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 June 30, 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 (IRS Employer Identification Number)
Incorporation or organization)
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 July 29, 1996
Common Stock, par value $.001 6,562,159
<PAGE>
CARDIOVASCULAR DIAGNOSTICS, INC.
INDEX TO FORM 10-Q
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of June 30, 1996 (unaudited)
and December 31, 1995 3
Consolidated Statements of Operations for the Three Months Ended
June 30, 1996 and 1995 and Six Months Ended June 30, 1996
and 1995 (unaudited) 4
Consolidated Statements of Cash Flows for the Six Months Ended
June 30, 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 4. Submission of Matters to a Vote of Security Holders 10
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES 11
<PAGE>
CARDIOVASCULAR DIAGNOSTICS, INC.
Consolidated Balance Sheets
(In thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
---------------- ------------------
ASSETS (unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $4,053 $16,237
Investments 8,324 0
Accounts receivable 1,183 803
Inventories 1,572 1,305
Other current assets 336 159
---------------- ------------------
Total current assets 15,468 18,504
Property and equipment, net 3,889 3,496
Intangible assets, net 1,745 1,810
Other assets 262 175
---------------- ------------------
Total assets $21,364 $23,985
================ ==================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $816 $953
Accrued expenses 145 387
Current portion of long-term debt 4 283
Current portion of capital lease obligations 26 54
---------------- ------------------
Total current liabilities 991 1,677
---------------- ------------------
Long term debt, less current portion 54 457
Capital lease obligations, less current portion 27 38
Deferred gain on sale-leaseback 0 4
---------------- ------------------
Total non-current liabilities 81 499
---------------- ------------------
Total liabilities 1,072 2,176
---------------- ------------------
Shareholders' equity:
Common stock, $.001 par value; authorized 10,000,000 shares; 6,562,159 and
6,447,562 issued and outstanding at June 30, 1996 and
December 31, 1995, respectively 7 6
Additional paid-in capital 33,686 32,672
Unrealized loss on investments (8) 0
Cumulative translation adjustment (97) (6)
Accumulated deficit (13,257) (10,819)
Unearned compensation (39) (44)
---------------- ------------------
Total shareholders' equity 20,292 21,809
---------------- ------------------
Total liabilities and shareholders' equity $21,364 $23,985
================ ==================
</TABLE>
See accompanying notes.
3
<PAGE>
CARDIOVASCULAR DIAGNOSTICS, INC.
Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
1996 1995 1996 1995
---------------- ----------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Net sales $1,721 $1,437 $3,224 $2,420
Cost of goods sold 1,303 973 2,491 1,742
---------------- ----------------- ---------------- ---------------
Gross profit 418 464 733 678
---------------- ----------------- ---------------- ---------------
Operating expenses:
Administration and finance 806 530 1,442 899
Sales and marketing 537 251 991 487
Research and development 575 542 1,086 926
---------------- ----------------- ---------------- ---------------
Total operating expenses 1,918 1,323 3,519 2,312
---------------- ----------------- ---------------- ---------------
Operating loss (1,500) (859) (2,786) (1,634)
---------------- ----------------- ---------------- ---------------
Other income(expense):
Interest expense (2) (9) (10) (19)
Interest income 176 39 367 54
Grant/royalty income 19 189 29 259
---------------- ----------------- ---------------- ---------------
Total other income (expense) 193 219 386 294
---------------- ----------------- ---------------- ---------------
Net loss before taxes (1,307) (640) (2,400) (1,340)
Provision for income taxes (19) (2) (38) (38)
================ ================= ================ ===============
Net loss ($1,326) ($642) ($2,438) ($1,378)
================ ================= ================ ===============
Loss per share ($0.20) ($0.12) ($0.37) ($0.26)
================ ================= ================ ===============
</TABLE>
See accompanying notes.
4
<PAGE>
CARDIOVASCULAR DIAGNOSTICS, INC.
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
June 30, June 30,
1996 1995
---------------- --------------------
<S> <C> <C>
Cash flows from operating activities:
Net loss ($2,438) ($1,377)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 341 244
Amortization of intangible assets 106 107
Amortization of deferred gain on sale-lease back (4) (9)
Amortization of unearned compensation 5 50
Provision for income taxes 0 38
Change in assets and liabilities:
Receivables (380) (304)
Inventories (267) (436)
Other assets (258) (90)
Accounts payable and accrued expenses (379) 208
Deferred revenue and gains (25)
---------------- --------------------
Net cash used in operating activities (3,274) (1,594)
---------------- --------------------
Cash flows from investing activities:
Payments for purchase of property and equipment (724) (909)
Costs incurred to obtain patents (57) (54)
Net purchase of investments (8,332) 0
---------------- --------------------
Net cash used in investing activities (9,113) (963)
---------------- --------------------
Cash flows from financing activities:
Principal payments on long-term debt and capital lease obligations (721) (50)
Net proceeds from issuance of stock 1,015 1,279
---------------- --------------------
Net cash provided by financing activities 294 1,229
---------------- --------------------
Effect of exchange rates on cash (91) 9
Net decrease in cash and cash equivalents (12,184) (1,319)
Cash and cash equivalents at beginning of period 16,237 3,206
---------------- --------------------
Cash and cash equivalents at end of period $4,053 $1,887
================ ====================
</TABLE>
See accompanying notes.
