ADLI American Medical Technologies Inc (CE)

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PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements	F-1 - F-11
	Condensed Consolidated Balance Sheets as of September 30, 2008 (unaudited) and December 31, 2007	F-1
	Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2008 and 2007 (unaudited)	F-2
	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2008 and 2007 (unaudited)	F-3
	Notes to Interim Condensed Consolidated Financial Statements	F-4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3
	Forward Looking Statements	3
	Critical Accounting Policies	3
	Results of Operations	3
	Liquidity and Capital Resources	5
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	7
Item 4T.	Control and Procedures	8
PART II	OTHER INFORMATION	8
Item 1.	Legal Proceedings	8
Item 1A3	Risk Factors	8
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	8
Item 3.	Defaults Upon Senior Securities	8
Item 4.	Submission of Matters to a Vote of Security Holders	8
Item 5.	Other Information	8
Item 6.	Exhibits	9
SIGNATURES		11
CERTIFICATIONS

 

 

		September 30,  2008				December 31,  2007
		(unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents		$	51,710			$	20,369
Restricted certificate of deposit			323,143				313,950
Accounts receivable, less allowance of approximately $6,300 at September 2008 and $16,500 at December 2007			127,660				272,113
Inventories, net			142,790				133,829
Prepaid expenses and other current assets			138,675				158,857
Total current assets			783,978				899,118
PROPERTY AND EQUIPMENT, net			63,935				89,912
INTANGIBLE ASSETS, net			727,111				849,030
Total assets		$	1,575,024			$	1,838,060
LIABILITIES AND STOCKHOLDERS’ DEFICIT
CURRENT LIABILITIES:
Line of credit		$	630,000			$	500,000
Bear Street note			175,000				—
Accounts payable			618,121				672,712
Compensation and employee benefits			53,864				48,236
Accrued restructuring costs			65,892				65,892
Warrants subject to registration rights			299,125				449,410
Other accrued liabilities			47,106				110,392
Total current liabilities			1,889,108				1,846,642
LONG-TERM LIABILITIES:
Deferred gain on sale of building			—				503,202
Deferred revenues			48,656				—
Total long-term liabilities			48,656				503,202
COMMITMENTS AND CONTINGENCIES (Note 9)
STOCKHOLDERS’ DEFICIT
Preferred Stock, authorized 9,425,000 shares, none outstanding			—				—
Common stock, $.04 par value, authorized 100,000,000 shares; issued and outstanding 10,389,306 and 10,117,274 respectively			415,572				404,691
Additional paid-in capital			43,875,699				43,790,539
Accumulated deficit			(44,654,011	)			(44,707,014	)
Total stockholders’ deficit			(362,740	)			(511,784	)
Total liabilities and stockholders’ deficit		$	1,575,024			$	1,838,060

 

See accompanying notes to condensed consolidated financial statements.

 

(Unaudited)

 

		Three Months Ended September 30								Nine Months Ended September 30
		2008				2007				2008				2007
Revenues		$	588,968			$	784,277			$	1,913,089			$	2,466,868
Royalties			5,944				8,593				18,500				14,656
			594,912				792,870				1,931,589				2,481,524
Cost of sales			216,120				541,601				636,650				1,164,932
Gross profit			378,792				251,269				1,294,939				1,316,592
Selling, general and administrative			468,567				768,950				1,629,887				2,210,921
Research and development			—				—				—				10,846
Loss from operations			(89,775	)			(517,681	)			(334,948	)			(905,175	)
Other income (expenses)
Net realized and unrealized gains on investments			3,188				—				9,193				1,114
Other income			4,738				36,805				263,747				139,005
Gain on sale of machinery			—				—				—				76,101
Change in fair value of warrant subject to registration rights			(24,613	)			174,931				150,285				(349,322	)
Interest expense			(10,698	)			(15,313	)			(31,454	)			(40,741	)
Interest income			—				4,843				—				14,936
Net income (loss)		$	(117,160	)			(316,415	)			56,823				(1,064,082	)
Preferred dividends			—				(25,963	)			—				(25,963	)
Net income (loss) available to common stockholders			(117,160	)		$	(342,378	)		$	56,823			$	(1,090,045	)
Basic earnings per common share		$	(0.01	)		$	(0.04	)		$	0.01			$	(0.13	)
Diluted earnings per common share		$	(0.01	)		$	(0.04	)		$	0.01			$	(0.13	)
Weighted average shares, basic and diluted			10,389,306				8,446,751				10,230,215				8,276,064

 

See accompanying notes to condensed consolidated financial statements.

