<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended Commission File Number
June 30, 1995 0-10581
------------- -------
TRIMEDYNE, INC.
(Exact name of Registrant as specified in its charter)
NEVADA 36-3094439
(State or other jurisdiction (IRS Employer Identification Number)
of incorporation or organization)
2801 BARRANCA ROAD, IRVINE, CA 92714
(Address of principal executive offices) (Zip Code)
(714/559-5300)
(Registrant's telephone number, including area code)
NOT APPLICABLE
(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), (2) has been subject to such
filing requirements for the past 90 days.
Yes x No
----- -----
Indicate the number of shares outstanding of each of the issuer's class of
common stock, as of the last practicable date.
Class Outstanding at July 29, 1995
---------------------------- ----------------------------
Common Stock, $.01 par value 9,451,701 shares
(excluding 101,609 shares
held as Treasury Shares)
FILED ELECTRONICALLY VIA EDGAR ON 8/14/95.
<PAGE> 2
TRIMEDYNE, INC.
<TABLE>
<CAPTION>
Page Number
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<S> <C>
PART I. Financial Information
ITEM 1. Financial Statements
Condensed Consolidated Balance Sheets 3
Condensed Consolidated Statements of Operations 4
Condensed Consolidated Statements of Cash Flows 5
Notes to Condensed Consolidated Financial Statements 6
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II. Other Information 10
SIGNATURE PAGE 11
</TABLE>
2
<PAGE> 3
TRIMEDYNE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
JUNE 30, SEPTEMBER 30,
1995 1994
------------ ------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents..................................... $ 522,000 $ 3,183,000
Marketable securities......................................... 4,034,000 5,478,000
Trade accounts receivable, net of allowance for doubtful
accounts of $304,000 and $335,000........................... 2,331,000 2,608,000
Inventories (Note 2).......................................... 6,533,000 5,730,000
Other......................................................... 1,441,000 1,134,000
------------ ------------
Total Current Assets.................................... 14,861,000 18,133,000
------------ ------------
Net Properties (Note 2)......................................... 1,513,000 1,628,000
Prepaid royalties............................................... 376,000 439,000
Intangible assets, net of accumulated amortization of
$296,000 and $246,000........................................ 299,000 298,000
------------ ------------
$ 17,049,000 $ 20,498,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable.............................................. $ 656,000 $ 1,297,000
Accrued expenses.............................................. 1,850,000 1,825,000
Deferred income............................................... 131,000 182,000
------------ ------------
Total Current Liabilities............................... 2,637,000 3,304,000
------------ ------------
Minority Interest............................................... 130,000 113,000
------------ ------------
Stockholders' Equity:
Common stock - .01 par value; 15,000,000 shares authorized,
9,553,310 and 9,548,310 shares issued...................... 96,000 96,000
Capital in excess of par value................................ 34,946,000 34,932,000
Accumulated deficit........................................... (19,048,000) (16,156,000)
Notes receivable under stock option plans..................... (982,000) (982,000)
Unrealized loss on securities available for sale.............. (17,000) (96,000)
------------ ------------
14,995,000 17,794,000
Less shares of common stock in treasury,
at cost; 101,609 and 101,609 shares........................... (713,000) (713,000)
----------- ------------
Total Stockholders' Equity.............................. 14,282,000 17,081,000
------------ ------------
$ 17,049,000 $ 20,498,000
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements
3
<PAGE> 4
TRIMEDYNE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
JUNE 30, JUNE 30,
------------------------- -------------------------
1995 1994 1995 1994
---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Net Sales................................................ $3,521,000 $3,418,000 $9,807,000 $10,333,000
Costs and Expenses:
Cost of goods sold..................................... 2,046,000 1,837,000 5,848,000 5,535,000
Selling, general and administrative.................... 1,754,000 1,691,000 5,079,000 4,774,000
Research and development............................... 654,000 648,000 2,009,000 1,868,000
---------- ---------- ---------- -----------
Total Costs and Operating Expenses................ 4,454,000 4,176,000 12,936,000 12,177,000
---------- ---------- ---------- -----------
Loss from Operations..................................... (933,000) (758,000) (3,129,000) (1,844,000)
Other Income (expense):
Interest income....................................... 71,000 49,000 255,000 250,000
Other................................................. 19,000 122,000 6,000 119,000
Minority interest in consolidated subsidiary company.. (9,000) (7,000) (24,000) (16,000)
