without
question. No pllillS were made to
furmali:r.e the benefits plan b<l5ed
ou this assumption fOf this
progTlIm.
II. "Big" company fringe
benefits such as a
pen'lion plan were not
practical for this small
company. we
have II medical
r:cimbursemcnt plan.
b. The educatioJ1ld Imfnillg
wan. din:c1 expense of
the jJroject,. n=!aled to
the re:seareh.
B. Sec IUlswers to tA"lIIld IB above.
a. Since they should Iur,oe
a zero disallowance on
Salarit:!l, health
insurance is 100%
aIlOt;ilble.
A-211
b, $2,600 of childcare cost paid for
the child ora fl.'ical conlro]
employee: whose salary was not
E!pproved.
c. S &,466 ofpayrolliaxes
associated with a percentage of
the nlIIlloca:ted sulillies afthe
ChicfOpemting Officer &
. CbiefTCl:hnical Officer's non"
NIST activities.
C. $355 for miscelhmeous fitness costs in
excess of gym membership paid.
D. S Z, 106 of pllrlting costs for
employa:s while they are at work ilIId
medical visits.
3. Travel: $ 23,99& of gas, local gas, parking. taxis,
tolls. meal..5 and miscellllfloous ullJer iwrru lIle
questioned.
b. Childcare' sbould
100% allowed just
D.$ the n:lllted "base"
salary has no basis
for disalloWllllCc.
c. The COO lind era
salary should not be
a/(ocal:e:d. Similarly
their fiinges should
nOI be IIIloelded.
C. CASt's Health Plan
does reimburse Gym Visits.
CASI was simpl)'
supplementing llJe Oxford
bllllefit, whieh was allowed
by the OlG. The amount is
vel)' small and fitness
expense is becoming II
commonplace fringe benefit
Furth.el, bccaUlieofllJe
se deritaty nature of computer
work, Ibis bcnefiL is
particularly important for
computer software companie:r
and their t::ITlpJoyce bealth.
D. This benefit mtS modeled
after the IRS benefit, whicb
allows ancillary rosts to
medical visil${laxi,
transportation. meals). These
are al1ernaJive fringe
nectl.1iS
rv
for employees to
minimim time un meolical
visits and to support
employee productivity.
3. CASI Employees can n01 always
spend II 9 am 10 5 pm day at
CAS!; Frequently employees would
have to run out mid day to teach II
cllDS lit Brooldyn College or City
AIlcmatJvely, t!kc clllSSC'> at
!!Chool. In order to minimlz.e the time
spent by employees searching for
parKing, this benefit was implemented.
Commutation 10 Bnd from CASI was
Similarly supported to enCOurage the
traveJ 10 CASI.
APPENDIX III
Page 17 .f38
A-212
4. Equipment: $ 201,443 is questioned.
A. $ 18,424 for capital improvl:fII.ent to the
IIpartnu:mt owned by the primary
shareholder orCASI, Md used by the
compony 11$ its place ofbusinC3S.
II. $3,'500 ofMistmm E1et:tnmic
was correctly posted to CASI
books 11$ CEtpltai improvements
but"WlIS inocm:ctly cluu&ed to
NIST as equipmeuL expenses.
b. $ 14,924 of capital costs was
identified 11$ equipment costs.
B. $ 2.533 of costs is booked twice.
c. $ 703 of coslS was not i!lloo;;ablc to the
p,.TP award.
D. $ 265 of dues &, subscriptions w'DII not
approved in thc budget.
APPENDIXID
Page 18of38
4. Only m2.ll2 in equipment COsls
are clwmed noI1l]11,923. The balance
is computer software and olller
computer costs, aseparate calegory.
A. Since the apartmCllt was !!!1...i!
residence (tho PI paid rent Cr.,
It share in II home jn
Connecticut) but an office:.
these altcnJlions which
detmct from the tnIIlKet va.!ue
of selling the apartment,
:5'hould be apPfoved 11$
for running lix:
equipment. 11le auditor
admits that it was used by:ab
e
complillY lIS "its place of
business". By looking lit the
veQdors, it is obvious that
these expenditures aa: related
to wiring WId peripherals that
buttreu the computer
technology.
B. Thiscostwu2ll1
upgrade,
absolutely required, to
run the computer syste!l15
for the project
Frequcntly
breaker overloads WId
losses of data, and
illsufficient C41nent for
. air conditioning made
this an emugency
expense.
b. They are moved to an
"other" category. scc #-7
below.
B. Imufficient supporting detail
is givcn to continn or rcfute
this questioned cost item.
c. No sufficient detail is given
to nrify or deny, this
questionl.ld con.
D. De Minimus and ImJN.letial.
A-213
E. $179,518 exceeded the amount in !he
budget for
5. Supplies: 124,011 are quesfiuned.
A. S 2-1,506 was nllt approved by NIST
gnml officials.
a. S 378 for chase bank and
NSF charges.
b. $2,952 fOT dw:s and
subscriptions.
C. . S 599 for miscellaneous costs..
This reveals the petty and
hostile orienlation of Ms.
Hayes. As was explained to
Ihl:l8uditor face 10 face, thl:l
way llIat CASI kept trnck of
the vital professional
literature in the fidd was
through IEEE, AtM. AAAS.
MBDLARS, SP)E, and
Sigma Psi professional
li1erllture online indices and
datDbal\':3... Then:: is no way to
subscribe toth=se do.llIhases
Without membership.
H. $6(),I()6 WIIS computer costs.
software., IIl1d computer
repairs not rela!cd to the
Equipment taltgory but
properly allocable to the
"other" ca1cgory. $1.7.700
(146.700-110,000) should be
alfowed a permitted
rWlocation of 1()% ofprojcct
costs. The ball!nce should be
allowed as per budget
revision n:quest, where Ihe
orlbe projc:cf
changed Ciomplotely Wid is
"equipment" driven. See
schedule ofexpenditurcs
earlier in this
5. "-
a. Book fees werercfundcd
bul not credited properly.
b. Most memberships
for access to
online library resew-ch.
See above on
SubscriptiOl15".
c. Paypal and 8o.mcs &
Noble are of the-
project. '
APPENDIXID
Page 19 0138
A-214
6.
d. S 285 for internet C(lsls incurred
prior 10 the sward period.
II. .$! 5,809 fur hook-up BlId
interne! fce:I, which lisled
indin:\:;! cost on the proposal,
therefore they are not an
allowable direct proje:ct cost.
r. $ 1,014 was reclassified from
miSC1::Uancous expense to
internet expense.
B. $ 2,323 of com was booked twice.
c. $ 65 I is'capitll improvements.
A. $ 31,146 should be considered
oosls.
$2,465 is \ax wolk and trainiug
course tak= by thlll.luditor.
b: $7,455 in legal frc:5 W!I11 not
I.Ipprtl"ved as part orthe budget.

$25,317 for bookkeeping
S\: ..... this WiU nm appn:rved
as'part of the budget.
d. 5909 for clerical com thai are
indinct oom.
,.
$1,000 fOl" work dOM by Valley
for Mage Conllullants. Thill was
not .approved by NfST officials.
6.
APPENDIXm
Page 20 of38
d. Conceded as error by Pi.
e-f. All internet rclaJed oorts
as indispcru:llble to
oompuIflr technology a.s
electricity
The original propo.w cites
lfeJivwy of
milestones. This
Unfllfllomab!e disallowance
milkes no sc:nse becauS"e the
proposed revisions to
bUdget, would haye
oorro:ooted this erroneous
categorization of these
being "indirect" oosls. The
internet oosts in oW"
original propo5:!!l and
refio:oot the hostile and
unconsidered oric:nurtion of
Ms. Hayes.
B.
C. See 4A above.
A.
11.. Conceded.
b. TIlese legal fees were never
claimed lIS NIST
c & d. A project without
boold:eepillg jg a project
without W controls. Both
bookkeeping i!IlId clerical
cosls are integral direct
""".
e. Emergency repairs on a.
sCoCurity problem wilh
intemt't oommllllicalioo do
'not nt:t:d a(7prOl'al.
A-215
B.
$1,00010 the ChicfTcclmical Officers's
brother for setting up projector. The
projector was not Ilpproved by HIS[
orlCiaIs. and the inrtallation is not
allowed.
c.
$12,000 for subcontrading with A TG
consultant5.
D. $400 to Axiom Inc., who helped WIth
budgtrt ne:golhrtions wlth NIST.
E.
$170 to Paypal, this WlUo not o.pproved by
NIST offici";ls.
F.
$16,656 for equipment installation that
capital to the
apartment.
7. Other: $57,035 in other rosts are q1ieitioned
because they Vl!::1'e booked in Non-NIST boob.
"-
c.
D.
E.
F.
APPENDIX III
Page 21 of38
CAS! had nc blarlk walls 10 project
mything. CASI na:tled to make II.
projection screen because there
were no blank walls for projection.
