10QSB: Optional form for quarterly and transition reports of small business issuers
Published on October 15, 1999
FORM 10-QSB
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES ACT OF 1934
For the quarterly period ended August 31, 1999
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Commission File Number 0-12305
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REPRO-MED SYSTEMS, INC.
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(Exact name of registrant as specified in its charter)
New York 13-3044880
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
24 Carpenter Road, Chester, NY, 10918
(Address of principal executive offices) Zip Code
Registrant's telephone number, including area code (914) 469-2042
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 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 ( )
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at August 31, 1999
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Common stock, $.01 par value 22,142,000 shares
REPRO-MED SYSTEMS, INC.
TABLE OF CONTENTS
PART I PAGE
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Item 1. Financial Statements
Balance Sheets - August 31, 1999 and 3
February 28, 1999.
Statements of Income - For the three month and six 4
month periods ended August 31, 1999 and August 31, 1998.
Statements of Cash Flow - August 31, 1999 and 5
August 31, 1998.
Item 2. Management's Discussion and Analysis of Financial 6
Condition and Results of Operations.
PART II
Item 1. Legal Proceedings 9
None
Item 2. Changes in Securities 9
None
Item 3. Defaults Upon Senior Securities 9
None
Item 4. Submission of Matters to a Vote of Security Holders 9
None
Item 5. Other Information 9
None
Item 6. Exhibits and Reports on Form 8-K 9
None
2
PART I. ITEM 1 - FINANCIAL STATEMENTS
REPRO-MED SYSTEMS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
8-31-99 2-28-99
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CURRENT ASSETS
Cash $ 218,186 $ 683,321
Short-term Investments 249,884 81,352
Accounts Receivable, net 149,253 120,470
Inventory 649,634 573,560
Prepaid Expenses 68,042 78,785
Deposits 190,000 190,000
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TOTAL CURRENT ASSETS $ 1,524,999 $ 1,727,488
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PROPERTY, PLANT & EQUIPMENT-NET 504,144 522,660
OTHER ASSETS 63,242 68,484
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TOTAL ASSETS $ 2,092,385 $ 2,318,632
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CURRENT LIABILITIES
Accounts Payable $ 90,220 $ 41,250
Current Portion Long Term Debt 55,580 55,580
Bank Line of Credit Payable 358,364 439,372
Other Current Liabilities 535,859 344,818
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TOTAL CURRENT LIABILITIES $ 1,040,023 $ 881,020
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Other Liabilities 415,896 427,136
Long Term Debt 157,536 184,926
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TOTAL LIABILITIES 1,613,455 1,493,082
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Minority Interest in Subsidiary 234,340 288,882
STOCKHOLDERS' EQUITY
Preferred Stock, 8% Cumulative $.01
Par Value Authorized 2,000,000,
issued & Outstanding10,000 Shares 100 100
Common Stock, $.01 Par Value,
Authorized 50,000,000 Shares,
Issued & Outstanding 22,142,000 221,420 221,420
Warrants Outstanding 140 140
Additional Paid-In Capital 3,040,662 3,040,662
Accumulated Deficit (2,875,732) (2,583,654)
Treasury Stock at Cost (142,000) (142,000)
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TOTAL STOCKHOLDERS' EQUITY 244,590 536,668
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TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 2,092,385 $ 2,318,632
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3
REPRO-MED SYSTEMS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
4
REPRO-MED SYSTEMS, INC. AND SUBSIDIARY
STATEMENTS OF CASH FLOWS
FOR 6 MONTH ENDED
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8-31-99 8-31-98
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NET INCOME (LOSS) $(288,078) $(133,619)
ADJUSTMENTS TO RECONCILE NET INCOME
TO NET CASH PROVIDED BY OPERATIONS:
Income (Loss) in Minority Interest (54,542) (39,979)
Depreciation & amortization 53,603 78,760
Decrease (Increase) in Short
Term Investments (168,532) 279,776
Decrease (increase) in Accounts
Receivable (28,783) (6,982)
Decrease (Increase) in inventory (76,074) (118,483)
Decrease (Increase) in Prepaid
Expenses 10, 743 (1,211)
Decrease (Increase) in Deferred
Taxes 0 (49,373)
Decrease (Increase) in
Accounts Payable 48,970 (56,415)
Decrease (Increase) other
Liabilities 179,801 (63,188)
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NET CASH PROVIDED BY OPERATIONS (322,892) (110,714)
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CASH FLOW FROM INVESTING ACTIVITY
Acquisition of Property and
Equipment (29,845) (32,533)
Acquisition of Other Assets 0 (245)
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Net Cash Used in Investing
Activities (29,845) (32,778)
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NET CASH FLOW FROM FINANCING
Activities
Proceeds (Repayment) from Bank
Notes Payable (108,398) 120,000
Repayment of Mortgage 0 41,910)
Preferred Stock Dividend (4,000) (4,000)
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Net Cash Used in Financing Activities (112,398) 74,090
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NET INCREASE (DECREASE) IN CASH (465,135) (69,402)
Cash and Equivalents beginning
Of Period 683,321 160,567
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CASH AND EQUIVALENTS END OF PERIOD $ 218,186 $ 91,165
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SUPPLEMENTARY DATA
Interest Paid $ 21,225 $ 62,887
Taxes Paid 0 0
5
REPRO-MED SYSTEMS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Reference is made to Notes to Financial Statements included in the Company's
Annual Report).
