Page 1 of 12 consecutively numbered pages
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 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 33-19583
ZEVEX INTERNATIONAL, INC.
(Exact name of registrant as specified in charter)
NEVADA 87-0462807
(State or other jurisdiction of (I.R.S.Employer
incorporation or organization) Identification No.)
5175 Greenpine Drive, Murray, Utah 84123
(Address of principal executive offices)
(Zip Code)84123
(801) 264-1001
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address, and former fiscal year, if changed since
last report)
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
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a
plan confirmed by a court.
Yes [ ] No [ ] Not Applicable [ X ]
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date. As of November 4,
1996, the Company had outstanding 1,495,716 shares of common stock, par
value $0.04 per share.
PART I
FINANCIAL INFORMATION
______________________________________________________________________
ITEM 1. FINANCIAL STATEMENTS REQUIRED BY FORM 10-Q
______________________________________________________________________
ZEVEX International, Inc. (the "Company"), files herewith balance
sheets of the Company as of September 30, 1996, and December 31, 1995,
and the related statements of operations and cash flows for the
respective three month and nine month periods ended September 30, 1996
and 1995. In the opinion of the Companys management, the financial
statements reflect all adjustments, all of which are normal recurring
adjustments, necessary to fairly present the financial condition of
the Company for the interim periods presented. The financial
statements included in this report on Form 10-Q should be read in
conjunction with the audited financial statements of the Company and
the notes thereto included in the annual report of the Company on Form
10-KSB for the year ended December 31, 1995.
ZEVEX INTERNATIONAL, INC. & SUBSIDIARY
Balance Sheet
-Unaudited-
ASSETS
Sept 30 Dec 31
1996 1995
CURRENT ASSETS
Cash in 473,748 870,333
Banks
Accounts Receivable 862,935 1,209,794
Employee Advances 4,022 2,835
Prepaid Taxes 52,353 0
Work-In-
Process 1,456,740 791,960
Total Current Assets 2,849,798 2,874,922
OTHER ASSETS
Net Property & Equipment 637,037 363,771
Deposits 3,490 8,682
Total Other Assets 640,527 372,453
TOTAL ASSETS 3,490,325 3,247,375
LIABILITIES & STOCKHOLDERS' EQUITY
LIABILITIES
Accounts Payable 344,604 191,562
Other Accrued Expenses 102,138 96,206
Income Taxes Payable 0 58,735
Total Current Liabilities 446,742 346,503
Long-Term Debt 0 0
Deferred Taxes 0 0
Total Long-Term Debt 0 0
STOCKHOLDERS EQUITY
Common Stock 5,000,000
shares authorized at $.04 par
value issued and outstanding
1,130,716 shares in 1995 and
1,356,716 share in 1996 54,629 54,629
Capital in excess of Par Value 1,344,833 1,344,833
Retained Earnings 1,644,121 1,501,410
Total Stockholders Equity 3,043,583 2,900,872
TOTAL LIABILITIES &
STOCKHOLDERS EQUITY 3,490,325 3,247,375
ZEVEX INTERNATIONAL, INC. & SUBSIDIARY
Statement of Operations
For Three For Three For Nine For Nine
Months Months Months Months
Ended Ended Ended Ended
9/30/96 9/30/95 9/30/96 9/30/95
REVENUES
Sales 1,333,030 1,380,141 3,878,255 3,770,055
Cost of Sales
732,085 785,963 2,121,740 2,143,555
Gross Profit 600,945 594,178 1,756,515 1,626,500
General
Expenses
Marketing, G&A 382,970 336,031 1,214,623 950,964
Research and
Devel. 114,521 120,088 360,335 400,579
Operating 138,059 181,557 274,958
Income 103,454
Other Income 8,078 9,482 35,804 28,127
Provision for
Taxes (58,369) (59,811) (74,651) (81,507)
Net Income
(Loss) 53,163 87,730 142,710 221,577
Income Per
Share .0389 .0644 .1045 .1729
Weighted
Average Shares
Outstanding 1,365,716 1,356,716 1,365,716 1,281,347
ZEVEX INTERNATIONAL, INC. & SUBSIDIARY
Statement of Cash Flows
For the nine months ended September 30, 1996
and September 30, 1995
Sept 30 Sept 30
1996 1995
Cash Flows from Operating Activities:
Net income (loss) 142,710 221,577
Noncash revenue and expense adjustments:
Depreciation 156,570 98,616
Change in assets and liability accounts:
(Increase) decrease in accounts
receivable 346,859 (157,233)
(Increase) decrease in work-in-process (664,780) (94,968)
(Increase) decrease in deposits 5,192 (5,000)
(Increase) decrease in prepaid expenses (52,353) 16,235
(Increase) decrease in employee advances (1,187) 0
(Increase) decrease in tax refunds 0 109,251
Increase (decrease) in accounts payable 153,042 36,220
Increase (decrease) in accrued expenses 5,932 (1,368)
Increase (decrease) in provision for
taxes (58,735) 32,387
Net Cash flows used for
operating activities
33,250 255,717
Cash flows from investing activities:
Purchase of equipment and tooling (429,835) (159,143)
Net increase (decrease) in cash (396,585) 96,574
Cash at beginning of period
870,333 864,332
Cash at end of period
473,748 960,906
ZEVEX INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1996
1. Summary of Significant Accounting Policies
A. Business Information
The Company was incorporated under the laws of the State of
Nevada on December 30, 1987. The Company was originally
incorporated as Downey Industries, Inc., and changed its
name to ZEVEX International, Inc., on August 15, 1988.
