1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended: June 30, 2001
Commission file number: 0-11363
CHAD THERAPEUTICS, INC.
(Exact name of registrant as specified in its charter)
California 95-3792700
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
21622 Plummer Street, Chatsworth, CA 91311
(Address of principal executive offices) (Zip Code)
(818) 882-0883
(Registrant's telephone number, including area code)
-------------------------------------------------------------------------------
(Former Address)
(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 CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Common Shares 10,052,000
2
CHAD THERAPEUTICS, INC.
Condensed Balance Sheets
June 30, 2001 and March 31, 2001
(Unaudited)
ASSETS
June 30, March 31,
2001 2001
------------ ------------
Current Assets:
Cash $ 1,623,000 $ 1,059,000
Accounts receivable, less allowance for
doubtful accounts of $153,000 at
June 30, 2001 and $33,000 at
March 31, 2001 3,211,000 2,352,000
Inventories (Note 2) 2,988,000 3,415,000
Prepaid expenses 564,000 598,000
------------ ------------
Total current assets 8,386,000 7,424,000
Property and equipment, at cost 5,652,000 5,576,000
Less accumulated depreciation 3,738,000 3,534,000
------------ ------------
Net property and equipment 1,914,000 2,042,000
------------ ------------
Other assets, net 1,266,000 1,322,000
------------ ------------
Total assets $ 11,566,000 $ 10,788,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,058,000 $ 465,000
Accrued expenses 1,284,000 1,109,000
Income taxes payable -- 3,000
------------ ------------
Total current liabilities 2,342,000 1,577,000
------------ ------------
Shareholders' equity:
Common shares, $.01 par value, authorized
40,000,000 shares; 10,052,000 and 10,052,000
shares issued and outstanding 13,092,000 13,092,000
Accumulated deficit (3,868,000) (3,881,000)
------------ ------------
Total shareholders' equity 9,224,000 9,211,000
------------ ------------
Total liabilities and shareholders' equity $ 11,566,000 $ 10,788,000
============ ============
See accompanying notes to condensed financial statements.
3
CHAD THERAPEUTICS, INC.
Condensed Statements of Operations
For the three months ended June 30, 2001 and 2000
(Unaudited)
Three Months Ended
June 30
------------------------------
2001 2000
------------ ------------
Net sales $ 4,847,000 $ 2,965,000
Cost of sales 3,121,000 2,274,000
------------ ------------
Gross profit 1,726,000 691,000
Costs and expenses:
Selling, general and administrative 1,521,000 1,281,000
Research and development 205,000 141,000
------------ ------------
Total costs and expenses 1,726,000 1,422,000
------------ ------------
Operating income (loss) -- (731,000)
Other income - interest income, net 14,000 11,000
------------ ------------
Earnings (loss) before income taxes 14,000 (720,000)
Income tax expense 1,000 --
------------ ------------
Net earnings (loss) $ 13,000 $ (720,000)
============ ============
Basic earnings (loss) per share $ .00 $ (.07)
============ ============
Diluted earnings (loss) per share $ .00 $ (.07)
============ ============
Weighted shares outstanding:
Basic 10,052,000 10,038,000
Diluted 10,270,000 10,038,000
============ ============
See accompanying notes to condensed financial statements.
4
CHAD THERAPEUTICS, INC.
Condensed Statement of Shareholders' Equity
For the three months ended June 30, 2001
(Unaudited)
Common Shares Accumulated
Shares Amount Deficit
----------- ----------- -----------
Balance at March 31, 2001 10,052,000 $13,092,000 $(3,881,000)
Net earnings -- -- 13,000
----------- ----------- -----------
Balance at June 30, 2001 10,052,000 $13,092,000 $(3,868,000)
=========== =========== ===========
See accompanying notes to condensed financial statements.
5
CHAD THERAPEUTICS, INC.
