<PAGE>
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, 1997
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)
.
------------------------------------------------------------------
(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 August 31, 1997 the registrant had outstanding 22,142,000 shares of Common
Stock, $.01 par value.
<PAGE>
PART I
Item 1. Financial Statements
Balance Sheets - August 31, 1997, August 31, 1996 and February 28, 1997.
Statements of Income - For the three month period ended August 31, 1997 and
August 31, 1996.
Statements of Cash Flow - August 31, 1997 and August 31, 1996.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
PART II
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
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
None
2
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PART I, Item 1 - Financial Statements
Repro-Med Systems, Inc And Subsidiary
Consolidated Balance Sheets
<TABLE>
<CAPTION>
Aug 31, 1997 Aug 31, 1996 Feb 28,1997
------------ ------------ -----------
<S> <C> <C> <C>
Assets
Current Assets
Cash and Cash Equivalents $ 611,095 $ 927,021 $ 734,076
Accounts Receivable 815,859 344,803 146,506
Inventory 675,611 582,770 523,967
Prepaid Expenses & Other Receivables 66,398 84,525 78,126
Deferred Taxes - Current 156,000 156,000 156,000
--------- --------- -----------
Total Current Assets 2,324,963 2,095,119 1,638,675
--------- --------- -----------
Land, Property, Equipment And Other Assets
Land 290,303 409,500 290,303
Property and Equipment, Net 1,391,260 904,018 1,324,856
Deferred Taxes - Non-current 76,827 18,286 23,659
Other Assets, Net 70,540 68,596 73,190
--------- --------- -------------
Total Property, Equipment And Other Assets 1,828,930 1,400,400 1,712,008
--------- --------- -------------
Total Assets $ 4,153,893 $ 3,495,519 $ 3,350,683
============ =========== ============ =============
Liabilities And Stockholders' Equity
Current Liabilities
Accounts Payable $ 97,613 $ 104,847 $ 119,156
Current Portion Long-term Debt 70,188 14,420 18,403
Bank Line of Credit Payable 85,000 0 0
Other Current Liabilities 171,285 77,608 56,816
---------- ----------- ---------
Total Current Liabilities 424,086 196,875 194,375
---------- ----------- ---------
Long Term Debt 1,059,607 881,856 870,163
---------- ----------- ---------
Total Liabilities 1,483,693 1,078,731 1,064,538
--------- ----------- ---------
Minority Interest In Subsidiary 310,811 122,012 118,824
---------- ----------- ---------
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, issued and outstanding 221,420 221,420 221,420
Warrants Outstanding 140 140 140
Additional Paid-In Capital 3,040,662 3,040,662 3,040,662
Accumulated (Deficit) (760,933) (945,546) (953,001)
Treasury Stock at Cost (2,275,000, 275,000 and 2,275,000 shares at
respective dates), (142,000) (22,000) (142,000)
---------- --------- ---------
Total Stockholder's Equity 2,359,389 2,294,776 2,167,321
---------- --------- ---------
Total Liabilities And Stockholders' Equity $ 4,153,893 $ 3,495,519 $ 3,350,683
========================================== =========== ============ ===========
</TABLE>
3
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Repro-Med Systems, Inc And Subsidiary
Consolidated Statements Of Income
<TABLE>
<CAPTION>
For Three Months Ended For Six Months Ended
Aug 31, 1997 Aug 31, 1996 Aug 31, 1997 Aug 31, 1996
<S> <C> <C> <C> <C>
Sales:
Product Sales $ 422,623 $ 637,548 $ 755,091 $ 1,356,250
Sale of Impotence Treatment 708,000 0 708,000 0
---------- ---------- ---------- -----------
1,130,623 637,548 1,463,091 1,356,250
---------- ---------- ---------- -----------
Costs And Expenses:
Cost of Goods Sold 198,243 266,970 314,095 585,667
Selling, General & Administrative
Expenses 302,489 246,555 595,605 489,892
Research and Development 20,488 58,520 61,224 114,700
