-----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, U/KPUIcNdXp/5Fn8wgoe0+6G6cBbJOh5jq3PWx54rP+RjIASCs74y501uRGhnylF 9SPQlgx+JzeHu71tDaYlBQ== 0000892569-97-000445.txt : 19970222 0000892569-97-000445.hdr.sgml : 19970222 ACCESSION NUMBER: 0000892569-97-000445 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970214 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: GISH BIOMEDICAL INC CENTRAL INDEX KEY: 0000700945 STANDARD INDUSTRIAL CLASSIFICATION: SURGICAL & MEDICAL INSTRUMENTS & APPARATUS [3841] IRS NUMBER: 953046028 STATE OF INCORPORATION: CA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-10728 FILM NUMBER: 97534284 BUSINESS ADDRESS: STREET 1: 2681 KELVIN AVE CITY: IRVINE STATE: CA ZIP: 92714 BUSINESS PHONE: 7147565485 MAIL ADDRESS: STREET 1: 2681 KELVIN AVE CITY: IRVINE STATE: CA ZIP: 92714 10-Q 1 FORM 10-Q FOR PERIOD ENDED DECEMBER 31, 1996 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 31, 1996 ----------------- OR [ ] 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 0-10728 ------- GISH BIOMEDICAL, INC. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) California 95-3046028 - -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 2681 Kelvin Avenue, Irvine California 92614 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code (714) 756-5485 -------------- 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 January 31, 1997: 3,382,895 1 2 GISH BIOMEDICAL, INC. INDEX
Page PART I. Financial Information Item 1: Condensed Consolidated Financial Statements Condensed Consolidated Balance Sheets as of December 31, 1996 and June 30, 1996 3 Condensed Consolidated Statements of Operations for the three and six months ended December 31, 1996 and 1995 4 Condensed Consolidated Statements of Cash Flows for the six months ended December 31, 1996 and 1995 5 Notes to Condensed Consolidated Financial Statements 6 Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations. 8 PART II. Other Information Item 4: Submission of Matters to a Vote of Security-Holders 10 Item 6: Exhibits and Reports on Form 8-K 10
2 3 GISH BIOMEDICAL, INC. CONDENSED CONSOLIDATED BALANCE SHEETS
December 31, June 30, 1996 1996 -------------- ------------- ASSETS (Unaudited) Current assets: Cash and cash equivalents $ 3,461,300 $ 3,314,200 Short-term investments 1,031,600 1,031,600 Accounts receivable, net 3,867,900 4,078,000 Inventories 7,004,700 7,083,700 Deferred income tax assets 748,900 748,900 Prepaid expenses 603,300 245,700 ----------- ----------- Total current assets 16,717,700 16,502,100 ----------- ----------- Property and equipment, at cost 10,130,500 9,799,900 Less accumulated depreciation (5,915,400) (5,463,200) ----------- ----------- Net property and equipment 4,215,100 4,336,700 Other assets 123,900 130,400 Goodwill, net of accumulated amortization 1,867,500 1,966,800 ----------- ----------- $22,924,200 $22,936,000 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 760,000 $ 984,500 Accrued compensation and related items 628,700 571,800 Accrued income taxes -- -- Other accrued liabilities 24,200 60,300 ----------- ----------- Total current liabilities 1,412,900 1,616,600 ----------- ----------- Deferred rent 300,300 282,600 Deferred income taxes 27,000 27,000 ----------- ----------- Shareholders' equity: Preferred stock, 2,250,000 shares authorized; no shares outstanding Common stock, no par value, 7,500,000 -- -- shares authorized, 3,382,895 shares issued and outstanding (3,363,444 shares at June 30, 1996) 9,928,900 9,828,000 Note receivable - officer stock purchase (30,000) (50,000) Retained earnings 11,285,100 11,231,800 ----------- ----------- Total shareholders' equity 21,184,000 21,009,800 ----------- ----------- $22,924,200 $22,936,000 =========== ===========
See accompanying notes 3 4 GISH BIOMEDICAL, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS THREE AND SIX MONTHS ENDED DECEMBER 31, 1996 AND 1995 (UNAUDITED)
