AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON
SEPTEMBER 28, 1998
REGISTRATION NO. 333-[ ]
=================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------------
COMPUMED, INC.
(Exact name of Registrant as specified in its Charter)
DELAWARE 5047 95-2860434
-------- ---- -----------
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NO.)
INCORPORATION OR CLASSIFICATION
ORGANIZATION) CODE NO.)
-------------------------
1230 ROSECRANS AVENUE, SUITE 1000
MANHATTAN BEACH, CALIFORNIA 90266
(310) 643-5106
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF PRINCIPAL EXECUTIVE OFFICES)
-------------------------
JAMES LINESCH
PRESIDENT AND CHIEF EXECUTIVE OFFICER
COMPUMED, INC.
1230 ROSECRANS AVENUE, SUITE 1000
MANHATTAN BEACH, CALIFORNIA 90266
(310) 643-5106
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
COPIES TO:
BRUCE A. RICH, ESQ.
THELEN REID & PRIEST LLP
40 WEST 57TH ST.
NEW YORK, NEW YORK 10019
(212) 603-6780
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: FROM TIME
TO TIME AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT
AS DETERMINED BY MARKET CONDITIONS AND OTHER FACTORS.
IF THE ONLY SECURITIES BEING REGISTERED ON THIS FORM ARE
BEING OFFERED PURSUANT TO DIVIDEND OR INTEREST REINVESTMENT
PLANS, PLEASE CHECK THE FOLLOWING BOX. [ ]
IF ANY OF THE SECURITIES BEING REGISTERED ON THIS FORM ARE
TO BE OFFERED ON A DELAYED OR CONTINUOUS BASIS PURSUANT TO RULE
415 UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OTHER THAN SECURITIES OFFERED ONLY IN CONNECTION WITH
DIVIDEND OR INTEREST REINVESTMENT PLANS, CHECK THE FOLLOWING
BOX.[X]
IF THIS FORM IS FILED TO REGISTER ADDITIONAL SECURITIES FOR
AN OFFERING PURSUANT TO RULE 462(B) UNDER THE SECURITIES ACT,
PLEASE CHECK THE FOLLOWING BOX AND LIST THE SECURITIES ACT
REGISTRATION STATEMENT NUMBER OF THE EARLIER EFFECTIVE
REGISTRATION STATEMENT FOR THE SAME OFFERING.
[ ]
-----------------
IF THIS FORM IS A POST-EFFECTIVE AMENDMENT FILED PURSUANT TO
RULE 462(C) UNDER THE SECURITIES ACT, CHECK THE FOLLOWING BOX AND
LIST THE SECURITIES ACT REGISTRATION STATEMENT NUMBER OF THE
EARLIER EFFECTIVE REGISTRATION STATEMENT FOR THE SAME OFFERING.
[ ]
-----------------
IF DELIVERY OF THE PROSPECTUS IS EXPECTED TO BE MADE
PURSUANT TO RULE 434, PLEASE CHECK THE FOLLOWING BOX. [ ]
CALCULATION OF REGISTRATION FEE
=================================================================
TITLE OF PROPOSED
EACH MAXIMUM PROPOSED
CLASS OF OFFERING MAXIMUM
SECURITIES AMOUNT TO PRICE AGGREGATE AMOUNT OF
TO BE BE PER OFFERING REGISTRATION
REGISTERED REGISTERED UNIT(1) PRICE(1) FEE(3)
Common
Stock, par
value $.01
per share(2) 1,925,000 $3.00 $5,775,000 $1,703.63
=================================================================
(1) ESTIMATED SOLELY FOR PURPOSES OF CALCULATING THE
REGISTRATION FEE PURSUANT TO RULE 457.
(2) ISSUABLE UPON EXERCISE OF WARRANTS. INCLUDES, PURSUANT TO
RULE 416, AN ADDITIONAL AMOUNT OF SHARES OF COMMON STOCK BY
VIRTUE OF THE ANTI-DILUTION PROVISIONS OF THE WARRANTS.
(3) IN ACCORDANCE WITH RULE 457(G), THE REGISTRATION FEE FOR
THESE SHARES IS CALCULATED UPON A PRICE WHICH REPRESENTS THE
HIGHEST OF (I) THE PRICE AT WHICH THE WARRANTS MAY BE
EXERCISED; (II) THE OFFERING PRICE OF SECURITIES OF THE SAME
CLASS INCLUDED IN THIS REGISTRATION STATEMENT; OR (III) THE
PRICE OF SECURITIES OF THE SAME CLASS, AS DETERMINED
PURSUANT TO RULE 457(C).
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON
SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE
DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH
SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL
THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OR UNTIL THE REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT
TO SAID SECTION 8(A), MAY DETERMINE.
<PAGE>
PRELIMINARY PROSPECTUS
SUBJECT TO COMPLETION, DATED SEPTEMBER 28, 1998
1,925,000 SHARES OF COMMON STOCK
($.01 PAR VALUE)
COMPUMED, INC.
COMMON STOCK
This Prospectus relates to the offering by CompuMed, Inc., a
Delaware corporation (the "Company"), of up to 1,925,000 shares
of Common Stock, $.01 par value per share (the "Common Stock"),
issuable upon exercise of up to 1,925,000 of the Company's Common
Stock Purchase Warrants (the "Warrants"). The Warrants entitle
the holders thereof to purchase shares of Common Stock at a price
per share of $3.00, subject to customary antidilution
adjustments. Each Warrant may be exercised until 5:00 p.m.,
Pacific Time, on January 26, 2003.
The Warrants have, or will be, issued in connection with a
Final Judgment and Order of Dismissal, dated January 26, 1998,
approving a Stipulation and Settlement of Class Action and
Derivative Claims, dated as of August 7, 1997 (the "Settlement
Agreement"), relating to securities class action lawsuits filed
in 1995 against the Company and certain of its current and former
officers and directors.
The Warrants were issued under a Warrant Agreement, dated as
of February 27, 1998 (the "Warrant Agreement"), between the
Company and U.S. Stock Transfer Corporation, as Warrant Agent
(the "Warrant Agent").
The Company will receive proceeds from the exercise of the
Warrants, but not from the sale of the underlying Common Stock.
See "USE OF PROCEEDS."
All expenses of the registration of the shares of the
Company's Common Stock issuable upon exercise of the Warrants,
estimated to be $32,000, are to be borne by the Company.
The Warrants are to be traded on the OTC Bulletin Board.
The Company expects that the Warrants will not be actively
traded.
The Company's Common Stock is quoted on the Nasdaq SmallCap
Market under the symbol CMPD. On September 23, 1998, the closing
bid price for the Company's Common Stock was $0.44 per share of
Common Stock. See "MARKET PRICE INFORMATION."
AN INVESTMENT IN THESE SECURITIES INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" ON PAGES [ ] THROUGH [ ] HEREOF.
