FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
/ 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
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from............................to....................
Commission File Number........0-19410
HemaSure Inc.
(Exact name of registrant as specified in its charter)
Delaware 04-3216862
(State or other jurisdiction of (I.R.S. Employer Identification No.)
organization or incorporation)
140 Locke Drive, Marlborough, Massachusetts 01752
(Address of principal executive offices)
(Zip Code)
(508) 485-6850
(Registrant's telephone number, including area code)
N/A
-----------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
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 / /
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Common Stock, par value $.01 per share 8,127,602
-------------------------------------- ---------
Class Outstanding at November 9, 1997
<PAGE>
<TABLE>
HemaSure Inc.
INDEX
<CAPTION>
Page
<S> <C> <C>
Part I Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets as of September 30, 1997 and
December 31, 1996 3
Consolidated Statements of Operations for the Three and Nine
Month Periods Ended September 30, 1997 and 1996 4
Consolidated Statements of Cash Flows for the Periods Ended
September 30, 1997 and 1996 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 9
Part II Other Information 12
Item 1. Legal proceedings 13
Item 2. Changes in Securities and Use of Proceeds 14
Item 3. Defaults Upon Senior Securities 14
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 15
</TABLE>
2
<PAGE>
<TABLE>
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements
HemaSure Inc.
Consolidated Balance Sheets
<CAPTION>
(In thousands) September 30, December 31,
1997 1996
(Unaudited)
-------------------- -------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 3,914 $ 5,527
Marketable securities 6,787 11,369
Accounts receivable 250 283
Inventories 787 376
Assets held for sale 150 500
Prepaid expenses 29 208
-------------------- -------------------
Total current assets 11,917 18,263
Property and equipment, net 1,993 2,245
Other assets 65 52
-------------------- -------------------
Total assets $ 13,975 $ 20,560
==================== ===================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 751 $ 1,612
Accrued restructuring expenses 665 --
Accrued expenses 1,270 1,573
Note payable - current portion 28 --
Capital lease obligations-current portion 242 234
-------------------- -------------------
Total current liabilities 2,956 3,419
Capital lease obligations 381 525
Note payable 91 --
Convertible subordinated note payable 8,687 8,687
-------------------- -------------------
Total liabilities 12,115 12,631
-------------------- -------------------
Stockholders' equity:
Common stock 82 81
Additional paid-in-capital 60,753 60,702
Unearned compensation (250) (398)
Unrealized holding loss of available for sale marketable securities (1) (3)
Accumulated deficit (58,724) (52,453)
-------------------- -------------------
Total stockholders' equity 1,860 7,929
-------------------- -------------------
Total liabilities and stockholders' equity $ 13,975 $ 20,560
==================== ===================
</TABLE>
The accompanying notes are an integral part
of the financial statements
3
<PAGE>
<TABLE>
HemaSure Inc.
Consolidated Statements of Operations
For the Three and Nine Month Periods Ended
September 30, 1997 and 1996
(Unaudited)
<CAPTION>
(In thousands, except per share amounts) Three-month periods Nine-month periods ended
ended September 30, September 30,
---------------------------- ---------------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Product sales $ 522 $ 518 $ 1,590 $ 555
Product sales to related parties -- -- -- 13
Collaborative research and development -- -- -- 54
---------- ------------- -------------- -------------
Total revenues 522 518 1,590 622
---------- ------------- -------------- -------------
Costs and expenses:
Cost of products sold 626 1,321 2,505 2,355
Cost of products sold to related parties -- -- -- 13
Cost of collaborative research and development -- -- -- 41
Research & development 938 1,166 2,699 4,209
Selling, general and administrative 837 1,784 3,450 4,798
Restructuring charge -- -- 1,121 --
---------- ------------- -------------- --- -------------
Total costs and expenses 2,401 4,271 9,775 11,416
---------- ------------- -------------- -------------
Loss from operations (1,879) (3,753) (8,185) (10,794)
Interest income 117 376 458 1440
Interest expense (374) (22) (1,042) (63)
Other income (expense) 2,499 -- 2,498 --
---------- ------------- -------------- -------------
Net income (loss) from continuing operations 363 (3,399) (6,271) (9,417)
---------- ------------- -------------- -------------
Discontinued operations:
Loss from operations of discontinued business -- (135) -- (788)
Loss on disposal of discontinued business -- -- -- --
---------- ------------- -------------- -------------
Net income (loss) $ 363 $(3,534) $ (6,271) $ (10,205)
---------- ------------- -------------- -------------
Net income (loss) per share:
Net income (loss) from continuing operations $0.04 $(0.42) $ (0.77) $ (1.17)
Loss from operations of discontinued business -- (0.02) -- (0.10)
Net income (loss) per share $0.04 (0.44) (0.77) (1.27)
---------- ------------- -------------- -------------
Weighted average number of common and
common equivalent shares outstanding 8,128 8,077 8,122 8,061
</TABLE>
The accompanying notes are an integral part
of the financial statements
4
<PAGE>
<TABLE>
HemaSure Inc.