CASI gives regularly
pertalning to our research. Md this
diffusion ofre:ieafch findings i, II
direct rosL The CfQ's brother was
in the room automation
and vidtlO indUStry, and designs
and specifics million. dollar
instaUations professionally for ilo
major video manufacbJn.r. The
wade he did forCASI fur O[lIy
$1,000 was more B donation than
an installation i:ontrnct. CAS]
needed light baffles ilnd hlllClcout
shades, as well as the scretlll and
projector.
These post-inceptlon
costs, not apre-project cost,
utIlizes II $1,000 pel" month
retainer.
Project manager Ik:nc.did
originally wortoo for th& firm,
whlch rontracted him 10 CASI fur
$2,400, only 400 ofwhldi vms
paid wilh NIST ATP funds.
Benooict was intimately fiunililll"
with CASl's NIST problems and
agreed ttl join CASI despite these
problems, as an employ.:e foc much
Jess money then he would hllYe
earned otherwise.
Pari ofbookk..ecping. solely. a
dilt:ct project cost
See iIllswer 4A. This should be
approved under 8 budget rcvision.
7. These were booKed in a "not (yd)
aJloea1ed" to NIST section. A budget
revidon allowing rent, electric, telephone,
cleanlng, computer sofho.rare and other
computer rom, including apartment
capital ren(JValions n::lated to romputers
A-216
APPENDIX III
Page 22 0138
and inltmd technology would add
approximately $153,000 to this l:Iltegory. The
breakdown is I!S folllWr.5;
R ~ t
Electricity
Telephone & Modem
Cleaning
Computer Costs
S 42,000
16,735
8.J1l
7,600
60,106
(including internet)
Aplll'tmetltRenovations 18,424
CostofAudlt ~
169,676
A-217
C.A.S.L
Computer Aided Surgery.,1nc.
Exhibit II Payroll Reconciliation
Monday. May 10,1004 ur i8: 1l:11 HOl/rs
oj b kalTan I d b brroll
Page 24 oDS
FILE:" OIG R&PQn5f!!;AS1 Dill( New Lel!ertJljad 2 3 . d o c ~
APPENDIX II!
Pagc230f38
I
,
A-218
"'"
Gross
.E&&
511312002 8;333.33 637.50
6M002 8333.33

Total Per Quarter 1&,656.66 1,275.00
71512002 9,956.97 1,800.20
71512.002- 14,583.33 211.46
7/512002 9,956.97 1,033.90
8.'1312002 61,918.07 2,555.84
61,918.00 897.61
156,333.34 6,499.29
1011912002 16.1126.00 270.96
11/512002 16.8'2.6.00 243,9B
1112012002 15,fl26.oo 2<13.97
121212003 16,626.00 2<13.tl9
12{1712002 4,206.50 60.99
12131Yl002 4,205.50 61.00
iolat 75,717.00 1,124.90
IDlaJ per year 250?17.oo 8,999.19
",00003 4,206.50 60.99
"2312003 4,205.50 321.80
2{1212OO3 5,047.80 386.16
2121/2003 5,047.90 3116.15
;y,nOO3 5,047.90 366.16
"'2512003 5,047.90 300.16
Toial Par Quarter 29,604.20
419/2003 5,047.60 365.16
411812003 6,730.<10 51<1.88
5/m00' 6,730.40 514.68
5/16fZOO3 6,7J(L4O 514.69
513012003 6,730.40 514.99
611312003 6,730.40 514.98
6/2712003 6,730.<10 514.00
TDlal Per QUOJl1I3r 45,430.20 3,475.41
Quarterly Payroll_ Dr.IQmon
tOf1fUl - 6IJ0I03
W .....
"'"
1,909.00 493.56 210.83
1909 00 49'356
......
3,818.00 967.12 559.25
2,637.81 255.10 115.65
3,555.00 967.78 538.42
2,637.81 967.78 538.42
17,104.00 4,351.00 2,231.00
17,104.00 4,351.00 2,231.00
43,036.62 10,932.66 5,654.69
5.109.00 1,197.90 652.31
5,109.00 1,197.00 652.31
5,109,00 1,197.90 552.31
5,109.1)0 1,197.90 652.31
678.00 255.60 147.53
679.00 255,60 147.53
21,792,00 5,302.80 2,004.30
69,649.62 17,Z2.2.58 9,118.2<1
e76.00 255.60 147.53
556.00 255.60 147,53
921.00 295.90 167.34
921.00 295.90
,.,.34
921.00 29:5.90 167.34
921.00 21>5.00 167.34
5,030.00 1.694.80 004.<12
921.00 295.90 167.34
1,426.00 430.43 234.64
1,670.66 447.39 243.97
1,670.56 447.39 243.97
1,970.56 447.39 243.97
1,670.56 447.39 243.97
l,67t1.54 447.Jtl 243.87
10,699.76 2,963.28 1,621.33
Con1!lb!.!l!s!n
lOl!!lIT.
-
Proj9Cf
2.50
"'"
5.20
1.20
2.50
2.60
1.20 30,000.00
0.00 37,334.19
7.60 67,334.19'
1.20
1-20
120
1.20
1.20
1.20
7.20
20.00 67,334.19
1.20
1.20
1.20
1.20
1.20
1.20
7.20
1.20
1.20
1.20
1."
1.20
1.20
1.20
8.40'
APPENDIXID
Page 24 of38
...
5,019.84
5 002.25
10,022.09
5,146.81
8,268.01
4,756.38
5,675.03
(0.00)
24,866.29
9,594.61
8,621.61
9,621.62
9,621.61
3,003.19
3,063.17
44,SB5.90
79,474.18
3,063.18
2,912.37
3,276.20
3,276.21
3,276.20
3,276.20
18,960.39
3,276.20
4,123.25
3,852.50
3,952.50
3,952..50
3,952.50
3,652.:52
26,662.00
A-219
C.A.S.l.
Cumputer Aided Surgery, Inc.
Exhibit III Consolidated Project Expenditures (Profit and
Loss) and related 'Balance Sheet-(9/30/02 6/30/03)
Monduj, May 10, :laM at 18:1/:21 HarJU
If b k/lrrool d h karron
Pagc26of38
FILE:" OIG CASt DBKNeIll' lellemaad 23.lfoc"
APPENDIXll
Page 250138
A-220
COMBINED BALANCE SHEET
CASI! NIST
CASI (LLC) CtJecking - 3165
CASI (LLC) Checldng - "0065
NIST Checking - 3565
Total Bank
Advance on payroll
Total other Current Assets
Total Assets
Uablllties & Equity
Accounts Payable
Total Accounts Payable
CAS! loan
Chase SBFS Loan
DKB Loan
Due to ATP Program
Total other: Current UablUty
Total L.iabillty
Contributions to NIST ptogmm
Current Period Income (loss)
Opening Balance Equity
Total Equity
Total UabliUles & EquIty
9130/02
CASI HIST
$0 $0
43. 0
0
{60,
31O
l
43. (60,310)
75,000 19
1
000
75,000 19,000
75,438 (41,310)
3,131 5,453
3,131 5,453
0 (166,927)
(1,317) " 0
(5,100) 49,736
188,927 0
162,510 (139,191)
165,641 (133.737)
0 67,334
(110,606) 25,094
403 0
(110,203) 92,428
$76,438 ($41,309)
TOTAL
$0
43.
!60
j
310)
(59,672)
94,000
94,000
34,129
8,584
8 , 5 ~
(168,927)
(1,317)
44,636
188,927
43,319
51,904-
67,334
(85,512)
403
(17,175) "
$34,130
APPENDlXllI
Page 26 of38
A-221
COMBINED PROfIT & LOSS STATEMENT
CASII NIST
Income
AT? Award Funds
AT? Award Funds - Year 1
A TP Award Fum1s - Year 2
Consuttine Fee Income
Total Income
Expensn
Advertising
Amex. CredIt Card
Amex Credit Cartl: Membership
Amex Credit Card: Purchases
Auto: Fuel
Auto : Mobil CredIt Card
Auto: SUI10c0 Credit Card
Bank Service Charges
Credit carel: Membel5hlp Fee
OBK Personal
OBK Personal: Phannacy
Dues & Subscnpti0ll5
Fringe Benefits (non NIS1)
Insurance: Disability Insurance
InSlJram:e: Health Plan
Interest E:..pense: Finance Charge
MIscellaneous
NIST"Equipment: Ancillaries
NIST Equipment Hartiware
N[ST Equipment: Software
NIST Equipment Repair & other
NIST Equipment: CDmputer Expense
NIST Fringe Benefits
NIST Fringe Benefits: Admll1: Chlldcare
NIST Fringe Benefits: Admin: Doctors & Pharmacy
NIST Fringe Benefits: Disability Insurance
NIST Fringe Benefits: Doctors & Pharmacy
NIST Fringe Benefits: EducaUon: DaSal!a
NIST Fringe Benefits: Fitness
NIST Fringe Beneftts: Health Insurance
NIST Fringe Benefits: pari:;ing
9/30/02
NIST Fringe Benefi{.$: Technical: Doctors & Pharmaq
NIST Fringe Benefits: TransitCheks
NIST Fringe Benefits: Trave! & Parting
NIST Fringe Benefits: 'Norker's CompensaUon Insurance
N!ST MalerialslSuppUes
N1ST Materials/SUpplies: Dues & Subscriptions
N1ST Materials/SUpplies: Postage, Shipping, Messenger
I<MI
NIST
$.
