<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
May 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
--------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(303) 772-3631
---------------------------------------------------------
(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
----------- -----------
6,480,726
- --------------------------------------------------------------------------------
(Number of shares of common stock outstanding as of June 30, 1996)
<PAGE>
PART I. FINANCIAL INFORMATION
STAODYN, INC.
BALANCE SHEET
(Unaudited)
<TABLE>
<CAPTION>
May 31
1996
------------
<S> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 2,055,684
Short-term investments 505,460
Accounts receivable, net 4,550,015
Inventories 4,071,581
Prepaid expenses and other assets 243,316
-----------
Total current assets 11,426,056
Property, Plant and Equipment, Net 2,159,967
Other Assets
Patents and intangibles, net 838,521
Product supply agreement, net 585,000
Other 11,232
-----------
Total Assets $15,020,776
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current portion of long-term debt $ 214,651
Accounts payable 634,318
Accrued expenses and other liabilities 884,775
-----------
Total current liabilities 1,733,744
Long-Term Debt 1,353,964
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; 6,479,926 shares issued 64,799
Additional paid-in capital 15,306,652
Retained earnings (deficit) (3,438,383)
-----------
11,933,068
Total Liabilities and Stockholders' Equity $15,020,776
===========
</TABLE>
See accompanying notes.
2
<PAGE>
STAODYN, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
----------------------- -----------------------
May 31 May 31 May 31 May 31
1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net Sales $4,684,077 $4,728,879 $8,834,375 $9,286,384
Cost of Sales 1,704,557 1,559,194 3,122,203 3,107,883
---------- ---------- ---------- ----------
Gross Profit 2,979,520 3,169,685 5,712,172 6,178,501
---------- ---------- ---------- ----------
Operating Expenses
Selling, general and
administrative 2,819,712 2,943,970 5,370,865 5,734,222
Research and development 129,064 109,410 254,235 212,409
---------- ---------- ---------- ----------
2,948,776 3,053,380 5,625,100 5,946,631
---------- ---------- ---------- ----------
Income from Operations 30,744 116,305 87,072 231,870
Other Income (Expense), Net (10,467) 5,603 (27,505) (29,618)
---------- ---------- ---------- ----------
Income Before Income Taxes 20,277 121,908 59,567 202,252
Income Tax Expense (Benefit) - - - -
---------- ---------- ---------- ----------
Net Income $ 20,277 $ 121,908 $ 59,567 $ 202,252
========== ========== ========== ==========
Income per Common Share $ - $ .02 $ .01 $ .03
========== ========== ========== ==========
Weighted Average Number of
Common Shares Outstanding 6,381,475 6,269,232 6,358,717 6,254,421
========== ========== ========== ==========
</TABLE>
See accompanying notes.
3
<PAGE>
STAODYN, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
-------------------------
May 31 May 31
1996 1995
---------- ----------
<S> <C> <C>
NET CASH PROVIDED BY
OPERATING ACTIVITIES $ 276,609 $ 421,964
---------- ----------
INVESTING ACTIVITIES
Payments for purchases of property, plant
and equipment (179,302) (119,543)
Payment for other assets (28,882) (28,413)
Purchases of short-term investments (501,365) -
Maturities of short-term investments 1,000,000 -
---------- ----------
Net cash provided by (used in)
investing activities 290,451 (147,956)
---------- ----------
FINANCING ACTIVITIES
Proceeds from issuance of common stock 17,907 46,369
Principal payments under capital lease
obligations and long-term debt (139,923) (132,467)
---------- ----------
Net cash used in financing
activities (122,016) (86,098)
---------- ----------
Net increase in cash and cash equivalents 445,044 187,910
Cash and cash equivalents at beginning of period 1,610,640 1,546,174
---------- ----------
Cash and cash equivalents at end of period $2,055,684 $1,734,084
========== ==========
Supplemental information:
Interest paid $ 98,568 $ 109,862
========== ==========
</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 six month period ended May 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 periods ended May
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 periods ended May 31, 1996
are not included, as dilutive effect is below three percent. The Company has
never declared or paid 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 May 31, 1996, no single customer accounted for more than 5% of total
accounts receivable.
