<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended SEPTEMBER 30, 1995
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 0-9570
LUTHER MEDICAL PRODUCTS, INC.
(Exact name of small business issuer as specified in its charter)
CALIFORNIA 33-0468235
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
14332 CHAMBERS ROAD, TUSTIN, CA 92680
(Address of principal executive offices) (Zip Code)
(714) 544-3002
(Issuer's telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last
report.)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days.
[X] Yes [_] No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
COMMON STOCK NO STATED PAR VALUE--2,985,636 SHARES AS OF SEPTEMBER 30, 1995
<PAGE>
INDEX
LUTHER MEDICAL PRODUCTS, INC.
PART I - FINANCIAL INFORMATION
<TABLE>
<S> <C>
Condensed Consolidated Balance Sheet -
September 30, 1995 3
Condensed Consolidated Statements of
Operations - Three months ended
September 30, 1995 and 1994 4
Condensed Consolidated Statements of
Cash Flows - Three months ended
September 30, 1995 and 1994 5
Notes to the Condensed Consolidated
Financial Statements 6
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 7,8
PART II - OTHER INFORMATION 9
Signature Page 9
</TABLE>
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LUTHER MEDICAL PRODUCTS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
SEPT. 30, 1995
<S> <C>
ASSETS
CURRENT ASSETS
Cash $ 644,375
U.S. Treasury bills 1,973,800
Accounts receivable - net 441,198
Inventories - Note C 1,326,287
Other current assets 61,675
-----------
TOTAL CURRENT ASSETS 4,447,335
PROPERTY AND EQUIPMENT 1,201,826
Less allowances for depreciation (735,307)
-----------
PROPERTY AND EQUIPMENT - NET 466,519
OTHER ASSETS 10,198
-----------
$ 4,924,052
===========
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Debt, current portion $ 481,250
Accounts payable 198,316
Accrued payroll and related
expenses 73,380
Other accrued liabilities 225,518
-----------
TOTAL CURRENT LIABILITIES 978,464
-----------
STOCKHOLDERS' EQUITY
Preferred stock - no stated par
value;
10,000,000 shares authorized; none
issued
Common stock - no stated par value;
25,000,000 shares authorized;
issued and outstanding 2,985,636 9,630,713
Accumulated deficit (5,685,125)
-----------
NET STOCKHOLDERS' EQUITY 3,945,588
$ 4,924,052
===========
</TABLE>
See notes to condensed consolidated financial statements.
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<PAGE>
LUTHER MEDICAL PRODUCTS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE QUARTER ENDED SEPTEMBER 30,
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED 1995 ENDED 1994
------------ ------------
<S> <C> <C>
REVENUES $671,691 $711,845
COSTS AND EXPENSES:
Cost of sales 349,034 322,041
Selling 196,910 150,369
General and administrative 173,327 214,250
Research and development 102,236 99,317
Depreciation and amortization 50,946 52,176
Interest expense 9,865 14,652
--------- ---------
TOTAL COSTS AND EXPENSES 882,318 852,805
NET LOSS $(210,627) $(140,960)
Weighted average number of shares
outstanding ('000) 2,986 2,954
Net loss per share: $ (.07) $ (.05)
</TABLE>
See notes to condensed consolidated financial statements
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<PAGE>
LUTHER MEDICAL PRODUCTS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED SEPTEMBER 30
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(210,627) $(140,960)
Adjustments to reconcile net
loss to net cash used by operating
activities:
Depreciation and amortization 50,946 52,176
Changes in operating assets
and liabilities:
Accounts and other receivables (69,970) 50,343
Inventories (137,895) (174,838)
Prepaid expenses and
other assets 26,746 (95,532)
Accounts payable 57,123 (69,044)
Accrued payroll and related expenses (6,717) (52,103)
Accrued interest 9,625 (19,629)
Other accrued liabilities (140,396) 41,007
--------- ---------
Net cash (used) provided (421,165) (408,580)
--------- ---------
INVESTING ACTIVITIES:
Proceeds from sale of U.S. Treasury bills 736,794
Purchases of property and equipment (37,424) (28,108)
--------- ---------
Net cash used in investing activities 699,370 (28,108)
--------- ---------
FINANCING ACTIVITIES:
Proceeds from sales of common stock 72,885
Proceeds from collection of notes
receivable from stockholder 183,444
Proceeds from issuance of notes payable 400,000
Principal payments of debt (43,750)
--------- ---------
Net cash (used) provided by financing
activities 183,444 429,135
--------- ---------
Net increase (decrease) in cash 461,649 (7,553)
Cash, beginning of year 182,726 216,366
--------- ---------
Cash, at end of three months $ 644,375 $ 208,813
========= =========
</TABLE>
See notes to condensed consolidated financial statements
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<PAGE>
LUTHER MEDICAL PRODUCTS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
NOTE A - BASIS OF PREPARATION
The accompanying condensed consolidated financial statements 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-B. 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-month period ending September
30, 1995 are not necessarily indicative of the results that may be expected for
the year ended June 30, 1996. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Company's Annual Report on Form 10-KSB.
