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, 2000
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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 _X_ No ___
The number of shares outstanding of the issuer's common stock was 10,981,534
shares of common stock, par value $.001, as of August 10, 2000. No shares of
preferred stock are outstanding.
Transitional Small Business Disclosure Format:
Yes___ No _X_
<PAGE>
ACCUIMAGE DIAGNOSTICS CORP.
Form 10-QSB
June 30, 2000
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements 3
Balance Sheets as of June 30, 2000 (unaudited) and
September 30, 1999 3
Statements of Operations (unaudited) for the Three and Nine Months
Ended June 30, 2000 and 1999 4
Statements of Cash Flow (unaudited) for the Three Months
Ended June 30, 2000 and 1999 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition or Plan of Operations 7
PART II. OTHER INFORMATION
Item 2. Changes in Securities 10
Item 4. Submission of Matters to a Vote of Securities Holders 10
Item 6. Exhibits and Reports on Form 8-K 10
Signature 10
2
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ACCUIMAGE DIAGNOSTICS CORP.
BALANCE SHEETS
JUNE 30, 2000 (UNAUDITED) AND SEPTEMBER 30, 1999
<TABLE>
<S> <C> <C>
ASSETS June 30, 2000 September 30, 1999
Current Assets (UNAUDITED)
Cash $ 744,034 $ 34,201
Accounts Receivable 610,682 188,744
Less Allowance for Doubtful accounts (24,427) (16,619)
Other receivable - 31,274
Inventory 38,009 44,957
Prepaid Insurance - 745
Prepaid Rent - 3,744
Licenses For Resale 16,370 16,370
-----------------------------------------
Total Current Assets 1,384,668 303,416
Property and Equipment 53,440 61,351
Other Assets
Security Deposits 3,820 3,820
Deposits & License Fees 125,716 125,716
License TECH 5,200 5,200
License Fee NECTEC 10,000 10,000
Less Accumulated Amortization (92,424) (80,700)
Goodwill 618,140 618,140
Acc. Amort-Goodwill (169,995) (123,633)
-----------------------------------------
Total Other Assets 500,457 558,543
TOTAL ASSETS $1,938,565 $923,310
=========================================
LIABILITIES AND STOCKHOLDERS' EQUITY June 30, 2000 September, 30 1999
Current Liabilities
Accounts Payable $ 57,195 $ 146,376
Product Warranty Reserve 223,647 84,270
Sales Tax Payable 11,585 4,190
Wages & Payroll taxes Payable 34,412 71,464
Other Accrued Expenses 21,954 5,332
Notes Payable-related party 52,000 56,500
-----------------------------------------
Total Current Liabilities 400,793 368,132
Stockholders' Equity
Preferred Shares - $0.001 Par Value; 10,000,000 - -
shares Authorized; None issued or outstanding
Common Shares - $0.001 Par Value; 50,000,000 Authorized: 10,981 9,748
10,981,534 shares & 9,748,200 shares issued and outstanding on
June 30, 2000 and September 30, 1999 respectively
Paid-In-Capital 2,469,929 1,740,662
Accumulated Earnings (Deficit) (943,138) (1,195,232)
-----------------------------------------
Total Stockholder's Equity 1,537,772 555,178
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,938,565 $923,310
=========================================
</TABLE>
The accompanying notes are an integral part of these financial statements
3
<PAGE>
ACCUIMAGE DIAGNOSTICS CORP
STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE THREE AND NINE MONTHS ENDED JUNE 30, 2000 AND 1999
<TABLE>
<S> <C> <C> <C> <C>
For the three months For nine months
Ended June 30, Ended June 30,
-------------- --------------
2000 1999 2000 1999
---- ---- ---- ----
$ 694,567 $ 297,826 $ 2,372,369 $ 760,539
TOTAL REVENUES
COST OF GOODS SOLD 204,128 100,195 764,613 193,947
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490,439 197,631 1,607,756 566,592
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 589,978 404,917 1,368,589 906,314
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OPERATING INCOME (LOSS) (99,539) (207,286) 239,167 (339,722)
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OTHER INCOME AND EXPENSES
Interest Income (9,481) (669) (13,329) (2,209)
Other Income - - (200) (3,602)
Franchise and Other 200 600 600 600
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TOTAL OTHER INCOME AND EXPENSES (9,281) (69) (12,929) (5,211)
----------------------------------------------------------------
NET INCOME (LOSS) $ (90,258) $ (207,217) $ 252,096 $ (334,511)
================================================================
INCOME(LOSS) PER SHARE-BASIC ($0.0083) ($0.0213) $0.0246 ($0.0355)
INCOME(LOSS) PER SHARE-DILUTED ($0.0077) ($0.0211) $0.0228 ($0.0352)
Weighted Average Shares Outstanding
Basic 10,914,253 9,747,100 10,236,497 9,419,822
Diluted 11,731,543 9,831,002 11,053,787 9,503,724
</TABLE>
The accompanying notes are an integral part of these financial statements
4
<PAGE>
ACCUIMAGE DIAGNOSTICS CORP
STATEMENTS OF CASH FLOW (UNAUDITED)
FOR THE PERIOD OCTOBER 1, 1999 TO JUNE 30, 2000
and THE PERIOD FROM OCTOBER 1, 1998 TO JUNE 30, 1999
<TABLE>
<S> <C> <C>
June 30, June 30,
2000 1999
---- ----
