UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarter Ended April 30, 1998 Commission File Number 0-19019
PRIMEDEX HEALTH SYSTEMS, INC.
(Exact name of registrant as specified in charter)
New York 13-3326724
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1516 Cotner Avenue
Los Angeles, California 90025
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (310) 478-7808
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 of 15(d) of the Securities and Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No ___
Number of shares outstanding of the issuer's common stock as of August 7, 1998
was 39,132,260 [excluding treasury shares].
<PAGE>
PRIMEDEX HEALTH SYSTEMS, INC.
PART I - FINANCIAL INFORMATION
The condensed consolidated financial statements included herein have been
prepared by the Registrant without audit, pursuant to the rules and regulations
of the Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. However, the Registrant believes that
the disclosures are adequate to make the information presented not misleading.
It is suggested that these consolidated financial statements be read in
conjunction with the financial statements and the notes thereto included in the
Registrant's latest Annual Report on Form 10-K.
In the opinion of the Registrant, all adjustments, consisting of normal
recurring adjustments, necessary to present fairly the financial position of the
Registrant as of April 30, 1998, and the results of its operations and changes
in its cash flows for the six months ended April 30, 1998 and 1997, have been
made. The results of operations for such interim periods are not necessarily
indicative of the results to be expected for the entire year.
1
<PAGE>
PRIMEDEX HEALTH SYSTEMS, INC. AND AFFILIATES
- ------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS
- ------------------------------------------------------------------------------
April 30, October 31,
1 9 9 8 1 9 9 7
[Unaudited]
Assets:
Current Assets:
Cash and Cash Equivalents $ 332,580 $ 129,517
Marketable Securities - Held for Sale 1,161,156 --
Accounts Receivable - Net 18,085,522 16,933,340
Unbilled Receivables 304,496 693,847
Other Receivables - Current 1,353,688 2,390,755
Due from Related Party 990,714 55,568
Other 873,791 765,467
---------- -----------
Total Current Assets 23,101,947 20,968,494
---------- -----------
Property, Plant and Equipment - Net 31,527,428 33,401,161
---------- -----------
Other Assets:
Accounts Receivable - Net 6,460,907 5,810,814
Due from Related Parties 127,122 897,133
Other Receivables -- 899,896
Goodwill - Net 19,320,451 20,168,729
Other 2,779,045 4,193,696
---------- -----------
Total Other Assets 28,687,525 31,970,268
---------- -----------
Total Assets $83,316,900 $86,339,923
=========== ===========
See Notes to Consolidated Financial Statements.
2
<PAGE>
PRIMEDEX HEALTH SYSTEMS, INC. AND AFFILIATES
- ------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS
- ------------------------------------------------------------------------------
April 30, October 31,
1 9 9 8 1 9 9 7
[Unaudited]
Liabilities and Stockholders' Deficit:
Current Liabilities:
Cash Overdraft $2,110,603 $ 319,481
Accounts Payable 4,971,172 4,010,861
Accrued Expenses 4,403,345 5,270,787
Accrued Expenses - Professional Fees 1,552,682 1,596,916
Notes and Leases Payable 26,835,914 20,341,372
Accrued Restructuring Costs 105,000 1,062,026
Deferred Revenue 200,000 200,000
Other 933,972 194,084
---------- -----------
Total Current Liabilities 41,112,688 32,995,527
---------- -----------
Long-Term Liabilities:
Subordinated Debentures Payable 20,912,000 22,923,000
Notes and Leases Payable 47,665,134 51,445,256
Deferred Revenue 1,566,666 1,666,666
Accrued Expenses 236,474 225,292
Accrued Expenses - Professional Fees 552,704 582,998
---------- -----------
Total Long-Term Liabilities 70,932,978 76,843,212
---------- -----------
Commitments and Contingencies -- --
---------- -----------
Minority Interest 862,379 1,430,788
---------- -----------
Stockholders' Deficit:
Common Stock - $.01 Par Value, 100,000,000
Shares Authorized; 40,757,260 and 40,432,260
Shares Issued; 39,132,260 and 38,807,260 Shares
Outstanding at April 30, 1998 and
October 31, 1997, respectively 407,572 404,322
Paid-in Capital 99,491,650 99,434,150
Stock Subscription - Related Party (30,000) --
Retained Earnings [Deficit] (128,575,013) (124,153,129)
Accumulated Other Comprehensive Loss (270,407) --
---------- -----------
Totals (28,976,198) (24,314,657)
Less: Treasury Stock - 1,625,000 Shares, At Cost (614,947) (614,947)
---------- -----------
Total Stockholders' Deficit (29,591,145) (24,929,604)
----------- -----------
Total Liabilities and Stockholders' Deficit $83,316,900 $86,339,923
=========== ===========
See Notes to Consolidated Financial Statements.
3
<PAGE>
PRIMEDEX HEALTH SYSTEMS, INC. AND AFFILIATES
- ------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
[UNAUDITED]
- ------------------------------------------------------------------------------
<TABLE>
Three months ended Six months ended
April 30, April 30,
--------- ---------
1 9 9 8 1 9 9 7 1 9 9 8 1 9 9 7
------- ------- ------- -------
Revenue:
<S> <C> <C> <C> <C>
Revenue $33,183,476 $33,125,252 $63,549,539 $64,963,295
Less: Allowances 17,488,900 15,683,201 33,590,027 29,884,122
----------- ----------- ----------- -----------
Net Revenue 15,694,576 17,442,051 29,959,512 35,079,173
----------- ----------- ----------- -----------
Operating Expenses:
Operating Expenses 12,847,372 14,794,923 25,016,975 29,722,311
Depreciation and Amortization 2,157,103 2,166,007 4,274,310 4,543,786
Provision for Bad Debts 528,023 645,743 1,013,719 1,218,285
Impairment Loss Long-Lived Assets -- -- -- 4,953,783
--------- ----------- ----------- -----------
Total Operating Expenses 15,532,498 17,606,673 30,305,004 40,438,165
----------- ----------- ----------- -----------
Income [Loss] from Operations 162,078 (164,622) (345,492) (5,358,992)
----------- ----------- ----------- -----------
Other [Expenses] and Revenue:
Interest Expense (2,314,854) (2,361,730) (4,541,451) (5,021,738)
Interest Income 62,198 178,497 167,668 231,553
Gain on Sale of Subsidiaries 4,811 5,593,832 340,710 5,593,832
Other Income [Expense] (170,457) 50,722 (38,032) 185,655
----------- ----------- ----------- -----------
Total Other Revenue [Expenses] (2,418,302) 3,461,321 (4,071,105) 989,302
----------- ----------- ----------- -----------
[Loss] Income Before Minority
Interest in Income of
Subsidiaries, Cumulative
Effect of Change in Accounting
Principle and Extraordinary Item (2,256,224) 3,296,699 (4,416,597) (4,369,690)
Minority Interest in Income of
Subsidiaries (100,717) (165,228) (187,878) (307,719)
----------- ----------- ----------- -----------
[Loss] Income Before Extraordinary
Item and Cumulative Effect of
Change in Accounting Principle (2,356,941) 3,131,471 (4,604,475) (4,677,409)
Extraordinary Item-Gain from Early
Extinguishment of Debt [Net of
Income Taxes of $-0- for the six
months ended April 30, 1998 and
1997, respectively] 372,763 -- 961,885 --
----------- ----------- ----------- -----------
[Loss] Income Before Cumulative
Effect of Change in Accounting
Principle - Forward $(1,984,178)$ 3,131,471 $(3,642,590) $(4,677,409)
</TABLE>
See Notes to Consolidated Financial Statements.
