<PAGE>
U. S. SECURITIES AND EXCHANGE COMMISSION
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 SEPTEMBER 30, 1995
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE TRANSITION PERIOD FROM __________ TO __________
Commission file number 0-12471
-------
COLORADO MEDTECH, INC.
----------------------
(Exact name of small business issuer as specified in its charter)
COLORADO 84-0731006
-------- ----------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
6175 LONGBOW DRIVE, BOULDER, COLORADO 80301
-------------------------------------------
(Address of principal executive offices)
(303) 530-2660
--------------
(Issuer's telephone number)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15 (d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such report(s), and (2)
has been subject to such filing requirements for the past 90 days.
Yes __X___ No ______
As of October 31, 1995, the Company had 6,901,762 shares of Common Stock
outstanding.
Transitional Small Business Disclosure Format (Check One):
Yes _____ No __X__
-1-
<PAGE>
COLORADO MEDTECH, INC.
FORM 10-QSB
PART I FINANCIAL INFORMATION PAGE
--------------------- ----
Item 1. Financial Statements:
Consolidated Balance Sheet -
September 30, 1995 3
Consolidated Statements of Operations -
Three-months ended
September 30, 1995 and 1994 5
Consolidated Statements of Cash Flows -
Three-months ended
September 30, 1995 and 1994 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis
of Financial Condition
and Results of Operations 9
-2-
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
COLORADO MEDTECH, INC.
CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1995
(UNAUDITED)
ASSETS
------
CURRENT ASSETS:
Cash and cash equivalents $ 4,784,116
Accounts receivable, net 2,705,588
Inventories, net 1,153,393
Deferred income taxes and other
current assets 884,826
-----------
Total current assets 9,527,923
-----------
EQUIPMENT AND FURNITURE, net 446,740
-----------
LAND, DEFERRED INCOME TAXES
AND OTHER ASSETS 659,327
-----------
TOTAL ASSETS $10,633,990
===========
The accompanying notes are an integral part
of this balance sheet.
-3-
<PAGE>
COLORADO MEDTECH, INC.
CONSOLIDATED BALANCE SHEET (CONTINUED)
AS OF SEPTEMBER 30, 1995
(UNAUDITED)
LIABILITIES AND
SHAREHOLDERS' EQUITY
--------------------
CURRENT LIABILITIES:
Accounts payable $ 1,475,498
Accrued salaries and wages 623,945
Accrued product service costs 413,000
Customer deposits 1,732,289
Other accrued expenses 1,126,919
-----------
Total current liabilities 5,371,651
-----------
SHAREHOLDERS' EQUITY:
Common stock 3,713,653
Retained earnings 1,548,686
-----------
Total shareholders' equity 5,262,339
-----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $10,633,990
===========
The accompanying notes are an integral part
of this balance sheet.
-4-
<PAGE>
COLORADO MEDTECH, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE-MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(UNAUDITED)
1995 1994
---- ----
SALES AND SERVICE $4,219,235 $4,310,505
COST OF SALES AND SERVICE 2,735,683 2,795,099
---------- ----------
GROSS PROFIT 1,483,552 1,515,406
---------- ----------
COSTS AND EXPENSES:
Marketing and selling 262,444 371,489
Operating, general and administrative 979,018 816,055
Research and development 2,291 15,746
---------- ----------
Total operating expenses 1,243,753 1,203,290
---------- ----------
EARNINGS FROM OPERATIONS 239,799 312,116
OTHER INCOME, NET 179,078 478
---------- ----------
EARNINGS BEFORE INCOME TAXES 418,877 312,594
Provision for income taxes 110,000 115,500
---------- ----------
NET INCOME $ 308,877 $ 197,094
========== ==========
NET INCOME PER COMMON AND
COMMON EQUIVALENT SHARE
(Primary and Fully Diluted) $ .04 $ .03
========== ==========
WEIGHTED AVERAGE COMMON AND
COMMON EQUIVALENT SHARES
OUTSTANDING
- Primary 7,100,278 7,132,134
========== ==========
- Fully Diluted 7,147,430 7,132,134
========== ==========
The accompanying notes are an integral part
of these statements.
