U.S. Securities and Exchange Commission
Washington, D.C. 2054
FORM 10-QSB
(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, 2000
---------------
[ ] 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.
-------------------------
Exact name of small business issuer as specified in its charter
Delaware 95-4315412
-------- ----------
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
12085 Research Drive, Alachua, FL 32615
--------------------------------------------
(Address of principal executive offices)
(904) 462-2249
--------------
(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 ___
---
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, 2000
----- -----------------
Common Stock, $ .01 par value 17,268,325
Transitional Small Business Disclosure Format:
Yes____ No X
<PAGE>
ELECTROPHARMACOLOGY, INC.
INDEX TO FORM 10-QSB
Page
PART I. FINANCIAL INFORMATION
ITEM 1. Consolidated Balance Sheets as of March 31, 2000 and
December 31, 1999 2
Consolidated Statements of Operations for the three months
ended March 31, 2000 and 1999 3
Consolidated Statements of Cash Flows for the three months
ended March 31, 2000 and 1999 4
Notes to Consolidated Financial Statements 5
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations for the three months ended
March 31, 2000 and 1999 6
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings 10
ITEM 3. Defaults Upon Senior Securities 10
ITEM 6. Exhibits and Reports on Form 8-K 11
Signatures 12
1
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<TABLE>
<CAPTION>
Electropharmacology, Inc.
Consolidated Balance Sheets
(Unaudited with respect to March 31, 2000)
March 31, December 31,
2000 1999
-------- ---------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 41,305 $ 6,577
Accounts receivable, net of allowance for
doubtful accounts of $30,203 at March 31,
2000 and December 31, 1999 53,829 61,554
Other receivable - 32,612
Inventory 3,172 7,172
Investment 46,249 210,182
Prepaid expenses 95,777 30,031
--------- ---------
Total current assets 240,332 348,128
Property and equipment, net of accumulated
depreciation of $272,782 at March 31, 2000
and $255,012 at December 31, 1999 248,186 265,956
Patents, net of accumulated amortization of
$26,385 at December 31, 1999 76,462 76,969
Other assets 400 400
--------- ---------
TOTAL ASSETS $ 565,380 $ 691,453
LIABILITES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable $ 395,929 $ 403,964
Accrued expenses 394,185 354,606
Accrued expenses - related parties 107,744 63,654
Current portion of long term debt 1,408,738 1,280,890
Current portion of capital leases 13,921 54,504
--------- ---------
Total current liabilities 2,320,517 2,157,618
Notes payable - related parties 65,926 65,926
Long term debt, less current portion 14,807 15,503
Long term capital leases, less current portion 7,593 8,188
Mandatorily redeemable convertible preferred
stock, $.01 par value, 7,887 shares authorized,
issued and outstanding at March 31, 2000 and
December 31, 1999 9,093,263 8,886,544
--------- ---------
Total Liabilities 11,502,106 11,133,779
Stockholders' deficit
Convertible preferred stock, $.01 par value
9,992,113 shares authorized, no shares issued
and outstanding
Common stock, $.01 par value, 30,000,000 shares
authorized; 17,268,325 shares issued and
outstanding at March 31, 2000 and December 31,
1999 172,683 172,683
Additional paid-in capital 21,738,152 21,738,152
Accumulated other comprehensive loss (8,505) (88,399)
Accumulated deficit (33,081,056) (32,506,762)
---------- ----------
(11,178,726) (10,684,326)
Common Stock Reserved 242,000 242,000
---------- ----------
Total stockholders' deficit (10,936,726) (10,442,326)
---------- ----------
TOTAL LIABILITIES & STOCKHOLDERS' DEFICIT $ 565,380 691,453
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
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<TABLE>
<CAPTION>
Electropharmacology, Inc.
