AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 23, 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.
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 EACH PROPOSED PROPOSED
CLASS OF MAXIMUM MAXIMUM
SECURITIES AMOUNT OFFERING AGGREGATE AMOUNT OF
TO BE TO BE PRICE PER OFFERING REGISTRATION
REGISTERED REGISTERED UNIT(1) PRICE(1) FEE(4)
------------------------------------------------------------------------
Common Stock, par
value $.01 per
share(2) 6,194,690 $1.34 $8,300,885. $2,448.76
------------------------------------------------------------------------
Common Stock, par
value $.01 per
share(3) 200,000 $1.34 268,000. 79.06
------------------------------------------------------------------------
Total 6,394,690 -- -- $2,527.82
========================================================================
(1) Estimated solely for purposes of calculating the
registration fee pursuant to Rule 457, on the basis of the
average of the bid and ask prices reported on the Nasdaq
SmallCap Market on January 16, 1998.
(2) Includes (i) a presently indeterminate number of shares
issued or issuable upon conversion of or otherwise in
respect of Registrant's Class C 7% Cumulative Convertible
Preferred Stock Series 1 and Class C 7% Cumulative
Convertible Preferred Stock Series 2 and (ii) a presently
indeterminate number of shares issued or issuable upon
exercise of or otherwise in respect of Registrant's warrants
issued or issuable upon the conversion of the Class C 7%
Cumulative Convertible Preferred Stock Series 1 and warrants
issued or issuable upon the conversion of the Class C 7%
Cumulative Convertible Preferred Stock Series 2. This is
not intended to constitute a prediction as to the number of
shares of Common Stock into which the Preferred Stock will
be convertible or as to the number of shares of Common Stock
into which the warrants would be exercisable.
(3) Includes 200,000 shares of Common Stock underlying
outstanding warrants.
(4) 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>
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 the registration
or qualification under the securities laws of any such state.
SUBJECT TO COMPLETION, DATED JANUARY 23, 1998
PROSPECTUS
6,394,690 SHARES OF COMMON STOCK
($.01 PAR VALUE)
COMPUMED, INC.
COMMON STOCK
All of the shares of Common Stock, par value $.01 per share
("Common Stock") of CompuMed, Inc., a Delaware corporation (the
"Company"), offered hereby (the "Shares") are being offered for
resale by certain stockholders of the Company (the "Selling
Stockholders") as described more fully herein.
The shares of Common Stock offered hereby by the Selling
Stockholders consist of (A) 200,000 shares issuable upon the
exercise of outstanding warrants (the "Distributors Warrants")
and (B) a presently indeterminate number of shares issued or
issuable upon conversion or otherwise in respect of (i) 17,500
shares of the Company's Class C 7% Cumulative Convertible
Preferred Stock Series 1 ("Series C-1 Preferred Stock") and (ii)
17,500 shares of the Company's Class C 7% Cumulative Convertible
Preferred Stock Series 2 ("Series C-2 Preferred Stock") and a
presently indeterminate number of shares issued or issuable upon
exercise or otherwise in respect of (iii) warrants issued or
issuable upon the conversion of the Series C-1 Preferred Stock
("Series C-1 Warrants") and (iv) warrants issued or issuable upon
the conversion of the Series C-2 Preferred Stock (Series C-2
Warrants"). (The Series C-1 Preferred Stock and the Series C-2
Preferred Stock sometimes collectively, the "Class C Preferred
Stock"). For purposes of calculating the number of shares of
Common Stock to be registered hereby, the number of Common Shares
calculated to be issuable in connection with the conversion of
Class C Preferred Stock and the number of Common Shares
calculated to be issuable in connection with the exercise of the
Series C-1 Warrants and the Series C-2 Warrants (collectively,
the "Placement Warrants") is based on a conversion price of $1.13
for the Series C-1 Preferred Stock, which is derived from the
average closing bid price, as reported on the Nasdaq SmallCap
Market, of the Company's Common Stock for the ten (10)
consecutive trading days immediately preceding December 24, 1997,
the closing day for the issuance of the Series C-1 Preferred
Stock, which average price was $1.51 per share. One Placement
Warrant to purchase one share of Common Stock will be issued for
each share of Common Stock into which the Class C Preferred Stock
is converted. The number of shares available for resale is
subject to adjustment and could be materially less or more than
the amount predicted herein depending on factors which cannot be
predicted by the Company at this time, including, among others,
the future market price of the Common Stock. This presentation
is not intended, and should in no way be construed, to constitute
a prediction as to the future market price of the Common Stock.
See "RISK FACTORS -- MARKET RISKS" and "SELLING STOCKHOLDERS."
The Selling Stockholders will sell the Shares from time to
time through customary brokerage channels, either through broker-
dealers acting as agents or brokers for the seller, or through
broker-dealers acting as principals, who may then resell the
Shares in the over-the-counter market or at private sale or
otherwise, at market prices prevailing at the time of sale, at
prices related to such prevailing market prices or at negotiated
prices. The Selling Stockholders and any agents, broker-dealers
or underwriters that participate with the Selling Stockholders in
the distribution of the Shares may be deemed to be "underwriters"
within the meaning of the Securities Act of 1933, as amended (the
"Securities Act"), and any commission received by them and any
profit on the resale of the Common Stock purchased by them may be
deemed to be underwriting discounts or commissions under the Act.
See "PLAN OF DISTRIBUTION."
The Company will not receive any proceeds from the sale of
the Shares offered hereby. The Company has agreed to bear all
expenses of registration of the Shares, excluding the selling and
brokerage expenses of the Selling Stockholders. It is estimated
that the Company will receive aggregate gross proceeds of
$3,720,000 upon the exercise of all of the Placement Warrants and
Distributors Warrants. See "USE OF PROCEEDS".
<PAGE>
The Company's Common Stock is quoted on the Nasdaq SmallCap
Market under the symbol CMPD. On _______, 1998, the closing bid
and asked prices were $______ and $________ 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 5 THROUGH 10 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
<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. Annual Report on Form 10-KSB for the fiscal year ended
September 30, 1997.
2. Proxy Statement, dated February 20, 1997, for an Annual
Meeting of Stockholders held on March 28, 1997.
3. Form 8-K for an event of December 24, 1997 to report on
Item 5 the sale of the Series C-1 Preferred Stock.
4. Description of the Common Stock contained in the
Registration Statement on Form SB-2, filed on March 5,
1996.
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
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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 906266, 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
Sales of Preferred Stock. On December 24, 1997, the Company
issued an aggregate of 17,500 shares of Series C-1 Preferred
Stock to seven of the Selling Stockholders at a price of $100 per
share. As of January 22, 1998, the Company sold an aggregate of
8,750 shares of Series C-2 Preferred Stock to seven of the
Selling Stockholders at a price of $100 per share. The aggregate
net proceeds of these placements was approximately $2,500,000.
On or before February 15, 1998, the Company is expected to close
on the sale of an additional 8,750 shares of Series C-2 Preferred
Stock at a price of $100 per share, which closing may be extended
to 30 days after the effectiveness of this Registration Statement
if the Company's Common Stock does not meet certain price and
volume minimums by February 15, 1998. Pursuant to the Securities
Purchase Agreements for the Class C Preferred Stock, the Company
entered into a Registration Rights Agreement under which the
Company is obligated to file the Registration Statement. See
"SELLING STOCKHOLDERS."
Each share of Class C Preferred Stock is convertible at the
option of the Selling Stockholder into the number of fully paid
and nonassessable shares 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) .775 (or .80 for original
issuances after December 31, 1997) 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 Notice Date.
Upon conversion of the Class C Preferred Stock, the holder
of the Class C Preferred Stock will obtain one Placement Warrant
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.
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")
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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 will cease
performance of tests using the licensed technology on February 27,
1998, and will return the licensed technology to the Company on
March 31, 1998.
The OsteoView(R). The Company's research and development
efforts are currently focused primarily on producing a
stand-alone bone densitometer, the OsteoView(R). This 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. During the 1997 fiscal year, the Company developed a
prototype model for this device. The Company is seeking to make
the OsteoView(R) device competitive with other peripheral-site bone
scanning devices on the market. A development team has been
assembled which includes the University of Massachusetts Medical
Center and specialized high technology vendors for certain
aspects of this project. The Company coordinates and funds the
development performed by project members and will retain primary
rights to the completed product.