---------- ---------- ---------- -----------
Net Loss................................................. ($852,000) ($594,000) ($2,892,000) ($1,491,000)
========== ========== ========== ===========
Net Loss per Share (Note 3).............................. ($0.09) ($0.07) ($0.31) ($0.17)
========== ========== ========== ===========
Weighted average number of shares outstanding............ 9,451,701 9,096,701 9,448,635 9,035,480
========== ========== ========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE> 5
TRIMEDYNE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED,
JUNE 30,
-----------------------------
1995 1994
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss...................................................... $(2,892,000) $(1,491,000)
Adjustment to reconcile net loss to net cash used for
operating activities:
Depreciation and amortization................................. 409,000 379,000
Loss on disposal of assets.................................... 18,000
Reversal of provision for excess and obsolete inventory, net.. (4,000)
Disposition of excess and obsolete inventory.................. (45,000)
Minority interest in earnings of subsidiary................... 17,000 16,000
Changes in operating assets and liabilities:
Decrease (increase) in trade accounts receivable, net......... 277,000 (244,000)
Increase in inventories....................................... (758,000) (479,000)
Increase in other current assets.............................. (307,000) (82,000)
Decrease in prepaid royalties................................. 63,000
(Decrease) increase in accounts payable....................... (641,000) 169,000
Increase (decrease) in accrued expenses....................... 25,000 (95,000)
(Decrease) increase in deferred income........................ (51,000) 10,000
----------- -----------
Net cash used for operating activities........................... (3,885,000) (1,821,000)
----------- -----------
Cash flows from investing activities:
Capital expenditures.......................................... (262,000) (271,000)
Patent expenditures........................................... (38,000) (42,000)
Prepaid royalty expenditures, net............................. (501,000)
Payments received on note receivable from sale of subsidiary.. 42,000
Sale of (investment in) marketable securities................. 1,523,000 (2,898,000)
----------- -----------
Net cash provided by (used for) investing activities.......... 1,223,000 (3,670,000)
----------- -----------
Cash flows from financing activities:
Proceeds from exercise of stock options....................... 1,000 859,000
----------- -----------
Net cash provided by financing activities..................... 1,000 859,000
----------- -----------
Net decrease in cash and cash equivalents........................ (2,661,000) (4,632,000)
----------- -----------
Cash and cash equivalents at beginning of period................. 3,183,000 7,150,000
----------- -----------
Cash and cash equivalents at end of period....................... $ 522,000 $ 2,518,000
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements
5
<PAGE> 6
TRIMEDYNE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995
(UNAUDITED)
NOTE 1
In the opinion of the Company, the accompanying condensed consolidated
financial statements contain all adjustments (consisting of only normal
recurring adjustments) necessary to present fairly the Company's condensed
consolidated financial position as of June 30, 1995 and September 30, 1994, the
results of operations and of cash flows for the nine month periods ended June
30, 1995 and 1994.
While the Company believes that the disclosures presented are adequate to make
the information not misleading, it is suggested that these condensed
consolidated financial statements be read in conjunction with the consolidated
financial statements and the notes included in the Company's latest annual
report on Form 10-K.
NOTE 2
<TABLE>
<CAPTION>
June 30, 1995 September 30, 1994
------------- ------------------
<S> <C> <C>
Inventories consist of the following:
Raw material............................... $ 3,727,000 $ 3,796,000
Work-in-process............................ 1,511,000 1,010,000
Finished goods............................. 3,871,000 3,545,000
----------- -----------
9,109,000 8,351,000
Inventory reserve.......................... (2,576,000) (2,621,000)
----------- -----------
Net inventory................................. $ 6,533,000 $ 5,730,000
=========== ===========
Net properties consist of the following:
Furniture and equipment.................... $ 4,622,000 $ 4,457,000
Leasehold improvements..................... 278,000 256,000
Construction in progress................... 66,000 43,000
----------- -----------
4,966,000 4,756,000
Accumulated depreciation and amortization.. (3,453,000) (3,128,000)
----------- -----------
Net properties................................ $ 1,513,000 $ 1,628,000
=========== ===========
</TABLE>
NOTE 3
The loss per share is based on the weighted average number of common shares
outstanding. Common stock equivalents including stock options and warrants
have not been considered in the calculation because they would be antidilutive.
