AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 28, 1999
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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COMPUMED, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 5047 95-2860434
-------- ----------
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NO.) IDENTIFICATION NO.)
------------------------
5777 WEST CENTURY BOULEVARD
SUITE 1285
LOS ANGELES, CALIFORNIA 90045
(310) 258-5000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF PRINCIPAL EXECUTIVE OFFICES)
------------------------
ROBERT GOLDBERG
CHAIRMAN OF THE BOARD OF DIRECTORS
COMPUMED, INC.
5777 WEST CENTURY BOULEVARD
SUITE 1285
LOS ANGELES, CALIFORNIA 90045
(310) 258-5000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES TO:
BRUCE A. RICH, ESQ.
THELEN REID & PRIEST LLP
40 WEST 57TH STREET
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, 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
===============================================================================
Proposed Proposed
Maximum Maximum
Title of Each Offering Aggregate Amount of
Class of Securities Amount to Be Price Offering Registration
to Be Registered Registered Per Unit (1) Price(1) Fee(2)
- -------------------------------------------------------------------------------
Common Stock, par
value $.01 per share 4,452,594 $0.95 $4,229,964.30 $1,175.93
===============================================================================
(1) THE OFFERING PRICE PER SHARE AND THE AGGREGATE OFFERING PRICE HAVE BEEN
ESTIMATED PURSUANT TO RULE 457 FOR THE PURPOSE OF CALCULATING THE
REGISTRATION FEE.
(2) THE REGISTRATION FEE FOR THESE SHARES HAS BEEN DETERMINED PURSUANT TO RULE
457(C).
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON THE 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
THE DATE THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
<PAGE>
INFORMATION CONTAINED IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE
MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND WE ARE NOT SOLICITING OFFERS TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
PROSPECTUS (SUBJECT TO COMPLETION)
DATED SEPTEMBER 28, 1999
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COMPUMED, INC.
4,452,594 SHARES OF COMMON STOCK
--------------------------------
The stockholders of CompuMed, Inc. listed elsewhere in this prospectus are
offering up to 4,452,594 shares of our common stock. These shares will have been
issued upon the exercise of common stock purchase warrants previously issued by
us. We will not receive any proceeds from the sale of the common stock.
The selling stockholders may offer their shares at prevailing market prices
in public transaction on the Nasdaq SmallCap Market or in privately negotiated
transactions. No period of time has been fixed within which the shares may be
offered or sold.
Our common stock is quoted on the Nasdaq SmallCap Market under the symbol
"CMPDC." On September 23, 1999, the closing price of the common stock was
$29/32.
INVESTING IN THE COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON
PAGE 5.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The Date of this Prospectus is , 1999
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TABLE OF CONTENTS
Page
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WHERE YOU CAN FIND MORE INFORMATION ABOUT US................................ 1
PROSPECTUS SUMMARY.......................................................... 2
RISK FACTORS................................................................ 5
USE OF PROCEEDS............................................................. 10
MARKET PRICE INFORMATION.................................................... 10
SELECTED FINANCIAL INFORMATION.............................................. 11
THE COMPANY................................................................. 12
PLAN OF DISTRIBUTION........................................................ 14
LEGAL MATTERS............................................................... 15
EXPERTS ................................................................... 15
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WHERE YOU CAN FIND MORE INFORMATION ABOUT US
ACCESS TO OUR PUBLICLY FILED DOCUMENTS
We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission. You may read and copy
any document we file at the SEC's public reference rooms in Washington, D.C.,
New York, New York and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330
for further information on the public reference rooms. Our SEC filings are also
available to the public at the SEC's web site at http://www.sec.gov.
DOCUMENTS INCORPORATED BY REFERENCE
The SEC allows us to "incorporate by reference" the information we file
with it, which means we can disclose important information to you by referring
you to those documents. The information incorporated by reference is considered
to be a part of this prospectus, and later information that we file with the SEC
will automatically update and supersede this information. We incorporate by
reference the documents listed below and any future filings we make with the SEC
under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934
until all of the shares of common stock offered hereby are sold.
1. Proxy Statement on Schedule 14A filed March 15, 1999.
2. Annual Report on Form 10-KSB for the fiscal year ended September 30,
1998.
3. Quarterly Report on Form 10-QSB for the fiscal quarter ended December
31, 1998.
4. Quarterly Report on Form 10-QSB for the fiscal quarter ended March 31,
1999.
5. Quarterly Report on Form 10-QSB for the fiscal quarter ended June 30,
1999.
6. The description of our common stock contained in our Registration
Statement on Form SB-2, filed March 5, 1996 and any amendment or
report filed to update this description.
This prospectus is part of a registration statement that we filed with the
SEC under the Securities Act of 1933. As permitted by the rules and regulations
of the SEC, this prospectus does not contain all the information set forth in
the registration statement and the exhibits and schedules thereto. The
statements contained in this prospectus as to the contents of any contract or
any other document are not necessarily complete. We qualify any statement by
reference to the copy of such contract or document filed as an exhibit to the
registration statement.
You may request a copy of any document incorporated in this prospectus by
reference (other than exhibits, unless such exhibits are specifically
incorporated by reference in any such document) at no cost, by writing or
telephoning us at the following address: CompuMed, Inc., at 5777 W. Century
Boulevard, Suite 1285, Los Angeles, California 90045, Attn: Robert Goldberg,
Chairman of the Board of Directors; telephone (310) 258-5000.
YOUR RELIANCE ON INFORMATION CONTAINED IN THIS PROSPECTUS
In deciding whether to invest in our common stock, you should rely on the
information contained in this prospectus. We have not authorized anyone to
provide you with information different from that contained in this prospectus.
