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FORM 10-QSB
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES ACT OF
1934
For the quarterly period ended NOVEMBER 30, 1999
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Commission File Number 0-12305
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REPRO-MED SYSTEMS, INC.
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(Exact name of registrant as specified in its charter)
NEW YORK 13-3044880
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
24 CARPENTER ROAD, CHESTER, NY 10918
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(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 latest practicable date.
Class Outstanding at November 30, 1999
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Common stock, $.01 par value 22,142,000 shares
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REPRO-MED SYSTEMS, INC.
TABLE OF CONTENTS
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PAGE
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PART I
ITEM 1. Financial Statements
Balance Sheets - November 30, 1999 and 3
February 28, 1999
Statements of Income - For the three months and nine months
periods ended November 30, 1999 and November 30, 1998 4
Statements of Cash Flow -
November 30,1999 and 1998 5
Notes to Financial Statements 6
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations. 6
PART II
ITEM 1. Legal Proceedings 8
None
ITEM 2. Changes in Securities 8
None
ITEM 3. Defaults Upon Senior Securities 8
None
ITEM 4. Submission of Matters to a Vote of Security Holders 8
None
ITEM 5. Other Information 8
None
ITEM 6. Exhibits and Reports on Form 8-K 8
None
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PART I. ITEM 1 - FINANCIAL STATEMENTS
REPRO-MED SYSTEMS, INC.
BALANCE SHEETS
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11-30-99 2-28-99
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CURRENT ASSETS
Cash $182,162 $683,321
Short-term Investments 0 81,352
Accounts Receivable, net 278,178 120,470
Inventory 493,744 573,560
Prepaid Expenses 44,661 78,785
Deposits 40,000 190,000
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TOTAL CURRENT ASSETS 1,038,745 1,727,488
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PROPERTY & EQUIPMENT-NET 495,340 522,660
OTHER ASSETS 61,647 68,484
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TOTAL ASSETS $1,595,732 $2,318,632
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CURRENT LIABILITIES
Accounts Payable $110,861 $41,250
Current Portion Long Term Debt 0 55,580
Bank Line of Credit Payable 0 439,372
Accrued Expenses 77,139 75,727
Current Portion Capital Gain 22,481 22,481
Customer Deposits 473,418 246,610
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TOTAL CURRENT LIABILITIES 683,899 881,020
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DEFERRED CAPITAL GAIN 410,276 427,136
LONG TERM DEBt 0 184,926
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TOTAL LIABILITIES 1,094,175 1,493,082
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MINORITY INTEREST IN SUBSIDIARY 0 288,882
STOCKHOLDERS' EQUITY
Preferred Stock, 8% Cumulative $.01
Par Value Authorized 2,000,000,
issued & Outstanding 10,000 Shares 100 100
Common Stock, $.01 Par Value,
Authorized 50,000,000 Shares,
Issued & Outstanding 22,142,000 221,420 221,420
Warrants Outstanding 100 140
Additional Paid-In Capital 3,040,662 3,040,662
Accumulated Deficit (2,618,725) (2,583,654)
Treasury Stock at Cost (142,000) (142,000)
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TOTAL STOCKHOLDERS' EQUITY 501,557 536,668
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TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $1,595,732 $2,318,632
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REPRO-MED SYSTEMS, INC.
STATEMENTS OF INCOME
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FOR 3 MONTHS ENDED FOR 9 MONTHS ENDED
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11-30-99 11-30-98 11-30-99 11 30-98
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SALES
Net Sales of Products $524,445 $312,103 $1,449,384 $1,383,651
COST AND EXPENSES
Cost of Goods Sold 303,920 237,204 900,132 859,127
Selling, General & Administrative 203,408 209,823 744,718 785,777
Research & Development 25,248 56,771 83,932 139,886
Depreciation & Amortization 22,545 31,880 76,148 110,640
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Total Expenses 555,121 535,678 1,804,930 1,895,430
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(LOSS) FROM OPERATIONS (30,676) (223,575) (355,546) (511,779)
Non-Operating Income (Expense)
Rental Income 0 21,525 0 64,575
Interest Expense (9,858) (35,791) (31,083) (98,678)
Interest & Other Income 5,021 2,659 10,016 88,479
Gain on Sale of Investment 221,800 0 221,800 0
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216,963 (11,607) 200,733 54,376
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INCOME (LOSS) BEFORE TAXES 186,287 (235,182) (154,813) (457,403)
(Provision) Benefit for
Income Taxes (760) 39,119 (2,280) 87,742
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NET INCOME (LOSS) BEFORE MINORITY
INTEREST & EXTRAORDINARY ITEM 185,527 (196,063) (157,093) (369,661)
