-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IQAO2s6uKl9QFykiGiETBJhOoQ3CJhv/I9toEvzovMpFXGfIwJWhA2cRbsLkAlUU NxtCpVpxBuVqcgydZuSl/w== 0000927356-96-001085.txt : 19961115 0000927356-96-001085.hdr.sgml : 19961115 ACCESSION NUMBER: 0000927356-96-001085 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961113 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: PRO DEX INC CENTRAL INDEX KEY: 0000788920 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-MEDICAL, DENTAL & HOSPITAL EQUIPMENT & SUPPLIES [5047] IRS NUMBER: 942561543 STATE OF INCORPORATION: CA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-14942 FILM NUMBER: 96662304 BUSINESS ADDRESS: STREET 1: 1401 WALNUT STREET STE 500 CITY: BOULDER STATE: CO ZIP: 80302-5333 BUSINESS PHONE: 3034438165 MAIL ADDRESS: STREET 1: 1401 WALNUT STREET STREET 2: SUITE 540 CITY: BOULDER STATE: CO ZIP: 80302 10QSB 1 FORM 10QSB U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ----------------------- FORM 10-QSB (Mark One) [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended September 30, 1996 [_] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Commission File Number 0-14942 PRO-DEX, INC. ---------------------------------------------- (name of small business issuer in its charter) Colorado 84-1261240 -------- ---------- (State or other jurisdiction of (I.R.S. Employer ID No.) incorporation or organization) 1401 Walnut St., Ste., 540, Boulder, Colorado 80302 --------------------------------------------------- (Address of principal executive offices) Issuer's telephone number: (303) 443-6136 -------------- Securities registered under Section 12(b) of the Exchange Act: Name of each exchange --------------------- Title of each class on which registered - ------------------- --------------------- None None Securities registered under Section 12(g) of the Exchange Act: Common Stock, no par value -------------------------- (Title of class) The number of shares of the Registrant's no par value common stock outstanding as of September 20, 1996, was 9,050,783. PRO-DEX, INC. AND SUBSIDIARIES ------------------------------ DOCUMENTS INCORPORATED BY REFERENCE: None. Table of Contents ----------------- Page No. -------- PART I Financial Information Item 1. Financial Statements Consolidated Balance Sheets F-1 & F-2 Consolidated Statements of Income F-3 Consolidated Statements of Cash Flow F-4 Notes to Consolidated Financial Statements 5 Item 2. Management Discussion and Analysis of Financial Condition and Results of Operations 6 SIGNATURES 7 EXHIBITS NONE PAGE 1 of 7 Pages PRO-DEX, INC. AND SUBSIDIARIES ------------------------------ CONSOLIDATED BALANCE SHEET ASSETS September 30, June 30, 1996 1996 ---- ---- (unaudited) Current assets: Cash & cash equivalents $ 266,037 $ 407,722 Accounts receivable, net 4,930,209 5,069,942 Inventories, at cost 4,797,275 4,699,567 Deferred taxes 495,300 398,300 Prepaid expenses 714,650 257,898 ---------- ---------- 11,203,471 10,833,429 ---------- ---------- Property and equipment 5,546,644 5,505,127 Less accumulated depreciation (2,349,708) (2,186,233) ---------- ---------- Net property and equipment 3,196,936 3,318,894 ---------- ---------- Other assets: Deferred taxes 404,000 387,000 Other 296,744 133,761 Intangibles 13,419,829 13,654,404 ---------- ---------- Total other assets 14,120,573 14,175,165 ---------- ---------- Total assets $28,520,980 $28,327,488 =========== =========== See Notes to Financial Statements F-1 PRO-DEX, INC. AND SUBSIDIARIES ------------------------------ CONSOLIDATED BALANCE SHEET - CONTINUED LIABILITIES & STOCKHOLDERS' EQUITY