The selling stockholders are offering to sell, and seeking offers to buy, shares
of common stock only in jurisdictions where offers and sales are permitted. The
information contained in this prospectus is accurate only as of the date of this
prospectus, regardless of the time of delivery of this prospectus or of any sale
of the common stock. You must not consider that the delivery of this prospectus
or any sale of the common stock covered by this prospectus implies that there
has been no change in our affairs since the date of this prospectus or that the
information contained in this prospectus is current or complete as of any time
after the date of this prospectus.
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PROSPECTUS SUMMARY
The following summary information is qualified in its entirety by the
information contained elsewhere in this prospectus and the documents
incorporated by reference herein.
THE COMPANY
We develop medical devices and employ information technologies to diagnose
and monitor costly, high incidence diseases. We have focused our business
primarily on:
() the ongoing development of our osteoporosis testing technology and
() electrocardiogram (ECG) computer interpretation and overread services.
CompuMed was incorporated in the State of Delaware on July 21, 1986.
SIGNIFICANT BUSINESS DEVELOPMENTS
FDA Approval of Automated OsteoGram(R) 2000 System. We have been developing
automated software called OsteoGram(R) which will assist medical professionals
in analyzing bone density by producing a digitized image of the bone from a
radiograph (x-ray). On May 19, 1999, we received clearance from the U.S. Food
and Drug Administration to begin marketing our Automated OsteoGram(R) 2000
system. The system consists of a desktop scanner, standard personal computer and
the OsteoGram(R) bone density analysis software, and it allows physicians to
perform accurate bone density tests in their offices using existing standard
x-ray equipment. We are taking steps to commercialize the technology.
Ongoing Research and Development of the OsteoView(R). We plan to develop a
device called the OsteoView(R) to measure bone density, which we have performed
initial feasibility testing and analysis. This instrument will use a low-dose
x-ray source and a digital detector to determine bone density from a measurement
of the fingers and the wrist. We have entered into an agreement with The Johns
Hopkins University Medical School and The Johns Hopkins University Applied
Physics Laboratory to cooperatively develop instruments to diagnose and treat
osteoporosis and other musculoskeletal diseases. As part of the agreement, the
University may employ its engineering resources to assist in the manufacturing
design and augment the clinical capability of our Digital OsteoView(R) 2000
concept device. The completion of the development, manufacture and marketing of
the Osteoview(R) device will probably require a development or manufacturing
partner. There is no assurance that such a partner will be secured or that such
a device will be completed.
Cessation of Development of Detoxahol(TM). In March 1994, we acquired the
rights to a potential new drug called Detoxahol(TM), which could facilitate the
rapid lowering of blood alcohol levels. We filed a patent application covering
the technology underlying Detoxahol(TM), and we had been developing
Detoxahol(TM) technology in conjunction with the University of Georgia. We
subsequently stopped this development work. We are currently seeking a partner
with which to recommence our development efforts, but 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 we could produce a marketable Detoxahol(TM)
product.
CONDITIONAL LISTING ON NASDAQ SMALLCAP MARKET
We are required to meet stock price, tangible net worth and market value
criteria in order to maintain our listing on the Nasdaq SmallCap Market. As of
November 16, 1998, we were notified that the minimum bid price for our common
stock fell below $1.00, a level for which a company may be delisted from The
Nasdaq SmallCap Market. The National Association of Securities Dealers Inc.,
which supervises this market, has granted us a temporary exception which will
expire on December 31, 1999. Our trading symbol now indicates that we are
conditionally listed, which could affect negatively the price and liquidity of
our common stock. If we do not meet Nasdaq's condition after December 31, 1999,
we could be delisted and our stockholders may find it difficult to dispose of
their shares of common stock.
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PRINCIPAL EXECUTIVE OFFICES
Our principal executive offices are located at 5777 W. Century Boulevard,
Suite 1285, Los Angeles, California 90045. You can reach our principal executive
offices by telephone at (310) 258-5000.
THE OFFERING
SECURITIES OFFERED
This prospectus relates to the offer and sale of up to 4,452,594 share of
our common stock by stockholders listed elsewhere in this prospectus.
The shares of common stock covered by this prospectus will have been issued
upon the exercise of common stock purchase warrants. In 1997, we offered shares
of our Class C 7% Convertible Preferred Stock. Each share of this series of
preferred stock is convertible into shares of our common stock and an equal
number of common stock purchase warrants. In 1992, we offered shares of common
stock and warrants to purchase shares of common stock. Of the 4,452,594 shares
of common stock being offered hereby, 3,805,424 shares of common stock relate to
the warrants that we have issued upon the conversion of the preferred stock and
647,170 shares of common stock relate to the warrants that we issued in 1992.
SECURITIES OUTSTANDING
At September 2, 1999, we had the following securities outstanding other
than warrants and stock options:
Common Stock.............................................. 16,555,857
Class A Convertible Preferred Stock....................... 8,400
Class B Convertible Preferred Stock....................... 300
Preferred Stock
The holders of Series A Convertible Preferred Stock may convert these
securities into shares of common stock by surrendering two shares of the
preferred stock. At September 2, 1999, a total of 4,200 shares of common stock
were issuable upon conversion of all of the currently outstanding shares of this
series of preferred stock. Each share of Class B Convertible Preferred Stock is
convertible into ten shares of common stock. At September 2, 1999, a total of
3,000 shares of common stock were issuable upon conversion of all of the
outstanding shares of this series of preferred stock.
Warrants
At September 2, 1999, we had outstanding warrants to purchase a total of
7,008,585 shares of common stock at a weighted average price of $1.52 per share.
In 1992, we issued warrants to the public to purchase 8,000,000 shares of common
stock at $3.75 per share. After we effected a one-for-ten reverse stock split of
our common stock and amended the warrant agreement by extending the expiration
date and reducing the exercise price, the public warrants entitle holders to
purchase a total of 647,170 shares of common stock at $2.50 per share and expire
on August 2, 2000. Upon the conversion of shares of our Class C Preferred Stock,
we have issued Class C Warrants to purchase 5,619,525 shares of common stock, of
which warrants to purchase 4,289,415 shares of common stock remain unexercised.
