Page 1 of 13 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 June 30, 1997
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.)
4314 ZEVEX Park Lane, Salt Lake City, Utah 84123
(Address of principal executive offices) (Zip Code)
(801) 264-1001
(Registrant's telephone number, including area code)
5175 Greenpine Drive, Salt Lake City, UT 84123
(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
August 8, 1997, the Company had outstanding 2,035,376 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 June 30, 1997, and December 31, 1996,
and the related statements of operations and cash flows for the
respective three month and six month periods ended June 30, 1997
and 1996. In the opinion of the Company's 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, 1996.
ZEVEX INTERNATIONAL, INC. & SUBSIDIARY
Balance Sheet
- -Unaudited-
ASSETS
June 30 Dec 31
1997 1996
CURRENT ASSETS
Cash in Banks 802,223 2,085,055
Accounts Receivable 830,045 1,429,521
Employee Advances 10,326 5,350
Tax Refunds 0 41,458
Inventory & Work-in-Process 2,429,101 1,344,297
Marketable Securities 203,109 203,109
Total Current Assets 4,274,804 5,108,790
OTHER ASSETS
Net Property and Equipment 3,635,431 1,207,034
Patents and Trademarks 47,659 49,357
Deposits 755 3,489
Total Other Assets 3,683,845 1,259,880
TOTAL ASSETS 7,958,649 6,368,670
LIABILITIES & STOCKHOLDERS' EQUITY
LIABILITIES
Accounts Payable 464,617 339,023
Other Accrued Expenses 133,962 188,878
Income Taxes Payable 46,883 0
Bank Line of Credit 0 60,108
Current Portion of L-T Debt 100,000 0
Total Current Liabilities 745,462 588,009
Long Term Debt 1,900,000 2,000,000
Deferred Taxes 79,212 79,212
Total Long Term Debt 1,979,212 2,079,212
STOCKHOLDERS'EQUITY
Common Stock 5,000,000 shares
authorized at $0.04 par value
issued and outstanding 1,495,716
shares in 1996 and 1,995,716
shares in 1997 79,829 59,829
Capital in Excess of Par Value 3,024,633 1,794,633
Retained Earnings 2,129,513 1,846,987
Total Stockholders' Equity 5,233,975 3,701,449
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY 7,958,649 6,368,670
ZEVEX INTERNATIONAL, INC. & SUBSIDIARY
Statement of Operations
For Three For Three For Six For Six
Months Months Months Months
Ended Ended Ended Ended
6/30/97 6/30/96 6/30/97 6/30/96
REVENUES
Sales 1,603,260 1,277,618 3,814,365 2,545,225
Cost of Sales 768,114 676,349 1,940,789 1,389,655
Gross Profit 835,146 601,269 1,873,576 1,155,570
General Expenses
Marketing,
G&A 514,050 474,435 1,058,851 831,653
Research and
Devel. 272,494 131,586 458,121 245,814
Operating
Income 48,602 (4,752) 356,604 78,103
Other Income 24,758 14,642 61,835 27,726
Other Expense (20,641) 0 (37,463) 0
Benefit for Taxes
(Provision) 4,268 (3,669) (98,451) (16,282)
Net Income
(Loss) 56,987 6,221 282,525 89,547
Income
Per Share .0286 .0046 .1505 .0656
Income Per Share
Fully Diluted .0215 .0046 .1282 .0656
Weighted Average Shares
Outstanding 1,995,716 1,365,716 1,876,932 1,365,716
Weighted Average Shares Outstanding
Fully Diluted 2,646,966 1,365,716 2,204,356 1,365,716
ZEVEX INTERNATIONAL, INC. & SUBSIDIARY
Statement of Cash Flows
For the six months ended June 30, 1997 and June 30, 1996
June 30 June 30
1997 1996
Cash Flows from Operating Activities:
Net income (loss) 282,525 89,547
Noncash revenue and expense adjustments:
Depreciation 164,418 99,340
Change in assets and liability accounts:
(Increase) decrease
in accounts receivable 599,476 336,934
(Increase) decrease
in work-in-process (1,084,804) (449,765)
(Increase) decrease in deposits 2,734 5,192
(Increase) decrease in tax refunds 41,458 0
(Increase) decrease
in employee advances (4,976) 0
(Increase) decrease
in prepaid expenses 0 (47,435)
Increase (decrease)
in accounts payable 125,594 149,703
Increase (decrease)
in accrued expenses (54,916) 6,143
Increase (decrease)
in provision for taxes 46,883 (58,735)
Increase (decrease)
in bank line of credit (60,108) 0
Net Cash flows used for
operating activities 58,284 130,924
Cash flows from investing activities:
Purchase of
property & equipment (2,591,116) (370,547)
Cash flows from financing activities:
Proceeds from issuance
of common stock 1,250,000 0
Net increase (decrease)
in cash (1,282,832) (239,623)
Cash at beginning
of period 2,085,055 870,333
Cash at end of period 802,223 630,710
ZEVEX INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1997
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 to seven years.
