<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial information extracted from the
Form 10-QSB of Gish Biomedical, Inc., for the nine months ended March 31, 2000
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000700945
<NAME> GISH BIOMEDICAL, INC.
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> MAR-31-2000
<CASH> 2,305
<SECURITIES> 887
<RECEIVABLES> 3,506
<ALLOWANCES> 0
<INVENTORY> 6,619
<CURRENT-ASSETS> 13,366
<PP&E> 9,422
<DEPRECIATION> 7,137
<TOTAL-ASSETS> 15,803
<CURRENT-LIABILITIES> 1,848
<BONDS> 0
0
0
<COMMON> 10,483
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 15,803
<SALES> 13,370
<TOTAL-REVENUES> 13,370
<CGS> 9,939
<TOTAL-COSTS> 9,939
<OTHER-EXPENSES> 5,941
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2,510)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,510)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,510)
<EPS-BASIC> (.68)
<EPS-DILUTED> (.68)
</TABLE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended: March 31, 2000
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
Commission File No.: 0-10728
GISH BIOMEDICAL, INC.
-------------------------------------------------------------------
(Exact name of small business issuer 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)
(949) 756-5485
--------------------------------------------------------------
(Issuer's telephone number)
N/A
--------------------------------------------------------------
(Former name, former address and formal fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15 (d) of the Exchange Act during the past 12 months (or for such
shorter period that the issuer was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes X No
--- ---
As of May 9, 2000, the issuer had 3,592,147 shares of its common stock, no
par value, outstanding.
Transitional Small Business Disclosure Format (check one): Yes X No
--- ---
1
<PAGE>
PART I - FINANCIAL INFORMATION
- ------ ---------------------
ITEM 1. - Financial Statements
- ------ --------------------
GISH BIOMEDICAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 31, 2000
(unaudited)
ASSETS (In thousands, except share data)
Current assets:
Cash and cash equivalents $ 2,305
Short-term investments 887
Accounts receivable, net 3,506
Inventories 6,619
Prepaid expenses 49
--------
Total current assets 13,366
Property and equipment, at cost 9,422
Less accumulated depreciation ( 7,137)
-------
Net property and equipment 2,285
Other assets 152
--------
Total assets $ 15,803
========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,024
Accrued compensation and related items 626
Other accrued liabilities 198
--------
Total current liabilities 1,848
Deferred rent 264
--------
Total liabilities 2,112
--------
Stockholders' equity:
Preferred stock, 2,250,000 shares authorized;
no shares outstanding
Common stock, no par value, 7,500,000 shares
authorized, 3,592,147 shares issued and outstanding 10,483
Retained earnings 3,208
--------
Total stockholders' equity 13,691
--------
Total liabilities and stockholders' equity $ 15,803
========
See accompanying notes to condensed consolidated financial statements.
2
<PAGE>
GISH BIOMEDICAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three and Nine months ended March 31, 2000 and 1999
<TABLE>
(unaudited)
(In thousands, except share and Three months ended Nine months ended
per share data) March 31, March 31,
------------------------ -----------------------
2000 1999 2000 1999
------ ------ ------ ------
<S> <C> <C> <C> <C>
Net sales $ 4,422 $ 4,609 $ 13,370 $ 13,876
Cost of sales 3,103 3,249 9,939 9,861
--------- --------- --------- ---------
Gross profit 1,319 1,360 3,431 4,015
Research and development 210 330 900 896
Selling and marketing 1,072 936 3,125 2,925
General and administrative 486 398 1,916 1,206
--------- --------- --------- ---------
Total operating expenses 1,768 1,664 5,941 5,027
--------- --------- --------- ---------
Operating loss ( 449) ( 304) ( 2,510) ( 1,012)
Interest income 34 35 126 147
--------- --------- --------- ---------
Loss before provision for taxes ( 415) ( 269) ( 2,384) ( 865)
Benefit for taxes - - - -
--------- --------- --------- ---------
Net loss ($ 415) ($ 269) ($ 2,384) ($ 865)
========= ========= ========= =========
Basic and diluted net loss per
share ($ .12) ($ .08) ($ .68) ($ .25)
========= ========= ========= =========
Basic and diluted weighted
average common shares 3,527,555 3,450,632 3,490,342 3,449,476
========= ========= ========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
GISH BIOMEDICAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine months ended March 31, 2000 and 1999
(unaudited)
<TABLE>
(In thousands) 2000 1999
<S> <C> <C>
------ ------
Cash flows from operating activities:
Net loss $(2,384) $ (865)
