<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
February 28, 1997 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 Ken Pratt Boulevard, 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
----------- -----------
6,660,022
- --------------------------------------------------------------------------------
(Number of shares of common stock outstanding as of March 31, 1997)
<PAGE>
PART I. FINANCIAL INFORMATION
STAODYN, INC.
BALANCE SHEET
(Unaudited)
<TABLE>
<CAPTION>
February 28
1997
------------
<S> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 654,101
Short-term investments 1,343,168
Accounts receivable, net 5,214,464
Inventories 4,639,957
Prepaid expenses and deposits 231,350
-----------
Total current assets 12,083,040
Property, Plant, and Equipment, Net 1,840,089
Other Assets
Patents and intangibles, net 817,277
Product supply agreement, net 517,500
Other 11,851
-----------
Total Assets $15,269,757
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current portion of long-term debt $ 154,554
Accounts payable 624,242
Accrued expenses and other liabilities 882,880
-----------
Total current liabilities 1,661,676
Long-Term Debt 1,257,571
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; 6,665,022 shares issued 66,650
Additional paid-in capital 15,494,623
Accumulated deficit (3,178,130)
-----------
12,383,143
Less Treasury stock (at cost) - 22,000 shares (32,633)
-----------
12,350,510
-----------
Total Liabilities and Stockholders' Equity $15,269,757
===========
</TABLE>
See accompanying notes.
2
<PAGE>
STAODYN, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
---------------------------------
February 28 February 29
1997 1996
------------------- ------------
<S> <C> <C>
Net Sales $5,008,223 $4,150,298
Cost of Sales 1,814,692 1,417,646
---------- ----------
Gross Profit 3,193,531 2,732,652
---------- ----------
Operating Expenses
Selling, general and administrative 3,011,880 2,551,153
Research and development 106,145 125,171
---------- ----------
3,118,025 2,676,324
---------- ----------
Income from Operations 75,506 56,328
Other Income (Expense), Net (12,780) (17,038)
---------- ----------
Income Before Taxes 62,726 39,290
Income Tax Expense (Benefit) - -
---------- ----------
Net Income $ 62,726 $ 39,290
========== ==========
Income per Common Share $ .01 $ .01
========== ==========
Weighted Average Number of Common
Shares Outstanding 6,643,656 6,335,865
========== ==========
</TABLE>
See accompanying notes.
3
<PAGE>
STAODYN, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
------------------------------------
February 28 February 29
1997 1996
------------------ ----------------
<S> <C> <C>
NET CASH (USED IN) PROVIDED BY OPERATING
ACTIVITIES $(222,057) $ 234,897
--------- ---------
INVESTING ACTIVITIES
Payments for purchases of property, plant
and equipment (83,706) (18,911)
Payment for other assets (5,622) (23,562)
Purchases of short-term investments (824,721) -
Maturities of short-term investments 825,000 500,000
--------- ---------
Net cash (used in) provided by
investing activities (89,049) 457,527
--------- ---------
FINANCING ACTIVITIES
Proceeds from issuance of common stock 26,422 16,895
Principal payments under capital lease
obligations and long-term debt (53,925) (86,702)
Purchases of treasury stock (32,633) -
--------- ---------
Net cash used in financing
activities (60,136) (69,807)
--------- ---------
Net (decrease) increase in cash and cash
equivalents (371,242) 622,617
Cash and cash equivalents at beginning of period 1,025,343 1,610,640
--------- ---------
Cash and cash equivalents at end of period $ 654,101 $2,233,257
========== =========
Supplemental information:
Interest paid $ 41,669 $ 50,582
</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 three month period ended February 28, 1997 are not
necessarily indicative of the results that may be expected for the year ending
November 30, 1997. 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, 1996.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INCOME TAXES
Deferred income taxes are provided for the difference between the book and tax
basis of assets and liabilities.
EARNINGS PER SHARE
Earnings (loss) per common share is based on the weighted average number of
common and common equivalent shares, including dilutive common stock options and
warrants, outstanding during the period. Options and warrants outstanding
during the fiscal quarter ended February 28, 1997 are not included in the
computation of weighted shares outstanding as their inclusion results in a
dilution of less than three percent. The Company has never declared or paid a
dividend to its shareholders.
