<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________________ to __________________
Commission file number 0-6906
MEDICORE, INC.
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(Exact name of registrant as specified in its charter)
Florida 59-0941551
- ------------------------------ -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2337 West 76th Street, Hialeah, Florida 33016
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(305) 558-4000
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(Registrant's telephone number, including area code)
NOT APPLICABLE
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(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X]or No[ ]
Common Stock Outstanding
Common Stock, $.01 par value -- 5,456,940 shares as of April 30, 1997.
<PAGE> 2
MEDICORE, INC. AND SUBSIDIARIES
INDEX
PART I -- FINANCIAL INFORMATION
- ------ ---------------------
The Consolidated Condensed Statements of Income (Unaudited) for the
three months ended March 31, 1997 and March 31, 1996 include the accounts of the
Registrant and all its subsidiaries.
Item 1. Financial Statements
- ------- --------------------
1) Consolidated Condensed Statements of Income for the three months
ended March 31, 1997 and March 31, 1996.
2) Consolidated Condensed Balance Sheets as of March 31, 1997 and
December 31, 1996.
3) Consolidated Condensed Statements of Cash Flows for the three months
ended March 31, 1997 and March 31, 1996.
4) Notes to Consolidated Condensed Financial Statements as of March 31,
1997.
Item 2. Management's Discussion and Analysis of Financial Condition
- ------- and Results of Operations
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PART II -- OTHER INFORMATION
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Item 6. Exhibits and Reports on Form 8-K
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<PAGE> 3
PART I -- FINANCIAL INFORMATION
-------------------------------
ITEM 1. FINANCIAL STATEMENTS
- ------- --------------------
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
MEDICORE, INC. AND SUBSIDIARIES
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------
1997 1996
---- ----
<S> <C> <C>
REVENUES
Sales $ 7,757,836 $ 8,229,558
Gain on subsidiary securities offering and warrants exercise 60,981
Realized gain on sale of marketable securities 49,493 562,029
Other income 145,944 120,780
Litigation settlement 139,645
----------- -----------
8,014,254 9,052,012
COST AND EXPENSES
Cost of goods sold 6,165,392 6,636,687
Selling, general and administrative expenses 1,421,120 1,289,290
Interest expense 55,791 54,919
----------- -----------
7,642,303 7,980,896
----------- -----------
INCOME BEFORE INCOME TAXES
AND MINORITY INTEREST 371,951 1,071,116
Income tax (benefit) provision (24,341) 189,927
----------- -----------
INCOME BEFORE MINORITY INTEREST 396,292 881,189
Minority interest in earnings of consolidated subsidiaries (129,929) (155,936)
----------- -----------
NET INCOME $ 266,363 $ 725,253
=========== ===========
Net income per share $ .04 $ .12
=========== ===========
</TABLE>
See notes to consolidated condensed financial statements.
<PAGE> 4
MEDICORE, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1997 1996(A)
--------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 8,767,258 $ 10,665,826
Marketable securities 648,170 1,405,579
Short-term investments 131,803 129,472
Accounts receivable, less allowances of $369,000 at
March 31, 1997 and $385,000 at December 31, 1996 4,735,801 3,711,600
Inventories, less allowances for obsolescence of $178,000 at
March 31, 1997 and $169,000 at December 31, 1996 4,174,063 3,637,556
Prepaid expenses and other current assets 517,296 589,502
------------ ------------
Total current assets 18,974,391 20,139,535
Property and Equipment
Land and improvements 1,016,055 1,024,455
Building and building improvements 3,089,558 2,986,126
Equipment and furniture 6,496,148 6,364,188
Leasehold improvements 407,570 392,607
------------ ------------
11,009,331 10,767,376
Less accumulated depreciation and amortization 4,864,728 4,728,167
------------ ------------
6,144,603 6,039,209
Deferred expenses and other assets 200,762 204,361
Costs in excess of net tangible assets acquired, less accumulated
amortization of $367,000 at March 31, 1997 and $356,000
at December 31, 1996 690,581 701,747
------------ ------------
$ 26,010,337 $ 27,084,852
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 2,893,559 $ 2,726,817
Accrued expenses and other current liabilities 1,160,784 1,412,623
Current portion of long-term debt 671,043 832,851
Income taxes payable 297,389 788,976
Deferred income taxes 246,305 534,120
------------ ------------
Total current liabilities 5,269,080 6,295,387
Long-term debt 1,765,752 1,677,367
Deferred income taxes 2,175,560 2,155,603
Minority interest in subsidiaries 3,946,243 3,935,037
Commitments and contingencies
Stockholders' Equity
Common stock, $.01 par value authorized 12,000,000 shares;
issued and outstanding 5,456,940 shares 54,569 54,569
Capital in excess of par value 11,493,255 11,493,255
Retained earnings 875,909 609,546
Foreign currency translation adjustment 28,104 (7,371)
Unrealized gain on marketable securities for sale 401,865 871,459
------------ ------------
Total Stockholders' Equity 12,853,702 13,021,458
------------ ------------
$ 26,010,337 $ 27,084,852
============ ============
</TABLE>
(A) Reference is made to the Company's Annual Report on Form 10-K for the year
ended December 31, 1996 filed with the Securities and Exchange Commission
in March, 1997.
See notes to consolidated condensed financial statements.