Consolidated Statements of Cash Flows
(Unaudited)
<CAPTION>
(In thousands) Nine-month periods ended
September 30,
-------------------------------------
1997 1996
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net loss $(6,271) $(10,205)
Adjustments to reconcile net loss to net cash used in operating activities
Discontinued business 788
Depreciation and amortization 568 587
Accretion of marketable securities discount 7 (4)
Changes in operating assets and liabilities:
Net assets of discontinued business 350 --
Accounts receivable 33 (341)
Inventories (411) 226
Prepaid expenses 179 (838)
Accounts payable and accrued expenses (499) 174
---------------- ---------------
Net cash used in continuing operations (6,044) (9,613)
Net cash used in discontinuing business -- (9,954)
Net cash used in operating activities (6,044) (19,567)
---------------- ---------------
Cash flows from investing activities:
Purchase of available-for-sale marketable securities (77,642) (181,690)
Maturities of available-for-sale marketable securities 82,217 195,621
Unrealized holding loss of available-for-sale marketable securities 2 2
Additions to property and equipment (130) (1,171)
Acquisition of business net of cash acquired -- (4,092)
Decrease in other assets (13) 45
---------------- ---------------
Net cash provided from investing activities 4,434 8,715
---------------- ---------------
Cash flows from financing activities:
Proceeds from issuance of common stock 52 235
Borrowing from notes payable arrangements 140 --
Repayments of notes payable (21) --
Repayments of capital lease obligations (174) (153)
---------------- ---------------
Net cash (used in) provided from financing activities (3) 82
---------------- ---------------
Net (decrease) in cash and cash equivalents (1,613) (10,770)
Cash and cash equivalents at beginning of period 5,527 23,028
---------------- ---------------
Cash and cash equivalents at end of period $ 3,914 $12,258
---------------- ---------------
</TABLE>
The accompanying notes are an integral part
of the financial statements
5
<PAGE>
HemaSure Inc.
Notes To Consolidated Financial Statements
1. Basis of Presentation
The accompanying financial statements are unaudited and have been
prepared on a basis substantially consistent with the audited financial
statements.
Certain information and footnote disclosures normally included in the
Company's annual statements have been condensed or omitted. The
condensed interim financial statements, in the opinion of management,
reflect all adjustments (including normal recurring accruals) necessary
for a fair statement of the results for the interim periods ended and
1996.
The results of operations for the interim periods are not necessarily
indicative of the results of operations to be expected for the fiscal
year. These interim financial statements should be read in conjunction
with the audited financial statements for the year ended December 31,
1996, which are contained in the Company's Form 10-K (File No.
000-23776), filed with the Securities and Exchange Commission on March
31, 1997.
