<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1998
Commission File Number: 0-24635
HYPERTENSION DIAGNOSTICS, INC.
(Exact name of small business issuer as specified in its charter)
MINNESOTA 41-1618036
(State of incorporation) (I.R..S. Employer Identification No.)
2915 WATERS ROAD, SUITE 108
EAGAN, MINNESOTA 55121-1562
(651) 687-9999
(Address of issuer's principal executive offices and telephone number)
Check whether the issuer (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.
Yes /X/ No / /
The number of shares of Common Stock outstanding as of January 31, 1999 was
5,107,235.
Transitional Small Business Disclosure Format:
Yes / / No /X/
<PAGE>
HYPERTENSION DIAGNOSTICS, INC.
INDEX TO FORM 10-QSB
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements 3
Balance Sheets - June 30, 1998 and December 31, 1998 3
Statements of Operations - Three Months and Six Months Ended
December 31, 1997 and 1998, respectively, and Period
from July 19, 1988 (inception) to December 31, 1998 4
Statements of Cash Flows - Six Months Ended December 31, 1997 and 1998 and
Period from July 19, 1988 (inception) to December 31, 1998 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 7
PART II. OTHER INFORMATION:
Item 2. Use of Proceeds 12
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURES 13
EXHIBIT INDEX 14
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
Hypertension Diagnostics, Inc.
(A Development Stage Company)
Balance Sheets
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
June 30, December 31,
1998 1998
----------------- ----------------
<S> <C> <C>
ASSETS (Unaudited)
Current Assets:
Cash and cash equivalents $ 1,239,804 $ 8,967,242
Accounts receivable -- 95,785
Interest receivable 4,676 57,933
Inventory 39,054 211,227
Prepaid expenses 11,254 33,114
----------------- ----------------
Total Current Assets 1,294,788 9,365,301
Property and Equipment:
Leasehold improvements 13,377 13,377
Furniture and equipment 136,737 377,989
Less accumulated depreciation (25,997) (52,097)
----------------- ----------------
124,117 339,269
Patents, net of accumulated amortization of $12,524
and $17,064 at June 30 and December 31, 1998,
respectively 32,881 28,341
Prepaid Offering Expenses 146,981 --
Others Assets 6,740 6,834
----------------- ----------------
Total Assets $ 1,605,507 $ 9,739,745
----------------- ----------------
----------------- ----------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 188,100 $ 104,481
Accrued compensation -- 10,180
Other accrued expenses -- 33,452
----------------- ----------------
Total Current Liabilities 188,100 148,113
Shareholders' Equity:
Preferred Stock, $.01 par value:
Authorized shares--5,000,000
Issued and outstanding shares--none -- --
Common Stock, $.01 par value:
Authorized shares--25,000,000
Issued and outstanding shares--2,517,735 and
5,107,235 at June 30 and December 31, 1998,
respectively 25,177 51,092
Additional paid-in capital 4,668,479 13,839,028
Deficit accumulated during the development stage (3,276,249) (4,298,488)
----------------- ----------------
Total Shareholders' Equity 1,417,407 9,591,632
----------------- ----------------
----------------- ----------------
Total Liabilities and Shareholders' Equity $ 1,605,507 $ 9,739,745
----------------- ----------------
----------------- ----------------
</TABLE>
SEE ACCOMPANYING NOTES.
3
<PAGE>
Hypertension Diagnostics, Inc.
(A Development Stage Company)
Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Period from
Three Months Ended Six Months Ended July 19, 1988
December 31 December 31 (inception) to
-------------------------------- --------------------------------- December 31,
1997 1998 1997 1998 1998
---------------- --------------- --------------- ----------------- ----------------
<S> <C> <C> <C> <C> <C>
Revenue:
Equipment sales $ -- $ 95,498 $ -- $ 95,498 $ 95,498
Cost and Expenses:
Cost of equipment sales -- 29,092 -- 29,092 29,092
Research and development 54,441 195,708 191,283 364,751 1,924,050
Selling, general and administrative 197,440 533,032 326,902 937,594 2,810,037
--------------- ------------- --------------- ---------------- --------------
Total Cost and Expenses 251,881 757,832 518,185 1,331,437 4,763,179
--------------- ------------- --------------- ---------------- --------------
Operating Loss (251,881) (662,334) (518,185) (1,235,939) (4,667,681)
Other Income (Expense):
Interest income 11,499 121,100 26,338 213,700 416,224
Interest expense -- -- -- -- (47,031)
--------------- ------------- --------------- ---------------- --------------
11,499 121,100 26,338 213,700 369,193
--------------- ------------- --------------- ---------------- --------------
Net Loss and Deficit Accumulated
During the Development Stage $ (240,382) $ (541,234) $ (491,847) $ (1,022,239) $ (4,298,488)
--------------- ------------- --------------- ---------------- --------------
--------------- ------------- --------------- ---------------- --------------
Basic and Dilutive Net Loss per Share $ (.12) $ (.11) $ (.25) $ (.21) (4.08)
Weighted Average Shares Outstanding 2,008,928 5,105,857 1,963,575 4,836,655 1,052,512
</TABLE>
SEE ACCOMPANYING NOTES.
4
<PAGE>
Hypertension Diagnostics, Inc.
(A Development Stage Company)
Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Period from
Six Months Ended July 19, 1988
December 31 (inception) to
----------------------------------- December 31,
1997 1998 1998
---------------- ------------------ ----------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (491,847) $ (1,022,239) $ (4,298,488)
Adjustments to reconcile net loss to net
cash used in operating activities:
Value of stock options granted in lieu
of cash compensation 58,222 - 483,453
Depreciation 852 26,100 88,566
Amortization 1,245 4,646 18,010
Write-off of property and equipment - - 42,702
Change in operating assets and liabilities:
Accounts receivable - (95,785) (95,785)
Interest receivable 5,375 (53,257) (57,933)
Inventory - (172,173) (211,227)
Prepaid expenses (33,684) 125,121 (33,114)
Other assets (6,529) (200) (6,730)
Accounts payable 86,287 (83,619) 104,481
Accrued compensation - 10,180 10,180
Other accrued expenses - 33,452 33,626
---------------- ------------------ -----------------
Net cash used in operating activities (380,079) (1,227,774) (3,922,259)
INVESTING ACTIVITIES:
Purchase of property and equipment (53,727) (241,252) (470,537)
Payment of patent costs - - (46,455)
---------------- ------------------ -----------------
Net cash used in investing activities (53,727) (241,252) (516,992)
FINANCING ACTIVITIES:
Proceeds from notes payable - - 315,500
Payments of notes payable - - (49,000)
Issuance of common stock 671,506 9,196,464 13,140,293
Redemption of common stock - - (300)
---------------- ------------------ -----------------
Net cash provided by financing activities 671,506 9,196,464 13,406,493
---------------- ------------------------------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 237,700 7,727,438 8,967,242
Cash and cash equivalents at beginning of period 1,198,778 1,239,804 -
---------------- ------------------ -----------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,436,478 $ 8,967,242 $ 8,967,242
---------------- ------------------ -----------------
---------------- ------------------ -----------------
SUPPLEMENTAL SCHEDULE OF NONCASH FINANCING ACTIVITIES:
Conversion of note payable and accrued interest into
common stock $ - $ - $ 266,674
Cash paid for interest - - 12,526
</TABLE>
SEE ACCOMPANYING NOTES.
