UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED June 30, 2000
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _________________ TO _______________
COMMISSION FILE NUMBER 0-28566
HENLEY HEALTHCARE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
TEXAS 76-0335587
(STATE OR OTHER JURISDICTION (IRS EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
120 INDUSTRIAL BOULEVARD, SUGAR LAND, TEXAS 77478
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
713-276-7000
(REGISTRANT'S TELEPHONE NUMBER)
Check whether the issuer: (i) filed all reports required to be filed by Section
13 or 15 (d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (ii) has been
subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
As of August 18, 2000, the registrant had 8,821,751 shares of common stock
outstanding.
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The information required hereunder is included in this report as set forth
in the "Index to Consolidated Financial Statements."
2
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
Consolidated Balance Sheets as of June 30, 2000 and
December 31, 1999................................................ 4
Consolidated Statements of Operations for the Six and Three Months
Ended June 30, 2000 and 1999................................ 5
Consolidated Statements of Cash Flows for the Six Months
Ended June 30, 2000 and 1999..................................... 6
Notes to Consolidated Financial Statements.......................... 7
3
<PAGE>
HENLEY HEALTHCARE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
2000 1999
------------ ------------
ASSETS (UNAUDITED)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents .......................................... $ 838,432 $ 535,294
Accounts receivable, net of allowance for doubtful
accounts of $815,640 and $756,407, respectively ................. 5,691,704 7,695,984
Inventory .......................................................... 8,542,769 11,264,286
Prepaid expenses ................................................... 123,887 220,643
Other current assets ............................................... 158,995 116,200
------------ ------------
TOTAL CURRENT ASSETS ............................................... 15,355,787 19,832,407
PROPERTY, PLANT AND EQUIPMENT, net ..................................... 5,441,116 5,901,070
INTANGIBLE AND OTHER LONG-LIVED ASSETS, net ............................ 15,938,318 17,315,359
------------ ------------
TOTAL ASSETS ....................................................... $ 36,735,221 $ 43,048,836
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Line of credit ..................................................... $ 3,661,000 $ 9,670,200
Current maturities of long-term debt ............................... 2,016,337 7,324,205
Accounts payable ................................................... 5,771,495 7,220,012
Accrued expenses and other current liabilities ..................... 4,266,842 6,707,485
------------ ------------
TOTAL CURRENT LIABILITIES .......................................... 15,715,674 30,921,902
INTEREST PAYABLE ....................................................... 507,902 364,774
LONG-TERM DEBT, net of current maturities .............................. 13,247,426 4,579,711
OTHER LONG-TERM LIABILITIES ............................................ 1,647,000 3,100,000
------------ ------------
TOTAL LIABILITIES .................................................. 31,118,002 38,966,387
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock - $.10 par value; 2,500,000 shares authorized;
Series A Preferred stock - 5,000 shares authorized;
696 and 1,035 shares issued and outstanding .................... 69 103
Series B Preferred stock - 8,000 shares authorized;
3,894 and 4,700 shares issued and outstanding .................. 389 470
Series C Preferred stock - 2,250 shares authorized;
750 shares issued and outstanding .............................. 75 75
Series D Preferred stock - 3,885 shares authorized;
2775 shares issued and outstanding ............................. 278 -
Common stock - $.01 par value; 20,000,000 shares authorized;
7,919,636 and 6,411,139 issued; 7,640,636 and 6,132,139 outstanding 79,193 64,111
Additional paid-in capital ......................................... 32,827,907 29,337,454
Cumulative translation adjustment .................................. (178,354) (493,528)
Accumulated deficit ................................................ (26,886,159) (24,600,057)
Treasury stock, at cost, 279,000 common shares ..................... (226,179) (226,179)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY ......................................... 5,617,219 4,082,449
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ......................... $ 36,735,221 $ 43,048,836
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE>
HENLEY HEALTHCARE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, THREE MONTHS ENDED JUNE 30,
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
NET SALES ............................................ $ 25,593,054 $ 25,147,907 $ 11,903,876 $ 11,809,891
COST OF SALES ........................................ 18,924,023 15,612,776 9,329,261 7,245,447
------------ ------------ ------------ ------------
GROSS PROFIT ......................................... 6,669,031 9,535,131 2,574,615 4,564,444
OPERATING EXPENSES:
Selling, general and administrative ............... 6,235,691 7,092,196 2,524,566 3,751,289
Research and development .......................... 185,530 423,031 88,251 158,632
Depreciation and amortization ..................... 1,043,362 1,336,979 349,763 674,042
------------ ------------ ------------ ------------
INCOME (LOSS) FROM OPERATIONS ........................ (795,552) 682,925 (387,965) (19,519)
INTEREST EXPENSE ..................................... 1,036,178 920,254 628,530 452,626
OTHER (INCOME) EXPENSE, net .......................... (4,628) (777,219) 50,682 (759,205)
------------ ------------ ------------ ------------
INCOME (LOSS) BEFORE INCOME TAXES .................... (1,827,102) 539,890 (1,067,177) 287,060
PROVISION FOR INCOME TAXES ........................... (459,000) (96,000) (283,000) (96,000)
------------ ------------ ------------ ------------
NET INCOME (LOSS) .................................... ($ 2,286,102) $ 443,890 ($ 1,350,177) $ 191,060
============ ============ ============ ============
Preferred Stock Dividends ............................ (104,767) (591,270) (48,767) (524,029)
------------ ------------ ------------ ------------
NET LOSS AVAILABLE TO COMMON SHAREHOLDERS ............ ($ 2,390,869) ($ 147,380) ($ 1,398,944) ($ 332,969)
============ ============ ============ ============
NET LOSS PER COMMON SHARE - basic and diluted ........ ($ 0.35) ($ 0.03) ($ 0.19) ($ 0.06)
============ ============ ============ ============
SHARES USED IN COMPUTING NET LOSS PER
COMMON SHARE - basic and diluted .................. 6,865,754 5,672,109 7,252,883 5,805,081
============ ============ ============ ============
COMPREHENSIVE LOSS:
Net Income (Loss) ................................. ($ 2,286,102) $ 443,890 ($ 1,350,177) $ 191,060
Foreign Currency Translation Gain (Loss) .......... 315,174 (736,045) 48,369 (267,045)
------------ ------------ ------------ ------------
TOTAL COMPREHENSIVE LOSS ............................. ($ 1,970,928) ($ 292,155) ($ 1,301,808) ($ 75,985)
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE>
HENLEY HEALTHCARE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
2000 1999
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net Income (loss) .................................................. ($2,286,102) $ 443,890
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Depreciation and amortization expense ......................... 1,043,362 1,336,979