September 30, June 30, 1996 1996 ---- ---- (unaudited) Current liabilities: Notes payable $ 1,263,363 $ 1,162,465 Current portion of long-term debt 1,151,442 1,236,570 Accounts payable 1,197,495 1,039,706 Accrued expenses 1,007,546 1,330,450 Income taxes payable 547,007 Deferred revenue 218,016 208,485 ----------- ----------- Total current liabilities 4,837,862 5,524,683 Long-term debt, net of current portion 6,591,626 5,371,264 ----------- ----------- Total liabilities 11,429,488 10,895,947 ----------- ----------- Commitments and contigencies Stockholders' equity: Series A convertible preferred stock, no par value; 10,000,000 shares authorized; 78,129 shares issued and outstanding 282,990 282,990 Common stock, no par value; 50,000,000 shares authorized; 9,025,783 shares issued and outstanding shares 16,697,660 16,697,660 Additional paid in capital 1,004,541 1,004,541 Accumulated deficit (872,399) (532,350) ----------- ----------- 17,112,792 17,452,841 Receivable from employee stock ownership plan (ESOP) (21,300) (21,300) ----------- ----------- Total stockholders' equity 17,091,492 17,431,541 ----------- ----------- Total liabilities and stockholders' equity $28,520,980 $28,327,488 =========== ===========
See Notes to Financial Statements F-2 PRO-DEX, INC. AND SUBSIDIARIES ------------------------------ CONSOLIDATED STATEMENTS OF INCOME Quarter Ended September 30, 1996 1995 ---- ---- (unaudited) (unaudited) Net sales (net of sales from discontinued operation of $594,263 and $636,529) $4,442,268 $4,136,636 Cost of Sales 1,812,085 1,595,827 ---------- ---------- Gross Profits 2,630,183 2,540,809 ---------- ---------- Operating expenses: Selling 1,065,791 757,529 General and administrative 1,226,725 807,616 Research and development 242,337 132,646 Amortization 294,356 152,201 ---------- ---------- Total operating expenses 2,829,209 1,849,992 ---------- ---------- Income (loss) from operations (199,026) 690,817 ---------- ---------- Other income (expense): Interest expense (261,242) (174,503) Other income, net 10,384 20,852 ---------- ---------- Total (250,858) (153,651) Income (loss) before income taxes (benefit) and loss from discontinued operation (449,884) 537,166 Income taxes (benefit) 114,000 157,341 ---------- ---------- Income (loss) before loss from discontinued operation (335,884) 379,825 (Loss) from discontinued operation (net of tax benefit) (4,162) (32,661) ---------- ---------- Net income $ (340,046) 347,164 ========== ========== Earnings per common and common equivalent share: Income (loss) from continuing operations $ (0.04) $ 0.04 (Loss) from discontinued operation ---------- ---------- Net income (loss) per share $ (0.04) $ 0.04 ========== ========== See Notes to Financial Statements F-3 PRO-DEX, INC. AND SUBSIDIARIES ------------------------------ CONSOLIDATED STATEMENTS OF CASH FLOWS
Quarter ended September 30, 1996 1995 ---- ---- (unaudited) (unaudited) CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $ (340,046) $ 347,164 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 398,050 269,383 Provision for doubtful accounts 44,251 -- Loss (gain) on sale of property and equipment -- (9,984) Change in working capital components net of effects from purchase of Oregon Micro Systems, Inc. Micro Motors, Inc., and Pnu-Light Tool Works, Inc.: (Increase) decrease in accounts receivable 95,481 (345,689) (Increase) decrease in inventories (97,708) (303,131) (Increase) decrease in deferred taxes (114,000) -- (Increase) decrease in prepaids (456,752) 420,688 (Increase) decrease in other assets (162,983) -- Increase (decrease) in accounts payable and accrued expense (165,115) 340,606 Increase (decrease) in deferred revenue 9,531 7,304 Increase (decrease) in income taxes payable (547,007) 175,801 ----------- ----------- Net cash provided by (used in) operating activities (1,336,298) 902,142 ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES Acquisitions of businesses (4,738,800) Proceeds from sale of property and equipment -- -- Purchase of property and equipment (41,517) (38,804) ----------- ----------- Net cash flows (used in) investing activities (41,517) (4,777,604) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES Net borrowing on revolving credit agreements 100,898 215,077 Proceeds from long-term borrowing 1,220,362 4,000,000 Principal payments on long-term borrowing (85,130) (138,271) Issuance of common stock ----------- ----------- Net cash flows provided by financing activities 1,236,130 4,076,806 ----------- ----------- INCREASE (DECREASE) IN CASH (141,685) 201,344 CASH, beginning of period 407,722 384,968 ----------- ----------- CASH, end of period $ 266,037 $ 586,312 =========== =========== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash payments for interest $ 261,242 $ 171,500 Cash payments for income taxes $ 677,950 $ --
