Delaware | 06-1123096 | |
(State or other jurisdiction of
incorporation or organization)
|
(I.R.S. employer
identification no.)
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Page No. | |||
PART I | Financial Information | ||
Item 1
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Financial Statements (Unaudited)
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3 | |
Condensed Consolidated Balance Sheets as of June 30, 2015 and December 31, 2014
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3
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Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2015 and 2014
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5
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Condensed Consolidated Statement of Changes in Stockholders’ Equity for the Six Months Ended June 30, 2015
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6 | ||
Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2015 and 2014
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7 | ||
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Notes to Condensed Consolidated Financial Statements
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8
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Item 2
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
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14 | |
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Item 3
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Quantitative and Qualitative Disclosures about Market Risk
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19 | |
Item 4
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Controls and Procedures
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19 | |
PART II
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Other Information
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Item 6
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Exhibits
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20 |
Signatures
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21 |
June 30,
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December 31,
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|||||||
Assets
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2015
|
2014
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||||||
Current assets:
|
||||||||
Cash and cash equivalents
|
$ | 9,556,655 | $ | 4,494,663 | ||||
Accounts receivable, net
|
3,391,441 | 3,277,460 | ||||||
Inventories
|
3,013,055 | 3,358,908 | ||||||
Other current assets
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535,683 | 556,760 | ||||||
Total current assets
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16,496,834 | 11,687,791 | ||||||
Property and equipment:
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||||||||
Leasehold improvements
|
139,970 | 139,970 | ||||||
Equipment at customers
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3,834,593 | 3,795,659 | ||||||
Machinery and equipment
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5,654,852 | 5,799,015 | ||||||
9,629,415 | 9,734,644 | |||||||
Accumulated depreciation and amortization
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(7,394,343 | ) | (7,458,220 | ) | ||||
Property and equipment, net
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2,235,072 | 2,276,424 | ||||||
Intangible and other assets, net
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1,367,100 | 1,471,900 | ||||||
Total assets
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$ | 20,099,006 | $ | 15,436,115 | ||||
June 30,
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December 31,
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|||||||
Liabilities and Stockholders' Equity
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2015
|
2014
|
||||||
Current liabilities:
|
||||||||
Accounts payable
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$ | 1,497,717 | $ | 1,210,412 | ||||
Accrued expenses
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1,717,270 | 1,808,529 | ||||||
Notes payable
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129,887 | 86,941 | ||||||
Note payable - line-of-credit
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— | 1,000,000 | ||||||
Current portion of long-term debt
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1,451,610 | 1,216,218 | ||||||
Total current liabilities
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4,796,484 | 5,322,100 | ||||||
Deferred gain on sale and leaseback of property
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293,559 | 360,877 | ||||||
Long-term debt, less current portion
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6,048,390 | 6,283,782 | ||||||
Other long-term liability
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300,000 | 300,000 | ||||||
Total liabilities
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11,438,433 | 12,266,759 | ||||||
Commitments and contingencies
|
||||||||
Stockholders' equity:
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||||||||
Preferred stock, $.001 par value per share, 1,000,000 shares authorized
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||||||||
Series A convertible preferred stock, 95,500 shares issued and
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||||||||
outstanding, liquidation value of $12,687,752 and $12,255,072 at
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||||||||
June 30, 2015 and December 31, 2014, respectively
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8,802,000 | 8,802,000 | ||||||
Series A exchangeable preferred stock, 54,500 shares issued and
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||||||||
outstanding, liquidation value of $7,240,654 and $6,993,732 at
|
||||||||
June 30, 2015 and December 31, 2014, respectively
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5,135,640 | 5,135,640 | ||||||
Common stock, $.004 par value per share, 60,000,000 shares authorized,
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||||||||
26,835,960 and 19,563,333 shares issued at June 30, 2015 and
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||||||||
December 31, 2014, respectively, including shares held in treasury
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107,344 | 78,253 | ||||||
Common stock held in treasury, at cost - 86,000 shares
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(101,480 | ) | (101,480 | ) | ||||
Additional paid-in capital
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29,227,931 | 20,285,008 | ||||||
Accumulated deficit