Interest expense imputed on notes payable ..................... 143,128 21,000
Provision for doubtful accounts ............................... 85,834 128,988
Issuance of common stock for services ......................... 74,102 32,500
Gain on involuntary conversion ................................ -- (729,518)
Non-cash provision for income taxes ........................... 459,000
Changes in operating assets and liabilities:
Decrease in accounts receivable ................................ 1,945,047 908,733
Decrease in inventory .......................................... 2,721,517 533,062
(Increase) decrease in prepaid expenses and other current assets 111,766 (369,793)
Decrease in other long-term assets ............................. 326,016 66,000
Decrease in accounts payable and accrued liabilities ........... (3,494,274) (2,608,399)
----------- -----------
Total adjustments ........................................... 3,415,498 (680,448)
----------- -----------
Net cash provided by (used in) operating activities ............ 1,129,396 (236,558)
Cash flows from investing activities:
Capital expenditures ............................................... - (14,806)
Proceeds from asset sales .......................................... 8,617 -
----------- -----------
Net cash provided by (used in) investing activities ............ 8,617 (14,806)
Cash flows from financing activities:
Net proceeds from issuance of preferred stock and warrants ......... 2,500,000 623,750
Payments of dividends on preferred stock ........................... - (424,637)
Proceeds from involuntary conversion, net of expenses .............. - 904,735
Net payments on lines of credit, debt & other long-term liabilities (3,650,049) (869,109)
----------- -----------
Net cash provided by (used in) financing activities ............ (1,150,049) 234,739
Effect of translation exchange rate changes on cash ..................... 315,174 16,420
----------- -----------
Net increase (decrease) in cash and cash equivalents .................... 303,138 (205)
Cash and cash equivalents at beginning of period ........................ 535,294 490,649
----------- -----------
Cash and cash equivalents at end of period .............................. $ 838,432 $ 490,444
=========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the period for interest ................................ $ 831,503 $ 868,254
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
6
<PAGE>
HENLEY HEALTHCARE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION:
The accompanying unaudited interim consolidated financial statements of
Henley Healthcare, Inc. and Subsidiaries (collectively, the "Company"), have
been prepared in accordance with accounting principles generally accepted in the
United States and the rules of the United States Securities and Exchange
Commission (the "SEC"), and should be read in conjunction with the audited
consolidated financial statements and notes thereto contained in the Company's
latest Annual Report filed with the SEC on Form 10-KSB, as amended. In the
opinion of management, all adjustments, consisting of normal recurring
adjustments, necessary for a fair presentation of financial position and the
results of operations for the interim periods presented have been reflected
herein. The results of operations for interim periods are not necessarily
indicative of the results to be expected for the full year. Notes to the
consolidated financial statements, which would substantially duplicate the
disclosure contained in the audited consolidated financial statements for the
most recent fiscal year, as reported in the Company's 1999 Form 10-KSB, as
amended, have been omitted.
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. For the quarter
ended June 30, 2000, the Company incurred a net loss of approximately $1,350,000
and had a working capital deficit at June 30, 2000, of approximately $359,887.
As of December 31, 1999, and through May 22, 2000, the Company was in default of
certain financial and other covenants under its line of credit with Comerica
Bank - Texas ("Comerica") which expired March 3, 2000. The lender had waived the
default. Recently, the Company renegotiated its line of credit with Comerica,
renegotiated its convertible note with Maxxim Medical, Inc.("Maxxim"), sold
shares of Series D Convertible Preferred Stock for $2,500,000 and paid some of
its vendor claims with shares of the Company's common stock par value $.01 per
share (the "Common Stock").
Under the terms of the amended and restated credit agreement with
Comerica, as long as the Company stays within the prescribed borrowing base and
in compliance with the agreement, there are no restrictions on the use of the
collections of operating revenues. While these steps have improved the Company's
ability to purchase supplies and raw materials to manufacture and deliver
products, there are no assurances that the Company's working capital position
has improved enough to successfully continue operations. Also, additional
capital may be needed to satisfy outstanding vendor obligations, overdue royalty
obligations, the note with Maxxim and outstanding debt obligations under the
line of credit with Comerica. While the Company has negotiated an additional
sale of shares of Series D Convertible Preferred Stock for $1,000,000, there can
be no assurance that the funding will be sufficient to continue current
operations. As previously disclosed in the Company's Annual Report on Form
10-KSB as filed with the SEC for the year ended December 31, 1999, as amended,
the opinion of Arthur Andersen LLP, the independent public accountants for the
Company, included an explanatory fourth paragraph stating that the Company's
continued operations are dependent upon its ability to obtain additional
financing to meet obligations as they become due.
2. LOSS PER COMMON SHARE:
Basic income (loss) per common share is based on the weighted average
number of common shares outstanding during the period, while diluted income
(loss) per common share considers the dilutive effect of stock options and
warrants reflected under the treasury stock method. The Company has stock
options and warrants, convertible debt and convertible preferred stock, that
could potentially dilute basic income (loss) per share in the future that were
not included in the computation of diluted income (loss) per share because to do
so would have been antidilutive for the periods presented.
7
<PAGE>
3. SEGMENT REPORTING:
The Company has two reportable segments: Henley Healthcare, Inc., in the
United States (Henley - U.S.) and its wholly owned subsidiary Enraf-Nonius,
which is based in The Netherlands. Both Henley - U.S., and Enraf-Nonius
specialize in the development, manufacture, distribution, and sale of medical
products. The two entities are operated separately due to geographic
considerations. Intersegment revenues are not significant. The only significant
noncash items reported in the respective segments' profit or loss are
depreciation and amortization.
To more accurately report the profitability of each segment, management
has allocated to Enraf-Nonius certain corporate costs that have been incurred by
Henley-U.S. for the periods ended June 30, 2000. The allocated costs include
interest expense, personnel costs and certain selling, general and
administrative costs. Interest expense is allocated based on the average
outstanding inter-company payable from Enraf-Nonius to Henley-U.S using the
incremental borrowing rate of Enraf-Nonius. All other costs are allocated based
on actual amounts incurred by Henley-U.S. that are directly attributable to
Enraf-Nonius or one-half of those centrally incurred costs that benefit both
segments. All prior period amounts, for all periods presented herein, have been
restated to consistently reflect the allocations.