-------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is , 1998
--------
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR
AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES
HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE
ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL
OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY
SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER,
SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR
QUALIFICATION UNDER THE SECURITIES LAWS OF ANY STATE.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational
requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and in accordance therewith files reports
and other information with the Securities and Exchange Commission
(the "SEC"). Such reports and other information can be inspected
and copied at the Public Reference Section of the SEC at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549;
or at its offices at Northwest Atrium Center, 500 West Madison
Street, 14th Floor, Chicago, IL 60661; or Seven World Trade
Center, 13th Floor, New York, NY 10048. Copies of this material
can also be obtained at prescribed rates by writing to the Public
Reference Section of the SEC at its principal office at Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. The SEC
maintains a Web site (http://www.sec.gov) that contains reports,
proxy statements and other information regarding registrants that
file electronically with the SEC, including the Company. The
Common Stock of the Company is quoted on the Nasdaq SmallCap
Market. In addition, copies of this material and other
information are provided to Nasdaq and can be inspected at the
Nasdaq offices maintained at the National Association of
Securities Dealers, Inc., 1735 "K" Street, Washington, D.C.
20006.
This Prospectus constitutes a part of a Registration
Statement on Form S-3 (together with all amendments and exhibits
thereto, the "Registration Statement") filed by the Company with
the SEC under the Securities Act. This Prospectus omits certain
information contained in the Registration Statement, and
reference is hereby made to the Registration Statement and to the
exhibits relating thereto for further information with respect to
the Company and the Shares offered hereby. In addition, certain
information filed by the Company with the SEC has been
incorporated herein by reference, see "INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE." Any statements contained herein
concerning the provisions of any document are not necessarily
complete, and, in each instance, reference is made to the copy of
such document filed as an exhibit to the Registration Statement
or otherwise filed with the SEC. Each such statement is
qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, filed by the Company with the SEC,
are hereby incorporated by reference in this Prospectus:
1. Description of the Common Stock contained in the
Registration Statement on Form SB-2, filed on March
5, 1996.
2. Annual Report on Form 10-KSB for the fiscal year ended
September 30, 1997.
3. Proxy Statement, dated April 1, 1998, for an Annual
Meeting of Stockholders held on May 1, 1998.
4. Quarterly Report on Form 10-QSB for the quarter ended
December 31, 1997.
5. Quarterly Report on Form 10-QSB for the quarter ended
March 31, 1998.
6. Quarterly Report on Form 10-QSB for the quarter ended
June 30, 1998.
7. Report on Form 8-K for an event of December 24, 1997.
8. Report on Form 8-K for an event of January 30, 1998.
9. Report on Form 8-K for an event of March 31, 1998.
All documents filed by the Company with the SEC
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act
subsequent to the date of this Prospectus and prior to the
termination of the offering of the securities covered by this
Prospectus shall be deemed to be incorporated by reference in
this Prospectus and to be a part hereof from the date of filing
such documents.
Any statement contained in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for the purposes of this Prospectus to
the extent that a statement contained herein or in any other
subsequently filed document which is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this
Prospectus.
The Company undertakes to provide without charge to
each person to whom this Prospectus is delivered, upon request of
any such person, a copy of any and all of the documents referred
to above which have been or may be incorporated by reference in
this Prospectus other than the exhibits thereto. Requests for
such copies should be directed to the Company at 1230 Rosecrans
Avenue, Suite 1000, Manhattan Beach, California 90266, Attn:
James Linesch, President; telephone (310) 643-5106.
THE COMPANY
The Company is a medical information technology and service
company focused on the diagnosis, monitoring and management of
costly, high incidence diseases, particularly cardiovascular
disease and osteoporosis. The primary focus of the Company's
business is (i) the ongoing development of its osteoporosis
testing technology and (ii) the computer interpretation of
electrocardiograms ("ECGs"). The Company applies advanced
computing, medical imaging, telecommunications and networking
technologies to provide medical professionals and patients with
affordable, point-of-care solutions for disease risk assessment
and decision support.
The Company was incorporated in the State of Delaware on
July 21, 1986. The address and telephone number of the Company's
principal executive offices are 1230 Rosecrans Avenue, Suite
1000, Manhattan Beach, California 90266, telephone (310) 643-
5106.
RECENT DEVELOPMENTS
The OsteoView(R) and OsteoGram(R). The Company's research
and development efforts are currently focused primarily on
producing automated software for bone density analysis (second
generation OsteoGram(R)). The software may be applied to a
computer-digitized image of the bone from a radiograph (x-ray),
or a bone image may be acquired directly in digital form using a
stand-alone bone densitometer under development, the
OsteoView(R). The OsteoView(R) device will utilize a low-dose
x-ray source and a digital detector to determine bone density
from a measurement of the fingers and the wrist. The OsteoView(R)
will utilize amorphous silicon as its detector which will produce
a high resolution digital x-ray image. The Company is seeking to
first introduce the automated software (OsteoGram(R)) to be used
with a personal computer and a desktop scanner. The software
will then be integrated into the proposed OsteoView(R) device, to
be developed in conjunction with a partner. A partner has not
yet been identified. See "RISK FACTORS." A development team has
been assembled which includes the University of Massachusetts
Medical Center ("UMMC") and specialized high technology vendors
for certain aspects of this project. During the 1997 fiscal
year, the Company developed a prototype model for illustrating
the proposed design of this device. The Company coordinates and
funds the development efforts of the project members and intends
to retain primary rights to the completed product.
Sales of Preferred Stock. Between December 24, 1997 and
March 31, 1998, the Company placed an aggregate of 35,000 shares
of its Class C 7% Convertible Preferred Stock (the "Class C
Preferred Stock") at a purchase price of $100 per share, or an
aggregate purchase price of $3,500,000. The Class C Preferred
Stock was issued in two series, the Series 1 Class C 7%
Convertible Preferred (the Series C-1 Preferred Stock") and the
Series 2 Class C 7% Convertible Preferred Stock (the "Series C-2
Preferred Stock"). The major difference between the two series
is the conversion price discount.
Each share of Class C Preferred Stock is convertible at the
option of the Selling Stockholder into the number of Common Stock
as is determined by dividing (A) $100 by (B) the respective
Conversion Price in effect at the time of conversion for each
series. The Conversion Price for the Series C-1 Preferred Stock
is equal to the lesser of: (a) $1.51 or (b) the product of (i)
.75 and (ii) the average closing bid price, as reported on the
Nasdaq SmallCap Market (or on such national securities exchange
or automated trading system on which the Common Stock is then
primarily traded), of the Common Stock for the ten (10)
consecutive trading days immediately preceding the date (the
"Notice Date") on which a notice is received by the Company from
the holder desiring to convert his Series C-1 Preferred Stock.
The Conversion Price for the Series C-2 Preferred Stock is equal
to the lesser of: (a) $1.34 or (b) the product of (i) .80 and
(ii) the average closing bid price, as reported on the Nasdaq
SmallCap Market on such national securities exchange or automated
trading system on which the Common Stock is then primarily
traded), of the Common Stock for the ten (10) consecutive trading
days immediately preceding the Notice Date.
Upon conversion of the Class C Preferred Stock, the holder
of the Class C Preferred Stock will also obtain one Placement
Warrant (the "Placement Warrants") for the purchase of one share
of Common Stock for each share of Common Stock into which the
Class C Preferred Stock is converted, exercisable for three years
at an exercise price equal to the conversion price of such
Class C Preferred Stock.
Pursuant to the Securities Purchase Agreements for the Class
C Preferred Stock, the Company entered into a Registration Rights
Agreement with each of the purchasers of Class C Preferred Stock
under which the Company agreed to file a registration statement
with the SEC covering the Common Stock underlying the Class C
Preferred Stock and the Placement Warrants. The Company filed
such a registration statement on January 23, 1998, which
registration statement was declared effective by the SEC on
February 6, 1998.
