<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 JUNE 30, 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
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MEDICORE, INC.
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(Exact name of registrant as specified in its charter)
FLORIDA 59-0941551
- --------------------------------- -------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
2337 WEST 76TH STREET, HIALEAH, FLORIDA 33016
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(Address of principal executive offices) (Zip Code)
(305) 558-4000
(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 July 31, 1997.
<PAGE> 2
MEDICORE, INC. AND SUBSIDIARIES
INDEX
PART I -- FINANCIAL INFORMATION
The Consolidated Condensed Statements of Income (Unaudited) for the
three months and six months ended June 30, 1997 and June 30, 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 and six months ended June 30, 1997 and June 30, 1996.
2) Consolidated Condensed Balance Sheets as of June 30, 1997 and
December 31, 1996.
3) Consolidated Condensed Statements of Cash Flows for the six
months ended June 30, 1997 and June 30, 1996.
4) Notes to Consolidated Condensed Financial Statements as of
June 30, 1997.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
PART II -- OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
ITEM 5. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
<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 SIX MONTHS ENDED
JUNE 30, JUNE 30,
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
REVENUES
Sales $ 8,086,790 $ 7,523,999 $ 15,844,626 $ 15,753,557
Gain on subsidiary securities offering and warrants
exercise 28,917 1,521,127 89,898 1,521,127
Realized gain on sale of marketable securities 923,817 49,493 1,485,846
Other income 144,798 142,083 290,742 262,863
Litigation settlement 139,645
------------ ------------ ------------ ------------
8,260,505 10,111,026 16,274,759 19,163,038
COST AND EXPENSES
Cost of goods sold 6,537,454 6,128,252 12,702,846 12,764,939
Selling, general and administrative expenses 1,457,177 1,776,842 2,878,297 3,066,132
Interest expense 54,435 58,071 110,226 112,990
------------ ------------ ------------ ------------
8,049,066 7,963,165 15,691,369 15,944,061
------------ ------------ ------------ ------------
INCOME BEFORE INCOME TAXES
AND MINORITY INTEREST 211,439 2,147,861 583,390 3,218,977
Income tax (benefit) provision (15,526) 826,783 (39,867) 1,016,710
------------ ------------ ------------ ------------
INCOME BEFORE MINORITY INTEREST 226,965 1,321,078 623,257 2,202,267
Minority interest in earnings of consolidated
subsidiaries 111,275 39,752 241,204 195,688
------------ ------------ ------------ ------------
NET INCOME $ 115,690 $ 1,281,326 $ 382,053 $ 2,006,579
============ ============ ============ ============
Net income per share $ .02 $ .21 $ .06 $ .33
============ ============ ============ ============
</TABLE>
See notes to consolidated condensed financial statements.
<PAGE> 4
MEDICORE, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996(A)
------------ ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 8,775,063 $ 10,665,826
Marketable securities 655,948 1,405,579
Short-term investments 131,802 129,472
Accounts receivable, less allowances of $353,000 at
June 30, 1997 and $385,000 at December 31, 1996 4,524,939 3,711,600
Inventories, less allowances for obsolescence of $152,000 at
June 30, 1997 and $169,000 at December 31, 1996 4,160,429 3,637,556
Prepaid expenses and other current assets 684,446 589,502
------------ ------------
Total current assets 18,932,627 20,139,535
Property and Equipment
Land and improvements 1,018,455 1,024,455
Building and building improvements 3,111,712 2,986,126
Equipment and furniture 6,689,115 6,364,188
Leasehold improvements 636,604 392,607
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11,455,886 10,767,376
Less accumulated depreciation and amortization 5,044,697 4,728,167
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6,411,189 6,039,209
Deferred expenses and other assets 278,758 204,361
Costs in excess of net tangible assets acquired, less accumulated
