<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, 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 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
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6,708,065
- --------------------------------------------------------------------------------
(Number of shares of common stock outstanding as of September 30, 1997)
<PAGE>
PART I. FINANCIAL INFORMATION
STAODYN, INC.
BALANCE SHEET
<TABLE>
<CAPTION>
August 31 November 30
1997 1996
------------ ------------
(unaudited)
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 965,636 $ 1,025,343
Short-term investments 1,182,075 1,323,706
Accounts receivable, net 5,368,468 5,319,749
Inventories, net 4,636,568 4,398,525
Prepaid expenses and other assets 177,517 235,220
----------- -----------
Total current assets 12,330,264 12,302,543
Property, Plant and Equipment, Net 2,007,139 1,928,485
Other Assets
Patents and intangibles, net 687,543 873,457
Product supply agreement, net 472,500 540,000
Other 11,348 9,967
----------- -----------
$15,508,794 $15,654,452
=========== ===========
Total Assets
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current portion of long-term debt $ 89,436 $ 207,086
Accounts payable 379,157 730,938
Accrued expenses and other liabilities 1,012,884 1,164,566
----------- -----------
Total current liabilities 1,481,477 2,102,590
Long-Term Debt 1,484,876 1,258,146
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; 6,707,165 shares issued
in 1997 and 6,641,217 in 1996 67,072 66,412
Additional paid-in capital 15,537,718 15,468,439
Accumulated deficit (2,978,111) (3,241,135)
----------- -----------
12,626,679 12,293,716
Less treasury stock (at cost) - 60,000 shares (84,238) -
----------- -----------
12,542,441 12,293,716
----------- -----------
Total Liabilities and Stockholders' Equity $15,508,794 $15,654,452
=========== ===========
</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
1997 1996 1997 1996
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Net Sales $5,278,192 $4,834,491 $15,699,741 $13,668,866
Cost of Sales 1,847,156 1,691,171 5,603,711 4,813,374
---------- ---------- ----------- -----------
Gross Profit 3,431,036 3,143,320 10,096,030 8,855,492
---------- ---------- ----------- -----------
Operating Expenses
Selling, general and
administrative 3,184,390 2,980,100 9,448,536 8,350,963
Research and development 119,232 96,661 343,817 350,898
---------- ---------- ----------- -----------
3,303,622 3,076,761 9,792,353 8,701,861
---------- ---------- ----------- -----------
Income (Loss) from Operations 127,414 66,559 303,677 153,631
Other Income (Expense), Net (13,993) (12,633) (40,653) (40,138)
---------- ---------- ----------- -----------
Income (Loss) Before
Income Taxes 113,421 53,926 263,024 113,493
Income Tax Expense (Benefit) - - - -
---------- ---------- ----------- -----------
Net Income (Loss) $ 113,421 $ 53,926 $ 263,024 $ 113,493
========== ========== =========== ===========
Income (Loss) Per Common Share $ .02 $ .01 $ .04 $ .02
========== ========== =========== ===========
Weighted Average Number of
Common Shares Outstanding 6,642,434 6,519,882 6,644,587 6,412,685
========== ========== =========== ===========
</TABLE>
See accompanying notes.
