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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
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, 2000 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 92606
(Address of principal executive offices) (Zip Code)
(949/559-5300)
(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 11, 2000
- ---------------------------- ----------------------------
Common Stock, $.01 par value 11,930,878 shares (excluding
101,609 shares held as
Treasury Shares)
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TRIMEDYNE, INC.
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Page Number
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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 10
SIGNATURE PAGE 11
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2
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TRIMEDYNE, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
ASSETS
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<CAPTION>
March 31,
2000
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Current Assets:
Cash and cash equivalents.................................... $ 1,973,000
Marketable securities........................................ 2,065,000
Trade accounts receivable, net of allowance for doubtful
accounts of $582,000....................................... 1,584,000
Inventories (Note 2)......................................... 4,248,000
Other........................................................ 462,000
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Total Current Assets..................................... 10,332,000
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Net Properties (Note 2) 468,000
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$ 10,800,000
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable............................................. $ 354,000
Accrued expenses............................................. 510,000
Deferred income.............................................. 133,000
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Total Current Liabilities................................ 997,000
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Stockholders' Equity:
Common stock - .01 par value; 15,000,000 shares authorized,
11,270,259 shares issued................................. 111,000
Capital in excess of par value............................... 43,532,000
Accumulated deficit.......................................... (32,990,000)
Unrealized loss on marketable securities available for sale.. (137,000)
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10,516,000
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Less shares of common stock held in treasury,
at cost; 101,609 shares...................................... (713,000)
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Total Stockholders' Equity.................................. 9,803,000
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$ 10,800,000
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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,
------------------------- -------------------------
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Net sales....................................... $ 1,515,000 $ 2,069,000 $ 3,500,000 $ 3,580,000
Costs and expenses:
Cost of goods sold............................. 635,000 953,000 1,708,000 1,799,000
Selling, general and administrative............ 913,000 1,384,000 1,422,000 2,374,000
Research and development....................... 798,000 983,000 1,758,000 1,762,000
----------- ----------- ----------- -----------
Total costs and operating expenses........... 2,346,000 3,320,000 4,888,000 5,935,000
----------- ----------- ----------- -----------
Loss from operations............................ (831,000) (1,251,000) (1,388,000) (2,355,000)
Other income:
Interest income............................... 59,000 110,000 125,000 172,000
Other (Note 5)................................ 7,000 12,000 14,000 6,552,000
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Net income (loss)............................... $ (765,000) $(1,129,000) (1,249,000) $ 4,369,000
=========== =========== =========== ===========
Basic earnings (loss) per share (Note 3)........ $ (0.07) $ (0.10) $ (0.11) $ 0.40
=========== =========== =========== ===========
Weighted average number of shares outstanding:
Basic 11,198,852 10,905,956 11,126,157 10,905,956
=========== =========== =========== ===========
Dilutive 11,198,852 10,905,956 11,126,157 10,905,956
=========== =========== =========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
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TRIMEDYNE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
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Six Months Ended
March 31,
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2000 1999
<S> <C> <C>
Cash flows from operating activities:
Net income (loss)......................................................................... $(1,249,000) $ 4,369,000
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization............................................................. 87,000 118,000
Value of employees' stock options issued below fair value................................. 6,000 9,000
Changes in operating assets and liabilities:
Decrease (increase) in trade accounts receivable, net..................................... 629,000 (78,000)
(Increase) decrease in inventories........................................................ (808,000) 134,000
(Increase) decrease in other current assets............................................... (53,000) 16,000
Increase in accounts payable.............................................................. 29,000 206,000
(Decrease) in accrued expenses............................................................ (124,000) (114,000)
Increase in deferred income............................................................... 4,000 58,000
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Net cash flows (used in) provided by operating activities (1,479,000) 4,718,000
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Cash flows from investing activities:
Capital expenditures...................................................................... (67,000) -
Unrealized loss on securities............................................................. (76,000) (7,000)
Sale (purchase) of marketable securities.................................................. 105,000 (6,333,000)
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Net cash (used in) investing activities................................................... (38,000) (6,340,000)
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Cash flows from financing activities:
Proceeds from the exercise of stock options 278,000 -
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Net decrease in cash and cash equivalents................................................... (1,239,000) (1,622,000)
Cash and cash equivalents at beginning of period............................................ 3,212,000 1,974,000
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Cash and cash equivalents at end of period.................................................. $ 1,973,000 $ 352,000
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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, 2000
(UNAUDITED)
NOTE 1 - Basis of Presentation
In the opinion of management, 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, 2000, the results of operations for the three
and six month periods ended March 31, 2000 and 1999 and of cash flows for the
six month periods ended March 31, 2000 and 1999.
While management 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.
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NOTE 2 - Balance Sheet Items
March 31, 2000
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Inventories consist of the following:
Raw material $ 2,134,000
Work-in-process 729,000
Finished goods 1,385,000
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$ 4,248,000
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Net properties consist of the following:
Furniture and equipment $ 3,178,000
Leasehold improvements 331,000
Other 16,000
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Total properties 3,525,000
Accumulated depreciation and amortization (3,057,000)
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Net properties $ 468,000
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6
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NOTE 3 - Earnings Per Share
For all periods presented, the net earnings available to common shareholders and
the weighted average shares outstanding are the same for both basic and diluted
EPS, since the effects of the Company's and the Company's majority owned
subsidiary Cardiodyne's stock options would be antidilutive. Basic and diluted
EPS do not differ from earnings per share previously presented.
NOTE 4 - Comprehensive Income
On October 1, 1998, the Company adopted the disclosure standard, Statement of
Financial Accounting Standard No. 130 "Comprehensive Income". The Company's
sole component of Other Comprehensive Income is changes in unrealized
appreciation (depreciation) - Securities Available for Sale. For the six months
ended March 31, 2000 and 1999, such changes were not material, and accordingly,
not presented in the accompanying consolidated statements of operations.
