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 January 31, 1998
?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.)
2415 Midway Road, Suite 121, Carrollton, Texas 75006
(Address of Principal Executive Offices)
(972) 733-3005
(Issuer's Telephone Number, Including Area Code)
17770 Preston Road, Dallas, Texas 75252
(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:
14,198,333
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)
January 31, 1998 April 30, 1997
(Unaudited)(Audited/Adjusted)
CURRENT ASSETS
Cash and cash equivalents $ 1,756.1 $ 3,667.7
Securities available for sale 222.0 8.3
Accounts receivable, net of allowance for
doubtful accounts of $19,947 and $19,947
at January 31, 1998 and April 30, 1997 714.2 493.8
Prepaid expenses 43.0 167.8
Inventories, net of allowance for
obsolescence of $630,145 and $494,744 at
January 31, 1998 and April 30, 1997 473.4 644.2
Total current assets 3,208.7 4,981.8
PROPERTY, PLANT AND EQUIPMENT - AT COST
Office equipment and fixtures 2,094.7 2,055.8
Leasehold improvements 64.2 64.2
Less accumulated depreciation (993.4) (800.7)
Total property, plant and
equipment-at cost 1,165.5 1,319.3
OTHER ASSETS
Note receivable - officer, net of allowance
of $889,000 1,025.2 968.2
Preferred stock - related party 530.9 530.9
Licenses and product development, net of
$38,385 and $31,000 accumulated amortization
at January 31, 1998 and April 30, 1997 980.0 421.5
Other 43.7 23.1
Total other assets 2,579.8 1,943.7
$ 6,954.0 $ 8,244.8
</TABLE>
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ADINA, INC.
CONSOLIDATED BALANCE SHEETS (continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
(In Thousands)
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January 31, 1998 April 30, 1997
(Unaudited) (Audited/Adjusted)
CURRENT LIABILITIES
Accounts payable $ 2,324.9 $ 2,642.8
Accrued expenses 112.7 223.0
Total current liabilities 2,437.6 2,848.9
Notes payable 800.0
Non Affiliate Interest 2,168.9 2,743.1
Total Liabilities 5,406.5 5,608.9
STOCKHOLDERS' EQUITY
Common stock, $.00002 par value, 40,000,000
shares authorized, 14,198,333 and 1,083,333
shares issued at January 31, 1998 and
April 30, 1997, respectively 3.0 0.1
Preferred stock - -
Additional paid-in capital 37,911.9 38,772.5
Accumulated deficit (33,513.9) (33,342.4)
Less: treasury stock, at cost, 29,245
and 28,745 shares at January 31, 1998
and April 30, 1997 (2,766.7) (2,715.7)
Dividends (5.8) -
Notes receivable related to purchase of
common stock (81.0) (78.6)
Total stockholders' equity 1,547.5 2,635.9
$ 6,954.0 $ 8,244.8
</TABLE>
See accompanying notes to these consolidated financial statements.
<PAGE>
ADINA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(In Thousands, Except Share and Per Share Data)
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Nine Months Ended
January 31,
1998 1997
REVENUE $ 1,710.9 $ 1,443.0
COST OF SALES 2,194.3 1,549.8
GROSS PROFIT (LOSS) (483.3) 106.8
OPERATING EXPENSES:
General and administrative 3,630.6 5,691.4
Provision for inventory E & O 342.0 621.0
Depreciation and amortization 138.1 387.0
4,110.7 6,699.4
LOSS FROM OPERATIONS (4,594.1) (6,806.2)
OTHER INCOME (EXPENSES):
Interest expense (42.5) (13.4)
Interest income 99.5 305.6
Dividend income - affiliate 35.0 34.9
Gain (Loss) on disposition of assets 3.4 (660.2)
Other - (2,099.2)
Total other income (expense) 95.4 (2,432.4)
INCOME (LOSS) FROM CONTINUING
OPERATIONS (4,498.7) (9,238.6)
DISCONTINUED OPERATIONS:
Loss on disposal (14.4) (703.4)
(14.4) (703.4)
NET INCOME (LOSS) (4,514.1) (9,942.0)
DIVIDENDS ON PREFERRED STOCK (1.0) (90.4)
NET INCOME (LOSS) ATTRIBUTABLE TO
COMMON STOCKHOLDERS $ (4,514.1)$ (10,002.4)
INCOME (LOSS) PER SHARE:
Income (loss) from continuing operations $ (.561)$ (16.424)
Loss from discontinued operations (.001) (1.250)
Dividends on preferred stock (.001) (.161)
NET INCOME (LOSS) PER COMMON SHARE $ (.563)$ 17.835
WEIGHTED AVERAGE OF COMMON
STOCK OUTSTANDING 8,011,209 562,500
</TABLE>
See accompanying notes to these consolidated financial statements.