3
<PAGE>
STAODYN, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
------------------------------
August 31 August 31
1997 1996
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<TABLE>
<CAPTION>
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 252,978 $ 153,420
----------- -----------
INVESTING ACTIVITIES
Payments for purchases of property, plant
and equipment (288,472) (225,752)
Payment for other assets (11,206) (30,297)
Proceeds from sale of equipment - 8,000
Purchases of short-term investments (1,166,289) (1,303,217)
Maturities of short-term investments 1,362,000 1,000,000
----------- -----------
Net cash used in investing
activities (103,967) (551,266)
----------- -----------
FINANCING ACTIVITIES
Proceeds from issuance of common stock 46,421 40,650
Principal payments under capital lease
obligations and long-term debt (170,901) (192,744)
Purchases of treasury stock (84,238) -
----------- -----------
Net cash used in financing
activities (208,718) (152,094)
----------- -----------
Net decrease in cash and cash equivalents (59,707) (549,940)
Cash and cash equivalents at beginning of period 1,025,343 1,610,640
----------- -----------
Cash and cash equivalents at end of period $ 965,636 $ 1,060,700
=========== ===========
Supplemental information:
Interest paid $ 121,179 $ 143,382
=========== ===========
Supplemental schedule of noncash investing
activities:
Equipment acquisitions through capital
lease obligations $ 277,527 $ -
Stock issued as compensation $ 23,518 $ 21,000
</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, 1997 are not
necessarily indicative of the results that may be expected for the year ended
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
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 August 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)
3. INVENTORIES
Inventories include the following components:
<TABLE>
<CAPTION>
August 31 November 30
1997 1996
---------- -----------
<S> <C> <C>
Raw materials $ 755,925 $ 684,860
Work in process 68,953 46,450
Finished goods 3,811,690 3,667,215
---------- ----------
$4,636,568 $4,398,525
========== ==========
</TABLE>
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 -NINE MONTHS ENDED AUGUST 31, 1997
RESULTS OF OPERATIONS
Net sales for the fiscal 1997 third quarter were $5,278,192, an increase of
$443,701 or 9% over the comparable quarter of the prior year. For the nine
month period, sales increased by $2,030,875 or 15%. The majority of this
increase is attributable to the addition of two independent representative
groups in the second half of fiscal 1996 and increased sales of the Company's
SporTX product, as it continues to gain acceptance in the professional and
amateur sports markets.
Gross profit was $3,431,036 or 65%, as compared to $3,143,320 or 65% for the
third quarter of the prior year. For the nine month period, gross profit was
$10,096,030 or 64%, which compares to $8,855,492 or 65% for the nine months
ended August 31, 1996. Gross profit has remained steady due to relatively stable
product mix and pricing.
Total operating expenses were $3,303,622 for the third quarter of 1997, which
represents an increase of $226,861 or 7%. For the nine month period, operating
expenses increased by $1,090,492 or 13% to $9,792,353. Approximately $630,000
of this increase relates to higher commissions paid on the higher sales levels.
The balance of the increase is attributable to additional managed care and sales
support personnel.
Other income (expense) for the quarter was $(13,993), as compared to $(12,633)
for the comparable quarter of the prior year. For the nine month period, other
income (expense) was $(40,653) and $(40,138) 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 $59,707 in the nine month period ended August
31, 1997, primarily due to increased inventories and lower payables at period-
end. Working capital at August 31, 1997 was $10,848,787, or 8.3:1. 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: October 8, 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> 9-MOS
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-START> DEC-01-1996
<PERIOD-END> AUG-31-1997
<CASH> 965,636
<SECURITIES> 1,182,075
<RECEIVABLES> 5,368,468
<ALLOWANCES> 0
<INVENTORY> 4,636,568
<CURRENT-ASSETS> 12,330,264
<PP&E> 7,664,053
<DEPRECIATION> 5,656,914
<TOTAL-ASSETS> 15,508,794
<CURRENT-LIABILITIES> 1,481,477
<BONDS> 0
0
0
<COMMON> 67,072
<OTHER-SE> 12,559,607
<TOTAL-LIABILITY-AND-EQUITY> 15,508,794
<SALES> 15,699,741
<TOTAL-REVENUES> 15,699,741
<CGS> 5,603,711
<TOTAL-COSTS> 5,603,711
<OTHER-EXPENSES> 9,792,353
<LOSS-PROVISION> 207,507
<INTEREST-EXPENSE> 121,179
<INCOME-PRETAX> 263,024
<INCOME-TAX> 0
<INCOME-CONTINUING> 263,024
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 263,024
<EPS-PRIMARY> .04
<EPS-DILUTED> .04
</TABLE>
