UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1995
or
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________________ to ________________
Commission File Number: 0-14210
COMPUMED, INC.
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(Exact Name of Small Business Issuer as Specified in Its Charter)
Delaware 95-2860434
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(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
1230 Rosecrans Avenue, Suite 1000, Manhattan Beach, CA 90266
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(Address of Principal Executive Offices)
(310) 643-5106
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(Issuer's Telephone Number, Including Area Code)
Not applicable
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(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 12 months (or for
such shorter period that the Issuer was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes X No
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The Issuer had 8,408,517 shares of common stock, $.01 par value,
outstanding as of February 9, 1996.
<PAGE>
INDEX
COMPUMED, INC. AND SUBSIDIARY
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Condensed consolidated balance sheets - December 31, 1995 and
September 30, 1995.
Condensed consolidated statement of operations - three months
ended December 31, 1995 and 1994.
Condensed consolidated statements of changes of cash flows -
three months ended December 31, 1995 and 1994.
Notes to interim unaudited condensed consolidated financial
statements.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
SIGNATURES
<PAGE>
CONDENSED CONSOLIDATED BALANCE SHEETS
COMPUMED, INC. AND SUBSIDIARIES
December 31, September 30,
1995 1995
------------- -------------
(Unaudited)
ASSETS
CURRENT ASSETS
Cash $ 24,000 $ 299,000
Marketable securities 5,017,000 4,723,000
Accounts receivable, less allowance of
$211,000 (December 1995) and $218,000
(September 1995) 415,000 469,000
Other receivables 102,000 433,000
Inventories 112,000 123,000
Prepaid expenses and other current assets 39,000 48,000
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TOTAL CURRENT ASSETS 5,709,000 6,095,000
PROPERTY AND EQUIPMENT
Machinery and equipment 3,015,000 2,944,000
Furniture, fixtures and leasehold
improvements 199,000 199,000
Equipment under capital leases 611,000 562,000
Rental Property
Land 1,022,000 1,022,000
Buildings 2,828,000 2,828,000
----------- -----------
7,675,000 7,555,000
Less allowance for depreciation and
amortization 3,601,000 3,516,000
----------- -----------
4,074,000 4,039,000
OTHER ASSETS
Reacquired franchises, net of accumulated
amortization of $127,000 (December 1995)
and $117,000 (September 1995) 200,000 210,000
Other assets 176,000 154,000
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$10,159,000 $10,498,000
============ ===========
See notes to condensed consolidated financial statements
<PAGE>
CONDENSED CONSOLIDATED BALANCE SHEETS
COMPUMED, INC. AND SUBSIDIARIES
December 31, September 30,
1995 1995
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(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 464,000 $ 465,000
Deferred revenue 100,000 95,000
Other accrued liabilities 932,000 952,000
Current portion of long term debt 3,633,000 704,000
Current portion of capital lease obligations 31,000 22,000
------------ ------------
TOTAL CURRENT LIABILITIES 5,160,000 2,238,000
TRUST DEED NOTES PAYABLE, less current portion 2,932,000
CAPITAL LEASE OBLIGATIONS, less current portion 101,000 69,000
OTHER LIABILITIES 59,000 58,000
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock, $.10 par value-- authorized
1,000,000 shares
Class A $3.50 cumulative convertible voting
preferred stock, issued and outstanding --
8,400 shares (December 1995 and
(September 1995) 1,000 1,000
Class B $3.50 convertible voting preferred
stock, issued and outstanding - 52,333
(December 1995) and (September 1995) 5,000 5,000
Common stock, $.01 par value--authorized
60,000,000 shares, issued and outstanding--
8,346,566 shares (December 1995) and
8,235,937 shares (September 1995) 83,000 82,000
Additional paid in capital 24,920,000 24,633,000
Retained deficit (20,170,000) (19,520,000)
------------ ------------
STOCKHOLDERS' EQUITY 4,839,000 5,201,000
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$ 10,159,000 $ 10,498,000
============ ============
See notes to condensed consolidated financial statements
<PAGE>
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
COMPUMED, INC. AND SUBSIDIARIES
Three Months Ended
December 31,
1995 1994
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(Unaudited) (Unaudited)
REVENUE FROM OPERATIONS
ECG service $ 426,000 $ 401,000
Osteo services, net 174,000
Product sales 53,000 55,000
Rental property 99,000 132,000
Other income 74,000 1,000
----------- ----------
652,000 763,000
COST AND EXPENSES
Cost of services 300,000 315,000
Cost of sales 24,000 29,000
Selling expenses 73,000 77,000
Research and development 164,000 47,000
General and administrative expenses 553,000 393,000
Depreciation and amortization 102,000 125,000
Interest expense 85,000 106,000
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1,301,000 1,092,000
NET LOSS $ (649,000) $ (329,000)
----------- -----------
NET LOSS PER SHARE $ (.08) $ (.07)
=========== ===========
Weighted average number of common
shares outstanding 8,344,300 4,809,200
============ ===========
See notes to condensed consolidated financial statements
<PAGE>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
