** **

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON,D.C. 20549**

 

**FORM 10-QSB**

**(MarkOne)**

** **

** **

**ý  QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF**

**THE SECURITIES EXCHANGE ACT OF 1934**

** **

**Forthe quarterly period ended June 30, 2002**

** **

**or**

** **

**o  TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF**

**THE SECURITIES EXCHANGE ACT OF 1934**

** **

**Forthe transition period from             to             **

** **

**CommissionFile Number:  0-14210**

 

**                                                                            ****COMPUMED, INC.**

 (Exact name ofsmall business issuer as specified in its charter)

|                            |   |                                 |
|---------------------------------|--------|--------------------------------------|
| **Delaware**                    |   | **95-2860434**                       |
| State or other jurisdiction of  |   | (I.R.S. Employer Identification No.) |
| incorporation or  organization) |   |                                 |
|                            |   |                                 |

 

| **5777  W. Century Blvd., Suite 1285, Los Angeles, CA  90045**                 |
|-------------------------------------------------------------------------------------|
| (Address of  principal executive officers)                                          |
|                                                                                |
| **(310)  258-5000**                                                                 |
| (Issuer’s  telephone number)                                                   |
|                                                                                |
|                                                                                |
| (Former name,  former address and former fiscal year, if changed since last report) |

 

                Indicate by check mark whetherthe registrant (1) has filed all reports required to be filed by Section 13 or15(d) of the Exchange Act during the preceding 12 months (or for such shorterperiod that the registrant was required to file such reports, and (2) has beensubject to such filing requirements in for the past 90 days.

Yes ý Noo

 

                The registrant had 17,869,309 shares of common stock,($.01 par value) issued and outstanding as of June 30, 2002.

 

                Transitional Small BusinessDisclosure Format (Check one):  Yes o  Noý    

 

 

----

 
| PART I.   FINANCIAL INFORMATION |
|--------------------------------------|
|                                 |   |   |
| Item  1.                             | Financial Statements (unaudited) |   |
|                                 |   |   |
|                                 | Balance Sheets — June 30, 2002  (unaudited) and September 30, 2001. |   |
|                                 |   |   |
|                                 | Statements of  Operations — Three months and nine months ended June 30, 2002 and 2001  (unaudited). |   |
|                                 |   |   |
|                                 | Statements of Cash  Flows — Three months and nine months ended June 30, 2002 and 2001  (unaudited). |   |
|                                 |   |   |
|                                 | Notes to  Financial Statements (unaudited). |   |
|                                 |   |   |
| Item  2.                             | Management’s  Discussion and Analysis of Financial Condition and Results of Operations. |   |
|                                 |   |   |
| PART II.   OTHER INFORMATION    |
|                                 |   |   |
| 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                           |   |

2

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PART I

 

FINANCIAL INFORMATION

 

 

BALANCE SHEETS

COMPUMED, INC.

 
|                                                                                      |   | **June 30,**    |      | **September  30,** |   |
|-------------------------------------------------------------------------------------------|--------|-----------------|-----------|--------------------|--------|
|                                                                                      |   | **2002**        |      | **2001**           |   |
|                                                                                      |   | **(Unaudited)** |      | **(Audited)**      |   |
| ASSETS                                                                                    |   |            |      |               |   |
|                                                                                      |   |            |      |               |   |
| CURRENT ASSETS                                                                            |   |            |      |               |   |
| Cash and cash  equivalents                                                                |   | $               | 73,000    |               | $      | 239,000 |   |
| Marketable  securities                                                                    |   | 421,000         |      | 424,000            |   |
| Accounts  receivable, less allowance of $82,000 (June 2002) and $69,000 (September  2001) |   | 219,000         |      | 224,000            |   |
| Inventory                                                                                 |   | 85,000          |      | 83,000             |   |
| Prepaid expenses  and other current assets                                                |   | 19,000          |      | 23,000             |   |
|                                                                                      |   |            |      |               |   |
| TOTAL CURRENT  ASSETS                                                                     |   | 817,000         |      | 993,000            |   |
|                                                                                      |   |            |      |               |   |
| PROPERTY AND  EQUIPMENT                                                                   |   |            |      |               |   |
| Machinery and  equipment                                                                  |   | 1,246,000       |      | 994,000            |   |
| Furniture,  fixtures and leasehold improvements                                           |   | 100,000         |      | 100,000            |   |
| Equipment under  capital leases                                                           |   | 66,000          |      | 326,000            |   |
|                                                                                      |   | 1,412,000       |      | 1,420,000          |   |
|                                                                                      |   |            |      |               |   |
| Accumulated  depreciation and amortization                                                |   | (947,000        | )         | (762,000           | )      |
|                                                                                      |   | 465,000         |      | 658,000            |   |
| OTHER ASSETS                                                                              |   |            |      |               |   |
| Other Assets                                                                              |   | 28,000          |      | 28,000             |   |
|                                                                                      |   |            |      |               |   |   |   |
| TOTAL ASSETS                                                                              |   | $               | 1,310,000 |               | $      | 1,679,000 |   |

