<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 December 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.)
9555 James Avenue South, Suite 200, Bloomington, Minnesota 55431-2543
- ------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(612) 703-3300
- -------------------------------------------------------------------------------
(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 January 31, 1997, 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>
December 31, September 30,
1996 1996
------------- ------------
ASSETS
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 1,391,069 $ 3,288,781
Accounts receivable 3,543,031 992,198
Inventories 1,834,900 1,519,692
Prepaid assets 268,714 133,746
------------ ------------
Total current assets 7,037,714 5,934,417
Property and equipment (net) 268,230 238,297
Intangible assets (net) 5,214,153 5,297,329
------------ ------------
Total assets $ 12,520,097 $ 11,470,043
============ ============
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
<S> <C> <C>
Current Liabilities:
Accounts payable $ 1,971,684 $ 651,546
Accrued expenses 553,869 879,599
------------ ------------
Total current liabilities 2,525,553 1,531,145
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 (22,007,553) (22,067,276)
Cumulative translation adjustment (143,797) (139,720)
------------ ------------
Total shareholders' equity 9,994,544 9,938,898
------------ ------------
Total liabilities and shareholders' equity $ 12,520,097 $ 11,470,043
============ =============
</TABLE>
See notes to consolidated financial statements.
2
<PAGE> 3
RINGER CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
December 31,
--------------------------------
1996 1995
--------------------------------
<S> <C> <C>
NET SALES $ 3,480,731 $ 3,636,477
COST OF SALES 1,706,499 1,785,923
----------- -----------
Gross Profit 1,774,232 1,850,554
OPERATING EXPENSES:
Distribution 387,111 407,620
Sales & Marketing 817,539 917,351
General & Administration 325,073 375,091
Research & Development 124,617 121,739
Amortization of intangibles 93,625 99,855
----------- -----------
1,747,965 1,921,656
----------- -----------
INCOME (LOSS) BEFORE OTHER INCOME 26,267 (71,102)
OTHER INCOME, NET 33,456 18,924
----------- -----------
NET INCOME (LOSS) $ 59,723 $ (52,178)
=========== ===========
Net income (loss) per weighted
average common share $ .01 $ (.00)
=========== ===========
Weighted average common
shares outstanding $10,921,930 $10,921,930
=========== ===========
</TABLE>
See notes to consolidated financial statements.
3
<PAGE> 4
RINGER CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
December 31,
------------------------------
1996 1995
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 59,723 $ (52,178)
Adjustments to reconcile net loss
to net cash used in operating activities:
Depreciation and amortization 124,682 129,687
Loss (gain) on sale of assets 3,868 (533)
(Increase) decrease in assets:
Trade accounts and notes receivable (2,555,381) (2,443,465)
Inventories (318,011) (322,833)
Prepaid expenses (134,736) (167,858)
Increase (decrease) in liabilities:
Accounts payable 1,321,280 798,896
Accrued expenses (325,576) 142,610
---------- ----------
Net cash used in operating activities (1,824,151) (1,915,674)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (66,813) (27,564)
Proceeds from sale of equipment 1,684 9,523
Purchase of intangible assets (10,493) (33,738)
---------- ----------
Net cash used in investing activities (75,622) (51,779)
Effect of exchange rate changes on cash 2,061 (5,257)
---------- ----------
Decrease in cash and cash equivalents (1,897,712) (1,972,910)
CASH AND CASH EQUIVALENTS:
BEGINNING OF PERIOD 3,288,781 2,756,377
----------- ----------
END OF PERIOD $ 1,391,069 $ 783,667
=========== ==========
</TABLE>
See notes to consolidated financial statements.
4
<PAGE> 5
RINGER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE QUARTER ENDED DECEMBER 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, 1996. 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 for the first quarter of fiscal 1997 are not
necessarily indicative of the operating results for the year ending
September 30, 1997.
Net income (loss) per share is calculated using the weighted average
common shares outstanding. Common stock equivalents, which consist of
stock options and warrants, have been excluded because their effect
would be 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, except as disclosed in Note 7, and contain no prior period
adjustments.
Note 4. Inventory consists of the following:
December 31, September 30,
1996 1996
----------- -------------
Raw Materials $ 1,180,076 $ 726,099
Finished Goods 654,824 793,593
----------- -----------
$ 1,834,900 $ 1,519,692
=========== ===========
Note 5. Supplemental disclosure of cash flow information.
