UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
(X) Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the second quarter period ended: June 30, 1996
or
( ) Transition Report Under Section 13 or 15(d) of the Exchange Act.
For the transition period from __________ to __________
Commission File Number: 0-28260
EP MEDSYSTEMS, INC.
______________________________________________________
(Exact name of registrant as specified in its charter)
New Jersey 22-3212190
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
58 Route 46 West, Budd Lake, New Jersey 07828
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (201) 691-6400
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 for 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. X Yes No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: Common Stock, no par value
7,543,667 shares outstanding at August 11, 1996.
<PAGE>
EP MEDSYSTEMS, INC. AND SUBSIDIARY
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PART I. -- FINANCIAL INFORMATION Page
Item 1. Financial Statements
Consolidated Balance Sheets at June 30, 1996 and
December 31, 1995 3-4
Consolidated Statements of Operations for the three
months ended June 30, 1995 and 1996 (unaudited) 5
Consolidated Statements of Operations for the six
months ended June 30, 1995 and 1996 (unaudited) 6
Consolidated Statements of Cash Flows for the six
months ended June 30, 1995 and 1996 (unaudited) 7-8
Notes to Consolidated Financial Statements 9-10
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11-17
PART II. -- OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 18
Signatures 18
Exhibit Index 19
-2-
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
EP MEDSYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, June 30,
1995 1996
------------ ------------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 34,588 $12,233,696
Accounts receivable, net 438,120 1,045,134
Inventories 469,265 452,280
Notes receivable, net 150,000 -
Prepaid expenses and other current assets 53,648 44,210
------------ -----------
Total current assets 1,145,621 13,775,320
------------ ------------
Property and equipment, net 148,954 143,732
Intangible assets, net 722,448 666,903
Other assets 26,837 -
----------- -----------
Total assets $ 2,043,860 $14,585,955
========== ===========
</TABLE>
The accompanying notes are an integral part of these statements
Continued
-3-
<PAGE>
EP MEDSYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
December 31, June 30,
1995 1996
----------- ------------
(unaudited)
LIABILITIES AND SHAREHOLDERS' (DEFICIT) EQUITY
Current liabilities:
Current portion of notes payable $ 17,200 $ 17,200
Accounts payable 281,118 281,424
Payable due to related party 258,720 385,098
Accrued expenses 248,397 259,520
Offering expenses payable - 535,567
Deferred revenue 145,875 42,813
Customer deposits 91,502 88,852
------------- ------------
Total current liabilities 1,042,812 1,610,474
Long-term debt 1,180,318 83,450
------------ ------------
Total liabilities 2,223,130 1,693,924
------------ ------------
Commitments and contingencies
Shareholders' (deficit) equity
Preferred Stock, no par value, 5,000,000 shares
authorized, no shares issued and outstanding - -
Common Stock, $.001 stated value, 25,000,000
shares authorized, 4,352,000 and 7,543,667
shares issued and outstanding 4,352 7,544
Additional paid-in capital 3,306,088 16,635,881
Accumulated deficit (3,489,710) (3,751,394)
------------ -----------
Total shareholders' (deficit) equity (179,270) 12,892,031
------------ -----------
Total liabilities and shareholders'
(deficit) equity $2,043,860 $14,585,955
=========== ============
The accompanying notes are an integral part of these statements
-4-
<PAGE>
EP MEDSYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
For the Three Months Ended
June 30, June 30,
1995 1996
--------- ----------
Product sales $ 431,528 $ 569,032
Revenue from catheter development - 250,000
--------- ---------
Total revenues $ 431,528 $ 819,032
--------- ----------
Operating costs and expenses:
Cost of sales 216,097 308,547
Sales and marketing expenses 105,383 163,597
General and administrative expenses 140,659 250,258
Depreciation and amortization 33,212 29,533
Research and development expenses 69,033 98,020
