SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
X ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934 [FEE REQUIRED]
For the Fiscal Year Ended December 31, 1997
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 [NO FEE REQUIRED]
Commission File Number: 33-13058-C
SURGIDYNE, INC.
(Name of small business issuer in its charter)
Minnesota
(State or other jurisdiction of incorporation or organization)
58-1486040
(I.R.S. Employer Identification Number)
9909 South Shore Drive
Minneapolis, MN 55441
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (612) 595-0665
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, no par value
(Title of class)
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
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of the Form 10-KSB or any
amendment to this Form 10-KSB. X
Issuer's revenues for the year ended December 31, 1997 were $486,761.
The aggregate market value of the voting stock held by non-affiliates of the
Registrant as of February 3, 1998 was approximately $219,284 (based on a price
of $.03125, the bid price of the local over-the-counter market.) For purposes
of this calculation, all Directors and Executive Officers of the Registrant have
been deemed affiliates.
7,017,085 shares of Common Stock, no par value, were outstanding at
February 3, 1998
DOCUMENTS INCORPORATED BY REFERENCE
NONE
This Form 10-KSB consists of 26 pages (including exhibits). The index to
exhibits is set forth on page 25.
<PAGE>
PART 1
ITEM 1. DESCRIPTION OF BUSINESS
General
Surgidyne, Inc. (the "Company"), a Minnesota corporation, designs, develops,
manufactures and markets specialty medical and surgical wound drainage products.
The Company was incorporated in Minnesota in March, 1984, and is successor by
merger to a corporation of the same name which was incorporated in Georgia in
September, 1982. The Company's executive offices are located at 9909 South
Shore Drive, Minneapolis, Minnesota 55441 (612-595-0665).
Products
The Company's current product lines are comprised of VariDyne microelectronic
A.C./D.C. battery powered suction systems with disposable drainage/collection
products for postoperative and other suction drainage applications, disposable
SABER and S-VAC 100 bulb evacuators for postoperative closed wound suction
drainage along with other related disposable products. The Company also sells
some of its disposable wound drainage components on an original equipment
manufacturer (OEM) basis. Additionally, the Company provides contract assembly
and packaging services for disposable medical and related products.
In 1990, the Company entered into agreements with Baxter Healthcare Corporation
(Baxter) for the development, license, manufacture and sale of an auto-
transfusion system under their Jackson-Pratt (J-P) trademark. The manufacturing
agreement provides for Baxter to pay an agreed upon price for the product. This
agreement expired December 31, 1993 and the Company continued manufacturing
under a order/bid basis. The development and license agreement calls for a 20%
royalty on the net sales by Baxter to their customers of autotransfusion system
products until total royalties paid equal $2,000,000.
In October of 1996, Baxter advised the Company that in conjunction with the
formation and spinoff of the Allegiance Corporation, they were discontinuing the
orthopedic autotransfusion product line licensed from the Company. Total
revenues received from Baxter for purchases of, and royalties on these
autotransfusion products were $10,115 in 1996 compared to $1,500 in 1997.
In 1997, the Company completed cost reduction programs for its' bulb evacuator
and silicone drain products. In 1998 the Company would like to expand its' line
to include additional manual evacuators and drains for closed wound suction
drainage. During 1998 the Company also would like to expand OEM and contract
manufacturing.
Marketing and Distribution
The Company's basic products are sold through a network of independent dealers,
with eight domestic dealers and five international dealers. The Company sells
directly to hospital accounts in the United States in areas without dealer rep-
resentation. The Company does not employ an outside sales force and is largely
dependent upon its dealers for sales and service to hospital accounts.
Internationally, the Company's products are sold through five dealers located in
Canada, Puerto Rico, the United Kingdom, France and Italy.
The Company's business is not seasonal in nature. The Company typically does
not provide extended payment terms to customers and, has had satisfactory
collections of accounts receivable. Sales are usually made on a net 30 day
basis. Sales orders from the exclusive dealer in Italy are done by irrevocable
letter of credit in U.S. dollars or are prepaid by bank wire transfer.
Suppliers
The Company purchases all components for its products from outside suppliers and
has some components manufactured to its specification. The Company is
dependent upon such suppliers for a readily available supply of necessary
components. The Company has single sources of supply for some of its critical
components. Management has determined that developing and maintaining
additional sources for all critical components is not cost effective. The
Company is unaware of any difficulty experienced by its suppliers in obtaining
raw materials for component manufacture. The Company has no written agreements
with its suppliers, other than purchase orders.
Most suppliers sell to the Company on standard credit terms, while some sell on
a collect-on-delivery basis.
Patents and Trademarks
The Company has patents covering its SABER Bulb Evacuator and its 3C System.
There can be no assurance that these patents will be of material benefit to the
Company.
<PAGE>
Major Customers
Net sales to international customers for the years ended December 31, 1997 and
1996 totalled $143,806 and $206,589 respectively, representing approximately 30%
and 33% of the Company's sales. Chirmed, S.R.L., located in Sassari, Italy,
accounted for 17% and 22% of total net sales for 1997 and 1996, respectively.
Master Medical, Inc. accounted for 11% and 9% of total net sales in 1997
and 1996, respectively. The loss or material reduction of business from Italy
could adversely affect future net sales levels.
Competition
The hospital market for disposable suction drainage products is highly price
competitive. One company, Stryker Corporation an orthopedic product company,
markets battery powered suction drainage systems, including both wound and
orthopedic drainage and autotransfusion products. A number of other companies
market disposable closed suction wound drainage products including Allegiance
Healthcare, Zimmer, Inc., C.R. Bard, and DePuy. The Company's products are
designed to provide significant enhancements to existing products in it's
specific market niches.
Research and Development
For the fiscal year ended December 31, 1996 the Company incurred research and
development expenditures of $32,182, including a $19,365 write-down of certain
tooling that the Company determined would not be utilized in future product
manufacturing. The adjusted 1996 research and development costs were $12,817.