Elimination of Telecor Services Division. The Company's
Telecor Services Division ("Telecor") previously offered to
physicians transtelephonic cardiac event monitoring equipment and
services. Through such equipment and services physicians were
able to continuously monitor their patients' heart rate and
rhythms to detect arrhythmias and other cardiac abnormalities.
Telecor revenues reduced considerably during the second fiscal
quarter of 1997 following the termination of several key
distributors of this service. The Company elected to terminate
the offering of this service rather than invest the necessary
marketing costs to rebuild the customer base.
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
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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. The Company anticipates losses during the 1998
fiscal year 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
"SELECTED 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 as a result of the
$3.5 million private placement to the Selling Stockholders of
which $2.625 million has been received, and the balance is
expected on or before February 15, 1998, subject to extension
upon certain events. 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. Moreover, the Securities Purchase
Agreement pursuant to which the Class C Preferred Stock was sold
provides that the Company is limited in offering or selling its
Common Stock until 100 days after the effective date of the
Registration Statement without the consent of 80% in interest of
the purchasers of the Class C Preferred Stock.
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.
To date, the Company has received only modest revenues under the
Agreement. As discussed above, the Licensing Agreement has been
cancelled effective March 31, 1998. See "THE COMPANY - Recent
Developments."
The existence of the OsteoGram(R) for testing bone mass is
currently at an early stage in market development and is not
widely recognized by the medical profession and the public.
Management had considered that the introduction of drugs like
Merck's Fosamax(TM) into the market would have increased the
public's awareness of the OsteoGram(R), however, 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, 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.
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.
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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 devoting
substantial efforts to develop the OsteoView(R). The development
costs could be substantial and the development period could be
longer than that presently anticipated by the Company. There is
no assurance that the OsteoView can be commercially developed and
even if so, that it would be profitable. The Company may seek to
enter into a venture arrangement with a third party to provide
financing or other support in connection with the development of
the OsteoView(R).
Lack of Patent Protection. The Company has 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
will be returned to the Company, see, "THE COMPANY - Recent
Developments." Notwithstanding the termination of the License
Agreement, Merck shall remain 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 a second generation OsteoSystem 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.
In June 1995, a patent application was filed on behalf of
the Company covering the technology underlying Detoxahol(TM).
There can be no assurance that such patent application will be
approved, that the Company can develop or acquire Detoxahol(TM)
products or methods of use that are patentable, or even if
patents are issued that they will afford the Company's potential
Detoxahol(TM) products any competitive advantage or will not be
challenged by third parties, or that patents issued to others
will not adversely affect the development or commercialization of
the Company's products. As previously noted, the Company has
ceased its development of Detoxahol.(TM)
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 capability to manufacture
apparatus used in connection with the Osteoview(R) or ECG services.
The Company has entered into arrangements with third parties for
the manufacture of certain apparatus used in connection with the
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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 $3,000,000 per
occurrence and $3,000,000 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. In the past two fiscal years, 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 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 never 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 $.09 per share on
September 30, 1997. 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 December 31, 1997,
9,041,857 shares of the Company's Common Stock were outstanding.
In addition, (i) 8,200 shares of Common Stock are issuable upon
8
<PAGE>
conversion of the outstanding Class A Preferred Stock and Class B
Preferred Stock, (ii) 994,918 shares of Common Stock are issuable
upon the exercise of outstanding stock options, (iii) 770,000
shares of Common Stock and warrants for the exercise of 1,920,000
shares of Common Stock are issuable upon finalization of a class
action settlement, (v) 669,170 shares of Common Stock are
issuable upon the exercise of outstanding public warrants and
(vi) 372,000 shares of Common Stock are issuable upon the
exercise of other warrants. The foregoing excludes the presently
indeterminable number of shares of Common Stock issuable upon the
conversion of the Class C Preferred Stock, subject to certain
limitations on conversion if the market price of the Common Stock
is less than $1.00 on the notice date for conversion and the
exercise of the Placement Warrants issuable upon conversion of
the Class C Preferred Stock, and the 200,000 Distributors
Warrants. 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
has recently received notice with respect to its continued
eligibility for listing on the Nasdaq SmallCap Market. The
Company believes that it meets the criteria for continued listing
and is in correspondence with Nasdaq. However, should the
Company continue to incur losses, be unable to raise additional
equity capital, or the market price of its Common Stock decline,
there can be no assurance that the Company will continue to meet
the present listing requirements of the Nasdaq SmallCap Market or
the amended requirements which become effective in February 1998.
Should the Company fail to meet such listing standards, it would
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
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 million minimum net tangible assets or, a $1 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.
9
<PAGE>
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 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 (through 1.41 1.31
January 16, 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.
10
<PAGE>
USE OF PROCEEDS
The Company will not receive any of the proceeds from the
sale of the Shares by the Selling Stockholders. Through the
placement of the Class C Preferred Stock, the Company has
obtained gross proceeds of $2,625,000 and is expected to receive
the balance of $875,000 by February 15, 1998 (which may be
extended to 30 days after the effective date of the Registration
Statement if the average closing bid price of the Common Stock
for the ten trading days prior to the closing date is less than
$1.50 per share), prior to a 4% distributors fee and placement
expenses. The additional closing is also subject to (i) the
continuing material accuracy of representations and warranties by
the Company in the Securities Purchase Agreement, (ii) the
average closing bid price of the Common Stock is at least $1.00
per share and (iii) the average dollar volume for the 20 trading
days preceding such closing shall be at least $159,000.
The Company estimates that it will also receive (i) gross
proceeds of $220,000 upon exercise in full of the Distributors
Warrants in accordance with the terms thereof and (ii) an amount
equal to the number of Placement Warrants issuable upon the
conversion of the Class C Preferred Stock multiplied by the
exercise prices thereof, which exercise prices will be equal to
the respective conversion prices of such Class C Preferred Stock.
There can be no assurance that the Selling Stockholders will
exercise any or all of the Placement Warrants or Distributors
Warrants. The Company would use the net proceeds from exercise
of the Warrants for further research and development and for
general corporate purposes.
The Company will bear the expenses of the registration of
the Shares. The Company estimates that these expenses will be
approximately $20,000.
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.
11
<PAGE>
STATEMENT OF OPERATIONS DATA:
YEAR ENDED SEPTEMBER 30
------------------------------------
1997 1996 1995
REVENUES:
ECG services . . . . . . . . $1,674,000 $2,008,000 $1,643,000
Osteo royalty revenues . . . 119,000 37,000 327,000
Product sales . . . . . . . . 146,000 200,000 573,000
Rental property . . . . . . . -0- 99,000 431,000
---------- ---------- ----------
1,939,000 2,344,000 2,974,000
COST OF SALES . . . . . . . . . 4,222,000 7,123,000 6,026,000
OTHER INCOME (EXPENSE) . . . . 69,000 132,000 (338,000)
---------- ---------- ----------
NET LOSS . . . . . . . . . . . $(2,214,000) $(4,647,000) $(3,390,000)
========== ========== ==========
NET LOSS PER SHARE . . . . . . $(.25) $(.54) $(.55)
---------- ---------- ----------
Weighted average number of
common shares outstanding . . 8,965,045 8,534,276 6,150,500
========== ========== ==========
BALANCE SHEET DATA:
SEPTEMBER 30,
--------------------------
1997 1996
---- ----
CASH AND MARKETABLE SECURITIES . . . $931,000 $2,644,000
TOTAL ASSETS . . . . . . . . . . . . 1,776,000 3,978,000
TOTAL CURRENT LIABILITIES . . . . . . 756,000 942,000
TOTAL STOCKHOLDERS' EQUITY . . . . . 868,000 2,958,000
SELLING STOCKHOLDERS
The Shares offered by this Prospectus may be offered from
time to time by the Selling Stockholders. All Selling
Stockholders were purchasers under Securities Purchase Agreements
including First Geneva Holdings, Inc. which also is the holder of
the Distributors Warrants. None of the Selling Stockholders has
held any position, office or material relationship with the
Company or any of its predecessors or affiliates within three
years of the date of this Prospectus. On December 24, 1997, the
Company issued an aggregate of 17,500 shares of Series C-1
Preferred Stock and as of January 22, 1998, the Company issued an
aggregate of 8,750 shares of Series C-2 Preferred Stock. On or
before February 15, 1998 (which may be extended to 30 days after
the date of this Prospectus by reason of the Common Stock not
meeting certain price or volume amounts as of February 15, 1998),
certain of the Selling Stockholders are expected to close on the
purchase of 8,750 shares of Series C-2 Preferred Stock. See "USE
OF PROCEEDS." Upon conversion of the Class C Preferred Stock,
the Selling Stockholders will obtain Placement Warrants for the
purchase of one share of Common Stock for each share of Common
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<PAGE>
Stock into which the Class C Preferred Stock is converted at an
exercise price equal to the respective conversion prices and
exercisable for three years.
