<PAGE> 1
FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
/X/ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended July 30, 1995
/ / TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from to .
--------------------- -------------------------
Commission file number 20-8969
-------
NOVAMETRIX MEDICAL SYSTEMS INC.
(Exact name of small business issuer as specified in its charter)
Delaware 06-0977422
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
1 Barnes Industrial Park Road, Wallingford, CT 06492
---------------------------------------------------------
(Address of principal executive offices) (zip code)
Issuer's telephone number, including area code: (203) 265-7701
--------------
-------------------------------------------------------------------------------
(Former name, former address and former fiscal year if changed
since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
YES X NO
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS:
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
Common Stock, $0.01 par value: 5,876,547 shares issued and outstanding as of
September 1, 1995.
Transitional Small Business Disclosure Format (check one):
YES NO X
----- -----
Page 1 of 14
Index to Exhibits at Page 12
<PAGE> 2
NOVAMETRIX MEDICAL SYSTEMS INC.
INDEX
<TABLE>
<CAPTION>
PAGE
<S> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Condensed Consolidated Statements of Operations (Unaudited) -
Quarters ended July 30, 1995 and July 31, 1994 3
Condensed Consolidated Balance Sheets (Unaudited) -
July 30, 1995 and April 30, 1995 4
Condensed Consolidated Statements of Cash Flows (Unaudited) -
Quarters ended July 30, 1995 and July 31, 1994 6
Notes to Condensed Consolidated Financial Statements
(Unaudited) - July 30, 1995 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN
OF OPERATION 8
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 10
SIGNATURES 11
</TABLE>
Page 2 of 14
<PAGE> 3
PART I - FINANCIAL INFORMATION
NOVAMETRIX MEDICAL SYSTEMS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
QUARTER ENDED QUARTER ENDED
JULY 30, 1995 JULY 31, 1994
------------- -------------
<S> <C> <C>
Net sales $6,080,509 $5,495,063
Costs and expenses:
Cost of products sold 2,590,268 2,392,142
Research and product development 685,253 534,421
Selling, general and administrative 2,312,332 2,220,126
Interest 74,822 124,227
Other expense 21,667 19,973
---------- ----------
5,684,342 5,290,889
---------- ----------
INCOME BEFORE INCOME TAXES 396,167 204,174
Income taxes - current 8,000
NET INCOME $ 388,167 $ 204,174
========== ==========
Per common share amounts:
Primary $ .05 $ .03
========== ==========
Fully diluted $ .05 $ .03
========== ==========
Average common shares outstanding:
Primary 8,096,077 7,349,425
Fully diluted 8,096,077 7,368,713
</TABLE>
See accompanying notes.
Page 3 of 14
<PAGE> 4
NOVAMETRIX MEDICAL SYSTEMS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
<TABLE>
<CAPTION>
ASSETS JULY 30, 1995 APRIL 30, 1995
------ ------------- --------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 269,102 $ 272,033
Accounts receivable, less
allowance for losses of $250,000 5,258,887 5,247,171
Inventories:
Finished products 1,223,452 1,247,541
Work in process 1,159,834 1,088,864
Materials 2,891,108 2,595,455
----------- -----------
5,274,394 4,931,860
Prepaid expenses 114,944 106,440
----------- -----------
TOTAL CURRENT ASSETS 10,917,327 10,557,504
EQUIPMENT 5,834,378 5,736,892
Accumulated depreciation (deduction) (4,699,264) (4,603,479)
----------- -----------
1,135,114 1,133,413
LICENSE, TECHNOLOGY, PATENTS AND OTHER 7,642,866 7,606,069
Accumulated amortization (deduction) (2,814,559) (2,691,005)
----------- -----------
4,828,307 4,915,064
----------- -----------
$16,880,748 $16,605,981
=========== ===========
</TABLE>
See accompanying notes.
