SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
Commission File No. 0-14696
RMED International, Inc.
------------------------
(Exact Name of Registrant and Specified in its Charter)
Colorado 84-0898302
-------- ----------
(State of Incorporation) (I.R.S. Employer Identification Number)
3925 North Hastings Way
Eau Claire, WI 54703
--------------------
(Address of Principal Office)
(715) 831-0280
--------------
(Registrant's Telephone Number)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock $.01
Par value (Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 3 or 15 (d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter periods that the Registrant was
required to file such reports), and (2) had been subject to such filing
requirements for the past 90 days.
X Yes __No
There were 9,022,942 shares of the Registrant stock $.01 par value common stock
outstanding as of September 30, 1999.
<PAGE>
RMED International, Inc.
Condensed Financial Statements
Table of Contents
PAGE
PART I. Item 1.
Condensed Balance Sheets as of September 30, 1999 and F-1
December 31, 1998
Condensed Statements of Operations for the three and F-2
nine month periods ended September 30, 1999 and 1998
Condensed Statements of Cash Flows for the three and F-3
nine month periods ended September 30, 1999 and 1998
Notes to Condensed Financial Statements F-4
Item 2.
Management's Discussion and Analysis of Financial Condition 5
and Results of Operations
PART II. Other Information 7
Signatures 8
<PAGE>
<TABLE>
<CAPTION>
RMED International, Inc.
Condensed Balance Sheets
(Unaudited)
September 30, December 31,
1999 1998
---------------- ----------------
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash $ -- $ 120,504
Accounts receivable, less allowance for doubtful
accounts of $32,000 and $29,000 1,388,304 832,898
Notes receivable, current maturities 5,520 25,180
Inventory 1,482,803 979,770
Prepaid and other 100,030 192,340
----------- -----------
Total current assets 2,976,657 2,150,692
PROPERTY AND EQUIPMENT
Land and building 245,000 245,000
Furniture and office equipment 118,707 105,116
Machinery and equipment 2,077,377 2,712,186
----------- -----------
2,441,084 3,062,302
Less accumulated depreciation 203,235 642,779
----------- -----------
2,237,849 2,419,523
LONG-TERM ASSETS
Notes receivable, less current maturities 43,906 47,034
Other 43,442 43,853
----------- -----------
$ 5,301,854 $ 4,661,102
=========== ===========
LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT)
CURRENT LIABILITIES
Current maturities of long-term obligations $ 352,905 $ 12,230
Bank line of credit 1,241,175 3,052,000
Note payable to director 250,000 71,860
Accounts payable 1,164,359 1,212,689
Accrued liabilities 146,988 303,594
----------- -----------
Total current liabilities 3,155,427 4,652,373
LONG-TERM OBLIGATIONS, less current maturities 1,770,722 156,218
NOTE PAYABLE TO DIRECTOR 250,000 --
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, $.01 par value; 50,000,000 shares
authorized; 9,322,942 and 9,195,958 shares
issued and outstanding 93,230 91,960
Contributed capital 7,876,537 7,534,712
Accumulated deficit (7,544,062) (7,774,161)
----------- -----------
425,705 (147,489)
Treasury stock, at cost, 300,000 shares 300,000 --
----------- -----------
Total stockholders' equity (deficit) 125,705 (147,489)
----------- -----------
$ 5,301,854 $ 4,661,102
=========== ===========
</TABLE>
See accompanying notes.
F-1
<PAGE>
<TABLE>
<CAPTION>
RMED International, Inc.
