FORM 10--Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-14659
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TECHDYNE, INC.
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(Exact name of registrant as specified in its charter)
Florida 59-1709103
- --------------------------------------------- -------------------
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
2230 West 77th Street, Hialeah, Florida 33016
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(Address of principal executive offices) (Zip Code)
(305) 556-9210
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(Registrant's telephone number, including area code)
NOT APPLICABLE
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(Former name, former address and former fiscal year, if changed
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 reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes [x] or No [ ]
Common Stock Outstanding
Common Stock, $.01 par value - 5,250,167 shares as of August 10,
1998.
<PAGE>
TECHDYNE, INC. AND SUBSIDIARIES
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INDEX
PART I -- FINANCIAL INFORMATION
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The Consolidated Condensed Statements of Income (Unaudited) for the
three months and six months ended June 30, 1998 and June 30, 1997 include
the accounts of the Registrant and its subsidiaries.
Item 1. Financial Statements
- ------ --------------------
(1) Consolidated Condensed Statements of Income for the three
months and six months ended June 30, 1998 and June 30, 1997.
(2) Consolidated Condensed Balance Sheets as of June 30, 1998
and December 31, 1997.
(3) Consolidated Condensed Statements of Cash Flows for the six
months ended June 30, 1998 and June 30, 1997.
(4) Notes to Consolidated Condensed Financial Statements as of
June 30, 1998.
Item 2. Management's Discussion and Analysis of Financial Condition and
- ------ ---------------------------------------------------------------
Results of Operations
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PART II -- OTHER INFORMATION
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Item 4. Submission of Matters to a Vote of Security Holders
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Item 5. Other Information
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Item 6. Exhibits and Reports on Form 8-K
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<PAGE>
PART I -- FINANCIAL INFORMATION
---------------------------------
Item 1. Financial Statements
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TECHDYNE, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------- -------------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Sales $11,614,077 $ 6,641,712 $23,486,098 $12,984,487
Interest and other income 40,379 36,292 71,096 76,624
----------- ----------- ----------- -----------
11,654,456 6,678,004 23,557,194 13,061,111
Cost and expenses:
Cost of goods sold 10,107,341 5,651,657 20,268,740 11,006,499
Selling, general and
administrative expenses 834,383 685,825 1,860,652 1,356,302
Interest expense 155,338 72,275 320,849 142,255
----------- ----------- ----------- -----------
11,097,062 6,409,757 22,450,241 12,505,056
----------- ----------- ----------- -----------
Income before income taxes 557,394 268,247 1,106,953 556,055
Income tax provision (benefit) 11,981 (1,515) 51,573 (49,029)
----------- ----------- ----------- -----------
Net income $ 545,413 $ 269,762 $ 1,055,380 $ 605,084
=========== =========== =========== ===========
Earnings per share:
Basic $.11 $.06 $.21 $.14
==== ==== ==== ====
Diluted $.08 $.05 $.16 $.11
==== ==== ==== ====
</TABLE>
See notes to consolidated condensed financial statements.
<PAGE>
TECHDYNE, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997(A)
---- -------
(Unaudited)
ASSETS
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 1,662,803 $ 1,451,564
Accounts receivable, less allowances of $52,000
at June 30, 1998 and $54,000 at December 31, 1997 5,726,864 5,707,471
Inventories, less allowances for obsolescence of
$392,000 at June 30, 1998 and $223,000 at
December 31, 1997 8,554,895 8,325,309
Prepaid expenses and other current assets 523,192 574,250
Deferred tax asset 1,010,558 1,010,558
------------ ------------
Total current assets 17,478,312 17,069,152
Property and Equipment:
Land and improvements 200,400 198,000
Buildings and building improvements 773,838 764,571
Machinery and equipment 6,425,642 6,176,733
Tools and dies 844,844 844,132
Leasehold improvements 297,524 241,934
------------ ------------
8,542,248 8,225,370
Less accumulated depreciation 3,470,226 2,984,825
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5,072,022 5,240,545
Deferred expenses and other assets 80,562 79,707
Costs in excess of net tangible assets acquired, less
accumulated amortization of $133,000 at June 30, 1998
and $85,000 at December 31, 1997 2,741,834 2,235,743
------------ ------------
$ 25,372,730 $ 24,625,147
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Short-term bank borrowings $ $ 548,698
Accounts payable 4,108,237 4,214,639
Accrued expenses 1,848,196 1,745,926
Current portion of long-term debt 855,529 909,080
Income taxes payable 165,844 103,559
------------ ------------
Total current liabilities 6,977,806 7,521,902
Deferred gain on sale of real estate 161,047 161,047
Deferred income taxes 508,203 507,003
Long-term debt, less current portion 4,253,554 4,619,066
Advances from parent 2,470,010 2,307,221
Commitments and Contingencies
Stockholders' Equity:
Common stock, $.01 par value, authorized 10,000,000
shares; issued and outstanding 5,250,167 shares at
June 30, 1998 and 5,135,167 at December 31, 1997 52,501 51,351
Capital in excess of par value 11,131,176 10,612,691
Deficit (50,268) (1,105,648)
Accumulated other comprehensive income- foreign currency
translation adjustments (17,449) (49,486)
Notes receivable from options exercise (113,850)
------------ ------------
Total stockholders' equity 11,002,110 9,508,908
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$ 25,372,730 $ 24,625,147
============ ============
</TABLE>
(A) Reference is made to the Company's Annual Report on Form 10-K for
the year ended December 31, 1997 filed with the Securities and
Exchange Commission in March 1998.
See notes to consolidated condensed financial statements.
