U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1996.
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ______________ to ______________.
Commission file number 0-19827
HYMEDIX, INC.
(Exact name of registrant, as specified in its charter)
Delaware 22-3279252
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2235 Route 130, Dayton, New Jersey 08810
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (908) 274-2288
Check whether the registrant (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 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
- -
State the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date.
Class Outstanding as of September 30, 1996
Common 5,713,500
Transitional Small Business Disclosure Format (Check one): Yes No X
-
Page 1 of 15
Exhibit Index begins on Page 13
<PAGE>
HYMEDIX, INC.
INDEX
Page No.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of September 30, 1996
and December 31, 1995 3
Consolidated Statements of Operations for the
Three Months and Nine Months Ended September 30, 1996
and September 30, 1995 4
Consolidated Statements of Cash Flows for the
Nine Months Ended September 30, 1996 and September
30, 1995 5
Notes to Consolidated Interim Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II - OTHER INFORMATION
Item 6. Exhibit and Reports on Form 8-K 11
SIGNATURES 12
Page 2 of 15
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
HYMEDIX, INC. AND SUBSIDIARY
Consolidated Balance Sheets (Note 1)
ASSETS
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash $ 67,371 $ 31,295
Short-term investments 14,300 151,731
Accounts receivable 68,189 31,258
Inventories 410,176 477,938
Prepaid expenses and other current assets 63,580 57,227
----------- ------------
Total current assets 623,616 749,449
PROPERTY AND EQUIPMENT, NET 137,268 206,174
PATENTS, NET 132,817 156,397
----------- ------------
Total assets $ 893,701 $ 1,112,020
=========== =============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Current maturities of long-term debt $ 3,554,043 $ 3,031,843
Accounts payable and accrued expenses 2,048,028 1,844,935
Accrued legal judgment 805,964 0
Deferred revenue 43,750 100,000
Liabilities related to discontinued operation 59,222 59,222
----------- ------------
Total current liabilities 6,511,007 5,036,000
----------- ------------
STOCKHOLDERS' DEFICIT:
8% Senior Convertible Preferred Stock, $3.00 par value,
800,000 shares authorized, 10,190 shares issued and
outstanding 30,570 30,570
Preferred Stock, $.01 par value, 150 shares authorized,
issued and outstanding 2 2
Common Stock, $.001 par value, 20,000,000 shares
authorized, 5,713,500 shares issued and outstanding 5,713 5,713
Additional paid-in capital 15,642,174 15,635,301
Accumulated deficit (19,795,765) (18,095,566)
Subscription receivable (1,500,000) (1,500,000)
----------- ------------
Total stockholders' deficit (5,617,306) (3,923,980)
----------- ------------
Total liabilities and stockholders' deficit $ 893,701 $ 1,112,020
=========== ============
</TABLE>
The accompanying notes to interim consolidated financial statements are an
integral part of these financial statements.
Page 3 of 15
<PAGE>
HYMEDIX, INC. AND SUBSIDIARY
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
REVENUES:
Net product sales $ 267,174 $ 67,258 $ 770,881 $ 620,290
Royalty income 12,500 0 37,500 0
License and option fees 500,000 700,000 650,000 700,000
Research and development contracts 83,750 52,273 231,250 291,894
----------- ------------ ----------- -----------
Total revenues 863,424 819,531 1,689,631 1,612,184
----------- ------------ ----------- -----------
COSTS AND EXPENSES:
Cost of sales 107,690 31,536 369,226 257,650
Selling, general and administrative 461,087 440,867 1,544,150 1,375,555
Research and development 160,381 152,508 495,441 452,958
Legal judgment 0 0 805,964 0
----------- ------------ ----------- -----------
Total costs and expenses 729,158 624,911 3,214,781 2,086,163
----------- ------------ ----------- -----------
Income (loss) from operations 134,266 194,620 (1,525,150) (473,979)
----------- ------------ ----------- -----------
INTEREST (EXPENSE) INCOME:
Interest expense (63,854) (49,824) (180,020) (154,914)
Interest income 2,281 996 4,971 2,407
----------- ------------ ----------- -----------
Total interest expense, net (61,573) (48,828) (175,049) (152,507)
----------- ------------ ----------- -----------
Net income (loss) $ 72,693 $ 145,792 $(1,700,199) $ (626,486)
=========== =========== =========== ===========
NET INCOME (LOSS) PER
COMMON SHARE: $ 0. 01 $ 0.03 $ (0.30) $ (0.11)
=========== =========== =========== ===========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 5,713,500 5,713,500 5,713,500 5,713,500
=========== =========== =========== ===========
</TABLE>
The accompanying notes to interim consolidated financial statements are an
integral part of these financial statements.
