<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended June 30, 1996 Commission File Number 0-19841
-------
i-STAT Corporation
- ---------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 22-2542664
- ------------------------------- -----------------------
(State or other jurisdiction of (IRS employer
incorporation or organization) Identification No.)
303 College Road East, Princeton, New Jersey 08540
- ---------------------------------------------------------------------------
(Address of principal executive offices)
(609) 243-9300
- ---------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
The number of shares outstanding of each of the Issuer's classes of common stock
as of the latest practicable date.
Class July 31,1996
- ------------------------------- ------------
Common Stock, $ .15 par value 11,187,392
<PAGE> 2
i-STAT CORPORATION
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
NUMBER
------
PART I. FINANCIAL INFORMATION
<S> <C> <C>
ITEM 1 - Financial Statements
Consolidated Condensed Statements of Operations for the three
months and six months ended June 30, 1996 and 1995 ..................... 3
Consolidated Condensed Balance Sheets
as of June 30, 1996 and December 31, 1995............................... 4
Consolidated Condensed Statements of Cash Flows for the six
months ended June 30, 1996 and 1995 .................................... 5
Notes to Consolidated Condensed Financial Statements ...................... 6
ITEM 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations .......................... 7-9
PART II. OTHER INFORMATION
ITEM 1 - Legal Proceedings................................................. 10
ITEM 2 - Changes in Securities............................................. N/A
ITEM 3 - Defaults upon Senior Securities................................... N/A
ITEM 4 - Submission of Matters to a Vote of
Security Holders........................................... 10
ITEM 5 - Other Information................................................. N/A
ITEM 6 - Exhibits and Reports on Form 8-K.................................. 11
SIGNATURES ....................................................................... 12
</TABLE>
<PAGE> 3
i-STAT CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------------- ---------------------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $ 6,740 $ 5,125 $ 13,151 $ 8,484
Cost of sales (6,636) (5,663) (12,435) (10,764)
------------ ------------ ------------ ------------
Gross profit (loss) 104 (538) 716 (2,280)
------------ ------------ ------------ ------------
Operating expenses:
Research and development 1,364 1,433 2,684 2,653
General and administrative 1,559 1,141 2,661 2,384
Sales and marketing 2,838 2,896 5,915 5,383
------------ ------------ ------------ ------------
Total operating expenses 5,761 5,470 11,260 10,420
------------ ------------ ------------ ------------
Operating loss (5,657) (6,008) (10,544) (12,700)
------------ ------------ ------------ ------------
Other income (expenses), net 555 (433) 1,155 (272)
------------ ------------ ------------ ------------
Net loss ($ 5,102) ($ 6,441) ($ 9,389) ($ 12,972)
============ ============ ============ ============
Net loss per share ($ 0.38) ($ 0.58) ($ 0.71) ($ 1.18)
============ ============ ============ ============
Shares used in computing
net loss per share 13,324,591 11,041,186 13,304,716 11,027,978
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these
consolidated condensed financial statements.
3
<PAGE> 4
i-STAT CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
(unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
--------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents .............................................. $ 38,575 $ 47,494
Short-term investments ................................................. -- 2,025
Accounts receivable, net ............................................... 3,495 4,053
Inventories ............................................................ 8,547 9,003
Prepaid expenses and other current assets .............................. 663 688
--------- ---------
Total current assets ......................................... 51,280 63,263
Plant and equipment, net of accumulated depreciation of $11,061 and $9,758 ............... 10,631 9,163
Other assets ............................................................................. 1,533 1,624
--------- ---------
Total assets ................................................. $ 63,444 $ 74,050
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ....................................................... $ 1,288 $ 1,554
Accrued expenses ....................................................... 2,741 2,527
Deferred revenue, current .............................................. 3,311 --
--------- ---------
Total current liabilities .................................... 7,340 4,081
Deferred revenue, non-current ............................................................ 1,585 6,375
--------- ---------
Total liabilities ............................................ 8,925 10,456
--------- ---------
Stockholders' equity:
Preferred Stock, $.10 par value, shares authorized 7,000,000:
Series A Junior Participating Preferred Stock, $.10 par value,
shares authorized 1,500,000; none issued at June 30, 1996
and December 31, 1995 .................................... -- --
Series B Preferred Stock, $.10 par value, shares authorized
2,138,702; 2,138,702 shares issued at June 30, 1996
and December 31, 1995 .................................... 214 214
Common Stock, $.15 par value, shares authorized 25,000,000;
shares issued 11,186,634 at June 30, 1996 and 11,123,698 at
December 31, 1995 ............................................ 1,678 1,669
Additional paid-in capital ............................................. 186,146 188,698
Other, net ............................................................. (286) (3,143)
Accumulated deficit .................................................... (133,233) (123,844)
--------- ---------
Total stockholders' equity ................................... 54,519 63,594
--------- ---------
Total liabilities and stockholders' equity ................... $ 63,444 $ 74,050
========= =========
</TABLE>
The accompanying notes are an integral part of these
consolidated condensed financial statements.
