UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(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 September 30, 1996
[ ] 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 Securities Act Registration No. 33-75276
------------------------------------------------------
CREATIVE MEDICAL DEVELOPMENT, INC.
- --------------------------------------------------------------------------------
(Name of small business issuer in its charter)
Delaware 68-0281098
- ------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
870 Gold Flat Road, Nevada City, CA 95959
- ---------------------------------------- --------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (916) 478-0740
-----------------
Securities registered under Section 12(b) of the Exchange Act:
Title of each class Name of each exchange on which registered
- ---------------------- -----------------------------------------
- ---------------------- -----------------------------------------
Securities registered under Section 12(g) of the Exchange Act:
Common Stock $.01 Par Value
---------------------------
(Title of class)
Warrants to purchase Common Stock $.01 Par Value
------------------------------------------------
(Title of class)
Check whether the issuer (1) filed all reports 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 reauired to file such reports), and (2) has been subject
to such filing requirements for the past 90 days Yes [ X ] No [ ]
<PAGE>
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosures 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 to this Form 10-KSB [ ].
State issuer's revenues for its most recent fiscal year. -0-
----------------------
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 Tule 12b-02 of the Exchange Act). As of
December 31, 1996 average of Bid and asked price was $.40. Common stock held by
non affiliates was 1,577,318 with aggregate market value of $630,827.
Note: If determining whether a person is an affiliate will involve an
unreasonable effort and expense, the isuer 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 sisuer's classes of
common equity, as of the latest practicable date.
As of 12/31/96 2,084,745 shares $.01 Par Value Common
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 hooders;
(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 [ ]
<PAGE>
CREATIVE MEDICAL DEVELOPMENT, INC.
FORM 10-KSB
ANNUAL REPORT FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1996
INDEX
<TABLE>
<CAPTION>
<S> <C> <C>
PART I
Item 1. Description of Business ....................................... 1
Item 2. Description of Property ....................................... 2
Item 3. Legal Proceedings ............................................. 2
Item 4. Submission of Matters to a Vote of Security Holders ........... 2
PART II
Item 5. Market for Common Equity and Related Stockholder Matters ...... 3
Item 6. Management's Discussion and Analysis of Financial Condition
and Results of Operations ..................................... 3
Item 7. Financial Statements
Independent Auditor's Report .............................. F-1
Consolidated Balance Sheets ............................... F-2
Consolidated Statements of Operations ..................... F-3
Consolidated Statements of Shareholders' Equity (Deficit) . F-4
Consolidated Statements of Cash Flows ..................... F-5
Notes to Consolidated Financial Statements ................ F-6
Item 8. Changes In And Disagreements With Accountants On
Accounting And Financial Disclosure ........................... 6
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) in the Exchange Act ............. 6
Item 10. Executive Compensation ........................................ 7
Item 11. Security Ownership of Certain Beneficial Owners and Management 8
Item 12. Certain Relationships and Related Transactions ................ 9
Item 13. Exhibits and Reports on Form 8-K .............................. 10
Index of Exhibits................................................................. 11
Signatures........................................................................ 13
</TABLE>
<PAGE>
PART I
Item 1. Description of Business:
------------------------
Creative Medical Development, Inc. (the "Company") was incorporated in the
state of California on July 20, 1992 and reincorporated in the state of
Delaware on June 1, 1993. The Company designed, developed, manufactured and
marketed ambulatory infusion therapy products under the "EZ Flow" trade
name.
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.
At December 31, 1996, the Company had no full time employees.
In August 1993 the Company acquired a 99% interest in LBI, a general
partnership which owns the real estate and building which the Company
utilizes as its office and rents to others.
Item 2. Description of Property
-----------------------
The Company's office is located in a facility owned by it at 870 Gold Flat
Road, Nevada City, California 95959. The facility consists of two buildings
with a total of approximately 30,000 square feet. Approximately 95% of the
space is leased to others. Management considers that the facilities are
well maintained and sufficient for the Company's present operations. The
current financing of the building has a principal balance in the amount of
$1,234,656, as of December 31, 1996, which is payable on a twenty year
amortization schedule ($12,750/Mo) with a balloon payment due December 21,
1998.
1
<PAGE>
Item 3 Legal Proceedings
------------------
On July 30, 1992, Keller Medical, Inc. ("Keller"), a company which employed
Mr. Gangemi as the general manager of one of its divisions and upon whose
Board of Directors Mr. Gangemi served, filed a civil action against Mr.
Gangemi alleging, among other things, that Mr. Gangemi improperly acquired
trade secrets and proprietary information of Keller while employed by
Keller. The action did not include the Company as a party defendant,
although the Company subsequently elected to join as a cross complainant,
filing claims against Keller. Although a settlement was reached between Mr.
Gangemi and Keller in July 1993, whereby Mr. Gangemi agreed to purchase
from Keller certain medical technology not related to the Company's
products, Keller filed for bankruptcy in November 1993, thereby staying the
litigation and suspending consummation of the settlement agreement.
While Keller has not pursued its claims in bankruptcy court or elsewhere
against Mr. Gangemi and has not included the Company in any of the
allegations in its complaint, nevertheless should Keller reinstate the
civil action and should it be successful in claiming that Mr. Gangemi
obtained trade secrets or proprietary information from Keller during Mr.