Condensed Statements of Cash Flows
For the three months ended June 30, 2001 and 2000
(Unaudited)
Three Months Ended
June 30
-----------------------------
2001 2000
----------- -----------
Cash flows from operating activities:
Net earnings (loss) $ 13,000 $ (720,000)
Adjustments to reconcile net earnings (loss) to
net cash provided by operating activities:
Depreciation and amortization of property and
equipment 204,000 170,000
Amortization of intangibles 30,000 24,000
Compensation expense related to stock issued -- 4,000
Changes in assets and liabilities:
Decrease (increase) in accounts receivable (859,000) 22,000
Decrease (increase) in inventories 427,000 240,000
Decrease (increase) in prepaid expenses 34,000 226,000
Decrease (increase) in other assets 26,000 (30,000)
Increase (decrease) in accounts payable 593,000 152,000
Increase (decrease) in accrued expenses 175,000 (2,000)
Increase (decrease) in income taxes payable (3,000) --
----------- -----------
Net cash provided by (used in)
operating activities 640,000 86,000
Cash flows from investing activities:
Capital expenditures (76,000) (79,000)
----------- -----------
Net cash used in investing
Activities (76,000) (79,000)
----------- -----------
Net increase (decrease) in cash 564,000 7,000
Cash beginning of period 1,059,000 1,772,000
----------- -----------
Cash end of period $ 1,623,000 $ 1,779,000
=========== ===========
See accompanying notes to condensed financial statements.
6
CHAD THERAPEUTICS, INC.
June 30, 2001
(Unaudited)
1. Interim Reporting
Chad Therapeutics, Inc. (the Company) is in the business of developing,
producing and marketing respiratory care devices designed to improve the
efficiency of oxygen delivery systems for home health care and hospital
treatment of patients suffering from pulmonary diseases.
In the opinion of management, all adjustments necessary, which are of a
normal and recurring nature, for a fair presentation of the results for the
interim periods presented have been made. The interim statements are
condensed and do not include some of the information necessary for a more
complete understanding of the financial data. Accordingly, your attention
is directed to the footnote disclosures found in the March 31, 2001, Annual
Report and particularly to Note 1 which includes a summary of significant
accounting policies.
2. Inventories
Inventories in 2001, are summarized as follows:
June 30 March 31
---------- ----------
Finished goods $ 575,000 930,000
Work-in-process 654,000 594,000
Raw materials 1,759,000 1,891,000
---------- ----------
$2,988,000 3,415,000
========== ==========
3. Earnings (Loss) Per Common Share
Following is a reconciliation of the numerators and denominators used in
the calculation of basic and diluted earnings (loss) per common shares:
Three Months Ended
June 30
2001 2000
------------ ------------
Basic earnings (loss) per share:
Numerator-net earnings (loss) $ 13,000 $ (720,000)
Denominator-weighted average
common shares outstanding 10,052,000 10,038,000
------------ ------------
Basic earnings (loss) per share $ .00 $ (.07)
============ ============
7
CHAD THERAPEUTICS, INC.
June 30, 2001
- -------------
(Unaudited)
3. Earnings (Loss) Per Common Share (cont'd)
Diluted earnings (loss) per share:
Numerator-net earnings (loss) $ 13,000 $ (720,000)
Denominator:
Weighted average common
shares outstanding 10,052,000 10,038,000
Dilutive effect of common
stock options 218,000 --
------------ ------------
10,270,000 10,038,000
------------ ------------
Diluted earnings (loss) per share $ (.00) $ (.07)
============ ============
Options to purchase 483,000 shares of common stock at prices ranging from
$1.83 to $13.47 per share and 993,000 shares of common stock at prices
ranging from $.88 to $13.47 per share were not included in the computation
of diluted earnings (loss) per share for the three month periods ended June
30, 2001 and 2000, respectively, because their effect would have been
anti-dilutive.
4. Income Taxes
Income taxes for the period ended June 30, 2001, relate to minimum state
income taxes due for the period. The Company has federal and California net
operating loss carryforwards of $4,006,000 and $3,076,000, respectively.
5. Geographic Information
The Company has one reportable operating segment. Geographic information
regarding the Company's sales is as follows:
Three Months Ended
June 30
2001 2000
---------- ----------
United States $4,296,000 $2,506,000
Germany 309,000 22,000
Japan 71,000 239,000
All other countries 171,000 198,000
---------- ----------
$4,847,000 $2,965,000
========== ==========
All long-lived assets are located in the United States.
