<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 September 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 September 30, 1997, was 20,763,100.
==============================================================================
<PAGE>
DIAMETRICS MEDICAL, INC.
Part I FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Statements of Operations:
Three Months Ended September 30, 1997 and 1996............... 3
Nine Months Ended September 30, 1997 and 1996................ 3
Consolidated Balance Sheets as of September 30, 1997
and December 31, 1996......................................... 4
Consolidated Statements of Cash Flows:
Nine Months Ended September 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
2
<PAGE>
DIAMETRICS MEDICAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
------------ ------------ -------------- --------------
<S> <C> <C> <C> <C>
Net sales $2,829,279 $669,848 $7,391,924 $1,862,949
Cost of sales 3,018,947 2,180,528 8,668,467 6,725,480
------------ ------------ -------------- --------------
Gross profit (loss) (189,668) (1,510,680) (1,276,543) (4,862,531)
------------ ------------ -------------- --------------
Operating expenses:
Research and development 1,782,933 1,691,164 5,344,396 4,884,082
Sales and marketing 1,917,018 1,617,058 5,860,444 4,897,064
General and administrative 936,330 702,493 2,874,344 2,210,147
Restructuring and other charges 134,939 - 298,143 525,301
------------ ------------ -------------- --------------
Total operating expenses 4,771,220 4,010,715 14,377,327 12,516,594
------------ ------------ -------------- --------------
Operating loss (4,960,888) (5,521,395) (15,653,870) (17,379,125)
Other income (expense), net (192,379) 37,123 (525,444) 282,372
------------ ------------ -------------- --------------
Net loss ($5,153,267) ($5,484,272) ($16,179,314) ($17,096,753)
============ ============ ============== ==============
Net loss per common share ($0.25) ($0.36) ($0.90) ($1.14)
------------ ------------ -------------- --------------
Weighted average number of
common shares outstanding 20,279,062 15,155,812 17,935,053 15,054,734
============ ============ ============== ==============
</TABLE>
3
<PAGE>
DIAMETRICS MEDICAL, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $1,701,760 $2,451,993
Marketable securities 13,902,063 3,402,598
Accounts receivable:
Trade, net 2,992,668 2,033,496
Nontrade 102,223 556,272
Inventories 3,820,717 4,464,099
Prepaid expenses and other current assets 468,541 543,755
------------ ------------
Total current assets 22,987,972 13,452,213
------------ ------------
Property and equipment 17,676,137 16,295,952
Less accumulated depreciation and amortization (9,912,360) (8,008,200)
------------ ------------
7,763,777 8,287,752
------------ ------------
Other assets 1,975,718 2,318,674
------------ ------------
$32,727,467 $24,058,639
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $1,700,144 $1,644,324
Accrued expenses 3,660,945 3,848,248
Current portion of long-term liabilities 1,161,913 1,310,154
------------ ------------
Total current liabilities 6,523,002 6,802,726
------------ ------------
Long-term liabilities:
Long-term liabilities, excluding current portion 8,551,400 7,795,851
Capital lease obligations, excluding current portion 208,069 666,668
Other liabilities, excluding current portion 114,856 119,155
------------ ------------
Total liabilities 15,397,327 15,384,400
------------ ------------
Shareholders' equity:
Common stock, $.01 par value: 35,000,000 authorized
20,763,100 and 15,209,481 shares issued and outstanding 207,631 152,095
Additional paid-in capital 113,350,175 88,451,972
Cumulative translation adjustment (29,215) 89,309
Accumulated deficit (96,198,451) (80,019,137)
------------ ------------
Total shareholders' equity 17,330,140 8,674,239
------------ ------------
$32,727,467 $24,058,639
============ ============
</TABLE>
4
<PAGE>
DIAMETRICS MEDICAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1997 1996
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss ($16,179,314) ($17,096,753)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 3,077,761 2,051,351
Gain on disposal of property and equipment (89,526) (1,686)
Change in operating assets and liabilities:
Receivables, net (505,123) (34,308)
Inventories 643,382 (1,233,493)
Prepaid expenses and other current assets 75,214 (26,494)
Accounts payable and accrued expenses (98,810) (208,687)
------------ ------------
Net cash used in operating activities (13,076,416) (16,550,070)
------------ ------------
Cash flows from investing activities:
Purchases of property and equipment (2,466,031) (1,151,571)
Purchases of marketable securities (22,899,465) (8,363,881)
Proceeds from maturities of marketable securities 12,400,000 24,537,617
Other 164,080 125,510
------------ ------------
Net cash provided by (used in) investing activities (12,801,416) 15,147,675
------------ ------------
Cash flows from financing activities:
Principal payments on borrowings (87,312) (76,542)
Proceeds from long-term borrowings 1,058,626 -
Net proceeds from the issuance of preferred stock 11,900,000 -
Net proceeds from the issuance of common stock 13,053,739 886,343
Principal payments under capital lease obligations (812,203) (805,864)
------------ ------------
Net cash provided by financing activities 25,112,850 3,937
------------ ------------
Cumulative translation adjustment 14,749 -
------------ ------------
Net decrease in cash and cash equivalents (750,233) (1,398,458)
------------ ------------
Cash and cash equivalents at beginning of period 2,451,993 2,702,232
------------ ------------
Cash and cash equivalents at end of period $1,701,760 $1,303,774
============ ============
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $298,734 $395,098