As of August 31, 1998, 23,350 shares of Class C Preferred
Stock were converted into 3,294,182 shares of Common Stock.
Termination of Merck License Agreement. Effective September
22, 1995, the Company entered into a Technology License Agreement
(the "License Agreement") with Merck & Co., Inc. ("Merck")
pursuant to which Merck was granted a perpetual, exclusive
license of the Osteogram(R) and the Company was to receive a
royalty payment for each Osteogram(R) test sold by Merck to a
physician during the years 1996 through 2000, subject to certain
caps, at which time the royalties would cease. Through September
30, 1997, the Company had earned cumulative royalties on
approximately 70,000 Osteogram(R) tests amounting to gross
proceeds of $155,000. Merck had the right to terminate the Merck
License Agreement at any time. By letter, dated January 7, 1998,
Bone Measurement Institute ("BMI"), the assignee of Merck's
interest under the License Agreement and a non-profit wholly-
owned subsidiary of Merck, gave notice of cancellation of the
License Agreement effective March 31, 1998. BMI ceased
performance of tests using the licensed technology on February
27, 1998, and returned the licensed technology to the Company on
March 31, 1998. On June 17, 1998, the Company reached an
agreement with Merck to obtain the software enhancements,
laboratory equipment, regulatory and clinical work products,
intellectual property rights, copyrights, trademarks, marketing
materials and artwork, and other substantial assets purchased or
developed by Merck to support the OsteoGram(R).
Cessation of Development of Detoxahol(TM). In March 1994,
the Company acquired the rights to a potential new pharmaceutical
product called Detoxahol(TM), a substance intended to facilitate
the rapid lowering of blood alcohol of people who have been
drinking alcohol. In June 1995, a patent application was filed
on behalf of the Company covering the technology underlying
Detoxahol(TM). The Company was developing Detoxahol(TM)
technology pursuant to certain agreements with the University of
Georgia. The Company now has ceased its development of
Detoxahol(TM) technology and there is no assurance that the
Company will commence development in the future or that if any
Detoxahol(TM) product is ultimately developed by the Company such
product will be cleared by the appropriate regulatory agencies.
The Company is currently seeking a development partner for this
product, however, there is no assurance that such a partner will
be secured. Significant further research and development,
including clinical testing, as well as obtaining necessary
regulatory clearances, are required before the Company could
produce a marketable Detoxahol(TM) product.
RISK FACTORS
An investment in the Common Stock involves a high degree of
risk and, therefore, should be considered extremely speculative.
It should not be purchased by persons who cannot afford the
possibility of the loss of their entire investment. Prospective
investors should consider carefully among other risk factors, the
risk factors and other special considerations relating to the
Company and this offering set forth below. The discussion in
this Prospectus contains, in addition to historical information,
certain forward-looking statements that involve risks and
uncertainties, such as statements of the Company's plans,
beliefs, expectations and intentions. The Company's actual
results could differ materially from the results discussed in the
forward-looking statements. Factors that could cause or
contribute to such differences include the following risk
factors, as well as factors discussed elsewhere in this
Prospectus. The cautionary statements made in this Prospectus
should be read as being applicable to all related forward-looking
statements wherever they appear in this Prospectus.
FINANCIAL RISKS
History of Losses. The Company's operations incurred net
losses of approximately $2,202,000 in 1993, $3,864,000 in 1994,
$3,390,000 in 1995, $4,647,000 in 1996, and $2,214,000 in 1997.
The Company's retained deficit at September 30, 1997 was
$26,393,000. For the nine months ended June 30, 1998, the
Company incurred net losses of $1,218,000 and anticipates that it
will continue to incur net losses during the remaining three
months of the 1998 fiscal year and thereafter due to future
research and development costs and corporate costs. It should
also be noted that while net losses were lower in fiscal 1997
than in fiscal 1996, net revenues were also reduced from
$2,344,000 in 1996 to $1,939,000 in 1997. See "SUMMARY
FINANCIAL INFORMATION."
No Assurance of Future Sources of Capital to Support and
Grow Business. The Company will require capital to finance its
continued investment in research and development of the OsteoView
and to support and grow its existing ECG systems. Although the
Company believes it has sufficient capital to fund these
activities for at least the next 12 months, inasmuch as the
Company expects to incur additional operating losses, there can
be no assurance that the Company will have adequate working
capital to fund all of these activities thereafter. Further, the
sale or issuance of additional equity or convertible debt
securities could result in additional dilution to the Company's
stockholders. See "Market Risks -- Shares Eligible for Future
Sale." There can be no assurance that additional financing, if
required, will be available when needed or, if available, will be
on terms acceptable to the Company.
BUSINESS AND REGULATORY RISKS
Lack of Acceptance of the OsteoGram(R). Management had
expected that a significant portion of the Company's future
revenues would come from royalties under the License Agreement
with Merck. As discussed above, the royalty revenues received
were not significant and the License Agreement was cancelled
effective March 31, 1998. See "THE COMPANY - Recent
Developments."
The Company intends to market the second generation
OsteoGram(R) software in the future, however, this method of
testing bone mass is currently at an early stage in market
development and is not widely recognized by the medical
profession and the public. Education of the medical profession
and public of the OsteoGram(R)'s effectiveness, low cost, ease of
use and lack of any need for specialized capital equipment to
administer the test remains vital to the success of the
OsteoGram(R). In addition, other obstacles, such as competition
with other companies that are better known and financed than the
Company, may impede the OsteoGram(R)'s acceptance.
FDA Regulation. The Company's medical devices, medical
services and potential pharmaceutical products are subject to
varying degrees of FDA regulation. The FDA Office of Medical
Devices regulates the safety and efficacy of medical devices.
All medical devices and their components are subject to certain
general controls, including compliance with specified
manufacturing practices. Manufacturers are required to provide
the FDA with advance notice of their intention to introduce and
market new medical devices and demonstrate such devices' safety
and efficacy to the FDA's satisfaction prior to commencement of
their commercial use. The Company has not filed for FDA approval
for the second generation OsteoGram(R) software or for the
OsteoView(R) device. Therefore, ultimate 510(k) approval is not
assured.
Medical Reimbursement Program. The OsteoGram(R) and ECG
services are approved for reimbursement by Medicare and most
other third party payors. Most payments for these services are
made by the medical insurance carrier of the patients.
Government regulation may change at any time and Medicare
reimbursements for the Osteogram(R) or ECG services may be
withdrawn or reduced. Further, should Medicare reimbursement
programs be significantly reduced or should other regulatory
changes affect the ability of physicians or the Company to
recover the cost of OsteoGram(R) tests or ECG services, the
Company's ability to market and sell its products would be
adversely affected.
