<PAGE> 1
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 November 2, 1997
[ ] 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 20-8969
NOVAMETRIX MEDICAL SYSTEMS INC.
(Exact name of registrant as specified in its charter)
Delaware 06-0977422
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
5 Technology Drive, Wallingford, CT 06492
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (203) 265-7701
(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 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
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Common Stock, $0.01 par value: 8,787,230 shares issued and outstanding as of
December 15, 1997
Page 1 of 34
Index to Exhibits at Page 16
<PAGE> 2
NOVAMETRIX MEDICAL SYSTEMS INC.
INDEX
<TABLE>
<CAPTION>
PAGE
<S> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (Unaudited)
Condensed Consolidated Statements of Operations -
Quarters ended November 2, 1997 and October 27, 1996 3
Six months ended November 2, 1997 and October 27, 1996 4
Condensed Consolidated Balance Sheets -
November 2, 1997 and April 27, 1997 5
Condensed Consolidated Statements of Cash Flows -
Six months ended November 2, 1997 and October 27, 1996 7
Notes to Condensed Consolidated Financial Statements -
November 2, 1997 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 10
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 13
ITEM 5. OTHER INFORMATION 14
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 14
SIGNATURES 15
</TABLE>
Page 2 of 34
<PAGE> 3
PART I - FINANCIAL INFORMATION
NOVAMETRIX MEDICAL SYSTEMS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
QUARTER ENDED QUARTER ENDED
NOVEMBER 2, 1997 OCTOBER 27, 1996
---------------- ----------------
<S> <C> <C>
Net sales $ 7,505,960 $ 6,591,346
Costs and expenses:
Cost of products sold 3,278,430 2,840,473
Research and product development 851,156 842,662
Selling, general and administrative 2,495,182 2,264,158
Interest 20,025 46,769
Other expense 23,379 1,126
----------- -----------
6,668,172 5,995,188
----------- -----------
INCOME BEFORE INCOME TAXES 837,788 596,158
Income tax provision (benefit) 211,000 (100,000)
----------- -----------
NET INCOME $ 626,788 $ 696,158
=========== ===========
Earnings per common share:
Primary $ 0.07 $ 0.09
=========== ===========
Fully diluted $ 0.07 $ 0.08
=========== ===========
Weighted average common shares outstanding:
Primary 9,082,105 8,153,379
Fully diluted 9,304,236 8,359,407
</TABLE>
See accompanying notes.
Page 3 of 34
<PAGE> 4
PART I - FINANCIAL INFORMATION
NOVAMETRIX MEDICAL SYSTEMS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED SIX MONTHS ENDED
NOVEMBER 2, 1997 OCTOBER 27, 1996
---------------- ----------------
<S> <C> <C>
Net sales $14,872,421 $ 13,013,347
Costs and expenses:
Cost of products sold 6,392,882 5,578,844
Research and product development 1,711,313 1,641,956
Selling, general and administrative 5,034,156 4,541,312
Interest 104,332 99,059
Other expense 32,092 8,144
----------- ------------
13,274,775 11,869,315
----------- ------------
INCOME BEFORE INCOME TAXES 1,597,646 1,144,032
Income tax provision (benefit) 447,000 (200,000)
----------- ------------
NET INCOME $ 1,150,646 $ 1,344,032
=========== ============
Earnings per common share:
Primary $ 0.13 $ 0.17
=========== ============
Fully diluted $ 0.13 $ 0.16
=========== ============
Weighted average common shares outstanding:
Primary 8,660,543 7,980,756
Fully diluted 9,171,078 8,328,146
</TABLE>
See accompanying notes.
Page 4 of 34
<PAGE> 5
NOVAMETRIX MEDICAL SYSTEMS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
<TABLE>
<CAPTION>
ASSETS NOVEMBER 2, 1997 APRIL 27, 1997
- ------ ---------------- --------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 303,466 $ 236,808
Accounts receivable, less
allowance for losses of $250,000 6,762,292 8,328,515
Inventories:
Finished products 2,138,598 1,741,426
Work in process 1,914,648 1,851,736
Materials 3,366,001 3,241,653
------------ ------------
7,419,247 6,834,815
Deferred income taxes, net 2,450,000 2,450,000
Prepaid expenses and other current assets 380,428 313,220
------------ ------------
TOTAL CURRENT ASSETS 17,315,433 18,163,358
Equipment 8,045,161 7,683,006
Less accumulated depreciation (5,679,620) (5,396,091)
------------ ------------
2,365,541 2,286,915
License, technology, patents and other costs 7,645,592 7,849,401
Less accumulated amortization (3,569,678) (3,675,242)
------------ ------------
4,075,914 4,174,159
Deferred income taxes, net 2,183,000 2,600,000
------------ ------------
$ 25,939,888 $ 27,224,432
============ ============
</TABLE>
See accompanying notes.
Page 5 of 34
<PAGE> 6
NOVAMETRIX MEDICAL SYSTEMS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) - (CONTINUED)
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY NOVEMBER 2, 1997 APRIL 27, 1997
- ------------------------------------ ---------------- --------------
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 1,471,424 $ 2,058,142
Accrued expenses 1,427,871 2,299,709
Current portion of capital lease obligations 32,987 79,380
Current portion of long-term debt 2,895,000
------------ ------------
TOTAL CURRENT LIABILITIES 2,932,282 7,332,231
Capital lease obligations, less current portion 102,510 198,942
Long-term debt, less current portion 583,333
Redeemable Preferred Stock, $1 par value,
40,000 shares at redemption and liquidation value
at April 27, 1997 1,000,000
SHAREHOLDERS' EQUITY
Common Stock, $.01 par value, authorized
20,000,000 shares, issued 8,738,967 at
November 2, 1997 and 7,525,539 at April 27, 1997,
including 338,452 Treasury shares 87,390 75,255
Additional paid-in capital 32,384,606 28,737,217
Retained-earnings (deficit) (7,079,862) (8,215,508)
Treasury stock (2,487,038) (2,487,038)
------------ ------------
22,905,096 18,109,926
------------ ------------
$ 25,939,888 $ 27,224,432
============ ============
</TABLE>
See accompanying notes.
