SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark one)
[XX] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934.
For the period ended June 30, 1999.
[_] 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: 0-16128
TUTOGEN MEDICAL, INC.
(Exact name of registrant as specified in its charter)
Florida 59-3100165
(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1719 Route 10, Suite 314, Parsippany, New Jersey 07054
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (973) 359-8444
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.01
(Title of Class) (Name of Each Exchange on Which Registered)
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 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_.
As of July 31, 1999 there were outstanding 10,853,188 shares of Tutogen Medical,
Inc. Common Stock, par value $0.01.
<PAGE>
TUTOGEN MEDICAL, INC. AND SUBSIDIARIES
INDEX
PART I. Financial Information.
ITEM 1. Financial Statements.
Consolidated Balance Sheets - June 30, 1999 and 1
September 30, 1998.
Consolidated Statements of Operations for the 2
three and nine months ended June 30, 1999
and 1998.
Consolidated Statements of Cash Flows for the nine 3
months ended June 30, 1999 and
1998.
Notes to Consolidated Financial Statements. 4
ITEM 2. Management's Discussion and Analysis of 6
Financial Condition and Results of
Operations.
PART II. Other Information.
ITEM 6. Exhibits and Reports on Form 8-K 9
SIGNATURES 10
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
TUTOGEN MEDICAL, INC. AND
SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
(unaudited) (audited)
June 30, September 30,
1999 1998
----------- -------------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 278 $
357
Accounts receivable 1,777 1,685
Inventories 4,440 4,435
Other current assets 211 173
---------- ----------
6,706 6,650
Property, plant and equipment, net 2,547 2,995
Intangible and other assets, net 279 596
---------- ----------
TOTAL ASSETS $ 9,532 $ 10,241
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 652 $ 1,010
Accrued interest 136 189
Other accrued expenses 874 953
Revolving credit arrangements 1,018 895
Current portion of long-term debt 70 162
---------- ----------
2,750 3,209
Other Liabilities
Long-term debt 1,406 3,644
Other long-term obligations 15 17
Shareholders' Equity 5,361 3,371
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 9,532 $ 10,241
========== ==========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
1
<PAGE>
TUTOGEN MEDICAL, INC. AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per
share data)
<TABLE>
<CAPTION>
Three Months Ended June 30, Nine Months Ended June 30,
1999 1998 1999 1998
---- ---- ----- ----
<S> <C> <C> <C> <C>
OPERATING REVENUES
Revenue $ 2,549 $ 2,348 $ 7,822 $ 6,261
Cost of revenue 1,416 1,124 4,506 3,386
------------ ------------ ------------ ------------
Gross margin 1,133 1,224 3,316 2,875
OPERATING EXPENSES
General and administrative 509 564 1,564 1,425
Distribution and marketing 483 404 1,489 1,071
Research and development 74 77 279 200
Depreciation and amortization 114 167 361 523
------------ ------------ ------------ ------------
1,180 1,212 3,693 3,219
Operating (loss) profit (47) 12 (377) (344)
License fee -- -- -- (200)
Settlement of partnership interest -- (205) -- (205)
Other (income) expenses 13 (4) (133) (58)
Interest expense 45 98 183 278
------------ ------------ ------------ ------------
58 (111) 50 (185)
------------ ------------ ------------ ------------
Net (loss) profit before income taxes (105) 123 (427) (159)
Income taxes -- -- -- --
------------ ------------ ------------ ------------
NET (LOSS) PROFIT $ (105) $ 123 $ (427) $ (159)
============ ============ ============ ============
Average common shares outstanding 10,851,707 5,316,570 8,925,453 5,017,178
============ ============ ============ ============
Net (loss) profit per share $ (0.01) $ 0.02 $ (0.05) $ (0.03)
============ ============ ============ ============
</TABLE>
See accompanying Notes to Consolidated Financial Statements
2
<PAGE>
TUTOGEN MEDICAL, INC. AND
SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Nine Months Ended June 30,
-----------------------------
1999 1998
---------- ----------
<S> <C> <C>
Cash flows from operating activities
Net loss $ (427) $ (159)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 583 784
Increase (decrease) in cash resulting from changes in:
Accounts receivable (92) (168)
Inventories (5) (1,353)
Prepaid expenses and other current assets (38) (58)
Accounts payable and accrued liabilities (169) (109)
