SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB/A
(MARK ONE)
X Quarterly Report under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the quarterly period ended December 31, 1995
___ Transition report under 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)
1328 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)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act 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 March 31, 1996
This amendment contains only Part I, Items 1 and 2, Part II, Item 6, and Exhibit
27 of the Report on Form 10-QSB for the quarter ended December 31, 1995,
originally filed April 12, 1996. These are the only items being amended.
TABLE OF CONTENTS
Page No.
Part I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets at December 31,
1995 (unaudited) and September 30, 1995 4
Condensed Consolidated Statements of Operations for
Three Months Ended December 31, 1995 and 1994
(unaudited) 5
Condensed Consolidated Statements of Cash Flows for Three
Months Ended December 31, 1995 and 1994 (unaudited) 6
Notes to Condensed Consolidated Financial Statements
(unaudited) 7
Item 2. Management's Discussion and Analysis 8
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 10
Signatures 11
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
CONDENSED CONSOLIDATED BALANCE SHEETS
December 31, September 30,
1995 1995
---------- ----------
(unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 439,187 $ 689,420
Receivables:
Trade, less allowance for
doubtful accounts of $17,088
and $17,547, respectively 552,504 577,296
Interest receivable 19,453 15,134
Inventory 2,241,925 1,807,666
Deferred income taxes 74,000 74,000
Other current assets 153,401 122,710
---------- ----------
TOTAL CURRENT ASSETS 3,480,470 3,286,226
---------- ----------
PROPERTY AND EQUIPMENT:
Building 472,020 472,020
Land 57,211 57,211
Furniture and Equipment 810,401 728,802
---------- ----------
1,339,632 1,258,033
Less accumulated depreciation (512,006) (484,412)
---------- ----------
827,626 773,621
Construction in progress 191,327 196,727
---------- ----------
1,018,953 970,348
INVESTMENTS: 343,583 323,847
OTHER ASSETS: 197,009 206,978
---------- ----------
TOTAL ASSETS $5,040,015 $4,787,399
---------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 369,941 $ 164,972
Accrued salaries, wages, payroll taxes 365,918 310,643
Other accrued expenses 48,171 62,193
---------- ----------
TOTAL CURRENT LIABILITIES 784,030 537,808
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 2,988,208 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 4,134,985 4,128,591
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $5,040,015 $4,787,399
---------- ----------
See accompanying notes to condensed consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
December 31
-------------------
1995 1994
Net sales $ 939,335 $ 905,342
Cost of goods sold 271,226 209,181
---------- ----------
Gross margin 668,109 696,161
Selling, general and administrative expenses 671,210 632,549
---------- ----------
(3,101) 63,612
Interest and other income 13,155 14,316
---------- ----------
Earnings before income taxes 10,054 77,928
Income taxes 3,660 28,366
---------- ----------
Net earnings $ 6,394 $ 49,562
---------- ----------
Net earnings per common and
common equivalent share $ .00 $ .02
---------- ----------
Weighted average common shares outstanding 2,672,278 2,672,278
---------- ----------
See accompanying notes to condensed consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
December 31
---------------------------
1995 1994
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 6,394 $ 49,562
Adjustments to reconcile net
earnings to net cash used in
operating activities:
Depreciation and amortization 11,739 13,261
Loss from limited partnership -- 3,530
Change in current assets and
current liabilities:
Income taxes payable -- 7,366
Receivables 20,473 (22,832)
Inventory (434,259) (270,532)
Other current assets (30,691) 24,757
Accounts payable 204,969 (14,092)
Accrued salaries, wages,
payroll taxes and other
accrued expenses 41,253 (180,650)
----------- -----------
NET CASH USED IN
OPERATING ACTIVITIES (180,122) (389,630)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
(Additions to) reduction of
other assets 8,469 (49,736)
Purchase of property, plant
and equipment (58,844) (58,277)
Long-term investment (19,736) 0
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES (70,111) (108,013)
----------- -----------
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 (250,233) (457,643)
CASH AND CASH EQUIVALENTS,
at beginning of period 689,420 1,157,942
----------- -----------
CASH AND CASH EQUIVALENTS,
at end of period $ 439,187 $ 700,299
----------- -----------
See accompanying notes to condensed consolidated financial statements.
OXBORO MEDICAL INTERNATIONAL, INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED DECEMBER 31, 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, 1995.
2. Inventory
December 31, 1995 September 30, 1995
----------------- ------------------
Inventory consists of:
Raw materials $1,167,397 $ 863,694
Finished goods 1,074,528 943,972
---------- ----------
$2,241,925 $1,807,666
---------- ----------
3. Other Investments
December 31, 1995 September 30, 1995
----------------- ------------------
Long-term investments include:
Investment in cash surrender
value of life insurance $282,057 $262,321
Investment in limited
partnership 61,526 61,526
-------- --------
$343,583 $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 was to expire October 31, 1995. Effective October
31, 1995, the Company extended the Stock Award Agreement to October 31,
1998. These shares have been valued at $967,250.
4. Shareholders' Equity
Changes in shareholders' equity during the three months ended December 31,
1995 were as follows:
Shareholders' equity at September 30, 1995 $4,128,591
Net earnings 6,394
----------
Shareholders' equity at December 31, 1995 $4,134,985
----------
5. Supplemental Disclosure of Cash Flow Information
The Company paid $0 and $0 in interest during the three months ended
December 31, 1995 and 1994, respectively, and received cash of $7,572 and
$9,607 as interest payments during the three months ended December 31, 1995
and 1994, respectively.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1995, the Company had working capital of $2,696,440 as
compared to $2,748,418 at September 30, 1995 and no long-term debt. As of
December 31, 1995, the Company had $439,187 in cash as compared to $689,420 at
September 30, 1995.