Page 6 of 34
<PAGE> 7
NOVAMETRIX MEDICAL SYSTEMS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS
ENDED ENDED
NOVEMBER 2, 1997 OCTOBER 27, 1996
---------------- ----------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 1,150,646 $ 1,344,032
Adjustments to reconcile net income
to net cash provided (used) by operating activities:
Depreciation 283,755 194,743
Amortization 270,625 261,790
Deferred income taxes 417,000 (230,000)
Increases (decreases) in cash flows as
a result of changes in operating assets and liabilities:
Accounts receivable 1,619,474 (1,823,981)
Inventories (584,432) (45,147)
Prepaid expenses and other current assets (67,208) (865,833)
Accounts payable (586,718) 345,425
Accrued expenses (871,838) 325,330
NET CASH PROVIDED (USED) BY OPERATING
ACTIVITIES ----------- -----------
1,631,304 (493,641)
INVESTING ACTIVITIES
Purchases of equipment (362,381) (509,604)
Purchases of license, technology, patents and other (225,631) (26,024)
----------- -----------
NET CASH USED BY INVESTING ACTIVITIES (588,012) (535,628)
FINANCING ACTIVITIES
Proceeds from borrowings 720,000
Principal payments on borrowings (3,621,158) (250,000)
Dividends on Preferred Stock (15,000) (15,000)
Net proceeds from sales of Common Stock 2,659,524 593,285
NET CASH (USED) PROVIDED BY FINANCING
ACTIVITIES ----------- -----------
(976,634) 1,048,285
----------- -----------
INCREASE IN CASH AND CASH EQUIVALENTS 66,658 19,016
Cash and cash equivalents at beginning of period 236,808 283,003
----------- -----------
Cash and cash equivalents at end of period $ 303,466 $ 302,019
=========== ===========
NON-CASH INVESTING ACTIVITIES:
Capital lease obligation $ 149,052
</TABLE>
See accompanying notes.
Page 7 of 34
<PAGE> 8
NOVAMETRIX MEDICAL SYSTEMS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOVEMBER 2, 1997
NOTE 1 - BASIS OF PRESENTATION: The accompanying 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-Q 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. Due to the Company's 52/53 week fiscal
year reporting structure ending on the Sunday closest to April 30th, the first
quarter of the current fiscal year included an extra week with the six month
period containing 27 weeks compared to 26 weeks in the prior fiscal year.
Operating results for the quarter and six months ended November 2, 1997 are not
necessarily indicative of the results that may be expected for the year ending
May 3, 1998. For further information, refer to the consolidated financial
statements and footnotes thereto included in the Company's annual report on
Form 10-K for the year ended April 27, 1997.
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.
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings Per Share". Statement No. 128
simplifies the standards for computing earnings per share and improves their
comparability to international standards. The Company will adopt this standard,
as required, in the third quarter of fiscal 1998, at which time it will change
the method currently used to compute earnings per share and restate all prior
periods presented. Had this standard been adopted at November 2, 1997, the
Company would have reported basic earnings per share of $0.08 and $0.10,
respectively, for the quarters ended November 2, 1997 and October 27, 1996, and
$0.15 and $0.20, respectively, for the six-month periods ended November 2, 1997
and October 27, 1996. The impact of Statement No. 128 on the calculation of
fully diluted earnings per share would not have been material.
Page 8 of 34
<PAGE> 9
NOVAMETRIX MEDICAL SYSTEMS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(CONTINUED)
NOTE 3 - CAPITAL STOCK: On September 26, 1997, the Company's primary lender,
First Union Corporation, the holder of the outstanding Preferred Stock,
Series B, and 271,738 warrants to purchase common stock of the Company,
converted all of such Preferred Stock and exercised all of such warrants.
As a result of the December 8, 1997 expiration date of the Company's Class A
Warrants, approximately 373,000 Class A Warrants were exercised subsequent to
the end of the second quarter.
NOTE 4 - INCOME TAXES: For the second quarter and six months ended November 2,
1997, the provision for income taxes is based upon the Company's estimated
income tax expense for fiscal 1998. The computed effective tax rate differed
from the statutory tax rate due to certain timing differences for book to tax
purposes and the establishment of a Foreign Sales Corporation which is expected
to result in a reduction in the Company's overall effective tax rate.
NOTE 5 - 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 9 of 34
<PAGE> 10
NOVAMETRIX MEDICAL SYSTEMS INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Operating results for both the second quarter and the first six months
ended November 2, 1997 improved compared to the corresponding periods of the
prior fiscal year ended October 27, 1996. On a comparable, fully diluted, fully
taxed basis, net income for the quarter ended November 2, 1997 increased to
approximately $627,000 or $0.07 per share compared to $393,000 or $0.05 per
share for the quarter ended October 27, 1996. Net income for the six months
ended November 2, 1997 increased to approximately $1,151,000 or $0.13 per share
as compared to approximately $755,000 or $0.09 per share for the first six
months of the prior year when comparing both periods on a fully diluted, fully
taxed basis. Reported net income for the quarter and six months ended October
27, 1996 which included certain deferred tax benefits described below, was
approximately $696,000 or $0.08 per fully diluted share and approximately
$1,344,000, or $0.16 per fully diluted share, respectively.
Revenues for the second quarter of fiscal 1998 increased 14% to
approximately $7,506,000 compared to revenues of approximately $6,591,000 for
the second quarter of fiscal 1997. Revenues for the first six months of fiscal
1998 increased 14% to approximately $14,872,000 as compared to revenues of
approximately $13,013,000 for the first six months of fiscal 1997. The increase
in revenues for both periods was primarily led by an increase in international
sales and sales to original equipment manufacturers (OEMs), partially offset by
delays in domestic orders.
Cost of products sold as a percentage of revenues was approximately 43.7%
and 43.0%, respectively, for the second quarter and first six months of fiscal
1998 as compared to 43.1% and 42.9% for the second quarter and first six months
of fiscal 1997. Cost of products sold as a percentage of revenues was relatively
unchanged from year to year. The Company is continuing to pursue improvements in
gross margins from product cost reductions and manufacturing efficiencies.