If on the last trading date preceding a notice of conversion
from a holder, the closing bid price is less than $1.00 per share,
the number of shares of Series C Preferred Stock which may be
converted by the holder then seeking conversion would be limited
to an amount which does not exceed 5% of the amount of Series C-1
or C-2 Preferred Stock initially purchased by such holder, and
such limitations shall be for a 30-day period following the
notice of conversion. The Company, at its sole discretion, may
force conversion of any or all shares of Series C-1 Preferred
Stock outstanding on November 30, 1999 and of Series C-2 Preferred
Stock outstanding on December 31, 1999.
The following table sets forth, as of January 22, 1998 and
upon completion of this offering, information with regard to the
beneficial ownership of the Company's Common Stock by each of the
Selling Stockholders. The table assumes the conversion of all
the Class C Preferred Stock and the exercise of all of the
Distributors Warrants and the Placement Warrants. For purposes
of calculating the number of shares of Common Stock beneficially
owned by the Selling Stockholders, the number of shares
calculated to be issuable in connection with the conversion of
the Class C Preferred Stock is $1.13, which is 75% of the average
closing bid price, as reported on the Nasdaq SmallCap Market, of
the Company's Common Stock for the ten consecutive trading days
immediately preceding December 24, 1997, the closing day for the
sale of the Series C-1 Preferred Stock. The Registration
Statement includes, in accordance with Rule 416 of the Securities
Act, an indeterminate number of shares issuable upon conversion
of the Class C Preferred Stock and exercise of the Placement
Warrants as a result of the floating rate conversion features of
the Class C Preferred Stock. The use of such hypothetical
conversion prices is not intended, and should in no way be
construed, to constitute a prediction as to the future market
price of the Common Stock.
The information included below is based upon information
provided by the Selling Stockholders. Because the Selling
Stockholders may offer all, some or none of their Common Stock,
no definitive estimate as to the number of shares thereof that
will be held by the Selling Stockholders after such offering can
be provided and the following table has been prepared on the
assumption that all shares of Common Stock offered under this
Prospectus will be sold.
AMOUNT
BENEFICIALLY AMOUNT
OWNED SHARES BENEFICIALLY
PRIOR TO TO BE OWNED AFTER
NAME(1) OFFERING OFFERED OFFERING(3)
---- ------------- --------- -----------
The Shaar Fund Ltd. . . 1,769,912(4) 1,769,912 0
Shaar Advisory Services 1,238,938(5) 1,238,938 0
First Geneva Holdings, Inc. 907,966(6) 907,966 0
Firmvest Capital Corp. 884,956(7) 884,956 0
Nachum Stein and Feige Stein 398,230(8) 398,230 0
Peter Chenam . . . . . 353,982(9) 353,982 0
Rutgers Casualty, Inc. 309,734(10) 309,734 0
The Gross Foundation . 176,991(11) 176,991 0
NSI Partnership . . . . 176,991(12) 176,991 0
Kentucky National
Insurance Co. . . . . 132,742(13) 132,742 0
Alexander Hasenfeld,
Inc. Profit Sharing
Retirement Plan . . . 44,248(14) 44,248 0
=====================================================================
___________________
(1) Unless otherwise indicated in the footnotes to this table,
the persons and entities named in the table have sole
voting and sole investment power with respect to all shares
beneficially owned, subject to community property laws where
applicable.
(2) As required by regulations of the SEC, the number of shares
shown as beneficially owned includes shares which can be
purchased within 60 days after January 23, 1998. The actual
number of shares of Common Stock beneficially owned is
subject to adjustment and could be materially less or more
than the estimated amount indicated depending upon factors
which cannot be predicted by the Company at this time,
including, among others, the market price of the Common
Stock prevailing at the actual date of conversion of Class C
Preferred Stock.
(3) Assumes the sale of all shares offered hereby.
(4) Includes 1,769,912 shares underlying Series C-1 Preferred
Stock and Series C-1 Warrants.
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<PAGE>
(5) Includes (i) 796,460 shares underlying Series C-1 Preferred
Stock and Series C-1 Warrants and (ii) 442,478 shares
underlying Series C-2 Preferred Stock and Series C-2
Warrants.
(6) Includes (i) 707,964 shares underlying Series C-2 Preferred
Stock and Series C-2 Warrants and (ii) 200,000 shares
underlying the Distributors Warrants exercisable at $1.10
per share until December 1, 1999.
(7) Includes 884,956 shares underlying Series C-2 Preferred
Stock and Series C-2 Warrants.
(8) Includes (i) 44,248 shares underlying Series C-1 Preferred
Stock and Series C-1 Warrants and (ii) 353,982 shares
underlying Series C-2 Preferred Stock and Series C-2
Warrants.
(9) Includes 353,982 shares underlying Series C-2 Preferred
Stock and Series C-2 Warrants.
(10) Includes (i) 152,744 shares underlying Series C-1 Preferred
Stock and Series C-1 Warrants and (ii) 176,990 shares
underlying Series C-2 Preferred Stock and Series C-2
Warrants.
(11) Includes 176,690 shares underlying Series C-1 Preferred
Stock and Series C-1 Warrants.
(12) Includes 176,690 shares underlying Series C-2 Preferred
Stock and Series C-2 Warrants.
(13) Includes 132,744 shares underlying Series C-1 Preferred
Stock and Series C-1 Warrants.
(14) Includes 44,248 shares underlying Series C-1 Preferred Stock
and Series C-1 Warrants.
Pursuant to the Securities Purchase Agreement for the Class
C Preferred Stock, the Company entered into a Registration Rights
Agreement with the Selling Stockholders under which the Company
is obligated to file the Registration Statement and to use its
best efforts to cause the Registration Statement to become
effective by March 24, 1998. Otherwise, the Company will pay the
holders of the outstanding Class C Preferred Stock an amount
equal to 0.5% of their purchase price for the seven day period
beyond March 24, 1998 that the effective day is delayed.
PLAN OF DISTRIBUTION
The Selling Stockholders have advised the Company that,
prior to the date of this Prospectus, they have not made any
agreement or arrangement with any underwriters, brokers or
dealers regarding the distribution and resale of the Shares. If
the Company is notified by a Selling Stockholder that any
material arrangement has been entered into with an underwriter
for the sale of the Shares, a supplemental prospectus will be
filed to disclose such of the following information as the
Company believes appropriate: (i) the name of the participating
underwriter; (ii) the number of the Shares involved; (iii) the
price at which such Shares are sold, the commissions paid or
discounts or concessions allowed to such underwriter; and (iv)
other facts material to the transaction.
The Company expects that the Selling Stockholders will sell
their Shares covered by this Prospectus through customary
brokerage channels, either through broker-dealers acting as
agents or brokers for the seller, or through broker-dealers
acting as principals, who may then resell the Shares in the over-
the-counter market, or at private sale or otherwise, at market
prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices. The Selling
Stockholders may effect such transactions by selling the Shares
to or through broker-dealers, and such broker-dealers may receive
compensation in the form of concessions or commissions from the
Selling Stockholders and/or the purchasers of the Shares for whom
they may act as agent (which compensation may be in excess of
customary commissions). The Selling Stockholders and any broker-
dealers that participate with the Selling Stockholders in the
distribution of Shares may be deemed to be underwriters and
commissions received by them and any profit on the resale of
Shares positioned by them might be deemed to be underwriting
14
<PAGE>
discounts and commissions under the Securities Act. There can be
no assurance that any of the Selling Stockholders will sell any
or all of the Shares offered by them hereunder.
