SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(MARK ONE)
XX Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
--- Act of 1934.
For the period ended December 31, 2003.
Transition Report Pursuant to Section 13 or 15(d) of the Securities
--- Exchange Act of 1934.
For the transition period from _____ to _____.
COMMISSION FILE NUMBER: 0-16128
TUTOGEN MEDICAL, INC.
(Exact name of registrant as specified in its charter)
FLORIDA 59-3100165
(State or other Jurisdiction of (I.R.S.Employer
Incorporation or Organization) Identification No.)
1130 MCBRIDE AVENUE, WEST PATERSON, NEW JERSEY 07424
(Address of Principal Executive Offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (973) 785-0004
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
COMMON STOCK, PAR VALUE $.01
(Title of Class) (Name of Each Exchange on Which Registered)
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 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 .
--- ---
As of January 31, 2004 there were outstanding 15,690,210 shares of Tutogen
Medical, Inc. Common Stock, par value $0.01.
TUTOGEN MEDICAL, INC. AND SUBSIDIARIES
INDEX
-----
PART I. Financial Information. Page No.
ITEM 1. Financial Statements.
Consolidated Balance Sheets - December 31, 2003 1
(unaudited) and September 30, 2003.
Consolidated Statements of Operations for the 2
three months ended December 31, 2003 and
2002(unaudited).
Consolidated Statements of Cash Flows for the 3
three months ended December 31, 2003 and
2002(unaudited).
Notes to Consolidated Financial Statements 4
(unaudited).
ITEM 2. Management's Discussion and Analysis of Financial 9
Condition and Results of Operations.
ITEM 4. Controls and Procedures 13
PART II. Other Information.
ITEM 6. Reports on Form 8-K 14
SIGNATURES 15
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
TUTOGEN MEDICAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)
DECEMBER 31, SEPTEMBER 30,
2003 2003
----------------- -----------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 5,631 $ 5,049
Accounts receivable - net 4,777 5,526
Inventories - net 13,132 11,992
Deferred income taxes 755 709
Other current assets 649 1,098
----------------- -----------------
24,944 24,374
PROPERTY, PLANT AND EQUIPMENT, NET 5,180 4,842
DEFERRED INCOME TAXES 1,101 1,187
----------------- -----------------
TOTAL ASSETS $ 31,225 $ 30,403
================= =================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and other accrued expenses $ 7,315 $ 7,438
Accrued commissions 473 445
Current portion of deferred distribution fees 659 617
Current portion of long-term debt 99 91
----------------- -----------------
8,546 8,591
OTHER LIABILITIES
Deferred distribution fees 3,091 3,038
Long-term debt 768 728
SHAREHOLDERS' EQUITY 18,820 18,046
----------------- -----------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 31,225 $ 30,403
================= =================
See accompanying Notes to Consolidated Financial Statements.
1
TUTOGEN MEDICAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
THREE MONTHS ENDED DECEMBER 31,
2003 2002
---- ----
REVENUE $ 7,485 $ 6,574
COST OF REVENUE 2,989 2,846
----------------- -----------------
Gross margin 4,496 3,728
OPERATING EXPENSES
General and administrative 1,158 929
Distribution and marketing 2,070 2,342
Research and development 339 248
Depreciation and amortization 71 41
----------------- -----------------
3,638 3,560
OPERATING INCOME 858 168
OTHER EXPENSE (19) (25)
INTEREST EXPENSE (14) (13)
----------------- -----------------
(33) (38)
INCOME BEFORE INCOME TAX EXPENSE (BENEFIT) 825 130
Income tax expense (benefit) 243 (1)
----------------- -----------------
NET INCOME $ 582 $ 131
================= =================
AVERAGE SHARES OUTSTANDING FOR BASIC
EARNINGS PER SHARE 15,667,195 15,158,110
================= =================
BASIC EARNINGS PER SHARE $ 0.04 $ 0.01
================= =================
AVERAGE SHARES OUTSTANDING FOR DILUTED
EARNINGS PER SHARE 16,682,431 15,884,927
================= =================
DILUTED EARNINGS PER SHARE $ 0.04 $ 0.01
================= =================
See accompanying Notes to Consolidated Financial Statements
2
TUTOGEN MEDICAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
THREE MONTHS ENDED DECEMBER 31,
2003 2002
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 582 $ 131
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 189 141
Deferred distribution fees revenue (157) (135)
Deferred income taxes 41 (1)
Changes in assets and liabilities:
Accounts receivable 1,009 (911)
Inventories (909) (202)
Other current assets 500 (153)
Accounts payable and other accrued expenses (558) 620
Accrued commissions 28 98
----------------- -----------------
Net cash provided by (used in) operating activities 725 (412)
CASH FLOWS USED IN INVESTING ACTIVITIES
Purchase of property and equipment (194) (109)
----------------- -----------------
(194) (109)
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock 2 -
Repayment of long-term debt (15) (11)
----------------- -----------------
Net cash used in financing activities (13) (11)
EFFECT OF EXCHANGE RATE CHANGES ON CASH 64 (53)
----------------- -----------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 582 (585)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 5,049 3,083
----------------- -----------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 5,631 $ 2,498
================= =================
SUPPLEMENTAL CASH FLOW DISCLOSURES
Interest paid $ 14 $ 13
================= =================
See accompanying Notes to Consolidated Financial Statements
3
TUTOGEN MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
DECEMBER 31, 2003
(IN THOUSANDS, EXCEPT SHARE DATA)
(1) OPERATIONS AND ORGANIZATION
Tutogen Medical, Inc. with its consolidated subsidiaries (the "Company")
processes, manufactures and distributes worldwide, specialty surgical
products and performs tissue processing services for neuro, orthopedic,
reconstructive and general surgical applications. The Company's core
business is processing human donor tissue, utilizing its patented
Tutoplast(R) process, for distribution to hospitals and surgeons. The
Company processes at its two manufacturing facilities in Germany and the
United States and distributes its products and services to over 30
countries worldwide.
