FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
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 001-12965
ZEVEX INTERNATIONAL, INC.
(Exact name of registrant as specified in charter)
DELAWARE 87-0462807
(State or other jurisdiction Of (I.R.S. Employer
Identification No.) organization) incorporation or
4314 ZEVEX Park Lane, Salt Lake City, Utah 84123
(Address of principal executive offices and zip code)
(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 August 7, 2000, the
Company had outstanding 3,439,314 shares of common stock, par value $0.001 per
share.
<PAGE>
See accompanying notes.
<PAGE>
PART I
FINANCIAL INFORMATION
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ITEM 1. FINANCIAL STATEMENTS REQUIRED BY FORM 10-Q
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ZEVEX International, Inc. (the "Company") files herewith balance sheets of the
Company as of June 30, 2000 and December 31, 1999, and the related statements of
operations and cash flows for the respective three month and six month periods
ended June 30, 2000 and 1999. 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-K for the year ended December 31, 1999.
<PAGE>
ZEVEX INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
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June 30 December 31
2000 1999
----- ----
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 963,821 $ 3,383,544
Restricted cash for sinking
fund payment on IDB 38,538 86,549
Accounts receivable 7,173,295 5,843,229
Inventories 7,762,721 5,119,291
Marketable securities 2,361,087 3,224,817
Other current assets 22,523 26,859
Prepaid expenses
35,825 33,554
------ ------
Total current assets 18,357,810 17,717,843
Property and equipment, net 7,289,800 5,333,577
Patents, trademarks and acquisition costs, net 350,319 349,354
Goodwill, net 11,383,427 10,642,304
Other assets
73,686 6,611
------ -----
$ 37,455,042 $ 34,049,689
============ ============
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,761,231 $ 1,134,946
Other accrued expenses 560,531 731,852
Income taxes payable 183,656 957,309
Bank lines of credit 1,703,110 1,613,453
Current portion of long-term debt 2,100,304 1,234,483
Deferred income taxes 110,276
---------- --------------
43,104
Total current liabilities 8,351,936 5,782,319
Deferred income taxes -- 6,648
Industrial development bond 1,600,000 1,700,000
Convertible debt, long-term 5,440,275 5,470,000
Other long-term liabilities 77,724 --
Stockholders' equity:
Common stock, $.001 par value;
10,000,000 shares authorized; 3,439,314
and 3,420,726issued and outstanding
shares at June 30, 2000
and December 31,1999, respectively 3,439 3,421
Additional paid in capital 16,287,938 16,212,966
Unrealized gain on marketable securities, net 278,348 331,484
Retained earnings
5,415,382 4,542,851
--------- ---------
Total
stockholders' equity 21,985,107 21,090,722
---------- ----------
$ 37,455,042 $ 34,049,689
============ ============
</TABLE>
<PAGE>
ZEVEX INTERNATIONAL, INC.
STATEMENTS OF OPERATIONS
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Three months ended Six months ended
June 30, June 30,
<PAGE>
2000 1999 2000 1999
------------------- ----------------- ------------------- --------------------
<PAGE>
(unaudited) (unaudited) (unaudited) (unaudited)
Revenue:
Product sales $ 8,931,666 $ 5,079,335 $ 14,347,438 $ 9,377,562
Engineering services 105,933 402,069 348,208 765,295
----------------- ------------------ ------------------- --------------------
Total revenue 9,037,599 5,481,404 14,695,646 10,142,857
Cost of sales 5,821,822 2,991,430 8,950,436 5,378,537
----------------- ------------------ ------------------- --------------------
Gross profit 3,215,777 2,489,974 5,745,210 4,764,320
Operating expenses:
General and administrative 1,228,617 1,028,428 2,451,624 2,073,380
Selling and marketing 652,136 579,292 1,234,163 1,107,735
Goodwill amortization 143,481 154,206 270,266 308,412
Research and development 144,230 169,683 360,213 298,745
----------------- ------------------ ------------------- --------------------
Total operating expenses 2,168,464 1,931,609 4,316,266 3,788,272
Operating income 1,047,313 558,365 1,428,944 976,048
Other income (expense):
Interest and other income 44,870 33,821 82,839 88,590
Interest expense (156,143) (115,104) (297,856) (220,134)
Gain on sale of
marketable securities -- -- 298,048
Unrealized gain on
marketable securities -- -- -- 87,903
----------------- ------------------ ------------------- --------------------
Income before provision for
income taxes 936,040 477,082 1,511,975 932,407
Provision for income taxes (383,524) (171,087) (639,444) (338,644)
----------------- ------------------ ------------------- --------------------
Net income $ 552,516 $ 305,995 $ 872,531 $ 593,763
================= ================== =================== ====================
Basic net income per share $ .16 $ .09 $ .25 $ .17
================= ================== =================== ====================
Weighted average shares
outstanding 3,436,995 3,413,371 3,429,881 3,412,777
================= ================== =================== ====================
Diluted net income per share .15 .09 .23 .17
================= ================== =================== ====================
Diluted weighted average shares
outstanding 3,698,171 3,430,125 3,728,419 3,439,283
================= ================== =================== ====================
</TABLE>
See accompanying notes.