Development of the OsteoView(R). The Company is currently
seeking joint venture partners for the development, manufacture
and marketing of the OsteoView(R). Such partners may not be
secured and the development costs could be substantial in
relation to the Company's available cash resources and the
development period could be longer than that presently
anticipated by the Company. There is no assurance that the
OsteoView(R) can be commercially developed and even if so, that
it would be profitable
Lack of Patent Protection. The Company had licensed its
proprietary technology in the OsteoGram(R) to Merck in reliance
on trade secret protection for the OsteoGram(R) and considers the
software to process the OsteoGram(R) to be proprietary. With the
cancellation of the License Agreement, the proprietary technology
has been returned to the Company. See "THE COMPANY - Recent
Developments." Notwithstanding the termination of the License
Agreement, Merck remains bound by the confidentiality provisions
of the agreement. However, such protection may not preclude
competitors from developing products which can be marketed in
competition with the OsteoGram(R). The Company intends to file
for patents as improvements are made to the OsteoSystem or as the
OsteoView(R) is developed. There can be no assurance that patent
applications, if filed, will result in issued patents or that
patents, if issued will not be circumvented or invalidated.
Moreover, there is no assurance that the Company is not
infringing the patents of third parties.
Competition. The primary businesses in which the Company
engages, testing for bone density and sales and processing of
ECGs, are highly competitive. There are other companies with
substantially greater market recognition and financial and
development resources than those of the Company which are engaged
in the marketing of products similar to and which compete with
the OsteoGram(R) and the Company's ECG terminals. Many radiology
centers (in hospitals and free standing) also consider themselves
competitors of the Company, because of their capital investments
in expensive bone scanning equipment. In addition, and
particularly in regard to the OsteoGram(R), physicians and other
prominent members of the medical community frequently are
reluctant to accept new products until their contribution to
health care has been established over an extended period of time.
Should the Company successfully develop a marketable product
using the OsteoView(R) technology, it would be subject to these
same risks. In addition, there is no assurance that other
companies with competing technologies will not be approved for
reimbursement by Medicare and/or private insurance carriers.
New Products and Technological Change. The Company is in
the "high tech" end of the health care industry. This industry
has been historically marked by very rapid technological change
and frequent introductions of new products. Accordingly, the
Company's future growth and profitability depend in part on its
ability to continue to respond to technological changes and
successfully develop and market new products that achieve
significant market acceptance. There is no assurance that the
Company will be able to do so.
Dependence on Third Parties for Manufacturing, Marketing and
Research. The Company currently has no in house capability to
manufacture apparatus used in connection with the Osteoview(R),
the OsteoGram(R) or ECG services. The Company has entered into
arrangements with third parties for the manufacture of certain
apparatus used in connection with the Osteoview(R) and ECG
services. There can be no assurance that third party
manufacturers will be able to continue to meet the Company's
quantity and quality requirements for manufactured products.
Products Liability Exposure. The malfunction or misuse of
the medical devices assembled and sold and services rendered by
the Company may result in potential injury to physicians'
patients, thereby subjecting the Company to possible liability.
Although the Company's insurance coverage is $5,000,000 per
occurrence and $5,000,000 in the aggregate with a deductible of
$1,000, which amounts and deductibles are customary in the
industry, there can be no assurance that such insurance will be
sufficient to cover any potential liability. Furthermore, there
can be no assurance that this coverage will continue to be
available or, if available, that it can be maintained at
reasonable cost. To date, the Company has never been involved in
any litigation as a result of alleged product liability.
Professional Liability Exposure. The Company's current
liability insurance policy does not cover losses due to
misinterpreted overreads of ECG printouts by physicians retained
by the Company to provide such services. Medical professional
liability claims which may be brought against the Company for
misinterpreted overreads, which are not covered by or exceed the
coverage amount of a medical professional liability insurance
policy held by the physician performing the overread, could have
a material adverse effect on the Company's business, financial
condition or operating results. Since commencing its ECG
services, no medical professional liability claims have been made
against either physicians who perform overreads for the Company
or the Company with respect to misinterpreted overreads.
Dependence on Key Personnel. The Company is dependent upon
the continued services of James Linesch who since August 1997 has
been the President and Chief Executive Officer as well as
continuing as Chief Financial Officer and Secretary. Robert B.
Goldberg acts as the Chairman of the Board. The Company is
seeking to retain additional executive officers, however, there
is no assurance that suitable persons can be attracted to the
Company for such positions and thereafter retained.
MARKET RISKS
Securities Market Volatility. The trading price of the
Company's Common Stock is subject to wide fluctuations in
response to variations in operating results of the Company,
actual or anticipated announcements of technical innovations or
new products by the Company or its competitors or alliances
formed with other industry participants, general conditions in
the industry and the worldwide economy, and other events or
factors. Since October 1, 1995, the Company's stock traded from
a high of $19.13 to a low of $0.50. See "MARKET PRICE
INFORMATION." In addition, there have been periods of extreme
volatility in the stock markets, which in many cases were
unrelated to the operating performance of, or announcements
concerning, the issuers of the affected stock. The Company's
Common Stock has at times been traded at a high volume and the
bid and asked prices for its Common Stock have fluctuated
significantly as a result of such volume. General market price
declines or market volatility or factors related to the general
economy or the Company in the future could adversely affect the
price of the Common Stock.
Absence of dividends. The Company has not paid a cash
dividend on its Common Stock since its inception. At the present
time, the Company's anticipated working capital requirements are
such that it intends to follow a policy of retaining any earnings
in order to finance the development of its business.
Dilution. The market price of the Common Stock is presently
in excess of net tangible book value, which was $.24 per share on
June 30, 1998. Investors who purchase Common Stock would absorb
immediate dilution in the net tangible book value per share of
Common Stock.
Shares Eligible for Future Sale. At June 30, 1998,
12,406,102 shares of the Company's Common Stock were outstanding.
In addition, (i) 7,200 shares of Common Stock are issuable upon
conversion of the outstanding Class A Preferred Stock and Class B
Preferred Stock, (ii) based on the average conversion rate for
the fiscal year to date, the Company estimates that 1,643,564
shares of Common Stock are issuable upon conversion of the
outstanding Class C Preferred Stock, along with warrants to
purchase an additional 1,643,564 shares of Common Stock, (iii)
1,574,123 shares of Common Stock are issuable upon the exercise
of outstanding stock options, (iv) 959,027 shares of Common Stock
are issuable upon the exercise of outstanding warrants, and (v)
770,000 shares of Common Stock and warrants exercisable for
1,925,000 shares of Common Stock are being issued in connection
with the finalization of the Settlement Agreement. The sale, or
availability for sale, of substantial amounts of Common Stock in
the public market could adversely affect the prevailing market
price of the Common Stock and could impair the Company's ability
to raise additional capital when needed through the sale of its
equity securities.
Risk of Losing Nasdaq SmallCap Market Listing. The
Company's Common Stock is listed on the Nasdaq SmallCap Market.
Nasdaq maintains certain requirements for the continued listing
on the Nasdaq SmallCap Market, including requirements that the
Common Stock have a minimum bid price of $1.00 per share; that
the Company either have net tangible assets of $2,000,000, market
capitalization of $35,000,000 or net income (in latest fiscal
year or 2 of last 3 fiscal years) of $500,000; and that the
market value of the public float be not less than $4,000,000.
The bid price has recently been less than $1.00 per share.
