<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period ended December 31, 1995
Commission File No. 0-11336
----------------------------
CIPRICO INC
(Exact name of Small Business Issuer as specified in its charter)
DELAWARE 41-1749708
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2800 Campus Drive
Plymouth, Minnesota 55441
(Address of principal executive offices)
Issuer's telephone number, including area code: (612) 551-4000
Check whether the Issuer (1) 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 X No
--- ---
Shares of Common Stock outstanding at February 7, 1996, 2,297,350 shares.
Transitional Small Business Disclosure Format (check one):
Yes No X
--- ---
<PAGE> 2
PART I
Item 1. Financial Statements
CIPRICO INC AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 31 September 30
1995 1995
Assets (Unaudited)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 5,863,729 $ 3,425,471
Marketable Securities -- 1,267,482
Receivables - net 2,943,948 3,315,286
Inventories (Note 2) 1,645,588 1,577,838
Other current assets 159,939 115,490
---------- ----------
Total current assets 10,613,204 9,701,567
Furniture and equipment - net 1,116,814 1,212,434
Other assets 7,639 6,066
---------- ----------
Total assets $11,737,657 $10,920,067
========== ==========
Liabilities and Stockholders' Equity
Current Liabilities:
Current installments of obligations
under capital leases $ 26,812 $ 27,330
Accounts payable 2,321,256 2,346,639
Accrued expenses 643,594 588,908
Income taxes payable 65,388 76,454
Deferred revenue 229,949 89,548
---------- ----------
Total current liabilities 3,286,999 3,128,879
Long-term installments of obligations
under capital lease 32,119 40,102
Deferred rent 49,379 54,822
---------- ----------
Total liabilities 3,368,497 3,223,803
Stockholders' equity (Note 3):
Capital stock 22,722 22,659
Additional paid-in capital 6,661,706 6,633,034
Retained earnings 1,703,070 997,509
Unrealized holding gain
on marketable securities -- 60,400
Accumulated translation adjustments (18,338) (17,338)
---------- ----------
Total stockholders' equity 8,369,160 7,696,264
---------- ----------
Total liabilities &
stockholders equity $11,737,657 $10,920,067
========== ==========
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements.
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<PAGE> 3
CIPRICO INC AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended December 31
1995 1994
<S> <C> <C>
Net sales $ 6,086,902 $ 3,668,527
Cost of sales 3,304,310 2,016,993
--------- ---------
Gross profit 2,782,592 1,651,534
Sales & Marketing expenses 1,154,680 917,097
General and administrative expenses 537,677 323,430
Research & development expenses 513,206 377,652
--------- ---------
Earnings from operations 577,029 33,355
Other income 133,532 66,256
--------- ---------
Earnings before taxes 710,561 99,611
Income tax expense 5,000 5,000
--------- ---------
Net Earnings $ 705,561 $ 94,611
========= =========
Earnings per share - primary $ .28 $ .04
Earnings per share - fully diluted $ .28 $ .04
========= =========
Average primary shares 2,480,710 2,147,982
Average fully diluted shares 2,543,405 2,147,982
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements.
-3-
<PAGE> 4
CIPRICO INC AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended December
1995 1994
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 705,561 $ 94,611
Adjustments to reconcile net earnings
to net cash provided by
(used in) operating activities
Depreciation 219,447 180,488
Loss on retirement of fixed assets 255 1,185
Gain on sale of marketable securities (60,424) --
Changes in operating assets & liabilities
Inventory (67,750) (473,131)
Accounts receivable 371,338 117,738
Other current assets (44,449) 33,196
Accounts payable (25,383) (216,076)
Accrued expenses 54,686 (72,459)
Income taxes payable (11,066) 352
Deferred revenue 140,401 33,245
Other, net (6,443) (1,154)
---------- ----------
NET CASH FLOWS PROVIDED BY (USED IN)
OPERATING ACTIVITIES 1,276,173 (296,005)
CASH FLOWS FROM INVESTING ACTIVITIES:
Equipment purchases (124,082) (174,616)
Proceeds from sale of equipment -- 16,043
Other assets, net (1,573) 150
Proceeds from sale of securities 1,267,506 --
---------- ----------
NET CASH FLOWS PROVIDED BY (USED IN)
INVESTING ACTIVITIES 1,141,851 (158,423)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments under capital lease
obligations (8,501) (5,686)
Proceeds from issuance of common stock 28,735 48,659
---------- ----------
NET CASH FLOWS PROVIDED BY
FINANCING ACTIVITIES 20,234 42,973
---------- ----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 2,438,258 (411,455)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 3,425,471 2,176,125
CASH AND CASH EQUIVALENTS AT END OF
PERIOD $ 5,863,729 $ 1,764,670
========== ==========
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements.