Three months ended Six months ended December 31, December 31, --------------------------- ----------------------------- 1996 1995 1996 1995 ---------- ---------- ----------- ----------- Net sales $5,340,900 $5,780,600 $10,653,500 $11,051,800 Cost of sales 3,658,400 3,765,300 7,171,500 7,198,600 ---------- ---------- ----------- ----------- Gross profit 1,682,500 2,015,300 3,482,000 3,853,200 ---------- ---------- ----------- ----------- Operating expenses Selling and marketing 914,600 980,100 1,827,800 1,675,800 Research and development 359,300 440,700 706,500 697,200 General and administrative 479,900 483,700 971,800 864,000 Distributor contract termination fee -- -- -- 702,000 ---------- ---------- ----------- ----------- Total operating expenses 1,753,800 1,904,500 3,506,100 3,939,000 ---------- ---------- ----------- ----------- Operating income (loss) (71,300) 110,800 (24,100) (85,800) ---------- ---------- ----------- ----------- Other income, net 57,800 49,400 111,400 108,200 ---------- ---------- ----------- ----------- Income (loss) before provision for taxes (13,500) 160,200 87,300 22,400 Provision (benefit) for taxes (5,300) 62,400 34,000 8,700 ---------- ---------- ----------- ----------- Net income (loss) $ (8,200) $ 97,800 $ 53,300 $ 13,700 ========== ========== =========== =========== Net income (loss) per share: Primary $ -- $ 0.03 $ .02 $ -- ========== ========== =========== =========== Fully diluted $ -- $ 0.03 $ .02 $ -- ========== ========== =========== =========== Average common and common equivalent shares: Primary 3,382,895 3,363,938 3,581,070 3,368,169 ========== ========== =========== =========== Fully diluted 3,382,895 3,370,812 3,546,830 3,377,377 ========== ========== =========== ===========
See accompanying notes 4 5 GISH BIOMEDICAL, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS SIX MONTHS ENDED DECEMBER 31, 1996 AND 1995 (UNAUDITED)
1996 1995 ------------ ------------ Cash flows from operating activities: Net income $ 53,300 $ 13,700 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 566,500 388,200 Deferred rent 17,700 27,700 Changes in operating assets and liabilities (272,200) (2,297,900) ----------- ----------- Net cash provided by (used in) operating activities 365,300 (1,868,300) ----------- ----------- Cash flows for investing activities: Sale of short-term investments -- 1,957,900 Note receivable -- (600,000) Purchases of property and equipment (330,600) (443,000) Increase (decrease) in other assets (8,500) 42,400 ----------- ----------- Net cash provided by (used in) investing activities (339,100) 957,300 ----------- ----------- Cash flows from financing activities: Proceeds from stock options exercised 100,900 27,900 Payment on note receivable from officer 20,000 10,000 ----------- ----------- Net cash provided by financing activities 120,900 37,900 ----------- ----------- Net increase (decrease) in cash and cash equivalents 147,100 (873,100) ----------- ----------- Cash and cash equivalents at beginning of period 3,314,200 2,165,800 ----------- ----------- Cash and cash equivalents at end of period $ 3,461,300 $ 1,292,700 =========== ===========
See accompanying notes 5 6 GISH BIOMEDICAL, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1996 (UNAUDITED) 1. General The condensed financial statements included herein have been prepared by the Registrant, without audit, and include all adjustments which are, in the opinion of management, necessary for a fair presentation of the results of operations for the three and six month periods ended December 31, 1996 and 1995, financial position at December 31, 1996, and cash flows for the six month periods ended December 31, 1996 and 1995, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Registrant believes that the disclosures in such financial statements are adequate to make the information presented not misleading. These condensed financial statements should be read in conjunction with the Registrant's consolidated financial statements and the notes thereto included in the Registrant's Annual Report filed with the Securities and Exchange Commission on Form 10-K for the year ended June 30, 1996. Statement of Cash Flows Changes in operating assets and liabilities as shown in the condensed consolidated statements of cash flows comprise:
Six months ended December 31, 1996 1995 ----------------------------- ---------- ----------- (Increase) decrease in: Accounts receivable $ 210,100 $ (502,100) Inventories 79,000 (878,700) Prepaid expenses (357,600) (651,800) Increase (decrease) in: Accounts payable (224,500) 104,300 Accrued compensation and related items 56,900 (64,900) Accrued income taxes -- (570,900) Other accrued liabilities (36,100) 266,200 --------- ----------- Changes in operating assets and liabilities $(272,200) $(2,297,900) ========= ===========
The Company paid $184,700 and $937,500 in Federal and State income taxes during the six month periods ended December 31, 1996 and 1995, respectively. 6 7 GISH BIOMEDICAL, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1996 (UNAUDITED) 2. Inventories Inventories are stated at the lower of cost (first-in, first out) or net realizable value and are summarized as follows:
