<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
/X / QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
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 33-96882-LA
CARING PRODUCTS INTERNATIONAL, INC.
(Name of small business issuer in its charter)
--------------------
DELAWARE 98-0134875
(State or other jurisdiction of (IRS Employer Identification No.)
--------------------
200 FIRST AVENUE WEST, SUITE 200, SEATTLE, WASHINGTON 98119
(Address of principal executive offices)
(206) 282-6040
(Issuer's telephone number, including area code)
--------------------
Securities registered under Section 12(b) of the Exchange Act: None.
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $.01 par value
Warrants to purchase common stock.
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
--- ---
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS
Not applicable.
APPLICABLE ONLY TO CORPORATE REGISTRANTS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: As of November 14, 1998, the
Registrant had 2,781,343 shares of Common Stock outstanding.
Transitional Small Business Disclosure Format (check one):
Yes No X
--- ---
1
<PAGE>
CARING PRODUCTS INTERNATIONAL, INC.
AND SUBSIDIARIES
FORM 10-QSB
FOR THE QUARTER ENDED SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
PAGE
INDEX NUMBER
PART I FINANCIAL INFORMATION
<S> <C> <C>
Item 1 Consolidated Balance Sheets at March 31, 1998 and September 30, 1998. 3
Consolidated Statements of Operations for the three and six month
periods ended September 30, 1997 and 1998. 4
Consolidated Statements of Cash Flows for the three and six month periods
ended September 30, 1997 and 1998 5
Notes to Unaudited Consolidated Financial Statements 6
Item 2 Management's Discussion and Analysis or Plan of Operation 8
PART II OTHER INFORMATION
Item 1 Legal Proceedings. 13
Item 2 Changes in Securities. 13
Item 3 Defaults Upon Senior Securities 13
Item 4 Submission of Matters to a Vote of Security Holders 13
Item 5 Other Information 14
Item 6 Exhibits and Reports on Form 8-K 14
</TABLE>
2
<PAGE>
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CARING PRODUCTS INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, March 31,
- ------------------------------------------------------------------------------------------------------------------
1998 1998
- ------------------------------------------------------------------------------------------------------------------
(Unaudited)
ASSETS
--------------------------------------------------------
<S> <C> <C>
Current assets:
Cash $ 1,254,379 $ 3,415,569
Accounts receivable, less allowance for doubtful
accounts of $23,279 at March 31, 1998 and $22,867 1,079,434 600,795
at September 30, 1998
Inventories 1,882,073 2,263,333
Prepaid expenses 3,989 15,782
------------------------------
Total current assets 4,219,875 6,295,479
Equipment, net 219,457 221,245
Intangible assets, net 205,531 204,205
Other assets 18,041 18,041
------------------------------
$ 4,662,904 $ 6,738,970
------------------------------
------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
--------------------------------------------------------
Current liabilities:
Accounts payable $ 510,119 $ 1,040,096
Accrued liabilities 40,486 49,600
Current portion of lease obligations 8,770 8,770
------------------------------
Total current liabilities 559,375 1,098,466
Commitments, contingencies and subsequent events - -
Lease obligations, less current portion 6,323 10,418
------------------------------
Total liabilities 565,698 1,108,884
Stockholders' equity:
Preferred stock, no shares outstanding - -
Common stock, 2,781,343 shares outstanding at March 31, 1998
and September 30, 1998 27,814 27,814
Additional paid-in capital 19,681,685 19,686,115
Accumulated deficit (15,612,293) (14,083,843)
------------------------------
Total stockholders' equity 4,097,206 5,630,086
- ------------------------------------------------------------------------------------------------------------------
$ 4,662,904 $ 6,738,970
------------------------------
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
CARING PRODUCTS INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Three And Six Month Periods Ended September 30, 1997 and 1998
(Unaudited)
<TABLE>
<CAPTION>
Six-month periods Three-month periods
ended September 30, ended September 30,
1998 1997 1998 1997
- ---------------------------------------------------------------------------------------------- ------------------------------------
<S> <C> <C> <C> <C>
Revenues $ 944,542 $ 1,196,953 $ 155,582 $ 378,550
Cost of sales 565,464 652,162 112,092 266,691
----------------------------------- ----------------------------------
Gross profit 379,078 544,791 43,490 111,859
Operating expenses:
Selling 1,212,292 1,111,884 623,292 562,934
General and administrative 640,631 499,371 344,979 209,904
Amortization and depreciation 33,133 31,742 16,565 17,464
----------------------------------- ----------------------------------
Total operating expenses 1,886,056 1,642,997 984,836 790,302
----------------------------------- ----------------------------------
Loss from operations (1,506,978) (1,098,206) (941,346) (678,443)