4
<PAGE> 5
i-STAT CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF DOLLARS)
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-------------------------
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net loss ......................................................... ($9,389) ($12,972)
Adjustments to reconcile net loss to net cash used in
operating activities ............................................. (68) 747
Change in assets and liabilities ................................. 1,137 (2,094)
-------- --------
Net cash used in operating activities ............. (8,320) (14,319)
-------- --------
Cash flows from investing activities:
Purchase of investments .......................................... -- (7,447)
Sale of investments .............................................. 2,025 24,927
Purchase of equipment ............................................ (2,790) (1,439)
Other ............................................................ (81) (90)
-------- --------
Net cash provided by (used in) investing activities (846) 15,951
-------- --------
Cash flows from financing activities:
Proceeds from sale of Common Stock ............................... 364 135
Purchase of Treasury Stock ....................................... (2) --
-------- --------
Net cash provided by financing activities ......... 362 135
-------- --------
Effect of currency exchange rate changes on cash .................... (115) (12)
-------- --------
Net decrease in cash and cash equivalents ........................... (8,919) 1,755
Cash and cash equivalents at beginning of period .................... 47,494 4,719
-------- --------
Cash and cash equivalents at end of period .......................... $ 38,575 $ 6,474
======== ========
</TABLE>
The accompanying notes are an integral part of these
consolidated condensed financial statements.
5
<PAGE> 6
i-STAT CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(unaudited)
1. BASIS OF PRESENTATION
The information presented as of June 30, 1996 and 1995, and for the
periods then ended, is unaudited, but includes all adjustments (consisting
only of normal recurring accruals) which the management of i-STAT
Corporation (the "Company") believes to be necessary for the fair
presentation of results for the periods presented. The results for the
interim periods are not necessarily indicative of results to be expected
for the year. The year end consolidated condensed balance sheet data was
derived from the audited financial statements, but does not include all
disclosures required by generally accepted accounting principles. These
condensed financial statements should be read in conjunction with the
Company's audited financial statements for the year ended December 31,
1995 which were included as part of the Company's Annual Report on Form
10-K, File No. 0-19841.
2. NET LOSS PER SHARE
Net loss per share is calculated using the weighted average number of
common shares and preferred shares outstanding for all periods presented.
Preferred shares have been included in the calculation since their date of
issuance as they are convertible into common on a 1:1 basis and have
substantially the same characteristics as common stock. Options and
warrants outstanding are not included in the calculation as they are
anti-dilutive.
3. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
June 30, 1996 December 31, 1995
------------- -----------------
<S> <C> <C>
Raw materials $ 2,555,000 $3,113,000
Work in process 1,429,000 1,146,000
Finished goods 4,563,000 4,744,000
----------- ----------
$ 8,547,000 $9,003,000
=========== ==========
</TABLE>
4. COMMITMENTS AND CONTINGENCIES
The Company is a defendant in a case entitled Nova Biomedical Corporation,
Plaintiff v. i-STAT Corporation, Defendant. The Complaint, which was filed
in the United States District Court for the District of Massachusetts on
June 27, 1995, alleges infringement by i-STAT of Nova's U.S. Patent No.
4,686,479. The Plaintiff seeks unspecified damages and that the damages be
trebled. Nova also is asking for attorneys' fees and prejudgement
interest. The case currently is in the pre-trial discovery stage.
