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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
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(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NO. 0-27506
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COHR INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 95-4559155
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION)
21540 PLUMMER STREET
CHATSWORTH, CALIFORNIA 91311-4103
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (818) 773-2647
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Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES [X] NO [ ]
As of August 11, 1998 there were outstanding 6,433,189 shares of the
Registrant's Common Stock, par value $0.01, which is the only class of common
stock of the Registrant.
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COHR INC. AND SUBSIDIARIES
FORM 10-Q
TABLE OF CONTENTS
FOR THE THREE MONTHS ENDED JUNE 30, 1998
PAGE
NUMBER
------
PART I FINANCIAL INFORMATION
Item 1 Consolidated Financial Statements:
Consolidated Balance Sheets as of June 30, 1998 (unaudited)
and March 31, 1998............................................. 4
Consolidated Statements of Loss for the three months ended
June 30, 1998 and 1997 (unaudited)............................. 5
Consolidated Statements of Cash Flows for the three months
ended June 30, 1998 and 1997 (unaudited)....................... 6
Notes to Consolidated Financial Statements..................... 7
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations...................................... 9
PART II OTHER INFORMATION
Item 1 Legal Proceedings.............................................. 11
Item 6 Exhibits and Reports on Form 8-K............................... 12
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3
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FORWARD LOOKING STATEMENTS
Statements in this Form 10-Q that are not historical facts are hereby
identified as "forward-looking statements" for the purposes of the safe harbor
provided by Section 21E of the Securities Exchange Act of 1934, as amended and
Section 27A of the Securities Act of 1933, as amended. COHR Inc. ("COHR" or the
"Company") cautions readers that such "forward-looking statements," including
without limitation, those relating to the Company's future business prospects,
revenues, working capital, liquidity, capital needs and income, wherever they
may appear in this document or in other statements attributable to the Company,
are necessarily estimates reflecting the best judgment of the Company's
management and involve a number of risks and uncertainties that could cause
actual results to differ materially from those suggested by the "forward-looking
statements." Such "forward-looking statements" should, therefore, be considered
in light of various important factors ("Cautionary Statements"), including those
set forth from time to time in the Company's reports and registration statements
filed with the Securities and Exchange Commission (the "SEC").
These "forward-looking statements" are found at various places throughout
this document. In addition, forward-looking statements generally can be
identified by the use of forward-looking terminology such as "may," "will,"
"expect," "should," "intend," "estimate," "anticipate," "believe," or "continue"
or the negative thereof or variations thereon or similar terminology. Moreover,
the Company, through its senior management or persons acting on its behalf, may
from time to time make "forward-looking statements" about the matters described
herein or other matters concerning the Company and such statements are subject
to the qualifications set forth herein and in the Cautionary Statements. The
Company disclaims any intent and undertakes no obligation to update publicly or
revise "forward-looking statements."
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PART I
COHR INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
ITEM 1. FINANCIAL STATEMENTS
ASSETS
JUNE 30, MARCH 31,
1998 1998
--------- ---------
(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents ................................ $ 15,042 $ 14,026
Accounts receivable, net of allowance for doubtful
accounts of $4,414 (June 30, 1998) and $4,232
(March 31, 1998) .................................... 14,780 16,946
Inventory ................................................ 6,457 6,891
Prepaid expenses and other ............................... 341 716
Income tax refund receivable ............................. 5,714 8,391
-------- --------
Total current assets .................................. 42,334 46,970
EQUIPMENT AND IMPROVEMENTS, net of accumulated depreciation
of $5,741 (June 30, 1998) and $5,416 (March 31, 1998) 6,378 6,804
INTANGIBLE ASSETS, net of accumulated amortization of $314
(June 30, 1998) and $261 (March 31, 1998) ........... 2,562 2,615
OTHER ASSETS ............................................... 177 195
-------- --------
TOTAL .............................................. $ 51,451 $ 56,584
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable ............................................ $ 40 $ 40
Accounts payable ......................................... 5,401 6,183
Accrued expenses ......................................... 8,459 11,174
Deferred revenue ......................................... 213 734
Current portion of long-term debt ........................ 647 649
-------- --------
Total current liabilities ............................ 14,760 18,780
LONG-TERM DEBT ............................................. 453 498
OTHER LONG-TERM LIABILITIES ................................ 156 136
SHAREHOLDERS' EQUITY
Preferred Stock, $.01 par value; 2,000,000 shares
authorized; no shares issued and outstanding
Common Stock, $.01 par value; 20,000,000 shares
authorized; 6,433,189 shares issued and outstanding . 887 887
Additional paid in capital ............................... 55,153 55,153
Accumulated deficit ...................................... (19,958) (18,870)
-------- --------
