U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended May 31, 1999
OR
( ) TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE EXCHANGE ACT
Commission File Number : 0-27380
ECHOCATH, INC.
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(Exact Name of Small Business Issuer as specified in its charter)
New Jersey 22-3273101
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(State or Other Jurisdiction of Incorporation or (I.R.S. Employer Identification No.)
Organization)
P.O. Box 7224, Princeton, NJ 08543
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(Address of Principal Executive Offices)
Issuer's Telephone Number. . .(609) 987-8400
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Former Name, Former Address and Former Fiscal Year, If Changed Since Last Report
Check whether Issuer (1) has filed all reports required to be filed by Section
13 or 15 (d) of the Exchange Act during the past 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
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State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
CLASS OF COMMON EQUITY OUTSTANDING AT JULY 12, 1999
- ----------------------------------- ----------------------------
Class A common stock (No Par Value) 2,352,018
Class B common stock (No Par Value) 1,172,018
Transitional Small Business Disclosure Format (check one)
YES NO X
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PART 1: FINANCIAL INFORMATION
PART 2: OTHER INFORMATION
ECHOCATH, INC.
INDEX
Item 1: Financial Statements Page
----
Balance Sheets,
August 31, 1998 and May 31, 1999 (Unaudited) 3
Statements of Operations for the three months ended
May 31, 1998 (Unaudited), and May 31, 1999 (Unaudited) 4
Statements of Operations for the nine months ended
May 31, 1998 (Unaudited), and May 31, 1999 (Unaudited) 5
Statements of Cash Flows for the nine months ended
May 31, 1998 (Unaudited), and May 31, 1999 (Unaudited) 6
Notes to Financial Statements 7 - 9
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operation 9 - 11
Signatures 12
2
ITEM 1: FINANCIAL STATEMENTS
ECHOCATH, INC.
BALANCE SHEETS
ASSETS
August 31, 1998 May 31, 1999
--------------- ------------
(Unaudited)
Current assets:
Cash and cash equivalents $ 256,234 $ 209,240
Accounts receivable 4,905 ------
Inventory 189,121 172,612
Prepaid expenses 106,449 32,967
------- ------
Total current assets 556,709 414,819
Furniture, equipment and leasehold improvements, net 254,180 206,288
Intangible assets, net 282,145 277,771
Debt issuance cost ------ 173,000
Other assets 19,731 19,322
------- ---------
$1,112,765 $1,091,000
========== =========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Notes payable $ 540,000 $ 1,065,000
Accounts payable 71,061 101,393
Deferred income ------ 200,000
Accrued expenses 550,299 722,080
Obligations under capital leases, less current portion 16,069 17,863
--------- ----------
Total current liabilities 1,177,429 2,106,336
6.5% Convertible Notes ------ 558,094
Obligations under capital leases 22,398 21,799
Other liabilities 149,244 147,850
---------- ---------
Total liabilities 1,349,071 2,834,079
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Stockholders' deficit:
Preferred stock, no par value, 5,000,000 shares authorized;
280,000 shares of Series B cumulative convertible issued and
outstanding, senior in liquidation to Class A and Class B common
stock, (liquidation value $1,400,000) 1,393,889 1,393,889
Class A common stock, no par value, 18,500,000 shares authorized;
2,352,078 issued and outstanding as of May 31, 1999 and
2,332,078 as of August 31, 1998 7,248,219 7,421,834
Class B common stock, no par value, 1,500,000 shares authorized;
1,172,018 shares issued and outstanding, 327,982 shares retired and
transferred to Class A shares; convertible into one share of Class A
common stock 4,023,470 4,023,470
Accumulated deficit (12,901,884) (14,582,072)
------------ ------------
Total stockholders' deficit (236,306) (1,742,879)
----------- ------------
$ 1,112,765 $1,091,200
=========== ============
See accompanying notes to financial statements.
3
ECHOCATH, INC.