Sales of OXYMATIC(R) conservers and OXYLITE(R) systems accounted for 53%
and 42% of the Company's sales for the three-month periods ended June 30,
2001 and 2000, respectively.
8
CHAD THERAPEUTICS, INC.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
June 30, 2001
Overview
The Company develops, assembles and markets medical devices that furnish
supplementary oxygen to home health care patients. The Company was a pioneer in
developing oxygen conserving devices that enhance the quality of life for
patients by increasing their mobility and, at the same time, lower operating
costs by achieving significant savings in the amount of oxygen actually required
to properly oxygenate patients. The market for oxygen conserving devices has
been significantly affected during the past several years by increased
competition, consolidation among home oxygen dealers and revisions (and proposed
revisions) in governmental reimbursement policies. All of these factors, as
described more fully below, have contributed to an erosion of the Company's
market share, as devices that are less expensive but which provide lower oxygen
savings (or, in some cases, do not truly provide ambulatory oxygen) have
prospered in this environment. The Company's market share for conservers has
also been affected by the introduction of competing devices that offer features
not available on the OXYMATIC 301, which was the Company's primary product in
this market until July of 2000.
The TOTAL O2 Delivery System, which combines the benefits of an oxygen
concentrator with a system enabling patients to refill their portable cylinders,
has the potential for improving the Company's performance. Introduced in 1998,
initial sales of the TOTAL O2 system by home oxygen dealers were slowed by
several factors discussed below.
In order to address this situation, the Company has implemented a four-part
strategy:
o Introduction of the OXYMATIC 400 series in July 2000 with improved
features, which should place these oxygen conservers at the forefront of
the industry;
o Development of additional oxygen conserver models that will diversify the
product line in order to offer customers a range of oxygen conservation
choices;
o A continued promotional and educational campaign with respect to the
benefits of the TOTAL O2 system, coupled with greater focus on monitoring
the performance of component suppliers; and
o Cost cutting to align the Company's operating expenses more closely with
its revenue profile.
While these measures are beginning to have a positive impact and management
believes they should continue to enhance the Company's competitive position and
future operating performance, no assurances can be given that these objectives
will be achieved. Management of the Company will continually monitor the success
of these efforts and will attempt to remain flexible in order to adjust to
possible future changes in the market for oxygen conserving devices.
9
CHAD THERAPEUTICS, INC.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
June 30, 2001
Results of Operations
Sales for the three months ended June 30, 2001 and 2000, increased $1,882,000
(63.5%) and decreased $673,000 (18.5%), respectively, from the prior year's
periods. The decrease in sales in 2000 related primarily to price reductions and
lower domestic unit sales of OXYMATIC conservers and OXYLITE complete portable
oxygen systems which were being affected by the marketing environment for home
oxygen therapy discussed below. The increase in sales in 2001 is a result of
sales of the new OXYMATIC 400 series conservers and sales of the TOTAL O2
system, both domestically and in Europe. Domestic unit sales in 2001 increased
191.6% as compared to a dollar increase of 121.6% due to price reductions and
the effects of national chain contract pricing (see below).
Sales to foreign distributors represented 11% and 15% of total sales for the
three months ended June 30, 2001 and 2000, respectively. Currently, management
expects an increase in sales to foreign distributors during the upcoming twelve
months, however, quarter-to-quarter sales may fluctuate depending on the timing
of shipments. All foreign sales are denominated in US dollars.
The current procedures for reimbursement by Medicare for home oxygen services
provide a prospective flat fee monthly payment based solely on the patient's
prescribed oxygen requirement. Under this system, inexpensive concentrators have
grown in popularity because of low cost and less frequent servicing
requirements. At the same time, interest heightened in oxygen conserving
devices, such as the Company's products, which can extend the life of oxygen
supplies and reduce service calls by dealers, thereby providing improved
mobility for the patient and cost savings for dealers. In January of 1998 and
1999, the Federal government implemented reimbursement cuts of 25% and 5%,
respectively. These cuts affected homecare providers' purchasing patterns as
they struggled to deal with significant reductions in their revenues.
In addition, other changes in the health care delivery system, including the
increase in the acceptance and utilization of managed care, have stimulated a
significant consolidation among home oxygen dealers. As major national and
regional home medical equipment chains attempt to secure managed care contracts
and improve their market position, they have expanded their distribution
networks through the acquisition of independent dealers in strategic areas.
