U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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 March 31, 1996
__ Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from to
Commission file number Securities Act Registration No. 33-75276
Creative Medical Development, Inc.
(Exact Name of Small Business Issuer as Specified in its Charter)
Delaware 68-0314381
(State or Other Jurisdiction of (I.R.S. Employer Identification NO.)
Incorporation or Organization)
870 Gold Flat Road, Nevada City, CA 95959 (Address
of Principal Executive Offices)
(916) 265-8222 (Issuer's Telephone Number, Including Area Code)
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
Check whether the issuer: (1) 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
reports), and (2) has been subject to such filing requirements for the
past 90 days.
Yes X No
APPLICABLE ONLY TO ISSUERS INVOLVED IN
BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS
Check whether the registrant 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 ISSUERS
State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date:
2,046,159 Common Shares and 810,000 Series A Preferred Shares all at $.01
par value were outstanding as of April 30, 1996.<PAGE>
INDEX
PART I. FINANCIAL
Item 1. Financial Statements
Unaudited Consolidated Balance Sheets . . . . . . . . . . . .1
Unaudited Consolidated Statements of Operations . . . . . . .2
Unaudited Consolidated Statements of
Shareholders' Deficit. . . . . . . . . . . . . . . . . . .3
Unaudited Consolidated Statements of Cash Flows. . . . . . .4
Notes to Unaudited Consolidated Financial
Statements . . . . . . . . . . . . . . . . . . . . . . . .5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . . . .6
PART II. OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . .8
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
<PAGE>
CREATIVE MEDICAL DEVELOPMENT, INC.
UNAUDITED CONSOLIDATED BALANCE SHEET
ASSETS
Current Assets March 31, 1996
Accounts Receivable, less allowance for doubtful accounts; $ 121,196
Net assets of discontinued operations 807,873
Net assets held for sale 1,205,128
----------
Total current assets $2,134,197
==========
LIABILITIES AND
SHAREHOLDERS' EQUITY (DEFICIT)
Current Liabilities
Bank overdraft $ 13,006
Notes payable due within one year 651,108
Accounts Payable 358,951
Accrued liabilities 41,116
----------
Total current liabilities 1,064,181
Notes payable due after one year 1,234,061
---------
Total liabilities 2,298,241
---------
Shareholders' equity:
Convertible Preferred stock; $.01 par value;
5,000,000 shares authorized;
March 31, 1996, 810,000 shares outstanding 8,100
Common stock; $.01 par value; 10,000,000 shares authorized;
March 31, 1996, 2,046,159 shares outstanding 20,461
Additional paid-in capital 4,818,626
Accumulated equity (deficit) (5,011,231)
-----------
Total shareholders' equity (164,044)
-----------
2,134,197
===========
The accompanying notes are an integral part of these financial statements.
-1-
CREATIVE MEDICAL DEVELOPMENT, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
Six Months Ended Three Months Ended
March 31, March 31,
1996 1995 1996 1995
Assets held for sale
Gain (loss)
from operations
of assets held
for sale $ (30,069) $ (70,471) $ (11,157) $ (29,863)
Discontinued operations
Loss from
discontinued
operations (68,583) (957,287) (37,566) (488,856)
----------- ---------- ----------- ---------
Net loss $ (98,652) $(1,027,758) $ (48,723) $(518,719)
=========== ============ ============ ==========
Net loss per share
Income (loss) before
discontinued
operations $ (0.02) $ (0.04) $ (0.01) $ (0.02)
Loss from
discontinued
operations (0.03) (0.49) (0.02) (0.25)
----------- ------------ ------------ -----------
Total
loss per share $ (0.05) $ (0.53) $ (0.02) $ (0.27)
=========== ============ ============ ===========
Shares used
in computations 2,046,159 1,927,630 2,046,159 1,927,630
=========== ============ ============ ===========
The accompanying notes are an integral part of these financial statements.
-2-
<PAGE>
CREATIVE MEDICAL DEVELOPMENT, INC.
