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 March 31, 1996
___ 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 Identification No.)
incorporation or organization)
13828 Lincoln Street NE, 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 ___ No _X_
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 April 30, 1996
OXBORO MEDICAL INTERNATIONAL, INC.
TABLE OF CONTENTS
Page No.
-----------
Part I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets March 31, 1996
(unaudited) and September 30, 1995 3
Condensed Consolidated Statements of Operations for
Three Months and Six Months Ended March 31, 1996
and 1995 (unaudited) 4
Condensed Consolidated Statements of Cash Flows for
Six Months Ended March 31, 1996 and 1995 (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 9
Signatures 10
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, September 30,
1996 1995
----------- -----------
(unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 150,739 $ 689,420
Accounts receivable, less allowance for doubtful
accounts of $20,954 and $17,547, respectively 610,852 577,296
Interest receivable 24,176 15,134
Inventory 2,420,353 1,807,666
Deferred income taxes 74,000 74,000
Other current assets 129,211 122,710
----------- -----------
TOTAL CURRENT ASSETS 3,409,331 3,286,226
PROPERTY AND EQUIPMENT:
Building 472,020 472,020
Land 57,211 57,211
Furniture and equipment 1,057,240 728,802
----------- -----------
1,586,471 1,258,033
Less accumulated depreciation (542,294) (484,412)
----------- -----------
1,044,177 773,621
Construction in progress 234,619 196,727
----------- -----------
1,278,796 970,348
OTHER INVESTMENTS 147,602 323,847
OTHER ASSETS 191,431 206,978
----------- -----------
TOTAL ASSETS $ 5,027,160 $ 4,787,399
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 295,468 $ 164,972
Accrued salaries, wages, payroll taxes 385,354 310,643
Other accrued expenses 57,152 62,193
----------- -----------
TOTAL CURRENT LIABILITIES 737,974 537,808
DEFERRED INCOME TAXES 121,000 121,000
SHAREHOLDERS' EQUITY:
Common stock 26,722 26,722
Additional paid-in capital 2,276,111 2,276,111
Retained earnings 3,021,409 2,981,814
Less:
Receivable from ESOP (108,806) (108,806)
Stock subscription receivable (80,000) (80,000)
Deferred R&D expense (967,250) (967,250)
----------- -----------
TOTAL SHAREHOLDERS' EQUITY 4,168,186 4,128,591
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
$ 5,027,160 $ 4,787,399
=========== ===========
See accompanying notes to condensed consolidated financial statements.
</TABLE>
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31 March 31
----------------------- -----------------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net sales $1,040,270 $1,014,890 $1,979,605 $1,920,231
Cost of goods sold 290,372 256,066 561,598 465,247
---------- ---------- ---------- ----------
749,898 758,824 1,418,007 1,454,984
Selling, general and administrative
expenses 706,273 731,290 1,377,483 1,363,839
---------- ---------- ---------- ----------
43,625 27,534 40,524 91,145
Interest and other income 8,578 13,192 21,733 27,508
---------- ---------- ---------- ----------
Earnings before income taxes 52,203 40,726 62,257 118,653
Provisions for income taxes 19,002 15,304 22,662 43,670
---------- ---------- ---------- ----------
Net income $ 33,201 $ 25,422 $ 39,595 $ 74,983
========== ========== ========== ==========
Net income per share of common stock
(based on weighted average)
$ .01 $ .01 $ .01 $ .03
========== ========== ========== ==========
Weighted average common and common
equivalent shares 2,672,278 2,672,278 2,672,278 2,672,278
========== ========== ========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
March 31
--------------------------
1996 1995
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 39,595 $ 74,983
Adjustments to reconcile net earnings to net cash
used in operating activities:
Depreciation and amortization 60,882 29,577
Loss from limited partnership -- 7,060
Change in current assets and current liabilities:
Accounts receivable (42,598) (93,707)
Inventory (612,687) (235,567)
Other current assets (6,501) 29,986
Accounts payable 130,496 (35,960)
Income taxes payable -- 1,670
Accrued salaries, wages, payroll taxes and
other accrued expenses
69,670 (104,283)
----------- -----------
NET CASH USED IN OPERATING ACTIVITIES (361,143) (326,241)
CASH FLOWS FROM INVESTING ACTIVITIES:
Long-term investment 176,245 --
(Additions to) reduction of other assets 12,547 (80,636)
Purchase of property, plant and equipment (366,330) (75,596)
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES (177,538) (156,232)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Receipt of stock subscriptions -- 40,000
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES
-- 40,000
----------- -----------
NET DECREASE IN CASH AND CASH EQUIVALENTS (538,681) (442,473)
CASH AND CASH EQUIVALENTS, at beginning of period 689,420 1,157,942
----------- -----------
CASH AND CASH EQUIVALENTS, at end of period $ 150,739 $ 715,469
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the six months ended March 31 for:
Income taxes $ -- $ 42,000
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
OXBORO MEDICAL INTERNATIONAL, INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED MARCH 31, 1996
(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, 1995.