6
<PAGE> 7
NOTE 4
The Company accounts for income taxes under Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" (SFAS 109). SFAS 109 is an
asset and liability approach which required the recognition of deferred tax
liabilities and assets for the expected future tax consequences of temporary
differences between the carrying amounts for financial statement purposes and
tax bases of assets and liabilities.
At June 30, 1995, the Company had net operating loss carryforwards for federal
and state income tax purposes totaling approximately $15,392,000 and
$11,892,000 respectively, which begin to expire in 2006. The Tax Reform Act of
1986 includes provisions which may limit the net operating loss carryforwards
available for use in any given year if certain events occur, including
significant changes in ownership. A net deferred tax asset has not been
created for such loss carryforwards due to the uncertainty of future
realization.
7
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
During the third quarter of fiscal 1995 ended June 30, 1995, Trimedyne's net
revenues increased 3% from the same fiscal 1994 quarter ($3,521,000 vs.
$3,418,000). For the current quarter, the Company incurred a loss from
operations of $933,000 compared to a loss from operations of $758,000 for the
year earlier period. The net loss for the quarter ended June 30, 1995, was
$852,000 as compared to a net loss of $594,000 in the same quarter of the
previous year.
Revenues for the current quarter were slightly higher than revenues in the same
quarter last year. While sales of Urolase(R) side-firing laser catheters to
C.R. Bard, Inc. ("Bard") declined by $1,000,000 from the year ago quarter,
orthopedic sales increased by $1,295,000. In the first nine months of this
year, sales of orthopedic products increased $2,440,000 over the first nine
months of the prior year, while sales of urology products to Bard in this
period declined by $1,940,000. Sales of orthopedic products have increased in
each of the last four quarters, and this growth is anticipated to continue. As
a result of the change in product mix from urology to orthopedic products,
which carry a lower profit margin, the Company's net loss was higher, despite
the increase in sales of orthopedics versus urology, in these periods.
Sales of Urolase(R) catheters have declined significantly in fiscal 1995
compared to fiscal 1994. In June 1993, the U.S. Food and Drug Administration
(FDA) designated right angle laser devices as "investigational" in the
treatment of BPH, despite such devices having earlier been cleared by the FDA
for general urologic use. The FDA's action caused Medicare reimbursement
authorities in many states to deny reimbursement for the use of such devices,
resulting in a decrease of Urolase(R) device sales to hospitals by Bard in these
areas. Procedure codes for laser treatment of the prostate were published in
the Federal Register in December 1994, and fee schedules for laser treatment of
the prostate were recently established by the U.S. Government's Health Care
Financing Administration ("HCFA"). However, in the absence of specific FDA
approval to treat BPH, only about one-half of Medicare's disbursing
intermediaries are reimbursing hospitals and paying physicians for the use of
laser devices to treat patients suffering from BPH. Bard built up a
substantial inventory of Urolase(R) Fibers in fiscal 1994 and has not placed any
further orders in fiscal 1995. The company does not anticipate significant
revenues in urology products until the regulatory, reimbursement and marketing
issues are resolved.
Cost of goods sold was 58.1% of net sales in the third quarter of fiscal 1995
compared to 53.7% for the third quarter of fiscal 1994. The increase in cost
of goods sold as percentage of sales was the result of the Company's product
mix which shifted from urology to orthopedic products which carry lower profit
margins and warranty costs associated with the introduction of the higher-
powered Holmium laser for use in orthopedics.
Selling, general and administrative expenses increased slightly to $1,754,000
for the current quarter compared to $1,691,000 for the quarter ended June 30,
1994. The increase in selling, general and administrative expenses was
primarily due to the higher commission expense attributed to increased
orthopedic product sales and expenses incurred in connection with patent
litigation.
Research and development expenditures for the quarter ended June 30, 1995,
increased slightly to $654,000 compared to $648,000 for the quarter ended June
30, 1994. R&D spending in fiscal 1995 is expected to increase slightly
compared to fiscal 1994, as the Company continues to expand its development
efforts of Holmium and Neodymium YAG lasers and other products for use in
urology and orthopedic applications.
