<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________________
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
<TABLE>
<S> <C>
For the fiscal quarter ended July 1, 1995 Commission File No. 0-11484
</TABLE>
_______________________
MARQUEST MEDICAL PRODUCTS, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
Colorado 84-0785259
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
11039 EAST LANSING CIRCLE, ENGLEWOOD, COLORADO 80112
(Address of principal executive offices, including zip code)
(303) 790-4835
(Registrant's telephone number, including area code)
N/A
(Former name, former address, and former fiscal year, if changes since last report)
</TABLE>
Indicate by check mark whether the Registrant (1) has filed all reports 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 / /
Number of shares of common stock, no par value, of Registrant outstanding at
July 28, 1995.
8,246,880
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MARQUEST MEDICAL PRODUCTS, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
July 1, April 1,
1995 1995
---- ----
(Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 877 $ 562
Trade accounts receivable, less allowances for
doubtful accounts of $183 and $178, respectively 2,262 2,847
Notes and other receivables 18 --
Inventories 2,425 2,610
Prepaid items 315 260
------- -------
Total current assets 5,897 6,279
PROPERTY, PLANT AND EQUIPMENT
Land 1,265 1,265
Buildings 4,976 4,976
Machinery and equipment 8,325 8,364
Other 2,573 2,573
Construction in progress 223 220
------- -------
17,362 17,398
Less accumulated depreciation (9,972) (9,727)
------- -------
Net property, plant and equipment 7,390 7,671
OTHER ASSETS 41 42
------- -------
$13,328 $13,992
------- -------
------- -------
</TABLE>
The accompanying notes to Consolidated Financial Statements are an integral
part of these consolidated balance sheets.
2
<PAGE>
MARQUEST MEDICAL PRODUCTS, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(THOUSANDS OF DOLLARS, EXCEPT SHARE AMOUNTS)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
July 1, April 1,
1995 1995
---- ----
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 1,338 $ 1,220
Accrued liabilities 2,702 3,622
Payable to related party 852 683
Swiss debt principal and interest 816 813
Notes payable 220 220
Current maturities of long-term debt 97 93
Current maturities of capital lease obligation 145 141
------- -------
Total current liabilities 6,170 6,792
CAPITAL LEASE OBLIGATION 253 291
NOTE PAYABLE TO SCHERER 1,852 1,852
NOTE PAYABLE TO BANK 1,114 1,141
SWISS NOTES PAYABLE 2,637 2,677
SHAREHOLDERS' EQUITY (DEFICIT)
Common stock, no par value; 50,000,000
shares authorized; 8,267,720 and 8,102,720 shares
issued and outstanding, respectively 6,231 6,177
Warrants 599 612
Retained earnings(deficit) ($20,434 of retained
deficit eliminated at July 3, 1993 relating to the
quasi-reorganization) (5,458) (5,480)
Treasury stock, 20,840 shares (70) (70)
------- -------
Total shareholders' equity (deficit) 1,302 1,239
------- -------
$13,328 $13,992
------- -------
------- -------
</TABLE>
The accompanying notes to Consolidated Financial Statements are an integral
part of these consolidated balance sheets.
3
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MARQUEST MEDICAL PRODUCTS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(THOUSANDS OF DOLLARS EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
---------------------
July 1, July 2,
1995 1994
-------- -------
<S> <C> <C>
NET REVENUES $ 5,284 $ 4,899
COST OF SALES (3,679) (3,718)
--------- ---------
GROSS PROFIT 1,605 1,181
COSTS AND EXPENSES
Selling and marketing expenses (1,054) (1,202)
General and administrative expenses (557) (799)
Research and development expenses (39) (60)
--------- ---------
OPERATING INCOME (LOSS) (45) (880)
OTHER INCOME (EXPENSE)
Interest and other income 2 13
Interest expense (151) (181)
Foreign exchange gain (loss) 11 (40)
Gain on sale of assets 209 27
Other expense (4) (9)
--------- ---------
LOSS FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 22 (1,070)
Provision for income taxes -- --
--------- ---------
NET INCOME (LOSS) $ 22 $ (1,070)
--------- ---------
--------- ---------
Earnings (loss) per common share $ 0.00 $ (0.18)
--------- ---------
--------- ---------
Weighted average number of common shares
outstanding during the period 8,201,047 5,970,667
--------- ---------
--------- ---------
</TABLE>
The accompanying notes to Consolidated Financial Statements are an integral
part of these consolidated statements.
