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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, 1999
Commission File Number: 0-24635
HYPERTENSION DIAGNOSTICS, INC.
(Exact name of small business issuer as specified in its charter)
MINNESOTA (State of incorporation) |
41-1618036 (I.R.S. Employer Identification No.) |
2915 WATERS ROAD, SUITE 108
EAGAN, MINNESOTA 55121-1562
(651) 687-9999
(Address of issuers 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, 2000 was 5,109,235.
Transitional Small Business Disclosure Format:
Yes [ ] No [X]
HYPERTENSION DIAGNOSTICS, INC.
INDEX TO FORM 10-QSB
Page No. | ||||||
PART I. FINANCIAL INFORMATION: | ||||||
Item 1. Financial Statements | 3 | |||||
Balance Sheets June 30, 1999 and December 31, 1999 | 3 | |||||
Statements of Operations Three Months and Six Months Ended December 31, 1998 and 1999, respectively, and Period From July 19, 1988 (Inception) to December 31, 1999 | 4 | |||||
Statements of Cash Flows Six Months Ended December 31, 1998 and 1999 and Period From July 19, 1988 (Inception) to December 31, 1999 | 5 | |||||
Notes to Financial Statements | 6 | |||||
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations | 7 | |||||
PART II. OTHER INFORMATION: | ||||||
Item 2. Use of Proceeds | 13 | |||||
Item 4. Submission of Matters to a Vote of Security Holders | 13 | |||||
Item 6. Exhibits and Reports on Form 8-K | 13 | |||||
SIGNATURES | 15 | |||||
EXHIBIT INDEX | 16 |
2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Hypertension Diagnostics, Inc.
(A Development Stage Company)
Balance Sheets
June 30, | December 31, | ||||||||||
1999 | 1999 | ||||||||||
Assets | (Unaudited | ) | |||||||||
Current Assets: | |||||||||||
Cash and cash equivalents | $ | 7,684,525 | $ | 5,677,258 | |||||||
Accounts receivable | 182,728 | 88,498 | |||||||||
Interest receivable | 49,753 | 49,905 | |||||||||
Inventory | 375,497 | 972,201 | |||||||||
Prepaid expenses | 4,720 | 67,448 | |||||||||
Total Current Assets | 8,297,223 | 6,855,310 | |||||||||
Property and Equipment: | |||||||||||
Leasehold improvements | 17,202 | 17,202 | |||||||||
Furniture and equipment | 458,999 | 530,666 | |||||||||
Less accumulated depreciation | (92,119 | ) | (140,564 | ) | |||||||
384,082 | 407,304 | ||||||||||
Patents, net of accumulated amortization of $21,605 and $25,005 at June 30 and December 31, 1999, respectively | 23,800 | 20,400 | |||||||||
Others Assets | 6,730 | 6,730 | |||||||||
Total Assets | $ | 8,711,835 | $ | 7,289,744 | |||||||
Liabilities and Shareholders Equity Current Liabilities: |
|||||||||||
Accounts payable | $ | 113,397 | $ | 236,427 | |||||||
Accrued payroll and payroll taxes | 98,356 | 153,553 | |||||||||
Other accrued expenses | 10,856 | 2,594 | |||||||||
Total Current Liabilities | 222,609 | 392,574 | |||||||||
Shareholders Equity: | |||||||||||
Preferred Stock, $.01 par value: | |||||||||||
Authorized shares5,000,000 | |||||||||||
Issued and outstanding sharesnone | | | |||||||||
Common Stock, $.01 par value: | |||||||||||
Authorized shares25,000,000 | |||||||||||
Issued and outstanding shares5,109,235 | 51,092 | 51,092 | |||||||||
Additional paid-in capital | 14,083,028 | 14,083,028 | |||||||||
Deferred compensation | (154,550 | ) | (118,880 | ) | |||||||
Deficit accumulated during the development stage | (5,490,344 | ) | (7,118,070 | ) | |||||||
Total Shareholders Equity | 8,489,226 | 6,897,170 | |||||||||
Total Liabilities and Shareholders Equity | $ | 8,711,835 | $ | 7,289,744 | |||||||
See accompanying notes.
