<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the quarter ended September 30, 1995 Commission file number 01-18695
WORK RECOVERY, INC.
(Exact name of registrant as specified in its charter)
Colorado 68-0165800
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
2341 South Friebus, Suite 14, Tucson, AZ. 85713
(Address of principal executive offices) (Zip Code)
(520)-322-6634
(Registrant's telephone number, including area code)
Not Applicable
(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 No
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 12, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes____ No____
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date. As of September 30, 1995,
there were 45,858,074 shares of common stock outstanding, which is Registrant's
sole class of common stock outstanding.
<PAGE> 2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
WORK RECOVERY, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
(Unaudited)
September 30, June 30,
1995 1995
------------ ------------
<S> <C> <C>
Current Assets:
Cash and Cash Equivalents $4,539,000 $ 6,554,000
Accounts Receivable, net 733,000 1,493,000
Inventories, net 942,000 356,000
Marketable Securities 49,000 66,000
Prepaid Expenses and Other Assets 252,000 333,000
---------- ----------
Total Current Assets 6,515,000 8,802,000
Property, Plant & Equipment, net 5,862,000 5,649,000
Intangible Assets, net 583,000 465,000
Other Assets 484,000 743,000
---------- ----------
Total Assets $13,444,000 $15,659,000
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts Payable $ 1,436,000 $ 1,168,000
Accrued Expenses 645,000 345,000
Notes Payable 129,000 3,676,000
Current Portion of Long-Term Debt 471,000 441,000
Other Current Liabilities 69,000 88,000
Unallocated Credits 2,466,000 966,000
Deferred Consulting Revenue 2,009,000 2,009,000
---------- ----------
Total Current Liabilities 7,225,000 8,693,000
Long-Term Debt 2,095,000 2,255,000
---------- ----------
Total Liabilities 9,320,000 10,948,000
Commitments and Contingent Liabilities
Shareholders' Equity:
Preferred Stock, Cumulative Convertible 1,425,000 1,685,000
Common Stock, $.004 par value:
Authorized 100,000,000 shares, issued
and outstanding 45,858,074 shares at
September 30,1995 and 44,132,172
shares at June 30,1995 184,000 176,000
Additional Paid-in Capital 57,265,000 53,648,000
Accumulated Deficit (54,750,000) (49,414,000)
Treasury Stock, at Cost (1,384,000)
----------- ----------
Total Shareholders' Equity 4,124,000 4,711,000
----------- ----------
Total Liabilities and Shareholders'
Equity $13,364,000 $15,659,000
=========== ==========
See Notes to Consolidated Financial Information
</TABLE>
<PAGE> 3
WORK RECOVERY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
--------------------------
(Restated)
1995 1994
------------ ------------
<S> <C> <C>
Net Revenues $ 1,823,000 $ 4,589,000
Cost of Sales 2,638,000 2,354,000
---------- ----------
Gross Profit (Loss) (815,000) 2,235,000
Expenses:
Selling, General and Administrative 2,416,000 1,475,000
Settlement with Investors 185,000
Loss from Unusual Transactions
and Activities 128,000
Additional Bad Debts 984,000 2,963,000
--------- ----------
Loss From Operations (4,528,000) (2,203,000)
Other Income (Expense):
Interest Income 135,000 16,000
Interest Expense (94,000) (47,000)
Investment Losses (773,000) (3,472,000)
Miscellaneous Income (Expense) 6,000 (87,000)
--------- ----------
Net Other Expense (726,000) (3,590,000)
Loss From Operations Before
Income Taxes (Benefits) (5,254,000) (5,793,000)
Income Taxes (Benefits) (332,000)
---------- -----------
Net Loss $(5,254,000) $(5,461,000)
========== ==========
Loss Per Common and Common
Equivalent Share $ (.12) $ (.20)
Weighted Average Number of Common
Shares Outstanding 45,554,066 27,568,480
See Notes to Consolidated Financial Information
</TABLE>
<PAGE> 4
WORK RECOVERY, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
September 30
--------------------------
1995 1994
------------ ------------
<S> <C> <C>
Net Cash Used in
Operating Activities $(1,854,000) $(1,292,000)
--------- ---------
Cash Flows from Investing Activities:
Investment in Notes Receivable (1,526,000)
Investment in Unconsolidated Affiliates (534,000) 400,000
Purchases of Property, Plant and
Equipment In-Service (305,000) (27,000)
Loans to Officers and Former Officers (164,000)
---------- ---------
Net Cash Used in Investing Activities (1,003,000) (1,153,000)
---------- ---------
Cash Flows from Financing Activities:
Proceeds from Issuance of Stock 924,000 1,552,000
Net Borrowings on Short-Term Debt 506,000
Proceeds from Issuance of Long-Term Debt 175,000
Repayment of Long-Term Debt (257,000) (114,000)
---------- ---------
Net Cash Provided by Financing Activities 842,000 1,944,000
---------- ---------
Net Decrease in Cash (2,015,000) (501,000)
Cash at Beginning of Period 6,554,000 1,188,000
---------- ---------
Cash at End of Period $ 4,539,000 $ 687,000
========== ==========
See Notes to Consolidated Financial Information
</TABLE>
<PAGE> 5
WORK RECOVERY, INC.
