UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



Amendment No. 1 on Form 10-QSB/A to

FORM 10-QSB



[x]

QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2004

OR

[  ]

TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______ to _______



Commission file number 0-18785

_________

STERION INCORPORATED

(Exact name of small business issuer as specified in its charter)



Minnesota

41-1391803

(State or other jurisdiction of incorporation

(IRS Employer Identification No.)



or organization)





13828 Lincoln Street N.E., Ham Lake, Minnesota 55304(Address of principal executive offices)

(763) 755-9516(Issuer's telephone number)

(Former name, former address and former fiscal year, if changed since last report)

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: YES [x] NO [  ]

At August 13, 2004, 1,738,618 shares of the issuer's Common Stock were outstanding.



1







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Description of Amendment of Form 10-QSB for Quarterly Period Ended June 30, 2004:



This amendment to the Sterion Incorporated Form 10-QSB for the quarter ended June 30, 2004 is being filed solely to provide additional financial information at Note 10 and Note 13 to the Companys financial statements contained in Part I  Financial Information, Item 1.  Consolidated Financial Statements (unaudited).  This Form 10-QSB/A does not amend any of the financial statements contained in the Companys original filing.



STERION INCORPORATED
INDEX TO AMENDMENT NO. 1 TO FORM 10-QSB

|PART I-FINANCIAL INFORMATION:
|-----------------------------
|                             
|Item 1.                      
|                             
|                             
|                             
|                             
|                             
|                             
|                             
|                             
|                             
|                             
|                             
|                             
|                             
|PART II - OTHER INFORMATION: 
|                             
|Item 6.                      
|                             
|SIGNATURES                   
|                             



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STERION INCORPORATED AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS



|                                                        |              | June 30,
2004 |                 | September 30,
2003
|------------------------------------------------------- | ------------ | ------------- | --------------- | ------------------
|                                                        |              | (unaudited)   |                 | (audited)         
|ASSETS                                                 
|CURRENT ASSETS                                          |              |               |                
|Cash and cash equivalents                               | $    603,640 |               | $1,762,819     
|Accounts receivable, net                                | 1,837,507    |               | 994,629        
|Inventories, net                                        | 3,338,742    |               | 3,176,910      
|Deferred income taxes                                   | 144,000      |               | 144,000        
|Other current assets                                    | 431,298      |               | 270,501        
|Total Current Assets                                    | 6,355,187    |               | 6,348,859      
|PROPERTY AND EQUIPMENT, NET                             | 3,748,745    |               | 1,568,847      
|OTHER ASSETS                                            |              |               |                
|Intangible assets, net                                  | 1,195,576    |               | 118,105        
|Goodwill                                                | 428,579      |               | 356,439        
|Cash surrender value of life insurance, net of loans    | 12,865       |               | 41,351         
|Total Other Assets                                      | 1,637,020    |               | 515,895        
|                                                        |              |               |                
|Total Assets                                            | $11,740,952  |               | $8,433,601     
|                                                       
|LIABILITIES AND STOCKHOLDERS' EQUITY                   
|CURRENT LIABILITIES                                     |              |               |                
|Line of credit, bank                                    | $ 1,197,034  |               | $             -
|Current portion of long-term debt                       | 313,308      |               | 116,820        
|Accounts payable                                        | 656,949      |               | 731,300        
|Accrued payroll and related taxes                       | 379,006      |               | 244,892        
|Deferred revenue and service cost liability             | 832,797      |               | -              
|Other accrued expenses                                  | 163,907      |               | 57,658         
|Total Current Liabilities                               | 3,543,001    |               | 1,150,670      
|LONG-TERM LIABILITIES                                   |              |               |                
|Long-term debt, net of current portion                  | 1,857,978    |               | 1,236,933      
|Deferred income taxes                                   | 44,000       |               | 44,000         
|Total Liabilities                                       | 1,901,978    |               | 2,431,603      
|STOCKHOLDERS' EQUITY                                    |              |               |                
|Capital stock, $.01 par value, 20,000,000 common shares |              |               |                
|authorized, 5,000,000 undesignated shares authorized,   |              |               |                
|1,800,318 and 1,800,118 common shares issued and        |              |               |                
|1,738,618 and 1,738,418 outstanding                     | 17,386       |               | 17,384         
|Additional paid-in capital                              | 3,482,923    |               | 3,144,494      
|Retained earnings                                       | 2,977,988    |               | 2,914,997      
|Deferred compensation                                   | (182,324)    |               | (74,877)       
|Total Stockholders' Equity                              | 6,295,973    |               | 6,001,998      
|TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY              | $11,740,952  |               | $8,433,601     



See accompanying notes to consolidated financial statements.





