<PAGE> 1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTER ENDED MARCH 31, 1997.
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 for the transition period from_______to_______
COMMISSION FILE NUMBER: 0-26748
- --------------------------------------------------------------------------------
CARDIOMETRICS, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 77-0095687
(State of Incorporation) (I.R.S. Employer Identification No.)
</TABLE>
645 CLYDE AVENUE, MOUNTAIN VIEW, CALIFORNIA 94043
(Address of principal executive offices)
Registrant's telephone number, including area code: (415) 961-6993
- --------------------------------------------------------------------------------
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $0.01 PAR VALUE
Indicate by check whether the Registrant (1) has filed all reports to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter periods as 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 April 15, 1997, there were 6,959,684 shares of the issuer's Common Stock,
$0.01 par value, outstanding.
================================================================================
1
<PAGE> 2
CARDIOMETRICS, INC.
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<S> <C>
Balance Sheets as of March 31, 1997 and December 31, 1996.............. 3
Statements of Operations for the three months ended
March 31, 1997 and March 31, 1996........................................ 4
Statements of Cash Flows for the three months
ended March 31, 1997 and March 31, 1996.................................. 5
Notes to Financial Statements............................................ 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations...................................... 8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings............................................... 11
Item 6. Exhibits and Reports on Form 8-K................................ 11
SIGNATURE............................................................... 12
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
CARDIOMETRICS, INC.
BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
March 31, 1997 December 31, 1996
-------------- -----------------
(Unaudited) (Note 1)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 746 $ 548
Short-term investments 14,850 16,891
Accounts receivable, net 2,292 2,462
Accounts receivable, related party 1,771 1,331
Inventories 2,578 2,542
Other current assets 731 329
-------- --------
Total current assets 22,968 24,103
Property and equipment, net 1,036 935
Other assets 1 1
-------- --------
Total assets $ 24,005 $ 25,039
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 968 $ 712
Accrued employee compensation 628 569
Accrued clinical trial expenses 556 518
Current portion of note payable 166 176
Deferred revenue and other current liabilities 238 174
-------- --------
Total current liabilities 2,556 2,149
Notes payable, less current portion 19 47
Stockholders' equity:
Preferred stock $0.01 par value; -- --
5,000 shares authorized, none
issued and outstanding
Common stock, $0.01 par value;
15,000 shares authorized, 6,960 and 6,926 shares
issued and outstanding as of March 31, 1997 and
December 31, 1996, respectively 70 69
Additional paid-in capital 57,405 57,354
Deferred compensation (496) (549)
Accumulated deficit (35,549) (34,031)
-------- --------
Total stockholders' equity 21,430 22,843
-------- --------
Total liabilities and equity $ 24,005 $ 25,039
======== ========
</TABLE>
See accompanying notes.
3
<PAGE> 4
CARDIOMETRICS, INC.
STATEMENTS OF OPERATIONS
(In thousands, except per share amounts; unaudited)
<TABLE>
<CAPTION>
Three months
ended March 31,
---------------------
1997 1996
------- -------
<S> <C> <C>
Sales $ 1,701 $ 1,888
Sales to related party 1,766 1,278
------- -------
Total sales $ 3,467 $ 3,166
Costs and expenses:
Cost of sales 1,391 1,332
Research and development 862 709
Selling, general and administrative 2,189 1,792
Merger expenses 761 --
------- -------
Total costs and expenses 5,203 3,833
------- -------
Loss from operations (1,736) (667)
Interest and other income 226 271
Interest expense (8) (16)
------- -------
Net loss $(1,518) $ (412)
======= =======
Net loss per share $ (0.22) $ (0.06)
======= =======
Shares used in computing net loss per share 6,944 6,728
======= =======
</TABLE>
See accompanying notes.
4
<PAGE> 5
CARDIOMETRICS, INC.
