Creative Medical Development, Inc.: Loss for Year Ended April 30, 1998; Management Changes.PORTLAND, Ore.--(BUSINESS WIRE)--Aug. 18, 1998-- Senior Debt Restructuring Debt Restructuring A method used by companies with outstanding debt obligations to alter the terms of the debt agreements in order to achieve some advantage. Notes: ; Cancellation of Former OMNI OMNI Omnidirectional OMNI Organising Medical Networked Information OMNI Opportunities for Micronutrient Interventions Project OMNI Operating Missions as a Node on the Internet (NASA networking project) Shareholders' Escrowed Shares Escrowed Shares Shares held in an escrow account and in most cases cannot be traded or transfered until certain circumstances like time horizon have been reached. The use of escrow for holding shares is often done during acquisitions and for performance-based executive incentives. Creative Medical Development, Inc. (OTC BULLETIN BOARD OTC Bulletin Board An electronic quotation listing of the bid and asked prices of OTC stocks that do not meet the requirements to be listed on the NASDAQ stock-listing system. :CMDI,CMDIW)("CMD CMD cerebromacular degeneration. "), announced today it will report a net loss of $2,882,185 ($.52 per basic common share) on sales of $16,448,876 for its fiscal year ended April 30, 1998 compared to a net loss of $1,295,065 ($.41 per basic common share) on sales of $12,902,491 for the prior year. One-time restructuring charges restructuring charge The expense of reorganizing a company's operations. A restructuring charge is an infrequent expense that generally results from asset writedowns or facility closings. and inventory writeoffs contributed $2,497,673 ($.45 per share) to the loss. Inefficiencies related to the Company's over capacity for recycled rubber production and the resulting low gross margins and warranty expense were also significant factors in the losses for both 1997 and 1998 fiscal years. According to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. William E. Cook, interim CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. , the Company and its senior secured lender FINOVA entered into an agreement for restructuring the Company's obligations, which is effective as of June 1, 1998. The Forbearance Refraining from doing something that one has a legal right to do. Giving of further time for repayment of an obligation or agreement; not to enforce claim at its due date. A delay in enforcing a legal right. Agreement, which continues through June 30, 1999, resolves several significant Company defaults under the terms of its loan agreements, permits continued borrowing under the existing credit line, allows additional borrowing and defers installment payments Installment payments Distribution of plan assets to beneficiaries based upon a regular schedule. on term debt. The agreement is conditioned upon the Company raising additional equity or subordinated debt Subordinated Debt A loan (or security) that ranks below other loans (or securities) with regard to claims on assets or earnings. Also known as "junior security" or "subordinated loan". , achieving forecast operating results and executing subordination and standstill agreements Standstill agreement Contract by which the bidding firm in a takeover attempt agrees to limit its holdings of another firm. standstill agreement with certain unsecured creditors Unsecured Creditor An individual or institution that lends money without obtaining specified assets as collateral. This poses a higher risk to the creditor because they have nothing to fall back on should the borrower default on the loan. A debenture holder is an unsecured creditor. . Cook said, "In conjunction with the plan for restructured operations the Company focus has been shifted to improving asset utilization and reducing debt. The Company has initiated efforts to sell facilities that are no longer required for operations, to sell fixed assets fixed assets npl → activo sg fijo fixed assets npl → immobilisations fpl fixed assets fix npl → previously employed in the production of recycled rubber products, and to sell and leaseback necessary operating facilities currently owned by the Company. Proceeds from any sales are planned to be used to retire a substantial portion of the Company's long term debt." The merger agreement between the Company and OMNI International Rail Products, Inc. ("OMNI") effective April 30, 1997, whereby the Company's wholly owned subsidiary Wholly Owned Subsidiary A subsidiary whose parent company owns 100% of its common stock. Notes: In other words, the parent company owns the company outright and there are no minority owners. , OMNI Products, Inc. was created, provided for the escrow escrow Instrument, such as a deed, money, or property, that constitutes evidence of obligations between two or more parties and is held by a third party. It is delivered by the third party only upon fulfillment of some condition. of 10% of the shares issuable to the former shareholders of OMNI pending certain adjustments under the terms of the merger agreement. The adjustment process has recently been completed. The net result is that all 344,619 shares of common stock and 35,207 shares of Series B preferred stock Stock shares that have preferential rights to dividends or to amounts distributable on liquidation, or to both, ahead of common shareholders. Preferred stock is given preference over common stock. Holders of preferred stock receive dividends at a fixed annual rate. held in escrow have been canceled. In addition, the substitute options issuable to the holders of OMNI stock options are adjusted downward by 10% reducing the stock options by 183,960 shares of common stock and 18,794 shares of Series B preferred stock. The Company has entered into an agreement with