<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
August 31, 1995 0-8350
- -------------------------------- ----------------------------
(For Quarter Ended) (Commission File Number)
STAODYN, INC.
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(Exact name of registrant as specified in its Charter)
Delaware 84-0684224
- ---------------------------- -------------------------------
(State of Incorporation) (IRS Employer Identification No.)
1225 Florida Ave., Longmont, CO 80501
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(Address of principal executive offices) (Zip Code)
(303) 772-3631
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(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days.
Yes X No
----------- -----------
6,324,536
- --------------------------------------------------------------------------------
(Number of shares of common stock outstanding as of October 9, 1995)
<PAGE>
PART I. FINANCIAL INFORMATION
STAODYN, INC.
BALANCE SHEET
(Unaudited)
<TABLE>
<CAPTION>
August 31
1995
------------
<S> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 2,314,626
Accounts receivable, net 4,407,725
Inventories 3,950,321
Prepaid expenses and other assets 163,471
-----------
Total current assets 10,836,143
Property, Plant and Equipment, Net 2,442,113
Other Assets
Patents and intangibles, net 776,657
Product supply agreement, net 652,500
Other 25,703
-----------
Total Assets $14,733,116
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current portion of long-term debt $ 276,908
Accounts payable 584,674
Accrued expenses and other liabilities 710,046
-----------
Total current liabilities 1,571,628
Long-Term Debt 1,513,340
Commitments and Contingencies
Stockholders' Equity
Preferred stock - $0.01 par value; 1,000,000
shares authorized; none issued -
Common stock - $0.01 par value; 10,000,000
shares authorized; 6,324,536 shares issued 63,245
Additional paid-in capital 15,105,103
Retained earnings (deficit) (3,520,200)
-----------
11,648,148
Total Liabilities and Stockholders' Equity $14,733,116
===========
</TABLE>
See accompanying notes.
2
<PAGE>
STAODYN, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------------ --------------------------
August 31 August 31 August 31 August 31
1995 1994 1995 1994
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Net Sales $4,432,759 $4,576,938 $13,719,143 $11,852,820
Cost of Sales 1,668,277 1,568,717 4,797,069 4,300,164
---------- ---------- ----------- -----------
Gross Profit 2,764,482 3,008,221 8,922,074 7,552,656
---------- ---------- ----------- -----------
Operating Expenses
Selling, general and
administrative 2,645,552 2,903,226 8,358,865 8,423,969
Research and development 114,742 106,937 327,151 310,218
---------- ---------- ----------- -----------
2,760,294 3,010,163 8,686,016 8,734,187
---------- ---------- ----------- -----------
Income (Loss) from Operations 4,188 (1,942) 236,058 (1,181,531)
Other Income (Expense), Net (25,034) (20,679) (54,652) (47,520)
---------- ---------- ----------- -----------
Income (Loss) Before
Income Taxes (20,846) (22,621) 181,406 (1,229,051)
Income Tax Expense (Benefit) - - - -
---------- ---------- ----------- -----------
Net Income (Loss) $ (20,846) $ (22,621) $ 181,406 $(1,229,051)
========== ========== =========== ===========
Income (Loss) Per Common Share $ - $ - $ .03 $ (.23)
========== ========== =========== ===========
Weighted Average Number of
Common Shares Outstanding 6,308,996 5,425,736 6,272,599 5,415,208
========== ========== =========== ===========
</TABLE>
See accompanying notes.
3
<PAGE>
STAODYN, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
-------------------------
August 31 August 31
1995 1994
----------- -----------
<S> <C> <C>
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES $1,059,195 $(2,303,602)
---------- -----------
INVESTING ACTIVITIES
Payments for purchases of property, plant
and equipment (118,864) (409,562)
Payment for other assets (36,070) (1,401)
---------- -----------
Net cash used in investing
activities (154,934) (410,963)
---------- -----------
FINANCING ACTIVITIES
Proceeds from issuance of common stock 78,268 309,825
Payments of offering costs - (20,024)
Principal payments under capital lease
obligations and long-term debt (214,077) (261,288)
Payment for purchase of treasury stock - (244,358)
---------- -----------
Net cash used in financing
activities (135,809) (215,845)
---------- -----------
Net increase (decrease) in cash and
cash equivalents 768,452 (2,930,410)
Cash and cash equivalents at beginning of period 1,546,174 4,384,266
---------- -----------
Cash and cash equivalents at end of period $2,314,626 $ 1,453,856
========== ===========
Supplemental information:
Interest paid $ 164,725 $ 172,572
========== ===========
</TABLE>
See accompanying notes.
4
<PAGE>
STAODYN, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB and Regulation S-B.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the nine-month period ended August 31, 1995 are not
necessarily indicative of the results that may be expected for the year ended
November 30, 1995. For further information, refer to the financial statements
and footnotes thereto included in the Registrant Company's annual report on Form
10-KSB for the year ended November 30, 1994.
Reclassifications
Certain prior period amounts have been reclassified to conform to the current
presentation format.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INCOME TAXES
Income taxes are provided for the difference between the book and tax basis of
assets and liabilities.
EARNINGS (LOSS) PER SHARE
Earnings (loss) per common share is based on the weighted average number of
common shares. Options and warrants outstanding during the period ended
August 31, 1994 are not included in the computation of weighted average shares
outstanding as their inclusion would be antidilutive due to the Company's
losses. Options and warrants outstanding during the period ended August 31,
1995 are not included, as the dilutive effect is below three percent. The
Company has never declared or paid a dividend to its shareholders.
