<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED
MARCH 31, 1996 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 0-10728
GISH BIOMEDICAL, INC.
(Exact name of registrant as specified in its charter)
California 95-3046028
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
2681 Kelvin Avenue, Irvine, California 92614
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (714)756-5485
N/A
(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
The number of shares outstanding of each of the issuer's classes of common
stock, as of May 10, 1996 were 3,360,802.
The number of pages in this Form 10-Q/A is 12.
<PAGE> 2
GISH BIOMEDICAL, INC.
INDEX
<TABLE>
<CAPTION>
PART I. Financial Information Page
<S> <C> <C>
(As amended August 27, 1996 to revised accrued compensation
and related items.)
Item 1: Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets
as of March 31, 1996 (restated) and June 30, 1995 3
Condensed Consolidated Statements of
Income for the three and nine months
ended March 31, 1996 (restated) and 1995 4
Condensed Consolidated Statements of
Cash Flows for the nine months ended
March 31, 1996 (restated) and 1995 5
Notes to Condensed Consolidated
Financial Statements 6
Item 2: Management's Discussion and Analysis
of Financial Condition and Results
of Operations. 9
PART II. Other Information
Item 6: Exhibits and Reports on Form 8-K 11
</TABLE>
2
<PAGE> 3
GISH BIOMEDICAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, 1996 June 30, 1995
(Restated)
-----------------------------------------
ASSETS (Unaudited)
<S> <C> <C>
Current assets:
Cash $ 1,536,900 $ 2,165,800
Short-term investments 2,200,600 5,147,900
Accounts receivable, net 4,282,500 3,342,200
Inventories 6,644,800 5,561,900
Deferred income tax assets 625,000 625,000
Prepaid expense 419,400 171,600
Prepaid taxes 269,400 ---
- ------------------------------------------------------------------------------------------------------------------------
Total current assets 15,978,600 17,014,400
Property and equipment, at cost 9,244,700 8,574,900
Less accumulated depreciation (5,252,300) (4,661,700)
- ------------------------------------------------------------------------------------------------------------------------
Net property and equipment 3,992,400 3,913,200
Note receivable 600,000 ---
Other assets 190,900 116,700
- ------------------------------------------------------------------------------------------------------------------------
$20,761,900 $21,044,300
========================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 837,300 $ 944,300
Accrued compensation and related items 569,100 563,400
Accrued income taxes --- 570,900
Other accrued liabilities 252,000 128,600
- ------------------------------------------------------------------------------------------------------------------------
Total current liabilities 1,658,400 2,207,200
Deferred rent 269,100 227,900
Deferred income taxes 4,500 4,500
Shareholders' equity:
Preferred stock, 2,250,000 shares
authorized; no shares outstanding
Common stock, no par value, 7,500,000 --- ----
shares authorized, 3,117,562 shares issued
and outstanding (3,101,129 shares at June 30, 1995) 7,812,800 7,761,800
Note receivable - officer stock purchase (50,000) (60,000)
Retained earnings 11,067,100 10,902,900
- ------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 18,829,900 18,604,700
- ------------------------------------------------------------------------------------------------------------------------
$20,761,900 $21,044,300
========================================================================================================================
</TABLE>
See accompanying notes
3
<PAGE> 4
GISH BIOMEDICAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
THREE AND NINE MONTHS ENDED MARCH 31, 1996 AND 1995 (UNAUDITED)
<TABLE>
<CAPTION>
Three months ended Nine months ended
March 31, March 31,
1996 1995 1996 1995
(Restated) (Restated)
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 6,000,200 $ 5,591,600 $17,052,000 $16,344,800
Cost of sales 3,982,600 3,577,000 11,181,200 10,481,900
- --------------------------------------------------------------------------------------------------------------------
Gross profit 2,017,600 2,014,600 5,870,800 5,862,900
Operating expenses
Selling and marketing 994,200 617,100 2,670,000 1,806,400
Research and development 354,300 268,900 1,051,500 883,400
General and administrative 515,700 410,800 1,379,700 1,225,300
Distributor contract
termination fee -- -- 702,000 --
- --------------------------------------------------------------------------------------------------------------------
Total operating expenses 1,864,200 1,296,800 5,803,200 3,915,100
- --------------------------------------------------------------------------------------------------------------------
Operating income 153,400 717,800 67,600 1,947,800
Interest income 93,400 57,700 201,600 155,300
- --------------------------------------------------------------------------------------------------------------------
Income before provision
for taxes 246,800 775,500 269,200 2,103,100
Provision for taxes 96,300 301,800 105,000 819,500
- --------------------------------------------------------------------------------------------------------------------
Net income $ 150,500 $ 473,700 $ 164,200 $ 1,283,600