Three major national chains accounted for approximately 28% and 13% of the
Company's domestic sales for the three month periods ended June 30, 2001 and
2000, respectively. Margins on these sales are generally lower due to quantity
pricing. To ensure continued awareness of the benefits of the Company's products
by chain headquarters' personnel, a proactive marketing and communication
program is in effect with all of the major national chains.
10
CHAD THERAPEUTICS, INC.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
June 30, 2001
Results of Operations (cont'd)
As stated above, the Company believes that its revenues during the three years
ending March 31, 2001, were adversely affected by several factors. These include
price competition, continuing industry consolidation and competitive products
with features not found in the Company's products prior to the introduction of
the OM-400 series conservers discussed below. The effects of managed care and
concerns over the severity of reimbursement cuts have, in many cases, resulted
in the provision of systems to patients that do not provide truly ambulatory
oxygen. Management believes these factors may continue to affect the Company's
revenues from sales of oxygen conserving devices for the foreseeable future. To
combat the erosion in sales of the oxygen conserver product line, the Company is
developing and introducing several new products in this area. The first of
these, the OXYMATIC 401 conserver, received 501(k) clearance from the Food and
Drug Administration in June 2000, and shipments of the new product began in July
2000. The second, the OXYMATIC 411 conserver was cleared in December 2000, and
shipments began in January, 2001. The third, the OXYMATIC 401A and 411A
conservers received clearance in March 2001 with shipments beginning that month.
Management believes the features and improvements in these products have enabled
the Company to regain some of the market share lost in the conserver market over
the prior three years. No estimate can currently be made regarding the level of
success the Company may achieve with the OXYMATIC 400 series conservers. For
information, which may affect the forward, looking statements made in this
paragraph about the OXYMATIC 400 series conservers, see Outlook: Issues and
Risks - New Products.
Management also believes that, based on its experience in the home oxygen
industry, future revenues may be positively affected by sales of the TOTAL O2
Delivery System. The TOTAL O2 system provides stationary oxygen for patients at
home, portable oxygen, including an oxygen conserving device for ambulation and
a safe and efficient mechanism for filling portable oxygen cylinders. This
should provide home care dealers with means to deal with the reimbursement cuts
discussed above by reducing their monthly cost of servicing patients while at
the same time providing a higher quality of service by maximizing ambulatory
capability. The Company received clearance in November 1997, to sell this
product from the Food and Drug Administration. Initial sales of the TOTAL O2
system were adversely affected by several factors, including the overall home
oxygen market climate as well as start-up manufacturing and related supplier
quality issues. The Company has taken a number of steps to resolve the
manufacturing and supplier issues. The Company believes the sales potential for
the new system is significant as the market size for units is similar to the
conserver market and the average selling price is approximately four times that
of the OXYMATIC and OXYLITE systems. No estimates can currently be made
regarding the level of success the Company may achieve with the TOTAL O2 system.
For information which may affect the outcome of forward-looking statements made
in this paragraph about the TOTAL O2 systems, see Outlook: Issues and Risks -
New Products.
11
CHAD THERAPEUTICS, INC.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
June 30, 2001
Results of Operations (cont'd)
Cost of sales as a percent of net sales decreased from 76.7% to 64.4% and
increased from 63.7% to 76.7% for the three month periods ended June 30, 2001
and 2000, respectively, as compared to the prior year's periods. The three
months ended June 30, 2001, were primarily affected by increased sales volume
while the corresponding prior year period was affected by decreased sales volume
and the corresponding impact of fixed overhead costs on units produced, price
competition and the lower gross profit margin on the TOTAL O2 system.
Selling, general and administrative expenditures increased from $1,281,000 (43%
of sales) to $1,521,000 (31% of sales) and decreased from $1,419,000 (39% of
sales) to $1,281,000 (43% of sales) for the three month periods ended June 30,
2001 and 2000, respectively. The increase in 2001 is primarily the result of
variable selling expenses that fluctuate directly with sales volume. The
Company's cost reduction efforts over the past two years, including reductions
in personnel, should align staffing and operating expenses more closely with
current sales expectations, but will be offset to some extent by commissions
paid to the Company's field sales force of manufacturer's representatives.
