2
<PAGE>
FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended November 30, 1998
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, NY, 10918 10918
_____________________________________ ____________________
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (914) 469-2042
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act during the past 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes [ X ] No [ ]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the lastest practicable date.
Class Outstanding at November 30, 1998
________________________________ --------------------------------
(Common Stock, $.01 par value) 22,142,000
<PAGE>
REPRO-MED SYSTEMS,INC.
INDEX
PART I Financial Information Page No.
Condensed Consolidated Balance Sheet -
November 30, 1998; November 30, 1997 and February 28, 1998 3
Condensed Consolidated Statement of Income -
three months and nine months ended November 30, 1998 4
and November 30, 1997
Condensed Consolidated Statements of Cash Flows -
nine months ended November 30, 1998 and November 30, 1997 5
Notes to Condensed Consolidated Financial Statements 6
Management's Discussion and Analysis of Financial Condition and
Results of Operations 7-15
PART II Other Information
Item 1. Other Information 16
Item 2. Exhibits and Reports on Form 8-K 17-23
<PAGE>
FORM 10-Q
PART I - FINANCIAL INFORMATION
REPRO-MED SYSTEMS,INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
November 30, November 30, February 28,
Assets 1998 1997 1998
---------- ---------- ----------
<S> <C> <C> <C>
Current assets
Cash and cash equivalents $ 108,597 $63,099 $ 160,567
Short-term investments 155,025 839,308 631,289
Accounts receivable (less allowance for
doubtful accounts of $2,976 11/98, 151,135 311,085 232,915
$2,976 11/97, $2,976 2/98)
Inventory 788,520 729,291 634,109
Prepaid expenses & other receivables 85,367 49,042 65,876
Deferred taxes - current 156,000 156,000 156,000
--------- --------- ---------
Total current assets 1,444,644 2,147,825 1,880,756
Land 290,303 290,303 290,303
Property and equipment, net 1,370,564 1,417,275 1,432,591
Deferred taxes - non-current 446,901 131,659 358,409
Other assets, net 59,435 67,160 69,130
--------- --------- ---------
Total property, equipment and other
assets 2,167,203 1,906,397 2,150,433
- ----------------------------------------- --------- --------- ---------
Total Assets $3,611,847 $4,054,222 $4,031,189
========= ========= ========= =========
LIABILITIES
Current Liabilities
Accounts payable $ 102,443 $ 141,345 $ 140,440
Current maturities of long-term debt 85,328 70,188 85,327
Bank line of credit payable 480,000 160,000 360,000
Other current liabilities 191,174 84,162 218,188
--------- --------- ---------
Total current liabilities 858,945 455,695 803,955
Long-term debt 976,934 1,053,895 1,077,605
--------- --------- ---------
Total Liabilities 1,835,879 1,509,590 1,881,560
- --------------------- --------- --------- ---------
Minority interest in subsidiary 184,271 300,669 280,493
Stockholder's equity
Preferred stock, 8% cumulative $.01 par
value, Authorized 2,000,000 shares,
issued & outstanding 10,000 shares 100 100 100
Common stock, $.01 par value, authorized
50,000,000 shares, issued and outstanding
22,142,000 221,420 221,420 221,420
Warrants outstanding 140 140 140
Additional paid-in capital 3,040,662 3,040,662 3,040,662
Accumulated (deficit) (1,528,625) (876,359) (1,251,186)
Treasury stock at cost (2,275,000 shares) (142,000) (142,000) (142,000)
Total stockholder's equity 1,591,697 2,243,963 1,869,136
--------- --------- ---------
Total Liabilities And Stockholders'
Equity $3,611,847 $4,054,222 $4,031,189
</TABLE>
<PAGE>
FORM 10-Q
REPRO-MED SYSTEMS,INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
Three months ended Nine months ended
November 30, November 30,
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Sales
Net sales of products $ 312,103 $ 440,728 $ 1,383,651 $ 1,195,819
Sale of impotence treatment 0 0 0 708,000
--------- --------- --------- ---------
312,103 440,728 1,383,651 1,903,819
Costs and expenses:
Cost of goods sold 237,204 281,442 859,127 595,537
Selling, general &
administrative expenses 209,823 280,463 785,777 876,068
Research and development 56,771 21,358 139,886 82,582
Depreciation and
amortization 31,880 31,880 110,640 96,204
--------- --------- --------- ---------
535,678 615,143 1,895,430 1,650,391
--------- --------- --------- ---------
Income (loss) from (223,575) (174,415) (511,779) 253,428
operations
Non-operating
income(expense):
Licensing income 0 0 0 (75,000)
Rental income 21,525 21,525 64,575 64,575
Interest (expense) (35,791) (31,427) (98,678) (80,845)
Interest & other income
expense) 2,659 7,032 88,479 22,388
--------- --------- --------- ---------
(11,607) (2,870) 54,376 (68,882)
In come (loss) before
minority interest share of (235,182) (177,285) (457,403) 184,546
operations
- ---------------------------
Minority interest in
(income) Loss of subsidiary 56,243 10,199 96,222 (181,787)
--------- --------- --------- ---------
Income (loss) before income (178,939) (167,086) (361,181) 2,759
taxes
Provision (benefit) for (39,119) (55,719) (87,742) (81,943)
income taxes
--------- --------- --------- ---------
Net income (loss) after
income taxes $ (139,820) $ (111,367) $ (273,439) $ 84,702
=========================== ========= ========= ========= =========
Weighted average number of
shares outstanding
Primary 22,142,000 22,142,000 22,142,000 22,142,000
Fully Diluted 25,967,158 25,581,762 25,967,158 25,581,762
Net income (loss) per share
Primary $ (0.01) $ (0.01) $ (0.01) $ 0.00
Fully Diluted $ (0.01) $ (0.01) $ (0.01) $ 0.00
</TABLE>
<PAGE>
FORM 10-Q
REPRO-MED SYSTEMS,INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended
