<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended SEPTEMBER 30, 1995
-----------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________________ to _______________________
Commission file number 0-16752
MEDSTONE INTERNATIONAL, INC.
- ------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 66-0439440
- ------------------------------------------------------------------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
100 COLUMBIA, SUITE 100, ALISO VIEJO, CALIFORNIA 92656-4114
- ------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (714) 448-7700
-------------------------
CYTOCARE,INC.
- ------------------------------------------------------------------------------
(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 Securities Exchange Act of
1934 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 for the past 90 days.
Yes X No
--- ---
The number of shares of the Common Stock of the registrant outstanding as of
November 9, 1995 was 5,447,294.
<PAGE> 2
MEDSTONE INTERNATIONAL, INC.
INDEX TO FORM 10-Q
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets
September 30, 1995 (Unaudited)
and December 31, 1994 3
Condensed Consolidated Statements of Operations (Unaudited)
Three and Nine Months Ended September 30, 1995 and 1994 4
Condensed Consolidated Statement of Stockholders' Equity (Unaudited)
Nine Months Ended September 30, 1995 5
Condensed Consolidated Statements of Cash Flows (Unaudited)
Nine Months ended September 30, 1995 and 1994 6
Notes to Unaudited Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 10
PART II. OTHER INFORMATION
---------------------------
Item 1. Legal Proceedings 12
Item 2. Changes in Securities 12
Item 3. Defaults Upon Senior Securities 12
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
</TABLE>
<PAGE> 3
MEDSTONE INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1995 1994
------------- ------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and equivalents . . . . . . . . . . . . . . . . . . . $ 2,417,258 $ 1,261,596
Short term investments . . . . . . . . . . . . . . . . . . 14,423,706 13,148,586
Accounts receivable, less allowance for doubtful
accounts of $265,000 and $257,000 at September
30, 1995 and December 31, 1994, respectively . . . . . . . 2,557,614 1,825,150
Inventories . . . . . . . . . . . . . . . . . . . . . . . . 1,857,297 1,607,090
Deferred tax assets . . . . . . . . . . . . . . . . . . . . 1,005,000 1,005,000
Prepaid expenses and other current assets . . . . . . . . . 503,303 394,595
----------- -----------
Total current assets . . . . . . . . . . . . . . . . . . 22,764,178 19,242,017
Property and equipment, at cost . . . . . . . . . . . . . . . . . 5,936,075 6,722,721
Less accumulated depreciation and amortization . . . . . . . (2,904,235) (3,727,123)
----------- -----------
Net property and equipment . . . . . . . . . . . . . . 3,031,840 2,995,598
Other assets, net . . . . . . . . . . . . . . . . . . . . . . . . 153,573 22,500
----------- -----------
$25,949,591 $22,260,115
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . $ 748,486 $ 521,496
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . 280,455 368,942
Accrued income taxes . . . . . . . . . . . . . . . . . . . . 686,886 601,776
Accrued payroll expenses . . . . . . . . . . . . . . . . . . 306,583 408,884
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . 612,025 642,551
Customer deposits . . . . . . . . . . . . . . . . . . . . . . --- 40,000
----------- -----------
Total current liabilities . . . . . . . . . . . . . . . 2,634,435 2,583,649
Deferred tax liabilities . . . . . . . . . . . . . . . . . . . . 225,000 225,000
Commitments and contingencies
Stockholders' equity:
Common stock - $.004 par value, 20,000,000
shares authorized, 5,226,003 and 4,944,603
shares issued and outstanding at June 30,
1995 and December 31, 1994, respectively . . . . . . . . . 20,904 19,778
Additional paid-in capital . . . . . . . . . . . . . . . . . 18,046,530 17,675,642
Unrealized gain/(loss) on short-term investments . . . . . . --- (46,279)
Accumulated earnings . . . . . . . . . . . . . . . . . . . . 5,022,722 1,802,325
----------- -----------
Total stockholders' equity . . . . . . . . . . . . . . 23,090,156 19,451,466
----------- -----------
$25,949,591 $22,260,115
=========== ===========
</TABLE>
See accompanying notes.