2. Inventory
March 31, September 30,
1996 1995
---------- ----------
Inventory consists of:
Raw materials $1,328,744 $ 863,694
Finished goods 1,091,609 943,972
---------- ----------
$2,420,353 $1,807,666
========== ==========
3. Long-Term Investments
Long-term investments include:
March 31, September 30,
1996 1995
---------- ----------
Investment in cash surrender value
of life insurance $ 86,076 $ 262,321
Investment in limited partnership 61,526 61,526
---------- ----------
$ 147,602 $ 323,847
========== ==========
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 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,
1998. These shares have been valued at $967,250.
4. Shareholders' Equity
Changes in shareholders' equity during the six months ended March 31,
1996 were as follows:
Shareholders' equity at September 30, 1995 $4,128,591
Net earnings 39,595
----------
Shareholders' equity at March 31, 1996 $4,168,186
==========
5. Supplemental Disclosure of Cash Flow Information
The Company paid $149 and $221 in interest during the six months ended
March 31, 1996 and 1995, respectively.
Item 2. Management's Discussion and Analysis
Liquidity and Capital Resources
As of March 31, 1996, the Company had working capital of $2,671,357 as compared
to $2,748,418 at September 30, 1995 and no long-term debt. As of March 31, 1996,
the Company had $150,739 in cash as compared to $689,420 at September 30, 1995.
During the six months ended March 31, 1996, the Company used $407,097 in cash in
operating activities, including an increase of $612,687 in inventory offset by
an increase of $130,496 in accounts payable.
The Company used $131,584 in investing activities during the six months ended
March 31, 1996, mainly in the purchase of equipment and property used for
continuing operations.
The Company has commenced construction of an addition of approximately 15,000
square feet to its corporate headquarters on land previously owned by the
Company. The Company anticipates a cost of approximately $450,000 for this
project and intends to secure funding by a mortgage of $400,000 with the
remaining cost to be supplied by the Company's operations. The Company has
obtained a line of credit of $500,000, subject to certain terms and conditions
related to the Company's financial performance. As of March 31, 1996, the
Company had not drawn on this line of credit.
The Company's subsidiary, Oxboro Outdoors, recently received a letter of intent
from NFL Properties, Inc., whereby Oxboro Outdoors would have the right to use
team names, logos, conference designation, and various copyrights of the
National Football League on fishing tackle. The Company has not determined
whether to use internal funds or obtain outside financing to fund this project.
Other than the matters discussed above, management is not aware of any trends,
commitments, events, or uncertainties that will or are reasonably likely to
result in the Company's liquidity increasing or decreasing in any material way.
Results of Operations
Net sales during the three-month and six-month periods ended March 31, 1996,
increased by 2.5% and 3.1%, respectively, as compared to the corresponding
periods in the previous fiscal year. Medical sales for fiscal 1996 for the
three-month and six-month periods were $995,323 and $1,918,641, representing
increases of 1.3% and 2.0% compared to the corresponding prior periods.