STATEMENT OF OPERATIONS
THREE MONTHS ENDED MAY 31, 1998 AND
MAY 31, 1999
(UNAUDITED)
1998 1999
REVENUE:
License fees $ 254,414 $ 110,000
Product sales 16,080 1,438
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Total revenue 270,494 111,438
Cost of sales 10,696 404
----------- ----------
Gross profit 259,798 111,034
Operating expenses:
Research & Development 242,064 329,130
Marketing and G&A 324,694 241,564
----------- ----------
Total operating expenses 566,758 570,694
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Loss from operations (306,960) (459,660)
Net interest income (expense) (3,255) (24,669)
----------- ----------
Net loss (310,215) (484,329)
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Preferred dividends 18,900 18,900
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Net loss to common stockholders $ (329,115) $ (503,229)
=========== ==========
Basic and diluted net (loss) per share $ (0.12) $ (0.19)
Weighted average shares outstanding 2,690,636 2,691,000
See accompanying notes to financial statements.
4
ECHOCATH, INC.
STATEMENT OF OPERATIONS
NINE MONTHS ENDED MAY 31, 1998 AND
MAY 31, 1999
(UNAUDITED)
1998 1999
REVENUE:
License fees $ 1,054,414 $ 275,000
Product sales 16,080 25,198
----------- -----------
Total revenue 1,070,494 300,198
Cost of sales 10,696 15,703
----------- -----------
Gross profit 1,059,798 284,495
Operating expenses:
Research & Development 938,563 1,047,950
Marketing and G&A 1,204,125 797,816
----------- -----------
Total operating expenses 2,142,688 1,845,766
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Loss from operations (1,082,890) (1,561,271)
Net interest income (expense) (35) (62,216)
----------- -----------
Net loss (1,082,925) (1,623,487)
----------- -----------
Preferred dividends 56,700 56,700
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Net loss to common stockholders $(1,139,625) $(1,680,187)
=========== ===========
Basic and diluted earnings per share $ (0.44) $ (0.62)
Weighted average shares of Common Stock 2,602,840 2,691,000
See accompanying notes to financial statements.
5
ECHOCATH, INC.
STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED MAY 31, 1998 AND 1999
(UNAUDITED)
1998 1999
Cash flows from operating activities:
Net loss to common stockholders $(1,082,925) $(1,623,487)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization 88,929 82,705
Deferred income ------ 200,000
Change in operating assets & liabilities:
(Increase) decrease in trade accounts receivable (69,120) 4,905
Decrease in inventory 8,900 16,509
Decrease in prepaid expenses and other current assets 61,059 58,482
(Increase) decrease in deferred financing costs (15,000) 15,000
(Increase) decrease in other assets (570) 409
(Decrease) increase in accounts payable (9,090) 62,437
Increase in accrued expenses 14,304 146,377
Increase (decrease) in other liabilities 46,294 (8,094)
--------- -----------
Net cash used in operating activities (957,219) (1,044,757)
--------- -----------
Cash flows from investing activities:
Purchase of furniture, equipment and leasehold improvements (28,646) (19,393)
Purchase of intangible assets (31,215) (11,047)
--------- -----------
Net cash used in investing activities (59,861) (30,440)
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Cash flows from financing activities:
Principal payments on capital lease obligations (10,612) 1,194
Proceeds from employee stock purchase plan 223 615
Issuance of Class A common stock 1,049,000 ------
Class B preferred dividends (56,700) (56,700)
Proceeds from IPA notes --- 525,000
Net proceeds from 6.5% convertible notes --- 558,094
--------- ---------
Net cash provided by financing activities 981,911 1,028,203
--------- ---------
Net decrease in cash & cash equivalents (35,169) (46,994)
Cash and cash equivalents, beginning of year 788,933 256,234
--------- ---------
Cash and cash equivalents, end of period $ 753,764 $ 209,240
========= =========
Supplemental disclosure of cash flow information:
Interest expense $ 44,424 $ 66,394
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Supplemental disclosure of noncash information:
Equipment acquired under capital lease $ 8,190 $ 13,337
========= =========
Debt issuance cost of 6.5% converted notes $ --- $ 173,000
========= =========
See accompanying notes to financial statements.
6
ECHOCATH, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
NOTE A: GENERAL AND BUSINESS
The summary financial statements included herein have been prepared, without
audit, 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 management of EchoCath, Inc. (the "Company") believes
that the disclosures are adequate to make the information presented not
misleading. It is suggested that these summary financial statements be read in
conjunction with the financial statements and the notes thereto included in the
Company's Form 10-KSB for the fiscal year ended August 31, 1998.
