UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 11 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended September 30, 1996 Commission File Number Q-3052
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Diapulse Corporation of America
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(Exact name of registrant as specified on its charter)
Delaware 13-5671991
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(State or other jurisdiction of) (I.R.S. Employer
incorporation of organization Identification Number)
321 East Shore Road
Great Neck, New York 11023
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(Address of principle offices) (Zip Code)
Registrant's telephone number,
including area code (516) 466-3030
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, and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
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As of September 30, 1996 there were 3,956,448 shares of common stock
outstanding.
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DIAPULSE CORPORATION OF AMERICA AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
Sept. 30, Dec. 31,
1996 1995
(Unaudited) (Audited)
------------ ------------
A S S E T S
Current assets:
Cash and cash equivalents $ 126,355 $ 222,318
Commissions advances 353,017 238,543
Accounts receivable, net of allowances for
doubtful accounts of $60,000 at June 30, 1996
and December 31, 1995 1,206,532 777,873
Inventories 478,834 458,720
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Total current assets 2,164,738 1,697,454
Commission advances, net of current portion 198,948 198,948
Equipment, net of accumulated depreciation and
amortization of $142,662 at Sept 30, 1996 and
$134,061 at December 31, 1995 179,251 187,851
Other assets - sundry 28,254 28,254
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Total Assets $2,571,191 $2,112,507
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses $ 628,333 $ 450,658
Dues to officers and former officers 742,456 650,688
------------ ----------
Total current liabilities $1,370,789 $1,101,346
Due to officer - long term portion 977,350 977,350
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Total liabilities $2,348,139 $2,078,696
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Stockholders' equity:
Common stock - $0.25 par value; authorized
6,000,000 shares, issued 3,956,448 shares 98,911 98,911
Additional paid-in capital 2,131,426 2,131,426
Accumulated deficit (1,997,943) (2,187,184)
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232,394 43,153
Less: Treasury stock of 5,328 shares at Sept
30, 1996 and December 31, 1995, at cost 9,342 9,342
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Total stockholders' equity 223,052 33,811
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Total Liabilities and Stockholders' Equity $2,571,191 $2,112,507
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DIAPULSE CORPORATION OF AMERICA AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Nine Months Ended
September 30,
1996 1995
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Net sales and rentals (see $1,269,987 $1,262,765
management discussion note)
Cost of sales and rentals 44,412 39,654
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Gross Profit $1,225,575 $1,223,111
Operating Expenses:
Selling, general and administrative 803,708 695,680
Interest expense 149,738 132,767
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Total operating expenses 953,446 828,447
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Net operating income 272,129 394,664
Interest and other income 14,598 17,484
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Net income before provision for
income taxes 286,727 412,148
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Provision for income taxes 97,487 140,523
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Net Income $189,240 $271,625
============ ============
Earnings Per Share $ 0.048 $ 0.070
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Weighted Average
Number of Common
Shares Outstanding 3,956,448 3,907,732
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DIAPULSE CORPORATION OF AMERICA AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
September 30,
1996 1995
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Cash flows from operating activities:
Net Income $ 189,240 $ 271,625
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 8,601 8,602
Prior period adjustment of accounting error 30,812
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable (428,659) (265,606)
(Increase) in commission advances (114,474) (46,770)
Increase in inventories (20,114) (25,193)
Decrease in other assets - (1,000)
Increase (Decrease) accounts payable and
accrued expenses 177,675 (38,900)
Increase in accrued income taxes - 135,280
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Total adjustments (376,971) (202,775)
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Net cash (provided) used by
operating activities (187,731) 68,850
Cash flow from investing activities:
Capital expenditures - 1,800
