U.S. Securities & Exchange Commission
Washington, D.C. 20549
Form 1O-QSB/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 September 30, 1996
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or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission File No. 001-12189
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Image Guided Technologies, Inc.
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(Exact name of small business issuer as specified in its charter)
Colorado 84-1139082
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
5710-B Flatiron Parkway
Boulder, CO 80301
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(Address of principal executive offices) (Zip Code)
(303) 447-0248
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(Registrant's telephone number including area code)
Image Guided Technologies, Inc. ("Image Guided Technologies" or "the
Company") (1) has not previously been required to file reports under Section
13 or 15(d) of the Securities Exchange Act of 1934 and (2) has been subject
to such filing requirements since October 21, 1996.
3,105,241 shares of common stock, no par value,
are outstanding on December 5, 1996.
Index
PAGE
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Part I -- Financial Information (unaudited)
Balance Sheet -- September 30, 1996 1
Statement of Operations -- Three Months Ended
September 30, 1996 and 1995 and Nine Months Ended
September 30, 1996 and 1995 2
Statement of Cash Flows -- Nine Months Ended
September 30, 1996 and 1995 3
Notes to Financial Statements 4
Management's Discussion and Analysis of Financial
Condition and Results of Operations 5
Part II -- Other Information 8
PART I -- FINANCIAL INFORMATION
Image Guided Technologies, Inc.
Balance Sheet
September 30, 1996
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 112,000
Accounts receivable, net 658,000
Inventory 368,000
Other current assets 317,000
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Total current assets 1,455,000
Property and equipment, net 282,000
Other assets 17,000
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Total assets $ 1,754,000
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LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 500,000
Accrued liabilities 411,000
Notes payable 775,000
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Total current liabilities 1,686,000
Capital lease obligation 106,000
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Total liabilities 1,792,000
Shareholders' equity (deficit):
Series A Convertible Preferred Stock, no par value;
2,500,000 shares authorized, 83,332 issued and outstanding 1,000,000
Common Stock, no par value; 10,000,000 shares authorized;
1,667,741 shares issued and outstanding 2,115,000
Accumulated deficit (3,153,000)
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Total shareholders' equity (deficit) (38,000)
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Total liabilities and shareholders' equity (deficit) $ 1,754,000
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The accompanying notes are an integral part of these financial statements.
1
Image Guided Technologies, Inc.
Statement of Operations
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
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1996 1995 1996 1995
---- ---- ---- ----
Revenue $1,165,000 $ 616,000 $2,912,000 $1,112,000
Cost of goods sold 555,000 236,000 1,289,000 494,000
---------- ----------- ---------- ----------
Gross Profit 610,000 380,000 1,623,000 618,000
---------- ----------- ---------- ----------
Operating expenses:
Research and development 168,000 173,000 497,000 558,000
Selling and marketing 162,000 220,000 386,000 573,000
General and administrative 159,000 134,000 455,000 371,000
---------- ----------- ---------- ----------
Total operating expenses 489,000 527,000 1,338,000 1,502,000
---------- ----------- ---------- ----------
Operating income (loss) 121,000 (147,000) 285,000 (884,000)
Other Income (expense):
Interest expense (22,000) --- (66,000) ---
Interest and other income 3,000 12,000 9,000 24,000
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Net Income (Loss) $ 102,000 $ (135,000) $ 228,000 $ (860,000)
---------- ----------- ---------- ----------
---------- ----------- ---------- ----------
Earnings (Loss) per Share $ 0.04 $ (0.08) $ 0.10 $ (0.51)
Weighted average common
shares outstanding 2,333,850 1,675,937 2,324,943 1,675,937
The accompanying notes are an integral part of these financial statements.
2
Image Guided Technologies, Inc.
