UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: September 30, 1999
OR
|_| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from __________ to __________
Commission File Number: 0-28260
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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.)
100 Stierli Court, Mount Arlington, New Jersey 07856
- ---------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (973) 398-2800
--------------
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: Common Stock, no par value, and
11,010,417 shares outstanding at November 10, 1999.
Transitional Small Business Disclosure Format: Yes |_| No |X|
1
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EP MEDSYSTEMS, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PART I. -- FINANCIAL INFORMATION Page
----
Item 1. Financial Statements
Consolidated Balance Sheet at September 30, 1999
(unaudited) 3
Consolidated Statements of Operations for three months
ended September 30, 1999 and 1998 (unaudited) 4
Consolidated Statements of Operations for nine months
ended September 30, 1999 and 1998 (unaudited) 5
Consolidated Statements of Cash Flows for nine months
ended September 30, 1999 and 1998 (unaudited) 6
Notes to Consolidated Financial Statements (unaudited) 7-8
Item 2. Management's Discussion and Analysis or Plan of Operation 9-14
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 2. Changes in Securities and Use of Proceeds 14
Item 3. Defaults Upon Senior Securities 15
Item 4. Submission of Matters to a Vote of Secure 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
Signatures 15
Exhibit Index 16
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PART I. -- FINANCIAL INFORMATION
Item 1. Financial Statements
EP MEDSYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
September 30,
ASSETS 1999
------------
Current assets: (unaudited)
Cash and cash equivalents $ 2,597,303
Accounts receivable, net of allowances for
Doubtful accounts of $97,025 2,897,690
Inventories 1,872,992
Prepaid expenses and other current assets 115,509
------------
Total current assets 7,483,494
Property and equipment, net 1,719,672
Intangible assets, net 504,815
Other assets 31,673
Total assets $ 9,739,654
============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 730,854
Payables due to related parties 253,549
Accrued expenses 474,924
Deferred revenue 123,646
Customer deposits 41,846
Current portion of long-term debt 29,173
------------
Total current liabilities 1,653,992
Long-term debt, less current portion 483,223
Total liabilities $ 2,137,215
------------
Commitments and contingencies
Shareholders' 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, 11,010,417 shares issued
and outstanding 11,010
Additional paid-in capital 24,469,493
Accumulated deficit (16,878,064)
------------
Total shareholders' equity 7,602,439
------------
Total liabilities and shareholders' equity $ 9,739,654
============
The accompanying notes are an integral part of these statements.
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EP MEDSYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
For the Three Months Ended
September 30, September 30,
1999 1998
------------ ------------
Sales $ 2,836,267 $ 2,038,528
Cost of products sold 1,215,711 868,762
------------ ------------
Gross profit 1,620,556 1,169,766
Operating costs and expenses:
Sales and marketing expenses 1,034,065 1,036,190
General and administrative expenses 797,772 410,631
Research and development expenses 625,606 427,935
Write-down of investment in EchoCath -- 1,400,000
------------ ------------
Loss from operations (836,887) (2,104,990)
Other (expense) income, net (5,057) 57,148
------------ ------------
Net loss $ (841,944) $ (2,047,842)
============ ============
Basic loss per share $ (0.08) $ (0.21)
============ ============
Diluted loss per share $ (0.08) $ (0.21)
============ ============
Weighted average shares outstanding used
to compute basic and diluted loss per share 10,233,189 9,872,417
============ ============
The accompanying notes are an integral part of these statements.
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EP MEDSYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
For the Nine Months Ended
September 30, September 30,
1999 1998
----------- -----------
Sales $ 7,792,278 $ 5,224,809
Cost of products sold 3,480,777 2,658,231
----------- -----------
Gross profit 4,311,501 2,566,578
Operating costs and expenses:
Sales and marketing expenses 3,117,830 2,547,205
General and administrative expenses 2,002,455 1,207,182
Research and development expenses 1,678,453 1,105,474
Write-down of investment in EchoCath -- 1,400,000
----------- -----------
Loss from operations (2,487,237) (3,693,283)
Other income, net 44,133 157,616
----------- -----------
Net loss $(2,443,104) $(3,535,667)
=========== ===========
Basic loss per share $ (0.25) $ (0.39)
=========== ===========
Diluted loss per share $ (0.25) $ (0.39)
=========== ===========
Weighted average shares outstanding used
to compute basic and diluted loss per share 9,958,053 9,044,038
=========== ===========
The accompanying notes are an integral part of these statements.