4
<PAGE>
MARQUEST MEDICAL PRODUCTS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(THOUSANDS OF DOLLARS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
---------------------------
July 1, July 2,
1995 1994
-------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 22 $(1,070)
Adjustments to reconcile net loss to net cash used
in operations:
Depreciation and amortization 290 377
Provision for losses on accounts receivable 5 13
Foreign exchange (gain) loss (11) 40
Gain on sale of assets (209) (27)
Increase(decrease) in operating assets and
liabilities:
Accounts receivable 580 695
Notes and other receivables (18) 15
Inventories and prepaid items 130 (476)
Accounts payable, accrued liabilities and
payable to related party (633) (200)
Accrued interest on Swiss bonds 14 11
Other 1 (6)
-------- -------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 171 (628)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of equipment (9) (135)
Proceeds from sale of assets 209 3
-------- -------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 200 (132)
-------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock 1 --
Principal payments on borrowings (57) (120)
-------- -------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (56) (120)
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 315 (880)
CASH AND CASH EQUIVALENTS, BEGINNING
OF PERIOD 562 1,662
-------- -------
CASH AND CASH EQUIVALENTS, END OF
PERIOD $ 877 $ 782
-------- -------
-------- -------
</TABLE>
(Continued)
5
<PAGE>
MARQUEST MEDICAL PRODUCTS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(THOUSANDS OF DOLLARS)
(UNAUDITED)
<TABLE>
<CAPTION>
July 1, July 2,
1995 1994
---- ----
<S> <C> <C>
NONCASH INVESTING AND FINANCING
TRANSACTIONS:
Debt conversion:
Note payable converted $ -- $ (2,500)
Common stock issued -- 2,500
-------- --------
$ -- $ --
-------- --------
-------- --------
Refinancing of Industrial Revenue Bonds:
Bonds retired $ -- $ (1,300)
Note payable issued to bank -- 1,300
-------- --------
$ -- $ --
-------- --------
-------- --------
Warrants exercised:
Warrants $ (13) $ --
Swiss notes (40) --
Common stock 53 --
-------- --------
$ -- $ --
-------- --------
-------- --------
</TABLE>
The accompanying notes to Consolidated Financial Statements are an integral
part of these statements.
6
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MARQUEST MEDICAL PRODUCTS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. INVENTORIES:
Inventories consist of the following (in thousands of dollars):
<TABLE>
<CAPTION>
July 1, 1995 April 1, 1995
------------ -------------
<S> <C> <C>
Raw materials $1,443 $1,530
Work in process 193 203
Finished goods 789 877
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$2,425 $2,610
------ ------
------ ------
</TABLE>
2. REPORT OF MANAGEMENT:
The management of Marquest Medical Products, Inc. (the "Company") is
responsible for the integrity of the financial information presented. The
financial statements have been prepared in accordance with generally accepted
accounting principles and they include amounts that are based on management's
best estimates and judgment. These unaudited interim financial statements
reflect all adjustments which are, in the opinion of management, necessary to
a fair statement of the results of the interim periods presented.
Management relies upon the Company's system of internal controls in meeting
its responsibilities for maintaining reliable financial records. This system
is designed to provide reasonable assurance that assets are safeguarded and
that transactions are properly recorded and executed in accordance with
management's intentions. Judgments are required to assess and balance the
relative cost and expected benefits of such controls.
3. BASIS OF PRESENTATION:
The Company's consolidated financial statements have been presented on the
basis that it will continue as a going concern, which contemplates the
realization of assets and the satisfaction of liabilities in the normal
course of business.
During the first quarter of Fiscal 1996, the Company generated positive cash
flow from operations and has taken several steps to preserve cash and
increase profitability on sales. The Company believes that it can fund its
current operations and meet its obligations as they come due for the
remaining first half of Fiscal 1996, however the viability of the Company
thereafter will depend on increasing operating income and, if necessary, the
successful completion of external financing arrangements. There can be no
assurance that external financing will be available and there remains
substantial doubt about the Company's ability to continue as a going concern.
The accompanying consolidated financial statements do not include any
adjustments that might result from the outcome of these uncertainties.
4. QUASI-REORGANIZATION:
In June 1993, the Company's Board of Directors approved quasi-reorganization
procedures which were effective July 3, 1993, the end of the Company's first
quarter of Fiscal 1994.
7
<PAGE>
MARQUEST MEDICAL PRODUCTS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
5. WARRANTS:
In April, 1995 165,000 of the Company's warrants to purchase common stock at
$0.25 per share were exercised. These warrants had been issued to the Swiss
bondholders in an exchange in Fiscal 1994, and, in accordance with the
warrant agreement, $40,000 of the Company's 8% Swiss notes payable were used
in lieu of cash to exercise the warrants.
6. INCOME TAXES:
During Fiscal 1994, the Company received a refund of federal income taxes of
approximately $745,000 due to the carryback to prior years of losses incurred
during the temporary suspension of operations by the United States Food and
Drug Administration. The Internal Revenue Service ("IRS") completed an audit
during Fiscal 1995 and determined that the losses could not be carried back
and issued an assessment to the Company for the taxes plus interest. In June
1995, the Company negotiated a repayment plan with the IRS whereby the
Company paid $400,000 in June 1995 and the remaining balance will be paid in
equal monthly installments over a two-year period. The Company must use best
efforts to obtain third party financing for all or a portion of the remaining
balance by January 2, 1996
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Sales increased 7.9% over the first quarter of Fiscal 1995. Sales in the
first quarter of Fiscal 1995 were low due to a decline in hospital census
which the Company believes was due to the uncertainties of healthcare reform.