Management intends to contest the case vigorously and does not believe
that it has infringed the Nova patent. The Company has obtained an opinion
from recognized patent counsel to the effect that no infringement has
occurred. However, if the plaintiff should totally prevail in this matter,
it could have a material impact on the financial position, results of
operations and cash flows of the Company. The Company has asserted
counterclaims under the antitrust laws alleging that Nova commenced the
action knowing that the patent was not infringed and that it had reason to
believe that the patent was invalid and unenforceable.
The Company is a defendant in a class action complaint entitled Susan
Kaufman, on behalf of herself and all others similarly situated,
Plaintiff, v. i-STAT Corporation, William P. Moffitt, Lionel N. Sterling,
Imants R. Lauks and Matthias Plum, Jr. The class action was brought by
Susan Kaufman on her behalf and on behalf of all purchasers of the
Company's Common Stock between May 9, 1995 and March 19, 1996. The
complaint, which was filed in the Superior Court of New Jersey in Mercer
County on June 19, 1996, alleges New Jersey common law "fraud on the
market" in connection with certain sales of i-STAT stock by the Company's
chief executive officer, chief technology officer and two outside
directors during a nine-month period. The plaintiffs seek unspecified
compensatory damages, interest and payment of all costs and expenses
incurred in connection with the class action. Management believes the
complaint is without merit and intends to vigorously contest it. However,
if the plaintiff should totally prevail in this matter, it could have a
material impact on the financial position, results of operations and cash
flows of the Company.
6
<PAGE> 7
i-STAT CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company develops, manufactures and markets medical diagnostic
products for blood analysis that provide health care professionals with
immediate and accurate critical diagnostic information at the point of patient
care. The Company markets and distributes its products in the United States and
Canada principally through its own direct sales and marketing organization, in
Japan through Japanese marketing partners and in South America through selected
distribution channels. In February 1996, the Hewlett Packard Company ("HP")
began marketing and distributing the Company's products in certain countries in
Europe through its distribution arrangements with the Company. In April 1996,
the Company and HP entered into a marketing agreement pursuant to which HP and
the Company have begun to jointly market the Company's products into the
critical care departments of hospitals in the United States which meet certain
criteria. The Company is actively planning market introduction into other
foreign markets, including but not limited to, through its arrangements with HP.
During the Company's first two quarters of 1996, international sales as a
component of total sales increased substantially due primarily to the
introduction of the Company's blood gas product in Japan, increases in the unit
transfer prices specified in the Company's contracts with its Japanese partners,
increased deferred revenue, and changes in the Company's U.S. marketing
strategy discussed below. This is not necessarily indicative of a trend. Sales
to its Japanese marketing partners represent the only significant component of
the Company's international sales during the first six months of 1996.
This management's discussion and analysis of financial condition and
results of operations contains both historical financial information and forward
looking statements. The Company operates in a high technology, emerging market
environment that involves significant risks and uncertainties which may cause
actual results to vary from such forward looking statements and to vary
significantly from reporting period to reporting period. These risks include,
among others, competition from existing manufacturers and marketers of blood
analysis products who have greater resources than the Company, the uncertainty
of new product development initiatives, difficulties in tranferring new
technology to the manufacturing stage, market resistance to new products,
domestic and international regulatory constraints, uncertainties of
international trade and other risks detailed from time to time in the Company's
filings with the Securities and Exchange Commission.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1996
The Company generated revenues of approximately $6.7 million and
$5.1 million for the quarters ended June 30, 1996 and 1995, respectively,
including international revenues of $2.2 million and $0.9 million, respectively.
The $1.6 million (31.5%) increase in revenues was primarily due to: 1) increased
shipment volume and higher average selling prices per unit of the Company's
cartridges and analyzers primarily as a result of both higher cartridge
consumption by existing hospital customers and the addition of new hospital
customers in the U.S. and internationally, and 2) recognition of an additional
$0.5 million of deferred revenue, due to a change of accounting estimate in
1996, from the Company's Japanese marketing partners. The Company has
experienced a slight increase in average price per cartridge in 1996 due to
changes in cartridge mix. The near term rate of growth of sales revenues may be
reduced by the Company's recent marketing focus on potential large scale
adopters of the i-STAT System. Such customers tend to require a longer sales
cycle as the marketing focus with respect to such customers is on having these
customers re-engineer or replace their "stat" lab departments with the i-STAT
System, as compared to other potential customers who may be using the i-STAT
System as a supplement to their existing laboratory arrangements.