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EP MEDSYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
For the Nine Months Ended
September 30, September 30,
1999 1998
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(2,443,104) (3,535,667)
Adjustments to reconcile net loss to net cash
used in operating activities:
Write-down of investment in EchoCath -- 1,400,000
Depreciation and amortization 284,543 221,160
Changes in assets and liabilities:
Increase in accounts receivable (592,192) (687,177)
Increase in inventories (388,001) (132,498)
Decrease in prepaid and other current assets 36,387 23,683
(Increase) decrease in other assets (12,351) 9,838
Increase in payables due to related parties 64,761 16,916
Decrease in accounts payable (41,786) (123,050)
Decrease in accrued expenses, deferred
revenue and customer deposits (86,586) (339,629)
----------- -----------
Net cash used in operating activities $(3,178,329) (3,146,424)
----------- -----------
Cash flows from investing activities:
Proceeds from maturity and sale of investments 729,351 863,453
Patent costs (6,000) (37,901)
Capital expenditures (831,303) (267,974)
----------- ----------
Net cash (used in) provided by investing $ (107,952) 557,578
activities
----------- -----------
Cash flows from financing activities:
Net proceeds from equity offering 3,032,256 4,661,708
Proceeds from exercise of stock options 6,000 29,925
Net borrowings under note payable 512,397 --
----------- -----------
Net cash provided by financing activities $ 3,550,653 4,691,633
----------- -----------
Net increase in cash and cash equivalents 264,372 2,102,787
Cash and cash equivalents, beginning of period 2,332,931 752,068
----------- -----------
Cash and cash equivalents, end of period $ 2,597,303 2,854,855
=========== ===========
Supplemental disclosure of non-cash investing activity:
Transfer of assets from inventory to fixed assets $ 315,700 --
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
6
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EP MEDSYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Note 1. Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and in accordance with the instructions to Form 10-QSB.
Accordingly, they do not include all of the financial information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (including normal
recurring adjustments) considered necessary for a fair presentation have been
included.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
The results of operations for the respective interim periods are not necessarily
indicative of the results to be expected for the full year. The accompanying
unaudited consolidated financial statements should be read in conjunction with
the audited consolidated financial statements and the notes thereto included in
the Company's Form 10-KSB for the year ended December 31, 1998 filed with the
Securities and Exchange Commission.
Note 2. Net Loss Per Common Share
The Company calculates basic and diluted Earnings Per Share under Statement of
Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS 128"). Basic
and diluted earnings per share are equal, due to the exclusion of common stock
equivalents, which would make the earnings per share calculations anti-dilutive.
Note 3. Inventories
Inventories consist of the following:
September 30,
1999
-------------
Raw materials $ 88,409
Work in process 28,785
Finished goods 955,798
$1,872,992
==========
The Company transferred approximately $316,000 of assets from inventory used for
demonstration purposes to fixed assets. The assets are being depreciated over
three years.
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Depreciation in the amount of $26,000 was recorded for the three-month period
ended September 30, 1999.
Note 4. Long-Term Debt
Effective June 30, 1999, the Company entered into two debt agreements with a
bank: a $2,000,000 revolving line of credit ("revolver") and a $500,000 term
note.
The proceeds of the revolver, when drawn down are intended to fund future
working capital needs. Borrowings bear interest at either the bank's Prime Rate
plus 1/2% or LIBOR plus 3%. A facility fee is payable quarterly on the average
unused commitment at a rate of 3/4%.
The proceeds from the term note were used to fund the purchase of 7,500 square
feet of manufacturing and warehouse space at the Company's ProCath subsidiary
and building improvements. Interest is payable monthly in arrears at either
Prime plus 3/4% or LIBOR plus 3 1/4%. Principal is payable commencing January
2000 in 48 equal monthly installments under a 15 year amortization schedule with
a balloon payment due in December 2004.
The Company is required to maintain certain financial ratios, and meet certain
net worth and indebtedness tests. The debt is collateralized by a first priority
lien on all corporate assets. The agreement also prohibits the Company from
incurring certain additional indebtedness, limits investments, advances or loans
and restricts substantial asset sales, capital expenditures and cash dividends.
