10-K 1 cdxx10-kval.txt CDX COM INC Filing Type: 10-K Description: Annual Report Filing Date: November ____, 2000 Period End: June 30, 2000 Primary Exchange: Over the Counter Includes OTC and OTCBB Ticker: CDXX Table of Contents 10-K PART I 4 Item 1 5 Item 2 6 Item 3 6 Item 4 7 PART II 7 Item 5 7 Item 6 7 Table1 7 Table2 6 Item 7 8 Item 8 8 Item 9 9 PART III 9 Item 10 9 Table3 9 Table4 9 Item 11 10 Table5 10 Table6 11 Item 12 12 Table7 12 Item 13 12 PART IV 13 Item 14 13 Balance Sheet 16 Income Statement 37 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 [x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended June 30, 2000 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___________ to _____________ CDX CORPORATION (Exact name of Registrant as specified in its charter) Commission file number Colorado 84-0771180 (State or other jurisdiction of (I.R.S. Employer incorporation or organization Identification No.) One Richmond Square 02906 Providence, RI (Zip Code) (Address of principal executive offices) Registrant's telephone number, including area code (401)274-1444 Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered None None Securities registered pursuant to 12(g) of the Act: Common Stock, Par Value $.01 (Title of class) 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 ___ No X. Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] Since February of 1986, there have been no published prices of the Registrant's stock. The total number of shares held by nonaffiliates of the Registrant as of June 30, 2000 was 1,180,191. Indicate the number of shares outstanding of each of the Registrant's classes of common stock, as of June 30, 2000 4,887,927 DOCUMENTS INCORPORATED BY REFERENCE Document Part of 10-K into which incorporated None CDX CORPORATION 2000 Annual Report on Form 10-K Table of Contents Page # PART I ITEM 1 - Business 3 A. General 3 B. Products And Services 3 C. Marketing And Customers 4 D. Product Development 4 E. Product Protection 5 F. Backlog 5 G. Competition 5 H. Employees 5 ITEM 2 - PROPERTIES 5 ITEM 3 - LEGAL PROCEEDINGS 5 ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 6 PART II ITEM 5 - MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER MATTERS 6 ITEM 6 - SELECTED FINANCIAL DATA 6 ITEM 7 - MANAGEMENT DISCUSSIONS AND ANALYSES OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 7 ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 8 ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES 8 PART III ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT 9 ITEM 11 - EXECUTIVE COMPENSATION 10 ITEM 12 - CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 12 ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 13 PART IV ITEM 14 - EXHIBITS, FINANCIAL SCHEDULES AND REPORTS ON FORM 8-K 13 SIGNATURES 14 PART I Item 1. BUSINESS A. General CDX Corporation is a Colorado corporation incorporated in 1978 with its corporate offices headquartered in Providence, Rhode Island. The Business of the Company has consisted of the sale of computerized pulmonary diagnostic equipment which is used in the medical profession to test for indications of lung or congestive heart disease. Approximately 11,000 units have been sold. In December 1994 the Company acquired Compliance Systems, a manufacturer of infection control products which provide emergency personnel with protection during trauma response situations and assist compliance with certain OSHA mandates. In FY96 the Company also introduced a new version of its Instant Response Mask (IRM) with improved features designed to protect personnel involved in administering emergency cardio-resuscitation techniques to compliment the Compliance Systems product line. Marketing of the IRM was discontinued in FY 99. CDX also generates revenue from the sale of consumable supplies and accessory items associated with its diagnostic equipment. In addition, the Company procured a new model of spirometer in FY 99. B. Products And Services Approximately 20% of the Company's gross revenues in its most recent fiscal year was attributable to the sale of its testing machines, 65% of gross revenues was attributable to sales of consumable and accessory items and 7% of gross revenues was attributable to repairs and testing. Bio-hazard control products comprised 8% of sales. The Company's objective is to increase gross revenues with the introduction of new and upgraded version of the current spirometer. A new version of the Instant Response Mask was released in December 1995. Although initially well received, this product has not lived up to the Company's expectations and marketing efforts and expenditures in connection with it have been curtailed. The types of products which the Company currently markets are described below. 1. CDX SPIRO 850. A new model of spirometer, the CDX850, was procurred under an exclusive OEM supply arrangement to replace the CDX Spiro 110's and was introduced in the beginning of FY 99. The CDX850 is a portable, compact pulmonary diagnostic machine utilizing digital electronics and the latest technology. 2. CDX SPIRO 110's. The Company previously sold a line of spirometers(the 110 series) which it manufactured. Production of the 110 Series spirometers was curtailed at the end of FY 98. The Company continues to support and repair such spirometers. Additionally, the Company provides for sale of disposable and accessory items associated with its testing equipment as well as maintenance and service agreements. 3. Biosponse A portable bio-hazard spill kit for bloodborne pathogens which complies with OSHA regulation. 