SECURITIES AND EXCHANGE COMMISSION
UNITED STATES
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1999
or
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to _________
Commission File Number: 0-14210
COMPUMED, INC.
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(Exact name of registrant as specified in its charter)
Delaware 95-2860434
- -------------------------------- -------------------------------------
State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
5777 W. Century Blvd., Suite 1285, Los Angeles, CA 90045
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(Address of Principal Executive Officers)
(310) 258-5000
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(Registrant's telephone number, including area code)
1230 Rosecrans Avenue, Suite 110, Manhattan Beach, CA 90266
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(Former name, former address and former fiscal year, if
changed since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Exchange Act during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports, and (2) has been subject to such filing
requirements in for the past 90 days.Yes X No
The registrant had 16,803,097 shares of common stock, ($.01 par value)
issued and outstanding as of December 31, 1999.
<PAGE>
INDEX
COMPUMED, INC. AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Consolidated balance sheets - December 31, 1999 (unaudited)
and September 30, 1999.
Consolidated statements of operations - three months ended
December 31, 1999 and 1998 (unaudited).
Consolidated statements of cash flows - Three months ended
December 31, 1999 and 1998 (unaudited).
Notes to interim unaudited consolidated financial statements.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
PART II. OTHER INFORMATION
Item 2 Changes in Securities and Use of Proceeds
Item 6 Exhibits and Reports on Form 8K
SIGNATURES
2
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PART I
FINANCIAL INFORMATION
CONSOLIDATED CONDENSED BALANCE SHEETS
COMPUMED, INC. AND SUBSIDIARIES
December 31, September 30,
1999 1999
---- ---------
(Unaudited) (Audited)
ASSETS
CURRENT ASSETS
Cash $ 1,573,000 $ 2,598,000
Marketable securities 958,000 45,000
Accounts receivable, less allowance of $41,000
(December 1999) and $32,000 (September 1999) 283,000 497,000
Inventories 74,000 50,000
Prepaid expenses and other current assets 27,000 24,000
--------- ---------
TOTAL CURRENT ASSETS 2,915,000 3,214,000
PROPERTY AND EQUIPMENT
Machinery and equipment 1,863,000 1,781,000
Furniture, fixtures and leasehold improvements 173,000 173,000
Equipment under capital leases 1,005,000 1,079,000
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3,041,000 3,033,000
Less allowance for depreciation and amortization (2,495,000) (2,508,000)
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546,000 525,000
OTHER ASSETS 55,000 33,000
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$3,516,000 $3,772,000
========== ==========
See notes to interim unaudited consolidated condensed financial statements
3
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CONSOLIDATED CONDENSED BALANCED SHEETS
COMPUMED, INC. AND SUBSIDIARIES
December 31, September 30,
1999 1999
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(Unaudited) (Audited)
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $215,000 $ 272,000
Other accrued liabilities 219,000 215,000
Current portion of capital lease obligations 166,000 193,000
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TOTAL CURRENT LIABILITIES 600,000 680,000
CAPITAL LEASE OBLIGATIONS, less current portio 156,000 188,000
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Class A $3.50 cumulative convertible voting
preferred stock, issued and outstanding --
8,400 shares 1,000 1,000
Class B $3.50 convertible voting preferred
stock, issued and outstanding - 8,400 shares - -
Common Stock, $.01 par value--authorized
50,000,000 shares, issued and outstanding--
16,803,097 shares (December 1999) and
16,613,486 shares (September 1999) 168,000 166,000
Additional paid in capital 31,587,000 31,504,000
Retained deficit (28,996,000) (28,767,000)
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STOCKHOLDERS' EQUITY 2,760,000 2,904,000
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$ 3,516,000 $3,772,000
=========== ==========
See notes to interim unaudited consolidated condensed financial statements
4
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CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
COMPUMED, INC. AND SUBSIDIARIES
Three Months Ended
December 31,
----
1999 1998
---- ----
REVENUES FROM OPERATIONS
ECG services $ 351,000 $ 326,000
ECG product and supplies sales 115,000 186,000
OsteoGram services and royalties 13,000 5,000
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479,000 517,000
COSTS AND EXPENSES
Costs of ECG services 221,000 236,000
Cost of goods sold 54,000 110,000
Selling expenses 81,000 60,000
Research and development 57,000 112,000
General and administrative expenses 248,000 291,000
