SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(MARK ONE)
_X_ Quarterly Report pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the quarterly period ended June 30, 1995
___ Transition report pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the transition period from to
Commission File No. 0-18785
OXBORO MEDICAL INTERNATIONAL, INC.
(Exact name of small business issuer as specified in its charter)
Minnesota 41-1391803
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
13828 Lincoln Street, N.E., Ham Lake, Minnesota 55304
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (612) 755-9516
No Change
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark 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 past 12 months (or for such shorter period that the issuer was required to
file such reports), and (2) has been subject to such filing requirements for the
past 90 days.
Yes _X_ No ___
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date.
2,672,278 shares of Common Stock at July 25, 1995
TABLE OF CONTENTS
Page No.
Part I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets at
June 30, 1995 (unaudited) and
September 30, 1994 . . . . . . . . . . . . . . . . . 3
Condensed Consolidated Statements of
Operations for Three Months and Nine
Months Ended June 30, 1995 and 1994
(unaudited) . . . . . . . . . . . . . .. . . . . . . 4
Condensed Consolidated Statements of
Cash Flow for Nine Months Ended
June 30, 1995 and 1994 (unaudited) . . . . . . . . . 5
Notes to Condensed Consolidated Financial
Statements (unaudited) . . . . . . . . . . . . . . . 6
Item 2. Management's Discussion and Analysis . . . . . . . . 7
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . 8
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . 9
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, 1995 September 30, 1994
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash & cash equivalents $ 728,162 $1,157,942
Receivables:
Trade (net) 564,658 461,606
Interest receivable 26,062 19,269
Inventory 1,647,020 1,308,484
Deferred income taxes 79,805 79,805
Other current assets 45,316 93,960
TOTAL CURRENT ASSETS 3,091,023 3,121,066
PROPERTY AND EQUIPMENT:
Building 476,020 472,020
Land 57,211 57,211
Furniture and equipment 681,591 576,809
1,214,822 1,106,040
Less accumulated depreciation (444,810) (372,511)
770,012 733,529
Construction in process 181,772 153,107
951,784 886,636
OTHER INVESTMENTS 301,588 249,440
OTHER ASSETS 178,999 154,043
TOTAL ASSETS $4,523,394 $4,411,185
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 39,547 $ 98,645
Income taxes payable 25,052 0
Accrued salaries, wages,
payroll taxes 332,633 336,701
Other accrued expenses 55,604 67,982
TOTAL CURRENT LIABILITIES 452,836 503,328
DEFERRED INCOME TAXES 79,805 79,805
SHAREHOLDERS' EQUITY:
Undesignated shares 0 0
Common stock 26,722 26,722
Additional paid-in capital 2,276,111 2,276,111
Retained earnings 2,891,476 2,768,775
Less:
Receivable from ESOP (116,306) (116,306)
Stock subscriptions
receivable (120,000) (160,000)
Deferred R&D expense (967,250) (967,250)
TOTAL SHAREHOLDERS' EQUITY 3,990,753 3,828,052
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $4,523,394 $4,411,185
See accompanying notes to condensed consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Nine Months Ended
June 30 June 30
1995 1994 1995 1994
Net sales $ 976,626 $ 888,601 $2,896,858 $2,589,257
Cost of goods sold 234,300 194,361 699,547 583,520
742,326 694,240 2,197,311 2,005,737
Selling, general &
administrative
expenses 679,147 534,303 2,042,986 1,566,971
Nonoperating income
Interest Income 13,590 13,983 40,690 44,982
Other income 192 732 600 1,610
Total nonoperating
income 13,782 14,715 41,290 46,592
Income before
income taxes 76,961 174,652 195,615 485,358
Provision for
income taxes 29,244 63,573 72,914 175,738
Net income $ 47,717 $ 111,079 $ 122,701 $ 309,620
Net income per share
of common stock
(based on weighted
average shares
outstanding) $ .02 $ .04 $ .05 $ .12
Weighted average
common and common
equivalent shares
outstanding 2,672,278 2,663,558 2,672,278 2,605,973
See accompanying notes to condensed consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
June 30
1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 122,701 $ 309,620
Adjustments to reconcile net
earnings to net cash provided by
(used in) operating activities:
Depreciation and amortization 42,838 73,707
Loss from limited partnership 10,590 -0-
