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Table of Contents
 
 
 
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 June 30, 2002
 
OR
 
¨    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 
 
 
 
Commission file number 0-21982
 
Diametrics Medical, Inc.
Incorporated pursuant to the Laws of Minnesota
 
 
 
 
Internal Revenue Service — Employer Identification No. 41-1663185
 
2658 Patton Road, Roseville, Minnesota 55113
(651) 639-8035
 
 
 
 
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    ¨
 
The total number of shares of the registrant’s Common Stock, $.01 par value, outstanding on July 31, 2002, was 26,819,165.
 
 
 

Table of Contents
Diametrics Medical, Inc.
 
         
Page
Part I — FINANCIAL INFORMATION
     
Item 1.
   
Consolidated Financial Statements (unaudited)
     
         
    
    Three Months Ended June 30, 2002 and 2001
   
3
    
    Six Months Ended June 30, 2002 and 2001
   
3
       
4
         
    
    Six Months Ended June 30, 2002 and 2001
   
5
       
6
Item 2.
      
9
Item 3.
      
15
Part II — OTHER INFORMATION
     
Item 1.
      
15
Item 2.
      
15
Item 3.
      
15
Item 4.
      
15
Item 5.
      
15
Item 6.
      
16
         Signatures
  
17

2

Table of Contents
PART I – FINANCIAL INFORMATION
 
Item 1.    Consolidated Financial Statements (unaudited)
 
DIAMETRICS MEDICAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
 
    
Three Months Ended
June 30,
     
Six Months Ended
June 30,
  
    
2002
     
2001
     
2002
     
2001
  
Net sales
   
$
5,275,931
 
   
$
6,127,674
 
   
$
10,738,805
 
   
$
11,843,568
 
Cost of sales
   
 
3,953,497
 
   
 
4,452,860
 
   
 
7,958,776
 
   
 
8,854,013
 
    
  
  
  
Gross profit
   
 
1,322,434
 
   
 
1,674,814
 
   
 
2,780,029
 
   
 
2,989,555
 
    
  
  
  
Operating expenses:
                                    
Research and development
   
 
1,298,895
 
   
 
1,310,865
 
   
 
2,520,532
 
   
 
2,471,567
 
Selling, general and administrative
   
 
1,345,102
 
   
 
1,309,286
 
   
 
2,529,048
 
   
 
2,555,218
 
Restructuring and other charges
   
 
688,188
 
   
 
—  
 
   
 
688,188
 
   
 
—  
 
    
  
  
  
Total operating expenses
   
 
3,332,185
 
   
 
2,620,151
 
   
 
5,737,768
 
   
 
5,026,785
 
    
  
  
  
Operating loss
   
 
(2,009,751
)
   
 
(945,337
)
   
 
(2,957,739
)
   
 
(2,037,230
)
Other expense, net
   
 
(120,837
)
   
 
(81,614
)
   
 
(231,840
)
   
 
(117,621
)
    
  
  
  
Net loss
   
$
(2,130,588
)
   
$
(1,026,951
)
   
$
(3,189,579
)
   
$
(2,154,851
)
    
  
  
  
Basic and diluted net loss per common share
   
$
(0.08
)
   
$
(0.04
)
   
$
(0.12
)
   
$
(0.08
)
    
  
  
  
Weighted average number of common shares outstanding
   
 
26,813,070
 
   
 
26,747,261
 
   
 
26,808,785
 
   
 
26,735,071
 
    
  
  
  
 
See accompanying notes to consolidated financial statements.

3

Table of Contents
DIAMETRICS MEDICAL, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
 
    
June 30,
2002
     
December 31, 2001
  
ASSETS
                  
Current assets:
                  
Cash and cash equivalents
   
$
3,598,096
 
   
$
7,654,845
 
Marketable securities
   
 
—  
 
   
 
749,141
 
Accounts receivable
   
 
4,668,191
 
   
 
4,556,865
 
Inventories
   
 
4,455,982
 
   
 
4,066,964
 
Prepaid expenses and other current assets
   
 
442,844
 
   
 
247,286
 
    
  
Total current assets
   
 
13,165,113
 
   
 
17,275,101
 
    
  
Property and equipment
   
 
23,256,555
 
   
 
22,900,450
 
Less accumulated depreciation and amortization
   
 
(17,732,392
)
   