Research and development expenses increased by $64,000 and decreased $14,000 for
the three month periods ended June 30, 2001 and 2000, as compared to the prior
year's periods. Currently, management expects research and development
expenditures to total approximately $830,000 in the fiscal year ended March 31,
2002, on projects to enhance and expand the Company's product line. Interest
income increased $3,000 for the three months ended June 30, 2001, as compared to
the prior year's period due to generally higher cash balances than in the prior
year.
At June 30, 2001, the Company had fully utilized its net operating loss
carrybacks and had approximately $4,006,000 and $3,076,000 in Federal and
California net operating loss carryforwards, respectively. As a result of
valuation allowances placed on the net operating loss carryforwards and deferred
tax assets, these net operating loss carryforwards and deferred tax assets will
be available to offset future income tax expense when and if the Company
generates taxable income.
Financial Condition
At June 30, 2001, the Company had cash totaling $1,623,000 or 14% of total
assets, as compared to $1,059,000 (10% of total assets) at March 31, 2001. Net
working capital increased from $5,847,000 at March 31, 2001 to $6,044,000 at
June 30, 2001. Accounts receivable increased $859,000 during the three months
ended June 30, 2001, due to the increase in sales. Future increases or decreases
in accounts receivable will generally coincide with sales volume fluctuations
and the timing of shipments to foreign customers. During the same period,
inventories decreased $427,000. This decrease relates primarily to utilization
of raw materials purchased in prior years for the manufacture of the TOTAL O2
product line. The Company attempts to maintain sufficient inventories to meet
its
12
CHAD THERAPEUTICS, INC.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
June 30, 2001
Financial Condition (cont'd)
customer needs as orders are received. Thus, future inventory and related
accounts payable levels will be impacted by the ability of the Company to
maintain its safety stock levels. If safety stock levels drop below target
amounts, then inventories in subsequent periods will increase more rapidly as
inventory balances are replenished. Currently, inventory balances are generally
near safety stock levels.
Management believes cash balances and funds derived from operations should be
adequate to meet the Company's cash requirements for the next twelve months
given the recent recovery of market share for oxygen conservers. If operations
do not continue to improve, the Company may need to seek other sources of
working capital. The Company expects capital expenditures during the next twelve
months to be approximately $200,000.
The Company has not adopted any programs that provide for post employment
retirement benefits, however, it has on occasion provided such benefits to
individual employees.
Outlook: Issues & Risks
This quarterly report contains forward-looking statements, which reflect the
Company's current views with respect to future events and financial performance.
These forward-looking statements are subject to certain risks and uncertainties,
which may cause actual operating results to differ materially from currently,
anticipated results. Among the factors that could cause actual results to differ
materially are the following:
Dependence Upon a Single Product Line
Although the Company currently markets a number of products, these products
comprise a single product line for patients requiring supplementary oxygen. The
Company's future performance is thus dependent upon developments affecting this
segment of the health care market and the Company's ability to remain
competitive within this market sector.
New Products
The Company's future growth in the near term will depend in significant part
upon the commercial success of the TOTAL O2 Delivery System, the OXYMATIC 400
series conservers and other new products which are under development. The
success of these new products will depend upon the health care community's
perception of such products capabilities, clinical efficacy and benefit to
patients and obtaining timely regulatory approval. In addition, prospective
sales will be impacted by the degree of acceptance
13
CHAD THERAPEUTICS, INC.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
June 30, 2001
New Products (cont'd)
achieved among home oxygen dealers and patients requiring supplementary oxygen.
As with the introduction of any new product, the Company's ability to
successfully promote the TOTAL O2 Delivery System, the OXYMATIC 400 series
conservers and other new products cannot be assessed at this time.
Consolidation of Home Care Industry
The home health care industry is undergoing significant consolidation. As a
result, the market for the Company's products is increasingly influenced by
major national chains. Three major national chains accounted for 28% of the
Company's domestic sales during the period ended June 30, 2001. Future sales may
be increasingly dependent on a limited number of customers, which may have an
impact on margins due to quantity pricing.
