FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
___X ____ Quarterly report pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934. For the quarterly period
ended March 31, 1996.
________ 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
0-26992
CARDIOVASCULAR DIAGNOSTICS, INC.
(Exact Name of Registrant as Specified in its Charter)
North Carolina 56-1493744
(State or other jurisdiction
of incorporation or organization) (IRS Employer Identification Number)
5301 Departure Drive
Raleigh, North Carolina 27604
(Address of Principal Executive
Office) (Zip Code)
Registrant's Telephone Number,
Including Area Code 919-954-9871
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or such 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________
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding as of May 8, 1996
Common Stock, par value $.001 6,558,046
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CARDIOVASCULAR DIAGNOSTICS, INC.
INDEX TO FORM 10-Q
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of March 31, 1996 (unaudited)
and December 31, 1995 3
Consolidated Statements of Operations for the Three Months Ended
March 31, 1996 and 1995 (unaudited) 4
Consolidated Statements of Cash Flows for the Three Months Ended
March 31, 1996 and 1995 (unaudited) 5
Notes to Unaudited Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 9
SIGNATURES 10
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CARDIOVASCULAR DIAGNOSTICS, INC.
Consolidated Balance Sheets
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
---------------- -----------------
<S> <C> <C>
ASSETS (Unaudited)
Current Assets:
Cash and cash equivalents $3,343 $16,237
Investments 4,873
Accounts Receivable 1,269 803
Inventories 1,353 1,305
Other current assets 309 159
---------------- -----------------
Total current assets 16,973 18,504
Property and equipment, net 3,657 3,496
Intangible assets, net 1,773 1,810
Investments 5,826
Other assets 224 175
---------------- -----------------
Total Assets $22,627 $23,985
================ =================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts Payable $593 $953
Accrued Expenses 122 387
Current portion of long-term debt 0 283
Current portion of capital lease obligations 11 54
---------------- -----------------
Total current liabilities 726 1,677
---------------- -----------------
Long term debt, less current portion 50 457
Capital lease obligations, less current portion 68 38
Deferred gain on sale-leaseback 0 4
---------------- -----------------
Total non-current liabilities 118 499
---------------- -----------------
Total liabilities 844 2,176
---------------- -----------------
Shareholders' Equity
Common stock, $.001 par value; authorized 10,000,000 shares; 6,556,338 and
6,447,562 issued and outstanding at March 31, 1996 and
December 31, 1995, respectively 7 6
Additional paid-in capital 33,684 32,672
Unrealized gain on investments 11
Cumulative translation adjustment 53 (6)
Accumulated deficit (11,931) (10,819)
Unearned compensation (41) (44)
---------------- -----------------
Total Shareholders' Equity 21,783 21,809
================ =================
Total Liabilities and Shareholders' Equity $22,627 $23,985
================ =================
See accompanying notes.
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CARDIOVASCULAR DIAGNOSTICS, INC.
Consolidated Statements of Operations
(Dollars in thousands, except per share data)
(Unaudited)
Three Months Ended
March 31,
------------------------------------
1996 1995
--------------- -----------------
Sales $1,503 $983
Cost of goods sold 1,188 769
--------------- -----------------
Gross profit 315 215
--------------- -----------------
Operating Expenses:
Administration and Finance 636 369
Sales and Marketing 454 237
Research and Development 511 384
--------------- -----------------
Total expenses 1,601 990
--------------- -----------------
Operating loss (1,286) (775)
--------------- -----------------
Other income(expense):
Interest expense (8) (10)
Interest income 191 15
Grant/royalty income 10 70
--------------- -----------------
Net other income (expense) 193 75
--------------- -----------------
Net loss before taxes (1,093) (701)
Provision for income taxes (19) (36)
--------------- -----------------
Net loss ($1,112) ($736)
=============== =================
Loss per share ($0.17) ($0.14)
======= =======
See accompanying notes.
4
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CARDIOVASCULAR DIAGNOSTICS, INC.
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
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<CAPTION>
Three Months Ended
March 31,
---------------------------------------
1996 1995
--------------- --------------------
<S> <C> <C>
Cash flows from operating activities:
Net loss ($1,112) ($736)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 166 125
Amortization of intangible assets 40 32
Amortization of deferred gain on sale-lease back (4) 0
Amortization of unearned compensation 3 0
Unrealized gain on investments 11 0
Change in assets and liabilities:
Receivables (466) (118)
Inventories (48) (412)
Other assets (199) (43)
Accounts payable and accrued expenses (625) 219
--------------- --------------------
Net cash used in operating activities (2,234) (933)
--------------- --------------------
Cash flows from investing activities:
Payments for purchase of property and equipment (327) (372)
Purchase of investments (10,699) 0
Costs incurred to obtain patents (3) 0
--------------- --------------------
Net cash used in investing activities (330) (372)
--------------- --------------------
Cash flows from financing activities:
Proceeds from issuance of long-term debt 0 11
Principal payments on long-term debt and capital lease obligations (703) (40)
Net proceeds from issuance of stock 1,013 1,279
--------------- --------------------
Net cash provided by financing activities 310 1,250
--------------- --------------------
Effect of exchange rates on cash 59 28
Net increase (decrease) in cash and cash equivalents (12,894) (27)
Cash and cash equivalents at beginning of period 16,237 3,206
--------------- --------------------
Cash and cash equivalents at end of period $3,343 $3,179
=============== ====================
See accompanying notes.