Write-off of value of 1995 Warrants on
retirement of 1995 Debentures - 46,497
Write-off of intangible and other assets - 7,500
---------- ---------
Loss from operations (132,856) (84,920)
---------- ---------
Interest expense 9,770 19,933
Interest income - (10,460)
---------- ---------
Net loss $(142,626) $(94,393)
========== ==========
Net loss per share $ (0.02) $ (0.02)
========== =========
Weighted average shares outstanding 5,789,654 5,930,046
========= =========
The accompanying notes are an integral part of these statements
-5-
<PAGE>
EP MEDSYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
For the Six Months Ended
June 30, June 30,
1995 1996
---------- ----------
Product sales $ 895,640 $1,324,695
Revenue from catheter development - 250,000
---------- -----------
Total revenues $ 895,640 $1,574,695
---------- -----------
Operating costs and expenses:
Cost of sales 480,253 665,806
Sales and marketing expenses 211,558 269,189
General and administrative expenses 291,271 487,149
Depreciation and amortization 66,170 72,943
Research and development expenses 141,669 159,272
Write-off of value of 1995 Warrants on
retirement of 1995 Debentures - 46,497
Write-off of intangible and other assets - 107,500
---------- -----------
Loss from operations (295,281) (233,661)
---------- ------------
Interest expense 19,540 38,481
Interest income - (10,460)
--------- ------------
Net loss $(314,821) $ (261,682)
========== ===========
Net loss per share $ (0.05) $ (0.04)
========== ===========
Weighted average shares outstanding 5,789,654 5,860,229
========== == =========
The accompanying notes are an integral part of these statements
-6-
<PAGE>
<TABLE>
EP MEDSYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<CAPTION>
For the Six Months Ended June 30,
1995 1996
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (314,821) $ (261,682)
Adjustments to reconcile net income to net
cash provided (used) by operating activities:
Depreciation and amortization 66,169 84,412
Write-off of intangible and other assets - 107,500
Write-off of value of 1995 Warrants on
retirement of 1995 Debentures - 46,497
Bad debt expense 24,000 -
Changes in operating assets and liabilities:
(Increase) in accounts receivable (5,460) (607,015)
Decrease in inventories 20,103 16,986
(Increase) decrease in prepaid expenses
and other current assets (8,712) 9,438
(Increase) decrease in other assets (2,071) 26,837
Increase in due to related party 134,758 126,378
Increase in accounts payable 17,878 306
Increase (decrease) in accrued expenses
and deferred revenue 173,676 (91,939)
Increase (decrease) in customer deposits (405) (2,650)
----------- ------------
Net cash provided (used) by operating
activities 69,359 (544,932)
----------- ------------
<FN>
The accompanying notes are an integral part of these statements
Continued
-7-
</TABLE>
<PAGE>
EP MEDSYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
For the Six Months Ended June 30,
1995 1996
------------ -----------
Cash flows from investing activities:
Capital expenditures, net of disposals (8,940) (20,911)
Loan to Falfab - (7,500)
------------ ----------
Net cash used in investing activities (8,940) (28,411)
------------ ------------
Cash flows from financing activities:
(Repayment) of debentures, net - (62,500)
Net proceeds from issuance of stock - 12,843,551
(Payments) of notes payable - (8,600)
------------ -------------
Net cash provided by financing activities - 12,772,451
------------ -------------
Net increase (decrease) in cash 60,419 12,199,108
Cash, beginning of period 20,008 34.588
------------ -------------
Cash, end of period $ 80,427 $12,233,696
============ ============
Supplemental Statement of Cash Flow Information:
Supplemental Noncash Investing and Financing Activities
During the six months ended June 30, 1996, the holders of $1,025,000 face
amount of long term debt (the "1995 Debentures") elected to exercise warrants
("the 1995 Warrants") to purchase 512,500 shares of common stock at $2.00
per share in lieu of receiving cash repayment of the debentures.
Cash paid for interest was $5,400 and $51,633 for the six months end June
30, 1995 and 1996, respectively.
The accompanying notes are an integral part of these statements
-8-
<PAGE>
EP MEDSYSTEMS, INC.
