<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB/A-1
(Mark One)
[X] Annual report under section 13 or 15(d) of the Securities Exchange Act
of 1934 [Fee Required] for the fiscal year ended December 31, 1995
[ ] Transition report under section 13 or 15(d) of the Securities Exchange
Act of 1934 [No Fee Required] for the transition period from
_______________ to _______________
COMMISSION FILE NUMBER 2-94117-D and 33-14106
---------------------------------------------------
MICROTECH MEDICAL SYSTEMS, INC.
(Name of small business issuer in its charter)
Colorado 84-0867911
- ---------------------------------------- ---------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
401 Laredo St., Unit I 80011
Aurora, Colorado ---------
- ---------------------------------------- (Zip Code)
(Address of principal executive offices)
Issuer's telephone number (303) 363-0007
Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
___________________ _________________________________________
Securities to be registered under Section 12(g) of the Act:
Common
- ---------------------------------------------------------------------------
(Title of class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act during the past 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 for the
past 90 days. Yes No X
------ ------
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained in this form, and no disclosure will
be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB or any amendment. [X]
State issuer's revenues for its most recent fiscal year. $475,091
-------
State the aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock was sold, or the
average bid and asked prices of such stock, as of a specified date within
the past 60 days. (See definition of affiliate in Rule 12b-2 of the
Exchange Act.) $592,168/1/
---------------------------------------------------------
/1/ Based on bid price of $.02 per share at 2/28/96
Note. If determining whether a person is an affiliate will involve an
unreasonable effort and expense, the issuer may calculate the aggregate
market value of the common equity held by non-affiliates on the basis of
reasonable assumptions, if the assumptions are stated.
(ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)
Check whether the issuer has filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution
of securities under a plan confirmed by a court. Yes_____ No_____
(APPLICABLE ONLY TO CORPORATE REGISTRANTS) State the number of shares
outstanding of each of the issuer's classes of common equity, as of the
latest practicable date. 59,080,900 as of March 7, 1996
-------------------------------------------------
DOCUMENTS INCORPORATED BY REFERENCE. If the following documents are
incorporated by reference, briefly describe them and identify the part of
the Form 10-KSB (e.g., Part I, Part II, etc.) into which the document is
incorporated: (1) any annual report to security holders; (2) any proxy or
information statement; and (3) any prospectus filed pursuant to Rule 424(b)
or (c) of the Securities Act of 1933 ("Securities Act"). The listed
documents should be clearly described for identification purposes (e.g.,
annual report to security holders for fiscal year ended December 24, 1990).
TRANSITIONAL SMALL BUSINESS DISCLOSURE
FORMAT (CHECK ONE):
Yes No X
----- -----<PAGE>
ITEM 7. FINANCIAL STATEMENTS.
- -----------------------------
The Report of Independent Auditors on the Financial Statements
appears at page F-2 and the Financial Statements and Notes to
Financial Statements appear at pages F-3 through F-10 hereof.
ITEM 13. EXHIBITS, AND REPORTS ON FORM 8-K.
- -------------------------------------------
(a) Exhibits:
--------
Exhibit
- -------
Number
- -------
3.1 Articles of Incorporation, as amended /1/
3.2 Bylaws /1/
4.1 Form of Underwriter's Warrant /1/
10.1 Lease Agreement /2/
10.2 Incentive Stock Option Plan /2/
10.3 Distribution Agreement with Innovative Diagnostic Systems,
Inc. /3/
10.4 Settlement Agreement between the Company and Jerry
Kilgore /3/
27 Financial Data Schedule
/1/ Incorporated by reference to the Company's Registration Statement
No. 2-94117-D on Form S-18 pursuant to the Securities Act of
1933, as amended.
/2/ Incorporated by reference to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1990.
/3/ Incorporated by reference to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1994.
(b) No reports on Form 8-K were filed by the Company during its
last fiscal quarter.
-1-<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Company has duly caused this
Amendment No. 1 of its report on Form 10-KSB to be signed on its
behalf by the undersigned, thereunto duly authorized.
MICROTECH MEDICAL SYSTEMS, INC.