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CARDIOVASCULAR DIAGNOSTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 1. Basis of Presentation
Cardiovascular Diagnostics, Inc. ("CVDI") is the parent company of Coeur
Laboratories, Inc. ("Coeur") and Cardiovascular Diagnostics Europe, BV ("CDE").
The "Company" refers collectively, to CVDI, Coeur and CDE. All CVDI financial
reporting is consolidated including the accounts of Coeur and CDE. All
significant intercompany activity has been eliminated. The consolidated
financial statements included herein as of any date other than December 31 have
been prepared by the Company without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Financial information as
of December 31 has been derived from the audited financial statements of the
Company, but does not include all disclosures required by generally accepted
accounting principles. In the opinion of management, the accompanying unaudited
consolidated financial statements include all adjustments (consisting only of
normal recurring adjustments) necessary to present fairly the consolidated
financial position, results of operations and cash flows of the Company. For
further information regarding the Company's accounting policies, refer to the
Consolidated Financial Statements and related notes included in the Company's
Annual Report on Form 10-K for the year ended December 31, 1995. Results for the
interim period are not necessarily indicative of the results for any other
interim period or for the full fiscal year.
Note 2. Income Taxes Paid
No Federal income tax provision or benefit has been provided for income tax
purposes, as the Company has not realized net income for the quarter ended March
31, 1996 and has net operating loss carryforwards to offset any net income when
realized. Coeur made state income tax payments in the amount of $19,181 for the
quarter ended March 31, 1996.
Note 3. Cash Equivalents
The Company considers all highly liquid investments with a maturity of three
months or less to be cash equivalents.
Note 4. New Accounting Pronouncements
On January 1, 1996 the Company adopted Statement of Financial Accounting
Standards No. 123, Accounting for Stock Based Compensation. As permitted by SFAS
123, the Company has chosen to apply APB Opinion 25 and related Interpretations
in accounting for its stock-based compensation plans. Had compensation
cost for the Company's stock-based compensation plans been determined
based on the fair value at the grant dates for awards under those plans
consistent with the method of SFAS 123, the Company's net income loss and loss
earnings per share would have been reduced to the pro forma amounts indicated
below. The Company did not award any option grants during the first quarter of
1995, therefore there is no pro forma amount for the three months ended March
31, 1995.
Three Months Ended
March 31,
1996
Net loss As reported ($1,113)
Pro forma ($1,185)
Loss per share As reported ($0.17)
Pro forma ($0.17)
6
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Introduction
This Management's Discussion and Analysis of Financial Condition and Results of
Operations contains forward-looking statements. The actual results might differ
materially from those projected in the forward-looking statements. Additional
information concerning factors that could cause actual results to materially
differ from those in the forward-looking statements is contained in the
Company's other SEC filings, including its Registration Statement on Form S-1,
copies of which are available upon request from the Company.
The following discussion should be read in conjunction with the unaudited
Consolidated Financial Statements and Notes thereto appearing elsewhere in this
report. Unless the context indicates otherwise, all references to the Company
include Cardiovascular Diagnostics, Inc. and its subsidiaries, Coeur
Laboratories, Inc. and Cardiovascular Diagnostics Europe, BV.
In May 1995, the Company began commercial marketing of its Thrombolytic
Assessment System ("TAS"), consisting of a compact, portable analyzer and
disposable test cards which are inserted into the analyzer to perform a variety
of hemostasis tests. Coeur currently manufactures and sells a line of disposable
syringes used in angiography injectors, as well as a line of angiographic
procedure kit manifolds (collectively, "Imaging Products").
Results of Operations
Net sales for the quarter ended March 31, 1996 were $1,503,195, an increase of
53% or $519,956, as compared to the same period in 1995. As a result of the May
1995 commercial market launch of TAS products, $374,271 of the increase from
1995 to 1996 was generated from TAS sales. Sales of Imaging Products for the
period ended March 31, 1996 were $1,111,682 as compared to $965,997 for the
period ended March 31, 1995.
Cost of goods sold increased $419,208 or 54% from March 31, 1995 to March 31,
1996, as a direct result of increased sales of TAS products. Gross profit showed
a slight decrease of 1% for the three-month period ended March 31, 1996 as
compared to the same period in 1995.
Total operating expenses increased $611,842 for the quarter ended March 31, 1996
as compared to the same period in 1995. This increase was primarily due to
increased staffing, as headcount increased to 81 employees as of March 31, 1996
from 52 employees as of March 31, 1995.