Notes to Consolidated Financial Statements
(unaudited)
Note 1 - Basis of Presentation
The accompanying unaudited consolidated financial statements reflect all
adjustments (including normal recurring adjustments) that management considers
necessary to present fairly the Company's financial position as of June 30,
1996; the results of operations for the three and six months ended June 30,
1996 and 1995; and the cash flows for the six months then ended. The results
of operations for the respective interim periods are not necessarily indicative
of the results to be expected for the full year. The unaudited consolidated
financial statements should be read in conjunction with the audited
consolidated financial statements and the notes thereto included in EP
MedSystems, Inc.'s Registration Statement on Form SB-2 (Reg. No. 333-3642).
Note 2 - Initial Public Offering
In June, 1996, the Company completed its initial public offering consisting
of 2,500,000 shares of common stock at $5.50 per share. The net proceeds
from the offering were approximately $11,790,000 after deducting offering
expenses (including approximately $536,000 of offering expenses included as
current liabilities at June 30, 1996).
Note 3 - Repayment of Debentures and Exercise of Stock Purchase Warrants
During June, 1996, the holders of $1,025,000 face amount of 1995 Debentures
elected to exercise their 1995 Warrants to purchase 512,500 shares of common
stock at $2.00 per share in lieu of receiving cash repayment of the Debentures.
On June 30, 1996, the Company repaid the remaining outstanding 1995 Debentures
in the face amount of $112,500 in cash. During July and August, 1996, the
holders of 1995 Warrants exercised their option to purchase 43,750 shares of
common stock at $2.00 per share. Upon repayment of the 1995 Debentures, the
Continued
-9-
<PAGE>
Company recorded a write off of $46,497, representing the unamortized value
placed on the 1995 Warrants issued in connection with the 1995 Debentures.
Note 4 - Inventories
Inventories consist of the following:
December 31, June 30,
1995 1996
----------- -----------
Raw materials $ 285,326 $ 270,288
Work-in-process 21,671 -
Finished goods 162,268 181,992
----------- ----------
$ 469,265 $ 452,280
=========== ==========
Note 5 - Net Loss Per Common Share
Net loss per share for the three and six months ended June 30, 1996 and 1995
is computed by dividing net loss by the weighted average number of shares
of common stock and common stock equivalents outstanding during the periods
presented. Pursuant to the Securities and Exchange Commission Staff
Accounting Bulletin No. 83, common stock, stock options and warrants issued
during the twelve months preceding the Company's Initial Public Offering at
prices below the Initial Public Offering Price have been included in the
Company's loss per share computation for all periods presented, using the
treasury stock method, even though they were antidilutive. Stock options
issued prior to the twelve months preceding the Initial Public Offering are
excluded as they are antidilutive.
-10-
<PAGE>
EP MEDSYSTEMS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following is management's discussion of significant factors that affected
the Company's interim financial condition and results of operations. This
should be read in conjunction with Management's Discussion and Analysis
of Financial Condition and Results of Operations included in the Company's
Registration Statement on Form SB-2 filed with the Securities and Exchange
Commission (Reg. No. 333-3642).
This Report on Form 10-QSB contains certain statements of a forward looking
nature relating to future events or the future financial performance of the
Company. Such forward-looking statements are only predictions, and the actual
events or results may differ materially from the results discussed in the
forward looking statements. Factors that could cause or contribute to such
differences include those discussed below as well as those discussed in "Risk
Factors" of the Company's Registration Statement on Form SB-2 filed with the
Securities and Exchange Commission (Reg. No. 333-3642).
RESULTS OF OPERATIONS
- -------------------------------------
Six Months Ended June 30, 1996 Compared to Six Months Ended June 30, 1995
Total revenues increased $679,055 (or 75.8%) from $895,640 to $1,574,695 in
the six months ended June 30, 1996. The increase was due to the initiation of
sales of the EP WorkMate in September, 1995, recognition of deferred revenue
on certain disposable products and development income realized through the
development, for a third party, of a new dual shock atrial defibrillation
catheter using a single catheter placed in the coronary sinus. The level of
1996 sales will depend significantly on sales of the EP WorkMate. The increase
was partially offset by decreased sales of PaceBase/TeleTrace Products and
Memory-Trace arrhythmia monitors. The Company does not expect sales of its
arrhythmia monitors to increase materially until completion of the development
of its new monitor. Catheter development income may or may not be recurring.
