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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the quarterly period ended September 30, 1996 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 0-19562
BIO-DYNE CORPORATION
(Exact name of
Registrant as Specified in its Charter)
Georgia 58-1865733
(State or other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
5400 Bucknell Dr. S.W., Atlanta Georgia 30336
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (404) 346-3100
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 report(s), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No ___
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, at of the latest practicable date.
Common Stock $ .01 Par Value 10,463,529
Class November 13, 1996
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BIO-DYNE CORPORATION
FORM 10-QSB
FOR THE QUARTER ENDED SEPTEMBER 30, 1996
INDEX
PART I. FINANCIAL INFORMATION Page No.
Item 1. Financial Statements
Consolidated Balance Sheets - September 30, 1996
(Unaudited) and March 31, 1995 . . . . . . . . . 3
Consolidated Statements of Operations for the
Three and the Six Months Ended September 30,
1995 and 1994 (Unaudited) . . . . . . . . . . . 5
Condensed Notes to Consolidated
Financial Statements . . . . . . . . . . . . . . 6
Item 2. Management's Discussion and analysis of
Financial Condition and Results of Operations . . 7
PART II. OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . 10
Exhibit 11.1 Statement Regarding computation of Per Share Earnings . . 12
2
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BIO-DYNE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
($000 omitted)
September 30, March 31,
1996 1996
------------- ---------
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash $ 216 $ 286
Factored Accounts Receivable 53 239
Accounts Receivable 41 564
Inventories 1,915 2,095
Prepaid expenses and other current assets 101 174
------ ------
Total current assets 2,326 3,358
PROPERTY, PLANT AND EQUIPMENT, net 420 499
DEPOSITS AND OTHER ASSETS 110 113
GOODWILL, net of accumulated amortization 2,479 2,064
------ ------
$5,335 $6,034
------ ------
See accompanying condensed notes to consolidated financial statements.
3
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BIO-DYNE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (continued)
($000 omitted)
September 30, March 31,
1996 1996
------------- ---------
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 2,823 $ 2,432
Accrued expenses 774 686
Current portion of notes payable and capital
lease obligations 210 437
Due to factor -- 156
Line of credit 34 --
Customer deposits 882 756
Notes Payable to Continental 450 --
Current portion of reserve for acquisition costs 186 186
Current portion of deferred gain on sale of
building 10 10
-------- -------
Total current liabilities 5,369 4,663
NOTES PAYABLE AND CAPITAL LEASE OBLIGATIONS,
net of current portion 217 271
CAROLINA FITNESS EQUIPMENT CREDITORS SETTLEMENT 450 450
RESERVE FOR ACQUISITION COSTS, net of current portion -- --
ACCRUED EXECUTIVE SEPARATION EXPENSE, net of current
portion -- 56
DEFERRED GAIN ON SALE OF BUILDING, net of current
portion 96 96
-------- -------
Total liabilities 6,132 5,536
STOCKHOLDERS' EQUITY:
Common stock 103 103
Common stock subscribed -- --
Additional paid-in capital 9,729 9,729
Accumulated deficit (10,629) (9,334)
-------- -------
(797) 498
Less: Treasury stock -- --
-------- -------
Total stockholders' equity (797) 498
-------- -------
$ 5,335 $ 6,034
-------- -------
See accompanying condensed notes to consolidated financial statements.
4
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BIO-DYNE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED
($000 omitted, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $ 1,351 $ 3,977 $ 3,012 $ 7,811
Cost of goods sold 753 2,941 2,016 5,813
----------- ---------- ----------- ----------
Gross margin 598 1,036 996 1,998
Selling, general and
administrative expenses 1,011 1,456 2,523 3,014
Depreciation and amortization,
less amortization of goodwill 53 69 162 92
----------- ---------- ----------- ----------
(466) (489) (1,689) (1,108)
Amortization of goodwill 45 45 91 90
----------- ---------- ----------- ----------
Loss from operations (512) (534) (1,780) (1,198)
Interest expense 3 29 15 59
----------- ---------- ----------- ----------
Net Loss $ (515) $ (563) $ (1,795) $ (1,257)
----------- ---------- ----------- ----------
Net loss per common share $ (0.05) $ (0.06) $ (0.17) $ (0.15)
----------- ---------- ----------- ----------
Weighted average shares outstanding 10,463,529 8,810,942 10,463,529 8,179,155
----------- ---------- ----------- ----------
</TABLE>
See accompanying condensed notes to consolidated financial statements.
5
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BIO-DYNE CORPORATION AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. FINANCIAL STATEMENTS (BASIS OF PRESENTATION)
In the opinion of the Company, the statements for the unaudited interim periods
presented herein include all adjustments (which include only normal recurring
adjustments) necessary to present a fair statement of the results of such
interim periods. The results of operations for the period ended September 30,
1995 are not necessarily indicative of the operating results for the year.