3
Hypertension Diagnostics, Inc. Statements of Operations
(A Development Stage Company)
(Unaudited)
Period From | |||||||||||||||||||||||
Three Months Ended | Six Months Ended | July 19, 1988 | |||||||||||||||||||||
December 31 | December 31 | (Inception) to | |||||||||||||||||||||
December 31, | |||||||||||||||||||||||
1998 | 1999 | 1998 | 1999 | 1999 | |||||||||||||||||||
Revenue: | |||||||||||||||||||||||
Equipment sales | $ | 95,498 | $ | 57,499 | $ | 95,498 | $ | 128,997 | $ | 510,244 | |||||||||||||
Cost and Expenses: | |||||||||||||||||||||||
Cost of equipment sales | 29,092 | 12,420 | 29,092 | 29,953 | 168,741 | ||||||||||||||||||
Research and development | 195,708 | 164,687 | 364,751 | 227,958 | 2,362,902 | ||||||||||||||||||
Selling, general and administrative | 533,032 | 926,220 | 937,594 | 1,676,931 | 5,844,798 | ||||||||||||||||||
Total Cost and Expenses | 757,832 | 1,103,327 | 1,331,437 | 1,934,842 | 8,376,441 | ||||||||||||||||||
Operating Loss | (662,334 | ) | (1,045,828 | ) | (1,235,939 | ) | (1,805,845 | ) | (7,866,197 | ) | |||||||||||||
Other Income (Expense): | |||||||||||||||||||||||
Interest income | 121,100 | 86,837 | 213,700 | 178,119 | 795,158 | ||||||||||||||||||
Interest expense | | | | | (47,031 | ) | |||||||||||||||||
121,100 | 86,837 | 213,700 | 178,119 | 748,127 | |||||||||||||||||||
Net Loss and Deficit Accumulated During the Development Stage | $ | (541,234 | ) | $ | (958,991 | ) | $ | (1,022,239 | ) | $ | (1,627,726 | ) | $ | (7,118,070 | ) | ||||||||
Basic and Dilutive Net Loss per Share | $ | (.11 | ) | $ | (.19 | ) | $ | (.21 | ) | $ | (.32 | ) | $ | (5.04 | ) | ||||||||
Weighted Average Shares Outstanding | 5,105,857 | 5,109,235 | 4,836,655 | 5,109,235 | 1,413,434 |
See accompanying notes.
4
Hypertension Diagnostics, Inc. Statements of Cash Flows
(A Development Stage Company)
(Unaudited)
Period From | ||||||||||||||
Six Months Ended | July 19, 1988 | |||||||||||||
December 31 | (Inception) to | |||||||||||||
December 31, | ||||||||||||||
1998 | 1999 | 1999 | ||||||||||||
Operating Activities: | ||||||||||||||
Net loss | $ | (1,012,239 | ) | $ | (1,627,726 | ) | $ | (7,118,070 | ) | |||||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||||||
Value of stock options granted in lieu of cash compensation | | 35,670 | 608,573 | |||||||||||
Depreciation | 26,100 | 48,445 | 177,033 | |||||||||||
Amortization | 4,646 | 3,400 | 26,055 | |||||||||||
Write-off of property and equipment | | | 42,702 | |||||||||||
Change in operating assets and liabilities: | ||||||||||||||
Accounts receivable | (95,785 | ) | 94,230 | (88,498 | ) | |||||||||
Interest receivable | (53,257 | ) | (152 | ) | (49,905 | ) | ||||||||
Inventory | (172,173 | ) | (596,704 | ) | (972,201 | ) | ||||||||
Prepaid expenses | 125,121 | (62,728 | ) | (67,448 | ) | |||||||||
Other assets | (200 | ) | | (6,730 | ) | |||||||||
Accounts payable | (93,619 | ) | 123,030 | 236,427 | ||||||||||
Accrued payroll and payroll taxes | 10,180 | 55,197 | 153,553 | |||||||||||
Other accrued expenses | 33,452 | (8,262 | ) | 2,768 | ||||||||||
Net cash used in operating activities | (1,227,774 | ) | (1,935,600 | ) | (7,055,741 | ) | ||||||||
Investing Activities: | ||||||||||||||
Purchase of property and equipment | (241,252 | ) | (71,667 | ) | (627,039 | ) | ||||||||
Payment of patent costs | | | (46,455 | ) | ||||||||||
Net cash used in investing activities | (241,252 | ) | (71,667 | ) | (673,494 | ) | ||||||||
Financing Activities: | ||||||||||||||
Proceeds from notes payable | | | 315,500 | |||||||||||
Payments of notes payable | | | (49,000 | ) | ||||||||||
Issuance of Common Stock | 9,196,464 | | 13,140,293 | |||||||||||
Redemption of Common Stock | | | (300 | ) | ||||||||||
Net cash provided by financing activities | 9,196,464 | | 13,406,493 | |||||||||||
Net increase (decrease) in cash and cash equivalents | 7,727,438 | (2,007,267 | ) | 5,677,258 | ||||||||||
Cash and cash equivalents at beginning of period | 1,239,804 | 7,684,525 | | |||||||||||