Dated: April 4, 1996 By Charles L. Diehl
---------------------------------------
Charles L. Diehl, President pro tempore
--- -------
-2-<PAGE>
MICROTECH MEDICAL SYSTEMS, INC.
INDEX TO FINANCIAL STATEMENTS
PAGE
----
INDEPENDENT AUDITOR'S REPORT . . . . . . . . . . . . . . . . . . . F-2
BALANCE SHEET - December 31, 1995. . . . . . . . . . . . . . . . . F-3
STATEMENTS OF OPERATIONS - For the Years Ended December 31,
1995 and 1994. . . . . . . . . . . . . . . . . . . . . . . . . . F-4
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY - For the Years
Ended December 31, 1995 and 1994. . . . . . . . . . . . . . . . F-5
STATEMENTS OF CASH FLOWS - For the Years Ended December 31,
1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . . . . F-6
NOTES TO THE FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . F-7
F-1<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Stockholders and Board of Directors
Microtech Medical Systems, Inc.
Aurora, Colorado
We have audited the accompanying balance sheet of Microtech Medical
Systems, Inc. as of December 31, 1995, and the related statements of
operations, changes in stockholders' equity and cash flows for the
years ended December 31, 1995 and 1994. These financial statements
are the responsibility of the Company's management. Our responsi-
bility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Microtech
Medical Systems, Inc. as of December 31, 1995, and the results of its
operations and its cash flows for the years ended December 31, 1995
and 1994 in conformity with generally accepted accounting principles.
Hein + Associates LLP
Denver, Colorado
March 7, 1996
F-2<PAGE>
MICROTECH MEDICAL SYSTEMS, INC.
BALANCE SHEET
DECEMBER 31, 1995
<TABLE>
<CAPTION>
ASSETS
------
<S> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 506,519
Certificates of deposit 104,065
Accounts receivable, net of allowance of $12,000 116,274
Inventory 56,631
---------
Total current assets 783,489
EQUIPMENT, at cost 184,406
Less accumulated depreciation (153,486)
---------
30,920
OTHER ASSETS:
Deferred taxes 69,000
Other 500
---------
69,500
---------
TOTAL ASSETS $ 883,909
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable - trade $ 39,424
Income tax payable 38,246
---------
Total current liabilities 77,670
COMMITMENTS AND CONTINGENCY (Notes 2 and 6)
STOCKHOLDERS' EQUITY:
Common stock, $.0005 par value; 200,000,000 shares authorized,
59,080,900 shares issued and outstanding 29,540
Additional paid-in capital 1,010,605
Accumulated deficit (233,906)
---------
Total stockholders' equity 806,239
---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 883,909
=========
</TABLE>
See accompanying notes to these financial statements.
F-3<PAGE>
MICROTECH MEDICAL SYSTEMS, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Years Ended
December 31,
-------------------------
1995 1994
------------- -----------
<S> <C> <C>
NET SALES $ 475,091 $ 473,258
Less cost of goods sold (247,960) (228,070)
---------- -----------
GROSS PROFIT 227,131 245,188
OPERATING AND OTHER EXPENSES:
Selling, general and administrative 131,606 148,302
Stock option expense - -
Bad debt expense 13,794 11,500
Unauthorized transactions (recoveries) (Note 2) (12,000) 135,000
---------- -----------
133,400 294,802
---------- -----------
INCOME (LOSS) FROM OPERATIONS 93,731 (49,614)
---------- -----------
OTHER INCOME (EXPENSE):
Interest and dividend income 24,177 15,829
Other income (expense), net 1,440 (16,647)
---------- -----------
Total other income (expense), net 25,617 (818)
INCOME (LOSS) BEFORE INCOME TAXES 119,348 (50,432)
PROVISION FOR INCOME TAXES:
Current expense (36,000) (11,000)
Deferred benefit 9,000 -
---------- -----------
(27,000) (11,000)
---------- ----------
NET INCOME (LOSS) $ 92,348 $ (61,432)
========== ==========
NET INCOME (LOSS) PER SHARE $ <F1> $ <F1>
========== ==========
WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING 62,992,000 51,200,000
========== ==========
________________________
<FN>
<F1> Less than $.01 per share.
</FN>
</TABLE>
See accompanying notes to these financial statements.