Page 4 of 15
<PAGE>
HYMEDIX, INC. AND SUBSIDIARY
Consolidated Statements Of Cash Flows (Note 1)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1996 1995
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
(Net loss) $(1,700,199) $(626,486)
----------- ---------
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciation and amortization 92,486 93,056
(Increase) decrease in:
Accounts receivable (36,931) 6,663
Inventories 67,762 (94,600)
Other current assets (6,353) 34,272
Increase (decrease) in:
Accounts payable and accrued expenses 209,966 292,676
Accrued legal judgment 805,964 0
Deferred revenue (56,250) (24,393)
Total adjustments 1,076,644 307,674
----------- ---------
Net cash used by operating activities (623,555) (318,812)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of debt 522,200 0
----------- ---------
Net cash provided by financing activities 522,200 0
----------- ---------
Net decrease in cash and cash equivalents (101,355) (318,812)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 183,026 393,330
----------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 81,671 $ 74,518
========== =========
</TABLE>
The accompanying notes to interim consolidated financial statements are an
integral part of these financial statements.
Page 5 of 15
<PAGE>
HYMEDIX, INC. AND SUBSIDIARY
Notes to Interim Consolidated Financial Statements
1. MERGER AND REINCORPORATION
HYMEDIX, Inc. (the "Company") was incorporated in Delaware on
December 20, 1993, as a wholly-owned subsidiary of Servtex International
Inc. (the "Predecessor"). On February 23, 1994, the Predecessor merged with
and into HYMEDIX, Inc., and, concurrently, a wholly-owned subsidiary of the
Predecessor was merged with and into HYMEDIX International, Inc. ("HYMEDIX
International"), a privately-held Delaware corporation, which resulted in
HYMEDIX International becoming a wholly-owned subsidiary of HYMEDIX, Inc.
HYMEDIX International was incorporated in October, 1985 under the name
Kingston Technologies, Inc.
The unaudited consolidated financial statements have been prepared based
upon financial statements of HYMEDIX, Inc. and its wholly owned subsidiary,
HYMEDIX International, Inc.
2. LONG-TERM DEBT
During the first quarter of 1996, the Company issued a convertible
bond in the principal amount of $150,000 (the "September Bond") pursuant to
a Convertible Bond Purchase Agreement effective March 5, 1996, by and among
the Company, HYMEDIX International and Su Chen Huang. The September Bond
bears interest at a rate of 7% per annum and matures on September 5, 1997.
The September Bond is convertible in whole at any time prior to payment or
prepayment into one hundred fifty thousand (150,000) shares of common stock
of the Company. Interest on the September Bond is payable at maturity or
upon prepayment or conversion thereof.
In April of 1996, the Company issued convertible bonds in the
aggregate principal amount of $1,000,000 (the "June Bonds") pursuant to a
Convertible Bond Purchase Agreement effective February 27, 1996, by and
among the Company, HYMEDIX International, First Taiwan Investment and
Development, Inc. and the Purchasers (as defined therein). The June Bonds
bear interest at a rate of 7% per annum and mature on June 1, 1997. The
June Bonds are convertible in whole or in part at any time prior to payment
or prepayment into one thousand (1,000) shares of common stock of the
Company for each one thousand dollars ($1,000) of principal amount
outstanding. Interest on the June Bonds is payable at maturity or upon
prepayment or conversion thereof. The June Bonds may be subject to
mandatory prepayment by the Company under certain circumstances.