The Company experienced a gross profit of $0.1 million in the
quarter ended June 30, 1996 compared with a gross loss of $0.5 million in the
quarter ended June 30, 1995. To the extent that sales volume increases, the
Company expects its gross profit to improve as manufacturing costs (including
direct labor and a large component of overhead) are spread over a larger number
of product units. However, gross profit as a percentage of sales declined from
approximately 9.5% ($0.6 million) on sales of $6.4 million in the first quarter
of 1996 to approximately 1.5% ($0.1 million) on sales of $6.7 million in the
second quarter of 1996, primarily as a result of
7
<PAGE> 8
certain cartridge production issues which the Company believes have since
been resolved and lower sales volume of analyzers in the second quarter of 1996.
The reduction in analyzer sales in the second quarter of 1996 versus the first
quarter of 1996 primarily reflects a reduction in international sales of
analyzers, partially offset by an increase in analyzer sales in the U.S. The
first quarter of 1996 benefited from initial stocking orders from HP for its
European operations.
The Company incurred research and development costs (percentage of
sales) of approximately $1.4 million (20.2%) and $1.4 million (28.0%) for the
quarters ended June 30, 1996 and 1995, respectively, consisting of costs
associated with the personnel, material, equipment and facilities necessary for
conducting new product development.
The Company incurred general and administrative expenses (percentage
of sales) of approximately $1.6 million (23.1%) and $1.1 million (22.3%) for the
quarters ended June 30, 1996 and 1995, respectively. General and administrative
expenses consisted primarily of salaries and benefits of personnel, office
costs, professional fees and other costs necessary to support the Company's
infrastructure. The increase primarily reflects the Company's increased need for
management personnel and other services to support its continuing growth, and
legal fees and expenses associated with the defense of the Nova patent
infringement action.
The Company incurred sales and marketing expenses (percentage of
sales) of approximately $2.8 million (42.1%) and $2.9 million (56.5%) for the
quarters ended June 30, 1996 and 1995, respectively, consisting primarily of
salaries, benefits, travel, and other expenditures for sales representatives,
product literature, market research, clinical studies and other infrastructure
costs.
The increase in other income (expense), net, to $0.6 million for the
three months ended June 30, 1996 from a loss of ($0.4) million for the three
months ended June 30, 1995, in part reflects additional interest income earned
on significantly higher cash, cash equivalents and short-term investment
balances in 1996. The Company also recorded a charge against other income
(expense), net, of $0.4 million in the quarter ended June 30, 1995, relating to
the implementation of stockholder protection measures and a proposed offering of
securities that was terminated. Interest income is expected to decline in the
near future as cash and cash equivalent balances decline.
SIX MONTHS ENDED JUNE 30, 1996
The Company generated revenues of approximately $13.2 million and
$8.5 million for the six months ended June 30, 1996 and 1995, including
international revenues of $4.7 million and $1.5 million, respectively. The $4.7
million (55.0%) increase in revenues was primarily due to: 1) higher average
selling prices per unit of the Company's cartridges, and increased shipment
volume primarily as a result of both higher cartridge consumption by existing
hospital customers and the addition of new hospital customers in the U.S. and
internationally, and 2) recognition of an additional $1.1 million of deferred
revenue, due to a change in accounting estimate in 1996, from the Company's
Japanese marketing partners.
The manufacturing costs associated with product sales for the six
months ended June 30, 1996 and 1995 were approximately $12.4 million and $10.8
million, respectively. This resulted in a gross loss of $2.3 million in the 1995
period because sales volume was not sufficient to absorb the overhead and labor
costs inherent in the Company's manufacturing process, compared with a gross
profit of $0.7 million in the 1996 period. To the extent that sales volume
increases, the Company expects its gross profit to improve as manufacturing
costs (including direct labor and a large component of overhead) are spread over
a larger number of product units. The increase in manufacturing costs from 1995
to 1996 was primarily attributable to the increase in materials, personnel and
equipment necessary to support the volume of product being produced and the
anticipated requirements throughout the remainder of 1996.
The Company incurred research and development costs (percentage of
sales) of approximately $2.7 million (20.4%) and $2.7 million (31.3%) for the
six months ended June 30, 1996 and 1995, respectively.