3







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STERION INCORPORATED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(unaudited)





|                                                                 | For the Three Months Ended |  | For the Nine Months Ended
|---------------------------------------------------------------- | -------------------------- |  | -------------------------
|                                                                 | June 30,                   |  | June 30,                 
|                                                                 | 2004                       |  | 2003                     
|                                                                 |                            |  |                          
|Sales, net                                                       | $2,796,363                 |  | $2,269,966               
|                                                                 |                            |  |                          
|Cost of goods sold                                               | 1,611,860                  |  | 1,619,412                
|Gross profit                                                     | 1,184,503                  |  | 650,554                  
|                                                                 |                            |  |                          
|Selling, general and administrative expenses                     | 1,028,382                  |  | 1,000,475                
|Income (loss) from operations                                    | 156,121                    |  | (349,921)                
|                                                                 |                            |  |                          
|Other income (expense)                                           |                            |  |                          
|Gain on sale of certain assets of the                            |                            |  |                          
|sterilization container system product line                      | -                          |  | 550,000                  
|Interest expense                                                 | (48,390)                   |  | (25,961)                 
|Investment income                                                | 1,086                      |  | 2,811                    
|Total other income (expense)                                     | (47,304)                   |  | 526,850                  
|                                                                 |                            |  |                          
|Income before income taxes                                       | 108,817                    |  | 176,929                  
|                                                                 |                            |  |                          
|Provision for income taxes                                       | 30,250                     |  | 75,200                   
|Net income                                                       | 78,567                     |  | 101,729                  
|                                                                 |                            |  |                          
|Net income per share                                             |                            |  |                          
|Basic                                                            | $.05                       |  | $.06                     
|Diluted                                                          | $.04                       |  | $.06                     
|                                                                 |                            |  |                          
|Weighted average common and common equivalent shares outstanding |                            |  |                          
|Basic                                                            | 1,738,618                  |  | 1,729,537                
|Diluted                                                          | 1,847,950                  |  | 1,817,800                



See accompanying notes to consolidated financial statements

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STERION INCORPORATED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)



|                                                                             | For the Nine Months Ended
June 30,
|---------------------------------------------------------------------------- | ----------------------------------
|                                                                             | 2004                              
|                                                                             |                                   
|Cash flows from operation activities:                                        |                                   
|Net income                                                                   | $62,991                           
|Adjustments to reconcile net income to cash flows from
operating activities: |                                   
|Depreciation and amortization                                                | 453,290                           
|Gain on sale of certain assets of the sterilization container                |                                   
|system product line                                                          | -                                 
|Compensation related to non-employee stock options                           | 55,185                            
|Debt issuance costs                                                          | 20,417                            
|Deferred income taxes                                                        | -                                 
|Changes in operating assets and liabilities:                                 |                                   
|Accounts receivables, net                                                    | (470,087)                         
|Inventories, net                                                             | (108,942)                         
|Other current assets                                                         | (162,397)                         
|Accounts payable                                                             | (101,462)                         
|Accrued payroll and related taxes                                            | 89,114                            
|Deferred revenue and service cost liability                                  | 26,797                            
|Accrued income taxes                                                         | -                                 
|Other accrued expenses                                                       | 35,930                            
|Net cash flows from operating activities                                     | (99,164)                          
|                                                                             |                                   
|Cash flows from investing activities:                                        |                                   
|Purchases of property and equipment                                          | (355,609)                         
|Purchase of intangibles                                                      | (46,703)                          
|Proceeds from sale of certain assets of the sterilization                    |                                   
|container system product line                                                | -                                 
|Purchase of SOS from Complient Corporation                                   | (2,700,000)                       
|Proceeds from sale of property and equipment                                 | 650                               
|Prepaid interest and cash value of life insurance                            | 28,486                            
|Net cash flows from investing activities                                     | (3,073,176)                       
|                                                                             |                                   
|Cash flows from financing activities:                                        |                                   
|Net adjustments in line of credit, bank                                      | 1,197,034                         
|Proceeds from long-term debt                                                 | 1,500,000                         
|Payments on long-term debt                                                   | (682,467)                         
|Payments on capital lease obligation                                         | (3,806)                           
|Proceeds from rights and warrants exercised and stock                        |                                   
|options exercised                                                            | 2,400                             
|Net cash flows from financing activities                                     | 2,013,161                         
|Increase (decrease)  in cash and cash equivalents                            | (1,159,179)                       
|                                                                             |                                   
|Cash and cash equivalents, beginning of period                               | 1,762,819                         
|                                                                             |                                   
|Cash and cash equivalents, end of period                                     | $  603,640                        
|                                                                             |                                   
|Non-cash financing activities:                                               |                                   
|Stock options issued for guarantee of long tern debt                         | $  175,000                        



