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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 NOVEMBER 30, 1996
Commission File Number 0-12305
REPRO-MED SYSTEMS, INC
- -------------------------------------------------------------------------------
(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.)
24 Carpenter Road, Chester, New York 10918
- ------------------------------------ ----------
(Address of principle executive offices) (Zip Code)
(914) 469-2042
(Registrant's telephone number, including area code)
17 Industrial Place, Middletown, NY, 10940
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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
--- ---
At November 30, 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 - November 30, 1996, November 30, 1995 and February 29, 1996.
Statements of Income - For the three and nine month periods ended November 30,
1996 and November 30, 1995.
Statements of Cash Flow - November 30, 1996 and November 30, 1995.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
- ------- -----------------------------------------------------------------------
of Operations
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PART II
Item 1. Legal Proceedings
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None
Item 2. Changes In Securities
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None
Item 3. Defaults Upon Senior Securities
- ------- -------------------------------
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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None
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
- -------------------------------------
Repro-Med Systems, Inc And Subsidiary
-------------------------------------
Consolidated Balance Sheets
---------------------------
Nov 30,1996 Nov 30,1995 Feb 29,1996
----------- ----------- -----------
Assets
- ------
Current Assets
- --------------
<S> <C> <C> <C>
Cash and Cash Equivalents $ 1,014,637 $ 976,441 $ 1,125,957
Accounts Receivable 119,260 310,072 87,489
Inventory 514,716 583,068 542,865
Prepaid Expenses & Other Receivables 68,671 76,459 65,890
Deferred Taxes - Current 136,686 156,000 156,000
----------- ----------- -----------
Total Current Assets 1,853,970 2,102,040 1,978,201
- -------------------- ----------- ----------- -----------
Land, Property, Equipment And Other Assets
- ------------------------------------------
Land 409,500 0 0
Property and Equipment, Net 1,143,183 327,256 317,874
Deferred Taxes - Non-current 0 115,046 101,127
Other Assets, Net 66,987 75,154 73,511
----------- ----------- -----------
Total Property, Equipment And Other Assets 1,619,670 517,456 492,512
- ------------------------------------------ ----------- ----------- -----------
Total Assets $ 3,473,640 $ 2,619,496 $ 2,470,713
- ------------ ----------- ----------- -----------
Liabilities And Stockholders' Equity
- ------------------------------------
Current Liabilities
- -------------------
Accounts Payable $ 112,393 $ 216,461 $ 114,202
Mortgage Payable - Current Portion 14,420 0 0
Other Current Liabilities 91,364 109,114 93,132
----------- ----------- -----------
Total Current Liabilities 218,177 325,575 207,334
- ------------------------- ----------- ----------- -----------
Mortgage Payable - Long Term Portion 878,046 0 0
- ------------------------------------ ----------- ----------- -----------
Total Liabilities 1,096,223 325,575 207,334
- ----------------- ----------- ----------- -----------
Minority Interest In Subsidiary 112,653 135,131 115,561
- ------------------------------- ----------- ----------- -----------
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) (855,558) (1,073,532) (1,084,504)
Treasury Stock at Cost (2,275,000, 275,000 and 275,000
shares at respective dates) (142,000) (22,000) (22,000)
----------- ----------- -----------
Total Stockholder's Equity 2,264,764 2,158,790 2,147,818
- -------------------------- ----------- ----------- -----------
Total Liabilities And Stockholders' Equity $ 3,473,640 $ 2,619,496 $ 2,470,713
========================================== =========== =========== ===========
</TABLE>
3
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Repro-Med Systems, Inc And Subsidiary
-------------------------------------
Consolidated Statements Of Income
---------------------------------
<TABLE>
<CAPTION>
For Three Months Ended For Nine Months Ended
Nov 30, 1996 Nov 30, 1995 Nov 30, 1996 Nov 30, 1995
------------ ------------ ----------- ------------
<S> <C> <C> <C> <C>
Sales $ 769,023 $ 800,269 $ 2,125,273 $ 2,412,391
Costs And Expenses:
- -------------------
Cost of Goods Sold 309,008 417,743 894,675 1,176,441
Selling, General & Administrative
Expenses 270,674 227,414 760,566 635,968
Research and Development 49,796 115,643 164,496 153,281
Depreciation and Amortization 22,838 10,453 62,654 47,655
----------- ----------- ----------- -----------
652,316 771,253 1,882,391 2,013,345
