UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-QSB
[X] Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of
1934 For the quarterly period ended November 30, 1995
[ ] Transition Report Under Section 13 or 15(d) of the Securities Exchange Act
of 1934 For the transition period from _______________ to ______________
Commission File Number: 0-18105
VASOMEDICAL, INC.
(Exact name of small business issuer as specified in its charter)
Delaware 11-2871434
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
180 Linden Ave., Westbury, New York 11590
(Address of Principal Executive Offices)
Issuer's Telephone Number (516) 997-4600
Number of Shares Outstanding of Common Stock,
$.001 Par Value, at January 12, 1996 39,028,528
----------
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 registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes [X] No []
Transitional Small Business Disclosure Format Yes [ ] No [X]
<PAGE>
Vasomedical, Inc. and Subsidiaries
(a development stage enterprise)
INDEX
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION Page
----
<S> <C>
Item 1 - Financial Statements:
Consolidated Condensed Balance Sheets as of
November 30, 1995 and May 31, 1995 (Unaudited) 3
Consolidated Condensed Statements of Operations for the
Six and Three Months Ended November 30, 1995 and 1994
and for the period from July 22, 1987 (inception) to
November 30, 1995 (Unaudited) 4
Consolidated Condensed Statement of Changes in Stockholders'
Equity for the period from July 22, 1987 (inception)
to November 30, 1995 (Unaudited) 5
Consolidated Condensed Statements of Cash Flows for the Six
Months Ended November 30, 1995 and 1994 and for the
period from July 22, 1987 (inception)
to November 30, 1995 (Unaudited) 7
Notes to Consolidated Condensed Financial Statements 9
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
PART II - OTHER INFORMATION 13
</TABLE>
<PAGE>
<TABLE>
Vasomedical, Inc. and Subsidiaries
(a development stage enterprise)
CONSOLIDATED CONDENSED BALANCE SHEETS
(unaudited)
<CAPTION>
November 30, May 31,
ASSETS 1995 1995
------------ --------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $2,575,364 $491,609
Investments in mutual funds 654,536 628,152
Accounts receivable 12,000
Inventory 224,576
Other current assets 173,520 120,456
---------- ---------
Total current assets 3,639,996 1,240,217
PROPERTY AND EQUIPMENT, net 118,142 77,075
CAPITALIZED COSTS IN EXCESS OF FAIR
VALUE OF NET ASSETS ACQUIRED, net 1,317,489 1,426,065
DEFERRED LOAN COSTS, net 768,111
OTHER ASSETS 23,588 9,781
------------ -----------
$5,867,326 $2,753,138
------------ -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $267,056 $404,051
Accrued interest 116,667 89,096
-------- --------
Total current liabilities 383,723 493,147
LONG-TERM DEBT 4,000,000
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value; 1,000,000
shares authorized; none issued and outstanding - -
Common stock, $.001 par value; 85,000,000 shares
authorized; 38,948,528 shares and 37,899,432 shares at
November 30, 1995 and May 31, 1995, respectively, issued
and outstanding 38,948 37,899
Additional paid-in capital 21,912,625 21,134,578
Deferred compensation (254,720) (339,626)
Unrealized loss on investments (1,020) (7,370)
Accumulated deficit (20,212,230) (18,565,490)
------------ ------------
1,483,603 2,259,991
------------ ------------
$5,867,326 $2,753,138
------------ ------------
<FN>
The accompanying notes are an integral part of these condensed statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
Vasomedical, Inc. and Subsidiaries
(a development stage enterprise)
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(unaudited)
<CAPTION>
Cumulative
July 22, 1987
Six months ended Three months ended (inception) to
November 30, November 30, November 30,
1995 1994 1995 1994 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenues $344,000 $ - $344,000 $ - $2,693,502
-------- --------- -------- -------- ----------
Cost and expenses
Cost of sales 48,990 48,990 663,469
Selling, general and
administrative 1,502,218 923,358 904,259 474,798 18,303,901
Research and development 168,452 240,000 75,243 120,000 3,630,759
