UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB / A1
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended December 31, 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 February 10, 1997 is 9,575,736 shares, $.001 par value.
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements.
MEDICAL DYNAMICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
ASSETS December September
31, 1997 30, 1997
----------- -----------
CURRENT ASSETS
Cash and equivalents $ 1,179,300 $ 836,400
Restricted cash 50,000 50,000
Trade receivables, less
allowance for doubtful
accounts of $25,000 and $5,000 638,200 127,500
Inventories 610,900 683,400
Prepaid expenses 134,600 15,700
----------- -----------
Total Current Assets 2,613,000 1,713,000
----------- -----------
PROPERTY AND EQUIPMENT
Demonstration equipment 306,400 296,700
Machinery and equipment 363,200 334,300
Furniture and fixtures 236,600 221,300
Leasehold improvements 54,500 54,500
----------- -----------
960,700 906,800
Less accumulated deprecia-
tion and amortization (843,600) (830,600)
----------- -----------
Property and Equipment, Net 117,100 76,200
----------- -----------
OTHER ASSETS
Software development
costs net of accumulated
amortization of $101,100 2,747,500 --
Non-compete agreement net of
accumulated amortization of $16,600 182,600 --
Technical support
contracts net of accumulated
Depreciation of $74,200 1,410,300 --
Goodwill, net of accumulated
amortization of $18,800 1,110,500 --
Patents, patents pending and
trademarks, net of accumulated
amortization of $738,600
and $734,300 56,900 49,700
Inventories 32,000 32,000
Other 22,600 46,000
----------- -----------
Total Other Assets 5,562,400 127,700
----------- -----------
TOTAL ASSETS $8,292,500 $1,916,900
========== ==========
See Notes to Consolidated Financial Statements.
-2-
<PAGE>
MEDICAL DYNAMICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
December September
31, 1997 30, 1997
------------ ------------
CURRENT LIABILITIES
Accounts payable $ 389,100 $ 297,600
Accrued expenses 139,200 61,100
Warranty reserve 11,000 11,000
Notes payable-related parties 376,700 --
Deferred revenue 376,500 --
Accrued income taxes 129,000 --
------------ ------------
Total Current Liabilities 1,421,500 369,700
------------ ------------
LONG TERM LIABILITIES
Convertible debenture 1,100,000 --
Other long term liabilities 34,100 --
------------ ------------
Total Long Term Liabilities 1,134,100 --
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 9,255,736
and 7,627,300 shares 9,300 7,600
Additional paid-in capital 23,319,100 18,811,100
Accumulated deficit (17,591,500) (17,271,500)
------------ ------------
Total Stockholders= Equity 5,736,900 1,547,200
------------ ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 8,292,500 $ 1,916,900
============ ============
See Notes to Consolidated Financial Statements.
-3-
<PAGE>
MEDICAL DYNAMICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Quarter Ended
December 31,
--------------------------------
1997 1996
----------- -----------
Medical & Dental sales $ 505,800 $ 197,600
Cost of goods sold 436,100 145,300
----------- -----------
Gross profit 69,700 52,300
Software sales 1,003,600 --
Cost of goods sold 266,700 --
----------- -----------
Gross profit 736,900 --
Other operating
revenue 500 6,900
----------- -----------
Operating expenses:
Selling, general and
administrative 1,057,800 328,700
Depreciation and
amortization 54,300 38,800
Research and
development 4,100 32,300
----------- -----------
Total Operating Exp 1,116,200 399,800
----------- -----------
Operating Loss (309,100) (340,600)
----------- -----------
Other income/(expense)
Interest income 13,900 11,100
Interest expense (24,700) (500)
Other income/(expense) (10,800) 10,600
----------- -----------
Net loss $ (319,900) $ (330,000)
=========== ===========
Earnings per share $ (0.04) $ (0.05)
=========== ===========
Weighted average
number of shares
outstanding 8,866,000 7,309,000
=========== ===========
See Notes to Consolidated Financial Statements.