Cash paid (received) for interest during the period for:
Three Months Ended
December 31,
----------------------------------------
1996 1995
----------------------------------------
Interest paid $ 718 $ 622
Interest received (34,359) (21,484)
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
Note 7. SHAREHOLDERS' EQUITY:
The Company has adopted, Statement of Financial Accounting Standard No.
123, "Accounting for Stock-Based Compensation," for its Non-Employee
Director Stock Option Plan. There was no material financial impact on
the Company resulting from this adoption.
On November 25, 1996, the Board of Directors adopted, subject to
shareholder approval, the Ringer Corporation 1996 Incentive and Stock
Option Plan. A total of 500,000 shares are reserved for issuance upon
the exercise of options which may be granted to employees under the
plan.
6
<PAGE> 7
Item 2. MANAGEMENTS 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
Ended December 31,
--------------------
1996 1995
---- ----
<S> <C> <C>
Net sales 100.0 % 100.0 %
Cost of sales 49.0 49.1
----- -----
Gross profit 51.0 50.9
Operating Expenses:
Distribution 11.1 11.2
Sales & Marketing 23.5 25.3
General & Administrative 9.3 10.3
Research & Development 3.6 3.3
Amortization of intangibles 2.7 2.8
----- -----
50.2 52.9
Income (loss) before other income .8 (2.0)
Other income, net .9 .6
----- -----
Net income (loss) 1.7% (1.4)%
===== =====
</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
December 31,
--------------------
1996 1995
---- ----
<S> <C> <C>
Pest control 76% 73%
Fertilizers and composting 24 27
--- ---
100% 100%
==== ===
</TABLE>
Comparison of the three months ended December 31, 1996 to the three
months ended December 31, 1995
Net Sales. Net sales decreased $155,746, or 4.3%, to $3,480,731 in the
first quarter of fiscal 1997 compared to $3,636,477 for the same period of
fiscal 1996. This sales decrease was primarily due to lower international
sales, to the discontinuance of the Company's Supreme Lawn(R) fertilizer line
and to lower domestic sales resulting from the effects of the Ernst Home
Centers bankruptcy, partially offset by sales of the Company's new Weed-Away(R)
Lawn Weed Killer and by sales to new customers such as Lowe's Companies, Inc.
First quarter sales consist primarily of sales to distributors who
resell the Company's products to retailers who, in turn, sell to individual
consumers. The Company's performance during the subsequent three quarters of
its fiscal year is dependent upon reorders from distributors and from initial
orders and reorders from certain direct customers who tend to begin purchasing
products in the second quarter. Sales for the full year hinge upon the level of
retail sales of the Company's products to consumers and the level of retail
inventory of the Company's products remaining unsold from the previous year.
Retail sales to consumers are affected by numerous outside circumstances such
as weather, competitors' products and sales and marketing programs, as well as
new product introductions. Each of these factors can fluctuate
7
<PAGE> 8
substantially from year to year. Total year sales cannot be accurately
projected with any degree of certainty based on first quarter results.
Gross Margins. Gross margins increased slightly to 51.0% in the first
quarter of fiscal 1997 compared to 50.9% in the first quarter of fiscal 1995.
The slight increase in gross margins for the period in fiscal 1997 was primarily
due to favorable product mix differences compared to the same period of the
prior year.
The Company is dependent on ingredients which are traded in agricultural
and industrial markets, such as feather, bone and blood meal. Market
fluctuations may adversely affect prices paid for these ingredients and,
consequently, the Company's gross margins. The Company has been able to manage
the effect of recent price fluctuations through reformulations and marketing
programs. There is no assurance that the Company could successfully avoid
higher costs or recover higher costs through product price increases should
unfavorable ingredient prices develop.
Operating Expenses. Operating expenses decreased in absolute dollars by
$173,691, or 9.0%, to $1,747,965 in the first quarter of fiscal 1997 from
$1,921,656 in the first quarter of fiscal 1996, and decreased as a percentage
of sales to 50.2% in fiscal 1997 compared to 52.9% in the same period of fiscal
1996. Distribution expenses decreased $20,509, or 5.0%, to $387,111 in the
first quarter of fiscal 1997 from $407,620 in the same period of fiscal 1996,
due primarily to lower freight costs associated with lower levels of sales in
fiscal 1997 compared to fiscal 1996. Sales and marketing expenses decreased
$99,812, or 10.9%, to $817,539 in the first quarter of fiscal 1997 from
$917,351 in the same period of fiscal 1996. The decrease in sales and marketing
expenses was partially caused by the reversal of $50,000 in estimated
co-operative advertising expenses recorded in prior periods. General and
administrative costs decreased $50,018, or 13.3%, to $325,073 in the first
quarter of fiscal 1997 from $375,091 in the same period in fiscal 1996. This
decrease was largely due to lower facility costs resulting from the Company's
relocation of its offices and due to reduced professional fee expenses.
