<PAGE>1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(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
Commission file number 0-11580.
PHARMAKINETICS LABORATORIES, INC.
(Exact name of registrant as specified in its charter)
Maryland 52-1067519
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
302 West Fayette Street
Baltimore, Maryland 21201
(Address of principal executive offices)
(Zip Code)
(410) 385-4500
(Registrant's telephone number, including area code)
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_____
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Sections 12, 13 or
15(d) of the Securities Exchange Act of 1934 subsequent to the
distribution of securities under a plan confirmed by a court.
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. 12,195,891 common shares were outstanding as of October
26, 1995.
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PHARMAKINETICS LABORATORIES, INC.
FORM 10-Q
INDEX
Page No.
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
Statements of Operations for the three
months ended September 30, 1995 and 1994
(unaudited) 3
Balance Sheets at September 30, 1995
(unaudited) and June 30, 1995 4
Statements of Cash Flows for the three
months ended September 30, 1995 and 1994
(unaudited) 5
Notes to Financial Statements (unaudited) 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 6
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 8
Signatures 9
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PHARMAKINETICS LABORATORIES, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
---------------------------
1995 1994
------------ ------------
<S> <C> <C>
Contract Revenue $ 2,721,560 $ 2,600,626
Cost of Contracts 1,912,639 1,734,035
------------ ------------
Gross Profit 808,921 866,591
General and
administrative expenses 571,402 587,724
Research and
development expenses 96,385 54,143
------------ ------------
Earnings from operations 141,134 224,724
Interest expense (60,160) (63,611)
Interest income 9,454 11,141
Loss on disposal of equipment (12,548) -
------------ ------------
Earnings before income taxes 77,880 172,254
Provision for income taxes - -
------------ ------------
Net earnings $ 77,880 $ 172,254
============ ============
Net earnings per share $ 0.01 $ 0.01
============ ============
Weighted average
shares outstanding 12,357,654 12,652,195
============ ============
- ---------------------------------------------------------------
See notes to financial statements.
</TABLE>
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PHARMAKINETICS LABORATORIES, INC.
BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
September 30, June 30,
1995 1995
------------ ------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and equivalents $ 792,460 $ 1,044,782
Restricted cash and equivalents 39,069 39,036
Accounts receivable, net 876,612 774,684
Refundable income taxes 29,364 29,364
Contracts in process 341,101 695,359
Prepaid expenses 153,838 63,681
------------ ------------
Total Current Assets 2,232,444 2,646,906
Property, plant and equipment, net 3,773,862 3,848,020
Other assets 58,422 58,422
------------ ------------
Total Assets $ 6,064,728 $ 6,553,348
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses $ 821,356 $ 1,378,495
Deposits on contracts in process 1,165,635 1,133,547
Current portion of long-term debt 206,116 198,338
------------ ------------
Total Current Liabilities 2,193,107 2,710,380
Other liabilities 100,727 116,150
Long-term debt 1,924,155 1,957,959
------------ ------------
Total Liabilities 4,217,989 4,784,489
------------ ------------
Commitments and Contingent Liabilities
Stockholders' Equity:
Preferred stock, no par value;
1,500,000 shares authorized and
unissued - -
Common stock, $.001 par value;
authorized, 25,000,000 shares;
issued 12,195,891 shares 12,196 12,196
Additional paid-in-capital 12,013,701 12,013,701
Accumulated deficit (10,179,158) (10,257,038)
------------ ------------
Total Stockholders' Equity 1,846,739 1,768,859
------------ ------------
Total Liabilities and
Stockholders' Equity $ 6,064,728 $ 6,553,348
============ ============
- -----------------------------------------------------------------
See notes to financial statements.