Minority Interest 0 56,243 54,542 96,222
Extraordinary Item 71,480 0 71,480 0
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NET INCOME (LOSS) $257,007 ($139,820) ($31,071) ($273,439)
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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
EARNINGS (LOSS) PER COMMON SHARE
Primary-Before Extraordinary Item $0.01 ($0.01) ($0.00) ($0.02)
Fully Diluted Before Extraordinary Item $0.01 ($0.01) ($0.00) ($0.01)
Primary-Extraordinary Item $0.01 ($0.01) ($0.00) ($0.01)
Fully Diluted-Extraordinary Item $0.01 ($0.01) ($0.00) ($0.01)
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REPRO-MED SYSTEMS, INC
STATEMENTS OF CASH FLOWS
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FOR 9 MONTHS ENDED
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11-30-99 11-30-98
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NET INCOME (LOSS) $ (31,071) $(273,439)
ADJUSTMENTS TO RECONCILE NET INCOME
TO NET CASH PROVIDED BY OPERATIONS:
Income (Loss) in Minority Interest (54,542) (96,222)
Depreciation & Amortization 76,148 110,640
Gain on Sale of Investment (221,800) 0
Gain on Forgiveness of Debt (71,480) 0
Decrease in Short Term Investments 81,352 476,264
Decrease (Increase) in Accounts Receivable (157,708) 81,780
Decrease (Increase) in inventory 79,816 (154,411)
Decrease (Increase) in Prepaid Expenses 34,124 (19,491)
(Increase) in Deferred Taxes 0 (88,492)
(Decrease) Increase in Accounts Payable 69,611 (37,997)
(Decrease) in Deferred Capital Gain (16,860) 0
(Decrease) Increase other Liabilities 228,220 (27,013)
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NET CASH PROVIDED BY OPERATIONS 15,810 (28,381)
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CASH FLOW FROM INVESTING ACTIVITIES
Proceeds from sale of Investment 263,579 0
Cost of Investment (41,779) 0
Minority Interest (234,340) 0
Acquisition of Equipment (48,828) (38,473)
Acquisition of Other Assets 6,837 (445)
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NET CASH USED IN INVESTING ACTIVITIES (54,531) (38,918)
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NET CASH FLOW FROM FINANCING ACTIVITIES
Proceeds (Repayment) Bank Notes Payable (458,398) 120,000
Repayment of Mortgage 0 (100,671)
Decrease in Warrants (40) 0
Preferred Stock Dividend (4,000) (4,000)
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NET CASH PROVIDED (USED) IN FINANCING ACTIVITIES (462,438) 15,329
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NET INCREASE (DECREASE) IN CASH (501,159) (51,970)
Cash and Equivalents beginning of Period 683,321 160,567
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CASH AND EQUIVALENTS END OF PERIOD $ 182,162 $ 108,597
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SUPPLEMENTARY DATA
Interest Paid $ 29,766 $ 98,678
Taxes Paid 0 0
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REPRO-MED SYSTEMS, INC.
NOTES TO THE FINANCIAL STATEMENTS
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 dated February 28, 1999.
PART I ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
This Quarterly Report on Form 10-QSB contains certain "forward-looking"
statements (as such term is defined in the Private Securities Litigation Reform
Act of 1995) and information relating to Repro-Med Systems, Inc. that are based
on the beliefs of the management of Repro-Med Systems, Inc. as well as
assumptions made by and information currently available to the management of
Repro-Med Systems, Inc. The Company's actual results may vary materially from
the forward-looking statements made in this report due to important factors such
as: recent operating losses, uncertainties associated with future operating
results; unpredictability related to Food and Drug Administration regulations,
introduction of competitive products, limited liquidity; reimbursement related
risks; government regulation of the home health care industry; success of the
research and development effort, market acceptance of FREEDOM60, availability of
sufficient capital to continue operations and dependence on key personnel. When
used in this report, the words "estimate," "project," "believe," "anticipate,"
"intend," "expect" and similar expressions are intended to identify
forward-looking statements. Such statements reflect the current views of
Repro-Med Systems, Inc. with respect to future events based on currently
available information and are subject to risks and uncertainties that could
cause actual results to differ materially from those contemplated in such
forward-looking statements. Readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date hereof.
Repro-Med does not undertake any obligation to release publicly any revision to
these forward-looking statements to reflect events or circumstances after the
date hereof or to reflect the occurrence of unanticipated events.
THREE MONTHS ENDED NOVEMBER 30, 1999 VS. 1998
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Sales increased 68% from $312,103 (1998) to $524,445 (1999) for the
quarters ended November 30. Of the increased revenue, 45% is attributed to
intravenous
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infusion and resuscitation products and 55% to suction and OEM (Original
Equipment Manufacture) sales.