Research and development expenses increased slightly to $124,617 in the first
quarter of fiscal 1997 compared to $121,739 in the same period of fiscal 1996.
Other Income, Net. Net other income increased to $33,456 in the first
quarter of fiscal 1997 compared to $18,924 in the same period of the prior
year. This increase was due primarily to increased interest income resulting
from higher average excess cash balances with which to invest and to increased
royalty income.
LIQUIDITY AND CAPITAL RESOURCES
The Company relies upon a bank line of credit to fund yearly seasonal
increases in receivables. The Company has a $5,000,000 bank line of credit
which will expire on October 31, 1997. Management believes the Company will be
able to renew its bank line of credit or that other bank line of credit
arrangements can be made on terms that are reasonable and acceptable to the
Company. There is no assurance, however, that a line of credit facility can be
renewed or otherwise obtained or that, if obtained, terms will be reasonable or
favorable to the Company. At December 31, 1996, the Company had no outstanding
borrowings under the line of credit. Management believes that cash on hand and
the line of credit will meet the cash needs of the Company in fiscal 1997.
Cash decreased by approximately $1.9 million during the quarter. Most of
this cash was used to finance seasonal working capital requirements, primarily
increases in accounts receivable and inventory. In addition, $77,306 was used
in the purchase of equipment and investment in intangible assets. Accounts
receivable increased $2,555,381 to $3,543,031 during the first quarter of
fiscal 1997 as a result of increased sales with usual extended payment terms
under seasonal early order programs. Inventory increased $318,011 to $1,834,900
during the first quarter of fiscal 1997 as a result of normal seasonal buildup
of inventory. Inventory levels are expected to further increase during the
second quarter as the Company increases production in anticipation of the
Spring selling season in the second and third quarters.
The Company has no material purchase commitments. Although the Company
continues to evaluate companies and product lines for possible acquisition, no
such agreements are currently in place.
The Company believes that inflation has not had a significant impact on
the results of its operations.
8
<PAGE> 9
FORWARD LOOKING INFORMATION
The information contained in this Quarterly Report includes forward-looking
statements as defined in Section 21E of the Securities Exchange Act of 1934, as
amended. These forward-looking statements involve a number of risks and
uncertainties, including demand from major customers, competition, changes in
product or customer mix or revenues, and changes in product costs and operating
expenses, and other factors disclosed throughout this Quarterly Report and the
Company's other filings with the Securities and Exchange Commission. The
actual results that the Company achieves may differ materially from any
forward-looking statements due to such risks and uncertainties. The Company
undertakes no obligation to revise any forward-looking statement in order to
reflect events or circumstances that may arise after the date of this report.
Readers are urged to carefully review and consider the various disclosures made
by the Company in this report and in the Company's other reports filed with the
Securities and Exchange Commission that attempt to advise interested parties of
the risks and uncertainties that may affect the Company's financial condition
and results of operations.
9
<PAGE> 10
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).
27.1 Financial Data Schedule
(b) Reports on Form 8-K
No Reports on Form 8-K were filed during the quarter ended December
31, 1996.
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: February 12, 1997 By /S/ Stanley Goldberg
----------------------------------------
Stanley Goldberg
President and Chief Executive Officer
Dated: February 12, 1997 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
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 1,391,069
<SECURITIES> 0
<RECEIVABLES> 3,675,554
<ALLOWANCES> (132,523)
<INVENTORY> 1,834,900
<CURRENT-ASSETS> 7,037,714
<PP&E> 1,594,289
<DEPRECIATION> (1,326,059)
<TOTAL-ASSETS> 12,520,097
<CURRENT-LIABILITIES> 2,525,553
<BONDS> 0
0
0
<COMMON> 32,145,894
<OTHER-SE> (22,151,350)
<TOTAL-LIABILITY-AND-EQUITY> 12,520,097
<SALES> 3,480,731
<TOTAL-REVENUES> 3,480,731
<CGS> 1,706,499
<TOTAL-COSTS> 1,706,499
<OTHER-EXPENSES> 1,747,965
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 718
<INCOME-PRETAX> 59,723
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 59,723
<EPS-PRIMARY> .01
<EPS-DILUTED> 0
</TABLE>