See accompanying notes to consolidated financial statements





5







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STERION INCORPORATED AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2004



Note 1 - Basis of Financial Statement Presentation



The accompanying unaudited consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission.  Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been consolidated or omitted pursuant to such rules and regulations, although management believes that the disclosures are adequate to make the information presented not misleading.



In the opinion of management, the unaudited consolidated financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the financial position and results of operations.  Results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year or of the results for any future periods.



In preparation of the Companys consolidated financial statements, management is required to make estimates and assumptions that affect reported amounts of assets and liabilities and related revenues and expenses.  Actual results could differ from the estimates used by management.



Note 2 - Significant Accounting Policies



Principles of consolidation -The consolidated financial statements include the accounts of Sterion Incorporated and its subsidiaries, Oxboro, Inc. (formerly known as Oxboro Medical, Inc.) and its newly created subsidiary LifeSafe Services, Inc. (created November 26, 2003). All significant intercompany transactions and balances have been eliminated in consolidation.



Accounts receivable-Accounts receivables are shown net of an allowance for doubtful accounts of $99,200 and $92,300 at June 30, 2004 and September 30, 2003, respectively.



Amortization - Patents and trademarks are being amortized over their estimated useful lives using the straight-line method.



Debt issuance costs- Debt issuance costs are amortized over the life of the loan using the straight-line method, which approximates the interest method. During the nine months ended June 30, 2004, the Company issued two five-year options to purchase 100,000 shares of its common stock, vested immediately, with an exercise price of $6.00, which were valued at $175,000 as debt issuance costs. These options were granted to two directors of the Company for their guarantee of the Companys indebtedness to Citizens Independent Bank. Amortization expense for the three and nine months ended June 30, 2004 was $8,750 and $20,417, respectively. Future estimated amortization expense for debt issuance costs are $29,167, $35,000, $35,000, $35,000 and $35,000 for the years ending September 30, 2004, 2005, 2006, 2007 and 2008, respectively.



Income taxes - The Company has adopted Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes, under which deferred income tax assets and liabilities are recognized for the temporary differences between the financial statement and income tax reporting bases of assets and liabilities based on currently enacted rates and laws.  These temporary differences include depreciation and related party accruals.



Research and development - The Company expenses all costs related to product research and development as incurred.  Research and development expense was $20,750 and $7,268 for the three months ended June 30, 2004 and 2003, respectively, and $49,557 and $29,683 for the nine months ended June 30, 2004 and 2003, respectively.



Stock-based compensation - The Company uses the intrinsic value-based method prescribed by Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations in accounting for employee stock options and stock based compensation.  Under the intrinsic value method, compensation expense is recorded only to the extent that the market price of common stock exceeds the exercise price of the stock option on the date of grant.

6







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In December 2002, the Financial Accounting Standards Board (FASB) issued SFAS No. 148 as an amendment to SFAS No. 123 providing alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation and also provides required additional disclosures about the method of accounting for stock-based employee compensation. The amendments are effective for financial statements for fiscal years ending after December 31, 2002 and for interim periods beginning after December 15, 2002.  The Company adopted the annual disclosure provision of SFAS No. 148 during the year ended September 30, 2003.  The Company has currently chosen to not adopt the voluntary change to the fair value based method of accounting for stock-based employee compensation, pursuant to SFAS No. 148.