Change in current assets and current
liabilities:
Income taxes payable 25,052 (146,262)
Accounts receivable (109,845) (38,472)
Inventory (338,536) (277,169)
Other current assets 48,644 (62,467)
Accounts payable (59,098) (35,588)
Accrued expenses (16,446) (136,707)
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES (274,100) (313,338)
CASH FLOWS FROM INVESTING ACTIVITIES:
Net maturities (purchases) of
investments -0- 487,138
(Additions to) deductions from
construction in process (27,665) (27,665)
Long-term investment -0- (48,617)
(Additions to) deductions from
other assets (90,716) (59,117)
Purchase of property, plant and
equipment (77,299) (58,092)
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES (195,680) 293,647
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of common stock -0- 99,990
Receipt on stock subscription
receivables 40,000 -0-
NET CASH PROVIDED BY
FINANCING ACTIVITIES 40,000 99,990
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (429,780) 80,299
CASH AND CASH EQUIVALENTS, at
beginning of period 1,157,942 132,281
CASH AND CASH EQUIVALENTS, at
end of period $ 728,162 $ 212,580
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Income taxes $ 47,862 $ 322,000
Cash received during the period for:
Interest $ 25,754 $ 31,434
See accompanying notes to condensed consolidated financial statements.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Nine months ended June 30, 1995
(Unaudited)
1. Interim Financial Statements
The interim financial statements are unaudited but, in the opinion of
management, reflect all adjustments necessary for a fair presentation of
results for such periods. The results of operations for any interim period
are not necessarily indicative of results for the full year. These
financial statements should be read in conjunction with the financial
statements and notes thereto contained in the Company's Report on Form
10-KSB for the fiscal year ended September 30, 1994.
2. Inventory
June 30, September 30,
1995 1994
Inventory consists of:
Raw materials $ 655,953 $ 476,189
Finished goods 991,067 832,295
$1,647,020 $1,308,484
3. Other Investments
June 30, September 30,
Other investments include: 1995 1994
Cash surrender value of
life insurance $234,019 $174,811
Investment in limited partnership 67,569 74,629
$301,588 $249,440
The investment in limited partnership is a $142,000 cash investment for a
30% limited partnership interest in a partnership formed to develop
processes or devices for inhibiting rejection in connection with organ
transplant procedures. The general partner of the limited partnership is a
corporation owned by a significant shareholder, officer, and director of
the Company.
In addition, the Company placed 383,500 shares of common stock of the
Company in escrow for release pursuant to a Stock Award Agreement to the
general partner/shareholder on the attainment of specific milestones in the
development of the concept to be used in the limited partnership project.
The Stock Award Agreement expires October 31, 1995. These shares have been
valued at $967,250.
4. Shareholders' Equity
Changes in shareholders' equity during the nine months ended June 30, 1995
were as follows:
Shareholders' equity at September 30, 1994 $3,828,052
Receipt of stock subscriptions 40,000
Net earnings 122,701
Shareholders' equity at June 30, 1995 $3,990,753
5. Supplemental Disclosure of Cash Flow Information
The Company paid $266 and $0 in interest during the nine months ended June
30, 1995 and 1994, respectively, and received cash of $25,754 and $31,434
as interest payments during the nine months ended June 30, 1995 and 1994,
respectively.
Item 2. Management's Discussion and Analysis
Liquidity and Capital Resources
As of June 30, 1995, the Company had working capital of $2,638,187 as compared
to $2,617,738 as of September 30, 1994 and no long term debt. As of June 30,
1995, the Company had cash and cash equivalents of $728,162 as compared to
$1,157,942 as of September 30, 1994.
The Company used $274,100 in operations during the nine months ended June 30,
1995, including increases of $109,845 in accounts receivable and $338,536 in
inventory and decreases of $59,098 in accounts payable and $16,446 in accrued
salaries, wages, payroll and other expenses. The increased inventory is due
mainly to large quantity purchases of medical products raw materials to secure
favorable pricing and increases in Oxboro Outdoors inventory levels.