Note 5. Common Stock
On September 1, 1999, the Company sold and issued an aggregate of 1,135,000
shares of common stock in a private offering with a major institutional
investment fund and three private investors (the "Investors") at $2.75 per
share. The Investors each received a callable warrant purchasing an aggregate of
567,500 common shares exercisable at $3.50 per share. The warrants are callable
when the average closing price of the Company's Common Stock has equaled or
exceeded $4.125 per share during any twenty consecutive trading days. The
warrants will expire five years from the date of grant, and were valued using
the Black-Scholes option pricing model. The proceeds from the offering were
$3,032,256, net of approximately $89,000 in related filing expenses.
The Company granted the Investors certain registration rights with respect to
the shares pursuant to a Registration Rights Agreement. The Company filed a
shelf registration statement on Form S-3 on September 30, 1999 covering all of
the common stock. On October 22, 1999 the registration statement was declared
effective by the Securities and Exchange Commission.
8
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ITEM 2. Management's Discussion and Analysis or Plan of Operation
Overview
The Company was incorporated in New Jersey in January 1993 and operates in a
single industry segment. The Company develops, manufactures, markets and sells a
line of products for the cardiac electrophysiology ("EP") market used to
diagnose, monitor and treat irregular heartbeats known as arrhythmias. Since
inception, the Company has acquired technology, has developed new products and
has begun marketing various electrophysiology products, including the EP
WorkMate(R) electrophysiology workstation, the EP-3(TM) Stimulator, diagnostic
electrophysiology catheters, internal cardioversion catheters and related
disposable supplies.
The Company has developed a new product for internal cardioversion of atrial
fibrillation known as the ALERT(R) System, which uses a patented electrode
catheter to deliver measured, variable, low energy electrical impulses directly
to the inside of the heart in order to convert atrial fibrillation to a normal
heart rhythm. The ALERT(R) System is not approved for sale in the United States,
however, on November 1, 1999, the Company submitted the final clinical module
and original Pre Market Approval application with the FDA. The Company intends
to market a full family of internal cardioversion catheters around the ALERT(R)
platform.
The Company has also developed an intracardiac ultrasound product line including
the ViewMate(R) ultrasound imaging console and U-View(R) deflectable
intracardiac imaging catheter. These products are designed to improve a
physician's ability to visualize inside the chambers of the heart, including the
internal anatomy of the heart. The Company believes that the ViewMate(R) and
U-View(R) may play an important role as new and effective treatment options are
developed for the treatment of complex cardiac arrhythmias, including
ventricular tachyarrhythmia and atrial fibrillation. The Company's ultrasound
products are not approved for sale and the Company does not anticipate receiving
approval to sell the ViewMate(R) or U-View(R) for at least several months, if
approved at all.
Forward-Looking Statements
This report contains certain statements of a forward-looking nature relating to
such matters as anticipated financial and operational performance, business
prospects, technological developments, results of clinical trials, new products,
research and development activities and similar matters. Stockholders are
cautioned that such statements are only predictions and that actual events or
results may differ materially. In evaluating such statements, prospective
investors should specifically consider the various factors effecting the
industry and economy generally, as well as those identified in this report and
in the Company's other reports filed with the Securities and Exchange
Commission, which could cause actual results to differ materially from those
indicated by such forward-looking statements.
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RESULTS OF OPERATIONS
Nine months ended September 30, 1999 compared to nine months ended September 30,
1998
Sales increased $2,568,000 (or 49%) in the nine months ended September 30, 1999
as compared to the prior period in 1998. The majority of the increase in revenue
in the quarter resulted from increased sales of the EP WorkMate(R), which
represented a substantial percentage of sales during the nine-month period in
1999. The Company also realized increased sales of certain of its catheter
products during the period.
The level of sales for the remaining three months of 1999 will depend materially
on sales of the EP WorkMate(R) and diagnostic catheters and the ability of the
Company's direct sales force and network of international independent
distributors to effectively market and sell the Company's existing products. The
ALERT(R) System is not approved for sale in the United States, however, on
November 1, 1999, the Company submitted the final clinical module and original
Pre Market Approval application with the FDA. The ALERT(R) System has been
introduced for sale in Europe. However, the Company cannot accurately determine
the sales level of the ALERT(R) System for the remaining quarter in 1999 at this
time or when it will be available if at all in the United States. The Company
expects the ALERT(R) System to contribute a greater proportion of revenues in
2000 and beyond.
