<PAGE>
================================================================================
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 March 31, 2000
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
(651) 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 April 30, 2000, was 26,626,047.
================================================================================
<PAGE>
Diametrics Medical, Inc.
Page
----
Part I -- FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements (unaudited)
Consolidated Statements of Operations:
Three Months Ended March 31, 2000 and 1999.....................3
Consolidated Balance Sheets as of March 31, 2000
and December 31, 1999............................................4
Consolidated Statements of Cash Flows:
Three Months Ended March 31, 2000 and 1999.....................5
Notes to Consolidated Financial Statements........................6
Item 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition...........................................7
Item 3. Quantitative and Qualitative Disclosure About Market Risk........11
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)
Three Months Ended
March 31,
2000 1999
------------ ------------
Net sales $ 5,670,894 $ 4,243,187
Cost of sales 4,269,957 3,516,906
------------ ------------
Gross profit 1,400,937 726,281
------------ ------------
Operating expenses:
Research and development 1,109,369 1,535,643
Sales and marketing 519,445 2,030,114
General and administrative 952,053 896,766
------------ ------------
Total operating expenses 2,580,867 4,462,523
------------ ------------
Operating loss (1,179,930) (3,736,242)
Other income (expense), net 36,521 (171,500)
------------ ------------
Net loss $ (1,143,409) $ (3,907,742)
============ ============
Basic and diluted net loss per common share $ (0.04) $ (0.17)
============ ============
Weighted average number of
common shares outstanding 26,008,225 23,434,552
============ ============
See accompanying notes to consolidated financial statements.
3
<PAGE>
DIAMETRICS MEDICAL, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
------------- -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 2,565,159 $ 2,786,162
Marketable securities 10,641,156 11,339,009
Accounts receivable 6,309,092 6,790,673
Inventories 3,742,039 4,116,348
Prepaid expenses and other current assets 379,805 285,336
------------- -------------
Total current assets 23,637,251 25,317,528
------------- -------------
Property and equipment 20,049,857 19,455,298
Less accumulated depreciation and amortization (13,965,883) (13,680,801)
------------- -------------
6,083,974 5,774,497
------------- -------------
Other assets 760,880 880,171
------------- -------------
$ 30,482,105 $ 31,972,196
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,966,228 $ 2,438,550
Accrued expenses 1,745,369 2,414,785
Other current liabilities 4,553,918 5,454,725
------------- -------------
Total current liabilities 8,265,515 10,308,060
------------- -------------
Long-term liabilities:
Long-term liabilities, excluding current portion 7,796,498 7,813,796
Other liabilities 9,684 9,684
------------- -------------
Total liabilities 16,071,697 18,131,540
------------- -------------
Shareholders' equity:
Common stock, $.01 par value: 35,000,000 authorized
26,372,469 and 25,778,499 shares issued and outstanding 263,725 257,785
Additional paid-in capital 145,192,681 143,463,332
Accumulated other comprehensive loss (538,635) (516,507)
Accumulated deficit (130,507,363) (129,363,954)
------------- -------------
Total shareholders' equity 14,410,408 13,840,656
------------- -------------
$ 30,482,105 $ 31,972,196
============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
DIAMETRICS MEDICAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
2000 1999
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(1,143,409) $(3,907,742)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 473,719 578,479
Other (102) 3,150
Changes in operating assets and liabilities:
Accounts receivable 481,581 (855,736)
Inventories 374,309 (53,963)
Prepaid expenses and other current assets (94,469) (62,095)
Accounts payable (472,322) (755,917)
Accrued expenses (669,416) 112,318
Deferred credits and revenue (950,000) --
----------- -----------
Net cash used in operating activities (2,000,109) (4,941,506)
----------- -----------
Cash flows from investing activities:
Purchases of property and equipment (695,866) (151,648)
Sale of evaluation and demonstration instruments -- 640,302
Purchases of marketable securities (4,302,147) --
Proceeds from maturities of marketable securities 5,000,000 2,976,443
Other 701 --
----------- -----------
Net cash provided by investing activities 2,688 3,465,097
----------- -----------
Cash flows from financing activities:
Principal payments on borrowings (83,951) (968,910)
Proceeds from borrowings 115,846 --
Net proceeds from the issuance of common stock 1,735,289 3,806,893
----------- -----------
Net cash provided by financing activities 1,767,184 2,837,983
----------- -----------
Effect of exchange rate changes on cash and cash equivalents 9,234 (134,767)
----------- -----------
Net increase (decrease) in cash and cash equivalents (221,003) 1,226,807
Cash and cash equivalents at beginning of period 2,786,162 3,432,614
----------- -----------
Cash and cash equivalents at end of period $ 2,565,159 $ 4,659,421
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 150,074 $ 165,413
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
DIAMETRICS MEDICAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2000
(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, 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, 1999.
