<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
March 31, 1996 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 May 13, 1996
- ---------------------------- ----------------------------
Common Stock, $.01 par value 10,618,556 shares (excluding
101,600 shares held as
Treasury Shares)
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TRIMEDYNE, INC.
<TABLE>
<CAPTION>
Page Number
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<S> <C> <C> <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 8
Condition and Results of Operations
PART II. Other Information 9
SIGNATURE PAGE 10
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2
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TRIMEDYNE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31, SEPTEMBER 30,
1996 1995
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<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,914,000 $ 1,367,000
Marketable securities . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,022,000 3,048,000
Trade accounts receivable, net of allowance for doubtful
accounts of $304,000 and $315,000 . . . . . . . . . . . . . . . . . . . . 2,111,000 2,098,000
Inventories (Note 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,758,000 5,798,000
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 500,000 712,000
----------- -----------
Total Current Assets . . . . . . . . . . . . . . . . . . . . . . . . 14,305,000 13,023,000
Net Properties (Note 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,384,000 1,368,000
Prepaid royalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 313,000 355,000
Intangible assets, net of accumulated amortization of
$354,000 and $315,000 . . . . . . . . . . . . . . . . . . . . . . . . 290,000 294,000
----------- -----------
$16,292,000 $15,040,000
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 494,000 $ 1,021,000
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,113,000 1,833,000
Deferred income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140,000 87,000
----------- -----------
Total Current Liabilities . . . . . . . . . . . . . . . . . . . . . . . . 2,747,000 2,941,000
----------- -----------
Minority Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 159,000 142,000
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Stockholders' Equity:
Common stock - .01 par value; 15,000,000 shares authorized,
9,989,081 and 9,548,310 shares issued . . . . . . . . . . . . . . . . . 101,000 96,000
Capital in excess of par value . . . . . . . . . . . . . . . . . . . . . . 37,312,000 35,007,000
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . (23,312,000) (21,446,000)
Notes receivable under stock option plans . . . . . . . . . . . . . . . . . (982,000)
Unrealized loss on securities available for sale . . . . . . . . . . . . . (2,000) (5,000)
----------- -----------
14,099,000 12,670,000
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Less shares of common stock in treasury,
at cost; 101,609 and 101,609 shares . . . . . . . . . . . . . . . . . . . . (713,000) (713,000)
----------- -----------
Total Stockholders' Equity . . . . . . . . . . . . . . . . . . . . . . . . 13,386,000 11,957,000
----------- -----------
$16,292,000 $15,040,000
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</TABLE>
See accompanying notes to condensed consolidated financial statements
3
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TRIMEDYNE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
MARCH 31, MARCH 31,
------------------------- ---------------------------
1996 1995 1996 1995
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<S> <C> <C> <C> <C>
Net Sales . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,969,000 $3,206,000 $ 5,934,000 $6,286,000
Costs and Expenses:
Cost of goods sold . . . . . . . . . . . . . . . . . . . 1,765,000 2,041,000 3,479,000 3,802,000
Selling, general and administrative . . . . . . . . . . . 1,756,000 1,680,000 3,442,000 3,325,000
Research and development . . . . . . . . . . . . . . . . 572,000 734,000 1,053,000 1,356,000
----------- ----------- ----------- -----------
Total Costs and Operating Expenses . . . . . . . . . 4,093,000 4,455,000 7,974,000 8,483,000
----------- ----------- ----------- -----------
Loss from Operations . . . . . . . . . . . . . . . . . . (1,124,000) (1,249,000) (2,040,000) (2,197,000)
Other Income (expense):
Interest income . . . . . . . . . . . . . . . . . . . . 126,000 92,000 176,000 184,000
Other . . . . . . . . . . . . . . . . . . . . . . . . . 27,000 (2,000) 15,000 (12,000)
Minority interest in consolidated subsidiary company . . (9,000) (9,000) (17,000) (15,000)
----------- ----------- ----------- -----------
Net Loss . . . . . . . . . . . . . . . . . . . . . . . . . ($980,000) ($1,168,000) ($1,866,000) ($2,040,000)
=========== =========== =========== ===========
Net Loss per Share (Note 3) . . . . . . . . . . . . . . . . ($0.10) ($0.12) ($0.20) ($0.22)
=========== =========== =========== ===========
Weighted average number of shares outstanding . . . . . . . 9,509,377 9,447,479 9,491,251 9,447,086
=========== =========== =========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
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TRIMEDYNE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(UNAUDITED)
