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 June 30, 2000
or
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number: 0-14210
COMPUMED, INC.
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(Exact name of registrant as specified in its charter)
Delaware 95-2860434
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State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
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)
N/A
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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 17,868,878 shares of common stock, ($.01 par value)
issued and outstanding as of June 30, 2000.
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INDEX
COMPUMED, INC. AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Consolidated balance sheets - June 30, 2000 (unaudited) and
September 30, 1999.
Consolidated statements of operations - Three and nine months
ended June 30, 2000 and 1999 (unaudited).
Consolidated statements of cash flows - Nine months ended
June 30, 2000 and 1999 (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 4 Submission of Matters to a Vote of Security Holders
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
June 30, September 30,
2000 1999
------------ -------------
(Unaudited) (Audited)
ASSETS
CURRENT ASSETS
Cash $ 490,000 $ 2,598,000
Marketable securities 1,857,000 45,000
Accounts receivable, less allowance of $43,000
(June 2000) and $32,000 (September 1999) 243,000 497,000
Inventories 130,000 50,000
Prepaid expenses and other current assets 15,000 24,000
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TOTAL CURRENT ASSETS 2,735,000 3,214,000
PROPERTY AND EQUIPMENT
Machinery and equipment 1,813,000 1,781,000
Furniture, fixtures and leasehold improvements 101,000 173,000
Equipment under capital leases 1,027,000 1,079,000
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2,941,000 3,033,000
Less allowance for depreciation and amortization (2,134,000) (2,508,000)
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807,000 525,000
OTHER ASSETS
67,000 33,000
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$ 3,609,000 $ 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
June 30, September 30,
2000 1999
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(Unaudited) (Audited)
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 359,000 $ 272,000
Other accrued liabilities 283,000 215,000
Current portion of capital lease obligations 131,000 193,000
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TOTAL CURRENT LIABILITIES 773,000 680,000
CAPITAL LEASE OBLIGATIONS, less current portion 92,000 188,000
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred Stock- Class A $3.50 cumulative
convertible voting;
-issued and outstanding - 8,400 shares (June 2000 1,000 1,000
and September 1999)
Preferred Stock- Class B $3.50 convertible voting
issued and outstanding - 300 shares (June 2000
and September 1999) - -
Common Stock, $.01 par value--authorized
50,000,000 shares, issued and outstanding--
17,868,878 shares (June 2000) and
16,613,486 shares (September 1999)
179,000 166,000
Additional paid in capital 32,179,000 31,504,000
Accumulated deficit (29,615,000) (28,767,000)
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STOCKHOLDERS' EQUITY 2,744,000 2,904,000
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$ 3,609,000 $ 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
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
June 30, June 30,
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2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES FROM OPERATIONS
ECG services $ 342,000 $ 348,000 $1,045,000 $1,033,000
ECG product and supplies sales 82,000 201,000 417,000 640,000
OsteoGram services and royalties - 0 - 8,000 13,000 16,000
----------- ----------- ----------- -----------
424,000 557,000 1,475,000 1,689,000
----------- ----------- ----------- -----------
COSTS AND EXPENSES
Costs of ECG services 226,000 228,000 654,000 698,000
Cost of goods sold 36,000 97,000 197,000 353,000
Selling expenses 134,000 85,000 366,000 227,000
Research and development 173,000 80,000 347,000 264,000
General and administrative expenses 249,000 253,000 663,000 790,000
Depreciation 74,000 54,000 203,000 139,000
----------- ----------- ----------- -----------
892,000 797,000 2,430,000 2,471,000
----------- ----------- ----------- -----------
LOSS FROM OPERATIONS (468,000) (240,000) (955,000) (782,000)
Other income 61,000 20,000 141,000 63,000
Interest expense (7,000) (18,000) (34,000) (47,000)
----------- ----------- ----------- -----------
NET LOSS $ (414,000) $ (238,000) $ (848,000) $ (766,000)
=========== =========== =========== ===========
NET LOSS PER SHARE $ (.02) $ (.02) $ (.05) $ (.06)
=========== =========== =========== ===========
(Basic and diluted)
Weighted average number of
common shares outstanding 17,568,191 14,703,410 17,301,745 13,656,032
=========== =========== =========== ===========
</TABLE>
See notes to interim unaudited consolidated condensed financial statements