<PAGE> 5
MEDICORE, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------
1997 1996
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 266,363 $ 725,253
Adjustments to reconcile net income to net cash (used in) provided
by operating activities:
Depreciation 176,502 157,286
Amortization 17,670 18,807
Bad debt expense 38,390 29,831
Gain on Viragen note collection (24,123)
Provision for inventory obsolescence 20,881 72,550
Gain on sale of securities (49,493) (562,029)
Gain on subsidiary securities offering and warrants exercise (60,981)
Minority interest 129,929 155,936
Deferred income taxes 24,151
Increase (decrease) relating to operating activities from:
Accounts receivable (1,090,087) (316,345)
Inventories (590,609) 327,001
Prepaid expenses and other current assets 62,797 147,979
Accounts payable 190,183 (617,837)
Accrued expenses and other current liabilities (233,113) (239,565)
Income taxes payable (479,259) 171,496
------------ ------------
Net cash (used in) provided by operating activities (1,576,676) 46,240
INVESTING ACTIVITIES
Additions to property and equipment, net of minor disposals (331,734) (88,101)
Payments received on note receivable from Viragen, Inc. 170,368
Proceeds from short-term investments 98,472 93,854
Short-term investments (100,802) (96,192)
Proceeds from sale of securities 49,493 562,029
Deferred expenses and other assets (2,627) (108,601)
------------ ------------
Net cash (used in) provided by investing activities (287,198) 533,357
FINANCING ACTIVITIES
Proceeds from exercise of subsidiary public offering warrants 130,625
Proceeds from long-term borrowings 181,476
Payments on long-term borrowings (64,904) (91,949)
Deferred financing costs 1,032 (14,168)
Proceeds from exercise of stock options 300
------------ ------------
Net cash provided by (used in) financing activities 67,053 75,359
Effect of exchange rate fluctuations on cash (101,747) (17,477)
------------ ------------
Decrease (increase) in cash and cash equivalents (1,898,568) 637,479
Cash and cash equivalents at beginning of year 10,665,826 4,836,512
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 8,767,258 $ 5,473,991
============ ============
</TABLE>
See notes to consolidated condensed financial statements.
<PAGE> 6
MEDICORE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
MARCH 31, 1997
(UNAUDITED)
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION
The Consolidated Condensed Financial Statements include the accounts of
Medicore, Inc., Medicore's 67.2% owned subsidiary, Dialysis Corporation of
America ("DCA") (see Note 8) and Medicore's 63.1% owned subsidiary, Techdyne,
Inc. ("Techdyne") (including its wholly-owned subsidiaries Techdyne (Scotland)
Limited ("Techdyne (Scotland)" and Techdyne Livingston Limited (a subsidiary
of Techdyne (Scotland)), collectively known as the Company. All material
intercompany accounts and transactions have been eliminated in consolidation.
SALE OF STOCK BY SUBSIDIARIES
The Company follows an accounting policy of income statement recognition for
sales of stock by its subsidiaries, which includes exercise of warrants issued
in subsidiary stock offerings. See Note 8.
INVENTORIES
Inventories are comprised of the following:
March 31, December 31,
1997 1996
--------- ------------
Electronic and mechanical components, net:
Finished goods $ 436,356 $ 486,863
Work in process 745,149 478,481
Raw materials and supplies 2,473,141 2,083,990
---------- ----------
3,654,646 3,049,334
Medical supplies 519,417 588,222
---------- ----------
$4,174,063 $3,637,556
========== ==========
BUSINESS
The Company manufactures and distributes medical products. The Company, through
its subsidiary, Techdyne, including its wholly-owned subsidiary, Techdyne
(Scotland), is an international contract manufacturer of electronic,
electro-mechanical and plastic insert injection molded products used by original
equipment manufacturers and distributors primarily in the data processing,
telecommunication and instrumentation industries. The Company, through DCA,
operates three kidney dialysis centers, which are located in Florida and
Pennsylvania, and has agreements to provide inpatient dialysis treatments to
various hospitals and provides medical supplies for dialysis home patients.
MAJOR CUSTOMERS
A majority of the Company's electro-mechanical sales are to certain major
customers. The loss of, or substantially reduced sales to, any of these
customers would have an adverse effect on the Company's operations.
<PAGE> 7
MEDICORE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
MARCH 31, 1997
(UNAUDITED)
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES --CONTINUED
Increased competition in the bidding for Compaq business has resulted in a
substantial loss of Compaq sales by Techdyne (Scotland) commencing in the third
quarter of 1996 and reduced profit margins on remaining Compaq sales. Techdyne
(Scotland) is pursuing cost reduction and new business development efforts to
attempt to make up for reductions in Compaq business, although there can be no
assurance as to the success of such efforts.
Medical services revenues, which represent revenues of the Company's dialysis
division, are attributable to payments received under Medicare, which is
supplemented by Medicaid or comparable benefits in the states in which the
Company operates. Reimbursement rates under these programs are subject to
regulatory changes and governmental funding restrictions. Although the Company
is not aware of any future rate changes, significant changes in reimbursement
rates could have a material effect on the Company's operations.
Medical product sales are highly dependent on government contracts which have
become increasingly difficult to secure due to changes in government procurement
procedures. Significant reductions in government contract revenues would have a
material adverse effect on the operations of the Medical Products Division. The
Company decided to shutdown the durable medical equipment portion of its medical
products business due to its unprofitable operations and recorded approximately
$305,000 in costs in connection with this shutdown in the fourth quarter of
1996.
INCOME TAXES
Deferred income taxes at the end of each period are determined by applying
enacted tax rates applicable to future periods in which the taxes are expected
to be paid or recovered to differences between financial accounting and tax
basis of assets and liabilities.
The Company filed consolidated federal and state tax returns with Techdyne until
October 2, 1995, the date Techdyne's securities offering was completed, after
which Techdyne files separate income tax returns with its income tax liability
reflected on a separate return basis. DCA was likewise included in the
consolidated tax returns of the Company until the completion of its public
offering in April 1996, after which it files separate income tax returns with
its income tax liability reflected on a separate return basis. See Note 8.
NOTE 2 -- INTERIM ADJUSTMENTS
The financial summaries for the three months ended March 31, 1997 and March 31,
1996 are unaudited and include, in the opinion of management of the Company, all
adjustments (consisting of normal recurring accruals) necessary to present
fairly the earnings for such periods. Operating results for the three months
ended March 31, 1997 are not necessarily indicative of the results that may be
expected for the entire year ending December 31, 1997.
<PAGE> 8
MEDICORE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
MARCH 31, 1997
(UNAUDITED)
NOTE 2 -- INTERIM ADJUSTMENTS--CONTINUED
While the Company believes that the disclosures presented are adequate to make
the information not misleading, it is suggested that these Consolidated
Condensed Financial Statements be read in conjunction with the financial
statements and notes included in the Company's latest annual report for the year
ended December 31, 1996.
NOTE 3 -- TRANSACTIONS WITH VIRAGEN, INC.
The Company owns approximately 259,000 shares of common stock of Viragen,
formerly a majority-owned subsidiary of the Company. The carrying value of these
securities was written off as of December 31, 1991.
