UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-12998
INFRASONICS, INC
(Exact name of registrant as specified in its charter)
California 95-3797283
(State or other jurisdiction of (I.R.S.Employer
incorporation or organization) Identification Number)
3911 Sorrento Valley Blvd.
San Diego, California 92121
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(619) 450-9898
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 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.
Yes X No
Indicate the number of shares outstanding of each of the
issuer's classes of common stock as of the latest
practicable date:
10,554,100 shares of Common Stock as of April 10, 1996.
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Infrasonics, Inc.
Index to Form 10-Q
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PART I. FINANCIAL INFORMATION
<S> <C>
Item 1. Condensed Consolidated Financial Statements PAGE
Condensed Consolidated Balance Sheets (unaudited)
March 31, 1996 and June 30, 1995 3
Condensed Consolidated Statements of Income (unaudited)
Three and Nine-Months Ended March 31, 1996 and 1995 4
Condensed Consolidated Statements of Cash Flows (unaudited)
Nine Months Ended March 31, 1996 and 1995 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
PART II. OTHER INFORMATION 8
SIGNATURES 8
Exhibit 27. Financial Data Schedule 9
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<PAGE>
Item 1. Condensed Consolidated Financial Statements
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INFRASONICS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
March 31, June 30,
1996 1995
___________ ___________
<S> <C> <C>
Current assets:
Cash and equivalents $ 6,044,600 $ 4,748,900
Short-term investments 971,000 989,300
Accounts receivable, net 6,358,200 6,355,300
Inventories 7,995,600 6,313,000
Other current assets 420,100 203,500
___________ ___________
Total current assets 21,789,500 18,610,000
Equipment, furniture and fixtures,
net of accumulated depreciation 2,587,700 2,538,500
Computer software costs,
net of accumulated amortization 2,049,600 2,231,500
Intangible assets and other assets 3,789,000 3,573,800
___________ ___________
Total assets $30,215,800 $26,953,800
=========== ===========
Liabilities & Shareholders' Equity
Current liabilities:
Accounts payable $ 450,600 $ 274,100
Accrued liabilities 2,253,000 1,119,700
___________ ___________
Total current liabilities 2,703,600 1,393,800
Shareholders' Equity:
Preferred shares, none issued - -
Common shares, no par value;
10,554,100 shares issued and
outstanding ( 10,339,400 at
June 30, 1995) 26,646,800 26,083,700
Deferred consulting expense (27,800) (110,800)
Retained earnings 893,200 (412,900)
__________ __________
Total shareholders' equity 27,512,200 25,560,000
Total liability and
shareholders' equity $30,215,800 $26,953,800
=========== ===========
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See accompanying notes.
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<TABLE>
<CAPTION>
INFRASONICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
Three months ended Nine months ended
March 31, March 31,
1996 1995 1996 1995
___________ ___________ ___________ ___________
<S> <C> <C> <C> <C>
Revenues
Net sales $ 7,147,300 $ 5,426,000 $19,270,500 $15,668,900
Interest income 86,900 55,700 250,600 155,600
___________ ___________ ___________ __________
Total revenues 7,234,200 5,481,700 19,521,100 15,824,500
Costs and expenses
Cost of sales 3,230,600 3,365,900 9,074,800 9,136,800
Engineering, research and
development 506,900 528,500 1,458,900 1.503,300
Selling, general and
administrative 2,733,800 2,268,300 7,121,500 6,939,100
___________ ___________ ___________ ___________
Total costs and expenses 6,471,300 6,162,700 17,655,200 17,579,200
Income before
income taxes 762,900 (681,000) 1,865,900 (1,754,700)
Provision for (benefit from
income taxes) 162,700 (257,000) 559,800 (257,000)
___________ ___________ ___________ ___________
Net income $ 600,200 $ (424,000) $ 1,306,100 $(1,497,700)
=========== =========== =========== ===========
Net income per share $ .06 $ <.04> $ .12 $ <.14>
=========== =========== =========== ===========
Shares used in calculation
of net income per share 10,900,100 10,339,400 10,829,800 10,339,400
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See accompanying notes.