amortization of $378,000 at June 30, 1997 and $356,000
at December 31, 1996 679,415 701,747
------------ ------------
$ 26,301,989 $ 27,084,852
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 2,787,201 $ 2,726,817
Accrued expenses and other current liabilities 1,483,665 1,412,623
Current portion of long-term debt 666,093 832,851
Income taxes payable 272,470 788,976
Deferred income taxes 249,260 534,120
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Total current liabilities 5,458,689 6,295,387
Long-term debt 1,762,464 1,677,367
Deferred income taxes 2,188,757 2,155,603
Minority interest in subsidiaries 3,982,502 3,935,037
Commitments and contingencies
Stockholders' Equity
Common stock, $.01 par value authorized 12,000,000 shares;
issued and outstanding 5,456,940 shares 54,569 54,569
Capital in excess of par value 11,465,099 11,493,255
Retained earnings 991,599 609,546
Foreign currency translation adjustment (8,378) (7,371)
Unrealized gain on marketable securities for sale 406,688 871,459
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Total Stockholders' Equity 12,909,577 13,021,458
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$ 26,301,989 $ 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>
SIX MONTHS ENDED
JUNE 30,
-------------------------------
1997 1996
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<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 382,053 $ 2,006,579
Adjustments to reconcile net income to net (used in) cash
provided by operating activities:
Depreciation 363,189 319,063
Amortization 35,695 38,269
Bad debt expense 26,051 80,113
Gain on Viragen note collection (29,490)
Provision for inventory obsolescence 40,468 65,143
Gain on sale of securities (49,493) (1,485,846)
Gain on subsidiary securities offering and warrants exercise (89,899) (1,521,127)
Minority interest 241,204 195,688
Forgiveness of option notes and accrued interest 344,871
Stock compensation 5,560
Deferred income taxes 36,118 578,000
Increase (decrease) relating to operating activities from:
Accounts receivable (851,489) (243,900)
Inventories (588,964) 656,359
Prepaid expenses and other current assets (100,792) 87,142
Accounts payable 75,043 (1,177,128)
Accrued expenses and other current liabilities 83,682 (143,570)
Income taxes payable (506,741) 433,929
------------ ------------
Net cash (used in) provided by operating activities (903,875) 209,655
INVESTING ACTIVITIES
Additions to property and equipment, net of minor disposals (719,013) (396,448)
Payments received on note receivable from Viragen, Inc. 175,735
Proceeds from short-term investments 129,472 188,954
Short-term investments (131,802) (127,192)
Proceeds from sale of securities 49,493 1,485,846
Deferred expenses and other assets (87,386) 148,630
------------ ------------
Net cash (used in) provided by investing activities (759,236) 1,475,525
FINANCING ACTIVITIES
Proceeds from subsidiary stock offering 3,445,158
Proceeds from long-term borrowings 181,476
Subsidiary repurchase of stock (206,250)
Payments on long-term borrowings (128,179) (138,394)
Dividend payments to minority shareholder (2,998)
Deferred financing costs 1,237 (14,697)
Proceeds from exercise of warrants and stock options 194,328 1,300
------------ ------------
Net cash provided by (used in) financing activities (141,862) 3,474,843
Effect of exchange rate fluctuations on cash (85,790) (2,009)
------------ ------------
Decrease (increase) in cash and cash equivalents (1,890,763) 5,158,014
Cash and cash equivalents at beginning of year 10,655,826 4,836,512
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 8,775,063 $ 9,994,526
============ ============
</TABLE>
See notes to consolidated condensed financial statements
<PAGE> 6
MEDICORE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
JUNE 30, 1997
(UNAUDITED)
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION
The Consolidated Condensed Financial Statements include the accounts of
Medicore, Inc., Medicore's 69.1% owned subsidiary, Dialysis Corporation of
America ("DCA") and Medicore's 62.9% owned subsidiary, Techdyne, Inc.