The following table summarizes certain financial information for each of
the Company's reportable segments for the six and three months ended June 30,
2000 and 1999:
<TABLE>
<CAPTION>
HENLEY - U.S. ENRAF-NONIUS CONSOLIDATED
------------ ------------ ------------
<S> <C> <C> <C>
Six months ended June 30, 2000
Revenues from unaffiliated customers . $ 5,085,000 $ 20,508,000 $ 25,593,000
Gross Profit ......................... 1,414,000 5,255,000 6,669,000
Net Income (loss) before income taxes (2,347,000) 520,000 (1,827,000)
Net Income (loss) .................... (2,347,000) 61,000 (2,286,000)
Six months ended June 30, 1999
Revenues from unaffiliated customers . $ 10,921,000 $ 14,227,000 $ 25,148,000
Gross Profit ......................... 4,437,000 5,098,000 9,535,000
Net Income (loss) before income taxes 157,000 383,000 540,000
Net Income ........................... 157,000 287,000 444,000
<CAPTION>
HENLEY - U.S. ENRAF-NONIUS CONSOLIDATED
------------ ------------ ------------
<S> <C> <C> <C>
Three months ended June 30, 2000
Revenues from unaffiliated customers . $ 1,882,000 $ 10,022,000 $ 11,904,000
Gross Profit ......................... 191,000 2,384,000 2,575,000
Net Income (loss) before income taxes (1,354,000) 287,000 (1,067,000)
Net Income (loss) .................... (1,354,000) 4,000 (1,350,000)
Three months ended June 30, 1999
Revenues from unaffiliated customers . $ 4,798,000 $ 7,012,000 $ 11,810,000
Gross Profit ......................... 2,094,000 2,470,000 4,564,000
Net Income (loss) before income taxes 22,000 265,000 287,000
Net Income ........................... 22,000 169,000 191,000
</TABLE>
8
<PAGE>
4. STOCKHOLDERS' EQUITY:
In January 2000, the Company received $84,416 for the exercise of warrants
issued in connection with its November 1999 private placement offering of such
warrants. These warrants expired in February 2000.
During April 2000, the Company issued 28,738 shares of its Common Stock as
compensation for services received and recorded related compensation expense of
$57,102 based on the market price of the Common Stock on the measurement dates.
During the quarter ended June 30, 2000, the Company issued 580,610 shares
of its Common Stock to vendors as settlement for $990,415 of outstanding
invoices.
During the quarter ended June 30, 2000, certain holders of the Company's
Series A Preferred Stock converted an aggregate of 7 shares of Series A
Preferred Stock into an aggregate of 61,718 shares of Common Stock.
5. INCOME TAXES:
The Company has recorded a provision for income taxes related to net
income earned by its Enraf-Nonius, B.V. subsidiary. This provision does not
represent an income tax liability due to the expected usage of the available net
operating loss carryforwards. Since the net operating loss carryforwards have
been fully reserved against, the provision for income taxes has been reflected
as a reduction of goodwill and identifiable intangibles associated with the
acquisition of Enraf-Nonius.
6. FINANCING:
SERIES D PREFERRED STOCK PLACEMENT
On May 23, 2000, the Company, sold in a private placement 2,500 shares of
the Company's Series D Convertible Preferred Stock, par value $.10 per share
(the "Series D Shares"), convertible into shares of the Common Stock, for an
aggregate purchase price of $2,500,000. The proceeds of the private placement
were used to reduce bank debt, pay vendors and for operating capital. The
purchasers were The Endeavour Capital Fund S.A., Esquire Trade & Invest, Inc.,
and Celeste Trust Reg (collectively, the "Purchasers"), each of which are
accredited investors. In connection with the issuance of the Series D Shares,
the Purchasers also were issued warrants to acquire 200,000 shares of Common
Stock. The warrants expire May 31, 2005 and have an exercise price of $1.99 per
share. The estimated fair value of the warrants total approximately $200,000 and
have been recorded as a cost of capital in additional paid-in capital. An
additional 1,000 Series D shares for a purchase price of $1,000,000 is to be
paid by the Purchasers upon notice by the Company to the escrow agent specifying
the additional closing date (the "Additional Closing"); provided however, that
the Additional Closing will not occur until the later of (i) September 3, 2000
or (ii) 10 days after the notice is delivered. The Series D Shares bear a 6%
cumulative dividend payable to the holders of the Series D Shares on the date of
each conversion into shares of Common Stock. The dividends shall be payable in
cash or in Common Stock at the Company's option. The Series D Shares are
convertible into the Company's Common Stock at the lesser of (i) 105% of the
average closing bid price for the Company's Common Stock as reported by
Bloomberg L.P. for the 10 consecutive trading days immediately proceeding the
initial issuance of the Series D shares(the "Fixed Conversion Price"), or (ii)
the amount obtained by multiplying .8 by the average closing bid price for the
Company's Common Stock as reported by Bloomberg L.P.for the lowest three trading
days during the period beginning on the fifteenth day prior to the conversion
date for such conversion and ending on such conversion date.
The Series D Shares have no voting rights and rank junior to all of the
Company's previously issued shares of Series A, Series B and Series C Preferred
Stock. The Company, at its option, may force the conversion of the Series D
Shares under certain circumstances, including if the market price of the Common
Stock exceeds 300% of the Fixed Conversion Price. In addition, the Series D
Shares are redeemable at the holder's option if, among other things, the Company
is unable to issue shares of its Common Stock upon conversion of the Series D
9
<PAGE>
Shares due to Nasdaq regulations. The Series D Shares have a liquidation
preference of $1,000 per share, plus the accrued and unpaid dividends thereon
through the date of final distribution.
The placement agent, Union Atlantic LC and Union Atlantic Capital L.C.,
received a commission of 11% which was paid by the issuance of 275 Series D
Shares, as well as warrants to acquire 125,000 shares of Common Stock at a price
equal to 110% of the warrants issued to the Purchasers with an expiration date
of May 31, 2004. The fair value of the Series D Shares of approximately $275,000
and the fair value of the warrants of approximately $108,000 have been recorded
as a cost of capital in additional paid-in capital. The placement agent also
will be entitled to an 11% commission on any amounts received at the Additional
Closing.
In addition, The Endeavour Capital Fund S.A. was issued a warrant to
acquire 50,000 shares of Common Stock in connection with the $200,000 bridge
loan provided by it prior to the private placement. The warrant expires May 1,
2005 and has an exercise price of $2.00 per share. The fair value of the
warrants totalling approximately $50,000 has been recorded as interest expense
during the quarter ended June 30, 2000. The bridge loan was repaid out of
proceeds received from the sale of Series D Shares.
Pursuant to the terms of the Statement of Designation of Rights and
Preferences of the Series D Preferred Stock, the Company is not required to
issue shares of its Common Stock on conversion of the Preferred Stock unless
such shares have been approved for listing on the exchange or market on which
the Common Stock is trading. In such an event, until the Company obtains the
requisite shareholder approval, the Company is not obligated to issue shares in
excess of the amount of shares which does not require shareholder approval,
which under the Nasdaq SmallCap rule is 20% of the Company's outstanding Common
Stock. Therefore, until the Company receives shareholder approval, the Series D
Shares will not be convertible into more than the number of shares of Common
Stock which may be listed under the Nasdaq SmallCap Rules without obtaining
shareholder approval. The Company is seeking shareholder approval for the
issuance of the Series D Shares at the next meeting of its shareholders in order
to eliminate this limit on the shares of Common Stock issuable on conversion of
the Series D Shares.
