<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, 1996 0-8350
-------------------------------- ----------------------------
(For Quarter Ended) (Commission File Number)
STAODYN, INC.
------------------------------------------------------
(Exact name of registrant as specified in its Charter)
Delaware 84-0684224
--------------------------------- ---------------------------------
(State of Incorporation) (IRS Employer Identification No.)
1225 Ken Pratt Blvd., 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
----------- ----------
6,641,217
- -------------------------------------------------------------------------------
(Number of shares of common stock outstanding as of October 8, 1996)
<PAGE>
PART I. FINANCIAL INFORMATION
STAODYN, INC.
BALANCE SHEET
(Unaudited)
<TABLE>
<CAPTION>
August 31
1996
------------
<S> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 1,060,700
Short-term investments 1,320,422
Accounts receivable, net 4,746,388
Inventories 4,361,260
Prepaid expenses and other assets 323,237
-----------
Total current assets 11,812,007
Property, Plant and Equipment, Net 2,020,147
Other Assets
Patents and intangibles, net 983,635
Product supply agreement, net 562,500
Other 9,966
-----------
Total Assets $15,388,255
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current portion of long-term debt $ 219,379
Accounts payable 716,704
Accrued expenses and other liabilities 949,200
-----------
Total current liabilities 1,885,283
Long-Term Debt 1,297,234
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; 6,640,817 shares issued 66,408
Additional paid-in capital 15,523,787
Retained earnings (deficit) (3,384,457)
-----------
12,205,738
Total Liabilities and Stockholders' Equity $15,388,255
===========
</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
1996 1995 1996 1995
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Net Sales $4,834,491 $4,432,759 $13,668,866 $13,719,143
Cost of Sales 1,691,171 1,668,277 4,813,374 4,797,069
---------- ---------- ----------- -----------
Gross Profit 3,143,320 2,764,482 8,855,492 8,922,074
---------- ---------- ----------- -----------
Operating Expenses
Selling, general and
administrative 2,980,100 2,645,552 8,350,963 8,358,865
Research and development 96,661 114,742 350,898 327,151
---------- ---------- ----------- -----------
3,076,761 2,760,294 8,701,861 8,686,016
---------- ---------- ----------- -----------
Income (Loss) from Operations 66,559 4,188 153,631 236,058
Other Income (Expense), Net (12,633) (25,034) (40,138) (54,652)
---------- ---------- ----------- -----------
Income (Loss) Before
Income Taxes 53,926 (20,846) 113,493 181,406
Income Tax Expense (Benefit) - - - -
---------- ---------- ----------- -----------
Net Income (Loss) $ 53,926 $ (20,846) $ 113,493 $ 181,406
========== ========== =========== ===========
Income (Loss) Per Common Share $ .01 $ - $ .02 $ .03
========== ========== =========== ===========
Weighted Average Number of
Common Shares Outstanding 6,519,882 6,308,996 6,412,685 6,272,599
========== ========== =========== ===========
</TABLE>
See accompanying notes.
3
<PAGE>
STAODYN, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
------------------------
August 31 August 31
1996 1995
----------- ----------
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 153,420 $1,059,195
----------- ----------
INVESTING ACTIVITIES
Payments for purchases of property, plant
and equipment (225,752) (118,864)
Payment for other assets (30,297) (36,070)
Proceeds from sale of equipment 8,000 -
Purchases of short-term investments (1,303,217) -
Maturities of short-term investments 1,000,000 -
----------- ----------
Net cash used in investing
activities (551,266) (154,934)
----------- ----------
FINANCING ACTIVITIES
Proceeds from issuance of common stock 40,650 78,268
Principal payments under capital lease
obligations and long-term debt (192,744) (214,077)
----------- ----------
Net cash used in financing
activities (152,094) (135,809)
----------- ----------
Net increase (decrease) in cash and
cash equivalents (549,940) 768,452
Cash and cash equivalents at beginning of period 1,610,640 1,546,174
----------- ----------
Cash and cash equivalents at end of period $ 1,060,700 $2,314,626
=========== ==========
Supplemental information:
Interest paid $ 143,382 $ 164,725
=========== ==========
</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, 1996 are not
necessarily indicative of the results that may be expected for the year ended
November 30, 1996. 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, 1995.