During the quarter ended December 31, 1995, the Company used $180,122 in cash in
operating activities, including an increase of $434,259 in inventory offset by
an increase of $204,969 in accounts payable.
The Company used $70,111 in investing activities during the quarter ended
December 31, 1995, mainly in the purchase of equipment and property used for
continuing operations. The Company's principal investment continues to be
development of the hunting and fishing recreational products business of its
Oxboro Outdoors subsidiary.
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.
Subsequent to December 31, 1995, the Company has obtained a line of credit of
$500,000, subject to certain terms and conditions related to the Company's
financial performance. The Company has not drawn on this line of credit.
Subsequent to December 31, 1995, the Company's subsidiary, Oxboro Outdoors,
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 for the three-month period ended December 31, 1995 were $939,335 as
compared to $905,342 for the corresponding period in the previous fiscal year.
This represents an increase of approximately 4%. Sales of medical and surgical
products were $923,318, an increase of approximately $24,908, or 3%, over the
corresponding period in fiscal 1995. Increases were realized in sales to
dealers/distributors, international distributors and surgical procedure kit
packing companies while direct sales to hospitals declined slightly. The
competitiveness and extensive downward pressure on product pricing continues in
the Company's medical products markets.
Oxboro Outdoors sales for the three months ended December 31, 1995, were $16,017
as compared to $6,932 for the corresponding period in the previous fiscal year.
This increase is mainly due to sales of tackle products added to the product
line through the acquisitions of TMI, Fritzie and Helco Tackle.
Gross margin for the first quarter of fiscal 1996 was 71% as compared to 77% for
first quarter of fiscal 1995, mainly as a result of manufacturing inefficiencies
encountered in late fiscal 1995 that were more prevalent in first quarter 1996.
Gross margin for first quarter 1996 was also affected slightly by continued
downward pressure on competitive product pricing as compared to first quarter
1995.
During the first quarter fiscal 1996, selling, general and administrative
expenses increased by 6%, or $38,661, and increased by 1.6% as a percentage of
net sales, as compared to first quarter 1995.
Expenses increased for Oxboro Medical by approximately $48,000, resulting from
the introduction of ten new products to the home health care market, increased
shipping/freight costs, higher telephone usage and increased medical
reimbursement costs.
Oxboro Outdoors expenditures decreased by approximately $10,000 compared to the
corresponding period in the previous fiscal year. The reduction came solely from
reduced printing costs, which were offset by increases in postage for mailing
samples and catalogs, additional salaries, increased convention expenses and
higher advertising costs.
Earnings before taxes for the first quarter of fiscal 1996 was $10,054 as
compared to $77,928 for first quarter of fiscal 1995, a decrease of 87%. The
decrease was mainly due to reductions in gross margin. Due to the funding of
Oxboro Outdoors, Oxboro Medical's earnings continue to be negatively impacted.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 Amendment No. 2 to Stock Award Agreement by and between the Registrant
and Larry Rasmusson, effective October 31, 1995, was filed as Exhibit
10.2(c) to the Registrant's Annual Report on Form 10-KSB for the year
ended September 30, 1995 (the "1995 10-KSB") and is incorporated
herein by reference.
10.2 First Amendment to Exclusive License Agreement by and between the
Registrant and Larry Rasmusson, effective November 8, 1995, was filed
as Exhibit 10.3(b) to the 1995 10-KSB and is incorporated herein by
reference.
10.3 Second Amendment to Exclusive License and Royalty Agreement by and
between Oxboro Outdoors, Inc. and Larry Rasmusson, effective November
8, 1995, was filed as Exhibit 10.5(c) to the 1995 10-KSB and is
incorporated herein by reference.
10.4 Consulting Agreement, effective November 1, 1995, by and between the
Registrant and Larry Rasmusson was filed as Exhibit 10.6 to the 1995
10-KSB and is incorporated herein by reference.
10.5 Consulting Agreement, effective November 1, 1995, by and between the
Registrant and Harley Haase was filed as Exhibit 10.10 to the 1995
10-KSB and is incorporated herein by reference.
10.6 Product Development and Incentive Agreement, effective November 8,
1995, by and between the Registrant and Harley Haase was filed as
Exhibit 10.11 to the 1995 10-KSB and is incorporated herein by
reference.
10.7 Royalty Sharing Agreement, effective November 21, 1995, by and between
the Registrant, Oxboro Outdoors, Inc., Larry Rasmusson, and Harley
Haase, was filed as Exhibit 10.12 to the 1995 10-KSB and is
incorporated herein by reference.
27 Financial Data Schedule
(b) Reports on Form 8-K
No Reports on Form 8-K were filed during the quarter ended December 31,
1995.
SIGNATURES
Pursuant to the requirements of the Exchange Act, the Registrant caused
this Amendment to be signed on its behalf by the undersigned, thereunto duly
authorized.
OXBORO MEDICAL INTERNATIONAL, INC.
Dated: April 26, 1996 By /s/ Harley Haase
----------------------------
Harley Haase
Its President
Dated: April 26, 1996 By /s/ Larry A. Rasmusson
----------------------------
Larry A. Rasmusson
Its Chief Financial and
Accounting Officer
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