Cash Flows from Operating Activities
Net Cash used by Operating Activities: $ (9,174) $ (215,382)
----------------------------------
Cash Flow from Investing Activities:
Investment in Property and Equipment (6,993) 6,510
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Net Cash Provided (Used) by Investing Activities (6,993) 6,510
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Cash Flow From Financing Activities:
Proceeds from Short-Term Debt - -
Repayment of Short-Term Debt (4,500) (75,750)
Proceeds from sales of Stock 730,500 387,000
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Net Cash Provided (Used) by Financing Activities 726,000 311,250
----------------------------------
Increase (Decrease) in Cash 709,833 102,378
Cash Balance at beginning of period 34,201 2,117
----------------------------------
Cash balance at end of period $744,034 $104,495
==================================
Supplemental Disclosure:
Interest Paid $0 $0
Income Taxes-Franchise tax $0 $0
Compensation paid in shares (Non-Cash) $0 $134,410
</TABLE>
The accompanying notes are an integral part of these financial statements
5
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS
(1) Basis of Presentation
In the opinion of the management, the accompanying consolidated financial
statements contain all adjustments necessary (consisting of only normal
recurring accruals) to present fairly the financial position at June 30, 2000,
the results of its operations for the three months and nine months ended June
30, 2000 and June 30, 1999; and a statement of cash flows for the two nine month
periods ended June 30, 2000; and June 30,1999. Certain information and footnote
disclosures normally included in financial statements that would have been
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to the rules and regulations of the Securities and
Exchange Commission, although management of the Company believes that the
disclosures in these financial statements are adequate to make the information
presented therein not misleading. It is suggested that these condensed financial
statements and notes thereto be read in conjunction with the financial
statements and the notes thereto included in the Company's September 30, 1999
Form 10-KSB. The results of operations for the three months and nine months
ended June 30, 2000 are not necessarily indicative of the results of operations
to be expected for the full fiscal year ending September 30, 2000.
(2) Interim Period Cost of Goods Sold
Interim period cost of goods sold is calculated using the perpetual
inventory record. The Company reports any significant adjustments that result
from reconciliations of the perpetual inventory record to periodic and annual
physical inventory observations.
(3) Income Taxes
Significant components of the provision for taxes based on income for the
nine months ended June 30, 2000 and 1999 are as follows:
2000 1999
------- --------
Current tax expense
Federal $ 0 $ 0
State 600 600
-------- ---------
600 600
Deferred tax expense
Federal 0 0
State 0 0
--------- ---------
Provision for income taxes $ 600 $ 600
========= =========
At September 30, 1999, the Company has approximately $1,188,232 net
operating loss carryforwards available to offset future federal and state income
taxes, which expire through 2010 and 2019.
The Company has elected to fully reserve all tax benefits until such time
as it is able to reasonably expect to realize those benefits.
6
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition or Plan
of Operations
The following discussion and analysis should be read in conjunction with
AccuImage Diagnostics (the "Company") Consolidated Financial Statements and
related Notes thereto contained elsewhere with this document. Operating results
for the three-month period ended June 30, 2000 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-KSB, filed on March
17, 2000, and the Company's Form 10-QSB, filed on May 15, 2000.
The Company is engaged in the development, marketing and support of
software for the visualization, analysis and management of medical imaging data.
The software's primary function is to enhance physicians' interpretation of data
from medical imaging modalities such as computed tomography, magnetic resonance
and ultrasound through the application of three-dimensional computer graphics
and image processing technologies. This enhanced analysis can support physicians
in clinical diagnosis, surgical planning and medical research. Three-dimensional
visualization allows communication of findings in a form readily understood by
physicians and others without the specialized training otherwise required for
interpretation of the native images generated by the medical imaging modalities.
Efficiency gains and cost savings may be realized through automated reporting
tools and provision for electronic distribution of the medical imaging data and
post-processed results via internal networks and the Internet.