Each of the Class C Warrants is exercisable at the price that the holder
converted the preferred stock. The Class C Warrants expire on February 17, 2001.
In January 1998, a United States federal district court approved the settlement
of a class action against us. Under the terms of this settlement agreement, we
issued warrants to purchase 1,875,000 shares of common stock at $3.00 per share,
expiring on January 25, 2003. In addition, there are other warrants to purchase
an aggregate of 197,000 shares of common stock expiring between September 2000
and January 2003.
Options
At September 2, 1999, we had issued currently exercisable stock options to
purchase 897,172 shares of common stock at a weighted average exercise price of
$0.94 per share.
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Common Stock Issuable upon Conversion of Other Securities
The following table provides information with respect to our securities
that are exchangeable or exercisable for shares of common stock at September 2,
1999.
NUMBER OF SHARES WEIGHTED
OF COMMON STOCK AVERAGE PRICE
----------------- ----------------
Class A Preferred Stock............... 4,200 $ 0
Class B Preferred Stock............... 3,000 0
Public Warrants....................... 647,170 2.50
Class C Warrants...................... 4,289,415 0.66
Settlement Warrants................... 1,875,000 3.00
Other Warrants........................ 197,000 2.63
Stock Options......................... 897,172 0.94
USE OF PROCEEDS
We will not receive any proceeds from the sale of the common stock sold by
the selling stockholders listed elsewhere in this prospectus.
The shares of common stock covered by this prospectus underlie common stock
purchase warrants. Although we will receive no proceeds from the sale of the
common stock, we will receive proceeds upon the exercise of the common stock
purchase warrants. In order to receive one share of common stock, the holders of
the public warrants that we issued in 1992 must pay us $2.50 and surrender ten
warrants. We will receive $1,617,925 if all of these warrants are exercised. The
other 3,805,424 shares of common stock covered by this prospectus underlie
warrants that we have issued upon the conversion of the Class C Preferred Stock.
The holders of these warrants must surrender one warrant and pay us the same
amount that they paid us to convert the preferred stock. Because the conversion
price of the preferred stock was based upon the market price of our common
stock, and holders have converted their shares of preferred stock at different
times, the exercise prices for the warrants vary. We anticipate that we will
receive approximately $2,511,580 if all of these warrants are exercised based
upon the weighted average exercise price of $0.66.
RISK FACTORS
You should read the disclosures we make under the heading "Risk Factors" in
considering whether to invest in our common stock.
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RISK FACTORS
You should consider the following factors and other information in this
prospectus before deciding to invest in the common stock. This investment
involves a high degree of risk, and you should only purchase shares of common
stock if you can afford a complete loss of your investment.
FINANCIAL RISKS
WE HAVE A HISTORY OF INCURRING LOSSES AND WE ANTICIPATE THAT WE WILL CONTINUE TO
INCUR LOSSES.
We incurred net losses of approximately $4,647,000 in 1996, $2,214,000 in
1997 and $1,333,000 in 1998. For the nine months ended June 30, 1999, we
incurred net losses of $766,000, and we anticipate that we will continue to
incur net losses during the remaining three months of the 1999 fiscal year and
thereafter due to future research and development costs and corporate costs. Our
retained deficit at June 30, 1999 was $28,492,000.
OUR CONTINUED DEVELOPMENT EFFORTS AND FUTURE GROWTH DEPEND UPON OUR ABILITY TO
RAISE ADDITIONAL CAPITAL WHICH MAY NOT BE AVAILABLE TO US WHEN NEEDED OR ON
ACCEPTABLE TERMS.
We will require capital to finance our continued research and development
programs and to support and grow our existing ECG business. Although we believe
that we have sufficient capital to fund these activities for at least the next
12 months, there can be no assurance that we will have adequate working capital
to fund all of these activities in the future particularly in light of our
continued and significant losses. There can be no assurance that additional
financing required will be available when needed or, if available, will be on
terms acceptable to us.
BUSINESS AND REGULATORY RISKS
WE MUST ATTRACT AND RETAIN KEY PERSONNEL IN ORDER TO REMAIN COMPETITIVE WHICH
MAY BE DIFFICULT GIVEN OUR SMALL SIZE AND LIMITED RESOURCES COMPARED TO MANY OF
OUR COMPETITORS.
James Linesch resigned as the President and Chief Executive Financial
Officer of the Company effective September 8, 1999 to pursue other
opportunities. Robert B. Goldberg, the Company's chairman, is serving as the
interim principal and executive officer and shall devote an increased portion
of his time to the Company while serving in such capacities, and Phuong Dang
will serve as the interim principal accounting officer until a person is hired
for these positions. Our success depends on our ability to attract and retain
skilled managerial, marketing and sales personnel. We face competition for such
personnel from other companies and institutions in our industry. Our company is
smaller and we have fewer resources than many of our competitors. Therefore, we
may have difficulty successfully competing for the personnel required to achieve
future success.
THE SUCCESS OF OSTEOGRAM(R) FORMS AN IMPORTANT PART OF OUR PLANS FOR FUTURE
GROWTH AND POTENTIAL CUSTOMERS MAY NOT ACCEPT THIS METHOD OF TESTING BONE
MINERAL DENSITY.
We intend to market the OsteoGram(R) software in the future, but this
method of testing bone mass is currently at an early stage in market development
and is not widely recognized by the medical profession and the public. Education
of the medical profession and public of the OsteoGram(R)'s effectiveness, low
cost, ease of use and lack of any need for specialized capital equipment to
administer the test remains vital to the success of OsteoGram(R). Physicians and
other 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. In addition, other obstacles, such as competition with
other companies that are better known and financed than us, may impede the
OsteoGram(R)'s acceptance. Many radiography centers consider themselves to be
our competitors because of their capital investments in expensive bone scanning
equipment.