In the opinion of management, all adjustments (consisting solely of normal
recurring adjustments) necessary to present fairly the financial position,
results of operation and cash flows at May 31, 1998 and 1999 have been made.
NOTE B:
Inventories are summarized as follows:
August 31, 1998 May 31, 1999
--------------- ------------
Raw Materials $ 96,659 $ 96,230
Work in Process 15,605 11,598
Finished Goods 76,857 64,784
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$ 189,121 $ 172,612
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NOTE C:
SALE OF TAX BENEFITS
As of February 1, 1999, The Company sold $220,000 of New Jersey tax benefits to
a related party for $165,000 under the New Jersey Technology Business Tax
Certificate Program. The transaction is subject to final regulations and the
issuance of the Tax Certificate. As a result, the $165,000 is reflected as
deferred income.
NOTE D:
LICENSE AGREEMENTS
On December 30, 1996 the Company announced that it entered into an exclusive
license agreement with Medtronic, Inc. for the licensing of EchoMark(R) and
ColorMark(R) proprietary technologies for certain medical procedures. The total
payments to the Company under the December 1996 Medtronic Agreement have been
$265,000, including a payment of $65,000 pursuant to a termination agreement in
February 1999.
The Company entered into an exclusive license agreement dated February 27, 1997
with EP MedSystems, Inc. (EP MedSystems). The agreement provides that certain
products can be incorporated into the EP MedSystems' diagnostic catheter line.
The Company may potentially receive development milestone payments of up to
$150,000. Milestones include the sale of a limited quantity of product. When
products are commercially available the Company will receive royalties under the
terms of the agreement. The Company has received no milestone payment but it has
earned minimum royalties of $30,000 per quarter starting with calendar quarter
beginning January 1999 under this agreement. The agreement provides that any
royalty payment can be reduced, but not to an amount below zero, by an amount
equal to the amount of any dividends under the Company's Series B cumulative
preferred stock which are accrued but not paid as of that date. As of May 31,
1999, $50,000 of royalties due have been used to reduce accrued dividends. As of
May 31, 1999 the Company has $120,100 of accrued preferred stock dividends,
which is included as a component of accrued expenses on the accompanying
Balance Sheet.
7
On October 30, 1997, the Company announced it had reached a second definitive
licensing and development agreement with Medtronic, Inc. Pursuant to the terms
of the October 1997 Medtronic Agreement, the Company granted Medtronic (i) a
worldwide exclusive license to make, have made, use, sell and have sold products
utilizing the Company's ColorMark and EchoMark technologies in guiding devices
during cardiothoracic surgical procedures: and (ii) the exclusive right and
option at any time within six (6) months of the effective date of the October
1997 Medtronic Agreement, to acquire a worldwide exclusive license to the
Company's EchoEye and EchoFlow technologies for use in guiding device during
cardiothoracic surgical procedures. This option expired on December 31, 1998
after the granting of several extensions after the initial six months.
In consideration of the grant of the exclusive rights to Medtronic, Medtronic
agreed to pay to the Company a combined total of $1,800,000, which amount
included, (i) $800,000 paid to the Company in upfront licensing fees and (ii)
$1,000,000 from the purchase of 363,636 restricted shares of the Company's Class
A common stock, no par value (the "Class A common stock"), issued to Medtronic
Asset Management, Inc., a wholly-owned subsidiary of Medtronic. Additionally,
the Company may receive minimum annual royalties from Medtronic upon product
commercialization. The Company has received $250,000 payment for the completion
of "Concept Design Validation" for the EchoFlow instrument under this agreement.
The Company entered into an option agreement on January 11, 1999 with another
company for the licensing of certain technology. The term of the option was
three months and the consideration received for the option was $100,000. The
Company extended the option to June 11, 1999 for additional consideration of
$60,000, but did not renew the option beyond June 11, 1999. The option has now
expired.
The Company entered into an option agreement on April 16, 1999 with another
company for the licensing of certain technology. The term of the option is three
months, and the consideration received for the option was $35,000 which has been
deferred. The option may be extended at the election of the holder for up to
three one-month periods upon payment to the Company of $10,000 per month.
NOTE E :
EARNINGS PER SHARE
Basic and dilutive loss per share is based on net loss for the relevant period,
adjusted for cumulative Series B preferred stock dividends of $56,700 and
$18,900 for the nine and three month periods ended May 31,1999 and 1998,
respectively, divided by the weighted average number of shares outstanding
during the period. For purposes of the diluted loss per share calculation, the
exercise or conversion of all potential common shares is not included since
their effects would be antidilutive for all periods presented.