Should the Company fail to meet any of these requirements for the
requisite periods, it could be delisted from the Nasdaq SmallCap
Market. Trading, if any, in the listed securities would
thereafter be conducted on the OTC Electronic Bulletin Board or
the National Quotation Bureau's "pink sheets." As a result,
should delisting occur, an investor may find it difficult to
dispose of, or to obtain accurate quotations of the price of, the
Company's securities. This would severely limit the liquidity of
such shares, and would likely have a material adverse effect on
the market price of the Company's Common Stock and on the
Company's ability to raise additional capital.
Risks Relating to Low-Priced Stock; Possible Effect of
"Penny Stock" Rules on Liquidity for the Company's Securities.
If the Company's Common Stock ceases to be listed on the Nasdaq
SmallCap Market, the Common Stock would become subject to Rule
15g-9 under the Exchange Act. This Rule (the "Penny Stock Rule")
imposes additional sales practice requirements on broker-dealers
that sell such securities to persons other than established
customers and "accredited investors" (generally, individuals with
a net worth in excess of $1,000,000 or annual incomes exceeding
$200,000, or $300,000 together with their spouses). For
transactions covered by Rule 15g-9, a broker-dealer must make a
special suitability determination for the purchaser and have
received the purchaser's written consent to the transaction prior
to sale. Consequently, such Rule may affect the ability of
broker-dealers to sell the Company's securities and may affect
the ability of purchasers to sell any of the Company's securities
in the secondary market.
The SEC has adopted regulations that define a "penny stock"
to be any equity security that has a market price (as therein
defined) of less than $5.00 per share or with an exercise price
of less than $5.00 per share, subject to certain exceptions. For
any transaction involving a penny stock, unless exempt, the rules
require delivery, prior to any transaction in a penny stock, of a
disclosure schedule prepared by the SEC relating to the penny
stock market. Disclosure is also required to be made about sales
commissions payable to both the broker-dealer and the registered
representative and current quotations for the securities.
Finally, monthly statements are required to be sent disclosing
recent price information for the penny stock held in the account
and information on the limited market in penny stock.
The foregoing required penny stock restrictions will not
apply to the Company's Common Stock if the Company meets a
$2,000,000 minimum net tangible assets or, a $1.00 market price
or other Nasdaq rules. There can be no assurance that the
Company's Common Stock will qualify for exemption from the penny
stock restrictions. In any event, even if the Company's Common
Stock were exempt from such restrictions, the Company would
remain subject to Section 15(b)(6) of the Exchange Act, which
gives the SEC the authority to restrict any person from
participating in a distribution of penny stock, if the SEC finds
that such a restriction would be in the public interest.
If the Company's Common Stock were subject to the rules on
penny stocks, the market liquidity for the Company's Common Stock
could be materially adversely affected.
Antitakeover Effect of Certain Charter Provisions. Certain
provisions of the Company's Certificate of Incorporation and
Bylaws and of Delaware law could discourage potential acquisition
proposals and could delay or prevent a change in control of the
Company. Such provisions could diminish the opportunities for a
stockholder to participate in tender offers, including tender
offers at a price above the then current market value of the
Common Stock. Such provisions may also inhibit fluctuations in
the market price of the Common Stock that could result from
takeover attempts. In addition, the Board of Directors, without
further stockholder approval, may issue Preferred Stock that
could have the effect of delaying or preventing a change in
control of the Company. The issuance of Preferred Stock could
also adversely affect the voting power of the holders of Common
Stock, including the loss of voting control to others.
MARKET PRICE INFORMATION
The Company's Common Stock is included on the Nasdaq
SmallCap System under the symbol CMPD. The following table sets
forth, for the Company's fiscal years indicated, the quarterly
high and low closing bid prices for the Common Stock as reported
by Nasdaq for the periods indicated. These prices are based on
quotations between dealers, and do not reflect retail mark-up,
mark-down or commissions, and may not necessarily represent
actual transactions.
Common Stock High Low
------------ ---- ---
Fiscal 1996
-----------
First Quarter $ 19.13 $ 3.00
Second Quarter 5.06 2.31
Third Quarter 3.75 2.25
Fourth Quarter 2.63 .94
Fiscal 1997
-----------
First Quarter 1.94 .54
Second Quarter 1.38 .69
Third Quarter 1.22 .50
Fourth Quarter 3.09 .59
Fiscal 1998
-----------
First Quarter 2.09 1.34
Second Quarter 1.44 .78
Third Quarter 1.16 .75
Fourth Quarter .81 .38
(through September 23,
1998)
See the cover page of this Prospectus for the last sales price of
the Common Stock reported on the Nasdaq SmallCap Market as of a
recent date. Investors should check the market prices of the
Common Stock before making an investment decision with respect to
securities of the Company.
USE OF PROCEEDS
Assuming all the Warrants are exercised, the Company will
receive gross proceeds of $5,775,000, with net proceeds of
approximately $5,743,000. The proceeds to be received by the
Company upon the exercise of the Warrants will be utilized for
research and development, marketing and working capital purposes.
SUMMARY FINANCIAL INFORMATION
The following tables set forth historical consolidated
financial data of the Company for the fiscal years ended
September 30, 1997, September 30, 1996 and September 30, 1995.
The selected historical consolidated financial data for each of
the fiscal years presented below were derived from the
consolidated financial statements of the Company. This data
should be read in conjunction with the Company's financial
statements and "Management's Discussion and Analysis or Plan of
Operation" incorporated by reference herein to the Company's
Annual Report on Form 10-KSB for the fiscal year ended September
30, 1997 and the Quarterly Report on Form 10-QSB for the fiscal
quarter ended June 30, 1998.
STATEMENT OF OPERATIONS DATA:
YEAR ENDED SEPTEMBER 30
1995 1996
--------------------------
REVENUES:
ECG services . . . . . . . . $1,643,000 $2,008,000
Osteo royalty revenues . . . 327,000 37,000
Product sales . . . . . . . . 573,000 200,000
Rental property . . . . . . . 431,000 99,000
----------- -----------
2,974,000 2,344,000
COST OF SALES . . . . . . . . . 6,026,000 7,123,000
OTHER INCOME (EXPENSE) . . . . (338,000) 132,000
----------- -----------
NET LOSS . . . . . . . . . . .
$(3,390,000) $(4,647,000)
=========== ===========
NET LOSS PER SHARE . . . . . . $(.55) $(.54)
----------- -----------
Weighted average number of 6,150,500 8,534,276
common shares outstanding . . . =========== ===========
YEAR ENDED SEPTEMBER 30
NINE MONTHS
ENDED
1997 JUNE 30, 1998
------------- -------------
REVENUES:
ECG services . . . . . . . $1,674,000 $1,076,000
Osteo royalty revenues . . 119,000 42,000
Product sales . . . . . . . 146,000 242,000
Rental property . . . . . . -0- -0-
----------- -----------
1,939,000 1,360,000
COST OF SALES . . . . . . . . 4,222,000 2,629,000
OTHER INCOME (EXPENSE) . . . 69,000 51,000
----------- -----------
NET LOSS . . . . . . . . . . $(2,214,000) $1,218,000
=========== ===========
NET LOSS PER SHARE . . . . . $(.25) $(.19)
----------- -----------
Weighted average number of 8,965,045 10,391,952
common shares outstanding . . =========== ===========
BALANCE SHEET DATA:
SEPTEMBER 30, JUNE 30, 1998
-------------------- -------------
1996 1997
--------- ----------
CASH AND MARKETABLE
SECURITIES . . . . . . . $2,644,000 $931,000 $3,066,000
TOTAL ASSETS . . . . . . 3,978,000 1,776,000 3,831,000
TOTAL CURRENT LIABILITIES 942,000 756,000 703,000
TOTAL STOCKHOLDERS' 2,958,000 868,000 3,008,000
EQUITY . . . . . . . . .