("Techdyne") (including its wholly-owned subsidiary 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:
June 30, December 31,
1997 1996
---------- -----------
Electronic and mechanical components, net:
Finished goods $ 440,366 $ 486,863
Work in process 546,132 478,481
Raw materials and supplies 2,766,570 2,083,990
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3,753,068 3,049,334
Medical supplies 407,361 588,222
---------- ----------
$4,160,429 $3,637,556
========== ==========
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 and six months ended June 30, 1997
and June 30, 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 and six months ended June 30, 1997 are not necessarily indicative of the
results that may be expected for the entire year ending December 31, 1997.
<PAGE> 7
MEDICORE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS -- (CONTINUED)
JUNE 30, 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 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 market price of Viragen common stock has fluctuated significantly amounting
to $2.53 per share at June 30, 1996 and $5.22 per share at December 31, 1996.
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.
There was no such sales during the second quarter of 1997 as compared with
sales for the second quarter of 1996 of 160,000 shares for $924,000.
The Company had a second mortgage and related note due from Viragen. 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 $6,000 and $15,000 for the three months and six
months ended June 30, 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.
NOTE 4--LONG-TERM DEBT
On February 8, 1996, Techdyne refinanced its term loan by entering into three
loan agreements 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 June
30, 1997 and no amounts had been drawn down on this line as of that date. In
conjunction with Techdyne's acquisition of Lytton Incorporated on July 31, 1997,
the line of credit was modified and was increased to $2,500,000 with the
interest rate reduced to prime plus .75% and various other modifications. The
line was fully drawn down in connection with the Lytton acquisition. See Note 9.
<PAGE> 8
MEDICORE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS -- (CONTINUED)
JUNE 30, 1997
(UNAUDITED)
NOTE 4--LONG-TERM DEBT--CONTINUED
The bank also extended two commercial term loans to Techdyne, one for $712,500
which had an outstanding balance of $678,000 and $691,000 at June 30, 1997 and
December 31, 1996 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.
The second commercial term loan for $200,000 had an outstanding balance of
$147,000 and $167,000 at June 30, 1997 and December 31, 1996, respectively, 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 revolving loan and the two commercial term loans.
Techdyne has a promissory note payable to a local bank of $145,000 at June 30,
1997 and December 31, 1996, with interest payable monthly at prime with the note
maturing April 2000.
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 $588,000 and $622,000 at June 30, 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 $332,000 and $342,000 at
June 30, 1997 and December 31, 1996, respectively. No amounts were outstanding
under this line of credit as of June 30, 1997 or December 31, 1996.
The Company obtained a $130,000 mortgage on vacant land for possible future
expansion in April 1993. This mortgage has been extended from its originally
scheduled due date of April 1, 1998 to May 1, 2003 with payments remaining at
$1,083 per month plus interest at prime plus 1.50%. This mortgage had a balance
of approximately $76,000 at June 30, 1997 and $76,000 at December 31, 1996.
DCA has mortgages on its buildings in Lemoyne, Pennsylvania and Easton, Maryland
for which the remaining combined principal balance amounted to approximately
$468,000 and $504,000 at June 30, 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.
DCA 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, $17,000 in 1997 and $48,000
in June 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% with additional monthly payments of
$975 commencing June 1997, including principal and interest through May 2002,
with interest at 8%. The remaining principal balance under this agreement
amounted to approximately $312,000 and $272,000 at June 30, 1997 and December
31, 1996, respectively.
The prime rate was 8.5% as of June 30, 1997 and 8.25% as of December 31, 1996.
<PAGE> 9
MEDICORE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS -- (CONTINUED)
JUNE 30, 1997
(UNAUDITED)
NOTE 4--LONG-TERM DEBT--CONTINUED
Interest payments on long-term debt amounted to $54,000 and $108,000 for the
three months and six months ended June 30, 1997 and $59,000 and $116,000 for the
same periods of the preceding year.
NOTE 5 -- INCOME TAXES
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 1996 public offering.
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 $2,087,000 at June 30, 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 $155,000 has been recorded for the unrealized
gain on marketable securities. See Note 3.