Depreciation and Amortization 31,471 21,168 64,324 39,816
---------- ---------- ---------- -----------
552,691 593,213 1,035,248 1,230,075
---------- ---------- ---------- -----------
Net Income (Loss) From Operations 577,932 44,335 427,843 126,175
Non-Operating Income (Expense):
Licensing - Maintenance
Payments (Credits) (125,000) 0 (75,000) 0
Licensing - Non-compete Payments 0 0 0 87,800
Rental Income 21,525 21,525 43,050 28,939
Interest (Expense) (26,628) (16,839) (49,418) (23,564)
Interest & Other Income 6,804 10,240 15,356 21,822
---------- ---------- ---------- -----------
(123,299) 14,926 (66,012) 114,997
---------- ---------- ---------- -----------
Income (Loss) Before Minority Interest
Share of Operations 454,633 59,261 361,831 241,172
Minority Interest In (Income) Loss of Subsidiary
(189,844) 17,742 (191,986) (6,451)
---------- ---------- ---------- -----------
Net Income Before Income Taxes 264,789 77,003 169,845 234,721
Provision (Benefit) For Income Taxes 21,303 46,717 (26,224) 91,763
---------- ---------- ---------- -----------
Net Income $ 243,486 $ 30,286 $ 196,069 $ 142,958
========== ========== ========= ========== ==========
Net Income Per Common Share $ 0.01 $ 0.00 $ 0.01 $ 0.01
=========================== ========== ========= ========== ==========
</TABLE>
4
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Repro-Med Systems, Inc And Subsidiary
Statements Of Cash Flows
For Six Months Ended
<TABLE>
<CAPTION>
Aug 31, 1997 Aug 31, 1996
Cash Flows From Operating Activities
<S> <C> <C>
Net Income (Loss) $ 196,069 $ 142,958
Adjustments To Reconcile Net Income To Net
Cash Provided By Operating Activities:
Income (Loss) Of Minority Interests 191,987 6,451
Depreciation and Amortization 64,324 39,816
Decrease (Increase) In Accounts Receivable (669,353) (257,314)
Decrease (Increase) In Inventory (151,644) (39,905)
Decrease (Increase) In Prepaid Expenses &
Other Receivables 11,728 (18,635)
Decrease (Increase) In Deferred Taxes (53,168) 82,841
Increase (Decrease) In Accounts Payable (21,543) (9,355)
Increase (Decrease) In Other Current Liabilities 114,468 (15,524)
--------- ----------
Net Cash Provided By Operating Activities (317,132) (68,667)
--------- ----------
Cash Flows From Investing Activities
(Acquisition) of Land, Property and Equipment (124,638) (1,030,295)
(Acquisition) of Other Assets (3,440) (250)
--------- ----------
Net Cash (Used) by Investing Activities (128,078) (1,030,545)
--------- ----------
Cash Flows From (Used By) Financing Activities
Proceeds From Mortgage 0 900,000
Proceeds From Term Loan 250,000 0
Proceeds (Repayment) Line Of Credit 85,000 0
Preferred Stock Dividend (4,000) (4,000)
Proceeds From Issuance of Common Stock 0 8,000
Repayment Of Mortgage and Term Loan (8,771) (3,724)
--------- ----------
Net Cash Provided (Used) by Financing Activities 322,229 900,276
--------- ----------
Increase (Decrease) In Cash and Cash Equivalents (122,981) (198,936)
Cash and Cash Equivalents - Beginning of Year 734,076 1,125,957
--------- ----------
Cash and Cash Equivalents - End of Period $ 611,095 $ 927,021
========================================= =========== ===========
Supplementary Data - Interest Paid $ 49,418 $ 23,564
</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 August 31, 1997
Capital Resources and Liquidity
Cash and equivalents on a consolidated basis were $611,095 at August 31, 1997,
as compared to $927,021 at August 31, 1996, a decrease of $315,926. Cash and
equivalents includes cash of the Company's subsidiary, Gamogen, Inc, of $6,185
at August 31, 1997, and $61,974 at August 31, 1996.
Net working capital on a consolidated basis at August 31, 1997 was $1,900,877,
as compared to $1,898,244 at August 31, 1996. Net working capital included
Gamogen, Inc net working capital of $606,715 at August 31, 1997, and $122,470
at August 31, 1996.