Revenue
-------
For the three months ended June 30, 2000, revenue increased 133% to
$694,567 compared with $297,826 for the same period in 1999. This increase was
almost entirely the result of increased sales of the Company's medical
visualization and analysis software. During 1999, the Company successfully
transitioned from distributing software developed by a third party and licensed
to the Company to distributing its own software that was developed in-house.
This transition was completed prior to the first quarter of fiscal year 2000,
and the third quarter results reported here are entirely related to sales of the
Company's own software.
Gross Margin
------------
The gross margin percentage for the quarter was 71% compared to 66% for the
same period in 1999. This increase in gross margin is largely due to a reduced
cost of goods sold now that the Company is distributing its own software
product, rather than having to pay a licensing fee for each sale to a third
party.
Sales and Marketing
-------------------
The Company's sales and marketing expenses for the quarter were $136,914,
compared with expenses of $47,744 for the same period in fiscal year 1999. The
increase reflects the cost of increased sales and marketing activity. The
Company expects sales and marketing costs to continue to increase as additional
sales personnel are recruited and sales commissions increase, although this
forward looking statement will be influenced by the actual sales levels attained
by the Company's sales force.
Research and Development
------------------------
The Company spent $56,693 on research and development activities during the
quarter, which compares with $83,683 for the same quarter in the prior fiscal
year. The Company anticipates that software development costs will increase as
the Company continues its recruitment of additional software development
expertise. The Company does not intend to reduce its research and development
effort since maintenance of a competitive position in the marketplace where the
Company operates requires constant improvement and high-level development of the
Company's software products.
Operational and Administrative
------------------------------
Operational and administrative expenses were $396,371 for the quarter,
compared with $273,490 for the same quarter in the previous year.
Eighty-eight percent (88%) of this increase is explained by an increase in
headcount and salary expense, with the remaining 12% explained by an increase in
Sales and Marketing promotions expense. The Company believes that operational
and administrative costs will increase in the future if the Company is
successful in its efforts to recruit additional staff and continue to develop
its capabilities in this area. As a result of becoming a reporting company
pursuant to the Securities Exchange Act of 1934, the Company will likely
increase its expenditures on investor relations and legal and financial
expertise.
7
<PAGE>
Results of Operations
---------------------
Due to increased expenses for sales, marketing, operations and
administration, and cost of good sold, the Company's increased revenues resulted
in an operating loss of ($99,539) for the three months ended June 30, 2000 and
operating income of $239,167 for the nine months ended June 30, 2000 compared to
operating losses of ($207,286) and ($339,722) for the respective periods in the
prior fiscal year.
Liquidity and Capital Resources
-------------------------------
In the quarter ending June 30, 2000, the Company generated an operating
loss of ($99,539) and secured financing through the sale of stock and warrants
with net proceeds of $672,072. On June 30, 2000, the Company had $744,034 in
cash and accounts receivable of $610,682. Accounts payable totaled $57,195.
The Company anticipates that cash requirements for the remainder of the
year will be met by a combination of existing cash on hand, further operational
income and additional equity financing. The Company believes it will have enough
capital to ensure that it will have sufficient resources to achieve its
strategic objectives for the fiscal year ended September 30, 2000.
During the next twelve months, the Company anticipates that cash
requirements will be met by a combination of operational income and the proceeds
of the equity financing from the private placement ended April 30, 2000. There
is no guarantee that such income will be forthcoming and the inability of the
Company to secure additional capital would have a material adverse effect on the
Company's business.
Foreign Currency Transactions
-----------------------------
All of the Company's transactions are negotiated, invoiced and paid in U.S.
dollars.
Inflation
---------
Management believes the Company's operations and financial condition have
suffered no adverse material effect due to inflation.
Share Price Volatility
----------------------
During the third quarter of fiscal year 2000, the Company's share price
continued to experience relative stability. The trading price of the Company's
common stock could be subject to wide fluctuations in response to
quarter-to-quarter variations in operating results, changes in earnings
estimates by analysts, announcements of technological innovations or new
products by the Company or its competitors, general conditions in the software
and computer industries and other events or factors. In addition, in recent
years the stock market in general, and the shares of technology companies in
particular, have experienced extreme price fluctuations. This volatility has had
a substantial effect on the market price of securities issued by many companies
for reasons unrelated to the operating performance of the specific companies.
These broad market fluctuations may adversely affect the market price of the
common stock.
Year 2000 Impact.
----------------
The year 2000 computer problem refers to the potential for system and
processing failures of date-related data as a result of computer-controlled
systems using two digits rather than four to define the applicable year. For
example, computer programs that have time-sensitive software may recognize a
date represented as "00" as the year 1900 rather than the year 2000. This could
result in a system failure or miscalculations causing disruptions with internal
administrative and operational software, software developed by the Company,
software integrated in the Company's products, and third-party systems to which
the Company's products interface.
