U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
(Mark One)
Quarterly report under Section 13, or 15 (d) of the Securities
Exchange Act of 1934
For the quarterly period ended July 31, 1997
Transition report under Section 13 or 15 (d) of the Exchange Act
For the transition period from ________________ to
_________________
Commission file number 33-19435
ADINA, INC..
(Exact Name of Small Business Issuer as Specified in Its Charter)
Delaware 75-2233445
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
17770 Preston Road,
Dallas, Texas 75252
(Address of Principal Executive Offices)
(972) 733-3005
(Issuer's Telephone Number, Including Area Code)
(Former Name, Former Address and Former Fiscal Year, if Changed Since
Last Report)
Check whether the issuer: (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past 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 past 90 days.
Yes No
APPLICABLE ONLY TO ISSUERS INVOLVED IN
BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports
required to be filed by Section 12, 13, or 15 (d) of the Exchange Act
after the distribution of securities under a plan confirmed by a
court.
Yes No
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date:
75,000,000
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ADINA, INC .
I N D E X
Page No.
Part I FINANCIAL INFORMATION (UNAUDITED):
Item 1. Consolidated Balance
Sheets 3
Consolidated Statements of
Operations 5
Consolidated Statements of
Cash Flows 6
Notes to Consolidated
Financial Statements 8
Items 2. Management's Discussion
and Analysis of Financial
Condition and Results of
Operations 9
Part II OTHER INFORMATION 11
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ADINA, INC.
PART I: FINANCIAL INFORMATION
ITEM 1. Financial Statements
CONSOLIDATED BALANCE SHEETS
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ASSETS
(In Thousands)
July 31, 1997 April 30, 1997
(Unaudited)(Audited/ Adjusted)
CURRENT ASSETS
Cash and cash equivalents $ 2,370.8 $ 3,667.7
Securities available for sale 8.3 8.3
Accounts receivable, net of allowance for
doubtful accounts of $19,947 and $19,947
at July 31, 1997 and April 30, 1997 517.8 493.8
Prepaid expenses 158.7 167.8
Inventories, net of allowance for
obsolescence of $495,145 and $494,744 at
July 31, 1997 and April 30, 1997 660.0 644.2
Total current assets 3,715.7 4,981.8
PROPERTY, PLANT AND EQUIPMENT - AT COST
Office equipment and fixtures 2,067.3 2,055.8
Leasehold improvements 64.2 64.2
Less accumulated depreciation (861.3) (800.7)
Total property,plant and equipment-at cost 1,270.2 1,319.3
OTHER ASSETS
Note receivable - officer, net of allowance
of $889,000 996.5 968.2
Preferred stock - related party 530.9 530.9
Licenses and product development, net of
$35,395 and $31,000 accumulated amortization
at July 31, 1997 and April 30, 1997 763.5 421.5
Other 51.2 23.1
Total other assets 2,342.1 1,943.7
$ 7,328.0 $ 8,244.8
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ADINA, INC.
CONSOLIDATED BALANCE SHEETS (continued)
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LIABILITIES AND STOCKHOLDERS' EQUITY
(In Thousands)
July 31, 1997 April 30, 1997
(Unaudited) (Audited/Adjusted)
CURRENT LIABILITIES
Accounts payable $ 2,629.1 $ 2,642.8
Accrued expenses 190.8 223.0
Total current liabilities 2,819.9 2,848.9
Non Affiliate Interest 2,299.2 2,743.1
Total Liabilities 5,119.1 5,608.9
STOCKHOLDERS' EQUITY
Common stock, $.01 par value, 75,000,000
shares authorized, 75,000,000 and 32,500,000
shares issued at July 31, 1997 and
April 30, 1997, respectively 0.7 0.7
Additional paid-in capital 38,776.9 38,771.9
Accumulated deficit (33,727.3) (33,342.4)
Less: treasury stock, at cost, 28,795
and 28,745 shares at July 31, 1997
and April 30, 1997 (2,756.7) (2,715.7)
Dividends (4.7) -
Notes receivable related to purchase of
common stock (80.0) (78.6)
Total stockholders' equity 2,208.8 2,635.9
$ 7,328.0 $ 8,244.8
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See accompanying notes to these consolidated financial statements.
