FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Quarterly Report Under Section 13 or 15 (d)
of the Securities Exchange Act of 1934
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the combined three quarterly periods ended March 31, 1999
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
For Three Quarters Ended Commission File Number
March 31, 1999 0-9735
CDX CORPORATION
(Exact name of registrant
as specified in its charter)
COLORADO 84-0771180
(State of Incorporation) (I.R.S. Employer
Identification Number)
One Richmond Square
Providence, RI 02916
(Address of principal
executive offices) (Zip Code)
Registrant's telephone number, including area code (401) 274-1444
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 ninety days.
YES X NO
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
CLASS SHARES OUTSTANDING AT MARCH 31, 1999
Common, $.01 par value 4,887,927
<PAGE>
CDX CORPORATION
FORM 10-QSB QUARTERLY REPORT
Table of Contents
PART I - FINANCIAL INFORMATION
Item 1.
Financial Statement:
Condensed Balance Sheets as of March 31, 1999
and June 30, 1998 . . . . . . . . . . . . . . . . . . . . . 3
Condensed Statements of Operations - Three months ended
September 30, 1998 and September 30, 1997 . . . . . . . . . 4
Condensed Statements of Operations - Six months ended
December 31, 1998 and December 31, 1997 . . . . . . . . . . 5
Condensed Statements of Operations - Nine months ended
March 31, 1999 and March 31, 1998 . . . . . . . . . . . . . 6
Condensed Statements of Cash Flows - Nine months ended
March 31, 1999 and March 31, 1998 . . . . . . . . . . . . . 7
Notes to Condensed Financial Statements . . . . . . . . . . 8
Item 2.
Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . . . . . 9
Other Information . . . . . . . . . . . . . . . . . . . . . 10
<PAGE>
CDX CORPORATION
CONDENSED BALANCE SHEETS
ASSETS
March 31, 1999 June 30,1998
(unaudited) (note)
Current Assets:
Cash and Cash Equivalents $ 14,244 $ 13,516
Accounts Receivable, Net 40,959 28,708
Inventory 37,206 40,491
Prepaid Expenses & Other 0 1,240
Total Current Assets 92,409 83,955
Property at Cost:
Furniture & Equipment 190,716 187,998
Less Accumulated Depreciation (172,534) (169,133)
Property-Net: 18,182 18,865
New Product Development 70,754 67,126
Invention Rights 6,490 9,742
Intangible Assets, Net: 77,244 76,868
Total Assets $ 187,835 $ 179,688
LIABILITIES AND STOCKHOLDERS' EQUITY
March 31, 1999 June 30,1998
(unaudited) (note)
Current
Liabilities:
Accounts Payable-Trade $ 84,591 $ 69,760
Accounts Payable-Affiliate 251,500 270,500
Accrued Interest Payable 81,225 71,375
Accrued Expenses & Other 11,501 10,295
Total Current Liabilities 428,817 421,930
Notes Payable-officers 223,946 214,484
Notes Payable 50,000 50,000
Total Other Liabilities 273,946 264,484
Stockholders' Equity:
Common Stock,$.01 Par Value
Authorized 10,000,000 Shares
Issued: 4,887,927 ; 4,887,927 48,881 48,881
Capital Surplus 4,771,798 4,771,798
Accumulated Deficit - (5,335,607) (5,327,405)
Less Treasury Stock,
166 Shares;
No Assigned Value -------- --------
Total Stockholder's Equity (514,928) (506,726)
Total $ 187,835 $ 179,688
Note: The balance sheet at June 30, 1998, has been taken from the audited
financial statement at that date and condensed.