----------- ----------- ----------- -----------
Net Income From Operations 116,707 29,016 242,882 399,046
- --------------------------
Non-Operating Income (Expense):
- -------------------------------
Licensing Income 0 0 87,800 0
Rental Income 21,525 0 50,464 0
Interest (Expense) (20,171) 0 (43,735) 0
Interest & Other Income 10,876 (9,541) 32,698 13,982
----------- ----------- ----------- -----------
12,230 (9,541) 127,227 13,982
----------- ----------- ----------- -----------
Income Before Minority Interest Share
- -------------------------------------
of Operations 128,937 19,475 370,109 413,028
- -------------
Minority Interest In (Income) Loss of
Subsidiary 9,359 15,495 2,908 26,833
----------- ----------- ----------- -----------
Net Income Before Income Taxes 138,296 34,970 373,017 439,861
- ------------------------------
Provision (Benefit) For Income Taxes 48,308 23,783 140,071 200,473
----------- ----------- ----------- -----------
Net Income $ 89,988 $ 11,187 $ 232,946 $ 239,388
=========== =========== ============ =========== ===========
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 Nine Months Ended
<TABLE>
<CAPTION>
Nov 30, 1996 Nov 30, 1995
------------ ------------
Cash Flows From Operating Activities
<S> <C> <C>
Net Income $ 232,946 $ 239,388
Adjustments To Reconcile Net Income To Net
Cash Provided By Operating Activities:
Income (Loss) Of Minority Interests (2,908) (26,833)
Depreciation and Amortization 62,654 47,655
Decrease (Increase) In Accounts Receivable (31,771) (54,958)
Decrease (Increase) In Inventory 28,149 (25,088)
Decrease (Increase) In Prepaid Expenses &
Other Receivables (2,781) (4,847)
Decrease (Increase) In Deferred Taxes 120,441 178,638
Increase (Decrease) In Accounts Payable (1,809) 7,017
Increase (Decrease) In Other Current Liabilities (1,768) (168,188)
----------- -----------
Net Cash Provided By Operating Activities 403,153 192,784
- ------------------------------------------------ ----------- -----------
Cash Flows From Investing Activities
- ------------------------------------
(Acquisition) of Land, Property and Equipment (1,289,665) (77,265)
(Acquisition) of Other Assets (1,274) (755)
----------- -----------
Net Cash (Used) by Investing Activities (1,290,939) (78,020)
- ---------------------------------------------- ----------- -----------
Cash Flows From (Used By) Financing Activities
- ----------------------------------------------
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 (7,534) 0
(Acquisition) Disposition of Treasury Stock (120,000) (22,000)
Repayment of Note 0 (36,000)
----------- -----------
Net Cash Provided (Used) by Financing Activities 776,466 (62,000)
- ------------------------------------------------ ----------- -----------
Increase (Decrease) In Cash and Cash Equivalents (111,320) 52,764
Cash and Cash Equivalents - Beginning of Year 1,125,957 923,677
----------- -----------
Cash and Cash Equivalents - End of Period $ 1,014,637 $ 976,441
================================================ ============ ===========
Supplementary Data - Interest Paid $ 43,735 $ 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
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PART I, Item 2
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 November 30, 1996
Capital Resources and Liquidity
- -------------------------------
Cash and equivalents on a consolidated basis were $1,014,637 at November 30,
1996, as compared to $976,441 at November 30, 1995, an increase of $38,196.
Cash and equivalents includes cash of the Company's subsidiary, Gamogen, Inc,
of $12,747 at November 30, 1996, and $8,670 at November 30, 1995.
Net working capital on a consolidated basis at November 30, 1996 was
$1,635,793, as compared to $1,776,465 at November 30, 1995. Net working capital
included Gamogen, Inc net working capital of $103,467 at November 30, 1996, and
$143,616 at November 30, 1995.
The Company's liquidity declined as reflected in the nine month decrease in its
net working capital of $135,074 versus the balance at February 29, 1996 of
$1,770,867. The nine month decrease in net working capital, reflected in a
decrease in cash and cash equivalents, results primarily from the purchase of
production tooling and equipment for the Syringe I.V. Infusion System, the
purchase of and capital improvements for the Chester facility see below), and
the purchase of treasury stock. On September 10, 1996, the Company redeemed in
a private transaction 2,000,000 shares of common shares for a total payment of
$120,000 (see below). The decrease in working capital due to spending on
Syringe I.V. Infusion System and the Chester facility and the purchase of
treasury stock, was offset in part by the Company's net income of $232,946 and
the utilization of $137,867 in tax benefits it derives from accrued net
operating loss credits (NOLs) on federal and state income taxes. Versus the
balance at November 30, 1995 the Company's net working capital decreased
$140,672.
