UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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, 1997
OR
( ) 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: 0-8632
------
MEDICAL DYNAMICS, INC.
---------------------------------------------------
Exact name of Registrant as specified in its charter
Colorado 84-0631765
- ------------------------------ -----------------
State or other jurisdiction of I.R.S. Employer
incorporation or organization Identification No.
99 INVERNESS DRIVE EAST, ENGLEWOOD, CO 80112
- -------------------------------------- --------
Address of principal executive offices Zip Code
Registrant's telephone number, including area code: 303-790-2990
-------------
Former name, former address and former fiscal year, if changed
since last report: NA
Indicate by check mark whether the Registrant (1) has filed all annual,
quarterly and other reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the Registrant was required to file such reports) and (2)
has been subject to such filing requirements for the past 90 days.
YES X NO
--- ---
The number of shares outstanding of each of the issuer's classes of common
stock, as of August 11, 1997 is 7,643,233 shares, $.001 par value.
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements.
MEDICAL DYNAMICS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Unaudited)
ASSETS June September
30, 1997 30, 1996
----------- -----------
CURRENT ASSETS
Cash and equivalents $ 1,028,900 $ 993,200
Certificates of deposit 50,000 10,000
Trade receivables, less
allowance for doubtful
accounts of $25,000 129,500 181,600
Inventories 406,000 264,400
Prepaid expenses 24,400 9,400
----------- -----------
Total Current Assets 1,638,800 1,458,600
----------- -----------
PROPERTY AND EQUIPMENT
Loaner equipment 337,700 853,800
Machinery and equipment 288,000 266,800
Furniture and fixtures 267,700 266,700
Leasehold improvements 54,500 54,500
----------- -----------
947,900 1,441,800
Less accumulated deprecia-
tion and amortization (665,300) (1,225,300)
----------- -----------
Property and Equipment, Net 282,600 216,500
----------- -----------
OTHER ASSETS
Inventories, net of allowance
for obsolescence of $296,900 450,000 450,000
Patents, patents pending and
trademarks, net of accumulated
amortization of $714,000
and $681,400 66,400 96,700
Other 11,600 14,900
----------- -----------
Total Other Assets 528,000 561,600
----------- -----------
TOTAL ASSETS $ 2,449,400 $ 2,236,700
=========== ===========
See Notes to Consolidated Financial Statements.
-2-
<PAGE>
MEDICAL DYNAMICS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
June September
30, 1997 30, 1996
------------ ------------
CURRENT LIABILITIES
Accounts payable $ 196,700 $ 217,900
Accrued expenses 36,100 77,500
Warranty reserve 15,000 15,000
Accrued royalties 90,000 --
------------ ------------
Total Current Liabilities 337,800 310,400
------------ ------------
STOCKHOLDERS' EQUITY
Preferred stock, $.001
par value; authorized
5,000,000 shares; none
issued and outstanding -- --
Common stock, $.001 par
value; authorized
15,000,000 shares;
issued 7,643,200
and 7,180,200 shares 7,700 7,200
Additional paid-in capital 18,742,500 17,721,900
Accumulated deficit (16,638,600) (15,723,500)
------------ ------------
2,111,600 2,005,600
Treasury stock, at cost;
0 and 15,900 shares -- (79,300)
------------ ------------
Total Stockholders' Equity 2,111,600 1,926,300
------------ ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 2,449,400 $ 2,236,700
============ ============
See Notes to Consolidated Financial Statements.