Adjustments:
Depreciation 669 680
Loss on disposal of assets 313 -
Amortization 5 18
Deferred rent ( 38) ( 16)
Changes in operating assets and liabilities 430 921
------- ------
Net cash provided by (used in) operating activities ( 1,005) 738
------- ------
Cash flows from investing activities:
Purchases of property and equipment ( 413) ( 296)
Sale of short-term investments 603 -
Increase in other assets ( 6) ( 32)
------- -----
Net cash provided by (used in) investing activities 184 ( 328)
------- -----
Cash flows from financing activities:
Proceeds from stock options exercised 334 16
------- ------
Net cash provided by financing activities 334 16
------- ------
Net decrease in cash and cash equivalents ( 487) 426
Cash and cash equivalents at beginning of period 2,792 3,497
------- ------
Cash and cash equivalents at end of period $ 2,305 $3,923
======= ======
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
GISH BIOMEDICAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2000 (unaudited)
1. General
-------
The condensed consolidated financial statements included herein have
been prepared by the Company, without audit, and include all
adjustments which, in the opinion of management, are necessary for a
fair presentation of the results of operations and cash flows for the
three and nine month periods ended March 31, 2000 and 1999, and
financial position at March 31, 2000, pursuant to the rules and
regulations of the Securities and Exchange Commission ("SEC"). Certain
information and footnote disclosures normally included in consolidated
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such
rules and regulations. Although the Company believes that the
disclosures in such condensed consolidated financial statements are
adequate to make the information presented not misleading, these
condensed consolidated financial statements should be read in
conjunction with the Company's consolidated financial statements and
the notes thereto included in the Company's Annual Report filed with
the SEC on Form 10-K for the year ended June 30, 1999. Commencing with
this fiscal year, the Company has elected to make its filings with the
SEC pursuant to the small business reporting alternative provided by
the SEC under Regulation S-B.
Statement of Cash Flows
----------------------
Changes in operating assets and liabilities as shown in the condensed
consolidated statements of cash flows comprise (in thousands):
Nine months ended March 31, 2000 1999
--------------------------- ------ ------
Decrease (increase) in:
Accounts receivable ($ 103) $ 184
Note receivable 54 -
Inventories 561 484
Prepaid expenses 68 ( 73)
Income tax refund receivable - 751
Increase (decrease) in:
Accounts payable ( 342) ( 382)
Accrued compensation and related items 31 ( 69)
Other accrued liabilities 161 26
------ -----
Change in operating assets and liabilities $ 430 $ 921
====== =====
The Company paid three thousand six hundred dollars in state income taxes during
the nine month period ended March 31, 2000. The Company did not pay any interest
or federal income taxes during the same period. The Company did not pay any
interest or federal income taxes during the nine month period ended March 31,
1999. The Company paid eleven thousand two hundred dollars in state income
taxes during the nine months ended March 31, 1999.
5
<PAGE>
GISH BIOMEDICAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
March 31, 2000
(unaudited)
2. Inventories
-----------
Inventories are stated at the lower of cost (first-in, first-out) or
net realizable value and are summarized as follows (in thousands):
March 31, 2000
Raw materials $ 3,537
Work in progress 1,255
Finished goods 1,827
-----
$ 6,619
=======
3. Earnings per share
------------------
The Company calculates earnings (loss) per share pursuant to SFAS 128
"Earnings Per Share". Due to the incurrence of losses in each reporting
period, there is no difference between basic and diluted per share
amounts.
4. Acquisition
-----------
On April 17, 1996, the Company assumed ownership of the net assets and
technology of Creative Medical Development ("CMD") in exchange for a
payment of $600,000 in cash and $2,000,000 of Gish Biomedical, Inc.
common stock. During the fourth quarter of fiscal 1997, the Company
recorded an impairment of goodwill of $1,800,000 to write off the
goodwill associated with this product line.
During the fiscal year ended June 30, 1998 the Company decided to
redesign the infusion pump without utilizing the technology acquired
from CMD. Consequently, in the fourth quarter of fiscal 1998, the
Company wrote off all remaining assets, principally inventory, property
and equipment associated with the CMD infusion pump, and recognized
charges aggregating $827,000.