UNAUDITED STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)
For The Quarter Ended March 31, 1996
Preferred Stock Common Stock
Shares Amount Shares Amount
Balances, September 30, 1995 810,000 $ 8,100 2,012,480 $ 20,125
Issuance of Common Stock
for services 33,679 336
Net loss ________ ________ _________ _________
Balances, March 31, 1996 810,000 $ 8,100 2,046,159 $ 20,461
======= ======== ========= =========
Additional Total
Paid-in Accumulated Shareholders'
Capital Deficit Equity (Deficit)
Balances, September 30, 1995 $ 4,802,123 $(4,912,579) $ (82,231)
Issuance of Common Stock
for services 16,503 16,839
Net loss (98,652) (98,652)
----------- ------------ -----------
Balances, March 31, 1996 $ 4,818,626 $(5,011,231) $ (164,044)
=========== ============ ============
The accompanying notes are an integral part of these financial statements.
-3- <PAGE>
CREATIVE MEDICAL DEVELOPMENT, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended March 31,
1996 1995
Cash flows from operating activities:
Net loss $ (98,652) $(1,027,758)
Reconciliation to net cash used
for operating activities:
Depreciation and amortization: 17,900 76,578
Issuance stock for services
Common stock 16,839 30,000
Preferred stock 600
Changes in assets and liabilities:
Accounts receivable 120,794 (7,980)
Net assets of
discontinued operations (99,367) (50,157)
Accounts payable 47,320 28,862
Accrued liabilities (14,066) 11,611
----------- -----------
Net cash used for
operating activities (9,230) (938,244)
----------- ------------
Cash flows from investing activities:
Property and equipment 0 (101,026)
----------- -------------
Cash flows from financing activities:
Bank overdraft 13,006 79,243
Issuance of notes payable 100,000
Repayment of notes payable (6,801) (12,891)
------------ -------------
Net cash provided by
financing activities 6,205 166,352
------------ -------------
Increase (Decrease) in cash (3,025) (872,918)
Cash:
Beginning of period 3,025 872,918
------------ -------------
End of period $ 0 $ 0
============ =============
Supplemental disclosure of cash flow information:
Interest paid $ 75,969 $ 65,889
============ ============
The accompanying notes are an integral part of these financial statements.
-4-
CREATIVE MEDICAL DEVELOPMENT, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(1) INTERIM FINANCIAL INFORMATION
The accompanying unaudited consolidated financial statements of Creative
Medical Development, Inc. have been prepared by the Company pursuant to
the rules and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures normally included in
consolidated financial statements prepared in accordance with generally
accepted accounting principles have been omitted pursuant to such rules
and regulations. In the opinion of Management, the consolidated
financial statements include all adjustments necessary in order to make
the consolidated financial statements not misleading. Results for the
period ended March 31, 1996 are not necessarily indicative of the
results that may be expected for the fiscal year ending September 30,
1996. For further information, refer to the consolidated financial
statements and footnotes thereto, for the fiscal year ended September
30, 1995, included in the Company's Form 10-KSB.
(2) DISCONTINUED OPERATIONS
On September 13, 1995, the Company entered into an agreement with Gish
Biomedical, Inc. ("Gish") to sell substantially all of its operating
assets and technology for $600,000 cash and shares of Gish common stock
valued at $2,000,000 (240,240 shares). Upon closing, Note (3), the
Company entered into a one year lease with Gish for the portion of the
building which the Company currently occupied.
Under terms of the agreement, from September 13, 1995, through the
closing date, the Company's manufacturing operations were operated for
the benefit of Gish. Accordingly, net losses related to sales of
approximately $268,350 and expenses of approximately $348,417 have been
offset against operating advances to the Company by Gish.
Cash, accounts receivable and the building housing the Company's
operations and land with a net book value of $1,912,885 have been
excluded from the sale. The agreement does not provide for the
assumption of any of the Company's liabilities by Gish.
(3) SUBSEQUENT EVENTS
On April 17, 1996, the Gish transaction closed. Pursuant to a separate
agreement at the closing, Gish retained a certificate for 10,000 shares of
its stock pending completion of final accounting and payment of any funds
owed to Gish for the interim operations period from September 13, 1995
through April 17, 1996. The remainder of the shares received by the
Company were used as security for a line of credit issued by Citizens
Bank of Nevada County in the maximum amount of $330,000.
