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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended March 31, 1997
or
[_] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from ______________________ to ______________________
Commission File Number 0-9570
LUTHER MEDICAL PRODUCTS, INC.
(Exact name of small business issuer as specified in its charter)
CALIFORNIA 33-0468235
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
14332 CHAMBERS ROAD, TUSTIN, CA 92780
(Address of principal executive offices) (Zip Code)
(714) 544-3002
(Issuer's telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last
report.)
Check whether the issuer (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.
[X] Yes [_] No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock No Stated Par Value--3,262,786 shares as of April 5, 1997
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INDEX
LUTHER MEDICAL PRODUCTS, INC.
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<S> <C>
PART I - FINANCIAL INFORMATION
Condensed Consolidated Balance Sheet - March 31, 1997 3
Condensed Consolidated Statements of Operations - Three months
ended March 31, 1997 and 1996, and nine months ended
March 31, 1997 and 1996 4
Condensed Consolidated Statements of Cash Flows
Nine months ended March 31, 1997 and 1996 5
Notes to Condensed Consolidated Financial Statements 6
Management's Discussion and Analysis of Financial
Condition and Results of Operations 7, 8
PART II - OTHER INFORMATION 9
Signature Page 9
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LUTHER MEDICAL PRODUCTS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
MAR. 31,1997
<S> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,081,119
Accounts receivable - net 859,101
Inventories - Note C 1,769,390
Other current assets 49,494
-----------
TOTAL CURRENT ASSETS 3,759,104
-----------
PROPERTY AND EQUIPMENT 1,209,871
Less accumulated depreciation (876,163)
-----------
PROPERTY AND EQUIPMENT - NET 333,708
INTANGIBLE ASSETS - NET 98,145
OTHER ASSETS 10,199
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$ 4,201,156
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LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 471,300
Accrued payroll and related
expenses 102,540
Other accrued liabilities 58,662
-----------
TOTAL CURRENT LIABILITIES 632,502
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STOCKHOLDERS' EQUITY
Preferred stock - no stated par
value;
10,000,000 shares authorized; none
issued
Common stock - no stated par value;
25,000,000 shares authorized;
issued and
outstanding 3,262,786 10,249,978
Accumulated deficit (6,681,324)
NET STOCKHOLDERS' EQUITY 3,568,654
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$ 4,201,156
===========
</TABLE>
See notes to condensed consolidated financial statements.
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LUTHER MEDICAL PRODUCTS, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended March 31 Nine Months Ended March 31
--------------------------- --------------------------
1997 1996 1997 1996
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<S> <C> <C> <C> <C>
Revenues $1,534,646 $1,174,230 $3,914,171 $2,702,217
---------- ---------- ---------- ----------
Costs and Expenses:
Cost of sales 851,736 668,869 2,240,314 1,512,580
Selling expense 254,504 231,349 868,249 635,959
General and administrative 210,235 196,853 847,323 580,042
Research and development 129,938 121,019 378,470 330,250
Depreciation and
amortization 55,773 37,791 177,985 139,683
Interest expense -0- -0- -0- 13,237
---------- ---------- ---------- ----------
Total costs and expenses 1,502,186 1,255,881 4,512,341 3,211,751
---------- ---------- ---------- ----------
Net income (loss) before
extraordinary item 32,460 (81,651) (598,170) (509,534)
Forgiveness of debt -0- -0- -0- (122,958)
---------- ---------- ---------- ----------
Net income (loss) after
extraordinary item $ 32,460 $ (81,651) $ (598,170) $ (386,576)
========== ========== ========== ==========
Weighted average number of
shares outstanding ('000) 3,397 3,111 3,277 3,038
Net income (loss) per share before
extraordinary item $.01 $(.03) $(.18) $(.17)
Net income (loss) per share after
extraordinary item $.01 $(.03) $(.18) $(.13)
</TABLE>
See notes to condensed consolidated financial statements.
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LUTHER MEDICAL PRODUCTS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED MARCH 31
<TABLE>
<CAPTION>
1997 1996
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (598,170) $ (386,576)
Adjustments to reconcile net loss to
net cash used by operating activities:
Depreciation and amortization 177,985 139,683
Changes in operating assets and
liabilities:
Accounts and other receivables (34,816) (314,993)
Inventories (182,068) (370,387)
Prepaid expenses and other assets 22,725 (11,822)
Accounts payable 140,753 190,755
Accrued payroll and related
expenses 21,780 24,142
Other accrued liabilities (29,941) (265,552)
---------- ----------
Net cash used in operating
activities (481,752) (994,750)
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INVESTING ACTIVITIES:
Proceeds from sale of U.S. Treasury
bills -0- 1,209,987
Purchase of other assets -0- (60,000)
Purchases of property and equipment (81,246) (73,057)
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Net cash (used) provided in investing
activities (81,246) 1,076,930)
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FINANCING ACTIVITIES:
Proceeds from sales of common stock 45,976 405,096
Proceeds from collection of notes
receivable from stockholder -0- 32,808
Principal payments of debt -0- (481,250)
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Net cash (used) provided by financing
activities 45,976 (43,346)
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Net increase (decrease) in cash (517,022) 38,834
Cash, beginning of year 1,598,141 182,726
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Cash, at end of nine months $1,081,119 $ 221,560
========== ==========
</TABLE>
See notes to condensed consolidated financial statements
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<PAGE>
LUTHER MEDICAL PRODUCTS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997
NOTE A - BASIS OF PREPARATION
The accompanying condensed consolidated 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 Article 10 of
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 ending March 31,
1997 are not necessarily indicative of the results that may be expected for the
year ended June 30, 1997. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's Annual
Report on Form 10-KSB.