Depreciation 61,000 38,000
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LOSS FROM OPERATIONS (243,000) (330,000)
Other income 29,000 24,000
Interest expense (15,000) (14,000)
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NET LOSS $(229,000) $(320,000)
========= =========
NET LOSS PER SHARE $ (.01) $ (.02)
(Basic and diluted) ======== ========
Weighted average number of
common shares outstanding 16,708,292 12,934,929
========== ==========
See notes to interim unaudited consolidated condensed financial statements
5
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CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
COMPUMED, INC. AND SUBSIDIARIES
Three Months Ended
December 31, December 31,
1999 1998
---- ----
OPERATING ACTIVITIES:
Net loss $(229,000) $(320,000)
Adjustment to reconcile net loss to net
cash used in operating activities:
Depreciation 61,000 38,000
Changes in operating assets and liabilities:
Accounts receivable 214,000 (35,000)
Inventories, prepaid expenses and other assets (27,000) (7,000)
Accounts payable and other liabilities (53,000) 24,000
Other assets (22,000) -
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NET CASH USED IN OPERATING ACTIVITIES (56,000) (300,000)
INVESTING ACTIVITIES:
Purchases of marketable securities (913,000) -
Sale of marketable securities - 400,000
Purchases of property, plant and equipment (82,000) (5,000)
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NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES (995,000) 395,000
FINANCING ACTIVITIES:
Proceeds from the sale of Class C 7%
convertible preferred stock,
net of offering costs - (9,000)
Dividends on Class A preferred stock - -
Principal payments on capital lease obligations (59,000) (46,000)
Exercise of stock options and warrants 85,000 -
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NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 26,000 (55,000)
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INCREASE (DECREASE) IN CASH (1,025,000) 40,000
Cash at beginning period 2,598,000 51,000
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CASH AT END OF PERIOD $1,573,000 $ 91,000
=========== =========
Cash paid for interest $ 15,000 $ 14,000
=========== =========
See notes to interim unaudited consolidated condensed financial statements
6
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NOTES TO INTERIM UNAUDITED CONSOLIDATED CONDENSED,
FINANCIAL STATEMENTS
COMPUMED, INC. AND SUBSIDIARIES
NOTE A--BASIS OF PREPARATION
The balance sheet at September 30, 1999 has been derived from the Company's year
end audited financial statements.
The accompanying interim unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and pursuant to the rules and regulations of the
Securities and Exchange Commission. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the period ended December
31, 1999 are not necessarily indicative of the results that may be expected for
the year ending September 30, 2000. For further information, refer to the
consolidated financial statements for the year ended September 30, 1999 and the
notes thereto included in the Company's Annual Report on Form 10-KSB.
NOTE B--PER SHARE DATA
Basic loss per share is calculated using the net loss, less preferred stock
dividends, divided by the weighted average common shares outstanding. Shares
from the assumed exercise of outstanding warrants, options and effect of the
conversion of the Class A Preferred Stock, Class B Preferred Stock and Class C
Preferred Stock are omitted from the computations of diluted loss per share
because the effect would be antidilutive.
NOTE C--COMMITMENTS AND CONTENGENCIES
On January 26, 1998, the United States District Court for the Central District
of California approved the settlement of the class action and derivative
lawsuits on the terms agreed to by the parties in the Memorandum of
Understanding entered into on August 5, 1996. The final settlement is
anticipated to be completed in early 2000 and will involve the issuance of
770,000 shares of Common Stock and the issuance of 1,870,000 warrants for the
purchase of Common Stock at a price of $3.00. The effect of these issuances on
the Company's statement of operations was recorded during the fiscal year ended
September 30, 1997.
7
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NOTE D - CONVERSION OF STOCK OPTIONS AND WARRANTS
The terms of the purchase agreement for the Class C Preferred Stock include the
issuance of warrants for the purchase of Common Stock at exercise prices
equivalent to the discounted prices on the date of conversion of the Preferred
Stock to Common Stock. Warrants were issued, when the Class C Preferred Stock
was converted to Common Stock during fiscal year ended September 30, 1999 and
1998, for the purchase of 5,619,525 shares of Common Stock at a total exercise
price of $3,500,000. During November 1999, a portion of such warrants was
exercised to purchase 186,512 shares of common stock for $80,006.
