<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended: December 31, 1999
Commission file number: 0-11363
CHAD THERAPEUTICS, INC.
-----------------------
(Exact name of registrant as specified in its charter)
California 95-3792700
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
21622 Plummer Street, Chatsworth, CA 91311
--------------------------------------- -----------
(Address of principal executive offices) (Zip Code)
(818) 882-0883
--------------
(Registrant's telephone number, including area code)
-------------------------------------------------------
(Former Address)
(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (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. Yes [X] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Common Shares 10,027,060
<PAGE> 2
CHAD THERAPEUTICS, INC.
Balance Sheets
December 31, 1999 and March 31, 1999
ASSETS
<TABLE>
<CAPTION>
December 31, March 31,
1999 1999
------------ -----------
(Unaudited)
<S> <C> <C>
Current assets:
Cash $ 1,930,000 $ 137,000
Accounts receivable, less allowance for
doubtful accounts of $96,000 at
December 31, 1999 and $88,000 at
March 31, 1999 2,116,000 2,165,000
Inventories (Note 2) 5,984,000 7,642,000
Income taxes refundable 175,000 687,000
Prepaid expenses 402,000 294,000
Deferred income taxes 230,000 445,000
----------- -----------
Total current assets 10,837,000 11,370,000
Property and equipment, at cost 5,436,000 5,366,000
Less accumulated depreciation 2,683,000 2,086,000
----------- -----------
Net property and equipment 2,753,000 3,280,000
----------- -----------
Other assets, net 1,132,000 1,249,000
----------- -----------
Total assets $14,722,000 $15,899,000
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 237,000 $ 227,000
Accrued expenses 1,044,000 979,000
----------- -----------
Total current liabilities 1,281,000 1,206,000
----------- -----------
Shareholders' equity:
Common shares, $.01 par value, authorized
40,000,000 shares; 10,027,060 and 10,012,000
shares issued and outstanding 13,071,000 13,052,000
Retained earnings 370,000 1,641,000
----------- -----------
Total shareholders' equity 13,441,000 14,693,000
----------- -----------
Total liabilities and shareholders' equity $14,722,000 $15,899,000
=========== ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 3
CHAD THERAPEUTICS, INC.
Statements of Operations
For the nine months ended December 31, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
December 31
------------------------------
1999 1998
------------ ------------
<S> <C> <C>
Net sales $ 10,013,000 $ 11,040,000
Cost of sales 6,669,000 7,209,000
------------ ------------
Gross profit 3,344,000 3,831,000
Costs and expenses:
Selling, general and administrative 4,166,000 4,664,000
Research and development 380,000 467,000
------------ ------------
Total costs and expenses 4,546,000 5,131,000
------------ ------------
Operating income (loss) (1,202,000) (1,300,000)
Other income - interest income, net 24,000 41,000
------------ ------------
Earnings (loss) before income taxes (1,178,000) (1,259,000)
Income tax expense (benefit) 93,000 (474,000)
------------ ------------
Net earnings (loss) $ (1,271,000) $ (785,000)
============ ============
Basic earnings (loss) per share $ (.13) $ (.08)
============ ============
Diluted earnings (loss) per share $ (.13) $ (.08)
============ ============
Weighted shares outstanding:
Basic 10,021,000 10,011,000
Diluted 10,021,000 10,011,000
============ ============
</TABLE>
See accompanying notes to financial statements.
<PAGE> 4
CHAD THERAPEUTICS, INC.
Statements of Operations
For the three months ended December 31, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
December 31
------------------------------
1999 1998
------------ ------------
<S> <C> <C>
Net sales $ 2,959,000 $ 2,983,000
Cost of sales 2,044,000 2,606,000
------------ ------------
Gross profit 915,000 377,000
Costs and expenses:
Selling, general and administrative 1,302,000 1,682,000
Research and development 98,000 145,000
------------ ------------
Total costs and expenses 1,400,000 1,827,000
------------ ------------
Operating income (loss) (485,000) (1,450,000)
Other income - interest income, net 17,000 10,000
------------ ------------
Earnings (loss) before income taxes (468,000) (1,440,000)
Income tax expense (benefit) 215,000 (546,000)
------------ ------------
Net earnings (loss) $ (683,000) $ (894,000)
============ ============
Basic earnings (loss) per share $ (.07) $ (.09)
============ ============
Diluted earnings (loss) per share $ (.07) $ (.09)
============ ============
Weighted shares outstanding:
Basic 10,027,000 10,012,000
Diluted 10,027,000 10,012,000
============ ============
</TABLE>
See accompanying notes to financial statements.