------- -------
Net cash used in operating activities (148) (1,063)
Cash flows from investing activities
Purchase of property, plant and equipment (176) (128)
------- -------
Net cash provided by (used in) investing activities (176) (128)
Cash flows from financing activities
Issuance of stock 458 4,295
Proceeds from long-term borrowings 500
-------
Proceeds (repayment) of short-term borrowings 183 (3,946)
Repayment of long-term debt (48) (129)
------- -------
Net cash provided by financing activities 593 720
Effect of exchange rate changes on cash (348) (56)
Net decrease in cash and cash equivalents (79) (527)
Cash and cash equivalents at beginning of period 357 777
------- -------
Cash and cash equivalents at end of period $ 278 $ 250
======= =======
- --------------------------------------------------------------------------------------------
Supplemental cash flow disclosures
Interest paid $ 103 $ 428
======= =======
Schedule of noncash financing activities:
Issuance of common stock in exchange for
convertible long-term debt and accrued interest $ 2,162 $ --
Issuance of common stock for interest 376 --
------- -------
$ 2,538 $ --
======= =======
</TABLE>
See accompanying Notes to Consolidated Financial Statements
3
<PAGE>
TUTOGEN MEDICAL, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1999
(in thousands, except share data)
(1) OPERATIONS AND ORGANIZATION
Tutogen Medical, Inc. along with its consolidated subsidiaries ("the
Company") processes, manufactures and distributes worldwide specialty
surgical products and provides tissue processing services for neuro,
orthopedic, cardiovascular, reconstructive and general surgical
applications. The Company's core business is processing human donor tissue
("allografts") utilizing its patented Tutoplast(R) process for distribution
to hospitals and surgeons.
(2) SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited consolidated financial statements of the Company
and the unaudited results of operations and cash flows for the three months
ended June 30, 1999 and 1998 have been prepared in conformity with
generally accepted accounting principles for interim financial reporting.
Accordingly, they do not include all of the information and notes required
by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments necessary in
order to make the financial statements not misleading have been made.
Operating results for the three and nine months ended June 30, 1999 are not
necessarily indicative of the results which may be expected for the fiscal
year ending September 30, 1999. The interim financial statements should be
read in conjunction with the audited consolidated financial statements of
the Company for the year ended September 30, 1998.
(3) INVENTORIES
Major classes of inventory at June 30, 1999 and September 30, 1998 were as
follows:
June 30, September 30,
1999 1998
Raw materials $ 1,362 $ 1,473
Work in process 2,787 2,729
Finished goods 1,142 1,249
Less reserves for obsolescence (851) (1,016)
------- -------
$ 4,440 $ 4,435
------- -------
4
<PAGE>
(4) SHAREHOLDERS' EQUITY
On January 28, 1999, one of the Company's institutional investors converted
its Convertible Debenture and accrued interest and expenses (approximately
$2,162) into 4,600,507 shares of the Company's common stock. In
consideration of the agreement to convert, the Company issued to the
investor 149,334 common shares as prepayment for one year's interest on the
Debenture and agreed to amend its outstanding Stock Purchase Warrants,
totaling 1,353,957, by reducing the exercise price from $2.50 per share to
$1.25 per share if such warrants are exercised prior to June 30, 2000,
after which date such warrants shall revert to their initial terms.
During the nine months ended June 30, 1999, this same institutional
investor, a Director of the Company and private investors purchased 300,000
Units, 100,000 Units and 57,500 Units, respectively, at $1.00 per Unit,
each Unit consisting of one common share of the Company and one Common
Stock Purchase Warrant, expiring March 31, 2000, at an exercise price of
$1.50 per share.
(5) DISTRIBUTION AGREEMENT
On July 9, 1999, the Company entered into a Third Amendment to an Exclusive
Distribution Agreement with Mentor Corporation "Mentor" for the purpose of
granting a license to Mentor to exclusively distribute the Tutoplast(R)
Processed Pericardium ("Pericardium") as an additional product in their
field of use which is defined as all urological and gynecological
applications and procedures in the United States and all foreign markets.
