UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-10574
CARDIAC RESUSCITATOR CORPORATION
(Exact name of registrant as specified in its charter)
OREGON 22-2305475
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
9 Entin Road Parsippany, New Jersey 07054
(Address of principal executive offices) (Zip code)
(201)884-5800
(Registrant's telephone number, including area code)
(Former name, former address, and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed all
reports 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
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Sections 12, 13 or 15(d) of the
Securities Exchange Act of 1934 subsequent to the distribution of
securities under a plan confirmed by a court.
[ ] Yes [ ] No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of common stock at March 31,
1996: 17,971,775.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CARDIAC RESUSCITATOR CORPORATION
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
Three Months Ended
March 31,
1996 1995
<S> <C> <C>
Net revenues . . . . . . . . . . . . . . . $ --- $ 100,100
Selling, general & administrative
expenses . . . . . . . . . . . . . . . . 1,900 2,000
Interest income - net . . . . . . . . . . . (8,100) (900)
(6,200) 1,100
NET EARNINGS . . . . . . . . . . . . . . . $ 6,200 $ 99,000
Net earnings per common share . . . . . . . $ --- $ .01
Weighted average number of common
shares outstanding. . . . . . . . . . . . 17,971,775 17,971,775
</TABLE>
The accompanying notes are an integral part of the interim financial
statements.
CARDIAC RESUSCITATOR CORPORATION
BALANCE SHEETS
(Unaudited)
<TABLE>
March 31, December 31,
1996 1995
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents . . . . . $ 593,500 $ 587,300
Total current assets . . . . . . . 593,500 587,300
TOTAL . . . . . . . . . . . . . . . $ 593,500 $ 587,300
LIABILITIES
Current Liabilities:
Accounts payable and accrued
expenses . . . . . . . . . . . . . $ 1,300 $ 1,300
Advances from Emerson Radio Corp. . 131,700 131,700
Total current liabilities . . . . 133,000 133,000
SHAREHOLDERS' EQUITY
Preferred stock--par value $10.00
per share; authorized 500,000
shares; issued and outstanding
500,000 shares . . . . . . . . . . . 5,000,000 5,000,000
Common stock--no par value; authorized
20,000,000 shares; issued and
outstanding 17,971,775 shares . . . 678,400 678,400
Additional paid-in capital . . . . . 20,376,300 20,376,300
Accumulated deficit . . . . . . . . . (25,594,200) (25,600,400)
Total shareholders' equity . . . . . 460,500 454,300
TOTAL . . . . . . . . . . . . . . . $ 593,500 $ 587,300
</TABLE>
The accompanying notes are an integral part of these interim financial
statements.
CARDIAC RESUSCITATOR CORPORATION
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
Three Months Ended
March 31,
1996 1995
<S> <C> <C>
Cash Flows from Operating Activities:
Net cash provided by operating
activities . . . . . . . . . . . . . . . $ 6,200 $ 102,100
Net increase in cash and cash
equivalents . . . . . . . . . . . . . . . 6,200 102,100
Cash and cash equivalents at beginning
of year . . . . . . . . . . . . . . . . . 587,300 315,900
Cash and cash equivalents at end of period . $ 593,500 $ 418,000
Supplemental disclosure of cash flow
information:
Interest paid . . . . . . . . . . . . . . $ --- $ ---
</TABLE>
The accompanying notes are an integral part of the interim financial
statements.
CARDIAC RESUSCITATOR CORPORATION
NOTES TO INTERIM FINANCIAL STATEMENTS
(Unaudited)
NOTE 1
The unaudited interim financial statements reflect all
adjustments (consisting only of normal recurring adjustments) that
management believes necessary for a fair presentation of the results
of operations for the periods being reported. The unaudited interim
financial statements have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission and consequently
do not include all of the disclosures normally made in the Cardiac
Resuscitator Corporation ("the Company") annual Form 10-K filing.
NOTE 2
As described below, the Company's liquidity had been adversely
affected by the bankruptcy of Truvel Corporation ("Truvel").
From July 1989 to June 1990, the Company had been engaged in the
performance of consulting services with respect to the strategic
marketing and sale and attendant financial considerations of medical
electronic instrumentation and devices for Truvel, a concern engaged
in the development, manufacture and sale of electronic digitizing
image scanners. Such services were performed pursuant to a two year
agreement entered into in June 1989 between the Company and Truvel
providing for the Company's performance of the aforementioned
consulting services on Truvel's behalf for an aggregate consideration
of $240,000. Contemporaneously with its entrance into such an
agreement, the Company acquired a $750,000 equity interest in Truvel.