F-4<PAGE>
MICROTECH MEDICAL SYSTEMS, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
--------------------------- PAID-IN ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT CAPITAL DEFICIT EQUITY
---------- ---------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE, January 1, 1994 51,080,900 $ 25,540 $ 1,006,605 $ (264,822) $ 767,323
Options exercised 8,000,000 4,000 4,000 - 8,000
Net loss - - - (61,432) (61,432)
---------- --------- ---------- --------- ---------
BALANCE, December 31, 1994 59,080,900 29,540 1,010,605 (326,254) 713,891
Net income - - - 92,348 92,348
---------- --------- ---------- --------- ---------
BALANCE, December 31, 1995 59,080,900 $ 29,540 $ 1,010,605 $ (233,906) $ 806,239
========== ========= ========== ========= =========
</TABLE>
See accompanying notes to these financial statements.
F-5<PAGE>
MICROTECH MEDICAL SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Years Ended
December 31,
-------------------------
1995 1994
------------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 92,349 $ (61,432)
Adjustments to reconcile to net cash from operating activities:
Depreciation 9,113 7,601
Options issued below market - -
Unauthorized transaction losses (recoveries) (12,000) 135,000
Bad debt expense 13,794 11,500
Deferred income taxes (9,000) -
Other, net 4,602 2,053
Changes in operating assets and liabilities:
Accounts receivable (17,711) (40,613)
Unauthorized advances, former president - (138,000)
Inventory (2,578) 821
Accounts payable and other current liabilities 8,504 11,912
Income tax payable 24,046 11,000
-------- --------
Net cash provided by (used in) operating activities 111,119 (60,158)
CASH FLOWS FROM INVESTING ACTIVITIES:
Repayments, former president 12,000 55,000
Purchase of certificates of deposit (100,000) -
Sale of securities - 463,343
Purchase of property and equipment (26,000) -
-------- --------
Net cash provided by (used in) investing activities (114,000) 518,343
CASH FLOWS FROM FINANCING ACTIVITIES -
Proceeds from sale of common stock - 8,000
-------- --------
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (2,881) 466,185
CASH AND CASH EQUIVALENTS, beginning of year 509,400 43,215
-------- --------
CASH AND CASH EQUIVALENTS, end of year $ 506,519 $ 509,400
======== ========
</TABLE>
See accompanying notes to these financial statements.
F-6<PAGE>
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING
----------------------------------------------------------
POLICIES:
--------
Nature of Operations - Microtech Medical Systems, Inc. (the
--------------------
Company) was incorporated in Colorado on December 8, 1981, to
develop and manufacture a line of products for sale to clinical
microbiology laboratories throughout the United States. The
Company is dependent on one employee, the former president, for
technical knowledge and expertise necessary to continue the
operation of its business. The industry is considered intensely
competitive and there appeared to be a trend during the last five
years for microbiology laboratories to automate their antibiotic
testing and bacterial identification procedures. The Company
endeavors to compete by appealing to smaller users who do not
require automated testing procedures, and emphasizing convenience,
disposability, simplicity, and cost-effectiveness.
Cash Equivalents - The Company considers all highly liquid debt
----------------
instruments with original maturities of three months or less to be
cash equivalents.
Inventory - Inventory is stated at the lower of cost or market on a
first-in, first-out (FIFO) basis. Below is a summary of
inventories as of December 31:
1995 1994
-------- --------
Materials $ 28,592 $ 20,857
Finished goods 28,039 33,196
------- -------
$ 56,631 $ 54,053
======= =======
Property and Equipment - Property and equipment is stated at
----------------------
cost. Depreciation is computed using the straight-line method over
the estimated useful lives of 5 years. Maintenance and repairs are
charged to operations as incurred; expenditures for major improve-
ments are capitalized.
Revenue Recognition - Revenue is recognized from product sales at
-------------------
the time of shipment.
Net Income (Loss) Per Share - Net income (loss) per share is
---------------------------
calculated by dividing net income (loss) by the average shares of
common stock and common stock equivalents (stock options)
outstanding. Common stock equivalents are not included in loss
years as their effect is anti-dilutive.
