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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 June 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 July 31, 1996, there were 3,094,500 shares of common stock outstanding.
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PERFECTDATA CORPORATION
INDEX
PAGE
PART I. FINANCIAL INFORMATION
Consolidated Balance Sheets -
June 30, 1996 and March 31, 1996 2
Consolidated Statements of Earnings -
quarters ended June 30, 1996
and 1995 3
Consolidated Statements of Shareholders'
Equity - three months ended
June 30, 1996 4
Consolidated Statements of Cash Flows -
three months ended June 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 1. Legal Proceedings 9
Item 6. Exhibits and Reports on Form 8-K 9
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PERFECTDATA CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands, except number of shares)
June 30, March 31
1996 1996
------- -------
ASSETS
Current assets
Cash and cash equivalents, including
short-term certificates of deposit of
$160 at June and at March $ 700 $ 711
Accounts receivable, less allowance
for doubtful receivables of
$11 at June and at March 825 906
Inventories 1,417 1,245
Prepaid expenses and other current assets 117 85
Marketable securities, short-term 326 323
Current assets of discontinued operations 88 88
Deposit on litigation award 305 305
Deferred income tax benefit 108 117
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Total current assets 3,886 3,780
Property, plant and equipment, net 216 248
Deferred Income Tax benefit 610 603
Other assets, net 19 19
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$ 4,731 $ 4,650
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 423 $ 381
Accrued expenses 186 193
Accrued salaries, wages and vacation 61 68
Current liabilities of discontinued
operations 203 203
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Total current liabilities 873 845
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Minority Interest 13 12
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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
June and 3,069,000 shares at March 8,053 8,026
Accumulated deficit (4,209) (4,211)
Allowance for gain (loss) on
marketable securities 1 (22)
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Net shareholders' equity 3,845 3,793
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$ 4,731 $ 4,650
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------- -------
See accompanying notes to financial statements.
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PerfectData Corporation and Subsidiary
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
- - --------------------------------------------------------------------------------
(Dollars in thousands, except per share amounts)
- - --------------------------------------------------------------------------------
Three Months Ended
June 30,
1996 1995
- - --------------------------------------------------------------------------------
Net sales $ 1,436 $ 1,507
Costs and Expenses:
Cost of sales 918 993
Selling, general and administrative 511 516
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Total costs and expenses 1,429 1,509
Income (loss) from operations 7 (2)
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Other income and (expense):
Interest income, net 9 8
Minority Interest Expense (1) -
Other, net 9 12
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Total other income and (expense) 17 20
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Income from continuing operations before
income taxes 24 18
Income tax provision 3 13
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Income from continuing operations 21 5
Gain (loss) on disposal of
discontinued operations (19) -
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Net income (loss) $ 2 $ 5
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Net income (loss) per common share:
Income from continuing operations $ .01 $ -
Gain (loss) on disposal of
discontinued operations (.01) -
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$ - $ -
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Weighted average shares outstanding 3,074 3,137
See accompanying notes to financial statements.
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PerfectData Corporation and Subsidiary
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Unaudited)
- - --------------------------------------------------------------------------------
(In thousands)
Period from March 31, 1996 through June 30, 1996
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Allowance Net
Common Stock for gain/ share-
------------------- Accumulated (loss) on holders'
Shares Amount deficit mkt. sec. equity
- - ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
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 - - - 23 23
Net earnings - - 2 - 2
- - ----------------------------------------------------------------------------------------------------------------
Balance at
June 30, 1996 3,095 $8,053 $(4,209) $ 1 $3,845
- - ----------------------------------------------------------------------------------------------------------------
- - ----------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
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PERFECTDATA CORPORATION
STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
Three Month Period Ended
June 30,
------------------------
1996 1995
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 2 $ 5
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
(Gain) loss on disposal of
discontinued operations 19 -
Depreciation and amortization 32 32
Deferred income tax (benefit) provision 2 13
(Increase) decrease in accounts
receivable 81 166
(Increase) decrease in inventories (172) (89)
(Increase) decrease in prepaid
expenses and other current assets (32) 10
(Increase) decrease in other assets - 1
Increase (decrease) in accounts
payable 42 (183)
Increase (decrease) in accrued
expenses (7) (55)
Increase (decrease) in accrued
salaries, wages and vacation (7) (2)
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NET CASH PROVIDED (USED) BY
OPERATING ACTIVITIES (40) (102)
------- -------
CASH FLOW FROM INVESTING ACTIVITIES:
Purchases of property, plant, and
equipment $ - $ (2)
(Increase) decrease in investment
securities, net 20 17
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NET CASH PROVIDED BY
INVESTING ACTIVITIES 20 15
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Contributions from minority interest 1 -
Exercise of stock options 29 -
Repurchase of common stock (2) (39)
------- -------
NET CASH PROVIDED (USED) BY
FINANCING ACTIVITIES 28 (39)
------- -------
NET CASH PROVIDED (USED) BY
CONTINUING OPERATIONS 8 (126)
CASH PROVIDED (USED) IN
DISCONTINUED OPERATIONS (19) -
------- -------
Increase (decrease) in cash and
cash equivalents (11) (126)
Cash and cash equivalents at
beginning of period 711 929
------- -------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 700 $ 803
------- -------
------- -------
See accompanying notes to financial statements.
