SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM l0-QSB
QUARTERLY REPORT
Pursuant to sections 13 or 15(d) of The Securities Exchange Act of 1934
FOR THE QUARTER ENDED AUGUST 31, 1996
Commission File Number 0-12305
REPRO-MED SYSTEMS, INC
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(Exact name of registrant as specified in its charter)
NEW YORK 13-3044880
(State or other jurisdiction of (IRS Employer
incorporation or organization) identification No.)
17 Industrial Place, Middletown, New York 10940
- ------------------------------------------ ----------
(Address of principle executive offices) (Zip Code)
(914) 343-8499
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
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
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At August 31, 1996 the registrant had outstanding 22,142,000 shares of Common
Stock, $.01 par value.
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PART I
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Item 1. Financial Statements
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Balance Sheets - August 31, 1996, August 31, 1995 and February 29, 1996.
Statements of Income - For the three and six month periods ended August 31,
1996 and August 31, 1995. Statements of Cash Flow - August 31, 1996 and August
31, 1995.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
-----------------------------------------------------------------------
of Operations
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PART II
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Item 1. Legal Proceedings None
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None
Item 2. Changes In Securities
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None
Item 3. Defaults Upon Senior Securities
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None
Item 4. Submission of Matters to a Vote of Security Holders
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None
Item 5. Other Information
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Purchase of Treasury Stock
Item 6. Exhibits and Reports on Form 8-K
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None
2
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<TABLE>
<CAPTION>
PART I, Item 1 - Financial Statements
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Repro-Med Systems, Inc And Subsidiary
-------------------------------------
Consolidated Balance Sheets
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Aug 31,1996 Aug 31,1995 Feb 29,1996
----------- ----------- -----------
<S> <C> <C> <C>
Assets
- ------
Current Assets
- --------------
Cash and Cash Equivalents $ 927,021 $ 854,002 $ 1,125,957
Accounts Receivable 344,803 330,628 87,489
Inventory 582,770 579,787 542,865
Prepaid Expenses & Other Receivables 84,525 106,566 65,890
Deferred Taxes - Current 156,000 156,000 156,000
------------ ------------ -----------
Total Current Assets 2,095,119 2,026,983 1,978,201
- -------------------- ------------ ------------ -----------
Land, Property, Equipment And Other Assets
- ------------------------------------------
Land 409,500 0 0
Property and Equipment, Net 904,018 463,157 317,874
Deferred Taxes - Non-current 18,286 136,081 101,127
Other Assets, Net 68,596 77,431 73,511
------------ ------------ -----------
Total Property, Equipment And Other Assets 1,400,400 676,669 492,512
- ------------------------------------------ ------------ ------------ -----------
Total Assets $ 3,495,519 $ 2,703,652 $ 2,470,713
============ ============ ============ ===========
Liabilities And Stockholders' Equity
- ------------------------------------
Current Liabilities
- -------------------
Accounts Payable $104,847 $ 204,830 $ 114,202
Notes Payable - Current Portion Notes Payable 0 18,000 0
Mortgage Payable - Current Portion 14,420 0 0
Other Current Liabilities 77,608 160,593 93,132
------------ ------------ -----------
Total Current Liabilities 196,875 383,423 207,334
- ------------------------- ------------ ------------ -----------
Mortgage Payable - Long Term Portion 881,856 0 0
- ------------------------------------ ------------ ------------ -----------
Total Liabilities 1,078,731 383,423 207,334
- ----------------- ------------ ------------ -----------
Minority Interest In Subsidiary 122,012 150,626 115,561
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Stockholder's Equity
- --------------------
Preferred Stock, 8% Cumulative $.01 Par Value, 2,000,000 shares
authorized, 10,000 issued and outstanding 100 100 100
Common Stock, $.01 Par Value, 50,000,000 shares authorized, 22,142,000
22,042,000 and 22,042,000 issued and outstanding, respectively
221,420 220,420 220,420
Warrants Outstanding 140 140 140
Additional Paid-In Capital 3,040,662 3,033,662 3,033,662
Accumulated (Deficit) (945,546) (1,084,719) (1,084,504)
Treasury Stock at Cost (275,000 shares) (22,000) 0 (22,000)
------------ ------------ -----------