For the fiscal year ended December 31, 1997 the Company incurred research and
development expenditures of $20,628. The 1997 increase, when compared to
adjusted 1996 expenditures, resulted from the allocation of management salaries
and contracted outside services. The Company is expected to increase develop-
ment expenditures in 1998.
Government Regulation
The Company's products are classified as Class I and II medical devices under
the Medical Device Amendment to the Federal Food, Drug and Cosmetic Act (the
"Act"). As such, they are subject to regulation by the United States Food and
Drug Administration (FDA), which has the power to approve medical devices before
sale, remove medical devices from the marketplace if found to be unsafe or
ineffective, and control plant conditions to assure product quality. No govern-
ment approval, other than FDA premarket approval, is required for sale and use
of the Company's products in the United States and Puerto Rico. The Company has
FDA 510(k) exemption for all marketed products, including VariDyne Vacuum
Controllers and collection systems, SABER and S-VAC 100 Bulb Evacuators. The
VariDyne Vacuum Controller Models 140 and 350, used in conjunction with the CSA
approved Model 2007 battery charger, have been approved by the Canadian
Standards Association.
The Company's products require the CE mark for European markets as of June 14,
1998. The Company plans to obtain certification for the CE mark for its
products prior to June 14, 1998.
Employees
At December 31, 1997, 6 full-time persons were employed by the Company. None of
the Company's employees are represented by a labor union. The Company has
experienced no work stoppages and believes that its employee relations are good.
Year 2000 Compliance
Based on a preliminary review management believes that there are no critical
issues regarding compliance for the year 2000, specifically concerning software,
products, and government regulation. Management also believes that any problems
that may arise are insignificant and can be resolved with little or no outlay of
capital or disruption to the business.
ITEM 2. DESCRIPTION OF PROPERTY
The Company's administrative headquarters, research and development, production
and warehousing operations are located in a single building in Minneapolis,
Minnesota. This facility comprises approximately 7,000 square feet, which the
Company leases for approximately $3,000 per month through November, 1998.
Management considers that this property is sufficient for its present
operations.
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to, nor is any of its property subject to, any
material pending legal proceedings, nor any material legal proceedings known
to be contemplated by governmental authorities or others.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of shareholders during the fourth quarter
ended December 31, 1997.
<PAGE>
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The following table sets forth for the fiscal period indicated, the high and low
bid prices as reported in the local over-the-counter market in Minneapolis,
Minnesota, by Summit Investments Corporation. These quotations reflect inter-
dealer prices, without retail mark-up, mark-down or commission and may not rep-
resent actual transactions.
Bid Price Range
1997 1996
Fiscal Period High Low High Low
First quarter $ .15 $ .05 $ .15 $ .06
Second quarter .28 .13 .16 .06
Third quarter .10 .04 .15 .05
Fourth quarter .09375 .03125 .19 .03
On February 3, 1998, the bid price for the common shares as reported in the
local over-the-counter market was $.03125 and the Company had 412 holders of
record of its common shares. Although the shares are reported in the local
over-the-counter market, there was limited sales activity.
The Company has not paid cash dividends on its common shares and does not plan
to pay cash dividends to its shareholders in the immediate future. On December
1, 1993, the Company's debenture holders elected to convert the face value of
the debentures into 1,600,000 shares of unregistered Series A preferred stock at
$.25 per share. Commencing January 1, 1994, the preferred shareholders are
entitled to a dividend equal to 3% of net sales. The dividend in a given year
is limited to 50% of the Company's net income. Cumulative dividends cannot
exceed $210,000. As of December 31, 1997 cumulative dividends totalled $437.
<PAGE>
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
Results of Operations - 1997 compared to 1996
Net Sales. Net sales for the year ended December 31, 1997 decreased by $147,748
as compared to the same period in 1996 as a result of both decreased product
sales and OEM revenues. Sales to Italy decreased $57,000 due to new government
purchasing regulations mandating hospitals to purchase supplies on tender (bid).
Subsequently our dealer lost substantial business. Domestic product sales
decreased $58,000 due to loss of business to competitors with group purchasing
contracts requiring member compliance. OEM sales decreased $27,000 due to the
loss of one major customer.
Gross Profit. Gross profit, expressed as a percentage of sales, decreased from
32% in 1996 to 23% in 1997. This decrease is due to reduced production and a
higher absorption of overhead per unit manufactured.
Operating Expenses. Operating expenses decreased from $215,518 in 1996 to
$180,379 in 1997. This decrease is due to reductions in contracted temporary
labor costs, rent, utilities, property and liability insurance, and legal fees,
combined with a $19,365 write off of tooling in 1996 the Company determined
would not be used in future product manufacturing.
Other Income (Expense). Other income (expense) decreased from a net expense of
$7,180 in 1996 to $2,785 in 1997. This decrease is attributed primarily to
lower interest expense on notes payable due to the reduction of principal
balances from the conversion to common stock.
Results of Operations - 1996 compared to 1995
Net Sales. Net sales for the year ended December 31, 1996 decreased by $56,962
as compared to the same period in 1995 as a result of decreased sales to Baxter.
Baxter sales decreased from $105,161 in 1995 to $11,670 in 1996. Increased
contract manufacturing sales in 1996 offset a portion of the Baxter decrease.
Gross Profit. Gross profit, expressed as a percentage of sales, decreased from
34% in 1995 to 32% in 1996. This decrease is due to a reduction in Baxter
royalty revenues in 1996.
Operating Expenses. Operating expenses decreased from $223,519 in 1995 to
$215,518 in 1996. This decrease is due primarily to the elimination of certain
salaried positions of $25,655, offset by a $19,365 write off of tooling the
Company determined would not be used in future product manufacturing.
Other Income (Expense). Other income (expense) decreased from a net expense of
$10,007 in 1995 to $7,180 in 1996. This decrease is attributed primarily to
lower interest expense on notes payable due to the reduction of principal
balances from the conversion to common stock.