-4-
<PAGE>
MEDICAL DYNAMICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended December 31,
-------------------------------
1997 1996
------------ ------------
Cash Flows From Operating
activities:
Net Loss $ (319,900) $ (330,000)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Depreciation 87,200 25,700
Amortization 145,500 13,100
Fair value Common Stock Options 13,600
Changes in operating assets
and liabilities, net of effects
from purchase of CADI:
Decrease (increase)in:
Trade receivable (262,200) 41,700
Inventories 103,100 (80,000)
Prepaid expenses (5,200) --
Increase (decrease) in:
Accounts payable (17,200) (108,900)
Accrued expenses 8,000 --
Deferred revenue 18,100 --
Accrued royalties -- 30,000
----------- -----------
Net cash used in operating
activities (242,600) (394,800)
----------- -----------
Cash Flows From Investing
activities:
Increase in intangible assets (8,400) (4,000)
Loss on disposal of
demonstration equipment -- 41,600
Payment for acquisition of CADI (379,200) --
Additions to patents (18,300) --
Purchase of property and
equipment (24,500) (38,500)
Deposits and other -- (4,900)
----------- -----------
Net Cash used in
investing activities (430,400) (5,800)
----------- -----------
Cash Flows from Financing
activities:
Proceeds from exercise of
options to purchase common stock 29,600 441,400
Net proceeds from issuance
of convertible debenture 986,300 --
----------- -----------
1,015,900 441,400
----------- -----------
Net Increase in Cash and
Equivalents 342,900 40,800
Cash and Equivalents
Beginning of period 836,400 993,200
----------- -----------
-5-
<PAGE>
Cash and Equivalents
end of period $ 1,179,300 $ 1,034,000
=========== ===========
Supplemental Disclosures of
Cash Flow Information:
Cash paid for interest $ -- $ 500
=========== ===========
Supplemental Schedule of
Noncash Investing and
Financing Activities:
Demonstration equipment
transfers from inventories $ -- $ 102,000
Common stock issued for
acquisition of CADI 4,480,000 --
Notes payable for
acquisition of CADI 372,000 --
(net of discount)
Debt issuance costs incurred
for convertible debenture 113,700 --
See Notes to Consolidated Financial Statements
-6-
<PAGE>
MEDICAL DYNAMICS, INC. AND SUBSIDIARIES
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 MEDY's September 30, 1997 Form 10-KSB. The
results of operations for the periods ended December 31, 1997 and December 31,
1996 are not necessarily indicative of operating results for the full years.
In October 1997, the company completed the acquisition of Computer Age
Dentist, Inc. (CADI). Accordingly the accompanying statement of operations
includes the accounts of CADI beginning October 1, 1997.
The Consolidated Financial Statements and other information furnished
herein reflect all adjustments which are, in the opinion of the management of
MEDY, 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 three months ended December 31, 1997 and 1996, basic earnings per
share was calculated based upon the weighted average common shares outstanding
of 8,866,000 and 7,309,000, respectively. Shares issuable under common stock
options and warrants were excluded from the computation of fully diluted
earnings per share because the effect was anti-dilutive. At December 31, 1997
MEDY had 1,103,000 of vested common stock options outstanding. Total common
stock options outstanding (including both vested and unvested) were 2,988,000 at
December 31, 1997.
NOTE 3. INCOME TAXES
Under the provisions of the Internal Revenue Code, MEDY has available net
operating loss and research and development tax credit carryforwards of
approximately $18,000,000 and $170,000, respectively, which expire in varying
amounts from 1998 through 2011.