During the nine months ended June 30, 1995, the Company used $195,680 in
investing activities, of which approximately $110,000 was used for the
acquisition of two tackle companies during the third quarter. The Company plans
to expand its current facility by adding approximately 16,000 square feet of
production and warehouse space at an estimated cost of $350,000. If necessary,
upon completion of the expansion, the Company intends to obtain a loan of
approximately $250,000 secured by a mortgage on the building.
Results of Operations
Net sales during the three months and nine months ended June 30, 1995, increased
10% and 12%, respectively, as compared to the corresponding periods in the
previous fiscal year. Medical sales for the three and nine months ended June 30,
1995, were $939,433 and $2,819,590, respectively, representing increases of 10%
and 11% compared to the corresponding periods of the previous fiscal year.
Outdoors sales for the three-month and nine-month periods ended June 30, 1995
were $37,193 and $77,268, respectively, representing increases of 40% and 111%
compared to the corresponding periods of the previous fiscal year.
These increases resulted from a combination of new customers for both Oxboro
Medical and Oxboro Outdoors, while sales of current medical products to existing
medical customers also increased. Medical unit sales increased by more than the
increase in dollar sales because of the Company's emphasis on increasing its
customer base in an increasingly competitive market place through aggressive
pricing strategies.
Gross margin was 76% for both the third quarter and the nine-month period in
fiscal 1995, as compared to 78% and 77%, respectively, for the corresponding
periods in fiscal 1994. The competitiveness in the markets served and variation
of the product mix has resulted in a gross margin reduction.
Selling, general and administrative expenses during the three months and nine
months ended June 30, 1995, increased by 27% and 30%, respectively, as compared
to the corresponding periods for the previous fiscal year. During the three
months ended June 30, 1995, expenses related to the medical products business
increased by $67,310, or 15%, primarily as a result of additional legal,
royalty, research and development, and convention expenses. In addition,
decreased freight income for the third quarter contributed to the increase.
During the same period, Oxboro Outdoors expenses increased by $77,535, or 80%,
reflecting increased legal expenses, primarily related to the two acquisitions
cited above, and increases in advertising, printing, and miscellaneous marketing
expenses.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
11 -- Per Share Earnings Computation (at page 10)
27 -- Financial Data Schedule (electronic filing only)
(b) Reports on Form 8-K.
A report on Form 8-K dated June 9, 1995, reporting under Item 4 the
resignation of the Company's principal independent accountants was filed
on June 16, 1995.
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.
OXBORO MEDICAL INTERNATIONAL, INC.
Dated: August 11, 1995 By /s/ Harley Haase
Harley Haase
Its President
Dated: August 11, 1995 By /s/ Larry A. Rasmusson
Larry A. Rasmusson
Its Chief Financial and
Accounting Officer
EXHIBIT 11
OXBORO MEDICAL INTERNATIONAL INC. AND SUBSIDIARIES
PER SHARE EARNINGS COMPUTATION
Three Months Ended Nine Months Ended
June 30 June 30
1995 1994 1995 1994
Weighted average
number of common
shares outstanding 2,672,278 2,628,797 2,672,278 2,549,318
Common stock equivalents
due to assumed exercise
of options -0- 34,761 -0- 56,655
Total shares 2,672,278 2,663,558 2,672,278 2,605,973
Net earnings $ 47,717 $ 111,079 $ 122,701 $ 309,620
Earnings per share $ .02 $ .04 $ .05 $ .12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's financial statements for the 9 months ended June 30, 1995 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> JUN-30-1995
<CASH> 728,162
<SECURITIES> 0
<RECEIVABLES> 564,658
<ALLOWANCES> 0
<INVENTORY> 1,647,020
<CURRENT-ASSETS> 3,091,023
<PP&E> 1,396,594
<DEPRECIATION> 444,810
<TOTAL-ASSETS> 4,523,394
<CURRENT-LIABILITIES> 452,836
<BONDS> 0
<COMMON> 26,722
0
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<OTHER-SE> 3,964,031
<TOTAL-LIABILITY-AND-EQUITY> 4,523,394
<SALES> 2,896,858
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<CGS> 699,547
<TOTAL-COSTS> 699,547
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