USE OF ESTIMATES
The preparation of the Company's consolidated financial statements in conformity
with generally accepted accounting principles requires the Company's management
to make estimates and assumptions that affect the amounts reported in these
financial statements and accompanying notes. The more significant areas
requiring the use of management estimates relate to accounts receivable and
inventory reserves, the estimated useful lives of intangible assets, and the
valuation allowance for deferred tax assets. Actual results could differ from
those estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist of cash and cash equivalents, short-
term investments, accounts receivable, payables, and accrued liabilities whose
fair value approximates the carrying amount due to the short maturities of these
instruments.
5
<PAGE>
STAODYN, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
(Continued)
3. INVENTORIES
Inventories include the following components:
<TABLE>
<CAPTION>
February 28
1997
-----------
<S> <C>
Raw Materials $ 717,429
Work in process 84,979
Finished goods 3,837,549
----------
$4,639,957
==========
</TABLE>
6
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS -THREE MONTHS ENDED FEBRUARY 28, 1997
RESULTS OF OPERATIONS
Net sales for the first quarter of 1997 were $5,008,223, an increase of $857,925
or 21% from the comparable quarter of 1996. The increase was incurred in both
the retail and wholesale divisions. Retail sales increased approximately
$810,000 due primarily to the addition of two independent representative groups
in the second half of fiscal 1996. Wholesale sales increased approximately
$41,000 from the comparable prior period.
Gross profit was $3,193,531 or 63.8%, as compared to $2,732,652 or 65.8% in the
comparable quarter of the prior year. Product shipment costs increased by
approximately 1.2% of net sales between the first quarters of 1996 and 1997.
The balance of the decline in gross profit between the two periods is due to
changes in sales mix.
Total operating expenses were $3,118,025, an increase of $441,701 or 17% over
the first quarter of 1996. The increase was due primarily to sales support
expenses and higher commissions on higher sales in the retail division.
Other income (expense) for the period was $(12,780), compared to $(17,038) in
the first quarter of the prior year. Net expense consists primarily of interest
income and expense.
The Company generated net income of $62,726 or $.01 per share for the quarter,
as compared to $39,290 or $.01 per share for the comparable quarter of the prior
year.
LIQUIDITY AND CAPITAL RESOURCES
Company operations used cash of $222,057 in the quarter ended February 28, 1997.
Most of the cash usage was to finance higher inventory levels required to
support increased sales activity. Working capital at February 28, 1997 was
$10,421,364, with a current ratio of 7.3:1. This compares favorably to
$10,199,953 or 5.9:1 at November 30, 1996. 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.
7
<PAGE>
Part II Other Information
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None
(b) Reports
None
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: April 14, 1997 /s/Michael J. Newman
------------------ --------------------------------------------
Vice President - Finance and Administration
8
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Form 10-QSB
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-START> DEC-01-1996
<PERIOD-END> FEB-28-1997
<CASH> 654,101
<SECURITIES> 1,343,168
<RECEIVABLES> 5,214,464
<ALLOWANCES> 0
<INVENTORY> 4,639,957
<CURRENT-ASSETS> 12,083,040
<PP&E> 7,191,491
<DEPRECIATION> 5,351,402
<TOTAL-ASSETS> 15,269,757
<CURRENT-LIABILITIES> 1,661,676
<BONDS> 0
0
0
<COMMON> 66,650
<OTHER-SE> 12,316,493
<TOTAL-LIABILITY-AND-EQUITY> 15,269,757
<SALES> 5,008,223
<TOTAL-REVENUES> 5,008,223
<CGS> 1,814,692
<TOTAL-COSTS> 1,814,692
<OTHER-EXPENSES> 3,118,025
<LOSS-PROVISION> 53,804
<INTEREST-EXPENSE> 41,669
<INCOME-PRETAX> 62,726
<INCOME-TAX> 0
<INCOME-CONTINUING> 62,726
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 62,726
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