STATEMENTS OF CASH FLOW
(In thousands; unaudited)
<TABLE>
<CAPTION>
Three months
ended March 31,
----------------------
1997 1996
------- --------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(1,518) $ (412)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 139 107
Amortization of deferred compensation 53 53
Gain or disposal of fixed assets (6) --
Changes in operating assets and liabilities:
Accounts receivable 170 (551)
Accounts receivable, related parties (440) 64
Inventories (36) (78)
Other assets (402) (99)
Accounts payable 256 184
Accrued employee compensation 59 36
Accrued clinical trial expenses 38 80
Deferred revenue and other current liabilities 64 (67)
------- --------
Net cash used in operating activities (1,623) (683)
Cash flows from investing activities:
Purchases of available-for-sale securities (7,119) (10,424)
Maturities of available-for-sale securities 9,160 2,436
Expenditures for property and equipment (240) (107)
Proceeds from sale of equipment 6 --
------- --------
Net cash provided by (used in) investing activities 1,807 (8,095)
Cash flows from financing activities:
Proceeds from sale of common stock 52 (136)
Principal payments on note payable (38) (46)
------- --------
Net cash provided by (used in) financing activities $ 14 $ (182)
------- --------
Net increase (decrease) in cash and cash equivalents 198 (8,960)
Cash and cash equivalents at beginning of period 548 11,898
------- --------
Cash and cash equivalents at end of period $ 746 $ 2,938
======= ========
Supplemental disclosure of cash flow information
Cash paid for interest $ 8 $ 16
======= ========
</TABLE>
See accompanying notes.
5
<PAGE> 6
CARDIOMETRICS, INC.
----------------------
NOTES TO FINANCIAL STATEMENTS
March 31, 1997
(Unaudited)
1. Basis of Presentation
The accompanying unaudited financial statements for the three
month periods ended March 31, 1997 and 1996 include all adjustments
(consisting of normal recurring adjustments) which the Company
considers necessary for a fair presentation of the operating results
and cash flows for those periods.
Certain information and footnote disclosures required by
generally accepted accounting principles for complete financial
statements have been omitted pursuant to the rules and regulations
of the Securities and Exchange Commission ("SEC"), although the
Company believes that the disclosures included are adequate to make
the information presented not misleading. These financial statements
should be read in conjunction with the audited financial statements
and footnotes included in the Company's Annual Report on Form 10-K
for the year ended December 31, 1996.
Results for the interim period ended March 31, 1997 are not
necessarily indicative of the results for future interim periods or
for the entire year ending December 31, 1997.
2. Reorganization Agreement
On January 26, 1997, Cardiometrics, EndoSonics Corporation, a
Delaware corporation ("EndoSonics") and River Acquisition
Corporation, a Delaware corporation and a wholly owned subsidiary of
EndoSonics ("Merger Sub"), entered into an Agreement and Plan of
Reorganization, as subsequently amended (the "Reorganization
Agreement"), pursuant to which Merger Sub will be merged with and
into Cardiometrics (the "Merger"), with Cardiometrics surviving the
Merger and becoming a wholly owned subsidiary of EndoSonics. The
consummation of the Merger is subject, among other things, to the
approval of the Merger by the stockholders of Cardiometrics at a
stockholders' meeting, which is currently expected to be held in
June 1997, and the satisfaction of certain other closing conditions.
In the event Cardiometrics terminates the Merger, under certain
circumstances, Cardiometrics is obligated to pay up to $3,500,000
in cash as a termination fee. Pursuant to the Reorganization
Agreement, stockholders of Cardiometrics will receive shares in
EndoSonics, shares in CardioVascular Dynamics, Inc. and cash, (the
"Merger Consideration") which, based on closing prices on the last
trading day prior to the execution of the Reorganization Agreement
(which values are subject to change), approximated $9.00 per share
of Cardiometrics common stock. Since the date of the execution of
the agreement, the value of the Merger Consideration has fluctuated
between $6.60 and $9.00 per share and as of May 12, 1997 was
approximately $7.57 per share. The Reorganization Agreement gives
the Cardiometrics board of directors the right to terminate the
Reorganization Agreement if the Merger Consideration is below $8.00
per share after the Merger exchange ratios are fixed three days
before the Cardiometrics stockholders meeting to vote on the
Reorganization Agreement.
On January 26, 1997, EndoSonics and Cardiometrics entered into
a Stock Option Agreement, pursuant to which, under limited
circumstances, EndoSonics has the right to acquire up to 1,379,717
shares of authorized, unissued shares of Cardiometrics common stock
at $9.00 per share. Under the terms of the Stock Option Agreement,
EndoSonics will remit to Cardiometrics any proceeds otherwise
payable to EndoSonics from any disposition of the stock option or
the shares of Cardiometrics common stock issued upon exercise of the
stock option which are in excess of the exercise price paid by
EndoSonics to exercise the stock option.
3. Net Loss Per Share
Net loss per share is computed using the weighted average
number of shares of common stock outstanding. Common equivalent
shares from stock options and warrants are excluded from the
computations for the three months ended March 31, 1997 and March 31,
1996, as their effect is antidilutive.