Liquidity and Capital Resources
At December 31, 1997 the Company had working capital of $133,837 compared to
working capital of $200,715 at December 31, 1996. In 1997, net cash used in
operating activities was $12,348 compared to net cash provided by operating
activities of $1,852 in 1996. The current year amount resulted from a net loss
of $69,927 and decreases in accounts payable and accrued expenses offset by
noncash expenses of $10,882, decreases in accounts receivable of $43,315, and
decreases in inventories and prepaid expenses of $30,162. The Company had
capital expenditures of $4,704 in 1997 for tooling and leasehold improvements,
compared to no capital expenditures in 1996. Net cash used in financing
activities was $3,165 in 1997 compared to $21,792 provided by financing
activities in 1996, resulting primarily from the proceeds of a private placement
of common stock completed in February, 1996.
In 1995, the Company converted an accounts payable balance of $35,546 into a
non-interest bearing unsecured note payable due in one installment on January 1,
1997. The Company did not pay-off the note on January 1, 1997 and as a result,
the note is currently due on demand.
The ability of the Company to continue as a going concern and its short-term
liquidity is dependent upon obtaining additional debt and/or equity financing to
fund future development and operations. The Company has made changes to it's
current product lines and would like to add additional products in order to
offer a more complete and competitive line. These products will be manufactured
for the Company on an OEM basis without incurring any capital or development
costs on the part of the Company.
By June 14, 1998 the Company is required to obtain a CE mark in order to
continue selling their product in Europe. At this time the Company intends to
obtain the CE mark prior to June 14, 1998. But there is no assurance that the
Company can accomplish this without uninterrupted sales of product to the
European market.
Long-term liquidity is dependent upon the attainment of the short-term factors
discussed above and greater sales volumes that generate profitable operations.
Increased sales volumes in 1998 depend largely on increased business from
contract manufacturing and increased sales from existing and new products.
<PAGE>
ITEM 7. FINANCIAL STATEMENTS
SURGIDYNE, INC.
CONTENTS PAGE
INDEPENDENT AUDITOR'S REPORT
ON THE FINANCIAL STATEMENTS 8
FINANCIAL STATEMENTS
Balance sheets 9
Statements of operations 11
Statements of stockholders' equity 12
Statements of cash flows 13
Notes to financial statements 14
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Surgidyne, Inc.
Plymouth, Minnesota
We have audited the accompanying balance sheets of Surgidyne, Inc. as of
December 31, 1997 and 1996, and the related statements of operations,
stockholders' equity, and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our resp-
onsibility is to express an opinion on these financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Surgidyne, Inc. as of December
31, 1997 and 1996, and the results of its operations and its cash flows for the
years then ended, in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company is dependent upon obtaining additional debt or
equity financing to fund future development and operations, which raises
substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note 2. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
McGLADREY & PULLEN, LLP
Minneapolis, Minnesota
February 27, 1998
<PAGE>
SURGIDYNE, INC.
BALANCE SHEETS
December 31, 1997 1996
ASSETS
Current Assets
Cash $ 46,724 $ 66,941
Accounts receivable, less allowance
for doubtful accounts of $4,200 in
1997 and $4,700 in 1996 (Note 10) 43,024 86,339
Inventories (Note 3) 170,359 198,461
Prepaid expenses 14,405 16,465
Total current assets 274,512 368,206
Furniture and Equipment, at cost (Note 4) 333,396 328,692
Less accumulated depreciation 315,441 306,926
17,955 21,766
Other Assets
Patents, trademarks, and other, net
of accumulated amortization of
$14,679 in 1997 and $12,312 in 1996 7,161 9,528
Deposits 3,529 3,529
10,690 13,057
$ 303,157 $ 403,029
See Notes to Financial Statements.
<PAGE>
December 31, 1997 1996
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Note payable to officer and director
(Note 5) $ 10,000 $ 10,000
12% demand note payable 11,646 11,646
Non-interest bearing demand note
payable (Note 5) 35,546 35,546
Current maturities of long-term debt 3,129 3,165
Accounts payable 42,111 68,486
Accrued expenses 38,243 38,648
Total current liabilities 140,675 167,491
Long-Term Debt, less current maturities - 3,129
Commitments and Contingencies (Note 9)
Stockholders' Equity (Notes 6 and 7)
Series A Preferred stock, 1,600,000
shares authorized and issued,
$400,000 liquidation preference 400,000 400,000
Common stock, no par value; authorized
18,400,000 shares; issued and
outstanding 7,017,085 shares 4,472,042 4,472,042
Accumulated deficit (4,709,560) (4,639,633)
162,482 232,409
$ 303,157 $ 403,029
See Notes to Financial Statements.
<PAGE>
SURGIDYNE, INC.
STATEMENTS OF OPERATIONS
Years Ended December 31, 1997 1996
Net sales (Note 10) $ 486,761 $ 634,509
Cost of goods sold 373,524 429,916
Gross profit 113,237 204,593
Operating expenses
Research and development 20,628 32,182
Sales and marketing 27,700 29,776
General and administrative 132,051 153,560
Total operating expenses 180,379 215,518
Operating loss (67,142) (10,925)
Other income (expense)
Interest income 1,624 1,594
Interest expense (Note 5) (4,409) (8,774)
Net loss $ (69,927) $ (18,105)
Basic and diluted loss per share $ (.01) $ -
Weighted average common shares
outstanding 7,017,085 6,952,350
See Notes to Financial Statements.
<PAGE>
SURGIDYNE, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
Years Ended December 31, 1997 and 1996
Common
Preferred Common Stock Stock Accumulated
Stock Shares Amount Subscribed Deficit Total
Balance, December 31, 1995
$ 400,000 4,537,913 $4,286,086 $ 143,614 $(4,621,528) $ 208,172
Subscribed shares issued
- 1,914,852 143,614 (143,614) - -
Shares issued for private placement (Note 2)
- 333,333 25,000 - - 25,000
Shares issued in lieu of notes payable and accrued interest to directors
- 230,987 17,342 - - 17,342
Net loss
- - - - (18,105) (18,105)
Balance, December 31, 1996
$ 400,000 7,017,085 $4,472,042 $ - $(4,639,633) $ 232,409
Net loss
- - - - (69,927) (69,927)
Balance, December 31, 1997
$ 400,000 7,017,085 $4,472,042 $ - $(4,709,560) $ 162,482
See Notes to Financial Statements.