<PAGE>
TECHDYNE, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-------------------------
1998 1997
---- ----
<S> <C> <C>
Operating activities:
Net income $1,055,380 $ 605,084
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation 488,353 187,500
Amortization 53,458 8,118
Provision for inventory obsolescence 235,393 40,468
Bad debt expense 551
Deferred income taxes 1,956
Consultant stock option expense 4,635
Increase (decrease) relating to operating activities from:
Accounts receivable (7,201) (776,876)
Inventories (451,396) (769,825)
Prepaid expenses and other current assets 55,213 (106,879)
Accounts payable (113,254) 58,051
Accrued expenses 97,602 215,511
Income taxes payable 62,285 (50,740)
---------- ----------
Net cash provided by (used in) operating activities 1,481,019 (587,632)
Investing activities:
Additions to property and equipment, net of minor
disposals (302,276) (301,146)
Subsidiary acquisition payments (153,818)
Deferred expenses and other assets (6,490) (92,152)
---------- ----------
Net cash used in investing activities (462,584) (393,298)
Financing activities:
Short-term line of credit payments (548,698)
Payments on long-term debt (425,882) (59,167)
Exercise of stock options and warrants 1,150 194,328
Increase (decrease) in advances from parent 162,789 263,118
Deferred financing costs 169 1,238
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Net cash (used in) provided by financing activities (810,472) 399,517
Effect of exchange rate fluctuations on cash 3,276 (85,790)
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Increase (decrease) in cash and cash equivalents 211,239 (667,203)
Cash and cash equivalents at beginning of year 1,451,564 3,954,047
---------- ----------
Cash and cash equivalents at end of period $1,662,803 $3,286,844
========== ==========
</TABLE>
See notes to consolidated condensed financial statements.
<PAGE>
TECHDYNE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
June 30, 1998
(Unaudited)
NOTE 1--Summary of Significant Accounting Policies
Consolidation
The consolidated financial statements include the accounts of
Techdyne, Inc. ("Techdyne") and its subsidiaries, including Lytton
Incorporated ("Lytton"), Techdyne (Scotland) Limited ("Techdyne
(Scotland)"), and Techdyne (Livingston) Limited which is a subsidiary of
Techdyne (Scotland), collectively referred to as the "Company." All
material intercompany accounts and transactions have been eliminated in
consolidation. The Company is a 61.5% owned subsidiary of Medicore,
Inc. (the "Parent"). See Note 5.
Major Customers
A majority of the Company's sales are to certain major customers.
The loss of or substantially reduced sales to any of these customers
would have an adverse effect on the Company's operations if such sales
were not replaced.
Inventories
Inventories, which consist primarily of raw materials used in the
production of electronic components, are valued at the lower of cost
(first-in, first-out method) or market value. The cost of finished goods
and work in process consists of direct materials, direct labor and an
appropriate portion of fixed and variable manufacturing overhead. In-
ventories are comprised of following:
June 30, December 31,
1998 1997
---------- -----------
Finished goods $ 675,227 $ 554,903
Work in process 2,073,190 1,772,724
Raw materials and supplies 5,806,478 5,997,682
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$8,554,895 $8,325,309
========== ==========
Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets is comprised as follows:
June 30, December 31,
1998 1997
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United Kingdom VAT tax receivable $ 58,595 $ 283,106
Other 464,597 291,144
---------- ----------
$ 523,192 $ 574,250
========== ==========
Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities is comprised as
follows:
June 30, December 31,
1998 1997
---------- -----------
United Kingdom VAT tax payable $ 184,098 $ 342,112
Accrued compensation 729,222 493,660
Other 934,876 910,154
---------- ----------
$1,848,196 $1,745,926
========== ==========
<PAGE>
TECHDYNE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS--(Continued)
June 30, 1998
(Unaudited)
NOTE 1--Summary of Significant Accounting Policies--(Continued)
Earnings per Share
In February 1997, the Financial Accounting Standards Board issued
FAS 128, "Earnings Per Share," which was adopted on December 31, 1997
requiring a change in the method previously used to compute earnings per
share and restatement of all prior periods. The new requirements for
calculating basic earnings per share exclude the dilutive effect of
stock options and warrants. Earnings per share under the diluted compu-
tation required under FAS 128 includes the dilutive effect of stock
options and warrants using the treasury stock method and average market
price, shares assumed to be converted on the conversion of the con-
vertible promissory note to the Company's Parent with earnings adjusted
for interest expense related to the convertible promissory note which
is assumed to be converted, and contingent shares for the stock price
guarantee for the acquisition of Lytton.
Following is a reconciliation of amounts used in the basic and
diluted computations:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
----------------------- -----------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income - numerator basic computation $ 545,413 $ 269,762 $1,055,380 $ 605,084
Effect of dilutive securities:
Interest adjustment on convertible note 33,364 43,630 66,261 86,649
---------- ---------- ---------- ----------
Net income, as adjusted for assumed
conversion-numerator diluted computation $ 578,777 $ 313,392 $1,121,641 $ 691,733
========== ========== ========== ==========
Weighted average shares - denominator
basic computation 5,135,167 4,334,590 5,135,167 4,316,329
Effect of dilutive securities:
Warrants 95,108 175,484
Stock options 323,846 258,758 326,377 258,810
Contingent stock - acquisition 233,333 233,333
Convertible note 1,337,910 1,749,563 1,328,544 1,737,315
---------- ---------- ---------- ----------
Weighted average shares, as adjusted -
denominator 7,030,256 6,438,019 7,023,421 6,487,938
========== ========== ========== ==========
Earnings per share:
Basic $.11 $.06 $.21 $.14
==== ==== ==== ====
Diluted $.08 $.05 $.16 $.11
==== ==== ==== ====
</TABLE>
In addition to the dilutive stock options and warrants included in
the reconciliation above, neither the 1995 publicly offered warrants
exercisable at $5.00 per share nor underwriter warrants to purchase
100,000 shares of common stock and/or 100,000 warrants exercisable at
$6.60 per share and $.25 per warrant with each warrant exercisable into
common stock at $8.25 per share have been included since they were anti-
dilutive.
Comprehensive Income
The Company has adopted the provisions of Financial Accounting
Standards Board Statement No. 130, "Reporting Comprehensive Income"
(FAS 130) in 1998 which is required by FAS 130 for fiscal years beginning
after December 15, 1997. FAS 130 requires the presentation of compre-
hensive income and its components in the financial statements and the
accumulated balance of other comprehensive income separately from
retained earnings and additional paid in capital in the equity section
of the balance sheet. The adoption of FAS 130 has no impact on the
Company's net income or stockholders' equity. The only component of
other comprehensive income in the Company's balance sheet is foreign
currency translation adjustments which even prior to adoption of FAS
130 would have been separately reported in stockholders' equity.