4. Biopail A complete clean up and personal protection for first responders against blood pathogens contained in a refillable two gallon pail meeting OSHA Regulations. The Company formerly marketed a CPR mask known as the "Instant Response Mask" or "IRM." Marketing of the IRM was discontinued in FY98 in an effort to reduce costs related to marginal products. C. Marketing And Customers The Company's principal customers have historically been primary care physicians, group practices, clinic, and medical centers. Portable spirometers are typically used by internists, family physicians, and general practitioners in their offices to conduct preliminary diagnostic tests of a patients pulmonary function. Spirometers are also used extensively in industry to provide screening diagnosis, establish baselines and monitor pulmonary function in the workplace. The Company's customer base includes pulmonologists, allergists, and cardiologists who require the speed, accuracy, and flexibility of hospital- based systems in a small, light-weight, portable system. During the year ended June 30, 2000, the Company did not have any one customer responsible for 10% or more of sales activity or revenues. The Company currently markets its products directly to retail customers from its Rhode Island office and through medical equipment dealers and distributors, supported through a network of factory trained manufacturer's representatives. The Company supports this sales network through direct mail, advertising in clinical and trade publications, and participation in national and regional trade shows. D. Product Development In FY 00 the Company terminated its product development program which was targeted at the equipment needs of the physician's office to reduce costs. E. Products Protection The company held a patent issued by the U.S. Patent office in 1981 for the overall structure and function of its remote pulmonary function tester known as the CDX 110. The patent does not apply outside the United States. The Company's current products had protection under certain claims of this patent until 1998. Protection under this patent lapsed in 1998. The Company holds a federal trademark "CDX" which is used on its products. F. Backlog The Company does not currently have any backlog of sales orders or delays of shipments due to lack of parts or supplies. G. Competition The market for the Company's products is characterized by rapid advancements in technology and by intense competition among a number of manufacturers and distributors. The Company believes that it competes favorably in the market; however, no assurance can be given that the Company will have the financial resources, marketing, distribution, service or support capabilities, depth of key personnel or technological expertise to compete successfully in the future. H. Employees As of June 30, 2000, the Company employed no full- time employees. All services were provided to the Company by two independent contractors, one of which is an affiliate. Item 2. PROPERTIES In July of 1997 the Company moved its sales offices and operations to Massachusetts. In September 1998 the Company moved its sales offices and operations to Providence, Rhode Island. Currently the Company rents its facilities on a month to month basis from an affiliate. Management believes that the rental rates charged are the same or more favorable than those which would be available from unaffiliated third parties. Rental space is available in the area, and the Company expects to be able to continue to be able to obtain adequate space at costs comparable to its current rent. Item 3. LEGAL PROCEEDINGS There are no legal proceedings pending against the Company. Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The corporation did not submit any matter to a vote of security holders during the year ended June 30, 2000. PART II Item 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDERS MATTERS There is no established public trading market for the Corporation's common stock. The stock is traded over-the-counter in privately negotiated transactions between market makers and brokers. Prices are published in the pink sheets issued by the National Quotation Bureau, but sales are not systematically reported by market makers and brokers. Holders Based upon the number of record holders, the approximate number of shareholders of the common stock of the Corporation as of June 30, 2000 was 868. Dividends No dividends have been declared during the past fiscal years with respect to common stock. Item 6. SELECTED FINANCIAL DATA 2000 1999 1998 1997 1996 Net Sales & Operating Revenues $243,327 $318,260 $264,175 $379,608 $394,043 Profit (Loss) $(26,356) $(14,980) $84,452 (122,372) (206,413) Profit (Loss) per Common Share (.005) (.003) .017 (.028) (.057) Total Assets 105,548 120,151 179,688 185,918 184,081 Long Term Obligations 25,000 25,000 25,000 25,000 25,000 Cash Dividend Declared per Share 0.00 0.00 0.00 0.00 Weighted average number of Common Shares Outstanding 4,887,927 4,887,927 4,887,927 4,339,434 3,587,927 MARKET INFORMATION CDX Corporation's common stock is traded over- the-counter in privately negotiated transactions between makers and brokers. Price Range (closing bid) For fiscal year ending June 30: 2000 1999 Quarter Bid High Prices Low Asked High Prices High Bid High Prices Low Asked High Prices High 1st .08 .09 .09 .12 .125 .125 .1875 .175 2nd .08 .09 .09 .14 .125 .125 .2188 .1875 3rd .05 .09 .09 .15 .125 .125 .1875 .1875 4th .08 .09 .09 .12 .125 .125 .1875 .1875 These market quotations are from the National Daily Quotation Service. They reflect prices between dealers without retail mark up, mark down or commission. They do not represent actual transactions. No dividends have been declared during the past two fiscal years with respect to common stock. Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations Net Sales and Operating Revenues for FY 00 decreased by $74,935 which is down approximately 24% from the previous fiscal year. This compares with an increase of $54,085, or approximately 20%, in similar figures for FY 99 to FY 98. Cost of Sales decreased by $66,534 for FY 00 compared to FY 99, with the Company incurring an Operating Loss of $26,356. During the previous fiscal year, Cost of Sales increased by $77,856 from those of FY 98 resulting in Operating Loss of $14,900. FY 98 showed an Operating income of $84,452. The Operating Loss for FY 00 was 10.7% as a percentage of Net Sales compared with Operating Loss of 4.4% for FY 99 and operating income of 31% for FY 98, respectively. The decrease in profitability and FY 00 and FY 99 is the result of higher unit costs and lower sales. The improvement in operating results for FY 99 was a reflection of reduced costs and expenses, primarily in the areas of cost of goods, payroll and rent. Management hopes to continue its efforts to reduce expenses and keep them in line with margins and to increase sales volume. Cost of Goods Sold as a percent of Net Sales decreased from 44.8% ($109,177) in FY 00 from 53.3% (169,711) in FY 99 due primarily to decreased sales. Similar costs for FY 98 to FY 99 increased from 34.4% ($91,855) in FY 98 to 53.1% ($169,711) in FY 99. Selling and Administrative Expenses decreased overall by $26,241, to $130,925 for FY 00 from $157,166 for FY 99. As a percentage of Net Sales these figures were 53.5% and 49.38% respectively which represents a 17.2% decrease in such expenses between the two years. Comparable expenses for FY 98 were 57.1% ($162,303). The increase in percentages of expenses shown in FY 00 over FY 99 reflects a decrease in Net Sales without a corresponding decrease in expenses. Interest expense for FY 00 increased to $29,581 from $21,863 for FY 99. In FY 99, interest expense decreased $1,213. Interest income was immaterial for FY 99 and 00. Inflation has had a minimum impact upon the Revenues and Costs of the Company. Liquidity And Capital Resources In fiscal year 2000, the Company's liquidity decreased by $11,875. This compares with a decreased position of $3,257 in FY 99. The FY 00 increase primarily reflects the impact of an increase in cash provided by operations for FY 00 of $9,219 versus cash from operations of $2,656 in FY 99. The Company expects that its current working capital position is sufficient to continue to meet operating requirements during the coming fiscal year and that it has sufficient reserves to meet some unforeseen contingencies given a continued willingness on the part of several of its officers to fund deficits with loans. Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA See Item 14 of this report. Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III Item 10. DIRECTORS AND EXECUTIVE OFFICERS The current directors and executive officers of the Corporation, their ages, their positions held in the Corporation and the term during which each served in such position are as follows: DIRECTORS Year First Elected Name and All Positions or Nominated to Held With the Corporation Age Become a Director Harold I. Schein 65 1985 Chairman of the Board, Treasurer and Director Michael L. Schein 36 1998 President Philip D. Schein 37 1989 Secretary And Director Officers and directors are elected on an annual basis. The present term of office for each director will expire at the next annual meeting of the Company's stockholders at such time as his successor is duly elected. Officers serve at the discretion of the Board of Directors. EXECUTIVE OFFICERS Name and All Positions Year First Term of Currently Held Elected to Office With the Corporation Age This Office Expiring Harold I. Schein (2) 65 Chairman of the Board, 1989 (1) Chief Executive Officer, 1989 (1) Treasurer, 1989 (1) Director 1985 (1) Michael L. Schein (2) 36 President 1998 (1) Philip D. Schein (2) 37 Secretary, 1989 (1) Director 1989 (1) (1) The executive officers serve at the pleasure of the board of directors and do not have fixed terms. (2) Michael L. Schein and Philip D. Schein are sons of Harold I. Schein HAROLD I. SCHEIN, 65, serves as Chairman of the Board, Chief Executive Officer, Treasurer and a Director. Mr. Schein, since January 1990, has been President of Richmond Square Capital Corporation, a private lender and venture capital corporation. Prior to 1990, Mr. Schein served as chairman and chief executive officer of William Bloom & Son, Inc, a manufacturer of store fixtures. From March 1989 to September 1992, Mr. Schein also served as chairman of Piezo Electric Products, Inc. of Metuchen, New Jersey, a publicly owned company. He is also a developer of commercial real estate. Mr. Schein became chairman of the board of directors and treasurer of the Corporation in March 1989. MICHAEL L. SCHEIN, 36, serves as President. Mr. Schein became president of the corporation in May 1999. Mr. Schein has been in the private practice of law from 1990 to the present. Mr. Schein served as a special assistant prosecutor in the Rhode Island Department of Attorney General from 1990 to 1993. He is a 1986 graduate of Tufts University and received his JD from Boston University School of Law in 1990. PHILIP D. SCHEIN, 37, serves as Secretary and a Director. Mr. Schein became secretary of the corporation in March 1989 and assumed the office of president in October 1992. He resigned as president in May, 1999 in order to pursue other ventures. Prior to this, Mr. Schein held the position of Executive Vice President of William Bloom & Son, a manufacturer of custom store fixtures, where he was in charge of sales and manufacturing. He is a 1985 graduate of Boston University. Item 11. EXECUTIVE COMPENSATION No executive officer received in excess of $100,000. No executive officer of the Corporation received other compensation not reported in the above cash compensation table in excess of $25,000 or 10% of the compensation reported in the above cash compensation table. Directors who are not regular, full-time employees may be compensated for service on the board of directors at the rate of $1,500 per director per quarter, i.e., $6,000 annually. In order to qualify for quarterly compensation, a director must attend the majority of meetings held within the quarter. No such payments have been made since 1989. SUMMARY COMPENSATION TABLE Annual Compensation Long