Competition
Chad's success in the early 1990's has drawn new competition to vie for a share
of the home oxygen market. These new competitors include both small and very
large companies. While the Company believes the quality of its products and its
established reputation will continue to be a competitive advantage, some
competitors have successfully introduced lower priced products with features not
currently found in the Company's products but which do not provide oxygen
conserving capabilities comparable to the Company's products. No assurance can
be given that increased competition in the home oxygen market will not continue
to have an adverse affect on the Company's operations.
Rapid Technological Change
The health care industry is characterized by rapid technological change. The
Company's products may become obsolete as a result of new developments. The
Company's ability to remain competitive will depend to a large extent upon its
ability to anticipate and stay abreast of new technological developments related
to oxygen therapy. The Company has limited internal research and development
capabilities. Historically, the Company has contracted with outside parties to
develop new products. Some of the Company's competitors have substantially
greater funds and facilities to pursue research and development of new products
and technologies for oxygen therapy.
Potential Changes in Administration of Health Care
A number of bills proposing to regulate, control or alter the method of
financing health care costs have been discussed and certain of such bills have
been introduced in Congress and various state legislatures. Because of the
uncertain state of health care proposals, it is
14
CHAD THERAPEUTICS, INC.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
June 30, 2001
Potential Changes in Administration of Health Care (cont'd)
not meaningful at this time to predict the effect on the Company if any of these
proposals is enacted.
Approximately 80% of home oxygen patients are covered by Medicare and other
government programs. Federal law has altered the payment rates available to
providers of Medicare services in various ways during the last several years.
Congress has passed legislation, which has reduced Medicare spending. It cannot
yet be predicted how future changes in reimbursement levels will affect the home
oxygen industry and there can be no assurance that such changes will not have an
adverse effect on the Company's business.
Patents and Trademarks
The Company pursues a policy of protecting its intellectual property rights
including, obtaining patents for appropriate inventions related to products
marketed or manufactured by the Company. The Company considers the patentability
of its products to be significant to the success of the Company. To the extent
that the products to be marketed by the Company do not receive patent
protection, competitors may be able to manufacture and market substantially
similar products. Such competition or claims that the Company's products
infringe the patent rights of others could have an adverse impact upon the
Company's business.
Product Liability
The nature of the Company's business subjects it to potential legal actions
asserting that the Company is liable for damages for product liability claims.
Although the Company maintains product liability insurance in an amount which it
believes to be customary in the industry, there is no assurance that this
insurance will be sufficient to cover the costs of defense or judgments which
might be entered against the Company. The type and frequency of these claims
could have an adverse impact on the Company's results of operations and
financial position.
Availability of Third Party Component Products
The Company tests and packages its products in its own facility. Some of its
other manufacturing processes are conducted by other firms and the Company
expects to continue using outside firms for certain manufacturing processes for
the foreseeable future and is thus dependent on the reliability and quality of
parts supplied by these firms. The Company's agreements with its suppliers are
terminable at will or by notice. The Company believes that other suppliers would
be available in the event of termination of these arrangements. No assurance can
be given, however, that the Company will not suffer a material disruption in the
supply of its products.
15
CHAD THERAPEUTICS, INC.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
June 30, 2001
Accounting Standards
Accounting standards promulgated by the Financial Accounting Standards Board
change periodically. Changes in such standards may have an impact on the
Company's future financial position.
In December 1999, the Securities and Exchange Commission ("SEC") issued Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements" ("SAB
101"). SAB 101, as amended, summarizes certain of the SEC's views of applying
generally accepted accounting principles to revenue recognition in financial
statements. SAB 101 was adopted in the fourth quarter of fiscal 2001 and did not
have a material impact on the Company's financial statements.
Additional Risk Factors
Additional factors, which might affect the Company's performance, may be listed
from time to time in the reports filed by the Company with the Securities and
Exchange Commission.
16
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.
CHAD THERAPEUTICS, INC.
---------------------------------
(Registrant)
Date 7/24/01 /s/ Thomas E. Jones
------- ---------------------------------
Thomas E. Jones
Chief Executive Officer
Date 7/24/01 /s/ Earl L. Yager
---------------------------------
Earl L. Yager
Chief Operating Officer,
Chief Financial Officer and
Secretary