-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BXbvMSD83FY1PI2G+M+TxJCoz3aoDm0g+XqRIJG4Pd1VFF9s3yjogq8vT54pYqdx Uns4v9tG6llonKperDHUcQ== 0000927016-96-001764.txt : 19961118 0000927016-96-001764.hdr.sgml : 19961118 ACCESSION NUMBER: 0000927016-96-001764 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961114 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: INNOVASIVE DEVICES INC CENTRAL INDEX KEY: 0001003608 STANDARD INDUSTRIAL CLASSIFICATION: ORTHOPEDIC, PROSTHETIC & SURGICAL APPLIANCES & SUPPLIES [3842] IRS NUMBER: 043132641 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-28492 FILM NUMBER: 96666423 BUSINESS ADDRESS: STREET 1: 734 FOREST ST CITY: MARLBOROUGH STATE: MA ZIP: 01752 BUSINESS PHONE: 5084346000 MAIL ADDRESS: STREET 1: 734 FOREST STREET CITY: MARLBOROUGH STATE: MA ZIP: 01752 10-Q 1 FORM 10-Q FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarter ended September 30, 1996 Commission file number 0-28492 ------------------ - ------------------------------------------------------------------------------ INNOVASIVE DEVICES, INC. - ------------------------------------------------------------------------------ (Exact name of registrant as specified in its charter) Massachusetts 04-3132641 - ------------------------------------------------------------------------------ (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 734 Forest Street, Marlborough MA 01752 - ------------------------------------------------------------------------------ (Address of principal executive offices) Registrant's telephone number, including area code 508/460-8229 ------------ 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 9or 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 number of shares outstanding of the registrant's common stock as of November 14, 1996 was 7,260,408. 1 INNOVASIVE DEVICES, INC. INDEX
Page ---- Part I: Financial Information Item 1. Condensed Financial Statements Condensed Balance Sheet at September 30, 1996 (unaudited) and December 31, 1995 3 Condensed Statement of Operations (unaudited) for the Three Months and Nine Months Ended September 30, 1996 and September 30, 1995 4 Condensed Statements of Cash Flows (unaudited) for the Nine Months Ended September 30, 1996 and September 30, 1995 5 Notes to unaudited Condensed Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 PART II. Other Information 11 Signatures 12 Exhibit Index 13
2 Part I - Financial Information Item 1. Financial Statements INNOVASIVE DEVICES, INC. Condensed Balance Sheet (in thousands)
ASSETS September 30, December 31, 1996 1995 --------------- --------------- (unaudited) Current assets: Cash and cash equivalents $ 23,985 $ 5,052 Accounts receivable, less allowance 709 283 of $59 at September 30, 1996 and $51 at December 31, 1995 Inventories 701 405 Prepaid expenses 119 48 --------- --------- Total current assets 25,514 5,788 Fixed assets, net 687 599 Other assets, net 25 12 --------- --------- $ 26,226 $ 6,399 ========= ========= LIABILITIES, REDEEMABLE PREFERRED STOCK, AND STOCKHOLDERS' EQUITY (DEFICIT) Current liabilities: Accounts payable $ 215 $ 459 Related party payables 528 265 Other current liabilities 752 206 --------- --------- Total current liabilities 1,495 930 Mandatorily redeemable convertible preferred stock - 13,970 --------- --------- Stockholders' equity (deficit): Common stock 1 1 Additional paid in capital 39,803 3,459 Accumulated deficit (15,073) (11,936) --------- --------- 24,731 (8,476) Less: common stock held in treasury - 25 --------- --------- Total stockholders' equity (deficit) 24,731 (8,501) --------- --------- $ 26,226 $ 6,399 ========= =========
The accompanying notes are an integral part of these unaudited condensed financial statements. 3 INNOVASIVE DEVICES, INC. Condensed Statement of Operations (In thousands, except per share data; unaudited)
Three months ended Nine months ended September 30, September 30, -------------------- --------------------- 1996 1995 1996 1995 ------- ------- ------- ------- Net sales $ 1,106 $ 303 $ 2,996 $ 765 Cost of sales 399 290 1,151 694 ------- ------- ------- ------- Gross profit 707 13 1,845 71 Selling, general and administrative expenses 1,374 557 3,622 1,639 Research and development 662 408 1,840 1,110 ------- ------- ------- ------- Loss from operations (1,329) (952) (3,617) (2,678) Interest income (expense), net 310 (9) 484 15 ------- ------- ------- ------- Net loss $(1,019) $ (961) $(3,133) (2,663) ======= ======= ======= ======= Net loss per share Unaudited proforma net loss per share $( 0.14) $( 0.20) $( 0.51) $( 0.55) ======= ======= ======= ======= Shares used in computing net loss per share 7,260 4,820 6,200 4,820 ======= ======= ======= =======
The accompanying notes are an integral part of these unaudited condensed financial statements. 4 INNOVASIVE DEVICES, INC. Condensed Statement of Cash Flows (In thousands; unaudited)