COMERICA AMENDED LOAN AGREEMENT
On May 23, 2000, the Company entered into a Second Amended and Restated
Loan Agreement with Comerica (the "Amended Loan Agreement"). The Amended Loan
Agreement is effective as of March 3, 2000. The Amended Loan Agreement provides
for (i) a revolving loan ("Line of Credit"), with permitted borrowings of up to
$5,200,000 through April 1, 2002 and (ii) three term loans in the original
amounts of $1,430,000 ("Term Note A"), $1,616,000 ("Term Note B") and $1,260,000
("Term Note C"). Term Note A, Term Note B and Term Note C (collectively, the
"Term Notes") are payable in monthly installments of $23,833, $7,000 and $8,978,
respectively, plus interest through September 30, 2002, April 30, 2011 and
February 12, 2013, respectively. Interest on the Line of Credit and three term
loans is payable monthly and is calculated at a rate equal to the Prime Rate
(9.5% at June 30, 2000) plus one and one-half percent per annum, until the
respective maturity dates at which the interest payable for such note will be
the maximum rate allowed under applicable law. Term Note B is callable by
Comerica beginning on April 1, 2002 and each anniversary thereafter. All of the
borrowings from Comerica are secured by substantially all the assets of the
Company. The total amount available for borrowing under the Line of Credit is
the lesser of (i) $5,200,000 and (ii) a variable borrowing base calculated based
on the amount and type of accounts receivable and the value of certain items of
inventory. Prior to the Company entering into the Amended Loan Agreement, it had
no amounts available for borrowing under the Line of Credit and its borrowings
exceeded its borrowing base. As of June 30, 2000, the Company had $309,000
available for borrowing under the Line of Credit.
The Amended Loan Agreement relaxed a number of affirmative covenants, negative
covenants and financial covenants with which the Company must comply, including
reducing the minimum tangible net worth test and eliminating the leverage ratio,
the fixed charge coverage ratio and the current ratio. The Amended Loan
Agreement also contains a covenant that may require the Company to issue shares
of its Common Stock to Comerica if the sale or disposal of certain assets is not
completed within a specified time.
10
<PAGE>
MAXXIM MEDICAL SUBORDINATED PROMISSORY NOTE
In connection with an agreement entered into in April 1996 with Maxxim,
the Company issued to Maxxim a convertible subordinated promissory note in the
principal amount of $7 million (the " Maxxim Note"). The Maxxim Note is due and
payable on May 1, 2003 with interest payable semi-annually on November 1 and May
1 of each year and calculated at a rate equal to 2 percent per year and
increasing at a rate of 2 percent per year. Effective May 1, 2000, the Company
amended the Maxxim Note (the "Amendment") with respect to certain interest
payments and mandatory redemption provisions. The Amendment provides that all
past due interest installments are deferred until May 1, 2002. The Amendment
also provides that such interest installments, which were due on May 1 and
November 1, 2000, are deferred until May 1, 2002. The Maxxim Note is secured by
a second lien on substantially all of the Company's assets. The Company may
redeem all or any portion of the outstanding principal amount of the Note at
redemption prices ranging from 104 percent to 110 percent of the principal
amount being redeemed, depending upon when the redemption occurs.
In addition, the Maxxim Note was subject to mandatory redemption in annual
principal installments of $l.4 million which began on May 1, 1999 at premiums
starting at 7 percent and decreasing by 1 percent each year. The Company did not
make the mandatory principal redemption payment on May 1, 1999. The Amendment
provided that the past due mandatory principal redemption payment due May 1,
1999 and redemption payments payable on May 1, 2000 were deferred until May 1,
2002. The Maxxim Note also requires the Company to redeem 40 percent of the
Maxxim Note upon the completion of a public offering. As amended, the Note is
convertible into common stock at a conversion price of $2 per share. Upon any
default under the Maxxim Note, the conversion price will be automatically
adjusted to an amount equal to the lesser of the conversion price then in effect
or 80 percent of the average market price for the Company's common stock for the
30 trading days immediately before the default. The Maxxim Note also provides
anti dilution protection, including the adjustment of the conversion price upon
the occurrence of certain events, including the issuance of common stock for
less than the conversion price.
ENRAF - NONIUS CREDIT FACILITY
Pursuant to acquiring Enraf-Nonius in May 1998, the Company entered into
a revolving credit facility with a bank in The Netherlands, (the "Enraf-Nonius
Credit Facility"). The agreement provides for aggregate borrowings of up to
$7,500,000, subject to a revised borrowing base calculation derived from
Enraf-Nonius' eligible accounts receivable and inventory. The Enraf-Nonius
Credit Facility had an outstanding balance of $3,661,000 at June 30, 2000, and
is subject to interest, payable monthly, at the rate of AIBOR (3.5 percent at
June 30, 2000) plus 1 percent per annum. The Enraf-Nonius Credit Facility is
secured by Enraf-Nonius' accounts receivable, inventory and certain fixed
assets, and renews annually. At June 30, 2000, there were no funds available for
borrowing under this revolving credit facility.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The Company's operating results may fluctuate significantly in the future as a
result of a variety of factors, some of which are outside of the Company's
control. These factors include general economic conditions, specific economic
conditions in the pain management and rehabilitation industry, seasonal trends
in sales, capital expenditures, new acquisitions and other costs relating to the
expansion of operations, the introduction of new products or services by the
Company or its competitors, the mix of the products and services sold and the
channels through which they are sold and pricing changes. As a strategic
response to a changing competitive environment, the Company may elect from time
to time to make certain pricing, service, marketing or other decisions that
could have a material adverse effect on the Company's business, results of
operations and financial condition. Due to all of the foregoing factors, it is
possible that in some future quarter, the Company's operating results may be
11
<PAGE>
below the expectations of public market analysts and investors. In such event,
the price of the Company's Common Stock may be materially adversely affected.
The following discussion should be read in conjunction with the
consolidated financial statements and notes thereto and other detailed
information contained in the Company's Annual Report for fiscal year 1999 filed
with the SEC on Form 10-KSB, as amended.
RESULTS OF OPERATIONS
The Company operates Enraf-Nonius as a distinct separate unit, apart from
the Company's operations in the United States due to geographic considerations.
Accordingly, the following discussion of results of operations is presented
separately for Henley - U.S. and Enraf-Nonius. To more accurately report the
profitability of each segment, management has allocated to Enraf-Nonius certain
corporate costs that have been incurred by Henley-U.S. for the three and six
months ended June 30, 2000. The allocated costs include interest expense,
personnel costs and certain selling, general and administrative costs. Interest
expense is allocated based on the average outstanding inter-company payable from
Enraf-Nonius to Henley-U.S using the incremental borrowing rate of Enraf-Nonius.
All prior period amounts, for all periods presented herein, have been restated
to consistently reflect the allocations.