Page 4 of 14
<PAGE> 5
NOVAMETRIX MEDICAL SYSTEMS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) - (CONTINUED)
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY JULY 30, 1995 APRIL 30, 1995
------------------------------------ ------------- --------------
<S> <C> <C>
CURRENT LIABILITIES
Current portion long-term debt $ 900,000 $ 925,000
Accounts payable 1,666,238 1,662,950
Accrued expenses 1,438,102 1,557,798
----------- -----------
TOTAL CURRENT LIABILITIES 4,004,340 4,145,748
LONG-TERM DEBT, less current portion 2,183,333 2,308,333
REDEEMABLE PREFERRED STOCK, at
redemption and liquidation value 1,000,000 1,000,000
SHAREHOLDERS' EQUITY
Preferred Stock, $1 par value,
authorized 1,000,000 shares, 100,000
issued and outstanding (less 40,000
shares redeemable), at liquidation
value 1,500,000 1,500,000
Common Stock, $.01 par value,
authorized 20,000,000 shares,
issued 6,211,999 at July 30 1995,
and 6,136,533 at April 30, 1995,
including 338,452 Treasury shares 62,120 61,365
Additional paid-in capital 26,410,688 26,239,685
Retained-earnings deficit (15,792,695) (16,162,112)
Treasury stock (2,487,038) (2,487,038)
----------- -----------
9,693,075 9,151,900
----------- -----------
$16,880,748 $16,605,981
=========== ===========
</TABLE>
See accompanying notes.
Page 5 of 14
<PAGE> 6
NOVAMETRIX MEDICAL SYSTEMS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
QUARTER QUARTER
ENDED ENDED
JULY 30, 1995 JULY 31, 1994
------------- -------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 388,167 $ 204,174
Adjustments to reconcile net income
to net cash provided by operating activities
Depreciation 98,260 108,276
Amortization 124,599 122,277
Changes in operating assets and liabilities
Increase in accounts receivable (11,716) (185,237)
Increase in inventories (342,534) (93,558)
(Increase) decrease in prepaid expenses (8,504) 175,961
Increase (decrease) in accounts payable 3,288 (88,498)
(Decrease) increase in accrued expenses (144,696) 301,169
--------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 106,864 544,564
INVESTING ACTIVITIES
Purchases of equipment (99,961) (190,476)
Purchases of license, technology, patents and other (37,842) (367,245)
--------- -----------
NET CASH USED BY INVESTING ACTIVITIES (137,803) (557,721)
FINANCING ACTIVITIES
Proceeds from borrowings 2,500,000
Principal payments on borrowings (125,000) (5,785,007)
Principal payment on customer advance (654,400)
Dividends on Preferred Stock (18,750) (18,750)
Net proceeds from sales of Common Stock 171,758 3,977,759
--------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 28,008 19,602
--------- -----------
(DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS (2,931) 6,445
Cash and cash equivalents at beginning of period 272,033 267,882
--------- -----------
Cash and cash equivalents at end of period $ 269,102 $ 274,327
========= ===========
</TABLE>
See accompanying notes.
Page 6 of 14
<PAGE> 7
NOVAMETRIX MEDICAL SYSTEMS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JULY 30, 1995
NOTE 1 -- BASIS OF PRESENTATION
The condensed consolidated financial statements of Novametrix Medical
Systems Inc. (the "Company") have been prepared in accordance with generally
accepted accounting principles for interim financial information and with the
instructions to Form 10-QSB and Article 10 of Regulation S-X. Accordingly, they
do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three months ended July 30, 1995 are not necessarily
indicative of the results that may be expected for the year ending April 28,
1996. For further information, refer to the consolidated financial statements
and footnotes thereto included in the Company's annual report on Form 10-KSB
for the year ended April 30, 1995.
NOTE 2 -- PER SHARE AMOUNTS
Common stock equivalents consist of the Company's Preferred Stock, stock
options, warrants and shares subscribed under the Company's Employee Stock
Purchase Plan. The computation of dilutive common stock equivalents is based on
the if-converted method for the Preferred Stock and on the treasury stock
method for the other common stock equivalents using the average market price
for the primary earnings per share computations and the higher of average or
period-end market price for the fully diluted earnings per share computations.
NOTE 3 -- CONTINGENCIES
The Company is a party to various legal proceedings generally incidental
to its business. Management believes that none of such legal proceedings will
have a material adverse effect on the Company's consolidated financial
position, results of operations or liquidity.