4
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PRIMEDEX HEALTH SYSTEMS, INC. AND AFFILIATES
- ------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
[UNAUDITED]
- ------------------------------------------------------------------------------
<TABLE>
Three months ended Six months ended
April 30, April 30,
--------- ---------
1 9 9 8 1 9 9 7 1 9 9 8 1 9 9 7
------- ------- ------- -------
[Loss] Income Before Cumulative
Effect of Change in Accounting
<S> <C> <C> <C> <C>
Principle - Forwarded $(1,984,178)$ 3,131,471 $(3,642,590) $ (4,677,409)
Cumulative Effect of Change in
Accounting Principle -- -- (779,294) --
----------- ----------- ----------- -----------
Net [Loss] Income (1,984,178) 3,131,471 (4,421,884) (4,677,409)
Other Comprehensive Income:
Unrealized Holding Loss on
Marketable Securities (270,407) -- (270,407) --
----------- ----------- ----------- ------------
Total Comprehensive [Loss]
Income $(2,254,585)$ 3,131,471 $(4,692,291) $ (4,677,409)
=========== =========== =========== ============
Net [Loss] Income Available to
Common Shareholders $(1,984,178)$ 3,131,471 $(4,421,884) $ (4,677,409)
=========== =========== =========== ============
Basic EPS:
[Loss] Income Before Change in
Accounting Principle and
Extraordinary Item $ (.06)$ .08 $ (.12) $ (.12)
Extraordinary Item .01 -- .03 --
Change in Accounting Principle--
Write-off of Costs of Start-up
Activities -- -- (.02) --
----------- ----------- ----------- ------------
Net [Loss] Income $ (.05)$ .08 $ (.11) $ (.12)
=========== =========== =========== ============
[Loss] Income Available to
Common Shareholders and
Assumed Conversions $(1,984,178)$ 3,131,471 $(4,421,884) $ (4,677,409)
=========== =========== =========== ============
Diluted EPS:
[Loss] Income Before Change in
Accounting Principle and
Extraordinary Item $ (.06)$ .08 $ (.12) $ (.12)
Extraordinary Item .01 -- .03 --
Change in Accounting Principle--
Write-off of Costs of Start-up
Activities -- -- (.02) --
----------- ----------- ---------- -----------
Net [Loss] Income $ (.05)$ .08 $ (.11) $ (.12)
=========== =========== ========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
5
<PAGE>
PRIMEDEX HEALTH SYSTEMS, INC. AND AFFILIATES
- ------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
- ------------------------------------------------------------------------------
<TABLE>
Accumulated
Common Stock Retained Stock Other Total
Number Par Value Treasury Paid-in Earnings Subscription Comprehensive Stockholders'
of Shares Amount Stock Capital [Deficit] Related Party Loss [Deficit]
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance - November 1, 1997 40,432,260 $404,322 $(614,947) $99,434,150 $(124,153,129) $ -- $ -- $(24,929,604)
Issuance of Common Stock 325,000 3,250 -- 57,500 -- -- -- 60,750
Common Stock Subscribed -- -- -- -- -- (30,000) -- (30,000)
------------
(24,898,854)
Comprehensive Income:
Net Loss for the six months
ended April 30, 1998 -- -- -- -- (4,421,884) -- -- (4,421,884)
---------- -------- --------- ----------- ------------- -----------
Other Comprehensive
Income [Loss] - Net of Tax:
Unrealized Holding Loss
Arising During the Period (270,407) (270,407)
--------- ------------
Comprehensive [Loss] (4,692,291)
Balance - April 30, 1998
[Unaudited] 40,757,260 $407,572 $(614,947) $99,491,650 $(128,575,013) $ (30,000)$(270,407) $(29,591,145)
========== ======== ========= =========== ============= =========== ========= ============
</TABLE>
See Notes to Consolidated Financial Statements.
6
<PAGE>
PRIMEDEX HEALTH SYSTEMS, INC. AND AFFILIATES
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CONSOLIDATED STATEMENTS OF CASH FLOWS [UNAUDITED]
- ------------------------------------------------------------------------------
Six months ended
April 30,
1 9 9 8 1 9 9 7
------- -------
Cash (Used for) Provided by Continuing Operations $(2,631,037) $(1,366,424)
Cash (Used) for Discontinued Operations -- (38,393)
---------- -----------
Net Cash - Operating Activities (2,631,037) (1,404,817)
---------- -----------
Investing Activities:
Acquisitions - Net of Cash Acquired (673,278) (263,811)
Purchase of Property and Equipment (1,349,277) (996,939)
Proceeds - Sale of Centers or Equipment 20,000 15,972,720
Proceeds - Note Receivable 2,059,179 --
Proceeds - Partnership Dissolution 94,515 --
Loans to Related Parties (125,000) --
---------- -----------
Net Cash - Investing Activities 26,139 14,711,970
---------- -----------
Financing Activities:
Cash Overdraft 1,791,122 1,090,649
Principal Payments on Capital Leases and
Notes Payable (5,187,788) (13,973,707)
Proceeds from Short-Term Borrowings on Notes
Payable 7,470,615 525,000
Joint Venture Distributions -- (178,125)
Joint Venture Proceeds 75,000 --
Payments to Related Parties -- (5,000)
Repurchase of Bond Debentures (1,371,738) (259,553)
Proceeds from Issuance of Common Stock 30,750 --
---------- -----------
Net Cash - Financing Activities 2,807,961 (12,800,736)
---------- -----------
Net Increase in Cash and Cash Equivalents 203,063 506,417
Cash and Cash Equivalents - Beginning of Periods 129,517 151,870
---------- -----------
Cash and Cash Equivalents - End of Periods $ 332,580 $ 658,287
========== ===========
Supplemental Disclosures of Cash Flow Information:
Cash paid during the years for:
Interest $4,498,849 $ 5,309,364
Income Taxes $ -- $ --
See Notes to Consolidated Financial Statements.