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<PAGE> 5
CIPRICO INC AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
December 31, 1995
(Unaudited)
Note 1 Unaudited Statements
The accompanying unaudited condensed financial statements have been
prepared by the Company in accordance with generally accepted accounting
principles, pursuant to the rules and regulations of the Securities and
Exchange Commission. Pursuant to such rules and regulations, certain financial
information and footnote disclosures normally included in the financial
statements have been condensed or omitted. In the opinion of management, the
accompanying unaudited condensed, consolidated financial statements contain all
necessary adjustments, consisting only of a recurring nature, and disclosures
to present fairly the financial position as of December 31, 1995 and the
results of operations and cash flows for the three month periods ended December
31, 1995 and 1994. These condensed consolidated financial statements should be
read in conjunction with the consolidated financial statements and the notes
thereto included in the Company's Annual Report to Shareholders for fiscal
1995.
Note 2 Inventories
Inventories were comprised of the following:
<TABLE>
<CAPTION>
December 31, 1995 September 30, 1995
<S> <C> <C>
Raw Materials $ 574,839 $ 397,172
Work-in Process 348,662 231,622
Finished Goods 722,087 949,044
--------- ---------
$ 1,645,588 $ 1,577,838
========= =========
</TABLE>
Note 3 Earnings Per Share
Earnings per common share primary and fully diluted were computed using
the weighted average number of common and common equivalent shares outstanding
during the respective periods. Common equivalent shares included in the
computation represent shares issuable upon assumed exercise of stock options
which would have had a dilutive effect.
-5-
<PAGE> 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
LIQUIDITY AND CAPITAL RESOURCES
(December 31, 1995 vs. September 30, 1995)
During the first quarter of fiscal year 1996, the level of cash and cash
equivalents increased by $2,438,258. Operating activities generated $1,276,173
of cash mainly from net earnings of $705,561, the non-cash expense of
depreciation of $219,447 and a decrease in accounts receivable of $371,338.
Investing activities generated net cash of $1,141,851. Sale of the Company's
marketable securities generated $1,267,506 and was partially offset by a
$124,082 investment in capital equipment
Management feels there is adequate liquidity to meet the immediate
on-going operating needs of the Company.
RESULTS OF OPERATIONS
(Three months ended December 31, 1995
compared to three months ended December 31, 1994)
Sales during the first quarter of fiscal year 1996 increased by 66% to
$6,086,902 when compared to sales of $3,668,527 for the same period last year.
The increase is attributed to continued product acceptance and, addition of new
customers in the visual computing markets for disk arrays. The film/video
production market was the Company's largest market segment for shipments in the
first quarter. Management anticipates improved sales over the previous fiscal
year subject to growth in new applications and markets for disk arrays.
Gross profit margin for the first quarter of fiscal year 1996 was 45.7%
compared to 45.0% for the same period last year. The increase is due to
manufacturing efficiencies from a higher sales volume and product cost
controls. Management anticipates future gross profit margins will maintain at
approximately the current quarter's level, but are highly dependent on customer
mix and product mix.
Sales and Marketing expenses were 19.0% of sales for the first quarter of
fiscal year 1996 compared to 25.0% for the same period last year. Actual
dollars of spending increased in the first quarter by $237,583, when compared
to the same period last year. The increase in spending is largely attributed
to the sales staff and related commissions expense associated with a higher
level of sales. Management anticipates future sales and marketing spending for
the remainder of the fiscal year will be higher than last year, as the Company
increases the number of sales and marketing people to address the anticipated
growth in the vertical markets for disk arrays.
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<PAGE> 7
General and Administrative expenses were 8.8% of revenue for both the
first quarter of fiscal year 1996 and 1995. The actual dollars of spending
increased by $214,247 mainly due to increases in bad debt reserves and,
management and employee bonuses. Management anticipates general and
administrative expenses for the remainder of the fiscal year will be greater
than last year based on expected continued sales growth, and are expected to be
approximately 7-9% of sales.
Research and Development spending was $513,206 for the first quarter of
fiscal year 1996 compared to $377,652 for the same period last year. The
current quarter spending is 8.4% of sales compared to 10.3% for the same period
last year. Spending for the first quarter of fiscal year 1996 was to develop
new disk array products, which complement the Company's current products, and
for research work on the Company's next generation of disk arrays. Management
anticipates research and development expenses for the remainder of the year
should be in line with management's objective of 9-12% of sales, to support
expected new product development and sales growth.