HENLEY - U.S.
Sales during the quarter ended June 30, 2000 decreased 61% to $1,882,000,
compared to $4,798,000 for the same period last year. Sales for the six-month
period ended June 30, 2000 were $5,085,000 compared to $10,921,000 for the six
months ended June 30, 1999. The decline in sales is primarily the result of
inadequate working capital, which has adversely affected the Company's ability
to purchase supplies and raw materials to manufacture and deliver products.
Demand for the Company's products is strong and the Company has a current
backlog of $2,044,000.
To address the revenue shortfall, the Company has several initiatives
designed to increase sales:
1) To alleviate the adverse impact of it's working capital shortfall, the
Company has placed increased emphasis on the timely conversion of
accounts receivable and inventory into cash and has initiated a plan
to satisfy past due payables and to purchase products and supplies
under favorable terms.
2) The Company is placing increased emphasis on working with and
expanding its sales network and providing products and services to
increase the success of the sales network.
3) The Company is increasing its effort to bring Enraf-Nonius branded
products, such as treatment beds, electrotherapy and ultrasound
devices, rehabilitation equipment and other Enraf-Nonius branded
products, to the US market. In some cases this may require approval
from the FDA such as the recently granted market clearance for the
Enraf-Nonius Sonopuls 190, an economic alternative to many of the
existing US ultrasound units. The Company is currently in the process
of requesting FDA market clearance for several more Enraf-
Nonius products and expects to request approval for additional
products in the future.
4) The Company is in the process of launching its e-commerce initiative,
which it believes will provide a worldwide portal for product
information, healthcare content and educational features related to
the non-invasive treatment of acute and chronic pain. The Company has
already enhanced its web sites and it believes it will be able to use
its existing internet presence, customer service centers and
distribution facilities to grow revenues.
12
<PAGE>
Gross profit for the quarter ended June 30, 2000 decreased 91% to $191,000
compared to $2,094,000 for the same period last year. For the six months ended
June 30, 2000, gross profit decreased 68% to $1,414,000 compared to $4,437,000
for the same period in 1999. Gross margin as a percentage of sales in 2000
decreased when compared to the same periods in 1999 due to lower net sales and
underutilization of manufacturing capacity.
For the quarter ended June 30, 2000, selling, general and administrative
expenses decreased by $1,084,000 from $2,068,000 to $983,000 in 2000, a decrease
of approximately 52%. For the six-month period ended June 30, 2000 selling,
general and administrative expenses decreased by $1,002,000 to $2,570,000 in
2000 or 28% from $3,572,000 for the same period in 1999. This decrease is due
primarily to the Company's restructuring which included downsizing of various
departments throughout the Company as part of management's initiative to reduce
expenses and improve efficiency. As a percentage of revenues, selling, general
and administrative costs increased from approximately 33% for the six months
ended June 30, 1999 to approximately 51% percent for the six-months ended June
30, 2000. The increase as a percent of revenue is primarily attributable to
decreased net sales without a corresponding decrease in selling, general and
administrative costs. The Company will continue its efforts to reduce its
expense structure. Management is continually evaluating all aspects of the
Company's operation and implementing measures to improve efficiency and decrease
costs.
Depreciation and amortization expense decreased $256,000 from $333,000 for
the quarter ended June 30, 1999 to $77,000 for the quarter ended June 30, 2000.
This decrease is due to certain non-competition agreements becoming fully
amortized along with NCI goodwill being fully expensed at December 31, 2000. For
the six months ended June 30, 2000 depreciation and amortization decreased 36%
to $419,000 from $651,000 reported for the six months ended June 30, 1999. This
decrease was due primarily to write off of NCI at December 31,1999.
For the three months ended June 30, interest expense increased $84,000
from $325,000 to $409,000 or 26%. Interest expense increased $29,000 from
$657,000 to $686,000 or 4% for the six months ended June 30, 2000. This increase
is the result of interest associated with the bridge loan in favor of The
Endeavour Capital Fund entered into in connection with the sale of Series D
Shares. Management will continue to focus on reducing overall indebtedness and
as a result, interest expense.
Henley-US reported a net loss of approximately $1,354,000 for the quarter
ended June 30, 2000, which included expenses of $350,000 related to the private
placement and renewing of it's senior credit facility and $251,000 related to
it's restructuring efforts. During the comparable period of 1999 net income was
$22,000, which included other income of approximately $1,200,000 reflecting a
gain from estimated insurance proceeds from a fire at the Company's Sugar Land
facility. For the six-months ended June 30, 2000 the Company reported a loss of
$2,347,000 compared to net income of $157,000 for the same period in 1999.
With the strategic initiatives underway to improve overall performance,
the Company intends to focus its resources in the following areas:
o Strengthening distribution channels;
o Expanding US distribution of Enraf-Nonius products;
o Reducing expenses and improving efficiencies;
o Introducing new Enraf-Nonius products to the US market;
o Reducing debt;
o Obtaining approval for the Microlight 830; and
o Applying e-commerce solutions to improving overall performance.
ENRAF-NONIUS
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<PAGE>
For the quarter ended June 30, 2000, Enraf - Nonius' revenues increased
$3,010,000 or 43% to $10,022,000 compared to $7,012,000 reported for the same
period in 1999. For the six months ended June 30, 2000, Enraf - Nonius' revenues
increased $6,281,000 or 44% to $20,508,000 compared to $14,227,000 reported for
the same period in 1999. The increase in revenues was due primarily to shipments
related to large projects such as Indonesia and Ghana. Enraf - Nonius continues
to be awarded on large projects and was recently awarded the contract for a new
project of approximately $1,500,000 in the Philippines.
Gross profit for the quarter ended June 30, 2000 was approximately
$2,384,000 or 24% compared to approximately $2,470,000 or 35% for the same
period in 1999. Gross profit for the six-months ended June 30, 2000 was
approximately $5,255,000 or 26% compared to approximately $5,098,000 or 36% for
the same period in 1999. Gross profit as a percentage of sales decreased due to
the lower margins on the large projects and lower sales of Enraf's higher margin
core business during the second quarter of 2000.
Operating expenses for the quarter ended June 30, 2000 were approximately
$1,877,000 or 19% of revenues compared to approximately $2,077,000 or 30%
percent reported for the same period in 1999. Operating expenses for the six
months ended June 30, 2000, were approximately $4,385,000 or 21% of revenues
compared to approximately $4,452,000 or 31% reported for the same period in
1999. The decrease in operating expenses resulted primarily from cost saving
measures implemented in 1999 and from lower incremental cost related to large
projects.
Net income for the quarter ended June 30, 2000 was approximately $4,000 or
0.03% of sales compared to approximately $169,000 or 2% of sales reported for
the period in 1999. For the six months ended June 30, 2000 net income was
$61,000 or approximately 0.3% of sales compared to approximately $287,000 or 2%
of sales reported for the same period in 1999.