(2) SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited consolidated financial statements of the Company
and the unaudited results of operations and cash flows for the three months
ended December 31, 2003 and 2002 have been prepared in conformity with
accounting principles generally accepted in the United States of America
for interim financial reporting. Accordingly, they do not include all of
the information and notes required by accounting principles generally
accepted in the United States of America for complete financial statements.
In the opinion of management, all adjustments necessary in order to make
the financial statements not misleading have been made. Operating results
for the three months ended December 31, 2003 are not necessarily indicative
of the results, which may be expected for the fiscal year ending September
30, 2004. The interim financial statements should be read in conjunction
with the audited consolidated financial statements of the Company for the
year ended September 30, 2003.
NEW ACCOUNTING PRONOUNCEMENTS - In June 2002, the FASB issued SFAS No. 146,
ACCOUNTING FOR COSTS ASSOCIATED WITH EXIT OR DISPOSAL ACTIVITIES. SFAS No.
146 nullifies Emerging Issues Task Force ("EITF") No. 94-3, LIABILITY
RECOGNITION FOR CERTAIN EMPLOYEE TERMINATION BENEFITS AND OTHER COSTS TO
EXIT AN ACTIVITY (INCLUDING CERTAIN COSTS INCURRED IN AS RESTRUCTURING).
The principal difference between SFAS No. 146 and EITF No. 94-3 relates to
its requirements for recognition of a liability for a cost associated with
an exit or disposal activity. SFAS No. 146 requires that a liability for a
cost associated with an exit or disposal activity be recognized when the
liability is incurred. Under EITF No. 94-3, a liability for an exit cost
was recognized at the date of an entity's commitment to an exit plan. SFAS
No. 146 was effective for exit and disposal activities that are initiated
after December 31, 2002. The provisions of SFAS No. 146 did not have a
material impact on its financial position or results of operations.
On December 31, 2002, the FASB issued SFAS No. 148, ACCOUNTING FOR
STOCK-BASED COMPENSATION-TRANSITION AND DISCLOSURE, which amends SFAS No.
123, ACCOUNTING FOR STOCK-BASED COMPENSATION. SFAS 148 provides alternative
methods of transition for a voluntary change to the fair value based method
of accounting for stock-based employee compensation. (Under the fair value
based method, compensation cost for stock options is measured when options
are issued). In addition, SFAS No. 148 amends the disclosure requirements
of SFAS No. 123 to require more prominent and more frequent disclosures in
financial statements of the effects of stock-based compensation. The
Company adopted SFAS No. 148 beginning in the second fiscal quarter of
fiscal 2003 and such disclosures are included as herein.
4
The following table reconciles net income and basic and diluted earnings
pre share (EPS), as reported, to pro-forma net income and basic and diluted
EPS, as if the Company had expensed the fair value of stock options as
permitted by SFAS No. 123, as amended by SFAS No. 148, since it permits
alternative methods of adoption.
Three Months Ended December 31,
2003 2002
---- ----
Net Income, as reported: $582 $131
Pro-forma expense as if stock options
were charged against net income 16 15
---- ----
Pro-forma net income using the fair
value method $566 $116
==== ====
Basic EPS:
As reported $0.04 $0.01
Pro forma using the fair value method $0.04 $0.01
Diluted EPS:
As reported $0.04 $0.01
Pro forma using the fair value method $0.03 $0.01
In April 2003, the FASB issued SFAS No. 149, AMENDMENT OF STATEMENT 133 ON
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES. SFAS No. 149 amends SFAS No.