CDX CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
(unaudited)
Three Months Ended
1st Qtr-FY98 1st Qtr-FY99
September 30, 1997 September 30, 1998
Revenues:
Net Sales & Other Revenues $ 56,366 $ 53,750
Operating Costs & Expenses:
Cost of Sales 14,414 20,906
Selling & Administrative
Expenses 30,781 21,193
TOTAL OPERATING COSTS &
EXPENSES 45,194 42,099
Operating Income (Loss) 11,172 11,651
Other Income
Interest Income 0 0
Interest Expense 7,273 5,451
Other 4,723 0
Income (Loss) Before Income Taxes 8,622 6,200
Provision for Income Taxes --- ---
Net Earnings (Loss) $ 8,622 $ 6,200
Net Earnings (Loss) per $ .0018 $ .0013
Common Share
WEIGHTED-AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 4,887,927 4,887,927
<PAGE>
CDX CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
(unaudited)
Six Months Ended
2nd Qtr-FY98 2nd Qtr-FY99
December 31, 1997 December 31, 1998
Revenues:
Net Sales & Other Revenues $ 117,954 $ 148,755
Operating Costs & Expenses:
Cost of Sales 34,271 69,105
Selling & Administrative
Expenses 64,746 53,999
TOTAL OPERATING COSTS &
EXPENSES 99,018 123,014
Operating Income (Loss) 18,936 25,651
Other Income
Interest Expense 12,768 11,086
Interest Income 1 0
Other 4,952 80
Income (Loss) Before Income Taxes 11,121 14,645
Provision for Income Taxes 0 0
Net Earnings (Loss) $ 11,121 $ 14,645
Net Earnings (Loss) per $ .0018 $ .003
Common Share
WEIGHTED-AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 6,208,228 4,887,927
CDX CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
(unaudited)
Nine Months Ended
3rd Qtr-FY98 3rd Qtr-FY99
March 31, 1998 March 31, 1999
Revenues:
Net Sales & Other Revenues $ 182,784 $ 235,888
Operating Costs & Expenses:
Cost of Sales 54,793 144,295
Selling & Administrative
Expenses 107,510 92,924
TOTAL OPERATING COSTS &
EXPENSES 162,303 237,219
Operating Income (Loss) 20,231 (1,331)
Other Income
Interest Expense 12,768 11,106
Interest Income 1 0
Other 4,769 4,234
Income (Loss) Before Income Taxes 12,234 (8,203)
Provision for Income Taxes --- ---
Net Earnings (Loss) $ 12,234 $ (8,203)
Net Earnings (Loss) per $ .0020 $ (.0017)
Common Share
WEIGHTED-AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 6,208,228 4,887,927
<PAGE>
CDX CORPORATION
CONDENSED STATEMENTS OF CASH FLOW
(unaudited)
Nine Months Ended
March 31, 1998 March 31, 1999
OPERATING ACTIVITIES:
Net Income(Loss) $ 12,235 $ (8,203)
Adjustments to Reconcile
Net Loss to Net Cash Provided/
(Used) by Operating Activities:
Depreciation & Amortization 8,590 6,653
A/R Allowance (947) (600)
Changes in Operating
Assets & Liabilities:
Accounts Receivable 14,404 (11,651)
Inventory 5,865 3,285
Prepaid Expenses 9,980 1,240
Accounts Payable-Trade 0 14,831
Accounts Payable-Affiliate (386,147) (19,000)
Accrued Expenses (54,820) 11,056
Total Adjustments (403,075) 5,814
Net Cash (Used for)
Operating Activities (390,841) (2,389)
INVESTING ACTIVITIES:
Purchase of Equipment (2,718)
Acquisition of Assets-Other 0 0
Fixed Assets (1,444) 0
New Product Development (38,586) (3,628)
Net Cash (Used for)
Investing Activities (40,030) (6,346)
FINANCING ACTIVITIES:
Short-term Borrowings 0 0
Issuance of Common Stock 13,201 0
Issuance of Preferred Stock 266,743 0
Note Payable - Bank (3,707) (3,707)
Note Payable - Affiliate (247,656) 13,169
Additional Paid in Capital 316,832 0
Adjustment to Prior Period
Retained Earnings 98,912 0
Net Cash Provided by
Financing Activities 444,325 9,462
Net (Decrease) in Cash
and Cash Equivalents 13,454 727
Cash and Cash Equivalents,
Beginning of Period 1,305 13,516
Cash and Cash Equivalents,
End of Period $ 14,759 $ 14,244
<PAGE>
CDX CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
1. In the opinion of Management, the unaudited condensed financial
statements contain all adjustments (consisting of normal accruals) necessary
to present fairly the financial position as of March 31, 1999, the results of
operations for the nine months ended March 31, 1999 and the cash flows for
the nine months ended March 31, 1999. These statements should be read in
conjunction with the audited financial statements and notes thereto included
in the Company's Annual Report on Form 10-K for the year ended June 30, 1998.
The unaudited financial statements have been prepared in the ordinary
course of business for the purpose of providing information with respect
to the interim periods and have been prepared in accordance with Generally
Accepted Accounting Principles for interim financial information and with
the instructions to Form 10QSB and Rule 310 of Regulation S-B. Accordingly,
they do not include all of the information and footnotes required by
Generally Accepted Accounting Principles for complete financial statements.
2. Inventory consists of the following at March 31, 1999 and June 30,
1998.