Management believes that the continued successful implementation of cost
reductions and the potential synergies to be gained by combining the core
products of Henley - U.S. with Enraf-Nonius' international distribution system
will enable Enraf-Nonius to achieve and maintain positive cash flow.
Additionally, management believes that increased distribution of Enraf - Nonius
products in the US will provide manufacturing efficiencies that may have a
positive impact on Enraf - Nonius' profitability.
To continue to improve its performance, Enraf - Nonius will focus its
resources in the following areas:
o Strengthening distribution channels and sales of core products;
o Assisting in the expansion of US distribution of Enraf-Nonius products;
o Reducing expenses and improving efficiencies;
o Reducing debt and continuing to improve cash flow; and
o Applying e-commerce solutions to improving overall performance.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 2000, the Company had a working capital deficit of approximately
$359,887. The Company entered into recent financing transactions in an attempt
to improve its working capital position, including renegotiating its Line of
Credit with Comerica, renegotiating the Maxxim Note, selling $2,500,000 of
Series D Shares, and paying some of its vendor claims with shares of Company
Common Stock. Although the Amended Loan Agreement allows for additional
borrowings, as of June 30, 2000, the amount available under the Line of Credit
was only $309,000. The funds provided from operations for the six month period
ended June 30, 2000 was $1,129,396. The only other sources of liquidity for the
Company consists of proceeds from the sale of its equity securities and the
disposal of assets.
14
<PAGE>
SERIES D SHARES. On May 23, 2000, the Company sold in a private placement 2,500
shares of the Company's Series D Shares convertible into shares of the Company's
Common Stock for an aggregate purchase price of $2,500,000. The proceeds of the
private placement were used to reduce bank debt, pay vendors and for operating
capital. In connection with the acquisition of the Series D Shares, the
Purchasers also were issued warrants to acquire 200,000 shares of Common Stock.
An additional 1,000 Series D shares for a purchase price of $1,000,000 will be
paid by the Purchasers upon notice by the Company to the escrow agent specifying
the Additional Closing Date; provided however, that the Additional Closing will
not occur until the later of (i) September 3, 2000 or (ii) 10 days after the
notice is delivered. See Notes to Consolidated Financial Statements.
In addition, The Endeavour Capital Fund S.A. was issued a warrant to
acquire 50,000 shares of Common Stock in connection with the $200,000 bridge
loan provided by it prior to the private placement. The warrant expires May 1,
2005 and has an exercise price of $2.00 per share. The bridge loan was repaid
out of proceeds received from the sale of Series D Shares.
AMENDED LOAN AGREEMENT. On May 23, 2000, the Company entered into the Amended
Loan Agreement with Comerica. The Amended Loan Agreement is effective as of
March 3, 2000. The Amended Loan Agreement provides for (i) a Line of Credit,
with permitted borrowings of up to $5,200,000 through April 1, 2002 and (ii)
three Term Notes in the original amounts of $1,430,000, $1,616,000 and
$1,260,000, respectively. Interest on the Line of Credit and three term loans is
payable monthly and is calculated at a rate equal to the Prime Rate (9.5% at
June 30, 2000) plus one and one-half percent per annum. Prior to the Company
entering into the Amended Loan Agreement, it had no amounts available for
borrowing under the Line of Credit and its borrowings exceeded its borrowing
base. As of June 30, 2000, the Company had $309,000 available for borrowing
under the Line of Credit. See Notes to Consolidated Financial Statements.
ENRAF-NONIUS CREDIT FACILITY. Pursuant to acquiring Enraf-Nonius in May 1998,
the Company entered into the Enraf-Nonius Credit Facility. The agreement
provides for aggregate borrowings of up to $7,500,000, subject to a revised
borrowing base calculation derived from Enraf-Nonius' eligible accounts
receivable and inventory. The Enraf-Nonius Credit Facility had an outstanding
balance of $3,661,000 at June 30, 2000, and is subject to interest, payable
monthly, at the rate of AIBOR (3.5 percent at June 30, 2000) plus 1 percent per
annum. At June 30, 2000, there were no funds available for borrowing under this
revolving credit facility. See Notes to Consolidated Financial Statements.
MAXXIM NOTE. Effective May 1, 2000, the Company amended the Maxxim Note with
respect to certain interest payments and mandatory redemption provisions. The
Amendment provides that all past due interest installments are deferred until
May 1, 2002. The Amendment also provides that such interest installments, which
were due on May 1 and November 1, 2000, are deferred until May 1, 2002. The
Amendment also provided that the past due mandatory principal redemption payment
due on May 1, 1999 and redemption payments payable on May 1, 2000 were deferred
until May 1, 2002. See Notes to Consolidated Financial Statements.
While the Company has successfully renegotiated the Line of Credit, the
Maxxim Note and has sold new equity securities, it still has a negative working
capital position and a limited amount of funds available from operations. Under
the terms of the Amended Loan Agreement with Comerica, as long as the Company
stays within the prescribed borrowing base and in compliance with the agreement,
there are no restrictions on the use of the collections of operating revenues.
While these steps have improved the Company's ability to purchase supplies and
raw materials to manufacture and deliver products, there are no assurances that
the Company's working capital position has improved enough to successfully
continue operations. Also, additional capital may be needed to satisfy
outstanding vendor obligations, overdue royalty obligations, the Maxxim Note and
outstanding debt obligations under the Line of Credit with Comerica. While the
Company has negotiated an additional sale of Series D Shares for $1,000,000,
there can be no assurance that the funding will be sufficient to continue
current operations. As previously disclosed in the Company's Annual Report on
Form 10-KSB as filed with the SEC for the year ended December 31, 1999, as
amended, the opinion of Arthur Andersen LLP, the independent public accountants
for the Company, included an explanatory fourth paragraph stating that the
Company's continued operations are dependent upon its ability to obtain
additional financing to meet obligations as they become due.
The Company may pursue the sale of some of its assets and/or the sale
equity securities in order to reduce its indebtedness and obtain working
capital. The sale of equity securities could, however, result in dilution to the
percentage ownership interests of existing shareholders and could also adversely
affect the market price of the Company's Common Stock.
15
<PAGE>
There can be no assurance that the Company will be successful selling additional
securities or selling assets at attractive prices. If the Company is not
successful in quickly eliminating or reducing its working capital deficit and
satisfying its outstanding debt obligations, the Company may not be able to
continue its current operations and there will be substantially increased doubt
as to the Company's ability to continue as a going concern.