 

See notes to condensedfinancial statements

 

3

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BALANCE SHEETS

COMPUMED, INC.  
|                                                                                                                           |   | **June 30,**    |      | **September  30,** |   |
|--------------------------------------------------------------------------------------------------------------------------------|--------|-----------------|-----------|--------------------|--------|
|                                                                                                                           |   | **2002**        |      | **2001**           |   |
|                                                                                                                           |   | **(Unaudited)** |      | **(Audited)**      |   |
| LIABILITIES AND  STOCKHOLDERS’ EQUITY                                                                                     |   |            |      |               |   |
|                                                                                                                           |   |            |      |               |   |
| CURRENT  LIABILITIES                                                                                                           |   |            |      |               |   |
| Accounts payable                                                                                                               |   | $               | 175,000   |               | $      | 174,000 |   |
| Accrued  liabilities                                                                                                           |   | 212,000         |      | 76,000             |   |
| Unearned revenue                                                                                                               |   | –0–   |      | 18,000             |   |
| Current portion  of capital lease obligations                                                                                  |   | 8,000           |      | 47,000             |   |
|                                                                                                                           |   |            |      |               |   |
| TOTAL CURRENT  LIABILITIES                                                                                                     |   | 395,000         |      | 315,000            |   |
|                                                                                                                           |   |            |      |               |   |
| Capital lease  obligations, less current portion                                                                               |   | 9,000           |      | 15,000             |   |
|                                                                                                                           |   |            |      |               |   |
| Commitments  (Note C)                                                                                                          |   |            |      |               |   |
|                                                                                                                           |   |            |      |               |   |
| STOCKHOLDERS’  EQUITY                                                                                                     |   |            |      |               |   |
| Preferred Stock,  $.10 par value-authorized 1,000,000 shares                                                                   |   |            |      |               |   |
| Class A $3.50  cumulative convertible voting  —  issued and outstanding — 8,400 shares                          |   | 1,000           |      | 1,000              |   |
|                                                                                                                           |   |            |      |               |   |
| Class B $3.50  cumulative convertible voting  —  issued and outstanding —300 shares                             |   | –0–   |      | –0–      |   |
|                                                                                                                           |   |            |      |               |   |
| Common Stock,  $.01 par value-authorized 50,000,000 shares   — issued and outstanding—   17,869,309 shares |   | 179,000         |      | 179,000            |   |
|                                                                                                                           |   |            |      |               |   |
| Additional paid  in capital                                                                                                    |   | 32,241,000      |      | 32,241,000         |   |
|                                                                                                                           |   |            |      |               |   |
| Accumulated  deficit                                                                                                           |   | (31,622,000     | )         | (31,109,000        | )      |
|                                                                                                                           |   |            |      |               |   |
| Accumulated other  comprehensive income                                                                                        |   | 111,000         |      | 55,000             |   |
|                                                                                                                           |   |            |      |               |   |
| Deferred stock  compensation                                                                                                   |   | (4,000          | )         | (18,000            | )      |
|                                                                                                                           |   |            |      |               |   |
| TOTAL  STOCKHOLDERS’ EQUITY                                                                                               |   | 906,000         |      | 1,349,000          |   |
|                                                                                                                           |   |            |      |               |   |
| TOTAL  LIABILITIES AND STOCKHOLDERS’ EQUITY                                                                               |   | $               | 1,310,000 |               | $      | 1,679,000 |   |