The Company has adopted the disclosure-only provisions of SFAS No. 123, Accounting for Stock-Based Compensation. Accordingly, no compensation cost has been recognized with respect to stock options. Had compensation cost for the Company's stock options been determined based on fair value at the grant dates consistent with the method as defined under SFAS No. 123, the Company's net income would have changed to the pro forma amounts indicated below:



|                                            |  | Three Months Ended
June 30, |  | Nine Months Ended
June 30, | 
|------------------------------------------- |  | --------------------------- |  | -------------------------- | 
|                                            |  | 2004                        |  | 2003                       | 
|Net income (loss):                          |  |                             |  |                            | 
|As reported                                 |  | $78,567                     |  | $101,729                   | 
|Pro forma                                   |  | 42,077                      |  | 73,126                     | 
|Basic net income (loss) per common share:   |  |                             |  |                            | 
|As reported                                 |  | .05                         |  | .06                        | 
|Pro forma                                   |  | .02                         |  | .03                        | 
|Diluted net income (loss) per common share: |  |                             |  |                            | 
|As reported                                 |  | .04                         |  | .06                        | 
|Pro forma                                   |  | .02                         |  | .03                        | 
|Stock based compensation:                   |  |                             |  |                            | 
|As reported                                 |  | 22,912                      |  | 0                          | 
|Pro forma                                   |  | 36,490                      |  | 28,603                     | 
|                                            |  |                             |  |                            | 



The pro forma amounts may not be representative of the effects on reported net loss for future years. The per share, weighed-average fair value of each option granted is calculated using the Black-Scholes pricing model with the following weighted-average assumptions used for grants in the following years:





|                                 |  | Three Months Ended
June 30, |  | Nine Months Ended
June 30, | 
|-------------------------------- |  | --------------------------- |  | -------------------------- | 
|                                 |  | 2004                        |  | 2003                       | 
|                                 |  |                             |  |                            | 
|Risk-free interest rate          |  | N/A                         |  | 3.25%                      | 
|Expected life of options granted |  | N/A                         |  | N/A                        | 
|Expected volatility              |  | N/A                         |  | 51.9%                      | 
|Expected dividend yield          |  | N/A                         |  | 0%                         | 





Note 3 - Inventories



Inventories consist of medical and operating room supplies, wound closure strips, surgical wound drainage supplies, sterilization containers and filters, first aid supplies and training materials and are valued at the lower of cost, using the first in, first out (FIFO) method, or market.



|                           | June 30, 2004 |  | September 30, 2003
|-------------------------- | ------------- |  | ------------------
|Inventories consisting of: |               |  |                   
|Raw materials              | $1,754,961    |  | $1,759,391        
|Work in process            | 448,475       |  | 524,213           
|Finished Goods             | 1,135,306     |  | 893,306           
|Total inventories          | $3,338,742    |  | $3,176,910        





7







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Note 4 - Net Income (Loss) Per Share



The Companys basic net income per share amounts have been computed by dividing net income by the weighted average number of outstanding common shares. The Companys diluted net income per share is computed by dividing net income by the weighted average number of outstanding common shares and common share equivalents relating to stock options and warrants, when dilutive. For the three months ended June 30, 2004 and 2003, 109,332 and 88,263 shares of common stock equivalents (based on the treasury stock method) were included in the computation of diluted net income per share, respectively. For the nine months ended June 30, 2004 and 2003, 127,076 and 136,380 shares of common stock equivalents (based on the treasury stock method) were included in the computation of diluted net income per share, respectively.



Options to purchase 373,000 and 293,000 shares of common stock with a weighted average exercise price of $6.21 and $6.40 were outstanding for the three and nine months ended June 30, 2003, respectively but were excluded from the computation of common shares equivalents because their exercise prices were greater than the average market price of the common shares for the respective periods. Options to purchase 182,400 shares of common stock with a weighted average exercise price of $6.61 were outstanding at the three and nine months ended June 30, 2003, but were excluded from the computation of common shares equivalents because their exercise prices were greater than the average market price of the common shares for the periods.



Note 5 - Income Taxes



The Company recorded a provision for income taxes of $30,250 and $75,200 for the three months ended June 30, 2004 and 2003, and $21,250 and $68,200 for the nine months ended June 30, 2004 and 2003, respectively.



Note 6 - Deferred Income Taxes



The Companys deferred income tax assets and liabilities are recognized for the differences between the financial statement and income tax reporting basis of assets and liabilities based on currently enacted rates and laws.  These differences include depreciation, net operating loss carryforwards, capital loss carryforwards, allowance for accounts receivable, inventory valuation adjustments and accrued liabilities.