-5-
<PAGE>
COLORADO MEDTECH, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE-MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(UNAUDITED)
1995 1994
---- ----
OPERATING ACTIVITIES:
Net income $ 308,877 $ 197,094
Adjustment to reconcile net income
to net cash flows from
operating activities-
Depreciation and amortization 109,177 81,342
Gain on sale of product line (121,986) -
Change in assets and liabilities-
Accounts receivable, net 366,227 241,860
Inventories, net (231,656) (14,717)
Prepaid and other assets (20,626) (71,448)
Accounts payable and accrued expenses (529,969) (258,681)
Customer deposits (62,198) (61,490)
----------- -----------
Net cash flows from operating activities (182,154) 113,960
----------- -----------
INVESTING ACTIVITIES:
Proceeds from sale of product line 250,000 -
Acquisition of equipment and furniture (20,789) (64,554)
----------- -----------
Net cash flows from investing activities 229,211 (64,554)
----------- -----------
FINANCING ACTIVITIES:
Repayment of notes - (896,893)
----------- -----------
Net cash flows from financing activities - (896,893)
------------ ------------
Net change in cash and cash equivalents 47,057 (847,487)
Cash and cash equivalents, beginning 4,737,059 3,727,260
----------- -----------
Cash and cash equivalents, ending $4,784,116 $2,879,773
========== ==========
The accompanying notes are an integral part
of these statements.
-6-
<PAGE>
COLORADO MEDTECH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE-MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(UNAUDITED)
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
- ----------------------------------------
The financial information is unaudited and should be read in conjunction with
the consolidated financial statements filed with Form 10-KSB on September 28,
1995. The accounting policies utilized in the preparation of the financial
information herein presented are the same as set forth in the Company's annual
consolidated financial statements filed with the Form 10-KSB, except as
modified for interim accounting policies which are within the guidelines set
forth in Accounting Principles Board Opinion No. 28. Certain amounts have been
reclassified in the prior year financial statements to be consistent with the
current year presentation.
In the opinion of management, the accompanying unaudited consolidated financial
statements contain all adjustments necessary to present fairly the Company's
financial position as of September 30, 1995, the results of its operations and
its cash flows for the three-month periods ended September 30, 1995 and 1994.
All of the adjustments were of a normal and recurring nature.
The following sets forth the supplemental disclosures of cash flow information
for the three-month periods ended September 30, 1995 and 1994, respectively:
1995 1994
---- ----
Cash paid for interest $ 16,891 $ 30,415
Cash paid for income taxes $200,000 $415,000
NOTE 2 - DEBT
- -------------
On October 30, 1995, the Company renewed a financing arrangement with a bank
that provides for a $3 million revolving line of credit at prime plus .5% which
matures October 31, 1996, and a $500,000 nonrevolving equipment line of credit
at prime plus 1% that converts to a term note on April 30, 1996. The term note
requires monthly principal and interest payments through the April 30, 1999
maturity. This credit facility is secured by all accounts, general intangibles,
inventory and equipment. The agreement contains various restrictive covenants
which include, among others, maintenance of certain financial ratios,
maintenance of a minimum tangible net worth and limitations on annual
investments, dividends and capital expenditures.
-7-
<PAGE>
NOTE 3 - SALE OF PRODUCT LINE
- -----------------------------
In June of 1995, the Company entered into an agreement to sell the Company's
cardiopulmonary product lines to a competitor (the "Purchaser"). The
transaction closed on August 16, 1995. The sale transaction included all
inventories, intangible property rights, customer lists, and tooling
associated with the cardiopulmonary product lines as well as the trade name
Cybermedic. In addition, the Purchaser assumed the warranty and service
obligations related to these products. The Purchaser has placed
noncancellable orders with the Company for additional manufactured units.
The gain on this transaction of approximately $122,000 has been classified as
other income in the accompanying consolidated statements of operations.