Income Taxes - The Company accounts for income taxes under the
------------
liability method, which requires recognition of deferred tax assets
and liabilities for the expected future tax consequences of events
that have been included in the financial statements or tax returns.
Under this method, deferred tax assets and liabilities are
determined based on the difference between the financial statements
and tax bases of assets and liabilities using enacted tax rates in
effect for the year in which the differences are expected to
reverse.
F-7<PAGE>
Use of Estimates - The preparation of the Company's financial
----------------
statements in conformity with generally accepted accounting
principles requires the Company's management to make estimates and
assumptions that affect the amounts reported in these financial
statements and accompanying notes. Actual results could differ
from those estimates. Significant estimates include the allowance
established in the collectibility of the Company's note receivable
from its former president (see Note 2) and the related valuation
allowance on the Company's deferred tax asset. It is reasonably
possible that these estimates could materially change within the
next year, if the former president is able to repay his note.
Fair Value of Financial Instruments - The carrying amounts of the
-----------------------------------
Company's financial instruments, which include trade receivables,
certificates of deposit, and trade payables, approximate fair value
because of the short maturity of those instruments. Financial
instruments also include the note receivable from the former
president (see discussion in Note 2).
2. RECEIVABLE, FORMER PRESIDENT:
----------------------------
The Company's former president was involved in various unauthorized
transactions. These transactions totaled approximately $380,000,
including $135,000 in 1994. All amounts have been expensed in
operations in the year incurred, net of recovery by the Company.
These transactions related to company funds which were either
invested in the name of the former president or disbursed in other
unauthorized transactions. As of December 31, 1995, the
investments consisted of common stock or notes receivable totaling
$285,000 in two development stage private companies.
The Company has entered into an agreement with the former
president, which was finalized in August 1995. The agreement calls
for the repayment of approximately $423,000, which includes accrued
interest through February 1995 and is collateralized by his shares
of the Company's common stock and stock options, investments in the
above mentioned companies, and his personal residence. The
agreement provides for defined repayment terms and bears interest.
The former president also resigned as an officer and a director
under the agreement. He, however, remains a Company employee with
a four-year employment agreement and as an advisor to the Board of
Directors. There currently is a disagreement between the directors
and the former president regarding the non-payment of an annual
life insurance premium of $25,000 for 1995 and 1996 and the
ownership of the cash surrender value of the life insurance. No
amounts have been accrued in the financial statement for the 1995
insurance premium and the cash surrender value of the life
insurance has not been recorded as an asset.
For financial presentation purposes an allowance has been
established for possible unrecoverable amounts for the total amount
due under the agreement, even though the Company and the former
president are actively seeking recovery of the funds. To the
extent amounts are recovered and/or the former president makes
payments under his note agreement (including accrued interest) in
the future, it will be recorded as income, when received. Payments
totaling $12,000 were received in 1995, and in March 1996, an
additional payment of $34,000 was received.
F-8<PAGE>
3. STOCKHOLDERS' EQUITY:
--------------------
The Company has reserved 10,000,000 shares of its common stock for
issuance under the terms of an incentive stock option plan, which
was adopted during 1986. Under the plan, the Board of Directors
has the authority to grant, with certain restrictions, stock
options to employees of the Company. In a prior year, the Company
had granted 7,500,000 options with an exercise price of
approximately $.002 per share to the Company's former president.
These shares are vested and expire in March 1996. Subsequent to
year-end, the options have been exercised.
In prior years, the Company granted 12,000,000 non-qualified stock
options, with an exercise price of $.001 per share, primarily to
the Company's former president and to the directors. During 1994,
options were exercised to purchase 8,000,000 shares of common stock
(including 7,000,000 options of the former president). The
outstanding options are vested and exercisable through December
1997 (1,000,000 options) and October 1998 (3,000,000 options). In
February 1996, an additional 3,000,000 options have been granted to
the Company's two Board members. These options are exercisable at
$.02 per share for five years.
The Board of Directors has approved a 1 for 100 reverse stock
split, subject to stockholder approval which has not yet occurred
as of December 31, 1995. Therefore, shares outstanding have not
been restated.
4. INCOME TAXES:
------------
Deferred tax assets (liabilities) result from temporary differences
between financial statement and tax basis of assets (liabilities).