5
<PAGE>
HYPERTENSION DIAGNOSTICS, INC.
(A Development Stage Company)
Notes to Financial Statements
(Unaudited)
December 31, 1998
1. Interim Financial Information
The accompanying unaudited financial statements have been prepared in
accordance with the instructions to Form 10-QSB and do not include all
the information and notes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, these unaudited financial statements reflect all adjustments,
consisting only of normal and recurring adjustments necessary for a fair
presentation of the financial statements. The results of operations for
the three months and six months ended December 31, 1998, respectively,
are not necessarily indicative of the results that may be expected for
the full year ending June 30, 1999. The June 30, 1998 balance sheet was
derived from audited financial statements. For further information, refer
to the financial statements and notes included in the Company's Annual
Report on Form 10-KSB for the fiscal year ended June 30, 1998. The
policies described in that report are used for preparing quarterly
reports.
2. Shareholders' Equity
In July and August 1998, the Company raised $9,188,464 (net of
underwriting discounts and offering expenses), through an initial public
offering of 2,587,500 units (which includes 337,500 additional units to
cover over-allotments) at $4.125 per unit. Each unit consists of one
share of Common Stock and one redeemable Class A Warrant which entitles
the holder to purchase one share at an exercise price of $5.50 per
Warrant, subject to adjustment. The Class A Warrants are subject to
redemption by the Company for $.01 per Warrant at any time commencing 90
days after the Effective Date (July 23, 1998), provided that the closing
bid price of the Common Stock exceeds $6.50 (subject to adjustment) for
14 consecutive trading days.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FORWARD-LOOKING DISCLOSURE
This report contains forward-looking statements within the meaning of
Section 21E of the Securities Exchange Act of 1934. In addition, forward-looking
statements may be made orally in the future by or on behalf of the Company. When
used in this report, the words "believe," "expect," "anticipate," "will" and
similar expressions are intended to identify such forward-looking statements.
The Company wishes to caution readers not to place undo reliance on any
forward-looking statements and to recognize that the statements are not
predictions of actual future results. Actual results could differ materially
from those anticipated in the forward-looking statements due to the risks and
uncertainties set forth in the Company's 1998 Annual Report on Form 10-KSB under
the caption "Risk Factors," as well as others not now anticipated. These risks
and uncertainties include, without limitation, the Company's ability to receive
regulatory approval for its Model DO-2020 product; the availability of
third-party reimbursements; market acceptance of the Company's products; timely
development of the central data management facility; the ability of third
parties to manufacture the Company's products on a commercial scale and in
compliance with regulatory requirements; the availability of integral components
for the Company's products; the Company's ability to develop distribution
channels; increased competition; changes in government regulation; health care
reform; exposure to potential product liability; and the Company's ability to
protect its proprietary technology.
DEVELOPMENT STAGE RESULTS OF OPERATIONS
The Company is a development stage company and is not presently
generating any significant revenues. There can be no assurance that the Company
will ever be able to generate significant revenues, attain or maintain
profitable operations or successfully implement its business plan or its current
development opportunities. As of December 31, 1998, the Company had a deficit
accumulated during the development stage of $(4,298,488), attributable primarily
to research and development and general and administrative expenses. Until it is
able to generate significant revenues from its activities, the Company expects
to continue to incur operating losses.
The Company has developed proprietary cardiovascular profiling
technology that analyzes non-invasively derived arterial pulse pressure
waveform data as a means of providing parameters that are useful in assessing
the cardiovascular system. The Company has designed two models of the
HDI/PulseWave-TM- CardioVascular Profiling Instrument: (1) the CR-2000 which
is currently in use by physician scientists for research purposes only; and
(2) the DO-2020 which is intended to assist physicians in screening and
diagnosing patients with cardiovascular disease. The Company has not yet
received permission to market the DO-2020 from the Food and Drug
Administration ("FDA"). Although the Company's initial goal was to obtain FDA
510(k) clearance in the fiscal year ending June 30, 1999, it is not likely
that this will be achieved. The Company is working diligently with the FDA to
obtain 510(k) clearance in the fiscal year ending June 30, 2000.
THREE MONTHS ENDED DECEMBER 31, 1997 COMPARED TO THREE MONTHS ENDED DECEMBER 31,
1998
For the three months ended December 31, 1998, the Company recorded
revenue of $95,498 relating to its initial sales of the HDI/PulseWave-TM-
CR-2000 Research CardioVascular Profiling Instrument.
Total cost and operating expenses for the three months ended December
31, 1997 were $251,881 compared to $757,832 for the three months ended December
31, 1998. Approximately 22% of the $251,881 and 26% of the $757,832 total cost
and operating expenses were related to research and development expenses. A
further breakdown of research and development expenses is as follows:
7
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended
December 31
---------------
1997 1998
------------------ -----------------
<S> <C> <C>
Design and development of prototype devices and other
enhancements and improvements.................................... $ 25,330 $ 80,408
Design and development of a Central Data Management
Facility (CDMF)..................................................... -- 115,300
Recognized compensation cost for value of stock options
granted in lieu of cash compensation.............................. 29,111 --
------------------ -----------------
Total research and development expenses.................. $ 54,441 $ 195,708
------------------ -----------------
------------------ -----------------
</TABLE>
For the three months ended December 31, 1998, approximately 59% of
the total research and development expenses related to the design and
development of a CDMF. When completed, the CDMF will be capable of handling
multiple simultaneous transmissions by the DD-2020 integrated with the
Company's tracking, billing and production systems and capable of storing and
retrieving several hundred thousand patient records.
The following is a summary of the major categories included in selling,
general and administrative expenses:
<TABLE>
<CAPTION>
Three Months Ended
December 31
---------------
1997 1998
------------------ -----------------
<S> <C> <C>
Wages and related expenses ............................................... $ 94,349 $ 162,630
Outside consultants ...................................................... 18,442 60,100
Rent-building and utilities .............................................. 10,906 21,706
Insurance-general and health ............................................. 6,582 18,000
Travel ................................................................... 1,397 17,254
Legal and accounting ..................................................... 33,585 59,555
Selling, marketing and promotion, including applicable wages ............. 2,400 50,786
Depreciation and amortization............................................. 1,049 18,686
Other-general and administrative.......................................... 28,730 124,314
------------------ -----------------
Total selling, general and administrative expenses............ $ 197,440 $ 533,031
------------------ -----------------
------------------ -----------------
</TABLE>
The Company's number of employees increased from four in the
three months ended December 31, 1997 to ten in the three months ended December
31, 1998. In September 1997, the Company hired its President, Greg H. Guettler.
Effective November 1997, the Company leased approximately 6,900 square feet of
commercial office and light assembly space in Eagan, Minnesota.
Interest income was $11,499 and $121,100 for the three months ended
December 31, 1997 and December 31, 1998, respectively. In July and August 1998,
the Company raised $9,188,464 (net of underwriting discounts and offering
expenses) through an initial public offering of 2,587,500 units (which includes
337,500 additional units to cover over-allotments) at $4.125 per unit.