In addition, processing fees were modified on selected other products under
the Agreement. The initial term of the Pericardium license is ten years
with an automatic renewal for successive terms of two full calendar years.
The Company was paid a license fee of $300,000.
5
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (in thousands)
Results of Operations
Net Loss
Net loss for the three months ended June 30, 1999 totaled $105 or $0.01 per
share as compared to a net income of $123 or $0.02 per share for the same period
a year ago. The net loss for the nine months ended June 30, 1998 was $427 or
$0.05 per share as compared to a net loss of $159 or $0.03 per share.
Revenue and Cost of Revenue
Revenue for the three months ended June 30, 1999 increased 9% to $2,549 from
$2,348 for the comparable period. The US operation revenues were $1,105 or 55%
higher than the same period last year. This is a direct result of its strategic
alliances with the Mentor Corporation and IOP, Inc. The International operation
had a decrease in revenues of 7% from the same period last year due primarily as
a result of the delay in adapting to revised standards for tissue processing
issued by the international regulatory body. The revenue for the nine months
ended June 30, 1999 increased 25% to $7,822 from $6,261 for the comparable
period. The revenues for the US operation were $3,123 or a 99% increase from
$1,573 for the same period last year. The revenues for the International
operation increased by 3% from the same period last year.
Gross margins for the three months ended June 30, 1999 were 44% and 52% for the
comparable period last year. The gross margins for the nine months ended June
30, 1999 decreased to 42% from 46% for the comparable period last year. The
decrease was primarily attributable to an unfavorable mix of products sold at
both the US and International operations.
General and Administrative
General and administrative expenses decreased 10% and increased 10% for the
three and nine months ending June 30, 1999, respectively, from the comparable
periods last year. The year-to-date increase was due primarily to an increase in
legal, consulting and travelling expenses.
Distribution and Marketing
Distribution and marketing expenses increased 20% and 39% for the three and nine
months ending June 30, 1999, respectively, from the comparable periods last
year. The increase was primarily associated with the building of a direct sales
force in Germany and the costs associated with the introduction of a new product
line, Tutoplast(R) bovine pericardium.
Research and Development
Research and development expenses decreased 4% and increased 40% for the three
and nine months ending June 30, 1999, respectively, from the comparable periods
last year. The year-to-date increase was due to the expansion of the R & D
effort in Germany and travelling and personnel costs to expand the tissue
recovery sites in Europe.
6
<PAGE>
Depreciation and Amortization
Depreciation and amortization decreased 32% and 31% for the three and nine
months ending June 30, 1999, respectively, from the comparable periods last
year. The reduction in depreciation and amortization was attributed to an
increase in fully depreciated property, plant and equipment.
Interest Expense
Interest expense declined 54% and 34% for the three and nine months ending June
30, 1999, respectively, from the comparable periods last year. Lower interest
was the direct result of capital restructurings completed during the quarter
ending December 31, 1997 and the recent conversion of $2,074 of long-term debt
to common stock at the end of January of 1999.
Liquidity and Capital Resources
At June 30, 1999 and September 30, 1998 the Company had working capital of
$3,956 and $3,441, respectively. The Company maintains revolving credit
facilities totaling DM 2,360 (approximately $1,250) with three German banks. At
June 30, 1999 the Company had borrowed $961 against these lines.
In the past the Company has relied upon its available working capital lines and
institutional investors to fund operational cash flow, when needed. During this
year, one of the Company's institutional investors, a Director of the Company
and private investors purchased 300,000 Units, 100,000 Units and 57,500 Units,
respectively, at $1.00 per Unit, each Unit consisting of one common share of the
Company and one Common Stock Purchase Warrant, expiring March 31, 2000, at an
exercise price of $1.50 per share. In addition, the Company is continuing to
seek other investors to infuse additional capital into the Company. While
management believes that it will be successful in securing new funding, there
can be no assurances that it will be able to do so. Lack of new funding along
with the inability to increase processing revenues could result in a curtailment
of operations in the future.
The Company's ability to generate positive operational cash flow is dependent
upon increasing processing revenues through increased recoveries by tissue banks
in the U.S. and Europe, and the development of additional markets and surgical
applications worldwide. While the Company believes that it continues to make
progress in both these areas, there can be no assurances that changing
governmental regulations will not have a material adverse effect on results of
operations and cash flow.