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Net cash provided by investing activities - 1,800
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Cash flow from investing activities:
Net borrowing under bank line of credit - (19,000)
Net increase (decrease) in due to
officers'and former officer 91,768 (59,751)
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Net cash provided (used) by financing activities 91,768 (78,751)
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Net decrease in cash and cash equivalents (95,963) (11,701)
Cash and cash equivalents - beginning of period 222,318 148,503
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Cash and cash equivalents - end of period $ 126,355 $ 136,802
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DIAPULSE CORPORATION OF AMERICA AND SUBSIDIARY
SELECTION INFORMATION - SUBSTANTIALLY ALL DISCLOSURES REQUIRED
BY GENERALLY ACCEPTED ACCOUNTING PRINCIPLES ARE NOT INCLUDED
1. Basis of presentation
The consolidated balance sheet of Diapulse Corporation of America and
Subsidiary as of September 30, 1996, and the related consolidated statements of
operations and cash flows for the nine months ended September 30, 1996 and
1995, have been prepared by the Company without audit. The balance sheet for
the year ended December 31, 1995, was audited and an unqualified opinion was
expressed in the report dated March 7, 1996, but no auditing procedures have
been performed since that date. In the opinion of management, all adjustments
(which include only normal recurring adjustments) necessary to present fairly
the financial position, results of operations and changes in cash flows for
the nine months ended September 30, 1996 and for all periods presented have
been made. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted principles
have been omitted. It is suggested that these consolidated statement be read in
conjunction with the consolidated financial statements and notes thereto
included in the Company's December 31, 1995 annual report to shareholders.
There have been no changes of significant accounting policies since December
31, 1995. Results of operations for the nine month period are not necessarily
indicative of results of operations for the corresponding years.
2. Inventories
September 30, Dec. 31,
1996 1995
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Parts, components and subassemblies $ 243,697 $ 204,384
Finished goods 282,229 301,336
Finished good, rental and loaner machines 236,389 236,481
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Total inventories 762,315 742,201
Less: Inventories in fixed assets (236,481) (236,481)
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Total inventories for resale 525,834 505,720
Less: inventory reserve 47,000 47,000
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Total inventories $ 478,834 $ 458,720
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DIAPULSE CORPORARY OF AMERICA AND SUBSIDIARY
MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of operations
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Net sales for the current nine months increased by $7,222 to $1,269,987 from
last year's comparable nine months of $1,262,765. Operating expenses for the
current nine months increased to $949,196 from last year's comparable nine
months of $828,447. Interest expense represents the accrual of interest on the
debt to officers, former officers and employees.
Liquidity and capital resources
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As of September 30, 1996, the Company had working capital of $796,774 and a
current ration of approximately 1.58 to 1. This represents an increase in
working capital since December 31, 1995 of $200,666.
The Company expanded its distribution channels in the United States and
therefore realized an improvement in revenues and profitability. The Company
intends to fund its future operations, pursue research and development of
current and future products and expand operations through product rental and
sales.
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SIGNATURES
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Pursuant to the requirements of Section 11 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.
DIAPULSE CORPORATION OF AMERICA
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Registrant
/s/ Jesse Ross
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Jesse Ross, President
/s/ Gladys Ross
----------------------------------------
Gladys Ross, Acting Corporate Secretary
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 126,355
<SECURITIES> 0
<RECEIVABLES> 1,266,532
<ALLOWANCES> 60,000
<INVENTORY> 478,834
<CURRENT-ASSETS> 2,164,738
<PP&E> 321,913
<DEPRECIATION> 142,662
<TOTAL-ASSETS> 2,571,191
<CURRENT-LIABILITIES> 1,370,789
<BONDS> 0
0
0
<COMMON> 98,911
<OTHER-SE> 133,483
<TOTAL-LIABILITY-AND-EQUITY> 2,571,191
<SALES> 1,269,987
<TOTAL-REVENUES> 1,284,585
<CGS> 44,412
<TOTAL-COSTS> 997,858
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 149,738
<INCOME-PRETAX> 286,727
<INCOME-TAX> 97,487
<INCOME-CONTINUING> 189,240
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 189,240
<EPS-PRIMARY> 0.048
<EPS-DILUTED> 0.048
</TABLE>
