UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------------
FORM 10-Q/A
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended February 28, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ____________
Commission File No. 0-7578
ELECTRO-CATHETER CORPORATION
----------------------------
(Exact name of the registrant as specified in its charter)
New Jersey 22-1733406
---------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2100 Felver Court, Rahway, New Jersey 07065
- ------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's Telephone No. including Area Code: 732-382-5600
------------
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
---
Indicate the number of shares outstanding of the issuer's common stock, as of
the latest practical date:
As of April 6, 1998, the number of shares outstanding of the Registrant's common
stock was 6,390,389 shares, $.10 par value.
AMENDMENT NO. 1
The undersigned hereby amends the following items, financial statements,
exhibits or other positions of its Quarterly Report on Form 10-Q for the
quarterly period ended February 28, 1998, as set forth in the pages attached
hereto:
PART I
Item 1. Financial Statements (unaudited)
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Questions.
PART II
Item 6. Exhibits and Reports on Form 8-K
ELECTRO-CATHETER CORPORATION
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION PAGE
- ------- --------------------- ----
Item 1. Financial Statements (Unaudited) 1
Condensed Comparative Balance Sheets
February 28, 1998 and August 31, 1997 2
Condensed Comparative Statements of Operations -
Three and Six Months Ended February 28, 1998
and February 28, 1997 3
Condensed Comparative Statements of Cash Flows -
Six Months Ended February 28, 1998 and
February 28, 1997 4-5
Notes to Condensed Financial Statements 6-8
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial Condition 9-12
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
PART I - FINANCIAL INFORMATION
------------------------------
ELECTRO-CATHETER CORPORATION
----------------------------
CONDENSED COMPARATIVE BALANCE SHEETS
------------------------------------
(Unaudited)
February 28, August 31,
ASSETS 1998 1997
------------ ----
Current assets:
Cash and cash equivalents $ -0- $ 98,127
Accounts receivable, net 854,902 988,859
Inventories
Finished goods 329,770 481,660
Work-in-process 845,105 490,621
Materials and supplies 282,536 270,086
------- -------
Total inventories 1,457,411 1,242,367
Prepaid expenses and
other current assets 60,196 168,781
--------- ---------
Total current assets 2,372,509 2,498,134
Property, plant and equipment, net 715,251 777,663
Other assets, net 93,836 97,275
--------- ---------
Total assets 3,181,596 3,373,072
========= =========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities:
Current installments of subordinated
debentures due to T Partnership, a
related party 150,000 -0-
Current installments of capitalized
lease obligations 63,672 50,734
Accounts payable and accrued expenses 1,207,390 1,045,406
Accrued litigation expenses 389,354 443,820
--------- ---------
Total current liabilities 1,810,416 1,539,960
Subordinated debentures due to
T Partnership, a related party,
excluding current installments 1,897,125 1,747,125
Capitalized lease obligation, excluding
current installments 236,603 222,277
--------- ---------
Total liabilities 3,944,144 3,509,362
--------- ---------
Stockholders' deficiency:
Common stock 639,039 638,361
Additional paid-in capital 10,683,491 10,682,008
Accumulated deficit (12,085,078) (11,456,659)
Total stockholders' deficiency (762,548) (136,290)
Total liabilities and stockholders'
deficiency $ 3,181,596 $ 3,373,072
========= =========
See accompanying notes to condensed financial statements.
1
ELECTRO-CATHETER CORPORATION
----------------------------
CONDENSED COMPARATIVE STATEMENTS OF OPERATIONS
----------------------------------------------
(Unaudited)
Three Months Ended Six Months Ended
February 28, February 28, February 28, February 28,
1998 1998 1998 1998
Net revenues $ 1,314,696 $ 1,741,555 $ 2,650,009 $ 3,419,305
Cost of goods
sold 852,213 961,136 1,717,059 1,776,131
--------- --------- --------- ---------
Gross profit 462,483 780,419 932,950 1,643,174
Operating
expenses:
Selling, general
and administra-
tive 590,417 604,982 1,116,467 1,198,815
Research and
development 134,472 235,214 297,490 447,781
------- ------- ------- -------
Operating loss (262,406) (59,777) (481,007) (3,422)
Other expenses:
Interest
expense (74,556) (60,789) (147,412) (115,489)
------ ------ ------- -------
Net loss $ (336,962) $ (120,566) $ (628,419) $ (118,911)
========= ========= ========= =========
Basic and
diluted loss
per share $ (0.05) $ (0.02) $ (0.10) $ (0.02)
====== ====== ====== ======
Dividends per
share None None None None
Weighted
average shares
outstanding 6,387,000 6,378,661 6,385,548 6,377,247
See accompanying notes to condensed financial statements.
