<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-QSB
(Mark One)
[ X ]QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 1996
------------------------
[ ]TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
For the transition period from _______________ to _______________
Commission file number: 1-11032
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PROFESSIONAL DENTAL TECHNOLOGIES, INC.
-------------------------------------
(Exact name of small business issuer as
specified in its charter)
Nevada 71-0644350
-------------------------------- --------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
633 Lawrence Street, Batesville, Arkansas 72501
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(Address of Principal Executive Offices)
(501) 698-2300
(Issuer's telephone number)
----------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past 12 months
(or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the
past 90 days. Yes __X__ No _____
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports
required to be filed by Section 12, 13 or 15(d) of the Exchange Act after
the distribution of securities under a plan confirmed by court.
Yes _______ No ________.
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's
classes of common equity, as of May 31, 1996:______14,100,000_____
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PROFESSIONAL DENTAL TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEET
APRIL 30 OCTOBER 31
1996 1995
(unaudited)
------------ ----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and Cash Equivalents $ 866,860 $ 898,641
Accounts Receivable:
Trade - net of allowance for doubtful
accounts of $40,500 1,771,657 1,344,804
Affiliates 99,269 150,160
Inventory 2,285,271 2,379,984
Deferred Income Taxes 175,000 175,000
Income Tax Receivable --- ---
Other Current Assets 278,930 493,106
---------- ----------
Total Current Assets 5,476,987 5,441,695
Property and Equipment - Net 2,020,051 1,513,264
Other Assets - net of accumulated amortization 112,493 131,460
Investments - at equity (Note 1) 539,355 622,786
----------- -----------
Total Assets $ 8,148,886 $ 7,709,205
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes Payable $ 871,145 $ 932,984
Accounts Payable - Trade 1,169,592 1,199,487
Other Accrued Liabilities 953,835 915,128
Long-term debt - current portion 294,548 343,048
----------- -----------
Total Current Liabilities 3,289,120 3,390,647
Long-Term Debt - net of current portion 896,030 526,511
----------- -----------
Total Liabilities 4,185,150 3,917,158
----------- ----------
Stockholders' Equity:
Common Stock $0.01 par value: 30,000,000
shares authorized: 14,100,000 shares and 14,000,000
issued and outstanding in
1995 and 1994, respectively 141,000 141,000
Additional Paid-in Capital 251,167 238,667
Retained Earnings 3,582,845 3,423,656
<PAGE>
APRIL 30 OCTOBER 31
1996 1995
(unaudited)
------------ ----------
Equity Adjustment from Foreign
Currency Translation ( 11,276) ( 11,276)
------------ ----------
Total Stockholders' Equity 3,963,736 3,792,047
----------- ----------
Total Liabilities and Stocholders' Equity $ 8,148,886 $ 7,709,205
=========== ===========
See Notes to the Financial Statements
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<TABLE>
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PROFESSIONAL DENTAL TECHNOLOGIES, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(unaudited)
For The Three and Six Month Periods Ended April 30, 1996 and 1995
THREE MONTHS ENDED SIX MONTHS ENDED
APRIL 30 APRIL 30
--------------------------- ----------------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Sales $ 5,583,991 $ 6,095,592 $ 11,182,067 $ 12,709,296
Cost of Goods Sold 2,227,070 2,303,127 4,566,250 5,247,756
----------- ---------- ----------- ------------
Gross Profit 3,356,921 3,792,465 6,615,817 7,461,540
Operating Expenses 3,111,742 3,416,642 6,127,832 6,908,218
----------- ----------- ------------ ------------
Income
from Operations 245,179 375,823 487,985 553,322
Other Income (Expenses) ( 97,683) ( 217,479) ( 231,394) ( 346,630)
----------- ----------- ----------- -----------
Net Income
Before Taxes 147,496 158,344 256,591 206,692
Provision for
Income Taxes ( 55,990) ( 60,107) ( 97,402) ( 78,461)
---------- ----------- ----------- -----------
Net Income $ 91,506 $ 98,237 $ 159,189 $ 128,231
=========== =========== =========== ===========
Net Income per Share $ .01 $ .01 $ .01 $ .01
========== =========== =========== ===========
Weighted average number