-8-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
As an aid to understanding the Company's operating results, the following
table indicates the percentage relationships of income and expense items to
total revenue for the line items included in the Consolidated Statements of
Operations for the three-month periods ended September 30, 1995 and 1994, and
the percentage changes in those items for the three-month period ended
September 30, 1995, from the comparable period in 1994.
<TABLE>
<CAPTION>
Percentage Change From
As a Percentage of Total Revenues Prior Year's Comparable Period
--------------------------------- ------------------------------
Three Month Period Three Month Period
Ended September 30, Ended September 30,
------------------- -------------------
<C> <C> <S> <C>
1995 1994 LINE ITEMS 1995
---- ---- ---------- ----
% % %
100.0 100.0 Sales and Service (2.1)
64.8 64.8 Cost of Sales and Service (2.1)
----- ----- ------
35.2 35.2 Gross Profit (2.1)
----- ----- ------
6.2 8.6 Marketing and Selling (29.4)
23.2 18.9 Operating, General and 20.0
Administrative
0.1 0.4 Research and Development (85.5)
----- ----- ------
29.5 27.9 Total Operating Expenses 3.4
5.7 7.3 Earnings from Operations (23.2)
4.2 0.0 Other Income, Net 37,364.0
----- ----- ---------
9.9 7.3 Earnings Before Income 34.0
Taxes
2.6 2.7 Provision for Income Taxes (4.8)
----- ----- ------
7.3 4.6 NET INCOME 56.7
===== ===== ======
</TABLE>
-9-
<PAGE>
RESULTS OF OPERATIONS
- ---------------------
The Company reported net income of $308,877 for the three-months ended
September 30, 1995, compared to $197,094 for the same period in the prior
year. Earnings per share for the three-months ended September 30, 1995 were
$.04 calculated on 7,147,430 fully diluted weighted average common share
equivalents outstanding compared to $.03 for the same period in the prior
year calculated on 7,132,134 fully diluted weighted average common equivalent
shares. Net income included approximately $122,000 of gain from the sale of
the cardiopulmonary product lines in August of 1995. The Company has net
operating losses available to offset the tax impact of this gain, which
reduced the Company's effective tax rate.
Revenues for the three-month period ended September 30, 1995 were $4,219,235,
down 2% as compared to the same period in the prior year. The reduction in
sales is attributable to the disposition of the cardiopulmonary product lines
sold in August, 1995. Gross margins remained at 35% for the three-month
periods ended September 30, 1994 and 1995, respectively.
Marketing and selling expenses decreased 29% for the three-month period ended
September 30, 1995, as compared to the same period in the prior year.
Marketing and selling expenses as a percentage of total revenues were
approximately 6% for the three-month period ended September 30, 1995 compared
to approximately 9% for the same period in the prior year. During the
quarter ended September 30, 1995, the Company reduced its direct sales staff
as a result of the cardiopulmonary product lines sale in August, 1995.
Management believes that the Company can continue to market and sell the
remaining proprietary product lines with a reduced direct sales staff.
Operating, general and administrative expenses increased 20% for the
three-month period ended September 30, 1995, as compared to the same period
in the prior year. As a percentage of revenues, operating, general and
administrative expenses increased from 19% to 23% compared to the same
three-month period in the prior year. The increase in the operating,
general, and administrative expenses is due to reclassification of certain
sales and marketing personnel and under utilized labor resources.
Research and development expenses historically were attributable to the
cardiopulmonary and metabolic product lines and ranged between 8-10% of
revenues for those product lines. No research and development expenditures
are attributable to the RELA operations as RELA does not currently have
proprietary products. Consistent with the Company's operating plans, the
Company continues to pursue the acquisition or development of new or improved
technology or products. Should the Company identify any such opportunities,
the amount of future research and development expenditures may increase.
In addition to the gain from the sale of the cardiopulmonary product lines,
other income currently reflects the increase in interest income earned from
temporary investments of the Company's cash. As of September 30, 1995, the
Company retired all of its debt, reducing interest expense, the other primary
component in this caption.