November 30, November 30,
1998 1997
----------- -----------
Cash flow from operating activities
<S> <C> <C>
Net Income (Loss) $ (273,439) $ 84,702
Adjustments to reconcile net income to
net cash
provided by operating activities:
Income (loss) of minority interests (96,222) 181,787
Depreciation and amortization 110,640 96,204
(Increase) decrease short-term
investments 476,264 (202,767)
Decrease (increase) in accounts
receivable 81,780 (164,579)
Decrease (increase) in inventory (154,411) (205,324)
Decrease (increase) in prepaid expenses
and other receivables (19,491) 29,084
Decrease (increase) in deferred taxes (88,492) (108,000)
Increase (decrease) in accounts payable (37,997) 22,189
Increase (decrease) in other current
liabilities (27,013) 27,345
--------- ---------
Net cash provided by operating
activities (28,381) (239,359)
--------- ---------
Cash flows from investing activities
(Acquisition) of property and equipment (38,473) (179,079)
(Acquisition) of other assets (445) (3,515)
--------- ---------
Net cash (used) by investing activities (38,918) (182,594)
--------- ---------
Cash flows from (used by) financing
activities
Proceeds from term loan 0 261,583
Proceeds (repayment) line of credit 120,000 160,000
Repayment of mortgage and term-loan (100,671) (26,066)
Preferred stock dividend (4,000) (8,000)
--------- ---------
Net cash provided (used) by financing
activities 15,329 387,517
--------- ---------
Net increase (decrease) in cash and
cash equivalents (51,970) (34,436)
Cash and cash equivalents - beginning of
period 160,567 97,535
--------- ---------
Cash and cash equivalents - end of $ 108,597 $ 63,099
period
Supplementary data - interest paid $ 98,678 $ 80,845
</TABLE>
<PAGE> FORM 10-Q
REPRO-MED SYSTEMS,INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 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.
<PAGE>
FORM 10-Q
REPRO-MED SYSTEMS,INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Capital Resources and Liquidity
Cash and equivalents on a consolidated basis were $108,597 at November 30,
1998, as compared to $63,099 at November 30, 1997. Cash and equivalents
includes cash of the Company's subsidiary, Gamogen, Inc., of $33,680 at
November 30, 1998, and $17,724 at November 30, 1997.
Net working capital on a consolidated basis at November 30, 1998 was
$585,699, as compared to $1,076,801 at February 28, 1998 and $1,692,130 at
November 30, 1997. Net working capital included Gamogen, Inc. net working
capital of $307,140 at November 30, 1998, $524,059 at February 28, 1998 and
$571,645 at November 30, 1997.
In the nine month period ended November 30, 1998, the Company's liquidity
declined as reflected in the decrease in its net working capital of
$491,102, or 46%, versus the balance at February 28, 1998 of $1,076,801.
The nine month decrease in net working capital of $491,102 resulted
primarily from $100,671 in scheduled repayments of long-term debt, purchase
of production tooling and inventory for new products and the effect of the
Company's pre-tax loss for the nine months ended November 30, 1998 of
$361,181.
Versus the balance at November 30, 1997 the Company's net working capital
decreased $1,106,431 due to long-term debt repayments of $126,737, purchase
of production tooling and inventory for new products, and the Company's pre-
tax losses for the 12 month period ending November 30, 1998 of $791,594.
The Company has developed a non-electric, portable I.V. delivery system,
trade-named the Freedom60 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 syringe and disposable
tubing. 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. No minimum purchase commitments were required under this
agreement, however, the agreement included, as a condition to maintaining
these exclusive distribution rights, minimum dealer purchase volumes of
infusion pumps and disposable syringe/tubing sets, beginning July 1997. Due
to low dealer purchase volumes, effective May 11, 1998 Repro-Med
terminated this exclusive distribution agreement. Repro-Med has retained
certain of these dealers in certain regions of the US and is seeking
alternative distribution in other areas. There can be no guarantee that
the dealers retained or new dealers will be successful in marketing and
selling of the Freedom60 Syringe I.V. Infusion System. In April 1998, the
Company hired and appointed a sales manager experienced in the infusion
market
<PAGE>
to direct and support its US distribution and sales of its infusion
products. The Company is exploring various other options for marketing and
distribution of the Freedom60 Syringe Infusion System.
In November 1998 the Company restructured its marketing efforts for several
of its key products. Marion Howarth, was appointed the new product manager
for the Freedom60 Syringe Infusion Pump System, this position reports to
the President. This effort is in addition to the two outside consultants
who were engaged in August 1998 to assist in marketing the Freedom60 to
national accounts and to identify and sell to large regional home health
care companies. In addition to the President and newly appointed product
manager, the Company has two full time sales personnel calling directly on
Freedom60 accounts. The Company has developed and is refining its sales
and marketing strategy which management believes will successfully
establish the Freedom60 in the ambulatory infusion market due to the
Freedom60's low cost per use, reliability, safety and significant benefits
to the patient. There can be no assurance, however, that sales will be
generated or that the sales will be sufficient to return the company to
profitability or that competition with greater capital resources than the
Company will not adversely impact sales of the Freedom60.