The Company's liquidity improved as reflected in the six month increase in its
net working capital of $456,577 versus the balance at February 29, 1997 of
$1,444,300. The six month increase in net working capital, reflected primarily
by increases in accounts receivable and inventory, results primarily from net
income of $196,069 and an increase in minority interest in Gamogen of
$191,986. The increase in working capital was offset in part by $91,659 in
purchases for production tooling and equipment and patent expenditures for the
Freedom60(TM) Syringe Infusion System (see description below). Versus the
balance at August 31, 1996 the Company's net working capital increased $2,633
primarily due to increases in accounts receivable and inventory offset by
$443,338 in capital spending, since March 31, 1996, for improvements to the
Company's new Chester facility (see description below) and production tooling
and equipment primarily for the Freedom60 Syringe Infusion System.
The Company has developed a non-electric, portable I.V. delivery system,
trade-named the Freedom60(TM) Syringe Infusion System ("Freedom60 System")
which employs a unique pump, standard syringes, and proprietary disposable
tubing resulting in a very low cost per infusion. The Company has secured the
necessary FDA approvals on the Freedom60 System and completed product
engineering, the purchase of production tooling and component parts inventory,
and long-term supply agreements for the disposable administration set
components. The Company initiated production of the Freedom60 System in April
1997. In May 1997 the Company initiated advertising in US infusion medical
journals and promotion at various US and international trade expositions.
Effective July 1997, the Company entered into an agreement with a large
organization of independent US medical equipment and supply dealers for the
exclusive distribution rights for the Freedom60 System in certain US medical
markets, including hospitals, nursing homes, and home infusion service
providers. Although no minimum purchase commitments are required under this
agreement, the agreement includes, as a condition to maintaining these
exclusive distribution rights, the following annual dealer purchase volumes of
infusion pumps and disposable syringe/tubing sets, beginning July 1997:
<TABLE>
<CAPTION>
Year 1 Year 2 Year 3
------ ------ ------
<S> <C> <C> <C>
Infusion Pumps 7,000 15,000 25,000
Syringe/tubing Sets 635,000 1,600,000 2,400,000
</TABLE>
For the first year of the agreement the dealer purchase price per unit on the
infusion pumps and disposable syringe/tubing sets are $31 per pump and $1.61
per set. Under the agreement the Company will rebate to the organization, on a
monthly basis, an amount equal to 2.5% of the aggregate value of purchases by
the organization's dealers.
7
<PAGE>
There can be no guarantee that the organization's dealers will be successful
in establishing distribution of the Freedom60 Syringe I.V. Infusion System, or
if distribution is established that the Company or the organization's dealers
will be successful in marketing and selling of the device, or that the annual
dealer purchase volumes, to maintain exclusive distribution rights, will be
achieved.
The Company is presently engaged in the development of a medical device for an
OEM customer based on the Company's suction technology. The Company's
agreement with its OEM customer requires scheduled advance payments for
engineering and production tooling costs of approximately $93,000. As of May
30, 1997 the Company has received payment of $93,030 in payments for
engineering expenses and purchase of Company tooling. Under the Company's
agreement with its OEM customer the Company will manufacture and sell this
medical suction device to its OEM customer. Under the terms of its agreement
for the development and manufacture of the OEM medical suction device and
dependent on timely device development by the Company and the successful
marketing of the device by its OEM customer, the Company anticipates annual
revenues of approximately $800,000 to $900,000 from the sale of this medical
suction device. There can be no guarantee, however, concerning the timely
development of the medical suction device and that, if timely developed, its
OEM customer will be successful in marketing of the device. The OEM medical
suction device under development may compete with the Company's other OEM
products, but in management's opinion will not significantly reduce sales of
other OEM products.
On July 10, 1993 the Company's 58% owned subsidiary, Gamogen, acquired the
rights to an Oral Treatment for Male Impotence developed by Dr. Zorgniotti. On
April 12, 1994 the Board of Directors approved and on April 14, 1994 Gamogen
signed with Zonagen, a small US based biotechnology company, an agreement
under which Zonagen acquired all rights 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, and royalties on Zonagen's future sales of
the Oral Treatment.
