-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HyhWHkqs9lyJdr5TheKiceG2LhvFACccrEY8Q+/bPaz7DWein8ymFdX14yqtI2cy mKjKOVaAwOFn6km48iHPLA== 0000914190-96-000237.txt : 19960816 0000914190-96-000237.hdr.sgml : 19960816 ACCESSION NUMBER: 0000914190-96-000237 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960814 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: EVEREST MEDICAL CORPORATION CENTRAL INDEX KEY: 0000869426 STANDARD INDUSTRIAL CLASSIFICATION: ELECTROMEDICAL & ELECTROTHERAPEUTIC APPARATUS [3845] IRS NUMBER: 411454928 STATE OF INCORPORATION: MN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-18900 FILM NUMBER: 96615075 BUSINESS ADDRESS: STREET 1: 13755 1ST AVE N STE 500 CITY: MINNEAPOLIS STATE: MN ZIP: 55441 BUSINESS PHONE: 6124736262 MAIL ADDRESS: STREET 1: 13755 FIRST AVE N STREET 2: STE 500 CITY: MINNEAPOLIS STATE: MN ZIP: 55441-5454 10QSB 1 FORM 10QSB FOR PERIOD ENDING JUNE 30, 1996 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-QSB QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended: June 30, 1996 Commission File No.: 0-18900 EVEREST MEDICAL CORPORATION (Exact name of small business issuer as specified in its charter) 13755 1st Avenue North, Suite 500, Minneapolis, MN 55441-5454 (Address of Principal executive offices) (Zip Code) (612) 473-6262 (Issuer's Telephone number, including area code) MINNESOTA 41-1454928 (State of incorporation) (IRS Employer I.D.#) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO ___ As of August 12,1996 6,617,298 shares of Common Stock of the Registrant were outstanding. Transitional Small Business Disclosure Format (check one): YES___ NO X
EVEREST MEDICAL CORPORATION BALANCE SHEETS June 30,1996 December 31, 1995 (Unaudited) (Note) - ---------------------------------------------------------------------------------------------------------------------- ASSETS Current assets Cash and cash equivalents $ 742,563 $ 1,028,476 Accounts receivable, net 1,001,275 916,341 Inventories 871,299 658,754 Prepaid insurance and deposits 67,346 51,506 - ---------------------------------------------------------------------------------------------------------------------- Total current assets 2,682,484 2,655,077 Equipment Office and display equipment 382,175 374,278 Research and development equipment 188,715 188,715 Production equipment 995,741 941,010 ---------- ---------- 1,566,631 1,504,003 Less allowance for depreciation (1,313,293) (1,233,782) - ---------------------------------------------------------------------------------------------------------------------- 253,337 270,221 Patents, net of amortization 25,026 34,754 - ---------------------------------------------------------------------------------------------------------------------- Total assets $ 2,960,847 $ 2,960,052 ====================================================================================================================== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Customer advances $ 168,000 $ 168,000 Accounts payable 203,078 216,450 Accrued compensation and related taxes 190,322 140,889 Other accrued liabilities 124,441 85,113 Convertible notes, current portion - 488,975 Capital lease obligations, current portion 15,897 28,320 - ---------------------------------------------------------------------------------------------------------------------- Total current liabilities 701,738 1,127,747 Capital lease obligations, net of current portion 3,379 9,138 Other accrued liabilities, net of current portion 54,167 - Convertible notes, net of current portion - 126,700 Shareholders' equity Convertible preferred stock series A, ($.01 par value, $2.50 liquidation value) 1,400,000 authorized; outstanding: 1996 - 756,237 shares; 1995 - 1,092,937 shares 1,859,967 2,701,717 Convertible preferred stock series B, ($.01 par value, $2.75 liquidation value) authorized and outstanding: 1996 - 662,273 shares; 1995 - 727,273 shares 1,614,063 1,792,813 Convertible preferred stock series C, ($.01 par value, $2.75 liquidation value) authorized and outstanding: 1996 - 410,906 shares; 1995 - 410,906 shares 1,002,832 1,002,832 Convertible preferred stock series D, ($.01 par value, $2.875 liquidation value) authorized and outstanding: 1996 - 471,500 shares; 1995 - 471,500 shares 1,205,807 1,205,807 Common stock, ($.01 par value) 12,461,821 authorized; outstanding: 1996 - 6,609,168; 1995 - 5,782,800 66,092 58,067 Additional paid-in capital 16,163,541 14,121,227 Retained deficit (19,710,738) (19,185,996) - ---------------------------------------------------------------------------------------------------------------------- 2,201,563 1,696,467 - ---------------------------------------------------------------------------------------------------------------------- Total liabilities and shareholders' equity $ 2,960,847 $ 2,960,052 ======================================================================================================================
Note: The balance sheet at December 31, 1995 is derived from the audited financial statements at that date. EVEREST MEDICAL CORPORATION STATEMENT OF OPERATIONS (Unaudited)