8
<PAGE>
Net loss was $(240,382) and $(541,234) for the three months ended
December 31, 1997 and December 31, 1998, respectively. For the three months
ended December 31, 1997, basic and dilutive net loss per share was $(.12), based
on weighted average shares outstanding of 2,008,928. For the three months ended
December 31, 1998, basic and dilutive net loss per share was $(.11), based on
weighted average shares outstanding of 5,105,857.
SIX MONTHS ENDED DECEMBER 31, 1997 COMPARED TO SIX MONTHS ENDED DECEMBER 31,
1998
Total cost and operating expenses for the six months ended December 31,
1997 were $518,185 compared to $1,331,437 for the six months ended December 31,
1998. Approximately 37% of the $518,185 and 27% of the $1,331,437 total cost and
operating expenses were related to research and development expenses. A further
breakdown of research and development expenses is as follows:
<TABLE>
<CAPTION>
Six Months Ended
December 31
---------------
1997 1998
------------------ -----------------
<S> <C> <C>
Design and development of prototype devices and other
enhancements and improvements........................... $ 133,061 $ 157,555
Design and development of a Central Data Management
Facility (CDMF)......................................... -- 207,196
Recognized compensation cost for value of stock options
granted in lieu of cash compensation.................... 58,222 --
------------------ -----------------
Total research and development expenses........... $ 191,283 $ 364,751
------------------ -----------------
------------------ -----------------
</TABLE>
For the six months ended December 31, 1998, approximately 57% of the
total research and development expenses related to the design and development of
a CDMF.
The following is a summary of the major categories included in selling,
general and administrative expenses:
<TABLE>
<CAPTION>
Six Months Ended
December 31
-----------------
1997 1998
------------------ -----------------
<S> <C> <C>
Wages and related expenses................................... $ 163,318 $ 304,081
Outside consultants.......................................... 41,442 129,528
Rent-building and utilities.................................. 10,906 43,323
Insurance-general and health................................. 11,444 35,610
Travel....................................................... 1,397 24,786
Legal and accounting......................................... 42,265 98,261
Selling, marketing and promotion, including applicable wages. 3,400 103,696
Depreciation and amortization................................ 2,098 30,746
Other-general and administrative............................. 50,632 167,563
------------------ -----------------
Total selling, general and administrative expenses...... $ 326,902 $ 937,594
------------------ -----------------
------------------ -----------------
</TABLE>
The Company's number of employees increased from four in the six months
ended December 31, 1997 to ten in the six months ended December 31, 1998. In
September 1997, the Company hired its President, Greg H. Guettler.
9
<PAGE>
The increase in outside consultants expense from $41,442 for the six
months ended December 31, 1997 to $129,528 for the six months ended December
31, 1998 was mainly attributable to additional work relating to the Company's
FDA 510(k) application and efforts concerning an approach for obtaining
physician reimbursement from insurance coverage and third party payers.
Selling, marketing and promotion expense increased from $3,400 for
the six months ended December 31, 1997 to $103,696 for the six months ended
December 31, 1998. This category includes wages and commissions paid by the
Company relating to its sales and marketing efforts. In this regard, the
Company added the following individuals: Director of Sales (during March
1998) and Director of Marketing (during May 1998).
Interest income was $26,338 and $213,700 for the six months ended
December 31, 1997 and December 31, 1998, respectively. In July and August 1998,
the Company raised $9,188,464 (net of underwriting discounts and offering
expenses) through an initial public offering of 2,587,500 units (which included
337,500 additional units to cover over-allotments) at $4.125 per unit.
Net loss was $(491,847) and $(1,022,239) for the six months ended
December 31, 1997 and December 31, 1998, respectively. For the six months ended
December 31, 1997, basic and dilutive net loss per share was $(.25), based on
weighted average shares outstanding of 1,963,575. For the six months ended
December 31, 1998, basic and dilutive net loss per share was $(.21), based on
weighted average shares outstanding of 4,836,655.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents had a net increase of $237,700 for the six
months ended December 31, 1997. The significant elements of this change were
as follows: NET CASH USED IN OPERATING ACTIVITIES -- net loss, as adjusted
for non-cash items, of $(431,528); NET CASH PROVIDED BY FINANCING ACTIVITIES
- -- issuance of Common Stock -- $671,506. For the six months ended December
31, 1998, cash and cash equivalents had a net increase of $7,727,438. The
significant elements of this change were as follows: NET CASH USED IN
OPERATING ACTIVITIES -- net loss, as adjusted for non-cash items, of
$(981,493); increase in accounts receivable - $95,785; increase in inventory
- - $172,173; decrease in prepaid expenses - $125,121; decrease in accounts
payable - $83,619; NET CASH USED IN INVESTING ACTIVITIES -- purchase of
property and equipment -$241,252; NET CASH PROVIDED BY FINANCING ACTIVITIES
- -- issuance of Common Stock -$9,196,464.
In July 1998, the Company completed its initial public offering
(IPO) in which it sold 2,250,000 units at $4.125 per unit, each unit
consisting of one share of Common Stock and one redeemable Class A Warrant.
In August 1998, the underwriter exercised in full an overallotment option to
purchase an additional 337,500 units. Total net proceeds from the IPO were
$9,188,464. As of December 31, 1998, the Company has cash and cash
equivalents of $8,967,242, and currently anticipates that this amount should
satisfy its cash requirements for at least the next 24 months. The Company's
business plan and financing needs are subject to change depending on, among
other things, market conditions, timing of the receipt of clearance from the
FDA to market the Model DO-2020, business opportunities and cash flow from
operations. Pending application of the net proceeds, such proceeds will be
invested in short-term, high quality, interest-bearing instruments.
Although not assured, in addition to the net proceeds from the IPO, the
Company may derive over a period of time up to $14,231,250 from the exercise of
the Class A Warrants included in the units. Each Class A Warrant entitles the
holder to purchase one share at an exercise price of $5.50 per Warrant, subject
to adjustment. The Class A Warrants are subject to redemption by the Company for
$.01 per Warrant at any time commencing October 21, 1998, provided that the
closing bid price of the shares exceeds $6.50 (subject to adjustment) for 14
consecutive trading days. The amounts, if any, that the
10
<PAGE>
Company derives from the exercise of such Class A Warrants will be used in
connection with the Company's development opportunities, business plan
activities and/or working capital requirements.
YEAR 2000 COMPLIANCE
The Company has considered the potential impact of the Year 2000 for
its internal information systems, external integration problems and the two
models of its HDI/Pulsewave-TM- CardioVascular Profiling Instrument (the
"Product"). The Company believes that its internal information systems and
current Product are Year 2000 compliant and that its CDMF will be so prior to
the Year 2000. The Company's Product has been, and the CDMF is being, designed
and developed to be Year 2000 compliant. In addition, the Product has been
tested to ensure that its performance and functionality are not affected by the
Year 2000 compliance issues. There can be no assurance, however, that the
Company will not experience unexpected costs and delays in achieving Year 2000
compliance, which could result in a material adverse effect on the Company's
future results of operations.