Total shareholders' equity ............................ 36,082 37,170
-------- --------
TOTAL .............................................. $ 51,451 $ 56,584
======== ========
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COHR INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF LOSS
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED
JUNE 30,
-----------------------
1998 1997
-------- --------
Revenues ................................................. $ 26,513 $ 24,811
Direct operating expenses ................................ 18,618 17,148
-------- --------
Gross margin ............................................. 7,895 7,663
Selling, general and administrative expenses ............. 8,664 8,518
Special charges .......................................... 479
-------- --------
Operating loss ........................................... (1,248) (855)
Interest income, net ..................................... 160 296
-------- --------
Loss before income tax benefit ........................... (1,088) (559)
Income tax benefit ....................................... 204
-------- --------
Net loss ................................................. $ (1,088) $ (355)
======== ========
Net loss per common share
Basic ................................................. $ (0.17) $ (0.06)
======== ========
Diluted ............................................... $ (0.17) $ (0.06)
======== ========
Number of shares used to compute net loss per common share 6,433 6,419
======== ========
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COHR INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
THREE MONTHS ENDED
JUNE 30,
-----------------------
1998 1997
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss .................................................................... $ (1,088) $ (355)
-------- --------
Adjustments to reconcile net loss to net cash provided by (used in) operating
activities:
Depreciation and amortization ............................................. 378 505
Gain on sale of fixed assets .............................................. (17)
Provision for losses on accounts receivable ............................... 180 75
Increase in other long-term liabilities ................................... 20
Changes in assets and liabilities, net of effect of acquisitions of certain
assets:
(Increase) decrease in:
Accounts receivable ................................................. 1,986 (2,794)
Inventory, excluding transfer from equipment and improvements........ 559 (508)
Prepaid expense and other ........................................... 375 478
Income tax refund receivable ........................................ 2,677 (600)
Other assets ........................................................ 18 (460)
Increase (decrease) in:
Accounts payable .................................................... (782) 741
Accrued expenses .................................................... (2,715) 1,263
Deferred revenue .................................................... (521) (628)
-------- --------
Total adjustments ...................................................... 2,158 (1,928)
-------- --------
Net cash provided by (used in) operating activities ..................... 1,070 (2,283)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ........................................................ (50) (557)
Proceeds from sale of fixed assets .......................................... 43
Payment for business acquisitions ........................................... (1,147)
Sale of investments ......................................................... 4,000
-------- --------
Net cash (used in) provided by investing activities ..................... (7) 2,296
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of long-term debt and notes payable .............................. (47) (1,836)
-------- --------
Net cash used in financing activities ................................... (47) (1,836)
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ........................... 1,016 (1,823)
CASH AND CASH EQUIVALENTS, beginning of period ................................. 14,026 22,948
-------- --------
CASH AND CASH EQUIVALENTS, end of period ....................................... $ 15,042 $ 21,125
======== ========
Supplemental disclosures of cash flow information -- Cash paid
during the period for:
Income taxes .............................................................. $ $ 407
======== ========
Interest .................................................................. $ 12 $ 70
======== ========
DETAILS OF BUSINESSES OR ASSETS ACQUIRED AT FAIR VALUE ARE AS FOLLOWS:
Current assets .............................................................. $ $ 409
Equipment ................................................................... 138
Goodwill and other intangibles .............................................. 660
-------- --------
1,207
-------- --------
Note issued ............................................................... 60
-------- --------
Net cash paid for acquisitions ........................................ $ $ 1,147
======== ========
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COHR INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED JUNE 30, 1998
(UNAUDITED)
1. BASIS OF PRESENTATION
In the opinion of management, the accompanying consolidated financial
statements include all adjustments necessary for a fair presentation of the
financial position of COHR Inc. ("COHR") and subsidiaries (collectively, the
"Company"), and the results of its operations and its cash flows for the interim
periods presented. Although COHR believes that the disclosures in these
consolidated financial statements are adequate to make the information presented
not misleading, certain information and footnote disclosures normally included
in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to the rules and
regulations of the Securities and Exchange Commission. Results of operations for
the interim periods are not necessarily indicative of results to be expected for
any other interim period or for the full year.