CONCENTRATION OF CREDIT RISK
The Company's accounts receivable are due from approximately 400 active dealers
and distributors primarily located in the United States and Canada, and from a
larger number of individuals and insurance carriers throughout the United
States. At August 31, 1995, no single customer accounted for more than 5% of
total accounts receivable.
5
<PAGE>
STAODYN, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
(Continued)
3. INVENTORIES
Inventories include the following components:
<TABLE>
<CAPTION>
August 31
1995
----------
<S> <C>
Raw Materials $ 719,930
Work in process 43,507
Finished goods 3,186,884
----------
$3,950,321
==========
</TABLE>
4. INCOME TAXES
Effective December 1, 1993, the Company changed the method used for accounting
for income taxes from the deferred method to the liability method required by
FASB Statement No. 109, "Accounting for Income Taxes." Under the provisions of
FASB Statement No. 109, a deferred tax liability or asset (net of a valuation
allowance) is provided in the financial statements by applying the provisions of
applicable tax laws to measure the deferred tax consequences of temporary
differences that will result in net taxable or deductible amounts in future
years as a result of events recognized in the financial statements in current or
preceding years.
Prior year's financial statements have not been restated to reflect this change.
There was no cumulative effect of adopting FASB Statement No. 109 as of December
1, 1993, due primarily to the fact that the Company has significant net
operating loss carryforwards. For financial reporting purposes, the Company has
established a valuation allowance of $1,695,000 at the date of implementation to
offset the deferred tax assets related primarily to the carryforwards.
6
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS -- NINE MONTHS ENDED AUGUST 31, 1995
RESULTS OF OPERATIONS
Net sales for the third quarter were $4,432,759, down $144,179 or 3% from the
comparable quarter of the prior year, and down $296,120 or 6% from the second
quarter of 1995. These decreases are due to seasonal slowdowns in sales, as the
summer months typically show a drop in the level of patients visiting their
physical therapy clinics. The third quarter of the prior fiscal year reflected
some sales which normally would have occurred in the second quarter but which
were not realized until the third quarter. For the nine-month period ended
August 31, 1995, sales were $13,719,143, an increase of $1,866,323 or 16% over
the comparable period in the prior year. This increase is all in the retail
division and is due to a larger sales force and internal operations
improvements.
Gross profit was $2,764,482, or 62%, as compared to $3,008,221 or 66% for the
same quarter in the prior year. For the nine-month period, gross profit was
$8,922,074 or 65%, as compared to $7,552,656, or 64%. Fluctuations in the
profit margin are due primarily to changes in the sales mix between manufactured
and non-manufactured products.
Total operating expenses were $2,760,294 for the current quarter, as compared to
$3,010,163 for the comparable quarter of the prior year. The decrease of
$249,869, or 8%, is due primarily to reduced commissions on lower sales,
increased non-commissionable sales, and lower headcount in the retail inside
sales operations. For the nine-month period, operating expenses were
$8,686,016, down $48,171 from the comparable period in the prior year. For the
six months through May 31, 1995, selling expenses were higher on the higher
sales.
Other income (expense) consists primarily of interest income and expense, and
are comparable between periods.
The net loss for the third quarter was $(20,846), or less than $(.01) per share,
as compared to $(22,621), or less than $(.01) per share for the third quarter of
the prior year. For the nine-month period, net income was $181,406, or $.03 per
share, compared to a loss of $(1,229,051) or $(.23) per share in 1994. The
increase in the weighted average number of shares is due primarily to
approximately 750,000 shares issued in November 1994.
LIQUIDITY AND CAPITAL RESOURCES
The Company cash flow from operations was $1,059,195 in the nine months ended
August 31, 1995, provided primarily from depreciation and amortization,
earnings, and reductions in accounts receivable and inventory. Working capital
at August 31, 1995 was $9,264,515 or 6.9:1, as compared to $8,546,364 or 5.7:1
at November 30, 1994. The Company anticipates that current liquidity will be
sufficient to fund its cash requirements.
INFLATION AND CHANGING PRICES
Inflation has a negligible effect on the Company's operations. Governmental and
other efforts to reduce healthcare spending have and may continue to affect the
Company's revenues. Management anticipates continued price sensitivity in the
medical marketplace.
7
<PAGE>
PART II OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None
(b) Reports
The Company filed a Form 8-K on July 13, 1995, covering the addition of
Patrick F. Crane to its Board of Directors.
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.
STAODYN, INC.
(REGISTRANT)
Date: October 12, 1995 /s/Michael J. Newman
---------------------- --------------------------------------------
Vice President - Finance and Administration
8
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
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<FISCAL-YEAR-END> NOV-30-1995
<PERIOD-START> DEC-01-1994
<PERIOD-END> AUG-31-1995
<CASH> 2314626
<SECURITIES> 0
<RECEIVABLES> 4407725
<ALLOWANCES> 0
<INVENTORY> 3950321
<CURRENT-ASSETS> 10836143
<PP&E> 2442113
<DEPRECIATION> 0
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<CURRENT-LIABILITIES> 1571628
<BONDS> 0
<COMMON> 63245
0
0
<OTHER-SE> 11584903
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<SALES> 13719143
<TOTAL-REVENUES> 13719143
<CGS> 4797069
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<OTHER-EXPENSES> 54652
<LOSS-PROVISION> 0
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<EPS-PRIMARY> .03
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</TABLE>
