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 September 30, 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 September 30,
1996: 17,971,775.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
CARDIAC RESUSCITATOR CORPORATION
STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
Nine Months Ended Three Months Ended
September 30, September 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net revenues . . . . . . . . $ 178,400 $ 218,400 $ 28,400 $42,700
Selling, general &
administrative expenses . . 5,800 16,000 1,900 12,000
Interest income - net . . . . (22,000) (4,600) (7,100) (1,800)
(16,200) 11,400 (5,200) 10,200
Net Earnings . . . . . . . . 194,600 207,000 33,600 32,500
Net earnings per common share: $ .01 $ .01 $ - $ -
Weighted average number of
common shares outstanding. . 17,971,775 17,971,775 17,971,775 17,971,775
The accompanying notes are an integral part of the interim financial statements.
</TABLE>
<TABLE>
CARDIAC RESUSCITATOR CORPORATION
BALANCE SHEETS
(Unaudited)
<CAPTION>
September 30, December 31,
1996 1995
ASSETS
Current Assets:
<S> <C> <C>
Cash and cash equivalents . . . . . $ 753,500 $ 587,300
Royalty receivable . . . . . . . . . 28,400 -
Total current assets . . . . . . . 781,900 587,300
TOTAL . . . . . . . . . . . . . . . $ 781,900 $ 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 . . . . . . . . . (25,405,800) (25,600,400)
Total shareholders' equity . . . . 648,900 454,300
TOTAL . . . . . . . . . . . . . . . $ 781,900 $ 587,300
The accompanying notes are an integral part of these interim financial
statements.
</TABLE>
<TABLE>
CARDIAC RESUSCITATOR CORPORATION
STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Nine Months Ended
September 30,
1996 1995
Cash Flows from Operating Activities:
<S> <C> <C>
Net cash provided by operating
activities . . . . . . . . . . . . . . . $ 166,200 $ 228,000
Net increase in cash and cash
equivalents . . . . . . . . . . . . . . . 166,200 228,000
Cash and cash equivalents at beginning
of year . . . . . . . . . . . . . . . . . 587,300 315,900
Cash and cash equivalents at end of period . $ 753,500 $ 543,900
Supplemental disclosure of cash flow
information:
Interest paid . . . . . . . . . . . . . . $ --- $ ---
The accompanying notes are an integral part of the interim financial
statements.
</TABLE>
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 are
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 re-organization 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. See
Note 7 for Subsequent Events.
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 (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, the holder of the Note (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 June 6, 1984
have not been included in Emerson's consolidated tax return and the accumulated
oper-ating losses of $5,193,700 for the period are available to the Company to
offset any taxable income earned through 1999. Since June 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 June 6, 1984 to September 30, 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 nine month periods ended September
30, 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, 1995 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.
NOTE 7 - SUBSEQUENT EVENTS
In December 1996, the Company sold its patents relating to the medical
electronics business for $81,625. Therefore, the Company will no longer receive
royalty revenue effective October 1, 1996.
CARDIAC RESUSCITATOR CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
ITEM 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition
RESULTS OF OPERATIONS
Net revenues for the three and nine month periods ended September 30, 1996
were $28,400 and $178,400, which includes corrections during the six months
ended June 30, 1996, as compared to $42,700 and $218,400 for the same periods
last year. The decrease in the total units sold by the licensee of the Company's
patents was due to the pending sale negotiations of the patent during the nine
months ended September 30, 1996. The patent was subsequently sold on December
19, 1996. The Company did not incur any costs to generate these royalties.
Selling, general and administrative expenses ("S,G&A") decreased $10,100
and $10,200 in the three and nine month periods ended September 30, 1996,
respectively, as compared to the same periods last year, resulting from a
decrease in professional fees.
Interest income increased $5,300 and $17,400 in the three and nine month
periods ended September 30, 1996. The increase was related to the investment of
a higher proportion of the available cash balance in an interest bearing
account.
As a result of the foregoing factors, net earnings were $33,600 and
$194,600 for the three and nine month periods ended September 30, 1996,
respectively, in comparison to net earnings of $32,500 and $207,000,
respectively, for the same periods last year.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities for the nine months ended
September 30, 1996 was $166,200, attributable to net earnings and the collection
of royalties.
There were no financing or investing activities for the nine months ended
September 30, 1996.
Through August 15, 1994, the Company was in default of its 11-1/2%
convertible subordinated note (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. Contempor-aneously 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 oppor-tunities. 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.
In December 1996, the Company sold its patents relating to the medical
electronics business for $81,625. Therefore, the Company will no longer receive
royalty revenue effective October 1, 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 September 30, 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: April 11, 1997 /s/ Eugene I. Davis
Eugene I. Davis*
* Duly authorized to execute on behalf of the Registrant.