133 for certain decisions made by the Board as part of the Derivatives
Implementation Group ("DIG") process and is effective for contracts entered
into or modified after June 30, 2003. In addition, SFAS No. 149 should be
applied prospectively. The provisions of SFAS No. 149 that relate to SFAS
No. 133 Implementation Issues that have been effective for fiscal quarters
that began prior to June 15, 2003, should continue to be applied in
accordance with their respective effective dates. The adoption of SFAS No.
149 did not have an impact on the results of operations or financial
position.
In June 2003, the FASB issued SFAS No. 150, ACCOUNTING FOR CERTAIN
FINANCIAL INSTRUMENTS WITH CHARACTERISTICS OF BOTH LIABILITIES AND EQUITY
to improve the accuracy of securities issuers' accounting for such
financial instruments. For earlier transactions, the provisions of SFAS No.
150 take effect at the start of the first interim period beginning after
December 15, 2003. The adoption of SFAS No. 150 did not have a material
impact on the results of operations or financial position.
In January 2003, the FASB issued FIN No. 46, CONSOLIDATION OF VARIABLE
INTEREST ENTITIES, AND AN INTERPRETATION OF ARB 51. FIN No. 46 defines when
a business enterprise must consolidate a variable interest entity. This
interpretation applies immediately to variable interest entities created
after January 31, 2003. It applies in the first fiscal year or interim
period beginning after December 15, 2003, to entities in which an
enterprise holds a variable interest that it acquired before February 1,
2003. The Company does not have variable interest entities as of December
31, 2003.
5
(3) INVENTORIES
Major classes of inventory at December 31, 2003 and September 30, 2003 were
as follows:
December 31, September 30,
2003 2003
---- ----
Raw materials $ 2,623 $ 2,439
Work in process 3,230 3,316
Finished goods 10,724 9,335
--------- ---------
16,577 15,090
Less reserves for obsolescence 3,445 3,098
----- ---------
$ 13,132 $ 11,992
========= =========
(4) INCOME TAXES
The Company has incurred net operating losses through December 31, 2003 of
approximately $16 million, generated from its U.S. and German operations of
$8 million and $8 million, respectively. These net operating losses are the
primary component of the Company's net deferred tax asset of $2.0 million
as of December 31, 2003, generated from its U.S. and German operations. A
full valuation allowance had been provided on all but $135,000 of the U.S.
deferred tax asset and no valuation allowance has been provided on its
German operations in the Company's consolidated financial statements. The
Company establishes valuation allowances in accordance with the provisions
of FASB Statement No. 109, ACCOUNTING FOR INCOME TAXES. The Company
continually reviews the adequacy and necessity of the valuation allowance
and recognizes these benefits only as reassessment, based on recent
developments including income from new contracts, indicates that it is more
likely than not that the benefits will be realized. As of December 31, 2003
the Company continues to record the existing valuation allowance on its
U.S. operations and has not provided a valuation allowance on its German
operations based upon future taxable income projections.
(5) SEGMENT DATA
The Company operates principally in one industry providing specialty
surgical products and tissue processing services. These operations include
two geographically determined segments: the United States and Europe
("International"). The accounting policies of these segments are the same
as those described in the summary of significant accounting policies. The
Company evaluates performance based on profit or loss from operations
before income taxes, not including non-recurring and foreign exchange gains
or losses. The Company accounts for intersegment sales and transfers at
contractually agreed-upon prices.
The Company's reportable segments are strategic business units that offer
products and services to different geographic markets. They are managed
separately because of the differences in these markets as well as their
physical location.
6
A summary of the operations and assets by segment as of and for the three months
ended December 31, 2003 and 2002, respectively are as follows:
2003 INTERNATIONAL UNITED STATES CONSOLIDATED
Gross revenue $ 5,695 $ 5,063 $ 10,758
Less - intercompany (3,273) - (3,273)
-------- -- -------
Total revenue - third party $ 2,422 $ 5,063 $ 7,485
======== ======== ========
Depreciation and amortization $ 134 $ 55 $ 189
======== ======== ========
Interest expense $ 12 $ 2 $ 14
======== ======== ========
Net income $ 446 $ 136 $ 582
======== ======== ========
Capital expenditures $ 164 $ 30 $ 194
======== ======== ========
Total assets $ 8,316 $ 34,014 $ 42,330
Less intercompany advances - (11,105) (11,105)
-------- -------- --------
$ 8,316 $ 22,909 $ 31,225
======== ======== ========
2002 INTERNATIONAL UNITED STATES CONSOLIDATED
Gross revenue $ 2,707 $ 4,525 $ 7,232
Less - intercompany (658) - (658)
-------- -------- --------
Total revenue - third party $ 2,049 $ 4,525 $ 6,574
======== ======== ========
Depreciation and amortization $ 78 $ 63 $ 141
======== ======== ========
Interest expense $ 11 $ 2 $ 13
======== ======== ========
Net income (loss) $ (131) $ 262 $ 131
======== ======== ========
Capital expenditures $ 59 $ 50 $ 109
======== ======== ========
Total assets $ 11,173 $ 29,923 $ 41,096
Less intercompany advances - (16,066) (16,066)
-------- -------- --------
$ 11,173 $ 13,857 $ 25,030
======== ======== ========
7
(6) RECLASSIFICATION
Certain reclassifications have been made to the 2002 financial statements
to conform to the 2003 presentation.