March 31, 1999 June 30, 1998
(Unaudited)
Raw Material $ 17,698 $ 17,589
Work-in-Process 2,644 2,549
Finished Goods 16,864 20,353
Total $ 37,206 $ 40,491
3. Intangible assets consist of the following at March 31, 1999 and June
30, 1998.
March 31, 1999 June 30, 1998
Invention Rights, Net $ 70,754 $ 67,126
New Product Development Costs, Net 6,490 9,742
Total $ 77,244 $ 76,868
4. Accounts Payable-Affiliate represents rent and related expenses
of office space.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
Net sales and operating revenues for nine months ended March 31, 1999,
increased by 26.1% over the equivalent period in the prior year.
Cost of sales as a percentage of net sales and operating revenues
increased by 32% from 29% to 61% compared with the same period in the prior
year. This is essentially due to purchasing spirometers from an OEM outside
source compared with in-house manufacture.
Sales and administrative expenses in the nine months ended March 31,
1999, decreased by 20% from 59% to 39% as compared to the same period in the
prior year. This is primarily due to a reduced net sales and marketing payroll
and by the curtailment of certain all marketing costs associated with
CPR mask and all print media advertising.
Liquidity
Working capital deficit at March 31, 1999, was generally unchanged from
June 30, 1998. This improvement in the working capital deficit was primarily
due to the maintenance of relative positions of payables and short term
borrowings and receivables.
Capital Resources
Management has not committed to any material capital expenditures
for the future.
Research and Development Resources
The Company has several products in the research and development stage.
Management continues to fund the R&D of these products as needed.
The Company has been in the process of developing new and innovative
products. The development of these products has taken longer than planned.
The Company brought some of these products to market, which have been met
with a demand for improvements and changes to the products. Management
plans to develop upgrades and improvements to existing products utilizing
state of the art technology and to re-market these products to a
substantial existing client base. Management expects sales and profits to
significantly increase when the improved products are re-marketed.
<PAGE>
BUSINESS AND PROPERTIES OF CDX CORPORATION
CDX Corporation is a Colorado corporation incorporated in 1978 with its
corporate offices headquartered in Dedham, Massachusetts.
The Business of the Company has consisted of the sale of computerized
pulmonary diagnostic equipment which is used in the medical profession to
test for indications of lung or congestive heart disease.
In December 1994 the Company acquired Compliance Systems, a manufacturer of
infection control products which provide emergency personnel with protection
during trauma response situations and assist compliance with certain OSHA
mandates.
CDX also generates revenue from the sale of consumable and accessory items
associated with its diagnostic equipment. In addition, the Company has
developed an upgrade for its spirometers marketed to existing customers. The
Company has curtailed manufacture of its Model 110S spirometer. The Model 110
series has been replaced by an updated model, CDX SPIRO 850, which is
manufactured for the Compnany on an exclusive OEM basis. This product is
marketed to physician offices, hospitals and industrial sites.
<PAGE>
B. Products And Services
Approximately 22% of the Company's gross revenues in its most recent fiscal
year was attributable to the sale of its testing machines, 57% of gross
revenues was attributable to sales of consumable and accessory items and 9%
of gross revenues was attributable to repairs and maintenance. Bio-hazard
control products comprised 12% of sales.
The types of products which the Company currently markets are described below.
1. CDX SPIRO 850 Spirometer
Computerized pulmonary diagnostic equipment which is used in
the medical profession to test for indications of lung or
congestive heart disease.
Additionally, the Company provides for sale of disposable and accessory items
associated with its testing equipment as well as maintenance and service
agreements; it also offers disposable items for the infection control markets.
2. Biosponse
A portable bio-hazard spill kit for bloodborne pathogens which
complies with OSHA regulation.
3. Biopail
A complete clean up and personal protection for first reponders
against blood pathogens contained in a refillable two gallon
pail meeting OSHA Regulations.
<PAGE>
C. Marketing And Customers
The Company's principal customers have historically been primary care
physicians, group practices, clinic, and medical centers. Portable
spirometers are typically used by internists, family physicians, and general
practitioners in their offices to conduct preliminary diagnostic tests of a
patients pulmonary function. Spirometers are also used extensively in
industry to provide screening diagnosis, establish baselines and monitor
pulmonary function in the workplace. The Company's customer base includes
pulmonologists, allergists, and cardiologists who require the speed,
accuracy, and flexibility of hospital-based systems in a small, light-weight,
portable system.
During the period ended March 31, 1999, the Company did not have any one
customer responsible for 10% or more of sales activity or revenues.
The Company currently markets its products directly to retail customers from
its Dedham, Massachusetts office and through medical equipment dealers and
distributors, supported through a network of factory trained manufacturer's
representatives. The Company supports this sales network through direct mail,
advertising in clinical and trade publications, and participation in national
and regional trade shows.