The consolidated financial statements for the three months ended June 30,
1998 and 1997 are unaudited and should be read in conjunction with the
consolidated financial statements and notes thereto included in COHR's Annual
Report on Form 10-K for the year ended March 31, 1998.
On February 17, 1998, the Company disclosed that it had restated its
financial statements for the fiscal year ended March 31, 1997 and for the first
two quarters of the fiscal year ended March 31, 1998 ("the Restatement"). All
references herein to the financial statements for such periods refer to such
financial statements as restated. These restatements related primarily to
management's determination that certain equipment and software sales were
prematurely recorded and that certain liabilities and reserves were understated.
Consolidation of Subsidiaries -- The Company's financial statements include
the activity of all of its wholly owned subsidiaries over which the Company has
direct or indirect unilateral and perpetual control. All intercompany
transactions have been eliminated in consolidation.
2. SPECIAL CHARGES
Special charges for the three months ended June 30, 1998 represent
severance costs for those officers and employees who were terminated or removed
from office by the Company and so notified as of June 30, 1998.
3. INCOME TAXES
At June 30, 1998, the Company had net operating loss carryforwards ("NOLs")
of approximately $8.9 million for Federal income tax purposes and $8.0 million
for state income tax purposes. The NOLs expire in 2013 and 2003, respectively.
Assuming the Company has sufficient future taxable income, the NOLs could be of
significant value to the Company, because generally the NOLs could be used to
offset future taxable income. However, if the Company has undergone, or
undergoes in the future, an "ownership change" within the meaning of Section 382
of the Internal Revenue Code of 1986, as amended ("Code"), then the Company's
utilization of the NOLs generally will be limited to an annual amount equal to
the product of (a) the fair market value of the Company's stock immediately
before the ownership change and (b) the "long-term tax-exempt rate" published by
the Internal Revenue Service at the time of the ownership change (5.15 percent
for the month of June, 1998). Such a limitation could significantly reduce the
value of the NOLs.
Generally speaking, an "ownership change" occurs whenever, within a
three-year period, the aggregate ownership of a company's stock by its "5
percent shareholders" (as defined by the applicable Federal income tax
regulations) increases by more than 50 percentage points. Making that
calculation is complex, uncertain and ongoing once a company has NOLs. The
Company has begun, but has not yet completed, an initial set of such
calculations. Nevertheless, because of the significant recent turnover in the
Company's stock, the Company believes that there is a strong possibility that an
"ownership change" has already occurred, or, if not, that an "ownership change"
could occur at any time. If so, then the Company's utilization of its NOLs would
be limited, as discussed above.
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4. RECLASSIFICATIONS
Certain reclassifications have been made to the prior period's consolidated
financial statements to conform to the current period's presentation.