As part of the investment, the Company received a distribution of
139,993 shares of Vision Ten Inc. ("Vision Ten") common stock. On June
5, 1990, Truvel instituted a voluntary proceeding under Chapter 11 of
the Bankruptcy Code for the Central District of California. On
September 4, 1990, a plan of reorganization was approved providing
for the sale of Truvel's assets and the cancellation of all common
shares. Based on the bankruptcy court decision, the Company has not
received revenues from Truvel and has written off its investment in
Truvel aggregating $708,000. Therefore, no consulting revenues have
been recognized since June 1990. In October 1991, the Company sold
12,000 shares of Vision Ten common stock for net proceeds of $4,800,
resulting in a net gain of $1,200. The Company subsequently sold all
remaining Vision Ten common stock in January 1992 for net proceeds of
$65,400, resulting in a net gain of $27,000.
As a consequence of Truvel's insolvency proceeding, commencing
June 1990, the Company began to pursue acquisitions or other business
opportunities. There are currently no specific plans or
understandings to cause the Company to make any specific acquisition
or enter into any specific business opportunity. The Company's current
operating activities consists of licensing patents relating to the
medical electronics business which it sold in June 1988 (the "Asset
Sale"). The Company's medical electronics business consisted of the
development, manufacture, and sale of portable devices that
electronically identified in human beings ventricular fibrillation
and/or severe slowing of the heart and provided such patients with
appropriate electrical treatment by means of defibrillation
shock or pacing stimulation.
As part of the terms of the Asset Sale, the Company was entitled
to receive minimum royalties of $150,000 in each of the three years
ending June 30, 1991. In the contract year ended June 30, 1991, the
Company recognized additional royalties in excess of the minimum
royalty level. The minimum royalty was not exceeded in the contract
years ended June 30, 1990 and 1989. The royalties to be earned under
the Asset Sale extend to the expiration date of the patents. Based on
the change in technologies and the development of new defibrillation
devices by the licensee, the licensee has notified the Company that
sales of products utilizing the Company's patents will probably
continue only through the end of 1996.
The Company has received funding from Emerson Radio Corp.
("Emerson") in prior years; however, on September 29, 1993, Emerson
filed a Voluntary Petition for Reorganization under Chapter 11 of the
Bankruptcy Code. Although Emerson emerged from bankruptcy on March 31,
1994, it is unlikely that the Company will receive any funding from
Emerson for the Company's operations. All advances from Emerson since
June 30, 1988 have been non-interest bearing. Emerson owns
approximately 79% of the Company's outstanding common stock and
approximately 92% of the Company's voting power.
The Company believes that cash flow from operations and the
available cash balance will be sufficient to maintain the Company's
operations for the next year.
NOTE 3
Through August 15, 1994, the Company was in default of its 11 1/2%
convertible subordinated note, due to its inability to maintain a
minimum current ratio of 1.25 and for failure to make required sinking
fund payments due annually on May 1 from 1987 to 1991 and aggregating
$500,000 through May 1, 1991. In addition, the Company elected not to
make scheduled interest and principal payments aggregating $528,600
that were due on May 1, 1992. In April 1993, the Noteholder made a
formal demand for payment of the principal sum of $500,000 plus
interest of $81,300 accrued through March 31, 1993. Accordingly, the
principal balance of the Note in the amount of $500,000 was
classified as a current liability. In August 1994, the Company and
the Noteholder agreed to settle the Note in full satisfaction
of the Company's obligations for $500,000 in cash. The Note was paid
in full on August 16, 1994. As a result, the Company recognized an
extraordinary gain on the extinguishment of debt of $153,100 in the
year ended December 31, 1994. The Note was convertible into a maximum
of 166,667 shares of the Company's common stock. The Note also
contained various restrictive covenants related to the payment of
dividends and repurchase of its common stock. The Note was
guaranteed by Emerson, but Emerson was precluded from satisfying
such guarantee due to certain restrictions created in connection with
its bankruptcy proceeding and reorganization.
A 15% promissory note issued by Emerson, which was converted to
common stock on February 6, 1986, was issued with warrants of the
Company to acquire up to 450,000 shares of the Company's common stock.
The warrants were exercisable at $6 per share and expired on May 1,
1992.
NOTE 4
(A) Statements of Cash Flows:
For purposes of the statements of cash flows, short-term invest-
ments with maturities of three months or less at the time of purchase
are considered to be cash equivalents.