Total Stockholder's Equity 2,294,776 2,169,603 2,147,818
- -------------------------- ------------ ------------ -----------
Total Liabilities And Stockholders' Equity $ 3,495,519 $ 2,703,652 $ 2,470,713
========================================== ============ ============ ===========
</TABLE>
3
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<TABLE>
<CAPTION>
Repro-Med Systems, Inc And Subsidiary
-------------------------------------
Consolidated Statements Of Income
---------------------------------
For Three Months Ended For Six Months Ended
---------------------- --------------------
Aug 31, 1996 Aug 31, 1995 Aug 31, 1996 Aug 31, 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Sales $ 637,548 $ 870,648 $ 1,356,250 $ 1,612,122
Costs And Expenses:
- -------------------
Cost of Goods Sold 266,970 409,756 585,667 758,698
Selling, General & Administrative Expenses
246,555 232,728 489,892 408,554
Research and Development 58,520 21,318 114,700 37,638
Depreciation and Amortization 21,168 19,341 39,816 37,202
------------ ------------ ------------ ------------
593,213 683,143 1,230,075 1,242,092
------------ ------------ ------------ ------------
Net Income From Operations 44,335 187,505 126,175 370,030
- --------------------------
Non-Operating Income (Expense):
- -------------------------------
Licensing Income 0 0 87,800 0
Rental Income 21,525 0 28,939 0
Interest (Expense) (16,839) 0 (23,564) 0
Interest & Other Income 10,240 10,742 21,822 23,523
------------ ------------ ------------ ------------
14,926 10,742 114,997 23,523
------------ ------------ ------------ ------------
Income Before Minority Interest Share
- -------------------------------------
of Operations 59,261 198,247 241,172 393,553
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Minority Interest In (Income) Loss of Subsidiary
17,742 10,212 (6,451) 11,338
------------ ------------ ------------ ------------
Net Income Before Income Taxes 77,003 208,459 234,721 404,891
- ------------------------------
Provision (Benefit) For Income Taxes 46,717 92,893 91,763 176,690
------------ ------------ ------------ ------------
Net Income $ 30,286 $ 115,566 $ 142,958 $ 228,201
- ---------- ------------ ------------ ------------ ------------
Net Income Per Common Share $ 0.00 $ 0.00 $ 0.01 $ 0.01
- --------------------------- ============ ============ ============ ============
</TABLE>
4
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Repro-Med Systems, Inc And Subsidiary
-------------------------------------
Statements Of Cash Flows
------------------------
For The 6 Months Ended
----------------------
<TABLE>
<CAPTION>
Aug 31, 1996 Aug 31, 1995
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<S> <C> <C>
Cash Flows From Operating Activities
- -----------------------------------
Net Income $ 142,958 $ 228,201
Adjustments To Reconcile Net Income To Net
Cash Provided By Operating Activities:
Income (Loss) Of Minority Interests 6,451 (11,338)
Depreciation and Amortization 39,816 37,202
Decrease (Increase) In Accounts Receivable (257,314) (75,514)
Decrease (Increase) In Inventory (39,905) (21,807)
Decrease (Increase) In Prepaid Expenses &
Other Receivables (18,635) (34,954)
Decrease (Increase) In Deferred Taxes 82,841 157,603
Increase (Decrease) In Accounts Payable (9,355) (4,614)
Increase (Decrease) In Other Current Liabilities (15,524) (116,709)
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Net Cash Provided By Operating Activities (68,667) 158,070
- ----------------------------------------- ------------- -------------
Cash Flows From Investing Activities
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(Acquisition) of Land, Property and Equipment (1,030,295) (205,155)
(Acquisition) of Other Assets (250) (590)
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Net Cash (Used) by Investing Activities (1,030,545) (205,745)
- --------------------------------------- ------------- -------------
Cash Flows From (Used By) Financing Activities
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Proceeds From Mortgage 900,000 0
Proceeds From Issuance of Common Stock 8,000 0
Preferred Stock Dividend (4,000) (4,000)
Repayment Of Mortgage (3,724) 0
Repayment of Note 0 (18,000)
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Net Cash Provided (Used) by Financing Activities 900,276 (22,000)
- ------------------------------------------------ ------------- -------------
Increase (Decrease) In Cash and Cash Equivalents (198,936) (69,675)
Cash and Cash Equivalents - Beginning of Year 1,125,957 923,677
------------- -------------
Cash and Cash Equivalents - End of Period $ 927,021 $ 854,002
========================================= ============= =============
Supplementary Data - Interest Paid $ 23,564 $ 0
- ------------------
</TABLE>
5
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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),
(1) 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.