Depreciation and amortization 257,253 22,821 141,644 11,410 1,183,403
Provision for uncollectable note 318,000
Royalty fees 196,963
Registration costs 89,797
Minority interest in net losses
of subsidiaries (1,110,221)
Net gain on sale or disposition
of subsidiaries stock (119,701)
Interest and financing costs 118,651 409 70,597 82 361,935
Interest and other income - net (104,824) (37,630) (63,424) (17,441) (612,573)
--------- -------- -------- -------- ---------------
1,990,740 1,148,958 1,177,309 588,849 22,905,732
---------- --------- --------- ------- -------------
NET LOSS $(1,646,740) $(1,148,958) $(833,309) $(588,849) $(20,212,230)
------------ ------------ ---------- ---------- -------------
Net loss per common share $(.04) $(.04) $(.02) $(.02)
------ ------ ------ ------
Weighted average common
shares outstanding 38,773,679 25,808,599 38,948,528 25,894,432
---------- ---------- ---------- ----------
<FN>
The accompanying notes are an integral part of these condensed statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
Vasomedical, Inc. and Subsidiaries
(a development stage enterprise)
CONSOLIDATED CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<CAPTION>
Deficit
Unreal- Stock accumula- Total
ized gain subscrip- ted in stock-
Addition- Deferred (loss) on tions the develop- hold-
Preferred Stock Common Stock al paid in compen- invest- receiv- ment ers'
Shares Amount Shares Amount capital sation ments able stage equity
------- ------ ------ ------ ---------- -------- ---------- --------- ------------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at July 22, 1987
(inception) - $ - - $ - $ - $ - $ - $ - $ - $ -
Issuance of common stock 7,330,355 7,330 296,215 303,545
Common stock issued for
services 169,645 170 4,919 5,089
Net loss (233,465) (233,465)
------ ------ --------- ------ -------- --------- ------- -------- -------- ---------
Balance at May 31, 1988 7,500,000 7,500 301,134 (233,465) 75,169
Issuance of common stock 2,500,000 2,500 2,054,246 2,056,746
Common stock issued for
services 137,500 138 39,862 40,000
Net loss (538,919) (538,919)
------ ------ --------- ------- -------- --------- ------- -------- --------- ---------
Balance at May 31, 1989 10,137,500 10,138 2,395,242 (772,384) 1,632,996
Net loss (797,720) (797,720)
------ ------ --------- ------- -------- --------- ------- -------- --------- ---------
Balance at May 31, 1990 10,137,500 10,138 2,395,242 (1,570,104) 835,276
Common stock issued to consultants
for services 462,750 462 114,588 115,050
Additional paid-in capital arising
from investment in subsidiary by
minority interest 315,241 315,241
Net loss (666,259) (666,259)
------ ------ --------- ------- -------- --------- ------- -------- --------- --------
Balance at May 31, 1991 10,600,250 10,600 2,825,071 (2,236,363) 599,308
Common stock issued for services
to officers/employees and
consultants 1,632,253 1,632 1,785,794 1,787,426
Issuance of common stock for cash 1,317,500 1,318 2,521,893 2,523,211
Common stock issued under option
agreements 225,000 225 53,910 54,135
Common stock dividend 901,553 902 (902) -
Issuance of subsidiary stock to
minority interests pursuant to
anti-dilution provisions 304,400 304,400
Net loss (4,043,755)(4,043,755)
------ ------ --------- ------- -------- --------- ------- -------- ---------- --------
Balance at May 31, 1992 14,676,556 14,677 7,490,166 (6,280,118) 1,224,725
Common stock issued for services
to officers/employees and
consultants 227,500 227 252,818 253,045
Issuance of common stock for cash 8,217,876 8,218 8,216,782 (1,712,500) 6,512,500
Common stock issued to officers
under stock bonus arrangement 1,900,000 1,900 1,696,225 (1,698,125) -
Amortization of deferred compensation 339,625 339,625
Warrants issued to lenders and
consultants 210,000 210,000
Net loss (4,356,925)(4,356,925)
------ ------ --------- ------- ---------- --------- ------- --------- ---------- ---------
Balance at May 31, 1993 25,021,932 25,022 17,865,991 (1,358,500) (1,712,500)(10,637,043)4,182,970
------ ------ --------- ------- ---------- --------- ------- --------- ---------- ---------
<FN>
The accompanying notes are an integral part of this condensed statement.