The Company had a domestic income tax expense (benefit) of approximately
$(7,000) and $26,000 for the three months and six months ended June 30, 1997,
including deferred taxes of approximately $11,000 and $34,000 on gains on
Techdyne warrant exercises (see Note 8), and $109,000 and $123,000 for the same
periods of the preceding year.
Techdyne (Scotland) had an income tax benefit of approximately $6,000 and
$15,000 for the three months and six months ended June 30, 1997 and income tax
expense of approximately $140,000 and $316,000 for the same periods of the
preceding year.
Income tax payments were $406,000 for the six months ended June 30, 1997 and
$10,000 for the six months ended June 30, 1996 with no payments during the
second quarter of either 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
<PAGE> 10
MEDICORE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS -- (CONTINUED)
JUNE 30, 1997
(UNAUDITED)
NOTE 6 -- STOCK OPTIONS AND STOCK COMPENSATION--CONTINUED
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.
On June 11, 1996, the Company's Board of directors granted a five-year
non-qualified stock option for 35,000 shares immediately exercisable with an
exercise price of $3.75 to a new Board member.
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 June 30, 1997, to
certain of its officers, directors, employees and consultants. These options are
excercisable for a period of five years at $1 per share.
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 191,500 outstanding options as of June 30,
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.
On June 6, 1997, Techdyne's Board of Directors adopted a stock Option Plan with
500,000 shares of its common stock reserved under the plan with the plan
approved by shareholders at Techdyne's annual meeting of shareholders on June
11, 1997. On June 23, 1997, Techdyne's Board granted options under the plan for
an aggregate of 375,000 shares of Techdyne common stock exercisable for five
years through June 22, 2002 at $3.25 per share, the closing price of the common
stock on that date as reported by Nasdaq.
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.
<PAGE> 11
MEDICORE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS -- (CONTINUED)
JUNE 30, 1997
(UNAUDITED)
NOTE 7--COMMITMENTS AND CONTINGENCIES
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.
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 common stock and
redeemable common stock purchase warrants. During the first half of 1997,
approximately 41,000 Techdyne warrants were exercised providing net proceeds of
approximately $194,000 after underwriter commissions on the 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 and a gain
of $29,000 with applicable income taxes of approximately $11,000, which resulted
in a net gain of approximately $18,000 during the second quarter of 1997. See
Note 1.
DCA completed a public offering in April 1996 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.
NOTE 9--ACQUISITION
On July 31, 1997, Techdyne acquired Lytton Incorporated, which is engaged in the
manufacture and assembly of printed circuit boards and other electronic products
for commercial customers. Techdyne's modified bank line of credit (see Note 4)
provided $2,500,000 cash required at closing. In addition, the purchase price
included 300,000 shares of Techdyne, Inc. common stock which Techdyne has agreed
to use its best-efforts to have registered within 120 days from the closing date
of the acquisition. Techdyne has guaranteed that the seller will realize a
minimum of $2,000,000 from the sale of these shares which had a fair value of
approximately $1,031,000 based on the closing price of Techdyne common stock on
the date of the acquisition with the guaranteed sales proceeds amounting to
$2,400,000 if certain earnings objectives are met by Lytton in a specified one
year period. In addition, the Stock Purchase Agreement provides for incentive
consideration based on specific sales levels of Lytton for each of three years
as specified by the Agreement.
<PAGE> 12
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 S-3, as filed with the Securities and Exchange Commission
("Commission") (effective December 11, 1996) and DCA's Registration Statement,
Form SB-2, as filed with the Commission (effective on April 17, 1996).
Techdyne's electronic and electro-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 as well as pursue acquisitions in new geographical and product
markets. 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 recently opened its fourth center in Carlisle,
Pennsylvania. A lease has been completed for a fifth center located in
Manahawkin, New Jersey and the Company is seeking certain regulatory approvals
from the state which if not granted will result in further delays in opening
that new dialysis facility. 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 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.