of shares outstanding 14,476,298 14,988,313 14,476,298 14,988,313
========== ========== ========== ==========
See Notes to the Financial Statements
</TABLE>
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<TABLE>
<CAPTION>
PROFESSIONAL DENTAL TECHNOLOGIES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
For The Six Month Periods Ended April 30, 1996 and 1995
Cash Flows from Operating Activities 1996 1995
---- ----
<S> <C> <C>
Net Income $ 159,189 $ 128,231
Adjustments to reconcile net income
to net cash from operations:
Depreciation and amortization 174,696 160,938
Deferred compensation expense 12,500 12,500
Decrease (increase) in:
Accounts Receivable:
Trade - Net ( 426,853) ( 271,054)
Due from Affiliate 50,891 ( 146,304)
Inventory 94,713 ( 54,053)
Income Taxes Receivable --- ---
Other Current Assets 214,176 53,661
Increase (decrease) in:
Accounts Payable - Trade ( 29,895) ( 461,791)
Other Accrued Liabilities 38,707 94,135
--------- ----------
Net Cash Provided by Operations 288,124 ( 483,737)
--------- ----------
Cash Flows from Investing Activities:
Decrease (increase) in Other Assets* (650) ( 110)
Purchase of Property and Equipment ( 661,866) ( 196,025)
Investment in Joint Ventures 83,431 ( 93,510)
---------- ----------
Net Cash (used) for Investing Activities ( 579,085) ( 289,645)
---------- ----------
Cash Flows from Financing Activities:
Increase (Decrease) in Notes Payable ( 110,339) 201,048
Issuance of long-term debt 453,592 135,930
Payment of long-term debt ( 84,073) ( 86,487)
Net Cash (used) for Financing Activities 259,180 ( 250,491)
---------- ----------
Effect of Exchange Rate Changes on Cash --- ---
---------- ---------
Increase (decrease) in Cash ( 31,781) ( 522,891)
Cash and Cash Equivalents - 898,641 1,243,693
Beginning of Period ---------- ----------
End of period $ 866,860 $ 720,802
========== ==========
Supplemental Schedule of
Non-Cash Investing & Financing Activities
*During December 1993, the Company issued 100,000 shares of stock in exchange for trade secrets relating to marketing and
developing dental products valued at $225,000.
</TABLE>
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PROFESSIONAL DENTAL TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Three And Six Month Periods Ended April 30, 1996 and 1995
Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Organization:
Professional Dental Technologies, Inc. (the "Company") is
engaged in the business of designing, manufacturing, and
marketing innovative products and services for dental
professionals for the diagnosis, treatment, and prevention of
periodontal and other dental diseases in the general dental
practice. The Company extends credit to its customers in the
normal course of business. Customers of the Company are
dentists located throughout the world with the primary
customer base in the United States.
Principles of Consolidation:
The consolidated financial statements include the results of
operations, account balances and changes in cash flows of the
Company and its wholly owned subsidiaries: Professional
Dental Hygienists, Inc., Professional Dental Therapeutics,
Inc., Pro-Dentec FSC, Inc., PDT Image, Inc., PDT Byte, Inc.
(formerly PDT Computer Associates, Inc.), PDT Production
Company, and PDP, Inc. All significant intercompany accounts
and transactions have been eliminated.
Cash Equivalents:
For purposes of the statement of cash flows, the Company
considers all highly liquid debt instruments and time deposits
with an original maturity of three months or less, in addition
to all checking, savings and money market accounts, to be cash
equivalents.
Inventory:
Inventory is recorded at the lower of cost (determined on a
first-in, first-out basis) or market.
Property and Equipment:
Property and equipment is stated at cost. Depreciation is
calculated using straight-line and accelerated methods and is
expensed based on the estimated useful lives of the assets.
Expenditures for additions and improvements are capitalized,
while repairs and maintenance are expensed as incurred.
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PROFESSIONAL DENTAL TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Three And Six Month Periods Ended April 30, 1996 and 1995
Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Investments in and Advances to Affiliates:
The equity method of accounting is used to account for
investments made when the Company has the ability to exercise
significant influence over the operating and financial polices
of an investee, generally involving a 20% to 50% interest in
those investees.