(B) Income Taxes:
Emerson, as a result of owning at least 80% of the Company's
common stock, included the Company's results of operations in its
consolidated tax returns and has utilized all of the Company's
operating losses from August 30, 1979 to November 30, 1982. The
Company has not received, nor expects to receive, a benefit from
Emerson for its use of these losses. As a result, these losses are not
available to the Company to offset any taxable income which may be
earned in future years. On December 1, 1982, Emerson's ownership of
the Company decreased to approximately 74%. As a result, for Federal
income tax purposes, the Company's results of operations for the
period December 1, 1982 to September 6, 1984 have not been included in
Emerson's consolidated tax return and the accumulated operating
losses of $5,193,700 for the period are available to the Company to
offset any taxable income earned through 1999. Since September 6,
1984, Emerson has controlled in excess of 80% of the shares of the
Company in terms of both voting power and value. As a result, Emerson
has included the Company's results of operations in its consolidated
tax returns for periods subsequent to that date and has utilized
substantially all of the Company's net operating losses from September 6,
1984 to March 31, 1996. The Company has not received, nor expects to
receive, a benefit from Emerson for use of these losses. The Company
has not paid any income taxes for the three months ended March 31,
1996 and 1995.
(C) Earnings Per Share:
Earnings per common share is based on the weighted average number
of shares outstanding during each of the periods.
NOTE 5
In June 1984, the Company's Board of Directors adopted a stock
grant plan pursuant to which 100,000 shares of common stock were
reserved for issuance under the Plan. At March 31, 1996 the Company
had issued 69,667 shares of common stock pursuant to the Plan.
NOTE 6
In September 1984, the Company's Articles of Incorporation were
amended to include the authority to issue 500,000 shares of preferred
stock with a par value of $10.00 per share. Each preference share
shall have 60 votes per share for each corporate matter on which
shareholders may vote. The Company may, on not less than 10 days'
prior written notice to the holders of preference shares, redeem all
or any portion of the preference shares at a redemption price of
$10.00 per share plus declared and unpaid dividends, if any. The
preference shares do not have preemptive rights. The holders of
preference shares are entitled to non-cumulative dividends at the rate
of $.80 per share, payable semiannually when, as and if declared by
the Board of Directors before any dividends are paid on common shares.
In the event of any liquidation, dissolution, or winding up of the
Company, either voluntary or involuntary, the holder of the preference
shares is entitled, after provision for payment of the Company's debts
and other liabilities, to a liquidation preference of $10.00 per
share. Initially, each preference share is convertible into 1-1/3
common shares of the Company, at any time (an effective conversion
price of $7.50 per share), subject to adjustment to protect against
dilution. Emerson purchased 150,000 shares of the preferred stock on
September 6, 1984 and converted certain notes payable into 350,000
shares of preferred stock on February 6, 1986.
CARDIAC RESUSCITATOR CORPORATION
ITEM 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition
Results of Operations
There were no net revenues for the three month period ended March
31, 1996 as compared to $100,100 for the same period last year. A
decrease in the total units sold by the licensee of the Company's
patents and an adjustment by the licensee to reduce the reported
royalties for units in inventory and units on loan or used on a demo
basis reduced the royalty to zero. In the first quarter of 1994, net
revenues also included royalties from a correction of the number of
units sold in 1994. The correction reported by the licensee increased
1995 first quarter net revenues by $39,400. The Company did not incur
any costs to generate these royalties.
Selling, general and administrative expenses were relatively
unchanged in the three month period ended March 31, 1996, as compared
to the same period last year.
Interest income increased $7,200 in the three month period ended
March 31, 1996 as compared to the same period last year related to a
higher average cash balance in the current quarter and investment of a
higher proportion of the cash balance in an interest bearing account.
As a result of the foregoing factors, net earnings were $6,100
and $99,000 for the three month periods ended March 31, 1996 and 1995,
respectively.
Liquidity and Capital Resources
Net cash provided by operating activities for the three months
ended March 31, 1996 was $6,200, attributable to net earnings.
There were no financing or investing activities in the three
months ended March 31, 1996.
Through August 15, 1994, the Company was in default of the Note
due to its inability to maintain a minimum current ratio of 1.25 and
for failure to make required sinking fund payments due annually on May
1 from 1987 to 1991 and aggregating $500,000 through May 1, 1991. In
addition, the Company elected not to make scheduled interest and
principal payments aggregating $528,600 that were due on May 1, 1992.
In April 1993, a formal notice of demand for payment of the principal sum
of $500,000 plus interest of $81,300 accrued through March 31, 1993
was received by the Company from the holder of the Note (the
"Noteholder"). In August 1994, the Company and the Noteholder agreed
to settle the Note in full satisfaction of the Company's obligations
for $500,000 in cash. The Note was paid in full on August 16, 1994.
The Note was guaranteed by Emerson, which currently owns approximately
79% of the Company's outstanding common stock and approximately 92% of
the Company's voting power. However, Emerson was precluded from
satisfying such guarantee due to certain restrictions created in
connection with its bankruptcy proceeding and reorganization.