Cash and cash equivalents at end of period | $ | 8,967,242 | $ | 5,677,258 | $ | 5,677,258 | ||||||||
Supplemental Schedule of Noncash Financing Activities: | ||||||||||||||
Conversion of note payable and accrued interest into Common Stock | $ | | $ | | $ | 266,674 | ||||||||
Cash paid for interest | | | 12,526 |
See accompanying notes.
5
Hypertension Diagnostics, Inc.
(A Development Stage Company)
Notes to Financial Statements
(Unaudited)
December 31, 1999
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, 1999 are not necessarily indicative of the results that may be expected for the full year ending June 30, 2000. The June 30, 1999 balance sheet was derived from audited financial statements. For further information, refer to the financial statements and notes included in the Companys Annual Report on Form 10-KSB for the fiscal year ended June 30, 1999. The policies described in that report are used for preparing quarterly reports. | ||
2. | Shareholders Equity | |
In July and August 1998, the Company raised $9,188,414 (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. 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. The Class A Warrants expire on July 22, 2002. |
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Item 2. ManagementS Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
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, will, can, estimate, anticipate and similar expressions are intended to identify such forward-looking statements. The Company wishes to caution readers not to place undue 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 Companys 1999 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 Companys ability to receive regulatory approval for its CVProfilor DO-2020 System; the availability of third-party reimbursements; market acceptance of the Companys products; the ability to operate and maintain the Central Data Management Facility (CDMF) on a commercial scale; regulatory restrictions pertaining to data privacy issues in utilizing the CDMF; the ability to manufacture the Companys products on a commercial scale and in compliance with regulatory requirements; the availability of integral components for the Companys products; the Companys ability to develop distribution channels; increased competition; changes in government regulation; health care reforms; exposure to potential product liability; and the Companys ability to protect its proprietary technology.
Overview
The Company was founded in July 1988 to develop its blood pressure waveform analysis technology into a clinically acceptable, non-invasive method for conducting cardiovascular profiling. 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. From inception, the majority of the Companys efforts have been focused on incorporating this technology into an instrument that is intended to allow physicians to reliably and effectively screen patients with cardiovascular disease. While the Company has developed and tested commercial models of the Product and in April 1998 commenced marketing the CR-2000 Research CardioVascular Profiling System for research use only, it expects to incur substantial net operating losses until it achieves a significant level of revenue following FDA clearance to market the CVProfiler DO-2020.
The Company plans to market three models: the CR-2000 Research CardioVascular Profiling System, the CVProfilor DO-2020 System and the CVProfilor MD-3000 System (previously referred to as the Model DO-2020i). Management believes that the CR-2000, intended for research use only in the United States (that is, not for screening, diagnosing, monitoring or determining treatment of patients), does not require FDA clearance to market, and marketing activities have commenced worldwide. The CVProfilor DO-2020 System, intended for use by physicians to screen patients with vascular disease, is an FDA regulated medical device. The Company is unable to market the CVProfilor DO-2020 System in the United States until FDA clearance to market is obtained.