-3-
<PAGE>
<TABLE>
<CAPTION>
MEDICAL DYNAMICS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Quarter Ended Nine Months
June 30, Ended June 30,
---------------------------------- ----------------------------------
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $ 225,600 $ 132,700 $ 713,900 $ 523,500
Cost of goods sold 210,500 155,200 582,600 530,600
----------- ----------- ----------- -----------
Gross profit 15,100 (22,500) 131,300 (7,100)
----------- ----------- ----------- -----------
Other operating
revenue 5,300 15,900 17,600 60,500
----------- ----------- ----------- -----------
Operating expenses:
Selling, general
and adminis-
trative 250,300 217,700 807,700 709,700
Depreciation and
amortization 38,800 44,900 116,300 134,700
Royalties 30,000 -- 90,600 --
Research and
development 51,700 62,200 132,700 156,000
----------- ----------- ----------- -----------
370,800 324,800 1,147,300 1,000,400
----------- ----------- ----------- -----------
Operating loss (350,400) (331,400) (998,400) (947,000)
----------- ----------- ----------- -----------
Other income
(expense):
Other income 37,000 -- 41,500 --
Interest income 15,500 6,900 42,400 32,900
Interest expense -- -- (600) --
----------- ----------- ----------- -----------
52,500 6,900 83,300 32,900
----------- ----------- ----------- -----------
Loss before
income taxes (297,900) (324,500) (915,100) (914,100)
Income tax benefit -- -- -- --
----------- ----------- ----------- -----------
Net loss $ (297,900) $ (324,500) $ (915,100) $ (914,100)
=========== =========== =========== ===========
Net loss per share $ (0.04) $ (0.05) $ (0.12) $ (0.13)
=========== =========== =========== ===========
Weighted average
number of shares
outstanding 7,637,500 6,879,500 7,534,100 6,879,500
=========== =========== =========== ===========
See Notes to Consolidated Financial Statements.
-4-
</TABLE>
<PAGE>
MEDICAL DYNAMICS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended June 30,
1997 1996
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(915,100) $(914,100)
Adjustments to reconcile net
loss to net cash used in
operating activities:
Depreciation and
amortization 116,300 134,700
Fair value of common
stock options 40,800 --
Gain on sale of loaner
equipment -- (4,500)
Change in assets and liabilities:
(Increase) decrease in
trade accounts receivable 52,100 174,000
Decrease in notes
receivable -- 110,000
Increase in accrued
royalties payable 90,000 --
(Increase) decrease in
inventory purchases (304,100) 69,800
Decrease in other assets 3,300 23,100
(Increase) in prepaid expenses (15,000) --
(Decrease) in accounts
payable, accrued expenses
and product warranty costs (62,600) (121,400)
--------- ---------
Net cash used in
operating activities (994,300) (528,400)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of
loaner equipment -- 4,500
Loss on disposal of
loaner equipment 41,600 --
Change in other assets -- (14,400)
Increase in intangible assets (9,000) --
Purchase of certificate of
deposit (40,000) --
Purchase of equipment (22,200) (40,600)
--------- ---------
Net cash used in
investing activities (29,600) (50,500)
--------- ---------
See Notes to Consolidated Financial Statements.
-5-
<PAGE>
<TABLE>
<CAPTION>
MEDICAL DYNAMICS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)
Nine Months Ended June 30,
--------------------------
1997 1996
----------- -----------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sale of common
stock arising from exercise
of options $ 1,059,600 $ --
----------- -----------
Net Increase (Decrease) in cash
and cash equivalents 35,700 (578,900)
Cash and equivalents:
Beginning of Period 993,200 1,071,700
----------- -----------
End of Period $ 1,028,900 $ 492,800
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest $ 600 $ --
=========== ===========
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Loaner equipment transferred
from inventory $ 102,000 $ 27,900
=========== ===========
See Notes to Consolidated Financial Statements.
-6-
</TABLE>
<PAGE>
MEDICAL DYNAMICS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. BASIS OF PRESENTATION
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. It is suggested that these financial statements
be read in conjunction with the Registrant's September 30, 1996 Form 10-KSB. The
results of operations for the periods ended June 30, 1997 and June 30, 1996 are
not necessarily indicative of operating results for the full years.
The Consolidated Financial Statements and other information furnished
herein reflect all adjustments which are, in the opinion of management of the
Registrant, necessary for a fair presentation of the results of the interim
periods covered by this report. Adjustments to the financial statements were of
a normal recurring nature.