</FN>
</TABLE>
<PAGE>
<TABLE>
Vasomedical, Inc. and Subsidiaries
(a development stage enterprise)
CONSOLIDATED CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (continued)
<CAPTION>
Deficit
Unreal- Stock accumulated Total
Additional Deferred ized gain sub- in the stock-
Preferred Stock Common Stock paid-in compen- loss) on in- scriptions development holders'
Shares Amount Shares Amount capital sation vestments receivable stage equity
------- ------ ------ ------ ---------- -------- ---------- --------- ------------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at May 31, 1993 25,021,932 25,022 17,865,991 (1,358,500) (1,712,500)(10,637,043)4,182,970
Rescission of common stock
underlying stock
subscriptions receivable (1,712,500) (1,713) (1,710,787) 1,712,500 -
Issuance of common stock for
cash 2,500,000 2,500 947,500 950,000
Common stock issued for
services to officers and
consultants 555,000 555 416,539 417,094
Issuance of common stock of
subsidiary for services 120,667 120,667
Contribution of common stock
of subsidiaries by officers 135,329 135,329
Contribution of common stock
by officer and consultant (300,000) (300) 300 -
Warrants issued to officers/
employees and consultants 193,500 193,500
Amortization of deferred
compensation 339,624 339,624
Net loss (4,811,153) (4,811,153)
------ ------ --------- ------- -------- --------- ------- -------- ----------- -----------
Balance at May 31, 1994 26,064,432 26,064 17,969,039 (1,018,876) - - (15,448,196) 1,528,031
Unvested common stock
forfeited under stock
bonus arrangement (570,000) (570) (508,868) 509,438 -
Issuance of common stock
for cash 6,000,000 6,000 1,481,625 1,487,625
Issuance of preferred stock
for cash 500,000 5,000 382,625 387,625
Conversion of preferred
stock (500,000)(5,000)1,000,000 1,000 4,000 -
Issuance of common stock
to acquire subsidiary 5,000,000 5,000 1,460,000 1,465,000
Common stock issued for
services to consultants 405,000 405 273,657 274,062
Warrants issued to directors
and consultants 72,500 72,500
Amortization of deferred
compensation 169,812 169,812
Unrealized loss on
investments (7,370) (7,370)
Net loss (3,117,294)(3,117,294)
------ ------ --------- ------- -------- -------- ------- -------- ----------- ----------
Balance at May 31, 1995 - - 37,899,432 37,899 21,134,578 (339,626) (7,370) - (18,565,490) 2,259,991
Common stock issued to
consultant in connection
with debt financing 600,000 600 599,400 600,000
Common stock issued in
lieu of cash interest 89,096 89 89,007 89,096
Exercise of warrants 360,000 360 89,640 90,000
Amortization of deferred compensation 84,906 84,906
Unrealized gain on investments 6,350 6,350
Net loss (1,646,740) (1,646,740)
------ ----- ---------- ------ ---------- -------- ------ ------- ---------- ---------
Balance at November 30, 1995 - - 38,948,528 $38,948 $21,912,625 $(254,720) $(1,020) $ - $(20,212,230)$1,483,603
------ ----- ---------- ------ ---------- -------- ------ ------- ---------- ---------
<FN>
The accompanying notes are an integral part of this condensed statement.