3
<PAGE> 4
MEDSTONE INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
Net equipment sales . . . . . . . . $1,596,315 $ 265,000 $ 3,988,980 $ 2,551,095
Procedures and maintenance fees
and laser catheters . . . . . . . . 3,430,836 3,551,319 9,642,894 9,325,049
Interest income . . . . . . . . . . 256,567 183,506 733,338 443,269
---------- ---------- ----------- -----------
Total revenues . . . . . . . . . . . 5,283,718 3,999,825 14,365,212 12,319,413
Costs and expenses:
Cost of equipment sales . . . . . . 686,011 97,368 1,727,487 1,063,060
Costs related to procedures and
maintenance fees . . . . . . . . 1,554,206 1,417,955 4,149,079 3,492,832
Research and development . . . . . . 186,233 241,146 675,761 913,630
Selling . . . . . . . . . . . . . . 531,326 611,692 1,501,042 2,104,656
General and administrative . . . . . 413,249 472,477 1,296,257 1,617,753
Other expense (income). . . . . . . . 50,584 10,906 64,189 31,408
---------- ---------- ----------- -----------
Total costs and expenses. . . . . . . 3,421,609 2,851,544 9,413,815 9,223,339
---------- ---------- ----------- -----------
Income before provision for
income taxes . . . . . . . . . . . 1,862,109 1,148,281 4,951,397 3,096,074
Provision for (benefit from) income taxes 651,000 (331,000) 1,731,000 0
---------- --------- ----------- -----------
Net income . . . . . . . . . . . . . . . $1,211,109 $1,479,281 $ 3,220,397 $ 3,096,074
========== ========== =========== ===========
Earnings per share:
Primary . . . . . . . . . . . . . . $ .22 $ .28 $ .58 $ .58
========== ========== =========== ===========
Fully diluted . . . . . . . . . . . $ .21 $ .27 $ .56 $ .57
========== ========== =========== ===========
Number of shares used in the computation
of income per share:
Primary . . . . . . . . . . . . . . 5,590,330 5,336,111 5,538,913 5,329,987
========== ========== =========== ===========
Fully diluted . . . . . . . . . . . 5,649,209 5,395,963 5,704,439 5,384,628
========== ========== =========== ===========
</TABLE>
See accompanying notes.
4
<PAGE> 5
MEDSTONE INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
NINE MONTHS ENDED SEPTEMBER 30, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCK
------------------- ADDITIONAL UNREALIZED LOSS
NUMBER OF PAID-IN ACCUMULATED ON SHORT-TERM
SHARES AMOUNT CAPITAL (DEFICIT) INVESTMENTS TOTAL
--------- ------- ----------- ------------- --------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1994 . . . 4,944,603 $19,778 $17,675,642 $1,802,325 $(46,279) $19,451,466
Common Stock options exercised 281,400 1,126 370,888 --- --- 372,014
Unrealized loss on short-term
investments . . . . . . . . . . . --- --- --- --- 46,279 46,279
Net income . . . . . . . . . . . . --- --- --- 3,220,397 3,220,397
--------- ------- ----------- ---------- -------- -----------
Balance at September 30, 1995 . . . 5,226,003 $20,904 $18,046,530 $5,022,722 $ 0 $23,090,156
========= ======= =========== ========== ======== ===========
</TABLE>
See accompanying notes.
