<PAGE>
U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(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, 1999
[ ] 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
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COLORADO MEDTECH, INC.
----------------------
(Exact name of 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)
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
report(s), and (2) has been subject to such filing requirements for the past 90
days.
Yes X No _____
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As of October 31, 1999, the Company had 11,251,552 shares of Common Stock
outstanding.
<PAGE>
COLORADO MEDTECH, INC.
FORM 10-Q
<TABLE>
<CAPTION>
PART I Financial Information PAGE
--------------------- ----
<S> <C> <C>
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets - 3
September 30, 1999 (Unaudited) and June 30, 1999
Condensed Consolidated Statements of Operations (Unaudited) - 5
Three-months ended
September 30, 1999 and 1998
Condensed Consolidated Statements of Cash Flows (Unaudited) - 6
Three-months ended
September 30, 1999 and 1998
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis 11
of Financial Condition
and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk 15
PART II Other Information
-----------------
Item 6. Exhibits and Reports on Form 8-K 16
</TABLE>
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<PAGE>
PART I Financial Information
Item 1. Financial Statements
COLORADO MEDTECH, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
------
<TABLE>
<CAPTION>
September 30, 1999 June 30, 1999
------------------ -------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 1,663,021 $ 8,457,552
Short-term investments 14,570,105 14,394,870
Accounts receivable, net 14,170,270 10,725,887
Inventories, net 6,217,328 4,598,686
Deferred income taxes and other
current assets 2,343,814 2,283,177
----------- -----------
Total current assets 38,964,538 40,460,172
----------- -----------
PROPERTY AND EQUIPMENT, net 2,946,187 2,378,294
----------- -----------
GOODWILL, net 2,152,980 1,582,039
----------- -----------
LAND, DEFERRED INCOME TAXES
AND OTHER ASSETS 1,271,053 1,267,377
----------- -----------
TOTAL ASSETS $45,334,758 $45,687,882
=========== ===========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
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<PAGE>
COLORADO MEDTECH, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
LIABILITIES AND
SHAREHOLDERS' EQUITY
--------------------
<TABLE>
<CAPTION>
September 30, 1999 June 30, 1999
------------------ -------------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 4,466,090 $ 5,664,484
Accrued salaries and wages 3,104,554 4,519,996
Accrued product service costs 328,962 313,409
Customer deposits 2,854,865 3,482,841
Other accrued expenses 2,640,202 2,455,555
Income taxes payable 781,020 564,274
----------- -----------
Total current liabilities 14,175,693 17,000,559
----------- -----------
SHAREHOLDERS' EQUITY:
Common stock 11,555,234 11,000,446
Retained earnings 19,575,451 17,658,497
Unrealized gain on available-for-sale investment 28,380 28,380
----------- -----------
Total shareholders' equity 31,159,065 28,687,323
----------- -----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $45,334,758 $45,687,882
=========== ===========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
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<PAGE>
COLORADO MEDTECH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE-MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
SALES AND SERVICE $17,765,772 $13,408,421
COST OF SALES AND SERVICE 10,912,387 8,434,125
----------- -----------
GROSS PROFIT 6,853,385 4,974,296
----------- -----------
COSTS AND EXPENSES:
Marketing and selling 772,281 551,885
Operating, general and administrative 2,704,719 1,979,653
Research and development 533,690 487,590
----------- -----------
Total operating expenses 4,010,690 3,019,128
----------- -----------
EARNINGS FROM OPERATIONS 2,842,695 1,955,168
OTHER INCOME, NET 225,259 177,737
----------- -----------
EARNINGS BEFORE INCOME TAXES 3,067,954 2,132,905
Provision for income taxes 1,151,000 814,000
----------- -----------
NET INCOME $ 1,916,954 $ 1,318,905
=========== ===========
NET INCOME PER COMMON AND
COMMON EQUIVALENT SHARE:
Basic $ .17 $ .12
=========== ===========
Diluted $ .15 $ .11
=========== ===========
WEIGHTED AVERAGE COMMON AND
COMMON EQUIVALENT SHARES
OUTSTANDING:
Basic 11,136,756 10,740,529
=========== ===========
Diluted 12,948,710 12,336,377
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
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<PAGE>
COLORADO MEDTECH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE-MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
1999 1998
------------ -------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 1,916,954 $ 1,318,905
Adjustment to reconcile net income