<PAGE>
SURGIDYNE, INC.
STATEMENTS OF CASH FLOWS
Years Ended December 31, 1997 1996
Cash Flows from Operating Activities
Net loss $ (69,927) $ (18,105)
Adjustments to reconcile net loss to net
cash provided by (used in) operating
activities:
Depreciation and amortization 10,882 9,449
Write-off of tooling - 19,365
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable 43,315 19,897
Inventories 28,102 (30,806)
Prepaid expenses 2,060 (12,037)
Increase (decrease) in:
Accounts payable and accrued expenses (26,780) 14,089
Net cash provided by (used in)
operating activities (12,348) 1,852
Cash Flows from Investing Activities
Capital expenditures (4,704) -
Net cash used in investing activities (4,704) -
Cash Flows from Financing Activities
Proceeds from issuance of common stock - 25,000
Principal payments on capital leases (3,165) (3,208)
Net cash provided by (used in)
financing activities (3,165) 21,792
Increase (decrease) in cash (20,217) 23,644
Cash:
Beginning 66,941 43,297
Ending $ 46,724 $ 66,941
Supplemental Disclosures of Cash Flow
Information
Cash payments for interest $ 930 $ 3,574
Supplemental Schedule of Noncash
Financing Activities
Notes payable and accrued expenses
exchanged for common shares
subscribed/issued $ - $ 17,324
See Notes to Financial Statements.
<PAGE>
Note 1. Nature of Business and Significant Accounting Policies
Nature of business: Surgidyne, Inc. (Company) designs, develops, manufactures
and markets specialty medical and surgical wound drainage products. The Company
sells its products primarily on a credit basis throughout the United States and
Europe.
A summary of the Company's significant accounting policies follows:
Revenue recognition: The Company recognizes revenue, including revenue from
contract manufacturing, upon shipment to the customer.
Inventories: Inventories are stated at the lower of cost (first-in, first-out
method) or market.
Patents and trademarks: Patent and trademark costs have been capitalized and
are being amortized over 17 years using the straight-line method.
Furniture and equipment: Depreciation is provided for on the straight-line
method over estimated useful lives of three to five years.
Research and development costs: Expenditures for research and development
activities, whether performed by the Company or performed by outside parties
under contract, are charged to operations as incurred. During 1996, the Company
determined certain tooling would not be utilized in future product manufac-
turing, and accordingly wrote-off an amount of $19,365 to research and
development.
Income taxes: Deferred taxes are provided on a liability method whereby
deferred tax assets are recognized for deductible temporary differences and
operating loss and tax credit carryforwards and deferred tax liabilities are
recognized for taxable temporary differences. Temporary differences are the
differences between the reported amounts of assets and liabilities and their tax
bases. Deferred tax assets are reduced by a valuation allowance when, in the
opinion of management, it is more likely than not that some portion or all or
the deferred tax assets will not be realized. Deferred tax assets and
liabilities are adjusted for the effects of changes in tax laws and rates on the
date of enactment.
Fair value of financial instruments: The fair value of the notes payable and
long-term debt are estimated based on interest rates for the same or similar
debt offered to the Company having the same or similar remaining maturities and
collateral requirements. The carrying amount of these obligations approximates
fair value.
Management estimates: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Net loss per share: The FASB has issued Statement No. 128, Earnings per Share,
which supersedes APB Opinion No. 15. Statement No. 128 requires the pre-
sentation of earnings per share by all entities that have common stock or
potential common stock, such as options, warrants and convertible securities,
outstanding that trade in a public market. Those entities that have only common
stock outstanding are required to present basic earnings per-share amounts.
Basic per-share amounts are computed, generally, by dividing net income or loss
by the weighted-average number of common shares outstanding. All other entities
are required to present basic and diluted per-share amounts. Diluted per-share
amounts assume the conversion, exercise or issuance of all potential common
stock instruments unless the effect is anti-dilutive thereby reducing the loss
or increasing the income per common share.
The Company initially applied Statement No. 128 for the year ended December 31,
1997 and, as required by the Statement, has restated all per share information
for the prior years to conform to the Statement. Because the Company has
incurred a loss in both years presented, the inclusion of potential common
shares in the calculation of diluted loss per-share would have an anti-dilutive
effect. Therefore, Basic and Diluted loss per-share amounts are the same in
each year.
Note 2. Going Concern
The ability of the Company to continue as a going concern and its short-term
liquidity is dependent upon obtaining additional debt and/or equity financing to
fund future development and operations. The Company has made changes to it's
current product lines and would like to add additional products in order to
offer a more complete and competitive line. These products will be manufactured
for the Company on an OEM basis without incurring any capital or development
costs on the part of the Company.
By June 14, 1998 the Company is required to obtain a CE mark in order to
continue selling their product in Europe. At this time the Company intends to
obtain the CE mark prior to June 14, 1998. The estimated cost of obtaining the
CE mark is $20,000. But there is no assurance that the Company can accomplish
this without uninterrupted sales of product to the European market. Long-term
liquidity is dependent upon the attainment of the short-term factors discussed
above and greater sales volumes that generate profitable operations. Increased
sales volumes in 1998 depend largely on increased business from contract
manufacturing and increased sales from existing and new products.