Gangemi's employment, Keller might subsequently be in a position to make a
claim against the Company for trade secrets or proprietary information it
might allege Mr. Gangemi provided to the Company. The Company believes it
is unlikely that Keller will pursue any action against it and even more
unlikely that Keller would prevail with any such claim. Although the
possibility is remote, the loss of any such litigation would materially and
adversely affect the Company.
Item 4 Submission of Matters to a Vote of Security Holders
---------------------------------------------------
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report.
2
<PAGE>
PART II
Item 5 Market for Common Equity and Related Stockholder Matters
---------------------------------------------------------
The Company's Common stock commenced trading on the NASDAQ Smallcap Market
on May 13, 1994. The stock was delisted on May 11, 1995 and now trades on
the Electronic Bulletin Board under the symbol "CMDI".
- -------------------------------------------------------------------------------
Quarterly Common Stock Bid Price Ranges
- -------------------------------------------------------------------------------
1995 1996
- -------------------------------------------------------------------------------
Quarter High Low High Low
- -------------------------------------------------------------------------------
1st 4.75 2.50 .313 .125
- -------------------------------------------------------------------------------
2nd 2.50 1.12 .313 .125
- -------------------------------------------------------------------------------
3rd .375 .375 .40 .125
- -------------------------------------------------------------------------------
4th .375 .375 .563 .188
- -------------------------------------------------------------------------------
At December 31, 1996, the Company had approximately 350 record and
beneficial stockholders.
No dividends have been declared or paid on the Common Stock and none are
anticipated.
Item 6 Management's Discussion and Analysis of Financial Condition and Results
of Operations
-----------------------------------------------------------------------
Background
From its founding in July, 1992, through completion of the Initial Public
Offering (IPO), May 13, 1994, the Company's operations have been funded
primarily by equity capital and debt financing provided by principal
shareholders and private investors. During the Company's development stage
and through the end of the fiscal year ended September 30, 1995, losses
were incurred as costs of designing, developing, testing, producing and
marketing the Company's initial products and administrative overhead
exceeded revenues generated from product sales.
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.
3
<PAGE>
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.
Results of Operations
---------------------
Because Gish assumed operating control of the purchased assets as of the
date of the agreement, September 13, 1995, and all operations from that
date to the closing April 17, 1996, were at their expense and for their
account, the Company had no manufacturing operations or sales during fiscal
1996. Accordingly a comparison of operations for years ended Sept. 30, 1995
and 1996 would not be meaningful.
However, the Company continued to incur general and administrative expenses
in connection with the audit of its financial statements for fiscal 1995,
processing the proxy materials and conducting the shareholders meeting for
approval of the Gish transaction, concluding the Gish transaction,
management of its real estate, accounting, corporate governance and
compliance matters and the investigation and evaluation of corporate
opportunities.
All of the general and administrative expenses, $217,500, have been charged
to discontinued operations and represent the amount shown as "Loss from
discontinued operations." General and administrative expenses for the
discontinued operations for fiscal 1995 were $966,114.
The loss on the discontinued operations for the fiscal year ended September
30, 1996, was $217,500 compared to a loss of $1,518,875 for the fiscal year
ended September 30, 1995.
Rental operations of the real estate are segregated from the discontinued
operations and shown as operations of assets held for sale. Although a loss
of $31,319 is reported for the fiscal year ended September 30, 1996,
current rental income on the real estate is approximately cash flow break
even.
Liquidity and Capital Resources
-------------------------------
Cash on hand and in money market investments at September 30, 1996 was
$5,912 as compared to $3,025 at September 30, 1995.
In order to maximize its value, the Company is actively pursuing several
opportunities for merger with or acquisition of a profitable operating
company with sound management and a record of successful performance.
Because the Gish stock received at the closing of the Gish transaction was
unregistered, the Company secured a bank credit line to pay delinquent
accounts payable from the discontinued operations and fund the general and
administrative expenses pending the
4
<PAGE>
registration of those securities. The registration of those securities
became effective November 22, 1996. The Company expects to margin or
liquidate Gish stock to pay the bank credit line and meet any immediate
cash flow needs pending sale of the real estate and determination of the
future business of the Company.
The Company's stock is traded on the Electronic OTC Bulletin Board.
As of December 31, 1996, the Gish stock had a high bid of 7 1/8 and high
asked of 7 5/8 with thirty day average trading volume of approximately
10,000 shares per day. Management believes that the Gish stock is
sufficiently liquid to enable the Company to pay the bank credit line
balance of approximately $315,000, provide for any operating expenses in
excess of rental income pending determination of the future direction of
the Company and fund the costs of a merger or acquisition transaction.
5
<PAGE>
CREATIVE MEDICAL DEVELOPMENT, INC.
CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended September 30, 1996 and 1995
TABLE OF CONTENTS
-----------------
Page
----
Independent Auditor's Report F-1
Consolidated Balance Sheet F-2
Consolidated Statement of Operations F-3
Consolidated Statement of Shareholders' Equity (Deficit) F-4
Consolidated Statement of Cash Flows F-5
Notes to Consolidated Financial Statements F-6-13
<PAGE>
INDEPENDENT AUDITOR'S REPORT
The Shareholders and
Board of Directors
Creative Medical Development, Inc.
We have audited the accompanying consolidated balance sheet of Creative
Medical Development, Inc. as of September 30, 1996 and 1995, and the related
consolidated statements of operations, shareholders' equity (deficit) and cash
flows for the years then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated 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 consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Creative
Medical Development, Inc. at September 30, 1996 and 1995, and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
As discussed in Note 10 to the financial statements, on September 13, 1995,
the Company entered into an agreement to sell substantially all of its operating
assets and technology.