6
<PAGE>
PART I, Item 2
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Repro-Med Systems, Inc And Subsidiary
-------------------------------------
Management's Discussion and Analysis of
Financial Condition and Results of Operations
for use with 10-QSB for the Quarter Ended August 31, 1996
Capital Resources and Liquidity
- -------------------------------
Cash and equivalents on a consolidated basis were $927,021 at August 31, 1996,
as compared to $854,002 at August 31, 1995, an increase of $73,019. Cash and
equivalents includes cash of the Company's subsidiary, Gamogen, Inc, of $61,974
at August 31, 1996, and $10,847 at August 31, 1995.
Net working capital on a consolidated basis at August 31, 1996 was $1,898,244,
as compared to $1,643,560 at August 31, 1995. Net working capital included
Gamogen, Inc net working capital of $122,470 at August 31, 1996, and $177,337
at August 31, 1995.
The Company's liquidity improved as reflected in the 6 month increase in its
net working capital of $127,377 versus the balance at February 29, 1996 of
$1,770,867. The six month increase in net working capital, reflected in
increased accounts receivable, results primarily from the Company's net income
of $142,958 and the utilization of $82,841 in tax benefits it derives from
accrued net operating loss credits (NOLs) on federal and state income taxes.
Versus the balance at August 31, 1995 the Company's net working capital
increased $254,684.
On May 18, 1994, Repro-Med received approval notification from the FDA on the
Syringe I.V. Infusion System which allows the Company to commence production
and marketing of the Syringe I.V. Infusion System. The Company is presently
proceeding with product engineering, the purchase of production tooling and
parts inventory, and supply agreements for the disposable I.V. administration
set components and anticipates initiating production of the Syringe I.V.
Infusion System in the fiscal year ending February 1997. The Company is
exploring various options for marketing of the Syringe I.V. Infusion System but
has not yet finalized its plans.
As previously reported, on April 12, 1994 the Board of Directors of the
Company's 58.3% owned subsidiary, Gamogen, Inc ("Gamogen"), approved and on
April 14, 1994 Gamogen signed with Zonagen, Inc. ("Zonagen"), a small US based
biotechnology company, an agreement under which Zonagen acquired all rights of
Gamogen to Gamogen's Oral Treatment for Male Impotence ("Impotence Agreement").
In exchange for the above rights Gamogen received from Zonagen $100,000 in cash
and, subject to certain FDA approvals and Gamogen's agreement not to compete,
future payments of $200,000 in restricted common stock of Zonagen, valued based
on the closing price on the day due, and royalties on Zonagen's future sales of
the Oral Treatment as follows payable in cash to Gamogen. Future product
royalties payable to Gamogen under the Impotence Agreement are equal the
following percentages of net sales of the Oral Treatment for Male Impotence:
Aggregate Net Sales: % Royalty
First $100,000,000 6%
Second $100,000,000 5%
Third $100,000,000 4%
Excess Over $300,000,000 3%
Under certain terms of the Impotence Agreement the above royalty percentages
may be reduced by two percentage points for sales in countries where patent
protection is unavailable or deemed ineffective. There can be no guarantee
concerning the Oral Treatment that FDA approvals will be secured and if secured
that Zonagen will be successful in marketing of the product.
7
<PAGE>
In the year ended February 1995 Gamogen recorded Licensing Income from the
Impotence Agreement of $47,107 ($100,000 in payments made by Zonagen less
related expenses of $52,893). As disclosed in Gamogen's Form 10KSB Annual
Report dated February 29, 1996, on May 28, 1996 a stock payment was received by
Gamogen in the form of 19,512 restricted common stock shares of Zonagen in
accordance with the terms of the Impotence Agreement. The number of shares was
computed by dividing $200,000 by the NASDAQ closing price on April 12, 1996 of
$10.25 per share. In accordance with the terms of the Impotence Agreement, the
19,512 shares are restricted and bear the appropriate legend. Considering the
generally limited market for restricted shares, the Rule 144 holding period of
a minimum of two years, and the historical variance in the market prices for
Zonagen stock, Gamogen initially valued these shares at 50% of the stock price
on April 12, 1996 or $100,000. Gamogen valued these shares understanding that
the future valuation of these shares may be changed to reflect the length of
the holding period, changes in the current market price of Zonagen common
stock, or other factors which in the opinion of management may affect the value
of these securities. On June 10, 1996 Gamogen received an offer of $4.50 per
share, a total of $87,800, on the 19,512 restricted shares from a small group
of private investors. This price was approximately 50% of the then NASDAQ
market price for Zonagen, Inc. common stock. On June 20, 1996 Gamogen sold the
19,512 restricted shares to the group of private investors for $87,800. As a
result of these transactions Gamogen recorded Licensing Income from the
Impotence Agreement of $87,800 in the quarter ended May 31, 1996 and the
receipt of $87,800 in cash and cash equivalents as of May 31, 1996.