A new product manager, Sam Sorbello, was appointed for the Res-Q-Vac
System, this position reports to the President. He is also responsible for
sales of the Plus resuscitator and for sales of the Gyneco affiliate. The
Company has reviewed the sales history of Res-Q-Vac and in November 1998
initiated a year-end sales promotion which was successfully completed in
December 1998. The Company is redirecting its efforts and is embarking on
additional sales, telemarketing, and other sales strategies to increase
sales on the successful Res-Q-Vac system. In the opinion of management,
the Res-Q-Vac is the device of choice for the emergency resuscitation
market.
In the fiscal year ended February 28, 1998, the Company developed a medical
device for an OEM customer, Mission Pharmacal ("Mission"), a San Antonio
based manufacturer of pharmaceuticals and medical devices, based on the
Company's suction technology. The Company's agreement with Mission includes
advance payments to help defer Company expenditures for engineering and
production tooling costs related to the development of the medical suction
device. As of November 30, 1998 the Company has received advance payments
totaling $93,030. Based on its agreement with Mission repayment of these
advances was contingent on purchase of a certain minimum quantity of the
OEM medical suction device by September 1998. As of October 10, 1998
Mission had not purchased its minimum requirement and had previously
advised the Company that it would not purchase the minimum. As a result
Mission has forfeited the advance payments of $93,030. In the quarter ended
August 31, 1998 the Company reduced its other current liability by $93,030
to reflect elimination of its liability for these advances and recorded
other income and reduced research and development costs to reflect income
from the payment of these advances.
Under the Company's agreement with Mission, the Company will manufacture
and sell this medical suction device to Mission. The Company initiated
production of the OEM medical suction device in September 1997 and
initiated shipments in November 1997. Total sales in the fiscal year ended
February 1998 of the OEM medical suction device were $122,511. Total sales
in the nine month period ended November 30, 1998 of the OEM medical suction
device were $420,200. The OEM medical suction device sold to Mission is
purchased for distribution in the impotence vacuum device market.
<PAGE>
In the past year, impotence vacuum devices have seen increased competition
from new pharmaceutical products, specifically a urethral suppository trade
named Muse, introduced in May 1997, and an orally administered pill trade
named Viagra, introduced in March 1998. Muse, manufactured and sold by
Vivus, Inc, was highly successful in 1997. Since its introduction in March
1998, Viagra has supplanted Muse, accounting for an estimated 95% of newly
issued prescriptions for impotence medications. It is too early to predict
the impact of Viagra on the impotence vacuum device market. While Viagra
has at least temporarily, substantially reduced sales of the impotence
vacuum devices, it has significantly increased public awareness of
impotence problems in general. Depending on Viagra's clinical effectiveness
and reimbursement policies adopted by healthcare insurers, the
introduction of Viagra may on a longer term basis, stimulate, or at least
not interfere with the market for the Company's OEM impotence vacuum devices.
Due to market conditions including the introduction of Muse and Viagra,
Mission, as of May 1998, had significant inventory of the OEM vacuum
erection device. As a result, Mission negotiated with the Company to
continue to purchase components and assemble product, hold Mission product
at the Company's Chester facility, and bill Mission, at the reduced
purchase rate of 1,800 units or $39,600 per month, through June 1999, under
30 day payment terms. As of November 1998 the
Company has recorded sales of $217,800 and deposits of $59,400 for a total
of $277,200 under this arrangement and Mission has timely remitted payment.
For the quarter ended November 1998, $59,400 of the $118,800 in total
payments received from Mission were recorded as deposits. This $59,400
which is included on the balance sheet as other current liabilities, will
be recorded as sales when the units are assembled into finished product.
The Company has purchased components for the total $59,400, but pending
certain changes in the OEM medical suction device subsequently requested by
Mission, assembly of the device by Repro-Med had been delayed until these
changes were resolved. The Company resumed assembly of the OEM medical
suction device in November 1998.
There can be no guarantee that Mission will be successful in marketing of
the device or that sales of vacuum erection devices can recover from the
impact of Viagra. The Mission OEM vacuum erection device may compete with
the Company's other OEM products, but in management's opinion will not
directly reduce sales of other OEM products.
In February 1998, the Company initiated the development of a vacuum
erection device and constriction ring devices for vacuum treatment of
impotence. These devices will be targeted at both impotent men and men
seeking to enhance natural or induced erections and sexual performance.
According to published reports, it is estimated that in the United States
there are 30 million men who suffer impotence with approximately 3 million
currently treated by approved prescription treatments, including vacuum
therapy. The Company's devices will offer convenient, highly effective
treatments for impotence and for individuals seeking sexual improvement
from natural or induced erections, and will be sold on an OTC basis. In
June 1998 the Company received approval of its 510(k) application to the
FDA which allows the Company to market these devices, including over-the-
counter sale ("OTC"). The Company, in a joint venture with its subsidiary,
Gamogen, Inc., completed development and initiated production of its OTC-
version vacuum erection device in September 1998 and completed development
of the constriction ring devices in October and production in November
1998. The Company is in the process of developing distribution for these
devices, but has not finalized its plans.