Both the June Bond and the September Bonds are structured in such
a way as to permit the Company, subject to certain terms and conditions,
including approval of the Bondholders (as hereinafter defined), to make
withdrawals from a special account up to the principal amount of the bonds
on a periodic basis and to reduce the amounts outstanding with respect to
the bonds by making payments into such account. As of September 30, 1996:
(i) with respect to the September Bond, the Company has withdrawn $150,000
and made no repayments, resulting in an outstanding balance of $150,000;
and (ii) with respect to the June Bonds, the Company has withdrawn $945,200
and made repayments of $573,000, resulting in an outstanding balance of
$372,200.
Pursuant to a Security Agreement dated as of August 8, 1996, by
and among the Company and the Bondholder Representative (as defined
therein), in order to induce the Purchasers and Su Chen Huang
(collectively, the "Bondholders") to approve future withdrawals by the
Company from the special account, the Company granted to the Bondholder
Representative, for the ratable benefit of the Bondholders, a security
interest in all of the Company's assets and properties.
3. LEGAL PROCEEDINGS
In July of 1996, a judgment was rendered against the Company in
the amount of $805,964 in connection with a legal proceeding to which the
Company was a party. Although the Company has filed a notice of appeal to
this judgment, an accrual to the Company's financial statements was made to
account for this potential liability. See "PART II - OTHER INFORMATION:
Item 1 - Legal Proceedings" of this Form 10-QSB for a more detailed
description of this matter.
4. INTERIM FINANCIAL STATEMENTS
In the opinion of management, the accompanying financial
statements of the Company reflect all adjustments, consisting of normal
recurring accruals, necessary to present fairly, in all material respects, the
Company's financial position as of September 30, 1996 and the results of
operations for the three and nine months ended September 30, 1996 and 1995. The
results of operations for interim periods are not necessarily indicative of the
results to be expected for an entire fiscal year. The interim financial
statements and related notes should be read in conjunction the Company's annual
report filed on Form 10-KSB.
Page 6 of 15
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
This report contains forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Actual results could differ materially from those
projected in the forward-looking statements as a result of the risk factors set
forth below. The industry in which the Company competes is characterized by
rapid changes in technology and frequent new product introductions. The Company
believes that its long-term growth depends largely on its ability to continue to
enhance existing products and to introduce new products and technologies that
meet the continually changing requirements of customers. While the Company has
devoted significant resources to the development of new products and
technologies, there can be no assurance that it can continue to introduce new
products and technologies on a timely basis or that certain of its products and
technologies will not be rendered noncompetitive or obsolete by its competitors.
Overview
HYMEDIX, Inc. ("HYMEDIX") was incorporated in Delaware on December
20, 1993 as a wholly-owned subsidiary of Servtex International Inc. (the
"Predecessor"). On February 23, 1994, the Predecessor merged with and into
HYMEDIX, Inc. and, concurrently, a wholly-owned subsidiary of the Predecessor
was merged with and into HYMEDIX International, Inc. ("HYMEDIX International")
which resulted in HYMEDIX International becoming a wholly-owned subsidiary of
HYMEDIX. As used in this Form 10-QSB, unless the context otherwise requires, the
term "Company" collectively means HYMEDIX, HYMEDIX International and their
respective predecessors. HYMEDIX International was incorporated in October, 1985
under the name Kingston Technologies, Inc.
Results of Operations
Revenues
The Company's total revenues for the three months and nine months ended
September 30, 1996 were $863,424 and $1,689,631, respectively, versus $819,531
and $1,612,184 for the same periods in 1995, an increase of 5.4% and 4.8%,
respectively. The revenue increase resulted from an increase of $199,916 in net
product sales offset by a decrease of $156,023 of royalty, license and option
fees and research and development revenues, during the three months ended
September 30, 1996 compared to the same period of 1995. The increase of $199,916
in net product sales came principally from (1) $102,501 of increased sales of
skin care products domestically and overseas, (2) $156,028 increased sales of
hydrogels and (3) a $57,013 decrease in net sales of wound care product. The
increase in net product sales of $150,591 for the nine months ended September
39, 1996 compared to the same period of the previous year was principally due to
an increase of $415,018 in sales of skin care products to domestic and overseas
customers, offset by $219,709 in reduced sales of wound gels to the medical
market and $41,968 less sales of hydrogels to LIPO Chemicals, Inc.
