<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended March 31, 1996
------------------------------------------------
[ ] 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: 0-18921
-------------------------------------------------------
RINGER CORPORATION
- - -------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Minnesota 41-0848688
- - -------------------------------------------------------------------------------
(State of incorporation or organization) (I.R.S. Employer Identification No.)
9959 Valley View Road, Eden Prairie, Minnesota 55344-3585
- - -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(612) 941-4180
- - -------------------------------------------------------------------------------
(Issuer's telephone number, including area code)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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.
[X] Yes [ ] No
The number of shares outstanding of each of the registrant's classes of
capital stock, as of April 30, 1996, was:
Common Stock, $.01 par value 10,921,930 shares
Transitional Small Business Issuer format:
[ ] Yes [X] No
<PAGE> 2
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS.
RINGER CORPORATION
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
March 31, September 30,
1996 1995
--------------- --------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 70,061 $ 2,756,377
Accounts receivable 7,885,867 1,200,352
Inventories 2,526,575 2,026,981
Prepaid assets 85,801 132,607
---------------- ----------------
Total current assets 10,568,304 6,116,317
Property and equipment (net) 267,302 299,374
Intangible assets (net) 5,435,550 5,582,957
---------------- ----------------
Total assets $ 16,271,156 $ 11,998,648
================ ================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 2,942,078 $ 847,733
Accrued expenses 2,359,648 630,609
---------------- ----------------
Total current liabilities 5,301,726 1,478,342
Shareholders' Equity:
Common Stock, par value
$.01 per share, authorized
25,000,000 shares, issued
and outstanding 10,921,930 shares 109,219 109,219
Additional paid-in capital 32,036,675 32,036,675
Accumulated deficit (21,044,640) (21,499,157)
Cumulative translation adjustment (131,824) (126,431)
---------------- ----------------
Total shareholders' equity 10,969,430 10,520,306
---------------- ----------------
Total liabilities and shareholders' equity $ 16,271,156 $ 11,998,648
================ ================
</TABLE>
See notes to consolidated financial statements.
2
<PAGE> 3
RINGER CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31, March 31,
----------------------------- ------------------------------
1996 1995 1996 1995
------------ ------------ ------------- -------------
<S> <C> <C> <C> <C>
NET SALES $ 5,612,256 $ 5,584,086 $ 9,248,733 $ 8,764,076
COST OF SALES 2,734,853 2,659,124 4,520,776 4,114,824
------------- -------------- -------------- --------------
Gross Profit 2,877,403 2,924,962 4,727,957 4,649,252
OPERATING EXPENSES:
Distribution 602,879 724,142 1,010,499 1,092,831
Sales & Marketing 1,006,897 1,275,994 1,924,248 2,422,928
General & Administration 329,494 388,638 704,585 797,093
Research & Development 342,517 432,459 464,256 642,498
Amortization of Intangibles 100,946 88,315 200,801 179,046
------------- -------------- -------------- --------------
2,382,733 2,909,548 4,304,389 5,134,396
------------- -------------- -------------- --------------
INCOME (LOSS) BEFORE
OTHER INCOME 494,670 15,414 423,568 (485,144)
OTHER INCOME, NET 12,024 15,526 30,948 98,092
------------- -------------- -------------- --------------
INCOME (LOSS) BEFORE
INCOME TAXES 506,694 30,940 454,516 (387,052)
INCOME TAXES -- -- -- --
------------- -------------- -------------- --------------
NET INCOME (LOSS) $ 506,694 $ 30,940 $ 454,516 $ (387,052)
============= ============== ============== ==============
Net income (loss) per common
and common equivalent share $ .05 $ .00 $ .04 $ (.04)
============= ============== ============= ==============
Weighted average common
and common equivalent
shares outstanding 10,923,015 10,927,654 10,922,473 10,877,214
============= ============== ============= ==============
</TABLE>
See notes to consolidated financial statements.