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ADINA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(In Thousands, Except Share and Per Share Data)
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Three Months Ended
July 31,
1997 1996
REVENUE $ 1,662.0 $ 767.0
COST OF SALES 2,055.2 328.4
GROSS PROFIT(LOSS) (393.2) 438.6
OPERATING EXPENSES:
General and administrative 2,151.7 2,283.0
Depreciation and amortization 229.4 217.9
2,381.1 2,500.9
LOSS FROM OPERATIONS (2,774.3) (2,062.3)
OTHER INCOME (EXPENSES):
Interest expense (43.1) (3.1)
Interest income 55.6 110.5
Dividend income - affiliate 11.6 11.7
Gain (Loss) on disposition of assets 1.0 (643.9)
Other - -
Total other income (expense) 25.1 (524.8)
INCOME (LOSS) FROM CONTINUING
OPERATIONS (2,749.2) (2,587.1)
DISCONTINUED OPERATIONS:
Loss on disposal (.4) (413.1)
(.4) (413.1)
NET INCOME(LOSS) (2,749.6) (3,000.2)
DIVIDENDS ON PREFERRED STOCK (4.7) (73.2)
NET INCOME (LOSS) ATTRIBUTABLE TO
COMMON STOCKHOLDERS $ (2,754.3) $(3,073.4)
INCOME (LOSS) PER SHARE:
Income(loss) from continuing operations $ (.042) $ (.230)
Loss from discontinued operations (.000) (.037)
Dividends on preferred stock (.000) (.006)
NET INCOME (LOSS) PER COMMON SHARE $ (.042) $ (.273)
WEIGHTED AVERAGE OF COMMON
STOCK OUTSTANDING 65,771,739 11,250,000
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See accompanying notes to these consolidated financial statements.
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ADINA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In Thousands)
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Three Months Ended
July 31,
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income(loss) $ (2,748.9) $(2,999.6)
ADJUSTMENTS TO RECONCILE NET GAIN
(LOSS) TO NET CASH FROM OPERATING
ACTIVITIES:
Depreciation and amortization 161.9 217.9
(Gain) loss on disposal of assets 14.1 643.9
Write-off(provision) uncollectible
accounts receivable - (5.0)
Write-down of Assets 453.3 -
Provision for inventory obsolescence .4 (1.3)
Change in assets and liabilities
Accounts and accrued receivables 147.1 (500.4)
Prepaid expenses 9.1 59.4
Inventories 171.3 (113.4)
Accounts payable and accrued
expenses 516.8 329.6
Net cash used by operating
activities (1,274.9) (2,368.9)
CASH FLOW FROM INVESTING ACTIVITIES:
Purchases of property and equipment (24.3) (1,206.4)
Purchases of marketable securities - (1,230.1)
Proceeds from sale of property and
equipment - -
Disposition of assets of discontinued
operations - -
Loan to Director of Company (29.6) 729.8
Deposits (5.3) -
Licenses and product development (367.7) (244.2)
Net cash used by investing activities (426.9) (1,950.9)
CASH FLOW FROM FINANCING ACTIVITIES:
Sale of common stock 5.0 2,319.6
Dividends on preferred stock (4.7) (73.2)
Purchase of Treasury Stock (41.0) -
Net cash provided by financing
activities 40.7 2,246.4
NET INCREASE (DECREASE) IN CASH (1,742.5) (2,073.4)
CASH AT BEGINNING OF PERIOD 4,113.9 9,870.6
CASH AT END OF PERIOD $ 2,371.4 $ 7,797.2
SUPPLEMENTAL INFORMATION:
Cash paid for interest $ 71.2 $ 6.1
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See accompanying notes to these consolidated financial statements.
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ADINA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In Thousands)
NONCASH INVESTING AND FINANCING ACTIVITIES
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Three Months Ended
July 31,
1997 1996
During the quarter ended July 31, 1996,
Camelot recognized a loss on the August
1996 disposal of the remaining investment
in Firecrest. (643.9)
During the period under review, Meteor
Technology, plc expensed the UK, Ireland
Distribution Rights to DigiPhone. (453.5)
During the period under review, Meteor
Technology issued shares in settlement
for rent obligations for property
previously occupied by Telecredit
Telekommunications GmbH. (318.4)
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ADINA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
ITEM 1. Financial Statements and Principles of Consolidation
The accompanying condensed consolidated financial statements have
been prepared in accordance with the instruction to Form 10-QSB, and
do not include all of the information and footnotes required by
generally accepted accounting principles for complete financial
statements.