11
<PAGE>
PART II. OTHER INFORMATION.
ITEM 2. USE OF PROCEEDS
The following table sets forth the Company's use of proceeds from its
initial public offering, from the closing of the offering until December 31,
1998:
<TABLE>
<CAPTION>
<S> <C>
Temporary investments (U.S. Government obligations/notes
and U.S. Government money market fund; other short-term, high
quality, interest-bearing instruments) $8,967,242
Central Data Management Facility (CDMF) 221,222
-----------
TOTAL NET PROCEEDS $9,188,464
-----------
-----------
</TABLE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Shareholders was held on December 7, 1998.
The results of the shareholders' votes were as follows:
<TABLE>
<CAPTION>
Broker
For Against Abstain Nonvotes
------------------ -------------- -------------- ------------------
<S> <C> <C> <C> <C>
1. Election of Directors
Melville R. Bois 3,614,286 - 29,975 -
Charles F. Chesney, D.V.M., Ph.D. 3,614,286 - 29,975 -
Greg H. Guettler 3,614,286 - 29,975 -
Jay N. Cohn, M.D. 3,614,286 - 29,975 -
Kenneth W. Brimmer 3,614,286 - 29,975 -
2. Approval of Selection of
Independent Auditors 3,617,761 23,000 3,500 -
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following Exhibits are furnished pursuant to Item 601 of Regulation S-B:
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C>
10.14 Amended and Restated Consulting Agreement between Jay N. Cohn,
M.D. and the Company, effective August 31, 1998
27 Financial Data Schedule for the quarter ended December 31, 1998.
99 Press Release dated February 16, 1999
</TABLE>
- --------------------
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter ended December 31,
1998.
12
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant has
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
HYPERTENSION DIAGNOSTICS, INC.
By /S/ JAMES S. MURPHY
-------------------------------
James S. Murphy
Vice President-Finance and
Chief Financial Officer
(principal financial officer)
Date: February 16, 1999
---------------------------
13
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C>
10.14 Amended and Restated Consulting Agreement between Jay N. Cohn,
M.D. and the Company, effective August 31, 1998
27 Financial Data Schedule for the quarter ended December 31,
1998.
99 Press Release dated February 16, 1999
</TABLE>
14
<PAGE>
Exhibit 10.14
AMENDED AND RESTATED
CONSULTING AGREEMENT
BETWEEN JAY N. COHN, M.D. AND
HYPERTENSION DIAGNOSTICS, INC.
This Agreement is entered into as of this 31st day of August, 1998, by
and between Hypertension Diagnostics, Inc., a Minnesota corporation (the
"COMPANY"), and Jay N. Cohn, M.D.
("CONSULTANT").
WHEREAS, the Company and Consultant previously entered into a
Consulting Agreement dated October 30, 1995 (the "1995 CONSULTING AGREEMENT");
and
WHEREAS, the Company desires to amend and restate the 1995 Consulting
Agreement to reflect the expanded nature and scope of consulting services to be
provided to the Company by Consultant, in accordance with the terms and
conditions set forth in this Agreement; and
WHEREAS, Consultant wishes to be engaged by the Company on such terms
and conditions.
NOW, THEREFORE, in consideration of the mutual promises and other good
and valuable consideration set forth herein, the parties hereby agree as
follows:
A. SUPERCEDES PRIOR AGREEMENTS. This agreement contains the entire
agreement of the parties relating to the engagement of Consultant by the Company
and the ancillary matters discussed herein and supersedes the 1995 Consulting
Agreement and all other prior agreements and understandings with respect to such
matters, and the parties hereto have made no agreements, representations or
warranties relating to such employment or ancillary matters which are not set
forth within.
B. TERM. The initial term of this Agreement (the "TERM") shall commence
on the date hereof and continue until August 31, 2001, unless terminated sooner
as provided below. In no event shall either party have any obligation to extend
or renew this Agreement following the end of the initial term hereunder. Without
limiting the generality of the foregoing, Consultant specifically acknowledges
that the Company has made no representations or promises to Consultant regarding
any services to be performed following the termination of this Agreement.
C. SERVICES. During the Term of this Agreement, Consultant shall serve
the Company in the following positions and/or capacities and shall perform such
duties as are reasonably consistent with such positions as the Board of
Directors shall assign to him from time to time:
1. CHIEF CLINICAL CONSULTANT (MEDICAL DIRECTOR). Consultant
shall be responsible for advising the Company on all medical and
clinical matters relating to the development and marketing of Company
products; analyzing cardiovascular industry trends and
alternative/competitive technologies; reviewing company informational
and promotional
<PAGE>
brochures; advising the Company regarding strategic positioning of
technology; reviewing and advising the Company on the value of
scientific proposals submitted by outside researchers; advising the
Company on key medical issues/research findings; advising the Company
with respect to product development issues; authoring and publishing
compliance research data; serving as a medical/clinical reference to
customers; advising the Company regarding FDA matters and clinical
trials; hosting/chairing Company sponsored symposiums on arterial
compliance; and conducting Company sponsored research.
2. CHAIRMAN OF THE SCIENTIFIC AND CLINICAL ADVISORY BOARD.
Consultant shall be responsible for organizing, chairing and leading
the Company's Scientific and Clinical Advisory Board (the "ADVISORY
BOARD") with regard to discussions on scientific, technological and
physiological topics relating to use of the HDI/PULSEWAVETM
CardioVascular Profiling technology. Meetings of the Advisory Board
shall be held once or twice annually. Since members of the Advisory
Board will also be conducting research on behalf of the Company,
Consultant shall work with members to develop and review research study
protocols, and assist with study implementation, data analysis,
manuscript drafting and publication.
3. PUBLIC RELATIONS/INVESTOR RELATIONS SUPPORT. Consultant
shall assist the Company in making presentations to investors regarding
the clinical merit of the Company's technologies; participate in
shareholder meetings; assist in the development and execution of
investor relations/public relations strategies; serve as a clinical
spokesperson to the media on behalf of the Company; make public
presentations on behalf of the Company; and make scientific
presentations at medical conferences.
4. SALES/MARKETING SUPPORT. Consultant shall assist the
Company in customer sales/marketing presentations, customer contacts,
customer needs analysis, customer references, customer site visits,
convention/exhibition support, analysis of customer profiles,
convention/conference presentations, referral source for customer
contacts, analysis of customer data/trends, and review of Company
marketing tools and strategies.
5. OTHER DUTIES. Consultant shall provide other services as
requested by the Company regarding the research, clinical presentation,
marketing and sales of the Company's products.
D. COMPENSATION AND EXPENSES.
1. COMPENSATION--STOCK OPTION GRANT. As compensation for all
services to be rendered by Consultant under this Agreement during the
full term of this Agreement, the Company grant shall Consultant a
nonqualified option to purchase up to 100,000 shares of the common
stock of the Company at a price of $3.656 per share, in the form
attached hereto and labeled as EXHIBIT A.
2
<PAGE>
2. EXPENSES. The Company shall pay or reimburse Consultant for
all reasonable and necessary out-of-pocket expenses incurred by him in
the performance of his duties under this Agreement, subject to
compliance by Consultant with the Company's policies for expense
reimbursements.