The Company sold 10,000 shares of Viragen stock and recognized a gain of
approximately $49,000 during the first quarter of 1997, and sold 310,000 shares
and recognized a gain of $562,000 during the same period of the preceding year.
During 1996, the Company sold approximately 682,000 shares of Viragen stock and
recognized total gains for the year of approximately $2,584,000 . The Company
has recorded these securities at fair value with the unrealized gain credited to
a separate component of stockholders' equity, net of income tax effect. Fair
value was determined using quoted market prices by the Nasdaq stock market
commencing September 1996 and by the National Quotation Bureau, Inc. prior to
that time.
The Company had a second mortgage and related note due from Viragen. Under the
terms of this note, the receivable was payable in monthly installments of
$1,789, with a final payment of all unpaid principal and interest due August 6,
1996. The note bore interest at 1% over prime. The note balance included amounts
due from Viragen that were previously written off by the Company. In March,
1996, Viragen prepaid $165,000 on this note. The Company recognized a gain of
approximately $24,000 in the first quarter of 1996 as a result of collecting a
portion of the previously reserved amount. Interest earned on the note amounted
to $9,000 for the three months ended March 31, 1996.
The Company has a royalty agreement with Viragen, pursuant to which it receives
a royalty on Viragen's net sales of interferon and related products. The terms
of the agreement include an aggregate of $2.4 million to be paid based on the
following percentages of Viragen sales: 5% of the first $7 million, 4% of the
next $10 million, and 3% of the remaining $55 million. Royalty payments are due
quarterly. Under the agreement, approximately $108,000 of royalties earned
pursuant to a previous agreement, will comprise the final payment under the new
agreement. There was no royalty income accrued under the amended agreement
during the three months ended March 31, 1997, and $2,000 was accrued for the
three months ended March 31, 1996.
NOTE 4 -- LONG-TERM DEBT
On February 8, 1996, Techdyne refinanced its term loan by entering into several
loans with a Florida bank. One credit facility is a $2,000,000 line of credit,
due on demand, secured by Techdyne's accounts receivable, inventory, furniture,
fixtures and intangible assets and bears interest at the bank's prime rate plus
1.25%. There were no amounts outstanding under this loan as of March 31, 1997
and no amounts have been drawn down on this line as of that date.
<PAGE> 9
MEDICORE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
MARCH 31, 1997
(UNAUDITED)
NOTE 4 -- LONG-TERM DEBT--CONTINUED
The bank has also extended two commercial term loans to Techdyne, one for
$712,500 for five years expiring on February 7, 2001 at an annual rate of
interest equal to 8.28% with monthly payments of principal and interest of
$6,925 based on a 15-year amortization schedule with the unpaid principal and
accrued interest due on the expiration date. This term loan which had an
outstanding balance of $684,000 and $691,000 at March 31, 1997 and December 31,
1996 respectively, has a prepayment penalty and is secured by a mortgage on
properties in Hialeah, Florida owned by the Company, two of which properties are
leased to Techdyne and one parcel being vacant land used as a parking lot. Under
this term loan, Techdyne is obligated to adhere to a variety of affirmative and
negative covenants.
The second commercial term loan is for the principal amount of $200,000 for a
period of five years bearing interest at a per annum rate of 1.25% over the
bank's prime rate and requiring monthly principal payments with accrued interest
of $3,333 through expiration on February 7, 2001. This $200,000 term loan, which
had an outstanding balance of $157,000 and $167,000 at March 31, 1997 and
December 31, 1996, respectively, carries no prepayment penalty and is secured by
all of Techdyne's tangible personal property, goods and equipment, and all cash
or noncash proceeds of such collateral.
The Company has unconditionally guaranteed the payment and performance by
Techdyne of the $2,000,000 revolving loan and the two commercial term loans.
A default of the $712,500 term loan will be deemed a default of the $2,000,000
revolving line, but only a financial default of the $2,000,000 revolving line
will be deemed a default of the $712,500 term loan.
Techdyne has a promissory note payable to a local bank of $145,000 at March 31,
1997 and December 31, 1996, with interest payable monthly at prime with the note
maturing April 1997. This note has been renewed for an additional 3 years until
April 2000 with the same terms.
In October 1994, the Company obtained a $230,000 mortgage to refinance a
mortgage note and a second mortgage note secured by land and building leased to
Techdyne which represents a noncash financing activity and is a supplemental
disclosure required by FAS 95. This mortgage had a remaining balance of $213,000
at December 31, 1995. As part of Techdyne's bank loan refinancing, the balance
of this mortgage was paid off.
In October, 1994, Techdyne (Scotland) finalized the purchase of the facility
which houses its operations at a cost of approximately $730,000. This mortgage
had a remaining balance of $589,000 and $622,000 at March 31, 1997 and
December 31, 1996, respectively. Techdyne (Scotland) has a line of credit with a
Scottish bank with a U.S. dollar equivalency of approximately $328,000 and
$342,000 at March 31, 1997 and December 31, 1996, respectively. No amounts were
outstanding under this line of credit as of March 31, 1997 or December 31, 1996.
The Company obtained a $130,000 mortgage on vacant land for possible future
expansion in April 1993. The Company received $30,000 cash proceeds from the
mortgage with $100,000 representing a noncash financing activity which is a
supplemental disclosure as required by FAS 95. This mortgage had a balance of
approximately $79,000 at March 31, 1997 and $82,000 at December 31, 1996.
In December 1988, DCA obtained mortgages through November 2003 on its buildings
in Lemoyne, Pennsylvania and Easton, Maryland with interest at 1% over the prime
rate. The remaining combined principal balance under these mortgages amounted to
approximately $486,000 and $504,000 at March 31, 1997 and December 31, 1996,
respectively. Commencing November 30, 1993 the bank has the right to demand
repayment on the outstanding balance of the borrowings under these mortgages
which have accordingly been classified as current liabilities.