The net operating loss and business tax credit carryforwards described
above give rise to a deferred tax asset of approximately $7,300,000. 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 SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
NOTE 4. INVENTORIES
Inventories consist of the following at December 31, 1997 and September 30,
1997:
December 31, September 30,
1997 1997
----------- -------------
Raw materials, purchased and
replacement parts $ 848,500 $ 723,900
Finished goods 420,800 422,300
Work in process (69,600) 126,000
Allowance for obsolescence (556,800) (556,800)
Less inventory classified
as long term (32,000) (32,000)
---------- ---------
$ 610,900 $ 683,400
========== =========
At December 31, 1997 medical products inventories have decreased $103,100 and
increased $30,600 due to the purchase of CADI for a net inventory decrease of
$72,500 or 10.1%. Management continues its efforts to reduce inventory and
inventory carrying costs while maintaining enough inventory to meet production
demand.
NOTE 5. DEFERRED REVENUE
Deferred revenue primarily represents payments received on deferred
maintenance contracts that has not been earned. The amounts are amortized into
revenue on a monthly basis using the straight-line method over the life of the
contract.
Costs for maintenance and customer support are charged to expense when the
related revenue is recognized or when those costs are incurred, whichever occurs
first.
-8-
<PAGE>
MEDICAL DYNAMICS, INC. AND SUBSIDIARIES
Note 6. Prior Period Adjustment
The 1998 financial statements reflect the revaluation of the common stock
issued as consideration for three acquisitions that were completed in fiscal
1998. The impact of this revaluation was to increase stockholders' equity,
software development costs, and goodwill. The revaluation also increased the net
loss due to higher amortization expense. The valuation of the common stock
reflected in the Company's 1998 interim financial statements was based upon the
report of an independent valuation expert. However, based on comments recently
received from the Securities and Exchange Commission, the value of the shares
issued in each of the acquisitions was increased.
The Company has also recognized discounts on the debt incurred in the
acquisitions due to below market interest rates.
The impact of the revaluation on the Company's 1998 quarterly financial
statements is summarized as follows:
Originally As
Reported Restated Change
-------- -------- ------
Current Assets $2,613,000 $2,613,000 $ --
Long-term Assets 5,235,000 5,679,500 444,500
Current Liabilities 1,444,800 1,421,500 (23,300)
Long-term Liabilities 1,134,100 1,134,100 --
Stockholders' Equity 5,269,100 5,736,900 467,800
Net Loss $(307,700) $(319,900) (12,200)
Net Loss Per Share $ (0.03) $ (0.04) $ (0.01)
-9-
<PAGE>
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, 1997, (see MEDY's form 10-KSB dated September 30, 1997 and the accompanying
audited financial statements), MEDY has suffered recurring losses and negative
cash flows from operations. Without significant sales increases, MEDY
anticipates negative cash flow from operations for fiscal 1998. MEDY believes
that its existing capital resources are sufficient for the current fiscal year,
and the MEDY is not seeking any additional debt or equity financing at this
time. However there are 1,103,000 vested common stock options outstanding as of
December 31, 1997, and if exercised (of which there can be no assurance), these
options would provide additional working capital to MEDY.
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 actual results in future periods to differ materially from
forecasted results. These risks and uncertainties include, among other things,
product demand, market competition, risks inherent in MEDY'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. (December 31, 1997 as compared to September 30, 1997)
During the three month period ended December 31, 1997, the MEDY's net working
capital decreased approximately $151,800. Principal changes in the components of
net working capital for the fiscal quarter ended December 31, 1997 consist of:
December September W/C
31, 1997 30, 1997 Effect
-------- -------- ------
Cash & Equivalents $1,229,300 $ 886,400 $342,900
Trade Receivables 638,200 127,500 510,700
Inventories 610,900 683,400 (72,500)
Pre-paids 134,600 15,700 118,900
---------- --------- --------
Current Assets: 2,613,000 1,713,000 900,000
Accounts Payable 389,100 297,600 91,500
Accrued Expenses 139,200 61,100 78,100
Warranty Reserve 11,000 11,000 0
Notes payable-
related parties, net 376,700 -- 376,700
-10-
<PAGE>
MEDICAL DYNAMICS, INC. AND SUBSIDIARIES
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operation. (Continued)
Deferred revenue 376,500 -- 376,500
Accrued taxes 129,000 -- 129,000
---------- ---------- ---------
Current Liabilities: 1,421,500 369,700 1,051,800
Working Capital: $1,191,500 $1,343,300 $(151,800)
========== ========== =========
Working capital decreased during the first quarter of fiscal 1998 by
$151,800. The components of the decrease in working capital included negative
cash flow from operations of $242,600, payment of the cash portion of the
consideration for the acquisition of Computer Age Dentist, Inc. (CADI) of
$379,200, and other capital expenses incurred by MEDY during the quarter.