From July 1989 to June 1990, the Company had been engaged in the
performance of consulting services with respect to the strategic
marketing and sale and attendant financial considerations of medical
electronic instrumentation and devices for Truvel, a concern engaged
in the development, manufacture and sale of electronic digitizing
image scanners. Such services were performed pursuant to a two year
agreement entered into in June 1989 between the Company and Truvel
providing for the Company's performance of the aforementioned
consulting services on Truvel's behalf for an aggregate consideration
of $240,000. Contemporaneously with its entrance into such an
agreement, the Company acquired a $750,000 equity interest in Truvel.
As part of the investment, the Company received a distribution of
139,993 shares of Vision Ten Inc. ("Vision Ten") common stock. On June
5, 1990, Truvel instituted a voluntary proceeding under Chapter 11 of
the Bankruptcy Code for the Central District of California. On
September 4, 1990, a plan of reorganization was approved providing for
the sale of Truvel's assets and the cancellation of all common shares.
Based on the bankruptcy court decision, the Company has not received
revenues from Truvel and has written off its investment in Truvel
aggregating $708,000. Therefore, no consulting revenues have been
recognized since June 1990. In October 1991, the Company sold 12,000
shares of Vision Ten common stock for net proceeds of $4,800,
resulting in a net gain of $1,200. The Company subsequently sold all
remaining Vision Ten common stock in January 1992 for net proceeds of
$65,400, resulting in a net gain of $27,000.
As a consequence of Truvel's insolvency proceeding, commencing
June 1990, the Company began to pursue acquisitions or other business
opportunities. There are currently no specific plans or
understandings to cause the Company to make any specific acquisition
or enter into any specific business opportunity. The Company's current
operating activities consist of licensing patents relating to the
medical electronics business which it sold in June 1988 (the "Asset
Sale"). The Company's medical electronics business consisted of the
development, manufacture, and sale of portable devices that
electronically identified in human beings ventricular fibrillation
and/or severe slowing of the heart and provided such patients with
appropriate electrical treatment by means of defibrillation shock or
pacing stimulation.
As part of the terms of the Asset Sale, the Company was entitled
to receive minimum royalties of $150,000 in each of the three years
ending June 30, 1991. In the contract year ended June 30, 1991, the
Company recognized additional royalties in excess of the minimum
royalty level. The minimum royalty was not exceeded in the contract
years ended June 30, 1990 and 1989. The royalties earned under the
Asset Sale extend to the expiration date of the patents. Based on the
change in technologies and the development of new defibrillation
devices by the licensee, the licensee has notified the Company that
sales of products utilizing the Company's patents will probably
continue only through the end of 1996.
The Company has received funding from Emerson in prior years;
however, it is unlikely that the Company will receive any funding from
Emerson for the Company's operations. The Company believes that cash
flow from operations and the available cash balance will be sufficient
to maintain the Company's operations for the next year.
As a result of the termination of its consulting activities and
the composition of its assets, the Company could be deemed to be an
investment company for the purposes of the Investment Company Act of
1940, as amended ("1940 Act"). If such a determination were made, the
Company would be required to register as an investment company under
the 1940 Act. The Act imposes restrictions as to an investment
company's name, capital structure, issuance of its securities,
investments, constitution of its board of directors, and power to
declare dividends and select accountants and financial officers, as
well as to the rights of its shareholders to vote. In addition, the
1940 Act, if applicable, would require the Company to register under
the 1940 Act as an Investment Company, adopt a specific form of
corporate structure and comply with certain burdensome reporting,
record keeping, voting, proxy, disclosure and other rules and
regulations. If the Company were to be characterized as an investment
company for purposes of the 1940 Act, the failure by the Company to
satisfy regulatory requirements, whether on a timely basis or at all,
would under certain circumstances, have a material adverse effect on
the Company.
CARDIAC RESUSCITATOR CORPORATION
PART II
OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
Exhibits pursuant to provisions of Item 601 of
Regulation S-K are not applicable.
(b) Reports on Form 8-K:
During the three month period ended March 31,
1996, no Form 8-K was filed.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this Report to be signed on its
behalf by the undersigned thereunto duly authorized.
CARDIAC RESUSCITATOR CORPORATION
(Registrant)
Date: June 11, 1996
/s/ Albert G. McGrath, Jr.
Albert G. McGrath, Jr.*
* Duly authorized to execute on behalf of the Registrant.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 5,400
<SECURITIES> 588,100
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 593,500
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 593,500
<CURRENT-LIABILITIES> 133,000
<BONDS> 0
0
5,000,000
<COMMON> 678,400
<OTHER-SE> (5,217,900)
<TOTAL-LIABILITY-AND-EQUITY> 593,500
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,900
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (8,100)
<INCOME-PRETAX> 6,200
<INCOME-TAX> 0
<INCOME-CONTINUING> 6,200
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,200
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