November 27, 1996
F-1
<PAGE>
CREATIVE MEDICAL DEVELOPMENT, INC.
CONSOLIDATED BALANCE SHEET
September 30, 1996 and 1995
1996 1995
---------- ----------
ASSETS
Current assets:
Cash $ 5,912 $ 3,025
Accounts receivable 9,422 241,991
Investment securities (Notes 2 and 5) 1,771,771
Net assets of discontinued operations (Note 10) 680,957
Assets held for sale (Note 3) 1,194,133 1,235,965
--------- ---------
Total assets $2,981,238 $2,161,938
========== ==========
LIABILITIES AND
SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Notes payable due within one year (Note 5) $ 329,362 $ 710,237
Accounts payable 43,013 241,012
Accrued liabilities (Note 4) 5,037 55,182
---------- ----------
Total current liabilities 377,412 1,006,431
---------- ----------
Notes payable due after one year (Note 5) 1,224,873 1,237,738
---------- ----------
Total liabilities 1,602,285 2,244,169
---------- ----------
Commitments and contingencies (Notes 7 and 8)
Shareholders' equity (deficit) (Note 6):
Convertible Preferred Stock; $.01 par value;
5,000,000 shares authorized; shares
outstanding: 810,000 in 1996 and 1995 8,100 8,100
Common stock; $.01 par value; 10,000,000 shares
authorized; shares outstanding: 2,084,745
and 2,012,480 in 1996 and 1995, respectively 20,847 20,125
Additional paid-in capital 4,837,533 4,802,123
Unrealized loss on available-for sale investment
securities, net of taxes (Note 2) (228,229)
Accumulated deficit (3,259,298) (4,912,579)
Total shareholders' equity (deficit) 1,378,953 (82,231)
---------- ----------
$2,981,238 $2,161,938
========== ==========
The accompanying notes are an integral part of
these financial statements.
F-2
<PAGE>
CREATIVE MEDICAL DEVELOPMENT, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
For the Years Ended September 30, 1996 and 1995
1996 1995
---------- -----------
Assets held for sale:
(Loss) gain from operations of assets
held for sale $ (31,319) $ 29,871
Discontinued operations (Note 10):
Loss from discontinued operations (217,500) (1,518,875)
Gain on disposal of discontinued o
operations,net of tax 1,902,100
----------- -----------
Net gain (loss) $ 1,653,281 $(1,489,004)
=========== ===========
Net gain (loss) per share $ .81 $ (.76)
=========== ===========
Shares used in per share computations 2,052,629 1,958,624
=========== ===========
The accompanying notes are an integral
part of these financial statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
CREATIVE MEDICAL DEVELOPMENT, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)
For the Years Ended September 30, 1996 and 1995
Unrealized
Loss
on Available- Total
Preferred Stock Common Stock Additional for-Sale Shareholders'
----------------- -------------------- Paid-in Accumulated Investment Equity
Shares Amount Shares Amount Capital Deficit Securities (Deficit)
------ ------ --------- -------- ----------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances, September 30, 1994 750,000 $7,500 1,918,880 19,189 $4,707,259 $ (3,423,575) $1,310,373
Issuance of common stock
for services (Notes 6 and 7) 17,600 176 31,124 31,300
Issuance of common stock
(Notes 6 and 7) 76,000 760 56,240 57,000
Issuance of preferred stock
(Notes 6 and 7) 60,000 600 600
Issuance of warrants for services
(Note 6) 7,500 7,500
Net loss (1,489,004) (1,489,004)
-------- ------- --------- ------ --------- ---------- ---------- ----------
Balances, September 30, 1995 810,000 8,100 2,012,480 20,125 4,802,123 (4,912,579) (82,231)
-------- ------- --------- ------ --------- ---------- ---------- ----------
Issuance of common stock for
services (Notes 6 and 7) 72,265 722 35,410 36,132
Unrealized loss on available-for-sale
investment securities, net of taxes $(228,229) (228,229)
Net income 1,653,281 1,653,281
-------- ------- --------- ------- --------- ---------- ---------- ----------
Balances, September 30, 1996 810,000 $ 8,100 2,084,745 $20,847 $4,837,533 $(3,259,298) $(228,229) $1,378,953
======== ======= ========= ======= ========== =========== ========= ==========
The accompanying notes are an integral
part of these financial statements.