In February 1997, the Financial Accounting Standards Board
issued Statement No. 128, Earnings per Share, which is required to
be adopted on December 31, 1997. At that time, the Company will be
required to change the method currently used to compute loss per
share and to restate all prior periods. Under the new requirements
for calculating primary earnings per share, the dilutive effect of
stock options will be excluded. As a result of the antidilutive
effect of equivalent shares from stock options and warrants stated
above, the impact of Statement 128 on the calculation of primary
earnings per share for the quarter ended March 31, 1997 and
March 31, 1996 is not expected to be material.
6
<PAGE> 7
4. Balance Sheet Information
Certain balance sheet components are as follows:
<TABLE>
<CAPTION>
(In thousands) March 31, 1997 December 31, 1996
-------------- -----------------
(unaudited)
<S> <C> <C>
Accounts receivable:
Accounts receivable $ 2,411 $ 2,577
Allowance for doubtful accounts (119) (115)
------- -------
$ 2,292 $ 2,462
======= =======
Inventories:
Raw materials $ 872 $ 784
Work-in-process 809 428
Finished goods 897 1,330
------- -------
$ 2,578 $ 2,542
======= =======
</TABLE>
5. Litigation
On January 28, 1997, an alleged class action complaint was
filed in the New Castle County Delaware Court of Chancery against
the Company and other parties seeking injunctive relief to prevent
the consummation of the acquisition of the Company by EndoSonics, or
if the Merger is consummated, seeking rescission of the Merger and
payment of damages. The complaint, among other allegations, alleges
that the directors of the Company, two officers of the Company (one
of whom is a director), and a former director of the Company
breached their fiduciary and other duties to the Company's
stockholders and that EndoSonics knowingly aided and abetted such
breaches. Cardiometrics and the individual defendants named in the
complaint deny the material allegations asserted against them.
Cardiometric intends to defend vigorously itself and the named
individual defendents against the allegations in the complaint.
7
<PAGE> 8
CARDIOMETRICS, INC.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The discussion in this Form 10-Q contains forward looking statements
that involve risks and uncertainties. The Company's actual results could differ
materially from those discussed herein. Factors that could cause or contribute
to such differences include, but are not limited to the effect of the potential
merger on the Company's operations, clinical and payor acceptance of the
Company's products, the impact of competitive products and other risks detailed
from time to time in the Company's SEC reports, including the Company's Annual
Report on Form 10-K for the year ended December 31, 1996 and the Company's
Registration Statement on Form S-1 as declared effective by the SEC on November
1, 1995 (Reg. No. 33-96690).
GENERAL
Cardiometrics develops, manufactures and markets intravascular
medical devices to measure blood flow impairment caused by coronary artery
disease. Cardiometrics' principal products, the FloWire(R) Doppler guide wire
and FloMap(R) ultrasound instrument, represent an advance in functional testing
of blood flow impairment, enabling cardiologists to evaluate the
appropriateness of angioplasty interventions and assess post-procedural results
directly in the cardiac catheterization laboratory. Clinical experience
demonstrates that the measurement of blood flow impairment downstream from
(distal to) an obstruction, which Cardiometrics calls functional angiometry,
provides information to improve the quality of patient care and procedure
outcomes in the diagnosis and treatment of cardiovascular disease. The
FloWire/FloMap system has received clearance from the U.S. Food and Drug
Administration ("FDA") and many corresponding European and Pacific Rim
regulatory agencies. As of March 1997, more than 71,000 FloWire guide wires
have been sold and approximately 515 FloMap instruments have been shipped.
On January 26, 1997, Cardiometrics, EndoSonics Corporation, a
Delaware corporation ("EndoSonics"), and River Acquisition Corporation, a
Delaware corporation and a wholly owned subsidiary of EndoSonics ("Merger Sub"),
entered into an Agreement and Plan of Reorganization, as subsequently amended
(the "Reorganization Agreement"), pursuant to which Merger Sub will be merged
with and into Cardiometrics (the "Merger"), with Cardiometrics surviving the
Merger and becoming a wholly owned subsidiary of EndoSonics. The consummation
of the Merger is subject, among other things, to the approval of the Merger by
the stockholders of Cardiometrics, at a stockholders' meeting currently
expected to be held in June 1997 and the satisfaction of certain other closing
conditions.