8
<PAGE> 9
For the quarter ended June 30, 1995, the Company reported a net loss of
$852,000 or $.09 per share, based on 9,451,701 weighted average number of
shares outstanding, compared to a net loss of $594,000 or $.07 per share,
based on 9,096,701 weighted average number of shares outstanding for the year
earlier quarter.
Liquidity and Capital Resources
The Company's working capital decreased from $14,829,000 at September 30, 1994
to $12,224,000 at June 30, 1995, of which $4,556,000 is cash and equivalents,
and marketable securities. The Company's management believes that the current
level of cash and equivalents and marketable securities will be sufficient to
support its working capital requirements for at least the next two years.
Changes in Financial Condition
Cash and cash equivalents (including marketable securities) decreased by
$4,050,000 (47%) in the first three quarters of fiscal 1995. The decline in
cash is attributed to the net loss ($2,892,000), increase in inventories and
other current assets and purchase of machinery and equipment offset by
improved accounts receivable collections of $277,000.
The Company invested $300,000 in machinery to support production activities.
Net inventories increased $758,000 (14%) from September 30, 1994 primarily due
to production increases to support the higher demand for orthopedic products
and increased demonstration inventory of Holmium lasers. Other current assets
increased $307,000 from September 30, 1994, primarily due to deposits and
prepayments on asset purchases and general liability insurance.
9
<PAGE> 10
PART II.
OTHER INFORMATION
ITEM 1. Legal Proceedings
In January 1995, the Company filed a lawsuit in the
United States District Court for the Central District
of California against Surgical Laser Technologies,
Inc. ("SLT") of Oaks, Pennsylvania for infringement
of United States patents covering devices that use
laser energy to cause coagulation, such as our
Urolase(R)Fiber, or localized vaporization of tissue,
such as our Hot Tips(TM).
ITEM 2. Changes in Securities None
ITEM 3. Defaults Upon Senior Securities None
ITEM 4. Submission of Matters to Vote of Security Holders
a) Annual Stockholders Meeting of Trimedyne,
Inc. was held on April 6, 1995.
b) The directors elected at the meeting were:
1) Bruce N. Barron
2) Peter T. Hyde
c) The proposal presented to the stockholders
and the voting results were:
For Withheld
--------- --------
Bruce N. Barron 8,301,753 298,652
Peter T. Hyde 8,302,384 298,021
d) Ratification of amendment to Trimedyne, Inc.
1992 Incentive and Non-Qualified Stock
Option Plan
For Withheld Abstain
--------- -------- -------
7,535,488 712,472 104,172
ITEM 5. Other Information None
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibit
27 Financial Data Schedule
(b) Reports on Form 8-K None
10
<PAGE> 11
SIGNATURE PAGE
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 hereunto duly authorized.
TRIMEDYNE, INC.
Date: August 11, 1995 s/ MARVIN P. LOEB
--------------- --------------------------
Marvin P. Loeb
Chairman and
Chief Executive Officer
Date: August 11, 1995 s/ JAMES L. KELLY
--------------- ---------------------------
James L. Kelly
Vice President-Finance,
Chief Financial Officer and
Chief Accounting Officer
11
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> JUN-30-1995
<EXCHANGE-RATE> 1
<CASH> 522
<SECURITIES> 4,034
<RECEIVABLES> 2,634
<ALLOWANCES> 304
<INVENTORY> 6,533
<CURRENT-ASSETS> 1,441
<PP&E> 4,967
<DEPRECIATION> 3,454
<TOTAL-ASSETS> 17,049
<CURRENT-LIABILITIES> 2,637
<BONDS> 0
<COMMON> 96
0
0
<OTHER-SE> 14,316
<TOTAL-LIABILITY-AND-EQUITY> 17,049
<SALES> 9,807
<TOTAL-REVENUES> 9,807
<CGS> 5,848
<TOTAL-COSTS> 12,936
<OTHER-EXPENSES> (237)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2,892)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,892)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,892)
<EPS-PRIMARY> (.31)
<EPS-DILUTED> (.31)
</TABLE>