F-4
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CREATIVE MEDICAL DEVELOPMENT, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
For the Years Ended September 30, 1996 and 1995
1996 1995
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net gain (loss) $ 1,653,281 $(1,489,004)
Reconciliation to net cash used
for operating activities:
Gain on disposal of discontinued operations (1,902,100)
Depreciation and amortization 41,832 166,763
Issuance of common and convertible preferred
stock for services and 36,132 31,900
Issuance of warrants for services 7,500
Changes in assets and liabilities:
Accounts receivable 232,569 (138,746)
Inventories (41,743)
Accounts payable (197,999) 85,509
Accrued liabilities (50,145) 20,717
----------- -----------
Net cash used for operating activities (186,430) (1,357,104)
Cash flows from investing activities:
Acquisition of property and equipment (147,033)
Proceeds from sale of discontinued operations 583,057
Net cash provided by (used for)
investing activities 583,057 (147,033)
----------- -----------
Cash flows from financing activities:
Issuance of common stock 57,000
Issuance of notes payable 316,498 853,300
Repayment of notes payable (710,238) (276,057)
Net cash (used for) provided by financing activities (393,740) 634,243
Increase (decrease) in cash 2,887 (869,894)
Cash:
Beginning of period 3,025 872,919
End of period $ 5,912 $ 3,025
=========== ===========
Supplemental disclosure of cash flow information:
Interest paid $ 159,029 $ 160,290
=========== ===========
Noncash changes:
Investment securities acquired in connection
with sale of discontinued operations $ 2,000,000
Inventory $ 223,714
Other assets $ 28,280
Property and equipment, net $ 1,684,658
Net assets of discontinued operations $ (680,957)
Net assets held for sale $(1,235,965)
Unrealized loss on available-for sale investments
securities, net of taxes $ (228,229) $(1,235,965)
The accompanying notes are an integral
part of these financial statements
F-5
</TABLE>
<PAGE>
CREATIVE MEDICAL DEVELOPMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
Business
--------
Creative Medical Development, Inc. (the "Company"), designed, developed,
manufactured and marketed proprietary ambulatory infusion therapy products
for alternate site patient care. The Company was incorporated in the State
of California on July 20, 1992, and reincorporated in the State of Delaware
on June 1, 1993. The Company discontinued its operations on September 13,
1995 (Note 11).
Principles of Consolidation
---------------------------
The consolidated financial statements include the accounts of the Company
and its majority-owned subsidiary, LBI. The Company acquired a 99% interest
in LBI, a California partnership ("LBI") in 1993. LBI was organized to own
and operate the building in which the Company's offices and manufacturing
facilities were located.
Net Income (Loss) Per Share
---------------------------
Net income (loss) per share has been computed using the weighted average
number of common shares outstanding during the period. Outstanding
convertible preferred stock, warrants and stock options have not been
included in the calculation as they would have an antidilutive effect.
Income Taxes
------------
The Company has generated net operating loss carryforwards of approximately
$3,165,000 and $1,557,000 which are available to offset future Federal and
State income tax expense, respectively. Federal and State loss
carryforwards expire through 2011. The tax benefit of loss carryforwards
has been offset by a valuation allowance of the same amount.
Use of Estimates
----------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
F-6
<PAGE>
CREATIVE MEDICAL DEVELOPMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
2. INVESTMENTS
The Company received 240,240 shares of Gish Biomedical common stock in
conjunction with the sale of assets discussed in Note 10. Management
classified the stock as available- for-sale upon receipt. The securities
were adjusted to fair value, as required under SFAS 115, and net unrealized
losses of $228,229 were recorded as a separate component of stockholders'
equity.
<TABLE>
<CAPTION>
1996
-----------------------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
------------ ---------- ---------- -----------
Available-for-Sale:
-------------------
<S> <C> <C> <C> <C>
Gish Biomedical
common stock $ 2,000,000 $ - $ 228,229 $ 1,771,771
============ ========= ========= ===========
</TABLE>
3. NET ASSETS HELD FOR SALE
The land, building, leasehold improvements and other assets of the Company
are classified as net assets held for sale consistent with management's
intent. These assets were transferred at their aggregate net book value
which management believes is less than market value. The Company has
continued to provide for depreciation using the straight-line method over
the estimated useful lives which range from 2 to 40 years.
Net assets held for sale at September 30, 1996 and 1995 are as follows:
1996 1995
----------- -----------
Land $ 275,000 $ 275,000
Building, net 881,262 932,685
Other assets 23,289 28,280
------------ -----------
$ 1,179,551 $ 1,235,965
=========== ===========
4. ACCRUED LIABILITIES
Accrued liabilities at September 30, 1996 and 1995 are as follows:
1996 1995
---------- ---------
Accrued payroll $ 46,007
Other $ 5,037 9,175
---------- ---------
$ 5,037 $ 55,182
========== =========
F-7
<PAGE>
CREATIVE MEDICAL DEVELOPMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
5. NOTES PAYABLE
Notes payable at September 30, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
1996 1995
---------- -----------
<S> <C> <C>
11.375% secured note payable; secured by a
building; monthly installments of $12,750
due through December 21, 1998 $1,237,737 $1,249,225
10.25% secured line of credit; secured by
230,240 shares of Gish Biomedical common
stock, due on or before February 1, 1997 289,722
10% secured note payable; secured by substantially
all assets of the Company; due upon closing
of the Asset Purchase Agreement (Note 10) 600,000
10% secured note payable; secured by 10,000
shares of Gish Biomedical common stock 26,776
10% unsecured notes payable; due July 1, 1996 92,500
10.75% unsecured notes payable; due on or
before August 5, 1996 6,250
----------- ----------
1,554,235 1,947,975
Less current portion (329,362) (710,237)
----------- ----------
Notes payable due after one year $1,224,873 $1,237,738
=========== ==========
</TABLE>
Notes payable mature as follows:
Year Ending
September 30,
-------------
1997 $ 329,362
1998 14,405
1999 1,210,468
-----------
$ 1,554,235
===========
F-8
<PAGE>
CREATIVE MEDICAL DEVELOPMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
6. SHAREHOLDERS' EQUITY
Issuance of Common Stock
------------------------
In December, 1994, the Company issued 15,000 shares of common stock
pursuant to an employment agreement with one of its officers (Note 7).
Compensation expense of $30,000 was recognized in connection with the
issuance of common stock.
In May, 1995, the Company issued 76,000 shares of common stock to private
parties resulting in net proceeds of $57,000.