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(34,510,862 | ) | (31,030,065 | ) | ||||
Total stockholders' equity
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8,660,573 | 3,169,356 | ||||||
Total liabilities and stockholders' equity
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$ | 20,099,006 | $ | 15,436,115 | ||||
Three Months Ended
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Six Months Ended
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|||||||||||||||
June 30,
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June 30,
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|||||||||||||||
2015
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2014
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2015
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2014
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|||||||||||||
Net sales
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$ | 5,787,361 | $ | 5,842,980 | $ | 11,594,591 | $ | 11,554,037 | ||||||||
Cost of sales
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3,165,594 | 3,459,200 | 6,303,754 | 6,826,603 | ||||||||||||
Gross profit
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2,621,767 | 2,383,780 | 5,290,837 | 4,727,434 | ||||||||||||
Operating expenses:
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||||||||||||||||
Research and development
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899,609 | 862,490 | 1,775,910 | 1,744,223 | ||||||||||||
Selling, general and administrative
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3,471,210 | 3,540,276 | 6,564,762 | 6,766,837 | ||||||||||||
Total operating expenses
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4,370,819 | 4,402,766 | 8,340,672 | 8,511,060 | ||||||||||||
Operating loss
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(1,749,052 | ) | (2,018,986 | ) | (3,049,835 | ) | (3,783,626 | ) | ||||||||
Interest expense
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214,274 | 255,321 | 432,088 | 340,554 | ||||||||||||
Other income
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(777 | ) | (122 | ) | (1,126 | ) | (908 | ) | ||||||||
Net loss
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(1,962,549 | ) | (2,274,185 | ) | (3,480,797 | ) | (4,123,272 | ) | ||||||||
Preferred stock dividend accretion
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342,749 | 319,771 | 679,603 | 634,042 | ||||||||||||
Net loss applicable to common stockholders
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$ | (2,305,298 | ) | $ | (2,593,956 | ) | $ | (4,160,400 | ) | $ | (4,757,314 | ) | ||||
Per share basic and diluted loss applicable to common stockholders
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$ | (0.09 | ) | $ | (0.13 | ) | $ | (0.17 | ) | $ | (0.25 | ) | ||||
Weighted-average number of common shares outstanding:
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||||||||||||||||
Basic and diluted
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26,595,219 | 19,226,605 | 24,700,099 | 19,187,795 |
Preferred Stock
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Common Stock Issued
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Common Stock Held in Treasury
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Additional Paid-in
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Accumulated
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||||||||||||||||||||||||||||||||
Shares
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Amount
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Shares
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Amount
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Shares
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Amount
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Capital
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Deficit
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Total
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||||||||||||||||||||||||||||
BALANCE, December 31, 2014
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150,000 | $ | 13,937,640 | 19,563,333 | $ | 78,253 | 86,000 | $ | (101,480 | ) | $ | 20,285,008 | $ | (31,030,065 | ) | $ | 3,169,356 | |||||||||||||||||||
Net loss
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(3,480,797 | ) | (3,480,797 | ) | ||||||||||||||||||||||||||||||||
Common stock issued in public offering
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7,130,000 | 28,520 | 8,488,975 | 8,517,495 | ||||||||||||||||||||||||||||||||
Common stock issued under stock purchase plan
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7,627 | 31 | 11,792 | 11,823 | ||||||||||||||||||||||||||||||||
Warrants exercised
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135,000 | 540 | 41,710 | 42,250 | ||||||||||||||||||||||||||||||||
Stock compensation
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400,446 | 400,446 | ||||||||||||||||||||||||||||||||||
BALANCE, June 30, 2015
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150,000 | $ | 13,937,640 | 26,835,960 | $ | 107,344 | 86,000 | $ | (101,480 | ) | $ | 29,227,931 | $ | (34,510,862 | ) | $ | 8,660,573 |
Six Months Ended
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||||||||
June 30,
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||||||||
2015
|
2014
|
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OPERATING ACTIVITIES:
|
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Net loss
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$ | (3,480,797 | ) | $ | (4,123,272 | ) | ||
Adjustments to reconcile net loss to net cash
|
||||||||
used in operating activities:
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||||||||
Depreciation and amortization
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745,588 | 841,332 | ||||||
Amortization and write-off of deferred financing costs
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— | 181,188 | ||||||
Provision for doubtful accounts
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— | 65,000 | ||||||
Stock compensation
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400,446 | 555,856 | ||||||
Amortization of gain on sale and leaseback of property
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(67,318 | ) | (67,319 | ) | ||||
Changes in operating assets and liabilities:
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||||||||
Accounts receivable
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(113,981 | ) | (904,497 | ) | ||||
Inventories
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345,853 | 61,954 | ||||||