to net cash flows from
operating activities-
Depreciation and amortization 385,343 351,847
Change in assets and liabilities-
Accounts receivable, net (3,283,297) (691,240)
Inventories, net (1,099,784) (65,467)
Deferred income taxes and other assets (64,315) 11,096
Accounts payable and accrued expenses (2,672,033) (1,882,767)
Customer deposits (627,976) 908,126
----------- -----------
Net cash flows from operating activities (5,445,108) (49,500)
----------- -----------
INVESTING ACTIVITIES:
Cash paid for purchase of Creos assets, net (1,151,993) -
(Increase) Decrease in short-term investments, net (175,235) 1,350,777
Capital expenditures (250,323) (397,722)
----------- -----------
Net cash flows from investing activities (1,577,551) 953,055
----------- -----------
FINANCING ACTIVITIES:
Issuance of common stock 228,128 2,524
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Net cash flows from financing activities 228,128 2,524
----------- -----------
Net change in cash and cash equivalents (6,794,531) 906,079
Cash and cash equivalents, beginning 8,457,552 2,499,072
----------- -----------
Cash and cash equivalents, ending $ 1,663,021 $ 3,405,151
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
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<PAGE>
COLORADO MEDTECH, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE-MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(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-K on September 28,
1999. 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 Form 10-K, 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 condensed consolidated
financial statements contain all adjustments necessary to present fairly the
Company's financial position as of September 30, 1999 and the results of its
operations and its cash flows for the three-month periods ended September 30,
1999 and 1998. 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, 1999 and 1998, respectively:
<TABLE>
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
Cash paid for interest $ - $ -
Cash paid for income taxes $600,000 $540,000
</TABLE>
NOTE 2 - DEBT
- -------------
The Company entered into a bank financing agreement on October 30, 1997 that
provides for a three year revolving line of credit for $5 million the first
year, $7 million the second year and $9 million the third year. The credit
facility is at the bank's prime lending rate through the term of the agreement
and 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. No amounts had been advanced under the credit facility as of
September 30, 1999.
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<PAGE>
NOTE 3 - EARNINGS PER SHARE
- ---------------------------
Basic earnings per share are computed on the basis of the weighted average
common shares outstanding during each period. Diluted earnings per share are
computed on the basis of the weighted average shares outstanding during each
period, including dilutive common equivalent shares for stock options and
warrants.
A reconciliation between the number of shares used to calculate basic and
diluted earnings per share is as follows:
<TABLE>
<CAPTION>
(In Thousands, except earnings per share amounts)
Three Months Ended
September 30,
-------------
1999 1998
-------- -------
<S> <C> <C>
Net income (income available to common shareholders) $ 1,917 $ 1,319
======= =======
Weighted average number of common shares
outstanding (shares used in basic earnings
per share computation) 11,137 10,741
Effect of stock options and warrants
(treasury stock method) 1,812 1,595
------- -------
Shares used in diluted earnings per share
Computation 12,949 12,336
======= =======
Basic earnings per share $ .17 $ .12
======= =======
Diluted earnings per share $ .15 $ .11
======= =======
Options and warrants that were of an antidilutive
nature that were outstanding but not included in
the shares used in diluted earnings per share - 80
======= =======
</TABLE>
NOTE 4 - STOCK AND STOCK OPTIONS
- --------------------------------
During the quarter ended September 30, 1999, the Company issued 215,000
incentive stock options to certain employees, including three officers of the
Company. The options to purchase the Company's common stock were issued at
exercise prices ranging from $17.50 to $18.75 per share, which were the fair
market values of the Company's common stock on the dates of the grants. The
options are exercisable for a period of five years from the dates of grant.
The Company had 91,352 stock options exercised by certain employees and
consultants, including three officers of the Company, during the quarter ended
September 30, 1999. The stock options were exercised at prices per share
ranging from $1.66 to $6.41, resulting in cash proceeds to the Company of
$180,428 and cancellation of 1,457 shares of previously issued common stock that
were used in lieu of cash to exercise the options.