The Company incurred general and administrative expenses (percentage
of sales) of approximately $2.7 million (20.2%) and $2.4 million (28.1%) for the
six months ended June 30, 1996 and 1995, respectively. General and
administrative expenses consisted primarily of salaries and benefits of
personnel, office costs, professional fees, and other costs necessary to support
the Company's infrastructure. The year-to-year increase reflects the
8
<PAGE> 9
Company's increased need for management personnel and other services to support
its continuing growth, and legal fees and expenses associated with the defense
of the Nova patent infringement action.
The Company incurred sales and marketing expenses (percentage of
sales) of approximately $5.9 million (45.0%) and $5.4 million (63.4%) for the
six months ended June 30, 1996 and 1995, respectively, consisting primarily of
salaries, benefits, travel and other expenditures for sales representatives,
product literature, market research, clinical studies and other sales
infrastructure costs. The dollar increase from 1995 to 1996 is attributable to
increased marketing activities, and the hiring of management and other marketing
personnel necessary to support the Company's planned growth in product sales.
The change in other income (expense), net, to $1.2 million for the
six months ended June 30, 1996 from ($0.3) million for the six months ended June
30, 1995, in part reflects additional interest income earned on significantly
higher cash, cash equivalents and short-term investment balances in 1996. The
Company also recorded a charge against other income (expense), net, of $0.4
million in the six months ended June 30, 1995 relating to the implementation of
stockholder protection measures and a proposed offering of securities that was
terminated. Interest income is expected to decline in the near future as cash
and cash equivalent balances decline.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1996, the Company had cash and cash equivalents of
approximately $38.6 million, a decline of $8.9 million from the December 31,
1995 balance of approximately $47.5 million, primarily reflecting cash used in
operating activities for the six months ended June 30, 1996. The Company expects
its existing funds to continue to decline until its revenues are sufficient to
support its growth, but to be sufficient to meet its obligations and its
liquidity and capital requirements for the near term. The Company regularly
monitors capital raising alternatives in order to take advantage of
opportunities to supplement its current working capital upon favorable terms,
including joint ventures, strategic corporate partnerships or other alliances
and the sale of equity and/or debt securities. The Company's need, if any, to
raise additional funds to meet its working capital and capital requirements will
depend upon numerous factors, including the results of its product marketing and
sales activities, its new product development efforts, manufacturing
efficiencies and competitive conditions.
The change in other, net, under stockholders' equity from ($3.1)
million at December 31, 1995 to ($0.3) million at June 30, 1996 primarily
reflects: 1) the change of estimate in respect to the Strategic Milestone Stock
Award Program of $2.3 million, and 2) treasury stock of $0.7 million which was
retired in the first quarter of 1996. During the first quarter of 1996 the
Company achieved its first milestone under its Strategic Milestone Stock Award
Program. In connection with the achievement of this milestone, an aggregate
amount of $33,000 will be recognized as a non-cash compensation expense over a
27 month period. This represents a reduction of approximately $2.3 million from
amounts previously estimated as of December 31, 1995. The difference relates to
changes in the price of the Company's Common Stock since the milestone first
appeared likely to be achieved.
9
<PAGE> 10
i-STAT CORPORATION
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Reference is made to the Company's Annual Report on Form 10-K for the
year ended December 31, 1995, and Note 4 to the Notes to Consolidated
Condensed Financial Statements herein, for a description of legal
proceedings entitled Nova Biomedical Corporation, Plaintiff v. i-STAT
Corporation, Defendant.
The Company is a defendant in a class action complaint entitled Susan
Kaufman, on behalf of herself and all others similarly situated,
Plaintiff, v. i-STAT Corporation, William P. Moffitt, Lionel N.
Sterling, Imants R. Lauks and Matthias Plum, Jr. The class action was
brought by Susan Kaufman on her behalf and on behalf of all
purchasers of the Company's Common Stock between May 9, 1995 and
March 19, 1996. The complaint, which was filed in the Superior Court
of New Jersey in Mercer County on June 19, 1996, alleges New Jersey
common law "fraud on the market" in connection with certain sales of
i-STAT stock by the Company's chief executive officer, chief
technology officer and two outside directors during a nine-month
period. The plaintiffs seek unspecified compensatory damages,
interest and payment of all costs and expenses incurred in connection
with the class action. Management believes the complaint is without
merit and intends to vigorously contest it. However, if the plaintiff
should totally prevail in this matter, it could have a material
impact on the financial position, results of operations and cash
flows of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its Annual Meeting of Stockholders on June 12, 1996,
at which time two matters were submitted to a vote of stockholders. A
description of the matters voted upon and a voting tabulation for
each matter is as follows:
I. Election of nine members to the Board of Directors, each to
serve until the next annual meeting.