====================================================================================================================
Earnings per share:
Primary net income $ 0.05 $ 0.14 $ 0.05 $ 0.40
====================================================================================================================
Fully diluted net income $ 0.05 $ 0.14 $ 0.05 $ 0.40
====================================================================================================================
Average common and
common equivalent shares:
Primary 3,329,903 3,269,369 3,354,834 3,196,096
====================================================================================================================
Fully diluted 3,330,730 3,270,606 3,363,698 3,247,471
====================================================================================================================
</TABLE>
See accompanying notes
4
<PAGE> 5
GISH BIOMEDICAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED MARCH 31, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
(Restated)
------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 164,200 $1,283,600
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 590,600 545,900
Deferred rent 41,200 66,400
Changes in operating assets and liabilities (3,089,200) (995,400)
- ----------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities (2,293,200) 900,500
- ----------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Sale of short-term investments 2,947,300 ---
Note receivable (600,000) ---
Purchases of property and equipment (669,800) (637,400)
(Increase) decrease in other assets (74,200) (25,700)
- ----------------------------------------------------------------------------------------------------------------------
Net cash provided (used) by in investing activities 1,603,300 (663,100)
- ----------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Proceeds from stock options exercised 51,000 294,700
Repayment of stockholder's loan 10,000 ---
- ----------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 61,000 294,700
- ----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalent (628,900) 532,100
Cash and cash equivalents at beginning of period 2,165,800 6,124,900
- ----------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 1,536,900 $6,657,000
======================================================================================================================
</TABLE>
See accompanying notes
5
<PAGE> 6
GISH BIOMEDICAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
(UNAUDITED)
1. General
The condensed financial statements included herein have been prepared by the
Registrant, without audit, and include all adjustments (consisting of normal
recurring accruals) which are, in the opinion of management, necessary for a
fair presentation of the results of operations for the three and nine month
periods ended March 31, 1996 and 1995, financial position at March 31, 1996,
and cash flows for the nine month periods ended March 31, 1996 and 1995,
pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations, although the Registrant believes that the disclosures in such
financial statements are adequate to make the information presented not
misleading. These condensed financial statements should be read in conjunction
with the Registrant's financial statements and the notes thereto included in
the Registrant's Annual Report filed with the Securities and Exchange
Commission on Form 10-K for the year ended June 30, 1995.
Restatement
Management discovered an error in the calculation of the accrued liability for
employee benefits, vacation, and sick pay as of March 31, 1996 in the course of
preparing the Company's consolidated financial statements for the year ended
June 30, 1996. To properly state the accured liability, the accompanying
condensed consolidated financial statements have been restated from those
originally issued by increasing the accrued liability balance and
correspondingly increasing employee related expenses (reported in cost of
sales, selling and marketing, research and development, and general and
administrative expenses) by $180,000. After related income tax benefit, the
correction resulted in a decrease of $109,800 ($.03 per share) in net income
for the three and nine month periods in 1996.
6
<PAGE> 7
GISH BIOMEDICAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1996
(UNAUDITED)
Statement of Cash Flows
Changes in operating assets and liabilities as shown in the condensed
consolidated statements of cash flows comprise:
<TABLE>
<CAPTION>
Nine months ended March 31, 1996 1995
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
(Increase) decrease in:
Accounts receivable $ (940,300) $ (347,800)
Inventories (1,082,900) (803,900)
Prepaid expenses (247,800) (167,500)
Prepaid taxes (269,400) --
Increase (decrease) in:
Accounts payable (107,000) (43,800)
Accrued compensation 5,700 --
Accrued income taxes (570,900) 376,000
Accrued liabilities 123,400 (8,400)
- ----------------------------------------------------------------------------------------------------
Changes in operating assets and liabilities $(3,089,200) $ (995,400)
====================================================================================================
</TABLE>
The Company paid $937,500 and $819,631 in Federal and State income taxes
during the nine month periods ended March 31, 1996 and 1995,
respectively.