<PAGE>
In October 1997, the Company submitted to the FDA a 510(k) application to
market a reusable resuscitator ("resuscitator"). This 510(k) application
was approved by the FDA in June 1998. This product, developed by a Taiwan
medical device and component supplier, will be marketed primarily in the US
emergency medical (ambulance) and homecare marketplace and in certain
foreign countries. Tradenamed the Plus resuscitator, this respiratory
device combines premium features in a low cost unit. The Plus resuscitator
is used to replace or assist normal breathing in patients suffering from
respiratory arrest or, especially in the home, as a backup for ventilator
assisted patients. The reusable resuscitator is sold through many of the
same distributors currently marketing the Company's Res-Q-Vac suction
system. The Company initiated sales of this product in the month of August
1998. Total sales through November 30, 1998 of the reusable resuscitator
were $40,337.
On July 10, 1993 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, 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
countries 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.
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
<PAGE>
30, 1997. On September 30, 1997 Gamogen received payment from Zonagen for
$558,000 which resulted from the sale of the impotence oral treatment for
$708,000 reduced by credits for maintenance payments previously received of
$150,000. As a result of this payment Zonagen has exercised the Option and
Gamogen has effectively sold its interest in this product and is not
entitled to further payments under the Assignment Agreement and its
amendments.
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. 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 nine months ended
November 30, 1998 a total of $64,575 in rent, exclusive of property tax
rent allocations have been paid by Key Bank.
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. On December 1, 1997, the Company secured from Key Bank of New
York a $300,000 five-year term loan and a new line of credit of $500,000.
At February 28, 1998 the Company had an outstanding balance of $291,606 on
the 5-year term loan and $360,000 on the line of credit. At November 30,
1998, the Company had an outstanding balance of $253,833 on the 5-year term
loan and $439,691 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 8.43%. Principal payments on
the term loan are monthly beginning January 1, 1998 at a rate of $4,197 per
month, plus accrued interest to date. The interest rate on the line of
credit is prime rate less one-quarter of one percent (currently 8.25% per
annum).
The Company's mortgage and bank loans include negative covenants and
cessation of advances and related events of default and financial
covenants, certain of which are described in the 10-KSB dated February 28,
1998.
The Company is currently in the contract phase of a sale-leaseback for the
Chester facility. The current terms call for the Company to sell the
building and enter into a long-term, 20 year lease as a tenant. The sale
will provide the Company with working capital and the Company will continue
its operations at the Chester location.
The Osbon Medical Systems division ("Osbon" ) of Imagyn Medical
Inc.("Imagyn"), formerly Urohealth Systems, Inc., OEM product purchases
represented 21% of the Company's total sales for the fiscal year ending
February 1998. In the fiscal year ended February 1997 the Osbon
corporation's OEM product purchases represented 61% of the Company's total
sales. Sales of OEM products to Osbon in the nine month period ended
November 30, 1998 were $111,888 or 8.1% of total Company sales.
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
<PAGE>
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, or 32%, from the previous fiscal year.
For the fiscal year ended February 1998, sales to Osbon declined to
$459,667. The sharp decline in sales to Osbon in the fiscal year ended
February 28, 1998 was due to three factors: 1) introduction of the Esteem
products in fiscal 1997, 2) overstocking by Osbon of the OEM products in
fiscal 1997 which impacted sales in the first quarter of fiscal 1998, and
3) an overall decline in Osbon sales in the impotence vacuum device market
in the third and fourth quarters of fiscal 1998. Osbon reported a decline
of over 30% in its total sales of all vacuum devices in the final two
calendar quarters of 1997. As a result Repro-Med did not sell any OEM
products to Osbon from November 1997 through March 1998. The overall
decline in Osbon sales in the impotence vacuum device market in the third
and fourth quarters of fiscal 1998 was due to a decrease in demand for
vacuum devices due
to increased competition from new pharmaceutical products, specifically a
urethral suppository tradenamed Muse introduced in May 1997 and an orally
administered pill tradenamed Viagra, introduced in March 1998. Muse,
manufactured and sold by Vivus, Inc, was highly successful in 1997. Since
its introduction in March 1998, Viagra has supplanted Muse, accounting for
an estimated 95% of newly issued prescriptions for impotence medications.
Viagra is manufactured and sold by Pfizer, Inc. It is too early to predict
the impact of Viagra on the impotence vacuum device market. While Viagra
has at least temporarily substantially reduced sales of the impotence
vacuum devices, it has significantly increased public awareness of
impotence problems in general. Depending on Viagra's clinical effectiveness
and reimbursement policies adopted by healthcare insurers, the introduction
of Viagra may on a longer term basis, stimulate, or at least not interfere
with the market for the Company's OEM impotence vacuum devices. Sales of
OEM products to Osbon in the three month period ended November 30, 1998
$8,880. Sales of OEM products to Osbon in the nine month period ended
November 30, 1998 were $111,888 or 8.1% of total Company sales. Repro-Med
sales of OEM products to Osbon in the three month period ended November 30,
1997 were $187,053, or 42% of product sales. Repro-Med sales of OEM
products to Osbon in the nine month period ended November 30, 1997 were
$458,781, or 38% of product sales. On November 23, 1998 Imagyn sold its
impotence product line to Timm Research of Eden Prairie, Minnesota
("Timm"). By the end of November, Osbon had paid its accounts receivable
balance in full. On December 1,1998 an order was received for $148,000 of
OEM products from Timm. On December 4, 1998 the Company received a $74,000
pre-payment deposit on this order. In December 1998 the Company shipped
$72,816 in OEM product on this order and received the balance of payment
for the shipment on January 8, 1999. The Company will ship an additional
$75,184 in OEM product in January 1999 to Timm for which it anticipates
full payment in January 1999. Based on discussion with Timm management, the
Company has been advised that Timm intends to continue to market the OEM
products on the same basis as Imagyn.