E. CONFIDENTIALITY.
1. Consultant shall keep confidential and not disclose to
anyone or use, either during the Term of this Agreement or thereafter,
any confidential information of the Company, except as required by this
Agreement, or as authorized in writing by the Company. Confidential
information means any information which derives independent economic
value from not being generally known or readily ascertainable by proper
means ("Confidential Information"). Examples of Confidential
Information which is not to be disclosed or used includes, but is not
limited to: existing or contemplated products, services, processes,
techniques, know-how, data, customer identity, customer documents,
projects, customer lists, formulas, products, data devices, study
results, software, hardware, firmware and any other of the Company or
Customer information designated as confidential.
2. Consultant agrees not to remove any Confidential
Information from the Company's premises, except as necessary in the
ordinary course of conducting business for and subject to the prior
approval of the Company. Upon cancellation of this Agreement,
Consultant shall immediately return all documents and Confidential
Information, and all other tangible property of the Company to the
Company.
F. COVENANT NOT TO COMPETE. Consultant expressly acknowledges that he
is entering into this covenant not to compete so as to protect the business and
goodwill of the Company from competition in the event of a termination of the
consultancy relationship and Consultant further acknowledges the reasonableness
of the restriction imposed herein. Accordingly, Consultant warrants and agrees
that:
1. Consultant will inform any new employer, before accepting
employment, of the existence of this Agreement and give such new
employer a copy of this Section F, Covenant Not to Compete.
2. Consultant will not, for a period beginning from the date
of this Agreement and for twelve (12) months after the termination
thereof, sell to, solicit, serve, or attempt to sell to, solicit, or
serve any customer, client or account or any prospective customer,
client or account of the Company; PROVIDED, HOWEVER, that the foregoing
limitation shall only apply to sales, solicitations, services or
attempts to do any of the foregoing which involve a Competing Product.
A "customer, client or an account" is any person, firm or entity to
whom or to which the Company furnished any services, materials, or
products at any time during the term of this Agreement. A "prospective
customer, client or account" is one which, during Employee's
consultancy relationship with the Company, is solicited, successfully
or
3
<PAGE>
unsuccessfully, to become a customer, client or account of the Company.
As used herein, a "Competing Product" is a product similar to or in
competition with any product, or planned product, of the Company as of
the date this Agreement is terminated.
3. Consultant will not, from a period beginning with the date
of this Agreement and for twelve (12) months after the termination
thereof, cause or attempt to cause any customer, client or account or
any prospective customer, client or account, to divert, terminate,
limit or in any manner modify or fail to enter into any actual or
potential business relationship with the Company.
4. Consultant will not, for a period beginning with the date
of this Agreement and for twelve (12) months after the termination
thereof, divert, solicit, or employ, or attempt to divert, solicit, or
employ any employees of the Company.
5. Consultant shall not, directly or indirectly, from a period
beginning from the date of this Agreement and for twelve (12) months
after the termination thereof, engage in competition with the Company
in any manner or capacity (e.g., as an advisor, principal, agent,
partner, officer, director, stockholder, employee, member of any
association, or otherwise) for a competitor of the Company.
6. The obligations of Consultant under this Section F shall
apply to any geographic area in which the Company: (i) has engaged in
business during the term of this Agreement through production,
promotional, sales or marketing activity, or otherwise, (ii) has
otherwise established the Company's goodwill, business reputation or
any customer or supplier relations, or (iii) has been directly involved
in the expansion of the Company's business and development of the
Company's customer base.
G. INVENTIONS/ASSIGNMENT.
1. Consultant acknowledges and agrees that the Company is and
shall remain the owner of all materials, information, copyrightable
information, trademarks, or other proprietary information
(collectively, the "Proprietary Information") developed by Consultant
as a function of his relationship with the Company either prior to or
after commencement of the relationship described hereunder and that any
such Proprietary Information shall be treated as "works for hire" under
applicable law.
2. Both during the term of this Agreement and thereafter,
Consultant shall treat all Proprietary Information and all other
information that he has obtained about the Company's operation as
confidential. Without the prior written consent of the Company,
Consultant shall not copy or reproduce the Proprietary Information
except to the extent necessary to perform the services to be provided
under this Agreement. Upon termination of this Agreement, Consultant
shall promptly turn over to the Company all copies of Proprietary
Information and all other materials (including work in process)
developed in the
4
<PAGE>
course of its consulting for the Company hereunder. The obligations of
Consultant under this paragraph shall survive termination of this
Agreement.
3. This Section G does not apply to an Invention for which no
equipment, supplies, facility or trade secret information of the
Company was used and which was developed entirely on Consultant's own
time, and (1) which does not relate (a) directly to the business of the
Company or (b) to the Company's actual or demonstrably anticipated
research or development, or (2) which does not result from any work
performed by Consultant for the Company.
H. TERMINATION. Either party may terminate this Agreement at any time,
for any reason, by providing 30 days written notice of such termination to the
other party. Notwithstanding the foregoing, the confidentiality obligations
relating to Proprietary Information and other responsibilities of Consultant
hereunder and the obligation of the Company to make payment to Consultant as
provided herein for work performed prior to the termination of this Agreement,
shall survive the termination of this Agreement.
I. LEGAL STATUS OF CONTRACTOR.
1. Consultant is an independent contractor subject to the
terms and conditions of this Agreement. Consultant will not make any
representation, either express or implied, to the contrary.
2. Any and all income tax returns filed by Consultant with
either the federal or state governments shall be prepared in accordance
with the terms of this Agreement; such returns shall indicate that all
income Consultant receives as a result of this Agreement is income
earned as an independent contractor and not as an employee of the
Company.
3. Because Consultant is not an employee of the Company and is
expressly an independent contractor under this Agreement, the Company
will not provide any employee benefits or withhold monies from
Consultant's compensation for federal or state income tax purposes.
Furthermore, the Company will not make any payment or contribution in
Consultant's name or on his behalf for purposes of social security,
unemployment compensation, workers' compensation, or for any other
similar purpose.
J. INDEMNIFICATION.
1. The Company shall defend, indemnify and hold Consultant
harmless from and against any and all claims, liabilities, damages,
costs and expense (including reasonable attorneys' fees) ("the Claims")
which Consultant may at any time incur arising out of, related to, or
in connection with Consultant's performance of his duties hereunder,
except where such Claims arise in whole or in part from Consultant's
negligence or misconduct.
5
<PAGE>
2. Consultant shall defend, indemnify and hold the Company,
and its officers, directors, employees, agents, and other
representatives, harmless from and against any Claims which the Company
may at any time incur arising out of, related to, or in connection with
Consultant's negligence or misconduct in the performance of his duties
hereunder.
K. NOTICE. Any notice or other communication required or permitted
pursuant to the terms of this Agreement shall be in writing and shall be deemed
to have been duly given or served if delivered, in person or deposited in the
United States mail, postage prepaid, for mailing by certified or registered
mail, return receipt requested or of telegram, by prepaid telegram, telex,
facsimile, or telecopier, and addressed, to a party to this Agreement, to the
address set forth below:
If to Company: Hypertension Diagnostics, Inc.