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OUR DEVICES ARE COVERED BY MEDICAL REIMBURSEMENT PROGRAMS, AND ANY LEGISLATION
THAT REDUCED THE ABILITY OF PATIENTS TO OBTAIN REIMBURSEMENT FOR THE USE OF, OR
OF PHYSICIANS TO RECOVER THE COST OF, OUR DEVICES WOULD ADVERSELY AFFECT OUR
BUSINESS.
The OsteoGram(R) and ECG services are approved for reimbursement by
Medicare and most other third party payors. Most payments for these services are
made by the medical insurance carrier of the patients. Government regulation may
change at any time, and Medicare reimbursements for the Osteogram(R) or ECG
services may be withdrawn or reduced. Further, should Medicare reimbursement
programs be significantly reduced or should other regulatory changes affect the
ability of physicians or us to recover the cost of OsteoGram(R) tests or ECG
services, our ability to market and sell our products would be adversely
affected.
WE HAVE NOT PATENTED TECHNOLOGIES THAT ARE IMPORTANT ASSETS OF OUR BUSINESS, AND
WE CANNOT ASSURE THE CONTINUED PROPRIETARY NATURE OF SUCH TECHNOLOGIES.
We believe that the software that operates the OsteoGram(R) is a
proprietary trade secret that is protected by a confidentiality agreements with
a prior licensee of the technology and with other parties that have developed
the technology. However, such protection may not preclude competitors from
developing products which can be marketed in competition with the OsteoGram(R).
We intend to file for patents as improvements are made to the OsteoSystem or as
the OsteoView(R) is developed. There can be no assurance that patent
applications, if filed, will result in issued patents or that patents, if issued
will not be circumvented or invalidated. Moreover, there is no assurance that we
are not infringing the patents of others.
WE WILL RELY ON OTHERS TO MANUFACTURE OUR DEVICES, AND WE MAY NOT BE ABLE TO
MEET CUSTOMER DEMAND IF OUR SUPPLIERS CANNOT MEET OUR QUANTITY AND QUALITY
REQUIREMENTS.
We do not manufacture apparatus used in connection with the OsteoGram(R) or
ECG services. We have entered into arrangements with third parties for the
manufacture of apparatus used in connection with the ECG services. However,
there can be no assurance that third party manufacturers will be able to
continue to meet our quantity and quality requirements for manufactured
products.
OUR BUSINESS EXPOSES US TO PRODUCTS LIABILITY AND MEDICAL MALPRACTICE SUITS, AND
WE CANNOT BE SURE THAT OUR INSURANCE WILL BE SUFFICIENT TO COVER ALL POTENTIAL
LIABILITIES.
We could be sued for products liability if a patient is injured as the
result of the misuse or malfunction of one of our medical devices. Although we
maintain insurance that provides $5,000,000 of coverage per occurrence and
$5,000,000 in the aggregate with a deductible of $1,000, we cannot be sure that
this 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, we have
never been involved in any litigation as a result of alleged product liability.
Our current liability insurance policy does not cover losses due to
misinterpreted overreads of ECG printouts by physicians that we retain to
provide such services. Medical professional liability claims which may be
brought against us 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 our business, financial condition or operating results. Since
commencing our ECG services, no medical professional liability claims have been
made against either the physicians retained by us to perform overreads or our
employees with respect to misinterpreted overreads.
OUR PRODUCTS AND SERVICES ARE HIGHLY REGULATED BY THE FDA, AND NEW LEGISLATION,
GOVERNMENT REGULATIONS OR COURT RULINGS COULD ADVERSELY EFFECT OUR BUSINESS BY
PREVENTING US FROM MARKETING NEW PRODUCTS OR INCREASING OUR COSTS.
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Our medical devices, medical services and potential pharmaceutical products
are subject to varying degrees of FDA regulation. All medical devices and their
components are subject to general FDA controls, including compliance with
specified manufacturing practices. Manufacturers must 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 their commercial use.
The FDA and other government agencies may in the future issue new
regulations, or issue new interpretations of existing regulations, which affect
the manufacture, marketing and sale of our products. Our operations may also be
affected if Congress passes new legislation or if courts issue new rulings with
respect to existing legislation. We can offer no assurances that we will not be
adversely affected by new, or newly interpreted, regulatory requirements.
OUR INDUSTRY IS CHARACTERIZED BY RAPID TECHNOLOGICAL CHANGES AND AGGRESSIVE
COMPETITION.
We operate in an industry where technological developments occur at a rapid
pace. We compete with a large number of established companies and institutions
many of whom have more capital, larger staffs and greater expertise than our
company. Our competitors may develop technologies and products that are more
effective than any that we currently have. If this occurs, our products and
technology could become obsolete.
MARKET RISKS
NASDAQ HAS MADE OUR NASDAQ SMALLCAP MARKET LISTING CONDITIONAL, AND WE COULD
LOSE OUR LISTING WHICH WOULD REDUCE THE LIQUIDITY OF OUR COMMON STOCK.
Our common stock is listed on the Nasdaq SmallCap Market. Nasdaq maintains
requirements for the continued listing on the Nasdaq SmallCap Market, including
the following requirements:
() the common stock have a minimum bid price of $1.00 per share;
() we either have net tangible assets of $2,000,000, market
capitalization of $35,000,000 or net income (in latest fiscal year or
2 of last 3 fiscal years) of $500,000; and
() that the market value of the public float if our common stock be at
least $4,000,000.