The amounts which give rise to the net deferred tax asset
(liability) as of December 31, 1995, are as follows:
<TABLE>
<CAPTION>
Current Long-Term
--------- -----------
<S> <C> <C>
Note receivable from former president $ - $ 79,000
Compensation on options granted at less than fair market value - 22,000
Other, net 2,000 5,000
-------- -------
2,000 106,000
Valuation allowance (2,000) (37,000)
-------- -------
Net deferred tax (liability) asset $ - $ 69,000
======== =======
</TABLE>
The valuation allowance decreased $10,000 in 1995, net of an
adjustment for graduated rates.
F-9<PAGE>
Total income tax expense (benefit) differed from the amounts
computed by applying the U.S. federal statutory tax rates to pre-
tax income as follows:
<TABLE>
<CAPTION>
For the Years Ended
December 31,
---------------------
1995 1994
------ ------
<S> <C> <C>
Total expense (benefit) computed by applying the U.S.
statutory rate 34% 34%
State income taxes, net of Federal tax benefit 2% 12%
Effect of graduated rates, net of valuation allowance (9)% (63)%
Permanent differences (3)% (5)%
Other (1)% - %
---- ----
23% (22)%
==== ====
</TABLE>
5. MAJOR CUSTOMERS AND SIGNIFICANT CONCENTRATION OF CREDIT RISK:
------------------------------------------------------------
The Company made sales to unaffiliated customers which individually
represent more than 10% of the Company's total sales for the years
ended December 31, 1995 and 1994, as follows:
Customers 1995 1994
-------- ---- ----
A 20% 19%
B 19% 18%
Credit risk represents the accounting loss that would be recognized
at the reporting date if counterparties failed completely to
perform as contracted. Most of the Company's accounts receivable
are with hospitals throughout the United States. The receivables
are not collateralized.
At December 31, 1995, the Company maintained cash balances and
certificates of deposit with a commercial bank which were
approximately $130,034 in excess of FDIC insurance limits. In
addition, the Company has invested approximately $345,750 in a
money market mutual fund, which is not FDIC insured.
F-10<PAGE>
6. COMMITMENTS:
-----------
Lease - The Company leases office space under a lease that
-----
expires in 1997. Rent expense for the years ended December 31,
1995 and 1994 was approximately $8,000 for each year. The total
minimum rental commitments at December 31, 1995 are as follows:
1996 $ 8,880
1997 8,880
--------
$ 17,760
========
Simplified Employee Pension Plan - The Company has a Simplified
--------------------------------
Employee Pension Plan (the Plan). The Company, at its sole
discretion, shall determine the amount contributed to the Plan in
each plan year. The contribution is allocated in the ratio that
each participant's compensation is to the total compensation of all
participants. During 1995 and 1994, $-0- and $5,400 were
contributed to the Plan. All contributions made under the Plan are
fully vested at the date of the contribution.
7. SUBSEQUENT EVENTS (UNAUDITED):
-----------------------------
The Company is aware of a proposal, communicated by the
representative of an undisclosed principal, whereby the principal
would purchase from the former president all of his currently
outstanding shares of the common stock of the Company and his
outstanding options to acquire shares of common stock. The Company
was later advised by the former president that he had rejected or
terminated any contract. The proposal or any other such sale, if
consummated, could result in a change in control of the Company.
F-11
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1995, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 506,519
<SECURITIES> 104,065
<RECEIVABLES> 128,274
<ALLOWANCES> 12,000
<INVENTORY> 56,631
<CURRENT-ASSETS> 783,489
<PP&E> 184,406
<DEPRECIATION> 153,486
<TOTAL-ASSETS> 883,909
<CURRENT-LIABILITIES> 77,670
<BONDS> 0
<COMMON> 29,540
0
0
<OTHER-SE> 1,010,605
<TOTAL-LIABILITY-AND-EQUITY> 883,909
<SALES> 475,091
<TOTAL-REVENUES> 475,091
<CGS> 247,960
<TOTAL-COSTS> 247,960
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 119,348
<INCOME-TAX> 27,000
<INCOME-CONTINUING> 92,348
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 92,348
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
