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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
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Commission File Number: 000-26555
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ACCUIMAGE DIAGNOSTICS CORP.
(Name of Small Business Issuer in its Charter)
Nevada 33-0713615
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
400 Oyster Point Blvd., Suite 114, South San Francisco, California 94080-1917
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (650) 875-0192
Indicate by check mark whether the registrant has (1) filed all reports required
to be filed by Section 13 or 15(d) of the Securities 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 filing requirements within
the past 90 days.
Yes ___ No _X_
The number of shares outstanding of the issuer's common stock
was 9,748,200 shares of common stock, par value $.001, as of August 20, 1999.
No shares of Preferred stock are outstanding.
Transitional Small Business Disclosure Format:
Yes___ No _X_
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<PAGE>
INDEX
PART I - FINANCIAL INFORMATION
Item Description
1. Financial Statements 4
2. Management's Discussion and Analysis of Financial Condition or
Plan of Operations 8
PART II - OTHER INFORMATION 9
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
JAMES R. KERR
CERTIFIED PUBLIC ACCOUNTANT
60 East Third Avenue, Suite 390
San Mateo, California 94401
(650) 548-1700 - FAX (650) 548-1716
Acculmage Diagnostics Corp.
South San Francisco, California
We have compiled the accompanying balance sheet of Acculmage Diagnostics Corp.
(a corporation) as of June 30, 1999, and the related statements of income and
retained earnings and cash flows for the nine months then ended, in accordance
with Statements on Standards for Accounting and Review Services issued by the
American Institute of Certified Public Accountants.
A compilation is limited to presenting in the form of financial statements
information that is the representation of management. We have not audited or
reviewed the accompanying financial statements and, accordingly, do not express
an opinion or any other form of assurance on them.
Management has elected to omit substantially all of the disclosures required by
generally accepted accounting principles. If the omitted disclosures were
included in the financial statements, they might influence the user's
conclusions about the Company's financial position, results of operations, and
cash flows. Accordingly, these financial statements are not designed for those
who are not informed about such matters.
/s/ James R. Kerr
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Certified Public Accountant
August 18, 1999
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Acculmage Diagnostics Corp.
Balance Sheet
June 30, 1999
Assets
Current Assets
Cash $ 67,660.23
Accounts receivable 204,722.92
Inventory 5,391.48
Prepaid expenses 81,850.00
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359,624.63
Property and Equipment
Equipment 46,797.78
Less accumulated depreciation (24,708.56)
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22,089.22
Other Assets
Deposits 4,318.45
Other intangible assets 171,265.00
Less accumulated amortization (100,462.77)
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75,120.68
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$ 456,834.53
Total Assets ============
Liabilities & Capital
Current Liabilities
Accounts payable $ 56,931.39
Other accrued liabilities 42,559.70
Withheld and accrued payroll taxes 14,919.03
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114,410.12
Long Term Liabilities
Notes payable 25,000.00
Loan from shareholders 56,500.00
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81,500.00
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Total Liabilities 195,910.12
Stockholder's Equity
Common stock issued 159,199.00
Additional paid-in capital 1,278.010.86
Retained earnings (1,176,285.45)
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260,924.41
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Total Liabilities &
Capital $ 456,834.53
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Compiled - see accompanying accountants' report.
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Acculmage Diagnostics Corp.
Statement of Income and Retained Earnings
For the Period Ended June 30, 1999
Year to
June % Date %
------------ ------ ------------ ------
Revenue
Sales $ 303,774.49 100.00 $ 783,538.49 100.00
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303,774.49 100.O0 783,538.49 100.00
Cost of Sales 92,059.94 30.31 185,812.61 23.71
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Gross Profit 211,714.55 69.69 597,725.88 76.29
Operating Expenses
Depreciation & amortization 12,886.77 4.24 40,558.14 5.18
Salaries and Wages 79,342.13 26.12 213,215.82 27.21
Employee benefits 11,078.06 3.65 58,377.17 7.45
General & Administrative
Expense 15,827.08 5.21 39,338.37 5.02
Legal and accounting 73,276.14 24.12 88,281.02 11.27
Interest 750.00 0.25 2,500.00 0.32
Professional Consulting 5,223.92 1.72 111,734.77 14.26
Rent 11,243.30 3.70 33,488.20 4.27
Marketing & Promotion 26,039.95 8.57 80,974.47 10.33
Other operating expenses 1,350.17 0.44 21,550.23 2.75
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237,017.52 78.02 690,018.19 88.06
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Operating Income (25,302.97) (8.33) (92,292.31 (11.78)
Other Income and Expense 668.96 0.22 5,389.16 0.69
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668.96 0.22 5,389.16 0.69
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Net Income (Loss) $(24,634.01) (8.11) (86,903.15) (11.09)
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Beginning Retained Earnings (1,089,382.30)
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Ending Retained Earnings $(1,176,285.45)
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Compiled - see accompanying accountants' report.