Income from royalty, license and option fees and research and
development contracts decreased approximately $156,023 during the three months
ended September 30, 1996 from the prior year period, resulting mainly from
$200,000 less license fees received. Due to the $12,500 decrease in royalty,
license and option fees and $60,644 decrease in research and development
revenues there is a net decrease of $73,144 in royalty, license and option fees
and research and development revenues for the nine months ended September 30,
1996 from the same period of 1995.
Page 7 of 15
<PAGE>
Costs and Expenses
Cost of sales for the three months and nine months ended September 30,
1996 were $107,690 and $369,226, respectively, versus $31,536 and $257,650 for
the same periods in 1995, an increase of $76,154 and $111,576, respectively. The
increases for the three months and nine months ended September 30, 1996 were in
proportion of the increases in net product sales from the same periods of the
prior year. Selling, general and administrative expenses increased 4.6% and
12.3% to $461,087 and $1,544,150, respectively, for the three months and nine
months ended September 30, 1996 from the same periods of 1995. For the three
month periods, the increase mainly stemmed from a slight increase in premises
expenses. As for the comparison of nine month periods between 1996 and 1995, the
increase was principally due to higher legal expenses incurred for the defense
of two lawsuits previously filed against the Company. The research and
development costs for the three months and nine months ended September 30, 1996
were $160,381 and $495,441, respectively, as compared to $152,508 and $452,958
for the same periods in 1995, an increase of 5.2% and 9.4%, respectively,
resulting from increased work days and costs of the research and development
staff. Additionally, to account for the Company's potential liability with
respect to the recent legal judgment rendered against it and described in detail
elsewhere herein, an accrual of $805,964 has been recorded in a separate line
item under costs and expenses for the nine months ended September 30, 1996,
which was not present during the same period in 1995.
Interest Expense, Net
Total net interest expense for the three months and nine months ended
September 30, 1996 was $61,573 and $175,049, respectively, versus $48,828 and
$152,507 for the same periods in 1995, increases of $12,745 and $22,542,
respectively. The increases are attributable to the issuance of convertible
bonds in the aggregate principal amount of up to $1,150,000 during the first
half of 1996.
As a result of the increased costs and expenses described above for the
three months ended September 30, 1996 as compared to the same period of the
prior year and the increased revenues described above for the same period of
1996 versus the prior year, the Company earned a net income of $72,693 for the
three months ended September 30, 1996 versus the net income of $145,792 for the
same period in 1995. For the nine months ended September 30, 1996, the Company
incurred higher net losses of $1,700,199 than the net losses of $626,486 of the
prior year period, which resulted from the increased costs and expenses.
Liquidity, Capital Resources and Changes in Financial Condition
The Company had $81,671 in cash and cash equivalents on hand as of
September 30, 1996 versus $183,026 on December 31, 1995. The working capital
deficit $(5,887,391) on September 30, 1996 represents an increase of $1,600,840
from the previous year-end level of $(4,286,551). The increase in working
capital deficit was primarily attributable to the net loss incurred in the
nine-month period ended September 30, 1996.
In April of 1996, the Company issued convertible bonds in the aggregate
principal amount of $1,000,000 (the "June Bonds") pursuant to a Convertible Bond
Purchase Agreement effective February 27, 1996, by and among the Company,
HYMEDIX International, First Taiwan Investment and Development, Inc. and the
Purchasers (as defined therein). The June Bonds bear interest at a rate of 7%
per annum and mature on June 1, 1997. The June Bonds are convertible in whole or
in part at any time prior to payment or prepayment into one thousand (1,000)
shares of common stock of the Company for each one thousand dollars ($1,000) of
principal amount outstanding. Interest on the June Bonds is payable at maturity
or upon prepayment or conversion thereof. The June Bonds may be subject to
mandatory prepayment by the Company under certain circumstances. An additional
$150,000 or convertible bonds with similar terms had been issued in the first
quarter of 1996.
Both the June Bond and the September Bonds are structured in such a way
as to permit the Company, subject to certain terms and conditions, including
approval of the Bondholders (as hereinafter defined), to make withdrawals from a
special account up to the principal amount of the bonds on a periodic basis and
to reduce the amounts outstanding with respect to the bonds by making payments
into such account. As of September 30, 1996: (i) with respect to the September
Bond, the Company has withdrawn $150,000 and made no repayments, resulting in an
outstanding balance of $150,000; and (ii) with respect to the June Bonds, the
Company has withdrawn $945,200 and made repayments of $573,000, resulting in an
outstanding balance of $372,200.