DESCRIPTION OF WARRANT AND COMMON STOCK
The Company's authorized capital stock currently consists of
50,000,000 shares of Common Stock and 1,000,000 shares of
Preferred Stock, $.10 par value. As of August 31, 1998, the
Company had issued and outstanding 12,406,102 shares of Common
Stock, 8,400 shares of Class A $3.50 Cumulative Convertible
Voting Preferred Stock, 300 shares of Class B $3.50 Convertible
Voting Preferred Stock and 11,650 shares of Class C Preferred
Stock.
COMMON STOCK
Holders of the Company's Common Stock are entitled to one
vote per share on all matters submitted to a vote of stockholders
of the Company and to receive dividends when, as and if declared
by the Company's Board from funds legally available therefor.
Upon liquidation of the Company, holders of Common Stock are
entitled to share ratably in any assets available for
distribution to stockholders after payment of all obligations of
the Company and priority payments to any senior class of capital
stock. Holders of the Common Stock do not have cumulative voting
rights or preemptive, subscription or conversion rights.
WARRANTS
General. The Warrants were issued under the Warrant
Agreement. The description of the Warrant Agreement set forth
below does not purport to be complete and is qualified in its
entirety by reference to the Warrant Agreement.
Each Warrant initially entitles the holder thereof to
purchase one share of Common Stock at an exercise price of $3.00
(the "Exercise Price"). The Exercise Price and the number of
shares of Common Stock issuable upon the exercise of each Warrant
are subject to adjustment in certain events described below.
Each Warrant may be exercised on or after the issuance thereof
and until 5:00 p.m., Pacific time, on January 26, 2003 in
accordance with the terms of the Warrants and the Warrant
Agreement. To the extent that any Warrant remains outstanding
after such time, such unexercised Warrant will automatically
terminate.
Exercise. Warrants may be exercised by surrendering to U.S.
Stock Transfer Corporation, the Warrant Agent, a signed Warrant
certificate indicating the warrantholder's election to exercise
all or a portion of the Warrants evidenced by such certificate.
Surrendered certificates must be accompanied by payment of the
aggregate Exercise Price in respect of the Warrants to be
exercised, which payment may be made in cash or by certified or
official bank check payable to the order of the Company. No
adjustments as to cash dividends with respect to the Common Stock
will be made upon any exercise of Warrants.
If fewer than all the Warrants evidenced by any certificate
are exercised, the Warrant Agent will deliver to the exercising
warrantholder a new Warrant certificate representing the
unexercised Warrants. The Company will not be required to issue
fractional shares of its Common Stock upon exercise of any
Warrant, and in lieu thereof will pay an amount equal to the same
fraction of the current market value per share of Common Stock,
determined as provided in the Warrant Agreement.
Antidilution and Exercise Price Adjustments. The number of
shares of Common Stock purchasable upon the exercise of each
Warrant and the Exercise Price are subject to adjustment in
connection with (a) the issuance of a stock dividend to holders
of Common Stock, or a combination or subdivision of Common Stock,
and (b) certain distributions by the Company to the holders of
Common Stock of evidences of indebtedness or of its assets
(excluding cash dividends or distributions out of earnings or out
of surplus legally available for dividends) or of convertible
securities, all as set forth in the Warrant Agreement.
Notwithstanding the foregoing, no adjustment in the Exercise
Price will be made until cumulative adjustments require an
adjustment of at least $.05.
In case of any reclassification, capital reorganization or
other change to the Common Stock, or any consolidation or merger
of the Company with or into another corporation, or any sale or
conveyance of the property of the Company as an entirety or
substantially as an entirety, the Warrant Agreement will require
that effective provisions will be made so that each holder of an
outstanding Warrant will have the right thereafter to exercise
his or her Warrant for the kind and amount of securities and
property receivable in connection with such reclassification,
capital reorganization, consolidation, merger or sale by a holder
of the number of shares of Common Stock for which such Warrants
were exercisable immediately prior thereto. Furthermore, if the
Company grants to the holders of Common Stock rights or warrants
or options to purchase the Company's Common Stock or securities
convertible into or exchangeable or exercisable for Common Stock,
the Company shall concurrently grant to each warrantholder the
rights, warrants or options to which such warrantholder would
have been entitled if such warrantholder were the holder of the
number of shares of Common Stock then issuable upon exercise of
his or her Warrants.
Other Public Warrants. In addition to the Warrants, the Company
also has outstanding certain other Common Stock purchase warrants
issued in August 1992 which allow the holders thereof to purchase
Common Stock at a price of $3.75 per share. All of such other
warrants are due to expire on August 2, 1999.
REPORTS
The Company furnishes to its stockholders and will furnish
to its warrantholders, after the close of each fiscal year, an
annual report containing audited financial statements. In
addition, the Company may furnish to its stockholders and
warrantholders such other reports as may be authorized, from time
to time, by its Board of Directors.
TRANSFER AGENT, REGISTRAR AND WARRANT AGENT
U.S. Stock Transfer Corporation, 1745 Gardena Avenue,
Glendale, California 91204, is the transfer agent, registrar and
Warrant Agent for the securities of the Company.
PLAN OF DISTRIBUTION
No underwriter is being utilized in connection with this
offering or with the exercise of the Warrants. The 1,925,000
shares of Common Stock are issuable upon exercise of the
Warrants.
The Company is registering the shares of Common Stock
issuable upon exercise of the Warrants and not the resale thereof
by the holders of the shares of Common Stock after such exercise.
LEGAL MATTERS
Certain legal matters in connection with the validity of the
shares of Common Stock offered hereby will be passed upon for the
Company by Thelen Reid & Priest LLP, New York, New York.
EXPERTS
The consolidated financial statements of the Company
appearing in its Annual Report on Form 10-KSB for the two fiscal
years ended September 30, 1997 have been audited by Ernst & Young
LLP, independent auditors, to the extent indicated in their
report thereon included therein and incorporated herein by
reference. Such consolidated financial statements are
incorporated herein by reference in reliance upon such report
given upon the authority of such firm as experts in accounting
and auditing.
<PAGE>
=============================== ===============================
No person is authorized in
connection with any offering
made hereby to give any informa-
tion or to make any
representation not contained in
this Prospectus, and, if given 1,925,000 Shares
or made, such information or of Common Stock
representation must not be
relied upon as having been
authorized by the Company or any
Underwriter. This Prospectus
does not constitute an offer to
sell or a solicitation of an
offer to buy any security other COMPUMED, INC.
than the shares of Common Stock
offered hereby, nor does it
constitute an offer to sell or a
solicitation of any offer to buy
any of the securities offered
hereby to any person in any
jurisdiction in which it is
unlawful to make such an offer
or solicitation. Neither the P R O S P E C T U S
delivery of this Prospectus nor
any sale made hereunder shall
under any circumstances create
any implication that the infor-
mation contained herein is
correct as of any date subse-
quent to the date hereof.