Research and product development ("R&D") expenses increased by 1% to
approximately $851,000 or 11% of revenue for the second quarter of fiscal 1998
compared to approximately $843,000 or 13% of revenue for the second quarter of
fiscal 1997. R & D expenses increased by 4% to approximately $1,711,000 or 12%
of revenue for the first six months of fiscal 1998 compared to approximately
$1,642,000 or 13% of revenue for the first six months of the prior fiscal year.
Increases in salaries and related fringe benefits and depreciation were
partially offset by decreased outside professional services for both periods
reported.
Selling, general and administrative ("S,G&A") expenses increased by 10% to
approximately $2,495,000 or 33% of revenues for the second quarter of fiscal
1998 compared to approximately $2,264,000 or 34% of revenues for the second
quarter of fiscal 1997. Increases in marketing promotional costs, international
selling expenses required to support increased international sales, and G & A
expenditures including legal, accounting and insurance were responsible for the
overall
Page 10 of 34
<PAGE> 11
NOVAMETRIX MEDICAL SYSTEMS INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
increase in S,G & A expenses during this period. S, G & A expenditures increased
by $493,000 or 11% to approximately $5,034,000 or 34% of revenues for the first
six months of fiscal 1998 compared to approximately $4,541,000 or 35% of
revenues for the first six months of fiscal 1997. Increased marketing salaries
and related fringe benefits, marketing promotional costs primarily related to
new product support, and international selling expenses were largely responsible
for the increase in S, G & A expenses for the first six months of fiscal 1998 as
compared to the first six months of the prior year. Increases in G & A expenses
including salaries and related fringe benefits, legal costs, insurance and
depreciation contributed to the balance of the increase in S,G & A.
Interest expense decreased by approximately $27,000 or 57% for the second
quarter ended November 2, 1997 as compared to the quarter ended October 27,
1996. The decrease resulted from the Company's repayment of its term loan and
revolving credit facility during October 1997 funded by cash from operations and
exercises of the Company's warrants. Interest expense increased by approximately
$5,000 for the first six months of fiscal 1998 compared to fiscal 1997 primarily
as a result of increased working capital requirements in the first quarter.
Income taxes of $211,000 and $447,000, respectively, for the second quarter
and six months ended November 2, 1997, are recorded on a fully taxed basis as
compared to the prior year which included $15,000 and $30,000, respectively, of
income tax expense. For the second quarter and six months ended October 27,
1996, the Company recognized $115,000 and $230,000, respectively, of deferred
income tax benefit. As a result of reductions in the valuation allowance during
fiscal 1996 and fiscal 1997 totaling $1,020,000 and $3,864,000, respectively,
the Company began recording income tax expense on a fully-taxed basis for
financial reporting purposes during the first quarter of fiscal 1998. Due to
significant net operating loss carryforwards for federal income tax purposes,
the Company expects cash payments for income taxes to be minimal for fiscal
1998.
LIQUIDITY AND SOURCES OF CAPITAL
The Company had working capital of approximately $14,383,000 at November 2,
1997 compared to approximately $10,831,000 at April 27, 1997. The increase in
working capital of approximately $3,552,000 was primarily generated by increases
in inventory of approximately $584,000, decreases in accrued expenses and
accounts payable of approximately $1,459,000 and reductions in the current
portion of long-term bank debt of approximately $2,895,000 offset by decreases
in accounts receivable of approximately $1,566,000. As a result, the Company's
current ratio increased to 5.9 to 1 at November 2, 1997 from 2.5 to 1 at April
27, 1997.
Page 11 of 34
<PAGE> 12
NOVAMETRIX MEDICAL SYSTEMS INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
Approximately $1,631,000 of cash was provided by operations for the first
six months of fiscal 1998 as compared to cash used of approximately $494,000 for
the first six months of fiscal 1997. Decreases in accounts receivable, partially
offset by increases in inventory and decreases in accounts payable and accrued
expenses, were primarily responsible for the improvement in cash provided from
operations. Approximately $551,000 of increased cash from operations was
provided from income before taxes, amortization and depreciation for the first
six months of fiscal 1998 compared to the corresponding period of the prior
fiscal year.
Available cash was used to pay off effectively all of the Company's
long-term debt. Debt payments of approximately $3,621,000 were issued during the
six months ended November 2, 1997 as the Company repaid its bank term note,
revolving credit facility and a portion of its capital lease obligations.
Approximately $2,660,000 of funds were provided from exercises of the Company's
options and warrants while the remaining funds were provided from operations.
The Company expects cash from operations to adequately fund its planned
operating requirements for the balance of fiscal 1998 and that additional funds,
if needed, could be obtained from the Company's available revolving credit
facility or from other available sources on commercially reasonable terms.
* * * * * * * * * *
This Quarterly Report contains forward-looking statements about the
Company's projected operating results. The Company's ability to achieve its
projected results is dependent upon a variety of factors, many of which are
outside of management's control, including without limitation, an unanticipated
slowdown in the healthcare industry, unanticipated technological developments
which affect the competitiveness of the Company's products, or an unanticipated
loss of business. The Company does not intend to update publicly any of the
forward-looking statements contained herein.
Page 12 of 34
<PAGE> 13
PART II- OTHER INFORMATION
ITEM 4. Submission of Matters to a Vote of Security Holders.
(a) The Annual Meeting of Stockholders (the "Meeting") of the Company was
held on October 14, 1997 at the Company's headquarters in Wallingford,
Connecticut.
(b) Not applicable because:
(i) Proxies for the meeting were solicited pursuant to Regulation
14 under the Securities Exchange Act of 1934,
(ii) There was no solicitation in opposition to management's
nominees as listed in the Company's Proxy Statement dated
September 12, 1997, and
(iii) Such nominees were elected.
(c) Matters voted upon at the Meeting were as follows:
<TABLE>
<CAPTION>
Votes Votes Withheld/
For Against Abstain
--- ------- -------
<S> <C> <C> <C>
(i) Election of Photios T. Paulson 5,934,577 23,440
as a Class C director for the next
three years.
(ii) Election of Steven J. Shulman 5,876,997 81,020
as a Class C director for the next
three years.
(iii) Approval of the Company's 1997 2,889,843 503,822 25,327
Long Term Incentive Plan.