NOTE B - EARNINGS (LOSS) PER SHARE
Loss per share is calculated using the weighted average number of common shares
and common share equivalents outstanding. Common sotck equivalents are not
included when their effect would be antidilutive.
NOTE C - INVENTORIES
The components of inventory consist of the following:
<TABLE>
<CAPTION>
March 31,1997
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<S> <C>
Raw material $ 688,280
Work in process 483,727
Finished goods 597,383
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$1,769,390
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</TABLE>
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Results of operations
Total consolidated revenues for the third quarter of fiscal year 1997 increased
31% to $1,535,000 from $1,174,000 for the prior year's quarter. Domestic
product sales contributed $1,067,000, a 71% increase from $624,000 for the same
period last year. Product sales to international distributors increased 62% to
$385,000 compared to $237,000 during last year's quarter. OEM sales were
$68,000 for the quarter ended March 31, 1997, compared to $286,000 for the prior
year's quarter. The decrease is primarily due to no sales to a major OEM
customer as a result of a product design modification. Sales to this customer
will resume in May 1997. Additionally, as previously reported, the Company
changed its relationship with Pertrach Inc. ("Pertrach"), a former OEM customer.
In March 1996, the Company purchased Pertrach's patents, trademarks and certain
additional assets. The Company had manufactured tracheostomy products for
Pertrach for many years on an OEM basis, and pursuant to the March 1996 purchase
agreement, now markets these products as well. OEM sales to Pertrach for the
quarter ended March 31, 1996 were $30,000; sales during this year's quarter
increased to $38,000 and are included in domestic sales. For the first nine
months of fiscal year 1997, total consolidated revenues increased over last
year's period by 45% to $3,914,000.
Cost of revenues as a percentage of net sales for three months ended March 31,
1997, decreased slightly to 55.5% from 57% for the prior year's quarter. For
the first nine months of fiscal year 1997, cost of revenues were 57% as compared
to 56% for the same period last year.
Selling expenses increased by $23,000 for the quarter and by $232,000 for the
nine months ended March 31, 1997. The increase for both periods is mainly
attributable to increased marketing efforts, such as extensive product training
programs to support the Company's growing distributor network. General and
administrative expenses increased by $13,000 for the quarter, and by $267,000
for the nine-month period. The increase of $267,000 is primarily the result of
non-recurring expenses of $245,000 incurred in the second quarter of fiscal year
1997, when the Company modified its internal quality assurance and regulatory
affairs system. In October 1996, the Company engaged the services of a
consulting firm specializing in Quality Assurance and Regulatory Affairs, to
assist the Company in implementing such modifications. The total non-recurring
expense was $300,000 (allocated among cost of revenues, general and
administrative expenses and research and development expenses).
Research and development expenses increased by $9,000 for the quarter and by
$48,000 for the nine months. The increase for both periods is primarily the
result of a reduction in billable hours to a major OEM customer, due to a
slowdown in design activity. Management expects chargeable research and
development activity to resume in the third quarter of fiscal year 1997.
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Depreciation and amortization expense increased by $18,000 for the quarter and
by $38,000 for the nine-month period, due to purchases of injection molds.
Interest expense for both quarters was zero as well as for the nine-month period
ended March 31, 1997, compared to $13,000 for the prior year's period.
Liquidity and Capital Resources
At March 31, 1997, the Company had working capital of $3.1 million and its
principal sources of liquidity consisted of $1.1 million in cash and cash
equivalents. Net cash used by operating activities for the nine months ended
March 31, 1997, was $482,000, mainly as the result of the net loss of $598,000,
including a non-recurring expense of $300,000. With respect to investing
activities, the Company made purchases of property and equipment totaling
$81,000. Financing activities provided $46,000, resulting from sales of common
stock for the exercise of stock options and warrants.
The Company has no long-term commitments other than an annual lease obligation
of between $130,000 and $151,000 for its facilities through 1998.
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<PAGE>
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
There were no reports on Form 8-K filed for the three months ended March 31,
1997.
SIGNATURES
In accordance with the requirements of the Securities Exchange Act, the
Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
LUTHER MEDICAL PRODUCTS, INC.
By: /s/David Rollo Date: May 9, 1997
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David Rollo
Chief Financial Officer
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<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> MAR-31-1997
<CASH> 1,081,119
<SECURITIES> 0
<RECEIVABLES> 859,101
<ALLOWANCES> 0
<INVENTORY> 1,769,390
<CURRENT-ASSETS> 3,759,104
<PP&E> 1,209,871
<DEPRECIATION> 876,163
<TOTAL-ASSETS> 4,201,156
<CURRENT-LIABILITIES> 632,502
<BONDS> 0
0
0
<COMMON> 10,249,978
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 4,201,156
<SALES> 3,914,171
<TOTAL-REVENUES> 3,914,171
<CGS> 2,240,314
<TOTAL-COSTS> 4,512,341
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (598,170)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (598,170)
<EPS-PRIMARY> (.18)
<EPS-DILUTED> 0
</TABLE>