Condensed Statements of Operations
(Unaudited)
Three Months Ended Nine Months Ended
---------------------------------------- ------------------------------------------
September 30, 1999 September 30, 1998 September 30, 1999 September 30, 1998
------------------ ------------------ ------------------- --------------------
<S> <C> <C> <C> <C>
SALES $ 3,692,032 $ 4,920,766 $ 11,533,408 $ 14,200,632
COST OF GOODS SOLD 2,309,387 3,192,135 6,655,614 8,996,310
------------ ------------ ------------ ------------
GROSS PROFIT 1,382,645 1,728,631 4,877,794 5,204,322
OPERATING EXPENSES
General and Administrative 346,948 409,919 946,634 1,084,297
Sales and Marketing 1,096,477 1,263,739 3,563,963 4,502,393
------------ ------------ ------------ ------------
1,443,425 1,673,658 4,510,597 5,586,690
------------ ------------ ------------ ------------
OPERATING INCOME (LOSS) (60,780) 54,973 367,197 (382,368)
OTHER INCOME (EXPENSE)
Interest income 6,468 7,890 16,785 23,894
Interest expense (79,449) (69,061) (200,459) (221,558)
Gain on sale of assets 29,464 8,890 29,464 15,202
Other (15,053) 15,613 17,112 29,209
------------ ------------ ------------ ------------
(58,570) (36,668) (137,098) (153,253)
------------ ------------ ------------ ------------
NET INCOME (LOSS) BEFORE (119,350) 18,305 230,099 (535,621)
INCOME TAXES
PROVISION FOR INCOME TAXES -- -- -- --
------------ ------------ ------------ ------------
NET INCOME (LOSS) $ (119,350) $ 18,305 $ 230,099 $ (535,621)
============ ============ ============ ============
BASIC EARNINGS (LOSS) PER SHARE $ (0.01) $ 0.00 $ 0.02 $ (0.06)
============ ============ ============ ============
DILUTED EARNINGS (LOSS) PER SHARE $ (0.01) $ 0.00 $ 0.02 $ (0.06)
============ ============ ============ ============
WEIGHTED AVERAGE SHARES - BASIC 9,293,877 9,195,958 9,240,172 9,184,328
============ ============ ============ ============
WEIGHTED AVERAGE SHARES - DILUTED 9,293,877 10,458,286 10,370,090 9,184,328
============ ============ ============ ============
</TABLE>
See accompanying notes.
F-2
<PAGE>
<TABLE>
<CAPTION>
RMED International, Inc.
Condensed Statement of Cash Flows
(Unaudited)
Three Months Ended Nine Months Ended
------------------------------ ----------------------------
September 30, September 30, September 30, September 30,
1999 1998 1999 1998
------------------------------ ----------------------------
<S> <C> <C> <C> <C>
Cash flows from operating activities
Net income (loss) $ (119,350) $ 18,305 $ 230,099 $ (535,621)
Adjustments to reconcile net income (loss) to cash
flows from operating activities
Depreciation and amortization 78,509 72,153 220,503 215,748
Other (9,876) -- (9,876) 3,950
Changes in assets and liabilities
Accounts receivable (636,835) (66,966) (555,406) (100,479)
Inventory (93,868) (184,519) (503,033) 89,109
Prepaid and other 4,399 (2,181) 92,310 117,593
Accounts payable and accrued liabilities (203,333) 669,740 (204,936) 592,931
----------- ----------- ----------- -----------
Cash flows provided by (used in)
operating activities (980,354) 506,532 (730,339) 383,231
Cash flows from investing activities
Purchase of equipment -- (1,353) (13,591) (9,068)
Payments received on notes receivable 1,207 13,015 22,788 26,039
Decrease in other assets 69 16,322 388 74,624
----------- ----------- ----------- -----------
Cash flows from investing activities 1,276 27,984 9,585 91,595
Cash flows from financiang activities
Loans from directors -- -- 500,000 102,000
Increase (decrease) in bank overdraft 86,175 (165,924) 86,175 (115,807)
Proceeds from exercise of stock options 30,595 -- 43,095 --
Borrowings (payments) on bank line-of-credit, net (1,080,000) (275,000) (1,897,000) (304,000)
Proceeds on sale of property, plant, and equipment 2,000,000 -- 2,000,000 --
Payments on loans from officer (11,926) (96,052) (59,934) (217,929)
Increases to (payments on) capital leases (53,325) (2,024) (554,993) (5,344)
Payments on mortgage note (3,235) (762) (5,167) (2,161)
----------- ----------- ----------- -----------
Cash flows provided by (used in) financing activities 968,284 (539,762) 112,176 (543,241)
----------- ----------- ----------- -----------
Net decrease in cash (10,794) (5,246) (608,578) (68,415)
Cash, Beginning of period 10,794 116,378 120,504 179,547
----------- ----------- ----------- -----------
Cash, End of period $ -- $ 111,132 $ (488,074) $ 111,132
=========== =========== =========== ===========
Supplemental disclosure of cash flow information
Cash paid for interest $ 79,449 $ 69,061 $ 200,459 $ 221,558
=========== =========== =========== ===========
</TABLE>
Non Cash Activity:
During July 1999, the company entered into a capital lease for the
sale-lease back of equipment totaling $2,015,339.
