<PAGE>
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, 1998
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 X No
----- -----
The number of shares of the issuer's Common Stock outstanding at April 30,
1998 was 3,168,942 shares.
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OXBORO MEDICAL INTERNATIONAL, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page No.
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<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of March 31, 1998 (unaudited) and 3
September 30, 1997
Consolidated Statements of Operations for Three Months and Six 4
Months Ended March 31, 1998 and 1997 (unaudited)
Consolidated Statements of Cash Flows for Six Months Ended March 5
31, 1998 and 1997 (unaudited)
Notes to Consolidated Financial Statements (unaudited) 6
Item 2. Management's Discussion and Analysis 8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 10
Item 2. Changes in Securities and Use of Proceeds 11
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 6. Exhibits and Reports on Form 8-K 12
Signature 14
</TABLE>
2
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
OXBORO MEDICAL INTERNATIONAL, INC. AND CONSOLIDATED SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, September 30,
1998 1997
---------- -------------
(unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 50,924 $ 124,815
Accounts receivable, less allowance for doubtful
accounts of $21,950 and $24,601, respectively 709,697 719,547
Interest receivable 18,769 12,766
Inventories 1,866,196 1,659,838
Deferred income taxes 188,000 188,000
Other current assets 144,222 237,563
---------- ----------
TOTAL CURRENT ASSETS 2,977,808 2,942,529
PROPERTY AND EQUIPMENT:
Building 905,366 891,919
Land 57,211 57,211
Furniture and equipment 1,271,228 1,243,080
---------- ----------
2,233,805 2,192,210
Less accumulated depreciation 940,840 841,582
---------- ----------
1,292,965 1,350,628
OTHER ASSETS
Investments -- Cash surrender value of life insurance 234,010 203,770
Inventories 851,000 910,000
Other 236,348 171,250
---------- ----------
TOTAL ASSETS $5,592,131 $5,578,177
---------- ----------
---------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Note payable to bank $ 268,313 $ 131,313
Current maturities of long-term debt 6,411 6,411
Accounts payable 269,936 231,704
Accrued salaries, wages, payroll taxes 161,276 245,126
Income taxes payable 21,242 32,602
Other accrued expenses 135,439 195,139
---------- ----------
TOTAL CURRENT LIABILITIES 862,617 842,295
LONG-TERM DEBT 383,531 386,754
DEFERRED INCOME TAXES 115,000 115,000
SHAREHOLDERS' EQUITY:
Common stock 31,690 22,586
Additional paid-in capital 2,737,399 1,313,057
Retained earnings 2,971,286 2,992,291
---------- ----------
5,740,375 4,327,934
Less: Receivable from ESOP (181,806) (93,806)
Stock subscription receivable (318,746) 0
Shares in escrow - Employee Agreement (708,840) 0
Shares in escrow - Royalty Agreement (300,000) 0
---------- ----------
TOTAL SHAREHOLDERS' EQUITY 4,230,983 4,234,128
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $5,592,131 $5,578,177
---------- ----------
---------- ----------
</TABLE>
See accompanying notes to consolidated financial statements.
3
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OXBORO MEDICAL INTERNATIONAL, INC. AND CONSOLIDATED SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31 March 31
------------------------- -------------------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net sales $1,226,800 $1,161,663 $2,404,546 $2,301,295
Cost of goods sold 402,582 317,978 813,863 638,374
---------- ---------- ---------- ----------
Gross margin 824,218 843,685 1,590,683 1,662,921
Selling, general and
administrative expenses 957,317 807,121 1,607,045 1,580,536
---------- ---------- ---------- ----------
Operating income (loss) (133,099) 36,564 (16,362) 82,385
Interest expense (11,942) (18,055) (22,526) (29,290)
Interest and other income 8,272 8,820 12,883 18,981
---------- ---------- ---------- ----------
Earnings (loss) before income taxes (136,769) 27,329 (26,005) 72,076
Income tax expense (benefit) (27,153) 12,025 (5,000) 22,407
---------- ---------- ---------- ----------
Net earnings (loss) ($109,616) $ 15,304 ($21,005) $ 49,669
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Net earnings (loss) per share
Basic ($ .04) $ .01 ($.01) $ .02
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Diluted ($ .04) $ .01 ($.01) $ .02
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Weighted average common and
common equivalent shares outstanding
Basic 2,730,552 2,708,722 2,493,840 2,690,300
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Diluted 2,730,552 2,711,837 2,493,840 2,694,691
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
See accompanying notes to consolidated financial statements.