2. INVENTORY
Inventory consisted of the following:
September 30,
($000 omitted) 1996 March 31, 1996
---------------- --------------
Raw materials $ 358 $ 459
Work in process 93 43
Finished goods 104 169
Retail 1,360 1,424
------ -------
$1,915 $2,095
------ ------
3. INCOME TAXES
At March 31 and September 30, 1996, the Company had net operating loss
carryforwards for financial reporting and income tax purposes of approximately
$6,416,812 and $6,943,812, respectively, which, unless utilized, begin to
expire in the year 2005.
The Company adopted the provisions of Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" (SFAS 109) effective April 1,
1993. SFAS 109 requires the recognition of deferred tax liabilities and assets
for the expected future tax consequences of events that have been recognized in
a company's financial statement or tax returns. Under this method, deferred tax
liabilities and assets are determined based on the difference between the
financial statement carrying amounts and tax basis of assets and liabilities
using enacted tax rates in effect in the years in which the differences are
expected to reverse. The Company has not recognized the benefit of any net
operations loss carryforwards as the result of adopting SFAS 109.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction
with the Company's Consolidated Financial Statements and related
condensed notes thereto.
($000 omitted) Three Months Ended September 30,
1996 1995
------------------ -------------------
Net sales $ 1,351 100.0% $ 3,977 100.0%
Cost of goods sold 753 55.7 2,941 74.0
------- ----- ------- -----
Gross Profit 598 44.3 1,036 26.0
Selling, general and
administrative expenses 1,011 74.7 1,456 36.6
Depreciation and amortization,
less amortization of goodwill 53 3.9 69 1.7
------- ----- ------- -----
(466) (34.5) (489) (12.3)
Amortization of goodwill 45 3.3 45 1.1
------- ----- ------- -----
Loss from operations (512) (37.8) (534) (13.4)
Interest expense, net 3 .002 29 .7
------- ----- ------- -----
Net loss ($515) (38.1%) ($563) (14.1%)
------- ----- ------- -----
Three Months Ended September 30,
1996 1995
------------------ ----------------
Net sales $ 3,012 100.0% $ 7,811 100.0%
Cost of goods sold 2,016 66.9 5,813 74.4
------- ----- ------- -----
Gross Profit 996 33.1 1,998 25.6
Selling, general and
administrative expenses 2,523 83.7 3,014 38.6
Depreciation and amortization,
less amortization of goodwill 162 5.4 92 1.2
------- ----- ------- -----
(1,689) (56.1) (1,018) (14.2)
Amortization of goodwill 91 3.0 90 1.1
------- ----- ------- -----
Loss from operations (1,780) (59.1) (1,198) (15.3)
Interest expense, net 15 .5 59 .8
------- ----- ------- -----
Net loss ($1,795) (59.6%) ($1,257) (16.1%)
------- ----- ------- -----
The Company's first two fiscal quarters ending June 30 and September 30
are historically the Company's two weakest quarters in an increasingly
more skewed year, with the period November 1 to January 15 being the
strongest period in the year.
Net sales decreased approximately $2,646,000, or 66% and $4,799,000, or
61%, in the three and six months ended September 30, 1996 compared to
1995. The decrease was caused by the continued softness in the
Company's manufacturing operation and the inability to fill retail and
commercial orders in the Company's two subsidiaries, Home Fitness
Studios, Inc. (HFS) and Carolina Fitness Equipment, Inc. (CFE).
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The decrease in sales in the Company's manufacturing operations is
caused primarily by one condition. The inability to purchase raw
materials resulted in canceled purchase orders from dealers and
decreased order flow from CFE and HFS. The decrease in sales in the
Company's retail and commercial sales operations is caused primarily by
two conditions. The inability to purchase inventory due to frozen
credit lines with most of HFS and CFE trade creditors and the
subsequent cesation of retail operations at the end of August 1996.
Gross profit decreased approximately $438,000, or 43%, in the second
quarter of 1996 compared to 1995, and to 44% as a percentage of sales
from 28% in 1995. For the six months ended September 30, 1995, gross
profit declined approximately $1,002,000, or 50%, and to 33% in 1996
compared to 26% in 1995.
Selling, general and administrative expenses (SG&A)were down
approximately $445,000, or 30% in the quarter ending September 30, 1996
compared to the quarter ending September 30, 1995 due to the cost
reduction programs instituted by the Company. The increase of SG&A as a
percent of sales in the quarter, to 75% in 1996 to 37% in 1995, is due
to the relatively fixed nature of these expenses and the lower sales
volume in 1996.
Loss from operations decreased approximately $22,000 and net loss
decreased approximately $48,000 in the second quarter of fiscal 1996
compared to 1995, and increased approximately $538,000 for the six
months. These increased losses are directly attributable to the reduced
volume in 1996.