During September 1999, the Company received $300,000 shares of its common
stock for post merger adjustments. These shares are held as treasury
shares.
See accompanying notes.
F-3
<PAGE>
RMED International, Inc.
Notes to Condensed Financial Statements
Nine Months Ended September 30, 1999
(Unaudited)
Note A - General
The accompanying unaudited condensed financial statements have been prepared in
accordance with the instructions to Form 10-QSB and do not include all of the
information and notes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all material
adjustments, consisting of only normal recurring adjustments considered
necessary for a fair presentation, have been included. These statements should
be read in conjunction with the financial statements and notes thereto included
in the Company's Form 10-KSB for the year ended December 31, 1998.
November 23, 1998, the Company merged with Jettar, Ltd. The merger has been
accounted for as a "pooling of interests." Under this method of accounting, the
previously issued financial statements of RMED have been restated to include the
assets, liabilities, stockholders' equity and results of operations of Jettar
for all periods presented. All share and per share amounts are also restated for
all periods presented.
Note B - Earnings (Loss) Per Share
Basic earnings (loss) per share are computed using the weighted average number
of shares outstanding during each period. Diluted earnings per share is computed
by increasing the weighted average shares by contingently issuable shares and
for stock options, when diluted.
Note C - Loans from Directors
March 31, 1999, two members of the board of directors loaned the Company
$250,000 (a total of $500,000). The loans bear interest at the rate of 7-1/2%,
payable monthly in arrears beginning May 1, 1999. Payment on the two notes,
consisting of unpaid principal and accrued interest is due December 15, 1999 and
December 15, 2000. The loans are unsecured and subordinate to the bank
line-of-credit.
Note D - Treasury Stock
As a result of post-merger adjustments to the purchase price related to the
merger of Jettar, Ltd. with RMED International, Inc., the former shareholders of
Jettar, Ltd. returned 300,000 shares to RMED on September 22, 1999. The returned
shares are recorded as treasury shares.
Note E - Reclassifications
Certain amounts have been reclassified to conform to the September 30, 1999
financial statement presentation.
F-4
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RMED International, Inc. (the "Company", "RMED") manufactures,
markets and sells disposable baby diapers and related products under
its own branded labels and private branded labels.
On November 23, 1998, the Company acquired Jettar, Ltd. ("Jettar"), a
privately held diaper manufacturing and distributing company located
in Eau Claire, WI. As a result of the acquisition, RMED has the
capability of manufacturing its own baby diaper products in addition
to manufacturing private label diapers. Various RMED products are
manufactured by outside private label manufacturers pursuant to
Company specifications.
As of July 1999, consumers are purchasing Tushies(R) Baby Products
through our new and exciting website WWW.TUSHIES.COM.
MATERIAL CHANGES IN FINANCIAL POSITION
Total assets of the Company increased $640,752 from $4,661,102 at
December 31, 1998 to $5,301,854 at September 30, 1999.
During the nine month period ended September 30, 1999, net working
capital increased by $2,322,911 primarily due to increases in
Accounts Receivable and inventory and decreases in the bank line of
credit, and accrued liabilities.
Total liabilities at September 30, 1999 were $5,176,149 compared to
$4,808,591 at December 31, 1998. The increase was primarily due to
the capital lease from the sale leaseback of the diaper machine.
Total stockholders' equity increased $273,194 during the nine-month
period ended September 30, 1999. The increase was primarily a result
of increased earnings.
MATERIAL CHANGES IN RESULTS OF OPERATIONS
Net sales for the quarter ended September 30, 1999 were $3,692,032
compared to $4,920,766 for the quarter ended September 30, 1998, a
decrease of $1,228,734 due to the Company's commitment to pursue more
profitable sales.
Gross profit as a percentage of sales increased from 35.1% for the
quarter ended September 30, 1998 to 37.4% in the quarter ended
September 30, 1999, due to decreased promotional activity by the
Company.
Operating expenses for the quarter period ended September 30, 1999
were $1,443,425 compared to $1,673,658 for the quarter ended
September 30, 1998, a decrease of $230,233.
5
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION cont'd
Net loss for the quarter ended September 30, 1999 was ($119,350) and
net income for the nine month period ended September 30, 1999 was
$230,099 as compared to a net income of $18,305 for the quarter ended
September 30, 1998, and a net loss of ($535,621) for the nine month
period ended September 30, 1998.