<PAGE> 13
RESULTS OF OPERATIONS
Consolidated revenues decreased approximately $1,851,000 (18%) and $2,888,000
(15%) for the three months and six months ended June 30, 1997 compared to the
same periods of the preceding year. Sales revenues increased $563,000 (7%) and
$91,000 (1%) for the three months and six months ended June 30, 1997 compared to
the same periods of the preceding year. 1997 revenues included gains of
approximately $29,000 and $90,000 for the three months and six months ended June
30, 1997 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 no gain for the three months ended June
30, 1997 and a gain of $49,000 for the six months ended June 30, 1997 compared
to gains of $924,000 and $1,486,000 for the same periods of the preceding year.
Other income increased approximately $3,000 and $28,000 for the three months and
six months ended June 30, 1997 compared to the same periods of the preceding
year 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 in the first
quarter of 1996.
Techdyne sales increased $495,000 (8%) and $70,000 (1%) for the three months and
six months ended June 30, 1997 compared to the same periods of the preceding
year. Domestic sales of Techdyne increased $1,923,000 (67%) and $3,695,000 (61%)
and European-based sales decreased $1,428,000 (44%) and $3,625,000 (53%)
compared to the same periods of the preceding year. The decrease in
European-based sales was largely attributable to decreases of $2,096,000 (71%)
and $4,471,000 (73%) in sales to Compaq Computer Corp. by Techdyne (Scotland)
for the three months and six months ended June 30, 1997 compared to the same
periods of the preceding year.
Approximately 64% and 69% of Techdyne's consolidated sales and 53% and 56% of
the Company's consolidated sales for the three months and six months ended June
30, 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 for the three months and six months ended June
30, 1997 included Compaq which accounted for 13% and 13% and 11% and 10%, IBM
for 28% and 29% and 23% and 24% and EMC and its related suppliers for 13% and
17% and 11% and 14%. 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 46%
and 50% of the sales of Techdyne (Scotland) for the three months and six months
ended June 30, 1997, and 90% and 89% for the same periods of the preceding year.
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 $30,000 (7%) and $238,000 (21%) for the
three months and six months ended June 30, 1997 compared to the same periods of
the preceding year largely due to the Company's shutdown, resulting from
unprofitable operations, of All American Medical & Surgical Supply Corp., the
Company's home healthcare durable subsidiary, which commenced operations in
January 1996.
Medical services sales revenues, which represents revenues of DCA, the Company's
dialysis division, increased $68,000 (7%) and $209,000 (11%) for the three
months and six months ended June 30, 1997 compared to the same periods of the
preceding year. This increase was largely attributable to increased revenues of
approximately $134,000 (43%) and $317,000 (56%) 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 $24,000 (19%) and
$41,000 (17%) for the three months and six months ended June 30, 1997 compared
to the preceding year. Revenues attributable to the Company's Florida dialysis
center decreased $42,000 (8%) and $65,000 (6%) for the three months and six
months ended June 30, 1997 compared to the preceding year.
<PAGE> 14
RESULTS OF OPERATIONS -- CONTINUED
Cost of goods sold as a percentage of consolidated sales remained relatively
stable amounting to 81% and 80% of sales for the three months and six months
ended June 30, 1997 and 81% for the same periods of the preceding year.
Cost of goods sold for Techdyne remained relatively stable, amounting to 85% for
the three months and six months ended June 30, 1997 compared to 86% and 85% for
the same periods of the preceding year.
Cost of goods sold for the medical products division amounted to 66% and 63% for
the three months and six months ended June 30, 1997 compared to 74% and 66% for
the same periods of the preceding year with the decrease largely attributable to
the relatively low margins of All American Medical & Surgical Supply Corp.
included in prior year amounts.
Cost of medical services sales although increasing to 63% from 62% during the
second quarter of 1997 compared to the preceding year decreased to 62% for the
six months ended June 30, 1997 compared to 66% 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 with salaries at that facility
remaining approximately the same.