NOTES TO CONSOLIDATED FINANCIAL INFORMATION
(UNAUDITED)
1. Chapter 11 Bankruptcy Filings and Reorganization
DURING THE FISCAL YEAR ENDED JUNE 30, 1996, THE ENTIRE MEMBERSHIP OF THE BOARD
OF DIRECTORS OF WORK RECOVERY, INC. (the "COMPANY") WAS REPLACED AND SIGNIFICANT
CHANGES IN THE COMPANY'S MANAGEMENT OCCURRED.
ON MAY 29, 1996, THE COMPANY AND ITS WHOLLY-OWNED SIBSIDIARY WORK RECOVERY
CENTERS, INC. FILED VOLUNTARY PETITIONS FOR REORGANIZATION UNDER CHAPTER 11
OF THE UNITED STATES BANKRUPTCY CODE IN THE THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF ARIZONA AND IS CURRENTLY OPERATING AS DEBTOR-IN-POSSESSION
SUBJECT TO THE LIMITATIONS AND REQUIREMENTS OF THE BANKRUPTCY CODE. ON
NOVEMBER 25, 1996 THE BANKRUPTCY COURT CONFIRMED THE COMPANY'S PLAN OF
REORGANIZATION.
THE ACCOMPANYING FINANCIAL STATEMENTS HAVE BEEN RESTATED TO REFLECT CERTAIN
ADJUSTMENTS RECORDED TO THE FINANCIAL STATEMENTS IN FORM 10-K FOR THE YEAR ENDED
JUNE 30, 1995. DUE TO THE SIGNIFICANT CHANGES IN THE MANAGEMENT OF THE COMPANY,
CURRENT MANAGEMENT IS UNABLE TO PROVIDE AN ACCURATE OR COMPLETE DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE PERIODS
COVERED BY THIS REPORT. THIS REPORT SHOULD BE READ IN CONJUNCTION WITH FORM
10-K FOR THE YEARS ENDED JUNE 30, 1995, 1996 AND SUBSEQUENT FILINGS.
2. Basis of Presentation
The accompanying unaudited consolidated financial information has been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article l0 of
Regulation S-X. Accordingly, they 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 accruals) considered necessary for a fair
presentation have been included.
All inter-entity accounts and transactions have been eliminated in the
consolidated financial statements.
<PAGE> 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
DUE TO THE SIGNIFICANT CHANGES IN THE MANAGEMENT OF THE COMPANY, CURRENT
MANAGEMENT IS UNABLE TO PROVIDE AN ACCURATE OR COMPLETE DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE PERIODS COVERED BY
THIS REPORT. THIS REPORT SHOULD BE READ IN CONJUNCTION WITH FORM 10-K FOR THE
YEARS ENDED JUNE 30, 1995, 1996, SUBSEQUENT FILINGS AND ACCOMPANYING FINANCIAL
STATEMENTS AND NOTES THERETO.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Due to the significant changes in the management of the Company, current
management is unable to provide an accurate or complete discussion of legal
proceedings for the period covered by this report. This report should be read
in conjunction with Form 10-K for the years ended June 30, 1995, 1996 and
subsequent filings which discuss the Company's Chapter 11 bankruptcy
proceedings and developments in connection therewith and other matters
pertaining to the period covered by this Form 10-Q.
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
None
<PAGE> 7
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.
WORK RECOVERY, INC.
(Registrant)
/s/ DORCAS R. HARDY
Dorcas R. Hardy,Acting Chief Executive Officer (Principal Executive Officer)
Date: January 15, 1997
/s/ ROBERT D. JUDSON, JR.
Robert D. Judson, Jr., Acting Chief Financial officer (Principal Financial and
Accounting Officer)
Date: January 15, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-1-1995
<PERIOD-END> SEP-30-1995
<CASH> 4,539,000
<SECURITIES> 49,000
<RECEIVABLES> 3,466,000
<ALLOWANCES> (2,733,000)
<INVENTORY> 942,000
<CURRENT-ASSETS> 6,515,000
<PP&E> 9,588,000
<DEPRECIATION> (3,726,000)
<TOTAL-ASSETS> 13,444,000
<CURRENT-LIABILITIES> 7,225,000
<BONDS> 0
0
1,425,000
<COMMON> 184,000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 13,444,000
<SALES> 616,000
<TOTAL-REVENUES> 1,823,000
<CGS> 308,000
<TOTAL-COSTS> 2,638,000
<OTHER-EXPENSES> 3,361,000
<LOSS-PROVISION> 984,000
<INTEREST-EXPENSE> 94,000
<INCOME-PRETAX> (5,254,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (5,254,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,254,000)
<EPS-PRIMARY> (.12)
<EPS-DILUTED> 0
</TABLE>