5
<PAGE>
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 six months ended
June 30, 1996 and has net operating loss carryforwards to offset any net income
when realized. Coeur made state income tax payments in the amount of $38,362 for
the six months ended June 30, 1996.
Note 3. Cash Equivalents
The Company considers all highly liquid investments with a maturity of three
months or less to be cash equivalents.
6
<PAGE>
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(TM)"), 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
THREE MONTHS ENDED JUNE 30, 1996 VS. JUNE 30, 1995
Net sales for the three months ended June 30, 1996 were $1,721,000, an increase
of 20% or $284,000, as compared to the same period in 1995. As a result of the
May 1995 commercial market launch of TAS products, $248,000 of the increase from
1995 to 1996 was generated from TAS sales. Sales of Imaging Products for the
three-month period ended June 30, 1996 were $1,303,000 as compared to $1,267,000
for the same period in 1995.
Cost of goods sold increased $330,000 or 34% from June 30, 1995 to June 30,
1996, as a direct result of increased sales of TAS products. Gross profit
decreased 10% for the three-month period ended June 30, 1996 as compared to the
same period in 1995.
Total operating expenses increased $595,000 for the three months ended June 30,
1996 as compared to the same period in 1995. This increase was primarily due to
increased staffing, as headcount increased to 84 employees as of June 30, 1996
from 54 employees as of June 30, 1995.
Administration and finance expenses increased $276,000, or 52%, due to increased
staffing as well as, additional expenses such as, Directors' and Officers'
liability insurance, investor relations consultants and transfer agent fees.
Sales and marketing expenses for the three months ended June 30, 1996 were
$276,000 greater than the same period in 1995. This increase was due to
additional staffing and their associated travel expenses, as well as, increased
advertising expenses to expand the marketing efforts of its TAS products.
Research and development expenses were $33,000 greater for the three months
ended June 30, 1996 than for the same period in 1995. This increase was due to
additional engineering support for continued product and manufacturing
development.
7
<PAGE>
Interest income increased $137,000 for the three-month period ended June 30,
1996 from the three-month period ended June 30, 1995 due to the investments of
the funds received from the Company's initial public offering, which was
consummated in December 1995. Grant and royalty income decreased $170,000 from
the three-month period in 1996 as compared to the same period in 1995. Of the
$170,000 decrease, $86,000 was a decrease in grant income, as a result of the
Company changing its focus from research and development to commercialization.
SIX MONTHS ENDED JUNE 30, 1996 VS. JUNE 30, 1995
Net sales for the six months ended June 30, 1996 were $3,224,000, an increase of
33% or $804,000, as compared to the same period in 1995. As a result of the May
1995 commercial market launch of TAS products, $623,000 of the increase from
1995 to 1996 was generated from TAS sales. Sales of Imaging Products for the six
months ended June 30, 1996 were $2,414,000 as compared to $2,233,000 for the six
months ended June 30, 1995.
Cost of goods sold increased $749,000 or 43% from June 30, 1995 to June 30,
1996, primarily as a result of increased sales of TAS products. Gross profit
increased 8.00% for the six months ended June 30, 1996 as compared to the same
period in 1995, however, gross profit margin decreased 5.00%.
Total operating expenses increased $1,207,000 for the six months ended June 30,
1996 as compared to the same period in 1995. This increase was primarily due to
increased staffing, expansion of the facilities, additional sales and marketing
expenses and continued validation of manufacturing processes. The Company's
facilities expanded approximately 23,000 square feet to 54,000 square feet as of
June 30, 1996.
Administration and finance expenses increased $543,000 for the six months ended
June 30, 1996 as compared to the same period in 1995, due to additional
staffing, increased rent and associated expenses incurred with the facility
expansion and associated expenses for a public company, such as Directors' and
Officers' liability insurance, investor relations consultants and transfer agent
fees.
Sales and marketing expenses for the six months ended June 30, 1996 were
$504,000 greater than the same period in 1995. This increase was due to
additional staffing, associated travel expenses and advertising as the Company
expanded marketing efforts of its TAS products.
Direct labor and material variances and overhead expenses incurred from January
1995 to April 1995 in the amount of $247,000 were recorded as development
expenses as the Company was building inventories in preparation of its market
launch of TAS products. During 1996 these expenses were recorded as a part of
cost of goods sold. Therefore, when adjusted for the reclass of the direct
labor and material variances and overhead, research and development expenses
for the six months ended June 30, 1996 increased $407,000, or 60%, as compared
to the same period in 1995. Most of this increase was additional personnel and
the remaining for expenses incurred for new TAS test card development.