7
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PRIMEDEX HEALTH SYSTEMS, INC. AND AFFILIATES
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CONSOLIDATED STATEMENTS OF CASH FLOWS [UNAUDITED]
- ------------------------------------------------------------------------------
Supplemental Schedule of Non-Cash Investing and Financing Activities:
The Company entered into capital leases or financed equipment through notes
payable for approximately $2,025,000 and $1,985,000 for the six months ended
April 30, 1998 and 1997, respectively. During the six months ended April 30,
1997, the Company acquired approximately $1,050,000 in net assets and related
notes payable from DIS previously recorded as "Assets Held for Divestiture" with
a net book value of $-0-.
During the six months ended April 30, 1998, the Company wrote-off
approximately $1,565,000 in net property and equipment, approximately $285,000
in net accounts receivable, approximately $735,000 in net goodwill,
approximately $19,000 in non current assets, approximately $865,000 in notes and
capital lease obligations, approximately $160,000 in other current liabilities
and approximately $398,000 in minority interest related to the sale of Scripps
Chula Vista ["SCV"] to Diagnostic Health Services, Inc. ["DHS"] effective
January 1, 1998. As consideration, the Company received 127,250 shares of DHS
common stock valued at $11.25 per share as of the transaction date.
During the six months ended April 30, 1998, the Company dissolved its
partnership between La Habra Imaging Group II and Friendly Hills Healthcare
Network, Inc. ["Friendly Hills"] effective December 31, 1997. Upon the
dissolution, the Company wrote-off approximately $270,000 of Friendly Hills
accounts receivable, approximately $365,000 in net property, approximately
$155,000 of accrued expenses and approximately $435,000 in minority interest.
During the six months ended April 30, 1997, the Company wrote-off
approximately $1,515,000 in net property and equipment, approximately $2,875,000
in net goodwill and $782,273 in deferred compensation related to the closure of
Parkside.
During the six months ended April 30, 1997, the Company acquired the assets
and related liabilities of Woodward Park Imaging Center ["WWP"] in Fresno,
California for approximately $200,000 in notes payable and assumed assets and
liabilities resulting in goodwill of approximately $90,000. In the acquisition,
the Company recorded approximately $2,075,000 in net property and equipment,
approximately $725,000 in other receivables, approximately $2,600,000 in notes
payable and capital leases and $300,000 in accrued expenses. During the six
months ended April 30, 1998, the Company wrote-off the goodwill and a portion of
the accrued expenses associated with the acquisition of WWP and recognized an
extraordinary gain from early extinguishment of debt of approximately $193,000.
During the six months ended April 30, 1998, the Company issued 300,000 shares
of its common stock and recorded $30,000 as due from related parties.
During the six months ended April 30, 1998, the Company received medical
equipment of approximately $730,000 in lieu of cash rebates for Fuji medical
film purchases.
See Notes to Consolidated Financial Statements.
8
<PAGE>
PRIMEDEX HEALTH SYSTEMS, INC. AND AFFILIATES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS [UNAUDITED]
- ------------------------------------------------------------------------------
[1] Summary of Significant Accounting Policies
Significant accounting policies of Primedex Health Systems, Inc. and affiliates
are set forth in the Company's Form 10-K for the year ended October 31, 1997 as
filed with the Securities and Exchange Commission.
During the six months ended April 30, 1998, the Company adopted Statement of
Position ["SOP"] No. 98-5, "Reporting on the Costs of Start-Up Activities." As a
result of the decision, the Company reduced historical net organizational costs
and capitalized fees by approximately $780,000. The effect of this change was to
increase the loss before net income for the six months ended April 30, 1998 by
$.02 per share.
[2] Basis of Presentation
The accompanying interim consolidated financial statements are unaudited and
have been prepared in accordance with generally accepted accounting principles
and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X and,
therefore, do not include all information and footnotes necessary for a fair
presentation of financial position, results of operations and cash flows in
conformity with generally accepted accounting principles for complete financial
statements; however, in the opinion of the management of the Company, all
adjustments consisting of normal recurring adjustments necessary for a fair
presentation of financial position, results of operations and cash flows for the
interim periods ended April 30, 1998 and 1997 have been made. The results of
operations for any interim period are not necessarily indicative of the results
for the full year. These interim consolidated financial statements should be
read in conjunction with the consolidated financial statements and notes thereto
contained in the Registrant's annual report on Form 10-K for the fiscal year
ended October 31, 1997.
[3] Goodwill
The Company's goodwill as of April 30, 1998 is shown net of accumulated
amortization of approximately $3,812,000. Amortization expense for the six
months ended April 30, 1998 and 1997 was approximately $700,000 and $750,000,
respectively. The 1998 decrease in amortization expense was primarily due to the
write-off of goodwill associated with the sales of DIS's Ultrasound Division and
four of its hospital-based MRI facilities to Diagnostic Health Services, Inc.
["DHS"] effective March 1, 1997 and the sale of Scripps Chula Vista to DHS
effective January 1, 1998.
During the six months ended April 30, 1998, the Company wrote-off approximately
$778,000 of DIS acquisition goodwill and approximately $43,000 of related
accumulated amortization with the sale of Scripps Chula Vista. In addition, the
Company wrote-off approximately $92,000 of Woodward Park acquisition goodwill
and approximately $4,000 of related accumulated amortization. At the time of the
acquisition, unrealized liabilities [written off in January 1998] were recorded
creating the goodwill.