Increases were realized in sales to dealer/distributors and surgical procedure
kit packing companies while sales to hospitals and international distributors
declined.
Oxboro Outdoor sales for fiscal 1996 for the three-month and six-month periods
were $44,947 and $60,964, compared to $33,133 and $40,075 for the comparable
prior periods. The increases of Oxboro Outdoors sales continue to result mainly
from sales of tackle products added to the product line through acquisitions in
fiscal 1995.
Gross margin was 71.6% for the first six months of 1996 and 75.8% for the first
six months of 1995. Manufacturing inefficiencies accounted for substantially all
of the reduction in gross margin.
Selling, general and administrative expenses during the three-month and
six-month periods ended March 31, 1996, decreased by 3.4% and increased by 1%,
respectively, as compared to the corresponding periods in the previous fiscal
year. Decreases in Oxboro Medical expenses primarily resulted from legal
expenses and compensation reductions. Oxboro Outdoors' expenses were up slightly
due to additions to staff and increased marketing activities offset by reduction
in printing expenses.
Earnings before taxes during the three-month and six-month periods ended March
31, 1996, were $52,203 and $62,257, which represents an increase of 28% and a
decrease of 48%, respectively, as compared to the corresponding periods in the
previous fiscal year. For the three months, the increase is attributable to
lower selling, general and administrative expenses offset partially by increased
cost of goods. The six-month decrease in earnings before taxes resulted from
higher cost of goods and selling, general and administrative expenses.
Forward-Looking Statements.
Forward-looking statements herein are made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. There are
certain important factors that could cause results to differ materially from
those anticipated by some of the statements made herein. Investors are cautioned
that all forward-looking statements involve risks and uncertainty. Among the
factors that could cause actual results to differ materially are the following:
acceptance of new products, pricing strategies of competitors, general
conditions in the industries served by the Company's products, and overall
economic conditions, including inflation.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
11 - Per share earnings computation
27 - Financial Data Schedule
(b) Reports on Form 8-K
No Reports on Form 8-K were filed during the quarter ended
March 31, 1996.
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: May 13, 1996 By /s/ Harley Haase
Harley Haase
Its President and Chief Executive Officer
Dated: May 13, 1996 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
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31 March 31
----------------------------- --------------------------
1996 1995 1996 1995
------------- ------------- ------------- ----------
<S> <C> <C> <C> <C>
Weighted average number of common shares 2,672,278 2,672,278 2,672,278 2,672,278
outstanding
Common stock equivalent due to assumed
exercise of options -0- -0- -0- -0-
------------- ------------- ------------- ----------
Total shares 2,672,278 2,672,278 2,672,278 2,672,278
============= ============= ============= ==========
Net earnings $ 33,201 $ 25,422 $ 39,595 $ 74,983
============= ============= ============= ==========
Earnings per share $ .01 $ .01 $ .01 $ .03
============= ============= ============= ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's financial statements for the 6 months ended March 31, 1996, and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> MAR-31-1996
<CASH> 150,739
<SECURITIES> 0
<RECEIVABLES> 610,852
<ALLOWANCES> 20,954
<INVENTORY> 2,420,353
<CURRENT-ASSETS> 3,409,331
<PP&E> 1,586,471
<DEPRECIATION> 542,294
<TOTAL-ASSETS> 5,027,160
<CURRENT-LIABILITIES> 737,974
<BONDS> 0
0
0
<COMMON> 26,722
<OTHER-SE> 4,141,464
<TOTAL-LIABILITY-AND-EQUITY> 5,027,160
<SALES> 1,979,605
<TOTAL-REVENUES> 1,979,605
<CGS> 561,598
<TOTAL-COSTS> 561,598
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 62,257
<INCOME-TAX> 22,662
<INCOME-CONTINUING> 39,595
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 39,595
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