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 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
<PAGE>
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.
Management believes that the Company's revenues will increase due to growth
in sales of the Res-Q-Vac and Syringe I.V. Infusion System, market
introduction of its three new products (OTC vacuum device, OTC constriction
rings and the reusable resuscitator) and also, contingent on the effect of
Viagra, Muse, and other new products on the impotence vacuum device market,
increased sales of OEM products to Timm or Mission. Management anticipates
that the Company's total cash position will continue to decline during
fiscal 1999, due to increases in inventory and accounts receivable from
increasing sales and scheduled long-term debt repayment of approximately
$122,000. The operating loss and capital spending for new products in the
fiscal year ended February 1998 generated a significant negative cashflow.
Additionally a significant increase in inventory, due primarily to the
Company's new Freedom60 I.V. and Mission OEM vacuum device, resulted in
increased borrowing under the Company's bank line of credit. These items
have severely reduced the Company's liquidity and available cash to expand
operations and improve profitability. The Company recorded a loss of
$273,439 in the nine month period ended November 30, 1998. This loss is due
in part to the Company maintaining staff and expense spending to support
anticipated sales of its new products. The Company has taken actions to
reduce expenses and effected certain staff reductions in May and June 1998.
To further conserve cash, the Company is limiting inventory for the OTC
vacuum erection device until firm sales orders are secured and is
investigating other means of increasing cash flow, including further
reducing operating costs and deferring non-essential expenditures. The
expense and staff reductions taken to date (see above) are not sufficient
to return the Company to consistent profitability. If no significant
increase in product sales versus current levels is seen, then management
will have to consider additional steps to attempt to return the Company to
profitability. There can be no guarantee that obligations beyond February
1999 can be met from current projected cash flow. As previously reported,
the Company, in consideration of the above items, is investigating other
options to improve its projected cash flow and liquidity. The Company
believes it has developed alternate sources of funds which will be
available to it to meet its obligations and enable the Company to continue
its product development efforts and market its products more aggressively
through the end of the new fiscal year beginning in March 1999.
<PAGE>
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 Timm or Mission, other unexpected increases or decreases
in sales or manufacturing costs of the Company's products, market
acceptance and product demand for the Company's Syringe I.V. Infusion
System, OTC vacuum erection and constriction ring devices, and
resuscitator, 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-Three Months November 1998 vs Three Months November 1997:
In the three months ended November 30, 1998 the loss from operations was
$223,575 as compared to loss from operations of $174,415 in the three
months ended November 30, 1997, an increase of $49,160. Selling, general,
and administrative expenses were $209,823, a decrease of $70,640, versus
the same quarter of the prior year, due to decreased marketing and
administrative costs. Selling, general and administrative expensese were
also reduced by reversal of incentive bonuses recorded during the 1998
fiscal year which ended on February 28, 1998. The total incentive bonuses
were $27,000. The incentive bonus payments were deferred at February 28,
1998 until cash flow warranted payment. Business conditions do not warrant
payment and the incentive bonuses have been reversed. Research and
development expense was $56,771. Research and development expense was
higher due primarily to customer payments for product development in the
three month period ending November 30, 1997 which were not repeated in the
period ending November 30, 1998. Depreciation and amortization was $31,880
for both periods.
<PAGE>
In the quarter ended November 30, 1998, the Company's net loss was
$139,820, as compared to a net loss of $111,367 in the quarter ended
November 30, 1997. The loss per common share was $0.01 as compared to a
loss per share of $0.01 in the fiscal quarter ended November 30, 1997.
Results of Operations-Nine Months November 1998 vs Nine Months November 1997:
In the nine month period ended November 30, 1998 the loss from operations
was $511,779 as compared to income from operations of $253,428 in the nine
month period ended November 30, 1997, a decline of $765,207. The decline of
$765,207 resulted primarily from $708,000 in revenues from sale of the
Company's impotence treatment technology in the nine month period ended
November 30, 1997 which did not repeat in the nine month period ended
November 30, 1998. Selling, general, and administrative expenses were
$785,777, a decrease of $90,291, versus the same nine month period of the
prior year, due primarily to decreased marketing and administrative costs.
Selling, general and administrative expenses were also reduced by reversal
of incentive bonuses recorded during the 1998 fiscal year which ended on
February 28, 1998. The total incentive bonuses were $27,000. The incentive
bonus payments were deferred at February 28, 1998 until cash flow warranted
payment. Business conditions do not warrant payment and the incentive
bonuses have been reversed. Research and development expense was $139,886.
Research and development expense was higher due primarily to customer
payments for product development received in the nine month period ended
November 1997 which were not repeated in the current fiscal year.
Depreciation and amortization increased $14,436 to $110,640 due to tooling
for the Freedom60 and OEM vacuum products.
In the nine month period ended November 30, 1998, the Company's net loss
was $273,439, as compared to net income of $84,702 in the nine month period
ended November 30, 1997. The loss per common share was $0.01 in the current nine
month period as compared to income per share of $0.00 in the nine month
period ended November 30, 1997.
<PAGE>
Year 2000 Compliance
Company State of Readiness - The Company will be ready for the year
2000 in both information technology (IT) and non-IT systems. In terms of IT
systems, the Company has purchased and taken delivery of a software upgrade
to make its primary accounting, sales and manufacturing systems year 2000
compliant. The upgrade will be installed and validated by the summer of
1999. The internal network on which the primary business IT software runs,
is currently being upgraded, completion is planned for spring 1999.