<PAGE>
Note 3. Inventories
Inventories consisted of the following:
1997 1996
Component parts and subassemblies $ 97,767 $ 100,098
Work-in-process 18,561 23,146
Finished goods 64,031 85,217
Less obsolescence reserve (10,000) (10,000)
$ 170,359 $ 198,461
Note 4. Furniture and Equipment
Furniture and equipment consisted of the following:
1997 1996
Furniture, fixtures and equipment $ 232,244 $ 230,300
Tooling and molds 101,152 98,392
$ 333,396 $ 328,692
Note 5. 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 10%.
The balance of $10,000 is due in annual installments limited to 50% of the
audited net income each year until paid in full. Related party interest expense
was approximately $1,025 and $1,099 in 1997 and 1996, respectively.
Other note payable: 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.
Note 6. Series A Preferred Stock
On December 1, 1993, certain debenture holders elected to convert the face value
of the debentures into 1,600,000 shares of unregistered Series A preferred stock
at $.25 per share. The preferred shareholders are entitled to a dividend equal
to 3% of net sales. The dividend in a given year is limited to 50% of the
Company's net income. Cumulative dividends cannot exceed $210,000. In 1995,
the Company accrued $437 for dividends on net income.
The preferred stock is convertible into common stock on a one for one basis,
subject to certain anti-dilutive adjustments. The preferred stock is auto-
matically convertible into common stock upon the occurrence of any of the
following:
* The Company's common stock price is traded at a bid price of $.50 or more
for thirty consecutive trading days;
* The preferred shareholders have received the cumulative dividends
specified above.
* Two-thirds of the preferred shareholders elect to convert their preferred
stock.
<PAGE>
Note 7. Stock Options and Warrants
Incentive stock options: The Company maintains a 1986 Incentive Stock Option
Plan. The plan provides for issuance of up to 195,000 shares of common stock to
selected management and other key employees of the Company.
Under the Plan, the exercise price cannot be less than 100% of the fair market
value of the common stock on the date the option is granted. Options are fully
vested upon issuance and are exercisable over a five year period from date of
grant. Information with respect to incentive stock option activity is summa-
rized as follows:
Weighted
Average
Exercise
Shares Price
Outstanding at December 31, 1995 90,000 $0.22
Cancelled (70,000) $0.23
Outstanding at December 31, 1996
and 1997 20,000 $0.19
Warrants: The Company has granted warrants for the purchase of shares of the
Company's common stock to directors, medical advisors, employees and certain
debt and equity holders. The warrants are fully vested upon issuance and expire
in varying amounts through 2002. Information with respect to warrant activity
is summarized as follows:
Weighted
Average
Exercise
Shares Price
Outstanding at December 31, 1995 1,170,000 $.21
Granted 30,000 $.11
Cancelled (310,000) $.25
Outstanding at December 31, 1996 890,000 $.19
Granted 20,000 $.07
Outstanding at December 31, 1997 910,000 $.19
Option and warrant grants discussed above are accounted for following APB
Opinion No. 25 and related interpretations. For 1997 and 1996, there was no
compensation expense recorded on the issuance of warrants as they were issued at
or above quoted market prices. Compensation costs as determined using the fair
value method required by FASB Statement No. 123 did not vary significantly from
the cost under APB Opinion No. 25, and, accordingly, the pro forma information
required by Statement No. 123 has not been presented.
The following table summarizes information about options and warrants out-
standing as of December 31, 1997:
Weighted
Average Weighted
Range of Number Remaining Average
Exercise of Units Contractual Exercise
Price Outstanding Life (Years) Price
$.07 - .11 225,000 2.0 $.09
$.19 - .25 605,000 0.6 $.19
$.38 100,000 1.5 $.38
930,000 1.1 $.19
All stock options and warrants are exercisable as of December 31, 1997.
<PAGE>
Note 8. Income Taxes
Deferred tax assets consisted of the following:
1997 1996
Allowance for inventory obsolescence $ 2,000 $ 2,000
Other 2,000 2,000
Net operating loss carryforwards 675,000 665,000
Tax credit carryforwards 42,000 42,000
Gross deferred tax assets 721,000 711,000
Less valuation allowance 721,000 711,000
Net deferred tax assets $ - $ -
During the year ended December 31, 1997 the Company recorded a valuation allow-
ance of $721,000 on deferred tax assets to reduce the total to an amount that
management believes will ultimately be realized.
The Company's income tax benefit differed from the statutory federal rate as
follows:
1997 1996
Statutory rate applied to (loss) before
tax $ (24,000) $ (6,000)
Change in valuation allowance 10,000 2,000
Effect of graduated tax rates 14,000 4,000
$ - $ -
The Company has federal net operating loss and credit carryforwards at December
31, 1997 which are available to reduce income taxes payable in future years,
subject to potential limitations due to changes in ownership. These carry-
forwards and credits will expire as follows:
Net
Operating Tax Credit
Loss Carry- Carry-
Year forwards forwards
1998 $ 12,000 $ 900
1999 324,000 22,600
2000 226,000 13,700
2001 819,000 4,600
2002 1,128,000 -
2003 995,000 -
2004 407,000 -
2005 144,000 -
2006 4,000 -
2007 - -
2008 164,000 -
2009 187,000 -
2010 21,000 -
2011 3,000 -
2012 72,000 -
$ 4,506,000 $ 41,800
<PAGE>
Note 9. Lease
The Company leases its office and warehouse facilities under a noncancellable
operating lease. The lease requires monthly payments of $2,978 through
November, 1998. Rent expense was approximately $32,000 and $36,000 in 1997 and
1996, respectively, net of sub-lease rental income of $4,000 in 1997.
The Company also leases certain equipment under operating leases. Equipment
rental expense was approximately $6,000 in 1997 and 1996.
<PAGE>
Note 10. Major Customers, Suppliers and Export Sales
Major customers: Net sales for the year ended December 31, 1997 and 1996
include sales to major customers as follows:
Sales Percentage
Company 1997 1996
A* 17% 22%
B 11% 9%
Year End Receivable Balances
Company 1997 1996
A* $ - $ 3,200
B - 8,500
* International customer, representing 57% and 67% of export sales in
1997 and 1996, respectively.