(2) COMPREHENSIVE LOSS
Three Months Ended
March 31,
2000 1999
------------- -------------
Net loss $ (1,143,409) $ (3,907,742)
Change in cumulative
translation adjustment (22,128) (264,867)
------------ ------------
Comprehensive loss $ (1,165,537) $ (4,172,609)
============ ============
(3) Inventories
March 31, December 31,
2000 1999
----------- -----------
Raw materials $ 1,815,225 $ 2,260,586
Work-in-process 728,227 658,983
Finished goods 1,198,587 1,196,779
----------- -----------
$ 3,742,039 $ 4,116,348
=========== ===========
(4) OTHER CURRENT LIABILITIES
March 31, December 31,
2000 1999
----------- ------------
Deferred research and development funding $ 2,333,334 $ 2,833,334
Deferred royalty payments 1,821,880 2,271,880
Current portion of long-term debt 398,704 349,511
----------- -----------
$ 4,553,918 $ 5,454,725
=========== ===========
6
<PAGE>
The Company's distribution agreement with Agilent Technologies, Inc.
("Agilent") provides for prepaid funding of research and development costs
and royalty payments over the initial term of the agreement. These
prepayments will be recognized over the periods benefited.
(5) SHAREHOLDERS' EQUITY
On March 13, 2000, the Company called the warrants issued in connection
with a private equity placement completed in June 1997, resulting in the
issuance during the first quarter of 101,978 shares of Common Stock at
$6.75 per share. The remaining increase in shareholders' equity is
primarily due to the issuance of 251,404 shares of Common Stock in
connection with employee stock plans, partially offset by a net loss for
the quarter.
(6) RELATED PARTY TRANSACTIONS
One of the Company's directors is also a director of DVI, Inc., a health
care finance company with which the Company has a credit line and notes
payable. As of March 31, 2000, there were no outstanding advances against
the $1,000,000 receivable backed credit line and the outstanding balance of
the notes payable totaled $779,355.
The Company's exclusive distributors, Agilent and CODMAN, a Johnson &
Johnson company, are shareholders of the Company. Sales to these parties
were approximately $4.8 million for the three months ended March 31, 2000.
As of March 31, 2000, outstanding accounts receivable for these
distributors represented 82% of total outstanding accounts receivable. One
of the Company's directors is also an executive officer of Agilent.
Item 2. Management's Discussion and Analysis of Results of Operations and
-------------------------------------------------------------------------
Financial Condition
-------------------
The Company's discussion and analysis of results of operations and
financial condition, including statements regarding the Company's
expectations about new and existing products, future financial performance,
market risk exposure 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, stability of domestic and international
financial markets 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 U.S. Securities and Exchange Commission,
with respect to the Company's fiscal year ended December 31, 1999. When
used in the Form 10-Q, and in future filings by the Company with the
Securities and Exchange Commission, in the Company's press releases,
presentations to securities analysts or investors, in oral statements made
by or with the approval of an executive officer of the Company, the words
or phrases "believes," "may," "will," "expects," "should," "continue,"
"anticipates," "intends," "will likely result," "estimates," "projects," or
similar expressions and variations thereof are intended to identify such
forward-looking statements.