0

0
o

(0)
(1)

0
..
0
,.
0
200
0
313
0
0
0
0
0
4,093
2,326
3,675
0
0
0
0
0
0
12
0
0
0
44
0
(0)
0
0
0
0
316
$0
600,000
0
0
APPENDiXm
PageZ7.08
TOTAL
$.
800,000
0
0
BOO,OOO 800.000
11 11
(34,563) (34,583)

(1)
34,563 34,583
0 0
10 64
16 16
0
'6
0 0
0 200
0 0
316 629
0 0
0 0
0 0
0 0
1,074 1,074
16,569 22,662
163,557 165,683
9,579 13,254
4,704 4,704
247 247
0 0
1,700 1,700
807 607
163 163
0 12
3,236 3,238
1,246 1,246
15,013 1B,013
0 44
39,246 39.24e
0 (0)
2,631 2,631
902 902
0 0
682 662
1,187 1,503
A-222
COMBINED PROFIT & LOSS 5rATEMENT
CASI! NIST
9I3{l/02
NIST Materials/Supplies: Supplies &. Non-computer Equipment 4,064
NIST Materials/Supplies: Supplies &. Non-computer Equipment 0
NIST Office Expense 0
NIST other: Accounting 0
NIST other: Capilallmprovemems 0
NIST Olhe.r: Communication: Inlemet, Broadband, Modem Etc. 0
NIST Other: Communication; Telephones 0
NIST Other: Communication 0
NIST other: Communication: Internet, Broadband, Mooem 0
NIST Other: Dues &. Membership 882
NIST Other: Legal 0
NIST Other. other Repair5 0
NIST Pa),roll Expenses 0
NIST Payroll Expenses: 940 0
NIST Payroll Expenses: 940 & ~ 1 0
NIST Payroll Expenses: 941 0
NIST Payroll Expenses: FICA 0
NIST Payron Expenses: Ne 0
NIST Payroll Expenses: NC-5 0
NIST Payroll Expenses: NJ 0
NIST Payroll Expenses: NYSlNYC 0
NIST Payroll Expenses: NYS--15 0
NIST Payroll Expenses: Propay fees 0
NIST Payroll Expenses: taxes wJheld 0
NIST Payroll Expenses: taxes w/he{d: Albin 0
NIST Payroll Expenses: taxes w/held: Benedid 0
NIST Payro!l Expenses: taxes WJheld: Borthwick 0
NIST Payroll Expenses: taxes wJhe!d: Cox 0
NIST Payroll Expenses: taxes w/heJd: DaSalla 0
NIST Payroll Expenses: laXes wl1leld: Gurfe!n 0
NIST Payroll Expenses: taxes wJheld: Karron 0
HIST Payroll Expenses: taxes wflleld: Peralta 0
NIST Pa)'mll Expenses: taxes wille!d: Ross 0
NIST Payroll Expenses: taxes willeld: Rothman 0
NIST Payroll Expenses: taxes willeld: Wine 0
NIST Payroll Expenses; taxes w/held: Wynter 0
N1ST Payroll Expenses: Temporary 0
NIST Projed Salaries 0
NIST Projed Salaries: Admin: BenedIct 0
NIST Projed Salaries: Admin: Gurfein 0
NIST Projed Salaries: Admin: Ross 0
NIST Project Salaries: Admin: Wynter 0
NIST Project Salaries: Terhnlcal: Albin 0
NIST Project Salaries: Technical: Borthwick 0
NIST Project Salaries: Technical: Cox 0
NIST Project Salaries: Technical: DaSalla 0
NIST Project Salaries: Technical: Kanon 0
NIST Project Salaries: Tedmlcal: Peral1a 0
N!ST Proj'ect Salaries: Tedmical: Rothman 0
NIST Project Salaries: Terhnical: Wine 0
NIST Sub=ntracts 0
12,962
0
2,284
5,090
3,500
6,326
110
0
0
0
7,455
424
3.
214
0
25,410
(O)
0
0
{OJ
0
0
0
0
{OJ
0
0
0
0
0
(OJ
(O)
0
(OJ
;
0
0
0
0
100,001
0
9,349
6,200
0
5,200
18,936
174,970
1,313
3,405
3,520
0
APPENDIXffi
Page 28 oB8
17,025
0
2,284
5,090
3,500
6,326
110
0
0
682
7,455
424
39
21.
0
25,410
{OJ
0
0
{OJ
0
0
0
0
{OJ
0
0
0
0
0
(D)
{OJ
0
(O)
0
0
0
0
0
100,001
0
9,349
6,200
0
5,200
18,936
174,970
1,313
3,405
3,520
0
A-223
COMBINED PROFIT &. LOSS STATEMENT
CASIIN[ST
NIST Subcontracts; Accounting
NIST Subcontracts: AdmIn: Accounting
NIST Subcontracts: Admin: Axiom
NIST Subcontracts: Admin: Bookkeeping
NIST Subcontracts: AdmIn: Clerical
NIST Subcontracts: Admin: Ferrand
NIST Subcontrads: Admin: Legal
NIST Subconlracts: AdmJn: Mannil1g
NIST Subcontracts: Admin: Ross
NtST Subcontracts: Equipmenllnstallalion
NIST SUbcontracts: Professional Tax Services
NIST Subc:.ontrects: Technical
NIST Subcontracts: Technical:.Abe KarIon
NIST Subcontracts: Tet"hnical AlbIn
NIST Subconlracls: Technical: ATG
NIST Subcontracts: Techn\cal: Blumenthal
NIST Subcontracts: TechnIcal: Cox
NIST Subcontracts: Tedmical: Frost'
NIST Subcontracts: TechnIcal: Honoraria
NIST Technical: Mage
NIST Subc;ontrads: Technical: Radio Logic
NIST Subcontracts: Technical: Walberg
NIST Subcontracts: Technical: Zeevi
N1ST'Travel
NIST Travel: Auto & other Transportation
NIST Travel: Conferences
NIST Travel: Meals
NISTTrave(: Other
NIST Travel: Other: Travel & Business Meals
Total E)(psnsss:
Net NIST Income:
NON.NIST (not allocated to NISD
Non-NIST Expenses
Non-NIST Expenses: Bank Servica Charges
Non-NIST Expenses; CleanIng
Non-NIST Expenses: Can Ed
Non-NIST Expenses: Con Ed Solutions
Non-NIST Expenses: Conference!>
Non-NIST Expenses: Fil18S
Non-I'/IST Expenses: NJ -'i12.7
. 9130/(J2
Non-NIST E)(penses: Professional Fees: Accounting
Non-NIST E)(penses: Professional Fees: Legal
Non-NIST E)(pensea: Renl
. Noo-NIST Expenses; Repairs & Hardware
Noo-N 1ST Expenses: Shipping
1,000
0
0
0
0
0
0
a
a
0
0
a
a
0
0
0
0
0
a
a
a
a
0
a
3,338
3,312
54'
0
a
24,007
(24,001)
0
0
2,900
0
a
0
0
a
0
0
0
a
a
a
0
0
4,930
509
0
0
0
0
0
0
300
1,000
a
12,000
200
33,930
100
a
a
100
39,675
375
0
2,105
6,943
0
438
5,528
762,739
37,261
a
0
1,400
1,040
528
a
55
0
a
4,159
2,000
a
a
Al'PENDIXll
Page 29 or38
1,000
0
0
4,930
509
0
a
0
0
0
0
300
1,000
a
12,000
200
33,930
100
0
0
100
39,675
375
0
5,443
10,255.