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 expensed as 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. Inventory & Work In Process
Inventory & 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.
2. Current Income Taxes Payable
Current income taxes payable are 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 June
30, 1997 and December 31, 1996 consists of the following:
1997 1996
Federal Income Taxes Payable (Refund) $ 34,938 $(34,354)
State Income Taxes Payable (Refund) 11,945 (7,104)
Total Income Taxes Payable (Refund) $ 46,823 $(41,458)
========== ==========
3. Major Customers
The Company distributes its products directly and is not dependent
upon any single customer. However, sales to three customers for
the six months ending June 30, 1997, 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 increased to $1,603,260 in the second quarter
1997 from $1,277,618 in the second quarter 1996, and $3,814,365
for the first six months of 1997, from $2,545,229 for the first
six months of 1996, an increase of approximately 26% for the three
months ending June 1997, and an increase of 50% for the six months
ending June 1997. During the first six months of 1997, 68% of
total revenues resulted from sales to three customers, all of whom
were
major customers in 1996. Since the Company's products are sold to
OEM's 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 OEM's, 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 52% in the
second quarter 1997, compared to 47% in the second quarter 1996,
and 49% for the six months ending June 1997, compared to 45% for
the six months ending June 1996. Management attributes the
increase to the product mix that was delivered during the second
quarter of 1997.
Selling, general and administrative expenses for the quarter ended
June 30, 1997 increased $39,615, from $474,435 in the second
quarter of 1996 to $514,050 in the second quarter of 1997. For
the six months ended June 30, 1997, selling, general and
administrative expenses were up $227,198, from $831,653 in 1996,
to $1,058,851 in 1997. Management attributes the increase in
these expenses to increased legal expenses and fees associated
with the Company's listing on the American Stock Exchange, and
increased payroll and related employee expenses, insurance and tax
costs. The Company believes that general and administrative
expenses will remain constant for the remainder of 1997.
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 second quarter of 1997, research and development
expenses were $272,494 compared to $131,586 during the second
quarter of 1996, and $458,121 for the first six months of 1997,
compared to $245,814 for the first six months of 1996. Expenses
incurred during the first six months were for the continued
development of new applications for the company's ultrasound
technology, and proprietary products. 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 increased to $56,987 in the second quarter of 1997,
from $6,221 in the second quarter of 1996. Net income of
$282,525 for the first six months of 1997 increased from a
net income of $89,547 in the first six months of 1996. The
increases in net income during 1997 compared to 1996 are
principally due to increased demand for the Company's
products, and the mix of product delivered during that
period.
As of June 30, 1997 the Company's backlog of customer orders
was $7,739,000, compared to $2,726,000 on June 30, 1996.
Management estimates that approximately 60% of the backlog
will ship before December 31, 1997.
