<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
(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, 1995
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
----------------- -----------------
Commission file number 1-7081
CUSTOMEDIX CORPORATION
(Exact name of registrants specified in its charter)
Delaware #22-1844840
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
P. O. BOX 724, 53 NORTH PLAINS INDUSTRIAL ROAD, WALLINGFORD, CT 06492
(Address of principal executive offices)
(Zip Code)
203-284-9079
(Registrant's telephone number, including area code)
---------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
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
--- ---
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the close of the period covered by this report.
Class Outstanding at September 30, 1995
Common stock $.01 par value 3,295,986
<PAGE> 2
Item 1. PART I
CUSTOMEDIX CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
================================================================================
<TABLE>
<CAPTION>
September 30, June 30,
1995 1995
(Unaudited) (a)
------------- --------
<S> <C> <C>
ASSETS
------
CURRENT ASSETS:
Cash and cash equivalents $ 294,009 $ 166,670
Accounts receivable, less allowance
for possible losses of $301,900 and $283,000 6,433,276 6,862,206
Inventory (Note 3) 7,917,516 7,411,332
Other 582,700 581,698
------------ ------------
TOTAL CURRENT ASSETS 15,227,501 15,021,906
PROPERTY AND EQUIPMENT, less accumulated
depreciation and amortization of $3,870,379
and $3,714,656 (Note 6) 3,156,172 3,148,573
EXCESS OF COST OVER NET ASSETS OF BUSINESSES
ACQUIRED, less accumulated amortization of
$2,402,600 and $2,331,371 4,738,435 4,809,664
OTHER ASSETS 409,791 416,159
------------ ------------
TOTAL ASSETS $ 23,531,899 $ 23,396,302
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Current portion of long-term debt and
obligations under capital leases (Note 5) $ 978,918 $ 1,050,600
Accounts payable and accrued expenses 3,556,886 3,330,687
------------ ------------
TOTAL CURRENT LIABILITIES 4,535,804 4,381,287
LONG-TERM DEBT AND OBLIGATIONS UNDER CAPITAL
LEASES, less current portion (Note 5) 6,675,818 6,823,926
LONG-TERM PENSION OBLIGATION AND OTHER 1,894,100 1,788,894
------------ ------------
TOTAL LIABILITIES 13,105,722 12,994,107
------------ ------------
STOCKHOLDERS' EQUITY:
Preferred stock, $1.00 par value - 100,000
shares authorized; none issued -- --
Common stock, $.01 par - 3,900,000 shares
authorized; outstanding 3,295,986 and 3,296,286 32,960 32,963
Additional paid-in capital 26,833,581 26,834,399
Accumulated deficit (16,440,364) (16,465,167)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 10,426,177 10,402,195
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 23,531,899 $ 23,396,302
============ ============
</TABLE>
(a) Derived from the audited financial statements
See accompanying "Notes to Condensed Consolidated Financial Statements".
2
<PAGE> 3
CUSTOMEDIX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
================================================================================
<TABLE>
<CAPTION>
Three Months Ended
September 30,
-------------------------------
1995 1994
---- ----
<S> <C> <C>
REVENUES:
Sales $11,977,499 $11,384,289
Other income 122,059 111,923
----------- -----------
Total revenues 12,099,558 11,496,212
----------- -----------
COSTS, EXPENSES AND OTHER:
Cost of sales 8,721,851 8,328,231
Selling, general and administrative
expenses 3,104,595 2,806,893
Interest expense - net of interest
income of $25 and $0 228,309 223,678
----------- -----------
12,054,755 11,358,802
----------- -----------
Income before provision for income taxes 44,803 137,410
PROVISION FOR INCOME TAXES (Note 4) (20,000) (60,000)
----------- -----------
NET INCOME $ 24,803 $ 77,410
=========== ===========
INCOME PER SHARE (Note 2) $ .01 $ .02
=========== ===========
</TABLE>
See accompanying "Notes to Condensed Consolidated Financial Statements".
3
<PAGE> 4
CUSTOMEDIX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
================================================================================
<TABLE>
<CAPTION>
Three Months Ended
September 30,
--------------------------
1995 1994
---- ----
<S> <C> <C>
Cash flows from operating activities: $ 24,803 $ 77,410
Net income
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 155,723 149,000
Amortization 79,212 108,617
Loss on disposal of property and equipment -- 788
Provision for loss on accounts receivable 39,747 27,999
Change in assets and liabilities:
Accounts receivable 389,183 646,935
Inventory (506,184) (489,795)
Other assets (2,617) 699,353
Accounts payable and accrued expenses 226,199 (859,113)
Other liabilities 105,206 96,944
--------- ---------
Net cash provided by operating
activities 511,272 458,138
--------- ---------
Cash flows from investing activities:
Purchase of property and equipment (163,318) (127,591)
--------- ---------
Cash flows from financing activities:
Repayments to banks and others (219,790) (320,016)
Repurchase and retirement of common stock (825) --
--------- ---------
Net cash used in financing activities (220,615) (320,016)
--------- ---------
Net increase in cash and
cash equivalents 127,339 10,531
Cash and cash equivalents, beginning
of period 166,670 477,983
--------- ---------
Cash and cash equivalents, end of period $ 294,009 $ 488,514
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for -
Interest $ 227,907 $ 274,300
Income taxes 124,725 81,300
</TABLE>
See accompanying "Notes to Condensed Consolidated Financial Statements".