</TABLE>
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PHARMAKINETICS LABORATORIES, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
---------------------
1995 1994
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 77,880 $ 172,254
Adjustments to reconcile net earnings
to net cash provided (used) by
operating activities:
Depreciation and amortization 95,424 64,502
Loss on sale of equipment 12,548 -
Changes in operating assets
and liabilities:
Accounts receivable (101,928) 128,000
Contracts in process 354,258 (167,481)
Prepaid expenses and other assets (90,157) (135,772)
Accounts payable and accrued expenses (521,783) 294,368
Accrued non-recurring expenses - (10,562)
Deposits on contracts in process 32,088 (64,942)
Other liabilities (15,423) (81,483)
---------- ----------
Net cash provided (used)
by operating activities (157,093) 198,884
---------- ----------
Cash flows from investing activities:
Payment for purchase of
property and equipment (42,314) (135,184)
Proceeds from sale of equipment 8,500 -
---------- ----------
Net cash (used) by investing activities (33,814) (135,184)
---------- ----------
Cash flows from financing activities:
Payment on long-term debt (26,026) (51,289)
Payment in capital lease obligations (35,356) -
---------- ----------
Net cash (used) by financing activities (61,382) (51,289)
---------- ----------
Increase (decrease) in cash and equivalents (252,289) 12,411
Cash and equivalents, beginning of period 1,083,818 1,074,582
---------- ----------
Cash and equivalents, end of period $ 831,529 $1,086,993
========== ==========
Non-Cash Transactions:
Investment valuation allowance $ - $ 9,908
Cash Paid for Interest: $ 58,645 $ 53,393
- ------------------------------------------------------------------
See notes to financial statements.
</TABLE>
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PHARMAKINETICS LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
BASIS OF PRESENTATION
The statements of operations for the three months ended
September 30, 1995, and 1994, the balance sheet as of September
30, 1995, and the statements of cash flows for the three months
ended September 30, 1995, and 1994, have been prepared by the
Company without audit. In the opinion of management, all
adjustments necessary to present fairly the financial position,
results of operations and cash flows at September 30, 1995, and
for all periods presented, have been made. The balance sheet at
June 30, 1995, has been derived from the audited financial
statements as of that date.
Certain information and footnote disclosures normally
included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or
omitted. It is suggested that these condensed financial
statements be read in conjunction with the financial statements
and notes thereto included in the Company's fiscal 1995 Form
10-K.
The Company operates principally in one industry segment,
the testing and related research of pharmaceutical products.
Contract revenue includes revenue from operations and from
licensing technologies under special agreements whereby the
Company receives license fees based upon the clients' actual
product sales. License fee income of $127,766 and $231,047 was
recorded for the three month periods ended September 30, 1995,
and 1994, respectively. The results of operations for the
periods ended September 30, 1995, are not necessarily indicative
of the operating results for the full year.
PART I.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
RESULTS OF OPERATIONS
Revenue from operations increased 9.5% to $2,593,794 for the
three month period ended September 30, 1995, from $2,369,579 for
the comparable period in the prior year, demonstrating the
success, during the first quarter of fiscal year 1996, of the
Company's efforts to diversify into new market segments and to
add new clients. As a result of this growth in operating
revenues, overall revenues increased 4.7% to $2,721,560 from
$2,600,626, despite an expected decline in license fee income
from $231,047 for the three month period ended September 30,
1994, to $127,766 for the period ended September 30, 1995.
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License fee income, based on clients' sales of approved drug
products, will continue through the expiration of the license fee
agreements, the first of which will expire during fiscal 1998.
The Company's gross profit before license fees increased to
$681,155 in the three month period ended September 30, 1995, from
$635,544 in the three month period ended September 30, 1994,
remaining flat at 26% of operating revenues. The decline in
license fee income and costs associated with the Company's
decision to discontinue its offering of stability services caused
gross profit to decline to $808,921 in the current period,
compared to $866,591 for the three month period ended September
30, 1994, a decline of 6.7%. The decision to eliminate the
offering of stability services was reached in July 1995, and
operations ceased in September 1995.
General and administrative expenses decreased 2.8% to
$571,402 for the three month period ended September 30, 1995,
from $587,724 for the same period of the prior year. The Company
carefully evaluated its cost structure in the quarter ended
September 30, 1995, and took actions to decrease costs on an on-
going basis. In addition to eliminating the stability services
group, other positions throughout the Company were eliminated in
order to reduce costs. These actions took place during the
quarter and the Company expects the results will become apparent
in the remainder of the fiscal year. As a part of these efforts,
the Company sold equipment and realized a loss of $12,548.
