<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended September 30, 1996 Commission File Number 0-12817
PERFECTDATA CORPORATION
(Exact name of registrant as specified in its charter)
CALIFORNIA 95-3087593
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
110 West Easy Street
Simi Valley, California 93065-1689
(Address of principal executive offices)
(Zip Code)
(805) 581-4000
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year,
if changes 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 report), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
------- -------
As of October 31, 1996, there were 3,094,500 shares of common stock outstanding.
<PAGE>
PERFECTDATA CORPORATION
-----------------------
INDEX
-----
Page
----
PART I. FINANCIAL INFORMATION
Consolidated Balance Sheets -
September 30, 1996 and March 31, 1996 2
Consolidated Statements of Earnings -
quarters ended September 30, 1996
and 1995, and six months ended
September 30, 1996 and 1995 3
Consolidated Statements of Shareholders'
Equity - six months ended September 30,
1996 4
Consolidated Statements of Cash Flows -
six months ended September 30, 1996
and 1995 5
Notes to Consolidated Financial Statements 6 - 7
Management's discussion and analysis of
financial condition and results of
operations 8
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 9
- 1 -
<PAGE>
PERFECTDATA CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands, except number of shares)
Sept. 30, March 31
1996 1996
-------- --------
ASSETS
Current assets
Cash and cash equivalents, including
short-term certificates of deposit of
$160 at September and at March $ 652 $ 711
Accounts receivable, less allowance
for doubtful receivables of
$11 at September and at March 857 906
Inventories 1,267 1,245
Prepaid expenses and other current assets 110 85
Marketable securities, short-term 324 323
Current assets of discontinued operations 88 88
Deposit on litigation award 305 305
Deferred income tax benefit 106 117
-------- --------
Total current assets 3,709 3,780
Property, plant and equipment, net 194 248
Deferred Income Tax benefit 613 603
Other assets, net 19 19
-------- --------
$ 4,535 $ 4,650
-------- --------
-------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 274 $ 381
Accrued expenses 163 193
Accrued salaries, wages and vacation 52 68
Current liabilities of discontinued
operations 203 203
-------- --------
Total current liabilities 692 845
-------- --------
Minority Interest 11 12
-------- --------
Shareholders' equity:
Preferred stock. Authorized 2,000,000
shares; none issued - -
Common stock, no par value. Authorized
10,000,000 shares; issued and
outstanding 3,094,500 shares at
September and 3,069,000 shares at March 8,053 8,026
Accumulated deficit (4,210) (4,211)
Allowance for gain (loss) on
marketable securities (11) (22)
-------- --------
Net shareholders' equity 3,832 3,793
-------- --------
$ 4,535 $ 4,650
-------- --------
-------- --------
See accompanying notes to financial statements.
- 2 -
<PAGE>
PerfectData Corporation and Subsidiary
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
- --------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
- --------------------------------------------------------------------------------
Three Months Ended Six Months Ended
September 30, September 30,
1996 1995 1996 1995
- --------------------------------------------------------------------------------
Net sales $ 1,474 $ 1,495 $2,910 $3,002
Costs and Expenses:
Cost of sales 1,012 983 1,930 1,976
Selling, general and
administrative 493 498 1,004 1,014
------- ------- ------ ------
Total costs and expenses 1,505 1,481 2,934 2,990
Income (loss) from operations (31) 14 (24) 12
------- ------- ------ ------
Other income and (expense):
Interest income, net 5 11 14 19
Minority Interest Expense - - (1) -
Other, net 23 13 32 25
------- ------- ------ ------
Total other income and (expense) 28 24 45 44
------- ------- ------ ------
Income (loss) from continuing
operations before income taxes (3) 38 21 56
Income tax benefit (provision) 2 (11) (1) (24)
------- ------- ------ ------
Income (loss) from continuing
operations (1) 27 20 32
Gain (loss) on disposal of
discontinued operations - (119) (19) (119)
------- ------- ------ ------
Net income (loss) $ (1) $ (92) $ 1 $ (87)
------- ------- ------ ------
------- ------- ------ ------
Net income (loss) per common share:
Income (loss) from continuing
operations $ - $ .01 $ .01 $ .01
Gain (loss) on disposal of
discontinued operations - (.04) (.01) (.04)
------- ------- ------ ------
$ - $ (.03) - $ (.03)
------- ------- ------ ------
------- ------- ------ ------
Weighted average shares outstanding 3,084 3,121 3,084 3,129
See accompanying notes to financial statements.
