<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
[X] SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 26, 1998
------------------------
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 0-16453
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HEARx LTD
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EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER
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DELAWARE 22-2748248
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(STATE OF OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
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<S> <C>
1250 NORTHPOINT PARKWAY, WEST PALM BEACH, FLORIDA 33407
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
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REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (561) 478-8770
----------------
----------------------------------------------------------------------------
FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR,
IF CHANGED SINCE LAST REPORT
INDICATE BY CHECK [X] 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
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ON JUNE 26,1998, 100,855,550 SHARES OF THE REGISTRANT'S COMMON STOCK WERE
OUTSTANDING.
<PAGE> 2
INDEX
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PAGE
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PART I. FINANCIAL INFORMATION
<S> <C> <C>
Item 1. Financial Statements:
Balance Sheets 3
June 26, 1998 and December 26, 1997
Statements of Operations 4
Six months ended June 26, 1998 and June 27, 1997
Statements of Operations 5
Three months ended June 26, 1998 and June 27, 1997
Statements of Cash Flows 6
Six months ended June 26, 1998 and June 27,1997
Notes to Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition 8 - 12
and Results of Operations
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 5. Other Information 13
Item 6. Exhibits and reports on Form 8-K 14
Signatures 15
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2
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HEARx LTD.
BALANCE SHEETS
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<CAPTION>
June 26, December 26,
1998 1997
-------------- ---------------
(unaudited) (audited)
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ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 1,534,577 $ 3,644,838
Investment securities 7,778,133 10,281,913
Accounts and notes receivable, less allowance for
doubtful accounts of $336,081 and $246,371 3,861,860 3,256,716
Inventories 587,226 523,356
Prepaid expenses 340,362 312,866
Other 673,332 143,371
-------------- --------------
Total current assets 14,775,490 18,163,060
PROPERTY AND EQUIPMENT - NET 8,749,077 9,014,190
OTHER 1,468,747 1,182,297
-------------- --------------
$ 24,993,314 $ 28,359,547
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 4,557,522 $ 3,062,062
Accrued salaries and other compensation 274,667 914,156
Current maturities of long term debt 992,728 1,050,695
-------------- --------------
Total current liabilities 5,824,917 5,026,913
-------------- --------------
LONG TERM DEBT, LESS CURRENT MATURITIES 171,897 177,897
-------------- --------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Non-redeemable preferred stock:
(Aggregate liquidation preference $ 7,335,927 and $7,447,163)
$1 par; 2,000,000 shares authorized; issued and
outstanding:
1997 Convertible - 6,815 shares 6,815 7,115
-------------- --------------
Total preferred stock 6,815 7,115
Common stock; $.10 par; 130,000,000 shares authorized;
100,885,550 and 99,211,436 shares issued
and outstanding 10,085,555 9,921,144
Additional paid-in capital 70,671,417 70,646,172
Accumulated deficit (61,689,132) (57,326,412)
Unrealized gain on marketable securities 16,376 20,156
Unamortized deferred compensation ( 94,531) (113,438)
--------------- ---------------
Total stockholders' equity 18,996,500 23,154,737
-------------- --------------
$ 24,993,314 $ 28,359,547
============== ==============
</TABLE>
See accompanying notes to the consolidated financial statements
3
<PAGE> 4
HEARx LTD.