4
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OXBORO MEDICAL INTERNATIONAL, INC. AND CONSOLIDATED SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
March 31
1998 1997
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss) ($21,005) $ 49,669
Adjustments to reconcile net earnings (loss) to net
cash used in operating activities:
Depreciation 99,258 90,452
Compensation expense related to options 12,500 -
Change in current assets and current liabilities:
Accounts receivable 3,847 2,042
Inventories (147,358) (226,670)
Other current assets 93,341 (99,747)
Accounts payable 38,232 (85,138)
Income taxes payable (6,000) 2,694
Accrued salaries, wages, payroll taxes and other
accrued expenses (143,550) (149,669)
--------- ---------
NET CASH USED IN OPERATING ACTIVITIES (70,735) (416,367)
CASH FLOWS FROM INVESTING ACTIVITIES:
Long-term investment - (39,472)
Additions to other assets (95,338) (62,257)
Purchase of property, plant and equipment (41,595) (50,006)
--------- ---------
NET CASH USED IN INVESTING ACTIVITIES (136,933) (151,735)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Exercise of stock options - 90,000
Payment of ESOP subscription receivable - 7,500
Payments on long-term debt (3,223) (3,441)
Bank note proceeds 137,000 485,000
--------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 133,777 579,059
--------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (73,891) 10,957
CASH AND CASH EQUIVALENTS, at beginning of period 124,815 13,323
--------- ---------
CASH AND CASH EQUIVALENTS, at end of period $ 50,924 $ 24,280
--------- ---------
--------- ---------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the six months ended March 31 for:
Income taxes - $ 29,000
--------- ---------
--------- ---------
</TABLE>
See accompanying notes to consolidated financial statements.
5
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OXBORO MEDICAL INTERNATIONAL, INC. AND CONSOLIDATED SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED MARCH 31, 1998
(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, 1997.
2. Inventories
<TABLE>
<CAPTION>
March 31, September 30,
1998 1997
---------- ----------
<S> <C> <C>
Inventories consist of:
Raw materials $1,609,939 $1,385,987
Finished goods 1,107,257 1,183,851
---------- ----------
$2,717,196 $2,569,838
---------- ----------
---------- ----------
</TABLE>
The Company produces inventory in anticipation of customer demand and,
with respect to Oxboro Outdoors, Inc. ("Outdoors") has acquired inventory
in connection with its earlier acquisitions of assets of fishing tackle
companies. Although management believes its estimated carrying value of
the inventory for Medical and Outdoors is appropriate, it is reasonably
possible that limited sales of such inventory items could result in a
significant reduction of the value of this inventory, which could have a
material adverse effect to the Company.
3. Shareholders' Equity
Changes in shareholders' equity during the six months ended March 31,
1998 were as follows:
<TABLE>
<S> <C>
Shareholders' equity at September 30, 1997 $4,234,128
Receivable from ESOP (a) (88,000)
Stock subscription received (b) (318,746)
Shares issued into escrow - Employment Agreement (c) (708,840)
Shares issued into escrow - Royalty Agreement (d) (300,000)
Paid in capital received (e) 1,424,342
Common stock issued (f) 9,104
Net (loss) for the period (g) (21,005)
Shareholders' equity at March 31, 1998 $4,230,983
----------
----------
</TABLE>
6
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(a) On January 16, 1998, Company issued 80,000 shares of its common
stock to the Company ESOP. The stock was issued at $1.10 per share.