Consolidated Statements of Operations
(Unaudited)
For the three months ended
March 31,
--------------------------
2000 1999
----------- -----------
<S> <C> <C>
Sales Revenue $ 57,912 $ 124,163
Operating expenses:
Cost of Revenue 65,902 104,638
Selling, general and administrative 267,409 543,795
Research and development 19,609 88,047
----------- -----------
Total operating expenses 352,920 736,480
----------- -----------
Loss from operations (295,008) (612,317)
Other income (expense)
Interest expense (39,835) (34,476)
Interest and other income 17 10,506
Loss on sale of investment (32,749) -
----------- -----------
Total other income (expense) (72,567) (23,970)
Loss from continuing operations (367,575) (636,287)
Minority interest - 206,303
----------- -----------
Net loss ($ 367,575) ($ 429,984)
Net loss per share - basic and diluted ($ .02) ($ .03)
=========== ===========
Weighted average number of common shares
outstanding - basic and diluted 17,268,325 15,276,758
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
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<TABLE>
<CAPTION>
Electropharmacology, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
For the three months ended
March 31,
--------------------------
2000 1999
----------- -----------
<S> <C> <C>
Operating activities
Net loss $ (367,575) $ (429,984)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 18,277 28,984
Issuance of common stock for services - 12,500
Loss attributable to minority interest - (206,303)
Changes in operating assets and liabilities:
Decrease/(increase) in accounts receivable 7,725 (39,413)
Decrease in trade notes and other receivables 32,612 -
Decrease/(increase) in inventory 4,000 (4,232)
Decrease in prepaid expenses (65,746) 27,788
Decrease/(increase) in deposits - (5,000)
Increase in accounts payable (8,035) (59,204)
Increase/(decrease) in accrued expenses 39,579 (7,359)
Increase in accrued expenses - related parties 44,090 -
----------- ----------
Net cash used in operating activities (262,324) (682,223)
Investing activities
Sales of available for sale securities 211,078 -
Purchases of property and equipment - (23,044)
Loan to related party - (85,000)
----------- ----------
Net cash provided by (used in) investing
activities 85,974 811,967
----------- ----------
Financing activities
Proceeds from note payable to finance
insurance premium 100,315 -
Repayment of notes payable and capital lease
obligations (14,341) (88,033)
Proceeds from issuance of common stock - 900,000
----------- ----------
Net cash provided by financing activities 85,974 811,967
Net increase in cash equivalents 34,728 21,700
Cash and cash equivalents at beginning of period 6,577 160,011
----------- ----------
Cash and cash equivalents at end of period $ 41,305 $ 181,711
=========== ==========
Supplemental disclosure of cash flow information:
Cash paid during the period of interest $ 917 $ 23,862
=========== ==========
Supplemental disclosure of non-cash investing
and financing activities:
Issuance of common stock for services - $ 22,500
</TABLE>
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SELECTED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. UNAUDITED INTERIM INFORMATION
The accompanying 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, 2000 are not necessarily
indicative of the results that may be expected for the year ending
December 31, 2000.
2. RELATED PARTY TRANSACTION
On February 20, 2000, the Company, Dr. Sen and a third party
provider of Web-site design and marketing services entered into an
agreement. Due to the Company's lack of funds with which to pay
the third party provider, Dr. Sen agreed to assign the proceeds of the
sale of up to 128,520 shares of Company common stock held by Dr.
Sen to the third party provider. Dr. Sen agreed to sell 18,360 shares
per month in order to pay the monthly obligations of the Company to
the third party provider under the agreement for services rendered by
the provider over the seven-month period from January 2000 to July
2000. As consideration for this advance of funds to the Company by
Dr. Sen, the Company agreed to issue to Dr. Sen on a monthly basis
shares of Company common stock equal to the current value of (i)
that number of shares required to be sold by Dr. Sen under the
agreement, and (ii) any adverse tax consequences resulting to Dr. Sen
as a result of the sale of such shares, subject to the discretion of the
Company's board of directors to modify such timing or formula for
repayment. As of March 31, 2000, the Company recorded a related
party accrued expense of $22,032 as a result of this agreement.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
The following Management's Discussion and Analysis of Financial Condition
and Results of Operations contains forward - looking statements about our
plans and business. Actual events and results may differ materially from those
anticipated in these forward-looking statements. The ability to achieve our
projections and business objectives is dependent on a variety of factors, many
of which are outside of management's control. Some of the most significant
factors, alone or in combination, would be the failure to obtain additional
equity financing to fund research and development activities and projected
losses from operations; the inability to grow the revenues and improve the
financial performance from Gemini's custom synthesis business; the failure to
successfully restructure a defaulted loan from Gemini's major creditor, a life
insurance company, in the principal amount of $1,163,090; unanticipated
disagreements with prospective corporate partners, if any; an unanticipated
slowdown in the health care industry (as a result of cost containment
measures, changes in governmental regulation or other factors), or an
unanticipated failure in the commercialization of our technologies or potential
products developed from these technologies. Accordingly, there can be no
assurances that we will achieve our business objectives.