5
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CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
COMPUMED, INC. AND SUBSIDIARIES
Nine Months Ended
June 30, June 30,
2000 1999
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OPERATING ACTIVITIES:
Net loss $ (848,000) $(766,000)
Adjustment to reconcile net loss to net
cash used in operating activities:
Depreciation 203,000 139,000
Changes in operating assets and liabilities:
Accounts receivable 254,000 (81,000)
Inventories, prepaid expenses and other assets (71,000) (16,000)
Accounts payable and other liabilities 155,000 44,000
Other assets (34,000) -
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NET CASH USED IN OPERATING ACTIVITIES (341,000) (680,000)
INVESTING ACTIVITIES:
Purchases of marketable securities (1,812,000) -
Sale of marketable securities - 386,000
Purchases of property, plant and equipment (528,000) (12,000)
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NET CASH (USED IN) PROVIDED BY INVESTING
ACTIVITIES (2,340,000) 374,000
FINANCING ACTIVITIES:
Proceeds from the sale of Class C 7% convertible
preferred stock, net of offering costs - (9,000)
Principal payments on capital lease obligations (115,000) (143,000)
Exercise of stock options and warrants 688,000 760,000
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NET CASH (USED IN) PROVIDED BY (USED IN)
FINANCING ACTIVITIES 573,000 608,000
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INCREASE (DECREASE) IN CASH (2,108,000) 302,000
Cash at beginning period 2,598,000 51,000
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CASH AT END OF PERIOD $ 490,000 $ 353,000
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Cash paid for interest $ 34,000 $ 47,000
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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 June 30,
2000 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 late 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.
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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 the nine months ended June 30, 2000, a portion of such warrants was
exercised to purchase 1,083,450 shares of Common Stock for $365,000.
NOTE E - MARKETABLE SECURITIES
Marketable securities consist of investments in 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 June 30, 2000. 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 June 30, 2000.
8
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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
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During the nine months ended June 30, 2000, in addition to the Company's
transtelephonic EKG business, the Company introduced its automated Osteogram
software in a technical meeting in London and presented at the World Congress of
Osteoporosis. The Company is currently taking steps to commercialize this
technology.
RESULTS OF OPERATIONS
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Total revenues from operations for the three months ended June 30, 2000 (the
"Third Quarter 2000") were $424,000, as compared to $557,000 for the same period
in 1999. Revenues from EKG operations decreased to $82,000 from $201,000 during
the same period in fiscal 1999, due to an increase in rental unit placements
rather than unit sales.
Costs of EKG Services were consistent in amount and percentage of revenues for
the Third Quarter 2000 compared to the same period in 1999. Cost of goods sold
consists of the costs of supplies and cost of 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. During the Third Quarter 2000, costs of goods sold decreased, as a
percentage of sales, to 44% from 49% during the same period in fiscal 1999. The
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decrease is primarily due to the lower unit costs for electrocardiograph units
pursuant to the purchase terms for such units.
Overall operating costs increased by 12% during the Third Quarter 2000 to
$892,000, as compared to $797,000 for the same period in fiscal 1999. This
includes $130,000 of market development and pre-marketing costs associated with
the Osteogram. General and administrative expenses decreased by 2% to $249,000,
as compared to $253,000 for the same period in fiscal 1999. Research and
development costs increased by 117%, from $80,0000 to $173,000 during the Third
Quarter 2000, as compared to the same period in fiscal 1999, primarily due to
costs incurred in clinical trial and pre-marketing of the Osteogram. Selling
expenses increased from $85,000 to $134,000 during the Third Quarter 2000, as
compared to the same period in fiscal 1999, primarily due to an increase of
promotional activities.
The Company recorded other income during the Third Quarter 2000 of $61,000 and
$20,000 for the same period in fiscal 1999, which is comprised of income from
investments in marketable securities. The increase is due to investment in
higher yielding issues in the Third Quarter of 2000 as compared to the prior
year.
