11
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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
Quarterly Report Under Section 13 or 15 (d) of the
Securities Exchange Act of 1934
For the Quarter Ended: September 30, 1997 Commission File Number: 0-8995
COMPUTER DEVICES, INC.
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(Exact name of registrant as specified in its charter)
Maryland 04-2446436
------------------------ --------------------------------
(State of incorporation) (IRS EmployerIdentification No.)
34 Linnell Circle, Nutting Lake, MA 01865
------------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code: (508) 663-4980
Not Applicable
--------------
(Former name, former address and former fiscal year, if changed since
last report)
Check whether the issuer (1) filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past twelve
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
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date.
Shares Outstanding
Common Class as of September 30, 1997
------------ -------------------------
Class A 1,846,063
Class B 2,233,080
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TABLE OF CONTENTS
Page No.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited):
Consolidated statements of operations for the three and nine
months ended September 30, 1997 and September 30, 1996 3
Consolidated balance sheet at September 30 1997 4
Consolidated statements of cash flows for the nine months
ended September 30, 1997 and September 30, 1996 6
Notes to consolidated financial statements 7
Item 2. Management's Discussion and Analysis or Plan of Operation 9
PART II. OTHER INFORMATION 10
SIGNATURES 11
2
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COMPUTER DEVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share amounts)
(unaudited)
For the Three Months For the Nine Months
Ended September 30 Ended September 30
1997 1996 1997 1996
-------------------- --------------------
REVENUES $ 290 $ 248 $ 630 $ 683
COST OF REVENUES 127 191 409 537
-------------------- --------------------
Gross profit 163 57 221 146
OPERATING EXPENSES:
Engineering, research and development 6 7 18 20
Selling, general and administrative 184 130 515 461
-------------------- --------------------
Total operating expenses 190 137 533 481
-------------------- --------------------
Operating loss (27) (80) (312) (335)
Interest income 2 7 8 22
Other income 0 0 60 0
-------------------- --------------------
Net loss $ (25) $ (73) $(244) $(313)
==================== ====================
Net loss per common share (Note 5) $(.01) $(.02) $(.06) $(.09)
==================== ====================
Weighted average number of common
shares outstanding (Note 5) 4,079 3,579 3,766 3,579
The accompanying notes are an integral part of
these consolidated financial statements.
3
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COMPUTER DEVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(In thousands except share amounts)
(unaudited)
September 30, 1997
------------------
ASSETS
- ------
CURRENT ASSETS:
Cash and cash equivalents $ 102
Accounts receivable, less reserve of $12 208
Inventories 26
Prepaid expenses 19
------------------
Total current assets 355
------------------
PROPERTY AND EQUIPMENT:
Property and equipment, at cost 271
Accumulated depreciation (249)
------------------
22
------------------
TOTAL ASSETS $ 377
==================
The accompanying notes are an integral part of
these consolidated financial statements.
4
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COMPUTER DEVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (continued)
(In thousands except share amounts)
(unaudited)
September 30, 1997
------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 19
Accrued expenses 246
------------------
Total current liabilities 265
------------------
LONG-TERM LIABILITIES:
Non-qualified retirement obligation 408
------------------
STOCKHOLDERS' EQUITY
Preference stock, $.01 par value
Authorized - 64,000 shares
Issued and outstanding - 49,406 shares
Liquidation value - $4941 --
Class A common stock, $.01 par value
Authorized - 49,968,000 shares
Issued and outstanding - 1,846,063 shares 19
Class B common stock, $.01 par value
Authorized - 49,968,000 shares
Issued and outstanding - 2,233,080 shares 22
Capital in excess of par value 2,016
Accumulated deficit (2,353)
------------------
Total stockholders' equity (296)
------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 377
==================
The accompanying notes are an integral part of
these consolidated financial statements.
5
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COMPUTER DEVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
For the Nine Months Ended
Sept. 30, 1997 Sept. 30, 1996
-------------- --------------
Cash flows from operating activities:
Net loss $(244) $(313)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 13 14
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable (132) (13)
Decrease (increase) in inventory (14) 36
Decrease (increase) in prepaid expenses 5 0
Increase (decrease) in accounts payable (108) 40
Increase (decrease) in accrued expenses 57 44
--------- ---------
Net cash used in operating activities (423) (192)
Cash flows from investing activities:
Purchases of property and equipment (10) (6)
Proceeds from sale of marketable securities -- 470
--------- ---------
Net cash provided by (used in) investing activities (10) 464
Cash flows from financing activities:
Proceeds from exercise of stock option 20 --
--------- ---------
Net cash provided by financing activities 20 --
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Net increase (decrease) in cash and cash equivalents (413) 272
Cash and cash equivalents at beginning of year 515 268
--------- ---------
Cash and cash equivalents at end of nine months $ 102 $ 540
========= =========
The accompanying notes are an integral part of
these consolidated financial statements.
6
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COMPUTER DEVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(unaudited)
Note 1 - Operations
- -------------------
Incorporated as a Massachusetts corporation in 1968 and reincorporated in
Maryland in 1986, Computer Devices, Inc. (the "Company") is primarily
engaged in the design, manufacture, sale and service of computer
peripheral products. Business is conducted primarily in the United States.