5
<PAGE> 6
MEDSTONE INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(UNAUDITED)
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . $ 3,220,397 $ 3,096,074
Adjustments to reconcile net income to net
cash provided (used) by operating activities:
Depreciation and amortization . . . . . . . . . . . . . 702,251 661,953
Provision for doubtful accounts . . . . . . . . . . . . --- 140,000
Provision for related party loan . . . . . . . . . . . 1,315 28,492
Unrealized losses (gains) on short-term
investments . . . . . . . . . . . . . . . . . . . . --- (9,513)
Changes in assets and liabilities:
Accounts receivable . . . . . . . . . . . . . . . . (728,699) (506,459)
Inventories . . . . . . . . . . . . . . . . . . . . (663,889) (620,360)
Deferred tax assets . . . . . . . . . . . . . . . . --- (1,100,000)
Prepaid expenses and other current assets . . . . . (108,708) 198,585
Accounts payable and accrued expenses . . . . . . . 36,202 81,461
Accrued income taxes . . . . . . . . . . . . . . . . 85,110 440,346
Deferred revenue . . . . . . . . . . . . . . . . . . (30,526) 212,205
Customer deposits . . . . . . . . . . . . . . . . . (40,000) (180,750)
Other, net . . . . . . . . . . . . . . . . . . . . . (131,073) 34,561
------------ ------------
Net cash provided by (used in) operating activities . . . . 2,342,380 2,476,595
------------ ------------
Cash flows from investing activities:
Purchase of marketable securities . . . . . . . . . . . . . (15,471,271) (20,330,573)
Sale of marketable securities . . . . . . . . . . . . . . . 14,234,899 17,157,412
Related party loan . . . . . . . . . . . . . . . . . . . . 2,450 (28,492)
Purchase of property and equipment . . . . . . . . . . . . (1,001,035) (795,954)
Disposals of property and equipment . . . . . . . . . . . . 676,225 37,571
------------ ------------
Net cash provided by investing activities . . . . . . . . . (1,558,732) (3,960,036)
------------ ------------
Cash flows from financing activities:
Proceeds from issuance of common stock . . . . . . . . . . 372,014 116,059
------------ ------------
Net increase (decrease) in cash and cash equivalents . . . . . 1,155,662 (1,367,382)
Cash and cash equivalents at beginning of period . . . . . . . 1,261,596 2,410,363
------------ ------------
Cash and cash equivalents at end of period . . . . . . . . . . $ 2,417,258 $ 1,042,981
============ ============
Supplemental cash flow disclosures:
Cash paid during the period for:
Income taxes . . . . . . . . . . . . . . . . . . . . . . . $ 1,645,890 $ 659,654
Interest . . . . . . . . . . . . . . . . . . . . . . . . . $ 0 $ 0
</TABLE>
See accompanying notes.
6
<PAGE> 7
MEDSTONE INTERNATIONAL, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
A. ORGANIZATION AND OPERATIONS OF THE COMPANY
Medstone International, Inc., formerly known as Cytocare, Inc.
prior to its renaming in September 1995 (the "Company" or "Medstone"), a
Delaware corporation formed in October 1984, develops, manufactures and markets
medical devices and therapeutics to treat urological diseases. Medstone
manufactures, markets and maintains lithotripters, and is expanding its
Fee-for-Service Program that supplies lithotripsy equipment to providers on a
per procedure basis. Endocare, the Company's endourology subsidiary,
manufactures equipment and devices to treat urologic soft tissue diseases. A
majority of the Company's consolidated revenues come from Medstone's
lithotripsy business.
The Company, as a manufacturer of capital medical devices, has
been vertically integrating by offering its medical devices directly to
providers on a fee-per-procedure basis. Medstone currently offers mobile
lithotripsy services using mobile systems in the Western United States on a
fee-per-procedure basis. Medstone intends to expand efforts to grow this
medical service side of its business.
The Company continues efforts to separate its operating
business units and revenue streams into independent operations. Management
hopes that such a restructuring will benefit shareholders by bringing about
operational advantages as well as more discriminating and favorable valuations
of Medstone's units.
B. BASIS OF PRESENTATION
In the opinion of the Company's management, the accompanying
unaudited condensed consolidated financial statements include all adjustments
(which consist only of normal recurring adjustments) necessary for a fair
presentation of its consolidated financial position at September 30, 1995 and
consolidated results of operations and cash flows for the periods presented.