ZEVEX INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
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Six months ended
June 30,
2000 1999
--------------- ---------------
(unaudited) (unaudited)
Cash flows from operating activities
Net income $ 872,531 $ 593,763
Adjustments to reconcile net income to net cash (used in)
provided by operating activities:
Depreciation and amortization 761,779 665,078
Deferred income taxes (42,210) 68,503
Unrealized loss on marketable securities -- 93,609
Realized gain on marketable securities (298,048) --
Changes in operating assets and liabilities:
Decrease in restricted cash for sinking fund payment
on industrial development bond 48,011 146,757
Increase in accounts receivable (1,330,066) (1,066,776)
Decrease in trading securities 313,993 641,515
Increase in inventories (2,643,430) (168,027)
(Increase) decrease in prepaid expenses (2,271) 6,211
(Increase) decrease in other assets (62,739) 35,289
Increase in accounts payable 2,626,285 100,845
Decrease in accrued and other liabilities (93,597) (9,924)
(Decrease) increase in income taxes payable (773,653) 201,247
--------------- ---------------
Net cash (used in) provided by operating activities (623,415) 1,308,090
Cash flows from investing activities
Purchase of property and equipment (859,693) (406,138)
Additions of patents and trademarks (14,305) (2,270)
Purchase of product line (2,586,092) --
Redemption of available-for-sale marketable securities 763,039 --
--------------- ---------------
Net cash used in investing activities (2,697,051) (408,408)
Cash flows from financing activities
Payments on debt related to business acquisitions (1,163,904) (4,680,239)
Issuance of debt related to product line acquisition 2,000,000 --
Repurchase of common stock warrants -- (1,175,000)
Repayment on industrial development bond (100,000) (100,000)
Proceeds from/(repayment) on bank line of credit 89,657 (392,993)
Proceeds from exercise of stock options 74,990 5,175
--------------- --- ---------------
Net cash provided by (used in) financing activities 900,743 (6,343,057)
--------------- ---------------
Net decrease in cash and cash equivalents (2,419,723) (5,443,375)
Cash and cash equivalents at beginning of period 3,383,544 7,960,511
--------------- ---------------
Cash and cash equivalents at end of period $ 963,821 $ 2,517,136
=============== ===============
Supplemental disclosure:
Non-cash activities
Unrealized loss on available-for-sale marketable securities $ 84,746 --
</TABLE>
See accompanying notes.
<PAGE>
ZEVEX INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000
1. Summary of Significant Accounting Policies
Description of Organization and Business
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. In November
1997, the Company reincorporated into Delaware. During 1998, the Company's
operations consisted of the business of its wholly-owned subsidiary, ZEVEX, Inc.
In December 1998, the Company acquired an additional product line and completed
the acquisition of two additional subsidiaries, Aborn Electronics, Inc. and
JTech Medical Industries, Inc. In April 2000, the Company completed a
transaction with Nestle Clinical Nutrition, a division of Nestle USA, to acquire
Nestle USA's installed base of approximately 20,000 stationary enteral pumps and
will replace Nestle as the supplier of disposable sets, feeding tubes, and
accessories to such base. The Company and its subsidiaries design and
manufacture advanced medical devices, including surgical systems, device
components, and sensors for other companies. The Company's design and
manufacturing service customers are primarily medical technology companies,
which sell the Company's systems and devices under private labels or incorporate
the Company's devices into their products. The Company and its subsidiaries also
design, manufacture, and market their own medical devices using proprietary
technologies.