STATEMENTS OF OPERATIONS
SIX MONTHS ENDED JUNE 26, 1998 AND JUNE 27, 1997
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<CAPTION>
1998 1997
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(Unaudited) (Unaudited)
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NET REVENUE $ 13,910,905 $ 11,602,849
--------------- ----------------
COSTS AND EXPENSES:
Cost of products sold 3,993,738 3,279,883
Center operating expenses 9,534,405 8,060,129
General and administrative expenses 3,383,739 3,015,935
Depreciation and amortization 1,122,374 952,777
Interest expense 36,716 -
--------------- ----------------
Total expenses 18,070,972 15,308,724
--------------- ----------------
LOSS BEFORE DIVIDENDS ON PREFERRED STOCK (4,160,067) (3,705,875)
DIVIDENDS ON PREFERRED STOCK:
Deemed dividends - (1,500,000)
Dividends (202,653) (236,057)
--------------- ----------------
Total dividends (202,653) (1,736,057)
--------------- ----------------
NET LOSS APPLICABLE TO COMMON SHAREHOLDERS $ (4,362,720) $ (5,441,932)
=============== ================
NET LOSS PER COMMON SHARE - BASIC AND DILUTED $ (0.04) $ (0.06)
=============== ================
WEIGHTED AVERAGE NUMBER OF SHARES OF
COMMON STOCK OUTSTANDING 100,579,400 84,425,871
=============== ================
</TABLE>
See accompanying notes to the consolidated financial statements
4
<PAGE> 5
HEARx LTD.
STATEMENTS OF OPERATIONS
THREE MONTHS ENDED JUNE 26, 1998 AND JUNE 27, 1997
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<CAPTION>
1998 1997
---------------- ------------------
(Unaudited) (Unaudited)
<S> <C> <C>
NET REVENUE $ 6,816,576 $ 5,854,592
---------------- ----------------
COSTS AND EXPENSES:
Cost of products sold 1,913,691 1,468,120
Center operating expenses 4,869,950 4,057,941
General and administrative expenses 1,667,671 1,594,856
Depreciation and amortization 567,319 548,067
Interest expense 17,210 -
----------------- ----------------
Total expenses 9,035,841 7,668,984
----------------- ----------------
LOSS BEFORE DIVIDENDS ON PREFERRED STOCK (2,219,265) (1,814,392)
DIVIDENDS ON PREFERRED STOCK
Deemed dividends - (1,500,000)
Dividends (98,618) (180,871)
---------------- ----------------
Total dividends (98,618) (1,680,871)
---------------- ----------------
NET LOSS APPLICABLE TO COMMON SHAREHOLDERS $ (2,317,883) $ (3,495,263)
================ ================
NET LOSS PER COMMON SHARE - BASIC AND DILUTED $ (0.02) $ (0.04)
================ ================
WEIGHTED AVERAGE NUMBER OF SHARES OF
COMMON STOCK OUTSTANDING 100,806,813 84,764,248
================ =================
</TABLE>
See accompanying notes to the consolidated financial statements
5
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HEARx LTD.
STATEMENT OF CASHFLOWS
SIX MONTHS ENDED JUNE 26, 1998 AND JUNE 27, 1997
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<CAPTION>
1998 1997
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(Unaudited) (Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (4,362,720) $ (5,441,932)
Adjustments to reconcile net loss to net cash
Used by operating activities:
Depreciation and amortization 1,122,374 952,777
Provision for doubtful accounts 65,967 (159,865)
Loss on disposition of property 23,013 -
(Increase) decrease in:
Accounts and notes receivable (642,650) (182,910)
Inventories (63,871) 3,256
Prepaid expenses (27,496) 35,720
Other current assets and deferred charges (851,518) (4,528)
Accounts payable and accrued expenses 855,975 (1,466,584)
-------------- --------------
Net cash used in operating activities (3,880,926) (6,264,066)
--------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (854,703) (1,688,062)
Purchase/sale on investments 2,503,858 (1,969,769)
-------------- ---------------
Net cash provided (used) by investing activities 1,649,155 (3,657,831)
-------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of:
Long-term debt - 114,219
Principle payments:
Long-term debt (63,966) (62,561)
Forgiveness of long-term debt - (97,883)
Proceeds from the issuance of capital stock, net of
offering costs 185,476 12,702,680
-------------- --------------
Net cash provided by financing activities 121,510 12,656,455
-------------- --------------
Net increase (decrease) in cash and cash equivalents (2,110,262) 2,734,558
Cash and cash equivalents at beginning of period 3,644,838 1,811,437
-------------- ---------------
Cash and cash equivalents at end of period $ 1,534,577 $ 4,545,995
============== ===============
</TABLE>
See accompanying notes to the consolidated financial statements
6
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HEARx LTD.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
The accompanying unaudited consolidated financial statements should be
read in conjunction with the Company's Annual Report on Form 10-K for the
fiscal year ended December 26, 1997. All adjustments, consisting of
normal recurring accruals, which are, in the opinion of management,
necessary for a fair statement of results for interim periods have been
made.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Reclassifications
Certain amounts in the 1997 consolidated financial statements have been
reclassified in order to conform to the 1998 presentation.
2. RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the FASB issued SFAS 130, Reporting Comprehensive Income,
which establishes standards for reporting and presentation of
comprehensive income and its components. SFAS 130 is effective for
periods beginning after December 15, 1997 and is not expected to have a
material impact on the Company's financial statements.
Additionally in June 1997, the FASB issued SFAS 131, Disclosure about
Segments of an Enterprise and Related Information. SFAS 131 establishes
standards for the way public enterprises are to report operating segments
in annual financial statements and requires reporting of selected
information about operating segments in interim reports. SFAS 131 is
effective for periods beginning after December 15, 1997 and is not
expected to have a material impact on the Company's financial statements.
7
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION
GENERAL
Management believes the shift of patients from the Medicare population to
managed care, which has occurred in recent years, will continue and
increase in the future. To the extent the Company is successful in
contracting with the providers of Medicare managed care for the provision
of hearing care goods and services, the Company can enjoy the benefits of
this shift.
HEARx intends, as its ultimate goal, to establish a nationwide network of
hearing care centers, located in the metropolitan areas or regions with
concentrations of elderly consumers who are more likely to need the
Company's products or services. During the second quarter of 1998, the
Company acquired the customer list and selected assets of a hearing care
center in the Southeast, Florida market and closed its center in
Virginia. At the end of the second quarter of 1998, HEARx operated 75
centers. Those include 35 centers in Florida, 16 in New York, 15 in New
Jersey, 4 in Connecticut, and 5 in Pennsylvania. At this point in time,
the Company believes the existing center network is adequate to service
all current contracts.
During the second quarter, HEARx signed an Agreement in Principle to form
a joint venture in hearing care with The Permanente Federation. Kaiser
Permanente is America's largest not-for-profit health maintenance
organization, serving over 9.1 million members in 19 states and the
District of Columbia. Kaiser Permanente's delivery system is comprised
of Kaiser Foundation Health Plan, Kaiser Foundation Hospitals, and the
Permanente Medical Groups. The Permanente Federation is a national
association of the Permanente Medical Groups and is responsible for new
venture development such as the venture with HEARx.
The parties intend that the joint venture will concentrate initially on
providing hearing aids and diagnostic audiology testing in the State of
California to serve the needs of Kaiser Permanente's membership in that
State. The joint venture also will seek contracts to provide services to
members of other managed care organizations and will market to the
"self-pay" patients in the same geographic region. The Agreement in
Principle provides that the joint venture will be owned 50/50 by HEARx
and the Permanente Federation and that the centers will bear the HEARx
name. HEARx will be responsible for day-to-day operations management of
the centers, but all clinical and quality issues will be overseen by a
joint operating committee of the Federation and HEARx clinicians.
Implementation of the venture is subject to completion of final
contracts, approval by the governing bodies of each organization and
approval from the appropriate regulatory bodies. If the final contracts
and approvals can be obtained, plans call for the first cluster of
approximately 15 centers in Southern California to open no later than
January 1999. Each center would have adequate testing rooms and
diagnostic equipment to service approximately $3 million in sales per
annum, although there can be no assurance that this level of revenue will
be generated at these centers. While there can be no assurance the
Company will obtain such final contracts and approvals, management
believes good progress is being made and the current targeted date for
the initial 15 centers is achievable.