<PAGE>
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<CAPTION>
INFRASONICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Nine months ended
March 31,
1996 1995
___________ ___________
<S> <C> <C>
Operating activities:
Net income $ 1,306,100 $(1,497,700)
Adjustments to reconcile
net income to net cash flows
from operating activities:
Depreciation and amortization 1,263,300 1,140,900
Deferred income taxes - (257,000)
Changes in operating assets
and liabilities (601,400) 2,398,500
___________ ___________
Net cash flows from
operating activities 1,968,000 1,784,700
Investment activities:
Changes in short-term
investments 18,300 1,002,700
Additions to equipment,
furniture and fixtures (631,300) (453,600)
Additions to computer
software costs (189,400) (304,600)
Changes in other assets (433,000) (132,800)
___________ ___________
Net cash flows from (used in)
investing activities (1,235,400) 111,700
Financing activities:
Exercise of stock options and
warrants 563,100 8,200
___________ ___________
Net changes in cash and
cash equivalents 1,295,700 1,904,600
Cash and cash equivalents
at beginning of period 4,748,900 2,697,300
___________ ___________
Cash and cash equivalents
at end of period $ 6,044,600 $ 4,601,900
=========== ===========
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See accompanying notes.
<PAGE>
INFRASONICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The condensed consolidated financial statements of
Infrasonics, Inc. (the "Company") for the three and nine-
month periods ended March 31, 1996 and 1995 are unaudited.
These financial statements reflect all adjustments,
consisting of only normal recurring adjustments which in the
opinion of management, are necessary to fairly present the
financial position at March 31, 1996 and the results of
operations for the three and nine-month periods ended
March 31, 1996 and 1995. The results of operations
for the three and nine-months ended March 31, 1996 are not
necessarily indicative of the results to be expected for the
year ending June 30, 1996. For more complete financial
information, these financial statements, and the notes
thereto, should be read in conjunction with the audited
financial statements for the year ended June 30, 1995
included in the Company's Form 10-K filed with the
Securities and Exchange Commission.
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<CAPTION>
2. Inventories:
March 31, June 30,
1996 1995
___________ ___________
<S> <C> <C>
Raw Materials $ 3,459,500 $ 2,864,500
Work in Process 1,252,900 947,000
Finished Goods 3,283,200 2,501,500
___________ ___________
$ 7,995,600 $ 6,313,000
=========== ===========
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3. Per Share Information
Net income (loss) per common share has been computed using
the weighted average number of common shares and dilutive
common share equivalents outstanding during each period
presented unless the effect of such would be antidilutive.
Common share equivalents result from outstanding options and
warrants to purchase common shares.
4. Merger Agreement
A Form 8-K was filed on March 13, 1996 to report the
execution of a merger agreement with Nellcor Puritan
Bennett("NPB"), pursuant to which the Company would be
acquired by NPB. Consumation of the transaction
contemplated by the merger agreement is subject to the
satisfaction of a number of conditions, including
shareholder approval.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
Net sales and cost of sales were $7,147,300 and $3,230,600,
respectively, for the quarter ended March 31, 1996, as
compared to $5,426,000 and $3,365,900, respectively, for the
corresponding quarter of the prior fiscal year. For the
nine-months ended March 31, 1996 and 1995, net sales were
$19,270,500 and $15,668,900, respectively, and the cost of
sales for those periods were $9,074,800 and $9,136,800,
respectively. The growth in sales was due to the increased
number of units sold. The Company believes that healthcare
reform issues continue to impact sales growth (as compared
to historical trends) although to a lesser degree than prior
years. For the three-month period ended March 31, 1996, cost
of sales were 45% of sales, down from 62% for the same
period last year. For the nine-month period ended March 31,
1996, cost of sales were 47% of sales, down freom 58% in the
same period for fiscal year 1995. The decrease in cost of
sales as a percentage of sales resulted from the mix of
products sold, improved manufacturing processes and a
decrease in material costs.
Engineering, research and development expenses decreased to
$506,900 and $1,458,900 for the three and nine-months ended
March 31, 1996, respectively,as compared to $528,500 and
$1,503,300 for the corresponding periods ended March 31,
1995. The decrease in expense was due to completion of some
product improvement projects.