2. Inventories
Inventories consist of the following (in thousands):
September 30, 1997 December 31, 1996
------------------ -----------------
Raw Materials $ 177 $ 240
Work in progress 104 122
Finished goods 506 14
--- ---
$ 787 $ 376
========== =========
3. Property and Equipment
Property and equipment consists of the following (in thousands):
September 30, 1997 December 31, 1996
------------------ -----------------
Property and equipment $ 3,777 $ 3,618
Less accumulated depreciation
and amortization (1,841) (1,421)
-------- --------
1,936 2,197
Construction in progress 57 48
-------- --------
$ 1,993 $ 2,245
======== ========
6
<PAGE>
4. Note payable
In March 1997, the Company exercised its right, under the lease
arrangement of its Marlborough Massachusetts facility, to have a
portion of its leasehold improvements financed and received $140,000 in
connection with this arrangement. This amount will be repaid in 60
equal monthly installments at a rate of 12% per annum.
5. Convertible subordinated note payable
In January 1997, the Company entered into a Restructuring Agreement of
the debt related to its acquisition of Novo Nordisk's plasma products
unit. Pursuant to the Restructuring Agreement, approximately
$23,000,000 of indebtedness owed to Novo Nordisk was restructured by
way of issuance by HemaSure to Novo Nordisk of a 12% convertible
subordinated promissory note in the principal amount of $11,700,000,
which is due and payable on December 31, 2001, with interest payable
quarterly (provided that up to $3,000,000 may be forgiven in certain
circumstances). Approximately $8,500,000 of the reduction of such
indebtedness was forgiven. The remainder of the reduction represents a
net amount due from Novo Nordisk to HemaSure related to various service
arrangements between the two companies. The amount included in the
balance sheet at September 30, 1997 and December 31, 1996 includes the
effect of the Restructuring Agreement net of the $3,000,000 contingency
amount to reflect the most probable result of the Company's decision to
exit the plasma business. All amounts outstanding under such note are
convertible by either party, commencing January 1998, into shares of
common stock, par value $.01 per share, of HemaSure ("Common Stock") at
a conversion price equal to $10.50 per share.
6. Net income (loss) per share
The net income (loss) per share is based on the weighted average number
of common and common equivalent shares outstanding during the period.
Common equivalent shares are not included in the per share calculation
where the effect of their inclusion would be anti-dilutive. The Company
has incurred a net loss for the nine month period ended September 30,
1997 and expects to recognize a net loss for the twelve month period
ended December 31, 1997. The Company believes that the inclusion of
common equivalent shares for purposes of calculating the net income per
share for the three month period ended September 30, 1997 is not
meaningful or useful for comparative purposes.
7. Litigation
The Company is a defendant in two lawsuits brought by Pall Corporation
("Pall"). In complaints filed in February 1996 and November 1996, Pall
alleged that HemaSure's manufacture, use and/or sale of the LeukoNet
product infringes upon three patents held by Pall.
7
<PAGE>
On October 14, 1996 in connection with the first action concerning U.S.
Patent No. 5,451,321 (the "321 patent") the Company filed for summary
judgment of noninfringement. Pall filed a cross motion for summary
judgment of infringement at the same time.
In October 1997 the Eastern District of New York granted in part Pall's
summary judgment motion relating to the 321 patent. Pall has moved for
a preliminary injunction. The Company believes, based on the advice of
its patent counsel, that Pall's application will be denied in due
course. The court has not yet ruled on the validity of Pall's 321
patent claims, which HemaSure has asserted are invalid and
unenforceable. The court now will need to review and determine the
validity of this patent prior to any further action. No date has been
set for these proceedings.
With respect to the second action concerning U.S. Patent Nos. 4,340,479
(the "479 patent") and 4,952,572 (the "572 patent"), the Company has
answered the complaint stating that it does not infringe any claim of
the asserted patents. Further, the Company has counterclaimed for
declaratory judgment of invalidity, noninfringement and
unenforceability of the '572 patent, and a declaratory judgment of
noninfringement of the '479 patent, as a result of a license.
The Company believes, based on advice of its patent counsel, that a
properly informed court should conclude that the manufacture, use
and/or sale by the Company or its customers of the present LeukoNet
product does not infringe any valid enforceable claim of the three Pall
patents. However, there can be no assurance that the Company will
prevail in the pending litigations, and an adverse outcome in a patent
infringement action would have a material adverse effect on the
Company's future business and operations.