Liquidity and Capital Resources
During the quarter ending June 30, 1997, and the six months ending
June 30 1997, the Company produced $56,897 in net income and
$282,525 in net income respectively from net income. Cash
decreased by $1,282,832 for the six months ending June 30, 1997,
as the Company continued to fund construction of its new
manufacturing facility, and purchased new equipment. During the
quarter ending June 30, 1996, and the six months ending June 30
1996, the Company had net incomes of $6,221 and $89,547
respectively from net income. Net cash decreased by $239,623 for
the six months ending June 30, 1996.
The Company's construction of the new facility, and purchases of
new research, production, test equipment and tooling was
$1,372,286 for the second quarter of 1997, and $2,591,116 for the
first six months of 1997.
The Company's working capital at June 30, 1997, was $3,529,342,
compared to $2,351,951 at June 30, 1996. The increase is
primarily attributed to income from operations. The portion of
working capital represented by cash at such dates was $802,223 and
$630,710 respectively. The Company utilizes substantial portions
of its cash from time to time to fund its operations.
Cautionary Statement for Purposes of Safe Harbor Provisions of the
Private Securities Litigation Reform Act of 1995
When used in this report, the words estimate, believe, project
and similar expressions, together with other discussion of future
trends or results, are intended to identify forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as
amended (the Securities Act) and Section 21E of the Securities
Exchange Act of 1934, as amended (the Exchange Act). Such statements
are subject to certain risks and uncertainties, including those
discussed below, that could cause actual results to differ materially
from those projected. These forward-looking statements speak only as
of the date hereof. All of these forward-looking statements are based
on estimates and assumptions made by management of the Company, which
although believed to be reasonable, are inherently uncertain and
difficult to predict. Therefore, undue reliance should not be placed
upon such estimates. There can be no assurance that the benefits
anticipated in these forward-looking statements will be achieved. The
following important factors, among others, could cause the Company not
to achieve the benefits contemplated herein, or otherwise cause the
Companys results of operations to be adversely affected in future
periods: (i)continued or increased competitive pressures from existing
competitors and new entrants; (ii)unanticipated costs related to the
Companys growth and operating strategies; (iii)loss or retirement of
key members of management; (iv)increase in interest rates of the
Companys cost of borrowing, or a default under any material debt
agreement; (vi)prolonged labor disruption; (viii)deterioration in
general of regional economic conditions; (ix)adverse state or federal
legislation or regulation that increases the cost of compliance, or
adverse findings by a regulator with respect to existing operations;
(x)loss of customers;(xi)adverse determinations in connection with
pending or future litigation or other material claims and judgments
against the Company; (xii)inability to achieve future sales; and
(xiii)the unavailability of funds for capital expenditures. Many of
such factors are beyond the control of the Company.
PART II
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the second quarter of the year ending December 31, 1997, matters
submitted to a vote of the security holders of the Company were to
reelect the current members of the Companys board of directors, and to
ratify the appointment by the Board of Directors of Ernst & Young, LLP,
as independent auditors. The vote from ballots and proxies tallied for
each member proposed for election to the Board of Directors of the
Company was 1,481,872 shares voted For, zero shares voted Against, and
zero shares Abstained from voting. The vote from ballots and proxies
tallied for ratification of the Companys auditors was 1,482,872 shares
voted For, zero shares voted Against, and zero shares abstained from
voting. All proposals were approved by a majority of the issued and
outstanding shares of the Companys common stock. No other matter was
submitted to a vote of the Companys shareholders.
ITEM 6. EXHIBITS AND REPORTS OF FORM 8-K
CHANGE IN REGISTRANTS CERTIFYING ACCOUNTANTS
On June 19, 1997, the Company filed Form 8-K, stating that the
registrants Board of Directors had appointed Ernst & Young, LLP, as
the Companys Certified Public Accountants. There have been no
disagreements with the previous accountants of the Company.
OTHER INFORMATION NOT APPLICABLE AT THIS TIME
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults upon Senior Securities
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: August 13, 1997 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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