Statement of Cash Flows
(Unaudited)
Nine Months Ended
September 30,
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1996 1995
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OPERATING ACTIVITIES:
Net income (loss) $ 228,000 $(860,000)
Adjustments to reconcile net income (loss) to net
cash used in operating activities:
Depreciation 63,000 30,000
Provision for doubtful accounts 26,000 15,000
Allowance for inventory obsolescence 2,000 32,000
Changes in operating assets and liabilities:
Accounts receivable (161,000) (37,000)
Inventories (196,000) (28,000)
Other current assets (4,000) (10,000)
Deposits (17,000) ---
Accounts payable 194,000 66,000
Accrued liabilities 10,000 61,000
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Net cash provided by (used for) operating activities 145,000 (731,000)
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INVESTING ACTIVITIES:
Additions to property and equipment (127,000) (64,000)
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Net cash used by investing activities (127,000) (64,000)
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FINANCING ACTIVITIES:
Proceeds from issuance of debt and warrants --- 655,000
Proceeds from the issuance of common stock
and preferred stock 337,000 ---
Deferred public offering costs (275,000) ---
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Net cash provided by financing activities 62,000 655,000
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Net increase (decrease) in cash and cash equivalents 80,000 (140,000)
Cash and cash equivalents at beginning of period 32,000 92,000
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Cash and cash equivalents at end of period $ 112,000 $ (48,000)
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SUPPLEMENTAL CASH FLOW DISCLOSURES
Interest paid $ 9,000
Equipment acquired under capital lease $ 126,000
The accompanying notes are an integral part of these financial statements.
3
Image Guided Technologies, Inc.
Notes to Financial Statements
(Unaudited)
1. Basis of Presentation
The accompanying financial statements are unaudited. However, in the opinion
of management, such statements reflect all adjustments, consisting of only
normal recurring adjustments, necessary for a fair presentation. Interim
results of operations are not necessarily indicative of results for the full
year. These financial statements should be read in conjunction with the
Image Guided Technologies, Inc. prospectus, dated October 21, 1996.
This Form contains forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ materially from
those discussed herein. Factors that could cause or contribute to such
differences include, but are not limited to, those discussed herein as well
as in the Image Guided Technologies, Inc. prospectus dated October 21, 1996
and any documents incorporated herein by reference.
2. Subsequent Events
On September 23, 1996, the Company effected a four-for-five reverse split of
the Company's outstanding shares of common stock, as well as an equivalent
change in the conversion rate applicable to Series A Convertible Preferred
Stock and the exercise price and related common shares subject to outstanding
stock options and warrants. As a result of the reverse stock split, all
share and per share information included in these financial statements have
been restated for all periods presented.
On October 24, 1996, Image Guided Technologies, Inc. closed on its initial
public offering ("IPO") of 1,437,500 shares of Common Stock, including a
187,500 share over-allotment purchase by the IPO underwriter at the IPO price
of $5.00 per share. The offering resulted in gross proceeds of $7,187,500.
Aggregate offering cost was approximately $1,400,000. The shares were
offered pursuant to a Registration Statement on Form SB-2 filed with the
Securities and Exchange Commission. A portion of the proceeds was used to
retire approximately $889,000 of 11% secured notes and related interest.
4
Management's Discussion and Analysis of
Financial Condition and Results of Operations
The following discussion of the results of operations and financial condition
should be read in conjunction with the financial statements and notes thereto.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
Revenue increased by $549,000, or approximately 89%, to $1,165,000 for the
three months ended September 30, 1996, as compared to $616,000 for the three
months ended September 30, 1995. The increase was primarily due to greater
demand for the Company's FlashPoint-Registered Trademark- 5000 and Pixsys-TM-
5000 products.
Cost of goods sold increased by $319,000, or approximately 135%, to $555,000
for the three months ended September 30, 1996, compared to $236,000 for the
three months ended September 30, 1995. Cost of goods sold as a percentage of
revenue increased to 48% for the three months ended September 30, 1996, as
compared to 38% for the three months ended September 30, 1995. The increase
in cost of goods sold was attributable to increased sales volume and the
increase in cost of goods sold as a percentage of revenue was primarily due
to additional manufacturing costs in the total cost of manufacturing the
Company's products and the mix of products sold.
Gross profit increased by $230,000, or approximately 61%, to $610,000 for the
three months ended September 30, 1996, as compared to $380,000 for the three
months ended September 30, 1995. Such increase was primarily attributable to
increased sales volume.
Research and development expenses decreased by $5,000, or approximately 3%,
to $168,000 for the three months ended September 30, 1996, as compared to
$173,000 for the three months ended September 30, 1995. This decrease was
principally due to the reduction of costs associated with the ongoing
development of the FlashPoint 5000 and Pixsys 5000 products, which were
released during the second quarter of 1995.