4
<PAGE> 5
CUSTOMEDIX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
(UNAUDITED)
================================================================================
Note 1 - Basis of Presentation
The accompanying unaudited, condensed consolidated financial statements
have been prepared by the Company in accordance with generally accepted
accounting principles for interim financial information, and pursuant
to the rules and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures normally included in the
financial statements have been condensed or omitted pursuant to such
rules and regulations, although management believes that the
disclosures are adequate to make the information presented not
misleading. In the opinion of management, the accompanying condensed
consolidated financial statements contain all adjustments (consisting
of only normal recurring accruals) necessary for a fair presentation of
the results for the interim periods presented. The results for the
interim periods are not necessarily indicative of the results to be
expected for the full year. It is suggested that these condensed
consolidated financial statements be read in conjunction with the
financial statements and the notes thereto included in the Company's
Annual Report to Stockholders.
Note 2 - Earnings Per Share
Income per share was computed based on the weighted average number of
common stock and common stock equivalent shares outstanding during each
period. There were 3,318,100 and 3,698,200 weighted average shares
outstanding for the three months ended September 30, 1995 and 1994,
respectively.
Note 3 - Inventory
Inventory is summarized as follows:
<TABLE>
<CAPTION>
September 30, 1995 June 30,1995
------------------ ------------
<S> <C> <C>
Finished Products $5,080,696 $4,592,441
Work-In-Process 810,397 694,073
Raw Material & Supplies 2,026,423 2,124,818
--------- ---------
Total $7,917,516 $7,411,332
========== ==========
</TABLE>
Note 4 - Income Taxes
The provision for income taxes represents minimum federal and state
income taxes. The Company has recognized a deferred tax asset to the
extent existing deductible temporary differences are expected to
reverse and enable the Company to recapture alternative minimum taxes
previously paid. The deferred tax assets totalling $205,000 and
$170,000 in fiscal 1996 and 1995, respectively, are included in other
current assets.
5
<PAGE> 6
CUSTOMEDIX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1995
(UNAUDITED)
================================================================================
Note 5 - Long-Term Debt and Obligations Under Capital Leases
Long-term debt and obligations under capital leases are summarized as
follows:
<TABLE>
<CAPTION>
September 30, 1995 June 30, 1995
------------------ -------------
<S> <C> <C>
Term Loan $6,116,336 $6,279,002
Revolving credit facility 300,000 300,000
Obligations under capital
leases 597,595 656,292
Note payable to officer 591,500 591,500
Other 49,305 47,732
---------- ----------
7,654,736 7,874,526
Less current portion 978,918 1,050,600
---------- ----------
Total $6,675,818 $6,823,926
========== ==========
</TABLE>
Note 6 - Property and Equipment
Major classes of property and equipment consist of the following:
<TABLE>
<CAPTION>
September 30, 1995 June 30, 1995
------------------ -------------
<S> <C> <C>
Machinery and equipment $3,452,777 $3,411,694
Leasehold improvements 2,131,022 2,081,034
Furniture and fixtures 1,410,211 1,337,960
Transportation equipment 32,541 32,541
---------- ----------
Total 7,026,551 6,863,229
Less accumulated depreciation
and amortization 3,870,379 3,714,656
---------- ----------
$3,156,172 $3,148,573
========== ==========
</TABLE>
Note 7 - Reclassifications
Certain reclassifications have been made to the fiscal 1995
consolidated financial statements in order for them to be presented in
conformity with the fiscal 1996 consolidated financial statements.
6
<PAGE> 7
Item 2.
CUSTOMEDIX CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
================================================================================
Three Months Ended September 30, 1995 vs. September 30, 1994
Operations
Sales for the quarter ended September 30, 1995 were $11,977,500
compared to $11,384,300 for the quarter ended September 30, 1994, an increase
of $593,200 or 5.2%. This increase was primarily attributable to higher sales,
both domestic and foreign, of most of the Company's dental products, offset by
a $129,000 decrease in medical sales by the Company's subsidiary, Transidyne
General Corporation ("Transidyne").
Gross profit as a percentage of sales was 27.2% for the quarter ended
September 30, 1995 compared to 26.8% for the quarter ended September 30, 1994.
Gross profit as a percentage of sales was 26.5% for fiscal year ended June 30,
1995.
Selling, general and administrative expenses were $3,104,600 for the
quarter ended September 30, 1995 compared to $2,806,900 for the same quarter
last year. This increase of $297,700 was primarily attributable to increases
in advertising expenses, professional fees, research and development and
salaries as well as expenses associated with an alleged employee
misappropriation of funds at Transidyne.