Other income (expense):
Interest income 53,877 46,648 20,054 24,149
Interest expense (147) (221,376) - (69,221)
Other, net (75,202) (70,911) (76,174) 3,179
----------------------------------- ----------------------------------
(21,472) (245,639) (56,120) (41,893)
----------------------------------- ----------------------------------
Net loss $ (1,528,450) $ (1,343,845) $ (997,466) $ (720,336)
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
Net loss per common share $ (0.55) $ (1.30) $ (0.36) $ (0.70)
----------------------------------- ----------------------------------
----------------------------------- ----------------------------------
Weighted average common shares 2,781,343 1,031,343 2,781,343 1,031,343
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
CARING PRODUCTS INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six-Month Periods ended September 30, 1997 and 1998
- ------------------------------------------------------------------------------------------------------------------------------------
(Unaudited)
1998 1997
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (1,528,450) $ (1,343,845)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization and depreciation 35,669 55,209
Deemed interest - 74,980
Gain on sale of fixed asset - (1,311)
Change in operating assets and liabilities:
Decrease (increase) in accounts receivable (478,639) 251,260
Decrease (increase) in inventories 381,260 (447,164)
Decrease in prepaid expenses 11,793 9,427
Increase in other assets - (14,861)
Increase (decrease) in accounts payable (529,977) (318,569)
Increase (decrease) in accrued liabilities (9,114) (36,089)
---------------- ----------------
Net cash used in operating activities (2,117,458) (1,770,963)
Cash flows from investing activities:
Capital expenditures (14,808) (16,402)
Intangible expenditures (20,399) -
Proceeds from sale of fixed asset - 1,311
---------------- ----------------
Net cash used in investing activities (35,207) (15,091)
Cash flows from financing activities:
Decrease in restricted cash, net - 2,694,671
Proceeds from lines of credit, net - (1,240,043)
Repayment of long-term debt - (6,749)
Proceeds from notes payable to related parties - 1,420,400
Repayment of notes payable to related parties - (741,700)
Repayment of lease obligations (4,095) (15,633)
Increase in deferred financing costs (4,430) (224,536)
---------------- ----------------
Net cash provided by (used in) financing activities (8,525) 1,886,410
Increase (decrease) in cash (2,161,190) 100,356
Cash at beginning of period 3,415,569 118,573
---------------- ----------------
Cash at end of period $ 1,254,379 $ 218,929
---------------- ----------------
---------------- ----------------
Supplemental disclosure of cash flow information - cash paid during the
period for interest $ - $ 147,468
Supplemental schedule of noncash investing and financing activities:
Estimated fair market value of warrants issued
recorded as deemed interest - 163,592
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
CARING PRODUCTS INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
THREE AND SIX MONTH PERIODS ENDED SEPTEMBER 30, 1997 AND 1998
(1) PRESENTATION OF INTERIM INFORMATION
The unaudited consolidated financial statements and related notes are
presented as permitted by Form 10-QSB, and do not contain certain
information included in the Company's audited consolidated financial
statements and notes for the fiscal year ended March 31, 1998. The
information furnished reflects, in the opinion of management, all
adjustments, consisting of normal recurring accruals, necessary for a
fair presentation of the results of the interim periods presented. The
results of operations for interim periods are not necessarily
indicative of the results to be expected for the entire fiscal year
ending March 31, 1999. The accompanying unaudited consolidated
financial statements and related notes should be read in conjunction
with the audited consolidated financial statements and the Form 10-KSB
of Caring Products International, Inc. and its subsidiaries (the
"Company") and notes thereto, for its fiscal year ended March 31, 1998.
(2) INVENTORIES
Inventories consisted of the following:
<TABLE>
<CAPTION>
September 30, 1998 March 31, 1998
------------------ ---------------
(Unaudited)
<S> <C> <C>
Finished goods $1,737,202 $2,154,395
Work in process 86,228 86,228
Raw materials 51,342 15,409
Packaging 7,301 7,301
---------- ----------
$1,882,073 $2,263,333
---------- ----------
---------- ----------
</TABLE>
(3) LOSS PER SHARE
In accordance with SFAS No. 128, EARNINGS PER SHARE, the computation of
diluted EPS shall not assume conversion, exercise, or contingent
issuance of securities that would have an antidilutive effect on
earnings per share. SFAS No. 128 also states that although including
those potential common shares in the other diluted per-share
computations may be dilutive to their comparable basic per-share
amounts, no potential common shares shall be included in the
computation of any diluted per-share amount when a loss from continuing
operations exists, even if the entity reports net income.