Cost of products sold increased $823,000 (or 31%) due to the 49% increase in
sales for the nine months ended September 30, 1999 as compared to 1998. Gross
profit on sales for the nine months ended September 30, 1999 was $4,312,000 (or
55% as a percentage of sales), as compared with $2,567,000 (or 49% as a
percentage of product sales) for the comparable period in 1998. The Company
realized an increase in gross profit on sales of existing products during this
period primarily due to increased sales of the EP WorkMate, which currently
yields a higher gross margin than certain of the Company's other products. The
Company hopes to improve its overall gross profit percentage as sales of the
ALERT(R) System and other catheter products increase, which may offset the fixed
costs associated with maintaining a catheter manufacturing operation.
Sales and marketing expenses increased $571,000 (or 22%), but decreased as a
percentage of sales 40% from 49% in the nine months ended September 30, 1999 as
compared to 1998. The dollar increase during this period was primarily due to
the impact of increase in personnel, travel, trade show related expenses,
product promotion and physician educational materials in support of its sales
efforts. The international distribution network is currently supported by a team
of direct international sales and marketing professionals, international field
clinical engineers and administrative support personnel.
General and administrative expenses increased $795,000 (or 66%) in the nine
months ended September 30, 1999 as compared to 1998. The increase during this
period was due to increased personnel and other administrative costs necessary
to support the increased operations worldwide. It is anticipated that these
expenses may decline as a percentage of revenues as incremental sales are
generated.
10
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Research and development expenses increased $573,000 (or 52%) in the nine months
ended September 30, 1999 as compared to 1998. During this period, the Company
incurred research and development expenses primarily associated with the
clinical trials for the ALERT(R) System, development costs and costs of
preparing regulatory submissions for the new ultrasound imaging product line, as
well as costs associated with several new products under development. In
addition, the Company has ongoing development efforts on existing products,
including the EP WorkMate(R) electrophysiology workstation and the EP-3(TM)
Stimulator. The Company expects that research and development expenses are
likely to increase in future periods, in part due to ongoing expenses related to
the ALERT(R) System clinical trials, new product development activities and
regulatory applications aimed at gaining approval to sell other new products.
The net loss for the nine months ended September 30, 1999 was $2,443,104 as
compared to a net loss of $3,535,667 during the comparable period in 1998, which
included a $1.4 million write-down of the Company's investment in EchoCath, Inc.
The basic and diluted loss per share for the nine months ended September 30,
1999 was $0.25 per share versus $0.39 per share in 1998.
Liquidity and Capital Resources
Since inception, the Company's expenses have exceeded its sales, resulting in an
accumulated deficit of approximately $16,878,000 at September 30, 1999.
The Company entered into two financing arrangements in March of 1999 with a
bank: a $2,000,000 revolving line of credit and a $500,000 term loan. On
September 1, 1999, the Company sold and issued an aggregate of 1,135,000 shares
of common stock in a private offering with a major institutional investment fund
and three private investors (the "Investors") at $2.75 per share. The proceeds
from the offering were $3,032,256, net of approximately $89,000 in related
filing expenses. The Company intends to use the net proceeds from the sale of
the shares for working capital purposes. Management believes that its current
liquidity position will be sufficient to meet the needs of the Company until at
least September 30, 2000. In the event that it cannot generate additional
capital funds after September 30, 2000, the Company believes that it can reduce
non-core-related expenditures, which will allow it to continue in its operations
for a significant period. However, that continuation may not be possible should
circumstances outside the Company's control (including, for example, changes in
general economic conditions) significantly interfere with the Company's
business.
Net cash used in operating activities for the nine months ended September 30,
1999 increased $32,000 (or 1%) as compared to 1998. The net use of cash in
operations for the nine months ended September 30, 1999 was primarily due to the
Company's loss from operations. Payables to related parties increased $65,000
due to an increase in purchases of components for the Alert(R) System. Payments
to related parties are made on terms similar to those of other suppliers.