The Company amortizes goodwill over the lesser of 20 years or the estimated
useful life of the assets.
[4] Due to/from Related Party
The Company has a $1,000,000 loan receivable due from its President and C.E.O.
in February 1999 discounted at 8%. For the six months ended April 30, 1998, the
Company recorded interest income on the note of approximately $40,000.
9
<PAGE>
PRIMEDEX HEALTH SYSTEMS, INC. AND AFFILIATES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS [UNAUDITED], Sheet #2
- ------------------------------------------------------------------------------
[4] Due to/from Related Party [Continued]
As of October 31, 1997, the Company advanced $30,000 to an officer of the
Company, at no interest, which will be repaid within the 1998 fiscal year.
During the six months ended April 30, 1998, the Company advanced an additional
$25,000 to the officer with the same terms.
As of October 31, 1997, the Company loaned another officer of the Company
$25,000, with interest at 6%. During the six months ended April 30, 1998, the
Company loaned an additional $180,000 to this officer. In February 1998, the
officer renegotiated and terminated his contract with the Company and used his
net severance to repay $50,000 of the prior loans made to him by the Company.
The remaining $155,000 of loans due to the Company are to be repaid in five
years with interest at 6.5%; $30,000 of these loans were used to purchase stock
from the Company using his available options and are classified as "Stock
Subscription - Related Party" in the financial statements. As part of the
contract renegotiation, the individual was retained as a legal consultant to the
Company to be paid $50,000 per year for five years.
[5] Litigation
The Company is a defendant in a class action pending in the United States
District Court for the District of New Jersey entitled "In re Hibbard Brown &
Company Securities Litigation" [No. 93 CV 1150]. The Company entered into a
preliminary settlement with the plaintiff class in the lawsuit by the payment of
$240,000 in April 1996. Although the settlement between the Company and the
plaintiff class was granted preliminary court approval, the settlement is
subject to final approval by the class and to final court approval which has not
yet been obtained. Management expects there will be no additional costs to
settle the case beyond the $240,000. The lawsuit continues with respect to the
other defendants. The Company remains convinced that it has not engaged in any
inappropriate conduct in this matter.
The Company is currently a party to other litigation, none of which is deemed
material by nature.
[6] Acquisitions, Sales and Divestitures
In February 1998, the Company dissolved its partnership between La Habra Imaging
Group II and Friendly Hills Healthcare Network, Inc. ["Friendly Hills"]
effective December 31, 1997. Upon the dissolution, the Company wrote-off
approximately $270,000 of Friendly Hills accounts receivable, approximately
$365,000 in net property, approximately $155,000 of accrued expenses and
approximately $435,000 in minority interest. The Company received approximately
$95,000 from Friendly Hills as part of the final dissolution. The Company
recognized a gain of approximately $48,000 on the dissolution and continues to
operate the now wholly-owned La Habra center. As part of the dissolution,
Friendly Hills acquired the modular building utilized by the center. The Company
entered into a five-year lease with Friendly Hills with an initial base rent of
$3,034 per month.
In March 1998, effective January 1, 1998, the Company's DIS subsidiary sold its
share of Scripps Chula Vista MRI L.P. ["SCV"] to Diagnostic Health Services,
Inc. ["DHS"] for 127,250 shares of DHS stock. As of the transaction date, the
shares were valued at $1,431,563 and recorded as "Marketable Securities Held for
Sale" [see Note 8]. Due to the sale, the Company wrote-off approximately
$735,000 of net acquisition goodwill.
[7] Capital Transactions
During the six months ended April 30, 1998, the Company purchased an additional
603,000 shares of DIS common stock for approximately $673,000. Subsequent to the
quarter's end, as of August 13, 1998, the Company has purchased an additional
1,165,374 shares of DIS common stock for approximately $1,370,000 in cash and
notes payable increasing its total ownership to 9,768,344 shares, or
approximately 85% [excluding treasury shares].
10
<PAGE>
PRIMEDEX HEALTH SYSTEMS, INC. AND AFFILIATES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS [UNAUDITED], Sheet #3
- ------------------------------------------------------------------------------
[7] Capital Transactions [Continued]
During the six months ended April 30, 1998, the Company repurchased 2,011,000 of
its subordinated bond debentures for cash of approximately $1,372,000. These
bonds were retired and resulted in a gain on early extinguishment of debt of
approximately $639,000. Subsequent to the quarter's end, as of August 13, 1998,
the Company repurchased an additional 194,000 of its subordinated bond
debentures for approximately $113,000. When the bonds are retired, the Company
will recognize an additional gain from early extinguishment of debt of
approximately $81,000 while reducing quarterly interest payments to
approximately $518,000.
On December 4, 1997, a previous employee of the Company exercised his options
for 25,000 shares of the Company's common stock for $.23 per share, or $5,750.
During the six months ended April 30, 1998, a previous officer of the Company,
who had existing options for 200,000 shares of the Company's common stock, was
granted options for an additional 100,000 shares as part of his contract buyout
and renegotiation. On January 20, 1998, the officer exercised all of his options
for 300,000 shares of the Company's common stock for approximately $.183 per
share, or $55,000. The officer was loaned the entire $55,000 of which $25,000
was repaid in February 1998 with the remainder to be repaid in five years at
6.5% interest. In addition, the Company entered into an agreement with the
former officer whereby the Company agreed to purchase from him up to 600,000
shares of the Company's common stock owned by him at a price of $.40 per share,
in minimum increments of 100,000 shares, upon his election anytime subsequent to
December 31, 1998 and prior to February 28, 2003.
[8] [Loss] Income Per Share
A reconciliation of weighted average common shares outstanding assuming dilution
follows:
Three months ended Six months ended
April 30, April 30,
--------- ---------
1 9 9 8 1 9 9 7 1 9 9 8 1 9 9 7
------- ------- ------- -------
Average Common Shares Outstanding 39,132,260 38,932,260 38,994,343 38,932,260
Common Shares Issuable Pursuant
to Stock Options -- 547,591 -- --
---------- ---------- ---------- ----------
Average Common Shares
Outstanding Assuming Dilution 39,132,260 39,479,851 38,994,343 38,932,260
----------------- ========== ========== ========== ==========
Stock options and purchase warrants outstanding at the end of the three month
periods ending April 30, 1998 and 1997 of 11,879,175 and 11,074,115,
respectively, and 11,879,175 and 11,904,175 at the end of the six month periods
ending April 30, 1998 and 1997, respectively, to purchase shares of common stock
were not included in the computation of earnings per common share assuming
dilution because the options exercise prices were greater than the average
market price of the common shares, however, the options could be dilutive in the
future.