Due to the net loss position of the Company, only the net loss per
common share is presented on the face of the unaudited consolidated
statements of operations for the three and six-month periods ended
September 30, 1997 and 1998.
6
<PAGE>
CARING PRODUCTS INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
THREE AND SIX MONTH PERIODS ENDED SEPTEMBER 30, 1997 AND 1998
(4) OTHER
The Company maintains cash equivalents with various financial
institutions located in the U.S. and Canada. The Company's policy has
been and continues to be to limit the exposure at any one financial
institution and to invest solely in highly liquid investments that are
readily convertible to cash.
On November 13, 1998, the Company was advised by one of its
depositories which holds deposit balances of US $362,082 and Cdn
$74,489, that it has blocked withdrawal pending a review of
documentation of an unauthorized pledge of Company funds to secure a
personal guarantee.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
THE FOLLOWING ANALYSIS OF THE RESULTS OF OPERATIONS AND FINANCIAL CONDITION OF
THE COMPANY SHOULD BE READ IN CONJUNCTION WITH THE CONSOLIDATED FINANCIAL
STATEMENTS, INCLUDING THE NOTES THERETO, OF THE COMPANY CONTAINED ELSEWHERE IN
THIS FORM 10-QSB.
OVERVIEW
Caring Products International, Inc. (the "Company") has designed and markets a
line of proprietary urinary incontinence products that are sold under the
Rejoice brand name in the United States and Canada. Historically, the Company's
customer base has consisted primarily of drug store chains, retail stores,
hospital supply companies and other distributor relationships.
Quarter to quarter, the Company's sales can fluctuate with the introduction of a
large retail or drugstore chain, which requires higher initial product
requirements to stock store shelves. Additionally, gross margins can fluctuate
based on the mix of sales to healthcare and retail customers, as well as the
type of products sold. Gross profit margins are also affected by the type of
product sold as the Company sells down higher costed inventory produced in
Canada. All of the Company's pants are now being produced in Mexico at
significant savings compared to pants which had been produced in Canada.
RESULTS OF OPERATIONS
Total revenues for the six-month periods ended September 30, 1998 and 1997,
respectively, were as follows:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Gross revenues $ 1,161,475 $ 1,222,934
Returns and allowances ( 216,933) ( 25,981)
----------- -----------
Net revenues $ 944,542 $ 1,196,953
----------- -----------
</TABLE>
Total revenues for the three-month periods ended September 30, 1998 and 1997,
respectively, were as follows:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Gross revenues $ 325,267 $ 393,952
Returns and allowances ( 169,685) ( 15,402)
----------- -----------
Net revenues $ 155,582 $ 378,550
----------- -----------
</TABLE>
Net revenues were $378,550 for the three-month period ended September 30, 1997
(the "1997 Period") and $155,582 for the three-month period ended September 30,
1998 (the "1998 Period"), a decrease of 59%. During the 1998 Period, the Company
was notified of a temporary one-time overstock of certain items by one of its
chain drug customers, which was trying to temporarily reduce its inventory for
its fiscal year end. To maintain the relationship with this significant
customer, the Company agreed to accept a return of some of its inventory. The
customer has since issued new purchase orders to the Company. During the 1998
period, the Company offered reduced pricing on its liners to present a more
competitively priced product to the end home-consumer, primarily for its new
drug chain customers, resulting in lower overall sales dollars for similar
quantities in the same period in the prior fiscal year. The Company also made a
higher percentage of sales during the 1998 Period to healthcare customers than
in the comparative period, which historically are at lower prices than retail.
Net revenues for the six-month period ended September 30, 1997 were $1,196,953
and $944,542 for the six month period ended September 30, 1998, a decrease of
21%. During the six months ended September 30, 1997, the Company shipped a large
reorder to an existing customer, as well as to several other smaller customers.
During the six months ended September 30, 1998, the Company shipped an initial
order to one large drug chain, and was negatively impacted by the temporary
one-time return of some merchandise from the chain drug customer and the reduced
liner pricing.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION, CONTINUED:
Cost of sales decreased from $266,691 for the three-months ended September 30,
1997 to $112,092 for the three months ended September 30, 1998, a decrease of
58%. Cost of sales decreased from $652,162 for the six months ended September
30, 1997 to $565,464 for the six months ended September 30, 1998, a decrease of
13%. The decrease in cost of sales during the three and six month periods ended
September 30, 1998 is primarily attributable to the elimination of costs
associated with the Company's Canadian manufacturing facility which was closed
near the end of the prior fiscal year, the one-time return, and reduced sales.