<PAGE> 5
CHAD THERAPEUTICS, INC.
Statement of Shareholders' Equity
For the nine months ended December 31, 1999
(Unaudited)
<TABLE>
<CAPTION>
Common Shares
----------------------------- Retained
Shares Amount Earnings
----------- ----------- -----------
<S> <C> <C> <C>
Balance at
March 31, 1999 10,012,000 $13,052,000 $ 1,641,000
Common Shares issued in
lieu of cash for directors
fees 15,000 19,000 --
Net loss -- -- (1,271,000)
----------- ----------- -----------
Balance at
December 31, 1999 10,027,000 $13,071,000 $ 370,000
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 6
CHAD THERAPEUTICS, INC.
Statements of Cash Flows
For the nine months ended December 31, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
December 31
---------------------------
1999 1998
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $(1,271,000) $ (785,000)
Adjustments to reconcile net earnings (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization 597,000 579,000
Loss on disposition of property and equipment -- 77,000
Compensation expense related to stock issued 19,000 --
Changes in assets and liabilities:
Decrease (increase) in accounts receivable 49,000 249,000
Decrease (increase) in inventories 1,658,000 (1,627,000)
Decrease (increase) in income taxes refundable 512,000 164,000
Decrease (increase) in prepaid expenses (108,000) 30,000
Decrease (increase) in deferred income taxes 215,000 (191,000)
Decrease (increase) in other assets 117,000 119,000
Increase (decrease) in accounts payable 10,000 (177,000)
Increase (decrease) in accrued expenses 65,000 354,000
----------- -----------
Net cash provided by (used in)
operating activities 1,863,000 (1,208,000)
----------- -----------
Cash flows from investing activities:
Capital expenditures (70,000) (145,000)
----------- -----------
Net cash used in investing
activities (70,000) (145,000)
----------- -----------
Cash flows from financing activities:
Exercise of stock options -- 24,000
Common shares repurchased -- (79,000)
Common shares issued -- 136,000
----------- -----------
Net cash provided by
financing activities -- 81,000
----------- -----------
Net increase (decrease) in cash 1,793,000 (1,272,000)
Cash beginning of period 137,000 1,579,000
----------- -----------
Cash end of period $ 1,930,000 $ 307,000
=========== ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 7
CHAD THERAPEUTICS, INC.
December 31, 1999
(Unaudited)
1. Interim Reporting
Chad Therapeutics, Inc. (the Company) is in the business of developing,
producing and marketing respiratory care devices designed to improve the
efficiency of oxygen delivery systems for home health care and hospital
treatment of patients suffering from pulmonary diseases.
In the opinion of management, all adjustments necessary, which are of a
normal and recurring nature, to a fair statement of the results for the
interim periods presented have been made. The interim statements are
condensed and do not include some of the information necessary for a more
complete understanding of the financial data. Accordingly, your attention
is directed to the footnote disclosures found on pages 10, 11, 12 and 13 of
the March 31, 1999, Annual Report and particularly to Note 1 which includes
a summary of significant accounting policies. Certain reclassifications
have been made to the prior period's balances to conform to the 1999
presentation.