8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(IN THOUSANDS)
RESULTS OF OPERATIONS
REVENUE AND COST OF REVENUE
Revenues for the three months ended December 31, 2003, increased 14% to $7,485
from $6,574 for the comparable period. The $911 increase in revenue was almost
equally derived from the Company's U.S. operation, as its revenue increased to
$5,063 from $4,525 or 12% for the same period last year and from the
International operation, as its revenue increased to $2,422 from $2,049. It
should be pointed out that as a result of the new distribution agreement signed
with Zimmer Spine in April 2003, whereby Zimmer Spine became a "stocking
distributor" which means among other things that they would invoice the end
customer direct, the Company's revenues would have been $3,200 higher for this
quarter or $10,685 or an increase of 63% over the comparable period. The U.S.
revenue increase was primarily due to an increase in the demand for the
Company's Tutoplast(R) bone products for dental applications sold by Zimmer
Dental (formerly Centerpulse Dental), the Company's marketing partner. This
product line contributed $600 of the increase in revenue. The increase in
international revenue was due to an overall increase in the European and
international distributor business.
Cost of revenue, for the three months ended December 31, 2003 was 40% as
compared to 43% for the comparable period. The lower cost of revenue margin was
primarily due to a favorable mix of low cost of revenue on the spinal revenues
and a decrease in product development and manufacturing costs from a year ago.
GENERAL AND ADMINISTRATIVE
General and administrative expenses increased 25% for the three months ended
December 31, 2003, from the comparable period last year. Expenses increased due
to foreign exchange impact ($86), merger transaction expenses ($75) and higher
travel ($68). As a percentage of revenues, General and Administrative expenses
were 15% and 14% in 2003 and 2002, respectively.
DISTRIBUTION AND MARKETING
Distribution and marketing expenses decreased 12% from $2,342 in 2002 to $2,070
in 2003 for the three months ended December 31, 2003, from the comparable period
last year. The decrease was primarily due to lower marketing fees due under the
agreement with Zimmer Spine as a result of the new agreement whereby Zimmer is
invoicing the end customer direct and therefore the marketing fee is eliminated.
Such fees decreased from $1,476 in 2002 to $649 in 2003. The partial offset to
the decrease in marketing fees was due to higher expenditures as a result of
increased sales efforts Internationally. As a percentage of revenues,
Distribution and Marketing expenses decreased from 36% in 2002 to 28% in 2003.
RESEARCH AND DEVELOPMENT
Research and development expenses increased 37% for the three months ended
December 31, 2003, from the comparable period last year. The increase was due to
increased development efforts in the Spine, Dental and Ligament product areas.
As a percentage of revenues, Research and Development expenses increased from 4%
in 2002 to 5% in 2003.
9
DEPRECIATION AND AMORTIZATION
Depreciation and amortization was essentially flat from period to period.
OTHER EXPENSE
Other expenses were essentially flat from period to period.
INTEREST EXPENSE
Interest expense was essentially flat from period to period.
NET INCOME
Net income for the three months ended December 31, 2003 totaled $582 or $0.04
basic and diluted earnings per share as compared to a net income of $131 or
$0.01 basic and diluted earnings per share for the same period last year.
CRITICAL ACCOUNTING POLICIES
The Company's significant accounting policies are more fully described in Note 2
to the consolidated financial statements in the annual report. However, certain
of the accounting policies are particularly important to the portrayal of the
financial position and results of operations and require the application of
significant judgment by management; as a result, they are subject to an inherent
degree of uncertainty. In applying those policies, management uses its judgment
to determine the appropriate assumptions to be used in the determination of
certain estimates. Those estimates are based on historical experience, terms of
existing contracts, observance of trends in the industry, information provided
by customers and information available from other outside sources, as
appropriate. The Company's significant accounting policies include:
INVENTORIES. Inventories are valued at the lower of cost (weighted average
basis) or market. Work in process and finished goods include costs attributable
to direct labor and overhead. Reserves for slow moving and obsolete inventories
are provided based on historical experience and current product demand. The
adequacy of these reserves are evaluated quarterly.