Sales of the Shares on the Nasdaq SmallCap System or other
trading system may be by means of one or more of the following:
(i) a block trade in which a broker or dealer will attempt to
sell the Shares as agent, but may position and resell a portion
of the block as principal to facilitate the transaction; (ii)
purchases by a dealer as principal and resale by such dealer for
its account pursuant to this Prospectus; and (iii) ordinary
brokerage transactions and transactions in which the broker
solicits purchasers. In effecting sales, brokers or dealers
engaged by the Selling Stockholders may arrange for other brokers
or dealers to participate.
The Selling Stockholders are not restricted as to the price
or prices at which they may sell their Shares. Sales of such
Shares at less than market prices may depress the market price of
the Company's Common Stock. Moreover, the Selling Stockholders
are not restricted as to the number of Shares which may be sold
at any one time.
Pursuant to the Registration Rights Agreements, the Company
will pay all of the expenses incident to the offer and sale of
the Shares to the public by the Selling Stockholders other than
commissions and discounts of underwriters, dealers or agents.
The Company and the Selling Stockholders have agreed to indemnify
each other and certain persons, including broker-dealers or
others, against certain liabilities in connection with the
offering of the Common Stock, including liabilities arising under
the Securities Act.
The Company has advised the Selling Stockholders that the
anti-manipulative rules under the Exchange Act, including
Regulation M, may apply to sales in the market of the Shares
offered hereby and has furnished the Selling Stockholders with a
copy of such rules. The Company has also advised the Selling
Stockholders of the requirement for the delivery of this
Prospectus in connection with resales of the Shares offered
hereby.
The Company has been advised by each Selling Stockholder
that it will comply with Regulation M promulgated under the
Exchange Act, in connection with all resales of the Shares
offered hereby. The Company has also been advised by the Selling
Stockholders that none of them has, as of January 22, 1998,
entered into any arrangement with a broker-dealer for the sale of
the Shares through block trade, special offering, exchange
distribution or secondary distribution of a purchase by a broker-
dealer.
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 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, as set forth 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.
15
<PAGE>
=============================== =============================
No person is authorized in 6,394,690 Shares of Common
connection with any offering made Stock
hereby to give any information or
to make any representation not
contained in this Prospectus,
and, if given or made, such
information or representation COMPUMED,INC.
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 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
delivery of this Prospectus nor
any sale made hereunder shall
under any implication that the
information contained herein is
correct as of any date subsequent
to the date hereof.
TABLE OF CONTENTS
PAGE ------------------
---- PROSPECTUS
------------------
AVAILABLE INFORMATION . . . . . 3
INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE . . . . 3
THE COMPANY . . . . . . . . . . 4
RISK FACTORS . . . . . . . . . 5
MARKET PRICE INFORMATION . . 10
USE OF PROCEEDS . . . . . . . 11
SUMMARY FINANCIAL INFORMATION 11 _____________, 1998
SELLING STOCKHOLDERS . . . . 12
PLAN OF DISTRIBUTION . . . . 14
LEGAL MATTERS . . . . . . . . 15
EXPERTS . . . . . . . . . . . 15
================================= ==========================
<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 . . . . . . . . . . . . $ 2,527.82
Legal Fees and Expenses . . . . . . . . . 7,200.00
Accounting Fees and Expenses . . . . . . 4,500.00
Miscellaneous Expenses . . . . . . . . . 5,772.18
---------
Total . . . . . . . . . . . . . . . $ 20,000.00
=========
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.
<PAGE>
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
Amendment [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
Exhibit 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]
II-2
<PAGE>
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
reference 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* Distributors Warrant for the purchase of
200,000 shares of Common Stock.
5.* Opinion of Reid & Priest LLP
23.1* Consent of Ernst & Young LLP
23.2* Consent of 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 Statement. 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 prospectus 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.
II-3
<PAGE>
(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 provi-
sions 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.
II-4
<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 22 DAY OF JANUARY, 1998.
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, 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/ James Linesch President and January 22, 1998
----------------------- Chief Financial
James Linesch Officer
/s/ Robert B. Goldberg Chairman of the January 22, 1998
----------------------- Board
Robert B. Goldberg
/s/ John D. Minnick Director January 22, 1998
-----------------------
John D. Minnick
/s/ Robert Stuckelman Director January 22, 1998
-----------------------
Robert Stuckelman
/s/ Herbert Lightstone Director January 22, 1998
----------------------
Herbert Lightstone
Director January __, 1998
----------------------
John Romm
Director January __, 1998
-----------------------
Rod Raynovich
II-5
<PAGE>
EXHIBIT INDEX
Exhibit Description
------- -----------
4.6 Distributors Warrrant
5 Opinion of Reid & Priest LLP
23.1 Consent of Ernst & Young LLP
23.2 Consent of Reid & Priest LLP
(included as part of Exhibit 5)
24. Power of Attorney (included on p. II-5)
Exhibit 4.6
STOCK PURCHASE WARRANT
TO PURCHASE COMMON STOCK OF
COMPUMED, INC.
<PAGE>
VOID AFTER 5:00 P.M. NEW YORK TIME, ON DECEMBER 1, 1999
WARRANT TO PURCHASE 200,000 SHARES OF COMMON STOCK.
WARRANT TO PURCHASE COMMON STOCK
OF
COMPUMED, INC.
NO. ITF 2
----------------
This is to Certify that, FOR VALUE RECEIVED, First Geneva
Holdings Inc., or permitted assigns ("Holder"),is entitled to
purchase, subject to the provisions of this Warrant, from
COMPUMED, INC., a Delaware corporation ("Company"), up to Two
Hundred Thousand (200,000) shares of Common Stock, $.01 par value
per share, of the Company ("Common Stock") at a price of $1.10
per share at any time during the period from the date hereof to
December 1, 1999. The number of shares of Common Stock to be
received upon the exercise of this Warrant and the price to be
paid for each share of Common Stock may be adjusted from time to
time as hereinafter set forth. The shares of Common Stock
deliverable upon such exercise, and as adjusted from time to
time, are hereinafter sometimes referred to as "Warrant Shares"
and the exercise price for each share of Common Stock in effect
at any time and as adjusted from time to time is hereinafter
sometimes referred to as the "Exercise Price".
(a) EXERCISE OF WARRANT. Subject to the provisions of
Section (k) hereof, this Warrant may be exercised in whole or in
part at any time or from time to time on or after the date hereof
and until December 1, 1999, or if either such day is a day on
which banking institutions in the State of New York are
authorized by law to close, then on the next succeeding day which
shall not be such a day, by presentation and surrender hereof to
the Company at its principal office, or at the office of its
stock transfer agent, if any, with the Election To Purchase
annexed hereto duly executed and accompanied by payment of the
Exercise Price for the number of Warrant Shares specified in such
form. The payment shall be either a certified check payable to
the Company or a wire transfer to the Company's account for the
full Exercise Price of the Warrants being exercised. If this
Warrant should be exercised in part only, the Company shall, upon
surrender of this Warrant for cancellation, execute and deliver
a new Warrant evidencing the rights of the Holder thereof to
purchase the balance of the Warrant Shares purchasable
thereunder. Upon receipt by the Company of this Warrant at its
office, in proper form for exercise, the Holder shall be deemed
to be the holder of record of the shares of Common Stock issuable
upon such exercise, notwithstanding that the stock transfer books
of the Company shall then be closed or that certificates
representing such shares of Common Stock shall not then be
actually delivered to the Holder.
(b) RESERVATION OF SHARES. The Company hereby agrees that
at all times there shall be reserved for issuance and/or delivery
upon exercise of this Warrant such number of shares of its Common
Stock as shall be required for issuance and delivery upon
exercise of this Warrant.