B. Principles of Consolidation
The consolidated financial statements include the accounts of
ZEVEX, International, Inc. (Company) and its wholly-owned
subsidiary ZEVEX, Inc. All significant inter-company balances
and transactions have been eliminated in the consolidation.
C. Machinery and Equipment
Machinery and equipment are stated at cost less accumulated
depreciation. Depreciation is provided over expected useful
lives of five or seven years on accelerated methods, which
provide for more depreciation expense in the early years of the
estimated life of the asset.
Major replacements which extend the useful lives of equipment are
capitalized and depreciated over the remaining useful life.
Normal maintenance and repair items are charged to costs and
expenses incurred.
Upon retirement or disposal of property, plant or equipment, the
costs and related accumulated depreciation amounts are
eliminated, and any gain or loss is included in operation in the
year of disposition.
Notes to the financial statements - continued
D. Work In Process
Work in process is stated at the lower of cost (first-in, first-
out method) or market value.
E. Bad Debts
The Company accounts for bad debts using the direct write off
method. Accounts are written off when deemed uncollectible.
F. Net Income Per Share
The computation of net income per share of common stock is
computed by dividing net income for the period by the weighted
average number of shares outstanding during the period. Common
stock equivalents which dilute earnings per share are not taken
into consideration in the calculation because they have no
material impact.
2. Business Combination
On August 11, 1988, the Company acquired the outstanding stock of
ZEVEX, Inc., a manufacturer and producer of acoustic and electronic
equipment for special applications, in exchange for 600,000 shares of
its common stock. This business combination has been accounted for in
a manner similar to a pooling-of-interests.
Notes to the financial statements - continued
3. Income Taxes
Provision for income taxes is made, at Federal and State statutory
rates, based on earnings reported in the financial statements for the
amount of income taxes payable currently, less any prepayment
deposits. The provision for income taxes at September 30, 1996 and
September 30, 1995 consists of the following:
1996 1995
Federal income taxes $ 63,783 $ 24,054
State income taxes 10,868 8,333
Provision for income tax $ 74,651 $ 32,387
========== ==========
4.Major Customers
The Company distributes its products directly and is not dependent
upon any single customer. However, sales to three customers for the
nine months ending September 30, 1996, each represented 10% or more of
total sales.
______________________________________________________________________
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
______________________________________________________________________
Results of Operations
The Company's sales decreased to $1,333,030 in the third quarter 1996
from $1,380,141 in the third quarter 1995, and increased to $3,878,255
for the first nine months of 1996, from $3,770,055 for the first nine
months of 1995, a decrease of approximately 4% for the three months
ending September 1996, and an increase of 3% for the nine months
ending September 1996. During the first nine months of 1996, 63% of
total revenues resulted from sales to three customers, all of whom
were major customers in 1995. Since most of the Company's products
are sold to OEMs as components for incorporation into products
manufactured by them, demand for the Company's products is affected by
the demand for the final products manufactured by the OEMs, which is
beyond the control of the Company, and no assurances can be given that
orders from any customer will increase or remain at current levels or
that they will not decline.
The Company's gross profit as a percentage of sales was 45% in the
third quarter 1996, as compared to 43% in the third quarter 1995, and
45% for the nine months ending September 1996 compared to 43% for the
nine months ending September 1995. Management attributes the increase
to the product mix that was delivered during these periods of 1996.
Selling, general and administrative expenses for the quarter ended
September 30, 1996 increased $46,939, from $336,031 in the second
quarter of 1995 to $382,970 in the third quarter of 1996. Management
attributes the increase in these expenses to increased sales effort,
including travel, and legal costs related to the introduction and
marketing trials of the new Enteralite(Trademark) ambulatory enteral
feeding pump, and increased expenses related to employee insurance and
tax costs. The Company believes that general and administrative
expenses will remain constant for the remainder of 1996.
Research and development expenses vary from quarter to quarter
depending on the number and nature of pending research and development
projects and their various stages of completion. During the third
quarter of 1996, research and development expenses were $114,521
compared to $120,088 during the third quarter of 1995, and $360,335
for the first nine months of 1996, compared to $400,579 for the first
nine months of 1995. Expenses incurred during the first nine months
were for the continued development of several proprietary products and
new applications of the company's ultrasound technology. Management
believes investing in research and development will serve the
company's future well, and will continue these expenses at the current
rate for at least the next several quarters.