See Notes to Financial Statements F-4 PRO-DEX, INC. AND SUBSIDIARIES ------------------------------ NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THREE MONTHS ENDED SEPTEMBER 30, 1996 NOTE 1 - BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instruction to Form 10-Q and Article 10 of regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended September 30, 1996 are not necessarily indicative of the results that may be expected for the year ended June 30, 1997. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the year ended June 30, 1996. NOTE 2 - INCOME PER SHARE Income per share is based on the weighted average number of common shares outstanding during each year. Shares issuable upon the conversion of preferred stock and stock warrants are not included in the calculation if their inclusion would be anti-dilutive. NOTE 3 - BUSINESS ACQUISITIONS On July 26, 1995, the Company acquired for cash all the outstanding shares of Oregon Micro Systems, Inc., a manufacturer of multi-axis motion control circuit boards. Also, on July 26, 1995, the Company acquired all of the outstanding stock of Micro Motors, Inc., a manufacturer of patented miniature pneumatic (air) motors, and dental handpieces. On May 11, 1996, the Company acquired substantially all of the assets and liabilities of Pnu-Light Tool Works, Inc., a developer of pneumatic light mechanisms for pneumatic hand tools. All acquisitions have been accounted for as a purchase and the results of operations of the three companies are included in the consolidated financial statements since the dates of acquisition. Unaudited pro forma consolidated results of operations for the quarter ended September 30, 1995 as though OMS, Micro Motors, and Pnu-Light had been acquired as of July, 1, 1995, follows: Sales $4,930,037 Net Income 256,000 Earnings per share .03 5 ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS --------------------------------------------------------------------- OF OPERATIONS - ------------- RESULTS OF OPERATIONS Total revenues for the quarter ended September 30, 1996 were $4,442,268 as compared to $4,136,636 for the same quarter in the previous year. On July 26, 1995 the Company acquired for cash all of the outstanding shares of Oregon Micro Systems, Inc., a manufacturer of multi-axis motion control circuit boards. In addition to the stock, the Company acquired two letters patent for the design of multi-axis motion control circuit boards with an approximate value of $2,925,000. The total acquisition cost was approximately $6,700,000. Also on July 26, 1995, the Company acquired Micro Motors, Inc., a manufacturer of patented miniature pneumatic (air) motors, and dental handpieces in exchange for 3,350,000 shares of the Company's stock. The amount assigned to the shares of the stock was $2.75 per share making the total acquisition price $9,212,500. On May 11, 1996, the Company acquired certain assets and liabilities of Pnu- Light Tool Works, Inc., a developer of pneumatic light mechanisms for hand tools in exchange for common stock of the Company. The purchase agreement calls for the final purchase price to be determined based upon a multiple of the Pnu-Light subsidiary's net income for the year ended June 30, 1999, and also based upon the then current price of the Company's common stock. The agreement further states that the minimum value assigned to the net assets purchased is $4,000,000 subject to certain adjustments. The agreement provides that if the computed value based on the prescribed formula does not exceed $4,000,000, the Company has the option to rescind the transaction. Management believes that all three of these acquisitions will provide significant synergistic advantages to the Company's business. On a pro forma basis revenues for the quarter ended September 30, 1996 were $4,442,268 compared to $4,930,037 