5. Nonrecurring Charges
--------------------
In September, 1999 the Company discontinued development of the new
infusion pump for strategic and economic reasons and recognized
$429,000 in charges related to the discontinuance. The total charge
consisted of $140,000 charged to cost of sales for inventory
obsolescence, $7,000 charged to selling and marketing expense for the
write-down of field inventories, and $282,000 charged to general and
administrative expense consisting primarily of software development
costs.
Additionally, in the quarter ended September 30, 1999, the Company
recognized obsolete inventory write-offs of $83,000 for custom tubing
packs, field inventory shrinkage of $133,000, severance and other costs
associated with the resignation of the Company's chief executive of
$294,000, and severance of $95,000 resulting from a reduction in
workforce. Excluding nonrecurring charges, the Company's gross profit
margin for the quarter ended September 30, 1999 was 27.1% compared to
28.0% in the comparable period of the prior fiscal year.
6
<PAGE>
ITEM 2. - Management's Discussion and Analysis of Financial Condition and
- ------
Results of Operations
---------------------------------------------------------------
This Quarterly Report on Form 10-QSB contains certain forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934 and the Company intends that such
forward-looking statements be subject to the safe harbors created thereby. Words
such as "anticipates", "expects", "intends", "plans", "believes", "seeks",
"estimates", variations of such words and similar expressions are intended to
identify such forward-looking statements, which include (i) the existence and
development of the Company's technical and manufacturing capabilities, (ii)
anticipated competition, (iii) potential future growth in revenues and income,
(iv) potential future decreases in costs, and (v) the need for, and availability
of, additional financing.
In light of the important factors that can materially affect results, including
those set forth below and elsewhere in this Quarterly Report on Form 10-QSB, the
inclusion of forward-looking information herein should not be regarded as a
representation by Gish or any other person that our objectives or plans will be
achieved. We may encounter competitive, technological, financial and business
challenges making it more difficult than expected to continue to develop and
market our products; the market may not accept our existing and future products;
we may be unable to retain key management personnel; and there may be other
material adverse changes in our operations or business. Certain important
factors affecting the forward-looking statements made herein include, but are
not limited to (i) continued downward pricing pressures in our targeted markets,
(ii) the continued acquisition of our customers by certain of our competitors
and (iii) our decision to replace our distributor network with a direct sales
force in certain geographic territories. Assumptions relating to budgeting,
marketing product development and other management decisions are subjective in
many respects and thus susceptible to interpretations and periodic revisions
based on actual experience and business developments, the impact of which may
cause us to alter our marketing, capital expenditure or other budgets, which may
in turn affect our financial position and results of operations. The reader is
therefore cautioned not to place undue reliance on forward-looking statements
contained herein, which speak as of the date of this report.
The following is management's discussion and analysis of certain significant
factors which have affected the earnings and financial position of the Company
during the period included in the accompanying financial statements. This
discussion compares the three month period ending March 31, 2000 with the three
month period ended March 31, 1999, as well as the nine month period ended March
31, 2000 with the nine month period ended March 31, 1999. This discussion should
be read in conjunction with the financial statements and associated notes.
Results of Operations:
- ---------------------
The Company incurred a net loss of $415,000, or $.12 basic and diluted net loss
per share, for the three months ended March 31, 2000 compared to a net loss of
$269,000, or $.08 basic and diluted net loss per share, for the comparable
period in the prior fiscal year.
For the nine months ended March 31, 2000, the Company incurred a net loss of
$2,384,000, or $.68 basic and diluted net loss per share, compared to a net loss
of $865,000, or $.25 basic and diluted net loss per share, for the nine months
ended March 31, 1999.
7
<PAGE>
The increased loss relative to the nine months ended March 31, 1999 is partly
due to non-recurring charges of $1,034,000 which were reported in the quarter
ended September 30, 1999. The charges included $429,000 related to the
discontinuance of the Company's infusion pump business, $294,000 in severance
and costs related to the resignation of the Company's chief executive officer,
obsolete inventory write-offs of $83,000 for custom tubing packs, $133,000
write-down of field inventories, and $95,000 in severance from the Company's
reduction in workforce in September 1999. The $95,000 severance included $24,000
charged to selling and marketing expense, $15,000 charged to research and
development, and $56,000 charged to general and administrative costs.
In September 1999 the Company concluded that its ambulatory infusion pump
business was not viable due to the large number of competitive models available
and the downward trend in market pricing of both hardware and disposable pump
products. Consequently, the Company discontinued development of a new infusion
pump then under development, and wrote off inventory and other assets associated
with the infusion pump product line.