Gross profit on sales decreased from $111,859 for the 1997 Period to $43,490 for
the 1998 Period, a decrease of 61%. Gross profit on sales decreased from
$544,791 for the six month period ended September 30, 1997 to $379,078 for the
six months ended September 30, 1998, a decrease of 30%. The decrease in gross
profit margin during the 1998 Period as compared to the 1997 Period primarily
reflects the liner price reduction and the customer mix between retail and
healthcare accounts. Gross profit margins may fluctuate in the future depending
on changes in the mix of products sold, the mix of sales distribution channels,
and other factors such as the sale of inventory with lower gross profit margins.
Total operating expenses increased from $790,302 in the 1997 Period to $984,836
in the 1998 Period, an increase of 25%. Total operating expenses increased from
$1,642,997 for the six month period ended September 30, 1997 to $1,886,056 for
the six month period ended September 30, 1998, an increase of 15%.
Selling expenses increased 11% from $562,934 for the 1997 Period to $623,292 for
the 1998 Period. Selling costs increased from $1,111,884 for the six months
ended September 30, 1997 to $1,212,292 for the six months ended September 30,
1998, an increase of 9%. During the 1997 Period, the Company shipped primarily
reorders. During the 1998 Period, the Company shipped an initial order to one of
the largest retail chains, which required one-time store set-up costs including
one-time expenses for merchandising trays, freight expenses, slotting fees and
sales commissions attributable to the larger number of stores associated with
this order. Total one-time expenses associated with new distribution was
$89,260. The Company did not gain new chain customers in the comparable period
of the prior fiscal year with similar per-store listing fees and set up costs.
During the three and six months ended September 30, 1998, the Company
implemented a promotional program to urologists, and incurred new
distribution set-up costs, freight expenses and sales commissions for the
larger number of stores associated with the initial order shipped during the
1998 Period, and increased promotional expenses for ongoing participative
promotional expenses associated with customers obtained during the six month
period ended September 30, 1997 (including slotting fees, listing allowances,
and one-time merchandising racks). During the 1998 Period and the six month
period ended September 30, 1998, the Company also had increased, ongoing
participative in-store promotional expenses associated with customers
obtained during the six-month period ended September 30, 1997
General and administrative expenses increased 64% from $209,904 for the 1997
Period to $344,979 for the 1998 Period, and 28% from $499,371 for the six month
period ended September 30, 1997 to $640,631 for the six month period ended
September 30, 1998. The increase in general and administrative expenses was
primarily the result of higher legal costs during the six month period ended
September 30, 1998 for general corporate purposes, higher consulting fees
related to marketing and the development of international manufacturing and
sales opportunities, and higher insurance and franchise taxes associated with
becoming a U.S. public company and the resultant changes in the Company's
capital structure. Most of these costs were offset by lower general
administrative expenses such as telephone, office supplies, postage, and
Canadian filing expenses incurred during the 1997 Period which did not recur
during the 1998 Period.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION, CONTINUED:
The Company generated $20,054 in interest income during the 1998 Period as
compared to $24,149 during the 1997 Period. The Company generated $53,877 in
interest income during the six months ended September 30, 1998 compared to
$46,648 during the six months ended September 30, 1997. The increase in interest
income is attributable to higher average deposit balances. Interest expense
decreased from $69,221 during the 1997 Period to none during the 1998 Period,
and from $221,376 for the six month period ended September 30, 1997 to $147
during the six month period ended September 30, 1998. The decrease in interest
expense related to the decrease in short-term and long-term borrowing. Other
income (expense) during the three and six month periods ended September 30, 1998
was also impacted by the continued deterioration of the Canadian dollar against
the U.S. dollar, resulting in unrealized exchange losses associated with the
translation of the Company's Canadian assets to U.S. dollars for financial
statement presentation purposes.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically financed its operations through private placements
of its equity securities as well as various debt financing transactions. On
December 15, 1997, the Company completed a public offering ("the Offering") of
1,750,000 units at $5.00 per unit, each unit consisting of one share of the
Company's common stock and a five-year warrant to purchase one additional share
at a price equivalent to 150% of the unit price. Proceeds from the Offering were
$6,819,542, net of offering costs, of which $3,118,698 was used to pay
outstanding debt and accrued interest in December 1997.
