<PAGE>
================================================================================
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________________
FORM 10-Q
__________________
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
__________________
Commission file number 0-21982
DIAMETRICS MEDICAL, INC.
Incorporated pursuant to the Laws of Minnesota
__________________
Internal Revenue Service -- Employer Identification No. 41-1663185
2658 Patton Road, Roseville, Minnesota 55113
(612) 639-8035
__________________
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 total number of shares of the registrant's Common Stock, $.01 par value,
outstanding on June 30, 1997, was 19,738,506.
================================================================================
<PAGE>
DIAMETRICS MEDICAL, INC.
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I - FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF OPERATIONS:
Three Months Ended June 30, 1997 and 1996......................... 3
Six Months Ended June 30, 1997 and 1996........................... 3
CONSOLIDATED BALANCE SHEETS as of June 30, 1997
and December 31, 1996.............................................. 4
CONSOLIDATED STATEMENTS OF CASH FLOWS:
Six Months Ended June 30, 1997 and 1996........................... 5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.......................... 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION............................................. 8
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS................................................... 12
ITEM 2. CHANGES IN SECURITIES............................................... 12
ITEM 3. DEFAULTS UPON SENIOR SECURITIES..................................... 12
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS................. 12
ITEM 5. OTHER INFORMATION................................................... 12
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.................................... 12
SIGNATURES......................................................................... 13
</TABLE>
2
<PAGE>
DIAMETRICS MEDICAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
------------ ------------ ------------- -------------
<S> <C> <C> <C> <C>
Net sales $ 2,607,679 $ 583,530 $ 4,562,645 $ 1,193,101
Cost of sales 2,821,574 2,145,907 5,649,520 4,544,952
------------ ------------ ------------- -------------
Gross profit (loss) (213,895) (1,562,377) (1,086,875) (3,351,851)
------------ ------------ ------------- -------------
Operating expenses:
Research and development 1,772,087 1,804,950 3,561,463 3,192,918
Sales and marketing 1,954,638 1,670,447 3,943,426 3,280,006
General and administrative 986,935 772,775 1,938,014 1,507,654
Restructuring and other charges 163,204 303,864 163,204 525,301
------------ ------------ ------------- -------------
Total operating expenses 4,876,864 4,552,036 9,606,107 8,505,879
------------ ------------ ------------- -------------
Operating loss (5,090,759) (6,114,413) (10,692,982) (11,857,730)
Other income (expense), net (163,275) 49,942 (333,065) 245,249
------------ ------------ ------------- -------------
Net loss $(5,254,034) $(6,064,471) $(11,026,047) $(11,612,481)
============ ============ ============= =============
Net loss per common share $ (0.29) $ (0.40) $ (0.66) $ (0.77)
============ ============ ============= =============
Weighted average number of
common shares outstanding 18,244,016 15,094,419 16,743,710 15,003,639
============ ============ ============= =============
</TABLE>
3
<PAGE>
DIAMETRICS MEDICAL, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
------------- --------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 4,569,955 $ 2,451,993
Marketable securities 10,482,876 3,402,598
Accounts receivable:
Trade, net 2,498,309 2,033,496
Nontrade 86,733 556,272
Inventories 4,490,041 4,464,099
Prepaid expenses and other current assets 499,597 543,755
------------- --------------
Total current assets 22,627,511 13,452,213
------------- --------------
PROPERTY AND EQUIPMENT 17,041,647 16,295,952
Less accumulated depreciation and amortization (9,241,429) (8,008,200)
------------- --------------
7,800,218 8,287,752
------------- --------------
OTHER ASSETS 2,038,685 2,318,674
------------- --------------
$ 32,466,414 $ 24,058,639
============= ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 946,331 $ 1,644,324
Accrued expenses 3,573,332 3,848,248
Current portion of long-term liabilities 1,319,568 1,310,154
------------- --------------
Total current liabilities 5,839,231 6,802,726
------------- --------------
LONG-TERM LIABILITIES:
Long-term liabilities, excluding current portion 8,463,564 7,795,851
Capital lease obligations, excluding current portion 276,478 666,668
Other liabilities, excluding current portion 117,775 119,155
------------- --------------
