11
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: March 31, 1998 Commission File Number: 0-8995
COMPUTER DEVICES, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Maryland 04-2446436
- ------------------------ ---------------------------------
(State of incorporation) (IRS Employer Identification 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 March 31, 1998
------------ --------------------
Class A 1,924,363
Class B 2,256,524
<PAGE>
TABLE OF CONTENTS
Page No.
PART I. FINANCIAL INFORMATION 3
Item 1. Financial Statements (unaudited): 3
Consolidated statements of operations for the three
months ended March 31,1998 and March 31,1997 3
Consolidated balance sheet at March 31, 1998 4
Consolidated statements of cash flows for the three
months ended March 31, 1998 and March 31,1997 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
<PAGE>
COMPUTER DEVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share amounts)
(unaudited)
For the Three Months Ended
March 31, 1998 March 31, 1997
-------------- --------------
REVENUES $ 120 $ 218
COST OF REVENUES 105 179
--------- ---------
Gross profit 15 39
OPERATING EXPENSES:
Engineering, research and development 5 5
Selling, general and administrative 93 152
--------- ---------
Total operating expenses 98 157
--------- ---------
Operating loss (83) (118)
Interest income 5 3
--------- ---------
Net loss $ (78) $ (115)
========= =========
Basic and diluted loss per share (Note 5) $ (.02) $ (.03)
========= =========
Weighted average number of common
shares outstanding (Note 5) 4,180 3,579
========= =========
The accompanying notes are an integral part of
these consolidated financial statements.
3
<PAGE>
COMPUTER DEVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(In thousands except share amounts)
(unaudited)
March 31, 1998
--------------
ASSETS
- ------
CURRENT ASSETS:
Cash and cash equivalents $ 13
Accounts receivable, less reserve of $10 61
Inventories 5
Prepaid expenses 4
-------
Total current assets 83
-------
PROPERTY AND EQUIPMENT:
Property and equipment, at cost 96
Accumulated depreciation (85)
-------
11
-------
TOTAL ASSETS $ 94
=======
The accompanying notes are an integral part of
these consolidated financial statements.
4
<PAGE>
COMPUTER DEVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (continued)
(In thousands except share amounts)
(unaudited)
March 31, 1998
--------------
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 37
Deferred revenue 28
Accrued expenses 190
-------
Total current liabilities 255
LONG-TERM LIABILITIES:
Non-qualified retirement obligation 393
STOCKHOLDERS' EQUITY:
Preference stock, $.01 par value
Authorized - 64,000 shares
Issued and outstanding - 49,350 shares
Liquidation value - $4,935 --
Class A common stock, $.01 par value
Authorized - 49,968,000 shares
Issued and outstanding - 1,924,363 shares 19
Class B common stock, $.01 par value
Authorized - 49,968,000 shares
Issued and outstanding - 2,256,524 shares 23
Capital in excess of par value 2,019
Accumulated deficit (2,615)
-------
Total stockholders' equity (554)
-------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 94
=======
The accompanying notes are an integral part of
these consolidated financial statements.
5
<PAGE>
COMPUTER DEVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
For the Three Months Ended
March 31, 1998 March 31, 1997
-------------- --------------
Cash flows from operating activities:
Net loss $ (78) $(115)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 2 4
Changes in non-qualified retirement obligation (3) --
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable 55 (65)
Decrease (increase) in inventory 13 (4)
Decrease (increase) in prepaid expenses 2 (7)
Increase (decrease) in accounts payable (16) (32)
Increase (decrease) in deferred revenue (18) --
Increase (decrease) in accrued expenses (43) (15)
------ ------
Net cash used in operating activities (86) (234)
Cash flows from investing activities:
Purchases of property and equipment -- (5)
------ ------
Net cash provided by investing activities -- (5)
Cash flows from financing activities: -- --
------ ------
Net cash provided by financing activities -- --
------ ------
Net increase (decrease) in cash and cash equivalents (86) (239)
Cash and cash equivalents at beginning of year 99 515
------ ------
Cash and cash equivalents at end of three months $ 13 $ 276
The accompanying notes are an integral part of
these consolidated financial statements.