Under the equity method, original investments are recorded at
cost adjusted for the Company's share of undistributed
earnings or losses of the investee.
Accrued Warranty Costs:
Accrued warranty costs consist of the estimated replacement
cost of product returned to the Company pursuant to the terms
of their product warranties and is computed based upon
historical information.
Net Income Per Share:
Net income per share was computed based on the weighted
average number of shares actually outstanding plus the shares
that would be outstanding assuming exercise of options which
are considered to be common stock equivalents, less the shares
assumed to be acquired by the Company using the proceeds from
the assumed exercise of options assuming this acquisition was
based on the average market price per share.
Revenue Recognition:
Revenue is recognized at the time that ownership transfers to
the customer, principally at the time of shipment.
Income Taxes:
In 1994, the Company adopted the liability method of
accounting for income taxes pursuant to Statement of Financial
Accounting Standards No. 109 (SFAS 109), Accounting for Income
Taxes. The Company previously utilized the provisions of
Accounting Principle Board Opinion No. 11.
<PAGE>
PROFESSIONAL DENTAL TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Three And Six Month Periods Ended April 30, 1996 and 1995
Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Income Taxes (continued):
Under SFAS 109, income taxes are provided for the tax effects
of transactions reported in the financial statements and
consists of taxes currently due plus deferred taxes, if any.
Deferred taxes represent the net tax effects of temporary
differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts
used for income tax purposes.
Foreign Currency Translation:
The functional currency of Pro-Dentec Canada, a U.S.
partnership, accounted for under the equity method, is the
Canadian dollar. The adjustment resulting from the trans-
lation of the Canadian financial statement is reflected as a
separate component of stockholders' equity.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FOR THE SIX MONTH PERIODS ENDED APRIL 30, 1996 AND 1995
RESULTS OF OPERATIONS. For the period ended April 30, 1995 net sales were
$11.2 million, as compared with $12.7 million during the same period in
1995. This decrease is primarily attributable to the decrease in sales of
the Prism(Trademark) intra-oral camera. This decrease is a direct result
from the decision of management to no longer sell the unit based purely on
price. Severe price competition in the camera market has resulted in
sales of fewer units by the Company. In 1995, although many units were
sold almost all were sold at little or no profit to the Company.
The Company's total sales revenues during the six months ended
April 30, 1996 and 1995 have been substantially attributable to sales of
the Rota-Dent(Registered Trademark) and accessories. During the first six
months of 1996 revenue from such sales, including foreign sales of
$283,000, amounted to $8.2 million as compared with $9.0 million for the
same period in 1995 during which there were $332,000 in foreign sales.
Other significant sources of revenue included the Company's sales of
Victor(Trademark) and Prism(Trademark) and other computer based products
amounted to $1.1 million for the first half of 1996. Sales of these
systems amounted to $2.1 million in the six month period ended April 30,
1995. Revenue received during the first half from the sale of fluoride
products and Sensor Sc/RP(Trademark) totaled $1.4 million in 1996. Sales
of these products were $1.5 million in 1995.
The cost of goods sold for the six months ended April 30, 1996 was
$4.6 million, including $305,000 of costs related to commercial printing
projects for third party consumers which were insignificant in the prior
year, as compared with $5.2 million for the same period ended April 30,
1995, primarily due to the decrease in overall sales and the changes in
product mix as noted above.
Operating expenses decreased to $6.1 million during the first six
months of 1996, as compared with $6.9 million during the first half of
1995. This decrease is principally due to a significant effort by
management to reduce expenditures in all areas of the Company. Since May
of 1994 the Company has more than doubled the size of its field sales
force. Due to this rapid expansion of the field sales force and the
considerable investment required to make new outside sales representatives
profitable, selling expenses have been and continue to be the most
scrutinized of the operating expenses.
Other income and expenses netted an expense of $231,000 for the
first six months of 1996 compared with a net expense of $347,000 for the
same period in 1995. The decrease in net expense is due to improvement in
the performance of the joint ventures, in which the Company holds an
equity position, during the first half of 1996.
Net income for the six month period ended April 30, 1996 was
$159,000 which represents a small increase over the net income of $128,000
<PAGE>
during the same period of 1995. This increase is due to the combination
of the factors previously noted.