Cost of goods rose 28% with the sales increase improving the product
margin from 24% in 1998 to 42% in 1999.
Selling, general and administrative expense decreased 3% for the three
months period versus 1998. Management initiated expense and payroll reductions
in September 1999 that continue to produce savings compared to prior periods.
Research and development expenses are decreased 56% period to period
reflecting payroll reductions made in the second quarter of fiscal 2000.
The period to period reduction in depreciation and amortization expense
reflects the end of write offs for some intangible assets and the elimination of
building depreciation with its sale.
Interest expense was reduced 72% as the result of the sale and
lease-back of the company's building. Interest expense is now replaced by rent
payments.
Rental income has been eliminated with the sale of the building. Refer
to "Liquidity and Capital Resources " below for sale of investment explanation.
NINE MONTHS ENDED NOVEMBER 30 1999 VS. 1998
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Sales increased modestly +5% year-to-date November 1999 versus 1998.
Five of the Company's eight product lines increased revenues 1999 over 1998.
Total OEM sales declined -55% period to period.
Cost of goods sold were 62% for both nine months periods. The low
margins do not yet reflect the price structure objectives set for the new
products at 50%.
Selling, General and Administrative expenses were 5% lower for the
comparable period as management did initiate expense and payroll reductions in
the second quarter. Research and Development expenses were 40% lower for the
same reasons.
The sale and lease back of the Company's building served to eliminate
rental income and debt expense reducing non-operating income and expenses. Refer
to "Liquidity and Capital Resources " below for sale of investment explanation.
LIQUIDITY AND CAPITAL RESOURCES
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The Company did sign a forebearance agreement with its lender on July
27, 1999 that extended the maturity date for the line of credit to January 31,
2000 and precluded the issuance of new advances. Repro-Med Systems, Inc. then
negotiated a settlement payment of $350,000 with the lender that was remitted on
October 29, 1999. The payment resulted in the recognition of $71,480 in debt
forgiveness that is reflected as an extraordinary item on the Statement of
Income. As part of the agreement, Repro-
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Med Systems, Inc. signed a promissory note for $66,000 that becomes due through
October 2002 only upon the sale of either of the company's two major product
lines. If neither of the two product lines is sold, the note payable terminates.
Repro-Med Systems, Inc. concluded the sale of its investment in
Gamogen, Inc. on October 31, 1999 effective September 1, 1999. The proceeds form
the transaction were $ 263,579. The cost basis for the investment was $41, 779.
Consequently, the sale resulted in the recognition of a gain of $221,800 that is
reflected in the Statement of Income as "Other Income". As part of the sale,
Repro-Med Systems, Inc. purchased income producing assets and assumed certain
liabilities from Gamogen, Inc. and its subsidiary Gyneco, Inc. This purchase
resulted in Repro-Med Systems, Inc. retaining control and obtaining sole
ownership of the operations of Gyneco, Inc.
The funds available on November 30, 1999 are expected to meet cash
requirements as planned under current operating conditions beyond the end of the
current fiscal year.
PART II - OTHER INFORMATION
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ITEM 1. LEGAL PROCEEDINGS
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The Company is neither a party to any material litigation, nor to the
knowledge of the officers and directors of the Company, is there any material
litigation threatened against the Company.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
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None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
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None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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No matters were submitted to a vote of security holders of the Company
during the quarter ended November 30, 1999.
ITEM 5. OTHER INFORMATION
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None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
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None
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SIGNATURES
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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 undersigned; thereunto duly authorized.
REPRO-MED SYSTEMS, INC.
/s/ Andrew I. Sealfon January 7, 2000
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Andrew I. Sealfon, President, Treasurer,
Chairman of the Board, Director, and
Chief Executive Officer
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<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> FEB-28-2000
<PERIOD-END> NOV-30-1999
<CASH> 182,162
<SECURITIES> 0
<RECEIVABLES> 278,178
<ALLOWANCES> 0
<INVENTORY> 493,744
<CURRENT-ASSETS> 1,038,745
<PP&E> 495,340
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,595,732
<CURRENT-LIABILITIES> 683,899
<BONDS> 0
0
100
<COMMON> 221,420
<OTHER-SE> 280,037
<TOTAL-LIABILITY-AND-EQUITY> 1,595,732
<SALES> 1,449,384
<TOTAL-REVENUES> 1,449,384
<CGS> 900,132
<TOTAL-COSTS> 904,798
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 31,083
<INCOME-PRETAX> (154,813)
<INCOME-TAX> (2,280)
<INCOME-CONTINUING> (157,093)
<DISCONTINUED> 0
<EXTRAORDINARY> 71,480
<CHANGES> 0
<NET-INCOME> (31,071)
<EPS-BASIC> (0.00)
<EPS-DILUTED> (0.00)
</TABLE>