Additionally, at April 30, 1998 and 1997, convertible subordinated debentures to
acquire 20,912 and 25,829 shares of common stock were not included in the
computation of earnings per common share assuming dilution because the exercise
prices were greater than the average market price of the common shares, however,
the debentures could be dilutive in the future.
11
<PAGE>
PRIMEDEX HEALTH SYSTEMS, INC. AND AFFILIATES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS [UNAUDITED], Sheet #4
- ------------------------------------------------------------------------------
[9] Subsequent Events
In May 1998, the Company exercised its option to receive the $1.5 million in
post-closing payments related to the sale of DIS's MRI facilities to DHS in the
form of common stock of DHS. The Company received 200,000 shares of DHS stock
and sold the shares for $1,849,936 on May 8, 1998. The transaction will result
in a gain of approximately $496,000.
On May 15, 1998, the Company sold the 127,250 DHS shares it received from the
sale of SCV for approximately $1,230,000. The transaction will result in a loss
of approximately $202,000.
In June 1998, the Company received additional proceeds from Preferred Health
Management, Inc. ["PHM"] related to the sale of FDI by agreeing to an IRS
Section 338 (h)(10) Election for "Corporations Making Qualified Stock
Purchases". As part of the transaction, the Company made its final sale
reconciling adjustments and recorded an additional loss of approximately $44,000
increasing its liability due to PHM to approximately $194,000. PHM agreed to pay
the Company approximately $596,000 for the Section 338 (h)(10) Election and
forwarded proceeds [net of liabilities due PHM] of approximately $402,000 to the
Company on June 15, 1998. The Company will recognize a gain on the transaction
of approximately $596,000.
. . . . . . . . . . .
12
<PAGE>
Item 2:
PRIMEDEX HEALTH SYSTEMS, INC. AND AFFILIATES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
- ------------------------------------------------------------------------------
Background
Primedex Health Systems, Inc. ["PHS"] was incorporated on October 21, 1985.
On November 1, 1990, the Company acquired a 51% interest in Viromedics, Inc.
["VMI"] for $700,000. On February 18, 1992, Future Medical Products ["FMP"], the
parent corporation of VMI, exercised its right to repurchase one-half of the VMI
stock from PHS at a price of $700,000. The Company owns approximately 19% of
VMI's outstanding capital stock as of April 30, 1998, which is accounted for
using the cost method at $-0-.
On April 30, 1992, the Company entered into a purchase agreement with Radnet
Management, Inc. and certain related companies ["Radnet"] for approximately
$66,000,000. The statement of operations and cash flows for the six months ended
April 30, 1998 and 1997 include the operations and cash transactions of Radnet.
In November of 1995, the Company formed Radnet Managed Imaging Services, Inc.
["RMIS"] which acquired most of the assets of Future Diagnostics, Inc. by
purchasing 100% of its outstanding stock for approximately $3.2 million
consisting of notes and assumed liabilities. The statement of operations and
cash flows for the six months ended April 30, 1997 reflect the operations and
cash transactions of FDI. Effective September 3, 1997, 100% of the outstanding
capital stock of FDI was sold to Preferred Health Management, Inc. ["PHM"] for
$13,500,000 in cash, notes and assumed liabilities. The Company continues to
operate RMIS which provides utilization review services. The statements of
operations and cash flows for the six months ended April 30, 1998 and 1997
reflect the overhead costs and cash transactions of RMIS.
In March of 1996, the Company purchased 3,478,261 shares, or approximately 31%,
of Diagnostic Imaging Services, Inc. ["DIS"] for $4,000,000 with a five-year
warrant to acquire an additional 1,521,739 shares of DIS stock at $1.60 per
share. The $4 million was borrowed by the Company from a primary lending source.
During the four-month period ended July 31, 1996, the investment yielded a loss
to the Company of $313,649. Effective August 1, 1996, the Company issued a
five-year promissory note for $3,272,046 and five-year warrants to purchase
approximately 4,000,000 shares of PHS common stock at $.60 per share, to acquire
an additional 3,228,046 shares of DIS common stock. The purchase made PHS the
primary shareholder in DIS with approximately 59% ownership.
In subsequent purchases through August 13, 1998, the Company acquired an
additional 3,062,037 shares of DIS stock from various related and unrelated
parties for approximately $3,682,000 in cash and notes payable increasing its
ownership in DIS to approximately 85% [excluding treasury shares]. The
statements of operations and cash flows for the six months ended April 30, 1998
and 1997 reflect the operations and cash transactions with DIS.
Effective March 1, 1997, the Company sold the assets and related liabilities of
four of DIS's hospital-based MRI facilities and its ultrasound division to
Diagnostic Health Services, Inc. ["DHS"] for $15,972,720 in cash including
$2,000,000 in ten-year covenants not-to-compete. The covenants not-to-compete
were split equally between PHS and DIS and are classified as "Deferred Revenue"
on the Company's financial statements. The Company recognized a gain on the sale
of approximately $5,600,000 which included the write-off of approximately
$2,660,000 of net acquisition goodwill. In addition, a discounted receivable of
approximately $1,190,000 [utilizing a 11.75% interest rate] was recorded on the
Company's books for post-closing payments of $500,000 each to be made by DHS to
DIS on the first, second and third anniversaries of the sale closing date. The
Company had an option to receive these payments in the form of DHS common stock
valued at the mean average of the reported closing price of such common stock as
reported on the NASDAQ National Market for the five consecutive trading days
ending on the third day immediately prior to the closing date ["the Agreed
Value"] [See Note 8].
