<PAGE>
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 SEPTEMBER 30, 1998
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--3,222,986 shares as of October 30, 1998
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<PAGE>
INDEX
LUTHER MEDICAL PRODUCTS, INC.
PART I - FINANCIAL INFORMATION
<TABLE>
<S> <C>
Condensed Balance Sheet - September 30, 1998 3
Condensed Statements of Operations - Three months ended September 30, 1998 and 1997 4
Condensed Statements of Cash Flows
Three months ended September 30, 1998 and 1997 5
Notes to Condensed Consolidated Financial Statements 6
Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II - OTHER INFORMATION 8
Signature Page 8
</TABLE>
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<PAGE>
LUTHER MEDICAL PRODUCTS, INC.
CONDENSED BALANCE SHEET
<TABLE>
<CAPTION>
ASSETS SEPT. 30,1998
CURRENT ASSETS
<S> <C>
Cash and cash equivalents $ 282,713
Accounts receivable - net 952,970
Inventories - Note C 2,052,851
Other current assets 71,573
-----------
TOTAL CURRENT ASSETS 3,360,107
-----------
PROPERTY AND EQUIPMENT 1,361,234
Less accumulated depreciation (1,057,731)
-----------
PROPERTY AND EQUIPMENT - NET 303,503
INTANGIBLE ASSETS - NET 47,655
OTHER ASSETS 10,199
-----------
$ 3,721,464
===========
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 415,724
Accrued payroll and related expenses 137,602
Other accrued liabilities 50,612
-----------
TOTAL CURRENT LIABILITIES 603,938
-----------
LONG TERM LIABILITIES 51,529
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 3,219,986 10,377,969
Accumulated deficit (7,311,972)
-----------
NET STOCKHOLDERS' EQUITY 3,065,997
-----------
$ 3,721,464
===========
</TABLE>
See notes to condensed financial statements.
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<PAGE>
LUTHER MEDICAL PRODUCTS, INC.
CONDENSED STATEMENTS OF OPERATIONS
FOR THE QUARTER ENDED SEPTEMBER 30,
<TABLE>
<CAPTION>
Three Months Three Months
ended 1998 ended 1997
------------ ------------
<S> <C> <C>
REVENUES $1,594,401 $1,471,843
COSTS AND EXPENSES:
Cost of sales 1,039,655 804,294
Selling 275,418 272,774
General and administrative 158,747 185,117
Research and development 74,508 132,204
Depreciation and amortization 42,207 52,779
Interest 2,325 -0-
------------ ------------
TOTAL COSTS AND EXPENSES 1,592,860 1,447,168
NET INCOME 1,541 24,675
============ ============
Weighted average number of shares outstanding (`000) 3,223 3,196
Basic and diluted income per share $.00 $.01
</TABLE>
See notes to condensed financial statements
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<PAGE>
LUTHER MEDICAL PRODUCTS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED SEPTEMBER 30
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,541 $ 24,674
Adjustments to reconcile net income to net cash
used by operating activities :
Depreciation and amortization 42,207 52,779
Changes in operating assets and liabilities:
Accounts and other receivables (157,146) (3,692)
Inventories 36,215 (147,350)
Prepaid expenses and other assets (46,836) (35,738)
Accounts payable 56,594 (15,093)
Accrued payroll and related expenses (38,851) (28,017)
Other accrued liabilities 4,559 (25,478)
--------- ---------
Net cash used in operating activities (101,717) (177,915)
--------- ---------
INVESTING ACTIVITIES:
Purchases of property and equipment (26,215) (37,288)
--------- ---------
Net cash used in investing activities (26,215) (37,288)
--------- ---------
FINANCING ACTIVITIES:
Net cash provided by financing activities -0- -0-
--------- ---------
Net decrease in cash (127,932) (215,203)
Cash, beginning of year 410,645 811,974
--------- ---------
Cash, at end of nine months $ 282,713 $ 596,771
========= =========
</TABLE>
See notes to condensed financial statements
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<PAGE>
LUTHER MEDICAL PRODUCTS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
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 three-month period ending September
30, 1998 are not necessarily indicative of the results that may be expected for
the year ended June 30, 1999. 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 - PER SHARE AMOUNTS
In 1997, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 128, Earnings per Share. Statement 128 replaced the
previously reported primary and fully diluted earnings per share with basic and
diluted earnings per share. Unlike primary earnings per share, basic earnings
per share excludes any dilutive effects of options, warrants, and convertible
securities. Diluted earnings per share is very similar to the previously
reported fully diluted earnings per share. All earnings per share amounts for
all periods have been presented, and where necessary, restated to conform to
the Statement 128 requirements.
