SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarter ended: August 31, 1995 Commission file number: 0-11411
Q-Med, Inc.
(Exact name of registrant as specified in its charter)
Delaware 22-2468665
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
100 Metro Park South, Laurence Harbor, New Jersey 08878
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (908) 566-2666
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 the registrant's common stock on
October 4, 1995: 8,240,070
<PAGE>
Q-MED, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
August 31, 1995
(Unaudited) November 30, 1994
--------------- -----------------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents ................. $ 321,121 $ 626,462
Accounts receivable, net of
allowances of approximately
$143,000 and $507,000 respectively ...... 888,739 1,033,187
Inventory ................................. 1,562,504 1,523,497
Prepaid expenses and other current assets . 165,463 133,967
---------- ----------
Total current assets .................... 2,937,827 3,317,113
Product software development costs .......... 119,818 76,514
Property and equipment, net ................. 332,644 331,127
Cost of technology .......................... 466,678 541,675
Other assets ................................ 153,733 132,675
---------- ----------
$4,010,700 $4,399,104
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued expenses ..... $1,350,815 $1,190,204
Note payable to bank ...................... 300,000 300,000
---------- ----------
Total current liabilities ............... 1,650,815 1,490,204
Note payable--long term ................... 175,000 400,000
Deferred warranty revenue ................. 48,056 46,043
Leases payable--long term ................. 60,818 66,618
---------- ----------
Total liabilities ....................... 1,934,689 2,002,865
Minority interest ........................... 3,250 16,000
Stockholders' equity
Common stock $.001 par value;
20,000,000 shares authorized;
8,225,070 and 7,783,213 shares
issued and outstanding respectively ..... 8,225 7,783
Paid-in capital ........................... 12,564,262 11,738,113
Accumulated deficit ....................... (10,424,101) (9,290,032)
---------- ----------
2,148,386 2,455,864
Less: treasury stock at cost 22,000
common shares ........................... (75,625) (75,625)
---------- ----------
Total stockholders' equity .............. 2,072,761 2,380,239
---------- ----------
$4,010,700 $4,399,104
========== ==========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
Q-MED, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the Three For the Three For the Nine For the Nine
Months Ended Months Ended Months Ended Months Ended
August 31, 1995 August 31, 1994 August 31, 1995 August 31, 1994
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Sales .............................. $1,589,403 $2,237,617 $ 4,551,580 $ 6,805,233
Less sales returns
and allowances ................... 140,587 176,980 342,494 405,109
--------- ---------- ----------- -----------
Net sales .......................... 1,448,816 2,060,637 4,209,086 6,400,124
Cost of sales ...................... 409,290 439,329 1,150,342 1,559,264
--------- ---------- ----------- -----------
Gross profit ....................... 1,039,526 1,621,308 3,058,744 4,840,860
Selling, general and
administrative expenses .......... 1,357,852 1,458,606 3,869,975 4,530,963
Provision for uncollectible
accounts ......................... 6,558 24,753 9,120 86,125
Research and development
expenses ......................... 116,534 108,436 275,548 311,813
--------- ---------- ----------- -----------
Income (loss) from operations ...... (441,418) 29,513 (1,095,899) (88,041)
Interest expense ................... (18,014) (21,206) (52,451) (64,326)
Other income ....................... 6,506 2,005 14,281 1,607
--------- ---------- ----------- -----------
Net income (loss) .................. $(452,926) $ 10,312 $(1,134,069) $ (150,760)
========= ========== =========== ===========
Income (loss) per common
share ............................ $ (.06) $ .00 $ (.14) $ (.02)
--------- ---------- ----------- -----------
Weighted average number of
shares of common stock
outstanding ...................... 8,202,030 7,774,213 8,013,945 7,771,184
========== ========== =========== ===========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
Q-MED, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the Nine Months Ended
-----------------------------------
August 31, 1995 August 31, 1994
--------------- ---------------