December 31, 1996 June 30,1996 ----------------- ------------ Raw materials $3,377,100 $4,166,000 Work in progress 1,381,200 1,123,200 Finished goods 2,246,400 1,794,500 ---------- ---------- $7,004,700 $7,083,700 ========== ==========
3. Earnings per share Earnings per share is based on the weighted average number of common and common equivalent shares outstanding during the period. Common equivalent shares include the potential dilution from the exercise of stock options and warrants, and where dilutive, reduced by the number of common shares which are assumed to have been purchased with the income tax benefits and proceeds from the exercise of such instruments. Fully diluted earnings per share reflects additional dilution from the assured exercise of the dilutive common stock options at the beginning of the period. 4. Acquisition On September 12, 1995 the Company entered into an agreement to acquire the assets and technology of Creative Medical Development, Inc. ("CMD") for $600,000 in cash and 240,240 shares of the Company's common stock and assumed management of the assets and the risks and rewards from operation of the assets to be acquired. Accordingly, the Company has included revenue and costs related to the product lines acquired for the period September 13, 1995 through December 31, 1996 in the Company's financial statements. Additionally, the Company upon closing of the transaction April 17, 1996, entered into a one-year lease for the building which CMD currently occupies. During the quarter ended December 31, 1996 the Company ceased to utilize the building for manufacturing and anticipates it will be released from the lease sometime in February 1997. The Company had also executed one year employment agreements with four key employees which included provisions for the issuance of up to 53,500 shares of the Company's common stock to those employees upon completion of certain performance criteria. As of December 31, 1996, 10,875 such shares were issued. During the quarter ended December 31, 1996 two of those key employees were terminated for cause. Additionally, a third employee under contract resigned effective February 15, 1997. The Company has no reason to believe that the loss of these employees will negatively affect the performance of the assets acquired. 7 8 GISH BIOMEDICAL, INC DECEMBER 31, 1996 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations: On September 12, 1995 the Company entered into an agreement to acquire the assets and technology of Creative Medical Development, Inc. ("CMD") for $600,000 in cash and 240,240 shares of the Company's common stock and assumed management of the assets and the risks and rewards from operation of the assets to be acquired. Accordingly, the Company has included revenue and costs related to the product lines acquired for the period September 13, 1995 through December 31, 1996 in the Company's financial statements. Additionally, the Company upon closing of the transaction April 17, 1996, entered into a one-year lease for the building which CMD currently occupies. During the quarter ended December 31, 1996 the Company ceased to utilize the building for manufacturing and anticipates it will be released from the lease sometime in February 1997. The Company had also executed one year employment agreements with four key employees which included provisions for the issuance of up to 53,500 shares of the Company's common stock to those employees upon completion of certain performance criteria. As of December 31, 1996, 10,875 such shares were issued. During the quarter ended December 31, 1996 two of those key employees were terminated. The Company has no reason to believe that the loss of these employees will negatively affect the performance of the assets acquired. Additionally, a third employee under contract resigned effective February 15, 1997. The Company expects to realize approximately $100,000 in pretax savings per quarter as a result of these operational changes with respect to the assets acquired from CMD. Sales for the three and six month periods ended December 31, 1996 decreased by $440,000 or 8% and $398,000 or 4% respectively over the corresponding periods of fiscal 1996. The decreases in sales for the three and six month periods ended December 31, 1996 were due primarily to decreases in sales of the ambulatory infusion pump acquired from CMD. Cost of sales for the three month period ended December 31, 1996 was 68% of sales as compared to 65% of sales for the corresponding period of fiscal 1996. Cost of sales for the six month period ended December 31, 1996 was 67% of sales as compared to 65% of sales