2. Inventories
Inventories in 1999, are summarized as follows:
December 31 March 31
---------- ----------
Finished goods $1,288,000 1,619,000
Work-in-process 1,506,000 1,278,000
Raw materials 3,190,000 4,745,000
---------- ----------
$5,984,000 7,642,000
========== =========
3. Earnings Per Common Share
Following is a reconciliation of the numerators and denominators used in
the calculation of basic and diluted earnings per common shares:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
December 31 December 31
----------------------------- -----------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Basic earnings per share:
Numerator-net earnings (loss) $ (683,000) $ (894,000) $ (1,271,000) $ (785,000)
Denominator-common shares outstanding 10,027,000 10,012,000 10,021,000 10,011,000
------------ ------------ ------------ ------------
Basic earnings (loss) per share $ (.07) $ (.09) $ (.13) $ (.08)
============ ============ ============ ============
Diluted earnings per share:
Numerator-net earnings (loss) $ (683,000) $ (894,000) $ (1,271,000) $ (785,000)
Denominator:
Common shares outstanding 10,027,000 10,012,000 10,021,000 10,011,000
Common stock options -- -- -- --
------------ ------------ ------------ ------------
10,027,000 10,012,000 10,021,000 10,011,000
------------ ------------ ------------ ------------
Diluted earnings (loss) per share $ (.07) $ (.09) $ (.13) $ (.08)
============ ============ ============ ============
</TABLE>
<PAGE> 8
CHAD THERAPEUTICS, INC.
December 31, 1999
(Unaudited)
3. Earnings Per Common Share (cont'd)
Options to purchase 1,141,000 shares of common stock at prices ranging from
$1.00 to $13.47 per share and 1,230,000 shares of common stock at prices
ranging from $1.68 to $13.47 per share were not included in the computation
of diluted earnings per share for the three and nine month periods ended
December 31, 1999 and 1998, respectively, because their effect would have
been anti-dilutive.
4. Income Taxes
Income taxes have been provided for at an effective combined Federal and
California rate of approximately 8% and 38% for the periods ended December
31, 1999 and 1998, respectively. The income tax benefit for the nine month
period ended December 31, 1999, relates primarily to Federal income tax
carrybacks. The Company has approximately $750,000 in Federal income tax
net operating loss carryforwards generated in the periods ended December
31, 1999, and deferred tax assets totaling $215,000 for which the income
tax benefit has not been recognized.
5. Geographic Information
The Company has one reportable operating segment. Geographic information
regarding the Company's sales is as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
December 31 December 31
------------------------ ------------------------
1999 1998 1999 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
United States $2,694,000 2,666,000 9,020,000 9,620,000
Germany 2,000 68,000 41,000 641,000
All other countries 263,000 249,000 952,000 779,000
---------- ---------- ---------- ----------
$2,959,000 2,983,000 10,013,000 11,040,000
========== ========== ========== ==========
</TABLE>
All long-lived assets are located in the United States.
Sales of OXYMATIC(R) conservers and OXYLITE(R) systems accounted for 49%
and 67% of the Company's sales for the nine month periods ended December
31, 1999 and 1998, respectively.
<PAGE> 9
CHAD THERAPEUTICS, INC.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
December 31, 1999
Results of Operations
Sales for the three and nine months ended December 31, 1999, decreased $24,000
(.8%) and $1,027,000 (9.3%), respectively, from the prior year's periods. While
there have been price reductions in 1999 and 1998, the decrease in sales relates
primarily to decreases in domestic unit sales of OXYMATIC conservers and OXYLITE
complete portable oxygen systems which are being affected by the current
marketing environment for home oxygen therapy discussed below.
Sales to foreign distributors represented 10% and 13% of total sales for the
nine month periods ended December 31, 1999 and 1998, respectively. Currently,
management expects an increase in sales to foreign distributors during the
upcoming fiscal year and quarter to quarter sales will fluctuate depending on
the timing of shipments. In addition, all foreign sales are denominated in US
dollars, thus annual unit sales could be affected by foreign currency
fluctuations.
The current procedure for reimbursement by Medicare for home oxygen services
provides a prospective flat fee monthly payment based solely on the patient's
prescribed oxygen requirement. Under this system, inexpensive concentrators have
grown in popularity because of low cost and less frequent servicing
requirements. At the same time, interest heightened in oxygen conserving
devices, such as the Company's products, which can extend the life of oxygen
supplies and reduce service calls by dealers, thereby providing improved
mobility for the patient and cost savings for dealers.
In addition, other changes in the health care delivery system - including the
increase in the acceptance and utilization of managed care - have stimulated a
significant consolidation among home oxygen dealers. As major national and
regional home medical equipment chains attempt to secure managed care contracts
and improve their market position, they have expanded their distribution
networks through the acquisition of independent dealers in strategic areas.