<PAGE>
TECHDYNE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS--(Continued)
June 30, 1998
(Unaudited)
NOTE 1--Summary of Significant Accounting Policies--(Continued)
Below is a detail of comprehensive income for the three months and
six months ended June 30, 1998 and June 30, 1997:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
----------------------- -----------------------
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Net income $ 545,413 $ 269,762 $1,055,380 $ 605,084
Other comprehensive income (loss):
Foreign currency translation (1,702) 35,111 32,037 (118,082)
---------- ---------- ---------- ----------
Comprehensive income $ 543,711 $ 304,873 $1,087,417 $ 487,002
========== ========== ========== ==========
</TABLE>
Segment Reporting
The Company has adopted the provisions of Financial Accounting
Standards Board Statement No. 131, "Disclosures About Segments of an
Enterprise and Related Information" (FAS 131) in 1998 which is required
by FAS 131 for fiscal years beginning after December 15, 1997. FAS 131
establishes standards for reporting information about operating segments
in annual financial statements with operating segments representing
components of an enterprise evaluated by the enterprise's chief
operating decision maker for purposes of making decisions regarding
resource allocation and performance evaluation. FAS 131 also requires
that certain segment information be presented in interim financial
statements. Interim information is not required in the first year of
implementation; however, in subsequent years in which the first year of
implementation is a comparative year, any required interim information
for the initial year of implementation must be presented. The Company
does not believe that adoption of FAS 131 will significantly change its
segment reporting disclosures.
Reclassifications
Certain reclassifications have been made to the 1997 financial
statements to conform to the 1998 presentation.
NOTE 2--Interim Adjustments
The financial summaries for the three months and six months ended
June 30, 1998 and June 30, 1997 are unaudited and include, in the
opinion of management of the Company, all adjustments (consisting of
normal recurring accruals) necessary to present fairly the earnings for
such periods. Operating results for the three months and six months
ended June 30, 1998 are not necessarily indicative of the results that
may be expected for the entire year ending December 31, 1998.
While the Company believes that the disclosures presented are
adequate to make the information not misleading, it is suggested that
these Consolidated Condensed Financial Statements be read in conjunc-
tion with the financial statements and notes included in the Company's
latest annual report for the year ended December 31, 1997.
NOTE 3--Long-term Debt
The Company's $1,600,000 line of credit effective December 29, 1997
had an outstanding balance of $1,000,000 at June 30, 1998 and at December
31, 1997. This line matures May 1, 2000 and has monthly payments of
interest at prime. The new commercial term loan effective December 29,
1997 with an initial principal balance of $1,500,000 had an outstanding
balance of $1,350,000 at June 30, 1998 and $1,500,000 at December 31,
1997, matures December 15, 2002 with monthly principal payments of
$25,000 plus interest. In connection with the term loan, the
<PAGE>
TECHDYNE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS--(Continued)
June 30, 1998
(Unaudited)
NOTE 3--Long-term Debt--(Continued)
Company entered into an interest rate swap agreement with the bank to
manage the Company's exposure to interest rates by effectively con-
verting a variable rate obligation with an interest rate of LIBOR plus
2.25% to a fixed rate of 8.60%.
The bank also extended two commercial term loans to the Company in
February 1996, one for $712,500 for five years expiring on February 7,
2001 at an annual rate of interest equal to 8.28% with a monthly payment
of principal and interest of $6,925 based on a 15-year amortization
schedule with the unpaid principal and accrued interest due on the
expiration date. This term loan had an outstanding balance of approxi-
mately $651,000 at June 30, 1998 and $663,000 at December 31, 1997 and
is secured by a mortgage on properties in Hialeah, Florida owned by the
Company's Parent. The second commercial term loan was for the
principal amount of $200,000 for a period of five years bearing
interest at a per annum rate of 1.25% over the bank's prime rate and
requiring monthly principal payments with accrued interest of $3,333
through expiration on February 7, 2001. This $200,000 term loan which
had a balance of approximately $107,000 at June 30, 1998 and $127,000 at
December 31, 1997 is secured by all of Techdyne's tangible personal
property, goods and equipment, and all cash or noncash proceeds of such
collateral.
The Parent has unconditionally guaranteed the payment and performance
by the Company of the revolving loan and the three commercial term loans
and has subordinated the Company's intercompany indebtedness to the Parent
to the bank's position.
Lytton has a $1,500,000 revolving bank line of credit requiring
monthly interest payments at prime plus 1/2% which matures August 1, 1998.
The interest rate on this loan was 9% at June 30, 1998 and December 31,
1997. There was no outstanding balance on this loan as of June 30, 1998
with $549,000 outstanding at December 31, 1997. Lytton has a $1,000,000
installment loan with the same bank maturing August 1, 2002, at an annual
rate of 9% until July 1999, with monthly payments of $16,667 plus
interest, at which time Lytton will have an option to convert the note
to a variable rate. The balance outstanding on this loan was approxi-
mately $833,000 at June 30, 1998 and $933,000 as of December 31, 1997.
Lytton also has a $500,000 equipment loan agreement with the same bank
payable over four years through August 1, 2002 with the same interest
rate as the installment loan. There was no outstanding balance on this
loan as of June 30, 1998 or December 31, 1997. All of these bank loans
are secured by the business assets of Lytton.
The prime rate was 8.5% as of June 30, 1998 and December 31, 1997.
Lytton conducts a portion of its operations with equipment acquired
under equipment financing obligations which extend through July 1999 with
interest rates ranging from 8.55% to 10.09%. The remaining principal
balance under these financing obligations amounted to $283,000 at June
30, 1998 and $390,000 at December 31, 1997. Lytton has an equipment loan
at an annual interest rate of 5.5% maturing in April 2001 with monthly
payments of principal and interest of $4,298. This loan has a balance of
approximately $178,000 at June 30, 1998 and $198,000 at December 31, 1997
and is secured by equipment.
Techdyne (Scotland) had a line of credit with a Scottish bank with a
U.S. dollar equivalency of approximately $330,000 at December 31, 1997
which is not being renewed. This line of credit operated as an overdraft
facility, was secured by assets of Techdyne (Scotland) and guaranteed by
Techdyne. No amounts were drawn on this line of credit during 1998 and no
amounts were outstanding under the line as of December 31, 1997. Techdyne
(Scotland) has a mortgage on its facility which had a principal balance
with a U.S. dollar equivalency of $562,000 at June 30, 1998 and $569,000
at December 31, 1997.
Interest payments on long-term debt amounted to approximately
$124,000 and $267,000 for the three months and six months ended June
30, 1998 and $34,000 and $67,000 for the same periods of the preceding
year.
<PAGE>
TECHDYNE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS--(Continued)
June 30, 1998
(Unaudited)
NOTE 4--Income Taxes
Subsequent to the completion of the Company's public offering on
October 2, 1995, the Company files separate federal and state income
tax returns from its Parent, with its income tax liability reflected
on a separate return basis.