In 1996 and 1995, the Company issued 72,265 and 2,600 shares of common
stock to employees pursuant to a compensation reduction agreement.
Compensation expense of $36,132 and $1,300 was recognized in connection
with the issuance of common stock.
Convertible Preferred Stock
---------------------------
The Company's Certificate of Incorporation permits the Board of Directors
to issue convertible preferred stock with such conversion rates, rights,
privileges and preferences as the Board may determine.
In December, 1994, the Company issued 60,000 shares of $.01 par convertible
preferred stock pursuant to an employment agreement with one of its
officers (Note 7). Management has determined that the market value of the
convertible preferred stock approximated the par value of those shares. The
preferred stock is convertible into an equal number of common shares upon
the completion of certain revenue objectives set for the Company.
Warrants
--------
Between February 28, 1995 and May 2, 1995, the Company executed $200,000 of
short-term notes payable. As additional consideration for the loans, the
Company issued warrants for the purchase of 100,000 shares of Common stock.
The warrants are exercisable until March 1, 1998 at $.35 per share. The
market value was estimated at or below the strike price and accordingly no
interest expense or additional paid in capital was recorded.
In May, 1995, warrants for the purchase of 20,000 shares of Common stock
were issued for services rendered. 10,000 shares were exercisable at $1.50
per share and 10,000 were exercisable at $.75 per share. The difference
between the exercise price and the stock's fair market value, $7,500, was
recognized as an operating expense for the year ended September 30, 1995.
Additional paid-in-capital was increased by a corresponding amount to
reflect the issuance of the warrants. The warrants expire on May 31, 1998.
In June 1995, as consideration for restructuring a loan in default,
warrants for the purchase of 46,250 shares of common stock were issued with
an exercise price of $.35 per share. Market value of the shares was
estimated to be at or below the exercise price and accordingly no interest
expense or additional paid in capital was recorded.
F-9
<PAGE>
CREATIVE MEDICAL DEVELOPMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
7. COMMITMENTS
Obligations to Selling Agent
----------------------------
In exchange for investment banking services, the Company entered into an
exclusive five-year agreement, ending June 1998, with a selling agent.
Under the agreement, the Selling Agent is entitled to a consulting fee of
$2,000 per month. The selling agent is entitled to a fee ranging from 2 to
10 percent of the funds received by the Company pursuant to borrowing
agreements, joint ventures, mergers, sales or acquisitions with parties
introduced by the Selling Agent. The selling agent also received a
five-year option to purchase 10 percent of the outstanding common stock,
warrants and options of the Company at a purchase price equal to 10 percent
of the net book value of the Company as of May 31, 1993. The Company also
agreed to provide the selling agent with one seat on the Board of
Directors.
In September 1995, the Selling Agent agreed to terminate his rights and
obligation under the agreement.
Compensation Agreements
-----------------------
The Company has entered into a five-year employment agreement with the
President of the Company. The agreement expires in July 1997. In addition
to annual compensation, the agreement provides for additional incentive
compensation equal to one percent of net revenues.
Effective October 1, 1994, the Company entered into an employment agreement
with one of its officers, which extends through September 30, 1996. In
addition to annual compensation, this agreement provided for the issuance
of 15,000 shares of common stock and 60,000 shares of convertible preferred
stock (Note 6).
8. CONTINGENCIES
A claim has been asserted against the Company for $250,000 as a penalty for
not proceeding with a sale of assets pursuant to a letter of intent dated
August, 1995. The Company believes it is entitled to damages from the other
party in an as yet undetermined amount. Management intends to vigorously
contest this claim. The outcome of this matter cannot be reasonably
determined at this time.
F-10
<PAGE>
CREATIVE MEDICAL DEVELOPMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
8. CONTINGENCIES (Continued)
As discussed in Note 10, from September 13, 1995 through April 17, 1996,
the Company's manufacturing operations were operated for the benefit of
Gish Biomedical, Inc. (Gish). In connection with this arrangement, Gish
forwarded operating advances totaling $375,193 to the Company which were
secured by 10,000 shares of Gish stock due to the Company on April 17,
1996. The Company has offset losses incurred during the period that its
operations were for the benefit of Gish totaling $348,417 against the
advances resulting in owing a net amount of $26,776. Gish has disputed the
Company's loss calculation and maintains the Company is obligated for
amounts in excess of $84,000. Management believes that it has correctly
calculated the amounts due to Gish and intends to vigorously contest Gish's
dispute. The outcome of this matter cannot be reasonably determined at this
time.
9. INCOME TAXES
Deferred income taxes reflect the effect of temporary differences between
the tax basis of assets and liabilities and the reported amounts of those
assets and liabilities for financial reporting purposes. Deferred income
taxes also reflect the value of net operating losses and an offsetting
valuation allowance. The Company's total deferred tax assets and
corresponding valuation allowance at September 30, 1996 and 1995, consisted
of the following:
1996 1995
---------- -----------
Tax effects of carryforward benefits $ 644,000 $ 1,304,000
Less: valuation allowance (644,000) (1,304,000)
---------- ----------
Net deferred tax asset $ - $ -
========== ===========
The provision for income taxes is different than the amount computed
using the applicable statutory federal income tax rate as follows:
1996 1995
--------- -----------
Tax expense(benefit) at statutory rates $ 533,904 $ (580,711)
Increase(decrease) in valuation allowance (533,904) 580,711
--------- -----------
$ - $ -
========= ===========
F-11
<PAGE>
CREATIVE MEDICAL DEVELOPMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
9. INCOME TAXES (Continued)
The Company has available net operating loss carryforwards of $3,449,000
and $1,699,000 to offset Federal and State income taxes, respectively. The
carryforwards expire primarily in 2009 thru 2011.