Total liabilities 14,697,048 15,384,400
------------- --------------
SHAREHOLDERS' EQUITY:
Common stock, $.01 par value: 35,000,000 authorized 19,738,506
and 15,209,481 shares issued and outstanding 197,385 152,095
Additional paid-in capital 108,615,702 88,451,972
Cumulative translation adjustment 1,463 89,309
Accumulated deficit (91,045,184) (80,019,137)
------------- --------------
Total shareholders' equity 17,769,366 8,674,239
------------- --------------
$ 32,466,414 $ 24,058,639
============= ==============
</TABLE>
4
<PAGE>
DIAMETRICS MEDICAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1997 1996
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(11,026,047) $(11,612,481)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 2,068,723 1,372,642
Gain on disposal of property and equipment (61,883) (1,686)
Change in operating assets and liabilities:
Receivables, net 4,726 48,695
Inventories (25,942) (1,206,887)
Prepaid expenses and other current assets 44,158 (53,043)
Accounts payable and accrued expenses (933,678) (695,509)
------------- -------------
Net cash used in operating activities (9,929,943) (12,148,269)
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (1,447,754) (576,967)
Purchases of marketable securities (14,480,278) (5,907,680)
Proceeds from maturities of marketable securities 7,400,000 16,325,000
Other 91,843 48,144
------------- -------------
Net cash provided by (used in) investing activities (8,436,189) 9,888,497
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on borrowings (52,829) (44,608)
Proceeds from long-term borrowings 877,656 -
Net proceeds from the issuance of preferred stock 11,900,000 -
Net proceeds from the issuance of common stock 8,309,020 770,109
Principal payments under capital lease obligations (542,981) (543,325)
------------- -------------
Net cash provided by financing activities 20,490,866 182,176
------------- -------------
CUMULATIVE TRANSLATION ADJUSTMENT (6,772) -
------------- -------------
Net increase (decrease) in cash and cash equivalents 2,117,962 (2,077,596)
Cash and cash equivalents at beginning of period 2,451,993 1,149,311
------------- -------------
Cash and cash equivalents at end of period $ 4,569,955 $ (928,285)
============= =============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 201,724 $ 273,641
============= =============
</TABLE>
5
<PAGE>
DIAMETRICS MEDICAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
(UNAUDITED)
(1) UNAUDITED FINANCIAL STATEMENTS
The interim consolidated financial statements of Diametrics Medical, Inc.
(the "Company") are unaudited and have been prepared by the Company in
accordance with generally accepted accounting principles for interim
financial information, pursuant to the rules and regulations of the
Securities and Exchange Commission. Pursuant to such rules and regulations,
certain financial information and footnote disclosures normally included in
the financial statements have been consolidated or omitted. However, in the
opinion of management, the financial statements include all adjustments,
consisting of normal recurring accruals, necessary for a fair presentation
of the interim periods presented. Operating results for these interim
periods are not necessarily indicative of results to be expected for the
entire year, due to seasonal, operating and other factors.
These statements should be read in conjunction with the financial
statements and related notes which are incorporated by reference in the
Company's Annual Report on Form 10-K for the year ended December 31, 1996.
(2) RECLASSIFICATIONS
Certain 1996 amounts in the Consolidated Statements of Operations have been
reclassified from prior reported balances to conform to the 1997
presentation. The reclassifications had no impact on the net loss or loss
per share as reported in 1996.
(3) INVENTORIES
Inventories are summarized as follows:
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
-------------------------------------
<S> <C> <C>
Raw materials $ 1,185,325 $ 1,623,243
Work-in-process 556,157 569,505
Finished goods 2,748,559 2,271,351
-------------------------------------
$ 4,490,041 $ 4,464,099
=====================================
</TABLE>
6
<PAGE>
(4) PRO FORMA INFORMATION
On November 6, 1996, the Company acquired all the outstanding capital stock
of Biomedical Sensors, Ltd. (BSL), an operating unit of Pfizer Inc., and
certain assets from Howmedica, Inc., a wholly-owned subsidiary of Pfizer
Inc., for $1,500,000 in cash and a $7,300,000 senior secured fixed rate
loan note, due November 4, 2002. The Company has accounted for the
acquisition using the purchase method. As such, the excess of the purchase
price over the fair value of the identifiable assets acquired was recorded
as goodwill, which consisted of purchased technology and other intangible
assets totaling $2,305,899.