The Company maintains cash equivalents with various financial institutions
located in the U.S. and Canada. The Company's policy has been and continues to
be to limit the exposure at any one financial institution and to invest solely
in highly liquid investments that are readily convertible to cash.
On May 5, 1998, the Company took the following actions regarding certain
outstanding warrants and stock options:
- - The exercise price of the Special Warrants and the exercise price of the
warrants that can be exercised under the Special Right, were reduced to
$1.875 per share (representing the closing price per share of the common
stock on that date), and the number of shares entitled to be purchased
through the Special Warrants and Special Right were increased by 67,855.
These Special Warrants relate to a private placement completed in October
5, 1995.
- - The Company canceled and reissued all options outstanding under the 1993
and 1996 Stock Incentive Plans and reduced the exercise price thereof to
$1.875 per share (representing the closing price per share of the common
stock on that date).
- - The Company reduced the exercise price of warrants to Bradstone Equity
Partners Inc. (f/k/a H. J. Forest Products Inc.) to $1.875 per share
(representing the closing price per share of the common stock on that
date). These warrants were associated with a bank line of credit obtained
by the Company on May 8, 1997, for which the Company issued to the
guarantor thereof, Bradstone Equity Partners Inc.), warrants to purchase
31,667 shares (post reverse splits) of Common Stock at $7.44 per share at
any time until May 8, 1998 and thereafter at $8.64 per share until May 8,
1999. Bradstone Equity Partners Inc. is a Canadian publicly held
corporation.
On July 7, 1998, the company issued 20,000 warrants to a marketing consultant.
The warrants have an exercise price of $1.875 per share (representing the
closing price per share of the common stock on that date).
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION, CONTINUED:
LIQUIDITY AND CAPITAL RESOURCES, Continued:
On September 10, 1998 the Company took the following actions regarding certain
outstanding warrants and stock options:
- - The Special Warrants were extended through May 4, 2000.
- - The Brenark Special Right to purchase warrants for Common Stock was
extended through May 4, 2000. In connection with the private placement
completed on October 5, 1995, Brenark Securities Ltd., acted as agent and
was issued a special right (the "Special Right") which was exerciseable for
warrants to purchase 33,333 shares of Common Stock.
On December 14, 1997, US $350,160.05 was deposited into an account at the
direction of the Company's Chief Executive Officer (CEO) to secure an
undisclosed personal commitment between the CEO and his brother, relating to
third-party transactions in the Company's securities. On January 12, 1998, the
CEO signed a personal guarantee form and designated Company funds as security
for the personal guarantee. The guarantee and the pledge of the Company's assets
were given without the knowledge of the Company's Board of Directors or any
other corporate officer, and was not revealed by the depository to the Company's
auditors in response to its written inquiries during the 1998 fiscal year-end
audit.
The existence of the pledge was brought to the Company's attention by the
depository in late September. The officers and the Board of Directors
immediately initiated an investigation with respect to the pledge and related
matters. On November 8, 1998, the Board took action to prevent the application
of the Company's funds to support the personal guarantee, removed Mr. Atkinson
as Chairman, and initiated termination of his employment contract, pursuant to
its terms. Susan Schreter, the Company's President, has subsequently assumed the
responsibilities of CEO. In addition, on November 4, 1998, the Company's Chief
Financial Officer resigned but continues to work for the Company until a
replacement is named.
As of September 30, 1998, the Company's principal sources of liquidity
included cash of $1,254,379 (of which, approximately US $410,000 is currently
restricted), net accounts receivable of $1,079,434, and inventories of
$1,882,073. The Company's operating activities used cash of $2,117,458 during
the six-month period ended September 30, 1998. The Company anticipates that
the levels of inventories and accounts receivable will vary commensurate with
the Company's sales, and if sales increase, may negatively impact cash
resources.
YEAR 2000 COMPUTER SOFTWARE CONVERSION
The Company regularly updates its information systems capabilities, and has
evaluated all significant computer software applications for compatibility
with the year 2000. With the system changes implemented to date and other
planned changes, the Company anticipates that its computer software
applications will be compatible with the year 2000. Expenditures
specifically related to software modifications for year 2000 compatibility
are not expected to have a material effect on the Company's operations or
financial position. However, the Company is dependent on numerous vendors
and customers which may incur disruptions as a result of year 2000 software
issues. Accordingly, no assurance can be given that this will not impact
the Company's results of operations industry-wide issue.