SUMMARY
-------
Diametrics Medical, Inc., which began operations in 1990, is engaged in the
development, manufacturing and commercialization of critical care blood and
tissue 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 development, manufacturing
and marketing organization. As of
7
<PAGE>
March 31, 2000, the primary funding for the operations of the Company has
been approximately $145 million raised through public and private sales of
its equity securities and issuance of convertible promissory notes.
The Company's strategy for distribution and commercialization of its
products includes partnerships with Agilent and CODMAN. In October 1998,
the Company entered into an exclusive distribution agreement with CODMAN
for worldwide market development and distribution of the Company's
Neurotrend(TM) Cerebral Tissue Monitoring System ("Neurotrend"). CE Mark
approval for Neurotrend was received in the second quarter 1998, allowing
the system to be marketed in Europe, and the Company received clearance
from the Food and Drug Administration in November 1999, allowing the system
to be marketed in the United States. Sales of Neurotrend to CODMAN began in
the fourth quarter 1998. In June 1999, the Company entered into an
exclusive distribution agreement with Hewlett Packard Company ("HP"). Under
the terms of the distribution agreement, the Company transferred full
responsibility for marketing, sales and distribution of the Company's
leading critical care products, the IRMA(R)SL blood analysis system and the
Trendcare(R) continuous blood gas monitoring systems, including
Paratrend(R) and Neotrend(TM), to HP. The agreement also provides for
minimum purchase commitments, market development commitments, research and
development funding and royalty payments over the initial three and a
half-year term. In November 1999, HP assigned the distribution agreement to
Agilent, a leading provider of test and measurement solutions and
communications components, which was formed as a new company and subsidiary
of HP. HP plans to spin-off its ownership in Agilent to HP shareholders
during 2000.
RESULTS OF OPERATIONS
---------------------
Sales. Sales of the Company's products were $5,670,894 for the three months
ended March 31, 2000, compared to $4,243,187 for the same period last year,
an increase of 34%. The increase in sales over the prior year's first
quarter reflects an increase in instrument sales of 49%, partially offset
by a general decrease in product pricing under the Agilent and CODMAN
distribution agreements. The impact of reduced pricing was partially
mitigated by $450,000 of royalty revenue from the Agilent distribution
agreement. The significant increase in instrument sales between quarters
was impacted primarily by sales to Agilent and CODMAN. While unit sales of
disposable cartridges and sensors grew 26% between the first quarters of
1999 and 2000, related revenues declined due to the impact of lower average
sales prices described above. The Company's direct sales to Agilent and
CODMAN comprised approximately 49% and 84% of total sales in the three
months ended March 31, 1999 and March 31, 2000, respectively.
Intermittent testing products represented 45% of total sales for the three
months ended March 31, 2000, compared to 34% for the same period in 1999.
Continuous monitoring products comprised the remaining sales in each
period.
Intermittent blood testing products revenue was comprised of 70% instrument
related revenue and 30% disposable cartridge related revenue for the three
months ended March 31, 2000. Continuous monitoring products revenue was
comprised of 76% instrument related revenue and 24% disposable sensor
revenue for the three months ended March 31, 2000. The high concentration
of instrument related revenue was impacted primarily by sales to Agilent
and CODMAN.
The Company's revenues are affected principally by the number of
instruments, both monitors and IRMA analyzers, placed with customers and
the rate at which disposable sensors and cartridges are used in connection
with these products. As of March 31, 2000, the Company has sold
approximately 5,600 instruments. Unit sales of instruments for the three
months ended March 31, 2000, increased approximately 125% over unit sales
for the same period in 1999, while disposable sensor and cartridge unit
sales increased 26%. As the Company grows, it is expected that the
Company's growing end-user customer base will increase the usage and rate
of usage of disposable products, with the result that overall disposable
product sales will exceed that of instrument sales.
8
<PAGE>
The Company has targeted continued revenue growth during the remainder of
2000, as a result of further planned expansion of its blood and tissue
analysis product lines and continued commercialization of these products by
market leading distribution partners.