NOTE E - MARKETABLE SECURITIES
Marketable securities consist of investments of common stock and bonds in
various publicly traded domestic companies and are stated at market value based
on the most recently traded price of these securities at December 31,1999. These
short-term investments are defined as assets available for sale under the
provisions of FASB Statement No. 115, "Accounting for Certain Investments in
Debt and Equity Securities." Unrealized gains and losses were insignificant in
the period ended December 31, 1999.
8
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
This Form 10-QSB contains forward-looking statements as defined by the Private
Securities Litigation Reform Act of 1995. Forward-looking statements include
statements concerning plans, objectives, goals, strategies, future events or
performance and underlying assumptions and other statements that are other than
statements of historical facts. These statements are subject to uncertainties
and risks including, but not limited to, product and service demand and
acceptance, changes in technology, the availability of appropriate acquisition
candidates and/or business partnerships, economic conditions, the impact of
competition and pricing, capacity and supply constraints or difficulties,
government regulation and other risks defined in this document. All such
forward-looking statements, whether written or oral, and whether made by or on
behalf of the Company are expressly qualified by these cautionary statements and
any other cautionary statements which may accompany the forward-looking
statements. In addition, the Company disclaims any obligation to update any
forward-looking statements to reflect events or circumstances after the date
hereof.
OVERVIEW
- --------
During the three months ended December 31, 1999, in addition to the Company's
transtelephonic ECG business, the Company's research and development efforts
were directed primarily toward the completion of its Automated OsteoGram
software. On December 1, 1998, the Company filed for market clearance with the
U.S. Food and Drug Administration (FDA) to sell its Automated OsteoGram software
to Physicians and Clinicians. The Company gained market clearance from the FDA
on May 19, 1999. The Company is currently taking steps to commercialize this
technology.
RESULTS OF OPERATIONS
- ---------------------
Total revenues for the three months ended December 31, 1999 (the "First Quarter
2000") were $479,000, as compared to $517,000 for the same period in 1999.
Revenues from ECG operations decreased from $512,000 to $466,000 during the same
period in fiscal 1999, due to an increase in rental unit placements rather than
unit sales . Revenues from the Company's OsteoGram(R) services increased to
9
<PAGE>
$13,000, from $5,000 during the same period in fiscal 1999. The Company has
commenced offering OsteoGram services directly to research institutions and
revenues from such services are anticipated to continue in the future.
Cost of goods sold consists of the costs of supplies and electrocardiograph
equipment sold. The overall costs, as a percentage of product sales, are a
result of the mix between supplies and equipment sales and the available
equipment and supplies costs attainable, based on volumes purchased and vendor
pricing availability. During the First Quarter 2000, costs of sales decreased,
as a percentage of sales, to 47% from 59% during the prior year. The decrease is
primarily due to the lower unit costs for electrocardiograph units pursuant to
the purchase terms for such units.
Overall operating costs decreased by 15% during the First Quarter 2000 to
$722,000, as compared to $847,000 for the same period in fiscal 1999. General
and administrative expenses decreased by 15% to $248,000, as compared to
$291,000 for the same period in fiscal 1999, primarily due to reductions in
professional fees, consulting expenses and payroll. Research and development
costs decreased by 49% to $57,000 during the First Quarter 2000, as compared to
$112,000 for the same period in fiscal 1999. Selling expenses increased to
$81,000 during the First Quarter 2000, as compared to $60,000 for the same
period in fiscal 1999, primarily as a result of increased promotional
activities.
The Company recorded other income during the First Quarter 2000 of $23,000 and
$24,000 for the same period in fiscal 1999, which is comprised of interest
income from investments in marketable securities. The decrease is due to lower
invested funds in the First Quarter of 2000 as compared to the prior year.
Net loss for the First Quarter 2000 was $229,000 compared to a loss of $320,000
for the same period in fiscal 1999. The decreased loss is due to the cost
reductions enacted by the Company primarily in the area of general and
administrative expenses, and to reduced research and development expenses.