Principles of Consolidation
The consolidated balance sheets at June 30, 2000 and December 31, 1999 include
the accounts of ZEVEX International, Inc. (Company) and its wholly-owned
operating subsidiaries, ZEVEX, Inc., Aborn Electronics, Inc., and JTech Medical
Industries, Inc. All significant intercompany balances and transactions have
been eliminated in consolidation.
Basis of Presentation
The accompanying financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial information along
with the instructions to Form 10-Q of Regulation S-X. Accordingly, certain
information and footnote disclosures normally included in complete financial
statements have been condensed or omitted. These financial statements should be
read in conjunction with the financial statements and footnotes thereto included
in the Company's 1999 Annual Report on SEC Form 10-K.
In the opinion of management, all adjustments (consisting of normal and
recurring adjustments) considered necessary for a fair presentation have been
included. The results of operations for interim periods are not indicative of
the results of operations to be expected for a full year.
New Accounting Pronouncements
In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin (SAB) 101, Revenue Recognition in Financial Statements. The effective
date of SAB 101 is the fourth quarter of the fiscal year beginning after
December 15, 1999. The SAB clarifies proper methods of revenue recognition given
certain circumstances surrounding sales transactions. The Company continues to
evaluate the impact of SAB 101, but believes it is in compliance with the
provision of the SAB and, accordingly, does not expect SAB 101 to have a
material effect on its financial statements.
2. Bank Line of Credit
The Company renewed its line of credit arrangement with a financial institution
with availability of $5 million. The line matures on May 29, 2001. The line of
credit is collateralized by accounts receivable and inventory and bears interest
at the prime rate, 9.5% at June 30, 2000 and 8.5% at December 31, 1999. The
Company's balance on its line of credit was $1,703,110 at June 30, 2000 and
$1,613,453 at December 31, 1999. Under the line of credit agreement, the Company
is restricted from declaring cash dividends. In addition, the Company's line of
credit contains certain financial covenants. As of June 30, 2000, the Company
was in compliance with these financial covenants.
3. Repurchase of Common Stock
On June 14, 1999, the Company repurchased 470,0000 outstanding Common Stock
Warrants for $1,175,000. In December 1999, the Company repurchased 10,000 shares
of outstanding Common Stock for $45,731 which the Company contributed to the
Employees' Stock Ownership Plan.
4. Related Party Transactions
On December 31, 1998, the Company acquired JTech pursuant to a Stock Purchase
Agreement among the Company and the four shareholders of JTech (the "JTech Stock
Purchase"). Leonard C. Smith, one of the selling JTech shareholders, received
$1,257,900 in cash and a convertible debenture in connection with the JTech
Stock Purchase. The convertible debenture, in the principal amount of
$1,290,000, is due January 6, 2002 and is convertible at Mr. Smith's option
during the period from January 6, 2000 to January 6, 2002 at $11 per share. On
April 3, 2000 Mr. Smith received $73,594 in cash and a convertible debenture in
the principal amount of $73,594, in connection with the earn-out portion of the
JTech Stock Purchase. The convertible debenture, is due March 31, 2002 and is
convertible at Mr. Smith's option during the period from March 31, 2000 to March
31, 2002 at $11 per share.
JTech also entered into an Employment Agreement with Leonard C. Smith, dated
December 31, 1998, which provides that Mr. Smith serve as President of JTech for
three years at a salary of $100,000 per year. Pursuant to the employment
agreement, Mr. Smith also received an option to purchase 40,000 shares of the
Company's common stock, vesting over four years, at $4.875 per share, the
closing price of such stock on Nasdaq on the date of the JTech Stock Purchase.
Mr. Smith was appointed to fill a vacancy on the Company's Board of Directors,
effective April 26, 1999. Mr. Smith's term on the Board will expire at the 2001
annual meeting of shareholders.
