<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 June 30, 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 August 5, 1996,
5,001,652 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>
June 30 September 30
1996 1995
Assets (Unaudited)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $38,157,490 $ 3,425,471
Marketable securities -0- 1,267,482
Accounts receivable - net 3,235,922 3,315,286
Inventories (Note 2) 2,343,459 1,577,838
Deferred income taxes 308,000 --
Other current assets 132,578 115,490
--------- ---------
Total current assets 44,177,449 9,701,567
Furniture and equipment - net 1,616,276 1,212,434
Other assets 13,057 6,066
--------- ---------
Total assets $45,806,782 $10,920,067
========== ==========
Liabilities and Stockholders' Equity
Current Liabilities:
Current installments of obligations
under capital leases $ 27,212 $ 27,330
Accounts payable 2,584,339 2,346,639
Accrued expenses 1,065,653 588,908
Income taxes payable 675,710 76,454
Deferred revenue 191,897 89,548
-------- --------
Total current liabilities 4,544,811 3,128,879
Long-term installments of obligations
under capital lease 18,282 40,102
Deferred rent 35,912 54,822
--------- ---------
Total liabilities 4,599,005 3,223,803
Stockholders' Equity (Note 3):
Common stock 50,005 33,989
Additional paid-in capital (Note 5) 37,670,180 6,621,704
Retained earnings 3,508,498 997,509
Unrealized gain on
marketable securities -- 60,400
Accumulated translation
adjustment (20,906) (17,338)
--------- ---------
Total stockholders' equity 41,207,777 7,696,264
---------- ---------
Total liabilities &
stockholders' equity $45,806,782 $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 June 30 Nine Months Ended June 30
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net sales $ 7,100,950 $ 3,876,952 $ 19,883,829 $ 10,652,787
Cost of sales 3,678,669 1,974,144 10,386,380 5,641,493
--------- ---------- ---------- ---------
Gross profit 3,422,281 1,902,808 9,497,449 5,011,294
Sales and marketing 1,354,847 1,094,920 3,683,330 2,901,535
General and administrative 676,828 396,248 1,765,231 1,052,779
Research & development expense 552,170 448,725 1,668,272 1,257,819
--------- --------- ---------- -----------
Earnings (loss) from operations 838,436 (37,085) 2,380,616 (200,839)
Other income 221,679 77,719 454,373 223,842
--------- -------- ---------- ---------
Earnings before income taxes 1,060,115 40,634 2,834,989 23,003
Income tax expense 164,000 6,000 324,000 15,000
-------- --------- --------- --------
Net income $ 896,115 $ 34,634 $ 2,510,989 $ 8,003
Earnings per common share $ .20 $ .01 $ .63 $ .00
Weighted average common
shares outstanding (Note 3) 4,446,713 3,466,769 3,999,530 3,343,284
</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>
Nine Months Ended June 30
CASH FLOWS FROM OPERATING ACTIVITIES: 1996 1995
<S> <C> <C>
Net income $ 2,510,989 $ 8,003
Adjustments to reconcile net income
to net cash provided by (used in)
Operating Activities:
Depreciation and amortization 679,641 542,052
Deferred income taxes (308,000) --
(Gain) loss on retirement of fixed assets 2,972 (33,814)
Gain on sales of marketable securities (60,424) (4,093)
Excess of fair value over option price
for stock options exercised -- 59,466
Changes in operating assets & liabilities
Accounts receivable - net 79,364 30,320
Inventories (765,621) (68,492)
Other current assets (17,088) 85,854
Accounts payable 237,700 (557,122)
Accrued expenses 476,745 (42,995)
Income taxes payable 599,256 (9,398)
Deferred revenue 102,349 --
Other, net (22,478) (16,381)
------- --------
NET CASH FLOWS PROVIDED BY
OPERATING ACTIVITIES 3,515,405 23,945
CASH FLOWS FROM INVESTING ACTIVITIES:
Furniture and equipment purchases (1,088,394) (500,230)
Proceeds from sale of furniture and
equipment 1,939 125,458
Proceeds from sale of marketable
securities 1,267,506 --
Other assets, net (6,991) (4,938)
Net change in temporary cash investments -- 82,456
--------- --------
NET CASH FLOWS PROVIDED BY (USED IN)
INVESTING ACTIVITIES 174,060 (297,254)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments under capital lease (21,938) (15,050)
Proceeds from issuance of common stock
(Note 5) 31,064,492 504,812
---------- --------
NET CASH FLOWS PROVIDED BY
FINANCING ACTIVITIES 31,042,554 489,762
NET INCREASE IN CASH AND
CASH EQUIVALENTS 34,732,019 216,453
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 3,425,471 2,176,125
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD $38,157,490 $ 2,392,578
=========== ===========
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements.
-4-
<PAGE> 5
CIPRICO INC AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
June 30, 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 June 30, 1996 and the results of
operations and cash flows for the three and nine month periods ended June 30,
1996 and June 30, 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>
June 30, 1996 September 30, 1995
<S> <C> <C>
Raw Materials $ 785,792 $ 397,172
Work-in Process 396,036 231,622
Finished Goods 1,161,631 949,044
--------- ---------
$ 2,343,459 $ 1,577,838
========= =========
</TABLE>
Note 3 Earnings 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.