Certain prior period balances have been reclassified to conform with current
period presentation. Although the Company believes that the disclosures in
these financial statements are adequate to make the information presented not
misleading, certain information and disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted and should be read in conjunction with the
Company's audited financial statements included in the Company's 1994 Annual
Report on Form 10-K filed with the Securities and Exchange Commission on March
28, 1995. Results of operations for the nine months ended September 30, 1995
are not necessarily indicative of results to be expected for the full year.
7
<PAGE> 8
C. PER SHARE INFORMATION
Per share information is presented in the accompanying
consolidated statements of operations based upon the weighted average number of
common and common equivalent shares outstanding. Common equivalent shares
result from the assumed exercise of outstanding dilutive securities when
applying the treasury stock method. Fully diluted per share information is not
presented for periods in which the effect is antidilutive.
D. INVENTORIES
At September 30, 1995 and December 31, 1994, inventories
consisted of the following:
<TABLE>
<CAPTION>
September 30, 1995 December 31, 1994
------------------ -----------------
<S> <C> <C>
Raw materials . . . . . . . . . . . . . . . . $1,311,406 $1,194,369
Work in process . . . . . . . . . . . . . . . 88,226 181,416
Finished goods . . . . . . . . . . . . . . . 457,665 231,305
---------- ----------
$1,857,297 $1,607,090
========== ==========
</TABLE>
E. INCOME TAXES
The Company adopted Financial Accounting Standards Board
Statement No. 109 in 1991. The effect of the adoption was to permit the
Company to reduce its income tax expense by the utilization of the net
operating loss carryforward rather than treating the realization of the net
operating loss carryforward as an extraordinary credit.
F. SHORT-TERM INVESTMENTS
The Company adopted Financial Accounting Standards Board
Statement No. 115 as of January 1, 1994. The effect of the adoption is that
the Company classifies its entire investment portfolio as available-for-sale.
Accordingly, unrealized holding gains and losses on short- term investments
will be carried as a separate component of stockholder's equity.
G. CONTINGENCIES
The Company is a defendant in two related class action lawsuits
filed on behalf of two shareholders of the Company alleging that adverse
material information was not disclosed at the time of the initial public
offering and in subsequent periods. On May 4, 1992, the district court granted
summary judgment in one of the actions in favor of the Company on all claims.
On July 9, 1992, the district court granted the Company's motion to dismiss the
second action. Plaintiffs in both cases filed an appeal to the Ninth Circuit
Court. In October 1994, the Company received the opinion of the Ninth Circuit
Court of Appeals affirming in part and reversing in part the United States
District Court's decision granting summary judgment in favor of the Company and
several officers. The complaints allege principally that adverse material
information was not disclosed at the time of the initial public offering in
June 1988. In April 1995, the Company filed a Supreme Court brief, and in
October 1995, the Company was
8
<PAGE> 9
informed that the Supreme Court declined to hear the case, returning the case
to the district court for scheduling of the trial, for which the Company
intends to proceed. The ultimate outcome of this litigation cannot presently
be determined. Accordingly, no provision for any liability that may result, if
any, has been made in the financial statements.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis should be read in
conjunction with the Company's audited financial statements and Management's
Discussion and Analysis of Financial Condition and Results of Operations
included in the Company's Annual Report on Form 10-K filed with the Securities
and Exchange Commission on March 22, 1995.
GENERAL
As previously announced, the Company continues to work toward
spinning out its business units into independent companies in hopes of
achieving a fairer market valuation for our shareholders. To date, the
Company's consolidated revenues have come primarily from Medstone's lithotripsy
business. The Company also realized revenue from sales of its disposable laser
catheters that is included with procedures and maintenance fees.
The Company began the year with approximately $14.4 million in
cash and marketable securities, no debt, inventories of $1.6 million, and total
assets of $22.3 million. The Company ended the quarter with approximately
$16.8 million in cash and marketable securities, no debt, inventories of $1.9
million, and total assets of $25.9 million.
Accounts receivable increased by $732,000 from December 31, 1994
to September 30, 1995 on sales of $14,365,000 due to the timing of equipment
sales within the periods. In the nine months ended September 30, 1995,
equipment shipments occurred near the end of the period.