 

See notes to condensedfinancial statements

 

4

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STATEMENTS OF OPERATIONS(UNAUDITED)

COMPUMED,INC.

 
|                                                        |   | **Three  Months Ended** |     | **Nine  Months Ended** |   |
|-------------------------------------------------------------|--------|-------------------------|----------|------------------------|--------|
|                                                        |   | **June 30,**            |     | **June 30,**           |   |
|                                                        |   | **2002**                |     | **2001**               |   | **2002** |   | **2001** |   |
| REVENUES FROM  OPERATIONS                                   |   |                    |     |                   |   |   |   |   |   |
| ECG services                                                |   | $                       | 434,000  |                   | $      | 420,000 |   | $ | 1,278,000 |   | $ | 1,238,000 |   |
| ECG product and  supplies sales                             |   | 34,000                  |     | 32,000                 |   | 108,000 |   | 138,000 |   |
| OsteoGram sales  and services                               |   | 30,000                  |     | 27,000                 |   | 75,000 |   | 62,000 |   |
|                                                        |   | 498,000                 |     | 479,000                |   | 1,461,000 |   | 1,438,000 |   |
| COSTS AND  EXPENSES                                         |   |                    |     |                   |   |   |   |   |   |
| Costs of ECG  services                                      |   | 133,000                 |     | 132,000                |   | 385,000 |   | 439,000 |   |
| Cost of goods  sold-ECG                                     |   | 29,000                  |     | 18,000                 |   | 78,000 |   | 83,000 |   |
| Cost of goods  sold-OSTEOGRAM                               |   | –0–           |     | 5,000                  |   | 7,000 |   | 10,000 |   |
| Selling expenses                                            |   | 126,000                 |     | 69,000                 |   | 236,000 |   | 454,000 |   |
| Research and  development                                   |   | 68,000                  |     | 60,000                 |   | 202,000 |   | 175,000 |   |
| General and  administrative expenses                        |   | 375,000                 |     | 240,000                |   | 889,000 |   | 824,000 |   |
| Depreciation and  amortization                              |   | 59,000                  |     | 81,000                 |   | 200,000 |   | 244,000 |   |
|                                                        |   | 790,000                 |     | 605,000                |   | 1,997,000 |   | 2,229,000 |   |
|                                                        |   |                    |     |                   |   |   |   |   |   |
| OPERATING LOSS                                              |   | (292,000                | )        | (126,000               | )      | (536,000 | ) | (791,000 | ) |
|                                                        |   |                    |     |                   |   |   |   |   |   |
| Interest income  and dividends                              |   | 11,000                  |     | 12,000                 |   | 31,000 |   | 68,000 |   |
| Realized loss on  marketable securities                     |   | (9,000                  | )        | (9,000                 | )      | (9,000 | ) | (7,000 | ) |
| Interest expense                                            |   | –0–           |     | (3,000                 | )      | 1,000 |   | (14,000 | ) |
|                                                        |   |                    |     |                   |   |   |   |   |   |
| NET LOSS                                                    |   | $                       | (290,000 | )                      | $      | (126,000 | ) | $ | (513,000 | ) | $ | (744,000 | ) |
|                                                        |   |                    |     |                   |   |   |   |   |   |
| NET LOSS PER  SHARE  (Basic and diluted)               |   | $                       | (.02     | )                      | $      | (.01 | ) | $ | (.03 | ) | $ | (.04 | ) |
| Weighted average  number of  common shares outstanding |   | 17,869,309              |     | 17,869,309             |   | 17,869,309 |   | 17,869,326 |   |

 

Seenotes to condensed financial statements

 

5

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STATEMENTS OF CASH FLOWS(UNAUDITED)

COMPUMED, INC.