Major suppliers: The Company purchases all components for its products from
outside suppliers and has some components manufactured to its specification.
The Company is dependent upon such suppliers for a readily available supply of
necessary components. The Company has single sources of supply for some of its
critical components. Management has determined that developing and maintaining
additional sources for critical components is not cost effective.
Export sales: Net export sales to international customers were $143,806 and
$206,589 in 1997 and 1996, respectively.
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
NONE
<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Directors
The following seven persons serve as directors of the Company:
Director
Name Age Position Since Term*
Charles B. McNeil 68 Director, Executive 1982
3115 Maplewood Road Vice President and
Wayzata, MN 55391 Treasurer
Theodore A. Johnson 57 Chief Executive Officer 1985
825 Southgate Plaza and Chairman
5001 West 80th Street
Bloomington, MN 55437
David B. Kaysen 48 Director 1988
9909 South Shore Drive
Plymouth, MN 55441
William F. Gearhart 50 Director and Secretary 1984
9909 South Shore Drive
Plymouth, MN 55441
Arthur W. Schwalm 65 Director 1984
9909 South Shore Drive
Plymouth, MN 55441
Vance D. Fiegel 44 President and Director 1995
2460 South Highway 100
St. Louis Park, MN 55416
David R. Knighton, M.D. 49 Director 1994
2460 South Highway 100
St. Louis Park, MN 55416
* These directors will serve until the next annual meeting of the shareholders.
Charles B. McNeil, founder of the Company, has over 30 years experience in the
health care industry. He has served as Executive Vice President of the Company
for the past ten years and served as President of the Company from its incorp-
oration in 1982 until 1988. He previously served as Vice President and General
Manager of the Inmed and Bittner Medical and Home Health Division of Inmed
Corporation, Norcross, Georgia. Prior to joining Inmed, he was employed for 16
years by Davol, Inc., Providence, Rhode Island, where he directed product
development for seven years. New products he successfully developed at Davol
include numerous disposable surgical devices such as the Reliavac Closed Wound
Suction Device, surgical drains and disposable surgical suction devices.
Theodore A. Johnson, Chairman of the Board and Chief Executive Officer since
January, 1995 is also President, CEO and Director of the Minnesota Cooperation
Office for Small Business and Job Creation, Inc. (MCO), a non-profit corporation
formed in 1979 to foster job creation through assisting the start-up and growth
of innovative, technological ventures in Minnesota. Prior to joining MCO,
Mr. Johnson spent eight years at Control Data Corporation and twelve years at
DATA 100 Corporation in a number of different technical, marketing and
management positions. He currently serves as Chairman of the Board of Inter-
national Lottery and Totalizator Systems, Inc., a NASDAQ listed company in
California. In addition, he serves on the boards of directors of three private
companies and two venture capital funds and is also an active investor and
advisor to a number of emerging companies around the United States.
Vance D. Fiegel, President and Director since January 1995, is also Chief
Operating Officer and the Director of Research at Embro Corporation, a bio-
medical research and development company specializing in wound healing products
and vascular devices. At Embro, he directs corporate operations and new product
development. He is a founder of Embro as well as the National Reparative
Medicine Foundation where he serves as Director and Executive Vice President.
Prior to founding Embro, Mr. Fiegel held various positions at the University of
Minnesota, ultimately directing research in the field of wound healing where he
has published over fifty papers in national and international journals.
David B. Kaysen, Director, is an experienced healthcare executive with over 20
years involvement in medical products sales and marketing. He is currently
President, CEO of Rehabilicare, Inc.. From 1991 to 1992 he served as Vice
President of Emeritus Corporation. From 1989 to 1991 he served as Vice
President of Sales and Marketing for HDM Corporation. From 1988 to 1989, he
served as the President and CEO and Director of Surgidyne, Inc. From 1986 to
1988, Mr. Kaysen was Vice President of Marketing for Red Line/XVIIIB Medi Mart,
Minneapolis, Minnesota.
William F. Gearhart, Director and Secretary, is Vice President Sales and
Marketing for Schneider (USA), Inc. He was previously Director of Marketing for
St. Jude Medical, and Director of Sales and Marketing for the clinical division
of Sandoz Nutrition Corporation. Mr. Gearhart was President and COO of
MedVentures, Inc. from 1987 to 1990, and from 1985 to 1987 was Chairman and
President of Competitive Business Strategies, a developer of strategic planning
software, and Vice President of Alpha Business Group, Inc., a business consult-
ing service to start-up medical companies.
Arthur W. Schwalm, Director, was founder of Cardiac Pacemakers, Inc. (CPI) in
1972 and served as President and Chief Executive Officer for 10 years. CPI was
sold to Eli Lilly in 1978. Mr. Schwalm served as Chairman of the Board until
1983. Mr. Schwalm also serves on the board of directors of Orthofix. He is an
active investor in a number of new ventures, primarily in the medical device
area.
David R.Knighton, M.D., Director and Chairman of the Company's
Medical/Scientific Advisory Board. He is currently a practicing vascular
surgeon in the Twin Cities, Medical Director of the Institute for Reparative
Medicine, and President and CEO of Embro, Inc. Dr. Knighton founded Curative
Technologies, Inc., an international wound healing company which specializes in
formation and management of Wound Care Centers. In addition to his recognized
expertise in clinical wound care, Dr. Knighton is an experienced basic science
researcher in the field of wound repair and wound healing angiogenesis.
<PAGE>
ITEM 10. EXECUTIVE COMPENSATION
The following table sets forth the cash compensation paid or accrued by the
Company for services rendered during the years indicated to its executive
officer serving in the capacity as the CEO.
SUMMARY COMPENSATION TABLE
Long-Term Compensation
Annual Compensation Awards Payouts
Other Securities All
Name and Annual Restricted Underlying Other
Principal Compen- Stock Options/ LTIP Compen-
Position Year Salary Bonus sation Award(s) SARs (#) Payouts sation
*Charles B. McNeil (Exec. Vice Pres.)