(b) On January 16, 1998, various officers and directors exercised stock
options to purchase 300,364 shares of common stock. The average
exercise price was $1.061 per share. A stock subscription
receivable of $318,746 was established with the exercise, payable
over five years. The Company also received a $5,360 tax benefit
related to this transaction.
(c) On February 25, 1998, 360,000 shares of newly issued common stock
were placed in escrow in connection with an amendment to the
Employment Agreement with an officer of the Company. The stock was
issued at $1.969 per share.
(d) On February 25, 1998, 150,000 shares of newly issued common stock
were placed in escrow in connection with an amendment to the
Royalty Agreement with an officer of the Company. The stock was
issued at $2.00 per share.
(e) Paid-in capital increased by $1,424,342 due to the above
transactions.
(f) Common stock increased by $8,904 due to the above transactions.
Common stock also increased by an additional $200 to account for
options paid for by an officer in fiscal 1997.
(g) Operations during the six month period resulted in a net loss of
$21,005.
4. Supplemental Disclosure of Cash Flow Information
The Company paid $22,526 and $29,290 in interest during the six months
ended March 31, 1998 and 1997, respectively, and received cash of $765
and $10,133 as interest payments during the six months ended March 31,
1998 and 1997, respectively.
5. Recently Issued Accounting Standards
On December 31, 1997, the Company adopted Statement of Financial Accounting
Standards No. 128 - "Earnings per Share" ("SFAS 128"). As required by SFAS
128, all current and prior year earnings per share data have been restated
to conform to the provisions of SFAS 128. The Company's basic net earnings
per share amounts have been computed by dividing net earnings by the
weighted average number of outstanding common shares. The Company's
diluted net earnings per share is computed by dividing net earnings by the
weighted average number of outstanding common shares and common share
equivalents relating to stock options, when dilutive.
In June 1997, the Financial Accounting Standards Board (FASB) issued SFAS
No. 130, "Reporting Comprehensive Income," which is effective for fiscal
years beginning after December 15, 1997. SFAS No. 130 establishes
standards for the reporting and display of comprehensive income and its
components. Comprehensive income includes certain non-owner changes in
equity that are currently excluded from net income. Because the Company
historically has not experienced transactions that would be included in
comprehensive income, the adoption of SFAS No. 130 is not expected to have
a material effect on the financial position, results of operations or cash
flows of the Company.
7
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The FASB also issued SFAS No. 131, "Disclosures about Segments of
Enterprise and Related Information" effective for fiscal years beginning
after December 15, 1998. SFAS No. 131 requires public companies to report
certain information about operating segments in their financial statements,
and establishes related disclosures about products and services, geographic
areas and major customers. SFAS No. 131 does not need to be applied to
interim financial statements in the initial year of application; however,
comparative information for interim periods in the initial year of
application will be reported in the financial statements for interim
periods in fiscal 2000.
The AICPA's Accounting Standard Executive Committee has issued SOP 98-1,
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use." Capitalized costs of internal-use software projects consist
of external direct costs of materials and services used to develop or
purchase internal-use software, payroll and payroll-related costs, and
interest costs incurred during the development of internal-use software.
SOP 98-1 is effective for fiscal years beginning after December 15, 1998
for costs incurred in those fiscal years for all projects, including
projects in progress when the SOP is adopted. The adoption of this
standard is not expected to have a material effect on the financial
statements of the Company.
Item 2. Management's Discussion and Analysis
RESULTS OF OPERATIONS
The Company develops, assembles and markets disposable medical products for use
in general and cardiovascular surgery (Medical). Its wholly-owned subsidiary,
Oxboro Outdoors, Inc. (Outdoors), develops and markets products for outdoor
recreational use.
Net sales during the three-month and six-month periods ended March 31, 1998
increased by 5.6% and 4.5%, respectively, as compared to the corresponding
periods in the previous fiscal year. Medical sales for fiscal 1998 for the
three-month and six-month periods were $1,154,011 and $2,215,334, respectively,
representing increases of 9.1% and 5.6% compared to the corresponding prior
periods. Increases were realized in sales to dealer/distributors, hospitals,
and international distributors, with a slight decrease in sales to surgical kit
packing companies.