REVENUE RECOGNITION AND ACCOUNTS RECEIVABLE. Revenue on product sales is
recognized when persuasive evidence of an arrangement exists, the price is fixed
and final, delivery has occurred and there is a reasonable assurance of
collection of the sales proceeds. Oral or written purchase authorizations are
generally obtained from customers for a specified amount of product at a
specified price and consider delivery to have occurred at the time of shipment.
Customers are provided with a limited right of return.
Revenue is recognized at shipment. Reasonable and reliable estimates of product
returns are made in accordance with SFAS No. 48 and of allowances for doubtful
accounts based on significant historical experience. Revenue from service sales
is recognized when the service procedures have been completed or applicable
milestones have been achieved. Revenue form distribution fees include
nonrefundable payments received as a result of exclusive distribution agreements
between the Company and independent distributors. Distribution fees under these
arrangements are recognized as revenue as products are delivered.
10
FOREIGN CURRENCY TRANSLATION. The financial position and results of operations
of the Company's foreign subsidiary is measured using local currency (Euro) as
the functional currency. Assets and liabilities of the foreign subsidiary are
translated at the rate of exchange in effect at the end of the period. Revenues
and expenses are translated at the average exchange rated for the period.
Foreign currency translation gains and losses not impacting cash flows are
credited to or charged against other comprehensive income (loss). Foreign
currency translation gains and losses arising from cash transactions are
credited to or charged against current earnings.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 2003, the Company has working capital of $16.5 million as
compared to September 30, 2003 of $15.8 million. The Company maintains current
working capital credit lines totaling (euro)1.5 million Euros (approximately
$1.9 million) with several German banks and a $1.0 million credit line with a
U.S. bank. At December 31, 2003, the Company had no borrowings against these
lines.
The Company has experienced a positive cash flow of $582 for the three months
ended December 31, 2003 as compared to a negative cash flow of $585 for the same
period in 2002. The primary reason for the positive cash flow is the increase in
net income for the period.
The Company's ability to generate positive operational cash flow is dependent
upon increasing processing revenues through increased recoveries by tissue banks
in the U.S. and Europe, and the development of additional markets and surgical
applications worldwide. While the Company believes that it continues to make
progress in both these areas, there can be no assurances that changing
governmental regulations will not have a material adverse effect on the results
of operations and cash flow.
Future minimum rental payments required under Company's leases that have initial
or remaining non-cancelable lease terms in excess of one year as of December 31,
2003 are as follows:
2004 $ 389
2005 208
2006 130
2007 50
-----
$ 777
=====
Long-term debt consists of senior debt, 5.75% interest until March 30, 2008 when
terms are renegotiable, due 2008. Future minimum payments as of December 31,
2003 are as follows:
2004 $ 99
2005 104
2006 109
2007 117
2008 438
-----
$ 867
=====
11
NEW ACCOUNTING PRONOUNCEMENTS
In June 2002, the FASB issued SFAS No. 146, ACCOUNTING FOR COSTS ASSOCIATED WITH
EXIT OR DISPOSAL ACTIVITIES. SFAS No. 146 nullifies Emerging Issues Task Force
("EITF") No. 94-3, LIABILITY RECOGNITION FOR CERTAIN EMPLOYEE TERMINATION
BENEFITS AND OTHER COSTS TO EXIT AN ACTIVITY (INCLUDING CERTAIN COSTS INCURRED
IN AS RESTRUCTURING). The principal difference between SFAS No. 146 and EITF No.
94-3 relates to its requirements for recognition of a liability for a cost
associated with an exit or disposal activity. SFAS No. 146 requires that a
liability for a cost associated with an exit or disposal activity be recognized
when the liability is incurred. Under EITF No. 94-3, a liability for an exit
cost was recognized at the date of an entity's commitment to an exit plan. SFAS
No. 146 was effective for exit and disposal activities that are initiated after
December 31, 2002. The provisions of SFAS No. 146 did not have a material impact
on its financial position or results of operations.
On December 31, 2002, the FASB issued SFAS No. 148, ACCOUNTING FOR STOCK-BASED
COMPENSATION-TRANSITION AND DISCLOSURE, which amends SFAS No. 123, ACCOUNTING
FOR STOCK-BASED COMPENSATION. SFAS 148 provides alternative methods of
transition for a voluntary change to the fair value based method of accounting
for stock-based employee compensation. (Under the fair value based method,
compensation cost for stock options is measured when options are issued). In
addition, SFAS No. 148 amends the disclosure requirements of SFAS No. 123 to
require more prominent and more frequent disclosures in financial statements of
the effects of stock-based compensation. The Company adopted SFAS No. 148
beginning in the second fiscal quarter of fiscal 2003 and such disclosures are
included as herein.
The following table reconciles net income and basic and diluted earnings pre
share (EPS), as reported, to pro-forma net income and basic and diluted EPS, as
if the Company had expensed the fair value of stock options as permitted by SFAS
No. 123, as amended by SFAS No. 148, since it permits alternative methods of
adoption.