The $429,000 charge related to the discontinuance of the infusion pump business
included $140,000 in obsolete inventories charged to cost of sales, $7,000
charged to selling and marketing for obsolete field inventories, and $282,000
charged to general and administrative expenses which included the write-off of
capitalized software development costs for the infusion pump product previously
under development.
The Company had sales of $4,422,000 for the quarter ended March 31, 2000
compared to sales of $4,609,000 for the comparable quarter in the prior fiscal
year. For the nine months ended March 31, 2000, the Company had sales of
$13,370,000 compared to sales of $13,876,000 for the nine months ended March 31,
1999.
The $187,000 net sales decrease for the quarter ended March 31, 2000 compared to
the quarter ended March 31, 1999 included a $136,000 decrease in sales of
cardioplegia products, and a $295,000 decrease in sales of custom tubing sets,
partly offset by a $426,000 increase in sales of oxygenators.
The $506,000 net sales decrease for the nine months ended March 31, 2000
compared to the nine months ended March 31, 1999 included a $439,000 decrease in
sales of cardiotomy reservoirs, a $432,000 decrease in sales of cardioplegia
products, and a $1,160,000 decrease in sales of custom tubing sets, partly
offset by a $1,360,000 increase in sales of oxygenators.
The reduction in sales of cardiotomy reservoirs, cardioplegia products, and
custom tubing sets resulted from factors which include a loss of market share in
these products to other competitors, a shift in customer purchasing patterns
from separate components to integrated oxygenator systems which include those
components, and the increasing percentage of open heart surgeries which are
performed without stopping the heart. A majority of the Company's sales are
derived from products used in the open heart bypass circuit which is employed
when a patient's heart is stopped during cardiac surgery.
Oxygenator sales were $1,014,000 for the three months ended March 31, 2000
compared to $588,000 for the three months ended March 31, 1999. For the nine
months ended March 31, 2000, oxygenator sales were $2,676,000 compared to
$1,316,000 for the comparable period in the prior fiscal year. The sales
increase resulted from additional market penetration by the Vision oxygenator
which was introduced in August, 1997. The Vision oxygenator has been favorably
received by the market due to product features and operating performance.
8
<PAGE>
Gross profit decreased to $1,319,000 for the three months ended March 31, 2000
compared to $1,360,000 for the three months ended March 31, 1999. The primary
cause of the gross profit decrease was the decrease in sales compared to the
prior year quarter.
For the nine months ended March 31, 2000, gross profit was $3,431,000 compared
to $4,015,000 for the nine months ended March 31, 1999. The decrease included
the effect of obsolete inventory writeoffs totaling $223,000 which were recorded
in the first quarter of fiscal 2000. The inventory writeoffs consisted of
$83,000 for custom tubing packs and $140,000 related to the discontinuance of
the Company's infusion pump business. Additional factors in the gross profit
decrease were the decrease in total net sales, and the shift in product mix to
oxygenators from other products with higher margin such as cardiotomy reservoirs
and custom tubing packs.
Research and development expenses for the three months ended March 31, 2000 were
$210,000 compared to $330,000 for the three months ended March 31, 1999. The
decrease in expense compared to the comparable quarter in the prior year
resulted from the staff reduction in September 1999 and the discontinuation of
the Company's infusion pump business, also in September 1999.
Research and development expenses for the nine months ended March 31, 2000 were
$900,000 compared to $896,000 for the comparable period in the prior year.
Spending during the first quarter ended September 30, 1999 increased over the
comparable quarter in the prior year, due to additional staff and increased
prototype expenses, and $15,000 in severance related to the September, 1999
reduction in force. During the subsequent six month period which ended March 31,
2000, expenses decreased compared to the comparable period in the prior year due
to the reduced staffing level and discontinuation of projects relating to the
infusion pump business.
Selling and marketing expenses for the three months ended March 31, 2000 were
$1,072,000 compared to $936,000 for the three months ended March 31, 1999. The
increase resulted from increased promotional activities. Selling and marketing
expenses for the nine months ended March 31, 2000 were $3,125,000 compared to
$2,925,000 for the nine months ended March 31, 1999. The $200,000 increase is
partially attributable to $164,000 in nonrecurring charges incurred in the
quarter ended September 30, 1999. The nonrecurring charges consisted of $24,000
in severance from the Company's reduction in force in September 1999, $133,000
write-down of field inventories, and $7,000 write-down of discontinued infusion
pumps in field inventory.
