<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, 1997 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
----------- -----------
6,690,322
-- ----------------------------------------------------------------
(Number of shares of common stock outstanding as of June 30, 1997)
<PAGE>
PART I. FINANCIAL INFORMATION
STAODYN, INC.
BALANCE SHEET
(Unaudited)
<TABLE>
<CAPTION>
May 31
1997
------------
<S> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 799,687
Short-term investments 1,234,441
Accounts receivable, net 5,370,291
Inventories 4,724,358
Prepaid expenses and other assets 298,694
-----------
Total current assets 12,427,471
Property, Plant and Equipment, Net 1,755,658
Other Assets
Patents and intangibles, net 756,977
Product supply agreement, net 495,000
Other 11,348
-----------
Total Assets $15,446,454
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current portion of long-term debt $ 99,516
Accounts payable 677,658
Accrued expenses and other liabilities 993,617
-----------
Total current liabilities 1,770,791
Long-Term Debt 1,257,721
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; 6,690,322 shares issued 66,903
Additional paid-in capital 15,518,262
Accumulated deficit (3,091,532)
-----------
12,493,633
Less treasury stock (at cost) - 54,000 shares (75,691)
-----------
12,417,942
-----------
Total Liabilities and Stockholders' Equity $15,446,454
===========
</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
1997 1996 1997 1996
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Net Sales $5,413,326 $4,684,077 $10,421,549 $8,834,375
Cost of Sales 1,941,863 1,704,557 3,756,555 3,122,203
---------- ---------- ----------- ----------
Gross Profit 3,471,463 2,979,520 6,664,994 5,712,172
---------- ---------- ----------- ----------
Operating Expenses
Selling, general and
administrative 3,252,266 2,819,712 6,264,146 5,370,865
Research and development 118,440 129,064 224,585 254,235
---------- ---------- ----------- ----------
3,370,706 2,948,776 6,488,731 5,625,100
---------- ---------- ----------- ----------
Income from Operations 100,757 30,744 176,263 87,072
Other Income (Expense), Net (13,880) (10,467) (26,660) (27,505)
---------- ---------- ----------- ----------
Income Before Income Taxes 86,877 20,277 149,603 59,567
Income Tax Expense (Benefit) - - - -
---------- ---------- ----------- ----------
Net Income $ 86,877 $ 20,277 $ 149,603 $ 59,567
========== ========== =========== ==========
Income per Common Share $ .01 $ - $ .02 $ .01
========== ========== =========== ==========
Weighted Average Number of
Common Shares Outstanding 6,647,758 6,381,475 6,644,350 6,358,717
========== ========== =========== ==========
</TABLE>
See accompanying notes.
3
<PAGE>
STAODYN, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
-----------------------
May 31 May 31
1997 1996
---------- ----------
<S> <C> <C>
NET CASH (USED IN) PROVIDED BY
OPERATING ACTIVITIES $ (28,445) $ 276,609
---------- ----------
INVESTING ACTIVITIES
Payments for purchases of property, plant
and equipment (154,744) (179,302)
Payment for other assets (10,286) (28,882)
Purchases of short-term investments (388,655) (501,365)
Maturities of short-term investments 515,000 1,000,000
---------- ----------
Net cash (used in) provided by
investing activities (38,685) 290,451
---------- ----------
FINANCING ACTIVITIES
Proceeds from issuance of common stock 26,796 17,907
Principal payments under capital lease
obligations and long-term debt (109,631) (139,923)
Purchases of treasury stock (75,691) -
---------- ----------
Net cash used in financing
activities (158,526) (122,016)
---------- ----------
Net (decrease) increase in cash and cash equivalents (225,656) 445,044
Cash and cash equivalents at beginning of period 1,025,343 1,610,640
---------- ----------
Cash and cash equivalents at end of period $ 799,687 $2,055,684
========== ==========
Supplemental information:
Interest paid $ 81,485 $ 98,568
========== ==========
</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 and six month periods ended May 31, 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 May 31, 1997 are not included in the computation
of weighted shares outstanding as their inclusion results in 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:
May 31
1997
----------
Raw Materials $ 742,050
Work in process 82,753
Finished goods 3,899,555
----------
$4,724,358
==========
4. IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In February 1997 the FASB issued SFAS No. 128, "Earnings Per Share." SFAS No.