Deferred income taxes reflect the net tax effect of temporary dif-
ferences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax pur-
poses. For financial reporting purposes a valuation allowance of
approximately $850,000 has been recognized to offset the deferred tax
assets.
The Company had domestic income tax expense of approximately
$70,000 and $115,000 for the three months and six months ended June 30,
1998 and $6,000 and $15,000 for the same periods of the preceding year.
Techdyne (Scotland) had an income tax benefit of approximately
$58,000 and $63,000 for the three months and six months ended June 30,
1998 and $8,000 and $54,000 for the same periods of the preceding year.
Income tax payments for the three months and six months ended June
30, 1998 amounted to $16,000 and $54,000. There were no such payments
for the same period of the preceding year.
NOTE 5--Transactions with Parent
The Parent provides certain administrative services to the Company
including providing office space and general accounting assistance.
Effective October 1, 1996, the services provided to the Company by the
Parent were formalized under a two year service agreement for $408,000
per year. The amount of expenses covered under the service agreement
totaled $102,000 and $204,000 for the three months and six months ended
June 30, 1998 and for the same period of the preceding year.
The Company's demand convertible promissory note payable to the
Parent which bears interest at 5.7% had a balance including accrued
interest of approximately $2,358,000 at June 30, 1998 and $2,292,000
at December 31, 1997, and may be converted into common stock of the
Company at the option of the Parent at a conversion price of $1.75
per share. Advances from the Parent on the balance sheet includes
the convertible note balance and an advance payable to the Parent of
approximately $112,000 at June 30, 1998 and $15,000 at December 31,
1997 with interest at 5.7%. Interest on the advances amounted to
$35,000 and $69,000 for the three months and six months ended June 30,
1998 and $38,000 and $74,000 for the same periods of the preceding year
and is included in the net balance due the Parent. The Parent has
agreed not to require repayment of the intercompany advances prior to
July 1, 1999 and, therefore, the advances have been classified as
long-term at June 30, 1998.
The Company manufactures certain products for the Parent. Sales
of the products were $48,000 and $99,000 for the three months and six
months ended June 30, 1998 and $49,000 and $101,000 for the same periods
of the preceding year.
NOTE 6--Commitments and Contingencies
Lytton sponsors a 401(k) Profit Sharing Plan covering substantially
all of its employees. The discretionary profit sharing and matching
expense for the six months ended June 30, 1998 amounted to approximately
$21,000. The Company has adopted this plan as a participating employer
effective July 1, 1998. The plan has one year of service and 21 years of
age eligibility requirements.
<PAGE>
TECHDYNE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS--(Continued)
June 30, 1998
(Unaudited)
NOTE 6--Commitments and Contingencies--(Continued)
Lytton has a deferred compensation agreement with its President.
The agreement calls for monthly payments of $8,339 provided that
Lytton's cash flow is adequate to cover these payments with interest to
be calculated on any unpaid balance as of August 1, 1999. During the
six months ended June 30, 1998, a total of $58,000 was paid under this
agreement, leaving a balance of approximately $108,000 as of June 30,
1998.
Lytton leases its operating facilities from an entity owned by the
President of Lytton and his wife, the former owner. The lease expires
July 31, 2002 and requires monthly lease payments of approximately
$17,900 the first year, adjusted each year thereafter based upon the
Consumer Price Index.
The Company together with its Parent entered an agreement for
investor relations and corporate communications services as of May 15,
1998 for which the Company's portion of the monthly retainer is $2,500
per month plus expenses. Options for 25,000 shares of the Company's
common stock were issued as part of the agreement. See Note 7.
NOTE 7--Stock Options
In May 1994, the Company adopted a stock option plan for up to
250,000 options. Pursuant to this plan, in May 1994, the board of
directors granted 227,500 options to certain of its officers, directors
and employees. These options are exercisable at $1 per share through
May 24, 1999. On June 30, 1998, 115,000 of these options were exercised
leaving a balance of 56,600 outstanding. The Company received cash
payment of the par value and the balance in three year promissory notes,
presented in the Stockholders' Equity Section of the balance sheet with
interest at 5.16%.
On February 27, 1995 the Company granted stock options, not part of
the 1994 Plan, to directors of Techdyne and its subsidiaries for 142,500
shares exercisable at $1.75 per share through February 26, 2000. In
April 1996, the Company granted a stock option for 10,000 shares, not
part of the 1994 Plan, to its general counsel at the same price and terms
as the directors' options.
In June 1997, the Company adopted a Stock Option Plan for up to
500,000 options, and pursuant to the plan the board granted 375,000
options exercisable for five years through June 22, 2002 at $3.25 per
share.
As part of the consideration for the investor relations agreement,
the Company granted options for 25,000 shares of its common stock exer-
cisable for three years through May 14, 2001 at $4.25 per share. The
options vest and are exercisable quarterly on the basis of 25% at the
end of each quarter commencing June 30, 1998. Pursuant to FAS 123, the
Company recorded $4,635 expense for options vesting during the quarter
ended June 30, 1998. See Note 6.
NOTE 8--Common Stock
The Company completed a public offering of common stock and warrants
on October 2, 1995 providing it with net proceeds of approximately
$3,321,000. Pursuant to the offering, 1,000,000 shares of common stock
and 1,000,000 redeemable common stock purchase warrants were issued.
The warrants provided for the purchase of one common share, each with
an exercise price of $5.00 exercisable from September 13, 1995 through
September 12, 1998. During 1997, approximately 41,000 warrants were
exercised resulting in proceeds of approximately $194,000, net of com-
missions. The Company has extended the exercise period of the remaining
approximately 959,000 outstanding warrants to March 12, 1999. The
underwriter received warrants to purchase 100,000 shares of common stock
and/or 100,000 warrants exercisable from September 13, 1996 through
September 12, 2000 at $6.60 per share of common stock and $.25 per
warrant with each warrant exercisable into common stock at $8.25 per
share.