3
<PAGE> 4
RINGER CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
March 31,
------------------------------
1996 1995
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 454,516 $ (387,052)
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Depreciation and amortization 258,447 273,744
Loss (gain) on disposal of assets 5,995 (42)
(Increase) decrease in assets:
Trade accounts and notes receivable (6,680,600) (6,163,742)
Inventories (504,045) (1,356,447)
Prepaid expenses 46,903 43,251
Increase in liabilities:
Accounts payable 430,652 899,946
Accrued expenses 452,678 27,491
-------------- --------------
Net cash used in operating activities (5,535,454) (6,662,851)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (35,139) (63,673)
Proceeds from sale of equipment 20,736
3,800
Purchase of intangible assets (70,835) (36,185)
Net cash paid relating to acquisition of product line (257,660)
-------------- --------------
Net cash used in investing activities (85,238) (353,718)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 13,125
Net borrowings from seasonal bank line of credit 2,942,078 2,225,082
Principal payments on capital lease obligations (3,289)
-------------- --------------
Net cash received from financing activities 2,942,078 2,234,918
Effect of exchange rate changes on cash (7,702) (15,855)
-------------- --------------
Decrease in cash and cash equivalents (2,686,316) (4,797,506)
CASH AND CASH EQUIVALENTS:
BEGINNING OF PERIOD 2,756,377 4,847,623
-------------- --------------
END OF PERIOD $ 70,061 $ 50,117
============== ==============
</TABLE>
See notes to consolidated financial statements.
4
<PAGE> 5
RINGER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE QUARTER ENDED MARCH 31, 1996
(UNAUDITED)
Note 1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have
been prepared in accordance with generally accepted accounting
principles for interim financial information. They should be read
in conjunction with the annual financial statements included in
the Company's Annual Report on Form 10-KSB for the year ended
September 30, 1995. In the opinion of management, the interim
financial statements include all adjustments (consisting of normal
recurring accruals) necessary for a fair presentation of the
results for the interim periods presented. Operating results
through the second quarter of fiscal 1996 are not necessarily
indicative of the operating results for the year ending September
30, 1996.
Net income per share is calculated using the weighted average
common and common equivalent shares outstanding. Common
equivalents consist of stock options and warrants. Net loss per
share is calculated using the weighted average common shares
outstanding. For the purpose of calculating net loss per share,
common stock equivalents are excluded because their effect is
anti-dilutive.
Note 2. Sales of the Company's products are generally greater in the
second and third fiscal quarters due to seasonal factors.
Note 3. All comparative data reflect application of consistent accounting
principles and contain no prior period adjustments.
Note 4. Inventory consists of the following:
<TABLE>
<CAPTION>
March 31, September 30,
1996 1995
-------------- --------------
<S> <C> <C>
Raw Materials $ 1,318,786 $ 1,172,967
Finished Goods 1,207,788 854,014
--------------- ---------------
$ 2,526,575 $ 2,026,981
=============== ===============
</TABLE>
Note 5. Supplemental disclosure of cash flow information.
Cash paid (received) for interest during the period for:
<TABLE>
<CAPTION>
Six Months Ended
March 31,
--------------------------------
1996 1995
-------------- --------------
<S> <C> <C>
Interest paid $ 10,246 $ 22,359
Interest received (26,552) (63,742)
</TABLE>
Note 6. CONTINGENCIES:
The Company has a Contingency Retention Plan which provides for
the payment to certain key employees of the Company, including all
of the officers, of a lump sum termination benefit plus
continuation of life insurance, health insurance and dental
benefits for a period of time in the event the employment of such
employees is terminated within one year after a "change of
control," as defined. The amount of the lump sum termination
benefit varies from the equivalent of three months to two years of
salary and bonus at the time of termination. The period during
which health and welfare benefits continue after termination
varies from three months to two years, but is terminated if the
employee obtains other employment with similar benefits. The
Retention Plan continues in effect unless terminated, prior to a
change in control, by a resolution approved by at least two-thirds
of the Board of Directors.