<PAGE>
Cost of sales increased $185,553 (or 38.6%) from $480,253 to $665,806. Gross
profit increased $493,512 (or 118.8%) from $415,387 to $908,889 and increased
as a percentage of sales from 46.4% to 57.7% due to higher gross margins
realized on sales of EP WorkMate, certain disposable products and development
revenue related to the catheter agreement which were not present in the
corresponding period in 1995. To date, the Company has offered discounts
to purchasers of the EP WorkMate to help establish a base of customers. In the
future, the Company will attempt to reduce its discount and increase its list
price for the EP WorkMate. However, given the competitive nature of the market
there can be no assurance that it will be successful with respect to its
pricing goals for the EP WorkMate. The realization of catheter development
revenue improved gross profit margins during the period. This revenue may or
may not be recurring.
Sales and marketing expenses increased $57,631 (or 27.2%) from $211,558 to
$269,189 but decreased as a percentage of net sales from 23.6% to 17.0%.
The dollar increase was due to the addition of several sales professionals
and increased commissions and other sales costs due to higher sales volume,
partially offset by decreased brochure printing costs incurred in 1995 due to
the introduction of several new products. The decrease as a percentage of
sales was as a result of increased sales and lower selling costs associated
with the catheter development revenue. The Company expects these
expenses to increase significantly during the second half of 1996 to support
its increased sales efforts. The Company intends to hire a Director of
Marketing and one or more direct sales professionals and support personnel.
General and administration expenses increased $195,878 (or 67.2%) from $291,271
to $487,149 and decreased as a percentage of net sales from 32.5% to 30.9%.
The dollar increase was due to the hiring of several management personnel and
increased rent, insurance and other administrative costs associated with the
increased operating activities. The decrease as a percentage of sales was due
to increased sales. The Company expects these costs to increase to support
increased operations and the ALERT clinical trials.
Depreciation and amortization expenses increased $6,773 (or 10.2%) from $66,170
to $72,943 and decreased as a percentage of net sales from 7.4% to 4.6%. The
dollar increase was due to depreciation on new property and equipment. This
was partially offset by the elimination of depreciation on product
demonstration equipment which was fully depreciated during the period.
<PAGE>
Research and development expenses increased $17,603 (or 12.4%) from $141,669
to $159,272 and decreased as a percentage of net sales from 16.0% to 12.0%.
The dollar increase was due to expenditures associated with the Company's
preparations for the ALERT clinical trials and costs for the Spire technology
which was licensed in May, 1996. The increase was partially offset due to
outside consulting expenses associated with the steerable catheter technology
and the EP WorkMate product introduction in 1995 which were not recurring
during the six months ended June 30, 1996. The decrease as a percentage of
sales was due to increased sales. The Company expects these expenses to
increase significantly in connection with the proposed clinical evaluation
of the ALERT System, the development of new products and the enhancement
of existing products.
Write-off of intangible and other assets increased $107,500, as the Company
wrote off a loan to Falfab, a UK based manufacturer of angioplasty catheters,
due to Falfab's inability to repay such amount.
Write-off of debenture warrants upon repayment was $46,497 during the six
months ended June 30, 1996, as the Company expensed the value placed on the
1995 warrants due to the early repayment of the 1995 Debentures and the
concurrent exercise of the 1995 Warrants.
Interest expense increased $18,941 (or 96.9 %) from $19,540 to $38,481. The
increase was due to interest expense associated with the 1995 Debentures issued
beginning in July, 1995. The increase was partially offset by repayment of a
portion of indebtedness incurred in the acquisition of catheter and other
technologies. The Company expects interest expense to decline due to the
repayment of the 1995 Debentures in June, 1996.