(iv) Ratification of the Board of Directors' 5,910,198 34,242 13,577
selection of Ernst & Young LLP
to serve as the Company's
independent auditors for the fiscal
year ending May 3, 1998.
</TABLE>
Page 13 of 34
<PAGE> 14
PART II- OTHER INFORMATION (CONTINUED)
ITEM 5. Other Information.
(a) The Company entered into a Stockholders Agreement dated as
of September 30, 1997 with the members of the
Charles F. Manning, Jr., M.D., Group (the "Manning Group").
Under the the Stockholders Agreement, the members of the
Manning Group agreed to vote their shares of Common Stock at
the 1997 Annual Meeting of the Stockholders for the election
of the Company's nominees for director. The Stockholders
Agreement also provides that, if there shall not have been
any solicitation of proxies on or after the date of the
Stockholders Agreement (whether or not any members of the
Manning Group participate in such solicitation) not publicly
supported by a resolution of a majority of the current
members of the Board of Directors, the Company and the Board
of Directors increase by one the number of Class C directors
of the Company, elect John P. Mahoney, M.D., a member of the
Manning Group, as the new Class C director promptly following
the Meeting and nominate Dr. Mahoney for reelection as
a Class C director at the 1998 Annual Meeting of Stockholders.
(b) Effective September 30, 1997, the By-Laws of the Company were
amended to provide that the appointment of directors by the
Board of Directors, a change in the number or classification
of directors or the election or removal of officers be made by
the affirmative vote of a majority of the full Board of
Directors.
(c) On October 14, 1997, the Board of Directors of the Company
appointed John P. Mahoney, M.D., as a Class C director.
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-Q are listed in the attached Index
to Exhibits.
(b) Reports on Form 8-K: There were no reports filed on Form 8-K
filed during the quarter ended November 2, 1997.
Page 14 of 34
<PAGE> 15
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.
NOVAMETRIX MEDICAL SYSTEMS INC.
Dated: December 15, 1997 /s/ WILLIAM J. LACOURCIERE
-----------------------------------
William J. Lacourciere
Chairman of the Board,
President and
Chief Executive Officer
Dated: December 15, 1997 /s/ JEFFERY A. BAIRD
-----------------------------------
Jeffery A. Baird
Chief Financial Officer and
Principal Accounting Officer
Page 15 of 34
<PAGE> 16
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
PAGE
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3(e) Amendment to By-Laws of the Company effective 16
September 30, 1997
10(hh) Stockholders Agreement between the Company and the 19
Charles F. Manning, Jr., M.D., Group dated as of September 30, 1997
11 Statement Re: Computation of Per Share Earnings 33
27 Financial Data Schedule 34
</TABLE>
Page 16 of 34
<PAGE> 1
Exhibit 3(e)
NOVAMETRIX MEDICAL SYSTEMS INC.
Amendment to By-Laws
effective September 30, 1997
(a) The third sentence of Section 1 of Article IV of the By-Laws is hereby
amended to read in its entirety as follows:
"Within such limits, the number of Directors, and the number of
Directors in each class of Directors, may be fixed from time to time by
vote of a majority of the entire Board of Directors, at any regular or
special meeting; provided that the notice of such meeting shall have
included a reasonably detailed description of such proposed action; and
provided further that if the number of Directors is changed, any increase
or decrease shall be apportioned among the classes so as to maintain the
number of Directors in each class as nearly equal as possible, but in no
case shall a decrease in the number of Directors shorten the term of any
incumbent Director."
(b) The first sentence of Section 2 of Article IV of the By-Laws is hereby
deleted and replaced with the following two sentences:
"Except as hereinafter provided, any vacancy in the office of a
Director occurring for any reason other than the removal of a Director
pursuant to Section 3 of this Article may be filled by a majority of the
remaining members of the Board of Directors, though less than a quorum, or
by the sole remaining Director, at any regular or special meeting; provided
that the notice of such meeting shall have included a reasonably detailed
description of such proposed action. Any newly created Directorship
resulting from any increase in the number of Directors may be filled by the
vote of a majority of the entire Board of Directors, at any regular or
special meeting; provided that the notice of such meeting shall have
included a reasonably detailed description of such proposed action."
<PAGE> 2
2
(c) The second sentence of Section 1 of Article V of the By-laws is
hereby amended to read in its entirety as follows:
"The officers of the Corporation shall be elected annually by vote
of a majority of the entire Board of Directors at its meeting held
immediately after the annual meeting of the Stockholders, and shall
hold their respective offices until their successors are duly elected
and have qualified."
(d) The fourth sentence of Section 1 of Article V of the By-Laws is
hereby amended to read in its entirety as follows:
"The Board of Directors may from time to time appoint such other
officers and agents as the interest of the Corporation may require and
may fix their duties and terms of office, in each case by the vote of
a majority of the entire Board of Directors, at any regular or special
meeting; provided that the notice of such meeting shall have included a
reasonably detailed description of such proposed action."
(e) Sections 11, 12 and 13 of Article V of the By-Laws are hereby
amended to read in their entirety as follows:
"Section 11. Transfer of Duties. The Board of Directors in its
absolute discretion by the vote of a majority of the entire Board of
Directors, at any regular or special meeting, may transfer the power
and duties, in whole or in part, of any officer to any other officer,
or persons, notwithstanding the provisions of these By-Laws, except as
otherwise provided by the laws of the State of Delaware; provided that
the notice of such meeting shall have included a reasonably detailed
description of such proposed action.
Section 12. Vacancies. If the office of President, Executive Vice
President, Vice President, Secretary or Treasurer, or of any other
officer or agent becomes vacant for any reason, the Board of Directors
may choose a successor to hold office for the unexpired term by the vote
of a majority of the entire Board of Directors, at any regular or
special meeting; provided that the notice of such meeting shall have
included a
<PAGE> 3
3
reasonably detailed description of such proposed action.
Section 13. Removals. Any officer or agent of the Corporation
may be removed from office, with or without cause, by the vote of a
majority of the entire Board of Directors, at any regular or special
meeting; provided that the notice of such meeting shall have included
a reasonably detailed description of such proposed action."
