<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 March 31, 1996
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 April 23, 1996, 3,487,900 shares.
Transitional Small Business Disclosure Format (check one):
Yes No X.
-- --
Total of Sequentially Numbered Pages: 10
No Exhibit Index
<PAGE> 2
PART I
Item 1. Financial Statements
CIPRICO INC AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
March 31 September 30
1996 1995
<S> <C> <C>
Assets (Unaudited)
Current Assets:
Cash and cash equivalents $ 6,041,025 $ 3,425,471
Marketable securities -- 1,267,482
Accounts receivable - net 3,515,092 3,315,286
Inventories (Note 2) 2,452,464 1,577,838
Deferred income taxes 308,000 --
Other current assets 140,389 115,490
---------- ---------
Total current assets 12,456,970 9,701,567
Furniture and equipment - net 1,498,993 1,212,434
Other assets 7,840 6,066
----------- ----------
Total assets $13,963,803 $10,920,067
=========== ===========
Liabilities and Stockholders' Equity
Current Liabilities:
Current installments of obligations
under capital leases $ 28,976 $ 27,330
Accounts payable 2,817,254 2,346,639
Accrued expenses 886,348 588,908
Income taxes payable 530,285 76,454
Deferred revenue 167,913 89,548
----------- -----------
Total current liabilities 4,430,776 3,128,879
Long-term installments of obligations
under capital lease 22,399 40,102
Deferred rent 42,646 54,822
----------- -----------
Total liabilities 4,495,821 3,223,803
Stockholders' Equity (Note 3):
Common stock 34,875 33,989
Additional paid-in capital 6,842,553 6,621,704
Retained earnings 2,612,383 997,509
Unrealized gain on
marketable securities -- 60,400
Accumulated translation
adjustment (21,829) (17,338)
----------- -----------
Total stockholders' equity 9,467,982 7,696,264
----------- -----------
Total liabilities &
stockholders' equity $13,963,803 $10,920,067
=========== ===========
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements.
-2-
<PAGE> 3
CIPRICO INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31 Six Months Ended March 31
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net sales $6,695,977 $3,107,308 $12,782,879 $6,775,835
Cost of sales 3,403,401 1,650,356 6,707,711 3,667,349
---------- ---------- ---------- ----------
Gross profit 3,292,576 1,456,952 6,075,168 3,108,486
Sales and marketing 1,173,803 889,518 2,328,483 1,806,615
General and administrative 550,726 333,101 1,088,403 656,531
Research and development 602,896 431,442 1,116,102 809,094
--------- --------- --------- ---------
Earnings (loss) from operations 965,151 (197,109) 1,542,180 (163,754)
Other income, net 99,162 79,867 232,694 146,123
--------- --------- --------- ---------
Earnings (loss) before
income taxes 1,064,313 (117,242) 1,774,874 (17,631)
Income tax expense 155,000 4,000 160,000 9,000
--------- --------- --------- ---------
Net earnings (loss) $909,313 $(121,242) $1,614,874 $(26,631)
========= ========= ========== ========
Earnings (loss) per
common share .24 $ (.04) $ .43 $ (.01)
========= ========= ========== ========
Weighted average common
shares outstanding (Note 3) 3,830,802 3,218,293 3,775,938 3,164,270
</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>
Six Months Ended March 31
1996 1995
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss) $1,614,874 (26,631)
Adjustments to reconcile net earnings (loss) to
net cash provided by operating activities:
Depreciation and amortization 439,268 361,089
Deferred income taxes (308,000) --
(Gain) loss on retirement of fixed assets 1,658 (217)
Gain on sale of marketable securities (60,424) --
Changes in operating assets and liabilities:
Accounts receivable - net (199,806) 978,703
Inventories (874,626) (228,302)
Other current assets (24,899) 31,432
Accounts payable 470,615 (566,201)
Accrued expenses 297,440 (146,325)
Income taxes payable 453,831 3,299
Deferred revenue 78,365 21,902
Other, net (17,448) (4,545)
-------- --------
NET CASH FLOWS PROVIDED BY
OPERATING ACTIVITIES 1,870,848 424,204
CASH FLOWS FROM INVESTING ACTIVITIES:
Furniture and equipment purchases (728,365) (344,779)
Proceeds from sale of furniture and equipment 880 41,871
Other assets, net (1,774) (440)
Proceeds from sale of marketable securities 1,267,506 --
--------- -------
NET CASH FLOWS PROVIDED BY (USED IN)
INVESTING ACTIVITIES 538,247 (303,348)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments under capital leases (16,057) (8,786)
Proceeds from issuance of common stock
to employees 222,516 285,790
------- -------
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES 206,459 277,004
------- -------
NET INCREASE IN CASH AND CASH EQUIVALENTS 2,615,554 397,860
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 3,425,471 2,176,125