In the year ended February 1995 Gamogen recorded income from the Impotence
Agreement of $47,107 ($100,000 in licensing payments made by Zonagen less
related expenses of $52,893). In the year ended February 1996 no payments were
received by Gamogen under the Impotence Agreement.
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 certain
non-compete terms of the Impotence Agreement. On June 20, 1996 Gamogen sold
the 19,512 restricted shares to a small group of private investors for
$87,800. This price was approximately 50% of the then NASDAQ market price for
Zonagen, Inc. non-restricted common stock.
On January 24, 1997 the Board of Directors approved and signed with Zonagen a
conditional amendment to the Impotence Agreement granting Zonagen the right
("Option") to amend the Impotence Agreement eliminating the following:
1) Gamogen's rights to royalties on Zonagen's future sales of the Oral
Treatment;
2) Gamogen's rights to market the Oral Treatment in counties where Zonagen
does not timely obtain regulatory approval for and commence marketing of
the Oral Treatment.
The Option was conditioned on the payment to Gamogen the amount of $750,000
("Option Price") if the Option were exercised by January 24, 1998 less any
Maintenance Payments (see below) received by Gamogen. The Option included
increases in the Option Price for later exercise of the Option through
January 24, 2000.
8
<PAGE>
Under the conditional amendment Zonagen was granted the option, provided
however, that Zonagen make the following payments ("Maintenance Payments") in
cash to Gamogen: $75,000 upon the execution of the conditional amendment and
$75,000 on each July 24 and January 24 which occurs after the execution of the
conditional amendment and before Zonagen's exercise of the Option. On January
24, 1997 Gamogen received from Zonagen the initial Maintenance Payment of
$75,000 which Gamogen recorded as licensing income. In July 1997 Gamogen
received a second maintenance payment of $75,000 under the conditional
amendment.
In August 1997 Gamogen negotiated with Zonagen for revision to the Conditional
Amendment Number 1 of The Assignment Agreement. In September 1997 the Board of
Directors approved and signed with Zonagen a conditional amendment, Amendment
Number 2 to the Assignment Agreement, establishing an option price of $708,000
if the option were exercised on or before September 30, 1997. On August 31,
1997 Gamogen recorded a $558,000 accounts receivable which results from the
sale of the impotence oral treatment for $708,000 and offsetting credits
allowed on two maintenance payments previously received totaling $150,000.
Gamogen subsequently received payment from Zonagen on October 1, 1997 in the
net amount of $558,000. The amount of $558,000 is detailed as follows:
<TABLE>
<CAPTION>
<S> <C>
Sale of Impotence Oral Treatment $708,000
less : credits for Maintenance Payments (150,000)
---------
Net Payment $558,000
As a result of this payment Zonagen has exercised the Option and Gamogen and
the Company are not entitled to further payments under the Assignment
Agreement and its amendments.
In August 1997 Gamogen recorded general and administrative expenses of $55,660
for certain administrative costs and other expenses related to the sale of the
impotence oral treatment and the conditional amendments which are included in
the Company's selling general and administrative expenses for the quarter
ended August 31, 1997.
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 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. For the six months ended August 31, 1997 a total of $39,190 in interest
expense on the mortgage was recorded. Total mortgage principal payments for
the six months ended August 31, 1997 were $8,771. 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. For the six months ended August 31, 1997 a total of $43,050 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
additional rent payments by Key Bank of 35% of all property taxes paid. 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
9
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for expansion of operations. The total expenditure in the fiscal year ended
February 1996 for this real estate purchase was $78,736, which included a
$55,000 deposit. The total expenditure, net of the mortgage proceeds of
$900,000, in the fiscal year ended February 1997 for this real estate purchase
and certain capital improvements, and other related legal and engineering
costs was $227,643. The total expenditure in the fiscal quarter ended August
31, 1997 for capital improvements related to this real estate purchase was
$2,398.