<TABLE>
<CAPTION>
Number of Votes
---------------------------------------------------------------------------------------
Name of Nominee For Against/Withheld Abstentions Broker Non-Votes
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
J. Robert Buchanan, M.D. 11,572,262 39,345 N/A N/A
- ---------------------------------------------------------------------------------------------------------------
Curtis J. Crawford 11,572,477 39,130 N/A N/A
- ---------------------------------------------------------------------------------------------------------------
James A. Cyrier 11,572,277 39,330 N/A N/A
- ---------------------------------------------------------------------------------------------------------------
Richard Hodgson 11,572,062 39,545 N/A N/A
- ---------------------------------------------------------------------------------------------------------------
Imants R. Lauks 11,572,477 39,130 N/A N/A
- ---------------------------------------------------------------------------------------------------------------
William P. Moffitt 11,572,077 39,530 N/A N/A
- ---------------------------------------------------------------------------------------------------------------
Robert W. O'Leary 11,572,277 39,330 N/A N/A
- ---------------------------------------------------------------------------------------------------------------
Matthias Plum, Jr. 11,572,277 39,330 N/A N/A
- ---------------------------------------------------------------------------------------------------------------
Lionel N. Sterling 11,572,477 39,130 N/A N/A
===============================================================================================================
</TABLE>
II. Ratification of the appointment of Coopers & Lybrand L.L.P. as
independent accountants to audit the Company's books and accounts
for the year 1996.
<TABLE>
<CAPTION>
Number of Votes
- --------------------------------------------------------------------------------------
For Against/Withheld Abstentions Broker Non-Votes
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
11,573,184 16,457 21,966 N/A
======================================================================================
</TABLE>
10
<PAGE> 11
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3.1 Restated Certificate of Incorporation *
3.2 By-Laws **
3.3 Certificate of Designation, Preferences and Rights of Series A
Preferred Stock **
3.4 Certificate of Designation, Preferences and Rights of Series B
Preferred Stock **
4.1 Stockholder Protection Agreement, dated as of June 26, 1995,
between i-STAT Corporation and First Union National Bank
(formerly First Fidelity Bank, National Association) **
10.34 Employment Offer Letter - Roger J. Mason, dated June 6, 1996
27 Financial Data Schedule
(b) Reports on form 8-K
During the quarter for which this Report on Form 10-Q is filed, no
reports on Form 8-K were filed.
* These items are hereby incorporated by reference from the exhibits to
the Company's Form S-8/S-3 Registration Statement (File No. 33-48889)
and are made a part of this Report.
** These items are hereby incorporated by reference from the exhibits to
the Company's Current Report on Form 8-K, dated July 10, 1995 and
amended on September 11, 1995, and are made a part of this Report.
11
<PAGE> 12
i-STAT CORPORATION
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
DATE: August 9, 1996
i-STAT CORPORATION
(Registrant)
BY: /s/William P. Moffitt
------------------------------
William P. Moffitt
President and Chief
Executive Officer
(Principal Executive Officer)
BY: /s/Roger J. Mason
-------------------------------
Roger J. Mason
Vice President of Finance,
Treasurer and Chief Financial
Officer
(Principal Financial Officer)
12
<PAGE> 13
EXHIBIT INDEX
Exhibit
No. Description
- ------- -----------
3.1 Restated Certificate of Incorporation *
3.2 By-Laws **
3.3 Certificate of Designation, Preferences and Rights of Series A Preferred
Stock **
3.4 Certificate of Designation, Preferences and Rights of Series B Preferred
Stock **
4.1 Stockholder Protection Agreement, dated as of June 26, 1995, between
i-STAT Corporation and First Union National Bank (formerly First
Fidelity Bank, National Association) **
10.34 Employment Offer Letter - Roger J. Mason, dated June 6, 1996
27 Financial Data Schedule
* These items are hereby incorporated by reference from the exhibits to
the Company's Form S-8/S-3 Registration Statement (File No. 33-48889)
and are made a part of this Report.