Cost of Sales. Cost of sales totaled $4,269,957, or 75% of revenue for the
three months ended March 31, 2000, compared to $3,516,906 or 83% of revenue
for the same period last year. The quarter-to-quarter improvement in the
Company's cost of sales as a percentage of revenue reflects increased unit
sales volumes, a higher mix of instrument sales, improved cartridge yields,
a reduction in instrument material costs, and the impact of operational
efficiencies and process improvements, partially offset by lower average
sales prices. The impact of lower pricing was partially mitigated by
royalty revenue from Agilent. The Company is targeting continued
improvements in gross profit during the remainder of 2000 as a result of
expected continued improvements in manufacturing yields and higher unit
volumes.
Operating Expenses. Research and development expenditures totaled
$1,109,369 and $1,535,643 for the three months ended March 31, 2000 and
1999, respectively. The 28% decline in expenses from 1999 to 2000 is
primarily due to the recognition in 2000 of research and development
funding received from Agilent as part of the distribution agreement,
partially offset by additional investments to support new research and
development projects.
Sales and marketing expenses totaled $519,445 and $2,030,114 for the three
months ended March 31, 2000 and 1999, respectively. The 74% decrease in
expenses between quarters was primarily impacted by the transfer in
November 1999 of most of the Company's sales and marketing functions to
Agilent.
General and administrative expenses totaled $952,053 and $896,766 for the
three months ended March 31, 2000 and 1999, respectively. The 6%
period-to-period increase primarily reflects costs associated with
increased investor relations activities and higher insurance costs.
Operating expense run rates for the remaining three quarters of 2000 are
targeted to approximate first quarter levels.
Other Income (Expense). Net other income totaled $36,521 and net other
expense totaled $171,500 for the three months ended March 31, 2000 and
1999, respectively. The Company realized interest income of $201,018 for
the three months ended March 31, 2000, compared to $42,314 for the same
period in 1999. The period-to-period increase reflects the impact of higher
average cash balances, primarily due to the timing of the Company's
financing activities, funding received from Agilent and improved cash flow
from operations.
Interest expense totaled $150,074 and $165,414 for the three months ended
March 31, 2000 and 1999, respectively. The period-to-period decrease
reflects the impact of lower average debt balances.
Net Loss. The net loss for the three months ended March 31, 2000 and 1999
was $1,143,409 and $3,907,742, respectively. The 71% reduction in net loss
between periods reflects revenue growth; improved margins, influenced by
higher unit volumes, changes in product mix and improved manufacturing
yields; and reduced operating expenses due primarily to research and
development funding received from Agilent and the transfer of the Company's
sales and marketing functions to Agilent. The Company is targeting
continued improvement in net loss during the remainder of 2000.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
At March 31, 2000, the Company had working capital of $15,371,736, an
increase of $362,268 from the working capital reported at December 31,
1999. The increase is impacted primarily by
9
<PAGE>
proceeds from exercises under employee stock plans and outstanding warrants
of approximately $1.7 million, partially offset by purchases of property
and equipment of approximately $700,000.
Net cash used in operating activities totaled $2,000,109 for the three
months ended March 31, 2000, compared to $4,941,506 for the same period in
1999. This was the result of net losses of $1,143,409 and $3,907,742 for
these same periods in 2000 and 1999, respectively, adjusted by changes in
key operating assets and liabilities, primarily accounts receivable,
inventories, accounts payable, accrued expenses and deferred credits and
revenue.
Net accounts receivable decreased $481,581 for the three months ended March
31, 2000, compared to an $855,736 increase for the same period in 1999. The
reduction in accounts receivable in the first quarter of 2000 relative to
the increase for the same period in 1999 occurred in spite of a
significantly larger increase in sales between periods primarily due to an
improvement in days sales outstanding and the timing of sales.