General
We are a biotechnology company engaged in developing products based on
our proprietary drug delivery and drug design technologies to treat complex
diseases that are not effectively treated by available drugs or treatment
methods. We also generate revenues from a web-based service business that
uses our drug design expertise to design and sell custom molecules for
research and drug discovery based on genomics.
Complex diseases like cancer, tissue degenerative diseases (such as ulcers,
Alzheimer's disease or osteoporosis) or inflammation go through multiple
stages and involve a complex interplay of multiple genes and proteins. We
believe that the future of the biopharmaceutical product market will be based
on delivering the right amount of drug at the right time to diseased tissues
(drug delivery) and using a drug that is designed to attack the right gene or
protein target for the appropriate stage of a complex disease (drug design).
Our strategy is to develop:
(i) drug delivery technologies to non-invasively deliver
pharmaceutical drugs and biotechnology products more effectively to
diseased tissues; and
(ii) drug design technologies to create new drugs aimed at the genes
and proteins that cause or control complex diseases.
Drug Delivery - Improving the delivery of a drug to diseased tissues
can reduce side effects and/or allow patients to take lower doses of toxic
drugs. Examples include delivering topical drugs for skin disorders (psoriasis,
acne, herpes sores, wrinkles), chemotherapeutic drugs to cancerous organs, or
anti-inflammatory drugs to arthritic joints. We use the principle of applying
mild electric currents ("iontophoresis") to improve the delivery of topical
drugs through the skin and pulsed radiofrequency electromagnetic signals
("PEMS") broadcast to increase blood flow in superficial soft tissues and thus
improve the delivery of drugs taken orally or by injection that are carried to
diseased tissues via the bloodstream.
Drug Design - We have special expertise in designing and chemically
synthesizing new drugs that are small molecules (like antibiotics or
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chemotherapeutic drugs) as compared to large molecule drugs (like the
protein drugs made by the biotechnology industry). Our drug design strategy
uses new information from biomedical research that is revealing the roles of
specific genes and proteins in complex diseases. Each of our small molecule
drugs is designed to selectively target a specific gene or a protein in order to
either treat or detect a disease (or the stage of a complex disease). Our drug
design program is currently focused on:
* synthesizing novel molecules made from the building blocks of
genes and proteins to build a growing library of proprietary small
molecule drugs for cancer and inflammation; and
* marketing our synthesis capability, as a separate web-based
service business, to generate a revenue stream from the rapidly
growing markets of custom DNA and peptide synthesis for
genomics research.
All of our technologies are under development and not commercially
marketed. In addition, our web-based custom service business currently is not
profitable. Accordingly, we need additional capital from financing, corporate
partnerships or federal grants in order to advance our technologies toward
commercial feasibility. If we are unable to obtain sufficient additional funds
in a timely manner, the development of our technologies and our financial
condition will be materially adversely affected.
Our company was originally incorporated under the laws of the State of
California in August 1990 under the name Magnetic Resonance Therapeutics,
Inc. that was reorganized through a merger with and into
Electropharmacology, Inc., a Delaware corporation, in February 1995.
During 1998, we concluded a corporate reorganization into a biotechnology
company that included a series of transactions, including (i) the acquisition
of two privately held business entities engaged in developing new molecular
technologies for drugs for cancer and inflammation and (ii) the divestiture of
our past business related to the manufacturing and renting of our SofPulse
device in the nursing home and physical therapy markets to focus on the
biopharmaceutical applications of the underlying PEMS technology. In the
past year, we also acquired an iontophoresis flexible patch technology for
topical dermatology applications and an equity investment from Elan
Corporation, plc. Pending shareholder approval, we will change our name to
Gemini Health Technologies Inc. Our executive offices are located at 12085
Research Drive, Alachua, Florida 32615 and our telephone number is (904)
462-2249.
Financial Condition
Current assets declined from $348,128 at December 31, 1999 to $240,332 at
March 31, 2000, primarily as a result of the Company's use of available
current assets to fund its operating losses.
Results of Operations
The Company's revenue for the three months ended March 31, 2000 was
$57,912, as compared to $124,163 for the three months ended March 31,
1999. This 53.4% decrease was attributable to the restructuring and
subsequent relocation of the Gemini operation from The Woodlands, Texas,
to Alachua, Florida in July 1999 in order to reduce operating losses
associated with the production of products for genomics research.
Cost of revenue for the three months ended March 31, 2000 decreased to
$65,902, as compared to $104,638 for the three months ended March 31,
1999, a decrease of 37.0%, due to fixed labor costs associated with the
decreased production of Gemini's products and services in the first quarter of
2000.