Net income decreased to $53,163, or 4% of net sales, in the third
quarter of 1996, from $87,730 in the third quarter of 1995. Net
income of $142,710, or 3.7% of net sales, for the first nine
months of 1996 decreased from a net income of $221,577 in the
first nine months of 1995. The decreases in net income during
1996 as compared to 1995 are principally due to increased
selling, general and administrative expenses for the current
year, and a change in the tax law regarding research and
development tax credit.
As of September 30, 1996 the Company's backlog of customer orders was
$4,357,000, as compared to $3,688,000 on September 30, 1995.
Management estimates that approximately 40% of the backlog will ship
before December 31, 1996.
Liquidity and Capital Resources
During the quarter ending September 30, 1996, and the nine months
ending September 30 1996, the Company produced $53,163 in net income
and $142,710 in net income respectively from operating activities.
Cash decreased by $396,585 for the nine months ending September 30,
1996 as the company funded an increase in inventories and work in
process, as well as major production tooling costs. During the
quarter ending September 30, 1995, and the nine months ending
September 30 1995, the Company had net incomes of $87,730 and $221,577
respectively from operating activities. Net cash increased by $96,574
for the nine months ending September 30, 1995, as the Company funded
an increase in accounts receivable and inventories of work in progress
for future sale.
The Company's purchases of new research, production, test equipment
and tooling was $59,288 for the third quarter of 1996, and $429,835
for the first nine months of 1996. The Company has no material
commitments for the purchase of equipment or tooling during the
remainder of 1996.
The Company's working capital at September 30, 1996, was $2,403,056 as
compared to $2,423,994 at September 30, 1995. The decrease is
primarily attributed to a decrease in income from operations. The
portion of working capital represented by cash at such dates was
$473,748 and $960,906 respectively. The Company utilizes substantial
portions of its cash from time to time to fund its operations.
On October 30, 1996, the company completed the issuance and sale of a
$2,000,000 aggregate principal amount of adjustable rate Industrial
Development Revenue Bonds, series 1996 (ZEVEX, Inc., Project) of
Murray City, Salt Lake County, Utah. The bonds will finance
construction of a manufacturing facility for the Company in Murray,
Utah.
On October 29, 1996, the Company completed a transaction for the
amount of $50,000 cash and 130,000 shares of unregistered stock of the
company for the purchase of approximately 3.7 acres of land within
Murray City, Salt Lake County, Utah, for the purpose of constructing a
manufacturing facility with an unrelated party. As a result of the
above transactions, stockholders equity increased $455,000 subsequent
to the September 30, 1996, balance sheet date. Also, assets and
liabilities of the company will increase by approximately $2,000,000
subsequent to the September 30, 1996, balance sheet date.
The Companys warrants, issued on April 29, 1993, expired on October
29, 1996. The exercise price on the warrants was $6.67. The warrants
could not be exercised in the absence of an effective registration
statement. The Company chose not to extend the expiration date of the
warrants, because the current common stock price was $3.25, had never
been near the exercise price, and would not be exercisable in the
foreseeable future.
PART II
Item 6. Item 10. Material Contracts
Offering Memorandum "$2,000,000 Murray City, Utah
Adjustable Rate Industrial Development Bonds, Series
1996 (ZEVEX, INC. PROJECT)
Item 10. Reimbursement Agreement
OTHER INFORMATION NOT APPLICABLE AT THIS TIME
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
______________________________________________________________________
SIGNATURES
______________________________________________________________________
Pursuant to the requirements of the Securities Exchange Act of 1934,
as amended, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
ZEVEX INTERNATIONAL, INC.
Dated: November 4, 1996 By /s/ Dean G. Constantine
Dean G. Constantine, President
By /s/ Phillip L. Mcstotts
Phillip L. McStotts, Secretary
(Principal Financial Officer)
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 473,748
<SECURITIES> 0
<RECEIVABLES> 862,935
<ALLOWANCES> 0
<INVENTORY> 664,780
<CURRENT-ASSETS> 2,849,798
<PP&E> 1,253,821
<DEPRECIATION> 616,784
<TOTAL-ASSETS> 3,490,325
<CURRENT-LIABILITIES> 446,742
<BONDS> 0
0
0
<COMMON> 54,629
<OTHER-SE> 2,988,954
<TOTAL-LIABILITY-AND-EQUITY> 3,490,325
<SALES> 1,333,030
<TOTAL-REVENUES> 1,333,030
<CGS> 732,085
<TOTAL-COSTS> 732,085
<OTHER-EXPENSES> 497,491
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 111,532
<INCOME-TAX> 58,369
<INCOME-CONTINUING> 53,163
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 53,163
<EPS-PRIMARY> .039
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