2
ELECTRO-CATHETER CORPORATION
CONDENSED COMPARATIVE STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
February 28, 1998 February 28, 1997
----------------- -----------------
Cash flows from operating activities:
Net loss $ (628,419) $ (118,911)
Reconciliation of net loss to net cash used in operating activities:
Depreciation 64,497 70,026
Amortization 4,167 4,167
Changes in assets and liabilities:
Decrease in accounts receivable, net 133,957 92,834
(Increase) decrease in inventories (215,044) 188,487
Decrease (increase) in prepaid expenses
and other current assets 108,585 (205,385)
(Increase) decrease in other assets (728) 10,107
Decrease in deferred revenues -0- (144,293)
Increase (decrease) in accounts
payable and accrued expenses 156,668 93,387
------- ------
Net cash used in operating activities $(376,317) (9,581)
------- -----
Cash flows from investing activities:
Cash purchases of property, plant and
equipment (2,085) (59,824)
----- ------
Cash flows from financing activities:
Stock purchase plan 2,161 3,682
Proceeds from loan from T Partnership,
a related party 300,000 -0-
Reductions of debt and capitalized lease
obligations (21,886) (110,777)
------ -------
Net cash provided (used in) by financing
activities (280,275) (107,095)
------- -------
Net decrease in cash (98,127) (176,500)
Cash at beginning of period 98,127 275,283
------ -------
Cash at end of period $ -0- $ 98,783
======= =======
Interest paid $ 144,413 $ 112,321
Property, plant and equipment acquired
under capitalized lease obligations $ 49,150 $ 196,125
See accompanying notes to condensed financial statements.
3
ELECTRO-CATHETER CORPORATION
----------------------------
NOTES TO CONDENSED FINANCIAL STATEMENTS
---------------------------------------
Note 1 Basis of Presentation
- ------ ---------------------
In the opinion of management, the accompanying unaudited condensed financial
statements contain all adjustments (consisting only of normal recurring
accruals) necessary to present fairly the financial position of Electro-Catheter
Corporation as of February 28, 1998, the results of operations for the three and
six months ended February 28, 1998 and February 28, 1997 and statements of cash
flows for the six months ended February 28, 1998 and February 28, 1997, but are
not necessarily indicative of the results to be expected for the full year.
The financial statements have been prepared in accordance with the requirements
of Form 10-Q and consequently do not include disclosures normally made in an
Annual Report on Form 10-K. Accordingly, the financial statements included
herein should be reviewed in conjunction with the financial statements and notes
thereto included in the Company's Annual Report on Form 10-K for the fiscal year
ended August 31, 1997.
Note 2 Subordinated Debentures
- ------ -----------------------
In September 1997, in December 1997, and in January 1998, the Company borrowed
additional amounts from the T Partnership, a related party, in each case in the
amount of $100,000, under substantially the same terms and conditions as its
previous borrowings, without issuing any additional warrants. Under the current
arrangement, the Company is obligated to comply with a financial covenant to be
tested on a monthly basis. Noncompliance by the Company with such covenant would
allow the T Partnership to declare an event of default and accelerate repayment
of indebtedness. The Company is currently in compliance with the covenant. The
total indebtedness due to the T Partnership at February 28, 1998 was $2,047,125.
Note 3 Commitments and Contingencies
- ------ -----------------------------
FDA Warning Letter
- ------------------
The products developed and manufactured by the Company come under the
jurisdiction of the Food and Drug Administration ("FDA") of the United States
Department of Health and Human Services. Since the devices manufactured by the
Company are intended for "human use", as defined by the FDA, the Company and
said devices are subject to FDA regulations, which, among other things, allow
for the conduct of routine detailed inspections of device manufacturing
establishments and confirmation of adherence to "current good manufacturing
practices" ("cGMP") in the manufacture of medical devices which include testing,
quality control, design and documentation requirements.
In February 1997, the FDA conducted an inspection and audit of Electro. At the
conclusion of the audit, the FDA issued a number of observations regarding
noncompliance by Electro with certain cGMP in the manufacture of its products.