5
<PAGE> 6
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
Results of Operations
The following table sets forth, for the periods indicated,
information derived from the consolidated statements of operations of the
Company as a percentage of net sales:
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended March 31, Ended March 31,
------------------------- -------------------------
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 48.7 47.6 48.9 47.0
----- ----- ----- -----
Gross profit 51.3 52.4 51.1 53.0
Operating Expenses:
Distribution 10.8 13.0 10.9 12.5
Sales & Marketing 17.9 22.9 20.8 27.6
General & Administrative 5.9 7.0 7.6 9.1
Research & Development 6.1 7.7 5.0 7.3
Amortization of Intangibles 1.8 1.5 2.2 2.0
----- ----- ----- -----
42.5 52.1 46.5 58.5
----- ----- ----- -----
Income (loss) before
other income 8.8 .3 4.6 (5.5)
Other Income .2 .3 .3 1.1
----- ----- ----- -----
Net income (loss)
before taxes 9.0% .6% 4.9% (4.4)%
===== ===== ===== =====
</TABLE>
The following table sets forth the percentage of net sales represented by each
of the Company's major product categories:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31, March 31,
----------------------- -----------------------
1996 1995 1996 1995
------- ------ ------ ------
<S> <C> <C> <C> <C>
Pest control 64.4% 57.4% 67.9% 59.7%
Fertilizer 34.5 41.1 31.0 38.3
Composting 1.1 1.5 1.1 2.0
----- ----- ----- -----
100.0% 100.0% 100.0% 100.0%
===== ===== ===== =====
</TABLE>
6
<PAGE> 7
Net Sales. Net sales for the three months ended March 31, 1996
increased slightly to $5,612,256 compared to $5,584,086 for the same period
ended March 31, 1995. Net sales for the six months ended March 31, 1996
increased 5.5% to $9,248,733 compared to $8,764,076 for the same period ended
March 31, 1995. The increase in net sales for each period reflects increased
sales and distribution of Safer(R) branded pest control products partially
offset by decreased sales of fertilizer and composting products due primarily
to unusually poor spring weather which has reduced sales in virtually the
entire fertilizer industry.
Gross Margins. Gross margins for the three months ended March 31, 1996
decreased to 51.3% compared to 52.4% for the same period ended March 31, 1995.
Gross margins for the six months ended March 31, 1996 decreased to 51.1%
compared to 53.0% for the same period ended March 31, 1995. The decrease in
gross margin as a percentage of sales was caused by increased costs for raw
material ingredients and packaging and an increase in the proportion of foreign
sales which historically carry lower margins than domestic sales.
Operating Expenses. Operating expenses for the three months ended March
31, 1996 decreased $526,815 or 18.1% to $2,382,733 compared to $2,909,548 for
the same period ended March 31, 1995. Operating expenses for the six months
ended March 31, 1996 decreased $830,007 or 16.2% to $4,304,389 from $5,134,396
for the same period ended March 31, 1995.
Distribution expenses for the three months ended March 31, 1996
decreased 16.7% in absolute dollars to $602,879 and decreased as a percentage
of sales to 10.8% in 1996 from 13.0% for the same period in fiscal 1995.
Distribution expenses for the six months ended March 31, 1996 decreased 7.5% in
absolute dollars to $1,010,499 and decreased as a percentage of sales to 10.9%
in 1996 from 12.5% for the same period in fiscal 1995. The decrease in
distribution expenses was primarily due to reductions in outside distribution
and freight expenses resulting from cost control measures implemented in fiscal
1995 and improvements in shipping methods. In addition, the decrease in
distribution expenses as a percentage of sales also reflects the proportional
increase in pesticide product sales which carries a lower average freight cost
per dollar of revenue than fertilizer products.
Sales and marketing expense for the three months ended March 31, 1996
decreased 21.1% in absolute dollars to $1,006,897 from $1,275,994 for the same
period in fiscal 1995. Sales and marketing expense for the six months ended
March 31, 1996 decreased 20.6% in absolute dollars to $1,924,248 from
$2,422,928 for the same period in fiscal 1995. The decreases for these periods
was due primarily to cost reduction measures implemented in fiscal 1995. The
Company plans to incur increased sales and marketing expenses in the third
quarter of fiscal 1996 due to the implementation of a major-market radio and
television advertising campaign.
General and administrative expenses for the three month period ended
March 31, 1996 decreased $59,144 or 15.2% to $329,494 compared to $388,638 for
the same period in fiscal 1995. General and administrative expenses for the six
months ended March 31, 1996 decreased $92,508 or 11.6% to $704,585 compared to
$797,093 for the same period in fiscal 1995. The decrease in general and
administrative expenses was primarily the result of cost reduction measures
implemented in fiscal 1995.
Research and development expenses for the three months ended March 31,
1996 decreased $89,942 or 20.8% to $342,517 from $432,459 for the same period
in fiscal 1995 and decreased $178,242 or 27.7% to $464,256 for the six month
period ended March 31, 1996 from $642,498 for the same period in fiscal 1995.
The decrease was primarily due to reduced product registration costs and cost
reduction measures implemented in fiscal 1995.