2915 Waters Road
Suite 108
Eagan, MN 55121-1562
ATTN: President
Facsimile No. (651) 687-0485
If to Consultant: Dr. Jay N. Cohn
Professor of Medicine
University of Minnesota Medical School
Cardiovascular Division, Box 508
420 Delaware Street S.E.
Minneapolis, Minnesota 55455
Facsimile No. (612) 624-2174
L. SETTLEMENT OF DISPUTES.
1. ARBITRATION. Except as provided in section L.2., any claims
or disputes of any nature between the Company and Consultant arising
from or related to the performance, breach, termination, expiration,
application, or meaning of this Agreement or any matter relating to
Consultant's consultancy relationship and the termination of that
relationship by the Company shall be resolved exclusively by
arbitration in Minneapolis, Minnesota, in accordance with the
applicable rules then obtaining of the American Arbitration
Association. The arbitrators shall be required to provide a written
analysis of their decision. The fees of the arbitrator(s) and other
costs incurred by Consultant and the Company in connection with such
arbitration shall be paid by the party who is unsuccessful in such
arbitration.
The decision of the Arbitrator(s) shall be final and binding
upon both parties. Judgment of the award rendered by the arbitrator(s)
may be entered in any court having jurisdiction thereof. In the event
of submission of any dispute to arbitration, each party shall,
6
<PAGE>
not later than thirty (30) days prior to the date set for hearing,
provide to the other party and to the arbitrator(s) a copy of all
exhibits upon which the party intends to rely at the hearing and a list
of all persons each party intends to call at the hearing.
2. RESOLUTION OF CERTAIN CLAIMS - INJUNCTIVE RELIEF. Section
L.1. shall have no application to claims by the Company asserting a
violation of sections E, F or G or seeking to enforce, by injunction or
otherwise, the terms of either sections E, F or G. Such claims may be
maintained by the Company in a lawsuit subject to the terms of section
L.3. Consultant agrees that, in addition to, but not to the exclusion
of any other available remedy, the Company shall have the right to
enforce the provisions of sections E, F or G by applying for and
obtaining temporary and permanent restraining orders or injunctions
from a court of competent jurisdiction without the necessity of filing
a bond therefor, and the Company shall be entitled to recover from
Consultant its reasonable attorneys' fees and costs in enforcing the
provisions of sections E, F or G.
3. VENUE. Any action at law, suit in equity, or judicial
proceeding arising directly, indirectly, or otherwise in connection
with, out of, related to or from this Agreement or any provision
hereof, shall be litigated only in the courts of the state of
Minnesota, County of Ramsey or Dakota, or the Federal District Court,
District of Minnesota, Fourth Division. Consultant waives any right
Consultant may have to transfer or change the venue of any litigation
brought against Consultant by the Company. Consultant also waives any
claim of inconvenient forum.
M. MISCELLANEOUS.
1. GOVERNING LAW. This agreement is made under and shall be
governed by and construed in accordance with the laws of the state of
Minnesota other than its law dealing with conflicts of law.
2. AMENDMENTS. No amendment or modification of this Agreement
shall be deemed effective unless made in writing and signed by both
Consultant and the Company.
3. NO WAIVER. No term or condition of this Agreement shall be
deemed to have been waived, nor shall there by any estoppel to enforce
any provision of this Agreement, except by a statement in writing
signed by the party against whom enforcement of the waiver or estoppel
is sought. Any written waiver shall not be deemed a continuing waiver
unless specifically stated, shall operate only as to the specific term
or condition waived and shall not constitute a waiver of such term or
condition for the future or as to any act other than that specifically
waived.
4. SEVERABILITY. To the extent any provision of this Agreement
shall be invalid or unenforceable, it shall be considered deleted
herefrom and the remainder of such provision and of this Agreement
shall be unaffected and shall continue in full force and effect. In
7
<PAGE>
furtherance and not in limitation of the foregoing, should the duration
or geographical extent of, or business activities covered by, any
provision of this Agreement be in excess of that which is valid and
enforceable under applicable law, then such provision shall be
construed to cover only that duration, geographical extent or business
activities which may be valid and enforceable under applicable law.
Consultant acknowledges the uncertainty of the law in this respect and
expressly stipulates that this Agreement be given the construction
which renders its provisions valid and enforceable to the maximum
extent (not exceeding its express terms possible under applicable law).
5. ASSIGNMENT. This Agreement shall not be assignable, in
whole or in part, by either party without the written consent of the
other party.
6. COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, but all of
which shall constitute one and the same instrument.
7. CAPTIONS AND HEADINGS. The captions and section headings
used in this Agreement are for convenience of reference only, and shall
not affect the construction or interpretation of this Agreement or any
of the provisions hereof.
IN WITNESS WHEREOF, the undersigned have executed this Agreement
effective as of the day and year first above written.
HYPERTENSION DIAGNOSTICS, INC.
By /S/ GREG H. GUETTLER /S/ JAY N. COHN, M.D.
----------------------------- -----------------------------
Greg H. Guettler, President Jay N. Cohn, M.D., Consultant
8
<PAGE>
EXHIBIT A
STOCK OPTION AGREEMENT
9
<PAGE>
HYPERTENSION DIAGNOSTICS, INC.
STOCK OPTION AGREEMENT
THIS AGREEMENT is entered as of August 31, 1998 by and between
Hypertension Diagnostics, Inc., a Minnesota corporation (the "COMPANY") and Jay
N. Cohn, M.D. (the "PARTICIPANT").
WHEREAS, the Company maintains the 1998 Stock Option Plan (the "1998
Plan"), which is incorporated into and forms a part of this Agreement, and the
Participant has been selected by the individuals administering the 1998 Plan
(the "Committee") to receive a Nonqualified Stock Option under the 1998 Plan;
NOW, THEREFORE, IT IS AGREED, by and between the Company and the
Participant, as follows:
1. TERMS OF OPTION. The following terms used in this Agreement shall
have the following meanings.
a. The "Participant" is Jay N. Cohn, M.D.
b. The "Date of Grant" is August 31, 1998.
c. The number of "Covered Shares" shall be 100,000 shares of
Common Stock.
d. The "Exercise Price" is $3.656.
e. The "Expiration Date" is August 30, 2008.
2. GRANT OF OPTION. The Company hereby grants to the Participant an
option (the "OPTION") to purchase the number of Covered Shares of Common Stock
at the Exercise Price per share as set forth in paragraph 1, subject to all of
the terms and conditions of the 1998 Plan. This Option is not intended to
constitute an Incentive Stock Option within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "CODE").
3. EXERCISE OF OPTION.
a. DATE OF EXERCISE. The Option shall become
exercisable according to the following schedule.