543
438
5,528
786,745
13,'255
0
0
4,300
1,040
528
0
55
0
0
4,159
2,000
0
0
A-224
COMBINED PROFIT & LOSS STATEMENT
, CASI/ NIST
Non-NIST Expenses: Supplies
Non-NIST Expenses: Telephone, Cell, Pager
Non-NIST ~ n s e s : Travel: Auto
NonNIST Expenses: Travel: Meals &: Errtertainment
Office (Non-NIST): cleaning
9/30/02
Office (Non-NISn: Communication: Intamel, Broadband
Office (Non-NIST): CommunlcaUon: Pager
Offica (Non-NIST): Communlcafion: Telephone
Office (Non.NIST): Insuranpe
Office (Non-NIST): Meals
Office (Non.NIST): Postage and Delivery
Office (Non-NIST): Renl
Office (Non-NIST): Repairs & Hardware
Office (Non-NIST); Supplies
Office (NonNIST): Telephone
Office (Non-NIST): Travel
Payroll Expenses
Professional Fees: Accounllng
Professional Fees: L!'gal Fees
Rent
Taxes
Temporary
Travel & Ent: Confere:nce
Utilities: ConEd
Utilities: ConEd Solutions
Total NON - NIST
Other Income
Imerest Income
Other Expenses
Other Expenses
Total Net Income (Loss)
0
0
0
0
0
70
36'
1,723
(26)
1,340
0
2,UOO
683
B1'
0
157
0
2,000
12,335
56,000
0
43
545
1,964
3,676
66,59B
o
o
($110,606)
0
2,480
506
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
12,168
o
o
APPENDIX 111
Page 30 of38
0
2,480
506
0
0
70
3"
1,723
(i6)
1,340
0
2,000
6'3
B1'
0
157
0
2,000
12,335
55,000
0
43
545
1,864
3,576
98,757
o
o
$25,094 ($85,51:2)
A-225
Assets
CASI (LLC) Checking - 3165
CAS! (LLC) Checking - 9665
N!ST Checking ~ 3166
N!ST Checking - 3565
Total Bank
Advance on payroll
Total Other Current Assets
Total Assets
Liabilities & Equity
Accounts Payable
Total Accounts Payable
CASI Loan
Chase 58 FS Loan
DKB loan
Oue to A TP PrDgmm
COMBINED BALANCE SHEET
CASII NIST
6130/03
CAS!
llilIT
($16B)
0
0
0
(168)
75,000
75,000
74,832
30,018
30,018
$0
0
600
117
717
19,000
19,000
19,717
27,962
27,962
0 (249,374)
(1.317) 0
17,400 46,214
249.375 0
Total Other Current Liability 265-,456 (203,161)
Total Liablltty 295,475 (175,198)
Contributions to NIST program a 67,334
Current Period Income (Loss) (110.441) 102.488
OpenIng Balance Equity {110,20.3! 25,094-
Total Equity (220,644) 194,916
Total Liabilities & Equity $74,832 $19,118
TOTAL
($168)
0
600
117
54.
94,000
94.000
94,549
57.980
57,980
(249,374)
(1,317)
63.514
249
1
375
62.297
120,277
61,334
(7.953)
(65
1
10B}
(25,728)
$94,649
A1'PENDIXID
Page 31 or38
A-226
COMBINED PROFiT & LOSS STATEMENT
CASlfNlST
Income
ATP Award Funds
ATP Award Funds - Year 1
A TP Award Funds w Year 2
Con$\JlI.ing Fee Inrome
Total Income
Expenses
Arnex Credit Card
Amex Credit Card: Membership
Arnex Credit Card: Purchases
Auto: Fuel
AulD: Exxon CflIdlt Card
Auto: Sunoco Credit Card
Bank Service Charges
Credit Card: Membership Fee
DBK Personal
D8K Personal: Pharmacy
Dues & Subscriptions
Fmge Benefits (non NIS1)
Jnsurance: Disability Insurance
Insurance: Healltl Plan
Interesl Expense: Finance Charge
Miscellaneous
Nisr Equipment: Ancillaries
NIST Equipment: Hardware
NIST Equipment: Software
NIST Equipment Repair & other
NIST Equipment Computer Expense
NIST Fringe Benefits
NIST Fringe Benefits: AdmIn: Chl!dcare
1011102 - 6/30103
NIST Fringe Benefils:Admin; Docton; & Pharmar:y
N!ST Fringe Benefits: Disability In$llr&noa
NIST Fringe Benefits: Dodon; & Pl1armar:y
NIST Fringe Benefits: Educaflon: DaSalla
NIST Fringe Benefits: Fitness
NIST Fringe Benefits: Healtllinsuranca
NIST Fringe Benefits: Parking
NIST Fringe Benefits: Technical: Doctors & Phannacy
NIST Fringe Benefits: TransitCheks
NIST Fringe Benefits: Travel & Parking
NIST Fringe Benefits: Wori:;er's Compensation Insural1Ce
NIST MaterialslSupplies
NIST MaterialS/SUppIles: Dues & Subscriptions
NIST Materials/Supplies: Postage, Shipping, Messenger
NIST MaterielS/Supplies: Supplies & Non-computer EqUipment
NIST MaterialS/Supplies: Supplies & Non-computer Equipment
CASI NIST
0
0
0
0
o
0
75
0
0
0
0
266
0
0
0
0
0
0
0
0
0
1,209
0
436
0
0
0
0
0
0
0
0
0
213
0
0
0
0
0
0
143
0
0
0
545,500
0
APPENDIX III
Page 32 of38
TOTAL
$0
0
545,500
0
545,500 . 545,500
(17,837) (17,837)
0 75
22,531 22,531
0 0
32. 326
13'
13B
0 2B6
0 0
0 0
0 0
77_ 776
0 0
0 0
0 0
0 0
0 0
10,916 12,125"
86,260 86,260
1,176 1,612
396 396
0 0
0 0
goo gOO
0 0
0 0
0 0
0 0
"6
408
9,347 9,347
0 0
8,512 8,725
0 0
1,395 1,396
1,390 1,390
0 0
776 776
1,040 1,040
4,701 4,845
0 0
A-227
CAStfN1ST
10/1J02 6130/03
NIST Other 0
NIST other: Accounling 0
NIST Other: Capital Improvemenls 0
NIST other: Communication: Inlemet, Broadband, Modem Etc. 0
NIST Other: Communication: Telephones 0
NIST. Othe...-: Communication 0
NIST Other: Cc:mmunlcalion: Internet, Broadband, Modem 0
NIST other: Dues & Membership 10
NIST Other: legal 0
NIST Other: Other'Repairn (105)
NIST PaYToll Expenses' 0
NIST Payroll 940 0
NIST Payroll Expenses: 940 & 941 25,103
NIST Payroll E:xpenses: 941 0
N]ST Payroll Expenses: FICA 0
NIST Payroll Expenses: NC 1,178
NIST Payroll Expenses: NC-S 0
NIST Payroll Expellses: NJ 0
NIST Payroll Expenses: NYS/NYC 4.1135
NIST Payroll Expenses: NYS-45 0
NIST Payroll Expenses: Pro Pay fees 67
NIST Payroll E:xpenses: laxes wlheld 0
NIST Payroll Expenses: taxes w/held: Albin 0
NIST Payroll E:<penses: taxes w/held: Bened.ict 0
NIST-Payroll Expenses; laxes wlheld: Borthwick 0
NIST Payroll Expenses: taxes wl1ield: Cox 0
NIST Payroll Expenses: taxes wlhe!d: OaSalla 0
NIST payroll Expenses: taxes wlherd: Gurteln 0
NIST Payroll Expenses: taxes wlheld: Karren 0
NIST Payroll Expenses: ta:.les wfheld: Peralta 0
NIST Payroll Ex"penses: taxes w/held: Ross 0
NIST Payroll BqJenses: talo:es w/held: Rothman 0
NIST Payroll Experrses: taxes wlheld: Wine 0
NIST Payroll Expenses': taxes wlheld: l/'Iynler 0
NIST Payroll Expenses: Temporary 0
NIST Project Salar!es 0
NIST Project Salaries: Admin: Benedict 1D,BBB
NIST Project salaries: Admin: Gurfeln 0
NlST Project Salaries: Admin: Ross 0
N1ST Project Salaries: Admin: Wynter 0
NIST ProJEtCt Technical: Aloin 0
NIST Project Salaries: T6CtJnicaf: Borthwick 0
NIST ProJect Salaries: Technical: Cox 9,283
N1ST Project Salaries: Technical: l?aSalla 1,919
NIST Project Sa\ariEls:Tacimicat: Karron 19,263
NIST Project Salaries: Technical: Peralta 0
NIST Project salaries: Technical: Rothman 5,155
NIST Project Salaries: Technical: Wine 0
NIST Subcontracls 0
NIST Subc:ontraclS: Accounling 0
NIST Subc:onlrac1s: AdmIn: Accounting 0
0
12,500
0
9,768
0
0
0
0
0
960
0
[0)
0
13,994
0
0
0
0
(4,635)
2,164
20
0
(0)
0
[0)
[0)
[0)
0
0
(0)
(0)
0
0
0
[0)
0
6,923
0
7.718
5,873
600
7aO
35A25
1,410
116,099
3,735
21,848
0
0
37'
0
APPENDIXll
Page 33 of3S
0
12,500
0
9,768
0
0
0
10
0
855
0
(0)
25,103
13,994
0
1,178
0
0
0
2,164
107
0
[0)
0
[0)
[0)
(0)
0
0