In a transaction related to the purchase of the Chester facility on April 30,
1996, the Company secured from Key Bank of New York a line of credit of
$300,000. At August 7, 1997 the Company had outstanding debt of $260,000 on
this line of credit. The line of credit was due on September 30, 1997 and was
paid in full and closed on August 8, 1997. On August 8, 1997, the Company
secured from Key Bank of New York a $250,000 4-year term loan and a new line
of credit of $500,000. At August 31, 1997 the Company had outstanding debt of
$250,000 on the 4-year term loan and $85,000 on the line of credit. The
proceeds of the term-loan were used to pay $250,000 of the outstanding balance
of the previous line of credit of $260,000. The interest rate on the term loan
is fixed at an annual rate of 8.83%. Principal payments on the term loan are
monthly beginning September 8, 1997 at a rate of $6,216 per month, plus
accrued interest to date. The interest rate on the line of credit is prime
rate plus one-half of one percent (currently 9.0% per annum). At September 30,
1997 the Company had outstanding debt of $245,685 on the 4-year term loan and
$160,000 on the line of credit.
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. Treasury Stock shares may be sold
at a future time or held by the Company for corporate use.
The Osbon Medical Systems division of Imagyn Medical Inc., formerly Urohealth
Systems, Inc., ("Osbon") OEM product purchases represented 61% of the
Company's total sales for the fiscal year, ending February 1997.
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 were introduced by Osbon in direct competition to the Company's
OEM products in June 1996 and are sold under the trade name "Esteem" ("Esteem
products"). As a result the Company has seen a decline in sales of its OEM
products to Osbon. Sales of OEM products to Osbon for the fiscal year ended
February 1997 were $1,468,715, a decline of $676,008 from the previous fiscal
year. Based on orders to-date and discussions with Osbon concerning
anticipated purchases, management estimates sales to Osbon in the fiscal year
ended February 1998 may be approximately 50% to 60% lower as compared to
fiscal 1997. These estimates are based on the assumption that Osbon can
continue to successfully manufacture and generate significant market
acceptance for the Esteem products.
During the twelve month period ended 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
10
<PAGE>
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
to-date on the Esteem products and for use of its proprietary design and
manufacturing information. The Company has 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, 1997
were $159,840, or 38% of product sales and 14% of total sales. Repro-Med sales
of OEM products to Osbon in the quarter ended August 31, 1996 were $394,128,
or 62% of product sales and total sales. Repro-Med sales of OEM products to
Osbon in the six month period ended August 31, 1997 were $271,728, or 36% of
product sales and 19% of total sales. Repro-Med sales of OEM products to Osbon
in the six month period ended August 31, 1996 were $884,027, or 65% of product
sales and total sales.
Excessive purchases of OEM products by Osbon in the quarter ended November 30,
1996 resulted in a large increase in Osbon inventory of the Company's OEM
products. Due to subsequent efforts by Osbon to reduce these high inventory
levels, sales to Osbon in the fiscal quarter ended February 1997 were at
reduced levels and totaled $72,816. Sales to Osbon increased in the fiscal
quarter ended May 31, 1997 and totaled $111,888. Sales to Osbon increased
further in the fiscal quarter ended August 31, 1997 and totaled $159,840.
Based on discussions with Osbon and purchase orders received, management
anticipates that Osbon purchases of OEM products will continue to increase in
the fiscal quarter ended November 1997.
Management continues its optimism that company revenues will increase due to
continued growth in sales of the Res-Q-Vac, introduction of the Syringe I.V.
Infusion System, and development and sale of the OEM medical suction device,
limiting the impact of the decline in its OEM product sales to Osbon. The
Company is continuing to develop new products and expand its operations.
Management is seeking additional sources of capital to enable the Company's
product development to proceed at a more aggressive pace. Management believes,
however, that the Company's expansion can continue on the basis of currently
available funds which includes working capital of $1,900,877 and additional
cash flow derived from operations.
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 expected purchases of OEM
products by Osbon, other unexpected increases or decreases in sales of the
Company's products, market
11
<PAGE>
acceptance and product demand for the Company's Syringe I.V. Infusion System,
uncertainty related to Food and Drug Administration or other government
regulation, and other risks identified in the Company's Securities and
Exchange Commission filings.