<PAGE>
TECHDYNE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS--(Continued)
June 30, 1998
(Unaudited)
NOTE 9--ACQUISITION
On July 31, 1997, the Company acquired Lytton, which manufactures
and assembles printed circuit boards and other electronic products, for
$2,500,000 cash, paid at closing, and issuance of 300,000 shares of the
Company's common stock which have been registered for the seller of
Lytton ("Seller"). The Company has guaranteed that the Seller will
realize a minimum of $2,400,000 from the sale of these shares of common
stock based on Lytton having achieved certain earnings objectives
resulting in an increase of $400,000 in the valuation of $2,000,000
originally recorded for these securities. The total purchase price in
excess of the fair value of net assets acquired which originally amounted
to approximately $2,230,000 will be amortized over 25 years. In addition,
additional contingent consideration will be due if Lytton achieves certain
sales levels defined in the Stock Purchase Agreement over a three year
period. Additional consideration of approximately $154,000 based on
sales levels was paid in April 1998 pursuant to the Stock Purchase Agree-
ment. As the contingencies are resolved, if additional consideration is
due, the then current fair value of the consideration will be recorded as
goodwill, which will be amortized over the remainder of the initial 25
year life. The acquisition was accounted for under the purchase method
of accounting and, accordingly, the results of operation of Lytton have
been included in the Company's statement of income since August 1, 1997.
The terms of the Guaranty in the Stock Purchase Agreement were
modified in June, 1998 by the Company and the Seller ("Modified Guar-
anty"). The modified terms provide that the Seller will sell an amount
of common stock which will provide $1,300,000 gross proceeds, and the
Company will guarantee that, to the extent that the Seller has less than
150,000 shares of the Company's common stock remaining, the Company will
issue additional shares to the Seller. In July 1998, the Company
advanced the Seller approximately $1,278,000 ("Advance") toward the
$1,300,000 from the sale of the Company's common stock in addition to
the Seller having sold 5,000 shares of common stock in July 1998. Pro-
ceeds from the sale of the Company's common stock owned by the Seller,
up to 195,000 shares, would repay the Advance and to the extent proceeds
from the sale of these shares were insufficient to pay the Advance, the
balance of the advance would be forgiven. The Company has also guar-
anteed that the Seller aggregate proceeds of no less than $1,100,000
from the sale of the remaining common stock if sold on or prior to July
31, 1999 ("Extended Guaranty").
The following pro forma consolidated condensed financial informa-
tion reflects the Lytton acquisition as if it had occurred on January 1,
1997. The pro forma financial information does not purport to represent
what the Company's actual results of operations would have been had the
acquisition occurred as of January 1, 1997 and may not be indicative of
operating results for any future periods.
SUMMARY PRO FORMA INFORMATION
Six Months Ended
June 30, 1997
----------------
Total revenues $ 22,277,000
============
Net income $ 935,000
============
Earnings per share:
Basic $.22
====
Diluted $.16
====
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
- ------ -----------------------------------------------------------
and Results of Operations
-------------------------
Forward-Looking Information
The statements contained in this Quarterly Report on Form 10-Q that
are not historical are forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securi-
ties Exchange Act of the 1934. The Private Securities Litigation Reform
Act of 1995 (the "Reform Act") contains certain safe harbors regarding
forward-looking statements. Certain of the forward-looking statements
include management's expectations, intentions and beliefs with respect
to the growth of the Company, the nature of the electronics industry in
which it is engaged as a manufacturer, the Company's business strategies
and plans for future operations, its needs for capital expenditures,
capital resources, liquidity and operating results, and similar ex-
pressions concerning matters that are not historical facts. Such
forward-looking statements are subject to risks and uncertainties that
could cause actual results to materially differ from those expressed in
the statements. All forward-looking statements included in this docu-
ment are based on information available to the Company on the date
hereof, and the Company assumes no obligation to update any such forward-
looking statement. The following cautionary statements are being made
pursuant to the provisions of the Reform Act with the intention of the
Company obtaining the benefits of the safe harbor provisions of the
Reform Act. Among the factors that could cause actual results to differ
materially are the factors detailed in the risks discussed in the "Risk
Factors" section included in the Company's Registration Statements, as
filed with the Securities and Exchange Commission ("Commission") Form
SB-2 (effective September 13, 1995), and Forms S-3, effective November
11, 1996 and November 4, 1997, respectively.
The Company has continued to depend upon a relatively small number
of customers for a significant percentage of its net revenue. Signifi-
cant reductions in sales to any of the Company's large customers would
have a material adverse effect on the Company's results of operations.
The level and timing of orders placed by a customer vary due to, among
other variables, attempts to balance inventory, design changes, demand
for products, competition and general economic conditions. Termination
of manufacturing relationships or changes, reductions or delays in
orders as had occurred in the past, could have an adverse effect on the
Company's results of operations or financial condition.
The industry segments served by the Company and the electronics
industry as a whole, are subject to rapid technological change and
product obsolescence. Discontinuance or modification of products
containing components manufactured by the Company could adversely affect
the Company's results of operations. The electronics industry is also
subject to economic cycles and has in the past experienced, and is
likely in the future to experience, recessionary periods. A general
recession in the electronics industry could have a material adverse
effect on the Company's business, financial condition and results of
operations.
Due to the Company's utilization of just-in-time inventory tech-
niques, the timely availability of many components is dependent on the
Company's ability to continuously develop accurate forecasts of
customer volume requirements. Component shortages could result in man-
ufacturing and shipping delays or increased component prices which
could have a material adverse effect on the Company's results of oper-
ations. It is important for the Company, and there are significant
risks involved, to efficiently manage inventory, proper timing of
expenditures and allocations of physical and personnel resources in
anticipation of future sales, the evaluation of economic conditions
in the electronics industry and the mix of products, whether PCBs,
wire harnesses, cables or turnkey products, for manufacture.
In 1997 the Company commenced upgrading its operations software
program by acquiring a new Visual Manufacturing software package. It
has been and will be integrating this new software system into all of
its facilities. Lytton and Techdyne (Scotland) anticipate installing
the Visual Manufacturing software system into their operations some-
time in early 1999, most likely with more sophisticated modifications
based upon the Company's experience with and internal technological
advances to the system.
It is anticipated that the Visual Manufacturing software will be
fully integrated by 1999. This system is anticipated to also resolve
the "year 2000" issue which relates to computer information processing
challenges associated with the upcoming millennium change facing public
and private corporations, businesses, and all levels of government to
ensure continued proper operations, management and reporting.