Three Months Ended December 31,
2003 2002
---- ----
Net Income, as reported: $582 $131
Pro-forma expense as if stock options were
charged against net income 16 15
---- ----
Pro-forma net income using the fair value method $566 $116
==== ====
Basic EPS:
As reported $0.04 $0.01
Pro forma using the fair value method $0.04 $0.01
Diluted EPS:
As reported $0.04 $0.01
Pro forma using the fair value method $0.03 $0.01
12
In April 2003, the FASB issued SFAS No. 149, AMENDMENT OF STATEMENT 133 ON
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES. SFAS No. 149 amends SFAS No. 133
for certain decisions made by the Board as part of the Derivatives
Implementation Group ("DIG") process and is effective for contracts entered into
or modified after June 30, 2003. In addition, SFAS No. 149 should be applied
prospectively. The provisions of SFAS No. 149 that relate to SFAS No. 133
Implementation Issues that have been effective for fiscal quarters that began
prior to June 15, 2003, should continue to be applied in accordance with their
respective effective dates. The adoption of SFAS No. 149 did not have an impact
on the results of operations or financial position.
In June 2003, the FASB issued SFAS No. 150, ACCOUNTING FOR CERTAIN FINANCIAL
INSTRUMENTS WITH CHARACTERISTICS OF BOTH LIABILITIES AND EQUITY to improve the
accuracy of securities issuers' accounting for such financial instruments. For
earlier transactions, the provisions of SFAS No. 150 take effect at the start of
the first interim period beginning after December 15, 2003. The adoption of SFAS
No. 150 did not have a material impact on the results of operations or financial
position.
In January 2003, the FASB issued FIN No. 46, CONSOLIDATION OF VARIABLE INTEREST
ENTITIES, AND AN INTERPRETATION OF ARB 51. FIN No. 46 defines when a business
enterprise must consolidate a variable interest entity. This interpretation
applies immediately to variable interest entities created after January 31,
2003. It applies in the first fiscal year or interim period beginning after
December 15, 2003, to entities in which an enterprise holds a variable interest
that it acquired before February 1, 2003. The Company does not have variable
interest entities as of December 31, 2003.
ITEM 4. CONTROLS AND PROCEDURES
Within 90 days prior to the date of this report, the Company carried out an
evaluation, under the supervision and with the participation of the Company's
management, including the Company's Chief Executive Officer and Chief Financial
Officer, of the effectiveness of the design and operation of the Company's
disclosure controls and procedures pursuant to Exchange Act Rule 13 a-14. Based
upon that evaluation, the Company's Chief Executive Officer and Chief Financial
Officer concluded that the Company's disclosure controls and procedures are
effective in timely alerting them to material information relating to the
Company (including its consolidated subsidiaries) that is required to be
included in the Company's periodic filings with the Securities and Exchange
Commission. There have been no significant changes in the Company's internal
controls or, to the Company's knowledge, in other factors that could
significantly affect those internal controls subsequent to the date the Company
carried out its evaluation.
13
PART II. OTHER INFORMATION
ITEM 6. REPORTS ON FORM 8-K
The Company filed Reports on Form 8-K on November 4, 2003 and December 29, 2003
during the quarter ended December 31, 2003.
14
CERTIFICATION OF THE CHIEF FINANCIAL OFFICER PURSUANT TO
--------------------------------------------------------
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10QSB of Tutogen Medical, Inc.
(the "Company") for the three months ended December 31, 2003 as filed with the
Securities and Exchange commission on the date hereof (the "Report"), I George
Lombardi, as the Chief Financial Officer of the Company, hereby certify,
pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the
Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
(1) The Report fully complies with the requirements of Section 13 (a) or
15 (d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Company.
Date: February 12, 2004
TUTOGEN MEDICAL, INC.
/s/ George Lombardi
-------------------
George Lombardi
Chief Financial Officer, Treasurer and Secretary
CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER PURSUANT TO
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18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10QSB of Tutogen Medical, Inc.
(the "Company") for the three months ended December 31, 2003 as filed with the
Securities and Exchange commission on the date hereof (the "Report"), I Manfred
Krueger, as the Chief Executive Officer, President and Chief Operating Officer
of the Company, hereby certify, pursuant to 18 U.S.C. ss. 1350, as adopted
pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that to the best of my
knowledge:
(1) The Report fully complies with the requirements of Section 13 (a) or
15 (d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Company.
Date: February 12, 2004
TUTOGEN MEDICAL, INC.