With regard to internal use of software products, the Company inspected
financial and accounting software vendors whose products are in use by the
Company and reached a level of reasonable assurance that the software packages
used by the Company would behave correctly after the onset of year 2000.
With regard to software developed by the Company, the software development
team adopted procedures to avoid potential issues and conducted "roll-forward"
testing of the Company's products. Minor issues that arose during this testing
were corrected far in advance of year 2000.
8
<PAGE>
With regard to software integrated into the Company's products, the Company
took steps to determine what measures in terms of software upgrades and fixes
needed to be taken in order to render all integrated software products year 2000
compliant and adopted the appropriate versions as part of its integration
procedure. The Company's installed base was similarly updated.
With regard to third-party systems to which the Company's products
interface, the Company conducted a survey of the information transferred to its
products from such third-party systems in collaboration with the manufacturers
of these systems and modified its software in order to render them year 2000
compliant.
To date, the Company has not experienced any year 2000 issues with any of
its internal systems or products, and it does not expect to experience any in
the future. Additionally, it has not experienced any year 2000 issues related to
any of its key third party suppliers, distributors and customers nor does it
expect to experience any in the future. Costs associated with remediating the
Company's internal systems and software were not material.
Forward-looking Statements
--------------------------
The discussion contained in this Management Discussion & Analysis is
"forward looking" as that term is contemplated by Section 27A of the Securities
Act of 1933 and Section 12E of the Securities exchange Act of 1934, including,
without limitation, statements regarding the Company's expectations, beliefs,
intentions or strategies regarding future business operations and projected
earnings from its products and services, which are subject to many risks.
All forward-looking statements included in this document are based on
information available to the Company on the date hereof, and the Company assumes
no obligation to update any such forward-looking statements. The Company's
actual results may differ materially as a result of certain factors, including
those set forth hereafter and elsewhere in this Form 10-QSB. Potential investors
should consider carefully the previously stated factors, as well as the more
detailed information contained elsewhere in this Form 10-QSB, along with our
10-KSB for September 30,1999, before making a decision to invest in the Company.
9
<PAGE>
PART II - OTHER INFORMATION
Item 2. Changes In Securities
On January 25, 2000 the Company commenced a private placement offering of
up to 1,285,000 Units at $0.60 per Unit, each Unit consisting of (i) one share
of Company common stock and (ii) one common stock purchase warrant to purchase
one share of Company common stock at an exercise price of $1.50 per share at any
time during a five year term commencing on the date of issuance. As of March 31,
2000, the Company had received subscriptions to purchase 916,667 Units from
three accredited purchasers. On April 24, 2000, 166,667 Units were sold to
Gerhard Sennewald. On May 1, 2000, 50,000 Units were sold to Neil D'Rozario. On
April 19, 2000, 50,000 Units were sold to the Adams Family Trust. Additionally,
the Company paid a finder's fee in the amount of $33,000 to Inyoung Boyd, wife
of Douglas P. Boyd, Chairman of the Board of the Company, for services rendered
in connection with the placement of the Units. The issuance of the securities is
exempt from the registration requirements of the Securities Act of 1933, as
amended, pursuant to Section 4(2) thereof.
On June 8, 2000, the Company issued 50,000 shares of restricted common
stock to Gene Cardinal upon the exercise of an option priced at $0.41 per share.
This option was exercised January 4, 2000. The issuance of the securities is
exempt from the registration requirements of the Securities Act of 1933, as
amended, pursuant to Section 4(2) thereof.
Item 4. Submission of Matters to a Vote of Securities Holders
At the Company's Annual Meeting of Stockholders held on June 29, 2000, the
following matters were submitted to a vote of the stockholders of the Company.
(i) The election of Douglas P. Boyd, John Klock, Alexander R. Margulis,
Chris Shepherd, and Robert Taylor as directors to serve a one-year term.
Nominees Shares Voted in Favor Shares Withheld
-------- --------------------- ---------------
Douglas P. Boyd 6,830,291 0
John C. Klock. 6,830,291 0
Alexander R. Margulis 6,830,291 0
Chris Shepherd 6,829,291 1,000
Robert Taylor. 6,830,291 0
(ii) The AccuImage Stock Option Plan was approved by a total of 5,562,611
votes in favor, 75,667 votes against, and 54,000 shares abstaining.
Item 6 Exhibits And Reports On Form 8-K
(a) Exhibits:
No. 27 - Financial Data Schedule as of June 30, 2000.
(b) Form 8-K Reports: None.
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.
August 10, 2000
/s/ Robert Taylor, Ph.D.
-------------------------
Chief Executive Officer
10
