-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, O7pUS8TVSLYQt+JEjELjbK/A4CbigVZO7e0uYHXSMfXUrx2z7I9IQb9tb/aHX2aF 8nzmAQbguwDSF9xtOj/SWw== 0000057538-95-000008.txt : 19951002 0000057538-95-000008.hdr.sgml : 19951002 ACCESSION NUMBER: 0000057538-95-000008 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950831 FILED AS OF DATE: 19950927 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: LANCER ORTHODONTICS INC /CA/ CENTRAL INDEX KEY: 0000057538 STANDARD INDUSTRIAL CLASSIFICATION: DENTAL EQUIPMENT & SUPPLIES [3843] IRS NUMBER: 952497155 STATE OF INCORPORATION: CA FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-05920 FILM NUMBER: 95576441 BUSINESS ADDRESS: STREET 1: 253 PAWNEE STREET CITY: SAN MARCOS STATE: CA ZIP: 92069-2437 BUSINESS PHONE: 6197445585 MAIL ADDRESS: STREET 1: 253 PAWNEE ST CITY: SAN MARCOS STATE: CA ZIP: 92069-2437 FORMER COMPANY: FORMER CONFORMED NAME: LANCER PACIFIC INC DATE OF NAME CHANGE: 19870412 10QSB 1 SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-QSB Quarterly Report Under Section 13 or 15 (d) of the Securities Exchange Act of 1934 For Quarter Ended August 31, 1995 Commission File No. 0-5920 - ----------------------------------- -------------------------- LANCER ORTHODONTICS, INC. ------------------------- (Exact Name of Small Business Issuer as Specified in its Charter) CALIFORNIA 95-2497155 - -------------------------------- --------------------------- (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 253 Pawnee Street, San Marcos, California 92069 ----------------------------------------------- (Address of Principal Executive Offices) Issuer's telephone number, including area code: (619) 744-5585 Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act 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 ------ ----- State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: 14,656,551 ---------- Traditional small business disclosure format (check one): Yes X No ------ ----- PART I. FINANCIAL INFORMATION --------------------- Item 1. SUMMARIZED FINANCIAL INFORMATION See Exhibit A --------------------- Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND ---------------------------------------------------------------- RESULTS OF OPERATIONS --------------------- For the first three months of fiscal 1996, the Registrant's financial condition was as follows: 08-31-95 05-31-95 05-31-94 ---------- ---------- ----------- Current Assets $3,311,658 $3,383,867 $3,451,897 Current Liabilities 871,505 971,283 2,296,618 Working Capital 2,440,153 2,412,584 1,154,979 Bank Debt & Capitalized Leases 1,132,203 1,243,902 1,602,921 Shareholder Equity 2,650,118 2,527,489 2,335,594 Total Assets 4,277,932 4,389,267 4,632,512 For the three months ended August 31, 1995, net income increased $66,360 (159.4%) as compared to the year earlier. The increase in net income is primarily attributable to an improvement in cost of goods sold and increased sales. Net sales increased $53,715 (3.1%) compared to the year earlier period. The increase is the result of an increase in both the Registrant's domestic sales force and foreign distributors. To further increase sales, the Registrant continues to search for new distributors, private label customers, and sales representatives. Additionally, the Registrant is very active in adding new products to its growing product line. By adding new products, the Registrant believes its product line will appeal to a wider range of customers. Cost of sales as a percentage of sales decreased from 59.4% to 56.3% as compared to the year earlier period. The improvement in gross margin is attributable to actions taken in the first quarter to identify and correct manufacturing problems that were causing unusually high levels of scrap. Selling and general & administrative expenses increased $19,490 (3.3%) compared to the year earlier period. The increase is attributable to an increase in personnel and the publishing of a new catalog, partially offset by reduced professional fees. Product development expenses decreased $333 (0.9%) compared to the year earlier period. The Registrant continues to invest time and money in product development to develop new products, to identify products for purchase and resale, and to improve manufacturing procedures. Interest expense decreased $3,176 (8.0%) compared to the year earlier period, reflecting reduced debt, partially offset by higher interest rates. Working capital increased $27,569 during the three months, primarily because of profitability and non-cash expenses. The Registrant expects to meet its cash requirements out of its cash reserves and cash flow. PART II. OTHER INFORMATION ----------------- Item 6. EXHIBITS AND REPORTS ON FORM 8-K -------------------------------- There were no Form 8-K reports filed during the 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. LANCER ORTHODONTICS, INC. ----------------------------- Registrant Date September 27, 1995 By /s/ Douglas D. Miller ----------------------- -------------------------- Douglas D. Miller, President and Chief Operating Officer By /s/ Scott R. Striblen -------------------------- Scott R. Striblen, Vice President, Finance EXHIBIT A SUMMARIZED FINANCIAL INFORMATION -------------------------------- LANCER ORTHODONTICS, INC. ------------------------- CONDENSED STATEMENT OF OPERATIONS (UNAUDITED) --------------------------------------------- FOR THE THREE MONTHS ENDED AUGUST 31 1995 1994 ------------------------ NET SALES $1,796,602 $1,742,887 COST OF SALES 1,011,023 1,035,633 --------- --------- Gross Profit 785,579 707,254 OPERATING EXPENSES: Selling, General & Administrative 608,619 589,129 Product Development 38,587 38,920 --------- --------- TOTAL OPERATING EXPENSES 647,206 628,049 --------- --------- INCOME FROM OPERATIONS 138,373 79,205 OTHER (INCOME) EXPENSE: Interest Expense 36,299 39,475 Other (Income) Expense, Net ( 6,723) ( 1,907) --------- --------- TOTAL OTHER (INCOME) EXPENSE 29,576 37,568 --------- --------- INCOME BEFORE INCOME TAXES 108,797 41,637 INCOME TAXES (NOTE E) 800 -- --------- --------- NET INCOME $ 107,997 $ 41,637 ========= ========= NET INCOME PER COMMON SHARE (NOTE D) $ .007 $ .003 ========= ========= LANCER ORTHODONTICS, INC. ------------------------- CONDENSED BALANCE SHEETS (UNAUDITED) ------------------------------------ 08-31-95 -------- ASSETS ------ CURRENT ASSETS: Cash $ 316,870 Accounts Receivable, less Allowances of $129,521 1,401,060 Inventories 1,584,214 Prepaid Expenses 9,514 --------- Total Current Assets 3,311,658 --------- PROPERTY AND EQUIPMENT, at cost 2,454,365 Less: Accumulated Depreciation (2,077,820) --------- 376,545 INTANGIBLE ASSETS: Marketing and Distribution Rights 228,250 Technology Use Rights 357,079 --------- 585,329 OTHER ASSETS 4,400 --------- Total Assets $4,277,932 ========= LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ CURRENT LIABILITIES: Accounts Payable and Accrued Liabilities $ 495,611 Current Portion of Note Payable to Bank (Note B) 356,000 Capital Lease Obligations 19,894 --------- Total Current Liabilities 871,505 --------- LONG TERM PORTION OF NOTE PAYABLE TO BANK (Note B) 724,000 LONG TERM PORTION OF CAPITAL LEASES 32,309 COMMITMENTS AND CONTINGENCIES (Notes G and H) -- STOCKHOLDERS' EQUITY (Note C): Redeemable Convertible Preferred Stock, Series C, $.06 noncumulative annual dividend; $.75 par value: Authorized 250,000 shares; no shares issued and outstanding ($.,75 liquidation preference) -- Redeemable Convertible Preferred Stock, Series D, $.04 noncumulative annual dividend; $.50 par value: Authorized 500,000 shares; issued and outstanding 370,483 shares ($.50 liquidation preference) 185,242 Common Stock, no par value: Authorized 50,000,000 shares; issued and outstanding 14,656,551 4,644,748 Accumulated Deficit (2,179,872) --------- Total Stockholders' Equity 2,650,118 --------- Total Liabilities And Equity $4,277,932 ========= LANCER ORTHODONTICS, INC. ------------------------- CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) ---------------------------------------------- FOR THE THREE MONTHS ENDED AUGUST 31 1995 1994 ----------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $107,997 $ 41,637 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 73,923 89,253 Changes in assets and liabilities: (Increase) in accounts receivable, net ( 32,749) ( 39,209) (Increase) decrease in inventory (162,261) 77,402 Decrease in prepaid expenses 29,485 31,899 Decrease in accounts payable and accrued liabilities (107,633) (235,349) ------- ------- CASH FLOWS USED BY OPERATING ACTIVITIES ( 91,238) ( 34,367) ------- ------- CASH FLOWS FROM INVESTING ACTIVITIES: Additions to property and equipment ( 34,797) ( 26,560) ------- ------- CASH FLOWS USED IN INVESTING ACTIVITIES ( 34,797) ( 26,560) ------- ------- CASH FLOWS FROM FINANCING ACTIVITIES: Principal payments on note payable to bank (105,000) (109,271) Principal payments of long-term debt and capital leases ( 6,699) ( 12,853) ------- ------- CASH FLOWS USED IN FINANCING ACTIVITIES (111,699) (122,124) ------- ------- DECREASE IN CASH (237,734) (183,051) CASH AT BEGINNING OF PERIOD 554,604 739,894 ------- ------- CASH AT END OF PERIOD $316,870 $556,843 ======= ======= In fiscal 1996, the Registrant issued 72,034 shares of its common stock in satisfaction of $14,632 in accrued royalties. LANCER ORTHODONTICS, INC. ------------------------- Notes to Financial Statements ----------------------------- NOTE A - BASIS OF PRESENTATION - ------------------------------ The accompanying unaudited condensed financial statements have been prepared in accordance with the instructions to Form 10-QSB and therefore do not include all information and notes necessary for a fair presentation of financial position, results of operations, and cash flow in conformity with generally accepted accounting principles. The unaudited condensed financial statements include the accounts of Lancer Orthodontics, Inc. (The Registrant). The operating results for interim