Inventories are stated net of reserves for excess and
obsolescence. Management periodically reviews inventories for obsolescence
and, approximately $59K of inventories were written off against reserves in the
current period. Management will continue to monitor inventory and will, when
necessary, adjust inventory reserves accordingly.
RESULTS OF OPERATIONS
The Company recognized revenue of approximately $5.3 million and
$14.4 million for third quarter and first nine months of 1995, an increase of
24% and 17%, respectively, compared to the corresponding periods of 1994.
Equipment revenues in the three months ended September 30, 1995 increased by
502% compared to the same period in 1994, due to the shipment in 1995 of
lithotripter devices, whereas in the third quarter of 1994, only equipment
9
<PAGE> 10
upgrades were shipped. The nine months ended September 30, 1995 showed a 56%
increase in equipment revenues, as both the average unit selling price and the
number of units shipped increased in the period. Recurring revenues from
procedures, maintenance and laser catheters for the three months ended
September 30, 1995 compared to the same period in the prior year decreased by
3% due to overall decreases in the laser catheter market. Offsetting most of
this decline was an increase in procedures, which increased to approximately
5,350 in the third quarter of 1995 compared to 4,630 in the same period of the
prior year. For the nine months ended September 30, 1995 recurring revenue
increased by 3% from the same period in 1994 due to continued increases in
volume of patients treated on the Medstone STS systems. Patient count in the
U.S. for the 1995 period increased by 19% compared to 1994 with the number of
patients treated exceeding 14,400.
Interest income increased by 40% in the third quarter of 1995
compared to the third quarter of 1994 due to an increase of 44% on the average
investment yield in 1995 and an increased average invested cash balance of
$3,070,000 from period to period. For the nine months ended September 30,
1995, interest income increased by 65% from the same period of the prior year
due to an increased average yield of 62% on a $3,300,000 higher average
invested balance.
Equipment cost of sales increased to 43% and 43% for the third
quarter and first nine months of 1995, respectively, compared to 37% and 42%
for the corresponding periods of 1994 due to the change of product mix, with
more high content unit shipments occurring in 1995 when compared to the prior
year. The cost of sales related to recurring revenue increased to 45% and 43%
of revenues for the third quarter and first nine months of 1995, respectively,
compared to 40% and 32% for the same periods in the prior year due to the
Company's expanded mobile route operations and the overhead needed to service
those operations.
Research and development expenses decreased significantly during
both the three and nine months ended September 30, 1995 compared to the
corresponding periods of 1994, due primarily to a reduction in personnel and
lower expenses for development supplies.
Selling expenses decreased in the third quarter and first nine
months of 1995 by 13% and 29%, respectively, compared to the same periods of
the prior year. The decreases were attributable to lower bad debt expenses and
lower product support expenses.
General and administrative expenses decreased for the three
months ended September 30, 1995 by 13% compared to the corresponding period in
the prior year due to reductions in payroll and related travel expenses. For
the nine months ended September 30, 1995, general and administrative expenses
decreased by 20% from the same period in 1994 due to lower legal costs and
lower payroll and related expenses.
Other expenses increased in the third quarter and first nine
months of 1995 compared to the same periods of the prior year due to the
increase in legal costs incurred in connection with the class action lawsuit
filed against the Company.
10
<PAGE> 11
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1995, the Company had approximately $16.8
million in cash and short-term investments. These funds were generated from
the initial public offering of the Company's common stock in June 1988 and from
earnings, although funds generated from operations in the first nine months of
1995 are not necessarily indicative of results to be expected for the full
year. Currently, the Company's short-term capital requirements are supported
by the current revenue cash flow.
The Company's long-term capital expenditure requirements will
depend upon numerous factors, including the possibility of accessing the
capital markets to help fund potential acquisitions, progress of the Company's
research and development programs, the time required to obtain regulatory
approvals, the resources that the Company devotes to the development of
self-funded products, proprietary manufacturing methods and advanced
technologies, the ability of the Company to obtain additional licensing
arrangements and to manufacture products under those arrangements, and the
demand for its products if and when approved and possible acquisitions of
products, technologies and companies.