5. BUSINESS SEGMENTS (unaudited)
The Company currently provides services to the health care industry through
two principal business segments. The COHR MasterPlan segment provides equipment
sales and maintenance to hospitals and other health care providers. The Purchase
Connection segment is a group purchasing organization that negotiates pricing
for its membership with manufacturers and distributors. General corporate
expenses are classified as Corporate. Identifiable assets are those used in the
Company's operations in each segment as estimated by management based upon
factors such as revenue generated, number of personnel and space occupied by
each segment. Information concerning the Company's business segments in the
quarter ended June 30, 1998 and 1997 is as follows:
Equipment Purchasing
Services Services Corporate Total
--------- ---------- --------- -----
(Dollars in Thousands)
JUNE 30, 1998
Revenues....................................... $ 20,781 $ 5,732 $ 26,513
Operating income (loss) ....................... 789 2,174 $ (4,211) (1,248)
Interest income, net........................... 160 160
Identifiable assets............................ 31,900 5,145 14,406 51,451
Depreciation and amortization.................. 193 57 128 378
Capital expenditures........................... 38 12 50
JUNE 30, 1997
Revenues....................................... $ 19,221 $ 5,590 $ 24,811
Operating income (loss)........................ 344 1,898 $ (3,097) (855)
Interest income, net........................... 296 296
Identifiable assets............................ 29,990 3,395 23,199 56,584
Depreciation and amortization.................. 323 121 61 505
Capital expenditures........................... 373 45 139 557
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis of the Company's unaudited
consolidated results of operations and financial position should be read in
conjunction with the Company's unaudited consolidated financial statements,
including the notes thereto, appearing elsewhere in this Quarterly Report.
GENERAL
The Company is a national outsourcing service company, providing equipment
sales and servicing, group purchasing and other ancillary services to hospitals,
integrated health systems and alternative site providers.
On February 17, 1998, the Company disclosed that it had restated its
financial statements for the fiscal year ended March 31, 1997 and for the first
two quarters of the fiscal year ended March 31, 1998 ("the Restatement"). All
references herein to the financial statements for such periods refer to such
financial statements as restated. These restatements related primarily to
management's determination that certain equipment and software sales were
prematurely recorded and that certain liabilities and reserves were understated.
In June 1998 the Company announced the appointment of Mr. Raymond List as
President and Chief Executive Officer and Mr. Peter Socha as Executive Vice
President, Operations.
During the fourth quarter of fiscal year 1998 and the first quarter of
fiscal year 1999, the Company initiated a cost-reduction program which included
a 10% reduction in overall personnel, the closing or restructuring of certain
MasterPlan refurbishment and service operations and the closing of certain
under-utilized MasterPlan field offices. The Company will continue to pursue
additional cost-reduction opportunities during the balance of fiscal year 1999.
The goal to improve profitability may include the elimination or repricing of
certain low margin or unprofitable contracts. The Company has also instituted
stronger credit and collection policies and procedures and is adopting new
inventory management procedures to reduce its level of inventory investment.
Federal and state civil lawsuits have been filed against the Company
alleging, among other things, federal and/or state securities law violations and
the Securities and Exchange Commission (the "SEC") has commenced a formal
investigation of the Company. See Part II, Item 1 "Legal Proceedings" below.
In February 1998, the Company had announced the engagement of Lehman
Brothers, as its financial advisor, to evaluate strategic alternatives including
a possible sale of the Company. In June 1998, the Board of Directors determined
that it is not in the best interest of the shareholders to continue to pursue a
sale of the Company at the present time.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1998, VERSUS THREE MONTHS ENDED JUNE 30, 1997
Revenues. The Company's revenues for the three months ended June 30, 1998
totaled $26.5 million, an increase of $1.7 million or 6.9% over revenues of
$24.8 million for the three months ended June 30, 1997. Revenues increased
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primarily due to a rise in contract revenues produced by the COHR MasterPlan
segment. The COHR MasterPlan segment generated revenues of $20.8 million in the
three months ended June 30, 1998, compared to $19.2 million in the same quarter
last year. The Purchase Connection segment, which includes the Company's group
purchasing organization (GPO) and other ancillary businesses, produced revenues
of $5.7 million in the three months ended June 30, 1998, compared to $5.6
million in the same quarter last year, with revenue growth in the GPO being
partially offset by declines in the ancillary businesses.
Direct Operating Expenses. The Company's direct expenses for the three
months ended June 30, 1998 totaled $18.6 million which represented an increase
of $1.5 million or 8.6% over the three months ended June 30, 1997 total of $17.1
million. This increase was primarily attributable to higher spending on
outsourced services related to the increase in COHR MasterPlan contract
revenues. As a percentage of revenues, direct operating expenses increased to
70.2% for the three month period ended June 30, 1998 from 69.1% for the three
months ended June 30, 1997.