/s/ Manfred Krueger
Manfred Krueger
Chief Executive Officer, President and
Chief Operating Officer
CERTIFICATION
I GEORGE LOMBARDI CERTIFY THAT:
1. I HAVE REVIEWED THIS QUARTERLY REPORT ON FORM 10-QSB OF TUTOGEN MEDICAL,
INC.
2. BASED ON MY KNOWLEDGE, THIS QUARTERLY REPORT DOES NOT CONTAIN ANY UNTRUE
STATEMENT OF A MATERIAL FACT OR OMIT TO STATE A MATERIAL FACT NECESSARY TO
MAKE THE STATEMENTS MADE, IN LIGHT OF THE CIRCUMSTANCES UNDER WHICH SUCH
STATEMENTS WERE MADE, NOT MISLEADING WITH RESPECT TO THE PERIOD COVERED BY
THIS QUARTERLY REPORT;
3. BASED ON MY KNOWLEDGE, THE FINANCIAL STATEMENTS AND OTHER FINANCIAL
INFORMATION INCLUDED IN THE QUARTERLY REPORT FAIRLY PRESENT IN ALL MATERIAL
RESPECTS, THE FINANCIAL CONDITION, RESULTS OF OPERATIONS AND CASH FLOWS OF
THE REGISTRANT AS OF, AND FOR, THE PERIODS PRESENTED IN THIS QUARTERLY
REPORT;
4. THE REGISTRANT'S OTHER CERTIFYING OFFICER AND I AM RESPONSIBLE FOR
ESTABLISHING AND MAINTAINING DISCLOSURE CONTROLS AND PROCEDURES (AS DEFINED
IN EXCHANGE ACT RULES 13A-14 AND 15D-14) FOR THE REGISTRANT AND HAVE:
A) DESIGNED SUCH DISCLOSURE CONTROLS AND PROCEDURES TO ENSURE THAT MATERIAL
INFORMATION RELATING TO THE REGISTRANT, INCLUDING ITS CONSOLIDATED
SUBSIDIARIES, IS MADE KNOWN TO US BY OTHERS WITHIN THOSE ENTITIES,
PARTICULARLY DURING THE PERIOD IN WHICH THIS QUARTERLY REPORT IS BEING
PREPARED;
B) EVALUATED THE EFFECTIVENESS OF THE REGISTRANT'S DISCLOSURE CONTROLS AND
PROCEDURES AS OF A DATE WITHIN 90 DAYS PRIOR TO THE FILING DATE OF THIS
QUARTERLY REPORT (THE "EVALUATION DATE"); AND
C) PRESENTED IN THIS QUARTERLY REPORT OUR CONCLUSIONS ABOUT THE
EFFECTIVENESS OF THE DISCLOSURE CONTROLS AND PROCEDURES BASED ON OUR
EVALUATION AS OF THE EVALUATION DATE.
5. THE REGISTRANT'S OTHER CERTIFYING OFFICER AND I HAVE DISCLOSED, BASED ON
OUR MOST RECENT EVALUATION, TO THE REGISTRANT'S AUDITORS AND THE AUDIT
COMMITTEE OF REGISTRANT'S BOARD OF DIRECTORS (OR PERSONS PERFORMING THE
EQUIVALENT FUNCTIONS):
A) ALL SIGNIFICANT DEFICIENCIES IN THE DESIGN OR OPERATION OF INTERNAL
CONTROLS WHICH COULD ADVERSELY AFFECT THE REGISTRANT'S ABILITY TO RECORD,
PROCESS, SUMMARIZE AND REPORT FINANCIAL DATA AND HAVE IDENTIFIED FOR THE
REGISTRANT'S AUDITORS ANY MATERIAL WEAKNESSES IN INTERNAL CONTROLS; AND
B) ANY FRAUD, WHETHER OR NOT MATERIAL, THAT INVOLVES MANAGEMENT OR OTHER
EMPLOYEES WHO HAVE A SIGNIFICANT ROLE IN THE REGISTRANT'S INTERNAL
CONTROLS.
CERTIFICATION
-------------
6. THE REGISTRANT'S OTHER CERTIFYING OFFICERS AND I HAVE INDICATED IN THIS
QUARTERLY REPORT WHETHER THERE WERE SIGNIFICANT CHANGES IN INTERNAL
CONTROLS OR IN OTHER FACTORS THAT COULD SIGNIFICANTLY AFFECT INTERNAL
CONTROLS SUBSEQUENT TO THE DATE OF OUR MOST RECENT EVALUATION, INCLUDING
ANY CORRECTIVE ACTIONS WITH REGARD TO SIGNIFICANT DEFICIENCIES AND MATERIAL
WEAKNESSES.
DATE: FEBRUARY 12, 2004
BY:
NAME: /S/ GEORGE LOMBARDI
TITLE: CHIEF FINANCIAL OFFICER,
TREASURER AND SECRETARY
PAGE 2
CERTIFICATION
I MANFRED KRUEGER CERTIFY THAT:
1. I HAVE REVIEWED THIS QUARTERLY REPORT ON FORM 10-QSB OF TUTOGEN MEDICAL,
INC.