On November 30, 1999, the Company announced that its Quality Assurance System was registered to ISO-9002, EN-46002 and ISO-13488 by TUV Product Services. The Companys non-invasive CR-2000 Research CardioVascular Profiling System now carries the CE0123 mark, indicating that the CR-2000 is certified for sale throughout the European Union and that the product complies with applicable safety standards. The Company is currently pursuing foreign registrations and approvals that will allow marketing of a similar physician product, the CVProfilor MD-3000 System, in foreign markets.
7
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, 1999, the Company had a deficit accumulated during the development stage of $(7,118,070), 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 is seeking clearance from the FDA to market the CVProfilor DO-2020. The Company has been notified by the FDA that it will not be granted an extension to the 510(k) Premarket Notification submission that was previously submitted. Instead, the FDA has requested that the Company submit a new 510(k) submission which will include additional information as mutually agreed upon between the FDA and the Company. The gathering of information and the drafting of a new submission is ongoing, and a new 510(k) submission for the CVProfilor DO-2020 System is expected to be forwarded to the FDA before the end of the Company's fiscal year (that is, before June 30, 2000). It is unknown how long it will take the FDA to review the 510(k) submission, or when the FDA will clear the 510(k), if at all.
In the quarter ended December 31, 1999, the Company established an Executive Incentive Bonus Plan (the Bonus Plan). The main objective of the Bonus Plan is to reward the senior management team for accomplishment of periodic major corporate milestones essential to the growth of the Company and supporting of increased shareholder value. Each fiscal year, the Board of Directors of the Company will review program participation and the payout criteria established for the fiscal year. Upon approval, the eligible officers will be measured versus the criteria set and compensated in accordance with the terms of their own unique employment agreement.
Three Months Ended December 31, 1998 Compared to Three Months Ended December 31, 1999
Revenue was $95,498 and $57,499 for the three months ended December 31, 1998 and 1999, respectively. This revenue related to sales of the HDI/PulseWave CR-2000 Research CardioVascular Profiling System.
Total cost and expenses for the three months ended December 31, 1998 were $757,832 compared to $1,103,327 for the three months ended December 31, 1999. Approximately 26% of the $757,832 and 15% of the $1,103,327 total cost and expenses were related to research and development expenses. A further breakdown of research and development expenses is as follows:
Three Months Ended | |||||||||
December 31 | |||||||||
1998 | 1999 | ||||||||
Design and development of prototype devices and other enhancements and improvements | $ | 80,408 | $ | 146,852 | |||||
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 | | 17,835 | |||||||
Total research and development expenses | $ | 195,708 | $ | 164,687 | |||||
The design and development of the CDMF was completed in the fiscal year ended June 30, 1999. The CDMF is capable of handling multiple simultaneous transmissions by the CVProfilor DO-2020
8
System integrated with the Companys 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:
Three Months Ended | |||||||||
December 31 | |||||||||
1998 | 1999 | ||||||||
Wages, related expenses and benefits | $ | 127,489 | $ | 299,042 | |||||
Patents and related expenses | 8,367 | 14,584 | |||||||
Outside consultants | 60,100 | 101,527 | |||||||
Rent-building and utilities | 21,706 | 21,913 | |||||||
Insurance-general and directors/officers liability | 16,092 | 12,392 | |||||||
Selling, marketing and promotion, including applicable wages | 106,345 | 300,425 | |||||||
Depreciation and amortization | 18,686 | 27,026 | |||||||
Other-general and administrative | 174,247 | 149,311 | |||||||
Total selling, general and administrative expenses | $ | 533,032 | $ | 926,220 | |||||
The Companys number of employees increased from ten in the three months ended December 31, 1998 to seventeen in the three months ended December 31, 1999.
The increase in outside consultants expense from $60,100 for the three months ended December 31, 1998 to $101,527 for the three months ended December 31, 1999 was mainly attributable to additional work relating to the Companys FDA 510(k) Application and the Companys ISO-9002 certification and CE mark for the CR-2000 Research CardioVascular Profiling System.