Interest income increased $10,640 from $0 to $10,460 because of interest
earned on the proceeds of its initial public offering completed in June, 1996.
The Company expects interest income to increase in future periods as it
continues to invest the balance of the offering proceeds.
Net loss decreased $53,139 (or 16.9%) from $314,821 to $261,682 and as a
percentage of net sales from 35.2% to 16.6%. The decrease in net loss for
the six month period ending June 30, 1996 was due to increased sales and higher
gross margins, partially offset by higher operating expenses and the write-off
of the $107,500 loan to Falfab and the value of the Debenture Warrants.
<PAGE>
Three Months Ended June 30, 1996 Compared to Three Months Ended June 30, 1995
Total revenues increased $387,504 (or 89.8%) from $431,528 to $819,032 in the
three months ended June 30, 1996. The increase was due to the initiation of
sales of the EP WorkMate in September, 1995 and development income realized
through the development, for a third party, of a new dual shock atrial
defibrillation catheter using a single catheter placed in the coronary sinus.
The level of 1996 sales will depend significantly on sales of the EP WorkMate.
The increase was partially offset by decreased sales of PaceBase/TeleTrace
Products and Memory-Trace arrhythmia monitors. The Company does not expect
sales of its arrhythmia monitors to increase materially until completion of
the development of its new monitor. Catheter development income may or may
not be recurring.
Cost of sales increased $92,450 (or 42.8%) from $216,097 to $308,547. Gross
profit increased $295,054 (or 137.0%) from $216,097 to $510,485 and increased
as a percentage of sales from 49.9% to 62.3% due to higher gross margins
realized on sales of EP WorkMate and the catheter development agreement which
were not present in the corresponding period in 1995. To date, the Company has
offered discounts to purchasers of the EP WorkMate to help establish a base of
customers. In the future, the Company will attempt to reduce its discount and
increase its list price for the EP WorkMate. However, given the competitive
nature of the market there can be no assurance that it will be successful with
respect to its pricing goals for the EP WorkMate. The realization of catheter
development revenue improved gross profit margins during the period. This
revenue may or may not be recurring.
Sales and marketing expenses increased $58,214 (or 55.2%) from $105,383 to
$163,597 but decreased as a percentage of net sales from 24.4% to 20.0%. The
dollar increase was due to the addition of several sales professionals and
increased commissions and other sales costs due to higher sales volume. The
decrease as a percentage of sales was as a result of increased sales. The
Company expects these expenses to increase significantly during the second
half of 1996 to support its increased sales efforts. The Company intends to
hire a Director of Marketing and one or more direct sales professionals and
support personnel.
<PAGE>
General and administration expenses increased $109,599 (or 77.9%) from
$140,659 to $250,258 and decreased as a percentage of net sales from 32.6%
to 30.6%. The dollar increase was due to the hiring of several management
personnel and increased rent, insurance and other administrative costs
associated with the increased operating activities. The decrease as a
percentage of sales was due to increased sales. The Company expects these
costs to increase to support increased operations and the ALERT clinical trials
Depreciation and amortization expenses decreased $3,679 (or 11.1%) from
$33,212 to $29,533 and decreased as a percentage of net sales from 7.7% to
3.6%. The dollar decrease was due to reduced depreciation on product
demonstration equipment which was fully depreciated during the period.
Research and development expenses increased $28,987 (or 42.0%) from $69,033 to
$98,020 and decreased as a percentage of net sales from 16.0% to 12.0%. The
dollar increase was due to expenditures associated with the Company's
preparations for the ALERT clinical trials and costs for the Spire technology
which was licensed in May, 1996. The decrease as a percentage of sales was due
to increased sales. The Company expects these expenses to increase in
connection with the proposed clinical evaluation of the ALERT System, the
development of new products and the enhancement of existing products.
Write-off of intangible and other assets was $7,500 for the three moths ended
June 30, 1996, as the Company wrote off an additional $7,500 loan to Falfab
due to Falfab's inability to repay such amount.