</FN>
</TABLE>
<PAGE>
<TABLE>
Vasomedical, Inc. and Subsidiaries
(a development stage enterprise)
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(unaudited)
<CAPTION>
Cumulative
July 22, 1987
Six months ended November 30, (inception) to
1995 1994 November 30,1995
---- ---- ----------------
<S> <C> <C> <C>
Cash flows from operating activities
Net loss $(1,646,740) $(1,148,958) $(20,212,230)
----------- ----------- -------------
Adjustments to reconcile net loss
to net cash used in operating activities
Depreciation and amortization 257,253 22,821 1,183,403
Reserve for uncollectable note 318,000
Unrealized loss on investments 42,650
Amortization of deferred compensation 84,906 84,906 933,967
Amortization of deferred revenue (101,840)
Minority interest in net losses of subsidiaries (1,110,221)
Common stock issued for services
Officers/employees 1,291,133
Consultants 1,326,746
Warrants issued to officers/employees, lenders
and consultants 35,000 451,000
Acquired research and development costs 547,657
Reduction in carrying value of patents 159,775
Common stock of a subsidiary
issued for no additional consideration 304,400
Net gain on sale/disposition
of subsidiary stock (119,701)
Officers' loans forgiven as compensation 133,500
Net loss on sale of equipment 4,300
Changes in assets and liabilities, net of
assets acquired or disposed
Increase in accounts receivable (12,000) (729,210)
Increase in inventory (235,419) (503,187)
Decrease (increase) in other current assets (53,064) 10,205 (481,418)
Increase in other assets (13,807) (39,155)
Increase (decrease) in accounts payable and
accrued expenses (20,328) 8,780 965,750
Increase in amount due to minority
shareholder of subsidiary 191,392
Increase in deferred revenue 350,000
---------- -------- -------------
7,541 161,712 5,118,941
---------- -------- -------------
Net cash used in operating activities (1,639,199) (987,246) (15,093,289)
----------- -------- ------------
<FN>
The accompanying notes are an integral part of these condensed statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
Vasomedical, Inc. and Subsidiaries
(a development stage enterprise)
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (continued)
(unaudited)
<CAPTION>
Cumulative
July 22, 1987
Six months ended November 30, (inception) to
1995 1994 November 30,1995
---- ---- ----------------
<S> <C> <C> <C>
Cash flows from investing activities
Purchase of investments (20,034) (22,767) (995,859)
Proceeds from sale of investments 297,653 297,653
Proceeds from the sale of subsidiary stock 900,000
Acquisition/disposition of subsidiaries, net of cash (1,003,483)
Purchase of property and equipment (55,012) (575,257)
Net proceeds from the sale of equipment 8,500
Loans to officers (174,500)
Repayment of officer loans 41,000
Purchase of intangibles (725,000)
Purchase of patent (159,775)
---------- ---------- ----------
Net cash provided by (used in)
investing activities (75,046) 274,886 (2,386,721)
---------- ---------- ----------
Cash flows from financing activities
Proceeds from sale of common stock 14,330,360
Proceeds from the sale of preferred stock 387,625
Proceeds from exercise of stock options 54,135
Proceeds from exercise of warrants 90,000 90,000
Contribution from minority shareholder 525,000
Expenses of stock offerings (496,908)
Proceeds from notes 3,708,000 5,595,500
Repayments of loans (1,595,000)
Increase in stock subscriptions payable 85,000
Increase in minority interest ---------- ---------- 1,079,662
-----------
Net cash provided by financing activities 3,798,000 - 20,055,374
---------- ---------- -----------
NET (DECREASE) INCREASE IN
CASH AND CASH EQUIVALENTS 2,083,755 (712,360) 2,575,364
Cash and cash equivalents - beginning of period 491,609 762,875
----------- ---------- ----------
Cash and cash equivalents - end of period $2,575,364 $50,515 $2,575,364
----------- ---------- ----------
<FN>
The accompanying notes are an integral part of these condensed statements.
</FN>
</TABLE>
<PAGE>
Vasomedical, Inc. and Subsidiaries
(a development stage enterprise)
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
November 30, 1995
(unaudited)
NOTE A - BASIS OF PRESENTATION
The consolidated condensed balance sheet as of November 30, 1995 and
the related consolidated condensed statements of operations for the six- and
three-month periods ended November 30, 1995 and 1994 and changes in
stockholders' equity and cash flows for the six-month period ended November 30,
1995 have been prepared by Vasomedical, Inc. and Subsidiaries (the "Company")
without audit. In the opinion of management, all adjustments (which include only
normal, recurring accrual adjustments) necessary to present fairly the financial
position as of November 30, 1995 and for all periods presented have been made.