 

(Unaudited)

		Nine Months Ended September 30,
		2008				2007
OPERATING ACTIVITIES:
Net income (loss)		$	56,823			$	(1,064,082	)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation			27,397				38,050
Amortization			121,919				110,221
Provision for slow-moving inventory			(49,044	)			239,745
Provision of doubtful accounts			(10,217	)			14,568
Gain on sale of machinery			—				(76,101	)
Gain recognized on sale of building			(503,202	)			(114,655	)
Net realized and unrealized gains on investments			(9,193	)			(16,050	)
Net loss on disposal of asset			2,976				609
Expense related to option grants			48,720				74,372
Change in fair value of warrant			(150,285	)			349,322
Expense related to stock compensation			47,321				160,850
Total other operating activities			(473,608	)			780,931
Changes in operating assets and liabilities:
Accounts receivable			154,670				77,909
Inventories			40,083				46,489
Prepaid expenses and other current assets			20,182				(66,783	)
Accounts payable			(54,591	)			87,803
Compensation and employee benefits			5,628				(53,655	)
Bear Street Note			175,000				—
Other accrued liabilities			(63,286	)			(94,180	)
Deferred income			48,656				—
Net cash used in operating activities			(90,443	)			(285,568	)
INVESTING ACTIVITIES:
Purchases of property, plant and equipment			(4,396	)			(17,528	)
Proceeds from sale of machinery			—				76,300
Sales and maturities of government securities			—				190,038
Net cash (used) provided by investing activities			(4,396	)			248,810
FINANCING ACTIVITIES:
Proceeds from line of credit			130,000				120,000
Payment of Series B Preferred dividends			—				(25,963	)
Net cash provided by financing activities			130,000				94,037
Net increase in cash and cash equivalents			35,161				57,279
Effect of exchange rates on cash			(3,820	)			2,696
Increase in cash and cash equivalents			31,341				59,975
CASH and cash equivalents, at beginning of period			20,369				65,821
CASH and cash equivalents, at end of period		$	51,710			$	125,796
SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES
Issuance of options for license fee			—			$	526,726

See accompanying notes to condensed consolidated financial statements.

 

 

1.  Basis of Presentation and Other Accounting Information

Basis of Presentation

 

The accompanying unaudited condensed consolidated financial statements of American Medical Technologies, Inc. (the “Company” or “AMT”) have been prepared by management in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X and with the presumption that the Company will continue as a going concern.  Accordingly, they do not include all information and footnotes required by generally accepted accounting principles for complete financial statements.  In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.

 

The results of operations for the three and nine months ended September 30, 2008 are not necessarily indicative of the results to be expected for the year ending December 31, 2008.  The accompanying unaudited consolidated financial statements should be read with the annual consolidated financial statements and notes contained in the Company’s Annual Report on Form 10-KSB for the fiscal year ended December 31, 2007.

 

Liquidity

 

The Company’s financial statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.  The Company incurred an operating loss of ($334,948) and ($905,175) for the nine month periods ended September 30, 2008 and September 30, 2007, respectively.  The Company’s recurring losses from operations and the Company’s total liabilities exceeding its total assets raise substantial doubt as to the Company’s ability to continue as a going concern.  The Company believes that increases in revenue and gross margin due to the addition of new product line representations and additional funds available from the line of credit will alleviate the doubt about the Company’s ability to continue as a going concern; however, no assurances can be made.

 

 

American Medical Technologies, Inc. (the “Company,” “we” and “us”) uses forward-looking statements in this report and may make such statements in future filings with the Securities and Exchange Commission.  The Company may also make forward-looking statements in its press releases or other public shareholder communications.  The Company’s forward-looking statements are subject to risks and uncertainties and include information about its expectations and possible or assumed future results of operations.  When the Company uses any of the words “believes”, “expects”, “anticipates”, “estimates” or similar expressions, it is making forward-looking statements.