Three major national chains accounted for approximately 20% and 21% of the
Company's domestic sales for the nine months ended December 31, 1999 and 1998,
respectively. Margins on these sales may be somewhat lower due to quantity
pricing. In some instances consolidation has resulted in reduced purchases as
the former independent provider complies with the chain's purchasing policies.
The Company's products, which allow homecare dealers to provide cost efficient
home oxygen therapy, are ideally suited for use in a managed care environment
and as a tool for dealers to increase revenues
<PAGE> 10
CHAD THERAPEUTICS, INC.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
December 31, 1999
Results of Operations (cont'd)
and profits. To ensure continued awareness of the benefits of the Company's
products by chain headquarters personnel, a proactive marketing and
communication program is in effect with all of the major national chains.
The Company believes that its revenues during the past two years have been
adversely affected by several factors. During the three and nine month periods
ended December 31, 1999 and 1998, sales to national chain accounts as well as
independent dealers have been impacted by increased competitive factors,
including pricing and products with features not presently found in the
Company's products, and uncertainties regarding the size of cuts in Medicare
home oxygen reimbursement which were enacted as part of the Federal budget
process during the year ended March 31, 1998. This process was finalized and a
25% cut in home oxygen reimbursement went into effect January, 1998, with an
additional 5% cut effective January 1, 1999. The effects of managed care and
concerns over the severity of reimbursement cuts has, in many cases, resulted in
the provision of systems to patients that do not provide truly ambulatory
oxygen. Management believes these factors, including uncertainties as to how
home care providers are responding to the 25% and 5% cuts, may continue to
adversely affect the Company's revenues from sales of oxygen conserving devices
for the foreseeable future.
Management also believes future revenues may be positively affected by sales of
the TOTAL O2TM Delivery System based on its experience in the home oxygen
industry. The TOTAL O2 system provides stationary oxygen for patients at home,
portable oxygen including an oxygen conserving device for ambulation and a safe
and efficient mechanism for filling portable oxygen cylinders. This should
provide home care dealers with means to deal with the reimbursement cuts
discussed above by reducing their monthly cost of servicing patients while at
the same time providing a higher quality of service by maximizing ambulatory
capability. The Company received clearance in November, 1997, to sell this
product from the Food and Drug Administration. The Company began shipping TOTAL
O2 systems in January, 1998, and realized approximately $1,998,000 and $964,000
in sales during the nine month periods ended December 31, 1999 and 1998,
respectively. Initial sales of the TOTAL O2 system have been adversely affected
by several factors, including the overall home oxygen market climate as well as
start-up manufacturing and related supplier quality issues. The Company has
taken a number of steps to resolve the manufacturing and supplier issues. The
Company believes the sales potential for the new system is significant as the
average selling price is approximately four times that of the OXYMATIC and
OXYLITE
<PAGE> 11
CHAD THERAPEUTICS, INC.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
December 31, 1999
Results of Operations (cont'd)
systems. No estimate can currently be made regarding the level of success the
Company may achieve with the TOTAL O2 system. For information which may affect
the outcome of forward looking statements made in this paragraph see Outlook:
Issues and Risks - New Product.
Cost of sales as a percent of net sales decreased from 87.4% to 69.1% and
increased from 65.3% to 66.6% for the three and nine month periods ended
December 31, 1999, as compared to the prior year's periods. Both periods have
been affected by decreased sales volume and the corresponding impact of fixed
overhead costs on units produced. The periods ended December 31, 1998, were also
affected by costs associated with the replacement of two suppliers of components
for the TOTAL O2 system and inventory write-downs totaling $513,000, of which
$77,000 was charged to General and Administrative expenses.
Selling, general and administrative expenditures decreased from $1,682,000 to
$1,302,000 and from $4,664,000 to $4,166,000 for the three and nine month
periods ended December 31, 1999 and 1998, respectively. The Company anticipates
that recent cost reduction efforts, including reductions in personnel, should
align staffing and operating expenses more closely with current sales
expectations, but will be offset to some extent by commissions to be paid to the
Company's new field sales force of manufacturer's representatives. This field
sales force has recently been hired and trained, and now provides full coverage
in the United States. Historically, the Company has relied entirely on its
internal sales personnel and extensive marketing efforts to generate sales. The
shift to a field sales force will cause selling, general and administrative
expenses to fluctuate more closely with sales volume. Research and development
expenses decreased by $87,000 for the nine month period ended December 31, 1999,
as compared to the prior year's period. Currently, management expects research
and development expenditures to total approximately $525,000 in the fiscal year
ended March 31, 2000, on projects to enhance and expand the Company's product
line. Interest income declined $17,000 for the nine month period ended December
31, 1999, as compared to the prior year's period due to the reduction in the
Company's cash balances early in 1999.
