<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): FEBRUARY 10, 1998
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 ANNOUNCES FOURTH QUARTER
---------------------------------------------
AND 1997 FINANCIAL RESULTS
--------------------------
On February 10, 1998 Neuromedical Systems, Inc. (NSI) announced results for
its fourth quarter and year ending December 31, 1997.
Revenues for the fourth quarter were $2,967,000, an increase of 67% from
$1,775,000 in the fourth quarter of 1996. The revenue increase over 1996 was
due to an increase in unit volume and unit pricing for slide processing services
and to the initiation of PAPNET-on-Cyte(TM) equipment sales in the European
market.
The Company reported a net loss for the fourth quarter of 1997 of
$8,843,000, or $.28 per share, compared to a net loss of $10,345,000, or $.35
per share for the fourth quarter of 1996.
Revenues for 1997 were $9,374,000 compared to $4,729,000 for 1996, a
98% increase over the prior year. This increase was due to higher average unit
pricing and increased unit volume of slide processing services and revenue from
the sale of a PAPNET-on-Cyte(TM) system in Europe during the fourth quarter of
1997.
The net loss for the year was $36,581,000, or $1.18 per share, compared to
a net loss of $34,158,000, or $1.17 per share in 1996. The increased net loss
during 1997, compared to 1996, was due primarily to an increase in research and
development and general and administrative expenses and to a reduction in
interest income in 1997. These items were partially offset by an improved gross
margin and lower sales and marketing expenses associated with the Company's
previously announced decision to focus marketing efforts on laboratory
customers.
During the fourth quarter, the Company used $6.9 million of cash, which
represents a 39% decrease from the burn rate during the first quarter of 1997.
The Company believes that its initiatives to reduce the cash burn rate are
taking effect and that the Company will continue to reduce its cash consumption
during 1998. The Company intends to fund from internal sources its cash needs
for the next three years. The Company has reduced sales and marketing expenses
by focusing efforts directly on its laboratory customers. In addition, the
Company has reduced usage of consultants and contractors, and has aggressively
reduced purchases of capital equipment. The Company also announced plans to
consolidate its product development organization in the United States.
The Company's decision to consolidate its product development organization
was necessary to bring product development closer to its customers and to cut
expenses. The transition, which is expected to begin during the second quarter
of 1998, is anticipated to be completed by the early part of 1999. As part of
this consolidation, the Company announced the appointment of Zeev Hadass, Ph.D.,
formerly the Vice President of
2
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Processing Operations for the Company, as its new Vice President of Product
Development. Mr. Hadass, 64, has many years of experience in the development of
complex products, and the management of multi-faceted projects ranging from the
medical device industry to the military.
The Company implemented a significant shift in its European business
strategy. The sale and placement in the laboratory of the PAPNET Testing System
(under the brand name PAPNET-on-Cyte(TM)) has already begun generating cash from
equipment sales. The Company has several orders for PAPNET-on- Cyte(TM) systems,
and anticipates additional orders during the first quarter of 1998 and
throughout the coming year.
In the United States, the Company is laying the groundwork to make the same
transition that it has already made in Europe--toward becoming a provider of
image analysis equipment for sale to and placement in the anatomic pathology
laboratory. However, differences in the laboratory marketplace, reimbursement
and the regulatory environment will extend the transition to the end of 1999.
Accordingly, the Company is developing a configuration of the PAPNET technology
that can be easily deployed in customer labs, both inside and outside of the
United States. The Company is also working toward regulatory approval to sell
the PAPNET Testing System in the United States as an interactive primary
screener that can help laboratories more efficiently improve sensitivity in
cervical screening. The Company expects to invest nearly $1.0 million on a
multi-center clinical trial to provide data for a PMA supplement for the use
of the PAPNET Testing System as a primary screener.
The Company announced that it is committed to and focused on the goal of
obtaining Food and Drug Administration (FDA) approval for the primary screening
of cervical cytology specimens. The Company intends to continue to work closely
with the FDA to develop the protocol necessary to begin a clinical trial and to
establish the clinical sites for the trial. The study is designed to provide
data on the safety and effectiveness of PAPNET technology in the primary
screening of both conventional and liquid-based preparations on all patient
populations, including patients at higher risk for cervical disease.
In addition, the Company has reorganized its United States sales and
marketing organization to increase its focus on laboratory customers. Sales
territory realignments were made during the past several months to reflect the
Company's commitment to the laboratory customer. The Company is concentrating
sales resources in the United States on those laboratories that are supporters
of the PAPNET interactive approach. The Company expects to invest over $4.0
million during 1998 to support its base of more than 100 United States
laboratory customers in the use of the PAPNET system for rescreening.
Neuromedical Systems, Inc. focuses intelligent vision on medicine. NSI's
first product, the PAPNET Testing System, helps the laboratory increase the
accuracy of cervical screening by displaying potentially abnormal cells for
review and analysis by a cytology professional. PAPNET testing is available
through a network of laboratories nationwide. Laboratories, clinicians and
patients interested in learning more about
3
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PAPNET testing or Neuromedical Systems, Inc., may call toll-free at 1-800-
PAPNET4 or visit NSI on the World Wide Web at http://www.nsix.com.
Safe Harbor Statement
- ---------------------
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," "intend" 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.
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NEUROMEDICAL SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
DECEMBER 31, DECEMBER 31,
------------ ------------
1997 1996
------------ ------------
<S> <C> <C>
ASSETS
Cash and short term investments $ 45,936,000 $ 83,391,000
Other current assets 6,203,000 3,185,000
Property and equipment, net 12,092,000 16,388,000
Other assets 2,113,000 1,240,000
------------ ------------
Total Assets $ 66,344,000 $104,204,000
============ ============
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities $ 10,525,000 $ 9,510,000
Other liabilities 8,345,000 11,166,000
Stockholders' equity 47,474,000 83,528,000
------------ ------------
Total Liabilities and
Stockholders' Equity $ 66,344,000 $104,204,000
============ ============
</TABLE>
NEUROMEDICAL SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
THREE MONTHS ENDED TWELVE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
-------------------------------------- -----------------------------------------
1997 1996 1997 1996
------------------- --------------- -------------------- ------------------
<S> <C> <C> <C> <C>
REVENUES $ 2,967,000 $ 1,775,000 $ 9,374,000 $ 4,729,000
------------------- --------------- -------------------- ------------------
COSTS AND EXPENSES
Cost of sales 3,721,000 2,469,000 12,111,000 8,178,000
Marketing 3,611,000 6,693,000 17,884,000 20,328,000
Research and development 2,166,000 1,761,000 8,362,000 6,785,000
General and administrative 2,604,000 1,860,000 9,419,000 6,975,000
------------------- --------------- -------------------- ------------------
Total Costs and Expenses 12,102,000 12,783,000 47,776,000 42,266,000
------------------- --------------- -------------------- ------------------
Other income (expense), net 292,000 663,000 1,821,000 3,379,000
------------------- --------------- -------------------- ------------------
NET LOSS $ (8,843,000) $ (10,345,000) $ (36,581,000) $ (34,158,000)
=================== =============== ==================== ==================
NET LOSS PER SHARE $ (0.28) $ (0.35) $ (1.18) $ (1.17)
=================== =============== ==================== ==================
WEIGHTED AVERAGE
SHARES OUTSTANDING 31,037,000 29,748,000 30,928,000 29,277,000
=================== =============== ==================== ==================
</TABLE>
5
<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 10th day of
February, 1998.
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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