for the same quarter in the previous year, a decrease of 9.9%. The Company is also reporting on a pro forma basis a loss for the quarter ended September 30,1996 of ($340,046) compared to a profit of $256,000 for the same quarter in the previous year. The actual loss for the quarter ended September 30, 1996 was ($340,046), or ($.04) per share compared to a profit of $347,164, or $.04 per share for the same quarter in the previous year. Several factors contributed to the poor operating results for the first quarter of 1996. The Company absorbed a pre- payment penalty of $82,000 due to the refinancing of the FINOVA debt with more favorable terms from the Harris Bank of Chicago. In addition, additional research and development costs, and the transfer of the manufacturing operation at Pnu-Light to Micro Motors caused that subsidiary to sustain a pre-tax operating loss of $260,000 for the quarter. Also, a general softness in the semiconductor industry during the period slowed deliveries at Oregon Micro Systems resulting in lower revenues and profits compared to the previous period. Micro Motors continued to grow with its branded product line and Biotrol and Challenge Products achieved better than expected revenue from the sale of its infection control and preventive dental products. 6 In July, 1996 the Company obtained a $10,000,000 credit facility from Harris Bank secured by all assets of the Company. The facility requires monthly interest payments at the prime rate or at a variable interest rate from 1.5% to 2% above the LIBOR rate. The term loan requires annual prepayments equal to 50% of excess cash flow, as defined beginning in October 1997. A portion of the proceeds were used to retire existing debt for which the Company incurred a prepayment penalty of $293,200. The prepayment penalty is being amortized ratably during the year. On June 24, 1996, the Company decided to report the operations of PDM, its dental center business, on a discontinued basis and expects to sell the assets of that subsidiary. The Company believes that PDM will not incur future operating losses through its disposition and that the Company will be able to sell the net assets of this operation for at least equal to their recorded value. Management's current plans are to sell various assets of PDM and to provide financing to the buyer of the assets. Sales of PDM were approximately $594,000 for the quarter ended September 30, 1996 and $636,000 for the quarter ended September 30, 1995. Operating expenses for the same periods were approximately $598,000 and $682,000 respectively. These amounts are presented in the statement of operations as discontinued operations, net of applicable income tax benefits of approximately ($4,000) and ($33,000) for 1996 and 1995. At September 30,1996, the net assets of PDM consists of the following: Receivables $1,955,000 Inventories 262,000 Depreciated cost of equipment 309,000 Current liabilities (253,204) Deferred revenues (218,000) LIQUIDITY AND CAPITAL RESOURCES The Company's working capital on September 30, 1996 was $6,365,609 (a 2.3:1 ratio), compared to $4,528,000 (a 1.9:1 ratio) on September 30, 1995. The Company was able to increase its bank line of credit from approximately $5,500,000 to $10,000,000 in July 1996. The Company believes that its present bank line of credit and projected cash generated from operations will satisfy its working capital needs for the foreseeable future. In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Date: September 30, 1996 /s/ Kent E. Searl ---------------------------------------- Kent E. Searl, Chairman Date: September 30, 1996 /s/ George J. Isaac ---------------------------------------- George J. Isaac, Chief Financial Officer 7 EX-27 2 FINANCIAL DATA SCHEDULE
5 3-MOS JUN-30-1996 JUL-01-1996 SEP-30-1996 266,037 0 4,930,209 0 4,797,275 11,203,471 5,546,644 2,349,708 28,520,980 4,837,862 0 0 282,990 16,697,600 1,004,541 28,520,980 4,442,268 4,442,268 1,812,085 0 2,829,209 0 261,242 (449,884) (114,000) (335,884) (4,162) 0 0 (340,046) (.04) 0
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