(0)
(0)
0
0
0
[0)
0
17,911
0
7,718
5,B73
600
760
44,708
3,:!29
135,361
3,7:!5
27,003
0
0
375
0
A-228
CASUNIST
NIST Subcontracts: Admin: Axiom
NfST Subcontracts: Admin; Book;keeplng
NIST Subcontracts: Admin: CleriGa[
NIST Subcontracts: Admin: Fenand
NIST SUbcontracts: AdmIn: Legal
NIST SUbo:lntracts: Admin: Manning
NIST Subcontracts: Admin: Ross
NIST Subcontracts: Equipment Installation
NIST Subcontracts: Professional Tax Services
NIST Subcontracts; TechnIcal
NIST Subcontracts: Technical: f.be Karron
NIST Subcontracts: Technical: JlJbln
NIST subcontracts: Technical: ATG
NIST Subcontracts: Technical: Blumenthal
NIST'Subcontracts: Technical: Cox
NIST Subcontracts: Technical: FfDst
NIST Subcontracts: Technical: Honoraria
NIST Subcontracts: Tectmica\: Mage
NIST Subcontracts: Technical: Radio Logic
NIST Subcontracts: Technical: Walberg
NIST Subcontracts: Teclmica!; Zeevi
N1STTravei
NIST T/CI:vel: Auto & Other Transpartation
NIST Travel: Conferences
NIST Tl:avel: Meals
NISTTmvel: other
NISI Travel: Other: Travel & Business Meals
Total Expenses:
Het HIST Income:
HON-HISI (not allocatltd 10 NISn
Non-NIST Expenses
Non-NIST Expenses: Bank Service Charges
Non-NIST Expenses:
Non-NIST Expenses: Con Ed
Non-NIST Expenses: Con Ed Solutions
Non-NIST Expenses: ConfereJlCe'S
Non-NIST Expenses: Fines
Non-N1ST Expenses: NJ 927
1'0/1/02 - 6/30/03
NClR-NIST Expenses: PfDfesslonal Fees: Accounting
Noo-NisT prQfe$$lQ1lal Fees; leaa(
Non-NIST Expenses: Rent
Non-N1ST Expenses: Repair,; & Han:lware
Non-NIST Expenses: Shipping
Non-NIST Expenses: Supplies
Non-NISI Expenses: Telephone, Cen, Pager
0
0
0
200
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
(20)
342
(433)
128
0
0
80,295
(80.295)
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
400
20,387
200
0
0
170
4,100
16;657
0
0
0
0
0
0
0
0
0
1,000
0
1,000
0
0
2,325
1,626
0
6,405
3,415
426,193
119,307
0
205
3,300
1,061
3,815
506
0
146
250
150
0
0
7
202
2,829
APPENDrxm
Page 34 .r38
400
20,387
200
200
0
170
4,100
16,657
0
0
0
0
0
.0
0
0
0
1,000
0
1,000
0
(20) .
2,667
1,182
128
6,405
3,415
506,488
39,012
0
205
3,300
1,081
3,815
506
0
146
250
150
0
0
7
202
2,829
A-229
CASliNIST
10{1I026IJOf03
Non-N!ST Expenses: Travel: Auto
Non-NIST Expenses: Travel: Meals &. Entertainment
Office (Non-NISl): Cleaning
Office (Non-N1Sl): Communication: Internet, Broadband
Office (Non-NIS/): Communication: Pager
Office (Non-N1Sl): Communication: Telephone
Office (Non-NISl): Insurance
Office (Non-NIST): Meals
Office (Non-N!ST): Postage and Delivery
Office (Non-NISI): Rent
Office (Non--NISl): Repair.; &. Hardware
Office (Non-NIST): Supplies
Office (Nan-NISI): Telephone
Office (Non-NIST): Travel
Payroll Expenses
Professional Fees: Accounting
Professional Fees: Legal Fees
Rant
Taxes
Temporary
Travel & Ent Conference
Utilities: ConEd
Utilities: ConEd Solutions
Total NON - NIST
Other Income
Interest Income
other Expenses
Other Expenses
Total Net Income (loss)
0
0
0
177
'96
537
0
959
0
14,000
0
,
0
222
0
0
3,282
6,000
(75)
,,,
0
1,485
3,159
30,146
o
o
{$110.441)
0
222
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
4,107
0
0
0
16,619
o
APPENDIXm
Page350f38
0
222
0
177
196
537
0
959
0
14,000
0
6
0
222
0
0
3,282
6,000
(75)
4,305
0
1,485
3,159
46,005
o
o 0
($7,953)
A-230
C. A. S.1.
MOIIliaJ', MayJO, 20fH at 18:11:21 Hmvs
d b blrrnn f d b blrron
Page350f38
FltJ;: OIG R e s p o n ~ CAS! oaK New LettertJeatl23.doc"
APPENDIX ill
Page 36 of38
A-231
C.A,S.I.
Exhibit IV NIST ATP Project Timeline
2001 Pre Project
April 2001 CCNY Mecling wilb Stanley
June 2001 ATP National Mccl.ing
July 2001 Gate one Submission
Augusl2001 Gate two Submissions
Seplember 2001 QlUe three OJ1l1 PrdI:ll1mions
August 200 I Axiom 3Ild A TG .retained to assist with grant negotiatioWi
Sepb:mber1-001 Gale fourNegotiBtions
2001 Pr()ject Launch
October 1 Effedive Start of?tojco;;l
October 8 Noti1i[;Qtion ofGrnnt Start Retroactil'll
October 29 First Grant Payment
Octobec 20 A TO and Axiom n:tain,.,d to help manage Gnmt
October 20 Meetings willi ITAC on NY Sble Co fimdillg
Oct()ber 30 Dr, K8I'ron makCi Salary Adv!lClCIl and Pays Rent{mHJor over Jt:IJlwnder ofyc:ar)
November lQ{ Ki(;kolfMceting in GaithersbUrg ZOOZ
DeC{:moor Jill Feldman Certifies Acc.ounting System
December 2001 Jill 111kes in Hayes as purchase'r
Dec;unber 2001 Hayes Introducetl to CASl, sIarts managing lICCOunt
December ZOOI First Budget Revisiun (Con=ing errors in gnmt budget; reqLJCSfetl by A 'J'P)
December 2001 NIST Rebuffed visit to attcmpl budget negotiations.
December 2001 ReqlleS'l for Fiscal Control Speo;;iaiisl made
2002
JanuaJ)' 2002: Discussions with ATP: Discussions about budget revisions
February 20m Hayes?urchases CAS! BCC>Unt
Juno 2002 Hayea First LeU"r
June 2()02 Start Payroll I Haye5 makc:s enors in NJ paYToli
July 2002 Start Negolialing Budget revisioni I submit budget.
July 2002 Site Vbil
July 2002 Notify Gurfein of non ofCornract
Augurt 2002 Hayes Second Engagement Letter
hugust 2002 Beglil repair of CAS} books and taxes by Haye.!l
September DBK funding ofprojc:ct by I1OIJ-payclteck wilbholding paymcntll calculsW.l by Hayes
October 2002 1 Start second ptIject year
October 2002 Ross takes over for Gtlrfe.in: only mission is to obtain new bUdget.
Dctober 2002 Site Visit no: George Walberg, Ude and Onhwein Hayes, Pdt:r Ross
October Z002 Nt:W Piscal Plan dean sweep: Dr. Kanop on regular payroll
October 2002: Request actual costs from Haye.! for Budget SUbmlssloll by Ross;
APPENDIXllI
Page 37 of38
November 2002: Haye.! begins maklng lhf1:3ts to Dr. KBmJn ofreportillg nDlKtlmplianre nnless Hayes directives
implemented.
December 2002: Hayes threatens to report prune change to NIST; Memorandum of Law on name chlll1ge and
holdover contracts by CASllawyen.
Dt:(;ernbec 2002 Hayes ask!: fur audit Granted
2003
Maroh 2002: Hayes missu e.>;:tcndcd audit, "iting April 15 lID: deadlines
Monday, May 10, ZOO-! at i8: /I ::Z/ HOIIrJ
db karron I d b llarrot\
PageJ7of38
FILE:"' OIG Re:spoTl$e CAS1 OBl( Ne'Ir lal\f:rlJeBd 23.dEl&"
A-232
C. A. S. I.
Computer Aided Surgery,lnG.
Mart;h :WO'l: Robert Benedict agrees to corne in M Project Managt'l", replacing Peter Ross; Change nol
ack.nowledged by.NIST ATP
June 2003 DIG Audit visit; Project funding swope.nded
APPENDIXID
Pag.380f38
June 2003 CASI also hired Melvin CPA, of Spitz and Grcc:nslein and Professor Jerome Sdl'wacb:, CPA ESQ,
of Solomon and Schwaru; LLC, Md Joseph Comwul!. CPA as a backup accounting team, eiter the 010 completed
it:; fieldwork in June 2003.
July 2003 CASI its Financial SlBtus Reports as requested.