NOTE F :
CONVERTIBLE DEBT
The Company issued two convertible debentures to Investment Partners of America,
L.P. (IPA), a New Jersey limited partnership in the amounts of $250,000 on
September 18, 1998 and $275,000 on October 27,1998 which are included in notes
payable at May 31, 1999. The first debenture was issued directly to IPA and the
second debenture was issued to IPA on behalf of eight of its regular customers,
all of whom are accredited investors. The debentures pay 6.5% interest and
mature six months from the date of issuance and will be extended to December 31,
1999 in the event that the placement agents for the offering described in Note G
do not raise at least $1,500,000, or upon receipt of $1,500,000 of private
placement proceeds in such offering, the debentures will convert into the same
convertible notes as in such private placement. The debentures are convertible
into shares of the Class A common stock at the then current market price, but
not greater than $2.00 per share and no less than $1.00 per share. The shares of
Class A common stock issuable upon conversion of the debentures carry price
protection in that the holders of such shares will receive additional shares
equal to the price difference if the Company sells shares to a third party at a
price less than the conversion price. In addition, an affiliate of IPA received
a six-month consulting agreement with the Company for $5,000 monthly on October
27, 1998. In the event that at least $1,500,000 of the proposed financing is
complete, IPA will convert its existing $525,000 notes into the same convertible
debt offering described in Note G.
8
NOTE G:
PRIVATE PLACEMENT FINANCING
On May 11 and May 14, 1999 and on July 8 and July 9, 1999, the Company conducted
closings on an aggregate of $725,000 worth of securities as of May 31, 1999 the
Company booked $650,000 less closing costs of $91,906, a portion of the
Company's private placement offering to accredited investors. The offering is
for a minimum of 16 units and a maximum of 80 units, each unit consisting of a 6
1/2% convertible promissory note in the principal amount of $25,000 and a
three-year warrant to purchase 33,333 shares of Class A common stock of the
Company. In connection with the warrants issued, the Company recorded debt
issuance cost totaling $173,000. The warrants were valued at 20[c] per share
using the Black-Scholes model. The discount will be amortized over the life of
the debt. Beginning 90 days after the closing of the Offering, the notes are
convertible into shares of Class A Common Stock at any time at the option of
the holder, and at the option of the Company beginning one year after the
closing of the private placement. The notes are convertible at the lesser of
$0.75 per share or the market price at the time of conversion (but no less
than $0.25 per share). The Company has agreed to use its best efforts to
register the resale of the stock underlying the securities sold in the private
placement.
NOTE H :
COMPREHENSIVE INCOME
Effective October 1, 1998, the Company adopted Statement of financial Accounting
Standard No. 130 ("SFAS 130"), Reporting Comprehensive Income. SFAS 130
establishes new rules for the reporting and display of comprehensive income and
its components. The adoption of SFAS 130 had no impact on the Company's results
of operations for the three and nine months ended May 31, 1998 and 1999. The net
loss of $310,215 and $484,329 recorded for the three months ended May 31, 1998
and 1999 and the net loss of $1,082,925 and $1,623,487 recorded for the nine
months ended May 31, 1998 and 1999, respectively, is equal to the comprehensive
loss for those periods.
NOTE I :
NEED FOR ADDITIONAL FINANCING
At May 31, 1999 the Company had a working capital deficiency of $1,691,517. The
Company is in immediate need of additional financing and does not expect its
existing cash, together with funds anticipated to be generated through
operations, to be sufficient to meet the Company's cash requirements beyond July
1999.
On May 11 and May 14, 1999 and on July 8 and July 9, 1999, the Company conducted
closings on an aggregate of $725,000 worth of securities, a portion of the
Company's private placement offering to accredited investors. The offering is
for a minimum of 16 units and a maximum of 80 units, each unit consisting of a 6
1/2% convertible promissory note in the principal amount of $25,000 and a
three-year warrant to purchase 33,333 shares of Class A common stock of the
Company. Beginning 90 days after the closing of the Offering, the notes are
convertible into shares of Class A Common Stock at any time at the option of the
holder, and at the option of the Company beginning one year after the closing of
the private placement. The notes are convertible at the lesser of $0.75 per
share or the market price at the time of conversion (but no less than $0.25 per
share). The Company has agreed to use its best efforts to register the resale of
the stock underlying the securities sold in the private placement.