 
|                                                                             |   | **Nine  Months Ended** |     |
|----------------------------------------------------------------------------------|--------|------------------------|----------|
|                                                                             |   | **June 30,**           |     | **June 30,** |   |
|                                                                             |   | **2002**               |     | **2001** |   |
| OPERATING  ACTIVITIES:                                                           |   |                   |     |   |   |
| Net loss                                                                         |   | $                      | (513,000 | ) | $ | (744,000 | ) |
| Net adjustments  to reconcile net loss to net cash used in operating activities: |   |                   |     |   |   |
| Realized loss on  marketable securities                                          |   | 9,000                  |     | 7,000 |   |
| Amortization of  deferred stock compensation                                     |   | 14,000                 |     | 33,000 |   |
| Depreciation and  amortization                                                   |   | 200,000                |     | 242,000 |   |
| Changes in  operating assets and liabilities:                                    |   |                   |     |   |   |
| Accounts  receivable                                                             |   | 5,000                  |     | 21,000 |   |
| Inventory,  prepaid expenses and other assets                                    |   | 2,000                  |     | 74,000 |   |
| Accounts payable  and other liabilities                                          |   | 119,000                |     | (421,000 | ) |
| Other assets                                                                     |   | —0—          |     | 16,000 |   |
| NET CASH USED IN  OPERATING ACTIVITIES                                           |   | (164,000               | )        | (772,000 | ) |
|                                                                             |   |                   |     |   |   |
| INVESTING  ACTIVITIES:                                                           |   |                   |     |   |   |
| Sales of  marketable securities                                                  |   | 50,000                 |     | 1,090,000 |   |
| Net purchases  (proceeds from sales of property, plant and equipment)            |   | (7,000                 | )        | (41,000 | ) |
| NET CASH  PROVIDED BY (USED IN) INVESTING ACTIVITIES                             |   | 43,000                 |     | 1,049,000 |   |
|                                                                             |   |                   |     |   |   |
| FINANCING  ACTIVITIES:                                                           |   |                   |     |   |   |
| Principal  payments on capital lease obligations                                 |   | (45,000                | )        | (98,000 | ) |
|                                                                             |   |                   |     |   |   |
| NET CASH  PROVIDED BY (USED IN) FINANCING ACTIVITIES                             |   | (45,000                | )        | (98,000 | ) |
|                                                                             |   |                   |     |   |   |
|                                                                             |   |                   |     |   |   |
| INCREASE  (DECREASE) IN CASH AND CASH EQUIVALENTS                                |   | (166,000               | )        | 179,000 |   |
|                                                                             |   |                   |     |   |   |
| Cash and cash  equivalents at beginning period                                   |   | 239,000                |     | 129,000 |   |
|                                                                             |   |                   |     |   |   |
| CASH AND CASH  EQUIVALENTS AT END OF PERIOD                                      |   | $                      | 73,000   |   | $ | 308,000 |   |
|                                                                             |   |                   |     |   |   |
| Cash paid for  interest                                                          |   | $                      | 1,000    |   | $ | 14,000 |   |

 

See notes to condensedfinancial statements

 

6

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NOTESTO FINANCIAL STATEMENTS (UNAUDITED)

COMPUMED,INC.

 

NOTE A––BASIS OFPREPARATION

 

Thebalance sheet at September 30, 2001 has been derived from our year end auditedfinancial statements.

 

Theaccompanying interim unaudited financial statements have been prepared inaccordance with accounting principles generally accepted in the United Statesfor interim financial information and pursuant to the rules and regulations ofthe Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotesrequired by accounting principles generally accepted in the United States forcomplete financial statements.  In theopinion of management, all adjustments (consisting of normal recurringaccruals) considered necessary for a fair presentation have been included.  Operating results for the nine-month periodended June 30, 2002 are not necessarily indicative of the results that may beexpected for the year ending September 30, 2002.  For further information, refer to the financial statements forthe year ended September 30, 2001 and the notes thereto included in our AnnualReport on Form 10–KSB. Certain reclassifications have been made to priorperiod amounts to conform to the current period presentation.

 

NOTEB—PER SHARE DATA

 

Basicloss per share is calculated using the net loss, less preferred stockdividends, divided by the weighted average common shares outstanding.  Shares from the assumed exercise ofoutstanding warrants, options and effect of the conversion of the Class APreferred Stock and Class B Preferred Stock are omitted from the computationsof diluted loss per share because the effect would be antidilutive.