In regard to non-IT systems, which refers to systems using embedded
technology like microcontrollers, etc., the Company does not currently
manufacture, nor has it completed development of, products which utilize
microprocessors or similar date related functionality.
The Company is surveying third parties with which it has material
relationships to determine whether there are any known, significant risks
for business interruption, to-date no risk has been identified.
Costs of Year 2000 Issues - The estimated total cost of upgrading the
Company's IT and non-IT systems is under $15,000.
Risks of Year 2000 Issues - The primary risk to the Company in terms
of year 2000 issues, relates to external communication networks in the area
of international telephone systems. This effects a small portion of the
Company's overall business activity in the areas of customers and
suppliers.
Contingency Plans - The Company has the flexibility to temporarily
utilize off-the-shelf, year 2000 compliant software for key portions of
business system applications, should the Company experience an unforeseen
delay or problem with the aforementioned legacy system upgrades.
In regard to the risk of failures in international communications networks,
a contingency plan including provisions for sending and receiving orders
and payments using couriers and other secondary methods of communication is
currently being explored.
The Company currently believes that becoming Year 2000 compliant wil not
have a significant impact on the financial position or results of
operations of the Company. Although the Company is not aware of any
material operational issues or costs associated with preparing its products
or internal information systems for the year 2000, there can be no
asurances that the Company will not experience significant unanticipated
negative consequences or costs caused by undetected errors or defects in
the technology used in its internal systems, which are composed
predominately of third party software and hardware, or caused by software
used by its vendors or customers or by goverment agencies.
<PAGE>
FORM 10-Q
REPRO-MED SYSTEMS,INC. AND SUBSIDIARY
PART II - OTHER INFORMATION
Item 1. Change in Officers and Directors
On January 15, 1999 a Termination Agreement was agreed to between
J.Garringer and Repro-Med Systems, Inc. At that time Mr. Garringer
tendered his resignation as an officer and director of Gamogen and Repro-
Med Systems, Inc. Also on January 15, 1999, a one year Sales
Representative Agreement was entered into between J. Garringer and Repro-
Med Systems, Inc. For the first 28 weeks of this Sales Representative
Agreement, Mr. Garringer will be paid a minimum draw against commission of
$1,800 per week and insurance benefits. After the first 28 weeks,
commission will be paid on completed sales with no minimum draw against
commission and no company paid benefits.
Mr. Garringer had held the positions of Executive Vice-President,
Secretary, Director and Chief Financial Officer for the Company. The
positions of Chief Financial Officer and Secretary have been assumed by
Norman E. Rathfelder.
<PAGE>
Item 2. Exhibits and Reports on Form 8-K
No reports on Form 8-K have been filed during the quarter ended
November 30, 1998. The Exhibits filed as part of this report are listed
below.
Exhibit No. Description
1. Sales Representative Agreement
(pages 18-20)
2. Termination Agreement
(pages 21-22)
3. Joint Venture Agreement
(page 23)
<PAGE>
Item 2. Exhibit 1
Sales Representative Agreement between J. Garringer and Repro-Med Systems,Inc.
1) J. Garringer (or a new company named by J. Garringer) will be paid
monthly commissions on sales at rates as follows:
Commission Percentage of Sales
Restore (or equivalent, ie, private 15%(d) 10% if under $55(a)
label, OEM, etc.)
Prolon g 15%(d) 10% if under $5 (a)
US Military Special 10%
New Account Sales for Other Products (b) 10%
New Capital Raised (c) 5%
(a) equivalent prorata on cost:price basis
(b) paid on new customers initiated by J. Garringer
(c) development, private placement, etc; from persons introduced by J.
Garringer excludes building sale, B-D AsiaPacific, Sabratek
(d) a 5% override commission only, will be paid on customers or sales
introduced by individuals other than J.Garringer and not initiated by J.
Garringer nor related to his or his accounts efforts.
Note the 15% rate will be paid on first $1,000,000 in annual sales, 10%
thereafter.
Sales value used to calculate above commission rates will be reduced by any
other commissions that need to be paid by Repro-Med on the sale.
Monthly sales projections will be provided by J. Garringer on a rolling, 12
month basis.
Company has the last right of acceptance of any customer order tendered and
reserves the right to determine future support level for all products and
the right to sell and/or discontinue products.
J. Garringer understands that for his release of claims against Repro-Med
Systems/Gamogen, he is being given as consideration the opportunity to
establish a relationship as a Manufacturer's Representative/Consultant and
to receive the compensation as described in paragraphs (1), (2), & (3).
The aforementioned compensation is a commission draw and not salary
continuation.
2) For the first 28 weeks of the agreement minimum commissions and benefits
will be paid. Minimum commission payments will be paid at the rate of
$1,800 per week.
Commission Draw $1,800/wk/28 weeks
Benefits (health insurance, dental included at present level; J. Garringer
insurance, auto lease payments, will pay to Repro-Med the standard
long-term disability insurance) employee portion of health and
dental insurance.
During the initial 28 week period, commissions above the $1,800 minimum
will be paid when commissions on total sales exceeds the cumulative
minimums paid-to-date.
<PAGE>
Subsequent to the initial 28 week period commissions will be paid based on
the following formula:
At the end of the 28 week period the difference between the total minimum
commissions paid and commissions on sales for the 28 week period will be
calculated. This amount, "commission balance", will be deducted from all
subsequent monthly commissions at the rate of $750 per month, reducing the
commission balance until the commission balance is reduced to zero.