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, 1995 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,
1996 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, 1996, no single customer accounted for more than 5% of
total accounts receivable.
3. INVENTORIES
Inventories include the following components:
<TABLE>
<CAPTION>
August 31
1996
----------
<S> <C>
Raw materials $ 665,176
Work in process 161,988
Finished goods 3,534,096
----------
$4,361,260
==========
</TABLE>
5
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - NINE MONTHS ENDED AUGUST 31, 1996
RESULTS OF OPERATIONS
Net sales for the third quarter of 1996 were $4,834,491, an increase of $401,732
or 9% from the comparable quarter of the prior year. This increase occurred in
the Company's retail sales division, due primarily to the addition of several
new independent sales representative organizations. For the nine month period,
sales decreased by $50,277, or less than 1%. Wholesale sales have continued to
decline due to reduced sales representation and a shrinking market, offset by
increased retail sales due to higher levels of patient referrals and increased
sales representation.
Gross profit was $3,143,320, or 65%, for the quarter, as compared to $2,764,482,
or 62%, for the third quarter of 1995. Gross margins improved in the retail
business due to volume efficiencies and favorable product mix. For the nine
month period, gross profit was $8,855,492, or 65%, which compares to $8,922,074,
or 65%, for the first nine months of 1995.
Total operating expenses were $3,076,761 for the quarter ended August 31, 1996,
as compared to $2,760,294 for the same period in the prior year. The increase
of $316,467 results from increased sales and marketing expenses related to the
higher level of sales. For the nine month period ended August 31, 1996,
operating expenses totaled $8,701,861 as compared to $8,686,016 for the period
ended August 31, 1995.
Other income (expense) in the third quarter of 1996 was $(12,633), compared to
$(25,034) for 1995. For the nine month period, other income (expense) was
$(40,138), as compared to $(54,652). Other income (expense) consists primarily
of interest income and expense and fluctuates primarily based upon available
levels of excess cash for investment.
Net income for the third quarter was $53,926, or $.01 per share, as compared to
$(20,846), or $(.00) per share, for the third quarter of the prior year. For
the nine months ended August 31, 1996, net income was $113,493, or $.02 per
share, as compared to $181,406, or $.03 per share, for 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company provided $153,420 of cash from operations in the nine months ended
August 31, 1996. Working capital at August 31, 1996 was $9,926,724 or 6.3:1, as
compared to $9,432,636 or 6.9:1 at November 30, 1995. The Company believes that
funds on hand are sufficient to support its existing and planned operations for
at least the next twelve months.
INFLATION AND CHANGING PRICES
Inflation has had 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.
6
<PAGE>
PART II OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None
(b) Reports
The Company filed an amendment to the Form 8-K submitted on May 28, 1996.
The amendment added that John R. South was also appointed a member of the
Board of Directors effective June 1, 1996.
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 14, 1996 /s/ Michael J. Newman
---------------------- --------------------------------------------
Vice President - Finance and Administration
7
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-START> DEC-01-1995
<PERIOD-END> AUG-31-1996
<CASH> 1,060,700
<SECURITIES> 1,320,422
<RECEIVABLES> 4,746,388
<ALLOWANCES> 0
<INVENTORY> 4,361,260
<CURRENT-ASSETS> 11,812,007
<PP&E> 2,020,147
<DEPRECIATION> 0
<TOTAL-ASSETS> 15,388,255
<CURRENT-LIABILITIES> 1,885,283
<BONDS> 0
0
0
<COMMON> 66,408
<OTHER-SE> 12,139,330
<TOTAL-LIABILITY-AND-EQUITY> 15,388,255
<SALES> 13,668,866
<TOTAL-REVENUES> 13,668,866
<CGS> 4,813,374
<TOTAL-COSTS> 8,701,861
<OTHER-EXPENSES> 40,138
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 113,493
<EPS-PRIMARY> .02
<EPS-DILUTED> 0
</TABLE>