<PAGE> 10
MEDICORE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
MARCH 31, 1997
(UNAUDITED)
NOTE 4 -- LONG-TERM DEBT--CONTINUED
Other debt includes various capital lease and other financing obligations. The
Company has an equipment purchase agreement for kidney dialysis machines for its
facilities in Pennsylvania and Florida. The initial principal balance of
$195,130, additional borrowings of $124,096 in 1996 and $17,000 in 1997, net of
downpayments, represents a noncash financing activity which is a supplemental
disclosure required by FAS 95. Monthly payments were originally $4,435
commencing September 1995, including principal and interest, through June 2000,
with additional monthly payments of $2,750 on 1996 financing commencing December
1996, including principal and interest through September 2001 with interest at
12%. Additional monthly payments of $344 on 1997 financing, including principal
and interest, commenced March 1997 to continue through February 2002, with
interest at 8%. The remaining principal balance under this agreement amounted to
approximately $276,000 and $272,000 at March 31, 1997 and December 31, 1996,
respectively.
The prime rate was 8.5% as of March 31, 1997 and 8.25% as of December 31, 1996.
Interest payments on long-term debt amounted to $57,000 for the three months
ended March 31, 1997 and for the same period of the preceding year.
NOTE 5 -- INCOME TAXES
At March 31, 1997 and December 31, 1996, the Company had net operating loss
carryforwards of approximately $4,400,000 and $4,900,000 respectively, that
expire in years 2005 through 2008. The remaining net operating loss
carryforwards relate to Techdyne and are only available to offset future
Techdyne (US) taxable income. Subsequent to its public offering completed on
October 2, 1995, Techdyne files separate federal and state income tax returns
with its income tax liability reflected on a separate return basis. DCA likewise
files separate federal and state income tax returns subsequent to its public
offering which became effective on April 17, 1996 with its previously available
net operating loss carryforwards having been utilized prior to completion of its
public offering. See Note 8.
Deferred income taxes reflect the net tax effect of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. A deferred tax liability
of $2,076,000 at March 31, 1997 and $2,053,000 December 31, 1996 resulted from
income tax expense recorded on gains recognized for financial reporting
purposes, but not for income tax purposes resulting in a difference between book
and tax basis of the Company's investments in Techdyne and DCA. This temporary
difference would reverse upon the occurrence of certain events relating to the
divestiture of these subsidiaries. Management of the Company currently has no
plans to effect a transaction that will result in such a divestiture. A deferred
tax liability of approximately $246,000 has been recorded for the unrealized
gain on marketable securities. See Note 3.
Other deferred tax liabilities, which total approximately $332,000, result
primarily from tax over book depreciation and are more than offset by deferred
tax assets. Deferred tax assets of approximately $1,661,000 result from net
operating loss carryforwards with other deferred tax assets resulting primarily
from temporary differences in book and tax bases of receivables and inventory
amounting to approximately $353,000. Deferred tax assets have not been reflected
in the financial statements as a result of their being offset by a valuation
allowance which amounted to approximately $1,781,000 at March 31, 1997 and
$1,588,000 December 31, 1996.
<PAGE> 11
MEDICORE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
MARCH 31, 1997
(UNAUDITED)
NOTE 5 -- INCOME TAXES--CONTINUED
The Company had a domestic income tax expense of approximately $32,000 for the
three months ended March 31, 1997, including deferred taxes of approximately
$23,000 on a gain on Techdyne warrant exercises (see Note 8) and $14,000 for the
same period of the preceding year.
Techdyne (Scotland) had an income tax benefit of approximately $57,000 for the
three months ended March 31, 1997 and income tax expense of approximately
$176,000 for the same period of the preceding year.
Income tax payments were $406,000 for the three months ended March 31, 1997 and
$13,000 for the same period of the preceding year.
NOTE 6 -- STOCK OPTIONS AND STOCK COMPENSATION
In September 1994, the Company granted options to a consulting firm to purchase
400,000 shares of common stock exercisable at $1.25 per share through September
30, 1997. Options for 200,000 shares were transferred by the consulting firm to
another party in September 1996. The options vested on the basis of 25% of the
aggregate as of the end of each quarter beginning with the quarter ended
December 31, 1994.
In September 1994, options to purchase 480,000 shares of common stock at $.69
per share were exercised. The Company received cash payment of the par value and
the balance in three year promissory notes. In June 1996, the Company forgave
the balances due under the notes including accrued interest, in accordance with
which it recorded approximately $344,000 in compensation expense in the second
quarter of 1996.
The Company has 1,000,000 shares of common stock reserved for future issuance
pursuant to its 1989 Stock Option Plan. On April 18, 1995, the Company granted
809,000 options, of which there are currently 807,000 outstanding, as a service
award to officers, directors, consultants and certain employees of the Company
and certain of its subsidiaries under its 1989 Stock Option Plan. The options
were exercisable at $3.00 per share reduced to $2.38 per share on December 30,
1996, through April 17, 2000 and are exercisable 50% on or after the first
anniversary date of grant and in full on or after the second anniversary date of
grant.
On May 6, 1996, the Company adopted a Key Employee Stock Plan reserving 100,000
shares of its common stock for issuance from time to time to officers,
directors, key employees, advisors and consultants as bonus or compensation for
performances and or services rendered to the Company or otherwise providing
substantial benefit for the Company. 2,000 shares under this plan were issued to
the managing director of the Company's European operations for which the Company
recorded approximately $6,000 in compensation expense during the second quarter
of 1996.
In May 1994, Techdyne adopted a stock option plan for up to 250,000 options.
Pursuant to this plan, in May 1994, Techdyne's Board of Directors granted
227,500 options, of which there are 171,600 outstanding as of March 31, 1997, to
certain of its officers, directors, employees and consultants. These options are
excercisable for a period of five years at $1 per share.
<PAGE> 12
MEDICORE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
MARCH 31, 1997
(UNAUDITED)
NOTE 6 -- STOCK OPTIONS AND STOCK COMPENSATION--CONTINUED
On February 27, 1995 Techdyne granted stock options, not part of the 1994 Plan,
to directors of Techdyne and its subsidiary for 142,500 shares exercisable at
$1.75 per share for five years. In April 1995, Techdyne granted a stock option
for 10,000 shares, not part of the 1994 Plan, to its general counsel at the same
price and terms as the directors' options.
In November 1995, DCA adopted a stock option plan for up to 250,000 options.
Pursuant to this plan, in November 1995, DCA's Board of Directors granted
210,000 options, of which there are 193,500 outstanding as of March 31, 1997 to
certain of its officers, directors, employees and consultants. These options are
exercisable for a period of five years through November 9, 2000 at $1.50 per
share. In August 1995, DCA's Board granted 15,000 options to the medical
directors at its three kidney dialysis centers. These options are exercisable
for a period of 3 years through August 18, 1999 at $4.75 per share.