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 the purchase of production tooling, parts inventory, 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%
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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.
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 November 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
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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.'
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, November 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.
On October 31, 1995, the Company redeemed in a private transaction 275,000
shares of common shares at a price of $0.08 per share or a total of $22,000. On
September 10, 1996, the Company redeemed in a private transaction 2,000,000
shares of common shares at a price of $0.06 per share or a total of $120,000.
The 2,275,000 shares redeemed were previously restricted in part as to their
sale under "Rule 144" of the Securities and Exchange Act. The 2,000,000 shares
redeemed 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.
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 November 30, 1996 a total of $43,735 in interest expense due on the
mortgage was recorded. Mortgage principal payments made as of November 30, 1996
were $7,534. 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 November 30, 1996 a total
of $50,464 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.
9
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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 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% 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. For the year
ended February 1996, sales to Osbon aggregated $2,144,723.
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 November 30,
1996 were $511,872, or 67% of sales, and were at the increased selling prices
noted above. Repro-Med sales of OEM products to Osbon in the quarter ended
November 30, 1995 were $608,667, or 76% of sales.
10
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As a result of increased purchases of OEM products by Osbon, sales to Osbon in
the quarter ended November 30, 1996 were substantially higher than anticipated.
Based on discussions with Osbon concerning anticipated purchases and marketing
of the Esteem products, management has been advised that Osbon third quarter
purchases of OEM products were in excess of Osbon requirements and resulted in
a large increase in the inventory of OEM products held by Osbon at November 30,
1996. Based on these discussions with Osbon, management anticipates that sales
to Osbon in the fiscal quarter ended February 1997 will be minimal. As a result
of the anticipated absence of purchases by Osbon, management estimates a net
loss from operations of approximately $200,000 to $250,000 in the fiscal
quarter ended February 1997. Based on these discussions with Osbon, management
also anticipates that purchases of OEM products by Osbon will resume in the
fiscal quarter ended May 1997. Any statements which are not historical facts
contained in this report are forward looking statements that involve risks and
uncertainties, including but not limited to those relating to the uncertainty
of unexpected purchases of OEM products by Osbon in the fiscal quarter ended
February 1997, other unexpected increases or decreases in sales of the
Company's products, and market acceptance and product demand for the Company's
Syringe I.V. Infusion System, and uncertainty related to Food and Drug
Administration or other government regulation, and other risks identified in
the Company's Securities and Exchange Commission filings.
Repro-Med sales of OEM products to Osbon in the nine month period ended
November 30, 1996 were $1,395,899, or 66% of sales, and were at the increased
selling prices noted above. Repro-Med sales of OEM products to Osbon in the
nine month period ended November 30, 1995 were $1,687,378 or 70% of sales.
Results of Operations
- ---------------------
Results For Three Months Ended November 30, 1996 As Compared With Three Months
- ------------------------------------------------------------------------------
Ended November 30, 1995:
- ------------------------
In the quarter ended November 30, 1996 income from operations was $116,707 as
compared to $29,016 in the same quarter of the prior fiscal year, an increase
of $87,691. The increase in operating income resulted primarily from improved
margins on cost of goods sold due to price increases on OEM products (see
above) and a decrease in research and development expense versus the third
quarter of the prior fiscal year. Research and development expenses in the
third quarter of the prior fiscal year were substantially higher than in the
current quarter due to charges in the prior fiscal year resulting from certain
design changes to the Syringe I.V. system pump mechanism. Sales in the current
quarter were $769,023 a decrease of $31,246 or 4% versus sales of $800,269 in
the same quarter of the prior fiscal year. The decrease in sales resulted from
the OEM products decrease of $96,795 offset in part by increased sales of the
Company's Res-Q-Vac products. Cost of goods sold decreased $108,735 or 26% as a
result of decreased OEM 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 $270,674. Selling, general, and administrative expenses increased
$43,260, or 19%, versus the same quarter of the prior year due primarily to
increased property taxes, utilities, and maintenance costs on the new Chester
facility and increased marketing costs related to increased sales of Res-Q-Vac
products. Research and development expenses totaled $49,796 in the current
quarter, a substantial decline as compared to $115,643 in the same quarter of
the prior fiscal year (see above). Depreciation and amortization were $22,838
in the current quarter, as compared to $10,453 in the same quarter of the prior
fiscal year. The increase in depreciation and amortization is due primarily to
increased depreciation expense on the Chester facility.
In the quarter ended November 30, 1996, the Company earned income before taxes
of $138,296 as compared to $34,970 in the quarter ended November 30, 1995, an
increase of $103,326. Income before taxes increased versus the same quarter of
the prior fiscal year due primarily to the increase in operating income.