Also during the second quarter, HEARx distinguished itself from other
hearing care providers by being awarded a three year accreditation,
effective June 2, 1998, from the Joint Commission on Accreditation of
Healthcare Organizations (JCAHO). To achieve accreditation, HEARx was
required to meet national standards addressing the rights and
responsibilities of persons enrolled in the network; organization ethics;
providing a continuum of care; educating and communicating with
enrollees; leadership; human resources; management of information; and
improving network performance. The accreditation process was conducted
by physicians and managed healthcare experts and involved intensive
evaluations at specific hearing centers and the corporate office.
Management continues to observe a number of managed care organizations
experiencing significant difficulties arising from the widespread growth
and reach of available plans and
8
<PAGE> 9
benefits, as well as the diverse nature of some of the defined
participant populations. Many of these organizations, including some of
those with whom HEARx has contracts, have focused substantial resources
on correcting their own administrative and information systems instead of
expanding their plan memberships. In an effort to supplement its existing
and growing base of sales to and through the healthcare provider
contracts which continue to account for the majority of the Company's
sales, the Company has, since late 1997, developed and refined its
marketing programs oriented toward the non-insured "self pay" patient and
increasing referrals to our existing centers through additional contracts
(primarily in the Northeast).
There can be no assurance that all of the Company's provider contracts
will produce the revenues anticipated. These contracts call for the
managed care or insurance companies to reimburse the Company for all, or
a portion, of the costs incurred by their members for hearing care
services provided by the Company. The balance of the cost is borne by
the member. The Company is reimbursed by the insurer on either a "fee
for service" basis, or through a "capitated" plan. Capitation contracts
are those contracts which provide for payments to the Company on a per
member per month basis. Under those contracts, a member is entitled to
testing services and a product credit with respect to a hearing aid
purchase. These credits (discounted from published retail prices) are
then applied to the member's purchase of hearing aids. As generally
provided in those contracts, the member can receive this credit once
every three years. The price of the services and products provided on
the first visit, above the group discount, as well as any additional
services or products purchased, are the obligation of the member.
The Company believes that the loss of any single managed care or
insurance contract would not have a material adverse effect on its
financial condition or results of operations. Each of the existing
managed care and insurance contracts are achieving expected gross profit
margins and contributing positively to the Company's results of
operations.
Net Revenue for the second quarter was $6,816,576, which is 16.4% higher
than the comparable quarter of 1997, and included net revenue in the
month of May 1998 of $2,482,766 which was the highest in the Company's
history for a four week accounting month. At the center level, HEARx
realized an operating profit (before corporate expenses of general and
administration, depreciation, interest and preferred dividends) of
$32,935 for all centers for the most recent quarter, the second
consecutive quarterly operating profit.
The Company has conducted a comprehensive review of its computer systems
to identify any system that could be affected by the "Year 2000" issue.
The Year 2000 problem is the result of computer programs being written
using two digits rather than four to define the applicable year. Any of
the Company's programs that have time sensitive software may recognize a
date using "00" as the year 1900 rather than 2000. This could result in
a system malfunction or miscalculation. Management believes the Year
2000 problem will not pose significant operational problems for the
Company. The Company's computer operational programs have been written
within the past three years and use four digits to define the applicable
year. The Company plans to send confirmations to outside vendors and
principal customers to ensure their programs are Year 2000 compatible.
RESULTS OF OPERATIONS
For the three months ended June 26, 1998 Compared to June 27, 1997
Net revenue increased $961,984, or 16.4%, to $6,816,576 in the second
quarter of 1998 from $5,854,592 in the same period of 1997. The
increase in net revenue primarily resulted from the increase in the
Company's non-insured "self-pay" business and the effect of new
contracts signed with major managed care companies.
Cost of products sold increased $445,571, or 30.4%, to $1,913,691 in the
second quarter of 1998 from $1,468,120 in the same period of 1997. The
increase in the cost of products sold is primarily attributable to the
increase in net sales from new and existing centers.