Selling, general and administrative expenses were $2,733,800
and $7,121,500 for the three and nine-month periods ending
March 31, 1996, respectively. For the corresponding periods
in the prior fiscal year, selling, general and
administrative expenses were $2,268,300 and $6,939,100. The
increase in spending for both periods over the prior year is
the result of the increased commission costs due to
increased sales. Costs associated with the proposed merger
with Nellcor Puritan Bennett will be expensed when the
merger is completed or abandoned. Pending completion of
required reviews and receipt of required approvals by
shareholders, this merger is currently scheduled to be
completed late in the quarter ending June 30, 1996.
Liquidity and Capital Resources
At March 31, 1996, the Company had working capital of
$19,085,900 which is up $1,869,700 from the $17,216,200 on
June 30, 1995. For the period, cash and cash flows from
operating activities were positive primarily due to the
increase in profitability and liabilities, partially offset
by an increase in inventories. The increase in inventories
resulted from an increase in the level of manufacturing as
well as changes made in purchasing procedures.
A Form 8-K was filed on March 13, 1996 to report the
execution of a merger agreement with Nellcor Puritan
Bennett("NPB"), pursuant to which the Company would be
acquired by NPB. Consumation of the transaction
contemplated by the merger agreement is subject to the
satisfaction of a number of conditions, including
shareholder approval. Through March 31, 1996, the Company
has incurred expenses for this transaction amounting to
$78,300, which have been accounted for as deferred
acquisition costs. Additional expenses related to this
transaction will be incurred for investment banking and
professional services leading to a shareholder vote.
<PAGE>
Management believes that its present sources of liquidity
should be sufficient to finance operations over the next
year and may be used to fund acquisitions of complimentary
businesses, products or technologies in related industries.
Long-term liquidity is dependent upon results of operations
and the level of funding necessary to market existing and
new products. The need for additional equity or debt
financing at some point in the future is therefore possible.
Business Risks
In addition to the factors addressed in the preceding
sections, certain dynamics of the Company's markets,
technologies and operations create fluctuations in the
Company's results. The current health care reform climate
consisting of cost containment pressures and consolidation
trends may continue to affect product sales adversely,
although the Company is unable to determine the potential
effect on revenues and profits at this time. In addition,
variances in quarterly results, government regulation,
competitive conditions, and changes in third-party
reimbursement present certain other risks to operating
results which are more fully described in the Company's 1995
10-K and Annual Report to Shareholders.
Part II OTHER INFORMATION
6.(b) Exhibits and Reports on Form 8-K.
A Form 8-K was filed on March 13, 1996 to report the
execution of a merger agreement with Nellcor Puritan
Bennett("NPB"), pursuant to which the Company would be
acquired by NPB. Consumation of the transaction
contemplated by the merger agreement is subject to the
satisfaction of a number of conditions, including
shareholder approval.
SIGNATURES
Pursuant to the requirements 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.
INFRASONICS, INC.
Date: April 15, 1996
/s/ Jim Hitchin
Jim Hitchin
President, Treasurer,
Chairman of the Board
/s/ Fred McGee
Fred McGee
Vice President,
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> MAR-31-1996
<CASH> 6,044,600
<SECURITIES> 971,000
<RECEIVABLES> 6,358,200
<ALLOWANCES> 0
<INVENTORY> 7,995,600
<CURRENT-ASSETS> 21,789,500
<PP&E> 2,587,700
<DEPRECIATION> 0
<TOTAL-ASSETS> 30,215,800
<CURRENT-LIABILITIES> 2,703,600
<BONDS> 0
<COMMON> 26,646,800
0
0
<OTHER-SE> 865,400
<TOTAL-LIABILITY-AND-EQUITY> 30,215,800
<SALES> 19,270,500
<TOTAL-REVENUES> 19,521,100
<CGS> 9,074,800
<TOTAL-COSTS> 17,655,200
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,865,900
<INCOME-TAX> 559,800
<INCOME-CONTINUING> 1,306,100
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,306,100
<EPS-PRIMARY> .12
<EPS-DILUTED> .12
</TABLE>
