Financial troubles mount for Torrance medical distributor.

Financial troubles mount for Torrance medical distributor

The stock of Brentwood Instruments Inc., a Torrance-based medical products distributor, sank to less than 19 cents a share last week, in market speculation that the $13 million (sales) company may declare bankruptcy.

Brentwood's stock has been steadily declining after hitting $8 a share in 1985, in response to the losses the company has been reporting since then.

The company distributes electrocardiographic and pulmonary diagnostical equipment to doctors, and manufactures cardioscopes and other medical products to treat heart problems.

Until recently, Brentwood had been an exclusive distributor for Japanese-based medical products manufacturer Fekuda Denshi Co. Ltd., but that relationship has been severed.

The company's founder, chief executive and major shareholder, Delbert Freeman, could not be reached for comment last week.

However, the company's latest filing with the Securities and Exchange Commission indicates serious financial straits. Brentwood lost $1.20 million on revenues of $2.80 million in its latest report quarter, and $2.34 million on $5.26 million in revenues its latest six months.

Additionally, the company has reported losses in its last three full fiscal years.

In the SEC filing, Brentwood disclosed that Fekuda Denshi, which had provided 74 percent of Brentwood's product (as measured by revenues) "had unilaterally cancelled our distribution agreement."

The "relationship with Fekuda Denshi has deterioted to the point where the company can no longer expect timely receipt of repair parts to fix existing inventory stock," said Brentwood.

The filing continued, "The company is experiencing severe liquidity problems. The company anticipates that it will continue to experience significant losses . . . .The company does not anticipate that it will be able to finance its continuing operations through internally generated funds."

A former officer of Brentwood said the company's revenues declined precipitously in his brief tenure at the firm, which began last fall and recently ended.

"Brentwood's annual revenues have dropped from [a rate of] about $1.2 a million [a month] to $200,000 a month in the last six months," said the former officer. "Right now Brentwood is on the hairy edge."

Brentwood most recently reported that it had 42 employees, and maintained a mailing list of 200,000 doctors to whom Brentwood pitched medical products.

Although Brentwood stock is traded on the NASDAQ (National Association of Securities Dealers Automated Quotation) system, there are no analyst at securities firms that cover Brentwood. (One analyst with a smaller East Coast securities firm covered Brentwood last year, but no longer does.) As with dozens of other, smaller public companies, investors interested in bargain-shopping are on their own.

According the Joseph DiLillo of the Santa Monica-based Drake Capital Securities, the lack of coverage among the smaller public companies allows for opportunities - but also pitfalls.

"The are opportunities out there, but you have to be extremely careful," said DiLillo. "You have to do your homework. Read the disclosure documents. Many of the smaller companies are shells and should be avoided. But there are others that are not covered by analysts, and are undernoticed."

Table : Brentwood Instruments Inc.

                        Sales       Profit (loss)
Year/Period(*)     (in thousands)   (in thousands)
1990(six months)       $5,257          $(2,338)
1989                   13,445             (138)
1988                   13,375             (751)
1987                   12,855             (739)
1986                   11,127               603
1985                    6,083               463
1984                    2,281                93

Source: Brentwood Instruments Inc. (*)For years ended March 31, and for six-month period ended Sept. 30