The Companys deferred tax asset as of June 30, 2004 and September 30, 2003 was $144,000. The deferred tax liability as of June 30, 2004 and September 30, 2003 was $44,000.



Note 7 - Intangible Assets



Intangible assets primarily consist of franchise licenses, customer lists, covenants not to compete and debt issuance costs associated with the purchase as of November 26, 2003 of certain assets of SOS International, Inc. (SOS) and Complient Corporation (Complient) by LifeSafe Services, Inc., the Companys wholly-owned subsidiary (LifeSafe Services). Intangible assets are being amortized using the straight-line method over their estimated useful lives of 60 to 180 months (weighted average life of 10.15 years). The amortization expense related to the assets, not including the debt issuance costs, was $39,926 and $0 for the three months ended June 30, 2004 and 2003, respectively, and $73,815 and $0 for the nine months ended June 30, 2004 and 2003, respectively. The future estimated amortization expense for the related intangible assets for years ending September 30, 2004, 2005, 2006, 2007, and 2008 is $84,722, $101,667, $101,667, $101,667 and $101,667, respectively.  See Note 12 - Acquisition and Disposition of Assets regarding the valuation of these intangible assets and Note 2  Significant Accounting Policies regarding the debt issuance costs relating to the acquisition of these intangible assets.



Note 8 - Deferred Revenue and Service Cost Liability



With the acquisition as of November 26, 2003 of certain assets from, and the assumption of certain liabilities of, SOS and Complient by LifeSafe Services, LifeSafe assumed the obligation to provide on-going service to existing customers and, in the course of business, will enter into new service agreements or leases. Such leases are accounted for by the Company as operating leases. In addition to leasing the equipment, the Company also provides training and equipment servicing over the lease term. These service agreements or operating leases generally require payments in advance that are deferred as reported revenue and are recognized as revenue on a pro-rated basis over the term of the service agreement. In addition to lease payment advances, deferred revenue also consists of customer deposits and prepayments for services not yet rendered. Deferred revenues are recognized ratably over the term of the contracts,

8







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typically 3 to 12 months. The net amount of deferred revenue at June 30, 2004 was $502,131, which included $667,464 in revenue deferred for the nine months ended June 30, 2004, representing the net amount of service contract revenue received since the acquisition that will be realized in future periods, and $165,333 in deferred expenses which represented the remainder of $806,000 associated with servicing the acquired accounts, which was reflected in the total purchase consideration at the time of acquisition by LifeSafe. Net deferred revenue for the three months ended June 30, 2004 was $(81,601). The Company had no deferred revenue at June 30, 2003.



Note 9 - Long-term Debt



During July 2003, the Company entered into a $1,000,000 line of credit agreement with Citizens Independent Bank. The line of credit is subject to a defined borrowing base. Amounts outstanding are due on July 1, 2004 and bear interest at prime plus .5% (4.5% at June 30, 2004 and September 30, 2003). The line is secured by substantially all assets of the Company. On November 26, 2003, concurrent with the asset acquisition by LifeSafe Services, the Company and Citizens Independent Bank entered into an amendment to the line of credit agreement to increase the amount of borrowings available on the line of credit agreement from $1,000,000 to $1,800,000. As of June 30, 2004, outstanding borrowings under the line of credit agreement were $1,197,034.



During July 2003, the Company also obtained a term loan from Citizens Independent Bank in the amount of $500,000. On November 26, 2003, the Company paid off the term loan balance of $473,000 with Citizens Independent Bank and entered into a new five-year term loan in the amount of $1,500,000. The terms of the loan require monthly principal and interest payments of approximately $27,900 at an interest rate of prime plus 0.5% (4.5% at June 30, 2004) through November 1, 2008. The loan is collateralized by substantially all assets of the Company.The Company entered into this $1,500,000 loan to finance the SOS and Complient purchase described in Note 12 - Acquisition and Disposition of Assets. As of June 30, 2004, the outstanding balance was $1,320,665. The Company was not in compliance as of June 30, 2004 on loan covenants relating to working capital and tangible net worth and on August 09, 2004 obtained a waiver of these covenants for the three-month period ended June 30, 2004.



The Companys indebtedness to Citizens Independent Bank under the line of credit agreement and the term loan is guaranteed by Mr. Kenneth W. Brimmer, the Companys Chief Executive Officer and a director and Mr. Gary C. Copperud, a director of the Company.