(c) LEGEND ON WARRANT SHARES. The Warrant and each
certificate for Shares initially issued upon exercise of the
Warrant, unless at the time of exercise such Shares are
registered under the Securities Act of 1933, as amended (the
"Securities Act"), shall bear the following legend:
"No sale, transfer, pledge or other
disposition of this Warrant or the Shares
purchasable hereunder shall be made except
pursuant to registration under the Securities
Act of 1933, as amended, and registration or
qualification under state securities laws or
pursuant to an exemption from such
registration. Sale, transfer, pledge and
other disposition of this Warrant and such
Shares is also restricted by that certain
Warrant Agreement dated as of December 23,
1997."
Any certificate issued at any time in exchange or
substitution for any certificate bearing such legend (except a
new certificate issued upon completion of a public distribution
pursuant to a registration statement under the Securities Act of
the securities represented thereby) shall also bear the above
legend unless, in the case of the first sentence of such legend,
the Company receives the opinion of counsel, satisfactory to the
Company, that such legend is not required under the laws referred
to.
(d) FRACTIONAL SHARES. No fractional shares or script
representing fractional shares shall be issued upon the exercise
of this Warrant. With respect to any fraction of a share called
for upon any exercise hereof, the Company shall pay to the Holder
an amount in cash equal to such fraction multiplied by the
current market value of a share, determined as follows:
(1) If the Common Stock is listed on a
national securities exchange or admitted to unlisted trading
privileges on such exchange or listed for trading on the NASDAQ
system, the current market value shall be the last reported sale
price of the Common Stock on such exchange or system on the last
business day prior to the date of exercise of this Warrant or if
no such sale is made on such day, the average closing bid and
asked prices for such day on such exchange or system; or
(2) If the Common Stock is not so listed or
admitted to unlisted trading privileges, the current market value
shall be the mean of the last reported bid and asked prices
reported by the National Quotation Bureau, Inc. on the last
business day prior to the date of the exercise of this Warrant;
or
(3) If the Common Stock is not so listed or
admitted to unlisted trading privileges and bid and asked prices
are not so reported, the current market value shall be an amount,
not less than book value thereof as at the end of the most recent
fiscal year of the Company ending prior to the date of the
exercise of the Warrant, determined in such reasonable manner as
may be prescribed by the Board of Directors of the Company.
(e) EXCHANGE, TRANSFER, ASSIGNMENT OR LOSS OF WARRANT.
This Warrant is exchangeable, without expense, at the option of
the Holder, upon presentation and surrender hereof to the Company
or at the office of its stock transfer agent, if any, for other
warrants of different denomination entitling the holder thereof
to purchase in the aggregate the same number of shares of Common
Stock purchasable hereunder. This Warrant is not transferable
except in compliance with the applicable federal securities laws.
Subject to the provisions of Section (l), upon surrender of this
Warrant to the Company at its principal office or at the office
of its stock transfer agent, if any, with the Assignment Form
annexed hereto duly executed and funds sufficient to pay any
transfer tax, the Company shall, without charge, execute and
deliver a new Warrant in the name of the assignee named in such
instrument of assignment and this Warrant shall promptly be
cancelled. This Warrant may be divided or combined with the
warrants which carry the same rights upon presentation hereof at
the principal office of the Company or at the office of its stock
transfer agent, if any, together with a written notice specifying
the names and denominations in which new Warrants are to be
issued and signed by the Holder hereof. The term "Warrant" as
used herein includes any Warrants into which this Warrant may be
divided or exchanged. Upon receipt by the Company of evidence
satisfactory to it of the loss, theft, destruction or mutilation
of this Warrant, and (in the case of loss, theft or destruction)
of reasonably satisfactory indemnification, and upon surrender
and cancellation of this Warrant, if mutilated, the Company will
execute and deliver a new Warrant of like tenure and date. Any
such new Warrant executed and delivered shall constitute an
additional contractual obligation on the part of the Company,
whether or not this Warrant so lost, stolen, destroyed, or
mutilated shall be at any time enforceable by anyone.
(f) RIGHTS OF THE HOLDER. The Holder shall not, by
virtue hereof, be entitled to any rights of a shareholder in the
Company, either at law or equity, and the rights of the Holder
are limited to those expressed in the Warrant and are not
enforceable against the Company except to the extent set forth
herein.
(g) ANTI-DILUTION PROVISIONS. The Exercise Price and
the number and kind of securities purchasable upon the exercise
of this Warrant shall be subject to adjustment from time to time
upon the happening of certain events as hereinafter provided.
The Exercise Price in effect at any time and the number and kind
of securities purchasable upon exercise of each Warrant shall be
subject to adjustment as follows:
(1) In case the Company shall (i) pay a dividend
or make a distribution on its share of Common Stock in shares of
Common Stock, (ii) subdivide or reclassify its outstanding Common
Stock into a greater number of shares, or (iii) combine or
reclassify its outstanding Common stock into a smaller number of
shares, the Exercise Price in effect at the time of the record
date for such dividend or distribution or of the effective date
of such subdivision, combination or reclassification shall be
proportionately adjusted so that the Holder of this Warrant
exercised after such date shall be entitled to receive the
aggregate number and kind of shares which, if this Warrant had
been exercised by such Holder immediately prior to such date, he
would have owned upon such exercise and been entitled to receive
upon such dividend, subdivision, combination or reclassification.
For example, if the Company declares a 2 for 1 stock dividend or
stock split and the Exercise Price immediately prior to such
event was $4.00 per share, the adjusted Exercise Price
immediately after such event would be $2.00 per share. Such
adjustment shall be made successively whenever any event listed
above shall occur.
(2) In case the Company shall hereafter issue
rights or warrants to all holders of its Common Stock entitling
them to subscribe for or purchase shares of Common Stock (or
securities convertible into Common Stock) at a price (or having a
conversion price per share less than the current market price of
the Common Stock as defined in Subsection (8) below) on the
record date mentioned below, the Exercise Price shall be
adjusted so that the same shall equal the price determined by
multiplying the Exercise Price in effect immediately prior to the
date of such issuance by a fraction, the numerator of which shall
be the sum of the number of shares of Common Stock outstanding on
the record date mentioned below and the number of additional
shares of Common Stock which the aggregate offering price of the
total number of shares of Common Stock so offered (or the
aggregate conversion price of the convertible securities so
offered) would purchase at such current market price per share of
the Common Stock, and the denominator of which shall be the sum
of the number of shares of Common Stock outstanding on such
record date and the number of additional shares of Common Stock
offered for subscription or purchase (or into which the
securities so offered are convertible). Such adjustment shall be
made successively whenever such rights or warrants are issued and
shall become effective immediately after the record date for the
determination of shareholders entitled to receive such rights or
warrants; and to the extent that shares of Common Stock are not
delivered (or securities convertible into Common Stock are not
delivered) after the expiration of such rights or warrants the
Exercise Price shall be readjusted to the Exercise Price which
would then be in effect had the adjustments made upon the
issuance of such rights or warrants been made upon the basis of
delivery of only the number of shares of Common Stock (or
securities convertible into Common Stock) actually delivered.
(3) In case the Company shall hereafter
distribute to the holders of its Common Stock evidences of its
indebtedness or assets (excluding evidences of its indebtedness
or assets (excluding cash dividends or distributions and
dividends or distributions referred to in Subsection (1) above)
or subscription rights or warrants (excluding those referred to
in Subsection (2) above), then in each such case the Exercise
Price in effect thereafter shall be determined by multiplying the
Exercise Price in effect immediately prior thereto by a fraction,
the numerator of which shall be the total number of shares of
Common Stock outstanding multiplied by the current market price
per share of Common Stock (as defined in Subsection (8) below),
less the fair market value (as determined by the Company's Board
of Directors) of said assets or evidences of indebtedness so
distributed or of such rights or warrants, and the denominator of
which shall be the total number of shares of Common Stock
outstanding multiplied by such current market price per share of
Common Stock. Such adjustment shall be made successively whenever
such a record date is fixed. Such adjustment shall be made
whenever any such distribution is made and shall become effective
immediately after the record date for the determination of
shareholders entitled to receive such distribution.