Cardiometrics has not been profitable since inception and, as of
March 31, 1997, had an accumulated deficit of $35.5 million, $25.7 million of
which has been incurred since Cardiometrics restructured its operations in 1990.
Further growth in the sales volume of Cardiometrics' products and the resulting
gross profit will be needed to offset future investments in research and
development, including clinical outcome studies, and selling, general and
administrative expenses.
8
<PAGE> 9
RESULTS OF OPERATIONS
The following table summarizes the results of operations of the
Company as a percentage of sales for the periods indicated.
<TABLE>
<CAPTION>
Three months
ended March 31,
--------------------
1997 1996
-------- --------
<S> <C> <C>
Percentage of sales:
Sales 100 % 100 %
Cost of sales 40 42
--- --
Gross margin 60 58
Operating expenses:
Research and development 25 22
Selling, general and administrative 63 57
Merger expenses 22 -
--- --
Total operating expenses 110 79
Interest and other income, net 6 8
--- --
Net loss (44)% (13)%
=== ==
</TABLE>
Sales. Sales increased 10% during the three months ended March 31,
1997 compared to the three months ended March 31, 1996 to $3,467,000 from
$3,166,000. Sales for the first quarter of 1997 increased over the corresponding
period of 1996 primarily as a result of an increase in sales volume of FloWire
units. The increase in FloWire unit shipments was due in part to a U.S.
co-distribution agreement that the Company entered into in March 1997 with
Cordis Corporation, a Johnson & Johnson Company. The increase in FloWire sales
was partially offset by no sales of AccuTrac guide wires during the three month
period ended March 31, 1997 as compared to $420,000 of sales during the similar
period in 1996.
Cost of sales. Cost of sales increased four percent during the three
months ended March 31, 1997 compared to the three months ended March 31, 1996 to
$1,391,000 from $1,332,000. As a percentage of sales, cost of sales decreased to
40% for the three months ended March 31, 1997 compared to 42% in the same three
month period of 1996. This decrease was primarily the result of a greater
proportion of FloWire sales as a percentage of total sales partially offset by a
lower gross margin realized on instrument sales.
Research and development. Research and development expenses
increased 22% during the three months ended March 31, 1997 over the three month
period ended March 31, 1996 to $862,000 from $709,000. As a percentage of sales,
research and development expenses increased to 25% in the first quarter of 1997
from 22% in the same quarter of 1996. This increase was due to increased
spending on clinical studies, which the Company includes in research and
development expenses. The expenditures on clinical studies included both
on-going studies and studies initiated during the first three months of 1997.
The Company plans to continue its expenditures in research and development,
including additional expenditures on clinical studies.
Selling, general and administrative. Selling, general and
administrative expenses increased 22% during the three months ended March 31,
1997 over the three months ended March 31, 1996 to $2,189,000 from $1,792,000.
Selling, general and administrative expenses as a percentage of sales increased
during the first quarter of 1997 to 63% as compared to 57% during the first
quarter of 1997. The increase in selling, general and administrative expenses
was principally the results of increased staffing and associated expenses,
additional sales and marketing programs and expenses associated with increased
sales volumes.
Merger expenses. The Company incurred $761,000 of expenses in the
first quarter of 1997 related to the proposed merger with EndoSonics. These
expenses consisted primarily of expenditures for professional legal services and
investment banking fees. The Company expects to incur additional expenses
related to the proposed merger with EndoSonics at least through the second
quarter of 1997.
9
<PAGE> 10
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1997, the Company had working capital of $20,412,000
and its principal sources of liquidity consisted of $15,596,000 in cash, cash
equivalents and short term investments.
For the three months ended March 31, 1997 the Company's cash used in
operations was $1,623,000. Accounts receivable, including accounts receivable
from related parties, increased to $4,063,000 at March 31, 1997 from $3,793,000
at December 31, 1996. Inventories increased to $2,578,000 at March 31, 1997
compared to $2,542,000 at December 31, 1996 due to increases in work-in-process
and raw material inventories that were partially offset by a decrease in
finished goods inventories. Other assets increased to $731,000 at March 31, 1997
from $329,000 at December 31, 1996 primarily as the result of pre-payments for
current clinical outcome studies. The Company expects to incur substantial
additional costs, including costs related to research and development, including
additional clinical outcome studies, sales and marketing activities and the
purchase of capital equipment. The Company believes it has sufficient funds for
the Company's anticipated funding requirements through at least 1997 and for the
foreseeable future. However, there can be no assurance that the Company will not
require additional financing, or that if required, such financing will be
available on terms acceptable to the Company.