The following reflects unaudited consolidated condensed results of
operations for the three and six months ended June 30, 1997 compared to
results for the comparable periods in 1996, stated on a pro forma basis, as
though the acquisition occurred at the beginning of 1996:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 Pro forma 1997 1996 Pro forma
--------------------------------- --------------------------------
<S> <C> <C> <C> <C>
Net sales $ 2,607,679 $ 1,741,530 $ 4,562,645 $ 3,092,101
Cost of sales 2,821,574 3,039,097 5,649,520 6,208,952
Costing expenses 4,876,864 6,275,036 9,606,107 11,793,879
Net Loss (5,254,034) (7,485,471) (11,026,047) (14,639,481)
Net loss per
common share $ (0.29) $ (0.50) $ (0.66) $ (0.98)
</TABLE>
(5) SHAREHOLDERS' EQUITY
On January 30, 1997, the Company completed the sale in a private placement
of 750,000 shares of Series I Junior Participating Convertible Preferred
Stock at a price of $16.00 per share. Each share of Preferred Stock was
automatically converted into four shares of Common Stock upon shareholder
approval of an increase in authorized shares of Common Stock on April 10,
1997.
On June 10, 1997, the Company completed the sale in a private placement of
1,422,222 shares of Common Stock at a price of $5.625 per share.
Authorized shares of all classes of the Company's stock increased from
25,000,000 to 40,000,000, and authorized shares of Common Stock, par value
$.01 per share, increased from 20,000,000 to 35,000,000 upon shareholder
approval on April 10, 1997.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
-------------------------------------------------------------------------
FINANCIAL CONDITION
-------------------
Statements regarding the Company's expectations about new and existing
products, future financial performance and other forward looking statements
are subject to various risks and uncertainties, including, without
limitation, demand and acceptance of new and existing products,
technological advances and product obsolescence, competitive factors and
the availability of capital to finance growth. These and other risks are
discussed in greater detail in Exhibit 99 to the Company's Form 10-K filed
with the Securities and Exchange Commission, with respect to the Company's
fiscal year ended December 31, 1996.
SUMMARY
-------
Diametrics Medical, Inc. (the "Company"), which began operations in 1990,
is engaged in the development, manufacturing and marketing of critical care
blood analysis systems, which provide immediate or continuous diagnostic
results at the point of patient care.
Since its commencement of operations in 1990, the Company has transitioned
from a development stage company to a full-scale manufacturing and sales
organization. As of June 30, 1997, the primary funding for the operations
of the Company has been approximately $108.9 million raised through public
and private sales of its equity securities and issuance of convertible
promissory notes, all of which have been repaid or converted into common
stock.
As noted in Footnote 4, "Pro Forma Information", in November 1996 the
Company acquired all the outstanding capital stock of Biomedical Sensors,
Ltd. (BSL), an operating unit of Pfizer Inc., and certain assets from
Howmedica, Inc., a wholly owned subsidiary of Pfizer Inc. The combined
operations of these former Pfizer entities are collectively referred to
below as "Biomedical Sensors". Based in England, the new subsidiary,
Diametrics Medical, Ltd. (DML), brings an existing product line which
includes indwelling continuous blood monitoring systems utilizing fiber
optic and electrochemical technology platforms. Current products include
Paratrend 7, an intravascular blood gas monitoring system, and Neocath, a
continuous oxygen monitoring system for newborns. Both products consist of
a monitoring system and intravascular disposable sensors.
RESULTS OF OPERATIONS
---------------------
SALES Sales of the Company's products were $2,607,679 and $4,562,645 for
the three and six months ended June 30, 1997, compared to $583,530 and
$1,193,101 for the same periods last year, an increase of 347% and 282%,
respectively. The increase for the three and six months ended June 30, 1997
over the prior year reflects the inclusion of sales related to DML and also
a 142% and 94% increase, respectively, in sales of IRMA instruments and
cartridges. Compared to a pro forma combined basis of Diametrics' and
Biomedical Sensors' sales for the three and six months ended June 30, 1996,
sales increased 50% and 48% for the same periods in 1997.
The Company's revenues are affected principally by the number of Paratrend
7, Neocath and IRMA instruments placed with customers and the rate at which
disposable sensors and cartridges are used in connection with these
products. As of June 30, 1997, the Company has over 1,700 monitors and IRMA
instruments at customer locations consuming the Company's fiber optic and
electrochemical sensors for critical care blood and tissue analysis.
Disposable fiber optic sensor units sold for the six months ended June 30,
1997 increased 22% over Biomedical Sensors' unit sales as a Pfizer
operating unit for the same period in 1996, and IRMA disposable cartridge
units sold for the three and six months ended June 30, 1997 increased 131%
and 120%, respectively, over the comparable periods in 1996.