(f) Article XV of the By-laws is hereby amended to read in its
entirety as follows:
"ARTICLE XV
Amendments
Except as otherwise provided in the Certificate of Incorporation,
these By-Laws may be altered, amended or repealed, in whole or in
part, or new By-Laws may be adopted (i) upon a vote of a majority of
the entire Board of Directors, at any regular or special meeting,
provided that the notice of such meeting shall have included a
reasonably detailed description of such proposed amendment, or (ii) by
the affirmative vote of the holders of 80% or more of the combined
voting power of the then outstanding shares of stock of all classes
and series of stock the holders of which are entitled to vote
generally in the election of directors, voting together as a single
class."
* * *
<PAGE> 1
EXHIBIT 10(hh)
STOCKHOLDERS AGREEMENT dated as of September 30, 1997 (this
"Agreement") among Novametrix Medical Systems Inc., a Delaware corporation (the
"Corporation"), and the stockholders of the Corporation signing this Agreement
(the "Stockholders").
W I T N E S S E T H:
WHEREAS, each of the Stockholders is the beneficial owner of
the number of shares of common stock, $.01 par value ("Common Stock"), of the
Corporation, Class A Warrants to purchase the number of shares of Common Stock
("A Warrants") and Class B Warrants to purchase the number of shares of Common
Stock ("B Warrants") set forth opposite such Stockholder's name on the signature
page hereto and is a member of a group (the "13D Group") which has filed a
statement in respect of their holdings of the Corporation's securities on
Schedule 13D under the Securities Exchange Act of 1934, as amended (the
"Exchange Act").
NOW, THEREFORE, in consideration of the mutual benefits to be
derived and the conditions and promises herein contained, and intending to be
legally bound hereby, the parties hereto agree as follows:
1. Voting Agreement. The Corporation agrees that the 1997
annual meeting (the "1997 Meeting") of the Corporation's stockholders will be
held not later than October 14, 1997. Provided that none of the executive
officers of the Corporation has actual knowledge of any Solicitation (as
hereinafter defined) relating to the Corporation on the date hereof which
Solicitation is not publicly supported by a resolution of a majority of the
current members of the Board of Directors of the Corporation (a "Dissident
Solicitation"), each of the Stockholders, for the benefit of the Corporation and
as an inducement to the Corporation to enter into this Agreement, agrees to vote
or cause to be voted at the 1997 Meeting all of the shares of Common Stock which
he or she has the right to vote and of which he or she has the right to direct
the vote in favor of persons (the "Continuing Director Nominees") who shall be
nominated as directors by a majority of the current directors of the
Corporation. Immediately upon any of the executive officers of the Corporation
obtaining actual knowledge of any Dissident Solicitation, the Corporation shall
inform the Stockholder Representative of such Dissident Solicitation. The terms
"Solicitation" and "Solicit" shall mean (i) any solicitation (within the
<PAGE> 2
2
meaning of the Exchange Act) of a proxy (as defined in the Exchange Act), (ii)
any request for a proxy, whether or not accompanied, preceded or followed by a
proxy or included in a form of proxy, (iii) any request or recommendation to
execute or not to execute, or to revoke or not to revoke, a proxy, (iv) the
furnishing of a form of proxy or other communication to security holders under
circumstances reasonably calculated to result in the procurement, withholding or
revocation of a proxy or (v) any public statement, favorable or unfavorable,
regarding any proposal, nominee or other matter in any proxy.
2. The 13D Director. (a) Provided that (i) none of the
Stockholders shall have breached any of their agreements hereunder and (ii)
there shall not have been a Dissident Solicitation, then the Corporation shall
use its best efforts to cause the Board of Directors of the Corporation (x) to
increase by one the number of Class C directors of the Corporation and to elect
John P. Mahoney, M.D. (the "13D Director") as a Class C director of the
Corporation at a meeting of the Board of Directors to be held within 24 hours of
the adjournment of the 1997 Meeting and (y) to nominate the 13D Director for
reelection as a Class C director at the 1998 annual meeting of the Corporation's
stockholders. Attached hereto as Annex A is a form of the agreement of the
current directors of the Corporation concerning this Section 2; such form of
agreement, executed by a majority of the current directors of the Corporation,
is being delivered to the Stockholders contemporaneously herewith.
(b) Notwithstanding the foregoing, if the Stockholders shall
at any time beneficially own (within the meaning of Rule 13d-3 under the
Exchange Act) in the aggregate less than five percent (5%) of the shares of
Common Stock outstanding or 460,270 shares of Common Stock, whichever is less,
then the Stockholders shall have no further rights under this Section 2 and the
13D Director shall promptly resign as a director of the Corporation. The 13D
Director has executed a contingent resignation in the form of Annex B hereto.
3. By-law Amendment. The amendment to the By-laws of the
Corporation set forth on Annex C hereto will be proposed for adoption at the
next meeting of the Board of Directors of the Corporation. Each of the
Stockholders agrees that such amendment is appropriate and agrees not to oppose
or challenge its adoption.
<PAGE> 3
3
4. Appointment of Stockholder Representative.
(a) Each Stockholder hereby makes, constitutes and appoints
John P. Mahoney, M.D. to be such Stockholder's true and lawful attorney in fact
and agent (the "Stockholder Representative"), for such Stockholder and in such
Stockholder's name, as effectively as such Stockholder could act for himself or
herself, with full power of substitution in the premises, to take all actions
which under this Agreement are to be or may be taken by such Stockholder,
including, without limitation, to give and receive all consents, waivers,
amendments, notices and other communications to be given or which may be given
or to be received or which may be received under this Agreement. The incapacity
of any Stockholder shall not terminate the agency and power of attorney granted
hereby to the Stockholder Representative. Upon the death of any Stockholder,
such Stockholder's executors, administrators, legal representatives and heirs
may only exercise rights under this Agreement through the Stockholder
Representative as their sole and exclusive agent. Such agency and power of
attorney is irrevocable and coupled with an interest, and the provisions of this
Section 4 are independent and severable and shall be enforceable notwithstanding
any rights or remedies that any Stockholder may have in connection with, or in
any way arising out of, the transactions contemplated by this Agreement. The
obligations hereunder of Dr. Mahoney, as representative, shall not be terminated
by operation of law, whether by his death or incapacity or by the occurrence of
any other event. In the event Dr. Mahoney should die or become incapacitated, or
for any other reason become unable to perform his responsibilities hereunder, or
resign such position, the Stockholders holding a majority of the shares of
Common Stock held by all Stockholders shall select another representative by
written notice executed by such Stockholders and delivered to the Corporation to
fill such vacancy and such substituted representative shall be deemed the
Stockholder Representative for all purposes of this Agreement.