On November 1, 1996, the Company filed a complaint in the Supreme
Court, State of New York, County of New York, against Pharmacia &
Upjohn, Inc. ("P&U"). In its complaint, the Company sought to receive
damages arising out of the alleged breach by P&U of an agreement to
sell to the Company P&U's plasma pharmaceutical business located in
Stockholm, Sweden. In September 1997, the Company reached an
out-of-court settlement with P&U. The terms of settlement included a
cash payment to the Company and the granting of an option to P&U to
license, on a non-exclusive basis, certain intellectual property held
by the Company and its subsidiaries relating to plasma fractionation.
The cash payment was recognized as other income in the quarter ended
September 30, 1997.
8. Restructuring charge
In April 1997, the Company, primarily as a result of exiting the plasma
business, determined to focus management resources on its core business
of blood filtration technologies. In connection therewith, four
officers were relieved of their duties. The Company incurred a one time
charge of $1,121,000 in the second quarter of 1997 for severance and
related charges in connection with this action. At September 30, 1997
there was a balance of $665,000 remaining to be paid related to this
charge.
8
<PAGE>
9. Other
In June 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income" ("SFAS 130"). SFAS 130 requires the reporting and display, in a
full set of general purpose financial statements, of all items that are
required to be recognized under accounting standards as components of
comprehensive income. SFAS 130 is effective for statements issued for
periods ending after December 15, 1997 and reclassification of
financial statements for earlier periods for comparative purposes is
required. The adoption of SFAS 130 will have an immaterial impact on
the Company's financial statements.
This Quarterly Report on Form 10-Q contains forward-looking statements
within the meaning of the new Private Securities Litigation Reform Act
of 1995, which involve certain risks and uncertainties. The Company's
actual results or outcomes may differ materially from those
anticipated. The forward-looking statements relate to various aspects
of the Company's sale or other disposition of the Company's plasma
fractionation business in Denmark; the Company's consideration of
pursuing public or private equity and/or debt financing; and the
defense of the Company's pending or future patent litigation. Each
forward-looking statement that the Company believes is material is
accompanied by a cautionary statement or statements identifying
important factors that could cause actual results to differ materially
from those described in the forward- looking statement. The cautionary
statements are set forth following the forward-looking statement,
and/or elsewhere in this Form 10-Q and the Company's other documents
filed with the Securities and Exchange Commission, whether or not such
documents are incorporated herein by reference. In assessing the
forward-looking statements contained in this Form 10-Q, readers are
urged to read carefully all cautionary statements.
9
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
Overview
HemaSure Inc. (the "Company") was established in December 1993 as a wholly owned
subsidiary of Sepracor Inc. ("Sepracor"). Prior to that date, its business was
conducted as part of Sepracor's bioprocessing division. Effective as of January
1, 1994, in exchange for 3,000,000 shares of Common Stock, Sepracor transferred
to HemaSure its technology relating to the manufacture, use and sale of medical
devices.
The Company is utilizing its proprietary filtration technologies to develop
products to increase the safety of donated blood and to improve certain blood
transfusion procedures. The Company's products are designed for use in blood
centers and hospital blood banks worldwide. From inception through fiscal 1995,
the Company has sold non-blood related filter products primarily to Sepracor, a
related party, for use in chemical processing applications. As the Company
continues to focus its efforts in the medical device sector, it does not expect
sales of its non-blood related products to continue in any material respect. The
Company's collaborative research and development efforts have been with the U.S.
Department of the Army for blood filtration related practices.
The Company is subject to risks common to companies in the medical technology
industry, including, but not limited to, development by the Company or its
competitors of new technological innovations, dependence on key personnel,
protection of proprietary technology and compliance with Food and Drug
Administration ("FDA") regulations.
Three and nine months ended September 30, 1997 and 1996
Revenues were $522,000 for the quarter ended September 30, 1997 compared to
$518,000 in the same period in 1996. Revenues in both quarters represent sales
of the Company's LeukoNet system.