_____________, 1998
TABLE OF CONTENTS
PAGE
AVAILABLE INFORMATION . . . 2
INCORPORATION OF CERTAIN DOC-
UMENTS BY REFERENCE . . . . 2
THE COMPANY . . . . . . . . 3
RISK FACTORS . . . . . . . 4
MARKET PRICE INFORMATION . 9
USE OF PROCEEDS . . . . . . 9
SUMMARY FINANCIAL INFORMATION 10
DESCRIPTION OF WARRANT AND
COMMON STOCK . . . . . . . 11
PLAN OF DISTRIBUTION . . . 12
LEGAL MATTERS . . . . . . . 13
EXPERTS . . . . . . . . . . 13
=============================== ===============================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The estimated expenses of this offering in connection with the
issuance and distribution of the securities being registered, all
of which are to be paid by the Registrant, are as follows:
Registration Fee . . . . . . . . . . $ 1,703.63
Legal Fees and Expenses . . . . . . . 15,000.00
Accounting Fees and Expenses . . . . 9,500.00
Miscellaneous Expenses . . . . . . . 7,796.37
-----------
Total . . . . . . . . . . . . . . . $34,000.00
===========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article TENTH of the Certificate of Incorporation of the
Company and Article VI of the By-laws of the Company provide in
part that the Company shall indemnify its directors, officers,
employees and agents to the fullest extent permitted by the
General Corporation Law of the State of Delaware (the "DGCL").
Section 145 of the DGCL permits a corporation, among other
things, to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in
the right of the corporation), by reason of the fact that he is
or was a director, officer, employee or agent of the corporation,
or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against
expenses (including attorney's fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred in
connection with such action, suit or proceeding if he acted in
good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation, and, with
respect to any criminal action or proceeding, had no reasonable
cause to believe his conduct was unlawful.
A corporation also may indemnify any person who was or is a
party or is threatened to be made a party to any threatened,
pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the
fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other
enterprise against expenses (including attorneys' fees) actually
and reasonably incurred by him in connection with the defense or
settlement of such action or suit if acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best
interests of the corporation. However, in such an action by or
on behalf of a corporation, no indemnification may be made in
respect of any claim, issue or matter as to which the person is
adjudged liable to the corporation unless and only to the extent
that the court determines that, despite the adjudication of
liability but in view or all the circumstances, the person is
fairly and reasonably entitled to indemnity for such expenses
which the court shall deem proper.
In addition, the indemnification and advancement of expenses
provided by or granted pursuant to Section 145 shall not be
deemed exclusive of any other rights to which those seeking
indemnification or advancement of expenses may be entitled under
any by-law, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official
capacity and as to action in another capacity while holding such
office.
The Company has purchased and maintains insurance for its
officers and directors against certain liabilities, including
liabilities under the Securities Act. The effect of such insur-
ance is to indemnify any officer or director of the Company
against expenses, judgements, fines, attorney's fees and other
amounts paid in settlements incurred by him, subject to certain
exclusions. Such insurance does not insure against any such
amount incurred by an officer or director as a result of his own
dishonesty.
ITEM 16. EXHIBITS
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
3.1 Certificate of Incorporation of the Company
[Incorporated by reference to Exhibit 3.1 to the
Company's Registration Statement of Form S-1 (File
No. 33-46061), effective May 7, 1992]
3.2 Certificate of Amendment of Certificate of
Incorporation [Incorporated by reference to
Exhibit 3.1a to Amendment No. 1 to Post-Effective
Amendment No. 1 to the Company's Registration
Statement on Form S-2 (File No. 33-48437), filed
June 28, 1994]
3.3 Certificate of Amendment of Certificate of
Incorporation [Incorporated by reference to
Exhibit 3.1b to Amendment No. 2 to Post-Effective
Amendment No. 1 to the Company's Registration
Statement on Form S-2 (File No. 33-48437), filed
November 7, 1994]
3.4 Certificate of Correction of Certificate of Amend-
ment [Incorporated by reference to Exhibit 3.1c to
Amendment No. 2 to Post-Effective Amendment No. 1
to the Company's Registration Statement on Form S-
2 (File No. 33-48437), filed November 7, 1995]
3.5 Certificate of Designation of Class A Preferred
Stock [Incorporated by reference to Exhibit 4.5 to
the Company's Annual Report on Form 10-KSB for the
fiscal year ended September 30, 1995 (File No. 0-
14210)]
3.6 Certificate of Designation of Class B Preferred
Stock [Incorporated by reference to Exhibit 4.6 to
the Company's Annual Report on Form 10-KSB for the
fiscal year ended September 30, 1995 (File No. 0-
14210)]
3.7 Certificate of Designation of Class C 7%
Cumulative Convertible Preferred Stock
[Incorporated by reference to Exhibit 3.1 to the
Company's Form 8-K for an event of December 24,
1997]
3.8 Certificate of Correction for the Certificate of
Designation of Class C 7% Cumulative Convertible
Preferred Stock [Incorporated by reference to Ex-
hibit 3.2 to the Company's Form 8-K for an event
of December 24, 1997]
3.9 By-Laws of the Company, as currently in effect
[Incorporated by reference to Exhibit 3.2 to the
Company's Registration Statement on Form S-1 (File
No. 33-46061), effective May 7, 1992]
4.1 Form of Warrant Agreement and Warrant
[Incorporated by reference to Exhibit 4.5 to the
Company's Registration Statement on Form S-2 (File
No. 33-48437), effective August 3, 1992]
4.2 Specimen Common Stock Certificate [Incorporated by
reference to Exhibit 4.1 to the Company's
Registration Statement on Form S-1 (File No. 33-
46061), effective May 7, 1992]
4.3 Form of Preferred Stock Certificate [Incorporated
by reference to Exhibit 4.2 to the Company's
Registration Statement on Form S-1 (File No. 33-
46061), effective May 7, 1992]
4.4 Form of Warrant Agreement [Incorporated by refer-
ence to Exhibit 10.2 to the Company's Form 8-K
for an event of December 24, 1997]
4.5 Form of Registration Rights Agreement
[Incorporated by reference to Exhibit 10.3 to the
Company's Form 8-K for an event of December 24,
1997]
4.6 Warrant Agreement and Form of Warrant
[Incorporated by reference to Exhibits 1 and 1.1
to the Company's Form 8-A filed March 12, 1998]
4.7 Stipulation of Settlement of Class Action and
Derivative Claims dated as of August 12, 1997, in
Re CompuMed, Inc. Securities Litigation (without
exhibits) [Incorporated by reference to Exhibit
10.1 to the Company's Quarterly Report on Form 10-
QSB for the quarterly period ended December 31,
1997]
4.8 Final Judgment and Order of Dismissal, dated
January 26, 1998, in Re CompuMed, Inc. Securities
Litigation [Incorporated by reference to Exhibit
10.2 to the Company's Quarterly Report on Form 10-
QSB for the quarterly period ended December 31,
1997]
5.* Opinion of Thelen Reid & Priest LLP
23.1* Consent of Ernst & Young LLP
23.2* Consent of Thelen Reid & Priest LLP (included as
part of Exhibit 5)
24. Power of Attorney (included on p. II-5)
-------------------------
* Filed herewith.
ITEM 17. UNDERTAKINGS
UNDERTAKINGS REQUIRED BY REGULATION S-B, ITEM 512(A).