The Boards of Directors of each company granting stock options determined that
the fair value of the underlying common stock was not in excess of the exercise
price on the date of grant for stock options granted and, therefore, no amounts
have been charged to operations in connection with any grants of options.
NOTE 7 -- COMMITMENTS AND CONTINGENCIES
Upon completion of DCA's public offering in April 1996, DCA retained the
representative of the underwriters to provide financial consulting services
pertaining to DCA's business, at a monthly fee of $3,000 per month for a period
of 18 months, which sum was paid in advance upon on the closing of the offering.
See Note 8.
In the first quarter of 1996, a temporary worker provided by a temporary
personnel agency was injured while working at Techdyne. The worker was insured
through the temporary personnel agency. While the full extent of the temporary
worker's injuries and the ultimate costs associated with those injuries are not
presently known, the Company anticipates that its insurance is adequate to cover
any potential claims which might arise.
A litigation initiated by Techdyne in 1994 in the Florida courts was settled on
terms favorable to the Company in the first quarter of 1996.
Effective January 1, 1997, DCA established a 401(k) savings plan (salary
deferral plan) with an eligibility requirement of 1 year of service and 21 year
old age requirement.
NOTE 8 -- SUBSIDIARY STOCK OFFERINGS
In October 1995, Techdyne completed a public offering of 1,000,000 shares of
common stock and 1,000,000 redeemable common stock purchase warrants providing
that subsidiary with net proceeds of approximately $3,321,000 for which the
Company recognized a gain of approximately $2,002,000 with applicable income
taxes of $761,000, which resulted in a net gain of approximately $1,241,000.
During the first quarter of 1997, approximately 28,000 Techdyne warrants were
exercised providing net proceeds of approximately $131,000 after underwriter
<PAGE> 13
MEDICORE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
MARCH 31, 1997
(UNAUDITED)
NOTE 8 -- SUBSIDIARY STOCK OFFERINGS--CONTINUED
commissions on warrant exercises. In accordance with its accounting policy of
income statement recognition for sales of stock by subsidiaries, which includes
exercises of warrants issued in subsidiary stock offerings, the Company
recognized a gain of approximately $61,000 with applicable income taxes of
approximately $23,000, which resulted in a net gain of approximately $38,000
during the first quarter of 1997. See Note 1.
DCA completed a public offering in April 1996 of 1,150,000 shares of common
stock including 150,000 shares from exercise of the underwriters overallotment
options, and there are 2,300,000 redeemable common stock purchase warrants, with
net proceeds of the offering, including the exercise of the overallotment option
for 150,000 units, of approximately $3,445,000 for which the Company recorded a
gain of approximately $1,521,000 with applicable income taxes of $578,000, which
resulted in a net gain of approximately $943,000.
<PAGE> 14
Item 2. Management's Discussion and Analysis of Financial Condition and Results
- ------- of Operations
-----------------------------------------------------------------------
The statements contained in this Quarterly Report on Form 10-Q that are not
historical are forward looking statements within the meaning of Section 27A of
the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934, including statements regarding the Company's expectations, intentions,
beliefs, or strategies regarding the future. Forward looking statements include
the Company's statements regarding liquidity, anticipated cash needs and
availability, and anticipated expense levels in "Management's Discussion and
Analysis of Financial Condition and Results of Operations" including the pursuit
of new Techdyne business development efforts to replace lost sales from major
customers, and the development of new products and facilities, anticipated
development and acquisition of dialysis centers, new facility completions and
related anticipated costs. All forward looking statements included in this
document are based on information available to the Company on the date hereof,
and the Company assumes no obligation to update any such forward looking
statement. It is important to note that the Company's actual results could
differ materially from those in such forward looking statements. Among the
factors that could cause actual results to differ materially are the factors
detailed in the risks discussed in the "Risk Factors" section included in the
Registration Statements of the Company's subsidiaries, Techdyne's Registration
Statement, Form SB-2, as filed with the Securities and Exchange Commission
("Commission") (effective September 13, 1995) and DCA's Registration Statement,
Form SB-2, as filed with the Commission (effective on April 17, 1996).
Techdyne's electronic and electo-mechanical manufacturing and assembly
operations are subject to substantial competition from divisions of large
electronic and high-technology firms and numerous smaller, specialized
companies. Strong competition derives from price advantages of competitors with
less expensive off-shore operations. This imposes pressure on Techdyne's bidding
orders and profit margins.
The Company's future growth as an international contract manufacturer of
precision electronic, electro-mechanical and plastic insert and injection molded
products for OEMs in the data processing, telecommunication and instrumentation
industries, will be influenced by several factors including technological
developments, the ability of the Company to efficiently meet the design and
production requirements of its customers, and the market acceptance of its
customer's products. Further factors impacting the success of the Company's
electronic manufacturing operations are increases in expenses associated with
continued sales growth, the ability of Techdyne to control costs, management's
ability to evaluate new orders to target satisfactory profit margins, the
capacity of Techdyne to develop and manage the introduction of new products, and
competition. Quality control is also essential to Techdyne's operations, since
customers demand strict compliance with design and product specifications. Any
adverse change in Techdyne's excellent quality and process controls could
adversely affect its relationship with customers and ultimately its revenues and
profitability.
The dialysis industry is highly competitive and subject to extensive regulation,
including the limitation on fees for dialysis treatments and services.
Significant competitive factors include quality of care and service, convenience
of location and pleasant environment. Additionally, there is intense competition
for retaining qualified nephrologists who normally are the sole source of
patient referrals and are responsible for the supervision of the dialysis
centers. There is also substantial competition for obtaining qualified nurses
and technical staff. Major companies, some of which are public companies or
divisions of public companies, have many more centers, physicians and financial
resources than does the Company's subsidiary, DCA, and by virtue of such have a
significant advantage in competing for acquisitions of dialysis facilities in
areas targeted by the Company.