Oxboro Outdoors sales for fiscal 1998 for the three-month and six-month periods
were $72,789 and $189,212, respectively, compared to $103,665 and $204,079 for
the comparable prior periods. The decreases of Oxboro Outdoors sales result
mainly from orders taken which have requested ship dates after the end of the
March 31, 1998 period. Firm orders for shipments after March 31, 1998 total
approximately $120,000.
Consolidated gross margin was 67.2% for the three-month period and 66.2% for
the six-month period ended March 31, 1998, as compared to 72.6% and 72.3%,
respectively, for the same periods in fiscal 1997. For Medical, the gross
margin was 69.3% for both the three-month and six-month periods ended March
31, 1998 compared to 77.0% and 76.6%, respectively, for the same three and
six-month periods in fiscal 1997. For Outdoors, the gross margin was 32.9%
and 29.0%, respectively, for the three-month and six-month periods ended
March 31, 1998, compared to 28.0% for both the three and six-month periods in
fiscal 1997. The decrease in gross margin for Medical was due mainly to
inventory reduction efforts, the establishment of a regulatory compliance
office and CE certification approval processes.
8
<PAGE>
Selling, general and administrative expenses during the three-month and
six-month periods ended March 31, 1998 were $957,317 and $1,607,045,
respectively. The selling, general and administrative expenses during the
three-month and six-month periods ended March 31, 1997 were $807,121 and
$1,580,536, respectively. This represents an increase of 18.6% for the
three-month period and 1.7% for the six-month period. Increases in
consolidated Company expenses were due mainly to a proxy contest matter
occurring during the second quarter. These expenses represented an increase
of approximately $206,000 over the prior three-month period. Other Medical
increases of approximately $136,000, including $56,700 in compliance
activity, $10,600 in research and development, and $8,000 in consulting fees
were offset by decreases of approximately $225,000, including decreases of
$20,000 in outside services, $13,000 in postage, $36,000 in freight expense,
$61,000 in gross wages and $12,000 in printing expenses. Decreases in Oxboro
Outdoors expenses for the same period of $131,000 were due to decreases in
royalties of ($8,300), rent of ($7,000), legal fees of ($13,000), research
and development of ($8,100), advertising of ($112,000), medical reimbursement
of ($10,500), and consultation fees of ($34,000) with off-setting increases
in convention expenses of $14,000, commission expenses of $6,800 and
printing expenses of $37,200.
Losses before taxes during the three-month and six-month periods ended March 31,
1998 were $136,769 and $26,005, respectively, compared to earnings before taxes
of $27,329 and $72,076, respectively, for the corresponding periods of fiscal
1997. The losses for the three-month and six-month periods ended March 31, 1998
were largely attributable to expenses of approximately $222,000 incurred in
connection with the proxy contest.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1998, the Company had working capital of $2,115,191, compared to
$2,100,234 at September 30, 1997, and long-term debt of $383,531. As of March
31, 1998 the Company had $50,924 in cash, compared to $124,815 at September 30,
1997.
During the six months ended March 31, 1998, the Company used $70,735 net cash in
operating activities, including an increase of $147,358 in inventories, offset
by a decrease in other current assets of $93,341.
The Company used $136,933 in investing activities during the six months ended
March 31, 1998, primarily for equipment and tooling and prepaid expenses for
Oxboro Outdoors products.
The Company renewed its line of credit of $1,500,000 during the second quarter,
subject to certain terms and conditions related to the Company's financial
performance and management stability. As of March 31, 1998, the Company's
outstanding balance on this line of credit was $268,313. The Company believes
that additional funds, if needed, would be available in amounts sufficient for
the Company's anticipated fiscal 1998 operations, assuming the availability of
the line of credit.