(4) In case the Company shall issue shares
of its Common Stock [excluding shares issued (i) in any of the
transactions described in Subsection (1) above, (ii) upon
exercise of options granted to the Company's employees under a
plan or plans adopted by the Company's Board of Directors and
approved by its shareholders, if such shares would otherwise be
included in this Subsection (4), (but only to the extent that the
aggregate number of shares excluded hereby and issued after the
date hereof, shall not exceed ten (10%) percent of the Company's
Common Stock outstanding at the time of any issuance, (iii) upon
exercise of options and warrants outstanding at December 29,
1994, and this Warrant or similar warrants issued to Israel
Trading Fund Ltd., and (iv) to shareholders of any corporation
which merges into the Company, or is otherwise acquired by the
Company or any of its affiliates, in proportion to their stock
holding of such corporation immediately prior to such
acquisition, upon such acquisition, or issued in a bona fide
public offering pursuant to a firm commitment underwriting, but
only if no adjustment is required pursuant to any other specific
subsection of this Section (g) (without regard to Subsection (9)
below) with respect to the transaction giving rise to such
rights] for a consideration per share less than the current
market price per share [as defined in Subsection (8) below] on
the date the Company fixes the offering price of such additional
shares, the Exercise Price shall be adjusted immediately
thereafter so that it shall equal the price determined by
multiplying the Exercise Price in effect immediately prior
thereto by a fraction, the numerator of which shall be the sum of
the number of shares of Common Stock outstanding immediately
prior to the issuance of such additional shares and the number of
shares of Common Stock which the aggregate consideration received
[determined as provided in Subsection (7) below] for the issuance
of such additional shares would purchase at such current market
price per share of Common Stock, and the denominator of which
shall be the number of shares of Common Stock outstanding
immediately after the issuance of such additional shares. Such
adjustment shall be made successively whenever such an issuance
is made.
(5) In case the Company shall issue any
securities convertible into or exchangeable for its Common Stock
[excluding securities issued in transactions described in
Subsections (2) and (3) above] for a consideration per share of
Common Stock initially deliverable upon conversion or exchange of
such securities [determined as provided in Subsection (7) below]
less than the current market price per share [as defined in
Subsection (8) below] in effect immediately prior to the issuance
of such securities, the Exercise Price shall be adjusted
immediately thereafter so that it shall equal the price
determined by multiplying the Exercise Price in effect
immediately prior thereto by a fraction, the numerator of which
shall be the sum of the number of shares of Common Stock
outstanding immediately prior to the issuance of such securities
and the number of shares of Common Stock which the aggregate
consideration received [determined as provided in Subsection (7)
below] for such securities would purchase at such current market
price per share of Common Stock, and the denominator of which
shall be the sum of the number of shares of Common Stock
outstanding immediately prior to such issuance and the maximum
number of shares of Common Stock of the Company deliverable upon
conversion of or in exchange for such securities at the initial
conversion or exchange price of rate. Such adjustment shall be
made successively whenever such an issuance is made.
(6) Whenever the Exercise Price payable upon
exercise of each Warrant is adjusted pursuant to Subsections (1),
(2), (3), (4) and (5) above, the number of Shares purchasable
upon exercise of this Warrant shall simultaneously be adjusted by
multiplying the number of Shares initially issuable upon exercise
of this Warrant by the Exercise Price in effect on the date
hereof and dividing the product so obtained by the Exercise
Price, as adjusted.
(7) For purposes of any computation
respecting consideration received pursuant to Subsections (4) and
(5) above, the following shall apply:
(A) in the case of the issuance of
shares of Common Stock for cash, the consideration shall be the
amount of such cash, provided that in no case shall any deduction
be made for any commissions, discounts or other expenses incurred
by the Company for any underwriting of the issue or otherwise in
connection therewith;
(B) in the case of the issuance of
shares of Common Stock for a consideration in whole or in part
other than cash, the consideration other than cash shall be
deemed to be the fair market value thereof as determined in good
faith by the Board of Directors of the Company irrespective of
the accounting treatment thereof), whose determination shall be
conclusive; and
(C) in the case of the issuance of
securities convertible into or exchangeable for shares of Common
Stock, the aggregate consideration received therefor shall be
deemed to be the consideration received by the Company for the
issuance of such securities plus the additional minimum
consideration, if any, to be received by the Company upon the
conversion or exchange thereof [the consideration in each case to
be determined in the same manner as provided in clauses (A) and
(B) of this Subsection (7)].
(8) For the purpose of any computation under
Subsections (2), (3), (4) and (5) above, the current market price
per share of Common Stock at any date shall be deemed to be the
average of the daily closing prices for 30 consecutive business
days before such date. The closing price for each day shall be
the last sale price regular way or, in case no such reported sale
takes place on such day, the average of the last reported bid and
asked prices regular way, in either case on the principal
national securities exchange on which the Common Stock is
admitted to trading or listed, or if not listed or admitted to
trading on such exchange, the average of the highest reported bid
and lowest reported asked prices as reported by NASDAQ, or other
similar organization if NASDAQ is no longer reporting such
information, or if not so available, the fair market price as
determined by the Board of Directors.
(9) No adjustment in the Exercise Price
shall be required unless such adjustment would require an
increase or decrease of at least five cents ($0.05) in such
price; provide, however, that any adjustments which by reason of
this Subsection (9) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment
required to be amend hereunder. All calculations under this
Section (g) shall be made to the nearest cent or to the nearest
one-hundredth of a share, as the case may be. Anything in this
Section (g) to the contrary notwithstanding, the Company shall be
entitled, but shall not be required, to make such changes in the
Exercise Price, in addition to those required by this Section
(g), as it, in its sole discretion, shall determine to be
advisable in order that any dividend or distribution in shares of
Common Stock, subdivision, reclassification or combination of
Common Stock, issuance of warrants to purchase Common Stock or
distribution of evidences of indebtedness or other assets
excluding cash dividends referred to hereinabove in this Section
(g) hereafter made by the Company to the holders of its Common
Stock shall not result in any tax to the holders of its Common
Stock or securities convertible into Common Stock.
(10) Whenever the Exercise Price is adjusted,
as herein provided, the Company shall promptly cause a notice
setting forth the adjusted Exercise Price and adjusted number of
Shares issuable upon exercise of each Warrant to be mailed to the
Holder of this Warrant, at its last address appearing in the
Warrant Register, and shall cause a certified copy thereof to be
mailed to its transfer agent, if any. The Company may retain a
firm of independent certified public accountants selected by the
Board of Directors (who may be the regular accountants employed
by the Company) to make any computation required by this Section
(g), and a certificate signed by such firm shall be conclusive
evidence of the correctness of such adjustment.
(11) In the event that at any time, as a
result of an adjustment made pursuant to Subsection (1) above,
the Holder of this Warrant thereafter shall become entitled to
receive any shares of the Company, other than Common Stock,
thereafter the number of such other shares so receivable upon
exercise of this Warrant shall be subject to adjustment from time
to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Common Stock
contained in Subsections (1) to (9), inclusive above.
(12) Irrespective of any adjustments in the
Exercise Price or the number or kind of shares purchasable upon
exercise of this Warrant, Warrants theretofore or thereafter
issued may continue to express the same price and number and kind
of shares as are stated in the similar Warrants initially
issuable pursuant to this Agreement.
(h) OFFICER'S CERTIFICATE. Whenever the Exercise
Price shall be adjusted as required by the provisions of the
foregoing Section, the Company shall forthwith file in the
custody of its Secretary or an Assistant Secretary at its
principal office and with its stock transfer agent, if any, an
officer's certificate showing the adjusted Exercise Price
determined as herein provided, setting forth in reasonable detail
the facts requiring such adjustment, including a statement of the
number of additional shares of Common Stock, if any, and such
other facts as shall be necessary to show the reason for and the
manner of computing such adjustment. Each such officer's
certificate shall be made available at all reasonable times for
inspection by the Holder.