former CEO, Michael L. DeBonny, for his resignation as an officer and director of the Company effective April 30, 1998 and full settlement of any claims against the Company in connection with his employment as an officer of the Company. The agreement continues in effect certain provisions of the employment agreement related to noncompetition, restricted use of proprietary information and confidentiality. Also, pursuant to the terms of the severance agreement Noun 1. severance agreement - an agreement on the terms on which an employee will leave agreement, understanding - the statement (oral or written) of an exchange of promises; "they had an agreement that they would not interfere in each other's business"; "there was with DeBonny, he has relinquished additional options for 556,330 common shares and 56,835 Series B preferred shares Preferred shares Preferred shares give investors a fixed dividend from the company's earnings and entitle them to be paid before common shareholders. See: Preferred stock. . As a result of the adjustments under the merger agreement and the reduction of DeBonny's options, the ratio of the Company's outstanding stock held by the former OMNI shareholders, assuming exercise of all the substitute options and exercise of all options and warrants of the Company outstanding at the time of the merger which were exercisable at $1.00 or less, was reduced from approximately 67% to approximately 61%. At fiscal year end April 30, 1998, prior to the adjustments, there were 5,524,618 shares of common stock and 622,066 shares of Series B preferred stock outstanding. OMNI Products, Inc., the Company's wholly owned subsidiary, is a leading supplier of a full line of premium virgin rubber and concrete Rail-highway grade crossing surfaces. OMNI supplies Rail-highway crossing surfaces to all major North American North American named after North America. North American blastomycosis see North American blastomycosis. North American cattle tick see boophilusannulatus. railroads, numerous short line and regional railroads, independent railway contractors, transit systems, ports, intermodal yards, manufacturing facilities with rail access, and municipalities. Except for the historical information contained herein, the matters set forth in this release include forward-looking statements within the meaning of the "safe harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. " provisions of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially. These risks and uncertainties are detailed and are discussed from time to time in the Company's periodic reports filed with the Securities and Exchange Commission. The forward-looking statements included in this release speak only as of the date hereof. -0-
Creative Medical Development, Inc. & Subsidiary
Consolidated Balance Sheet
Assets
------
Unaudited Audited
April 30, April 30,
1998 1997
Current Assets:
Cash $ 393,877 $ 139,635
Investment securities 0 755,123
Accounts receivable, net 1,853,280 1,818,109
Inventories 1,423,800 2,494,743
Other current assets 52,158 20,680
Total current assets 3,723,115 5,228,290
Real estate held for sale 1,618,275 1,500,000
Property plant and equipment, net 2,272,214 4,286,656
Organization costs, net 0 237,955
---------- ------------
$7,613,604 $ 11,252,901
Liabilities and Stockholder' Equity
Current liabilities:
Accounts payable 1,884,679 1,364,079
Accrued liabilities 1,459,092 1,082,054
Notes payable 3,305,283 4,376,723
Current portion of long-term debt 2,136,376 99,550
Total current liabilities 8,785,430 6,922,406
Long-term debt, less current portion 522,342 3,111,226
Non-current accrued liabilities
Stockholders' equity
Common stock 55,246 55,543
Convertible preferred stock 6,221 6,221
Additional paid-in capital 2,413,651 2,444,606
Accumulated deficit (4,169,286) (1,287,101)
Total stockholder's equity (1,694,168) 1,219,269
------------ ------------
$ 7,613,604 $ 11,252,901
Creative Medical Development, Inc. & Subsidiary
Consolidated Statement of Operations
Years ended April 30, 1998 and 1997
Unaudited Audited 4th Quarter operating results
1998 1997 1998 1997
Net Sales $16,448,876 $12,902,491 4,090,402 2,473,449
Cost of Sales 13,446,678 10,557,688 3,938,420 2,625,266
Gross profit 3,002,198 2,344,803 151,982 (151,817)
General and
administrative
expenses 1,586,956 1,137,978 558,421 291,317
Selling expenses 1,665,506 1,323,070 447,389 412,011
Research, development
and engineering 127,624 61,646 31,120 (77,960)
Restructuring charges 1,684,833 0 1,684,833 0
--------- --------- --------- --------
5,064,919 2,522,694 2,721,763 625,368
Loss from
operations (2,062,721) (177,891) (2,569,781) (777,185)
Other income (expense)
Interest expense (633,316) (687,095) (119,722) (164,280)
Legal settlement 0 (334,500) 0 (334,500)
Miscellaneous
income (expense) 24,018 (6,781) 91,146 77,051
Amortization (237,955) (119,249) (148,722) (29,812)
Gain (loss) on
asset disposal 29,683 (25,156) 29,683 (25,156)
Total other
expense (817,570) (1,172,781) (147,615) (476,697)
Loss before
income
taxes (2,880,291) (1,350,672) (2,717,396) (1,253,882)
(Benefit) provision
for income taxes 1,894 (55,607) 0 (47,103)
Net loss $(2,882,185) $(1,295,065) $(2,717,396)$(1,206,779)
Basic loss per
share $ (0.52) $ (0.41) $ (0.49) $ (0.38)
Weighted average
common shares
outstanding 5,532,581 3,126,294 5,529,226 3,204,669
Note to Editors: The Company's Common Stock and Warrants are traded over the counter on the Electronic Bulletin Board of NASD NASD See: National Association of Securities Dealers NASD See National Association of Securities Dealers (NASD). under the symbols CMDI and CMDIW, respectively.
CONTACT: Creative Medical Development, Inc.
John E. Hart, 530/272-7277
or
OMNI Products, Inc.
M. Charles Van Rossen, 503/230-8034
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