for the corresponding period of fiscal 1996. The increase in cost of sales for the three and six month periods ended December 31, 1996 is primarily attributable to reduced absorption of manufacturing costs at CMD aggregating $60,000 and $160,000, respectively, resulting from decreased sales of the ambulatory infusion pump manufactured at that location and to increasing price competition in the cardiovascular surgery market. Selling and marketing expenses for the three month period ended December 31, 1996 remained constant at 17% of total sales as compared with the corresponding period of fiscal 1996. Selling and marketing expenses for the six month period ended December 31, 1996 increased $152,000 or 9% over the corresponding period of fiscal 1996 due to the operation of CMD. The Company anticipates that its selling and marketing expenses will continue to be approximately $900,000 to $1,000,000 per quarter for the remainder of the fiscal year. Research and development expenses for the three month period ended December 31, 1996 decreased $81,000 or 18% compared to the corresponding period in fiscal 1996 and increased $9,000 or 1% for the six month period ended December 31, 1996 over the corresponding periods of fiscal 1996. The Company is actively engaged in several new product development projects, including an oxygenator, all of which will continue to require expenditures approximating $350,000 per quarter for the foreseeable future. 8 9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) General and administrative expenses increased to 9% of sales as compared to 8% of sales for the corresponding periods of fiscal 1996. The increases are due to lower sales volumes and the amortization of excess purchase price associated with the purchase of the assets of CMD of approximately $50,000 per quarter. The Company anticipates that general and administrative expenses should approximate $450,000 per quarter for the remainder of the fiscal year. The Company also incurred a one-time expense of $702,000 during the first quarter of fiscal 1996, which represents payments due to a former distributor as compensation for the termination of its contract with the Company. The provision for taxes is based upon a combined federal and state effective tax rate of 39% for all periods presented. Quarterly earnings per share is not directly additive for the periods presented due to fluctuations in weighted average shares outstanding. These fluctuations are attributable to the exercise of stock options and the treasury stock method for determining the number of outstanding options to be included as common stock equivalents. These fluctuations are more significant when there are substantial variations in the market price of the Company's common stock. The effects of inflation have not been a significant factor in the results of operations. The cardiovascular surgery market has been experiencing pricing pressures which have precluded the Company from considering price increases. Liquidity and capital resources: At December 31, 1996, the Company had $15,305,000 of working capital, an increase of $419,000 from working capital at June 30, 1996. The increase is primarily due to cash provided by operating activities. For the period ended December 31, 1996 cash provided by operations of $365,300 was primarily due to operating income offset by increased prepaids and payment of trade payables. For the period ended December 31, 1995, cash used in operations of $1,868,300 was primarily due to increases in inventories, accounts receivable and payment of accrued taxes. Increases in inventories were primarily due to a commitment to stocking higher levels of finished goods related to our direct sales efforts and acquisition of component inventory for new products such as MyoManager (TM), the oxygenator, and the ambulatory infusion pumps. Increases in accounts receivable were due to increases in sales and the timing of those sales during the quarter. For the period ended December 31, 1996 cash used by investing activities of $339,100 was primarily due to the purchase of property and equipment for use in the manufacture of the Company's soon to be released oxygenator. For the period ended December 31, 1995 cash provided by investing activities was primarily due to sale of short-term investments offset by the advance of $600,000 to CMD and the purchase of property and equipment. The advance to CMD was in the form of a note and was secured by substantially all of CMD's assets. Purchases of property and equipment were primarily tooling purchases to manufacture inventory associated with new products such as the MyoManager and the oxygenator. For the periods ended December 31, 1996 and 1995 cash provided by financing activities of $120,900 and $37,900 was primarily due to proceeds from the exercise of stock options. 