Administration and finance expenses increased $267,567 due to increased expenses
associated with being a public company, such as legal fees, D&O insurance,
investor relations consultants and transfer agent fees.
Sales and marketing expenses for the quarter ended March 31, 1996 were $217,326
greater than the same period in 1995. This increase was due to additional
staffing, associated travel expenses and advertising as the Company continued to
expand marketing of its TAS products.
Research and development expenses were $126,949 greater for the period ended
March 31, 1996 than for the same period in 1995. A portion of this increase was
for additional personnel, as well as expenses incurred for new TAS test card
development.
Interest income increased $175,434 for the three-month period ended March 31,
1996 from the three-month period ended March 31, 1995 due to the investments of
the funds received from the Company's initial public offering, which was
consummated in December 1995. Grant income decreased $59,534
7
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from the first quarter in 1996 as compared to the same period in 1995, as a
result of the Company changing its focus from research and development to
commercialization.
Liquidity and Capital Resources
In December 1995 the Company completed its initial public offering, generating
net proceeds of approximately $16,700,000. In January 1996, an additional
100,000 shares were purchased by the underwriters to cover over-allotments,
which resulted in the Company receiving additional net proceeds of approximately
$1,000,000.
From December 31, 1995 to March 31, 1996, cash and cash equivalents decreased
$12,893,582. A portion of this decrease was due to purchases of Treasury
Bills and Treasury Notes of $10,687,897 during the three-month period ended
March 31, 1996. These investments, at the time of purchase, had maturity dates
greater than 90 days and accordingly have been classified as investments. In
addition, utilization of cash for operations was approximately $2,235,000,
capital expenditures for property and equipment were $327,000 and repayment
of debt obligations, prior to their maturity date, was $703,000.
Accounts receivable increased 58% or $465,549 from December 31, 1995 to March
31, 1996 due to the increase in TAS sales for the first quarter in 1996.
The Company expects to incur additional operating losses during 1996. The
Company's working capital requirements will depend on many factors, primarily
the amount of time for hospitals to complete evaluations of TAS and decide
whether or not to purchase TAS analyzers and test cards. In addition, the
Company expects to incur costs associated with clinical trials for new test
cards. The Company may acquire other products, technologies or businesses that
complement the Company's existing and planned products, although the Company
currently has no understanding, commitment or agreement with respect to any such
acquisitions.
Management believes that its existing capital resources and the cash flows from
operations will be adequate to satisfy its planned capital requirements through
at least 1997.
Factors That May Affect Future Results
- - --------------------------------------
A number of uncertainties exist that may affect the Company's future operating
results and stock price, including managed care, FDA regulations and other
regulatory guidelines affecting the Company. The market price of the Common
Stock could be subject to significant fluctuations in response to variations in
the Company's quarterly operating results, as well as other factors which may be
unrelated to the Company's performance. The stock market in recent years has
experienced extreme price and volume fluctuations that often have been unrelated
or disproportionate to the operating performance of or announcements concerning
public companies. Such broad fluctuations may adversely affect the market price
of the Company's Common Stock. Securities of issuers having relative limited
capitalization or securities recently issued in an initial public offering are
particularly susceptible to volatility based on short-term trading strategies of
certain investors.
8
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Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
11.1 Statement regarding computation of income (loss) per share
27.1 Financial Data Schedule
(b) No reports on Form 8-K were filed during the period.
9
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SIGNATURES
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.
CARDIOVASCULAR DIAGNOSTICS, INC.
Date: May 14, 1996 By: /s/ B. Denise Hobbs
------------------------------------------
B. Denise Hobbs
Treasurer
(Principal Financial and Accounting Officer)
10
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Exhibit 11.1
CARDIOVASCULAR DIAGNOSTICS, INC.
COMPUTATION OF EARNINGS PER SHARE
(Dollars and shares per thousand,except per share data)
(Unaudited)
Three Month Ended
March 31,
1996 1995
---- ----
Net loss ($1,112) ($736)
Weighted average number of shares outstanding 6,538 5,238
Loss per share ($.17) ($.14)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-END> Mar-31-1996
<CASH> 3,343
<SECURITIES> 10,699
<RECEIVABLES> 1,200
<ALLOWANCES> (30)
<INVENTORY> 1,353
<CURRENT-ASSETS> 11,147
<PP&E> 6,056
<DEPRECIATION> (2,399)
<TOTAL-ASSETS> 22,627
<CURRENT-LIABILITIES> 726
<BONDS> 0
0
0
<COMMON> 7
<OTHER-SE> 21,783
<TOTAL-LIABILITY-AND-EQUITY> 22,627
<SALES> 1,503
<TOTAL-REVENUES> 1,503
<CGS> 1,188
<TOTAL-COSTS> 1,188
<OTHER-EXPENSES> 1,601
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8
<INCOME-PRETAX> (1,093)
<INCOME-TAX> 19
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,112)
<EPS-PRIMARY> (0.17)
<EPS-DILUTED> (0.17)
</TABLE>