Note 2. EARNINGS PER SHARE
For the nine months ended June 30, 1997 and 1996, both primary and
fully-diluted earnings per share are calculated based upon the weighted average
common shares outstanding of 7,534,100 and 6,879,500, respectively. For the
three months ended June 30, 1997 and 1996, both primary and fully-diluted
earnings per share are calculated based upon the weighted average common shares
outstanding of 7,637,500 and 6,879,500, respectively. Shares issuable under
common stock options and warrants were excluded from the computation of earnings
per share because the effect was anti-dilutive. At June 30, 1997 and 1996, the
Registrant had 810,500 of vested common stock options outstanding. Total common
stock options outstanding (including both vested and unvested) were 1,420,537
and 2,172,950 at June 30, 1997 and 1996, respectively.
NOTE 3. INCOME TAXES
Under the provisions of the Internal Revenue Code, the Registrant has
available net operating loss and research and development tax credit
carryforwards of approximately $16,600,000 and $170,000, respectively, which
expire in varying amounts from 1997 through 2011.
The net operating loss and business tax credit carryforwards described
above give rise to a deferred tax asset of approximately $6,700,000. This asset
is recorded net of a valuation allowance of the same amount. Therefore no
amounts are reflected in the accompanying balance sheets.
-7-
<PAGE>
MEDICAL DYNAMICS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
NOTE 4. INVENTORIES
Inventories consist of the following at June 30, 1997 and September 30,
1996:
June 30, September 30,
1997 1996
---------- ----------
Raw materials, purchased and
replacement parts $ 711,700 $ 444,600
Finished goods 383,000 479,800
Work in process 58,100 --
Allowance for obsolescence (296,900) (210,000)
--------- ---------
$ 855,900 $ 714,400
========= =========
At June 30, 1997 and September 30, 1996 inventories of $450,000 are classified
as a long term asset in the accompanying balance sheets. This estimate was
determined by considering both historical and projected levels of sales for
goods included in inventories. A substantial portion of raw materials is
expected to be utilized for repairs of equipment sold over the past several
years. Management believes that it may take up to five years to fully utilize
this portion of the Company's inventories based upon current levels of repairs
and expected production levels of new products.
-8-
<PAGE>
MEDICAL DYNAMICS, INC. AND SUBSIDIARY
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
As discussed in Note 2 to the audited financial statements as of September
30, 1996, (see the Registrant's form 10-KSB dated September 30, 1996 and the
accompanying audited financial statements), the Company has suffered recurring
losses and negative cash flows from operations. This raises substantial doubt
about the Company's ability to continue as a going concern. Without significant
sales increases, the Registrant anticipates negative cash flow from operations
for fiscal 1997 and beyond. The Registrant believes that its existing capital
resources are sufficient for the current fiscal year, and the Registrant is not
seeking any additional debt or equity financing at this time. However there are
810,500 vested common stock options outstanding as of June 30, 1997, and if
exercised (of which there can be no assurance), these options would provide
varying amounts of additional working capital to the Registrant. In addition, as
described below, Management is pursuing the acquisition of a dental practice
management software company with significant existing revenues and is
contemplating further acquisitions in the dental field, although there can be no
assurances as to the successful completion of either the planned or future
acquisitions. Management's plans in regard to these matters are also described
in Note 2 to Form 10-KSB. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
Except for historical information contained herein, the statements in this
report are forward-looking statements that are made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements involve known and unknown risks and uncertainties
which may cause the Company's actual results in future periods to differ
materially from forecasted results. These risks and uncertainties include, among
other things, product demand, market competiton, risks inherent in the Company's
international operations and the possibility that the contemplated acquisitions
will not occur. These and other risks are described elsewhere herein and in the
Company's other filings with the Securities and Exchange Commission.
Financial Condition. (June 30, 1997 as compared to September 30, 1996)
During the nine month period ended June 30, 1997, the Registrant's net working
capital increased approximately $152,800, due primarily to the generation of
cash of $1,059,600 through the exercise of common stock options, offset by the
use of cash in operations and the resultant operating loss. Cash has been used
primarily to fund an increase in inventories in anticipation of increased dental
camera sales and certain manufacturer inventory purchase requirements, the
-9-
<PAGE>
MEDICAL DYNAMICS, INC. AND SUBSIDIARY
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operation. (Continued)
general operations of the Registrant including research and development, and to
promote the sales, introduction, and marketing of products.