CAPITAL RESOURCES AND LIQUIDITY. On April 30, 1996 the Company's
total assets were $8.1 million, as compared with $7.7 million at October
31, 1995. Total liabilities were $4.2 million, an increase of $268,000
over the year end. Stockholders' equity increased to $4.0 million,
primarily as a result of earnings.
During the period ended April 30, 1996 and 1995 net cash provided
from operations of $288,000 and $(484,000), respectively, was used in
combination with loan proceeds to reduce notes payable by $110,000 in 1996,
increase capital items, including vehicle, computer and manufacturing
equipment by $662,000 and $196,000, respectively, and repay long-term debt
by $84,000 and $86,000 respectively.
FOR THE THREE MONTH PERIODS ENDED APRIL 30 1996 AND 1995
RESULTS OF OPERATIONS. For the three month period ended April 30, 1996
net sales were $5.6 million as compared with $6.1 million the comparable
period in 1995. This decrease can be attributed to the decrease in sales
of the Prism(Trademark) intra-oral camera, as previously stated in the
year-to-date discussion, and a decrease in Rota-Dent sales.
The Company's total sales revenues during the three month period
ended April 30, 1996 and 1995 have been principally attributable to sales
of the Rota-Dent(Registered Trademark). During the second quarter of 1996
revenue from such sales, including accessory and foreign sales amounted to
$4.2 million as compared with $4.5 million for the same period in 1995.
The decrease is largely attributable to a reduction in domestic sales
during the quarter. Other significant sources of revenue included the
Company's sales of technology based computer products, including the Prism,
that amounted to $631,000 for the second quarter of 1996. Sales of these
systems amounted to $700,000 in the three month period ended April 30,
1995. Revenue received during the period from the sale of fluoride
products and Sensor Sc/RP(Trademark) totaled $770,000 in 1996. Sales of
these products were $692,000 in 1995.
The cost of goods sold for the second quarter ended April 30, 1996
decreased to $2.2 million including $127,000 of costs related to
commercial printing projects for third party consumers which were
insignificant in the prior year, from $2.3 million for the same period in
1995, primarily due to changes in the product mix as noted above, and the
decrease in overall sales.
Operating expenses decreased to $3.1 million during the three
month period ended April 30, 1996 from $3.4 million during the same period
of 1995. This decrease is principally due to a significant effort by
management to reduce expenditures in all areas of the Company. Due to the
rapid expansion of the field sales force and the considerable investment
required to make new outside sales representatives profitable, selling
<PAGE>
expenses have been and continue to be the most scrutinized of the
operating expenses.
Other income and expenses netted an expense of $98,000 for the
second quarter of 1996 compared with a net expense of $218,000 for the
same period in 1995. The decrease in net expense is due to improvement in
the performance of the joint ventures, in which the Company holds an
equity position.
Net income for the three month period ended April 30, 1996 was
$92,000 which represents a small decrease from net income of $98,000 during
the same period of 1995. This results from decreases in cost of goods sold,
operating expenses and enhanced performance in the joint ventures, as
previously noted.
CAPITAL RESOURCES AND LIQUIDITY. On April 30, 1996 the Company's
total assets were $8.1 million, as compared with $7.7 million at October
31, 1995. Total liabilities were $4.2 million, an increase of $268,000
from the same period in 1995. Stockholders' equity was $4.0 million, a
slight increase over October 31, 1995, primarily as a result of earnings.
During the period ended April 30, 1996 and 1995 net cash provided
from operations of $288,000 and $(484,000), respectively, was used in
combination with loan proceeds to reduce notes payable by $110,000,
increase capital items, including vehicle, computer and manufacturing
equipment by $662,000 and $196,000, respectively, and repay long-term debt
by $84,000 and $86,000 respectively.
The Company's existing line of credit with First Commercial Bank of
Little Rock, Arkansas has been extended through June 30, 1996. The
Company has agreed on, and NBD Bank, Detroit, Michigan, has approved, a
$3.0 million asset based line of credit. Final terms governing the credit
line are currently being negotiated, and documents are expected to be
signed before the end of June, 1996. The new credit line will be secured
by receivables, inventory and equipment. Citizens Bank of Batesville will
continue to be the Company's source of financing for real estate and
equipment as needed.