Research and development expenses increased 78.0% in the three
month period ended September 30, 1995, to $96,385, compared to
the same period in the prior year. The Company has continued to
invest in its research and development effort in the current
quarter in an effort to bring new analytical methods on-line to
meet client demands.
No provision for income taxes is required as the Company has
available unused operating loss and business tax credit
carryforwards.
LIQUIDITY AND CAPITAL RESOURCES
The reduction in the cash balances of the Company of $252,289
for the three months ended September 30, 1995, is primarily
attributable to changes in the operating accounts of the Company.
Accounts payable and accrued expenses have diminished
significantly due to payments made on a current basis. On a
discretionary basis, the Company has made and expects to
continue to make escalated principal payments relative to it term
note payable to the bank. The term note has certain financial
ratio and cash flow covenants with which the Company is currently
in compliance. However, no assurance can be given that the
results of future operations will allow the Company to remain in
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<PAGE>8
compliance. At September 30, 1995, the Company had working
capital of $39,337, compared to a deficiency of $63,474 at June
30, 1995. At September 30, 1995, the Company had available
$792,460 in current operating cash to meet the needs of its
business and $39,069 for the remaining administrative fees
related to the Company's Amended Plan of Reorganization,
confirmed on April 1, 1993. The Company also has available a
$500,000 line of credit through its primary secured lender, which
was unused as of September 30, 1995. Total Stockholders' Equity
at September 30, 1995, was $1,846,739, compared to $1,768,859 at
June 30, 1995. The increase is attributable to net income of
$77,880.
At September 30, 1995, the Company reported a decrease in its
contracts in process account which was attributed to the increase
in revenue for the quarter. Deposits on contracts in process
increased 2.8% indicating an increase in contracted studies.
Changes in these account balances affect the Company's backlog,
which will be utilized to generate future revenue.
PART II. Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit 11: Computation of Earnings per Share
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter
ended September 30, 1995.
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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.
PHARMAKINETICS LABORATORIES, INC.
Registrant
November 10, 1995 /s/James K. Leslie
Date James K. Leslie
President and
Chief Executive Officer
November 10, 1995 /s/Taryn L. Kunkel
Date Taryn L. Kunkel
Vice-President and
Chief Financial Officer
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<TABLE>
<CAPTION>
EXHIBIT 11
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
For the Three Months Ended September 30,
1995 1994
---------------------- ----------------------
Fully Fully
Primary Diluted Primary Diluted
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Weighted Average
Shares Outstanding:
Common Stock 12,195,891 12,195,891 12,395,891 12,395,891
Shares Available
Under Options 161,763 161,763 256,304 256,304
---------- ---------- ---------- ----------
Weighted Average
Common and Common
Equivalent Shares
Outstanding 12,357,654 12,357,654 12,652,195 12,652,195
========== ========== ========== ==========
Net Income $77,880 $77,880 $172,254 $172,254
========== ========== ========== ==========
Earnings per Share $0.01 $0.01 $0.01 $0.01
========== ========== ========== ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from SEC
Form 10Q and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-END> SEP-30-1995
<CASH> 831,529
<SECURITIES> 0
<RECEIVABLES> 876,612
<ALLOWANCES> 0
<INVENTORY> 341,101
<CURRENT-ASSETS> 2,232,444
<PP&E> 5,698,069
<DEPRECIATION> 1,924,207
<TOTAL-ASSETS> 6,064,728
<CURRENT-LIABILITIES> 2,193,107
<BONDS> 0
<COMMON> 12,196
0
0
<OTHER-SE> 1,834,543
<TOTAL-LIABILITY-AND-EQUITY> 6,064,728
<SALES> 2,721,560
<TOTAL-REVENUES> 2,731,014
<CGS> 1,912,639
<TOTAL-COSTS> 2,580,426
<OTHER-EXPENSES> 12,548
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 60,160
<INCOME-PRETAX> 77,880
<INCOME-TAX> 0
<INCOME-CONTINUING> 77,880
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 77,880
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