Note 2 - Summary of Significant Accounting Policies
- ---------------------------------------------------
The accompanying consolidated financial statements have been prepared by
the Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission, and reflect all adjustments, which,
in the opinion of management, are necessary for a fair statement of the
results of the interim periods, presented.These financial statements do
not include all disclosures associated with annual financial statements,
and accordingly should be read in conjunction with footnotes contained
in the Company's Form 10-KSB report for the year ended December 31, 1996
(a) Principles of Consolidation
The consolidated financial statements include the accounts of Computer
Devices, Inc., and its wholly owned subsidiaries, VoiSys International
Corporation and Neuro-Therapeutics, Inc. All material intercompany
accounts and transactions have been eliminated in consolidation.
(b) Use of Estimates in Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
(c) Cash, Cash Equivalents and Investments
The Company considers all highly liquid investments with maturities of
three months or less at the time of acquisition to be cash equivalents.
Included in cash equivalents at September 30, 1997 is approximately
$63,000 of money market funds.
(d) Inventories
Inventories are stated at the lower of cost (first-in, first-out) or
market and consist primarily of purchased finished goods.
(e) Revenue Recognition
The Company recognizes revenue upon the shipment of its product to a
customer.
7
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COMPUTER DEVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(unaudited)
(continued)
(f) Depreciation and Amortization
Property and equipment are depreciated using the straight-line method
for financial reporting purposes over their estimated useful lives of
three to five years.
Note 3 - Stockholders' Equity
- -----------------------------
For information regarding the terms of the Class A Common Stock, Class B
Common Stock and Preference Stock refer to the Company's Form 10-KSB
report for the year ended December 31, 1996.
Note 4 - Contingencies
- ----------------------
Federal and state authorities, together with other private parties, have
sought to hold the Company responsible, along with a number of other
parties, for various environmental cleanup costs and related penalties.
In addition, from time to time, the Company is involved in disputes
and/or litigation encountered in its normal course of business. The
Company does not believe that the ultimate impact of the resolution of
any outstanding matters will have a material effect on the Company's
financial condition or results of operations.
Note 5 - Net Loss Per Common Share
- ----------------------------------
For 1996 and 1997, net loss per common share was computed based upon the
weighted average number of outstanding common shares during the period.
Common share equivalents are not reflected in the computation due to
their anti-dilutive nature.
Note 6 - New Accounting Standard
- --------------------------------
In March 1997, the Financial Accounting Standards Board issued SFAS No.
128, Earnings Per Share. SFAS No. 128 establishes standards for
computing and presenting earnings per share and applies to entities
with publicly held common stock or potential common stock. This
statement is effective for fiscal years ending after December 15, 1997
and early adoption is not permitted. When adopted, the statement
will require restatement of prior years' earnings per share. The
Company will adopt this statement for its fiscal year ended December 31,
1997. The Company believes that the adoption of SFAS No. 128 will not
have a material effect on its financial statements.
8
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Except for historical information contained herein, the matters discussed
in Item 2 are forward-looking statements as that term is defined in the
Private Securities Litigation Reform Act of 1995. These forward-looking
statements involve risks and uncertainties that could cause actual
results to differ materially from those anticipated.
Revenues for the third quarter of 1997 totaled $290,000 compared to
$248,000 for the same period in the previous year. These figures
represent a 17% increase in revenues. Below is a table listing revenues:
For the Three Months For the Nine Months
Ended September 30 Ended September 30
1997 1996 1997 1996
-------------------- -------------------
(000's omitted)
Computer peripherals and printers $117 $248 $442 $683
VoiSys products $173 $ 0 $188 $ 0
-------------------- -------------------
$290 $248 $630 $683
Computer peripheral and printer revenues declined by 53% in the third
quarter of 1997 when compared with revenues for the same period in 1996.
The Company competes vigorously with other larger and better known
distributors to maintain market share. Because, in most cases, price is
the deciding factor in such sales, the Company can give no assurances that
it can maintain its current customer base in future years.
VoiSys International produced revenues of $173,000 in the third quarter of
1997. In July 1997, VoiSys International began shipping its latest
product, VOICE POWER, a voice control system for personal computers.
VoiSys distributes this product primarily through Tech Data, a master
distributor, who resells the product to retail computer chains/stores.
Operating expenses in the third quarter of 1997 increased by 39% from those
in the third quarter of 1996. The increase can be attributed to expenses
associated with the marketing of VoiSys International's product, VOICE POWER.
During 1997, cash from beginning of year was responsible for the Company's
liquidity. In the future, however, financing may be necessary to support
internal and/or external growth.
9
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PART II
OTHER INFORMATION
NONE
10
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
COMPUTER DEVICES, INC.
----------------------
(Registrant)
Date: NOVEMBER 6, 1997 S/EBERHARD W. RAU
- ----------------------- -----------------
Eberhard W. Rau
Treasurer
Principal Accounting Officer
11
<PAGE>
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<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 102
<SECURITIES> 0
<RECEIVABLES> 220
<ALLOWANCES> 12
<INVENTORY> 26
<CURRENT-ASSETS> 355
<PP&E> 271
<DEPRECIATION> 249
<TOTAL-ASSETS> 377
<CURRENT-LIABILITIES> 265
<BONDS> 0
0
0
<COMMON> 41
<OTHER-SE> (337)
<TOTAL-LIABILITY-AND-EQUITY> 377
<SALES> 630
<TOTAL-REVENUES> 630
<CGS> 409
<TOTAL-COSTS> 409
<OTHER-EXPENSES> 533
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (244)
<INCOME-TAX> 0
<INCOME-CONTINUING> (244)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (244)
<EPS-PRIMARY> (.06)
<EPS-DILUTED> (.06)
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