Term Compensation Awards Securities Name & Principal Fiscal Other Annual Underlying Position Year Salary Compensation(1) Option/SARS(#) ________________ ______ _______ ____________ ______________ Michael L. Schein 2000 $______ 0 0 President 1999 Philip D. Schein 2000 $ 0 President 1999 6,200 0 1998 52,944 0 1997 65,000 5,000 Harold I. Schein 2000 $ 0 Chairman & 1999 0 0 Treasurer 1998 0 0 1997 0 17,500 (1) Certain perquisites provided to each of the named executive officers totaled less than 10 percent of each officer's total salary and Stock Option Grants. (2) Michael L. Schein provided services as an independent contractor to the Company and was paid $21,000 in FY 00. OPTION/SAR GRANTS TABLE Option/SAR Grants in Last Fiscal Year The Company did not grant any options during FY 2000. AGGREGATED OPTION EXERCISES IN 2000 AND OPTION/SAR VALUES AT FISCAL YEAR-END Name Number of unexercised in- the-money options/SARs at fiscal year-end (#) Exercisable/unexercisable Value of Unexercised in-the-money options/SARs at fiscal year end($) (1) Exercisable/unexercisable Philip D. Schein 0/0 $0/$0 Harold I. Schein 0/0 $0/$0 (1) Market value of underlying securities at FYE 00 discounted by two-thirds to reflect restrictive provisions, minus exercise or base price. Stock Option Plan In November, 1987, the Shareholders of the Corporation approved an incentive stock option plan which provides that options may be granted to officers and employees, with a maximum aggregate number of 150,000 shares issuable under the plan. Shares underlying granted options are exercisable 25% on the date of grant and 25% each year thereafter on a cumulative basis. Unexercised options lapse ten years after the date of grant or expire within 90 days of termination of employment. Exercise price is fair market value of a share of common stock at date of grant. The plan has a term of ten years. In November 1987, the Directors of the Corporation approved a Non-Qualified Stock Option Plan for employees, consultants and directors. The Corporation has reserved 60,000 unregistered shares of its common stock for use in this plan. During 1993, the Board of Directors reserved another 1,440,000 unregistered shares of its common stock for use in this plan. Each of the four outside directors were granted options for 15,000 shares at $.10 per share exercisable during their continuation as an employee, director or advisory member of, or consultant to the Company, and for the three year period thereafter. In addition, during 1993, the Company granted one of its directors options for 250,000 shares at $.10 per share and granted one of its consultants options for 77,800 shares at $.05 per share. The options on 60,000 shares @$.10 per share granted to outside directors and 77,800 shares @$.05 granted to a consultant have expired unexercised. A summary of the plans at June 30, 2000 is as follows: TOTAL SHARES SHARES AT OPTION OPTION RESERVED OUTSTANDING PRICE ____________ ________________ _______ 1987 Non-Qualified Stock Option Plan 1,500,000 250,000 $.10 100,000 $.25 15,000 $.25 22,500 $.25 In December 1992, the Company issued 600,000 warrants for its common stock to certain of its officers and consultants in return for services. The warrants are exercisable at $.02 per share with an expiration date of December 31, 1998. Also, in February 1995, the Company issued 75,000 warrants for its common stock to an investor in connection with a loan. The warrants are divided into three equal classes with exercise prices of $0.25, $0.375 and $0.50 respectively with all classes expiring in February 1998. During December of FY99 the terms of the December 1992 warrants and the February 1995 warrants were modified and extended so that all series of warrants issued prior to December 31, 1998 shall expire as of December 31, 2001. Item 12. CERTAIN BENEFICIAL OWNERS AND MANAGEMENT SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth information as to persons other than management (see the following table) who are known to management to beneficially own more than 5% of the outstanding voting stock as of June 30, 2000. Title Name and Address Amount and Nature of Percent of of Class of Beneficial Owner Beneficial Ownership Class ________ ___________________ ____________________ __________ Common Mendel S. Kaliff 247,223 Direct 5.6% Stock 70 N.E. Loop 410 No. 450 San Antonio, TX 78216 The following table sets forth the security ownership of all directors and executive officers of the corporation as of June 30, 2000. Title Name of Amount and Nature of Percent of of Class Beneficial Owner Beneficial Ownership of Class Position ________ ________________ ____________________ __________ ________ Common Harold I. Schein 2,616,737 (1) 59.6% Treasurer, Stock Director, and Chairman of the Board 13 Common Philip D. Schein 426,000 (2) 9.7% President, Stock Secretary, Director Common Directors and 3,042,737 69.3% Stock Officers as a Group (2 persons) ____________________________ (1) Shares subject to sole investment and voting power. Includes options and warrants granted by the corporation to purchase 585,000 shares, as to which option shares the optionee/warrantholder disclaims beneficial ownership. (2) Shares subject to sole investment and voting power. Includes options and warrants granted by the corporation to purchase 215,000 shares, as to which option shares the optionee/warrantholder disclaims beneficial ownership. Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The Company entered into a lease agreement on March 26, 1990 with a related party to rent its facilities in Providence, Rhode Island. Base monthly rental payments were modified to $2,500 beginning October 1995 and the lease term to five years, expiring on February 28, 1995. In May of 1996 the Company and related party modified the terms of the lease to month to month rental payments of $1,500. The Company sublet a part of this space to an unrelated party for $500 per month. The Company believes this to have been at or below the rent for comparable space from unrelated parties. PART IV Item 14. EXHIBITS, FINANCIAL SCHEDULES AND REPORTS ON FORM 8-K (a) The following documents are filed as part of this report: 1. Financial Statements: Opinions of independent public accountants dated September 30, 1999 on the financial statements as follows: Balance Sheets, June 30, 2000 and 1999. Statements of Earnings for the years ended June 30, 2000, 1999 and 1998. Statements of Cash Flows for the years ended June 30, 2000, 1999 and 1998. Statements of Changes in Stockholders' Equity for the years ended June 30, 2000, 1999 and 1998. 2. Financial Statement Schedules: All schedules for which provision is made in the applicable regulations of the Securities and Exchange Commission have been omitted because they are not required if the information is shown in the financial statements and notes thereto. (b) Reports on form 8-K No reports on Form 8-K were filed. (c) Exhibits See the Index of Exhibits immediately preceding the exhibits attached to this report. The exhibits are incorporated herein by this reference. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CDX CORPORATION (Registrant) /s/Michael L. Schein By: __________________ Michael L. Schein President Dated: November ____, 2000 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. Signature Title Date /s/Harold I. Schein _______________________ Chairman of the Board, November ____, 2000 Harold I. Schein Treasurer, Chief Finanacial Officer and Director /s/Philip D. Schein _______________________ Secretary and November ____, 2000 Philip D. Schein Director 15 INDEX TO EXHIBITS (a) Exhibits: The following documents are filed herewith or have been included as exhibits to previous filings with the Commission and are incorporated herein by this reference: Exhibit No. Document * 3.1 Restated Articles of Incorporation dated July 3, 1985 (incorporated by reference to the exhibits and Registrant's report filed on Form 10-K dated September 25, 1985) * 3.2 Articles of Amendment dated December 4, 1987 to the Restated Articles of Incorporation (incorporated by reference to the exhibits to Registrant's report filed on Form 10-K dated September 15, 1989) * 3.3 Bylaws dated July 5, 1985 (incorporated by reference to the exhibits to Registrant's report filed on Form 10-K dated September 15, 1989) x 23.1 Consent of Counsel, Brendan P. Smith, Esq. x 23.2 Consent of Cayer, Prescott, Clune & Chatellier, LLP, Independent Certified Public Accountants x 27.0 Financial Data Schedule ______________ * Incorporated by reference from the issuer's Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 x Filed herewith CDX CORPORATION BALANCE SHEETS FOR YEARS ENDED JUNE 30, 2000 AND 1999 AND STATEMENTS OF OPERATIONS, STOCKHOLDERS' EQUITY AND CASH FLOWS FOR YEARS ENDED JUNE 30, 2000, 1999 AND 1998 INDEPENDENT AUDITOR'S REPORT To the Stockholders and Board of Directors CDX Corporation We have audited the balance sheets of CDX Corporation as of June 30, 2000 and 1999, and the related statements of operations, stockholders' equity and cash flows for the years ended June 30, 2000, 1999, and 1998. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of CDX Corporation as of June 30, 2000 and 1999, and the results of its operations and its cash flows for the years ended June 30, 2000, 1999, and 1998 in conformity with generally accepted accounting principles. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 12 to the financial statements, the Company has suffered recurring losses from operations and has a net capital deficiency, which raises substantial doubt about its ability to continue as a going concern. Management's plans regarding those matters are also described in Note 12. The financial statements do not include any adjustments that might result from this uncertainty. November 13, 2000 CDX CORPORATION BALANCE SHEETS JUNE 30, 2000 AND 1999 ASSETS 2000 1999 Current assets: Cash $ 22,134 $ 10,259 Accounts receivable - trade (net of allowance for doubtful accounts of $1,260 in 2000 and 1999) 22,489 37,045 Inventory 17,753 9,209 Total current assets 62,376 56,513 Property and equipment - net of accumulated depreciation 7,865 9,178 Other assets: Invention rights and deferred product development costs (less accumulated amortization of $495,817 in 2000 and $476,664 in 1999) 35,307 54,460 TOTAL ASSETS $ 105,548 $ 120,151 LIABILITIES AND STOCKHOLDERS' DEFICIENCY Current liabilities: Current portion of long-term debt $ 7,200 $ 4,000 Accounts payable - trade 27,612 33,089 Accounts payable - shareholder 238,317 243,500 Accrued interest payable 114,496 91,974 Accrued expenses 6,581 6,690 Total current liabilities 394,206 379,253 Other liabilities: Notes payable - officers, net 209,404 212,604 Notes payable 50,000 50,000 Total other liabilities 259,404 262,604 Stockholders' deficiency: Common stock, $.01 par value; 10,000,000 shares authorized, 4,888,093 shares issued 48,881 48,881 Capital surplus. 4,771,798 4,771,798 Deficit. (5,368,741) (5,342,385) Less: treasury stock, 166 shares, no assigned value Total stockholders' deficiency (548,062) (521,706) TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY $ 105,548 $ 120,151 SEE NOTES TO FINANCIAL STATEMENTS. CDX CORPORATION STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY YEARS ENDED JUNE 30, 2000, 1999, AND 1998 Shares Shares Capital Accumulated Treasury Outstanding Par Value Surplus Deficit Stock Total Balance, June 30, 1998 4,888,093 $48,881 $4,771,798 $(5,327,405) 166 $(506,726) Net loss (14,980) (14,980) Balance, June 30, 1999 4,888,093 48,881 4,771,798 (5,342,385) 166 (521,706) Net loss (26,356) (26,356) Balance, June 30, 2000 4,888,093 $48,881 $4,771,798 $(5,368,741) 166 $(548,062) SEE NOTES TO FINANCIAL STATEMENTS. CDX CORPORATION STATEMENTS OF OPERATIONS YEARS ENDED JUNE 30, 2000, 1999, AND 1998 2000 1999 1998 Revenues: Net sales and other revenues $243,327 $318,260 $264,175 Operating costs and expenses: Cost of sales 109,177 169,711 91,855 Selling & administrative expenses 130,925 157,166 162,303 Total operating costs and expenses 240,102 326,877 254,158 Operating income (loss) 3,225 (8,617) 10,017 Other income (expense): Interest expense. (29,581) (21,863) (23,676) De-recognition of previously accrued liability 15,500 98,111 Net other income (expense) (29,581) (6,363) 74,435 Net income (loss) $ (26,356) $(14,980) $ 84,452 Net income (loss) per common share $ (.005) $ (.003) $ .017 Weighted-average number of common shares outstanding 4,887,927 4,887,927 4,887,927 SEE NOTES TO FINANCIAL STATEMENTS. CDX CORPORATION STATEMENTS OF CASH FLOWS YEARS ENDED JUNE 30, 2000, 1999, AND 1998 2000 1999 1998 Cash was provided by (used for): Operating activities: Net income (loss) $(26,356) $(14,980) $84,452 Items in net loss not affecting cash: Depreciation and amortization 20,466 33,388 21,724 Provision for forgiveness of note payable (5,000) Increase (decrease) in cash from changes in assets and liabilities: Accounts receivable 14,556 (8,337) 10,780 Inventory (8,544) 31,282 6,064 Other assets 1,240 16,233 Accounts payable - trade (5,477) (35,931) (34,915) Accounts payable - shareholder (5,183) (27,000) (89,857) Other current liabilities 22,413 22,994 (9,604) Total cash provided by (used for) operating activities 11,875 2,656 (123) Investing activities: Purchase of property and equipment (2,033) (1,445) Total cash used for investing activities 0 (2,033) (1,445) Financing activities: Proceeds from notes payable - officers 20,000 Payments on notes payable (3,880) (6,221) Total cash provided by (used for) financing activities 0 (3,880) 13,779 Increase (decrease) in cash during the year 11,875 (3,257) 12,211 Cash balance, beginning of the year 10,259 13,516 1,305 Cash balance, end of the year. $22,134 $ 10,259 $ 13,516 Supplemental disclosures of cash flow information: Cash paid during the year for interest $ 7,059 $ 1,264 $ 1,117 SEE NOTES TO FINANCIAL STATEMENTS. CDX CORPORATION NOTES TO FINANCIAL STATEMENTS YEARS ENDED JUNE 30, 2000, 1999, 1998 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Background CDX Corporation (the Company) was incorporated in June, 1978 to engage in the manufacture and sale of computerized pulmonary diagnostic equipment used in the medical profession. This equipment tests for indications of lung or congestive heart disease. The Company also manufactures and sells other medical and sanitization equipment. Invention Rights In July of 1997, an updated version of the Spirosource, a technological enhancement to its computerized pulmonary diagnostic equipment, became available for sale to the public. For financial accounting purposes, this product has been recorded at cost, amortized on a straight-line basis over an estimated useful life of five years. The Three-Liter Calibration Syringe was also developed and made available for sale to the public during the year. It has also been recorded at cost and amortized on a straight-line basis over an estimated useful life of five years. Revenue Recognition Revenue is recognized upon the invoicing and shipping of equipment. Cash and Cash Equivalents The Company considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents. At June 30, 1999, the carrying amount of the Company's deposits was $10,259 and the bank balance was $20,621, of which all was covered by federal depository insurance. At June 30, 2000, the carrying amount of the Company's deposits was $21,834 and the bank balance was $36,629, of which all was covered by federal depository insurance. At June 30, 2000, the carrying value of deposits of $21,834 and petty cash funds relate to the Balance Sheet as follows: Cash deposits $21,834 Add: petty cash 300 Cash $22,134 Accounts Receivable An allowance for doubtful accounts receivable is provided equal to the estimated collection losses that will be incurred in collection of all receivables. Estimated losses are based on historical collection experience coupled with review of the current status of the existing receivables and amounted to $1,260 at June 30, 2000 and 1999, respectively. The Company grants credit to customers who are located throughout the United States. (CONTINUED) CDX CORPORATION NOTES TO FINANCIAL STATEMENTS YEARS ENDED JUNE 30, 2000, 1999, AND 1998 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Inventories Inventories are valued at the lower of cost or market using the first-in, first-out method. Property and Equipment Property and equipment are recorded at cost. Depreciation and amortization are recorded using the straight line and double declining balance methods over the estimated useful lives of the assets. The estimated useful lives of property and equipment are as follows: Office furniture 7 years Office equipment 5 years Production equipment 5 years Computer equipment 5 years Leasehold improvements 31.5 years Income Taxes Effective July 1, 1993, the Company adopted Statement of Financial Accounting No. 109, "Accounting for Income Taxes" (FAS 109). Under the provisions of FAS 109, an entity recognizes deferred tax assets and liabilities for the future tax consequences of events that have been previously recognized in the Company's financial statements or tax returns. The measurement of deferred tax assets and liabilities is based on provisions of the enacted tax law; the effects of future changes in tax laws or rates are not anticipated. The adoption of FAS 109 did not have an effect on the Company's financial statements, nor have any prior year financial statements been restated. Per Share Data Loss per common share was computed by dividing the net loss by the weighted average number of shares of common stock outstanding and common stock equivalents (unless antidilutive) during the periods. The weighted average number of shares of common stock were 4,887,927 shares at June 30, 2000 and 1999. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. (CONTINUED) CDX CORPORATION NOTES TO FINANCIAL STATEMENTS YEARS ENDED JUNE 30, 2000, 1999, AND 1998 2. INVENTORY Inventory consisted of the following at June 30: 2000 1999 Finished goods $17,753 $9,209 Total $17,753 $9,209 The company charged a write-off of obsolete/outdated inventory items in the amount of $30,667 to cost of goods sold during fiscal year 1999. 3. PROPERTY AND EQUIPMENT Property and equipment consists of the following at June 30: 2000 1999 Office equipment and furniture $ 66,795 $66,795 Production equipment 35,257 35,257 Computer equipment 72,242 72,242 Leasehold improvements 16,256 16,256 Total 190,550 190,550 Less: accumulated depreciation (182,685) (181,372) Net property and equipment $ 7,865 $ 9,178 Depreciation expense for the years ended June 30, 2000 and 1999 was $1,313 and $10,981, respectively. 4. INCOME TAXES Due primarily to the utilization of net operating loss carryforwards, the Company has no provisions for income taxes for 2000, 1999, and 1998. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The Company's net deferred tax asset balances are primarily attributable to net operating loss carryforwards and tax credits. At June 30, 2000, 1999, and 1998, the Company's deferred tax assets consisted of the following: 2000 1999 1998 Deferred tax assets $593,480 $597,289 $680,712 Valuation allowance (593,480) (597,289) (680,712) Net deferred tax assets recognized on the accompanying balance sheets $ 0 $ 0 $ 0 (CONTINUED) CDX CORPORATION NOTES TO FINANCIAL STATEMENTS YEARS ENDED JUNE 30, 2000, 1999, AND 1998 4. INCOME TAXES (Continued) The components of the income tax provision (benefit) consisted of the following for the years ended June 30, 2000, 1999, and 1998: 2000 1999 1998 Current $ 0 $ 0 $ 0 Deferred - using a blended federal and state rate of 24% (6,300) (3,600) 20,000 Tentative tax provision (benefit) (6,300) (3,600) 20,000 Expiration of net operating loss carryforwards 348,000 87,023 106,711 Change in valuation allowance (348,000) (83,423) (126,711) Net income tax provision (benefit) $ 0 $ 0 $ 0 The Company has a net operating and economic loss carryforward of approximately $2,470,000 available to offset future federal and state taxable income through 2018 as follows: 2001 $348,000 2002 142,500 2005 95,500 2006 349,000 2007 334,500 2008 207,000 2009 253,000 2012 71,500 2013 205,000 2014 121,000 2018 12,949 The Company has approximately $15,777 of research and development credits that will expire in year 2002. If certain substantial changes in the Company's ownership should occur, there would be a limitation on the amount of net operating loss and investment tax credit carryforwards, which could be utilized. 5. NOTES PAYABLE - OFFICERS During 1993, an officer of the Company loaned the Company $80,100, with interest to be paid at 8%. During 1994, the same officer loaned the Company an additional $5,000 at 8% interest. No payments are expected during the next fiscal year per a forbearance agreement on December 2, 1996. During 1995, an officer of the Company loaned the Company $15,000, with interest to be paid at 8%. No payments are expected during the next fiscal year. (CONTINUED) CDX CORPORATION NOTES TO FINANCIAL STATEMENTS YEARS ENDED JUNE 30, 2000, 1999, AND 1998 5. NOTES PAYABLE - OFFICERS (Continued) During 1996, officers of the Company loaned the Company $22,500 with interest to be paid at 9%, monthly principal and interest payments will continue to be made during the next fiscal year. During 1997, an officer of the Company loaned the Company $75,000, with interest to be paid at 9%, monthly principal and interest payments will continue to be made during the next fiscal year. Another officer of the Company loaned the Company $15,000 with interest to be paid at 13.99%, monthly principal and interest payments will continue to be made during the next fiscal year. During 1998, an officer of the Company loaned the Company $20,000 with interest to be paid at 8%. No payments are expected during the next fiscal year. Future maturities of long-term debt are as follows: Year ended June 30 Amount 2001 $ 7,200 2002 and thereafter 209,404 Total $216,604 6. NOTES PAYABLE At June 30, notes payable consisted of the following: 2000 1999 6% interest bearing note payable to a related party $25,000 $25,000 10% interest bearing note payable to a related party 25,000 25,000 Total $50,000 $50,000 7. STOCK OPTION PLANS In November 1987, the Directors of the Company approved a Non-Qualified Stock Option Plan for employees, consultants and directors. The Company has reserved 60,000 unregistered shares of its common stock for use in this plan. During 1992, the Board of Directors reserved another 1,440,000 unregistered shares of its common stock for use in this plan. In addition, during 1993, the Company granted one of its directors options for 250,000 shares at $.10 per share. In 1995 the Company granted to an officer of the Company a five year option to purchase 15,000 shares at $.25 per share. In 1996, the Company granted to officers of the Company five year options to purchase 22,500 shares at $.25 a share. In 1994, the Company granted to a related party options for 100,000 shares at $.25 per share. (CONTINUED) CDX CORPORATION NOTES TO FINANCIAL STATEMENTS YEARS ENDED JUNE 30, 2000, 1999, AND 1998 7. STOCK OPTION PLANS (Continued) In addition, in 1992, the Company issued 600,000 warrants for its common stock with an exercise price of $.02 to certain of its officers and consultants in return for forbearance and modification of certain notes and accounts payable and services. The warrant expires December 31, 1998. Further, during 1995, the Company issued 75,000 warrants for its common stock to an unrelated party in connection with a loan. The warrants are divided equally into three classes of 25,000 each designated A, B, and C with exercise prices of $.25, $.375 and $.50, respectively, all of which were to expire in February of 1998 and which have been extended and amended to expire in February of 2001. The Company has reserved 675,000 of its authorized common stock in connection with its warrants. In December 1998, the Company extended the expiration of all its unexpired and outstanding warrants and options to December 31, 2001. In December 1996, the Directors of the Company issued 1,300,000 shares of its authorized common stock at $.01 par per share to officers of the Company and a related party for services. 