-----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, S2mAIjOESDoZo3G6SWVYtdqX1PnKC+q6eEFL8nakYawm/rRAbqJY+Ebe4c8rdlPn UeYa2XxnFcQ38Ju3VBmV9A== 0000927016-97-001483.txt : 19970520 0000927016-97-001483.hdr.sgml : 19970520 ACCESSION NUMBER: 0000927016-97-001483 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970515 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: 97607233 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 March 31, 1997 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 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. (1) YES X NO --- --- (2) YES NO X --- --- The number of shares outstanding of the registrant's common stock as of May 14, 1997 was 7,265,018. INNOVASIVE DEVICES, INC. INDEX Page ---- Part I: Financial Information Item 1. Condensed Financial Statements Condensed Balance Sheet at March 31, 1997 (unaudited) and December 31, 1996 3 Condensed Statement of Operations (unaudited) for the Three Months Ended March 31, 1997 and 1996 4 Condensed Statements of Cash Flows (unaudited) for the Three Months Ended March 31, 1997 and 1996 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 10 Signatures 11 Exhibit Index 12 2
Part I - Financial Information Item 1. Financial Statements INNOVASIVE DEVICES, INC. Condensed Balance Sheet (in thousands) ASSETS March 31, December 31, 1997 1996 ------------- ------------ (unaudited) Current assets: Cash and cash equivalents $ 5,126 $ 12,825 Marketable securities 16,272 9,861 Accounts receivable, net of 982 759 allowance for doubtful accounts of $95 at March 31, 1997and $89 at December 31, 1996, respectively Inventories 872 859 Prepaid expenses 352 112 ------------- ------------ Total current assets 23,604 24,416 Fixed assets, net 1,004 922 Other assets, net 25 25 ------------- ------------ $ 24,633 $ 25,363 ============= ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 678 $ 628 Accounts payable to related party 392 170 Other current liabilities 627 777 ------------- ------------ Total current liabilities 1,697 1,575 Stockholders' equity: Common stock 1 1 Additional paid-in capital 39,928 39,789 Accumulated deficit (16,875) (16,002) Deferred compensation (118) - ------------- ------------ 22,936 23,788 ------------- ------------ $ 24,633 $ 25,363 ============= ============
The accompanying notes are an integral part of these condensed financial statements. 3 INNOVASIVE DEVICES, INC. Condensed Statement of Operations (In thousands, except per share data; unaudited)
Three months ended March 31, ----------------- 1997 1996 ------- ------- Net sales $ 1,663 $ 802 Cost of sales 510 338 ----- ----- Gross profit 1,153 464 Selling, general and administrative expenses 1,495 1,091 Research and development 830 582 ----- ----- Loss from operations (1,172) (1,209) Interest income 299 62 ----- ----- Net loss $ (873) $(1,147) ===== ===== Net loss per share $(0.12) $( 0.21) ===== ===== Shares used in computing net loss per share 7,261 5,457 ===== ======
The accompanying notes are an integral part of these condensed financial statements. 4 INNOVASIVE DEVICES, INC. Condensed Statement of Cash Flows (In thousands; unaudited)
Three months ended March 31, ------------------- 1997 1996 -------- -------- Cash flows from operating activities Net loss $ (873) $(1,147) Adjustments to reconcile net loss to net cash provided by (used for) operating activities: Depreciation and amortization 75 74 Changes in assets and liabilities: Accounts receivable, net (223) (87) Inventories (13) (104) Prepaid expenses (240) 35 Other assets - ( 6) Accounts payable 50 (66) Accounts payable to related party 222 87 Other current liabilities (150) 280 ------ ------ Net cash used for operating activities (1,152) (934) ------ ------ Cash flows from investing activities Purchases of fixed assets (157) (83) Purchases of marketable securities (6,411) - ------ ------ Net cash used for investing activities (6,568) (83) ------ ------ Cash flows from financing activities Proceeds from issuance of preferred stock, net of issuance costs - 927 Proceeds from issuance of common stock, net of issuance costs 21 7 ------ ------ Net cash provided by financing activities 21 934 ------ ------ Net decrease in cash and cash equivalents (7,699) (83) Cash and cash equivalents at beginning of period 12,825 5,052 ------ ------ Cash and cash equivalents at end of period $ 5,126 $ 4,969 ====== ======
The accompanying notes are an integral part of these 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 March 31, 1997 and the results of operations for the three month periods ended March 31, 1997 and 1996. 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 Annual Report on Form 10-K filed with the SEC on March 26, 1997. 2. Inventories Inventories consist of the following:
March 31, December 31, 1997 1996 ----------- ------------ (unaudited) Raw materials $ 292 $ 282 Work-in-process 104 117 Finished goods 476 460 ----------- ------------ Totals $ 872 $ 859 =========== ============
3. Net Loss Per Share (unaudited) Net loss per share is determined by dividing the net loss by the weighted average number of common stock outstanding during the period. The weighted average number of common stock outstanding during the period prior to and including the Company's initial public offering ("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 the period ending March 31, 1996 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 also been included in the calculation of net loss per share using the treasury stock method as if outstanding from January 1, 1996 through March 31, 1996. 6 INNOVASIVE DEVICES, INC. NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS - (CONTINUED) In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No.128 ("SFAS 128"), "Earnings Per Share". This statement establishes and simplifies standards for computing and presenting earnings per share. SFAS 128 will be effective for interim and annual periods ending after December 15, 1997, and requires the restatement of all previously reported earnings per share data that are presented. Early adoption of SFAS 128 is not permitted. SFAS 128 replaces primary and fully diluted earnings per share with basic and diluted earnings per share. As the Company has historically reported net losses, earnings per share as computed under the provisions of SFAS 128 will not differ from the earnings per share amounts previously reported by the Company. 3. Deferred compensation In February 1997, the Company issued 21,500 common stock options to members of its scientific advisory board under the 1996 Omnibus Stock Plan. The estimated value of these options totaled approximately $118,000 and was recorded as deferred compensation which will be amortized over the vesting period of the options. The estimated value of each option grant was calculated on the date of grant using the Black-Scholes option-pricing model with the following assumptions: expected option term of five years; no dividend yield; risk free interest rate of 6.2%; and expected volatility of 55%. 4. Asset Purchase Agreement with MedicineLodge, Inc. On February 4, 1997 the Company entered into an asset purchase agreement to acquire substantially all of the operating assets and liabilities of MedicineLodge Inc. (MLI), in exchange for 1,885,000 shares of the Company's common stock. MLI designs, develops and manufactures proprietary implantable medical devices and related instrumentation. The acquisition is subject to certain conditions, including approval of the Company's stockholders, and, if approved, is expected to be consummated in June 1997. The acquisition will be accounted for using the purchase method. Accordingly, the results of operations of MLI will be included with those of the Company for periods subsequent to the date of the acquisition. 7 INNOVASIVE DEVICES, INC. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations OVERVIEW Since its inception, Innovasive Devices (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 has since expanded its product offering to include the IDeal Arthroscopic Suture Fastener System, the ROC XS and Mini ROC suture fasteners and the Innovasive COR system for the repair of osteochondral defects. 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 Annual Report on Form 10-K filed with the SEC on March 26, 1997. 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 Exhibit 99 of the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 26, 1997. RESULTS OF OPERATIONS THREE MONTHS ENDED MARCH 31, 1997 COMPARED TO THE THREE MONTHS ENDED MARCH 31, 1996 Net sales increased $861,000 to $1,663,000 in the first quarter of 1997 from $802,000 in the first quarter of 1996. This increase was primarily due to the introduction of additional products in the second and fourth quarters of 1996. In the second quarter of 1996, the Company introduced the ROC XS, used for tissue reattachment in soft bone situations, and the Mini ROC, used for tissue reattachment in small joint situations. In the fourth quarter of 1996, the Company introduced the Innovasive COR system, used for the repair of osteochondral defects. The expansion of the Company's domestic direct sales force and international distributor network also contributed to the sales increase. Domestic net sales increased 138% during the first quarter of 1997 over the first quarter of 1996. The increase is the result of an increase in the unit sales of the Company's ROC, ROC XS and Mini Roc suture fasteners and COR systems. International net sales increased 29% during the first quarter of 1997 over the first quarter of 1996 as a result of increased unit sales of ROC XS and Mini Roc suture fasteners and COR systems. 