COMPUMED, INC. AND SUBSIDIARIES
Three Months Ended
December 31,
1995 1994
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(Unaudited) (Unaudited)
OPERATING ACTIVITIES:
Net Loss $ (649,000) $ (329,000)
Net adjustment to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 102,000 125,000
Changes in operating assets and liabilities:
Interest receivable 7,000
Accounts receivable 54,000 (27,000)
Other receivables 331,000 35,000
Inventories and prepaid expenses 20,000 9,000
Accounts payable and other liabilities (15,000) 19,000
Other assets (29,000) (2,000)
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NET CASH USED IN OPERATING ACTIVITIES (186,000) (163,000)
INVESTING ACTIVITIES:
Purchase of marketable securities (500,000)
Sale of marketable securities 206,000
Purchases of property, plant, and equipment (71,000) (36,000)
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NET CASH USED IN INVESTING ACTIVITIES (365,000) (36,000)
FINANCING ACTIVITIES:
Net proceeds from sale of stock 345,000
Dividends on Class A preferred stock (1,000) (1,000)
Proceeds from short term borrowings 176,000
Principal payments on capital lease obligations (8,000) (5,000)
Principal payments on trust deeds payable (3,000) (26,000)
Principal payments on notes payable (6,000)
Exercise of stock options and warrants 288,000
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 276,000 483,000
----------- -----------
(DECREASE) INCREASE IN CASH (275,000) 284,000
Cash at beginning of period 299,000 20,000
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CASH AT END OF PERIOD $ 24,000 $ 300,000
=========== ===========
Cash paid for interest: $ 85,000 $ 80,000
=========== ===========
See notes to condensed consolidated condensed financial statements
<PAGE>
NOTES TO INTERIM UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
COMPUMED, INC. AND SUBSIDIARIES
NOTE A--BASIS OF PREPARATION
The balance sheet at September 30, 1995 has been condensed from
the Company's year-end audited financial statements.
The accompanying interim unaudited consolidated financial
statements have been prepared in accordance with generally
accepted accounting principles for interim financial information
and pursuant to the rules and regulations of the Securities and
Exchange Commission. Accordingly, they do not include all of the
information and footnotes required by generally accepted
accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation
have been included. Operating results for the period ended
December 31, 1995 are not necessarily indicative of the results
that may be expected for the year ending September 30, 1996. For
further information, refer to the consolidated financial
statements for the year ended September 30, 1995 and the notes
thereto included in the Company's Annual Report on Form 10-KSB.
NOTE B--PER SHARE DATA
Net loss income per share is calculated using the net loss less
preferred stock dividends, divided by the weighted average of
common shares outstanding. Shares from the assumed conversion of
outstanding warrants, options and the effect of the conversion of
the Class A Preferred Stock and Class B Preferred Stock are
omitted from the computations because the effect would be
antidilutive.
<PAGE>
Item 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
Results of Operations
---------------------
Revenues from operations for the three months ended December 31,
1995 decreased by 15% as compared to the same period in 1994.
This decrease is primarily attributed to the loss of revenues
from the Company's Osteo services operation which was licensed to
Merck & Co., Inc. ("Merck") in September 1995 pursuant to a
Technology License Agreement (the "Merck License Agreement") with
Merck. Pursuant to the terms of the Merck License Agreement, the
Company will begin to receive royalties in the amounts specified
in the Merck License Agreement on OsteoGram(R) tests sold by
Merck on or after January 1, 1996, the beginning of the Company's
second fiscal quarter.
ECG services and product sale revenues increased by $23,000 or 5%
for the quarter ended December 31, 1995 over revenues for the
same period in the prior fiscal year and the Company earned
interest income of $74,000 on the Company's average $5 million
balance in marketable securities. Rental income from IRSCO
Development Company, Inc. ("Irsco"), the Company's wholly-owned
subsidiary, declined modestly as compared to prior periods. The
Board of Directors of Irsco had determined that it is in Irsco's
and the Company's best interests to allow the property held by
Irsco (the "Irsco Property") to be sold in foreclosure
proceedings. The foreclosure proceedings were instituted upon
the default by Irsco on the payment of indebtedness evidenced by
certain deeds of trust (the "Deeds of Trust"). The Deeds of
Trust are secured by the Irsco Property. The Company does not
believe that the sale of the Irsco Property in foreclosure
proceedings will have a material strategic impact on the
development of the Company's core business because Irsco was not
related to the Company's core medical systems business.
Net loss from operations for the first quarter was $649,000 or
$0.08 per share compared to a loss of $329,000 or $0.07 per share
for the same period in 1994. The loss for first quarter of 1996
increased by $320,000 or 66% compared to the prior quarter
primarily as the result of a $117,000 increase in research and
development and $100,000 increase in legal expenses as a result
of certain securities class action lawsuits and a derivative
lawsuit filed against the Company.