Certain information and footnote disclosures, normally included in
financial statements prepared in accordance with generally accepted accounting
principles, have been condensed or omitted. These financial statements should be
read in conjunction with the financial statements and notes thereto included in
the Annual Report on Form 10-KSB for the year ended May 31, 1995. Results of
operations for the period ended November 30, 1995 are not necessarily indicative
of the operating results expected for the full year.
NOTE B - LONG-TERM DEBT
On July 7, 1995, the Company sold $4,000,000 principal amount of 7%
five-year Convertible Debentures (the "Notes"), convertible into shares of the
Company's common stock at $1.00 per share commencing December 1, 1995. The
conversion price was equivalent to the quoted market price of the Company's
common stock when the transaction was negotiated.
Pursuant to the terms of the Note agreement: (i) the Noteholders may
request, at their option during the period June 1 through June 15, 1998,
redemption of the Notes at 104% of principal payable July 7, 1998, (ii) the
Company reserves the right to repay the Notes after January 7, 1996, at 110% of
principal, provided that the average daily closing price of the shares of the
Company is at least 200% of the conversion price for thirty (30) consecutive
trading days prior to conversion, (iii) the Company reserves the right to
convert all the Notes after January 7, 1996, provided that the average daily
closing price of the shares of the Company is at least 200% of the conversion
price for thirty (30) consecutive trading days prior to conversion, (iv) the
Note is collateralized by substantially all the existing assets of the Company,
and (v) interest is payable semi-annually commencing July 7, 1996. Also, in
connection with the sale of the Notes, the Company issued 600,000 shares of its
common stock to the broker/finder for services rendered.
On December 1, 1995, $60,000 principal amount of Notes were converted
into 60,000 shares of the Company's common stock.
NOTE C - STOCKHOLDERS' EQUITY
In the first quarter of fiscal 1996, the Company issued 600,000 shares
of its common stock to a broker/finder in connection with its July 1995
Convertible Debenture financing. These shares were valued at $600,000 and are
included as deferred loan costs amortizable over a three-year period. Such value
was equivalent to the quoted market price of the Company's common stock.
In July 1995, the Company issued 89,096 shares of its common stock in
lieu of $89,096 of interest previously accrued under a 1992 note at the option
of the lender.
In August 1995, warrants to purchase 360,000 shares of common
stock were exercised, aggregating $90,000. In December 1995, warrants to
purchase 20,000 shares of common stock were exercised, aggregating $15,200.
<PAGE>
Vasomedical, Inc. and Subsidiaries
(a development stage enterprise)
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued)
November 30, 1995
(unaudited)
NOTE D - COMMITMENTS AND CONTINGENCIES
Employment Agreements
In September 1995, the Board of Directors approved a three-year
extension of the employment agreements with the Company's President and its Vice
President, Marketing and Clinical Affairs.
Approximate aggregate minimum annual compensation obligations under
active employment agreements at November 30, 1995, after giving effect to the
above extensions, are summarized as follows:
<TABLE>
<CAPTION>
Year ended November 30, Amount
----------------------- ------
<S> <C> <C>
1996 $644,000
1997 566,000
1998 261,000
1999 23,000
----------
$1,494,000
----------
</TABLE>
SEC Investigation
The Company has been served with a subpoena duces tecum by the
broker-dealer branch of the Northeast Regional Office of the Securities and
Exchange Commission ("SEC") requesting certain documents from the Company
pursuant to a formal order of private investigation in connection with possible
registration and reporting violations. The Company is cooperating fully with
such investigation. As stated in the subpoena, the "investigation is
confidential and should not be construed as an indication by the Commission or
its staff that any violations of law have occurred, nor should it be interpreted
as an adverse reflection on any person, entity or security." This investigation
is in its early stages and the Company is unable to determine the likelihood of
any unfavorable outcome or the existence or amount of any potential loss.