Revenues were $1,590,000 for the first nine months of 1997 compared to $622,000
for the first nine months of 1996. Revenues for the nine month period ended
September 30, 1997 represent sales of the Company's LeukoNet system. Revenues
for the nine month period ended September 30, 1997 include product sales to
Sepracor of $13,000 and collaborative research and development revenues of
$54,000 related to the Company's SBIR grant.
Total cost of products sold exceeded total product sales in all periods due to
the start-up costs of new product introduction and the high costs associated
with low-volume production.
Research and development expenses were $938,000 in the third quarter of 1997
compared to $1,166,000 in the third quarter of 1996, and were $2,699,000 in the
nine months ended September 30, 1997 compared to $4,209,000 in the nine months
ended September 30, 1996. The decrease in the three
10
<PAGE>
month period is primarily attributable to a lower level of spending associated
with the Company's SteriPath Blood Pathogen Inactivation System, which program
was suspended in May 1997, offset in part by increased spending on the LeukoNet
System to effect process improvements. The decrease in the nine month period is
primarily attributable to a lower level of spending associated with the
Company's SteriPath Blood Pathogen Inactivation System.
Selling, general and administrative expenses were $837,000 in the three months
ended September 30, 1997 compared to $1,784,000 in the three months ended
September 30, 1996, and were $3,450,000 in the first nine months of 1997
compared to $4,798,000 in the first nine months of 1996. The Company incurred
costs in both the three and nine month periods ended September 30, 1996 that did
not recur in the same three and nine month periods of 1997 resulting in the
decrease for these periods. These non-recurring costs include marketing efforts
completed in 1996 associated with the introduction of the Company's LeukoNet
System and costs related to efforts to expand the Company's business beyond
medical devices. Sales and marketing costs may increase in future periods from
current levels as the Company continues its efforts to expand sales of its blood
filtration products.
In the second quarter of 1997, the Company recorded a one time charge of
$1,121,000 for severance and related charges in connection with executive
management departures pursuant to the Company's decision to focus on its core
filtration business.
Interest income for both the three and nine months ended September 30, 1997
decreased compared to the three and nine months ended September 30, 1996 due to
lower average cash and marketable securities balances available for investment.
Interest expense for the three and nine month periods ended September 30, 1997
increased compared to the same periods in 1996 related to a convertible
subordinated note payable that was not in existence during the first half 1996.
In September 1997, the Company reached an out-of-court settlement with Pharmacia
& Upjohn, Inc. ("P&U") arising out of the alleged breach by P&U of an agreement
to sell to the Company P&U's plasma pharmaceutical business located in
Stockholm, Sweden. The terms of settlement included a cash payment to HemaSure
and the granting of an option to P&U to license, on a non-exclusive basis,
certain intellectual property held by HemaSure Inc. and its subsidiaries
relating to plasma fractionation. The cash payment was recognized as other
income in the third quarter ended September 30, 1997.
Liquidity and Capital Resources
The net decrease in cash and cash equivalents for the nine months ended
September 30, 1997 was $1,613,000. This decrease is attributable primarily to
net cash used in operating activities of $6,044,000 offset in part by net cash
provided from investing activities of $4,434,000.
Net cash used in operating activities is primarily attributable to the net loss
of $6,271,000, an increase in inventories of $411,000 and a reduction in accrued
expenses of $499,000 offset in part by depreciation and amortization of $568,000
and the receipt of $350,000 related to the net assets of discontinued business.
Net cash provided from investing activities relates to available-for-sale
marketable securities investing activities of $4,575,000 offset in part by
additions to property and equipment of $130,000.