9
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YEAR 2000
The Company has assessed and continues to assess the impact of the Year 2000
issue on its reporting systems and operations. The Year 2000 issue exists
because many computer systems and applications currently use two-digit fields to
designate a year. As the century date occurs, date sensitive systems may
recognize the Year 2000 as 1900 or not at all. This inability to recognize or
properly treat the Year 2000 may cause systems to process critical financial and
operational information incorrectly.
Most systems under which the Company is currently operating recognize the Year
2000. The Company plans to devote the necessary resources to resolve all
significant Year 2000 issues in a timely manner. If Year 2000 modifications are
not properly completed either by the Company or any entities with whom the
Company conducts business, the Company could be adversely impacted.
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,
availability of bank financing, and overall economic conditions, including
inflation.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company previously reported a favorable jury verdict in an action
brought by Up North Communications, Ltd. ("Up North") against the Company and
Outdoors, in Minnesota District Court, Anoka County. Up North sought payment of
approximately $64,000, plus interest, for goods and services provided to
Outdoors. Outdoors asserted a counterclaim against Up North alleging breach of
contract, breach of warranty and misrepresentation, seeking damages in excess of
$50,000, for Up North's failure to comply with the contract by supplying
defective goods and services and misrepresenting its abilities and experience.
A jury trial held in late 1997 resulted in a jury verdict in favor of the
Company and Outdoors for between $19,000 and $26,700, depending on the court's
interpretation of the legal effect of one of the jury's answers to the special
verdict, plus attorney's fees. Subsequently, post-trial motions were filed by
Up North seeking judgment notwithstanding the verdict or, in the alternative, a
new trial. Outdoors, in turn, filed a motion seeking a determination of the
amount of attorney's fees. The motions were heard on March 17, 1998. The court
has not yet issued its order with respect to the motions.
10
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Item 2. Changes in Securities and Use of Proceeds
On January 15, 1998, the Company issued 80,000 shares of Common Stock to
the Company's ESOP. The purchase price was $1.10 per share, paid by a $88,000
promissory note payable in ten equal annual installments of $8,800, plus accrued
interest at 6% per annum. No underwriter or selling agent was used and no
discounts or commissions were paid. The Company claims exemption for this
transaction under Section 4(2) of the Securities Act of 1933 as a transaction
not involving a public offering.
On January 15, 1998, the Company issued 40,000 shares of Common Stock to
Dennis Mikkelson, a director of the Company, upon exercise of an outstanding
option. The exercise price was $1.125 per share, paid by a $45,000 secured
promissory note payable in five equal annual installments of $9,000, plus
accrued interest at 6% per annum. The shares are pledged as collateral, and the
note is non-recourse. No underwriter or selling agent was used and no discounts
or commissions were paid. The Company claims exemption for this transaction
under Section 4(2) of the Securities Act of 1933 as a transaction not involving
a public offering.
On January 16, 1998, the Company issued 40,000 shares of Common Stock to
John Walter, a director of the Company, upon exercise of an outstanding
option. The exercise price was $1.08 per share, paid by a $43,200 secured
promissory note payable in five equal annual installments of $8,640 plus
accrued interest at 6% per annum. The shares are pledged as collateral, and
the note is non-recourse. No underwriter or selling agent was used and no
discounts or commissions were paid. The Company claims exemption for this
transaction under Section 4(6) of the Securities Act of 1933 as a transaction
not involving a public offering.
On January 15, 1998, the Company issued 20,364, 100,000 and 100,000 shares
of Common Stock, respectively, to Larry Rasmusson, an officer and director of
the Company, upon exercise of three outstanding options. The exercise price was
$1.50, $1.00 and $1.00 per share, respectively, paid by secured promissory
notes. The $200,000 note for the 200,000 shares is payable in five equal annual
installments of $40,000 plus accrued interest at 6% per annum. The $30,546 note
for the 20,364 shares is payable in five equal annual installments of $6,109.20
plus accrued interest at 6% per annum. The shares are pledged as collateral,
and the notes are non-recourse. No underwriter or selling agent was used and no
discounts or commissions were paid. The Company claims exemption for this
transaction under Section 4(6) of the Securities Act of 1933 as a transaction
not involving a public offering.