The Company's "Other Income" reflects interest income generated during the
three month period from investment of excess cash balances and royalty income
from technology agreements with two customers. For the first quarter of fiscal
1996, this amount includes a gain of $60,424 from the sale of the Company's
marketable securities.
The Company's Net Earnings, for the first quarter of fiscal year 1996 of
$705,561, are at an untaxed basis due to the Company having approximately
$1,700,000 of net operating loss carryforwards and, $30,000 of tax credit
carryforwards as of September 30, 1995.
-7-
<PAGE> 8
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Annual Meeting of the Registrant's
shareholders was held on Thursday, January 25, 1996.
(b) At the Annual Meeting the number of directors was
set at six by a vote of 2,155,317 for, 16,272 against
and 4,000 abstentions.
(c) Ronald B. Thomas and Peyton Gannaway were elected
to serve as Class Two directors for a term of
three years and until their successors have been duly
elected and qualified. Each nominee received at least
2,097,648 shares in his favor with no more than 77,941
shares withholding their vote. The term of office of
Robert H. Kill and Gary Deaner continues until the 1997
meeting. The term of office of Donald H. Soukup and
William N. Wray continues until the 1998 Annual
Meeting.
(d) Shareholders voted on the adoption of a five-part
resolution in order to amend two existing stock
option plans and to adopt two additional employee
benefit plans. Specifically, the resolution (1)
increased by 100,000 the number of shares reserved for
issuance under the 1992 Nonqualified Stock Option Plan
(the "1992 Plan"), (2) adopted an amendment to the
automatic nonemployee director option grants under the
1992 plan, (3) increased by 250,000 the number of
shares reserved for issuance under the 1994 Incentive
Stock Option Plan, (4) adopted the Ciprico Inc. 1996
Restricted Stock Plan and (5) adopted the Ciprico Inc.
1996 Employee Stock Purchase Plan. With respect to
approval of this resolution, 926,968 shares voted in
favor, 171,084 were opposed, 7,669 shares abstained and
1,069,868 shares were represented by broker non-votes.
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<PAGE> 9
Item 5. Other Information
CAUTIONARY STATEMENTS FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS
OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Ciprico wishes to caution readers that statements in this
report and elsewhere which are looking forward in time involve risks
and uncertainties. Ciprico's actual results could differ materially
from those expressed in any forward looking statements made by the
Company due to important factors including the following:
-- The Company sells its products into six visual computing
vertical markets which include: film/video production, oil/gas
exploration, digital prepress, medical imaging,
satellite/telemetry and video services. Continued growth in
sales in these markets is essential to company growth.
-- Gross margins on product sales are highly dependent on
the cost of disk drives. There is no assurance the Company can
sustain the current gross margin levels given the price
fluctuations of new generation disk drives.
-- Component parts for the Company's products have been on
allocation from time to time from its suppliers, which means
parts could become difficult to obtain, thus having an adverse
effect on the Company's results of operations.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None.
(b) Reports on Form 8-K
No report on Form 8-K was filed during the quarter ended
December 31, 1995.
-9-
<PAGE> 10
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Issuer has duly caused this report to be signed on its behalf of the
undersigned thereunto duly authorized.
CIPRICO INC
(the "Issuer")
Date: February 7, 1996
/s/ Robert H. Kill
--------------------------------------------
Robert H. Kill, President
(Principal Executive Officer)
/s/ Cory J. Miller
--------------------------------------------
Cory J. Miller, Vice President of
Finance/Chief Financial Officer
(Principal Financial and Accounting Officer)
-10-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 5,863,729
<SECURITIES> 0
<RECEIVABLES> 3,196,313
<ALLOWANCES> 252,365
<INVENTORY> 1,645,588
<CURRENT-ASSETS> 10,613,204
<PP&E> 5,087,055
<DEPRECIATION> 3,970,241
<TOTAL-ASSETS> 11,737,657
<CURRENT-LIABILITIES> 3,286,999
<BONDS> 0
0
0
<COMMON> 8,387,498
<OTHER-SE> (18,338)
<TOTAL-LIABILITY-AND-EQUITY> 11,737,657
<SALES> 6,086,902
<TOTAL-REVENUES> 6,086,902
<CGS> 3,304,310
<TOTAL-COSTS> 3,304,310
<OTHER-EXPENSES> 452,021
<LOSS-PROVISION> 63,700
<INTEREST-EXPENSE> 2,221
<INCOME-PRETAX> 710,561
<INCOME-TAX> 5,000
<INCOME-CONTINUING> 705,561
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 705,561
<EPS-PRIMARY> .28
<EPS-DILUTED> .28
</TABLE>