128 specifies revised computational guidelines, presentation and disclosure
requirements for earnings per share and supersedes Accounting Principal Board
Opinion No. 15. SFAS No. 128 is effective for financial statements issued for
periods ending after December 15, 1997. Earlier application is not permitted;
however, upon adoption, SFAS No. 128 requires restatement of all prior period
earnings per share information. The Company believes adoption of SFAS 128 will
not have a material impact on its reported earnings per share.
6
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS -SIX MONTHS ENDED MAY 31, 1997
RESULTS OF OPERATIONS
Net sales for the fiscal 1997 second quarter were $5,413,326, an increase of
$729,249 or 16% over the comparable quarter of the prior year. For the six
month period, sales increased by $1,587,174 or 18%. The majority of this
increase is attributable to the addition of two independent representative
groups in the second half of fiscal 1996.
Gross profit was $3,471,463 or 64%, as compared to $2,979,520 or 64% for the
second quarter of the prior year. For the six month period, gross profit was
$6,664,994 or 64%, which compares to $5,712,172 or 65% for the six months ended
May 31, 1996. Gross profit has remained steady due to relatively stable product
mix and pricing.
Total operating expenses were $3,370,706 for the second quarter of 1997, which
represents an increase of $421,930 or 14%. For the six month period, operating
expenses increased by $863,631 or 15% to $6,488,731. Most of this increase is
due to additional sales support expenses as well as higher commissions paid on
higher sales levels.
Other income(expense) for the quarter was $(13,880), as compared to $(10,467)
for the comparable quarter of the prior year. For the six month period, other
income (expense) was $(26,660) and $(27,505) for the current and prior year,
respectively. Other income(expense) consists primarily of interest income and
expense.
LIQUIDITY AND CAPITAL RESOURCES
Company operations used cash of $28,445 in the six month period ended May 31,
1997, primarily to finance increased inventory levels. Working capital at May
31, 1997 was $10,656,950, or 7.0:1. 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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Stockholders of Staodyn, Inc. was held on May 21, 1997.
At this meeting, John R. South and Margaret S. Hansson were elected as
directors. Other directors continuing in office are Dr. Alan C. Stormo,
Frederick H. Ayers, W. Bayne Gibson and Patrick F. Crane.
Matters voted on at the meeting and the voting tabulations are as follows:
<TABLE>
<CAPTION>
VOTING TABULATIONS
Description of Matter For Against Withheld Abstained
- ---------------------------------- --- ------- -------- ---------
<S> <C> <C> <C> <C>
Election of Directors
John R. South 6,015,580 - 138,985 -
Margaret S. Hansson 6,015,610 - 138,955 -
Amendment to the 1992 Stock
Option Plan to increase the
number of shares available
for purchase by 200,000 3,476,661 371,856 - 67,494
Amendment to the 1983 Employee
Qualified Stock Purchase Plan
to increase the number of
shares available for purchase
by 200,000 3,475,733 365,384 - 74,594
Approval of Price Waterhouse LLP
as Independent Auditors for the
Year Ending November 30, 1997 5,896,078 230,257 - 28,230
</TABLE>
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: July 12, 1997 /s/Michael J. Newman
--------------------- ----------------------------
Vice President - Finance and
Administration
8
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS FINANCIAL INFORMATION EXTRACTED FROM FORM 10QSB AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-START> DEC-01-1997
<PERIOD-END> MAY-31-1997
<CASH> 799,687
<SECURITIES> 1,234,441
<RECEIVABLES> 5,370,291
<ALLOWANCES> 0
<INVENTORY> 4,724,358
<CURRENT-ASSETS> 12,427,471
<PP&E> 7,260,148
<DEPRECIATION> 5,504,490
<TOTAL-ASSETS> 15,446,454
<CURRENT-LIABILITIES> 1,770,791
<BONDS> 0
0
0
<COMMON> 66,903
<OTHER-SE> 12,426,730
<TOTAL-LIABILITY-AND-EQUITY> 15,446,454
<SALES> 10,421,549
<TOTAL-REVENUES> 10,421,549
<CGS> 3,756,555
<TOTAL-COSTS> 3,756,555
<OTHER-EXPENSES> 6,488,731
<LOSS-PROVISION> 121,508
<INTEREST-EXPENSE> 81,485
<INCOME-PRETAX> 149,603
<INCOME-TAX> 0
<INCOME-CONTINUING> 149,603
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 149,603
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