-8-
<PAGE>
During the three-months ended September 30, 1999 30,000 director warrants were
exercised for common stock. The warrants were exercised at a price per share of
$1.59, resulting in cash proceeds to the Company of $47,700.
NOTE 5 - SEGMENT INFORMATION
- ----------------------------
The Company operates in two industry segments, Outsourcing Services and Medical
Products, which will be reported in connection with the adoption of SFAS 131.
The Outsourcing Services segment is made up of the CMED/RELA Division ("RELA"),
CMED Manufacturing Division ("CMED MFG"), CMED Catheter and Disposables
Technology, Inc. ("CMED CDT"), CMED Automation Division ("CMED Automation") and
a portion of the Imaging and Power Systems Division ("IPS"). This segment
designs, develops and manufactures medical products for a broad range of
customers that includes major pharmaceutical and medical device companies.
The Medical Products segment is made up of a portion of IPS and BioMed Y2K, Inc.
("BioMed"). This segment designs, develops and manufactures proprietary medical
products which include: x-ray generators, high-performance RF amplifiers and
integrated power delivery subsystems for the medical imaging industry; a
combination of tools and services to support healthcare institutions in their
efforts to establish Year 2000 compliance for their biomedical devices; and a
self-contained oxygen generation system.
Following is a breakout of the Company's operating revenue and gross profit by
segment for the quarters ended September 30, 1999 and 1998:
<TABLE>
<CAPTION>
Outsourcing Medical Reconciling Consolidated
Services Products Items Totals
----------- -------- ----------- ------------
<S> <C> <C> <C> <C>
Quarter Ended September 30, 1999:
Operating revenue $12,077,000 $5,997,000 $(308,000) $17,766,000
Gross Profit 4,320,000 2,533,000 - 6,853,000
Quarter Ended September 30, 1998:
Operating revenue $ 9,535,000 $3,873,000 $ - $13,408,000
Gross Profit 3,422,000 1,552,000 - 4,974,000
</TABLE>
Included in the operating revenues disclosed above are intersegment operating
revenues of the Outsourcing Services segment of $308,000 for the quarter ended
September 30, 1999. The Medical Products segment had no intersegment revenues
for the quarters ended September 30, 1999 and 1998.
The Company manages its operating segments through the gross margin component of
each segment. It is impractical to break out other operating expenses,
including depreciation, on a segment basis.
-9-
<PAGE>
Following is a breakout of the Company's assets by segment at September 30, 1999
compared to June 30, 1999:
<TABLE>
<CAPTION>
Outsourcing Medical Reconciling Consolidated
Services Products Items Total
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Assets at September 30, 1999 $38,738,000 $14,673,000 $(8,076,000) $45,335,000
Assets at June 30, 1999 34,096,000 13,997,000 (2,405,000) 45,688,000
</TABLE>
On July 1, 1999 the Company dissolved the Respiratory Products Division
("Respiratory Products") and moved all of its assets into BioMed. All of the
investments in each of the acquired divisions and subsidiaries were transferred
from Respiratory Products to RELA. Since these investments were transferred,
the asset reconciling item at September 30, 1999 is the elimination of the
investment in BioMed and IPS and includes the investment in the assets of Creos
Technologies, LLC ("Creos") that were purchased in August 1999. The asset
reconciling item at June 30, 1999 consists of the elimination of the investments
in CDT and CMED Automation.
NOTE 6 - ACQUISITION OF OPERATING ASSETS OF CREOS TECHNOLOGIES, LLC.
- --------------------------------------------------------------------
The Company acquired certain operating assets of Creos on August 19, 1999.
Creos developed and manufactured high-voltage x-ray generator systems for
computed tomography ("CT") scanners. The assets of this operation have been
integrated into IPS and CMED Manufacturing. The purchase price for the assets
was approximately $2.0 million. The fair value of the purchased assets was
approximately $1,265,000. The acquisition created goodwill of approximately
$689,000 that will be amortized over a three-year period. Prior to the sale,
Creos had annualized revenues of approximately $4.0 million.