On June 24, August 2 and September 30 1996 Zonagen issued press releases
concerning FDA and US patent approvals on its Vasomax product (the Oral
Treatment) which included the following:
"The Woodlands, Texas, June 24, 1996 - Zonagen, Inc. (NASDAQ: ZONA;
------------------------------------
Pacific ZNG) announced today that it has received notification from
the United States Patent and Trademark Office that the patent
covering the use of VASOMAX(TM) as a treatment for erectile
dysfunction (impotency) has been allowed. The second, more recent
application, is still pending.
Zonagen also announced that it has submitted the IND for VASOMAX(TM)
to the FDA as the first step in its US Phase III development program.
VASOMAX(TM) is currently in a pivotal Phase III trial in Mexico
scheduled to be completed in 1996. The Company has selected
Pharmaco-LSR and Affiliated Research Centers (ARC) for its US
clinical development team and clinical sites. Dr. Irwin Goldstein of
Boston University Medical Center, a renowned researcher in the field
of impotency therapy, has been appointed as Scientific Advisor for
the VASOMAX(TM) program and Dr. David Ferguson, Senior Vice
President, Affiliated Research Centers, will act as special
consultant during the Phase III trials."
"The Woodlands, Texas, August 2, 1996 - Zonagen, Inc. (NASDAQ: ZONA;
-------------------------------------
Pacific ZNG) today has announced it has begun its U.S. pivotal
clinical trials of VASOMAX (TM), the Company's "on-demand" oral
therapeutic for male impotency. Based in part by what it considers to
be encouraging early data from its Mexican study, the Company has
decided to accelerate its U.S. clinical program. VASOMAX (TM) will be
administered to patients this week in the U.S. and the Company
expects to begin pivotal studies by late August. The Company plans to
complete the Phase III portion of the trials by the first quarter of
1997 and submit an NDA to the FDA by June of 1997.
Joseph S. Podolski, President and CEO said, `The continued clinical
success of VASOMAX(TM) confirms our belief that it may provide a
cost-effective, user-friendly therapy for approximately 40-50% of all
impotent men. Particular attention has been placed on both side
effect profiles and the ability to restore sufficient erectile
function to achieve organism on every sexual attempt. The interim
analysis of the Mexican data shows the drug to be well tolerated,
with no incidence of hypotension or fainting. Furthermore, the number
of men who were able to achieve orgasm using VASOMAX(TM) was
consistent with earlier pre-clinical and clinical human studies.'
8
<PAGE>
The Company's Board of Directors made a decision on July 31, 1996 to
accelerate the clinical development of VASOMAX(TM). As a result of
this accelerated U.S. clinical plan, the Company will require
additional funds in the beginning of the fourth quarter of 1996."
"The Woodlands, Texas, September 30, 1996 - ZONAGEN, INC. (Nasdaq:
-----------------------------------------
ZONA) announced today that it completed an initial closing of a
private placement in which the Company sold 1.14 million shares of
newly-authorized Series B Convertible Preferred Stock at a price of
$10.00 per share representing gross proceeds of $11.4 million. Each
share of the Company's Series B Convertible Preferred Stock is
initially convertible into approximately 1.51 shares of Common Stock.
The conversion price is subject to adjustment in certain
circumstances."
Based on the above press release by Zonagen, Gamogen does not anticipate any
royalty payments under the Impotence Agreement from Zonagen within the next 12
months, with the exception of possible royalty payments by Zonagen resulting
from the sale of the Oral Treatment in Mexico. There can be no guarantee
concerning the Oral Treatment that approvals by the US FDA or approvals in
other countries will be secured and if secured that Zonagen will be successful
in marketing of the product.
Beyond the above items, the Company's ability to increase its revenue and
develop other new products is primarily based on capital it derives from
current operations.
During the quarter ended November 30, 1995 the Company paid in full its bank
term loan which at August 31, 1995 had a balance of $18,000.