Cash flows from operating activities:
<S> <C> <C>
Net (loss) .............................................. $(1,134,069) $(150,760)
----------- ---------
Adjustments to reconcile net income to cash provided
by (used in) operating activities:
Depreciation and amortization ......................... 192,384 174,368
Changes in assets and liabilities:
Decrease in accounts receivable ..................... 144,448 317,950
(Increase) decrease in inventories .................. (39,007) 175,523
Increase (decrease) in accounts
payable and accrued liabilities ................... 160,611 (46,662)
(Increase) in prepaid expenses
and other assets .................................. (31,496) (103,848)
Other, net .......................................... (49,035) (46,034)
----------- ---------
Total adjustments ................................... 377,905 471,297
----------- ---------
Net cash provided by (used in) operating activities .. (756,164) 320,537
=========== =========
Cash flows from investing activities:
Capital expenditures ................................ (96,572) (81,112)
Product software development ........................ (54,196) --
----------- ---------
Net cash (used in) investing activities ............. (150,768) (81,112)
=========== =========
Cash flows from financing activities:
Principal (payment) on note
payable to bank ................................... (225,000) (225,000)
Proceeds from issuance of
common stock ...................................... 826,591 12,126
----------- ---------
Net cash provided by (used in) financing activities . 601,591 (212,874)
=========== =========
Net increase (decrease) in cash and cash equivalents ...... (305,341) 26,551
Cash and cash equivalents at beginning of period .......... 626,462 546,467
----------- ---------
Cash and cash equivalents at end of period ................ $ 321,121 $ 573,018
=========== =========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest ........................................... $ 54,529 $ 64,455
Income taxes ....................................... 7,328 1,087
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
<TABLE>
Q-MED, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the Nine Months Ended August 31, 1995
(Unaudited)
-----------
<CAPTION>
Common Stock
Held in Treasury
Common Paid-in Accumulated -------------------
Stock Capital Deficit Shares Amount Total
------ ----------- ------------ ------ --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance--November 30, 1994 .............. $7,783 $11,738,113 $ (9,290,032) 22,000 $(75,625) $2,380,239
Proceeds from sale of common stock* ..... 400 789,600 790,000
Exercise of stock options ............... 39 32,552 32,591
Issuance of stock in lieu of services ... 3 3,997 4,000
Net loss for the nine months
ended August 31, 1995 ................. (1,134,069) (1,134,069)
------ ----------- ------------ ------ -------- ----------
Balance--August 31, 1995 ................ $8,225 $12,564,262 $(10,424,101) 22,000 $(75,625) $2,072,761
====== =========== ============ ====== ======== ==========
- - -----------
*net of legal fees
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
<PAGE>
Q-MED, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Basis of Presentation
---------------------
The accompanying unaudited consolidated condensed financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions
to Form 10-QSB and Rule 10-01 of Regulation S-X. Accordingly, these
financial statements do not include all of the information and
footnotes required by generally accepted accounting principles. In the
opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been
included. Operating results for the nine month period ended August 31,
1995 are not necessarily indicative of the results that may be
expected for the year ending November 30, 1995. These consolidated
condensed financial statements should be read in conjunction with the
financial statements and footnotes thereto included in the Company's
annual report on Form 10-KSB for the year ended November 30, 1994.
Note 1 Results of Operations
---------------------
In the opinion of management, the financial statements for the nine
and three months ended August 31, 1995 and August 31, 1994 include all
adjustments and accruals necessary for a fair presentation. All such
adjustments are of a normal recurring nature. The results of
operations for the nine months ended August 31, 1995 are not
necessarily indicative of the results which may be expected for the
full year ending November 30, 1995.