Gross Margin. The Company's gross margin for the three months ended June 30,
1998 totaled $7.9 million, an increase of $232,000 or 3% over the three months
ended June 30, 1997 total of $7.7 million. Gross margin as a percentage of
revenues decreased to 29.8% for the three months ended June 30, 1998 from 30.9%
for the three months ended June 30, 1997.
Selling, General and Administrative Expenses. The Company's selling, general
and administrative expenses for the three months ended June 30, 1998 totaled
$8.7 million, an increase of $146,000 or 1.7% over the three months ended June
30, 1997 total of $8.5 million. This increase was primarily attributable to
higher professional outside services and insurance costs that were partially
offset by lower personnel and administrative expenses resulting from the
Company's ongoing cost-reduction program. As a percentage of revenues, selling,
general and administrative expenses decreased during the three months ended June
30, 1998 to 32.7% from 34.3% during the three months ended June 30, 1997.
Special Charges. Special charges for the three months ended June 30, 1998
represent severance costs for those officers and employees who were terminated
or removed from office by the Company and so notified as of June 30, 1998. Most
of this amount was disbursed during the quarter ended June 30, 1998.
Operating Loss. The Company's operating loss for the three months ended June
30, 1998 totaled $1.2 million, an increase of $393,000 from an operating loss
for the three months ended June 30, 1997 of $855,000. Operating loss as a
percentage of revenues for three months ended June 30, 1998 was 4.7% compared to
3.4% for the three months ended June 30, 1997.
Income Tax Benefit. The Company recognized no income tax benefit for the
three months ended June 30, 1998 due to the Company's being in a net operating
loss carryforward position. The income tax benefit for the three months ended
June 30, 1997 was $204,000. The Company's effective tax benefit rate was 36.5%
for the three months ended June 30, 1997 which was lower than it would have
otherwise been due to the fact that the Company is unable to carryback net
operating losses for state income tax purposes.
Net Loss. The Company's net loss for the three months ended June 30, 1998
totaled $1.1 million, an increase of $733,000 from the net loss for the three
months ended June 30, 1997 of $355,000. As a percentage of revenues, the net
loss was 4.1% for the three months ended June 30, 1998 as compared to 1.4% for
the three months ended June 30, 1997.
LIQUIDITY AND CAPITAL RESOURCES
The Company had working capital of $27.6 million and $28.2 million as of
June 30, 1998 and March 31, 1998, respectively. The Company had cash and cash
equivalents of $15 million and $14 million at those same respective dates. The
increase in the amount of cash and cash equivalents during the first three
months of fiscal year 1999 was primarily attributable to the receipt of a $2.7
million income tax refund and a $2.0 million reduction in accounts receivable
offset in part by the net loss for the quarter and a reduction in trade accounts
payable and accrued expenses.
Net cash provided by (used in) operating activities amounted to $1.1
million and $(2.3) million for the three months ended June 30, 1998 and 1997,
respectively. The factors contributing to the positive cash flow from
operations in the first quarter of fiscal year 1999 were noted in the change in
cash and cash equivalents above.
Net cash (used in) provided by investing activities was $(7,000) and $2.3
million in the first quarter of fiscal years 1999 and 1998, respectively. There
were no acquisitions of new businesses in the first quarter of fiscal year 1999
as compared to spending on acquisitions of $1.1 million in the prior year's
first quarter. The prior year's first quarter also included the sale of
investments of $4.0 million.
Cash used in financing activities for the repayment of long-term debt and
notes payable totaled $47,000 in the first quarter of fiscal year 1999 as
compared to $1.8 million in the first quarter of fiscal year 1998.
At present, the Company does not have a credit facility or line of credit.
The Company believes that its cash on hand and anticipated cash flows will be
sufficient to meet the Company's operating needs for the current fiscal year.
The Company has not paid dividends since its initial public offering in February
of 1996.
The Company is subject to various commitments and contingencies. See Part
II, Item 1 "Legal Proceedings" and "Additional Factors Affecting Operating
Results" below.