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Acculmage Diagnostics Corp.
Statement of Cash Flows
For the Period Ended June 30, 1999
Quarter ended Year to
March Date
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Cash Flows from Operating Activities:
Net income(loss) $ (24,634.01) $ (86,903.15)
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation expense 3,120.00 9,360.00
Amortization expense 9,766.77 27,904.37
Change in accounts receivable (49,424.84) (187,496.71)
Change in inventory 4,185.00 6,975.00
Change in prepaid assets -0- 3,667.20
Change in accounts payable 11,444.18 37,950.64
Change in accrued expenses 3,295.68 (67,160.06)
Change in other current liabilities 824.19 6,236.42
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Net Cash Provided by (Used by)
Operating Activities (41,423.03) (249,466.29)
Cash Flows from Investment Activities:
Investment in property & equipment -0- 6,510.00
Investment in other assets -0- 22,290.00
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Net Cash Provided by (Used by)
Investing Activities -0- 28,800.00
Cash Flows from Financing Activities:
Repayment of loans from shareholder (25,000.00) (75,000.00)
Additional paid-in capital -0- 210,742.97
Sale of capital stock -0- 150,467.00
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Net Cash Provided by (Used by)
Financing Activities (25,000.00) 286,209.97
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Net Increase (Decrease) in Cash (66,423.03) 65,543.68
Cash at Beginning of Period 134,083.26 2,116.55
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Cash at End of Period $67,660.23 $ 67,660.23
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Compiled -see accompanying accountants' report
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION.
The following discussion and analysis should be read in conjunction
with the Company's Condensed Financial Statements and related Notes thereto
contained elsewhere with this document. Operating results for the three-month
period ended June 30, 1999 are not necessarily indicative of the results that
may be expected for any future periods, including the full fiscal year.
Reference should also be made to the Annual Financial Statements, Notes thereto,
and Management's Discussion and Analysis of Financial Condition and Results of
Operations contained in the Company's Form 10-SB, General Form for Registration
of Securities that the Company filed on June 30, 1999.
Results of Continuing Operations:
Three months ended June 30, 1999 versus 1998
Overall revenues were $303,774 for the three months ended June 30, 1999
compared with $117,323 for the three months ended June 30, 1998, a 159%
increase. These increases were primarily the result of increases in shipments of
the Company's proprietary medical visualization software to the medical and
clinical community. Currently, the Company realizes negligible income from its
maintenance and services revenue.
Total cost of revenues as a percent of revenues for the three months
ended June 30, 1999 decreased to 30% as compared with 66% in 1998.
Operating expenses for the three months ended June 30 1999 decreased to
78% of overall quarterly revenues compared to 122% of quarterly revenues for the
equivalent period in 1998.
Liquidity and Capital Resources:
At June 30, 1999, working capital decreased to $245,214 compared to
March 31, 1999 working capital of $283,948 primarily as a result of the net loss
sustained by the Company. The current ratio decreased to 3.1:1 at June 31, 1999
from 3.9:1 at March 31, 1999.
The Company's total assets decreased to $456,864 compared to March 31,
1999 total assets of $490,904. Cash and cash equivalents decreased to $67,660 in
June 1999, from $134,083 in March 1999, as a result of operating losses and
payment of long term debt. Cash used in continuing operations was $41,422 for
three months ended June 30, 1999 compared to $143,365 during the same period in
1998. Cash generated from receivables and decreased inventory purchases were
augmented by an increase in accounts payable. The decrease in accounts
receivables was primarily due to payment of outstanding invoices. The decrease
in inventory resulted from the use of parts and materials in product shipments.
There was no cash provided by investment activities during the three
months ended June 30, 1999.
There was no cash provided by financing activities during the three
months ended June 30, 1999.
The Company's liquidity is affected by many factors, some based on the
normal ongoing operations of the business and others related to the
uncertainties of the industry and global economies. Although the cash
requirements will fluctuate based on timing and extent of these factors,
management believes that cash, and cash equivalents existing at June 30, 1999
together with the proceeds from ongoing sales of products and services in 1999
will provide the Company with sufficient cash for operating activities and
capital requirements through December 31, 1999.