Principal changes in the components of net working capital for the nine
months ended June 30, 1997 consist of an increase in short term investments by
$40,000, a decrease in the trade accounts receivable balance by $52,100, a net
increase in total inventory levels by $141,600 and a decrease in current
liabilities of $62,600.
During the nine month periods ended June 30, 1997 and 1996, the Registrant
experienced negative cash flows from operations of approximately $994,300 and
$528,400, respectively. This increase in cash used for operations of $465,900
over the comparable period of last fiscal year was a result of the following
significant factors: Cash purchases of inventory increased by $304,100 during
this period of fiscal 1997 as compared to a reduction in inventory levels by
$69,800 during the comparable period of fiscal 1996. This increase in
inventories during fiscal 1997 is in anticipation of increased dental camera
sales and certain manufacturer inventory purchase requirements. Trade accounts
receivable decreased by $52,100 due to more timely payments by current customers
in this fiscal year. Trade accounts receivable had decreased by $174,000 during
the comparable period of fiscal 1996 due to the Registrant collecting $110,000
due on a related party note receivable. There was no note receivable balance due
during fiscal 1997. A non-cash expense was recognized during this period of
fiscal 1997 in the amount of $90,000 for the accrual of royalties per the terms
of the amended and restated licensing agreement with the Registrant's Chairman.
A non-cash expense was recognized during this period of fiscal 1997 in the
amount of $40,800 for the fair value of common stock options accruing due to
dental camera sales benchmarks being achieved for consultant stock options in
accordance with FAS 123. No such option contracts existed during the comparative
period of fiscal 1996.
To continue the Registrant's objective of curtailing operating losses,
negative cash flow from operations and liquidity erosion further, management is
continually reviewing product profit margins and general expense accounts, and
will reduce or eliminate all non-essential expenditures. Purchasing procedures
are also in place to ensure minimized product costs and to avoid excess
inventory levels. Management of the Registrant is also continuing to seek OEM
customers for all product lines. The Company also entered into a revised license
agreement with Dr. Edwin Adair during fiscal 1995 resulting in reduced patent
maintenance and other associated costs.
-10-
<PAGE>
MEDICAL DYNAMICS, INC. AND SUBSIDIARY
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operation. (Continued)
Without significant sales increases, the Registrant still anticipates
negative cash flow from operations for fiscal 1997 and beyond. During fiscal
1997 and fiscal 1996 cash flow deficits were funded by employee, officer, and
consultant stock option exercises. In previous years this deficit has been
funded by equity placements and loans from the Company's chairman. However, the
Registrant's ability to fund its operations will be dependent upon achieving
profitability and in generating a positive cash flow from operations. Unless the
Registrant is able to increase sales revenues, and achieve and maintain
profitability during fiscal 1997, the Registrant may be facing significant
working capital shortages beginning in fiscal year 1998. There can be no
assurance that the Company will be able to achieve this goal.
The Registrant believes that its existing capital resources are sufficient
for the current fiscal year and the only significant capital expenditure planned
is in association with the Registrant's planned acquisition of Computer Age
Dentist, Inc., a Santa Monica, CA based practice management software developer
and marketer, that the Registrant has entered into a non-binding letter of
intent to acquire, dated August 1, 1997. The closing is scheduled to take place
prior to September 30, 1997. Management of the Registrant is of the opinion that
the Company currently has the capital resources on hand to close the
aforementioned transaction, but may in the future attempt to raise additional
capital for this and other future acquisitions. No assurance can be given as to
the successful completion of the acquisition, the timing thereof, or the ability
to raise any additional capital the Registrant may seek. The Registrant is not
seeking additional debt or equity capital at this time, although there are
810,500 vested common stock options outstanding as of June 30, 1997, and if
exercised (of which there can be no assurance), these options would provide
varying amounts of additional working capital to the Registrant. These options
have various exercise prices which range between $1.125 and $4.00 per share and
at August 7, 1997 the price of the Company's common stock was approximately
$3.0625. If the Registrant does obtain additional capital (of which there can be
no assurance), the Registrant will be able to allocate more resources to sales
and marketing efforts (including negotiations with prospective OEM
relationships), and research and development.