As of November 16, 1998, we were notified that the minimum bid price for
our common stock was below the $1.00 minimum bid price requirement and that our
common stock was subject to delisting. After a hearing, Nasdaq had granted us a
temporary exception to its share price rule. Our trading symbol now indicates
that we are conditionally listed, which could affect negatively the price and
liquidity of our common stock. Our conditional listing will expire on December
31, 1999, and if we do not meet Nasdaq's conditions, our common stock could be
delisted.
Trading, if any, in the delisted securities would thereafter be conducted
on the OTC Electronic Bulletin Board. As a result, should delisting occur, an
investor may find it difficult to dispose of, or to obtain accurate quotations
of the price of, our securities. This would severely limit the liquidity of our
common stock, and would likely have a material adverse effect on the market
price of our common stock and on our ability to raise additional capital.
If our 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 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
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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, the rule could
affect the ability of broker-dealers to sell our securities and could affect the
ability of purchasers to sell any of our securities in the secondary market.
OUR COMMON STOCK COULD BECOME SUBJECT TO "PENNY STOCK" RESTRICTIONS UNDER
FEDERAL SECURITIES LAWS, WHICH WOULD REDUCE THE LIQUIDITY OF OUR COMMON STOCK.
The SEC has adopted regulations that define a "penny stock" to be any
equity security that has a market price of less than $5.00 per share or with an
exercise price of less than $5.00 per share. 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 penny stock restrictions will not apply to our common stock if we meet
a $2,000,000 minimum net tangible assets or, a $1.00 market price or other
Nasdaq rules. There can be no assurance that our common stock will qualify for
exemption from the penny stock restrictions. In any event, even if our common
stock were exempt from such restrictions, we 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.
THE MARKET PRICE FOR OUR COMMON STOCK COULD DECLINE AS A RESULT OF SHARES THAT
WILL BE ELIGIBLE FOR SALE IN THE FUTURE.
At September 2, 1999, 16,555,857 shares of our common stock were
outstanding. In addition:
() 7,200 shares of common stock are issuable upon conversion of the
outstanding Class A Preferred Stock and Class B Preferred Stock,
() 7,008,585 shares of common stock, including the shares of common stock
offered hereby, are issuable upon the exercise of warrants, and
() 1,455,794 shares of common stock are issuable upon the exercise of
outstanding stock options.
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 our ability to raise additional capital when
needed through the sale of its equity securities.
If our common stock were subject to the rules on penny stocks, the market
liquidity for our common stock could be materially adversely affected.
PROVISIONS IN OUR CERTIFICATE OF INCORPORATION COULD DISCOURAGE UNSOLICITED
TAKEOVER ATTEMPTS WHICH COULD DEPRESS THE MARKET PRICE OF OUR COMMON STOCK.
Provisions of our Certificate of Incorporation and By-laws and of Delaware
law could discourage potential acquisition proposals and could delay or prevent
a change in control. 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, our board of directors, without
further stockholder approval, may issue preferred stock that could have the
effect of delaying or preventing a change in control. The issuance of preferred
8
<PAGE>
stock could also adversely affect the voting power of the holders of common
stock, including the loss of voting control to others.
THE ACCURACY OF FORWARD-LOOKING STATEMENTS CONTAINED IN THIS PROSPECTUS IS
UNCERTAIN.
This prospectus contains certain forward-looking statements that are based
on the beliefs of our management, as well as assumptions made by, and
information currently available to, our management. The words "anticipates,"
"believes," "estimates," "expects," "plans," "intends" and similar expressions
are intended to identify these forward-looking statements, but are not the
exclusive means of identifying them. These forward-looking statements reflect
the current views of our management and are subject to certain risks,
uncertainties and contingencies which could cause our actual results,
performance or achievements to differ materially from those expressed in, or
implied by, these statements. These risks, uncertainties and contingencies
include, but are not limited to, the following:
() our ability to raise additional capital when needed or on acceptable
terms;
() the acceptance of our products and services by the medical profession;
() our ability to obtain regulatory approvals for the devices that we
develop;
() our ability to retain the proprietary nature of the technologies that
we develop; and
() other factors discussed above under the heading "Risk Factors" and
elsewhere in this prospectus.
We assume no obligation to update any forward-looking statements, whether
as a result of new information, future events or otherwise.
9
<PAGE>
USE OF PROCEEDS
The stockholders listed elsewhere in this prospectus will sell the common
stock being offered hereby, and we will not receive any of the proceeds from the
sales.
MARKET PRICE INFORMATION
Our common stock is included on the Nasdaq SmallCap System under the symbol
"CMPDC". The following table sets forth the quarterly high and low closing bid
prices for the common stock as reported by Nasdaq for the periods indicated.
These prices are based on quotations between dealers, and do not reflect retail
mark-up, mark-down or commissions, and may not necessarily represent actual
transactions.
High Low
---- ---
FISCAL 1997
First Quarter $1.94 $0.54
Second Quarter 1.38 0.69
Third Quarter 1.22 0.50
Fourth Quarter 3.09 0.59
FISCAL 1998
First Quarter 2.34 1.34
Second Quarter 1.50 0.78
Third Quarter 1.25 0.69
Fourth Quarter 0.81 0.34
FISCAL 1999
First Quarter 1.25 0.34
Second Quarter 0.75 0.38
Third Quarter 4.03 0.38
Fourth Quarter (through September 23, 1.97 0.81
1999)
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.