NOTE B - LOSS PER SHARE
Loss per share is calculated using the weighted average number of shares
outstanding. Common stock equivalents were not included because their effect
would be antidilutive.
NOTE C - INVENTORIES
The components of inventory consist of the following:
<TABLE>
<CAPTION>
Sept. 30, 1995 June 30, 1995
-------------- -------------
<S> <C> <C>
Raw material $ 361,049 $ 279,830
Work in process 499,249 395,113
Finished goods 465,989 513,449
---------- ----------
$1,326,287 $1,188,392
========== ==========
</TABLE>
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
RESULTS OF OPERATIONS
Total consolidated revenues for the first quarter of fiscal year 1996 were
$672,000 compared to $712,000 for the prior year's quarter, a decrease of 6%.
In March of 1995, the Company sold five of its patents related to stickless
needle technology to Johnson & Johnson Medical, Inc. ("JJMI"), the corporate
successor to Critikon, for $4.7 million. JJMI was the exclusive licensee under
these patents pursuant to a royalty license agreement entered into in 1987.
Royalty income therefore decreased to $4,000 for the first quarter of 1996, as
compared to $136,000 for the same period last year as a result of the
termination of the above-mentioned license agreement. The Company's catheter
products generated revenues of $627,000, as compared to $575,000 for the prior
year's quarter, an increase of 9%. In 1994, the Company modified its agreement
with Pharmacia Deltec Inc. ("Pharmacia") from an exclusive to a non-exclusive
distributor relationship and established a network of specialty distributors.
Sales to the newly appointed distributors contributed $381,000, a 124% increase
from revenues of $170,000 for the same period last year, while sales to
Pharmacia decreased from $110,000 to $9,000. Catheter sales to international
distributors decreased by $55,000 or 34% due to backorders to one distributor at
September 30, 1995, which were shipped in October of 1995. Interest income
increased by $41,000 over the prior year's quarter, as a result of the
Company's increased cash balances that resulted from the patent sale to JJMI.
Cost of revenues for the three months ended September 30, 1995 were $349,000 as
compared to $322,000 in the prior year's period. Cost of revenues as a
percentage of product sales remained at 56% for both periods.
Selling expenses were $ 197,000 for the quarter ended September 30, 1995, a 31%
increase from $150,000 in the prior year's quarter. The increase is
attributable to increased marketing efforts to support the Company's distributor
network. General and administrative expenses decreased by $41,000 for the
quarter ended September 30, 1995, mainly as a result of a reduction in legal
fees. Research and development expenses were $102,000 for the quarter ended
September 30, 1995 compared to $99,000 for the prior year's period. Depreciation
and amortization expense decreased slightly from $52,000 to $51,000. Interest
expenses decreased by $5,000 over the prior year's quarter as a result of lower
debt balances.
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<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1995, the Company had working capital of $3.5 million and its
principal sources of liquidity consisted of $2.6 million in cash and cash
equivalents. Net cash used by operating activities for the quarter ended
September 30, 1995, was $421,000, mainly as the result of the net loss of
$211,000, the increase in accounts and other receivables of $70,000 and the
increase in inventories of $138,000. This increase is mainly attributable to a
build-up of sub-assemblies to be completed and sold in October of 1995. With
respect to investing activities, the Company made purchases of property and
equipment totaling $37,000 during the quarter ended September 30, 1995.
Financing activities provided $183,000 which was the repayment of a note
receivable from a stockholder.
On November 6, 1995, the Company repaid the note payable to Sims Deltec, Inc.
("SIMS"), formerly known as Pharmacia Deltec Inc. Pursuant to an agreement
between the Company and Sims, Sims accepted $400,000 as full and final payment
for the note payable of $481,250 plus accrued interest.
The Company has no long-term commitments other than an annual lease obligation
of between $130,000 and $151,000 for its facilities through 1998, a minimum
annual royalty of $60,000 for a proprietary polymer material and consulting fees
of $396,000 payable to National Contracts Inc. over a two-year period, $101,000
which was paid through September 30, 1995.
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<PAGE>
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
There were no reports on Form 8-K filed for the three months ended September 30,
1995.
SIGNATURES
In accordance with the requirements of the Securities Exchange Act, the
Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
LUTHER MEDICAL PRODUCTS, INC.
By: /s/ David Rollo Date: November 13, 1995
---------------- -----------------------
David Rollo
Chief Financial Officer
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<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 644,375
<SECURITIES> 1,973,800
<RECEIVABLES> 441,198
<ALLOWANCES> 0
<INVENTORY> 1,326,287
<CURRENT-ASSETS> 4,447,335
<PP&E> 1,201,826
<DEPRECIATION> 735,307
<TOTAL-ASSETS> 4,924,052
<CURRENT-LIABILITIES> 978,464
<BONDS> 0
<COMMON> 9,630,713
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 4,924,052
<SALES> 626,564
<TOTAL-REVENUES> 671,691
<CGS> 349,034
<TOTAL-COSTS> 872,453
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,865
<INCOME-PRETAX> (210,627)
<INCOME-TAX> 0
<INCOME-CONTINUING> (210,627)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (210,627)
<EPS-PRIMARY> (.07)
<EPS-DILUTED> 0
</TABLE>
