UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
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 0-12998
INFRASONICS, INC
(Exact name of registrant as specified in its charter)
California 95-3797283
(State or other jurisdiction of (I.R.S.Employer
incorporation or organization) Identification Number)
3911 Sorrento Valley Blvd.
San Diego, California 92121
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(619) 450-9898
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
Indicate the number of shares outstanding of each of the
issuer's classes of common stock as of the latest
practicable date:
10,443,900 shares of Common Stock as of October 10, 1995.
Infrasonics, Inc.
Index to Form 10-Q
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements PAGE
Condensed Consolidated Balance Sheets (unaudited)
September 30, 1995 and June 30, 1995 3
Condensed Consolidated Statements of Income (unaudited)
Three Months Ended September 30, 1995 and 1994 4
Condensed Consolidated Statements of Cash Flows (unaudited)
Three Months Ended September 30, 1995 and 1994 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
PART II. OTHER INFORMATION 8
SIGNATURES 8
Item 1. Condensed Consolidated Financial Statements
INFRASONICS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
September 30, June 30,
1995 1995
___________ ___________
Current assets:
Cash and equivalents $ 4,807,500 $ 4,748,900
Short-term investments 1,920,700 989,300
Accounts receivable 6,205,900 6,355,300
Inventories 6,442,500 6,313,000
Other current assets 441,400 203,500
___________ ___________
Total current assets 19,818,000 18,610,000
Equipment, furniture and fixtures,
net of accumulated depreciation 2,453,700 2,538,500
Computer software costs,
net of accumulated amortization 2,177,100 2,231,500
Intangible assets and other assets 3,533,600 3,573,800
___________ ___________
Total assets $27,982,400 $26,953,800
=========== ===========
Liabilities & Shareholders' Equity
Current liabilities:
Accounts payable $ 401,100 $ 274,100
Accrued liabilities 1,422,000 1,119,700
___________ ___________
Total current liabilities 1,823,100 1,393,800
Shareholders' Equity:
Preferred shares, none issued - -
Common shares, no par value;
10,436,900 shares issued and
outstanding ( 10,339,400 at
June 30, 1995) 26,352,400 26,083,700
Deferred consulting expense (83,200) (110,800)
Retained earnings (109,900) (412,900)
__________ __________
Total shareholders' equity 26,159,300 25,560,000
Total liability and
shareholders' equity $27,982,400 $26,953,800
=========== ===========
See accompanying notes.
INFRASONICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
Three months ended
September 30,
1995 1994
___________ ___________
Revenues
Net sales $ 6,255,600 $ 4,592,000
Interest income 74,900 40,600
___________ ___________
Total revenues 6,330,500 4,632,600
Costs and expenses
Cost of sales 3,253,800 2,426,200
Engineering, research and
development 561,600 532,700
Selling, general and
administrative 2,041,700 1,666,500
___________ ___________
Total costs and expenses 5,857,100 4,625,400
Income before
income taxes 473,400 7,200
Provision for income taxes 170,400 2,600
___________ ___________
Net income $ 303,000 $ 4,600
=========== ===========
Net income per share $ .03 $ .00
=========== ===========
Shares used in calculation
of net income per share 10,783,400 10,466,600
See accompanying notes.
INFRASONICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Three months ended
September 30,
1995 1994
___________ ___________
Operating activities:
Net income $ 303,000 $ 4,600
Adjustments to reconcile
net income to net cash flows
from operating activities:
Depreciation and amortization 431,500 391,500
Changes in operating assets
and liabilities 202,100 938,600
___________ ___________
Net cash flows from
operating activities 936,600 1,334,700
Investment activities:
Changes in short-term
investments (931,400) 1,028,700
Additions to equipment,
furniture and fixtures (120,100) (146,400)
Additions to computer
software costs (69,400) (175,400)
Changes in other assets (25,800) (38,200)
___________ ___________
Net cash flows from
investing activities (1,146,700) 668,700
Financing activities:
Exercise of stock options 268,700 -
Net change in cash and
cash equivalents 58,600 2,003,400
Cash and cash equivalents
at beginning of period 4,748,900 2,697,300
___________ ___________
Cash and cash equivalents
at end of period $ 4,807,500 $ 4,700,700
=========== ===========
See accompanying notes.
INFRASONICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The condensed consolidated financial statements of
Infrasonics, Inc. (the "Company") for the three month
periods ended September 30, 1995 and 1994 are unaudited.