Liquidity and Capital Resources
The Company had a line of credit with a bank, collateralized by the
manufacturing accounts receivable, inventory and machinery and
equipment, to provide loans up to an aggregate amount of $300,000,
however, this line was closed due to the deteriorating financial
position of the Company. Management aggressively pursued and negotiated
with several sources to finance or factor its manufacturing receivables
with lines of credit similar or higher than the line it had. However,
due to the importance of financing its manufacturing purchases to meet
its Christmas season need, management elected to secure a line of
credit with Continental American Transportation, Inc. (Continental) for
$1,000,000. On May 31, 1996, Chip Beam and Harvey Miller resigned as
Officers and Directors and appointed Timothy Holstein, Brian Henninger
and Erik Bailey to similar positions. As a condition of the line of
credit, three members of the seven member board resigned leaving Board
Control to the Continental group.
During the six months ended September 30, 1996, the Company experienced
a net decrease in cash of approximately $70,000, ending with a balance
of approximately $216,000 at September 30, 1996. During the six months
ended September 30, 1996, the Company received a revolving line of
credit from Continental for $1,000,000, of which the Company borrowed
$450,000 at June 30, 1996. The decrease in cash, increased customer
deposits, and the proceeds from the line were used to reduce long-term
liabilities and fund the Company's operating losses.
On August 23, 1996, the Company closed all of its seventeen retail
store locations due to narrowing profit margins, decreased sales, and
frozen credit lines with most of its trade creditors. The Company plans
on liquidating the assets of CFE and HFS in an orderly manner. While
sales will substantially decrease, the Company anticipates tremendous
savings in SG&A expenses and hopes to settle with many of its creditors
so that a substantial equity gain is realized. The Company will focus
on developing its manufacturing division on a full-time basis. While
this division has been historically unprofitable and there can be no
assurances that it will ever be
8
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profitable, the Company will concentrate on developing this operation
as well as commercial sales due to the relatively low fixed cost for
these types of operations.
The Company can not meet short and long term capital needs through cash
generated from operations and no assurances can be given that outside
financing is available, or if available, can be obtained on terms
suitable to the Company.
Inflation
Inflation has not had a significant impact on the Company's results of
operations to date.
Susequent Events
On October 31, 1996, the Company was granted a credit line of $75,000
from Colonial Financial Services, collateralized by receivables. The
Company has used this line to enhance manufacturing operations.
On Nov 14,1996, the Company issued 9,000,000 shares of stock to retire
$360,000 of debt to Continental American Transportation, Inc.
Remainder of page intentionally left blank
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings:
Subsequent to June 30, 1996, the Company has been
notified by several of its landlords at various retail
locations regarding pending litigation against the
Company's two subsidiaries, Home Fitness Studios, Inc.
and Carolina Fitness Equipment, Inc. The pending
litigation is a result of the retail store closings. The
Company is confident that these matters will not affect
the existing operations of Bio-Dyne Corporation.
Item 2. Changes in Securities: None
Item 3. Defaults Upon Senior Securities: None
Item 4. Submission of Matters to a Vote of Security Holders: None
Item 5. Other Information: None
Item 6. Exhibits and Reports on Form 8-K:
(a) Exhibit - 11.1 - Statement Regarding Computation of
Per Share Earnings.
(b) During the six months ended September 30,1996, one
report on Form 8-K was filed for May 31, 1996
reporting that the Company established a line of
credit with Continental American Transportation,
Inc. and that there was a change of control with
respect to the Company's Officers and Directors.
(c) During the six months ended September 30,1996, one
report on Form 8-K was filed for August 28, 1996
reporting that the company had discontinued
operations of its Carolina Fitness, Inc. (CFE) and
Home Fitness Studious, Inc. (HFS) subsidiaries.
10
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
BIO-DYNE CORPORATION
(Registrant)
Date: November 19, 1996 s/ Timothy Holstein
----------------------------
Timothy Holstein
President and Chief Operating Officer
Date: November 19, 1996 s/ Erik Bailey
-----------------------
Erik Bailey
Vice President and Chief Financial Officer
This document may contain "forward-looking statements" within the meaning of
section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities and Exchange Act of 1934 as amended.
11
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EXHIBIT 11.1
Statement Regarding Computation of Per Share Earnings
Income per share calculation:
($000 omitted, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net (loss) $ (527) $ (563) $ (1,807) $ (1,257)
------------ ------------ ------------ ------------
Weighted average number of
common shares and common
share equivalents are as follows:
Weighted average common
shares outstanding 10,313,529 8,960,942 10,313,529 8,329,155
------------ ------------ ------------ ------------
Shares held in escrow (150,000) (150,000) (150,000) (150,000)
Weighted average number of
shares outstanding as adjusted 10,463,529 8,810,942 10,463,529 8,179,155
------------ ------------ ------------ ------------
Net (loss) per common and
common equivalent share $ (0.05) $ (0.06) $ (0.17) $ (0.15)
------------ ------------ ------------ ------------
</TABLE>
Note: Shares issued from assumed exercise of options and warrants include the
number of incremental shares which result from applying the "treasury stock
method" for options and warrants, APB 15, paragraph 38.
12