3 Months Ended June 30 6 Months Ended June 30 1996 1995 1996 1995 - --------------------------------------------------------------------------------------------------------------------------- Net sales $ 1,470,291 $ 1,027,119 $ 2,770,424 $ 2,059,613 Cost of goods sold 826,260 596,762 1,540,143 1,248,860 - --------------------------------------------------------------------------------------------------------------------------- Gross margin 644,031 430,357 1,230,281 810,753 Cost and expenses: Sales and marketing 365,933 266,610 743,009 493,507 Research and development 159,894 143,896 316,777 287,751 General and administrative 180,692 172,912 364,065 348,325 - --------------------------------------------------------------------------------------------------------------------------- Total operating expenses 706,519 583,418 1,423,851 1,129,583 Interest and other income (6,137) (12,489) (35,257) (34,380) Interest expense 128,229 30,208 150,277 62,372 - --------------------------------------------------------------------------------------------------------------------------- Net loss (184,580) (170,780) (308,589) (346,822) Less preferred stock dividends 90,579 62,600 181,418 125,200 - --------------------------------------------------------------------------------------------------------------------------- Loss applicable to common stock $ (275,159) $ (233,380) $ (490,007) $ (472,022) =========================================================================================================================== Net loss per common share $ (0.05) $ (0.04) $ (0.08) $ (0.08) =========================================================================================================================== Weighted average number of shares outstanding during the period 6,012,867 5,785,514 5,925,081 5,780,620 ===========================================================================================================================
EVEREST MEDICAL CORPORATION STATEMENT OF CASH FLOWS (Unaudited)
Six Months Ended June 30 1996 1995 OPERATING ACTIVITIES - -------------------------------------------------------------------------------------------------------------------------- Net loss $ (308,589) $ (346,822) Adjustments to reconcile net loss to net cash used in operating activities Depreciation and amortization 89,241 120,973 Loss on sale and disposal of equipment - 4,429 Provision for losses on accounts receivable 15,000 (25,556) Provision for inventory obsolescence 48,977 14,037 Changes in operating assets and liabilities Accounts receivable (100,241) 55,628 Inventories (261,215) (50,463) Prepaid expenses (15,841) (6,843) Customer advances - 85,470 Accounts payable and accrued expenses 132,513 58,619 - -------------------------------------------------------------------------------------------------------------------------- Net cash used in operating activities (400,155) (90,528) INVESTING ACTIVITIES Purchase of equipment (62,629) (25,877) - --------------------------------------------------------------------------------------------------------------------------- Net cash used in investing activities (62,629) (25,877) FINANCING ACTIVITIES Dividends paid (113,640) (160,000) Proceeds from debt 500,000 - Proceeds from warrants and options 427,326 - Principal payments on debt and capital leases (636,815) (164,277) Net proceeds from sale of common stock - 16,630 Net proceeds from sale of preferred stock - - - --------------------------------------------------------------------------------------------------------------------------- Net cash provided by financing activities 176,871 (307,647) - --------------------------------------------------------------------------------------------------------------------------- Decrease in cash and cash equivalents (285,913) (424,052) Cash and cash equivalents at beginning of period 1,028,476 1,326,353 - --------------------------------------------------------------------------------------------------------------------------- Cash and cash equivalents at end of period $ 742,563 $ 902,301 ===========================================================================================================================
EVEREST MEDICAL CORPORATION NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) June 30, 1996 Note A - Business Activity Everest Medical Corporation is engaged in the development, manufacturing and marketing of bipolar electrosurgical devices for the gastrointestinal endoscopy, laparoscopy and other minimally invasive surgery markets. The Company no longer considers itself in the development stage. Note B - Basis of Presentation The accompanying unaudited, condensed financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-QSB and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for three months ended June 30, 1996 are not necessarily indicative of the results that may be expected for the year ended December 31, 1996. For further information, refer to the financial statements and footnotes thereto included in the Company's annual report on Form 10-KSB for the year ended December 31, 1995. Note C - Debt The $500,000 convertible note was converted to 200,000 shares of common stock on June 28, 1996. The supplemental loss per share, as if the conversion had occurred on the date of issuance (February 18, 1996) of the notes, would be $.08. (5) Part I - Item 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION RESULTS OF OPERATIONS Net Sales. Net sales in the second quarter of 1996 were $1,470,291, an increase of $443,172, or 43%, from the second quarter of 1995. This sales increase was a combination of the expansion of the Everest-branded laparoscopy product line and strong growth of the Company's OEM laparoscopy customers. The sales increases were offset in part by declines in the shipments of the Company's gastrointestinal products, in particular bipolar snares to Japan. Net sales for the six months ended June 30, 1996 were $2,770,424, an increase of $710,811, or 35% from the same period of 1995. The sales for the period reflect the ongoing growth in the Company's laparoscopy product offerings with growth of 70% in the Everest distribution channel and a 62% growth in sales to its OEM laparoscopy customers. These sales increases were offset by a 41% decline in shipments of bipolar snares to Japan. The Company realized an increase of 70% in its Everest-branded laparoscopy product sales for the first six months of 1996 which reflects the ongoing sales and marketing effort to focus on the Company's independent distribution channel. Sales of the BiCOAG(R) Bipolar Cutting Forceps account for 24% of the sales in this segment for the first six months. The Company, during the second quarter commenced shipments of a new locking feature on the 10mm version of this device and also commenced shipments of a 5mm version of the BiCOAG Cutting Forceps late in the quarter. The Company expects this category will continue to lead the growth of Everest-branded laparoscopy for the balance of 1996. For the year, the Company has experienced a 62% increase in shipments to its OEM laparoscopy customers. The Company expects these levels of growth will slow throughout the second half of 1996 as the inventory levels of these customers appear to be in balance. The Company has experienced a 41% decline in shipments of its bipolar snare to Japan due to delays in obtaining regulatory approval. The Company expects, now that approval has been obtained, that sales of this product to Japan will continue to grow throughout the balance of 1996. Additionally, the Company experienced a 4% growth in sales of its private label version of the bipolar coagulating probe to C.R. Bard in the first six months. The Company expects this level of sales to continue throughout the balance of 1996 as this product line appears to have reached a mature level of sales. (6) Gross Margin. Gross margin in the second quarter of 1996 was 43.8% of sales compared to 41.9% of sales for the second quarter of 1995. The improved gross margin was primarily a reflection of the growing share of Everest-branded products. Gross margin increased from 1995 levels due to the strong sales mix of Everest-branded products, ongoing expense controls implemented by the Company, increased production levels and raw materials cost reductions. Gross margin for the first six months of 1996 was 44.4% as compared to 39.4% for the same period of 1995. The increase in gross margin is reflective of the sales increases, the growing share of Everest-branded products and the higher production levels. The Company expects that the gross margin will continue to improve from 1995 levels due to the sales growth in Everest-branded products and increased production output. Sales and Marketing. Sales and marketing expenses for the second quarter of 1996 were $365,933, an increase of $99,323, or 37%, from the same period in 1995. This increase was a result of the growth in commission expenses due to changing sales mix to a larger portion of Everest-branded sales, the ongoing marketing efforts with the use of new product samples, the additional clinical fees to promote the product through professional articles and papers, and the full impact of staff additions made throughout 1995. For the first six months of 1996, sales and marketing expenses were $743,009, an increase of $249,502, or 51% from the same period of 1995. The Company expects the level of spending on sales and marketing to continue to increase in 1996 compared to 1995 levels due to the growth in Everest-branded sales and strategic marketing investments. Research and Development. Research and development expenses for the second quarter of 1996 were $159,894 , an increase of $15,998 , or 11%, from the same period in 1995. The Company experienced an increase in costs due to the ongoing development of the BiCOAG Cutting Forceps to add a locking mechanism and the introduction of a 5mm version. Shipments of the cutting forceps with the new locking feature commenced in April and the 5mm version in June. The Company also continues to support its intellectual property portfolio and incur professional fees in support of these activities. For the first six months of 1996, research and development expenses were $316,777 an increase of $29,026, or 10% from the same period of 1995. The Company expects spending in this area to increase over 1995 levels due to development projects and intellectual property issues. General and Administrative. General and administrative expense for the second quarter of 1996 were $180,692, an increase of $7,780, or 4%, from the same period of 1995. For the first six