Pursuant to a Security Agreement dated as of August 8, 1996, by and
among the Company and the Bondholder Representative (as defined therein), in
order to induce the Purchasers and Su Chen Huang (collectively, the
"Bondholders") to approve future withdrawals by the Company from the special
account, the Company granted to the Bondholder Representative, for the ratable
benefit of the Bondholders, a security interest in all of the Company's assets
and properties.
Page 8 of 15
<PAGE>
During the third quarter of 1994 the Company's total stockholders'
equity fell below the minimum $1,000,000 of capital and surplus necessary to
maintain its listing on the NASDAQ SmallCap Market. Consequently, NASDAQ
delisted the Company's common stock from the NASDAQ SmallCap Market on October
27, 1994. The Company is in compliance with all other NASDAQ requirements and is
in the process of seeking alternatives to increase its capital to above the
required level. However, there can be no assurance that these efforts will be
successful. In the meantime, HYMEDIX shares continue being traded on the Over
The Counter Electronic Bulletin Board under the symbol HYMX.
While management believes the Company will have adequate resources to
finance its operations in 1996, it continues to seek and evaluate financing
alternatives. In the event that cash flow from operations and the anticipated
proceeds from the issuance of the convertible bonds are not sufficient to
finance the Company's operations in 1996, there is no assurance that other
sources of funds will be available to the Company.
Risk Factors and Cautionary Statements
When used in this Form 10-QSB and in future filings by the Company with
the Securities and Exchange Commission, in the Company's press releases and in
oral statements made with the approval of an authorized executive officer, the
words or phrases "will likely result", "are expected to", "will continue", "is
anticipated", "estimate", "project", or similar expressions are intended to
identify "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Such statements are subject to certain
risks and uncertainties, including those discussed under this caption "Risk
Factors and Cautionary Statements," that could cause actual results to differ
materially from historical earnings and those presently anticipated or
projected. The Company wishes to caution readers not to place undue reliance on
any such forward-looking statements, which speak only as of the date made, and
wishes to advise readers that the factors listed below could cause the Company's
actual results for future periods to differ materially from any opinions or
statements expressed with respect to future periods in any current statements.
The Company will NOT undertake and specifically declines any obligation
to publicly release the result of any revisions which may be made to any
forward-looking statements to reflect events or circumstances after the date of
such statements or to reflect the occurrence of anticipated or unanticipated
events.
o The Company's revenues and income are derived primarily from the
development and commercialization of medical and skin care products. The medical
and skin care products industries are highly competitive. Such competition could
negatively impact the Company's market share and therefore reduce the Company's
revenues and income.
o Competition may also result in a reduction of average unit prices
paid for the Company's products. This, in turn, could reduce the percentage of
profit margin available to the Company for its product sales.
o The Company's future operating results are dependent on its ability
to develop, produce and market new and innovative products and technologies, and
to successfully enter into favorable licensing and distribution relationships.
There are numerous risks inherent in this complex process, including rapid
technological change and the requirement that the Company develop procedures to
bring to market in a timely fashion new products and services that meet
customers' needs.
o Historically, the Company's operating results have varied from fiscal
period to fiscal period; accordingly, the Company's financial results in any
particular fiscal period are not necessarily indicative of results for future
periods.
Page 9 of 15
<PAGE>
o The Company may offer a broad variety of products and technologies to
customers around the world. Changes in the mix of products and technologies
comprising revenues could cause actual operating results to vary from those
expected.
o The Company's success is partly dependent on its ability to
successfully predict and adjust production capacity to meet demand, which is
partly dependent upon the ability of external suppliers to deliver components
and materials at reasonable prices and in a timely matter; capacity or supply
constraints, as well as purchase commitments, could adversely affect future
operating results.
o The Company offers its products and technologies directly and through
indirect distribution channels. Changes in the financial condition of, or the
Company's relationship with, distributors, licensees and other indirect channel
partners, could cause actual operating results to vary from those expected.