Although the Company is presently seeking additional financing, there can be no
assurances that such financing will be obtained within the necessary time frame
on terms acceptable to the Company, or at all. Failure to obtain additional
financing would have a material adverse effect on the Company and could require
the Company to severely limit or cease its operations.
9
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
GENERAL
Certain statements in this Report on Form 10-QSB ("Report") under the caption
"Management's Discussion and Analysis of Financial Condition and Results of
Operation" and elsewhere constitute "forward-looking statements" within the
meaning of Private Securities Litigation Reform Act of 1995, including, without
limitation, statements regarding future cash requirements. Such forward-looking
statements involve known and unknown risks, uncertainties and other factors
which may cause the actual results, performance, or achievements of the Company,
or industry results, to be materially different from any future results,
performance, or achievements expressed or implied by such forward-looking
statements. Such factors include, among others, the following: limited
commercial operations; no assurances of success; need for additional financing;
uncertainty of market acceptance; reliance on collaborative agreements;
competition and rapid technological change; failure to receive or delays in
receiving regulatory approval; limited manufacturing and assembly experience;
limited marketing and sales experience; dependence upon, and need for, key
personnel; uncertain protection of patent and proprietary rights; lack of
reimbursement; general economic and business conditions; industry capacity;
industry trends; demographic changes; changes in business strategy or
development plans; quality of management; availability, terms and deployment of
capital; potential adverse impact of FDA and other government regulations;
limitations on third party reimbursement; potential adverse impact of
anti-remuneration laws; potential product liability; risk of loss in lawsuit;
risk of low-priced stocks; and other factors referenced in this Report and
described in the Company's Report on Form 10-KSB for the fiscal year ended
August 31, 1998. When used in this Report, statements that are not statements of
material fact may be deemed to be forward-looking statements. Without limiting
the foregoing, the words "anticipates," "plans," "intends," "estimates,"
"projects," "believes," "expects" and similar expressions are intended to
identify such forward-looking statements. Readers are cautioned not to place
undue reliance on these forward-looking statements, which speak only as of the
date hereof. The Company undertakes no obligation to publicly release the result
of any revisions to these forward-looking statements that may be made to reflect
events or circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
RESULTS OF OPERATIONS
Nine Months Ended May 31, 1999 and 1998
REVENUES:
The Company had revenues of $300,198 which included $275,000 of license fees and
$25,198 of product sales for the nine months ended May 31, 1999 as compared to
license fees of $1,054,414 and product sales of $16,080 for the nine months
ended May 31, 1998. The nine months ended May 31, 1998 included the payment of
$1,054,414 of license fees paid by Medtronic, Inc. described in Note D.
The Company had cost of sales of $15,703 for the nine months ended May 31, 1999
as compared to $10,696 for the nine months ended May 31, 1998.
RESEARCH AND DEVELOPMENT:
Research and Development expenses increased $109,387 or 11.7% from $938,563 to
$1,047,950 during the nine months ended May 31, 1999 as compared to the nine
months ended May 31, 1998, because of an increased allocation of facilities
space and payroll, which increase was partially offset by a decrease related to
expenditures made to upgrade the Company's computer system during the nine
months ended May 31, 1998.
10
MARKETING, GENERAL AND ADMINISTRATIVE:
Marketing, General and Administrative expenses decreased $406,409 or 33.8% from
$1,204,125 during the nine months ended May 31, 1998 to $797,816 for the nine
months ended May 31, 1999. The nine months ended May 31, 1998 included legal
expenses for the EP MedSystems litigation, satisfying listing requirements on
the NASDAQ Small Cap Market, a license agreement with Medtronic, and an
agreement with Alliance Partners to reclassify a contingent liability to
permanent capital. The Company also recognized $49,000 of compensation
associated with the issuance of Class A common stock to Alliance Partners. The
decreased allocations of certain payroll and facility expenses in the nine
months ended May 31, 1999 contributed to the decline in Marketing, General and
Administrative expenses.