Nine months ended September 30, ------------------ 1996 1995 -------- -------- Cash flows from operating activities Net loss $(3,133) $(2,663) Adjustments to reconcile net loss to net cash provided by (used for) operating activities: Depreciation and amortization 206 135 Changes in assets and liabilities: Accounts receivable, net (426) (151) Inventories (296) (35) Prepaid expenses (71) (30) Other assets (13) 5 Accounts payable (244) 115 Related party payables 263 113 Other current liabilities 546 110 ------- ------- Net cash used for operating activities (3,168) (2,401) ------- ------- Cash flows from investing activities Purchases of fixed assets (294) (136) ------- ------- Cash flows from financing activities Proceeds from issuance of preferred stock, net of issuance costs 926 - Proceeds from issuance of common stock, net of issuance costs 21,469 - Principal payments on note payable (464) Proceeds from issuance of convertible notes payable 1,000 ------- ------- Net cash provided by financing activities 22,395 536 ------- ------- Net increase (decrease) in cash and cash equivalents 18,933 (2,001) Cash and cash equivalents at beginning of period 5,052 2,051 ------- ------- Cash and cash equivalents at end of period $23,985 $ 50 ======= =======
The accompanying notes are an integral part of these unaudited condensed financial statements. 5 INNOVASIVE DEVICES, INC. NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS 1. -- BASIS OF PRESENTATION The accompanying unaudited condensed financial statements of Innovasive Devices, Inc. (the "Company") include, in the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of the Company's financial position at September 30, 1996 and the results of operations for the three and nine month periods ended September 30, 1996 and 1995. Interim results of operations are not necessarily indicative of the results to be achieved for the full year. Pursuant to accounting requirements of the Securities and Exchange Commission (the "SEC") applicable to quarterly reports on Form 10-Q , the accompanying unaudited condensed financial statements and these notes do not include all disclosures required by generally accepted accounting principles for complete financial statements. Accordingly, these statements should be read in conjunction with the financial statements and accompanying notes contained in the Company's Registration Statement on Form S-1 (Registration No. 333-3368) filed with the SEC on April 11, 1996, as amended by filings on May 17, 1996 and May 30, 1996. 2. Inventories Inventories consist of the following:
September 30, December 31, 1996 1995 ------------- ------------ (unaudited) Raw materials $ 154 $ 157 Work-in-process 67 68 Finished goods 480 180 ------------- ------------ Totals $ 701 $ 405 ============= ============
3. Common Stock Issuance (unaudited) In June 1996, the Company sold and issued 1,900,000 shares of its common stock pursuant to an initial public offering ("IPO"). Net proceeds to the Company from the offering were approximately $21 million. Upon completion of the offering, all outstanding shares of Preferred Stock were converted into 3.5 million shares of common stock. 6 INNOVASIVE DEVICES, INC. NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS 4. Net Loss Per Share (unaudited) Net loss per share is determined by dividing the net loss by the weighted average number of common stock and common stock equivalents outstanding during the period. The weighted average number of common stock and common stock equivalents outstanding during the period prior to and including the Company's initial IPO on June 5, 1996 includes the effect of the assumed conversion of all convertible preferred stock prior to the actual conversion which occurred upon the closing of the Company's IPO. Accordingly, net loss per share for these periods is presented on a pro forma basis. Pursuant to SEC Staff Accounting Bulletin 83, common stock equivalents, although anti-dilutive, issued at prices below the offering price per share during the twelve months preceding the initial public offering of the Company's common stock have been included in the calculation of net loss per share using the treasury stock method as if outstanding since the beginning of each period presented through March 31, 1996. 7 INNOVASIVE DEVICES, INC. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations OVERVIEW Since its inception, Innovasive Devices, Inc.