Offsetting the expenditures of cash for operations and in investing
activities, MEDY raised net proceeds of $986,300 from the sale of a $1,100,000
convertible debenture during the first quarter, as well as proceeds from the
exercise of options held by employees which provided additional working capital
to MEDY.
The acquisition of CADI and the placement of the convertible debenture
during the first quarter of fiscal 1998 were extraordinary transactions which
have no parallel in prior periods. Do to the fundamental requirement for MEDY to
achieve a positive cash flow from operations and net income, MEDY will continue
reviewing expenses, reviewing and improving product profit margins, and
increasing revenues from the sale of products with higher profit margins. In an
effort to increase sales revenues from higher-margin products, MEDY acquired
CADI in October 1997 and completed the acquisition of Information Presentation
Systems, Inc., of Marietta, Georgia (IPS) on February 6, 1998. The CADI
acquisition and the IPS acquisition are expected to substantially increase
MEDY=s revenues.
To continue MEDY'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.
The Company also entered into a revised license agreement with Dr. Edwin Adair
during fiscal 1997 resulting in reduced patent maintenance and other associated
costs.
Although the acquisition of CADI and IPS has resulted in (and is expected to
continue to generate) significant increases in revenues to MEDY during the
current fiscal year, MEDY still anticipates negative cash flow from operations
during fiscal 1998. 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, MEDY's ability to fund its operations will be
dependent upon achieving profitability and in generating a positive cash flow
from operations. Unless MEDY is able to increase sales revenues, and achieve and
maintain profitability during fiscal 1998, MEDY may be facing significant
working capital shortages beginning in fiscal year 1999. There can be no
assurance that the MEDY will be able to achieve this goal.
-11-
<PAGE>
MEDICAL DYNAMICS, INC. AND SUBSIDIARIES
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operation. (Continued)
MEDY believes that its existing capital resources are sufficient for the
current fiscal year and the only significant capital expenditure is in
association with MEDY's acquisition of Information Presentation Systems,
Inc.(IPS). MEDY entered into a non-binding letter of intent to acquire IPS,
dated January 5, 1998. The closing took place on February 6, 1998, with an
effective date of February 1, 1998. In its eight year history, IPS has grown
into one of the nation's largest suppliers of customized multimedia systems for
use in a variety of dental operatory environments. IPS has been involved in the
development and marketing of several dental technology products, including
intra-oral video cameras, video and computer image storage systems, patient
management systems, and digital radiography and micoabrasion instruments. For
the period ended December 31, 1997, IPS is estimated to have achieved unaudited
gross revenues of approximately $3 million. Medical Dynamics intends to
consolidate IPS with its newly acquired Computer Age Dentist, Inc. (CADI)
subsidiary. The resulting entity will handle the sale, installation, training
and follow-up support for the expanded line of dental products. With the
completed purchase of IPS, CADI will offer a broad range of products for the
dental industry, including practice management software, electronic claims
processing, image capture software, intra-oral cameras, multi-operatory
video/digital networks and digital x-ray systems. MEDY's goal is to become the
"Single Source Technology Solution" for dental practices moving into the complex
digital/computer age. Although as noted, Management believes that, even after
the acquisition of IPS, MEDY has sufficient capital resources for the current
fiscal year and beyond, MEDY is reviewing other possible acquisition candidates
and, if MEDY seeks to complete another acquisition (of which there can be no
assurance), MEDY may need additional capital. MEDY is not seeking any additional
capital at this time, and there can be no assurance that MEDY will attempt
another acquisition or that if MEDY needs additional financing, it will be
available on reasonable terms, if at all. MEDY is not seeking additional debt or
equity capital at this time, although there are 1,103,000 vested common stock
options outstanding as of December 31, 1997, and if exercised (of which there
can be no assurance), these options would provide varying amounts of additional
working capital to MEDY. These options have various exercise prices which range
between $1.00 and $4.00 per share and at February 9, 1998 the price of the
MEDY's common stock was approximately $2.88. If MEDY does obtain additional
capital (of which there can be no assurance), MEDY will be able to allocate more
resources to sales and marketing efforts, further acquisitions as well as
research and development.