13
<PAGE>
PRIMEDEX HEALTH SYSTEMS, INC. AND AFFILIATES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
- ------------------------------------------------------------------------------
Background [Continued]
As a result of a continuing deteriorating business climate and other business
reasons at DIS's Santa Monica ["Parkside"] facility, on June 25, 1997, the
Company decided to close substantially all of its operations at the facility on
or about August 29, 1997. Due to this decision, the Company recognized an
impairment loss of approximately $4,550,000 [net of final $400,000 fiscal 1997
sale payment] which included the write-off of approximately $1,530,000 of net
acquisition goodwill. In May 1997, the Company sold the facility's MRI for
$65,000 to an unrelated party; in August 1997, the Company's remaining Parkside
assets were sold for approximately $400,000 to another party who also assumed
the center's building lease. The Company still operates a separate entity,
Parkside Radiology Women's Center ["Parkside Womens"], which provides
ultrasound, mammography, stereotactic breast biopsy and bone densitometry
services.
Effective January 1, 1997, the Company's DIS subsidiary opened it Scripps Chula
Vista MRI, L.P. ["SCV"] servicing patients in San Diego. The Company and Scripps
Health are equal partners with the Company serving as managing partner.
In March 1998, effective January 1, 1998, the Company's DIS subsidiary sold its
share of SCV to DHS for 127,250 shares of DHS stock. As of the transaction date,
the shares were valued at $1,431,563 and recorded as "Marketable Securities Held
for Sale" [see Note 8]. Due to the sale, the Company wrote-off approximately
$735,000 of net acquisition goodwill.
Effective March 1, 1997, the Company acquired the assets and related liabilities
of Woodward Park Imaging Center ["WWP"] in Fresno, California for approximately
$200,000 in notes payable and assumed liabilities resulting in goodwill of
approximately $90,000. In January 1998, the goodwill was written-off due the
reversal of an unrealized liability [see Note 3]. WWP is a full service,
multi-modality imaging center providing MRI, CT, mammography, ultrasound and
general diagnostic radiology services.
During the year ended October 31, 1997, the Company acquired the assets of Las
Posas Medical Imaging for $35,000 in cash and relocated DIS's Camarillo facility
to its location. No goodwill was recorded in this transaction.
In February 1998, the Company dissolved its partnership between La Habra Imaging
Group II and Friendly Hills Healthcare Network, Inc. ["Friendly Hills"]
effective December 31, 1997. Upon the dissolution, the Company wrote-off
approximately $270,000 of Friendly Hills accounts receivable, approximately
$365,000 in net property, approximately $155,000 of accrued expenses and
approximately $435,000 in minority interest. The Company received cash of
approximately $95,000 from Friendly Hills upon the dissolution and recognized a
gain of approximately $48,000. As part of the dissolution, Friendly Hills
acquired the modular building utilized by the center. The Company entered into a
five-year building lease with Friendly Hills with an initial base rent of $3,034
per month.
In April 1997, the Company opened Oxnard Imaging, a start-up operation in
Ventura County.
14
<PAGE>
PRIMEDEX HEALTH SYSTEMS, INC. AND AFFILIATES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
- ------------------------------------------------------------------------------
Forward-Looking Information
The forward-looking statements herein are based on current expectations that
involve a number of risks and uncertainties. Such forward-looking statements are
based on assumptions that the Company will have adequate financial resources to
fund the development and operation of its business, and there will be no
material adverse change in the Company's operations or business. The foregoing
assumptions are based on judgment with respect to, among other things,
information available to the Company, future economic, competitive and market
conditions and future business decisions, all of which are difficult or
impossible to predict accurately and many of which are beyond the Company's
control. Accordingly, although the Company believes that the assumptions
underlying the forward-looking statements are reasonable, any such assumption
could prove to be inaccurate and therefore there can be no assurance that the
results contemplated in forward-looking statements will be realized. There are
number of other risks presented by the Company's business and operations which
could cause the Company's financial performance to vary markedly from prior
results or results contemplated by the forward-looking statements. Management
decisions, including budgeting, are subjective in many respects and periodic
revisions must be made to reflect actual conditions and business developments,
the impact of which may cause the Company to alter its capital investment and
other expenditures, which may also adversely affect the Company's results of
operations. In light of significant uncertainties inherent in forward-looking
information included in this Quarterly Report on Form 10-Q, the inclusion of
such information should not be regarded as a representation by the Company or
any other person that the Company's objectives or plans will be achieved.
The following discussion relates to the continuing activities of Primedex Health
Systems, Inc.
Results of Operations
The discussion of the results of continuing operations includes Radnet, PHS,
RMIS and DIS for the six months ended April 30, 1998. The discussion of the
results of continuing operations includes Radnet, PHS, RMIS, FDI and DIS for the
six months ended April 30, 1997. RMIS was consolidated with FDI during fiscal
1997.
During the six months ended April 30, 1998 and 1997, the Company had losses from
operations of approximately $345,000 and $5,360,000, respectively. During the
six months ended April 30, 1997, the Company recognized an impairment loss
related to the closure of Parkside of approximately $4,950,000.
During the six months ended April 30, 1998 and 1997, the Company realized net
revenues of approximately $29,960,000 and $35,075,000, respectively.
During the six months ended April 30, 1998 and 1997, Radnet realized net
revenues of approximately $24,489,000 and $22,173,000, respectively. The primary
reasons for the increase in net revenue was due to the addition of new centers
at Woodward Park [March 1997], Oxnard Imaging [March 1997] and University
Imaging [August 1997], and the addition of equipment including, but not limited
to, an MRI at Stockton [March 1998] and Oxnard [March 1998] and a CT at
Vacaville [November 1997].
15
<PAGE>
PRIMEDEX HEALTH SYSTEMS, INC. AND AFFILIATES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
- ------------------------------------------------------------------------------
Results of Operations [Continued]
During the six months ended April 30, 1998 and 1997, DIS realized net revenues
of approximately $5,324,000 and $9,211,000, respectively. The decrease in net
revenue was primarily attributable to the sales of DIS's ultrasound division,
four hospital-based MRI facilities and Scripps Chula Vista to DHS, and the
closure of Parkside and West L.A. during fiscal 1997 and 1998. In addition,
during fiscal 1998, DIS recorded a contractual adjustment of approximately
$225,000 on historical accounts receivable from its previously closed or sold
sites. During the six months ended April 30, 1997, FDI generated net revenues of
approximately $3,640,000; FDI was sold on November 3, 1997. During the six
months ended April 30, 1998 and 1997, PHS generated net billing revenue of
approximately $147,000 and $51,000, respectively. Effective August 1, 1998, DHS
terminated its billing service contract with PHS and moved the operation in
house.