 

NOTEC—COMMITMENTS

 

OnJanuary 26, 1998, the United States District Court for the Central District ofCalifornia approved the settlement of the class action and derivative lawsuitson the terms agreed to by the parties in the Memorandum of Understandingentered into on August 5, 1996.  Thefinal settlement is anticipated to be completed in 2002 and will involve theissuance of 770,000 shares of Common Stock and the issuance of 1,870,000warrants for the purchase of Common Stock at a price of $3.00.  The effect of these issuances on thestatement of operations was recorded during the fiscal year ended September 30,1997.

 

NOTE D — MARKETABLE SECURITIES

 

Marketable securities consist of investments in equity andbonds in various publicly traded domestic companies and are stated at marketvalue based on the most recently traded prices of these securities at June 30,2002. These short-term investments are defined as assets available for saleunder the provisions of FASB Statement No. 115, “Accounting for CertainInvestments in Debt and Equity Securities.”

 

During the nine months ended June 30, 2002, we recognized$56,000 of unrealized gains which was recorded as a component of AccumulatedOther Comprehensive Income in Stockholders’ Equity. At June 30, 2002 andSeptember 30, 2001, the investments in marketable securities are as follows:

 
| **Investments  Types**        |   | **June 30,  2002** |    | **September  30, 2001** |   |
|-------------------------------|--------|--------------------|---------|-------------------------|--------|
|                          |   |               |    |                    |   |
| Corporate Bonds               |   | $                  | 9,000   |                    | $      | 9,000 |   |
| Convertible  Preferred Stocks |   | 37,000             |    | 61,000                  |   |
| Common Stock                  |   | 375,000            |    | 354,000                 |   |
|                          |   |               |    |                    |   |
| Total                         |   | $                  | 421,000 |                    | $      | 424,000 |   |

 

7

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NOTE E — LEGAL ACTIONS

 

 

The Company was sued formonetary damages on August 14, 2001 in the Orange County Superior Court. Thissuit, case No. 01cc10485, involves a disputed consulting contract. The Companydoes not believe that the ultimate determination of this case will have amaterial adverse effect on the Company’s results of operations or financialposition.

 

NOTE F — 2002 STOCKOPTION PLAN

 

On June 14 ,2002, theCompany adopted the 2002 Stock Option Plan, under which 2,500,000 shares ofcommon stock are available for grant as stock options to employees anddirectors. As of June 30, 2002, 550,000 options had been granted under thisPlan at an exercise price of $0.25 which was the trading price of our commonstock on the date of grant.

 

8

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Item 2.             MANAGEMENT’S DISCUSSION ANDANALYSIS OF FINANCIAL  CONDITION ANDRESULTS OF OPERATIONS

 

## **Overview**

 

We provide trans-telephonic ECG interpretations. Our customers includehealth care providers in the correctional health system, short-stay surgerycenters and rural health clinics who do not have access to self-interpretingECG machines or who desire an overread by a Board Certified cardiologist. Wehave implemented measures to further automate and improve our service, and weare exploring new opportunities in the existing market. However, we could losecustomers who choose to receive services from a competitor or who purchase aself-interpretive machine and no longer need our ECG interpretations.  If we were to lose existing customers, theymay be difficult to replace and that could have a material adverse impact onour operations and financial condition.

 

For the nine months ended June 30, 2002, we pursued opportunities forour OsteoGram® product both in domestic and international markets.  The U.S. hospital market at present ismature, and sales of OsteoGram® systems have been sluggish due to the largenumber of existing competitive units. We have reevaluated our domestic marketopportunities, and we are currently refocusing our strategy towards thesubstantial number of primary care providers and rural hospitals.  The international markets are far lessmature, especially in sectors where economies are emerging, such as Asia andSouth America.  We concentrate on thosecountries that desire the ability to provide an accurate and cost effectivemethod for determining bone mineral density as an indicator of fracture risk,and where the cost of an expensive DXA scanner is prohibitive.  In June 2002, we received clearance tomarket the OsteoGram® system in China from the State Drug Administration (SDA),and marketing efforts commenced immediately thereafter.  In addition, we shipped an initial stockingorder to our distributor in Europe, and the distributor’s dealer networksubsequently sold 3 systems in the Middle East. We plan to aggressively pursueOsteoGram® sales on a global basis, and along those lines, we are submitting anapplication for a required CE mark in Europe.