<PAGE>
ADINA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In Thousands)
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Nine Months Ended
January 31,
1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (4,514.1) $ (9,942.0)
ADJUSTMENTS TO RECONCILE NET GAIN (LOSS) TO
NET CASH FROM OPERATING ACTIVITIES:
Depreciation and amortization 361.9 445.1
(Gain) loss on disposal of assets 14.5 786.7
Non cash transaction for cash 860.2 -
Write-off (provision) uncollectible
accounts receivable - (6.0)
Write-down of Assets 453.3 -
Provision for inventory obsolescence 135.4 387.0
Change in assets and liabilities
Accounts and accrued receivables (70.0) (188.5)
Prepaid expenses 124.7 58.7
Inventories 224.8 73.8
Accounts payable and accrued expenses 167.0 37.3
Net cash used by operating activities (2,242.3) (8,347.9)
CASH FLOW FROM INVESTING ACTIVITIES:
Purchases of property and equipment (45.1) (1,491.4)
Purchases of marketable securities (222.0) (2,030.1)
Proceeds from sale of property and equipment 8.2 1,731.4
Disposition of assets of discontinued operations - 152.2
Loan to Director of Company (59.4) (1,000.0)
Deposits (15.5) (25.8)
Licenses and product development (688.2) (312.2)
Net cash used by investing activities (991.4) (2,975.9)
CASH FLOW FROM FINANCING ACTIVITIES:
Sale of common stock 122.7 3,123.8
Sale of preferred stock - 2,593.7
Proceed from note payable 800.0 -
Dividends on preferred stock (5.8) (78.0)
Purchase of Treasury Stock (41.0) -
Net cash provided by financing activities 875.9 5,638.5
NET INCREASE (DECREASE) IN CASH (2,357.8) (5,685.3)
CASH AT BEGINNING OF PERIOD 4,113.9 9,870.6
CASH AT END OF PERIOD $ 1,756.1 $ 4.185.3
SUPPLEMENTAL INFORMATION:
Cash paid for interest $ 71.2 $ 6.1
</TABLE>
See accompanying notes to these consolidated financial statements.
<PAGE>
ADINA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In Thousands)
NONCASH INVESTING AND FINANCING ACTIVITIES
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Nine Months Ended
January 31,
1998 1997
During the period ended January 31, 1997,
Camelot (643.9)
recognized a loss on the August 1996
disposal of the remaining investment in
Firecrest.
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)
During the period under review Camelot issued shares for
commission expense related to $800,000 funding (100.0)
</TABLE>
<PAGE>
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 approximately
39.8% 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 annually. Meteor's
fiscal year end is May 31, 1997 and their last six month Interim
Financials were issued for November 30, 1996. The results for the
period ending January 31, 1998 and 1997 include the published results
of Meteor.
The financial statements include the 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.
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 January 31,
1998 and April 30, 1997, one pound equals $1.6317 and $1.62,
respectively.
ITEM 2. Management Discussion and Analysis of Financial Condition
and Results of Operations
The Company's revenue for the period ended January 31, 1998 was
$1,710,900 compared with $1,443,000 in 1997. Net loss for the period
was $4,514,100 compared with a loss for the previous year of
$9,942,000. 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 [TM]. Camelot Corporation
("Camelot"), has continued with its cost cutting efforts. Further
a write down of $453,300 was made by Meteor of the DigiPhone 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 $1,547,500 compared with $2,635,900 for the financial year
ended April 30, 1997. Total assets were $6,954,000 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 primarily 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 Equipment Manufacturers to license this technology.
Subsequent to the year end, Camelot announced that it has entered
into a conditional agreement to acquire 100% of the issued share
capital of DigiPhone International Ltd. ("DI"), the London based
company that is the exclusive worldwide distributor of VideoTalk.
Following this acquisition Camelot will own 100% of all the rights,
title and interests to VideoTalk through its wholly owned
subsidiaries Third Planet Publishing, Inc. (which owns the technology
rights to VideoTalk) and DI (which owns the marketing rights to
VideoTalk).
On February 26, 1998 Camelot was delisted from NASDAQ, and is
applying for trading on the OTC Bulletin Board.
Liquidity and Capital Resources
Net cash used by operating activities for the nine months ended
January 31, 1997 was $2,242,300 compared with $8,347,900 in 1997.
Net cash used by investing activities was $991,400 compared with
$2,975,900 in 1997. Net cash provided by financing activities was
$875,900 compared with cash provided of $5,638,500 in 1997.
The Company has no plan for capital expenditure, and Camelot's plans
for capital expenditures 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 Camelot
have any long term corporate debt. There are no known trends,
demands, commitments, or events that would result in or that is
known to management that would result in
increasing or decreasing in a material way other than the potential
use of cash resources for investment in the normal course of
business.
<PAGE>
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 and Principal
Financial Officer
Date: March 16, 1998
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