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 December 31, 1995
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:
10,522,600 shares of Common Stock as of January 15, 1996.
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Infrasonics, Inc.
Index to Form 10-Q
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PART I. FINANCIAL INFORMATION
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Item 1. Condensed Consolidated Financial Statements PAGE
Condensed Consolidated Balance Sheets (unaudited)
December 31, 1995 and June 30, 1995 3
Condensed Consolidated Statements of Income (unaudited)
Three and Six Months Ended December 31, 1995 and 1994 4
Condensed Consolidated Statements of Cash Flows (unaudited)
Six Months Ended December 31, 1995 and 1994 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)
December 31, June 30,
1995 1995
___________ ___________
<S> <C> <C>
Current assets:
Cash and equivalents $ 5,113,100 $ 4,748,900
Short-term investments 2,016,100 989,300
Accounts receivable 5,329,500 6,355,300
Inventories 7,446,000 6,313,000
Other current assets 386,100 203,500
___________ ___________
Total current assets 20,290,800 18,610,000
Equipment, furniture and fixtures,
net of accumulated depreciation 2,604,600 2,538,500
Computer software costs,
net of accumulated amortization 2,123,700 2,231,500
Intangible assets and other assets 3,576,600 3,573,800
___________ ___________
Total assets $28,595,700 $26,953,800
=========== ===========
Liabilities & Shareholders' Equity
Current liabilities:
Accounts payable $ 378,100 $ 274,100
Accrued liabilities 1,426,600 1,119,700
___________ ___________
Total current liabilities 1,804,700 1,393,800
Shareholders' Equity:
Preferred shares, none issued - -
Common shares, no par value;
10,519,600 shares issued and
outstanding ( 10,339,400 at
June 30, 1995) 26,553,700 26,083,700
Deferred consulting expense (55,600) (110,800)
Retained earnings 292,900 (412,900)
__________ __________
Total shareholders' equity 26,791,000 25,560,000
Total liability and
shareholders' equity $28,595,700 $26,953,800
=========== ===========
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See accompanying notes.
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INFRASONICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
Three months ended Six months ended
December 31, December 31,
1995 1994 1995 1994
___________ ___________ ___________ ___________
<S> <C> <C> <C> <C>
Revenues
Net sales $ 5,867,600 $ 5,650,900 $12,123,200 $10,242,900
Interest income 88,800 59,300 163,700 99,900
___________ ___________ ___________ ____________
Total revenues 5,956,400 5,710,200 12,286,900 10,342,800
Costs and expenses
Cost of sales 2,590,400 3,344,700 5,844,200 5,770,900
Engineering, research and
development 390,400 442,100 952,000 974,800
Selling, general and
administrative 2,346,100 3,004,300 4,387,800 4,670,800
___________ ___________ ___________ ___________
Total costs and expenses 5,326,900 6,791,100 11,184,000 11,416,500
Income before
income taxes 629,500 (1,080,900) 1,102,900 (1,073,700)
Provision for income taxes 226,700 (2,600) 397,100 -0-
___________ ___________ ___________ ___________
Net income $ 402,800 $(1,078,300) 705,800 (1,073,700)
=========== =========== =========== ===========
Net income per share $ .04 $ <.10> .07 <.10>
=========== =========== =========== ===========
Shares used in calculation
of net income per share 10,790,000 10,427,700 10,736,900 10,427,000
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See accompanying notes.
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INFRASONICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Six months ended
December 31,
1995 1994
___________ ___________
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Operating activities:
Net income $ 705,800 $(1,073,700)
Adjustments to reconcile
net income to net cash flows
from operating activities:
Depreciation and amortization 833,300 779,000
Changes in operating assets
and liabilities 112,000 1,915,600
___________ ___________
Net cash flows from
operating activities 1,651,100 1,620,900
Investment activities:
Changes in short-term
investments (1,026,900) 1,014,800
Additions to equipment,
furniture and fixtures (445,700) (327,000)
Additions to computer
software costs (139,700) (205,400)
Changes in other assets (144,500) (129,000)
___________ ___________
Net cash flows from
investing activities (1,756,800) 353,400
Financing activities:
Exercise of stock options 469,900 8,200
Net change in cash and
cash equivalents 364,200 1,982,500
Cash and cash equivalents
at beginning of period 4,748,900 2,697,300
___________ ___________
Cash and cash equivalents
at end of period $ 5,113,100 $ 4,697,800
=========== ===========
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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 six-
month periods ended December 31, 1995 and 1994 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 December 31, 1995 and the
results of operations for the three and six-month periods
ended December 31, 1995 and 1994. The results of operations
for the three and six months ended December 31, 1995 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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2. Inventory consisted of:
December 31, June 30,
1995 1995
___________ ___________
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Raw Materials $ 2,615,800 $ 2,864,500
Work in Process 1,202,800 947,000
Finished Goods 3,627,300 2,501,500
___________ ___________
$ 7,446,000 $ 6,313,000
=========== ===========
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3. Income Taxes
For the three and six months ended December 31, 1995 and
1994, income taxes have been provided based on the estimated
annualized effective tax rate applied to pretax income for
interim periods. The estimated effective rate is less than
the federal and state statutory rates principally due to the
benefits of estimated tax credits, net operating loss
carryforwards and the use of a Foreign Sales Corporation for
the Company's export sales.