Write-off of debenture warrants upon repayment was $46,497, as the
Company expensed the value placed on the 1995 warrants due to the early
repayment of the 1995 Debentures and the concurrent exercise of the 1995
Warrants.
Interest expense increased $10,163 (or 104.0 %) from $9,770 to $19,933 and
decreased as a percentage of net sales from 2.7% to 2.4%. The increase was due
to interest expense associated with the 1995 Debentures issued beginning in
July, 1995. The increase was partially offset by repayment of a portion of
indebtedness incurred in the acquisition of catheter and other technologies.
The Company expects interest expense to decline due to the repayment of the
1995 Debentures in June, 1996.
<PAGE>
Interest income increased $10,640 from $0 to $10,460 due to interest earned
on the proceeds of the Company's initial public offering. The Company expects
interest income to increase in future periods as it will continue to invest
the balance of the offering proceeds.
Net loss decreased $48,233 (or 33.8%) from $142,626 to $94,393 and as a
percentage of net sales from 33.1% to 11.5%. The decrease in net loss for
the three month period ending June 30, 1996 was due to increased sales and
higher gross margins, partially offset by higher operating expenses.
LIQUIDITY AND CAPITAL RESOURCES
- ------------------------------------------------------
Since inception, the Company's expenses have exceeded revenues, resulting
in an accumulated deficit of approximately $3.75 million. The Company's
expects that its capital requirements will continue to be significant. On
June 21, 1996, the Company completed an initial public offering of 2,500,000
shares at $5.50 per share, for aggregate proceeds of approximately $11,790,000
(after deducting approximately $536,000 of unpaid offering expenses classified
as current liabilities at June 30, 1996) which the Company intends to use for,
among other things, filing its PMA application, completion of clinical trials
of the ALERT System, expanding its sales and marketing capabilities, acquiring
new products and expanding its existing product line. The Company believes,
based on its currently proposed plans and assumptions relating to its
operations that the proceeds of this offering will be sufficient to complete
research and clinical studies, prepare and file a PMA application and otherwise
satisfy its contemplated cash requirements for at least the next 12 months.
Net cash (used in) provided by operating activities for the six months ended
June 30, 1996 was ($544,932) as compared to $719,467 for the six months
ended June 31, 1995. Net cash used was primarily to fund the net loss of
$261,682 and to fund increased accounts receivable. Accounts receivable
increased $607,014 in the six months ended June 30, 1996 from $438,120 to
$1,045,135. This increase resulted from increased product sales, particularly
EP WorkMate, which are often sold subject to extended payment terms secured
by a letter of credit, and catheter development revenue. At June 30, 1996,
<PAGE>
the Company's accounts payable, accrued expenses and payables to related
party were $926,042 as compared to $788,235 at December 31, 1995. Offering
expenses payable at June 30, 1996 were $535,567. At June 30, 1996, the Company
had cash and cash equivalents of $12,233,693 and working capital of $12,164,846
due to the completion of its initial public offering on June 21, 1996.
Cash used in investing activities for the six months ended June 30, 1996
included $20,911 of capital expenditures as compared to $8,940 in the
corresponding period in 1995. As of this date, the Company does not have any
material commitments for capital expenditures. The Company expects, however,
to use a portion of the proceeds of its offering for the purchase of capital
equipment, for expansion of manufacturing and assembly and implementation of
ISO-9000 and obtaining the CE Mark for its products. During the six months
ended June 30, 1996, the Company advanced a $7,500 loan to Falfab, a UK based
manufacturer of angioplasty catheters. The Company elected to write this
amount plus an additional $100,000 note receivable advanced in 1995 due to
Falfab's inability to repay the amounts due. The Company had evaluated Falfab
as a potential manufacturing facility for catheters in Europe.