10
<PAGE> 11
CARDIOMETRICS, INC.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
On or about January 28, 1997, an alleged class action complaint was
filed by a Cardiometrics stockholder in the New Castle County Delaware Court of
Chancery. The complaint names Cardiometrics, EndoSonics, the directors of
Cardiometrics, two officers of Cardiometrics (one of whom is a director), and a
former director of Cardiometrics as defendants, and alleges, among other things,
that the individual defendants breached and are breaching their fiduciary and
other duties to plaintiff and other members of the purported class and that
EndoSonics knowingly aided and abetted such breaches. Plaintiff seeks (I)
injunctive relief to prevent the consummation of the Merger, (ii) if the Merger
is consummated, rescission of the Merger or payment of rescissory damages, (iii)
an accounting by the defendants, individually and severally, to members of the
class for their damages and defendants' profits by reason of the allegations
contained in the complaint, (iv) payment to the plaintiff of the costs and
expenses of the action, including reasonable counsel and expert fees, and (v)
any other and further relief as the Court deems just and proper. Cardiometrics
and the individual defendants names in the complaint deny the material
allegations asserted against them. Cardiometrics intends to defend
vigorously itself and the named individual defendants against the allegations in
the complaint.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits required by Item 601 and Regulation S-K
Exhibit Description
Number
------- -----------
10.29* Distribution Agreement by and between Registrant,
EndoSonics Corporation and Cordis Corporation dated
February 19, 1997 as amended by Addendum dated March
27, 1997 and attachment dated March 25, 1997
27.1 Financial Data Schedule
* Confidential treatment requested as to certain
portions of this exhibit
(b) Reports on Form 8-K
On February 10, 1997, the Company filed a Form 8-K, reporting that
on January 26, 1997, Cardiometrics, EndoSonics Corporation, a
Delaware corporation ("EndoSonics"), and River Acquisition
Corporation, a Delaware corporation and a wholly owned subsidiary
of EndoSonics ("Merger Sub"), entered into an Agreement and Plan
of Reorganization (the "Reorganization Agreement"), pursuant to
which Merger Sub will be merged with and into Cardiometrics (the
"Merger"), with Cardiometrics surviving the Merger and becoming a
wholly owned subsidiary of EndoSonics. The consummation of the
Merger is subject, among other things, to the approval of the
Merger by the stockholders of the Company at a stockholders
meeting, which is currently expected to be held in June 1997, and
the satisfaction of certain other closing conditions.
11
<PAGE> 12
CARDIOMETRICS, INC.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CARDIOMETRICS, INC.
Date: May 14, 1997
/s/ Robert Y. Newell, IV
----------------------------------------
Robert Y. Newell, IV
Vice President, Finance & Administration,
Chief Financial Officer and Secretary
(Principal Financial Officer and Duly
Authorized Officer)
12
<PAGE> 13
CARDIOMETRICS, INC.
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Number
Description
- ----------------------------------------------------------------------------
<S> <C>
10.29* Distribution Agreement by and between Registrant, EndoSonics
Corporation and Cordis Corporation dated February 19, 1997 as
amended by Addendum dated March 27, 1997 and attachment dated
March 25, 1997
27.1 Financial Data Schedule
</TABLE>
* Confidential treatment requested as to certain portions of this exhibit
<PAGE> 1
EXHIBIT 10.29
[ENDOSONICS LETTERHEAD]
February 19, 1997
Mr. Gary Jordan
President Cordis Cardiology
Cordis Corporation, a Johnson & Johnson Company
P.O. Box 025700
Miami, FL 33102-5700
Dear Gary:
Based on our discussions and discussions between Meno Nassi and Bill Spies, I
think we have the basis for an agreement in principle. The key terms are as
follows:
1. FloWire/WaveWire Commitment
Non cancelable purchase commitments for 1997 as follows:
<TABLE>
<CAPTION>
March April May June July Aug. Sept. Oct. Nov. Dec. Total
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FloWire *** *** *** *** *** *** *** *** *** *** ***
(Units)
* * *
($) *** *** *** *** *** *** *** *** *** *** ***
WaveWire *** *** *** *** *** *** *** *** *** *** ***
(Units)
* * *
($) *** *** *** *** *** *** *** *** *** *** ***
</TABLE>
2. FloMap/WaveMap Pricing
FloMap $***
FloMap II $***
WaveMap $***
3. Co-Distribution
We agree that 40 accounts in the U.S. will be kept under the direct
sales channel by Cardiometrics throughout 1997 and individual accounts
may transition to Cordis on a mutually agreed upon basis. As mentioned
in your letter of February 19th, with mutual agreement, it may be
optimum for the Cordis and Cardiometrics sales teams to work together
in new accounts and in the pre-named 40 accounts. By the end of
September 1997, we will jointly reassess the structure and organization
<PAGE> 2
of the U.S. distribution and negotiate the terms and requirements of a
full exclusive distribution starting in January 1998.