2. Inventories
Inventories are stated at the lower of cost (first-in, first out) or net
realizable value and are summarized as follows:
<TABLE>
<CAPTION>
March 31, 1996 June 30,1995
----------------------------------------
<S> <C> <C> <C>
Raw materials $3,388,200 $2,936,700
Work in progress 1,536,600 1,317,900
Finished goods 1,720,000 1,307,300
- --------------------------------------------------------------------------------------------------------------
$6,644,800 $5,561,900
==============================================================================================================
</TABLE>
7
<PAGE> 8
GISH BIOMEDICAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1996
(UNAUDITED)
3. Note payable - bank
On March 31, 1996 the Company had available a $2,000,000 secured
revolving credit facility with interest at the bank's prime rate. The
Company had no balance outstanding under the line at either March 31,
1996 or June 30, 1995.
4. Earnings per share
Earnings per share is based on the weighted average number of common and
common equivalent shares outstanding during the period. Common equivalent
shares include the potential dilution from the exercise of stock options,
reduced by the number of common shares which are assumed to have been
purchased with the income tax benefits and proceeds from the exercise of
such instruments using average market price for the period. Fully diluted
earnings per share reflects additional dilution, if any, from using the
market price at the option exercise date or end of period to determine
share which would have been purchased.
5. Revenue recognition
Revenue is recognized at the time of shipment to the customer. The
customer's right of return is limited to damaged or defective product.
6. Acquisition
On September 12, 1995 the Company entered to an agreement to acquire the
assets and technology of Creative Medical Development, Inc. ("CMD") for
$600,000 in cash and 240,240 shares of the Company's common stock and
assumed management of the assets and operations of the assets to be
acquired. Accordingly, the Company has included revenue and costs related
to the product lines acquired for the period September 13, 1995 through
March 31, 1996 in the Company's financial statement. Additionally, the
Company upon closing of the transaction April 17, 1996, entered into a
one-year lease for the building which CMD currently occupies. The Company
has also executed one year employment agreements with four key employees
which includes provisions for the issuance of up to 53,500 shares of the
Company's common stock to those employees upon completion of certain
performance criteria.
8
<PAGE> 9
GISH BIOMEDICAL, INC
MARCH 31, 1996
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (REVISED)
Results of Operations: On September 12, 1995 the Company entered into an
agreement to acquire the assets and technology of Creative Medical Development,
Inc. ("CMD") for $600,000 in cash and 240,240 shares of the Company's common
stock and assumed management of the assets and operations of the assets to be
acquired. Accordingly, the Company has included revenue and costs related to
the product lines acquired for the period September 13, 1995 through March 31,
1996 in the Company's financial statement. Additionally, the Company upon
closing of the transaction April 17, 1996, entered into a one-year lease for
the building which CMD currently occupies. The Company has also executed one
year employment agreements with four key employees which includes provisions
for the issuance of up to 53,500 shares of the Company's common stock to those
employees upon completion of certain performance criteria.
Sales for the three and nine month periods ended March 31, 1996 increased by
$409,000 or 7% and $707,000 or 4% respectively over the corresponding periods
of fiscal 1995. The increases in sales for the three and six month periods
ended March 31, 1996 were due to primarily to increases in cardiovascular
surgery sales including the Company's recently introduced Myomanager. Sales
attributable to CMD's products were $87,000 and $360,000 for the three and nine
month period ended March 31, 1996 respectively.
Cost of sales for the three month period ended March 31, 1996 was 66% of sales
as compared to 64% of sales for the corresponding period of fiscal 1995. Cost
of sales for the nine month period ended March 31, 1996 was 66% of sales as
compared to 64% of sales for the corresponding period of fiscal 1995. The
increase in cost of sales of 2% for the three and nine month periods ended
March 31, 1996 is primarily attributable to CMD's unabsorbed manufacturing
costs of $127,000 and $192,000 respectively.
Selling and marketing expenses for the three and nine month periods ended March
31, 1996 increased $377,000 or 61% and $864,000 or 48% over the corresponding
periods of fiscal 1995. Selling expenses related to the operation of CMD
accounted for 33% and 29% of the increases for the three and nine month periods
ended March 31, 1996 respectively. The remaining increase was due to the
Company's recent direct sales force expansion. The Company anticipates that its
selling and marketing expenses will continue to be approximately $900,000 to
$1,000,000 per quarter for the remainder of the fiscal year.
Research and development expenses for the three and nine month periods ended
March 31, 1996 increased $85,000 and $168,000 respectively over the
corresponding periods of fiscal 1995. Costs associated with upgrading CMD's
ambulatory infusion pump product line represented the majority of the increase
in expenses over the corresponding periods of fiscal 1995. The Company is
actively engaged in several new product development projects, including an
oxygenator, all of which will continue to require expenditures approximating
$400,000 per quarter for the foreseeable future.