(i) NOTICES TO WARRANT HOLDERS. So long as this
Warrant shall be outstanding, (i) if the Company shall pay any
dividend or make any distribution upon the Common Stock or (ii)
if the Company shall offer to the holders of Common Stock for
subscription or purchase by them any share of any class or any
other rights or (iii) if any capital reorganization of the
Company, reclassification of the capital stock of the Company,
consolidation or merger of the Company with or into another
corporation, sale, lease or transfer of all or substantially all
of the property and assets of the Company to another corporation,
or voluntary or involuntary dissolution, liquidation or winding
up of the Company shall be effected, then in any such case, the
Company shall cause to be mailed by certified mail to the Holder,
at least fifteen days prior the date specified in (x) or (y)
below, as the case may be, a notice containing a brief
description of the proposed action and stating the date on which
(x) a record is to be taken for the purpose of such dividend,
distribution or rights, or (y) such reclassification,
reorganization, consolidation, merger, conveyance, lease,
dissolution, liquidation or winding up is to take place and the
date, if any is to be fixed, as of which the holders of Common
Stock or other securities shall receive cash or other property
deliverable upon such reclassification, reorganization,
consolidation, merger, conveyance, dissolution, liquidation or
winding up.
(j) RECLASSIFICATION, REORGANIZATION OR MERGER.
In case of any reclassification, capital reorganization or other
change of outstanding shares of Common Stock of the Company, or
in case of any consolidation or merger of the Company with or
into another corporation (other than a merger with a subsidiary
in which merger the Company is the continuing corporation and
which does not result in any reclassification, capital
reorganization or other change of outstanding shares of Common
Stock of the class issuable upon exercise of this Warrant) or in
case of any sale, lease or conveyance to another corporation of
the property or Common Stock of the Company as an entirety, the
Company shall, as a condition precedent to such transaction,
cause effective provisions to be made so that the Holder shall
have the right thereafter by exercising this Warrant at any time
prior to the expiration of the Warrant, to purchase the kind and
amount of shares of stock and other securities receivable upon
such reclassification, capital reorganization and other changes,
consolidation, merger, sale or conveyance by a holder of the
number of shares of Common Stock which might have been purchased
upon exercise of this Warrant immediately prior to such
reclassification, change, consolidation, merger, sale or
conveyance. Any such provision shall include provision for
adjustments which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Warrant. The
foregoing provisions of this Section (j) shall similarly apply to
successive reclassifications, capital reorganizations and changes
of shares and to successive consolidations, mergers, sales or
conveyances. In the event that in connection with any such
capital reorganization or reclassification, consolidation,
merger, sale or conveyance, additional shares of Common Stock
shall be issued in exchange, conversion, substitution or payment,
in whole or in part, for a security of the Company other than
Common Stock, any such issue shall be treated as an issue of
Common Stock covered by the provisions of Subsection (1) of
Section (h) hereof.
(k) REGISTRATION UNDER THE SECURITIES ACT OF 1933.
(1) Unless in the opinion of Company's
counsel the Warrant Shares may be sold or transferred without
registration under the Securities Act, the Company shall advise
the Holder of this Warrant or of the Warrant Shares or any then
holder of Warrants or Warrant Shares (such persons being
collectively referred to herein as "holders") by written notice
at least twenty (20) days prior to the filing of any registration
statement or post effective amendment thereto ("Registration
Statement") under the Securities Act as defined in (c) covering
securities of the Company (excluding a Registration Statement on
Form S-4 or S-8 or otherwise covering shares issued upon an
acquisition or reorganization or upon options, rights or
otherwise to employees or others on a compensation basis or on a
Form when the Warrant Shares are not eligible for inclusion), and
will for a period of five years, commencing one year from the
date hereof, upon the request of any such holder, which request
must be received by the Company at least ten (10) days prior to
the anticipated filing date of the Registration Statement as set
forth in the aforementioned notice from the Company, include in
any such Registration Statement such information as may be
required to permit a public offering of the Warrant Shares,
provided that the holders shall furnish the Company with such
appropriate information (relating to the intentions of such
holders) in connection therewith as the Company shall request in
writing. The Company shall supply prospectuses, qualify the
Warrant Shares for sale in such states as any such holder
designates, provided such qualification does not require the
Company to qualify as a foreign corporation or execute a general
consent to service of process, and furnish indemnification in
the manner as set forth in Subsection (2)(C) of this Section (k).
Such holders shall furnish information and indemnification as set
forth in Subsection (2)(C) of this Section (k).
(2) The following provision of this Section
(k) shall also be applicable:
(A) Following the effective date
of such post-effective amendment or registration, the Company
shall upon the request of any holder of Warrants and/or Warrant
Shares forthwith supply such a number of prospectuses meeting the
requirements of the Securities Act, as shall be requested by such
holder to permit such holder to make a public offering of all
Warrants and/or Warrant Shares form time to time offered or sold
to such holder.
(B) The Company shall bear the entire
cost and expense of any registration of securities initiated by
it under Subsection (1) of this Section (k) notwithstanding that
the Warrant and the Warrant Shares may be included in any such
registration, excluding commissions and fees chargeable to the
Warrant and the Warrant Shares. Any holder whose Warrants and/or
Warrant Shares are included in any such registration statement
pursuant to this Section (k) shall, however, bear the fees of his
own counsel and any registration fees, transfer taxes or
underwriting discounts or commissions applicable to the Warrant
Shares sold by him pursuant thereto.
(C) The Company shall indemnify
and hold harmless each such holder and each underwriter, within
the meaning of the Securities Act, who may purchase from or sell
for any such holder any Warrants and/or Warrant Shares from and
against any and all losses, claims, damages and liabilities
caused by any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement or any
post-effective amendment thereto or any registration statement
under the Securities Act or any prospectus included therein
required to be filed or furnished by reason of this Section (k)
or caused by any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make
the statement therein not misleading, except insofar as such
losses, claims, damages or liabilities are caused by any such
untrue statement or alleged untrue statement or omission or
alleged omission based upon information furnished or required to
the furnished in writing to the Company by such holder or
underwriter expressly for use therein, which indemnification
shall include each person, if any, who controls any such
underwriter within the meaning of such Securities Act; provided,
---------
however, that the Company shall not be obliged so to indemnify
-------
any such holder or underwriter or controlling person unless such
holder or underwriter shall at the same time indemnify the
Company, its directors, each officer signing the related
registration statement and each person, if any, who controls the
Company within the meaning of such Act, from and against any and
all losses, claims, damages and liabilities caused by any untrue
statement or alleged untrue statement of a material fact
contained in any registration statement or any prospectus
required to be filed or furnished by reason of this Section (k)
or caused by any omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, insofar as such losses, claims, damages
or liabilities are caused by any untrue statement or alleged
untrue statement or omission based upon information furnished in
writing to the Company by any such holder or underwriter
expressly for use therein.
(D) The making of any request for prospectuses
shall not impose upon such holder making such request any
obligation to sell any Warrants and/or Warrant Shares, or
exercise any Warrants.
(E) Upon notification from the Company that the
prospectus is in need of revision or upon the advice of counsel
that no offers or sales of Warrant Shares should then be made
under the Registration Statement, the holder shall (i) cease to
offer or sell any Warrant Shares which must be accompanied by
such prospectus, (ii) return all such prospectuses to the
Company, if requested, and (iii) not offer or sell any Warrant
Shares until provided with a current prospectus and the Company
has given notification to resume offers and sales.
(F) The number of Warrant Shares, together with
warrant shares under any other Warrants issued to the Holder for
serving as a placement agent, to be included in any Registration
Statement must have a market value of at least $250,000, based
upon the market price of the Common Stock at the time the request
for registration is made, which market price shall be calculated
in accordance with Section (g)(8).
(G) If the Registration Statement includes shares
of Common Stock to be offered by the Company through an
underwriter, the Company and the underwriter may, at their
discretion, require the holder to sell its Warrant Shares to or
through such underwriter on substantially the same terms, or the
underwriter may request that the Warrant Shares be excluded from
the Registration Statement on the ground that the inclusion of
the Warrant Shares would be detrimental to the underwritten
offering in which event the offering of the Warrant Shares may be
delayed for up to ninety (90) days from the initial effective
date of the Registration Statement.
(H) The Company shall not be obligated to keep
the Registration Statement effective for more than one hundred
twenty (120) days from its initial effective date, plus a number
of days equal to the number of days, if any, during which the
holders right to offer and sell its Warrant Shares shall have
been suspended pursuant to Paragraph (E) or shall have been
delayed pursuant to Paragraph (G).