 

To the extent available, the Company claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 for all of its forward-looking statements.  While the Company believes that its forward-looking statements are reasonable, you should not place undue reliance on any such forward-looking statements, which speak only as of the date made.  Because these forward-looking statements are based on estimates and assumptions that are subject to significant business, economic and competitive uncertainties, many of which are beyond the Company’s control or are subject to change, actual results could be materially different.  Factors that might cause such a difference include, without limitation, the following:  the Company’s inability to generate sufficient cash flow to meet its current liabilities, the inability of the Company to find suitable new acquisitions or the expense or difficulty of integrating such acquisitions with current Company operations, adverse results in any of the Company’s material lawsuits, if any, the possible failure of revenues to offset additional costs associated with its new business model, the potential lack of product acceptance, the Company’s potential inability to introduce new products to the market, the potential failure of customers to meet purchase commitments, the potential loss of customer relationships, the potential failure to receive or maintain necessary regulatory approvals, the extent to which competition may negatively affect prices and sales volumes or necessitate increased sales expenses, the failure of negotiations to establish original equipment manufacturer agreements or strategic alliances and the other risks and uncertainties set forth in this report and our Annual Report on Form 10-KSB for the period ended December 31, 2007.

 

Other factors not currently anticipated by management may also materially and adversely affect the Company’s results of operations.  Except as required by applicable law, the Company does not undertake any obligation to publicly release any revisions which may be made to any forward-looking statements to reflect events or circumstances occurring after the date of this report.

 

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires the Company to make estimates and assumptions that affect amounts reported in the accompanying consolidated financial statements and related footnotes.  These estimates and assumptions are evaluated on an on-going basis based on historical developments, market conditions, industry trends and other information the Company believes to be reasonable under the circumstances.  There can be no assurance that actual results will conform to the Company’s estimates and assumptions, and that reported results of operations will not be materially adversely affected by the need to make accounting adjustments to reflect changes in these estimates and assumptions from time to time.  The policies the Company believes to be the most sensitive to estimates and judgments are described in Item 7 of the Company’s 2007 Annual Report on Form 10-KSB.

 

 

The Company had revenues of $588,968 for the three month period ended September 30, 2008 compared to $784,277 for the same period in 2007, a decrease of 25%.  For the three month period ended September 30, 2008, domestic revenues decreased 11% and international revenues decreased 46% compared to the same period in 2007.  The decrease in revenues included a $53,000 decrease in the industrial product line due to two international sales totaling $95,000 in 2007 which were partially offset by a $57,000 international sale in 2008.  Revenues for parts and repairs decreased approximately $27,000 which was related to the historical decrease in equipment sales.   Spectrum revenues decreased approximately $95,000 related to economic concerns and pricing pressure from competition domestically and in the European and Latin American markets; regulatory issues which have since been resolved in the Asian markets and a traditional summer slowdown combined with and the timing of a major holiday month in the Middle Eastern markets for the three month period ended September 30, 2008, compared to the prior year’s period.

 

The Company had total assets of $1,575,024 as of September 30, 2008, consisting of cash and cash equivalents of $51,710. restricted certificate of deposit of $323,143, accounts receivable less allowance for doubtful accounts of $127,660, inventories net of $142,790 and prepaid expenses and other current assets of $138,675; property and equipment, net of $63,935; and intangible assets, net of $727,111.

The Company had total current liabilities of $1,889,108 as of September 30, 2008, which included line of credit of $630,000 (as described below), Bear Street Note of $175,000 (as described below), accounts payable of $618,121, compensation and employee benefits of $53,865, accrued restructuring costs of $65,892, warrants subject to registration rights of $299,125, and other accrued liabilities of $47,106.

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

		American Medical Technologies, Inc.
Date : November 14, 2008		/s/ Judd D. Hoffman
		Judd D. Hoffman
		President and Chief Executive Officer
Date : November 14, 2008		/s/ Barbara Woody
		Barbara Woody
		Vice President of Administration and Finance, and principal accounting officer