10
<PAGE>
SELECTED FINANCIAL INFORMATION
The following table provides summary financial data of CompuMed for the
periods indicated. We have prepared this information using the consolidated
financial statements of CompuMed for the years ended September 30, 1996,
1997 and 1998. We have derived the summary financial data for the nine months
ended June 30, 1998 and 1999 from our unaudited interim financial statements
which have been incorporated in this prospectus by reference to our Quarterly
Report on Form 10-QSB for the fiscal quarter ended June 30, 1999. We believe
that these unaudited interim financial data include all adjustments, consisting
of normal recurring adjustments necessary for a fair statement of our operating
and non-operating results for the unaudited interim periods. The results of
operation for the nine months ended June 30, 1999 are not necessarily indicative
of the results of operations to be expected for the entire year ended September
30, 1999. This data should be read in conjunction with our financial statements
and "Management's Discussion and Analysis or Plan of Operation" incorporated in
this prospectus by reference to our Annual Report on Form 10-KSB for the fiscal
year ended September 30, 1998 and the Quarterly Report on Form 10-QSB for the
fiscal quarter ended June 30, 1999.
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30 Nine Months Ended June 30
--------------------------------------------------- ----------------------------------
<S> <C> <C> <C> <C> <C>
1996 1997 1998 1998 1999
----------------- ----------------- ----------------- ----------------- -----------------
STATEMENT OF INCOME DATA
Revenues:
ECG services................ $ 2,008,000 $ 1,674,000 $1,420,000 $1,076,000 $1,033,000
Osteo royalty revenues...... 37,000 119,000 42,000 42,000 16,000
Product sales............... 200,000 146,000 395,000 242,000 640,000
Rental property............. 99,000 -- -- -- --
----------- ----------- ---------- ---------- ----------
2,344,000 1,939,000 1,857,000 1,360,000 1,689,000
Cost of Sales.................. 7,123,000 4,222,000 3,488,000 2,629,000 2,471,000
Other Income (Expense)......... 132,000 69,000 298,000 51,000 16,000
----------- ----------- ---------- ---------- ----------
Net Loss....................... $(4,647,000) $(2,214,000) $(1,333,000) $(1,218,000) $ (766,000)
=========== =========== =========== =========== ==========
Net Loss Per Share............. $ (.54) $ (.25) $ (.19) $ (.19) $ (.06)
=========== =========== =========== =========== ==========
Weighted average number
of common shares
outstanding................. 8,534,276 8,965,045 10,912,240 10,391,952 13,656,032
=========== =========== =========== =========== ==========
BALANCE SHEET DATA
1996 1997 1998 JUNE 30, 1999
------------------ ------------------ ------------------ ------------------
Cash and Marketable Securities............... $2,644,000 $ 931,000 $2,833,000 $2,749,000
Total Assets................................. 3,978,000 1,776,000 3,450,000 3,608,000
Total Current Liabilities.................... 942,000 756,000 453,000 563,000
Total Stockholders' Equity................... 2,958,000 868,000 2,885,000 2,870,000
</TABLE>
11
<PAGE>
THE COMPANY
OUR BUSINESS
We develop and provide information technologies and services for the
diagnosis, monitoring and management of costly, high incidence diseases,
particularly cardiovascular disease and osteoporosis. We apply computing,
medical imaging, telecommunications and networking technologies to provide
medical professionals with advanced and affordable diagnostic tools. We have
focused our business primarily:
() the ongoing development of its osteoporosis testing technology and
() the computer interpretation of electrocardiograms, or ECGs.
SIGNIFICANT BUSINESS DEVELOPMENTS
FDA Approval of Automated OsteoGram(R) 2000 System. We have been developing
automated software called OsteoGram(R) which will assist medical professionals
in analyzing bone density by producing a digitized image of the bone from an
x-ray. On May 19, 1999, we received clearance from the U.S. Food and Drug
Administration to begin marketing our Automated OsteoGram(R) 2000 system, which
we believe is the first device that enables a physician to perform accurate bone
density tests in their own offices using existing standard x-ray equipment.
Currently, the equipment used to measure bone density is costly and is typically
located in specialized osteoporosis centers. Based upon publicly available
information, we estimate that there are currently approximately 8,000 bone
densitometers installed throughout the United States. By contrast, over 100,000
facilities in the United States have the standard x-ray equipment that is
required to perform bone density diagnosis with our system. The Automated
OsteoGram(R) 2000 System consists of a desktop scanner, standard personal
computer and the OsteoGram(R) bone density analysis software. We are taking
steps to commercialize the technology.
Ongoing Research and Development of the OsteoView(R). We are planning to
develop a bone density measuring instrument called the OsteoView(R). The
OsteoView(R) device would use a low-dose x-ray source and a digital detector to
determine bone density from a measurement of the fingers and the wrist. During
the 1997 fiscal year, we developed a prototype model for illustrating the
proposed design of this device. We have entered into an agreement with The Johns
Hopkins University Medical School and The Johns Hopkins University Applied
Physics Laboratory to cooperatively develop instruments to diagnose and treat
osteoporosis and other musculoskeletal diseases. As part of the agreement, the
University may employ its engineering resources to assist in the manufacturing
design and augment the clinical capability of our Digital OsteoView(R) 2000
concept device. The completion of the development, manufacture and marketing of
the OsteoView(R) device will probably require a development or manufacturing
partner. There is no assurance that such a partner will be secured or that such
a device will be completed.
Cessation of Development of Detoxahol(TM). In March 1994, we acquired the
rights to a potential new pharmaceutical product called Detoxahol(TM), a
substance intended to facilitate the rapid lowering blood alcohol levels. In
June 1995, we filed a patent application covering the technology underlying
Detoxahol(TM). We had been developing Detoxahol(TM) technology in conjunction
with the University of Georgia, but we stopped this development work and there
is no assurance that we will commence development in the future or that if we
ultimately develop a Detoxahol(TM) product that we will be able to obtain all
necessary regulatory approvals. We are 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 we could produce a marketable Detoxahol(TM) product.
12
<PAGE>
SELLING STOCKHOLDERS
We have agreed with the selling stockholders to register the shares of
common stock underlying common stock purchase warrants that we had issued. We
also agreed to use our best efforts to keep the registration statement effective
until all of the shares have been sold. Our registration of the shares does not
necessarily mean that the selling stockholder will sell all or any of the
shares.