Inventories decreased $374,309 for the three months ended March 31, 2000,
after an increase of $53,963 for the three months ended March 31, 1999. The
decrease in 2000 was primarily due to an improvement in inventory turnover,
due to improved inventory management. The increase in 1999 was primarily
impacted by increased production of newly released continuous monitoring
instrument inventory to fulfill expected demand in the second quarter of
1999.
Accounts payable and accrued expenses decreased $1,141,738 and $643,599 for
the three months ended March 31, 2000 and 1999, respectively. The larger
decrease in 2000 was primarily due to higher accrued employee bonuses at
December 31, 1999 relative to December 31, 1998, paid in the first quarter
of each year.
Deferred credits and revenue decreased $950,000 during the three months
ended March 31, 2000, representing the recognition of funding from Agilent
for research and development costs and royalty payments.
Net cash provided by investing activities totaled $2,688 for the three
months ended March 31, 2000, compared to $3,465,097 for the same period in
1999. This change was affected primarily by the amounts and timing of
equity funding, which affected the amount of cash available for the
purchase of marketable securities. Purchases of property and equipment,
totaling $695,866 in 2000 and $151,648 in 1999, also affected net cash used
in investing activities in each period. In 2000, the Company expects
capital expenditures and new lease commitments to approximate $3 million,
primarily reflecting investments to support new product development and
production.
Net cash provided by financing activities totaled $1,767,184 for the three
months ended March 31, 2000, compared to $2,837,983 for the same period in
1999. In 2000, net cash provided by financing activities consisted
primarily of proceeds from employee stock plans and warrant exercises. Net
cash provided by financing activities in 1999 was primarily due to proceeds
from the issuance of common stock as a result of the exercise of a Put
Option under a Put Option and Stock Purchase Agreement with Johnson &
Johnson Development Corporation, partially offset by principal payments on
borrowings and capital lease obligations.
At March 31, 2000, the Company had U.S. net operating loss and research and
development tax credit carryforwards for income tax purposes of
approximately $113.9 million and $1.2 million, respectively. Pursuant to
the Tax Reform Act of 1986, use of a portion of the Company's net operating
loss carryforwards are limited due to a "change in ownership." The Company
estimates that U.S. net operating loss carryforwards of $2.9 million are
not currently available due to these annual limitations. Net operating
losses incurred since August 4, 1995 are not currently subject to the
"change in ownership" limitations. If not used, these net operating loss
carryforwards begin to expire in 2005.
The Company's foreign subsidiary also has net operating loss carryforwards
of approximately $47.3 million, which can be carried forward indefinitely.
10
<PAGE>
As part of an exclusive distribution agreement with HP completed in June
1999, HP agreed to acquire $9.5 million of the Company's Common Stock at
$7.00 per share, with a warrant to purchase 452,381 shares of Common Stock
at $8.40 per share, providing additional funding potential of $3.8 million.
In addition, HP agreed to minimum purchase commitments, market development
commitments, research and development funding and royalty payments over the
initial term of the agreement. In November 1999, HP assigned the
distribution agreement and its equity investment with the Company to
Agilent, which was formed as a new company and subsidiary of HP. The
Company believes proceeds from the funding agreements with Agilent,
currently available funds and cash generated from projected operating
revenues, supplemented by proceeds from employee stock plans, warrant
exercises and asset based credit will meet the Company's working capital
needs. If the amount or timing of funding from these sources or cash
requirements vary materially from those currently planned, the Company
could require additional capital. The Company's long-term capital
requirements will depend upon numerous factors, including the rate of
market acceptance of the Company's products and the level of resources
devoted to expanding the Company's business, manufacturing capabilities and
research and development activities. While there can be no assurance that
adequate funds will be available when needed or on acceptable terms,
management believes that the Company will be able to raise adequate funding
if needed.