On April 18, 1995 Repro-Med executed a formal Contract Of Sale with Key Bank of
New York ("Key Bank") on a facility in Chester, NY ("Chester facility") for the
purpose of housing all operations of Repro-Med, Gamogen, and Gyneco. The
purchase was completed on April 30, 1996. The price for the facility was
$1,030,000. The purchase of the Chester facility was financed in part by a
$900,000 mortgage loan from Key Bank. The mortgage is a 10 year loan with a 20
year amortization rate and annual interest at a rate of 8.82% for years 1-5.
For years 6-10 the interest rate shall be the lesser of either the Key Bank
base rate plus 0.5% or a fixed rate to be negotiated if offered by Key Bank.
The total annual mortgage payment for years 1-5 including principal and
interest, is $95,924, payable in equal monthly installments beginning June 15,
1996. As of August 31, 1996 a total of $23,564 in interest expense due on the
mortgage was recorded. Mortgage principal payments made as of August 31, 1996
were $3,724. A portion of the Chester facility is leased to Key Bank on a
net/net/net rent basis for 20 years at annual rent of $86,100 for years 1
through 10 and $99,990 for years 11 through 20. As of August 31, 1996 a total
of $28,939 in rent, exclusive of property tax rent allocations have been paid
by Key Bank. The formal lease contract required an $86,100 security deposit
from Key Bank and an additional rent allocation to Key Bank of 35% of all
property tax payments. Key Bank intends to maintain local branch operations in
the leased portion of the building. The new facility is expected to improve
Repro-Med and Gyneco manufacturing efficiencies and provide additional space
for expansion of operations.
The Osbon Medical Systems division of Urohealth Systems, Inc. OEM product
purchases represented 70% of the Company's total sales for the fiscal year
ending February 1996. A significant reduction in Company sales to Osbon could
materially affect the Company's liquidity, cash flow, and profitability. As a
result of increases in manufacturing costs and lower volume the Company
implemented an increase in selling prices of certain of its OEM products in
March 1996.
Osbon markets the Company's OEM products in the impotence vacuum device market.
Management believes that Osbon presently controls a substantial portion of the
impotence vacuum device market. Other products have
9
<PAGE>
recently been developed for Osbon which compete with the Company's current OEM
products and are anticipated to be manufactured and marketed directly by Osbon.
These new products, sold under the trade name "Esteem" ("Esteem products"),
were introduced by Osbon in direct competition to the Company's OEM products in
June 1996. As a result Osbon has discontinued purchases of certain Repro-Med
OEM products and its purchases of certain other OEM products are expected to be
substantially reduced. Based on orders received from Osbon to date and
discussions with Osbon concerning anticipated purchases and marketing of the
Esteem products, management estimates sales to Osbon in the fiscal year ended
February 1997 may be approximately 35% to 45% lower as compared to fiscal 1996.
These estimates however are based on the assumption that Osbon can successfully
manufacture and generate significant market acceptance for the Esteem products.
During the period March 1995 to March 1996, the Company, acting in accordance
with its written agreement with Osbon for the manufacture by Repro-Med of the
Esteem products ("Esteem Agreement"), cooperated in and provided extensive work
in testing, validation, design analysis and problem solving, prototyping and
generating and providing information concerning performance and improvements to
the Esteem products design. In furtherance of the Esteem Agreement Repro-Med
provided Osbon related information concerning Repro-Med's proprietary product
design, materials, and manufacturing processes. Management believes that
Repro-Med's assistance was vital to Osbon's attempts to complete the design and
facilitate the timely manufacture of the Esteem products. Throughout this time
period the Company advised Osbon of numerous engineering design faults related
to the manufacturability, quality, and customer use of the Esteem products
which Repro-Med had discovered through its testing and validation work on the
Esteem products. These faults were primarily the result of either design
specifications provided Osbon by its contract engineers or other items
initiated by Osbon. A number of these faults were significant and resulted in
delays throughout the program. In March 1996 the Company forthrightly advised
Osbon that, based on the Company's current knowledge of the status of the
design, that confirmation of certain production scheduling requested by Osbon
was unrealistic and could not reasonably be achieved, namely the production and
delivery of 7,000 Esteem products by May 15, 1996. In April 1996 Osbon advised
that it was withdrawing its commitment to Repro-Med for manufacture of the
Esteem products and had secured other options for manufacture of these
products. No prior notice was provided the Company by Osbon. Despite repeated
requests to Osbon the Company has not received an explanation for this action.