9
<PAGE> 10
Center operating expenses increased $812,009, or 20%, to $4,869,950 in
the second quarter of 1998 from $4,057,941 in the same period of 1997.
This increase is partially due to an increase in advertising expense of
$195,793, a 27.8% increase over the comparable period of 1997. The 1998
level of advertising expenditures is expected to be adjusted quarterly
depending on results. The remaining increase of $616,216, or 15.2%, is
attributable to the increase in the number of centers operating in the
second quarter of 1998 (75) compared to the second quarter of 1997 (73)
plus an increase in center wages in the Southeast Florida region to
manage the increased sales levels.
General and administrative expenses increased only $72,815, or 4.6%, to
$1,667,671 in the second quarter of 1998 from $1,594,856 in the same
period of 1997. General and administrative expenses actually decreased
by $48,397 from the first quarter of 1998. At this point in time, the
Company believes its current level of general and administrative expenses
is adequate to support its existing operations, including all current and
anticipated insurance and managed care contracts for its Northeast US and
Florida markets.
Depreciation and amortization expense increased only $19,252, or 3.5%, to
$567,319 in the second quarter of 1998 from $548,067 in the same period
of 1997. The increase was attributable to the depreciation and
amortization of the leasehold improvements, medical and computer
equipment, and furniture associated with the new centers opened in the
1997 fiscal year and the first and second quarters of 1998.
RESULTS OF OPERATIONS
For the six months ended June 26, 1998 Compared to June 27, 1997
Net revenue increased $2,308,056, or 19.9%, to $13,910,905 for the six
months ended June 1998 from $11,602,849 for the same period of 1997. The
increase in net sales primarily resulted from the increase in the
Company's non-insured "self-pay" business and the effect of new contracts
signed with major managed care companies.
Cost of products sold increased $713,855, or 21.8%, to $3,993,738 for the
six months ended June 1998 from $3,279,883 for the same period of 1997.
The increase in the cost of products sold is attributable to the increase
in net sales from new and existing centers.
Center operating expenses increased $1,474,276, or 18.3%, to $9,534,405
for the six months ended June 1998 from $8,060,129 for the same period of
1997. This increase is partially due to an increase in advertising
expense of $386,277, a 27.5% increase over the comparable period of 1997.
The 1998 level of advertising expenditures is expected to be adjusted
quarterly depending on results. The remaining increase of $1,087,999, or
13.5%, is attributable to the increase in the number of centers operating
in the second quarter of 1998 (75) compared to the fiscal year end 1997
(73) plus an increase in center wages in the Southeast Florida region to
manage the increased sales levels.
General and administrative expenses increased $367,804, or 12.2%, to
$3,383,739 for the six months ended June 1998 from $3,015,935 for the
same period of 1997. The increase, which primarily occurred in the first
quarter of 1998, is attributable to the expansion of staff functions in
the marketing and insurance claims processing departments as well as an
increase in outside consulting fees in the areas of public relations,
quality assurance and center office management, each of which was
implemented or increased in order to accomplish the Company's objectives
for 1998. As discussed in the three months' analysis of the second
quarter, general and administrative expenses actually decreased, in the
second quarter, by $48,397 from the first quarter of 1998. At this point
in time, the Company believes its current level of general and
administrative expenses is adequate to support its existing operations,
including all current and
10
<PAGE> 11
anticipated insurance and managed care contracts for its Northeast US and
Florida markets.
Depreciation and amortization expense increased only $169,597, or 17.8%,
to $1,122,374 for the six months ended June 1998 from $952,777 for the
same period of 1997. The increase was attributable to the depreciation
and amortization of the leasehold improvements, medical and computer
equipment, and furniture associated with the new centers opened in the
1997 fiscal year and the first and second quarters of 1998.