(I) The holder shall supply a reasonable number
of prospectuses to any broker through which the holder makes
sales and to inform such broker as to the number of Warrant
Shares the holder is selling, and that such shares may be part of
a distribution and, if so, that such broker may be subject to the
provisions of Rule 10b-6 under the Securities Exchange Act of
1934, as amended (the Exchange Act ), until such time as such
broker has completed the sale of all such Shares.
(J) The holder shall cancel any orders to sell
and/or to reverse any sales of Warrant Shares as to which, in the
reasonable belief of the Company and its counsel, such orders
and/or sales were effected in violation of the Securities Act,
the Exchange Act, or any applicable state securities laws.
(K) The holder shall furnish to the Company, not
later than ten (10) days after the close of each calendar month
during which the holder has sold any of its Warrant Shares, a
report of the number of Warrant Shares sold during such month.
The Company's agreements with respect to Warrants or
Warrant Shares in this Section (k) shall continue in effect
regardless of the exercise and surrender of this Warrant.
(l) TRANSFER TO COMPLY WITH THE SECURITIES ACT OF
1933. This Warrant or the Warrant Shares or any other security
issued or issuable upon exercise of this Warrant may not be sold
or otherwise disposed of except as follows:
(1) To a person, in the opinion of counsel,
satisfactory to the Company, is a person to whom this Warrant or
Warrant Shares may legally be transferred without registration
and without the delivery of a current prospectus under the
Securities Act with respect thereto and then only against receipt
of an agreement of such person to comply with the applicable
provisions of law with respect to any resale or other disposition
of such securities; or
(2) To any person upon delivery of a
prospectus then meeting the requirements of the Securities Act
relating to such securities and the offering thereof for such
sale or disposition; or
(3) Except as provided in Section (e), no
transfer of the Warrant or Warrant Shares may be made pursuant to
Subsections (1) or (2) above for a period of one year from the
date hereof.
(m) NOTICES. Any notice pursuant to this Agreement by the
Company or by the Warrantholder shall be in writing and shall be
deemed to have been duly given if delivered or mailed by
certified mail five days after mailing, return receipt requested:
If to the Warrantholder:
First Geneva Holdings, Inc.
c/o Israel Trading Fund Ltd.
50 Broad Street
New York, New York
with a copy to:
Samuel M. Krieger, Esq.
Krieger & Prager, Esqs.
319 Fifth Avenue
New York, New York 10016
If to the Company:
COMPUMED, INC.
Suite 1000
1230 Rosecrans Avenue
Manhattan Beach, California 90266
ATT: Chief Financial Officer
Each party hereto may from time to time change the
address to which notices to it are to be delivered or mailed
hereunder by notice in accordance herewith to the other party.
(n) SUCCESSORS. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the
Warrantholder shall bind and inure to the benefit of their
respective successors and permitted assigns hereunder.
(o) APPLICABLE LAW. This Agreement shall be deemed to be a
contract made under the laws of the State of Delaware and for all
purposes shall be construed in accordance with the internal laws
of said state.
COMPUMED, INC.
By: /s/ James Linesch
-----------------------
James Linesch,
President
Dated: December 24, 1997
<PAGE>
COMPUMED, INC.
ELECTION TO PURCHASE
--------------------
COMPUMED, INC.
Suite 1000
1230 Rosecrans Avenue
Manhattan Beach, California 90266
The undersigned hereby irrevocably elects to exercise the
right of purchase represented by the within Warrant for, and to
purchase thereunder, ___________ Shares provided for therein, and
requests that certificates for the Shares be issued in the name
of:
_________________________________________________________________
_________________________________________________________________
_____________________________
(Please Print Name, Address and Social Security Number)
and, if said number of Shares shall not be all of the Shares
purchasable under the Warrant, that a new Warrant certificate for
the balance of the Shares purchasable under the within Warrant be
registered in the name of the undersigned Warrantholder or his
Assignee* as below indicated and delivered to the address stated
below:
The undersigned is simultaneously paying the purchase price
by enclosing herewith a certified check or has arranged for a
wire transfer.
The undersigned acknowledges that if the Shares are not
registered under the Securities Act of 1933, it will execute and
deliver such documents as requested by the Company to fulfill the
exemptions from such registration.
Dated: __________________, 199__
Name of Warrantholder or
Assignee (Please Print): ___________________________________
Address: ___________________________________________________
Signature: _________________________________________________
Signature Guaranteed: ______________________________________
______________________
* The Warrant and the Warrant Agreement contain restrictions
on sale, assignment or transfer of this Warrant.
** Note: The signature of this assignment must correspond with
the name as it appears upon the face of the within Warrant
certificate in every particular, without alteration or
enlargement or any change whatever.
<PAGE>
(TO BE SIGNED ONLY UPON ASSIGNMENT OF WARRANT)*
FOR VALUE RECEIVED, the undersigned hereby sells, assigns
and transfers unto
_________________________________________________________________
(Name and Address of Assignee must be Printed or Typewritten)
the right to purchase Common Stock represented by this Warrant to
the extent of ______ Shares as to which such right is
exercisable, hereby irrevocably constituting and appointing
________________, Attorney to transfer said Warrant on the books
of the Company, with full power of substitution in the premises.
Dated: ___________________, 199__
_______________________________**
Signature of Registered Holder
_______________________________
Signature of Guarantor
Signature Guaranteed:
_______________________________________
_____________________
* The Warrant and the Warrant Agreement contain restrictions
on sale, assignment or transfer of this Warrant.
** Note: The signature of this assignment must correspond with
the name as it appears upon the face of the within Warrant
certificate in every particular, without alteration or
enlargement or any change whatever.
Exhibit 5
REID & PRIEST LLP
40 West 57th Street
New York, NY 10019-4097
Telephone 212 603-2000
Fax 212 603-2001
(212) 603-6780
New York, New York
January 22, 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 up to 6,394,690 shares
(the "Shares") of Common Stock, par value $.01 per share (the
"Common Stock"), of the Company. The Shares consist of (A)
200,000 shares issuable upon the exercise of certain outstanding
warrants (the "Distributors Warrants") and (B) a presently
indeterminate number of shares issued or issuable upon conversion
or otherwise in respect of (i) 17,500 shares of the Company's Class
C 7% Cumulative Convertible Preferred Stock Series 1 ("Series C-1
Preferred Stock") and (ii) 17,500 shares of the Company's Class
C 7% Cumulative Convertible Preferred Stock Series 2 ("Series C-2
Preferred Stock") (the Series C-1 Preferred Stock and the Series
C-2 Preferred Stock are collectively referred to as the "Class C
Preferred Stock") and a presently indeterminate number of shares
issued or issuable upon exercise or otherwise in respect of (iii)
warrants issued or issuable upon the conversion of the Series C-1
Preferred Stock ("Series C-1 Warrants") and (iv) warrants issued or
issuable upon the conversion of the Series C-2 Preferred Stock
("Series C-2 Warrants") (the Series C-1 Warrants and the Series
C-2 Warrants are collectively referred to as the "Placement
Warrants"), issued pursuant to Securities Purchase Agreements (the
"Placement Agreements").
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
Placement Agreements; (iii) the Distributors Warrants; (iv) the
form of the Placement Warrants; (v) the Certificate of Incorporation,
including the Certificate of Designation establishing the Class C
Preferred Stock, and By-Laws of the Company, as in effect on the
date hereof; (vi) resolutions adopted by the Board of Directors
of the Company relating to the approval of the Placement
Agreements and the issuance of the Class C Preferred Stock, the
Distributors Warrants and the Placement Warrants; and (vii) 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
Placement Agreements, the issuance of the Class C
Preferred Stock, the Distributors Warrants and the
Placement Warrants, and the issuance of the Shares
in accordance with the terms for conversion of the
Class C Preferred Stock and for exercise of the
Distributors Warrants and the Placement Warrants;
(3) The Shares will be duly authorized and validly
issued, and fully paid and non-assessable upon
their issuance if the Class C Preferred Stock
shall have been properly converted in accordance
with the terms therefore, and the Distributors
Warrants and Placement 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/ Reid & Priest LLP
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 6,394,690
shares of its common stock and to the incorporation by reference
therein of our report dated November 7, 1997 (except for Note I,
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
January 19, 1998