Selling, marketing and promotion expense increased from $106,345 for the three months ended December 31, 1998 to $300,425 for the three months ended December 31, 1999. This category includes wages and commissions paid by the Company relating to its sales and marketing efforts as well as travel and convention expenses.
Interest income was $121,100 and $86,837 for the three months ended December 31, 1998 and 1999, respectively. In July and August 1998, the Company raised $9,188,414 (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 $(541,234) and $(958,991) for the three months ended December 31, 1998 and 1999, respectively. 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. For the three months ended December 31, 1999, basic and dilutive net loss per share was $(.19), based on weighted average shares outstanding of 5,109,235.
Six Months Ended December 31, 1998 Compared to Six Months Ended December 31, 1999
Revenue was $95,498 and $128,997 for the six months ended December 31, 1998 and 1999, respectively. This revenue related to sales of the HDI/PulseWave CR-2000 Research CardioVascular Profiling System.
9
Total cost and expenses for the six months ended December 31, 1998 were $1,331,437 compared to $1,934,842 for the six months ended December 31, 1999. Approximately 27% of the $1,331,437 and 12% of the $1,934,842 total cost and expenses were related to research and development expenses. A further breakdown of research and development expenses is as follows:
Six Months Ended | |||||||||
December 31 | |||||||||
1998 | 1999 | ||||||||
Design and development of prototype devices and other enhancements and improvements | $ | 157,555 | $ | 192,288 | |||||
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 | | 35,670 | |||||||
Total research and development expenses | $ | 364,751 | $ | 227,958 | |||||
The design and development of the CDMF was completed in the fiscal year ended June 30, 1999. The CDMF is capable of handling multiple simultaneous transmissions by the CVProfilor DO-2020 System integrated with the Companys 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:
Six Months Ended | |||||||||||||
December 31 | |||||||||||||
1998 | 1999 | ||||||||||||
Wages, related expenses and benefits | $ | 304,081 | $ | 538,343 | |||||||||
Patents and related expenses | 16,205 | 43,966 | |||||||||||
Outside consultants | 129,528 | 194,521 | |||||||||||
Rent-building and utilities | 43,323 | 44,391 | |||||||||||
Insurance-general and directors/officers liability | 35,610 | 23,595 | |||||||||||
Selling, marketing and promotion, including applicable wages | 128,482 | 516,950 | |||||||||||
Depreciation and amortization | 30,746 | 51,846 | |||||||||||
Other-general and administrative | 249,619 | 263,319 | |||||||||||
Total selling, general and administrative expenses | $ | 937,594 | $ | 1,676,931 | |||||||||
The Companys number of employees increased from ten in the six months ended December 31, 1998 to seventeen in the six months ended December 31, 1999.
The increase in outside consultants expense from $129,528 for the six months ended December 31, 1998 to $194,521 for the six months ended December 31, 1999 was mainly attributable to additional work relating to the Companys FDA 510(k) Application and the Companys ISO-9002 certification and CE mark for the CR-2000 Research CardioVascular Profiling System.
Selling, marketing and promotion expense increased from $128,482 for the six months ended December 31, 1998 to $516,950 for the six months ended December 31, 1999. This category includes
10
wages and commissions paid by the Company relating to its sales and marketing efforts as well as travel and convention expenses.
Interest income was $213,700 and $178,119 for the six months ended December 31, 1998 and 1999, respectively. In July and August 1998, the Company raised $9,188,414 (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 $(1,022,239) and $(1,627,726) for the six months ended December 31, 1998 and 1999, respectively. 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. For the six months ended December 31, 1999, basic and dilutive net loss per share was $(.32), based on weighted average shares outstanding of 5,109,235.
Liquidity and Capital Resources
Cash and cash equivalents had a net increase of $7,727,438 for the six months ended December 31, 1998. 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); decrease in prepaid expenses $125,121; increase in inventory $172,173; 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. For the six months ended December 31, 1999, cash and cash equivalents had a net decrease of $2,007,267. The significant elements of this change were as follows: net cash used in operating activities net loss, as adjusted for non-cash items, of $(1,540,211); increase in inventory $596,704; increase in accounts payable $123,030.