-11-
<PAGE>
MEDICAL DYNAMICS, INC. AND SUBSIDIARY
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operation. (Continued)
Results of Operations. As an aid to understanding the Registrant's
operating results, the following table indicates the percentage relationships of
principal revenue and expense items to total net sales included in the
Consolidated Statements of Operations for the nine month periods ended June 30,
1997 and 1996 and the percentage changes in those items for the same periods.
<TABLE>
<CAPTION>
As a percent of
total revenue
for the nine Percentage
month period change from
ended June 30, the prior years'
1997 1996 Revenue/Expense Items comparable period
---- ---- --------------------- -----------------
<S> <C> <C> <C>
100.0% 100.0% Net sales 36.4%
81.6% 101.4% Cost of goods sold 9.8%
18.4% (1.4%) Gross profit 26.6%
2.4% 11.6% Other operating revenue (70.9%)
113.1% 135.6% Selling, general and admin 13.8%
16.3% 25.7% Depreciation & amortization (13.7%)
12.7% 0.0% Royalties n/a
18.6% 29.8% Research and development (14.9%)
(139.9%) (180.9%) Operating loss 5.4%
11.7% 6.3% Other income/(expense) 153.2%
(128.2%) (174.6%) Net loss 0.1%
</TABLE>
Revenue. Sales for the nine months ended June 30, 1997 and 1996 totaled
$713,900 and $523,500, respectively, for an increase of approximately $190,400
or 36.4%. The Registrant's intraoral dental camera, still in the introductory
stage, generated revenues of $496,300 for this nine month period of fiscal 1997,
or 70% of total sales revenue, primarily during January through June of 1997.
There were no sales of this camera during the comparable period of fiscal 1996.
The Registrant had previously received significant purchase orders for intraoral
dental cameras specifically developed for an OEM company (see the Registrant's
form 10-KSB dated September 30, 1996 for further information). To date this
company has been unable to obtain the financing necessary to allow the
Registrant to prudently build and ship the previously ordered cameras. There
have been no sales to this company as of the date of this report. On June 2,
1997 the Registrant entered into a Development Agreement and an OEM agreement
with Digital Doc, Inc. of Rancho Cordova, CA. The agreements call for the joint
development of an intraoral dental camera and for the Registrant to be the
exclusive manufacturer of the product. Development is scheduled for completion
by September 1997 with product deliveries to begin by the end of the calendar
year. No assurances can be given as to the success of the development program or
as to the subsequent purchase of products by Digitial Doc., Inc.
-12-
<PAGE>
MEDICAL DYNAMICS, INC. AND SUBSIDIARY
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operation. (Continued)
The following medical product groups incurred significant sales decreases
over the comparable nine month period of fiscal 1996 in the following amounts:
general accessories $131,200, electronic video laparoscope (EVL's) $46,900, the
Adair Veress needle $21,700. The declining sales levels are due to a decrease in
capital budget expenditures in hospitals coupled with less influence over
purchasing decisions by physicians, reduced medical marketing efforts by the
Registrant, and increased competition from other manufacturers of surgical
cameras. Domestic sales accounted for 95% and 67% of total sales and foreign
sales accounted for 5.0% and 33% of total sales for the comparable periods ended
June 30, 1997 and 1996, respectively.
Foreign sales for the nine months ended June 30, 1997 and 1996 were $17,300
and $174,500, respectively, for a decrease of $157,200 or 90%. This decrease is
due primarily to a decline in EVL, light source and spare cable sales to foreign
distributors in Pakistan and England, and to Rosot Enterprises, the Registrant's
South American distributor. The Company's foreign sales are derived primarily
from the following markets: South America, England, France, Australia and The
Netherlands. Management believes that foreign sales will be restored and exceed
previous period levels based upon the introduction of the True VisionTM II
intraoral dental camera, a digital version of the electronic video laparoscope,
and world wide distribution of Lap WrapTM, although no assurances as to the
success of this strategy can be given. The Registrant has entered into a Letter
of Intent with Computer Age Dentist, Inc. which, if completed, will
significantly increase its total revenues during 1998.