With respect to the year 2000 issue, the Company is communicating
with its key vendors, customers and other third parties with whom its
operations are essential to inquire of them their assessment of their
year 2000 issue and actions being taken to resolve it. To the extent
such third parties are potentially adversely affected by the year 2000
<PAGE>
Forward-Looking Information--Continued
issue, and such is not timely and properly resolved by such persons,
this could disrupt the Company's operations to the extent that the
Company will have to find alternative vendors or customers that have
resolved their year 2000 issue. No assurance can be given that the
Company's new Visual Manufacturing software program will be successful
in its anticipated operational benefits as assessed above or that the
Company's key vendors and customers will have successful conversion
programs, and that any such failures, whether relating to the manufac-
turing operational efficiencies or the year 2000 issue, will not have
a material adverse effect on the Company's business, results of opera-
tions or financial condition.
Although management believes that the Company's operations utilize
the assembly and testing technologies and equipment currently required
by the Company's customers, there can be no assurance that the Company's
process development efforts will be successful or that the emergence of
new technologies, industry standards or customer requirements will not
render the Company's technology, equipment or processes obsolete or
uncompetitive. In addition, to the extent that the Company determines
that new assembly and testing technologies and equipment are required to
remain competitive, the acquisition and implementation of such tech-
nologies and equipment are likely to require significant capital
investment.
Management intends to continue the Company's expansion of its geo-
graphic and customer base within the United States by continuing to
establish new manufacturing facilities and operations in areas to
better serve existing customers and to attract new OEMs, as well as
direct acquisition of contract manufacturing businesses complimentary
to the Company's operations. The Company will be competing with much
larger electronic manufacturing entities for such expansion opportuni-
ties. Further, any such transactions may result in potentially
dilutive issuance of equity securities, the incurrence of debt and amor-
tization expenses related to goodwill and other intangible assets, and
other costs and expenses, all of which could materially adversely affect
the Company's financial results. Such transactions also involve
numerous business risks, including difficulties in successfully inte-
grating acquired operations, technologies and products or formalizing
anticipated synergies, and the diversion of management's attention from
other business concerns. In the event that any such transaction does
occur, there can be no assurance as to the beneficial effect on the
Company's business and financial results.
The Company's results of operations are also affected by other
factors, including price competition, the level and timing of customer
orders, fluctuations in material costs, the overhead efficiencies
achieved by the Company in managing the costs of its operations, the
Company's experience in manufacturing a particular product, the timing
of expenditures in anticipation of increased orders, and selling,
general and administrative expenses. Accordingly, gross margins and
operating income margins have generally improved during periods of high
volume and high capacity utilization. The Company generally has idle
capacity and reduced operating margins during periods of lower-volume
production.
Quality control is also essential to the Company's operations, since
customers demand strict compliance with design and product specifications.
Any adverse change in the Company's excellent quality and process controls
could adversely affect its relationship with customers and ultimately its
revenues and profitability.
Results of Operations
Consolidated revenues increased approximately $4,976,000 (75%) and
$10,496,000 (80%) for the three months and six months ended June 30, 1998
compared to the preceding year. The increase was largely attributable to
the inclusion of sales of Lytton of $5,122,000 and $9,650,000. There was
an overall increase in domestic sales of $5,754,000 (120%) and $10,903,000
(112%), including Lytton, and a decrease in European sales of $782,000
(43%) and $401,000 (12%) compared to the same periods of the preceding
year. Interest and other income increased by approximately $4,000 for the
three months and decreased by approximately $6,000 for the six months
ended June 30, 1998 compared to the same periods of the preceding year,
due to lower interest income as a result of a decrease in funds invested.
Revenues of Techdyne (Scotland) continue to be highly dependent on
sales to Compaq, which, although substantially reduced, accounted for
approximately 26% of sales for the six months ended June 30, 1998 compared
to 50% for the same period of the preceding year. The bidding for Compaq
orders has become more competitive which has continued to result in sub-
stantial reductions in Compaq sales and lower profit margins on remaining
<PAGE>
Results of Operations--Continued
Compaq sales. Techdyne (Scotland) is pursuing new business development,
has offset some of the lost Compaq business with sales to other customers
and is continuing cost reduction efforts to remain competitive on Compaq
business. There can be no assurance as to the success of such efforts.
Approximately 46% of the Company's consolidated sales for the six
months ended June 30, 1998 were made to four customers. Customers gen-
erating at least 10% of sales included Motorola (13%) and PMI Food
Equipment Group (16%). PMI Food Equipment Group is Lytton's major
customer and represented 40% of Lytton's sales for the six months ended
June 30, 1998. The loss of, or substantially reduced sales to any major
customer, would have an adverse effect on the Company's operations if
such sales are not replaced.
Cost of goods sold as a percentage of sales amounted to 87% and
86% for the three months and six months ended June 30, 1998 compared
to 85% for the same periods of the preceding year reflecting changes
in product mix and a diversification of the Company's customer base,
including changes due to Lytton.
Selling, general and administrative expenses increased $149,000 and
$504,000 for the three months and six months ended June 30, 1998
compared to the same periods of the preceding year. The increase
resulted principally from inclusion of the selling, general and admin-
istrative expenses of Lytton. Selling general and administrative
expenses as a percent of sales were 7% and 8% for the three months
and six months ended June 30, 1998 compared to 10% for the same
periods of the preceding year.
Interest expense increased $83,000 and $179,000 for the three
months and six months ended June 30, 1998 compared to the same periods
of the preceding year. The increase reflects interest of approximately
$52,000 and $106,000 for the three months and six months ended June 30,
1998 associated with financing the Lytton acquisition and interest on
Lytton's debt and financing agreements of approximately $35,000 and
$78,000 for these periods. The prime rate was 8.5% at June 30, 1998 and
December 31, 1997.
Liquidity and Capital Resources
The Company had working capital of $10,501,000 at June 30, 1998, an
increase of $953,000 (10%) during the first six months of 1998. This
increase includes changes in components of working capital resulting
from overall increased sales levels and reflects Lytton's payment of
its outstanding line of credit balance which amounted to $549,000 at
December 31, 1997.
Included in the changes in components of working capital was an
increase of $211,000 in cash and cash equivalents, which included net
cash provided by operating activities of $1,481,000, net cash used in
investing activities of $463,000 (including $302,000 from additions to
property and equipment and $154,000 from additional consideration
regarding the Lytton acquisition) and net cash used in financing
activities of $810,000 (including short-term line of credit payments
of $549,000, payments on long-term debt of $406,000 and a net increase
in advances from the Parent of $163,000).