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 $9,188,414. As of December 31, 1999, the Company has cash and cash equivalents of $5,677,258, and anticipates that these funds should allow it to pursue the different elements of the Companys business development strategy for approximately the next 12 to 15 months. The Companys 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 CV Profilor 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 Class A Warrants expire on July 22, 2002. The amounts, if any, that the Company derives from the exercise of such Class A Warrants will be used in connection with the Companys development opportunities, business plan activities and/or working capital requirements.
11
Year 2000 Compliance
Although it is now after January 1, 2000, many existing computer programs still use only two digits to identify a year in a data field. These programs were designed and developed without considering the impact of the upcoming change in the century. If not corrected, many computer applications could fail, create erroneous results, or otherwise lead to significant business delays and disruptions in the Year 2000. The Company has experienced no Year 2000 information systems problems to date, and it believes its internal information technology systems remain Year 2000 compliant. The Company has, and expects to have certain material relationships with suppliers and vendors. Although the Company has experienced no problems to date, it is currently unable to predict to what extent the Year 2000 issue may affect such existing and anticipated suppliers or vendors, or to what extent the Company would be vulnerable to any failure by its suppliers or vendors to be Year 2000 compliant. The failure of a supplier or vendor to remediate any Year 2000 issues could have a material adverse effect on the Companys business, financial condition or results of operation.
12
PART II. OTHER INFORMATION
Item 2. Use of Proceeds
The following table sets forth the Companys use of the net proceeds from its initial public offering, from July 28, 1998 through December 31, 1999:
Temporary investments (U.S. Government obligations/notes and U.S. Government money market fund; other short-term high quality, interest-bearing instruments) | $ | 5,677,258 | ||
Central Data Management Facility | 318,194 | |||
Purchase of property and equipment | 397,754 | |||
Sales, marketing and promotion | 674,664 | |||
Wages, related expenses and benefits | 967,823 | |||
Outside consultants | 283,437 | |||
Inventory | 869,284 | |||
$ | 9,188,414 | |||
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Annual Meeting of Shareholders was held on November 30, 1999.
(b) The results of the shareholders votes were as follows:
For | Against | Abstain | ||||||||||
1. | Re-Election of Class I Directors Melville R. Bois Charles F. Chesney, D.V.M., Ph.D, R.A.C. | 3,923,536 4,021,036 | - - |
143,500 46,000 | ||||||||
2. | Approval of Selection of Independent Auditors | 4,021,496 | 45,100 | 440 |
Item 6. Exhibits and Reports on Form 8-K
(a) The following Exhibits are furnished pursuant to Item 601 of Regulation S-B:
Exhibit No. | Description | |
10.17 | Employment Agreement between Dennis L. Sellke and the Company, dated December 22, 1999 | |
10.18 | Employment Agreement between Charles F. Chesney, D.V.M and the Company, dated December 22, 1999 | |
10.19 | Employment Agreement between Greg H. Guettler and the Company, dated December 22, 1999 |
13
10.20 | Employment Agreement between James S. Murphy and the Company, dated December 22, 1999 | |
27 | Financial Data Schedule for the quarter ended December 31, 1999 |
(b) | Reports on Form 8-K. | |
No reports on Form 8-K were filed during the quarter ended December 31, 1999. |
14
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 of Finance and Chief Financial Officer (principal financial officer) |
Date: February 11, 2000
15
EXHIBIT INDEX
Exhibit No. | Description | |
10.17 | Employment Agreement between Dennis L. Sellke and the Company, dated December 22, 1999 | |
10.18 | Employment Agreement between Charles F. Chesney, D.V.M and the Company, dated December 22, 1999 | |
10.19 | Employment Agreement between Greg H. Guettler and the Company, dated December 22, 1999 | |
10.20 | Employment Agreement between James S. Murphy and the Company, dated December 22, 1999 | |
27 | Financial Data Schedule for the quarter ended December 31, 1999 |
16
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