On February 25, 1998, the Company issued 360,000 shares of Common Stock to
Mr. Rasmusson in consideration of his agreeing to the elimination of the
Company's obligation to make a severance payment to the officer in the
approximate amount of $1,000,000 in the event of Mr. Rasmusson's termination of
employment upon a change in control (as defined in Mr. Rasmusson's Employment
Agreement). The shares are to be held in escrow and will be released in four
equal annual installments over a four year period based upon certain performance
criteria being achieved by the Company. If the performance criteria are not met,
11
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the shares will be distributed on February 1, 2002. Mr. Rasmusson will be
able to vote the escrowed shares. No underwriter or selling agent was used
and no discounts or commissions were paid. The Company claims exemption for
this transaction under Section 4(2) of the Securities Act of 1933 as a
transaction not involving a public offering.
On February 25, 1998, the Company issued 150,000 shares of Common Stock to
Mr. Rasmusson in consideration of his agreeing to a four year amendment to his
royalty agreement with Outdoors. The Royalty Agreement was amended to provide
that one-half of the royalty (4 1/2%) will be paid in cash and that the other
half of the royalty will be paid in common stock of the Company calculated at
$2.00 per share as the royalties are earned for a period of approximately four
years from February 25, 1998 to February 15, 2002. The 150,000 shares issued
pursuant to the amendment will be held in escrow and will be released as the
royalties are earned. If the stock set aside for payment of the royalties is
not earned, the stock will be returned to the Company. Mr. Rasmusson will have
the right to vote the stock while it is held in escrow. No underwriter or
selling agent was used and no discounts or commissions were paid. The Company
claims exemption for this transaction under Section 4(2) of the Securities Act
of 1933 as a transaction not involving a public offering.
Item 4. Submission of Matters to a Vote of Security Holders
The Company's annual shareholders meeting as convened on February 26, 1998,
but was adjourned to March 3, 1998, to allow the Inspectors of Election to
inspect and tally the votes.
The election of two Class II directors, each to serve a three-year term,
was the only matter voted on by the shareholders at the 1998 annual shareholders
meeting. The vote was as follows for each of the four nominees:
<TABLE>
<CAPTION>
NAME AFFIRMATIVE AGAINST ABSTENTIONS
---- ----------- ------- -----------
<S> <C> <C> <C>
Dennis Mikkelson 944,514 4,627 0
Larry Rasmusson 944,192 4,949 0
Kenneth Brimmer 1,304,224 13,230 0
Gary Copperud 1,304,224 13,230 0
</TABLE>
Mr. Ralph Jon Fritz and Mr. John Sayer, both Class III directors whose
terms expire in 1999, and Mr. Robert S. Garin and Mr. John R. Walter, both
Class I directors whose terms expire in 2000, are all continuing to serve as
directors.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Third Amendment to Employment Agreement with Registrant
effective February 25, 1998, filed as Exhibit 2 and
incorporated by reference from Larry A. Rasmusson's Amendment
No. 1 to Schedule 13D filed March 18, 1998
12
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10.2 Third Amendment to Exclusive License and Royalty Agreement with
Oxboro Outdoors, Inc. effective February 25, 1998, filed as
Exhibit 1 and incorporated by reference from Larry A.
Rasmusson's Amendment No. 1 to Schedule 13D filed March 18, 1998
10.3(a) Stock Option Exercise and Loan Agreement for the purchase of
200,000 shares of Common Stock of the Company, between
Registrant and Larry A. Rasmusson dated January 15, 1998, filed
as Exhibit 5 and incorporated by reference from Larry A.
Rasmusson's Schedule 13D filed February 13, 1998
10.3(b) Secured Promissory Note in the amount of $200,000 to Registrant
from Larry A. Rasmusson dated January 15, 1998, filed as
Exhibit 6 and incorporated by reference from Larry A.