The Company's revenue in the last half of 1997 is expected to exceed that
of the first half, with revenues for the full year 1997 potentially more
than doubling the level achieved in 1996. The projected revenue growth is
the result of continued market penetration, further planned expansion of
the blood analysis and monitoring product lines and the inclusion of a full
year of sales from DML.
8
<PAGE>
COST OF SALES The Company incurred manufacturing costs associated with
product sales of $2,821,574 and $5,649,520 for the three and six months
ended June 30, 1997, compared to $2,145,907 and $4,544,952 for the same
periods in the prior year, an increase of 31% and 24%, respectively. The
increase over the prior year reflects the inclusion of manufacturing costs
related to the operations of DML, partially offset by reductions in IRMA
cartridge manufacturing costs. Compared to a pro forma combined basis of
Diametrics' and Biomedical Sensors' manufacturing costs for the three and
six months ended June 30, 1996, costs decreased 7% and 9%, respectively,
for the same periods in 1997. The improvement in manufacturing expenses
reflects increased fiber optic sensor and IRMA cartridge volumes, improved
yields, increased shelf life of cartridges and better control of overhead
costs.
A negative gross profit resulted as sales volume was not yet sufficient to
cover labor, material and overhead costs. The Company, however, expects
unit costs to continue to decline in 1997 as sales volumes increase and
continued improvements are realized in manufacturing yields, processes,
costs and product design. Depending upon product mix and production
volumes, gross margins are targeted to approximate break-even levels for
the full year 1997.
OPERATING EXPENSES Research and development expenditures were $1,772,087
and $3,561,463 for the three and six months ended June 30, 1997, compared
to $1,804,950 and $3,192,918 for the same periods in the prior year. The
decrease for the three months ended June 30, 1997 and increase for the six
months ended June 30, 1997, reflects inclusion of expenses related to the
operations of DML, offset in the second quarter 1997 by a 41% expense
reduction and in the 1997 year-to-date period by a 34% expense reduction in
Diametrics' U.S. operations. Compared to a pro forma combined basis of
Diametrics' and Biomedical Sensors' research and development costs for the
three and six months ended June 30, 1996, costs decreased 28% and 20%,
respectively, for the same periods in 1997, due to the completion during
1996 of development of the IRMA SL, and the impact of staff reductions in
the Company's U.S. operations in late 1996.
Sales and marketing expenses totaled $1,954,638 and $3,943,426 for the
three and six months ended June 30, 1997, compared to $1,670,447 and
$3,280,006 for the same periods in 1996. The period-to-period increases
reflect the inclusion of expenses related to the operations of DML.
Compared to a pro forma combined basis of Diametrics' and Biomedical
Sensors' sales and marketing expenses for the three and six months ended
June 30, 1996, expenses decreased 20% and 17%, respectively, for the same
periods in 1997, due to cost containment and better deployment of
resources.
General and administrative expenses totaled $986,935 and $1,938,014 for the
three and six months ended June 30, 1997, compared to $772,775 and
$1,507,654 for the same periods in 1996. The period-to-period increases
reflect the inclusion of expenses related to the operations of DML.
Compared to a pro forma combined basis of Diametrics' and Biomedical
Sensors' general and administrative expenses for the three and six months
ended June 30, 1996, general and administrative expenses decreased 6% and
5%, respectively, for the same periods in 1997, due primarily to the impact
of staff reductions in the Company's U.S. operations in late 1996.
Restructuring and other charges totaled $163,204 for both the three and six
month periods ended June 30, 1997, compared to $303,864 and $525,301,
respectively, for the same periods in 1996. 1997 charges reflect severance
costs associated with a work force reduction, primarily in the Company's
U.S. manufacturing operations. 1996 charges reflect severance costs
associated with a restructuring of the management team and work force
reductions primarily in manufacturing and research and development. These
restructuring activities were completed before the end of the second
quarter of the years in which charges were incurred, and the Company does
not have any future cash obligations relative to the described
restructuring activities. The impact of the headcount reductions on future
operating results and cash flows is not expected to be material, as savings
achieved in these areas have been and will continue to be reinvested in
other areas of the Company, including the Company's international
operations.
Operating expense run rates for the remaining two quarters in 1997 are
targeted to approximate or moderately exceed second quarter 1997 levels.