If you are in agreement with this final proposal, I would appreciate it if you
would sign and return the enclosed copy of this letter to me. Please give
instructions to Bill Spies to finalize the rest of the agreement details. We
look forward to making 1997 happen.
Sincerely,
/s/ REINHARD J. WARNKING
---------------------------------
Reinhard J. Warnking
President & CEO
EndoSonics Corporation
AGREED AND ACCEPTED BY:
/s/ GARY JORDAN February 20, 1997
- ------------------------------ ---------------------------
Gary Jordan Date
President
Cordis Cardiology
/s/ MENAHEM NASSI February 21, 1997
- ------------------------------ ---------------------------
Menahem Nassi, Ph.D. Date
President and CEO
Cardiometrics
*** Confidential treatment requested
<PAGE> 3
ADDENDUM TO LETTER AGREEMENT
This addendum, dated this 21st day of March, 1997, by and among Cordis
Corporation, a Johnson & Johnson Company, Cardiometrics, Inc., and Endosonics
Corporation, is hereby made a part and parcel of that Letter Agreement dated
February 19, 1997, by and among the parties hereto (the "Agreement") and this
addendum shall have the force and effect as if the terms hereof shall have been
included in the Agreement.
Now, therefore, the parties agree as follows:
1. All references herein to Cardiometrics shall mean to be EndoSonics if
and when EndoSonics shall become a successor in interests to Cardiometrics.
2. Cordis shall issue a purchase order in favor of Cardiometrics and such
purchase order shall be issued in accordance with the terms and conditions
hereof.
3. Cordis' purchase order shall be a non-cancelable, binding obligation
of Cordis to purchase, and upon Cardiometrics' acceptance of same a binding
obligation for Cardiometrics to supply, the total number of units of
Flo-Wire(tm) and WaveWire(tm) product according to the agreed upon delivery and
price schedules in the Agreement.
4. Purchases by Cordis in any given month, that are in excess of that
particular monthly requirement shall serve to reduce future monthly required
purchases. This shall in no way be construed to reduce the total number of units
required to be purchased by Cordis during the 1997 period of the Agreement.
5. In the event that Cardiometrics is unavailable to supply sufficient
units to fill any monthly purchase order requirement in whole or in part within
sixty (60) days of the delivery schedule, then the purchase order quantity and
extended price shall be amended accordingly.
/s/ J. GARY JORDAN /s/ REINHARD WARNKING
- ------------------------------- ----------------------------------
J. Gary Jordan Reinhard Warnking
President President & CEO
Cordis Corp. (Cardiology) EndoSonics Corporation
/s/ MENO NASSI
- -------------------------------
Meno Nassi, Ph.D.
President & CEO
Cardiometrics
<PAGE> 4
[CARDIOMETRICS LETTERHEAD]
March 25, 1997
STEVE SCHEISS
Director Marketing
Cordis Corporation
FAX: 305/824-2270
Dear Steve,
Consistent with our letter agreement dated February 19, 1997, the following U.S.
hospitals will represent the agreed upon forty (40) accounts that will be kept
throughout 1997 under the direct sales channel of Cardiometrics, or of
EndoSonics Corporation, if and when EndoSonics shall become a successor in
interest to Cardiometrics.
Please do not hesitate to call me with any questions.
Regards,
/s/ KEVIN RHATIGAN
- -------------------------
Kevin Rhatigan
Vice President, US Sales
encl.
KR/cb
<PAGE> 5
CORDIS/J&J AND CARDIOMETRICS U.S. CO-DISTRIBUTION
CARDIOMETRICS DIRECT ACCOUNTS
* * *
*** Confidential treatment requested
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from (a) balance
sheet as of March 31, 1997 and statement of operations for the three month
period ended March 31, 1997 and is qualified in its entirety by reference to
such (b) Form 10-Q.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
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