Note 2 Inventories
-----------
Inventories, consisting of finished units and raw materials, are
stated at the lower of cost (determined on a moving weighted average
method) or market. Inventories consist of the following:
August 31, 1995
(Unaudited) November 30, 1994
--------------- -----------------
Raw materials
(component parts) ......... $ 379,854 $ 426,856
Finished units ............ 1,182,650 1,096,641
---------- ----------
$1,562,504 $1,523,497
========== ==========
<PAGE>
Q-MED, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Note 3 Accounts Payable and Accrued Expenses
-------------------------------------
Accounts payable and accrued expenses include the following:
August 31, 1995
(Unaudited) November 30, 1994
-------------- -----------------
Accounts payable--trade .... $ 540,597 $ 444,433
Deferred Warranty Revenue .. 250,888 200,350
Accrued payroll ............ 116,969 168,879
Other accrued expenses ..... 362,517 286,990
Accrued sales commissions .. 79,844 89,552
---------- ----------
$1,350,815 $1,190,204
========== ==========
Note 4 Principles of Consolidation
---------------------------
The consolidated financial statements include the accounts of Q-Med,
Inc., its 83% owned subsidiary, Heart Map, Inc., and its 100% owned
subsidiary, Interactive Heart Management Corp., which was formed in
March, 1995. Interactive Heart Management Corp. provides coronary
artery disease management services to health care providers throughout
the United States. All inter-company accounts and transactions have
been eliminated.
<PAGE>
Part I--Item 2--Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations
The following table presents the percentage of total revenues for the
periods indicated and changes from period to period of certain items included in
the Company's Statements of Operations.
<TABLE>
<CAPTION>
For the Nine For the Three For the Nine For the Three
Months Ended Months Ended Months Ended Months Ended
August 31, August 31, August 31, August 31,
1995 1994 1995 1994 1995 vs 1994 1995 vs 1994
---- ---- ---- ---- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Sales (net) .................................... 100.0% 100.0% 100.0% 100.0% (34.2) (29.7)
Cost of sales .................................. 27.3 24.4 28.2 21.3 (26.2) (6.8)
----- ----- ----- -----
Gross profit ................................... 72.7 75.6 71.8 78.7 (36.8) (35.9)
Selling, general and administrative expenses ... 91.9 70.8 93.7 70.8 (14.6) (6.9)
Provision for uncollectable accounts ........... .2 1.3 .5 1.2 (89.4) (73.5)
Research and development expenses .............. 6.6 4.9 8.1 5.3 (11.6) 7.5
----- ----- ----- -----
Income (loss) from operations .................. (26.0) (1.4) (30.5) 1.4 1144.8 *
Interest expense ............................... (1.2) 1.0 (1.2) 1.0 (18.5) (15.1)
Other income (expense) ......................... .3 .0 .4 .1 788.7 224.5
----- ----- ----- -----
Net income (loss) .............................. (26.9) (2.4) (31.3) .5 652.2 *
===== ===== ===== =====
<FN>
* Not meaningful
</FN>
</TABLE>
Nine and Three Months Ended August 31, 1995 Compared with the Nine and Three
Months Ended August 31, 1994
Net sales for the nine months ended August 31, 1995 decreased by
approximately $2,191,000 or 34% when compared to the nine months ended August
31, 1994. Net sales for the three months ended August 31, 1995 decreased by
approximately $612,000 or 29.7% when compared to the corresponding period of the
prior year. The decrease in sales, in the opinion of management, was due to the
continued uncertainty in the changing health care marketplace, especially in the
primary care market. The Company continues to improve its domestic sales force
efforts which sells the Company's line of diagnostic instrumentation to the
primary care marketplace. In addition, the Company has been discovering
opportunities within the managed care market with the use of the ohms | cad
disease management system. The net loss for the nine months ended August 31,
1995 of $(1,134,069) includes approximately $(308,000) incurred by the Company's
subsidiary, Interactive Heart Management Corp., which was formed during March,
1995.
The Company's gross profit margins decreased from 75.6% to 72.7% for the
nine months ended August 31, 1995 when compared to the nine months ended August
31, 1994. The margins also decreased from 78.7% to 71.8% for the three month
period ended August 31, 1995 when compared to the corresponding period of the
prior year. The decrease in the Company's margins was primarily due to the
overall decrease in sales.
Selling, general and administrative expenses for the nine months ended
August 31, 1995 decreased approximately $661,000 or almost 15% when compared to
the nine months ended August 31, 1994. Selling, general and administrative
expenses for the three months ended August 31, 1995
<PAGE>
decreased by approximately $100,000 or 7% when compared to the
corresponding period of the prior year. The decrease was primarily due to lower
selling costs related to the decline in net sales, along with management's
efforts at reducing costs overall to become more closely related to anticipated
revenues.