<PAGE>
<TABLE>
<CAPTION>
As of the Date of Grant and each The Option shall become exercisable
succeeding anniversary of the Date of with respect to the following percentage
Grant: of the Covered Shares:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<S> <C>
August 31, 1998 33,334 Shares (33.34%)
- --------------------------------------------------------------------------------
August 31, 1999 33,333 Shares (33.33%)
- --------------------------------------------------------------------------------
August 31, 2000 33,333 Shares (33.33%)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
Exercisability under this schedule is cumulative. After the Option
becomes exercisable with respect to any portion of the Covered Shares,
it shall continue to be exercisable with respect to that portion of the
Covered Shares until the Option expires. The Option shall not be
exercisable on or after the Expiration Date as set forth in paragraph 1.
b. LIMITATIONS ON EXERCISE. The Covered Shares shall not be
issued unless the exercise of the Option and the issuance of such
Covered Shares shall comply with all applicable provisions of the law
and the applicable requirements of any stock exchange or Nasdaq. As a
condition to the exercise of all or any portion of the Option, the
Company may require the person exercising such Option to represent and
warrant at the time of any such exercise that the Covered Shares are
being purchased only for investment and without any present intention
to sell or distribute the Covered Shares.
4. TERMINATION.
a. TERMINATION FOR ANY REASON EXCEPT DEATH OR DISABILITY. If
Participant's consultancy relationship with the Company and all Related
Companies is terminated for any reason other than for death or
disability, the Option, to the extent that it would have been
exercisable by the Participant on the Date of Termination, may be
exercised by Participant no later than the Expiration Date.
b. TERMINATION BY REASON OF DEATH OR DISABILITY. If
Participant's consultancy relationship with the Company and all Related
Companies is terminated due to death or disability (within the meaning
of Section 22(e)(3) of the Code) of the Participant, the Option, to the
extent that it is exercisable on the Date of Termination, may be
exercised by Participant (or Participant's estate or legal
representative) no later than one year after such Date of Termination;
provided, however, the Option shall not be exercisable after the
Expiration Date.
c. DATE OF TERMINATION. For purposes of this Agreement, the
Participant's "Date of Termination" shall be the first day occurring on
or after the Date of Grant on which the Participant's consultancy
relationship with the Company and all Related Companies terminates for
any reason.
5. METHOD OF EXERCISE. The Option may be exercised in whole or in part
by delivering a written notice (in such form as may be approved by the
Committee) to the Secretary of the
-2-
<PAGE>
Company at its corporate headquarters prior to the Expiration Date. Such written
notice shall be accompanied by payment of the Exercise Price for such shares of
Common Stock being purchased. Payment shall be by cash or by check payable to
the Company. Except as otherwise provided by the Committee before the Option is
exercised: (i) all or a portion of the Exercise Price may be paid by the
Participant by delivery of shares of Common Stock acceptable to the Company and
having an aggregate Fair Market Value (valued as of the date of exercise) that
is equal to the amount of cash that would otherwise be required; and (ii) the
Participant may pay the Exercise Price by authorizing a third party to sell
shares of Common Stock (or a sufficient portion of the shares) acquired upon
exercise of the Option and remit to the Company a sufficient portion of the sale
proceeds to pay the entire Exercise Price and any tax withholding resulting from
such exercise.
6. TAX WITHHOLDING. All distributions under this Agreement are subject
to withholding of all applicable taxes. At the election of the Participant, and
subject to such rules as may be established by the Committee, such withholding
obligations may be satisfied through the surrender of shares of Common Stock
which the Participant already owns, or to which the Participant is otherwise
entitled under the 1998 Plan.
7. NOTICE OF DISQUALIFYING DISPOSITION OF SHARES. If the Option is an
Incentive Stock Option and if the Participant sells or otherwise disposes of any
of the shares acquired pursuant to the Option on or before two years from the
Date of Grant or one year following the exercise of the Option, the Participant
shall immediately notify the Company in writing of such disposition. The Company
shall have the right to require the Participant to remit to the Company an
amount sufficient to satisfy any withholding requirements.
8. NONTRANSFERABILITY OF OPTION. The Option is not transferable in any
manner other than by will or by the laws of descent and distribution and may be
exercised during the Participant's life only by the Participant. The terms of
the Option shall be binding upon the executors, administrators, heirs,
successors and assigns of the Participant.
9. ADMINISTRATION. The authority to control and manage the operation
and administration of this Agreement shall be vested in the Committee, and the
Committee shall have all powers with respect to this Agreement as it has with
respect to the 1998 Plan. Any interpretation of this Agreement by the Committee
and any decision made by it with respect to this Agreement is final and binding.
10. PLAN DEFINITIONS. Notwithstanding anything in this Agreement to the
contrary, the terms of this Agreement are subject to the terms of the 1998 Plan,
a copy of which may be obtained by the Participant from the Secretary of the
Company.
11. NO EFFECT ON TERMS OF EMPLOYMENT. Nothing in this Agreement shall
confer on the Participant any right with respect to continuation of a consulting
relationship with the Company or any Related Company, or limit the right of the
Company or any Related Company to terminate the Participant's consulting
relationship at any time, with or without cause.
12. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon, and
inure to the benefit of, the Company and its successor and assigns, and upon any
person acquiring, whether by
-3-
<PAGE>
merger, consolidation, purchase of assets or otherwise, all or substantially all
of the Company's business and assets.
13. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Minnesota.
14. PARTICIPANT ACKNOWLEDGMENT. Participant hereby acknowledges receipt
of a copy of the 1998 Plan. Participant has read and understands the terms and
provisions thereof, and accepts the Option subject to all the terms and
conditions of the 1998 Plan and this Agreement.
IN WITNESS WHEREOF, the Participant has executed this Agreement, and
the Company has caused this Agreement to be executed in its name and on its
behalf, all as of the date of this Agreement.
PARTICIPANT HYPERTENSION DIAGNOSTICS, INC.
/S/ JAY N. COHN, M.D. By: /S/ GREG H. GUETTLER
- ------------------------------------- -----------------------------
Signature Greg. H. Guettler
Its: President
JAY N. COHN, M.D.
- -------------------------------------
Print Name
-4-
<PAGE>
HYPERTENSION DIAGNOSTICS, INC.
1998 STOCK OPTION PLAN
NOTICE OF STOCK OPTION EXERCISE
Optionee Name:
------------------------------------------------------------------
Social Security Number:
---------------------------------------------------------
Address:
------------------------------------------------------------------------
1. I hereby elect to purchase _______ shares of common stock at an
exercise price per share of $__________ pursuant to the Stock Option
Agreement dated August 31, 1998 and the 1998 Stock Option Plan (the
"1998 Plan").
2. The shares should be issued in the name(s) of:_______________________
____________________________________________________________________ .
3. I hereby deliver payment of the purchase price as follows (check
appropriate box):
/ / in cash or check in the amount of $___________.
/ / by delivering shares of common stock having a Fair Market
Value (as defined in the 1998 Plan) on the date of exercise
equal to the purchase price.
/ / through the simultaneous sale through a broker of shares of
common stock acquired upon the exercise of the option (i.e., a
cashless exercise).
/ / a combination of cash and shares of common stock together
having a Fair Market Value on the date of exercise equal to
the purchase price.
IF PREVIOUSLY-ACQUIRED COMMON STOCK IS USED TO PAY THE PURCHASE PRICE,
THE COMMON STOCK MUST BE FREELY TRANSFERABLE AND HELD BY THE OPTIONEE
FOR AT LEAST SIX MONTHS.