Selling, general and administrative expenses decreased $320,000 and $188,000 for
the three months and six months ended June 30, 1997 compared to same period of
the preceding year. The decreases primarily resulted from the shutdown of All
American Medical & Surgical Supply Corp. and also approximately $344,000 for
forgiveness of stock option notes and accrued interest in the second quarter of
1996, although there were some increases in 1997 associated with increased
medical services revenues and increases related to Techdyne's Austin, Texas
facility which has substantially increased its operations.
Interest expense decreased approximately $4,000 and $3,000 for the three months
and six months ended June 30, 1997 compared to the same periods of the previous
year with the fluctuations 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 June 30, 1997
and 8.25% at December 31, 1996, respectively.
LIQUIDITY AND CAPITAL RESOURCES
Working capital totaled $13,474,000 at June 30, 1997, a decrease of $370,000
during the six months ended June 30, 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 $465,000
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
$1,891,000 in cash and cash equivalents, which included net cash used in
operating activities of $904,000, net cash used in investing activities of
$759,000 (including additions to property, plant and equipment of $719,000) and
net cash provided by financing activities of $142,000 (including net proceeds of
approximately $194,000 from the exercise of common stock purchase warrants from
Techdyne's securities offering, repayments on long-term debt of $128,000 and the
repurchase by DCA of 100,000 shares of its stock for $206,000).
In February 1996, Techdyne refinanced its bank loan agreement. The new financing
included 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 June 30, 1997 and no
amounts had been drawn down on this line. A $712,500 term loan which had a
balance of $678,000 and $691,000 at June 30, 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 $147,000 and $167,000 at
June 30, 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
<PAGE> 15
LIQUIDITY AND CAPITAL RESOURCES-CONTINUED
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. 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. In
connection with Techdyne's acquisition of Lytton Incorporated in July 1997, the
line of credit was increased to $2,500,000 with various other modifications,
including removal of conditions regarding use of proceeds upon any sale of
Techdyne (Scotland). In conjunction with this acquisition, the increased line of
$2,500,000 was fully drawn down in July 1997. See Notes 4 and 9 to "Notes to
Consolidated Condensed Financial Statements".
Techdyne has outstanding borrowings of $145,000 from a local bank with interest
payable monthly with 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 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 originally scheduled to
mature April 1998 which has been extended to May 2003. The principal balance
outstanding under this mortgage amounted to $76,000 and $82,000 at June 30, 1997
and December 1996, respectively. See Note 4 to "Notes to Consolidated Condensed
Financial Statements".
Techdyne (Scotland) has a line of credit with a Scottish bank, with a U.S.
dollar equivalency of approximately $332,000 and $342,000 at June 30, 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 June 30, 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 $588,000 and $622,000 at June 30, 1997 and December 31, 1996,
respectively. See Note 4 to "Notes to Consolidated Condensed Financial
Statements".
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. The mortgages had a combined remaining
balance of $468,000 and $504,000 at June 30, 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. See Note 4 to "Notes to
Consolidated Condensed Financial Statements".
DCA has an equipment purchase agreement for kidney dialysis machines for its
Florida and Pennsylvania dialysis facilities which had a remaining principal
balance of $312,000 and $272,000 at June 30, 1997 and December 31, 1996,
respectively, which included additional equipment financing of approximately
$17,000 in the first quarter of 1997 and $48,000 in the second 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. There were no such sales during the second quarter of 1997
compared to sales of 160,000 shares for $924,000 in the second quarter of 1996.
The carrying value of these securities was previously written off. Under the
provisions of FASB Statement No. 115, the remaining shares at June 30, 1997 have
been recorded at an estimated fair value of $656,000 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".
Techdyne has a convertible note payable to the Company, convertible at $1.75 per
share, which amounted to approximately $3,083,000 and $2,998,000, including
accrued interest, at June 30, 1997 and December 31, 1996, respectively, with
$350,000 of the note converted into 200,000 shares of Techdyne common stock in
June 1996.