To satisfy the Company's capital and operating requirements beyond
1999, profitable operations, additional public or private financing or the
incurrence of debt may be required. If future public or private financing is
required by the Company, holders of the Company's securities may experience
dilution. There can be no assurance that equity or debt sources, if required,
will be available or, if available, will be on terms favorable to the Company or
its shareholders. The Company does not believe that inflation has had a material
effect on its revenues or results of operations.
YEAR 2000 COMPLIANCE
The Company's State of Readiness
In 1999, the Company established a project team to coordinate existing
Year 2000 activities and address remaining Year 2000 issues. The team has
focused its efforts on three areas: (1) information systems software and
hardware, (2) software the Company produces and the operating systems used in
conjunction with the Company's proprietary software, and (3) third-party
relationships.
The Company has reviewed its primary financial and other business
information systems and it believes that the systems will be able to manage and
manipulate all material data involving the transition from 1999 to 2000 without
functional or data abnormality and without inaccurate results related to such
data.
The Company has reviewed its proprietary visualization and
communications software for Y2K readiness. The Company has made the commitment
that any product releases in 1999 and later will be Y2K compliant. The Company
is coordinated efforts with its largest customer, Imatron Inc., to ensure that
its software will transition from the year 1999 to the year 2000 without
functional abnormalities. The Company does not have any formal information
concerning the Y2K compliance status of its other customers. If customers
experience significant Y2K problems, they may choose to delay or cancel orders
for the Company's products.
The Company has contacted all its suppliers, especially sole-source
vendors, and a review is underway to ensure Year 2000 compliance. The Company
expects this evaluation to be completed by September 30, 1999. To the extent
that responses to the Y2K issue are unsatisfactory, the Company will consider
changing suppliers or service providers, but there can be no assurance that the
Company will be successful in finding such alternative suppliers or service
providers. In the event that any of the Company's significant suppliers or
customers do not achieve Y2K compliance in a timely manner, and the Company is
unable to replace them with alternate suppliers or customers, the Company's
operations could be materially adversely affected.
While the Company believes the issues associated with Year 2000
compliance are being addressed, and that the cost of conformance will be
negligible, there remains the risk that suppliers may encounter disruptions due
to Year 2000 compliance or the costs associated with implementing computer
system changes.
The Company's Risks and Contingency Plan
The Company is working to identify and analyze the most likely
worst-case scenarios for third-party relationships affected by Y2K. These
scenarios could include possible infrastructure collapse, the failure of power
and water supplies, major transportation disruptions, unforeseen product
shortages due to hoarding of products and sub-assemblies and failures of
communications and financial systems. Any one of these scenarios could have a
major and material effect on the Company's ability to build its products and
deliver services to its customers. An infrastructure problem outside of its
control or some combination of several of these problems could result in a delay
in product shipments depending on the nature and severity of the problems.
There is no assurance that the Company will be successful in its
efforts to identify and address all Y2K issues. Even if the Company acts in a
timely manner to complete all of its and develops contingency plans believed to
be adequate, some problems may not be identified or corrected in time to prevent
material adverse consequences to the Company.
Estimated Costs
The costs incurred by the Company to date in addressing its Y2K
readiness issues are primarily non-incremental compensation costs and have not
been material to the Company's operating results. The Company currently
estimates that the total additional costs for addressing its internal Y2K
readiness will not be substantial.
The discussion above regarding estimated completion dates, costs, risks
and other forward-looking statements regarding Y2K is based on the Company's
best estimates given information that is currently available and is subject to
change. As the Company continues to progress with its Y2K initiatives, it may
discover that actual results will differ materially from these estimates.
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
In the past the Company has held investments consisting of interest
bearing investment grade instruments consistent with the Company's investment
portfolio. At June 30, 1999, the Company had money market mutual funds,
certificates of deposit and commercial paper that mature in less than three
months.
The Company's sales are denominated in U.S. Dollars.
The Company does not believe that it is subject to any material
exposure to interest rate, foreign currency or other market risks.
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
Not applicable.
Item 2. CHANGES IN SECURITIES
Not applicable.
Item 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
Item 5. OTHER INFORMATION
None.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
No. 27 - Financial Data Schedule as of June 30, 1999.
(b) Form 8-K Reports:
Date Item Description
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8/20/99 5 Change in Registrant's Certifying Accountants
SIGNATURES
In accordance with the requirements of the Securities and Exchange Act, the
Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
ACCUIMAGE DIAGNOSTICS CORP.
Date: August 20, 1999 /s/ Allen B. Poirson, Ph.D.
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Allen B. Poirson, Ph.D.
President, CEO, and Director