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD $6,041,025 $2,573,985
========== ===========
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements
-4-
<PAGE> 5
CIPRICO INC AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
March 31, 1996
(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 March 31, 1996 and the results
of operations and cash flows for the three and six month periods ended March
31, 1996 and March 31, 1995. 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>
March 31, 1996 September 30, 1995
<S> <C> <C>
Raw Materials $ 775,609 $ 397,172
Work-in Process 714,563 231,622
Finished Goods 962,292 949,044
--------- ---------
$2,452,464 $1,577,838
========== ==========
</TABLE>
Note 3 Earnings (Loss) Per Share
Earnings per common and common stock equivalent share are computed by
dividing net earnings by the weighted average number of common and common stock
equivalent shares outstanding during the respective periods. Common stock
equivalent shares included in the computation represent shares issuable upon
assumed exercise of stock options which would have had a dilutive effect.
Loss per common share was determined using the weighted average number of
common shares outstanding. Stock options were excluded due to their
antidilutive effect.
Note 4 Stock Split
On March 27, 1996, the Company declared a three-for-two stock split which
was distributed on April 12, 1996. Share and per share data for all periods
presented have been restated to reflect the stock split.
-5-
<PAGE> 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
LIQUIDITY AND CAPITAL RESOURCES
(March 31, 1996 vs. September 30, 1995)
During the second quarter of fiscal year 1996, the level of cash and cash
equivalents increased by $2,615,554. Operating activities generated $1,870,848
of cash mainly from net earnings of $1,614,874, and the non-cash expense of
depreciation and amortization of $439,268. Increases in accounts receivable of
$199,806 and inventories of $874,626 occurred due to the increase in net sales.
These increases were partially offset by increases in accounts payable of
$470,615, accrued expenses of $297,440 and income taxes payable of $453,831.
Investing activities generated net cash of $538,247 mainly from the $1,267,506
in proceeds from the sale of marketable securities. The proceeds were
partially offset by a $728,365 investment in capital equipment. Proceeds
provided by financing activities were from the issuance of common stock for the
exercise of stock options by employees.
Management feels there is adequate liquidity to meet the on-going
operating needs of the Company.
RESULTS OF OPERATIONS
(Three and six months ended March 31, 1996
compared to three and six months ended March 31, 1995.)
Net sales in the second quarter of fiscal 1996 increased by 115% to
$6,695,977 when compared to sales of $3,107,308 for the same period last year.
Net sales for the six month period of fiscal 1996 were up 89% to $12,782,879
when compared to $6,775,835 for the same period last year. The increase in net
sales was attributed to strong product acceptance for disk arrays in the visual
computing market generally and the film/video production market segment
particularly. Several new customers in other vertical markets also contributed
to the sales growth.
The Company's continued international focus resulted in export sales of
$4.8 million or 37.7% of net sales during the six-month period ended March 31,
1996 compared to $2.1 million or 31.0% of net sales for same period last year.
Management anticipates sales growth over the previous year's level, due to
growth in the number of customers and product applications for its disk array
products.
-6-
<PAGE> 7
Gross profit, as a percent of net sales, for the most recent three and six
month periods were 49.2% and 47.5%, respectively compared to 46.9% and 45.9%,
respectively for the same periods last year. Gross profit for the current
six-month period was higher than the same period last year due to a reduction in
disk drive costs and strong sales of the Company's new 6900 disk array product,
which carries a higher gross profit margin. Management anticipates gross profit
margins for the remainder of fiscal 1996 should approximate the level attained
during the first six months of fiscal 1996, however, gross profit margins are
highly dependent on a number of factors including customer and product mix and
disk drive costs. Disk drives are a significant cost component of total disk
array costs and there is no assurance the Company can sustain the current gross
margin levels given the price fluctuations of new generation disk drives.