SFAS No. 109 requires that a valuation allowance be recorded against tax
assets which are not likely to be realized. Specifically, the Company's
carryforwards expire at specific future dates and utilization of certain
carryforwards is limited to specific amounts each year. However, due to the
uncertain nature of their ultimate realization based upon past performance,
the Company has established a full valuation allowance against these
carryforward benefits and will recognize the benefits only as reassessment
demonstrates they are realizable. Realization is entirely dependent upon
future earnings in specific tax jurisdictions. While the need for this
valuation allowance is subject to periodic review, if the allowance is
reduced, the tax benefits of the carryforwards will be recorded in future
operations as a reduction of the Company's income tax expense.
10. 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 in cash and shares of Gish common stock valued
at $2,000,000. Upon closing, April 17, 1996, the Company entered into a
one-year lease with Gish for the portion of the building which the Company
used in its manufacturing operations.
Net assets of discontinued operations at September 30, 1995 consisted of
the following:
Inventory $ 221,270
Manufacturing equipment, net of
accumulated depreciation of $195,060 390,193
Office furniture, net of accumulated
depreciation of $44,059 52,985
Other assets 16,509
----------
$ 680,957
==========
F-12
<PAGE>
CREATIVE MEDICAL DEVELOPMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
10. DISCONTINUED OPERATIONS (Continued)
Summary results of operations of discontinued operations for the year ended
September 30, 1996 and 1995 are as follows:
1996 1995
----------- -----------
Sales $ 806,637
----------- ----------
Cost of sales 453,702
Research and development 413,559
Selling expenses 492,137
General and administrative
expenses $ 217,500 966,114
----------- ----------
217,500 2,325,512
----------- ----------
Loss from discontinued
operations $ 217,500 $1,518,875
=========== ==========
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.
At September 30, 1995, the Company owed Gish $600,000 in the form of a
secured note (Note 5). In accordance with the terms of the agreement, the
Company retired $250,000 of notes payable, $150,000 of delinquent payroll
tax deposits, and paid current payroll and vendor payables with the
proceeds of the $600,000 note. The notes retired matured on September 1,
1995.
Cash, accounts receivable, the building housing the Company's operations
and land with a net book value of $1,912,885 were excluded from the sale.
The agreement does not provide for the assumption of any of the Company's
liabilities by Gish.
11. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company adopted SFAS 107, Disclosures About Fair Value of Financial
Instruments, October 1, 1995. SFAS 107 requires that the Company disclose
estimated fair values for financial instruments for which it is practicable
to estimate fair value. These estimates are made at a specific point in
time based on relevant market data and information about the financial
instruments. These estimates do not reflect any premium or discount that
could result from offering the Company entire holdings of a particular
financial instrument for sale at one time, nor do they attempt to estimate
the value of anticipated future business related to the instruments.
F-13
<PAGE>
CREATIVE MEDICAL DEVELOPMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
11. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)
Because no market exists for a significant portion of the Company's
financial instruments, fair value estimates are based on judgments
regarding current economic conditions, risk characteristics of various
financial instruments and of the factors. These estimates are subjective in
nature and involve uncertainties and matters of significant judgment and
therefore cannot be determined with precision. Changes in assumptions could
significantly affect the fair values presented.
The following methods and assumptions were used by the Company to estimate
the fair value of its financial instruments at September 30, 1996:
Cash: For cash, the carrying amount is estimated to be fair value.
Investment securities: For investment securities, fair values are based on
quoted market prices, where available.
Notes payable: For notes payable, fair values are estimated based on the
discounted present values of the note balance using current interest rates.
The estimated fair values of the Company's financial instruments are as
follows:
September 30, 1996
---------------------------
Carrying Fair
Amount Value
---------- ----------
Financial assets:
Cash $ 5,912 $ 5,912
Investment securities 1,771,771 1,771,771
---------- ----------
$1,777,683 $1,777,683
========== ==========
Financial liabilities:
Notes payable $1,554,235 $1,554,235
========== ==========
F-14
<PAGE>
Item 8 Changes In And Disagreements With Accountants On Accounting And
Financial Disclosure
-------------------------------------------------------------------
There have been no changes in or disagreements with the Company's
accountants requiring disclosure under Item 304 of Regulation S-B.
PART III
Item 9 Directors, Executive Officers, Promoters and Control Persons; Compliance
with Section 16 (a) in the Exchange Act.
The executive officers and directors of the Company are as follows:
NAME AGE POSITION
Mark A. Davies 51 Chairman of the Board
Ron Gangemi 54 CEO and Director
John E. Hart 57 Secretary and Treasurer
Eric P. Neibart 42 Director
Each director is elected for a period of one year and serves until his or
her successor is duly elected by the stockholders. The Board of Directors has no
committees.
The principal occupations of each director and executive officer of the
Company, for at least the past five years, are as follows:
Mark A. Davies has been a director of the Company since June 1993 and
Chairman of the Board of Directors since January 1994. From June 1984 to May
1988, Mr. Davies was employed by Codex Corporation, a division of Motorola
Corporation, where he became a vice president and general manager of product
development. From June 1988 to February 1995, Mr. Davies was an executive
officer of ShipNet Systems, Inc., a Chicago, Illinois based company engaged in
shipment management information systems. Since February 1995, Mr. Davies has
been a director in the Corporate Strategy office of Motorola Corporation. Mr.