Rasmusson's Schedule 13D filed February 13, 1998
10.3(c) Instruments Security Agreement between Registrant and Larry A.
Rasmusson dated January 15, 1998, filed as Exhibit 7 and
incorporated by reference from Larry A. Rasmusson's Schedule
13D filed February 13, 1998
10.4(a) Stock Option Exercise and Loan Agreement for the purchase of
20,356 shares of Common Stock of the Company, between
Registrant and Larry A. Rasmusson dated January 15, 1998, filed
as Exhibit 7 and incorporated by reference from Larry A.
Rasmusson's Schedule 13D filed February 13, 1998
10.4(b) Secured Promissory Note in the amount of $30,356 to Registrant
from Larry A. Rasmusson dated January 15, 1998, filed as
Exhibit 8 and incorporated by reference from Larry A.
Rasmusson's Schedule 13D filed February 13, 1998
10.4(c) Instruments Security Agreement between Registrant and Larry A.
Rasmusson dated January 15, 1998, filed as Exhibit 9 and
incorporated by reference from Larry A. Rasmusson's Schedule
13D filed February 13, 1998
10.5(a) Stock Option Exercise and Loan Agreement for the purchase of
40,000 shares of Common Stock of the Company between Registrant
and Dennis L. Mikkelson dated January 15, 1998, filed as
Exhibit 2 and incorporated by reference from Dennis L.
Mikkelson's Schedule 13D filed February 13, 1998
10.5(b) Secured Promissory Note in the amount of $45,000 to Registrant
from Dennis L. Mikkelson dated January 15, 1998, filed as
Exhibit 3 and incorporated by reference from Dennis L.
Mikkelson's Schedule 13D filed February 13, 1998
10.5(c) Instruments Security Agreement between Registrant and Dennis L.
Mikkelson dated January 15, 1998, filed as Exhibit 4 and
incorporated by reference from Dennis L. Mikkelson's Schedule
13D filed February 13, 1998
13
<PAGE>
10.6(a) Stock Option Exercise and Loan Agreement for the purchase of
40,000 shares of Common Stock of the Company between Registrant
and John Walter dated January 15, 1998, filed as Exhibit 2 and
incorporated by reference from John Walter's Schedule 13D filed
February 17, 1998
10.6(b) Secured Promissory Note in the amount of $43,200 to Registrant
from John Walter dated January 15, 1998, filed as Exhibit 3 and
incorporated by reference from John Walter's Schedule 13D filed
February 17, 1998
10.6(c) Instruments Security Agreement between Registrant and John
Walter dated January 15, 1998, filed as Exhibit 4 and
incorporated by reference from John Walter's Schedule 13D filed
February 17, 1998
27 Financial Data Schedule
(b) Reports on Form 8-K
No Reports on Form 8-K were filed during the quarter ended March
31, 1998
SIGNATURE
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 15, 1998 By /s/ Larry A. Rasmusson
-----------------------------
Larry A. Rasmusson
Its Chief Financial Officer
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FINANCIAL STATEMENTS FOR THE 6 MONTHS ENDED MARCH 31, 1998, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> MAR-31-1998
<CASH> 50,924
<SECURITIES> 0
<RECEIVABLES> 731,647
<ALLOWANCES> 21,950
<INVENTORY> 2,717,196
<CURRENT-ASSETS> 2,977,808
<PP&E> 2,233,805
<DEPRECIATION> 940,840
<TOTAL-ASSETS> 5,592,131
<CURRENT-LIABILITIES> 862,617
<BONDS> 0
0
0
<COMMON> 31,690
<OTHER-SE> 4,199,293
<TOTAL-LIABILITY-AND-EQUITY> 5,592,131
<SALES> 2,404,546
<TOTAL-REVENUES> 2,404,546
<CGS> 813,863
<TOTAL-COSTS> 813,863
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 22,526
<INCOME-PRETAX> (26,005)
<INCOME-TAX> (5,000)
<INCOME-CONTINUING> (21,005)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (21,005)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