11
<PAGE>
In January 1997, the Company entered into a Restructuring Agreement of the debt
related to its acquisition of Novo Nordisk's plasma products unit. Pursuant to
the Restructuring Agreement, approximately $23,000,000 of indebtedness owed to
Novo Nordisk was restructured by way of issuance by the Company to Novo Nordisk
of a 12% convertible subordinated promissory note in the principal amount of
$11,700,000, which is due and payable on December 31, 2001, with interest
payable quarterly (provided that up to $3,000,000 may be forgiven in certain
circumstances). Approximately $8,500,000 of the reduction of such indebtedness
was forgiven. The remainder of the reduction represents a net amount due from
Novo Nordisk to the Company related to various service arrangements between the
two companies. The amount included in the balance sheet at March 31,1997 and
December 31, 1996 includes the effect of the Restructuring Agreement net of the
$3,000,000 contingency amount to reflect the most probable result of the
Company's decision to exit the plasma business. All amounts outstanding under
such note are convertible by either party, commencing January 1998, into shares
of Common Stock of the Company at a conversion price equal to $10.50 per share.
In April 1997, the Company, as a result of exiting the plasma business,
determined to focus management resources on its core business of blood
filtration technologies. In connection therewith, four officers were relieved of
their duties. John F. McGuire was named President and CEO and Timothy J.
Barberich was named Chairman of the Board. In connection therewith, the Company
incurred a one time charge of $1,121,000 in the second quarter of 1997 related
to these actions. The Company paid $456,000 of this obligation as of September
30, 1997.
The Company believes based on its current operating plan that in addition to its
available cash balances, it will need additional financing in order to fund the
Company's operations beyond the second quarter of 1998. Possible sources of
capital include sale of the Company's plasma fractionation business in Denmark
and public or private equity and/or debt financing all of which the Company is
pursuing. The Company's cash requirements may vary materially from those now
planned because of factors such as successful development of products, results
of product testing, approval process at the FDA and similar foreign agencies,
commercial acceptance of new products, patent developments and the introduction
of competitive products.
12
<PAGE>
PART II.
OTHER INFORMATION
Item 1. Legal Proceedings
The Company is a defendant in two lawsuits brought by Pall Corporation ("Pall").
In complaints filed in February 1996 and November 1996, Pall alleged that
HemaSure's manufacture, use and/or sale of the LeukoNet product infringes upon
three patents held by Pall.
On October 14, 1996 in connection with the first action concerning U.S. Patent
No. 5,451,321 (the "321 patent") the Company filed for summary judgment of
noninfringement. Pall filed a cross motion for summary judgment of infringement
at the same time.
In October 1997, the Eastern District of New York granted in part Pall's
summary judgment motion relating to the 321 patent. Pall has moved for a
preliminary injunction. The Company belives, based on the advice of its patent
counsel, that Pall's application will be denied in due course. The court has not
yet ruled on the validity of Pall's 321 patent claims, which HemaSure has
asserted are invalid and unenforceable. The courts now will need to review and
determine the validity of this patent prior to any further action. No date has
been set for these proceedings.
With respect to the second action concerning U.S. Patent Nos. 4,340,479 (the
"'479 patent") and 4,952,572 (the "572 patent"), the Company has answered the
complaint stating that it does not infringe any claim of the asserted patents.
Further, the Company has counterclaimed for declaratory judgment of invalidity,
noninfringement and unenforceability of the '572 patent, and a declaratory
judgment of noninfringement of the '479 patent, as a result of a license.
The Company believes, based on advice of its patent counsel, that a properly
informed court should conclude the manufacture, use and/or sale by the Company
or its customers of the present LeukoNet product does not infringe any valid
enforceable claim of the three Pall patents. However, there can be no assurance
that the Company will prevail in the pending litigations, and an adverse outcome
in a patent infringement action would have a material adverse effect on the
Company's future business and operations.
On November 1, 1996, the Company filed a complaint in the Supreme Court, State
of New York, County of New York, against Pharmacia & Upjohn, Inc. ("P&U"). In
its complaint, the Company sought to receive damages arising out of the alleged
breach by P&U of an agreement to sell to the Company P&U's plasma pharmaceutical
business located in Stockholm, Sweden. In September 1997, the Company reached an
out-of-court settlement with P&U. The terms of settlement included a cash
payment to HemaSure and the granting of an option to P&U to license, on a
non-exclusive basis, certain intellectual property held by HemaSure Inc. and its
subsidiaries relating to plasma fractionation. The cash payment was recognized
as other income in the third quarter ended September 30, 1997.