The Company has a five-year $1,500,000 ("notional amount under
interest rate swap agreement") commercial term loan with monthly prin-
cipal payments of $25,000 plus interest at 8.60%, which had an out-
standing balance of $1,350,000 at June 30, 1998 and $1,500,000 at
December 31, 1997 and a $1,600,000 commercial revolving line of credit
with interest at prime of which $1,000,000 was outstanding as of June
30, 1998 and December 31, 1997. The commercial term loan matures
December 15, 2002 and the commercial line of credit, no longer a demand
line, matures May 1, 2000. See Note 3 to "Notes to Consolidated
Condensed Financial Statements."
The Company had obtained in 1996 two other term loans from its
Florida bank. One is a $712,500 term loan, which had a remaining
principal balance of $651,000 at June 30, 1998 and $663,000 at December
31, 1997, and is secured by two buildings and land owned by the Parent.
The second term loan for $200,000, which had a remaining principal
balance of $107,000 at June 30, 1998 and $127,000 at December 31, 1997,
is secured by the Company's tangible personal property, goods and equip-
ment. The Parent has guaranteed the revolving line and the three term
loans and subordinated the intercompany indebtedness due it from the
Company, provided that the Company may make payments to the Parent on
this subordinated debt from additional equity that is injected into
the Company and from earnings, so long as the Company is otherwise in
compliance with the loan agreements. See Note 3 to "Notes to Consoli-
dated Condensed Financial Statements."
<PAGE>
Liquidity and Capital Resources--Continued
The Company has outstanding borrowings of $145,000 from a local bank
with interest payable monthly with the note, which was renewed during
1997, maturing April 2000.
Techdyne (Scotland) had a line of credit with a Scottish bank, with
an U.S. dollar equivalency of approximately $330,000 at December 31, 1997
that was secured by assets of Techdyne (Scotland) and guaranteed by the
Company. This line of credit, which is not being renewed, operated as
an overdraft facility. No amounts were drawn on this line of credit
during 1998 and no amount were outstanding as of December 31, 1997. In
July, 1994 Techdyne (Scotland) purchased the facility housing its opera-
tions for approximately $730,000, obtaining a 15-year mortgage which had
a U.S. dollar equivalency of approximately $562,000 at June 30, 1998 and
$569,000 at December 31, 1997, based on exchange rates in effect at each
of these dates. See Note 3 to "Notes to Consolidated Condensed Financial
Statements."
On July 31, 1997, the Company acquired Lytton, which is engaged in
the manufacture and assembly of PCBs and other electronic products for
commercial customers. This acquisition required $2,500,000 cash at
closing, funded by the modified bank line of credit, as well as 300,000
shares of the Company's common stock which had a fair value of approxi-
mately $1,031,000 based on the closing price of the Company's common
stock on the date of acquisition. The Company has guaranteed $2,400,000
minimum proceeds from the sale of these securities based on Lytton
having achieved certain earnings objectives. The Stock Purchase Agree-
ment also provides for incentive consideration to be paid in cash
based on specific sales levels of Lytton for each of three successive
specified years. Additional consideration of approximately $154,000
based on sales levels was paid in April 1998, with the Stock Purchase
Agreement providing for possible additional sales level incentives
over a two year period. Based upon the closing price of the Company's
common stock on June 30, 1998, the shares issued in the Lytton acquisi-
tion had a fair value of $1,350,000 which could result in additional
consideration of approximately $1,050,000 payable in either cash or in
approximately 233,000 shares of the Company's stock. The Lytton
acquisition has expanded the Company's customer base, broadened its
product line, enhanced its manufacturing capabilities and provided a
new geographic area to better serve the Company's existing customer
base with opportunities to attract new customers. See Note 9 to
"Notes to Consolidated Condensed Financial Statements."
The Guaranty in the Stock Purchase Agreement was modified by the
Company and the Seller. The Company advanced approximately $1,280,000
to Seller. In addition to the Seller having sold 5,000 shares of the
Company's common stock in July, 1998, the Seller is to sell sufficient
shares to yield aggregate proceeds of no more than $1,300,000 towards
the Modified Guaranty. Upon the sale of Seller's remaining shares up
to 195,000 shares, she will repay the Advance. The Company funded the
Advance to the Seller largely through a drawdown of the previously
unused $600,000 of its line of credit and advances from its Parent. To
the extent that Seller does not have 150,000 shares remaining the
Company would make up the difference. If the sale of shares is insuf-
ficient to repay the advance, the balance would be forgiven. Pursuant
to the Extended Guaranty, sale of the remaining shares is guaranteed to
yield no less than $1,100,000 if sold on or prior to July 1, 1999 or
else the Company will make up the difference in either cash or addi-
tional common stock or a combination of both. See Note 9 to "Notes to
Consolidated Financial Statements."
Lytton has a $1,500,000 revolving bank line of credit requiring
monthly interest payments at prime plus 1/2% which matures August 1,
1998. There was no outstanding balance on this loan as of June 30,
1998 with $549,000 outstanding at December 31, 1997. Lytton has a
$1,000,000 installment loan with the same bank maturing August 1, 2002,
at an annual rate of 9% until July 1999, with monthly payments of
$16,667 plus interest, at which time Lytton will have an option to
convert the note to a variable rate. The balance outstanding on this
loan was approximately $833,000 at June 30, 1998 and $933,000 as of
December 31, 1997. Lytton also has a $500,000 equipment loan agreement
with the same bank payable over four years through August 1, 2002 with
the same interest rate as the installment loan. There was no out-
standing balance on this loan as of June 30, 1998 or December 31,
1997. All of these bank loans are secured by the business assets of
Lytton. See Note 3 to "Notes to Consolidated Condensed Financial State-
ments."
Lytton conducts a portion of its operations with equipment acquired
under equipment financing obligations which extend through July 1999
with interest rates ranging from 8.55% to 10.09%. The remaining prin-
cipal balance under these financing obligations amounted to $283,000 at
June 30, 1998 and $390,000 at December 31, 1997. Lytton has an equip-
ment loan at an annual interest rate of 5.5% maturing in April 2001
with monthly payments of principal and interest of $4,298. This loan
has a balance of approximately $178,000 at June 30, 1998 and $198,000
at December 31, 1997 and is secured by equipment. See Note 3 to
"Notes to Consolidated Condensed Financial Statements."
<PAGE>
The Company anticipates that current levels of working capital and
working capital from operations, including those of Lytton, will be
adequate to successfully meet liquidity demands for at least the next
twelve months, including the financing obligations incurred in the
acquisition of Lytton.