** These items are hereby incorporated by reference from the exhibits to
the Company's Current Report on Form 8-K, dated July 10, 1995 and
amended on September 11, 1995, and are made a part of this Report.
<PAGE> 1
EXHIBIT 10.34
May 29, 1996
Mr. Roger J. Mason
5 Empress Drive
Holmdel, NJ 07733
Dear Roger:
On behalf of the management team and associates of i-STAT Corporation, it is my
pleasure to offer you the senior management position of Vice President of
Finance, Treasurer & Chief Financial Officer. Reporting to me, this position is
responsible for the financial functions of SEC and internal financial reporting,
accounting, treasury, credit and collections and investor relations and
financial planning. Equally important, as a key member of the senior management
team, you will be instrumental in building i-STAT into a profitable, expanding
business while planning longer term strategy for diversification and continued
growth. As you may be aware, under Delaware law, the Board of Directors is
empowered to elect you to the position of Chief Financial Officer and it is
anticipated that this will occur with your commencement of employment.
The specifics of the offer are as follows:
1. BASE SALARY: $225,000 per year. Our pay cycles are on the 15th and last
days of each month. Your salary will be reviewed on an annual basis
with adjustments determined by the Compensation Committee of the Board
of Directors upon recommendation from the Chief Executive Officer.
2. SIGN-ON BONUS: In recognition of the cost of termination of your
current employment and as an incentive to accept our offer, a sign-on
bonus of $30,000 will be paid to you as soon as practicable after your
first day of employment.
3. ANNUAL INCENTIVE COMPENSATION PROGRAM: The Board of Directors has
established guidelines for rewarding, through cash bonuses and stock
options, certain management level employees of the company for
achievement of established business objectives (both quantitative and
qualitative). In the case of our senior management team, both the
objectives and the level of awards are reviewed and approved by the
Board. Achievement of the objectives will result in a cash bonus from
0% to 20% of your salary during the operating year, with a "target" of
10%. The Program also includes the potential for a stock option award
(fair market value) ranging from 0 to 15,000 shares depending upon
performance levels, with a target of 12,000 shares. The options become
exercisable on a three-year schedule according to the following
formula:
50% 1st anniversary of the award
25% 2nd anniversary of the award
25% 3rd anniversary of the award
<PAGE> 2
Mr. Roger J. Mason
May 29, 1996
Page 2
Both the cash bonus and stock award will be prorated to take into
account the date of commencement of your employment. Quantitative
objectives for 1996 are achievement of our budgeted revenues, gross
margin, operating income and cash flow targets. Qualitative objectives
are the continued building of our management team (in which you, of
course, figure prominently), managing our alliance with
Hewlett-Packard, and completion of a new, Board-approved Strategic
Plan.
You should be aware that, with the assistance of KPMG Peat Marwick
compensation consultants, who in 1992 helped us design both this
Program and our company-wide compensation structure, we are taking a
fresh look at both this Program and the company-wide structure to be
sure that they remain consistent with our progress to date and our
strategic plan. As a member of our senior management team, you will
have input on these issues.
4. INITIAL STOCK OPTION INCENTIVE: As additional incentive for you to join
i-STAT, on your start date the company will make a stock option grant
to you for 65,000 shares at fair market value. These options will vest
at the rate of 20% on each anniversary of the award for five successive
anniversaries.
5. BENEFITS: You will be entitled to participate in the company's benefit
programs available to senior management. This includes health and
dental programs, long term disability coverage, life insurance, paid
vacation and a 401(k) program. The details of each of these programs
can be further reviewed for you by our Director of Human Resources.
6. RELOCATION: Per our conversation, it is not immediately clear whether
you will need to relocate your family closer to the Princeton, NJ
office. We will leave this matter open for further consideration. If it
should become advisable for you to relocate, the company will reimburse
you for reasonable and customary expenses associated with your move, in
accordance with the company's relocation policy.
7. EXPENSES: All reasonable expenses incurred in the fulfillment of your
assigned responsibilities will be reimbursed by the company in
accordance with our established policy.