LIQUIDITY AND CAPITAL RESOURCES
Working capital decreased $4,185,574 to $8,950,573 as of June 26, 1998
from $13,136,147 as of December 26, 1997. This decrease is primarily the
result of operating losses. The Company believes that its current
working capital and revenues from operations are sufficient to support
the Company's current foreseeable capital requirements and current
operating needs through 1998 in accordance with its strategic plan,
although there can be no assurance that other cash needs will not arise.
As discussed above, in the second quarter HEARx signed an Agreement in
Principle to form a joint venture with The Permanente Federation to
provide hearing care products and services through centers to be
established in California. The cash requirements for this joint venture
will be evaluated when the final contracts and approvals have been
obtained. Additional cash needs for this joint venture may be met by
either cash available or cash proceeds from the private placement of
certain securities of the Company, although no definitive plans have yet
been established.
Net cash used by operating activities decreased from $6,264,066 in the
first six months of 1997, to $3,880,926 in the first six months of 1998.
The cash used by operating activities in 1998 and 1997 was primarily the
result of operating losses in the northeast U.S. market due to provider
contracts not starting on a timely basis or not producing the
anticipated revenue levels.
Net cash provided by investing activities increased from cash being used
by investing activities of $3,657,831, in the first six months of 1997 to
cash being provided by investing activities of 1,649,155 in 1998. This
increased resulted from a $833,359 reduction of cash ($ 1,688,062 in 1997
to $854,703 in 1998) used in the construction of leasehold improvements
and related purchase of property and equipment for new, relocated or
remodeled centers
Cash from financing activities decreased from $12,656,455, in the first
six months of 1997, to $121,510 in the first six months of 1998. This
difference was primarily the result of funds in the amount of $9,909,177,
from a preferred stock offering being included in the first six months of
1997.
Except for the historical information provided in this discussion and
analysis, the discussion contains forward looking statements,
including those concerning the shift of patients from Medicare to
managed care and the effect thereof on the Company; the Company's
goals of establishing a nationwide network; the adequacy of the
Company's existing center network; the adequacy of current levels of
general and administrative expenses and current working capital and
revenues from operations; the proposed joint venture with the
Permanente Federation and cash needs therefor; the loss of any
existing contracts; and the year 2000 problem. Such statements
involve certain risks and uncertainties that could cause actual
results to differ materially from those in the forward-looking
statements. Potential risks and uncertainties include the ability of
the Company to conclude definitive agreements with The Permanente
Federation which are consistent with the terms and conditions of the
Agreement
11
<PAGE> 12
in Principle, industry and market conditions, unforeseen capital
requirements, the ability of the Company to reach its revenue targets
and maintain cost controls, as well as those risks associated with the
Company's business described in the Company's filings with the
Securities and Exchange Commission, including the Form 10K for the
fiscal year ended December 26, 1997 and the Form S-3 resale
registration statement dated June 25, 1997.
12
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PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Company held its annual meeting of stockholders on May 18, 1998. At that
meeting, the stockholders were asked to consider and act on the following
matters:
1. The election of five directors; and
2. The ratification of the selection of BDO Seidman as the
Company's independent certified public accountants for its
fiscal year ending December 25, 1998.
The voting of the shareholders on the above issues was as follows:
1. Paul A. Brown, M.D.: 83,417,034 "For";
835,523 "Against/Withheld"; 0 broker non-votes; and 16,541,693
abstentions.
Stephen J. Hansbrough: 83,417,785 "For";
834,772 "Against/Withheld"; 0 broker non-votes; and 16,541,693
abstentions.
Thomas W. Archibald: 83,391,668 "For";
860,889 "Against/Withheld"; 0 broker non-votes; and 16,541,693
abstentions.
Joseph L. Gitterman III: 83,355,585 "For";
896,972 "Against/Withheld"; 0 broker non-votes; and 16,541,693
abstentions.
David J. McLachlan: 83,417,535 "For"
835,022 "Against/Withheld"; 0 broker non-votes; and 16,541,693
abstentions.
