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U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB/A
(Amendment No. 1)
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934.
For the quarterly period ended MARCH 31, 1997
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[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from __________ to __________
Commission File Number 0-25828
ELECTROPHARMACOLOGY, INC.
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Exact name of small business issuer as specified in its charter
DELAWARE 95-4315412
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(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
2301 N.W. 33RD COURT, SUITE 102, POMPANO BEACH, FL 33069
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(Address of principal executive offices)
(954) 975-9818
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(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
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State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
Number of Shares Outstanding
Class On March 31, 1997
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Common Stock, $.01 par value 3,529,672
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Transitional Small Business Disclosure Format:
Yes No X
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ELECTROPHARMACOLOGY, INC.
The following information is hereby amended in its entirety:
1. The Balance Sheets as of March 31, 1997 and December 31,
1996, contained in Item 1.
2. The Notes to Financial Statements contained in Item 1.
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ELECTROPHARMACOLOGY, INC.
BALANCE SHEETS
(UNAUDITED WITH RESPECT TO MARCH 31, 1997)
MARCH 31, DECEMBER 31,
1997 1996
ASSETS (RESTATEMENT) (RESTATEMENT)
- ------ ------------- -------------
Current assets:
Cash $ 136,246 $ 223,523
Trade accounts receivable, net of
allowance for doubtful accounts of
$159,466 at March 31, 1997 and $134,000
at December 31, 1996 583,372 572,202
Inventory 194,536 94,164
Trade notes receivable -- 248,190
Prepaid expenses 16,723 50,127
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Total current assets 930,877 1,188,206
Rental and other equipment, net 1,138,691 945,058
Deposits and other assets 92,709 79,816
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Total assets $ 2,162,277 $ 2,213,080
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 687,944 $ 316,746
Accrued expenses 268,930 513,130
Accrued commissions 93,823 30,845
Accrued payroll 130,274 104,701
Customer deposits 7,561 7,561
Current maturities of obligations under
capital leases 15,905 22,386
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Total current liabilities 1,204,437 995,369
Obligations under capital leases, less
current maturities 2,011 3,336
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Total liabilities 1,206,447 998,705
Shareholders equity:
Preferred stock, $0.01 par value -
10,000,000 shares authorized;
issued and outstanding 421,950 4,220 4,220
Common stock, $0.01 par value -
30,000,000 shares authorized;
3,540,165 shares issued and 3,529,672
shares outstanding 35,402 35,402
Additional paid-in capital 14,834,010 14,834,010
Treasury stock, at cost, 10,493 common
shares (60,000) (60,000)
Deficit (13,857,802) (13,599,257)
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Total shareholders' equity 955,830 1,214,375
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Total liabilities and shareholders' equity $ 2,162,277 $ 2,213,080
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ELECTROPHARMACOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB. Accordingly, they do
not include all of the information and footnotes required by generally
accepted accounting principles for complete audited financial statements. In
the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three-month period ended March 31, 1997 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1997. For further information, refer to the financial statements
and footnotes thereto included in the Company's Annual Report on Form 10-KSB
for the year ended December 31, 1996.
Electropharmacology, Inc. (the "Company") is engaged in developing,
manufacturing, and marketing medical devices that deliver pulsed
electromagnetic signals ("PEMS-TM-") in the radio frequency range. The
Company was incorporated under the laws of the State of California in August
1990 under the name Magnetic Resonance Therapeutics, Inc., and was reorganized
through a merger with and into Electropharmacology, Inc., a Delaware
corporation in February 1995. The Company's executive offices are located at
2301 N.W. 33rd Court, Suite 102, Pompano Beach, Florida 33069, and its
telephone number is (954) 975-9818.
The Company's product, which is marketed under the name SofPulse-TM-, is
an easy to operate, noninvasive device that delivers pulsed radiofrequency
("PRF") energy. The Company has focused on PEMS-TM- that combined selected
pulse forms and amplitudes to produce certain radio frequency energy fields
that are believed to affect superficial soft tissues. In January 1991, the
FDA advised the Company of its determination, pursuant to the premarket
notification provisions under Section 510(k) of the FDC Act, to treat the
MRT100, the first model of the SofPulse-TM- as a class III device. To date,
the Company's focus has been the application of PEMS-TM- as an adjunct in the
palliative treatment of pain and edema associated with various medical
conditions that involve superficial soft tissue injury. Edema is localized
tissue swelling resulting from an abnormal accumulation of fluid in the tissue
and frequently represents an obstacle to the achievement of effective healing
of soft tissue damages from conventional medical treatment. Edema can also
result in a permanent loss of range of motion. Since PRF can be administered
through clothing, casts or dressing, the SofPulse-TM-is a cost effective
adjunct for the palliation of and edema without any known adverse effects.
PEMS-TM- treatment is based on broadcasting pulsed electromagnetic fields
to achieve therapeutic benefits when applied to superficial soft tissue. To
date, the SofPulse-TM- has been used as an adjunct for palliative treatment of
postoperative pain and edema in various
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superficial soft tissues that suffer damage in medical conditions such as
acute or chronic (non-healing or recalcitrant) skin ulcers, edema and pain
resulting from trauma of hand and ankle, pain associated with sprains of the
lower back, and pain and edema following reconstructive and plastic surgery.