13
<PAGE>
Items 2 - 4. None
Item 5. Other information
On October 28, 1997 the Company's shares of Common Stock were included for
quotation on The Nasdaq SmallCap Market and removed from quotation on The Nasdaq
National Market. This transition results from a determination of the Nasdaq
Listing Qualifications Panel that, as of June 30, 1997 and currently, the
Company does not meet the $4 million net tangible assets Nasdaq National Market
listing maintenance requirement. The Company's Common Stock will continue to be
listed on The Nasdaq SmallCap Market via an exception from the net tangible
asset requirement subject to satisfying certain conditions. The exception will
expire on January 12, 1998. If the Company is deemed to have met the terms of
the exception by then, it shall continue to be listed on the Nasdaq SmallCap
Market. The Company believes it can meet the conditions, however, there can be
no assurance that it will be able to do so.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
The exhibits listed in the Exhibit Index immediately preceding the exhibits are
filed as part of this Quarterly Report 0n Form 10-Q.
b) Reports on Form 8-K - None
14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HEMASURE INC.
(Registrant)
Date: November 13, 1997 By:________________________________
Name: John F. McGuire
Title: President and Chief Executive Officer
(Principal Executive Officer)
Date: November 13, 1997 By:__________________________________
Name: James B. Murphy
Title: Senior Vice President Finance and
Administration
(Principal Financial Officer)
<PAGE>
Exhibit Index
The following exhibits are filed as part of this Quarterly Report on
Form 10-Q.
<TABLE>
<CAPTION>
Sequential
Exhibit No. Description Page No.
- ----------- ----------- --------
<S> <C>
2.1** Heads of Agreement, dated as of January 31, 1996, between the Company
and Novo Nordisk A/S.
3.1* Certificate of Incorporation of the Company.
3.2* By-Laws of the Company.
4.1* Specimen Certificate for shares of Common Stock, $.01 par value, of
the Company.
4.2*** Registration Rights Agreement, dated January 23, 1997, by and among
the Company and Novo Nordisk A/S.
10.1**** Restructuring Agreement, dated January 23, 1997, between the Company,
HemaPharm Inc., HemaSure A/S and Novo Nordisk A/S.
10.2*** Convertible Subordinated Note Due December 31, 2001 in the amount of
U.S. $11,721,989, issued by the Company to Novo Nordisk A/S, dated
January 23, 1997.
27.1 Financial Data Schedule.
</TABLE>
- ------------------------
* Incorporated herein by reference to the Company's Registration Statement
on Form S-1, as amended (File No. 33-75930).
** Incorporated herein by reference to the Company's Annual Report on Form
10-K for the year ended December 31, 1995.
*** Incorporated herein by reference to the Company's Annual Report on Form
10-K for the year ended December 31, 1996.
**** Incorporated by reference to the Company's Current Report on Form 8-K
filed with the Securities and Exchange Commission on February 27, 1997.
16
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF HEMASURE INC. FOR THE NINE MONTHS ENDED SEPTEMBER 30,
1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 1
<CASH> 3,914
<SECURITIES> 6,787
<RECEIVABLES> 250
<ALLOWANCES> 0
<INVENTORY> 787
<CURRENT-ASSETS> 11,917
<PP&E> 3,834
<DEPRECIATION> 1,841
<TOTAL-ASSETS> 13,975
<CURRENT-LIABILITIES> 2,956
<BONDS> 0
0
0
<COMMON> 82
<OTHER-SE> 1,778
<TOTAL-LIABILITY-AND-EQUITY> 13,975
<SALES> 1,590
<TOTAL-REVENUES> 1,590
<CGS> 2,505
<TOTAL-COSTS> 2,505
<OTHER-EXPENSES> 7,270
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (1,042)
<INCOME-PRETAX> (6,271)
<INCOME-TAX> 0
<INCOME-CONTINUING> (6,271)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,271)
<EPS-PRIMARY> (0.77)
<EPS-DILUTED> 0
</TABLE>