The Company's growth in dialysis operations depends primarily on the
availability of suitable dialysis centers for acquisition or development in
appropriate and acceptable areas, and the Company's ability to compete with
larger companies with greater personnel and financial resources to develop these
new potential dialysis centers at costs within the budget of the Company. Its
ability to retain qualified nephrologists, nursing and technical staff at
reasonable rates is also a significant factor. Management continues in
negotiations with nephrologists for the acquisition or development of new
dialysis facilities, as well as with hospitals and other health care maintenance
entities. The Company has its fourth center in Carlisle, Pennsylvania under
construction. A fifth center is seeking approval for upgraded services which if
not granted will result in further delays in opening that new dialysis facility
until a proper location is secured. Several agreements for acute in-patient
services are under review but there is no assurance that such agreements would
be completed. Even if the Company were to establish new centers in the near
future, or complete in-patient treatment
<PAGE> 15
arrangements, there is no certainty as to when any new centers or service
contracts would be implemented, or the number of stations, or patient treatments
such may involve, or if such will ultimately be profitable.
RESULTS OF OPERATIONS
Consolidated revenues decreased approximately $1,038,000 (11%) for the three
months ended March 31, 1997 compared to the same period of the preceding year.
Sales revenues decreased $472,000 (6%) for the three months ended March 31, 1997
compared to the same period of the preceding year. 1997 revenues included a gain
of approximately $61,000 from the exercise of common stock purchase warrants
from Techdyne's securities offering. See Note 8 to "Notes to Consolidated
Condensed Financial Statements". Gain on sale of marketable securities
represents a gain attributable to the sale of Viragen common stock for which the
carrying value had been written-off in previous periods (see Note 3 to "Notes to
Consolidated Condensed Financial Statements") with the gain for the three months
ended March 31, 1997 amounting to $49,000 compared to $562,000 for the same
period of the preceding year. Other income increased approximately $25,000
primarily due to increased interest income on invested funds, including proceeds
from DCA's security offering completed in the 2nd quarter of 1996. Prior year
revenues included $140,000 from a litigation settlement. See Note 7 to "Notes to
Consolidated Condensed Financial Statements".
Techdyne sales decreased $425,000 (6%) for the three months ended March 31, 1997
compared to the same period of the preceding year. Domestic sales of Techdyne
increased $1,772,000 (56%) and European-based sales decreased $2,197,000 (61%)
compared to the same period of the preceding year. The decrease in
European-based sales was largely attributable to a decrease of $2,375,000 (75%)
in sales to Compaq Computer Corp. by Techdyne (Scotland).
Approximately 73% of Techdyne's consolidated sales and 60% of the Company's
consolidated sales for the three months ended March 31, 1997 were made to four
customers. Customers generating in excess of 10% of Techdyne's consolidated
sales with their respective portions of Techdyne's and the Company's
consolidated sales included Compaq which accounted for 12% and 10%, IBM for 29%
and 24% and EMC and its related suppliers for 21% and 17%. The loss of, or
substantially reduced sales to, any of these customers would have an adverse
effect on the Company's operations.
Revenues of Techdyne's Scottish-based subsidiary, Techdyne (Scotland), continue
to be highly dependent on sales to Compaq, which accounted for approximately 55%
and 88% of the sales of Techdyne (Scotland) for the three months ended March 31,
1997, and March 31, 1996, respectively. The bidding for Compaq orders in
Scotland has become more competitive, which resulted in substantially reduced
Compaq sales commencing in the third quarter of 1996 and lower profit margins on
remaining Compaq sales. Techdyne (Scotland) is pursuing new business development
efforts to replace significant reductions in Compaq business and is pursuing
cost reductions efforts to remain competitive with respect to Compaq, although
there can be no assurance as to the success of such efforts.
Medical product sales revenues decreased $208,000 (48%) for the three months
ended March 31, 1997 compared to the same period of the preceding year largely
due to the Company's shutdown, due to unprofitable operations, of All American
Medical & Surgical Supply Corp., the Company's home healthcare durable
subsidiary, which commenced operations in January 1996. See Note 1 to "Notes to
Consolidated Condensed Financial Statements".
Medical services sales revenues, which represents revenues of DCA, the Company's
dialysis division, increased $141,000 (16%) for the three months ended March 31,
1997 compared to the same period of the preceding year. This increase was
largely attributable to increased revenues of approximately $182,000 (71%) at
the Company's new dialysis center in Lemoyne, Pennsylvania which commenced
operations in June 1995. Revenues attributable to the Company's center in
Wellsboro, Pennsylvania which commenced treatments in October 1995 decreased
approximately $17,000 (15%) for the three months ended March 31, 1997 compared
to the preceding year. Revenues attributable to the Company's Florida dialysis
center decreased $24,000 (5%) for the three months ended March 31, 1997 compared
to the preceding year.
<PAGE> 16
RESULTS OF OPERATIONS -- CONTINUED
Cost of goods sold as a percentage of consolidated sales amounted to 79% of
sales for the three months ended March 31, 1997 and 81% for the same period of
the preceding year.
Cost of goods sold for Techdyne remained relatively stable, increasing to 84%
for the three months ended March 31, 1997 compared to 85% for the same period of
the preceding year.
Cost of goods sold for the medical products division amounted to 60% for the
three months ended March 31, 1997 compared to 59% for the same period of the
preceding year.
Cost of medical services sales decreased to 61% for the three months ended March
31, 1997 compared to 70% for the same period of the preceding year, largely as a
result of a decrease in healthcare salaries as a percentage of sales due to the
increased sales revenues generated by the Company's Lemoyne, Pennsylvania
facility.
Selling, general and administrative expenses increased $132,000 for the three
months ended March 31, 1997 compared to same period of the preceding year
reflecting increases associated with increased medical services revenues and
increases related to Techdyne's Austin, Texas facility which has substantially
increased its operations.
Interest expense amounted to $56,000 for the three months ended March 31, 1997
compared to $55,000 for the same period of the previous year with the
fluctuation resulting from changes in both average outstanding borrowings and
average interest rates associated with those borrowings.
The bulk of the Company's outstanding borrowings are related to real property
and tied to the prime interest rate. The prime rate was 8.5% at March 31, 1997
and 8.25% at December 31, 1996, respectively.
LIQUIDITY AND CAPITAL RESOURCES
Working capital totaled $13,705,000 at March 31, 1997, a decrease of $139,000
during the three months ended March 31, 1997 reflecting income tax payments and
various changes in other components of working capital resulting from increased
sales levels compared to the prior quarter. Included was a decrease of $470,000
in the net of tax valuation of marketable securities pursuant to Statement of
Financial Accounting Standards No. 115, Accounting for Certain Investments in
Debt and Equity Securities.