Davies holds B.S. and M.B.A. degrees from the University of Waterloo.
Ronald J. Gangemi has been the Chief Executive Officer and a director of
the Company since he founded it in July 1992. From 1990 to 1991, he was
President, and subsequently from 1991 to 1992 he was General Manager of
Manufacturing, of Fergy Corp., ("Fergy") a developer and manufacturer of medical
products. In February 1991 Fergy was acquired by Keller Medical, Inc. ("Keller")
and Mr. Gangemi became General Manager for one of Keller's divisions in April
1991, serving until March 1992. Mr. Gangemi and Keller subsequently became
6
<PAGE>
involved in litigation with each other. See "Business-Litigation". From 1985 to
1990, he was Vice President-Research and Development for Healthtek, Inc.
John E. Hart has been general counsel to the Company since October 1993 and
has been its Secretary and Treasurer since June 1994. From 1985 to 1994 he was
engaged in the private practice of law. Mr. Hart holds a J.D. degree from the
University of Southern California and a B.A. degree from the University of
Redlands.
Eric B. Neibart, M.D., has been a director of the Company since November
1993 and has been engaged in the private practice of medicine, specializing in
infectious disease and internal medicine, since 1985. He graduated from New
Jersey Medical School.
Mr. Hart and Mr. Gangemi each failed to file one Form 4 to report receipt
of 12,139 and 14,843, respectively, shares of Common Stock on May 31, 1996, in
lieu of deferred salary. Both Mr. Hart and Mr. Gangemi failed to file the
appropriate Form 4s as a result of inadvertence. They each filed timely Form 5s
reporting the transactions.
Item 10 Executive Compensation
-----------------------
The following table sets forth remuneration paid to certain executive
officers for the fiscal years ended September 30, 1995 and September 30, 1996,
respectively:
<TABLE>
<CAPTION>
Long-Term Compensation
-----------------------------------------
Annual Compensation Awards Payouts
-----------------------------------------------------------------------------
Other Restricted Securities LTIP All Other
Name and Principal Annual Stock Underlying Payouts Comp.
Position Year Salary ($) Bonus Comp. Awards ($) Options
($) ($) (#) ($) ($)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Ronald J. Gangemi, 1995 102,469 0 0 0 0 0 0
C.E.O. 1996 85,273 0 0 0 0 0 0
John E. Hart, 1995 89,428 0 0 0 0 0 0
Secretary/Treasurer 1996 71,844 0 0 0 0 0 0
</TABLE>
Mr. Gangemi's five-year employment agreement effective July 1, 1992
provides for an annual salary of $110,000 and a bonus equal to 1% of the net
sales of the Company through June 30, 1997. Mr. Hart's two-year employment
agreement effective October 1, 1994 providing for an annual salary of $96,000
expired and he has been providing services on a consulting basis. Salary
accruing during the period September 13, 1995 through April 17, 1996 was
reimbursed to the Company by Gish. From April 17, 1996 through September 30,
1996 salary was paid directly by Gish. Mr. Gangemi has submitted a billing for
$7,000 for services he rendered to CMD during the period May 1, 1996 through
November 25, 1996. Mr. Hart is being paid a total of $17,500 for his services to
the Company from May 1, 1996 through December 31, 1996 and he will be a full
time employee for the period January 1, 1997 through March 31, 1997 under the
same terms as his employment contract.
The Company's nonsalaried directors receive $500 for each Board meeting
attended together with reimbursement for out-of-pocket expenses in attending
Board meetings.
7
<PAGE>
Item 11 Security Ownership of Certain Beneficial Owners and Management
--------------------------------------------------------------
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock as of the date hereof, by (I)
each person who is known by the Company to own of record or beneficially more
than 5% of the Company's Common Stock, (ii) each of the Company's directors and
(iii) all directors and officers of the Company as a group. The stockholders
listed in the table have sole voting and investment powers with respect to the
shares indicated.
Name and Address of Number of
Beneficial Owner(1)(3) Shares Owned Percent of Class
---------------------- ------------ ----------------
Mark A. Davies (3) 25,000 1.2%
870 Gold Flat Road
Nevada City, CA 95959
Ronald J. Gangemi (2) 447,788 21.5%
870 Gold Flat Road
Nevada City, CA 95959
Eric P. Neibart (3) 22,500 1.1%
870 Gold Flat Road
Nevada City, CA 95959
All officers and directors 507,427 24.3%
as a group (4 persons)
- ----------
(1) Assumes no exercise or conversion of (I) common stock purchase warrants and
underwriter's warrants issued in conjunction with the Company's 1994 public
offering, outstanding warrants, options or other commitments of the Company that
are convertible into or exercisable for shares of Common Stock, except that
Common Stock obtainable by persons named in the above table upon exercise of
options is deemed outstanding and beneficially owned by such persons in
calculating their percentage ownership; or (ii) the Class A Preferred Stock.
(2) Includes shares owned by Mr. Gangemi's spouse and children. Does not include
810,000 shares of Class A Preferred Stock held by Mr. Gangemi and his spouse
convertible into an equal number of shares of Common Stock contingent upon the
Company achieving certain levels of gross revenues or net income.