Cost of Goods Sold. Cost of goods sold for the nine months ended June 30,
1997 and 1996 totaled $582,600 and $530,600, respectively, for an increase of
approximately $52,000 or 9.8%. Total cost of goods sold as a percent of sales
was 81.6% and 101.4%, respectively, for the same periods. The cost of goods sold
amount for both fiscal 1997 and 1996 no longer includes a significant
underapplied overhead amount for under-utilized manufacturing capacity. The
fiscal 1996 cost of sales figure reflects a reclassification of $135,500 made by
management from cost of goods sold to selling, general and administrative
expense in an effort to more accurately identify and compare standard cost of
sales. Gross margins are higher in the 1997 fiscal year due to the mix of
products sold having higher gross margins on the average, than in the fiscal
year ending in 1996. In the fiscal year ending in 1997 overhead was applied to
limited product sales. Gross margin percentages are expected to increase as
product sales increase and overhead is applied over the increasing sales base.
-13-
<PAGE>
MEDICAL DYNAMICS, INC. AND SUBSIDIARY
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operation. (Continued)
Selling, General and Administrative Expenses (SG&A). SG&A expenses for the
nine months ended June 30, 1997 and 1996 were $807,700 and $709,700,
respectively, for an increase of approximately $98,000 or 13.8%. The fiscal 1997
number includes a non cash expense of $40,800 for vesting of consultant common
stock options per FAS 123, a $41,600 writeoff of loaner and demonstration
equipment, and a $10,200 charge for bad debts. Without these non-cash expense
charges totaling $92,600, the fiscal 1997 SG&A expense would have been
approximately $715,100. Other significant expense reductions during fiscal 1997
versus the comparable period of fiscal 1996 include reduced depreciation and
amortization charges as a substantial amount of loaner equipment became fully
depreciated during fiscal 1996, and cost cutting measures instituted by
Management precipitated by lower sales and production values. The registrant
continues to reduce or eliminate expenses in all areas when practical.
Research and Development Costs (R&D). For the nine months ended June 30,
1997 and 1996 R&D expenses were $132,700 and $156,000, respectively, for a
decrease of approximately $23,300 or 14.9%. A significant portion of this
decrease is due to a reallocation and focus of the Registrant's R&D budget
toward projects specifically related to the intraoral dental camera. General R&D
funding has been reduced along with funding for the model 5990 optical catheter
system. The Registrant's policy is to fund research and development as it deems
appropriate to maintain or gain a competitive advantage.
PART II - OTHER INFORMATION
Item 5. Other Information.
None
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
-14-
<PAGE>
27. Financial data schedule.
(b) Reports on Form 8-K: None.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: August 14, 1997 /s/ Van A. Horsley
------------------
Van A. Horsley, President,
Principal Executive Officer,
and Principal Financial Officer
-15-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> JUN-30-1997
<CASH> 1,028,900
<SECURITIES> 50,000
<RECEIVABLES> 154,500
<ALLOWANCES> (25,000)
<INVENTORY> 856,000
<CURRENT-ASSETS> 1,638,800
<PP&E> 947,900
<DEPRECIATION> (665,300)
<TOTAL-ASSETS> 2,449,400
<CURRENT-LIABILITIES> 337,800
<BONDS> 0
0
0
<COMMON> 7,700
<OTHER-SE> 2,103,900
<TOTAL-LIABILITY-AND-EQUITY> 2,449,400
<SALES> 713,900
<TOTAL-REVENUES> 815,400
<CGS> 582,600
<TOTAL-COSTS> 1,729,900
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 600
<INCOME-PRETAX> (915,100)
<INCOME-TAX> 0
<INCOME-CONTINUING> (915,100)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (915,100)
<EPS-PRIMARY> (.12)
<EPS-DILUTED> (.12)
</TABLE>