Included in the changes in components of working capital was a decrease of
$1,899,000 in cash and cash equivalents, which included net cash used in
operating activities of $1,600,000, net cash used in investing activities of
$287,000 (including additions to property, plant and equipment of $332,000) and
net cash provided by financing activities of $67,000 (including net proceeds of
approximately $131,000 from the exercise of common stock purchase warrants from
Techdyne's securities offering and repayments on long-term debt of $65,000).
In February 1996, Techdyne refinanced its bank loan agreement. The new financing
provides for a $2,000,000 line of credit, due on demand, secured by Techdyne's
accounts receivable, inventory, furniture, fixtures and intangible assets. There
were no amounts outstanding under this line of credit at March 31, 1997 and no
amounts have been drawn down on this line. A $712,500 term loan which had a
balance of $684,000 and $691,000 at March 31, 1997 and December 31, 1996,
respectively, is secured by two buildings and land owned by the Company. The
second term loan for $200,000 which had a balance of $157,000 and $167,000 at
March 31, 1997 and December 31, 1996, respectively is secured by Techdyne's
tangible personal property, goods and equipment. The Company has guaranteed
these loans and has subordinated $2,500,000 due from Techdyne, provided that
Techdyne may make payments to the Company on this subordinated debt from funds
from Techdyne's security offering and from earnings. Techdyne further agreed
that in the event that it should sell its interest in Techdyne (Scotland), which
is not anticipated, 50% of the selling price would be used to repay the $712,500
term loan facility. See Note 4 to "Notes to Consolidated Condensed Financial
Statements". The Company was in default of certain financial reporting
requirements regarding these loans as of December 31, 1996 for which the bank
has granted waivers as of December 31, 1996 and through December 31, 1997.
<PAGE> 17
LIQUIDITY AND CAPITAL RESOURCES-CONTINUED
Techdyne has outstanding borrowings of $145,000 from a local bank with interest
payable monthly with a renewal of the present note maturing April, 2000 after
Techdyne and the bank agreed to renew this note for 3 years upon its maturity in
April 1997. In October 1994, the Company obtained a replacement mortgage of
$230,000 to refinance the first and second mortgages on a building it leases to
Techdyne. The principal balance under this mortgage amounted to $213,000 at
December 31, 1995. This loan was paid off through the refinanced Techdyne bank
loan agreement which became effective in February 1996. In April 1993, the
Company purchased a vacant lot adjacent to Techdyne's facility in Hialeah,
Florida for possible future expansion. In connection with this purchase, the
Company obtained a $130,000 mortgage. The principal balance outstanding under
this mortgage amounted to $79,000 and $82,000 at March 31, 1997 and December
1996, respectively.
Techdyne (Scotland) has a line of credit with a Scottish bank, with a U.S.
dollar equivalency of approximately $328,000 and $342,000 at March 31, 1997 and
December 31,1996, respectively. The line of credit is secured by the assets of
Techdyne (Scotland) and guaranteed by Techdyne. This line of credit operates as
an overdraft facility. No amounts were outstanding under this line of credit as
of March 31, 1997 or December 31, 1996. In October, 1994, Techdyne (Scotland)
purchased the facility housing its operations for approximately $730,000,
obtaining a 15-year mortgage which had a U.S. dollar equivalency of
approximately $589,000 and $622,000 at March 31, 1997 and December 31, 1996,
respectively.
During 1988, the Company, through DCA, its dialysis subsidiary, obtained
mortgages totaling $1,080,000 on its two buildings, one in Lemoyne, Pennsylvania
and the other in Easton, Maryland, which housed the Company's dialysis centers.
These centers were sold in October, 1989. The mortgages had a combined remaining
balance of $486,000 and $504,000 at March 31, 1997 and December 31, 1996,
respectively. DCA was in default of certain covenants principally relating to
net worth and debt service ratio requirements under these loan agreements as of
December 31, 1996. The lender has waived compliance with these covenants as of
December 31, 1996 and through December 31, 1997.
The bank has liens on the real and personal property of DCA, including a lien on
all rents due and security deposits from the rental of these properties. The
loans contain a provision allowing the bank mandatory repayment upon 90 days
written notice after five years, which period has elapsed. Accordingly, while no
notice has been given, the unpaid principal balance is carried as a current
liability. An unaffiliated Maryland dialysis center continues to lease space
from the Company in its building. The Pennsylvania center relocated during 1995
and the Company constructed its own dialysis center at that property which
commenced treatments in September, 1995. The Company also opened a dialysis
center in a leased facility in Wellsboro, Pennsylvania in October 1995. See Note
4 to "Notes to Consolidated Condensed Financial Statements".
The Company has an equipment purchase agreement for kidney dialysis machines for
its Florida and Pennsylvania dialysis facilities which had a remaining principal
balance of $276,000 and $272,000 at March 31, 1997 and December 31, 1996,
respectively, which included additional equipment financing of approximately
$17,000 in the first quarter of 1997. See Note 4 to "Notes to Consolidated
Condensed Financial Statements".
The Company sold 10,000 shares of Viragen stock realizing a gain and cash
proceeds of approximately $49,000 during the first quarter of 1997 and sold
310,000 shares and recognized a gain of $562,000 during the same period of the
preceding year. During 1996, the Company sold 682,000 shares of Viragen stock,
realizing total gains for the year and cash proceeds of $2,583,000. During 1995,
the Company sold 173,000 shares of Viragen common stock, realizing a gain and
cash proceeds of $183,000. The carrying value of these securities was previously
written off. Under the provisions of FASB Statement No. 115, the remaining
shares at March 31, 1997 have been recorded at an estimated fair value of
$648,000 with the unrealized gain, net of income tax effect, credited to a
separate component of stockholder's equity. See Note 3 to "Notes to Consolidated
Condensed Financial Statements".