The Company believes that its existing working capital and funds
anticipated to be generated from operations will be sufficient to meet the cash
needs for continuation of its present operations during 1995.
11
<PAGE> 12
MEDSTONE INTERNATIONAL, INC.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
(a) The annual meeting of stockholders of the Company was held on
September 21, 1995.
(b) The election of three board of directors of the Company was
held. The number of shares cast for each of the individuals
listed below to serve until the next Annual Meeting of
stockholders and until their successors are elected and have
qualified was as follows:
<TABLE>
<CAPTION>
NAME FOR WITHHOLD AUTHORITY
---- --- ------------------
<S> <C> <C>
Frank R. Pope 4,496,093 20,629
David V. Radlinski 4,496,293 20,429
Donald John Regan 4,492,193 24,529
</TABLE>
The approval of the amendment of the Company's Certificate of
Incorporation to effect the Company's name change from Cytocare
to Medstone International, Inc.
<TABLE>
<S> <C>
For 4,493,284
Against 12,840
Abstain 10,598
</TABLE>
The ratification of the appointment of Ernst & Young, LLP as
independent accountants of the Company for the year ending
December 31, 1995.
<TABLE>
<S> <C>
For 4,506,154
Against 2,425
Abstain 8,143
</TABLE>
Item 5. Other Information
None
12
<PAGE> 13
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are included herein:
(11.1) Computation of Per Share Information
(27) Financial Data Schedule
(b) Reports on Form 8-K.
During the quarterly period ended September 30,
1995, the Company filed the following Current Reports
on Form 8-K:
1. A report dated September 21, 1995, which
reported the changes in Medstone's Board of
Directors, the approval and amendment of the
Bylaws to change the name Cytocare, Inc. to
Medstone International, Inc. and the
appointment of the new corporate officers of
the Company.
13
<PAGE> 14
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 hereunto duly authorized.
MEDSTONE INTERNATIONAL, INC.
A Delaware corporation
Date: November 11, 1995 Mark Selawski
----------------------------
Mark Selawski
Chief Financial Officer
(Principal financial and
accounting officer)
14
<PAGE> 1
Exhibit 11.1
MEDSTONE INTERNATIONAL, INC.
COMPUTATION OF PER SHARE INFORMATION
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------------- ----------------------------
1995 1994 1995 1994
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Earnings:
Net income . . . . . . . . . . . . . . . $1,211,109 $1,479,281 $3,220,397 $3,096,074
========== ========== ========== ==========
Computation of primary per share
information:
Shares:
Number of shares outstanding(b) . . . . 5,208,051 4,924,745 5,185,189 4,902,125
Add effect of outstanding
options and warrants (a) . . . . . . 382,279 411,366 353,724 427,862
---------- ---------- ---------- ----------
Number of shares outstanding, as
adjusted . . . . . . . . . . . . . . 5,590,330 5,336,111 5,538,913 5,329,987
========== ========== ========== ==========
Primary earnings per share:
Net income . . . . . . . . . . . . . . $ .22 $ .28 $ .58 $ .58
========== ========== ========= ==========
Computation of fully diluted per
share information:
Shares:
Number of shares outstanding
per primary computation . . . . . . . 5,208,051 4,924,745 5,185,189 4,902,125
Add effect of outstanding options and
warrants (a) . . . . . . . . . . . . 441,158 471,218 519,250 482,503
---------- ---------- ---------- ----------
Number of shares outstanding as
adjusted . . . . . . . . . . . . . . 5,649,209 5,395,963 5,704,439 5,384,628
========== ========== ========== ==========
Fully diluted earnings per share:
Net income . . . . . . . . . . . . . . $ .21 $ .27 $ .56 $ .57
========== ========== ========== ==========
</TABLE>
- ------------
(a) As determined by the application of the treasury stock method.
(b) Weighted average number of shares outstanding.
15
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