Sales and marketing expenses, as a percent of net sales, for the most
recent three and six month periods were 17.5% and 18.2% respectively compared to
28.6% and 26.7%, respectively for the same periods last year. These expenses,
decreased due to the increased sales volume when compared to the same periods
last year. The actual dollar spending for the current periods was higher than
the same periods last year due primarily to commission expense associated with
higher sales levels and an increase in the number of sales and marketing people
hired to address the growing market segments. Management anticipates sales and
marketing expenses for the remainder of fiscal 1996 will be higher than last
year, but lower as a percent of sales when compared to last year.
General and administrative expenses, as a percent of net sales, for the
most recent three and six month periods were 8.2% and 8.5%, respectively
compared to 10.7% and 9.7%, respectively for the same periods last year. The
percentage decrease was due primarily to the increased sales volume in fiscal
1996, when compared to the same periods of last year. Actual dollar spending
for the current periods was higher than last year due primarily to management
and employee bonuses and bad debt expense. Management anticipates general and
administrative expenses for the remainder of the fiscal year to be approximately
7-9% of net sales.
-7-
<PAGE> 8
Research and development expenses, as a percent of net sales, for the most
recent three and six month periods were 9.0% and 8.7%, respectively compared to
13.9% and 11.9%, respectively, for the same periods last year. The percentage
decrease was primarily due to the higher sales volume in the current six-month
period compared to the same period last year. Actual dollar spending during the
current periods was higher than the same periods last year, due to increases in
development expenses for the Fibre Channel disk array, future product
development expenses and engineering staff. Management anticipates research and
development expenses for the remainder of the fiscal year, to be approximately
8% to 10% of net sales.
Other income reflects the interest income from investment of excess cash
balances and royalty income from technology license agreements with two
customers. The increase for the current periods of fiscal 1996, when compared
to the same periods last year, is due primarily to increased interest income
from higher average cash balances and a gain of $60,424 from the sale of the
Company's marketable securities.
Income tax expense was $160,000 for the first six months of fiscal 1996
compared to $9,000 for the same period last year. This increase reflects the
change in operating results of $1.8 million of pre-tax earnings for the first
six month period of fiscal 1996 compared to a pre-tax loss of $18,000 for the
same period last year. In the second quarter of fiscal 1996, the Company began
to accrue income tax expense based on an estimated tax liability for fiscal 1996
resulting in an effective tax rate for the first six months of fiscal 1996 of 9%
due to utilization of $1.7 million net operating loss carryforwards. The
effective tax rate for fiscal 1996 is estimated to be 10% due to
the utilization of the net operating loss carryforwards. The Company expects
that its net loss carryforwards will be fully exhausted during fiscal 1996.
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
Reference is made to Item 4 of the Registrant's Form 10QSB for the
quarter ended December 31, 1995 which is incorporated herein by
reference.
-8-
<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 March
31, 1996.
-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: April 25, 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> 6-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> MAR-31-1996
<CASH> 6,041,025
<SECURITIES> 0
<RECEIVABLES> 3,800,409
<ALLOWANCES> 285,317
<INVENTORY> 2,452,464
<CURRENT-ASSETS> 12,456,970
<PP&E> 5,670,866
<DEPRECIATION> (4,171,873)
<TOTAL-ASSETS> 13,963,803
<CURRENT-LIABILITIES> 4,430,776
<BONDS> 0
0
0
<COMMON> 9,489,811
<OTHER-SE> (21,829)
<TOTAL-LIABILITY-AND-EQUITY> 13,963,803
<SALES> 12,782,879
<TOTAL-REVENUES> 12,782,879
<CGS> 6,707,711
<TOTAL-COSTS> 6,707,711
<OTHER-EXPENSES> 993,732
<LOSS-PROVISION> 100,517
<INTEREST-EXPENSE> 4,249
<INCOME-PRETAX> 1,774,874
<INCOME-TAX> 160,000
<INCOME-CONTINUING> 1,614,874
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,614,874
<EPS-PRIMARY> .43
<EPS-DILUTED> .43
</TABLE>