Results of Operations
Results For Three Months Ended August 31, 1997 As Compared With Three Months
Ended August 31, 1996: In the three months ended August 31, 1997 income from
operations was $577,932 as compared to income from operations of $44,335 in
the three months ended August 31, 1996. The increase in operating income
resulted primarily from the sale of Gamogen's impotence oral treatment, as
reflected in sales of impotence technology of $708,000, which was offset in
part by related Gamogen general and administrative expenses of $55,660, and a
decrease in research and development expenses versus the same three month
period of the prior fiscal year. Research and development expenses, in the
quarter ended August 31, 1997, were reduced by $35,000 in payments received for
the development of the new OEM medical suction device. The increase in
operating income was limited by increased depreciation and amortization
expense related to the Chester facility and lower product sales. Product sales
in the current quarter were $442,623 versus sales of $637,548 in the same
quarter of the prior fiscal year. The decline in product sales resulted from
the anticipated decline in OEM products sales to Osbon (see Capital Resources
and Liquidity section above).
In the quarter ended August 31, 1997 income before taxes was $264,789 as
compared to income before taxes of $77,003 in the quarter ended August 31,
1996. Income before taxes resulted from income from operations of $577,932
offset in part by $189,844 of income related to minority shareholders of
Gamogen, reversal of licensing income from Maintenance Payments previously
recorded of $125,000, and increased interest expense due to increased
borrowings, The credits for Maintenance Payments of $125,000 result from the
sale of Gamogen's impotence oral treatment (see capital Resources and
Liquidity section above).
Net income for the quarter ended August 31, 1997 was $243,486. This compares
with net income of $30,286 in the same quarter of the previous fiscal year.
Net income for the quarter ended August 31, 1997, resulted from income before
taxes of $264,789, reduced by $21,303 in related income tax expense.
The Company's net income per share of common stock was $0.01 in the current
fiscal quarter versus $0.00 in the quarter ended August 31, 1996.
Results For Six Months Ended August 31, 1997 As Compared With Six Months Ended
August 31, 1996: In the six months ended August 31, 1997 income from operations
was $427,843 as compared to income from operations of $126,175 in the six
months ended August 31, 1996. The increase in operating income resulted
primarily from the sale of Gamogen's impotence oral treatment, as reflected
in sales of impotence technology of $708,000 offset in part by related Gamogen
general and administrative expenses of $55,660, and decreased research and
development expense versus the same six month period of the prior fiscal year.
Research and development expenses, in the six month period ended August 31,
1997, were reduced by $55,000 in payments received for the development of the
new OEM medical suction device. The increase in operating income was limited by
increased depreciation and amortization expense related to the Chester
facility and lower product sales. Product sales in the six month period ended
August 31, 1997 were $755,091 versus sales of $1,356,250 in the same six month
period of the prior fiscal year. The decline in product sales resulted from
the anticipated decline in OEM products sales to Osbon (see Capital Resources
and Liquidity section above).
12
<PAGE>
In the six month period ended August 31, 1997 income before taxes was $169,845
as compared to income before taxes of $234,721 in the six month period ended
August 31, 1996. The decrease in income before taxes resulted primarily from
an increase of $185,535 in the portion of income related to minority
shareholders of Gamogen and reversal of licensing income from Maintenance
Payments previously recorded of $75,000 which results in net non-operating
expenses for the period of $66,012. The credits for Maintenance Payments of
$75,000 result from the sale of Gamogen's impotence oral treatment (see
capital Resources and Liquidity section above).
Net income for the six month period ended August 31, 1997 was $196,069. This
compares with net income of $142,958 for the same six month period of the
previous fiscal year. The Company's net income per share of common stock was
$0.01 in the current fiscal quarter versus $0.01 in the six month period ended
August 31, 1996.
13
<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 10, 1997
- ---------------------
Andrew I. Sealfon, President, Treasurer, Chairman of the Board,
Director, and Chief Executive Officer
/s/ Jesse A. Garringer October 10, 1997
- ----------------------
Jesse A. Garringer, Executive Vice-President, General Manager,
Secretary, Director, and Chief Financial Officer
14
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<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> FEB-28-1997
<PERIOD-END> AUG-31-1997
<CASH> 611,095
<SECURITIES> 0
<RECEIVABLES> 815,859
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<CURRENT-ASSETS> 2,324,963
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<TOTAL-LIABILITY-AND-EQUITY> 4,153,893
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