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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 June
30, 1996 and the results of its operations and cash flows for the three
months ended June 30, 1996 and 1995.
2. Marketable securities classified as current assets at June 30, 1996,
include the following (dollars in thousands):
Fair Value Cost
------------------ ----
U.S. Treasury obligations $ 52 $ 51
Corporate debt securities 10 10
Marketable equity securities 264 264
-------------------------
$ 326 $ 325
-------------------------
-------------------------
3. Inventories are stated at the lower of cost (determined by the first-in,
first-out method) or market. Inventories at
June 30, 1996 and March 31, 1996 consist of the following:
(In thousands)
June 30, 1996 March 31, 1996
--------------- --------------
Raw materials $ 526 $ 462
Work in process 168 148
Finished products 723 635
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$1,417 $1,245
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4. Property, plant and equipment consist of (dollars in thousands):
June 30, 1996 March 31, 1996
------------- --------------
Machinery and equipment $ 479 $ 479
Furniture and fixtures 149 149
Tooling 711 711
Leasehold improvements 155 155
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1,494 1,494
Less accumulated
depreciation (1,278) (1,246)
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$ 216 $ 248
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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.
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Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net sales from continuing operations for the first fiscal quarter ended June 30,
1996 were $1,436,000 compared to $1,507,000 in the year-earlier period. The
modest decrease in sales was primarily due to lower selling prices; unit volume
was up slightly.
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.
During the current quarter the Company introduced several new products and
anticipates this new business to contribute to the fourth quarter results.
For the first quarter ended June 30, 1996, the Company had a modest turnaround
with income from operations of $7,000 compared to a loss of $2,000 in the year
earlier period. The Company had income from continuing operations of $21,000
compared to $5,000 in the year-earlier period.
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 for the
current quarter is due to legal fees incurred relative to the appeal.
LIQUIDITY AND CAPITAL RESOURCES
The Company continues to maintain a strong financial position. Current assets
were $3,886,000 compared to current liabilities of $873,000 at June 30, 1996 for
a current ratio of better than 4 to 1. Working capital at June 30, 1996 was
$3,013,000 compared to $2,935,000 at fiscal year end. Cash and cash equivalents
decreased slightly to $700,000 as of June 30, 1996 from $711,000 as of March 31,
1996.
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.
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PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
A lawsuit was filed against PerfectData Corporation in the Superior
Court of Orange County, California, on May 11, 1995. The lawsuit
involved product liability resulting in a loss of life.
On June 4, 1996, judgement was found in favor of the Company with no
liability. On July 30, 1996, a motion filed by the plaintiff for a
new trial was denied. The plaintiff has ninety days in which to file
a notice of appeal. As of the date of this Form 10-Q filing, no
appeal has been filed.
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.
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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.
PERFECTDATA CORPORATION
Date: AUGUST 9, 1996 Joseph Mazin
-------------- -----------------------------------
Joseph Mazin
President,
Chief Executive Officer and
Chairman of the Board
Date: August 9, 1996 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> 3-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> APR-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 700
<SECURITIES> 326
<RECEIVABLES> 836
<ALLOWANCES> 11
<INVENTORY> 1,417
<CURRENT-ASSETS> 3,886
<PP&E> 1,494
<DEPRECIATION> 1,278
<TOTAL-ASSETS> 4,731
<CURRENT-LIABILITIES> 873
<BONDS> 0
0
0
<COMMON> 8,053
<OTHER-SE> (4,208)
<TOTAL-LIABILITY-AND-EQUITY> 4,731
<SALES> 1,436
<TOTAL-REVENUES> 1,436
<CGS> 918
<TOTAL-COSTS> 918
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 24
<INCOME-TAX> 3
<INCOME-CONTINUING> 21
<DISCONTINUED> (19)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