Liquidity and Capital Resources
At September 30, 1999 the Company had working capital ($178,770)
consisting of $2,976,657 in current assets and $3,155,427 in current
liabilities.
As of September 30, 1999 the Company's long term debt is $2,820,722
consisting of a mortgage payable on the Delta, Colorado facility
($134,864), and capital leases ($1,635,858), and a note payable to
director ($250,000). The Company has the ability through its line of
credit and other available resources to fund its current operations.
Year 2000 Issues
The Company believes the Eau Claire, WI facility is fully Y2K
compliant and the Delta, CO facility will be compliant by the end of
1999. The potential effect of the year 2000 issue on the Company and
its business partners will not be fully determinable until the year
2000 and thereafter. Notwithstanding the Company's efforts described
above, if complications should arise from Y2K modifications already
in place by the Company or compliance efforts by entities with whom
the Company conducts business, the Company's revenues and financial
condition could be adversely impacted.
Except for historical matters contained herein, the matters discussed
are forward-looking and made pursuant to the safe harbor provisions
of the Private Securities Litigation Reform Act of 1995. Investors
are cautioned that these forward-looking statements may reflect
numerous assumptions, especially sales and product mix, and involve
risks and uncertainties which may affect RMED International, Inc.'s
business and prospects and cause actual results to differ materially
from these forward-looking statements.
6
<PAGE>
Part II. Other Information
Items 1-5. Not applicable.
Item 6. Exhibits and reports on Form 8-K.
(a) Exhibits
Exhibit 11 - Statement regarding computation of
per share earnings.
Exhibit 27 - Financial Data Schedule
(b) Reports on form 8-K
In the three months ended September 30, 1999
three reports on Form 8-K dated July 6, 1999,
July 8, 1999 and July 26, 1999 were filed by the
Company with the Securities and Exchange
Commission. The Form 8-K's were to report a
change in certifying accountant.
7
<PAGE>
Signatures
Pursuant to the requirements 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.
RMED International, Inc.
Date: November 12, 1999
/s/Brenda Schenk
----------------
Brenda Schenk
President & Principal
Financial Officer
8
<PAGE>
RMED International, Inc.
Exhibit 11
The following represents the computation of per share earnings reflecting
the assumption that the granted shares under the option plan will be
exercised.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
---------------------------------- ----------------------------------
September 30, September 30, September 30, September 30,
1999 1998 1999 1998
---------------------------------- ----------------------------------
<S> <C> <C> <C> <C>
Net income (loss) $ (119,350) $ 18,305 $ 230,099 $ (535,621)
========== =========== =========== ===========
Weighted average common shares outstanding 9,293,877 9,195,958 9,240,172 9,184,328
Common share equivalents relating to stock options -- 1,262,328 1,129,918 --
---------- ----------- ----------- -----------
Adjusted common and common equivalent shares
for computation 9,293,877 10,458,286 10,370,090 9,184,328
========== =========== =========== ===========
Net earnings (loss) per share:
Basic $ (0.01) $ 0.00 $ 0.02 $ (0.06)
========== =========== =========== ===========
Diluted $ (0.01) $ 0.00 $ 0.02 $ (0.06)
========== =========== =========== ===========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-Mos
<FISCAL-YEAR-END> Dec-31-1999
<PERIOD-START> Jan-01-1999
<PERIOD-END> Sep-30-1999
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 1,420,395
<ALLOWANCES> 32,000
<INVENTORY> 1,482,803
<CURRENT-ASSETS> 2,976,657
<PP&E> 2,441,084
<DEPRECIATION> 203,235
<TOTAL-ASSETS> 5,301,854
<CURRENT-LIABILITIES> 3,155,427
<BONDS> 0
0
0
<COMMON> 93,230
<OTHER-SE> 32,475
<TOTAL-LIABILITY-AND-EQUITY> 5,301,854
<SALES> 11,533,408
<TOTAL-REVENUES> 11,533,408
<CGS> 6,655,614
<TOTAL-COSTS> 6,655,614
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 200,459
<INCOME-PRETAX> 230,099
<INCOME-TAX> 0
<INCOME-CONTINUING> 230,099
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 230,099
<EPS-BASIC> .02
<EPS-DILUTED> .02
</TABLE>