6
<PAGE>
COMPUTER DEVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998
(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.
Revenues from the Company's sale and service of computer
peripheral products have declined over the past decade due to
increased competition from lower-cost providers combined with the
erosion of the thermal printer marketplace due to the growth in
alternative devices. In 1997, the Company dedicated, through its
wholly owned subsidiary VoiSys International Corporation,
significant resources to develop its voice control software
product line. The future success of the Company is dependent on
the viability of its new voice control products. During fiscal
1997, the Company introduced its voice control product through the
retail distribution channel, but has not yet achieved significant
sales. The Company plans to continue further development of the
voice control product line with the exploration of alternative
voice control applications and alternative distribution methods.
The financial condition of the Company, including its ability to
seek additional capital for operations, is contingent on the
Company's ability to achieve projections for its voice control
product line.
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, 1997.
(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 and Cash Equivalents
The Company considers all highly liquid investments with maturities
of three months or less at the time of acquisition to be cash
equivalents.
(d) Inventories
Inventories are stated at the lower of cost (first-in, first-out) or
market and consist primarily of purchased finished goods.
7
<PAGE>
COMPUTER DEVICES, INC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998
(unaudited)
(continued)
(e) Revenue Recognition
The Company recognizes computer peripheral revenue upon the shipment
of its product to a customer. The Company recognizes license revenue
in accordance with the American Institute of Certified Public
Accountants Statement of Position (SOP) 97-2, Software Revenue
Recognition. Adoption of this pronouncement, on January 1, 1998, did
not have a material affect on the revenue recognition practices of
the Company.
(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, 1997.
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.
However, recently an appellate court upheld a judgement against the
Company where the liability is approximately $100,000. The courts
decision did not effect the Company's current financial statements,
as the loss had been accrued for in prior periods. Settlement,
however, has yet to be negotiated.
Note 5 - Net Loss Per Common Share
- ----------------------------------
For 1997 and 1998, 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.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Item 2 contains forward-looking statements as that term is defined in
the Private Securities Litigation Reform Act of 1995. These forward-
looking statements are subject to risks and uncertainties which could
cause actual results to differ materially from those anticipated.
Revenues for the first quarter of 1998 totaled $120,000 compared to
$218,000 for the same period in the previous year. These figures
represent a 45% reduction in revenues.
The computer peripheral revenues continued to decline in the first
quarter as a result of the Company's decision to de-emphasize the
distribution of low margin OEM products and to concentrate on the
development and sale of VoiSys software products for the voice
activated computer control market.
VoiSys' shipments were minimal in the first quarter and its revenues
declined sharply. The Company believes that this decline is primarily
due to its distributor overstocking the product in the fourth quarter
of 1997 for the holiday season. VoiSys' chief product is VOICE
POWER, a voice control software product that enables the user to
completely control the personal computer by voice. VoiSys
distributes this product primarily through Tech Data, a master
distributor, who resells the product to retail computer
chains/stores.
Operating expenses in the first quarter of 1998 decreased by 38% from
those in the first quarter of 1997. This reduction is attributed to
the Company's commitment to cut overhead while it strives to generate
revenue through VoiSys.
During 1998, cash from beginning of year was responsible for the
Company's liquidity. In the future, however, if the Company is
unable to substantially achieve its sales forecasts for voice
control products or is unable to secure additional financing, for
which it does not currently have any commitment, it is not certain
that the Company will have the ability to continue as a going
concern.
9
<PAGE>
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: May 12, 1998 S/EBERHARD W. RAU
- -------------------- -----------------
Eberhard W. Rau
Treasurer
Principal Accounting Officer
11
<PAGE>
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