(b) The Corporation shall be entitled to rely conclusively on
the actions, communications, instructions, decisions and agreements of the
Stockholder Representative as being the actions, communications, instructions,
decisions and agreements of each of the Stockholders (without the need to
communicate or otherwise confirm such with any Stockholder), and no Stockholder
shall have any claim or cause of action against the Corporation for any action
taken or not taken by the Corporation in reliance
<PAGE> 4
4
upon the actions, communications, instructions, decisions or agreements of the
Stockholder Representative.
(c) All actions, communications, instructions, decisions and
agreements of the Stockholder Representative shall be conclusive and binding
upon all of the Stockholders and no Stockholder shall have any claim or cause of
action against the Stockholder Representative for any action taken or not taken
by the Stockholder Representative in his role as such, except for any action or
omission taken or made fraudulently or in bad faith with respect to such
Stockholder.
5. No Solicitation.
(a) From the date hereof through the date of the 1997 Meeting,
none of the Stockholders and none of their respective affiliates or associates
shall become, provide information to or assist a Participant (as hereinafter
defined) in any Dissident Solicitation. The term "Participant" shall mean (i)
any committee or group which Solicits proxies, any member of such committee or
group, and any person whether or not named as a member who, acting alone or with
one or more other persons, directly or indirectly takes the initiative, or
engages, in organizing, directing or arranging for the financing of any such
committee or group; (ii) any person who finances or joins with another to
finance the Solicitation of proxies; (iii) any person who lends money or
furnishes credit or enters into any other arrangements, pursuant to any contract
or understanding with a Participant, for the purpose of financing or otherwise
inducing the purchase, sale, holding or voting of securities of the Corporation
by any Participant or other persons, in support of or in opposition to a
Participant; and (iv) any person who Solicits proxies. The terms "affiliate" and
"associate" shall have the respective meanings ascribed to such terms in Rule
12b-2 under the Exchange Act, as in effect on the date hereof.
(b) This Section 5 shall not be deemed to amend or modify in
any way that certain Rights Agreement dated as of March 14, 1989, as amended,
between the Corporation and the rights agent thereunder.
6. Public Announcements. Subject to Section 5(a), each of the
Stockholders will consult with the Corporation before issuing any press release
or making any public statement with respect to this Agreement or any of the
transactions contemplated hereby.
<PAGE> 5
5
7. Reorganization, Etc. The provisions of this Agreement shall
apply mutatis mutandi to any shares of capital stock resulting from any stock
split or reverse split, stock dividend, reclassification of the capital stock of
the Corporation, consolidation, merger or reorganization of the Corporation.
8. Notices. Any notice or other communication under this
Agreement shall be in writing and sufficient if delivered personally, by
telecopy or sent by registered or certified mail, postage prepaid, addressed as
follows:
If to the Corporation:
5 Technology Drive
Wallingford, Connecticut 06492
Telephone: (203) 265-7701
Telecopy: (203) 269-0189
Attention: President
with a copy to:
Haythe & Curley
237 Park Avenue
New York, New York 10017
Telephone: (212) 880-6000
Telecopy: (212) 682-0200
Attention: John J. Butler, Esq.
If to any Stockholder:
To the address as set forth opposite such
Stockholder's name on Annex D hereto.
with a copy to:
Cobb, Cole & Bell, PA
150 Magnolia Avenue
P.O. Box 2491
Daytona Beach, Florida 32115
Telephone: (904) 255-8171
Telecopy: (904) 258-5068
Attention: John P. Ferguson, Esq.
If to the Stockholder Representative:
806 Ivanhoe Road
Tallahassee, Florida 32308
<PAGE> 6
6
with a copy to:
Cobb, Cole & Bell, PA
150 Magnolia Avenue
P.O. Box 2491
Daytona Beach, Florida 32115
Telephone: (904) 255-8171
Telecopy: (904) 258-5068
Attention: John P. Ferguson, Esq.
All such notices and communications shall be deemed to have been duly given at
the time delivered by hand, if personally delivered, upon confirmation of
receipt, if sent by telecopy, or five (5) business days after being deposited in
the mail, if sent by registered or certified mail. Any party may, upon written
notice to the other parties hereto, change the address to which notices or other
communications to such party are to be delivered or mailed.
9. Expenses. Provided that none of the Stockholders shall
have breached any of their agreements hereunder, within 10 days after the 1997
Meeting, the Corporation shall pay directly or reimburse the Stockholders for
the reasonable out-of-pocket expenses of the Stockholders not to exceed $10,000
in the aggregate incurred in connection with this Agreement and any statements
they shall have filed on Schedule 13D under the Exchange Act with respect to
their holdings of the Corporation's securities. Except as set forth in the
preceding sentence, the Corporation, on the one hand, and the Stockholders, on
the other hand, shall bear their respective expenses in connection with this
Agreement.
10. Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, but all of which
taken together shall constitute one and the same instrument.
11. Entire Agreement. This Agreement contains the entire
agreement among the parties hereto with respect to the subject matter hereof.
All of the parties hereto agree that this Agreement may be amended or modified
or any provision hereof may be waived by a written agreement between the
Stockholder Representative and the Corporation. This Agreement supersedes all
prior understandings, negotiations and agreements relating to the subject matter
hereof.
12. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware applicable to
agreements made and to be
<PAGE> 7
7
performed entirely within such State, without regard to any conflict of laws
principles of such State which would apply the laws of any other jurisdiction.