FINANCIAL CONDITION AND LIQUIDITY
- ---------------------------------
As of December 31, 1999 the Company had $2,315,000 of working capital, a
decrease of $219,000 from September 30, 1999. This decrease in working capital
is primarily a result of losses from operations, and to principal payments on
lease financing. The decrease in working capital has been offset by increases
from proceeds of the exercise of stock options and warrants, which have
contributed approximately $85,000 to working capital.
The Company's capital resource commitments at December 31, 1999 consist
10
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primarily of costs associated with the development and commercialization of its
bone densitometry technology. During the three months ended December 31, 1999,
total research and development expenses were $57,000. Expenditures during future
periods may meet or exceed this level. Additionally, the Company is anticipating
incurring additional costs associated with the projected market introduction of
the OsteoGram software product.
The University of Georgia sponsored Detoxahol research agreement has been
suspended and the Company is only supporting patent-related costs at this time.
Due to the long-term nature of this project, the Company has been seeking a
strategic partner to participate in future development.
The Company intends to pursue additional research and/or sub-contractor
agreements relating to its development projects. Additionally, the Company is
actively seeking partners and acquisition candidates of businesses that are
complementary to its own. Such investments would be financed either by the
Company's working capital, through issuance of Company securities or a
combination thereof. No assurance can be given that any acquisition would not be
dilutive to stockholders.
Depending on the extent of development activities borne by the Company, the
Company will continue to incur losses from operations at least until sales of
products currently under development commence. Current working capital levels
are considered adequate for the Company's business activities during the next 12
months.
Nasdaq Delisting
- ----------------
On April 22, 1999 an oral hearing was held before a Nasdaq Listing
Qualifications Panel (the "Panel") to make a determination regarding the
Company's request for continued inclusion on the Nasdaq SmallCap Market. The
Company had been notified of potential delisting actions due to its inability to
meet the $1.00 per share minimum bid price requirement for continued listing on
the Nasdaq SmallCap Market. The Panel also expressed concerns with respect to
the Company's marginal compliance with the net tangible assets requirement and
its ability to meet this requirement in the future.
On July 19, 1999, the Company was granted a temporary exception from its prior
inability to meet the minimum bid price standard, subject to its meeting certain
conditions. On October 13, 1999, the exception conditions were amended to apply
increased requirements regarding the minimum bid price requirement.
On December 1, 1999, the Company was notified by Nasdaq that it had not met the
minimum bid price requirement for a sufficient duration and the Company's common
11
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stock was delisted from the SmallCap Market on that date. The securities of the
Company began trading immediately on the OTC Bulletin Board.
12
<PAGE>
PART II
OTHER INFORMATION
Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
(c) During the fiscal quarter ended December 31, 1999, the Company issued an
aggregate of 186,512 shares of Common Stock upon the exercise of warrants, which
issuances were exempt from the registration requirements of the Securities Act
by reason of Section 4(2) thereof. All proceeds received were added to the
Company's working capital.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 27- Financial data schedule
(b) Form 8-K - During the fiscal quarter ended December 31, 1999, the
Company did not file a report on Form 8-K.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COMPUMED, INC.
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(Registrant)
By: /s/ Phuong Dang
---------------------------
Phuong Dang
Principal Financial Officer
By: /s/ Robert B. Goldberg
---------------------------
Robert B. Goldberg
Chairman of the Board and
Chief Executive Officer
Date: February 14, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-END> DEC-31-1999
<CASH> 1,573,000
<SECURITIES> 958,000
<RECEIVABLES> 283,000
<ALLOWANCES> 41,000
<INVENTORY> 74,000
<CURRENT-ASSETS> 2,915,000
<PP&E> 3,041,000
<DEPRECIATION> 2,495,000
<TOTAL-ASSETS> 3,516,000
<CURRENT-LIABILITIES> 600,000
<BONDS> 0
0
1,000
<COMMON> 168,000
<OTHER-SE> 2,591,000
<TOTAL-LIABILITY-AND-EQUITY> 3,516,000
<SALES> 479,000
<TOTAL-REVENUES> 479,000
<CGS> 54,000
<TOTAL-COSTS> 722,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15,000
<INCOME-PRETAX> (229,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (229,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (229,000)
<EPS-BASIC> (0.01)
<EPS-DILUTED> (0.01)
</TABLE>