Note 10  Business Segments



Following are the Companys business segment information for the three months ended June 30, 2004 and 2003 and for the nine months ended June 30, 2004 and 2003





|                                 | Sterion   |  | LifeSafe  |  | Total     
|-------------------------------- | --------- |  | --------- |  | ----------
|                                 |           |  |           |  |           
|Three Months ended June 30, 2004 |           |  |           |  |           
|Revenues                         | 2,240,338 |  | 556,025   |  | 2,796,363 
|Income from operations           | 52,952    |  | 103,169   |  | 156,121   
|Identifiable assets              | 7,623,522 |  | 4,117,430 |  | 11,740,952
|Depreciation and amortization    | 90,386    |  | 92,222    |  | 182,608   
|Capital Expenditures             | 171,366   |  | 14,415    |  | 185,781   
|                                 |           |  |           |  |           
|Three Months ended June 30, 2003 |           |  |           |  |           
|Revenues                         | 2,269,966 |  | 0         |  | 2,269,966 
|Loss from operations             | (349,921) |  | 0         |  | (349,921) 
|Identifiable assets              | 8,386,336 |  | 0         |  | 8,386,336 
|Depreciation and amortization    | 108,830   |  | 0         |  | 108,830   
|Capital Expenditures             | 56,236    |  | 0         |  | 56,236    





9







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|                                | Sterion   |  | LifeSafe  |  | Total     
|------------------------------- | --------- |  | --------- |  | ----------
|                                |           |  |           |  |           
|Nine Months ended June 30, 2004 |           |  |           |  |           
|Revenues                        | 6,798,097 |  | 902,219   |  | 7,700,316 
|Income (loss) from operations   | (42,318)  |  | 250,375   |  | 208,057   
|Identifiable assets             | 7,623,522 |  | 4,117,430 |  | 11,740,952
|Depreciation and amortization   | 236,602   |  | 216,688   |  | 453,290   
|Capital Expenditures            | 271,893   |  | 83,716    |  | 355,609   
|                                |           |  |           |  |           
|Nine Months ended June 30, 2003 |           |  |           |  |           
|Revenues                        | 6,966,588 |  | 0         |  | 6,966,588 
|Loss from operations            | (301,982) |  | 0         |  | (301,982) 
|Identifiable assets             | 8,386,336 |  | 0         |  | 8,386,336 
|Depreciation and amortization   | 427,093   |  | 0         |  | 427,093   
|Capital Expenditures            | 199,823   |  | 0         |  | 199,823   



Note 11 - Commitments and Contingencies



Stock Repurchase Program -In September 2001, the Board of Directors authorized a stock repurchase program under which the Company is authorized to repurchase up to 175,000 shares of the Company's common stock.  As of June 30, 2004 and 2003, the Company has repurchased 55,400 shares of common stock for $398,286. No shares were repurchased during the three and nine months ended June 30, 2004.



Note 12 - Acquisitions and Disposition of Assets



On November 26, 2003, Sterion Incorporated (Sterion or the Company) completed the purchase through its newly-created, wholly-owned subsidiary, LifeSafe Services, Inc., a Minnesota corporation (LifeSafe), of certain assets and liabilities of SOS International, Inc. (SOS) a subsidiary of Complient Corporation (Complient).  As a result of this acquisition, the Company is in the business of leasing and servicing emergency oxygen tanks.



The acquisition of assets from SOS and Complient was pursuant to an Asset Purchase Agreement with a purchase price for the net assets acquired of $2.7 million. The Company in part financed the acquisition with net proceeds from its borrowings as arranged with Citizens Independent Bank (See Note 9 - Long Term Debt) plus the assumption of certain liabilities. In addition, the Company acquired certain intangible assets including rights under SOSs franchise agreement and customer lists. The Company assumed the obligation to service the existing customers. Such obligation is reflected as assumed liabilities in the following table. The Company has engaged an outside appraiser to confirm the value of the intangible assets. Although the report was not finished as of the date of this filing, the Company believes that there will be no significant adjustments required based upon the appraisal. However, if any adjustments to the values of the intangible assets are required based upon the independent appraisal, the Company expects to make such adjustments in the three-month period ending September 30, 2004. The consideration for the purchase was determined through arm's-length negotiations between the Company, LifeSafe, SOS and Complient.  The purchase also included the assumption by LifeSafe from Complient of a Lease dated December 21, 2000, as amended, for approximately 5,000 square foot portion of a building located in Jacksonville, Florida.