NOTE E - REVENUE RECOGNITION
The Company recognizes revenue from the sale of its EECP(TM) device in
the period in which the Company fulfills its obligations under the sale
agreement including delivery, installation and customer training, if applicable.
As of November 30, 1995, the Company has entered into agreements to lease its
EECP(TM) device under leases classified as operating leases. Revenues from
operating leases are recognized on a straight-line basis over the life of the
respective leases. The Company also provides for a warranty period of up to
three years. When material, the Company provides for estimated warranty costs at
the time the related revenue is earned. As the Company's experience with respect
to the commercial application of EECP(TM) is limited, revisions to the Company's
warranty cost estimates may be necessary in the future.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Results of Operations
Six and Three Months Ended November 30, 1995 and 1994
The Company generated its first revenues from the sale and lease of its
EECP(TM) (Enhanced External Counterpulsation) device during the second quarter
of fiscal 1996. The Company incurred net losses of $1,647,000 and $833,000 and
$1,149,000 and 589,000 for the six and three months ended November 30, 1995 and
1994, respectively.
Gross margins from the EECP(TM) are dependent on a number of factors,
including the number of units sold or leased during the period, the location of
the Company's customers and the amount and nature of training and other initial
costs required to place the EECP(TM) in service for customer use. Accordingly,
the gross margin realized during the current period may not be indicative of
future results.
The Company has successfully negotiated for the lease or sale of several
EECP(TM) units. Although there can be no assurances that the EECP(TM) will be
successfully commercialized, the Company continues to generate limited revenues
in the third quarter of fiscal 1996.
Potential investors should be aware of the difficulties and delays normally
encountered by a company in the development stage, especially in view of the
regulated environment in which the Company operates and the paradigm shift in
the treatment of ischemic heart disease that EECP(TM) represents.
Selling, general and administrative (SGA) expenses for the six and three
months ended November 30, 1995 and 1994 were approximately $1,502,000 and
$904,000 and $923,000 and $475,000, respectively. The $579,000 increase in SGA
expenses for the six-month period primarily resulted from a $288,000 increase in
payroll and related costs associated with the addition of management, employment
of a direct national sales force and other operating personnel, particularly
those formerly employed by Vasogenics, which was acquired in January 1995, and
an increase of $254,000 in marketing and related costs associated with the
commercial introduction of EECP(TM). Such increases have been offset by a
reduction in consulting fees. The $430,000 increase in SGA expenses for the
three-month period primarily resulted from a $168,000 increase in payroll and
related costs associated with the addition of management, employment of a direct
national sales force and other operating personnel, particularly those formerly
employed by Vasogenics, and an increase of $172,000 in marketing and related
costs associated with the commercial introduction of EECP(TM). Such increases
have been offset by a reduction in consulting fees.
The increase in depreciation and amortization expense of $234,000 and
$130,000 for the comparative six and three month periods ended November 30, 1995
was primarily related to the amortization of goodwill relating to the Vasogenics
acquisition in January 1995 and the amortization of deferred loan costs in
connection with the July 1995 debt financing.
Research and development (R&D) expenses decreased $72,000 and $45,000 for
the comparative six and three month periods ended November 30, 1995. The
decrease is a result of the timing of commitments and expenses relating to the
Company's multi-center clinical study for EECP(TM). Such commitments and
expenses are expected to continue in subsequent fiscal 1996 quarters and in
fiscal 1997.
The increase in interest and financing costs is directly attributable to
the Company's debt issuance in July 1995.
Investment income increased during the six and three month periods ended
November 30, 1995 due to the Company's increased cash and investment position
resulting from the July 1995 debt issuance.
<PAGE>
Liquidity and Capital Resources
Working capital at November 30, 1995 increased $2,509,000 to $3,256,000
as compared to $747,000 at May 31, 1995 due to the $4,000,000 7% Convertible
Debenture financing secured in July 1995, offset by continuing operating losses.