The traditional treatment of pain and edema generally involves a combination
of analgesic and anti-inflammatory drugs and superficial approaches such as
the application of ice packs. PEMS-TM- has been used by clinicians as an
adjunct to these other approaches.
The Company's principal marketing efforts are directed toward health care
professional and providers engaged in medical and health care practices. The
Company's strategy has been to market the SofPulse-TM- to nursing homes and
hospitals with access to substantial numbers of patients and, to a lesser
extent, to plastic, reconstructive and orthopedic surgeons. The Company has
focused on promoting rentals as part of its pricing and marketing strategies
whereby the user is billed by the Company, on a monthly basis, for the actual
length of time that the SofPulse-TM-is used by the clinicians to treat
patients. As part of its education, marketing and promotional strategy, the
Company disseminates information it receives from the clinicians to the
medical community through summary case reports, Continuing Educational Unit
courses and advertisements in professional journals.
The Company's objective is to establish PEMS-TM- delivery by the
SofPulse-TM- as a recognized modality used by physicians and other health care
practitioners, including physical therapists, occupational therapists, and
other professionals, to treat postoperative pain and edema. Since its
introduction in commercial marketing, the SofPulse-TM- has been used to
administer more than 250,000 treatments to thousands of patients. In order to
further expand the use of this non-invasive treatment modality, the Company
has continued to expand its technology base that may enable it to design
proprietary devices suitable for the delivery of various signals to (i)
different anatomical locations of the body, and (ii) aid in the healing or
regeneration of damaged tissues. The Company intends to conduct clinical
evaluations of specific PEMS-TM- in medical conditions where the reduction of
pain and edema is desirable for improved patient outcomes as well as in
additional markets that may be addressed by broader user of its proprietary
signals in tissue regeneration. In order to improve its competitive advantage
in the expanded market segments in the future, the Company intends to expand
its patent portfolio, which currently consists of two issued U.S. patents and
several patent pending patent applications in the U.S. and in certain foreign
countries.
The Company's principal sources of revenue have been rental fees charged
to nursing homes and hospitals for the use of the SofPulse-TM- and revenue
generated from sales of the SofPulse-TM- to certain distributors and surgeons.
As of March 31, 1997, the Company had 364 of the SofPulse-TM- devices under
rental agreements, and has sold an additional 104 SofPulse-TM- devices. To
date, the Company has generated limited revenue from sales and rentals of the
SofPulse-TM-, which has achieved only limited market acceptance. Expanding
market penetration for the SofPulse-TM- is expected to require substantial
marketing efforts and the expenditure of significant funds in order to
demonstrate the technological advantage and clinical benefit of the
PEMS-TM-modality to the clinicians. There can be no assurance that the
therapeutic use of PRF energy underlying the PEMS-TM- modality will become a
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generally accepted medical practice for which reimbursement by third party
payors is available. Further, there can be no assurance that the Company's
efforts will result in successful market penetration and increased revenue
from sales and rental of its products, or that the Company will be successful
in expanding its technology base.
(2) SUBSEQUENT EVENTS
The Company announced on April 2, 1997 the resignation of Joseph
Mooibroek, the Company's Chairman of the Board, President and Chief Executive
Officer, effective immediately, and the appointment of Dr. Arup Sen as the
Company's Chairman of the Board, President and Chief Executive Officer. Dr.
Sen previously was the Company's Executive Vice President of Research,
Development, Regulatory and Clinical Studies.
The Company announced on May 7, 1997 the execution of a multi-year
distribution agreement for the sale and rental of SofPulse-TM- devices for
selected applications in the United States with National Patient Care Systems,
Inc. ("NPCS"), a privately held company specializing in distribution, lease
and rental of specialty medical devices to hospitals, nursing homes,
physicians' offices and home care. Under the agreement, NPCS will purchase
from the Company specified minimum quotas of SofPulse-TM- devices in exchange
for exclusive distribution rights to three selected market applications of
SofPulse-TM-. The parties may agree to renegotiate the minimum purchase
quotas and exclusivity of distributorship in each market application based on
prospective market demand for SofPulse-TM- to be evaluated and developed
during the first eight months of the agreement. NPCS also will assume
responsibility for the growth and operation of the Company's current fleet of
rental devices including the Company's sales and marketing group, make monthly
payments to the Company for five years and pay royalties to the Company on
NPCS's rental revenues. The cumulative revenue to the Company through the
term of the agreement could exceed $25 million, provided that NPCS meets
substantially the minimum purchase quotas for all of the market applications,
for which there can be no assurance.
(3) RESTATEMENT
Additional paid-in capital and deficit were restated for 1997 and 1996 to
reflect assumed dividends arising from convertible preferred stock and
warrants issued in connection with the convertible preferred stock, at
conversion and exercise prices that were substantially discounted from the
fair market value of the Company's Common Stock at the time the convertible
preferred stock and warrants were issued in 1995.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
ELECTROPHARMACOLOGY, INC.
Registrant
Dated: October 10, 1997 /s/ DR. ARUP SEN
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Dr. Arup Sen
Chief Executive Officer
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