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.
Note 5 Secondary Offering
On June 5, 1996, the Company completed the sale of 1.5 million shares
of common stock in a public offering. Net proceeds from the stock offering
totaled $30,775,975
-5-
<PAGE> 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
LIQUIDITY AND CAPITAL RESOURCES
(June 30, 1996 vs. September 30, 1995)
During the third quarter of fiscal year 1996, the level of cash and
cash equivalents increased by $34,732,019. Operating activities generated
$3,515,405 of cash mainly from net earnings of $2,510,989, and the non-cash
expense of depreciation and amortization of $697,641. Increases in inventories
of $765,621 occurred due to the increase in net sales. These increases were
offset by increases in accounts payable of $237,700, accrued expenses of
$476,745 and income taxes payable of $599,256. Investing activities generated
net cash of $174,060 mainly from the $1,267,506 in proceeds from the sale of
marketable securities. The proceeds were partially offset by a $1,088,394
investment in capital equipment. Proceeds provided by financing activities were
largely from the issuance of common stock in a stock offering completed June 5,
1996 yielding net proceeds of $30,775,975.
Management feels there is adequate liquidity to meet the on-going
operating needs of the Company.
RESULTS OF OPERATIONS
(Three and nine months ended June 30, 1996
compared to three and nine months ended June 30, 1995.)
Net sales in the third quarter of fiscal 1996 increased by 83% to
$7,100,950 when compared to sales of $3,876,952 for the same period last year.
Net sales for the nine month period of fiscal 1996 were up 87% to $19,883,829
when compared to $10,652,787 for the same period last year. The increase in
net sales was attributed to the continued strong product acceptance for disk
arrays in the visual computing market, especially the film/video production
market segment. Sony and Avid Technology, two key customers, made up 22% and
14% of net sales, respectively, for the third quarter. Several new customers
were added which also contributed to the sales growth.
The Company's continued international focus resulted in export sales
of $8.0 million or 40% of net sales during the nine-month period ended June 30,
1996 compared to $3.4 million or 32% 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
nine month periods were 48.2% and 47.8%, respectively compared to 49.1% and
47%, respectively for the same periods last year. Gross profit for the current
nine-month period was comparable to the same period last year. Management
anticipates gross profit margins for the remainder of fiscal 1996 should
approximate the level attained during the first nine 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 nine month periods were 19.1% and 18.5%, respectively compared
to 28.2% and 27.2%, 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 to commission expense associated
with higher sales levels, an increase in advertising and promotional expense,
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 nine month periods were 9.5% and 8.9%, respectively
compared to 10.2% and 9.9%, respectively for the same periods last year.
Actual dollar spending for the current periods was higher than last year due
primarily to management and employee bonuses, bad debt expense, and a general
increase in spending. Management anticipates general and administrative
expenses for the remainder of the fiscal year to be approximately 8-10% of net
sales.
-7-
<PAGE> 8
Research and development expenses, as a percent of net sales, for the
most recent three and nine month periods were 7.8% and 8.4%, respectively
compared to 11.6% and 11.8%, respectively, for the same periods last year. The
percentage decrease was primarily due to higher sales volume in the current
nine-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 $324,000 for the first nine months of fiscal
1996 compared to $15,000 for the same period last year. This increase reflects
the change in operating results of $2.8 million of pre-tax earnings for the
first nine month period of fiscal 1996 compared to $23,000 for the same period
last year. The Company began to accrue income tax expense in the second
quarter, based on an estimated tax liability for fiscal 1996, resulting in an
effective tax rate for the first nine months of fiscal 1996 of 11% due to
utilization of $1.7 million net operating loss carryforwards. As of the
current period, the Company's net operating loss carryforwards are fully
exhausted.
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
None
-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
27 - Financial Data Schedule (filed in electronic format only)
(b) Reports on Form 8-K
No report on Form 8-K was filed during the quarter
ended June 30, 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: August 5, 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-
<PAGE> 11
EXHIBIT INDEX
CIPRICO INC
FORM 10-QSB
For Quarter Ended June 30, 1996
Exhibit Number Description
27 Financial Data Schedule
-11-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> JUN-30-1996
<CASH> 38,157,490
<SECURITIES> 0
<RECEIVABLES> 3,546,802
<ALLOWANCES> 310,880
<INVENTORY> 2,343,459
<CURRENT-ASSETS> 44,177,449
<PP&E> 5,794,693
<DEPRECIATION> 4,178,417
<TOTAL-ASSETS> 45,806,782
<CURRENT-LIABILITIES> 4,544,811
<BONDS> 0
0
0
<COMMON> 41,228,683
<OTHER-SE> (20,906)
<TOTAL-LIABILITY-AND-EQUITY> 45,806,782
<SALES> 19,883,829
<TOTAL-REVENUES> 19,883,829
<CGS> 10,386,380
<TOTAL-COSTS> 10,386,380
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 134,046
<INTEREST-EXPENSE> 6,261
<INCOME-PRETAX> 2,834,989
<INCOME-TAX> 324,000
<INCOME-CONTINUING> 2,510,989
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,510,989
<EPS-PRIMARY> .63
<EPS-DILUTED> .63
</TABLE>