2. The ratification of the selection of BDO Seidman as the
Company's independent certified public accountants for the fiscal
year ending December 25, 1998: 83,533,146 "For"; 426,531
"Against"; 0 broker non-votes and 16,834,573 abstentions.
Item 5. Other Information
Any shareholder of the Company that wishes to submit a stockholder proposal
pursuant to SEC Rule 14a-8 promulgated under the Securities Exchange Act of
1934, as amended (the "1934 Act"), for presentation to the Company's 1999
Annual Meeting of Stockholders must submit such proposal to the Company at its
principal office no later than December 7, 1998 for inclusion, if appropriate,
in the Company's proxy statement and form of proxy relating to such meeting. A
Company stockholder proposal submitted other than pursuant to Rule 14a-8 will
be timely for purposes of Rule 14a-4(c)(a) promulgated under the 1934 Act only
if submitted to the Company on or before February 20, 1999.
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Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
3.1(1) Restated Certificate of Incorporation of
HEARx Ltd., including certain certificates of
designations, preferences and rights of
certain preferred stock of the Company. [3]
3.2(2) Amendment to Restated Certificate of
Incorporation. [3.1A]
3.3(3) Certificate of Designations, Preferences and
Rights of the Company's 1997 Convertible
Preferred Stock. [3]
3.4(4) By-Laws of HEARx Ltd. [3.2]
27 Financial Data Schedule (provided
for the information of the Securities and
Exchange Commission only).
======================================================================
(1) Filed as an exhibit to the Company's Current
Report on Form 8-K, filed May 17, 1996, as
the exhibit number indicated in brackets, and
incorporated herein by reference.
(2) Filed as an exhibit to the Company's
Quarterly Report on Form 10-Q for the period
ended June 28,1996, as the exhibit number
indicated in brackets, and incorporated
herein by reference.
(3) Filed as an exhibit to the Company's Current
Report on Form 8-K, filed March 26, 1997, as
the exhibit number indicated in brackets, and
incorporated herein by reference.
(4) Filed as an exhibit to the Company's
Registration Statement on Form S-18
(Registration No. 33-17041-NY) as the
exhibit number indicated in brackets, and
incorporated herein by reference.
(b) Reports on Form 8-K:
None
14
<PAGE> 15
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.
HEARx Ltd.
(Registrant)
<TABLE>
<S> <C> <C> <C>
Date: August 10, 1998 By: s/Stephen J. Hansbrough
-----------------------
Stephen J. Hansbrough
President and
Chief Operating Officer
Date: August 10, 1998 By: s/James W. Peklenk
------------------
James W. Peklenk
Vice President and
Chief Financial Officer
</TABLE>
15
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains financial information extracted from financial statements
of HEARx Ltd. and is qualified in its entirety by references to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-26-1997
<PERIOD-START> DEC-27-1997
<PERIOD-END> JUN-26-1998
<CASH> 1,534,577
<SECURITIES> 7,778,133
<RECEIVABLES> 4,197,941
<ALLOWANCES> (336,081)
<INVENTORY> 1,600,920
<CURRENT-ASSETS> 14,775,490
<PP&E> 14,412,172
<DEPRECIATION> (5,663,095)
<TOTAL-ASSETS> 24,993,314
<CURRENT-LIABILITIES> 5,824,917
<BONDS> 171,897
0
6,815
<COMMON> 10,085,555
<OTHER-SE> 8,904,130
<TOTAL-LIABILITY-AND-EQUITY> 24,993,314
<SALES> 13,910,905
<TOTAL-REVENUES> 13,910,905
<CGS> 3,993,738
<TOTAL-COSTS> 14,077,234
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (4,160,067)
<INCOME-TAX> 0
<INCOME-CONTINUING> (4,160,067)
<DISCONTINUED> 0
<EXTRAORDINARY> 202,635
<CHANGES> 0
<NET-INCOME> (4,362,720)
<EPS-PRIMARY> ($0.04)
<EPS-DILUTED> ($0.04)
</TABLE>