13. Jurisdiction; Waiver of Trial by Jury. THE PARTIES HERETO
HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION OF ANY CONNECTICUT STATE OR UNITED
STATES FEDERAL COURT SITTING IN THE CITY OF NEW HAVEN, CONNECTICUT OVER ANY
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, AND HEREBY
IRREVOCABLY AGREE THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE
HEARD AND DETERMINED IN SUCH NEW HAVEN, CONNECTICUT, STATE OR FEDERAL COURT. THE
PARTIES AGREE THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE
CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR
IN ANY OTHER MANNER PROVIDED BY LAW. THE PARTIES FURTHER WAIVE TRIAL BY JURY,
ANY OBJECTION TO VENUE IN SUCH STATE AND ANY OBJECTION TO ANY ACTION OR
PROCEEDING IN SUCH STATE ON THE BASIS OF FORUM NON CONVENIENS. THE PARTIES
FURTHER AGREE THAT ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT SHALL BE BROUGHT ONLY IN A CONNECTICUT STATE OR UNITED STATES FEDERAL
COURT SITTING IN NEW HAVEN, CONNECTICUT.
14. Headings. The headings in this Agreement are solely for
convenience of reference and shall not affect the interpretation of any of the
provisions hereof.
15. Severability. If any provision herein contained shall be
held to be illegal or unenforceable, such holding shall not affect the validity
or enforceability of the other provisions of this Agreement.
16. Binding Effect. Provided that this Agreement shall have
been duly and validly executed by the Corporation and Stockholders beneficially
owning an aggregate of at least 90% of the shares of Common Stock beneficially
owned by all of the members of the 13D Group, this Agreement shall be binding
upon and inure to the benefit of the Corporation and its successors and
permitted assigns and the Stockholders who have signed this Agreement and their
respective executors, administrators, legal representatives and heirs, as
applicable.
17. Specific Enforcement. Each of the parties hereto hereby
consents and agrees that, in the event of a breach or threatened breach by any
party of any provision this Agreement, the Corporation, in the case of a breach
by any Stockholder, or the Stockholder Representative, in the case of a breach
by the Corporation, shall be entitled to an injunction or similar equitable
relief restraining the party
<PAGE> 8
8
breaching or threatening a breach from committing or continuing any such breach
or threatened breach or granting specific performance of any act required to be
performed under this Agreement by the party breaching or threatening a breach,
without the necessity of showing any actual damage or that money damages would
not afford an adequate remedy and without the necessity of posting any bond or
other security.
18. Construction. The parties hereto agree that this Agreement
is the product of negotiations among sophisticated parties, each of whom were
represented by counsel, and each of whom had an opportunity to participate in,
and did participate in, the drafting of each provision hereof.
* * *
<PAGE> 9
9
IN WITNESS WHEREOF, each of the parties hereto has executed
this Stockholders Agreement on the date first above written.
NOVAMETRIX MEDICAL SYSTEMS
INC.
By:
----------------------------
Name:
Title:
6,470 730 /s/ Charles F. Manning, Jr., M.D.
------ ---------- ---------- --------------------------------
Shares A Warrants B Warrants Charles F. Manning, Jr., M.D.
58,8601 /s/ Meredith S. Manning
------- ---------- ---------- -----------------------
Shares A Warrants B Warrants Meredith S. Manning
4,470 /s/ John P. Mahoney, M.D.
------- ---------- ---------- ------------------------
Shares A Warrants B Warrants John P. Mahoney, M.D.
1,2642 /s/ Barbara P. Mahoney
------- ---------- ---------- ----------------------
Shares A Warrants B Warrants Barbara P. Mahoney
88,0003 /s/ Todd A. Patterson, M.D.
- -------- ---------- ---------- --------------------------
Shares A Warrants B Warrants Todd A. Patterson, M.D.
88,0003 /s/ Rose M. Patterson
- -------- ---------- ---------- ---------------------
Shares A Warrants B Warrants Rose M. Patterson
10,0004 /s/ Gary W. Cater, M.D.
- -------- ---------- ---------- ----------------------
Shares A Warrants B Warrants Gary W. Cater, M.D.
- --------
1 Owned jointly with Charles F. Manning, Jr., M.D.
2 An additional 173,741 Shares and 10,400 B Warrants are owned jointly
with John P. Mahoney, M.D.
3 Owned jointly by Todd A. Patterson, M.D. and Rose M. Patterson.
4 Owned jointly by Gary W. Cater, M.D. and Teresa C. Cater.
<PAGE> 10
10
10,0004 /s/ Teresa C. Cater
- -------- ---------- ---------- -------------------
Shares A Warrants B Warrants Teresa C. Cater
5,5005 /s/ David T. Stewart, M.D.
------ ---------- ---------- -------------------------
Shares A Warrants B Warrants David T. Stewart, M.D.
/s/ Gillian L. Stewart
------ ---------- ---------- ----------------------
Shares A Warrants B Warrants Gillian L. Stewart
400 1,000 /s/ Arthur R. Carlson
------ ---------- ---------- ---------------------
Shares A Warrants B Warrants Arthur R. Carlson
200 /s/ Virginia Lynn Carlson
------ ---------- ---------- -------------------------
Shares A Warrants B Warrants Virginia Lynn Carlson
32,145 20,430 /s/ Sandra Schwemmer, M.D.
- -------- ---------- ----------- ---------------------------
Shares A Warrants B Warrants Sandra Schwemmer, M.D.
81,020 2,090 /s/ Mike Stary, M.D.
- -------- ---------- ---------- -------------------
Shares A Warrants B Warrants Mike Stary, M.D.
32,4406 2,946 /s/ Henry J. Yee
- -------- ---------- ---------- -----------------
Shares A Warrants B Warrants Henry J. Yee
2,908 /s/ Angela S. Yee
------ ---------- ---------- -----------------
Shares A Warrants B Warrants Angela S. Yee
- --------
(4) Owned jointly by Gary W. Cater, M.D. and Teresa C. Cater.
(5) Owned jointly by David T. Stewart, M.D. and Gillian L. Stewart.
(6) Owned jointly by Henry J. Yee and Angela S. Yee.
<PAGE> 11
Annex A to Stockholders Agreement
DIRECTORS' AGREEMENT
Reference is hereby made to that certain Stockholders
Agreement dated as of September 30, 1997 (the "Stockholders Agreement") among
Novametrix Medical Systems Inc., a Delaware corporation (the "Corporation"), and
the stockholders of the Corporation who are a party thereto (the
"Stockholders"). All capitalized terms used herein and not otherwise defined
herein shall have the same respective meanings as in the Stockholders Agreement.