Selling, general and administrative expenses decreased to $267,409 in the
three months ended March 31, 2000, as compared to $543,795 for the three
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months ended March 31, 1999. This 50.8% decrease in expenses is primarily
attributable to the reduced volume of sales, as well as a $124,642 decrease in
personnel, sales and marketing, and administrative expenses associated with
the restructuring and relocation of the Gemini operation.
Research and development expenses decreased to $19,609 in the first quarter
of 2000 as compared to $88,047 in the first quarter of 1999. Basic scientific
research was curtailed in the first quarter of 2000 due to lack of available
funds, as compared to the same period in 1999, when the Company had both
the cash resources and certain contractual obligations to Elan for research and
development pertaining to acquired Elan technology.
Interest income for the three months ended March, 2000 was $17 due to no
funds being available for short term investment in that time period. In
comparison, interest income of $10,506 for the comparable period in 1999
was primarily attributable to interest earned on cash received from Elan's
$900,000 investment in the Company's common stock in January 1999.
Interest expense increased to $39,835 for the three months ended March 31,
2000 as compared to $34,476 for the three months ended March 31, 1999, an
increase of 15.5%, due primarily to the accrual of interest starting in May
1999 on a $98,430 payable to the Company's former audit firm and a $35,000
note payable entered into by the Company in December 1999 in settlement of
a lease obligation for the former Gemini facility in Texas.
In the three months ended March 31, 1999, minority interest of $206,303 was
recorded as a reduction to the Company's net loss and relates to the former
minority shareholders' 32% interest in Gemini Health Technologies L.P., an
operating subsidiary that was 68% controlled by the Company prior to
September 1999. On September 23, 1999, the Company acquired the
minority interests in the partnership as part of a litigation settlement,
resulting in no related minority interest in the three months ended March
31, 2000.
The above resulted in a net loss of $367,575 for the three months ended
March 31, 2000, as compared to a net loss of $429,984 for the three months
ended March 31, 1999. Since July 1999, the Company has been
implementing plans to significantly reduce these operating losses and cash
outflows while retaining the value of Gemini's custom products business. In
accordance with these plans, the Company downsized Gemini's operations,
including a significant reduction in personnel and occupancy expenses. In
order to reduce its occupancy expenses, in August 1999, the Company
relocated the Gemini operations from The Woodlands, Texas to Alachua,
Florida, where the Company's Florida-based research laboratories have been
located since December 1998. The Company also initiated litigation against
the former President of Gemini, resulting in the settlement of certain
employment and other contractual obligations of the Company to this
individual that were entered into by the Company in connection with the
Gemini acquisition transaction. As part of this settlement, the former
President of Gemini received 950,000 shares of Company common stock in
exchange for his partnership interest, in lieu of the 6,000,000 shares
previously issuable by the Company to this individual resulting in less
dilution to the existing shareholders. The Company is also attempting to
restructure Gemini's balance sheet, including the compromise and settlement
of certain other Gemini liabilities, including the secured note to a life
insurance company in the approximate principal amount of $1.16 million,
trade payables and an equipment lease obligation in the approximate amount
of $52,000.
Other strategies being evaluated for the Gemini operations include strategic
alliances, including mergers and acquisitions of related or complementary
custom molecular businesses and raising additional investment capital in
order to sustain continuing operations.
8
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Liquidity and Capital Resources
The Company's cash requirements have been and will continue to be
significant. Since its inception, the Company has satisfied its operating
requirements primarily through the issuance of equity and debt securities and
loans from stockholders, revenues from rental and sale of SofPulse devices,
and, to a lesser extent, the sale of custom products for genomics research.
At March 31, 2000, the Company had a working capital deficit of $2,080,185
and an accumulated deficit of $33,081,056.
Net cash used in operating activities for the three months ended March 31,
2000 was $262,324 as compared to $682,223 for the same period in 1999.
Net cash was used primarily to fund the losses from operations. Net cash
provided by investing activities for the three months ended March 31, 2000
was $211,078, from the sale of marketable securities in order to fund
operating losses. In comparison, net cash used by investing activities of
$108,044 in the comparable period in 1999 was used primarily to make an
$85,000 loan to the Company's chief executive officer and purchase
laboratory equipment for research related to the Elan technology. At March
31, 2000, the Company did not have any material commitments for capital
expenditures. Net cash provided by financing activities was $85,974 for the
three months ended March 31, 2000, primarily from the financing of
$100,315 of insurance premiums, as compared to $811,967 for the same
period in 1999. This decrease is primarily attributable to an investment of
$900,000 in common stock by Elan in January 1999, partially offset by
repayments of $88,033 on notes payable.