NOTE 7 - SUBSEQUENT EVENT
- -------------------------
On October 11, 1999, the Company signed a letter of intent to acquire CIVCO
Medical Instruments Co., Inc. ("CIVCO"). It is expected that the acquisition
will be accounted for as a pooling of interests. CIVCO, a privately held
company located in Kalona, Iowa, is a leading designer and manufacturer of
specialized medical products for ultrasound imaging equipment and for minimally
invasive surgery equipment. CIVCO's annualized revenues are approximately $10
million and it employs approximately 90 people.
-10-
<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 Condensed Consolidated Statements of
Operations for the three-month periods ended September 30, 1999 and 1998, and
the percentage changes in those items for the three-month period ended September
30, 1999, from the comparable period in 1998.
<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,
------------------ -------------------
<S> <C> <C> <C>
1999 1998 LINE ITEMS 1999
---- ---- ---------- ----
% % %
100.0 100.0 Sales and Service 32.5
61.4 62.9 Cost of Sales and Service 29.4
----- ----- ----
38.6 37.1 Gross Profit 37.8
----- ----- ----
4.3 4.1 Marketing and Selling 39.9
15.2 14.8 Operating, General and 36.6
Administrative
3.0 3.6 Research and Development 9.5
----- ----- ----
22.6 22.5 Total Operating Expenses 32.8
----- ----- ----
16.0 14.6 Earnings from Operations 45.4
1.3 1.3 Other Income, Net 26.7
----- ----- ----
17.3 15.9 Earnings Before Income Taxes 43.8
6.5 6.1 Provision for Income Taxes 41.4
----- ----- ----
10.8 9.8 NET INCOME 45.3
===== ===== ====
</TABLE>
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<PAGE>
RESULTS OF OPERATIONS
- ---------------------
Revenues for the three-month period ended September 30, 1999 were $17.8 million,
up 32%, compared to $13.4 million in the prior year. Of total revenues, the
Outsourcing Services segment contributed approximately 67% and 71% for the
quarters ended September 30, 1999 and 1998, respectively, while the Medical
Products segment contributed approximately 33% and 29% for the quarters ended
September 30, 1999 and 1998, respectively. The increase in revenue is
attributable to the growth of the Medical Products segment, which had an
increase in revenues of 55% for the quarter ended September 30, 1999, compared
to the same period in 1998. The increase is also attributable to the
acquisition of the CMED Automation Division ("CMED Automation") in February 1999
and the acquisition of the assets of Creos Technologies, LLC ("Creos") in August
1999, which together contributed approximately $1.5 million in the quarter ended
September 30, 1999.
Gross margins increased to 39% for the three-month period ended September 30,
1999, compared to 37% in the same period in the prior year. The increase in the
Company's margins is a result of the shifting composition of the Company's
revenues between outsourcing services and medical products.
Marketing and selling expenses increased 40% for the three-month period ended
September 30, 1999, compared to the same period in the prior year. The increase
is attributable to the growth in sales and the addition of CMED Automation.
Marketing and selling expenses as a percentage of total revenues were 4% for
each of the three-month periods ended September 30, 1999 and 1998.
Operating, general and administrative expenses increased 37% for the three-month
period ended September 30, 1999, compared to the same period in the prior year.
The increase is attributable to the addition of CMED Automation, expenses
related to an FDA regulatory audit successfully completed during the quarter,
and the overall growth of the Company. As a percentage of revenues, operating,
general and administrative expenses were 15% for each of the quarters ended
September 30, 1999 and 1998.
Research and development expenses increased by $46,000 for the three-month
period ended September 30, 1999, compared to the same three-month period in
1998. Research and development expenses are attributable to the Imaging and
Power Systems Division ("IPS") product lines. 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 such
opportunities, the amount of future research and development expenditures may
increase.
Other income increased 27% to $225,000 for the three-month period ended
September 30, 1999. The increase is attributable to the increased amount of
investment capital of the Company during the quarter ended September 30, 1999,
compared to the same period in 1998.