2. BASED ON MY KNOWLEDGE, THIS QUARTERLY REPORT DOES NOT CONTAIN ANY UNTRUE
STATEMENT OF A MATERIAL FACT OR OMIT TO STATE A MATERIAL FACT NECESSARY TO
MAKE THE STATEMENTS MADE, IN LIGHT OF THE CIRCUMSTANCES UNDER WHICH SUCH
STATEMENTS WERE MADE, NOT MISLEADING WITH RESPECT TO THE PERIOD COVERED BY
THIS QUARTERLY REPORT;
3. BASED ON MY KNOWLEDGE, THE FINANCIAL STATEMENTS AND OTHER FINANCIAL
INFORMATION INCLUDED IN THE QUARTERLY REPORT FAIRLY PRESENT IN ALL MATERIAL
RESPECTS, THE FINANCIAL CONDITION, RESULTS OF OPERATIONS AND CASH FLOWS OF
THE REGISTRANT AS OF, AND FOR, THE PERIODS PRESENTED IN THIS QUARTERLY
REPORT;
4. THE REGISTRANT'S OTHER CERTIFYING OFFICER AND I AM RESPONSIBLE FOR
ESTABLISHING AND MAINTAINING DISCLOSURE CONTROLS AND PROCEDURES (AS DEFINED
IN EXCHANGE ACT RULES 13A-15 (E) AND 15D-15(E)) FOR THE REGISTRANT AND
HAVE:
A) DESIGNED SUCH DISCLOSURE CONTROLS AND PROCEDURES TO ENSURE THAT MATERIAL
INFORMATION RELATING TO THE REGISTRANT, INCLUDING ITS CONSOLIDATED
SUBSIDIARIES, IS MADE KNOWN TO US BY OTHERS WITHIN THOSE ENTITIES,
PARTICULARLY DURING THE PERIOD IN WHICH THIS QUARTERLY REPORT IS BEING
PREPARED;
B) EVALUATED THE EFFECTIVENESS OF THE REGISTRANT'S DISCLOSURE CONTROLS AND
PROCEDURES AS OF A DATE WITHIN 90 DAYS PRIOR TO THE FILING DATE OF THIS
QUARTERLY REPORT (THE "EVALUATION DATE"); AND
C) PRESENTED IN THIS QUARTERLY REPORT OUR CONCLUSIONS ABOUT THE
EFFECTIVENESS OF THE DISCLOSURE CONTROLS AND PROCEDURES BASED ON OUR
EVALUATION AS OF THE EVALUATION DATE.
5. THE REGISTRANT'S OTHER CERTIFYING OFFICER AND I HAVE DISCLOSED, BASED ON
OUR MOST RECENT EVALUATION, TO THE REGISTRANT'S AUDITORS AND THE AUDIT
COMMITTEE OF REGISTRANT'S BOARD OF DIRECTORS (OR PERSONS PERFORMING THE
EQUIVALENT FUNCTIONS):
A) ALL SIGNIFICANT DEFICIENCIES IN THE DESIGN OR OPERATION OF INTERNAL
CONTROLS WHICH COULD ADVERSELY AFFECT THE REGISTRANT'S ABILITY TO RECORD,
PROCESS, SUMMARIZE AND REPORT FINANCIAL DATA AND HAVE IDENTIFIED FOR THE
REGISTRANT'S AUDITORS ANY MATERIAL WEAKNESSES IN INTERNAL CONTROLS; AND
B) ANY FRAUD, WHETHER OR NOT MATERIAL, THAT INVOLVES MANAGEMENT OR OTHER
EMPLOYEES WHO HAVE A SIGNIFICANT ROLE IN THE REGISTRANT'S INTERNAL
CONTROLS.
CERTIFICATION
-------------
6. THE REGISTRANT'S OTHER CERTIFYING OFFICERS AND I HAVE INDICATED IN THIS
QUARTERLY REPORT WHETHER THERE WERE SIGNIFICANT CHANGES IN INTERNAL
CONTROLS OR IN OTHER FACTORS THAT COULD SIGNIFICANTLY AFFECT INTERNAL
CONTROLS SUBSEQUENT TO THE DATE OF OUR MOST RECENT EVALUATION, INCLUDING
ANY CORRECTIVE ACTIONS WITH REGARD TO SIGNIFICANT DEFICIENCIES AND MATERIAL
WEAKNESSES.
DATE: FEBRUARY 12, 2004
BY:
NAME: /S/ MANFRED KRUEGER
TITLE: CEO, PRESIDENT AND CHIEF OPERATING OFFICER
PAGE 2