(the "Company") has been primarily engaged in the development, manufacture and marketing of proprietary devices and instrumentation which facilitate the reattachment of soft tissue structures, such as ligaments and tendons, to bones and other tissues. The Company has a limited operating history and has expended significant resources to fund research and development, the establishment of its manufacturing capabilities and the expansion of its marketing and sales organization. The Company plans to continue investing aggressively in these areas. The Company's sales are principally derived from the sale of its family of ROC tissue fasteners and related surgical instrumentation. The Company commenced commercial shipments of its first ROC fastener during 1994 and expanded its product offering during 1995, to include the IDeal Arthroscopic Suture Fastener System. The following information should be read in conjunction with the unaudited condensed financial statements and notes thereto included in this Quarterly Report and with the Financial Statements and Management's Discussion and Analysis of Financial Condition and Results of Operations contained in the Company's Registration Statement on Form S-1 (Registration No. 333-3368) filed with the SEC on April 11, 1996, as amended by filings on May 17, 1996 and May 30, 1996. Any statements in this report expressing the beliefs and expectations of management regarding the Company's future results and performance are forward- looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based on current expectations that involve a number of risks and uncertainties. The Company wishes to caution readers not to place undue reliance on any such forward- looking statements, which speak only as of the date made. Such forward looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical earnings and those presently anticipated or projected. Certain of such risks and uncertainties are described in the Company's Report on Form 8-K filed with the Securities and Exchange Commission on July 23, 1996. RESULTS OF OPERATIONS THREE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO THE THREE MONTHS ENDED SEPTEMBER 30, 1995 Net sales increased $803,000 to $1,106,000 in the third quarter of 1996 from $303,000 in the third quarter of 1995. This increase was primarily due to the introduction of additional ROC suture fasteners and the expansion of the domestic direct sales force and the international distributor network. The Company ships and invoices direct to customers within the domestic market, however, internationally the Company sells through its distributors. Gross profit increased to $707,000 in the third quarter of 1996 from $13,000 in the third quarter of 1995. As a percentage of sales, gross profit increased to 63.9% in the third quarter of 1996 from 4.3% in the third quarter of 1995. The increase in gross profit was due primarily to increased volumes of ROC suture fasteners manufactured and sold. The higher volumes resulted in improved manufacturing efficiencies. 8 Selling, general and administrative expenses increased to $1,374,000 in the third quarter of 1996 from $557,000 in the third quarter of 1995. The increase resulted primarily from the expansion of the domestic direct sales force, increased salary and travel costs, higher aggregate selling commissions resulting from higher sales volume, increased sample expenses and the increased costs associated with operating as a public company. Research and development expenses increased to $662,000 in the third quarter of 1996 from $408,000 in the third quarter of 1995. The increase was primarily attributable to an increase in expenses related to the collaborative development effort with Collagen Corporation, other product development costs, patent preparation and filing costs associated with the development programs. Net interest income increased to $310,000 in the third quarter of 1996 from $(9,000) in the second quarter of 1995. The primary reason for the increase was the interest received on the investment of the proceeds of the initial public offering closed during the second quarter of 1996. As a result of the foregoing, the net loss increased to $1,019,000 in the third quarter of 1996 from a loss of $961,000 in the third quarter of 1995. NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO THE NINE MONTHS ENDED SEPTEMBER 30, 1995 Net sales increased $2,231,000 to $2,996,000 for the first nine months of 1996 from $765,000 for the first nine months of 1995. The increase was primarily attributable to the introduction of additional ROC suture fasteners and the expansion of the domestic direct sales force and the international distributor network. Gross profit increased to $1,845,000 for the first nine months of 1996 from $71,,000 for the first nine months of 1995. As a percentage of sales, gross profit increased to 61.6% for the first nine months of 1996 from 9.3% for the first nine months of 1995. The increase in gross profit was due primarily to increased volumes of ROC suture fasteners manufactured and sold. The higher volumes resulted in improved manufacturing efficiencies. Selling, general and administrative expenses increased to $3,622,000 for the first nine months of 1996 from $1,639,000 for the first nine months of 1995. The