- 3 -
<PAGE>
PerfectData Corporation and Subsidiary
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Unaudited)
- --------------------------------------------------------------------------------
(In thousands)
Period from March 31, 1996 through September 30, 1996
- --------------------------------------------------------------------------------
Allowance Net
for gain/ share-
COMMON STOCK Accumulated (loss) on holders'
Shares Amount deficit mkt. sec. equity
- --------------------------------------------------------------------------------
Balance at
March 31, 1996 3,069 $8,026 $(4,211) $ (22) $3,793
Stock issued upon
exercise of options 28 29 - - 29
Stock repurchased
and retired (2) (2) - - (2)
Net unrealized gain/
(loss) on marketable
securities - - - 11 11
Net earnings - - 1 - 1
- --------------------------------------------------------------------------------
Balance at
September 30, 1996 3,095 $8,053 $(4,210) $ (11) $3,832
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
- 4 -
<PAGE>
PERFECTDATA CORPORATION
STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
Six Month Period Ended
September 30,
-----------------------
1996 1995
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 1 $ (87)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
(Gain) loss on disposal of
discontinued operations 19 119
Depreciation and amortization 63 64
Deferred income tax (benefit) provision 1 24
(Increase) decrease in accounts
receivable 49 157
(Increase) decrease in inventories (22) 37
(Increase) decrease in prepaid
expenses and other current assets (25) 12
(Increase) decrease in other assets - 1
Increase (decrease) in accounts
payable (107) (292)
Increase (decrease) in accrued
expenses (30) (56)
Increase (decrease) in accrued
salaries, wages and vacation (16) (13)
Increase in current liabilities of
discontinued operations - 120
------- -------
NET CASH PROVIDED (USED) BY
OPERATING ACTIVITIES (67) 86
------- -------
CASH FLOW FROM INVESTING ACTIVITIES:
Purchases of property, plant, and
equipment $ (9) $ (13)
(Increase) decrease in investment
securities, net 10 (9)
------- -------
NET CASH PROVIDED (USED) BY
INVESTING ACTIVITIES 1 (22)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease in minority interest (1) -
Exercise of stock options 29 -
Repurchase of common stock (2) (47)
------- -------
NET CASH PROVIDED (USED) BY
FINANCING ACTIVITIES 26 (47)
------- -------
NET CASH PROVIDED (USED) BY
CONTINUING OPERATIONS (40) 17
CASH PROVIDED (USED) IN
DISCONTINUED OPERATIONS (19) (119)
------- -------
Increase (decrease) in cash and
cash equivalents (59) (102)
Cash and cash equivalents at
beginning of period 711 929
------- -------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 652 $ 827
------- -------
------- -------
See accompanying notes to financial statements.
- 5 -
<PAGE>
PERFECTDATA CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. In the opinion of the Company, the unaudited consolidated financial
statements contained in this report have been prepared on a basis
consistent with the financial statements contained in the Company's Annual
Report on Form 10-K for the year ended March 31, 1996. All adjustments
included in the financial statements are of a normal recurring nature and
are necessary to present fairly the Company's financial position as of
September 30, 1996 and the results of its operations and cash flows for the
six months ended September 30, 1996 and 1995.
2. Marketable securities classified as current assets at September 30, 1996,
include the following (dollars in thousands):
FAIR VALUE COST
---------- ----
U.S. Treasury obligations $ 53 $ 52
Corporate debt securities 10 10
Marketable equity securities 261 273
----- -----
$ 324 $ 335
----- -----
----- -----
3. Inventories are stated at the lower of cost (determined by the first-in,
first-out method) or market. Inventories at September 30, 1996 and
March 31, 1996 consist of the following:
(In thousands)
Sept. 30, 1996 March 31, 1996
-------------- --------------
Raw materials $ 470 $ 462
Work in process 151 148
Finished products 646 635
------ ------
$1,267 $1,245
------ ------
------ ------
4. Property, plant and equipment consist of (dollars in thousands):
Sept. 30, 1996 March 31, 1996
-------------- --------------
Machinery and equipment $ 488 $ 479
Furniture and fixtures 149 149
Tooling 711 711
Leasehold improvements 155 155
------- -------
1,503 1,494
Less accumulated
depreciation (1,309) (1,246)
------- -------
$ 194 $ 248
------- -------
------- -------
- 6 -
<PAGE>
5. During the quarter ended June 30, 1996, the Company issued 27,500 shares of
Common Stock under the 1985 Employee Stock Option Plan for consideration of
$29,219.