<PAGE> 18
LIQUIDITY AND CAPITAL RESOURCES - CONTINUED
Techdyne completed a public offering on October 2, 1995, realizing net proceeds
of approximately $3,321,000 from which it repaid $1,500,000 of intercompany
indebtedness to the Company with the balance of the proceeds to be used to
establish new facilities, expand existing products, upgrade plant and equipment,
hire additional direct sales personnel and for working capital. Techdyne has a
convertible note payable to the Company, convertible at $1.75 per share for the
balance of intercompany indebtedness due to the Company which amounted to
approximately $3,040,000 and $2,998,000, including accrued interest, at March
31, 1997 and December 31, 1996, respectively, with $350,000 of the note
converted into 200,000 shares of Techdyne common stock in June 1996. In the
first quarter of 1997, the Company recognized a gain of approximately $61,000,
with applicable income taxes of $23,000, which resulted in a net gain of
approximately $38,000 resulting from exercise of Techdyne common stock purchase
warrants from Techdyne's public offering. See Note 8 to "Notes to Consolidated
Condensed Financial Statements".
Techdyne is seeking to expand its operations possibly through suitable
acquisitions of companies in similar businesses. No assurance can be given that
its present funding, including the proceeds from its securities offering, would
be sufficient to finance such acquisitions or that sufficient outside financing
would be available to fund expansion.
Techdyne is in the process of establishing a new manufacturing facility in
Milford, Massachusetts with the facility having an initial 5 year lease term
through March 31, 2002, with occupancy commencing in late April 1997. This
facility is intended to assist in meeting increased customer demand in the
Northeastern United States, as well as to increase service levels to customers
in the Northeast and to penetrate new markets. Techdyne is increasing its
manufacturing capacity with new leases for its Houston and Austin, Texas
facilities to meet increased customer demand in the Southwestern United States.
Most of the costs related to its new facility, including leasehold
improvements, equipment and furniture and fixtures, and the costs of expansion
of existing facilities will be provided from the proceeds from Techdyne's 1995
security offering which, together with its refinanced credit facilities, should
be adequate for these expenditures required over the next 12 months.
DCA, having operated on a larger scale in the past, is seeking to expand its
outpatient dialysis treatment facilities and inpatient dialysis care. Such
expansion, whether through acquisition of existing centers, or the development
of its own dialysis centers, requires capital, which was the basis for DCA's
securities offering. No assurance can be given that DCA will be successful in
implementing its growth strategy or that the funds from the public sale of the
DCA securities will be adequate to finance expansion or that sufficient outside
financing would be available to fund expansion.
DCA has entered into agreements for medical directors, and intends to establish
two new dialysis centers, one in New Jersey and one in Pennsylvania. It is
anticipated that the Pennsylvania center, currently under construction will
commence operations in the third quarter of 1997. Establishment of the New
Jersey center is subject to meeting various regulatory requirements and
negotiating satisfactory lease terms.
The bulk of the Company's cash balances are carried in interest yielding
vehicles at various rates and mature at different intervals depending on the
anticipated cash requirements of the Company.
Given its current level of working capital and Techdyne's refinanced bank loan,
management believes current levels of working capital are adequate to
successfully meet liquidity demands for at least the next twelve months.
INFLATION
Inflationary factors have not had a significant effect on the Company's
operations. The Company attempts to pass on increased costs and expenses by
increasing selling prices when and where possible and by developing different
and improved products for its customers that can be sold at targeted profit
margins. However, in the Company's medical services segment, revenue per
dialysis treatment is subject to reimbursement rates established and regulated
by the federal government. These rates do not automatically adjust for
inflation. Any rate adjustments relate to legislation and executive and
Congressional budget demands, and have little to do with the actual cost of
doing business. Therefore, dialysis services revenues cannot be voluntarily
increased to keep pace with increases in nursing and other patient care costs.
<PAGE> 19
PART II -- OTHER INFORMATION
----------------------------
Item 6. Exhibits and Reports on Form 8-K
- ------- --------------------------------
(a) Exhibits
Part I Exhibits
(11) Statements re: computation of per share earnings
Part II Exhibits
None
(b) Reports on Form 8-K
There were no reports on Form 8-k filed for the
quarter ended March 31, 1997.
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.
MEDICORE, INC.
By /s/ DANIEL R. OUZTS
---------------------------------
DANIEL R. OUZTS, Vice President/
Finance, Controller and Principal
Accounting Officer
Dated May 7, 1997
<PAGE> 20
EXHIBIT INDEX
Exhibit
No.
- -------
(11) Statement re: computation of per share earnings
(27) Financial Data Schedule (for SEC use only)
<PAGE> 1
MEDICORE, INC. AND SUBSIDIARIES
EXHIBIT 11 -- COMPUTATION OF EARNINGS PER SHARE
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------
1997 1996
---- ----
<S> <C> <C>
PRIMARY AND FULLY DILUTED
Weighted average shares outstanding 5,456,940 5,454,940
Net effect of dilutive stock options-based on the
modified treasury stock method using
average market price 495,738 678,746
---------- ----------
5,952,678 6,133,686
========== ==========
Net income $ 266,363 $ 725,253
========== ==========
Net income per share $ .04 $ .12
========== ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 8,767,258
<SECURITIES> 648,170
<RECEIVABLES> 4,735,801<F1>
<ALLOWANCES> 0
<INVENTORY> 4,174,063<F2>
<CURRENT-ASSETS> 18,974,391
<PP&E> 11,009,331
<DEPRECIATION> 4,864,728
<TOTAL-ASSETS> 26,010,337
<CURRENT-LIABILITIES> 5,269,080
<BONDS> 1,765,752
0
0
<COMMON> 54,569
<OTHER-SE> 12,799,133
<TOTAL-LIABILITY-AND-EQUITY> 26,010,337
<SALES> 7,757,836
<TOTAL-REVENUES> 8,014,254
<CGS> 6,165,392
<TOTAL-COSTS> 6,165,392
<OTHER-EXPENSES> 1,421,120
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 55,791
<INCOME-PRETAX> 371,951
<INCOME-TAX> (24,341)
<INCOME-CONTINUING> 266,363
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 266,363
<EPS-PRIMARY> .04
<EPS-DILUTED> 0
<FN>
<F1>ACCOUNTS RECEIVABLE ARE NET OF ALLOWANCE OF $369,000 AT MARCH 31, 1997.
<F2>INVENTORIES ARE NET OF RESERVE OF $178,000 AT MARCH 31, 1997.
</FN>
</TABLE>