Relative to the IRM mask, the Company held exclusive worldwide distribution
rights under terms of an agreement with Valley Forge Scientific. During FYE
6.30.96 the Company relinquished its exclusive rights and has undertaken to
co-distribute the IRM with Valley Forge in return for a 10% royalty on all
IRM sales by Valley Forge. The Company has curtailed all efforts to market the
IRM.
D. Product Development
The Company has undertaken a product development program with the ultimate
objective of the following:
The development of products specifically targeted at the equipment needs of
the physician's office. During the period ended March 31, 1999, the Company
spent $ 377 on research and development.
<PAGE>
E. Products Protection
The company holds a patent issued by the U.S. Patent office in 1981 for the
overall structure and function of its remote pulmonary function tester known
as the CDX 110. The Company's current products have protection under certain
claims of this patent. The patent does not apply outside the United States.
The Company holds a federal trademark "CDX" which is used on its products.
The Company uses additional trademarks related to the IRM mask.
The Company's developmental efforts on the IRM mask has resulted in a U.S.
patent application. As per the terms of an agreement between the Company and
Valley Forge Scientific this patent has been assigned to Valley Forge. Under
the further terms of this agreement, the Company received the exclusive
worldwide distribution rights for the IRM mask.
F. Backlog
The Company does not currently have any backlog of sales orders or delays of
shipments due to lack of parts or supplies.
G. Competition
The market for the Company's products is characterized by rapid advancements
in technology and by intense competition among a number of manufacturers and
distributors. The Company believes that it competes favorably in the market;
however, no assurance can be given that the Company will have the financial
resources, marketing, distribution, service or support capabilities, depth of
key personnel or technological expertise to compete successfully in the
future.
H. Employees
As of March 31, 1999, the Company employed one full-time employee.
<PAGE>
PART II
OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS -
Neither the Registrant nor any of its affiliates
are a party, nor is any of their property subject, to material
pending legal proceedings or material proceedings known to be
contemplated by governmental authorities.
ITEM 2 CHANGES IN SECURITIES -
The Registrant converted notes payable ($266,742.63) to 266,743
shares of Preferred Stock, $1.00 par, in order to effectuate the
negotiated Recharacterizations of notes payable-affiliate under
a mutually accepted earn-out arrangement.
The Registrant issued 1,075,269 shares of Common Stock at $0.25
per share to convert $268,817.30 of shareholder accounts payable,
effectuating the negotiated Recharacterizations of accounts
payable under a mutually accepted earn-out arrangement.
The Registrant issued 244,865 shares of Common Stock at $0.25
per share to convert $61,216.37 of interest payable at 12-31-97,
effectuating the negotiated Recharacterizations of interest payable
under a mutually accepted earn-out arrangement.
The agreement and arrangement described preceding was terminated in the fourth
quarter FY 98 and all securities and liabilities were restored to previous
status.
ITEM 3 DEFAULTS UPON SENIOR SECURITIES -
None
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS -
None
ITEM 5 OTHER INFORMATION -
None
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K -
A. Exhibits
Exhibit 27. Financial Data Schedule
B. Reports on Form 8-K
None
ADDITIONAL EXHIBITS -
The exhibits required to be furnished are either not
applicable or the information can be clearly determined
from the filed material.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has dully caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CDX Corporation
/S/ Michael L. Schein
_________________________________________
Michael L. Schein, President and Secretary
/s/ Harold I. Schein
_______________________________________
Harold I. Schein, Chairman of the Board,
and Treasurer
Date: September 30, 1999
<PAGE>
INDEX TO EXHIBITS
(a) Exhibits:
The following documents are filed herewith or have been included as
exhibits to previous filings with the Commission and are incorporated
herein by this reference:
Exhibit No. Document
* 3.1 Restated Articles of Incorporation dated
July 3, 1985
(incorporated by reference to the exhibits
and Registrant's report filed on Form 10-K
dated September 25, 1985)
* 3.2 Articles of Amendment dated December 4, 1987
to the Restated Articles of Incorporation
(incorporated by reference to the exhibits
to Registrant's report filed on Form 10-K
dated September 15, 1989)
* 3.3 Bylaws dated July 5, 1985
(incorporated by reference to the exhibits
to Registrant's report filed on Form 10-K
dated September 15, 1989)
______________
* Incorporated by reference from the issuer's Annual Report Pursuant
to Section 13 or 15(d) of the Securities Exchange Act of 1934
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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