Interest expense for the quarter ended September 30, 1995 was $228,300
compared to $223,700 for the quarter ended September 30, 1994. This increase
was attributable to increases in interest rates and was partially offset by a
reduction in long-term debt.
Income before income taxes was $44,800 for the quarter ended September
30, 1995 compared to $137,400 for the quarter ended September 30, 1994. This
decrease of $92,600 was primarily attributable to increased selling, general
and administrative expenses and was offset in part by increased gross profit
due to increased sales.
Impact of Inflation
The Company experienced only minor inflation-related cost increases
which were not a material factor in the comparison of expenses with respect to
the periods compared.
7
<PAGE> 8
CUSTOMEDIX CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
================================================================================
Liquidity and Capital Resources
Working capital increased by approximately $51,100 to $10,691,700 at
September 30, 1995 as compared to $10,640,600 at June 30, 1995. This increase
was due primarily to earnings of the Company during the period.
For the three months ended September 30, 1995, cash generated by
operations and cash on hand were primarily used as follows: (i) to reduce debt
by approximately $219,800 and (ii) to purchase property and equipment totaling
approximately $163,300.
As of September 30, 1995, the Company was in compliance with all of
the financial convenants contained in the loan agreement, as amended, with the
Company's principal lending bank (the "Bank"). The Company and the Bank have
agreed to an amendment to the agreement which would extend the maturity on the
term loan until January 2, 2000 from January 2, 1997. Also, the Revolving Line
of Credit would be increased from $600,000 to $1,000,000 and would be payable
on demand. The interest rate on the term loan and the Revolving Line of Credit
would be reduced from 1/4% above the Bank's index rate to the Bank's index
rate.
The Company expects significant demands on cash during the next twelve
months as a result of anticipated advertising expenses, salaries, professional
fees,and federal alternative minimum taxes and state income taxes. In addition,
because of the Company's substantial debt burden, a significant portion of cash
flow will continue to be used to repay debt. This substantial use of cash
limits the funds available for general working capital purposes, product
research and marketing, as well as funds that can be expended on new facilities
and capital equipment. Furthermore, the ability of the Company to expand
operations through mergers or acquisitions is limited by the lack of available
cash with which to fund such activities.
Future Outlook
The Company expects to continue to incur high expenses in the areas of
new product development and research and product introduction. The Company
expects these efforts will primarily focus on dental products, and the
associated expenses could contribute to reduced earnings. In addition, the
dental products market faces increasing competition and profitability
pressures, both in domestic and foreign markets. Accordingly, the Company may
experience further reduction in its margins on certain dental products. The
Company is highly leveraged and any significant increase in interest rates
could materially and adversely affect the Company's profitability and cash
flow.
8
<PAGE> 9
PART II
CUSTOMEDIX CORPORATION
OTHER INFORMATION
================================================================================
Item 1. Legal Proceedings
There has been no material change from the information set forth in
Item 3 of the Company's Annual Report on Form 10-K for the fiscal year ended
June 30, 1995 except as follows:
The Company's subsidiary, Jeneric/Pentron, Inc., has recently filed
suit in Connecticut Superior Court against two former employees and business
entities with which they are affiliated for unfair trade practices and breach of
common law duties of loyalty in connection with the alleged sales of dental
products through companies in competition with Jeneric/Pentron, Inc. The Company
is seeking injunctive relief and damages.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
27 Financial Data Schedule
(b) Reports on Form 8-K: None
9
<PAGE> 10
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.
November 14, 1995 Customedix Corporation
Date -----------------------
Registrant
/s/ Gordon S. Cohen
-----------------------
Gordon S. Cohen
Chairman and
Chief Executive Officer
/s/ Barry L. Kosowsky
----------------------------
Barry L. Kosowsky
Principal Financial Officer
Principal Accounting Officer
10
<TABLE> <S> <C>
<ARTICLE> 5
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> SEP-30-1995
<EXCHANGE-RATE> 1
<CASH> 293,996
<SECURITIES> 13
<RECEIVABLES> 6,735,176
<ALLOWANCES> 301,900
<INVENTORY> 7,917,516
<CURRENT-ASSETS> 15,227,501
<PP&E> 7,026,551
<DEPRECIATION> 3,870,379
<TOTAL-ASSETS> 23,531,899
<CURRENT-LIABILITIES> 4,535,804
<BONDS> 0
<COMMON> 32,960
0
0
<OTHER-SE> 10,393,217
<TOTAL-LIABILITY-AND-EQUITY> 23,531,899
<SALES> 11,977,499
<TOTAL-REVENUES> 12,099,558
<CGS> 8,721,851
<TOTAL-COSTS> 11,826,446
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 228,334
<INCOME-PRETAX> 44,803
<INCOME-TAX> 20,000
<INCOME-CONTINUING> 24,803
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 24,803
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