Selling and marketing expenses decreased by $58,000, or approximately 26%, to
$162,000 for the three months ended September 30, 1996, as compared to
$220,000 for the three months ended September 30, 1995. This decrease was
primarily attributable to the Company's decision to focus its sales and
marketing efforts on selling its FlashPoint product to medical device
companies rather than also attempting to sell an ear, nose and throat ("ENT")
system under the Company's own label directly to end users. The Company
decided to terminate its efforts to sell an ENT system because the Company
believed it could better utilize its resources by concentrating on sales of
its FlashPoint product to its medical device customers.
General and administrative expenses increased by $25,000, or approximately
19%, to $159,000 for the three months ended September 30, 1996, as compared
to $134,000 for the three months ended September 30, 1995. Such increase was
primarily attributable to additional personnel and associated costs.
Operating income increased by $268,000 to $121,000 for the three months ended
September 30, 1996 compared to an operating loss of $147,000 for the three
months ended September 30, 1995. This increase was primarily attributable to
increased revenue and decreased total operating expenses.
Net other income (expense) decreased by $31,000 to ($19,000) for the three
months ended September 30, 1996 from $12,000 for the three months ended
September 30, 1995. This change was primarily due to interest expense
incurred in connection with the funds borrowed by the Company during 1995.
As a result of the foregoing, net income increased to $102,000 for the three
months ended September 30, 1996, compared to a net loss of $135,000 for the
three months ended September 30, 1995.
5
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
Revenue increased by $1,800,000, or approximately 162%, to $2,912,000 for the
nine months ended September 30, 1996, as compared to $1,112,000 for the nine
months ended September 30, 1995. The increase was primarily due to the
commercial introduction and sale of the FlashPoint 5000 and Pixsys 5000
products.
Cost of goods sold increased by $795,000, or approximately 161%, to
$1,289,000 for the nine months ended September 30, 1996, as compared to
$494,000 for the nine months ended September 30, 1995. Cost of goods sold as
a percentage of revenue was unchanged at approximately 44% for the nine
months ended September 30, 1996 and 1995. The increase in cost of goods sold
was primarily attributable to the increased sales volume.
Gross profit increased by $1,005,000, or approximately 163%, to $1,623,000
for the nine months ended September 30, 1996, compared to $618,000 for the
nine months ended September 30, 1995. Such increase was principally a result
of the increase in revenue.
Research and development expenses decreased by $61,000, or approximately 11%,
to $497,000 for the nine months ended September 30, 1996, as compared to
$558,000 for the nine months ended September 30, 1995. This decrease was
principally due to the reduction of costs associated with the completion of
the FlashPoint 5000 and Pixsys 5000 products, which were released during the
second quarter of 1995.
Selling and marketing expenses decreased by $187,000, or approximately 33%,
to $386,000 for the nine months ended September 30, 1996, compared to
$573,000 for the nine months ended September 30, 1995. Such decrease was
primarily attributable to the Company's decision to focus its sales and
marketing efforts on selling its FlashPoint product to medical device
companies rather than also attempting to sell an ENT system under the
Company's own label directly to end users.
General and administrative expenses increased by $84,000, or approximately
23%, to $455,000 for the nine months ended September 30, 1996, as compared to
$371,000 for the nine months ended September 30, 1995. Such increase was
attributable to the addition of personnel and related expenses.
Operating income increased by $1,169,000 to $285,000 for the nine months
ended September 30, 1996, as compared to an operating loss of $884,000 for
the nine months ended September 30, 1995. This increase was primarily
attributable to increased revenue and decreased operating expenses.
Net other income (expense) decreased by $81,000 to ($57,000) for the nine
months ended September 30, 1996, compared to $24,000 for the nine months
ended September 30, 1995. This change was primarily due to interest expense
incurred in connection with the funds borrowed by the Company during 1995.
As a result of the foregoing, net income increased to $228,000 for the nine
months ended September 30, 1996, compared to a net loss of $860,000 for the
nine months ended September 30, 1995.
LIQUIDITY AND CAPITAL RESOURCES
During the nine months ended September 30, 1996, $145,000 in cash was
provided by operating activities, principally by increases in net income and
accounts payable, and partially offset by increases in accounts receivable,
inventories and other current assets. The Company used $127,000 in cash for
investing activities during the nine month period ended September 30, 1996 to
purchase property and equipment. Also during the nine month period ended
September 30, 1996, $337,000 in cash was provided by the exercise by certain
warrantholders of their warrants to purchase 270,000 shares of Common Stock.