RESULTS OF OPERATIONS
Three Months Ended May 31, 1999 and 1998
REVENUES:
The Company had revenues of $111,438 which included $1,438 of product sales and
$110,000 of license fees for the three months ended May 31, 1999 as compared
with revenues of $270,494 which included $16,080 of product sales and $254,414
in license fees for the three months ended May 31, 1998. The three months ended
May 31, 1998 included the payment of $254,414 of license fees paid by Medtronic,
Inc. described in Note D.
RESEARCH AND DEVELOPMENT:
Research and development expenses increased $87,066 or 36.0% from $242,063
during the three months ended May 31, 1998 to $329,130 during the three months
ended May 31, 1999 because of an increased allocation of facilities space and
payroll, effective as of May 31, 1999. In addition, the three months ended
May 31, 1998 included reimbursement of certain costs that reduced expenses
for the period.
MARKETING, GENERAL AND ADMINISTRATIVE:
Marketing, General and Administrative expenses decreased $83,130 or 25.6% from
$324,694 to $241,564 during the three months ended May 31, 1999 because of a
decreased allocation of certain payroll and facility expenses in the three
months ended May 31, 1999.
LIQUIDITY AND CAPITAL RESOURCES
NEED FOR ADDITIONAL FINANCING
At May 31, 1999 the Company had a working capital deficiency of $1,691,517. The
Company is in immediate need of additional financing and does not expect its
existing cash, together with funds anticipated to be generated through
operations, to be sufficient to meet the Company's cash requirements beyond July
1999.
On May 11 and May 14, 1999 and on July 8 and July 9, 1999, the Company conducted
closings on an aggregate of $725,000 worth of securities, a portion of the
Company's private placement offering to accredited investors. The offering is
for a minimum of 16 units and a maximum of 80 units, each unit consisting of a 6
1/2% convertible promissory note in the principal amount of $25,000 and a
three-year warrant to purchase 33,333 shares of Class A common stock of the
Company. Beginning 90 days after the closing of the Offering, the notes are
convertible into shares of Class A Common Stock at any time at the option of the
holder, and at the option of the Company beginning one year after the closing of
the private placement. The notes are convertible at the lesser of $0.75 per
share or the market price at the time of conversion (but no less than $0.25 per
share). The Company has agreed to use its best efforts to register the resale of
the stock underlying the securities sold in the private placement.
11
Although the Company is presently seeking additional financing, there can be no
assurances that such financing will be obtained within the necessary time frame
on terms acceptable to the Company, or at all. Failure to obtain additional
financing would have a material adverse effect on the Company and could require
the Company to severely limit or cease its operations.
YEAR 2000 COMPATIBILITY
The Company is working to resolve the potential impact of the year 2000 on the
ability of the Company's computerized information systems to accurately process
information that may be date sensitive. Any of the Company's programs or
computer-assisted systems that recognize a date using "00" as the year 1900
rather than 2000 could result in errors or system failures. It is also possible
that certain computer systems or software products of the Company's suppliers
and contractors may not be year 2000 compatible. The Company has assurance from
all software vendors from which it has purchased or from which it may purchase
software that such software will correctly process all date information at all
times. Furthermore, the Company has queried its suppliers and contractors as to
their progress in identifying and addressing problems that their computer and
other technological systems will face in correctly processing date information
as the year 2000 approaches. The Company has completed its assessment, and
currently believes that costs of addressing this issue will not have material
adverse impact on the Company's financial position. However, if third parties
upon which it relies are unable to address this issue in a timely manner, it
could result in a material financial risk to the Company. In order to assure
that this does not occur, the Company plans to devote all resources required to
resolve any significant Year 2000 issues in a timely manner.
PART II: OTHER INFORMATION
Item 1: Legal Proceedings - None
Item 2: Changes in Securities and Use of Proceeds - 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) Exhibits
I 10.26 Form of 6 1/2% Convertible Promissory Note
II 10.27 Form of Warrant to Purchase Shares of Class A Common Stock
III 27 Financial Data Schedule
b) Reports on Form 8-K - None
12
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.
Date: July 14, 1999
EchoCath, Inc.
----------------------------
(Registrant)
By: /s/ Frank DeBernardis
----------------------------
Frank DeBernardis
President, Chief Executive Officer,
Principal Financial and Accounting Officer
13
STATEMENT OF DIFFERENCES
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The cent sign shall be expressed as....................................... [c]