Government Regulation
It has previously been reported in an SEC filing that the Food and Drug
Administration ("FDA") has raised a concern about the potential for transmission
of Creutzfeldt-Jacob Disease ("CJD") from one lot of Tutoplast(R) Dura Mater
processed by the Company in Germany before April 1994. The FDA and the Centers
for Disease Control and Prevention ("CDC") have investigated an incident in
which a patient who received a Tutoplast(R) Dura Mater transplant in 1992 was
diagnosed with CJD in 1998. Although there have been no other reports of disease
transmission associated with over 500,000 Tutoplast(R) Dura Mater transplants,
based on the investigation conducted by FDA and CDC, the Company cannot rule out
with absolute certainty at this time that Tutoplast(R) Dura Mater may have been
the possible cause of CJD in this incident.
7
<PAGE>
Consequently, the Company has voluntarily recalled from the market all sizes and
lots of Tutoplast(R) Dura Mater processed in Germany before 1994 under the same
conditions as the lot that is the subject of FDA's concern. All sizes and lots
of Tutoplast(R) Dura Mater bearing an expiration date after April 1999 that were
processed by the Company's US operation at its facility in Alachua, Florida
since April 1994, under conditions that meet current United States and
International standards and regulatory requirements, are not involved. There has
been no recall requested by the German health authorities. However, they have
raised the regulatory requirements on dura mater. The Company will comply with
these new requirements.
There have been minimal returns of product in the U.S., it will take several
weeks to comply with the new requirements in Germany. Meanwhile, the Company is
offering alternative tissues such as fascia lata and bovine pericardium to the
market. Nevertheless, the impact of the delay in supplies caused by the new
requirements on dura mater is estimated to be a loss of $350,000 in revenues and
reduced profits of $210,000 for the fiscal year.
Year 2000 Compliance
Management has recently become aware that one of the operating systems in the
International operations is not currently Year 2000 compliant. The International
operation is currently implementing a new operating system, which will encompass
the necessary amendments for the system to become Year 2000 compliant. The
implementation is expected to be completed by September 1999. The costs of the
Year 2000 upgrade are included in the overall implementation cost, and
therefore, are not separately identifiable.
8
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
Exhibits
No. 27 Financial Data Schedule
No reports on Form 8-K were filed by the Company during the
quarter ended June 30, 1999.
9
<PAGE>
SIGNATURES
Registrant has duly caused this report to be signed on its behalf by the
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
undersigned, thereunto duly authorized.
Tutogen Medical, Inc.
Date: August 9, 1999 /s/ Charles C. Dragone
-------------------------------
Interim Chief Executive Officer
Date: August 9, 1999 /s/ George Lombardi
-------------------------------
Chief Financial Officer
(Principal Financial and
Accounting Officer)
10
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE (IN THOUSANDS, EXCEPT PER SHARE DATA) CONTAINS SUMMARY FINANCIAL
INFORMATION EXTRACTED FROM THE CONDENSED FINANCIAL STATEMENTS FOR THE QUARTER
ended JUNE 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Sep-30-1998
<PERIOD-END> Jun-30-1999
<CASH> 278
<SECURITIES> 0
<RECEIVABLES> 1,935
<ALLOWANCES> (158)
<INVENTORY> 4,440
<CURRENT-ASSETS> 6,706
<PP&E> 4,344
<DEPRECIATION> (1,797)
<TOTAL-ASSETS> 9,532
<CURRENT-LIABILITIES> 2,750
<BONDS> 0
0
0
<COMMON> 108
<OTHER-SE> 5,253
<TOTAL-LIABILITY-AND-EQUITY> 9,532
<SALES> 2,549
<TOTAL-REVENUES> 2,549
<CGS> 1,416
<TOTAL-COSTS> 1,416
<OTHER-EXPENSES> 1,193
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 45
<INCOME-PRETAX> (105)
<INCOME-TAX> 0
<INCOME-CONTINUING> (105)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (105)
<EPS-BASIC> (0.01)
<EPS-DILUTED> 0.00
</TABLE>