Net cash provided by financing activities was $12,772,451 for the six months
ended June 30, 1996 and included approximately $12,327,000 net proceeds of the
initial public offering (before deducting approximately $536,000 of unpaid
offering expenses classified as current liabilities at June 30, 1996), $500,000
from the sale of 166,667 shares of common stock at $3.00 per share in January,
1996 and the proceeds of the exercise of 12,500 common stock options. During
June, 1996, the Company repaid $112,500 face amount of 1995 Debentures. The
holders of $1,025,000 face amount of 1995 Debentures elected to exercise 1995
Warrants to purchase 512,500 shares of common stock at $2.00 per share in lieu
of receiving cash repayment of the debentures.
During the periods discussed above, the overall effects of inflation and
seasonality on the Company's business were not significant.
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and reports on Form 8-K
(a) Exhibits
The following exhibits will be filed as part of this
Form 10-Q:
Exhibit 11.1 * Computation of Earnings Per Share
Exhibit 27 * Financial Data Schedule
* Filed herewith
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the
quarter ended June 30, 1996.
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.
EP MEDSYSTEMS, INC.
(Registrant)
Date: August 14, 1996 By: /s/ David A. Jenkins
-----------------------
David A. Jenkins,
President and Chief Executive Officer
By: /s/ James J. Caruso
-------------------------
James J. Caruso,
Vice President and Chief Financial Officer
(Principal Financial and
Accounting Officer)
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description of Exhibit Method of Filing
- ---------- --------------------------- ------ ---------------------
11.1 * Statement regarding Calculation
of Shares Used in Computing Net
Loss Per Share EDGAR
27 * Financial Data Schedule EDGAR
* Filed herewith
<PAGE>
Exhibit 11.1
EP MEDSYSTEMS, INC.
STATEMENT OF COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------------- ------------------------------
1995 1996 1995 1996
------------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
Net loss $(142,626) $ (94,393) $(314,821) $(261,682)
Weighted average shares outstanding:
Common stock (1) 4,518,667 4,659,059 4,518,667 4,589,242
Stock options (2) 909,055 909,055 909,055 909,055
Warrants (2) 361,932 361,932 361,932 361,932
------------ ------------ ------------ ------------
5,789,654 5,930,046 5,789,654 5,860,229
------------ ------------ ------------ ------------
Historical net loss
per share $ (0.02) $ (0.02) $ (0.05) $ (0.04)
- ---------------------- ======= ======= ======= =======
(1) 93,500 and 166,667 shares of stock were issued in 1995 and 1996,
respectively. These shares were issued within 12 months preceding the
filing of the registration statement at prices lower than the initial
public offering price. Pursuant to Staff Accounting Bulletin No. 83
such shares have been included in the weighted average number of shares
outstanding.
(2) Options and warrants at 909,055 and 361,932, respectively, were granted
at prices below the initial public offering price. The dilutive effect
of these options have been included in the earnings per share
calculation using the treasury stock method in accordance with SAB No.
83.
Options Warrants
------------- -------------
Options issued within one year 1,324,000 568,750
Proceeds from exercise $2,282,200 $1,137,500
Public offering price / $5.50 / $5.50
-------------- --------------
Treasury stock 414,945 206,818
-------------- --------------
Incremental shares 909,055 361,932
======== =========
</TABLE>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 12,234
<SECURITIES> 0
<RECEIVABLES> 1,125
<ALLOWANCES> 80
<INVENTORY> 452
<CURRENT-ASSETS> 13,775
<PP&E> 281
<DEPRECIATION> 137
<TOTAL-ASSETS> 14,586
<CURRENT-LIABILITIES> 1,610
<BONDS> 0
0
0
<COMMON> 8
<OTHER-SE> 16,636
<TOTAL-LIABILITY-AND-EQUITY> 14,586
<SALES> 1,575
<TOTAL-REVENUES> 1,575
<CGS> 666
<TOTAL-COSTS> 666
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 38
<INCOME-PRETAX> (262)
<INCOME-TAX> 0
<INCOME-CONTINUING> (262)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (262)
<EPS-PRIMARY> (0.04)
<EPS-DILUTED> 0
</TABLE>