The Company has advised Osbon that Repro-Med is due compensation for its work
on the Esteem products and for use of its proprietary design and manufacturing
information. The Company also advised Osbon that Repro-Med is available to
initiate the manufacture the Esteem products in accordance with its written
agreement. The Company intends to seek to resolve these matters on an amicable
basis with Osbon. To date no resolution has been agreed to. Osbon remains a
significant and important customer of Repro-Med.
Repro-Med sales of OEM products to Osbon in the quarter ended August 31, 1996
were $394,128, or 62% of sales, and were at the increased selling prices noted
above. Repro-Med sales of OEM products to Osbon in the quarter ended August 31,
1995 were $587,160, or 67% of sales. Repro-Med sales of OEM products to Osbon
in the six month period ended August 31, 1996 were $884,027, or 65% of sales,
and were at the increased selling prices noted above. Repro-Med sales of OEM
products to Osbon in the quarter ended August 31, 1995 were $1,079,691, or 67%
of sales.
10
<PAGE>
Results of Operations
- ---------------------
Results For Three Months Ended August 31, 1996 As Compared With Three Months
- ----------------------------------------------------------------------------
Ended August 31, 1995:
- ----------------------
In the quarter ended August 31, 1996 income from operations was $44,335 as
compared to $187,505 in the same quarter of the prior fiscal year, a decrease
of $143,170. The decrease in operating income resulted primarily from a
decrease in sales and increased expenditures for research and development
offset in part by improved margins on cost of goods sold. Sales in the current
quarter were $637,548 a decrease of $233,100 or 27% versus sales of $870,648 in
the same quarter of the prior fiscal year. Cost of goods sold decreased
$142,786 or 35% as a result of decreased product sales volume. Margins on sales
after cost of goods sold improved versus the same quarter of the prior fiscal
year due to increased prices on OEM products (see Capital Resources and
Liquidity section above) and improved product sales mix. Selling, general, and
administrative expenses were $246,555. Selling, general, and administrative
expenses increased $13,827, or 6%, versus the same quarter of the prior year
due primarily to increased property taxes, utilities, and maintenance costs on
the new Chester facility. Research and development costs totaled $58,520 in the
current quarter as compared to $21,318 in the same quarter of the prior fiscal
year. The increase in research and development costs result primarily from
expenses for design changes to the Syringe I.V. Infusion System pump mechanism
initiated in November 1995, the addition of a staff engineer hired in May 1996,
and general wage increases. Depreciation and amortization were $21,168 in the
current quarter, as compared to $19,341 in the same quarter of the prior fiscal
year. The increase in depreciation and amortization is due primarily to
depreciation expense on the Chester facility in the amount of $3,780.
In the quarter ended August 31, 1996, the Company earned income before taxes of
$77,003 as compared to $208,459 in the quarter ended August 31, 1995, a decline
of $131,456. Income before taxes decreased versus the same quarter of the prior
fiscal year due to the $143,170 decrease in operating income. Non-operating
income increased due to rental income on the Chester facility offset in part by
mortgage interest expense.
The Company earned net income of $30,286 in the quarter ended August 31, 1996,
as compared to net income of $115,566 in the prior year quarter ended August
31, 1995. The decline in income before taxes, versus the same quarter of the
prior year, was offset by lower income tax expense in the current quarter. Net
income in the current quarter was reduced by a net loss after minority
interests of Gamogen of $24,805. Net income in the previous year quarter ended
August 31 was reduced by a net loss after minority interests by Gamogen of
$14,277.
Net income per common share $0.00 in the current quarter and in the same
quarter of the prior fiscal year.
Results For Six Months Ended August 31, 1996 As Compared With Six Months Ended
- ------------------------------------------------------------------------------
August 31, 1995:
- ----------------
In the six months ended August 31, 1996 income from operations was $126,175 as
compared to $370,030 in the same six months of the prior fiscal year, a
decrease of $243,855. The decrease in operating income resulted primarily from
a decrease in sales and increases in selling, general, and administrative
expenses and research and development offset in part by improved margins on
cost of goods sold. Sales in the current six months were $1,356,250 a decrease
of $255,872 or 16% versus sales of $1,612,122 in the same six months of the
prior fiscal year. Cost of goods sold decreased $173,031 or 23% as a result of
decreased product sales volume. Margins on sales after cost of goods sold
improved versus the same six months of the prior fiscal year due to increased
prices on its OEM products (see Capital Resources and Liquidity section above)
and improved product sales mix. Selling, general, and administrative expenses
were $489,892. Selling, general, and administrative expenses increased $81,338
versus the same six months of the prior year due primarily to general wage
increases, additional expenditures for promotion and export marketing, and
increased property taxes, utilities, and
11
<PAGE>
maintenance costs on the new Chester facility. Research and development costs
totaled $114,700 in the current six months as compared to $37,638 in the same
six months of the prior fiscal year. The increase in research and development
costs result primarily from expenses for design changes to the Syringe I.V.