9
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
General and administrative expenses increased $101,000 and $154,000 over the
corresponding periods of fiscal 1995. The increases during the three and nine
month periods were primarily due to the operations of CMD of $64,000 and
$155,000 respectively.
The Company also incurred a one-time expense of $702,000 during the first
quarter of fiscal 1996, which represents payments due to a former distributor
as compensation for the termination of its contract with the Company.
The provision for taxes is based upon a combined federal and state effective
tax rate of 39% for all periods presented.
Quarterly earnings per share is not directly additive for the periods presented
due to fluctuations in weighted average shares outstanding. These fluctuations
are attributable to the exercise of stock options and the treasury stock method
for determining the number of outstanding options to be included as common
stock equivalents. These fluctuations are more significant when there are
substantial variations in the market price of the Company's common stock.
The effects of inflation have not been a significant factor in the results of
operations. The cardiovascular surgery market has been experiencing pricing
pressures which have precluded the Company from considering price increases.
Liquidity and capital resources: At March 31, 1996, the Company had $14,320,000
of working capital, a decrease of $487,000 from working capital at June 30,
1995. The decrease is primarily due to the use of cash in operating activities
and an increase in inventories needed to support our direct sales efforts.
For the period ended March 31, 1996 cash used in operations of $2,293,200 was
primarily due to increased inventories, increased accounts receivable and
payment of accrued taxes. Increases in inventories were primarily due to a
commitment to stocking higher levels of finished goods, related to our direct
sales efforts and acquisition of component inventory for new products such as
Myomanager (TM), the oxygenator, and the ambulatory infusion pumps. Increases
in accounts receivable were due to increases in sales and the timing of those
sales during the quarter. For the period ended March 31, 1995, cash provided by
operations of $900,500 was primarily due to profitable operations.
For the period ended March 31, 1996 cash provided by investing activities of
$1,603,300 was primarily due to the sale of short-term investments offset by
the advance of $600,000 to CMD and the purchase of property and equipment. The
advance to CMD is in the form of a note and is secured by substantially all of
CMD's assets. Purchases of property and equipment were primarily tooling
purchases to manufacture inventory associated with new products such as the
Myomanager and the oxygenator. For the period ended March 31, 1995 cash used by
investing activities was primarily due to the purchase of property and
equipment.
For the periods ended March 31, 1996 and 1995 cash provided by financing
activities of $61,000 and $294,700 was primarily due to proceeds from the
exercise of stock options.
10
<PAGE> 11
GISH BIOMEDICAL, INC.
MARCH 31, 1996
PART II. OTHER INFORMATION
ITEM 6. Exhibits and reports on Form 8K.
On May 2, 1996 the Company filed a report on Form 8K regarding the acquisition
of certain assets from Creative Medical Development, Inc.
11
<PAGE> 12
GISH BIOMEDICAL, INC.
MARCH 31, 1996
SIGNATURES
Pursuant to the Requirements of Section 13 or 15(d) 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, at Irvine, California this
27 day of August 1996.
GISH BIOMEDICAL, INC.
Date: August 27, 1996 By: /s/ JEANNE MILLER TARAZEVITS
- --------------------- -------------------------------------------
JEANNE MILLER TARAZEVITS
V.P. and Chief Financial Officer
12
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> MAR-31-1996
<CASH> 1,536,900
<SECURITIES> 2,200,000
<RECEIVABLES> 4,282,500
<ALLOWANCES> 0
<INVENTORY> 6,644,800
<CURRENT-ASSETS> 15,978,600
<PP&E> 9,244,700
<DEPRECIATION> (5,252,300)
<TOTAL-ASSETS> 20,761,900
<CURRENT-LIABILITIES> 1,658,400
<BONDS> 0
0
0
<COMMON> 7,812,800
<OTHER-SE> (50,000)
<TOTAL-LIABILITY-AND-EQUITY> 20,761,900
<SALES> 17,052,000
<TOTAL-REVENUES> 17,052,000
<CGS> 11,181,200
<TOTAL-COSTS> 11,181,200
<OTHER-EXPENSES> 5,803,200
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 269,200
<INCOME-TAX> 105,000
<INCOME-CONTINUING> 164,200
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 164,200
<EPS-PRIMARY> .05
<EPS-DILUTED> .05
</TABLE>