On March 11, 1997, the FDA issued a Warning Letter to Electro requesting that
prompt action be taken to correct the violations. The areas of noncompliance
include Electro's methods of investigation of device complaints, methods of
validation of device sterilization, environmental monitoring procedures, methods
of validation of extrusion processes which are used in the manufacture of
certain Electro's catheters and other quality assurance and record keeping
requirements.
4
Electro has communicated with the FDA its intentions to remedy the
noncompliance, has established a plan and timetable to effectuate such
remediation and has diligently worked to take the necessary corrective actions;
Electro's actions have included the establishment of certain validation
protocols, revisions to Electro's Quality System and Quality System Manual, the
implementation of a program for environmental testing, the purchase of equipment
for extrusion process validation and the institution of file and record keeping
protocols. A subsequent FDA inspection in September 1997 indicated that while
substantial progress has been made, not all corrective actions have been
completed. Electro is continuing in its efforts to complete such actions. There
can be no assurance, however, that Electro will be ready for any reinspection
when it occurs nor that Electro will pass any such reinspection when it occurs.
While Electro is currently under no restrictions by the FDA regarding the
manufacture or sale of its products, Electro is unable to precisely determine
the short-term economic impact of instituting the required corrective actions
and there can be no assurance that the FDA will not take further action,
including seizure of products, injunction and/or civil penalties, if the
necessary corrective actions are not completed on a timely basis. The voluntary
discontinuation of manufacturing of certain products and the delay in the sale
of other products has adversely affected sales by an estimated 10%.
Litigation
- ----------
In September 1997, a Superior Court jury in Middlesex County found the Company
liable for age discrimination in connection with its termination of an employee
in April 1994. The jury awarded the terminated employee $283,000 plus attorney's
fees and expenses and prejudgment interest in the combined amount of
approximately $47,990. The Company also incurred legal costs from September 1996
through September 1997 in the amount of approximately $115,665. All of the
aforementioned costs were recorded in the financial statements for the year
ended August 31, 1997.
Pending the Company's appeal, the plaintiff, in an effort to execute upon the
judgment rendered in his favor, levied the Company's bank accounts, thereby
freezing the available funds. Notwithstanding management's belief that the
Company had arguments supporting its appeal, management weighed the considerable
cash requirements of an appeal bond, the costs of continued efforts relative to
the appeal, and the need to vacate the levies to satisfy the Company's immediate
cash requirements against the likelihood of prevailing on its appeal and the
terms of a possible settlement, and on April 8, 1998, the Company entered into a
Settlement Agreement with the plaintiff. Under the key terms of the Settlement
Agreement, the matter is deemed settled for the sum of $305,000 payable by a
lump sum payment of $65,000 within five business days of the date of the
Settlement Agreement with the balance, bearing interest at the rate of 6% per
annum, payable in monthly installments of $10,000, plus interest, commencing
July 1, 1998. A default in any monthly payment which remains unpaid for a period
of ten days allows the plaintiff to declare a default and accelerate the payment
of the entire outstanding balance with interest.
Merger
- ------
The Company entered into an Agreement and Plan of Reorganization, dated as of
January 20, 1998, with Cardiac Control Systems, Inc. ("CCS"), a Delaware
corporation located in Palm Coast, Florida, to effect a merger of the two
companies targeted toward the development and marketing of advanced specialty
electrophysiology products. Currently, the structure of the transaction
contemplates the merger of a newly-created, wholly-owned subsidiary of CCS into
and with the Company as a result of which the Company shall become a
wholly-owned subsidiary of CCS.
5
The transaction further contemplates an exchange of common stock of the two
companies, with two shares of CCS common stock, $.10 par value per share, to be
exchanged for every three shares of the Company's common stock, $.10 par value
per share. This exchange ratio is currently being reassessed. Upon closing of
the transaction, $1 million of the Company's senior debt is intended to be
converted into convertible preferred stock.
Consummation of the merger is subject, among other things, to: (i) raising
sufficient capital to support the product development efforts of both companies;
(ii) declaration of the effectiveness of the registration statement filed with
the Securities and Exchange Commission in connection with the merger; (iii) the
approval of the transaction by the shareholders of Electro-Catheter Corporation;
(iv) the receipt of all required regulatory approvals by the two companies.