Commissions will be paid on this formula until commissions on total sales
(including the 28 week period sales) exceed the cumulative minimums paid
for the 28 week period.
When commissions on total sales (including the 28 week period sales) exceed
the cumulative minimums paid for the 28 week period, commissions will then
be paid on the above percentage of sales.
This is a one year, non-exclusive agreement, automatically renewed in one
year increments unless written notice of termination is given 60 days prior
to the end of each year by either party. After termination, J. Garringer
will be paid commission on the customers introduced by J. Garringer for a
period of two years. Provided he maintains adequate customer support. No
override commission will be paid after termination of this agreement.
J. Garringer agrees that for the term of this agreement he will not become
a sales representative for infusion pumps or impotence pumps of companies
whose business includes either of the following and includes the companies
noted:
1.) Manufacturer or distribution of infusion pumps, ie., I-Flow
Corp,;
2.) Manufacturer or distribution of impotence vacuum pumps, ie.,
American MedTech (Rejoyn), Timm Medical (Osbon).
3) Repro-Med will also provide the following incentive and support items:
Incentive Stock Program sales based incentive, see attached
Office/sales support office space, copying, telephone, word
processing, mailing, and reasonable
administrative support.
Other consulting as requested by Repro-Med at rate of $50/hr
Note, timesheets are to be submitted on a
weekly basis regardless of whether any
consulting work has been requested.
COBRA insurance coverage after 28 weeks J. Garringer to pay full cost.
(4) During the next several weeks, J. Garringer will direct and train
designated employees of Repro-Med Systems, Inc., with the objective of
transitioning all day-to-day and all other company related activities which
J. Garringer has been responsible to those designated employees. There
will be no additional charges for this work.
Nothing in this Agreement will provide the authority to either party to
bind the other in any respect. Each shall remain an independent contractor
responsible only for his own actions.
Agreed by: Repro-Med Systems, Inc. Agreed by: J. Garringer
/s/ Andrew I. Sealfon /s/ Jesse A. Garringer
Andrew I. Sealfon, President
Date: January 15, 1999 Date: January 15, 1999
<PAGE>
Sales Based Incentive Addendum to Agreement between J. Garringer and Repro-
Med Systems, Inc.
Upon execution of the aforementioned agreement J. Garringer will be given
300,000 shares of Repro-Med stock as an incentive to build sales as a
manufacturers representative/consultant relationship.
As a further incentive to develop sales for the company, the following
table outlines the additional shares of stock J. Garringer will receive
when specfic sales goals are attained. This table is designed to provide
incentive to reach $1,000,000 in Restore sales in any one year during the
term hereof. Other sales are not considered in this stock program. The
program is valid as long as the Agreement between J. Garringer as a
manufacturers representative /consultant and Repro-Med Systems, Inc. is in
effect.
Sales of Restore to Accounts Shares of Repro-Med Stock Granted
Introduced by J. Garringer *
$300,000 200,000
Next $100,000 150,000
Next $100,000 150,000
Next $100,000 100,000
Next $100,000 100,000
Next $100,000 100,000
Next $100,000 100,000
Next $100,000 100,000
For the second and subsequent years, shares of stock will be issued based
on cumulative sales only if sales in such year exceed the level of sales in
all prior years from the beginning of this agreement. For example, if the
first years' sales were $500,000, in the second year shares of stock will
be issued after sales reach $600,000. In this example, for the first
$500,000 of sales stock was awarded in the first year, as each $100,000
increment of sales is attained in the second and subsequent years an
additional stock award will for such increases be granted. This program is
in affect until $1,000,000 of Restore sales are reached from customers
introduced by J. Garringer in any year.
* Does not include override sales.
<PAGE>
Item 2. Exhibit 2
Termination Agreement Between J. Garringer & Repro-Med Systems, Inc.
1) It is understood that Repro-Med Systems, Inc. is restructuring its
staffing and terminating Jesse Garringer as an employee. Jesse Garringer
will tender his resignation as an officer and director of Repro-Med Inc.
and Gamogen, Inc. upon execution of this agreement.
J. Garringer, of his own free will, hereby voluntarily releases and forever
discharges the Company, its subsidiaries and affiliates, and its and their
predecessors, successors, and assigns and its and their current trustees,
directors, officers, shareholders, employees and agents, both individually
and in their official capacities with those entities, of and from any and
all actions or causes of action, suits, claims, demands, liabilities,
charges, complaints, promises, whatsoever, in law or equity, which against
any of them, J. Garringer, his heirs, executors, administrators,
successors, and assigns may now have or hereafter can, shall or may have
for, upon or by reason of any matter, cause, or action whatsoever including
arising out of (a) his employment by Repro-Med or Gamogen (except only such
matter as to which J. Garringer is entitled to coverage as an insured,
pursuant to the terms of any insurance policy owned by Repor-Med/Gamogen at
the time that matter shall be deemed to have occurred), (b) the
compensation, benefits, terms and conditions of his employment and (c) the
cessation of said employment, any alleged violation of Title VII of the
Civil Rights Act of 1964, as amended, the Civil Rights Act of 1991,
Sections 1981 through 1988 of Title 42 of the United States Code, as
amended, the National Labor Relations Act, the Americans with Disabilities
Act of 1990, the Fair Labor Standards Act, the Occupational Safety and
Health Act, the Employee Retirement Income Security Act of 1974, as
amended, the Age Discrimination in Employment Act of 1967, as amended, the
Family Leave and Medical Leave Act, the New York Human Rights Act, and any
other federal, state or local law, regulations or ordinances, and/or public
policy, contract or tort law, having any bearing whatsoever on the terms
and conditions and/or cessation of his employment with Repro-Med Systems,
Inc./Gamogen, Inc. or any or its or their subsidiaries and affiliates and
any predecessors or successors thereof, he ever had, now has, or shall have
as of the date of this Agreement.