Interest income increased $313,000 for the six months ended June 30, 1996 from
the six months ended June 30, 1995 due to the investments of the funds received
from the Company's initial public offering, which was consummated in December
1995. Grant and royalty income decreased $230,000 in the six months ended June
30, 1996, as compared to the same period in 1995. Of the $230,000, $145,000 was
a decrease in grant income as a result of the Company changing its focus from
research and development to commercialization.
8
<PAGE>
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 June 30, 1996, cash and cash equivalents decreased
$12,184,000. A portion of this decrease was due to purchases of Treasury Bills
and Treasury Notes of $8,332,00 during the six-month period ended June 30, 1996.
These investments have maturity dates greater than 90 days and accordingly have
been classified as investments. In addition, utilization of cash for operations
was $3,274,000, capital expenditures for property and equipment were $724,000
and repayment of debt obligations prior to their maturities was $703,000 and
other debt repayments were $18,000.
Accounts receivable increased $380,000 from December 31, 1995 to June 30, 1996
due to the increase in TAS sales during 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.
9
<PAGE>
Part II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Shareholders of the Company was held on May 8, 1996. The
following is a brief description of each matter voted upon at the meeting and
the number of affirmative votes and the number of negative votes cast with
respect to each matter.
(a) The shareholders elected the following persons as directors of the Company:
Dennis J. Dougherty, William A. Hawkins, John K. Pirotte, Stephen R. Puckett,
Philip R. Tracy, Paul M. Wiles and John P. Funkhouser. The votes for and against
(withheld) each nominee were as follows:
Votes Votes Votes
Nominee For Withheld Abstained
------- ---- -------- ---------
Dennis J. Dougherty 4,386,688 0 12,091
William A. Hawkins 4,390,232 0 8,547
John K. Pirotte 4,390,232 0 8.547
Stephen R. Puckett 4,390,232 0 8,547
Philip R. Tracy 4,390,232 0 8,547
Paul M. Wiles 4,390,232 0 8,547
John P. Funkhouser 4,390,232 0 8,547
(b) The shareholders approved the amendment to the Cardiovascular Diagnostics,
Inc. Employee Stock Option Plan of 1994 with 4,139,505 shares voting for, 81,431
shares voting against and 177,843 shares abstained.
(c) The shareholders approved the amendment to the Cardiovascular Diagnostics,
Inc. Employee Stock Option Plan of 1995 with 4,174,599 shares voting for, 35,741
shares voting against and 188,439 shares abstained.
(d) The shareholders ratified the appointment of Coopers & Lybrand L.L.P. as the
independent auditors of the Company for the year ending December 31, 1996.
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.
10
<PAGE>
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: August 14, 1996 By: /s/ B. Denise Hobbs
-------------------
B. Denise Hobbs
Treasurer
(Principal Financial and Accounting Officer)
11
CARDIOVASCULAR DIAGNOSTICS, INC.
Computation of Earnings Per Share
(Dollars and shares per thousand, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
1996 1995 1996 1995
------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net loss ($1,326) ($641) ($2,438) ($1,377)
============= ============ ============ ============
Weighted average shares Class A Common 2,689 2,689
Weighted average shares Class B Common 42 42
Convertible debt 7 7
Convertible Series A Preferred 693 693
------------ ------------
3,431 3,431
Stock split 1.26578 1.26578
------------ ------------
4,343 4,343
Kicker shares 394 394
Stock options within one year 501 501
------------ ------------
Weighted average number of
shares outstanding 6,560 5,238 6,549 5,238
============= ============ ============ ============
Loss per share ($0.20) ($0.12) ($0.37) ($0.26)
============= ============ ============ ============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1996
<PERIOD-END> MAR-31-1996 JUN-30-1996
<CASH> 3,343 4,053
<SECURITIES> 10,688 8,324
<RECEIVABLES> 1,299 1,213
<ALLOWANCES> (30) (30)
<INVENTORY> 1,353 1,572
<CURRENT-ASSETS> 11,151 15,468
<PP&E> 6,056 6,453
<DEPRECIATION> (2,399) (2,563)
<TOTAL-ASSETS> 22,627 21,364
<CURRENT-LIABILITIES> 726 991
<BONDS> 0 0
7 7
0 0
<COMMON> 0 0
<OTHER-SE> 21,776 20,292
<TOTAL-LIABILITY-AND-EQUITY> 22,627 21,364
<SALES> 1,503 3,224
<TOTAL-REVENUES> 1,503 3,224
<CGS> 1,188 2,491
<TOTAL-COSTS> 1,188 1,491
<OTHER-EXPENSES> 1,601 3,519
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 8 10
<INCOME-PRETAX> (1,093) (2,400)
<INCOME-TAX> 19 38
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (1,112) (2,438)
<EPS-PRIMARY> (.17) (.37)
<EPS-DILUTED> (.17) (.37)
</TABLE>