5. Comprehensive Income
Effective January 1, 1998, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 130, "Reporting Comprehensive Income". SFAS No. 130
requires that all items recognized under accounting standards as components of
comprehensive income be reported in an annual financial statement that is
displayed with the same prominence as other annual financial statements. This
statement also requires that an entity classify items of other comprehensive
income by their nature in an annual financial statement. Other comprehensive
income may include foreign currency translation adjustments, and unrealized
gains and losses on marketable securities classified as available-for-sale. For
the three months and six months ending June 30, 2000, the Company's
comprehensive income was $140,198 and $53,136 (net of tax effect) lower than net
income reported on the Company's financial statements. For the three months and
six months ending June 30, 1999, the Company's comprehensive income was $16,198
and $93,609 (net of tax effect) higher than net income reported on the Company's
financial statements.
6. Inventories
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Inventories consist of the following:
June 30, 2000 December 31, 1999
------------------------------------------
Materials $ 3,250,114 $ 2,228,174
Work in Progress 2,794,846 1,867,894
Finished goods, including completed subassemblies 1,717,761 1,023,223
------------------------------------------
$ 7,762,721 $ 5,119,291
==========================================
</TABLE>
7. Net Income Per Common Share
Basic net income per common share is calculated by dividing net income for the
period by the weighted-average number of the Company's common shares
outstanding.
Diluted net income per common share includes the dilutive effect of options in
the weighted-average number of the Company's common shares outstanding as
calculated using the treasury stock method.
<PAGE>
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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Results of Operations
The Company's revenues for the second quarter ended June 30, 2000 increased to
$9,037,599 from $5,481,404 for the second quarter of 1999, an increase of
approximately 65%. For the first six months of 2000, revenues increased 45% to
$14,695,646 from $10,142,857 for the six months ended June 30, 1999. Sales of
the Company's proprietary enteral feeding products line accounted for
approximately 45% of the total revenues for the second quarter of 2000, compared
to 32% for the second quarter of 1999, and 38% for the first six months of 2000,
compared to 33% for the six months ended June 30, 1999. The increase in both
revenue dollars and percentage of revenues was largely due to the acquisition of
the enteral nutrition delivery device product line of Nestle Clinical Nutrition,
which was completed on April 6, 2000. Sales of the Company's proprietary JTech
product line, accounted for approximately 10% of the total revenues for the
second quarter of 2000 compared to 13% for the second quarter of 1999.
Forty-five percent of the Company's revenues in the second quarter 2000, and 50%
for the first six months of 2000 compared to 51% for the second quarter of 1999,
were from products manufactured for and sold to OEM customers, who market the
final product. During the first six months of 2000, 28% of total revenues
resulted from sales to two OEM customers, one of which was a major customer in
1999, compared to 14% of total revenues for the first six months of 1999, from
sales to one customer. The Company's manufacturing revenue growth depends upon
growth in demand for systems, devices, and instruments manufactured by ZEVEX,
and ZEVEX's ability to acquire additional manufacturing service contracts from
medical technology companies. ZEVEX's contract manufacturing customers have
complete control over the marketing and sales of products that ZEVEX
manufactures for them. ZEVEX has no ability to increase demand for instruments
that it manufactures for its contract-manufacturing customers. No assurances can
be given that orders from any customer will increase or remain at current levels
or that they will not decline.
With the completion of the acquisition of the Nestle enteral delivery device
product line, the Company will no longer sell stationary feeding pumps to
Nestle. Instead, the Company will generate more revenue then that expected from
pump sales to Nestle from the sale of disposable devices to users of the
approximately 20,000 feeding pumps acquired from Nestle. The pumps acquired from
Nestle are being used by persons and businesses that have an obligation to buy
disposable products from the Company while they are using the pumps.
Additionally, the Company plans to place more stationary feeding pumps with new
users (at little or no cost to the user) under similar arrangements where the
pump users commit to buy disposable products from the Company while using the
pumps.