Other Income, Net. For the three months ended March 31, 1996, the
Company incurred net other income of $12,024 compared to net other income of
$15,526 for the same period in fiscal 1995. For the six months ended March 31,
1996, the Company incurred net other income of $30,948 compared to a net other
income of $98,092 for the same period in fiscal 1995. The decrease in net other
income for these periods was largely the result of higher interest expense due
to increased borrowings on the Company's bank line of credit and reduced
interest income caused by lower average excess cash balances with which to
invest. Net other income consists of
7
<PAGE> 8
interest income on investments of excess cash balances, primarily during the
first and fourth quarters, net of interest expense incurred on borrowings
against the Company's seasonal bank line of credit, usually during the second
and third quarters, and also includes royalty income from international
marketing agreements and royalty expense on technologies licensed by the
Company.
Liquidity and Capital Resources
The Company's operations and cash needs are highly seasonal. During the
first quarter of each year, the Company solicits early orders and plans
production, typically building its inventory of products through January of
each year for shipment during the spring selling season. Most of the shipments
for the peak retail season, and therefore most of the billings that result in
revenue recognition and in receivables, occur in February through May of each
year. Accordingly, the Company typically consumes significant cash in operating
activities during the first and second quarters of each year as it finances
increases in inventory, primarily during the first quarter, and increases in
receivables, primarily during the second and early third quarters.
Consistent with such seasonal fluctuations, cash decreased by
approximately $2.7 million during the six months ended March 31, 1996. The
decrease in cash reflects the following: cash of $5.5 million consumed in
operating activities, primarily to finance the seasonal buildup of receivables;
cash of $85,000 consumed in investing activities to purchase office equipment
and intangible assets; and cash of $2.9 million provided by financing
activities from borrowings on the Company's seasonal bank line of credit.
The Company normally relies on bank financing to fund seasonal
increases in receivables and inventory and currently maintains a $5,000,000
bank line of credit which will expire on October 31, 1997. At March 31, 1996,
the Company had outstanding borrowings under the line of $2,942,078. The
Company believes that cash on hand and the line of credit will be adequate to
meet the Company's cash needs for fiscal 1996.
The Company does not believe that inflation has had a significant
impact on the results of its operations.
8
<PAGE> 9
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS.
The Company is not a party to any material legal proceedings.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
Exhibit
Number Description
- - -------------------------------------------------------------------------------
3.1 Restated Articles of Incorporation of the Company, as amended
to date (incorporated by reference to Exhibit 3.2 of the
Company's Registration Statement on Form S-18, SEC File No.
33-36205-C).
3.2 Bylaws of the Company, as amended to date (incorporated by
reference to Exhibit 3.3 of the Company's Registration
Statement on Form S-18, SEC File No. 33-36205-C).
4.1 Specimen certificate of Common Stock, $.01 par value
(incorporated by reference to Exhibit 4.1 of the Company's
Registration Statement on Form S-18, SEC File No. 33-36205-C).
* 10.1 1986 Employee Incentive Stock Option Plan (incorporated by
reference to Exhibit 4.4 of the Company's Registration
Statement on Form S-8, SEC File No. 33-37806).
* 10.2 Stock Option Plan for Non-Employee Directors (incorporated by
reference to Exhibit 10.2 of the Company's Annual Report on
Form 10-KSB for the fiscal year ended September 30, 1993, SEC
File No. 0-18921).
10.3 Lease Agreement between the Company and CSM Lakeside, a
Minnesota Partnership, dated September 29, 1993 (incorporated
by reference to Exhibit 10.4 of the Company's Annual Report on
Form 10-KSB for the fiscal year ended September 30, 1993, SEC
File No. 0-18921).
10.4 Lease Agreement between the Company and The Northwestern
Mutual Life Insurance Company dated May 13, 1994 (incorporated
by reference to Exhibit 10.4 of the Company's Annual Report on
Form 10-KSB for the fiscal year ended September 30, 1995, SEC
file no. 0-18921).
* 10.5 Employment Agreement between the Company and Stanley Goldberg
dated September 13, 1992 (incorporated by reference to Exhibit
10.6 of the Company's Annual Report on Form 10-K for the
fiscal year ended September 30, 1992, SEC File No. 0-18921).
10.6 Credit and Security Agreement and Supplement A to Credit and
Security Agreement between the Company and FBS Business
Finance Corporation relating to the Company's line of credit
(incorporated by reference to Exhibit 10.7 of the Company's
Annual Report on Form 10-K for the fiscal year ended September
30, 1992, SEC File No. 0-18921).