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INFLATION
The Company believes that its operations have not been materially adversely
affected by inflation. The Company expects that salary and wage increases for
its skilled staff will continue to be higher than average wage increases, as is
common in the Company's industry.
ADDITIONAL FACTORS AFFECTING OPERATING RESULTS
The Company's business is subject to a number of risks, some of which are
beyond the Company's control. In addition to the factors described herein, the
Company has identified in "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Risk Factors" in its Annual Report on Form
10-K for the fiscal year ending March 31, 1998, important factors that could
cause actual results to differ materially from those projected in any
forward-looking statements the Company may make from time to time.
RISKS ASSOCIATED WITH MANAGEMENT OF DATA AND YEAR 2000 ISSUES
The Company's business is dependent upon its ongoing ability to obtain,
process, analyze and manage data and to maintain and upgrade its data processing
capabilities. Interruption of data processing capabilities for any extended
period of time, the failure to upgrade data services, difficulties in converting
data and information systems after acquisitions, loss of stored data,
programming errors or other computer programs could have a material adverse
effect on the Company's business. As the year 2000 approaches, an issue ("Year
2000 Issue") affecting many companies has emerged regarding how existing
application software programs and operating systems can accommodate the date
value as described herein. In brief, many existing applications in the
marketplace and some proprietary database applications developed by the Company
were designed to use a two-digit data position to represent the year (e.g., "98"
is stored on the systems and represents the year 1998). The Company has
initiated an assessment of its own computer systems and other date-sensitive
electronic systems, such as security systems. The financial and general ledger
systems of the Company are substantially compliant already; the cost to upgrade
these systems is not expected to be material. The Company expects the year 2000
related modifications and conversions to its own systems and software, including
testing, to be substantially completed by December 1998. The Company has also
commenced communications with suppliers, customers, financial institutions and
others with whom it conducts business to assess whether the systems of these
other companies, with which the Company interfaces or on which the Company
relies, will be upgraded on a timely basis or that such systems will not have an
adverse effect on the Company's systems. The Company does not believe that it
will incur a material financial impact from the risk, or from assessing the
risk, arising from the Year 2000 Issues. However, there can be no assurance that
the Company's initial assessment of this risk will be accurate or that the Year
2000 Issue will not materially affect future financial results or future
financial conditions.
Another area of potential risk is with certain medical equipment which
belongs to the Company's customers but which is maintained or serviced by the
Company and has microprocessors with date functionality which could malfunction
in the year 2000. Among other steps, the Company has initiated formal
communications with all of its customers and with all of the major suppliers of
medical equipment to ensure that these third parties are also working to
remediate their own Year 2000 Issues, if applicable. However, the Company is
unable to determine whether the Year 2000 Issue related to customer's medical
equipment which is serviced or maintained by the Company will materially affect
future financial results or future financial conditions.
Upon the completion of the Company's assessment of its exposure to the risk
of Year 2000 non-compliance by third parties, the Company will formulate
contingency plans to handle the most likely worst-case Year 2000 scenarios.
Until the assessment is completed, the Company cannot reasonably define what
those scenarios might be.
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PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company, certain of its present and former officers and directors and
others are named as defendants in four purported class action lawsuits which
allege, among other things, false and misleading statements in various public
disclosures in violation of federal and/or state securities laws. Sherleigh
Associates Inc. Profit Sharing Plan v. Cohr, Inc. et al. (Case No. 98-3028 JSL)
was filed in the United States District Court for Central District of California
on or about April 21, 1998. Zabronsky et al. V. Cohr, Inc. et al. (Case No.
98-3493 JSL) was filed in the same court on May 6, 1998. Bird v. Cohr, Inc. et
al. (Case No. 98-4177 WMB) was filed in the same court on May 27, 1998. Leeds v.
Malhotra et al. (Case No. BC198490) was filed in the Superior Court of the State
of California, Los Angeles County, on April 16, 1998. The plaintiffs in each
action seek to represent a class of purchasers of the Company's common stock
during various time periods between 1996 and 1998.