============ ============
</TABLE>
5
<PAGE>
DIAMETRICS MEDICAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 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 condensed or omitted. However, in the opinion of
management, the financial statements include all adjustments, consisting of
normal recurring accruals and restructuring and other charges, 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:
September 30, December 31,
1997 1996
------------------------------
Raw materials $1,000,402 $1,623,243
Work-in-process 524,880 569,505
Finished goods 2,295,435 2,271,351
------------------------------
$3,820,717 $4,464,099
==============================
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 nine months ended September 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:
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1996
1997 Pro forma 1997 Pro forma
----------- ----------- ----------- -----------
Net sales $ 2,829,279 $ 1,496,848 $ 7,391,924 $ 4,588,949
Cost of sales 3,018,947 4,749,528 8,668,467 10,958,480
Operating expenses 4,771,220 5,792,715 14,377,327 17,586,594
Net loss (5,153,267) (10,499,272) (16,179,314) (25,138,753)
Net loss per
common share $ (0.25) $ (0.69) $ (0.90) $ (1.67)
(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. In
addition, each purchaser received a warrant to purchase one share of Common
Stock, at a purchase price of $6.75, for every four shares of Common Stock
purchased, providing additional future funding potential of approximately
$2.4 million. The warrants can be exercised at any time during the five year
period ending June 10, 2002. Additionally, the Company can call the warrants
if the Company's Common Stock trades for any consecutive 20 trading days at
a price greater than $8.75 in the first 12 months, or $9.25, $9.75, $10.25,
and $10.75 in each subsequent year, respectively.
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.
On August 4, 1997, the Company called the warrants issued in connection with
the private equity placement completed in January 1997, resulting in the
issuance during the third quarter of 750,000 shares of Common Stock at $5.0625
per share.
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 September 30, 1997, the primary funding for the operations
of the Company has been approximately $113.3 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 a
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 Neotrend, a continuous multi-parameter blood gas monitoring system for use
with low birth weight newborns. Each of these products consists of a
monitoring system and intravascular disposable sensors.
RESULTS OF OPERATIONS
---------------------
SALES Sales of the Company's products were $2,829,279 and $7,391,924 for the
three and nine months ended September 30, 1997, compared to $669,848 and
$1,862,949 for the same periods last year, an increase of 322% and 297%,
respectively. The increase for the three and nine months ended September 30,
1997 over the prior year reflects the inclusion of sales related to DML and
also a 183% and 126% 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 nine months ended September 30,
1996, sales increased 89% and 61% for the same periods in 1997.
The Company's revenues are affected principally by the number of monitors and
IRMA instruments placed with customers and the rate at which disposable
sensors and cartridges are used in connection with these products. As of
September 30, 1997, the Company has over 2,000 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 three and nine months ended September 30, 1997
increased 10% and 14%, respectively, over Biomedical Sensors' unit sales as a
Pfizer operating unit for the same periods in 1996, and IRMA disposable
cartridge units sold for the three and nine months ended September 30, 1997
increased 62% and 96%, respectively, over the comparable periods in 1996.
The Company's revenue in the fourth quarter of 1997 is targeted to exceed that
of the third quarter, with revenues for the full year 1997 more than doubling
the level achieved in 1996. The projected revenue growth is the result of
further planned expansion of the blood analysis and monitoring product lines,
continued market penetration of these products 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 $3,018,947 and $8,668,467 for the three and nine months ended
September 30, 1997, compared to $2,180,528 and $6,725,480 for the same periods
in the prior year, an increase of 38% and 29%, respectively. The increase over
the prior year reflects the inclusion of manufacturing costs related to the
operations of DML and increased IRMA instrument and cartridge sales volume,
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 nine months ended September 30, 1996,
costs decreased 36% and 21%, 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 during the remainder of 1997 and beyond, as sales
volumes increase and continued improvements are realized in manufacturing
yields, processes, costs and product design.
OPERATING EXPENSES Research and development expenditures were $1,782,933 and
$5,344,396 for the three and nine months ended September 30, 1997, compared to
$1,691,164 and $4,884,082 for the same periods in the prior year. The increase
for the three and nine months ended September 30, 1997 reflects inclusion of
expenses related to the operations of DML, partially offset by expense
reductions of 39% and 36%, respectively, 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 nine months ended September
30, 1996, costs decreased 27% and 23%, respectively, for the same periods in
1997, due to the completion during 1996 of development of the IRMA SL, and
improved efficiencies resulting in staff reductions in the Company's U.S.
operations in late 1996 and 1997.