Management's Statement
The financial statements included herein have been prepared by the
Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in the financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations, although
the Company believes that the disclosures are adequate to make the
information presented not misleading. It is suggested that these
financial statements be read in conjunction with the financial
statements and the notes thereto included in the Company's latest
annual report on Form 10-KSB.
PART I. ITEM 2.
Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Three months ended August 31, 1999 vs. 1998
Sales increased +7% from $371,230 to $397,663 for the quarter
ended August 31,1999 versus 1998. The increase is attributed to sales
of the Company's new intravenous infusion products.
Cost of goods rose moderately + 1.6% with the sales increase
improving the product margin from 22% in 1998 to 26% in 1999.
Selling, general and administrative expense decreased $47,071
for the three months period versus 1998. Management initiated expense
and payroll reductions that resulted in the savings.
Research and development expense are virtually unchanged
period to period. The period to period reduction in depreciation and
amortization expense reflects the end of write offs for some intangible
assets and the elimination of building depreciation with its sale.
6
Interest expense was reduced -67% as the result of the sale
and lease-back of the company's building. Interest expense is now
replaced by rent payments.
Interest and other income decreased by -97% with the
elimination of rental income upon sale of the building.
The loss from operations was lowered 27% with margins
improving +$21,793, SG&A reductions of $47,071 and lower depreciation
$8,753 accounting for the gain.
Six Months ended August 31, 1999 vs. 1998
Sales decreased $146,609 (14%) primarily because the Company's
OEM (Original Equipment Manufacture) sales in 1998 have not been
repeated to the same levels in 1999 and the sales of new products have
not yet compensated for that shortfall.
Cost of goods sold were 64% for the first six months of 1999
versus 58% for the comparable period in 1998. The lower margins reflect
the price structure for the new products that have yet to meet the
Company's objective of +50%.
Selling, General and Administrative expenses were 6% lower for
the comparable period as management did initiate expense and payroll
reductions in the second quarter. Research and Development expenses
were 29% lower for the same reasons.
The sale and lease back of the Company's building served to
eliminate rental income and debt expense reducing non-operating income
and expenses $82,214.
The loss before taxes increased $104,316 as savings in
operating expenses $84,232 were impacted by lower gross margin of
-$120,897 and reduced non-operating income of -$82,214. The minority
interest in subsidiary loss increased $14,563.
Liquid and Capital Resources
For the first six months of fiscal 2000, through August 31,
1999, the company experienced negative cash flow of approximately
$300,000 as a result of declining sales and significant expenses to
prepare new products for the market. In August/September management
initiated expense and payroll reductions that are expected to reduce
negative cash flow below $20,000 per month if sales achieve minimum
expectations or to a cash breakeven with increased volume.
7
The Company did sign with its lender on July 27, 1999 a
Forebearance Agreement that extended the maturity date for the line of
credit to January 31, 2000 and precluded the issuance of new advances.
The Company continues to attempt to refinance the indebtedness before
January 31, 2000. If new financing is not arranged the Company will
attempt to negotiate an extension of the forebearance agreement or
other arrangement with the lender.
The funds available on August 31, 1999 are expected to meet
cash requirements as planned under current operating conditions for the
remainder of the fiscal year.
8
FORWARD LOOKING STATEMENTS
The Company has made and will make certain forward-looking statements
in the Quarterly Report relating to market and product development among others.
These Forward-looking statements represent challenging goals for the Company and
are based on certain assumptions and estimates including the Worldwide economy,
competitive activity, funding availability, product introductions, governmental
action and the development of certain markets. Some examples of key factors
necessary to achieve the Company's goals are: (1) the ability to continue
successful technological innovation (2) the avoidance of adverse cost increases
(3) the ability to achieve projected sales of the Company's products (4)
uncertainty related to Food and Drug Administration or other government
regulation (5) introduction by other companies of competitive products (6)
changes in the Company's relationships with its customers and distributors and
(7) adequate and available sources of funds. If the Company's assumptions and
estimates are incorrect or do not come to fruition, or if the Company does not
achieve all of these key factors, then the Company's actual performance could
vary materially from the forward-looking statements made herein.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is neither a party to any material litigation, nor to the knowledge
of the officers and directors of the Company, is there any material litigation
threatened against the Company.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders of the Company during
the quarter ended August 31, 1999.
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
None
9
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) 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.
REPRO-MED SYSTEMS, INC.
/S/ Andrew I. Sealfon
Andrew I. Sealfon, President October 14, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been and on the date indicated.
/s/ Andrew I. Sealfon October 14, 1999
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Andrew I. Sealfon, President, Treasurer,
Chairman of the Board, Director, and
Chief Executive Officer
10