The provision for income taxes remained at 38% of earnings before income taxes
for the three-month periods ended September 30, 1999 and 1998. The Company's
ordinary combined Federal and state tax rate is approximately 38%.
The Company reported net income of $1.9 million for the three-months ended
September 30, 1999, compared to $1.3 million for the same period in the prior
year. Earnings per share for the three-months ended September 30, 1999 were
$.15 calculated on 12.9 million diluted weighted average common equivalent
shares outstanding, compared to $.11 for the same period in the prior year
calculated on 12.3 million diluted weighted average common equivalent shares.
This increase in net income is attributed to the 32% growth in the Company's
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<PAGE>
revenues and the increase in gross margins to 39% from 37% for the three-month
period ended September 30, 1999, compared to the same period in 1998.
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, and cash
proceeds from the issuance of common stock. Historically, the Company has also
utilized proceeds from debt borrowings.
The Company entered into a bank financing arrangement on October 30, 1997 which
provides for a three year revolving line of credit for $5 million the first
year, $7 million the second year and $9 million the third year. The credit
facility is at the bank's prime lending rate through the term of the agreement
and 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. No amounts had been advanced under this credit facility as of
September 30, 1999.
The ratio of current assets to current liabilities was 2.7 to 1 at September 30,
1999, compared to 2.4 to 1 at June 30, 1999. The Company's working capital
increased by approximately $1.3 million since June 30, 1999. Working capital
increased primarily as a result of continued profitability of the business. The
average number of days outstanding of the Company's accounts receivable at
September 30, 1999 was approximately 68 days, compared to 49 days at June 30,
1999. The increase in the number of days outstanding is a result of extended
payment terms granted to three major customers, which increased the average
number of days outstanding of the Company's accounts receivable by 16 days. The
Company believes that the average number of days outstanding of the Company's
accounts receivable will be brought to approximately 55 to 60 days by the end of
the second quarter.
The Company used approximately $5.4 million of cash for operations during the
three-month period ended September 30, 1999 primarily due to the payment of
taxes and other accrued expenses, including year-end bonuses, the slowdown in
the collection of accounts receivable and the increase in inventory levels due
to the acquisition of Creos.
During the three-months ended September 30, 1999, the Company made capital
expenditures of approximately $250,000 consisting principally of computer
equipment and office furniture. The Company had no material commitments for
capital expenditures at September 30, 1999.
The Company believes that its current cash, cash equivalents and investments and
cash generated from operations, will be sufficient based on the Company's
presently anticipated needs, to fund necessary capital expenditures, to provide
adequate working capital and to finance the Company's expansion for the
foreseeable future.
INFORMATION SYSTEMS AND THE YEAR 2000 ISSUE
- -------------------------------------------
The Company believes that it has fully addressed the Year 2000 issue as of
September 30, 1999. The Company has engaged in a comprehensive project to
upgrade its information technology and manufacturing computer software to
programs that will consistently and properly recognize the year 2000. Many of
the Company's systems include new hardware and packaged software recently
purchased from vendors who have represented that these systems are already Year
2000 compliant. During the past two years, the Company has replaced or added
new equipment to its inventory of network and systems computers. This hardware
includes the
-13-
<PAGE>
Company's organization-wide network system and servers, telecommunication
systems and personal computer equipment. In addition, the Company has upgraded
its organization-wide accounting and management information computer software.
This new software operates the Company's accounting and operational systems and
is functional at each of its facility locations. The vendor has warranted that
the software is Year 2000 compliant. The Company has successfully tested the
system for Year 2000 compliance. The primary purpose of acquiring this system
was to provide improved functionality in the area of consolidated financial
reporting, financial project control and management reporting. In addition, the
Company has upgraded its telecommunication system to make it Year 2000
compliant. The Company has also obtained assurances from vendors that timely
updates will be made available to make all remaining purchased software Year
2000 compliant. The Company utilized both internal and external resources to
test and reprogram or replace all of its software for Year 2000 compliance.
The Company does not believe that its proprietary products or any of its
outsourcing services involve any material Year 2000 risks. In addition to
reviewing its internal systems, the Company has had formal communications with
its significant vendors concerning Year 2000 compliance. There can be no
assurance that the systems of other companies that interact with the Company
will be sufficiently Year 2000 compliant so as to avoid an adverse impact on the
Company's financial condition and results of operations.