During the six months ended April 30, 1998 and 1997, the Company incurred
operating expenses of approximately $30,305,000 and $40,440,000, respectively.
The 1998 operating expense decrease is primarily attributable to the sales of
DIS's Ultrasound Division, MRI sites and SCV to DHS, the sale of FDI, the
closure of West L. A. and Parkside and recognition of an impairment loss of
approximately $4,950,000 during the six months ended April 30, 1997.
For the six months ended April 30, 1998 and 1997, Radnet's operating expenses
were approximately $22,985,000 and $21,615,000, respectively, DIS's operating
expenses were approximately $6,115,000 and $14,745,000, respectively, FDI's and
RMIS's operating expenses were approximately $165,000 and $3,040,000,
respectively, and PHS's operating expenses were approximately $1,040,000 for
both years.
During the six months ended April 30, 1998 and 1997, the Company's operating
expenses consisted of approximately $12,870,000 and $13,010,000, respectively,
for salaries and reading fees, approximately $-0- and $2,150,000, respectively,
for radiology site costs related to FDI, approximately $2,615,000 and
$3,045,000, respectively, for building and equipment rentals, approximately
$9,530,000 and $11,520,000, respectively, in general and administrative
expenditures, approximately $4,275,000 and $4,545,000, respectively, in
depreciation and amortization, approximately $1,015,000 and $1,220,000,
respectively, for provisions for bad debt, and approximately $-0- and $4,950,000
attributable to the recognition of an impairment loss, pursuant to FASB 121, for
the writedown of assets related to the closure of Parkside.
During the six months ended April 30, 1998 and 1997, interest income was
approximately $168,000 and $230,000, respectively. Interest income for 1998
consisted primarily of imputed interest income on notes receivable due from PHM,
DHS and related parties. Interest income for 1997 consisted primarily of imputed
interest income on related party note receivables.
During the six months ended April 30, 1998 and 1997, interest expense was
approximately $4,540,000 and $5,020,000, respectively. The primary reason for
the decrease in interest expense was due to the sale of DIS's ultrasound
division, four of its MRI facilities and SCV to DHS, the sale of FDI and the
repurchase of bond debentures during the fiscal year.
During the six months ended April 30, 1998 and 1997, the Company recognized
gains from the sales of subsidiaries or divisions of approximately $340,000 and
$5,600,000, respectively. During the six months ended April 30, 1998, the
Company realized a gain from the sale of SCV to DHS of approximately $252,000
and an additional gain from the sale of FDI to PHM [post-closing adjustment] of
approximately $88,000. During the six months ended April 30, 1997, the Company
recognized a gain from the sale of DIS's ultrasound division and four of its
hospital-based MRI facilities to DHS of approximately $5,600,000.
16
<PAGE>
PRIMEDEX HEALTH SYSTEMS, INC. AND AFFILIATES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
- ------------------------------------------------------------------------------
Results of Operations [Continued]
During the six months ended April 30, 1998, the Company adopted the Statement of
Position ["SOP"] No.98.5 regarding the "Reporting on the Costs of Start-up
Activities" and the expenditure of these costs as they are incurred. As a result
of this decision, the Company wrote-off approximately $780,000 of historical net
organizational costs and capitalized fees in January 1998.
During the six months ended April 30, 1998, the Company realized extraordinary
gains from early extinguishment of debt of approximately $960,000 from the
repurchase and retirement of subordinated bond debentures, the settlement of
limited partner notes payable at a discount and the write-off of acquisition
accrued expenses that never materialized.
During the six months ended April 30, 1998 and 1997, the Company had net losses
of approximately $4,420,000 and $4,675,000, respectively
Liquidity and Capital Resources
Cash increased for the six months ended April 30, 1998 and 1997 by approximately
$203,000 and $506,000, respectively.
Cash generated from investing activities for the six months ended April 30, 1998
and 1997 was approximately $26,000 and $14,712,000, respectively. For the six
months ended April 30, 1998 and 1997, the Company acquired additional DIS stock
for approximately $674,000 and $67,000, respectively, acquired additional units
in Temecula Valley Imaging ["TVIC"] for approximately $-0- and $197,000,
respectively, purchased property and equipment of approximately $1,350,000 and
$997,000, respectively, and sold centers and equipment for approximately $20,000
and $15,973,000, respectively. In addition, during the three months ended April
30, 1998, the Company collected approximately $2,060,000 from notes receivable
due from PHM, received proceeds from the dissolution of a partnership for
approximately $95,000 and loaned $125,000 to related parties.
Cash generated from financing activities for the six months ended April 30, 1998
was approximately $2,808,000. Cash utilized for financing activities for the six
months ended April 30, 1997 was approximately $12,800,000. During the six months
ended April 30, 1998 and 1997, the Company increased its cash overdraft by
approximately $1,790,000 and $1,090,000, respectively, made principal payments
on capital leases and notes payable of approximately $5,188,000 and $13,974,000,
respectively, received proceeds from borrowing under existing lines of credit
and refinancing arrangements of approximately $7,470,000 and $525,000,
respectively, and repurchased subordinated bond debentures for approximately
$1,372,000 and $260,000, respectively. In addition, during the six months ended
April 30, 1998, the Company received $75,000 from its SCV joint venture partner
and received proceeds of approximately $31,000 for the issuance of common stock.
During the six months ended April 30, 1997, the Company distributed
approximately $178,000 to its joint venture partners and made payments to
related parties of approximately $5,000.
At April 30, 1998, the Company had a working capital deficit of $18,010,741 as
compared to a working capital deficit of $12,027,033 at October 31, 1997, a
decrease of $5,983,708. The decrease from year-end is primarily attributable to
increased borrowings from the Company's existing lines of credit and cash
overdrafts which are classified as current liabilities on the Company's
financial statements.