8. TERMS OF EMPLOYMENT; SEVERANCE: Your employment with i-STAT is
considered to be "at will" and either you or the company may terminate
your employment at any time, with or without cause for any reason
whatsoever. Except for "Due Cause" (as defined in the addendum to this
letter), should your employment be terminated by the company, the
company will be obligated to continue to pay your salary and company
paid health and dental benefits contributions for a term of up to nine
months, on a month-by-month basis, if you have not found employment or
commenced self-employment. In
<PAGE> 3
Mr. Roger J. Mason
May 29, 1996
Page 3
addition, the company will reimburse you the expenses of a qualified
outplacement service of your choosing in an amount not to exceed
$30,000. Your continuing salary payments under this provision shall be
reduced to the extent you receive, during the said nine-month period,
any payments under the company's disability insurance coverage.
For the purposes of the foregoing provisions, your employment shall be
deemed to have been terminated if (a) without your consent, (i) your
principal place of employment shall have been changed to a location
more than 60 miles from Princeton, New Jersey or (ii) a substantial
reduction shall have occurred in your title, office, compensation,
duties, responsibilities and/or reporting relationship; or (b) a
"Change in Control" shall have occurred as defined in the Company's
1985 Stock Option Plan, as amended. In the event of your constructive
termination pursuant to this paragraph, you shall be entitled to
receive, in addition to your salary continuation and other benefits
delineated in the next preceding paragraph, any bonus earned prior to
your termination, prorated to the date of termination.
9. CONFIDENTIALITY AND NON-COMPETE AGREEMENT: A condition of your
employment is that you sign and abide by the company's "Confidentiality
and Non-Compete Agreement". Two copies of this agreement are enclosed
for your signature.
10. STOCK OPTIONS IN THIS OFFER: All stock options referenced in this offer
will be non-statutory stock options subject to the provisions of our
1985 Stock Option Plan (as amended) and evidenced by a stock option
agreement in customary form. All shares underlying options granted
under the Plan are registered for resale with the SEC and therefore
freely saleable by you after purchase, subject to SEC-mandated volume
restrictions applicable to company "affiliates", among which you are
likely to be counted due to your position as Chief Financial Officer. A
copy of the Plan , the SEC-mandated Plan Document, and the stock option
agreement form which describes the terms and conditions generally
applicable to options granted under the Plan are enclosed. As set forth
in Section 16 of the Plan, all options are subject to "Change in
Control" provisions which require acceleration of vesting schedules
upon the occurrence of certain events affecting i-STAT's status as an
independent entity.
11. START DATE: It is anticipated that your start date with the company
will be July 1, 1996.
12. ENTIRE AGREEMENT: Together with the Confidentiality Agreement referred
to in paragraph 9, this letter encompasses all of the terms applicable
to your offer of employment by i-STAT.
<PAGE> 4
Mr. Roger J. Mason
May 29, 1996
Page 4
Roger, we at i-STAT are truly excited about the opportunity to have you join us.
Everyone who has met you was most impressed. We believe we have the opportunity
to make a profound effect upon the quality and cost of health care delivery and
build i-STAT into a highly successful, profitable company, but we need people
like you to make our goals come true. Please accept our offer by signing below
on or before June 10, 1996. If there are any questions I can answer for you,
please call me at your earliest convenience. I look forward to working with you.
Sincerely,
William P. Moffitt
President and Chief Executive Officer
ACCEPTED:
/s/ Roger J. Mason June 6, 1996
- ------------------ ------------
Roger J. Mason Date
<PAGE> 5
ADDENDUM TO ROGER MASON EMPLOYMENT OFFER LETTER
DATED MAY 29, 1996
"Due Cause" means (a) the commitment by R. Mason of a willful serious act, such
as embezzlement, against i-STAT intended to enrich himself at the expense of
i-STAT; (b) the conviction of R. Mason for a felony involving moral turpitude;
(c) R. Mason's willful and gross neglect of his employment duties; (d) R.
Mason's intentional failure to observe specific directives or policies of
i-STAT's Board of Directors which are consistent with R. Mason's position,
duties and responsibilities at i-STAT (which failure is likely to have an
adverse impact upon i-STAT's business, financial condition, results of
operations, prospects or reputation); or (e) any breach by R. Mason of any of
the terms and conditions of the Confidentiality and Non-Competition Agreement
between himself and i-STAT.
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