J. Garringer waives his right to file any charge or complaint on his own
behalf and/or to participate in any charge or complaint which may be made
by any other person or organization on his behalf before any federal,
state, or local court or administrative agency against Repro-Med or Gamogen
or any of its or their subsidiaries and affiliates and its and their
predecessors, successors, assigns, current and former trustees, directors,
officers, shareholders, employees or agents, except as such waiver is
prohibited by law. Should any such charge or complaint be filed, J.
Garringer agrees that he will not accept any relief or recovery therefrom.
J. Garringer confirms that no charge, complaint, or action exists in any
forum or form. Except as prohibited by law, in the event that any such
claim is filed by J. Garringer, it shall be dismissed with prejudice upon
presentation of this Agreement and J. Garringer shall reimburse Repro-
Med/Gamogen for the costs, including attorney's fees, of defending any such
action filed by J. Garringer. J. Garringer acknowledges he has no claims
against Repro-Med/Gamogen at the current time.
<PAGE>
J. Garringer acknowledges that he has been given the opportunity to
consider this Agreement for twenty-one (21) days before signing it. In the
event J., Garringer signs this Agreement within less than twenty-one (21)
days of his receiving it, he acknowledges that he did so voluntarily and
with knowledge of the opportunity to consider this Agreement for the entire
twenty-one (21) day period. J. Garringer also acknowledges that for a
period of seven (7) days following the date he signs this Agreement he may
revoke its terms by written notice sent to the President of Repro-Med
Systems, Inc. at the Company's principal business address of 24 Carpenter
Road, Chester, New York 10918.
This Agreement shall not become effective or enforceable until the seven
(7) day period following his execution hereof has expired. This Agreement
shall be construed to be a contract entered into and to be governed by the
internal laws of the State of New York. The parties agree that this
Agreement represents the entire agreement except for the Sales
Representative Agreement of the parties and supercedes all prior
communications, agreements or understandings, either oral or written, if
any, regarding the same.
Agreed by: Repro-Med Systems, Inc. Agreed by: J. Garringer
/s/ Andrew I. Sealfon /s/ Jesse A. Garringer
Andrew I. Sealfon, President
Date: January 15, 1999 Date: January 15, 1999
<PAGE>
Item 2. Exhibit 3
JOINT VENTURE AGREEMENT - RESTORE
This agreement entered into as of this 28th day of October 1998
between Repro-Med Systems, Inc.("Repro-Med") and Gamogen Inc. ("Gamogen").
Whereas Repro-Med has been developing a new impotence treatment named
Restore; and
Whereas the parties wish to establish a joint venture relating to the
ownership, development and marketing of Restore on the terms as set forth
herein.
NOW THEREFORE, the parties hereby agree as follows:
1. Repro-Med hereby contributes all of its rights, title and
interest in the Restore product and the trademark, all parts,
molds, drawings and inventory and all goodwill and technology
owned in connection therewith to the joint venture.
Such contribution is valued at $300,000 for purposes hereof.
2. Gamogen shall contribute $175,000 in cash to the joint venture.
3. Repro-Med shall manage the joint venture.
4. Gamogen shall receive 5% of gross revenues of Restore product
shipped.
5. Repro-Med shall use its best efforts to market the Restore
product. Except to the extent of the $175,000 paid
hereunder, all costs incurred by Repro-Med in connection
with the distribution of the Restore product and all other
marketing expenses and costs of the joint venture shall be
paid by Repro-Med.
6. Repro-Med may terminate the Joint Venture at anytime.
IN WITNESS WHEREOF, the parties have entered into this agreement as of the
day and year first above written.
Repro-Med Systems, Inc. Gamogen, Inc.
By: /s/ Andrew I.Sealfon By: /s/ Andrew I. Sealfon
Andrew I. Sealfon, President Andrew I. Sealfon, President
<PAGE>
FORM 10-Q
REPRO-MED SYSTEMS, INC. AND SUBSIDIARY
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 18, 1999
Andrew I. Sealfon, President, Treasurer, Chairman of
the Board, Director, and Chief Executive Officer
/s/ Norman E. Rathfelder January 18, 1999
Norman E. Rathfelder, Chief Financial Officer,
Secretary
<TABLE> <S> <C>
<PAGE>
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<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> Feb-28-1999
<PERIOD-END> Nov-30-1998
<CASH> 108,597
<SECURITIES> 155,025
<RECEIVABLES> 151,135
<ALLOWANCES> 2,976
<INVENTORY> 788,520
<CURRENT-ASSETS> 1,444,644
<PP&E> 2,363,970
<DEPRECIATION> 703,103
<TOTAL-ASSETS> 3,611,847
<CURRENT-LIABILITIES> 858,945
<BONDS> 0
0
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<COMMON> 221,420
<OTHER-SE> 1,370,177
<TOTAL-LIABILITY-AND-EQUITY> 3,611,847
<SALES> 1,383,651
<TOTAL-REVENUES> 1,383,651
<CGS> 859,127
<TOTAL-COSTS> 1,895,430
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<INTEREST-EXPENSE> 98,678
<INCOME-PRETAX> (361,181)
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<INCOME-CONTINUING> (273,439)
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