<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): OCTOBER 30, 1997
NEUROMEDICAL SYSTEMS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 0-26984 13-3526980
(State or other (Commission File No.) (I.R.S. Employer
jurisdiction Identification No.)
of incorporation
Two Executive Boulevard, Suite 306
Suffern, New York 10901-4164
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (914) 368-3600
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ITEM 5.
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NEUROMEDICAL SYSTEMS, INC.
1997 THIRD QUARTER AND NINE MONTHS FINANCIAL RESULTS
Neuromedical Systems, Inc. (the "Company") today announced third
quarter and nine month financial results for the period ended September 30,
1997.
Revenues for the third quarter were $2,526,000, an increase of 96%
from $1,286,000 reported in the third quarter of 1996. During the third quarter
of 1997, approximately 60% of the Company's revenues were derived from the
United States, with the balance coming from Western Europe, Australia and the
greater China market (including Hong Kong, the People's Republic of China and
Taiwan). Net loss for the quarter was $9,244,000, or $.30 per share, compared to
a net loss of $9,588,000, or $.33 per share, for the third quarter of 1996.
Revenues for the nine month period ended September 30, 1997 were
$6,407,000, an increase of 117% from $2,954,000 reported for the same period of
1996. The net loss for the first nine months of 1997 was $27,738,000, or $.90
per share, compared to a net loss of $23,813,000, or $.82 per share, for the
same period of 1996.
During the third quarter, the Company devoted its efforts to becoming a
laboratory-focused organization. The Company believes that several programs
initiated during the third quarter will add value in the pathology laboratories,
both medically and economically, and that laboratories are becoming more
supportive of PAPNET(R) testing.
During the quarter, the Company continued its efforts to build support
among opinion-leading cytopathologists and cytotechnologists. Several programs
announced during the quarter contributed toward that goal.
First, the Company assembled a distinguished group of physicians to
make up the pathology advisory board (PAB). The PAB is comprised of independent
physicians who will help direct the Company's efforts in the development of
services and programs that can help laboratory professionals improve patient
care. The PAB held its first meeting in September and will continue to meet
periodically throughout the coming year. The Company expects that the PAB will
add value to the laboratory and to NSI.
Second, the Company launched the PAPNET(R) Access Program, a
partnership with ten academic medical centers to provide free PAPNET(R) testing
to indigent women, and to gather data on the benefits that PAPNET(R) testing can
confer to infrequently screened populations.
Finally, in October the Company announced the publication of its Food
and Drug Administration (FDA) clinical trial in the peer-review journal Human
Pathology,
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showing PAPNET(R) testing can help laboratories detect cervical cancer more
efficiently and earlier. This publication now brings the total number of peer-
reviewed manuscripts on PAPNET(R) testing in gynecologic cytology to thirty-six
(36) and contributes to the body of data that makes PAPNET(R) testing a widely
studied and extensively reviewed technology in cervical cancer screening.
During the quarter, the Company also initiated new programs to help the
Company communicate more effectively with pathologists at customer labs. NSI
sponsored workshops for pathologists to discuss how PAPNET(R) testing can help
laboratory professionals improve patient care. These programs were designed to
provide pathologists with a better understanding of the clinical and economical
value of integrating PAPNET(R) testing into their laboratories.
The Company also focused its technical efforts for the benefit of the
pathology laboratory customer. The Company has implemented its Laboratory
Support Group (LSG). The LSG has hired cytotechnologists with extensive
experience in both hands-on cytology and in the supervision of cytotechnology
teams.
During the month of October, the Company signed a contract with Mercy
Medical Center of Canton, Ohio to rescreen 100% of its Pap smear slides using
the PAPNET(R) Testing System. This contract represents a significant milestone
for the Company. The Company expects to begin generating revenue from this
contract during the fourth quarter of 1997.
The Company made progress in its commitment to seek approval of the
PAPNET(R) Testing System as a primary screener in the United States, and is
working with the FDA to establish the trial protocol. The Company expects to
complete site selection and training in the fourth quarter of 1997, and
anticipates that it will begin screening trial smears during the first quarter
of 1998.
