UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the Quarterly Period Ended March 31, 1997
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
Commission File Number 33-13058-C
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SURGIDYNE, INC.
(Name of small business issuer in its charter)
Minnesota 58-1486040
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
9909 South Shore Drive, Minneapolis, MN 55441
(Address of principal executive offices)
(612) 595-0665
(Issuer's telephone number)
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 registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
X YES NO
7,017,085 shares of Common Stock, no par value, outstanding at
May 12, 1997
Transitional Small Business Disclosure Format. YES X NO
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SURGIDYNE, INC.
CONTENTS PAGE
FINANCIAL STATEMENTS
Balance sheets 3
Statements of operations 5
Statements of cash flows 6
Notes to financial statements 7
<PAGE>
SURGIDYNE, INC.
BALANCE SHEETS
(Unaudited)
March 31, December 31,
1997 1996
ASSETS
Current Assets
Cash and cash equivalents $60,319 $ 66,941
Accounts receivable, less allowance for
doubtful accounts of $4,700 55,236 86,339
Inventories (Note 2) 218,298 198,461
Prepaid expenses 14,713 16,465
Total current assets 348,566 368,206
Furniture and Equipment, at cost (Note 3) 330,636 328,692
Less accumulated depreciation 308,644 306,926
Total furniture and equipment 21,992 21,766
Other Assets
Patents and trademarks, net of accumulated amortization
of $12,904 in 1997 and $12,312 in 1996 8,936 9,528
Deposits 3,529 3,529
Total other assets 12,465 13,057
Total assets $383,023 $ 403,029
See Notes to Financial Statements.
<PAGE>
SURGIDYNE, INC.
BALANCE SHEETS (Continued)
(Unaudited)
March 31, December 31,
1997 1996
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Notes payable to officers and directors (Note 4)$ 10,000 $ 10,000
12% demand note payable 11,646 11,646
Accounts payable 64,956 68,486
Current maturities of long-term debt 38,224 38,711
Accrued expenses 34,673 38,648
Total current liabilities 159,499 167,491
Long-Term Liabilities
Long-term debt 3,129 3,129
Total long-term liabilities 3,129 3,129
Stockholders' Equity
Series A Preferred stock, authorized 1,600,000 shares;
$400,000 liquidation preference, 1,600,000 shares
issued and outstanding in 1997 and 1996 400,000 400,000
Common stock, no par value; authorized 18,400,000 shares;
issued and outstanding 7,017,085
in 1997 and 1996 4,472,042 4,472,042
Accumulated deficit (4,651,647) (4,639,633)
Total stockholders' equity 220,395 232,409
Total liabilities and stockholders' equity $ 383,023 $ 403,029
See Notes to Financial Statements.
<PAGE>
SURGIDYNE, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
March 31, March 31,
Three Months Ended 1997 1996
OPERATIONS
Net sales $144,718 $130,089
Cost of goods sold 99,878 93,551
Gross profit 44,840 36,538
Operating expenses
Research and development 4,106 1,306
Sales and marketing 6,692 6,397
General and administrative 45,881 39,363
Total operating expenses 56,679 47,066
Operating income (loss) (11,839) (10,528)
Other income (expense)
Interest income 458 225
Interest expense (1,093) (3,301)
Other 460 1,380
Net income (loss) $(12,014) $ (12,224)
Net income (loss) per share $ .00 $ .00
Weighted average common
shares outstanding 7,017,085 6,754,630
See Notes to Financial Statements.
<PAGE>
SURGIDYNE, INC.
STATEMENTS OF CASH FLOWS
March 31, March 31,
Three Months Ended 1997 1996
Cash Flows from Operating Activities
Net income (loss) $ (12,014) $ (12,224)
Adjustments to reconcile net income (loss) to net
cash provided by (used) in operating activities:
Depreciation and amortization 2,310 2,363
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable 31,103 44,382
Inventories (19,837) (3,825)
Prepaid expenses 1,752 (406)
Decrease in:
Accounts payable and accrued expenses (7,505) (17,157)
Net cash provided by (used) in operating
activities (4,191) 13,133
Cash Flows used in Investing Activities
Capital expenditures (1,944) -
Net cash used in investing activities (1,944) 0
Cash Flows from Financing Activities
Payments on capital leases payable (487) (1,606)
Proceeds from private placement - 25,000
Net cash provided by (used) in financing
activities (487) 23,394
Increase (decrease) in cash and cash equivalents (6,622) 36,527
Cash and Cash Equivalents:
Beginning 66,941 43,297
Ending $ 60,319 $ 79,824
Supplemental Disclosures of Cash Flow Information
Cash payments for interest $ 235 $ 672
Supplemental Schedule of Noncash Financing Activities
Accrued expenses exchanged for common shares
subscribed $ - $ 7,737
Notes payable exchanged for common shares
subscribed - 9,605
See Notes to Financial Statements.