<PAGE> 16
LIQUIDITY AND CAPITAL RESOURCES - CONTINUED
For the three months and six months ended June 30, 1997, the Company recognized
gains of approximately $29,000 and $90,000, with applicable income taxes of
$11,000 and $34,000, which resulted in net gains of approximately $18,000 and
$56,000 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 has established 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
1996 securities offering. No assurance can be given that DCA will be successful
in implementing its growth strategy or that the funds from the securities
offering will be adequate to finance expansion or that sufficient outside
financing would be available to fund expansion.
DCA commenced operations at its newly established dialysis center in Carlisle,
Pennsylvania in July 1997 and has also entered into an agreement with a medical
director, and intends to establish another new dialysis center in New Jersey.
Establishment of the New Jersey center is subject to meeting various regulatory
requirements.
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.
In July 1997, Techdyne acquired Lytton Incorporated, which is engaged in the
manufacture and assembly of printed circuit boards and other electronic products
for over 40 commercial customers. This acquisition required $2,500,000 cash at
closing, funded by Techdyne's modified bank line of credit, as well as 300,000
shares of Techdyne, Inc. common stock which had a fair value of approximately
$1,031,000 based on the closing price of Techdyne common stock on the date of
the acquisition for which Techdyne has guaranteed $2,000,000 minimum proceeds
($2,400,000 if certain earnings objectives are met) to the seller with the Stock
Purchase Agreement also providing for incentive consideration based on specific
sales levels for each of three specified years. See Notes 4 and 9 to "Notes to
Consolidated Condensed Financial Statements".
The Company anticipates that current levels of working capital and working
capital from operations, including those of Lytton Incorporated, will be
adequate to successfully meet liquidity demands for at lease the next twelve
months, including the financing obligations incurred in the acquisition of
Lytton (see Notes 4 and 9).
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> 17
PART II -- OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On June 11, 1997, the Company held its annual shareholders meeting to
elect two members, Anthony C. D'Amore and Robert P. Magrann, to the Class 2
members of the Board of Directors to serve for a three year term until the
Annual Meeting of Shareholder in 2000. Mr. D'Amore received 3,098,417 votes for
his election, with 18,079 votes against, 29,784 abstentions and 50 broker
non-votes. Mr. Magrann received 3,097,917 votes for his election, with 18,579
votes against, 29,784 abstentions and 50 broker non-votes.
ITEM 5. OTHER INFORMATION
On July 31, 1997, Techdyne acquired Lytton Incorporated, a private
corporation engaged in the manufacture, assembly and sale of printed circuit
boards and other electronic products for over 40 major commercial customers. The
combined revenues of Techdyne and Lytton for their last fiscal years was in
excess of $40,000,000 and for the Company and Lytton combined revenue was in
excess of $50,000,000. The acquisition was accomplished with $2,500,000 and
300,000 shares of Techdyne common stock together with guarantees provided the
shares are sold by July 30, 1998, and incentive consideration which, for the 12
month periods ending March 31, 1998, 1999 and 2000, includes payment to the
Seller of Lytton Incorporated, 4% of Lytton's sales over $14,000,000 up to
$20,000,000, and 5% of Lytton's sales over $20,000,000.
The cash portion of the consideration was obtained from Techdyne's
revolving loan with Barnett Bank, N.A. which loan was increased from $2,000,000
to $2,500,000 on July 31, 1997, the closing date of the Lytton acquisition.
The acquisition and bank financing has been reported by Techdyne in its
Current Report on Form 8-K dated August 12, 1997.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Part I Exhibits
(11) Statements re: computation of per share earnings
(27) Financial Data Schedule (for SEC use only)
Part II Exhibits
(2) Plan of Acquisition, Reorganization, Arrangement,
Liquidation and Succession.
(i) Stock Purchase Agreement between Patricia
Crossley, Lytton Incorporated and Techdyne, Inc.
dated July 31, 1997 (incorporated by reference
to Techdyne, Inc.'s Current Report on Form 8-K,
dated August 12, 1997 ("Techdyne's August 1997
Form 8-K"), Item 7(c)(2)(i)).