In Europe, the Company announced its plan to sell scanners and related
PAPNET(R) equipment to laboratories. In October, the Company signed its first
European contract and expects to deliver the first PAPNET-on-Cyte(TM) system in
the fourth quarter. The Company plans to focus product development activities on
reconfiguring and packaging the PAPNET(R) Scanning Station so that it will be a
convenient and efficient tool for the laboratory customer.
During the third quarter, the Company continued its search for a
permanent Chief Executive Officer. There has been substantial interest in the
position and the Board of Directors and Company management have met with several
promising candidates. The Company expects the new Chief Executive Officer to be
appointed during the fourth quarter of 1997.
The Company's third quarter revenues of $2,526,000 increased by 13%
from the second quarter 1997 level of $2,230,000. This increase was due to
higher revenues in
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both the United States and international markets. The revenue increase in the
United States was due primarily to increased unit volume while the increase in
international revenue was primarily associated with the purchase by the Company
of New System International, Ltd. in June 1997. Total costs and expenses were
$12,124,000 during the third quarter of 1997 compared to $11,591,000 in the
second quarter of 1997, an increase of $533,000. Although the Company reduced
sales and marketing expenses by $871,000 from the prior quarter, higher costs
for legal fees, primarily litigation related, cost of sales and CEO related
recruiting fees and severance costs more than offset this reduction and resulted
in the overall increase in costs and expenses compared to the second quarter of
1997. Litigation and CEO related recruiting fees and severance costs were
approximately $880,000 during the quarter. For these reasons, the net loss of
$9,244,000 or $.30 per share during the third quarter was slightly greater than
the net loss of $8,769,000 or $.28 per share which occurred in the second
quarter of 1997.
During the third quarter, the Company initiated several cost reduction
programs. These initiatives included an overall reduction in headcount and
contracted consultants of approximately 11% in the United States, Israel and
Europe from June 1997 levels; a reduction in marketing costs associated with
advertising and agency fees, consistent with NSI's efforts to become a
laboratory and clinician focused company; a reduction in the use of outside
consulting firms; and the adoption of a build-to-demand production schedule for
scanners and related equipment in place of the previous policy of
build-to-stock. The Company anticipates that these changes will help to reduce
its burn rate in the fourth quarter 1997 and during 1998.
Neuromedical Systems, Inc. is a healthcare technology company focused
on diagnostic screening applications to aid in the early detection of certain
cancers. Neuromedical's first product, the PAPNET(R) Testing System, increases
the accuracy of cervical screening by displaying potentially abnormal cells for
review and analysis by a cytology professional. The Company believes that
increasing access to routine screening and adoption of PAPNET(R) testing can
reduce the morbidity and mortality associated with cervical cancer.
Laboratories, clinicians and patients interested in learning more about
PAPNET(R) testing may call Neuromedical Systems toll-free at 1-800-PAPNET4, or
may visit NSI on the World Wide Web at www.nsix.com.
The Company's Condensed Consolidated Balance Sheets and Consolidated
Condensed Statements of Operations with respect to 1997 third quarter and nine
months financial results appear on the following page.