9
<PAGE>
OTHER INCOME (EXPENSE) Net other expense was $163,275 and $333,065 for the
three and six months ended June 30, 1997, compared to net other income of
$49,942 and $245,249 for the same periods in the prior year, a decrease of
$213,217 and $578,314, respectively. The Company realized interest income
of $126,402 and $258,635 for the three and six months ended June 30, 1997,
compared to $263,766 and $626,752 for the same periods in the prior year.
The period-to-period decrease reflects the impact of lower average cash
balances resulting from a net use of cash in operations.
Interest expense totaled $257,910 and $529,635 for the three and six months
ended June 30, 1997, compared to $134,034 and $273,641 for the same periods
in 1996. The period-to-period increase primarily reflects interest accrued
on a long-term note payable to Pfizer Inc. issued in connection with the
Company's acquisition of Biomedical Sensors in November 1996.
NET LOSS The net loss for the three and six months ended June 30, 1997 was
$5,254,034 and $11,026,047, compared to $6,064,471 and $11,612,481 for the
same periods in 1996. Compared to a pro forma combined basis of Diametrics'
and Biomedical Sensors' net loss for the three and six months ended June
30, 1996, the net loss decreased 30% and 25%, respectively, for the same
periods in 1997. The Company is targeting a reduced net loss in the last
half of 1997, compared to the first half of 1997.
10
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
At June 30, 1997, the Company had working capital of $16,788,280, an
increase of $10,138,793 from the working capital reported at December 31,
1996. The increase primarily reflects the impact of $11.9 million net
proceeds received in January 1997 with the completion of a private equity
placement of 750,000 shares of convertible preferred stock and $7.9 million
net proceeds received in June 1997 with the completion of a private equity
placement of 1,422,222 shares of common stock less the net cash used in
operating, investing and financing activities for the six months ended June
30, 1997.
On August 4, 1997, the Company announced it called the warrants issued in
conjunction with a private equity placement in January of this year.
Effective July 31, 1997, warrants for 750,000 shares of common stock at
$5.0625 per share were called, providing additional funding of $3.8 million
for the Company if all warrants are exercised. Warrant holders have until
August 29, 1997 to exercise. As of August 11, 1997, 51,250 shares were
exercised resulting in gross proceeds to the Company of $259,453.
At June 30, 1997, the Company had property and equipment of $17,041,647, up
from $16,295,952 at December 31, 1996, less accumulated depreciation of
$9,241,429 and $8,008,200 at June 30, 1997 and December 31, 1996,
respectively. The $746,000 net increase in the cost of property and
equipment is the result of approximately $1,448,000 of capital additions,
consisting primarily of investments in production equipment and
demonstration instruments used to facilitate sales, less retirements of
approximately $488,000 and foreign currency translation decreases of
approximately $185,000. Approximately $3,650,000 of the Company's property
and equipment are financed through capital lease obligations at June 30,
1997. In 1997, the Company expects capital expenditures and new lease
commitments to approximate $3 million, primarily reflecting investments to
support new product development and production.
At June 30, 1997, the Company had U.S. net operating loss and research and
development tax credit carryforwards for income tax purposes of
approximately $84,000,000 and $1,000,000 respectively. Pursuant to the Tax
Reform Act of 1986, use of the Company's net operating loss carryforwards
may be limited if a cumulative "change in ownership" of more than 50
percent occurs within any three year period. In connection with prior sales
by the Company of its securities in public and private offerings, the
Company has experienced a "change in ownership." As a result, the
utilization of the Company's net operating loss and certain credit
carryforwards incurred prior to these changes are subject to annual
limitations.
The Company's foreign subsidiary also has net operating loss carryforwards
of approximately $35,800,000 which can be carried forward indefinitely.
As reflected in the accompanying consolidated financial statements, the
Company has incurred a net loss of $5,254,034 and $11,026,047 for the three
and six months ended June 30, 1997. In addition, the Company has incurred
net losses and has had negative cash flows from operating activities since
inception. In January and June 1997 the Company completed two private
placements which generated net cash proceeds to the Company of
approximately $19.8 million. The Company believes current working capital
and projected operating revenues for the remainder of 1997 and 1998,
supplemented by proceeds from employee stock plans, warrant exercises and
asset based credit, may provide the Company with sufficient liquidity
through most of 1998. If capital requirements vary materially from those
currently planned, the Company could require additional capital at an
earlier time. Additional funds may also be required for the Company to meet
significantly greater than anticipated demand for its products. As a
result, the Company has and will continue to evaluate raising additional
capital through alliances with strategic corporate partners, issuance of
debt, or an equity offering. There can be no assurance that adequate funds
will be available when needed or on acceptable terms. The Company's long-
term capital requirements will depend upon numerous factors, including the
rate of market acceptance of the Company's products, the level of resources
devoted to expanding the sales and marketing organization, manufacturing
capabilities and the Company's research and development activities.