CCS develops, manufactures and sells a broad line of implantable cardiac
pacemakers, pacemaker leads and related products which Company management
believes are complementary to its own product lines. The Company believes the
merger may allow certain efficiencies to improve operating performance and that
the broader product line may provide for a more effective marketing and
distribution process. There can be no assurance, however, that consummation of
the merger will yield positive operating results in the future.
During the past few months, the Company has also had discussions regarding
acquisition by another firm based outside the United States. The Company's Board
of Directors recently terminated these discussions, believing that the terms
proposed were not in the best interest of the shareholders.
Note 4 Reclassifications
- ------ -----------------
Certain reclassifications have been made to conform to the fiscal year 1998
presentation.
Note 5 Earnings Per Share
- ------ ------------------
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 128 "Earnings Per Share" (SFAS 128). SFAS 128
supersedes Accounting Principles Board Opinion No. 15, Earnings Per Share and
specifies the computation, presentation and disclosure requirements for earnings
per share for entities with publicly held common stock. SFAS 128 is effective
for financial statements relating to both interim and annual periods ending
after December 15, 1997.
Basic loss per share is based on net loss for the relevant period, divided by
the weighted average number of common shares outstanding during the period.
Diluted loss per share is based on net loss for the relevant period, divided by
the weighted average number of common shares outstanding during the period.
Common share equivalents, such as outstanding stock options, are not included in
the calculation since the effect would be antidilutive.
6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
- ------- -------------------------------------------------------------
AND FINANCIAL CONDITION
-----------------------
General
- -------
The following is management's discussion and analysis of certain significant
factors which have affected the Company's financial condition and results of
operations during the periods included in the accompanying financial statements.
Statements contained in and preceding management's discussion and analysis
include various forward-looking information that is based on data currently
available to management and management's beliefs and assumptions. When used in
this report, the words "anticipates," "estimates, "believes," "plans," and
similar expressions are intended to identify forward-looking statements, but are
not the exclusive means of identifying such statements. Such statements are
subject to risks and uncertainties, and the Company's actual results may vary
materially from those anticipated, estimated or projected due to a number of
factors, including, without limitation, the competitive environment for the
Company's products and services, and other factors set forth in reports and
other documents filed by the Company with the Securities and Exchange Commission
from time to time.
Results of Operations
- ---------------------
General. The Company entered into an Agreement and Plan of Reorganization, dated
- ------- as of January 20, 1998, with Cardiac Control Systems, Inc., ("CCS") a
Delaware corporation located in Palm Coast, Florida, to effect a merger of the
two companies targeted toward the development and marketing of advanced
specialty electrophysiology products. Currently, the structure of the
transaction contemplates the merger of a newly-created, wholly-owned subsidiary
of CCS into and with the Company as a result of which the Company shall become a
wholly-owned subsidiary of CCS. The transaction further contemplates an exchange
of common stock of the two companies, with two shares of CCS common stock, $.10
par value per share, to be exchanged for every three shares of the Company's
common stock, $.10 par value per share. This exchange ratio is currently being
reassessed. Upon closing of the transaction, $1 million of the Company's senior
debt is intended to be converted into convertible preferred stock.
Consummation of the merger is subject, among other things, to: (i) raising
sufficient capital to support the product development efforts of both companies;
(ii) declaration of the effectiveness of the registration statement filed with
the Securities and Exchange Commission in connection with the merger; (iii) the
approval of the transaction by the shareholders of Electro-Catheter Corporation;
(iv) the receipt of all required regulatory approvals by the two companies.
CCS develops, manufactures and sells a broad line of implantable cardiac
pacemakers, pacemaker leads and related products which Company management
believes are complementary to its own product lines. The Company believes the
merger may allow certain efficiencies to improve operating performance and that
the broader product line may provide for a more effective marketing and
distribution process. There can be no assurance, however, that consummation of
the merger will yield positive operating results in the future.
During the past few months, the Company has also had discussions regarding
acquisition by another firm based outside the United States. The Company's Board
of Directors recently terminated these discussions, believing that the terms
proposed were not in the best interest of the shareholders.