General and administrative expenses for the three months ended March 31, 2000
were $486,000 compared to $398,000 for the three months ended March 31, 1999.
The $88,000 increase included $29,000 loss on disposal of fixed assets, $10,000
consulting expense, and $20,000 accrued legal costs related to the
discontinuation of the infusion pump business.
For the nine month period ending March 31, 2000, general and administrative
expenses were $1,916,000 compared to $1,206,000 for the nine month period ending
March 31, 1999. The $710,000 increase over the prior year period included
$294,000 in severance and other costs related to the resignation of the
Company's chief executive officer, Jack W. Brown, in September, 1999. An
employment agreement between the Company and Mr. Brown provides for Mr. Brown's
continued compensation by the Company until September 15, 2001 at an annual
salary of $100,000, for which the Company recorded a $225,000 charge including
fringe benefits. As part of the agreement, Mr. Brown also received forgiveness
of debt of $54,000 and title to a former company automobile valued at $15,000.
9
<PAGE>
General and administrative expenses for the nine months ended March 31, 2000
also included a charge of $282,000 relating to the Company's ambulatory infusion
pump product previously under development. The charge included the write-off of
capitalized software development costs for the new pump. Product development
activities for the pump ceased in September 1999. In addition, the current year
period included $56,000 in severance related to the September 1999 reduction in
force, $29,000 loss on disposal of fixed assets, and $20,000 accrued legal costs
related to the discontinuation of the infusion pump business.
Year 2000 Compliance Update
- ---------------------------
We earlier disclosed our estimate of cost and risk associated with the potential
Year 2000 computer issue. We also informed you of our efforts to reduce the risk
to the Company from the Year 2000 problems. The measures that we had undertaken
to alleviate the internal and external issues regarding potential Year 2000
problems proved to be appropriate and effective. Our internal operating systems
have not suffered any significant Year 2000 related problems that impacted
operations during the transition to the new millennium. Any issues encountered
were minor and were resolved immediately without any impact on our operating
systems. However, we continue to monitor our internal and external operations to
ensure that these problems have truly been resolved. Issues may surface
regarding Year 2000 compliance but we expect these issues, if any, to be
relatively insignificant.
Liquidity and Capital Resources:
- -------------------------------
At March 31, 2000, the Company had cash and cash equivalents of $2,305,000 and
short-term investments of $887,000. Short-term investments consisted of
government-backed securities and short-term certificates of deposit.
For the nine months ended March 31, 2000 net cash used in operating activities
was $1,005,000 compared to net cash provided by operating activities of $738,000
for the nine months ended March 31, 1999. Cash flows from operating activities
for the nine months ended March 31, 2000 decreased from the comparable period in
the prior year due to the increased net loss, and also due to the receipt during
the prior year period of an $800,000 income tax refund in January, 1999. The
cash flow effect of the increased loss in the nine months ended March 31, 2000
was partially offset by the $313,000 loss on disposal of fixed assets which was
included in the loss from operations but did not consume cash. The $313,000 loss
on disposal of fixed assets consisted primarily of a $266,000 charge in
September 1999 for software development costs associated with the Company's
discontinued ambulatory infusion pump and MyoManager product lines.
Net cash provided by investing activities for the nine months ended March 31,
2000 was $184,000 compared to net cash used in investing activities of $328,000
for the nine months ended March 31, 1999. The increase in cash provided from the
prior year period resulted primarily from increased sales of short-term
investments partially offset by increased purchases of manufacturing tooling and
equipment.
For the nine months ended March 31, 2000 net cash provided by financing
activities was $334,000 compared to net cash provided by financing activities of
$16,000 for the nine months ended March 31, 1999. The increase in net cash
provided by financing activities from the comparable period in the prior year
resulted from increased proceeds from stock options exercised.
The Company believes that cash generated from operations together with available
cash will be adequate to meet the Company's planned expenditures and liquidity
needs for fiscal 2000.
10
<PAGE>
PART II - OTHER INFORMATION
- ------- -----------------
ITEM 6. - Exhibits and Reports on Form 8-K
- ------ --------------------------------
a. Exhibits
27 Financial Data Schedule for the nine months ended
March 31, 2000
b. Reports on Form 8-K
None.
11
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
GISH BIOMEDICAL, INC.
Date: May 15, 2000 /s/ James R. Talevich
----------------------------
James R. Talevich
Vice President/CFO