Financial Condition
At December 31, 1999, the Company had cash totaling $1,930,000 or 13% of total
assets, as compared to $137,000 (1%) at March 31, 1999. Net working capital
decreased from
<PAGE> 12
CHAD THERAPEUTICS, INC.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
December 31, 1999
Financial Condition (cont'd)
$10,164,000 at March 31, 1999 to $9,556,000 at December 31, 1999. Accounts
receivable decreased $49,000 during the nine month period ended December 31,
1999. Future increases or decreases in accounts receivable will generally
coincide with sales volume fluctuations and the timing of shipments to foreign
customers. During the same period, inventories decreased $1,658,000. This
decrease relates primarily to utilization of raw materials purchased in the
prior year for the manufacture of the new TOTAL O2 product line. The Company
attempts to maintain sufficient inventories to meet its customer needs as orders
are received. Thus, future inventory and related accounts payable levels will be
impacted by the ability of the Company to maintain its safety stock levels. If
safety stock levels drop below target amounts, then inventories in subsequent
periods will increase more rapidly as inventory balances are replenished.
Management believes funds derived from operations should be adequate to meet the
Company's present cash requirements. The Company expects capital expenditures
during the next twelve months to be approximately $250,000.
The Company has not adopted any programs which provide for post employment
retirement benefits, however, it has on occasion provided such benefits to
individual employees.
Year 2000
All of the Company's systems performed properly on January 1, 2000, and the
Company does not anticipate any year 2000 compliance problems.
Outlook: Issues & Risks
This quarterly report contains forward-looking statements which reflect the
Company's current views with respect to future events and financial performance.
These forward-looking statements are subject to certain risks and uncertainties
which may cause actual operating results to differ materially from currently
anticipated results. Among the factors that could cause actual results to differ
materially are the following:
Dependence Upon a Single Product Line
Although the Company currently markets a number of products, these products
comprise a single product line for patients requiring supplementary oxygen. The
Company's future performance is thus dependent upon developments affecting this
segment of the health care market and the Company's ability to remain
competitive within this market sector.
<PAGE> 13
CHAD THERAPEUTICS, INC.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
December 31, 1999
New Products
The Company's future growth in the near term will depend in significant part
upon the commercial success of the TOTAL O2 Delivery System and other new
products which are under development. The success of these new products will
depend upon the health care community's perception of the system's capabilities,
clinical efficacy and benefit to patients, obtaining timely regulatory approval,
as well as timely resolution of manufacturing and supplier issues. In addition,
prospective sales will be impacted by the degree of acceptance achieved among
home oxygen dealers and patients requiring supplementary oxygen. As with the
introduction of any new product, the Company's ability to successfully promote
the TOTAL O2 Delivery System and other new products cannot be assessed at this
time.
Consolidation of Home Care Industry
The home health care industry is undergoing significant consolidation. As a
result, the market for the Company's products is increasingly influenced by
major national chains. Three major national chains presently account for 20% of
the Company's domestic sales. Future sales may be increasingly dependent on a
limited number of customers which may have an impact on margins due to quantity
pricing.
Competition
Chad's success in the early 1990's has drawn new competition to vie for a share
of the home oxygen market. These new competitors include both small and very
large companies. While the Company believes the quality of its products and its
established reputation will continue to be a competitive advantage, some
competitors have successfully introduced lower priced products with features not
currently found in the Company's products but which do not provide oxygen
conserving capabilities comparable to the Company's products. No assurance can
be given that increased competition in the home oxygen market will not continue
to have an adverse affect on the Company's operations.