Provided that none of the Stockholders shall have breached any of their
agreements under the Stockholders Agreement and there shall not have been a
Solicitation relating to the Corporation on or after the date thereof which
Solicitation is not publicly supported by a resolution of a majority of the
current members of the Board of Directors of the Corporation, then each of the
undersigned hereby agrees, in his capacity as a director of the Corporation, to
(x) to increase by one the number of Class C directors of the Corporation and to
elect John P. Mahoney, M.D. (the "13D Director") as a Class C director of the
Corporation at a meeting of the Board of Directors to be held within 24 hours of
the adjournment of the 1997 Meeting and (y) to nominate the 13D Director for
reelection as a Class C director at the 1998 annual meeting of the Corporation's
stockholders.
________________________________ ___________________________
Paul A. Cote Vartan Ghugasian
________________________________ ___________________________
Thomas M. Haythe William J. Lacourciere
________________________________ ___________________________
Phortios T. Paulson Steven J. Shulman
<PAGE> 12
Annex B to Stockholders Agreement
CONTINGENT RESIGNATION
Novametrix Medical Systems Inc.
If (i) I am elected as a director of Novametrix Medical
Systems Inc., a Delaware corporation (the "Corporation"), and (ii) the
stockholders of the Corporation who are a party to that certain Stockholders
Agreement dated as of September --, 1997 with the Corporation beneficially own
(within the meaning of Rule 13d-3 under the Securities Exchange Act of 1934) in
the aggregate less than 460,270 shares of common stock, $.01 par value, of the
Corporation, then effective upon the occurrence of the circumstance set forth in
clause (ii) I hereby resign my position as a director of the Corporation.
-------------------------------
John P. Mahoney, M.D.
<PAGE> 13
Annex C to Stockholders Agreement
AMENDMENT TO THE BY-LAWS
The By-Laws of the Corporation will be amended to provide that
the election of directors by the Board of the Directors of the Corporation, a
change in the number or classification of directors of the Corporation or the
election or removal of officers of the Corporation must be by the affirmative
vote of a majority of the full Board of Directors of the Corporation, at a
meeting for which notice of the proposed action has been given.
<PAGE> 14
Annex D to Stockholders Agreement
STOCKHOLDERS
Name Address
Charles F. Manning, Jr., M.D. 1831 Ox Bottom Road
Meredith S. Manning Tallahassee, Florida 32312
John P. Mahoney, M.D. 806 Ivanhoe Road
Barbara P. Mahoney Tallahassee, Florida 32308
Todd A. Patterson, M.D. 2700 Cline Street
Rose M. Patterson Tallahassee, Florida 32312
Gary W. Cater, M.D. 2569 Noble Drive
Teresa C. Canter Tallahassee, Florida 32312
David T. Stewart, M.D. 2528 Noble Drive
Gillian L. Stewart Tallahassee, Florida 32312
Arthur R. Carlson 6329 Coach House Court
Virginia Lynn Carlson Tallahassee, Florida 32312
Sandra Schwemmer, M.D. 160 Key Heights Drive
Miami, Florida 33070-2010
Mike Stary, M.D. 16780 S.W. 277th Street
Miami, Florida 33031-2722
Henry J. Yee 5137 Hampton Lake Drive
Angela S. Yee Marietta, Georgia 30068
<PAGE> 1
EXHIBIT 11
NOVAMETRIX MEDICAL SYSTEMS INC.
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
QUARTER ENDED SIX MONTHS ENDED
11-02-97 10-27-96 11-02-97 10-27-96
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net Income $ 626,788 $ 696,158 $1,150,646 $1,344,032
PRIMARY EARNINGS PER SHARE:
Weighted average number of shares of
Common Stock outstanding 7,914,648 6,955,902 7,581,194 6,809,614
Net effect of dilutive common stock
equivalents (1) 1,167,457 1,197,477 1,079,349 1,171,142
Total weighted average number of shares
of Common Stock and dilutive common
stock equivalents outstanding ---------- ---------- ---------- ----------
9,082,105 8,153,379 8,660,543 7,980,756
========== ========== ========== ==========
Per common share amounts: $ 0.07 $ 0.09 $ 0.13 $ 0.17
========== ========== ========== ==========
FULLY DILUTED EARNINGS PER SHARE:
Weighted average number of shares of
Common Stock outstanding 7,914,648 6,955,902 7,581,194 6,809,614
Net effect of dilutive common stock
equivalents (1) 1,389,588 1,403,505 1,589,884 1,518,532
Total weighted average number of
shares of Common Stock and dilutive
common stock equivalents ---------- ---------- ---------- ----------
9,304,236 8,359,407 9,171,078 8,328,146
Per common share amounts: $ 0.07 $ 0.08 $ 0.13 $ 0.16
========== ========== ========== ==========
</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 17 of 34
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
unaudited Novametrix Medical Systems Inc. Condensed Consolidated Statements of
Operations for the six months ended November 2, 1997 and the Condensed
Consolidated Balance Sheets at November 2, 1997, and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-03-1998
<PERIOD-END> NOV-02-1997
<CASH> 303,466
<SECURITIES> 0
<RECEIVABLES> 7,012,292
<ALLOWANCES> (250,000)
<INVENTORY> 7,419,247
<CURRENT-ASSETS> 17,315,433
<PP&E> 8,045,161
<DEPRECIATION> (5,679,620)
<TOTAL-ASSETS> 25,939,888
<CURRENT-LIABILITIES> 2,932,282
<BONDS> 102,510
0
0
<COMMON> 87,390
<OTHER-SE> 22,817,706
<TOTAL-LIABILITY-AND-EQUITY> 25,939,888
<SALES> 14,872,421
<TOTAL-REVENUES> 14,872,421
<CGS> 6,392,882
<TOTAL-COSTS> 6,392,882
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 104,332
<INCOME-PRETAX> 1,597,646
<INCOME-TAX> 447,000
<INCOME-CONTINUING> 1,150,646
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,150,646
<EPS-PRIMARY> .13
<EPS-DILUTED> .13
</TABLE>