The plaintiffs in each of the three federal actions filed in the United
States District Court for the Central District of California assert claims of
violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934,
and of certain regulations promulgated thereunder. The plaintiffs in each of the
three federal actions seek unspecified compensatory damages, interest,
attorneys' fees and costs, and injunctive and/or other relief as permitted by
law. The plaintiff in the action filed in California Superior Court asserts
claims of violations of California Corporations Code Section 25400 and 25500.
The plaintiff in that action seeks unspecified compensatory damages, interest,
attorneys' fees and costs, and injunctive and/or other relief as permitted by
law. No class has been certified in any of these actions.
A shareholder of the Company has brought a derivative lawsuit purportedly
on behalf of the Company, alleging breaches of fiduciary duty and related
claims, and naming certain of its present and former officers and directors as
defendants, with the Company as a nominal defendant. This action, which is
entitled Schug v. Chopra et al. (Case No. BC190933) was filed in the Superior
Court for the State of California, Los Angeles County, on May 12, 1998. The
shareholder-plaintiff seeks unspecified compensatory and punitive damages,
disgorgement of profits and gains, attorneys' fees and costs, injunctive relief,
and other relief as permitted by law.
The Securities and Exchange Commission (the "SEC") is conducting an
investigation relating to the Company. The Company understands that the
investigation relates to, among other things: (1) the accuracy of the Company's
financial statements and periodic filings with the SEC; (2) the accuracy of the
Company's books and records; (3) the adequacy of the Company's system of
internal accounting controls; and (4) trading of the Company's securities by
certain present or former officers, directors, or employees, or other persons.
In addition, the Nasdaq Listing Investigations, a division of the Nasdaq Stock
Market, has requested from the Company certain documents in connection with its
review of the Restatement and the Company's compliance with its rules and
regulations. The Company intends to cooperate fully with the inquiries from all
regulatory agencies.
Management is unable to predict at this time the final outcome of the
matters described above or whether the resolution of such matters will
materially affect the Company's results of operations, cash flows or financial
position.
The Company is also involved from time to time in various legal proceedings
incidental to the normal conduct of its business. Management does not believe
that such proceedings are likely, individually or in the aggregate, to have a
material adverse effect on the Company's business.
ITEM 2. CHANGES IN SECURITIES
None.
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ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
On June 29, 1998 the Board of Directors was expanded from eight to nine
members with Mr. Stephen W. Ritterbush appointed as a director. On July 17,
1998, Mr. Paul Chopra resigned as a director.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits included or incorporated herein:
See Index to Exhibits
(b) Reports on Form 8-K:
None.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COHR INC.
(Registrant)
Date: August 14, 1998 /s/ RAYMOND E. LIST
------------------------------------------
Raymond E. List
President and Chief Executive Officer
(Principal Executive Officer)
Date: August 14, 1998 /s/ DANIEL F. CLARK
------------------------------------------
Daniel F. Clark
Executive Vice President and Chief
Financial Officer
(Principal Accounting and Financial
Officer)
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COHR INC. AND SUBSIDIARIES
INDEX TO EXHIBITS
ITEM (6)
EXHIBIT
NUMBER DESCRIPTION
------ -----------
3.1* Certificate of Incorporation of Registrant
3.2* By-laws of Registrant
3.3 By-laws of Registrant as amended on June 29, 1998
4.1* Form of Warrant to be issued to the Representatives of the
Underwriters
4.2* Form of Registration Rights Agreement between Registrant,
Healthcare Association of Southern California ("HASC")
and Hospital Council Coordinated Programs, Inc
4.3* Specimen Stock Certificate
10.16 Employment Agreement between Registrant and Raymond E. List
10.17 Stock Option Agreement between Registrant and
Raymond E. List
10.18 Employment Agreement between Registrant and Stephen W.
Ritterbush
10.19 Stock Option Agreement between Registrant and Stephen W.
Ritterbush
10.20 Employment Agreement between Registrant and Peter T. Socha
10.21 Stock Option Agreement between Registrant and Peter T. Socha
11 Computation of Net Loss Per Share
27.1 Financial Data Schedule
99.1 Press release dated August 13, 1998
- ----------
* Incorporated by reference from Registrant's Statement on Form S-1,
Registration No. 33-80635.
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