o The Company does business and continues to seek to develop business
on a worldwide basis. Global and/or regional economic factors and potential
changes in laws and regulations affecting the Company's business, including
without limitation, currency exchange rate fluctuations, changes in monetary
policy and tariffs, and federal, state and international laws regulating its
products, could impact the Company's financial condition or future results of
operations.
o The market price of the Company's securities could be subject to
fluctuations in response to quarter to quarter variations in operating results,
market conditions in the medical and skin care products industry, as well as
general economic conditions and other factors external to the Company.
o As described below under "Legal Proceedings," a judgment was recently
rendered against the Company in the amount of $805,964 in connection with a
legal proceeding to which the Company was a party. Although the Company has
filed a motion of appeal in this matter, there can be no assurances that the
Company will be successful in such appeal. If the appeal is unsuccessful, it
could have a materially adverse affect on the Company's financial condition and
future operating results.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
In September, 1993, HYMEDIX International's former President filed a
Complaint against HYMEDIX International in the Superior Court of New Jersey, Law
Division, Middlesex County. The Complaint named HYMEDIX International, each
member of HYMEDIX International's Board of Directors, and Kingston Technologies
Limited Partnership as defendants. The Complaint alleged (i) that HYMEDIX
International wrongfully terminated the former President's employment, (ii) that
he is owed $367,500 in reduced compensation and $74,500 in back salary, (iii)
that $323,138 is owed him based on his claim that an agreement between him and
KTLP to consolidate and extend the maturity date on three promissory notes that
KTLP had executed in his favor was signed by him under duress and, therefore,
void, and (iv) that KTLP's General Partners failed to disclose to the former
President at the time he signed the promissory note extension that HYMEDIX
International planned to terminate his employment. The former President sought
compensatory damages in excess of $6,000,000 plus punitive damages in an
unstated amount.
The parties settled the former President's claim for back salary. A
trail was held with respect to the remaining eight (8) counts of the Complaint
from June 24, 1996 until July 3, 1996. A judgment was rendered on July 31, 1996
in favor of five (5) of the individual defendants with respect to all counts, in
favor of the remaining individual defendants and HYMEDIX International and KTLP
with respect to six (6) counts; and against the remaining individual defendants
and HYMEDIX International and KTLP with respect to two (2) counts in an
aggregate amount of $805,964.28 ($367,500 with respect to the plaintiff's claim
for reduced compensation and $438,464.28 with respect to the plaintiff's claim
of fraud in the inducement against the defendants for failing to disclose their
plan to terminate the plaintiff at the time the plaintiff signed the promissory
note extension). The Company has filed a notice of appeal to the judgment
against it in connection with this matter.
Page 10 of 15
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
10.46 Security Agreement dated as of August 8, 1996, by and
among the Company and the Bondholder Representative
(as defined therein).
27 Financial Data Schedule
(b) Reports on Form 8-K
None.
Page 11 of 15
<PAGE>
SIGNATURES
In accordance with 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.
HYMEDIX, INC.
(Registrant)
Date: November 11, 1996 By: /s/ Joseph Y. Peng
Joseph Y. Peng ---------------------------------------
President (Principal Executive Officer),
Treasurer
Date: November 11, 1996 By: /s/ William G. Gridley, jr.
----------------------------------------
William G. Gridley, jr.
Chief Financial Officer (Principal Financial
Officer and Principal Accounting Officer),
Secretary, Director
Page 12 of 15
<PAGE>
TABLE OF EXHIBITS
Page
Exhibit No. Number
- ---------- ------
10.46 Security Agreement dated as of August 8, 1996,
by and among the Company and the Bondholder
Representative (as defined therein). 14
27 Financial Data Schedule 15
Page 13 of 15
Exhibit 10.46
SECURITY AGREEMENT
This Security Agreement dated as of August 8, 1996, is by and among
HYMEDIX, Inc., a Delaware corporation (the "Company"), HYMEDIX International,
Inc., a Delaware corporation and wholly-owned subsidiary of the Company ("HII"),
and First Taiwan Investment and Development, Inc. (the "Bondholder
Representative"), a Taiwanese corporation and representative of the Bondholders
(as hereinafter defined).