Research and development expenses for the nine months ended August 31, 1995
decreased approximately $36,000 or 12% when compared to the nine months ended
August 31, 1994. Research and development expenses for the three month period
ended August 31, 1995 increased approximately $8,000 or 7.5% when compared to
the corresponding period of the prior year. Management expects research and
development expenses to remain relatively consistent throughout the remainder of
fiscal 1995 as the Company continues to improve its existing product line, as
well as continue to develop the ohms | cad disease management system.
The Company had a net loss for the nine months ended August 31, 1995 of
$(1,134,069) compared to a net loss of $(150,760) for the nine months ended
August 31, 1994. The Company had a net loss for the three months ended August
31, 1995 of $(452,926) compared to a net profit of $10,312 for the three months
ended August 31, 1994.
Liquidity and Capital Resources
To date, the Company's principal sources of working capital have been
provided from operations, the proceeds from public and private offerings of
securities, and the sale of certain assets. Since the Company's inception, these
proceeds have generated approximately $12,500,000 less applicable expenses.
The Company is indebted to a bank pursuant to a term loan agreement in the
amount of $475,000 at August 31, 1995. The indebtedness is secured by
substantially all of the Company's tangible assets and certain patents. The
Company has been making monthly principal payments of $25,000 plus interest at
1% over prime. The prime rate on October 3, 1995 was 8 3/4%.
The Company had working capital of approximately $1,287,000 at August 31,
1995 compared to approximately $1,827,000 at November 30, 1994 and a ratio of
current assets to current liabilities of 1.8 to 1 and 2.2 to 1 respectively. The
decrease in working capital of approximately $540,000 was primarily due to the
net loss of approximately $1,130,000 from operations of the nine months ended
August 31, 1995 offset by approximately $790,000 in proceeds from the sale of
the Company's common stock.
The Company realizes that funds generated from operations, together with
cash and cash equivalents, may not be sufficient to meet its working capital and
capital requirements for the immediate future and is presently seeking alternate
sources of financing, including equity financing. While the Company is confident
it will find some alternate financing, there is no assurance that it will be
available or, if available, that it will be on terms acceptable to the Company.
The Company maintains a general policy of net 30-day payment terms for
distributors, cash or third party leasing arrangements with direct sales to
physicians and letters of credit for international sales. In some instances, the
Company has extended payment terms beyond net 30 to selected distributors. The
receivables balance over 90 days past due of the gross receivables balance at
August 31, 1995 was 16.9% of gross receivables compared to 14.1% in 1994.
<PAGE>
Inflation
The Company believes that inflation has not had a significant impact on its
business.
Part II--OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
No change from previous filing
Item 2. Changes in Securities
---------------------
None
Item 3. Defaults upon Senior Securities
-------------------------------
None
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
None
Item 5. Other Information
-----------------
None
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
None
<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.
Q-Med, Inc.
By:
--------------------------------
Debra A. Fenton, CPA
Controller
Dated: October 11, 1994
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> NOV-30-1995
<PERIOD-END> AUG-31-1995
<CASH> 321,121
<SECURITIES> 0
<RECEIVABLES> 1,031,739
<ALLOWANCES> 143,000
<INVENTORY> 1,562,504
<CURRENT-ASSETS> 2,937,827
<PP&E> 1,936,878
<DEPRECIATION> 1,604,234
<TOTAL-ASSETS> 4,010,700
<CURRENT-LIABILITIES> 1,650,815
<BONDS> 0
<COMMON> 8,225
0
0
<OTHER-SE> 2,064,536
<TOTAL-LIABILITY-AND-EQUITY> 4,010,700
<SALES> 4,209,086
<TOTAL-REVENUES> 4,223,367
<CGS> 1,150,342
<TOTAL-COSTS> 3,869,975
<OTHER-EXPENSES> 275,548
<LOSS-PROVISION> 9,120
<INTEREST-EXPENSE> 52,451
<INCOME-PRETAX> (1,134,069)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,134,069)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,134,069)
<EPS-PRIMARY> (.14)
<EPS-DILUTED> (.14)
</TABLE>