October 2003 Jo.sn HII1d. relel\SeS Audit Report (I year J:!.Ie)
November 2003 Pres-entation at MCCAII Montreal Omada
De.cemberZOO3 Rc-Audit byOIG willi Spitz
2004
JW1\1ary 2004 MMVR Presented
March 2004 Draft Audit Report Issued
April 2004 Answer to Omft Audit Report commenced
Monday, Ma.y HI, ]00" at 18:/1,'21 f{oUTJ
db brron' d b karron
Page)8 oDS
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A-234
549
8657KAR2 Riley - direct
1 which is the nine months of the second year of the award.
2 Q. What does the purple area of the graph represent?
3 A. Deposits of grant monies received by CAS!.
4 Q. And how about that line that's breaking up the circle?
5 A. This is miscellaneous other deposits into the account.
6 Q. Ms. Riley, did you prepare a-ny additional graphs aside from
7 these ones that we just looked at?
8 A. Yes.
9 Q. What did you prepare?
10 THE COURT: What was the amount of those other
11 deposits into the account?
12 THE WITNESS: The deposits from NIST were $545,000,
13 and the miscellaneous deposits were like 1200, 1500, something
14 really small.
15 THE COURT: Sorry.
16 Q. Ms. Riley, aside from these graphs, did you create any
17 additional charts and graphs?
lS A. Yes.
19 Q. What did you prepare?
20 A.! analyzed the expenditures from the accounts.
21 Q. I am showing you what have been marked for identification
22 as Government's Exhibits 114 and 115. Do you have those in
23 front of you?
24 A. Yes.
25 Q. Do you recognize what they are?
SOUTHERN DISTRICT REPORTERS, P.c.
(212) B05-0300
A-235
550
8657KAR2 Riley - direct
1 A. Yes, they are the pie charts that [ created for the
2 analysis of the expenditures.
3 Q. p,nd what documents did you look at to create these gra'phs
4 and charts?
5 A. Canceled checks and American Expres statements were the
6 main source documents used to create these.
7 MR. KWOK', Government offers Government's Exhibits 114
8 and 115.
9 MR. RUBINSTEIN: No objection, your Honor.
10 THE COURT: 114 and 115 are admitted into evidence.
11 (Government's Exhibits 114 and 115 received in
12 evidence)
13 MR. KWOK: May we publish that to the jury?
14 THE COURT: You say these are expenditures?
15 THE WITNESS: Yes, sir. For 114 and 115! did
16 analysis and expenditures.
17 THE COURT: First for the year ended October 10, 20027
18 THE WITNESS: OK. And that is because of the
19 breakdown for the fringe benefits for check paid to IRS for
20 with holdings or whatever, the breakdown I had for check and
21 fringe benefits,! had an analysis for the year prepared by one
22 of the accountants that I could reconcile the numbers -- the
23 check payments through October 10. So, it doesn't--
24 THE COURT: 114 and 115 are admitted in evidence.
25 Q. Now, Ms. Riley looking first at Government Exhibit li4,
(212) 8 0 5 ~ 0 3 0 0
A-236
628
8657KAR4 Gurfein - direct
1 Q. And how was that money going to be disbursed?
2 A. In progress payments over a three-year period.
3 Q. Did you in fact have any continuing involvement with CAS!
4 after the grant was awa rded?
5 A. Yes.
6 Q. What was that involvement?
7 A. I was taken on as the business manager.
8 Q. How long were you the business manager?
9 A. For one year.
10 Q. Starting when and ending when?
11 A. Starting October I, 2001, ending September 3D, 2002.
12 Q. Were you paid anything forthisjob?
13 A. Yes.
14 Q. How much were you paid?
15 A. I was paid $100,000.
16 Q. Mr. Gurfein, did there came a time when you met with people
17 at NIST after the grant was awarded to discuss the grant?
18 A. Yes.
19 Q. About when was that?
20 A. Approximately a month Or so after the award.
21 Q. When was the award?
22 A. The award was effective October 1, 2001. We were advised
23 of it on October 4,2001.
24 THE COURT: For the $100,000, was that a full-time
25 job?
(212) 805-0300
A-237
633
Gurfein - direct
1 Q. To your knowledge, were any of those preproposal costs ever
2 approved by N!ST people?
3 A. Not to my knowledge.
4 Q. What other specific expenditures did you discuss with the
5 defendant around this time when the grant Was awarded?
6 A. Well, after the award, we discussed rent and utilities and
7 legal and accounting.
8 Q. Let's talk about rents and utilities for a moment. What
9 was the nature of your discussions about rent and utilities?
10 A. Well, we had, in the proposal, and as approved in the
11 grant, we had indicated that we were going to be involved with
12 the City University at Fifth Avenue and 34th Street with the
13 graduate center there, the computer science part of it, where
14 we would have a facility there, and that facility would be a
15 company with some support staff from graduate students or
16 whatever, who were in the computer science area.
17 Q. What happened with respect to that facility?
18 A. Well, it was decided that we would not be using that
19 facility.
20 Q. Why not?
21 A. I think Dr. Karron had indicated that the overhead rates
22 for the people there was high, and that it was something that
23 would not be desirable.
24 Q. So where did CASI set up its business location?
25 A. We set up, basically, in Dr. Karron's apartment.
(212)805-0300
A-238
634
865ZKAR5 Gurfein - direct
1 Q. And what, if any, discussions did you have with the
2 defendant about rent and utilities with respect to the business
3 space of CAS!?
4 A. Well, yeah, he felt that -- I mean, he indicated to me that
5 the rent should be paid to him by CASI, because that's where we
5 were doing all the work, and it was essentially an office
7 laboratory situation.
8 Q. This was rent from CASI to' the defendant?
9 A. From CAS I to the defendant, yes.
10 Q. And when the defendant told you this, what, if anything,
11 was your reaction?
12 A. Well, it was clear that the rules, or the guidelines given
13 to us by the people at NIST said no, that's -- that was not
14 a!Iowed.
15 Q. And what, if anything, did the defendant respond?
16 A. Well, he asked me to see if we can get it approved. So!
17 wound up calling Hope Snowden at N!ST and asking her if it
18 could be approved.
19 Q. What, if anything, was her response?
20 A. She said no.
21 Q. And what did you do after you heard no from Hope Snowden?
22 A.! reported to Dr. Karron. And he said, well, we talked
23 about it and he said, well, why don't you go back and try
24 aga in. But under the idea that this is a one grant company,
25 and so it's clear that everything we do here is for this grant
SOUTHERN DISTR!CT REPORTERS, P.c.
(212) 805-0300
A-239
635
865ZKARS Gurfein - direct
1 and there were no other funds, and so that there's no other
2 activity at the moment. So that we could simply -- you know,
3 it would be, as he expressed it, appropriate for us to get paid
4 rent for that facility.
5 Q. And did you, in fact, call Hope Snowden again?
6 A. Yes, I did.
7 Q. And did you ask her that question?
8 A. Yes, I did.
9 Q. That way?
10 A. With regard, with regard to it being a one grant operation,
11 yes.
12 Q. And what was her response?
13 A, She said no, we can't -- we don't approve that.
14 Q. And what, if anything, did you do with that response?
15 A. I told it to Dr. Karran.
16 Q. And what was his response?
17 A. I don't know. I think he was a little none plused by it, I
18 don't know exactly. For that moment we dropped it at the
19 moment at that point.
20 Q. About how many times did you speak to Hope Snowden about
21 this issue of rent?
22 A. Well, certainly twice, maybe more, but certainly twice.
23 Q. And did you -- did Hope Snowden ever tel! you that rent was
24 an allowable expense?
25 A. No.
(212) 805-0300
A-240
636
865ZKARS Gurfein - direct
1 Q. Did you have any other discussions with Hope Snowden about
2 other expense?
3 A. Yes. We discussed other expenses. 1 think I probably
4 discussed the proposal costs expense and utilities. I think we
5 discussed again similar to the rent discussion.
6 THE COURT: Did you ever talk to anyone besides Hope
7 Snowden about these this rent and utilities?
8 THE WITNESS: It's possible. I might've discussed--
9 I might have called her supervisor, Marilyn Goldstein, on a few
10 occasions.
11 THE COURT: And did you get a -- what answer did you
12 get?
13 THE WITNESS: Essentially, no.
14 ' THE COURT: All right.
15 Q. And about how often did you call Hope Snowden and these
16 other people you mentioned?
17 A. Well, at the beginning of the grant period that I was
18 there, I would call her two times a week or so. As time went
19 on, I called her maybe two times a month.
20 Q. All right. Mr. Gerfein, do you know, approximately, when
21 CASI received its first installment of ATP grant money?
22 A. I've been trying to figure that out. But I know it was.
23 very early. It was not very much after the notice of award.
24 The notice of award was October 4th. I keep thinking it was
25 right after that, but I'm not sure.