(99) Additional Exhibits
(i) Unconditional and Continuing Guaranty of
Payments and Performance by the Company in favor
of Barnett Bank, N.A. dated July 31, 1997
(incorporated by reference to Techdyne's August
1997 Form 8-K, Item 7(c)(99)(iii)).
(ii) Subordination Agreement among Techdyne, Inc.,
Barnett Bank, N.A. and the Company dated July 31,
1997 (incorporated by reference to Techdyne's
August 1997 Form 8-K, Item 7(c)(99)(iv)).
(b) Reports on Form 8-K
There were no reports on Form 8-k filed for the quarter ended
June 30, 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 August 13, 1997
<PAGE> 18
EXHIBIT INDEX
Exhibit
No.
-------
Part I Exhibits
(11) Statement re: computation of per share earnings
(27) Financial Data Schedule (for SEC use only)
Part II Exhibits
(2) Plan of Acquisition, Reorganization, Arrangement,
Liquidation and Succession
(i) Stock Purchase Agreement between Patricia Crossley, Lytton
Incorporated and Techdyne, Inc. dated July 31, 1997
(incorporated by reference to Techdyne, Inc.'s Current Report
on Form 8-K, dated August 12, 1997 ("Techdyne's August 1997
Form 8-K"), Item 7(c)(2)(i)).
(99) Additional Exhibits
(i) Unconditional and Continuing Guaranty of Payments and
Performance by the Company in favor of Barnett Bank,
N.A. dated July 31, 1997 (incorporated by reference to
Techdyne, Inc.'s Current Report on Form 8-K, dated August 12,
1997 ("Techdyne's August 1997 Form 8-K"),
Item 7(c)(99)(iii)).
(ii) Subordination Agreement among Techdyne, Inc., Barnett
Bank, N.A. and the Company dated July 31, 1997
(incorporated by reference to Techdyne's August 1997
Form 8-K, Item 7(c)(99)(iv)).
<PAGE> 1
MEDICORE, INC. AND SUBSIDIARIES
EXHIBIT 11 -- COMPUTATION OF EARNINGS PER SHARE
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------- --------------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
PRIMARY AND FULLY DILUTED
Weighted average shares outstanding 5,456,940 5,456,171 5,456,940 5,456,555
Net effect of dilutive stock options-based on
the modified treasury stock method
using average market price 360,615 664,948 434,038 671,936
---------- ---------- ---------- ----------
5,817,555 6,121,119 5,890,978 6,128,491
========== ========== ========== ==========
Net income $ 115,690 $1,281,326 $ 382,053 $2,006,579
========== ========== ========== ==========
Net income per share $ .02 $ .21 $ .06 $ .33
========== ========== ========== ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 8,775,063
<SECURITIES> 655,948
<RECEIVABLES> 4,524,939<F1>
<ALLOWANCES> 0
<INVENTORY> 4,160,429<F2>
<CURRENT-ASSETS> 18,932,627
<PP&E> 11,455,886
<DEPRECIATION> 5,044,697
<TOTAL-ASSETS> 26,301,989
<CURRENT-LIABILITIES> 5,458,689
<BONDS> 1,762,464
0
0
<COMMON> 54,569
<OTHER-SE> 12,855,008
<TOTAL-LIABILITY-AND-EQUITY> 26,301,989
<SALES> 15,844,626
<TOTAL-REVENUES> 16,274,759
<CGS> 12,702,846
<TOTAL-COSTS> 12,702,846
<OTHER-EXPENSES> 2,878,297
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 110,226
<INCOME-PRETAX> 583,390
<INCOME-TAX> (39,867)
<INCOME-CONTINUING> 382,053
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 382,053
<EPS-PRIMARY> .06
<EPS-DILUTED> 0
<FN>
<F1>ACCOUNTS RECEIVABLE ARE NET OF ALLOWANCE OF $353,000 AT JUNE 30, 1997.
<F2>INVENTORIES ARE NET OF RESERVE OF $152,000 AT JUNE 30, 1997.
</FN>
</TABLE>