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NEUROMEDICAL SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
----------------------- --------------------
1997 1996
----------------------- --------------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Cash and marketable securities $ 52,824,000 $ 83,391,000
Other current assets 3,785,000 3,185,000
Property and equipment, net 16,411,000 16,388,000
Other assets 2,355,000 1,240,000
----------------------- --------------------
Total Assets $ 75,375,000 $ 104,204,000
======================= ====================
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities $ 9,721,000 $ 9,510,000
Other liabilities 9,484,000 11,166,000
Stockholders' equity 56,170,000 83,528,000
----------------------- --------------------
Total Liabilities and
Stockholders' Equity $ 75,375,000 $ 104,204,000
======================= ====================
</TABLE>
NEUROMEDICAL SYSTEMS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
-------------------------------------------------
1997 1996
------------------------- ---------------------
REVENUES $ 2,526,000 $ 1,286,000
------------------------- ---------------------
<S> <C> <C>
COSTS AND EXPENSES
Cost of sales 3,138,000 2,085,000
Marketing 3,962,000 6,262,000
Research and development 2,207,000 1,945,000
General and administrative 2,817,000 1,559,000
------------------------- ---------------------
Total Costs and Expenses 12,124,000 11,851,000
------------------------- ---------------------
Other income (expense), net 354,000 977,000
------------------------- ---------------------
NET LOSS $ (9,244,000) $ (9,588,000)
========================= =====================
NET LOSS PER SHARE $ (0.30) $ (0.33)
========================= =====================
WEIGHTED AVERAGE
SHARES OUTSTANDING 30,931,000 29,450,000
========================= =====================
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------------------------------------
1997 1996
---------------------- ----------------------
<S> <C> <C>
REVENUES $ 6,407,000 $ 2,954,000
---------------------- ----------------------
COSTS AND EXPENSES
Cost of sales 8,390,000 5,709,000
Marketing 14,273,000 13,635,000
Research and development 6,196,000 5,024,000
General and administrative 6,815,000 5,115,000
---------------------- ----------------------
Total Costs and Expenses 35,674,000 29,483,000
---------------------- ----------------------
Other income (expense), net 1,529,000 2,716,000
---------------------- ----------------------
NET LOSS $ (27,738,000) $ (23,813,000)
====================== ======================
NET LOSS PER SHARE $ (0.90) $ (0.82)
====================== ======================
WEIGHTED AVERAGE
SHARES OUTSTANDING 30,891,000 29,117,000
====================== ======================
</TABLE>
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SAFE HARBOR STATEMENT
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Forward-looking statements discussed in this release are made under the
safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
Except for the historical information contained herein, the matters discussed in
this release are forward-looking statements which reflect the Company's current
views with respect to future events and financial performance, which include,
but are not limited to, statements regarding Company plans and operations,
management's assessments and decisions, marketing and promotion strategy, and
discussions of product development and performance. The words "believe",
"expect", "anticipate", "estimate", "project" and similar expressions identify
forward-looking statements, which speak only as of the date hereof. Investors
are cautioned that such forward looking statements involve risks and
uncertainties that could cause actual results to differ materially from
historical results or those anticipated due to many factors, including, but not
limited to, the Company's continuing negative cash flow, reliance on a single
product, competition, dependence on key personnel, the impact on the Company of
its territorial license agreements, dependence on patents and proprietary
technology, government regulation of products and advertising, limited marketing
and sales history, the impact of third-party reimbursement decisions, litigation
and other risks detailed in the Company's Securities and Exchange Commission
filings, including its 1996 Form 10-K and Exhibit 99.1 attached thereto. The
Company undertakes no obligation to publicly update or revise any
forward-looking statements.
EXHIBITS
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Exhibit No. Exhibit
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27.1 Financial Data Schedule
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<PAGE>
The filing of this Form 8-K by the Company is made pursuant to the
Company's contractual obligations under Section 6A of the Underwriting Agreement
(U.S. Version) among the Company and the underwriters of the Company's initial
public offering of common stock, par value $.0001 per share, dated December 7,
1995, previously filed with the Commission as an Exhibit to the Company's
Registration Statement on Form S-1, dated as of even date therewith.
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 hereunto duly authorized in Suffern, New York on this 30th day of
October, 1997.
NEUROMEDICAL SYSTEMS, INC.
By: /s/ David Duncan, Jr.
----------------------------
David Duncan, Jr.
Vice President, Finance and
Administration and Chief
Financial Officer
<TABLE> <S> <C>
<PAGE>
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<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 22,642
<SECURITIES> 30,182
<RECEIVABLES> 2,865
<ALLOWANCES> (315)
<INVENTORY> 0
<CURRENT-ASSETS> 56,609
<PP&E> 29,561
<DEPRECIATION> (13,150)
<TOTAL-ASSETS> 75,375
<CURRENT-LIABILITIES> 9,721
<BONDS> 9,484
0
0
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<OTHER-SE> 56,167
<TOTAL-LIABILITY-AND-EQUITY> 75,375
<SALES> 0
<TOTAL-REVENUES> 6,407
<CGS> 0
<TOTAL-COSTS> 8,390
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,213
<INCOME-PRETAX> (27,738)
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<INCOME-CONTINUING> (27,738)
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<NET-INCOME> (27,738)
<EPS-PRIMARY> (.90)
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