8 Gross profit increased to $1,153,000 in the first quarter of 1997 from $464,000 in the first quarter of 1996. As a percentage of sales, gross profit increased to 69.3% in the first quarter of 1997 from 57.9% in the first quarter of 1996. The increase in gross profit was due primarily to increased net sales of ROC suture fasteners and COR systems which resulted in improved manufacturing efficiencies. Selling, general and administrative expenses increased to $1,495,000 in the first quarter of 1997 from $1,091,000 in the first quarter of 1996. The increase resulted primarily from the expansion of the domestic direct sales force, increased salary and travel costs, higher selling commissions resulting from higher sales volume, increased advertising costs and the increased administrative costs associated with operating as a public company. Research and development expenses increased to $830,000 in the first quarter of 1997 from $582,000 in the first quarter of 1997. The increase was primarily attributable to an increase in expenses related to product development costs and patent preparation and filing costs associated with product development programs. Interest income increased to $299,000 in the first quarter of 1997 from $62,000 in the first quarter of 1996. 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 decreased to $873,000 in the first quarter of 1997 from a loss of $1,147,000 in the first quarter of 1996. LIQUIDITY AND CAPITAL RESOURCES As of March 31, 1997, working capital amounted to $21.9 million as compared to $22.8 million at December 31, 1996. The decrease was primarily the result of the net loss incurred in the first quarter of 1997 and expenditures made for capital equipment. Cash used in the Company's operations amounted to $1.2 million for the first quarter of 1997 as a result of the net loss of $873,000 and a net increase in working capital requirements including an increase in accounts receivable as a result of higher sales levels and an increase in prepaid expenses related to the MedicineLodge, Inc. agreement, partially offset by an increase in current liabilities. Cash used for investing activities totaled $6.6 million for the first quarter of 1997 resulting from purchases of marketable securities totaling $6.4 million and capital equipment totaling $157,000. The Company invests its excess cash in marketable securities with maturities of less than two years. The Company expects that its balance of cash, cash equivalents and marketable securities will be adequate to fund the near term cash requirements for operations, working capital and fixed assets. On February 4, 1997 the Company entered into an asset purchase agreement to acquire substantially all of the operating assets and liabilities of MedicineLodge Inc. (MLI), in exchange for 1,885,000 shares of the Company's common stock. The acquisition is subject to certain conditions, including approval of the Company's stockholders, and, if approved, is expected to be consummated in June 1997. The acquisition will be accounted for using the purchase method. 9 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 12 b. Reports on Form 8-K None 10 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: MAY 15, 1997 BY:/S/ RICHARD D. RANDALL --------------------------------------- RICHARD D. RANDALL PRESIDENT, CHIEF EXECUTIVE OFFICER AND DIRECTOR (PRINCIPAL EXECUTIVE OFFICER) DATE: MAY 15, 1997 BY:/S/ JAMES V. BARRILE ------------------------ JAMES V. BARRILE EXECUTIVE VICE PRESIDENT OF FINANCE, CHIEF FINANCIAL OFFICER AND TREASURER (PRINCIPAL FINANCIAL OFFICER) 11 INNOVASIVE DEVICES, INC. EXHIBIT INDEX EXHIBIT PAGE 11 STATEMENT REGARDING COMPUTATION OF NET LOSS PER SHARE 13 EX-11 2 STATEMENT REGARDING COMPUTATION OF NET LOSS EXHIBIT 11 INNOVASIVE DEVICES, INC. Statement Regarding Computation of Net Loss Per Common Share
Three months ended March 31, ------------------------ 1997 1996 ---------- ----------- (unaudited) Net loss $ (873,000) $(1,147,000) ========== ============ Weighted average common shares outstanding: a. Shares attributable to common stock outstanding 7,260,870 1,812,015 b. Shares attributable to mandatorily convertible preferred stock 3,518,255 c. Shares attributable to common stock options pursuant to SAB 83 126,438 ---------- ----------- Weighted average common shares outstanding 7,260,870 5,456,708 ========== =========== Net loss per share $ (0.12) $ (0.21) ========== ============
EX-27 3 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS DEC-31-1997 JAN-01-1997 MAR-31-1997 5,126 16,272 1,080 95 872 23,604 1,719 715 24,633 1,697 0 0 0 1 22,935 24,633 1,663 1,663 510 510 0 0 0 (873) 0 (873) 0 0 0 (873) (0.12) (0.12)
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