These financial statements reflect all adjustments,
consisting of only normal recurring adjustments which in the
opinion of management, are necessary to fairly present the
financial position at September 30, 1995 and the results of
operations for the three-month periods ended September 30,
1995 and 1994. The results of operations for the three
months ended September 30, 1995 are not necessarily
indicative of the results to be expected for the year ending
June 30, 1996. For more complete financial information,
these financial statements, and the notes thereto, should be
read in conjunction with the audited financial statements
for the year ended June 30, 1995 included in the Company's
Form 10-K filed with the Securities and Exchange Commission.
2. Inventory consisted of:
September 30, June 30,
1995 1995
___________ ___________
Raw Materials $ 2,772,500 $ 2,864,500
Work in Process 1,083,600 947,000
Finished Goods 2,586,400 2,501,500
___________ ___________
$ 6,442,500 $ 6,313,000
=========== ===========
3. Income Taxes
For the three months ended September 30, 1995 and 1994,
income taxes have been provided based on the estimated
annualized effective tax rate applied to pretax income for
interim periods. The estimated effective rate is less than
the federal and state statutory rates principally due to the
benefits of estimated tax credits, net operating loss
carryforwards and the use of a Foreign Sales Corporation for
the Company's export sales.
4. Per Share Information
Net income per common share has been computed using the
weighted average number of common shares and dilutive common
share equivalents outstanding during each period presented.
Common share equivalents result from outstanding options and
warrants to purchase common shares.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Revenues
Net sales and cost of sales were $6,255,600 and $3,253,800,
respectively for the quarter ended September 30, 1995, as
compared to $4,592,600 and $2,426,200, respectively, for the
corresponding quarter of the prior fiscal year. For the
three months ended September 30, 1995, net sales increased
36% over the same period from the prior year. The growth
was due to the the increased number of units of the
Company's products sold as well as increased penetration of
foreign markets. The current health care reform trends
consisting of cost containment and consolidation may
continue to affect product sales adversely, although the
Company is unable to determine the potential effect on
revenues and profits at this time. In addition, variances
in quarterly results, government regulation, competitive
conditions, and changes in third party reimbursement present
certain other risks to operating results which are more
fully described in the Company's 1995 10-K and Annual Report
to Shareholders. For the three months ended September 30,
1995, cost of sales were 52% of sales, down from 53% for the
same period last year. The decrease in cost of sales as a
percentage ofsales is primarily the result of the Company's
continuing efforts to control costs in manufacturing and
purchasing along with an increase in certain product prices.
The cost of sales percentage may change in the future as a
result of the mix of products sold.
Expenses
Engineering, research and development expenses increased to
$561,600 for the three months ended September 30, 1995, as
compared to $532,700 for the corresponding period ended
September 30, 1994. This represents a decrease from 12% of
net sales in the quarter ended September 30, 1994 to 9% in
the quarter ended September 30, 1995 primarily due to the
higher level of sales. The $28,900 increase in expenses
resulted from continued work on new products as well as
improvements to existing ventilators.
Selling, general and administrative expenses were $2,041,700
for the three month period ending September 30, 1995. For
the corresponding period in the prior fiscal year, selling,
general and administrative expenses were $1,666,500. The
increase in spending of $375,200 is primarily due to the
addition of sales personnel. As a percentage of net sales,
these expenses decreased from 36% in the three months ended
September 30, 1994 to 33% in the same period in 1995 as a
result of increased sales levels.
Liquidity and Capital Resources
At September 30, 1995, the Company had working capital of
$17,994,900 which is up $778,700 from the $17,216,200 on
June 30, 1995. Cash and cash flow from operations were both
up from June 30, 1995 due to profitability and an increase
in liabilities. Management believes that its present
sources of liquidity should be sufficient to finance
operations over the next year and may be used to fund
acquisitions of complimentary businesses, products or
technologies in related industries. Long-term liquidity is
dependent upon results of operations and the level of
funding necessary to market existing and new products. The
need for additional equity or debt financing at some point
in the future is therefore possible.
Part II OTHER INFORMATION
6.(b) Exhibits and Reports on Form 8-K.
No reports were filed on Form 8-K during the
preceding quarter.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
INFRASONICS, INC.
Date: October 16,1995
/s/ Jim Hitchin
Jim Hitchin
President, Treasurer,
Chairman of the Board
/s/ Fred McGee
Fred McGee
Vice President,
Chief Financial Officer