 

**Results ofOperations**

 

Ourrevenues from ECG operations increased 4% to $468,000 for the quarter endedJune 30, 2002, as compared to $452,000 for the same period in 2001, and for thenine months ended June 30, 2002 revenues from ECG operations were $1,386,000 ascompared to $1,376,000 for the same period in fiscal 2001. Our revenues fromOsteoGram® sales and services for the quarter ended June 30, 2002 increased to$30,000, as compared to $27,000 for the same period in 2001, and increased to$75,000 for the nine months ended June 30, 2002, as compared to $62,000 for thesame period in 2001.

 

Costof services and goods sold consists of the costs of ECG services provided,supplies, electrocardiograph equipment sold, OsteoGram® systems sold andcertain overhead expenses.  For thequarter ended June 30, 2002, costs of services and goods sold increased by 5% to$162,000 from $155,000 during the same period in fiscal 2001, and for the ninemonths ended June 30, 2002 decreased by 12% to $470,000 as compared to $532,000for the same period in 2001. The decrease in cost of services for the ninemonth periods is due to the automation of the ECG overread process.

 

Sellingexpenses increased by 83% for the quarter ended June 30, 2002 to $126,000 ascompared to $69,000 for the same period in fiscal 2001, primarily due toincreased marketing & sales, and litigation related expenses. For the ninemonths ended June 30, 2002, selling expenses decreased by 48% to $236,000 ascompared to $454,000 for the same period in fiscal 2001, primarily due to adecrease in marketing expenses of the OsteoGram® in the U.S.

 

OurResearch and Development costs increased by 13% for the quarter ended June 30,2002 to $68,000 as compared to $60,000 for the same period in fiscal 2001, andfor the nine months ended June 30, 2002, 

 

9

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increasedby 15% to $202,000 as compared to $175,000 for the same period in fiscal 2001,due to our attendance at scientific symposia and increased interaction with themedical community.

 

Ourgeneral and administrative expenses increased by 56% for the quarter ended June30, 2002 to $375,000, as compared to $240,000 for the same period in fiscal2001, primarily due to additional expenses related to our Annual StockholdersMeeting. For the nine months ended June 30, 2002, our general andadministrative expenses increased by 8% to $889,000, as compared to $824,000for the same period in fiscal 2001.

 

We recorded interest and dividend income for the quarter ended June 30,2002 of $11,000 as compared to $14,000 for the same period in fiscal 2001, andfor the nine months ended June 30, 2002, we recorded $31,000 as compared to$68,000 for the same period in fiscal 2001. The decrease was primarily due to adecrease in the marketable securities balance from 2002 to 2001.

 

Our net loss for the quarter ended June 30, 2002 was $290,000 comparedto a loss of $126,000 for the same period in fiscal 2001.  The increased loss is due to increasedmarketing & sales, litigation related expenses and costs of the AnnualShareholders Meeting. Our net loss for the nine months ended June 30, 2002 was$513,000 as compared to $744,000 for the same period in fiscal 2001, which isprincipally due to the decrease in marketing expenses of the OsteoGram® and the automation of the ECGoverread process.

 

**FinancialCondition and Liquidity**

 

As of June 30, 2002 we had $422,000 of working capital, a decrease of$256,000 from September 30, 2001. This decrease in working capital is primarilya result of losses from operating activities, payments made on capital leaseobligations and increased marketing & sales and litigation relatedexpenses.

 

We anticipate that our current working capital will be sufficient tomeet its anticipated financial needs for the next 12 months.

 

### **Factors That May Affect Future Results**

 

Thefollowing cautionary statement is included pursuant to the Private SecuritiesLitigation Reform Act of 1995 with respect to any forward-looking statementsmade by us, or on our behalf. Forward-looking statements include statements concerning plans,objectives, goals, strategies, future events or performance and underlyingassumptions and other statements that are other than statements of historicalfacts.  From time to time, we maypublish or otherwise make available forward-looking statements of this nature.  All such subsequent forward-looking statements,whether written or oral, and whether made by us or on our behalf, are alsoexpressly qualified by these cautionary statements.