Infusion System pump mechanism initiated in November 1995, the addition of a
staff engineer hired in May 1996, and general wage increases. Depreciation and
amortization were $39,816 in the current six months, as compared to $37,202 in
the same six months of the prior fiscal year. The increase in depreciation and
amortization is due primarily to depreciation expense on the Chester facility
in the amount of $5,040.
In the six months ended August 31, 1996, the Company earned income before taxes
of $234,721 as compared to $404,891 in the six months ended August 31, 1995, a
decline of $170,170. Income before taxes decreased versus the same six months
of the prior fiscal year due to the $243,855 decrease in operating income. The
decrease in income before taxes was limited by an increase in non-operating
income in the current period of $91,474. The increase in non-operating income
results primarily from Gamogen Licensing Income from the Impotence Agreement of
$87,800 (see Capital Resources and Liquidity section above). Non-operating
income increased due to rental income on the Chester facility offset in part by
mortgage interest expense.
The Company earned net income of $142,958 in the six months ended August 31,
1996, as compared to net income of $228,201 in the prior year six months ended
August 31, 1995. The decline in income before taxes, versus the same six month
period of the prior year, was offset by lower income tax expense in the current
period. Net income in the current six month period included net income after
minority interests of Gamogen of $9,018. Net income in the same period of the
previous year was reduced by a net loss after minority interests by Gamogen of
$15,852.
Net income per common share $0.01 in the current six months and $0.01 in the
six months ended August 31 of the prior fiscal year.
PART II, Item 5- Other Information
- ----------------------------------
Subsequent Event - Purchase of Treasury Stock:
- ----------------------------------------------
On September 10, 1996, the Company purchased in a private offering 2,000,000
shares of common shares at a price of $0.06 per share or a total of $120,000.
The shares purchased were previously restricted in part as to their sale under
"Rule 144" of the Securities and Exchange Act. The 2,000,000 shares purchased
are subject to a ten year voting agreement dated June 30, 1992 under which Mr.
Andrew I. Sealfon, President and Chairman of Repro-Med has the exclusive right
to vote all the shares covered under the voting agreement. The Treasury Stock
shares while held by the Company will be voted exclusively by Mr. Sealfon as
required by the voting trust.
12
<PAGE>
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 following persons, thereunto duly authorized.
REPRO-MED SYSTEMS, INC
/s/ Andrew I. Sealfon
____________________________________ October 2, 1996
Andrew I. Sealfon
President, Treasurer, Chairman of the Board,
Director, and Chief Executive Officer
/s/ Jesse A. Garringer
____________________________________ October 2, 1996
Jesse A. Garringer
Executive Vice-President, Secretary,
Director, and Chief Financial Officer
13
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<ARTICLE> 5
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> FEB-28-1997
<PERIOD-END> AUG-31-1996
<CASH> 927,021
<SECURITIES> 0
<RECEIVABLES> 344,803
<ALLOWANCES> 0
<INVENTORY> 582,770
<CURRENT-ASSETS> 2,095,119
<PP&E> 1,785,335
<DEPRECIATION> 469,607
<TOTAL-ASSETS> 3,495,519
<CURRENT-LIABILITIES> 196,875
<BONDS> 0
0
100
<COMMON> 221,420
<OTHER-SE> 2,195,268
<TOTAL-LIABILITY-AND-EQUITY> 3,495,519
<SALES> 1,356,250
<TOTAL-REVENUES> 1,356,250
<CGS> 585,667
<TOTAL-COSTS> 1,230,075
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 23,564
<INCOME-PRETAX> 234,721
<INCOME-TAX> 91,763
<INCOME-CONTINUING> 142,958
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 142,958
<EPS-PRIMARY> 0.01
<EPS-DILUTED> 0.01
</TABLE>