The Company's gross profit as a percentage of revenues was approximately 36% for
the three months ended June 30, 2000 as compared to 45% for 1999. Gross profit
for the six months ended June 30, 2000 was approximately 39% compared to 47% for
the same period in 1999. Management attributes the decrease in gross profit
percentage year over year to several matters, including startup costs related to
bringing in-house the manufacturing of the Enteral EZ enteral feeding pump, the
servicing of the Nestle N2200 pumps acquired as mentioned above, which included
labor, tooling and setup costs for non-recurring engineering (NRE), the lower
margin product line acquired from Nestle, and a shift in the revenue mix of its
products to lower margin complete system instrumentation shipped during the
second quarter and the first six months of 2000.
Selling, general and administrative expenses for the three months ended June 30,
2000 increased $273,033, from $1,607,720 in 1999 to $1,880,753 in 2000. For the
six months ended June 30, 2000 selling, general and administrative expenses
increased $504,672 from $3,181,115 in 1999 to $3,685,787 in 2000. Increased
expenses resulted from the Company's continuing growth, an expanded sales
effort, customer relations and marketing effort, and increased staffing, travel,
advertising and administrative expenses related to the Company's proprietary
clinical nutrition delivery product line and JTech product lines. The Company
also incurred expenses related to the acquisition of the Nestle enteral feeding
delivery product line which closed April 6, 2000. Expenses included increasing
the number of customer service and administrative personnel needed by the
Company to handle the increased volume of orders from the Nestle transaction.
The Company also had an increase in expenses related to employees, such as
insurance, taxes, and pension benefits. The Company believes that general and
administrative expenses in 2000 as related to sales will continue at
approximately the same percentage as in the previous two years.
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. For the three months ended June 30, 2000, research and
development expenses were $144,230 compared to $169,683 in 1999. For the six
months ended June 30, 2000, research and development expenses were $360,213
compared to $298,745 in 1999. Expenses incurred during the second quarter and
for the six months ended June 30, 2000 were for the continued development of new
applications of the Company's ultrasound technology, clinical nutrition and
JTech proprietary products. Management believes investing in research and
development will serve the Company's future well, and intends to continue this
investment for the foreseeable future. Management currently anticipates that
research and development expenses will continue during 2000 at approximately the
same percentage of revenues as in the previous two years.
For the three months ended June 30, 2000 the Company had net income of $552,516,
6.1% of revenues, compared to net income of $305,995, or 5.6% of revenues, for
the three months ended June 30, 1999. Net income for the six months ended June
30, 2000, increased to $872,531, or 5.9% of revenues, from $593,763, or 5.9% of
revenues for the six months ended June 30, 1999. The increase in net income
during the second quarter of 2000, as compared to the second quarter of 1999, is
principally due to increased revenues. The increase in net income during the
first six months of 2000, as compared to the first six months of 1999, is due to
increased revenues and partially due to the gain on the sale of securities that
were received as payment from customers on previous system design contracts.
As of June 30, 2000, the Company's backlog of customer orders was $6,361,000, as
compared to $5,645,000 on June 30, 1999. Management estimates that approximately
80% of the backlog will be shipped before December 31, 2000. The Company's
backlog is for contract manufacturing only and can be drastically affected by
the timing of annual or semi-annual purchase orders placed by its customers.
Liquidity and Capital Resources
During the three months and six months ended June 30, 2000, the Company produced
net income of $552,516 and $872,531, respectively, compared to net income of
$305,995 and $593,763 for the three months and six months ended June 30, 1999.
Cash decreased by $2,419,723 for the six months ending June 30, 2000, as the
Company made payments on short-term notes related to JTech and Aborn acquisition
earn-outs, made necessary tax payments, continued to fund an increase in
accounts receivable and inventories, as well as purchases of plant and
equipment.
The Company's investment in property, patents from new research, production,
test equipment and tooling, and the assets acquired from Nestle USA as described
previously was $3,460,090 for the six months ended June 30, 2000, compared to
$406,138 for the six months ended June 30, 1999. Total expenditures for
equipment of $859,693 in the first six months of 2000 were primarily due to
approximately $250,000 for a new accounting and MRP system including hardware
and software, $230,000 for upgrading and providing the Company with new
research, design, and engineering equipment and $390,000 for new stationary
enteral feeding pumps. Total expenditures for Nestle the acquisition were
$2,586,092, which included stationary enteral feeding pumps, tooling, patent
license, customer lists and pump bilateral agreements. The Company expects to
spend approximately $300,000 for the remainder of 2000 for additional
manufacturing equipment and software, as well as for normal replacement of old
equipment. The Company also anticipates approximately $300,000 of additional
research and development expenses during 2000.