(212)805-0300
A-241
637
865iKARS Gurfein - direct
1 Q. Do you recall how much was transferred into the CASI bank
2 account?
3 A. Yes. $150,000.
4 Q. And where did that money go?
5 A. That money went into a CAS1 general account of some kind.
6 Q. Did you --
7 A. At Chase Bank.
8 Q. j'm sorry?
9 A. It was at Chase Bank, I reca"!1 that.
10 Q. Did you ever have any discussions with the defendant about
11 that initial transfer of $150,DOO?
12 A. Yes. He, he -- we had appUed for, I believe, or we had to
13 apply for it, and I think with happiness he told me one morning
14 when I arrived at his apartment that the money came in, the
15 150,000 came in. And in the same sentence I recall he said,
16 and I've transferred $75,000 out of the account.
17 Q. Did he say why he did that?
18 A. Yes. He said he had some personal obligations to his
19 family, money owed to his family, and he said that he had
20 credit card payments to make.
21 Q. With respect to his obligations to his family that you
22 mentioned, did you ever have any other discussions with him
23 about that topic?
24 A. Well, I mean in-the course of writing the proposal, he had
25 allowed that he had not had a -- been employed in any way, nor
(212) 805-0300
A-242
638
B65ZKARS Gurfein - direct
1 had any other grant money for sometime, and so that he had to
2 resort to credit cards and to family help.
3 Q. And what in particular did you -- did he say what he was
4 spending the credit card money on?
5 A. Well, my sense was that from what the discussions were was
6 that he was spending it on just living. He said he had to
7 live, and so he used his cred1t cards to live.
S Q. When you heard from tbe defendant that he had transferred
9 $75,000 out of.the $150.,000, what, if anything, did you say?
10 A. I told him he couldn't do that.
11 Q. And what was the defendant's response?
12 A. He said, ! have to do it.
13 Q. Did he expand on that?
14 A. Well, he said he had no choice; he had to get rid of those
15 debts he had and he was taking those funds at the get--
16 initially, he had to just take those funds immediately.
17 Q. Did you have any other discussions with the defendant about
18 where the grant money was being deposited?
19 A. Yes.
20 Q. What were those discussions?
21 A. Well, 1 told him that we had to open up a separate account
22 for the grant so that we don't have it mixed up with any other
23 activities of CAS!, if there were any.
24 Q. And what was the defendant's response to that?
25 A. Well, at first he rejected the idea, I think saying that it
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86SZKARS Gurfein - direct
1 was -- it would just cost tao much to open up another account.
2 But I didn't -- I didn't understand what that meant about the
3 cost would be so great. But I told him it was a requirement of
4 the grant that we had to have a separate account.
5 Q. And was a separate account eventually opened?
6 A. Yes.
7 Q. Mr. Gerfein, when you accepted the job at CAS1 as business
8 manager, what was your understanding about who would have the
9 authority to sign checks for the company?
10 A. OUf initial discussions Were that I was going to have sole
11 responsibility for signing checks. I told him that, look,
12 that's okay, but this is your company and really there should
13 be dual signature requirement for most checks. And we agreed
14 that there would be dual signature responsibility, but anything
15 under $250 could be signed by one person.
16 Q. Is this in fact that arrangement you just described, is
17 that in fact what happened after the grant was awarded?
18 A. No.
19 Q. How did it work in practice after the grant was awarded?
20 A. Within one week exactly on October 11th, Dr. Karron sent a
21 note to Hope Snowden saying that, while I had administrative
22 responsibility, I had no signature or officer responsibility at
23 CAS!.
24 Q. And what did you understand that to mean?
25 A. That means that I was stripped of my ability to control the
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865ZKAR5 Gurfein ~ direct
1 business as I was told I would have.
2 Q. Take a look at Government's exhibit 21 in the other folder
3 in front of you. Could we display that on the screen, page
4 three. It's also in the jury binders.
5 A. Uh-huh. Yes.
G Q. You see that document?
7 THE COURT: It's a little hard to see, but can you
8 read it?
9 THE WITNESS: Yes.
10 THE COURT: I can't, I can't read it.
11 THE WITNESS: Here's my copy.
12 THE DEPUTY CLERK: Judge, he has a copy.
13 THE COURT: All right. He was looking up there, so I
14 was--
IS Q. Actually, he, if you could blowup exactly what you blew up.
16 Mr. Gerfein, do you see that document?
17 A. Yes.
18 Q. What is that document?
19 A. That document is the letter that Dr. Karron sent to Hope
20 Snowden dated October 11th, 2001 and indicating that I only had
21 the administrator responsibility, but not the signature
22 authority. And it says here, and is not authorized to sign for
23 the corporation.
24 Q. Where do you see that?
25 A. From the third -- on the right side, third line frcim the
SOUTHERN DISTRICT REPORTERS, p.c.
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B6SZKARS Gurfein - direct
1 bottom.
2 Q. And you see the final sentence which says, the
3 authorization for Mr. Gerfein to commit the corporation wi!! be
4 made by separate letter authorization ifthe need arises?
5 A. Correct. ! see that.
6 Q. Were you ever given signatory authority for the company
7 while you were working at CAS!?
B A. No.
9 Q. And what's the date on this letter?
10 A. I'm sorry?
11 Q. What's the date on this letter?
12 A. The date on the letter above, October 11th -- right there,
13 yeah.
14 Q. And about how long after the grant was awarded was that
15 letter dated?
16 A. It's dated -- well the grant was -- notification of award
17 was October 4th, and this letter is dated October 11th. So
18 it's exactly one week after the notice of award.
19 Q. All right. Mr. Gerfein. did you have any further
20 discussions with the defendant about spending grant money after
21 that letter was submitted?
22 A. About spending grant money?
23 Q. About particular expenditures?
24 A. Sure,! mean we discussed various things that -- I mean Dr.
25 Karron kind of liked equipment. I mean he--
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86SZKARS Gurfein - crOSS
1 Q. You had that discussion with Dr. Karron, did you not?
2 A. Yes. Well, we discussed the subject in general, more with
3 respect to his requirements for medical than mine. I was way
4 within the 34 percent.
S Q. And his view was that if you had fringe benefits for the
6 company, whatever was utilized, as long as it was a fringe
7 benefit, anybody could use it?
8 A. 1 don't understand your question.
9 Q. Did you have a discussion with Dr. Karron as to the use of
10 fringe benefits?
11 A. Yes.
12 Q. And didn't he advise you that it was his understanding that
13 fringe benefits -- that he could utilize up to whatever fringe
14 benefit money was not used by other employees that was
15 available for him?
16 A. He said that.
17 Q. And are you aware -- did you have anything to do with the
18 quarterly financial statements?
19 A. Yes.
20 Q. Old you help prepare them?
21 A. Yes.
22 Q. Where did you get the numbers from to put into the
23 quarterly financial statements?
24 A. Those numbers were the aggregate of what was in the monthly
25 applications for, for the various progress payments. That's
(21Z) BOS-0300
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865ZKARS Gurfein - cross
1 where these numbers came from.
2 Q. Did they come from actual expenses?
3 A. No, they did not.
4 Q. And who determined that that was the proper numbers, those
5 were the proper numbers to use?
6 A. Well, the first time we went in after Dr. Karran withdrew
7 the $75,000, and we had we had a discussion about that, about
8 how that $75,000, for example, could be applied to direct -- on
.' 9 the direct charges for the grant, which we couldn't possibly do
10 because it wasn't -- I mean that money was not spent on the
11 grant. So Dr. Karron said just, okay, make it that it works;
12 make sure that, you know, you don't raise any red flags and
13 just submit the numbers that will make it work. And that's
14 what we did.
15 Q. You are aware, sir, that Dr. Karr'on paid back that $75,000
16 in that first year; you're aware ofthat?
17 A. I am. But it caused usgreat pain to have that $75,000
18 taken out, so at the end of every month we were down to almost
19 zero on the bank account.
20 Q. And whenever you got down to zero, Dr. Karron would put his
21 own money into the company, correct?
22 A. I don't know that.
23 Q. Well, how did you get above zero?
24 A. We got another progress payment.
25 Q. Did you get a personal loan from CAS! during this period?
SOUTHERN D!STRICT REPORTERS, p.C.
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8657KAR6
1 Q. Right.
Gurfein - cross
683
2 A. No, he didn't tell me what the policy was prior to getting
3 the grant.
4 Q. Did you ever ask him if he ever charged any -- what kind of
5 fringe benefits he was accustomed to paying prior to getting
6 the grant?
7 A. In the most general way I know that his policy unwritten
8 was very loose.
9 Q. Now, were you involved in the hiring of Joan Hayes?
10 A. No.
11 Q. Did you have dealings with her involving any financial
12 documents?
13 A. Yes,
14 Q. Which financial documents were those?
15 A. I don't remember.
16 Q. You filed I believe the quarterly financial statements?
17 A. Yes.
18 Q. And did Ms. Hayes provide any of the figures that you
19 incorporated in those filings?