The Company has established reserves for potential warranty claims
on its primary products, and such claims have historically been within
management's expectation.
The Company defines liquidity as the ability of the Company to
generate adequate amount of cash to meet the Company's needs. The Company
has historically relied on cash provided from operations to meet a
majority of its financial needs.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The lawsuit filed against the Company by Dr. Thomas E. Dudney in
the Circuit Court of Shelby County, Alabama on August 5, 1995 has been
settled. The Complaint was originally seeking compensatory damages in the
amount of $400,000. The settlement reached involved the return of the
equipment to the Company in exchange for a cash payment to the Doctor not
to exceed $10,000. The settlement was finalized in March 1996.
As previously reported, on June 26, 1995, PDT Image, Inc., (a
wholly owned subsidiary of Professional Dental Technologies, Inc.) filed
its Petition for Declaratory Decree and Restraining Order against Source-1
Dental Image, Inc., et al, its partner in a partnership known as Pro-
Dentec Canada. The Company was granted a Temporary Restraining Order by
the Court, and later it amended its claim to include damages for fraud,
breach of fiduciary duty and unjust enrichment. In July 1995, Source-1
Dental Image, Inc., filed its response and a Petition to dissolve the
partnership. The lawsuit is in the discovery stages and it is anticipated
that a trial based on the merits of the case will be held sometime this
year. The Company intends to vigorously prosecute this action and has
recently amended its complaint to include malicious interference with
business relations and breach of contract against Source-1 Dental Image
and its owners Dr. David Gane and Mr. Wayne Rees. Regardless of the
outcome, the Company will continue distributing its products in Canada.
The Company knows of no other material litigation involving the
Company or any officer or director of the Company.
ITEM 2. CHANGES IN SECURITIES
"NONE"
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
"NONE"
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On March 29, 1996, the Company held its annual meeting and the
election of the Company's full Board of Directors was put to a vote of
security holders with the following results:
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Number of shares voting: 12,326,570
FOR ABSTAIN
J. Robert Lemon 12,311,870 14,700
William T. Evans 12,311,870 14,700
Robert E. Christian 12,311,870 14,700
Timothy A. Nolan 12,311,870 14,700
J. Philip Boesel 12,311,570 15,000
Michael S. Black 12,311,570 15,000
ITEM 5. OTHER INFORMATION
Mr. J. Robert Lemon has resigned from the position of corporate
President effective February 1, 1996. Mr. Lemon has agreed to
serve as a consultant to the Company and remain on the Board of
Directors.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit No. Description
----------- -----------
27 Financial Data Schedule
(b) Reports on Form 8-K
On April 24, 1996, the Company filed with the Securities and
Exchange Commission a Current Report on Form 8-K dated April 1,
1996, with respect to the information reported in Item 5 above.
<PAGE>
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.
PROFESSIONAL DENTAL
TECHNOLOGIES, INC.
-------------------------------------
(Registrant)
June 6, 1996 /s/ William T. Evans
--------------------- -------------------------------------
Date William T. Evans
President
June 6, 1996 /s/ N.E. Deskin
--------------------- -------------------------------------
Date N.E. Deskin
VP Administration
<PAGE>
<TABLE> <S> <C>
<PAGE>
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<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> APR-30-1996
<CASH> 867
<SECURITIES> 0
<RECEIVABLES> 1,871
<ALLOWANCES> 40
<INVENTORY> 2,285
<CURRENT-ASSETS> 5,477
<PP&E> 3,576
<DEPRECIATION> 1,556
<TOTAL-ASSETS> 8,149
<CURRENT-LIABILITIES> 3,289
<BONDS> 0
0
0
<COMMON> 141
<OTHER-SE> 3,823
<TOTAL-LIABILITY-AND-EQUITY> 8,149
<SALES> 11,182
<TOTAL-REVENUES> 11,182
<CGS> 4,566
<TOTAL-COSTS> 6,128
<OTHER-EXPENSES> 168
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<INTEREST-EXPENSE> 63
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<PAGE>
</TABLE>