Page 7 of 14
<PAGE> 8
NOVAMETRIX MEDICAL SYSTEMS INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
RESULTS OF OPERATIONS
Operating results for the three-months ended July 30, 1995 compared
favorably to the three months ended July 31, 1994. The Company recorded net
income of approximately $388,000 or $.05 per share on net sales of
approximately $6.1 million for the three months ended July 30, 1995 compared to
net income of approximately $204,000 or $.03 per share on net sales of
approximately $5.5 million for the first quarter of the prior fiscal year.
Net sales increased by approximately $585,000 or 11% for the three months
ended July 30, 1995 compared to the three months ended July 31, 1994. The
year-to-year increase was primarily attributable to the growth of domestic and
international product sales and higher sales levels to OEM customers who
utilize the Company's technology in their monitoring systems.
Cost of products sold as a percentage of net sales for the three months
ended July 30, 1995 improved to 42.6% compared to 43.5% for the three months
ended July 31, 1994. The reduction in cost of products sold as a percentage of
net sales resulted from favorable product mix and higher labor efficiencies.
Research and product development ("R & D") expenses increased by
approximately $151,000 or 28% for the three months ended July 30, 1995
compared to the corresponding period of the prior fiscal year. The increase to
over 11% of net sales, was due primarily to higher levels of salaries and
related fringe benefits and outside professional services, a portion of which
are unique expenses not expected to continue for future quarters. The Company
expects R & D spending to approximate 10% of net sales during the remainder of
Fiscal 1996.
Selling, general and administrative ("S,G&A") expenses increased by
approximately $92,000 or 4% for the three months ended July 30, 1995 compared
to the three months ended July 31, 1994. International selling expenses which
increased as a result of costs associated with additional sales personnel and
higher sales levels, were effectively offset by lower domestic selling expenses
in the quarter. Higher administrative expenses resulted primarily from
increased outside service costs, primarily recruiting fees, insurance and
shareholder reporting costs.
Interest expense for the three months ended July 30, 1995 decreased by
approximately $49,000 or 40% compared to the corresponding period of the prior
fiscal year. The improvement resulted from a decrease in the Company's bank
debt as a result of the Company's public offering consummated in June 1994 and
scheduled principal payments.
The Company's backlog of firm orders aggregated approximately $4,180,000
as of July 30, 1995 compared to approximately $3,994,000 as of April 30, 1995.
Except for orders pursuant to long-term OEM agreements, the Company
traditionally ships its products on a current basis. As such, the Company does
not consider its backlog at any time to be a meaningful indicator of future
sales.
Page 8 of 14
<PAGE> 9
LIQUIDITY AND SOURCES OF CAPITAL
As of July 30, 1995, the Company's working capital increased to $6,913,000
from $6,412,000 at April 30, 1995. The Company's current ratio improved to 2.7
to 1 at July 30, 1995 from 2.5 to 1 at April 30, 1995 primarily as a result of
the Company's continued improvement in operating results. In addition, the
Company had $1,425,000 available for borrowing under its revolving credit
agreement at both July 30, 1995 and April 30, 1995.
Approximately $107,000 of cash was provided by operations for the three
months ended July 30, 1995. Temporary increases in inventory resulting from
product mix associated with new product introductions and a decrease in accrued
expenses partially offset the approximately $611,000 of cash provided from net
income, after adding back non-cash expenses (depreciation and amortization).
The Company anticipates continued improvement in its financial results for
the balance of fiscal 1996 and expects cash flow from operations to exceed
scheduled debt service requirements and planned investing activities, with the
surplus being applied to reduce the balance of the Company's revolving credit
facility. Management believes that cash provided by operations will support its
planned rate of growth and that additional funds, if required, will be
available from the Company's revolving credit facility or from other sources on
commercially reasonable terms. In addition, the Company has approximately
$5,600,000 of additional net proceeds that it could potentially realize upon
exercise of the Class A and Class B Warrants issued in June 1994, which are
redeemable by the Company under specified conditions.
During July 1995, the Company amended its revolving credit agreement,
extending the expiration date to August 31, 1997 and modifying the interest
rate to the London Interbank Offering Rate ("LIBOR") plus 2.5% (8.375% at
August 31, 1995). Under the revised agreement, borrowing continues to be
limited to a maximum of $2,500,000 or 75% of the Company's eligible accounts
receivable, as defined. Furthermore, the bank has released the Company's
patents and trademarks previously held as collateral for the Company's debt
obligations.