1997 $35,000 $ - $ 4,800 $ - - $ - $ -
1996 35,000 - 4,000 - - - -
1995 35,500 - - - - - -
* Vance D. Fiegel is employed by the Company part-time and although Theodore A.
Johnson, who is a non-employee of the Company, has the title of CEO, Charles
B. McNeil has served in that capacity. Mr. Johnson does not receive compen-
sation from the Company.
The following table provides information with respect to option/SAR grants for
the year ended December 31, 1997:
Number of Secu- % of Total Options/
rities Underly- SARs Granted to Em-
ing Options/ ployees in Fiscal Exercise or Base Expir-
Name SARs Granted (#) Year Price ($/Sh) tion Date
Charles B. McNeil - - $ - -
The following table provides information with respect to stock option exercises
in fiscal 1997 by the named executive officers and the value of such officers'
unexercised options at December 31, 1997.
Aggregate Option Exercises in Last Fiscal Year and Year-End Option Values
Shares Number of Value of Unexercised
Acquired Unexercised Options In-the-Money Options
on Value at Year-End at Year-End
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
Charles B. McNeil
- $ - 20,000 - $ - $ -
Compensation of Directors
The Company does not provide cash remuneration to its directors.
<PAGE>\
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table presents certain information with respect to each share-
holder known by the Company to own beneficially 5% or more of its outstanding
common shares (which includes the assumed conversion of the Series A preferred
stock) and for each Director and Officer as of February 3, 1998. Each share-
holder has sole voting and investment power with respect to the shares shown as
beneficially owned, except as otherwise indicated in a footnote.
Name and Address of Amount and Nature of
Beneficial Owner Beneficial Owner Percent of Class
All Directors and Officers
as a group (7 people in group) 2,702,354 (1) 28.7%
Charity, Inc.
6187 Heather Circle
Fridley, MN 55432 1,126,016 (2) 12.5%
Theodore A. Johnson
825 Southgate Office Plaza
5001 West 80th Street
Bloomington, MN 55437 906,875 (3) 10.3%
Charles B. McNeil
9909 South Shore Drive
Plymouth, MN 55441 752,839 (4) 8.6%
Arthur W. Schwalm
9909 South Shore Drive
Plymouth, MN 55441 406,640 (5) 4.7%
David R. Knighton, M.D.
2460 South Highway 100
St. Louis Park, MN 55416 356,000 (6) 4.1%
David B. Kaysen
9909 South Shore Drive
Plymouth, MN 55441 130,000 (7) 1.5%
William F. Gearhart
9909 South Shore Drive
Plymouth, MN 55441 100,000 (8) 1.2%
Vance D. Fiegel
2460 South Highway 100
St. Louis Park, MN 55416 50,000 (9) 0.6%
******************************
(1) Includes 705,000 shares issuable pursuant to options and warrants which
are currently exercisable and 80,000 shares of Series A convertible pre-
ferred stock. Also includes 200,000 shares held by EMBRO Corporation, of
which Dr. Knighton is an 80% shareholder.
(2) Includes 400,000 shares of Series A convertible preferred stock.
(3) Includes 120,000 shares issuable pursuant to warrants which are currently
exercisable and 60,000 shares of Series A convertible preferred stock.
Does not include 27,300 shares held by Minnesota Cooperation Office, of
which Mr. Johnson is President.
(4) Includes 120,000 shares issuable pursuant to options and warrants which
are currently exercisable.
(5) Includes 50,000 shares issuable pursuant to warrants which are currently
exercisable.
(6) Includes 135,000 shares issuable pursuant to warrants which are currently
exercisable and 20,000 shares of Series A convertible preferred stock.
Also includes 200,000 shares of common stock held by EMBRO Corporation, of
which Dr. Knighton is an 80% shareholder.
(7) Represents 130,000 shares issuable pursuant warrants which are currently
exercisable.
(8) Represents 100,000 shares issuable pursuant warrants which are currently
exercisable.
(9) Represents 50,000 shares issuable pursuant warrants which are currently
exercisable. Does not include any portion of the 200,000 shares stock
held by EMBRO Corporation, of which Mr. Fiegel is a 20% shareholder.
<PAGE>
The following table presents certain information with respect to each share-
holder known by the Company to own beneficially 5% or more of its outstanding
Series A Preferred Stock shares and for each Director and Officer as of February
23, 1996. Each shareholder has sole voting and investment power with respect to
the shares shown as beneficially owned, except as otherwise indicated in a
footnote.
Name and Address of Amount and Nature of
Beneficial Owner Beneficial Owner Percent of Class
Charity, Inc.
6187 Heather Circle
Fridley, MN 55432 400,000 25.0%
Samuel M. Joy
828 Ridge Place
Mendota Heights, MN 55118 140,000 8.8%
Dr. Demetre Nicoloff
c/o National City Bank
Account #50-1580-04
75 South Fifth Street
Minneapolis, MN 55402 120,000 7.5%
Eugene T. and Joan L. Plitt
S76 West 12816 Cambridge Court
Muskego, WI 53150 100,000 6.3%
John M. Metcalfe
6565 Word Parkway
Melbourne Village, FL 32904-3636 80,000 5.0%
Dr. Melvin P. Bubrick
5712 Long Brake Trail
Edina, MN 55345 80,000 (1) 5.0%
Theodore A. Johnson
825 Southgate Plaza Office
5001 West 80th Street
Bloomington, MN 55437 60,000 3.8%
David R. Knighton, M.D.
2460 South Highway 100
St. Louis Park, MN 55416 20,000 1.3%
All Directors and Officers
as a group 80,000 5.0%
******************************
(1) Includes 40,000 shares held in trust in the names of Dr. Bubrick's
children.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In 1991, Theodore A. Johnson, Arthur W. Schwalm and Charles B. McNeil each
loaned the Company $25,000 in the form of short-term notes payable bearing
interest at 15%. The aggregate balance of these notes as of December 31, 1997
and December 31, 1996 was $10,000. In 1996 the Company exchanged a portion of
the notes payable plus accrued interest totalling $17,324 for common stock at
$.075 per share.