4. Per Share Information
Net income per common share has been computed using the
weighted average number of common shares and dilutive common
share equivalents outstanding during each period presented.
Common share equivalents result from outstanding options and
warrants to purchase common shares. For the three and six
months ended December 31,1994, the common share equivalents
are antidilutive.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Revenues
Net sales and cost of sales were $5,867,600 and $2,590,400,
respectively for the quarter ended December 31, 1995, as
compared to $5,650,900 and $3,344,700, respectively, for the
corresponding quarter of the prior fiscal year. For the six
months ended December 31, 1995 and 1994, net sales were
$12,123,200 and $10,242,900, respectively, and the cost of
sales for those periods were $5,844,200 and $5,770,900,
respectively. The growth in sales was due to the increased
number of units of the Company's products sold as well as
increased penetration of foreign markets. The Company
believes that healthcare reform issues continue to impact
sales growth (as compared to historical trends) although to
a lesser degree than recent prior years. The current
health care reform climate consisting of cost containment
and consolidation 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. For the three and
six-months ended December 31, 1995, cost of sales were 44%
and 48%,respectively, of net sales, down from 56% and 59%,
respectively, for the same periods in fiscal year 1994. The
decrease in cost of sales as a percentage of sales is
primarily the result of the Company's continuing efforts to
control costs in manufacturing and purchasing along with an
increase in certain product prices. The cost of sales
percentage may change in the future as a result of the mix
of products sold.
Expenses
Engineering, research and development expenses decreased to
$390,400 and $952,000 for the three and six months ended
December 31, 1995, as compared to $442,100 and $974,800 for
the corresponding periods ended December 31, 1994. The
decrease is the result of project completions and continuing
cost-control programs. These expenses may fluctuate based on
the timing of future engineering activities.
Selling, general and administrative expenses were $2,346,100
and $4,387,800 for the three and six-month periods ending
December 31, 1995, respectively. For the corresponding
periods in the prior fiscal year, selling, general and
administrative expenses were $3,004,300 and $4,670,800. The
decrease in spending is primarily due to expense reduction
measures.
<PAGE>
Liquidity and Capital Resources
At December 31, 1995, the Company had working capital of
$18,486,100 which is up $1,269,900 from the $17,216,200 on
June 30, 1995, due primarily to an increase in cash flow
from operations and cash from stock option exercises,
partially offset by capital investments. 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.
Part II OTHER INFORMATION
4. Voting results for Annual Meeting held October 19, 1995.
Voting results for Directors were as follows:
Name of nominee For Withheld
_______________ _________ _________
Harry Casari 9,033,477 45,788
Janet Colson 9,033,177 46,088
Jim Hitchin 9,026,377 52,888
Robert Hovee 9,033,327 45,938
E. A. Vanderpool 9,033,327 47,938
Voting results for the 1995 Stock Option Plan were:
For Against Withheld
_________ _______ ________
8,706,122 289,200 83,943
Except for votes withheld, there were no other abstentions or broker non-votes.
6.(b) Exhibits and Reports on Form 8-K.
No reports were filed on Form 8-K during the
preceding quarter.
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: January 16,1996
/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
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> DEC-31-1995
<CASH> 5,113,100
<SECURITIES> 2,016,100
<RECEIVABLES> 5,329,500
<ALLOWANCES> 0
<INVENTORY> 7,446,000
<CURRENT-ASSETS> 20,290,800
<PP&E> 5,442,900
<DEPRECIATION> 2,838,300
<TOTAL-ASSETS> 28,595,700
<CURRENT-LIABILITIES> 1,804,700
<BONDS> 0
<COMMON> 26,553,700
0
0
<OTHER-SE> 237,300
<TOTAL-LIABILITY-AND-EQUITY> 28,595,700
<SALES> 12,123,200
<TOTAL-REVENUES> 12,286,900
<CGS> 5,844,200
<TOTAL-COSTS> 11,184,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,102,900
<INCOME-TAX> 397,100
<INCOME-CONTINUING> 705,800
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 705,800
<EPS-PRIMARY> .07
<EPS-DILUTED> .07
</TABLE>