The Company expects its cash needs will continue to increase in future
periods, primarily because it will incur additional expenses related to the
development of its drug delivery and drug design technologies prior to
seeking corporate partnerships for future development and marketing of
products based on the Company's technologies. In addition, under the
licensing agreement with Elan, the Company agreed to certain funding and
diligent development obligations with respect to the iontophoresis technology.
The Company will need to raise substantial additional funds to continue the
development and commercialization of its technologies and products. The
future cash needs of the Company will depend significantly on many factors
that relate to the development of drug delivery and small molecule drug
products, including, but not limited to, continued scientific progress in the
research and development programs; the results of research and development;
preclinical studies and clinical trials; acquisition of products and
technologies, if any; relationships with corporate partners, if any;
competing technological and market developments; the time and costs
involved in obtaining regulatory approvals; the costs involved in filing,
prosecuting and enforcing patent claims; the time and costs of manufacturing
scale-up and commercialization activities and other factors.
In connection with the Gemini acquisition, the Company guaranteed Gemini's
secured loan to an insurance company in the current principal amount of
$1,163,090. In addition to the Company's guarantee, other collateral for the
loan includes Gemini's assets, including accounts receivable, inventory, and
property and equipment owned now or acquired in the future, as well as 65
SofPulse devices owned by the Company. The former President of Gemini
and his wife also have personally guaranteed the repayment of the
indebtedness. The terms of the loan include maintaining certain financial
covenants, principally relating to working capital liquidity and net working
capital ratios, and permitted purchases and expenses. The covenants also
include a limitation on compensation and distributions. All of the amounts
outstanding under the loan become due and payable if an event of default
occurs. Gemini has not been in compliance with the financial covenants of
the loan principally relating to net worth and working capital. In addition,
the Company had ceased making the required payments as of April 1999. The
loan is currently in default and the lender has the right to accelerate payment
of the loan although it has not yet notified the Company of its intent to
accelerate. The Company believes that this loan must be restructured in order
for Gemini's operations to remain commercially viable. Management is
currently conducting settlement negotiations with the lender in an attempt to
reach mutually acceptable restructuring of this loan obligation. However,
there can be no assurances that the lender will not accelerate payment on the
loan or will agree to a restructuring of the loan.
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Under the present circumstances, the Company's ability to continue as a going
concern depends on its ability to obtain additional financing. The Company is
exploring alternative sources of additional financing, including the raising of
additional investment capital through a private placement and a follow-on
public offering, and seeking federal grants directly (such as Small Business
Innovation Research Grants) or through collaborations. In April 2000, the
Company was awarded an SBIR Grant from the National Institute of Allergy
and Infectious Diseases in the amount of approximately $97,000 to test a
novel means of delivering a genetically engineered vaccine in an animal
model system. However, no definitive sources of additional financing have
been identified at this time, nor can there be any assurance that additional
financing will be obtained on favorable terms. The Company is now quoted
on the OTC Bulletin Board, but there can be no assurance a public trading
market for the Company's common stock will continue to exist.
The Company cannot predict whether the operating and financing strategies
and plans described above, if implemented by the Company, will be
successful. If the Company is unable to improve its operations and ultimately
obtain additional financing, it may be forced to discontinue further
development of its technologies, discontinue marketing of Gemini's custom
business or to sell its assets.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In August 1994, Diapulse Corporation of America, a former competitor of the
Company, filed a lawsuit against the Company and certain of its present and
former directors and officers alleging the defendants had engaged in deceptive
acts and practices, false advertising, unfair competition, breach of contracts
of fiduciary duties between the plaintiff and certain Company employees. They
also alleged the Company was involved in facilitating or participating in the
breach of contracts. The plaintiff is seeking an injunction to rectify the
effects of the misconduct, an unspecified amount of compensatory damages,
disgorgement of profits, treble damages, punitive damages and attorney's fees.