NEW ACCOUNTING PRONOUNCEMENTS
-----------------------------
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities," (as amended by SFAS No. 137 with respect to the effective
date) will be effective for the Company in January 2001. SFAS No. 133
requires all derivatives to be recognized as assets or liabilities on the
balance sheet and measured at fair value on a mark-to-market basis. This
applies whether the derivatives are stand-alone instruments, such as
forward currency exchange contracts and interest rate swaps or collars, or
embedded derivatives, such as call options contained in convertible debt
investments. Along with the derivatives, the underlying hedged items are
also to be marked-to-market on an ongoing basis. These market value
adjustments are to be included either in net earnings or loss in the
statement of operations or in other comprehensive income (and accumulated
in shareholders' equity), depending on the nature of the transaction. The
Company is currently evaluating SFAS No. 133, but does not expect that it
will have a material effect on its financial statements.
In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin ("SAB") No. 101 which provides the staff's views
in applying generally accepted accounting principles to selected revenue
recognition issues. On March 24, 2000, the SEC issued SAB No. 101A,
"Deferral of the Effective Date of SAB 101 and Implementation Issues
Related to SAB 101," which defers the effective date of SAB 101 by one
quarter for certain registrants. SAB 101 is now effective beginning the
second quarter of all fiscal years beginning after December 15, 1999 for
registrants with fiscal years that begin between December 16, 1999 and
March 15, 2000. The Company will be required to adopt the guidance of this
bulletin, beginning with the second quarter of 2000. The Company believes
that its revenue recognition policies are in compliance with SAB 101, and
does not expect it to have a material impact on its financial condition or
results of operations.
Item 3. Quantitative and Qualitative Disclosure About Market Risk
-----------------------------------------------------------------
The Company's primary market risk exposure is foreign exchange rate
fluctuations of the British pound sterling to the U.S. dollar as the
financial position and operating results of the Company's U.K. subsidiary,
Diametrics Medical, Ltd., are translated into U.S. dollars for
consolidation. The Company's exposure to foreign exchange rate fluctuations
also arises from transferring funds to its U.K. subsidiary in British
pounds sterling. Effective November 1, 1999 most of the Company's sales are
made to distributors and denominated in U.S. dollars, thereby significantly
mitigating the risk of exchange rate fluctuations on trade receivables. The
Company does not currently use derivative financial instruments to hedge
against exchange rate risk. The Company's exposure to interest rate risk is
limited to short-term borrowings under its $1,000,000 receivable backed
credit
11
<PAGE>
line. Based upon currently available information, management does not
believe that the effect of foreign exchange rate fluctuations and interest
rate risk will have a material impact on the Company's financial condition
or overall trends in results of operations. There have been no material
changes in market risk faced by the Company from what has been previously
reported in the Company's Annual Report on Form 10-K for the year ended
December 31, 1999.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
The Company issued stock warrants in 1991 through 1993 as part of a
lease financing arrangement with Medical Innovation Partnership. The
warrants are exercisable up to ten years from the date of grant at
exercise prices ranging from $1.72 to $3.45 per share. On March 3,
2000, the Company issued 240,588 shares of Common Stock in connection
with the exercise of these warrants. 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: May 15, 2000
13
<PAGE>
DIAMETRICS MEDICAL, INC.
EXHIBIT INDEX
Exhibit
No. Description
------- -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 2,565,159
<SECURITIES> 10,641,156
<RECEIVABLES> 6,501,112
<ALLOWANCES> 192,020
<INVENTORY> 3,742,039
<CURRENT-ASSETS> 23,637,251
<PP&E> 20,049,857
<DEPRECIATION> 13,965,883
<TOTAL-ASSETS> 30,482,105
<CURRENT-LIABILITIES> 8,265,515
<BONDS> 7,796,498
0
0
<COMMON> 263,725
<OTHER-SE> 14,146,683
<TOTAL-LIABILITY-AND-EQUITY> 30,482,105
<SALES> 5,670,894
<TOTAL-REVENUES> 5,670,894
<CGS> 4,269,957
<TOTAL-COSTS> 2,580,867
<OTHER-EXPENSES> (186,595)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 150,074
<INCOME-PRETAX> (1,143,409)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,143,409)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,143,409)
<EPS-BASIC> (.04)
<EPS-DILUTED> (.04)
</TABLE>