<PAGE>
SURGIDYNE, INC.
NOTES TO FINANCIAL STATEMENTS
Note 1. Financial Statements
The Balance Sheet as of March 31, 1997, the
Statement of Operations for the three month
periods ended March 31, 1997 and March 31, 1996,
and the Statement of Cash Flows for the three
month periods ended March 31, 1997 and March 31,
1996 have been prepared by the Company without
audit. In the opinion of management, all
adjustments (consisting solely of normal,
recurring adjustments) necessary to present
fairly the financial position at March 31, 1997;
the results of operations for the three month
periods ended March 31, 1997 and March 31, 1996,
and the statement of cash flows for the three
month periods ended March 31, 1997 and March 31,
1996 have been made. The Balance Sheet at
December 31, 1996 has been taken from the audited
financial statements at that date. Results of
operations for the interim periods are not
necessarily indicative of the full fiscal year.
Note 2 Inventories
Inventories consisted of the following:
March 31,December 31,
1997 1996
Component parts and
subassemblies $121,946 $100,098
Work in process 22,232 23,146
Finished goods 84,120 85,217
Less obsolescence reserve (10,000) (10,000)
$218,298 $198,461
Note 3. Furniture and Equipment
Furniture and equipment consisted of the following:
March 31, December 31,
1997 1996
Furniture, fixtures and
equipment $232,244 $230,300
Tooling and molds 98,392 98,392
$330,636 $328,692
Note 4. Notes Payable
Notes payable to related parties: The Company
has short-term notes payable outstanding with a
certain officer and director which bears interest
at an interest rate of prime plus two percent.
The interest rate will be adjusted every six
months on June 30 and December 31. Currently the
interest rate is 10.25% annually. The $10,000 is
due in annual installments limited to 50% of the
audited net income each year until paid in full.
Notes payable to unrelated parties: The Company
has a 12% short-term note payable. The Company
has paid $38,354 in principal on the note and the
balance of $11,646 is due on demand.
Long-term debt: In 1995, the Company converted
an accounts payable balance of $35,546 into a
non-interest bearing unsecured note payable due
in a single installment on January 1, 1997. The
Company did not pay-off the note on January 1,
1997 and as a result the note is due on demand.
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations - 1997 compared to 1996
Sales. Sales for the first three months of fiscal 1997 were $144,718,
approximately an 11% increase in sales for the same period in fiscal 1996.
This increase is attributed primarily to increases in VariDyne pump and
contract manufacturing sales offset by the discontinuation of sales to Baxter.
Baxter sales for the first three months of fiscal 1996 were $6,247 compared to
$0 for the same period in 1997.
Gross Profit. Gross profit expressed as a percentage of sales increased from
approximately 28% for the first three months of fiscal 1996 compared to
approximately 31% for the same period in fiscal 1997. This increase is
primarily due to changes in the Company's product sales mix and certain
additional costs incurred in 1996 related to the discontinuation of
maufacturing for Baxter.
Operating Expenses. Operating expenses increased from $47,066 for the three
month period ended March 31, 1996 to $56,678 for the same period in fiscal
1997. The increase is primarily attributed to two factors; professional fees
which were $8,700 for the first three months of 1996 compared to $13,422 for
the same period in fiscal 1997, and research and development costs which
increased from $1,306 for the first three months of fiscal 1996 to $4,106 for
the same period in 1997, due to increased wages and benefits.
Liquidity and Capital Resources
At March 31, 1997 the Company had working capital of $189,067 compared to
$200,715 at December 31, 1996. The cash flows utilized by operating activities
for the first three months of fiscal 1997 were $4,191, primarily due to three
factors; an increase in inventories of $19,837 due to increased raw material
costs and a lower sales volume while maintaining production levels, a net loss
of $12,014 offset by a decrease of $31,103 in accounts receivable due to a
decrease in sales from the fourth quarter of 1996 compared to the first three
months of 1997 and payments received on account.
The Company is developing new products to expand it's product line and is
increasing it's sales efforts through the addition of international dealers
worldwide. New product introductions and increased international marketing
efforts are scheduled for 1997 and 1998. The success of these strategies is
dependent upon the ability of the Company to successfully complete the
development programs, including manufacturing, and to obtain necessary
governmental approvals for marketing. These efforts may require additional
funding in late 1997 or early 1998.
Long-term liquidity is dependent upon greater sales volumes that generate
profitable operations. Increased sales volumes in 1997 depend largely on
increased business from contract manufacturing, and increased sales from
existing and new products.
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
(b) Reports on Form 8-K
No reports on Form 8-K were filled during the three month
period ended March 31, 1997.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
SURGIDYNE, INC.
(Registrant)
Date May 12, 1997 /s/ Vance D. Fiegel
Vance D. Fiegel
President and Principal
Accounting Officer
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