NOTE C - INVENTORIES
The components of inventory consist of the following:
<TABLE>
<CAPTION>
<S> <C>
Sept. 30, 1998
--------------
Raw material $ 764,785
Work in process 608,509
Finished goods 679,557
==============
$2,052,851
</TABLE>
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Results of operations
Total consolidated revenues for the first quarter of fiscal year 1999 increased
8% to $1,594,000 from $1,472,000 for the prior year's quarter. Domestic product
sales contributed $1,483,000, a 38% increase from $1,078,000 for the same period
last year, of which Long Term Peripheral Catheter sales, a new product line
introduced in the second quarter of fiscal year 1997, were $150,000 compared to
$113,000 in the prior year's quarter. Sales of the tracheostomy products
increased to $95,000 from $89,000 in the previous year's quarter. Product sales
to international distributors were $106,000 compared to $222,000 during last
year's quarter. Sales to Japan decreased by $65,000 and sales to other
international distributors decreased by $51,000. The Japanese distributor has
been experiencing competition from a product manufactured in Japan. The Company
has redesigned its product for the Japanese market and approval to import the
redesigned product was granted in August 1998. The Company expects the Japanese
distributor to return to historical purchasing levels later this year. OEM
sales were $308,000 for the quarter ended September 30, 1998, compared to
$157,000 for the prior year's quarter. The increase is due to resuming shipment
of products to a major OEM customer, as a result of completing their product
modification. Other income decreased by $9,000.
Cost of revenues as a percentage of net sales for three months ended September
30, 1998, increased to 65% from 55% for the prior year's quarter, due to higher
manufacturing costs per unit of OEM products.
Selling expenses increased by $3,000 for the quarter. General and administrative
expenses decreased by $26,000 for the quarter, as a result of reduced
professional service fees and shareholder expenses. Research and development
expenses decreased by $58,000 for the quarter , as the result of reduced
compensation expenses. Depreciation and amortization expense decreased by
$11,000 for the quarter due to reduced depreciation expense.
Impact of Year 2000
Some of the Company's older accounting programs were written using two digits
rather than four digits to define the applicable year. As a result, those
computer programs have time-sensitive software that recognize a date using "00"
as the year 1900 rather than the year 2000. This could cause a system failure
or miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions, send invoices, or engage
in similar normal business activities. The Company has acquired a new software
program and the appropriate hardware and is in the process of implementing the
new system.
Liquidity and Capital Resources
At September 30, 1998, the Company had working capital of $2.8 million and its
principal source of liquidity consisted of $283,000 in cash. Net cash used by
operating activities for the three months ended September 30, 1998, was
$102,000, mainly as the result of increased accounts receivable of $157,000, due
to increased sales during the quarter. With respect to investing activities,
the Company made purchases of property and equipment totaling $78,000 and
entered into a lease for software and hardware to upgrade the Company's internal
computer system , which long-term portion amounts to $51,529. The Company also
has an annualized lease obligation for its facility, which is subject to
termination with not less than six months' written notice by the Company or its
lessor.
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<PAGE>
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K
There were no reports filed on Form 8-K, for the three months ended September
30, 1998.
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: November 10, 1998
- ------------------ ------------------------
David Rollo
Chief Financial Officer
-8-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 282,713
<SECURITIES> 0
<RECEIVABLES> 952,970
<ALLOWANCES> 0
<INVENTORY> 2,052,851
<CURRENT-ASSETS> 3,360,107
<PP&E> 1,361,234
<DEPRECIATION> 1,057,731
<TOTAL-ASSETS> 3,721,464
<CURRENT-LIABILITIES> 603,938
<BONDS> 0
0
0
<COMMON> 10,377,969
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 3,721,464
<SALES> 1,594,401
<TOTAL-REVENUES> 1,594,401
<CGS> 1,039,655
<TOTAL-COSTS> 1,592,860
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,541
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,541
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,541
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