1987 Plan A summary of option transactions for the 1987 Plan during the years ended June 30, 1999 and 2000 is shown below: Number of Weighted-average Shares Exercise Price Outstanding at June 30, 1998 387,500 $0.18 Granted 0 Exercised 0 Forfeited 0 Expired 0 Outstanding at June 30, 1999 387,500 $0.18 Available for issuance at June 30, 1999 1,112,500 Number of Weighted-average Shares Exercise Price Outstanding at June 30, 1999 387,500 $0.18 Granted 0 Exercised 0 Forfeited 0 Expired 0 Outstanding at June 30, 2000 387,500 $0.18 Available for issuance at June 30, 2000 1,112,500 A summary of options outstanding as of June 30, 1999 and 2000 is shown below: Exercise Number of Shares Price Outstanding $0.18 387,500 (CONTINUED) CDX CORPORATION NOTES TO FINANCIAL STATEMENTS YEARS ENDED JUNE 30, 2000, 1999, AND 1998 7. STOCK OPTION PLANS (Continued) 1992 Plan A summary of option transactions for the 1992 Plan during the years ended June 30, 1999 and 2000 is shown below: Number of Weighted-average Shares Exercise Price Outstanding at June 30, 1998 600,000 $0.02 Granted 0 Exercised 0 Forfeited 0 Expired 0 Outstanding at June 30, 1999 600,000 $0.02 Available for issuance at June 30, 1999 0 Number of Weighted-average Shares Exercise Price Outstanding at June 30, 1999 600,000 $0.02 Granted 0 Exercised 0 Forfeited 0 Expired 0 Outstanding at June 30, 2000 600,000 $0.02 Available for issuance at June 30, 2000 0 A summary of options outstanding as of June 30, 1999 and 2000 is shown below: Exercise Number of Shares Price Outstanding $0.02 600,000 1995 Plan A summary of option transactions for the 1995 Plan during the years ended June 30, 1999 and 2000 is shown below: Number of Weighted-average Shares Exercise Price Outstanding at June 30, 1998 75,000 $0.33 Granted 0 Exercised 0 Forfeited 0 Expired 0 Outstanding at June 30, 1999 75,000 $0.33 Available for issuance at June 30, 1999 0 (CONTINUED) CDX CORPORATION NOTES TO FINANCIAL STATEMENTS YEARS ENDED JUNE 30, 2000, 1999, AND 1998 7. STOCK OPTION PLANS (Continued) Number of Weighted-average Shares Exercise Price Outstanding at June 30, 1999 75,000 $0.33 Granted 0 Exercised 0 Forfeited 0 Expired 0 Outstanding at June 30, 2000 75,000 $0.33 Available for issuance at June 30, 2000 0 A summary of options outstanding as of June 30, 1999 and 2000 is shown below: Exercise Number of Shares Price Outstanding $0.33 75,000 8. LEASE AGREEMENT - RELATED PARTY In October, 1998, the Company entered into an informal agreement with a related party for rental of facilities in Providence, Rhode Island with monthly rental payments of $750. On November 1, 1999, the related party agreed to reduce base monthly rental to $500. Rent expense charged to operations is as follows: Year ended June 30, Rent expense 2000 $ 4,750 1999 15,147 1998 7,820 9. SEGMENT INFORMATION Industry Segments Approximately 92% of the Company's business consist of sales of computerized pulmonary diagnostic equipment and supplies. The rest of the Company's business consists of sales of infection and biohazard control products and repair services. The Company does not operate in other industry segments. The Company has no foreign operations. (CONTINUED) CDX CORPORATION NOTES TO FINANCIAL STATEMENTS YEARS ENDED JUNE 30, 2000, 1999, AND 1998 10. SUPPLEMENTARY INCOME STATEMENT INFORMATION For the years ended June 30, the following supplemental expense information is presented for analysis. 2000 1999 1998 Repairs and maintenance $ 317 $ 280 $ 418 Advertising 23,417 6,678 3,154 Sales and property taxes 207 819 Provision for doubtful accounts 600 2,307 11. FINANCIAL INSTRUMENTS The Company is engaged primarily in the distribution of specialized medical equipment in North America. The Company performs ongoing credit evaluations of its customers' financial condition and, generally, requires no collateral from its customers. Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of trade accounts receivable. Concentrations of credit risk with respect to trade receivables are limited due to the number of customers comprising the customer base and their dispersion across geographic areas. The carrying amounts reflected in the balance sheets for cash and notes payable approximate the respective fair values due to the short maturities of those instruments. 12. FUTURE OPERATIONS The accompanying financial statements have been prepared in conformity with generally accepted accounting principles, which contemplate continuation of the Company as a going concern. However, the Company suffered losses of $26,356 and $14,980 during the years ended June 30, 2000 and 1999, respectively. In addition, the Company has a net stockholders' deficiency of $548,062 at June 30, 2000. Management continues to look for opportunities in manufacturing new products in the medical field. Management is also seeking to merge with companies with products and/or services compatible with the Company's core business. The Company is in the process of developing new and innovative products for the physician's marketplace. Management plans to develop upgrades and improvements to existing products utilizing state of the art technology and to remarket these products to its substantial existing client base. 13. SUBSEQUENT EVENTS On September 7, 2000, the Corporation entered into a promissory note payable with a related party in the amount of $10,000. This note bears an interest rate of 9.5% per year and is due on or before December 7, 2000. (CONCLUDED) 19 33