The Purchasers (as hereinafter defined) and Su Chen Huang (collectively,
with their respective successors as holders of the Bonds referred to herein, the
"Bondholders"), are the current holders of convertible bonds of HII in the
original aggregate principal amount of up to $1,150,000 and convertible into
shares of common stock of the Company as provided in the Bond Purchase
Agreements (as defined below) (collectively, such bonds, the "Bonds"), purchased
from HII and the Company pursuant to (i) the Convertible Bond Purchase Agreement
effective February 27, 1996, by and among HII, the Company, the Bondholder
Representative and the Purchasers (as defined therein), and (ii) the Convertible
Bond Purchase Agreement effective March 5, 1996, by and among HII, the Company
and Su Chen Huang (collectively, the "Bond Purchase Agreements").
1. To secure their obligations in respect of the Bonds and to induce the
Bondholder Representative, on behalf of the Bondholders, to make future deposits
into and to approve future withdrawals by HII from, the Special Account (as
defined in the Bond Purchase Agreements), each of the Company and HII hereby
grants to the Bondholder Representative, for the ratable benefit of the
Bondholders, a security interest in all of the assets and properties of the
Company and HII, respectively, both tangible and intangible, whether now
existing or subsequently acquired, and all additions, substitutions, accessions,
replacements, proceeds (including without limitation insurance proceeds), and
products thereof or thereto, including without limitation all accounts, chattel
paper, contract rights, documents, equipment, general intangibles, goods,
instruments, and inventory (collectively, the "Collateral"); and the Bondholder
Representative hereby accepts such grant.
2. In its own discretion, or upon the request of the Bondholders holding at
least fifty percent (50%) of the aggregate principal amount of the Bonds then
outstanding, the Bondholder Representative will take such actions as may be
reasonably appropriate to foreclose and realize upon the security interests
hereby granted. The Bondholders and the Bondholder Representative will be
responsible for any expenses incurred in connection with such actions, pro rata
in proportion to the respective amounts outstanding in respect of their
respective Bonds (including without limitation principal, interest, and
collection costs, if any).
3. Upon any material default by the Company and/or HII under the Bond
Purchase Agreements and/or the Bonds that is not cured within thirty (30) days
after written notice thereof to the Company and/or HII, as the case may be, each
of the Bondholders will be entitled to all of the rights and remedies of a
secured party under the Uniform Commercial Code as then in force in the State of
New Jersey, which rights and remedies will be cumulative and not exclusive to
the maximum lawful extent.
4. This Security Agreement shall be governed by and interpreted and
construed in accordance with the internal laws of the State of New Jersey
(without reference to principles of choice of law).
Executed and delivered as of the date first above written.
Company: Bondholder Representative:
- -------- --------------------------
HYMEDIX, INC. FIRST TAIWAN INVESTMENT
AND DEVELOPMENT, INC.
By /s/ Joseph Y. Peng By /s/ Chang Hsiu-Chung
------------------------ ------------------------
Name: Joseph Y. Peng Name: Chang Hsiu-Chung
Title: President Title: Vice President
HII:
- ----
HYMEDIX INTERNATIONAL, INC.
By /s/ Joseph Y. Peng
------------------------
Name: Joseph Y. Peng
Title: President
Page 14 of 15
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JUL-1-1996
<PERIOD-END> SEP-30-1996
<EXCHANGE-RATE> 1
<CASH> 67,371
<SECURITIES> 0
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<ALLOWANCES> 0
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<CURRENT-ASSETS> 623,616
<PP&E> 838,569
<DEPRECIATION> 701,301
<TOTAL-ASSETS> 893,701
<CURRENT-LIABILITIES> 6,511,007
<BONDS> 522,200
0
30,572
<COMMON> 5,713
<OTHER-SE> (5,653,591)
<TOTAL-LIABILITY-AND-EQUITY> 893,701
<SALES> 267,174
<TOTAL-REVENUES> 863,424
<CGS> 107,690
<TOTAL-COSTS> 729,158
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 63,854
<INCOME-PRETAX> 72,693
<INCOME-TAX> 0
<INCOME-CONTINUING> 72,693
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 72,693
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