NOTE 5 - Other Income
Other Income during the six months ended March 31, 1999 includes $6.5 million,
net of legal fees and costs, received in December 1998 in connection with the
settlement of the Company's lawsuit against C.R. Bard, Inc.
NOTE 6 - Subsequent Events
In April, 2000 the Company raised approximately $2.1 million in a private
placement of 657,819 shares of the Company's Common Stock and 328,910 Warrants.
The Warrants are each exercisable to purchase one share of Common Stock at a
price of $4.88 per share.
7
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The statements contained in this Quarterly Report on Form 10-Q that are not
historical facts may contain forward-looking statements that involve a number of
known and unknown risks and uncertainties that could cause actual results to
differ materially from those discussed or anticipated by management. Risk
factors and uncertainties include general business conditions, government
regulations governing medical device approvals and manufacturing practices,
competitive market conditions, success of the Company's business strategy, delay
of orders, changes in the mix of products sold, availability of suppliers,
concentration of sales in markets and to certain customers, changes in
manufacturing efficiencies, development and introduction of new products,
fluctuations in margins, timing of significant orders, and other risks and
uncertainties currently unknown to management.
Method of Presentation.
The condensed consolidated financial statements include the accounts of the
Company and its 90% owned subsidiary, Cardiodyne, Inc. ("Cardiodyne").
Quarter ended March 31, 2000 compared to quarter ended March 31, 1999.
During the quarter ended March 31, 2000, Trimedyne's net revenues decreased 27%
from the same quarter of the previous year ($1,515,000 vs. $2,069,000). The
decrease in revenues is attributed to a delay in commencing sales and shipments
of the Company's new, lower cost 30 watt Junior(TM) Holmium laser. Sales and
shipments of the new laser are expected to commence in July. For the current
quarter, the Company incurred a loss from continuing operations of $765,000 or
$0.07 per share compared to a loss from operations of $1,129,000 or $0.10 per
share for the prior year period.
Cost of goods sold was 42% of net sales in the second quarter of fiscal 2000
compared to 46% for the second quarter of fiscal 1999. The decrease in cost of
goods sold as a percentage of revenues was due to a decline in the ratio of
laser sales to sales of disposables, as compared to the year ago quarter, and
due to the liquidation of certain older laser models which had been previously
reserved for.
Selling, general and administrative expenses decreased to $913,000 for the
current quarter compared to $1,384,000 for the quarter ended March 31, 1999, a
decrease of $471,000 or 34%. The decrease in selling, general and administrative
expenses is attributed to the continued implementation of cost containment
measures.
Research and development expenditures for the quarter ended March 31, 2000,
decreased 19% ($798,000 vs. $983,000) due to the reduction in expenditures to
complete the development of Cardiodyne's Laser TMR and Injection System.
8
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Interest income decreased by 46% to $59,000 for the current quarter, compared
with $110,000 for the same period of the prior year, due to the decreased
balance of marketable securities.
Liquidity and Capital Resources
- -------------------------------
The Company's working capital decreased from $10,357,000 at September 30, 1999
to $9,335,000 at March 31, 2000, of which $4,038,000 is cash and equivalents and
marketable securities. Management believes its existing working capital, along
with revenues from operations, will be sufficient to meet Trimedyne's operating
needs and the needs of its 90% owned subsidiary, Cardiodyne, Inc. for at least
the next twelve months. The Company has cut-back Cardiodyne's research and
development expenses as the project nears completion, and has also implemented
cost reductions at Trimedyne. The Company is seeking additional financing to
continue development of Cardiodyne's products and to support Trimedyne's
operations, the success of which cannot be assured.
9
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PART II.
Other Information
Item 1. Legal Proceedings
On October 6, 1995, the Company filed a lawsuit against C.R. Bard Inc.
claiming substantial damages for Bard's failure to perform its obligations as
Trimedyne's exclusive distributor under the Agreement and pay certain amounts
due under the Agreement. In December 1999, the Company settled its lawsuit
against Bard and received $6.5 million after legal costs and expenses.
In early 1995, the Company filed a patent infringement lawsuit against
Surgical Laser Technologies, Inc. (SLT). In April 1999, the Company settled its
lawsuit against SLT. The Company granted SLT a license to certain of its
patents, and SLT agreed to pay the Company a modest payment and royalties on any
future sales of products covered by the licensed patents.
The Company is subject to various claims and actions which arise in the
ordinary course of business. The litigation process is inherently uncertain,
and it is possible that the resolution of the Company's existing and future
litigation may adversely affect 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
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
None
10
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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, 2000 /s/ MARVIN P. LOEB
-------------------- -------------------------------------
Marvin P. Loeb
Chairman and
Chief Executive Officer
Date: May 15, 2000 /s/ SHANE H. TRAVELLER
-------------------- -------------------------------------
President and Chief Financial Officer
11
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<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM * _________________ AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINACIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 1,973
<SECURITIES> 2,065
<RECEIVABLES> 2,166
<ALLOWANCES> (582)
<INVENTORY> 4,248
<CURRENT-ASSETS> 10,332
<PP&E> 468
<DEPRECIATION> 87
<TOTAL-ASSETS> 10,800
<CURRENT-LIABILITIES> 997
<BONDS> 0
0
0
<COMMON> 111
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 10,800
<SALES> 1,515
<TOTAL-REVENUES> 1,581
<CGS> 635
<TOTAL-COSTS> 2,346
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (831)
<INCOME-TAX> 0
<INCOME-CONTINUING> (831)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (765)
<EPS-BASIC> (0.07)
<EPS-DILUTED> (0.07)
</TABLE>