9 10 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) For the periods ended December 31, 1996 and 1995 cash provided by financing activities of $120,900 and $37,900 was primarily due to proceeds from the exercise of stock options. The Company believes that cash generated from operations together with available cash will be adequate to meet the Company's planned expenditures and liquidity needs for fiscal 1997. This Quarterly Report on Form 10-Q contains certain forward-looking statements that are based on current expectations. In light of the important factors that can materially affect results, including those set forth below and elsewhere in this Quarterly Report on Form 10-Q, the inclusion of forward-looking information herein should not be regarded as a representation by the Company or any other person that the objectives or plans of the Company will be achieved. The Company may encounter competitive, technological, financial and business challenges making it more difficult than expected to continue to develop and market its products; the market may not accept the Company's existing and future products; the Company may be unable to retain existing key management personnel; and there may be other material adverse changes in the Company's operations or business. Certain important factors affecting the forward-looking statements made herein include, but are not limited to (i) failure to obtain U.S. Food and Drug Administration approval for its oxygenator which is currently in development, (ii) the lack of market acceptance of its redesigned MyoManager or ambulatory infusion pump, (iii) continued downward pricing pressures in the Company's targeted markets, (iv) the continued acquisition of the Company's customers by certain of its competitors and (v) the decision by the Company to replace its distributor network with a direct sales force in certain geographic territories. Assumptions relating to budgeting, marketing, product development and other management decisions are subjective in many respects and thus susceptible to interpretations and periodic revisions based on actual experience and business developments, the impact of which may cause the Company to alter its marketing, capital expenditure or other budgets, which may in turn affect the Company's financial position and results of operations. The reader is therefore cautioned not to place undue reliance on forwarding-looking statements contained herein, which speak as of the date of this Report. PART II. OTHER INFORMATION ITEM 4. Submission of Matters to a Vote of Security-Holders. The Company held its annual meeting of Shareholders ("Annual Meeting") on November 13, 1996. At the Annual Meeting the Shareholders voted upon the following two proposals: (1) the election of all directors for the ensuing year (proposal one); (2) the ratification of the selection of Ernst & Young, LLP as the Company's auditors for 1997 (proposal two). The number of votes cast for or withheld for each of the Directors were: Jack W. Brown 3,057,836 and 29,222; Richard A. Braun 3,056,836 and 30,222; Ray R. Coulter 3,059,336 and 27,722; Richard W. Dutrisac 3,053,536 and 33,522; James B. Glavin 3,055,636 and 31,422; James S. Hagestad 3,059,836 and 27,222, respectively. The number of votes cast for, against or withheld, as well as the number of abstentions and broker non- votes for proposals two were: 3,064,250, 14,850, and 7,958 respectively. ITEM 6. Exhibits and reports on Form 8K. None. 10 11 GISH BIOMEDICAL, INC. DECEMBER 31, 1996 SIGNATURES Pursuant to the Requirements of Section 13 or 15(d) 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, at Irvine, California this 14th day of February 1997. GISH BIOMEDICAL, INC. Date: February 14, 1997 By: /s/ JACK W. BROWN -------------------------------- JACK W. BROWN Chairman and President Date: February 14, 1997 By: /s/ JEANNE MILLER -------------------------------- JEANNE MILLER V.P. and Chief Financial Officer 11 EX-27 2 FINANCIAL DATA SCHEDULE
5 6-MOS JUN-30-1997 JUL-01-1996 DEC-31-1996 3,461,300 1,031,600 3,867,900 0 7,004,700 16,717,700 10,130,500 5,915,400 22,924,200 1,412,900 0 0 0 9,928,900 (30,000) 22,924,200 10,653,500 10,653,500 7,171,500 7,171,500 3,506,100 0 0 87,300 34,000 53,300 0 0 0 53,300 .02 .02
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