The shares of common stock covered by this prospectus will have been issued
upon the exercise of common stock purchase warrants. In 1997, we offered and
sold shares of our Class C 7% Convertible Preferred Stock. Each share of this
series of preferred stock was convertible into shares of our common stock and
an equal number of common stock purchase warrants. In 1992, on our initial
public offering, we offered shares of common stock and warrants to purchase
shares of common stock. Of the 4,452,594 shares of common stock being offered
hereby, 3,805,424 shares of common stock relate to the preferred stock that we
issued in 1997 and 647,170 shares of common stock relate to the warrants that we
issued in 1992.
The shares offered by this prospectus may be offered from time to time by
the stockholders listed in the following table. The information provided in the
following table relates to the selling stockholders who acquired an aggregate of
3,805,424 shares of common stock upon the exercise of warrants that they
received from us upon the conversion of shares of preferred stock. The balance
of 647,170 shares of common stock covered by this prospectus have been acquired
upon the exercise of publicly traded warrants. Because these warrants are
publicly traded, there is no way for us to know the identity of the beneficial
holders at the date of this prospectus. To our knowledge, none of the selling
stockholders has held any position, office or material relationship with us or
any of our predecessors or affiliates within three years prior to the date of
this prospectus. The following table sets forth, as of September 2, 1999,
information with regard to the beneficial ownership of common stock by each of
the selling stockholders. The information included below is based upon
information provided to us 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 that will be held by the selling
stockholders after the offering can be provided and the following table has been
prepared on the assumption that all shares of common stock offered under this
prospects will be sold. 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. We have assumed the sale of
all shares of common stock being offered by this prospectus.
AMOUNT BENEFICIALLY AMOUNT BENEFICIALLY
OWNED SHARES TO BE OWNED
NAME(1) PRIOR TO OFFERING OFFERED AFTER OFFERING(2)
- ---- ----------------------- ------------ ---------------------
The Shaar Fund Ltd. 2,066,992 2,066,992 0
Shaar Advisor Services
Ltd. 796,906 796,906 0
First Geneva Holdings,
Inc. 189,558 189,558 0
Rutgers Casualty, Inc. 178,312 178,312 0
Firmvest Capital Corp. 168,122 168,122 0
Nachum Stein & Feige
Stein 139,877 139,877 0
Peter Chenam 137,033 137,033 0
Kentucky National
Insurance Co. 108,362 108,362 0
NSI Partnership 20,262 20,262 0
(1) Unless otherwise indicated, the persons and entities named in the table
have sole voting and sole investment power with respect to all shares
beneficially owned.
(2) Assumes the sale of all shares offered hereby.
13
<PAGE>
PLAN OF DISTRIBUTION
The selling stockholders have advised us 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 we are 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 we believe appropriate:
() the name of the participating underwriter;
() the number of the shares involved;
() the price at which such shares are sold, the commissions paid or
discounts or concessions allowed to such underwriter; and
() other facts material to the transaction.
We expect 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 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 Market or other trading system
may be made by means of one or more of the following:
() 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;
() purchases by a dealer as principal and resale by such dealer for its
account pursuant to this prospectus; and
() ordinary brokerage transactions and 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 shares at less than market prices may
depress the market price of our common stock. Moreover, the selling stockholders
are not restricted as to the number of shares which may be sold at any one time.
We have agreed to 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. In addition, we 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
14
<PAGE>
offering of the common stock, including liabilities arising under the Securities
Act.
We have 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 we have furnished the selling stockholders
with a copy of such rules. We have also advised the selling stockholders of the
requirement for the delivery of this prospectus in connection with resales of
the shares offered hereby.
We have 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. We have also been advised by the selling
stockholders that none of them has, as of September 2, 1999, 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
Legal matters in connection with the validity of the shares of common stock
offered hereby will be passed upon for us by Thelen Reid & Priest LLP, New York,
New York.
EXPERTS
Ernst & Young LLP, our independent auditors, have audited our consolidated
financial statements included in our Annual Report on Form 10-KSB for the year
ended September 30, 1998, as set forth in their report, which is incorporated
by reference in this prospectus and elsewhere in the registration statement.
Our consolidated financial statements are incorporated by reference in
reliance on Ernst & Young LLP's report, given on their authority
as experts in accounting and auditing.
15
<PAGE>
4,452,594 Shares
of Common Stock
COMPUMED, INC.
-------------------
P R O S P E C T U S
-------------------
, 1999
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The estimated expenses of this offering in connection with the issuance and
distribution of the securities being registered, all of which are to be paid by
the Registrant, are as follows:
Registration Fee...............................................$ 1,175.93
Legal Fees and Expenses........................................ 17,000.00
Accounting Fees and Expenses................................... 8,000.00
Miscellaneous Expenses......................................... 1,824.07
==========
Total................................................. $28,000.00
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article TENTH of the Certificate of Incorporation of CompuMed and Article
VI of the By-laws of CompuMed provide in part that CompuMed 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
<PAGE>
view or all the circumstances, the person is fairly and reasonably entitled to
indemnity for such expenses which the court shall deem proper.
In addition, the indemnification and advancement of expenses provided by or
granted pursuant to Section 145 shall not be deemed exclusive of any other
rights to which those seeking indemnification or advancement of expenses may be
entitled under any by-law, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office.
CompuMed has purchased and maintains insurance for its officers and
directors against certain liabilities, including liabilities under the
Securities Act. The effect of such insurance is to indemnify any officer or
director of CompuMed 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
- ------- ----------------------
4.1 Certificate of Incorporation of CompuMed [Incorporated by reference to
Exhibit 3.1 to CompuMed's Registration Statement of Form S-1 (File No.