The Company does not presently anticipate that the costs to address the Year
2000 issue will have a material adverse effect on the Company's financial
condition, results of operations or liquidity. Present estimated cost for
remediation is less than $100,000. The Company had spent approximately $90,000
as of September 30, 1999 on the Year 2000 issue.
Although the Company believes its internal systems are Year 2000 compliant, as
described above, the Company may be adversely affected by the inability of other
companies whose systems interact with the Company to become Year 2000 compliant
and by potential interruptions of utility, communications or transportation
systems as a result of Year 2000 issues. The Company has prepared a contingency
plan that specifies what it plans to do if it or important external companies
are not Year 2000 compliant.
FORWARD - LOOKING STATEMENTS
- ----------------------------
The statements contained in this report which are not historical facts are
forward-looking statements that are subject to risks and uncertainties that
could cause actual results to differ materially from those set forth in or
implied by forward-looking statements including, but not limited to, the risk
that the Company's existing level of orders may not be indicative of the level
or trend of future orders, the risk that the Company may not successfully
complete the work encompassed by such orders, the risk that a downturn in
general economic conditions or customer budgets may adversely affect research
and development and capital expenditure budgets of potential customers upon
which the Company is dependent, and the risk that the nature of bidding and
performing research and development-type contracts may result in short-term
fluctuations in revenue or expense that could adversely affect quarterly
results. These factors are more fully described in the Company's documents
filed with the Securities and Exchange Commission, including its Form 10-K for
the year ended June 30, 1999, copies of which the Company will provide on
request.
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<PAGE>
Item 3. Quantitative And Qualitative Disclosures About Market Risk
The Company, as part of its cash management strategy, had short-term investments
at September 30, 1999 consisting of approximately $14.6 million in U.S. Treasury
and government agency securities. The Company has the intent and ability to
hold these short-term investments to maturity and thus has classified these
investments, which are stated at amortized cost, as "held-to-maturity". All of
the short-term investments mature in less than one year. The Company has
completed a market risk sensitivity analysis of these short-term investments
based upon an assumed 1% increase in interest rates at October 1, 1999. If
market interest rates had increased by 1% on October 1, 1999, the Company would
have had an approximate $38,000 loss on these short-term investments. Because
this is only an estimate, any actual loss due to an increase in interest rates
could differ from this estimate.
The Company does not believe there have been any material changes in the
reported market risks faced by the Company since the end of its most recent
quarter ended September 30, 1999.
-15-
<PAGE>
PART II Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27.1 Financial Data Schedule for the three months ended September 30,
1999.
(b) Reports on Form 8-K during the quarter ended September 30, 1999: None
-16-
<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.
Colorado MEDtech, Inc.
----------------------
(Registrant)
DATE: November 10, 1999
/s/ John V. Atanasoff II
------------------------
John V. Atanasoff II
Chief Executive Officer
DATE: November 10, 1999
/s/ Stephen P. Hall
-------------------
Stephen P. Hall
Chief Financial Officer
-17-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-END> SEP-30-1999
<CASH> 1,663,021
<SECURITIES> 14,570,105
<RECEIVABLES> 14,170,270
<ALLOWANCES> 0
<INVENTORY> 6,217,328
<CURRENT-ASSETS> 38,964,538
<PP&E> 2,946,187
<DEPRECIATION> 0
<TOTAL-ASSETS> 45,334,758
<CURRENT-LIABILITIES> 14,175,693
<BONDS> 0
0
0
<COMMON> 11,555,234
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 45,334,758
<SALES> 17,765,772
<TOTAL-REVENUES> 17,765,772
<CGS> 10,912,387
<TOTAL-COSTS> 4,010,690
<OTHER-EXPENSES> (225,259)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 3,067,954
<INCOME-TAX> 1,151,000
<INCOME-CONTINUING> 1,916,954
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,916,954
<EPS-BASIC> .17
<EPS-DILUTED> .15
</TABLE>