4. I have received a copy of the complete 1998 Plan and agree to be bound
by the terms and conditions of the 1998 Plan.
5. I understand that my exercise of the option and sale of the shares
acquired upon exercise may have certain adverse tax consequences and
that I should consult with my own personal tax advisor concerning the
possible tax consequences.
Dated:
--------------------------- --------------------------------
Signature of Optionee
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS AS OF AND FOR THE THREE MONTHS ENDED DECEMBER 31, 1998, AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 8,967,242
<SECURITIES> 0
<RECEIVABLES> 153,718
<ALLOWANCES> 0
<INVENTORY> 211,227
<CURRENT-ASSETS> 9,365,301
<PP&E> 391,366
<DEPRECIATION> 52,097
<TOTAL-ASSETS> 9,739,745
<CURRENT-LIABILITIES> 148,113
<BONDS> 0
0
0
<COMMON> 51,092
<OTHER-SE> 9,540,540
<TOTAL-LIABILITY-AND-EQUITY> 9,739,745
<SALES> 95,498
<TOTAL-REVENUES> 216,598
<CGS> 29,092
<TOTAL-COSTS> 29,092
<OTHER-EXPENSES> 728,740
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (541,234)
<INCOME-TAX> 0
<INCOME-CONTINUING> (541,234)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (541,234)
<EPS-PRIMARY> (.11)
<EPS-DILUTED> (.11)
</TABLE>
<PAGE>
Exhibit 99
HYPERTENSION DIAGNOSTICS, INC.
2915 WATERS ROAD, SUITE 108
EAGAN, MINNESOTA 55121
FOR RELEASE ON: FEBRUARY 16, 1999
Contact: Mr. James S. Murphy
Chief Financial Officer
Hypertension Diagnostics, Inc.
651-687-9999
HYPERTENSION DIAGNOSTICS ANNOUNCES SECOND QUARTER FY 1999 RESULTS
ST. PAUL, MN - February 16, 1999 - Hypertension Diagnostics, Inc. (Nasdaq
SmallCap: HDII; HDIIW; HDIIU;), today announced financial results for the
second quarter ended December 31, 1998.
The Company reported initial sales revenue of $95,498 relating to its
CR-2000 Research CardioVascular Profiling Instrument in the second quarter
fiscal year 1999. The Company also reported a net loss for the second
quarter of fiscal year 1999 of $(541,234) or $(.11) per share as compared
with a net loss of $(240,382) or $(.12) per share for the same period in
fiscal year 1998. Net loss for the six months ended December 31, 1998 was
$(1,022,239) or $(.21) per share compared to a net loss of $(491,847) or
$(.25) per share for the six months ended December 31, 1997. As of
December 31, 1998, the Company has cash and cash equivalents of $8,967,242,
and currently anticipates that this amount should satisfy its cash
requirements for at least the next 24 months.
"We are pleased with our second quarter results and with customer
acceptance of the HDI/PULSEWAVE-TM- CR-2000 Research CardioVascular
Profiling Instrument technology," said Greg H. Guettler, President.
"FDA clearance on our DO-2020 product is our next Company milestone," said
Guettler. "Although our initial goal was to obtain FDA 510(k) clearance
in the fiscal year ending June 30, 1999, it is not likely that we will
achieve it. We are working diligently with the FDA to obtain 510(k)
clearance in the fiscal year ending June 30, 2000."
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<PAGE>
PAGE 2, HYPERTENSION DIAGNOSTICS, INC.
FEBRUARY 16, 1999
Hypertension Diagnostics has developed proprietary cardiovascular
profiling technology that analyzes non-invasively derived arterial
pulse pressure waveform data as a means of providing parameters that
are useful in assessing the cardiovascular system. The Company has
designed two models of the HDI/PULSEWAVE-TM- CardioVascular Profiling
Instrument: (1) the CR-2000 which is currently in use by physician
scientists for research purposes only; and (2) the DO-2020 which is
intended to assist physicians in screening and diagnosing patients with
cardiovascular disease. The Company has not yet received permission to
market the DO-2020 from the Food and Drug Administration.
Forward-looking statements in this press release are made under the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995.
The Company wishes to caution readers not to place undo reliance on any
forward-looking statements and to recognize that the statements are not
predictions of actual future results. Actual results could differ
materially from those anticipated in the forward-looking statements due to
the risks and uncertainties set forth in the Company's 1998 Annual Report
on Form 10-KSB under the caption "Risk Factors," as well as others not now
anticipated. These risks and uncertainties include, without limitation, the
Company's ability to receive regulatory approval for its Model DO-2020
product; the availability of third-party reimbursements; market acceptance
of the Company's products; timely development of the central data
management facility; the ability of third parties to manufacture the
Company's products on a commercial scale and in compliance with regulatory
requirements; the availability of integral components for the Company's
products; the Company's ability to develop distribution channels; increased
competition; changes in government regulation; health care reform; exposure
to potential product liability; and the Company's ability to protect its
proprietary technology.
-MORE-
<PAGE>
PAGE 3, HYPERTENSION DIAGNOSTICS, INC.
FEBRUARY 16, 1999
HYPERTENSION DIAGNOSTICS, INC.
(A DEVELOPMENT STAGE COMPANY)
SUMMARY FINANCIAL DATA
(UNAUDITED)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31 December 31
-------------------- -------------------
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenue:
Equipment sales $ 95,498 $ -- $ 95,498 $ --
Cost and Expenses:
Cost of equipment sales 29,092 -- 29,092 --
Research and development 195,708 54,441 364,751 191,283
Selling, general and administrative 533,032 197,440 937,594 326,902
-------------- ------------ ------------- ------------
Total Cost and Expenses 757,832 251,881 1,331,437 518,185
-------------- ------------ ------------- ------------
Operating Loss (662,334) (251,881) (1,235,939) (518,185)
Interest Income 121,100 11,499 213,700 26,338
-------------- ------------ ------------- ------------
Net Loss and Deficit Accumulated
During the Development Stage $ (541,234) $ (240,382) $ (1,022,239) $ (491,847)
-------------- ------------ ------------- ------------
-------------- ------------ ------------- ------------
Basic and Dilutive Net Loss per Share $ (.11) $ (.12) $ (.21) $ (.25)
Weighted Average Shares Outstanding 5,105,857 2,008,928 4,836,655 1,963,575
</TABLE>
BALANCE SHEET DATA
<TABLE>
<CAPTION>
DECEMBER 31, 1998 JUNE 30, 1998
----------------- -------------
<S> <C> <C>
Cash and cash equivalents . . . . . . . . . . . . . . . . . . $ 8,967,242 $ 1,239,804
Total assets . . . . . . . . . . . . . . . . . . . . . . . . 9,739,745 1,605,507
Total current liabilities . . . . . . . . . . . . . . . . . . 148,113 188,100
Total debt, less current portion . . . . . . . . . . . . . . -- --
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . (4,298,488) (3,276,249)
Total shareholders' equity . . . . . . . . . . . . . . . . . 9,591,632 1,417,407
</TABLE>
- -----------------------------
Hypertension Diagnostics and HDI/PULSEWAVE are trademarks of Hypertension
Diagnostics, Inc.
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