-10-
<PAGE>
FINANCIAL CONDITION -- LIQUIDITY AND CAPITAL RESOURCES
- -----------------------------------------------------
The Company's primary sources of liquidity have consisted of cash flow from
operations, cash deposits received from customers related to contracts, proceeds
from debt borrowings and the cash proceeds from private placements of stock.
The Company renewed its bank financing arrangement during October of 1995 that
provides for a $3 million revolving line of credit at prime plus .5% which
matures October 31, 1996, and a $500,000 nonrevolving equipment line of credit
at prime plus 1% that converts to a term note on April 30, 1996. The term note
requires monthly principal and interest payments through the April 30, 1999
maturity. This credit facility is secured by all accounts, general intangibles,
inventory and equipment of the Company. The agreement contains various
restrictive covenants which include, among others, maintenance of certain
financial ratios, maintenance of a minimum tangible net worth and limitations on
annual investments, dividends and capital expenditures. No amounts had been
advanced under the previous credit facility as of September 30, 1995.
In June of 1994, the Company completed the private placement of 1,500,000 units,
each unit consisting of one share of no par common stock and two warrants. The
units were offered at the greater of $1.00 or 75% of the average of the closing
bid and ask price of the common stock for the five days prior to subscription.
The warrants issued are callable by the Company, and expire after five years.
In accordance with the private placement memorandum, 1,500,000 of the warrants
were priced at 125% of the average of the closing bid and ask price of the
common stock on the date of purchase of the units, and an additional 1,500,000
warrants were issued with an exercise price equal to 175% of the average of the
closing bid and ask price of the common stock on the date of purchase of the
units. The exercise prices of the warrants range from $1.41 to $2.68. The
proceeds from this offering were approximately $1.5 million.
In December 1993, the Company completed the private placement of 500,000 shares
of no par common stock at an offering price of $1.00 per share. The net
proceeds from this offering were approximately $493,000.
The ratio of current assets to current liabilities was 1.8 to 1 at September 30,
1995, compared to 1.6 to 1 at June 30, 1995. The Company's working capital
increased approximately $416,000 since June 30, 1995. Working capital increased
primarily as a result of the sale of the cardiopulmonary product lines. The
average number of days outstanding of the Company's accounts receivable at
September 30, 1995 was approximately 63 days, compared to 54 days at June 30,
1995. The increase in the number of days outstanding is a result of extended
payment terms granted to certain customers and an increase in the number of slow
paying customers attributable to the cardiopulmonary product lines that were
sold in August, 1995. Management believes that these accounts will be brought
back into terms during the next quarter.
The Company used approximately $182,000 of cash for operations during the three-
month period ended September 30, 1995 primarily for the purchase of inventory to
support new orders and the reduction of certain yearend liabilities.
During the three-months ended September 30, 1995, the Company acquired
approximately $21,000 of property and equipment consisting principally of
computer equipment. The Company has no present material commitments for
capital expenditures.
-11-
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934,
the Registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Colorado MEDtech, Inc.
----------------------
(Registrant)
DATE: November 14, 1995
/s/ John V. Atanasoff II
------------------------
John V. Atanasoff II
Chief Executive Officer
DATE: November 14, 1995
/s/ Bruce L. Arfmann
--------------------
Bruce L. Arfmann
Chief Financial Officer
-12-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM
10-QSB AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> SEP-30-1995
<CASH> 4,784,116
<SECURITIES> 0
<RECEIVABLES> 2,705,588
<ALLOWANCES> 0
<INVENTORY> 1,153,393
<CURRENT-ASSETS> 9,527,923
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 10,633,990
<CURRENT-LIABILITIES> 5,371,651
<BONDS> 0
<COMMON> 3,713,653
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 10,633,990
<SALES> 4,219,235
<TOTAL-REVENUES> 4,219,235
<CGS> 2,735,683
<TOTAL-COSTS> 1,243,753
<OTHER-EXPENSES> (179,078)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 418,877
<INCOME-TAX> 110,000
<INCOME-CONTINUING> 308,877
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 308,877
<EPS-PRIMARY> .04
<EPS-DILUTED> .04
</TABLE>