Non-operating income
11
<PAGE>
increased due to increased interest income and rental
income on the Chester facility offset in part by mortgage interest expense.
The Company earned net income of $89,988 in the quarter ended November 30,
1996, as compared to net income of $11,187 in the prior year quarter ended
November 30, 1995. The increase in income before taxes, versus the same quarter
of the prior year, was offset in part by increased 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 $13,804. Net income in the previous year
quarter ended November 30 was reduced by a net loss after minority interests by
Gamogen of $21,664. Net income per common share was $ 0.00 in the current
quarter and in the same quarter of the prior fiscal year.
Results For Nine Months Ended November 30, 1996 As Compared With Nine Months
- ----------------------------------------------------------------------------
Ended November 30, 1995:
- ------------------------
In the nine months ended November 30, 1996 income from operations was $242,882
as compared to $399,046 in the same nine months of the prior fiscal year, a
decrease of $156,164. 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 nine months were $2,125,273 a decrease
of $287,118 or 12% versus sales of $2,412,391 in the same nine months of the
prior fiscal year. The decrease in sales resulted primarily from the OEM
products decrease of $291,479. Cost of goods sold decreased $281,766 or 24% as
a result of decreased product sales volume. Margins on sales after cost of
goods sold improved versus the same nine 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 $760,566. Selling, general, and administrative
expenses increased $124,598 versus the same nine months of the prior year due
primarily to general wage increases, additional expenditures for promotion and
export marketing, and increased property taxes, utilities, and maintenance
costs on the new Chester facility. Research and development costs totaled
$164,496 in the current nine months as compared to $153,281 in the same nine
months of the prior fiscal year. The increase in research and development costs
result primarily from the addition of a staff engineer hired in May 1996 and
general wage increases offset in part by charges in the prior fiscal year
resulting from certain design changes to the Syringe I.V. system pump
mechanism. Depreciation and amortization were $62,654 in the current nine
months, as compared to $47,655 in the same nine months of the prior fiscal
year. The increase in depreciation and amortization is due primarily to
depreciation expense on the Chester facility.
In the nine months ended November 30, 1996, the Company earned income before
taxes of $373,017 as compared to $439,861 in the nine months ended November 30,
1995, a decline of $66,844. Income before taxes decreased versus the same nine
months of the prior fiscal year due to the $156,164 decrease in operating
income. The decrease in income before taxes was limited by an increase in
non-operating income in the current period of $113,245. 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).
The Company earned net income of $232,946 in the nine months ended November 30,
1996, as compared to net income of $239,388 in the prior year nine months ended
November 30, 1995. The decline in income before taxes, versus the same nine
month period of the prior year, was offset by lower income tax expense in the
current period. Net income in the current nine month period included a net loss
after minority interests of Gamogen of $4,065. Net income in the same period of
the previous year was reduced by a net loss after minority interests by Gamogen
of $37,515. Net income per common share $0.01 in the current nine months and
$0.01 in the nine months ended November 30 of the prior fiscal year.
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
____________________________________ January 10, 1997
Andrew I. Sealfon
President, Treasurer, Chairman of the Board,
Director, and Chief Executive Officer
/s/ Jesse A. Garringer
____________________________________ January 10, 1997
Jesse A. Garringer
Executive Vice-President, Secretary,
Director, and Chief Financial Officer
13
<TABLE> <S> <C>
<ARTICLE> 5
<FISCAL-YEAR-END> FEB-28-1997
<PERIOD-END> NOV-30-1996
<PERIOD-TYPE> 9-MOS
<CASH> 1,014,637
<SECURITIES> 0
<RECEIVABLES> 119,260
<ALLOWANCES> 0
<INVENTORY> 514,716
<CURRENT-ASSETS> 1,853,970
<PP&E> 2,044,705
<DEPRECIATION> 492,022
<TOTAL-ASSETS> 3,473,640
<CURRENT-LIABILITIES> 218,177
<BONDS> 0
0
100
<COMMON> 221,420
<OTHER-SE> 2,155,897
<TOTAL-LIABILITY-AND-EQUITY> 3,473,640
<SALES> 2,125,273
<TOTAL-REVENUES> 2,125,273
<CGS> 894,675
<TOTAL-COSTS> 1,882,391
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 43,735
<INCOME-PRETAX> 373,017
<INCOME-TAX> 140,071
<INCOME-CONTINUING> 232,946
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 232,946
<EPS-PRIMARY> 0.01
<EPS-DILUTED> 0.01
</TABLE>