Net loss for the Third Quarter 2000 was $414,000 compared to a loss of $238,000
for the same period in fiscal 1999. The increased loss is due to the items noted
above, primarily the decrease in EKG product and supply and the increase in
research and development costs.
Revenues for the nine months ended June 30, 2000 were $1,475,000 as compared to
$1,689,000 for the same period in 1999. Revenues from EKG operations decreased
from $640,000 to $415,000 during the same period in fiscal 1999, due to an
increase in rental placements rather than unit sales. Costs of good sold
decreased during the nine months ended June 30, 2000, as a percentage of sales,
to 48% from 56% during the same period in fiscal 1999. The decrease is primarily
due to an increase in rental placements rather than unit sales.
Overall operating costs decreased by 2% during the nine months ended June 30
2000 to $2,430,000, as compared to $2,471,000 for the same period in fiscal
1999. General and administrative expenses decreased by 16% to $663,000, as
compared to $790,000 for the same period in fiscal 1999. Research and
development costs increased by 32%, from $264,0000 to $347,000 during the nine
months ended June 2000, as compared to the same period in fiscal 1999, due to an
increase in marketing of the Osteogram. Selling expenses increased from $227,000
to $366,000 during the nine months ended June 30 2000, as compared to the same
period in fiscal 1999, primarily due to an increase of promotional activities.
The Company recorded other income during the 2000 nine -month period of $141,000
and $63,000 for the same period in fiscal 1999, which is comprised of income
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from investments in marketable securities. The increase is due to investment in
higher yielding issues in the fiscal of 2000 as compared to the prior year.
Net loss for the nine months ended June 30, 2000 was $848,000 compared to a loss
of $766,000 for the same period in fiscal 1999. The increase in loss is due to
expenses in market development and pre-marketing of the Osteogram.
FINANCIAL CONDITION AND LIQUIDITY
---------------------------------
As of June 30, 2000 the Company had $1,962,000 of working capital, a decrease of
$572,000 from September 30, 1999. This decrease in working capital is primarily
a result of losses from operations, and the Company's decision to purchase EKG
terminals rather than lease them. The decrease in working capital has been
offset by increases from proceeds of the exercise of stock options and warrants,
which have contributed approximately $688,000 to working capital.
The Company's capital resource commitments at June 30, 2000 consist primarily of
costs associated with the development and commercialization of its bone
densitometry technology. During the nine months ended June 30, 2000, total
research and development expenses were $347,000. 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 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.
On December 1, 1999, Nasdaq notified the Company that it had not met the minimum
bid price requirement for a sufficient duration and the Company's common stock
was delisted from the SmallCap Market on that date, and have since been traded
on the OTC Bulletin Board. The delisting may impede or increase the cost of
raising capital.
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PART II
OTHER INFORMATION
Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
(c) During the fiscal quarter ended June 30, 2000, the Company issued an
aggregate of 601,375 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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On June 23, 2000, the Company held its 2000 Annual Meeting of Stockholders. At
the meeting, the stockholders elected six directors, approved an amendment to
the 1992 Stock Option Plan increasing the number of shares thereunder to
2,400,000 shares, and ratified the appointment of Ernst & Young LLP as
independent auditors for the 2000 fiscal year.
The voting results were as follows:
(1) Election of Directors
Nominees For Abstain:
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Goldberg 14,954,722 803,758
Lightstone 15,030,510 727,970
Minnick 15,012,162 746,318
Romm 15,315,460 443,020
Silverman 15,006,940 751,540
Stuckelman 15,038,260 720,220
(2) Amendment to Stock Option Plan
For - 13,866,278
Against - 1,114,664
Abstain - 34,950
(3) Ratification of Auditors
For - 15,641,630
Against - 46,730
Abstain - 34,950
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Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 27- Financial data schedule
(b) Form 8-K - During the fiscal quarter ended June 30, 2000, the Company
did not file a report on Form 8-K.
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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
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Phuong Dang
Principal Financial Officer
By: /s/ Herbert S. Lightstone
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Herbert S. Lightstone
President and Chief Executive Officer
Date: August 14, 2000
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