8
<PAGE>
(3) Includes options held by Messrs. Davies and Neibart to purchase 17,500
shares each under the Company's Incentive Stock Option Plan.
Item 12 Certain Relationships and Related Transactions
----------------------------------------------
Between February 28 and May 2, 1995, the Company borrowed, on short term
notes, a total of $200,000 from four investors, including $25,000 from Mr.
Gangemi. The interest on the Gangemi loan was at the rate that he was required
to pay the bank from which he borrowed the funds to make the loan. The interest
on the other $175,000 was at 10% per annum. As additional consideration for the
loans, the lenders received, pro rata, warrants to purchase a total of 100,000
shares of the Company's common stock, exercisable until March 1, 1998, at $.35
per share.
In June, 1995, as consideration for restructuring a $92,500 loan in
default, warrants, exercisable until March 1, 1998, for the purchase of 46,250
shares of common stock were issued with an exercise price of $.35.
On December 10, 1994, Mr. Hart entered into a two-year employment contract
with the Company effective October 1, 1994, providing for an annual salary of
$96,000 and issuance of 15,000 shares of Common stock and 60,000 shares of
Series A Preferred stock. One half of the Series A Preferred stock is subject to
forfeiture in the event Mr. Hart does not meet his agreed performance
objectives.
9
<PAGE>
Management is of the opinion that all transactions described above between
the Company and its officers, directors or stockholders were on terms at least
as fair to the Company as had the transactions been concluded with an
unaffiliated party. All material transactions effected in the future between the
Company and its officers, directors and principal stockholders will be subject
to approval by a majority of the Company's outside directors not having an
interest in the transaction.
Item 13 Exhibits and Reports on Form 8-K
---------------------------------
a. The Exhibits listed on the accompanying Index of Exhibits are filed as
part of this annual report.
b. No reports on Form 8-K were filed during the quarter ended
September 30, 1996.
10
<PAGE>
Index of Exhibits:
Exhibit # Description
--------- -----------
1.01 Form of Underwriting Agreement with Oak Ridge Investments, Inc. (1)
1.02 Form of Selected Dealers Agreement (1)
1.03 Form of Representative's Warrant (1)
1.04 Consulting Contract (1)
2.01 Certificate of Incorporation of the Registrant (1)
2.02 Bylaws of the Registrant (1)
2.03 Migratory Merger Agreement (1)
2.04 Bylaws of the Registrant as amended December 10, 1994 (1)
4.01 Form of Warrant Agreement (1)
5.01 Opinion of John Hart, Esq., regarding legality of the
Common Stock and Warrants (includes Consent) (1)
10.01 Incentive Stock Option Plan (1)
10.02 Employment Agreement (Mr. Gangemi) (1)
10.03 Agreement with LBI general partnership (1)
10.04 Employment Agreement (Mr. Hart) (2)
10.05 Gish Biomedical, Inc. Asset Purchase Agreement, dated September 13,
1995 (4)
11.01 Statement of Computation of Per Share Loss (1)
11.02 Statement of Computation of Per Share Loss (1)
11.03 Statement of Computation of Per Share Loss (1)
11
<PAGE>
Exhibit # Description
--------- -----------
11.04 Statement of Computation of Per Share Loss (2)
24.01 Consent of Perry-Smith & Co. (1)
24.02 Consent of John Hart, Esq. (See 5.01, above.) (1)
24.03 Consent of Gary A. Agron (1)
24.04 Consent of Perry-Smith & Co. (1)
24.05 Consent of Perry-Smith & Co. (1)
24.06 Consent of Perry-Smith & Co. (1)
24.07 Consent of Perry-Smith & Co. (3)
27.01 Financial Data Schedule September 30, 1996
(1) Previously filed as part of the Company's SB-2 Registration Statement filed
on February 11, 1994, as amended and effective on May 13, 1994.
(2) Previously filed as Exhibits to the Company's Annual Report on Form 10-KSB
for the fiscal year ended September 30, 1994.
(3) Previously filed as an Exhibit to the Company's Post Effective Amendment No.
1 to Form SB- 2 Registration Statement filed on March 10, 1995 and effective on
March 28, 1995.
(4) Previously filed as an Exhibit to the Company's Preliminary Proxy Statement
filed October 24, 1995.
12
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) 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)
By: /S/ RON GANGEMI
------------------------------------
(Signature and Title)
Ron Gangemi, CEO & Director
Date: January 13, 1997
---------------------------------
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.
By: /S/ JOHN E. HART
------------------------------------
(Signature and Title)
John E. Hart, Treasurer & Secretary
Date: January 13, 1997
---------------------------------
By: /S/ MARK A. DAVIES
-----------------------------------
(Signature and Title)
Mark A. Davies, Director
Date: January 13, 1997
---------------------------------
-13-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1996 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> SEP-30-1996
<CASH> 5,912
<SECURITIES> 1,771,771<F1>
<RECEIVABLES> 9,422
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,787,105
<PP&E> 1,194,133
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,981,238
<CURRENT-LIABILITIES> 377,412
<BONDS> 0
0
8,100
<COMMON> 20,847
<OTHER-SE> 1,350,006
<TOTAL-LIABILITY-AND-EQUITY> 2,981,238
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> (31,319)
<DISCONTINUED> (217,500)<F2>
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,653,281
<EPS-PRIMARY> .81
<EPS-DILUTED> .81
<FN>
<F1>See footnotes 2 and 5 fo financial statements.
<F2>See footnote 10 to financial statements.
</FN>
</TABLE>