7
Overview. Net revenues declined $426,859(24.5%)and $769,296 (22.5%),
- -------- respectively, for the three and six months ended February 28, 1998 as
compared to the same three and six months ended February 28, 1997. Product sales
declined $270,408 (18.0%) and $502,448 (17.0%), respectively, for the three and
six months ended February 28, 1998. Contract research and development revenues
declined $159,471 (100%) and $303,764 (100%), respectively, for the three and
six months ended February 28, 1998. Licensing fees declined $67,665 (100%) and
$45,811 (46.0%), respectively, for the three and six months ended February 28,
1998. These decreases were partially offset by an increase in sales to an
original equipment manufacturing ("OEM") customer in the amounts of $70,685
(440.3%) and $82,727 (149.9%), respectively, for the three and six months ended
February 28, 1998.
Sales. Domestic sales decreased $132,398 (12.8%) and $279,668
- ------ (13.6%),respectively, for the three and six months ended February 28,
1998 as compared to the same periods in the prior fiscal year. This decrease is
attributed to the Company not having an approved electrophysiology ablation
catheter, lack of new products, a continued decline in demand for the Company's
older products in pacing and monitoring, backorders, as well as the impact of
not replacing sales representatives who have left the Company. International
sales decreased $138,010 (29.6%) and $222,780 (24.5%), respectively, for the
three and six months ended February 28, 1998 as compared to the same periods
last year. The decline in international revenues is attributed to the lack of
new products, lower demand for the Company's electrophysiology products, product
redesign problems, pricing pressure due to competition and backorders.
Gross Profits. Gross profit dollars decreased $317,936 (40.7%) and $710,224
- ------------- (43.2%), respectively, for the three and six months ended February
28, 1998 as compared to the three and six months ended February 28, 1997. This
decrease is primarily attributed to lower volume. The decreased production
levels caused the cost of goods sold of the catheters to increase due to less
efficient labor utilization and a greater amount of fixed overhead allocated to
each catheter produced. The increased cost of goods sold is also attributable to
write-offs of certain inventories which were scrapped for sterilization samples,
evaluation and testing failures and increased costs associated with regulatory
compliance. The lower volume continues to negatively impact gross profit.
Selling, General and Administrative Expenses. Selling, general and
- ---------------------------------------------------- administrative expenses
decreased $14,565 (2.4%) and $82,348 (6.9%), respectively, for the three and six
month periods ended February 28, 1998 as compared to the same periods last year.
These decreases primarily reflect lower domestic and international selling
expenses, substantially attributable to the loss of sales personnel that have
not been replaced, and to cutbacks in international sales and marketing
activities. This decrease was partially offset by expenses associated with the
contemplated merger with Cardiac Control Systems, Inc.
Engineering, Research and Development Expenses. Research and development
- --------------------------------------------------- expenses decreased $100,742
(42.8%) and $150,291 (33.6%), respectively, for the three and six months ended
February 28, 1998 as compared to the same periods last year. This decrease
reflects the cutback in engineering activities. In the prior fiscal year, costs
associated with contract research and development activities were charged to
cost of revenues. There were no contract research and development activities
during the six month period ended February 28, 1998.
8
Other Income and Expenses. Interest expense increased as a result of increased
- ------------------------- borrowings from the T Partnership as well as interest
paid on capitalized lease obligations.
Liquidity and Capital Resources
- -------------------------------
At February 28, 1998, working capital decreased $396,081 to $562,093 from August
31, 1997. The current ratio was at 1.3 to 1 at February 28, 1998 as compared to
1.6 to 1 at August 31, 1997. Net cash used in operating activities was $376,317
for the six months ended February 28, 1998 as compared to $9,581 for the six
months ended February 28, 1997. This increase in cash required for operations is
a result of the increase in the Company's losses and a higher inventory level
offset partially by an increase in accounts payable and accrued expenses and a
decline in accounts receivable and other current assets. The Company has been
able to satisfy its obligations with borrowings from the T Partnership, cash on
hand and extending its accounts payable.
In September 1997, a Superior Court jury in Middlesex County found the Company
liable for age discrimination in connection with its termination of an employee
in April 1994. The jury awarded the terminated employee $283,000 plus attorney's
fees and expenses and prejudgment interest in the combined amount of
approximately $47,990. The Company also incurred legal costs from September 1996
through September 1997 in the amount of approximately $115,665. All of the
aforementioned costs were recorded in the financial statements for the year
ended August 31, 1997.