This report contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities and
Exchange Act of 1934. All statements other than statements of historical fact
included in and incorporated by reference into this report are forward-looking
statements. These forward looking statements include, without limitation,
statements regarding the Company's estimate of the sufficiencey of its existing
capital resources and its ability to raise additional capital to fund cash
requirements for future operations, and regarding the uncertainties involved in
the timing of regulatory approvals required to market certain of the Company's
products. Although the Company believes that the expectations reflected in these
forward looking statements are reasonable, it can not give any assurance that
such expectations reflected in these forward looking statements will prove to
have been correct.
When used in this report, the words "expect," "anticipate," "intend,"
"plan," "believe," "seek," "estimate," and similar expressions are intended to
identify forward-looking statements, although not all forward-looking statements
contain these identifying words. Since these forward-looking statements involve
risks and uncertainties, actual results could differ materially from those
expressed or implied by these forward-looking statements for a number of
important reasons, including those discussed under "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and elsewhere in this
report.
These statements should be read carefully because they discuss the
Company's expectations about its future performance, contain projections of its
future operating results or its future financial condition, or state other
"forward-looking" information. Investors in the Company's common stock should be
aware that the occurrence of any of the events that constitute risk for the
Company as described in this report could substantially harm the Company's
business, results of operations and financial condition and that upon the
occurrence of any of these events, the trading price of the Company's common
stock could decline, and the investor could lose all or part of their
investment.
The Company cannot guarantee any future results, levels of activity,
performance or achievements. Except as required by law, the Company undertakes
no obligation to update any of the forward-looking statements contained herein
after the date of this report.
ITEM 3: DISCLOSURE ABOUT MARKET RISK
INTERNATIONAL CURRENCY FLUCTUATIONS AND EURO CONVERSION
The Company has arrangements with several foreign distributors to
distribute products in Europe, Southeast Asia, the Far East, Central America and
South America. In addition, the Company obtains certain supplies from foreign
suppliers. The acquisition of Enraf-Nonius significantly expanded the Company's
foreign operations. International transactions subject the Company to several
potential risks, including fluctuating exchange rates (to the extent the
Company's transactions are not in U.S. dollars), varying economic and political
conditions, cultures and business practices in different countries or regions,
regulation of fund transfers by foreign governments, overlapping or differing
tax structures, and United States and foreign export and import duties and
tariffs. Fluctuations in the exchange rates between the U.S. dollar and the
currencies of the other countries in which the Company operates will affect the
results of the Company's international operations reported in U.S. dollars. Over
one-half of the Company's total sales for 1999 were in currencies other than
U.S. dollars, and the Company anticipates a similar situation in 2000. In
addition, the Company may make loans to and/or receive dividends and loans from
certain of its foreign subsidiaries and may suffer a loss as a result of adverse
exchange rate movements between the relevant currencies. There can be no
assurance that any of the foregoing will not have a material adverse effect upon
the business of the Company.
On January 1, 1999, 11 of the 15 member countries of the European Union
adopted the Euro as their common legal currency. The local currencies are
scheduled to remain legal tender in the participating countries until January 1,
2002. During this transition period, goods and services may be paid for using
either the Euro or the participating country's local currency. Thereafter, the
local currencies will be canceled and the Euro currency will be used for all
transactions between the eleven participating members of the European Union. The
Euro conversion raises strategic as well as operational issues. The conversion
is expected to result in a number of changes, including the stimulation of
cross-border competition by creating cross-border price transparency. The
Company is assessing Euro issues related to its product pricing, contract,
treasury operations and accounting systems. Although evaluation of these items
is still in process, the Company believes that the hardware and software systems
it uses internally will accommodate this transition and any required policy or
operating changes will not have a material adverse effect on future results.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
NIVA MEDICAL COMPANY V. HENLEY HEALTHCARE, INC.; CAUSE NO. 112679; IN THE
240TH JUDICIAL DISTRICT COURT OF FORT BEND COUNTY, TEXAS
This is a breach of contract case wherein the plaintiff alleges that the
Company has failed to pay him certain commissions owed under a written Trade
Representative Agreement entered into between plaintiff and the Company.
Plaintiff has also demanded an accounting of the Company's records to determine
the amount of commissions allegedly owed. The Company timely filed an answer.
The case is in the very early stages of discovery. The Company believes this
claim is without merit and intends to vigorously defend this matter.
The Company has been dismissed as a defendant in a whistle blower case
filed in United States District Court in Tampa, Florida. This suit was initiated
by a former employee of Rehabilicare, Inc., and the United States government has
intervened as a co-plaintiff under the false claims act.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
The following sales of unregistered securities occurred during the quarter
ended June 30, 2000, in private transactions in which the Company relied on the
exemption from registration available under Section 4(2) of the Securities Act
of 1993, as amended and Regulation D:
16
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On May 23, 2000, The Company, sold in a private placement 2,500 shares of
the Company's Series D Shares, convertible into shares of the Company's Common
Stock, for an aggregate purchase price of $2,500,000. Each of the Purchasers are
accredited investors. In connection with the acquisition of the Series D Shares,
the Purchasers were also issued warrants to acquire 200,000 shares of Common
Stock. An additional 1,000 Series D shares for a purchase price of $1,000,000
will be paid by the Purchasers upon notice by the Company to the escrow agent
specifying the Additional Closing Date. The placement agent, Union Atlantic LC
and Union Atlantic Capital L.C., received a commission of 11% which was paid by
the issuance of 275 Series D Shares, as well as warrants to acquire 125,000
shares. The placement agent also will be entitled to an 11% commission on any
amounts received at the Additional Closing. (See the Notes to Consolidated
Financial Statements).
On May 23, 2000, The Endeavour Capital Fund S.A. was issued a warrant to
acquire 50,000 shares of Common Stock in connection with the $200,000 bridge
loan provided by it prior to the private placement. The bridge loan was repaid
out of proceeds received from the sale of Series D Shares. (See the Notes to
Consolidated Financial Statements).
During May 2000, the Company also issued 580,610 shares of its Common
Stock to certain vendors (the "Vendors") in connection with the settlement of
$990,415 outstanding payments to such Vendors.
The Company has filed a registration statement covering the resale of
shares of Common Stock issued to certain Vendors, (ii) the Common Stock issuable
on conversion of the Series D Shares, and (iii) the Common Stock issuable on
exercise of the Warrants.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The following exhibits, from which schedules and exhibits have been
omitted and will be furnished to the Commission upon its request, are filed with
this Current Report on Form 10-Q:
EXHIBIT
NO. DESCRIPTION
------- -----------
3.1 -- Amended and Restated Articles of Incorporation (Exhibit 3.1 to
the Company's Quarterly Report on Form 10-QSB for the quarter
ended June 30, 1997 as filed on August 14, 1997.
3.2 -- Amended and Restated By-Laws (Exhibit 3.2 to the Company's
Annual Report on Form 10-KSB for the year ended December 31,
1997 as filed on March 31, 1998)
3.3 -- Statement of Designation of Series A Preferred Stock (Exhibit
3.3 to the Company's Annual Report on Form 10-KSB for the year
ended December 31, 1997 as filed on March 31, 1998).