On March 29, 2000, the Company entered into an agreement to acquire certain
assets from Nestle USA, Inc. relating to Nestle's enteral nutrition delivery
devices. The purchase was completed on April 6, 2000 for a purchase price that
will range from $1.5 million to approximately $2.7 million, depending upon sales
generated by the acquired assets during the 12 months following the closing of
the purchase, plus the actual cost of inventory acquired by the Company which
iwas approximately $1,200,000. Upon closing, cash of $500,000 was paid, with an
additional $1 million due six months from closing. The remainder of the purchase
price will be settled upon resolution of contingencies within the purchase
agreement. The Company also anticipates spending approximately $500,000 for the
manufacturing of stationary enteral feeding pumps during the remainder of 2000.
These pumps will be leased, rented or placed as part of arrangements in which
pump users will agree to periodically purchase related disposable products from
the Company for use with the pumps.
The Company's working capital at June 30, 2000 was $10,005,873 compared to
$11,935,524 at December 31, 1999. The portion of working capital represented by
cash at such dates was $963,821 and $3,383,544, respectively. The Company uses
substantial portions of its cash from time to time to fund its operations,
including increases in inventories, accounts receivable and work in process in
connection with various customer orders. The Company feels its working capital
is sufficient for operations for the next twelve months.
<PAGE>
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 Company's 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 Company's growth and operating strategies;
(iii) loss or retirement of key members of management; (iv) increase in interest
rates of the Company's cost of borrowing, or a default under any material debt
agreement; (v) prolonged labor disruption; (vi) deterioration, in general, of
regional economic conditions; (vii) adverse state or federal legislation or
regulation that increases the cost of compliance, or adverse findings by a
regulator with respect to existing operations; (viii) loss of customers; (ix)
adverse determinations in connection with pending or future litigation or other
material claims and judgments against the Company; (x) inability to achieve
future sales; and (xi) the unavailability of funds for capital expenditures.
Many of such factors are beyond the control of the Company. Please refer to the
Company's SEC Form 10-K for its fiscal year ended December 31, 1999 for
additional cautionary statements.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE
ABOUT MARKET RISK
-------------------------------------------------------------------------------
No significant changes in market risk have occurred since December 31, 1999.
Please refer to the Company's SEC Form 10-K for its fiscal year ended December
31, 1999 for additional discussions on market risks.
<PAGE>
PART II
Item 1. Legal Proceedings - None.
Item 2. Changes in Securities and Use of Proceeds.
During the period ending June 30, 2000, there were 18,588 shares of
Common Stock issued pursuant to exercise of stock options by employees of the
Company. The exercise price on such shares ranged from $2.50 to $5.00 per share.
The shares issued upon exercise of the options were issued pursuant to the
exemption from registration under SEC Rule 505.
Item 3. Defaults upon Senior Securities - None.
Item 4. Submission of Matters to a Vote of Security Holders - None.
Item 5. Other Information - None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
The following exhibits are attached hereto or are incorporated herein
by reference as indicated in the table below:
Exhibit Location if other
No. Title of Document than attached hereto
------ ----------------- --------------------
3.01* Certificate of Incorporation Amendment No. 1 to Form S-1,
filed October 24, 1997
3.02* Bylaws 1997 Form 10-K
27.1 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the
quarter ended June 30, 2000.
* Denotes exhibits specifically incorporated in this Form 10-Q by reference to
other filings of the Company pursuant to the provisions of Securities and
Exchange Commission rule 12b-32 and Regulation S-B, Item 10(f)(2). These
documents are located under File No. 001-10287 at, among other locations, the
Securities and Exchange Commission, Public Reference Branch, 450 5th St., N.W.,
Washington, D.C. 20549.
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SIGNATURES
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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 11, 2000
By /s/ Dean G. Constantine
Dean G. Constantine, President
(Chief Executive Officer)
By /s/ Phillip L. McStotts
Phillip L. McStotts, Secretary
(Principal Financial Officer)