During the quarter ended June 30, 1996, the Company repurchased an
aggregate of 2,000 shares of the Company's Common Stock on the open market,
for an aggregate value of $2,379.
6. Net earnings (loss) per share is based on the weighted average number of
shares outstanding during each of the respective periods. Common stock
equivalents are excluded from the calculation of weighted average shares
outstanding as their effect is immaterial or antidilutive.
- 7 -
<PAGE>
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net sales from continuing operations for the second fiscal quarter ended
September 30, 1996 was $1,474,000 compared to $1,495,000 in the year-earlier
period. Net sales for the six months ended September 30, 1996 were $2,910,000
compared to $3,002,000 in the year-earlier period. Although sales have
decreased a modest 3% due to lower selling prices, unit volume has increased
more than 13% from the year-earlier periods.
In June of 1996 the Company appointed a new Director of Sales and Marketing, Mr.
Al Pramschufer. Mr. Pramschufer came to PerfectData with vast experience and an
accomplished background, having served as Vice President of Sales and Marketing
at several corporations.
The Company took an aggressive sales posture, reducing selling prices on some
items and penetrating new markets. Registrant further expanded its distribution
subsequent to the quarter's end by becoming the approved vendor to the 300+
dealers of the National Purchasing Association. PerfectData also strengthened
its field sales apparatus with the addition of several new key sales
representative organizations.
The decline in net earnings from continuing operations from the year-earlier
period is directly related to lower selling prices. Management continues to
monitor and tighten cost controls including an aggressive approach to product
purchasing. Subsequent to the quarter ended September 30, 1996, the Company
restructured and downsized as well as lowered its product costs.
As previously discussed in the Company's Form 10-K for the fiscal year ended
March 31, 1996, the Company appealed the judgement awarded a former employee
relating to an employment contract. The loss on discontinued operations at
September 30, 1996 is due to legal fees incurred relative to the appeal.
Unit sales and market share are monitored regularly to position the Company for
accelerated growth and profitability.
LIQUIDITY AND CAPITAL RESOURCES
The Company continues to maintain a strong financial position. Current assets
were $3,709,000 compared to current liabilities of $692,000 at September 30,
1996 for a current ratio of better than 5 to 1. Working capital at September
30, 1996 was $3,017,000 compared to $2,935,000 at fiscal year end.
The Company continues to maintain a line of credit for $1,000,000, which it has
not yet used. Management believes that future working capital requirements will
be provided primarily from operations and that the Company's liquidity and
working capital requirements are adequate for the foreseeable future.
Management feels that the Company's credit worthiness is substantial, relative
to its size.
- 8 -
<PAGE>
PART II. OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
Inapplicable.
(b) Reports on Form 8-K.
No report on Form 8-K was filed during the quarter for which this
report is filed.
- 9 -
<PAGE>
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.
PERFECTDATA CORPORATION
Date: November 11, 1996 /s/ Joseph Mazin
-------------------- -------------------------------
Joseph Mazin
President,
Chief Executive Officer and
Chairman of the Board
Date: November 11, 1996 /s/ Irene J. Marino
-------------------- -------------------------------
Irene J. Marino
Corporate Secretary,
V.P. Finance and
Chief Financial Officer
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> APR-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 652
<SECURITIES> 324
<RECEIVABLES> 868
<ALLOWANCES> 11
<INVENTORY> 1,267
<CURRENT-ASSETS> 3,709
<PP&E> 1,503
<DEPRECIATION> 1,309
<TOTAL-ASSETS> 4,535
<CURRENT-LIABILITIES> 692
<BONDS> 0
0
0
<COMMON> 8,053
<OTHER-SE> (4,221)
<TOTAL-LIABILITY-AND-EQUITY> 4,535
<SALES> 2,910
<TOTAL-REVENUES> 2,910
<CGS> 1,930
<TOTAL-COSTS> 1,930
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 21
<INCOME-TAX> 1
<INCOME-CONTINUING> 20
<DISCONTINUED> (19)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