As of September 30, 1996, the Company had a working capital deficit of
$231,000, compared to a working capital deficit of $695,000 at December 31,
1995 (which included $883,000 and $818,000, respectively, of principal and
interest owed on the loans which were repaid from the proceeds of the IPO).
The improvement in working capital was primarily the result of increases in
accounts receivable, inventories and cash resulting from the Company's 1996
net income and the exercise of the warrants.
6
On October 24, 1996, Image Guided Technologies, Inc. closed on its IPO of
1,437,500 shares of common stock, including a 187,500 share over-allotment
purchase by the IPO underwriter at the IPO price of $5.00 per share. The
offering resulted in gross proceeds of $7,187,500. Aggregate offering cost
was approximately $1,400,000. The shares were offered pursuant to a
Registration Statement on Form SB-2 filed with the Securities and Exchange
Commission. A portion of the proceeds was used to retire approximately
$889,000 of 11% secured notes and related interest.
FORWARD-LOOKING STATEMENTS
From time to time, the Company may publish or make forward-looking statements
relating to such matters as anticipated financial performance, business
prospects, technological developments, new products, research and development
activities and similar matters. The Private Securities Litigation Reform Act
of 1995 provides a safe harbor for forward-looking statements. In order to
comply with the terms of the safe harbor, the Company notes that a variety of
factors could cause the Company's actual results and experience to differ
materially from the anticipated results or other expectations expressed in
the Company's forward-looking statements. The risks and uncertainties that
may affect the operations, performance, development and results of the
Company's business include, without limitations, the following:
- The Company's limited history of profitability and potential fluctuations
in operating results.
- The Company's dependence on a single type of product.
- The uncertainty of market acceptance for the Company's product.
- Rapid technological change in the medical industry and in the Company's
product.
- Concentration of sales to two customers, neither of which has entered
into any long-term minimum purchase agreements with the Company.
- The risk of patent infringement claims brought against the Company's
customers.
- The Company's ability to protect its intellectual property rights.
- Competition by existing competitors and potential new entrants into
the marketplace.
- Regulation by the Federal Drug Administration.
- The risk of product liability claims.
- Possible changes to government regulations governing health care.
- The Company's dependence on key management and technical personnel and
its ability to attract new personnel.
7
PART II -- OTHER INFORMATION
Item 2. Changes in Securities
On October 24, 1996, all of the outstanding shares of Series A Preferred
Stock of the Company were converted into Common Stock upon the closing of the
IPO.
Item 4. Submission of Matters to a Vote of Security Holders
On March 21, 1996, at the Company's annual meeting of shareholders, the
Company's shareholders approved an amendment to the Company's Articles of
Incorporation changing the Company's name from Pixsys, Inc. to Image Guided
Technologies, Inc., approved an amendment to the Company's 1994 Stock Option
Plan to allow the Board of Directors more latitude in granting non-qualified
stock options, and elected Clifford Frith, Robert Hamilton, Ray Hauser, Paul
Ray, David Sengpiel, Derace Shaffer and Waldean Schulz as directors. Derace
Shaffer has resigned and was replaced on November 21, 1996 by William
O'Connor. On each matter, all shares present, or 1,269,520 (on a converted
basis), or approximately 93% of the outstanding shares, were voted in favor
of the above matters.
On September 23, 1996, at a special meeting of shareholders, the Company's
shareholders approved a four-for-five reverse stock split of the Company's
Common Stock. All shares present, or 1,269,988 shares of Common Stock
(approximately 93% of the outstanding common shares) and 80,126 of the Series
A Preferred Stock (approximately 96% of the outstanding Series A Preferred
shares), voting separately by class and voting as one class, were voted in
favor of the reverse stock split.
The above information with respect to the number of shares of Common Stock
reflects the four-for-five reverse stock split.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit
Number Description of Document
- ------ -----------------------
27 Financial Data Schedule.
(b) Form 8-K Reports
No Form 8-K reports were filed during the period covered by this report.
Image Guided Technologies did not become subject to the reporting
requirements of Section 13 of the Securities and Exchange Act of 1934, as
amended, until October 21, 1996.
8
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
IMAGE GUIDED TECHNOLOGIES, INC.
(Registrant)
By:
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December 5, 1996 Robert E. Silligman
President and Chief Operating Officer
By:
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December 5, 1996 Jeffrey J. Hiller
Vice President and Chief Financial Officer
9