 

Certainstatements contained herein are forward-looking statements and accordinglyinvolve risks and uncertainties that could cause actual results or outcomes todiffer materially from those expressed in the forward-looking statements. Theforward-looking statements contained herein are based on various assumptions,many of which are based, in turn, upon further assumptions.  Our expectations, beliefs andforward-looking statements are expressed in good faith, but there can be noassurance that management’s expectations, beliefs or projections will result orbe achieved or accomplished.

 

Inaddition to other factors and matters discussed elsewhere herein, the followingare important factors that, in our view, could cause actual results to differmaterially from those discussed in the forward-looking statements:technological advances by our competitors, the impact of competition andpricing, the ability to attract and retain key employees and new management,the risks of patent claims or other third party liability, and the risks oflaunching a new product or service, such as our OsteoGram® test, changes inhealth care regulation, including reimbursement programs, capital needs to fundany delays or extensions of research programs and the ability to raise capitalon terms satisfactory to us.

 

10

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We intend to pursue additional research and/or sub-contractoragreements relating to our development projects.  Additionally, we are actively seeking partners and acquisitioncandidates of businesses that are complementary to its own. Such investments wouldbe financed either by our working capital, through issuance of our securitiesor a combination thereof.

 

11

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**PART II**

**OTHERINFORMATION**

 

Item1.  LEGAL PROCEEDINGS

 

                The Company was sued for monetary damages on August14, 2001 in the Orange County Superior Court. This suit, case No. 01cc10485,involves a disputed consulting contract. The Company does not believe that theultimate determination of this case will have a material adverse effect on theCompany’s results of operations or financial position.

 

 

Item 2.  CHANGES IN SECURITIES

 

                Not Applicable

 

Item3.  DEFAULTS UPON SENIOR SECURITIES

 

                Not Applicable

 

Item4.  SUBMISSION OF MATTERS TO A VOTE OFSECURITY HOLDERS

 

                On June 14, 2002, we held our2002 Annual Meeting of Stockholders. At the meeting, the stockholders electedfour directors, approved the adoption of the 2002 Stock Option Plan, andratified the appointment of Ernst & Young LLP as our independent auditorsfor the 2002 fiscal year.

 

Thevoting results were as follows:

 

(1)           Election of Directors

 
| **Nominees**       |   | **For**    |   | **Abstain** |
|--------------------|--------|------------|--------|-------------|
|               |   |       |   |        |
| John  Minnick      |   | 15,709,297 |   | 395,884     |
| John  Romm         |   | 15,507,497 |   | 597,684     |
| Stuart  Silverman  |   | 15,504,097 |   | 601,084     |
| Robert  Stuckleman |   | 15,699,277 |   | 405,904     |

 

(2)                                  Adoption of the2002 Stock Option Plan

 
| For               |   | — |   | 3,013,955  |
|-------------------|--------|--------|--------|------------|
| Against           |   | — |   | 939,284    |
| Abstain           |   | — |   | 137,311    |
| Broker  Non-Votes |   | — |   | 12,014,631 |

 

(3)          Ratification of Auditors

 
| For               |   | — |   | 15,986,127 |
|-------------------|--------|--------|--------|------------|
| Against           |   | — |   | 84,680     |
| Abstain           |   | — |   | 34,374     |
| Broker  Non-Votes |   | — |   | —0-   |

 

12

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Item 5.  OTHER INFORMATION

                None

 

Item6.  EXHIBITS AND REPORTS ON FORM 8-K

 

(a)          Exhibits

 