Also, many of the Company's distributors had purchased high levels of
product during the fourth quarter of Fiscal 1994 which depressed sales in the
first quarter of Fiscal 1995. During the first quarter of Fiscal 1996, the
Company implemented a network of independent manufacturer's representatives
which supplements the Company's sales force.
The gross margin increased from 24.1% in the first quarter of Fiscal 1995 to
30.3% in the first quarter of Fiscal 1996. The Company has reduced
manufacturing costs through reductions in personnel, improved operational
efficiencies and increased its vertical integration of the manufacturing
process.
Selling and marketing and general and administrative expenses decreased 12%
and 30%, respectively, compared to the first quarter of Fiscal 1995 primarily
due to reductions in personnel which have occurred since the first quarter of
Fiscal 1995.
Interest expense decreased 16.5% in the first quarter of Fiscal 1996 compared
to the same quarter in the prior fiscal year due to the conversion by Scherer
Healthcare, Inc. of $2,500,000 of debt to equity in the Company in May 1994.
LIQUIDITY AND CAPITAL RESOURCES
The following events affecting the liquidity of the Company occurred in the
first quarter of Fiscal 1996: (i) the Company sold its 10% investment in
Seabrook Medical Systems, Inc., realizing proceeds of $200,000; (ii) the
Company negotiated a repayment plan with the IRS for $745,000 in taxes owed
plus interest, whereby the Company paid $400,000 in June 1995, with the
remaining balance due in monthly installments over a two-year period; and
(iii) the Company settled a lawsuit in May 1995 with former officers of the
Company whereby the Company agreed to pay a total of $725,000 plus interest
at 9%. A total of $200,000 was paid in May 1995 and the remainder will be
paid in monthly installments though September 1998.
During the first quarter of Fiscal 1996, the Company generated positive cash
flow from operations. The Company has taken several steps in Fiscal 1996 to
preserve cash and increase profitability on sales, including (i) the addition
of independent manufacturer's representatives, (ii) cost reductions in all
departments, and (iii) ordering of equipment to increase the automation of
the Company's manufacturing process.
Management of the Company believes that it can fund its current operating
levels and meet its obligations as they come due for the remaining first half
of Fiscal 1996 from existing cash. Thereafter, the viability of the Company
will be dependent on increasing operating income and, if necessary, the
successful completion of external financing arrangements, which the Company
is currently negotiating. There can be no assurance that external financing
will be available to meet operating requirements and there remains
substantial doubt about the Company's ability to continue as a going concern.
9
<PAGE>
PART II
OTHER INFORMATION
ITEM l. LEGAL PROCEEDINGS.
None
ITEM 3. DEFAULTS UPON SECURITIES.
On January 14, 1992, the Company was notified that the holders of the
majority of its Swiss bonds has exercised their right to but the bonds for
redemption as of March 11, 1992. The Company was not able to honor this put,
and accordingly defaulted on these obligations. The Company did not make any
payments of principal or interest on the Swiss bonds during 1993. During
Fiscal 1994, the Company refinanced 96% of the Swiss bonds outstanding with
8% notes, warrants to purchase Marquest common stock and cumulative
convertible preferred stock of Scherer Healthcare, Inc. The Swiss bonds
outstanding at July 1, 1995 and April 1, 1995, including the accrued interest
on these bonds of $188,000 and $176,000, respectively, have been classified
as current liabilities.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
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<CAPTION>
Exhibit No. Description Page
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<S> <C> <C>
27. Financial Data Schedule (EDGAR version only) 12
</TABLE>
(b) Reports on Form 8-K
There have been no reports on Form 8-K filed during the quarter for which
this report on Form 10-Q is being filed.
10
<PAGE>
SIGNATURES
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 thereunto duly authorized.
Dated: August 15, 1995 MARQUEST MEDICAL PRODUCTS, INC.
/S/ WILLIAM J. THOMPSON
--------------------------------------
William J. Thompson
President
/S/ MARGARET VON DER SCHMIDT
--------------------------------------
Margaret Von der Schmidt
Vice President - Finance and Chief
Financial Officer
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED JULY 1, 1995 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-END> JUL-1-1995
<CASH> 877
<SECURITIES> 0
<RECEIVABLES> 2,445
<ALLOWANCES> (183)
<INVENTORY> 2,425
<CURRENT-ASSETS> 5,897
<PP&E> 17,362
<DEPRECIATION> (9,972)
<TOTAL-ASSETS> 13,328
<CURRENT-LIABILITIES> 6,170
<BONDS> 5,856
<COMMON> 6,231
0
0
<OTHER-SE> (4,929)
<TOTAL-LIABILITY-AND-EQUITY> 13,328
<SALES> 5,284
<TOTAL-REVENUES> 5,284
<CGS> 0
<TOTAL-COSTS> 3,679
<OTHER-EXPENSES> 1,650
<LOSS-PROVISION> 5
<INTEREST-EXPENSE> 151
<INCOME-PRETAX> 22
<INCOME-TAX> 0
<INCOME-CONTINUING> 22
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 22
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
</TABLE>