Capital expenditures were $831,000 during the nine months ended September 30,
1999 as compared to $268,000 for the same period in 1998. During February 1999,
the Company purchased an additional 7,500 square feet of manufacturing and
warehouse space at ProCath
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for a purchase price of approximately $400,000. Costs to prepare the space for
intended use approximated $100,000. This purchase was financed via a $500,000
term loan executed March 31, 1999. The purchase provided for expansion of the
existing manufacturing operations, additional warehousing, shipping and quality
assurance activities and relocation of ProCath's administrative offices.
Net borrowings under note payable increased $512,000 as compared to 1998 due
primarily to the proceeds the Company received from the $500,000 term loan.
As of the date of this Report on Form 10-QSB, the Company does not have any
other material commitments for capital expenditures. However, the Company
expects to purchase capital equipment and to expand its manufacturing and
assembly capabilities as it continues to grow. The Company leases office and
manufacturing space and certain office equipment under operating leases.
During February 1997, the Company licensed the rights to several ultrasound
technologies from EchoCath, for use in the field of electrophysiology. The
agreement with EchoCath calls for the Company to make payments totaling up to a
maximum of $700,000, in four installments, as certain development milestones and
initial sales are achieved on the EchoMark and EchoEye technologies. One of the
milestones calls for a $400,000 payment payable upon the completion of a
development program for the EchoEye. This milestone was only payable in the
event that the development was completed by September 30, 1998. To the best of
the Company's knowledge, the milestone was not achieved and no milestone
payments are accrued or payable to EchoCath as of September 30, 1999.
The Company expects its operating losses to continue in the near future as it
will continue to expend substantial funds for research and development, clinical
trials in support of regulatory approvals, increased manufacturing capacity and
expansion of sales and marketing activities. The amount and timing of future
losses will be dependent upon, among other things, increased sales of the
Company's existing products, clinical approval and market acceptance of the
ALERT(R) System and developmental, regulatory and market success of new products
under development. There can be no assurance that any of the Company's
development projects will be successful or that if development is successful,
that the products will generate any sales. Based upon its current plans and
projections, the Company believes that its existing capital resources will be
sufficient to meet its anticipated capital needs for at least the next twelve
months.
Year 2000 Readiness
The Year 2000 issue could affect computers, software and other equipment used,
operated or maintained by the Company. The Company has completed a review of its
internal computer programs and systems to ensure that the programs and systems
will be Year 2000 compliant. The Company presently believes that, based on this
review, its internal programs and systems are Year 2000 compliant in all
material respects. However, it is possible that these current internal systems
contain undetected errors or defects with Year 2000 date functions.
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The Year 2000 issue can also affect products sold by the Company, particularly
the EP WorkMate(R) and ALERT(R) Companion. The Company has performed an
assessment of its products and, as a result of this review, believes that it has
substantially identified and resolved the potential Year 2000 issues with these
products. However, the Company also believes that it is not possible to
determine with complete certainty that all Year 2000 issues affecting the
Company's products have been identified or corrected due to the complexity of
these products and the fact that these products interact with other third party
products or operate on computer systems which are not under the Company's
control.
The Company believes that its greatest Year 2000 risk for disruption to its
business is the potential noncompliance of third parties. In this regard, the
Company is in communication with its vendors, major customers and service
providers in order to determine the extent to which the Company's business is
vulnerable to the third parties' failure to make their systems Year 2000
compliant. Since the Company has no control over the actions of these third
parties, there can be no assurance that these third parties will resolve any or
all Year 2000 issues. Any failure of these third parties to resolve Year 2000
issues in a timely manner could have a material adverse effect on the Company's
financial condition and results of operations.
The Company currently does not have a contingency plan in the event that
particular systems, including the systems of material third parties, are not
Year 2000 compliant. It is intended that such a plan will be developed if it
becomes clear that the Company is not going to achieve its scheduled compliance
objectives. Although no assurance can be given that there will be no
interruption of operations as a result of the Year 2000 issue, the Company
believes, and assuming that third parties with whom the Company has material
business relationships successfully remediate their own Year 2000 issues) that
it has reasonably assessed its systems in order to ensure that the Company will
not suffer any material adverse effect from the Year 2000 issue
Costs specifically associated with Year 2000 compliance are expensed as
incurred. To date, the Company has not spent a material amount on this project.