Rapid Technological Change
The health care industry is characterized by rapid technological change. The
Company's products may become obsolete as a result of new developments. The
Company's ability to remain competitive will depend to a large extent upon its
ability to anticipate and stay abreast of new technological developments related
to oxygen therapy. The Company has limited internal research and development
capabilities. Historically, the Company has contracted with outside parties to
develop new products. Some of the Company's
<PAGE> 14
CHAD THERAPEUTICS, INC.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
December 31, 1999
Rapid Technological Change (cont'd)
competitors have substantially greater funds and facilities to pursue research
and development of new products and technologies for oxygen therapy.
Potential Changes in Administration of Health Care
A number of bills proposing to regulate, control or alter the method of
financing health care costs have been discussed and certain of such bills have
been introduced in Congress and various state legislatures. There are wide
variations among these bills and proposals. Because of the uncertain state of
the health care proposals, it is not meaningful at this time to predict the
effect on the Company if any of these proposals is enacted.
Approximately 80% of home oxygen patients are covered by Medicare and other
government programs. Federal law has altered the payment rates available to
providers of Medicare services in various ways during the last several years.
Congress has passed legislation which has reduced Medicare spending. It cannot
yet be predicted how future changes in reimbursement levels will affect the home
oxygen industry and there can be no assurance that such changes will not have an
adverse effect on the Company's business.
Patents and Trademarks
The Company pursues a policy of obtaining patents for appropriate inventions
related to products marketed or manufactured by the Company. The Company
considers the patentability of its products to be significant to the success of
the Company. To the extent that the products to be marketed by the Company do
not receive patent protection, competitors may be able to manufacture and market
substantially similar products. Such competition could have an adverse impact
upon the Company's business.
Product Liability
The nature of the Company's business subjects it to potential legal actions
asserting that the Company is liable for damages for product liability claims.
Although the Company maintains products liability insurance in an amount which
it believes to be customary in the industry, there is no assurance that this
insurance will be sufficient to cover the costs of defense or judgments which
might be entered against the Company. The type and frequency of these claims
could have an adverse impact on the Company's results of operations and
financial position.
<PAGE> 15
CHAD THERAPEUTICS, INC.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
December 31, 1999
Availability of Third Party Component Products
The Company tests and packages its products in its own facility. Some of its
other manufacturing processes are conducted by other firms and the Company
expects to continue using outside firms for certain manufacturing processes for
the foreseeable future and is thus dependent on the reliability and quality of
parts supplied by these firms. The Company's agreements with its suppliers are
terminable at will or by notice. The Company believes that other suppliers would
be available in the event of termination of these arrangements. No assurance can
be given, however, that the Company will not suffer a material disruption in the
supply of its products.
Accounting Standards
Accounting standards promulgated by the Financial Accounting Standards Board
change periodically. Changes in such standards may have an impact on the
Company's future financial position.
Additional Risk Factors
Additional factors which might affect the Company's performance may be listed
from time to time in the reports filed by the Company with the Securities and
Exchange Commission.
<PAGE> 16
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.
CHAD THERAPEUTICS, INC.
(Registrant)
Date 02/09/00 /s/ THOMAS E. JONES
------------------------------------
Thomas E. Jones
Chief Executive Officer
Date 02/09/00
/s/ EARL L. YAGER
------------------------------------
Earl L. Yager
Executive Vice President,
Chief Financial Officer and
Secretary
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> APR-01-1999
<PERIOD-END> DEC-31-1999
<EXCHANGE-RATE> 1,000
<CASH> 1,930
<SECURITIES> 0
<RECEIVABLES> 2,116
<ALLOWANCES> 0
<INVENTORY> 5,984
<CURRENT-ASSETS> 10,837
<PP&E> 5,436
<DEPRECIATION> 2,683
<TOTAL-ASSETS> 14,722
<CURRENT-LIABILITIES> 1,281
<BONDS> 0
0
0
<COMMON> 13,070
<OTHER-SE> 370
<TOTAL-LIABILITY-AND-EQUITY> 14,722
<SALES> 10,013
<TOTAL-REVENUES> 0
<CGS> 6,669
<TOTAL-COSTS> 4,546
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,178)
<INCOME-TAX> 93
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,271)
<EPS-BASIC> (.13)
<EPS-DILUTED> (.13)
</TABLE>