Other current assets
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162,006 | 133,179 | ||||||
Accounts payable and accrued expenses
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196,047 | (60,254 | ) | |||||
Net cash used in operating activities
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(1,812,156 | ) | (3,316,833 | ) | ||||
INVESTING ACTIVITIES:
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Expenditures for property and equipment
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(566,423 | ) | (923,211 | ) | ||||
Additions to intangible assets
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(33,013 | ) | (49,972 | ) | ||||
Net cash used in investing activities
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(599,436 | ) | (973,183 | ) | ||||
FINANCING ACTIVITIES:
|
||||||||
Repayments of note payable
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(97,983 | ) | (20,748 | ) | ||||
Deferred financing costs
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— | (291,312 | ) | |||||
Repayment of line-of-credit
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(1,000,000 | ) | — | |||||
Debt extinguishment
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— | (5,000,000 | ) | |||||
Proceeds from long-term debt and warrants
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— | 7,500,000 | ||||||
Proceeds from issuance of common stock
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8,571,567 | 107,226 | ||||||
Net cash provided by financing activities
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7,473,584 | 2,295,166 | ||||||
Net increase (decrease) in cash and cash equivalents
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5,061,992 | (1,994,850 | ) | |||||
Cash and cash equivalents, beginning of period
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4,494,663 | 8,190,302 | ||||||
CASH AND CASH EQUIVALENTS, END OF PERIOD
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$ | 9,556,655 | $ | 6,195,452 | ||||
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
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||||||||
Cash paid during the period for interest
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$ | 363,769 | $ | 166,940 | ||||
Insurance premiums funded with note payable
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$ | 140,929 | $ | 147,162 | ||||
End-of-term fee payable to lender
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$ | — | $ | 300,000 | ||||
Warrants issued to lender
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$ | — | $ | 190,840 |
●
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Tissue oximetry monitoring products – includes sales of the Company’s FORE-SIGHT cerebral monitors, sensors, and accessories.
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●
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Traditional monitoring products – includes vital sign monitors, non-invasive blood pressure technology for sale to OEMs, and neonatal intensive care disposable supplies.
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June 30,
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December 31,
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|||||||
2015
|
2014
|
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Raw materials
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$ | 1,863,433 | $ | 1,875,483 | ||||
Work in process
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30,831 | 25,014 | ||||||
Finished goods
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1,118,791 | 1,458,411 | ||||||
Total
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$ | 3,013,055 | $ | 3,358,908 |
June 30,
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December 31,
|
|||||||
2015
|
2014
|
|||||||
Patents and other assets
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$ | 1,034,275 | $ | 997,076 | ||||
Patents pending
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278,447 | 282,633 | ||||||
Purchased technology
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33,893 | 33,893 | ||||||
Deferred financing costs
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780,810 | 780,810 | ||||||
2,127,425 | 2,094,412 | |||||||
Accumulated amortization
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(760,325 | ) | (622,512 | ) | ||||
Total
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$ | 1,367,100 | $ | 1,471,900 |
2016
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$ | 253,400 | ||
2017
|
214,600 | |||
2018
|
107,600 | |||
2019
|
26,000 | |||
2020
|
25,600 | |||
Thereafter
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519,700 | |||
$ | 1,146,900 |
June 30,
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December 31,
|
|||||||
2015
|
2014
|
|||||||
Balance of bank term loan
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$ | 7,500,000 | $ | 7,500,000 | ||||
Less current portion
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1,451,610 | 1,216,218 | ||||||
Long-term portion
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$ | 6,048,390 | $ | 6,283,782 |
Weighted-
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Aggregate
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Weighted-Average
|
||||||||||||||
Option
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Average
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Intrinsic
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Contractual Life
|
|||||||||||||
Shares
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Exercise Price
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Value (1)
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Remaining in Years
|
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Outstanding at December 31, 2014
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3,106,000 | $ | 2.05 | $ | 75,000 | 7.6 | ||||||||||
Granted
|
220,000 | 1.57 | ||||||||||||||
Cancelled or expired
|
(148,250 | ) | 2.62 | |||||||||||||
Exercised
|
— | — | ||||||||||||||
Outstanding at June 30, 2015
|
3,177,750 | 1.99 | 600 | 7.5 | ||||||||||||
Exercisable at June 30, 2015
|
1,542,125 | $ | 2.22 | $ | — | 6.2 | ||||||||||
Vested and expected to vest at
|
||||||||||||||||
June 30, 2015
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3,128,724 | $ | 2.00 | $ | 582 | 7.5 |
(1)
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The intrinsic value of a stock option is the amount by which the market value, as of the applicable date, of the underlying stock exceeds the option exercise price.