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SIX MONTHS ENDED,
MARCH 31,
-------------------------------------
1996 1995
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Cash flows from operating activities: ($1,866,000) ($2,040,000)
Net loss
Adjustment to reconcile net loss to net cash used for operating activities:
Depreciation and Amortization 248,000 268,000
Disposition of inventories (42,000)
(Reversal of provision) provision for excess and obsolete inventory (26,000) 26,000
Minority interest in earnings of subsidiary 17,000 8,000
Gain on disposal of assets (2,000)
Changes in operating assets and liabilities:
(Increase) decrease in trade accounts receivable, net (13,000) 889,000
Decrease (increase) in inventories 66,000 (502,000)
Decrease (increase) in other current assets 212,000 (143,000)
Decrease in prepaid royalties 42,000 42,000
Decrease in accounts payable (527,000) (641,000)
Increase (decrease) in accrued expense 280,000 (99,000)
Increase (decrease) in deferred income 53,000 (24,000)
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Net cash used for operating activities (1,516,000) (2,258,000)
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Cash flows from investing activities:
Capital expenditures (224,000) (171,000)
Patent expenditures (34,000) (26,000)
Sale of marketable securities 2,029,000 985,000
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Net cash used for investing activities 1,771,000 788,000
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Cash flows from financing activities:
Proceeds from exercise of stock options 2,001,000 1,000
Net proceeds from exercise of warrants 309,000
Payments received on notes receivable under stock option plans 982,000
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Net cash provided by financing activities 3,292,000 1,000
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Net increase (decrease) in cash and cash equivalents 3,547,000 (1,469,000)
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Cash and cash equivalents at beginning of period 1,367,000 3,183,000
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Cash and cash equivalents at end of period $4,914,000 $1,714,000
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</TABLE>
See accompanying notes to condensed consolidated financial statements
5
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TRIMEDYNE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
(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 March 31, 1996 and September 30, 1995,
the results of operations and of cash flows for the six month periods ended
March 31, 1996 and 1995.
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
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<CAPTION>
March 31, 1996 September 30, 1995
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Inventories consist of the following:
Raw material . . . . . . . . . . . . . . . . . . . . . . . . . $3,346,000 $3,362,000
Work-in-process . . . . . . . . . . . . . . . . . . . . . . . 1,354,000 633,000
Finished goods . . . . . . . . . . . . . . . . . . . . . . . . 3,775,000 4,546,000
---------- ----------
8,475,000 8,541,000
Inventory reserve . . . . . . . . . . . . . . . . . . . . . . (2,717,000) (2,743,000)
---------- ----------
Net inventory . . . . . . . . . . . . . . . . . . . . . . . . . . $5,758,000 $5,798,000
========== ==========
Net properties consist of the following:
Furniture and equipment . . . . . . . . . . . . . . . . . . . $4,821,000 $4,593,000
Leasehold improvements . . . . . . . . . . . . . . . . . . . . 278,000 278,000
Construction in progress . . . . . . . . . . . . . . . . . . . 66,000 72,000
---------- ----------
5,165,000 4,943,000
Accumulated depreciation and amortization . . . . . . . . . . (3,781,000) (3,575,000)
---------- ---------
Net properties . . . . . . . . . . . . . . . . . . . . . . . . . $1,384,000 $1,368,000
========== ==========
</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
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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 March 31, 1996, the Company had net operating loss carryforwards for federal
and state income tax purposes totaling approximately $15,430,000 and
$11,530,000 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
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
During the quarter ended March 31, 1996, Trimedyne's net revenues decreased
7% from the same fiscal 1995 quarter ($2,969,000 vs. $3,206,000). For the
current quarter, the Company incurred a loss from operations of $1,124,000
compared to a loss from operations of $1,249,000 for the year earlier period.
The net loss for the quarter ended March 31, 1996, was $980,000 as compared to
a net loss of $1,168,000 in the same quarter of the previous year.
The Company believes that the 7% decline in revenue was primarily due to
international hospital capital equipment budget constraints. The Company's
international revenue declined 37% ($293,000 vs. $569,000) compared to the
year ago quarter. Partially offsetting the above, revenue from orthopedic
disposables increased $164,000 or 31% and service revenue increased by $41,000
or 48% compared to the year ago quarter.