3. INVENTORIES
Inventories include the following components:
<TABLE>
<CAPTION>
May 31
1996
----------
<S> <C>
Raw Materials $ 622,457
Work in process 127,127
Finished goods 3,321,997
----------
$4,071,581
==========
</TABLE>
5
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - SIX MONTHS ENDED MAY 31, 1996
Results of Operations
Net sales for the second quarter of 1996 were $4,684,077, a decrease of $44,802
or 9% from the comparable quarter of the prior year. For the six month period,
sales decreased by $452,009, or 5%. This decrease in sales occurred in both the
retail and wholesale divisions. Wholesale sales have continued to decline due
to reduced sales representation and a shrinking market. Retail sales have
decreased as a result of lower patient referral levels.
Gross profit was $2,979,520, or 63%, for the quarter, as compared to $3,169,685,
or 67%, for the second quarter of 1995. For the six-month period, gross profit
was $5,712,172, or 65%, which compares to $6,178,501 or 67% for the first six
months of 1995. Gross margins were down due to the lower sales, as well as
product mix changes in the retail business and higher overhead costs related to
the Company's ISO 9001 qualification.
Total operating expenses were $2,948,776 for the quarter ended May 31, 1996, as
compared to $3,053,380 for the same period in the prior year. The decrease of
$104,604, or 3%, is due primarily to reduced sales and marketing expenses in the
wholesale division. For the six month period ended May 31, 1996, operating
expenses totalled $5,625,100, as compared to $5,946,631 for the period ended May
31, 1995. The decrease of $321,531, or 5%, is also due to reduced wholesale
sales and marketing expenses, as well as to lower commissions paid on reduced
sales.
Other income (expense) in the second quarter of 1996 was $(10,467), compared to
$5,603 for 1995. For the six-month period, other income (expense) was
$(27,505), as compared to $(29,618). 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 second quarter was $20,277, or $.00 per share, as compared to
$121,908, or $.02 per share for the second quarter of the prior year. For the
six months ended May 31, 1996, net income was $59,567, or $.01 per share, as
compared to $202,252, or $.03 per share.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided from operations was $276,609 in the six months ended May 31, 1996.
Working capital at May 31, 1996 was $9,692,312 or 6.6:1, as compared to
$9,432,636 or 6.8:1 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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Stockholders of Staodyn, Inc. was held on May 23, 1996.
At this meeting, W. Bayne Gibson, Frederick H. Ayers and Patrick F. Crane were
elected as directors. Other directors continuing in office are Dr. Alan C.
Stormo and Margaret S. Hansson.
Matters voted on at the meeting and the voting tabulations are as follows:
<TABLE>
<CAPTION>
VOTING TABULATIONS
<S> <C> <C> <C> <C>
Description of Matter For Against Withheld Abstained
- ----------------------- --- ------- -------- ---------
Election of Directors
W. Bayne Gibson 5,145,076 - 123,004 -
Frederick H. Ayers 5,154,921 - 113,159 -
Patrick F. Crane 5,148,973 - 119,107 -
</TABLE>
Approval of Price Waterhouse LLP
as Independent Auditors for the
Year Ending November 30, 1996 5,207,688 27,400 - 32,992
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None
(b) Reports
The Company filed a Form 8-K on May 28, 1996 covering the election of
John R. South as President and Chief Executive Officer.
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: July 12, 1996 /s/ Michael J. Newman
---------------------- --------------------------------------------
Vice President - Finance and Administration
7
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-START> DEC-01-1995
<PERIOD-END> MAY-31-1996
<CASH> 2,055,684
<SECURITIES> 505,460
<RECEIVABLES> 4,550,015
<ALLOWANCES> 0
<INVENTORY> 4,071,581
<CURRENT-ASSETS> 11,426,056
<PP&E> 2,159,967
<DEPRECIATION> 0
<TOTAL-ASSETS> 15,020,776
<CURRENT-LIABILITIES> 1,733,744
<BONDS> 0
<COMMON> 64,799
0
0
<OTHER-SE> 11,868,269
<TOTAL-LIABILITY-AND-EQUITY> 15,020,776
<SALES> 8,834,375
<TOTAL-REVENUES> 8,834,375
<CGS> 3,122,203
<TOTAL-COSTS> 5,625,100
<OTHER-EXPENSES> 27,505
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 59,567
<EPS-PRIMARY> .01
<EPS-DILUTED> 0
</TABLE>