In the opinion of management, all adjustments (consisting of normal
recurring adjustments) considered necessary for a fair presentation
have been included. These statements should be read in conjunction
with the audited financial statements and notes thereto included in
the Registrant's annual Form 10-KSB filing for the year ended April
30, 1997.
The consolidated financial statements include the accounts of the
Company and the non-affiliated interest of Camelot Corporation
("Camelot"). Camelot is consolidated with the Company because the
Company has significant influence over Camelot with 49% ownership of
the voting stock and common directorship. Camelot is the majority
owner of Alexander Mark Investments (USA), Inc. who is the majority
owner of Meteor Technology, plc ("Meteor"). The April 30, 1997
adjusted balance sheet consolidates numbers from the April 30, 1997
Audited Financial Statements of the Company, the April 30, 1997
adjusted Audited Financial Statements of Camelot, the April 30, 1997
adjusted Audited Financial Statements of Alexander Mark and the May
31, 1997 adjusted Audited Financial Statements of Meteor.
Adjustments were made to eliminate intercompany transactions and for
the conversion of Meteor's numbers from pounds to US Dollars. The
accumulated deficit increase represents the portion of earning
recognized in the first quarter and the currency adjustment.
The Meteor financial presentation is based on the accounting rules of
the United Kingdom. The balance sheet reflects adjustments to
present financial statements per US GAAP accounting rules. The
adjustments included presenting current assets first on the balance
sheet, reclassing creditors payable due within one year to the
liability section from the current asset section, reclassing
creditors payable greater than one year to notes payable, and
combining reserve amount and profit and loss account into retained
earnings. The assets and liability amounts were not changed.
The accounting rules of the United Kingdom only require financial
statements of public companies to be published every six months.
Meteor's fiscal year end is May 31, 1997 and their last six month
Interim Financials were issued for November 30, 1996. The three month
results for the period ending July 31, 1997 and 1996 include the
published six month results of Meteor for periods commencing on
December 1, 1995 and 1996 and ending on May 31, 1996 and 1997,
respectively.
The financial statements include the 51 per cent majority interest in
the outstanding voting share capital of Camelot not owned by the
Company. The non-affiliated interest is based on the proportioned
share of the consolidated net assets of Camelot on a historical
basis.
Meteor's financial statements were converted from British Pounds to
US Dollars based on US accounting guidelines. The conversion rate
for the balance sheet was based on the published exchange rate at
July 31, 1997 and April 30, 1997, one pound equals $1.64 and $1.62,
respectively. The conversion used for the statement of operations
was based on an average exchange rate for the six months ended July
31, 1997 and 1996. This conversion rate was one pound equals $1.65
for period ended May 31, 1997 and $1.53 for period ended May 31,
1996.
ITEM 2. Management Discussion and Analysis of Financial Condition
and Results of Operations
The Company's revenue for the quarter ended July 31, 1997 was
$1,662,000 compared with $767,000 in the comparable quarter of 1996.
Net loss for the three month period was $2,749,200 compared with a
loss of for the previous year of $2,587,100 These results are due to
the restructuring by Meteor of the newly acquired payphone business
in the United Kingdom and the continued expenditure by Third Planet
on the development of Internet products, primarily VideoTalk.
Further a write down of $453,300 was made by Meteor of theDigiPhone
UK distribution rights to comply with UK accounting requirements.
VideoTalk is a complete hardware and software system which, when
connected to a multimedia PC, enables full duplex video conferencing
over the Internet and over local and wide area networks. It uses a
PCI plug-and-play add-in card that provides high quality audio and
video while achieving extremely low processor load. VideoTalk does
not require a sound card or a video capture card, and allows
communication over the Internet with only a 28.8 Kbps modem. The
unit includes the VideoTalk card, a color video camera, a special
version of the Proficia telephony handset, and both the VideoTalk and
DigiPhone 2.0 software.