Management's Discussion and
Analysis of Financial Condition and
Results of Operations
Results of Operations -- Quarter Ended March 31, 1996
Compared with the Quarter Ended March 31, 1995
The Company designs, develops, manufactures and markets innovative
proprietary medical devices and related products. Beginning in July, 1992,
the Company developed and brought to market the EZ Flow Pumps, a line of
ambulatory infusion therapy pumps and related products primarily for
alternate site patient care.
On September 13, 1995, the Company entered into an Asset Purchase
Agreement with Gish Biomedical, Inc. ("Gish") for sale of the EZ Flow Pump
technology and product line. Under its terms, substantially all of the
Company's manufacturing related assets (with a net book value of $680,957)
were sold for $600,000 cash and $2,000,000 of Gish Stock (240,240 shares).
At a special meeting of stockholders held February 21, 1996, the transaction
was approved and it closed April 17, 1996.
Since the closing of the Gish transaction, the Company has had no
full time employees and no business activity except concluding the transition
and accounting for the interim operations between September 13, 1995 and
April 17, 1996, managing its real estate, corporate governance and compliance
matters.
The Gish stock received in the sale is not registered, but the
Company has demand registration rights which can be exercised on
October 17, 1996. Until the stock is registered, it can not be sold or
distributed. In the interim, the Company is continuing its exploration of
opportunities for merger, acquisition or strategic alliances to maximize
return on its assets.
Results of Operations
From September 13, 1995 to the Closing, the Company's manufacturing
business was operated for the benefit of and at the risk of Gish. Accordingly,
the operation of the manufacturing business through March 31, 1995, has been
accounted for as a discontinued operation and the results of operations have
been netted against operating funds advanced by Gish.
Rental operations of the real estate are segregated from the
discontinued operations. Because of intra-company rental payments and the
pre-payment of rent by one tenant which was taken as income in the quarter
ended September 30, 1995, there was a loss of $30,069 in the quarter ended
March 31, 1996, compared to a loss of $72,920 for the same quarter in 1995.
Effective at the Closing, the Company's principal remaining assets
are its real property and the Gish common stock. Pending determination of the
future direction of the Company, no full time employees are anticipated and
the only business activities necessary will be management of the real estate
and accounting, corporate governance and compliance matters.
Liquidity and Capital Resources
Cash on hand and in money market investments at March 31, 1996
was $(13,006).
Because the net asset value of the Company did not meet the NASDAQ
maintenance criteria, the NASDAQ listing committee de-listed the Company's
stock effective May 11, 1995. The Company's stock is now traded on the OTC
Bulletin Board.
Since the closing of the Gish transaction, the Company has arranged
a credit line with a local bank in the amount of $330,000 which was necessary
to pay legal, accounting, and proxy expenses incurred in connection with the
transaction, short term debt and trade accounts payable, and wind up the
manufacturing operations of the Company. The credit line will also be used
to cover the negative cash flow on the real estate owned by the Company which
will have positive cash flow beginning in July.
Management believes that the credit line and rental cash flow will
provide sufficient liquidity to meet the cash needs of the Company until the
Gish stock is registered and liquid.
<PAGE>
OTHER INFORMATION - PART II
Item 1. Legal Proceedings
Not applicable
Item 2. Changes in Securities
Not applicable
Item 3. Defaults on Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
Special meeting of Stockholders held February 21, 1996, pursuant to
notice. The only matter voted on was a resolution approving the Asset Purchase
Agreement dated as of September 13, 1995, between the Company and Gish
Biomedical, Inc., as described in the Proxy Statement. Of the 2,856,160
shares eligible to vote, there were 1,575,115 shares present and all voted for
the resolution, which was duly passed.
Item 5. Other Information
Not applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Not applicable
(b) Reports on Form 8-K
One filed May 1, 1996, reporting the closing of the sale
of Assets to Gish Biomedical, Inc. on April 17, 1996.
<PAGE>
(4) SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Creative Medical Development, Inc.
Registrant
Dated: May 20, 1996 Ronald J. Gangemi,
Chief Executive Officer
Dated: May 20, 1996 John E. Hart
Treasurer