<PAGE>
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits required to be filed by Item 601(a) of Regulation S-B are included
as Exhibits to this report as follows:
3.1 Articles of Incorporation of Surgidyne, Inc. (including Articles of
Merger).(1)
3.2 Bylaws of Surgidyne, Inc.(1)
4.1 Private Placement Offering Statement of Terms for Convertible Sub-
ordinated Debenture Offering.(2)
4.2 Form of 12% Convertible Subordinated Debenture for Convertible Sub-
ordinated Debenture Offering.(2)
4.3 Form of 10% Convertible Subordinated Debenture for Convertible Sub-
ordinated Debenture Offering.(2)
4.4 Form of Convertible Subordinated Debenture Agreement for Convertible Sub-
ordinated Debenture Offering.(2)
4.5 Form of Amendment to Convertible Subordinated Debenture Agreement for
Convertible Subordinated Debenture Offering, dated November 28, 1989.(3)
4.6 Common Stock Purchase Warrant dated December 22, 1988, issued to Samuel
M. Joy for the purchase of 21,600 shares at a price of $0.01 per share.(2)
4.7 Common Stock Purchase Warrant dated February 28, 1989, issued to Samuel
M. Joy for the purchase of 5,400 shares at a price of $0.01 per share.(2)
4.8 Form of Amendment to Convertible Subordinated Debenture Agreement for
Convertible Subordinated Debenture Offering, dated June 5, 1990.(4)
4.9 1990 Private Placement Offering Memorandum.(4)
10.1 Lease dated August 23, 1985 between Technology Park Associates and
Surgidyne, Inc. for the office and warehouse space located at 9600 West
76th Street, Eden Prairie, Minnesota, as amended.(1)
10.2 Lease dated January 30, 1989 between Medical Incorporated and Surgidyne,
Inc. for the office and warehouse space located at 9605 West Jefferson
Trail, Inver Grove Heights, Minnesota.(2)
10.3 1984 Stock Option Plan.(1)
10.4 1986 Stock Option Plan.(1)
10.5 Selling Agency Agreement dated October 12, 1988 between Surgidyne, Inc.
and Samuel M. Joy.(2)
10.6 Employment Agreement dated September 11, 1989 between Surgidyne, Inc. and
Thomas J. McEvoy.(3)
10.7 Lease dated August 1, 1990 between Omnicor, Inc. and Surgidyne, Inc. for
the office and warehouse space located at 9605 West Jefferson Trail, Inver
Grove Heights, Minnesota.(4)
10.8 Development and license agreement and Manufacturing Agreement dated
October 9, 1990 with Baxter Healthcare Corporation.(4)
10.9 Lease dated August 1, 1991 between Omnicor, Inc. and Surgidyne, Inc. for
the office and warehouse space located at 9605 West Jefferson Trail, Inver
Grove Heights, Minnesota.(5)
10.10 Lease dated June 21, 1994 between Medicine Lake Properties of Plymouth and
Surgidyne, Inc. for office and warehouse space located at 9909 South Shore
Drive, Minneapolis, Minnesota.(6)
10.11 Purchase and sale of Assets and Restated Manufacturing Agreements dated
August 24, 1993 with Baxter Healthcare Corporation.(7)
10.12 Promissory note dated June 14, 1994 between Robert D. Furst, Jr. and
Surgidyne, Inc.(9)
(1) Incorporated by reference to Exhibits filed with Registrants' 1987 Form
10-K under the Securities and Exchange Act of 1934, file #33-13058-C.
(2) Incorporated by reference to Exhibits filed with Registrants' 1988 Form
10-K under the Securities and Exchange Act of 1934, file #33-13058-C.
(3) Incorporated by reference to Exhibits filed with Registrants' 1989 Form
10-K under the Securities and Exchange Act of 1934, file #33-13058-C.
(4) Incorporated by reference to Exhibits filed with Registrants' 1990 Form
10-K under the Securities and Exchange Act of 1934, file #33-13058-C.
(5) Incorporated by reference to Exhibits filed with Registrants' 1991 Form
10-K under the Securities and Exchange Act of 1934, file #33-13058-C.
(6) Incorporated by reference to Exhibits file with Registrant's Form 10-QSB
for the quarter ended June 25, 1994 under the Securities and Exchange
Act of 1934, file #33-13058-C.
(7) Incorporated by reference to Exhibits file with Registrant's Form 10-QSB
for the quarter ended September 24, 1994 under the Securities and Exchange
Act of 1934, file #33-13058-C.
(8) Incorporated by reference to Exhibits file with Registrant's 1993 Form 10-
KSB under the Securities and Exchange Act of 1934, file #33-13058-C.
(9) Incorporated by reference to Exhibits file with Registrant's Form 10-QSB
for the quarter ended June 30, 1994 under the Securities and Exchange
Act of 1934, file #33-13058-C.
B. Reports on Form 8-K.
No reports on Form 8-K were filed during the last quarter of the fiscal
year covered by this report.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
SURGIDYNE, INC.
(Registrant)
/s/ Vance D. Fiegel March 27, 1998
By: Vance D. Fiegel
President and Principal Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
/s/ Charles B. McNeil March 27, 1998
By: Charles B. McNeil
Executive Vice President, Treasurer and Director.
/s/ Theodore A. Johnson March 27, 1998
By: Theodore A. Johnson
Chief Executive Officer and Chairman of the Board of Directors
/s/ David B. Kaysen March 27, 1998
By: David B. Kaysen
Director
/s/ Arthur W. Schwalm March 27, 1998
By: Arthur W. Schwalm
Director
/s/ William F. Gearhart March 27, 1998
By: William F. Gearhart
Secretary and Director
/s/ David R. Knighton March 27, 1998
By: David R. Knighton
Director
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