The consolidated balance sheets for the period show stockholders'
equity of $2,208,800 compared with $2,635,900 for the financial year
ended April 30, 1997. Total assets were $7,328,000 compared with
$8,244,800 for the comparable period. The decrease in stockholders'
equity and total assets was due to the operating loss.
The Company's activities are conducted through its affiliate Camelot.
The management of Camelot continues to concentrate the majority of its
management and financial resources on the development and successful
marketing of Internet related software and hardware products produced
by its subsidiary, Third Planet Publishing, and continues to anticipate
that its principal revenue and profitability will emanate from these
hardware and software products. As previously announced, negotiations have
commenced with major Original EquipmentManufacturers to license this technology.
Liquidity and Capital Resources
Net cash used by operating activities for the three months ended
July 31, 1997 was $1,274,900 compared with $2,368,900 in 1996. Net
cash used by investing activities was $426,900 compared with
$1,950,900 in 1996. Net cash used by financing activities was
$40,700 compared with cash provided of $2,246,400 in 1996. Cash and
securities of $2,370,800 compares with $3,667,700 at April 30, 1997.
The Company has no plans for capital expenditure, and Camelot's
plans for capital expenditure relate principally
to the purchase of property and equipment to further its hardware and
software development program. Management believes that Camelot's Internet
products and its payphone operations will generate its principal
revenues and cash flow during the next twelve months.
Management believes that the anticipated level of revenue generated
by Camelot together with the present level of cash resources
available to Camelot will be sufficient for its needs. However,
Management believes that additional cash resources may be needed if
the anticipated level of revenues are not achieved, or are not
achieved timely. Management believes that should the Company or its affiliate
require additional cash resources, it can raise additional resources from the
sale of Common and Preferred Stock and/or by incurring borrowing.
Management is aware that neither the Company nor its affiliate have any long
term corporate debt. There are no known trends, demands, commitments, or
events that would result in or that is reasonably likely to result in the
Company's or its affiliate's liquidity increasing or decreasing in a
material way other than the potential use of cash resources for investment
in the normal course of business.
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PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
A majority of the shareholders approved a one for thirty
reverse of the Common Shares, authorized and outstanding and then
amended the articles of the Registrant to authorize 15,000,000
Preferred Shares and 25,000,000 Common Shares.
Item 5. Exhibits and Reports on Form 8-K.
(a) Exhibits:
3(1) Articles of Incorporation: Incorporated
by reference to Registration Statement
filed on Form 10, June 23, 1976.
3(2) Bylaws: Incorporated by reference as
immediately above.
(10) 1991 Incentive Stock Option Plan:
Incorporated by reference to
proxy statement for 1991.
(b) Reports on Form 8-K: Form 8-K dated May 20, 1997 with amendments
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 thereto duly authorized.
ADINA, INC.
(Registrant)
By: /s/ Daniel Wettreich
DANIEL WETTREICH,
President
Date: September 15, 1997
[ARTICLE] 5
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[PERIOD-TYPE] 3-MOS
[FISCAL-YEAR-END] APR-30-1998
[PERIOD-END] JUL-31-1997
[CASH] 2370800
[SECURITIES] 8300
[RECEIVABLES] 517800
[ALLOWANCES] 19947
[INVENTORY] 66000
[CURRENT-ASSETS] 3715700
[PP&E] 1270200
[DEPRECIATION] 861300
[TOTAL-ASSETS] 732800
[CURRENT-LIABILITIES] 2819900
[BONDS] 0
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[COMMON] 7000
[OTHER-SE] 2208800
[TOTAL-LIABILITY-AND-EQUITY] 7328000
[SALES] 1662000
[TOTAL-REVENUES] 1662000
[CGS] 2055200
[TOTAL-COSTS] 2055200
[OTHER-EXPENSES] 43100
[LOSS-PROVISION] 2749200
[INTEREST-EXPENSE] 43100
[INCOME-PRETAX] 2749200
[INCOME-TAX] 2749200
[INCOME-CONTINUING] 2749200
[DISCONTINUED] 400
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] 2749600
[EPS-PRIMARY] (.042)
[EPS-DILUTED] (.042)
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