20 A. I don't think so. It's possible, but I don't recal! that.
21 THE COURT: Where did you get the figures?
22 THE WITNESS: We!l, basically the figures were not
23 representative of what was actually spent but representative of
24 what was received from NIST.
25 THE COURT: So w h e T ' ~ did you get the figures?
(212) 805-0300
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8657KAR6 Gurfein - cross
1 THE WITNESS: Well, the figures forthe quarterly
2 reports were basically a summation of data in the applications
3 made for the prior three months to NIST for the progress
4 payments, where we had to report what was done in the prior
5 month.
6 THE COURT: Where would you get those figures?
7 THE WITNESS: Well, those figures would again be
8 gotten from essentially from what we received as opposed to
9 having the correct figures, which would have been what was
10 actually spent directly on the project.
11 THE COURT: Well, what you received was $150,000 and
12 then monthly payments of--
13 THE WITNESS: -- 60,000.
14 THE COURT: -- 60 or 65.
15 THE WITNESS: 60.
16 THE COURT: So those don't tel! you the break-down.
17 THE WITNESS: No.
18 THE COURT: Does the quarterly report show a
19 break-down?
20 THE WITNESS: No, no break-down of the quarterly
21 report.
22 THE COURT: Let me see a quarterly report.
23 MR. EVERDELl: Your Honor, Government Exhibit 40 for
24 example.
25 THE COURT: He has one. He has h;;lnded me one.
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8657KAR6 Gurfein - redirect
1 this mmpany, it is too risky.
2 In fact this is the point to be made. One of the
3 reasons for getting the AlP grant in fact is because it is
4 given to risky ventures that have difficulty raising funds in
5 the private sector, and that's one of the purposes and one of
6 the criteria for getting the award. So, 1 told him- no, and I
7 of course did not give the 50,000, nor did I get the signature
8 authority back.
9 Q. You testified also on cross-examination about some
10 quarterly financial reports.
11 A. Yes.
12 Q. And I believe you testified that the defendant told you to
13 make it work, is that correct?
14 A. That's correct.
15 Q. Who actually signed those financial reports that were
16 submitted?
17 A. Dr. Karron.
18 Q. Did you sign those financial reports?
19 A. I did not. I had no such authority.
20 THE COURT: Are you aware of any contributions to the
21 capital of CASI that were made by anyone other than NIST?
22 THE WITNESS: No, I'm not aware of a ny such
23 contributions.
24 Q. You were also asked about a screen in the defendant's
25 apartment, is that correct?
SOUTHERN OISTRICT REPORTERS, P.c.
(212)805-0300
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824
866zkar4 Riley - recross
1 THE COURT: Objection sustained.
2 MR. RUBINSTEIN: I'm asking her e)(actly what she was
3 asked.
4 THE COURT: We all heard what she was asked her.
5 MR. RUBINSTEIN: Objection.
6 THE COURT: She doesn't have to reply to that
7 question, now go ahead and ask a question if you're going to
8 ask one or the cross-e)(amination, recross is over.
9 MR. RUBINSTEIN: With all due respect, Judge, could I
10 have a sidebar?
11 THE COURT: No, you may not at this point. The rules
12 apply to recross-e)(amination and they're going to be strictly
13 adhered to, in light of the lengthy lengthy cross-e)(amination
14 we've already heard.
15 MR. RUBINSTEIN: I'm going to ask for a limiting
16 instruction to the jury, your Honor, on that comment by your
17 Court. 1 think it was, in all due respect--
18 THE COURT: I don't know what to instruct them. All
19 I'm doing is stating the facts. If you want to have a sidebar
20 on that, J'lltake a sidebar on that.
21 MR. RUBINSTE!N: Yes, your Honor.
22 '(Continued on next page)
23
24
25
1212) 805-0300
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1350
86B7KAR4 Charge
1 reimbursed, in the usual course of business.
2 In order to sustain its burden of proof with respect
3 to the allegation in Count one, the government must prove
4 beyond a reasonable doubt the following five elements:
5 First, at the time alleged in the indictment, the
6 defendant was an agent of Computer Aided Surgery, Inc., or
7 CASlj
8 Second, in a one-year period, CASI received a federal
9 grant in excess of $10,000;
10 Third, during that one-year period, the defendant
11 without authority intentionally misapplied the grant money;
12 Fourth, the misapplied grant money was under the care,
13 custody, or control of, CASI;
14 Fifth, the value of the money intentionally misapplied
15 by defendant was at least $5,000.
16 Now, let us separately consider these five elements.
17 The first element the government must prove beyond a
18 reasonable doubt is that at the time alleged in the indictment,
19 the defendant was an agent of CAS!.
20 The term "agent" means a person authorized to act on
21 behalf of an organization. Employees, partners, directors,
22 officers, managers and representatives are all agents of an
23 organization.
24 Second element the government must prove beyond a
25 reasonable doubt is that in a one-year period, CASI received
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86B7KAR4 Charge
1 federal benefits in excess of $10,000.
2 To prove this element, the government must establish
3 that CASl received, during a one-year period, benefits in
4 excess of $10,000 under a federal program involving a grant,
5 contract, subsidy, loan, guarantee, insurance, or some other
6 form of federal assistance.
7 The one-year period must begin no more than 12 months
8 before the defendant committed the acts charged in the
9 indictment and must end no more than 12 months after those
10 acts. You can choose any period offederal funding you want as
11 long as you unanimously find that the acts of misapplication
12 charged in the indictment occurred in that one-year period.
13 The third element the government must prove beyond a
14 reasonable doubt is that the defendant without authority
15 intentionally misapplied money. To intentionally misapply
16 money means to use money under the control of CAS] knowing that
17 such use is unauthorized or unjustifiable or wrongful.
18 Intentional misapplication includes the wrongful use of the
19 money for a purpose the defendant knew was unauthorized, even
20 if such use benefited CASI in Some way.
21 In this case,'to intentionally misapply money means to
22 intentionally a pp!y the grant money received by CAS! in a
23 manner which the defendant knew was unauthorized under the
24 terms and conditions of the grant. Misapplication of money,
25 however, does not apply to bona fide salary, wages, fringe
(212)805-0300
A-254
1352
86B7KAR4 Charge
1 benefits, or other compensation paid, or expenses paid or
2 reimbursed, in the usual course of business.
3 As! said, the government must prove beyond a
4 reasonable doubt H1at the defendant acted intentionally in
5 misapplying grant money, To find that the defendant acted
6 intentionally, you must be satisfied beyond a reasonable doubt
7 that the defendant acted deliberately and purposefully. That
8 is, the defendant's misapplication must havE' been the product
9 of the defendant's conscious objective to spend the money for
10 an unauthorized purpose, rather than the product of a mistake
11 or accident or some other innocent reason.
12 The fourth element that the government must prove
13 beyond a reasonable doubt is that the grant money that was
14 intentionally misapplied was in the care, custody, or control
15 of, CAS!. Although the words "care," "custody," and "contra!"
16 have slightly different meanings, for the purposes of this
17 element, they express a similar idea. All that is necessary is
18 that CASI had control over and responsibility for the grant
19 money.
20 The fifth and final element the government must prove
21 beyond a reasonable doubt is that the value of the
22 intentionally misapplied money was at least $5,000.
23 The word "value" means face, par or market value, or
24 cost price, either wholesale Or retail, whichever is greater.
25 "Market value" means the price a willing buyer would pay a
(212) 805-0300
A-255
1379
86B7KAR4
1
2 (5:25; jury not present)
3 THE COURT: Mr. Monteguedo informs me that the
4 marshals have indicated that the jury has a verdict.
5 Bring the jury in.
6 (Jury present)
7 THE COURT: Please be seated. Ladies and gentlemen,
8 Mr. Monteguedo reports that the marshals have reported that you
9 have reached a verdict, and J will ask Mr. Monteguedo to take
10 the verdict.
11 DEPUTY COURT CLERK: Ladies and gentlemen of the jury,
12 please answer to your presence as your name is called.
13 (Jury roll called; jury present)
14 DEPUTY COURT CLERK: Foreperson please stand.
15 As to Count One, with respect to Count One of
16 indictment, 52 07 Crim. 541 (RPP), how do you find the
17 defendant Daniel B. Karron. Did you answer guilty or not
18 guilty?
19 THE FOREPERSON: Guilty.
20 DEPU1Y COURT CLERK: Thank you. Please be seated.
21 Ladies and gentlemen of the jury, please listen to
22 your verdict as it stands recorded. With respect to Count 0 ne
23 of indictment, 52 07 Crim. 541 (RPP), how could you find the
24 defendant Daniel B Karron? You answered guilty.
25 (Jury polled; each juror answered in the affirmative)
(212) 8 a 5 ~ 0 3 a a

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