10







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Statement of Financial Accounting Standards (SFAS) No. 141 Business Combinations requires that all business combinations after June 30, 2001 be accounted for under the purchase method of accounting. The acquisition of assets and assumed liabilities of Oxygen leasing and servicing business of Complient were accounted for under the purchase method of accounting and, accordingly, the purchase price was allocated to assets acquired and liabilities assumed based on the estimated fair value as of the acquisition date. The following table is a condensed balance sheet summarizing the amounts assigned to the assets acquired and liabilities assumed:



|                       | SOS/Complient
|---------------------- | -------------
|Accounts receivable    | $   372,791  
|Inventories            | 52,890       
|Property and equipment | 2,204,414    
|Intangibles            | 950,000      
|Goodwill               | 73,016       
|Liabilities assumed    | (953,111)    
|Net purchase price     | $ 2,700,000  



SFAS No. 141 includes guidance on the initial recognition and measurement of goodwill and other intangible assets arising from business combinations. SFAS No. 142 Goodwill and Other Intangible Assets indicates that goodwill (and intangible assets deemed to have indefinite lives) will no longer be amortized but will be subject to annual impairment tests. Other intangible assets with identifiable lives will continue to be amortized over their useful lives.  The Company performed the required goodwill impairment test and determined an impairment charge was not required at June 30, 2004. The estimated fair value of the reporting unit was estimated using the expected present value of future cash flows. Components of all intangible assets are as follows:





|                                              | June 30, 2004  |  |              |  | September 30, 2003 |  |             
|--------------------------------------------- | -------------- |  | ------------ |  | ------------------ |  | ------------
|                                              | Gross Carrying |  | Accumulated  |  | Gross Carrying     |  | Accumulated 
|                                              | Amount         |  | Amortization |  | Amount             |  | Amortization
|Intangible assets subject to amortization     |                |  |              |  |                    |  |             
|Customer lists                                | $  350,000     |  | $   20,417   |  | $            -     |  | $         - 
|Franchise fees                                | 400,000        |  | 15,554       |  | -                  |  | -           
|Covenant not to compete                       | 200,000        |  | 23,334       |  | -                  |  | -           
|Debt Issuance Costs                           | 175,000        |  | 20,418       |  |                    |  |             
|Patents and trademarks                        | 75,243         |  | -            |  | 69,767             |  | -           
|Design, layout and artwork costs              | 89,566         |  | 14,510       |  | 48,338             |  | -           
|Total                                         | $1,289,809     |  | $94,233      |  | $118,105           |  | -           
|Intangible assets not subject to amortization |                |  |              |  |                    |  |             
|Goodwill                                      | $   428,579    |  | $         -  |  | $356,439           |  | $         - 





The (decrease) increase in goodwill amounts of $(876) and $72,140 during the three and nine months ended June 30, 2004 relates to an adjustment of assets acquired from the SOS acquisition. In addition, the increases in customer lists, franchise fees, the covenant not to compete amounts and the debt issuance costs during the nine months ended June 30, 2004 relate to the SOS acquisition.



The following unaudited pro forma condensed results of operations for the three and nine months ended June 30, 2004 and 2003, give effect to the acquisitions of the Oxygen Business of Complient as if such transactions had occurred on October 1, 2002.



The unaudited pro forma information does not purport to represent what the Companys results of operations would actually have been if such transactions in fact had occurred at such date or to project the Companys results of future operations:

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|                       | For the Three Months Ended June 30, |  | For the Nine months Ended June 30,
|---------------------- | ----------------------------------- |  | ----------------------------------
|                       | 2004                                |  | 2003                              
|                       |                                     |  |                                   
|Sales, net             | 2,796,363                           |  | 2,838,153                         
|                       |                                     |  |                                   
|Income from operations | 156,121                             |  | (158,462)                         
|                       |                                     |  |                                   
|Net income             | 78,567                              |  | 293,188                           
|                       |                                     |  |                                   
|Net income per share:  |                                     |  |                                   
|Basic                  | $.05                                |  | $0.17                             
|Diluted                | $.04                                |  | $0.16                             
|                       |                                     |  |                                   
|Shares outstanding     |                                     |  |                                   
|Basic                  | 1,738,618                           |  | 1,729,537                         
|Diluted                | 1,848,817                           |  | 1,817,800                         