11
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
On June 10, 1997, the Company completed the sale in a private placement of
1,422,222 shares of Common Stock, par value $.01 per share (the "Common
Stock"), at a price of $5.625 per share, for aggregate proceeds of
$8,000,000. Each purchaser of Common Stock also received a detachable
warrant to purchase one share of the Company's Common Stock for each four
shares of common stock purchased, with an exercise price (subject to
adjustment) equal to $6.75 per share. Such warrants were immediately
exercisable. The securities were privately sold to certain accredited
investors. The securities were sold pursuant to Rule 506 under Regulation D
of the Securities Act of 1933, as amended.
The Company issued stock warrants in 1992 in conjunction with private
bridge financing agreements with certain shareholders and outside
investors. The detachable warrants are exercisable up to five years from
the date of purchase at an exercise price of $4.77 per share. During the
quarter ended June 30, 1997, 6,637 shares of the Company's common stock
were issued in connection with such warrants, with proceeds amounting to
$31,658. The securities were sold pursuant to Rule 506 under Regulation D
of the Securities Act of 1933, as amended.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
A Special Meeting of the Company's shareholders was held on April 10, 1997
to consider an amendment to the Company's Articles of Incorporation to
increase the number of authorized shares of Common Stock from 20,000,000 to
35,000,000 (the "Amendment"). The Amendment was approved by shareholders by
a vote as follows: 9,601,120 voted "For"; 88,405 voted "Against"; 22,195
abstained; and no broker non-votes.
The Annual Meeting of the Company's shareholders was held on May 7, 1997.
At the meeting, shareholders voted on the reelection of two directors for
terms expiring at the Annual Meeting of the Company in 2000. Each of the
directors was reelected by a vote as follows: James E. Ashton, Ph.D.
received 13,529,470 votes "For" and 47,676 votes were "Withheld"; and Roy
S. Johnson received 13,527,870 votes "For" and 49,276 votes were
"Withheld."
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. EXHIBITS
EXHIBIT METHOD
NO. DESCRIPTION OF FILING
--- ------------ ---------
27 Financial Data Schedule Filed herewith
B. REPORTS ON FORM 8-K.
On June 26, 1997, the Company filed a Current Report on Form 8-K
relating to the Company's completion of the sale in a private
placement of 1,422,222 shares of Common Stock at a price of $5.625 per
share.
12
<PAGE>
DIAMETRICS MEDICAL, INC.
SIGNATURE
- ---------
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.
DIAMETRICS MEDICAL, INC.
By: /s/ Laurence L. Betterley
-------------------------
Laurence L. Betterley
Senior Vice President
and Chief Financial Officer
(and Duly Authorized Officer)
Dated: August 14, 1997
13
<PAGE>
DIAMETRICS MEDICAL, INC.
EXHIBIT INDEX
EXHIBIT
NO. DESCRIPTION
--- -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 4,569,955
<SECURITIES> 10,482,876
<RECEIVABLES> 2,695,042
<ALLOWANCES> 110,000
<INVENTORY> 4,490,041
<CURRENT-ASSETS> 22,627,511
<PP&E> 16,938,467
<DEPRECIATION> 9,138,249
<TOTAL-ASSETS> 32,466,414
<CURRENT-LIABILITIES> 5,839,231
<BONDS> 8,740,042
0
0
<COMMON> 197,385
<OTHER-SE> 17,571,981
<TOTAL-LIABILITY-AND-EQUITY> 32,466,414
<SALES> 4,562,645
<TOTAL-REVENUES> 4,562,645
<CGS> 5,649,520
<TOTAL-COSTS> 9,606,107
<OTHER-EXPENSES> (203,815)
<LOSS-PROVISION> 7,245
<INTEREST-EXPENSE> 529,635
<INCOME-PRETAX> (11,026,047)
<INCOME-TAX> 0
<INCOME-CONTINUING> (11,026,047)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (11,026,047)
<EPS-PRIMARY> (0.66)
<EPS-DILUTED> (0.66)
</TABLE>