33-46061), effective May 7, 1992]
4.2 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 CompuMed's Registration Statement on Form S-2 (File
No. 33-48437), filed June 28, 1994]
4.3 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 CompuMed's Registration Statement on Form S-2 (File
No. 33-48437), filed November 7, 1994]
4.4 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 CompuMed's Registration Statement on Form S-2 (File
No. 33-48437), filed November 7, 1995]
4.5 By-Laws of CompuMed, as currently in effect [Incorporated by reference
to Exhibit 3.2 to CompuMed's Registration Statement on Form S-1 (File
No. 33-46061), effective May 7, 1992]
4.6 Specimen Common Stock Certificate [Incorporated by reference to
Exhibit 4.1 to CompuMed's Registration Statement on Form S-1 (File No.
33-46061), effective May 7, 1992]
5.* Opinion of Thelen Reid & Priest LLP
23.1* Consent of Ernst & Young LLP
II-2
<PAGE>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
23.2* Consent of Thelen Reid & Priest LLP (included as part of Exhibit 5)
24.* Power of Attorney (included on p. II-5)
- ------------------------------------
* Filed herewith.
ITEM 17. UNDERTAKINGS
UNDERTAKINGS REQUIRED BY REGULATION S-K, 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.
(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 provided 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 given in
the "Calculation of Registration Fee" table in the effective
registration statement.
(iii) to include any additional or changed material
information with respect to the plan of distribution.
(2) that, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered
therein, and the offering of such securities at the time shall be
deemed to be the initial bona fide offering thereof.
(3) to remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold
at the termination of the offering.
II-3
<PAGE>
UNDERTAKING REQUIRED BY REGULATION S-K, ITEM 512(H).
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the provisions of
the foregoing provisions, 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 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 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
27TH DAY OF SEPTEMBER, 1999.
COMPUMED, INC.
BY: /S/ ROBERT B. GOLDBERG
________________________________
Robert B. Goldberg
Chairman of the Board of Directors
POWER OF ATTORNEY
EACH DIRECTOR AND/OR OFFICER OF THE REGISTRANT WHOSE SIGNATURE APPEARS
BELOW HEREBY APPOINTS ROBERT B. GOLDBERG AS HIS ATTORNEY-IN-FACT TO SIGN IN
HIS NAME AND BEHALF, IN ANY AND ALL CAPACITIES STATED BELOW AND TO FILE WITH
THE SEC, ANY AND ALL AMENDMENTS (INCLUDING POST-EFFECTIVE AMENDMENTS) AND
SUPPLEMENTS TO THIS REGISTRATION STATEMENT.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN
THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Robert B. Goldberg Chairman of the Board September 27, 1999
- ------------------------------- (Principal Executive
Robert B. Goldberg Officer)
/s/ Phuong Dang Principal Accounting September 27, 1999
- ------------------------------- Officer
Phuong Dang
/s/ Herbert Lightstone Director September 27, 1999
- -------------------------------
Herbert Lightstone
/s/ John D. Minnick Director September 27, 1999
- -------------------------------
John D. Minnick
/s/ John Romm Director September 27, 1999
- -------------------------------
John Romm
/s/ Robert Stuckelman Director September 27, 1999
- -------------------------------
Robert Stuckelman
II-5
<PAGE>
EXHIBIT INDEX
Exhibit Page
- ------- ----
5 Opinion of Thelen Reid & Priest LLP
23.1 Consent of Ernst & Young LLP
23.2 Consent of Thelen Reid & Priest LLP (included as part of Exhibit 5)
24. Power of Attorney (included on p. II-5)
Exhibit 5
THELEN REID & PRIEST LLP
40 WEST 57TH STREET
NEW YORK, NEW YORK 10019-4097
(212) 603-6780
New York, New York
September 27, 1999
CompuMed, Inc.
5777 West Century Boulevard
Suite 1285
Los Angeles, California 90045
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 4,452,594 shares (the
"Shares") of Common Stock, par value $.01 per share (the "Common
Stock"), of the Company. The Shares consist of (i) 3,805,424
shares of Common Stock which are issuable upon the exercise of
certain Common Stock Purchase Warrants which were issued upon the
conversion of the Company's Class C 7% Convertible Preferred
Stock, par value $.01 per share, and (ii) 647,170 shares of
Common Stock which are issuable upon the exercise of certain
Common Stock Purchase Warrants.
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
Certificate of Incorporation and By-Laws of the Company, as in
effect on the date hereof; (iii) resolutions adopted by the Board
of Directors of the Company relating to the approval of the
issuance of the Convertible Preferred Stock, the issuance of the
warrants under which the Shares are issuable (the "Warrants"),
the execution and delivery of the agreements for the Warrants and
the filing of the Registration Statement; (iv) the form of the
Warrants; and (v) 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
issuance of the Shares.
(3) The Shares have been duly authorized and will be
validly issued and fully paid and non-assessable
upon their issuance if the Warrants shall have
been properly exercised and the exercise price
shall have been paid in accordance with the
respective terms therefore.
We are members of the Bar of the State of New York and
do not hold ourselves out as experts concerning, or qualified to
render opinions with respect to any laws other than the laws of
the State of New York, the Federal laws of the United States and
the General Corporation Law of the State of Delaware.
We hereby consent to the filing of this opinion with
the Securities and Exchange Commission as Exhibit 5 to the
Registration Statement.
Very truly yours,
/s/Thelen Reid & Priest LLP
THELEN REID & PRIEST LLP
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) and related Prospectus of CompuMed, Inc. for
the registration of 4,452,594 shares of its common stock and to the
incorporation by reference therein of our report dated November 20, 1998,
with respect to the consolidated financial statements of CompuMed, Inc.
included in its Annual Report (Form 10- KSB) for the year ended September 30,
1998, filed with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
Ernst & Young LLP
Los Angeles, California
September 27, 1998