The plaintiff also seeks unspecified injunctive relief prohibiting the Company
from engaging in the alleged acts and ordering the defendants to take remedial
action to rectify the effects on consumers and the plaintiff caused by the
alleged acts. The Company believes it has meritorious defenses, which it will
pursue vigorously and has filed a counterclaim against the plaintiff and its
President. The parties are currently in settlement negotiations and have
reached a settlement in principle whereby the Company would pay plaintiff
the amount of $50,000 plus interest in monthly payments over a thirty- month
period; however, a definitive settlement agreement has not been executed by
both parties.
The Company's future product development, including the development of the
technology underlying the SofPulse product is not likely to be adversely
affected by the outcome. However, if the anticipated settlement does not
occur, there can be no assurance the ultimate outcome of such action will not
have a material adverse effect on the Company's liquidity, financial condition
and results of operations.
In July 1999, Copelco Credit Corporation filed suit against the Company
alleging breach of lease agreement in connection with an equipment lease on
a copier. The Plaintiff is seeking to accelerate all sums allegedly due under
the lease agreement in the amount of $58,584. The Company believes that the
ultimate outcome of such action, even if unfavorable to the Company, will not
have a material adverse effect on the Company's liquidity, financial condition
or results of operations.
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ITEM 3. DEFAULTS UPON SENIOR SECURITIES
On June 27, 1997, Gemini entered into a loan agreement (the "Loan") with an
insurance company (the "Lender") in the amount of $1,315,000. The loan
amortizes over 101 payments ending July 1, 2006. The interest rate is two
points over prime, and at December 31, 1998 and March 31, 2000, was
10.25%. Collateral for the Loan is Gemini's assets, including accounts
receivable, inventory, and property and equipment owned now or acquired in
the future. On December 22, 1998, the loan was modified to add as additional
collateral the Company's corporate guarantee and 65 SofPulse devices owned
by the Company. The former President of Gemini and his wife have
personally guaranteed the repayment of the indebtedness. In addition,
repayment of the loan is guaranteed in part by the Rural Biological Science
Department of the U.S. Department of Agriculture.
The terms of the Loan include maintaining certain financial covenants,
principally relating to working capital liquidity and net working capital
ratios, and permitted purchases and expenses. The covenants also include a
limitation on compensation and distributions. All of the amounts outstanding
under the Loan become due and payable if an event of default occurs. As of
March 31, 2000, Gemini was not in compliance with certain ratios relating to
net worth and working capital. In addition, since March 1999, the Company
has not made the required monthly principal and interest payments and as of
the date hereof owes $264,045 in arrearages on the Loan. The Lender
currently has the right to accelerate payment of the Loan although it has not
yet notified the Company of its intent to accelerate. Management is currently
conducting settlement negotiations with the Lender in an attempt to reach a
mutually acceptable restructuring of this loan obligation. However, there can
be no assurances that the Lender will not accelerate payment on the Loan or
will agree to a restructuring of the Loan.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K
None.
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SIGNATURES
In accordance with the requirements of the Securities and Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto authorized.
ELECTROPHARMACOLOGY, INC.
Registrant
Dated May 18, 2000 /s/ Arup Sen
-------------------
Arup Sen
Chairman of the Board, Chief
Executive Officer and President
Dated May 18, 2000 /s/ Arup Sen
-------------------
Arup Sen
Chief Financial Officer
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Exhibit 27 Financial Data Schedule
Article 5 of Regulation S-X
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
FORM 10-QSB AT MARCH 31, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
PERIOD-TYPE 3-MOS
FISCAL-YEAR-END DEC-31-2000
PERIOD-END MARCH-31-2000
CASH 41,305
SECURITIES 46,249
RECEIVABLES 84,032
ALLOWANCES (30,203)
INVENTORY 3,172
CURRENT-ASSETS 240,332
PP&E 520,968
DEPRECIATION (272,782)
TOTAL-ASSETS 565,380
CURRENT-LIABILITIES 2,320,517
BONDS 0
COMMON 172,683
PREFERRED-MANDATORY 9,093,263
PREFERRED 0
OTHER-SE (11,109,409)
TOTAL-LIABILITY-AND-EQUITY 565,380
SALES 57,912
TOTAL-REVENUES 57,929
CGS 65,902
TOTAL-COSTS 65,902
OTHER-EXPENSES 287,018
LOSS-PROVISION 0
INTEREST-EXPENSE 39,835
INCOME-PRETAX (367,575)
INCOME-TAX 0
INCOME-CONTINUING (367,575)
DISCONTINUED 0
EXTRAORDINARY 0
CHANGES 0
NET-INCOME (367,575)
EPS-PRIMARY (.02)
EPS-DILUTED (.02)
13