17
<PAGE>
PRIMEDEX HEALTH SYSTEMS, INC. AND AFFILIATES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
- ------------------------------------------------------------------------------
Liquidity and Capital Resources [Continued]
The Company's working capital needs are currently provided under two lines of
credit. Under one agreement, due December 31, 1998, the Company may borrow the
lesser of 75% to 80% of eligible accounts receivable, $10,000,000 or the prior
120-days' cash collections. Borrowings under this line are repayable together,
with interest, at an annual rate equal to the greater of (a) the bank's prime
rate plus 3%, or (b) 10%. The lender holds a first lien on substantially all of
Radnet's [Beverly Radiology's] assets to secure repayment under this line of
credit. The President and C.E.O. of PHS has personally guaranteed $3,000,000 of
the loans. In addition, the credit line is collateralized by a $5,000,000 life
insurance policy on the President and C.E.O. of PHS. At April 30, 1998,
approximately $9,108,000 was outstanding under this line.
Under a second line of credit, renewed on a month-to-month basis, the Company
may borrow the lesser of 75% of the eligible accounts receivable, $5,000,000 or
the prior 120-days' cash collections. Borrowings under this line are repayable
together with interest at an annual rate of the bank's prime rate plus 3-1/2%.
The President and C.E.O. of PHS has personally guaranteed $1,000,000 of the
loans. The credit line is collateralized by approximately 80% of the Tower
division's [Radnet Sub, Inc.] accounts receivable. As of April 30, 1998,
approximately $4,497,000 was outstanding under this line.
The Company's future payments for debt and equipment under capital lease for the
next five years, assuming lines of credit are paid in the first year and not
renewed, will be approximately $32,225,000, $15,970,000, $15,680,000,
$11,935,000 and $10,295,000, respectively. Interest expense [excluding line of
credit and bond debenture interest] for the next five years, included in the
above payments, will be approximately $5,390,000, $3,880,000, $2,670,000,
$1,500,000 and $700,000, respectively. In addition, the Company has
non-cancelable operating leases for use of its facilities and certain medical
equipment which will average approximately $2,950,000 in annual payments over
the next five years.
The Company has approximately $105,000 on its books for accrued restructuring
costs associated with the buyout and renegotiation of employment contracts which
will be fully utilized by fiscal year-end 1998.
At three of the Company's Tower locations [120 East, 444 San Vicente and 1
West/Womens], the Company's leases expire at various times beginning in January
1999. Due to this, the Company has entered into a new lease agreement for nearby
space in Beverly Hills ["Wilshire"] and will consolidate the assets and business
of these three Tower locations to the new space during fiscal 1999. The Company
cannot predict whether the move will negatively impact the volume of business
previously obtained from these three centers, but the new site will reduce
respective average building rental disbursements by approximately $1,015,000 per
year [including note payment disbursements assumed upon the acquisition of Tower
in October 1994]. For the six months ended April 30, 1998, the combined net
revenue for these three sites was approximately $6,190,000. One of the Company's
primary lendors has agreed to lend the Company up to $6,000,000 for new
equipment and leasehold improvements for the site.
18
<PAGE>
PRIMEDEX HEALTH SYSTEMS, INC. AND AFFILIATES
PART II - OTHER INFORMATION
- ------------------------------------------------------------------------------
Item 2: Changes in Securities and Use of Proceeds
a. On January 20, 1998, the Company sold 300,000 shares of its common stock
pursuant to the exercise of Company options.
b. The shares were sold to Steven R. Hirschtick, a former officer of the
Company.
c. The shares were sold for $55,000 ($.183 per share) pursuant to a five year
6.5% promissory note of which $25,000 of principal was paid in February
1998.
d. The issuance of the shares is exempt as a private placement pursuant to
Section 4(2) of the Securities Act of 1933, as amended.
e. Inapplicable.
f. Inapplicable.
Item 5: Other Information
In February 1998, the Company dissolved its partnership between La Habra Imaging
Group II and Friendly Hills Healthcare Network, Inc. ["Friendly Hills"]
effective December 31, 1997. Upon the dissolution, the Company wrote-off
approximately $270,000 of Friendly Hills accounts receivable, approximately
$365,000 in net property, approximately $155,000 of accrued expenses and
approximately $435,000 in minority interest. The Company received approximately
$95,000 from Friendly Hills as part of the final dissolution. The Company
recognized a gain of approximately $48,000 on the dissolution and continues to
operate the now wholly-owned La Habra center. As part of the dissolution,
Friendly Hills acquired the modular building utilized by the center. The Company
entered into a five-year lease with Friendly Hills with an initial base rent of
$3,034 per month.
In March 1998, effective January 1, 1998, the Company's Diagnostic Imaging
Services, Inc. subsidiary sold its partnership interest in Scripps Chula Vista
MRI L.P. ["SCV"] to Diagnostic Health Services, Inc. ["DHS"] for 127,250 shares
of DHS stock. On May 15, 1998, the Company sold the shares for which it received
approximately $1,230,000.
Item 6: Exhibits and Reports on Form 8-K
b. No reports on Form 8-K were filed during the quarter ended April 30,
1998.
19
<PAGE>
PRIMEDEX HEALTH SYSTEMS, INC. AND AFFILIATES
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.
Primedex Health Systems, Inc.
(Registrant)
August 20, 1998 By: /s/ Howard G. Berger
------------------------
Howard G. Berger, M.D., President, Chief
Executive Officer and Principal Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheet and the consolidated statement of operations and is
qualified in its entirety by reference to such statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-mos
<FISCAL-YEAR-END> Oct-31-1998
<PERIOD-END> Apr-30-1998
<CASH> 332,580
<SECURITIES> 1,161,156
<RECEIVABLES> 18,390,018
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 23,101,947
<PP&E> 31,527,428
<DEPRECIATION> 0
<TOTAL-ASSETS> 83,316,900
<CURRENT-LIABILITIES> 41,112,688
<BONDS> 0
0
0
<COMMON> 407,572
<OTHER-SE> (29,998,717)
<TOTAL-LIABILITY-AND-EQUITY> 83,316,900
<SALES> 29,959,512
<TOTAL-REVENUES> 29,959,512
<CGS> 0
<TOTAL-COSTS> 30,305,004
<OTHER-EXPENSES> (470,346)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,541,451
<INCOME-PRETAX> (4,604,475)
<INCOME-TAX> 0
<INCOME-CONTINUING> (4,604,475)
<DISCONTINUED> 0
<EXTRAORDINARY> 961,885
<CHANGES> (779,294)
<NET-INCOME> (4,421,884)
<EPS-PRIMARY> (0.11)
<EPS-DILUTED> (0.11)
</TABLE>