Pending the Company's appeal, the plaintiff, in an effort to execute upon the
judgment rendered in his favor, levied on the Company's bank accounts, thereby
freezing the funds. Notwithstanding management's belief that the Company had
arguments supporting its appeal, management weighed the considerable cash
requirements of an appeal bond, the costs of continued efforts relative to the
appeal, and the need to vacate the levies to satisfy the Company's immediate
cash requirements against the likelihood of prevailing on its appeal and the
terms of a possible settlement, and on April 8, 1998, the Company entered into a
Settlement Agreement with the plaintiff. Under the key terms of the Settlement
Agreement, the matter is deemed settled for the sum of $305,000 payable by a
lump sum payment of $65,000 within five business days of the date of the
Settlement Agreement with the balance, bearing interest at the rate of 6% per
annum, payable in monthly installments of $10,000, plus interest, commencing
July 1, 1998. A default in any monthly payment which remains unpaid for a period
of ten days allows the plaintiff to declare a default and accelerate the payment
of the entire outstanding balance with interest.
The Company's ability to continue with its plans is contingent upon its ability
to either obtain sufficient cash flow from operations, obtain additional
financing, or consummate a combination with another company. The Company has had
difficulty in paying its obligations and, as a result, has delayed payments to
some vendors. The Company continues to evaluate its plans to obtain funds.
Consummation of the merger is subject, among other things, to: (i) raising
sufficient capital to support the product development efforts of both companies;
(ii) declaration of the effectiveness of the registration statement filed with
the Securities and Exchange Commission in connection with the merger; (iii) the
approval of the transaction by the shareholders of Electro; (iv) the receipt of
all required regulatory approvals by the two companies.
Management believes that this merger can offer benefits to both companies by
taking advantage of economies of scale and elimination of redundant efforts.
9
However, there can be no assurance that the merger will be consummated or that
the Company will be able to generate the funding required.
Inflation did not have a material impact on the results of the Company's
operations for the six months ended February 28, 1998.
Operating Trends and Uncertainties
- ----------------------------------
Sales. The ability of Electro to attain a profitable level of operations is
- ------ dependent upon expansion of sales volume, both domestically and
internationally, and continued development of new and advanced products. Many
countries in which Electro markets its products regulate themanufacture,
marketing and use of medical devices. Electro intends to pursue product approval
or registration procedures in countries where is it marketing its products. The
international registration and approval process is normally accomplished in
coordination with its international distributors. In order for Electro to
continue to sell certain of its products in the nations of EEC after June 14,
1998, Electro must obtain certification, the CE Mark, from the International
Organization for Standardization. In the event that Electro is unable to obtain
the CE Mark by such date it will be unable to sell certain of its products in
the nations of the EEC and international sales (which account for approximately
17% of total revenues) should be adversely affected in Europe for some period of
time. The effort to obtain the CE Mark is continuing and Electro is hopeful of
obtaining this designation before June 14, 1998.
Year 2000 Issue. Electro is reviewing its computer programs and systems to
- ---------------- ensure that the programs and systems will function properly and
by in compliance with Year 2000 capability requirements. Management of Electro
presently believes that the Year 2000 issue will not pose significant
operational programs for Electro's computer systems. The estimated cost of
Electro's review and assessment efforts is not expected to be material to
Electro's financial position or any year's result of operations, although there
can be no assurance of this result. In addition, the Year 2000 issue may impact
other entities with which Electro transacts business, and Electro cannot predict
the effect of the Year 2000 issue on such entities.
10
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The exhibits filed or incorporated by reference as part of
this Quarterly Report on Form 10-Q are listed in the attached
Index of Exhibits.
(b) The Company filed a Current Report on Form 8-K dated January
20, 1998, which reported under "Item 5. Other Events" that the
Company had entered into a definitive merger agreement with
Cardiac Control Systems, Inc.
11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this amendment to be signed on its behalf by the
undersigned thereunto duly authorized.
ELECTRO-CATHETER CORPORATION
/s/Ervin Schoenblum
-------------------
Date: October 9, 1998 Ervin Schoenblum
Acting President & Chief Operating Officer
/s/Joseph P. Macaluso
---------------------
Date: October 9, 1998 Joseph P. Macaluso
Chief Financial Officer
12
INDEX TO EXHIBITS
10.1 Agreement and Plan of Reorganization dated as of January 20,1998 among the
Company, Cardiac Control Systems, Inc. and CCS Subsidiary, Inc.
13