 
(16,721,645
)
    
  
    
 
5,524,163
 
   
 
6,178,805
 
    
  
Other assets
   
 
6,700
 
   
 
6,700
 
    
  
    
$
18,695,976
 
   
$
23,460,606
 
    
  
LIABILITIES AND SHAREHOLDERS' EQUITY
                  
Current liabilities:
                  
Accounts payable
   
$
1,199,620
 
   
$
1,562,569
 
Accrued expenses
   
 
1,716,110
 
   
 
1,796,390
 
Other current liabilities
   
 
842,854
 
   
 
2,039,686
 
    
  
Total current liabilities
   
 
3,758,584
 
   
 
5,398,645
 
    
  
Long-term liabilities:
                  
Long-term liabilities, excluding current portion
   
 
7,510,911
 
   
 
7,572,752
 
Other liabilities
   
 
960,300
 
   
 
960,300
 
    
  
Total liabilities
   
 
12,229,795
 
   
 
13,931,697
 
    
  
Shareholders' equity:
                  
Common stock, $.01 par value: 45,000,000 authorized
26,819,165 and 26,802,687 shares issued and outstanding
   
 
268,192
 
   
 
268,027
 
Additional paid-in capital
   
 
147,631,310
 
   
 
147,517,078
 
Accumulated deficit
   
 
(139,077,049
)
   
 
(135,887,470
)
Accumulated other comprehensive loss
   
 
(2,356,272
)
   
 
(2,368,726
)
    
  
Total shareholders' equity
   
 
6,466,181
 
   
 
9,528,909
 
    
  
    
$
18,695,976
 
   
$
23,460,606
 
    
  
 
See accompanying notes to consolidated financial statements.

4

Table of Contents
DIAMETRICS MEDICAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
 
    
Six Months Ended
June 30,
  
    
2002
     
2001
  
Cash flows from operating activities:
                  
Net loss
   
$
(3,189,579
)
   
$
(2,154,851
)
Adjustments to reconcile net loss to net cash used in operating activities:
                  
Depreciation and amortization
   
 
1,037,610
 
   
 
1,244,799
 
Other
   
 
(2,000
)
   
 
1,506
 
Changes in operating assets and liabilities:
                  
Accounts receivable
   
 
(111,326
)
   
 
978,581
 
Inventories
   
 
(389,018
)
   
 
(473,489
)
Prepaid expenses and other current assets
   
 
(195,558
)
   
 
52,258
 
Accounts payable
   
 
(362,949
)
   
 
(859,793
)
Accrued expenses
   
 
(80,280
)
   
 
(577,261
)
Deferred credits and revenue
   
 
(1,083,333
)
   
 
(250,365
)
    
  
Net cash used in operating activities
   
 
(4,376,433
)
   
 
(2,038,615
)
    
  
Cash flows from investing activities:
                  
Purchases of property and equipment
   
 
(287,911
)
   
 
(701,688
)
Purchases of marketable securities
   
 
—  
 
   
 
(3,569,950
)
Proceeds from maturities of marketable securities
   
 
749,141
 
   
 
9,851,711
 
Other
   
 
2,000
 
   
 
(1,100
)
    
  
Net cash provided by investing activities
   
 
463,230
 
   
 
5,578,973
 
    
  
Cash flows from financing activities:
                  
Principal payments on borrowings and capital leases
   
 
(175,340
)
   
 
(276,951
)
Proceeds from borrowings
   
 
—  
 
   
 
487,310
 
Net proceeds from the issuance of common stock
   
 
114,397
 
   
 
176,591
 
    
  
Net cash provided by (used in) financing activities
   
 
(60,943
)
   
 
386,950
 
    
  
Effect of exchange rate changes on cash and cash equivalents
   
 
(82,603
)
   
 
(157,708
)
    
  
Net increase (decrease) in cash and cash equivalents
   
 
(4,056,749
)
   
 
3,769,600
 
Cash and cash equivalents at beginning of period
   
 
7,654,845
 
   
 
2,431,704
 
    
  
Cash and cash equivalents at end of period
   
$
3,598,096
 
   
$
6,201,304
 
    
  
Supplemental disclosure of cash flow information:
                  
Cash paid during the period for interest
   
$
271,021
 
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