Financial Condition and Liquidity
---------------------------------
The Company included in current assets at December 31, 1995
approximately $5 million in marketable securities primarily as
the result of the Company's August 1995 private placement of $5.1
million worth of its Common Stock. At December 31, 1995, the
ratio of current assets to current liabilities was 1.1 to 1.0 as
compared to 2.7 to 1.0 at September 30, 1995. This decrease in
the ratio resulted from the classification as a current asset of
the Secured Promissory Note in the amount of $2,963,765, dated
December 31, 1986 (the "Note"), in favor of Principal Mutual Life
Insurance Company, due December 1, 1996. The Note was
reclassified as a result of a default by Irsco on the payment of
the indebtedness evidenced by the Note. The Note, like the Deeds
of Trust, is secured by the Irsco Property. The Company has
incurred $669,000 in current liabilities related to the payment
of the Deeds of Trust. Irsco's revenues in fiscal year 1995 were
$431,000 and costs were $419,000, excluding $197,000 of
depreciation. After the sale of the Irsco Property in
foreclosure, the Company expects the ratio of current assets to
current liabilities to move closer to the ratio that existed at
September 30, 1995 because current liabilities relating to the
Irsco Property will be removed from the consolidated balance
sheet of the Company and subsidiaries as a result of such sale.
The Company's primary capital resource commitments at December
31, 1995 consist of the remaining lease commitments, primarily
for computer equipment and certain commitments resulting from
liabilities assumed pursuant to the Irsco acquisition. The
Company currently does not have, and does not anticipate
significant commitments for capital expenditures.
For the last few years, the Company has financed its operations
primarily through private and public sales of securities, and
revenues from sales of its services. Since August 1991 the
Company received net proceeds of approximately $10,400,000 from
the private and public sale of equity securities. The Company
believes that as a result of the private placement of $5.1
million worth of its Common Stock in August 1995, it has enough
capital for at least the next 24 months. The Company may,
however, raise additional capital through the sale of its
securities.
The Company's ongoing research and development activities
associated with Detoxahol(TM) and the second generation
OsteoSystem technology and the current manufacture of its ECG
terminals are all subject to federal, state, local and in some
instances, foreign authorities. In June the Company filed patent
applications on Detoxahol(TM). Subject to obtaining such
patents, the Company would seek strategic partners to help fund
the research and development of Detoxahol(TM) at the University
of Georgia. The regulatory approval process for Detoxahol(TM)
can take years and require expenditure of substantial resources.
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(b) Reports on Form 8-K
On October 17, 1995, the Company filed a Current Report
on Form 8-K for an event of September 7, 1995,
disclosing in Item 5 thereof facts relating to the
Merck License Agreement.
On October 24, 1995, the Company filed a Current Report
on Form 8-K for an event of October 18, 1995,
disclosing in Item 5 thereof that certain securities
class action complaints had been filed against the
Company.
On December 8, 1995, the Company filed a Current Report
on Form 8-K for an event of October 24, 1995,
disclosing in Item 5 thereof that additional securities
class action complaints and one derivative complaint
had been filed against the Company.
On December 29, 1995, the Company filed a Current
Report on Form 8-K for an event of November 29, 1995,
disclosing in Item 5 thereof that Irsco had defaulted
on certain deeds of trust which are secured by the
Industrial Park owned by Irsco.
<PAGE>
SIGNATURES
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.
COMPUMED, INC.
-----------------------------------
(Registrant)
/s/ Rod N. Raynovich
-----------------------------------
Rod N. Raynovich
President
/s/ DeVere B. Pollom
----------------------------------
DeVere B. Pollom
Chief Financial Officer
Date: February 14, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM COMPUMED,
INC. FORM 10-Q FOR THE QUARTER ENDED DECEMBER 31, 1995 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> DEC-31-1995
<CASH> 24,000
<SECURITIES> 5,017,000
<RECEIVABLES> 626,000
<ALLOWANCES> 211,000
<INVENTORY> 112,000
<CURRENT-ASSETS> 5,709,000
<PP&E> 7,675,000
<DEPRECIATION> 3,601,000
<TOTAL-ASSETS> 10,159,000
<CURRENT-LIABILITIES> 5,160,000
<BONDS> 0
6,000
0
<COMMON> 83,000
<OTHER-SE> 4,750
<TOTAL-LIABILITY-AND-EQUITY> 10,159,000
<SALES> 578,000
<TOTAL-REVENUES> 652,000
<CGS> 324,000
<TOTAL-COSTS> 397,000
<OTHER-EXPENSES> 904,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 85,000
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 649,000
<EPS-PRIMARY> (.08)
<EPS-DILUTED> 0
</TABLE>