Sales and marketing expenses totaled $1,917,018 and $5,860,444 for the three
and nine months ended September 30, 1997, compared to $1,617,058 and
$4,897,064 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 nine months ended September 30, 1996,
expenses decreased 16% and 17%, respectively, for the same periods in 1997,
due to organizational efficiencies and better deployment of resources.
General and administrative expenses totaled $936,330 and $2,874,344 for the
three and nine months ended September 30, 1997, compared to $702,493 and
$2,210,147 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 nine months ended September 30,
1996, expenses decreased 12% and 8%, 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 and early 1997.
Restructuring and other charges totaled $134,939 and $298,143 for the three
and nine month periods ended September 30, 1997, respectively, compared to no
charges 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, research and development and general and
administrative areas. 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 or shortly after the end of the quarter of the years in
which charges were incurred, and the Company does not have any material 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 remainder of 1997 are targeted to
approximate third quarter 1997 levels, excluding restructuring and other
charges.
9
<PAGE>
OTHER INCOME (EXPENSE) Net other expense was $192,379 and $525,444 for the
three and nine months ended September 30, 1997, compared to net other income
of $37,123 and $282,372 for the same periods in the prior year, a decrease of
$229,502 and $807,816, respectively. The Company realized interest income of
$204,814 and $463,449 for the three and nine months ended September 30, 1997,
compared to $193,244 and $819,996 for the same periods in the prior year. The
increased interest income in the third quarter 1997 relative to the same
quarter in 1996 reflects the impact of higher average cash balances resulting
from $4.4 million of proceeds from warrant exercises during the quarter, while
the decrease in the year-to-date periods reflects the impact of lower average
cash balances resulting from a net use of cash in operations.
Interest expense totaled $268,889 and $798,524 for the three and nine months
ended September 30, 1997, compared to $121,457 and $395,098 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 nine months ended September 30, 1997
was $5,153,267 and $16,179,314, compared to $5,484,272 and $17,096,753 for the
same periods in 1996. Compared to a pro forma combined basis of Diametrics'
and Biomedical Sensors' net loss for the three and nine months ended September
30, 1996, the net loss decreased 51% and 36%, respectively, for the same
periods in 1997. The Company is targeting a reduced net loss in the fourth
quarter of 1997, compared to the third quarter of 1997.
10
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
At September 30, 1997, the Company had working capital of $16,464,970, an
increase of $9,815,483 from the working capital reported at December 31, 1996.
The increase primarily reflects the impact of two private equity placements
completed in January and June of 1997, resulting in net proceeds of
approximately $19.8 million, followed by $4.4 million of proceeds during the
third quarter generated from the issuance of Common Stock from warrant
exercises, less the net cash used in operating, investing and financing
activities for the nine months ended September 30, 1997.
At September 30, 1997, warrants for 355,556 shares of Common Stock, issued in
connection with the Company's private equity placement in June 1997, were
outstanding. The warrants are exercisable at $6.75 per share, providing
additional future funding potential of $2.4 million. The five-year warrants
are callable if the Company's Common Stock price exceeds $8.75 for 20
consecutive trading days in the 12 months after issuance, and at increasing
amounts thereafter.
At September 30, 1997, the Company had property and equipment of $17,676,137,
up from $16,295,952 at December 31, 1996, less accumulated depreciation of
$9,912,360 and $8,008,200 at September 30, 1997 and December 31, 1996,
respectively. The $1,380,000 net increase in the cost of property and
equipment is the result of approximately $2,466,000 of capital additions,
consisting primarily of investments in production equipment and demonstration
instruments used to facilitate sales, less retirements of approximately
$735,000 and foreign currency translation decreases of approximately $308,000.
Approximately $3,500,000 of the Company's property and equipment are financed
through capital lease obligations at September 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 September 30, 1997, the Company had U.S. net operating loss and research
and development tax credit carryforwards for income tax purposes of
approximately $88,000,000 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 $5,153,267 and $16,179,314 for the three
and nine months ended September 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, and in the third quarter 1997, the Company received net
proceeds of $4.4 million from the issuance of common stock from warrant
exercises. 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
Effective July 31, 1997, the Company called the warrants issued in
connection with a private equity placement completed in January of this
year. This resulted in the issuance of 750,000 shares of Common Stock at
$5.0625 per share, providing additional funding of approximately $3.8
million during the third quarter. 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
quarters ended June 30 and September 30, 1997, 6,637 and 128,205 shares of
the Company's common stock were issued in connection with such warrants,
with proceeds amounting to $31,658 and $611,538, respectively. 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
None
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.
None
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: November 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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 1,701,760
<SECURITIES> 13,902,063
<RECEIVABLES> 3,219,112
<ALLOWANCES> 226,444
<INVENTORY> 3,820,717
<CURRENT-ASSETS> 22,987,972
<PP&E> 17,676,137
<DEPRECIATION> 9,912,360
<TOTAL-ASSETS> 32,727,467
<CURRENT-LIABILITIES> 6,523,002
<BONDS> 8,759,469
0
0
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