increase resulted primarily from the expansion of the domestic direct sales force, increased salary and travel costs, higher aggregate selling commissions resulting from higher sales volume, increased sample expenses and the increased costs associated with operating as a public company. In addition, the Company recorded a charge of $128,000 in the first quarter of 1996 associated with a facility under lease through May 1997, which it vacated in March 1996. Research and development expenses increased to $1,840,000 for the first nine months of 1996 from $1,110,000 for the first nine months of 1995. The increase was primarily attributable to an increase in expenses related to the collaborative development effort with Collagen Corporation, other product development costs, patent preparation and filing and salary related costs associated with the development programs. Net interest income increased to $484,000 for the first nine months of 1996 from $15,000 for the first nine months of 1995. The primary reason for the increase is due to the interest received on the investment of the proceeds of the initial public offering closed during the second quarter of 1996. 9 As a result of the foregoing, the net loss increased to $3,133,000 for the first nine months of 1996 from $2,663,000 for the first nine months of 1995. LIQUIDITY AND CAPITAL RESOURCES As of September 30, 1996 the Company had cash and cash equivalents of $24.0 million as compared to a balance of $5.1 million on December 31, 1995. The increase in the balance is primarily a result of the proceeds of $21.5 million from the Company's initial public offering of 1,900,000 shares of common stock completed in June 1996. Cash used in the Company's operations increased to $3.2 million for the first nine months of 1996 from $2.4 million for the first nine months of 1995. The increase in cash used for operations resulted from a higher net loss, an increase in accounts receivable due to the higher sales level, and the build up of inventories to support a broader product offering and higher sales levels. Cash provided from operations included an increase in related party payables and other current liabilities. The Company expects that its balance of cash and cash equivalents will be adequate to fund the near term cash requirements for operations, working capital and fixed assets. 10 INNOVASIVE DEVICES, INC. PART II -- OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS ----------------- None ITEM 2. CHANGES IN SECURITIES --------------------- None 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. See Exhibit Index, Page 13 b. Reports on Form 8-K 1) Form 8-K, filed July 23, 1996 describing certain cautionary statements 11 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. INNOVASIVE DEVICES, INC, DATE: NOVEMBER 12, 1996 BY: /S/ RICHARD D. RANDALL --------------------------------------- RICHARD D. RANDALL PRESIDENT, CHIEF EXECUTIVE OFFICER AND DIRECTOR (PRINCIPAL EXECUTIVE OFFICER) DATE: NOVEMBER 12, 1996 BY: /S/ JAMES V. BARRILE -------------------------- JAMES V. BARRILE EXECUTIVE VICE PRESIDENT OF FINANCE, CHIEF FINANCIAL OFFICER AND TREASURER (PRINCIPAL FINANCIAL OFFICER) 12 INNOVASIVE DEVICES, INC. EXHIBIT INDEX EXHIBIT PAGE 11 STATEMENT REGARDING COMPUTATION OF PRO FORMA NET LOSS PER SHARE 14 27 FINANCIAL DATA SCHEDULE 15 13 EX-11 2 STATEMENT REGARDING COMPUTATION OF PRO FORMA EXHIBIT 11 INNOVASIVE DEVICES, INC. Statement Regarding Computation of Pro Forma Net Loss Per Common Share
Three months ended Nine months ended September 30, September 30, ------------------------ ------------------- 1996 1995 1996 1995 ------ ------ ------ ------ (unaudited) (unaudited) Net loss $(1,019,000) $ (961,000) $(3,133,000) $(2,663,000) ============ =========== ============ ============ Weighted average common shares outstanding: a. Shares attributable to common stock outstanding 7,260,408 1,811,478 4,127,967 1,811,478 b. Shares attributable to mandatorily convertible preferred stock 2,881,624 2,029,499 2,881,624 c. Shares attributable to common stock options pursuant to APB 15 and SAB 83 126,438 42,146 126,438 ------------ ----------- ------------ ------------ Weighted average common shares outstanding 7,260,408 4,819,540 6,199,612 4,819,540 ============ =========== ============ ============ Net loss per share unaudited proforma net loss per share $(0.14) $(0.20) $(0.51) $(0.55) ============ =========== ============ ============
EX-27 3 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED UNAUDITED BALANCE SHEET AT SEPTEMBER 30, 1996 AND THE UNAUDITED CONDENSED STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS DEC-31-1996 JAN-01-1996 SEP-30-1996 23,985 0 768 59 701 25,514 1,325 638 26,226 1,495 0 0 0 1 24,730 26,226 2,996 2,996 1,151 1,151 0 0 0 (3,133) 0 (3,133) 0 0 0 (3,133) (0.51) (0.51)
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