-12-
<PAGE>
MEDICAL DYNAMICS, INC. AND SUBSIDIARIES
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operation. (Continued)
Results of Operations. As an aid to understanding MEDY'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 three month periods ended December 31, 1997 and 1996 and the
percentage changes in those items for the same periods.
<TABLE>
<CAPTION>
As a percent of
total revenue
for the three Percentage
month period change from
ended Dec. 31, the prior years'
1997 1996 Revenue/Expense Items comparable period
---- ---- --------------------- -----------------
<S> <C> <C> <C>
33.5% 100.0% Medical /Dental Sales 156.0%
(28.9%) (73.5%) COGS Medical 200.1%
4.6% 26.5% Gross Profit Medical 33.3%
66.5% 0.0% Software Sales 100.0%
(17.7%) 0.0% COGS Software 100.0%
48.8% 0.0% Gross Profit Software 100.0%
0.0% 3.5% Other Operating Revenue (92.8%)
70.1% 166.3% Selling, General and Administrative 221.8%
3.6% 19.6% Depreciation and Amortization 20.6%
0.3% 16.3% Research and Development (87.3%)
0.9% 5.6% Interest Income 25.2%
1.6% 0.3% Interest Expense 3,900.0%
(20.4%) (167.0%) Net Loss (6.8%)
</TABLE>
Revenue. Medical and dental sales for the three months ended December 31,
1997 and 1996 were $505,800 and $197,600, respectively, for an increase of
$308,200 or 156.0%. Overall medical sales were up $33,000 or 45.1% and dental
sales were up $274,000 or 217.5%. MEDY has closed on the acquisition of IPS as
of February 6, 1998 and it should be noted that approximately 70% of MEDY=s
dental camera sales for the three months ended December 31, 1997 were made to
IPS. Foreign market sales are negligible at less than 2% of total net sales.
-13-
<PAGE>
MEDICAL DYNAMICS, INC. AND SUBSIDIARIES
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operation. (Continued)
Sales attributable to CADI totaled $1,003,600 for the period. Please refer
to the schedule below for a more detailed breakdown of revenues. On June 2, 1997
MEDY 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
intra-oral dental camera and for MEDY to be the exclusive manufacturer of the
product. Development is currently ongoing with completion of development and
delivery of product scheduled for April 1998. No assurances can be given as to
the success of the development program or as to the subsequent purchase of
products by Digital Doc, Inc.
December December
31, 1997 31, 1996
---------- ---------
Medical Sales $ 105,800 $ 73,000
Dental Sales 400,000 126,000
Software Sales 601,400 --
Hardware Sales 82,000 --
Support 287,600 --
Electronic Billing 35,600 --
--------- ---------
Total Revenue: $1,509,400 $ 197,600
========== =========
Cost of Goods Sold. Cost of goods sold for the three months ended December
31, 1997 and 1996 as a percent of net sales were 28.9% and 73.5% respectively,
for medical and dental sales. The percentage drop is due to the dilutive effect
of Computer Age Dentist sales. Cost of goods sold is calculated at 86.2% for
medical and dental products for the quarter ended December 31, 1997. This
adjusted COGS increase as a percent of net revenue is due to the increase in
sales of lower margin dental cameras and dental camera accessories as a
percentage of product sales.