The Company does not expect the total costs relating to Year 2000 compliance to
have a material effect on the Company's results of operations or financial
condition. However, the total costs that the Company will incur in connection
with the Year 2000 issue will be influenced by (i) its ability to successfully
identify Year 2000 issues, (ii) the nature and amount of programming required to
remediate the issues, (iii) the related labor and/or consulting costs for such
remediation and (iv) the ability of third parties with whom the Company has
business relationships to successfully address their own Year 2000 concerns.
These and other unforeseen factors could have a material adverse effect on the
Company's results of operations or financial condition.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
During October 1997, the Company filed a lawsuit against EchoCath in the United
States District Court for the District of New Jersey alleging, among other
things, that EchoCath
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made fraudulent misrepresentations and omissions in connection with the prior
sale of $1,400,000 of its preferred stock to the Company.
EchoCath filed an answer to the complaint, denying the allegations and asserting
a counterclaim against the Company seeking its costs and expenses in the action.
EchoCath also filed a motion to dismiss the complaint. During October 1998, the
complaint was dismissed by the District Court. The Company is appealing the
decision. The Company believes that EchoCath's counterclaim and request for
reimbursement of its costs and expenses is without merit. As a result, the
Company has not accrued for such costs and expenses at September 30, 1999. In
the opinion of management, the ultimate resolution of the counterclaim will not
have a material adverse impact of the Company's financial condition or results
of operations. The Company cannot determine the outcome of the EchoCath
litigation at this time.
Item 2. Changes in Securities
On September 1, 1999, the Company sold and issued an aggregate of 1,135,000
shares of common stock in a private offering with a major institutional
investment fund and three private investors (the "Investors") at $2.75 per
share. The Investors additionally received callable warrants to purchase an
aggregate of 567,500 common shares exercisable at $3.50 per share. The proceeds
from the offering were $3,032,256, net of approximately $89,000 in related
filing expenses.
The Company granted the Investors certain registration rights with respect to
the hares pursuant to a Registration Rights Agreement. The Company filed a shelf
registration statement on Form S-3 on September 30, 1999 covering all of the
common stock. On October 22, 1999 the registration statement was declared
effective by the Securities and Exchange Commission.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
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The following exhibits will be filed as part of this Form 10-QSB:
Exhibit 27 Financial Data Schedule (SEC filing only)
(b) Reports on Form 8-K
Current report on Form 8-K was filed on September 7, 1999,
reporting that the Company raised $3.1 million of new equity.
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
EP MEDSYSTEMS, INC.
(Registrant)
Date: November 12, 1999 By: /s/ David A. Jenkins
----------------- ---------------------
David A. Jenkins
President and Chief Executive Officer
Date: November 12, 1999 By: /s/ Joseph M. Turner
----------------- ---------------------
Joseph M. Turner
Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
- ------ ----------------------
Exhibit 27 Financial Data Schedule
(SEC filing only)
15
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED CONSOLIDATED STATEMENT OF EARNINGS AND UNAUDITED CONSOLIDATED BALANCE
SHEET FOR THE PERIOD ENDED SEPTEMBER 30, 1999 FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION ON FORM 10-QSB AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS. IN ACCORDANCE WITH STATEMENT OF FINANCIAL
ACCOUNTING STANDARDS NO. 128, "EARNINGS PER SHARE," BASIC EARNINGS PER SHARE AND
DILUTED EARNINGS PER SHARE HAVE BEEN INCLUDED IN THE FINANCIAL DATA SCHEDULE
PRESENTED BELOW IN PLACE OF PRIMARY EARNINGS PER SHARE AND FULLY DILUTED
EARNINGS PER SHARE.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 2,597
<SECURITIES> 0
<RECEIVABLES> 2,994
<ALLOWANCES> (97)
<INVENTORY> 1,873
<CURRENT-ASSETS> 7,484
<PP&E> 2,534
<DEPRECIATION> 814
<TOTAL-ASSETS> 9,740
<CURRENT-LIABILITIES> 1,654
<BONDS> 0
0
0
<COMMON> 11
<OTHER-SE> 7,591
<TOTAL-LIABILITY-AND-EQUITY> 9,740
<SALES> 7,792
<TOTAL-REVENUES> 7,792
<CGS> 3,481
<TOTAL-COSTS> 6,800
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (44)
<INCOME-PRETAX> (2,443)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,443)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,443)
<EPS-BASIC> (.25)
<EPS-DILUTED> (.25)
</TABLE>