**Number                                 Description ofExhibit**

 
| 3.1  |   | Certificate of Incorporation [Incorporated by  reference to Exhibit 3.1 to our Registration Statement on Form S-1 (File No.  33-46061), effective May 7, 1992]                                                                                        |
|------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3.2  |   | Certificate of Amendment of Certificate of  Incorporation [Incorporated by reference to Exhibit 3.1a to Amendment No. 1  to Post-Effective Amendment No. 1 to our Registration Statement on Form S-2  (File No. 33-48437), filed June 28, 1994]       |
| 3.3  |   | Certificate of Amendment of Certificate of  Incorporation [Incorporated by reference to Exhibit 3.1b to Amendment No. 2  to Post-Effective Amendment No. 1 to our Registration Statement on Form S-2  (File No. 33-48437), filed November 7, 1994]    |
| 3.4  |   | Certificate of Correction of Certificate of  Amendment [Incorporated by reference to Exhibit 3.1c to Amendment No. 2 to  Post-Effective Amendment No. 1 to our Registration Statement on Form S-2  (File No. 33-48437), filed November 7, 1995]       |
| 3.5  |   | By-Laws, as currently in effect [Incorporated by  reference to Exhibit 3.2 to our Registration Statement on Form S-1 (File No.  33-46061), effective May 7, 1992]                                                                                     |
| 4.1  |   | Form of Preferred Stock Certificate [Incorporated by  reference to Exhibit 4.2 to our Registration Statement on Form S-1 (File No.  33-46061), effective May 7, 1992]                                                                                 |
| 4.2  |   | Certificate of Designation of Class A Preferred  Stock [Incorporated by reference to Exhibit 4.5 to our Annual Report on Form  10-KSB for the fiscal year ended September 30, 1995 (File No. 0-14210)]                                                |
| 4.3  |   | Certificate of Designation of Class B Preferred  Stock [Incorporated by reference to Exhibit 4.6 to our Annual Report on Form  10-KSB for the fiscal year ended September 30, 1995 (File No. 0-14210)]                                                |
| 10.1 |   | 1992 Stock Option Plan [Incorporated by reference to  Exhibit 10.12 to our Registration Statement on Form S-1 (File No. 33-46061),  effective May 7, 1992]                                                                                            |
| 10.2 |   | Form of Non-Qualified Stock Option Agreement  [Incorporated by reference to Exhibit 10 to our Registration Statement on  Form S-8 (File No. 33-63435), filed October 14, 1995]                                                                        |
| 10.3 |   | Commercial Office Lease dated August 16, 1999  between us and L.A.T. Investment Corporation, a California corporation  [Incorporated by reference to Exhibit 10.24 to our Annual Report on Form  10-KSB for the fiscal year ended September 30, 1999] |
| 10.4 |   | 2002 Stock Option Plan [Incorporated by reference to  Appendix B to our Definitive Proxy Statement on Schedule 14A (File No.  0-14210), filed on May 3, 2002]                                                                                         |
| 10.5 |   | Form of Stock Option Agreement**                                                                                                                                                                                                                      |
| 11   |   | Statement re: computation of per share earnings*                                                                                                                                                                                                      |
| 99.1 |   | Certification Pursuant to 18 U.S.C. Section 1350, as  Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002**                                                                                                                             |
| 99.2 |   | Certification Pursuant to 18 U.S.C. Section 1350, as  Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002**                                                                                                                             |

 

 
| *     Data required is provided in note B to  the condensed consolidated financial statements in this report. |
|-----------------------------------------------------------------------------------------------------------------------------------|
| **  Included  herein                                                                                                         |   |   |

 

(b)         Form 8-K — Duringthe fiscal quarter ended June 30, 2002, we did not file any reports on Form8-K.

 

 

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SIGNATURES

 

 

Pursuantto the requirements of the Securities Exchange Act of 1934, the registrant hasduly caused this report to be signed on its behalf by the undersigned thereuntoduly authorized.

 

 
|                  |   |   |                                     | COMPUMED,  INC. |   |
|-----------------------|--------|--------|------------------------------------------|-----------------|--------|
|                  |   |   |                                     | (Registrant)    |   |
|                  |   |   |                                     |            |   |   |
|                  |   |   |                                     |            |   |   |
| Date  August 13, 2002 |   | By:    | /s/ John G. McLaughlin                   |            |
|                  |   |   | John G. McLaughlin                       |            |
|                  |   |   | President and Chief Executive Officer    |            |
|                  |   |   |                                     |            |   |   |
| Date  August 13, 2002 |   | By:    | /s/ Phuong Dang                          |            |
|                  |   |   | Phuong Dang                              |            |
|                  |   |   | Controller (Principal Financial Officer) |            |

 

 

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