The COGS for software as a percent of net revenue is 17.7%, as a percent of
software sales it is 26.6% for a gross margin percentage of 73.4%. The major
components of CADI cost of goods sold is the depreciation and amortization
expense attributable to software development costs of $2,848,600 amortized over
7 years, or $101,100, for the period; and technical support contracts of
$1,484,500 depreciated over 5 years, or $74,200, for the period.
-14-
<PAGE>
MEDICAL DYNAMICS, INC. AND SUBSIDIARIES
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operation. (Continued)
Selling, General and Administrative Expenses (S,G&A). S,G&A expenses for
the three months ended December 31, 1997 and 1996 were $1,057,800 and $328,700,
respectively, for an increase of $729,100 or 221.8%. The acquisition of CADI and
it=s related expense stream accounts for $651,700 of this variance. The
remaining variance of $77,400 over the same three month period of 1996 is
attributed to the increased S,G&A costs associated with a 156.0% increase in
medical and dental sales for the same period.
Depreciation and Amortization. Depreciation and amortization for the three
months ended December 31, 1997 and 1996 totaled $54,300 and $38,800,
respectively, for an increase of $15,500 or 39.9%. The CADI portion accounts for
$39,400 of this variance. The remaining variance is a decrease of $23,900 due to
the retirement of demonstration and loaner equipment in fiscal 1997.
Research and Development Costs (R&D). For the three months ended December
31, 1997 and 1996 R & D expenses were $4,100 and $32,300 respectively, for a
decrease of $28,200 or 87.3%.The Registrants policy is to fund research and
development as it deems appropriate to maintain or gain a competitive advantage.
Interest Income and Expense. Interest income is a function of current cash
invested for the period; the balances for December 31, 1997 and 1996 was $13,900
and $11,100 respectively. Interest expense for the three months ended December
31, 1997 and 1996 was $24,700 and $500, respectively, for an increase of
$24,200. The components of interest expense are, interest on notes payable to
related parties for the CADI acquisition of $2,667 per month for two months,
interest on the convertible debenture of $7,333 per month for two months, and
amortization of debt discount of $4,700.
PART II - OTHER INFORMATION
Item 5. Other Information.
None
-15-
<PAGE>
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
27. Financial data schedule.
(b) Reports on Form 8-K: Filed, dated October 23,1997,
October 31, 1997 and January 5, 1998.
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: January 12, 1999 /s/ Van A. Horsley
-------------------------------------------
Van A. Horsley, President, Principal
Executive Officer, and Principal Financial
Officer
-16-
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> DEC-31-1997
<CASH> 1,179,300
<SECURITIES> 50,000
<RECEIVABLES> 663,200
<ALLOWANCES> (25,000)
<INVENTORY> 610,900
<CURRENT-ASSETS> 2,613,000
<PP&E> 960,700
<DEPRECIATION> (843,600)
<TOTAL-ASSETS> 8,292,500
<CURRENT-LIABILITIES> 1,421,500
<BONDS> 1,134,100
0
0
<COMMON> 9,300
<OTHER-SE> 5,727,600
<TOTAL-LIABILITY-AND-EQUITY> 8,292,500
<SALES> 1,509,400
<TOTAL-REVENUES> 1,523,800
<CGS> 702,800
<TOTAL-COSTS> 1,854,500
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 24,700
<INCOME-PRETAX> (319,900)
<INCOME-TAX> 0
<INCOME-CONTINUING> (319,900)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (319,900)
<EPS-PRIMARY> (.04)
<EPS-DILUTED> (.04)
</TABLE>