periods are unaudited and are not necessarily an indication of the results to be expected for the full fiscal year. In the opinion of management, the results of operations as reported for the interim period reflect all adjustments which are necessary for a fair presentation of operating results. NOTE B - NOTE PAYABLE TO BANK - ----------------------------- Effective November 1, 1994, the Registrant arranged for a two year renewal of its bank term loan through November 1, 1996. The new bank loan requires monthly principal payments of $23,000 during the first year and $31,000 during the second year, plus interest at prime plus 3%. All unpaid principal and accrued interest is due and payable on November 1, 1996. The loan is collaterized by inventories, receivables, and equipment. The lending agreement requires the Registrant to maintain a tangible net worth of $1,800,000, a debt to tangible net worth ratio of no more than 1.25 to 1, and a current ration of at least 1.5 to 1.0. The Registrant is not required to maintain compensating balances. NOTE C - STOCKHOLDER'S EQUITY - ----------------------------- Common Stock Reserved - --------------------- Shares of the Registrant's common stock reserved for issuance at August 31, 1995 and May 31, 1994, were as follows: 8-31-95 5-31-95 --------- --------- Stock Options: Outstanding 1,546,000 1,546,000 Future Issuance 954,000 954,000 Warrants issued in conjunction with loans and convertible debt 1,404,167 1,404,167 For conversion of preferred stock 370,483 370,483 --------- --------- 4,274,650 4,274,650 ========= ========= NOTE D- EARNINGS PER COMMON SHARE - --------------------------------- Net income per common share is computed based on the weighted average number of common shares and common equivalent shares outstanding (14,967,006 and 14,817,383 at August 31, 1995 and 1994, respectively) during each period. Outstanding stock options, warrants, and convertible preferred stock are common stock equivalents and they have been included in the number of shares outstanding at August 31, 1995 and 1994. NOTE E - INCOME TAXES - --------------------- At May 31, 1995, the Registrant had net tax operating loss carryforwards of approximately $3,051,000 and business tax credits of approximately $179,000 available to offset future Federal taxable income and tax liabilities, respectively, expiring at varying dates between 1996 and 2007. The Registrant also had net tax operating loss carryforwards of approximately $1,251,000 and business tax credits of approximately $23,000 available to offset future California taxable income and tax liabilities, expiring at varying dates between 1996 and 1998. NOTE F - MANUFACTURING AGREEMENT - -------------------------------- In May, 1990, the Registrant entered into a manufacturing subcontractor agreement whereby, the subcontractor agreed to provide manufacturing services to the Registrant through its affiliated entities located in Mexicali, B.C., Mexico. The Registrant has moved the majority of its manufacturing operations to Mexico. Under the terms of the original agreement, the subcontractor manufactured the Registrant's products based on an hourly rate per employee based on the number of employees in the subcontractor's workforce. As the number of employees increased, the hourly rate decreased. In December 1992, the Registrant renegotiated the agreement changing from an hourly rate per employee to a pass through of actual costs plus a weekly administrative fee. The amended agreement gives the Registrant greater control over all costs associated with the manufacturing operation. In July, 1994, the Registrant again renegotiated the agreement, reducing the administrative fee and extending the agreement through June 30, 1998. After June 30, 1996, either party may terminate the agreement with three months written notice. The Registrant has retained the option to convert the manufacturing operation to a wholly-owned subsidiary at any time. Should the Registrant discontinue operations in Mexico, it is responsible for the accumulated employee seniority obligation as prescribed by Mexican law. NOTE G - LEASES - --------------- The Registrant leases its main facility under an operating lease expiring December 31, 1998, which requires monthly rental payments that increase annually. As of May 31, 1994, future minimum annual cash rental payments under the Registrant's facility lease are as follows: Fiscal Year Amount 1996 $45,000 1997 $48,300 1998 $51,400 EX-27 2
5 This schedule contains summary financial information extracted from Lancer Orthodontics, Inc. first quarter fiscal 1996 10-QSB and is qualified in its entirety by reference to such 10-QSB. 3-MOS MAY-31-1996 AUG-31-1995 316,870 0 1,530,581 129,521 1,584,214 3,311,658 2,454,365 2,077,820 4,277,932 871,505 756,309 4,644,748 0 185,242 (2,179,872) 4,277,932 1,796,602 1,796,602 1,011,023 1,011,023 0 0 36,299 108,797 800 107,997 0 0 0 107,997 .007 .007
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