10.7 Waiver and First Amendment to Credit and Security Agreement
referred to in 10.6 above (incorporated by reference to
Exhibit 10.9 of the Company's Annual Report on Form 10-K for
the fiscal year ended September 30, 1993, SEC File No.
0-18921).
9
<PAGE> 10
10.8 Second Amendment to Credit and Security Agreement referred to
in 10.6 and 10.7 above (incorporated by reference to Exhibit
10.10 of the Company's Annual Report on Form 10-KSB for the
fiscal year ended September 30, 1993, SEC File No. 0-18921)
10.9 Third Amendment to Credit and Security Agreement referred to
in 10.6, 10.7 and 10.8 above (incorporated by reference to
Exhibit 10.10 of the Company's Annual Report on Form 10-KSB
for the fiscal year ended September 20, 1994, SEC File No.
0-18921)
10.10 Waiver and Fourth Amendment to Credit and Security Agreement
referred to in 10.6, 10.7, 10.8 and 10.9 above (incorporated
by reference to Exhibit 10.10 of the Company's Annual Report
on Form 10-KSB for the fiscal year ended September 30, 1995,
SEC file no. 0-18921).
10.11 Stock Subscription Warrant between the Company and Robert W.
Fischer Co., Inc. dated July 18, 1990 (incorporated by
reference to Exhibit 10.16 of the Company's Registration
Statement on Form S-18, SEC File No. 33-36205-C).
* 10.12 Ringer Corporation Contingency Retention Plan, and Amendment
No.1 to Ringer Corporation Contingency Retention Plan, dated
October 26, 1993 (incorporated by reference to the Company's
Annual Report on Form 10-KSB for the fiscal year ended
September 30, 1994, SEC File No. 0-18921).
10.13 Cross-Licensing and Joint Licensing/Sale Agreement between
Ringer Corporation and Mycogen Corporation, dated May 31, 1994
(incorporated by reference to Exhibit 10.1 of the Company's
Quarterly Report on Form 10-QSB for the fiscal quarter ended
June 30, 1994, SEC File No. 0-18921).
10.14 Patent License Agreement between Ringer Corporation, Mycogen
Corporation and Monsanto Company, dated June 29, 1994
(incorporated by reference to Exhibit 10.2 of the Company's
Quarterly Report on Form 10-QSB for the fiscal quarter ended
June 30, 1994, SEC File No. 0-18921).
* Management contract or compensation plan or arrangement.
(b) Reports on Form 8-K
No Reports on Form 8-K were filed during the quarter ended
December 31, 1995.
10
<PAGE> 11
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
RINGER CORPORATION
Dated: May 13, 1996 By /S/ Stanley Goldberg
-------------------------------------------
Stanley Goldberg
President and Chief Executive Officer
Dated: May 13, 1996 By /S/ Mark G. Eisenschenk
-------------------------------------------
Mark G. Eisenschenk
Vice President of Finance and Chief Financial
Officer
(principal financial officer)
11
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
CONSOLIDATED FINANCIAL STATEMENTS CONTAINED IN THE COMPANY'S QUARTER REPORT
ON 10-QSB DATED MARCH 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FORM 10-QSB AND THE COMPANY'S ANNUAL REPORT ON FORM 10-KSB
DATED SEPTEMER 30, 1995.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> MAR-31-1996
<CASH> 70,061
<SECURITIES> 0
<RECEIVABLES> 8,107,980
<ALLOWANCES> (222,113)
<INVENTORY> 2,526,575
<CURRENT-ASSETS> 10,568,304
<PP&E> 1,569,355
<DEPRECIATION> (1,302,053)
<TOTAL-ASSETS> 16,271,156
<CURRENT-LIABILITIES> 5,301,726
<BONDS> 0
0
0
<COMMON> 32,145,894
<OTHER-SE> (21,176,464)
<TOTAL-LIABILITY-AND-EQUITY> 16,271,156
<SALES> 9,248,733
<TOTAL-REVENUES> 9,248,733
<CGS> 4,520,776
<TOTAL-COSTS> 4,520,776
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 29,860
<INCOME-PRETAX> 454,516
<INCOME-TAX> 0
<INCOME-CONTINUING> 454,516
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 454,516
<EPS-PRIMARY> .04
<EPS-DILUTED> .04
</TABLE>