On May 7, 2003, the Company sold certain assets, and assigned certain liabilities, relating to the Company's sterile container product line to STERIS Corporation (STERIS) for $2,900,000 in cash pursuant to an Asset Purchase Agreement dated May 7, 2003. The purchase price was subject to adjustment within 60 days of the closing for the value of net finished goods inventory. However, under the terms of the Asset Purchase Agreement no adjustment was made to the purchase price for the value of net finished goods inventory. In connection with the closing of the sale to STERIS Corporation, the Company repaid its outstanding indebtedness to Crown Bank of $1,166,263 as of May 7, 2003, representing $647,500 outstanding as of May 7, 2003 relating to the revolving line of credit and $518,763 outstanding as of May 7, 2003 relating to the promissory note.



Note 13 - Subsequent Event



On July 1, 2004, Sterion Incorporated (the Company) completed the purchase, through its newly-created, wholly-owned subsidiary, Burger Time Acquisition Corporation, a Minnesota corporation (BTAC), of substantially all of the assets and certain liabilities of Burger Time Corporation (Burger Time) relating to Burger Times fast food restaurant business operated under the same name.



The purchase was pursuant to a Business Transfer Agreement dated as of July 1, 2004 between BTAC and Burger Time.  The purchase price for the assets was $3,014,950 (which included a $150,000 fee to the sellers agent).  Of the purchase price consideration, BTAC paid $714,950 in cash from working capital obtained from the Company and BTAC will pay $2,000,000 through Contracts for Deed on ten parcels of real estate. The terms of the Contracts for Deed have an interest rate of 6% and require monthly principal and interest payments of approximately $16,900. BTAC also assumed a lease relating to an eleventh parcel of real estate pursuant to an Assignment of Real Estate Lease effective July 1, 2004.  The remaining $300,000 of consideration for BTACs purchase was paid by a Promissory Note dated July 1, 2004.  Under the terms of the Business Transfer Agreement, if the purchase price for the assets is not paid in full by November 12, 2004, the purchase price will increase by $300,000 and BTAC will issue an additional promissory note for $300,000 to Burger Time.  The additional promissory note is for a five year term with interest only payments due monthly at the rate of 6% per annum and all interest and principal due at maturity.  In connection with the transactions, Burger Time and two of its officers also entered into a Covenant Not to Compete dated July 1, 2004 in favor of BTAC.



The obligations under the Contracts for Deed and Promissory Note(s) are guarantied by Gary C. Copperud, a director of the Company, pursuant to a Personal Guaranty.  Mr. Copperud received no consideration from the Company or BTAC in exchange for his guaranty, which was approved by the Audit Committee of the Board of Directors of the Company.  The obligations under the Contracts for Deed and Promissory Note(s) are also secured by a security interest in all of the assets acquired by BTAC pursuant to a Security Agreement.



Consideration for the purchase was determined through arms-length negotiations between the Company and Burger Time.  BTAC intends to use the assets acquired from Burger Time to continue the fast food restaurant business.



Proforma information with regards to this transaction was not available at the time of filing.





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PART II

OTHER INFORMATION



Item 6. Exhibits and Reports on Form 8-K:



(a)

Exhibits:



31.1

Certification of Chief Executive Officer pursuant to Rules 13a-14 and 15d-14 of the Exchange Act.



31.2

Certification of Chief Financial Officer pursuant to Rules 13a-14 and 15d-14 of the Exchange Act.



32

Certification pursuant to 18 U.S.C. §1350



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SIGNATURES



In accordance with the requirements of the Exchange Act, the registrant caused Amendment No. 1 on Form 10-QSB/A to Form 10-QSB to be signed on its behalf by the undersigned, thereunto duly authorized.



|                      | STERION INCORPORATED                                                                                    
|--------------------- | --------------------------------------------------------------------------------------------------------
|Date: August 19, 2004 | By: /s/ Kenneth W. Brimmer

Kenneth W. Brimmer, Chief Executive Officer
(Principal Executive Officer)   
|Date: August 19, 2004 | By: /s/ Mark Buckrey

Mark Buckrey, Chief Financial Officer
(Principal Financial and Accounting Officer)



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