Cost of goods sold was 59.4% of net sales in the second quarter of fiscal 1996
compared to 63.7% for the second quarter of fiscal 1995. The decrease in cost
of goods sold as a percentage of sales was primarily due to the higher costs
incurred in the prior fiscal year associated with the introduction of the
higher powered Holmium Laser, offset in part by royalty expenses incurred on
orthopedic revenues which were not covered by a license agreement in the prior
year.
Selling, general and administrative expenses increased slightly to $1,756,000
for the current quarter compared to $1,680,000 for the quarter ended March 31,
1995. The increase in selling, general and administrative expenses was
primarily due to the increased legal expenses incurred in connection with
patent litigation, offset in part by generally lower operating expenses.
Research and development expenditures for the quarter ended March 31, 1996,
decreased 22% ($572,000 vs. $734,000) due to the decrease in costs associated
with development work on the Holmium and Neodymium:YAG Lasers, which has been
largely completed.
Net interest income increased by 37% to $126,000 for the current quarter,
compared with $92,000 for the same period of the prior year. The increase was
largely due to the receipt of $113,000 of interest income in the quarter in
connection with the repayment of a note.
Liquidity and Capital Resources
The Company's working capital increased from $10,082,000 at September 30, 1995
to $11,558,000 at March 31, 1996, of which $5,936,000 is cash and cash
equivalents, and marketable securities. The exercise of stock options by
employees, repayment of option exercise loans and the exercise of outstanding
warrants resulted in the receipt of approximately $3.4 million in cash proceeds
in the current quarter. In addition, in April 1996 the Company completed a
private placement under Regulation S of 500,000 shares of common stock along
with 250,000 warrants (exercisable at $6.53 per share), resulting in proceeds
of approximately $2.6 million.
8
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PART II.
OTHER INFORMATION
ITEM 1. Legal Proceedings
Surgical Laser Technologies, Inc. ("SLT"), a competitor of the
Company, sued the Company's distributor, C.R. Bard, Inc. and Bard Urological
Division ("Bard") in 1994, alleging contract and tort claims. The action was
filed in the United States District Court for the Eastern District of
Pennsylvania, styled Surgical Laser Technologies, Inc. v. C.R. Bard, Inc., et
al, and bears case no. 94 CV-7073. In September 1995, the court granted a
motion by SLT to file an amended complaint naming the Company as a defendant,
claiming the Company allegedly interfered with SLT's purported contractual
relationship with one of its foreign distributors, and alleging civil
conspiracy between the Company and Bard purportedly to control and restrict
competition in the market for urological and gynecological products. The
Company filed a motion to dismiss the second amended complaint for lack of
personal jurisdiction over the Company. On April 4, 1996 the court granted the
Company's motion and dismissed the action against the Company.
ITEM 2. Changes in Securities
None
ITEM 3. Defaults Upon Senior Securities
None
ITEM 4. Submission of Matters to Vote of Security Holders
None
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
The Company filed a Form 8-K on March 20, 1996 under Item 5.
9
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to the traditional surgical procedure over a period of three years, with
substantially fewer complications. Published studies have also shown that
Trimedyne's laser procedure can be safely performed on an outpatient basis for
at least $2,000 per case less than the cost of the traditional surgical
procedure.
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: May 15, 1996 s/ MARVIN P. LOEB
-------------------------
Marvin P. Loeb
Chairman and
Chief Executive Officer
Date: May 15, 1996 s/ PETER T. HYDE
-------------------------
Peter T. Hyde
President and
Chief Operating Officer
Date: May 15, 1996 s/ JAMES L. KELLY
-------------------------
James L. Kelly
Vice President-Finance,
Chief Financial Officer and
Chief Accounting Officer
10
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> MAR-31-1996
<CASH> 4,914
<SECURITIES> 1,022
<RECEIVABLES> 2,415
<ALLOWANCES> 304
<INVENTORY> 5,758
<CURRENT-ASSETS> 14,305
<PP&E> 5,165
<DEPRECIATION> 3,781
<TOTAL-ASSETS> 16,292
<CURRENT-LIABILITIES> 2,747
<BONDS> 0
0
0
<COMMON> 101
<OTHER-SE> 13,285
<TOTAL-LIABILITY-AND-EQUITY> 16,292
<SALES> 2,969
<TOTAL-REVENUES> 3,095
<CGS> 1,765
<TOTAL-COSTS> 4,093
<OTHER-EXPENSES> 18
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (980,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (980,000)
<EPS-PRIMARY> (.10)
<EPS-DILUTED> (.10)
</TABLE>