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration
Statement:
(i) to include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933, as amended (the "Securities Act").
(ii) to reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or the
most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the Registration State-
ment. Notwithstanding the foregoing, any increase or decrease
in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered)
and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of a pro-
spectus filed with the Commission pursuant to Rule 424(b) if,
in the aggregate, the change in volume and price represents no
more than a 20 percent change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table
in the effective registration statement.
(iii) to include any additional or changed material
information with respect to the plan of distribution.
(2) that, for the purpose of determining any liability under
the Securities Act, each such post-effective amendment shall be
deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities
at the time shall be deemed to be the initial bona fide
offering thereof.
(3) to remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
UNDERTAKING REQUIRED BY REGULATION S-B, ITEM 512(E).
Insofar as indemnification for liabilities arising under the
Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the provisions of its
Certificate of Incorporation, By-Laws, the DGCL or otherwise,
the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In event that a claim for
indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a
director, officer of controlling person of the Registrant in
the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in
connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Securities Act and will be governed by the final
adjudication of such issue.
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS
AMENDED, THE REGISTRANT CERTIFIES THAT IT HAS REASONABLE GROUNDS
TO BELIEVE THAT IT MEETS ALL OF THE REQUIREMENTS FOR FILING ON
FORM S-3 AND HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF MANHATTAN BEACH, AND STATE OF
CALIFORNIA, ON THE 25TH DAY OF SEPTEMBER, 1998.
<PAGE>
COMPUMED, INC.
BY: /S/ JAMES LINESCH
------------------------------------
James Linesch
President
POWER OF ATTORNEY
EACH DIRECTOR AND/OR OFFICER OF THE REGISTRANT WHOSE SIGNATURE
APPEARS BELOW HEREBY APPOINTS JAMES LINESCH AS HIS ATTORNEY-IN-
FACT TO SIGN IN HIS NAME AND BEHALF, IN ANY AND ALL CAPACITIES
STATED BELOW AND TO FILE WITH THE SEC, ANY AND ALL AMENDMENTS
(INCLUDING POST-EFFECTIVE AMENDMENTS) AND SUPPLEMENTS TO THIS
REGISTRATION STATEMENT.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOW-
ING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Robert B. Goldberg Chairman of the September 25, 1998
------------------ Board
Robert B. Goldberg
/s/ James Linesch President and Chief September 25, 1998
------------- Financial Officer
James Linesch
/s/ Herbert Lightstone Director September 25, 1998
------------------
Herbert Lightstone
/s/ John D. Minnick Director September 25, 1998
---------------
John D. Minnick
/s/ John Romm Director September 25, 1998
---------
John Romm
/s/ Robert Stuckelman Director September 25, 1998
-----------------
Robert Stuckelman
<PAGE>
EFFECTIVE DATED ___________, 1998
Information contained herein is subject to completion or
amendment. A registration statement relating to these securities
has been filed with the Securities and Exchange Commission.
These securities may not be sold nor may offers to buy be
accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell
or the solicitation of an offer to buy nor shall there be any
sale of these securities in any jurisdiction in which such offer,
solicitation, or sale would be unlawful prior to registration or
qualification under the securities laws of any such jurisdiction.
<PAGE>
EXHIBIT INDEX
Exhibit Page
------- ----
5 Opinion of Thelen Reid & Priest LLP
23.1 Consent of Ernst & Young LLP
23.2 Consent of Thelen Reid & Priest LLP (included as
part of Exhibit 5)
24. Power of Attorney (included on p. II-5)
Exhibit 5
Thelen Reid & Priest LLP
40 West 57th Street
New York, N.Y. 10019
(212) 603-6780
New York, New York
September 25, 1998
CompuMed, Inc.
1230 Rosecrans Avenue, Suite 1000
Manhattan Beach, California 90266
Gentlemen:
We have acted as counsel to CompuMed, Inc. a Delaware
corporation (the "Company"), in connection with the preparation
and filing with the Securities and Exchange Commission of a
Registration Statement on Form S-3 (the "Registration Statement")
under the Securities Act of 1933, as amended (the "Securities
Act"), relating to the registration of 1,925,000 shares (the
"Shares") of Common Stock, par value $.01 per share (the "Common
Stock"), of the Company. The Shares are issuable upon the
exercise of 1,925,000 of the Company's Common Stock Purchase
Warrants (the "Settlement Warrants") which have, or will be,
issued in connection with the Final Judgment and Order of
Dismissal, dated January 26, 1998 (the "Final Order"), approving
a Stipulation of Settlement of Class Action and Derivative
Claims, dated as of August 7, 1997 (the "Settlement Agreement"),
relating to securities class action lawsuits filed in 1995
against the Company and certain of its current and former
officers and directors. The Warrants are being issued under a
Warrant Agreement between the Company and U.S. Stock Transfer
Corporation, as Warrant Agent, dated as of February 27, 1998 (the
"Warrant Agreement).
For purposes of this opinion, we have examined
originals or copies, certified or otherwise identified to our
satisfaction, of (i) the Registration Statement; (ii) the Final
Order; (iii) the Settlement Agreement; (iv) the form of the
Settlement Warrants; (v) the Warrant Agreement; (vi) the
Certificate of Incorporation and By-Laws of the Company, as in
effect on the date hereof; (vii) resolutions adopted by the Board
of Directors of the Company relating to the approval of the
Warrant Agreement, the form of Settlement Warrants, the issuance
of the Settlement Warrants and Shares and the filing of the
<PAGE>
CompuMed,Inc. -2- September 25, 1998
Registration Statement; and (viii) such other documents,
certificates or other records as we have deemed necessary or
appropriate.
Based upon the foregoing, and subject to the
qualifications hereinafter expressed, we are of the opinion that:
(1) The Company is a corporation duly organized,
validly existing and in good standing under the
laws of the State of Delaware.
(2) The Board of Directors of the Company has taken
such action as may be necessary to authorize the
Warrant Agreements, the issuance of the Warrants,
and the issuance of the Shares in accordance with
the terms for exercising the Settlement Warrants.
(3) The Shares will be duly authorized and validly
issued, and fully paid and non-assessable upon
their issuance if the Settlement Warrants shall
have been properly exercised and the exercise
price shall have been paid in accordance with the
terms therefore.
We are members of the Bar of the State of New York and
do not hold ourselves out as experts concerning, or qualified to
render opinions with respect to any laws other than the laws of
the State of New York, the Federal laws of the United States and
the General Corporation Law of the State of Delaware.
We hereby consent to the filing of this opinion with
the Securities and Exchange Commission as Exhibit 5 to the
Registration Statement.
Very truly yours,
/s/Thelen Reid & Priest LLP
---------------------------
THELEN REID & PRIEST LLP
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption
"Experts" in the Registration Statement (Form S-3) and related
Prospectus of CompuMed, Inc. for the registration of 1,925,000
shares of its common stock and to the incorporation by reference
therein of our report dated November 7, 1997 (except for Note 1,
as to which the date is December 24, 1997), with respect to the
consolidated financial statements of CompuMed, Inc. included in
its Annual Report (Form 10-KSB) for the year ended September 30,
1997, filed with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
Ernst & Young LLP
Los Angeles, California
September 21, 1998