Inflation
Inflationary factors have not had a significant effect on the
Company's operations. The Company attempts to pass on increased costs
and expenses by increasing selling prices when and where possible and
by developing different and improved products for its customers that
can be sold at targeted profit margins.
<PAGE>
PART II -- OTHER INFORMATION
----------------------------
Item 4. Submission of Matters to a Vote of Security Holders
- ------ ---------------------------------------------------
On June 10, 1998, the annual meeting of shareholders was held to
elect five members to the board of directors to serve until the next
annual meeting in 1999. Each nominee, all of whom have been directors
for many years, Messrs. Thomas K. Langbein, Barry Pardon, Joseph Verga,
Peter D. Fischbein and Anthony C. D'Amore, was elected by a vote of
3,567,237 shares for and no votes against. There were no abstentions
and no broker non-votes by virtue of the fact that the meeting was
called pursuant to an Information Statement under Regulation C of the
Securities Exchange Act of 1934 with no proxy solicitations, since the
parent, Medicore, Inc. owns 63% of the voting equity of the Company.
Item 5. Other Information
- ------ -----------------
Lytton, a wholly owned subsidiary acquired in July, 1997, sponsors
an Incentive Savings and Retirement Plan ("Plan"). On June 10, 1998,
the board adopted the Plan as a participating employer, effective July
1, 1998. Employee eligibility requires one year of service and 21 years
of age. The Plan is paid for entirely by employee pre-tax contributions
through salary deferrals (up to 15% of salary to a maximum per year of
$10,000). The Company may provide a limited percentage of the employee's
salary deferred contribution as a matching contribution, and as deter-
mined by the board of directors, a discretionary contribution. The
Plan provides for vesting schedules, benefit payments based on
different terminations with respect to salary deferred and regular
accounts, breaks in service, methods of payment, and related benefit
and termination provisions. Since the Plan is a defined contribution
plan and not a defined benefit pension plan, benefits under the Plan are
not insured by the Pension Benefit Guaranty Corporation. Trustees of
the Plan include officers and employees of Lytton.
In May, 1998, the Company sold an option to Joseph Dillon & Company,
Inc. ("Dillon") for $150,000 to be payable over several months but no
later than August 31, 1998. The option was for 500,000 shares of common
stock of the Company exercisable through May 17, 1999 at an exercise
price of $4.75 per share. The option was not paid for nor any part exer-
cised by Dillon, and the option was cancelled in July, 1998.
Pursuant to its acquisition of Lytton in 1997, the Company guaran-
teed the Seller $2,400,000 for the sale of her 300,000 shares of common
stock of the Company which was a portion of the acquisition considera-
tion. On June 29, 1998, the Guaranty was modified to provide Seller
with $1,300,000 with respect to the sale of such numbers of her Company
common stock on or prior to July 31, 1998 with the balance of her
Company common stock defined as the Remaining Techdyne Common Stock.
To the extent that the Remaining Techdyne Common Stock was less than
150,000 shares, the Company would make up the difference. The Remaining
Techdyne Common Stock was also guaranteed to yield Seller no less than
$1,100,000 if sold on or prior to July 31, 1999. On July 31, 1998, the
Company advanced Seller $1,277,511 toward the Modified Guaranty. Any
proceeds from the sale of her Company common stock thereafter, up to
195,000 shares, would repay the Advance. To the extent that the sale
of the 195,000 shares is insufficient to pay the Advance, the balance
of the Advance would be forgiven.
If the sale of the Remaining Techdyne Common Stock provides less
than the Extended Guaranty, the Company shall provide the difference in
cash or additional common stock, or a combination of both. The Extended
Guaranty terminates if the Remaining Techdyne Common Stock is sold after
July 31, 1999 or the last sale price per share of the Company's common
stock trades over a certain period of time up to July 31, 1999 at a
formulated price which is at least 40% more than the per share price of
the Remaining Techdyne Common Stock.
On July 13, 1998, the Company notified the holders of its 959,152
outstanding common stock purchase warrants ("Warrants") issued in its
1995 public offering of common stock and Warrants of the extended
exercise period of six months from September 12, 1998 to March 12, 1999.
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
- ------ --------------------------------
(a) Exhibits
Part I Exhibits
(27) Financial Data Schedule (for SEC use only)
Part II Exhibits
None
(b) Reports on Form 8-K
Three Form 8-K Current Reports, were filed re: Item 5, "Other
Events" as follows:
(i) May 28, 1998 relating to (a) the Company and its parent,
Medicore, Inc. having retained an investor relations group;
and (b) sale of an option.
(ii) July 6, 1998 relating to (a) the modified guaranty to the
selling shareholder of Lytton, Incorporated; and (b)
exercise of options by certain officers and directors of
the Company.
(iii) July 13, 1998 relating to extension of exercise period of
publicly traded Warrants.
No financial statements were filed with respect to the Form 8-K
Current Reports.
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.
TECHDYNE, Inc.
/s/ Daniel R. Ouzts
By:-----------------------------
DANIEL R. OUZTS, Vice
President/Finance,
Controller and Chief
Financial Officer
Dated: August 10, 1998
<PAGE>
EXHIBIT INDEX
Exhibit
No.
- -------
Part I Exhibits
(27) Financial Data Schedule (for SEC use only)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 1,662,803
<SECURITIES> 0
<RECEIVABLES> 5,726,864 <F1>
<ALLOWANCES> 0
<INVENTORY> 8,554,895 <F2>
<CURRENT-ASSETS> 17,478,312
<PP&E> 8,542,248
<DEPRECIATION> 3,470,226
<TOTAL-ASSETS> 25,372,730
<CURRENT-LIABILITIES> 6,977,806
<BONDS> 4,253,554
0
0
<COMMON> 52,501
<OTHER-SE> 10,949,609
<TOTAL-LIABILITY-AND-EQUITY> 25,372,730
<SALES> 23,486,098
<TOTAL-REVENUES> 23,557,194
<CGS> 20,268,740
<TOTAL-COSTS> 20,268,740
<OTHER-EXPENSES> 1,860,652
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 320,849
<INCOME-PRETAX> 1,106,953
<INCOME-TAX> 51,573
<INCOME-CONTINUING> 1,055,380
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,055,380
<EPS-PRIMARY> .21
<EPS-DILUTED> .16
<FN>
<F1>Accounts receivable are net of allowance of $52,000 at June 30,
1998.
<F2>Inventories are net of reserve of $392,000 at June 30, 1998.
</FN>
</TABLE>