3.4 -- Amendment to Articles of Incorporation Amending the Statement
of Designation of Rights and Preferences of the Series B
Preferred Stock (Incorporated herein by reference to Exhibit
3.2 to the Company's Current Report on Form 8-K as filed on
April 20, 1999).
3.5 -- Statement of Designation of Rights and Preferences of the
17
<PAGE>
EXHIBIT
NO. DESCRIPTION
------- -----------
Series C Preferred Stock of the Company (Incorporated herein by
reference to Exhibit 3.1 to the Company's Current Report on
Form 8-K as filed on April 20, 1999).
3.6 -- Statement of Designation of Rights and Preferences of the
Series D Convertible Preferred Stock of Henley Healthcare, Inc.
(Incorporated herein by reference to Exhibit 3.1 to the
Company's Current Report on Form 8-K as filed on June 7, 2000).
4.20 -- Registration Rights Agreement dated as of May 19, 2000, by and
among Henley Healthcare, Inc., The Endeavour Capital Fund S.A.,
Esquire Trade & Invest, Inc., and Celeste Trust Reg.
(Incorporated herein by reference to Exhibit 4.1 to the
Company's Current Report on Form 8-K as filed on June 7,
2000).
4.21 -- Form of Series D Warrant. (Incorporated herein by reference to
Exhibit 4.2 to the Company's Current report on Form 8-K as
filed on June 7, 2000).
10.26 -- Securities Purchase Agreement dated as of May 19, 2000, between
Henley Healthcare, Inc., The Endeavor Capital Fund S.A.,
Esquire Trade & Invest, Inc., and Celeste Trust Reg.
(Incorporated herein by reference to Exhibit 10.1 to the
Company's Current Report on Form 8-K as filed on June 7, 2000).
10.27 -- Financial Consulting Agreement dated as of May 8, 2000 by
and among Henley Healthcare, Inc., Union Atlantic LC and Union
Atlantic Capital, L.C. (Incorporated herein by reference to
Exhibit 10.2 to the Company's Current Report on Form 8-K as
filed on June 7, 2000).
10.28 -- Second Amended and Restated Loan Agreement dated effective as
of March 3, 2000 by and between Henley Healthcare, Inc. and
Comerica Bank-Texas. (Incorporated herein by reference to
Exhibit 10.3 to the Company's Current Report on Form 8-K as
filed on June 7, 2000).
10.29* -- Fourth Amendment to Subordinated Note to that certain
Convertible Subordinated Promissory Note dated effective as of
May 1, 2000 between Lasermedics, Inc. and Maxxim Medical, Inc.
27.1* -- Financial Data Schedule.
(b) Reports on Form 8-K
The Company filed the following report on Form 8-K during the three-month
period ended June 30, 2000:
o Current Report on Form 8-K dated June 7, 2000 filed to report, among other
things, that the Company had completed a private offering of its securities
and renegotiated its credit agreement with Comerica Bank-Texas.
18
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant caused
this Report to be signed on its behalf by the undersigned, thereunto duly
authorized.
HENLEY HEALTHCARE, INC.
(Registrant)
Date: August 21, 2000 By: /s/ JAMES L. STURGEON
---------------------------
James L. Sturgeon
Executive Vice President
& Chief Accounting Officer)
HENLEY HEALTHCARE, INC.
EXHIBITS TO FORM 10-Q
for the quarter
ended June 30, 2000
INDEX OF EXHIBITS
Exhibits filed herewith are designated by an asterisk (*); all exhibits
not so designated are incorporated by reference to a prior filing:
EXHIBIT
NO. DESCRIPTION
------- -----------
3.1 -- Amended and Restated Articles of Incorporation (Exhibit 3.1 to
the Company's Quarterly Report on Form 10-QSB for the quarter
ended June 30, 1997 as filed on August 14, 1997.
3.2 -- Amended and Restated By-Laws (Exhibit 3.2 to the Company's
Annual Report on Form 10-KSB for the year ended December 31,
1997 as filed on March 31, 1998)
3.3 -- Statement of Designation of Series A Preferred Stock (Exhibit
3.3 to the Company's Annual Report on Form 10-KSB for the year
ended December 31, 1997 as filed on March 31, 1998).
3.4 -- Amendment to Articles of Incorporation Amending the Statement
of Designation of Rights and Preferences of the Series B
Preferred Stock (Incorporated herein by reference to Exhibit
3.2 to the Company's Current Report on Form 8-K as filed on
April 20, 1999).
3.5 -- Statement of Designation of Rights and Preferences of the
Series C Preferred Stock of the Company (Incorporated herein by
reference to Exhibit 3.1 to the Company's Current Report on
Form 8-K as filed on April 20, 1999).
3.6 -- Statement of Designation of Rights and Preferences of the
Series D Convertible Preferred Stock of Henley Healthcare, Inc.
(Incorporated herein by reference to Exhibit 3.1 to the
Company's Current Report on Form 8-K as filed on June 7, 2000).
4.20 -- Registration Rights Agreement dated as of May 19, 2000, by and
among Henley Healthcare, Inc., The Endeavour Capital Fund S.A.,
Esquire Trade & Invest, Inc., and Celeste Trust
19
<PAGE>
Reg. (Incorporated herein by reference to Exhibit 4.1 to the
Company's Current Report on Form 8-K as filed on June 7, 2000).
4.21 -- Form of Series D Warrant. (Incorporated herein by reference to
Exhibit 4.2 to the Company's Current Report on Form 8-K as
filed on June 7, 2000).
10.26 -- Securities Purchase Agreement dated as of May 19, 2000, between
Henley Healthcare, Inc., The Endeavor Capital Fund S.A.,
Esquire Trade & Invest, Inc., and Celeste Trust Reg.
(Incorporated herein by reference to Exhibit 10.1 to the
Company's Current Report on Form 8-K as filed on June 7, 2000).
10.27 -- Financial Consulting Agreement dated as of May 8, 2000 by
and among Henley Healthcare, Inc., Union Atlantic LC and Union
Atlantic Capital, L.C. (Incorporated herein by reference to
Exhibit 10.2 to the Company's Current Report on Form 8-K as
filed on June 7, 2000).
10.28 -- Second Amended and Restated Loan Agreement dated effective as
of March 3, 2000 by and between Henley Healthcare, Inc. and
Comerica Bank-Texas. (Incorporated herein by reference to
Exhibit 10.3 to the Company's Current Report on Form 8-K as
filed on June 7, 2000).
10.29* -- Fourth Amendment to Subordinated Note to that certain
Convertible Subordinated Promissory Note dated effective as of
May 1, 2000 between Lasermedics, Inc. and Maxxim Medical, Inc.
27.1* -- Financial Data Schedule.
20