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Six Months
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Weighted-Average
|
|||||||
Ended
|
Grant Date
|
|||||||
June 30, 2015
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Fair-Value
|
|||||||
Outstanding at beginning of period
|
178,694 | $ | 2.12 | |||||
Granted
|
— | — | ||||||
Cancelled
|
— | — | ||||||
Vested
|
(28,694 | ) | 2.20 | |||||
Outstanding at end of period
|
150,000 | $ | 2.10 |
Three Months
|
Three Months
|
|||||||||||||||
Ended
|
Ended
|
Increase /
|
%
|
|||||||||||||
June 30, 2015
|
June 30, 2014
|
(Decrease)
|
Change
|
|||||||||||||
Tissue Oximetry Monitoring
|
$ | 3,887 | $ | 3,273 | $ | 614 | 19% | |||||||||
Traditional Monitoring
|
1,900 | 2,570 | (670 | ) | (26% | ) | ||||||||||
$ | 5,787 | $ | 5,843 | $ | (56 | ) | (1% | ) | ||||||||
Domestic Sales
|
$ | 4,566 | $ | 4,494 | $ | 72 | 2% | |||||||||
International Sales
|
1,221 | 1,349 | (128 | ) | (9% | ) | ||||||||||
$ | 5,787 | $ | 5,843 | $ | (56 | ) | (1% | ) |
Three Months
|
Three Months
|
|||||||||||||||
Ended
|
Ended
|
Increase /
|
%
|
|||||||||||||
June 30, 2015
|
June 30, 2014
|
(Decrease)
|
Change
|
|||||||||||||
Sensor Sales
|
$ | 3,197 | $ | 2,622 | $ | 575 | 22% | |||||||||
Monitors & Accessories
|
690 | 651 | 39 | 6% | ||||||||||||
$ | 3,887 | $ | 3,273 | $ | 614 | 19% | ||||||||||
Domestic Sales
|
$ | 3,205 | $ | 2,487 | $ | 718 | 29% | |||||||||
International Sales
|
682 | 786 | (104 | ) | (13% | ) | ||||||||||
$ | 3,887 | $ | 3,273 | $ | 614 | 19% |
Six Months
|
Six Months
|
|||||||||||||||
Ended
|
Ended
|
Increase /
|
%
|
|||||||||||||
June 30, 2015
|
June 30, 2014
|
(Decrease)
|
Change
|
|||||||||||||
Tissue Oximetry Monitoring
|
$ | 7,162 | $ | 6,033 | $ | 1,129 | 19% | |||||||||
Traditional Monitoring
|
4,433 | 5,521 | (1,088 | ) | (20% | ) | ||||||||||
$ | 11,595 | $ | 11,554 | $ | 41 | 0% | ||||||||||
Domestic Sales
|
$ | 9,078 | $ | 9,147 | $ | (69 | ) | (1% | ) | |||||||
International Sales
|
2,517 | 2,407 | 110 | 5% | ||||||||||||
$ | 11,595 | $ | 11,554 | $ | 41 | 0% |
Six Months
|
Six Months
|
|||||||||||||||
Ended
|
Ended
|
Increase /
|
%
|
|||||||||||||
June 30, 2015
|
June 30, 2014
|
(Decrease)
|
Change
|
|||||||||||||
Sensor Sales
|
$ | 6,120 | $ | 5,042 | $ | 1,078 | 21% | |||||||||
Monitors & Accessories
|
1,042 | 991 | 51 | 5% | ||||||||||||
$ | 7,162 | $ | 6,033 | $ | 1,129 | 19% | ||||||||||
Domestic Sales
|
$ | 5,775 | $ | 4,728 | $ | 1,047 | 22% | |||||||||
International Sales
|
1,387 | 1,305 | 82 | 6% | ||||||||||||
$ | 7,162 | $ | 6,033 | $ | 1,129 | 19% |
31.1
|
Certification pursuant to Rule 13a-14(a) of Thomas M. Patton, President and Chief Executive Officer
|
31.2
|
Certification pursuant to Rule 13a-14(a) of Jeffery A. Baird, Chief Financial Officer
|
32.1
|
Certification pursuant to 18 U.S.C. 1350 of Periodic Financial Report of Thomas M. Patton,President and Chief Executive Officer, and Jeffery A. Baird, Chief Financial Officer
|
101
|
Interactive data files pursuant to Rule 405 of Regulation S-T.
|
/s/ Thomas M. Patton |
Date: August 5, 2015
|
By: Thomas M. Patton
|
|
President and Chief Executive Officer | |
/s/ Jeffery A. Baird |
Date: August 5, 2015
|
By: Jeffery A. Baird
|
|
Chief Financial Officer | |