11
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION, CONTINUED:
FORWARD LOOKING STATEMENTS
This Form 10-QSB and other reports and statements filed by the Company from time
to time with the Securities and Exchange Commission (collectively, the
"Filings") contain or may contain forward-looking statements and information
that are based upon beliefs of, and information currently available to, the
Company's management, as well as estimates and assumptions made by the Company's
management.
When used in the Filings, the words "anticipate", "believe", "estimate",
"expect", "future", "intend", "plan" and similar expressions, as they relate to
the Company or the Company's management, identify forward-looking statements.
Such statements reflect the current view of the Company with respect to future
events and are subject to risks, uncertainties and assumptions relating to the
Company's operations and results of operations, competitive factors and pricing
pressures, shifts in market demand, the performance and needs of the industries
which constitute the customers of the Company, the costs of product development
and other risks and uncertainties, including, in addition to any uncertainties
with respect to management of growth, increases in sales, the competitive
environment, hiring and retention of employees, pricing, new product
introductions, product productivity, distribution channels, enforcement of
intellectual property rights, possible volatility of stock price and general
industry growth and economic conditions. Should one or more of these risks or
uncertainties materialize, or should the underlying assumptions prove incorrect,
actual results may differ significantly from those anticipated, believed,
estimated, expected, intended or planned.
12
<PAGE>
PART II
OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a vote of Security Holders.
(a) The Company's 1998 Annual Meeting of Stockholders was
held on September 28, 1998.
The directors elected at the Meeting and the number of
votes case were as follows:
<TABLE>
<CAPTION>
For Against Withheld
--- ------- --------
<S> <C> <C> <C>
William H.W. Atkinson 2,141,905 - 293
Susan A. Schreter 2,141,789 - 409
Michael M. Fleming 2,141,905 - 293
Anthony A. Cetrone 2,141,905 - 293
Paul Stanton 2,141,905 - 293
Herbert Sohn 2,142,097 - 1
All of the directors elected at the Meeting had previously served as directors of the Company.
Other matters voted upon at the Meeting and the number of votes case were as follows:
<CAPTION>
For Against Withheld
--- ------- --------
<S> <C> <C> <C>
Approval to amend the Company's Certificate of
incorporation to decrease the Company's
authorized capital 2,142,774 11,340 1,000
Appointment of Grant Thornton LLP as
Auditors of the Company 2,152,615 2,499 -
</TABLE>
The foregoing matters are described in detail in the
Company's proxy statement dated September 8, 1998.
13
<PAGE>
PART II
OTHER INFORMATION, CONTINUED:
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
27.1 - - Financial Data Schedule
(b) Reports on Form 8-K:
None.
SIGNATURES
In accordance with 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, hereunto duly authorized.
CARING PRODUCTS INTERNATIONAL, INC.
(REGISTRANT)
DATE: NOVEMBER 23, 1998 BY: /S/ SUSAN A. SCHRETER
SUSAN A. SCHRETER
PRESIDENT
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FORM
10-QSB FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH CONSOLIDATED FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> APR-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 1,254,379
<SECURITIES> 0
<RECEIVABLES> 1,102,301
<ALLOWANCES> 22,867
<INVENTORY> 1,882,073
<CURRENT-ASSETS> 4,219,875
<PP&E> 315,862
<DEPRECIATION> 96,405
<TOTAL-ASSETS> 4,662,904
<CURRENT-LIABILITIES> 559,375
<BONDS> 0
0
0
<COMMON> 27,814
<OTHER-SE> 4,069,392
<TOTAL-LIABILITY-AND-EQUITY> 4,662,904
<SALES> 944,542
<TOTAL-REVENUES> 944,542
<CGS> 565,464
<TOTAL-COSTS> 2,451,520
<OTHER-EXPENSES> 21,472
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 147
<INCOME-PRETAX> (1,528,450)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,528,450)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,528,450)
<EPS-PRIMARY> (0.55)
<EPS-DILUTED> (0.55)<F1>
<FN>
<F1>DUE TO THE NET LOSS POSITION OF THE COMPANY, THE BASIC NET LOSS PER
COMMON SHARE IS THE SAME AS THE DILUTED NET LOSS PER COMMON SHARE. NET
LOSS PER SHARE IS COMPUTED BASED ON THE WEIGHTED AVERAGE NUMBER OF
SHARES OF COMMON STOCK OUTSTANDING DURING THE YEAR.
</TABLE>