Historically, the Company's principal source of funds from financing activities
has been from the sale of equity or debt securities in public and private
markets. Such proceeds have enabled the Company to continue its operations
despite its use of cash for operating activities. From inception through
November 30, 1995, the Company has raised $14,275,000 and $5,595,000 from the
sale of equity and debt securities, respectively. As indicated in the
accompanying consolidated condensed statements of cash flows, cash flows
provided by (used in) investing activities were $(75,000) and $275,000 for the
six months ended November 30, 1995 and 1994. The Company's investing activities
to date have consisted primarily of purchases of: (a) subsidiaries, (b)
intangibles, (c) property and equipment, offset by the proceeds from the sale of
subsidiary stock and (d) net investments in mutual funds.
On July 7, 1995, the Company sold $4,000,000 principal amount of
7% five-year Convertible Debentures (the "Notes"), convertible into shares of
the Company's common stock at $1.00 per share commencing December 1, 1995.
The Company intends to use the net cash proceeds of $3,700,000 to support
the expansion of the sales force for the EECP(TM) treatment procedure
and new clinical studies designed to confirm additional therapeutic claims,
as well as for inventory, capital expenditures and general working capital.
Management believes that its present working capital position at
November 30, 1995, and the commercialization of EECP(TM), will be sufficient to
support its internal overhead expenses and to implement its new development and
business plans at least through November 30, 1996.
<PAGE>
VASOMEDICAL, INC.
AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS:
None
ITEM 2 - CHANGES IN SECURITIES:
None
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES:
None
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS:
A. The Issuer held its Annual Meeting of Stockholders on December 5, 1995.
C. Four directors were elected at the Annual Meeting to serve in Class III
until the Annual Meeting of Stockholders for fiscal 1998. The names of these
directors and votes cast in favor of their election and shares withheld are as
follows:
<TABLE>
<CAPTION>
Name Class Votes For Votes Withheld
- ---- ----- --------- --------------
<S> <C> <C> <C>
Alexander G. Bearn III 29,217,946 103,418
David S. Blumenthal III 28,257,646 1,063,718
Kenneth W. Rind III 29,214,723 106,641
Francesco Bolgiani III 29,214,723 106,641
</TABLE>
The other matter voted upon and the votes cast are as follows:
1) Ratification of the appointment of Grant Thornton LLP as the Company's
independent certified public accountants for the fiscal year ended May 31, 1996.
Votes For: 29,179,843; Votes Against: 65,771; Votes Abstained: 75,750
ITEM 5 - OTHER INFORMATION:
None
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K:
Exhibits: Exhibit 27 - Financial Data Schedule (for electronic
submission only)
Reports on Form 8-K:
The Company filed a Report on Form 8-K dated October 24, 1995.
<PAGE>
In accordance with to the requirements of the Exchange Act, the
Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
VASOMEDICAL, INC.
By: /s/ Anthony Viscusi
--------------------------
President and CEO
(Principal Executive Officer)
/s/ Joseph A. Giacalone
---------------------------
Treasurer
(Principal Accounting Officer)
Date: January 12, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
consolidated condensed financial statements for the six months ended November
30, 1995 and is qualified in its entirety by reference to such statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-31-1996
<PERIOD-END> NOV-30-1995
<CASH> 2,575,364
<SECURITIES> 654,536
<RECEIVABLES> 12,000
<ALLOWANCES> 0
<INVENTORY> 224,576
<CURRENT-ASSETS> 3,639,996
<PP&E> 118,142
<DEPRECIATION> 0
<TOTAL-ASSETS> 5,867,326
<CURRENT-LIABILITIES> 383,723
<BONDS> 4,000,000
38,948
0
<COMMON> 0
<OTHER-SE> 1,444,655
<TOTAL-LIABILITY-AND-EQUITY> 5,867,326
<SALES> 0
<TOTAL-REVENUES> 344,000
<CGS> 48,990
<TOTAL-COSTS> 1,990,740
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 118,651
<INCOME-PRETAX> (1,646,740)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,646,740)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,646,740)
<EPS-PRIMARY> (.04)
<EPS-DILUTED> (.04)
</TABLE>