months of 1996, general and administrative expenses were $364,064, an increase of $15,740, or 4% from the same period of 1995. The Company does not expect significant general and administrative cost increases in the near future. (7) Net Loss. Net loss for the second quarter was $184,580 compared to a net loss of $170,780 for the same quarter in 1995. The second quarter loss was increased from the second quarter of 1995 due to the Company recording a one-time charge of $111,042 for the balance of the fee due the noteholder on the Company's $500,000 note which was converted to 200,000 shares of common stock on June 28, 1996. Aside from this financing activity the Company reduced its operating loss in the second quarter due primarily to the growth in sales, the increase in gross margin as a result of the changing sales mix and the continued cost control efforts initiated by management. The net loss for the first six months of 1996 was $308,589 compared to a net loss of $346,822 for the first six months of 1995. The Company believes that with its changing sales mix, the projected sales increases and its continuing control of its operating expenses will result in the Company approaching profitability by year-end. LIQUIDITY and CAPITAL RESOURCES Cash and cash equivalents were $742,563 on June 30, 1996 compared to $1,028,476 on December 31, 1995. The Company used $400,155 of cash in operating activities in the first six months of 1996 compared to $90,528 for the same period of 1995. Operating activities in the first six months included an increase in accounts receivable due to the sales growth, an increase in inventories relating to the increasing demand and achievement of desired inventory levels and a growth in accounts payable. The Company spent $62,629 on capital equipment in the first six months of 1996 and expects this level of investment to remain constant over the next two quarters as the Company redesigns the handle of its laparoscopy product line. In the second quarter of 1996 the $500,000 note, raised in February to pay off outstanding principal and interest under certain 13% notes, was converted into 200,000 shares of common stock. The Company also raised $427,326 from the exercise of warrants and options in the second quarter of 1996. In addition, 401,700 shares of preferred stock were converted to common shares in the first six months of 1996. The Company also met its obligation on preferred stock dividends of $113,640. The Company believes it has sufficient capital to fund operations through 1996, on the assumption that its sales goals are met and there are no significant unexpected expenditures. If for any reason the Company's sales goals are not met or it incurs significant unexpected expenditures, the Company may require additional debt or equity financing. There is no assurance that such financing will be available. Certain statements in this Management's Discussion and Analysis section are forward looking statements that involve a number of risks and uncertainties, including those described in the Company's Form 10-KSB for the year ended December 31, 1995 under Part I "Cautionary Statements." EFFECT OF INFLATION The Company does not believe that inflation will have a significant effect on operations. (8) PART II - OTHER INFORMATION Item 4 - Submission of Matters to a Vote of Security Holders The Company held its Annual Meeting on Tuesday, April 30, 1996. Proxies for the Annual Meeting were solicited pursuant to Regulation 14 under the Securities Exchange Act of 1934. There was no solicitation in opposition to management's nominees as listed in the Company's proxy statement, and all nominees were elected. The following persons were elected to serve as directors of the Company, by the votes indicated, until the next annual meeting of shareholders: Number of Number of Nominee Votes For Votes Withheld ------- --------- -------------- David D. Koentopf 7,030,382 38,513 John L. Shannon, Jr. 7,027,006 41,889 Donald R. Brattain 7,036,082 32,813 Richard J. Migliori, M.D. 7,031,682 37,213 By a vote of 6,805,592 shares in favor, with 244,631 shares opposed and 18,312 shares abstaining, the shareholders also ratified the appointment of Ernst & Young LLP as independent auditors for the fiscal year ending December 31, 1996. Item 6 - Exhibits and Reports on Form 8-K (a) Exhibits: 27. Financial Data Schedule (filed with electronic version only) (b) Reports on Form 8-K: None filed in the period. (9) SIGNATURES Pursuant to the requirements of the Securities Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. EVEREST MEDICAL CORPORATION August 13, 1996 By: /s/ John L. Shannon, Jr. John L. Shannon, Jr., President and Chief Executive Officer (Principal executive officer) August 13, 1996 By: /s/ Thomas F. Murphy Thomas F. Murphy Chief Financial Officer and Assistant Secretary (Principal financial and accounting officer) (10) EX-27 2 FDS --
5 1 U.S. DOLLARS 6-MOS DEC-31-1996 JAN-1-1996 JUN-30-1996 1 742,563 0 1,032,275 31,000 871,299 2,682,484 1,566,631 1,313,293 2,960,847 701,738 0 5,682,669 0 66,092 16,163,541 2,960,847 2,770,424 2,770,424 1,540,143 1,423,851 0 0 150,277 (490,007) 0 (490,007) 0 0 0 (490,007) .08 .08
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