Page 9 of 14
<PAGE> 10
PART II- OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K.
(a) Exhibits: The exhibits required to be filed as part of the Quarterly
Report on Form 10-QSB are listed in the attached Index to Exhibits.
(b) Reports on Form 8-K: There were no reports on Form 8-K filed during
the quarter ended July 30, 1995.
Page 10 of 14
<PAGE> 11
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
NOVAMETRIX MEDICAL SYSTEMS INC.
Dated: September 8, 1995 s/WILLIAM J. LACOURCIERE
-------------------------------
William J. Lacourciere
Chairman of the Board,
President and
Chief Executive Officer
Dated: September 8, 1995 s/JOSEPH A. VINCENT
-------------------------------
Joseph A. Vincent
Vice President Finance,
Chief Financial Officer and
Principal Accounting Officer
Page 11 of 14
<PAGE> 12
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
11 Statement Re: Computation of Per Share Earnings 13
27 Financial Data Schedule 14
</TABLE>
Page 12 of 14
<PAGE> 1
EXHIBIT 11
NOVAMETRIX MEDICAL SYSTEMS INC.
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
QUARTER QUARTER
ENDED ENDED
07-30-95 07-31-94
-------- --------
<S> <C> <C>
PRIMARY EARNINGS PER SHARE:
Weighted average number of shares of
Common Stock outstanding 5,851,621 5,104,322
Net effect of dilutive common stock
equivalents (1) 2,244,456 2,245,103
--------- ---------
Total weighted average number of shares
of Common Stock and dilutive common
stock equivalents outstanding 8,096,077 7,349,425
========= =========
FULLY DILUTED EARNINGS PER SHARE:
Weighted average number of shares of
Common Stock outstanding 5,851,621 5,104,322
Net effect of dilutive common stock
equivalents (1) 2,244,456 2,264,391
--------- ---------
Total weighted average number of shares
of Common Stock and dilutive common
stock equivalents outstanding 8,096,077 7,368,713
========= =========
Net income $ 388,167 $ 204,174
Per common share amounts:
Primary $ .05 $ .03
Fully Diluted $ .05 $ .03
</TABLE>
(1) Common stock equivalents consist of the Company's Preferred Stock, stock
options, warrants and shares subscribed under the Company's Employee Stock
Purchase Plan. The computation of dilutive common stock equivalents is based on
the if-converted method for the Preferred Stock and on the treasury stock
method for the other common stock equivalents using the average market price
for the primary earnings per share computations and the higher of average or
period-end market price for the fully diluted earnings per share computations.
Page 13 of 14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED NOVAMETRIX MEDICAL SYSTEMS INC. CONDENSED CONSOLIDATED STATEMENT OF
OPERATIONS FOR THE QUARTER ENDED JULY 30, 1995 AND THE CONDENSED CONSOLIDATED
BALANCE SHEETS AT JULY 30, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> APR-28-1996
<CASH> 269,102
<SECURITIES> 0
<RECEIVABLES> 5,508,887
<ALLOWANCES> (250,000)
<INVENTORY> 5,274,394
<CURRENT-ASSETS> 10,917,327
<PP&E> 5,834,378
<DEPRECIATION> (4,699,264)
<TOTAL-ASSETS> 16,880,748
<CURRENT-LIABILITIES> 4,004,340
<BONDS> 2,183,333
<COMMON> 62,120
0
2,500,000
<OTHER-SE> 8,130,955
<TOTAL-LIABILITY-AND-EQUITY> 16,880,748
<SALES> 6,080,509
<TOTAL-REVENUES> 6,080,509
<CGS> 2,590,268
<TOTAL-COSTS> 5,587,853
<OTHER-EXPENSES> 21,667
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 74,822
<INCOME-PRETAX> 396,167
<INCOME-TAX> 8,000
<INCOME-CONTINUING> 388,167
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 388,167
<EPS-PRIMARY> .05
<EPS-DILUTED> .05
</TABLE>
